Sufficiently awed and hopefully impressionable governments—that was so nice in all these little countries on the other side of the globe, why couldn’t ExxonMobil have that everywhere? His favorite book, Tillerson had told the readers of Scouting magazine, was Ayn Rand’s Atlas Shrugged, that bible of bright, contrarian high school sophomores and adult free-market zealots, in which slug-brained bureaucrats and politicians are the obstacles blocking the exalted few individuals of drive and genius who are the only real heroes who can be counted on to power world progress, if they could only be allowed to operate unfettered by the small, the meek, the uninformed, the uncertain. Tillerson, à la Rand, chafed at anyone who thought they had some good reason why Exxon should slow down or alter its course. Anyone operating outside his industry, in his reckoning, was operating without sufficient knowledge to offer constructive criticisms or solutions. His biggest challenge in leading ExxonMobil, he confided in his Scouting magazine interview, was to “communicate to the public and policymakers the complexities of the energy business in ways that help them better understand some of the issues involved and why things are how they are.” He once told his fellow oilmen at a Houston conference, “You can be afraid of a lot of things that you don’t understand.”
When Rex Tillerson ascended to the top of ExxonMobil in 2006, at age fifty-three, after more than thirty years at the company, he was crawling atop a juggernaut. ExxonMobil had booked all-time world-record earnings in each of the three years prior to Tillerson’s installation as chairman and chief executive officer. Its gross revenues the year he took over were approximately equivalent to the gross domestic product of Sweden, Switzerland, Indonesia, or Saudi Arabia. And CEO Tillerson had scant cause to worry about malign interference from the political classes, even on his tricky home shores. Like all U.S. oil producers, ExxonMobil (and its investors) continued to enjoy the sorts of subsidies and incentives that had been in the tax codes for almost a century. This kept its annual tax bills low—at times, almost unbelievably low—no matter how high its profits.
Both houses of the U.S. Congress, and all the relevant committee chairmanships, were in the hands of industry-friendly Republicans when Tillerson took over in 2006. The White House was manned by George W. Bush, who had started his career, in the footsteps of his father, as a landman in the Texas oil business. George W. had entered the oil fields at an inopportune time, so his early career was much more bust than boom before he left the oil bidness for baseball and politics. As president, the younger Bush did give his fellow oilmen a little fright in 2005, when ExxonMobil and other companies were booking gargantuan profits, largely because the price of oil—along with the price of gasoline at the pump—was on the rise. “With $55 [a barrel] oil, we don’t need incentives for oil and gas companies to explore,” the president told a group of newspaper publishers that spring. Bush’s policy team that year stunned the oil and gas industry by broaching the possibility of a reduction or repeal of the hallowed oil depletion allowance and of new tax breaks that would instead encourage the development of woo-woo hippie renewable energy sources like wind and solar. This sent a serious shiver down the spines of oil industry execs, until President Bush thought better of it. Or was talked out of it. He not only backed off a proposed repeal of the oil depletion allowance; he ultimately signed on to Congress’s decision to expand it.
But that mostly cuddly, only occasionally and briefly scary, political environment for the oil business began to change, as luck would have it, soon after Rex Tillerson took hold of the corporate reins. The Democrats won back both the House and the Senate in 2006, and then ahead of the 2008 presidential race a charismatic young first-term senator began using the oil industry in general (and ExxonMobil in particular) to great political advantage in his unlikely journey toward the White House. One of the few pieces of legislation Barack Obama introduced in his brief, four-year stay in the Senate was the inelegantly named Oil Subsidy Elimination for New Strategies on Energy Act. Senator Obama’s Oil Sense Act took big bites out of the oil depletion allowance and introduced some environment-friendly regulatory hurdles to offshore drilling in Alaska and the Gulf of Mexico, and to “unconventional” natural gas and petroleum operations (a.k.a. horizontal drilling and hydraulic fracturing). The legislation did not gain a single co-sponsor, and it died without getting so much as a hearing in the Senate Finance Committee. But it put Obama on record against what many Americans were beginning to see as the industry’s well-lubricated free ride.
Candidate Obama got more traction on that issue out on the campaign trail than he did in the Senate, largely because ExxonMobil presented a very easy target. Gas prices jumped to a record high in the long hot summer of 2008, to more than $4 a gallon, while Obama was battling for the presidency with the Republican nominee, John McCain. Would-be vacationers were doing the math and were not happy with the results. Hundreds of extra dollars would have to be set aside just to make the drive to Disney World, or the Grand Canyon, or Yellowstone. Obama had done his own calculations and saw he could tie Rex Tillerson’s record profits at ExxonMobil, like an albatross, around John McCain’s neck. “At a time when we’re fighting two wars, when millions of Americans can’t afford medical bills or their tuition bills, when we’re paying more than $4 a gallon for gas, the man who rails against government spending wants to spend $1.2 billion on a tax break for ExxonMobil,” Obama began saying at rallies across the country. “That isn’t just irresponsible. It’s outrageous.”
These theatrics were annoying to Tillerson but not tremendously concerning—that is, not until Obama’s surprisingly decisive victory helped sweep into office the largest Democratic majority in the House in sixteen years and the largest Democratic majority in the Senate in thirty-two years. Democrats had gained fifty-six seats in the House and fourteen seats in the Senate in just two election cycles. ExxonMobil, it was noted by the new majority, had spent heavily in the failed effort to keep friendly Republicans in power. Doggone democracy had thrown Exxon a nasty curveball.
But Tillerson and his ExxonMobil team hadn’t failed entirely to anticipate the trouble ahead. They knew how to hedge. Back in 2006, when the Democrats were starting to achieve liftoff, the head of ExxonMobil’s in-house Washington lobbying office had acknowledged, “We need a conversation with Democrats.” That conversation ended up costing, and plenty. ExxonMobil quadrupled its lobbying budget from $7.3 million in 2005 to around $28 million in both 2008 and 2009. At the tail end of 2009, heading into Obama’s second year in office, it was still too early to say just what ExxonMobil was getting for its millions. The company was chiefly playing defense when it came to public policy. There were plenty of threats afoot in the halls of Congress: a rollback of the (by now politically toxic) tax breaks for the oil and gas industry; a windfall profits tax to clip the energy companies whenever oil and gas prices went way high; limits to offshore drilling; tougher standards for carbon emissions; and a cap-and-trade program designed to reduce the amount of greenhouse gases released into the environment and to force major carbon producers to pay a heavy price for the right to continue doing damage.
On climate change and global warming, Tillerson had taken a much more diplomatic line than his predecessor, who had led a campaign of flat-out denial. The Tillerson regime at ExxonMobil was willing to admit that global warming was a dangerous phenomenon and that it might be caused in some unknowable portion by man-made activities, like, for instance, burning fuel that spewed carbon dioxide into the air and the oceans. “Let’s continue to support the scientific investigation of what is one of the most complicated areas of science that people are studying today, and that is climate,” Tillerson pronounced shortly after he took over. But what sounded like moderation turned out to be an effort to run out the clock while ExxonMobil hoped for a new and less alarmist Congress. The climate models, he kept saying, are “inconclusive.” This was “a risk-management problem,” Tillerson would say. And he liked to remind folks that risk management
was ExxonMobil’s stock-in-trade. There was nobody better—so long as the company’s bottom line was the final judgment.
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Turns out Tillerson’s 2009 purchase of the shale gas player XTO Energy presented an entirely new front on which ExxonMobil would have to push back against the Democratic majority in Congress. A certain amount of toxic evidence was beginning to bubble up to the surface, suggesting potential environmental hazards inherent in the very technologies—hydraulic fracturing and horizontal drilling—that had combined to make recovery of tight gas and tight oil commercially viable. The Bush-era EPA had concluded a multiyear study back in 2004 and pronounced fracking safe and sound, good to go, then left it to the states to write the regulations as they saw fit. But now it was the Obama administration and a new guard on Capitol Hill. This Congress authorized and funded a fresh new EPA study on the risks to groundwater and drinking water. There was also legislation in both the House and the Senate to end a Bush-era Clean Water Act exemption and require fracking operations to disclose the ingredients—including all chemicals and carcinogens—of the slickwater they were shooting at subterranean rock by the hundreds of millions of gallons.
And now that the mammoth ExxonMobil was finally lumbering into the field of shale gas, the U.S. Congress was eager to hear from Rex Tillerson on this very subject. There was an interesting little piece of the ExxonMobil-XTO agreement that had got into the news. “The proposed deal with XTO,” wire services reported, “is contingent on Congress not passing laws that would make hydraulic fracturing ‘illegal or commercially impracticable,’ according to contract language filed by Exxon with the Securities and Exchange Commission.”
The chairman of the House Subcommittee on Energy and Environment summoned Tillerson and XTO Energy’s chairman, Bob Simpson, to share their thoughts on the merger and on the future of shale gas. “Remember the old commercial—‘When E. F. Hutton talks, people listen?’ ” Chairman Edward Markey said in opening the hearing, on January 20, 2010. “Well it is no secret that I disagree with ExxonMobil on many aspects of energy policy. But when America’s biggest company makes a big move in the energy sector, policy makers need to listen and understand what it means….This merger heralds a fundamental long-term shift in U.S. energy markets and one that deserves our close attention.”
There were twenty-one Democrats on Chairman Markey’s subcommittee, only a few of whom had ever enjoyed the benefit of financial support from ExxonMobil’s prodigious PAC, and only ten surefire industry-friendly Republicans. But if Rex Tillerson anticipated a rough morning-to-midday session, he didn’t show it as he sat, unperturbed, listening to Chairman Markey’s opening statement. He didn’t confer with aides or riffle through his prep notes, but kept his attention focused on Markey. He had the sort of steely self-possession that could not be bought, even with a compensation package worth $27 million a year, which Tillerson currently claimed. His face was unlined, still a bit tan even in winter, and jowly in the subtle and pleasant way that suggests the absence of menace; every Dry Look strand of Tillerson’s thick graying hair, swept elegantly back off his forehead, remained in its place. He sat silent, next to Bob Simpson, listening to eighteen separate long-winded opening statements from committee members. Tillerson didn’t fidget. He didn’t occupy himself by taking faux notes. He didn’t look away from his about-to-be inquisitors. And when it was his turn to speak, his voice remained mellifluous and measured, like he was talking to schoolchildren, trying to, you know, explain “the complexities of the energy business in ways that help them better understand some of the issues involved and why things are how they are.” If the Boy Scouts started a course in unflappability, Eagle Scout Rex Tillerson would have to find more room on his sash for a new merit badge.
Turns out, that January hearing was mostly a cheerleading session for him and his new merger. The chief concern of the subcommittee at large was energy independence—getting America to stop importing oil and gas from unsavory foreign countries—and even the Democrats seemed perfectly willing to overlook a lot, given how much this fracking and horizontal drilling was doing to move the country toward that long-sought and elusive goal. “We love having [XTO] in Pennsylvania,” offered a Democratic congressman from Pittsburgh. “We want to get that gas out of the ground. We are all for doing that.” Everybody was pretty much in agreement that a federal mandate requiring operators to disclose the recipe of fracking fluids was fine, so long as no secret recipe was shared with competitors. But past that, very little time was spent drilling down on the potential hazards of hydraulic fracturing.
When questions of safety did occasionally arise, Tillerson asserted that oil and gas producers had employed hydraulic fracturing in more than a million wells in the previous decades, “and there is not one reported case of a freshwater aquifer ever having been contaminated.” Nobody challenged him. A congressman from North Carolina quoted Obama’s new secretary of energy, a Nobel Prize–winning physicist, who said he believed fracking for tight gas held extraordinary promise. There were potential dangers, and a hundred different ways to screw it up, but as Secretary Steven Chu had said, “if it can be extracted in an environmentally safe way, then why would you want to ban it?” Rex agreed! “You have hundreds to thousands of feet of rock strata between the freshwater and the hydrocarbon-bearing shale, then you have multiple layers of steel casing as well,” he explained to the subcommittee. “So it is a risk that we know how to manage.” Nobody challenged him.
Tillerson’s compatriot, XTO’s chairman, Bob Simpson, told the committee he had faith “in the wisdom of Congress collectively, the greater wisdom, that [fracking] will continue because it is safe and the consequence of not being able to do it for our economy is too grave.” And then Tillerson reminded the committee that if stringent regulations on fracking were adopted, the added costs could make drilling prohibitively expensive and kill off the great national march toward energy independence, just as it was finally within reach. “Without hydraulic fracturing the gas that is locked in the shale rock stays locked. It just stays there,” he said. “If you remove hydraulic fracturing as one of the key enabling technologies, this resource can no longer be recovered.” And this, Tillerson added, would cost jobs, right now, in the middle of a recession, when the country could least afford it. “All of the job growth we have talked about would pretty well come to a halt,” he said, “because you wouldn’t drill the wells anymore if you couldn’t fracture them.” Nobody challenged him on that either.
The colloquy devolved into an opportunity for Democrats to put themselves firmly on the record—for energy independence. One Colorado Democrat wanted it known that she had offered a bill to disclose the recipe of fracking fluids injected into the ground, but even that was accompanied by the congresswoman’s firm declaration: “I have absolutely no intention of outlawing fracking. In fact, I think fracking is important to get a lot of these reserves out of the ground.” The general consensus was that the industry had always been at its most productive when it was allowed to police itself; the company’s bottom line would suffer if anything went wrong, and what could be a more effective deterrent than that! “Clearly it is a risk that we have to manage,” Tillerson said of fracking, “and the expectation is that we manage it well.”
The most colorful defense of the industry’s commitment to safety was offered by Representative Steve Scalise, a newbie from Louisiana’s First Congressional District, which stretches from inland Folsom out into the Gulf of Mexico. Scalise wasn’t even an official member of this particular subcommittee, but he got himself into the room just the same, and in front of the cameras. Left-wing pols and environmentalists were simply behind the curve as always, Scalise implied. Unaware of the spectacular advances being made in drilling technology and safety. “It gets lost in the shuffle a lot,” he said in a lead-up to a question for Tillerson. “People talk as if the technologies of twenty years ago were still being employed. You know,
I like to tell my colleagues that the best place to go fishing in the Gulf of Mexico is next to an oil rig because, number one, with the environmental safeguards that are in place, it is one of the best habitats for fish. They love congregating and thriving in that area. And the fishing captains know that because that is where they take people to go fishing. And you will catch some really good fish and some of the best eating you are going to find right there next to the oil rig.”
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