Ed. note: This two-part series addresses repeated media errors about the role of Charles Koch in the formation of the Institute for Energy Research (IER) in 1989. Part I yesterday covered the history of the Institute for Humane Studies–Texas, the forerunner to IER. Part II below reviews the formation and early history of IER, then based in Houston, Texas.
Q1. Roger Donway: First, briefly summarize the major point of Part I yesterday on the founding of the Institute for Humane Studies–Texas (IHS–Texas), the predecessor to the Institute for Energy Research (IER).
A1. Robert Bradley Jr.: IHS–Texas was a classical liberal organization focused on education, with Greg Rehmke focused on high school debate and the both of us on summer seminars for business people. Energy was part of it to the extent that I lectured given my specialization with oil and gas history and related public policy.
Q2. But there has been some misinterpretations and error about IER and IHS–Texas….
A2. Yes. It involved the bogeyman, classical-liberal businessman Charles Koch. He was not directly involved in the formation of either IHS–Texas in 1984 or IER in 1989. He was a passive director of the former and not involved in the latter. No monies were received either from Mr. Koch.
Q3. Is their anything wrong with Charles Koch to have to emphasize this?
A3. The problem is that the mainstream media and others want to tarnish IER as a “Koch operation.” It is a Rob Bradley operation, if anything, although in 2007 IER would outgrow me by establishing a Washington, DC office with a full staff and an much expanded operation.
Let me add that Charles Koch is a principled entrepreneur of a great company. He does not seek government subsidies but specializes in Good Profit, real wealth creation from consumer demand where taxpayers are not involved non-neutrally.
Q4. This was covered yesterday in regard to a since corrected article in the Austin American Statesman tying Charles Koch to IER.
Q5. So how did IER emerge from IHS–Texas?
A5. As explained yesterday, IHS–Texas became dormant with its only employee leaving for another position, so I and a few others kept the nonprofit going on a volunteer basis.
But in 1989, with the publication of my first energy book, The Mirage of Oil Protection, I needed to have an independent affiliation from my full-time employer, an interstate transmission company, Transwestern Pipeline, that was part of Enron Corp.
So that led to a name change from IHS–Texas to IER, which required lawyer help and a new statement of purpose to retain our nonprofit educational foundation status, a 501c3 organization in the eyes of the IRS.
Q6. A promotion of sorts…
A6. Well, it was. I suddenly was “President, Institute for Energy Research.” Before, I was “an analyst with an interstate gas transmission company in Houston, Texas” or something like that.
Q7. What was it like to be a full-time employee and run a nonprofit at the same time?
A7. I was always busy–nights and weekends. Working on IER matters got the adrenaline up so I put the time in. Why goof off when you are trying to save the world? But more seriously, I felt I was filling a large gap in the classical liberal movement and thus excited.
I also had a good board of directors and some able talent that needed a voice in the free market side of energy.
Q8. Give us some names for posterity.
A8. Board-wise, I had William Johnston, a free-market energy PhD. who labored in government on oil price and allocation regulation in the 1970s, as well as Emma Broussard who was very free market and an expert on Latin America energy issues.
A gentleman named Howard Gano, Jr. was interested in the free market and classical liberalism and helped us on the financial side of things.
Q9. What was your budget in the early years?
A9. Not much! It was around one thousand dollars in our first year. It took awhile to get to the low five figures for sure.
Everything was volunteer, which left expenses to cover, which we did with some contributions, such as from my father. But we had to meet a public support test, and we were able to do that.
Q10. So a real shoe-strong operation.
A10. That and more, really. We did not have a dedicated phone line, for example, until the Atlas Foundation, which was dedicated to helping free-market upstarts, paid for one.
That story began when the New York Times mentioned me and IER in a February 3, 1991, piece by Matthew Wald, “If It’s Good News for the Oil Industry, The World Beware.” It mentioned Houston as our home too.
Well, IER did not have a phone number, and there was complaint. So Atlas came to the rescue and got some good publicity for their effort.
But being so small but productive was fun. I operated out of my home, which lead to questions about my suite number for those mailing to us. I told them “the had the whole building.” And when I got a call about a project, I would say, “I’ll put my best person on it.” Which was … me.
Q.11 But you were getting publicity and had work product of note.
A11. Yes. The industry trade press liked our messages, particularly in the natural gas area. Natural Gas Week under founder/editor John Jennrich ran a number of stories on me. He famously referred to IER as a “think bucket” rather than, like Cato, where I was doing a lot of my work, a “think tank.”
We even got up a press list and faxed out News Releases on things, which got us publicity. One time we fussed at the American Gas Association for pushing some regulation and literally got them flipping around in response to press inquires and reports. Ken Lay saw my father and commented, smiling, that I was “rattling AGA’s cage.”
Q12. Ken Lay knew your father?
A12. They were business associates and friends coming out of Lay’s tenure as president of Transco Companies. It’s a long story, maybe reserved for a venue where I can revisit my energy life anecdotally.
Q13. How did this play out at work, at Enron, or really Transwestern Pipeline?
A13. Good question. The big man, the real decision-maker, was Ken Lay, a Ph.D economist who took a liking to me and my maverick ways. I tried to keep both of my lives separate, which he appreciated, and I never asked him for money to create a conflict of interest.
Q14. Were there conflicts regarding public policy between your views and Enron’s regarding natural gas or other energies?
A14. Yes and no. With natural gas, the need to expedite certification for new capacity and to remove or at least lighten rate ceilings (wholesale pipeline rates under FERC cost-of-service regulation) called for free market reform.. I was all over that at IER, as well as other inhibiting regulation such as the Fuel Use Act which advantaged coal at the expense of natural gas.
In 1991, I received a good deal of trade press interest (they are hungry for stories as either dailies or weeklies) in my call to abolish the Natural Gas Act of 1938 and state regulation of natural gas utilities. Lay wrote: “I totally agree, Keep up the provocative and productive work. Ken 9/25/91)
Q15. But there were differences too.
A15. Yes. My 1989 book on oil tariffs were not what Ken Lay and Enron wanted given that cheap imported oil were depressing volume and rates in California and in Florida, respectively.
But Ken Lay wrote me a nice note upon the publication of my The Mirage of Oil Protection.
Later on, however, with Enron’s embrace of climate alarmism and still later, wind and solar energy, the divergence became more and more. This was in the mid-to-late 1990s.
Q16: Jim Clarkson, who is a director of both IER and the American Energy Alliance today, was part of the early history.
A15. Absolutely. Jim runs through the history above.
In 1989 or so, I met this fellow who is a free-marketeer focused on energy. The energy manager of Southwire Company, a privately held corporation paying a big electric bill with Georgia Power for its copper wiring operation, Jim was a flaming free marketeer.
Jim had his own think bucket, the Southern Regulatory Policy Institute. Though not a 501c3 nonprofit, SRPI was productive with its energy policy booklets produced at the company print shop. But most of all, Jim was a principled classical liberal and as enthusiastic as can be.
He found out about me and IER and was all in. He made me feel important by insisting that I take out dates because my analysis was “timeless.”
Before long, his print shop was publishing our studies, and in 1991 he merged his operation into IER. That was a big step for us! We were now a bigger think bucket.
END OF PART II. PART III AT A LATER DATE WILL CONTINUE THE PRE-1997 HISTORY OF IER FOR THE HISTORICAL RECORD.
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June 24, 2021 By Robert Bradley Jr.