Smoke and Mirrors: Obama DOE Fracked Gas Export Study Contractor's Tobacco Industry Roots

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At first, it was kept secret for months, crypticallyย referred to only as an โ€œunidentified third-party contractor.โ€

Finally, in November 2012, Reutersย revealed the name ofย the corporate consulting firm the U.S. Department of Energy (DOE) hired to produce a study on the prospective economic impacts of liquefied natural gas (LNG)ย exports.

LNG is the super-chilled final product of gas obtained – predominatly in today’s context – via the controversialย hydraulic fracturing (โ€œfrackingโ€)ย process taking place within shale deposits located throughout the U.S. This โ€œprizeโ€ is shipped from the multitude of domestic shale basins in pipelines to various coastal LNG terminals, and thenย sent on LNG tankers to the global market.ย 

The firm:ย National Economic Research Associates (NERA) Economic Consulting, has a long history of pushing for deregulation. Its claim to fame: theย deregulationย โ€œstudiesโ€ it publishes on behalf of the nuclear, coal, and oil/gas industry – and as it turns out, Big Tobacco,ย too.

Alfred E. Kahn, the late โ€œFather of Deregulation,โ€ founded NERA in 1961 along withย Irwin Stelzer, now a senior fellow and director of the right-wing Hudson Instituteโ€™s Center for Economicย Policy.ย 

The NERA/Obama DOE LNG export economic impact study, released in early-December 2012,ย concluded that exporting the U.S. shale gas bounty is in the best economic interest of the country. The commenting period for that study closes today at 4:30 PM EST.ย 

This conclusion drew metaphorical hisses from many analysts, including prominent shale gas market economist and former Wall Street investorย Deborah Rogers, who now maintains the blog Energy Policy Forum. Her critique cut straight to the very foundation of the study itself, stating that โ€œeconomic model[s] are only as good as theirย inputs.โ€

She proceeded to explain,

In fact, it is neither difficult nor unusual for models to be designed to favor one outcome over another. In other words, models can be essentially reverse engineered. This is especially true when the models have been commissioned by industries that stand to gain significantly in monetary terms. Or government agencies which are perhaps pushing a politicalย agenda.

Beyond its history working as a hired gun for the fossil fuel industry, NERA also has deeper historical roots producing โ€œsmoke and mirrorsโ€ studies on behalf of the tobacco industry.ย The long view of the firm’s past is something NERA would likely rather see โ€œgo up in smoke,โ€ forever buried in the historical annals. But that would be a disservice to U.S. taxpayers since NERA continues to receive government contracts to produce tobacco-era disinformation to thisย day.ย 

NERA and the โ€œTobaccoย Playbookโ€

Many fossil fuel industry public relations flacks learned the tactics of mass manipulation by reading the โ€œtobacco playbook,โ€ meticulously documented in Naomi Oreskes’ and Erik Conway’s classic book, โ€œMerchants of Doubt.โ€ย 

โ€œDoubt is our product,โ€ a tobacco industry CEO once said of the playbook, โ€œsince it is the best means of competing with the ‘body of fact’ that exists in the minds of the general public. It is also the means of establishing a controversy.โ€ย ย 

NERA Health โ€œBenefitsโ€ ofย Smoking

Theย University of California-San Francisco’s Tobacco Archivesย reveal NERA worked on behalf of the tobacco industry dating back at least toย 1986.

A May memoย from that year written by thenย NERA Vice Presidentย William B. Shew (who now works at the previously mentioned Hudson Institute as an Adjunct Fellow alongside NERA Founder, Irwin Stelzer) addressed to Arnold & Porter attorney Thomas Silfen says the tobacco industry should aim to explain the so-called health โ€œbenefitsโ€ ofย smoking.

Most studies don’t explain โ€œthe satisfactions that induce smokers to put up with health hazards,โ€ Shew explains in the memo. โ€œThis imbalance would be rectified by looking at the satisfaction derived fromย smoking.โ€

At the time of the internal memo’s publication, Arnold & Porterย served as national counsel for Philipย Morris.

A memo published in 1988 by Silfen posits that Big Tobacco has an obligation going forward to overcome its โ€œlong agony over health issuesโ€“to get the industry out of the ‘it hasn’t been proven’ trap once and forย all.โ€

Attempt to Defeat L.A.’s Restaurant Smokingย Banย 

Working alongside public relations industry giant Ogilvy-Matherย and the Tobacco Institute, NERA alsoย attempted to defeat the then-proposed smoking ban inย Los Angeles County in 1990, the Tobacco Archivesย reveal.ย 

SourceWatch details that the Tobacco Institute hired Ogilvyย โ€œto provide public affairs consulting services aimed at helping the Instutitute fight cigarette excise taxes, public smoking restrictions and to help with coalition building issues,โ€ proceeding to explain that it helped to โ€œdevise ad campaigns to take the public’s focus off the health hazards of secondhand tobaccoย smoke.โ€

Among other accolades, Ogilvy helped BP rebrand itselfย โ€Beyond Petroluem,โ€ a propaganda campaign which won the corporation now infamous for its Gulf Coast oil disasterย theย PR Week โ€œBrand of the Yearโ€ in 2001.ย Critics at the time called it a case of โ€œgreenwashing.โ€ย 

Yet in the end, it was a case of โ€œtoo little, too lateโ€ for NERA, Ogilvy and the Tobaccoย Institute.ย 

In 1990,ย San Luis Obispo, CA โ€œbecame the first city in the world to ban indoor smoking at all public places, including bars and restaurants,โ€ according to theย San Francisco Gate. By 1998, California adopted these regulations as theย law of the land statewide.

NERA Offers Philip Morris Advertisingย Analytics

In 1992, tobacco giantย Philip Morris hiredย NERAย to analyze whether cigarette advertisements made an impact on consumption habits. This came during a time when the industry facedย sharp scrunity for whitewashing the dangerous health impacts of smoking in its ads. ย 
ย 
Given this premise, it’s no shock NERA concluded that the concerns about the effectiveness of Big Tobacco’s advertising charm offensive were overblown.ย 
ย 
โ€œThe issue of whether cigarette advertising has had any effect on cigarette consumption per adult in Western countries over the last several decades remains uncertain,โ€ NERA explained in the lenghty report now posted on the Tobacco Archives. โ€œHowever, it seems clear that advertising has had at most a minor effect, if any, on consumption per adult.โ€
ย 

NERA/Philip Morris’ War on OSHA and Maryland Workplace Smokingย Regsย 

Later, in 1994 and 1995, the Tobacco Archives also reveal that NERA served as a contractor forย Philip Morris (now owned by Altria Group), taking the fight to an Occupational Safety and Health Administration (OSHA)ย proposal to implement regulations for smoking on theย job.ย 

OSHA proposed banning smoking everywhere within the workplace except for in small, desiginated and isolatedย lounges.

Dr. Albert L . Nicholsย authored a Dec. 1995 NERAย economic study contracted out by Philip Morris which critiqued OSHA regulations. That study predictably concluded that OSHA‘s regulations were โ€œdraconianโ€ in nature, suggesting OSHA relied on โ€œpatently ludicrousโ€ economicย assumptions.

While NERA/Philip Morris waged its battle against OSHA, NERA also devoted itself to fighting back against Maryland’s state-level workplace smokingย regulations.

A Feb. 1995ย Associated Press article quotes Nichols saying that cigarette sales in Maryland โ€œcould fall by $27 millionโ€ on an annual basis if the regulations areย implemented.

Much to NERA‘s chagrin, a month later, the proposed regulations became Maryland state law.

Should Firm with Big Tobacco Roots Beย Trusted?

Theย Sierra Clubย is skeptical of the Obama DOE‘s choice of NERA as the contractor to perform the fracked gas LNG export study. The Club just filed a Freedom of Information Act request to ascertain exactly how the Department went about choosing NERA for its โ€œstudyโ€ that will play a large part in shaping the future of global energyย markets.

โ€œDeciding to export the U.S. gas supply is a major public decision,โ€ Deb Nardone, director of the Sierra Clubโ€™s Beyond Natural Gas Campaign,ย said in a press release. โ€œWe deserve a full and fair conversation about it. Thatโ€™s why we deserve to know how and why DOE picked this anti-environmental, pro-corporate consultant for this crucialย report.โ€

With easily apparent deep-seated roots dating back to the halcyon days of Big Tobacco, the DOE‘s NERA selection begs the question: Can one view the NERA/Obama DOE economic findings on LNG exports as anything but a deeply cynical PRย ploy?

Update (5:33 PM CST): Over 200,000 public comments were delivered to the DOE, according to aย Sierra Clubย press release. โ€œThe public should be outraged to hear that domestic supplies of gas would be shipped overseas and that households which rely on a paycheck will see no benefit, which is clearly stated in the report,โ€ said Nardone. โ€œMost Americans rely on a paycheck. Meanwhile communities all across the country are left footing the bill to clean up contaminated water supplies and with increased medical bills due to air pollution. Exporting fracked gas is clearly not in the best interest of the United States. DOE and President Obama must not accept this flawed study.โ€ย 

Photo Credit:ย ShutterStock |ย Oleksandrย Kalinichenko

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Steve Horn is the owner of the consultancy Horn Communications & Research Services, which provides public relations, content writing, and investigative research work products to a wide range of nonprofit and for-profit clients across the world. He is an investigative reporter on the climate beat for over a decade and former Research Fellow for DeSmog.

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