November 1, 2019

Time to Wake Up: Marathon Petroleum

As-prepared for delivery.

When historians look back at why the United States failed so badly to take on climate change, they’ll of course focus on the political efforts of the world’s largest oil companies, Exxon, Chevron, BP, and Shell; they’ll note the obstructive role of leading trade associations, the U.S. Chamber of Commerce, the National Association of Manufacturers, and the American Petroleum Institute; and they’ll chronicle the network of phony front groups set up by Big Oil and the Koch brothers to sow doubt of the science and fear of climate action.

Big Oil, the Kochs, the trade associations, and the front groups will deserve plenty of blame.  Their climate denial apparatus and their capture of the Republican Party is a direct and deliberate cause of our failure.

But there are other, less-heralded, but equally bad actors.  I come to the floor today to discuss one of them.  Future historians of anni Trumpi, take note of Marathon Petroleum.  

Marathon Petroleum is the largest oil refiner in the United States.  It refines oil into gasoline, other fuels, and lubricants.  It owns pipelines and gas stations.  Its 4,000 Speedway locations and almost 8,000 independent gas stations selling Marathon-branded fuels reach across the country.  It is number 31 on the Fortune 500 list of largest U.S. companies; it has almost $100 billion in revenues. 

This is a big company with a big stake in blocking climate action.

So what does Marathon want?  Its annual report, filed with the Securities and Exchange Commission, makes one thing clear:  Marathon sees laws and regulations that reduce carbon pollution as a threat.  One threat Marathon specifically cites in its annual report is fuel economy, or CAFE, standards.  Why?  Marathon’s 2018 annual report reads, “Higher CAFE standards for cars and light trucks have the potential to reduce demand for our transportation fuels.”  Simple as that; fuel-efficient cars burn less gas, and that’s bad for a big refiner.

In 2012, automakers, the state of California and the previous administration agreed to significantly higher fuel economy standards.  That was a good deal for almost everyone.  Consumers were estimated to save more than $1.7 trillion in reduced fuel costs or $8,000 per vehicle purchased in 2025.  The air would be cleaner.  Carbon emissions from cars and light trucks would be cut in half by 2025.  And automakers would have a competitive incentive to keep pace with new vehicle technologies being developed in Europe and China.

In 2017, automakers came in to the Trump administration and asked them to revisit the standards.  It looks like the auto industry primarily wanted technical changes to make the standards easier to meet.  I’ve found no evidence that the auto industry asked the administration to freeze the standards, or to revoke California’s authority under the Clean Air Act to set its own standards.

When automakers asked the administration for these changes, however, the oil industry sensed opportunity.  The standards may have been good for consumers, the auto industry, states, and our global climate; but that $1.7 billion in reduced fuel costs that consumers would save — that would come directly out of oil industry revenues. 

So the oil industry sprang into action to hijack the standards’ rulemaking process.  The oil industry demanded weakening of the standards to the max (read: a freeze) and even revocation of California’s longstanding authority to set its own standards.  An administration marbled through with fossil fuel lobbyists and attorneys heard the call. 

It must have been a strange experience for the automakers:  one minute they are asking for technical changes to a regulation they had agreed to; the next minute the whole process has been run off with by another industry. 

Marathon was the ringleader.  I obtained an electronic draft of a letter to the Deputy Administrator of the National Highway Traffic Safety Administration urging her to weaken the fuel economy standards.  The metadata of the letter was available, and according to the metadata on this document, it was written by a Marathon Petroleum in-house lobbyist. 

Marathon shopped this letter around to members of Congress, convincing House members to send similar letters backing weakened standards.  We ran these House letters through plagiarism software, and here’s what we got. 

When we compared the Marathon letter with the letter sent by members of Pennsylvania’s congressional delegation: an 80 percent match.  The red here is all language that’s identical.  Members from Indiana and West Virginia sent similar letters with text lifted directly from the Marathon’s lobbyist’s draft. 

If you want to give this political stunt a name, you could call it a Pruitt, after Pruitt copying Devon Energy text onto his official letterhead distinguished him for the Trump EPA position.

So back to Marathon.  Pulling a Pruitt with these congressmen was not enough.  We know from Marathon’s own reports that it directly lobbied on the standards, and we know that its trade association, American Fuel and Petrochemical Manufacturers, or AFPM, lobbied on the standards.  We also know AFPM launched a campaign on social media urging people to support the freeze.

Marathon is a member of a front group called the American Legislative Exchange Council or ALEC.  This front group pushes the agenda of the Koch apparatus in state legislatures.  ALEC passed a resolution in favor a weakening the standards and revoking California’s state authority.

We know that senior executives from Marathon met personally with EPA leadership and with senior officials in the White House to push for weakening the standards and revoking California’s authority.

But there’s a lot that we don’t know. 

We don’t know which front groups Marathon and other oil companies fund, and how any other groups were deployed. 

We don’t know the extent to which Marathon coordinated its campaign with the trade associations and the front groups, so we can’t assess whether this lobbying effort violated the front groups’ 501(c)(3) tax-exempt status.

And what role did Marathon or its front groups have in the mysterious antitrust letter out of DOJ to the auto companies?  When the auto companies realized this process had been hijacked by Marathon, they bailed; and negotiated an agreement directly with California, prompting a truly bizarre letter from DOJ that appears to ignore basic tenets of antitrust law and violate DOJ’s own antitrust procedures.  Who pulled those strings?

More broadly, if Marathon and other fossil fuel companies are purposefully paying a web of front groups and trade associations to spread deliberate disinformation about climate change in order to obstruct climate action, does that not warrant congressional investigation?  Might it not, in fact, be fraud?

Over the past two weeks, two different subcommittees of the House Committee on Oversight and Reform held hearings that examined how the fossil fuel industry deploys front groups and trade associations to spread disinformation about climate change and block climate action.  Yesterday, the Senate Democrats’ Special Committee on the Climate Crisis held our hearing on how dark money front groups hide the industry’s role in denial and obstruction. 

Fat chance we’ll have Senate committees investigate this masquerade in a chamber under Republican control.  But for our friends in the House, the time is ripe for congressional oversight.  Follow the money, and the facts, wherever they lead.  Let the subpoenas fly.  Congressman Henry Waxman led a successful investigation of lies and deceit from a corrupt industry, Big Tobacco; and that precedent served the public well.

Marathon shareholders are interesting, too.  Last month, 200 investors with $6.5 trillion in assets under management sent a letter to 47 U.S. companies — including Marathon — urging that the companies’ lobbying align with the Paris Agreement goal of global average temperature increase below 2 degrees Celsius; and warning that lobbying against that goal is an investment risk. 

The letter went to Marathon, but none of Marathon’s biggest investors – Blackrock, Vanguard, State Street, and JPMorgan Asset Management – signed it.  Collectively, these four investors own roughly 25 percent of Marathon.  BlackRock lists climate risk as one of its engagement priorities in 2019.  So it says.  And it published a report this year that by 2060, 58 percent of U.S. metro areas will see annual average climate-related losses of at least 1 percent of GDP, with some losing a staggering 15 percent of GDP.  JPMorgan CEO Jamie Dimon has said that “business must play a leadership role in creating solutions that protect the environment and grow the economy.”

The stakes are high, with credible warnings of a carbon asset bubble and crashes of coastal property values.  BlackRock hasn’t introduced a single climate-related shareholder resolution since at least 2001.  In 2018, Blackrock and Vanguard respectively voted in favor of only 10 and 12 percent of climate-related shareholder resolutions.  At Marathon in 2017, BlackRock voted against a shareholder proposal for Marathon to test its business operations against the two degrees Celsius threshold.  If BlackRock had voted for this proposal, it would have passed. 

Just this month, Marathon finally published a report examining its prospects in a carbon-constrained world:  in one scenario demand for petroleum-based liquids plummets 26 percent by 2040, with demand for vehicle fuels—Marathon’s primary market—falling even more steeply.  If Marathon estimates the market for its main product could shrink by a third or more, you can understand its manipulation of the fuel economy standards process.  And you can understand the warnings about a “carbon bubble.” 

We will get serious about climate change.  We must.  We have no choice.  The costs of inaction are catastrophic.  Eventually, all the fossil fuel money in the world won’t stave off action in the face of mounting climate calamities.  This should be obvious to everyone, certainly to sophisticated investors like those at BlackRock and JPMorgan.  So why aren’t they pushing Marathon to adapt to a low carbon economy?

Look at DSM, a Dutch multinational with roughly $10 billion in revenues and over 23,000 employees around the world, including many here in the U.S.  DSM began as a mining company over a century ago.  Its leaders realized coal mining in the Netherlands would someday end, so they reinvented themselves.  When the last mine closed in the 1970s, DSM had diversified.  Today, it’s a leading producer of nutritional additives for food and pharmaceuticals and hi-tech materials for electronics, automobiles, and construction.  Murray Coal, by contrast, filed for bankruptcy this week.

To the fossil fuel industry, I say you ought to begin adapting now.  You owe it to your shareholders, your employees — and your children. 

Blackrock and other big investors, that means you, too.  You say you are for climate action.  Show us you mean it.  Demand that Marathon and other fossil fuel companies on your books change.  Start with disclosure of their climate obstruction funding.

Congress, let’s investigate.  We’ve slept through this in induced narcolepsy for too long.  It’s time to wake up.