by Steve Coll
He resisted less for the reasons Nelson cited than because, reflexively, as a onetime Texan neighbor of Richard Armey’s who donated regularly to Republican political candidates, it pained Tillerson to endorse any tax increase. As he spoke at the Wilson Center in Washington that January morning, Tillerson looked out at the cluster of dark-suited ExxonMobil executives in the audience just as he was about to read out the change in the corporation’s lobbying position. “I still wasn’t sure, at that moment,” he told them later.
“Why are you making this carbon tax proposal now?” a reporter asked him afterward.
“If we are going to take a view, take a position, we need to do it now,” he said. “Because the debate is going to get under way again. . . . I’ve been chewing on this one for about three years—cap and trade versus carbon tax. What I’ve really been saying is, ‘There has to be a third option.’ And I haven’t been able to identify one. . . .
“We have tried to get down into the details of, if you are going to design a cap-and-trade system in the United States, what is it going to look like? It’s pretty scary. When you think about the enormous new bureaucracy that would have to be created—it would be bigger than the I.R.S. . . . The default fact is that we’ve got [to] have something that is simpler.”
Another reporter pressed him: “Exxon and other producers will be facing a Democratic administration, a Democratic Congress. What kind of reception do you expect for the next four years? Chilly?”
Tillerson laughed. “We still have friends on both sides of the aisle. As I said, we work with the government that is here, just like we work with the government in whatever country we are dealing with around the world. . . . We are going to engage, and we hope that they value our input.”4
Barack Obama’s most influential advisers on climate politics and policy—including Carol Browner, the former Environmental Protection Agency administrator, and John Podesta, the president’s transition chief—gave virtually no consideration to a carbon tax that autumn and early winter. A Democratic Party–led coalition focused instead on the development of a big cap-and-trade bill that would be introduced in Congress early in the Obama presidency. The corporate center of this lobbying push was the United States Climate Action Partnership, an advocacy group in Washington that had attracted Shell, Dow Chemical, Ford Motor Company, and major coal-dependent utility companies, as well as powerful environmental groups such as the Natural Resources Defense Council.
The negotiations within the Climate Action Partnership about what sort of cap-and-trade bill might be acceptable to the group’s diverse corporate and environmental members had become a kind of private dress rehearsal for the lobbying scrum expected on Capitol Hill once Obama and the new Democratic congressional leadership settled in. As prepackaged coalition politics and congressional lobbying, the Climate Action Partnership “was a very developed piece of work,” Browner recalled.5 It was, however, a fragile coalition—the oil company lobbyists involved felt that their industry’s interests were often neglected in comparison with coal utilities from political swing states such as Virginia, West Virginia, and Ohio. The Climate Action Partnership was a rare example, nonetheless, of a powerful business-environmentalist alliance focused on a major environmental policy reform that would impose costs on business—it was an association that had slowly taken form after a very long lobbying struggle over climate policy in Washington dating back to the second Clinton term.
The coalition had gathered momentum after 2006, amid economic growth and low unemployment. Those conditions no longer prevailed. In September 2008, the Wall Street bank Lehman Brothers collapsed, triggering a banking panic that froze up credit lines and paralyzed the global economy; the United States plummeted week by week into its deepest recession since the 1930s. Collapsing production and rising joblessness challenged every assumption about policy and politics that Obama had relied upon to win office—including climate policy.
On December 16, in Chicago, Obama met with Browner and his top economists. The depths of the economic crisis made clear to them that they would now have to push for a large stimulus bill, to use rapid federal government spending to prevent a full-blown depression. Obama and his advisers decided that day to design the stimulus to make a down payment on their major domestic priorities—particularly clean energy. Franklin Roosevelt’s stimulus during the Depression years had built national park facilities; Obama’s bill, they concluded, should launch a new era of investment in solar energy, wind power, other clean energy technology, “smart” meters to regulate home electricity use more efficiently, upgrades to the national electric grid transmission system, home weatherization, and energy efficiency programs. These expenditures ultimately would total $80 billion. The renewable energy advocates around Obama recognized, however, that the long-term economic viability of solar and wind power would depend on whether dirtier, cheaper sources of energy such as oil and coal would be taxed—directly or through cap and trade. If carbon-heavy fuels like gasoline and coal did not become more expensive, the rate of adoption of solar and wind would slow, and the dangers of climate change would remain unacceptably large, they believed.
The greatest obstacle facing Obama on climate regulation as he prepared for inauguration, then, was hardly ExxonMobil. With Chevron and Shell in the cap-and-trade lobbying coalition, the oil industry had been split and weakened as a lobbying force on climate policy. The challenge was whether the cap-and-trade lobbying coalition would hold together at all under the mounting pressure of the 2008–2009 recession. “Fundamentally, if you’re going to have an economy-wide cap-and-trade system, you need to trust government and Wall Street,” said one of the president’s outside energy advisers. That trust was collapsing even faster than the Obama team understood.
ExxonMobil stood apart. The corporation, said a second Obama adviser involved, “seemed to me to follow a track that was quite different from the other [oil] majors—being firmly fixed in the ‘Fuck you, no apologies, oil-is-here-to-stay mode.’” The corporation saw itself as merely carrying out its own global environmental and economic policy advocacy. It dispatched public affairs officers to explain its position to foreign governments with which it partnered to produce oil, lest those governments be confused about ExxonMobil’s thinking. Its briefings early in 2009 emphasized that “cap-and-trade is complex, unpredictable, cumbersome and expensive, making it difficult for firms to plan long-term investments. In comparison, ExxonMobil believes the predictability of a progressive carbon tax would encourage new investment in carbon reduction technologies.”6
Abraham Lincoln was a hero of Rex Tillerson’s boyhood. As a child in small-town Texas, Tillerson read books on great leaders of the type favored by the Boy Scouts of America. Lincoln was a member of this canon, notwithstanding the complications his presidency created for the Republic of Texas and its successor Confederate state. Tillerson remained “personally fascinated and inspired by Lincoln” as he came of age at the University of Texas and as a young ExxonMobil executive. He particularly admired Lincoln’s “ability to confront adversity with courage, find inspiration in challenges both personal and political, and shape leadership through the strength of diversity, with extraordinary grace.”7
During the second week of February 2009, Tillerson flew by corporate jet into Washington to attend a ribbon-cutting ceremony at Ford’s Theatre, where John Wilkes Booth had shot Lincoln dead. A few years before, Tillerson had agreed to chair a $50 million campaign to renovate Ford’s. ExxonMobil had contributed, as had one of its major business partners, the State of Qatar. (That an undemocratic kingdom with limited personal freedoms had funded the restoration of a theater devoted to memorializing the American president who emancipated slaves was an observation politely avoided by the speakers.) “Working on this campaign has been a labor of love for me,” Tillerson said.8
The next day he arrived with a few colleagues at the Eisenhower Executive Office Building, next door to the White House’s West Wing. Tillerson and his team made the
ir way to Room 157, where Carol Browner, now Obama’s chief White House climate and energy policy adviser, joined them, along with some of Browner’s staff. Tillerson had asked for the meeting.
Tillerson and Ken Cohen did not know whether Obama’s anti-oil populism during the campaign would carry on once the president had to govern. They decided to approach their lobbying during the early Obama administration on an issue-by-issue basis. Perhaps the most realistic opportunity involved offshore drilling. Tillerson wanted to push Obama for decisions that might open up the Gulf of Mexico for further exploration and drilling. Polling during the 2008 campaign had shown that voters supported domestic drilling—perhaps Obama would respond in office, even as he pushed simultaneously for cap and trade. The Irving team assumed that Obama’s advisers would welcome their perspective, notwithstanding ExxonMobil’s heavy spending in the past on the president’s political opposition. As an ExxonMobil executive put it, “Why wouldn’t the administration want the views of the country’s biggest energy company?”
There was rarely anything personal or intimate about an ExxonMobil lobbying meeting. As Tillerson had put it in January, the corporation managed Washington with the same PowerPoint-enabled educator’s mind-set that it brought to bear in Abuja, N’djamena, and Malabo. In Room 157, Tillerson laid out to Browner ExxonMobil’s principal policy priorities in the United States in 2009: He urged the administration to loosen the congressional moratoria on drilling in American ocean waters and the Gulf of Mexico. On climate, he ticked through ExxonMobil’s reasons for endorsing a carbon tax over a cap-and-trade regime. “He was just shopping the idea that there was a better way” to raise carbon prices in America, recalled a participant.
Browner had immersed herself deeply in the coalition-building politics of cap and trade, however; the idea of starting over with a carbon tax proposal was, at best, politically impractical. Obama’s chief energy policy adviser concluded after the meeting that Tillerson “was happy to have a position that nobody was going to embrace,” as the participant put it.9
George W. Bush had narrowed the list of points he wanted to make to his successor during his private handoff conversations with Obama that winter. One topic he emphasized privately to Obama was the importance of America’s alliance with Saudi Arabia, and particularly, the quality of the personal relationship between the American president and the Saudi king. After the shock of September 11, Bush had invested great effort to rebuild trust with King Abdullah; Bush talked with Obama about how to manage that bond.10
Obama’s White House team was turning away from traditional, geopolitical thinking about oil and power, however. As his national security team assembled, for example, the president’s closest advisers turned aside suggestions that he establish a special energy geopolitics section at the National Security Council, similar to the one that had managed Eurasian pipeline politics during the late Clinton administration. At the Department of Energy, Obama appointed a cautious scientist with no background in oil and gas, Steven Chu, as secretary. At almost every decision point, Obama emphasized renewable energy investments and greenhouse gas limitations as the pillars of his energy policy. In bilateral meetings with the Saudis, the Obama energy policy envoys stressed solar power cooperation that could feed the sun-saturated desert kingdom with sustainable electric power. If Obama had thought much about oil pipeline routes in the Caucusus, freedom of maneuver for oil tankers in the Gulf of Guinea, or European natural gas supply security, his instinct seemed to be to set aside that sort of strategizing.
One month after his inauguration, Obama flew to Ottawa, Canada’s canal-laced capital city. By tradition, new American presidents made their first foreign trip to Canada. As it happened, that winter, one of the biggest issues in U.S.-Canadian relations involved the geopolitics of oil and the security of American oil supply. The matter was also of deep importance to ExxonMobil.
Canada was by a wide margin America’s largest single supplier of imported oil, at 1.9 million barrels per day in 2008. It was doubtful that many Americans could recite this fact; their ignorance reflected the fact that Canada posed almost no political risk to the United States, and so its role as an oil spigot for American consumers was inconsequential. That was certainly true in comparison with, say, the role of Saudi Arabia, America’s second-largest supplier, located in a rough neighborhood far away, with a record of funding Islamist radicals and imposing oil embargoes over foreign policy disputes. Canada’s underpublicized oil bounty included conventional reserves, but also a vast treasure of “crude bitumen,” as ExxonMobil referred to it. Environmental activists often referred to these bitumen reserves as “tar sands oil,” evoking images of a sticky mess of a sort that might have trapped unsuspecting dinosaurs eons ago. The dueling language reflected a profound disagreement about the oil’s value.
The reserves in question lay 50 to 150 feet underneath the sands of the McMurray Formation, near the Athabasca River in northern Alberta Province, in western Canada. Lakes, streams, and boreal forests of stubby trees had covered the sands for centuries. By 2007, as new technology made it easier to separate the oil from its earthen mix at a reasonable cost, Oil & Gas Journal estimated that Alberta held 175 billion barrels in total oil reserves, which amounted to the third-largest national oil reserve in the world, after Saudi Arabia and Venezuela.11
ExxonMobil’s Canadian affiliate, Imperial Oil, had been producing oil from the Alberta sands since 1978, through a joint venture called Syncrude. The operations required open-pit mining to dig out the oily sand with mechanical shovels fifty feet high. Hot water or caustic soda then washed the sand to separate out the bitumen. “Upgraders” similar to those ExxonMobil had installed in the Orinoco basin of Venezuela refined the remainder into a synthetic blend that imitated the refinery-friendly characteristics of light, sweet crude.12
The final product was highly desirable in world oil markets, but the manufacturing process was environmentally destructive, expensive, and energy intensive. It also required immense water use. Syncrude stripped forests, dug out peat and dirt, and then attacked the sands below with its giant shovels. Environmental investigators documented toxic pollution runoff from the mining operations. Moreover, the industrial processes required to extract and manufacture oil from bitumen required burning more carbon-based fuels than would be burned to drill a normal oil well. As climate change gradually emerged as a global threat, environmental groups also campaigned against the Alberta operations because of the extra polluting energy that was needed to dig out and refine the bitumen. Oil from Alberta, barrel for barrel, contributed among the highest greenhouse gas emissions of any source of oil in the world. Carbon sequestration technology might eventually allow Alberta’s producers to capture greenhouse gases around the giant shovels and the upgraders and inject those gases into underground storage caverns, but that technology remained immature, unproven, and expensive.
“Climate Leaders Don’t Buy Tar Sands” read a banner draped across an Ottawa bridge when President Obama’s motorcade rolled in to the Canadian capital.
Over lunch with Stephen Harper, the pro-business prime minister, the Canadian cabinet team that worked on climate and energy was wary. The Bush administration had expressed no concerns at all about the pollution caused by companies operating in the oil sands; to the contrary, senior officials such as Energy secretary Samuel Bodman traveled regularly to Ottawa to convey the message, in effect, as a Canadian official involved put it, “Produce as much of this oil as you can—we’ll buy all of it.” Obama’s position seemed unclear. Prime Minister Harper’s advisers prepared for Obama a giant map of North America depicting—with drawings of bubbles of various sizes—the greatest industrial sources of greenhouse gas emissions on the continent. The map’s biggest bubbles showed that American coal-fired electric power plants were the greatest climate change offenders. By comparison, the oil sands were relatively minor contributors to global warming, the map showed. Of course, the map avoided emphasizing that the sands were, in fact, Canada
’s greatest source of greenhouse gas emissions, by far, and would be for the foreseeable future.13
“What do you think? Is it dirty oil?” a Canadian Broadcasting Corporation interviewer asked Obama.
“What we know is that oil sands create a big carbon footprint,” Obama answered. “So the dilemma that Canada faces, the United States faces, and China and the entire world faces, is how do we obtain the energy that we need to grow our economies in a way that is not rapidly accelerating climate change?”14
Obama had been among those American senators who had previously endorsed laws to limit oil imports from Canada derived from the Alberta sands, on environmental grounds. The 2007 Energy Independence and Security Act contained a provision, known as Section 526, that restricted U.S. federal agencies from procuring transportation fuel derived from any oil source with an unusually heavy carbon footprint. Section 526 was almost comically complicated because it defined the banned fuel sources through reference to statistical greenhouse gas emission averages that had never before been calculated for such a reason. Around the same time that Section 526 was enacted, California lawmakers also adopted a “low carbon fuel standard” for gasoline or other fuels used in that state. Lawsuits ensued. It remained unclear, for example, whether, under the North American Free Trade Agreement, California or the federal government had the legal right to limit Canadian oil exports in this way.
