Private Empire: ExxonMobil and American Power (83 page)

In Washington, higher taxes on carbon-based fuels will inevitably come later than they might have due to the resistance campaigns funded by oil and coal corporations—particularly ExxonMobil’s uniquely aggressive influence campaign to undermine legitimate climate science during the late Clinton administration and the early Bush administration. With its ideological allies, ExxonMobil funded the promotion of public confusion about climate science by means that future employees and executives of the corporation are likely to look back on with regret.

The climate risks future generations will inherit will pass to them from many authors, of course, and hardly just from ExxonMobil. Even if ExxonMobil began immediately to invest all of its lobbying and public policy expenditures to help enact an aggressive carbon price in the United States, the West’s ability to persuade China, India, and other poor, industrializing countries to adopt and enforce adequate emission reductions would still appear doubtful.

Early in 2011, the research group Climate Central, working from BP forecasts about future energy demand, calculated that stabilizing carbon dioxide concentrations by 2050 at five hundred parts per million (about a quarter higher than current levels) would require reducing average emissions per unit of energy used in the world by 4.2 percent per year. The analysts noted, “The highest previously recorded rate of decarbonization in a country probably took place in France between 1975 and 1990, when that country’s nuclear power system expanded very rapidly,” and yet even in that extreme instance, France’s emissions fell by only 2.6 percent annually.
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The numbers argue that global warming on a scale scientists describe today as dangerous will occur.

O
n July 1, 2011, ExxonMobil’s Silvertip pipeline, running from Wyoming to the corporation’s refinery in Billings, Montana, sprang a leak and poured about 1,000 barrels of oil into the majestic Yellowstone River. The corporation estimated that cleanup and payments for damaged property would cost $42.6 million. “We deeply regret this incident has happened,” corporate spokesman Kevin Allexon said.
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On the same day, Baltimore County jurors deliberating in the second of two civil lawsuits filed over the massive leak of gasoline from the former Jacksonville, Maryland, Exxon station—the case filed by Peter Angelos, Stephen Snyder’s archrival in the Baltimore plaintiff’s bar—returned a verdict of actual and punitive damages of $1.5 billion, ten times greater than the award Snyder had won for his clients. ExxonMobil vowed to appeal; the corporation continued to appeal Snyder’s award of damages, too.
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A week later, on July 8, the United States Court of Appeals for the District of Columbia reinstated the lawsuit filed by villagers in Aceh, Indonesia, who alleged that ExxonMobil bore responsibility for torture and killings they had suffered at the hands of Indonesian soldiers guarding the corporation’s gas fields. ExxonMobil’s lawyers had challenged the case at every turn; the lawsuit had now been pending without trial or settlement for more than a decade. The corporation again filed an appeal. A month later, ExxonMobil announced that it was placing its interests in Aceh’s gas fields and liquefied natural gas operations up for sale. A spokesman said the sale had “nothing to do with the Aceh lawsuit,” but was the result of routine reviews of worldwide holdings.
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In Russia, later that summer, Rex Tillerson flew to the Black Sea resort of Sochi to meet with Vladimir Putin. Before television cameras, the two men sat on opposite sides of a horseshoe-shaped table and announced a new partnership between ExxonMobil and Rosneft, the Russian oil company. The oil firms agreed to invest at least $3.2 billion to develop oil beneath the Arctic Kara Sea; if the deal survived the backtracking and disputes that disrupted so many other Russian oil deals, the total investment in the project could reach $500 billion. The United States Geological Survey estimated that the Arctic held about 90 billion barrels of recoverable but undiscovered oil and about as much natural gas as Russia’s onshore supplies, which were the world’s largest.
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Most of the Arctic’s oil and gas is believed to lie in areas controlled by Russia. In the Kara Sea, where ExxonMobil agreed to drill, oil development has become easier because of the rapid retreat of Arctic sea ice, most likely due to global warming. In 2011, on a typical August day, the amount of Arctic sea ice was about 40 percent less than had been present on an average August day between 1979 and 2000.
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At the announcement in Sochi, Vladimir Putin spoke approvingly of ExxonMobil’s “unique technology” and the corporation’s ability to operate in the Arctic’s “difficult conditions.” As to the scale of the investment planned, Putin added, “It’s scary to utter such huge figures.”
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Mikhail Khodorkovsky, the oil and banking tycoon who had drawn Lee Raymond into negotiations designed to transform the U.S.-Russian energy partnership during the first term of the Bush administration, languished in a remote Russian prison, under sentence until at least 2017.

In West Africa, ExxonMobil’s managers continued to bring oil to market despite the coup plots, kidnapping raids, corruption, and factionalism menacing the corporation’s host regimes in Nigeria, Chad, and Equatorial Guinea. After millions of dollars in expenditures on Washington lobbyists, Equatorial Guinea’s president, Teodoro Obiang, managed for the first time to have his photograph taken at the side of an American counterpart: Barack Obama, who agreed to pose with Obiang at a museum reception in New York. Obama’s administration continued to license military and police trainers to support Obiang’s regime, although the White House, cautioned by human rights activists and congressional critics of Equatorial Guinea, held back from partnership. Obama’s Justice Department filed a civil lawsuit against Obiang’s free-spending son, Teodoro, seeking forfeiture of his Malibu mansion and other assets on the grounds that Obiang’s money came from “foreign official corruption.” ExxonMobil produced more than 600,000 barrels of oil and gas liquids per day from West Africa; the corporation produced roughly the same amount of oil from the Gulf of Guinea as it produced from the United States and Canada. In 2011, Walter Kansteiner, the assistant secretary of state for African affairs during the first term of the George W. Bush administration, joined ExxonMobil as a senior adviser on the corporation’s Africa strategies.

In Iraq, ExxonMobil followed adventurous Hunt Oil into Kurdistan, in defiance of Baghdad’s government and despite discouragement from the Obama administration, which feared, as the Bush administration had, that oil deals struck independently with the Kurds would worsen Iraq’s ethnic conflicts. ExxonMobil’s decision risked stirring the ire of Iraq’s Shia-led national government, which had awarded the corporation a contract to raise production in its massive West Qurna field in the south of the country. Tillerson undertook his gambit without informing the Obama administration in advance. After ExxonMobil signed agreements concerning six Kurdish oil fields, Tillerson arranged a conference call with senior State Department officials, and told them, “I had to do what was best for my shareholders.”

The Obama administration announced plans in the summer of 2011 for the first sale of oil leases in the deep waters of the Gulf of Mexico since the
Deepwater Horizon
blowout. Interior secretary Ken Salazar said twenty million acres would be put up for lease—all in the Gulf’s western waters, nearest to Texas, Louisiana, Alabama, and Mississippi. “We have strengthened oversight at every stage of the oil and gas development process,” Salazar said. The sales were an “important step toward a secure energy future.”
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The administration also considered proposals for a pipeline that would transport oil from Canadian sands to refineries in the United States. Obama initially rejected the arguments of environmentalists and climate scientists who fear the pipeline will lock in energy-intensive oil production, and by doing so exacerbate global warming. The president later put the decision on hold.

It remained arguable how “American” ExxonMobil’s private empire was, given its global reach. Yet in its strategies and systems the corporation remained recognizably a descendant of the American icon John D. Rockefeller and his Standard Oil. And of all the banking, industrial, and transportation giants birthed by America’s Gilded Age, none could look back on a winning streak and a record of durability comparable to those of ExxonMobil’s.

The more recent heights of ExxonMobil’s profitability and political influence during the Raymond and Tillerson eras reflected in part the growing relative power of corporations in the American political and economic system. Corporate profits in 2011 made up a larger share of American national income, when compared to workers’ wages and small business income, than at any time since 1929, when such statistics were first recorded. The United States Supreme Court, in its landmark decision in
Citizens United vs. Federal Election Commission
, reaffirmed in 2010 the freedom of corporations to fund political advocacy. In the years after the Mobil merger, Raymond and Tillerson oversaw more spending on direct lobbying in Washington than all but two other American companies, General Electric and Pacific Gas & Electric. ExxonMobil had evolved into the most profitable corporation headquartered in the United States—and one of the most politically active—in an era of corporate ascendancy.

On July 28, 2011, ExxonMobil announced its profits for the first half of the year. The total came in at $21.3 billion, a whisker under the amount the corporation reported during the same period in 2008, when it set a record for the most nominal profit earned by any corporation in American history.

Eight days later, on August 5, 2011, Standard & Poor’s announced the first-ever ratings downgrade of the bonds issued by the United States Treasury, marking them down from a AAA rating to AA-plus. The Standard & Poor’s downgrade meant that ExxonMobil, one of only four American corporations to maintain the AAA mark, now possessed a credit rating superior to that of the United States.

Standard & Poor’s received intense criticism for its judgment that the American government’s ability to repay its lenders might be in any doubt. Yet the fiscal trajectories of the United States Treasury and ExxonMobil had certainly diverged. In 1999, the year that Exxon’s acquisition of Mobil closed, the federal government and the corporation each took in more money annually than was required to meet expenses. Their paths then divided. In an era of terrorism, expeditionary wars, and upheaval abroad, coupled with tax cutting and reckless financial speculation at home, one navigated confidently, while the other foundered. From the day of the Mobil merger closing until the day of the S&P downgrade, the net cash flow of the United States—receipts minus expenditures—was approximately negative $5.7 trillion. ExxonMobil’s net cash flow from operations and asset sales during the same period was a positive $493 billion.
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Acknowledgments

T
his book would not have been possible without the generosity of the scores of people who agreed to provide interviews, sometimes about sensitive or controversial subjects. Some of those to whom I owe the most cannot be named, but I am grateful for their trust and assistance. None of my sources, researchers, or collaborators should be judged accountable for errors or misjudgments in the text; the responsibility is mine.

Steve LeVine, Susan Murcko, and Ann O’Hanlon provided careful, multiple readings of early drafts, made important suggestions, rescued me from errors, and otherwise made the book better.

S. C. Gwynne contributed biographical insights about Lee Raymond and Rex Tillerson early on. Ian Gary generously opened his boxes and files about African oil. Ben Lando conducted interviews and provided insights about Iraq’s oil. Rob McKee and Mike Stinson shared their fascinating diaries and archives about their service as American oil advisers in Baghdad. Chris Goldthwait was equally helpful with his collection of letters from Chad. Dan Freifeld offered valuable insights. Vince Crawley arranged interviews at Africa Command in Stuttgart, Germany. Sally Donnelly was a great help at the Pentagon. Miriam Elder contributed energetically from Moscow. Robert Becker provided excellent legal advice about the Freedom of Information Act. I owe gratitude to Angue Ondo for her aid during my travel to Equatorial Guinea. Sam Olukoya and the resourceful Chris Ewokor assisted my travel in Nigeria. Esseme Eyiboh provided hospitality and high spirits during a memorable journey to Akwa Ibom. In Chad, I owe thanks to Besba Tong-pa Raoutouin, Michelle Bonnardeaux, and Celeste Hicks. In Jakarta and Aceh, Miki Salman and Sidney Jones helped greatly. Alan Jeffers at ExxonMobil endured my inquiries cheerfully.

I again enjoyed the fortune of partnership with Ann Godoff, Susan Petersen Kennedy, and the team at Penguin Press. I have now worked with Ann continually for two decades. As ever, she encouraged the most serious, ambitious work possible, and her editing notes were perceptive and important. Thanks as well to Tracy Locke, Lindsay Whalen, Ben Platt, and Deborah Weiss Geline.

Jon Wallace contributed research, organizational skill, and high morale. Thanks also to Christina Satkowski for her skill and reliability, and to Victoria Collins for her excellent work.

Alexandra Coll, Emma Coll, Maxwell Coll, and Rory Steele helped with research, chronologies, and other aspects of the family business, and were inspiring for many other reasons, too.

During the life of this project, I served as president of the New America Foundation, a nonprofit, nonpartisan public policy research institution headquartered in Washington, D.C., with an annual budget of about $16 million. About three fifths of New America’s revenue comes from philanthropic foundations such as the Ford Foundation, the Rockefeller Foundation, the Bill & Melinda Gates Foundation, the Macarthur Foundation, the Smith-Richardson Foundation, the Peter G. Peterson Institute for International Economics, and the Open Society Institute. Most of the rest of the revenue comes from contributions by individual philanthropists, such as Eric and Wendy Schmidt, Bernard and Irene Schwartz, Jeffrey and Cal Leonard, Gus and Rita Hauser, David and Katherine Bradley, Chip Kaye, William Gerrity, and Boykin Curry. The foundation also receives government grants and corporate donations. For the latest full year available, each of these sources of revenue provided less than 5 percent of the total. During 2009, my colleague Steve Clemons, while overseeing programs on American foreign policy, solicited and received from ExxonMobil two contributions, of $25,000 and $80,000, respectively, to support conferences he ran. I recused myself from those discussions and activities. A full listing of the foundation’s financial supporters is available at www .newamerica.net.

Colleagues at the New America Foundation contributed to the research and writing of this book in many ways, especially by challenging and refining my understanding of geopolitics, and by generously allowing me the time to travel and interview abroad. Thanks in particular to Simone Frank, Eric Schmidt, and Rachel White; the book would not have been possible without them. Thanks also to Liaquat and Meena Ahmed, Amjad Atallah, Peter Beinart, Peter Bergen, David Bradley, Steve Clemons, Jeannette Clonan, Reid Cramer, Michael Crow, Boykin Curry, Patrick Doherty, James Fallows, Sheri Fink, Brian Fishman, Frank Fukuyama, Joel Garreau, Atul Gawande, Bill Gerrity, Tom Glaisyer, Tim Golden, Eliza Griswold, Lisa Guernsey, Ted Halstead, Rita Hauser, Laurene Powell Jobs, Fred Kaplan, Zachary Karabell, Chip Kaye, Andrew Lebovich, Jeffrey Leonard, Flynt Leverett, Daniel Levy, Michael Lind, Maya MacGuineas, Lisa Margonelli, Andres Martinez, Kati Marton, Danielle Maxwell, MaryEllen McGuire, Walter Russell Meade, Sascha Meinrath, Lenny Mendonca, Evgeny Morozov, Bob Niehaus, Amanda Ripley, Nicholas Schmidle, Troy Schneider, Bernard Schwartz, Sherle Schwenninger, Anne-Marie Slaughter, Katherine Tiedemann, Laura Tyson, Robert Wright, Tim Wu, Dan Yergin, Fareed Zakaria, and Jamie Zimmerman, as well as the many other staff and fellows who saw to my continuing education.

Thanks, at the
New Yorker,
to David Remnick, Dorothy Wickenden, Nicholas Thompson, Virginia Cannon, Amy Davidson, Pam McCarthy, Nandi Rodrigio, Seema Gauhar, Tim Farrington, Jane Mayer, and Larry Wright, as well as many other terrific colleagues. Thanks as well to Susan Glasser at
Foreign Policy,
David Plotz and Jacob Weisberg at
Slate
, Carlos Lozada at the
Washington Post,
and Robert Silvers at the
New York Review of Books
.

Melanie Jackson, my literary agent for the past twenty-seven years, again made it all work.

Michael Abramowitz, Luke Albee, Rick Atkinson, Jane Atkinson, Dean Baquet, Phil Bennett, Eric Cohen, Dan Coll, Geoffrey Coll, Steve Fierson, David Finkel, Bart Gellman, Jane Getter, Bradley Graham, the Greenhouses, John Harris, Adam Holzman, Monica Klien-Samanez, Dylan Landis, Dafna Linzer, David Maraniss, Linda Maraniss, the Morrises, Lissa Muscatine, Janice Nittoli, Ama Nkrumah, the Reisses, Joanne Reynolds, Anthony Spaeth, Valerie Strauss, the Tulchins, and Alexandra Viets provided friendship, hospitality, entertainment, and other support to the Colls during the long life of this project. Thanks as well to Robert and Shirley Coll, and to John, Joan, Marian, and Mel. I owe it all again to Susan; her enthusiasm for this work did much to bring the book to the finish.