Koch, Exxon Mobil Among Corporations Helping Write State Laws

Koch Industries Inc. and Exxon Mobil Corp. (XOM) are among companies that would benefit from almost identical energy legislation introduced in state capitals from Oregon to New Mexico to New Hampshire -- and that’s by design.

The energy companies helped write the legislation at a meeting organized by a group they finance, the American Legislative Exchange Council, a Washington-based policy institute known as ALEC.

The corporations, both ALEC members, took a seat at the legislative drafting table beside elected officials and policy analysts by paying a fee between $3,000 and $10,000, according to documents obtained by Bloomberg News.

The opportunity for corporations to become co-authors of state laws legally through ALEC covers a wide range of issues from energy to taxes to agriculture. The price for participation is an ALEC membership fee of as much as $25,000 -- and the few extra thousands to join one of the group’s legislative-writing task forces. Once the “model legislation” is complete, it’s up to ALEC’s legislator members to shepherd it into law.

“This is just another hidden way for corporations to buy their way into the legislative process,” said Bob Edgar, president of Common Cause, a Washington-based group that advocates for limits on money in politics.

Photographer: John Gress/Getty Images

Koch Industries Inc. and Exxon Mobil Corp. are among companies that would benefit from almost identical energy legislation introduced in state capitals from Oregon to New Mexico to New Hampshire -- and that’s by design. Close

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Photographer: John Gress/Getty Images

Koch Industries Inc. and Exxon Mobil Corp. are among companies that would benefit from almost identical energy legislation introduced in state capitals from Oregon to New Mexico to New Hampshire -- and that’s by design.

‘Good Conservative Policy’

Raegan Weber, an ALEC spokeswoman, says the group simply facilitates the sharing of information and “good conservative policy.” ALEC’s mission is to promote free markets, limited government, federalism and individual freedom, according to its website. “All of our policies are in line with those principles,” said Weber.

The financing and internal operations of ALEC, which was founded in 1973, aren’t well known.

Environmentalists, labor unions and Democratic groups that oppose ALEC-inspired legislation have long claimed that corporations are behind it, citing the “private sector” member fees outlined on its website.

As a tax-exempt organization, however, ALEC doesn’t disclose its corporate donors. ALEC doesn’t reveal its corporate and legislative members beyond those who serve as committee chairmen. Its model bills, which now total almost 1,000, are listed on its website, although their full texts can be called up only by members.

Bloomberg used tax records, interviews, and ALEC materials provided by an attendee at an ALEC conference to shed some light on the organization, which promotes state legislative action that at times is aimed at undercutting federal government authority.

Model Legislation

After President Barack Obama signed the health-care overhaul into law, ALEC produced several model bills that have been introduced by Republican state lawmakers limiting its reach. The group followed up this year by publishing “The State Legislators Guide to Repealing Obamacare.” The Environmental Protection Agency is also a target, which reflects a lobbying priority in Washington for some of its corporate donors.

To join ALEC, legislators pay $100 for a two-year membership. Corporate members seeking to hold sway on legislative language can pay as much as $35,000 or more to get a seat on an issues task force. Beyond energy and environment, ALEC also has task forces devoted to civil justice, commerce, education, international relations, public safety, taxes and telecommunications.

Power to Block

If the final language doesn’t turn out the way they like, industry representatives have the power to block it from being posted in ALEC’s online library where it can be downloaded by state lawmakers.

Legislators and private-sector task force members must vote to endorse any model legislation -- and each group must deliver a majority before it is officially adopted, Weber said.

Industry advocates can give more money to ALEC by sponsoring events or simply donating.

At ALEC’s annual meeting in San Diego last year, three companies -- pharmaceutical manufacturer Allergan Inc., telephone giant AT&T Inc. (T) and cigarette maker Reynolds American Inc. (RAI) -- each paid $100,000 to be “President Level” sponsors. Another 11 groups, including Pfizer Inc. (PFE) and the Institute for Legal Reform, the U.S. Chamber of Commerce arm that advocates for jury award limits, wrote checks for $50,000, according to documents distributed at the meeting that were given to Bloomberg.

Exxon Money

Irving, Texas-based Exxon Mobil, through its foundation, donated $30,000 in 2005 and again in 2006, according to the foundation’s tax forms. Alan Jeffers, an Exxon Mobil spokesman, said the company paid $39,000 in dues last year and sponsored a reception at the annual meeting in San Diego for $25,000. In August, Exxon will spend $45,000 to sponsor a workshop on natural gas, he said.

“We try to provide our views on legislation to anyone who will listen, including legislators and non-governmental organizations,” Jeffers said. He said Exxon supports a range of public policy groups including the Washington-based Center for Clean Air Policy.

Wichita, Kansas-based Koch was one of 14 “Vice Chairman” level sponsors at the 2010 annual meeting, which requires a $25,000 donation to the group, according to the documents. The Charles G. Koch Charitable Foundation, founded by the energy conglomerate’s chief executive officer, gave $75,858 to ALEC in 2009, the latest year for which the foundation’s tax information is available.

Koch’s Support

“Koch Industries has been a member and supporter of the American Legislative Exchange Council for more than two decades,” said Philip Ellender, the company’s president of government and public affairs. “As a non-partisan organization that includes both public and private-sector members, ALEC’s mission aligns closely with many of the principles to which we are committed -- economic freedom, limited government and individual liberty.”

Koch companies, employees, political action committees, and affiliated non-profit groups spent at least $5 million to help elect Republicans to Congress in 2010, according to Common Cause and the Center for Responsive Politics, a nonpartisan group that tracks political donations.

According to the Helena, Montana-based National Institute on Money in State Politics, Koch entities have given $2.5 million to help elect state lawmakers since 1990. The institute’s analysis of a partial list of ALEC corporate backers found that their combined giving to state campaigns over the past decade amounts to $12.2 million. Of that sum, 97 percent went to Republicans.

Hotels, Meals

Companies can also donate to “scholarship funds,” which pay for transportation, hotel and meals for lawmakers attending ALEC meetings.

William Howell, the Republican speaker of the Virginia House, received $2,862 in reimbursements after attending the San Diego ALEC meeting and a policy meeting in Washington last year, according to his state ethics disclosures.

Under his leadership in Richmond this year, the Virginia Assembly passed two ALEC bills that are opposed by labor unions, one that requires union votes to be by secret ballot and another that would put the state’s “right to work” law in its constitution. Both measures died in the state Senate.

Howell also championed the ALEC-originated “Repeal Amendment,” which would allow states to repeal any federal law or regulation if two-thirds of the state legislatures vote to do so. He didn’t respond to a phone message seeking comment.

‘Opportunity to Connect’

Corporations are “paying for an opportunity to connect directly with legislators,” said Jeremy Kalin, a former Democratic Minnesota state representative. “It’s an end-run around transparency and disclosure laws. Corporate interests that would otherwise be required to register as lobbyists are writing legislation behind closed doors.”

An Oregon effort to remove the state from the Western Climate Initiative, a regional carbon cap and trade program, offers a case study in how the ALEC alliances work together.

Earlier this year, state Representative Kim Thatcher, a Republican, asked her staff to develop legislation that would put pressure on Governor John Kitzhaber, a Democrat, to withdraw from the climate initiative.

A Thatcher aide scrolled through ALEC’s website and found a model bill that could meet the need and passed it on to her. “I read it and I said that encapsulates it very well,” Thatcher said in an interview.

Growth ‘Sacrificed’

The eight-paragraph resolution, which was introduced in March, said “there has been no credible economic analysis of the costs associated with carbon reduction mandates” and “a tremendous amount of economic growth would be sacrificed for a reduction in carbon emissions that would have no appreciable impact on global concentrations of carbon dioxide.”

The model resolution was adopted by ALEC’s Natural Resources task force in April 2010, according to minutes from the meeting obtained by Bloomberg.

The group drafting and endorsing it included 13 legislators from states including Texas, Kansas and Indiana and 21 private sector members representing companies such as Exxon Mobil, Koch Industries and BP Plc (BP/), and trade groups including American Electric Power, the American Petroleum Institute and the American Coalition for Clean Coal Energy.

Koch, a conglomerate that includes oil refineries, pipelines, chemical producers and paper products, questions the role of carbon in global warming and opposes efforts to put a price on carbon emissions.

Identical Language

Legislation with the exact same language as Thatcher’s resolution has been introduced in dozens of other states, including Montana, New Hampshire, Washington, and New Mexico. Thatcher’s resolution is still pending.

A member of ALEC since 2004, Thatcher said: “When you get input from the private sector, and you get input from the public sector, you can get legislation that can be good for everyone.”

Thatcher’s resolution is one of five model laws that ALEC has in its library related to climate change and of 95 that fall under the Energy, Environment and Agriculture task force.

ALEC has made it a priority to guide state lawmakers in ways to thwart the U.S. EPA’s efforts to regulate and reduce greenhouse gases -- a goal that coincides with a lobbying objective in Washington for its energy-industry supporters.

In February, ALEC published a report called “EPA’s Regulatory Train Wreck: Strategies for State Legislators.” The report urges state lawmakers to adopt resolutions asking their members of Congress to stop EPA from regulating greenhouse gases “by any means necessary.”

Assessing Costs

It also directs members to a model bill that would require states to determine what any regulation would cost for each ton of carbon emissions reduced, and another model bill that prohibits a state agency from making any commitments to EPA to reduce greenhouse gases. As of June, 13 states had adopted resolutions opposing EPA’s effort to regulate greenhouse gases.

“Our position on EPA regulations is that they’re usurping the legislative process,” said Weber. “They’ve made these rules that the states have to follow. It is government through the federal rulemaking process.”

ALEC critics see the reverse. “It’s national policy at the state level,” said Adam Schafer, spokesman for the National Caucus of Environmental Legislators, a Washington-based group that also encourages state lawmakers to share policy ideas and legislation. Schafer’s group is funded primarily through foundation grants and doesn’t accept corporate donations.

Group’s Founders

ALEC was founded by the late Representative Henry Hyde of Illinois, a Republican who served in the U.S. Congress for 22 years, and the late political activist Paul Weyrich, who co- founded the Heritage Foundation, a policy and research organization in Washington that says its mission is to formulate and promote conservative policies.

ALEC began writing model bills in the 1990s and says on its website that about 1,000 pieces of legislation based on its bills are introduced each year and about 20 percent become law.

Last year, ALEC drafted legislation banning states from enforcing the new federal health insurance coverage mandate. It was enacted in 10 states from Virginia to Louisiana to Missouri.

In Missouri, the bill was introduced by its state ALEC Chairwoman Jane Cunningham. The measure asked for a referendum to add language to the state’s constitution that read, in part, “A law or rule shall not compel, directly or indirectly, any person, employer, or health care provider to participate in any health care system.”

In Louisiana, the “Health Care Freedom Act” language said: “relative to preserving the freedom of all citizens of Louisiana to provide for their own health care; to provide that no law or rule shall compel, directly or indirectly, any person, employer or health care provider to participate in any health care system or health insurance plan.”

Partisan Shift

In last November’s election, Republicans won from Democrats more than 675 state legislative seats, and now control both chambers in 26 states’ legislatures, up from 14 before the election, according to the National Conference of State Legislatures.

Former state lawmaker Kalin said the partisan shift is paving the way for ALEC legislation to advance.

An ALEC model bill was employed a year ago in Minnesota in an unsuccessful attempt to end that state’s restrictions on buying electricity from North Dakota coal-fired power plants, a policy aimed at reducing air pollution, he said.

After Republicans took control of the state legislature this year, lawmakers passed a bill in May allowing the state to import 1,500 megawatts of electricity from North Dakota, according to the legislature’s website.

Thousands of Members

ALEC counts more than 2,000 state lawmakers among its members and says 80 former members now represent their states in Congress. There are 300 private-sector members, including trade groups, corporations, policy organizations and non-profits, Weber said.

In addition to corporations, ALEC events are sponsored by nonpartisan public policy groups such as The Pew Center on the States, a group that does research on such issues as elections, public health and education. It sponsored a workshop at ALEC’s 2010 and 2011 annual meetings on prison-sentencing overhaul.

Weber says the legislators, by virtue of their positions, have more influence over which bills are included in the ALEC library, and, even then, it’s their choice whether they bring them home and put them forward in their own statehouses.

The group provides information to state lawmakers who have limited resources to learn about all the issues they have to deal with, she said.

“They make no bones about their policy perspective,” said Bridgett Wagner, director of coalition relations at the Heritage Foundation. “They’re certainly a limited-government, free- market organization and the positions they come out with are not a surprise.”

To contact the reporter on this story: Alison Fitzgerald in Washington at afitzgerald2@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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