Sarah Palin's $159,050 Conflict of Interest

At Huffington Post, Chris Kelly writes:

While you read this, Alaska's First Dude, Todd Palin, is riding a snowmobile -- I'm sorry, snow machine -- 1971 miles from Big Lake to Fairbanks. In the course of performing this awesome feat, his Arctic Cat's powerful two-stroke engine will emit the same amount of hydrocarbons as an automobile driving from Chicago to San Francisco and back 150 times.

A small price for the rest of us to pay to honor the indomitability of the human spirit and one man's ability to sit and hold on.

It's not just a blaze of glory and aromatic hydrocarbon. A conventional two-stroke engine emits as much as a quarter of its fuel unburned, directly into the air. This week, as a participant in the Iron Dog™ snow machine race, Todd Palin will release as many cancer-causing and smog-forming pollutants as a Chevy Malibu driven around the Earth at its equator 28 times.

Seems like a lot of work, just to get away from Sarah Palin.

But Todd's not just doing it because he hates his home life and likes things that make loud noises and emit benzene. He does it because it's there. And for hundreds of thousands of dollars in cash and gifts from corporations who do business with the Governor's office.

For riding a snowmobile.

Something you could train a bear to do.

The Emperor Nero used to clean up at the Olympic games. It was eerie. He won everything. According to Suetonius, he once won a chariot race despite falling off and not finishing the course. That's how good he was. He also never wore the same clothes twice. So he would have fit right in with the Palins there also.

I'm not insinuating anything. I'm just saying.

The total purse value of this year's Iron Dog™ is $159,050. The sponsors include the petroleum giants Tesoro and Conoco-Phillips; State Farm, Wells Fargo, Frontier Airlines, Alaska Airlines and the Alaska First National Bank.

The Iron Dog™ has fewer than 40 entrants a year, and one of them is always Todd.

Does this smell? I'm probably the wrong person to ask. I hate the cold and I think motor sports is an oxymoron. But he is Alaska's First Lady, and Tesoro is an oil company.

Let's say this was Louisiana in the '30s. If Texaco sponsored a pancake-eating contest, and Huey Long's wife kept winning it, there would have been talk.

To be fair, Todd can't win the whole purse. There are lots of little door prizes just for rookies and women and steak dinners for Cutest Hat. Just like in Jack London days.

And, to be fair, Todd doesn't always walk away from the camping trip with the hundred grand first prize. He's only won four times.

Once after Sarah was elected to the Wasilla City Council, once after she was elected mayor, the year she was appointed to the Alaska Oil and Gas Commission, and the year she was elected governor.

American Energy Policy, Asleep At The Spigot

The New York Times reports:

Just three years ago, with oil trading at a seemingly frothy $66 a barrel, David J. O’Reilly made what many experts considered a risky bet. Outmaneuvering Chinese bidders and ignoring critics who said he overpaid, Mr. O’Reilly, the chief executive of Chevron, forked over $18 billion to buy Unocal, a giant whose riches date back to oil fields made famous in the film “There Will Be Blood.”

For Chevron, the deal proved to be a movie-worthy gusher, helping its profits to soar. And while he has warned about tightening energy supplies for years and looks prescient for buying Unocal, even Mr. O’Reilly says that he still can’t get his head around current oil prices, which closed above $145 a barrel on Thursday, a record.

“We can see how you can get to $100,” he says. “At $140, I just don’t know how to explain it. We’re surprised.”

For the rest of the country, the feeling is more like shock. As gasoline prices climb beyond $4 a gallon, Americans are rethinking what they drive and how and where they live. Entire industries are reeling — airlines and automakers most prominent among them — and gas prices have emerged as an important issue in the presidential campaign.

Ninety percent of Americans, meanwhile, expect the pain at the pump to pose a financial hardship in the next six months, according to a recent Associated Press-Yahoo News poll. Stocks now trade inversely to crude prices, and the Dow Jones industrials are in bear-market territory. Old icons have been written off, with Starbucks boasting nearly twice the market value of General Motors, which some on Wall Street say faces the possibility of bankruptcy.

Outside the thriving oil patch, it makes for a bleak economic picture. But it didn’t have to be this way.

Over the last 25 years, opportunities to head off the current crisis were ignored, missed or deliberately blocked, according to analysts, politicians and veterans of the oil and automobile industries. What’s more, for all the surprise at just how high oil prices have climbed, and fears for the future, this is one crisis we were warned about. Ever since the oil shortages of the 1970s, one report after another has cautioned against America’s oil addiction.

Even as politicians heatedly debate opening new regions to drilling, corralling energy speculators, or starting an Apollo-like effort to find renewable energy supplies, analysts say the real source of the problem is closer to home. In fact, it’s parked in our driveways.

Nearly 70 percent of the 21 million barrels of oil the United States consumes every day goes for transportation, with the bulk of that burned by individual drivers, according to the National Commission on Energy Policy, a bipartisan research group that advises Congress.

So despite the fierce debate over what’s behind the recent spike in prices, no one differs on what’s really responsible for all that underlying demand here for black gold: the automobile, fueled not only by gasoline but also by Americans’ famous propensity for voracious consumption.

To be sure, the American appetite for crude oil is only one reason for the recent price surge. But the country’s dependence on imported oil has only kept growing in recent years, undermining the trade balance and putting an added strain on global supplies.

Although the road to $4 gasoline and increased oil dependence has been paved in places like Detroit, Houston and Riyadh, it runs through Washington as well, where policy makers have let the problem make lengthy pit stops.

“Much of what we’re seeing today could have been prevented or ameliorated had we chosen to act differently,” says Pete V. Domenici, the ranking Republican member of the Senate Energy and Natural Resources Committee and a 36-year veteran of the Senate. “It was a bipartisan failure to act.”

Mike Jackson, the chief executive of AutoNation, the country’s biggest automobile retailer, is even more blunt. “It was totally preventable,” he says, anger creeping into his affable car-salesman’s pitch.

The speed at which gas prices are climbing is forcing a seismic change in long-held American habits, from car-buying to commuting. Last week, Ford Motor reported that S.U.V. sales were down 55 percent from a year ago, while demand for its full-size F-series pickup, a gas guzzler that was the country’s best-selling vehicle for 26 consecutive years, is off 40 percent. The only Ford model to show a sales increase was the midsized Fusion. A Ford spokeswoman says the market shift is “totally unprecedented and faster than anything we’ve ever seen.”

If the latest rise in oil prices isn’t just another spike — like those of the 1970s and 1980s — but is instead a fundamental repricing of the commodity responsible for much of modern American life, the impact of that change will affect everyone from home builders and homeowners in exurbs to corporate leaders, landlords and commuters in cities.

Although Asian consumers have begun emulating America’s love affair with the automobile, with the commercial booms of China and India playing pivotal roles in increased oil demand, the largest energy appetite in the world is still found in the United States. Home to only 4 percent of the world’s population, the nation slurps up about a quarter of the planet’s oil — and Americans’ daily use is nearly twice the combined consumption of the Chinese and Indians, according to an annual energy survey published by BP, the British oil giant.

Indeed, low-priced gasoline has long been part of the American social contract, according to Newt Gingrich, the former House speaker and Republican leader. While in office, Mr. Gingrich battled efforts to modulate demand through tools like increased gas taxes and tighter fuel standards, and he argues that voters won’t support such measures even now.

“They will work if you coerce the entire system and if you pretend the American people are Japanese and Europeans,” Mr. Gingrich says. “Our culture favors driving long distances in powerful vehicles and the car as a social expression.”

In 2002, General Motors workers opposed legislation to increase fuel efficiency standards because they thought it might eliminate the S.U.V.
Perhaps, but on Capitol Hill, members of both parties now say they are furious with Detroit for fighting so hard, and for so long, against higher fuel-efficiency standards.

Though analysts say automakers who shoveled out highly profitable and highly inefficient road hogs like S.U.V.’s and pickups deserve much of the blame, they also criticize legislators who failed to provide an incentive for consumers to switch to fuel-sipping cars. Some politicians are quick to acknowledge the problem.

“We’ve got to fix it or our standard of living will change within a decade,” says Senator Domenici, who is retiring this year. “Oil was too damn cheap, it’s too high now and it’s going even higher. I hope I’m wrong, but the problem is, we can’t catch up soon enough.”

According to energy policy experts, it was in the late 1980s and early 1990s — during the administrations of President George H. W. Bush and Bill Clinton — that things began to go wrong.

Before that point, the country reaped the benefits of the first fuel-economy standards, passed in 1975, known as corporate average fuel economy, or CAFE. Between 1974 and 1989, the efficiency of a typical car sold in the United States almost doubled, to 27.5 miles per gallon from 13.8.

Largely as a result, oil consumption in 1990 totaled 16.9 million barrels, basically on a par with the 17 million barrels consumed in 1980, even as the economy grew substantially. Oil prices were in the middle of a long downward slide that would take them from well above $30 a barrel in 1980 to a low of just under $10 in late 1998 and early 1999, interrupted only by brief spike in 1990 after Iraq’s invasion of Kuwait.

In 1990, Richard H. Bryan, a Nevada Democrat, teamed up in the Senate with Slade Gorton, Republican of Washington, and proposed lifting fuel standards again over the next decade, with a goal of 40 m.p.g. for cars. Amid furious opposition from Detroit, liberal Democrats from automaking states, like Carl Levin of Michigan, joined conservative Republicans like Jesse Helms of North Carolina, who died on Friday, to block new CAFE standards. “It was one of the most frustrating issues in my Senate career,” says Mr. Gorton, who left the Senate in 2001.

Dan Becker, then a lobbyist for the Sierra Club, still remembers his shock when he saw Mr. Levin and Mr. Helms, diametrically opposed on most issues, walk amiably together onto the Senate floor to cast their votes. “This wasn’t East-West, right-left, or North-South,” he says. “But had we passed that bill, we’d be using three million barrels less oil a day now.”

That amount may not sound like much, given total global consumption of 85 million barrels a day, but it’s more than OPEC’s spare capacity now.

Mr. Levin didn’t return calls for comment. But Representative John D. Dingell, the powerful Democrat from Detroit who chairs the House Energy and Commerce Committee, argues — as he did more than a decade ago — that tightening CAFE standards unfairly penalizes domestic automakers while rewarding foreign rivals who make more small cars.

Mr. Dingell, who has defended the automakers fiercely during his 52 years on Capitol Hill, decided to support the stronger CAFE standards last year. But he does not apologize for his longtime stance. “The American auto industry has sold the cars people wanted,” he says. “You’re going to blame the auto industry for that or the American consumer? He likes it sitting in his driveway, he likes it big, he likes it safe.”

A much more effective approach would be to simply raise taxes on gasoline, Mr. Dingell says, because higher prices are the easiest way to change buying habits. Some Europeans agree with this, noting that policy changes engineered through taxation can alter consumer choices without impeding economic growth.

Consumers overseas might not like higher taxes on gasoline, but they’ve adapted, says Jeroen van der Veer, chief executive of Royal Dutch Shell, the European energy giant. “A society can work, can function and can grow even at higher fuel prices,” he says. “It’s a way of life — you get used to it.”

In Mr. van der Veer’s native Holland, for example, gasoline sells for more than $10 a gallon, with $5.57 of that going to taxes. Even in Britain, which has substantial North Sea production, gasoline sells for $8.71 a gallon.

A substantial gas tax increase was considered during the administration of the first President Bush, recalls William K. Reilly, who ran the Environmental Protection Agency at the time. But it was whittled down in 1990 to just 5 cents after Mr. Gingrich and other conservatives in the Republican Party broke with the president.

“This was a stark lesson and people decided the gas tax was the third rail of public policy,” Mr. Reilly says.

Even as Congress idled when it came to tightening CAFE standards or substantially raising levies on gas, the Exxon Valdez oil spill in 1989 made offshore drilling yet another unpalatable option. “That caused a sea change and after that no one had any sympathy for the oil industry,” Mr. Becker says.

In 1990, three months before the effort to raise fuel-efficiency standards failed on Capitol Hill, President Bush issued an executive order making large swaths of the continental shelf off-limits to new exploration. That policy remains in effect today.

Lee Raymond, former chief of Exxon Mobil, says of today’s oil prices: “There is no quick-fix on this. By the time you panic, it is way too late.”
When Senators Charles E. Schumer, a New York Democrat, and Frank H. Murkowski, an Alaska Republican, attempted to put together a grand bargain of opening up more of Alaska in exchange for raising auto efficiency in 1998, the two couldn’t persuade enough members of either party to go along.

“It was a no-action policy,” says Lee R. Raymond, the former chief executive of Exxon Mobil, who has had a ringside seat for most of the energy policy debates of the last 25 years. “By the time there is panic, people need to realize this: There is no quick-fix on this. By the time you panic, it is way too late.”

Still, many analysts argue that increased drilling alone is no panacea. They note that many of the oil giants don’t drill in areas to which they already have access. Exxon, in particular, has been criticized as spending too much to buy back its own stock and not enough on exploration. Chris Welberry, a spokesman for Exxon Mobil, defends the company’s record, saying, “We are investing in our business at record levels — around $25 billion this year.”

In any event, added drilling is unlikely to generate sharply lower prices. A recent study by the federal government’s Energy Information Administration estimated that under the best-case scenario opening up the Arctic National Wildlife Refuge would reduce prices by $1.44 a barrel by 2027. Drilling in broader swaths off the continental United States wouldn’t affect prices until 2030.

On the taxation frontier, President Clinton did manage to get through a small tax increase on gasoline — 4.3 cents — in 1993, but with oil prices hovering between $10 and $20 a barrel for most of the 1990s, conservation ended up on the back burner.

Indeed, President Clinton did propose a broader tax on energy consumption in 1993, but it died quickly when Senate Democrats rebelled, much as House Republicans derailed President Bush’s gas tax in 1990. Still, environmentalists like Mr. Becker remain disappointed with Mr. Clinton for not doing more in his first term when oil prices were low and Detroit was enjoying a recovery in profits after the lean years of the early 1990s.

Congressional Republicans made matters worse in 1995, when they attached a rider to a huge appropriations bill forbidding the National Highway Traffic Safety Administration from spending any money to raise fuel standards. That law, in effect until 2001, made any change in CAFE standards impossible, says Representative Edward J. Markey, a Massachusetts Democrat who has pushed for better fuel efficiency.

As Paul Bledsoe, strategy director of the National Commission on Energy Policy, recalls it, “The 1990s were something of a lost decade for American fuel efficiency.” With oil prices low, consumers began snapping up pickup trucks and sport utility vehicles, which were governed by less stringent fuel economy standards, thanks to a loophole in the original 1975 law. These carried higher sticker prices and profit margins, and both Detroit and foreign automakers were happy to oblige.

Although oil prices remained low through the 1990s, consumption patterns were taking an ominous turn. By 2000, daily demand reached 19.7 million barrels a day — nearly three million more than in 1990, a 17 percent jump in 10 years that wiped out much of the fuel savings that followed the energy crises of the 1970s.

Since then, global consumption has taken off, rising to 85.2 million barrels a day last year from 76.3 million in 2000.

In recent years, Mr. Reilly says that both the White House and Congress have passed up opportunities to call for higher gas taxes and fuel standards in the name of national security, especially after the Sept. 11 attacks. “We could have, but we didn’t,” says Mr. Reilly, who describes himself as a moderate Republican. “It’s part of a long pattern in which Democrats and Republicans have not wanted to wade into this issue.”

By 2001, oil prices were slowly creeping up, but few seemed to notice, perhaps because the march was slow and steady. By 2004, crude was at $37 a barrel and the next year it hit $50. With higher prices for oil, an increase in gas taxes was political poison, but Mr. Markey says support for new fuel standards was reawakening.

Nevertheless, his efforts to pass new fuel economy legislation in 2001, 2003, and 2005 went nowhere amid continued opposition by supporters of the auto industry on both sides of the aisle as well as many conservative Republicans. Although the United States had long ceased to be energy-independent — that era ended just after World War II — Mr. Markey says he believes the memory of plentiful domestic supplies created a different mind-set here than in Europe, where oil was generally scarce.

Other veterans of those battles cite lobbying by the domestic automakers as a main factor in the failure of Mr. Markey’s legislation. “The auto companies didn’t see the handwriting on the wall,” Mr. Schumer says. “The auto companies would go to people and say, ‘If you vote for CAFE standards, the auto plant in your district could shut down.’ They got the message.”

Representative Mike Castle, a Delaware Republican whose district includes plants owned by G.M. and Chrysler, adds that “nothing was ever said directly but it would go through the minds of members that Detroit might respond.”

“Sometimes, things don’t have to be said,” he added.

Susan M. Cischke, group vice president for sustainability, environment and safety engineering at Ford, says the recollections of Mr. Schumer and Mr. Castle are “way over the top — you don’t just pull up or put down auto plants.” Instead, she says, when lobbying on CAFE, “we talked with our friends and indicated what it did with jobs. You want support.”

Oil industry insiders say they remained on the sidelines during Congressional debates over CAFE standards, although legislators from oil states tended to vote against more rigorous rules.

In 2007, with oil at $82 and gas nearing $3, Congress finally approved the first big increase in fuel-efficiency standards in 32 years, requiring the fleet average to reach 35 m.p.g. by 2020. That will save one million barrels a day by 2020, but onetime CAFE opponents like Mr. Castle now say they wish that Congress had acted sooner. Since the 1980s, fuel efficiency has flatlined at 24 m.p.g., while vehicle weight has jumped more than 25 percent and horsepower has nearly doubled. In Europe, on the other hand, fuel efficiency currently stands at 44 m.p.g. and is slated to hit 48 m.p.g. by 2012.

“It’s a shame we’re doing this now instead of 10 or 20 years ago,” says Mr. Castle, who supported the legislation last year. “It was always my hope they would just do it without a mandate.” He adds that while he still opposes drilling in Alaska, “Republicans aren’t all wrong when they talk about increasing supplies of oil. There are opportunities in the Gulf of Mexico.”

Senator Domenici, the senior New Mexico Republican, agrees that it’s time to look at new supplies but is even more critical of Detroit. “They all said to us: ‘Don’t change CAFE. It’ll come when it’s supposed to.’ That’s baloney,” he said.

Until last year’s vote, Mr. Domenici was an opponent of new fuel-efficiency standards, a stance he now regards as a mistake. “We were like everybody else,” he says. “We should have been more active on CAFE sooner.”

With Detroit again seeing profits collapse as sales of big cars plunge, Mr. Domenici says he is worried about the survival of the domestic automakers.

“They talked a good research game,” he says. “But let’s face it, little was being done. They are suffering the consequences and could go broke just like the airlines.”

What Congress didn’t or couldn’t do, the free market is now doing in the form of higher gas prices: forcing Americans into more fuel-efficient cars. Ms. Cischke of Ford says that in the last two months, “We have seen more of a shift in the market than in 20 years of CAFE. People are buying what they need.”

Unfortunately, the shift is happening too fast for a company of Ford’s size. That is among the reasons Wall Street expects Ford to lose more than $2 billion this year.

Congress, meanwhile, in its bid to explain the run-up in fuel prices, is examining the role of speculation and the increased flow of investor money into commodities. Most energy economists emphasize the fundamental issue of supply and demand, rather than market manipulation, but financial factors like the weak dollar are also exacerbating the situation. Stephen P. A. Brown, director of energy economics and microeconomic policy analysis at the Federal Reserve Bank of Dallas, estimates that a little more than 20 percent of the price of oil today can be attributed to the dollar’s fall against the euro and other currencies.

Another financial factor behind the price rise that hasn’t been talked about much on Capitol Hill or elsewhere is reduced hedging by oil companies on futures markets, says Larry Goldstein, a longtime energy analyst. In the past, crude producers would offer buyers a portion of their energy output in future years in order to protect themselves if prices pulled back. But energy companies got burned as prices kept rising during the last two years and have since cut back on selling untapped production — forcing prices for energy futures even higher.

Now, the prospect of a perpetual climb in oil prices has become part of market psychology, which is notoriously hard to change. William H. Brown III, a former Wall Street energy analyst who now consults for hedge funds and financial institutions, says investors have become convinced that the White House and Congress are unlikely to do anything dramatic to bring down prices.

For example, a release of supplies from the Strategic Petroleum Reserve after disruptions in Nigeria or Venezuela might have persuaded the market that Washington was on the case and shaken some complacency out of the market. “I’ve been a little surprised at what has not been done or what has not been talked about to get a handle on the consumer situation,” Mr. Brown says.

Others say that although the push to blame market speculators rather than discuss economic realities is likely to intensify on Capitol Hill as the presidential election draws near, they believe that what the world is confronting is a momentous shift in energy supply and demand.

“Speculation and manipulation are two different things,” says Mr. O’Reilly of Chevron. “Most of where we are is because of fundamentals and concern about the future.”

Deals With Iraq Are Set To Bring Oil Giants Back

The NY Times reports:


Four Western oil companies are in the final stages of negotiations this month on contracts that will return them to Iraq, 36 years after losing their oil concession to nationalization as Saddam Hussein rose to power.

Exxon Mobil, Shell, Total and BP — the original partners in the Iraq Petroleum Company — along with Chevron and a number of smaller oil companies, are in talks with Iraq’s Oil Ministry for no-bid contracts to service Iraq’s largest fields, according to ministry officials, oil company officials and an American diplomat.

The deals, expected to be announced on June 30, will lay the foundation for the first commercial work for the major companies in Iraq since the American invasion, and open a new and potentially lucrative country for their operations.

The no-bid contracts are unusual for the industry, and the offers prevailed over others by more than 40 companies, including companies in Russia, China and India. The contracts, which would run for one to two years and are relatively small by industry standards, would nonetheless give the companies an advantage in bidding on future contracts in a country that many experts consider to be the best hope for a large-scale increase in oil production.

There was suspicion among many in the Arab world and among parts of the American public that the United States had gone to war in Iraq precisely to secure the oil wealth these contracts seek to extract. The Bush administration has said that the war was necessary to combat terrorism. It is not clear what role the United States played in awarding the contracts; there are still American advisers to Iraq’s Oil Ministry.

Sensitive to the appearance that they were profiting from the war and already under pressure because of record high oil prices, senior officials of two of the companies, speaking only on the condition that they not be identified, said they were helping Iraq rebuild its decrepit oil industry.

For an industry being frozen out of new ventures in the world’s dominant oil-producing countries, from Russia to Venezuela, Iraq offers a rare and prized opportunity.

While enriched by $140 per barrel oil, the oil majors are also struggling to replace their reserves as ever more of the world’s oil patch becomes off limits. Governments in countries like Bolivia and Venezuela are nationalizing their oil industries or seeking a larger share of the record profits for their national budgets. Russia and Kazakhstan have forced the major companies to renegotiate contracts.

The Iraqi government’s stated goal in inviting back the major companies is to increase oil production by half a million barrels per day by attracting modern technology and expertise to oil fields now desperately short of both. The revenue would be used for reconstruction, although the Iraqi government has had trouble spending the oil revenues it now has, in part because of bureaucratic inefficiency.

For the American government, increasing output in Iraq, as elsewhere, serves the foreign policy goal of increasing oil production globally to alleviate the exceptionally tight supply that is a cause of soaring prices.

The Iraqi Oil Ministry, through a spokesman, said the no-bid contracts were a stop-gap measure to bring modern skills into the fields while the oil law was pending in Parliament.

It said the companies had been chosen because they had been advising the ministry without charge for two years before being awarded the contracts, and because these companies had the needed technology.

A Shell spokeswoman hinted at the kind of work the companies might be engaged in. “We can confirm that we have submitted a conceptual proposal to the Iraqi authorities to minimize current and future gas flaring in the south through gas gathering and utilization,” said the spokeswoman, Marnie Funk. “The contents of the proposal are confidential.”

While small, the deals hold great promise for the companies.

“The bigger prize everybody is waiting for is development of the giant new fields,” Leila Benali, an authority on Middle East oil at Cambridge Energy Research Associates, said in a telephone interview from the firm’s Paris office. The current contracts, she said, are a “foothold” in Iraq for companies striving for these longer-term deals.

Any Western oil official who comes to Iraq would require heavy security, exposing the companies to all the same logistical nightmares that have hampered previous attempts, often undertaken at huge cost, to rebuild Iraq’s oil infrastructure.

And work in the deserts and swamps that contain much of Iraq’s oil reserves would be virtually impossible unless carried out solely by Iraqi subcontractors, who would likely be threatened by insurgents for cooperating with Western companies.

Yet at today’s oil prices, there is no shortage of companies coveting a contract in Iraq. It is not only one of the few countries where oil reserves are up for grabs, but also one of the few that is viewed within the industry as having considerable potential to rapidly increase production.

David Fyfe, a Middle East analyst at the International Energy Agency, a Paris-based group that monitors oil production for the developed countries, said he believed that Iraq’s output could increase to about 3 million barrels a day from its current 2.5 million, though it would probably take longer than the six months the Oil Ministry estimated.

Mr. Fyfe’s organization estimated that repair work on existing fields could bring Iraq’s output up to roughly four million barrels per day within several years. After new fields are tapped, Iraq is expected to reach a plateau of about six million barrels per day, Mr. Fyfe said, which could suppress current world oil prices.

The contracts, the two oil company officials said, are a continuation of work the companies had been conducting here to assist the Oil Ministry under two-year-old memorandums of understanding. The companies provided free advice and training to the Iraqis. This relationship with the ministry, said company officials and an American diplomat, was a reason the contracts were not opened to competitive bidding.

A total of 46 companies, including the leading oil companies of China, India and Russia, had memorandums of understanding with the Oil Ministry, yet were not awarded contracts.

The no-bid deals are structured as service contracts. The companies will be paid for their work, rather than offered a license to the oil deposits. As such, they do not require the passage of an oil law setting out terms for competitive bidding. The legislation has been stalled by disputes among Shiite, Sunni and Kurdish parties over revenue sharing and other conditions.

The first oil contracts for the majors in Iraq are exceptional for the oil industry.

They include a provision that could allow the companies to reap large profits at today’s prices: the ministry and companies are negotiating payment in oil rather than cash.

“These are not actually service contracts,” Ms. Benali said. “They were designed to circumvent the legislative stalemate” and bring Western companies with experience managing large projects into Iraq before the passage of the oil law.

A clause in the draft contracts would allow the companies to match bids from competing companies to retain the work once it is opened to bidding, according to the Iraq country manager for a major oil company who did not consent to be cited publicly discussing the terms.

Assem Jihad, the Oil Ministry spokesman, said the ministry chose companies it was comfortable working with under the charitable memorandum of understanding agreements, and for their technical prowess. “Because of that, they got the priority,” he said.

In all cases but one, the same company that had provided free advice to the ministry for work on a specific field was offered the technical support contract for that field, one of the companies’ officials said.

The exception is the West Qurna field in southern Iraq, outside Basra. There, the Russian company Lukoil, which claims a Hussein-era contract for the field, had been providing free training to Iraqi engineers, but a consortium of Chevron and Total, a French company, was offered the contract. A spokesman for Lukoil declined to comment.

Charles Ries, the chief economic official in the American Embassy in Baghdad, described the no-bid contracts as a bridging mechanism to bring modern technology into the fields before the oil law was passed, and as an extension of the earlier work without charge.

To be sure, these are not the first foreign oil contracts in Iraq, and all have proved contentious.

The Kurdistan regional government, which in many respects functions as an independent entity in northern Iraq, has concluded a number of deals. Hunt Oil Company of Dallas, for example, signed a production-sharing agreement with the regional government last fall, though its legality is questioned by the central Iraqi government. The technical support agreements, however, are the first commercial work by the major oil companies in Iraq.

The impact, experts say, could be remarkable increases in Iraqi oil output.

While the current contracts are unrelated to the companies’ previous work in Iraq, in a twist of corporate history for some of the world’s largest companies, all four oil majors that had lost their concessions in Iraq are now back.

But a spokesman for Exxon said the company’s approach to Iraq was no different from its work elsewhere.

“Consistent with our longstanding, global business strategy, ExxonMobil would pursue business opportunities as they arise in Iraq, just as we would in other countries in which we are permitted to operate,” the spokesman, Len D’Eramo, said in an e-mailed statement.

But the company is clearly aware of the history. In an interview with Newsweek last fall, the former chief executive of Exxon, Lee Raymond, praised Iraq’s potential as an oil-producing country and added that Exxon was in a position to know. “There is an enormous amount of oil in Iraq,” Mr. Raymond said. “We were part of the consortium, the four companies that were there when Saddam Hussein threw us out, and we basically had the whole country.”

Kurds Reach New Oil Deals, Straining Ties With Baghdad

The NY Times:

The Kurdish regional government has reached four new oil-exploration deals, further straining relations with many Iraqi leaders in Baghdad, who want to maintain a more centralized control over the country’s enormous oil reserves.

The new deals are the latest in an effort by the Kurds to build their own oil industry while national oil legislation languishes in Parliament. A similar agreement reached last month with the Hunt Oil Company of Dallas was criticized as illegal by the Iraqi oil minister, Hussain al-Shahristani.

Kurdish officials, who have said they want to bring about a major increase in oil production, say the deals are consistent with the Iraqi Constitution.

But many in Parliament object to the Kurdish interpretation, and it is unclear how the Kurds’ own regional oil law, passed in August, will conform with whatever might ultimately be approved by the central government.

Many Sunni Arab leaders object to the production-sharing agreements being negotiated by the Kurds, which call for companies to invest large sums for finding and producing oil and to be awarded a portion of the profits generated by the new fields.

Any federal oil law would have to take account of Kurdish and Shiite concerns that provincial governments be given substantial autonomy to carry out their own development plans and of the desire of Sunni Arabs for strong central control to assure that they receive a fair share of the revenues, even though there is little oil in their provinces.

So far, these problems have proved insurmountable, and the oil law, one of President Bush’s benchmarks of progress in Iraq, has stalled.

The Kurds’ new contracts were signed with Heritage Oil Corp., a publicly traded Canadian concern, and Perenco S.A., a privately held French company. Two other deals with “experienced international companies” are to be announced soon. The total initial amount invested is expected to be $500 million, the regional government said.

If the exploration leads to oil production, Kurdish officials said that in rough terms the deals call for the companies to recover their costs and split profits, with 15 percent going to the companies and 85 percent to the government. A Kurdish official said it would take three to five years before any production could start.

In Baghdad, a spokesman for the Iraqi Oil Ministry denounced the new oil-exploration contracts and warned companies not to sign deals without the blessing of the national government.

“Any contracts signed before the approval of the oil law will be ignored or considered illegal,” said the spokesman, Assim Jihad.

A senior State Department official in Baghdad has also criticized the oil contracts as having “needlessly elevated tensions” between the Kurds and Baghdad.

A Kurdish official defended the deals, saying that the revenue would be shared with all Iraqi regions and that delays in signing exploration pacts only postponed the delivery of much needed cash to the treasury. “We can start now to look for exploration, and by the time we need the money the cash flow will be coming into the country,” the official said.

A Western executive involved in negotiations with the Kurds said the regional government seemed to be trying to “create a fait accompli” by signing so many deals with foreign companies that the central government eventually had to accept the provisions sought by the Kurds in any final version of the oil law.

An official at another oil company said the burst of deals reflected the Kurds’ concerns that their oil development was delayed during the time of Saddam Hussein and that they lagged in production compared with Shiite-dominated southern Iraq.

“I just think they know instinctively that they are behind the curve, and they have to move or they will never get their resources out of the ground,” said this official, who was not authorized to speak publicly. “The Kurds might be playing catch-up in the petroleum business, but they are doing a good job.”

Western Oil Group Eyes Assets in Iraq

Financial Times reports:

A large western oil company has offered $700m for oil assets in Iraqi Kurdistan owned by DNO, the small Norwegian oil company. The offer signals that international oil companies are willing to put significant amounts of money into Iraq in spite of the security problems and lack of a legal framework.

DNO refused to name the company, but industry executives speculated that Royal Dutch Shell was a possible bidder. Shell on Wednesday refused to comment.

DNO said it had received an "unsolicited expression of interest from a reputable financial adviser on behalf of a large international oil company", but had rejected the offer.

Helge Eide, DNO's chief executive, said in an interview with the Financial Times that the company would focus instead on maximising the value of its Iraqi assets. "There is more and more interest in Iraq, and we have a unique position there," Mr Eide said.

The offer values DNO's proven and probable Iraqi oil reserves at about $11.9 a barrel, according to analysts' estimates. DNO shares surged 11 per cent to NKr10.77 in Oslo.

DNO, which is quoted on the Oslo stock exchange, discovered the Tawke oilfield in late 2005, after signing a production-sharing agreement in June 2004 with the Kurdish regional government, a semi-autonomous area of northern Iraq.

In June, it became the first foreign oil company to pump crude oil in Iraq since the nationalisation of the country's hydrocarbons industry 35 years ago, albeit on a very small scale.

The company is delivering its production from the Tawke oil field to the domestic market in Iraq at a rate of about 6,000 barrels a day.

Mr Eide said that DNO hoped to be able to begin exports in November, once it had secured approval from the Kurdistan regional government to connect to a pipeline that could carry oil to Turkey.

Shell is seen as one of the oil majors that is most positive about doing business in Iraq.

In 2005, Shell signed an agreement with Baghdad to study the northern Kirkuk oilfield. The area is the subject of a dispute between the Kurdish authorities and the Iraqi central government.

Shell has worked for the Iraqi oil ministry analysing the data on the oilfield.

A number of other international oil companies have signed similar co-operation agreements, or are training Iraqi petroleum engineers.

BP, Statoil, Total, Eni and Repsol YPF are understood not to be behind the bid to DNO.

Industry executives said it was unlikely that a US-based company would have made the offer. ExxonMobil and Chevron refused to comment on specific Iraqi projects.

Papers Detail Industry's Role in Cheney's Energy Report

The Washington Post reports:

At 10 a.m. on April 4, 2001, representatives of 13 environmental groups were brought into the Old Executive Office Building for a long-anticipated meeting. Since late January, a task force headed by Vice President Cheney had been busy drawing up a new national energy policy, and the groups were getting their one chance to be heard.

Cheney was not there, but so many environmentalists were in the room that introductions took up "about half the meeting," recalled Erich Pica of Friends of the Earth. Anna Aurilio of the U.S. Public Interest Group said, "It was clear to us that they were just being nice to us."

A confidential list prepared by the Bush administration shows that Cheney and his aides had already held at least 40 meetings with interest groups, most of them from energy-producing industries. By the time of the meeting with environmental groups, according to a former White House official who provided the list to The Washington Post, the initial draft of the task force was substantially complete and President Bush had been briefed on its progress.

In all, about 300 groups and individuals met with staff members of the energy task force, including a handful who saw Cheney himself, according to the list, which was compiled in the summer of 2001. For six years, those names have been a closely guarded secret, thanks to a fierce legal battle waged by the White House. Some names have leaked out over the years, but most have remained hidden because of a 2004 Supreme Court ruling that agreed that the administration's internal deliberations ought to be shielded from outside scrutiny.

One of the first visitors, on Feb. 14, was James J. Rouse, then vice president of Exxon Mobil and a major donor to the Bush inauguration; a week later, longtime Bush supporter Kenneth L. Lay, then head of Enron Corp., came by for the first of two meetings. On March 5, some of the country's biggest electric utilities, including Duke Energy and Constellation Energy Group, had an audience with the task force staff.

British Petroleum representatives dropped by on March 22, one of about 20 oil and drilling companies to get meetings. The National Mining Association, the Interstate Natural Gas Association of America and the American Petroleum Institute were among three dozen trade associations that met with Cheney's staff, the document shows.

The list of participants' names and when they met with administration officials provides a clearer picture of the task force's priorities and bolsters previous reports that the review leaned heavily on oil and gas companies and on trade groups -- many of them big contributors to the Bush campaign and the Republican Party. But while it clears up much of the lingering uncertainty about who was granted access to present energy policy views to Cheney's staff, it does not entirely explain why the Bush administration fought so hard to keep it and other as-yet-unreleased internal memos secret.

Contacted over the past week, several people who met with the task force's staff described their meetings as part of a normal "interagency" review of major domestic policy and expressed bewilderment that the White House and Cheney labored to keep the deliberations out of the public eye.

"I never knew why they fought so hard to keep it secret," said Charles A. Samuels, outside counsel to the Association of Home Appliance Manufacturers, which participated in a March 13 meeting to discuss the idea of tax credits for super-efficient appliances. "I am sure the vast majority of the meetings were very policy-oriented meetings -- exactly what should take place."

Provided a copy of the list, Cheney's office said he would not comment on it. "The vice president has respectfully but resolutely maintained the importance of protecting the ability of the president and vice president to receive candid advice on important national policy matters in confidence, a principle affirmed by the Supreme Court," spokeswoman Lea Anne McBride said by e-mail.

Rep. Henry A. Waxman (D-Calif.), chairman of the House Oversight and Government Reform Committee, who unsuccessfully pushed for details of the meetings, said it is "ridiculous" that it has taken six years to see who attended the meetings. He described the energy task force as an early indicator of "how secretively Vice President Cheney wanted to act."

Waxman said he was not surprised to see the prevalence of energy industry groups on the list of meetings. "Six years later, we see we lost an opportunity to become less dependent on importing oil, on using fossil fuels, which have been a threat to our national security and the well-being of the planet," he said.

The development of a new energy policy was Bush's first major initiative after he took office. He turned over responsibility of it to Cheney, a former chairman of Halliburton Co., a Dallas-based energy services firm.

Mindful of the disastrous fate that befell Hillary Rodham Clinton's unwieldy health-care task force, which included about 500 staff members and 34 working groups, Cheney kept his energy task force small and lean. Instead of a 1,300-page report, he aimed for something much shorter: The final product was 170 pages.

From the beginning, it was clear that Cheney was running the show, chairing meetings of the task force -- made up of about a dozen Cabinet officers and senior officials -- in his ceremonial office in the Eisenhower Executive Office Building. Much of the task force's work was done by a six-person staff, led by its executive director, Andrew D. Lundquist, a former aide to Republican Sens. Ted Stevens and Frank Murkowski of Alaska. In 2000, Lundquist was the Bush campaign's energy expert; Bush nicknamed him "Light Bulb."

Today, Lundquist is a lobbyist, and he has represented some of the companies who appeared before the task force, such as BP, Duke Energy and the American Petroleum Institute. He did not return phone calls for this article.

Back in 2001, Lundquist was the person to see, and the document suggests that he and his colleagues consulted widely with energy company executives and their lobbyists. That was especially true in the early stages of the project, which focused heavily on how to stimulate domestic oil drilling, promote nuclear power and coal, and respond to the Western electricity crisis, which had caused soaring rates and blackouts in California.

Jack N. Gerard, then with the National Mining Association, had a meeting with Lundquist and other staffers in February. He urged the administration to give the Energy Department responsibility for promoting technology for easing global warming and to keep the issue away from the Environmental Protection Agency, which could issue regulations on greenhouse gas emissions. The administration adopted that position.

Another visitor in March was Eli Bebout, an old friend of Cheney's from Wyoming who serves in the state Senate and owns an oil and drilling company. Bebout said he presented a report to Cheney's staff on behalf of a group of Western state officials recommending increased drilling, use of nuclear power and attention to renewable resources. Bebout said he had been scheduled to meet with Cheney but the vice president was ill.

One advocacy group that visited was the Council of Republicans for Environmental Advocacy, founded in 1998 by Grover Norquist and Gale A. Norton, who became Bush's first interior secretary. Later, the group was run by Italia Federici, who was involved socially with Steven Griles. Griles, then Norton's deputy at Interior, was recently sentenced to prison for obstructing a Senate investigation of disgraced lobbyist Jack Abramoff.

Red Cavaney, president of the American Petroleum Institute, also met with Lundquist, the document shows. Cavaney said they discussed position papers that the API had given to both presidential campaigns and to new members of Congress.

"We're in the business of routinely providing advocacy materials," Cavaney said. "Speaking for myself, I had zero hand in authoring or sitting with anyone from that task force and changing anything."

But the API did seem to have influence with the administration, according to a document obtained by the National Resources Defense Council.

Jim Ford of the API sent Joseph T. Kelliher, then an Energy Department official and now chairman of the Federal Energy Regulatory Commission, copies of the API's well-known positions, along with a "suggested executive order to ensure that energy implications are considered and acted on in rulemakings and executive actions."

Ford's memo was dated March 20, 2001. In May that year, Bush issued an executive order similar to API's proposal.

Cheney appears to have played a more behind-the-scenes role in the task force's deliberations, the document indicates, listing only a handful of meetings with the vice president. Those included a previously reported meeting with Lay, who died last year; a meeting with officials from Sandia National Laboratories to discuss their economic models of the energy industry; and two sets of meetings with lawmakers. Cheney had other meetings, such as with John Browne, then the chief executive of BP, that were not listed on the task force's calendar.

The vice president also met with energy experts he had known, such as J. Robinson West, chairman of the Washington-based consulting firm PFC Energy and an old friend of Cheney's.

Those who met with Cheney said he was intensely interested in waning U.S. energy supplies, even though prices of oil and natural gas were much lower than they are today.

West agreed, and still agrees, with Cheney about opening up more areas in the United States and offshore for oil drilling, but he said he thinks the administration ended up not doing enough to dampen energy demand. West said he also urged in vain that the administration pursue a cap-and-trade system that would include China and India in an effort to reduce greenhouse gas emissions.

"I don't agree with the administration on a number of issues," said West, who gave a memo to Cheney with his views. "But this issue of Cheney being a stooge of the oil industry . . . there's nothing there."

Cheney and Lundquist also met with Daniel Yergin, chairman of Cambridge Energy Research Associates and author of "The Prize," a history of the oil industry. Yergin recalls discussing energy efficiency and natural gas data, which were then showing that increased drilling had for the first time not raised U.S. production.

The task force issued its report on May 16, 2001. Though the report was roundly criticized by environmental groups at the time, some energy experts say that in retrospect it appears better balanced than the administration's actual policy.

Divided into eight chapters, the report correctly forecast higher energy prices, stressed energy efficiency and conservation, and pushed for boosting domestic conventional energy supplies and increasing use of renewable energy. Although it advocated wider drilling and omitted climate-change measures, it also said that "using energy more wisely" was the nation's "first challenge."

Some key proposals, such as opening the Arctic National Wildlife Refuge to oil drilling, have never won congressional approval, but some measures to encourage oil and gas production, coal output, and the development of biofuels and nuclear power have been included in Bush's budgets and in the 2005 energy bill.

"Cheney had his finger on a critical issue," said David G. Hawkins, a climate expert at the Natural Resources Defense Council. "He just pushed it in the wrong direction."

Democrats Press Plan To Channel Billions in Oil Subsidies to Renewable Fuels

The NYTimes reports:


Senate Democrats are seeking a major reversal of energy tax policies that would take billions of dollars in tax breaks and other benefits from the oil industry to underwrite renewable fuels.

The tax increases would reverse incentives passed as recently as three years ago to increase domestic exploration and production of oil and gas. The change reflects a shift from the Republican focus on expanding oil production to the Democratic concern about reducing global warming.

On Tuesday, the Senate Finance Committee will take up a bill that would raise about $14 billion from oil companies over 10 years and would give about the same amount of money on new incentives for solar power, wind power, cellulosic ethanol and numerous other renewable energy sources. The bill is one of the signature issues this year for Democrats, along with immigration and the war in Iraq, and one in which they hope to clearly distinguish themselves from the Republicans.

But Senate Democrats are expected to go beyond the $14 billion in tax changes in the draft bill. Democratic officials said the committee is all but certain to adopt a proposal by Senator Jeff Bingaman of New Mexico that would raise $10 billion from companies that drill for oil and gas in federal waters but do not currently pay royalties to the government.

“We are cutting back subsidies for the oil and gas industry and using that money to finance the development of new and cleaner sources of energy,” said Mr. Bingaman, who plans to attach the entire tax package to the energy bill on the Senate floor next week.

It is unclear how much President Bush or Republicans in Congress will fight the proposed tax shift. The ranking Republican on the Senate Finance Committee, Senator Charles Grassley of Iowa, has already endorsed the $14 billion package.

But the plan could easily founder because of opposition to any one of many hotly disputed provisions in the broader energy bill. Just last week, a threatened filibuster by Republicans forced Democrats to postpone a floor vote on requiring electric utilities to produce 15 percent of their power from renewable fuels. The White House, meanwhile, has threatened to veto the bill if lawmakers do not drop a provision intended to prosecute what Democrats call “unconscionably excessive” gasoline prices.

Senator Charles E. Schumer of New York has proposed that oil companies be prohibited from using an accounting method called “last in, first out” for inventories that saves them as much as $5 billion in taxes a year.

Because Senate Democrats want to offset the cost of any new tax breaks with tax increases elsewhere, many lawmakers are pushing for even more tax raises from oil companies.

Oil executives are protesting loudly, saying that the proposed changes would take money away from exploring and drilling in the United States and increase the nation’s dependence on imported foreign oil.

“They talk about our companies as if they’re owned by space aliens,” said John Felmy, chief economist at the American Petroleum Institute, a trade association. “They talk about energy security, but these provisions could have the opposite effect in terms of reducing our production here and increasing our imports.”

The oil industry has ample reason to worry. With consumers seething about gasoline prices increasing to more than $3 a gallon and oil profits reaching record highs, oil companies would be short of friends in Congress regardless of the party in power.

Beyond the immediate jockeying, however, lies a bigger question: Is Congress putting taxpayers at risk by funneling billions of dollars in subsidies into alternative fuels that are still a long way from being profitable?

Indeed, industry experts said the Senate bill greatly understated the true cost of incentives for renewable fuels. Most of the incentives are set to expire at the end of 2009 or 2010, but Democrats in both the House and Senate have called for an increase in the production of such fuels by 2022. As a practical matter, the vast majority of “temporary” tax breaks are routinely extended once they are passed for the first time.

In addition to higher taxes for oil companies, House and Senate Democrats are hitting at the oil industry in other ways. The Senate bill would give the federal government more power to prosecute companies that engage in “price gouging” on gasoline prices, which is broadly defined in the bill as charging “unconscionably excessive” prices that reflect “unfair leverage.” A similar measure is moving through the House.

Separately, the House Natural Resources Committee passed a bill last week that would, among other things, crack down on companies that cheat on royalties they pay for oil and gas pumped on publicly owned land.

In effect, the various bills would transfer billions of dollars from oil companies to producers of renewable fuels.

The Senate bill would offer $5.6 billion in tax credits over the next three years for companies that produce electricity from renewable fuels like wind and geothermal power. It would offer tax-free bonds for new power plants with renewable or clean energy. It would offer tax credits totaling about a dollar a gallon to producers of cellulosic ethanol, and even bigger tax credits for “biodiesel” fuel. It would extend and expand tax breaks for plug-in electric cars and other vehicles that use alternative energy sources, and it would provide tax breaks for gas stations that offer renewable fuels.

In a nod to the politically powerful coal industry, the bill would also provide $1.5 billion in tax-free “clean coal bonds” for advanced coal-fired electricity plants and $332 million in tax credits for plants that make diesel fuel from coal.

Democrats in the House are moving with similar legislation. The House passed a bill earlier this year that would raise about $14 billion over 10 years from oil companies, and the House Ways and Means Committee is expected to mark up a new tax bill that would offer rich incentives for alternative fuels and increased efficiency.

The Democratic bill contrasts sharply with the energy bill that the Republican-led Congress passed in 2005. The Senate bill offers less than $1 billion in incentives for coal, no tax breaks for nuclear power and tax hikes for oil. But two years ago, Congress approved $11 billion in additional tax breaks, of which $7 billion went to oil, coal and nuclear power.

“It is a dramatic change in policy, targeted at the big oil companies,” said Senator Ron Wyden, Democrat of Oregon. “It will show the country the kind of things we can do by taking away subsidies for fossil fuels and putting the money into new sources of energy.”

Privately, some Democrats say it is payback time: the oil industry’s political contributions have overwhelmingly gone to Republican lawmakers and President Bush, and many Democrats say they have little sympathy for the industry now.

It is unclear whether Republicans or Mr. Bush plan to protect the industry.

In stinging criticism earlier this month, the White House Office of Management and Budget said the proposed price-gouging measure amounted to price regulation that would jeopardize investment in oil production and ultimately hurt consumers.

In 2005, Mr. Bush threatened to veto a one-year measure that blocked oil companies from using the “last in, first out” accounting method for inventories. The Bush administration, echoing charges by the oil industry, said the measure amounted to a one-year windfall profits tax that would frighten investors by raising the prospect of further tax raises whenever oil prices jumped sharply.

Mr. Schumer’s proposal is similar to the 2005 proposal, except that his measure would be permanent.

The oil industry still has persuasive clout in Washington. Exxon, Shell and trade groups like the American Petroleum Institute have hired former Democratic lawmakers and Democratic lobbyists to help press their case.

They have carefully positioned themselves, picking their fights on selected issues that attract fairly little popular interest but affect potentially large amounts of money.

The effort is mostly defensive — fending off tax increases — but also has offensive elements. Royal Dutch Shell and other big companies hope to be big players in coal-based liquid fuels. And the industry in general is still pushing for Congress to open up more areas on the outer continental shelf for deepwater drilling.

But industry executives hold out little hope for emerging unscathed.

Bush & Industry Block Anti-Terror Regulations For Chemical Plants

At the Huffington Post, Thomas B. Edsall writes:

For nearly seven years, the chemical, oil and gas industries have successfully fought proposals to require stringent anti-terror security measures at facilities storing poisonous materials such as chlorine and methyl mercaptan.

These industries have been especially opposed to legislation requiring "inherently safer technology," a policy industry officials and the Bush administration view as both setting an excessively high standard and as leaving companies more vulnerable to lawsuits for failing to comply.

The chemical, oil and gas lobbies have successfully fended off regulation even under a Democratic Congress. A provision adamantly resisted by the industry was included in the first Iraq supplemental appropriation, which was vetoed by President Bush. The House added it again to the second Iraq supplemental appropriation, but it was quietly removed during final negotiations between top officials of the House and Senate at the request of Republican Senate leader Mitch McConnell, whose staff said he was acting at the behest of the White House.

Advocates of regulating chemical manufacturers and users have faced an uphill fight from the start.

This dispute began less than two months after the terrorist attacks of 9/11, when publicly released government documents disclosed the existence of more than 100 factories and other facilities where a successful attack would produce toxic clouds with the potential to severely sicken or kill at least a million people.

Then-Democratic Senator Jon Corzine of New Jersey, a state with more than its share of such facilities, introduced the Chemical Security Act in November, 2001. With environmental groups warning of the danger of a domestic Bhopal, the 1984 Union Carbide Corp. disaster which killed more than 3,000 in India, the Environment and Public Works Committee approved the Corzine Bill unanimously, 19-0.

Facing the threat of aggressive government oversight, Frederick L. Webber, then-chairman and chief executive of the American Chemistry Council, mobilized industry forces in a lobbying campaign that legislative strategists in Washington recall as one of the most effective in the past decade.

Webber joined forces with the American Petroleum Institute and formed a broad-based coalition that included truckers, railroads, the Fertilizer Institute, the National Propane Gas Association and the Chlorine Chemistry Council.

All these groups had particularly strong leverage in both the Republican Congress and the Bush administration because they had lined up firmly in the GOP corner before the Republican takeover of Congress in 1994.

In 1994, the oil and gas industry contributed a total of $17.5 million to Congressional candidates, with two thirds of it, $11 million, going to Republicans, according to the Center for Responsive Politics. By 2002, the industry gave a total of $25 million, with 80 percent, $19.9 million, going to Republicans. From 1990 to 2006, the chemical industry contributed $3 to Republicans for every $1 to Democrats, or $46 million to $14.2 million.

Similarly, at least 85 of Bush's major fundraisers - "Pioneers" who collected at least $100,000 and "Rangers" who collected $200,000 or more - were corporate officials in oil, gas, chemical and fertilizer companies.

Although industry forces with the backing of the administration were able to fend off the Corzine bill, pressure to require new security measures at facilities housing dangerous chemicals continued. In 2006, the Republican Congress authorized the Department of Homeland Security to oversee this sector.

That legislation and the regulations growing out of it, issued two months ago, met with the approval of the industry.

On September 30, 2006, American Chemistry Council President and CEO Jack N. Gerard declared that the "ACC would like to thank Congress for their work in accomplishing our shared objective of passing meaningful chemical security legislation this year." When the actual regulations were issued last April, the Council released a statement declaring: "New DHS Regulations Represent a Major Step Forward For Chemical Security."

Democratic legislators, especially those from New Jersey, were highly skeptical, however. Corzine, now N.J. Governor, Senator Frank Lautenberg and Representative Steve Rothman all warned that their state's tough regulations could be preempted by weaker federal rules.

Both Rothman and Lautenberg sought to firmly establish the authority of New Jersey and other states to set more stringent regulations than the federal government by attaching language to the Iraq supplemental. After that maneuver failed, both legislators attached similar language to the House and Senate versions of the Department of Homeland Security appropriations bill, on the theory that it is the kind of measure Bush cannot afford to veto.

"Allowing the State of New Jersey to protect its chemical plants from al Qaeda attacks is one of the most important provisions in this legislation. It took a great deal of effort to overcome the chemical plant lobby, but so far so good," said Rothman. "The Bush Administration should not be stopping our states from protecting themselves from chemical attacks," said Lautenberg. "I am proud we fought back the chemical industry lobbyists."

The two New Jersey legislators have not, however, won their fight. Both Bush and House Republican whip Roy Blunt warn that Bush could well veto the Homeland Security appropriations bill. A recent Blunt statement carried the headline, "DEMOCRATS FAIL TO SECURE VETO-PROOF MAJORITY ON BLOATED HOMELAND BILL"

Bush, who is adamantly opposed to the Rothman-Lautenberg language, declared in his June 16 radio address: "I will use my veto to stop tax increases and runaway spending," suggesting the fight over chemical plant security will not end soon.

Gail Norton To Join Royal Dutch Shell

The Denver Post reports:

Former Interior Secretary Gale Norton will join oil giant Royal Dutch Shell as a general counsel in its exploration and production business in mid-January, working primarily out of Colorado.

Norton, who stepped down from Interior in March, is a longtime Colorado resident who served two terms as state attorney general in the 1990s. During her tenure at Interior, she drew fire from environmentalists and praise from industry groups.

Shell said in a statement Wednesday that Norton, 52, will "provide and coordinate legal services" for its unconventional-resources unit, which is developing and testing proprietary technology to recover oil from shale and extra-heavy oils.

Colorado, Utah and Wyoming have massive oil- shale deposits, with as much as 1.1 trillion barrels of oil technically recoverable.

Shell owns 40,000 acres of oil-shale deposits near Meeker on which it hopes to begin commercial production by about 2015.

When Norton left Interior after five years, she said her primary reason was so she and her husband, John Hughes, could return to "the mountains we love in the West," as well as return to the private sector.

Norton could not be reached for comment.

Royal Dutch Shell is a multinational oil company with corporate headquarters in The Hague, Netherlands. Its U.S. subsidiary, Shell Oil Co., is based in Houston. The Forbes Global 2000 ranked Royal Dutch Shell as the seventh-largest company in the world in 2006. Its revenues in 2005 were $307 billion.

As Interior secretary, Norton was attacked by environmentalists for her pro-development policies regarding oil and gas, coal and timber. She also reopened Yellowstone National Park to snowmobiles.

Matt Baker, director of Environment Colorado, said he was disheartened by Shell's hiring of Norton.

He said his organization has done a lot of work with Shell on sustainability issues, particularly development of wind-powered energy resources.

"I think it's unsettling if she's going to be working on oil shale. Shell has cultivated an image as a good environmental steward who wants to take its time and do it right," he said. "For them to hire someone like Gale Norton undermines that claim."

Industry advocates and Norton's fellow Republicans, however, have praised her as a realist willing to open public lands to drilling during a time of energy shortages that threatened the economy.

Before moving to Interior, Norton was senior counsel at Denver law firm Brownstein, Hyatt & Farber.

Steve Farber, one of the firm's founding partners, said Norton's move is win-win: Shell will benefit from Norton's skills, and Norton will have the opportunity to return to Colorado.

"She (has) a wonderful wealth of knowledge and experience, and she will be a great asset to the team at Shell," he said.

Waist Deep in Big Oil

The Nation reports:
The mid-November revelation in the Washington Post that as early as February 2001 senior executives of at least four of the country's biggest oil companies met with aides to Vice President Cheney has reopened the debate over Big Oil's influence on the Bush Administration's energy policy. The immediate controversy concerns whether executives of ExxonMobil, Conoco, Shell and BP America misled the Senate Energy and Commerce committees when they denied knowledge of the meetings in testimony on November 9. The leaked documents confirm that these meetings in fact took place, but because Republican chair Ted Stevens declined to oblige the executives to testify under oath--which committee Democrats strongly protested at the time--they cannot be charged with perjury. (They could, however, be charged with making false or fraudulent statements to Congress.)

The executives' evasive answers have renewed questions about the functioning of the secretive White House Energy Task Force, especially its unwillingness to draft policies that transcend the interests of Big Oil. The focus on industry profits and prevarication, although it's important, misses a much more important reason for the Bush Administration's desperate attempts to keep documents related to the task force secret. In a word: Iraq.

Cheney's Halliburton Won $3.8 Billion In Contracts From Government

The Guardian reports:

The oil services company once headed by United States Vice-President Dick Cheney reaped massive rewards in government contracts and bank loans after he took its helm, including one deal with a Russian firm under investigation for mafia connections.

This was disclosed as President George Bush renewed his efforts to stabilise stock markets and distance himself from the wave of accounting scandals afflicting corporate America. Yesterday, Bush urged Congress to punish corporate abuses.

From 1995 to 2000 Cheney was chief executive and chairman of Halliburton, the Dallas-based company that provides products and services to the oil and energy industries, employing 100,000 people worldwide.

Its share value has fallen by two-thirds because of lawsuits over asbestos poisoning and an investigation of accounting changes introduced under Cheney.

Most of Halliburton's government contracts were won by its construction subsidiary, Kellogg, Brown and Root - a company with British origins that was sold to the US parent in the 1970s.

Documents uncovered by a Washington researcher, Knut Royce - formerly with the Centre for Public Integrity - and by The Observer show that government banks loaned or insured loans worth $1.5 billion during the five years that Cheney was chief executive, compared with only $100 million during the previous five years.

The company under Cheney benefited from $3.8bn in government contracts or insured loans. Although Bill Clinton was in the White House, Capitol Hill - where the Appropriations Committee handles government contracts - was controlled by Cheney's Republican Party, to which Halliburton doubled its contributions to $1,212,000 after his arrival.

The most eye-catching contract was for the refurbishment of a Siberian oilfield, Samotlor, for the Tyumen oil company of Russia. The company was loaned $489m in credits by the US Export-Import Bank after lobbying by Halliburton; it was in return to receive $292m for the refurbishments.

The White House and State Department tried to veto the Russian deal. But after intense lobbying by Halliburton the objections were overruled on Capitol Hill. One of Halliburton's top lobbyists was David Gribben, who had been Cheney's chief of staff at the Pentagon.

The State Department's concerns were based on the fact that Tyumen was controlled by a holding conglomerate, the Alfa Group, that had been investigated in Russia for mafia connections.

Alfa strongly denies that it has ever had any criminal connection, describing the allegations as 'nonsense'.

Cheney was highly valued by Halliburton because of connections made in the Arab oil-producing states while Defence Secretary during the war against Iraq under George Bush Snr.

Halliburton denies that Cheney used his position or contacts to win government business. A spokeswoman said: 'Any innuendo that Halliburton or Dick Cheney has acted improperly is false.'

The company's fortunes have flourished during the 'war on terrorism'. It has landed contracts to build the cells for al-Qaeda detainees at Guantanamo Bay.

A Securities and Exchange Commission investigation is under way into accounting changes introduced by Halliburton in 1998, when it inflated its revenue figures by including uncollected debts.

Forbes' Faces: The Koch Brothers

Forbes' reports:

When the federal government drops 86 felony charges against your company, it should be cause for celebration. Not so for brothers Charles and David Koch, who run family oil conglomerate Koch Industries.

When prosecutors reduced a list of the company's alleged environmental crimes from 97 to 11 items on Wednesday, the move generated little cheer from company headquarters in Wichita, Kans. Koch Industries still faces the harshest of the government's criminal charges, in which the petroleum giant is accused of spewing the toxic chemical benzene into the environment in 1995 and then trying to hide it from government investigators.

A federal grand jury indicted the privately held company and four of its employees in September on 97 related charges for alleged violations that took place at the company's refinery in Corpus Christi, Tex. Founded in 1940 by the late Fred Koch, father of Charles and David, Koch Industries faces up to $502 million in fines. Four former company executives face fines and possible prison terms.

It's just the latest in a string of mishaps for Charles, 64, the company's chairman, and David, 60, the executive vice president. In September 1999, Koch Industries paid $8 million in damages after a Minnesota oil spill. In January 2000, the company was slapped with the largest civil penalty ever against one company. It was forced to pay a $35 million settlement for 300 separate oil spills in six states, leaking 3 million gallons of crude oil from corroded pipelines into local waters.

Adding to all this is the backstabbing within the Koch family. Estranged brother William blew the whistle on the company for stealing oil from federal and American Indian lands in the 1970s; an Oklahoma jury found the company guilty last year and slapped it with a half million-dollar fine. Charles bought out William's shares in the company in 1983.

President-elect George W. Bush cooperated with the Justice Department's investigation of Koch Industries while serving as governor of Texas. But even though company executives contributed heavily to Bush's presidential campaign, they are unlikely to see benefits from having friends in high places.

U.S. District Judge Janis Jack of Corpus Christi prodded government lawyers to streamline their charges against Koch Industries, but that's not necessarily a good thing. Prosecutors dropped 86 relatively petty allegations--including charges that the Koch refinery used improper equipment to handle benzene--and in doing so may have strengthened their broader pollution case against the company.

Charles and David both have degrees from MIT and a net worth of over $3 billion each, but their continual brushes with the law lend an ironic tone to their company's slogan: "You know us better than you think."