CLIMATE:

After the spill, judging Big Oil's place at Senate table

Authors of the Senate climate bill didn't hide their courtship of Big Oil when crafting an industry-friendly proposal to curb greenhouse gas emissions.

Sen. Lindsey Graham (R-S.C.) claimed giving the industry access to more domestic offshore drilling would help reduce U.S. dependence on foreign sources of oil, all the while appealing to swing-vote senators. Sen. John Kerry (D-Mass.) boasted that he had sewn up endorsements from three of the country's major oil companies, with their representatives headed to the press conference where the bill would finally be unveiled.

But then came the Gulf Coast spill, with oil behemoth BP PLC culpable for an estimated 200,000 gallons of crude flowing every day into the Gulf of Mexico.

Now, the very perception that major oil companies are tied to the Senate climate proposal is under fire. And the sponsors themselves are being challenged to rewrite their bill and to play down the public role of the industry if the measure has any chance of becoming law.

"The American public has never much liked Big Oil," said Anna Aurilio, director of Environment America's Washington, D.C., office. "The last two weeks have made that perception probably even worse."

Environmentalists hope the BP spill turns into a game changer that will help propel the climate legislation's passage much like the Exxon Valdez oil spill led to the 1990 Clean Air Act amendments. But they insist that the authors must first abandon language that allows for an expansion of offshore drilling and revenue-sharing incentives for states -- replacing them with provisions that prevent future oil spills.

"If I was the bill's sponsor, I'd take out offshore drilling provisions and put in new safeguards for oil rigs, and get the oil companies to appear at that press conference," said Dan Weiss, a senior fellow at the left-leaning Center for American Progress.

In writing their bill's drilling provisions, Kerry, Graham and Sen. Joe Lieberman (I-Conn.) had their sights on about a half-dozen potential votes, including Sens. Mary Landrieu (D-La.), Jim Webb (D-Va.), Mark Warner (D-Va.), Mark Begich (D-Alaska), Lisa Murkowski (R-Alaska) and Byron Dorgan (D-N.D.). But they also have been wrestling with coastal state Democrats who want nothing to do with any additions to offshore drilling, arguments that have been echoed of late by Senate Democratic leadership following the Gulf Coast spill.

"This terrible event will, undoubtedly, require us to re-examine how we extract our nation's offshore energy resources and will have to be taken into consideration with any legislation that proposes to open new areas to development," Senate Majority Leader Harry Reid (D-Nev.) said Friday.

"The offshore drilling issue is being reconsidered by many at this point," Sen. Dick Durbin (D-Ill.) told reporters yesterday.

Durbin, the Senate majority whip, said safety issues would be paramount if Democrats move ahead. "There's a lot to be learned by members and perhaps new standards when it comes to offshore drilling," he said. "I don't think we're going to eliminate offshore drilling in the future, but any future drilling is going to be held to much higher safety standards."

For now, sponsors of the Senate proposal are holding onto the compromises they have reached with the oil industry, even in light of the Gulf Coast spill. After all, perhaps their biggest deal with Big Oil does not even have to do with drilling. Instead, it places the oil companies into a separate regulatory system for curbing their emissions that is outside the trading plan for power plants and major manufacturers -- a major change from the House-passed bill.

Kerry spokesman Whitney Smith did not respond directly to questions on the role that the oil companies would play in the climate legislation going forward. She said that Kerry is working with the White House, U.S. EPA and other senators to monitor the Gulf Coast spill and also remains focused on "passing a bill that will lead us to a day when most of America's energy is clean, and that will only happen if we put a price on carbon."

Graham, who bolted the negotiations last month over Democratic leadership's decision to place immigration on this year's agenda, said Friday that he saw no reason to change the offshore provisions, even in light of the Gulf Coast spill.

"We've had problems with car design, but you don't stop driving," he told home state newspaper, The Greenville News. "The Challenger accident was heartbreaking but we went back to space. The biggest beneficiaries of this proposal to stop drilling would be overseas oil interests, OPEC and regimes that don't like us very much."

Kerry never named the oil companies he expected at the April 26 press conference to roll out the climate bill, an event that was indefinitely postponed because of Graham's sudden departure from the climate negotiation. But a Shell spokesman said that the company's CEO, Marvin Odum, was planning to attend. And both BP and ConocoPhillips -- regular visitors in the senators' office during closed-door talks with Shell on the climate bill -- were also expected at the press conference.

ConocoPhillips spokeswoman Nancy Turner acknowledged yesterday her company's ongoing role in the negotiations but said it was "premature" to comment on the Kerry-Graham-Lieberman proposal because the legislation still had not been released. Officials at BP and Shell did not respond to requests for comment.

Other business officials said they would welcome the oil industry's continued participation at the bargaining table.

Preston Chiaro, group executive for technology and innovation at Rio Tinto, the nation's largest diversified mining company, said yesterday that the language that Kerry, Graham and Lieberman negotiated for transportation fuels was "one of the attractions of their bill."

"I think the oil companies have such a deep and vested interest in climate change, they can't help but play a part," Chiaro said.

"I don't know how you can't have the oil and petrochemical industry be an essential part of the dialogue," added Ralph Izzo, chairman of the board, president and CEO at New Jersey's Public Service Enterprise Group Inc., or PSEG.

Conservatives questioned efforts to push out the oil industry at a time when it is focused on the Gulf Coast cleanup.

"Demonizing oil companies is maybe good politics for Democrats, but it doesn't make for good policy," said Dana Perino, former White House spokeswoman for President George W. Bush. "All of us have to get the production from somewhere. We either have to make it from our own resources or get it from overseas. I'm not an oil company basher. If you want to solve this problem, you've got to have them at the table."

Entering the climate debate, industry attorney Scott Segal said the major integrated oil companies "needed at least two things in climate legislation in order to be fully supportive."

The first was some type of "linked fee" that kept the industry's greenhouse gas emissions outside of the cap faced by other industries. The second entailed proposals to help facilitate oil and gas exploration and production, including on the outer continental shelf.

"Both of those proposals seem to be highly questionable at this point," Segal said. "Even if [Kerry] can broker a careful preliminary deal on oil-related issues, it is hard to see how they could keep senators representing vastly different viewpoints from offering ill-considered amendments that would disrupt the entire process."

But Segal said he still expected the major oil companies to remain engaged in the climate bill negotiations.

"I think every energy company -- from oil and refining to utilities to renewables -- wants to remain constructive and engaged in the process of developing sensible climate change policies," Segal said. "However, no one has control over major external influences like accidents or oil spills that can change political perceptions. The best approach is to keep putting one foot in front of the other, and not to try to guess the final outcome when there is so much uncertainty."