Big Oil’s Footprint in Washington Shrinks With Price of Crudeby
Persistently low prices force companies to cut lobbying
Industry trade groups also take hit as membership drops
Tumbling crude and natural gas prices have weakened the energy industry’s influence in Washington as cutbacks in the oilfield have spread to the nation’s capital.
Casualties include the army of lobbyists battling new regulations and the rosters of trade groups trying to elect friendly candidates in November.
The Independent Petroleum Association of America has shed about 100 members in the past year, as low prices force oil and gas companies to merge, declare bankruptcy and scrutinize every transaction, including as much as $60,000 they send the trade group in annual dues. At the National Stripper Well Association, officials started a monthly payment plan to keep some members on their rolls. But they’ve still lost about 10 percent of their lineup.
The National Ocean Industries Association slashed 10 percent off its 2016 dues -- the first time it’s given an across-the-board reduction -- to try to keep its roster full. Even the biggest industry group -- the American Petroleum Institute -- waived dues briefly last year.
Fight is On
"When everybody starts looking at their bottom line, trade association dues can be the first to go," said Tim Charters, vice president of governmental and regulatory affairs at the stripper well group, which represents the producers, owners and operators of marginal, low-producing wells. "At the same time, this is when you need D.C. representation because the fight is on. With everything that’s rolling out of this administration and the presidential election on the line, we need to be right here in the middle of the fight."
The industry already feels battered by a two-year slump in oil and gas prices. After peaking at $6.149 per million British thermal units on Feb. 19, 2014, futures contracts for natural gas tumbled to nearly a quarter of that -- $1.64 -- on March 3, before recovering modestly to $2.48 on Tuesday. Oil prices sunk to a 12-year low of $26.21 per barrel in February. Though oil rebounded slightly, reaching $50.36 per barrel on Tuesday, West Texas Intermediate is still less than half its June 2014 high of $107.26 per barrel.
More than 140 North American oil and gas producers and service companies have filed for bankruptcy since the beginning of 2015, according to Haynes & Boone LLP, a law firm that tracks industry restructurings. Those that survived did so by cutting costs, including laying off more than 350,000 workers globally and cutting back on new drilling.
Now, those cash-strapped oil and gas companies have less room in their budget for advocacy in the nation’s capital. Exploration and production companies spent just $6.2 million on lobbying during the first quarter of 2016 -- 17.5 percent less than they did the same time period two years ago, according to public disclosure data analyzed by Bloomberg Government. Lobbying spending by the entire oil and gas industry -- including refiners, service companies, pipeline operators and producers -- is down 4.2 percent.
The sector is relying on a smaller army of lobbyists to deliver their message to lawmakers and regulators -- 608 so far this year, versus 812 at the beginning of the price slide in 2014, according to data from the not-for-profit Center for Responsive Politics.
Oil companies haven’t closed their outposts in D.C., but they haven’t rushed to fill lobbyist openings either. Consider Chevron Corp., which reported activity by 13 internal lobbyists at the beginning of this year, down from 15 two years ago. ConocoPhillips reported lobbying by four employees earlier this year, compared to five in the first quarter of 2014.
Oil and gas companies also have canceled contracts with outside consultants and lobbyists, who are sometimes hired to bring special expertise and personal connections to a single issue. Exxon Mobil Corp, the largest U.S. oil company, relied on 13 outside lobbying firms during the first quarter of 2016, according to disclosures filed with Congress -- down from 14 in the first quarter of 2014. Four lobbying firms reported doing work for Halliburton Co., the oilfield services company that made a failed bid to merge with Baker Hughes Inc., earlier this year, compared with six in the first quarter of 2014. The lobbying disclosures don’t capture spending on consultants, strategists and public relations firms that aren’t involved in direct advocacy.
Still, cutbacks in Washington haven’t matched the carnage in the oilfield. Lobbying experts say there’s a good reason for that: The industry knows it’s in the middle of an epic battle for survival.
Climate change concerns are driving a wave of new regulations and environmental activism aimed at oil and gas. Environmentalists united behind a "keep it in the ground" approach to fossil fuels have camped outside the homes of federal regulators deciding whether to permit new pipelines and have protested government auctions of drilling rights. They also have pushed the Obama administration to crack down on greenhouse gas emissions tied to oil and gas development, scoring a big win last month when the Environmental Protection Agency required energy companies to plug methane leaks at new wells and other facilities.
Because oil and gas companies’ “economic fortunes are very closely tied to policy around climate change, this is an industry with a tremendous amount at stake," said Lee Drutman, a senior fellow at the think tank New America who analyzes corporate influence and political spending. The industry "is facing a number of almost existential threats" and is "going to be directly affected by public policy choices in the next several years."
The American Petroleum Institute reported $232.9 million in total revenue in 2014, much of that coming from energy companies whose annual dues can stretch into seven figures for the group’s largest members. Its membership roster has grown over the past year, partly because API absorbed America’s Natural Gas Alliance (and its 17 members) in January.
"Now more than ever, people recognize their footprint in Washington needs to be firm," said API spokesman Eric Wohlschlegel.
But like other trade associations, API is adjusting to low oil and gas prices. It offered a dues holiday during one quarter last year, according to lobbyists whose companies are part of the organization.
Despite the downturn, oil companies and industry trade groups threw resources into a campaign for crude exports last year that culminated with Congress lifting a decades-old ban on those overseas sales in December. All told, the sector reported spending $129 million lobbying on exports and other issues last year, according to the Center for Responsive Politics. Companies and associations flew in executives to meet lawmakers on Capitol Hill, ordered up economic studies of the potential oil trade, commissioned public opinion surveys and used highly targeted online advertising to reach potential supporters.
That big push -- combined with the oil and gas industry’s downturn -- means some groups now have less money available to commission big economic studies and mount lawsuits to challenge new regulations now.
"Everybody put everything we had into exports last year," Charters said. "That was not a cheap effort."