Big Oil Profits Spell Big Trouble

Posted May 6, 2008 at 7:01pm

It’s tough being an oil lobbyist when gas prices are high. With oil companies posting record first-quarter profits and the presidential candidates demonizing the industry, it’s nearly impossible for them to recruit supportive lawmakers.

While the oil industry has long been the scapegoat for high gas prices, it’s always counted on Republicans and Oil Patch Democrats to stave off harmful legislation. That winning streak might be over as Democrats eye some of the toughest regulations and taxes the industry has ever faced.

This week alone, Senate Majority Leader Harry Reid (D-Nev.) is poised to unveil an energy package that is expected to focus on high prices for crude oil and oil company profits. One plank being considered is a windfall profit tax on the oil industry, an idea that has floated around the Hill for decades. Another proposal being offered by Sens. Hillary Rodham Clinton (D-N.Y.) and John McCain (R-Ariz.) on the presidential campaign trail favors a summer gas tax holiday that would place a moratorium on the 18.4 cent tax at the pump. Clinton’s proposal would make up the revenue by taxing the industry, though neither approach has much traction in the Senate.

Despite taking a PR beating, the oil industry and its trade association, the American Petroleum Institute, are sticking to message.

“We’ve been in essentially a continuous debate since 2001,” said Jim Ford, manager of federal relations for API. “Every one of those bills touched some aspect of the energy and gas industry.”

Ford says API’s strategy on the Hill is to emphasize the economic importance of the industry, noting that about 33 states produce gas and oil. And as for a windfall profits tax, the industry said it would vacuum up money for reinvestment in technology and renewable energy.

“We’re talking to everybody all the time,” Ford said. “We understand that when issues move through Congress — in one way or another — they pass through the hands of 535 Members, and every one of them and their constituents are affected in one degree or another.”

Former Louisiana Democratic Sen. Bennett Johnston agrees. The head of Johnston & Associates, he lobbies on behalf of API.

“We don’t know at this point what bills are really going to be seriously considered next year,” Johnston said. “We’d have to look at those bills and craft a message based on those bills. One thing is, there has to be a reasonable bill. There are all kind of things that are circulating out there,” he said.

Though their efforts haven’t stopped Democrats from pushing ahead with their energy plans, lobbyists who follow the energy market for Wall Street say they don’t anticipate a windfall tax moving markets since it’s not likely to pass before the end of the session.

“Where’s Wal-Mart? And as soon as you say its OK to tax companies that make too much money, where’s Google’s lobbyist or Microsoft’s?” asked one lobbyist who does political intelligence for hedge funds and private equity firms. “Wall Street is much more interested in climate change — not necessarily the legislation, but how the whole issue is going, and I also think they are interested in seeing the handwriting on the wall that renewable energy is here to stay.”

Some oil industry lobbyists say that API’s talking points are stale and need to be revisited, especially if the industry needs to move quickly to stop legislation.

“In the old days, API served a purpose,” said one energy company consultant. “The messenger may have more controversy than the message.”

Few trade organizations exceed at nimbly taking new positions on long-argued politics, but energy lobbyists say that while API has been encouraged to amp up efforts to build contacts with newly powerful voting blocs like the Democratic Blue Dog Coalition, the Congressional Hispanic Caucus and the Congressional Black Caucus, they’ve yet to do so.

“It’s like moving the Titanic,” said one lobbyist of trying to persuade energy companies and API to switch gears to bring on more grass-roots lobbying and take issues head-on.

Several contract lobbyists for the industry say there hasn’t been a call for all hands on deck to lobby the Hill and fight legislation. One oil company lobbyist likened the lack of momentum on the Hill to the backlash the drug industry faced when senior citizens were denied prescription drugs.

“It’s hard for them to go to the Hill and have to say, ‘Look, here’s where we’re making investments’ and tell them how the government can’t provide what we’re doing,” said one Democratic energy lobbyist.

Instead, the industry has largely relied on API and its longtime head, Byron “Red” Cavaney, to set the industry’s message. Cavaney, a former White House aide in the Nixon, Ford and Reagan administrations, headed the American Forest and Paper Association and the American Plastics Council before jumping to API in 1997. While Cavaney runs the organization, he doesn’t spend much time on Capitol Hill, according to Ford.

The behemoth trade organization relies on eight in-house lobbyists to take its message to Capitol Hill. In the first quarter of this year, API spent $1.27 million on lobbying, according to financial disclosure reports. API also relies on its state-based petroleum councils. Ford says the group has 21 councils and is active in 11 other states. It also has a cadre of outside lobbyists on retainer, including Timmons and Co. Inc., Johnston & Associates, Ogilvy Government Relations and Olsson Frank Weeda Terman Bode Matz. API spent $330,000 during the first three months on outside lobbyists.

While the current political rhetoric targets oil companies, energy lobbyists say the industry still has its allies on Capitol Hill, including Sens. Ted Stevens (R-Alaska) and Kay Bailey Hutchison (R-Texas), as well as Gulf Coast lawmakers.

Sen. David Vitter (R-La.) introduced an amendment last week to the Federal Aviation Administration bill to expand drilling off the Gulf Coast to reduce dependence on foreign oil. His amendment would allow for domestic drilling in what are now restricted areas if a governor and state legislature of a coastal state petition the Interior secretary for permission.

“If you look at the way Members approach these issues, you look as much as what region they come from as much as whether they are Republican or Democrat,” Ford said.