Private Empire: ExxonMobil and American Power

by Steve Coll

  ExxonMobil had a big stake in the Alberta sands, but so did BP, among other oil multinationals. In a world of rising resource nationalism, Canada’s oil, however dirty, offered the largest single reservoir in a free-market economy that could be easily acquired and owned by American or British corporations and their shareholders. They would not yield its potential casually.

  The Washington lobbyists of the major companies banded together after Obama’s return from Ottawa. Through the American Petroleum Institute, they launched a public relations and lobbying campaign to support expanded production from the Alberta sands. In Houston, the oil companies formed a front organization, the Consumer Energy Alliance, to fight against any proposed restrictions on Canadian oil. The campaigners appealed above all to American nationalism; by keeping out Canadian oil, lawmakers would only ensure that Alberta’s oil was sold to China or Japan, leaving the United States even more dependent on unreliable suppliers from the Middle East and Venezuela. An ad taken out by the Consumer Energy Alliance in the Weekly Standard showed Caucasian schoolgirls at play, presumably Canadians: “Energy Security? The Answer Just Might Be Closer Than You Think.”

  ExxonMobil put its corporate shoulder into the lobbying campaign. David P. Bailey, an in-house specialist on the subject, joined a task force at the Council on Foreign Relations that was organized early in 2009 to produce a definitive study on the issue. The study group’s advisory committee included, besides Bailey, a Chevron representative, business consultants, academics, and environmentalists. The final report, “The Canadian Oil Sands: Energy Security vs. Climate Change,” was rigorous and thorough. It recommended addressing the greenhouse gas emissions problem posed by the Alberta sands through linked cap-and-trade systems in the United States and Canada. The report also expressed skepticism about Section 526 and similar fuel restrictions aimed at Canadian oil. “Tread carefully with any low-carbon fuel standard,” it recommended. “Resist the misuse of other U.S. environmental regulations to constrain oil sands.” Apart from its endorsement of cap and trade, the council report generally sided with ExxonMobil’s positions.15

  Throughout the oil sands lobbying struggles of 2009, ExxonMobil’s executives were indignant about the issue, an oil industry lobbyist involved recalled. The corporation’s internal analysts and lobbyists saw Section 526 and Obama’s consideration of similar limits on Canadian imports as “more of an affront to the industry” than a legitimate public policy dilemma.

  Canada’s politics concerning the oil sands were complicated, but as a practical matter, there was virtually no chance that Alberta’s provincial politicians or the country’s national leaders in Ottawa would seriously limit Canada’s production in the years ahead. Too much national wealth was at stake. For its part, ExxonMobil’s Syncrude subsidiary possessed licenses to operate in Alberta through 2035; its holdings totaled at least 734 million barrels as of the end of 2008. A separate oil sands project called Kearl in which ExxonMobil was invested would soon produce another 110,000 barrels per day in bitumen.

  All this meant, from ExxonMobil’s perspective as a global corporation, that it did not necessarily have a Washington lobbying issue concerning the Alberta sands at all: If the United States were dumb enough, in the corporation’s estimation, to restrict Canadian imports, then ExxonMobil would just sell the same oil to Asia. It did not even seem obvious to ExxonMobil why the oil industry should spend so much time and money lobbying on the issue in Washington—building consumer front groups, buying ads in newspapers, enduring accusations that it was out, once again, to destroy the environment—so as to convince the Obama administration and Congress to see Canada as a strategic friend and a source of energy security. To ExxonMobil’s representatives, Canada’s relative desirability as an oil supplier seemed one of the more obvious propositions in foreign and energy policy. If the Obama team did not agree, let it explain its thinking to the American public. “The whole industry was pretty pissed off about it,” the lobbyist involved recalled.16

  In March, Theresa Fariello, Dan Nelson’s successor as head of ExxonMobil’s K Street office, settled on a $1.4 million, four-bedroom townhome in a tree-shaded, secluded section of Georgetown. Her arrival as a Democrat representing Irving’s interests in Obama’s Washington marked the most significant investment Tillerson had yet made in a political strategy of his own. Fariello had grown up in modest circumstances, and some of her acquaintances thought of her ascension as ExxonMobil’s chief Washington lobbyist as an American success story. During the late Reagan administration, the first Bush presidency, and much of Clinton’s presidency, Fariello had lobbied for Occidental Petroleum in Washington. She had been active as well in the pro-business wing of the Democratic Party. One of the party’s leading deal makers, perennial presidential candidate and New Mexico governor Bill Richardson, had hired Fariello at the Department of Energy during Clinton’s second term. As Democrats left federal office after George W. Bush’s disputed election, ExxonMobil recruited Fariello to its public affairs operation. She moved to Irving and worked closely with Ken Cohen during the Bush presidency. More than any ExxonMobil executive in Cohen’s departments, she managed channels to Democratic lobbyists and allies during the Bush years.

  While considering the dilemmas that Obama, Harry Reid, and Nancy Pelosi posed to the corporation, Fariello and Cohen had developed a multifaceted plan to bring ExxonMobil in from the political cold and to make the corporation more relevant in an age of Democratic ascendancy. Tillerson’s carbon tax endorsement was just one prong. Cohen authorized contributions to the Clinton Global Initiative, to advance and publicize ExxonMobil’s global programs on women’s rights. He designated Lorie Jackson, an African American lobbyist in the Washington office with graduate degrees from Stanford University and Harvard University, to represent this charitable and policy push at public events.

  ExxonMobil also announced that summer a potential $600 million investment in algae-derived biofuels that might replace gasoline one day, in partnership with the genetic researcher J. Craig Venter. The investment plan involved deep scientific uncertainties, but it did conform to ExxonMobil’s criteria in considering alternative energy initiatives, namely, that it would invest only if the payoff would be relevant to its core businesses and would be potentially scalable and transformative. The algae announcement won widespread and uncritical news coverage; it appeared that ExxonMobil had finally internalized BP’s example that, in calculating the full costs of alternative energy investments, unpopular oil companies should factor in the marketing benefits of free favorable publicity.

  In Washington, Fariello invited State Department officials, ambassadors, congressional staff, and other influential arrivals to Obama’s administration to hear ExxonMobil’s energy futures briefing, its gospel of 2030. The corporation purchased billboard space in the Washington Nationals’ new baseball stadium, on the Anacostia River, and erected image ads depicting ethnically diverse ExxonMobil scientists and engineers surrounded by photographs of molecules and other scientific signifiers. The strategy was working, Cohen told the Management Committee in Irving: ExxonMobil’s favorability ratings in its internal American and Canadian public opinion polling soared during 2009, from about 30 percent favorability the year before to about 50 percent. The internal polls showed that all of the big oil companies—ExxonMobil, BP, Chevron, and Shell—had recovered some of their public reputation in the United States, more or less in tandem. Perhaps the ratings were best understood as simply a reflection of public feeling about retail gasoline prices, which plunged during 2009 because of the recession. The strategy overall, said an executive involved, was premised on the belief that Democrats in Obama’s Washington “don’t want B.S. They don’t want greenwashing. . . . Let’s establish a tone. . . . We are prepared to disagree and hopefully we can think about it in a way that’s mutually respectful.”17

  ExxonMobil was partially constrained, however, by the fact that its Democratic Party connections were heavily located in the failed presidential candida
cy of Hillary Clinton. Theresa Fariello had worked actively to support Hillary Clinton’s candidacies for senate and president. Moreover, the principal Democratic lobbyist Fariello worked with in Washington, David Leiter, a former chief of staff to Senator John F. Kerry (D-Massachusetts), happened to be married to Tamera Luzzatto, Hillary Clinton’s chief of staff in her Senate office during the 2008 campaign.

  The Clinton universe was in general more connected to Fortune 500 executive suites than the Obama campaign had been. While raising campaign funds throughout the 1990s, Bill Clinton had developed friends in virtually every American industry. When he first ran for the U.S. Senate in 2004, by contrast, Obama had not needed decisive access to national corporate funding because his main Republican opponent dropped out early in the race, following a sex scandal; Obama won effortlessly. In his run for the White House, Obama had tapped Hollywood and Wall Street for support, and he attracted allies in the executive suites of large technology companies such as Google, but he did not have the breadth of connections to the Fortune 500 during the primary campaign that Hillary Clinton enjoyed.

  In Congress, early in 2009, allies of Obama’s overthrew one of ExxonMobil’s most stalwart Democratic allies, Representative John Dingell (D-Michigan), chairman of the House Energy and Commerce Committee, where all climate and energy legislation originated. Representative Henry Waxman (D-California), a pit bull of a liberal whose West Los Angeles constituency adamantly supported aggressive action on climate change, succeeded Dingell. Obama’s White House team cheered the coup on Energy and Commerce because they believed it would make possible a big cap-and-trade bill, which Dingell might have resisted.

  David Leiter and other ExxonMobil lobbyists, such as Kelly Bingel, a former chief of staff for Senator Blanche Lincoln (D-Arkansas), called Democratic members and staff in the House frequently to arrange meetings with ExxonMobil’s staff lobbyists and executives. A staffer for one centrist Democrat in the House estimated that, whereas ExxonMobil might come by at most once a year in previous eras, its lobbyists were seeking meetings in 2009 almost at a rate of once per month. “They don’t come in to be combative,” the staffer said. “Three quarters of the time they are defensive on something—cap and trade or tax issues. . . . I think people sense that Exxon’s scared,” he continued. “They need to find new friends.”18

  Sherri Stuewer, one of the relatively few women at ExxonMobil to rise to senior management, now served as the corporation’s lead adviser on climate issues. Her title was vice president of environmental policy and planning; she was a confident-looking woman in her fifties with shoulder-length auburn hair. During the first week of June 2009, she arrived at a farm along the Florida-Georgia border, White Oak, an unusual conference center built by the heir to a paper fortune, Howard Gilman. He had populated his land with endangered African and Asian species, including rhinos, giraffes, okapi, tigers, cassowary, bongos, and guars, cowlike beasts from the Indian subcontinent. Safari vans allowed guests to view the animals. A stuffed polar bear loomed over the conference center’s game room. Adding to the Jurassic Park-inspired atmosphere of eccentricity, Gilman had also established, on the same estate, a dance facility for the ballet maestro Mikhail Baryshnikov.

  “Power Politics: Moving Americans to a Clean Energy Future” was the private three-day meeting, sponsored by the Washington think tanks Third Way and the Center for Policy Innovation, that drew Stuewer. Other corporate representatives from companies that supported cap and trade arrived, as did Governor Joe Manchin of West Virginia, a staunch advocate of coal interests, and environmentalists from influential groups such as the Natural Resources Defense Council and the Environmental Defense Fund.

  A cap-and-trade bill known as Waxman-Markey, after its sponsors, was on the verge of passing the House. The bill was lengthy and complicated, but it brought some Democrats from coal states such as Virginia into political alliance with West Coast environmentalists such as Waxman himself. However, the legislation’s chances in the Senate, where the filibuster created a de facto requirement for a sixty-vote supermajority, looked doubtful. ExxonMobil had changed its public posture by endorsing a carbon tax, but it did not want cap and trade to succeed. The corporation and its allies had also kept all restrictions on Canadian oil imports out of the Waxman-Markey bill in the House; they wanted to ensure nothing of the kind resurfaced from the Senate. Part of the purpose of the White Oak meeting was to outline strategies that might push some sort of carbon cap or price through the Senate, despite the obstacles.

  Stuewer seemed overwhelmed by work and did not hang out much in the game room or the bar, but she participated in the break-out sessions. Tony Kreindler of the Environmental Defense Fund “got into a spirited discussion with her,” as he recalled it. Kreindler knew all about ExxonMobil’s support for a carbon tax, and in his circles, “there are two explanations—one is paranoid—that they were reading the tea leaves and proposed a poison pill they knew would never pass. The other explanation, which I’m inclined to believe, is that Exxon believed some [carbon pricing] mechanism was inevitable, and they took a very hard look at their business model and decided they could simply out-compete everyone else if the policy were a carbon tax.”

  Kreindler and Stuewer talked in detail about changes to the Waxman-Markey formulas that might bring it closer to something ExxonMobil could accept, by structuring the cap-and-trade regime so that it looked and worked more like a straight-up carbon tax. “We need certainty,” Stuewer said, according to Kreindler. That is, ExxonMobil could accept a carbon price if it knew that the price would not gyrate wildly.

  Kreindler pressed her. Why were they here? “Because we need to reduce emissions or because you need price certainty?”

  Stuewer pushed back: The solution ExxonMobil recommended would, in fact, reduce emissions; cap and trade was a less certain mechanism.

  “Why don’t you support something that would actually make a difference?” Kreindler asked. Stuewer insisted that she thought she was.19

  As the scrum over climate policy on Capitol Hill took form that summer, ExxonMobil lobbyists made two arguments to fence-sitting congresspeople and senators. Even if cap and trade were phased in, so that its costs did not hit the United States until the economy recovered fully from recession, they said, the system would nonetheless destroy jobs and growth. A Brookings Institution study showed, in fact, that the Obama and Waxman proposal might take about 2.5 percent out of American gross domestic product during the next forty years—the equivalent of one year’s economic growth—as the cost for removing between 110 and 140 billion metric tons of CO2 from the atmosphere. That was not a daunting price if climate change was accepted as a grave national danger, but among congresspeople whose constituents in 2009 suffered from personal bankruptcies, mortgage defaults, and even homelessness, it was not an easy trade-off to accept. The same Brookings study showed that cap and trade would destroy about 15 percent of jobs in the oil and coal industries by 2025, although it would have virtually no effect on employment outside of the energy sector. ExxonMobil emphasized those forecasted job losses to members of the Senate from the oil and coal states that would be hardest hit.20

  The corporation’s representatives also pointed out that the public did not understand cap and trade very well. Among those who had heard of the policy proposal at all, more than twice as many of those surveyed had negative as positive assessments. During 2009, ExxonMobil lobbyists left behind in congressional offices PowerPoint slides documenting a private Hart Research Associates poll, “Energy and Climate Change Policy,” that had been commissioned by the U.S. Climate Task Force, the pro–carbon tax coalition. The poll showed that Americans preferred a carbon tax to cap and trade, and they strongly favored a tax when educated about the arguments in favor of each approach.21

  On the morning of September 23, 2009, Rex Tillerson arrived at the Sheraton on Seventh Avenue to participate in the “Investing in Girls and Women” Plenary Session at the Clinton Global Initiative. Delegates in the ballroom
sat with name tags dangling from their necks. The decor was tinted blue, purple, and red; two large screens on the sides of a stage flashed photographs of dignified Third World poor.

  Bill Clinton took the stage wearing a brown suit; it was an early hour, and his baggy eyes and raspy voice hinted at a late night. “It was very important to me that this issue of women and girls be highlighted” at this year’s initiative, he told the audience. He invited a number of “commitment makers” to the stage to congratulate them on their philanthropy before the audience. Muhammad Yunus, the Nobel laureate and founder of Grameen Bank, was among the honored; so was Lorie Jackson of ExxonMobil.

  Clinton introduced Diane Sawyer. She summoned to the stage members of a panel to talk about women’s issues; the panel included Tillerson and Lloyd Blankfein, the chief executive of Goldman Sachs, the investment bank with a public reputation as much in need of repair as ExxonMobil’s. The ballroom atmosphere suggested the laying on of liberal, globalized hands to cleanse sinful multinational corporations. “These are some of the power hitters,” Sawyer said of Tillerson and Blankfein.

  Tillerson talked about ExxonMobil’s charitable initiatives to support girls and women in some of the poor countries where the corporation extracted oil. “Technology comes very natural to ExxonMobil,” he said. “What are the technologies that will provide them [girls and women] capabilities to undertake their daily activities in a more effective and efficient way?”

  Sawyer later asked him: What is the responsibility of a multinational corporation to make the world better through charitable activity? Is it a tithe of 10 percent? How much?

  “Ultimately,” Tillerson said, “this is our shareholders’ money we’re spending. It’s not my money to tithe. It’s not the corporation’s. It’s our shareholders’.”22