Jack Gerard, the force majeure behind Big Oil
By Steven Mufson,
Ask oil lobbyists, oil executives, and former employees and board members of the American Petroleum Institute how they describe API President Jack N. Gerard, and one thing they don’t say is soft. One calls him a “hard-nosed guy.” Another says he is “a political animal” who “loves a fight.” Yet another dubs him “Voldemort.”
And those are people who consider themselves supporters of the oil industry.
If Gerard loves a fight, he must be a happy man. Energy is one of this year’s biggest and most divisive political issues. Drilling. Fracking. Tax breaks. Soaring gasoline prices. Even pipeline permits have become front-page news.
Ever since taking the helm at API in November 2008, the pugnacious Gerard has worked to reshape the political landscape on energy issues. From the outset, he told API staffers that the group, founded in 1919 in part to promote industry-wide standards, needed to be run more like a political campaign. He ordered up newspaper and television ads targeted at the districts of lawmakers out of step with the oil industry. “I want to hang their feet to the fire,” one former senior employee recalls him saying.
Three and a half years later, Gerard is holding President Obama’s feet to the fire. A longtime supporter of fellow Mormon and former Massachusetts governor Mitt Romney, Gerard has repeatedly castigated Obama for his energy policies. He has also leaned on estimates — about the number of jobs the oil industry creates and the president’s power over oil prices — that many energy economists say are greatly inflated.
“Jack Gerard sent out a message saying we have to get out the right facts and have a reasonable discussion,” says Frank Verrastro, energy program director at the Center for Strategic and International Studies. Verrastro’s reply: “Well yeah, you could contribute to that, and you’re not. It’s flamethrowing at this point.”
The silver-haired Gerard, 54, may not be well-known outside the business. But as API president, he can spread the institute’s views — with members’ money. In 2010, he directed $63 million, a third of API’s total budget, to an outside public relations firm, Edelman, for ad campaigns, according to API’s most recent tax return. So far this year, the API has bought at least $4.3 million in broadcast ads, largely in a handful of swing states, outspending all but a few super PACs and almost every trade group, according to figures compiled by Kantar Media/Campaign Media Analysis Group.
Much, perhaps most, of that advertising is done under names like “Energy Nation,” “Energy Citizens,” “EnergyTomorrow,” or “the People of America’s Oil and Natural Gas Industry.” In the ads, ties to API are duly noted, albeit usually in small print. Its current campaign is called Vote4Energy, appealing to different demographic groups with photos of ordinary-looking folks — “I’m Kelsie” or “I’m Roy” — beside a pitch for “developing our plentiful domestic energy resources, like oil and natural gas.” In 2010, API also gave $1 million to the Coalition for American Jobs, an entity opposed to “arbitrary” greenhouse gas regulation by the EPA and whose five officers include Gerard, API’s top lobbyist and Gerard’s successor at the American Chemistry Council.
The strategy, Gerard says, is to influence lawmakers by mobilizing their constituents.
“If we’re concerned about a particular member [of Congress], we will educate that constituency and encourage people to weigh in with their elected official,” he says in a conference room at API’s L Street office. “Congress is a lagging indicator. Congress is responsive to the American people. That’s why a well-educated electorate is a key to sound policy.”
Sources familiar with API say that Gerard was bold enough to once consider targeting powerful Senate Finance Committee Chairman Max Baucus (D-Mont.). When asked, Gerard said only that “I know Chairman Baucus well” and that “we look at a lot of different members of Congress. . . . Over the course of time there will be a number under consideration.” (Baucus’s office declined to comment.)
On March 24, API launched ads urging voters to call their U.S. senators to stop “another bad idea from Washington” — an end to key tax breaks for the oil industry. The ads ran in seven states, six of which face hotly contested Senate races this fall.
Gerard believes his strategy is working: As evidence, he points to API polls showing widespread support for more oil and gas development. He also notes that 47 House Democrats and 11 Senate Democrats voted in favor of a recent Keystone XL measure that attempted to force Obama to approve the pipeline plan.
Like many environmental groups, API uses social media to build a network of supporters. It’s a tool Gerard says he learned about from people who worked for Obama’s 2008 campaign. Gerard says API’s role is transparent, but the Facebook sites of Energy Citizens (28,278 “like” this) and EnergyTomorrow (32,877 “like” that) identify themselves simply as nonprofit organizations. Only if readers click on the “about” section do they see “the organization is supported by API.”
This is how it aims to build its forces: API wants like-minded people to engage in Twitter feeds, join chat rooms or blog, so that they might move “offline” to meetings lawmakers hold in their districts.
In another time, Gerard relied on Big Oil employees to do that sort of thing. In 2009, Gerard urged oil giants to send their employees to “Energy Citizen” rallies aimed at influencing U.S. senators in 21 states. According to a Gerard e-mail that Greenpeace obtained, Gerard offered API’s help with logistics — including the hiring of “a highly experienced events management company that has produced successful rallies for presidential campaigns, corporations and interest groups.”
Romney’s ‘helpful’ background
Raised in Mud Lake, Idaho, outside the 140-year-old Mormon stronghold of Idaho Falls, Gerard was the son of a John Deere salesman and a teacher. He graduated from George Washington University after finishing his mission work in Sydney. He worked for Idaho Republicans Rep. George Hansen and Sen. James A. McClure, the former chief of the Senate Energy and Natural Resources Committee, who pushed to privatize federal lands, promoted the Strategic Petroleum Reserve and was one of 11 senators to vote against the Clean Air Act of 1990.
After McClure retired, he and Gerard formed a lobbying firm. Gerard left that to run the National Mining Association and later the American Chemistry Council.
At API, Gerard immediately shook things up and cut the payroll. He fired tax analysts, an economist, a congressional relations specialist and roughly 40 others, many of them just before Christmas. Gerard — who took home a $6.4 million pay package in 2010 that made him one of the city’s best-paid trade group leaders — says he wanted it to be more like a small business, though with 176 people in its D.C. headquarters and 45 others in state offices, it is a sizable trade group.
Gerard did some hiring, too. Communications aide Eric Wohlschlegel jumped from the U.S. Chamber of Commerce, and Marty Durbin followed Gerard from the American Chemistry Council. Durbin, API’s government affairs chief, is a nephew of Sen. Dick Durbin (D-Ill.). (Gerard also hired a driver-bodyguard away from the Chamber president.)
API, which still sets global technical standards, receives $29 million from certification fees. But the organization is primarily built on about $133 million in annual dues from members, from Milwaukee Valve Co. to Exxon Mobil, with the largest paying more than $20 million a year by some estimates. Even with the sliding scale, some small firms chafe at the dues; one unhappy executive said, “Maybe that’s latte money for Exxon Mobil, but a couple of million is important to us.”
Outside the API, Gerard is a leading figure in the Church of Jesus Christ of Latter-day Saints, a former bishop and a current member of what the church calls its “area 70s,” which puts him on a high rung of the organization. He has eight children, including a kindergarten-age pair adopted from Guatemala and others ranging in age from 14 to 26. He is a past chairman of the National Capital Area Council of the Boy Scouts of America.
On Super Tuesday, Ann Romney publicly thanked him for helping her husband in his bid for the presidency. According to the Center for Responsive Politics’ OpenSecrets Web site, Gerard has given $2,470 to Romney and his family members have given $4,970 for the 2012 campaign. He has raised much more by hosting fundraisers, including one at the District Chop House in 2010. He was a supporter of Romney in 2008, too, and some former API employees think he hopes to land a job in a Romney administration.
“Romney has a business background that would be helpful to get us back on track,” Gerard says. “They’ve asked us to support them, and we have. They’re good people.” He and his wife “believe the president’s approach to date is not consistent with what the people need or the country needs for sound energy policy.”
‘Far too aggressive’
Gerard has made that loud and clear.
On Jan. 6, 2010, he spoke of “what has become increasingly familiar double talk from this administration.” After Obama’s State of the Union address this year, Gerard issued his own response, saying it was “not a sound energy policy.” He said, “The president’s tax plan sounds like something Jimmy Carter would have supported back in the ’70s.”
The week before Obama rejected the proposed Keystone XL pipeline, the API blitzed TV viewers with $600,000 in ads urging people to “tell our president we need it now,” according to Kantar Media.
In March, after Obama proposed, as he had in the past, that Congress end about $4 billion a year in tax incentives for the oil industry, Gerard accused him of “efforts to punish the oil and natural gas industry through tax policy.” He then launched a new ad equating higher taxes with higher gasoline prices. “In speech after speech, President Obama is calling for higher taxes on energy producers to pay for more spending,” the ad said.
Obama, who in the 2008 campaign said “we must end the age of oil,” has drawn his own stark line. On March 29, with Congress set to vote on industry tax breaks, he said: “Today, members of Congress have a simple choice to make: They can stand with big oil companies, or they can stand with the American people.” The vote failed in the Senate.
For a brief moment in March 2010, it looked as though Obama’s effort to find a middle ground on energy policy might succeed. He unveiled a five-year lease plan that included expanded offshore drilling. Gerard called it a “positive development.” Three weeks later, when a BP exploration well exploded, killing 11 workers and uncorking a massive oil spill in the Gulf of Mexico, the administration backed away and declared a six-month drilling moratorium. Gerard went back on the offensive.
Interior Secretary Ken Salazar has been a special target because he oversees leases and drilling on federal lands, both onshore in the Rocky Mountain states and offshore on the Outer Continental Shelf. After the oil spill, Salazar angered oil execs by saying he wanted to “keep our boot on their neck” until BP cleaned up.
Gerard lambasted the drilling slowdown as the administration struggled to address the environmental disaster and overhaul of the discredited regulatory agency before ramping up drilling again. The Interior Department fired back: “API’s Gerard Makes Inaccurate Statements on Federal Oil and Gas Development,” it said in a “reality check” noting high levels of drilling and production on federal lands. Even after deep-water drilling returned to pre-spill levels, Gerard kept hammering Obama on the issue.
Is confrontation the best strategy? Not every trade association thinks so.
“Our association tries to avoid combat and hope the logic of our positions prevail,” said Thomas F. Farrell, chief of Dominion Power and chairman of the utility industry’s Edison Electric Institute.
A former API board member said “for my taste the whole organization is far too aggressive.”
“A trade organization should not adopt party loyalty,” said Fadel Gheit, an oil analyst with Oppenheimer & Co. “It should be much more constructive instead of just blaming the president.” According to Open Secrets, 70 percent of campaign contributions from API’s political action committee (started by Gerard and funded by employees) go to Republicans. Roughly 90 percent of oil company PAC contributions go to Republicans.
API has given relatively small grants to a litany of Republican causes. It gave $25,500 to Americans for Prosperity, the political action group run by the conservative Koch brothers; $25,000 to the Sixty Plus Association, devoted to ending the estate tax; $50,000 to Americans for Tax Reform, the Grover Norquist-led group that urges lawmakers to take a pledge not to raise taxes. API also gave $50,000 to the Congressional Coalition on Adoption Institute as well as the New Orleans-based America’s Wetland Foundation.
API’s shift toward Republicans predates Gerard’s arrival. According to a person present at a board meeting in 2008, some members wanted to spend money to defeat industry loyalist Sen. Mary Landrieu (D-La.) in order to prevent Democrats from gaining a filibuster-proof 60-vote majority in the Senate. Other board members blocked the idea.
Gerard says “energy is not about Republicans, not about Democrats. It is not a partisan issue. It’s an issue that affects Americans at large.” API has tried to woo Democrats by giving money to the Congressional Hispanic and Black caucuses, funding fellowships and supplying data about oil industry jobs in their districts.
At the White House, much of Gerard’s rhetoric has been dismissed as political noise. Bill Daley, who as Obama’s chief of staff was supposed to help bridge the gap between business and the president, says that he didn’t have any contact with API during his stint. “They are pretty much viewed as a Republican operation,” he said. “They’ve been beating up the president now for three years. It’s not a group most Democrats think of as an unbiased, nonpartisan organization.”
White House records from early 2009 through Aug. 31, 2011, show that Gerard visited twice, on Dec. 13, 2010, to see Kristin J. Sheehy, special assistant to the deputy chief of staff, and on Aug. 16, 2011, to see Cass Sunstein, head of the office of information and regulatory affairs at the Office of Management and Budget.
Oil company executives typically visit more often and see more senior officials. Exxon Mobil chief Rex W. Tillerson, for instance, has met with Obama, former Council of Economic Advisers head Austan Goolsbee, former OMB director Peter Orszag, economic coordinator Lawrence H. Summers and former energy and climate czar Carol Browner.
It’s not always clear whether Gerard is promoting API or himself. In January, he delivered his second “State of American Energy” speech at the Newseum, inviting notable guests; the news release promoted it as a “major address.”
But some lobbyists say Gerard is doing exactly what Big Oil expects of him, taking flak on controversial issues while corporate executives end up looking reasonable and moderate by comparison.
Gerard says “our views are a reflection of our member companies. . . . You don’t survive very long if you’re inconsistent with what members think.”
It’s possible that Gerard’s hard-nosed tactics are working. Obama has spent much of the past month defending his policies. The EPA has done little to regulate hydraulic fracturing, the Interior Department has approved Shell’s drilling plans in the Arctic and Obama has moved up plans for preliminary exploratory work off the Atlantic coast.
Indeed, many oil executives are frustrated with the administration. “This is a very different direction for the API than when I was on the executive committee,” said John Hofmeister, former president of Shell Oil. “In my opinion, it has been invited by the administration’s deliberate and explicit hostility to the hydrocarbon industry and in particular to oil and gas.”
Hofmeister, one of the industry’s few registered Democrats, said he was “blown off” by Obama during the 2008 campaign. His message was that cultivating biofuels wouldn’t be enough to alter the price of gasoline and that Obama should also support domestic drilling. After the election, he said, he tried again in vain.
“In a sense, the administration has invited hostility,” Hofmeister said.
‘Not on the same page’
Now Obama is trying to find middle ground. He’s for fracking — with regulations to ensure it’s done safely. He’s for offshore drilling — if it also is done properly. He rejected the Keystone XL proposal, but says he’s open to a revised one and has embraced the construction of its more urgently needed southern half. The White House said it believes its “goals . . . are largely shared with API.”
The Obama administration has found that it can be lonely in the middle of American politics. Oil companies say he hasn’t done enough to promote drilling on federal lands; unhappy environmentalists believe he has approved too much drilling in ecologically sensitive areas.
But it’s still trying to find the right spot. White House senior adviser Valerie Jarrett attended a recent meeting of oil executives on the API board, Gerard said. “We’re trying to at least establish some common understanding so we’re not talking past each other,” Durbin said. “They want to initiate a dialogue.” He said the meeting was “very cordial” but he added “we’re not on the same page” and “we didn’t come to any agreements other than to continue the dialogue.”
Two weeks later, Obama and API were at loggerheads again over taxes.
How this will play out in this election year is unclear. API is trying to give Big Oil a makeover. A mid-February Washington Post and Pew Research Center poll suggests it is making headway. Only 14 percent of those surveyed blamed oil giants for high gasoline prices, less than half the level in a 2006 poll; more people, 18 percent, blamed Obama. For his part, Obama has cast the industry as “raking in record profits — profits that go up every time folks pull up into a gas station.”
Frank Maisano, an energy media specialist at Bracewell & Giuliani, says API’s aggressive positions could allow Obama to chart a course between industry and environmentalists. “The president is triangulating between enviros and industry,” he said. “And he comes out looking like he’s in the middle, which is where he wants to be in an election year.”
Post researcher Lucy Shackelford contributed to this report.
The big numbers behind Big Oil $6.4 million Gerard’s pay package in 2010. That made him one of the highest- paid trade leaders in the city. $63 million How much money API paid an outside public relations firm in 2010 for ad campaigns. That was one-third of the organization’s total budget for the year. 70 percent of campaign contributions from API’s political action committee, which is funded by employees, go to Republicans. Roughly 90 percent of oil company PAC contributions go to Republicans.