Energy Bill a Special-Interests Triumph
Second of three parts
October 4, 2004
by Susan Milligan, Globe Staff
WASHINGTON -- Robert Congel has grand plans and a
heady vision for his upstate New York shopping complex. Billed as the
biggest mall in the world, the yet-to-be-built DestiNY USA would be filled
with 400 retailers, thousands of hotel rooms, a 65-acre glass-enclosed
indoor park, a rock- and ice-climbing wall, and a theater suitable for
Broadway shows. And if its patrons in Congress get their way, the mega-mall
would be partially funded through the federal energy bill, which would
provide $100 million in public money. A fervent lobbying campaign by Congel
paid dividends on Capitol Hill. When members of the House voted last winter
to ramp up domestic oil production, they also voted to help Congel build the
giant mall through tax-exempt "greenbonds."
The greenbonds initiative -- so named because the
developments it funds are supposed to be energy efficient -- was among
scores of items stuck into the energy bill by lawmakers meeting behind
closed doors. These provisions had no official sponsors and weren't part of
the original documents approved by the House and Senate, but were added
later by unseen hands as the 816-page bill was crafted in a secret
Intended to lay out an energy policy for the nation for
the first time in more than a decade, the energy bill became a cash bonanza
for corporate interests in and out of the energy arena. The bill, which is
stalled because of a Senate filibuster but which is still one of President
Bush's top legislative priorities, features initiatives to encourage
production of new and existing energy sources. But it has also become a
phonebook-sized symbol of modern Washington lawmaking, in which policy is
driven by those who have money, power, and access to a relatively small
group of decision-makers.
A Globe analysis of tens of thousands of pages of
lobbying records shows that entities with a stated interest in energy policy
spent $387,830,286 lobbying Washington last year. They also paid tens of
millions of dollars in campaign contributions to officials putting together
the package at the White House and on Capitol Hill.
The Globe analysis shows that the corporations and
others, including some universities, were rewarded in the bill with tax
breaks, construction projects, and easements of regulations that would save
them much more than they spent making their arguments to the government.
In some instances, the beneficiaries were specific
companies like Home Depot, which spent $240,000 lobbying in hopes of gaining
tens of millions in savings. Home Depot -- whose PAC contributed the maximum
$5,000 to Bush's 2004 campaign and whose employees have contributed $226,400
to Bush and the Republican National Committee this cycle -- benefits from a
two-paragraph section in the bill to eliminate tariffs on Chinese ceiling
fans. The change would save Home Depot and other companies a total of $48
million, according to the bipartisan Joint Committee on Taxation.
In other instances, entire industries spent tens of
millions of dollars to leverage billions in government funding and
The nuclear industry, which spent some $71,405,955
lobbying Capitol Hill, would get $7.37 billion in tax breaks and projects,
including federal funds to construct a $1 billion nuclear plant in Idaho.
The plant, which would be the first nuclear plant commissioned in decades,
would also benefit the hydrogen fuels industry, because the nuclear facility
is intended to create hydrogen fuels.
Several large power companies, which spent tens of
millions lobbying, won a historic deregulation of their industry that would
strip away controls dating from the Depression on how they spend their money
and allow them to become conglomerates -- with little recourse for
ratepayers if the companies' speculative investments go sour.
Bush's biggest supporters would profit handsomely from
the bill. Sixty of Bush's 400 Pioneers and Rangers -- those who have
committed to raising at least $100,000 and $200,000, respectively, for the
Bush-Cheney reelection effort -- would benefit from the tax breaks,
subsidies, and deregulation in the bill, according to an estimate by the
Massey Energy of West Virginia -- whose director, James
H. "Buck" Harless, is a major Bush fund-raiser --would get hundreds of
millions of dollars in loan guarantees for a coal gasification plant.
Harless served on President Bush's energy transition team, a precursor to
Vice President Dick Cheney's Energy Task Force, which developed the critical
blueprint for the energy package on Capitol Hill.
"The problem is that this has just turned into more of a
special interests bill," said Charlie Coon, an energy specialist with the
Heritage Foundation, a conservative think tank. "The bottom line is, it's
not going to provide the power that's needed for the economy so people can
turn on their lights. It's such a farce."
Behind closed doors
The construction of the bill reflects the way business is
done in Washington in 2004: With Republicans enjoying control of both
chambers of Congress, plus the White House, GOP leaders in the House craft
giant bills behind closed doors, freezing out the minority party and
squelching dissent from moderate Republicans and lobbyists whose agendas are
unsympathetic to the GOP's goals, according to interviews with members of
both parties and former House members.
And while other bills have included their share of
earmarked projects or handouts to various industries or interest groups, the
energy bill is considered by consumer and environmental groups to be one of
the most extreme examples of excessive corporate giveaways.
"What's really amazing is how a combination of energy
industry, oil and gas industry, utility industry guys, coal industry guys,
through a whole host of policy decisions -- through the Environmental
Protection Agency or the energy bill -- literally got billions of dollars in
payback for millions of dollars" in contributions and lobbying expenses,
said Mark Longabaugh, senior vice president for publicaffairs for the League
The bill first began to come together as an outgrowth of
Cheney's energy task force, a committee of Washington officials that met in
private to draft a sweeping national energy policy shortly after Bush took
A study by the nonpartisan General Accounting Office last
year found that the energy task force received advice from private "energy
stakeholders," mainly the petroleum, coal, nuclear, natural gas, and
electricity industries. The report said it was unable to determine the
extent of the influence these industries had on policy, because of the
limited information made available to the GAO.
But other records released under a court order show that
15 energy-related entities known to have had contact with the task force
ended up winning provisions in the energy policy that would benefit them.
The Edison Electric Institute, which had contact with the
task force 14 times and spent $12 million lobbying Washington last year,
secured a historic deregulation of the electricity industry analysts believe
could be worth billions of dollars.
The Nuclear Energy Institute, which won billions in tax
credits and projects, had 19 contacts with the task force and dumped
$1,280,000 into lobbying efforts in 2003. The nuclear industry also would
benefit from an extension and expansion in the energy bill of the Price
Anderson Act, which caps the financial liability nuclear power plant owners
face in case of a nuclear accident. While no new nuclear power plant has
been commissioned in decades, the bill envisions a rebirth of the
controversial power source.
Southern Company, an electricity company that spent
$990,000 on lobbying, would benefit from relaxed regulations on emissions of
mercury, a toxin released from power plants. Southern's executive vice
president and a paid lobbyist met with the task force, according to records
released pursuant to a lawsuit filed by the Natural Resources Defense
Council. The Environmental Protection Agency, which is set to issue final
rules next year, estimated that the deregulation of mercury rules would save
US power plants a total of $2.7 billion.
Members of the American Petroleum Institute, which had
contact with the task force six times and spent $3,140,000 lobbying last
year, would be eligible for billions in tax breaks and subsidies to
encourage domestic oil production.
Environmentalists, who were shut out of the task force,
won little in the final package after spending a small fraction of what the
energy industry spent on lobbying. The League of Conservation Voters, for
example, spent just $46,516 on lobbying last year; the Natural Resources
Defense Council spent $920,000, and the Union of Concerned Scientists
$150,000, according to an analysis of lobbying reports.
Industries that had contact with Cheney's task force had
a critical advantage, said Larry Noble, an analyst for the Center for
Responsive Politics, because they were able to plead their cases in the
early stages of the development of the energy policy.
"They have gotten what they wanted from the first day,"
Noble said. "What all lobbyists know is that it's important to be there when
the policy is being drafted, before the laws are being written. By the time
the bill's written, it's a little late. You're playing a defensive game."
The conference committee
After Cheney's task force issued its recommendations, the
job of drafting the bill went to House and Senate committees, where members
of the Republican majority kept many of the proposals intact. Then, in hopes
of forging an agreement between the House and Senate, congressional leaders
appointed members to a conference committee.
But the conference committee began adding projects that
had never appeared in either version of the bill. And lobbyists peppered
members of the committee with requests to get favored projects, including
Congel's mall, appended to the legislation.
The addition of projects like Congel's especially irks
government-waste watchdogs. Even though DestiNY USA had promised to be a
model of energy efficiency, critics wonder what a shopping mall has to do
with forging a national energy policy.
The greenbonds initiative wasn't part of the original
House or Senate bills that went through public hearings and floor debate. It
was added by the conference committee, a panel that excluded Democrats for
all but two of the meetings held to craft the bill. The final, massive bill
was released on a Saturday, giving House Democrats and any Republicans not
made privy to the negotiations barely three days to study it before being
asked to vote on it on the House floor.
Representative Edward Markey, a Malden Democrat who is a
veteran member of the Energy and Commerce Committee, said he was forced to
follow developments in his own committee's bill by talking to Washington
"We could not keep track of what was going on," Markey
said. "All we had were leaks. What they did on this energy bill was
unprecedented. It was disrespectful of the Democrats, but more importantly
of the environmental and consumer groups of the country."
Congel himself is a successful, if controversial,
developer who Forbes magazine estimates is worth some $700 million. Congel
and his company, Pyramid Management, were sued by dissident partners in 2000
for fraud; the case is still pending. Pyramid ultimately paid more than
$800,000 back to a tenant company, The Limited, which claimed the developer
had overcharged it by submitting phony tax bills. State and federal
prosecutors took no action against the company.
Congel and DestiNY USA failed to respond to repeated
requests for comment.
Three other shopping mall projects -- one in Georgia, one
in Louisiana (home of the former chairman of the House Energy and Commerce
Committee, Republican Representative Billy Tauzin), and one in Colorado --
would also benefit from the greenbonds proposal, although it takes some
sleuthing to figure that out from the language in the bill.
Called the "brownfields demonstration program for
qualified green building and sustainable design projects," the greenbonds
section in the bill makes no mention of the specific projects or states. But
the guidelines conform to no other projects, according to both congressmen
and watchdog groups who have studied the bill.
"They weren't named, but everyone knew who they were,
based on the language," said Keith Ashdown, vice president for policy at
Taxpayers for Common Sense. A Republican senator joked that the bill might
as well have required that one of the projects be located in a venue "whose
nickname is the 'Cajun State,' " to underscore that one of the projects
would be in Shreveport.
Congel has been an aggressive advocate for government
financing of his project. He set up a political action committee, the Green
Worlds Coalition Fund, which has raised $82,897, much of which has been
contributed to Bush's campaign and the campaigns of congressmen key to the
energy bill. In addition, Congel, his family, and employees of DestiNY USA
and Pyramid contributed an additional $69,084 to congressional campaigns and
to Bush, according to filings analyzed by the nonpartisan Center for
The project's proponents also have made a big investment
in lobbying, spending $140,000 last year and $60,000 this year to convince
Congress -- which already gave DestiNY USA $1.7 million last year for
construction around the development site -- to approve the greenbonds
Meanwhile, Congel labored to help key lawmakers. Congel,
his family, and business associates gave heavily to Representative Bob
Beauprez, a Colorado freshman who also wants financing assistance for a
development project in his district. Congel also hosted a fund-raiser
attended by Cheney.
While most of Congel's and DestiNY USA's campaign
contributions went to Republicans, the project's advocates have also looked
out for New York's Democratic senators, Hillary Rodham Clinton and Charles
Schumer, both of whom received contributions from the Green Worlds PAC and
from Congel himself.
Schumer, in a seemingly contradictory tactic common in
Washington, fought mightily to get the greenbonds provision included in the
energy bill, even as he was also battling to defeat the entire bill.
"I thought it was a good project," Schumer said of the
$2.2 billion DestiNY USA, which developers claim will bring more than
100,000 long-term, tourism-related jobs to economically troubled upstate New
Schumer said he nonetheless opposed the energy bill
because it gave relief from liability to producers of a gasoline additive
that has poisoned groundwater in New York and other states.
On the House side, Representative James Walsh, a Syracuse
Republican, has been championing the DestiNY project, which would be located
in his district. Walsh, who said he went to high school with Congel,
defended the project as a valuable prototype of how a mall can be powered
with renewable energy such as solar power.
And he said the jobs would be important to his district.
"This is the only guy knocking on my door willing to
spend $2 billion," Walsh said.
But congressional waste-watchers and environmentalists
wonder why the federal government should be helping a multimillionaire
developer build a shopping mall and resort.
"It's apparent that the only green Bob Congel has ever
been interested in is the green in his back pocket," said Chuck Porcari,
communications director of the League of Conservation Voters.
When the energy bill stalled in December, Senator Pete
Domenici, the New Mexico Republican who heads the Senate Energy and Natural
Resources Committee, pared it down to make it more palatable to an
unconvinced Senate. A newer version, which has not officially replaced the
original bill, does not include the greenbonds provision.
But with Schumer's help, DestiNY USA may get another shot
at the federal money pie. Schumer and Senator Zell Miller, a Democrat whose
home state of Georgia is also vying for a greenbonds project, introduced an
amendment to add the projects onto a corporate tax bill with a higher
likelihood of gaining congressional approval. A conference committee will
begin writing that bill today.
"It's like multiple warheads: Let's try the energy bill,
let's try the transportation bill, let's try the appropriations bill. If we
fire all these warheads, we'll be able to hit something," said David
Williams of the nonpartisan Coalition Against Government Waste.
Fattening the bill
Congel's project wasn't the only one to find a new
vehicle for funding, despite the hold-up of the entire bill.
Senator Charles Grassley, an Iowa Republican who heads
the Senate Finance Committee, and whose support for the energy bill was
critical because of its tax provisions, wanted $50 million for a simulated
rain forest in his corn-country state. Supporters said the project would be
educational, but it was deleted before the energy bill went to the House
But Grassley got what he wanted in January, when the
project was slipped onto an omnibus spending bill meant to fund federal
agency operations for 2004. "Most egregious projects, if they are backed by
a powerful politician, have nine lives," Ashdown said.
Backers of the energy bill acknowledged that it was
fattened with local projects, but said such inclusions were often needed to
cobble together a voting coalition. "That's a function of the legislative
process," said Frank Maisano, an energy industry lobbyist with the firm of
Brace and Patterson.
And the battle over the energy package surely has a
philosophical dimension. Those who support it argue that the nation must
produce more of its own energy to wean the country from reliance on foreign
oil. Companies must be offered tax credits and subsidies to encourage that
production, say industry officials and some lawmakers and analysts, because
energy exploration and development are pricey undertakings.
While environmentalists like to demonize the profitable
oil industry, Maisano said, oil companies need financial incentives to
search for reserves in untested areas. For example, some potential oil
reserves are more expensive to get at, because they are deep in the earth;
without a tax break, most companies wouldn't take the financial risk of
drilling there, he said.
But critics, who include many fiscally conservative
Republicans along with Democrats, insist that the tax breaks got out of hand
during all the closed-door meetings, with many benefiting interests as
narrow as individual companies. When the original version of the bill was
finished, it had an estimated $20 billion in tax credits and subsidies to
the energy industry.
But analysts believe the biggest financial windfall for
the industry is in the deregulation provisions, which energy companies spent
hundreds of millions of dollars to secure.
First on the to-do list was the elimination of a longtime
regulation called the Public Utility Holding Company Act. Little known
outside the energy and financial world, the regulation is a critical issue
for the electrical industry, whose vast team of lobbyists persuaded
negotiators in Congress to eradicate the law. In the hundreds of lobbying
reports filed by those seeking to influence the energy bill, getting rid of
electricity industry regulations shows up 98 times.
Electricity interests spent millions of dollars trying to
kill the law. The Edison Electric Institute, which represents the
electricity industry, spent $12,540,000 on a team of 35 lobbyists at its own
shop and at 12 other firms to lobby Congress, the White House, and federal
agencies against PUHCA and on other energy matters. Individual electricity
companies and others against the landmark regulatory law dumped another
$56,420,670 million on lobbying last year, according to reports filed with
the clerks of the House and the Senate.
Nor has the industry been stingy in handing out campaign
contributions. Electricity industry PACs and executives gave a total of
$7,733,941 for the 2004 election cycle, making the industry the 19th biggest
contributor, according to the Center for Responsive Politics. Tauzin, the
powerful former chairman of the House Energy and Commerce Committee, was
especially enriched, receiving more than $150,000 in campaign funds from the
energy industry as a whole, including nearly $76,000 from the electricity
sector, according to the center.
The effort was successful: Language killing the watershed
regulatory law is included in all versions of the energy bill now on Capitol
Hill. If the measure becomes law, both supporters and critics anticipate an
explosion in energy investments.
But where financiers see investment opportunities,
consumer advocates see future Enrons in the making, because the law was
intended to insulate utilities from the kind of energy-trading schemes that
caused the Houston-based Enron to collapse in the greatest bankruptcy in
history. Get rid of the rules restricting cross-investment by utility
holding companies, consumer advocates say, and the country faces an energy
and stock market debacle much like the one that led to the creation of the
public utilities act.
The law's roots go all the way back to the Great
Depression and the stock market crash of 1929. The then-nascent electricity
industry was largely owned by a small group of holding companies, which used
their reliable receipts from selling electricity to invest in riskier
When those ventures faltered, the holding companies
imploded, and 53 electricity companies went bankrupt; the collapse helped
deepen the Great Depression. Consolidation in the industry also allowed
holding companies to manipulate the market and overcharge consumers for
After an investigation and hearings, Congress approved
the PUHCA regulations in 1935, imposing historic controls on energy holding
companies. Now, however, energy industry spokesmen say the law is outdated
and so onerous that investors are discouraged from putting money into
"This is a fairly capital-intensive business. The repeal
of PUHCA would serve to potentially encourage capital to flow back into the
energy market," said Pete Sheffield, a spokesman for Duke Energy, which once
employed Andrew Lundquist, the director of Cheney's energy task force, to
lobby for the elimination of the law.
The Clinton and Bush administrations have already
weakened the regulations by allowing companies to be exempt from certain
PUHCA rules. But eliminating the law entirely could have a catastrophic
effect on both the financial markets and consumers, critics say.
"It's the only thing between us and a cartel," said Lynn
Hargis, a former staff attorney with the Federal Energy Regulatory
Commission who now works for the watchdog group Public Citizen.
Deleting PUHCA from the law books would put an estimated
$1 trillion in energy assets in play, she said, presenting enormous
implications for both the energy sector in particular and the financial
markets as a whole.
Deregulation, she predicted, would allow more episodes
like the Enron scandal, because holding companies could move capital around
and put the health of electricity providers at risk.
Lobbyists for energy interests succeeded in getting far
more than financial deregulation, however.
The current bill calls for deregulation of laws
protecting air quality. One provision would ease rules on ozone, which
produces smog. The language, which was not in either the original House or
Senate bill, would not only lower the standards set in the Clean Air Act for
ozone production, but would extend the time industry has to comply with the
rules. The provision, added by the conference committee, would largely
benefit oil refineries.
Language was also inserted in the bill that exempts the
oil and gas exploration industry from sections of the Clean Water Act; under
the bill, such companies would not be penalized for contaminating public
waterways. The provision would give oil and gas construction companies a
"free pass" to avoid clean water laws, making them the only construction
companies not subject to such regulations, said Representative Bob Filner, a
Energy lobbyists also persuaded the Bush administration
to weaken proposed rules on mercury, a toxin released in the air by
coal-fired power plants. The proposed new rules would ease emissions limits
and would give the power plants more time to comply, a combination
environmentalists say will do little to protect people from mercury
contamination in the water and in fish.
The Bush administration's view of the mercury threat is
far tamer than that of its predecessor.
When former President Clinton's EPA issued a December
2000 statement announcing that reductions in mercury emissions would be
required for the first time ever, the agency described mercury as a
"harmful" substance that "has been associated with both neurological and
developmental damage in humans. The developing fetus is the most sensitive
to mercury's effects, which include damage to nervous system development."
But the Bush administration's EPA has taken a more
relaxed view, describing mercury on its website as a "naturally occurring
element that is present throughout the environment." While mercury exposure
should be "treated seriously," the site says, "health problems caused by
mercury depend on how much has entered your body, how long you have been
exposed to it, and how your body responds to the mercury."
The energy interests and their supporters in Congress say
the provisions come down to a matter of philosophy, not lobbying clout;
industry spokesmen say too much regulation puts financial strains on
companies and makes it harder for them to update their operations with more
environmentally sensitive equipment. But those with access to Congress
clearly did well in the package, according to the Globe's analysis of
lobbying records, campaign contributions and the legislation.
On the Hill, legislation as complicated as the energy
bill tends to be written more by staff, who then may turn to people outside
government to help them with legal language, said a Republican senator who
asked not to be named. The specialists tend to be lobbyists, citizen
advocates say, creating a situation where lobbyists have a heightened
influence on lawmaking.
Outside specialists, lobbyists or not, often have
expertise that can be valuable. The trouble, some lobbyists and lawmakers
say, is that the process tends to favor those who already have close
connections to the White House, either by having held a previous job with
the administration or attracting attention by raising money for the
Energy industry lobbyists say it's not a matter of
payback, but simply a situation where environmentalists are running up
against an elected majority that happens to be unsympathetic to their
interests. Environmentalists, they say, should be more flexible and
recognize they are dealing with an administration that wants to increase
"I think the environmental groups have marginalized
themselves to the point where they don't get to have as much of an impact as
they probably should," because they are so focused on attacking Bush,
Maisano said. "They're not interested in policy. They're interested in
getting the guy."
Environmental lobbyists, for their part, said they bump
up against a lot of closed doors when they try to lobby on the Hill. When
they do get in to see sympathetic lawmakers, their views end up being
suppressed by a Republican majority that wants to see more exploration and
development of oil, gas, and nuclear power.
"On the House side, it's positively Orwellian," said
Marchant Wentworth, a lobbyist with the Union of Concerned Scientists.
"Republican members have told me to my face that they're just not going to
confront the chairman on an issue. I've never seen anything like it."
This report was prepared with the assistance of Marc
Shechtman of the Globe library and freelance research manager Maud S.
Beelman and researchers Kevin Baron and Samiya Edwards.