A War Over Oil

Chevron Asks Congress to Scrutinize Chinese Firm’s Unocal Bid

Posted June 28, 2005 at 6:37pm

>Energy giant Chevron Corp., which has already agreed to a merger deal with oil company Unocal, appears to be leveraging its American name and its hefty contributions to Members of Congress in a bid to scuttle a competing offer from China National Off-Shore Oil Corp., a company owned by the communist government of China.

Chevron lobbyists helped draft language for at least one letter being circulated by lawmakers to Treasury Secretary John Snow that warns that CNOOC’s bid for Unocal — which is worth $2 billion more than Chevron’s offer — challenges American jobs, energy production and national security, industry and Congressional sources said.

Chevron also is providing Member offices with information to support the claims and is working to gather signatures for the letter to Snow, those sources confirmed.

Repeated attempts to reach a Chevron Corp. spokesman were unsuccessful.

Chevron lobbyists are finding a warm reception to the patriotic message they have been pitching on Capitol Hill, especially among Members with oil and gas interests in their districts as well as those with long-standing national security concerns, sources close to the discussions say.

So far, more than 50 Members of Congress have signed letters urging the Treasury Department’s Committee on Foreign Investment in the United States to review the potential national security implications of a CNOOC-Unocal merger.

Many of those 50 Members have also accepted thousands of dollars in campaign contributions from Chevron in the past five years, according to Political Money Line.

House Energy and Commerce Chairman Joe Barton (R-Texas), who received $14,000 in Chevron PAC money over the past five years, penned a letter to President Bush Tuesday flatly asking him to make sure “that vital U.S. energy assets are never sold to the Chinese government.”

Rep. Ralph Hall (R-Texas), chairman of the energy and air quality subcommittee and recipient of $5,500 from Chevron over the past five years, also signed onto Barton’s letter.

However, Larry Neal, spokesman for Barton, took exception to the suggestion that Barton’s involvement was about repaying political debts instead of protecting American energy interests from control by Communist China.

“Chairman Barton has consistently opposed advancing Chinese governmental interests,” said Neal. “If you want the Chinese government to own an American oil company, please do not contribute to the Congressman Joe Barton Committee, PO Box 1444, Ennis, Texas, 75120. Send your contribution to Communist Party General Secretary Hu Jintao, instead. If the Chinese government manages to buy Unocal, you’re going to end up sending your money to Beijing, anyway.”

Before CNOOC even made a formal announcement of its bid for Unocal on June 23, House Resources Chairman Richard Pombo (R-Calif.) — in whose district Chevron is headquartered — and House Armed Services Chairman Duncan Hunter (R-Calif.) sent a letter to President Bush on June 17 urging him to “thoroughly review” any CNOOC bid for “an American energy company.”

Since 1999, Pombo has received $15,500 in campaign donations from Chevron’s political action committee. That’s $5,000 less than the contributions the company made to House Majority Leader Tom DeLay (R-Texas), but $3,500 more than it has given to Speaker Dennis Hastert (R-Ill.). Neither DeLay nor Hastert has so far signaled a willingness or desire to get involved in the matter.

Pombo spokesman Brian Kennedy acknowledged that Pombo, as Chevron’s primary Congressman, has an interest in the effects of a CNOOC takeover from both a district perspective and a national perspective.

“Coincidentally, it’s both an economic concern for the chairman’s district and for the rest of the nation,” said Kennedy. “The chairman has not and will not arbitrarily declare that a deal should be blocked. He’s asked for an investigation to vet out the potential national security and economic concerns.”

Kennedy added that Pombo “is not concerned” about the perception that he may be trying to influence the administration’s review of any potential deal on behalf of Chevron.

“He’s trying to do what’s right for the United States and national security,” Kennedy said.

Meanwhile, Rep. William Jefferson’s (D-La.) office acknowledged that Chevron lobbyists provided background information for a letter to Snow urging him to investigate any potential national security concerns a CNOOC-Unocal merger might trigger. Jefferson received $6,500 from Chevron’s PAC over the past five years.

Jefferson’s letter attracted more than 40 signatures from Members, and more have been adding their names to the list in recent days.

All told, Chevron’s PAC gave more than $111,000 over the past five years to 23 of the original 41 signatories to Jefferson’s letter. The list includes both Republicans and Democrats.

The Chevron campaign donations range from $11,750 and $10,500 respectively to Reps. Ellen Tauscher (D-Calif.) and Barbara Cubin (R-Wyo.), to $1,000 each to Reps. Mike Rogers (R-Mich.) and Ted Poe (R-Texas).

Jefferson spokeswoman Melanie Roussell said Chevron provided some background information to Jefferson’s staff for drafting the letter, but added that Jefferson “has been watching closely” the United States’ trade deficit with China and China’s increasingly aggressive moves to acquire more energy assets.

“They did provide information, but the debate is much bigger than what Chevron could provide us,” said Roussell. “In the letter, the Congressman did not ask Secretary Snow or anyone else to stop the deal from taking place. The Congressman is not against free trade. … He’s concerned about fair trade.”

Freshman Rep. Bobby Jindal (R-La.), another signer of the Jefferson letter, said he felt that minimal involvement from Congress was needed to make sure the nation’s energy and national security interests are protected.

“If this was Chevron competing with Exxon, I don’t think Congress would get involved,” said Jindal, who received $3,000 from Chevron’s PAC. Still, Jindal said he was not prejudging any potential CNOOC deal.

“It’s good news already that the Chinese announced their intent to sell off American assets and reserves” in order to avoid potential national security problems, he said.

Although the standard legislative options are limited, Chevron may benefit from some unconventional options, a source familiar with the discussions said, including an amendment to the House Treasury-Transportation-Housing and Urban Affairs spending bill that would require a months-long review of CNOOC’s bid. It was unclear which Member might offer such an amendment when the bill hits the House floor today, but House Appropriations Committee spokesman Jon Scofield said such an amendment would likely be ruled out of order.

In addition to its PAC giving, Chevron has spent considerably, and in increasing amounts, on its lobbying operation. The company shelled out $5.2 million on lobbying last year alone, up from about $1.7 million in 2000, according to Political Money Line. Lobbying expenditure figures include money spent on inside and outside lobbyists, for all federal issue areas.

In the past five years, the company has spent more than $19 million on its in-house team and an impressive lineup of outside consultants that includes Clark Consulting, the Federalist Group, and McGovern and Smith.

Outside lobbyists for the firm declined to comment on their work, and the U.S. Chamber of Commerce and the American Petroleum Institute — two heavy-hitting trade associations that claim Chevron as a member — both declined to comment on the Unocal deal.

The Chevron campaign comes as the Chinese company ramps up an American-style lobbying and PR assault of its own.

Anxious about rising anti-Chinese sentiment in Congress, CNOOC recently hired Akin Gump Strauss Hauer and Feld to handle its lobbying work. To manage the media firestorm around the proposed deal, the company has brought on Public Strategies Inc., a firm with close ties to the Bush White House, and Brunswick Group, which handled the corporate meltdown at the energy company Enron.

“Chevron has long established relations with Members of Congress,” said Akin Gump partner Dan Spiegel. “Our goal is to ask Members to look at the facts … and not to prejudge this.”

Spiegel noted that Unocal’s holdings are already primarily in Asia, where CNOOC’s assets are, while total U.S production of Unocal is only 1 percent of the United States’ daily consumption.

Public Strategies managing director Mark Palmer said lawmakers and market watchers need to understand that the company’s control by communist China is overstated, even though the Chinese government does own a 70 percent stake in CNOOC.

CNOOC has an independent board of directors that includes many non-Chinese, is publicly traded on the New York Stock exchange, and “made a transparent offer for another New York Stock Exchange listed company,” Palmer said.

Meanwhile, Unocal spokesman Barry Lane said his company is not actively lobbying Congress on the issue, but is considering the CNOOC counter bid. Lane added that so far, the Unocal board is sticking by its agreement to merge with Chevron.