Book: Private Empire: ExxonMobil and American Power

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Twenty-five

 

“It’s Not My Money to Tithe”

 

On the morning of January 8, 2009, twelve days before Barack Obama’s inauguration as president, Rex Tillerson arrived at the Ronald Reagan Building on Pennsylvania Avenue, two blocks from the White House, to announce ExxonMobil’s new lobbying position on climate change. He made his way to the rear of the cavernous Reagan building, which housed several government agencies. Upstairs, at the Woodrow Wilson International Center for Scholars, a government-supported think tank, Tillerson strode into an amphitheater where about one hundred scholars, researchers, and journalists had gathered. He took the podium and unfolded a printed speech.

He ticked through the corporation’s positions on American energy policy: Washington needed “long-range thinking”; rising global demand for oil and gas, through 2030, was inevitable; America, therefore, needed to develop “all our energy resources”; and it was particularly urgent to open up offshore and other domestic territory to drilling. Normally, the ExxonMobil chairman resisted arguments that pandered to the American yearning for “energy independence,” since he regarded the very idea as misguided. Yet if measured appeals to American nationalism were necessary to win approval for domestic oil drilling, he was willing to make them: “There is enough oil and natural gas offshore and in non-wilderness and non-park lands to fuel fifty million cars and heat nearly one hundred million homes for the next twenty-five years,” he declared.

He referred to climate change impassively as an “important global issue.” The incoming Obama administration proposed to reduce greenhouse gas emissions by enacting a cap-and-trade system in which polluters could buy and sell pollution credits under an overall “cap.” Tillerson argued that Europe’s similar system, inaugurated several years earlier, did not work well and had introduced “unnecessary cost and complexity,” while creating “problems with verification and accountability.”

In Beijing in 1997, Lee Raymond had delivered a landmark speech in which he argued that the evidence suggested global warming was not taking place at all. Ever since, ExxonMobil’s leaders had criticized public policies to reduce greenhouse gas emissions, such as the Kyoto Protocol, cap-and-trade proposals, and alternative energy subsidies. That morning in Washington, however, Tillerson’s speech took an unexpected turn: For the first time in ExxonMobil’s century-long history, its chairman went on to advocate that the government impose higher taxes on oil and gas use, to reduce the risks posed by climate change:

 

There is another policy option that should be considered, and that is a carbon tax. As a businessman, it is hard to speak favorably about any new tax. But a carbon tax strikes me as a more direct, a more transparent, and a more effective approach. . . . Such a tax should be made revenue neutral. In other words, the size of government need not increase. . . .

 

The idea of a carbon “sin” tax, comparable to the excise taxes imposed on tobacco products, had a distinctive history. Then-senator Al Gore proposed a version of the tax in his 1992 bestselling book, Earth in the Balance. Gore suggested that revenue from a carbon-based-fuels tax be used to reduce payroll taxes on salaried Americans—tax pollution, not work, was his rhetorical flourish. Advocates at some ardent environmental lobbies, such as Greenpeace and the Rainforest Action Network, advanced Gore’s proposal in the years afterward. Some of their leaders and thinkers preferred a broad carbon tax to regulator-heavy cap-and-trade systems; the latter allowed some polluters to buy their way out of accountability for their emissions. On the ideological right, some free-market tax economists, such as Kevin Hassett at the American Enterprise Institute, also endorsed the carbon tax after Gore proposed it, on the grounds of its relative economic efficiency. Tillerson and right-leaning economists argued that such a tax should be neutral; that is, revenues raised should be returned to taxpayers, perhaps by a reduction in the payroll tax. At a time of fiscal strain, however, a carbon tax also had the potential to shore up federal finances: At $20 to $25 per ton, the range around which there was the greatest political support, a tax could raise at least $100 billion annually. By the time of the 2008 presidential campaign, however, the carbon tax had become a politically marginal and quixotic proposal.

Cap and trade’s intellectual history, too, reflected compromises between conservatives and environmentalists. The first Bush administration embraced the system as a market-based way to control acid rain—and succeeded. Many of the large corporations that would be directly affected if carbon taxation of any kind was imposed—electric utilities that burned coal, for example—had concluded that they could manage their interests most successfully by lobbying for a tailored cap-and-trade program that eased their transition to higher carbon costs. The very efficiency of a carbon tax caused some coal-dependent utility executives to shudder because such a pure tax would hit every corporation in proportion to its polluting activity. By comparison, a global corporation of ExxonMobil’s profitability could absorb the financial hit, and in any event, it did not produce coal, the greatest greenhouse gas offender. A modest-size, locally regulated American coal utility might see its profits and market value shrink traumatically under a carbon tax; this explained the breadth of business support for cap and trade.

ExxonMobil had already conducted detailed reviews of cap and trade versus a direct carbon tax in 2006, as part of the climate strategy review Tillerson had ordered after becoming chief executive. Ken Cohen and other executives recoiled from cap-and-trade systems because of the systems’ susceptibility to manipulation by speculators and other distorting complexities. They also loathed the idea of a new federal regulatory system with which they would have to comply.

They had leaned toward the conclusion that if they had to endure a higher carbon price, they would continue to oppose cap and trade, but might support a straight carbon tax. Between 2006 and 2008, following the internal review, ExxonMobil quietly began to test out this change of lobbying position. In private discussions at the American Petroleum Institute, and at think tanks such as the Brookings Institution and the American Enterprise Institute, ExxonMobil executives rehearsed arguments in favor of a carbon tax, without openly endorsing the proposal. A few reports in the business press hinted that ExxonMobil might be leaning toward a straight carbon tax. The corporation also explored what a Washington lobbying strategy in support of such a tax might look like.

Justin Peterson, who had worked on Senator Elizabeth Dole’s staff and on the 2000 Bush-Cheney presidential campaign, served as managing partner at the D.C.I. Group, one of the outside lobbying firms in Washington that worked for ExxonMobil. Peterson supported a lobby coalition, the U.S. Climate Task Force, founded in 2008 and staffed by a former Gore aide, Elaine Kamarck. The task force sought to advance a carbon tax as an economically efficient alternative to cap and trade. The group received funding from a business coalition, called The Future 500, which tried to induce major American businesses not directly involved in carbon-intensive industries—Nike, Coca-Cola, Intel, Kraft Foods, and Hewlett-Packard, for example—to come out for a carbon tax. The task force tried to develop a campaign that could also attract major oil companies like ExxonMobil that opposed cap and trade.

ExxonMobil participated in the task force and similar efforts, indirectly and quietly. “We had determined that a carbon tax was a better approach, in our mind, but our engagement on that issue was below the radar,” an ExxonMobil executive involved said. “We knew that if we came out and we said, ‘ExxonMobil says that a carbon tax is the way to go,’” it would backfire and the corporation would be accused of trickery. ExxonMobil would be accused of bad faith “because they know that no one’s going to vote for it, or they are just trying to slow down action, blah, blah, blah. . . . We didn’t want to come out publicly for that very reason. We just thought there would be a lot of baggage.”

Obama’s election persuaded Tillerson to change tack. The ExxonMobil chairman first had to overcome internal objections, however. At the time of Obama’s election, Dan Nelson, the Lee Raymond protégé, was still running the corporation’s Washington office. According to an executive who heard Nelson’s arguments, he dissented from the plan to openly back carbon taxation; he argued to colleagues that Tillerson would only annoy ExxonMobil’s political friends, incite its opponents, and confuse everybody else, without actually changing public policy. At the October 2008 off-site meeting organized by Ken Cohen, Bennett Freeman urged ExxonMobil’s public affairs executives to endorse a higher carbon price, but between Election Day and the eve of Obama’s inauguration, Tillerson hesitated.

He resisted less for the reasons Nelson cited than because, reflexively, as a onetime Texan neighbor of Richard Armey’s who donated regularly to Republican political candidates, it pained Tillerson to endorse any tax increase. As he spoke at the Wilson Center in Washington that January morning, Tillerson looked out at the cluster of dark-suited ExxonMobil executives in the audience just as he was about to read out the change in the corporation’s lobbying position. “I still wasn’t sure, at that moment,” he told them later.

“Why are you making this carbon tax proposal now?” a reporter asked him afterward.

“If we are going to take a view, take a position, we need to do it now,” he said. “Because the debate is going to get under way again. . . . I’ve been chewing on this one for about three years—cap and trade versus carbon tax. What I’ve really been saying is, ‘There has to be a third option.’ And I haven’t been able to identify one. . . .

“We have tried to get down into the details of, if you are going to design a cap-and-trade system in the United States, what is it going to look like? It’s pretty scary. When you think about the enormous new bureaucracy that would have to be created—it would be bigger than the I.R.S. . . . The default fact is that we’ve got [to] have something that is simpler.”

Another reporter pressed him: “Exxon and other producers will be facing a Democratic administration, a Democratic Congress. What kind of reception do you expect for the next four years? Chilly?”

Tillerson laughed. “We still have friends on both sides of the aisle. As I said, we work with the government that is here, just like we work with the government in whatever country we are dealing with around the world. . . . We are going to engage, and we hope that they value our input.”

Barack Obama’s most influential advisers on climate politics and policy—including Carol Browner, the former Environmental Protection Agency administrator, and John Podesta, the president’s transition chief—gave virtually no consideration to a carbon tax that autumn and early winter. A Democratic Party–led coalition focused instead on the development of a big cap-and-trade bill that would be introduced in Congress early in the Obama presidency. The corporate center of this lobbying push was the United States Climate Action Partnership, an advocacy group in Washington that had attracted Shell, Dow Chemical, Ford Motor Company, and major coal-dependent utility companies, as well as powerful environmental groups such as the Natural Resources Defense Council.

The negotiations within the Climate Action Partnership about what sort of cap-and-trade bill might be acceptable to the group’s diverse corporate and environmental members had become a kind of private dress rehearsal for the lobbying scrum expected on Capitol Hill once Obama and the new Democratic congressional leadership settled in. As prepackaged coalition politics and congressional lobbying, the Climate Action Partnership “was a very developed piece of work,” Browner recalled. It was, however, a fragile coalition—the oil company lobbyists involved felt that their industry’s interests were often neglected in comparison with coal utilities from political swing states such as Virginia, West Virginia, and Ohio. The Climate Action Partnership was a rare example, nonetheless, of a powerful business-environmentalist alliance focused on a major environmental policy reform that would impose costs on business—it was an association that had slowly taken form after a very long lobbying struggle over climate policy in Washington dating back to the second Clinton term.

The coalition had gathered momentum after 2006, amid economic growth and low unemployment. Those conditions no longer prevailed. In September 2008, the Wall Street bank Lehman Brothers collapsed, triggering a banking panic that froze up credit lines and paralyzed the global economy; the United States plummeted week by week into its deepest recession since the 1930s. Collapsing production and rising joblessness challenged every assumption about policy and politics that Obama had relied upon to win office—including climate policy.

On December 16, in Chicago, Obama met with Browner and his top economists. The depths of the economic crisis made clear to them that they would now have to push for a large stimulus bill, to use rapid federal government spending to prevent a full-blown depression. Obama and his advisers decided that day to design the stimulus to make a down payment on their major domestic priorities—particularly clean energy. Franklin Roosevelt’s stimulus during the Depression years had built national park facilities; Obama’s bill, they concluded, should launch a new era of investment in solar energy, wind power, other clean energy technology, “smart” meters to regulate home electricity use more efficiently, upgrades to the national electric grid transmission system, home weatherization, and energy efficiency programs. These expenditures ultimately would total $80 billion. The renewable energy advocates around Obama recognized, however, that the long-term economic viability of solar and wind power would depend on whether dirtier, cheaper sources of energy such as oil and coal would be taxed—directly or through cap and trade. If carbon-heavy fuels like gasoline and coal did not become more expensive, the rate of adoption of solar and wind would slow, and the dangers of climate change would remain unacceptably large, they believed.

The greatest obstacle facing Obama on climate regulation as he prepared for inauguration, then, was hardly ExxonMobil. With Chevron and Shell in the cap-and-trade lobbying coalition, the oil industry had been split and weakened as a lobbying force on climate policy. The challenge was whether the cap-and-trade lobbying coalition would hold together at all under the mounting pressure of the 2008–2009 recession. “Fundamentally, if you’re going to have an economy-wide cap-and-trade system, you need to trust government and Wall Street,” said one of the president’s outside energy advisers. That trust was collapsing even faster than the Obama team understood.

ExxonMobil stood apart. The corporation, said a second Obama adviser involved, “seemed to me to follow a track that was quite different from the other [oil] majors—being firmly fixed in the ‘Fuck you, no apologies, oil-is-here-to-stay mode.’” The corporation saw itself as merely carrying out its own global environmental and economic policy advocacy. It dispatched public affairs officers to explain its position to foreign governments with which it partnered to produce oil, lest those governments be confused about ExxonMobil’s thinking. Its briefings early in 2009 emphasized that “cap-and-trade is complex, unpredictable, cumbersome and expensive, making it difficult for firms to plan long-term investments. In comparison, ExxonMobil believes the predictability of a progressive carbon tax would encourage new investment in carbon reduction technologies.”

Abraham Lincoln was a hero of Rex Tillerson’s boyhood. As a child in small-town Texas, Tillerson read books on great leaders of the type favored by the Boy Scouts of America. Lincoln was a member of this canon, notwithstanding the complications his presidency created for the Republic of Texas and its successor Confederate state. Tillerson remained “personally fascinated and inspired by Lincoln” as he came of age at the University of Texas and as a young ExxonMobil executive. He particularly admired Lincoln’s “ability to confront adversity with courage, find inspiration in challenges both personal and political, and shape leadership through the strength of diversity, with extraordinary grace.”

During the second week of February 2009, Tillerson flew by corporate jet into Washington to attend a ribbon-cutting ceremony at Ford’s Theatre, where John Wilkes Booth had shot Lincoln dead. A few years before, Tillerson had agreed to chair a $50 million campaign to renovate Ford’s. ExxonMobil had contributed, as had one of its major business partners, the State of Qatar. (That an undemocratic kingdom with limited personal freedoms had funded the restoration of a theater devoted to memorializing the American president who emancipated slaves was an observation politely avoided by the speakers.) “Working on this campaign has been a labor of love for me,” Tillerson said.

The next day he arrived with a few colleagues at the Eisenhower Executive Office Building, next door to the White House’s West Wing. Tillerson and his team made their way to Room 157, where Carol Browner, now Obama’s chief White House climate and energy policy adviser, joined them, along with some of Browner’s staff. Tillerson had asked for the meeting.

Tillerson and Ken Cohen did not know whether Obama’s anti-oil populism during the campaign would carry on once the president had to govern. They decided to approach their lobbying during the early Obama administration on an issue-by-issue basis. Perhaps the most realistic opportunity involved offshore drilling. Tillerson wanted to push Obama for decisions that might open up the Gulf of Mexico for further exploration and drilling. Polling during the 2008 campaign had shown that voters supported domestic drilling—perhaps Obama would respond in office, even as he pushed simultaneously for cap and trade. The Irving team assumed that Obama’s advisers would welcome their perspective, notwithstanding ExxonMobil’s heavy spending in the past on the president’s political opposition. As an ExxonMobil executive put it, “Why wouldn’t the administration want the views of the country’s biggest energy company?”

There was rarely anything personal or intimate about an ExxonMobil lobbying meeting. As Tillerson had put it in January, the corporation managed Washington with the same PowerPoint-enabled educator’s mind-set that it brought to bear in Abuja, N’djamena, and Malabo. In Room 157, Tillerson laid out to Browner ExxonMobil’s principal policy priorities in the United States in 2009: He urged the administration to loosen the congressional moratoria on drilling in American ocean waters and the Gulf of Mexico. On climate, he ticked through ExxonMobil’s reasons for endorsing a carbon tax over a cap-and-trade regime. “He was just shopping the idea that there was a better way” to raise carbon prices in America, recalled a participant.

Browner had immersed herself deeply in the coalition-building politics of cap and trade, however; the idea of starting over with a carbon tax proposal was, at best, politically impractical. Obama’s chief energy policy adviser concluded after the meeting that Tillerson “was happy to have a position that nobody was going to embrace,” as the participant put it.

George W. Bush had narrowed the list of points he wanted to make to his successor during his private handoff conversations with Obama that winter. One topic he emphasized privately to Obama was the importance of America’s alliance with Saudi Arabia, and particularly, the quality of the personal relationship between the American president and the Saudi king. After the shock of September 11, Bush had invested great effort to rebuild trust with King Abdullah; Bush talked with Obama about how to manage that bond.

Obama’s White House team was turning away from traditional, geopolitical thinking about oil and power, however. As his national security team assembled, for example, the president’s closest advisers turned aside suggestions that he establish a special energy geopolitics section at the National Security Council, similar to the one that had managed Eurasian pipeline politics during the late Clinton administration. At the Department of Energy, Obama appointed a cautious scientist with no background in oil and gas, Steven Chu, as secretary. At almost every decision point, Obama emphasized renewable energy investments and greenhouse gas limitations as the pillars of his energy policy. In bilateral meetings with the Saudis, the Obama energy policy envoys stressed solar power cooperation that could feed the sun-saturated desert kingdom with sustainable electric power. If Obama had thought much about oil pipeline routes in the Caucusus, freedom of maneuver for oil tankers in the Gulf of Guinea, or European natural gas supply security, his instinct seemed to be to set aside that sort of strategizing.

One month after his inauguration, Obama flew to Ottawa, Canada’s canal-laced capital city. By tradition, new American presidents made their first foreign trip to Canada. As it happened, that winter, one of the biggest issues in U.S.-Canadian relations involved the geopolitics of oil and the security of American oil supply. The matter was also of deep importance to ExxonMobil.

Canada was by a wide margin America’s largest single supplier of imported oil, at 1.9 million barrels per day in 2008. It was doubtful that many Americans could recite this fact; their ignorance reflected the fact that Canada posed almost no political risk to the United States, and so its role as an oil spigot for American consumers was inconsequential. That was certainly true in comparison with, say, the role of Saudi Arabia, America’s second-largest supplier, located in a rough neighborhood far away, with a record of funding Islamist radicals and imposing oil embargoes over foreign policy disputes. Canada’s underpublicized oil bounty included conventional reserves, but also a vast treasure of “crude bitumen,” as ExxonMobil referred to it. Environmental activists often referred to these bitumen reserves as “tar sands oil,” evoking images of a sticky mess of a sort that might have trapped unsuspecting dinosaurs eons ago. The dueling language reflected a profound disagreement about the oil’s value.

The reserves in question lay 50 to 150 feet underneath the sands of the McMurray Formation, near the Athabasca River in northern Alberta Province, in western Canada. Lakes, streams, and boreal forests of stubby trees had covered the sands for centuries. By 2007, as new technology made it easier to separate the oil from its earthen mix at a reasonable cost, Oil & Gas Journal estimated that Alberta held 175 billion barrels in total oil reserves, which amounted to the third-largest national oil reserve in the world, after Saudi Arabia and Venezuela.

ExxonMobil’s Canadian affiliate, Imperial Oil, had been producing oil from the Alberta sands since 1978, through a joint venture called Syncrude. The operations required open-pit mining to dig out the oily sand with mechanical shovels fifty feet high. Hot water or caustic soda then washed the sand to separate out the bitumen. “Upgraders” similar to those ExxonMobil had installed in the Orinoco basin of Venezuela refined the remainder into a synthetic blend that imitated the refinery-friendly characteristics of light, sweet crude.

The final product was highly desirable in world oil markets, but the manufacturing process was environmentally destructive, expensive, and energy intensive. It also required immense water use. Syncrude stripped forests, dug out peat and dirt, and then attacked the sands below with its giant shovels. Environmental investigators documented toxic pollution runoff from the mining operations. Moreover, the industrial processes required to extract and manufacture oil from bitumen required burning more carbon-based fuels than would be burned to drill a normal oil well. As climate change gradually emerged as a global threat, environmental groups also campaigned against the Alberta operations because of the extra polluting energy that was needed to dig out and refine the bitumen. Oil from Alberta, barrel for barrel, contributed among the highest greenhouse gas emissions of any source of oil in the world. Carbon sequestration technology might eventually allow Alberta’s producers to capture greenhouse gases around the giant shovels and the upgraders and inject those gases into underground storage caverns, but that technology remained immature, unproven, and expensive.

“Climate Leaders Don’t Buy Tar Sands” read a banner draped across an Ottawa bridge when President Obama’s motorcade rolled in to the Canadian capital.

Over lunch with Stephen Harper, the pro-business prime minister, the Canadian cabinet team that worked on climate and energy was wary. The Bush administration had expressed no concerns at all about the pollution caused by companies operating in the oil sands; to the contrary, senior officials such as Energy secretary Samuel Bodman traveled regularly to Ottawa to convey the message, in effect, as a Canadian official involved put it, “Produce as much of this oil as you can—we’ll buy all of it.” Obama’s position seemed unclear. Prime Minister Harper’s advisers prepared for Obama a giant map of North America depicting—with drawings of bubbles of various sizes—the greatest industrial sources of greenhouse gas emissions on the continent. The map’s biggest bubbles showed that American coal-fired electric power plants were the greatest climate change offenders. By comparison, the oil sands were relatively minor contributors to global warming, the map showed. Of course, the map avoided emphasizing that the sands were, in fact, Canada’s greatest source of greenhouse gas emissions, by far, and would be for the foreseeable future.

“What do you think? Is it dirty oil?” a Canadian Broadcasting Corporation interviewer asked Obama.

“What we know is that oil sands create a big carbon footprint,” Obama answered. “So the dilemma that Canada faces, the United States faces, and China and the entire world faces, is how do we obtain the energy that we need to grow our economies in a way that is not rapidly accelerating climate change?”

Obama had been among those American senators who had previously endorsed laws to limit oil imports from Canada derived from the Alberta sands, on environmental grounds. The 2007 Energy Independence and Security Act contained a provision, known as Section 526, that restricted U.S. federal agencies from procuring transportation fuel derived from any oil source with an unusually heavy carbon footprint. Section 526 was almost comically complicated because it defined the banned fuel sources through reference to statistical greenhouse gas emission averages that had never before been calculated for such a reason. Around the same time that Section 526 was enacted, California lawmakers also adopted a “low carbon fuel standard” for gasoline or other fuels used in that state. Lawsuits ensued. It remained unclear, for example, whether, under the North American Free Trade Agreement, California or the federal government had the legal right to limit Canadian oil exports in this way.

ExxonMobil had a big stake in the Alberta sands, but so did BP, among other oil multinationals. In a world of rising resource nationalism, Canada’s oil, however dirty, offered the largest single reservoir in a free-market economy that could be easily acquired and owned by American or British corporations and their shareholders. They would not yield its potential casually.

The Washington lobbyists of the major companies banded together after Obama’s return from Ottawa. Through the American Petroleum Institute, they launched a public relations and lobbying campaign to support expanded production from the Alberta sands. In Houston, the oil companies formed a front organization, the Consumer Energy Alliance, to fight against any proposed restrictions on Canadian oil. The campaigners appealed above all to American nationalism; by keeping out Canadian oil, lawmakers would only ensure that Alberta’s oil was sold to China or Japan, leaving the United States even more dependent on unreliable suppliers from the Middle East and Venezuela. An ad taken out by the Consumer Energy Alliance in the Weekly Standard showed Caucasian schoolgirls at play, presumably Canadians: “Energy Security? The Answer Just Might Be Closer Than You Think.”

ExxonMobil put its corporate shoulder into the lobbying campaign. David P. Bailey, an in-house specialist on the subject, joined a task force at the Council on Foreign Relations that was organized early in 2009 to produce a definitive study on the issue. The study group’s advisory committee included, besides Bailey, a Chevron representative, business consultants, academics, and environmentalists. The final report, “The Canadian Oil Sands: Energy Security vs. Climate Change,” was rigorous and thorough. It recommended addressing the greenhouse gas emissions problem posed by the Alberta sands through linked cap-and-trade systems in the United States and Canada. The report also expressed skepticism about Section 526 and similar fuel restrictions aimed at Canadian oil. “Tread carefully with any low-carbon fuel standard,” it recommended. “Resist the misuse of other U.S. environmental regulations to constrain oil sands.” Apart from its endorsement of cap and trade, the council report generally sided with ExxonMobil’s positions.

Throughout the oil sands lobbying struggles of 2009, ExxonMobil’s executives were indignant about the issue, an oil industry lobbyist involved recalled. The corporation’s internal analysts and lobbyists saw Section 526 and Obama’s consideration of similar limits on Canadian imports as “more of an affront to the industry” than a legitimate public policy dilemma.

Canada’s politics concerning the oil sands were complicated, but as a practical matter, there was virtually no chance that Alberta’s provincial politicians or the country’s national leaders in Ottawa would seriously limit Canada’s production in the years ahead. Too much national wealth was at stake. For its part, ExxonMobil’s Syncrude subsidiary possessed licenses to operate in Alberta through 2035; its holdings totaled at least 734 million barrels as of the end of 2008. A separate oil sands project called Kearl in which ExxonMobil was invested would soon produce another 110,000 barrels per day in bitumen.

All this meant, from ExxonMobil’s perspective as a global corporation, that it did not necessarily have a Washington lobbying issue concerning the Alberta sands at all: If the United States were dumb enough, in the corporation’s estimation, to restrict Canadian imports, then ExxonMobil would just sell the same oil to Asia. It did not even seem obvious to ExxonMobil why the oil industry should spend so much time and money lobbying on the issue in Washington—building consumer front groups, buying ads in newspapers, enduring accusations that it was out, once again, to destroy the environment—so as to convince the Obama administration and Congress to see Canada as a strategic friend and a source of energy security. To ExxonMobil’s representatives, Canada’s relative desirability as an oil supplier seemed one of the more obvious propositions in foreign and energy policy. If the Obama team did not agree, let it explain its thinking to the American public. “The whole industry was pretty pissed off about it,” the lobbyist involved recalled.

In March, Theresa Fariello, Dan Nelson’s successor as head of ExxonMobil’s K Street office, settled on a $1.4 million, four-bedroom townhome in a tree-shaded, secluded section of Georgetown. Her arrival as a Democrat representing Irving’s interests in Obama’s Washington marked the most significant investment Tillerson had yet made in a political strategy of his own. Fariello had grown up in modest circumstances, and some of her acquaintances thought of her ascension as ExxonMobil’s chief Washington lobbyist as an American success story. During the late Reagan administration, the first Bush presidency, and much of Clinton’s presidency, Fariello had lobbied for Occidental Petroleum in Washington. She had been active as well in the pro-business wing of the Democratic Party. One of the party’s leading deal makers, perennial presidential candidate and New Mexico governor Bill Richardson, had hired Fariello at the Department of Energy during Clinton’s second term. As Democrats left federal office after George W. Bush’s disputed election, ExxonMobil recruited Fariello to its public affairs operation. She moved to Irving and worked closely with Ken Cohen during the Bush presidency. More than any ExxonMobil executive in Cohen’s departments, she managed channels to Democratic lobbyists and allies during the Bush years.

While considering the dilemmas that Obama, Harry Reid, and Nancy Pelosi posed to the corporation, Fariello and Cohen had developed a multifaceted plan to bring ExxonMobil in from the political cold and to make the corporation more relevant in an age of Democratic ascendancy. Tillerson’s carbon tax endorsement was just one prong. Cohen authorized contributions to the Clinton Global Initiative, to advance and publicize ExxonMobil’s global programs on women’s rights. He designated Lorie Jackson, an African American lobbyist in the Washington office with graduate degrees from Stanford University and Harvard University, to represent this charitable and policy push at public events.

ExxonMobil also announced that summer a potential $600 million investment in algae-derived biofuels that might replace gasoline one day, in partnership with the genetic researcher J. Craig Venter. The investment plan involved deep scientific uncertainties, but it did conform to ExxonMobil’s criteria in considering alternative energy initiatives, namely, that it would invest only if the payoff would be relevant to its core businesses and would be potentially scalable and transformative. The algae announcement won widespread and uncritical news coverage; it appeared that ExxonMobil had finally internalized BP’s example that, in calculating the full costs of alternative energy investments, unpopular oil companies should factor in the marketing benefits of free favorable publicity.

In Washington, Fariello invited State Department officials, ambassadors, congressional staff, and other influential arrivals to Obama’s administration to hear ExxonMobil’s energy futures briefing, its gospel of 2030. The corporation purchased billboard space in the Washington Nationals’ new baseball stadium, on the Anacostia River, and erected image ads depicting ethnically diverse ExxonMobil scientists and engineers surrounded by photographs of molecules and other scientific signifiers. The strategy was working, Cohen told the Management Committee in Irving: ExxonMobil’s favorability ratings in its internal American and Canadian public opinion polling soared during 2009, from about 30 percent favorability the year before to about 50 percent. The internal polls showed that all of the big oil companies—ExxonMobil, BP, Chevron, and Shell—had recovered some of their public reputation in the United States, more or less in tandem. Perhaps the ratings were best understood as simply a reflection of public feeling about retail gasoline prices, which plunged during 2009 because of the recession. The strategy overall, said an executive involved, was premised on the belief that Democrats in Obama’s Washington “don’t want B.S. They don’t want greenwashing. . . . Let’s establish a tone. . . . We are prepared to disagree and hopefully we can think about it in a way that’s mutually respectful.”

ExxonMobil was partially constrained, however, by the fact that its Democratic Party connections were heavily located in the failed presidential candidacy of Hillary Clinton. Theresa Fariello had worked actively to support Hillary Clinton’s candidacies for senate and president. Moreover, the principal Democratic lobbyist Fariello worked with in Washington, David Leiter, a former chief of staff to Senator John F. Kerry (D-Massachusetts), happened to be married to Tamera Luzzatto, Hillary Clinton’s chief of staff in her Senate office during the 2008 campaign.

The Clinton universe was in general more connected to Fortune 500 executive suites than the Obama campaign had been. While raising campaign funds throughout the 1990s, Bill Clinton had developed friends in virtually every American industry. When he first ran for the U.S. Senate in 2004, by contrast, Obama had not needed decisive access to national corporate funding because his main Republican opponent dropped out early in the race, following a sex scandal; Obama won effortlessly. In his run for the White House, Obama had tapped Hollywood and Wall Street for support, and he attracted allies in the executive suites of large technology companies such as Google, but he did not have the breadth of connections to the Fortune 500 during the primary campaign that Hillary Clinton enjoyed.

In Congress, early in 2009, allies of Obama’s overthrew one of ExxonMobil’s most stalwart Democratic allies, Representative John Dingell (D-Michigan), chairman of the House Energy and Commerce Committee, where all climate and energy legislation originated. Representative Henry Waxman (D-California), a pit bull of a liberal whose West Los Angeles constituency adamantly supported aggressive action on climate change, succeeded Dingell. Obama’s White House team cheered the coup on Energy and Commerce because they believed it would make possible a big cap-and-trade bill, which Dingell might have resisted.

David Leiter and other ExxonMobil lobbyists, such as Kelly Bingel, a former chief of staff for Senator Blanche Lincoln (D-Arkansas), called Democratic members and staff in the House frequently to arrange meetings with ExxonMobil’s staff lobbyists and executives. A staffer for one centrist Democrat in the House estimated that, whereas ExxonMobil might come by at most once a year in previous eras, its lobbyists were seeking meetings in 2009 almost at a rate of once per month. “They don’t come in to be combative,” the staffer said. “Three quarters of the time they are defensive on something—cap and trade or tax issues. . . . I think people sense that Exxon’s scared,” he continued. “They need to find new friends.”

Sherri Stuewer, one of the relatively few women at ExxonMobil to rise to senior management, now served as the corporation’s lead adviser on climate issues. Her title was vice president of environmental policy and planning; she was a confident-looking woman in her fifties with shoulder-length auburn hair. During the first week of June 2009, she arrived at a farm along the Florida-Georgia border, White Oak, an unusual conference center built by the heir to a paper fortune, Howard Gilman. He had populated his land with endangered African and Asian species, including rhinos, giraffes, okapi, tigers, cassowary, bongos, and guars, cowlike beasts from the Indian subcontinent. Safari vans allowed guests to view the animals. A stuffed polar bear loomed over the conference center’s game room. Adding to the Jurassic Park-inspired atmosphere of eccentricity, Gilman had also established, on the same estate, a dance facility for the ballet maestro Mikhail Baryshnikov.

“Power Politics: Moving Americans to a Clean Energy Future” was the private three-day meeting, sponsored by the Washington think tanks Third Way and the Center for Policy Innovation, that drew Stuewer. Other corporate representatives from companies that supported cap and trade arrived, as did Governor Joe Manchin of West Virginia, a staunch advocate of coal interests, and environmentalists from influential groups such as the Natural Resources Defense Council and the Environmental Defense Fund.

A cap-and-trade bill known as Waxman-Markey, after its sponsors, was on the verge of passing the House. The bill was lengthy and complicated, but it brought some Democrats from coal states such as Virginia into political alliance with West Coast environmentalists such as Waxman himself. However, the legislation’s chances in the Senate, where the filibuster created a de facto requirement for a sixty-vote supermajority, looked doubtful. ExxonMobil had changed its public posture by endorsing a carbon tax, but it did not want cap and trade to succeed. The corporation and its allies had also kept all restrictions on Canadian oil imports out of the Waxman-Markey bill in the House; they wanted to ensure nothing of the kind resurfaced from the Senate. Part of the purpose of the White Oak meeting was to outline strategies that might push some sort of carbon cap or price through the Senate, despite the obstacles.

Stuewer seemed overwhelmed by work and did not hang out much in the game room or the bar, but she participated in the break-out sessions. Tony Kreindler of the Environmental Defense Fund “got into a spirited discussion with her,” as he recalled it. Kreindler knew all about ExxonMobil’s support for a carbon tax, and in his circles, “there are two explanations—one is paranoid—that they were reading the tea leaves and proposed a poison pill they knew would never pass. The other explanation, which I’m inclined to believe, is that Exxon believed some [carbon pricing] mechanism was inevitable, and they took a very hard look at their business model and decided they could simply out-compete everyone else if the policy were a carbon tax.”

Kreindler and Stuewer talked in detail about changes to the Waxman-Markey formulas that might bring it closer to something ExxonMobil could accept, by structuring the cap-and-trade regime so that it looked and worked more like a straight-up carbon tax. “We need certainty,” Stuewer said, according to Kreindler. That is, ExxonMobil could accept a carbon price if it knew that the price would not gyrate wildly.

Kreindler pressed her. Why were they here? “Because we need to reduce emissions or because you need price certainty?”

Stuewer pushed back: The solution ExxonMobil recommended would, in fact, reduce emissions; cap and trade was a less certain mechanism.

“Why don’t you support something that would actually make a difference?” Kreindler asked. Stuewer insisted that she thought she was.

As the scrum over climate policy on Capitol Hill took form that summer, ExxonMobil lobbyists made two arguments to fence-sitting congresspeople and senators. Even if cap and trade were phased in, so that its costs did not hit the United States until the economy recovered fully from recession, they said, the system would nonetheless destroy jobs and growth. A Brookings Institution study showed, in fact, that the Obama and Waxman proposal might take about 2.5 percent out of American gross domestic product during the next forty years—the equivalent of one year’s economic growth—as the cost for removing between 110 and 140 billion metric tons of CO2 from the atmosphere. That was not a daunting price if climate change was accepted as a grave national danger, but among congresspeople whose constituents in 2009 suffered from personal bankruptcies, mortgage defaults, and even homelessness, it was not an easy trade-off to accept. The same Brookings study showed that cap and trade would destroy about 15 percent of jobs in the oil and coal industries by 2025, although it would have virtually no effect on employment outside of the energy sector. ExxonMobil emphasized those forecasted job losses to members of the Senate from the oil and coal states that would be hardest hit.

The corporation’s representatives also pointed out that the public did not understand cap and trade very well. Among those who had heard of the policy proposal at all, more than twice as many of those surveyed had negative as positive assessments. During 2009, ExxonMobil lobbyists left behind in congressional offices PowerPoint slides documenting a private Hart Research Associates poll, “Energy and Climate Change Policy,” that had been commissioned by the U.S. Climate Task Force, the pro–carbon tax coalition. The poll showed that Americans preferred a carbon tax to cap and trade, and they strongly favored a tax when educated about the arguments in favor of each approach.

On the morning of September 23, 2009, Rex Tillerson arrived at the Sheraton on Seventh Avenue to participate in the “Investing in Girls and Women” Plenary Session at the Clinton Global Initiative. Delegates in the ballroom sat with name tags dangling from their necks. The decor was tinted blue, purple, and red; two large screens on the sides of a stage flashed photographs of dignified Third World poor.

Bill Clinton took the stage wearing a brown suit; it was an early hour, and his baggy eyes and raspy voice hinted at a late night. “It was very important to me that this issue of women and girls be highlighted” at this year’s initiative, he told the audience. He invited a number of “commitment makers” to the stage to congratulate them on their philanthropy before the audience. Muhammad Yunus, the Nobel laureate and founder of Grameen Bank, was among the honored; so was Lorie Jackson of ExxonMobil.

Clinton introduced Diane Sawyer. She summoned to the stage members of a panel to talk about women’s issues; the panel included Tillerson and Lloyd Blankfein, the chief executive of Goldman Sachs, the investment bank with a public reputation as much in need of repair as ExxonMobil’s. The ballroom atmosphere suggested the laying on of liberal, globalized hands to cleanse sinful multinational corporations. “These are some of the power hitters,” Sawyer said of Tillerson and Blankfein.

Tillerson talked about ExxonMobil’s charitable initiatives to support girls and women in some of the poor countries where the corporation extracted oil. “Technology comes very natural to ExxonMobil,” he said. “What are the technologies that will provide them [girls and women] capabilities to undertake their daily activities in a more effective and efficient way?”

Sawyer later asked him: What is the responsibility of a multinational corporation to make the world better through charitable activity? Is it a tithe of 10 percent? How much?

“Ultimately,” Tillerson said, “this is our shareholders’ money we’re spending. It’s not my money to tithe. It’s not the corporation’s. It’s our shareholders’.”

By late 2009, whatever anxieties Tillerson and Cohen might have possessed as the Obama administration took office, it had become apparent that ExxonMobil would prevail, again, on the public policy issues that mattered most to the corporation. Cap-and-trade legislation died a slow death in the U.S. Senate; its proponents could not construct a filibuster-proof majority. In Copenhagen, in December, representatives of the world’s major economies failed to agree on post-Kyoto rules that would deliver serious reductions in greenhouse gas emissions. (ExxonMobil sent its astrophysicist and climate policy advocate, Brian Flannery, to attend the Copenhagen negotiations; Flannery sought to educate media and delegates about the issues, as the corporation saw them.)

In Irving, ExxonMobil’s corporate forecasters monitored the Copenhagen talks, but they had by now concluded that even if some sort of international protocol on climate were reached, it would not actually affect emissions very much. “The implementation becomes extremely complicated, extremely political, and it’s hard to see that expanding on a really, really wide scale,” one of the executives involved said. Transformations as China industrialized further would do much more to determine the world’s climate future than negotiations such as those at Copenhagen, ExxonMobil’s analysts concluded.

Tillerson and his colleagues shifted their image advertising and lobbying messages to emphasize jobs, which their internal polling showed resonated strongly. Tillerson returned to Washington in October to speak at the Economic Club, at the luxury Ritz-Carlton hotel.

On ExxonMobil’s carbon tax proposal, which Tillerson had unveiled in Washington almost a year earlier, the chairman said, “I hope you see it shows how serious we are about this issue. . . . We’re engaged heavily. . . . We need to get this as right as we can.”

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