Private Empire: ExxonMobil and American Power

by Steve Coll

  “Look,” Raymond told Cheney, as he recalled it later, “my view is this country is going to be an importer [of oil] for as far as the eye can see. If you believe that to be the case, what things can we do?” Raymond answered his own question: “The first thing anybody will tell you is you have to have diversification of supply—you can’t get yourself in the position where you only have one supplier.”

  That situation had developed between the United States and the Middle East. To overcome this bottleneck of geopolitical dependency, Raymond said, the United States had to be “engaged every place, every place you can go. . . . Even in the North Slope of Alaska.” Raymond felt that “one of the key issues in foreign policy” was how to manage the challenge of increasing access to new oil supplies. As he recalled it, he told Cheney, “We should be trying to encourage, as a matter of foreign policy, having countries develop their natural resources,” so that the United States could have “as diverse a portfolio of supplies as you can have, so that you don’t get yourself beholden to any one person.”1

  ExxonMobil had enjoyed easy access to high-ranking government officials during the Clinton administration; when the corporation’s Washington representatives needed a meeting, they almost always got one. Raymond told colleagues that ExxonMobil enjoyed access to the administration that was comparable to the halcyon years of the Reagan presidency. Clinton appointees approved the Exxon and Mobil merger with a minimum of fuss. Al Gore’s candidacy for the White House, however, had attracted considerable resistance from the oil industry, in part because of Gore’s record of environmental activism. Oil and gas companies had donated $34 million to political candidates during the 2000 cycle—more than three fourths of that funding had gone to Republicans.2

  George W. Bush’s father had made his fortune in the oil patch, and the new president had run a wildcatting firm earlier in his career, less successfully. There was little mystery about how the Bush administration would proceed on energy policy. A few days before his meeting with Raymond, Bush had assigned Cheney to head a cabinet task force to make rapid recommendations. The speed with which the panel planned to issue its findings—just a few months would pass from the panel’s formation to the issuance of a finished report—made the initiative recognizable to Washingtonians as one of those precooked packages where the authors know much of the outcome in advance. The purpose of such a task force is typically not to deliberate over difficult problems, but to create a process whereby Congress, industry, and the incoming cabinet all become invested in a set of recommendations formally endorsed by a new president. These can then be quickly translated into executive orders, new regulations, and proposed laws.

  Cheney ordered the task force to work in secret, to protect the prerogatives of the White House, and by doing so he made the group’s work a lightning rod for criticism and conspiracy fears. It took years of litigation to discover through partial document releases what intuition might have suggested at the time: Cheney favored energy deregulation and an aggressive push to open up oil and gas production in the United States, and he identified himself with the priorities of Lee Raymond, among other industry executives.

  James J. Rouse, a United States Army veteran educated in Mississippi who ran ExxonMobil’s Washington, D.C., office, attended one of the Cheney panel meetings next door to the White House and presented some of the corporation’s forecasts about future global energy demand. It was rising, he noted, and so more oil and gas production would be required. But ExxonMobil did not require access to a midlevel panel staffed by civil servants to make its points to the Bush White House. Lee Raymond flew to Washington about every other month and met privately with Cheney on some of his visits, perhaps two or three times a year. If he needed to make a request or share an observation more urgently, all he had to do was pick up the telephone.

  Cheney had seen for himself at Halliburton how geopolitics, resource nationalism, and the emergence of large state-owned oil companies had pinched Western oil companies as they attempted to replace the equity reserves they pumped and sold each year. One purpose of the preconceived energy task force Cheney led was to prepare for legislation designed to open up Alaska’s Arctic National Wildlife Refuge to oil drilling. Raymond supported Cheney’s plan and railed regularly in public against what he regarded as the self-defeating energy policies of the United States, which restricted access to oil and gas on free-market American territory while exacerbating the country’s dependency on imports from unstable and nationalistic regimes. Compared with other oil majors, however, ExxonMobil was no longer a dominant player inside the United States. Chevron had inherited some of the longest-lived of Standard Oil’s American oil properties, in California, and Chevron and British Petroleum had moved more boldly than Exxon into the Gulf of Mexico when leasing opened during the Clinton administration. Exxon had opportunities to exploit oil and natural gas in Alaska, but held back from some expensive deals because Raymond had learned after the Valdez that the political risks posed by Alaska’s frontier-minded political culture and populist governors were comparable to those in West Africa.

  Buoyed by the trust embedded in their long-lived friendship, Raymond and Cheney typically talked less about domestic oil policy issues than about developments overseas in the world’s best-endowed regions. Raymond might report on conversations he had recently had with the president of Kazakhstan or the foreign minister of Saudi Arabia. He might relay to Cheney insights about the Saudi royal court or requests about some problem Saudi leaders were having with the Bush administration. Cheney might share similar notes from his own conversations with foreign leaders. In protocol, power, and habit of mind, Raymond and Cheney were each, in effect, deputy heads of state—when they traveled, they met with kings and presidents, and perhaps ministers or chiefs of national oil companies, but rarely anyone less powerful. When the friends gathered in Washington, their meetings were strictly business. If Raymond needed only ten minutes to make his request about a Kazakh trade issue, for example, and Cheney was quickly satisfied with the ExxonMobil chief’s arguments, Raymond would not waste the vice president’s time any further. In the White House, a one-hour meeting was a lengthy one, and Lee Raymond knew what it was like to have a daily schedule that was oversubscribed.

  ExxonMobil’s interests were global, not national. Once, at an industry meeting in Washington, an executive present asked Raymond whether Exxon might build more refineries inside the United States, to help protect the country against potential gasoline shortages.

  “Why would I want to do that?” Raymond asked, as the executive recalled it.

  “Because the United States needs it . . . for security,” the executive replied.

  “I’m not a U.S. company and I don’t make decisions based on what’s good for the U.S.,” Raymond said.

  ExxonMobil executives managed the interests of the corporation’s shareholders, employees, and worldwide affiliates that paid taxes in scores of countries. The corporation operated and licensed more gas stations overseas than it did in the United States. It was growing overseas faster than at home. Even so, it seemed stunning that a man in Raymond’s position at the helm of an iconic, century-old American oil company, a man who was a political conservative friendly with many ardently patriotic officeholders, could “be so bold, so brazen.” Raymond saw no contradiction; he did indeed regard himself as a very patriotic American and a political conservative, but he also was fully prepared to state publicly that he had fiduciary responsibilities. Raymond found it frustrating that so many people—particularly politicians in Washington—could not grasp or would not take the time to think through ExxonMobil’s multinational dimensions, and what the corporation’s global sprawl implied about its relationship with the United States government of the day.3

  After the merger, ExxonMobil moved its Washington, D.C., office from Pennsylvania Avenue to K Street, in the heart of the capital’s lobbying district. The office occupied one high floor of a new complex constructed from pink granite and concrete. A t
urret, topped by an American flag, distinguished the building from the LEGOLAND of downtown Washington. Landscape paintings lined the walls of ExxonMobil’s suite; antique Mobil oilcans and Esso signs decorated the shelves of its conference rooms. The furniture and dark cherry wood paneling created a formal and professional atmosphere, but the office eschewed the garish luxuries of the capital’s big law firms and the D.C. outposts of Wall Street investment banks.

  By the time of the merger with Mobil, the office’s director, James Rouse, had been with the company for thirty-seven years. The résumés of the lobbyists he hired spoke of technical competence and stolidity. ExxonMobil’s strategy was not so much to dazzle or manipulate Washington as to manage and outlast it.

  The Washington office functioned not only as a liaison to the White House and Congress, and to industry associations such as the American Petroleum Institute, but also as a kind of embassy, to deepen ExxonMobil’s influence and connections in the foreign countries where it did the most business. International issues managers developed contacts with ambassadors and commercial representatives of foreign embassies. As this international group in the K Street office expanded, Robert Haines, a West Point graduate and Vietnam veteran, handled Asian embassies; Sim Moats, a former State Department diplomat, handled Africa; and Oliver Zandona, a Mobil career manager, watched the Middle East. They also worked the American bureaucracy, particularly the State Department and the National Security Council, to influence and understand U.S. policy. They maintained some contacts at the Central Intelligence Agency and other federal intelligence departments as well. The C.I.A. ran a station in Houston, where oil industry executives who traveled globally occasionally stopped by for informal exchanges about leaders and events abroad, but in Washington the corporation’s lobbyists tried to keep their distance from Langley, site of the C.I.A.’s headquarters, for fear that host governments where the corporation produced oil might mistake ExxonMobil as some sort of wing of the spy agency.

  ExxonMobil relied mainly on lifelong career employees for much of its Washington lobbying. Lee Raymond kept the number of full-time lobbying staff relatively modest, partly to avoid attracting unfavorable attention from journalists or opponents in the environmental lobbies. Where possible, the corporation lobbied as part of an industry coalition, principally through the American Petroleum Institute. Yet Raymond maintained a strong core of ExxonMobil staff to work Capitol Hill, the White House, and regulatory agencies. Many of the corporation’s employee-lobbyists rotated into Washington from other corporate disciplines, with little or no prior experience of government affairs. “I think we did it in-house so we could get it done right,” said Joseph A. Gillan, who worked on environmental issues in the office around the time of the Mobil merger. “Exxon’s culture was, ‘Let’s do it ourselves.’”4

  The corporation did retain Washington law firms and outside lobbying shops as consultants, although relatively few during the first Bush term. But these hired guns dispensed advice to ExxonMobil on contracts and were not typically relied upon to deliver access—some of the outside retainers were even forbidden from attending meetings with public officials. Some of the key outsiders on retainer—former oil-friendly senators such as Don Nickles of Oklahoma and J. Bennett Johnston of Louisiana—attended a weekly meeting at ExxonMobil’s office to exchange intelligence and analysis about legislation, electoral politics, and energy issues. The meetings sometimes had an air of jockeying and showboating as the lobbyists competed to show how much inside knowledge they possessed (and therefore how much value their retainer contracts generated for the oil corporation). The corporation spent heavily on its Washington operation, but the great majority of its costs involved salaries and benefits for career employees. In 2001, ExxonMobil spent $6 million on its lobbying operation, but only $300,000 on outsiders. The next year, it spent $8.3 million in total, but only another $300,000 on contractors.5

  Rouse oversaw only one lobbyist to watch the entire House of Representatives: Jeanne O. Mitchell, a University of Florida graduate, a cheerful woman who briefed ExxonMobil’s policy and tax PowerPoint slides with genuine enthusiasm. Her counterpart for lobbying the Senate, William “Buford” Lewis, was a balding specialist in gasoline and other transport fueling systems.

  Lobbyists and consultants newly hired at the office were instructed that ExxonMobil sought to avoid asking for specific favors, such as earmarks, on Capitol Hill. “We don’t need the government’s help” was the prevailing instruction. “We just want to know the rules of the road.” The line used to indoctrinate new arrivals to the Washington office was that ExxonMobil did not want anything from the American government, but it did not want the government to do anything to the company, either. Lee Raymond saw his Washington operation as being 180 degrees opposite from, say, General Electric, which ExxonMobil executives regarded as a Washington rent seeker, always trying to bend Congress and the administration to policies that would subsidize or enhance G.E. business divisions. When Raymond saw G.E.’s celebrity chief executive, Jack Welch, he did not hesitate to give him a hard time about his corporation’s favor seeking in Washington. In fact, Raymond was kidding himself. There were many favors, executive orders, lobbying meetings, and laws ExxonMobil sought and obtained from the American government. Yet the above-it-all slogans imparted to newcomers did reflect the corporation’s aversion to back-room deal making on legislation in Congress. ExxonMobil had long had a policy of refusing to give rides to members of Congress on its fleet of corporate jets. The advantage of advertising an official, declared policy of asking for no favors from members of Congress, Raymond explained, was that “when they come and ask us for favors, we can say no.” The corporation’s typical lobbying meeting on the Hill involved briefing and then leaving behind preprinted PowerPoint slides vetted in Irving. When ExxonMobil lobbyists looked for serious help, they more often turned to the executive branch, discreetly.6

  A sardonic line among ExxonMobil lobbyists in the Washington office held that the corporation’s number-one issue of concern was taxation; its number-two issue was tax; its number-three issue was tax; and its number-four issue varied from year to year. With gross global revenues well north of $200 billion, even small changes in the U.S. corporate tax code could cost ExxonMobil dearly. Raymond instructed the K Street office not to ask for specific tax earmarks, but to concentrate on preventing unfavorable changes in the code, such as oil industry–specific windfall taxes or changes to depreciation rules that might raise ExxonMobil’s effective tax rates—this lobbying work was often defensive and involved trying to talk industry-friendly coalitions in Congress into blocking unfavorable changes.7

  ExxonMobil’s lobbyists operated within the same disciplined, hierarchical corporate system that refinery managers and offshore drilling platform operators did. Their talking points could be mechanical sounding: “This is what the corporation believes is the best course of action.” In the scrum of final conference talks over a particular bill, if Jeanne Mitchell or Buford Lewis was asked for an opinion about an alternative option to the one she or he had briefed, the ExxonMobil lobbyist would simply repeat the talking points and conclude again: “This is what the corporation believes is the best course of action.” A lobbyist for another oil corporation recalled, “You’d think, ‘Why do I feel like I’m talking to a wall?’ Because you are: They can’t move off a position” without permission from headquarters. They were “honest as the day is long,” recalled a former Republican staffer, speaking of the corporation’s Washington staff. “Sometimes blunt.”

  ExxonMobil commanded the in-house expertise “to run to ground all the possible technical arguments around a particular policy area,” said an industry advocate. “They have people there who can talk about epidemiological studies down to the parts per billion.” Yet the Washington office’s influence was also limited by its rigidity and perceived arrogance. “They have a terrible reputation and they deserve criticism for having allowed that to develop,” reflected a Republican lobbyist who wo
rked with them. “They very much have the opinion that ‘We are ExxonMobil; we’re right. And we will prevail.’ In Washington, it doesn’t always work that way. Most people don’t understand the economics of energy and ExxonMobil hasn’t explained that very well. They have the money to educate people but they don’t do it very well.”8

  ExxonMobil’s Washington strategists divided the capital’s political population into four broad tiers, in descending order of sympathy for Irving’s agenda. There were those who represented or otherwise had emerged from the oil patch, where many thousands of jobs were at stake—senators and congressmen from Texas, Louisiana, Oklahoma, and Wyoming, some of them industry veterans. This group included, after 2000, President George W. Bush and Vice President Dick Cheney. The second tier consisted of free-market Republicans who didn’t particularly understand the oil and gas industry, but who usually would be supportive of the industry’s positions. The third tier consisted of Democrats or liberal Republicans who tended not to trust ExxonMobil and its ilk, and who regularly voted against the corporation’s interests, but who had been around Washington long enough to become pragmatic about oil industry issues; they were at least open to constructive discussion and might occasionally vote the industry’s way. ExxonMobil’s lobbyists and executives cultivated ties and made generous campaign contributions to all three of these Washington subspecies. Lee Raymond had friendships with industry-leaning Democrats—Representative John Dingell, the longtime automotive industry champion from Michigan, for example.