The politics of energy: Coal

How a conservative think tank gave Bush the cover he needed to break his carbon dioxide pledge

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WASHINGTON, December 3, 2003 — At the first meeting of President George W. Bush's cabinet in 2001, then-Treasury Secretary Paul O'Neill distributed copies of a speech he had given in 1998 which made a stark warning about global warning: Delaying serious action to address the problem, if only by a few years, could spell "real danger to civilization."

During the 2000 presidential campaign, the man who appointed O’Neill had never used language that dire about the warming trend, which many scientists warn will bring assorted climate shifts because of human beings’ increasing production of “greenhouse gases.” The main one is carbon dioxide, emitted whenever coal, oil and other fossil fuels are burned. It is easy to forget that, despite the energy-friendly new president’s reticence on the looming question of the potential impacts of global warming, O’Neill’s dramatic message was not wholly out of line in early 2001.

In his campaign for the White House, Bush had pledged (boldly, for a former oilman and the governor of a conservative, oil-dependent state) to fight for a new law to reduce air pollution from power plants, including the United States’ first-ever legal restrictions on carbon dioxide. While he was a staunch critic of the pending Kyoto treaty to mandate CO2 cuts internationally, Bush’s promise suggested that he took the climate issue seriously.

Less than two months after his inauguration, however, Bush abruptly changed course and abandoned the carbon-dioxide pledge. Too expensive, he explained. [For a closer look at Bush’s climate-impact policy, see “How smart people playing word games came up with Bush’s greenhouse-gas policy.“] The president’s reversal of his most striking environmental campaign proposal came after a furious and fast-paced lobbying effort, which had been unleashed in the first weeks of the new administration by industry interests—particularly producers and users of coal—and by allies in conservative organizations. Coal producers and burners, which contributed more than $250,000 to Bush’s campaign and, from 1997 to 2002, another $4.7 million to the Republican National Committee, set an early precedent for the energy industry’s influence with the administration.

The decisiveness of that influence can be seen in a rejoicing e-mail to supporters sent by the industry-funded Competitive Enterprise Institute, a think tank based in Washington, D.C., that neatly turned O’Neill’s warning about “danger to civilization” on its head. Persuading Bush to change his mind about CO2 restrictions, an institute official wrote, was a “famous victory” in “the war to save industrial civilization from itself.”

Regardless of whether Bush’s about-face was a blow for or against civilization, it was undoubtedly a major victory for industry over the environmentalists who had privately lobbied Bush to adopt the pledge during his campaign. It was a big win for coal producers and transporters and for electric utilities heavily dependent on the fuel. And it was a big win for a cadre of highly skilled, well-connected insiders and lobbyists, who made sure that in the Bush administration, there would be no more “real dangers” to the interests of coal.

Conflicts of energy interests

As much as any plank in his presidential platform, Bush’s CO2 pledge grew directly out of his experience as Texas governor—in particular, from his record on the highly contentious state question of how to address the large volume of air pollution that was still being emitted by old, permit-exempt industrial plants. For two years after the issue became public in 1997, Bush promoted a controversial plan that would have provided for only voluntary emission cuts by those plants. Ultimately, he agreed to a two-part compromise negotiated in the Texas Legislature: most old plants (mainly in the oil and chemical industries) could take part in the voluntary cleanup program. Electric power plants, however, were ordered to reduce emissions of two major pollutants, nitrogen oxides and sulfur dioxide. (Participation in the voluntary program proved so lackluster that state lawmakers junked it in 2001 and ordered those industries, too, to get state permits.) Bush’s late acceptance of pollution mandates for old power plants in Texas set the stage for his endorsement as a presidential candidate of what is known as the four-pollutant approach for a federal law to clean up old power plants nationally. [See The Politics of Energy: Coal—How did coal become the Bush administration’s fuel of choice?]

Not surprisingly, coal and utility companies worried that a strict multi-pollutant mandate could end up doing just what many environmentalists want—reducing coal’s future viability. With no commercially-available technologies yet to remove carbon dioxide from power plant emissions, mandatory CO2 restrictions could force utilities to engage in large-scale “fuel switching”—that is, the replacement of coal with natural gas, accelerating a trend already present in some companies. Natural gas is more expensive, but emits less carbon dioxide as well as smaller volumes of already-regulated air pollutants.

The National Mining Association, arguing a pro-coal position, spelled out this prospect in troubling terms in a secret March 2001 memorandum to Vice President Dick Cheney’s energy task force, later released under the Freedom of Information Act: There would be “massive” movement from coal to natural gas after a carbon dioxide mandate, the group said. This was hardly a new topic in the often-regional politics of energy. As far back as 1988, some Texas politicians like Senator Lloyd Bentsen had explicitly touted natural gas as a cleaner replacement for coal in any efforts to curb global warming.

Just as it was a major win for coal, therefore, Bush’s decision to drop the power plant pledge was a major defeat for natural gas interests—especially the then-pre-bankruptcy Enron Corp. and its leader Kenneth Lay, a personal friend of Bush and leading campaign contributor who helped bankroll his political rise. Enron stood to benefit from CO2 regulation, not only as a major natural gas producer but because it was positioning itself for a potentially lucrative role as a broker of tradable “credits” for the release of carbon dioxide. Lay had played a behind-the-scenes role in the evolution of Bush’s views on the climate issue while he was still governor.

Much as Lay had helped nudge Bush toward the carbon dioxide pledge, the president’s decision to turn his back on the proposal followed high-level lobbying by other powerful and influential industry figures. Most prominently, they included Thomas Kuhn, who heads the leading electric utility trade group and was a roommate of Bush’s at Yale, and Haley Barbour, the former chairman of the Republican Party who represented Atlanta-based Southern Co., the nation’s second-largest coal-burning utility and a longtime battler against stricter environmental rules.

While climate change was not a prominent issue in the 2000 campaign, events began to push the issue into the spotlight as soon as Bush took office on Jan. 20, 2001. Three major diplomatic meetings were already scheduled, at which the new administration would be expected to explain whether, and how, the United States might participate in talks to modify the Kyoto treaty that Bush said was unacceptable as it stood. A pair of major U.N. reports, representing work by hundreds of scientists, presented growing evidence of human influence on the earth’s climate and predicted increased droughts, floods, storms and insect-carried diseases. Soon, rumors began to circulate in Washington that Bush would mention global warming in his first State of the Union address.

“As soon as he was in office, all of a sudden we heard that the State of the Union would include a greenhouse plank,” Fred Smith, the president of the Competitive Enterprise Institute, told the Center, but his group was unable to obtain any firm confirmation or denial from the new administration. Further worrying those who, like Smith, didn’t want Bush to keep his CO2 promise, the newly appointed Environmental Protection Agency administrator, former New Jersey Gov. Christie Whitman, began speaking out forcefully on the issue. On Feb. 27, just hours before Bush’s first address to Congress, she declared that the science driving global warming concerns was “strong;” reiterated the possibility of a carbon dioxide cap in a multipollutant bill for power plants. She also said the administration would try to fix the Kyoto treaty instead of quitting the climate negotiations.

A stake through the heart

In his address that night, however, Bush made no mention of the warming issue. The president’s silence was soon met by a torrent of lobbying from the industry. The Washington Post reported that a phalanx of high-level executives from coal, utility and railroad companies—a group calling itself the “Coal-Based Generators”—visited Washington in late February to warn that Bush’s promised CO2 mandate would “kill coal,” and to lobby for government subsidies for experimental “clean coal” technology instead.

“Coal interests and other businesses” teamed up with groups like the CEI-coordinated Cooler Heads Coalition, which tries to debunk global warming concerns, to place “tremendous pressure” on the administration to turn around on the issue, The Washington Times reported.

Newsweek described “two weeks of ferocious lobbying by energy interests”—mainly coal, electric utilities and oil, but also including chemical manufacturing groups. Among those taking part was Kuhn, head of the Edison Electric Institute, the main utility lobby group. Newsweek said he had personally called senior White House aides to argue that the CO2 pledge be dropped, but Kuhn told the magazine that “it doesn’t take any special phone calls from me to make our views known.”

Some industry grumbling was reflected in the press, such as a letter by Jack Gerard, head of the National Mining Association, submitted to The Washington Post on March 12, 2001 and displayed on NMA’s Web site. The energy self-sufficiency that the president had said he wanted the United States to attain would require coal along with other fuels, Gerard wrote, and mandatory CO2 controls at power plants would be “a stake through the heart of such a strategy.”

Former RNC chairman Barbour also made a special effort to sway the White House on behalf of his utility clients, including Southern Co. It made sense that Southern would be among those fighting a CO2 cap. In contrast to others in the utility industry taking a more accommodating stance on the climate issue—Louisiana-based Entergy, for instance, which has won praise from environmentalists for promising to cap its carbon dioxide emissions—Southern has argued that the scientific jury is still out on global warming.

Barbour was not only a former Republican chairman who represented some of the party’s biggest donors, he had also been enlisted to help map the Bush campaign’s strategy a year earlier. With such credentials ensuring the new administration’s attention, he issued the memo on March 1—just two days after the mixed signal of Whitman’s strong statements about the climate issue. Titled “Bush-Cheney Energy Policy & CO2,” the document was addressed to the vice president, whose task force was then gearing up, with a list of other recipients that pointedly omitted the names of Whitman and O’Neill.

The message was sent, among others, to several high-ranking officials with various prior connections to energy and automotive concerns keenly interested in the carbon-dioxide issue, including Energy Secretary Spencer Abraham, Interior Secretary Gale Norton, Commerce Secretary Don Evans, White House chief of staff Andy Card and legislative liaison Nick Calio. The memo did not come to light until it was quoted briefly by the Los Angeles Times, nearly six months later. The full text was publicly revealed a year afterward, with the release of some task force documents obtained in a Freedom of Information suit by Judicial Watch. In the memo, Barbour stressed the nation’s “serious energy problems,” which he said amounted to “an energy crisis” in some regions. Then, he pointedly asked whether the new, energy-friendly administration wanted to mimic its Democratic predecessors and hinted this might even align Bush with a radical fringe:

“A moment of truth is arriving in the form of a decision whether this Administration’s policy will be to regulate and/or tax CO2 as a pollutant. The question is whether environmental policy still prevails over energy policy with Bush-Cheney, as it did with Clinton-Gore. Demurring on the issue of whether the CO2 idea is eco-extremism, we must ask, do environmental initiatives, which would greatly exacerbate the energy problems, trump good energy policy, which the country has lacked for eight years?”

The memo had impact. “It was terse and highly effective, written for people without much time by a person who controls the purse strings for the Republican Party,” said John Walke, who was a high-ranking air quality official in the Clinton administration and now works for the Natural Resources Defense Council, or NRDC.

A day after Barbour’s memo was sent, The Washington Post reported that “a White House official” confidently asserted that Bush had enough political capital with conservatives to promote policies like CO2 restrictions “that may disappoint some industry leaders.”

On March 13, Bush announced he would not back a CO2 mandate for power plants after all, and did so with language and a rationale that would hardly disappoint industry leaders. Echoing Barbour, Bush highlighted regional “energy shortages” and the existence of an “energy crisis” that now trumped his campaign promise. Echoing a frequent refrain of coal producers, he noted that the fuel “generates more than half of America’s electricity supply.” Echoing various individuals opposed to mandatory CO2 caps, he stressed “the incomplete state of scientific knowledge” about global climate change. And he explained that carbon dioxide “is not a ‘pollutant’ under the Clean Air Act,” although his campaign promise had tacitly acknowledged as much, and proposed to change that status.

Relying on a “rigged study”

At the heart of Bush’s explanation for his changed position was what he called “important new information”—a then recently released Department of Energy study that concluded that including CO2 controls in a multipollutant bill for power plants would, in Bush’s words “lead to an even more dramatic shift from coal to natural gas for electric power generation” and “significantly higher” electricity prices. Published the month before Bush’s inauguration, the study had been generated by the Energy Information Administration, an independent DOE agency. Former Representative David McIntosh of Indiana, a staunchly antiregulatory Republican, ally of the coal industry, and longtime opponent of environmentalists’ calls for action to stem global warming, had called for the study when he was chairman of the House Government Reform Subcommittee on National Economic Growth, Natural Resources, and Regulatory Affairs.

Environmentalists promptly complained that the study had exaggerated the costs of making power plants cap CO2 releases. Indeed, the EIA itself had stated on the second page of the study that its calculations omitted various cost-cutting methods like the planting of CO2-eating forests, other land-use activities to soak up carbon dioxide, and participation in an emissions-trading market with other countries. Such “flexibility” mechanisms, sought by some U.S. businesses, were included in the Kyoto treaty. The EIA said that if they had been factored into the analysis McIntosh requested, “the costs of meeting the (CO2) target most likely would be lower.”

Stung by Bush’s turnaround, environmentalists complained that the DOE study was “fatally flawed” by the limits imposed upon it, arguing that it projected more economic pain than several other recent analyses by government, university and think-tank analysts.

Jim Marston, the Texas director of Environmental Defense, found the president’s sole reliance on the DOE-EIA study especially ironic, since it didn’t fully weigh the sort of cost-cutting techniques that were included in the power-plant bill Bush boasted about in his campaign. Marston’s office had played a key role in negotiating the terms of that law. Excluding available cost-saving factors in the DOE-EIA study “contradicts the trend of the last 10 years, at the federal level and here in Texas,” he said.

A former government official familiar with the preparation of the DOE-EIA report told the Center for Public Integrity bluntly that the “boundaries” set for it beforehand—a common practice in such directed research projects at federal agencies—had resulted in “a very rigged study.”

But the rigged study served its purpose. Two weeks after Bush abandoned his campaign pledge on carbon dioxide, a White House spokesman said the United States would indeed abandon the Kyoto talks. All told, it marked a lightning-fast triple victory for business lobbyists—particularly for coal and coal-related concerns—and their allies, who had waged an intense persuasion blitz on a variety of fronts.

Cooler heads and insider hands

A day after Bush disclosed he would not pursue carbon dioxide restrictions, Myron Ebell, the Competitive Enterprise Institute’s director of global warming policy, wrote the exultant e-mail message to “Cooler Heads and colleagues”—a reference to the Cooler Heads Coalition that Ebell also chairs, made up of like-minded groups on the climate issue. Like CEI itself, many are business-supported.

Bush and Cheney “have made the right decision on regulating CO2 with a little good advice from their friends,” he wrote. “We have won a famous victory, and everyone should congratulate themselves on the work they did to achieve this end.”

Ebell’s self-congratulation was not without reason. CEI’s own Marlo Lewis Jr., a senior fellow at the think tank, had been staff director for McIntosh’s subcommittee at the time the former congressman asked for the study in 2000. Lewis had previously worked for CEI, before his congressional staff service.

Bush’s reversal “could be a turning point in the war to save industrial civilization from itself,” Ebell wrote, proclaiming “a special huzzah” for McIntosh and Lewis “for initiating the EIA study that gave the administration the cover they needed to get out of the dead end they had blundered into.”

The word “cover” popped up again two weeks later in a letter by Jack Kemp—a CEI distinguished fellow at the time, and formerly a Republican congressman, cabinet secretary and vice-presidential nominee. In it, Kemp wrote to Energy Secretary Spencer Abraham, congratulating him and Bush for their “boldness, logic, and sensitivity” in handling the carbon dioxide question.

“While many people provided tactical, logistical, and moral support to you on the CO2 issue (and many more are now trying to take credit!), I’m sure you agree that Fred Smith and his Competitive Enterprise Institute did yeoman work in giving the President intellectual support and political cover to ‘do the right thing,’” Kemp wrote. The letter came to light a year later, in Cheney task force documents obtained by NRDC under the Freedom of Information Act. (In the letter, Kemp also invited Abraham to a fundraising dinner for CEI, where the DOE chief thanked the institute for its “good work.”)

That work, Smith told the Center, basically involved blowing a loud whistle when rumors suggested the CO2 pledge would be fulfilled. Soon after Bush took office, CEI “raised an alarm, with like-minded groups, business, the press, free market advocates and affordable energy advocates,” he said, admitting that one part of the message—that it seemed like Al Gore had been elected—was “a little overstatement.” Environmentalists promptly took note of the importance of CEI’s role in the CO2 reversal. Two days after Bush’s decision, the Washington-based Clean Air Trust, which monitors and publicizes efforts to weaken pollution-reduction efforts, named Ebell its “Villain of the Month” award for leading CEI’s “ferocious lobbying charge” against Bush’s campaign pledge. The environmental group (whose president, Leon Billings, was a chief architect of the 1970 Clean Air Act as a Senate staff director) obtained and released Ebell’s e-mail along with its citation. Also adept at political parry-and-thrust, CEI announced that Ebell was pleased by the award and would “try to live up to the honor.”

An aggressive advocate

At the Competitive Enterprise Institute, he would have plenty of opportunities to do so. David Callahan, author of a 1999 analysis of conservative think tanks for the National Committee for Responsive Philanthropy, reported that CEI was “a particularly aggressive advocate of the notion that global warming is a ‘theory not a fact.’”

CEI labels itself “a non-profit public policy organization dedicated to the principles of free enterprise and limited government.” Smith said the group, which he founded almost 20 years ago and modeled functionally after the environmentalist Friends of the Earth—operates as a hybrid between a traditional think tank and an activist organization.

The result, he said, is a blend of “analysis, promotion of views and litigation to encourage action.” On the climate issue, that has meant using an intellectual arsenal including newspaper op-ed pieces and pithy quotes (global warming is an “alleged problem”), a statistics-laden book with the arresting title “Global Warming and Other Eco-Myths,” and legal action such as a lawsuit against a Clinton administration report on the impacts of global warming, which CEI maintained was “junk science.”

Many of the institute’s adversaries on environmental issues long have criticized it as being little more than a puppet of its corporate funders, and that charge was revived in connection with its effort against Bush’s power plant pledge. When it released the Kemp letter, the NRDC said CEI is “essentially an anti-regulatory public relations front for industry, especially oil and auto companies.”

Smith was unperturbed when asked about such charges. “How do I prove I’m not a crook?” he replied amiably. CEI, he said, “has always been a free market organization with classical liberal ideas, pro-market and anti-government-regulations.”

He added that the group’s ideology often puts it at odds with the interests of its corporate sponsors. “Coal is pretty mad at us right now, because we don’t support ‘clean coal,’ and nuclear because of our position on carbon credits. Every group that supports us is mad at us at one time or another,” he said.

The institute does not regularly disclose the sources of its donations, which Smith said come in roughly equal parts from corporations, foundations and individuals. The group’s current budget is “a little more than $3 million,” he said.

Others have reported where some of that money comes from, however. In their 2001 book, Trust Us, We’re Experts!, investigative journalists Sheldon Rampton and John Stauber, who produce the quarterly publication PR Watch, published a partial list of past CEI donors, several of whom could be affected by government restrictions on CO2: American Petroleum Institute, Amoco, (now part of BP Amoco), Burlington Northern Railroad, CSX Corp. (another rail company), Dow Chemical, Ford Motor Co. and General Motors.

Smith volunteered to give the Center a list of the 26 sponsors of CEI’s 2002 fundraising dinner, which he said was a typical sample of the group’s donors except that foundations were underrepresented. Companies and trade groups on the list, and the amounts they donated, included these with an interest in the CO2 issue—ExxonMobil ($25,000); General Motors ($15,000); and Alliance of Automobile Manufacturers, American Airlines, American Chemistry Council, American Petroleum Institute and National Mining Association ($5,000 each).

CEI’s efforts to debunk global warming concerns and fight CO2 regulation over the years have included frequent collaborations with industry and industry-connected groups and individuals.

One of CEI’s coal-related partners in an e-mail campaign calling for Bush to drop the power plant pledge, for instance, was the Greening Earth Society, which has argued energetically that “having more CO2 in the atmosphere will be good, not bad.” Greening Earth is an entitity of the Colorado-based Western Fuels Association, a non-profit buyer, producer and transporter of coal, which is itself owned by 19 electric cooperatives, municipal utilities and other public power bodies.

In one of its own actions, Western Fuels in 2000 sued several environmental groups, alleging “commercial defamation” because they had published an opinion ad in The New York Times and a website linking coal to global warming, and global warming to assorted problems.

In 2000, McIntosh, still the chair of the House Government Reform Subcommittee on National Economic Growth, Natural Resources and Regulatory Affairs, held a hearing where he declared that the coal industry was “targeted for extinction” by the Kyoto Protocol. McIntosh solicited testimony by Mark P. Mills, who was then both a Greening Earth science advisor and CEI senior fellow. Mills argued that the Internet and electronic commerce depend on coal-fired electricity.

In 1998, an American Petroleum Institute document—obtained from an industry source by the National Environmental Trust and shared with The New York Times—mentioned CEI as a “potential fund allocator” for a projected $2 million campaign to debunk worries about global warming. The document proposed recruiting five “independent scientists” to generate media coverage for the argument “that science does not support the Kyoto treaty—which most true climate scientists believe to be the case.” Southern Co. was listed as a planner of the potential project, while the National Mining Association and Edison Electric Institute were called “possible funding sources.”

Spinning for the Bush administration

CEI’s assistance was sought in 2002 by former American Petroleum Institute official Philip Cooney for a different purpose, though one that also involved public relations. Cooney, who served on API’s “climate team” and was registered as a lobbyist for the group in 1998, had switched jobs by the time he made the request. He had joined the Bush White House as chief of staff at the Council on Environmental Quality, which broadly coordinates the president’s environmental policy.

On June 3 last year, news broke that the United States had delivered a new report on man-made global warming to the U.N., forecasting a variety of probable and troubling outcomes that included more heat waves, disrupted water supplies, and damage to fragile ecosystems such as wetlands and mountain meadows. The report clearly presented a dilemma for the administration, which was already being accused of responding weakly to the climate issue.

The next day, following up news about the report, a reporter asked Bush if he was planning any new initiatives to “combat global warming.”

The president’s reply was regarded by some observers as an effort to distance himself from the new climate assessment, but administration officials later said the reply was consistent with previous remarks by Bush on the issue: “No,” he said, “I’ve laid out that very comprehensive initiative. I read the report put out by a—put out by the bureaucracy. I do not support the Kyoto treaty.”

At a later press briefing, then-White House Press Secretary Ari Fleischer amplified upon Bush’s “bureaucracy” reference: “This is a report that came out of the EPA.” As journalists and environmentalists noted, however, the report was not just a product of the EPA, but was the work of several agencies and had been thoroughly reviewed by White House staff members, including officials at the Council on Environmental Quality.

What was not revealed until about four months later, however, was that the day before Bush’s and Fleischer’s comments about “the bureaucracy” and “the EPA,” Cooney had asked for CEI’s assistance (specifically, for help in getting “positive spin,” Smith later told the Center) in dealing with controversy over the report. In an e-mailed reply to Cooney—later obtained by the environmental group Greenpeace with a Freedom of Information Act request—Ebell thanked Cooney for his call and suggested that “the folks at the EPA are the obvious fall guys.”

CEI was giving the administration its talking points.

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