What do you do when an oil industry giant, on whom you have depended for sixteen years to provide your company's largest plant with natural gas, suddenly tries to use federal legislation as a way to increase its price by more than ten times over what the contract calls for? As DODGING THE BULLET recounts, you pull together a coalition of companies in the same bind as yours. And if your opponent has used the personal attorney to a powerful U.S. Senate figure to help draft the legislation that would abrogate their contract with you, you respond by hiring the best-known lobbying law firm in Washington and working side-by-side with them every step of the way. And you soon realize that the battle will involve a series of ups and downs. The story unfolds in 1983-84, a time when fax machines were in their infancy and their were no personal computers, cell phones, iPads or any of the other communications shortcuts we depend on so much today. The lobbying involved old-fashioned shoe leather, face-to-face meetings with members of Congress and their staff, and countless phone calls and strategy sessions. DODGING THE BULLET puts you right in the middle of the fray and shows you what high-level lobbying is really like, and what it is not. For anyone interested in knowing the ins and outs of Congress and the rules of lawmaking, this book is a must read.

DODGING THE BULLET

An Inside Washington Look At High-Stakes Lobbying Against an Oil GiantBy EDWARD L. JAFFEE

AuthorHouse

Copyright © 2011 Edward L. Jaffee
All right reserved.
ISBN: 978-1-4567-0065-2

Chapter One

"A KEY ISSUE FOR US"

MARCH 7, 1983 - IT WAS a meeting pretty much like any other in my typical day as a Washington government affairs representative with PPG Industries: this one held by the Energy Committee of the National Association of Manufacturers, located on Pennsylvania Avenue in Washington. The long table in the main conference room was nearly full, with some 40 corporate government affairs reps, lobbyists who focused, at least in part, on energy issues. Energy was a secondary issue for me, with environmental matters as my main concern. But this meeting was to cover natural gas decontrol legislation, a subject that figured to significantly affect my employer.

Jim Rubin of Allied Chemical chaired the group, and the meeting. The session dragged on for more than three hours, as Rubin and others plodded through the entire 488-page Reagan administration proposed natural gas decontrol bill, called the Natural Gas Policy Act Amendments of 1983 and given the bill number S. 615 in the Senate. Each attendee was handed a copy. Attorney Gordon Gooch held forth for part of the time, with lucid explanations of what various sections of the bill meant to industrial users of natural gas. Not surprisingly, most in the room were pleased with what they were hearing. After all, it meant less government intervention in the marketplace.

Rob Odle, head of the Department of Energy's lobbying office, was also on hand, and emphasized the Reagan administration's strong support of the bill.

I was struck by the number of outside attorneys at the table, many of them sitting next to the Washington rep from their corporate clients. One of the best-known lawyers in the room, John Camp, was seated beside Don Annett, the vice president in charge of Texaco's Washington office.

After two hours, I was finding it increasingly difficult to keep my attention locked on the arcane discussion, and took a break to stretch in the anteroom just outside the conference room. I used the time to grab one of the three phones there and call Bob Steder, the go-to guy on energy within PPG's Supply Department. I had told him that morning that the meeting was on for today, and that I would get back to him if I saw anything that might be important to the company.

"So far, it's boring as hell," I offered. "But we'll see if anything develops."

"Well, get back in there and stay alert, Ed. This could be a key issue for us."

* * *

It was now past noon. The meeting had gone on since 9:30, and matters were winding down. Rubin was nearing the end of the proposed legislation, in Section 316, on page 414. As he read the section title: "First Sale, Direct Sale, Not-for-Resale Intrastate Gas," the light bulb came on in my head. Direct sale, not-for-resale. I knew, from spending several days at PPG's largest facility, at Lake Charles, Louisiana, that it purchased natural gas from Texaco, for use both as a fuel source and to break into its component parts, including ethane and ethylene. We used those components in making compounds called chemical intermediates to sell to other companies for use in manufacturing end-use products.

Given that PPG Lake Charles was the third largest industrial plant in the state, with well over 2,000 employees, I paid close attention as Rubin went through the brief section. Then, for the second time that morning, I slipped out to the anteroom, and found a phone in the corner. Steder had not yet gone to lunch.

"I think we may have something here," I told him. "Something that could be big."

"Shoot," was the reply. Bob Steder, a roly-poly outgoing type, was all business when it mattered.

I read the entire section over the phone, including the actuating words: "Any two parties to a first-sale, direct-sale, not-for-resale contract for intrastate natural gas will have until January 1, 1985, to renegotiate said contract to their mutual agreement. In the instance of failure to reach such an accord, either party may market out." I added that in checking the glossary of terms at the back of the bill, it turned out that "market out" meant to use the price for natural gas as of January 1, 1985.

Silence, for several seconds, and then, "Shit, man! This could kill us at Lake Charles!"

Chapter Two

"A SWEET DEAL"

MARCH 7 - BEFORE I could ask for specifics, Steder continued: "Our sole supplier of natural gas at Lake Charles is Texaco. There's a feeder line that goes directly from one of their main pipelines into our facility. That's why we're in a first-sale, direct sale situation. And since we use the gas right there, it's not for resale."

"Right," I interjected. "We use the gas as feedstock and as heating fuel."

"Yes, but it's the amount we use that's the key. Lake Charles chews up more than a hundred million cubic feet of gas every single day. That's enough to heat the whole city of Lake Charles twice over."

I exhaled, "Damn!"

"Now, from what you've just told me, Ed, this bill would cost us dearly. Back in 1967, when natural gas was so cheap that Texaco and other companies were actually flaring it off into the air, we signed a twenty-year contract with them to buy the stuff at 18 cents per mcf (thousand cubic feet). The deal expires on March 1, 1987, and includes a one-penny escalator every four years, so that as of today, we're paying them 22 cents per mcf."

I added the obvious: "Sounds like a sweet deal to me."

"It's what the contract calls for. But Texaco's ticked off because natural gas is now at about $2.80 cents per mcf. Remember what the Arab oil embargo did to the price of gasoline back in '73? Well, sometimes when you drill for oil, you first hit natural gas. Texaco did, and they were smart enough to tap into the gas as a huge cash cow. Hell, they were bragging, back in 1967, that they'd been able to entice major industry to locate in South Louisiana because of the available long-term supply of cheap natural gas. They said that in one of their annual reports."

"So, what happened when the '73 Arab oil embargo shot up the price of natural gas as well as gasoline?" I asked.

"Good question. Texaco immediately took us to court in Louisiana and tried to abrogate the contract. They claimed something called force majeure, an act of God. The court threw the case out, based on the doctrine of sanctity of contract, and added that an act of OPEC was not, in their mind, an act of God.

"Then," Steder continued, "Texaco tried and failed to break the contract by going to the state legislature. Their sponsor there at the time was a guy named Billy Tauzin, and I think you introduced me to him as a U.S. congressman last month in Washington."

"Right," I replied, struck by the irony. "What goes around, comes around."

"Whaddya mean?" Steder asked.

"Well, I'd assume Texaco will want to get Billy Tauzin to push the House version of this bill for them." The House bill, which I hadn't yet seen, was numbered HR-1517.

"Don't forget, Ed, that while Texaco is a bigger company than PPG, we're the larger player in Louisiana. And thousands of jobs could be at stake there."

"That may or may not matter," I countered. "Look, do we know who else, if anybody down there, has contracts like ours with Texaco? We're gonna need allies, Bob."

"Okay," came the answer....