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3. The Personal Convictions and Idiosyncrasies of the Legislator. This was the most frustrating and most ambiguous factor. Legislators are only people, at the end of the day. Most of them ran for office for deeply personal, and sometimes irrational, reasons. It could not be overestimated how profoundly these personal motivations play into a legislator’s votes. Good lobbyists were intimately familiar with a lawmaker’s personal quirks and convictions.

  During a typical meeting with a lawmaker, a Koch Industries lobbyist pulled all these levers of influence. To pull the first lever, the lobbyist highlighted the deep ties that Koch Industries held with the legislator’s voters by listing the jobs that Koch provided in the state or congressional district in question. To pull the second lever, the lobbyist might talk about legislative issues that were important to the lawmaker’s party. What was left unsaid, but understood among everyone in the room, was the sizable volume of Koch’s political donations, which could help any politician’s standing in their party. Finally, the good lobbyist catered to a lawmaker’s personal quirks, talking about a given issue in terms of keeping taxes fair in one office, and talking about the same issue in terms of infrastructure investment in another.

  Bingel and the other Democrats for Koch helped the company understand the intricate power dynamics within the Democratic majority in Congress. It was clear that most Democrats in the House felt empowered to push the Obama agenda. But talking with staffers in the cafeterias yielded important insights about it. Obama’s chief of staff, the former congressman Rahm Emanuel, wanted Obama to push his agenda in three phases, with three major bills that would pass through the House and Senate like train cars in a row. First would be health care reform, second would be financial industry reform, and third would be climate change legislation. This was useful to Koch Industries, ExxonMobil, and other fossil fuel companies that wanted to derail the carbon control efforts. If the climate change bill was the caboose of the legislative train, then the opponents had more time to mount a fight against it.

  As they worked through their long Monday morning meetings and sketched ideas on the white notepad, Koch Industries’ lobbyists crafted a plan to do just that.

  * * *

  David Hoffmann worked for months on his study that explored how Koch Industries might adapt its business to a cap-and-trade bill. He was excited by his findings. Hoffmann’s committee discovered opportunities for Koch to make money in a market for carbon emissions. Invista released huge amounts of nitrous oxide into the air, a chemical that trapped heat at a magnitude of 290 times greater than carbon dioxide. If Invista cut its nitrous oxide emissions, it could reap extremely valuable carbon emission credits. The future under cap-and-trade might not be entirely bleak.

  In spite of these findings, Hoffmann wasn’t sure that anyone at Koch was interested in his committee’s work. It seemed like his reports and updates were being ignored. Hoffmann realized why after he was invited to attend a senior-level meeting of Koch’s lobbying operation. The topics of the meeting were EPA enforcement of the Clean Air Act and the Waxman-Markey cap-and-trade bill.

  The meeting convened in the same conference room where Koch’s lobbyists held their Monday-morning strategy sessions. Hoffmann didn’t usually attend such meetings, but was apparently invited to this one because of his role as an environmental compliance attorney. The first part of the meeting dealt largely with a new push by the EPA to strengthen air emission rules. Philip Ellender led the meeting, but the session was attended by some of the most senior people in Koch’s political operation.

  This included Richard Fink, who was second only to Charles Koch in the political shop. Fink had a hand in virtually all the facets of Koch’s political influence operations, from the Cato Institute think tank, to the academic studies at George Mason University, to the registered lobbyists. Only a handful of people knew about the inner workings of all these groups, and Fink was one of them.

  Also at the meeting was Laurie Sahatjian,II one of Koch’s most senior attorneys, who specialized in environmental compliance. She was joined by Don Clay, a former EPA official who had worked for Koch’s lobbying office since the 1990s.

  Before he sat down in the conference room, Hoffmann believed that Koch’s approach to the Waxman-Markey bill might be to mitigate its effects on the company, as he was trying to do. As the discussion got under way, he realized his opinion was in the minority.

  When the meeting turned to the cap-and-trade bill, the discussion began with some banter and small talk. Most of the attendees let it be known that they thought climate change was “a hoax,” Hoffmann recalled. This was difficult for him to absorb. The people in the room were very intelligent. Many of them had an almost encyclopedic knowledge of the emissions released from Koch’s factories and refineries and how those emissions interacted with the Earth’s atmosphere. The science of global warming was not fundamentally complex: carbon trapped heat in the atmosphere, more carbon trapped more heat, and humans were releasing unprecedented amounts of carbon into the sky.

  But Hoffmann realized that most of the people in the meeting doubted the underlying problem that Waxman-Markey sought to address. If global warming wasn’t real, then there was no justification for the law to exist. The feeling in the room was that the Waxman-Markey bill posed an existential threat to Koch Industries. Koch’s lobbying team was particularly aggrieved by the bill because it seemed as if the law was specifically targeting oil refineries in an effort to replace them with wind farms and solar panels.

  Koch’s lobbyists circulated a pie chart that seemed to prove their case. It highlighted a complicated provision of the cap-and-trade law that was seemingly being weaponized against Koch. The provision in question was the so-called carbon allotment. In essence, when the cap-and-trade law took effect, the government would instantly distribute allotments to the private sector that allowed companies to release a certain amount of greenhouse gases into the atmosphere. These allotments were the starting point of the carbon trading market; after a company used all its allotments, it would be forced to pay money for all the additional carbon it released.

  Under the proposed law, roughly $1 trillion worth of carbon allotments would be allocated in the beginning. The biggest share of the allotments, totaling about 37 percent, would be handed out to electrical utility companies. The theory behind giving so many allotments to utilities was that it would ultimately ease the regulatory burden on most consumers, who didn’t have a choice but to use electricity. The oil refineries, by contrast, would receive just 1.7 percent of the allotments. This tiny sliver of allotments was barely visible in the pie chart that Koch’s lobbyists were circulating. Even Hoffmann was swayed by this graphic presentation.

  “It was pretty clear that Congress was targeting the refinery industry,” he said. “It did seem starkly unfair.”

  There was even more for Koch to worry about. The government could ratchet down the allotments over time, squeezing the refineries even harder. It looked like a plan to make oil refining a thing of the past.

  As it happened, the carbon allotment provision of the Waxman-Markey law was written by Jonathan Phillips, the twenty-nine-year-old congressional aide who was toiling away in the basement of the Longworth Building. Phillips had no idea that he had just become Koch Industries’ chief antagonist. He was too busy working.

  * * *

  During the spring of 2009, the long-held liberal dream of passing a cap-and-trade bill was starting to look like a reality. Henry Waxman was in charge of the House Energy Committee, Ed Markey was lobbying his fellow Congress members, and President Obama was speaking in favor of its passage. The Committee on Global Warming spent years provoking Congress into action, and now that action was here. Phillips and his coworkers knew that they had one chance to get it right.

  Phillips was asked to write a significant portion of the bill that would create a mandate to spur energy production from renewable sources like wind turbines and solar panels. Creating an economically transformational law wasn’t nearly so
hard in 2009 as it had been in the early 1930s, when Franklin Roosevelt’s administration laid the groundwork for the New Deal. The basic policy machinery of the New Deal was still in place, which created a self-propelling momentum to increasing federal power. As Phillips and his colleagues sought to construct a cap-and-trade system, all they had to do was tweak the massive legislative structure that was already in place. The entire Waxman-Markey law, in fact, was really just an amendment of the Clean Air Act, the Federal Power Act, and other existing laws. It wasn’t even necessary to create a new federal agency to implement the law. The carbon cap could be imposed and policed by the EPA, and the renewable-energy mandate could be imposed by the Federal Energy Regulatory Commission, for example.

  This was, in short, Charles Koch’s worst nightmare. As the government became more powerful, it became easier to expand those powers.

  The technical aspects of the bill were mostly settled by early 2009. Phillips and his colleagues were now working on another aspect of the bill: its politics. They needed to win support from a majority of Democrats, which was problematic. One inarguable fact about the cap-and-trade bill is that it would put a price on carbon and thereby increase energy prices, at least in the near term. Oil prices would go up. Coal prices would go up. Electricity bills would go up. Congress members knew that supporting the bill would draw relentless political attacks when higher energy costs were realized. It was true that stemming carbon emissions might mitigate an eventual climate disaster, but this wouldn’t help a congressman get reelected in two years’ time.

  Phillips and his colleagues needed something more than an argument to persuade hesitant Democrats. Luckily, they did have something: an immense pot of money called carbon emission allotments. When a cap was put on carbon, the right to pollute with greenhouse gases would instantly be worth at least billions of dollars. And the government would possess a newly invented piggy bank from which it could disburse the money.

  Based in part on observations of carbon trading markets in Europe, most experts estimated that the price of carbon would float around $13 to $15 a ton in the first years of the market. The Waxman-Markey bill allowed for roughly $1 trillion in allotments during the first thirteen years of the law’s enactment. The initial allotments might become even more valuable over time because the bill called for total greenhouse gas emissions to fall 17 percent from their levels in 2005 by the year 2020.

  “We created a commodity out of nothing,” Phillips said.

  The committee invited conservative Democrats to negotiate how the allotments would be allocated, creating a windfall available to early adopters of the cap-and-trade system. Phillips and his colleagues held closed-door meetings with staffers for congressmen like Gene Green of Texas and Virginia’s Rick Boucher, whose home districts were rich in fossil fuel jobs. The political horse trading gained intensity through April and May as Waxman-Markey gained support in the House. Phillips said that the energy-backed Democrats bargained hard for a big share of allotments. The committee couldn’t help but comply. “The last thing we wanted to do was be responsible for shutting down US industry,” Phillips said. “So they had a captive audience.”

  The biggest share of allotments—about $378 billion worth—was given to the electrical utility companies. Just 6 percent of the allotments would be paid to support renewable-energy sources and energy efficiency plans at the state level. That was less than the 6.5 percent offered to natural-gas-fired utilities.

  Phillips said that the oil refiners pushed hard for more allotments, mostly through the office of Gene Green, who had multiple oil refineries in his home district in Texas. Ultimately, they agreed to a price. The bill would pay out $17.8 billion to the oil refiners. Phillips and his colleagues made this concession over the protests of environmental groups, who already claimed that the cap-and-trade system favored polluters. Even with that pressure coming from liberal Democrats, the subsidy to oil refineries seemed necessary to get the bill passed.

  “They got a great deal,” Phillips said.

  His view was not shared by Koch Industries’ lobbyists. While Phillips was using carbon allotments to target conservative lawmakers who were hesitant to support the bill, Koch’s lobbying shop was employing different tactics.

  David Hoffmann heard the strategy laid out during the meeting of Koch lobbyists. Koch decided to target moderate Republican politicians who might be tempted to support the measure. There were not enough Republican votes in Congress to kill the bill, but Republican resistance could help slow its passage and make conservative Democrats think twice about supporting it. These were the very same votes that Phillips and his colleagues were trying to secure in the early summer of 2009. If Koch could peel away support from the Republican side, the effort might collapse.

  “It was all about identifying those representatives who were on the fence,” Hoffmann recalled. “I just remember them talking about individual representatives they needed to reach out to.”

  There was no better target, in this effort, than a deeply conservative congressman from South Carolina named Bob Inglis. He was a close ally of Koch Industries, who had taken the company’s campaign donations and toured its factories. But Inglis would later admit that he was a “heretic” on one issue: global warming. It would make him an example to his peers—and destroy his career.

  * * *

  Bob Inglis was a reliably conservative Republican with a solidly conservative voting record from one of the most conservative congressional districts in the most conservative state in the country. It went without saying that he didn’t think global warming was real.

  “For six years, I said climate change was nonsense. I didn’t know anything about it but that Al Gore was for it,” Inglis recalled. “That was the end of the inquiry for me. Al Gore’s for it. I’m against it. Next.”

  Inglis might have remained rooted in this belief if he hadn’t been elected to Congress and then become a senior member of the House Committee on Science, Space, and Technology. During his tenure on the committee, Inglis traveled to Antarctica and toured a laboratory that tested ancient air bubbles trapped in ice cores from deep inside ancient glaciers. The evidence from these tests astounded Inglis and seemed simply inarguable. The evidence showed that atmosphere carbon concentrations were increasing dramatically. Al Gore wasn’t anywhere nearby to interject his opinion.

  The facts just stood alone.

  A slow change unfolded in Inglis’s thinking. The change was fed by other trips he took as a member of the Science Committee. He visited coral reefs that were dying because of the increased carbon levels in the water, which made oceans more acidic. He studied the heat-trapping effects of carbon and the enormous levels of carbon emissions from industrial activity. He came to believe that carbon emissions were a slow-moving, man-made disaster that might eventually endanger life on Earth.

  When he ran for Congress in 2008, Inglis ran on a platform that supported the renewable-energy industry. He saw it as a way to win jobs for his home district. Inglis didn’t see any political danger in this position—he had a keen feel for his voters in the Fourth District of South Carolina, a largely rural area that included the small cities of Greenville and Spartanburg. He thought that betting on conservation and renewable energy was betting on the home team. General Electric manufactured wind turbines in his district, and a Michelin factory there manufactured tires designed to increase gas mileage in cars. When he ran for office, one of his slogans was “The road to energy independence starts in South Carolina.”

  When Inglis talked about controlling carbon emissions, he talked about it using the vocabulary of markets, and capitalism, and innovation. Pollution became a problem if the pollution didn’t carry a price, he believed. This was the classic market problem of “externalities,” when companies externalized the cost of their production, like pollution. Carbon emissions were arguably the largest externality in the history of humankind. The cost of the emissions would be born heavily for future generations, and companies burning ca
rbon today didn’t have to pay a dime for it.

  “Coal-fired technology gets away with belching and burning into the trash dump of the sky without paying any tipping feeIII for the damage that it’s causing there,” Inglis said

  In spite of this conviction, Inglis couldn’t get behind the Waxman-Markey bill. He felt like it was too complex and too sprawling to actually work. But Inglis couldn’t let himself simply vote “no” on Waxman-Markey. “I had this rather Boy Scout notion that if you’re going to oppose, you better propose,” he said.

  In late May, Inglis proposed a law called the Raise Wages, Cut Carbon Act of 2009. The bill was similar to many New Deal laws in that it was severe, far reaching, and elegant in its simplicity. It proposed putting a tax on carbon but matching it with a cut to payroll taxes. This meant that any tax increase on consumers could be offset by a tax cut on their earnings. And if people wanted to avoid the tax on carbon, they had the freedom to shift away from carbon-intensive fuels. The tax would feature a “border adjustment,” meaning that it would be levied on imported products from China and other countries, ensuring that the cost of carbon wouldn’t be unfairly heaped on US manufacturers.

  In spite of this, Inglis was closely aligned with Koch Industries for most of his political career. After he was elected in 2004, Koch invited Inglis to tour the company’s Invista factory in his district, which provided about a thousand jobs. Inglis remembered Koch’s lobbyists flying in from DC to accompany him on the tour. He shook the hands of employees, learned about Invista’s product line, and had a delightful time. The affection seemed mutual. Between 2005 and 2006, Koch’s PAC donated $7,000 to Inglis’s campaign, becoming his fourth-largest contributor. For the 2008 campaign, Koch’s PAC donated $10,000 to his campaign, becoming his second-largest contributor.

  In 2009, the impending vote on the Waxman-Markey bill put Inglis in a bind. He had long claimed global warming was a danger, but now his convictions would be put to the test.