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How Big Oil and Canada Thwarted US Carbon Standards

Emails show how a Washington lobbyist enlisted Canadian officials to beat back climate regulation.

By Geoff Dembicki, 15 Dec 2011, TheTyee.ca

Salon graphic

Canadian diplomat Gary Mar and oil industry lobbyist Michael Whatley. Image courtesy of Salon.

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[Editor's note: This story is a joint investigation between The Tyee and Salon, and appears on both sites.]

When President Barack Obama decided in early November to delay a decision on TransCanada's Keystone XL pipeline until after the next election, America's environmental movement celebrated one of its biggest victories in recent memory. And no doubt the news came as a blow to Alberta's tar sands industry, and to Canada's oft-stated dream of becoming the next global energy superpower.

But behind activists' jubilation lurked a somber reality, an untold story with much wider implications. The broader fight to reform Alberta's tar sands, the one which actually stood a chance of breaking America's addiction to the continent's most polluting road fuel, has been quietly abandoned over the past several years. For that we can thank the planet's richest oil companies and their Canadian government allies, who've together waged a stealthy war against President Obama's climate change ambitions.

Their battle-plan is revealed in more 300 pages of personal emails obtained through a Freedom of Information request to the Alberta government. The story in the emails, reported for the first time in Salon and The Tyee, traces a year in the relationship of Michael Whatley, a GOP-connected oil industry lobbyist and his friend, Gary Mar, a smooth-talking and ambitious diplomat at the Canadian embassy in the Washington, DC.

The messages lay bare a sophisticated and stealthy public relations offensive, one designed to manipulate the U.S. political system; to deluge the media with messages favorable to the tar-sands industry; to sway key legislators at state and federal levels; and most importantly, to defeat any attempt to make the gasoline and diesel pumped everyday into U.S. vehicles less damaging to the climate. The goal of it all? "Defeat" Obama's effort to reduce carbon consumption and keep America hooked on Canada's $441 billion tar sands industry, no matter what the cost to our planet's future.

That campaign has largely succeeded too, with only a small group of players any the wiser.

On Pennsylvania Avenue

Perhaps the best place to start is on Dec. 30, 2009. It was a bad day for Michael Whatley, founding partner at a K-Street consulting firm in Washington called HBW Resources that has close ties to Alberta's tar sands industry. The reason: 11 Northeast and Mid-Atlantic governors had agreed in writing to consider adopting one of the planet's most forward-looking climate change policies, something called a low-carbon fuel standard. Whatley thought his friend Mar would be interested. "Please let me know your thoughts," Whatley emailed him.

The world's very first low carbon fuel standard was adopted by California in 2007. It's a complex climate change policy based on fairly simple logic. If global warming is to ever get solved, it will mean radical changes to the transportation sector, right now the second-biggest source of carbon emissions, after electricity generation, in the U.S. economy. Many of that sector's emissions are pumped directly out of vehicle exhaust pipes. But the actual industrial process of extracting energy from the ground, and then refining it into road fuel, also releases vast amounts of carbon.

The goal of California's low carbon fuel standard, and others like it, is to reduce these so-called "upstream" emissions, thereby making every gallon of gasoline, diesel or biofuel pumped into an automobile 10 per cent less damaging to the climate.

The Northeast and Mid-Atlantic governors had signaled their support for such a policy in the final days of 2009. Rising levels of greenhouse gases, they declared in their individually signed Memorandum of Understanding, "pose serious risks" to human health, the environment and the global economy. They went on: "Developing alternatives to our continued reliance on petroleum-based fuels will foster economic growth and enable increases in fuel security and reliability."

Whatley interpreted this document as a dangerous attack on the oil and gas companies he helped represent. The very next day he fired off an urgent email to Mar, who had an office in the mammoth modernistic Canadian embassy on Pennsylvania Avenue.

The governors' plan, Whatley wrote, warrants "a very serious response on all levels."

"As we have discussed, this fight cannot take place within DC -- and we need to get a team funded and on the ground in these 11 states as soon as possible," he wrote.

Less than a month later, the scale of that assault would grow larger still, when Whatley and Mar declared war on every low carbon fuel standard then under consideration in America. They had reason to worry. Certain road fuels would obviously fare much worse than others under a California-style standard, chief among them anything produced from Alberta's tar sands. The province's sprawling strip mines and toxic tailings ponds help result in a carbon footprint 23 percent bigger than most conventional oil operations, according to a recent Stanford University study.

The upshot is that any state or region considering a low carbon fuel standard could become a much more difficult place for the tar sands sector to sell its products. If ever adopted by the United States nationally, such a policy might devastate the Alberta-based industry, a 2010 Ceres-RiskMetrics report concluded. "The U.S. transportation market could conceivably disappear" for those firms.

With so much at stake, Whatley and Mar, the lobbyist and the diplomat, developed what amounted to a declaration of climate policy war.

"On behalf of HBW Resources," Whatley wrote to Mar and another Alberta government official on Jan. 25, 2010, "I would like to submit the attached documents as a proposal to develop and execute [an oil sands] campaign."

The memorandum of 11 governors to consider a low carbon fuel standard was just one part of the existential threat facing Alberta's tar sands. Ten Midwestern states were also studying the policy, as were policymakers in Oregon, Washington and Florida. And in the U.S. Congress, it seemed like every few months some representative proposed to do the same. Senator Barack Obama himself, in fact, had introduced a low carbon fuel standard as Illinois Senator in 2007, and then campaigned on the policy during his bid for president.

So Whatley wasn't taking any chances. With the support of the Alberta government, he said he would "defeat efforts" to develop fuel standards in "Northeast, Mid-Atlantic and Midwestern states" and fight anything similar at the national level. He pledged as well to "address potential efforts" to develop clean fuel legislation in "Washington, Oregon, Michigan, Minnesota and other states." Whatley also mused about "conducting a grassroots operation" in "target states" that would "generate significant opposition to discriminatory low carbon fuels standards."

(Mar himself does not appear to have responded in writing to the proposal. But sometime in the 2010/11 accounting year, Alberta's environment ministry quietly paid Whatley's consulting firm, HBW Resources, close to $36,000 for "supplies and services.")

Perhaps the reason Whatley was so confident in his ability to influence America's political process, is that he was once deep inside it. Years earlier, Whatley served as attorney and senior policy advisor on George W. Bush's first presidential campaign and transition team. And Whatley was later appointed chief of staff to Senator Elizabeth Dole, a former cabinet secretary and the wife of GOP elder statesman Bob Dole.

Then in the late 2000s, Whatley's firm created the Consumer Energy Alliance, a "grassroots" organization supported by such prominent tar sands producers as BP, Chevron, ExxonMobil, Marathon, Shell and Norway's Statoil. The group claims to be providing "a voice for consumers interested in vital public issues."

Environmental groups, however, dismiss the claim, saying the grassroots look more like astroturf, and the consumer rhetoric is a guise. "They're a front group that represents the interests of the oil industry," said analyst Luke Tonachel of Natural Resources Defense Council in an interview.

The Consumer Energy Alliance has been one of the most outspoken critics of low carbon fuel standard legislation. In August 2009, it began running a series of slick radio and TV ads in Tennessee, Montana and the Dakotas, warning that such policies "threaten thousands of American jobs" and "would be disastrous for American consumers." Each ad instructed viewers to complain to their state's representatives in Congress, providing phone numbers to make it easier.

One of those numbers belonged to Tennessee senator Lamar Alexander, the plaid-shirted Republican who had once observed that a national low carbon fuel standard "makes a lot of sense." Whatley orchestrated a classic pincer movement strategy. As the ads ran in Alexander's home state, Whatley pressured the senator in Washington, D.C.

"I am working a deal to keep Lamar Alexander from offering an LCFS amendment," Whatley wrote to Mar on Sept. 30, 2009. "If we can keep him off of it -- it will die an ugly partisan death on the Senate floor." Less than two weeks later, Alexander told Knoxville media he was undecided on the policy he once favored.

The irrepressible Gary Mar

Mar, too, could also cite victories in the fight to keep America hooked on Canada's oil sands. The diplomat first made his name as a minister in Alberta's provincial legislature. He was known at the time for his oversize personality, sometimes belting out old Elvis songs during cabinet meetings, and once posing for a newspaper photo in front of portraits of Winston Churchill and John F. Kennedy.

As minister of international and intergovernmental affairs in 2006, and with the province's tar sands industry booming, Mar oversaw the creation of Alberta's Washington office, a home-base for provincial lobbying efforts located inside the Canadian embassy. Less than two years later, Mar himself was appointed as the province's U.S. diplomat. Gregarious and talkative, he had no trouble making powerful friends. "It's amazing he's not cloned somehow," the American Petroleum Institute's Cindy Schild said in an interview last spring. "He's everywhere. He knows everybody."

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