http://www.commondreams.org/headline/2011/04/07-5

Published on Thursday, April 7, 2011

Statement by 350.org
Washington, DC — Even as Congress passes laws designed to gut the Clean Air Act and prevent action on global warming, the merger of two of the strongest climate campaigns signals the beginnings of a powerful mass movement for real action.

Grassroots groups 350.org and 1Sky today announced they will combine under the 350.org banner and dramatically expand their work. “In light of last night’s vote, it is more important than ever to unite and train a bigger, more powerful grassroots movement capable of attacking our corporate polluter opponents and fighting for a real clean energy future. This moment is our call to action,” said Liz Butler, Campaign Director of 1Sky.

Leading up to the 2010-midterm elections, dirty energy industries spent over $500 million on lobbying and campaign expenditures. That number is likely to be dwarfed in 2012, and the new organization believes it requires swift, decisive, and powerful response.

“People are excited about this because we haven’t been doing it: we haven’t been collaborating enough, we haven’t been connecting and mobilizing enough local leaders across the country. This is a critical moment for the environmental movement, for the American people as a whole. The new 350.org is a huge opportunity to grow the people power needed to counteract corporate influence in politics and reverse the climate crisis,” stated May Boeve, Executive Director of 350.org, who will head the newly merged group.

The new organization, 350.org, has already begun work in the United States to train and mobilize a powerful large-scale movement of individuals, businesses, organizations, and community leaders pushing for climate action. The U.S. campaign will complement and support the international activities of 350.org, overseen by a board chaired by 350 Founder Bill McKibben.

In an essay announcing the merger, McKibben and new 350.org board member, author and activist Naomi Klein, wrote, “The idea is not to supplant the Washington green groups, but instead to give the whole movement new clout—enough clout to withstand the crushing power of oil money.”

http://www.huffingtonpost.com/2011/04/06/how-the-oil-lobby-greases_n_845720.html

by Dan Froomkin froomkin@huffingtonpost.com

Clout in Washington isn’t about winning legislative battles — it’s about making sure that they never happen at all. The oil and gas industry has that kind of clout.

Despite astronomical profits during what have been lean years for most everyone else, the oil and gas industry continues to benefit from massive, multi-billion dollar taxpayer subsidies. Opinion polling shows the American public overwhelmingly wants those subsidies eliminated. Meanwhile, both parties are hunting feverishly for ways to reduce the deficit.

But when President Obama called on Congress to eliminate about $4 billion a year in tax breaks for Big Oil earlier this year, the response on the Hill was little more than a knowing chuckle. Even Obama’s closest congressional allies don’t think the president’s proposal has a shot.

“I would be surprised if it got a great deal of traction,” Senator Jeff Bingaman (D-N.M.), chairman of the Senate energy committee, told reporters at the National Press Club a few days after Obama first announced his plan.

Rep. Earl Blumenauer (D-Ore.), co-author of a House bill that closely resembles Obama’s proposal, nevertheless acknowledges that it has slim chances of passing. “It will be a challenge to get anything through the House that includes any tax increase for anyone under any circumstance,” he told The Huffington Post.

The list goes on: “It’s not on my radar,” said Frank Maisano, a spokesman for Bracewell Giuliani, a lobbying firm with several oil and gas industry clients. “It’s old news and it’s never going to happen in this Congress. It couldn’t even happen in the last Congress.”

Indeed, the oil and gas industry’s stranglehold on Congres is so firm that even when the Democrats controlled both houses, repeal of the subsidies didn’t stand a chance. Obama proposed cutting them in his previous two budgets as well, but the Senate — where Republicans and consistently pro-oil Louisiana Democrat Mary Landrieu had more than enough votes to block any legislation — never even took a stab at it.

Now that the House is controlled by the GOP, Obama’s proposal is deader than an oil-soaked pelican. Over the last decade in particular, the Republican Party’s anti-tax policies and pro-drilling campaign rhetoric have become nearly indistinguishable from those of Big Oil.

“Obama’s been proposing to get rid of these subsidies since his first budget in February 2009,” said Tyson Slocum, director of the energy program for the consumer watchdog group Public Citizen. “The obstacle has been the petroleum industry. The American Petroleum Institute has dug in their heels and is fighting tooth and nail to retain these subsidies.”

The American Petroleum Institute (API) is the industry’s enormously powerful lobbying and trade association.

“API is very focused on making sure that we have a voice in policy debates,” said Martin Durbin, the organization’s executive vice president for government affairs. “Certainly I hope we’re having some role in the debate here.”

Is he pleased at the industry’s success in heading off this particular debate? “I feel that we are successfully getting the point across, successfully educating policy-makers about the importance of our industry throughout the economy,” he said.

Even before Obama’s 2011 State of the Union address, API president Jack Gerard used his “State of American Energy” speech to cast the repeal attempt as a tax increase and a job-killer. “The way I see it, our policy-makers are at a crossroads,” Gerard said. “They face two choices: One leads us forward and promotes jobs, investments, revenue and growth — or one that takes us backward, threatening the progress we’ve made and closing the door on future opportunities.”

Gerard was speaking to a receptive audience. As Time noted, “Republican Fred Upton, the new chairman of the House Energy and Commerce Committee, was in the front row of the audience for Gerard’s speech.” Upton did not return calls for comment.

A PAMPERED INDUSTRY

In January, Obama previewed his 2012 budget proposal during his State of the Union address. “I’m asking Congress to eliminate the billions in taxpayer dollars we currently give to oil companies,” he said. “I don’t know if you’ve noticed, but they’re doing just fine on their own.”

The line got a laugh, and then Obama pointed out the trade-offs of giving public support to a powerful private interest: “Instead of subsidizing yesterday’s energy, let’s invest in tomorrow’s.” he said.

With the actual budget proposal came more details: a list of tax breaks that, if eliminated, would generate $43.6 billion of additional revenue over the next 10 years. Two of the biggest breaks date back nearly a century, to a time when a young, untested industry needed incentives to drill.

The API, after adding in the cost of some other proposed measures (including reinstating Superfund taxes and repealing two accounting gimmicks that would affect other industries as well), concluded that Obama’s FY 2012 proposed budget could cost the oil and gas industry $90 billion over the next decade.

The loss of subsidies would affect the industry’s bottom lines, but would hardly, as Rep. Joe Barton (R-Tex), recently suggested, start driving companies out of business.

That’s because Obama was right; the oil companies are doing just fine. The big five — BP, Chevron, ConocoPhillips, ExxonMobil and Shell — made a combined total profit of nearly $1 trillion over the past decade, with ExxonMobil clearing $31 billion in profits this past year alone.

And it’s hardly the case that the oil industry needs added incentives to drill. Former oilman George W. Bush made that point as clearly as anyone when he leveled with members of the American Society of Newspaper Editors in a 2005 address: “I will tell you with $55 [a barrel] oil we don’t need incentives to oil and gas companies to explore,” he said. “There are plenty of incentives.”

Slocum, of Public Citizen, concurs: “With prices around $100 a barrel, it is asinine to suggest that $4 to $6 billion a year collectively is driving decisions about whether or not to pursue extraction opportunities in the U.S.,” he said. “It is market prices that are driving investment decisions.”

While the oil industry warns that repealing the subsidies — in addition to costing jobs — would lead to higher gas prices, that too is hardly evident. Fuel costs largely reflect the price of oil, and that price has little to do with how much it costs to produce it. According to a U.S. Energy Information Administration survey, between 2007 and 2009, major U.S.-based oil companies spent an average of $29.31 to produce a barrel of oil. About one third of that amount went for extraction and taxes, and two thirds for exploration and development — precisely why those companies are making such a killing when prices are $100 a barrel or more.

Rather than production costs, the price of oil is set by the global market, and is affected by multiple factors. Those can include financial speculation and geopolitical fears that lately have been causing wild price swings. The repeal of a few billion dollars in subsidies isn’t enough to make more than a small ripple in an approximately $3 trillion-a-year global market.

Blumenauer argues that subsidies aren’t appropriate for any well-established industry. Instead, he says, they should be used to support developing ones. “What’s happened over the years, as the oil industry matured, as the giants consolidated into global players, and as the price of oil has been on a pretty steady upward trajectory — with some hiccups along the way — is that there ceased to be any rationale for providing these tax subsidies other than they were in the code and they benefited some of these companies.”

By contrast, he points out: “The rationale for providing tax subsidies for emerging technologies and energy sources now makes perfect sense for solar, wind, and geothermal — where helping them come to scale would help provide a better balance to our energy choices.”

Oil and gas subsidies don’t appear to wash with the general public, either. In a February NBC/Wall Street Journal poll that proffered suggestions for things that might be cut or eliminated as a way to reduce the current federal budget deficit, “eliminating tax credits for the oil and gas industries” was considered acceptable by a whopping 74 percent of Americans. Nearly 50 percent called it “totally acceptable.” The only policy proposals that were more popular were raising taxes on the rich, eliminating earmarks, and canceling unnecessary weapons systems.

The API says it has gotten very different signals from people.. Durbin said API’s own polls show otherwise. “If you ask people, ‘Should we take away unfair advantages to Big Oil,’ then of course they’ll say yes,” he said. “If you ask a straight question, as we do… you get a much different answer.” API’s poll question asked “Do you support or oppose increased taxes on America’s oil and natural gas industry?”

ENERGY GIANTS ANTE UP

With so much public opposition, why do subsidies remain? You might as well ask why there is no carbon tax, or why there was no significant reform legislation passed after the BP oil spill.

The answer is that one of the many things the industry can do with its fat pocketbook is hire a veritable army of sharp lobbyists and back them up with big wads of cash in the form of campaign donations and spending. The end result is that the industry has a remarkable ability to get its way on Capitol Hill.

According to the Center for Responsive Politics’ website, the oil and gas industry has spent more than $1 billion on lobbying since 1998, including a jaw-dropping $147 million just last year.

For comparison’s sake, $147 million is about equivalent to the total budget of 100 congressional offices. That’s more than the $103 million spent in 2010 by the financial service industry, another potent lobbying force — but considerably less than the $240 million spent by the pharmaceutical industry. Among major industries, Opensecrets.org ranked Big Oil fifth in terms of lobbying dollars spent, behind only Big Pharma, electric utilities, business associations and insurance.

The oil and gas industry used its $147 million to employ 788 individual lobbyists in 2010 — some 500 (or almost two thirds) of whom, according to Opensecrets.org, are former federal employees who came through the revolving door particularly well versed in the ways of government.

All told, that’s well more than one oil and gas lobbyist per member of Congress out there on the Hill arming allies with talking points and briefing books, spinning the undecided and pressuring the opposition.

And there’s more of them every year. Consider the trendlines. As recently as 2004, the oil and gas industry spent about $52 million a year in lobbying; by 2009, that figure was up to $175 million — or a 300 percent increase in just five years.

The industry backs up its extraordinary lobbying effort with lavish spending on political campaigns. Candidates associated with oil and gas companies made about $15 million in direct campaign donations during the 2010 mid-term election cycle ($26 million during the 2008 presidential cycle).

The industry was also responsible for more than $10 million in donations through its political action committees, or PACs, in the 2010 cycle.

The trendlines are notable here, as well. In the early ’90s, oil and gas campaign spending favored Republicans over Democrats by about a 2 to 1 margin: For every $1 the industry gave to Democrats, it gave Republicans $1.78. But starting in the 1996 election cycle (think Al Gore), that changed dramatically. Now, for every $1 the industry gives Democrats, it gives Republicans about $3.35.

Among the top oil and gas industry donors in the 2010 cycle, Koch Industries and ExxonMobil head the list. And Opensecrets.org’s top 20 list of oil and gas money recipients is 4 to 1 Republican.

In addition to contributions to individuals and PACs, there’s the whole new world of spending opportunities opened up by recent Supreme Court rulings that essentially blew a hole through the post-Watergate campaign finance laws.

Super PACs are groups that can now accept unlimited contributions, though they must disclose their contributors. Opensecrets.org calculates that companies with interests in the energy sector combined to give more than $5.6 million to Super PACs in the 2010 cycle.

Former Bush political guru Karl Rove’s American Crossroads group, for one such Super PAC. It spent $21 million on political advertising in the 2010 cycle; oil and gas interests contributed just over $3 million of that amount.

The recent court rulings also opened the way for nonprofit groups to spend unlimited amounts of money on political campaigns — and unlike the Super PACs, they don’t have to disclose their donors. All they have to do is report how much they spent.

These groups, led by the U.S. Chamber of Commerce, reported $140 million in campaign spending in the 2010 cycle, the vast majority of which went to support conservative causes. There’s no way to know how much of that money came from Big Oil.

Adding yet more firepower to its lobbyists’ arsenal, API announced last month that it will start funding political campaigns directly through a new PAC of its own — in addition to what its member organizations give already.

“API is very focused on making sure that we have a voice in policy debates,” said its spokesman, Durbin. “We’re always looking at ways to improve the way we do our jobs here. This just adds one more tool to leverage our ability to get the point across about the critical nature of this industry.”

One more thing: According to another study by the Center for Responsive Politics, oil and gas industry holdings are some of the most popular investments among lawmakers and their spouses, and in recent years have grown in value, offering a bundle of potential conflicts of interest problems.

“Without question, among all the different industries that lobby the federal government, that make campaign contributions, oil and gas is right at the top of the top,” said CRP’s Dave Levinthal. “They can invest incredible resources into the political process that make so much of a difference in Washington, at the cost of a fraction of a faction of their haul.”

And it’s not just the breadth of their efforts — it’s the ferocity and the effectiveness.

Last month, one of the House’s nine freshmen Democrats, Rep. William Keating of Massachusetts, tried to tack a subsidy repeal onto a continuing budget resolution. He failed, by a 73 vote margin, with not a single Republican voting in favor and 13 Democrats voting against the measure.

Keating said he considers that vote a testament to the power of the oil and gas lobby. “It’s incredible to me. It would be my Exhibit A,” he said. “Because we’re sitting here in the midst of a budget deadlock, we’re sitting here cutting Head Start programs, police, fire, border security, reading teachers — we’re sitting here cutting the basics, and there’s just this refusal to even consider subsidies for the oil companies.”

There’s no business or economic argument for them, Keating said. “These are profitable businesses right now. This isn’t a situation where you’re trying to provide capital for businesses that need it, or trying to provide assistance to get a small business off the ground. It’s not for economic development. It’s not for job creation. It’s not to enhance the middle class. So why is it there?”

The answer, Keating said, has to be the industry’s political clout. “I used to be a district attorney. Many times you begin an investigation by eliminating everything else. So I’ve been trying to eliminate every other possible reason, and I’m left with that.”

The money the industry spends influencing legislation and elections looks enormous — until you compare it with what it buys. “If you look at $4 billion [in subsidies] annually, compared to say $200 million for lobbying and campaign spending,” said Daniel J. Weiss, director of climate strategy for the Center for American Progress Action Fund, “that is a 20-to-1 payoff.”

And maintaining subsidies is only a small part of what the oil industry lobby has accomplished. Last session, the industry also blocked cap-and-trade legislation and staved off any action in response to the BP oil spill. Right now, it’s fully occupied trying to defund the Environmental Protection Agency and roll back regulations across the board.

UNBREAKABLE TAX BREAKS

Two of the big tax breaks Obama wants to roll back were created generations ago to provide incentives for what was then a nascent industry. One, which covers the “expensing of intangible drilling costs,” is a nearly 100-year-old credit intended to help make up for the losses associated with all the “dry holes” that were a common occurrence back then. Modern extraction science has made them something of a rarity. The other sweetener, called the “percentage depletion for oil and natural gas wells,” dates back to 1926. (See this Congressional Research Service report for more details.)

As anachronistic as those two seem today, it’s the third big tax break Obama wants eliminated that may be even more outrageous: a massive giveaway jammed into a 2004 bill that was supposed to create manufacturing jobs.

Back in 2004, the World Trade Organization had repeatedly declared American export tax incentives illegal, so Congress set out to replace them with an income tax deduction for domestic manufacturing. The oil and gas industry managed to get its nose under that tent flap.

John Buckley, a former Democratic chief tax counsel for the House Ways and Means Committee, remembers exactly how it happened. “That was Bill Thomas,” Buckley said, referring to the California Republican and then-chairman of the Ways and Means Committee, and a great friend of the oil industry. “It was that simple.”

Oil and gas companies were specifically precluded from taking the export subsidy Thomas’s bill was replacing. “So it was hard to justify,” Buckley said. But Thomas rammed it through nonetheless. Thomas, who now works at the K Street lobbying and law firm Buchanan Ingersoll & Rooney, could not be reached for comment.

When Democrats retook the House three years later, they mounted a serious effort to repeal oil and gas subsidies. H.R. 6, the sixth in a series of promised bills, was known at the time as the “Ending Subsidies for Big Oil Act of 2007.” It passed the House by a vote of 264 to 163 — including 36 Republicans.

But by the time it made it out of the Senate and was signed into law by Bush — some 11 months later — it was known as the “Energy Independence and Security Act of 2007” — in which the big oil subsidies lived on.

Despite considerable Republican support, the bill couldn’t get 60 votes in the Senate as long as it included the subsidy repeal — which, as in Obama’s current proposal, was paired with tax breaks for renewable energy sources. The second of two cloture votes was particularly close (59 to 40) and only failed because two Democrats — Sens. Mary Landrieu of Louisiana and Arlen Specter of Pennsylvania — voted with Big Oil.

Once the repeal provisions were jettisoned, the bill passed overwhelmingly.

The lesson of that vote — and the Senate’s failure to take up the hard-fought cap and trade legislation passed by the House in 2009 — combined to make last session’s House Democrats more wary of angering oil interests for the sake of legislation that would eventually be scrapped.

“It was very difficult to be able to produce a majority for something that wasn’t going anyplace in the Senate,” Blumenauer explained.

Democrats this session have formally introduced legislation in both Houses to repeal the subsidies. A House bill co-sponsored by Blumenauer, Rep. Ed Markey (D-Mass.) and others aims to cut about $40 billion in oil and gas subsidies over five years. It follows the general outlines of Obama’s plan, but would leave the subsidies intact for small, independent companies.

A Senate bill introduced by Sen. Robert Menendez (D-N.J.) and others would eliminate about $20 billion in subsidies over ten years.

There are two conceivable ways there might be some movement in the near future: Obama could demand some revenue increases as part of a larger deficit-reduction deal with Republicans. Alternately, some Democrats hope the oil subsidy issue will draw attention from some Tea Party Republicans the same way ethanol subsidies have. So far, however, there are no signs of movement on either front.

Keating said the issue transcends party lines — or at least it ought to. “I’m not going to say it’s just a partisan issue — although by definition, having no one on the Republican side vote for it would qualify,” he said. “This should be something that everyone agrees to, regardless of what party. So if there’s Democrats that wouldn’t cut here, then they’re in the same position of trying to justify something that’s not justifiable.”

Ben Schreiber, a climate and energy tax analyst for Friends of the Earth, sees a moment of reckoning ahead. “As we see deeper and deeper budget cuts, and people are more aware of what they’re losing, the reality of billions of dollars in handouts to the oil and gas industry is going to be less and less palatable,” he said. “It’s one thing in a vacuum, but when it comes to a question of educating our children or billions in tax breaks for the oil industry, that choice becomes much harder.”

“Ultimately, what would really make a difference would be long-term campaign finance reform,” said Weiss, the energy expert at the Center for American Progress. “Because if you remove Big Oil’s money from the electoral system, then you’ve reduced one of their major pressure points.

“Short of that,” he said, “it’s going to be public outrage about high gasoline prices.”

Public Citizen’s Slocum was more prescriptive. “For there to be any change, Democrats will need to make their public case much more assertively,” he said. They will need to start pounding away with populist messages about high gas prices, and making sure the public makes the connection that, “Hey! The oil companies ought to pay their fair share,” he said.

Slocum’s conclusion: “It’s going to take a counter to the American Petroleum Institute.”

Special thanks to Richard Charter

http://www.publicintegrity.org/articles/entry/3120/

This is why it is so important that unions exist and that the Democratic Party recognizes the value of grassroots support; they should listen to us more often. DV

Koch spends tens of millions trying to shape federal policies that affect their global business empire
By John Aloysius Farrell | April 06, 2011
Koch Inc., headquartered in Wichita, Kan., spends tens of millions of dollars to lobby Congress and federal agencies on issues ranging from oil and gas to the estate tax. Credit: Larry W. Smith/Associated Press

At an EPA hearing last summer, representatives from Koch Industries argued that moderate levels of the toxic chemical dioxin should not be designated as a cancer risk for humans.
Greenhouse cash

When members of Congress sought higher security at chemical plants to guard against terrorist attacks, Koch Industries lobbyists prowled Capitol Hill to voice their opposition.
And when Congress moved to strengthen regulation of the financial markets after recent collapses, Koch Industries – a major commodities and derivatives trader – deployed a phalanx of lobbyists to resist proposed changes.

Charles and David Koch, the owners of the country’s second-largest private corporation, are libertarians of long standing, who contend that government regulations, taxes and subsidies stifle individual initiative and hamper American competitiveness. In recent years, the Kochs have played an increasingly public role as financial angels for conservative causes, politicians and foundations

What’s not so well-known is the activity of Koch Industries in the trenches in Washington, where a Center for Public Integrity examination of lobbying disclosure files and federal regulatory records reveals a lobbying steamroller for the company’s interests, at times in conflict with its public pose.

The money that Koch (pronounced “coke”) has spent on lobbying in Washington has soared in recent years, from $857,000 in 2004 to $20 million in 2008. The Kochs then spent another $20.5 million over the next two years to influence federal policy, as the company’s lobbyists and officials sought to mold, gut or kill more than 100 prospective bills or regulations.

Oil is the core of the Koch business empire, and the company’s lobbyists and officials have successfully fought to preserve the industry’s tax breaks and credits, and to defeat attempts by Congress to regulate greenhouse gases.

But Koch’s diversified interests, and thus its lobbying activities, extend far beyond petroleum. Koch companies trade carbon emission credits in Europe and derivatives in the U.S. They make jet fuel in Alaska from North Slope oil, and gasoline in Minnesota from the oil sands of Canada. They raise cattle in Montana and manufacture spandex in China, ethanol in Iowa, fertilizer in Trinidad, nylon in Holland, napkins in France and toilet paper in Wisconsin.

According to the most recent Forbes magazine rankings, Koch had $100 billion in revenues in 2009 – on a par with corporate giants like IBM or Verizon – and stood a close second to Cargill Inc. on the list of the largest private US companies. The firm has 70,000 employees, and a presence in 60 countries and almost every state.

Koch’s decision to pour millions into lobbying Washington has put them high on the list of corporations whose lobbyists work the corridors of the nation’s capital. Last year, Koch Industries ranked in the top five – roughly on a par with BP and Royal Dutch Shell – in lobbying expenses among oil and gas companies, according to the Center for Responsive Politics.

These totals do not include the work of the trade associations that Koch uses to represent its interests in Washington. There’s a major industry group called the National Petrochemical & Refiners Association, and obscure organizations like the green-sounding National Environmental Development Association’s Clean Air Project, whose membership lists Koch and two of its subsidiaries (Georgia-Pacific and Invista) with a dozen industrial giants like ExxonMobil Corp., General Electric Co. and Alcoa Inc.

Koch’s lobbyists are known on Capitol Hill for maintaining a low profile. There are no former U.S. senators or House committee chairmen on the payroll. The firm had 30 registered lobbyists in 2010, many of whom are Washington insiders with previous experience as congressional staffers or federal agency employees.

Gregory Zerzan is a good example. Zerzan was a senior counsel for the House Financial Services Committee before serving as an acting assistant secretary and deputy assistant secretary at the U.S. Treasury Department during the George W. Bush administration. Zerzan then worked as counsel and head of global public policy for the International Swaps and Derivative Association before joining Koch Industries as a lobbyist.

Koch clout is augmented by campaign donations to parties and candidates for federal office – $11 million in the last two decades, according to the Center for Responsive Politics – and generous gifts from three family foundations to universities and conservative organizations and interest groups.

According to IRS records, the Koch foundations are essential donors (having given $3.4 million from 2007 through 2009) to the Americans for Prosperity Foundation, a nonprofit known for its support of the Tea Party movement. Among the organizations that have each received a million dollars or more over the last five years from Koch foundations are the Cato Institute, the Heritage Foundation, and two conservative think tanks at George Mason University in Virginia: the Institute for Humane Studies and the Mercatus Center.

The Kochs primarily donate to conservative candidates and causes but have given more than $1 million in the last decade to the liberal Brookings Institution. And among politicians they supported last year was Andrew Cuomo, a Democrat elected governor of New York with $87,000 from the Koch family.

The emergence of “the Koch web – political action, campaign giving, funding of groups engaged in political action and campaigns, conferences to expand political and policy influence – is a striking phenomenon,” said Norman Ornstein, a scholar at the conservative American Enterprise Institute.

The Center asked Koch Industries and its lobbyists in Washington, in a dozen emails and telephone calls over more than two weeks, to comment on the firm’s lobbying efforts. Koch’s representatives declined the opportunity.

But in a March 1 column in The Wall Street Journal, Charles Koch defended his and his company’s practices. “As a matter of principle our company has been outspoken in defense of economic freedom,” Koch wrote. “This country would be better off if every company would do the same. Instead, we see far too many businesses that paint their tails white and run with the antelope.”

ETHANOL

The Koch brothers are renowned as free market libertarians. But as a major trader in energy and financial markets, Koch Industries also knows how to hedge.
As its corporate officials and publicists decried ethanol as a costly government boondoggle, the Kochs bought four ethanol plants in Iowa in recent months, with a combined annual capacity of 435 million gallons. In Washington (where ethanol tax subsidies cost the Treasury some $6 billion annually) Koch representatives lobbied Congress on ethanol and other biofuel subsidies.

“New or emerging markets, such as renewable fuels, are an opportunity for us to create value within the rules the government sets,” Flint Hills Resources President Brad Razook told his employees in the January company newsletter.

Koch Industries’ status as an ethanol player goes beyond its new Iowa plants. Koch blends ethanol and gasoline nearby, in its Minnesota refinery. By its own account, the company’s subsidiaries, Flint Hills and Koch Supply & Trading, currently buy and market about one-tenth of all the ethanol produced in the United States.

The Kochs seem to have recognized that their actions might seem hypocritical and in a January 2011 newsletter the company tried to explain things to employees who have been “scratching their heads and wondering: what is going on?”

“After all, ethanol production is heavily subsidized, mandated and protected,” Koch Industries acknowledged, “while Koch companies openly oppose such government programs.”

Realism had won out. The company has the “capabilities necessary to be successful in the ethanol industry,” the newsletter explained. The new ethanol plants “fit well geographically with several other FHR assets, including fuel Š terminals, a widespread distribution network that includes Iowa, and the Pine Bend [Minnesota] refinery.”

“We are not going to place our company and our employees at a competitive disadvantage by not participating in programs that are available to our competitors,” Razook assured Koch employees.

The company has a history of pragmatism in commercial affairs. Koch was a pioneer importer of Russian oil to the United States, including a 2002 shipment of Russian crude that Koch sold to the U.S. government to help fill the U.S. Strategic Petroleum Reserve. And though it opposes a cap-and-trade solution to global warming for the United States, Koch makes money trading emissions credits under a similar program in Europe.
Nor is ethanol the only form of corporate welfare Koch Industries supports. As it ventures into biofuel production, and uses alternative fuels to power its plants, the company has its lobbyists working “to expand the [tax] credit for renewable electricity production” made from biomass.

Georgia-Pacific, the company reported in 2008, was responsible for more than 10 percent of all the renewable biomass electricity generated in the U.S.

TOXIC

Koch’s efforts to limit regulation of toxic substances illustrate the breadth of its lobbying operation.

In 2004 Koch Industries purchased Invista, a subsidiary of DuPont, known for manufacturing Lycra, Stainmaster carpets and other textiles and fabrics. In 2005, as part of the same corporate diversification and expansion strategy, Koch Industries bought the giant wood and paper products firm, Georgia-Pacific, adding Brawny paper towels, Angel Soft toilet paper, Dixie cups and dozens of factories and plants to its holdings.
Koch has since worked, on Capitol Hill and in various regulatory proceedings, to dilute or halt tighter federal regulation of several toxic byproducts that could affect its bottom line, including dioxin, asbestos and formaldehyde, all of which have been linked to cancer.
Dioxin is released from incinerators, hazardous waste treatment, pesticide manufacturing, paper plants and other sources. With 165 manufacturing facilities across the United States, Georgia-Pacific “has a significant interest in and will be significantly impacted,” by the EPA’s decisions on dioxin, Koch officials told the agency in April 2010.

Hundreds of workers would have to be hired, and trucks and earth-moving equipment leased or purchased. And “of the limited number of hazardous waste landfills operating in the United States, very few are willing to accept dioxin-containing soil,” the company noted.

It’s been three decades since the environmental catastrophes at Love Canal, N.Y., and Times Beach, Mo., introduced the American public to the dangers of dioxin. But in the EPA hearing at the Washington Hilton last July, toxicologist John M. DeSesso, a consultant speaking on behalf of Georgia-Pacific, told the agency that the scientific studies on common levels of exposure are still inconclusive. He urged further study.
The Environmental Working Group and a number of public health organizations,
meanwhile, chastised the EPA for dragging its feet, and reminded the agency panel that another arm of the federal government, the U.S. National Toxicology Program, and the World Health Organization have already classified dioxin as a known human carcinogen.
“Twenty-five years after publishing its first assessment of dioxin Š the EPA has yet to establish a safe daily dose for human exposure” for “one of the most-studied of all chemical pollutants,” the EWG told the panel. “It is EPA’s responsibility to address this problem with resolve Š without regard to pressure from special interests who stand to benefit financially from weak standards and regulations.”

It isn’t just dioxin that has drawn Koch’s interest. On Capitol Hill, and in regulatory proceedings, Koch lobbyists and officials have resisted tighter government regulation of a gallery of toxic and carcinogenic substances, like asbestos, formaldehyde and benzene.
“GP strongly disagrees with the [National Toxicology Program] panel’s conclusion to list formaldehyde, a natural component of every cell in the body, as a human carcinogen,” wrote Traylor Champion, the firm’s vice president for environmental affairs, in a February 2010 letter.

“Costly control requirements are being mandated on sources that have insignificant levels of HAP (hazardous air pollutants) emissions,” a Georgia-Pacific environmental health and safety manager, James Eckenrode, complained to the EPA in November 2008, when it sought to apply tougher air pollution standards on the firm’s manufacture of resins and formaldehyde.

Through its Flint Hills Resources subsidiary, Koch Industries operates a refinery near Fairbanks, Alaska. “Refineries in Alaska are geographically isolated from the rest of the U.S. market such that benzene extraction and sale into the petrochemical market would be infeasible,” the company argued in 2006, when the EPA proposed new clean air limits on benzene. “Benzene reductions to levels proposed in this rule would either require extensive and economically prohibitive capital upgrades at our facility or would result in a significant reduction in gasoline production.”

When Koch Industries purchased Georgia-Pacific, it inherited a titanic liability regarding asbestos. Georgia-Pacific had used asbestos to make gypsum-based drywall products, and starting in the 1980s the firm became a target for more than 340,000 claims by plaintiffs who said they suffered lung and other diseases, including mesothelioma, a deadly cancer. By 2005, the company was spending $200 million a year and had to build a $1.5 billion reserve fund for asbestos liabilities and defense costs.

In a 2008 Koch Industries publication, General Counsel Mark Holden griped that “many of those claims are an outright abuse of the legal system Š that often involve people who are not sick Š all because of over-zealous litigators and a legal system that gives them perverse incentives.”

The number of new claims has dropped with tougher federal safety standards. But in the 110th Congress Koch lobbyists still sought to sway members on legislative proposals intending to restrict the use of asbestos and improve public knowledge, even Senate Resolution 462, which called for a “National Asbestos Awareness Week.”

GLOBAL WARMING AND LOW CARBON FUEL STANDARDS

It’s in the Kochs’ commercial interest to preserve America’s reliance on carbon-based energy sources. Despite recent diversification, Koch remains a major petrochemical company with refineries in North Pole, Alaska; Corpus Christi, Texas; Rosemount, Minn., and Rotterdam in the Netherlands; an array of chemical plants; a coal subsidiary (the C. Reiss Coal Co.) and 4,000 miles of pipelines.

So it is not surprising that, when the Obama administration and the Democrats on Capitol Hill proposed to regulate the emission of greenhouse gases in recent years, Koch Industries responded with a fervent counteroffensive.

“Oppose government mandates on carbon reduction provisions Š [and] provisions related to climate change, and oppose entire bill,” Koch lobbyist Robert P. Hall wrote, listing his goals on the 2008 lobbying disclosure form.

The firm’s lobbying expenditures soared in 2008 as Koch Industries and its subsidiaries – Georgia-Pacific, Invista, Flint Hills Resources, Koch Carbon, Koch Nitrogen – peppered the EPA and members of Congress with objections. Several worked on measures that would strip the EPA of the power to regulate greenhouse gases through the Clean Air Act.
Koch-supported groups like the National Environmental Development Association’s Clean Air Project joined the effort. In a recent meeting, five Koch representatives joined colleagues from ExxonMobil, ConocoPhillips, Eli Lilly and other NEDA-CAP members to register concerns with EPA officials over the proposed mandatory reporting rule for greenhouse gas emissions, the record shows.

Koch’s lobbying efforts on climate change are matched by a public campaign. Via three foundations – the Claude R. Lambe Foundation, the Charles G. Koch Foundation and the David H. Koch Foundation – funded and administered by Koch family members and employees, the Kochs have donated several million dollars in recent years to think tanks and groups that have sought to discredit climate science and EPA’s efforts to reduce greenhouse gases.

“Why are such unproven or false claims promoted?” the Koch Industries company newsletter, Discovery, asked in an article on global warming entitled, “Blowing Smoke.”
“Scientists have Š perverted the peer review process, doing everything possible to prevent opinions contrary to the alarmist view from being heard,” the article said. Humans should adapt to global warming, not try to slow or stop it, the newsletter recommended. “Since we can’t control Mother Nature, let’s figure out how to get along with her changes.”
In early March, members of the Republican-led House Energy and Commerce Committee – many of whom had received campaign contributions from Koch employees and PACs last fall – voted to bar the EPA from regulating greenhouse gases under the Clean Air Act. Their action has been endorsed by Speaker John Boehner and Republican House leaders.

Of particular concern to Koch lobbyists in Washington, according to their disclosure forms, are measures to encourage or require the use of low-carbon fuels. These sources of energy, in their manufacture and use, contribute less than other fuels to global warming.
The Koch refinery in Minnesota is designed to process heavy “high-carbon” Canadian crude oil, and is fed by a pipeline from Canada. Koch “is among Canada’s largest crude oil purchasers, shippers and exporters,” the company says, with a trading and supply office in Calgary and a terminal in Hardisty, Alberta. Much of the oil comes from the mining of oil sands, which have a particularly heavy carbon footprint because the process releases greenhouse gases from peat lands and boreal forest, and requires a great deal of energy to heat and sweat the oil out.

“Canadian crude generates more greenhouse gas emissions” and so low-carbon standards “would cripple refiners that rely on heavy crude feedstocks,” the Koch Industries website notes. “It would be particularly devastating for refiners that use heavy Canadian crude.”

When lawmakers in Washington and states like California sought to address global warming by requiring the use of low carbon fuels, Koch Industries responded. Koch lobbyists listed the legislation as a lobbying priority on Capitol Hill. And in California, where a wide-ranging series of measures to slow climate change were launched by former Gov. Arnold Schwarzenegger, Koch joined the fight to defeat them.

A Koch subsidiary, Flint Hills Resources, donated a million dollars in support of Proposition 23, an unsuccessful attempt funded by Koch and other energy companies last year to stall implementation of the low-carbon standards and other remedial climate measures in California.

ENERGY INDUSTRY TAX BREAKS

Koch lobbyists spend much of their time, according to their disclosure reports, fighting attempts by members of Congress to curb price-gouging, windfall profit-taking and speculation in the oil industry. To this same end, Koch officials worked to dilute a 2009 Federal Trade Commission rule governing manipulation of the energy markets.
Meanwhile, Koch has lobbied to preserve some of the oil industry’s coveted tax breaks and credits.

One benefit is known as the Section 199 deduction, approved by Congress several years ago to help the hard-pressed U.S. manufacturing sector. In light of the oil and gas industry’s hearty profits, the Obama administration and members of Congress have sought to end the Section 199 subsidy for energy firms and save the U.S. Treasury $14 billion over 10 years. But Koch lobbyists and trade associations have worked to preserve the deduction.

Another industry tax break that drew the support of Koch representatives is the venerable “LIFO” (last-in, first-out) accounting rule. It allows energy companies effectively to raise the value of their existing inventory (and thus pay lower taxes on profits from sales) when the price of oil soars.

Under LIFO, the oil in a company’s inventory, no matter what it actually cost, is valued at the cost of the last-acquired (usually highest-cost) barrel. The LIFO rule has been a target in recent years for both Democrats and Republicans in Washington, who would like to raise revenue without raising taxes.

BUSH TAX CUTS

Koch lobbyists listed the expiring Bush tax cuts as a lobbying objective last year, and the Koch brothers were among an elite, relatively few Americans who profited when the income tax cuts for those earning more than $250,000 a year were extended in a year-end deal.

Another of the Bush tax breaks had special meaning for the Koch brothers. Charles Koch, 75, and David Koch, 70, are tied for fifth place, each with a net worth of $21.5 billion, in the latest Forbes rankings of the wealthiest Americans. Included in the deal to extend the Bush tax cuts was a proposal to reduce the federal estate tax. The Kochs have, historically, been players in an ongoing effort by wealthy families to curb or eliminate the tax on inheritances.
The final tax deal reached by the White House and Republicans in Congress in December set the estate tax at 35 percent. That makes the new rate considerably more favorable than during the Clinton (55 percent) or even the Bush (45 percent) years, and the lowest it’s been since the 1930s. If one of the patriarchs should die while the new rate is in effect, it would save the Koch family billions of dollars.

TERRORISM AND NATIONAL SECURITY

Another major preoccupation of Koch Industries lobbyists during recent sessions of Congress was the Chemical Facility Anti-Terrorism Standards, a federal effort to identify and regulate chemical facilities that could be vulnerable to terrorist attacks.

In 2009, the House passed legislation that would toughen the standards, and require manufacturers like Koch to use safer chemicals and processes to add another level of protection and minimize the effects of toxic releases from terrorist attacks or catastrophic accidents.

Koch opposed the changes, claiming they “increase cost and regulatory burden while shifting focus away from security and toward environmental considerations.” The chemical security provisions were listed as lobbying targets by Koch representatives in 2007, 2008, 2009 and 2010.

According to EPA records, Koch has four facilities that use chlorine dioxide-in Palatka, Fla.; Zachary, La.; New Augusta, Miss.; and Camas, Wash. It has an Invista plant that uses formaldehyde in LaPorte, Texas. Its Flint Hills refinery in Corpus Christi, Texas, uses hydrofluoric acid in refining gasoline.

Mandatory use of safer technology would “result in even more job losses and higher consumer prices as American manufacturers struggle to comply,” Koch contends in a statement on the chemical safety standards on its website. The House legislation would “restructure, and likely add additional cost to security programs currently in place for Koch companies’ facilities.”

FINANCIAL REGULATION

Koch pulls no punches when assigning the blame for the great financial meltdown of 2008: It was the government’s fault, not the markets.

“Almost all of these problems (and much of the current chaos) are, at their root, the result of political failure,” said Steve Feilmeier, the chief financial officer for Koch Industries, at the height of the crash.

It is not surprising, then, that Koch Industries – a major player in international trading markets – resisted increased regulation and spent heavily on lobbyists who worked to shape the 2010 Dodd-Frank Act and other vehicles for financial reform. The Koch lobbyists focused, in particular, on provisions aimed at regulating systemic risk in the financial markets, and the use of derivatives.

Koch Industries started out trading crude oil more than four decades ago, but its trading group has since branched into commodities, derivatives and other risk management products.

In that time, the market for trading derivatives and swaps in the energy industry has gone largely unregulated. And in past Congresses, Koch lobbyists labored to preserve the exemption, known as the “Enron Loophole,” that excused energy commodity contracts from regulation.

But the Dodd-Frank law gave the Commodity Futures Trading Commission and the Securities and Exchange Commission the authority to craft new rules to subject traders in the energy industry to increased regulation and transparency, capital and margin requirements, and supervision by a derivatives clearing house. Koch lobbyists worked to favorably shape the bill, and have not stopped working since it was passed.

Within a few weeks after President Obama signed the legislation, Koch lobbyist Gregory Zerzan had secured a coveted meeting with SEC Commissioner Troy Paredes, a Bush appointee, and his counsel, Gena Lai, to discuss how the government would implement the law.

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“Treatment and disposal of dioxin-containing soil is already a challenging, expensive and capacity-limited problem that would only get worse if additional volumes were generated.”
Courtesy of the Center for Responsive Politics

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Calling Koch
The Center for Public Integrity sought comment from Koch Industries a dozen times during the course of its investigation of Koch’s lobbying network. Read about our correspondence with the company.

Special thanks to Richard Charter

Phil Taylor, E&E reporter
Interior Secretary Ken Salazar today said his department is developing new rules to improve the performance of sub-sea blowout preventers to avoid a repeat of last year’s BP PLC Macondo well blowout and oil spill in the Gulf of Mexico.

Salazar said the updated rules are in response to an Interior-commissioned forensic report issued last month that found the blowout preventer’s blind shear rams — the equipment’s final line of defense against an oil gusher — could not seal off BP’s well as designed because the drill pipe had buckled in the initial blast (E&ENews PM, March 23).

“We’ll also be looking to develop some additional improvements with respect to BOPs,” Salazar told reporters during a conference call this morning. “Those will be mostly in the area of instrumentation and actuation and effectiveness with respect to dual blind shear rams.”

Salazar spoke from Mexico, where he is meeting with government and industry officials on creating a “gold standard” for deepwater drilling safety and discussing a Gulf of Mexico transboundary agreement.

Interior Deputy Secretary David Hayes said the agency will be looking to the new Ocean Energy Safety Advisory Committee for advice on the new rules and that it hopes to issue an advance notice for proposed rulemaking in the coming months. The notice will solicit comment from a variety of sources on what upgrades are appropriate for blowout preventers and other deepwater drilling technologies, Hayes said.

“We obviously are requiring a whole new set of tests relative to the functionality of blowout preventers,” said Salazar, who touted new drilling safety measures already implemented that include well integrity standards and worst-case discharge calculations, among others. “We are looking at what else is needed, and that is part of a regulatory rulemaking process which is being undertaken.”
The new rules come as Interior and the Coast Guard conduct joint hearings in New Orleans this week to discuss what went wrong with BP’s blowout preventer, a device most had considered “fail-safe” before the Deepwater Horizon incident.

Michael Bromwich, director of Interior’s Bureau of Ocean Energy Management, Regulation and Enforcement, last week told a House committee that blowout preventers could no longer be considered fail-safe devices and that more information would be provided in this week’s hearings on the Det Norske Veritas forensic report.

Special thanks to Richard Charter

(04/05/2011)

Katie Howell, E&E reporter

A group of House Democrats today offered a measure that would clamp
down on a controversial offshore drilling royalty-relief provision.

At issue in the legislation from Rep. Ed Markey (D-Mass.) and others is
a royalty-waiver program that allows some oil companies to reduce or
eliminate their royalty payments on federal drilling leases until they
have recouped their investments.

Lawmakers initially approved the program in 1995, when oil sold for $18
a barrel and deepwater drilling was considered unprofitable without
government help. Suspended payments helped bring about a boom for the
industry in the late 1990s, but the subsidies, which were expanded by a
broad 2005 energy law, continue today despite escalating crude oil
prices. The Government Accountability Office says the loss of future
royalties could range from $20 billion to $53 billion depending on the
price of oil.

“The biggest oil companies are already getting 100 year-old tax breaks
to sell $100 a barrel oil to make $100 billion a year in profits,”
Markey said in a statement. “Oil companies don’t need a $53 billion
windfall courtesy of American taxpayers that increases our national
deficit.”

Today’s measure is not the first attempt to reform the royalty-relief
law. Markey and other Democrats have introduced similar bills in
previous Congresses, and similar language introduced as an amendment to
the first House GOP spending bill this year failed.

But the new bill comes as Democrats ramp up their criticism of GOP
resistance to cutting oil industry tax breaks as they slash other areas
of federal spending (E&E Daily, April 5).

“The Republican plan to cut the budget? Continue to cheat taxpayers out
of billions of dollars owed by the big oil companies. That’s not much
of a budget-cutting plan,” Rep. George Miller (D-Calif.), a co-sponsor
of the measure, said in a statement. “It’s time that we hold giant oil
corporations accountable for the right to use the public’s resources.
Oil companies shouldn’t be drilling for free, and in a time of rising
gas prices, we need to close this $50 billion loophole.”

The oil industry is opposed to such reforms, saying it already pays
billions to the federal government in other royalties, taxes and fees.

Joining Markey and Miller in introducing today’s measure are Democratic
Reps. Rush Holt of New Jersey, Jim Moran of Virginia, Maurice Hinchey
of New York and Lois Capps of California.
Special thanks to Richard Charter