Big Oil Protects its Interests
Industry spends hundreds of millions on lobbying, elections

WASHINGTON, July 15, 2004 — The United States is the oil and gas industry's biggest customer, slurping up fully a quarter of global production in 2003. Not surprisingly, the industry has lavished more than $440 million over the past six years on politicians, political parties and lobbyists in order to protect its interests in Washington, according to a new report by the Center for Public Integrity. >>


Gimme Shelter (From Taxes)
U.S. oil and gas companies have 882 subsidiaries in tax haven countries

WASHINGTON, July 15, 2004 — U.S. oil and gas companies have at least 882 subsidiaries located in oil-free tax havens such as the Cayman Islands, Bermuda, and even the tiny European principality of Liechtenstein, a Center for Public Integrity investigation has found. Further, the investigation revealed that at least a half dozen U.S. oil and gas companies have actually re-incorporated in tax haven countries. >>

Koch's Low Profile Belies Political Power
Private oil company does both business and politics with the shades drawn

By Bob Williams and Kevin Bogardus

WASHINGTON, July 15, 2004 — Koch Industries could be the biggest oil company you have never heard of—unless, that is, you hang around the halls of government in Washington.

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Koch Industries (pronounced "coke") is a huge oil conglomerate controlled by brothers Charles and David Koch, two of the country's richest men and among the biggest backers of conservative and libertarian causes. With estimated revenue of about $40 billion last year, Koch is bigger than Microsoft, Merrill Lynch and AT&T.

Koch is the leading campaign contributor among oil and gas companies for the 2004 election cycle, giving $587,000 so far. Next came Valero Energy at $568,000.

Since 1998, Koch is the fourth biggest campaign oil and gas industry giver, behind ChevronTexaco, El Paso Corp. and Enron Corp.

Despite its size and political largesse, Koch is able to dodge the limelight because it is privately-held, meaning that nearly all of its business dealings are known primarily only by the company and the Internal Revenue Service. In fact, it is the second largest private company in the country, trailing only food processing giant Cargill.

Koch also prefers to operate in private when it comes to politics and government.

Although it is both a top campaign contributor and spends millions on direct lobbying, Koch's chief political influence tool is a web of interconnected, right-wing think tanks and advocacy groups funded by foundations controlled and supported by the two Koch brothers.

Among those groups are some of the country's most prominent conservative and libertarian voices including the Cato Institute, the Reason Foundation, Citizens for a Sound Economy and the Federalist Society. All regularly beat the drum in official Washington for the causes the Koch's hold dear—minimal government, deregulation, and free market economics.

For the Kochs, conservative and libertarian views are a family tradition. Fred Koch, who founded the company's predecessor in 1940, helped establish the ultra right-wing John Birch Society.

Some of Koch's other political activities have been less exotic, but no less controversial.

For example, Charles Koch found himself under investigation by the U.S. Senate for his alleged role in funding so-called "issue ads" that helped conservative Republican congressional candidates in 1996.

Even critics seem awed by the Kochs' ability to shape policy so effectively without drawing much attention to themselves.

"It's astounding that so few people have ever heard of a family this rich and powerful and aggressive when it comes to policy and politics," says Jeff Krehely, deputy director of the National Committee for Responsive Philanthropy, who co-authored a recent study on conservative think tanks, including those funded by the Kochs. "When you talk about Koch, most folks think you are talking about the soft drink company."

Koch Industries did not respond to repeated phone calls and emails requesting interviews for this report.

David Koch, who ran for vice president on the Libertarian Party ticket in 1980, in an interview with National Journal, has described his philosophy this way: "My overall concept is to minimize the role of government and to maximize the role of the private economy to maximize personal freedoms."

Navigating Troubled Waters
Koch has had plenty of run-ins with government regulators and other legal problems in recent years. Through it all, the company has shown a remarkable knack for getting criminal charges dropped and huge potential penalties knocked down.

In late 2000—as the Clinton Administration was preparing to leave office—Koch was hit with a 97-count indictment for covering up the discharge of more than 15 times the legal limit of benzene, a carcinogen, from a refinery in Corpus Christi, Texas.

The company faced penalties of more than $350 million. Four Koch employees were also charged individually and faced up to 35 years in prison.

Three months after the Bush administration took office—and just before the lawsuit went to trial—the Justice Department abruptly settled the case. Koch agreed to pay $20 million and plead guilty to a single count of concealment of information. In return, the Justice Department dropped all criminal charges against Koch and the four employees.

In another case, Koch was sued by the government in 1995 and 1997 over a reported 300 oil spills at pipelines owned and operated by the company. Those lawsuits sought from $71 million to $214 million in penalties for the spills, which dumped an estimated three million gallons of oil into lakes and streams in six states.

On January 13, 2000, the government settled that case for $35 million in fines.

The Kochs were also sued by their own brother several years ago in a case where the company was accused of stealing millions of barrels of oil from federal and Native American lands.

Bill Koch, best known for bankrolling a yacht racing team that won the 1992 America's Cup, and another plaintiff filed the suit under the False Claims Act, which allows private plaintiffs to sue on behalf of the government companies and individuals that are defrauding it. Plaintiffs get to keep a part of any money recovered in a successful suit.

In a settlement of that case in May 2001, the company agreed to pay $25 million to the U.S. government to dismiss charges of false claims estimated at about $170 million in oil purchases on federal and Native American lands. The company had faced potential penalties of $214 million in the case.

Bill Koch and his co-plaintiff shared $7.4 million; Koch told reporters that Koch Industries would also pay his legal fees.

Koch's Campaign Contributions
All told, Koch and its employees have made about $3.9 million in campaign contributions for national offices since 1998.

By comparison, ChevronTexaco—which had revenue of almost $121 billion last year—topped all oil and gas companies with campaign contributions of about $4.6 million since 1998. ExxonMobil—which with revenue of $242 billion is about six times the size of Koch—gave about $3.8 million.

About 79 percent of Koch's contributions went to Republican candidates, totaling roughly $3 million for the GOP compared to about $694,000 for Democrats, in transactions where a party affiliation could be identified.

Koch has rained the most campaign cash, almost $121,000, on Rep. Todd Tiahrt, a Republican who represents Wichita, where Koch is headquartered. Next comes Sen. Elizabeth Dole, R-N.C. ($115,000); President George W. Bush ($109,000); Sen. Sam Brownback, R-Kan. ($64,000); and House Majority Leader Tom DeLay, R-Texas ($53,000).

Only one of the top 20 recipients of Koch campaign cash was not a Republican—Democrat Rep. Cal Dooley, who represents the lower San Joaquin Valley in California, got roughly $26,000.

While many donors have given much more in campaign cash to Bush, Koch has not given any money at all to presumptive 2004 Democrat Presidential Candidate John Kerry.

Koch has also discovered the newest trend in campaign financing, so-called 527 committees.

Named after the section of the Internal Revenue Service code under which they're organized, these political committees can raise unlimited amounts of money to influence elections. They are also allowed to claim tax-exempt status as political committees while at the same time avoiding regulation by state or federal election authorities.

David Koch has given $165,000 to such committees, dividing the money between three Republican groups: the Republican Governor's Association, Americans for a Republican Majority and the Majority Leader's Fund.

Koch Industries gave a total $138,200 to 527 committees. Of that amount, $82,200 went to Democratic groups that mostly support moderate and conservative candidates, while $56,000 went to Republican groups.

Koch Industries has spent another $3,880,000 on direct lobbying on more than 50 pieces of legislation before Congress, helping shape the debate on everything from limiting class action lawsuits to repealing the estate tax.

When You Lose, Change the Rules
Koch has also shown a remarkable ability to get rid of or modify environmental policies and other government rules it doesn't like.

After facing the spate of government lawsuits brought by the Clinton Administration, Koch cranked up its policy influence machine to gut sections of federal environmental laws causing the company problems.

Koch's primary weapon in that battle was—and remains—the cadre of think tanks and other advocacy groups it finances. The brothers or their representatives usually sit on their boards, taking a hands-on approach to make sure the groups push the company's interests.

All of those groups are libertarian or conservative, pushing heavily for deregulation of industries and minimal government. They are also highly effective, particularly since Republicans took over the White House and Congress.

The largest recipient of the Koch's policy influence grants is George Mason University, which has received more than $23 million from the family's foundations between 1985 and 2002, according to the National Committee for Responsive Philanthropy.

The Fairfax, Va.-based school hosts several Koch funded institutes and think tanks. Richard Fink, a director and executive vice president at Koch, serves on the university's board of visitors. An economics professor at the university, he helped found another Koch-funded think tank called Citizens for a Sound Economy in the mid-1980s.

One of the groups housed at GMU is the Institute for Humane Studies, which offers scholarships to students interested in libertarian and free-market ideas.

Charles Koch has provided major funding for this group and the institute's scholarships are named for him. The institute's outstanding alumni award is also named for him.

On its Web site, the institute says its "perspective is that individual well-being, prosperity, and social harmony" are fostered by "as much liberty as possible" and "as little government as necessary."

Another Koch group housed at GMU is the Mercatus Center.

Koch family money was used to support Mercatus in the mid-1980s and still finances the organization today. Charles Koch and Richard Fink are on the Mercatus board of directors.

Situated at GMU's Law School in Arlington, Va., Mercatus defines itself as "an education, research and outreach organization."

"Outreach" in Mercatus's case includes an intense lobbying blitz of the federal government, including Capitol Hill breakfasts and luncheons hosted by deregulation scholars.

Mercatus has been effective in its political goals—and those of Koch Industries.

In a December 2001 report, the White House's Office of Management and Budget singled out eight major Environmental Protection Agency rules for review. Five of them, including a linchpin of the Clean Air Act called the New Source Review, came from public interest comments filed by the group.

John Graham, once an advisory board member of the Mercatus Center, is now a senior OMB official. His office has been particularly receptive to Mercatus's public comments.

According to a recent report from the Government Accountability Office, the think tank submitted more comments than any other organization for OMB's review. OMB marked 23 suggestions as "high priority," the majority of which were submitted by Mercatus, essentially guaranteeing their passage into White House policy.

The Kochs also control or hold substantial sway at many of the country's other leading right-wing and libertarian advocacy groups.

Among them:

The Cato Institute. Charles Koch was a co-founder of this libertarian think tank in 1977. Koch foundations have helped fund Cato since then. David Koch is on the board of directors of Cato.
Tax Foundation. Koch group money rescued this financially-troubled think tank in 1989. Charles Koch received the group's Distinguished Service Award in 2000.
Institute for Justice. Charles Koch provided the seed money to start this libertarian legal foundation in 1991 and the brothers have provided additional funding since then.
Foundation for Research on Economics & the Environment. Koch family foundation money provides significant funding for this group, which holds free seminars for federal judges at its ranch near Big Sky, Mont.
Federalist Society. Koch provides substantial funding to this group which says its purpose is to create a "conservative and libertarian intellectual network that extends to all levels of the legal community."
Charles and David Koch practice an economic philosophy at the company dubbed market-based management, which is based on the premise that societies which encourage entrepreneurship and individual responsibility will create vast wealth.

The brothers have made no secret that they feel such principles should be adopted by government and society at large, and have spent millions of dollars of their money to help make it happen.

David Koch says he supports the think tanks and advocacy groups to achieve the goals of limiting the role of government and maximizing the private sector to maximize personal freedoms.

"I am trying to support different approaches to achieve those objectives," he told the National Journal. "It's almost like an investor investing in a whole variety of companies."

Incestuous Relationships
The think tank that appears to have the most incestuous relationship with Koch is the Washington-based Citizens for a Sound Economy.

CSE was founded in 1984 by Charles and David Koch and Richard Fink, the group's first president.

Fink would go on to become a director and executive at Koch.

Reagan Office of Management and Budget Director James Miller became a board member of CSE in 1988. Wayne Gable, who replaced Fink as CSE President in 1989, is now Managing Director of Federal Affairs at Koch.

Former House Majority Leader Dick Armey, R-Texas, is the current co-chairman of CSE.

The other co-chairman is C. Boyden Gray, who was counsel to George H. W. Bush, during his terms as president and vice president. He was also counsel to the Presidential Task Force on Regulatory Relief during the Reagan Administration.

In 1999, Gray prepared an amicus brief that underpinned a decision by a U.S. Court of Appeals in Washington that suspended air quality regulations issued by the Clinton-Gore administration in July 1997. CSE says it helped fund Gray's brief.

Drafted Legislation for Bob Dole
That paled in comparison to what Gray and then-Sen. Bob Dole, R-Kan., tried to do on Koch's behalf several years earlier, however.

In 1995, Koch was facing a $54 million lawsuit filed by the Environmental Protection Agency, the Coast Guard, and the Justice Department. It was basically the same oil spill case that Koch settled on such favorable terms in early 2001.

At the request of Dole, Gray drafted a bill which the senator introduced called the Comprehensive Regulatory Reform Act of 1995. Dole said the legislation was an "effort to inject common sense into a federal regulatory process that is often too costly, too arcane, and too inflexible," according to The Buying of the President.

As Dole began pushing the bill through the Senate, a clause was inserted that would have allowed companies being sued to challenge the government by finding a conflicting or contradictory rule and to prove that the regulation had not been enforced uniformly.

If any companies had gotten leniency in the past on any regulations, companies such as Koch facing big government lawsuits could use the proposed law to make sure they weren't given tougher sentences or higher fines.

The legislation died on the Senate floor later that year.

Nader lovers?
CSE has found itself in hot water in recent weeks over charges it has been working illegally to get consumer activist Ralph Nader on the presidential ballot in Oregon.

On June 30, Citizens for Responsibility and Ethics in Washington filed a complaint with the Federal Election Commission alleging that groups, including Citizens for a Sound Economy, the Bush/Cheney campaign and the Nader campaign, had violated federal campaign laws through the use of prohibited in-kind contributions.

In its complaint, CREW said CSE directed employees to call members, using prepared scripts, to encourage them to sign a petition that allowed Ralph Nader to put his name on the November ballot in the presidential election. According to CREW, CSE's script stated "Liberals are trying to unite in Oregon and keep Nader off the ballot to help their chances of electing John Kerry. We could divide this base of support."

Since CSE is a corporation, it is prohibited from making contributions to federal campaigns, CREW said in its complaint. The costs of creating the scripts as well as the costs of the telephone calls constitute prohibited in-kind contributions.

CREW said the Oregon situation is part of a "pattern and practice of using tax-exempt corporations to provide substantial illegal assistance to presidential campaigns. As the names of the donors to tax exempt organizations are not reported, this allows campaigns to avoid the transparency called for by the Bi-Partisan Campaign Reform Act."

Senate Investigation on Issue Ads
The recent Oregon case isn't the first time that Koch-backed organization has been accused of playing fast and loose with campaign finance laws.

In 1997, the Kochs were investigated by the Democratic staff on the Senate Committee on Governmental Affairs for their alleged funding of so-called "issue ads" during elections the previous year.

The investigation involved a for-profit corporation called Triad Management Inc., which was owned by Carolyn Malenick, a Republican fundraiser.

In 1996, according to The Buying of the President 2000, Triad was responsible for pro-Republican advertising in 26 House races and three Senate races. Triad was connected to two not-for-profit organizations, Citizens for Reform and Citizens for the Republic Education Fund. Neither group had a staff or office, but they ran $3 million in television ads paid for by Triad-related entities in the closing days of the 1996 campaign.

More than half of the Triad-connected money—$1.79 million – came from a group called the Economic Education Trust, which the Democratic Staff of the Senate committee suggested had been funded by Charles and David Koch.

The Senate investigators found that much of the money spent by Triad and another group called the Coalition for Our Children's Future helped Republican candidates in states where Koch has refineries, pipelines, or offices, including Arkansas, Kansas, Louisiana, Minnesota and Oklahoma.

While the Senate committee did not officially charge Koch with campaign law violations, the investigation did uncover a $2,000 Koch Industries corporate check made out to Triad.

In 1998, the Wall Street Journal reported that it had discovered documents the paper said confirmed a direct link between Charles Koch and the ads.

Specifically, the Journal report said Republican political consultant Kenneth Barfield, who was on Koch's payroll in 1996, relayed information between Triad and the Economic Education Trust, which ultimately financed the ads.

The Koch revolving door
These days, Koch's sphere of influence also reaches directly into the White House and other parts of the executive branch.

Once an in-house lobbyist for Koch, Elizabeth Stolpe is now an associate director at the White House's Council on Environmental Quality.

Stolpe as well as Graham were copied on an e-mail sent to the White House by Bracewell & Patterson, a K Street lobby shop pushing for reform of the New Source Review section of the Clean Air Act. In fact, the White House team behind Clear Skies included Graham and Stolpe, as well as valued Bush advisors Karen Hughes and Karl Rove.

Another Koch employee has recently gone through the revolving door at the Pentagon.

Last December, Alex Beehler left Koch to become assistant deputy under secretary of defense for Environment, Safety and Occupational Health. In his new role, Beehler will be a top advisor on environmental, safety and occupational health policies and programs throughout the Defense Department.

A Pentagon press release said those programs include "clean-up at active and closing military bases, compliance with environmental laws, conservation of natural and cultural resources, pollution prevention, environmental technology, fire protection, safety and explosive safety, and pest management and disease control for Defense activities worldwide." While at Koch, Beehler served as director of environmental and regulatory affairs and concurrently served at the Charles G. Koch Foundation as vice president for environmental projects.

Prior to joining Koch, Beehler served in the Department of Justice as a senior trial attorney for environmental enforcement and at the Environmental Protection Agency as a special assistant for legal and enforcement counsel.


Center for Public Integrity

Gimme Shelter (From Taxes)
U.S. oil and gas companies have 882 subsidiaries in tax haven countries

By Bob Williams and Jonathan Werve

WASHINGTON, July 15, 2004 — U.S. oil and gas companies have at least 882 subsidiaries located in oil-free tax havens such as the Cayman Islands, Bermuda, and even the tiny European principality of Liechtenstein, a Center for Public Integrity investigation has found.

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Further, the investigation revealed that at least a half dozen U.S. oil and gas companies have actually re-incorporated in tax haven countries.

In the past, Enron Corp. had by far the most tax haven subsidiaries with 780, but that was before the troubled company declared bankruptcy and sold off or shut down nearly all of its operations. It is unclear how many of those subsidiaries are still in existence today.

Among active companies, El Paso Corp. leads the list with 233 subsidiaries located in tax haven countries, followed by ConocoPhillips (133).


This interactive feature profiles each tax haven used by U.S. oil and gas companies, and names the companies using them. Requires Macromedia Flash Player (version six or better), which can be downloaded free.

Officials from El Paso Corp. and ConocoPhillips did not return repeated phone calls about their subsidiaries located in tax haven countries.

Information on the subsidiaries came from MergentOnline and was gleaned from company financial filings. The latest available information showing where subsidiaries of companies are located was used.

The Cayman Islands were by far the most popular choice for U.S. oil and gas company subsidiaries, with 489 subsidiaries located there. Bermuda comes next with 126, followed by the British Virgin Islands (49), Liberia (41), and Panama (40).

The investigation also showed that U.S. companies are much more active than their overseas counterparts in setting up subsidiaries in tax havens. The entire rest of the world had just 311 such subsidiaries. One expert says companies locate in tax haven countries for a variety of reasons, many of which are absolutely legitimate—and have little or nothing to do with avoiding taxes.

That's the opinion of Philip Garlett, a policy analyst with the Organisation for Economic Co-operation and Development, a Paris-based international policy consortium made up of 30 governments, including the United States. He says oil companies might have subsidiaries in tax haven countries because they don't want to set up shop and make themselves subject to local laws in areas such as the Middle East or the Caspian Sea.

"It is sort of like a neutral court in basketball," Garlett says.

But another expert says the only plausible reason for U.S. oil and gas companies to locate subsidiaries in tax havens is to avoid paying U.S. taxes.

Bob McIntyre, the director of Citizens for Tax Justice, a government watchdog that has studied the issue, says that big companies with tax haven subsidiaries are able to conduct complex transactions that shelter their profits. Since the transactions are kept within the company, he says they are next to impossible to detect.

"The more these companies can bounce things around offshore, the more profit that can be kept offshore and tax free," McIntyre says. "They shouldn't get away with it, but it is really hard to police."

President Bush, who has said he disapproves of U.S. companies setting up subsidiaries in tax havens, was a director of a Texas oil company when it decided to do just that.

In 1989, Harken Energy Corp. set up Harken Bahrain Oil Co. in the Cayman Islands to oversee a drilling contract with the government of Bahrain. When questioned about it by reporters, Bush spokesman Dan Bartlett said the president had no recollection of the matter.

Vice President Dick Cheney was also a big fan of locating subsidiaries in tax havens during his days as CEO of Halliburton Corp.

An analysis of Halliburton's filings with the Securities and Exchange Commission by watchdog group Citizen Works showed that while Cheney was CEO of Halliburton between 1995 and 2000, the number of subsidiaries the company operated in tax havens rose from nine to 44.

Slashing Tax Bills
Among the U.S. companies incorporated in tax havens are GlobalSantaFe Corp. (Cayman Islands), McDermott International (Panama), Nabors Industries (Bermuda), Noble Corp. (Cayman Islands), Seven Seas Petroleum Corp. (Cayman Islands), and TransOcean Inc. (Cayman Islands).

As these companies have learned, setting up shop in a tax-haven country can certainly lower tax bills. In simple terms, a large U.S. company can effectively reduce its corporate tax rate from 35 percent to zero by reincorporating in a tax haven such as the Cayman Islands.

Take the case of Nabors Industries, one of the largest land-based, oil and gas drilling companies in the world with more than 600 rigs.

Nabors reincorporated in Bermuda in June 2002 and moved its "headquarters" from Texas to Barbados. That new headquarters consisted of a small office located on the tiny Caribbean island. The company's board of directors also held a meeting on Barbados.

Nabors says its effective overall tax rate fell from 36 percent in 2001—the last full year before it moved to Bermuda/Barbados—to 10 percent in 2003, the first full year after the move.

In actual dollars, Nabors' overall tax bill for 2001 was $83.7 million, according to the company's annual report. In 2003 the company's overall tax bill fell to just $8.5 million.

The company's revenue remained relatively steady during that period. In 2001, its revenue was $2.3 billion; in 2003, it was $1.9 billion.

Nabors Director of Corporate Development Denny Smith says the company made the move simply to remain competitive.

"We lost a ton of jobs and found ourselves in a position where we could not be competitive anymore," Smith says. "Most of our competitors don't face the same tax burden as we do."

Smith says Nabors still does most of its work in Houston and estimates the company pumped as much as $100 million into the local economy since re-incorporating offshore.

"We would love to see the tax code get fixed," Smith says.

Despite the huge tax windfalls it has realized from its move offshore, Nabors still wants to be considered a U.S. company when it works to its advantage to do so.

For example, Nabors wants to be considered a U.S. company to fully qualify for business under the Jones Act, a 1916 law that requires ships engaged in purely domestic trade to be built, owned and operated by American companies.

Nabors owns nearly three dozen ships that service oil rigs in the Gulf of Mexico. The company argues that its American subsidiary fully qualifies under the Jones Act because the Bermuda-based parent company is simply lending it money for the ships.

Nabors' competitors say full qualification of the company under the Jones Act while it pays no taxes would give the company a huge competitive advantage and could force them to eventually move offshore to remain in business.

Then there is Noble Corp., which operates one of the world's largest fleets of offshore drilling rigs. Noble reincorporated in the Caymans in May 2002, leaving its physical headquarters where it was in Sugarland, Texas.

The move has already paid off handsomely for Noble.

The company's overall tax bill fell from $29.5 million in 2001 to just $16.2 million in 2003. The company's revenue was steady those years at about $1 billion in 2001, compared to about $987 million in 2003.

The drop in U.S. taxes paid by the company was even more dramatic. Noble had paid $15.3 million in U.S. taxes in 2001, but got a refund of $2.6 million in 2003—the company's first full year in the Caymans.

Noble claimed it was forced to move to a tax haven in order to compete in the offshore drilling rig business. Noble's two other main competitors—Transocean Inc. and GlobalSantaFe Corp.—are also incorporated in the Caymans.

Noble CEO James Day admitted to stock analysts soon after the company's move that he was "philosophically opposed" to reincorporating offshore, but that his hand was forced.

"I don't want a competitor to get up and say we are bringing 10 percent more to the bottom line because we have a tax structure that Noble is too stupid to take advantage of," Day told the analysts on a conference call. "We were caught between a rock and a hard place on it."

Day said he would bring the company back to the U.S. if the tax laws were changed to remove the competitive advantages of incorporating in the Caymans.

"If legislation comes down that says we are going to level the playing field, you bet I would reverse everything we have done," said Day. "This is not appropriate in my mind."

Center for Public Integrity database editor Aron Pilhofer contributed to this report.

July 30, 2004



A Pipeline of Influence
Even before he became VP, Dick Cheney and Bush fundraisers were crafting national energy policy

By Kevin Bogardus

WASHINGTON, July 15, 2004 — The National Petroleum Council, a little-known federally chartered but privately funded advisory committee, has been an underground pipeline of political influence for the oil and gas industry in Washington for years.

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The NPC's membership roster reads like a who's who of the oil industry and the Bush political fundraising machine, particularly during the late 1990s. It included current Commerce Secretary Don Evans, once the chief executive officer of oil company Tom Brown Inc., recently indicted former Enron chief executive officer Ken Lay, and various Bush "pioneers"—individuals who pledged to raise more than $100,000 in hard-money donations for the Bush-Cheney 2000 campaign, according to an investigation by the Center for Public Integrity.

NPC members, including current members of the Bush White House and several Republican fundraisers, have often stood to benefit from their advice to the Energy Secretary, particularly when it comes to opening drilling concessions for their oil and gas companies.


Vice President Dick Cheney in a 2001 photo

As the CEO of Halliburton throughout the late 1990s, Vice President Richard Cheney attended meetings as an NPC member with his fellow oil and gas industry executives to draft reports and recommendations for the Department of Energy—plans that would ultimately be rolled into the Bush Administration's energy policy.

Transcripts acquired by the Center reveal that Cheney and many of the Bush Administration's largest political fundraisers were extremely active members of the NPC throughout the late 1990s. One of the major initiatives the group got the Energy Department to consider during Cheney's tenure there was a wide-ranging exemption for the energy industry from public disclosure laws. Another helped open up federal lands for oil and gas use in the Rocky Mountains, including Cheney's home state of Wyoming.

The NPC, designed to provide the government with the industry's expertise, was created by President Harry Truman after World War II. The council has 175 members that are asked to serve by the Energy Secretary for two-year terms. Membership includes academics, environmentalists, as well as oil and gas company representatives. Yet according to records analyzed by the Center, an average of about 45 people attended select committee meetings from 1999 to the present. The vast majority of attendees were oil and gas executives; none was from an environmentalist organization.

NPC members have given generously to political campaigns. Those who have been council members since 1999 are responsible for more than $14 million in contributions. About four-fifths of that money has been funneled to Republican candidates. John Kaneb, chairman of Gulf Oil, tops the list of donors at $1.3 million.



"Proprietary information"
In 1998, Cheney was asked by the Clinton Administration's Energy Secretary Bill Richardson to head an NPC committee that examined potential vulnerabilities of the oil industry to computer hackers and terrorists. Richardson, spurred by a Clinton White House initiative, directed the NPC to study computer-based threats such as e-mail viruses and the Y2K scare, as well as physical threats such as bombs.

As head of the committee, Cheney pushed hard to convince the federal government to exempt information it collected from energy companies from the Freedom of Information Act. "We want to make certain that there's no infringement with respect to proprietary information," Cheney said during an NPC meeting at Washington's Madison Hotel on December 15, 1999. "We're not interested in collecting individual company data and publishing anything like that."

Cheney would later resign from Halliburton and from the committee to hit the campaign trail with Republican presidential nominee George W. Bush in August 2000.

Halliburton representatives quickly took up his cause, however.

"Clearly, [the] Freedom of Information issues have got to be addressed, and there's got to be absolute protection for the private sector as we go forward with this," said Chuck Dominy, a retired three-star general from the Army Corp of Engineers, at a May 8, 2001 NPC meeting in Dallas, Texas. Since December 2000 the vice-president for government affairs at the oil services company, Dominy is Halliburton's chief lobbyist on Capitol Hill.

The proposal was made formally in a June 2001 NPC report, Securing Oil and Gas Infrastructures in the New Economy, which concluded that to "facilitate information sharing by industry with government, legislative action is needed to provide relief from liability and the Freedom of Information Act." The proposal was made in a report that aimed at removing government obstacles that might inhibit oil and gas companies from sharing private information to help better prepare for terrorist attacks.

"The concern was the publication of vulnerabilities—of a cookbook for bad guys to do bad things," said Marshall Nichols, the executive director of the National Petroleum Council.


Commerce Secretary Don Evans in a 2003 photo

The changes to the Freedom of Information Act recommended by the NPC have not been adopted, though Cheney appears to have taken his earlier penchant for nondisclosure to the administration. He has, for example, withheld records about his closed door meetings with energy lobbyists and executives from environmental groups, government watchdogs, and even Congress's investigative arm, the Government Accountability Office. The Supreme Court has ordered a lower federal appeals court to review a lawsuit that accuses the vice president of violating the law by refusing to disclose many of the records of his infamous energy task force, which drafted the administration's controversial energy plan.

Home is where the oil is
Another initiative championed by Cheney, Evans and others during their time on the council was relaxation of federal rules for drilling for oil and gas on federal lands.

Looking for untapped sources to help supplement offshore oil and gas production in the Gulf of Mexico and elsewhere, petroleum company executives had begun to look onshore within the United States for new supplies. According to industry representatives, western states had remained largely untapped until then due to federal land restrictions. A December 1999 NPC report lamented that 137 trillion cubic feet of gas—or 40 percent of the reserves on federal lands in the Rocky Mountains—enough to cover America's energy needs for seven years—were restricted or off limits.

Cheney, Evans, and Lay were all members of the Natural Gas committee within the NPC that developed and submitted the report on federal land restrictions to the Clinton Energy Department. Two other high-powered Bush "pioneers," Archie Dunham, CEO of Conoco, and William Wise, then CEO of El Paso Corporation, were also committee members.

"And the first thing that jumps out at you—at least, when we looked at it, anyway—was this big—this big area here in the Rockies which represents a significant part of the resource base that's subject to these federal restrictions," said Travis Stice, an executive of oil company Burlington Resources, at a November 1999 NPC meeting. Stice was referring to estimates that access to up to 40 percent of the Rocky Mountain region's natural gas was restricted due to leasing agreements and regulations. Cheney and Dunham were both present at the meeting.



The December 1999 report said "[a]ccess to some portion of the federal gas resource base currently closed or significantly restricted to appraisal or development, as well as acquisition of rights-of-way, is essential to meeting the projected demand with cost-competitive gas supply." According to Jim Lucier, a regulatory policy analyst at the Prudential Equity Group, the Rocky Mountain region was the only place left to search for oil and gas. "It is not from Canada, it is not from Alaska, it is not from the Gulf, it has to be from somewhere."

Cheney's home state Wyoming has since become the epicenter of new oil and gas exploration in the Rocky Mountains region. The industry has targeted two enclaves for drilling, the Green River and Powder River Basins. With offices dotted all over Wyoming, Cheney's former employer, Halliburton, is well-positioned to extend its operations in the area.

The Energy Department selected Green River to be the primary focus of a 2001 study of lease regulations in the Rocky Mountains. The study concluded that more land was closed to drilling and exploration than the NPC had estimated, and recommended removing restrictions for drilling there.

The Green River Basin is of particular interest to members of the current administration. Evans' former company, Tom Brown Inc., "significantly increased its position" (in the company's words) in the area by acquiring Presidio Oil Company in 1996.

Opening up the area, however, could be a boon for the industry as a whole. "Basically, it will benefit any company that operates in those areas," Lucier said.

Doing the energy task force's homework
The White House's energy policy would soon take shape as well – and it would use NPC's work as a blueprint for the nation's new energy policy, according to records obtained by the Center.

"We provided copies of the [1999 natural gas report] through the chain in the Department of Energy and also to the Vice President's office, and it's clear that a lot of these recommendations were rolled right into the national energy policy," said Acting Assistant Secretary of Fossil Energy Bob Kripowicz at the June 2001 NPC meeting. Cheney and other members of his energy task force, including Evans, were already familiar with the NPC's work.

Consistent with the task force's advice, the Bureau of Land Management, an agency within the Interior Department, announced in August 2003 that it was reducing or eliminating certain leasing restrictions on federal lands. Tens of thousands of wells—including more than 50,000 in the Powder River Basin alone—are being surveyed in the Rocky Mountains; meanwhile, some states are selling off publicly held lands to oil and gas companies.

Not surprisingly, environmentalists are deeply concerned. Much of the gas in the Powder River Basin would be removed by a method called coalbed methane development, a technique environmental groups say is highly hazardous. Drilling down to as much as 10,000 feet, engineers pump out water at 12 gallons per minute from underground aquifers. Drillers can then remove the valuable methane gas. Waste water is then dumped onto the surface where it can wash away vegetation and poison the soil, environmentalists argue.

Environmentalists are also worried about pipelines. Although modern wells only occupy about ten acres of land, they require pipelines to transport the fuel and roads to access the well. Environmentalists fear that the rural landscape might soon become an industrial wasteland. In addition, many oil and gas companies might leave once the fossil fuel is sucked dry.

"What we as landowners are concerned about is these companies are going to come in, get the gas, and leave," said Jill Morrison of the Powder River Basin Resource Council, a local environmental group. "Then there will be a huge mess we as taxpayers will have to pay for."

According to Morrison, some of Wyoming's residents—especially its farmers and ranchers—feel their property is threatened by oil and gas companies. Although 80 percent of the land's surface in the Powder River Basin is privately held, 60 percent of its minerals are controlled by federal authorities, Morrison said.

"You will need an attorney to represent you in your negotiations with the oil and gas companies," advises her group's Web site. "You cannot legally stop development of minerals below your surface if you do not own the minerals. If you fight the developers, they can take you to court and have your property condemned and then develop the methane gas."

Wyoming citizens such as Morrison will not find a sympathetic ear in their lone U.S. House representative, Republican Barbara Cubin. As a vice-chair to the House Speaker's Task Force on Affordable Natural Gas, Cubin recommended cutting red tape regarding federal leases and environmental regulations to develop oil and gas resources in the Rocky Mountains in September 2003. Cubin is no stranger to the power companies' political largesse. Since 1994, the oil and gas industry has contributed nearly $350,000 to Cubin, while the energy sector overall has given her over $600,000, according to the Center for Responsive Politics.

Although the December 1999 NPC report, drafted by Cheney, Evans, and Bush pioneers before the administration took office, has become a cornerstone of today's energy policy, its estimates for gas reserves beneath the Rocky Mountains have been fundamentally challenged by the RAND Corporation, a non-profit research institute. According to a 2002 RAND report, the difficulty in extracting the fuel, the expense of building necessary roads and pipelines to and from the new wells, and dangerous environmental impacts greatly reduce the amount that can viably be extracted, even if access restrictions are lifted.

Even some members of the NPC itself had doubts. On November 11, 1999, in New Orleans, an unidentified speaker at the NPC meeting was uncomfortable with the council's numbers.

"There are so many parts of this report that we just don't have the data that you would need to say categorically this is going to happen . . . and to the extent that they early on don't happen it really has some very serious implications to ten years from now because there are so many areas we just don't have the data yet to really pin [down with] any sort of accuracy you would like."

"When you are doing projections, you are making assumptions and a lot of things can change," Nichols, the NPC executive director, told the Center. He also noted the group has updated its estimates. "I think [the 2003 NPC Natural Gas report] effectively supersedes whatever the RAND Corporation and the '99 report said."

"Usual trade association activities"
Although highly influential in government circles, the NPC is not designated as an advocacy or lobbying group for the oil and gas industry. According to its Web site, "the NPC does not concern itself with trade practices, nor does it engage in any of the usual trade association activities."

Members even extol their own "objectivity." In his farewell speech in December 1999, NPC chairman and head of the Houston-based oil company Newfield Exploration Joe Foster said, "It really is true that when we get involved in a joint study with the DOE or government representatives, that most of us in the industry sort of check our company hats at the door."

A few NPC members are registered lobbyists. Many are high-ranking officials in powerful industry trade groups headquartered in Washington. NPC member Ray Hunt, the CEO of Hunt Oil and 2000 Bush pioneer, also serves on the board of directors for the American Petroleum Institute. Another NPC member and the CEO of oil and gas company Bretagne G.P., Virginia Lazenby, is the chairwoman of the Wildcatters Fund—the political action committee of the Independent Petroleum Association of America. Lazenby's husband, Fred Lazenby, is a Bush ranger—a fundraiser who's agreed to raise at least $200,000 for the President's reelection campaign.

"It is difficult to avoid people who are the heads of major trade associations," said Nichols. "The reality is if you are an industry leader, you will be singled out by your peers as well as the secretary for advice."

According to its staff, the NPC does not require financial disclosure statements from its members.

Stuart Gilman, a former special assistant to the Director of the Office of Government Ethics during the mid-1990s, thought some scrutiny may be justified. "I don't doubt that they are good people and they think what they are doing it is right but they have vested interests," Gilman said.

Among those regular attendees was indicted former Enron CEO Ken Lay. In a twist of irony, Lay directed the NPC's Finance Committee and was essentially the group's treasurer. Two other Bush pioneers, Archie Dunham and William Wise, have held senior positions within the Council at various times, including chair and vice-chair, from 1999 on.

Richard Kinder, husband of Bush ranger Nancy Kinder, has joined the NPC as well. Kinder left Enron in 1996, married Nancy, who had been Ken Lay's secretary, and formed Kinder Morgan, one of the nation's largest oil pipeline conglomerates. Nancy Kinder is the southern Texas finance chairwoman for Bush's re-election committee.

Dunham, the chairman of ConocoPhillips, once chaired the National Association of Manufacturers, America's largest industrial trade association. In a March 2003 open letter to the House Resources Committee, NAM wrote, "Federal lands must continue to be leased for multi-purpose uses, including gas, oil and coal extraction and infrastructure construction. This has been a particular problem in the ever-increasing restrictions applied to federal lands in the Rockies." As a well-placed advisor to the Energy Department, Dunham advanced NAM's agenda through the vehicle of the NPC.

Bereft of their "company hats," the NPC's members might dress themselves in lobbyists' suits instead. A quick search through lobbying disclosure forms shows a close link between what the NPC recommends and what its member companies' in-house lobbying teams are asking for from Congress. As NPC members, oil and gas executives regularly meet members of Congress and White House officials. They have met with Mexican and Canadian authorities to present their studies. At his first meeting with the group, Abraham, Bush's Secretary of Energy, even encouraged Council members to respond to editorials in their local newspapers in order to change public perception of the industry.

At a September 3, 2003, meeting in Denver, Colo., Wise talked about the potential fall-out from a recent, yet-to-be-released NPC report. "It seems to me the biggest criticism we're going to get is: this is a self-serving document; that it has in it things that this industry has wanted in various segments of the industry for many, many years; you know, you're attacking clean air; you're attacking the offshore Outer Continental Shelf reserves; you're attacking the Rockies reserve places; you're attacking the Northwest Territories and the Mackenzie Delta and it's just a small step from Alaskan gas to ANWR."

Nonetheless, the NPC is still hard at work. On June 22, 2004, Abraham, concerned over rising gasoline prices, asked the Council for advice on the nation's refining capacity. The NPC is drafting a report this summer.





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If not? What then?

xico you post things that really piss me off.....

thank you

Xico:
Thanks for the exposes.
There is a vast right wing conspiracy isn't there

Sorry to sound cynical, but, "This is new???"

As I have posted, before, the olil & gas lobby, is the most active in the USA, mainly 'cos it makes the most (aggregated) profits and is so central, to keeping alive the US economic machine.

Their product, has managed to weasel itself, into effectively controlling life.

If you look at the aggregated profits, "Buying" an oil-friendly President, for say $750,000,000 is cheap, compared with an ecologically based administration, who might oppose Big Oil's hegemony.

The USA a democracy?

Paq ROTFL.

Paq

Proven reserves in Iraq are about 115 billion barrels.
The closing price last friday was $43.85 US.
LINK

Estimated unfound oil is estimated at 50 to 100 billion barrels, depending on the source.

Total value can reasonably be projected at between
$7.235 trillion US and $9.427 trillion US

'Buying' an 'oil friendly' president for $750 million, represents only at the minimum projected volume, .001% of the value, unrefined.

The profit margins for refined oil vary greatly. Currently they are at about $10 US.
http://www.aiada.org/article.asp?id=18904

At $10 / barrel, the profit potential from Iraqi oil is near
$1.65 trillion dollars US
That's
$1,650,000,000,000 versus
.........$750,000,000 that Paq estimated to put an 'oil friendly' president in place.

And that's at the expected minimum .
considering profits, it only cost the industry about .oo4% .

either way you look at it, Bush is a cheap 'buy'
And that's only the oil industry.

Hey did you guys see my post(s) about Peak Oil in the Economy Thread? Just asking!

Read http://forums.techguy.org/showpost.p...&postcount=899

and the post after it http://forums.techguy.org/showpost.p...&postcount=900

Thanks DN, for bringing it to my attention.
I had missed it.

All of you are wrong!!!!!!! The war isn't about oil or its control, its about sand. Good Iraqi sand. Its Bush's' attempt to control and dominate the world market in Iraqi sand, world renowned for its sand like qualities. Chaney has a job lined up for when he leaves the Administration in the Haliburton Sand and Gravel Emporium out of InMyShoe, Wyoming. (Rumor has it Chaneys' first action as the new company president will be to move the company headquarters to the Sands Hotel in L.V. to throw off government ethics enforcers!).





Heck, I have as about much proof as you guys do about oil.

You know what happens when you put sand in your car's engine?

Sorry, I forgot you were chauffeured ______

GB ~ those evil sand pirates!