1. LOBBYING:
Soul-searching follows U.S. CAP defections
Published:
Advertisement
The U.S. Climate Action Partnership drew its mantra from a Rolling Stones song whose lyrics were once posted in the coalition's conference room in downtown Washington.
"You can't always get what you want, but if you try sometimes, you just might find, you get what you need."
But some U.S. CAP members did not believe -- after three years of marathon meetings aimed at reaching consensus on what a federal climate change and energy policy should be -- they would ever get what they need. So last week, with comprehensive global warming legislation languishing in the Senate, two major oil companies and an equipment manufacturer opted out of the $100,000-a-year club.
"One of the things about U.S. CAP is it does bring together organizations that, in some cases, were suing each other," said Steven Corneli, a regular at U.S. CAP events and senior vice president of market and climate policy for NRG Energy Inc., a Princeton, N.J.-based utility that relies on coal, oil and natural gas. "These are companies and groups with very different perspectives and very different business models.
"Some are making money by building technologies. Some are making money by raising contributions from philanthropies. Getting past these cultural issues to something everyone can agree on is really hard. One of the challenges is it can only move so fast and it can only go where it needs to go to get a deal done."
U.S. CAP has had its share of successes, culminating with House passage last June of a sweeping climate bill that incorporated many of the group's ideas. Democratic Reps. Henry Waxman of California and Ed Markey of Massachusetts gave orders to their staff to follow U.S. CAP's blueprint as they wrote the legislation, and they often cited the coalition's positions back to nervous members as they built a narrow House majority.
"They had a workable framework, and everybody needs a workable framework," said Gerry Waldron, the former staff director of Markey's Select Committee on Energy Independence and Global Warming. "They were giving their technical expertise, their learning from the European experience. They were building the house, but we sort of decided where the furniture went."
At its peak last October, U.S. CAP had 31 dues-paying members -- 26 companies and five nongovernmental organizations. The departures last Tuesday of ConocoPhillips, BP America and Caterpillar Inc. brought the group to 23 companies with revenues of about $1.7 trillion annually. In terms of membership size, that is still more than double what the coalition had upon its formation, just prior to President George W. Bush's final State of the Union address in January 2008.
Membership has shifted for a variety of reasons. Lehman Brothers left when it went bankrupt in 2008. The National Wildlife Federation cut its ties in January 2009, saying it disagreed with the environmental integrity of the coalition's blueprint. Insurance giant American International Group Inc. dropped out in February 2009 after a top House Republican complained that the company should not lobby the government as it receives federal bailout support. And both Xerox Corp. and Marsh & McLennan Cos. stepped away last year.
"We felt U.S. CAP had made enormous progress in their goals, but we decided to step aside to make room for new members who have a more direct and immediate business interest in the outcome of climate change discussions," said Christine Walton, vice president of corporate communications at Marsh & McLennan, an accounting and professional services firm.
The coalition also added new members last year: power company AES Corp., energy technology manufacturer Alstom SA and Honeywell International Inc.
U.S. CAP officials downplayed the latest departures, saying they expect more members to join. And several sources familiar with the coalition emphasized that the oil companies had grievances that could only be addressed from the outside, especially now, with Senate sponsors searching for the elusive 60 votes needed to beat an expected Republican-led filibuster.
For example, the House-passed climate bill is seen by many as favorable to coal-state lawmakers and electric utilities. Indeed, the legislation adopted many of U.S. CAP's recommendations when it came to distributing 35 percent of the cap-and-trade program's valuable emission allocations to the local distribution companies that service the power industry.
But the domestic oil companies got 2 percent of the credits, far short of the amount they say they will need to compete with companies in India, the Middle East and South America, which lack such strict emission restrictions.
The oil companies broached the allocation subject during U.S. CAP meetings -- often dubbed the "food fight" of the climate debate -- but found little traction with the group's environmentalists.
"They just weren't getting anywhere sitting around a table with NRDC and talking about the need for more allowances for refineries," said an oil industry lobbyist. "It just wasn't going to happen."
Writing on the wall
For the departing companies, observers say, the writing has been on the wall for some time.
Both BP and ConocoPhillips wrestled with how they fit in a group that is promoting itself as a solution to U.S. energy independence by using less oil for transportation fuel. "How does an oil company engage and contribute to reducing the use of oil?" Corneli said. "It's a little bit of a challenge for an oil company."
Underpinning the oil companies' exodus, several sources said, is the growing dispute between coal and natural gas, the latter of which is seeing a sharp boost in production due to the use of hydraulic fracture drilling techniques in mid-Atlantic and Northeastern states. U.S. EPA models show that the House-passed climate bill would give large benefits to coal but would lead to flat demand for natural gas, a trend the oil and gas companies would like to see flipped.
"There used to be a gentleman's agreement among fossil fuels that they didn't take shots at each other too much," the oil lobbyist said. "What I read into it is that they're seriously thinking of taking on coal."
Houston-based ConocoPhillips, the second-largest U.S. refiner, complained about the House-passed bill just days after its passage, saying that the measure did not treat transportation fuel and natural gas consumers the way it dealt with the electricity sector. The company also floated legislation among the group's members last fall suggesting a carbon tax instead of the cap-and-trade system at the center of the Capitol Hill debate. And a recent full-page newspaper ad -- titled "A Question of American Leadership" -- included many U.S. CAP members, but not ConocoPhillips.
BP signed onto the ad, although it avoided giving an endorsement to the House-passed bill and recently questioned the allocation structure. Explaining BP's departure last week, company spokesman Ronnie Chappell said, "We believe that legislation should create a price for carbon that is across the entire spectrum of the economy." He added that the transportation sector bears a "disproportionate share of burden."
Meanwhile, Caterpillar executives have been under pressure ever since they joined U.S. CAP from some shareholders and conservative groups to abandon the coalition. The company's chairman and CEO, Jim Owens, also sounded off against the House bill after its passage, writing Speaker Nancy Pelosi (D-Calif.) to say he had problems with provisions dealing with nonroad equipment, black carbon and border control measures.
Pressure from conservatives
Several leading conservatives have also been trying to challenge U.S. CAP and break the coalition apart.
Rep. Joe Barton (R-Texas), a skeptic on climate science and the ranking member of the House Energy and Commerce Committee, turned up the heat on several U.S. CAP CEOs when they served as the lead witnesses at a January 2009 hearing. The session was Waxman's first after wresting the gavel away from longtime Chairman John Dingell (D-Mich.), and Barton used his turn at the microphone to recite the declining stock prices of U.S. CAP companies present.
"There's not one CEO here today whose stock price is even close to what it was a year ago," Barton said. "We're in a very serious economic recession, and you cannot tell me that if we adopt one of their principles of a mandatory cap-and-trade program on CO2 emissions for our economy that it's going to help their stock prices."
On that same day, Sen. Bob Corker (R-Tenn.) criticized U.S. CAP companies during a closed-door meeting, a tense exchange that several sources say included several jabs directed at General Electric Co. CEO Jeffrey Immelt.
More recently, climate bill opponents have pounced on the U.S. CAP exodus.
"Their defections end the exceedingly small remaining chance that cap-and-trade could be enacted this year," Myron Ebell, a director of energy and global warming policy at the Competitive Enterprise Institute, wrote in a blog posting on FOXNews.com.
Ebell, a well-known skeptic on climate science, also spelled out why he thinks the companies left U.S. CAP: "They pulled out when it became clear that they were not going to get rich off the backs of American consumers if the cap-and-trade bill enacted is anything like the specific bills being considered in Congress."
Effective at '50,000-foot level'
Several officials connected to U.S. CAP acknowledge the group's shortcomings, and they say have many unresolved debates, including how to deal with an expansion of nuclear power and oil and gas drilling, as well as oversight of a carbon market. But those divisions, and the latest round of departures, should not be seen as the end of the effort to pass climate legislation in Congress.
"It is less an abandonment, as opposed to perhaps a recognition that there are limits to how far these individual partnership groups can go and pursue the nitty-gritty details of legislation," said Waldron, the former staff director of the House select climate panel.
"They're very effective and remain very effective at the framework level, at the 50,000-foot level," Waldron added. "But when you get down to the messy business of making laws and the sausage making, it's going to be hard to keep those people together."
Indeed, members of U.S. CAP still enjoy high levels of access on Capitol Hill and in the White House.
Several of the group's CEOs met earlier this month with White House Chief of Staff Rahm Emanuel, Treasury Secretary Timothy Geithner and President Obama's top climate adviser, Carol Browner, to talk about the prospects for the global warming and energy legislation now pending in the Senate.
"They weren't easy to arrange, but they were certainly readily accepted by key leaders in Congress and the White House," Duke Energy Corp. spokesman Tom Williams said. "That's a clear sign that U.S. CAP is very viable and looked to for guidance. And I'd expect that to continue."