Energy Lobby Behind McCrory’s Oil Crusade

This story first appeared in Facing South, a publication of the Institute for Southern Studies. 

When the BP Deepwater Horizon oil rig exploded in flames off the Louisiana coast five years ago, the disaster killed 11 workers, injured 17 others and unleashed an undersea geyser that spewed more than 160 million gallons of oil into the Gulf of Mexico.

The BP disaster would go on to pollute 1,100 miles of coastline and has been blamed for long-term damage to marine life and the health of cleanup workers and coastal residents, as well as costing the tourism and fishing industries an estimated $30 billion through 2020.

The scale of the calamity — the biggest oil spill in history — led many lawmakers and Gulf Coast advocates to not only call for safer approaches to offshore drilling, but to rethink the nation’s reliance on offshore oil. After a halting response that drew criticism, President Obama declared two months after the spill began that “no matter how much we improve our regulation of the industry, drilling for oil these days entails greater risk. […] The tragedy unfolding on our coast is the most painful and powerful reminder yet that the time to embrace a clean energy future is now.”

Five years later, however, little has changed. Oil and gas production in the Gulf is expected to reach pre-spill levels this year. Congress has not passed any far-reaching new safety legislation for offshore oil and gas drilling, and the U.S. Interior Department has implemented only piecemeal reforms, on well casings in 2010 and cementing of wells in 2012. Earlier this month, it announced new safety requirements for blowout preventers for oil and gas wells — a reform the industry had already adopted voluntarily.

Indeed, instead of moving away from risky offshore oil, the U.S. is now poised to expand exploration and drilling in vast new areas of the ocean. Earlier this year, energy interests scored a major victory when the Obama administration announced it would include waters off the coasts of Georgia, North Carolina, South Carolina and Virginia in a draft five-year plan for offshore oil and gas leasing beginning in 2017 — the first time a federal lease has been proposed for the Atlantic since the early 1980s.

The oil and gas industry’s success in getting Atlantic drilling back on the agenda can be traced in large part to the full-throttle lobbying efforts of the Outer Continental Shelf Governors Coalition — a secretive group founded in 2011 to revive and expand offshore drilling in the wake of the BP disaster.

Based in the offices of its chairman, Republican Gov. Pat McCrory of North Carolina, the Governors Coalition now includes member governors from nine coastal states. The group describes itself as the voice of these state leaders in their efforts to “foster a productive dialogue” with the federal government over the future of offshore oil policy.

However, an 18-month investigation by Facing South finds that despite its image of being a group of publicly-elected state officials, the Governors Coalition is largely run and managed by two groups tied to the oil and gas industry.

Drawing on thousands of pages of documents obtained through public records requests to the offices of Gov. McCrory and other officials, Facing South has uncovered new details about the Governors Coalition and its close but largely concealed ties to HBW Resources, a corporate lobbying and public relations firm representing some of the nation’s biggest energy interests, and the company’s sister group the Consumer Energy Alliance, a “dark money” nonprofit organization that doesn’t have to disclose its backers. Our findings add to previous details about the groups’ connections reported last year by the Center for Public Integrity.

For government ethics watchdogs, the unusual relationship between the Governors Coalition and oil and gas industry representatives raises troubling questions about transparency, the blurring of lines between public and private interests, and who is driving the national debate about offshore drilling.

“The until-now hidden connection between energy interests and the Governors Coalition illustrates how big money all too often calls the tune in today’s public policy debates,” says Common Cause President Miles Rapoport. “Unfortunately, it appears these governors have surrendered their independence and are providing a front for the energy industry’s drive to expand drilling for offshore oil and natural gas.”

Capitol Crusade: Big Oil joins forces with key governors

Soon after the BP disaster, oil and gas interests sprung into action to refurbish the industry’s image and ensure their long-term plans for expanding offshore drilling weren’t derailed.

In the face of skepticism about offshore drilling and calls to shift towards clean energy, the oil and gas industry spent unprecedented sums of money on political influence. According to OpenSecrets.org, the industry more than doubled its campaign contributions to federal candidates from the 2010 to the 2012 election cycle to more than $70 million. Oil and gas companies also dramatically expanded their independent or “outside” political spending following the U.S. Supreme Court’s 2010 Citizens United decision, from about $2.5 million in 2010 to almost $18.9 million in 2014. The industry’s spending on electing sympathetic lawmakers was complemented by more than $141 million spent on federal lobbying in 2014 alone.

Then in 2011, just over a year after the BP disaster, a new lobbying force appeared: the Outer Continental Shelf Governors Coalition, a group of coastal state governors who, according to the group’s website, “support policies that encourage an expansion of American energy, particularly U.S. offshore energy resources.”

The Governors Coalition, launched by Republican governors of Alaska, Louisiana, Mississippi and Texas, now includes, in addition to chairman Gov. McCrory, Republicans Greg Abbott of Texas, Robert Bentley of Alabama, Phil Bryant of Mississippi, Nikki Haley of South Carolina, Bobby Jindal of Louisiana and Paul LePage of Maine. Democrat Terry McAuliffe of Virginia joined shortly after his election in 2013, and Independent Bill Walker of Alaska came on board after his victory last year. Each governor’s office pays $1,000 a year, presumably taxpayer money, for membership in the Coalition.

From the beginning, the Governors Coalition has been open about its agenda: to expand offshore oil and gas drilling, both in areas where it is currently allowed in the Gulf Coast and Arctic Ocean, as well as opening up the untapped waters of the Atlantic Ocean. The position of governors is especially critical in deciding the fate of Atlantic drilling, since the Outer Continental Shelf Lands Act that guides the federal offshore leasing process gives significant weight to governors’ recommendations.

The Governors Coalition has been less open, however, about its close relationship to the oil and gas industry, which stands to reap immense profits if the elected officials are successful in promoting their pro-drilling agenda.

According to documents obtained by Facing South, the Governors Coalition — despite being ostensibly led by elected state officials and based in McCrory’s office — is largely managed and operated by two interrelated private outfits directly tied to the energy industry: the Consumer Energy Alliance, a 501(c)(4) “social welfare” nonprofit that under law is not required to disclose its donors, and HBW Resources, a corporate lobbying and public relations firm.

The Consumer Energy Alliance bills itself as the “voice of the energy consumer.” The dark-money group counts more than 90 energy companies and industry associations among its members, including the five so-called “oil supermajors”: BP, Chevron, ConocoPhillips, ExxonMobil and Shell. The Alliance has been a vocal advocate of fracking, the construction of the Keystone XL pipeline, and expanded offshore oil drilling. The watchdog Center for Media and Democracy calls the Alliance a “front group for the energy industry.”

Documents obtained by Facing South show the Consumer Energy Alliance has an especially close relationship with one leading figure in the oil and gas industry’s political network: HBW Resources, a lobbying and public relations firm founded in 2005 that specializes in energy development. HBW Resources’ current lobbying clients include Noble Energy, a major oil and gas exploration and production company based in Houston and a member of the Alliance; its previous clients include the American Petroleum Institute, the oil and gas industry’s leading advocacy group.

The Consumer Energy Alliance and HBW Resources are so closely intertwined that it’s difficult to tell where one group ends and the other begins:

• All of the staff listed on CEA’s website are also employees of HBW Resources.
• CEA was officially registered as a tax-exempt organization by David Holt, the “H” in HBW Resources and the firm’s managing partner, in 2008, according to an IRS letter confirming the group’s nonprofit status. Holt currently serves as CEA’s president.
• CEA’s mailing address is 2211 Norfolk St., Suite 614 in Houston — the same address as one of HBW Resources’ main offices.
• Websites for HBW Resources and CEA are hosted at the same IP address as dholtlaw.com and several other pro-drilling sites.
• CEA has also paid HBW Resources a substantial amount of money in contracting fees. According to CEA’s latest tax filing for 2013, of the group’s $3 million in income, $1.3 million was paid to HBW Resources for “management & professional services.”

Blurred Lines: Public vs. private

After the BP spill, the energy lobbyists at HBW Resources and the Consumer Energy Alliance sought new messengers to promote the offshore drilling agenda. They found the allies they needed in four Republican leaders from coastal states who would launch the Outer Continental Shelf Governors Coalition — a group in which the lobby firm and the dark-money nonprofit have played a central and often secretive role.

The Governors Coalition made its public debut on May 2, 2011 at the Offshore Technology Conference in Houston, one of the oil and gas industry’s largest trade shows.

The group’s original members — Bobby Jindal of Louisiana, Rick Perry of Texas, Haley Barbour of Mississippi and Sean Parnell of Alaska, all Republicans — wrote a letter to their fellow governors inviting them to join the group:

[W]e are forming the OCS Governors Coalition as a mechanism to foster an appropriate dialogue between the coastal states and the Administration and ensure that future actions are done with adequate state input.

Though the governors’ announcement letter did not mention any involvement by the Consumer Energy Alliance, the group was quick to celebrate the Coalition’s formation. Alliance President and HBW partner David Holt issued a statement that “CEA applauds the collaboration of these governors in promoting an open dialogue about the need to and realities of producing American energy offshore, not only for their individual states, but for the entire nation.”

The Consumer Energy Alliance began working with the Governors Coalition, then chaired by Alaska Gov. Parnell, the following year. According to emails obtained by Facing South, on April 23, 2012, Frank Collins — a former spokesperson for Louisiana Gov. Bobby Jindal who was then serving as policy coordinator for the state’s Coastal Protection and Restoration Authority, and who now serves as deputy chief of staff for Florida Gov. Rick Scott (R) — wrote an email to the Coalition membership, which by then had expanded to include Govs. Bentley of Alabama, Haley of South Carolina and McDonnell of Virginia.

Collins proposed “a handful of initiatives” to help the group “coordinate and communicate more effectively.” Among them:

David Holt and his volunteer team have offered to assist the Coalition to organize monthly status calls, bimonthly bulletin alerts, face-to-face meetings, and messaging opportunities, among other items. In order to start moving the ball forward, David and Natalie Joubert will be reaching out to each member state in the next few weeks to hold a status call.

Like David Holt, Joubert symbolized the blurred relationship between HBW Resources, the Consumer Energy Alliance and the Governors Coalition. At the time, Joubert was both the policy director for the Alliance and vice president for policy at HBW Resources. (She left both organizations earlier this year.) The signature line in her emails to the governors’ group identified her as being affiliated with the Alliance, but she often used an HBW Resources email address (for an example click here). According to her (now-deleted) HBW Resources bio, Joubert is a former associate at the Clinton Foundation and in 2012 served as an adviser for the Obama for America Energy and Environmental Team.

It wouldn’t be until August 2013 that the OCSGC would adopt a memorandum of understanding to formalize its relationship with the Consumer Energy Alliance, an agreement that underscored the Alliance’s central role in running the governors’ group. The document characterizes the Alliance’s role as “volunteer staff” for the Governors Coalition, which includes “[e]xecuting all day-to-day administrative, writing and research needs of the Coalition” and “[a]ssisting in the conceptualization and execution of all internal and external communication and media engagement of the Coalition.”

Yet the overlapping relationship between the three groups was largely concealed from the public. When Facing South first began looking into the Governors Coalition in 2013, its website did not mention the connection to the Consumer Energy Alliance at all; for example, see this version of the Governors Coalition’s “About” page from November 2013. In August 2014, however, the page had been edited to acknowledge that the Alliance provides the Governors Coalition with “information and administrative support.” The edit came after investigative reporter Lee Fang of The Republic Report used metadata from a letter sent by the Coalition to former U.S. Sen. Mary Landrieu (D-Louisiana) to reveal that the letter originated from HBW Resources.

Today, the website of the Outer Continental Shelf Governors Coalition — which is hosted at the same IP address as the Consumer Energy Alliance and HBW Resources — still does not disclose the Consumer Energy Alliance’s close relationship with HBW Resources. Nor does the Alliance’s “About” page disclose its relationship with the energy lobbying firm.

However, emails and other documents obtained by Facing South reveal the full extent to which the Governors Coalition has been largely run and driven by the oil and gas industry representatives at the Consumer Energy Alliance and HBW Resources. Among the initiatives the two outfits have spearheaded for the Governors Coalition:

• Drafting newspaper op-eds. Collins’ April 23, 2012 email to the Governors Coalition noted that “volunteer staff” — that is, the Alliance/HBW Resources — was “drafting op-ed for OCSGC use.” A week later, an op-ed titled “Virginia Could Be an Energy Power — If Washington Would Let It” ran in the Wall Street Journal under Gov. McDonnell’s signature, calling for Atlantic drilling as the Obama administration was in the process of finalizing its offshore leasing plan for the 2012-2017 period.
• Drafting lobbying letters. In July 2012, Joubert sent Governors Coalition members a draft of a letter urging President Obama to “advance the dialogue between federal and state officials,” asking them to review it and send edits “our way.” And as previously noted, The Republic Report used metadata from another letter sent by the Coalition to former U.S. Sen. Landrieu of Louisiana promoting expanded drilling to show the letter’s original author was “NJoubert” of HBW Resources.
• Connecting the governors to oil and gas industry insiders. For example, the Alliance/HBW Resources organized what it called a “closed-door session” for the governors with “industry leaders” at the Offshore Technology Conference in Houston in May 2013. When the Governors Coalition convened again that October in Biloxi, Mississippi at the Beau Rivage Resort and Casino, the Alliance/HBW Resources organized an “Industry Roundtable Luncheon” that was also closed to the press; among those who attended were representatives of Shell, ExxonMobil and Chevron. Prior to the October meeting, Joubert sent Coalition members what she called “Industry Briefing Read-Aheads” from Shell and ExxonMobil making the case for expanded drilling. In the documents obtained by Facing South, there is no evidence that the Governors Coalition solicited or received information for their meetings from environmentalists or scientists concerned about the impacts of offshore drilling.
• * Connecting governors with energy industry donors. Following the “closed-door session” with “industry leaders” at the May 2013 conference in Houston, Governors Coalition members headed to a fundraiser for Gov. Haley at the upscale Hotel ZaZa in the city’s Museum District. That same day, Haley’s campaign reported receiving a contribution of $2,319.22 from HBW Resources, listed as a “fundraising expense.”

The following day Haley’s campaign registered contributions of $2,500 each from HBW Resources partners Holt and Michael Whatley and $1,000 from Paul Looney, HBW vice president for strategic development who specializes in working with state regulators on permitting and exporting of petroleum products.

Haley also reported a contribution of $2,500 from Richmond “Richie” Miller, president of Spectrum Geo, a Houston-based company that conducts seismic testing for oil and gas reserves. He was among those who attended the industry roundtable earlier that day. Spectrum Geo later filed applications with both the state of South Carolina and the Bureau of Ocean Energy Management to move ahead with seismic testing for oil and gas reserves in federal waters off the South Carolina coast. Scientists have expressed concerns that the practice, which involves using underwater air blasts nearly as loud as conventional explosives, is harmful to marine life.

Earlier this month, Spectrum Geo and another seismic testing company, GX Technology, received approval from the McCrory administration to conduct testing off North Carolina’s coast.

Facing South contacted McCrory’s office to discuss the relationship between the Governors Coalition, the Consumer Energy Alliance and HBW Resources, but Communications Director Josh Ellis declined to comment on that specifically.

“Gov. McCrory is proud to chair this bipartisan group of governors working to find environmentally sound solutions for energy exploration,” Ellis said in an email.

‘Speaking for the oil industry’

In its push to open Atlantic waters for oil and gas drilling, the Outer Continental Shelf Governors Coalition, along with the Consumer Energy Alliance and HBW Resources, have focused their lobbying efforts on the U.S. Interior Department, which houses the Bureau of Ocean Energy Management, the agency that oversees offshore leasing.

In early 2013, when President Obama initially nominated Sally Jewell to replace Ken Salazar as Interior secretary, coalition members Haley of South Carolina, McCrory of North Carolina and McDonnell of Virginia wrote to Jewell congratulating her on the nomination and asking her to support Atlantic drilling. The following month, Jewell — a former CEO and president of outdoor retailer REI and a former Mobil Oil engineer — responded on personal letterhead that she appreciated hearing their concerns but as a nominee was “not yet in a position to be involved in policy matters before the agency.”

But the Governors Coalition didn’t give up. Instead, it sent a list of questions to U.S. Sens. Ron Wyden, D-Oregon, and Lisa Murkowski, R-Alaska, then the chair and ranking member respectively of the Committee on Energy and Natural Resources, to ask Jewell at her nomination hearings. “Fortunately, Senator Murkowski did include all of the proposed questions,” Natalie Joubert enthused in an email to Governors Coalition members.

After Jewell was confirmed, three members of the Governors Coalition — Bentley of Alabama, Bryant of Mississippi, and McCrory, who had become the group’s chair following Alaska Gov. Parnell’s defeat — traveled to Washington in February 2014 to meet with her in person to further press the case for Atlantic drilling. “As chair of the OCS Governors Coalition, I am encouraged with the opportunity to meet with Secretary Jewell and better advance the Coalition’s common mission of greater federal-state communication,” McCrory said at the time.

Five months later, the Interior Department announced plans to open the Atlantic to seismic testing for oil and gas reserves, the first step toward offshore drilling. Six months after that, in January 2015, it released a drilling lease plan for 2017-2022 that included the Atlantic outside of a 50-mile protective coastal buffer zone. The plan excluded parts of the Arctic and Eastern Gulf of Mexico near Florida, where Gov. Scott and other elected leaders have long opposed offshore drilling as a threat to the Sunshine State’s $67 billion annual tourism industry.

In a statement on behalf of the Governors Coalition, McCrory thanked Jewell “for taking a step in the right direction” by considering Atlantic drilling — but he criticized the proposal for allowing “many other resource-rich areas [to] remain under lock and key by the Obama administration.” McCrory continued that line of attack in testimony he gave earlier this month before a U.S. House subcommittee (in photo), where he criticized the 50-mile buffer zone for “unnecessarily put[ting] much of North Carolina’s most accessible and undiscovered resources, frankly, under lock and key.” He also called on BOEM to offer more than one drilling lease in the Atlantic, as it proposed.

In his statements, McCrory did not mention the considerable public opposition to Atlantic drilling in his own state — including unprecedented crowds that turned out for BOEM hearings earlier this year in Wilmington and Kill Devil Hills, or the resolutions opposing seismic testing and/or offshore drilling passed by more than a dozen North Carolina coastal communities as well as local chambers of commerce, tourism boards, and fishing industry associations.

The Southern Environmental Law Center, a nonprofit law firm opposed to Atlantic drilling, pointed to the disconnect between the governor’s statements and the outpouring of public opposition, issuing a statement blasting McCrory for “speaking for the oil industry.”

Additional research and reporting by Chris Kromm. This story was produced in part with support from the Fund for Investigative Journalism.