NATURAL GAS

Aubrey McClendon's energy 'education' campaign

This story is the first part of a two-part series. Click here to read the second part.

OKLAHOMA CITY -- Aubrey K. McClendon, a billionaire, is going to give you more "education" about clean energy, an effort that will earn him some nice federal tax breaks and, at the same time, probably fatten his company's bottom line. Conveniently, his company is one of the top sellers of the product he thinks the country must use more of to combat climate change: natural gas.

Flat-screen TVs posted around the sprawling "campus" of his Oklahoma City-based Chesapeake Energy Corp. tell the story of how McClendon, the company's chief executive and chairman, became a billionaire by finding natural gas in unconventional places. Even the name of the company cafe -- The Wildcat Restaurant -- portrays his reputation as one of the gas industry's premier mavericks, a man who bucked the trends and struck it rich.

And he's not done yet. Using millions of his and Chesapeake's money, McClendon has formed the Washington, D.C.-based American Clean Skies Foundation, a nonprofit organization that is broadcasting, publishing and blogging the virtues of natural gas. The group's latest effort, an online news channel called CleanSkies.tv, hit the airwaves earlier this week, on Earth Day.

According to McClendon, as Congress prepares to open its debate on how the nation might deal with climate change and weighs what resources will power the country's future, his product has not gotten enough attention.

"In my view, there was nobody standing up to say, here's a fuel that is clean, affordable, it's abundant, it's American," said McClendon, echoing the full-page advertisements the foundation he chairs has purchased in The Wall Street Journal, The Washington Post, this publication and the smaller dailies that cover Capitol Hill. "I am not ashamed whatsoever to be the No. 1 pitchman for my product. I believe in it with my heart and soul."

But critics contend that the new group is nothing but a brazen attempt to convince Congress to adopt policies that benefit McClendon's business interests.

"This is a lobbying advertising arm of his company. All of these things are directed at getting the government on the natural gas bandwagon," said Carol Raulston, spokeswoman for the National Mining Association, which represents most coal producers. In a letter to the foundation in February, the association accused Clean Skies of breaking the tacit rule of engagement in the energy sector: Thou shalt not cast aspersions on another industry's product.

"We all have enough problems that we don't have to be shooting one another," Raulston said.

McClendon's critics wonder about his group's status as a public charity, and his history of using covert advertising campaigns to take on his own utility customers and his coal-minded energy competitors. Prior to the American Clean Skies Foundation, McClendon launched campaigns in Texas, Oklahoma and Kansas -- all states where Chesapeake produces natural gas -- attacking proposals to build new coal-fired power plants.

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Last year, anti-coal ads by the McClendon-backed Clean Sky Coalition featuring models with smudged faces and the slogan "Face It, Coal is Filthy" started appearing on Washington buses and subway stations. They immediately drew the ire of coal-state lawmakers on Capitol Hill, including Rep. Nick Rahall (D-W.Va.), who called them "despicable." The ads were taken down. McClendon and Chesapeake Energy Corp.'s political action committee have since contributed $2,000 to Rahall's re-election bid, federal records show. And McClendon -- who has ramped up his company's business in West Virginia -- now calls Rahall a "friend."

"The filthy secret is that this ad campaign is about market share," said Rahall at the time. "It's about profits. It's about one segment of the energy industry trying to bamboozle the general public and policymakers to sell more of its products."

McClendon, and the foundation's CEO, Denise Bode, say things are different this time around.

"At the request of our friends in other industries and some of our friends in politics ... we tried to craft a message that is 100 percent pro-natural gas, and leave coal alone," McClendon said.

A 'public charity' that won't lobby

Unlike the lobbying groups and business associations that dominate the discourse on energy policy inside the Beltway -- and even McClendon's anti-coal campaigns -- the American Clean Skies Foundation is registered as a public charity. Contributions are unlimited and tax deductible, but what can be spent on lobbying is strictly limited. Both McClendon, whose personal net worth is estimated at $2.8 billion, and Chesapeake Energy, which had $30.7 billion in assets at the end of last year, will take deductions.

In its application to the Internal Revenue Service, which was approved in November, the organization reported receiving $7 million in contributions in 2007 and projected another $22 million in 2008 and 2009. Records also show it was initially incorporated in Delaware as a 501(c)(4), or lobbying organization, before being reclassified as a public charity. By comparison, Chesapeake Energy Corp. spent a mere $120,000 to hire lobbyist Chad Bradley, the former deputy chief of staff for Oklahoma Republican Sen. James Inhofe, according to the Senate Office of Public Records.

Bode, a former commissioner at the Oklahoma Corporation Commission and a member of the Bush-Cheney energy transition team, said the new group will not lobby.

"We don't want to go to the Hill. We don't want to get involved in any policy or legislative issues. What we seek to do is provide as much information as possible ... to be a kind of Heritage Foundation for energy and the environment," she said.

The roots of the American Clean Skies Foundation were planted in Texas. That is where, in early 2007, as the state rushed to approve 11 coal-fired power plants proposed by TXU, McClendon decided to take action. Under the name the Texas Clean Sky Coalition, he helped fund a series of ads that ran in Texas newspapers. Months later, after TXU was taken over by a private equity group, it was announced that eight of the 11 plants would be canceled.

"I'm not going to call it my radicalizing moment, but it was the moment at which I realized the fight was on, or the game was on, and I needed to get engaged," said McClendon, who will not reveal how much he spent on the effort or who else helped to finance the fight.

"I thought, gosh, here we are in the middle of the No. 1 gas-producing state in America, the No. 1 carbon-producing state in America, why don't we burn more Texas gas to make more Texas electricity, and one thing led to another," he said. "It was through that experience that I determined none of the traditional oil and gas trade groups in Washington is really set up to educate the country about the new world for natural gas."

The Clean Sky Coalition, with the Texas dropped from its name, soon began appearing inside the Beltway. But by April 2007, under criticism from Rahall and the energy lobby, the "Coal is Filthy" ads were pulled down.

'Clean Sky' group morphs into 'Know Your Power'

The fight didn't end there. McClendon was fighting coal on other fronts. He was also using the media to support his alma mater's men's lacrosse team. In June, using the name Duke Lacrosse Booster Club of Oklahoma City, he paid $400,000 for several full-page ads praising the lacrosse team after it lost the national championship.

"I wanted to publicly support a group of young men that I felt had been extremely unfairly treated," McClendon explained. "I felt the way a lot of people do, and I happened to have the financial resources to go out and do it."

A month later, he was back on energy. In August, the name of the Clean Sky Coalition was changed to Know Your Power in Delaware. Less than a month later, Know Your Power -- from its base in the Oklahoma City public relations firm Ackerman McQueen -- was running ads against a coal-fired power plant slated for northern Oklahoma.

The campaign pitted McClendon against his Oklahoma City neighbor Peter Delaney, who as president and chief operating officer of Oklahoma Gas & Electric Co. was one of the plant's applicants.

The application was denied, and the company is now seeking to acquire a natural gas-fired power plant.

"It was a significant investment in full-page advertising and television advertising that won the day," said Brian Alford, a spokesman for OG&E, of the media blitz.

By mid-October, Know Your Power advertisements began appearing in Kansas. The target this time was Sunflower Electric Power Corp., a rural nonprofit cooperative seeking to add two new coal-fired units to an existing power plant in the western half of the state.

Kansas calls McClendon's earlier anti-coal campaign 'lobbying'

Know Your Power's Web site says it is a "coalition formed to educate citizens -- on a state-by-state basis -- about power generation plants ... especially about newly proposed coal-burning plants." But after a Nov. 11, 2007, full-page ad asked Kansans to contact their legislators, the state ethics commission required Know Your Power to register as a lobbying group and to disclose the $405,000 it spent on ads.

"It was informational ... but they reached a point ... when they changed the context of their ads. That put them over the line," said Carol Williams, director of the Kansas Governmental Ethics Commission.

While the battle is not over in Kansas -- just last week, the governor vetoed another bill that would have cleared the plant -- Know Your Power and Chesapeake are working behind the scenes, funding other groups against coal. The energy company recently announced a $500,000 contribution to the American Lung Association's Clean Air Initiative. A doctor and a representative of the group appeared in some of Know Your Power's ads in Oklahoma.

"If you are against a coal-fired power plant, I may be your friend," McClendon said.

In Washington, the American Clean Skies Foundation is also pairing with environmental groups for CleanSkies.tv. For now, the fledgling online news channel is housed down the hallway from the National Rifle Association's news channel, in a waterfront office in Alexandria that belongs to The Mercury Group.

The Mercury Group is a subsidiary of the Oklahoma City advertising firm Ackerman McQueen that produces ads for Know Your Power and Chesapeake Energy. Ackerman McQueen also owns part of Branded News, which will operate the news channel CleanSkies.tv.

Over time, the foundation expects donations from other sources and wants to move beyond just natural gas to other forms of clean energy, Bode said. She also hopes the group will provide a forum for others, including environmental reporters, to discuss issues.

"You are at the beginning of a process. We hope to be around for the next 20 years," said Bode, who initially met McClendon while she was working at the Oklahoma Corporation Commission, the agency in Oklahoma that regulates natural gas and oil production. State records show that McClendon donated $5,000 to her campaign. "For me, this is an extension of public service. Obviously, it will benefit the cleanest fuel, because natural gas is a part of that."

Tomorrow: McClendon is pitching, but many in the gas industry aren't buying.

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