Auction 2012: Energy Lobby Finds Power In Money And Fear
When George W. Bush overruled scientists at the Environmental Protection Agency in 2008 and set a new smog standard that was considerably weaker than they had recommended, it was just another example of how closely entwined the interests of the energy sector and the Republican Party had become.
But when President Barack Obama this fall suddenly killed the stronger smog standards championed by his own EPA administrator -- thereby leaving the Bush-era standards unchanged -- it was a clear indication that the energy lobby's influence is powerful enough to intimidate the Democrats as well.
Obama's decision was widely seen as driven by politics, not science or even economics.
Lowering the ozone standard from 75 parts per billion to 60 parts would have prevented 4,000 to 12,000 premature deaths annually, along with 58,000 cases of aggravated asthma and 2.5 million days of missed work or school, according to the EPA. The agency also estimated that tightening the standard could cost as much as $90 billion per year, but that the benefits would total as much as $100 billion per year.
Powerhouse lobbying groups, including the American Petroleum Institute, Business Roundtable and U.S. Chamber of Commerce, led a fierce fight, repeatedly meeting with White House officials to argue against the rule. Industry representatives worked the refs -- then-White House chief of staff Richard Daley and regulatory czar Cass Sunstein -- appealing to their own anti-regulatory leanings.
And behind all that was the implicit -- or perhaps explicit -- threat that if Obama sided against the big money, it would return to haunt him, quite possibly in the form of massive ad purchases in swing states labeling him a job-killer in his reelection year. Especially in the new campaign finance era, there is legally no limit to how much firepower the energy sector could bring to bear.
Of course, those attacks may come anyway.
The energy industry pours hundreds of millions of dollars a year into political contributions and lobbying -- considerably less than the financial, legal or health sectors, but by any other standards, a massive amount.
Oil and gas interests, for instance, spent $145 million on lobbying in 2011, with electric utilities right behind at $144 million, according to data collected by the Center for Responsive Politics. In a telling sign of clout, more than half of the 2,177 registered lobbyists working on the energy sector's behalf were formerly government officials.
Unlike Wall Street, which historically has spread its campaign contributions around to both parties, the oil and gas industry leans heavily toward Republicans, especially over the last 15 years. At the same time, the GOP's anti-tax policies, anti-regulatory campaigns and pro-drilling rhetoric have become increasingly indistinguishable from the American Petroleum Institute's agenda.
In the early 1990s, the oil and gas industry's campaign spending favored Republicans over Democrats, but not by that much. For every $1 the industry gave to Democrats, it gave Republicans $1.78. But starting in the 1996 election cycle, that changed dramatically. By the 2010 election cycle, for every $1 the industry gave Democrats, it gave Republicans about $3.43. And so far in the 2012 campaign cycle, the tilt toward the GOP is more than 7 to 1, with individuals and companies associated with oil and gas contributing almost $12 million to Republicans and $1.6 million to Democrats.
The like-mindedness linking the industry and the GOP is best illustrated these days by the party's unprecedented congressional assault against environmental regulations. Last year, with Republicans back in control of the House, there were at least 159 votes on anti-environmental protection measures on the House floor alone, including 83 targeting the EPA, according to a list compiled by Democrats on the House Energy and Commerce Committee.
That's because the energy lobby never rests, said Tyson Slocum, director of the energy program for the consumer watchdog group Public Citizen.
"You're not satisfied with having a D.C. operation just to make sure that government doesn't do you any harm," he said, explaining industry thinking. "The goal is not to maintain the status quo. What you really want to do is to try to gain advantage."
For the fossil fuel industry, that can also mean "trying to demonize alternatives to your business model," including alternative energy sources and greater energy efficiency, Slocum said.
And often the battle has come down to tax breaks.
The energy industry won its most recent major tax break in 2004, after the World Trade Organization had repeatedly declared U.S. export tax incentives illegal. Congress set out to replace them with an income tax deduction for domestic manufacturing -- and somehow oil and natural gas production, despite having been explicitly precluded from the earlier incentives, was covered by the new deduction. That windfall now adds about $1 billion a year to the industry's bottom line.
Federal tax breaks for oil and gas total somewhere between $4 billion and $9 billion a year, even as the industry revels in record profits, undaunted by the financial crisis that has crippled so much of the American economy.
Obama's line at the 2012 State of the Union address -- "We've subsidized oil companies for a century. That's long enough." -- was greeted by applause. But if history is any guide, his proposal will come to naught.
Perhaps most important of all, the energy industry's political power has allowed it to crush -- and now make politically unthinkable -- any effort to assess the external costs of greenhouse gases created in the production and consumption of fossil fuels.
Just as one point of reference, a 2009 report from the National Research Council tried to estimate the costs of air pollution and other harms that are not reflected in the market price of fossil fuels. The report pegged the price of the damage from fossil fuel production and consumption at $120 billion in the U.S. in 2005 alone -- and that notably did not include the cost of climate change, harm to ecosystems, effects of some toxic air pollutants and risks to national security, all of which the report was unable to quantify.
Looking at power plants' burning of coal, the report found that damages from sulfur dioxide, nitrogen oxides and particulate matter averaged about 3.2 cents for every kilowatt-hour of energy produced. It estimated climate-related monetary damages at 0.1 cents to 10 cents per kwh, depending on assumptions. By contrast, coal costs 7 to 14 cents per kwh.
Yet any kind of carbon tax or fee is politically impossible right now, said Kyle Ash, senior legislative representative for Greenpeace. It's not so much an issue of dogma. "There are a lot fewer climate deniers than people think," he said.
It's a matter of money. "There's a lot of good data on which politicians are taking how much money from fossil fuel industries, and you can see clear connections," Ash said, pointing to a recent Greenpeace report titled "Polluting Democracy." "I think it's about who's paying for their campaigns," he said.
The clearest evidence, he said, comes in the otherwise unresolvable contradiction between what politicians say and what they do.
"The contradiction is that they're also really opposed to federal outlays, and they want to cut taxes," Ash said. "But they're fighting against the removal of fossil fuel subsidies."
The Auction 2012 series explores the ways industries influence policymaking in five areas: banking, energy, health care, trade and education. Read Dylan Ratigan's blog post introducing the series and his blog post on energy.
Follow this diagram of energy-industry power from Dylan Ratigan's book "Greedy Bastards":