Mary Clay Berry
Mary Clay Berry

Fellowship Title:

Lobbying by Public Relations: Big Oil at Bay

Mary Clay Berry
September 20, 1976

Fellowship Year

"The family jewels are on the table."


John D. Rockefeller I recognized the importance of having a good public image and hired the world’s first public relations man, Ivy Lee, to spread the word that the unpopular old man was not an unscrupulous businessman but a kindly philanthropist who distributed dimes to the deserving poor. In the half century since Rockefeller first employed Lee, the petroleum industry he helped to create has paid little attention to their founding father’s example. As a small group of multinational corporations which controlled the world’s access to crude oil by a series of secret operating agreements, the petroleum industry did not need to care about public relations, It was too powerful and secrecy was the order of the day. But today, when the producing nations and the independent oil companies have turned the petroleum business upside down and the US Congress, long a bastion of complacency as far as big oil was concerned, is making threatening noises, the companies have turned to Ivy Lee’s descendants for help. In 1976, Americans are assaulted on all sides by an industry-wide public relations campaign designed to remove the stigma that began with the first Rockefeller, grew to immense proportions during the Arab embargo, and now threatens the heart of the oil industry, the companies’ vertically-organized operating structures and their right to acquire control of other sources of energy.

Holders of Exxon credit cards are asked: “What’s So Bad About Being Big?”

“There was a time when big had a good sound to it. Land of the Big Sky. That’s big of you. The big picture. What are you going to be when you get big? Big-hearted. A big man.

“And nobody ever started a business without hoping that some day — if he or she worked hard enough — it would be a big success. That’s the American dream, isn’t it?”

By way of a commercial on a Bob Hope Special this summer, viewers learned new words to go with the tune of “Dem Bones, Dem Bones, Dem Dry Bones.” Now the gas station is connected with the pipeline and the pipeline is connected with the refinery. The message is: “Texaco does it all for you.”

Members of the National Association of Manufacturers, a Washington trade association and lobbying organization which represents 13,000 US corporations, are warned, “The current thrust to legalize the breakup of large US companies is part of a popular, but misguided, ‘big is bad’ syndrome.” To illustrate this, on the cover of a recent NAM booklet on the subject, the title, DIVESTITURE, graphically separates into six individually meaningless sets of gold characters, a definition by picture.

In July, the Union Oil Company of California bought two pages in several general circulation magazines in order to display pies. One, unsliced, was labeled, “This is a monopoly.” The other, sliced into pieces of different sizes, was labeled, “This is not a monopoly.” The double page spread was “a thought from a company with just a small piece of the pie,” 2.5% according to the pie-graph.

And the Mobil Oil Company invited readers of the New York Times and five other newspapers to “Meet some of our competitors.” There followed, in tiny letters that resembled texture more than type, a thousand or more brand names for gasoline: Awful, Buffalo, Kickapoo, Longhorn, Rotten Robbie, Save-A-Lot, Toot N Moo, Working Man. Said Mobil: “That’s a lot of competition. So why is the Senate considering a bill to break up the oil industry? We’d suggest that you ask your Senator that one.”

Almost a year ago, on October 8, 1975 during Senate consideration of a natural gas pricing bill, 45 senators went on record in favor of forcing integrated oil companies to split their holdings. An amendment to the gas bill would have prevented a company producing more than 100,000 barrels of domestic crude oil a day from engaging in any refining, transporting, or marketing operations. Refiners processing more than 500,000 barrels or oil a day would have been barred from domestic production or transportation. And pipeline owners would not have been allowed to produce, refine or market petroleum.

The amendment was narrowly defeated by a vote of 45 to 54. The nine vote margin was a surprise not only to the oil industry but also to the proponents of divestiture. Observers on both sides tried to explain it in various ways. Some said the closeness of the vote was a personal tribute to Sen. Philip Hart, long a proponent of divestiture in several industries and now dying of cancer (Hart had, in fact, left his hospital bed to be present for the vote). Others saw the vote as the result of politicians’ characteristic desire to play on both sides of the fence when possible by voting for a politically attractive piece of legislation with the certain knowledge that it would not pass. Still others saw the amendment as a tactical device and argued that it got much of its support from senators who wanted to kill the gas-pricing bill by adding controversial riders to it but did not necessarily favor divestiture. And many observers believed that some senators simply did not realize what they were doing when they voted for divestiture.

Then it happened again. On October 23, the Senate rejected, by a vote of 40 to 49, a scaled-down version of the earlier divestiture amendment.

Those votes were like the prince’s kiss to Snow White. They awoke the oil men to just how widespread and deeply-rooted the public’s distrust of and apprehension about their industry is. And they presented some politicians with an inexpensive issue to ride for what it was worth.

“No one’s ever been for Goliath,” said the Washington representative of one of the major oil companies recently, “but everybody’s willing to support David.”

It would be a mistake to suppose that those votes on divestiture took all oil men by surprise. They may have come as a shock in the boardrooms in Houston and New York but most of the companies’ Washington representatives could see them coming.

Washington representatives of oil companies tend to view the industry they serve from a peculiar vantage point. Most are fairly high in their companies’ hierarchies. Yet they often find themselves as the bearers of unpleasant tidings which the presidents and board chairmen frequently do not want to hear.

“It’s a different world outside of Washington,” said one. (Washington oil men usually speak anonymously, in large part because of the ponderous process by which their companies speak officially. For the purposes of this report, most of these men, many of them company vice presidents, were both accessible and remarkably candid on a not-for-attribution basis.) “I’ve found that a great number of people in industry in general, in our industry, want Washington to go away.”

He continued, “Those of us here were very frustrated. I didn’t know in what form it (divestiture) was coming but, for several months, I had been passing the word to my people. It got to the point that a year ago (September 1975), I unloaded on my president for two days. I told him it was a volatile situation and that public opinion was making us the whipping boy.”

The situation had been building for years. In the fifties, the leadership of both houses of Congress had been responsive to big oil’s needs. But Congress is no longer run by the rules laid down by Texan Sam Rayburn and his protégé, Lyndon Johnson. As Shell lobbyist J. Carter Perkins told a meeting of the American Petroleum Institute, the industry’s chief trade association and sometime lobbying organization, in 1972: “No longer can we rely on congressmen in leadership positions to recognize and take into account the seriousness of proposed legislation on the petroleum industry…it may have been foolish for our industry ever to have relied on a few knowledgeable and influential congressional leaders.”

As congressional responsiveness diminished, Washington’s role in the industry’s affairs grew. The industry, which had formerly been regulated only by state authorities such as the Texas Railroad Commission, found itself contending with the federal government on almost every level. In 1950 and 1951, the State Department pressed the Internal Revenue Service to allow foreign royalties paid to producing countries to be counted as a tax credit by the oil companies. While this was a tremendous tax advantage for the major oil companies, it nevertheless represented an intrusion of the federal government into their affairs. What the federal government gives it may also take away (and the IRS is seeking to do just this now). In 1954, in a case involving the Phillips Petroleum Company, the Supreme Court ruled that the Federal Power Commission had the authority to regulate the wellhead prices of natural gas sold to interstate pipelines. Then, in 1959, the Eisenhower administration set up controls on petroleum imports, a program finally abandoned by the Nixon administration in 1973. Legislation passed by Congress in the fifties gave the Interior Department authority to lease offshore tracts for oil exploration. In 1962, lucrative tracts in the Gulf of Mexico brought high bids. The federal leasing program continued until the blow-out of an oil well off the coast of Santa Barbara, California, in 1969 which dumped crude oil on the beaches there and brought the federal leasing program to a halt. About the same time, the federal government, pushed by environmental groups, became concerned about potential damage to the environment from oil exploration and pipeline construction in Alaska. This led to federal oversight of the trans-Alaska pipeline construction. In 1971, federal price controls were instituted. And finally the Arab embargo in 1973 and the subsequent energy crisis led to the creation of the Federal Energy Administration.

The oil lobby had wielded tremendous power by virtue of its size, its political contributions, and its friends in the right places. But, with the exception of the depletion allowance and tax matters (for which oil companies, just like anyone else who can afford to do so, hire Washington tax lawyers), the evidence is that the companies did not do a good job of keeping track of day-to-day activities. Many of them did not even have Washington offices. Whenever they were threatened, they sent in an executive from Houston.

The trans-Alaska pipeline is a case in point. For a long time the oil companies involved (ARCO, Exxon, and BP-Sohio primarily) ignored the situation in Congress, specifically the inability of Congress to resolve sweeping Native land claims in Alaska which effectively blocked pipeline construction. It took litigation to awaken the companies to the fact that they were not going to get permission to build their pipeline just because they were big oil companies. Once aroused, the companies lobbied effectively for the settlement of the claims and congressional approval of the pipeline but they were slow to act initially.

The companies reacted slowly to the changing situation. Some expanded their offices. One company representative said that, in the mid-sixties, his office consisted of two professional lobbyists and two secretaries, Now there are three lobbyists plus an environmental specialist and someone to handle FEA contacts.

Other companies opened Washington offices for the first time. And the industry’s chief trade association, the API, moved its headquarters from New York to Washington in 1970 although it did little to reorder its somewhat haphazard methods of operation, methods dictated by the diversity of its membership (nearly 7,500 individuals and more than 300 companies) and the difficulty of forming any consensus within it. The major companies, that is, those involved in all four phases of the petroleum business — production, refining, marketing and transportation — distrusted one another and hated the independents, There is no good working definition of an independent. J. Paul Getty, the world’s richest man until his death a few months ago, was one. But the industry likes to talk about the mythical “little man” even though the best rule of thumb is that a little oil man is a “four-foot tall Texan with his pockets stuffed with thousand dollar bills.” Any company or individual not involved in all four phases of the petroleum industry is an independent. Furthermore, the companies’ interests differ from those of the dealers and jobbers. In short, much of the API cordially disliked the rest of it. “You couldn’t get these people in the same room,” remarked an exasperated API employee.

The industry had increasing Washington representation but the worsening energy situation, which finally became a crisis in the public mind when the Organization of Petroleum Exporting Countries (OPEC) decided to limit supplies of crude oil to the United States and western Europe in 1973, did not improve the industry’s access to legislators and others. Nor did the companies’ huge inventory profits during the embargo. Added to this were revelations that Gulf Oil Company executives had handed out more than $12 million in bribes to national and international political figures. The activities of Gulf lobbyist Claude Wild are still being unraveled but most oil men think that it was the long lines at the local filling station that did the most damage.

One Washington oil man recalled that “during the Arab situation” people with whom he had dealt in the past were suddenly “very sensitive” about talking to or seeing him. He had become a political liability.

The situation had changed with regard to campaign contributions, too. The law now limits, individual contributions to $1,000 unless they come from a “multi-candidate committee.” A November 1975 ruling by the Federal Election Commission gave corporations the right to solicit political contributions from employees, form multi-candidate committees and give up to $5,000 to a candidate. Many oil companies and related businesses have set up such political action committees. Shell has a Political Awareness Committee, Union Oil has a Political Awareness Fund, Sohio has a Civic Contribution Fund, and Texaco has an Employees Political Involvement Committee. But records at the FEC show that most have not gathered in much money to date. Texaco leads with more than $71,000 as of June 30, 1976, but many funds show no contributions at all. By forming these committees, the companies are doing what the labor unions have done for years. But, unless a lot more money is collected between now and November, the oil companies’ political committees are unlikely to play a major role in the 1976 elections.

Divestiture in the oil industry is not a new idea. The Standard Oil Trust, from whence most of the major companies came, was broken up in 1911. As recently as 1973, the Federal Trade Commission decided to examine the activities of eight large oil companies to see if they were violating antitrust laws. (Nothing has come of that investigation to date.)

Sen. Philip Hart’s Antitrust and Monopoly Subcommittee has held hearings on monopoly practices in the oil industry off and on for eleven years. In 1972, Hart introduced legislation to force reorganization by corporations of a certain size and concentration within seven industries, one of them petroleum, But Hart’s bill made little headway and the oil industry regarded divestiture as just one more legislative concern, no more or less important than any other. The companies were apparently unable to take Hart’s bill seriously. “No one in his right mind could believe that it made any sense to break up the oil companies,” said the API’s Akins. And so the companies concentrated their congressional efforts on preserving tax breaks such as the depletion allowance.

Natural gas pricing was one of the industry’s legislative concerns. Thus, when the gas-pricing bill came up last October, the companies were already deeply involved in the legislative process. The first divestiture amendment to that bill was essentially a reworking of the original Hart legislation as it applied to the petroleum industry.

“We were principally concerned with the issues in the gas bill at the time it came to the floor,” recalled one oil company vice president. “We felt, at the time, the divestiture amendments were merely tactical ones — coming from individuals associated with the group trying to defeat the bill. We had no opportunity to talk about the merits of divestiture. We were concentrating on the issues in the gas bill.

“It is no secret,” he added, “that we were dismayed at the closeness of the vote.”

In November, the API held its annual meeting in Chicago. Realizing that this was one issue on which the industry could take a united stand, several top officers of major oil companies persuaded the API to form a committee to coordinate an industry-wide lobbying effort against divestiture. According to James Atkin, the lawyer who runs this task force, the Committee on Industrial Organizations, the chairman of the committee, H.J. Haynes, chairman and chief executive officer of the Standard Oil Company of California (Socal), agreed to take the job provided he could count upon the expertise and assistance of specific individuals in the industry. He then hand-picked the members of the committee: W.T. Slick Jr., senior vice president of the Exxon Company USA, whose expertise was economic analysis; C. Howard Hardesty Jr., vice chairman of the Continental Oil Company, whose area was constituencies or third parties, that is, groups which would feel the effects of divestiture; L.B. Lea, general counsel of Standard Oil of Indiana, who was to handle the legal aspects of divestiture; William K. Tell Jr., vice president of Texaco, a Washington representative who would specialize in Washington relations; and Herbert Schmertz, vice president of Mobil and mastermind of Mobil’s skillful advertising campaign on the Op Ed pages of the New York Times and elsewhere that has become a classic of sorts. To this formidable roster of oil talent were added the president of the API, Frank Ikard, a former Texas congressman generally regarded as an effective lobbyist for the industry, and Charles DiBona, executive vice president of the API and a one time energy adviser to President Nixon. The committee reportedly had a budget of $1 million with which to work, a figure about which API spokesmen are somewhat vague. “I don’t have a budget,” said Atkin. “They just say what do you need?”

One Washington oil man said that much of the impetus for the formation of the committee came from the Washington representatives who themselves have an informal association that meets every Thursday to discuss current issues of interest to the industry. This group regularly elects a chairman and, last November, the chairman was Texaco’s Tell who became a member of the API task force.

The task force’s areas of concern were pretty well defined by the interests of its members. The industry planned to use the API as a structure for organizing a sweeping lobbying effort. As Atkin described it, “The principal idea is to tap talent that exists within the industry.” Committee members and Atkin identified people with particular talents and then put them to use. “We didn’t want to go to AMOCO and say who’ve you got,” said Atkin. “We wanted to say ‘We want Charlie Brown.’ “

The task force staff consists of Atkin, an assistant whose job it is to keep track of what is going on in Congress and identify areas in which further research is necessary, a person in charge of coordination among the companies, a person who handles contacts with Chambers of Commerce, women’s groups, labor groups and other third parties, and clerical help.

“The key to the damn thing is to get the facts and figures pulled together,” said Atkin. “It hadn’t been done (before creation of his staff).”

The degree to which this marshaling of the “facts and figures” was not done is startling. For example, although API staff wrote up accounts of congressional hearings and circulated them, no one made any attempt to analyze them.

API policy is made by a Board of Directors but depends upon a consensus among its membership. There have in the past when the API could not take a position on an important industry issue because no consensus existed Oil import quotas were such an issue. Most of the domestic companies wanted quotas to prevent cheap foreign oil from flooding the country and lowering the price of domestic oil. A few companies, such as Gulf and Texaco, which produce most of their crude oil abroad, favored a flexible system. And the New England fuel oil distributors, also represented beneath the umbrella of the API, wanted to get rid of quotas altogether. As a result, the API took no position on quotas until mid-1973 when President Nixon announced that he was abandoning them. Then the API supported his move.

Despite the need for a consensus, the large companies pull more weight in the API than the small ones. After a bit of hedging, API vice president Stephen P. Potter remarked, “If you had total consensus of the eighteen largest oil companies, I can’t visualize that the API would not take a position.”

The eighteen largest oil companies — Exxon, Texaco, Shell, Standard of Indiana, Gulf, Mobil, Standard of California, Atlantic-Richfield, Getty, Union Oil of California, Sun, Phillips Petroleum, Continental, Cities Service, Marathon, BP-Sohio, Amerada Hess, and Ashland Oil — are those directly affected by the divestiture legislation before Congress at the beginning of this year, although the bill would change the structure and operating habits of the entire industry.

“The divestiture issue has been the making of the API,” remarked an executive of one of the eighteen companies.

The nine-vote margin on divestiture frightened the petroleum industry but elated its proponents. In the Senate, divestiture’s principal supporters were Sens. Hart, James Abourezk, Edward M. Kennedy, and Birch Bayh. One of these, Bayh, was a Presidential hopeful who entered primaries in early 1976. Clearly, Bayh saw divestiture as an issue that would give some oomph to his Presidential campaign. Since the public generally perceives the oil companies as responsible for current energy problems and rising prices, divestiture is an emotional issue which can be used to political advantage. For example, Rep. Herb Harris was elected to Congress from northern Virginia in 1974 on an anti-big oil platform and intends to run for re-election this fall in the same way. A September 1976 fund-raising effort for Harris centers around the theme that big oil is contributing to a Republican war chest to defeat him and that Harris is the underdog because his Democratic supporters cannot possibly contribute as much to his campaign as the oil companies can to his opponent’s.

At any rate, because of his political ambitions and because Hart was too ill to push a divestiture bill through the recalcitrant Senate Judiciary Committee himself, Bayh took up the divestiture battle. He took a bill which he had introduced in September 1975, the Petroleum Industry Competition Act, which would force the eighteen largest oil companies to divest themselves of all but one phase of the business, and determined to bring it to the Senate floor, not as a rider on some other piece of legislation but as a bill reported by the full Judiciary Committee. Despite the closeness of the divestiture votes in the Senate, the odds for approval of Bayh’s bill by the full committee were not good. Sen. Roman Hruska, the ranking minority member of the Antitrust and Monopoly Subcommittee, opposed it and he could count upon help from another formidable parliamentary opponent, Sen. Strom Thurmond. Committee chairman James Eastland also opposed divestiture.

Bayh’s bill addressed itself to a specific kind of divestiture. In the House of Representatives, the Judiciary Committee was cautiously investigating other possibilities, including legislation directed specifically at the joint ownership of pipelines by oil companies and a bill preventing oil companies from controlling other sources of energy. But it did not look as though the House would act on divestiture in 1976.

Opening hearings on his bill in late October, Bayh warned the industry that he meant business. “These hearings are not an idle gesture,” he said, “nor of indefinite duration. They are designed to provide a thorough airing of the relevant issues as quickly as possible so that the groundwork will be laid for timely action by the subcommittee.”

Outside of the Congress, the most vocal proponents of divestiture were representatives of a self-styled citizens’ group called the Energy Action Committee. The committee was financed in the fall of 1975 and early 1976 by donations from a number of wealthy Californians, including Miles J. Rubin, chairman of the Optical Systems Corporation of Los Angeles; Leo S. Wyler, chairman of the TRE Corporation of Beverly Hills; and actor Paul Newman and some New Yorkers such as Charles H. Dyson, chairman of the Dyson-Kissner Corporation, The committee hired James F. Flug, a lawyer who had worked as Kennedy’s legislative assistant and as counsel to the Senate Subcommittee on Administrative Practice and Procedure, as its director and counsel. Although Flug admittedly knew nothing about energy when he agreed to take the job, he brought to it broad Washington experience, an appetite for hard work, and a theatrical flair which keeps most oil men’s stomachs on edge. The Energy Action Committee is largely a public relations effort and Flug is skillful in his use of the media. An observer who does not agree with Flug on divestiture nevertheless said of him, “He certainly seems to be able to get it all together.” Said an oil man, “Flug’s group is a lot of noise.”

Less visible but also much involved in the divestiture battle is the law firm of Lobel, Novins and Lamont, whose offices are directly underneath the Energy Action Committee’s suite. Martin Lobel, an outspoken consumer advocate, was once Sen. William Proxmire’s legislative assistant and has been fighting big oil for years.

When Bayh’s hearings opened in October, neither side was in high gear. Energy action was being formed. And the industry was confronted with what one lobbyist, called “a forced march” to get their case before the public. Largely as a result of the efforts of Hruska, the industry was able to get the hearings extended into January and February of 1976.

Working through the API and the subcommittee staff, which was anxious to present both sides of the case fully, the oil men were able to marshal an impressive array of anti-divestiture witnesses in early 1976. These included: William P. Tavoulareas, the president of Mobil and generally considered to be one of the most able oil executives; representatives of George Washington University’s Energy Research Project who concluded that divestiture would be a mistake (and whose study was partially funded with oil money); Neil H. Jacoby of the University of California at Los Angeles who said divestiture would enhance the power of OPEC; Edward H. Mitchell, an economist at the University of Michigan and director of the American Enterprise Institute’s National Energy Project, who also thought divestiture would be a bad idea; and Peter Bator, a partner in the New York law firm of Davis, Polk and Wardwell, who analyzed the legal problems that might arise, The oil men were pleased with the record that had been made at the hearings. Copies of favorable testimony, and later copies of the numerous anti-divestiture editorials that began to appear in newspapers throughout the country including the New York Times and the Washington Post, were mailed to all Members of-Congress by API president Frank Ikard. Many were inserted into the Congressional Record by sympathetic legislators such as Sen. Clifford Hansen.

While the hearings were underway, the API task force was also preparing another line of attack. The API commissioned a number of studies of all aspects of divestiture, some academic, some independent. Clearly there have been problems with these studies, chiefly because the academics did not get them done as quickly as the oil men wanted. So far only one, “Vertical Integration and Vertical Divestiture in the US Petroleum Industry” by David J. Teece of the Graduate School of Business at Stanford University, has appeared, although a number of others are in progress.

“In dealing with academics you are dealing with people who have to be given full rein to come up with what they want,” said Atkin. “They spend a lifetime doing data collection. We can do that ourselves. So we started turning to the companies to do the stuff.”

A white paper based on the hearing record proved more useful and, most importantly, was immediately available for the kind of personal lobbying that was necessary to keep the divestiture bill bottled up in the subcommittee.

There are three ways to get to a senator, said one lobbyist, after stressing that he never gives up on anyone, even the most devoted proponent of divestiture in this case. “First you try to brief his staff and see what you get. Second you do something in his state. Third you find the guy to whom he listens, in whom he has confidence, and who shares your point of view, and you see that he gets to the senator.”

In these days of large senatorial staffs and a heavy press of complex legislative business, personal contacts with senators count for less than they used to, he continued. “There’s no access any more,” he said. “I can’t walk in as good old _________.”

Another lobbyist, asked how he would approach an uncommitted Judiciary Committee member to win him to the industry’s side, said he would use the direct approach, combined with a white paper on the record made at the hearings.

API vice president Potter cited Sen. Quentin Burdick, a member of the full committee who eventually voted against reporting Bayh’s bill, as a doubtful legislator who was convinced by the industry’s “facts and figures.” “We got to him with information,” Potter said, “and now he believes it (divestiture) is unsound.”

Information was all they got to him with for records filed with the Secretary of the Senate show that the only oil-related campaign contribution Burdick has received recently is $200 last September from John S. White, a lawyer here in Washington for the Marathon Oil Company. Marathon is one of the big eighteen.

The importance of doing something in a senator’s state should not be overlooked. The orchestration of grassroots opposition to a piece of legislation, if properly done, is one of the most effective forms of lobbying there is.

As far as the oil companies were concerned, the obvious third party with a direct stake in divestiture consisted of their stockholders. Every senator has some constituents who hold oil company stock.

Exxon stockholders received a booklet explaining how to “communicate effectively” with Members of Congress. Ranked in their order of effectiveness, according to a “survey of key professional staff aides of several congressmen” were 1.) personal visits; 2.) telephone calls from known supporters; 3.) personal letters — a sample format was included; and 4.) telegrams or mailgrams.

Socal interviewed several congressional aides, who it identified (they mostly worked for members from Texas and Oklahoma), and drew up a seven-point checklist for an effective letter. The article, in the company’s Winter 1976 Bulletin was written by the managing editor of Nation’s Business, a US Chamber of Commerce publication.

Gulf shareholders were warned, in a letter from the chairman of the board, that the Bayh bill was “an unprecedented social experiment that would have profound effect on the energy industry, on Gulf, and on the US economic system.” The letter was accompanied by anti-divestiture editorials from major newspapers and a list of all 100 senators. Stockholders were urged to write or wire their man in Washington.

Employees and retired employees, dealers and filling station operators all received similar appeals. And the companies did not stop with mailings. Gulf has slide shows for its employees; Standard of Indiana has prepared a videotape program; Sohio sends its executives on speaking tours; and Exxon has a musical dramatization starring the Spirit of Bureaucracy, Exxon and the Consumer.

Another group with a direct stake in divestiture is organized labor. The AFL-CIO lobbied for the divestiture amendments last October and approved a resolution urging Congress to pass “legislation requiring the divorcement of either the marketing of petroleum or else the production of it.” But labor has not played any day-to-day lobbying role in the divestiture battle. Flug said that labor lobbyists gave their support at crucial moments. However, the union most affected by divestiture in the petroleum industry, the Oil, Chemical, and Atomic Workers Union, has remained on the fence, studying the matter.

The long finger of public relations has reached beyond just people who have a direct financial stake in the future of a given company. Credit card holders are warned about the dangers of divestiture. Oil company executives are giving speeches to civic organizations, professional associations, and women’s groups on the subject.

Related industries, financial institutions, and organizations have gotten into the act. The First National City Bank’s January 1976 Energy Memo, a regular publication, is devoted to the impacts of divestiture upon the country’s financial system. The Chase Manhattan Bank’s March 31, 1976 newsletter, “The Petroleum Situation,” points out that vertical integration is a way of life in virtually all sectors of the US economy. And the National Association of Manufacturers’ pamphlet quoted earlier warns that the Bayh bill is “only the tip of the divestiture iceberg.” Oil is a good candidate for divestiture, the pamphlet continues, because of its poor public image. It concludes: “…if divestiture advocates succeed in breaking up the oil industry, other industries are sure to follow it to the divestiture chopping block.”

Another aspect of the industry’s lobbying campaign has been paid advertising, occasionally on television but primarily in newspapers and magazines. Here the companies have followed the example set by Mobil. As Atkin commented, “If somebody’s put together a good spiel, why reinvent the wheel?”

Mobil Oil began its issue advertising on a sporadic basis in the New York Times in 1970. In 1972, it started its once a week Op Ed page ads in the Times, the first company to take advantage of the Times’ decision to open that page of the paper to advertising. At one time, op ed ads were running in 103 newspapers but Mobil has cut back to six, primarily because of the cost according to a spokesman. Since Mobil is aiming at what it calls a “high level, opinion leader audience,” the ads now appear only in the Times, the Boston Globe, the eastern edition of the Wall Street Journal, the Washington Post, the Los Angeles Times, and the Chicago Tribune. These ads are usually cool and low key. For example, there is the August “Fable for Now,” a story about a Wondrous Waterhole which also contained, beneath the water, a substance called Gogo syrup upon which all the animals in the magical land of Glut depended for energy. In the end, Glut runs short of Gogo syrup because the wolf who maintains the waterhole will not allow the other animals to risk its purity by drilling for more Gogo syrup in it. “Moral: Even a wily wolf can behave like a dumb bunny if he lets exaggerated fears muddle his thinking.” Note: the ad appeared as Congress was considering offshore oil legislation and the Department of the interior was preparing for its first sale of oil leases off New York and New Jersey.

This is pretty sophisticated advertising aimed at a rather limited audience. Less sophisticated is a column called “Observations” which runs in some 400 newspapers and appears in Parade, a Sunday magazine insert used by many papers. Observations is a chatty exposition of odd bits of information. A recent column discussed the Hudson Institute’s rosy economic predictions for the next 200 years, a recent book by a futurologist, and people’s difficulties with accepting new ideas.

Mobil also supports high quality public television, notably Masterpiece Theatre. However, it does not advertise on television. Mobil would love to use television but the networks refuse to use commercials they consider controversial because they say the fairness doctrine leaves them open to demands for the right to reply by the other side.

The fairness doctrine is a very fuzzy area. Recently, Texaco ran a 60 second television commercial which addressed itself to divestiture without ever mentioning the word. The commercial featured a jigsaw puzzle and stressed that a company such as Texaco was in all phases of the oil business “so it can link the complex pieces together efficiently and economically” while the pieces of the puzzle are fitted together before the viewer’s eyes.

“Frankly,” said a Texaco man, “that message was so watered down in order to avoid the fairness doctrine that we questioned whether it was even worth running.”

The Energy Action Committee has complained to the Federal Communications Commission that proponents of divestiture should be given time in which to reply to Texaco. Sens. Bayh and Abourezk joined in the suit. But it will probably take some time to resolve the matter.

The other oil companies have followed Mobil’s lead, if without Mobil’s finesse. In late August, the Union Oil Company celebrated the success oil men claim their mailings to stockholders have had with a full-page advertisement in the Washington Post. “32,331 messages to 100 senators,” crowed Union underneath a huge photograph of a middle-aged, balding man seated at a desk stacked high with mail. It turned out that the figure referred to the number of Union stockholders who had returned a postcard to the company saying they thought divestiture was a bad idea, but the impression given was that Congress was being deluged with constituent mail against divestiture. The ad ran just as the Senate leadership was debating bringing up Bayh’s divestiture bill on the floor in the face of a threatened filibuster.

The Energy Action Committee has tried to find out how much all this is costing the oil companies. On June 18, Flug wrote Rawleigh Warner Jr., chairman of the board of Mobil, asking that the companies disclose the amount of money they had spent between October 8 and June 15, the day the Judiciary Committee voted to report Bayh’s bill; disclose the portions of those expenditures which were deducted as business expenses; provide equal time and equal space in all advertising and mailings for advocates of divestiture to present their side of the argument; and publicly debate the pros and cons of divestiture. A few days later, vice president Schmertz replied, “I have just finished reading your letter of June 18 to Rawleigh Warner Jr. and I consider it the height of chutzpah.”

Said Bayh, “It is the most elaborate and pervasive campaign I have ever seen, both from a lobbying standpoint and from a public relations and paid advertising standpoint. There has never been a legislative issue in which an industry has resorted to such massive use of paid advertising to affect public opinion. It is really awesome.”

It is possible to total up some costs, such as full-page newspaper ads or television commercials, but it is difficult to make any good estimate of what the companies have spent to date. Not surprisingly, nothing shows up on lobbying records kept by the Clerk of the House. Most oil companies do not even bother to file reports and the API, which does file, reveals little more than the dues its members pay.

At this point most companies probably do not have specific budgets for future spending. Clearly, money is no object and they will spend whatever they consider necessary for as long as they feel threatened. And they have a lot of money to spend among them.

“Of course it’s a multi-million dollar effort,” said one oil man. “It would have to be; to be less would be a disservice to our stockholders.”

He thought a minute. “When I first came here we were talking about trading stamps,” he said. “Now we’re fighting for the family jewels.”

Bayh brought his bill to the edge of the Senate floor by the byzantine and time-consuming process that simultaneously delights and enrages students of the US Senate. The hearings were over on February 18. The next afternoon, less than five days before the-New Hampshire Presidential primary in which Bayh was a candidate, the subcommittee scheduled a drafting session on the Bayh bill. But the subcommittee never met. Under Senate procedure, all committees meeting while the Senate is in session must have permission to do so. Usually this is pro forma approval, given by unanimous consent that is not even discussed. But one senator may object and on February 19, Sen. Jake Garn, a conservative Republican but not a member of the Judiciary Committee, objected, by prearrangement with Hruska.

On April 1, the subcommittee finally met to report the Bayh bill. “I hope you appreciate the irony of this day,” said one oil lobbyist to a colleague. “It’s April Fool’s Day.” But it turned out that Bayh had counted his votes properly and the bill was sent to the full committee by a vote of 4 to 3.

In May, Hart and Bayh reached an agreement with Hruska and Thurmond that the full Judiciary Committee would act on the divestiture bill no later than June 15, provided additional hearings were scheduled in which administration witnesses would testify. Supporters of divestiture threatened to bypass the committee and bring the bill to the floor as an amendment to another bill if the committee stalled any longer, thus setting the scene for the melodrama of June 15.

That morning the committee, which has 15 members, met in a back room generally used by the committee staff rather than in the regular committee room which can seat perhaps fifty spectators and numerous members of the press. At least 40 reporters gathered outside the closed door of the supposedly open meeting complaining bitterly. At last they sent in a petition signed with the names of their publications, ranging in nature from Time magazine to the Oil and Gas Journal, and the committee agreed to move next door. The reporters, followed by nearly twice as many lobbyists, raced around the corner to get seats. Finally, an hour after the meeting was to have started, Chairman Eastland, followed by other members of the committee, filed into the big hearing room. Their entrance was recorded by waiting television cameras.

There was some hassling back and forth during which Sen. Charles Mathias, the one uncommitted member of the committee, offered a substitute for Bayh’s bill which would have thrown the burden of determining monopolistic or discriminatory practices upon the FTC as well as requiring the companies to submit quarterly reports of their accounting to that commission. There was some desultory discussion of the Mathias substitute and then the senators fell to quarreling among themselves over when to vote on Mathias’ proposal and the bill itself. Eastland sank lower and lower in his chair and chewed on his cigar while other members of the committee tried to decide what to do about Sens. Robert Byrd and Hugh Scott who, as members of the leadership, were busy on the floor. Finally, Kennedy rose and went to summon them himself. The senators agreed to vote a few minutes before one o’clock and then sat, in effect twiddling their thumbs, until the clock ran out. At 12:43, Scott and Byrd arrived together from the floor and the committee rejected the Mathias proposal by a vote of 13-2. They then voted to report the Bayh bill to the floor by a vote of 8 to 7. Two senators, Byrd and Scott, voted in favor of bringing the bill to the floor “in order to let the Senate work its will” (in other words, they opposed the bill but did not want to be accused of stalling it further) and Mathias voted for the bill in the hopes of offering his substitute as a floor amendment.

The outcome did not surprise the oil lobbyists, most of whom had sized up the situation correctly. In fact, the only question was what Mathias would do once his substitute had been rejected. Throughout the frequent pauses in the meeting, Mathias was the object of considerable attention. Senators from both sides came over to talk to him. Television cameras were focused upon him. The oil men in the back of the room kept their distance, but watched him intently.

Two days later, Mobil spoke from the op-ed pages of the New York Times.

“Two days ago, a bare majority of the Senate Judiciary Committee…voted to send to the full Senate a bill to destroy America’s 18 largest oil companies. We know of no instance when overwhelming evidence has been so arrogantly ignored.

“Of some 80 non-government witnesses who testified at the subcommittee hearings on Senate Bill 2387, only two favored the concept. Two!

“Arrayed against divestiture were some of America’s most highly regarded economists, investment bankers and academicians. Even long time critics of the oil industry and representatives of the smaller ‘independent’ oil companies that divestiture is supposed to help.

“Their message? Smashing the largest oil companies will make the US increasingly dependent on insecure foreign oil; raise prices to you, the consumer; jeopardize jobs; and threaten the economic well-being of the nation.”

Then Mobil quoted some critics, economists, independent oil men, government officials, and professors who opposed the bill.

“When the bill comes before the full Senate, we sincerely hope that passion and politicking will yield to reason. Divestiture makes no sense. It is no substitute for forging a sensible national energy policy to increase America’s energy independence — the task Congress has thus far lacked the political courage to tackle.

“If some politicians won’t listen to reason, perhaps they’ll listen to the people. What’s needed now is a public outcry. Isn’t it time you spoke up? Your future may depend on it.”

After Bayh’s bill was reported, nothing happened. It was put on the calendar but every time the leadership reassessed the calendar, the divestiture bill slipped further down the list of priorities. By late August, it was not supposed to come up until after Labor Day yet everyone knew that Congress planned to adjourn the first week in October for the elections. After Labor Day, the bill vanished from the calendar altogether in the face of a threatened filibuster by its opponents. As this is written, the Senate is still meeting with the hope of finishing its business for this year by October 2. Bayh’s bill could come up but that is very unlikely.

The obvious question is: Was divestiture stalled because of what the oil companies did, and are still doing, to prevent it? Bayh’s bill had little future even if the Senate had passed it since the House had approved no similar legislation. But it took no massive lobbying campaign by the petroleum industry to get the bill into the pigeon hole where it now rests. The filibuster threat came from a small number of conservative senators who have opposed divestiture from the very beginning.

The oil companies’ expensive and wide-reaching anti-divestiture campaign is for the future, for the time when Congress seriously explores divestiture and alternatives to it, as Congress is almost certain to do, Its success as a lobbying campaign remains to be seen.

Right now, divestiture is a political issue. The companies are reaping the harvest of years of secrecy and neglect for public opinion and the public interest. The industry is not the source of all the country’s energy problems nor is it solely to blame for the rising cost of energy. Few economists feel vertical divestiture as laid out by Bayh’s bill would either lower consumer prices or enhance the US position vis-à-vis OPEC. But the companies have only themselves to thank for the low esteem in which the public presently holds them.

It is clear that the companies will do everything possible to preserve their present operating structure. It is also clear that there is a strong sentiment in Congress, which in turn reflects general dissatisfaction on the part of the voting public, to do something about big business generally and the oil business in particular. The battle over divestiture has just begun.

Received in New York on September 20, 1976.


Mary Clay Berry, a freelance writer, is an Alicia Patterson Foundation award winner. She is studying lobbying in Washington, DC. This article may be published with credit to Ms. Berry as a Fellow of the Alicia Patterson Foundation. The views expressed in this newsletter are not necessarily the views of the Foundation.