Ken Glozer’s Statement to the House Energy and Commerce Committee

Ken Glozer, a former official at the White House Office of Management and Budget and the Department of Energy, provided the House Energy and Commerce Committee with the following information:

Dear Committee Members;

I have been involved with federal energy policies, programs and agencies since the early 1970s for thirty years as a senior career staffer at the White House, OMB then as President of OMB Professionals for over 15 years providing expert services to companies in the energy industry. Here are my suggestions:

1. One of the worst anti competitive market, anti common sense federal policies is the Renewable Fuels Standard enacted in 2005 then expanded in 2007. This federal ethanol blend mandate is as bad and counterproductive as the earlier Emergency Petroleum Allocation Act (EPAA) of 1973 imposing nationwide petroleum allocation and price controls. The Reagan Administration had the good sense and political guts to abolish the EPAA. The House should abolish the RFS. The RFS was and is a political payoff to hugely wealthy Midwest corn farmers costing consumers and the economy tens of billions annually. The RFS has politicized gasoline markets making them inefficient, costly and subject to the whims of the White House, EPA and USDA. Go back to a competitive market policy for gasoline and scrap this mess called the RFS. Refer to my book entitled “Corn Ethanol: Who Pays, who Benefits?” for a fact based assessment of the RFS.

2. FDR’s policies live on at the federal level and after 80 years have become costly counterproductive albatross’s around taxpayer and most energy consumer necks. TVA, for example, has become the high cost electricity provider in its nine state region even though it has been and continues to be deeply subsidized by US taxpayers. Sell it off into the private sector before it defaults on over $25 billion in what is (in effect) federally guaranteed debt. Refer to my TVA paper prepared for Heritage Foundation attached. Get rid of the Rural Utility Service and its $6+ billion in annual new loan authority(over $50 billion in outstanding electric loans plus $5 billion the Treasury FFB has loaned to the so called private bank owned by the electric coops called the Cooperative Finance Corporation as most so called electric cooperatives are large scale enterprises often serving metro areas such as Old Dominion Cooperative serving Northern VA. Get rid of DOE’s Power Marketing Agency and competitively auction off to the highest bidders all federal hydro power. Get rid of the federal income tax exemption for electric coops and municipal electric power providers. Make them pay federal tax just like privately owned electric utilities. Refer to my FERC filing on the adverse impacts on competitive electricity markets of the above policies.

3.  Get rid of all of DOE’s loan programs. It is silly to think that somehow one of the most incompetent departments in government can make loans that will result in new technologies being commercialize successfully for the long haul. That is what private capital markets do in this country and they do it very well. DOE bureaucrats lawyers consultant and politicos will never do this well if at all. Rescind the programs and sell off the loans.

4.  Get rid of all USDA programs (other than competitive R&D grants) for Biofuels. USDA’s loan program for advanced ethanol refineries is a disaster with a loan default of of over 40% and rising. These plants—mainly for cellulosic ethanol are not now market competitive nor will they ever be because the chemistry  too costly to produce to little ethanol that we do not need. Stop the myth of the “billion ton of biomass” so called study. This is pure fiction for the Agriculture and Energy committees of congress and not serious energy policy.

5.  Get rid of federal vehicle mileage standards (CAFÉ) and the unattainable 54.5 mpg standard for 2025. This federal mandate is costly for consumers and is resulting in ever larger pickup trucks that pose a major safety problem for smaller cars. It is pricing millions of middle class Americans out of the new vehicle market as new vehicle prices increase to pay for the expensive technology to squeeze out tiny fuel economy increases. And no—consumers do not get their huge investment in new so called fuel efficient vehicles back in gasoline savings much of the time. Let the marketplace decide what cars and trucks are needed not the White house, EPA and others who use theoretical studies often done by advocates of CAFÉ to justify the standards.

6.  It is a fact that federal energy policy over the past few decades has become anti competitive market. The committee should make and major effort to get rid of these counterproductive antiquated, costly policies as its highest priority for the next few years. An added benefit would be hundreds of million in annual federal budget savings by eliminating the above programs.

See the two following documents which expand upon the aforementioned topics:

TVA Heritage Final Paper–Sunset TVA

FERC filing 6-23-06 Revised Final Document (2)

Best regards,

Ken G. Glozer

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  1. Ken Glozer

    April 30, 2015
     
    Chairman, Energy and Commerce Committee
    Rayburn House Office building (RHOB)
    Independence Avenue & S. Capitol St. SW
    Room 2183
    Washington DC 20515
     
    Dear Fred;
     
    It has been a long time since we worked together in OMB in the 1980s during the Reagan years.
     
    I read your committee’s bill on the Strategic Petroleum Reserve and believe that it fails to focus on the most important issue for the SPR. Requiring DOE to develop a long range plan for the SPR assumes a 700 million barrel SPR to forever. DOE’s budget for all the upgrades, bells and whistles will consume billions over the coming years when a SPR may not provide any positive US net economic benefits and few, if any, national security benefits. My assessment is that China is the major beneficiary of the US SPR and they also are the major beneficiary of the $50-60 per year that the US spends for defense of the Persian Gulf. If I am right it makes no sense for the US to maintain and upgrade the SPR.
     
    The first order issue for the SPR is whether there are any net national benefits (economic and security) to having any SPR at all. The world has changed tremendously since the SPR was authorized and built in the 1970s and 1980s. North America, in a few years, will not import any oil from the Persian Gulf and is likely to be an oil exporter to the rest of the world. Why one would need a SPR in view of this is hard to understand— but an objective analysis is needed before major policy decisions should be made. The February 1990 SPR study (Title Page and contents attached) was very well done, objective and thorough. The study was done with a team of capable experienced analysts from the key involved agencies including OMB, Treasury, CEA, Defense, CIA, State, DOE and DOE/EIA. EIA models were used extensively as well as EIA staff.
     
    DOE does not have either the competence or the objectivity necessary to complete this important update of the 1990 study. The 1990 study framework and methodology evolved over nearly ten with extensive interagency debate on the best methods, models and assumptions for completing the SPR analysis. Only a competent interagency team can do the analysis that is needed. DOE cannot and should not.
     
    I would welcome the opportunity to meet with you, Chairman Whitfield, other members, your respective staffs to further explain what needs to be done and why.
     
    With best regards,
     
    Ken G. Glozer
     
    (Former Senior Executive Service, OMB career official who served as OMB’s energy expert for nearly 26 years)

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