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DODGING THE BULLET
An Inside Washington Look At High-Stakes Lobbying Against an Oil Giant
By EDWARD L. JAFFEE
AuthorHouse
Copyright © 2011 Edward L. Jaffee
All right reserved.
ISBN: 978-1-4567-0065-2
Chapter One
"A KEY ISSUE FOR US"
MARCH 7, 1983 - IT WAS a meeting pretty much like any other in my typical day as a Washington government affairs representative with PPG Industries: this one held by the Energy Committee of the National Association of Manufacturers, located on Pennsylvania Avenue in Washington. The long table in the main conference room was nearly full, with some 40 corporate government affairs reps, lobbyists who focused, at least in part, on energy issues. Energy was a secondary issue for me, with environmental matters as my main concern. But this meeting was to cover natural gas decontrol legislation, a subject that figured to significantly affect my employer.
Jim Rubin of Allied Chemical chaired the group, and the meeting. The session dragged on for more than three hours, as Rubin and others plodded through the entire 488-page Reagan administration proposed natural gas decontrol bill, called the Natural Gas Policy Act Amendments of 1983 and given the bill number S. 615 in the Senate. Each attendee was handed a copy. Attorney Gordon Gooch held forth for part of the time, with lucid explanations of what various sections of the bill meant to industrial users of natural gas. Not surprisingly, most in the room were pleased with what they were hearing. After all, it meant less government intervention in the marketplace.
Rob Odle, head of the Department of Energy's lobbying office, was also on hand, and emphasized the Reagan administration's strong support of the bill.
I was struck by the number of outside attorneys at the table, many of them sitting next to the Washington rep from their corporate clients. One of the best-known lawyers in the room, John Camp, was seated beside Don Annett, the vice president in charge of Texaco's Washington office.
After two hours, I was finding it increasingly difficult to keep my attention locked on the arcane discussion, and took a break to stretch in the anteroom just outside the conference room. I used the time to grab one of the three phones there and call Bob Steder, the go-to guy on energy within PPG's Supply Department. I had told him that morning that the meeting was on for today, and that I would get back to him if I saw anything that might be important to the company.
"So far, it's boring as hell," I offered. "But we'll see if anything develops."
"Well, get back in there and stay alert, Ed. This could be a key issue for us."
* * *
It was now past noon. The meeting had gone on since 9:30, and matters were winding down. Rubin was nearing the end of the proposed legislation, in Section 316, on page 414. As he read the section title: "First Sale, Direct Sale, Not-for-Resale Intrastate Gas," the light bulb came on in my head. Direct sale, not-for-resale. I knew, from spending several days at PPG's largest facility, at Lake Charles, Louisiana, that it purchased natural gas from Texaco, for use both as a fuel source and to break into its component parts, including ethane and ethylene. We used those components in making compounds called chemical intermediates to sell to other companies for use in manufacturing end-use products.
Given that PPG Lake Charles was the third largest industrial plant in the state, with well over 2,000 employees, I paid close attention as Rubin went through the brief section. Then, for the second time that morning, I slipped out to the anteroom, and found a phone in the corner. Steder had not yet gone to lunch.
"I think we may have something here," I told him. "Something that could be big."
"Shoot," was the reply. Bob Steder, a roly-poly outgoing type, was all business when it mattered.
I read the entire section over the phone, including the actuating words: "Any two parties to a first-sale, direct-sale, not-for-resale contract for intrastate natural gas will have until January 1, 1985, to renegotiate said contract to their mutual agreement. In the instance of failure to reach such an accord, either party may market out." I added that in checking the glossary of terms at the back of the bill, it turned out that "market out" meant to use the price for natural gas as of January 1, 1985.
Silence, for several seconds, and then, "Shit, man! This could kill us at Lake Charles!"
Chapter Two
"A SWEET DEAL"
MARCH 7 - BEFORE I could ask for specifics, Steder continued: "Our sole supplier of natural gas at Lake Charles is Texaco. There's a feeder line that goes directly from one of their main pipelines into our facility. That's why we're in a first-sale, direct sale situation. And since we use the gas right there, it's not for resale."
"Right," I interjected. "We use the gas as feedstock and as heating fuel."
"Yes, but it's the amount we use that's the key. Lake Charles chews up more than a hundred million cubic feet of gas every single day. That's enough to heat the whole city of Lake Charles twice over."
I exhaled, "Damn!"
"Now, from what you've just told me, Ed, this bill would cost us dearly. Back in 1967, when natural gas was so cheap that Texaco and other companies were actually flaring it off into the air, we signed a twenty-year contract with them to buy the stuff at 18 cents per mcf (thousand cubic feet). The deal expires on March 1, 1987, and includes a one-penny escalator every four years, so that as of today, we're paying them 22 cents per mcf."
I added the obvious: "Sounds like a sweet deal to me."
"It's what the contract calls for. But Texaco's ticked off because natural gas is now at about $2.80 cents per mcf. Remember what the Arab oil embargo did to the price of gasoline back in '73? Well, sometimes when you drill for oil, you first hit natural gas. Texaco did, and they were smart enough to tap into the gas as a huge cash cow. Hell, they were bragging, back in 1967, that they'd been able to entice major industry to locate in South Louisiana because of the available long-term supply of cheap natural gas. They said that in one of their annual reports."
"So, what happened when the '73 Arab oil embargo shot up the price of natural gas as well as gasoline?" I asked.
"Good question. Texaco immediately took us to court in Louisiana and tried to abrogate the contract. They claimed something called force majeure, an act of God. The court threw the case out, based on the doctrine of sanctity of contract, and added that an act of OPEC was not, in their mind, an act of God.
"Then," Steder continued, "Texaco tried and failed to break the contract by going to the state legislature. Their sponsor there at the time was a guy named Billy Tauzin, and I think you introduced me to him as a U.S. congressman last month in Washington."
"Right," I replied, struck by the irony. "What goes around, comes around."
"Whaddya mean?" Steder asked.
"Well, I'd assume Texaco will want to get Billy Tauzin to push the House version of this bill for them." The House bill, which I hadn't yet seen, was numbered HR-1517.
"Don't forget, Ed, that while Texaco is a bigger company than PPG, we're the larger player in Louisiana. And thousands of jobs could be at stake there."
"That may or may not matter," I countered. "Look, do we know who else, if anybody down there, has contracts like ours with Texaco? We're gonna need allies, Bob."
"Okay," came the answer. "Give me a few hours to run the traps and see, and also to try to figure out the dollar impact on PPG if this bill goes through."
"So," I concluded, "I assume that if this is as big as we think, I have your okay to do whatever is necessary to get that language out of the bill?"
"You really need to ask?"
Chapter Three
"A MAJOR RAINMAKER"
MARCH 8 - IT WAS the next morning at 9:30 before Steder called back.
"It's every bit as bad as I feared," he began. "The hit on PPG would be more than three hundred million dollars." (In today's numbers, that would have amounted to more than half a billion.) "That's based on a $2.80 per mcf price from January 1, 1985, until March 1, 1987, when the contract expires, and it includes some down time at the plant."
"Oy," I blurted.
"Oy indeed. And we're not alone in being at risk. I have no idea of the specifics, but Kaiser Aluminum and Chemical, plus Georgia Pacific and Air Products all have Louisiana facilities and they all have the same kind of contracts with Texaco, negotiated at varying times. And by the way, I checked Texaco's earnings for last year. They made just over fourteen billion dollars, so you can see how big a deal this is for them."
Air Products Corporation was a lesser-known giant of a company, with the lion's share of the market in purging chemicals and
petrochemicals from the huge tanks industry uses for storing them, nationwide. I had no idea just how Air Products used natural gas, but I did know their Washington representative, Lewis Dale. The other two companies were major users of natural gas in Louisiana, as a key energy source and/or as a feedstock.
"Well," I began, "I know the Washington reps for all three of those companies. Give me a day or so to contact each of them and see if we can bring them on board with us."
"Make it one day if you can, Ed, and get back to me as soon as you know. Now, what're your plans for us to fight the Texaco language?"
I had thought about that ever since the previous call to Steder. "One thing I didn't mention yesterday was that one of the people at that NAM meeting was John Camp, Texaco's primary outside lawyer. My guess is that he had a hand in writing the direct sale language in the bill. He was sitting next to Don Annett, Texaco's Washington vice president."
"You mean outside lawyers can do that?" Steder asked.
"Hell yes. It happens all the time. They work with the staff of the members and the committees on the Hill, and with people in the president's administration as well. Anyway, Camp's firm is big in Louisiana. So I figure we should fight fire with fire, only with an even bigger fire. I'd like to see if we can get Patton, Boggs and Blow, Tommy Boggs's law firm, to represent us."
There was a pause while Steder digested this suggestion. Then, "Aren't they really expensive?"
"Oh yeah," I answered. "Tommy Boggs is a major rainmaker in this town. But if we want the best ..." (Tommy Boggs was the son of the late House majority leader Thomas Hale Boggs, Sr., Democrat from Louisiana, and of Lindy Boggs, who replaced her husband in Congress after he was lost in a small plane crash in Alaska eleven years earlier. Patton Boggs - as it is familiarly known - was perhaps the most prominent lobbying law firm in the city.)
"I know, I know," Steder interjected. "But be sure to make it clear to the other three companies that if they join us, this'll be a shared expense."
Steder's point was not unexpected. "Will do," I answered.
* * *
I didn't know Tommy Boggs personally. But as it happened, Phil Pulizzi, one of the other Washington reps in our office, knew someone else at Patton Boggs, a lawyer named Tim Vanderver. Phil called his contact and asked if we could set up a meeting with Boggs. I stood beside Phil as he made the call.
After a few moments, Phil covered the mouthpiece and said to me, "He wants to know how big an issue this is."
"Tell him it's an energy issue, and we're pretty sure it's major even by their standards." Pulizzi did so, listened and then turned to me and said, "He says they're likely to be willing to meet and see what we have in mind. Then they'll decide whether to work with us."
"Fair enough," I said. "Let's see if we can make it late tomorrow afternoon, after five." I figured it would take at least that long to bring the other companies on board with us.
Pulizzi spoke again to his contact, then hung up the phone and said, "You're on. He'll get back to me with the time. Do you need me there?"
"Will Vanderver be at the meeting?"
"Probably not. He'll likely clue in the partners and then stay out of it."
"Then, unless you feel you can add something different to the meeting, I'd really prefer we limit it to the Washington reps directly involved from each company."
"No problem. Happy to help."
"And Phil, many thanks, man."
Chapter Four
"THE MORE THE MERRIER"
MARCH 8 - THE NEXT round of phone calls - immediately after lunch - were to Bob Cole, head of the Kaiser Aluminum and Chemical Washington office, Lewis Dale of Air Products and John Ferguson, from Georgia Pacific's Washington office. I rang up Cole and explained the situation, suggesting that he check with his energy and/or supply departments and then let me know what they had to say.
Bob Cole was a clear thinker with a speech pattern that tended to end every sentence on an upswing, as if he were asking a question. But his first comment actually was a question: "Are you sure about all this?"
"The only thing I know for sure is the impact on PPG, based on the enormous amount of natural gas we use every day at Lake Charles. But our energy supply man seems to think you guys are right up there with us in usage."
"That's a good enough starting point for me. You gonna be in later this afternoon, if I get a quick answer?"
"You bet."
Next on the call list was Lew Dale of Air Products, and the discussion went pretty much the same way as the previous one. Dale, a tall, sandy-haired, slender dry-witted guy, said he'd get back to me ASAP.
John Ferguson of Georgia Pacific was less enthusiastic. A taciturn man by nature, his first response was, "I really doubt that this deal is gonna affect us much at all, Ed."
"Well, why not just check with your folks and see what they have to say, John? Then let me know, okay?"
"I'll call them, but I'd be surprised if we join in any coalition."
"Fair enough," I concluded.
* * *
By four o'clock - somewhat sooner than anticipated - I had answers from Kaiser and Air Products.
An excited Bob Cole said, "Jesus, Ed, this bill could cost us over three hundred million dollars!"
I chuckled and replied, "Welcome to the club, Bob. That's just about the impact we reckon it would have on us."
Cole continued, "And if you haven't yet thought about how to approach the issue, I have some ideas." That didn't surprise me.
"Matter of fact," I replied, "we do have a tentative plan, but it would have to include your full involvement as well as that of any other companies affected by Texaco's proposal. It seems pretty clear that John Camp was intimately involved with writing Section 316 of the bill, the part that would clobber us."
Cole rejoined, "You know, of course, that Camp is also the personal attorney for Russell Long, right?"
"Yes, we did know about the relationship between Camp and Senator Long. And given that Long is the ranking member on the Senate Finance Committee, to say nothing of his being Huey Long's son, he's a formidable force." (The term "ranking member" is used to denote the top-ranking minority party member on any committee.) I continued, "That's why I'd like to meet Camp head-on by hiring Tommy Boggs as our point man."
"I like it," Cole replied.
I explained, "In fact, we've already spoken with someone in Patton, Boggs about setting up a meeting in their offices for late tomorrow afternoon, after five. Could you make that meeting?"
"I'll be there. Just let me know the time."
"Oh, and by the way," I continued, "I have calls in to Air Products and Georgia Pacific as well, since our guy says they're likely in the same boat as you and we are."
"The more the merrier," said Cole. "In fact, since the bill's almost sure to be referred to the Senate Energy Committee, we ought to be thinking about which members of the committee each of our companies can contact. We might have reason to use that information at tomorrow's meeting."
"Agreed. We'll need to hit the ground at full speed if we're gonna stop this express."
Lew Dale called about half an hour later, and while he didn't offer the exact financial impact on Air Products, he said the more important words: "We're in." I briefed him about the calls to the other companies, including Bob Cole's idea, and about the planned meeting at Patton Boggs, and he agreed to join us there.
* * *
It was 11 a.m. the next morning and I was about to give up on Georgia Pacific when John Ferguson called.
"It'd be a big hit on us, something on the order of a hundred and twenty-five million. So what are we doing about it?"
(Continues...)
Excerpted from DODGING THE BULLET by EDWARD L. JAFFEE Copyright © 2011 by Edward L. Jaffee. Excerpted by permission of AuthorHouse. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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