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Black Gold for the GOP

Trevor Rees-Jones made his name as a Dallas fracking pioneer. So what's he doing bankrolling political attack ads halfway across the country?

In addition, four Duke University researchers who sampled water wells in the region as part of a peer-reviewed study determined that wells within 1,100 yards of a gas rig contained 17 times as much "thermogenic" methane—a type that originates deep underground—as wells located farther away (PDF). The DEP found that Stroud's methane was also thermogenic but argued that it may have come from something besides drilling. Doubting the agency's impartiality, Todd O'Malley, Stroud's lawyer, submitted a freedom of information request and learned that Chief's Richard Adams had written his former DEP colleagues complaining that Chief was being unfairly targeted and asserting that the pollutants in Stroud's well were not "characteristic" of what one encounters when "simply drilling a gas well." When a DEP manager disputed this, Adams responded that he would call to discuss the matter. He later showed up alongside state employees to resample Stroud's water. While neither Chief nor DEP officials responded to my repeated requests for further details, O'Malley believes that "the DEP's handling of our case has been improperly influenced by its connections to Chief."

In 2010, gas firms operating in the Marcellus Shale racked up more than 1,200 environmental violations. Rees-Jones' company led the pack with 176.

Rees-Jones' clout in Pennsylvania goes beyond his environmental adviser's revolving-door relationship. In 2010, he donated $50,000 to Tom Corbett's gubernatorial campaign, helping him trounce Dan Onorato, his Democratic opponent. Corbett returned the favor by proposing an "impact fee" five times smaller than the gas extraction tax proposed by state Democrats. (Pennsylvania is the only major gas-producing state lacking such a tax.) The governor also appointed Terry Bossert, a government affairs executive for Chief, to his industry-dominated Marcellus Shale Advisory Commission. In July, the commission released recommendations for regulating the industry that were panned by environmental groups.

"You have to literally have a smoking gun and a bullet and a body lying dead in front of you for DEP to act," Stroud told me later, standing by the water well on her now-abandoned property. There was so much methane in her well that the agency had Chief install a vent to keep it from exploding. Without clean water, her home, once valued at $160,000, is practically worthless. The family is also $22,000 in debt from covering her medical bills, potable water, and now rent on a new place. Since Chief won't compensate Stroud for her losses, she intends to file a lawsuit.

She's not alone in her predicament. According to activist Michael Lebron, at least 92 other Bradford County water wells near drilling sites have shown evidence of contaminated drinking water. In 2010, gas firms operating in the Marcellus Shale accrued more than 1,200 environmental violations, and Rees-Jones' company led the pack with 176. In one case, Chief was cited for discharging wastewater directly into two streams. In another, it was ordered to pay $180,000 for nearly overfilling a fracking waste pit and failing to report a spill.

Some Pennsylvanians see an upside to the state's three-year drilling boom. Gary Wilcox, who owns a 100-year-old jewelry store in Towanda, told me that selling roughnecks and their families gold-plated and diamond-studded gas derrick charms has "increased business quite a bit." Yet many locals I spoke with were having second thoughts about all the drilling. A security guard at the gas well behind Stroud's home explained why he wouldn't let me past the gate by asking, "Do you really think it's good?"

"Do you?" I asked.

"No," he replied.
 

In the run-up to the 2010 midterm elections, a bare-knuckled attack ad hit the airwaves in Democrat Maurice Hinchey's upstate New York congressional district. It juxtaposed a clip of the congressman saying "Shut up!" against claims that he'd voted to raise "job-killing taxes" and cut Medicare. The claims were deeply misleading, according to the nonpartisan watchdog site FactCheck.org. But that didn't seem to trouble its creator, American Crossroads.

 

"If you're interested in having reasonable regulations on frack drilling, as I am," says Rep. Maurice Hinchey, "a CEO for a shale gas company can decide to spend millions on ads attacking you and never be held to account."

Hinchey wasn't a logical target for the group. For one, he was a shoo-in; New York Times elections soothsayer Nate Silver put his chances of winning his deep-blue district at 93 percent. Yet Hinchey stood out from other congressional Dems in his commitment to better fracking oversight. In 2009, he coauthored the FRAC Act, which would do away with a loophole preventing the EPA from regulating toxic fracking fluids—a newer version is stalled in Congress. American Crossroads denied it targeted him for this reason, but Hinchey sees the gas industry's fingerprints. After Citizens United, he told me, "If you're interested in having reasonable regulations on frack drilling, as I am, a CEO for a shale gas company can decide to spend millions on ads attacking you and never be held to account."

In Pennsylvania, Crossroads GPS—the arm of American Crossroads that doesn't have to disclose its donors' identities—spent at least $880,000 attacking Joe Sestak, a former Democratic congressman and fracking critic who narrowly lost his 2010 Senate bid to Republican Pat Toomey. Big donors hid behind the dark-money group because they knew "citizens didn't trust them," Sestak says. The fact that they can now do so, he adds, "has done a great deal of harm to this idea of democracy of ours."

Rees-Jones' donations extend well beyond his direct business interests. Like the billionaire industrialists Charles and David Koch, he seems to favor a long-term strategic approach. In 2010, he gave $150,000 to the Associated Republicans of Texas, which spent $2.1 million to ensure GOP dominance of the state Legislature in advance of congressional redistricting. He donated $250,000 to the Wisconsin Club for Growth, a dark-money outfit that spent heavily to defend GOP state legislators from recall following the state's epic battle over public-employee unions. He also gave $500,000 to Texans for Lawsuit Reform, which aims to cap payments to plaintiffs' lawyers—another Democratic power base. His giving in Pennsylvania has a fringe benefit: The state's new GOP majority plans to reallocate its Electoral College votes to help swing the 2012 election.

"This idea that there's some objective organizational structure in Texas that really puts the health and safety of Texans first is bullshit," says a Dallas City Councilwoman.

Rees-Jones will need plenty of political capital if he's going to maintain Chief's brisk rate of expansion. New York and Maryland have banned fracking pending investigations into its environmental effects, and contamination scandals are heating up in Pennsylvania. In recent years, Rees-Jones sold most of Chief's Marcellus Shale holdings (pocketing another $2 billion or so), but he still owns a stake in PEC Minerals, a company with mineral rights in 31 states. He also plans to start fracking for oil, though he won't disclose the location of the little-known shale bed he's targeting.

Opening new fracking fronts nowadays requires the sort of discretion Chief has perfected: Your land men quietly snap up leases. You foster goodwill by donating to civic groups. You build obligations by giving to the right political players. By the time most people realize what's happened, the gas is flowing. Then you sell and move on.

The latest test case for this approach may be on Chief's home turf; the company is pursuing a drilling permit in Dallas, where Rees-Jones' generosity has bought him plenty of political leverage. This convergence worries Angela Hunt, a fracking critic who sits on the City Council. "This idea that there's some objective organizational structure in Texas that really puts the health and safety of Texans first is bullshit," she says. "The folks who are a part of this theater should be ashamed of themselves. They don't care about us. They care about the profit that it brings."
 

This past June back in Pennsylvania, feeling she had nowhere else to turn, Crystal Stroud decided to take her complaint to the top. She showed up in Harrisburg, the state capital, with 100 anti-fracking activists to demand a meeting with Gov. Corbett.

The governor's staff locked her out of Corbett's office, whereupon the activists moved in to chant their support for her. Someone in the crowd managed to scrape together $98 in campaign pledges and then called in to Corbett's office to see if it was enough to get her an audience—knowing full well it wasn't. "I'm not going to stop this industry; they are too powerful. There's too much money involved," Stroud told me. "Speaking out is the only thing that doesn't make me feel powerless."

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