Tim McDonnell joined the Climate Desk after stints at Mother Jones and Sierra magazine, where he nurtured his interest in environmental journalism. Originally from Tucson, Tim loves tortillas and epic walks.
Men walk past an illegal oil refinery in Nigeria, one of the countries where US companies rely on fixers to arrange deals.
When big oil companies like Exxon-Mobil and Chevron set their sights on a prime new oil reserve in Africa, Asia, or the Middle East, the first phone call they make usually isn't to the government office putting it up for sale. Instead, they ring up one of their contacts in a small, elite group of so-called "fixers," a shady cabal of a few dozen well-connected billionaires who hold the strings on the market for the world's most valuable commodity. The fixer gets a fat fee and a straightforward assignment: Do whatever you need to do to get us those oil rights.
Unlike the US, where oil rights are held by individual property owners and leased to mining companies, in most developing nations oil rights are held by the government, and getting them means having a personal relationship with the right ministers—and knowing how to grease their palms. Since the mid-1900s, oil companies have relied on fixers to do their dirty work, crisscrossing the globe with a Rolodex stacked with the calling cards of corrupt heads of state. In the end, we get cheap oil, oil companies get plausible deniability, and the leaders of some of the world's most oppressive regimes get astronomically rich.
Ken Silverstein is a veteran journalist who has spent the last several years finagling his way into the traditionally hyper-reclusive world of oil fixers, gaining unprecedented access to many key players and amassing a portfolio of outrageous tales of bribery, exploitation, and obscene wealth. His book, The Secret World of Oil, hit shelves yesterday, and I spoke to him about how US companies continue to skirt anti-bribery laws in the high-stakes pursuit of oil.
Climate Desk: The oil companies that are using fixers, these are the companies that people are familiar with—Exxon, Chevron?
Ken Silverstein: In all the big oil companies, it would be rare for them never to use fixers in their deals. The bigger firms like Exxon have a lot of power and local knowledge and may handle this sort of thing on their own. But even Exxon, for part of the negotiations, is going to rely on a fixer. One of the reasons is that it's a dicey game. It's not always flat-out bribery, although in the old days it really was. The old model was that let's say you were a company and you wanted a concession in Nigeria. Well, you'd go to Fixer A and give Fixer A, say, a million dollars, and Fixer A would go to his friends in the Nigerian government and wire half a million dollars into a few Swiss bank accounts—or just, you know, a suitcase full of cash. That was it. Fixer A kept his half million, the government officials had their half million, and the company got its oil concession. Pretty simple, pretty straightforward.
"Fixer A would go to his friends in the Nigerian government and wire half a million dollars into a few Swiss bank accounts—or just, you know, a suitcase full of cash."
Well, that's changed a lot, partly because the US and Europe have outlawed bribery. So it's gotten dicier. There's a senior Halliburton official who's currently in jail, who was implicated in a massive bribery scandal that helped Halliburton win a multimillion dollar stake in Nigeria. Typically, though, the companies want one or two degrees of separation—you're not going to have your senior vice president meeting with a government official who you need to pay off. You want an intermediary, a fixer who can handle that, who, if anything goes wrong, you can disown all knowledge of and the fixer gets dumped and blamed.
Ken Silverstein Courtesy Verso Books
CD: Is any of this legal, what the fixers are doing? It seems like it's in a strange grey area.
KS: It's illegal if you get caught. But you'd rarely be so stupid now as to wire money into an official's account, you don't do it that way. Here's a real example from what Exxon did in Equatorial Guinea, one of the world's worst dictatorships sitting on untold amounts of oil. In some places where there is no corruption, there's closed-door bidding and whoever makes the best offer wins. In a place like Equatorial Guinea that's not the way it works. It's whoever figures out how to give the president and his inner circle the most money, gets the contract. And sometimes it may be flat-out bribes, but Exxon doesn't want to do that. What did Exxon do? They wanted land to build their compound, and to develop their project. And where did they buy the land? "Well, the president owns some land and it would be perfect for us." And so they just overpaid by an enormous amount of money, and it's clearly just putting money in the president's pocket.
CD: Here, in Texas or North Dakota or wherever, you have a private landowner who owns the mineral rights and can sell them to whoever they want. But in the countries you're talking about oil is owned to start with by the government. Does that lend the process to the kind of corruption you're talking about?
"Oil companies do like dictatorial governments because there are fewer decision makers, it's easier to arrange these deals."
KS: It's a very highly politicized process to get access to that oil, so yes it absolutely does lend itself to corruption. And it also lends itself to reinforcing the power of these regimes that frequently are dictatorships. I want to cite Ed Chow, a former Chevron executive. He said: "In Texas I can convince landowners to lease me their mineral rights. They get a royalty check every month and the companies leave a small footprint on their land. What's not to love? There's no equivalent in places like Nigeria or Angola or Kazakhstan. You get the land, but you don't provide a lot of jobs, you may be destroying the environment, and most of the profit goes to international capital. The companies don't have a strong case to sell to local communities, so they come to not only accept highly centralized government, but to crave it. A strongman president can make all the necessary decisions. It's a lot easier to win support from the top than to build it from the bottom."
That's precisely the environment where fixers thrive.
Once upon a time a father sat his son on his lap and said, "Son, one day you will have a bottle of wine, but you will not have a corkscrew to open it with. You will look around for some sort of apparatus with which to free the wine from the bottle."
"Daddy, should I use a knife to push the cork into the bottle?"
Fracking has done some incredible things for North Dakota: It has the fastest-growing economy and lowest unemployment in the nation, and it is second only to Texas in churning out oil. But as with any gold rush, the boom comes with a human cost for those involved—illness, injury, and fatalities. (For a firsthand view of conditions in North Dakota's fracking fields, watch the video above, which we produced in 2012.)
In fact, across all industries, North Dakota has the least-safe working conditions of any state in the country, according to federal data compiled in a new report from the AFL-CIO. The report ranked North Dakota dead last for workplace safety. (Massachusetts ranked the most safe.) North Dakota had by far the highest overall workplace fatality rate, 17.7 deaths per 100,000 workers—about five times higher than the national average. According to the report, that's one of the highest fatality rates ever reported in any state.
The rise in fatality rates coincides with the state's oil and gas boom: In 2007, before the boom was really underway, the rate was 7 deaths per 100,000 workers, still on the high end but not exceptional. The chart below shows how that rate began to skyrocket in 2010-11, just as oil production began to surge as well.
Of the 65 people killed on the job in North Dakota in 2012, 15 worked in the mining and oil and gas industry. Another 25 worked in construction. Some jobs that are classified as construction are in fact linked directly to oil and gas operations, like the workers who build well pad sites and roads before the actual drilling begins. (The Bureau of Labor Statistics records aren't granular enough to know exactly how many construction workers were killed doing jobs related to the oil and gas boom.)
A spokesperson for the North Dakota Petroleum Council pointed to a slight drop in premium rates for the state's worker's comp program as evidence that "workplace safety has improved," but the BLS data compiled in the AFL-CIO report tell a different story.
As blue-collar workers flooded the state for an essentially limitless number of high-paying, risky jobs driving trucks and working on fracking rigs at a breakneck pace, the energy industry's fatality rate in North Dakota climbed to unbelievable heights. According to the report, in 2012 the mining and oil and gas sector rate was 104 deaths per 100,000 workers, six times the national average; in the construction sector, the rate was 97.4 per 100,000, almost 10 times the national average.
Grand Cayman Island is a speck of white sand about twice the size of Manhattan floating in the Caribbean Sea halfway between Cuba and Belize. It's known mainly as an offshore tax haven—"Wolf of Wall Street" Jordan Belfort spoke to a gathering of business leaders there recently—and as a stopover for cruise ships packed with sunburned Americans sipping bright blue cocktails with paper umbrellas.
It's also a key haven of marine biodiversity, sporting 36 different coral species (corals are tiny animals that build rock-like reef structures) and 350 kinds of fish. Generally speaking, coral reefs are some of the most ecologically rich habitats on Earth, supporting 25 percent of marine life in less than one percent of the ocean environment. They're a first line of defense for coastal communities against devastating storm surges. In Cayman, as in many small island nations, reefs are the backbone of the local tourism and subsistence fishing industries. And they're rapidly dying off.
A study published last October found that on reefs around Little Cayman, a kind of suburb island adjacent to Grand Cayman, coral cover fell from 26 to 14 percent just between 1999 and 2004. Since the early 1980s, coral cover across the entire Caribbean has plummeted 80 percent, so that living corals now cover only 10 percent, on average, of available surface area. And a 2011 report from the World Resources Institute that labeled reefs around Grand Cayman as highly threatened found that what's happening there is a microcosm of a global trend: 90 percent of the world's coral will be at risk of disappearance by 2030, thanks primarily to ocean acidification and global warming, both products of greenhouse gases released by human activity.
California has already logged 1,000 wildfires this year.
The upcoming wildfire season could cost $400 million more to fight than the Forest Service and Interior Department have in their available budgets, according to a report those agencies released today.
The forecast estimates that the Forest Service and Interior will need to spend a combined total of about $1.8 billion fighting wildfires this year (though the actual amount could be significantly higher or lower), while only $1.4 billion is available for that activity. The difference will have to be drawn out of the budget reserved for other activities, including fire-related work like clearing brush and controlled burns. In other words, the cost of fighting fires will take resources away from the very programs designed to keep fires in check.
The projected expenditures are the highest in several years, according to a statement from the US Department of Agriculture, which oversees the Forest Service. After record-breaking drought in the West over the last year, this year's fire season is expected to be especially frightful—by mid-April, California had already tallied nearly 1,000 fires for 2014 (without even counting fires occurring on federal land).
"With climate change contributing to longer and more intense wildfire seasons, the dangers and costs of fighting those fires increase substantially," Interior Dept. Assistant Secretary Rhea Suh said in the statement.
If you live in a wildfire-prone area, don't panic—federal firefighters will still be hard at work across the country this summer. But this is a familiar song and dance for the Forest Service: The agency has had to borrow against itself for firefighting costs in 7 of the last 12 years. (Last year was especially bad, as the sequester slashed the fire prevention budget.) The problem stems from the fact that firefighting costs have to be drawn out of the agency's fixed operating budget, rather than a special emergency fund like the kind used by FEMA to pay for recovery from other natural disasters. When costs exceed that budget, preventative programs—which likely do more to limit the devastation than firefighting itself—suffer.
"This is obviously not a sustainable approach to managing any budget," especially with the high firefighting costs of recent years, said Nature Conservancy policy analyst Cecilia Clavet.
Budget legislation recently introduced in Congress and backed by the White House aims to remedy the recurring problem by creating an emergency fund for federal firefighting agencies to tap when their costs go beyond the fixed budget. But that bill is still in its early stages, and in any case it would only take effect starting in fiscal year 2015, which begins in October—after the fire season has largely passed.