Vital Interests: Sam, thanks very much for joining us today in the Vital Interest forum. The topic is going to be energy - energy policy. You're a perfect person to talk to as energy issues, natural resources, and environmental concerns have been the specialty of your professional and academic life.

So what actually constitutes a national energy policy? How has it evolved in the United States? You did an important book recently with Robert Nordhaus called Energy Follies: Missteps, Fiascos, and Successes of America's Energy Policy. Can you give us some background, some context for what we're going to talk about today?

Sam Kalen: When we examine energy policy overall and, as you said, where it comes from, we're trying to understand how we look at the future of energy choices in our economy and historically. Energy policy often has been driven by individual decisions related to particular types of resources and resource users, as opposed to trying to look holistically at how best to approach our energy resources writ large.

What we're seeing today, finally, is an effort to look much more broadly at the future of energy choices. Particularly, in order to get to a zero-carbon economy by 2050, it's going to be essential that we, for the first time, really as a nation, focus on how we want to craft and employ an energy policy that encompasses resources and users across our society, a policy that addresses the effects of fossil fuel use not only in our electric industry, but also in home use, and industrial use, as well as in our transportation sectors.

VI: This came to mind when I recently saw the movie called The Current War that is about the late 19th-century competition between Thomas Edison and George Westinghouse about electrification of American cities, and it struck me, this all had to do with business, this had to do with enterprise. Has this always been the driver for energy policy in the United States - that it was defined by commerce rather than by science?

Sam Kalen: A lot of times energy policy has been driven by market forces, which are  naturally driven by the development of new technologies, but also by having those industries that are promoting those technologies ultimately winning out and ultimately achieving a market share in our economy. The choices we've been making for the last hundred plus years have typically been driven by the evolution of technology and markets with institutions responding to those new changes in both markets and technologies.

VI: One of the big drivers, of course, was the internal combustion engine. The use of gasoline for transportation, cars and trucks, and then another factor has been the state versus federal structure of this country, and who controls what within those jurisdictions. Is that right?

Sam Kalen: That's right. I think that, also, if you take a look at the problem we have today, most dialogues about the future of our energy policy on the electric side, for instance when we're talking about the transmission grid, involve some of the same conversations we had in the early 1900s about who gets to control and how should we control the development of the grid. Should it be done by the states or should it be done by the federal government? How, for example, do we decide whether to emphasize regional control or national or local control? I think those same issues still persist today.

VI: Also, is the pricing somewhat regulated by the government and the states, or is that also an open market reality?

Sam Kalen: Much more so since the 1980s, pricing has been done by market forces, more so than the typical or historic approach toward cost of service pricing. When we talk about the price of electricity, for example, there are two different things to think about. One is, if we're talking about the retail level, that is always typically done at the state level, not at the federal level. If we're talking about a wholesale sale of electricity, that's always been regulated since the 1935 Federal Power Act by the Federal Energy Regulatory Commission, originally, the Federal Power Commission.

Today, when we look at the way in which the Commission has been operating, for the most part, since the 1980s, it's been pushing toward the use of market-based rates as opposed to cost of service-based rates. In addition to that, it's developed these regional transmission organizations that end up helping to decide what kind of fuel source gets access to a particular region where there's organized markets, and then ends up being also a market-based driven price for the wholesale sale of electricity.

VI: Let's talk about the grid - we hear a lot about the electrical grid that it is not very robust, that it is prone to all kinds of failures, there are blackouts, there are system failures that are pretty catastrophic. Is this not part of critical infrastructure that should be more directly controlled by a national government rather than individual state entities?

Sam Kalen: I think the answer is yes. Almost everyone now, particularly after what happened in Texas, realizes that one of the key problems leading to what occurred in Texas was the unique character of its electric grid -  it is for the most part isolated, not really connected to a grid outside of Texas. If aspects of the grid go down in Texas, they can't easily import electricity, which makes it a problem when you have, let's say, climactic changes that affect the delivery of electricity as we just saw a number of weeks ago in Texas.

Consequently, we know we've got to do better about regional planning as opposed to state level planning, in order to increase the reliability of our transmission system. What we've seen, and what we're likely to see in the next several years, is the Federal Energy Regulatory Commission taking a hard look at how it's going to ensure the resiliency, as well as the reliability of our transmission systems.

A lot of that's now being done in the organized markets area by those regional transmission organizations, but we know that we're not getting enough transmission capacity, even in those areas, so we've got to develop more robust policies to ensure that we can build more transmission lines, particularly if we're going to get, let's say, more renewables onto the grid.

We need more transmission capacity to be able to move those renewables from where they exist, to the load centers. We know that there have been problems with the ability to get these transmission lines built fast. We know that there are issues that occur, particularly at the state level, when these transmission lines are interstate lines, where some states believe that they don't have any incentive to allow the location of those transmission lines in those states. particularly because we don't have federal eminent domain authority for electric transmission lines. There are a whole host of problems like that, that impede, or at least retard the ability to quickly build out our transmission system, which we know we need to do in order to achieve a net zero carbon system by 2050.

VI: The transmission is one thing, but what about the actual generation of the electricity? Let's talk about the power plants that produce the electrical energy that goes out into the grid. In years past, there was a lot of emphasis on hydroelectric power, and then it was oil, coal and now natural gas. We have nuclear in the picture, and now we have the renewables of solar, wind, biomass, and exploration of geothermal sources. Can you walk us through the evolution of power generation?

Sam Kalen: Historically what we have done is shifted toward reliance on new resources when older resources either became more scarce or problematic. For example, for many years as our electric grid began to expand in the early part of the last century, we witnessed the strong growth and development of oil and gas. We started using a lot of oil and gas to generate electricity. Then we started to use a lot of hydroelectric energy and started to promote the development of federal hydroelectric projects.

Up until roughly the 1950s, therefore, we had a lot of investment in oil and gas and hydroelectric energy. Indeed, we had people in the 1950s talk about the significant potential of hydroelectric energy. Then in the 1950s a growing chorus of folks talked as well about the huge potential and transformative effect that nuclear energy would have.

In the 1960s and 1970s, we experienced a couple of things. The adverse health effects from burning oil became more prominent. We experienced geopolitical issues with the ability to import oil and the inability to get natural gas into interstate markets. We also began to realize that the generation of hydroelectric energy was causing serious ecological damage.

As a consequence, we looked for new sources of energy and started to rely a lot on coal. That's when we saw a lot of coal mining, particularly out in the West where you had low sulfur coal. And during the '70s and '80s, we started to rely more heavily on our coal resources and less so on natural gas and oil in our electric systems.

When we entered the 1990s it became apparent that coal has a huge impact on greenhouse gas emissions (not to mention its additional adverse health effects from other emissions). We've been trying to identify the next resource and means for electric generation. This incentivized an expanding reliance on renewable energy resources, utility-scale solar plants, solar community gardens, home photovoltaics, and offshore and onshore wind farms. There's little doubt as well that at some point in the near future the technology for battery storage will advance sufficiently that storage will fundamentally change the character of our electric grid.   

Then finally, the last new resource I expect the Biden administration to address, or at least be forced to spend some time thinking about, is whether or to what role will advanced nuclear technologies play in our effort to achieve the 2050 goal. We could potentially hear more about the use of small modular reactors as a component of a more expanded reliance on distributed generation systems.

VI: I was surprised to learn that the United States is the world's largest producer of nuclear power, accounting for 30% of the world's nuclear generation of electricity. In this country still, 20% of our electricity is generated by nuclear power plants. Many of these plants are now aging out, with some new ones that are going to come online in a couple of years. Because of Chernobyl, Three-mile Island and Fukushima, nuclear power plants have gotten a lot of bad press, but I guess there should be some positive press about nuclear power as well.

Sam Kalen: Many believe that in order to really achieve and have long-term security post-2050 to a zero-carbon economy, we really do need to look at advanced nuclear technology. Part of the problem we have had in the past, as you said, is the perception of nuclear power, and its  safety concerns. Secondly, we've had an issue with whether or not we have long-term disposal options whether or not we can ensure that we have a place to dispose of it.

We've had a lot of the issues associated with Yucca Mountain and whether or not that would serve as a place to be able to dispose of nuclear waste. That's been a hotly debated political issue. I think, when we start to look at nuclear energy, we have a couple of issues that are most typically talked about. One is that these are aging plants. Many plants, because of their age, are offline a lot of times for maintenance so their dependability is questionable.

These plants are old. They're coming up for new licenses and we really don't know yet how that's going to unfold. Even under the projections that we've seen, those plants, assuming we can even go through the second licensing process for some of these plants, for a zero-carbon economy by 2050, we may need to build new plants. It's not clear, however, that the process we have today really incentivizes the market sufficiently to be able to build those plants.

For example, if we look at the levelized cost of energy and decide which type of fuel source we want to use, right now, nuclear does not come out very well. Obviously, solar and wind are going to basically be a lot cheaper from a levelized cost of energy than nuclear power. Unless we do subsidies, unless the government establishes some new programs, and we change the licensing process, it's unlikely that the market is going to accept new nuclear energy or many new nuclear projects, particularly when they cost upwards of what - $8 to $10 billion? - for a new plant.

VI: So new nuclear power plants are problematic, but what about gas? One big issue during the Biden presidential campaign was fracking and pipelines. Lots of the coal power plants have been converted to gas power plants now and they're fed by pipelines. Can you touch on the fact that the U.S. has pushed use of natural gas because they want to be energy independent, but there are serious downsides with fracking, pipelines, and the dependence on natural gas?

Sam Kalen: It's a really interesting story, in part, because if you recall, we did the same thing with coal when we had a problem with oil and in response to the limited amount of natural gas in our systems in the 1970s, we promoted coal. Now, what we're seeing is that we started to de-incentivize as much as we can the use of coal in our plants.

In the last decade or so, we enticed the utilities to shift toward natural gas. As a consequence of that, we've also seen efforts to build new large-scale natural gas interstate pipelines, which can cost as we've seen on the East coast, upwards of 4 or more billion dollars for one of these large pipelines.

Right now, though, we're realizing that in order to get to our green economy by 2050, natural gas has a problem because, while it's not as harmful as a coal-fired power plant, it's half as harmful. In some respects, when methane releases from the natural gas industry, it is at least 25 times more potent as a greenhouse gas than from a coal-fired plant, although the methane releases do not linger in the environment as long—although of course we are talking about trying to curtail our emissions over just a short period.

Consequently, I believe our next big challenge is going to be how to address the effects from the use of natural gas. What, in short, are we going to do about all the natural gas we have promoted during the past decade, for instance? When we talk about it, we're really talking about a couple of different things. Number one, what are we going to do about methane releases? Number two, what are we going to do about the burning of natural gas? And that gets broken down into two principal sectors, electric generation as well as home heating.

Those two sectors are addressed separately, however.  Home heating is regulated at the state level, and that gets us into natural gas bans at the local or possibly even state level. Yet, going back to interstate pipelines and the use of natural gas for the electric utility industry, those pipelines are causing a huge issue both before Congress, as well as at the Federal Energy Regulatory Commission (FERC), and they are regulated at the federal level.

At least for interstate natural gas pipelines, in February of this year, the FERC issued a notice soliciting input and comments on what it ought to do when it reviews an application for a certificate of public convenience and necessity for  a proposed new interstate natural gas pipeline, because all new natural interstate natural gas pipeline construction has to be certificated by the FERC. In the context of those certificates, the commission has had to address a number of issues.

First, interstate natural gas pipelines that receive a certificate from the FERC can exercise federal eminent domain authority and condemn people's land. They have federal eminent domain authority, and there even is a case pending right now at the Supreme Court about federal eminent domain authority for Interstate natural gas pipelines, and the ability to exercise eminent domain power over state lands. This condemnation authority is also causing at the local level considerable concern among landowners who have had their lands condemned, oftentimes without even having an effective ability to challenge the issuance of a certificate at the Federal Energy Regulatory Commission.

Second, the Commission has been embroiled in this feud about whether or not, when it decides whether to certificate one of these pipelines, it should consider the greenhouse gas impacts of one of these new large-scale pipelines. That includes both the downstream and the upstream impacts of these pipelines. And by the way, when we look at those impacts, should the Commission understand that it might lead to more wells, that might lead to more fracking.  There is little doubt that such an inquiry is required by both the Natural Gas Act and the National Environmental Policy Act, and the Commission will undoubtedly incorporate that type of analysis in future decisions.

Then finally, when the Commission decides whether or not to approve a new natural gas pipeline, it must make a decision about whether that pipeline is in the public interest, whether there's a “need” for the natural gas.

The Federal Energy Regulatory Commission’s policy and practice has for the most part disclaimed the idea of a robust examination into the need for that natural gas. That could change in the future. For example, if the Commission is looking at whether or not it ought to certificate a 4 billion dollar interstate natural gas pipeline that's going to promote the use of natural gas and probably have a lifespan of at least 40 years, that could take you well beyond 2050.  Should the Commission look at issues like that? Some people are urging that the Commission actually do that.

The Commission's policies or at least a recent notice last month is asking for ideas about all those different issues. Then finally, it takes us to the issue of fracking. I guess I look at fracking as - I might get in trouble for saying this - a sideshow, because it really comes down to, should we rely on more natural gas? Should we curtail our use of natural gas? That ought to be our policy question. Not so much whether or not we agree with fracking or not. It ought to be a much larger question about the role of natural gas in our society.

VI: You bring up an interesting point here, Sam, about energy policies. How are they created and moved forward? You talked about the Federal Energy Regulatory Commission that's looking at this natural gas pipeline issue in terms of immediate needs and long term public good. But what are the pressures on the Commission? Certainly, there must be powerful lobbying groups in Washington promoting the interests of energy companies that want these pipelines and want to generate power by gas. There are either Congressional representatives pushing for energy companies in their districts or concerned constituents who object to fracking and pipelines.

There is the Department of Energy which, in fact, does not have much to do with setting energy policy but then there's the Department of the Interior, which does have an impact on energy policy since it is in control of a lot of the land where the energy natural resources are coming. There is also the Executive branch, the president, who can outline general parameters of a national energy strategy. And finally there is the Supreme Court that gets to review important energy related cases. Your book goes into a lot of this. So just how is energy policy formulated and implemented?

Sam Kalen: Well, that might take a couple of days.

VI: I know - perhaps just a synopsis.

Sam Kalen: I think that one thing that's really interesting is - and you can see this already with the Biden's administration - we know, for example, that if in fact the Biden administration promotes the use of electric vehicles for DoD or promotes the use of small modular reactors on DoD lands, that is a huge economic driver that helps jumpstart a particular segment of society.

We know that the Executive branch has the capacity to influence energy policy, because it's one of the largest, if not the largest, energy consumer. When it makes choices about which type of resource it's going to use, that has a powerful ripple effect throughout our society, which is why I think there's a huge emphasis on what perhaps DoD will do and particularly with respect to maybe small modular reactors, as well as obviously electric vehicles.

Secondly, the Department of Interior can have a huge impact as well on where and how we drive energy policy. I think that when we take a look at the use of our public lands, there's little that would suggest we ought to be using our public lands now as an energy policy extractive resource. We know that we're going to be changing energy sourcing, at least from a fossil fuel perspective. We know that at some point, we're going to shy away from oil and natural gas and obviously coal much quicker. If that's going to be true, the real question then becomes why shouldn't we just protect those resources now anyway, and switch to other resources.

Then it comes down to when you said, other places, or at least other parts of Washington DC, that could also influence the energy policy, like both the Department of Energy, as well as the Federal Energy Regulatory Commission. Yes, if the FERC takes a much harder look at the use of natural gas pipelines; if it changes some of its policies about how it assesses whether to issue a certificate of public convenience and necessity; if the Department of Energy looks at different incentive programs and loan programs and tries to get Congress to pass new loan programs or beef up loan programs for the nuclear industry; if we continue the solar tax credit and the things like the production tax credit; if  the Interior Department promotes renewables instead of continuing any robust fossil fuel leasing program; and if we invest heavily in promoting new technologies, such as carbon utilization, direct air capture, and battery storage - all such efforts collectively could dramatically reduce our use of fossil fuels and have a huge influence on where we go over the next decade. 

When you're asked about lobbying groups and others who might be concerned about some of that, sure there will be groups who have assets in place. Obviously, the markets finance some of those large-scale projects like interstate pipelines. We don't want them to just become stranded assets, like we're seeing now with coal.

If we're going to still, even in the short term, allow some of these things to happen, but we know that 20 years from now, they're going to be effectively gone or at least not utilized, that's going to leave society with a stranded asset that either investors or shareholders, - perhaps  in a bankruptcy situation. We need to start to think now about how that will occur. When you talk about all the different interests that you mentioned, the hope would be that all those interests would coalesce with an appreciation for how best to deal with avoiding that stranded asset problem in the future by resolving some of those issues now, if that makes sense.

VI: This goes to the question of national infrastructure and some kind of national economic planning. In the United States we have a federal system, where as you have indicated, states have a good deal to say about energy policy in their jurisdictions. We don't like national mandates and we also like free-market economies. If the goal is to have a robust and forward-looking energy policy and system, doesn't this require some kind of national infrastructure, national economic planning mandate?

Sam Kalen: First, I would add, and some people may not be aware of this, we also considered it in the 1970s in the National Land Use Act that came close to passing but didn't. It was on the heels of other statutes like the Coastal Zone Management Act and obviously the National Environmental Policy Act that did pass. We know that Congress has the ability to incentivize particular technologies, and that may help shape how markets unfold.  

We may not necessarily need an entity that has robust regulatory authority at the national level, but we may need at least guidance from national authorities. It could be Congress, through the appropriation process affecting tax policies or developing other incentives or subsidies. Congress could become more proactive and pass climate legislation or meaningful amendments to the Federal Power Act to promote renewables.  DoE could develop more robust loan programs, incentivizing certain technologies. In short, we could develop programs tol shift markets toward where we want them to go. That all ought to occur at the federal level.

Again, it doesn't necessarily mean that it has to be regulated at the federal level, but we do need to have clear direction I believe at the federal level, which we are  getting with the Biden Administration that has committed to promoting a path toward a zero-carbon economy by at least 2050.

VI: In other words, trying to actualize elements of the Green New Deal - that is their blueprint, the energy plan that they're going to be working toward?

Sam Kalen: Yes.

VI: You agree with that agenda?

Sam Kalen: Well, I'm not sure how one can disagree with it to be quite honest.

VI: Let me put it the other way. Do you think it's a practical agenda for the next 5 to 10 years?

Sam Kalen: I'm going to be honest. If you had asked me three to four years ago whether or not I thought that it was achievable, I probably would have said no, but everything that we're seeing today is that, yes, we can do it quickly. Our society has demonstrated its ability to be flexible and respond.  We have that kind of resiliency. We have industries that could quickly respond and install new infrastructure with the right market incentives. That's a long-winded way of saying that I believe we can get there, but it has to be an aggressive push, and it also has to be a push that explores all sectors of our society.

For example, are we going to allow new buildings to be constructed using natural gas heating? Are we going to allow homes to have stoves that use natural gas? Are we going to ensure that we have enough charging stations for electric vehicles? Are we going to make sure that we employ new advanced technologies in the nuclear area? Those are all things that we have to collectively decide we're going to do in order to get to a zero-carbon economy by 2050.

VI: When you compare ideas of the Green New Deal with other countries that have progressive energy programs, countries in Europe, the Netherlands and Scandinavian countries for example, do they stand up well? Are there ideas, are there energy systems, are there new technologies from other countries that we can look to?

Sam Kalen: That is an area to be honest I am less familiar with. I think some of those countries actually use different technology and have different processes, such as with respect to nuclear technology.

Another seeming difference here as opposed to some countries is that our federalist system and the way in which our laws have evolved present challenges when trying to promote efficient change. We also have environmental statutes that exist and some might argue can end up impeding quick deployment of new infrastructure. That may not exist in other countries. For example, as I understand it, if you really wanted to have let's say, a new nuclear power plant built it probably could be built much faster in many other countries than here, because there aren't as many abilities to stop it in litigation, as it exists here in the United States.

In order to get a lot of it done, what we're probably seeing, at least here in the United States, as opposed to other countries, is that we need to have a better way to ensure that we have a streamlined process to get this new critical infrastructure built. That's why you're seeing more folks today emphasizing employing a streamlined process for some of these new projects.

VI: Are any of the Paris Accord requirements or guidelines part of what's included in the Green New Deal and what the government is looking to implement?

Sam Kalen: I think the answer is yes but again, those are not prescriptions. We probably need to even go well beyond that. I think that you're talking about a floor, but not where we really need to go. We need to be much more aggressive because we're already seeing that we've been too conservative in understanding what the impacts are, we're typically wrong about what our assessments are, we underestimate what the adverse effects are, how much climatic change is going to occur. We know we need to be as aggressive as possible.

VI: Is the momentum you are looking for coming out of grassroots organizations? Many states have activists who push for progressive environmental laws, and support alternative energy sources. Is there a bottom-up movement pushing a reform national energy agenda?

Sam Kalen: Absolutely. What we're seeing is one state after another getting serious about progressive energy and environmental issues - you take a look at New Mexico, or at some of the states in the Pacific Northwest, you take a look at New York, you can examine just how aggressive some of their plans are. I think that sets a good example for the federal government, because what these states and local communities are doing is really pushing as aggressively as they can.

It does end up motivating others to act. I think even if you take a look at a state like Wyoming, which is heavily fossil-fuel dependent on its resource extraction side. It's not suggesting that it disagrees at all with climate change. It's talking about how we can get to a zero-carbon economy, and how we do it from a market perspective and develop new technologies, for instance, that would capture, use or sequester the carbon.

That's reflective of how the dialogue has changed dramatically. You really do not hear climate deniers, or those who are objecting to getting us to a zero-carbon economy. Industry, too, is obviously switching and recognizing that's where we're going. I think that that's having a huge impact.

When you see the reinsurers, when you see Wall Street, and when you see the large manufacturers, and you see other companies saying, "This is who we're going to buy from", that "We're only going to buy renewable resources," that sends a huge market signal, that we know we're going to get there. The issues we're going to confront as a society is not whether or not we ought to get there. We all recognize we need to get there, and that we'll get there. The question is, how fast, and how are we going to do it?

VI: You see the momentum moving forward because of all these different factors coming together?

Sam Kalen: Yes You know when our book came out in 2018 we talked about electric vehicles. It sort of ended up saying that was really where we were going to go. Even since then, the momentum on electric vehicles has been exponential. That's just in a few years. If you think about that, and you think about where the auto manufacturers are today, and what they've all now decided to do in a very short period of time, you're talking about an escalating level of momentum in just a few years, and we're only going to see that increase.

I think, too, that's why energy sometimes reflects society and culture at the time, and the markets and technology as well. All those things are now converging with industry, our society, the markets, the technology, and maybe governmental policy - all pushing us towards trying to get to that zero-carbon economy.

VI: We like to end our conversations on a positive note, so I think that's where we are. It will be interesting to watch what can be achieved in energy policy in the next four years - eight if this administration stays in power. It does seem, as you have outlined, that many factors are converging to create the momentum in all the different sectors of our society to move toward dramatic changes in energy policy in order to reach a goal of a zero-carbon economy by 2050.

Sam Kalen: Well said.

Sam Kalen is the William T. Schwartz Distinguished Professor of Law and Associate Dean at the University of Wyoming College of Law. He currently is the Visiting Robert H. McKinney Chair in Environmental Law, at Indiana University Robert H. McKinney School of Law.  He has practiced or taught in the area of energy law and policy since the 1980s, publishing a variety of articles on energy law and policy and is a co-author of a book on the history of energy policy, Energy Follies: Missteps, Fiascos, and Successes of America’s Energy Policy (Cambridge U. Press 2018).