Private Empire: ExxonMobil and American Power

by Steve Coll

  Public records collated by the Center for Responsive Politics suggest that ExxonMobil took an especially strong interest in Barton during 2008, however. Barton attracted donations during each two-year campaign cycle from many corporations, but in 2008 ExxonMobil was one of the congressman’s top three campaign donors for the only time in a decade. Combining corporate, ExxonMobil Political Action Committee, and individual employee contributions, ExxonMobil gave Barton $38,298 that year, more than 40 percent more money than in any other cycle since 2000.

  In a telephone interview, Jeffers said he believed a fund-raising event had been held for Barton around the time the 2008 donations by ExxonMobil employees were recorded in public filings, but the spokesman later declined to respond to questions about the event’s date, organizers, or the timing of invitations, in relation to the consumer bill’s passage. Barton’s office did not respond to requests for comment.

  Twenty-three

  “We Must End the Age of Oil”

  The ExxonMobil Corporation Political Action Committee invested $722,000 in candidates for federal political office during the 2008 election cycle. Despite obvious signs of a strong Democratic electoral wave building across the United States at the end of the Bush administration, the corporation’s political spending remained staunchly Republican. Only 28 of the 207 recipients of ExxonMobil P.A.C. contributions during the 2008 cycle were Democrats; in dollar terms, ExxonMobil gave just 11 percent of its money to Democrats. The corporate P.A.C. gave more heavily to Republicans than did the company’s employees, when they made donations as individuals. Political contributions between 2000 and 2008 by individuals who declared an affiliation with ExxonMobil on disclosure forms—including Tillerson, Cohen, and other senior executives—totaled $1.22 million. Most employee contributions went to Republicans, but as a whole, employees gave more than twice as much to Democrats, as a percentage of their total, than the corporate P.A.C. did.1

  “We are a business-oriented P.A.C.,” an executive involved in the political spending decisions said. “So we are looking for candidates . . . who are pro-business. . . . Now when you apply that litmus, our P.A.C. is rightly criticized that we tend to give more money to Republicans than to Democrats, but it is a result of the [key vote system] approach we take and not a desired result.”2

  Joe Barton received more contributions from ExxonMobil than any member of Congress after 2000. Anne Northup, a Republican member of the House of Representatives from Kentucky, received the second most. Each of ExxonMobil’s top ten recipients was a House Republican. “Whoever’s in power in the House has almost dictatorial power,” a Washington consultant who worked on oil industry issues said. “If you control what’s going on in the House, you have huge influence over the final product; power is more diffuse in the Senate.”3 Moreover, low-tax, free-market ideology was ExxonMobil’s “North Star,” as a former executive involved put it, and the House Republican caucus increasingly offered the staunchest philosophical allies.4 In the Senate, Ken Cohen told his colleagues in the K Street office, “it’s all about the sixtieth vote,” that is, making sure that ExxonMobil could block unfavorable proposed legislation by encouraging loyalists to invoke the peculiar Senate institution of the filibuster.

  From an office in Arlington, Virginia, the ExxonMobil Citizen Action Team mobilized employees and retirees to reinforce ExxonMobil’s lobbying positions and favored candidates. The team maintained a toll-free information line, playing on the corporation’s stock exchange ticker symbol: 1-866-VOTE-XOM. It provided updates on the corporation’s legislative priorities on a Web site and sent out glossy newsletters about pending legislation and upcoming campaigns to employees, retirees, and sympathizers. “Electing people who will pursue policies that are good for our industry and make sense for our families is an important responsibility,” one of the mailings enjoined.5

  As the 2008 presidential campaign began, however, the greatest risk that American politics posed to ExxonMobil arose from something the Citizen Action Team had trouble addressing: the corporation’s general unpopularity and its attractiveness as a piñata for populists, left and right. ExxonMobil had never really broken free from the reputation for ruthlessness and self-interest Standard Oil had forged during the Gilded Age. As the Bush presidency entered its final year, retail gasoline prices rose toward four dollars a gallon. Quarter after quarter, higher global prices caused by Nigerian unrest and runaway Asian economic growth delivered jaw-dropping record profits to ExxonMobil. Its executives could hardly turn this cash flow off, but they had difficulty justifying it publicly in commonsense language. The problem was structural: Popular anger as pump prices spiked reflected a form of economic powerlessness among commuters and small business owners. Gasoline had become a necessity in the United States, like electricity, but its fluctuating price remained unregulated, in comparison with electric rates, which could be managed up and down more gradually, when underlying commodity prices changed. Moreover, when gasoline prices shot up very suddenly and without forewarning, the largest private corporation in the country made even more money, to add to its historically high profits. An American commuter or truck owner did not require socialist leanings to find this aggravating. “And how about this?” Jay Leno asked on The Tonight Show. “ExxonMobil today reported a profit last quarter—not last year, last quarter, one quarter—of $12 billion! . . . But in their defense, that money didn’t come from the gas. That’s just from the mini marts.”6

  Of all the candidates for president during the 2008 campaign, Barack Obama spoke most often and most pointedly about ExxonMobil. In debates and stump speeches, he offered none of the nuanced support for the sanctity of international oil contracts that he had voiced in private to Chad’s dictator Idriss Déby while visiting N’djamena two years before. Obama and his speechwriters exploited ExxonMobil’s unpopularity. They called out its profits and contrasted its wealth with the struggles of American working and middle-class families coping with long commutes and soaring gas prices. Obama’s spin specialists sought to link their Republican opponent, Senator John McCain, to the pro-oil policies of Dick Cheney. Politically, this was an attractive target of opportunity: In the summer of 2008, 72 percent of Americans surveyed had a negative view of Cheney, and only 18 percent saw the vice president positively. “President Bush, he has an energy policy,” Obama declared. “He turned to Dick Cheney and he said, ‘Cheney, go take care of this.’. . . McCain has taken a page out of the Cheney playbook.”7

  That was campaign rhetoric; off the trail, Obama’s evolving views about energy and climate policy were subtler. He had only begun to immerse himself as a senator. It took time to grasp the nuances of automobile mileage standards, international oil supply, clean coal technologies, balance-of-payments issues, and the myriad ways in which different forms of energy contributed to global warming and how the existing patterns might be altered by policy intervention or technological innovation. Obama’s primary campaign involved a make-or-break commitment to Iowa, where ethanol subsidies were politically untouchable, so he embraced those with a particular emphasis on local ownership and populism. He embraced “energy independence” even though he knew that it was not achievable in a literal sense and perhaps not desirable, either. But the idea sold as nationalism, especially with independent voters in swing states. “There hasn’t been a campaign in thirty years where the policy wonks don’t cringe when ‘energy independence’ comes up, but the speechwriters get the last word,” said Jason Grumet, one of Obama’s energy policy advisers. Obama embraced “the smart version,” Grumet said, “in a more metaphorical than a physical sense. . . . He knows the last barrel we use will be from Qatar or wherever it’s cheapest . . . [but] he painted a bigger arc around the issue, that America can be great again, that it can renew itself.”8

  In June, as McCain emerged as the presumptive Republican nominee and Obama’s grinding campaign against Senator Hillary Clinton neared a finish, McCain proposed a gas tax holiday to provide temporary relief to commuters bu
rdened by soaring pump prices. The holiday would, in fact, help middle-class households hurting from unexpected gasoline expenses over which they had no control, but it had a chicken-in-every-pot opportunism about it and did nothing to address the glaring gaps in American energy and climate policies. Clinton embraced McCain’s idea, but Obama announced, in effect, “This is stupid; the American people are smarter than this.” Against the advice of his campaign pollsters, he used the issue to differentiate himself from McCain and Clinton, painting them as pandering politicians, and he came out fine.

  The easiest case to make was to pound on Big Oil. To many independent voters and disillusioned Republicans, Obama’s strategists knew, the symbolic ExxonMobil-Cheney complex pointed toward all that had gone wrong in the Bush years—the Iraq War, the rise in American economic inequality and economic insecurity at home, an economy that seemed grotesquely based on greed and was beginning to teeter, and a corrupt culture in Washington that reinforced these failings by favoring special interests. Obama therefore salted his campaign speeches with ExxonMobil references even when they were gratuitous—the very word “ExxonMobil” resonated in his favor. “It’s not going to be easy to have a sensible energy policy in this country. ExxonMobil made $11 billion last quarter. They’re not going to give up those profits easily,” Obama said at an early primary debate. As the Democratic race narrowed to a campaign of attrition between Obama and Hillary Clinton, the two candidates competed in public about who opposed ExxonMobil more ardently. Then, after Obama’s nomination became secure, he turned the same line of attack on McCain. When McCain announced a plan to reform corporate taxes, Obama’s researchers figured out how much of the benefit would flow to ExxonMobil and immediately made that the focus of their criticism: “Think about that,” Obama said at a rally in North Carolina. “At a time when we’re fighting two wars, when millions of Americans can’t afford their medical bills or their tuition bills, when we’re paying more than four dollars a gallon for gas, the man who rails against government spending wants to spend $1.2 billion on a tax break for ExxonMobil. That isn’t just irresponsible. It’s outrageous!”9

  The Bush administration and the McCain campaign studied polls that showed many Americans favored new offshore oil drilling as a strategy to reduce high gasoline prices. They announced coordinated plans to promote more domestic exploration in ocean waters: “Drill, Baby, Drill!” became a tongue-in-cheek-sounding chant at Republican rallies that summer. Obama promptly linked McCain’s offshore plan to ExxonMobil’s $11.68 billion in quarterly profits and denounced it as merely an “oil-company wish list.” The Democratic nominee also embraced a plan to impose windfall taxes on oil corporations when global oil prices were about $80 per barrel, as they had been throughout 2008. Obama also declared again and again that if he were elected, he would push with new vigor, working with Democratic majorities in both houses of Congress to cap greenhouse gas emissions and to invest heavily in solar, wind, and biofuels. Privately, he recognized that the American oil industry “is of economic significance, and that greater domestic drilling reduces imports and the balance of payments problem,” an adviser on energy issues said. But Obama wanted a comprehensive package that combined increased oil and gas production with progress on carbon pricing: “The idea was an ‘all of the above’ strategy that advanced both energy security and environmental goals.” More than his profit bashing, Obama’s climate and alternative energy policies—the ones he might actually be able to push through Congress as president—galvanized the attention of ExxonMobil’s public affairs executives and K Street lobbyists. “We must end the age of oil in our time,” Obama declared.10

  “We felt like a candidate,” one of the corporation’s executives recalled. “Both parties were mentioning us by name. . . . So we were a candidate and we clearly knew that we were not electable.” A Democratic congressman, Maurice Hinchey, even ventured that ExxonMobil’s profits had “crossed the moral threshold of what is acceptable.”11 That sort of language—and the fervor and excitement that seemed to be coalescing around Obama’s candidacy—suggested something more threatening to ExxonMobil than the usual cycle of congressional hearings and antitrust inquiries whenever gasoline prices spiked and American drivers howled. Trustbusters had broken up Standard Oil on moral as much as economic grounds.

  ExxonMobil had no cause to fear anything so drastic. Yet the costs and taxes Democrats in Washington might impose on a corporation as unpopular as ExxonMobil in an emotional period of high gasoline prices and huge corporate profits could not be easily forecasted. In American history, a number of industries had been regulated and taxed during periods of popular revolt against corporate power on the grounds that the targeted businesses were “public callings” and served a public interest function: banking, telecommunications, transportation, electric energy, and natural gas transport, among them.

  In mid-July, global oil prices crossed above $140 a barrel. If such prices persisted, Democrats were almost certain to seek relief for disadvantaged households trapped by long commutes to work and stagnant incomes. Tillerson and his corporate planning group could not figure out what was causing the 2008 price spike. The detailed internal analysis of global supply and demand produced by ExxonMobil economists during early 2008 suggested that global prices were moving much higher than market fundamentals would predict. Was hot speculative money pouring into commodity funds a factor? Were traders assessing political risk in West Africa or the Middle East as a more profound forward-looking bottleneck on supply than ExxonMobil did? Tillerson felt genuinely befuddled. On the one hand, the corporation’s typical “one right answer” analysis suggested that some sort of bubble had inflated and that oil prices would eventually fall, relieving some of the reputational pressure faced by Big Oil that summer. On the other hand, ExxonMobil had forsworn price forecasts precisely because the corporation had learned over many years that oil prices could not be accurately predicted on the basis of the empirical methods employed by ExxonMobil’s economists and planners. The truth about future prices was anybody’s guess—in the meantime, the corporation’s reputation was being pounded.

  This was the kind of challenge for which Rex Tillerson had been chosen to lead ExxonMobil—a crisis that required more successful public communication than Lee Raymond had been able to deliver. Cohen approved the recommendation of his media specialists that Tillerson get out and speak more, to place ExxonMobil’s profits “into context.” Tillerson agreed. He invited a few members of the national press to visit him in Texas.

  The 2008 presidential campaign, Jad Mouawad of the New York Times pointed out when he arrived to meet the chief executive, “has centered around expanding domestic drilling. But many say this will do nothing to reduce prices now because it takes ten years before any new production comes online.”

  “If you use that logic,” Tillerson replied, “then we should not have any of the barrels that are available today. All of today’s supplies were developed years ago. It is nonsensical for people to make that argument. It reflects the ongoing difficulty we have with people who don’t understand the nature of the energy system.”

  “Sure, but the argument is that we should focus on the demand side of the equation and that we cannot drill out of the problem.”

  “Well, you can’t conserve yourself out of this problem, either. You can’t replace your fuels with alternatives out of this problem, either. The reason the United States has never had an energy policy is because an energy policy needs to be left alone for fifteen to twenty years to take effect. But our policymakers want a two-year energy policy to fit with the election cycle because that is what people want. The answer is you can’t fix it right now.”12

  After that condescending and vaguely antidemocratic debut (energy policy had failed because it was “what people want”), Tillerson next sat for an on-camera interview with ABC’s Charles Gibson. “Do you understand, and can you appreciate from your position, with the escalation of the price of a gallon of gas, why people are fed up
, angry, indeed, disgusted with oil companies?”

  “Well, I can understand why people are very upset and why they’re very worried and concerned about their ability to deal with these high prices. In terms of where they should direct their anger, I don’t think it’s useful for me to comment on that; although it does bother me that much of that is directed at us. . . .”

  “We in the media have made a lot of the profits that ExxonMobil has made, particularly in the last couple of quarters—more than $10 billion in profits first quarter this year; $11.68 billion in the second quarter of the year. When people, I don’t know, complain about that to you, or say, ‘How dare you? Those profits are obscene.’ What’s your best—in brief form—what’s your best justification?”

  “Well, I think it has to do with the ability to understand just the size of our business. Everything we do, the numbers are very large. I saw someone characterize our profits the other day in terms of $1,400 in profit per second. Well, they also need to understand we paid $4,000 a second in taxes, and we spent $15,000 a second in cost. We spend $1 billion a day just running our business. So this is a business where large numbers are just characteristic of it. . . .”

  “John McCain, for his part—it’s become a mantra for him: Drill now, drill here, drill immediately. Is that any kind of a solution?”

  “Well, it’s part of a solution. Again, I think this whole debate around someone looking for the solution is not a sensible approach. . . . We really should be developing all the supplies that are available to us, regardless of whether they come on now or whether they come on ten years from now. . . .”