Oil clout pits ethics against money in politics

By Mike Lee | 11/26/2018 07:09 AM EST

Voters in two of the nation’s biggest oil-producing states approved ballot measures this month that create new government agencies to enforce campaign finance and other ethics laws.

Gas flaring from an oil and gas well in New Mexico.

Gas flaring from an oil and gas well in New Mexico. Blake.Thornberry/Flickr

Voters in two of the nation’s biggest oil-producing states approved ballot measures this month that create new government agencies to enforce campaign finance and other ethics laws.

North Dakota voters approved Measure 1, a constitutional amendment creating an ethics commission and making other reforms, by a margin of about 54 percentage points. In New Mexico, three-quarters of voters approved Amendment 2, a constitutional amendment creating an ethics commission, a year after the state Legislature passed a law putting it on the ballot.

While the measures passed with healthy margins, the newly created watchdog agencies will face numerous obstacles, according to elections observers. The U.S. Supreme Court has weakened campaign finance laws with a series of decisions. And state ethics boards around the country have been challenged by big political spenders and conservative groups that argue regulating political campaigns infringes on their free-speech rights.


In North Dakota and New Mexico, which are the No. 2 and No. 3 oil-producing states, the new agencies may face even more hurdles because the oil industry has so much clout. The hydraulic fracturing boom that revitalized the energy business has created a new class of political patrons, including at least eight billionaires who have given a combined $40 million to state-level officeholders since 2010 (Energywire, Aug. 13).

That’s the fight Dina Butcher and Ellen Chaffee were looking for when they helped organized North Dakotans for Public Integrity, the group that successfully floated Measure 1.

"It is a natural evolution out [of] what happened during … the oil boom," Chaffee said.

Starting about 10 years ago, oil production in North Dakota started to spike after a handful of companies figured out how to use hydraulic fracturing and other new techniques to squeeze oil out of a deep layer of rock known as the Bakken Shale. Suddenly, the historically agrarian state was the nation’s second-biggest oil producer. Almost all the big exploration companies were based in other states.

Things started happening at the state Capitol in Bismarck. A bill that rewrote the state’s oil taxes flew through the Legislature in 2015, Butcher said. Four separate bills to create a state ethics commission failed.

Even Butcher, who’s a retired lobbyist for agriculture interests, had a hard time figuring out who was calling the shots. During the 2017 legislative session, she counted 501 registered lobbyists. That’s unheard of in North Dakota, which has a population of about 750,000.

"We don’t know what impacts they have on the decisions made by our Legislature," Butcher said of the lobbying push.

All that lobbying happened in a Wild West atmosphere. North Dakota is one of a handful of states that allow unlimited campaign contributions. And while it requires lobbyists to register with the state and report spending above a certain threshold, reporting tends to be slack, and the reports aren’t available online.

There’s no prohibition against giving gifts to elected officials and no disclosure requirement for outside spending groups, according to the Coalition for Integrity, a Washington-based nonprofit formerly known as Transparency International USA.

Right to participate

Butcher and Chaffee started organizing the petition drive that created Measure 1 about a year ago. It grew out of weekly coffee sessions with a dozen or so people who were concerned about the state government.

The final version created a five-member ethics commission and banned campaign donations from foreign companies and individuals. It also requires anyone spending more than $200 to influence the state government to disclose the source of the funds, prohibits gifts from lobbyists to state officials, and prohibits public officials from lobbying while they’re in office and two years after they leave office.

The group had powerful opponents. The North Dakota Petroleum Council and the state chamber of commerce opposed the amendment, saying it’s too vaguely worded and it infringes on people’s free-speech rights. Americans for Prosperity, the political group backed by Charles Koch, contributed funds.

The fight isn’t over, either. The state Legislature, led by Republicans, still has to pass laws enacting the amendment. And there are likely to be legal challenges, said Ron Ness, president of the North Dakota Petroleum Council.

"Oil and gas has a huge stake in this state. They employ 20 percent of the workers, provide 30 percent of the tax base," he said. "They have just as much right to engage and participate as anybody else."

New Mexico’s ethics commission faced less resistance, but it took a longer path to the ballot. Former Gov. Bill Richardson (D) suggested creating a commission in 2006, shortly after then-state Treasurer Robert Vigil (D) resigned amid misconduct allegations, according to the NM Political Report.

The current push started in 2015, shortly after Republican Secretary of State Dianna Duran resigned and pleaded guilty to criminal charges after diverting $13,000 in campaign contributions to pay for gambling debts.

The same year, Democratic state Sen. Phil Griego resigned amid allegations that he used his position to help sell a state-owned building to a land developer. The sale required a bill in the Legislature, and Griego was accused of taking a $50,000 commission. He was sentenced to 18 months in prison.

The Legislature passed a bill putting the ethics commission in front of voters in 2017, but some officeholders were still concerned about the idea.

"These things can be so treacherous," New Mexico state Sen. Stuart Ingle (R) told the Albuquerque Journal in September. "With that many people involved, it’s going to be hard to keep it private."

As in North Dakota, the New Mexico Legislature will have a second chance to shape the ethics commission when it takes up enabling legislation next year.

Heather Ferguson, executive director of Common Cause New Mexico, said she’s optimistic about the commission. The state already has effective laws on the books, she said, and the new agency will simply be in charge of enforcement.

The flow of money

To some extent, North Dakota and New Mexico are swimming against the tide. Ethics agencies in other oil patch states are facing legal and political challenges, and the U.S. Supreme Court has made it harder to enforce campaign contribution restrictions and rein in corruption in general, good-government advocates say.

In 2010, the court ruled in the landmark Citizens United case that corporations and labor unions can spend unlimited amounts of money on independent campaign advertisements. The 5-4 decision said laws prohibiting corporate financing of elections violated the constitutional guarantee of free speech (Greenwire, Jan. 21, 2010).

In 2016, the court reversed a criminal conviction against former Virginia Gov. Bob McDonnell (R), saying that merely accepting gifts from contributors and then setting up meetings for them wasn’t sufficient evidence of corruption. The justices ruled, 8-0, that McDonnell hadn’t committed an "official act" (E&E News PM, June 27, 2016).

"Especially since Citizens United, there’s been a lot of focus on challenges against disclosure requirements by organizations that aren’t political but still do a good amount of campaign spending," said Austin Graham, who works on state and local issues at the Campaign Legal Center.

In Texas, the tea party movement-affiliated group Empower Texans has argued in a lawsuit that the state Ethics Commission doesn’t have the authority to require the group to disclose more information about its donors. A state district court rejected the suit, but it was revived on appeal in August.

Empower Texans gets much of its funding from oilman Tim Dunn.

A libertarian-leaning group is also making a free-speech argument against the Oklahoma Ethics Commission. The Institute for Justice says in a federal district court lawsuit that Oklahoma’s $10 annual limit on gifts to legislators shouldn’t apply to "informational" materials. The group distributes books to state legislators around the country.

Oklahoma’s Republican-dominated Legislature also took aim at the state Ethics Commission this year, cutting the agency’s funding for fiscal 2019. The Ethics Commission sued, saying it needed an additional $2.6 million to do its job and that it should be afforded extra protection because it was created by a statewide vote. But the state Supreme Court threw out the complaint.

That sort of pushback from lawmakers — whether it’s budget cuts or bills that exempt certain types of spending from disclosure — is common in statehouses around the country, said Denise Roth Barber, managing director of the National Institute on Money in State Politics.

"Money’s going to find a way downhill," she said.

At the same time, state governments are playing a more important role in national affairs. State-level agencies are responsible for most environmental enforcement, for instance.

That makes it important for New Mexico and North Dakota to ensure that their ethics commissions are independent and have authority to conduct credible investigations, said Shruti Shah, executive director of the Coalition for Integrity.

"A toothless ethics commission is pointless," she said.