The oil and natural gas industry's biggest influence group will launch a major lobbying campaign next month, staging rallies and running advertisements tying the sector to job creation and opposing tax changes and tougher drilling regulations.
American Petroleum Institute kicks off what it dubs "citizen rallies" on Sept. 1 with events in Houston, Corpus Christi and Beaumont, Texas. Partnering with local energy groups and other business organizations, the trade group wants to drive support that can translate into calls and letters to Congress members.
"The focus of the rallies will be on jobs and the economy," Jack Gerard, API president and CEO, said today in a conference call with reporters. "Americans want to know that the government is working on constructing solutions to the challenges we all face, jobs and economic recovery. From an energy perspective we don't think that's happening.
"Rallies will mobilize our members and our allies as well as the public at large on the important topics of energy, jobs, taxes and economic development," Gerard added. "We will encourage the attendees to get involved in the public discussions on these most important issues."
The ad campaign will focus on jobs and taxes. Gerard would not reveal the cost of the promotion.
The API effort collides with campaigns from environmental and other groups, who are working to pressure Congress to pass measures that would tighten regulations on oil drilling and climate legislation. At least two large coalitions plan to paint the oil and natural gas industry as the enemy of both legislative actions.
Clean Energy Works, an alliance of about 60 groups that want congressional action on climate will hold a "Carnivoil" event in 25 cities this month. Modeled after a traveling carnival and featuring the subtitle "The Greatest Addiction on Earth," it aims to show the oil industry as a sector run amok and with too much political power.
"Carnivoil" will feature games with an oil theme, like a boxing match between soon-to-be former BP CEO Tony Hayward and a giant sea turtle, a "petroleum wheel of doom," and naming the oil company CEO's salary, said Clean Energy Works spokesman David Di Martino. There are prizes like an action figure modeled after Hayward (Greenwire, Aug. 4).
"We have our own road show that's about Big Oil partying at the expense of all Americans," Di Martino said.
Other groups plan to send members to hall forums, debates and other campaign events where they will decry the Senate's failure to combat global warming. About 2,500 people have signed up for the campaign organized by 350.org, which is coordinating its efforts with advocacy groups 1Sky and Energy Action Coalition (Greenwire, Aug. 12).
That coalition today said it is amplifying its efforts, funding a $100,000 advertising campaign and launching a website that targets lawmakers it sees as inappropriately tied to the oil and gas industry. The site shows 46 senators, both Democrats and Republicans, who the group says are "aligned with the oil industry." They are shown bobbing in a sea of petroleum, and people can click on each one to see how much they have received in campaign contributions from the oil and natural gas industry.
"The hope is first to just expose the amount of money that is continuing to flow into the Senate," from the oil and natural gas industry, said Jamie Henn, a spokesman with 350.org, and secondly, he said, to show the Senate that there are repercussions for their failure to act on climate legislation and oil drilling regulations.
API's new campaign, meanwhile is likely to stir controversy. API last August also financed an advocacy program that was attacked by critics as unauthentic.
Dubbed "Energy Citizens," last year's campaign followed passage of the House climate bill (H.R. 2454) from Reps. Henry Waxman (D-Calf.) and Ed Markey (D-Mass.) and featured rallies in towns were people talked about how the measure would drive up energy costs and potentially kill their jobs. API worked in coordination with FreedomWorks, the American Conservative Union and Americans for Tax Reform.
Critics condemned the effort as lacking any genuine grass roots, saying that most of those who attended worked for energy companies. An e-mail from Gerard, obtained by Greenpeace and verified as authentic by API, showed that he had encouraged member companies to send their workers to those rallies (E&ENews PM, Aug. 20, 2009).
"The measure of success for these events will be the diversity of the participants expressing the same message, as well as the turnouts of several hundred attendees," Gerard wrote in that e-mail. "Our member company local leadership -- including your facility manager's commitment to provide significant attendance -- is essential to achieving the participation level that senators cannot ignore."
As well, many of the rallies were organized by registered lobbyists working on behalf of API and other energy interests. A list of organizers circulated by the Sierra Club late last fall showed that state-registered lobbyists for the energy industry served as the coordinators for 16 of 21 scheduled events organized under the campaign. API argued that the rallies represent the views of much of the public regardless of who served as the actual organizer (E&ENews PM, Aug. 21, 2009).
Asked about last year's controversy, Gerard this morning said that more than 12,000 people showed up at those rallies and that "in most forums very few oil and gas people attended." Asked whether API would ask oil and gas industry workers to attend this year's rallies, he said that "we have always encouraged our employees to engage in political activities."
API also is uniting with other powerful trade groups in pushing back against President Obama and Democratic tax policy proposals. API yesterday invited reporters to its headquarters to hear from the trade group's chief economist, as well as those from the U.S. Chamber of Commerce and American Farm Bureau.
The economists offered opinions on what they view as the pitfalls of three potential tax changes: removing a series of tax benefits the oil and natural gas industry receives, allowing the tax cuts approved by President George W. Bush to expire at the end of the year for those in the top tax brackets, and changing the estate tax rate. After expiring this year, the estate tax in January bounces back to 55 percent for estates worth more than $1 million unless Congress passes new rules.
Obama's fiscal 2011 budget proposes eliminating tax breaks for petroleum companies, a move that would generate $36.5 billion over the next 10 years, the Department of Energy said. The industry says it would cost companies $80 billion over the same period.
With the economy still battered, "moving forward, the last thing you need to do is raise costs for fueling consumers," said John Felmy, API's chief economist, who also said that raising taxes on the industry could thwart investments that could create 400,000 jobs.
Other economists disagree on whether removing the tax benefits from the industry would affect gasoline prices significantly because the cost of oil is set on the world stage. They also argue that at any given time the work force is relatively the same size and that a job created in one sector mostly replaces one removed from another area.
Felmy rejected that.
"If our economy was at full employment, one could make the argument, but with unemployment and a growing population, this is not the case nor will it be likely in the near future," Felmy said.
The gathering yesterday also underscored an alliance that exists on many issues between API and the Chamber, two of the wealthiest and most powerful trade groups in town. API's director of media relations Eric Wohlschlegel, who started work last month, came from the Chamber where he worked on the media team (Greenwire, July 13). API communications director Linda Rozett, who started this spring, had earlier worked as senior vice president of communications for the Chamber (Greenwire, April 16). Wohlschlegel organized yesterday's gathering.
"The business community partners with each other all of the time," Wohlschlegel said. "Every single major business trade association in town shares certain issues, faces a lot of the challenges that other groups face.
"We're going to be doing this a lot," Wohlschlegel added. "We've partnered before. We're definitely partnering with different business-oriented groups around town."
Di Martino called the API-Chamber partnership "an echo chamber within an echo chamber."
"The challenge whenever you're in opposition to any of these groups always is money," Di Martino said. "But money can't make up for the fact that they're always wrong on issues."
Di Martino criticized API's planned August campaign, saying that "you can expect to see misleading advertising campaigns and distortions. They have the money to create an alternative reality."
Industry study argues against tax changes
The trade group is also highlighting the results of a study it commissioned that says proposed tax changes on the oil and gas industry could reduce domestic production by as much as 10 percent by 2017.
The new report released yesterday by Wood Mackenzie estimates that tax changes proposed by Congress and the Obama administration could put 2.4 million gallons of oil per day at risk next year and as much as 10.5 million gallons -- or 10 percent of total U.S. production -- at risk by 2017.
"The study illustrates a fundamental rule of economics: tax something more, get less of it," Gerard said in a statement. "But more important than the lost production is the loss of thousands of jobs that would follow."
At issue in the report are proposed repeals of two tax incentives: intangible drilling cost expensing and the domestic production activities deduction.
The intangible drilling cost deduction is a nearly 100-year-old deduction that allows oil companies to deduct a majority of expenses that do not have a salvage value in the year they are expensed. President Obama proposed repealing the incentive in his 2011 budget request. The new proposal would require companies to amortize the costs over a longer period.
The domestic production activities deduction is 3 percent on income from domestic production, manufacturing and extraction activities. The incentive, passed in 2004, allowed the deduction to increase to 9 percent in 2010 but was capped at 6 percent for the oil and gas industry.
Just before adjourning for recess, Sen. Max Baucus (D-Mont.) offered up a substitute amendment to a small business jobs package pending in the Senate that would repeal the incentive for the five largest corporations with more than $1 billion in before-tax income. The Wood Mackenzie report says that change could eliminate the deduction entirely for the oil and gas industry.
"The incentives have increased U.S. energy production and jobs, and other industries enjoy the same or similar incentives," Gerard said. "Proposals to eliminate them for oil and gas alone would discriminate against an industry that already pays federal income tax at an effective rate more than 70 percent higher than the other S&P industrials."
Click here to read the report.
Reporter Katie Howell contributed.