-----

Resources



Market News

 November 05, 2018
Koch Industries and BP are trying to kill state climate initiatives

 The latest report from the Intergovernmental Panel on Climate Change (IPCC) makes it vividly clear that averting catastrophic climate change means rapidly reducing the use of fossil fuels, getting as close to zero as possible, as soon as practicably possible. The US needs to fully decarbonize by mid-century or shortly thereafter.

Big Oil, at least with its public face, has acknowledged that reality and is supporting a revenue-neutral carbon tax in the US (one that, not incidentally, would shelter the industry from legal threats based on climate change). It is attempting to act, or at least to be seen as acting, as a reasonable partner in the federal climate effort.

Down at the state level, where media pays less attention? Not so much.

Take what's happening in Washington and Colorado. In those states, citizens who are tired of waiting for their elected officials to act are resorting to direct democracy: with ballot initiatives, up for votes on November 6, that would directly take on fossil fuels. (Washington's would put a price on carbon emissions; Colorado's would radically reduce oil and gas drilling.)

According to their public records, in just those two states, just this year, oil and gas --- both directly and through PACs --- has dumped $47 million into efforts to crush the initiatives. That number could easily top $50 million by the time of the election. On two underdog state initiatives!

Climate hawks often debate whether it works to frame Big Oil as the villain in the climate fight. But it's not really a "messaging" question here. In these state fights over fossil fuels, Big Oil is playing the villain in a very non-metaphorical, non-symbolic way, in the form of spending outrageous amounts of money to fight off climate action.

These initiatives illustrate, if it wasn't already obvious, that state-by-state climate policy is going to be an uphill battle. In each state, support for the climate side comes from underfunded citizen and public-interest groups --- and for the most part, only the ones inside the state. Meanwhile, Big Oil, backed by ideologically aligned billionaires like the Koch brothers, has effectively unlimited funds to spend on every one of these fights. It's overwhelmingly asymmetrical.

Let's take a quick look at each one.

Washington wants to charge a fee for carbon pollution

I-1631, the initiative on Washington's ballot this year, would charge a fee for carbon pollution ("fee" is not just a clever euphemism for tax; it's actually a fee under state law).

It would start at $15 per ton in 2020 and rise $2 a year (plus inflation) until 2035, where it would reach around $55. If state carbon targets are being reached, it would stay there; if not, it would continue upward.

That is a comparatively mild carbon price compared to, say, what Canada just implemented nation-wide, or even what oil companies are supporting at the federal level.

The revenue would be spent on clean energy, water, and forestry projects across the state, with around 30 percent of the investment targeted toward the most vulnerable communities.

Ballot initiatives are always an uphill climb, but Big Oil is taking no chances. As of this writing, the No on 1631 campaign has raised $26.2 million. That is more money than has ever been marshaled for an initiative campaign, ever, in Washington history. (The previous record-holder was $22.45 million spent by opponents of a GMO food-labeling initiative in 2013.)

And almost all of that money is coming from oil companies outside the state. According to the Public Disclosure Commission, donations and in-kind contributions have come from BP ($9.5 million), Valero, and, of course, Koch Industries.

Meanwhile, Clean Air Clean Energy WA, the group backing 1631, has not quite reached $15 million, mostly from state environmental groups and civic-minded billionaires like Michael Bloomberg and Bill Gates.

This extreme funding imbalance has resulted in a blizzard of misleading No on 1631 ads on local television. (I can testify --- during the World Series, it was relentless, and I didn't see a single Yes on 1631 ad.)

The ads claim the carbon fee is too big (it will crush families!) and that it's too small (it won't reduce carbon emissions at all!), that it exempts the state's biggest polluters (it exempts one, which is already scheduled to close) and that the revenue will go into an unaccountable slush fund (it won't).

One of the ads features Rob McKenna, identified only as a "Consumer Advocate & Washington State Attorney General 2005-2013." It fails to mention that the law firm he works for, Orrick, Herrington, and Sutcliffe, lobbies for Chevron, which has donated $500,000 to the No on 1631 campaign. Washingtonians for Ethical Government has filed a complaint with the state bar association.

The deluge of out-of-state corporate money flooding into Washington this year has gotten so bad that state lawmakers are talking about new campaign-finance laws. Still, Big Oil has more than enough money to bulldoze past any complaints and run out the clock. It's easier to flood the zone now and apologize afterward.

Washington is seeing the asymmetry between Big Oil and its opponents play out in real time, and the same thing is happening in Colorado.

Colorado citizens have the opportunity to slash the state's oil and gas industry
In Colorado, something pretty wild is happening: Proposition 112, a ballot initiative that would effectively take a sledgehammer to the state's oil and gas industry, gathered enough signatures to get on the ballot.

Currently, the state requires new oil or gas wells to be set back 500 feet from homes and 1,000 feet from schools. Prop 112 would increase that setback to 2,500 feet from any occupied building or "vulnerable" area like waterways or green spaces. At a stroke, it would increase the off-limits land around a qualifying structure from 18 to 450 acres.

According to state legislative analysis, 112 would put about 85 percent of Colorado's non-federal land off-limits to drilling --- 94 percent in the five most oil-heavy counties. (Federal land is exempted, and covers 36 percent of the state's total surface area, but that's almost entirely in the west and very little east of the Rockies, were many wells are located.)

Opponents say 112 would devastate the industry, eliminate thousands of jobs, and reduce state tax revenue. Proponents point out that natural resource extraction jobs are less than 1 percent of state jobs, the industry gets more in state subsidies than it pays in taxes, and the health benefits will outweigh the costs.

Whatever the merits, it has Big Oil completely freaked out. Protect Colorado, the group leading the opposition, has raised $35.6 million so far, overwhelmingly from the oil and gas industry, companies like PDC Energy, Anadarko Petroleum, SRC Energy, and Noble Energy.

Noble is a particularly notable case. It is funneling millions of dollars into TV ads in the state, in a way that it says bypasses disclosure laws. David Sirota and Chase Woodruff report: "The maneuver --- which pioneers a novel way for corporations to circumvent disclosure statutes and inject money directly into elections --- has been blessed by the office of Colorado Secretary of State Wayne Williams, who has led a Republican political group bankrolled by Noble."

Sounds totally above-board!

Meanwhile, Colorado Rising, the group backing the initiative, has raised [checks notes] a little more than $800,000 (just $34.8 million to go!). The initiative has proven too bold and sweeping for the tastes of mainstream environmental groups and the Democratic Party, neither of which have coughed up a penny. It's just some individual donors, Food & Water Watch, and, intriguingly, Google co-founder Sergey Brin's family foundation.

It's not exactly a fair fight.

Oil money is all up in the states, fighting energy transition

So, $47 million, on just these two initiatives, just this year.

That's the tip of the iceberg. Koch money, especially as funneled through state groups like Americans for Prosperity, killed a bold public-transit initiative in Nashville this year --- just the latest in more than two dozen local- and state-level transit efforts they have rallied against, including an important one in Phoenix. They've also joined in a fight against a clean-energy initiative in Arizona, against which the state utility has now spent $22 million.

The current effort to repeal the recent gas tax increase in California --- the disastrously misguided Proposition 6 --- is backed by a vaguely named group Reform California. It's unclear who's funding that group, but ... c'mon.

This is no great revelation: Despite its recent happy talk to the contrary, the oil and gas industry is going to fight the transition to a cleaner, less polluted economy every step of the way, on the ground, in local communities, where the rubber hits the road.

Big Oil --- the wealthiest companies in the world, ideologically committed billionaires, and the Republican Party that does their bidding --- has a lot of money to spend, with fewer and fewer restraints imposed by campaign finance law. (And a newly robust conservative majority on the Supreme Court, sure to further loosen what restraints remain.)

The only counterweight to this enormous financial advantage is people power --- organized citizen resistance. But it takes an enormous amount of people power, and right now, the climate side of these fights is fragmented, siloed, and woefully underfunded.

If direct democracy holds any hope of overcoming the power of fossil fuel incumbents, the left is going to have to bring its full, coordinated, organized weight to bear in each one of these fights, as Big Oil does. Small, scrappy citizen groups, as much as we may romanticize them, simply aren't equipped to win battles at this scale.

*Clarification, October 29, 2018: In a post on his personal website, Yoram Baumann, the founder and leader of the I-732 campaign in 2016, calls this a deliberate lie and says I should be fired. So let's take a look.

The ads say that 1631 exempts many of the state's biggest polluters. There are two ways to interpret that. In both cases, the statement is incorrect.

One interpretation is that individual polluters are making corrupt sweetheart deals with the backers of 1631 to exempt themselves. Only one polluter conceivably fits that description: Washington's last remaining coal plant, the TransAlta plant in Centralia. In 2011, environmentalists and then-Gov. Christine Gregoire made a deal with the plant's owners: It would shut down by 2025; in exchange, until then, it would be shielded from further regulations.

1631 honors the deal --- the one instance in which the initiative exempts a polluter that otherwise would have been covered by the fee.

I-732 did not honor the Transalta deal, and I think that was the right way to go. It's a bum deal. Times have changed. The plant should be shut down ASAP.

Nevertheless: that's what I meant when I said there's only one exemption.

There is, however, a class of exemptions, namely energy-intensive, trade-exposed (EITE) businesses. These are carbon-intensive businesses like aluminum and steel that are highly exposed to international competition. The fear is, if they are forced to pay the carbon fee, they will be disadvantaged relative to competitors, they will shut down, the business will move abroad, and emissions will merely be shifted, not reduced.

Every carbon tax system grapples with this problem. (The one just implemented in Canada has EITE exemptions.) Some systems exempt more classes of business, some fewer. 1631 exempts 23 business classes, which is about average.

Interestingly, 732 did not have any EITE exemptions. Instead, it eliminated the business and operating tax on manufacturers --- an attempt to keep their overall tax burden steady, while preserving the carbon-reduction incentive. It wasn't a crazy idea, but it got 732 backers bashed for giving handouts to Boeing, et. al.

The ideal solution would be eliminating EITE exemptions, and instead implementing some kind of border-adjustment tax based on carbon content --- that would equalize the competitive effects while preserving the incentive. But most states and provinces, including Washington, do not have the legal authority to do this. So EITE exemptions are the second-best solution.

Is No On 1631 criticizing the EITE exemptions? Should we interpret the ad that way?

That is a ... generous reading, for a few reasons.

For one thing, according to the Washington Department of Ecology data, EITE businesses represent just under 5 percent of Washington state emissions. Among the state's top 20 emitters, aside from the TransAlta plant, there is one EITE business, an Alcoa plant.

That makes two exemptions among "the state's top polluters." Is two "many"? I don't think so. I'll leave it to the reader to decide if I should be fired for that.

Perhaps No On 1631 just doesn't think there should be EITE exemptions at all. That would be a peculiar position for a purportedly pro-business group to take, since EITE is all about protecting in-state business competitiveness. It would mean they are attacking 1631 from the climate left, which is not where the No campaign is typically located.

Put in this way: If the ad is implying corruption and rampant side-dealing, it is dishonest. If it is attacking the EITE exemptions, it is even more dishonest. You'd have trouble finding a policy analyst in the world that recommends doing nothing for EITE businesses. Anyone concerned about competitiveness should view the EITE exemptions as a feature, not a bug, of 1631.

Most likely, the ad doesn't mean anything in particular --- it's just a well-funded attempt to inject fear, uncertainty, and doubt into the debate as the vote approaches.