Steve Coll: Private Empire

Steve Coll's big book on America's biggest oil company starts with the Exxon Valdez's giant oil spill in 1989 and ends in 2011 with a ruptured Exxon pipeline that dumped a thousand gallons of oil into the Yellowstone River. In between, a lot of oil, and some blood, get spilled, Exxon -- now ExxonMobil, after swallowing Mobil Oil in a $73.7 billion merger in 1998 -- itself becomes much larger and more profitable, and its lawyers and lobbyists have had a lot of work to do to cope with the mess.

Over the last decade, Coll has focused on America's terrorism wars, first with his history of the CIA's involvement in Afghanistan, Ghost Wars: The Secret History of the CIA, Afghanistan, and Bin Laden -- you know, when the terrorists were the "good guys" -- then in The Bin Ladens: An Arabian Family in the American Century he looked further into the confluence of business interests and terror in the middle east. But before that he had started out writing about business, with previous books on the breakup of AT&T and the takeover of Getty Oil. The current book combines all those interests, especially given how large and rich ExxonMobil is, and how it moves all over the world, looking for oil and finding trouble.

One persistent theme is how companies like ExxonMobil have come to operate both parasitically and independently of American interests, at least as understood by successive presidential administrations. The book jumps fairly quickly from the 1989 Exxon Valdez spill to the 1998 ExxonMobil merger, so it mostly overlaps with what Billmon liked to call the Cheney administration. Naturally, ExxonMobil CEO Lee Raymond was very close to Cheney -- a participant in Cheney's secretive energy planning sessions, and beneficiary of numerous special favors -- but ExxonMobil never had a problem getting access and government help. (The Clinton administration's rubber stamp approval of the merger, which combined the two largest Standard Oil companies broken up in the famous 1911 antitrust case, was the most remarkable favor, but the Obama administration followed suit in helping to secure ExxonMobil's takeover of the large Qurna oil field in Iraq -- maybe that war was only about oil after all?)

On the other hand, Raymond emphatically rejected the notion that ExxonMobil was an American company, insisting that his shareholders, employees, and customers were scattered all over the world, and that he had no special fealty to U.S. foreign policy. Given how confused US foreign policy wonks are about oil policy -- someone smarter than Michael Klare should write a book about the abuse of idiocy in the US trying to protect its supply of cheap oil with military efforts which disrupt markets and lobbying in favor of multinationals like ExxonMobil that benefit much more when oil becomes more expensive -- Raymond is refreshingly focused. He uses Washington when it's useful for ExxonMobil, and steers clear when they're more trouble than they're worth.

There are many case examples of the latter, especially in Africa, where ExxonMobil is a more significant force than the US government. Equatorial Guinea is one case in point: its corrupt dictator, Teodoro Obiang Ngeuma, ran up such a bad human rights record that even the Bush administration kept him at arm's length, but ExxonMobil had no problems doing business with him. Similar stories appear in chapters on Indonesia, Nigeria, and Chad, although in those cases the US did eventually get involved, providing guns to supposedly to quell civil wars. (The Aceh revolt in Indonesia eventually ended in negotiation; piracy in Nigeria is an ongoing problem, and Chad remains all the poorer, but at least the oil still flows.)

Probably the most egregious example of ExxonMobil pursuing its private interests over U.S. government wishes was when Raymond went to China to rail against the Kyoto agreement, which ExxonMobil was also lobbying against in Washington. That may seem pale compared to his predecessor, Walter Teagle, who sold patents to I.G. Farben in the late 1930s then refused to manufacture synthetic rubber without the Nazis' permission. But it is an example both of how narrowly ExxonMobil targets its interests, and how single-mindedly they pursue them with all their might.

The most notorious example is ExxonMobil's propaganda war against the idea of global warming, where they have pulled out all of the usual tricks, including creating front groups and hiring scientists to disinform the public. They weren't the only oil company to do so, but had considerable impact given their immense size and drive. Coll seems to admire Raymond for his disciplined management, but starting so late in the story we never get a clear picture of how Exxon got to be so large.

Under John D. Rockefeller, Standard Oil had become the most notorious monopoly of the gilded age. In 1911, the company was broken up into 34 separate companies, many of them delineated by state boundaries, like Standard Oil of New Jersey (future Exxon), Standard Oil of New York (future Mobil), California (Chevron), Ohio (SOHIO), and Indiana (Amoco). I'm not sure how Exxon (as we'll call Standard of New Jersey even before its 1972 rebranding) came to be the largest of the "baby Standards," but during Teague's management (1917-42) the company grew its market share from 2% to 11.5%. One chunk was their purchase of 50% of Humble Oil (one of the larger independents in Texas) in 1919 -- they bought up the rest of the stock in 1954. But they also made significant claims outside the US, like their controlling interest in Canada's Imperial Oil. They also owned fields in Venezuela, Iran, and elsewhere. After WWII they were the largest of the "seven sisters" that were organized to take over Iran's oil after the CIA's 1953 coup. Before that, in 1948 they took a large (30% stake) in Aramco, which became Saudi Aramco when it was nationalized in the 1970s. The nationalizations undercut their reserves, but they were often replaced by deals where Exxon would continue to refine the no-longer-owned crude, so they maintained their standing as the largest multinational oil company.

Mobil (originally Standard Oil of New York, reduced to SOCONY, then several other variants) also grew by acquisitions, like Magnolia Oil and Vacuum Oil) and foreign exploration, inheriting Standard's interests in China, and adding Vacuum's stake in Australia. Mobil was generally the second largest oil company in America. At the time of the merger, it had many of the fields that figure prominently in the book: Aceh (Indonesia), Nigeria, Equatorial Guinea, and a huge gas field in Qatar. As Coll sums up, "ExxonMobil had always been better at buying other people's oil than at finding it."

One particular aspect of history that Coll ignores by starting in 1989 is the role the oil companies interacted with US foreign policy, especially early on. The US didn't actually have much of a foreign policy before WWII, and in the early postwar period the State Department and the CIA tended to look to US companies for insight and expertise abroad -- especially in the Middle East. This could on occasion be disastrous, as when the CIA intervened in Iran in what was basically a dispute between Anglo-Iranian Oil (later BP) and a newly-elected democratic government in Iran over an extremely one-sided and unfair contract. (Much the same as the CIA intervened in Guatemala at the behest of United Fruit.)

The merged ExxonMobil's revenues in its first year were $228 billion. By 2011, they had grown to $486 billion, with $41.1 billion in profits. Lee Raymond retired in 2006 with a package valued at $400 million. He was replaced by Rex Tillerson. Raymond had moved the corporate headquarters to Irving, Texas, a suburb of Dallas that seemed to fit the management culture better than. The book includes some numbers of how much ExxonMobil put into various political campaigns, and needless to say they favored Republicans -- even in 2008, when the Democrats won massively, their take was only 11% -- but the numbers are piddly compared to what the Koch family spends. Still, you can't say that they were less effective: they've pretty much won every legislative and regulatory battle they've entered, and have had no problems getting Democrats like Clinton and Obama to do their bidding.

That is a huge flaw in our political system: we basically put government favor up to the highest private bidder, while at the same time not expecting corporations to take anything more than their shareholder's narrow pecuniary interests into consideration. In this system, the oil and banking industries loom exceptionally large, and their influence has been exceptionally corrupting.

One problem here is that oil has always engendered the worst in extreme right political crackpots -- Bryan Burrough's The Big Rich: The Rise and Fall of the Greatest Texas Oil Fortunes is a veritable catalog of them, although you'd also have to factor in non-Texans like the Buckleys, the Kochs, and the Cheneys. This has always struck me as rather perverse, as the root of all oil fortunes is a paper from a government giving someone arbitrary ownership of unseen pockets of hydrocarbons buried millions of years ago: nothing is more exemplary of the old adage about being born on third base and thinking you've hit a triple. But whereas such crackpots will always be with us, it is the sheer size of the oil industry that makes them so dangerous, and that size is readily inflated as every uptick in gasoline prices magnifies the value of unpumped reserves.

Those reserves, by the way, play a crucial role here. ExxonMobil's power -- in particular, their ability to merge with Mobil and to buy out XTO -- depends on their stock price, which is normally an estimate of future profitability: for an oil company, that mostly means the product of current profitability times proven reserves. Coll shows how nearly every strategic move ExxonMobil has made has been driven by the need to increase their reserves to make up for their yearly production. For several reasons this has been a tough problem, which for a long time Raymond was able to finesse by unorthodox accounting.

Coll highlights the problem of "resource nationalism": most nations, especially those long victimized by Euroamerican imperialism, insist on owning their own oil, even when in order to exploit that oil they wind up making production deals with foreign companies. (The first "third world" country to nationalize its oil fields was Mexico, and I'm pretty sure the foreign company was Exxon.) Since then Venezuela, Iran, Iraq, Saudi Arabia, and other major producers have taken their reserves off the company books, and it will be tempting for countries like Nigeria and Angola to do the same.

Another problem, which Coll doesn't cover in any systematic way, is that oil fields run dry, that there are only a finite number of them, and that new discoveries of oil fields are increasingly hard to find. This is consistent with the "peak oil" theory, which in its original version predicted that US oil production would peak in 1970 and decline thereafter. (In fact, the peak year was 1969. That this was non-calamitous was due to our ability to import oil to cover the shortfall, but that immediately resulted in the US turning its trade surplus into a deficit, which has only widened ever since.) Kenneth Deffeyes predicted that the peak for world oil production would be in the 2000-2005 window. (Results are less clear: production has basically plateaued since 2000, with a peak in 2005, but a slight rebound in 2011.)

What is clear from Coll's book is that the only way ExxonMobil has been able to increase its reserves is by counting things that wouldn't have been counted before. For starters, ExxonMobil has been replacing oil fields with gas fields -- both large, conventional ones like those in Aceh (Indonesia) and Qatar, and more recently with a lot of nonconventional fields (XTO was a major player in shale gas, which is obtained by horizontal drilling and "fracking" -- fracturing the shale with explosive blasts of highly toxic fluids). Gas is less valuable than oil, more expensive to drill, and much more expensive to distribute (ExxonMobil has an advantage in its experience in liquifying natural gas, but it's still relatively expensive).

Secondly, offshore oil deposits are much more expensive to drill than onshore, and deepwater even more so (especially if you factor the risks Deepwater Horizon ran into), and that's where many recent finds are. ExxonMobil is not a big player there, but is so desperate for new reserves they want to.

Third, there are nonconventional oil deposits, which have never been economically efficient but come more and more into play as oil prices rise. These include a couple of giant tar sand deposits, one in Canada, another in Venezuela. ExxonMobil has a stake in the former, and built (and gave up) a processing plant in the latter. Technology is likely to make these deposits more accessible, but they are very expensive to develop and produce, have massive environmental impact, and have very low recoverability ratios.

(When you initially drill into an oil reservoir, it will probably be under enough pressure that it will gush oil out: that's as good as it gets. When the pressure drops, you can still pump oil out, but you have to burn energy to run the pumps. You can also drill another hole, and pump water into the reservoir, repressurizing it to push more oil out, but before long most of what you're pumping out is water you pumped in, so that it some point it costs you as much to pump as the oil you get is worth. There are a few more techniques that help, but eventually you stop, leaving unrecoverable oil in the reservoir. Tar sands are worse because the tar isn't liquid, so can't be pumped, unless you can figure out a way to melt it. Until recently, it's mostly been strip-mined like coal, then cooked, which means you can only get to near-surface deposits, and even that is expensive, not to mention messy. Oil shales are even worse. Richard Heinberg has written about this sort of thing many times; e.g. in The Party's Over: Oil, War and the Fate of Industrial Societies. He tends to be very pessimistic, but raises valid questions.)

This increasingly frenzied search for bookable reserves is the reason why people think Bush's invasion of Iraq was for oil. Indeed, it took a while, but the key feature of ExxonMobil's 2009 deal to take over production of Iraq's Qurna oil field was that the reserves be bookable. The book includes two chapters on Iraq, and a couple more on Russia, which for a while in the kleptocratic 1990s looked like it might be willing to sell off ownership of its oil resources. (The main person interested in selling was Mikhail Khodorkovsky, who is currently off the market, doing time in one of Putin's jails.) That leaves only one major underdeveloped oil power in need of regime change, and that is the one you hear so much misleading propaganda about: Iran. (Embargoing Iran's oil does three things: it starves Iran, hopefully causing popular unrest; it reduces the world's oil supply, resulting in higher prices and profits for the oil companies; and it keeps oil in the ground, where it can eventually be booked if and when Iran adopts a legal system more friendly to ExxonMobil and its ilk.)

Coll's book raises as many questions as it answers. It offers a sobering demonstration of how one domineering executive, Lee Raymond, has been able to control, tune, and limit critical thinking within an organization that actually employs 86,000 people. Single-mindedness, as much as anything else, has made ExxonMobil a formidable force, both in its pursuit of profit and in its denial of responsibility. They, as much as anyone, have kept us from any sort of serious discussion about the declining quantity and quality of oil and gas, about what a more conserving approach to those resources would really mean for growth, about whether indeed that might be a better idea. They have been nothing less than deceitful about their environmental record, and especially about the potential effects of pumping so much carbon dioxide into the atmosphere. And they have used every ounce of their political clout to preserve the fantasy that we'll never have to face a world where oil isn't infinitely abundant, even though nothing could be clearer when you fill up your car.

This should be a cautionary tale against letting corporations get too big and granting them too much influence. We just passed the 100th anniversary of the breakup of Standard Oil, and in that century we have become markedly more cynical about democracy and remarkably more naive about corporations. On the other hand, if you read this closely, you can sense that ExxonMobil's triumphant era is coming to a close. Indeed, the merger mania of the 1990s -- not just Exxon + Mobil but BP + Amoco and Conoco + Phillips and all the rest -- were a desperate attempt to fall upward, one where the companies have mostly been saved by rising prices. On the other hand, there are any number of forces that could force us to rethink not our dependency on oil so much as our blind faith in oil companies. Of course, one could have said that just as emphatically about banks 3-4 years ago, but our political leaders utterly failed to face up to the challenge. It is, for now at least, so much easier to pretend all is well, or to blame it on your choice enemies.

Some quotes from the book, plus occasional comments, to give you a taste of the vast territory covered.

Prologue: "I'm Going to the White House on This": the Exxon Valdez crashes, March 23, 1989, resulting in the largest oil spill to date in American waters (pp. 6-7):

In 1982, the corporation employed 182,000 people. Unexpectedly, oil prices dropped. In response, chief executive Lawrence G. Rawl advanced a slashing campaign begun by his predecessor, Clifton C. Garvin Jr. The campaign eliminated about 80,000 jobs by 1989 -- more than 40 percent of the workforce in just seven years. At Exxon's headquarters in a white skyscraper on Sixth Avenue in New York City, employment fell from 1,362 to 330. The corporation's top environmental officer at headquarters was demoted; his staff was recoganized and absorbed by a research group. The experts in oil spill response that wrote Exxon's manual for disaster management also lost their jobs. The cuts buoyed Exxon's financial performance at a time when competitors struggled. In 1987, Exxon reported more annual profit per employee than any other major American corporation.

The National Transportation Safety Board concluded that third mate Cousins and his shipmates were overworked and that cutbacks of the number of crew assigned to Exxon tankers had compromised the ship's ability to detect potential hazards.

There is very little on the history of Exxon before the spill in 1989 and the rise of Lee Raymond as CEO; this is about it (pp. 19-20):

Exxon's power within the United States derived from an independent, even rebellious lineage. The corporation had been hived off from John D. Rockefeller's Standard Oil monopoly in 1911, after a bruising antitrust campaign led by economic reformers and populist politicians. The visceral hostility toward Washington sometimes eschewed by Exxon executives eight decades later suggested some of them had still not gotten over it.

Exxon's size and the nature of its business model meant that it functioned as a corporate state within the American state. Like its forebearer, Standard, Exxon proved across decades that it was one of the most powerful businesses ever produced by American capitalism. From the 1950s through the end of the cold war, Exxon ranked year after year as one of the country's very largest and most profitable corporations, always in the top five of the annual Fortune 500 lists. Its profit performance proved far more consistent and durable than that of other great corporate behemoths of America's postwar boom, such as General Motors, United States Steel, and I.B.M. In 1959, Exxon ranked as the second-largest American corporation by revenue and profit; four decades later it was third. And more than any of its corporate peers, Exxon's trajectory now pointed straight up. The corporation's revenues would grow fourfold during the two decades after the fall of the Berlin Wall, and its profits would smash all American records.

As it expanded, Exxon refined its own foreign, security, and economic policies. In some of the faraway countries where it did business, because of the scale of its investments, Exxon's sway over local politics and security was greater than that of the United States embassy. In impoverished African countries increasingly important to Exxon's strategy, such as Chad, the weight of the corporation's investments and the cash flow it shared with local governments overwhelmed the economy and became the central prize in violent local contests for power. In Moscow and Beijing, Exxon's independent power and negotiating agenda competed with and sometimes attracted more attention than the démarches issued by American secretaries of state. Yet the corporation could also be insular and even passive in the faraway places where it acquired and produced oil and gas.

Part One: The End of Easy Oil

1. "One Right Answer": in 1992, Sidney J. Reso, an Exxon manager in Florham Park, NJ, was kidnapped and killed, by a disgruntled Exxon security guard; in 1993, Exxon moved its headquarters from New York City to Arlington, Texas (p. 36):

The largest of the "baby Standards" born from the breakup was Standard Oil of New Jersey. It later marketed itself and its products under the Esso, Enco, and Humble Oil labels before modern branding specialists settled on Exxon in 1973. At the time of the Exxon Valdez spill the corporation remained by far the biggest oil company in the United States -- twice the size of the next largest, Mobil Oil, another baby Standard, the successor to Standard Oil of New York [ . . . ]

Exxon hewed most closely to the Rockefeller inheritance of discipline, rigor, technological research, and unsentimental competition. By the 1990s, there were "lots of wrong ways of doing projects -- and then there [was] the Exxon way," as Ed Chow, a longtime Chevron executive, put it. Exxon's management and engineers were "very, very prickly as partners . . . and they don't like to be partners, unless they're the operator," a competing executive said. At industry meetings the Exxon participants could be easily identified: conservatively dressed, hairstyles that seemed influenced by military rules, cliquish, secretive, and businesslike. Senior executives who rose through Exxon's ranks reinforced with one another that they served a corporation whose "fundamentals" traced in important ways all the way back to Rockefeller, as Raymond put it.

In response to the Exxon Valdez disaster, Exxon developed a risk management/quality control system called O.I.M.S. (Operations Integrity Management System, key slogan: "nobody gets hurt") (p. 39):

Senior executives noticed that employees tracking for management tended to reach a point -- somewhere around four to seven years after joining the corporation -- when they either committed to Exxon or left. Those who stayed did not find O.I.M.S. ironic or extreme; they liked the culture of discipline and accountability. Restless free thinkers and habitual dissenters who accidentally got hired (often as scientists) tended to decide quickly that they would be happier elsewhere. The result was a corporation led in its upper management ranks by people who were not only supporters of the O.I.M.S. reforms, but true believers.

2. "Iron Ass": Lee Raymond, CEO; R.O.C.E. (return on capital employed) was his pet measurement tool (pp. 50-51):

Exxon's rates of return on capital rose sharply during the 1990s, declined as oil prices fell late in the decade, and then recovered by a record level of about 20 percent by the decade's end, superior to any competitor. [ . . . ]

Raymond's relentless proselytizing about R.O.C.E. was part of a larger pattern of his leadership. He chose his own metrics; he declared that other metrics were wrong; he delivered profits; and he ignored criticism.

That worked well enough when the subject was Exxon's increasingly strong quarterly profit performance, in comparison to peers. It worked less well when the subject was Exxon's ability to find enough new oil and gas to replace the hundreds of millions of barrels the corporation pumped and sold every year. As profitable as Raymond was making Exxon by the late 1990s, he struggled increasingly with a challenge that had never shadowed John D. Rockefeller: how to keep the corporation's oil reserves -- the foundation of its business -- from shrinking.

Most generally, stock prices reflect a corporation's expected level of future profits. For oil companies, that depends more on how much oil a company still has available to pump regardless of what its past profit record shows. This poses a major problem for all oil companies: oil production peaked in 1969 in the US, so reserves there (and in many similar countries) have been declining; third world countries increasingly insist on owning their own oil fields, even when they cut deals to develop those fields, so much of the world's oil cannot be counted. Raymond found that the reserves Exxon still had shifted from oil to gas, and from light oil to heavy oil, so he devised his own metrics to count unconventional sources, and campaigned for their adoption. This issue underlies much of the rest of the book. It helps, for instance, explain why Exxon merged with Mobil (which had more bookable foreign oil and, especially, gas) and their later acquisition of EXO (more gas, obtained from unconventional deposits by fracking).

Coll doesn't provide much technical detail here, especially details on how much of what is produced where. Nor does he go into the geology (as does Matthew Simmons, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy). Nor does he as much as mention the whole peak oil hypothesis.

This section moves into merger talks that BP held with several US oil companies, including Exxon and Mobil. When BP finally acquired Amoco, Raymond decided to merge Exxon with Mobil. The combination's revenues for its first year together was $228 billion.

3. "Is the Earth Really Warming?" (pp. 67-69):

On February 8, 2001, nineteen days after George W. Bush's inauguration as president, ExxonMobil chairman Lee Raymond met with Vice President Dick Cheney in Cheney's West Wing office at the White House. They knew each other "very well," as Raymond put it later. Indeed, Raymond had known Cheney for more than two decades, dating back to the period when Cheney was a congressman from Wyoming. They had hunted quail and pheasants together. They were compatible personalities -- both reticent, bred on the cold plains of the upper Midwest, and both educated at the University of Wisconsin. They were ardent in their free-market views, inclined to a certain tough bluntness, and not very much worried about what others thought about them, particularly bicoastal media elites and liberal intelligentsia. [ . . . ]

ExxonMobil had enjoyed easy access to high-ranking government officials during the Clinton administration; when the corporation's Washington representatives needed a meeting, they almost always got one. Raymond told colleagues that ExxonMobil enjoyed access to the administration that was comparable to the halcyon years of the Reagan presidency. Clinton appointees approved the Exxon and Mobil merger with a minimum of fuss. Al Gore's candidacy for the White House, however, had attracted considerable resistance from the oil industry, in part because of Gore's record of environmental activism. Oil and gas companies had donated $34 million to political candidates during the 2000 cycle -- more than three fourths of that funding had gone to Republicans.

Much of the interest in Coll's book comes from the point that ExxonMobil goes its own way, regardless of whatever politicians see as US national interests; good example of this here (p. 71):

ExxonMobil's interests were global, not national. Once, at an industry meeting in Washington, an executive present asked Raymond whether Exxon might build more refineries inside the United States, to help protect the country against potential gasoline shortages.

"Why would I want to do that?" Raymond asked, as the executive recalled it.

"Because the United States needs it . . . for security," the executive replied.

"I'm not a U.S. company and I don't make decisions based on what's good for the U.S.," Raymond said.

ExxonMobil executives managed the interests of the corporation's shareholders, employees, and worldwide affiliates that paid taxes in scores of countries. The corporation operated and licensed more gas stations overseas than it did in the United States. It was growing overseas faster than at home. Even so, it seemed stunning that a man in Raymond's position at the helm of an iconic, century-old American oil company, a man who was a political conservative friendly with many ardently patriotic office-holders, could "be so bold, so brazen."

The main concern of ExxonMobil's Washington lobbying efforts was to avoid taxes, but they also spent a lot of time and money attacking the science behind global warming (p. 81):

Three years later, the United Nations's assessment group, the I.P.C.C., reported that most of the observed warming on Earth's surface since 1950 was likely to have been caused by human and industrial activity. "The balance of evidence . . . suggests a discernible human influence on global climate," its summary report stated.

Lee Raymond publicly rejected even the qualified formulations of the 1995 [I.P.C.C.] assessment. In October 1997 (which would prove to be the fifth-warmest year on the planet, to that point, since the mid-nineteenth century), he flew to Beijing to deliver a speech to the Fifteenth World Petroleum Congress, an event hosted by the People's Republic of China. At the time, the Clinton administration was in the last round of international negotiations that would produce the Kyoto Protocol, an enhancement of the 1992 Framework Convention, with commitments that would require rich governments to reduce their emissions. Raymond's purpose in Beijing was to denounce the Clinton administration's negotiating position.

Raymond also got to Cheney (pp. 90-91):

During these sessions, which were unpublicized and closed to all but senior staff, [Aristides] Patrinos was impressed at how open-minded some of the cabinet members, such as Colin Powell and Don Evans, seemed to be. As the lectures went on, however, he also became concerned about the demeanor of Vice President Cheney.

The scientists laid out vivid, illustrated accounts of the damage global warming could bring in the future: melting glaciers, rising sea levels, droughts, and severe storms. They offered specific forecasts about the impact global warming could have on public health and on the economy. One of the lecturing government scientists described the possibility of rising sea levels in "lowland areas in Miami, south Florida," as Patrinos recalled it.

Hearing this, Cheney shifted uncomfortably, Patrinos remembered. He looked like a "raging bull. . . . He got up, paced back and forth, then, stood next to me, and I could sense that he was not a happy camper." Cheney remained silent.

The vice president soon preempted the climate task force's work. Haley Barbour, a former chairman of the Republican National Committee who had become a lobbyist for a utility firm that stood to lose if greenhouse gases were regulated, urged Cheney in a March 1 memo to persuade Bush not to align with the "eco-extremism" of those who saw carbon dioxide as a pollutant. Two weeks after Barbour's memo landed, Cheney arranged for Bush to sign a letter to Congress repudiating his campaign position about CO₂ -- without so much as informing Christine Whitman, the new Environmental Protection Agency (E.P.A.) chief, in advance.

4. "Do You Really Want Us as an Enemy?" Mobil's giant gas field in Aceh province in northern Sumatra, in Indonesia, where there was an active guerrilla separatist movement (pp. 94-95):

A large share of the Arun field belonged to Mobil. It contained about 17 trillion cubic feet of gas (the equivalent of just under 3 billion barrels of oil) and proved to be highly remunerative: In the decade leading to the Exxon merger, the Arun field accounted for about a fifth of Mobil's overseas revenue from oil and gas production. The subsidiary that extracted Aceh's gas and then liquefied it for transportation to Japan and other markets earned $295 million in profits in 1998, $311 million the next year, and $498 million the year after that. The earnings reflected lucrative contracts Mobil had negotiated during the panicked period of the Arab oil embargoes and the early Iranian Revolution, when many energy-importing nations in Asia feared they would not have access to supply at any cost and proved willing to pay relatively high prices for guaranteed long-term deliveries.

5. "Unknown Injury": litigation over the Exxon Valdez spill, including independent and company-paid scientists (p. 135):

When regulators or lawsuits challenged ExxonMobil's liability on environmental matters, the corporation turned fiercely combative -- Irving's internal protocols provided for rapid intervention by ExxonMobil's law department, which spent large sums on the most talented and aggressive outside litigation firms. "They took a very hard line on the legal issues," explained a member of the corporation's board of directors. "It's very much a take-no-prisoners culture." From Washington to Houston to capitals worldwide, ExxonMobil executives internalized the corporation's attitude toward lawsuits of all kinds: "We will not settle just to avoid a struggle; if we believe we are in the right, we will use our superior resources to fight and appeal for as long as possible, and when the case is over, your house may no longer be standing. Think twice before you take us on." ExxonMobil's spokespeople and lobbyists regularly expressed dismay that the scientific findings they presented about the Valdez cleanup, climate, chemical regulation, and other public policy issues were not accepted by journalists, judges, and politicians as fully credible.

6. "E.G. Month!" Equatorial Guinea, a former Spanish post in the transatlantic slave trade, independent since 1968, controlled by dictator Teodoro Obiang Ngeuma since 1969; oil was discovered there in 1991, and Mobil had been the main operator there since 1995 (pp. 142-143):

"The private American (especially oil) companies would not wish to be pulled into U.S.G. [United States government] efforts to combat human rights violations in Cameroon and Equatorial Guinea," reported a U.S. embassy cable written just after Equatorial Guinea's oil began to flow in earnest. "U.S. companies are aware of human rights violations . . . [but they] present themselves as 'ahead of the curve.'" That seemed mainly a euphemism for corporate strategies of hunkering down, avoiding publicity about human rights and other controversial aspects of Obiang's reign, and staying as far away as possible from recurring State Department campaigns to reform Equatorial Guinea.

Then Al-Qaeda came to the rescue: after 9/11 (pp. 149-152):

Obiang readily invited American diplomats to talk with him about security issues. His regime lived in perpetual insecurity, plagued by internal coup plots and menaced by much larger neighbors, particularly Nigeria, that might covet the country's oil wealth. Rising fears within the Bush administration that seaborne Al Qaeda-inspired terrorists might attack American offshore oil platforms would draw Malabo and Washington toward a security partnership, some of Obiang's advisers believed. Equatorial Guinea's production, moreover, was expanding by the month. The country pumped out just fewer than 300,000 barrels per day in 2002 and expected more than 350,000 barrels per day in 2003. This would mean, a State Department cable noted, that Equatorial Guinea "will become the third largest oil producer in sub-Saharan Africa, after Nigeria and Angola." [ . . . ]

Obiang remained hopeful about the strategic partnership he could eventually build in Washington through oil and security. The president bought big houses in Washington for family members throughout the suburban Washington region and he traveled regularly to the capital and to New York. At the Riggs [bank] branch across from the White House, Obiang's aides arrived with heavy, bulging suitcases filled with plastic-wrapped hundred-dollar bills -- up to $3 million at a time -- and handed them over as cash deposits, which Riggs's account managers gratefully accepted.

7. "The Camel and the Jackal": Chad and dictator Idris Déby; ExxonMobil negotiated an unorthodox agreement to run their royalty payments through the World Bank, ostensibly to ensure that they would be spent wisely to develop the country; eventually, Déby decided that he's rather buy guns; after 9/11, the CIA brought in guns, too (p. 174):

The National Intelligence Council had forecasted as the bush administration arrived in office that West African oil would make up 25 percent of American imports by 2015. In the first years after September 11, there was a gathering sense within the intelligence and defense bureaucracies that instability in the Middle East required paying greater attention to oil-producing regions elsewhere. At a 2002 symposium entitled "African Oil: A Priority for U.S. National Security and African Development," Walter Kansteiner, the Bush administration's assistant secretary of state for African affairs, told the audience, "As we all start looking at the facts and figures of how many barrels a day are coming in from Africa, it's undeniable that this has become a national strategic interest for us." [ . . . ]

Soon after McChrystal took charge of the Joint Special Operations Command, elements of an Algerian-based Al Qaeda affiliate, the Salafist Group for Preaching and Combat, crossed Chad's northern border and entered the country. The C.I.A. and the Pentagon turned by Déby for military assistance. The Pentagon's European Command used reconnaissance aircraft to pinpoint the Islamist cell's location. The C.I.A. station chief asked Déby to send in his own ground forces to attack. The overall message was, as one individual involved put it, "If you can help us on this, we'll help you in a lot of ways."

8. "We Target Oil Companies": Frank Sprow, ExxonMobil VP in charge of safety and environmental issues, "in his private life, a thrill seeker"; Greenpeace, which criticized ExxonMobil in 2001 in a pamphlet "A Decade of Dirty Tricks: ExxonMobil's Attempts to Stop the World [from] Tackling Climate Change" (p. 184):

ExxonMobil had, in fact, self-consciously invested in the dissemination of doubt about climate change. Under Lee Raymond, ExxonMobil had persistently funded a public policy campaign in Washington and elsewhere that was transparently designed to raise public skepticism about the science that identified fossil fuels as a cause of global warming. ExxonMobil ran some aspects of its campaign clandestinely; that is , it did not initially disclose the full scope and purpose of contributions it made. ExxonMobil's opponents were guilty of lumping together the corporation's support for small, havoc-making groups focused heavily on climate issues with ExxonMobil's support for legitimate, well-established conservative and free-market research institutes such as the Cato Institute for Public Policy Research, the American Enterprise Institute, and the Heritage Foundation.

Those are legitimate research groups? Continuing (pp. 184-185):

What distinguished the corporation's activity during the late 1990s and the first Bush term was the way it crossed into disinformation. Even within ExxonMobil's K Street office, a haven of lifelong employees devoted to the corporation's viewpoints and principles, an uneasy recognition gathered among some of the corporation's lobbyists that some of the climate policy hackers in the ExxonMobil network were out of control and might do shareholders real damage, in ways comparable to the fate of tobacco companies. [ . . . ] If ExxonMobil were ever judged in a courtroom to be cooking science to appease Raymond's personal beliefs about warming issues, it could be devastating. The corporation was not alone in its support of fringe activists on climate, but it persisted longer than many other business groups and individual Fortune 500 corporations. The available record suggests that ExxonMobil was more aggressive than all but a handful of peer companies during this period, despite the fact that the corporation, because it produced no coal, did not belong to the energy industry's most vulnerable sector if restrictions on carbon fuels were enacted.

Greenpeace managed to pull off a "raiding party" event at ExxonMobil's headquarters in 2003 to publicize ExxonMobil's many sins. ExxonMobil fought back (pp. 187):

The corporation's executives did not have to passively accept Greenpeace's assault, however. After the Irving raid, ExxonMobil approached its Greenpeace problem as an aggressive litigator would. The corporation encouraged the Dallas County district attorney to prosecute fully the Greenpeace protesters who had participated in the Irving action. ExxonMobil also sued Greenpeace and thirty-six individuals who had been arrested on its campus. By threatening fines and jail terms, the corporation eventually won a seven-year standstill accord in which Greenpeace agreed not to commit any crimes while campaigning against the corporation. As a result of this settlement, the group's anti-Exxon campaign migrated from newsmaking direct action and civil disobedience into online publishing.

Investigators from the Internal Revenue Service turned up at the Chinatown office in Washington to conduct an audit. A small nonprofit group called Public Interest Watch had raised questions with the I.R.S. about whether Greenpeace was compliant with federal laws governing groups that received tax-deductible contributions. Greenpeace passed the audit and opened its own investigation of Public Interest Watch.

The group's tax form, filed about two months after the activists in tiger costumes had scaled the Irving headquarters' roof, showed that a single donor was responsible for $120,000 of Public Interest Watch's $124,000 in annual revenue: ExxonMobil Corporation.

(pp. 188-189):

As Raymond battled Greenpeace, the international oil company he most admired after his own, Royal Dutch Shell, stunned stock market investors by revealing that it had overstated its true proven reserves of oil and gas; the company eventually calculated that it had puffed up its holdings by 4.35 billion barrels of oil, an amount equivalent to more than a fifth of ExxonMobil's total proved reserves worldwide. Three top Shell executives resigned. The scandal made plain that the pressure on the very largest international oil companies to replace reserves in the era of resource nationalism had become so severe that it could induce grotesque distortions.

Shell's revelation galvanized regulators at the Securities and Exchange Commission in Washington to look at reserve counting and reporting practices by major American oil corporations. That review in turn brought fresh attention to a practice ExxonMobil had gotten away with for many years: The corporation still claimed each winter in press releases and in Wall Street presentations that it had an unbroken record, dating back to 1993, of replacing, through the discovery and purchase of new reserve additions, at least 100 percent of the oil and natural gas it pumped or otherwise disposed of each year. But the assumptions ExxonMobil used in making these public claims did not conform to S.E.C. regulations -- and the commission and its staff had done nothing, under either the Clinton or Bush administration, to force ExxonMobil to modify its public statements.

There were several discrepancies between S.E.C. rules and ExxonMobil's accounting practices, the most important being that the S.E.C. didn't count bitumen deposits in oil sands, which had to be mined and processed at great expense rather than simply pumped like most oil.

9. "Real Men -- They Discover Oil": the North field in Qatar, obtained as part of the Mobil merger, was eventually found to contain "800 trillion square feet" (presumably, cubic feet) of gas; the problem with gas was transporting it where pipelines wouldn't work -- this pushed ExxonMobil even more into building LNG (liquid natural gas) facilities, such as they had in Indonesia.

With its toehold in Qatar, ExxonMobil coveted access to Saudi Arabia (their previous participation in Aramco isn't covered in this book; the Saudis bought out their US partners, including Exxon's 30% stake and Mobil's 10%, in several steps 1973-80); the Saudis dangled several opportunities in 2003, but none of them amounted to much.

10. "It's Not Quite as Bad as It Sounds": Ken Cohen, VP of public affairs, PR strategies and issues; section here on why ExxonMobil isn't as bad as BP, but how in the PR sphere BP had "accomplished something improbable -- the cost-effective greening of an oil company."

11. "The Haifa Pipeline": the Bush administration invades Iraq, not for its oil, of course (why would you ever think that?), just for, well, what the heck? (pp. 232-234):

Some free-market conservatives within and around the Bush administration saw no reason why a post-Saddam Iraqi government should feel embarrassed about trading some oil reserves for access to foreign capital and technology. In their view, all countries were better off if they privatized their economies to the greatest possible extent. "Privatization works everywhere," a paper published by the Heritage Foundation in 2002 declared. Its authors urged the Bush administration to work with Iraqi opposition leaders at once to "prepare to privatize government assets" after Saddam's overthrow.

In Baghdad, immediately after the invasion, Thomas Foley, a business school classmate of George W. Bush's, organized a cell of privatization enthusiasts inside Paul Bremer's C.P.A.; Foley and his colleagues pushed plans for a "broad-based, mass privatization program" even before a transitional Iraqi government could be established. Iraqi technocrats who served as caretakers at the oil ministry in that chaotic spring and early summer of 2003 following Saddam's fall were stunned by the radicalism of some of the ideas the arriving Americans proposed. Pentagon planners suggested that Iraq should consider withdrawing from O.P.E.C. "This was part of the neoconservative view: Why have Iraq in O.P.E.C.?" recalled one American official involved. "'Let's break the cartel!'" The idea seemed preposterous to experienced Middle East hands, as such a proposal would only confirm ordinary Iraqis' worst fears about American intentions. State Department opponents of the proposal sought to dismiss it "out of hand," an official involved recalled. And yet, he idea "kept resurfacing."

Pentagon officials also suggested that Iraq's oil ministry look into shipping crude down "the Haifa pipeline," as they referred to it. The pipeline had been constructed in 1934 to serve territory that eventually became part of the state of Israel. It ran from Iraq's oil-producing region around Kirkuk through Jordan to modern Israel's coastal city of Haifa. It ceased operations after Israel's birth in 1948, but it was marked on old maps.

After the invasion, Michael Makovsky, a member of the Pentagon's Iraq oil planning team under [Douglas] Feith, chaired weekly telephone conferences with American oil advisers in Baghdad. Late in the spring of 2003, Makovsky asked that inquiries be made at Iraq's oil ministry about the old pipeline's status. Was it operational? Could it be repaired or placed into service?

The assignment fell to Gary Vogler, a West Point graduate and former Mobil Oil executive who had entered Baghdad with the first wave of American civilians as part of the oil advisory team led by Phil Carroll. [ . . . ] Vogler asked about the pipeline to Haifa. [Iraq's interim oil minister, Thamir] Ghadhban looked at him icily. "There are a lot of people in my organization, in my ministry, and throughout the country, who feel like the only reason why you guys came into this country is to get oil out to Israel," he said. "If I go out with a question like that, I'm only going to solidify their viewpoint."

Some discussion here of the conflicting views of US security honchos over the strategic question of oil security. Some, like Feith (echoing ExxonMobil's Raymond's view) assumed that the market would respond to any disruptions. Others pointed to China, in particular, as a nation with an active foreign policy intent on securing oil flow. (More often than not, the US took a similar position, but without the control and/or cooperation of the oil companies.)

ExxonMobil was in no big hurry to get into Iraq, but they would up as involved as anyone, mostly because they were strapped for bookable reserves (p. 247):

Iraq offered a potential breakthrough in ExxonMobil's access to equity reserves, but Raymond counseled patience. ExxonMobil had owned oil in Iran and Iraq for decades during the twentieth century. It did not own oil in those countries in 2003, but twenty years into the future, as [Rex] Tillerson put it, "we'll have another set of circumstances in some of those countries." One attribute of a nation-state ExxonMobil lacked was an army or a navy of its own. China could "free ride" on the United States Navy's control of the open seas; Lee Raymond had no choice but to free ride on the Bush administration's efforts to subdue Iraq.

Rex Tillerson replaced Lee Raymond as chairman and CEO in 2006. An "upstream" engineer and manager, he became Executive VP following the merger, and president and director in 2004.

12. "How High Can We Fly?": George W. Bush looks Vladimir Putin in the eye, and sees oil (p. 252):

The hypothesis [secretary of commerce Don] Evans and others in the Bush administration pursued after the Crawford dinner was that a strategic campaign to deepen commercial ties between oil companies in the United States and Russia might transform Russia's internal politics, remake U.S.-Russian relations, and even alter the global geopolitics of oil. President George H.W. Bush had seen oil-for-friendship as a critical element of his campaign to build a partnership with Mikhail Gorbachev as the Soviet Union cracked up; Bush persuaded Gorbachev to endorse Chevron's pioneering, lucrative entrance into the Tengiz oil project in the then Soviet Republic of Kazakhstan. George W. Bush intended something similar with Putin, whose intentions as a political leader and as a sponsor of market-led modernization were at best enigmatic.

(pp. 255-256):

ExxonMobil owned one significant oil interest in Russia at the time the Bush administration made its push to deepen cooperation. In the chaotic last months of the Soviet Union, investment bankers retained by elements of the dying regime presided over by Mikhail Gorbachev shopped around all sorts of natural resource deals; Lee Raymond had authorized bids on an exotic project in Russia's far eastern territory, near Sakhalin Island, just above Japan. The project dated to the 1970s, when Japanese corporations had lent money to the Soviet Union in exchange for exploration rights. But the deal went nowhere until the Soviet Union began to crack up and finally split apart. [ . . . ]

It was not until 1996 that ExxonMobil closed on terms for what became known as the Sakhalin-1 project. It was an undertaking that would test the corporation's engineering prowess like no other. Hurricane winds swept the Sakhalin region each autumn, and ice packs up to six feet thick built up during the winter. After the spring, melting ice floes threatened to knock down any offshore oil rig in their way. Exxon decided on a plan to drill a seven-mile horizontal well from mainland Russia underneath the ocean waters. It was the only well of its kind in the world. Sakhalin-1 suggested some of the appeal of Western oil technology and engineering skill to Russia. But to make the deal on terms acceptable to Exxon, Russia's government had had to set aside its nationalism and share oil ownership.

In 2002 ExxonMobil opened negotiations with Mikhail Khodorkovsky to buy a stake in Yukos, one of the largest oil companies privatized by Boris Yeltsin (p. 260):

[Khodorkovsky] had grown up in Moscow, served as a Communist youth leader, and had graduated from a technical institute in the mid-1980s, just as Mikhail Gorbachev consolidated power and introduced reforms. HE and his college friends worked with computers, symbols of modernization, and they joined one of the experimental cooperatives permitted under Gorbachev's new economic policy. When Gorbachev allowed private banking for the first time in 1987, Khodorkovsky and his partners -- then in their midtwenties -- formed a bank called Menatep. They accumulated rubles as communism collapsed. Radical reformers around Boris Yeltsin issued 150 million vouchers with which Russians could supposedly buy shares in former Soviet assets. By 1995, Yeltsin's administration was running out of money, in part because bankers like Khodorkovsky were not paying their taxes. Menatep helped to mastermind a "loans for shares" scheme with Yeltsin. In exchange for keeping the Russian government solvent and assuring Yeltsin's reelection, Khodorkovsky and his partners paid rock-bottom prices for state oil and gas properties. They spent about $300 million for a recently assembled energy corporation called Yukos, whose underlying oil and gas reserves were worth about $5 billion. Khodorkovsky was not only opportunistic, he was ruthless; a few years later, during the Russian currency and banking crisis of 1998, he shifted assets around to protect his fortune, while leaving depositors and investors, including some of the world's most respected investment banks, with large losses.

Khodorkovsky advanced in Russian politics as well as business, eventually running afoul of Putin, who had him arrested for tax evasion; ExxonMobil, characteristically, only wanted a deal where they could eventually see owning Yukos, something else Putin didn't want (pp. 276-277):

On January 29, 2004, a Russian commission denied licenses to ExxonMobil and Chevron for drilling in offshore blocks around Sakhalin, blocks that they had leased in 1993. Secretary of State Colin Powell met with his Russian counterpart, Sergey Lavrov, and handed over a letter of protest on behalf of the U.S. oil companies. The Bush administration was still fighting for the companies' prospects in Russia, but its campaign looked increasingly like a rearguard action, fought in retreat.

13. "Assisted Regime Change": a failed coup attempt in Equatorial Guinea, led by mercenary Simon Mann

14. "Informed Influentials": lobbying strategy (p. 305):

In Washington and elsewhere that spring [2005], ExxonMobil advanced a carefully designed, research-tested campaign to persuade political and media elites that while the oil industry should not necessarily be loved, it should be understood as inevitable. The "Conceptual Target" for this education and communications campaign, according to a 2005 ExxonMobil public affairs document, would be "Informed Influentials." [ . . . ]

The characteristics of the elites ExxonMobil sought to educate were derived in part from statistical modeling that Ken Cohen's public affairs department had commissioned in the United States and Europe, to understand in greater depth the corporation's reputation among opinion leaders. That model had allowed Cohen and his colleagues to forecast how elites would react to particular statements that ExxonMobil might make or actions it might take. The research found, among other things, that it would be beneficial for the corporation to brief elites about the findings of its in-house analysts' long-term forecasts about the global energy economy.

A lot of material follows on ExxonMobil's 2005-2030 estimates (pp. 310-311):

The ExxonMobil forecast numbers suggested that to make an impact on oil demand, the world's governments would have to reach a unified conclusion that climate change presented an emergency on the scale of the Second World War -- a threat so profound and disruptive as to require massive national investments and taxes designed to change the global energy mix. European governments had come closest to attempting such a policy, and ExxonMobil's forecasters had figured Europe's carbon pricing policies and alternative energy subsidies into the 2030 numbers. To reshape the global oil industry, however, the governments of China, India, the United States, and many other countries would have to adopt similar or even more aggressive carbon taxing policies. ExxonMobil's planners concluded that this was highly unlikely, if not all but impossible; they predicted, therefore, that CO₂ emissions would rise by an additional 30 percent worldwide between 2005 and 2030.

The corporation's forecasters assumed, essentially, that the world's governments would lack the political will to tax fossil fuels heavily enough to force any big shift away from oil.

Lee Raymond turned 67 in August 2005, having been an employee of Exxon for 42 years. He was dragging his feet on retiring, so the board started nudging. He had groomed two possible successors, Ed Galante and Rex Tillerson, his heads of downstream and upstream operations, respectively. Ultimately, he nodded toward Tillerson, who took over in January 2006. (pp. 318-320):

In the last year of Lee Raymond's leadership, ExxonMobil earned a net profit of $36.1 billion, more money than any corporation had ever made in history. That broke the previous record of $25.3 billion, set by ExxonMobil the year before. Even if the profits made during the late 1950s and 1960s by such postwar corporate giants as General Motors, Ford, International Business Machines, and General Electric were adjusted for inflation, none could match the size of ExxonMobil's 2005 profit. During the span of Raymond's tenure, from 1993 to 2005, ExxonMobil's market capitalization -- the total value of the corporation's shares in the stock market -- rose from $80 billion to $360 billion. The company also paid out $68 billion in dividends during that time. It was difficult for an oil corporation of ExxonMobil's size and experience to fail, particularly after oil prices began to rise in 2004. Yet ExxonMobil's performance reflected in substantial part Raymond's relentless focus on cost and efficiency. Raymond's record on behalf of the corporation's shareholders was by now less well known than his record as a self-appointed climate scientist. As part of his transition to retirement, Raymond was in the running to become the chairman of the John F. Kennedy Center for the Performing Arts in Washington, D.C., a prestigious and visible position, but environmentalists in the Kennedy family blocked him. [ . . . ]

Just a few weeks after ExxonMobil announced Lee Raymond's prospective retirement, Hurricane Katrina gathered force over the Bahamas, crossed into the Gulf of Mexico, and came ashore near New Orleans; the storm claimed more than eighteen hundred lives and caused about $80 billion in property damage. A month later, Hurricane Rita smashed into Teas and caused about $11 billion in damage. America's five largest oil refineries lay in the paths of the two storms. Chaos and shutdowns in the gasoline supply chain caused retail gas prices in the United States, which had been rising steadily during the previous year, to spike suddenly toward three dollars per gallon. In general, gasoline prices rose and fell in tandem with global prices for crude oil, but occasionally, as in this case, bad weather or strikes or other local disruptions could cause a spike upward. Within a few weeks, senators and congressmen responded to outraged phone calls and e-mails from angry, financially strapped constituents by introducing legislation to prevent ExxonMobil and other large oil corporations from reaping windfall profits from popular misery. It did not help ExxonMobil's public relations position that it announced on October 25 record third-quarter profits of just under $10 billion.

(pp. 322-323):

Lee Raymond leveraged his friendship with Vice President Cheney one last time. ExxonMobil's upstream division was negotiating with the Abu Dhabi National Oil Company over a stake in a 50-billion-barrel complex oil field called Upper Zakum. The government of the United Arab Emirates was willing to sell a 28 percent interest in the field in exchange for technology and engineering work that would enhance production and profitability. [ . . . ] The Upper Zakum sale would provide the corporation that bought in with a substantial boost to its booked oil reserves. [ . . . ] Ultimately, ExxonMobil's representatives were told, Vice President Cheney had picked up the phone and called contacts in the U.A.E. government himself. ExxonMobil won the exclusive right to negotiate for the project, pushing Shell aside. [ . . . ] The corporation's "capabilities to increase oil recovery and efficiently build production capacity were key considerations" in its success in winning the deal, ExxonMobil reported publicly. The corporation's executives often claimed that they did not require favors from the U.S. government, did not take direction from the White House, and preferred global independence. The reality was more complex. The corporation had a direct line to Cheney and negotiated with State and Abu Dhabi as its interests dictated.

(pp. 326-327):

After he formally retired, as part of a $1 million per year transition consultancy, Raymond embarked with his wife, Charlene, on an ExxonMobil Challenger jet from Dallas Love Field to Paris. For almost a month, the Raymonds circled the world on a farewell tour, touching down in Norway, London, and Singapore before they cleared customs and reentered the United States in Hawaii. They stayed a few days on the Big Island. Raymond's journey from Watertown, South Dakota, was over, and his family was now wealthy beyond imagination. Following formulas for executive retirements the corporation had previously established, and taking into account the compensation he had deferred over the course of his forty-year career, ExxonMobil's board of directors awarded Lee Raymond pension benefits as a lump sum of $98 million, restricted shares worth $183 million, stock options with a potential value of $70 million, the $1 million consultancy, and reimbursement of his country club fees. Altogether, his retirement package was worth just under $400 million.

Part Two: The Risk Cycle

15. "On My Honor": Rex Tillerson's background, including his work with Boy Scouts of America, and his favorite novel (Atlas Shrugged); Tillerson moves to soften Raymond's position on global warming (or make it more nuanced).

16. "Chad Can Live Without Oil": back to Chad, where the oil business was good, but Idris Déby's regime was increasingly challenged both within and by neighboring nations like Sudan (as the Darfur crisis boiled over), so Déby wanted to be able to use oil royalties to buy guns, screw the World Bank (pp. 362-363):

By now ExxonMobil had made its own choice clear: It was more interested in the survival of Chad's oil production than it was in the World Bank's experiment in nation building. If Déby found a way to pay back his bank loans, and also stuck to the letter of his oil production contract, ExxonMobil would stay with him, according to State Department cables and ExxonMobil managers involved. The corporation wanted to keep its options open: "Esso is seeking to stress its neutral position vis à vis the dispute between the [World Bank] and the [government of Chad], as it is not a signatory to the agreement," Wall reported to Washington. ExxonMobil described its general approach to troubled African countries where it produced oil by emphasizing that the corporation was merely "a guest . . . and as a guest we've got to show respect. . . . It's not up to us to go into a sovereign country and tell them how they ought to be governing their people." [ . . . ]

Robert Zoellick, the Bush administration's deputy secretary of state, telephones Wolfowitz and talked with him about the violence in Darfur and the gathering rebel attacks on Chad, sponsored by Sudan's notorious intelligence service. Wolfowitz said he felt he could still work out a compromise with Déby.

He was wrong; Déby refused to accept the bank's new proposals, which were designed to maintain social spending but allow some more defense spending.

17. "I Pray for Exxon": Exxon had a gas station in suburban Baltimore County, Maryland, which in 2006 was found to have "lost" 24,000 gallons of gasoline; the gas, including carcinogenic MTBE, had leaked from the station's underground tanks and polluted much of the neighborhood; lawsuits ensued (p. 393):

[Exxon lawyer] James Sanders had told the jurors repeatedly during the trial that ExxonMobil would pay whatever they thought was fair by way of actual damages. Nonetheless, once the verdict was in, ExxonMobil rejected the jury's decision and declared it would appeal. This was ultimately Rex Tillerson's decision; he followed the legal stategies and policies bequeathed to him by Lee Raymond, and before Raymond, by corporate lawyers dating back to Standard Oil's defiance of antitrust reformers. "Compensatory damages should not be so high as to essentially be punitive instead of truly compensating for actual harm caused by the spill," the corporation said in a statement. Judge Baldwin upheld the verdict on initial review, but ExxonMobil said it would appeal again. It would be years before the families around Jacksonville Exxon would see a dollar from the corporation, if ever. "Don't mess with Texas" remained the ExxonMobil law department's ethos, and the corporation's strategists believed that if they made exceptions for one set of accident or tort victims, they would only be challenged and exploited by others -- whether in Baltimore County, or Aceh, Indonesia.

18. "We Will Need Witnesses": back to Aceh, Indonesia: ExxonMobil was sued "in Washington, D.C., on June 19, 2001, by Terry Collingsworth, on behalf of eleven anonymous alleged victims of the T.N.I.'s violence around the gas fields"; ExxonMobil lawyers delayed, and the case was still undecided

19. "The Cash Waterfall": Venezuela, a country that remembers Standard Oil none too fondly, but has a lot of untapped heavy, sour oil that ExxonMobil's technical expertise might help crack; the fly in the ointment is president Hugo Chavez, whom Coll makes a point of disliking as much as the ExxonMobil execs do (p. 410):

ExxonMobil had multiple interests in Venezuela: downstream filling stations, some oil production ventures, and supply agreements that directed Venezuelan oil to a large refinery in Chalmette, Louisiana, which ExxonMobil owned jointly with Venezuela's state-owned oil company. The web of contracts, financing agreements, and supply linkages meant that confrontation with Venezuela's leader could prove unusually messy and costly. The dependency was mutual: Venezuela's oil was unusually sour, not suitable for most refineries worldwide, whereas the Chalmette facility was tailor-made to handle it profitably. Moreover, as the U.S. embassy noted succinctly, "Chavez's priority is regime survival." He needed oil royalties, profits, and taxes -- the principal source of revenue for the Venezuelan treasury -- to pay for expanded social spending born of his self-styled Bolivarian revolution. After the failed 2002 coup attempt, Chavez signaled in speeches and rambling television interviews that he intended to take greater control of Venezuela's oil industry, to challenge what he described as the dominance of foreign profiteers. Yet some of ExxonMobil's executives calculated that the president could not afford to spook international oil corporations precipitously or to trigger even more capital flight from Venezuela than was already taking place in response to the president's policies.

Coll tends to treat Chavez as a petty dictator along the lines of Obiang and Déby; he also glosses over various attempts by ExxonMobil executives to interfere in Venezuelan politics -- most notably in the 2002 coup attempt -- while crediting ExxonMobil with helping to get Chavez reelected in 2006. His characterization of Venezuelan crude as "unusually sour" focuses on the largely untapped Orinoco oil belt, ignoring the vast oil fields near Lake Maracaibo that have been in production since 1922 (pp. 413-418):

Some of the deals involved the country's rich, underdeveloped vein of extra-heavy oil, in the Orinoco River Basin, which lay in Venezuela's wet coastlands to the east, near Guyana. The Orinoco River snaked thirteen hundred miles to the Caribbean through tropical palms and slash-and-burn agricultural fields. The United States Geological Survey estimated that the basin held between 380 billion and 650 billion barrels of recoverable oil, perhaps double Saudi Arabia's endowment. This vast reserve lay beneath the river basin's muddy soil, but the petroleum was unusually viscous and contaminated. American, Canadian, and European oil companies had begun to experiment by the late 1990s with new technologies that could efficiently "upgrade" heavy oil near wellheads and refine it to a lighter blend, suitable for international markets. Mobil was a leader in the field. Its executives opened talks with Venezuela's oil ministry about an Orinoco heavy-oil project in 1991 and finalized a contract six years later. The deal was known as the Cerro Negro Association Agreement. (There were four such associations created to mine Orinoco's reserves. Total of France, Statoil of Norway, ConocoPhillips, Chevron, and BP all participated, either as operators or as minority holders.)

Mobil's civil engineers cleared a muddy expanse in a valley surrounded by thickly forested mountains and erected an "upgrader," a modest word to describe a facility that, when completed, would resemble in visual dimension the vast refineries of northern New Jersey. Its pipes, flaring smokestacks, and white oil storage tanks soon formed a gleaming, belching industrial park in the midst of Venezuela's rural poverty. Construction proceeded during the Exxon merger. After first oil flowed, senior executives from Irving, including Rex Tillerson, proudly flew in by jet and helicopter to inspect the achievement. "Exxon was extremely proud," recalled a U.S. government official who toured the facility. "This was the new frontier -- the first time anything on this scale had been tried . . . It worked. It was totally new. It had been a big risk." [ . . . ]

Chavez railed to his followers about the low royalty rates paid to Venezuela by ExxonMobil, Chevron, BP, Total, Statoil, and other international majors during the 1990s, when he had been in opposition. ExxonMobil's complex at Cerro Negro enjoyed a royalty rate of just 1 percent during the project's early years of production. [ . . . ] After nine years the royalty rate would rise to 16.67 percent, but that event still lay years away.

Chavez started to pressure the international oil companies over their royalty deal soon after he won his referendum, the victory ExxonMobil had aided. He threatened to unilaterally bring forward the 16.67 percent rate. [ . . . ] The U.S embassy cabled Washington that ExxonMobil, "presumably looking at potential risks around the world," had declared privately and repeatedly that it "takes sanctity of contract very seriously." Yet the corporation had invested $1.5 billion in its Orinoco operations and planned to spend at least $700 million more over the contract's thirty-five-year life. Would it really pull out of Venezuela a second time, and so early in the project's tenure, before profits had flowed amply? [ . . . ]

By the time of the Hugo Chavez imbroglio, the thinking of ExxonMobil's senior executives about the sanctity of contracts had evolved beyond business strategy into a philosophy of global governance. The spread of international law regimes and trade treaties had given birth to global business arbitration forums at the World Bank and international chambers of commerce. In its contracts with national oil companies or foreign governments, the corporation inserted elaborate clauses guaranteeing ExxonMobil's rights to international arbitration before these bodies if the host country tried to alter contract terms, royalty rates, or taxation. [ . . . ]

When Vladimir Putin during 2006 demanded to renegotiate one of ExxonMobil's remaining contracts in Russia, President George W. Bush telephoned Rex Tillerson to discuss the affront, according to reports of the call that circulated among the corporation's managers. The Bush administration was by now thoroughly disabused of its romanticism about oil capitalism under Putin; its optimism had ended when Putin arrested Mikhail Khodorkovsky, the president of Yukos, with whom Lee Raymond had negotiated unsuccessfully during 2003. [ . . . ] Tillerson thanked the president, but afterward, through its Washington office, the company begged the Bush administration to stay away.

A brief discussion of prices increases and the peak oil issue (p. 419-421):

The impact of Venezuela's turmoil, in particular, was not confined to its own borders. Instability in Caracas -- as well as in Nigeria, Iraq, and Iran -- contributed to steadily rising global oil prices after 2003. Benchmark per-barrel oil prices crossed $40 in 2004; $50 in 2005 and $60 in 2006. The average weekly price of a gallon of unleaded gasoline in the United States topped three dollars for the first time in American history in September 2005; the price fell back some the following winter, but then climbed back to $3 in the summer of 2006. Adjusted for inflation, American gasoline prices reached historic highs after three decades of flat or declining trends.

Soaring demand for oil from China, India, and other fast-growing emerging economies stoked the price rise. Between 2003 and 2007, China's oil consumption and net imports grew by about 50 percent. China's prospective thirst for oil as a transportation fuel, to power the cars of its burgeoning middle classes, created a psychology of scarcity.

Along with soaring demand came less provable claims that the world might be physically running out of oil. Matthew Simmons, a Houston-based oil industry consultant who specialized in financial matters and who was not a professional geologist, published an influential book in the summer of 2005 that argued, on the basis of his review of U.S. geological data about Saudi oil fields, that the kingdom had reached the peak of its capacity to pump oil and would soon enter a long decline. [ . . . ]

Saudi Arabia insisted that Simmons's forecasts were wildly off base, but its penchant for secrecy continued to stoke such reports. [ . . . ] There could be little doubt in any event that Saudi Arabia's ability to increase or lower global oil prices by adjusting the amount it pumped from day to day would be diminished in the future. The world's surplus oil production capacity -- that is, the amount of oil that could feasibly be pumped each day but was held back for market, economic, or political reasons -- peaked in 1985. After that, global oil supply and demand moved closer to equilibrium.

Rex Tillerson and ExxonMobil's Management Committee scoffed at the idea that the world was running out of oil. The corporation prepared PowerPoint slides to document that governments and industry analysts had badly underestimated the amount of oil in the earth throughout the twentieth century. Time and again, forecasters failed to anticipate how technological innovation would free up or "discover" oil previously thought to be unrecoverable, ExxonMobil executives argued in their slide shows. [ . . . ]

Rising prices did more to hurt the United States than just pinch its drivers' budgets. Higher prices made oil-exporting governments richer at the expense of importers such as America. BP's economists estimated that oil-exporting countries enjoyed a $3 trillion windfall between 2004 and 2007.

The Simmons book is Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy (paperback, 2005, Wiley). It includes a remarkable survey treating each and every oil field in Saudi Arabia, and ends with a worldwide survey of major oil fields, showing that production has peaked in many of the world's giant fields. Simmons' projections for Saudi Arabia are less conclusive due to the secrecy maintained by Saudi Aramco, and also the unique size and complexity of the Ghawar field (about 50% of Saudi Arabia's production). However, since Simmons' book appeared, Saudi production has not increased, despite promises to do so.

It certainly is true that over the last century new technologies have increased how much oil can be recovered, but recovery is always limited to the amount of energy it takes. For example, many people have speculated that as the price of oil rises Colorado's immense oil shales will become cost-effective, but no one has ever figured out how to extract them using less energy than they produce. For a long time the oil sands in Canada and Venezuela were also unusable. While that is changing somewhat, those resources will always be exceptionally expensive to produce, and the environmental costs (even excluding global warming) are immense (and currently poorly accounted for). The faith that there is always a technological solution for running out of a resource -- especially one as hard to replenish as oil -- tends to be blind: even when it happens there is scant reason to believe it will again.

ExxonMobil decided to withdraw from Venezuela, and turn the case over to their lawyers (pp. 424-426):

For the second time in just over three decades, the largest private oil corporation in the world would withdraw from Venezuela, a country that might hold the world's largest reserves, or was at least second to Saudi Arabia, where ExxonMobil also had not a single barrel of bookable reserves.

BP, Chevron, Total, ENI of Italy, Sinopec of China, and Statoil all negotiated compromises during the weeks that followed; they accepted new terms as minority owners, subordinate to the Chavez regime. Only ConocoPhillips joined ExxonMobil in refusal and departed. [ . . . ]

The Cerro Negro project had twenty-eight years to go under the terms of the 1997 contract. The contract had a clause that laid out the formula under which ExxonMobil's damages should be figured. This was called the Threshold Cash Flow Formula. It allowed ExxonMobil to estimate how much money it would have made in Venezuela after operating expenses, and taxes if it had not been forced to relinquish ownership. Plunkett arrived at a round number: somewhat more than $11.9 billion.

20. "Moonshine" (pp. 435-439):

On January 31, 2006, President George W. Bush delivered a State of the Union address in which he declared that the United States was, unfortunately, "addicted" to oil. A generation after President Jimmy Carter had declared America's oil dependency to be the "moral equivalent of war," and as casualties in Bush's Iraq War accumulated, the president laid out a timetable for greater American energy independence, driven above all by his exhaustion with radical suppliers such as Venezuela and Iran: [ . . . ]

Like many Americans, Bush seemed to receive the September 11 attacks as a message that reliance on unstable oil-producing Muslim regimes such as those in Saudi Arabia, Iran, and Iraq was in some generalized or intuitive sense debilitating and unsustainable for the United States. America consumed roughly 20 million barrels of oil each day, of which up to 12 million were imported. [ . . . ]

ExxonMobil's executives regarded the president's romanticism about energy "independence" and alternative technologies as misguided. Describing the United States as addicted to oil was "an unfortunate choice of words, quite frankly," Tillerson said. "To say that you're addicted to oil and natural gas seems to be to say you're addicted to economic growth." [ . . . ]

After the speech was delivered, Saudi officials and diplomats from other oil producers aligned with the United States, who felt they had been insulted, protested formally to the White House. "It upset the Saudis," the senior official recalled. "Démarches followed that speech."

In Irving, Rex Tillerson sided with the Saudis. he believed, as did ExxonMobil's Management Committee, that "energy independence is not attainable, not any time in the foreseeable future," and that its pursuit was not desirable because it would set the United States on "misguided courses" that might raise the cost of energy in the American economy, destroy jobs, and disrupt trade alliances around the world.

The rest of the chapter pretty much regurgitates ExxonMobil's thinking about energy independence, alternative energy sources (including solar and wind), ethanol, and batteries for electric cars -- the latter are considered a threat. Nothing on nuclear, or coal.

21. "Can't the C.I.A. and the Navy Solve This Problem?": Nigeria, in 2006, seven ExxonMobil contractors were abducted and held for ransom (asking price $40 million); ExxonMobil was pumping 850,000 barrels per day from mostly offshore platforms in Nigeria ("15 percent of the corporation's worldwide total"); the employees were eventually recovered, but got the hell out of Nigeria (pp. 461-462):

Corruption, mismanagement, theft, and criminal violence were hallmarks of the government's performance. During the 1990s, the military dictator General Sani Abacha stole an estimated $4 billion of government funds, in addition to that taken by cabinet officials, state governors, and their affiliated youth gangs. International oil and construction companies conspired in these crimes or tolerated them with see-no-evil policies. Halliburton and its subsidiary, Kellogg Brown & Root, agreed early in 2009 to pay $579 million in fines to settle charges related to their participation in a joint venture that systematically bribed Nigerian officials across a decade to secure more than $6 billion in construction contracts; Albert "Jack" Stanley, the chairman of K.B.R., named to his position by Halliburton chief executive Dick Cheney about two years before Cheney departed for the White House, pleaded guilty to criminal charges after personally authorizing a $23 million payment to a Gibraltar consultant to win Nigerian contracts.

(p. 464):

Tillerson was perhaps not ideally suited to assess Nigeria' moral swamps. His feel for political economies in poor countries was limited. Even during his rise within ExxonMobil's international divisions, he had never lived outside the United States. In any event, managing ExxonMobil's position in Nigeria in the post-Aceh era of the Voluntary Principles, heavy media scrutiny, and potential lawsuits would have been challenging even if Tillerson had been an anthropological expert.

In September 2005, on the cusp of taking power in Irving, Tillerson had flown into Abuja. President Obasanjo had been making noise about forcing Western oil companies in Nigeria to move beyond pumping crude and into the refining of gasoline and other products for local consumption. ExxonMobil had steered clear of Obasanjo because "he tended to pound tables" and make demands. Nigeria was about the last place in the world Lee Raymond wanted to spend time. Tillerson decided to engage, however. He met with the Nigerian president, flew down to Lagos, where he stayed in the corporation's Waterfront Guest House, traveled by helicopter to a few production sites, and departed. The corporation's message to American diplomats in the country was that they should "encourage deregulation" and work on "improving the investment climate."

(p. 468):

In September 2006, President Bush signed National Security Presidential Directive 50, outlining American security strategy in Africa. The directive's stated objectives included building African capacity to govern and deliver social services, consolidating democracies on the continent, and bolstering fragile states. [ . . . ]

African politicians, scarred by a century of resource-driven European colonialism, feared that the Bush administration viewed their oil as analogous to the oil in the Persian Gulf: as a vital American interest, one that might warrant military intervention, at least in extremis. Bush officials imagined themselves striking a more nuanced, postcolonial posture, one that emphasized encouraging African states to modernize and to rise from poverty. When an American official stood at a lectern flanked by U.S. Navy flags and spoke about oil security, however, the message was unavoidable. West Africa mattered to the United States in part because it possessed critical supplies of energy, and the American military stood ready to ensure oil flowed.

The oil companies were initially reluctant to get involved with the US Navy, but after the kidnappings that changed (pp. 471-472):

The Pentagon's Africa policy office viewed the Niger Delta as "the perfect storm of political bosses mixing in with disgruntled populations, and Mafioso kind of enterprise that reached quite high in the Nigerian government," as a U.S. Defense Department official put it. The Pentagon's advice to Nigeria's government, nonetheless, was that "number one, they needed to improve their situational awareness" of what was happening from hour to hour on Delta swamp rivers and open Gulf of Guinea waters. Theresa Whelan's office shepherded the transfer to the Nigerian navy of excess U.S. Navy sixty-foot "buoy tender" vessels, for coastal patrolling. The Pentagon also spent $16 million to provide Nigeria with a "suite of sensors," as Whelan described them, tied into a command and control center installed in Lagos by the United States. The command center was designed to provide Nigerian navy officers with a real-time radar-enhanced picture of authorized and unauthorized sea traffic off the Delta coastline. The problem remained that Nigerian admirals did not actually wish to intervene in much of the unauthorized activity because it represented income for them.

22. "A Person Would Have to Eat More Than 3,400 Rubber Ducks": ExxonMobil Chemical, headquarters in Houston, 2007 profits about 10% of that record $40.6 billion; maker of phthalates (e.g., DINP), a plasticizer added to polyvinyl chloride to make it softer, targeted by a Product Safety Improvement Act in Congress; Rep. Joe Barton (R-TX) (pp. 488-489):

Barton's relationship with ExxonMobil was strong. In the years after the Mobil merger, Barton received more money from the ExxonMobil Political Action Committee than any other member of Congress -- a total of $46,309. In general, ExxonMobil's K Street crew appreciated the Texas congressman's pro-market philosophy. In 2005, however, Barton had been infuriated when Lee Raymond and Dan Nelson, the ExxonMobil Washington office chief, declined to support a deal Barton had proposed to Dingell and other lawmakers to pass comprehensive energy legislation of the sort originally contemplated by Vice President Cheney's energy task force, but which had proved politically elusive during the first Bush term. One element of the 2005 deal was a prospective agreement by Congress to absolve oil companies from certain legal liabilities arising from spills of gasoline containing MTBE. (The deal was proposed just a year before ExxonMobil's disastrous spill of MTBE-laden gasoline at its gas station in Jacksonville, Maryland.) In exchange for legal protection, ExxonMobil and other oil companies would contribute to a $4 billion fund to pay nationwide MTBE cleanup costs. Barton thought he was close to an agreement to ensure payments to the fund, but Chevron, ExxonMobil, and the American Petroleum Institute balked. On the decisive weekend of negotiations, ExxonMobil's representatives, led by Dan Nelson, declared that the bill was just too much of a Washington mess for the corporation to support. Lobbyists for the major oil companies later said they had warned Barton that they would not pay more than $1.5 billion into the proposed cleanup fund. In any event, Barton was unhappy. He pulled all provisions for MTBE protections from the final bill and later issued a public letter protesting Lee Raymond's retirement package. "While we respect the right of corporations in America to set compensation packages as they see fit, it is hard to understand how, in light of most Americans paying nearly $3.00 per gallon at the pump, your board of directors can justify such an exorbitant payout."

The Senate passed a bill banning all phthalates, but Barton resisted in the House, eventually agreeing to a bill that left the question to the Consumer Product Safety Commission, where ExxonMobil had thus far been successful lobbying. Bush signed the bill in 2008. Barton cashed a long list of checks from ExxonMobil employees and cronies.

23. "We Must End the Age of Oil": the ExxonMobil PAC spent $722,000 during the 2008 election, only 11% on Democrats; in mid-2008 oil prices topped $140 per barrel; ExxonMobil replaced Dan Nelson with Theresa Fariello as chief Washington lobbyist -- she was a registered Democrat, more approachable to the Obama administration

24. "Are We Out? Or In?": Equatorial Guinea, producing 450,000 barrels of oil per day, still ruled by Obiang (U.N. news release headline: "Torture Is Rife in Equatorial Guinea's Prisons") (p. 518):

Fortunately for Obiang, coup-prone African governments rolling in oil but lacking in arms and intelligence to defend their bounty had a discreet alternative to the Pentagon and the C.I.A. for defense support: Israel. Quietly, the Bush administration encouraged Obiang to enter into security and commercial ties with Israel.

During the cold war, the United States and Israel had occasionally collaborated covertly to shore up friendly governments in Africa. More recently, Israel had extended its global influence by using security partnerships to export its high-technology equipment and its hard-earned lessons in counterterrorism and defense against strategic surprise. Retired Mossad and Israel Defense Forces officers formed consultancies to sell electronic surveillance equipment, drones, gunboats, helicopters, and training packages to wealthy, insecure African regimes facing insurgencies or the threat of coup makers. These deals often had at least as much of a commercial as a security motivation, but even when profit figured to a great extent, the exported sales and training packages strengthened Israel by providing additional revenue for its defense and intelligence industries, and by building new global networks and political alliances. Israeli trainers and consultants peddling intelligence and defense systems quietly equipped Angola's oil-rich, formerly Marxist government and Nigeria's Joint Task Force, which battled unauthorized oil-thieving militants in the Niger Delta (as opposed to the authorized ones).

Section on Obiang's son Teodorin, who "had easy access to many tens of millions of dollars" and "began to travel and to spend": there follows a list of cars, topped by two $1.5 million Bugatti Veyrons.

25. "It's Not My Money to Tithe": Tillerson gives a position speech on January 8, 2009, lecturing Obama (pp. 534-535):

He ticked through the corporation's positions on American energy policy: Washington needed "long-range thinking"; rising global demand for oil and gas, through 2030, was inevitable; America, therefore, needed to develop "all our energy resources"; and it was particularly urgent to open up offshore and other domestic territory to drilling. Normally, the ExxonMobil chairman resisted arguments that pandered to the American yearning for "energy independence," since he regarded the very idea as misguided. Yet if measured appeals to American nationalism were necessary to win approval for domestic oil drilling, he was willing to make them: "There is enough oil and natural gas offshore and in non-wilderness and non-park lands to fuel fifty million cars and heat nearly one hundred million homes for the next twenty-five years," he declared.

He referred to climate change impassively as an "important global issue." The incoming Obama administration proposed to reduce greenhouse gas emissions by enacting a cap-and-trade system in which polluters could buy and sell pollution credits under an overall "cap." Tillerson argued that Europe's similar system, inaugurated several years earlier, did not work well and had introduced "unnecessary cost and complexity," while creating problems with verification and accountability.

Tillerson did offer to support a carbon tax as an alternative to cap-and-trade -- which happened to be what Democrats were pushing, figuring that it was one of those American Enterprise Institute pro-market proposals that would appeal to, or lock in, Republican support; a carbon tax, on the other hand, was considered political poison, and ExxonMobil didn't support it heartily enough to bring it back from the dead. (Indeed, if it did, ExxonMobil could count on the coal lobby to kill it.)

Obama visits Canada, which exports 1.9 million barrels of oil per day to the US (pp. 544-545):

Canada's underpublicized oil bounty included conventional reserves, but also a vast treasure of "crude bitumen," as ExxonMobil referred to it. Environmental activists often referred to these bitumen reserves as "tar sands oil," evoking images of a sticky mess of a sort that might have trapped unsuspecting dinosaurs eons ago. The dueling language reflected a profound disagreement about the oil's value.

The reserves in question lay 50 to 150 feet underneath the sands of the McMurray Formation, near the Athabasca River in northern Alberta Province, in western Canada. Lakes, streams, and boreal forests of stubby trees had covered the sands for centuries. By 2007, as new technology made it easier to separate the oil from its earthen mix at a reasonable cost, Oil & Gas Journal estimated that Alberta held 175 billion barrels in total oil reserves, which amounted to the third-largest national oil reserve in the world, after Saudi Arabia and Venezuela.

ExxonMobil's Canadian affiliate, Imperial Oil, had been producing oil from the Alberta sands since 1978, through a joint venture called Syncrude. The operations required open-pit mining to dig out the oily sand with mechanical shovels fifty feet high. Hot water or caustic soda then washed the sand to separate out the bitumen. "Upgraders" similar to those ExxonMobil had installed in the Orinoco basin of Venezuela refined the remainder into a synthetic blend that imitated the refinery-friendly characteristics of light, sweet crude.

The final product was highly desirable in world oil markets, but the manufacturing process was environmentally destructive, expensive, and energy intensive. It also required immense water use. Syncrude stripped forests, dug out peat and dirt, and then attacked the sands below with its giant shovels. Environmental investigators documented toxic pollution runoff from the mining operations. Moreoer, the industrial processes required to extract and manufacture oil from bitumen required burning more carbon-based fuels than would be turned to drill a normal oil well. As climate change gradually emerged as a global threat, environmental groups also campaigned against the Alberta operations because of the extra polluting energy that was needed to dig out and refine the bitumen. Oil from Alberta, barrel for barrel, contributed among the highest greenhouse gas emissions of any source of oil in the world.

Much about lobbying in favor of oil sands crude, including setting up front groups like Consumer Energy Alliance; ExxonMobil is less concerned with what Obama does, figuring that if they can't sell the oil in the US, they'll sell it in Asia (p. 550):

ExxonMobil was partially constrained, however, by the fact that its Democratic Party connections were heavily located in the failed presidential candidacy of Hillary Clinton. Theresa Fariello had worked actively to support Hillary Clinton's candidacies for senate and president. Moreover, the principal Democratic lobbyist Fariello worked with in Washington, David Leiter, a former chief of staff to Senator John F. Kerry (D-Massachusetts), happened to be married to Tamera Luzzatto, Hillary Clinton's chief of staff in her Senate office during the 2008 campaign.

(p. 555):

By late 2009, whatever anxieties Tillerson and Cohen might have possessed as the Obama administration took office, ti had become apparent that ExxonMobil would prevail, again, on the public policy issues that mattered most to the corporation. Cap-and-trade legislation died a slow death in the U.S. Senate; its proponents could not construct a filibuster-proof majority. In Copenhagen, in December, representatives of the world's major economies failed to agree on post-Kyoto rules that would deliver serious reductions in greenhouse gas emissions.

26. "We're Confident You Can Book the Reserves": Iraq: despite protestations of indifference, or just a sense that 2003 was too early to get involved, by 2009 ExxonMobil had submitted a bid for a piece of the Iraq action (pp. 561-565):

As it sold ExxonMobil Iraqi crude in 2003, the Bush administration also urged the corporation to open a Baghdad office to lend support and credibility to what its occupation leaders hoped, naively, would be a rapidly normalizing country. Lee Raymond declined. By October of that year, violence was spreading across Iraq. The Coalition Provisional Authority increasingly was not in a position to make international oil deals; it was struggling to provide Iraq with adequate supplies of gasoline and electricity. An Iraqi government that would be credible enough with the Iraqi people to bargain on a subject of such symbolic and material importance as oil production partnerships with foreign companies looked a long way off. [ . . . ]

The corporation ran a regional office in Amman, Jordan, where Iraqi businessmen and refugees gathered as the war darkened, and another in Dubai. ExxonMobil used this forward position to monitor events and meet with Iraqi officials and executives from its historically state-owned oil companies. [ . . . ]

Shahristani's "clean games" visit to Washington in 2006 signaled, however, that the Iraqi oil ministry had gradually come to recognize it could not restore Iraqi oil production to acceptable levels on its own. After the talks with Energy secretary Bodman and he oil company lobbyists, Shahristani soon negotiated what he called "technical service agreements" with ExxonMobil and other companies. Under its deal, ExxonMobil would evaluate how to raise the rate of oil production in particular Iraqi fields.

The corporation used its access to develop and present to Iraqi officials an ambitious, unpublicized plan for ExxonMobil's reentry into the country: a $100 billion "transformative" program under which ExxonMobil would lead huge, staged investments in Iraq's oil and gas fields. These upstream investments would be integrated with similarly ambitious downstream projects -- refineries and petrochemical complexes. In essence, ExxonMobil proposed a strategic position in the Iraqi oil industry comparable to its dominant position in Qatar. The scale of the plan was bold -- and also politically unrealistic. [ . . . ]

Initially, after the war began, ExxonMobil and other major American oil companies pushed the Bush administration to persuade Iraq's government to adopt production-sharing agreements or other contract terms that would allow private oil companies to book Iraqi reserves for Wall Street. An early study of Iraq's oil industry carried out for the Coalition Provisional Authority by the consulting firm BearingPoint, Inc., suggested to Iraqi oil officials the benefits of production-sharing deals; the study cited nations such as Azerbaijan as examples.

(pp. 574-575):

Late in 2009, Vierbuchen and the president of ExxonMobil Upstream Ventures, Rob Franklin, at last closed a deal -- after months of private negotiations with Iraqi officials -- for exclusive access to Iraq's West Qurna Phase One oil project. The field contained at least 8.7 billion barrels -- a behemoth by industry standards. ExxonMobil agreed to apply modern technology and techniques to raise the field's production from its current 300,000 barrels per day to more than 2.3 million barrels per day within six years, taking a gross profit of only $1.90 per barrel -- below the $2.00 per-barrel remuneration fee Iraq had specified at the first unsuccessful auction. The deal was structured so that ExxonMobil first had to increase the ield's production to 10,000 barrels per day higher than the peak production achieved under Saddam Hussein. After that, ExxonMobil was permitted to take its $1.90 premium as oil in kind. ExxonMobil kept secret the full terms of the deal, so it was difficult to judge how profitable it might ultimately become. Deutsche Bank predicted that ExxonMobil might earn a 19 percent rate of return from West Qurna when all factors were considered -- comfortably within the corporation's targets for profitability worldwide.

An initial agreement between ExxonMobil and Iraq stalled; the corporation "asked for advocacy" from the Obama administration's Baghdad embassy to resolve the impasse. [ . . . ] The Obama administration's lobbying helped; the deal went through. Eighteen months later, ExxonMobil had crossed the contract threshold and was loading Iraqi crude into supertankers in the Persian Gulf that could hold 2 million barrels at a time. The U.S. embassy in Baghdad estimated that the work of ExxonMobil's partnership in West Qurna alone would raise Iraq's oil production by 2 million barrels per day within six to eight years. [ . . . ]

Seven years was almost precisely the length of time Lee Raymond had predicted, when the war began, that it would take for Iraq to be calm enough for big oil companies to enter. "I wouldn't say the profit margins have unlimited potential," said the corporation's Rob Franklin. On the other hand, he noted, "we're confident you can book the reserves."

27. "One Plus One Has Got to Equal Three": ExxonMobil acquires XTO, with a major position in unconventional gas fields (pp. 583-585):

Engineers at Exxon and many other companies had known for decades that the United States had large amounts of gas trapped in sand, shale rocks, and coal beds. They had also long known that certain unconventional drilling techniques -- horizontal drilling and techniques to inject pressurized fluids to fracture rocks to release and join isolated pockets of gas -- might allow these reserves to be exploited. The obstacles to refining these techniques mainly had to do with their costs. During the 1980s and 1990s, the wellhead price of natural gas in the United States hovered at or below two dollars per thousand cubic feet. The drilling techniques required to unlock unconventional gas were often too expensive to justify at that price. [ . . . ]

Unconventional gas drilling damaged the environment. The techniques could contaminate groundwater, if carried out improperly, by causing chemical-laced drilling fluids and natural gas to leak into aquifers. [ . . . ]

Geologists wielding modern computer software and ground penetrating radar had not previously devoted themselves to looking for "tight" or trapped unconventional gas beds in the United States. When they did in earnest, after 2003, they reported large finds. As early as 2003, the Gas Technology Institute, successor to the Gas Research Institute, revised past estimates upward to report that America's total natural gas resource base was about 2,000 trillion cubic feet. Americans consumed a little more than 20 trillion cubic feet of natural gas in 2003, roughly the equivalent of 8 million barrels of oil per day, or nearly the amount of the country's actual liquid oil imports.

Acquiring XTO was a quick way for ExxonMobil to gain a major stake in gas shale fracking; the deal was expensive, risky, possibly a bad deal (pp. 590-591):

A PowerPoint produced by analysts at the Society of Petroleum Evaluation Engineers in Houston noted that ExxonMobil's purchase of XTO was "based on the assumption that much higher natural gas prices" were coming in the future, and yet, there was "considerable risk in shale plays" because of uncertain geological and commercial factors. "Reserves are overstated," the presentation continued. "Costs are understated. . . . The gold rush mentality destroys capital and ensures the rule of expediency over science and risk management."

Uncertainty and skepticism of this kind leached out from geological engineers in the form of unfavorable press reporting, some of which went so far as to ask whether the American shale gas boom was some sort of Ponzi scheme in which early investors bid up faulty assets and lured in big-money suckers like ExxonMobil. Unconventional gas wells behaved unlike other wells, and their decline and production rates could be hard to calculate -- much about the drilling patterns in these fields still remained to be discovered. [ . . . ]

Wall Street swiftly made clear that it did not approve of Rex Tillerson's decision to buy XTO. It looked to analysts and investors that Tillerson had overpaid for Simpson's company and that ExxonMobil had made risky assumptions about future natural gas prices. Investors hammered ExxonMobil's share price, relative to its peer group, in a way the corporation had not experienced for many years.

(pp. 597-598):

The cleaner 2010 reserve replacement numbers looked good on the surface, but were concerning underneath. When the XTO gas properties were incorporated into ExxonMobil's resource base, the corporation reported that it had replaced an extraordinarily strong 209 percent of the oil and gas it produced that year. Yet XTO's purchased properties accounted for four fifths of the corporation's new reserves. Without XTO, according to Barclays, ExxonMobil would have replaced only 45 percent of its 2010 oil and gas production -- a performance so abysmal that if it continued for a prolonged period, ExxonMobil would be on a path to liquidation. By comparison, Conoco's "organic" or internally generated reserve replacement rate in 2010 was 138 percent. Shell's was 133 percent. Of course, ExxonMobil had always been better at buying other people's oil than at finding it. [ . . . ]

Tillerson promised when he took charge to increase ExxonMobil's annual production of oil and gas to 5 million barrels per day by 2009. The actual number was 3.9 million -- more than 20 percent short. Tillerson promised again that ExxonMobil's production would grow steadily until 2014, but the trailing numbers showed the corporation in a long, flat pattern -- its annual production in 2001, after the Mobil merger closed, was 4.3 million barrels per day. Tillerson had not cracked the challenge of reserve replacement that had also daunted Raymond.

28. "It Just Happened": BP and the Deepwater Horizon blowout (April 20, 2010) (pp. 610-611):

Flying over Prince William Sound twenty-three years earlier, as the Valdez's oil spread into dark shapes, BP's Lord Browne had reflected about how the oil industry would now be "measured by its weakest member, the one with the worst reputation," that is, Exxon. After long years of resentment an competition between the two companies, the tables had turned.

Browne was no longer around to face criticism. He had resigned as BP's chief executive on May 1, 2007, after admitting that he had made false statements in a British court document about the origins of his relationship with a Canadian man, Jeff Chevalier, with whom he had been romantically involved. The pair had been dining and social companions, court records showed, of Prime Minister Tony Blair; Peter Mandelson, Blair's controversial adviser; and other former luminaries of New Labour in Britain. Lord Browne's resignation from BP had seemed, in 2007, only a distasteful coda to the end of credulity about the Blair era. By 2011, it was plain that BP's corporate culture, more focused on hubristic global strategy than on day-to-day execution, had helped to set conditions for the Deepwater Horizon accident.

(p. 614):

The swagger was vintage Exxon, but the public policy at issue was the corporation's philosophy of risk management. Just ten days after the Deepwater Horizon exploded, a ruptured ExxonMobil pipeline dumped about a million gallons of oil in coastal areas of eastern Nigeria, soiling shorelines dotted by impoverished seaside villages. The affected area lay far from American television news bureaus, and its kidnapping gangs made it a risky place to travel in any event. The spill barely registered. Not all accidents can be prevented, Tillerson and ExxonMobil's lobbyists acknowledged.

(pp. 620-624):

On July 1, 2011, ExxonMobil's Silvertip pipeline, running from Wyoming to the corporation's refinery in Billings, Montana, sprang a leak and poured about 1,000 barrels of oil into the majestic Yellowstone River. The corporation estimated that cleanup and payments for damaged property would cost $42.6 million. "We deeply regret this incident has happened," corporate spokesman Kevin Allexon said.

On the same day, Baltimore County jurors deliberating in the second of two civil lawsuits filed over the massive leak of gasoline from the former Jacksonville, Maryland, Exxon station -- the case filed by Peter Angelos, Stephen Snyder's archrival in the Baltimore plaintiff's bar -- returned a verdict of actual and punitive damages of $1.5 billion, ten times greater than the award Snyder had won for his clients. ExxonMobil vowed to appeal, the corporation continued to appeal Snyder's award of damages, too.

A week later, on July 8, the United States Court of Appeals for the District of Columbia reinstated the lawsuit filed by villagers in Aceh, Indonesia, who alleged that ExxonMobil bore responsibility for torture and killings they had suffered at the hands of Indonesian soldiers guarding the corporation's gas fields. ExxonMobil's lawyers had challenged the case at every turn; the lawsuit had now been pending without trial or settlement for more than a decade. The corporation again filed an appeal. [ . . . ]

In Iraq, ExxonMobil followed adventurous Hunt Oil into Kurdistan, in defiance of Baghdad's government and despite discouragement from the Obama administration, which feared, as the Bush administration had, that oil deals struck independently with the Kurds would worsen Iraq's ethnic conflicts. ExxonMobil's decision risked stirring the ire of Iraq's Shia-led national government, which had awarded the corporation a contract to raise production in its massive West Qurna field in the south of the country. Tillerson undertook his gambit without informing the Obama administration in advance. After ExxonMobil signed agreements concerning six Kurdish oil fields, Tillerson arranged a conference call with senior State Department officials, and told them, "I had to do what was best for my shareholders." [ . . . ]

On July 28, 2011, ExxonMobil announced its profits for the first half of the year. The total came in at $21.3 billion, a whisker under the amount the corporation reported during the same period in 2008, when it set a record for the most nominal profit earned by any corporation in American history.

Eight days later, on August 5, 2011, Standard & Poor's announced the first-ever ratings downgrade of the bonds issued by the United States Treasury, marking them down from a AAA rating to AA-plus. The Standard & Poor's downgrade meant that ExxonMobil, one of only four American corporations to maintain the AAA mark, now possessed a credit rating superior to that of the United States. [ . . . ]

From the day of the Mobil merger until the day of the S&P downgrade, the net cash flow of the United States -- receipts minus expenditures -- was approximately negative $5.7 trillion. ExxonMobil's net cash flow from operations and asset sales during the same period was a positive $493 billion.

Some notable reviews:

• Paul Pillar: What's Good for Exxon Is Not So Good for America.

posted 2012-06-07