Political Intelligence

DRILLING DEMS

If you tuned in to the gubernatorial debates, you heard Dan Morales making hay out of Tony Sanchez’s drilling for oil in Falcon State Park shortly after Sanchez left the Texas Parks and Wildlife Commission. Sanchez isn’t the only Democratic primary candidate drilling on public park land. Barbara Canales-Black, who is running for the open Senate District 20 seat in South Texas, is co-owner of BNP Petroleum, which has recently begun drilling for natural gas on Padre Island National Seashore. Canales-Black’s firm quietly obtained the permit in February from the National Park Service, and the drilling has since become a hot issue in South Texas and in the election. She has three primary opponents, including McAllen State Represen-tative Juan Hinojosa, and a runoff is possible. (At press-time, the primary is still five days away.) Canales-Black is the scion of a well-connected political family and has been using her oil wealth to outspend Hinojosa three to one in the race. Her father is Tony Canales, Tony Sanchez’s private attorney. (Canales, you may recall, was the one who hired the private dicks involved in the embarrassing investigation–some say smear campaign–against former Secretary of State Henry Cuellar.)

To access the site, BNP had to bulldoze a road through pristine dunes. The site itself is covered by a 1.7 acre well-pad made of crushed rock. As obtrusive as this is on an almost completely undeveloped national seashore, this well may be just the beginning. The company’s permit applies to a 1300 square-kilometer drilling area on the island, and BNP also has plans to do slant drilling–for oil, not gas–from the shore out into the bay and gulf. According to Erin Rogers of the Sierra Club, the company has benefited from the Bush administration’s “streamlined” National Park drilling rules, which do not require a separate environmental impact statement for each new well in a permitted drilling area. To add insult to injury, as recently as eighteen months ago the U.S. Fish and Wildlife Service had planned to designate as much as 7,000 acres in the area as critical habitat for the piping plover, a threatened bird. This designation would have made much of BNP’s proposed drilling area off limits. But BNP came back with their own habitat study, which predictably recommended protecting a much smaller portion of the seashore. Backed by Nueces County and local Chambers of Commerce, the company successfully lobbied FWS to reduce the protected area to 2,000 acres.

A TANGLED WEB

Add the Texas Railroad Commission to the list of regulatory agencies and investigators trying to “pierce the corporate veil” of Enron. On January 17, the general counsel for the commission, which regulates oil and gas production in Texas, sent a letter to Enron notifying the company of nine polluted sites and asking for their plans on cleaning them up. The sites are primarily in Nueces and Aransas Counties at old gas plants and dehydrator stations.

In the missive, General Counsel Boyd Johnson related that the files at the commission indicate Enron acknowledged responsibility for most of the sites, and had even made some effort over the years to clean a few of them up, but that was about the extent of the cooperation. “The file review shows instances of Enron not reporting pollution events and tardiness in completing assessments and site remediation,” the regulator stated. “Further, there is evidence that Enron has failed to respond to prior staff requests for information and, therefore, our files are not complete.”

Johnson then gave the company 15 days to report back, with the threat that the Railroad Commission would follow the company through bankruptcy if necessary to get the sites cleaned. Thirty-nine days later, Enron’s K Street Washington D.C. bankruptcy lawyers at Weil, Gotshal & Manges finally wrote back. Crafted in legalese, the letter essentially tells the Commission to take a hike, and lays out a philosophy that is the ultimate teenage fantasy: ownership without responsibility.

At the outset David Hird, writing for the firm, dismissed the first and last sites on the railroad commission’s list, in Kleberg and Webb counties respectively, since they are indisputably not owned by Enron. And indeed, the Rio Paisano Ranch dehydrator station in Kleberg County is held by Florida Gas Transmission Company, who has written the commission to acknowledge that fact. The seven remaining sites on the list were all previously owned and operated by Houston Pipe Line Company, a former subsidiary of Enron, Hird conceded. Of course, it would be the height of foolishness to think a parent company like Enron would have responsibility for its subsidiary. Hird then explained why Enron must be let off the hook. If you can follow this, there’s a Congressional investigating committee that needs you in Washington right now.

In June 2001, Enron sold the stock of HPL to AEP Energy Services, who of course was not excited to get the seven polluted sites. So, prior to the sale, HPL transferred title to the seven sites to TerraCo, L.L.C., a separate legal entity, but also another Enron subsidiary. “Enron did, however, agree to indemnify AEP for the cost of remediation of these sites in connection with the sale of HPL stock,” wrote Hird. So there you go: “Indemnify,” that means “to compensate for damages or loss sustained, expenses incurred, etc.,” according to the Random House Dictionary of the English Language.

Not so fast.

Hird then explained that since Enron was never the “owner” or “operator” of the sites, the company had no legal responsibility to clean them. It gets better: “We are aware that in prior correspondence between representatives of Enron’s affiliates and the Railroad Commission, the imprecise statement was made that following the sale of HPL stock to AEP, Enron ‘retained’ the obligation to complete remediation of these sites,” wrote Hird. “In fact, Enron’s only legal obligation ran to AEP under its indemnity, not to the Railroad Commission. TerraCo, an Enron subsidiary, became the entity responsible to the Commission for undertaking remediation, not Enron itself.” Aha.

The U.S. Supreme Court ruled in 1998 that a “parent corporation is generally not responsible for the environmental obligations of its former or current subsidiaries,” Hird wrote. He accepted that prior to Enron’s bankruptcy the distinction between the company and its subsidiary was “immaterial.” But not any more. Now, if AEP (or anyone else) wanted help from Enron cleaning the sites, it would have to get in line with all the other creditors.

But if the Railroad Commission tries to get TerraCo to clean up the sites, it won’t get far. “TerraCo, Enron’s current subsidiary, is not in bankruptcy at the present time, but does not have the financial resources to continue the remediation activities at these sites,” explained Hird. “Moreover, Enron is restricted from advancing money to TerraCo,” because of the bankruptcy. (Read: Go find another tree to bark up). HPL has no current affiliation with Enron, Hird helpfully advised the Commission, so if regulators wanted to go after them for the cleanup costs, that would of course be okay.

Where does this leave the good people of Texas? Robert Heith, a spokesman for the Railroad Commission, says that the agency is still trying to verify the claims in the Enron letter and decide its next move. “We haven’t made any determination who is responsible yet,” he says. We’re not holding our breath.

PLACES WE’D LIKE TO VISIT

New Mexico continues to lead the way in sensible drug policy reform. This is the state where Republican Governor Gary Johnson has come out strongly against the drug war, arguing against the incarceration model and in favor of treatment. Far from ending the outspoken governor’s career, the message seems to have struck a chord with fiscal conservatives in New Mexico. Now the legislature has passed significant reforms in its most recent session, including more sentencing discretion for judges, increasing defendants’ protection from asset forfeiture, and waiving the federal ban on benefits for former drug offenders. The legislature has also created a Prison Population Control Commis-sion, which will evaluate the cases of nonviolent drug offenders currently locked up and determine “the appropriateness of their continued incarceration,” according to the New Mexico Drug Policy Project. (Such an evaluation would take a very long time here in Texas, but we know some people who would volunteer to help.) Look for the feds to begin punishing New Mexico immediately. In Illinois, meanwhile, Republican Governor George Ryan has recently said that he would consider commuting the sentence of every inmate on Illinois death row to life in prison. Ryan had previously placed a moratorium on executions in Illinois, following a spate of overturned convictions of death row inmates. Where do they grow this kind of Republican?