Archive for the ‘Climate Change’ Category

The Kochs’ Stake in Pollution

Thursday, May 30th, 2013

Accountability_LATimesPuppets_300x250_FINALREVISED050813_2Koch Industries and the billionaire brothers who run it are best known for their involvement in rightwing causes. The latest controversy is over the Kochs’ reported interest in purchasing the Los Angeles Times and other major newspapers owned by the Tribune Co. A campaign centered in L.A. is mobilizing opposition to such a deal among newspaper subscribers and Tribune shareholders, warning that a Koch takeover would create a new Fox News.

What often gets forgotten is that Koch Industries is not just part of the Koch ideological machine. It is a huge privately-held conglomerate with annual revenues of more than $100 billion and operations ranging from oil pipelines and refining to paper products (it owns Georgia-Pacific), synthetic fibers (it bought Lyrca and Stainmaster producer Invista from DuPont), chemicals, mining and cattle ranching.

I’ve just completed one of my Corporate Rap Sheets on Koch Industries, and it’s clear that the sins of the company go far beyond the political realm. The following is some of what I found.

In November 2011 the magazine Bloomberg Markets published a lengthy article entitled “The Secret Sins of Koch Industries” that made some explosive accusations against the company: “For six decades around the world, Koch Industries has blazed a path to riches—in part, by making illicit payments to win contracts, trading with a terrorist state, fixing prices, neglecting safety and ignoring environmental regulations. At the same time, Charles and David Koch have promoted a form of government that interferes less with company actions.”

What Bloomberg revealed for the first time were the allegations involving bribery and dealing with Iran. The article reported that the company’s subsidiary Koch-Glitsch paid bribes to secure contracts in six countries (Algeria, Egypt, India, Morocco, Nigeria and Saudi Arabia) and that it violated U.S. sanctions by doing business with Iran, including the sale of materials that helped the country build the world’s largest plant to convert natural gas to methanol used in plastics, paints and chemicals.

The environmental cases alluded to by Bloomberg had been previously reported and included the following.

In 1995 the U.S Justice Department, the Environmental Protection Agency and the United Stated Coast Guard filed a civil suit against Koch Industries and several of its affiliates for unlawfully discharging millions of gallons of oil into the waters of six states. In one of the largest Clean Water Act cased ever brought up to that time, the agencies accused Koch of being responsible for more than 300 separate spills in Alabama, Kansas, Louisiana, Missouri, Oklahoma and Texas.

In 1997 Tosco Corporation (now part of ConocoPhillips) sued Koch in a dispute over costs related to the clean-up of toxic waste at an oil refinery in Duncan, Oklahoma that used to be owned and operated by Koch. In 1998 a federal judge ordered Koch to contribute to those costs, and that ruling was upheld by an appeals court in 2000. The companies later settled the matter out of court.

In 1998 Koch agreed to pay $6.9 million to settle charges brought by state environmental regulators relating to large oil spills at the company’s Rosemount refinery in Minnesota. The following year it agreed to plead guilty to related federal criminal charges and pay $8 million in fines.

Also in 1998, the National Transportation Safety Board found that the failure of a Koch subsidiary to protect a liquid butane pipeline from corrosion was responsible for a 1996 rupture that released a butane vapor. When a pickup truck drove into the vapor it ignited an explosion that killed the driver and a passenger. In a wrongful death lawsuit a Texas jury awarded the father of one of the victims $296 million in damages.

In 2000 the U.S. Justice Department and the EPA announced that Koch Industries would pay what was then a record civil environmental fine of $30 million to settle the 1995 charges relating to more than 300 oil spills plus additional charges filed in 1997. Along with the penalty, Koch agreed to spend $5 million on environmental projects in Texas, Kansas and Oklahoma, the states where most of its spills had occurred. In announcing the settlement, EPA head Carol Browner said that Koch had quit inspecting its pipelines and instead found flaws by waiting for ruptures to happen.

Later in 2000, DOJ and the EPA announced that Koch Industries would pay a penalty of $4.5 million in connection with Clean Air Act violations at its refineries in Minnesota and Texas. The company also agreed to spend up to $80 million to install improved pollution-control equipment at the facilities.

In a third major environmental case against Koch that year, a federal grand jury in Texas returned a 97-count indictment against the company and four of its employees for violating federal air pollution and hazardous waste laws in connection with benzene emissions at the Koch refinery near Corpus Christi.

The Bloomberg Markets article reported that a former Koch employee said she was told to falsify data in a report to the state on the emissions.  The company was reportedly facing potential penalties of some $350 million, but in early 2001 the newly installed Bush Administration’s Justice Department negotiated a settlement in which many of the charges were dropped and the company pled guilty to concealing violations of air quality laws and paid just $10 million in criminal fines and $10 million for environmental projects in the Corpus Christi area.

With the purchase of Georgia-Pacific in 2005, Koch acquired a company with its own environmental and safety problems. For example, in 1984 a G-P plant in Columbus, Ohio had spilled 2,000 pounds of phenol and formaldehyde that reached a nearby community. Residents complained of health problems from that incident and from a huge industrial waste pond that the company continued to maintain at the plant.

In 2009 the U.S. Justice Department and the EPA announced that G-P would spend $13 million to perform clean-up activities at a Michigan Superfund site where it previously had a paper mill. In 2010 G-P was one of ten companies sued by the Justice Department over PCB contamination of the Fox River in Wisconsin. Unlike the other defendants, G-P had already settled with DOJ by agreeing to a $7 million penalty and to pay for the costs of a portion of the clean-up. One of the other defendants, Appleton Papers, called the settlement a “sweetheart deal.”

More recently, Koch Industries has been caught up in the controversy over the Keystone XL pipeline. In 2011 Inside Climate News reported that Koch already responsible for 25 percent of the tar sands oil being imported from Canada into the United States and stood to benefit greatly from the new pipeline. Koch denied its involvement, but Inside Climate News found documents filed with Canada’s Energy Board contradicting that statement.

An August 2012 report by the Political Economy Research Institute at the University of Massachusetts-Amherst identified Koch as being among the top five corporate air polluters in the United States.

The reason the Kochs rail against regulation is clear: they’ve got a big stake in pollution.

Note:  The full rap sheet on Koch Industries can be found here.

Who Pays for Extreme Weather?

Thursday, November 1st, 2012

As the northeast begins to recover from the ravages of Sandy, there are estimates that the giant storm caused some $20 billion in property damage and up to $30 billion more in lost economic activity.

The question now is who will pay that tab—as well as the cost of future disasters that climate change will inevitably bring about.

It’s already clear that the private insurance industry, as usual, will do everything in its power to minimize its share of the burden. Insurers take advantage of the fact that their policies often do not cover damages from flooding, passing that cost onto policyholders. Most of them are unaware of the fact and fail to purchase federal flood insurance until it is too late.

Insurers also exploit clauses in their policies that impose much higher deductibles for non-flood damages during hurricanes. Fortunately, governors in New York, New Jersey and Connecticut are blocking that maneuver by giving Sandy a different official designation (which is consistent with the National Weather Service’s use of the term “post tropical storm”).  It remains to be seen, nonetheless, to what extent the insurance industry manages to create new obstacles for its customers.

The challenges for homeowners are just one part of the problem. Sandy also did tremendous damage to public infrastructure—roads, bridges, subway stations, etc. Although these are government assets, should the public sector bear the cost of rebuilding?

Many people are arguing, in the words of a New York Times editorial, that “a big storm requires big government.” That’s certainly true when it comes to initial disaster response.  Many more people would have died and much more damage would have occurred but for the efforts of public-sector first responders and even the Federal Emergency Management Agency, which has been remade since its debacle during the aftermath of Hurricane Katrina.

But the challenges associated with extreme weather go far beyond those relief functions. There’s now discussion of the need for New York City to build a huge flood-prevention system along the lines of that in the Netherlands.

Taxpayers, especially those of the 99 percent, should not be forced to assume the entire cost of such a massive undertaking. Extreme weather is clearly linked to climate change, which in turn has been largely caused by the growth in greenhouse gas emissions caused by large corporations, especially those in the fossil fuel industry.

Holding corporations responsible for the consequences of climate change is not a new idea. Yet it is one that all too frequently gets drowned out amid the bloviating of the climate deniers, much of whose funding comes from the very corporate interests they are working to get off the hook.

Back in 2006 BusinessWeek wrote that lawsuits targeting corporations for global warming were “the next wave of litigation,” following in the footsteps of the lawsuits that forced the tobacco industry to cough up hundreds of billions of dollars in compensation. Such cases did materialize. For example, in 2008 lawyers representing the Alaska Native coastal village of Kivalina, which was being forced to relocate because of flooding caused by the changing Arctic climate, filed suit against Exxon Mobil, BP, Chevron, Duke Energy and other oil and utility companies, arguing that they conspired to mislead the public about the science of global warming and this contributed to the problem that was threatening the village.

Such suits have not had an easy time in the courts. The Kivalina case was dismissed by a federal district judge, and that dismissal was recently upheld by the federal court of appeals. A suit brought by the state of California against major automakers for contributing to global warming was also dismissed.

It is far from certain that corporations will continue to get off scot free. In fact, groups such as the Investor Network on Climate Risks argue that the potential liability is quite real and that this should be a matter of concern for institutional shareholders. The Network, a project of CERES, pursues its goals through initiatives such as appeals to the SEC to require better disclosure of climate risks and through friendly engagement with large corporations.

Yet it may be that a more confrontational approach is necessary to build popular support for the idea that big business needs to be held accountable for its big contribution to the climate crisis.

Unfortunately, we are already seeing steps in the opposite direction. The Bloomberg Administration in New York has already announced new storm-related subsidies that will apply not only to struggling mom-and-pop business but also to giant corporations. Unless there is a popular outcry, the city will repeat its mistakes in the wake of the 9-11 attacks of giving huge amounts of taxpayer-funded reconstruction assistance to the likes of Goldman Sachs (see the website of Good Jobs New York for the dismaying details).

The fact that the large New York banks that stand to benefit from Bloomberg’s new giveaways helped finance fossil-fuel projects that contribute to climate change shows just how self-defeating this approach is.

Rather than using public money to help wealthy corporations pay for storm damage on their premises, we should be forcing those companies to pay the costs of addressing the climate crisis they did so much to create.

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New in CORPORATE RAP SHEETS: a dossier on the many environmental and labor relations sins of chemicals giant DuPont.

Corporate Capture in Rio and at Home

Thursday, June 21st, 2012

The 50,000-person United Nations conference on sustainable development in Rio de Janeiro is bound to be followed by recriminations about what the nations of the world failed to accomplish. Perhaps the real story is what the planet’s giant corporations did accomplish in Rio — to advance their own interests.

Rio +20 is following what is now a familiar pattern in which governments drag their feet while major companies try to give the impression that they are the vanguard of environmental reform. The extent to which the United Nations — whose Centre on Transnational Corporations was once somewhat critical of big business — has embraced this dynamic can be seen on the website Business.UN.org, whose tagline is “Partnering for a Better World.” Corporations can post their sustainability goals on the site under the misleading category of Commitments. Whether the various goals are timid or ambitious, they are all, of course, voluntary in nature and thus unenforceable by the UN or any other body.

More is at work here than simple image-burnishing by many of the planet’s biggest polluters. According to a report issued for Rio +20 by Friends of the Earth International, large corporations and business associations have in effect hijacked the UN’s policymaking process: “There is increased business influence over the positions of national governments in multilateral negotiations; business representatives dominate certain UN discussion spaces and some UN bodies; business groups are given a privileged advisory role.”

“An even greater cause of concern,” the FOEI report goes on to say, “is the emergence of an ideology among some UN agencies and staff that what is good for business is good for society. This is reflected in a shift away from policies and measures designed to address the role of business in creating many of the problems that we face, towards policies that aim to define these problems in terms dictated by the corporate sector, meeting their needs without tackling the underlying causes of the multiple crises.”

All of this constitutes what FOEI calls “corporate capture” of the UN, a phrase that echoes the term “regulatory capture” used to describe what happens when the interests of corporations come to dominate the proceedings of government oversight agencies. FOEI has issued a statement with other NGOs decrying the excessive corporate influence over UN deliberations that has been endorsed by more than 400 groups from around the world.

It’s heartening that so many groups are willing to speak out, but it’s discouraging to realize that the same criticisms have been made for more than a decade, to little avail. At the time of the 2002 UN earth summit in Johannesburg, CorpWatch issued a report called Greenwash +10 that was already warning about the risks of the UN’s increasing commitment to corporate partnerships. It noted that one of those partnerships, Global Compact, claimed to be promoting business support for UN sustainability goals yet included among its members companies such as mining giant Rio Tinto with atrocious environmental records.

Rio Tinto is one of the companies singled out in the new FOEI report for continuing to engage in the same kind of hypocrisy. The mining company is also one of the main targets (along with BP and Dow Chemical) of the Greenwash Gold campaign, which  accuses the companies of covering up environmental destruction “while pretending to be a good corporate citizen by sponsoring the Olympic games” being held this summer in London.

Undue corporate influence over climate policy is also the theme of a recent report by the Union of Concerned Scientists.  While acknowledging that some U.S. companies have taken “consistent and laudable” actions in support of science-based climate reforms, it finds that others have worked aggressively to undermine such progress.

Most interesting is its finding that some large corporations have taken contradictory positions depending on the circumstances. For example, some companies are found to make legitimate statements of concern over climate change on their websites and in their filings with the Securities and Exchange Commission while misrepresenting the state of climate science in their comments submitted to Environmental Protection Agency proceedings. Companies that fall into the contradictory category — such as Alcoa, ConocoPhillips and General Electric — are said to be standing in the way of meaningful change.

Whatever positions corporations take, there will always be tension between their interests and the common good. The fact that those two goals may occasionally coincide does not justify the outsized role that corporations now have in policymaking at both the national and international levels. Progress on climate change and many other fronts will be a lot easier when we are free from corporate capture in all its forms.

Solyndra’s Fossil Fuel Cousins

Thursday, September 22nd, 2011

Republicans show no signs of relenting in their effort to exploit the bankruptcy filing of federally-backed solar equipment company Solyndra to delegitimize not only the Obama Administration’s renewable energy policies but the very concept of green jobs.

A key element of the campaign is the depiction of Obama as having a hippie-like preoccupation with wind and solar energy. What the Republicans conveniently ignore is that Obama hedged his bets. While running for the presidency and after taking office he also promoted non-flower-power forms of energy such as nuclear and coal. Much to the chagrin of his supporters in the environmental movement, Obama embraced the industry-contrived idea of “clean coal,” otherwise known as carbon capture and storage (CCS).

It is widely forgotten that the 2009 Recovery Act (ARRA), now being vilified for appropriating funds for the loan guarantees given to Solyndra and other solar firms, also included a provision for subsidizing CCS projects. ARRA provided $3.4 billion for the Department of Energy’s Fossil Energy R&D Program. Of that amount, $1.52 billion was to support large-scale demonstration projects involving the capture of carbon emissions from industrial sources. “Stimulus Money Puts Clean Coal Projects on a Faster Track” was the headline of a March 2009 article in the New York Times.

The brave new era of CCS did not begin auspiciously. In August 2009 it was revealed that consultants working for an industry front group called the American Coalition for Clean Coal Electricity had forged letters from non-profit groups to members of Congress expressing opposition to a climate bill that was being considered at the time.

In October 2009 the Energy Department announced a set of modest-sized CCS grants to companies such as Archer Daniels Midland, ConocoPhillips and Shell Chemical. Two months later, DOE handed out a set of much larger grants totaling $979 million to American Electric Power Company, Southern Company and Summit Texas Clean Energy.

And in August 2010 the Energy Department awarded $1 billion in ARRA funds to a large CCS project operated by several companies under the name FutureGen Alliance. In a previous incarnation, FutureGen had been funded by the Bush Administration—largely to justify inaction on greenhouse gas emissions—but that money was cut off as the result of a cost study that later turned out to have a major math error.

So how has all this turned out? In July, the CCS movement was dealt a severe blow when American Electric Power announced that, despite the federal aid it was receiving, it would suspend work on its flagship Mountaineer carbon capture project in West Virginia. AEP said it based the decision on the weak economy and the uncertain status of climate policy.

Later that month, Bloomberg BusinessWeek published a report called “What’s Killing Carbon Capture,” which pointed out that the Mountaineer suspension was only one of a series of recent cancellations or postponements of CCS projects in the United States and other countries. Meanwhile, FutureGen 2.0 is years away from operation and may never justify the federal government’s huge investment.

In other words, renewables are not the only kind of energy alternatives that are in trouble. If Republicans want to use the Solyndra case to argue the failure of green job creation, they have to acknowledge that clean coal initiatives promoted by the fossil fuel sector are also going nowhere.

And if they really want to be honest, they would admit that the reasons for setbacks in wind and solar as well as in carbon capture go far beyond the handling of ARRA grants by the Obama Administration. The feeble economy presents a formidable obstacle for any new industry. A dysfunctional policy environment made even more toxic by the rise of climate change denialism creates even more turmoil for energy industry innovators, whether in the renewable or the CCS camp. It may also be the case that those innovators just don’t have a viable business plan.

Of course, the Administration’s critics are not going to concede any of this. Anti-green job demagoguery will be with us for some time to come.

Perilous Pipelines

Thursday, July 7th, 2011

ExxonMobil's paper towel mobilization

At the height of the controversy last year over the BP oil spill in the Gulf of Mexico, top executives from four competing oil giants appeared before Congress and distanced themselves from their British rival.

“We would not have drilled the well the way they did,” smugly stated ExxonMobil CEO Rex Tillerson. “It certainly appears that not all the standards that we would recommend or that we would employ were in place,” chimed in Chevron chairman John Watson.

Now that ExxonMobil is at the center of an oil pipeline spill into Montana’s flooded Yellowstone River, Tillerson should be feeling somewhat less self-satisfied. And the rest of us have another reminder that poor safety practices in the petroleum industry are far from an anomaly.

It is also a reminder that companies professing concern about the environment can end up being major offenders. In 2008 the ExxonMobil refinery in Billings served by the Silvertip pipeline that just burst received certification from the Wildlife Habit Council for its efforts to conserve ecosystems and protect wildlife in and around company operations. Some of that wildlife is now covered in crude oil.

When people hear about oil spills, they tend to think of the large offshore incidents such as the BP mess in the gulf and ExxonMobil’s 1989 disaster in Alaska’s Prince William Sound. Equally dismal is the history of onshore spills caused by ruptures in the vast network of pipelines that carry crude oil from drilling sites to refineries.

A year ago this time, the news media were transmitting images very similar the ones now coming out of Montana. In July 2010 a burst pipeline released more than 800,000 gallons of oil into the Kalamazoo River in southern Michigan.

The company involved in the Michigan accident–Enbridge Inc., operator of the world’s largest crude oil pipeline system–had been warned by federal regulators that it was not properly monitoring corrosion on the pipeline. Over the past decade, Enbridge’s pipelines have been involved in a long list of ruptures and leaks in places such as Minnesota, North Dakota, Wisconsin and Alberta.

Enbridge, which is based in Canada, has annual revenues of more than $15 billion, has not felt much pain from the fines imposed by the U.S. regulators at the Pipeline and Hazardous Materials Safety Administration, which are often below $100,000. However, in response to a November 2007 explosion in Clearbrook, Minnesota that took two lives, Enbridge was fined $2.4 million.

What’s even more troubling than Enbridge’s past record is that the company is seeking to greatly expand its network, with a special focus on the environmentally disastrous tar sand fields of northern Alberta. Bringing the filthy oil output of the tar sands down to the United States is also the objective of the huge Keystone XL pipeline that would pass through eastern Montana (and the Yellowstone River) on its way to Texas.

Moreover, it would traverse the Ogallala Aquifer, which, NRDC points out, serves as the primary source of drinking water for millions of Americans and provides 30 percent of the nation’s ground water used for irrigation. Keystone XL, an expansion of an existing pipeline that opened last year, is awaiting federal approval. Earlier this year the existing pipeline was shut down for about a week after a series of a dozen leaks at pumping stations.

For companies such as TransCanada, Enbridge and ExxonMobil, the sky’s the limit when it comes to what they are willing to spend on projects such as Keystone XL (its price tag is $7 billion).  Yet when it comes to cleaning up their messes, things suddenly become austere. The main tools that ExxonMobil’s crews in Montana seem to be employing are glorified paper towels. If the fines for violations were more substantial, the pipeline companies might take safety more seriously.

The Dark Side of Family Business

Friday, August 27th, 2010

Americans love entrepreneurship, and no form of it is more celebrated than the family business. Most of us distrust big banks and giant corporations, but who doesn’t have warm feelings about mom and pop companies or family farms? These are the types of firms that politicians of all stripes want to shower with tax breaks and other forms of government assistance.

The problem is that family enterprises, like pet alligators, may start out as small and cuddly but can grow into large and dangerous monsters. We’ve seen two examples of this recently in connection with the family-owned oil company Koch Industries and the egg empire controlled by the DeCoster Family.

Koch Industries and its principals David and Charles Koch are the subject of a detailed article in The New Yorker by Jane Mayer. Much of the information in the piece has previously come out in blogs, websites and muckraking reports by environment groups, but she does a good job of consolidating those revelations and presenting them in a prestigious outlet.

Mayer describes how the Kochs, who are worth billions, have for decades used their fortune to bankroll a substantial portion of rightwing activism and are currently the big money behind groups such as Americans for Prosperity that are helping coordinate the purportedly grassroots Tea Party movement. What makes the Kochs especially insidious is that they use the guise of philanthropy to fund organizations promoting policy positions – environmental deregulation and global warming denial – that directly serve the Koch corporate interests, which include some of the country’s most polluting and greenhouse-gas-generating operations. The Kochs also contribute heavily to mainstream philanthropic causes such as the Metropolitan Opera and the Sloan-Kettering Cancer Center to win influential allies and gain respectability.

The DeCosters, whose egg business is at the center of the current salmonella outbreak, are not in the same social circles as the Kochs, but they have an even more egregious record of business misconduct. Hiding behind deceptively modest company names such as Wright County Egg, the family, led by Jack DeCoster, has risen to the top of the egg business while running afoul of a wide range of state and federal regulations.

As journalists such as Alec MacGillis of the Washington Post have recounted, the DeCosters have paid millions of dollars in fines for violating environmental regulations (manure spills), workplace health and safety rules (workers forced to handle manure and dead chickens with their bare hands), immigration laws (widespread employment of undocumented workers), animal protection regulations (hens twirled by their necks, kicked into manure pits to drown and subjected to other forms of cruelty), wage and hour standards (failure to pay overtime), and sex discrimination laws (female workers from Mexico molested by supervisors).

Their lawlessness dates back decades. A November 11, 1979 article in the Washington Post about Jack DeCoster’s plan to expand from his original base in Maine to the Eastern Shore of Maryland states that he was leaving behind “disputes over child labor, union organizing drives and citations for safety violations.” In 1988 the Maryland operation was barred from selling its eggs in New York State after an outbreak of salmonella. In 1996 the Occupational Safety and Health Administration fined the DeCosters $3.6 million for making its employees toil in filth. Then-Labor Secretary Robert Reich said conditions were “as dangerous and oppressive as any sweatshop we have seen.”

The DeCosters were notorious enough to be featured in a 1999 report by the Sierra Club called Corporate Hogs at the Public Trough.  The title referred to the fact that concentrated animal feeding operations (CAFOs) such as those operated by the DeCosters were receiving substantial federal subsidies despite their dismal regulatory track record.

Articles about Jack DeCoster invariably describe him as self-made and hard-working. “Jack doesn’t fish, he doesn’t hunt, he doesn’t go to nightclubs,” a farmer in Maine told the New York Times in 1996. “He does business — 18 hours a day.” He was recently described as a “born-again Baptist who has contributed significant amounts of money to rebuild churches in Maine and in Iowa.”

Like the Kochs, DeCoster apparently thinks that some philanthropic gestures will wipe away a multitude of business transgressions. Yet no amount of charitable giving can change the fact that these men grew rich by disregarding the well-being of workers, consumers and the earth. Such are the family values of these family businessmen.

Villainous Visionaries

Thursday, August 19th, 2010

It is tempting to refute the new book on business ethics by Andy Wales, Matthew Gorman, and Dunstan Hope with two letters; BP. The oil giant’s record of negligence in connection with the Gulf of Mexico disaster, its refinery accidents and its pipeline leaks in Alaska flies in the face of the thesis of Big Business, Big Responsibilities: that large corporations are in the vanguard of efforts to address the planet’s most pressing environmental and social problems.

The text of the book appears to have been completed before the blow-out of BP’s Macondo well this spring, but it is likely that the incident would not have merited mention if the timing had been different. Wales, Gorman and Hope seem to live in a world in which corporations act nobly and business crimes such as bribery, price-fixing, toxic waste dumping, mistreatment of workers and disregard for safety norms are either a thing of the past or are rare enough to ignore.

The authors – two of whom work for large corporations while the third (Hope) is on the staff of Business for Social Responsibility – would have us believe that many major companies have in a short period of time evolved from villains to visionaries.

To their credit, Wales, Gorman and Hope do not claim that this transformation happened spontaneously. They fully acknowledge the role of environmental and social justice campaigns in highlighting harmful and unfair business practices. Yet they fail to address corporate resistance to these campaigns, making it seem as if top executives promptly renounced pollution and exploitation as soon as an objection was raised.

Wales, Gorman and Hope admit that the initial boardroom motivation was to protect brands damaged by aggressive campaigners, but they insist that many large companies have gone beyond that defensive posture and are now engaged in a “proactive search for opportunities to improve social well-being and achieve corporate financial success at the same time.”

Their outlook is representative of the new corporate utopianism – the notion that the profit motive can be made to align perfectly with the public good, thus making global companies the perfect vehicle for reshaping the world.

It is easy to see why Wales, Gorman and Hope, who have built their careers on promoting corporate social responsibility, would embrace this view, and its appeal among the companies they advise is obvious.

But it is not clear why those of us with no vested interested in corporate canonization should go along. Even if we admit that some companies are doing some socially beneficial things, what took them so long? Are we expected to forget their decades of rapacious behavior?

It is also unclear how far should we trust companies that began to act responsibly only after being pressured to do so by outside forces, which according to Wales, Gorman and Hope include not just corporate campaigns but also growing consumer preference for ethical and sustainable goods and services. The only internal impulse that seems to be at work in socially responsible companies is the desire to make a buck from these new market opportunities.

So let me get this straight: responding to external pressures, giant corporations are doing the right thing, which turns out to be highly profitable – and we are supposed to believe this is some kind of great moral awakening?

Before passing judgment on the intentions of companies professing a commitment to social responsibility, perhaps we should take a step back and ask how real is the purported transformation. And this brings us back to BP, which is repeatedly praised by Wales, Gorman and Hope for its forward-thinking stance on issues such as climate change.

Given what we now know about BP’s reckless actions, as opposed to its high-minded principles, it is likely that its commitment to social responsibility is a smokescreen. Wales, Gorman and Hope don’t consider the possibility that many of the laudatory policies adopted by BP and other corporate leviathans are nothing more than greenwashing.

Big Business, Big Responsibilities could be dismissed as a work of corporate propaganda, but what makes it more insidious is the appeal the authors make to non-governmental organizations. The last page of the book calls on NGOs to be less suspicious of corporations and to accept them as full partners in environmental and social campaigns. I read this as an effort to bring about a unilateral ceasefire by watchdogs groups, which would lose their independence and start functioning as appendages of corporate public relations departments.

While a few NGOs have already moved in this direction, it would be foolhardy for serious campaigners to abandon their adversarial posture toward corporations. Without such pressure, big business would inevitably return to all its old tricks.

The New Petro-Villain

Friday, July 30th, 2010

The BP oil disaster in the Gulf of Mexico is 100 days old, and now another company is competing for the spotlight as a major petro-villain.

The upstart is Enbridge Energy Partners L.P. — a U.S.-based subsidiary of the Canadian pipeline giant Enbridge Inc. — which is responsible for the recent accident in Michigan that has filled the Kalamazoo River with some 800,000 gallons of oil and shown that crude does not need to be offshore to cause serious environmental damage. The incident occurred only months after the company was warned that it was not properly monitoring corrosion.

Enbridge is no stranger to controversy, both because of its own performance problems, including a series of earlier spills, and its role in facilitating the distribution of oil produced in environmentally destructive situations such as the Alberta tar sands. This dubious track record is worth a closer look.

  • In January 2001 a seam failure on a pipeline near Enbridge’s Hardisty Terminal in Alberta spilled more than 1 million gallons of oil.
  • In July 2002 a 34-inch-diameter pipeline owned by Enbridge Energy Partners ruptured in northern Minnesota, contaminating five acres of wetland with about 250,000 gallons of crude oil.
  • In January 2003 about 189,000 gallons of crude oil spilled into the Nemadji River from the Enbridge Energy Terminal in Superior, Wisconsin. Fortunately, the river was frozen at the time, so damage was limited.
  • In 2004 the federal Pipeline and Hazardous Materials Safety Administration (PHMSA) proposed a fine of $11,500 against Enbridge Energy for safety violations found during inspections of pipelines in Illinois, Indiana and Michigan. The penalty was later reduced to $5,000. In a parallel case involving Enbridge Pipelines operations in Minnesota, an initial penalty of $30,000 was revised to $25,000.
  • In January 2007 an Enbridge pipeline in Wisconsin spilled more than 50,000 gallons of crude oil onto a farmer’s field in Clark County. The following month another Enbridge spill in Wisconsin released 176,000 gallons of crude in Rusk County.
  • In November 2007 two workers were killed in an explosion that occurred at an Enbridge pipeline in Clearbrook, Minnesota. The PHMSA proposed a fine of $2.4 million for safety violations connected to the incident, but the case has not been resolved.
  • In 2008 the Wisconsin Department of Natural Resources charged Enbridge Energy with more than 100 environmental violations relating to the construction of a 320-mile pipeline across much of the state. The agency said that Enbridge workers illegally cleared and disrupted wooded wetlands and were responsible for other actions that resulted in discharging sediment into waterways. In January 2009 the company settled the charges by agreeing to pay $1.1 million in penalties.
  • In 2009 the PHMSA fined Enbridge Pipelines LLC-North Dakota $105,000 for a 2007 accident that released more than 9,000 gallons of crude oil.
  • In March 2010 the PHMSA proposed a fine of $28,800 against Enbridge Pipelines LLC for safety violations in Oklahoma; the case is not yet resolved.

Apart from its safety record, Enbridge is targeted by environmentalists for its role in transporting crude oil from the controversial tar sand operations of northeastern Alberta, which are regarded as one of the largest contributors to global warming as well as a major source of air and water pollution and forest destruction. Enbridge’s predecessor companies had some involvement in the tar sands as early as the 1970s. That role expanded greatly in the late 1990s, when Enbridge completed construction of an $800 million expansion of its pipeline system to bring tar sands oil to Eastern Canada and the U.S. Midwest. The pipeline initially served Suncor Energy, a spinoff of U.S.-based Sunoco that is now Canada’s largest petroleum company.

In recent years Enbridge has spent billions of dollars to expand its oil pipeline capacity, much of it dedicated to the tar sands industry. Enbridge is set to provide another boon to the tar sands producers with the opening later this year of its Alberta Clipper pipeline, which will carry more of the dirty crude to Superior, Wisconsin. It is also proceeding with its Northern Gateway Project, which involves the construction of parallel pipelines from the tar sands region to the western shore of British Columbia. Enbridge is partnering with PetroChina on that project.

Enbridge is also headed for more controversy in light of its announcement in March 2010 that it would develop a natural gas pipeline serving areas of Pennsylvania and nearby states where Marcellus Shale drilling is taking place. Those drilling activities have been the subject of numerous reports of drinking water contamination.

Like BP, Enbridge depicts itself as a strong proponent of corporate social responsibility. Also like BP, Enbridge illustrates how those noble sentiments are meaningless in the face of repeated acts of negligence and recklessness.

Profit, Baby, Profit

Friday, April 2nd, 2010

President Obama’s drill-baby-drill (but not quite everywhere) gambit does not only link him to an environmentally backward policy. It also will force his Administration to defend one of the most dysfunctional federal programs in modern history: the Interior Department’s offshore oil and gas leasing system.

Interior’s Minerals Management Service (MMS) is supposed to collect royalties from companies drilling in offshore public waters. After new activity was restricted in the wake of the devastating spill off the coast of Santa Barbara, California in 1969, the oil industry sought to make its leases more profitable by pressing for reductions in these payments.

In the mid-1990s, when energy prices were low, Big Oil got Congress to expand the “royalty relief” provisions that were already in the Outer Continental Shelf Lands Act of 1953. Royalties were supposed to return to higher rates when prices rebounded, but things got complicated. First, it came to light that MMS had failed to write those provisions into some 1,000 deepwater leases it signed in 1998 and 1999, putting into question its ability to collect billions of dollars in back royalties.

While this was being sorted out, one of the drilling companies – Kerr-McGee (now part of Anadarko Petroleum) – filed suit challenging the right of MMS to impose the higher royalties on any leases. The company’s self-serving arguments found a sympathetic ear in federal court. Last fall the Supreme Court declined to review an appellate ruling in favor of the company, thus allowing Anadarko to avoid paying more than $350 million in back royalties. For the industry as a whole, the Court blocked the Interior Department from trying to collect on a bill that the Government Accountability Office once estimated could run as high as $53 billion.

Then there’s the small matter of the wild parties and gifts that industry representatives lavished on MMS employees in charge of the agency’s royalty-in-kind program. In September 2008 Interior Department Inspector General Earl Devaney (now in charge of the Recovery Accountability and Transparency Board) issued three reports describing gross misconduct at MMS, including cases in which agency employees were literally in bed with the industry. Devaney concluded that the royalty program was mired in “a culture of ethical failure.”

Not all MMS employees were bought off. Some agency auditors came forward and charged that they had been pressured by their superiors to terminate investigations of royalty underpayments.

Once the Obama Administration took office, Interior Secretary Ken Salazar took steps to clean up MMS. Last September he announced plans to terminate the royalty-in-kind program, whose staffers had been at the center of the sex and gifts scandal.

For a while it was unclear whether Salazar would tighten up the remaining royalty programs. In fact, he told the editorial board of the Houston Chronicle last fall that in some cases he thought drilling companies should pay even lower royalty rates. He changed his tune this year, and the Administration is seeking modest increases in royalties and fees.

Yet the entire offshore leasing program still amounts to a giant boondoggle. Thanks to the federal courts, artificially low royalty rates are now effectively an entitlement for the drilling industry. Research conducted by the Interior Department itself suggested that the incentives result in little additional oil production. Not to mention the environmental risks.

And now, thanks to a dubious calculation that making concessions on offshore drilling will help prospects for a climate bill, the Obama Administration is bringing about a major expansion of a program that is disastrous even if there are no spills. Profit, baby, profit.

Attacking the Wrong Earmarks

Thursday, March 11th, 2010

Congress is once again talking tough about budget earmarks. House Democratic leaders announced that they are banning earmarks designed to benefit for-profit entities, while House Republicans upped the ante by calling for the abolition of the practice across the board.

Even if this latest in a long line of anti-earmark initiatives takes hold, it will have limited impact on the channeling of taxpayer dollars to favored interests. The earmark database compiled by Taxpayers for Common Sense indicates that in the current fiscal year they amount to only $16 billion. And many of the 11,860 individual items cannot be linked to a specific recipient, making targeted bans meaningless.

Even the largest items linked to individual corporations—such as $19.5 million to Boeing for “Maui Space Surveillance System Operations and Research” in Hawaii; $12 million to BAE Systems for “Mk 45 Mod 5 Gun Depot Overhauls” in Kentucky; and $9.6 million to Northrop Grumman for “B-2 Advanced Tactical Data Link” in California—are drops in the bucket of $1 trillion in overall federal discretionary spending and a military budget of $530 billion.

It’s amusing to watch the posturing about these small amounts at a time when Congress may be about to endorse what can be seen as perhaps the largest earmark ever: the healthcare subsidies that will pass from lower-income Americans to private insurers in a public-option-less system. A new report from the Congressional Budget Office estimates that premium and cost-sharing subsidies under the current (pre-reconciliation) Senate version of the bill would cost $337 billion over the next decade. The TARP bailout was bigger, but in that case the taxpayers are recouping much of the outlay.

Healthcare is not the only example of how reform gets built on corporate handouts. The climate bill that passed the House last June (and got stalled in the Senate) would have essentially given away many of the emission allowances for the cap and trade system rather than requiring corporate polluters to pay in full for their greenhouse gas output.

Corporate subsidies are also at the heart of the job-creation initiatives making their way through Congress. Most Democrats have embraced the Republican notion that the best way to increase employment is to decrease business taxes. The same goes for federal efforts to promote renewable energy. At the center of the green jobs initiatives in the Recovery Act were corporate tax breaks such as the $2.3 billion Advanced Energy Manufacturing Tax Credit, which the Obama Administration would like to expand by $5 billion. The Administration also wants to give $8 billion in loan guarantees to the Southern Company to build a nuke in Georgia.

In addition to the direct contracts and tax breaks, corporate America is also in effect being subsidized by the unwillingness of much of Congress to tighten regulation of business, even in cases of reckless behavior. The delay and dilution that have characterized financial reform are worth billions to the banks. The moves to exempt sectors such as payday lenders from federal oversight is an enormous boon to those businesses.

Healthcare reform, climate-crisis mitigation, job creation, renewable energy development and financial reform are all laudable goals, but it is frustrating that they are all being pursued in ways that often reward the same large corporations that created many of the problems these initiatives are meant to address. And it is mind-boggling that the critics of this business-friendly agenda repeatedly denounce it as socialistic.

Democrats should spend less time posturing on earmarks and more time trying to figure out how they can fix what’s wrong with the country without giving away the store to big business.