Pulitzer Prize-winner Steve Coll takes a close look at secretive behemoth that is Exxon Mobil.
“Presidents come and go; Exxon doesn’t come and go.”
So said Lee Raymond, the chief executive at ExxonMobil Corporation who retired in 2005. Raymond, known as “Iron Ass” for his combative disposition and demand for discipline throughout the ranks, embodies the defiance and dominance of the company that author Steve Coll labels a private empire in his masterful study.
In Private Empire – a book that, no doubt, will be described as exhaustive in reviews – Coll all but avoids dry holes in his wildcatting expedition to drill down into the story of a company that operates in many respects as its own nation. To cite but one of many examples, consider Raymond’s speech in 1997 in Beijing to the World Petroleum Congress.
At a time when the Clinton administration was working on the environmental agreement that became known as the Kyoto Protocol, Raymond not only argued against the notion of global warming, he openly flouted American foreign-policy, too.
“The most pressing environmental problems of the developing nations are related to poverty, not global climate change,” the ExxonMobil chief said in Beijing. “Addressing these problems will require economic growth, and that will necessitate increasing, not curtailing, the use of fossil fuels.”
Coll analyzes the speech as an extraordinary appeal to the Chinese Communist government, an accurate assessment that shows the company’s inclination to put its self-interest even above American priorities. Such actions, of course, could and would doom lesser companies when calling on Congress and the White House, but not ExxonMobil. The reason is obvious to even the most casual observer of American business: ExxonMobil routinely ranks at or near the top when it comes to annual profits and revenue.
Almost from the moment antitrust advocates forced the creation of Exxon (that particular name was created in 1973) by splitting it from Standard Oil, the company has grown in size and stature. And, the part of the company most people know best – the gas stations – are the least-profitable part of the business, serving more as advertising than anything else.
The Irving, Texas-based oil giant also stands as one of the most secretive major public corporations in the world. Coll lifts the veil on ExxonMobil’s strategies and techniques. His reporting spans Third World dictatorships enlisted as partners in finding much-needed oil reserves, K Street lobbyists fighting environmental and other regulatory legislation, and the looming hazards illustrated by massive spills.
“Private Empire” begins and ends with haunting evidence of the power and danger of the oil industry: the grounding of the Exxon tanker Valdez in 1989 that spilled 11 million gallons of oil into Prince William Sound in Alaska and, 21 years later, rival BP’s Deepwater Horizon oil rig explosion, which dumped 185 million gallons into the Gulf of Mexico and ravaged wildlife and beaches in several states.
Although the Valdez spurred vigorous safety reforms within Exxon and beyond, Congressional hearings and testimony following the BP disaster revealed lingering industry-wide problems two decades later. Lax oversight and regulation by the oil companies and government regulators proved catastrophic upon closer inspection. (Most recently, a BP engineer was arrested after deleting hundreds of text messages showing that the oil spill was much worse than the company had disclosed.)
Response and prevention manuals included laughable assertions and less-than-unassailable experts. A Florida Atlantic University professor listed as a source of marine wildlife expertise had, in fact, died several years earlier. Another part of the Gulf Coast response plans filed by BP, ExxonMobil, and other companies outlined steps to save walruses. Just one problem there: Walruses last populated the gulf three million years ago.
During a hearing on the BP spill, Rex Tillerson, Raymond’s successor as the top executive at Exxon, admitted his company’s shortcomings to a Michigan congressman.
“The answer is that when these things happen, we are not well equipped to deal with them,” Tillerson said.
Translation: What happened in the aftermath of the Deepwater Horizon explosion could have happened to any number of companies in the industry. Despite assurances from the companies and government regulators, the risks of offshore drilling – and dubious assertions offered in counterarguments – remain perilous.
Those facts mirror the Valdez tragedy in terms of reckless and feckless behavior. Between 1982 and 1989, Exxon slashed 40 percent of its 182,000-person workforce in response to falling oil prices, Coll writes. Those cuts included the company’s oil-spill team. Top environmental experts were demoted and Exxon’s frugality led to excessive work hours, causing fatigue, another factor cited by investigators in the Alaska spill.
Among the many reasons all of this was, and remains, disturbing, is the steep environmental toll of such episodes. Valdez oil killed 2,800 sea otters, 300 harbor seals, 250 bald eagles, 22 killer whales, 250,000 sea birds, and billions of salmon and herring eggs, according to federal statistics cited in the book.
Exxon became the most reviled company in the nation and spent billions on reparations and new safety measures. Customer sentiment grew so overwhelming that the company provided counselors for operators who found themselves on the wrong end of customer rants about the Valdez.
Still, in many respects, the Valdez proved but a blip in Exxon’s constant ascension. A decade later, Raymond, who became CEO in 1993, engineered the merger of unequals that created ExxonMobil. After the acquisition of Mobil, Coll notes, Exxon revenue outpaced the gross domestic product of Norway and generated an $18 billion net profit, eclipsing the gross domestic product of 100 nation-states.
Exxon’s story suits Coll, a New Yorker staff writer who learned the ways of Washington and international politics during an earlier stint at The Washington Post. “Ghost Wars,” his account of the rise of Osama Bin Laden and the lead-in to the 9-11 attacks, won the Pulitzer Prize.
Such expertise gives the book particular insight into the company’s far-flung operations. Coll delves into Exxon’s many marriages of convenience, including agreements with corrupt regimes in Indonesia, Chad, and Equatorial Guinea. At times, the tangle of diplomats, cables, and industry lobbyists gets confusing and bogs down, but, all things considered, Coll navigates arcane and complex debates and protocols with aplomb while explaining them to the reader with clarity and even-handedness.
Again and again, the depth of reporting conveys varying perspectives on the influence and clout wielded by ExxonMobil and the oil industry. But for oil, Equatorial Guinea, for example, would be forgotten. And, while most Americans would struggle to find it on the map, a small but influential group of diplomats and lobbyists began to take note of the tiny nation during the Bush administration when Exxon made significant investments there. Careful and consistent lobbying, along with hopes of broadening the global oil market, helped win the notorious president (read: dictator) Teodoro Obiang audiences with Colin Powell and, later, Condoleezza Rice.
Coll makes Obiang’s human-rights abuses and atrocities clear while also providing insight into the rationalizations Obiang and others felt when dealing with the American government.
“The oil-endowed autocracies of Saudi Arabia, Kuwait, and the United Arab Emirates had poor human rights records and hardly a whiff of democracy, yet they were treated in Washington as important strategic partners and received billions of dollars’ worth of sophisticated defense systems – jet fighters, missile interceptors, the works,” Coll writes. “Why not Equatorial Guinea?”
Contrasts between the blunt, cutting Raymond and his more gracious but equally determined successor, Tillerson, provide entrée into Exxon’s disciplined corporate culture. Under Raymond, for example, the company routinely flouted Securities and Exchange Commission rules for defining oil reserves, a key measure for analysts and investors. At the same time, safety guidelines and ethical standards, down to the minute details of employee expense reports, were inviolable.
Raymond, in Coll’s clear-eyed assessment, “chose his own metrics; he declared that other metrics were wrong; he delivered profits; and he ignored criticism.” Market capitalization at Exxon increased to $360 billion from $80 billion during Raymond’s 12-year tenure. Those figures help explain why the company awarded Raymond a retirement package worth $400 million in 2006.
He also enjoyed a rapport with Vice President Dick Cheney and the two men would have private conversations on oil issues from time to time. With a doctorate in chemical engineering and his legacy as a champion debater in high school, the Exxon chief leaped at the chance to rebut any notion of climate change.
The company fought environmentalists in ways large and small. Its tactics included the enlistment of college professors to publish articles in obscure academic journals on topics such as the effectiveness of punitive damages.
Tillerson softened the company stance on global warming after taking over in 2006, but, in other ways, Exxon retains its willing suspension of disbelief, or, more accurately, disclosure. “Private Empire” includes the harrowing tale of a Maryland leak at an Exxon gas station that spilled 24,000 gallons underground during a 6-week period. Instead of relating concerns over the vulnerabilities in an area dominated by water wells used by residents, the company hunkered down. A battalion of trucks and workers encamped at the station, with the following explanation posted on a nearby sign: “Please excuse our appearance. We’re working to serve you better. Fueling facility is temporarily closed for upgrade.”
Exxon leans heavily toward Republicans, but Coll criticizes both parties for pandering to Big Oil. (The company’s political action committee donated a mere 5 percent of its contributions to Democrats in the 2000 and 2004 election cycles, Coll found.) President Obama even posed with Obiang, the West African dictator, at a New York museum. He also lifted a moratorium on offshore drilling, ignoring not just his own campaign promises but also Interior Department studies showing the inherent risks of that particular type of oil exploration. Much like the Bush team in early-2000s, so, too, does the Obama administration have lengthy connections to failed energy policy.
Coll relates an unsuccessful collaboration between Exxon and the World Bank in Chad during the Clinton administration. Then-Treasury Secretary Larry Summers and one of his top lieutenants, Timothy Geithner, the current treasury secretary, created the campaign. Both political parties have overlooked the tendency of impoverished oil-rich nations to become more violent and corrupt as production increases.
Exxon and other oil companies have doubled down in war-torn lands, in part, due to nationalization in Saudi Arabia and other oil-rich countries. The Saudi nationalized company, Coll learned, “was so bloated that it employed about three quarters as many people to operate within the kingdom as ExxonMobil did to operate worldwide.” Exxon self-interest makes for the most interesting of political bedfellows. The book outlines extensive interests in Venezuelan dictator Hugo Chavez’s country even as Exxon executives fume over George W. Bush’s 2006 State of the Union declaration that America is “addicted to oil … often imported from unstable parts of the world.”
Surging demand in China, India, and other nations with greater economic power and more cars bodes well for Exxon in the decades ahead. The environment is not so lucky, Coll concludes. Even the increased efficiency of cars and trucks and introduction of hybrids will provide modest benefits domestically.
In recent weeks, The Wall Street Journal reported on a long-awaited agreement between ExxonMobil and Russian oil company Rosneft. The joint venture, aimed at exploring and recovering oil from the arctic waters in Russia, could total $300 billion in combined investment over the next 20 to 30 years. (The company has also made major forays into natural gas harvested through fracking in recent years, a move analysts have begun debating as prices dipped and supplies soared.) Tillerson completed the agreement after direct negotiations with Russian Prime Minister Vladimir Putin, yet another sign of the American oil company’s stature on the global stage.
In the final pages of “Private Empire,” Coll notes the irony of Exxon’s anticipated success if it enters Russian territory. Exploring and drilling in the brutal arctic waters has become more plausible in part, he writes, because of a more forgiving climate. The likely cause of that climate change? Global warming fueled by the effects of, yes, oil and carbon fuels.
Erik Spanberg is a regular contributor to the Monitor's Books section.