Democrats: When the War Was Lost

Here we are, in early 2006, and the headlines are briefly given over to the disclosure that the oil companies have been underpaying their royalties from drilling on US public lands by $7 billion. One of the firms, Kerr McGee, is saying defiantly it doesn't owe the US Treasury a penny and is suing in US court to have that view confirmed.

There was a time, a generation ago, when people here in the United States thought and wrote about the underpinning of the US economy--the energy industry--in a serious way. In the mid-'70s the country was bustling with groups pushing for public control, for extending the regulatory powers of the Federal Trade Commission over natural gas prices, for break-up of the oil companies. In the late 1970s I remember a bill put up by Senator Jim Abourezk of South Dakota calling for divestiture of the oil companies failed by only three votes on its first reading. Abourezk remembers Texaco immediately pumped millions into a pro-oil PR campaign.

In the 1976 Democratic primaries every candidate, from the left-populist Fred Harris to the center-right Jimmy Carter felt obliged to sign on to a statement thrust under their noses by a group called Energy Action committing themselves to aggressive moves to extend public control over the private energy sector.

In came Carter and up went the solar collectors on the White House roof. Aside from that it was downhill all the way. The oil companies spend millions to winch themselves out of the PR debacle of the oil embargo of 73-74, in which the public rightly perceived them as eager co-conspirators with OPEC in price gouging and profiteering.

By the time Carter surrendered the White House and its solar panels to Reagan (who swiftly tore them down and sent them up to Unity College in Maine) the first decisive counterattacks had taken place. The FTC's wings were clipped, with the oil industry positioning itself for the next great bonanza, in the Gulf of Mexico, the outer continental shelf of the California coast and Prudhoe Bay, which had just come on line. The trans-Alaska pipeline had been built and Alaska primed for the taking. In the interior American west the oil shale deposits of the Rocky Mountain Front were awaiting the green light and the necessary public subsidies.

For the oil men the overarching political task was to get the US Congress to surrender all effective public control and oversight and concentrate on the simple business of handing out these same subsidies. Remember, all these resources are in the public domain. On private lands the oil men had the depletion allowance, one of the great wonders of the world. On public lands the equivalent act of congressional generosity would be to relieve the oil companies of the burden of actually paying any royalties on the publicly-owned oil they were taking out of the ground and flogging to the public at a substantial mark-up.

The Reagan years were spent in clearing away inconvenient regulatory underbrush. While liberals cheered the downfall of James Watt and while the Sierra Club raised royalty-free millions by putting his sour visage on their mailers, the oil industry patiently pushed ahead, priming its champions in Congress for the struggles ahead. The strike force was to be a Louisiana/Alaska axis, with the Democratic senator for Louisiana, Bennett Johnson, speaking for interests poised to expand offshore drilling in the Gulf of Mexico and to build the necessary mainland refineries and pipelines and the Alaska senators, Ted Stevens and Frank Murkowski, pressing for royalty-free drilling everywhere in Alaska, from the North Slope, to the Kenai peninsula to the Navy Reserve to ANWR.

In came the Clinton crowd, briefly flapping its banner of economic populism. By the summer of 1993 the banner was furled, populism in pell-mell retreat and the sustainability of the corporate bottom-line dead center in Clinton's agenda.

In the summer of 1996 the president played host to a coven of oil company executives during his pre-convention vacation in Jackson Hole, Wyoming. It was a victory party. The executives were incandescent in the flush of a victory they had been scheming for the previous decade. Bennett Johnson and the Alaskans had scored one of the most significant victories for the oil industry in the twentieth century. The fruits of their triumph was called the Federal Oil and Gas Simplification and Fairness Act. Beyond this demure title were a series of provisions waiving all royalties due the US Treasury from the oil companies.

Finally approved by Congress on the last day of the 1996 session, the law did four things: it placed a seven-year limitation on the auditing of oil company books recording income from drilling on public lands; it turned over many of the auditing responsibilities concerning drilling on federal lands to the states; it permitted the oil companies to sue the federal government to collect interest on "overpayments," and it allowed those very same companies to set the "market price" of the crude oil upon which the royalty payments to the federal government are based.

In reality, the bill legalized a scam the big oil companies had been running for decades, underpaying royalties on crude oil extracted from federal lands, including the Alaskan fields.

Typically, Clinton cast the measure as simply a way of cutting government red tape and streamlining needless bureaucracy. "Many Americans don't know it, but a significant percentage of the oil and gas reserves in the United States are on federal lands," Clinton proclaimed. "Until today, regulatory red tape and conflicting court rulings had discouraged many companies from taking full advantage of these resources." This bill, Clinton remarked, was part of an overall strategy that "included lifting the 23-year old ban on Alaskan oil exports and efforts to increase production in the Gulf of Mexico." All this was to be done, needless to say, while protecting the environment.

Amid the cheers, the oil company executives laid out to the obedient president the next stages of their agenda. They wanted to open up the national reserve in Alaska, to expand drilling in the Gulf of Mexico and to overturn the 30-year ban on the export of Alaska crude oil, a provision deemed necessary in the early 1970s to win passage of the original pipeline bill.

The quid pro quo was a tidal wave of political contributions, Arco's in the lead, into the Democratic Party treasury. The chairman of Arco, Lodwrick Cook, celebrated his birthday in the White House Rose Garden, with Clinton carrying in the cake.

Twenty years after their nadir in the early 70s, the oil companies had won it all.

By the mid-90s the oil industry no longer had any effective foes arguing for public control. Senators like Abourezk and Howard Metzenbaum of Ohio had gone. The public interest groups were successfully unplugged during Clinton time and the credibility of proposals for public control of the nation's energy resources undermined by years of neo-liberal derision coming from groups like the NRDC and the Environmental Defense Fund which saw higher prices as the key to conservation, and which thus helped launch Enron on the world.

Today Exxon can schedule a net profit of nearly $100 billion in 2006. Meanwhile there are a few news snippets about a 3,600-mile pipeline scheduled to run from Prudhoe Bay, across Canada and down into the Midwest. Deployment of this pipe, 52 inches in diameter, will rival the Three Gorges dam in China as the largest construction project on the planet. There's not a political ripple to be seen. The green groups are silent, even though the project is three and a half times the length of the original Alaska pipeline whose scheduled construction in the early '70s prompted a savage political battle.

And yes, there are also stories about the Democrats being short of ideas. The ideas got flushed down the drain in Carter time. These battles were lost long, long ago.