Lobbying strategies and electioneering in significant flux

June 9, 2008 - Three energy industry titans can be counted on to pack a ballroom when slated to speak on a panel together: Red Cavaney, David Parker and Thomas Kuhn.

For more than a decade the oil, gas and power association heads have navigated shifting political winds and cut across regional divides to forge consensus.

Their colleagues credit them with buttressing the industry's clout in Washington and deftly fending off recurring attacks on energy profits.

For Cavaney of the American Petroleum Institute (API), Parker of the American Gas Association (AGA), Kuhn of the Edison Electric Institute and a platoon of energy lobbyists, shielding the energy sector from what they perceive as poor public policy has also meant echoing White House warnings that addressing global warming without lifting restrictions on domestic oil and gas production would have dire economic consequences.

But the push in Congress to address climate change, shifting public priorities and the prospect that Democrats will extend their hold on Congress and capture the White House in November have caused veteran lobbyists and trade groups to rip up some of the old playbook - and fast.

Campaign finance and lobbying records, interviews in recent months and a surge in paid TV and newspaper advertising from every corner of the energy industry suggest lobbying strategies and electioneering are in significant flux.

A consistent energy sector message is hard to pin down. Regional differences that dominate energy politics are compounded by fuel sectors jockeying for position.

Wall Street groups have urged lawmakers to press on with a federal mandate to cut carbon emissions and for industry groups to compromise, saying policy uncertainty has made it hard to invest long-term, even as a flotilla of energy lobbyists sought major changes to a climate bill before the US Senate.

The metaphor bandied about among energy practitioners is that climate change has produced nothing less than the Super Bowl of lobbying and election-year politicking.

"Most lobbying firms are reading the tea leaves and watching the polls in anticipation of changes in leadership at either end of Pennsylvania Avenue," said Jim Hoecker, a Washington attorney and former Federal Energy Regulatory Commission (FERC) chairman.

Political action committees (PACs) for energy companies and trade groups are increasing campaign contributions to Democrats after fourteen years of lopsided financial support for Republican candidates.

Public pressure to address climate change

Public pressure to address climate change has also softened the influence of K Street's biggest rock stars, sources in the energy community say, and could help shape gradual transitions at the big trade groups, opening doors for executives who tout their environmental credentials.

Political action committees for electric utilities and oil and gas companies adapting to an exceptional suite of challenges have given $6.3 million to Republican candidates and about $4.7 million to Democratic candidates for federal office during the 2008 election cycle, according to data collected by the Center for Responsive Politics through the end of April.

A broader category of energy PACs - for utilities, oil and gas, coal, wind and solar energy companies - contributed $12.8 million through April, which breaks down to $5.5 million to Democrats and $7.3 million to Republicans.

While energy industry giving still leans heavily toward Republicans, an analysis of election cycles dating to 1994 shows the campaign finance gap is closing.

The $7.1 million in campaign contributions by electric utilities through April, for example, are evenly split between Democrats and Republicans. Utilities gave far more to Republicans over the past decade.

Southern Company, an Atlanta-based utility that has been very active in Washington, has given 44% of its PAC money to Democrats this election cycle.

In the last two presidential election years, 2004 and 2000, Southern gave just 31% and 25% of its PAC contributions to Democrats.

Doug Weber, a Center for Responsive Politics researcher, said campaign contributions near the end of primary season tend to track in a similar way through November.

Total contributions from individuals with ties to energy companies and industry PACs top $35 million, according to the data, favoring Republicans 61% to 39%.

But the last time Democrats received more than 28% of total energy sector contributions was in 1994, a transition year that resulted in Republican control of the House after decades of Democratic rule.

Bruce Oppenheimer, a Vanderbilt University political science professor who studies energy politics, said utilities still face a fleet of unresolved issues.

Chief among them is concern that Congress could require utilities to produce a percentage of their power supplies from renewable fuels, or pass a carbon cap-and-trade bill that is too costly and puts too many coal-fired power plants out of business.

"Access reasons prevail," Oppenheimer said of the persistent desire of many industries to have the ear of key legislators. "Democrats are likely to be in control, and you certainly want to get a hearing."

Oil and gas contributions track much as they have over the past two decades, heavily Republican.

But even those individual and PAC donations are creeping closer to where they were before the power shift in Congress in 1994.

This election cycle, about 73% of the $14 million in total oil and gas contributions have gone to Republicans. That's slightly off the 80% or more going to the GOP during the past four election cycles, and getting closer to the 62% of contributions going to Republicans in 1994.

"They are finding it more and more difficult to take stands that are hostile to climate change legislation," Oppenheimer said of the oil and gas industry. "It's easy to make those arguments in Dallas, but it's getting harder to do it in Peoria."

The fossil fuel, automobile and electric utility industries are likely to be on the losing side of the broader climate issue, he said. "If you put all your money on one side, there may be nobody articulating your point of view."

Bedrock political issues remain unchanged

Still, some political certainties haven't changed. Oppenheimer said the partisan polarization of Congress on bedrock issues such as tax breaks for oil and gas producers and subsidies for alternative energy sources and low-income consumers is likely to remain in place for some time.

Democrats have made inroads in states that vote solidly Republican, he said, but the GOP still dominates the oil and gas producing states of

Texas, Louisiana, Oklahoma and Alaska. Colorado is well in the "red" camp despite a growing environmental movement.

Short of 60 seats in the Senate, Oppenheimer asserted, Democrats are not expected to gain ground in oil and gas country; but as long as Democrats have a majority in Congress, he said, oil and gas interests may see fit to steer more campaign funding their way.

In Louisiana, for example, oil and gas interests have a decision to make if Democrats continue to strengthen their grip on Congress.

"What do they do with Mary Landrieu's Senate race?" said Oppenheimer. "Maybe they'd like a Republican to have that seat, but you also may want a voice within the Democratic caucus."

Daniel Weiss, director of climate strategy at the Democrat-leaning Center for American Progress, said the uptick in contributions to Democrats by electric utilities suggests the industry wants a seat at the table when deals are cut on a climate change bill.

Senator Barack Obama, the Democratic nominee for president, has received more money from utilities in the 2008 cycle than anybody else in the Senate, he noted, despite the industry's misgivings about his plan to cut carbon emissions 80% by 2050 and auction emissions credits.

But to which Senate Democrats campaign money has gone might matter more this year, Weiss said.

A small fraction of electric utility money has gone to Majority Leader Harry Reid and climate bill sponsor Senator Barbara Boxer of California, Weiss pointed out.

Conversely, since 1990 utilities have contributed nearly $900,000 to Landrieu of Louisiana and Senator Jeff Bingaman of New Mexico, both moderate Democrats who have led recent energy debates but who have played lesser roles in the climate debate this year.

Because of this shift in legislative focus, utilities "may find they're not really buying a seat the table," Weiss said.

Fundraising is a staple for lobbyists and members of Congress nowadays, sources noted.

Ethics laws have squeezed out one-on-one lunches with lawmakers and staff and forced more face time to accompany the writing of campaign checks.

During an interview with Edison Electric Institute (EEI)'s Kuhn in April, he took pains to emphasize that lobbying and electioneering in the electric power industry is a bipartisan business.

He joined other trade group officials in saying the Senate climate bill introduced by Senators John Warner, Republican-Virginia, and Joseph Lieberman, Independent-Connecticut, poses unique challenges for lobbyists

EEI had a seat at the table in 1990 as Congress put the final touches on the Clean Air Act, Kuhn explained. The group reached consensus among its members on most provisions but not all, and individual companies lobbied their own interests.

To a far greater degree, companies were expected to split off as Congress negotiated the details of climate legislation, allocating costs and carving out exceptions for certain companies or sectors of the energy sector.

"Everybody's watching out for their own economic interests. We've got to get a more coherent plan," said former FERC commissioner Nora Mead Brownell.

Following several stops and starts over the past month, the climate bill died in the Senate in the week ended June 6.

But with a Democratic majority, Brownell and other sources said part of coming together will mean maintaining that seat at the table.

Doing so may mean that trade groups and lobbying firms push executives and lobbyists with Democratic ties to more visible positions.

Kuhn, Cavaney and Parker tend to travel in Republican circles, Washington observers noted. All three also are near or at retirement age; late the week ended June 6 (with Cavaney having already announced) / Cavaney announced his intent to retire in November.

Sources in those groups wouldn't confirm as much, but several acknowledged that gradual transitions are afoot.

"We frankly have pitched our ideas on a bipartisan basis," said Jeffrey Petrash, managing counsel for government relations at the American Gas Association (AGA). "But with the outcome of the 2006 election it was immediately apparent to us that [the Democrats] had different priorities from the old leadership. Our means of presenting our views needed to be informed by that fact."

Creating alliances with groups outside the energy industry, including environmental groups, has become every bit as critical as building consensus inside the industry, he said.

Hunter Johnston, a lobbyist who represents the American Petroleum Institute (API), said any climate bill will mean profound changes to how the energy industry is capitalized.

The issue has eaten up more of his time in recent months. "What does it mean for fuel selection, cost of fuels and the price of commodities?" he said. "The nature of this debate has changed so fundamentally."

Hoecker, the former FERC chairman, said climate change has scrambled some of the traditional regional and ideological splits in Congress over energy. "It's not entirely clear where the leadership on something like climate change, and its impact on energy policy, will come from," he said. "It will be important from a lobbyists' standpoint to make sure they've got all the bases covered."

The need to broaden that appeal will hit the major trade groups, as investment opportunities shift energy industry priorities, he continued.

Trade group leaders "have a premium value because of their relationships with the administration," he said. "When those relationships disappear, there tends to be some changes."

The changes will be gradual, Hoecker said. "There's a lot of momentum and inertia in this town. Some of those changes will happen."