California Previews the Next National Melodrama: Coal and the Clinton Legacy in Electric Power
Charleston, W.Va. February 15, 2001

Remarks by Jack N. Gerard President & Chief Executive Officer
National Mining Association
To The West Virginia Coal Association 28th Annual Mining Symposium

Thank you Ken Woodring, of Arch Coal, for your introduction to the West Virginia branch of the coal family.

And thank you ladies and gentlemen of the new West Virginia Coal Association.

Thank you for your welcome and for the opportunity to meet with you.

Today marks the beginning of my third month as president and chief executive officer of the National Mining Association.

This fact alone makes me feel – as I stand here – a little like a newlywed at a very big family reunion.

I’m excited to be here and you’ve made me feel most welcome.

Yet we’re about to embark together on an historic opportunity in energy that none of us could have predicted even six months ago.

And most of the family doesn’t know a thing about me.

Like a bride’s father and mother, uncles and aunts, you’ve got to be wondering about my intentions and…my prospects.

And so, what I propose for our first meeting this morning is:

• To inform you of my intentions – to touch on the ways I will think and work with some additional details of personal biography;
• Next, to explore our prospects – due to the situation in California real prospects are developing for everyone associated with coal, and all who will associate with coal;
• Then, finally, we’ll go over some of the association’s activities and objectives in this time of transitions in federal affairs and in the coal industry’s participation.

In the transitions at the national level there’s been a lot printed and much more said about the legacy of the departed Presidential administration:

• The Browner legacy at the Environmental Protection Agency;
• The Babbitt legacy at the Department of the Interior;
• And the umbrella Clinton legacy.

I’ll turn to this legacy as we move forward, for it is a close relation of the situation in California and is related to the prospects.

But before we start, there is another legacy that requires both early mention and a different kind of comment – the legacy of the National Mining Association.

General Richard Lawson presided at the union of the coal and hardrock branches of mining in their political representation. The unification was mandatory. The pace and scope of competition and politics at all levels is such that no segment of any industry has the luxury of trying to go it alone in public affairs.

Survival today requires the concentration of strengths and interests. It demands that they speak with one voice. It requires joining in coalition activities to multiply strength; and it demands making friends as widely as possible.

In a time of trouble and challenge, General Lawson:

• Blended two diverse groups, each led by executives with very few indifferent opinions;
• Then kept them together;
• And then infused in the united effort a reputation for integrity, credibility and effectiveness.

There’ll be no effort by me to reinvent the National Mining Association.

My intent is to build on the tradition and extend the achievement:

• To seize opportunities where they exist;
• To make opportunities where they are scarce;
• To adjust and synchronize the association’s activities with the other strong resources of the industry – resources such as the West Virginia Coal Association;
• And to participate to the maximum in all that is evolving – in politics, in policy, in public opinion.

My election may have surprised some here. I say this because it surprised me – surprised me, perhaps, more than anyone.

I was sure I had already settled into the more-comfortable life of founding partner and chief executive officer of a successful and growing consulting firm on Capitol Hill.

However, my best-made plans went the way of many other best-made plans for reasons and experiences that run all the way back to my hometown – Mud Lake, Idaho, population 190, a family community not unlike some in West Virginia.

My first job was with Gerard Brothers Dairy. I did not work for my father. The Gerards in this operation were my brothers and me.

Idaho winters are always rigorous, and Dad always had the heater going in the barn by 5 a.m. If every brother wasn’t on the job by 5:30, the heater went off; and we were left to finish the day’s chores on our own.

Dad called it incentive to pull together – no double meaning intended. It led us to keep track of one another, to check with one another frequently, and to trade information.

In a few years, we diversified. Dad gave us the use of a grain combine from his John Deere dealership and we began to harvest the neighbors’ grain. The working conditions were much better.

And so – in an outburst of business acumen – we sold the dairy and made the combine our core enterprise. We were happy to exchange the shovels and other duties of the barn for the tools of the harvest.

Following my first year of college, I accepted a two-year missionary assignment where I served as an assistant to the Mission President for Australia. My responsibilities involved the coordination, motivation and management of 200 young men and women volunteers.

As you can imagine, this was an interesting challenge – 200 19-to-21 year olds in a foreign land, paying their own way, conforming to strict standards far different than those of other 19-to-21 year olds.

When I came home, there were short stints in the Governor’s office of Idaho and as a lobbyist for higher education.

But curiosity about the federal government soon took me to Washington.

It was the outset of the Reagan administration: And I signed on as a intern for Congressman George Hansen, of Idaho.

In the welcome interview, he asked me to find him ways to save tax dollars and cut the federal budget. The inference I took: And don’t come back until you have something to report.

He never mentioned it again. But I was too dumb to be intimidated by the magnitude of the budget and too determined to give up.

At the exit interview, we shook hands; and then I produced my thick notebook of findings, offering it to him.

What’s this? he said.

Over $40 billion you can save the taxpayers, I answered.

Where’d you find it? he asked.

I documented it for him: In GAO reports – the work of the Government Accounting Office; in findings of House and Senate committees; in oversight testimony; in newspaper stories; from asking questions; and by following my nose.

Congressman Hansen immediately called the White House, and on the next day dispatched me to the Old Executive Office Building next door to the West Wing.

I took along my tattered, dog-eared report and met with the Reagan administration’s Director of Management and Budget, David Stockman. Mr. Stockman appeared to be appreciative and thanked me for my work.

Not long after, the Congressman received a personal note from Ronald Reagan. It thanked him for his work and went on to list items from my research that would be sent to Capitol Hill in the first Reagan budget.

The Congressman offered me a full-time job.

Even today one of my brothers swears that I owe my professional start to a habit I developed behind a shovel at the Gerard Dairy – the habit of following my nose.

I took the Congressman’s offer and – Idaho being prime mining country – embarked on simultaneous courses of study:

• The most important, a full immersion in the culture, values and fundamental importance of mining;
• And the other, to complete an undergraduate degree in night classes at George Washington University.

Later I was invited to join the staff of U.S. Senator James McClure who was:

• Chairman of the Committee on Energy and Natural Resources;
• And Chairman of the Appropriations Subcommittee on the Interior;
• And thus presided at important junctions from which to specify policy and direct its administration.

As the Senator’s director of legislation, I went in two directions:

• One was full immersion in the details and inter-relations of legislation, policy, budgets and administration;
• And the other was a widening in my understanding and appreciation of the enterprises and the resources that hold America together, especially those that flow from mining.

In these years, I also completed a law degree in night classes at George Washington University.

After Senator McClure decided to retire, I began to think about the future. In consequence there was also:

• Reflection on how much expensive-but-mediocre representation the McClure team had seen on behalf of clients who deserved better;
• The conclusion that the McClure team not only knew what constituted good representation, it also knew how to move legislation and to guide policy;
• The writing and presentation of the business plan for the government-affairs consulting firm of McClure, Gerard and Neuenschwander Inc.;
• And, then came formation of the firm.

The firm achieved success on Capitol Hill. Business responded accordingly.

And so, I settled into the comfortable life of chief executive officer and founding partner of a successful firm. I was making plans to relax and spend more time with my wife Claudette and our six children. I was sure I was settled down for all time.

Little did I know.

The search committee of CEOs approached me in the early rounds; but I gave them the senior practitioner’s view of the future.

I thanked them, but told them that my plans were made, my course set, my future secure; that I was flattered, but they ought to look elsewhere.

In the closing rounds, the committee approached again. They asked me to just consider the job description.

I agreed to read; but my big mistake was to take it home. I shared it with Claudette. She made a case that my experience was precisely what they wanted, that the job was tailor-made.

This was the sunset of complacency and the dawning of realization that all of my experience did lead up to this turning point.

Other thoughts welled up:

• Thoughts of the get-it-done traditions and entrepreneurial culture that motivate those in mining;
• Of the political movements and cultural trends that are dedicated to ripping out and casting aside the industry and the traditions;
• And, of how deeply the modern life of this nation depends on the material resources and electric power that can come only from mining.

Soon all was clear. I am a true believer!

This was not a job to me. It was a way of life – a passion.

I knew that no matter how comfortable, I could not turn my back on my beliefs, my experience or my passion.

And so, my name went before the search committee.

From the sum of my experience, the principles that will guide my conduct of the National Mining Association’s activity include the following:

• The day’s not over until the work’s done;
• We will coordinate and harmonize our capabilities, our strengths and our diverse membership across the range of activities;
• We will pursue objectives down all avenues and at all junctions open to representation – junctions of legislation, policy, budget, administration and, if necessary, judicial action;
• We will introduce our friends in office to one another and to our common concerns to maximize effectiveness – their effectiveness and our effectiveness;
• We will strive to make new friends for mining – new friends in elective office, in appointive office and among the public at large.

We don’t yet have all the answers; but we are willing to do what it takes to get the job done.

Coal the resource and coal the industry are two of America’s most valuable assets:

• Coal is our largest source of non-imported energy – 40 percent of all domestic fossil production, 95 percent of all reserves;
• West Virginia’s recoverable reserve alone is the equal of:
  • About one-and-a-half times all the natural gas in North America;
  • About two-and-a-half times the energy in this nation’s natural gas reserve;
  • And about three times our proved oil reserve;
• Coal delivers the majority share of America’s electric power, the crisis in California notwithstanding;

Californians would not have such a deep crisis today if they had not foreclosed coal in days gone by.

The crisis is not wider because the largest city of Los Angeles relies on and shares millions of tons of coal by wire – billions of kilowatt-hours generated elsewhere in the West;

The crisis is not deeper because coal-fired plants in the mountain states have raised output, where possible, to wheel power westward;

The point: Good public policy can neither neglect coal the resource nor penalize coal the industry – not if Americans are to have a hope of energy that is stable, reliable and adequate to their aspirations.

In matters of national and international energy, the relevant signs say that America’s aspirations and economic growth may be in peril.

Here and there around the nation some detect – and more suspect – early symptoms of the California syndrome.

In California, philosophies and personalities at the far edges of the green and consumer movements captured public policy and, in some cases, public office. Policy came to give preference to the novel, the exotic, the counter-intuitive and the would-be ideal.

The concern is that the legacies have imparted the same spin to the direction of events in the national power supply.

A good example is the "negawatts" concept of Amory Lovins of the Rocky Mountain Instititute, formerly of the group Friends of the Earth. Time magazine calls him a Hero of the Planet and the MacArthur Foundation once gave him a genius grant.

The word negawatts is a soundbite term Mr. Lovins conceived to merchandise his belief that conservation, demand-side management and renewable energy would meet all future power needs.

Time magazine has not recorded – as yet – what Californians might now be calling the Lovins concepts.

California has at least five weaknesses implanted by such preferences:

• Lack of intra-state generation capacity;
• Lack of diversity in the generation that exists – too little alternative to natural gas for too much power;
• Lack of transmission capacity for power and fuel;
• Over-stringent air regulations that take capacity out of service without regard to need;
• And, by most accounts, a sham deregulation – a counterfeit of the real thing that appears to have been an attempt to repeal the law of supply and demand.

California made itself a laboratory of the application of theory, and now the results of those experiments are making headlines every day.

The rolling blackout is the ultimate negawatt: The crudest tool of demand-side management.

California showed the new economy what the first economy has known all along – without power at the right time in the right places at the right prices, everything either slows down or goes down.

Adequate power and reliable power are a modern economy’s irreplaceable commodities.

There is mounting belief that California is a dress rehearsal for the next national melodrama.

For a national perspective, let’s turn to the legacies and the legators.

Let’s think about what the trade press calls former Director Browner’s legacy of regulatory experimentation at the Environmental Protection Agency:

• The former director told the trades: If Congress won’t make changes, the agency must make those changes;
• She was quoted: "I don’t know that we left a section of the Clean Air Act untouched….".

Under Ms. Browner’s direction, EPA discovered previously unknown authority to regulate and tried to use it as follows:

• To concentrate new generation in natural gas and force out of service significant capacity fueled by coal;
• To raise the cost of power from coal-capacity that remained in service;
• To deter generators from new coal-fired capacity from fear of subsequent regulatory caprice;
• And to enact through the backdoor a climate policy that the Clinton administration never sent to Congress for fear of rejection.

In the most imaginative of these matters, EPA’s approach is pending before the Supreme Court on the ultimate appeal of an appellate court decision against the agency.

Lower court decisions are running against EPA in other areas too. As did a district judge did recently in another mining case, the lower courts are finding in one way or another:

• That "EPA’s interpretation…(is) impermissible…"
• Or that it is "…contrary to plain language."

Let’s move on to the other legacies and other resources. Let’s think about former Secretary Babbitt’s legacy at Interior as set forth in a 60-page farewell edition of the department’s People, Land &Water.

The former Secretary was quoted (in essence): "We didn’t need to go to Congress…we…focused on…flexibility rather than…amending the law."

And let’s think about former President Clinton’s umbrella legacy:

• About the specific upwelling of midnight regulations in the closing hours;
• And about the regulatory objectives of the administration in general.

You lawyers, keep this in mind: In 1993 the White House issued a press release demanding that Congress change the law to conform to a favored rule-making.

Regulation without representation has no more in its favor than taxation without representation.

While we’re at it, let’s also put in perspective the midnight upwelling of rules and regulations in the Federal Register.

For mining, the 11th hour output included the following:

• From EPA – 17 regulations;
• From Interior – four regulations;
• From the Department of Labor – six regulations;
• And from the Department of Agriculture – one, the roadless initiative.

Compare them in the mind’s eye with these other documents that deal with human conduct and public affairs:

• The Preamble to the U.S. Constitution – in 52 words it gives all the purposes of government;
• The Constitution itself – in 4,400 words it gives the acts and functions;
• The Magna Carta, bedrock of all democratic tradition – 5,000 words;
• The Old Testament of the King James Bible with all its commandments, laws, admonitions, abominations, proverbs, prophecies and psalms – 590,000 words;
• The last day’s Register of the Clinton Administration – more than 1 million words;
• The last three Registers – 3 million words total;
• And, in the Registers for the last year of the Clinton administration, a swelling:
• To 74,250 pages;
• And to 89 million words.

The midnight regulations were the final expression of the departed administration’s dominant trait and general philosophy. For two terms its functionaries used regulation to implant in the law and policy changes of direction they knew that Congress would not otherwise approve.

The association will participate in the Bush administration’s review of these last-minute regulations.

In energy, the realization is taking hold in the new Congress and the new administration that:

• Absent modification, the nation may soon be justified in talking about a Clinton brownout legacy;
• That the power supply may soon be inadequate – to much demand, not enough capacity;
• That the reliability of supply may soon be at risk – limited capacity to generate or to transmit;
• That the recent legacies may well have set the stage for national episodes of the California syndrome in the rest of the nation;
• And that the sum of concerns adds up to a problem which demands early and serious attention for national energy policy.

Today it looks like and feels like things will move faster in energy than anyone could have guessed eight weeks ago or even four weeks ago.

The NMA involvement in these activities is early and extensive.

Thanks to the good offices of Senator Robert Byrd, of West Virginia, a stalwart for the wise use of coal, the industry is positioned well to move ahead strongly with developments – thanks to him and to House members of the likes of Alan Mollohan.

For context, let’s review the recent developments.

President Bush has established an Energy Policy Development Group and appointed Vice President Cheney to lead it. The members include the new secretaries of Energy, the Interior and Agriculture and the new director of the EPA.

Their mission is to find out the dangers, to identify the cures and to recommend a national energy policy before October. Among the specific concerns are the generation of electric power and the things that pertain to it, including adequacy and reliability of fuel supply – a special feature of coal.

The users of energy and the producers of energy are in consultation with leaders of the executive and legislative branches.

In the legislative branch, the majority is preparing a consensus energy bill. The major energy industries are joined in coalition behind this effort, and each will support the provisions for the others within the bill.

The heart of the coal portion was just introduced as a free-standing bill – the National Electricity and Environmental Technology Act, called the NEET bill. The number is S. 60.

NEET was introduced by Senator Byrd; and in bipartisan co-sponsorship is Senator Mitch McConnell, of Kentucky.

To the point of maximizing effectiveness, we’re adding other sponsors from other states across the range of mining’s activities.

Thanks to NMA members, our newer co-sponsors for NEET from the hardrock states of the West include the likes of:

• Harry Reid, of Nevada, the Whip and second-ranking Democrat in the Senate;
• And Jeff Bingaman, of New Mexico, the ranking Democrat on the Energy and Natural Resources Committee.

America had adequate power in the 1990s – and most parts of America still do have adequate power – because coal is in the mix.

At different times during the decade, the other forms of generation went up or down according to changes in the price of fuel, or the need to take big units off line for refueling or maintenance, or because of low water.

Through it all, the amount of power generated with coal rose almost 20 percent – capacity utilization rose and began an ongoing ascent that analysts think will reach 80-to-85 percent. It’s already 82 percent in some parts of the West.

Coal filled the gaps and satisfied growth. Coal was America’s margin of reliability.

Coal is filling the gaps today, is still the guarantor of reliability.

Coal is America’s first-line reserve of electric power – 275 billion tons of fuel and more than 200 years worth of electric power at today’s rate of use.

The NEET bill connects the present with the future – spans the gap and begins to bring order from the Clinton-Browner legacies.

The bill fosters the introduction of the clean-coal technologies into commercial use as follows:

• To upgrade existing capacity in ways that raise output;
• To repower existing sites;
• And to build greenfield capacity.

The bill offers incentives as follows:

• A period of "safe harbor" exemption from added, imaginative regulation in the style of Ms. Browner – this an assurance to investors;
• An investment tax credit – this an inducement;
• And a production tax credit of about three mills – a credit that is about 80 percent less than the 1.5 cents per kilowatt-hour credit now granted to wind power.

In addition, the technologies that NEET would foster can generally out-perform the most stringent federal emissions standards as follows:

• Hold sulfur dioxide to from one-sixth to one-quarter of the limit;
• And hold nitrogen to one-fifth to one-half the limit.

Joined specifically with NMA to advance NEET are:

• The Coal Based Generation Group that includes:
  • The Edison Electric Institute;
  • The National Rural Electric Cooperative Association;
  • The Center for Energy and Economic Development;
  • And the American Association of Railroads.
• Plus the Coalition for Affordable and Reliable Energy, called CARE , which includes all of the above plus:
  • More power generation;
  • Other basic industries and businesses;
  • Labor;
  • And agriculture.

CARE will soon initiate an opinion campaign aimed at members of Congress and their staffs that stresses the irreplaceable link between electric power and coal.

And so, for the Washington branch of the family business, those are the prospects, and those are my intentions.

Remember, nothing is guaranteed. There are less than 500 working days left in the current Congress to set things aright, and less than 1,000 days left to the Bush administration.

All we have is the moment. And time’s a wasting asset.

I invite you to join us in the effort to bring about forward movement.

Urge the other members of the excellent West Virginia delegation in Congress to co-sponsor NEET when the time comes.

Ask your governor and your legislature to make their support known in Washington as matters progress, and to support energy activity on the agendas of their professional conferences and councils.

The steps taken this year could well guarantee the future of coal and the reliability of America’s power supply for at least the next 20 years.

Coal is the antidote to the futility of the negawatt and a specific cure for the California syndrome.

Coal is diversity.

Coal is reliability.

And coal is America’s only certain electricity reserve.

Whether new economy or basic economy, if Americans are to have energy equal to their aspirations they’ll need coal – West Virginia coal, eastern coal, interior coal, western coal.

The American coal industry may not have every answer, but this much is sure: We’re willing to do what it takes to get the job done!

Thank you for your attention, and for making me feel like one of the family.