By Sue Sturgis
(The second in a three-part series. To read the first, "Energy lobbyists behind governors' crusade for Atlantic drilling," click here.)
When Pat McCrory was elected governor of North Carolina in 2012, the Outer Continental Shelf Governors Coalition wasted no time in recruiting him to join its crusade to expand offshore oil and gas drilling.
The Coalition was formed in May 2011 by four Republican governors in coastal states. As a Facing South investigation found, by early 2012 the Coalition had turned over its day-to-day management to the Consumer Energy Alliance, a "dark money" nonprofit whose members include leading energy companies and which is closely tied to HBW Resources, a corporate lobbying and public relations firm that represents energy interests.
The Governors Coalition was eager to bring McCrory on board as a spokesman for its pro-drilling agenda. As the governor of North Carolina, he represents the state with the second-longest coastline on the U.S. eastern seaboard — second only to Florida, where state leaders have opposed offshore drilling as a threat to tourism. McCrory's voice would be especially valuable given that, under federal law, the views of coastal governors carry significant weight in deciding the future of oil and gas leases in Atlantic waters.
For his part, McCrory was equally enthusiastic about joining the Governors Coalition and promoting the cause of offshore drilling. According to internal Coalition emails obtained by Facing South through public records requests, on Jan. 23, 2013 — three weeks after McCrory took office — energy lobbyists and state officials corresponded about North Carolina's possible involvement in the group.
The next day, McCrory's economic advisor at the time, Tony Almeida, emailed contacts of the Governors Coalition, which was then chaired by Alaska Gov. Sean Parnell and based in his office: "Thanks to all. North Carolina is in!"
Two weeks later, the North Carolina governor's staffer emailed the Governors Coalition again to confirm that McCrory would be joining the group and attending an upcoming Coalition meeting. Kip Knudson, a staffer for Parnell and former lobbyist for the Texas-based oil and gas company Tesoro, could hardly contain his delight, quickly emailing back: "You made my month!"
Since those heady first weeks, McCrory's leadership and visibility in the Governors Coalition has steadily grown. In January 2014, after being a member for less than a year, the North Carolina Republican took over as chair of the group. McCrory has also emerged as a leading national voice for the Coalition, which has enjoyed a string of successes under his leadership. In February 2014, the Interior Department endorsed opening the Atlantic to seismic testing for oil and gas reserves, the first step toward offshore drilling. In January 2015, the Governors Coalition scored again when the department released a drilling lease plan for 2017-2022 that included a stretch of Atlantic waters from Virginia to Georgia outside of a 50-mile protective coastal buffer zone.
McCrory's use of his state office to lead the Governors Coalition, which is largely run by oil and gas lobbyists, has raised concerns among government ethics watchdogs about transparency and conflicts of interest. The revelations by Facing South and other media outlets about McCrory's role in the Governors Coalition also comes in the wake of growing scrutiny over the governor's close personal and political ties to some of the nation's most powerful energy concerns.
'The voice of Americans for Prosperity'
When McCrory got involved with the pro-drilling Governors Coalition, he was no stranger to the energy industry. In fact, he spent much of his life working in it.
While a college student in the 1970s, McCrory took a job digging ditches for the Charlotte, North Carolina-based electric utility giant Duke Power. McCrory stayed employed with the company now known as Duke Energy for the next 28 years, including during his time as a city council member and mayor of Charlotte, where he held office until 2009. He retired as a senior adviser with Duke Energy's economic development group in 2007 to focus on his first run for governor the following year.
With oil and gas money flooding into national politics in 2008 and Republicans mobilizing under the slogan "Drill, baby, drill!," McCrory ran as an outspoken proponent of offshore drilling as well as inland fracking. Unfortunately for McCrory, 2008 was a banner year for Democrats in North Carolina: Barack Obama became the first Democratic presidential candidate to win the state since 1976, and McCrory lost to Democrat Beverly Perdue, who took a more cautious approach to offshore oil and gas exploration.
In 2010, McCrory went to work as an energy and economic development consultant for the Charlotte-based business law and lobbying firm Moore & Van Allen, which represents energy interests. Among its efforts on behalf of energy clients, Moore & Van Allen's website reports that the company has led a "targeted educational effort in the Carolinas to build broad support for outer continental shelf drilling," as well "worked with clients to secure appointments to legislative study committees to help advance their position."
Reporters and good-government advocates have raised questions about McCrory's role at the lobbying and PR firm, since he isn't an attorney and wasn't a registered lobbyist. However, McCrory has declined to talk specifically about what he did there on a typical workday, saying only that he did "client development work" and offered the firm's lawyers "strategic planning on policy issues."
From 2009 to 2011, McCrory also worked with Americans for Prosperity, a conservative advocacy group established in 2004 with backing from David and Charles Koch of Kansas-based Koch Industries, a sprawling conglomerate involved in the refining and distribution of petroleum products.
With annual revenues of $115 billion, Koch Industries is by far the top political contributor nationally among oil and gas interests. In addition to receiving financial support from the founding Koch brothers, Americans for Prosperity has also received substantial financial contributions from other oil and gas interests including the American Petroleum Institute, a leading industry advocacy group.
Americans for Prosperity's energy agenda has closely aligned with those of its financial backers: In 2011, for example, the group held rallies in North Carolina (in photo) and across the nation to press for expanded offshore drilling.
In 2010, McCrory headlined an Americans for Prosperity bus tour that crisscrossed North Carolina. He also recorded advocacy videos and automated phone calls for the group, which went on to travel around the state with a giant inflatable drill rig to promote its pro-oil and gas message. Later as governor, McCrory named Americans for Prosperity board chair and leading conservative benefactor Art Pope as his budget director.
"He became the voice of Americans for Prosperity," Bob Hall, executive director of Democracy North Carolina, a campaign finance watchdog group, said of McCrory.
Although not classified as campaigning for the governor's office, McCrory's tour stops with Americans for Prosperity offered a valuable public platform and boosted his visibility among conservatives in the state's burgeoning tea party movement. It also coincided with a surge in financial support from oil and gas interests for McCrory's campaign: They contributed over $172,000 to McCrory's 2012 gubernatorial effort — more than double the industry's $57,000 in contributions to his 2008 campaign and almost four times the $45,544 donated to his Democratic opponent, then-Lt. Gov. Walter Dalton, according to the National Institute on Money in State Politics' FollowTheMoney.org database.
The industry's increased political support for McCrory came even as its overall giving at the state level declined 45 percent from $57.3 million in 2010 to $31.3 million in 2012, according to FollowTheMoney.org. Leading oil and gas interests contributing to McCrory's campaign were BP and Marathon Oil, a Houston-based exploration and production company.
When McCrory ran again for governor in 2012, this time successfully, he again benefited from his relationship with Americans for Prosperity: The group spent $130,000 on mailers to benefit McCrory's campaign.
Click on chart for a larger version.
Lingering industry ties, heightened public scrutiny
The ethics and transparency questions raised by Gov. McCrory's ties to the energy lobbyists in the pro-drilling Governors Coalition echo criticisms that have hounded the governor about his relationship with his former employer, the utility giant Duke Energy.
Research by Democracy North Carolina found that McCrory's 2008 and 2012 gubernatorial campaigns benefited from Duke Energy contributions totaling $1.1 million through the end of 2012. That includes more than $332,000 in direct campaign donations linked to the company and more than $761,000 that the company and its Progress Energy subsidiary contributed to the Republican Governors Association super PAC, which in turn spent more than $10 million on McCrory's two campaigns.
Duke Energy has enjoyed significant influence in the McCrory administration. Almeida, McCrory's former economic adviser who signaled North Carolina's interest in joining the pro-drilling lobbying efforts of the Governors Coalition, worked for Duke Energy for more than 30 years. McCrory's former Commerce Secretary, Sharon Decker, worked for the company for 17 years. C. Neal Alexander Jr., the head of the Office of State Human Resources, was employed by Duke Energy for more than 40 years.
Government watchdog groups raised concerns about McCrory's unusually close ties to Duke Energy even before he took office. The day before he was sworn in as governor, for example, the clean energy advocacy group NC WARN and consumer advocate AARP North Carolina wrote a letter to McCrory urging him to recuse himself from making appointments to the N.C. Utilities Commission because of his long employment with the company.
NC WARN also raised concerns about the governor's continued stock holdings in Duke Energy. The statement of economic interest McCrory filed as a candidate in 2012 disclosed that he held Duke stock with a value of at least $10,000. North Carolina ethics rules don't require candidates and elected officials to report the exact value of holdings, but NC WARN urged him to do so because of the clear potential for a conflict of interest.
"Since you worked at Duke Energy for 28 years, it seems likely that your stock ownership could reach into six figures, if not into the millions," NC WARN wrote in a February 2013 letter to McCrory.
McCrory declined to recuse himself from making Utilities Commission appointments. But the issue of his holdings in Duke came roaring back in February 2014, after a pipe broke beneath one of the company's North Carolina coal ash ponds, sending tens of thousands of tons of toxic coal ash into the Dan River.
McCrory's administration was already under fire for a 2013 settlement with Duke over contamination of drinking water from the company's coal ash which proposed a fine of only $99,111 for the $50 billion company and didn't require Duke to clean up leaking coal ash pits. Democracy North Carolina blasted that settlement as "piddling" and a "remarkable sweetheart deal." The McCrory administration withdrew the settlement offer in early 2014 amid renewed criticism following the Dan River disaster.
The Dan River spill also revived scrutiny of McCrory's financial interests in Duke Energy, with reporters eventually revealing that the governor had failed in early 2014 to properly report his continued holdings in the company. McCrory was later forced to submit new filings, which disclosed he owned at least $10,000 in the company's stock at the end of the previous year.
A spokesperson for McCrory said the incorrect report was an innocent mistake, although the form clearly asked for all information as of Dec. 31, 2013.
"I'm sorry my legal counsel misread it and I thought we were following the instructions," McCrory said at the time.
Although Duke Energy is not directly engaged in offshore drilling, its business model increasingly depends on petroleum products. In the past several years, the company has closed half of its 14 coal-fired power plants in North Carolina while opening five natural gas-fired facilities in the state. It also plans to open a natural gas power plant in South Carolina in 2017.
In addition, the arrival of offshore drilling in North Carolina would benefit Duke through the creation of new industrial customers such as refineries, which are heavy electricity users.
Stonewalling the press, shutting out the public
McCrory isn't the first Republican governor of North Carolina to face the question of offshore drilling. In the late 1980s, GOP Gov. Jim Martin grappled with the issue after a consortium of oil companies led by Mobil applied for permits to drill an exploratory well off the state's Outer Banks.
A college chemistry professor before getting involved in politics, Martin consulted with fellow scientists before ultimately deciding against drilling off North Carolina's coast, concluding that the potential drawbacks outweighed the benefits. At the time, images of the 1989 Exxon Valdez oil spill disaster in Alaska — the worst oil spill in U.S. history before the 2010 BP Deepwater Horizon disaster in the Gulf — were fresh in the public's mind, serving as a dramatic reminder of what was at stake.
While Martin positioned himself as a public leader facilitating a policy discussion with key stakeholders, McCrory has served as a full-throated advocate for offshore drilling and energy-backed groups like the Governors Coalition — despite signs of growing opposition in coastal communities from diverse groups including fishing industry associations, local tourism boards, and chambers of commerce.
Furthermore, after McCrory took the helm of the pro-drilling Governors Coalition, information about the group's activities became harder to access.
Facing South first submitted information requests for correspondence related to offshore drilling from the offices of McCrory, as well as his counterparts Gov. Nikki Haley in South Carolina and then-Gov. Bob McDonnell in Virginia, in October 2013, when the Governors Coalition was still chaired by Gov. Parnell in Alaska. McDonnell's office promptly responded that it had none.
Two months later, Haley's office sent a box with thousands of pages of paper documents, including many of the materials used for Facing South's investigative series. McCrory's office was slow to respond, initially claiming that it hadn't received the request, but eventually emailed a cache of electronic records in March 2014.
Facing South submitted a second records request to McCrory's office in June 2014, after he had become chair of the Governors Coalition, picking up where the first request had left off. To date, McCrory's office has not produced any materials in response to our request.
McCrory's office has also failed to fulfill public records requests from other reporters seeking information about the Governors Coalition's work. The Center for Public Integrity, which looked at the group's ties to the energy industry last year, told Facing South that it also submitted a records request with McCrory's office that went unanswered until after its story was published.
When Facing South contacted McCrory's office in April 2015 for comment about our unanswered records request — 10 months after the second request was filed — Communications Director Josh Ellis responded with a terse email that read: "We are currently processing this request."
The paucity of information flowing from McCrory's office has not meant the governor has slowed his pro-drilling efforts, however. In fact, what little information has been made available for public view shows the McCrory's administration has ramped up its lobbying activities — often behind closed doors.
Last November, for example, McCrory hosted the Mid-Atlantic Outer Continental Shelf Oil and Gas Five-Year Program meeting at the N.C. Museum of Natural Sciences in Raleigh. Among those attending were officials from Virginia, South Carolina and the Bureau of Ocean Energy Management, the Department of Interior agency that oversees offshore oil and gas leasing.
The meeting was closed to the public and mostly closed to the press, with reporters allowed in to hear only McCrory's closing remarks after a police officer stationed outside the door checked their credentials.
Prior to the meeting, environmental groups wrote a letter to state officials protesting their exclusion from the discussion about Atlantic oil and gas leases. In response, Donald van der Vaart — then McCrory's energy policy adviser for the N.C. Department of Environment and Natural Resources and now its secretary, who previously worked for Shell Oil and an electric utility — sent a letter stating the meeting was kept invitation-only due to concerns raised by federal officials that inviting "special interest groups and industry" could "allow for the potential of the appearance of influence" on the offshore permits being reviewed by the Obama administration.
A spokesperson for the Bureau of Ocean Energy Management, however, later denied that it was their agency that had asked for reporters and other members of the public to be kept from the meeting.
What's more, it was later disclosed that groups representing the energy industry were not only allowed into the meeting hosted by Gov. McCrory but were also featured speakers. WRAL News obtained a list of attendees showing that speakers included representatives from the Center for Offshore Safety, an industry-sponsored organization affiliated with the American Petroleum Institute, and the Institute for Energy Research, a pro-drilling nonprofit partly funded by the Koch brothers and their donor network.
Another speaker came from the Consumer Energy Alliance — the same industry front group that runs the Outer Continental Shelf Governors Coalition, which Gov. McCrory leads and which is enmeshed with the energy lobbying firm HBW Resources. Speaking on behalf of the Alliance was its federal policy adviser Michael Zehr, who is also vice president of federal affairs for HBW Resources.
"We can't recall any other administration convening a meeting of public officials to talk about a public process for developing a public resource, held in a public location, that is closed to the public," Dustin Chicurel-Bayard, spokesperson for the North Carolina Sierra Club, said at the time. "It's hard to understand why the McCrory administration is being so secretive and shutting the public out of the conversation about the future of our coast."
(Additional research and reporting by Chris Kromm. Photo of Americans for Prosperity's inflatable drill rig outside the North Carolina legislature by Sue Sturgis. This story was produced in part with support from the Fund for Investigative Journalism.)
Next: The growing resistance to Atlantic oil and gas drilling.