Baptists and Bootleggers

In an article several years ago I noted several of the unusual bedfellows made between certain industries and environmental groups:

The presence of these “gains to trade” politics may explain the otherwise puzzling financial support of industry for environmental interest groups. For instance, in recent years members of the waste treatment industry have pumped hundreds of thousands of dollars into the coffers of various environmental advocacy groups, including the National Audubon Society and the National Wildlife Federation. Indeed, the Sierra Club has recognized that “the commercial waste industry has an interest in improving regulations sufficiently to drive mom-and-pop operations out of business.”  Of course, the waste treatment industry also is aware of these potential gains to trade. Oil companies, including Atlantic Richfield and Chevron, contribute to environmental groups such as the National Audubon Society, who lobby to restrict opening new areas for drilling, thereby keeping new supplies off the market. As these examples illustrate, there are ample gains to trade between environmentalists and polluting industries, and they are usually exploited.

Now comes the emerging story of an alliance between leading environmental groups and the natural gas industry to advocate for the elimination of one of natural gas’s leading competitors:

Just four years ago, shale gas king Aubrey K. McClendon told shareholders of Chesapeake Energy that “finally, we made some new friends this year.”

The chief executive sketched a vision of working hand in hand with “leading environmental organizations” on issues “where our interests might be aligned.” He said, “We believe this collaboration is unique in the industry and will benefit both Chesapeake and these environmental organizations for years to come.”

New friendships grew old, then cold. Environmental groups that once took money from McClendon — or considered doing so — to make a common cause against coal power, have stepped back as they weigh the environmental perils of extracting natural gas from shale, a business in which McClendon’s Chesapeake Energy is a leader.

The Sierra Club took $26.1 million in contributions from McClendon and Chesapeake-affiliated companies between 2007 and 2010, a fact that its executive director, Michael Brune, first disclosed to Time magazine earlier this month. Last year, Brune walked away from Chesapeake and an offer of an additional $30 million in donations.

To put the $26.1 million in context, compare the funding for the Heartland Institute, about which one critic stated, “That the Heartland Institute is effectively acting as a front group for big oil and energy, raising money from companies which are threatened by climate policies, so that it can essentially do their dirty work in undermining legislation that threatens their corporate bottom line.”  Heartland received a grand total of $676,500 from Exxon between 1998-2006 and $200,000 from the Koch Foundation in 2011.  If that amount makes Heartland a “front group for big oil and energy,” what does $26 million make the Sierra Club for natural gas?

Michael Brune, Executive Director of the Sierra Club, has now come out and stated that they won’t take any more money from the natural gas industry.  But if you read the statement, he is not saying that it was wrong for the Sierra Club to “effectively act[ ] as a front group for natural gas.”  Instead, he indicates that the Sierra Club dropped out of the lucrative arrangement only because the natural gas industry has started using hydraulic fracking.  It seems that but for that development the Sierra Club would have been perfectly content to lend its prestige and clout to Chesapeake’s rent-seeking efforts.

But the Sierra Club wasn’t the only one:

Although McClendon may be the gas industry’s most generous donor to environmental causes, he is not the only one. Natural gas entrepreneur T. Boone Pickens gave $453,250 to the liberal think tank Center for American Progress (CAP) in 2008 and 2009 through his nonprofit groups, to support its National Clean Energy Project events. At the time, Pickens was pressing lawmakers to adopt a bill to subsidize construction of natural gas filling stations. The legislation would have directly helped a company Pickens co-founded called Clean Energy Fuels, which describes itself as “the leading provider of natural gas for transportation.”

Several companies with natural gas interests, including Exxon Mobil, Chevron and the Interstate Natural Gas Association of America, have donated to the D.C.-based Center for Clean Air Policy as part of its efforts to sponsor an ongoing dialogue about domestic climate policy. Exxon and Chevron have given $35,000 each for an annual membership in the dialogue, while smaller industry associations have donated less.

I discuss the political economy of environmental interest groups more in this article.

For those who aren’t familiar with the concept of “Baptists and Bootleggers” the phrase was coined by my former professor Bruce Yandle to describe the regulatory process.

Update: I’ve been told that I overstated the size of the Koch Foundation’s contributions to Heartland, which was $25k in 2011 for health care issues and Heartland had hoped to raise that to $200k for health care the next year. I apologize for my misunderstanding.


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