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- 07/10/14--12:49: _New bank leak shows...
- 07/08/14--14:14: _Even low doses of a...
- 07/09/14--11:28: _Feds seek new autho...
- 07/10/14--10:00: _Class-action suit: ...
- 07/10/14--10:36: _Chattanooga wants f...
- 07/10/14--11:57: _Bush bundlers boost...
- 07/11/14--17:44: _Is this super PAC s...
- 07/14/14--10:48: _Attack ads may actu...
- 07/15/14--02:00: _Hobbled IRS can't s...
- 07/15/14--03:00: _New scrutiny on cam...
- 07/16/14--10:53: _Most senators wait ...
- 07/17/14--13:10: _How to fix the IRS ...
- 07/18/14--12:27: _Congressman defends...
- 07/18/14--13:11: _Trains, amputations...
- 07/18/14--12:36: _Tea party scandal b...
- 07/21/14--11:15: _How oil and gas fir...
- 07/21/14--09:40: _Obamacare-driven co...
- 07/21/14--06:59: _Four years after pa...
- 07/22/14--07:14: _Energy influence in...
- 07/22/14--06:50: _Politicos souring o...
- 07/10/14--12:49: New bank leak shows how rich exploit tax haven loopholes
- 07/08/14--14:14: Even low doses of arsenic trigger cancer in mice, study finds
- 07/09/14--11:28: Feds seek new authority to recoup Medicare Advantage overcharges
- 07/10/14--10:36: Chattanooga wants feds to pre-empt broadband ban
- 07/10/14--11:57: Bush bundlers boost pro-Gillespie super PAC
- 07/11/14--17:44: Is this super PAC subverting disclosure rules?
- 07/14/14--10:48: Attack ads may actually be benefiting Obamacare enrollment
- 07/15/14--02:00: Hobbled IRS can't stem 'dark money' flow
- Bled 14 percent of its staff positions during the past two decades while the number of nonprofits it regulates has grown by more than 40 percent.
- Scaled back inquiries, as the number of nonprofit group tax returns investigated recently fell by 10 percent, from 11,699 in 2011 to 10,575 last year. Applications for “social welfare” nonprofit status jumped 27 percent from 1,777 to 2,253 during the same time.
- Reduced the number of denials for exempt status for social welfare nonprofits from nearly 4 percent during the early 1980s to less than a quarter-percent in 2013.
- Softened, tabled or reversed course on at least a dozen proposed policy positions or enforcement plans after criticism from politicians and lobbyists.
- 07/15/14--03:00: New scrutiny on campus sexual violence highlights Center findings
- 07/16/14--10:53: Most senators wait to take e-filing leap
- Mark Begich, D-Alaska
- Barbara Boxer, D-Calif.
- John Cornyn, R-Texas
- Joe Donnelly, D-Ind.
- Dianne Feinstein, D-Calif.
- Al Franken, D-Minn.
- Kirsten Gillibrand, D-N.Y.
- Martin Heinrich, D-N.M.
- Tim Johnson, D-S.D.
- Angus King, I-Maine
- Patrick Leahy, D-Vt.
- Claire McCaskill, D-Mo.
- Jack Reed, D-R.I.
- Bernie Sanders, I-Vt.
- Chuck Schumer, D-N.Y.
- John Walsh, D-Mont.
- Sheldon Whitehouse, D-R.I.
- Ron Wyden, D-Ore.
- 07/17/14--13:10: How to fix the IRS nonprofit division
- 07/18/14--12:27: Congressman defends payday lending industry
- 07/18/14--13:11: Trains, amputations and the roots of why kids are on the run
- 07/18/14--12:36: Tea party scandal brews FOIA backlog at FEC
- 07/21/14--11:15: How oil and gas firms gained influence and transformed North Dakota
- 07/21/14--09:40: Obamacare-driven competition lowering rates in some states
Colorado: Anthem Blue Cross Blue Shield says it wants to lower rates by an average of 5.1 percent while two nonprofit carriers, Colorado Access and Colorado HealthOP, plan to reduce premiums by 22 and 9.63 percent, respectively.
Maryland: While CareFirst is seeking a whopping 28 percent average increase to its individual rates, it likely will lose customers to Kaiser Permanente and Evergreen Health Cooperative, both of which are saying they will reduce premiums for 2015 coverage.
Oregon: Oregon’s Health CO-OP is seeking a 16 percent decrease in premiums for its gold-level plans while a competitor, Health Republic, is proposing to increase rates for comparable coverage by 13 percent. Overall, Oregon’s Health CO-OP says it plans to cut premiums by 21 percent.
- 07/21/14--06:59: Four years after passage, House keeps trying to kill Dodd-Frank
- 07/22/14--07:14: Energy influence in North Dakota is expanding — so what?
- 07/22/14--06:50: Politicos souring on FEC advice?
The identities of thousands of wealthy offshore clients of a major Channel Isles private bank have been leaked to the International Consortium of Investigative Journalists.
The individuals include donors to the British government, which has been outspoken against tax havens, and some of the most prominent people in British life.
The ICIJ has exclusively allowed The Guardian newspaper to analyze more than 20,000 of the names, all of whom had dealings with a discreet Jersey, Channel Islands branch of Kleinwort Benson, a famous London firm which specializes in “wealth management”.
In the interests of transparency, ICIJ and The Guardian will publish some of their findings over the coming days, detailing the offshore links of political donors; international celebrities; judges; sportsmen; businessmen; and British aristocrats.
Names include opera singer Placido Domingo, Dire Straits musician Mark Knopfler, vacuum cleaner tycoon James Dyson and Hollywood actor Mel Gibson.
Today The Guardian identifies party donors who over the years have paid more than £8m to the governing Conservative party.
One of the recipients of donations is Britain’s newly-promoted financial services minister, Andrea Leadsom, who has run into a “Cash for Office” allegation after she told The Guardian she was unaware of the size of large offshore donations to the Conservatives made by her own family.
Read the full story on ICIJ.org.
Clarification: Sir James Dyson’s former trust in the Channel Islands was through Orbis Trustees Guernsey Limited rather than Kleinwort Benson, which purchased Orbis after the trust was wound up in 1999, according to Dyson’s representatives. No income was derived from the trust, nor was any tax avoided.
ICIJ is a project of the Center for Public Integrity founded in 1997 to extend the Center’s style of watchdog journalism, focusing on issues that do not stop at national frontiers: cross-border crime, corruption, and the accountability of power.
Researchers at the National Institutes of Health fed mice very low doses of arsenic and were surprised to find that many of them developed lung cancer, according to a study just published.
What made the results so surprising was that in previous studies, mice were fed extremely high doses of arsenic before they developed excess tumors. In the new study, mice fed lower doses of arsenic were more likely to develop tumors. The lowest dose is similar to amounts some people with private wells in the United States drink.
The Center for Public Integrity recently exposed how lobbying by pesticide companies that sell weed killers containing arsenic has delayed the EPA from issuing its findings and taking action on them for years.
“This is the first study to show tumor development in animals exposed to very low levels of arsenic, levels similar to which humans might be exposed,” Michael Waalkes, lead author on the paper and director of the National Toxicology Program Laboratory, said in a press release. “The results are unexpected and certainly give cause for concern.”
Studies in countries such as Taiwan, Chile and Bangladesh have shown that people who drink high doses of arsenic get cancer skin, bladder and lung cancer. High levels of arsenic in well water in Bangladesh created one of the worst environmental disasters in history.
Extrapolating from those studies, scientists with the U.S. Environmental Protection Agency have tentatively concluded that arsenic is a serious problem at low doses. A draft report on arsenic concluded that for every 100,000 women who drink the legal limit of arsenic in water each day, 730 will get lung or bladder cancer from it.
Some scientists argue that there is a threshold dose, below which arsenic is harmless. But the new study casts serious doubt on this contention.
NIH researchers fed adult mice arsenic before breeding and continued to give offspring arsenic in water throughout their two-year lives. Fifty-one percent of the male mice given arsenic at 50 parts per billion developed tumors, compared to 22 percent of mice given no arsenic. Fifty-four percent of male mice given 10 times that amount of arsenic also developed tumors. But there was no significant increase in tumors among mice given a much higher dose of 5 parts per million.
Researchers were not expecting worse effects at lower doses and say their findings raise concern about levels of arsenic to which people are exposed. The current drinking-water limit in the United States is 10 parts per billion.
“Although this is only one study, it adds to a growing body of evidence showing adverse health effects from very low exposures to arsenic, raising the possibility that no level of arsenic appears to be safe,” Linda Birnbaum, director of the National Institute of Environmental Health Sciences and the National Toxicology Program, said in a statement.
Federal officials, facing criticism they overpay Medicare Advantage plans for the elderly by billions of dollars annually, are seeking new power to recover excessive charges.
The Centers for Medicare and Medicaid Services says its wants to set up “a formal process to recoup overpayments” made to the health plans. The draft regulation is set to be published on July 14 and a final decision on the proposal is due by November 1.
Federal officials have struggled to pay the senior care plans accurately for years. A Center for Public Integrity investigation published last month found that Medicare paid the health plans nearly $70 billion in “improper” payments— mostly inflated fees from overstating the health risks of patients— from 2008 through 2013 alone.
Medicare expects to pay more for sicker patients and less for those in good health using a formula known as a risk score. But CMS largely trusts health plans to identify and return any money paid in error.
In its proposal, CMS acknowledges it lacks a process for routinely going after these overpayments—even though its own auditors estimate that Medicare loses billions annually as a result.
How much money CMS expects to recover also remains unclear. CMS said the health plans could be on the hook for overpayments dating back six years, but the agency did not indicate that it is ramping up audits to catch health plans that overbill.
CMS said that once it identifies an overpayment, most health plans return the money. Cases in which they don’t do so voluntarily happen “very infrequently,” according to CMS. The agency said health plans would routinely be notified of payment errors and allowed to appeal any repayment orders through an administrative process.
"Deterring improper payments is a top priority for CMS in order to protect beneficiaries and taxpayers," said CMS spokesman Raymond Thorn. "This new rule is just another tool that CMS would use to recover improper payments in the Medicare program."
It’s unclear, though, whether CMS will stick to its guns. In the past, the agency has regularly backed off proposed efforts to tighten oversight in the face of industry opposition. The draft regulation was quietly disclosed late last week. According to the rulemaking process, it will be subject to a public comment period before a final decision to issue the rule is made.
“We are evaluating the proposal,” said Clare Krusing, a spokeswoman for America’s Health Insurance Plans, the industry’s trade group.
Congress created Medicare Advantage and introduced risk scores in 2003 as a way to encourage private insurance companies to jump into the senior care market. The program now insures some 16 million elderly and disabled people, nearly a third of those eligible for Medicare, and its costs are expected to top $150 billion this year.
The plans, many of them run by some of the nation’s largest insurance companies, are popular because they often provide extra benefits, such as eyeglasses and dental care. They also can cost seniors less out of pocket than standard Medicare.
Whether the plans are a good deal for taxpayers is a far more contentious question.
The Center for Public Integrity’s analysis of Medicare Advantage plan data from 2007 through 2011 confirmed that risk scores rose more than twice as fast as the government-estimated average for people in standard Medicare in some plans in at least 1,000 counties nationwide.
Recognizing the problem, CMS started cutting risk scores in 2010, which reduced payments. But the scores crept back up in 2011. Critics argue that even as the health insurance industry lobbies Congress to stave off further rate cuts, it remains overpaid.
One new study concludes that Medicare Advantage plans on average cost taxpayers seven percent more every year than standard Medicare—or more than $9 billion annually.
The study by health economists Michael Geruso and Timothy Layton blames the “excess” payments on “upcoding,” or overstating how sick patients are. Their findings were presented at a conference of the American Society of Health Economists in Los Angeles on June 25.
“Our study is the first that can look at the whole system to look at total bottom line costs,” said Geruso, an assistant professor at the University of Texas at Austin.
Sen. Charles Grassley, R-Iowa, said that refining the payment system to keep those costs in check is a “constant challenge” for CMS and Congress.
“The difficulty of the challenge shouldn’t be an excuse to throw the baby out with the bath water and do away with Medicare Advantage. Instead, we have to work on the right formulas that keep providers in the program without creating incentives for gaming the taxpayers,” Grassley said in a statement.
Grassley said that he and Finance Committee Chairman Ron Wyden, D-Ore., have previously supported a competition to pay as much as $10 million to anyone who can figure out how to fine- tune the risk scoring system.
“I hope we’ll have the chance to advance this proposal, especially since it has bipartisan support,” he said.
The names of Medicare Advantage plans that have been overpaid — and by how much — remains under wraps. In late May, the Center for Public Integrity sued the Department of Health and Human Services to make its audits and other records public. The case is pending.
A coalition of civil rights groups filed a nationwide class-action suit Wednesday alleging that putting children into immigration court without counsel violates both constitutional due-process rights and immigration law.
The plaintiffs in the suit filed in Seattle are eight children aged 10 to 17 who have resided in the United States for various lengths of time and are scheduled to appear in court, unrepresented, for deportation proceedings in the near future.
Two of the minors, 13-year-old and 15-year-old Seattle siblings, saw their father gunned down by gangsters who objected to the father’s anti-gang rehabilitation center in El Salvador, according to the suit.
Typically, “in court, the Department of Homeland Security will be represented by a trained lawyer who will argue for the child’s deportation.”
“On the other side of the courtroom, no lawyer will stand with the child,” says the suit, which was filed against U.S. Attorney General Eric Holder, U.S. Homeland Security Secretary Jeh Johnson and other federal officials.
Neither adults nor children have an established right to appointment of legal counsel in immigration proceedings. But lawyers on behalf of these children argue that they are nonetheless protected by due process and long-standing immigration law establishing the right to a fair hearing. A national network of pro bono attorneys has traditionally tried to pick up the slack in patchwork fashion.
The suit was filed by Public Counsel, a large nonprofit, public-interest law firm; the American Civil Liberties Union; the American Immigration Council in Washington, D.C.; K&L Gates, a law firm in Washington, D.C.; and the Northwest Immigrant Rights Project in Seattle.
In response to the suit, Andrew S. Muñoz, public affairs officer for the Department of Homeland Security’s Immigration and Customs Enforcement (ICE) agency, said: “As a matter of policy, ICE doesn’t comment on pending litigation.”
A Justice Department spokesperson said the complaint was being reviewed, and declined to comment further. Holder himself has actually spoken out in favor of young children benefitting from counsel in immigration court.
Lawyers said the suit—one of the plaintiffs is originally from Mexico—was in the works before officials began noticing a dramatic surge this spring of Salvadoran, Guatemalan and Honduran children turning themselves over to Border Patrol agents along the Texas-Mexico border. The network of pro bono attorneys willing to represent minors was already stretched thin before the numbers of children began to surge, attorneys for the children said.
Some of the children in the lawsuit have already appeared in court multiple times without lawyers.
“The plight of these (plaintiff) children is not unique,” argues the suit, because thousands of minors are in court each year to face the “life-altering” possibility of deportation.
Without competent legal representation—and a professional who understands legal complexities—children’s established right to present evidence becomes “meaningless,” the suit argues.
Kristen Jackson, an attorney with Public Counsel in Los Angeles, said: “The fact that these children are immigrants, who may have lived here for some time, or are newly arrived here, does not take them out of due process protection.”
The law already establishes, Jackson said, that the “due process clause of our Constitution protects these children. The question is: What does due process require for these children? And what constitutes a fair hearing for a child?”
In 2013, in the wake of a separate suit filed by the ACLU and Public Counsel, federal officials began appointing counsel in cases involving people with serious mental difficulties who are in deportation proceedings.
In June, in response to the surge in kids, the Department of Justice announced that a project called Justice AmeriCorps would provide legal aid to child immigrants younger than 16 through a $2 million plan to recruit lawyers.
"How we treat those in need, particularly young people who must appear in immigration proceedings—many of whom are fleeing violence, persecution, abuse, or trafficking—goes to the core of who we are as a nation,” Attorney General Eric Holder said when the project was announced.
The child-focused effort, Holder said, would bolster the efficiency of immigration courts, which are so backlogged some children aren’t seen in court for more than a year after initially asking for a hearing.
Before the recent AmeriCorps plan, the government was already financing limited projects that provide pro bono aid to some immigrant children in a handful of cities.
But that effort and the $2 million Americorps plan to recruit more lawyers still won’t be enough to meet the developing needs, lawyers who work with immigrant kids have argued.
This week, President Obama asked Congress to allocate $3.7 billion in emergency funds to finance a range of responses to the influx of migrant kids, some of whom arrive alone and some with mothers.
Some of the spending would be for projects in Central America and for border enforcement and anti-smuggling actions, and some would be used to shelter kids and augment the ranks of immigration judges and government lawyers to more swiftly get minors into court to test their claims.
White House spokesman Josh Earnest said not all children are going to qualify for refuge in the United States.
Bob Ekblad, a Seattle area pastor, is a friend of the family of three children—aged 10, 13 and 15— who face a deportation hearing in September.
Their dad was the man killed by gang members in retaliation for involvement in anti-gang social work, according to the suit. The children were later pressed to join the gang, the suit alleges, and the three fled in 2013.
Ekblad is named as a “next friend” of these child plaintiffs in the class-action lawsuit filed Wednesday.
“Who’s going to speak for these kids? We connect them to lawyers who do pro bono work but our contacts are really stretched,” Ekblad said.
He blames years of war in Central America—and U.S. involvement in those wars—for leaving the region destabilized and thus fertile ground for the spread of organized crime.
He said the kids he knows who have fled Central America—where Ekblad lived between 1981 and 1988—“don’t stand a chance” without legal representation.
Chattanooga, Tenn., officials plan to ask the federal government to allow it to expand the super-fast Internet service it offers city residents, a move that will likely unleash a torrent of lobbying and lawsuits by telecommunications companies that have spent years convincing states to curb city-run networks.
The city’s Electric Power Board, which operates a fiber-optic Internet service that competes with companies such as Comcast Corp. and Charter Communications Inc., will petition the Federal Communications Commission in the next couple of months to pre-empt the Tennessee law that prohibits the city from expanding the network, Danna Bailey, vice president of corporate communications for the EPB, told the Center for Public Integrity.
“We continue to receive requests for broadband service from nearby communities to serve them,” Bailey said. “We believe cities and counties should have the right to choose the infrastructure they need to support their economies.”
The move by Chattanooga will be a first salvo in an effort by municipalities and the FCC to reverse the laws in 20 states that ban or severely restrict local governments from offering Internet service to residents.
FCC Chairman Tom Wheeler has said numerous times since he took over as chairman in November 2013, including in testimony before Congress, that he plans to pre-empt state laws that ban or place barriers on cities that want to build or expand broadband networks.
Wheeler asked to meet with Chattanooga Mayor Andy Berke in June to discuss the city’s plans for expanding its network. Wheeler told the mayor that any pre-emption of state laws would have to come out of the public utilities that operate the networks, Berke said in a phone interview.
“I did not talk to him about the overall plan of what he is going to do,” Berke said.
A day after his meeting with Berke, Wheeler wrote in his blog, “I believe that it is in the best interests of consumers and competition that the FCC exercises its power to pre-empt state laws that ban or restrict competition from community broadband. Given the opportunity, we will do so.”
Chattanooga’s network, which covers 600 square miles and serves 60,000 customers, has received wide acclaim for attracting high-tech businesses to the area and providing residents with speeds they couldn’t purchase from the area’s private Internet and cable providers such as Comcast and Charter.
A state law passed in 1999 prohibits Chattanooga from offering service beyond the area it provides electric power.
The FCC declined to comment specifically on a possible Chattanooga filing. Mark Wigfield, an FCC spokesman, said if a petition is filed “the commission would engage in a very fact-specific, case-specific, and statute-specific inquiry.”
Charter declined to comment, and Comcast didn’t respond to requests for comment.
More than 130 cities operate their own Internet network, according to the Institute for Local Self-Reliance. The Internet speeds are frequently faster than what private service providers offer and are comparable in price or cheaper. Cities view the networks as an economic development tool to create jobs and to offer service in areas that private companies view as unprofitable.
Telecommunications companies argue it is unfair for them to compete with government, which doesn’t have to make a profit or pay taxes.
It's not certain how the pre-emption process would work. Neither the city nor the FCC have offered up any details.
The state laws restricting municipal broadband have been backed, and sometimes written, by telecommunications companies led by AT&T Inc., Time Warner Cable Inc., Verizon Communications Inc. and Comcast.
The companies are among some of the biggest contributors to state lawmakers’ campaigns and spend millions of dollars more on lobbying state houses. AT&T has given nearly $140,000 to Tennessee lawmakers’ campaigns in the 2014 election cycle, the most for any state, according to the National Institute on Money in State Politics. Comcast gave $76,800 during the same cycle, also surpassing the totals for any other state it has given to.
The companies and Republicans in Congress will likely fight Chattanooga’s petition. Senators including Deb Fischer, R-Nebraska, Ron Johnson, R-Wisconsin, Ted Cruz, R-Texas and Marco Rubio, R-Florida, wrote a letter warning Wheeler not to act on the state laws, saying they were troubled by the agency “forcing taxpayer funded competition against private broadband providers.”
Sixty House Republicans led by House Energy and Commerce Vice Chairwoman Rep. Marsha Blackburn, R-Tennessee and Rep. Bill Johnson of Ohio followed up with their own letter criticizing Wheeler for his intention to pre-empt state broadband laws “despite the states’ determination to protect their taxpayers.”
“I find it deeply ironic that those who claim to protect taxpayers want to limit Chattanooga's network expansion,” said Christopher Mitchell, director of Community Broadband Networks at the Institute for Local Self-Reliance, which supports municipal networks. “Big companies like AT&T receive numerous tax subsidies and refuse to invest in modern connections whereas allowing Chattanooga to expand would supercharge local economies while almost certainly reducing or entirely removing such subsidies."
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A super PAC created to support Republican Ed Gillespie in Virginia's U.S. Senate race isn't yet a fundraising juggernaut — but its latest batch of donors boast elite political pedigrees.
Two former campaign bundlers for President George W. Bush — Howard Leach and Nicholas Taubman — each contributed $25,000 in April to the super PAC, known as the We Can Do Better PAC, according to documents filed today with the Federal Election Commission.
Leach, a businessman and investor, raised at least $100,000 for Bush's 2000 presidential campaign, according to Texans for Public Justice. In 2001, Bush selected Leach as U.S. ambassador to France, where he served until April 2005.
Meanwhile, Taubman, the former president and CEO of Advance Auto Parts, raised at least $100,000 for Bush's 2004 re-election campaign, according to Texans for Public Justice. Bush tapped Taubman to be the U.S. ambassador to Romania, where he served from December 2005 through December 2008.
Additionally, the pro-Gillespie We Can Do Better PAC scored $15,000 in April from Virginia businessman William H. Goodwin Jr., who is co-chairman of the Gillespie campaign's finance committee.
We Can Do Better PAC launched in January. Since then, it has raised $140,000, according to FEC records, including $65,000 during the second quarter.
Comparatively, several super PACs — both liberal and conservative in their leanings — have already raised into the tens of millions of dollars this election cycle.
The pro-Gillespie group's treasurer is attorney Michael G. Adams, who also serves as counsel to the Republican Governors Association and Republican Attorneys General Association. Paul Bennecke, a Georgia-based political consultant, also serves an adviser to the We Can Do Better PAC, according to the National Journal.
Neither Adams nor Bennecke immediately responded to requests for comment from the Center for Public Integrity.
Through mid-May, Warner's campaign had raised about $8.7 million, while Gillespie's had raised about $3 million.
For his part, Gillespie previously served as the chairman of the Republican National Committee and as an adviser in the White House to President George W. Bush.
Along with GOP strategist Karl Rove, Gillespie also helped found the super PAC behemoth American Crossroads, which, to date, has not aired advertisements in Virginia's Senate contest.
Super PACs are supposed to disclose the identities of their donors.
Except when they don't, exactly.
Nearly all of the money raised by the Citizens for a Working America PAC, a super PAC that's spent more than $2 million on ads boosting businessman David Perdue in Georgia's contentious Republican U.S. Senate primary, has come from two "social welfare" nonprofits connected to an Ohio lobbyist, according to a Center for Public Integrity review of campaign finance records.
Such nonprofits may keep their own donors secret. And although nonprofit groups rarely donate to super PACs, the practice worries some campaign finance reformers who fear these transfers leave voters uninformed about who is actually funding political campaigns in their states.
"This PAC's fundraising operation illustrates a big hole in disclosure when it comes to super PACs," said Paul S. Ryan, an attorney at the Campaign Legal Center. "The ability of super PACs to receive money from corporate entities that do not, in turn, disclose their own donors renders federal disclosure laws meaningless."
In Georgia, the Citizens for a Working America PAC has touted Perdue as a "conservative outsider" and attacked his GOP opponent, Rep. Jack Kingston, as "career politician."
Through July 2, the super PAC has raised $2.1 million, according to documents filed Thursday with the Federal Election Commission.
The group's top donor — at $1.7 million — is the Ohio-based Jobs and Progress Fund, a social welfare nonprofit that is focused on "education and legislative participation on public policy matters" dealing with the economy and fiscal responsibility, according to its most recent tax return.
That amount accounts for more than 80 percent of the Citizens for a Working America PAC's receipts this election cycle.
According to data provided to the Center for Public Integrity from ad tracking service Kantar Media CMAG, the Jobs and Progress Fund itself has also spent more than $400,000 on advertisements in June attacking Kingston as the "king of earmarks." The ads also urge viewers to call him and tell him to "stop wasting taxpayer money."
Because these ads did not explicitly tell viewers to vote for or against Kingston, and because they were aired more than 30 days before the July 22 runoff election, federal law does not require Jobs and Progress Fund to report its ads to the FEC.
A second Ohio-based social welfare nonprofit, the Government Integrity Fund, is also listed as a major donor to the Citizens for a Working America PAC.
That group has contributed $410,000, or nearly 20 percent, of the super PAC's receipts.
Formed in 2011 to "promote a stronger economic climate in Ohio," the Government Integrity Fund this year has also transferred money to a super PAC supporting Republican U.S. Senate candidate Tom Cotton of Arkansas.
Not only do the Jobs and Progress Fund and the Government Integrity Fund both hail from Ohio, they also share personnel.
Norris, the owner of Columbus-based Cap Square Solutions, represents clients including the Ohio Ready Mixed Concrete Association and California-based Optivus Proton Therapy Inc., a company that specializes in proton radiation therapy, according to state lobbying records.
Neither Norris nor other officials with either nonprofit responded to requests for comment.
Perdue, the former CEO of Dollar General, faces a runoff on July 22 against Kingston. The two men emerged as the top-two vote-getters in the state's May 20 primary, but neither garnered more than 50 percent of the vote.
The winner will face Democrat Michelle Nunn in November.
Perdue campaign spokesman Derrick Dickey said he did not know who was behind the nonprofits funding the Citizens for a Working America PAC.
"An important race such as this one is bound to draw attention from outside groups," Dickey said. "We do not coordinate with groups outside the campaign, so you probably know as much as I do."
Meanwhile, Kingston campaign spokesman Chris Crawford argued that television ads from Perdue's "shady, out-of-state super PAC" represented an effort to "mislead voters" about Kingston's "proven conservative record."
Crawford continued: "If these groups and those funding them have nothing to hide, why are they intentionally subverting public disclosure?"
(Update, July 11, 2014, 8:48 p.m.: Joe Trotter, a spokesman for the Center for Competitive Politics, said because the nonprofit donors were named there was "no 'subversion' of disclosure rules... Once someone gives money to an organization, if the money is not earmarked, that person does not control what the organization does with the money, and, therefore, isn't individually responsible for the actions taken by the organization.")
The only other donor to the Citizens for a Working America PAC this year is New York-based Paladin Holdings LLC, which gave $5,000 in May.
That limited liability company is connected to Paul Seid, an executive at Strategic Data Marketing, a firm that provides market research services to the dental industry.
It’s encouraging that something positive can come from something so unrelentingly negative.
Since the Affordable Care Act (ACA) was passed in 2010, its opponents have spent an estimated $450 million on political ads attacking the law, according to Kantar Media’s CMAG, which analyzes spending on advertising. Supporters have spent a tiny fraction of that amount. Kantar says opponents have outspent those who favor the law by 15 to 1.
While those attack ads likely cost some Democratic members of Congress their jobs in 2012, a new report indicates that, crazy as it sounds, those ads may have contributed to the success of the health care legislation this year.
The Obama administration had hoped that at least seven million Americans would sign up for coverage on the federal and state health insurance exchanges during the six-and-a half-month enrollment period that ended in April.
Because of the difficulty most people had with the exchanges’ websites last fall, that goal seemed unattainable. But as those problems were resolved, the enrollment numbers rose steadily. By mid-April, more than eight million people had signed up.
Last week, a researcher at the Brookings Institution released a report suggesting that all those negative ads actually helped the Obama administration blow past its enrollment projections.
After analyzing the negative spending and ACA enrollment on a state-by-state basis, Brookings Center for Technology Innovation Fellow Niam Yaraghi found a striking, counterintuitive correlation: there has been a positive association between anti-ACA spending and ACA enrollment in many states. It turns out that the more negative ads people were exposed to, the more likely they were to enroll in a health plan.
It seems that P.T. Barnum’s maxim — “I don’t care what they say about me as long as they spell my name right” — is at work here.
After controlling for state characteristics such as low per-capita income population and average insurance premiums, Yaraghi said he found a positive association between the anti-ACA spending and the ACA enrollment.
“This implies that anti-ACA ads may unintentionally increase the public awareness about the existence of government-subsidized service and its benefits for the uninsured,” Yaraghi wrote in his report, “Have the Anti-Obamacare Ads Backfired?”
Perhaps not surprisingly, the four states with the highest per capita spending on anti-Obamacare ads so far are Kentucky, Arkansas, Louisiana and North Carolina, where hotly contested Senate races are underway. Senate Majority Leader Mitch McConnell, R-Ky., is hoping to hold on to his seat while Democrats Mark Pryor of Arkansas, Mary Landrieu of Louisiana and Kay Hagan of North Carolina are facing serious re-election threats.
The balance of power in the Senate could be determined by the outcome of those contests. In at least two of those states — Arkansas and Kentucky — enrollment in Obamacare plans exceeded expectations. Although Yaraghi said that the negative ads had the most positive impact in terms of enrollment in blue states, there were impressive gains in several red states in addition to Arkansas and Kentucky.
His findings were consistent with another state-by-state analysis released last week by the personal finance social network WalletHub, which looked at the rates of uninsured in each state before and after Obamacare. WalletHub found that nationally, the uninsured rate has fallen 3.66 points, from 17.87 percent before Obamacare to 14.22 percent now.
WalletHub found that he biggest changes for the better were in a mix of red and blue states. Arkansas’s uninsured rate decreased 7.10 points, Kentucky 8.35 points, Rhode Island 8.73 points and Oregon 10.54 points. Red West Virginia saw its rate drop the most: 10.74 points. .
Yet another study, this one by the Kaiser Family Foundation, which tracks public opinion on the ACA every month, found that in June, more Americans said their opinions of the law were based on their own experience or that of their family and friends than on what they’ve heard in the media. KFF president Drew Altman wrote in a Wall Street Journal column last Tuesday (“Why the Political Heat on the ACA is Cooling”) that the enrollment success and changes in public opinion — and the decline in media interest in Obamacare — seem to be contributing to a change in the tone of Congressional campaigns.
“Some Republicans seem to be shifting their midterm strategy to focus less on the ACA and more on other issues they have with the president and the direction of the country,” Altman wrote.
That could change, of course. Obamacare likely will be back in the headlines when health insurers announce their rates for 2015 a few weeks before the November elections. But as more time goes by, running against the law will diminish as a winning strategy.
When federal election lawyers decided the nonprofit Crossroads Grassroots Policy Strategies likely violated political spending limits, campaign finance watchdogs were certain the Internal Revenue Service would take action.
After all, lawyers for the Federal Election Commission argued that Crossroads GPS, co-founded by Republican operatives Karl Rove and Ed Gillespie, spent more on politics than anything else leading up to the 2010 election.
Then the IRS tea party scandal exploded.
Republicans in Congress began waylaying the IRS over what they said was the systematic and inexcusable targeting of tea party and conservative groups. And the Treasury Inspector General for Tax Administration declared that the agency had employed “inappropriate criteria” in heavily scrutinizing some groups' tax-exemption applications.
The IRS’ nonprofit division, grappling with a decimated staff and limited resources, effectively lost whatever nerve it had left. Notably, it came to a near standstill on deciding whether it should grant "social welfare" nonprofit status to Crossroads GPS and other conservative groups. It likewise balked at denying or revoking nonprofit status for a growing constellation of politically driven, big-spending liberal nonprofits such as Patriot Majority USA and Priorities USA.
The IRS knew that many of these groups were highly political. But “nobody wanted to say 'no, you’re not exempt,'” said an IRS exempt organizations division staffer who asked not to be identified for fear of losing his job.
“We stalled so we wouldn’t have to say no,” he added.
The paralysis allowed organizations waiting for IRS approval to continue to spend freely on elections while keeping the names of their donors secret.
The tea party scandal, combined with Congress systematically stripping the IRS of resources and clout over decades, has led to an exempt organizations division that has all but quit regulating politically active nonprofits in any consistent, demonstrable way, a six-month Center for Public Integrity investigation reveals.
The investigation, which involved a review of thousands of pages of IRS documents and interviews with more than two dozen current and former IRS employees and administrators, finds the agency’s nonprofit regulation division has:
IRS Commissioner John Koskinen says the agency he’s led since December is in peril.
“We don’t have enough employees anywhere,” he told the Center for Public Integrity when asked about its ability to regulate nonprofit groups. “I think the whole agency is at risk at the level of underfunding we have.”
‘Social welfare’ explained
“Social welfare” nonprofits, also known as 501(c)(4) organizations, today play a key role in many federal political elections.
But they began their existence as entirely different — and unassuming — kinds of creatures.
A federal law passed in 1913 created them as a "catch all" for nonprofit groups that weren’t necessarily educational or charitable but provided a public service and operated “exclusively for the promotion of social welfare.”
Thank a macaroni factory run by the nonprofit New York University Law School for their evolution.
Responding to business complaints about the arrangement, Congress in 1950 passed a law levying taxes on nonprofits’ “unrelated business income.” If nonprofits — 501(c)(3)s like hospitals, charities and universities and 501(c)(4)s — could run a side business, it meant they weren’t operating “exclusively” for their exempt purpose.
The U.S. Department of the Treasury, the IRS' parent agency, ultimately issued new regulations interpreting “exclusively” as “primarily.” In other words, social welfare nonprofits could engage in other kinds of activities so long as they operated primarily for the common good.
By 1981, the IRS further relaxed the rules by saying social welfare nonprofits could “carry on lawful political activities” as long as their work primarily benefited society’s welfare.
It wasn’t until the Supreme Court’s Citizens United v. Federal Election Commission decision in 2010, however, that politically active nonprofits — social welfare groups as well as 501(c)(5) labor unions and 501(c)(6) trade groups — became a major force in political elections, all while receiving a de facto tax subsidy.
The decision allowed corporations, unions and certain nonprofit groups to spend unlimited amounts of cash supporting or opposing political candidates so long as they didn’t coordinate with candidates or their committees.
Social welfare and other nonprofit groups galloped into the post-Citizens United era with an inherent advantage over overtly political groups: They could hide the source of their funding, regardless of whether those sources were corporations, individuals or other special interests. And they're only required tell the FEC the names of donors who give money to help produce specific ads — something that rarely happens.
Social welfare groups’ political spending, specifically, ballooned to $256 million during the 2012 election cycle from next to nothing only a few years before, according to the Center for Responsive Politics.
Aghast, watchdog groups and politicos filed numerous complaints with the IRS in hope the agency’s exempt organizations division would intervene, since it's supposed to ensure 501(c) nonprofit organizations don't become more political than the law allows.
Meanwhile at the FEC, efforts by the commission's three Democratic appointees to rein in the nonprofits were stymied by the three Republicans on the commission, who were ideologically opposed to stifling what they consider the free expression of political views.
Weeks turned to months and months into years, and the IRS showed few outward signs that nonprofit groups' politicking and electioneering was of any particular concern.
While IRS officials declined to say how many social welfare groups have been rejected for tax-exempt status on the grounds that they were too political, the Center for Public Integrity and other media organizations have identified 10 groups since the Citizens United decision.
Six were chapters of Emerge America, a group that trains Democratic women who want to run for office, and one engaged in politics abroad. Another — Arkansans for Common Sense — spent about $1 million during 2010 supporting the failed re-election bid of Democratic Sen. Blanche Lincoln.
At least several other groups had their tax-exempt status denied for benefiting private groups such as political parties instead of the common good.
'Always being second-guessed'
Nonprofit regulation is “the most explosive, difficult and challenging area of the IRS,” said Larry Gibbs, a former IRS commissioner who served under presidents Ronald Reagan and George H. W. Bush. “It touches on issues that every voter in the country not only can understand, but they’re also issues voters have very strong feelings about.”
Both the IRS and its nonprofit division are prone to criticism, IRS Exempt Organizations Director Tamera Ripperda told the Center for Public Integrity.
“We’re always being second-guessed,” she said, adding that the division is obligated to consider external feedback.
Most of the two dozen former and current IRS employees interviewed — spanning five decades at the agency — could recall moments the nonprofit regulation division succumbed to outside pressure by retreating from or killing proposed actions.
In part because of this pressure, and in part because of what it considered its limited resources, the exempt organizations division deprioritized full-blown examinations in favor of audits done by mail and bare-boned “reviews” done by phone.
The division's “assembly line approach to deal with the volume” of work likely led to shortcuts, like searching for questionably named groups, and contributed to the tea party debacle, said Jim Buttonow, who worked for the IRS for nearly two decades until 2006 and managed large investigations of nonprofits.
"What you end up doing is delegating and empowering people at the lowest levels,” he said.
In late 2002, to grapple with new priorities and a smaller workforce, the nonprofit division officially reassigned about 100 employees from its investigations unit to the area that processes applications for tax-exempt status, said Steve Miller, who led the division then, in a speech published in the trade journal Tax Analysts.
“Examination workforces have greatly diminished and hence the number of examinations we are able to do,” added Miller, who was fired as acting IRS commissioner in May 2013 amid questions about tea party targeting.
The nonprofit regulation division’s investigations of all nonprofits — politically active ones and otherwise — have fallen during recent decades and also the post-Citizens United years. For instance, the division audited fewer than seven tax returns per every 1,000 nonprofits last year. Early in Ronald Reagan's presidency, the IRS audited such groups at nearly four times that rate.
During the post-Citizens United years, audited returns fell from 11,449 in 2010 to 10,575 in 2013, agency records indicate. During the same time, applications for 501(c)(4) social welfare status jumped to 2,253 — up from 1,741 in 2010. The Citizens United decision made it easier for these groups to involve themselves in elections.
In addition, last year and this year, the nonprofit regulation division temporarily shifted some employees from investigative work to help process the backlog of nonprofit applications. The backlog is a major concern of Republicans and conservatives upset with the IRS.
“Everybody is all hands on deck” to tackle that problem, said Ripperda, who replaced Lois Lerner, a central figure in the tea party controversy.
It’s not that there’s a dearth of complaints about nonprofits. Eve Borenstein, a Minneapolis attorney, said she was told by Lerner a few years ago that there were tens of thousands of them.
The retreat on investigations gives nonprofit groups the impression they can bend the IRS’ rules, which may not be clear in the first place, Borenstein said.
When Borenstein advises her nonprofit clients against doing something that may violate IRS rules, she says they sometimes tell her: “There are six others who do that.”
Fewer resources, less enforcement
For an agency whose primary responsibility is to collect tax dollars, the IRS itself is receiving fewer and fewer of them from Congress.
The IRS’ approved budget for the 2014 fiscal year is $11.3 billion. That's $855 million, or 7 percent, less than its 2010 budget.
During the same period, the IRS lost more than 10,000 staff positions — an 11 percent reduction. Meanwhile, it collected 22 percent more in taxes through fiscal year 2011, an indication that its workload has increased.
Congress is proposing another $341 million cut to the agency’s budget for fiscal year 2015.
The Center for Public Integrity is still waiting for a response to a Freedom of Information Act request filed in December that seeks a variety of basic information about the IRS’ exempt organization operations, such as a staff position roster and enforcement actions against politically active nonprofits.
But interviews and IRS documents show the division has, of late, been hit particularly hard.
Since the Citizens United decision in 2010, the exempt organization division’s budget has shrunk 6 percent, from $101.2 million to $95.4 million during 2013.
Staffing in the division dropped more than 8 percent, from 900 in 2010 to 824 in 2013. Ninety-eight division employees left the IRS from Jan. 1, 2012 to May 17, 2014, according to a list of former employees obtained from the IRS through a FOIA request to the federal Office of Personnel Management.
Viewed over decades, the staffing declines become more pronounced.
For example, exempt organization division staffing decreased 14 percent from the early 1990s to last year.
Unlike other IRS divisions, the nonprofit regulation unit’s main job isn’t raising revenue by collecting taxes — making it an easy target in times of budget cuts.
The exempt organizations division has also faced several waves of retirements, thereby losing expertise and institutional knowledge, former employees there say.
The “brain drain” has been exacerbated since the early 2000s by the agency filling key roles with people with management know-how but lacking nonprofit regulation experience.
The budget for training exempt organizations staffers was also slashed from 2009 to 2013 — from more than $7 million to less than $500,000 thanks to "budget cuts and sequestration," records show.
The IRS has also recently decided, in a bid to save time and money, that it will no longer screen most applications for 501(c)(3) charitable status. Some IRS watchdogs worry politically motivated organizations will attempt to exploit this decision.
Scandal, then paralysis
Since the tea party dispute erupted, more than half a dozen key agency employees have left the agency. They include Miller, acting commissioner at the time, and Lois Lerner, director of the exempt organizations division.
The tea party affair has directed attention away from what many IRS workers say is the much larger problem — regulating the activities of politically charged nonprofits.
The issue is "too hot to handle" for Congress in part because members may benefit from the groups, said Alex Reid, a former U.S. Treasury fellow who was also a staffer for the Joint Committee on Taxation.
"Money in politics is such a divisive and politically sensitive issue that Congress hasn't been able to" do anything, he said. "It has fallen to the IRS …. It’s working to sweep up after the parade.”
Still, employees and retirees say the teapartybrouhaha, triggered by the IRS delaying some conservative nonprofits' tax-exempt applications and asking them invasive questions based on their names, could have been averted.
Regulators, for example, could have denied exemptions on the grounds that some social welfare nonprofits appeared too political or they could have approved the groups and flagged some for future audits.
“It’s sort of ironic they got into trouble. She … should have denied the groups off the bat. But she kept them, kept looking at them, and the rest is history,” Streckfus said.
Miller and Lerner declined to comment on the record.
A current IRS exempt organization division attorney, who didn’t want to be identified for fear of losing his job, said denials were warranted in some cases.
“The groups were coming in saying, ‘No, we’re just trying to exercise free speech.’ But that doesn’t mean you should do that as a tax exempt organization,” he said. “We should have just let them go to court. A judge will tell us if we’re right or wrong.”
Gibbs, the former IRS commissioner appointed by Reagan who now works at the Miller & Chevalier law firm, echoed the sentiment, saying the social welfare designation isn’t intended for highly political nonprofits.
“No ma’am, it’s just not,” he said. “That’s why 527 was put in the code.”
Political “527 groups” are tax exempt like 501(c)(4) groups, but unlike them, they must disclose their donors.
U.S. Rep. Tony Cárdenas, D-Calif., said additional delays with applications can be blamed on congressional hearings that began in earnest during 2013.
"When you see employees of the federal government getting badgered by members of Congress … that’s got to have a really detrimental effect on the psyche of any worker [who is] thinking, 'Wow, if I take action or not, I might be called in front of Congress and I might be badgered like that in front of the whole country.'"
Groups like the Richmond Tea Party, one of 41 conservative groups suing the IRS, was not denied tax-exempt status. But delays and extra paperwork cost it time and money.
Organizations can initially operate as tax-exempt social welfare nonprofits without receiving formal approval from the IRS.
But Bruce Jaggard, chairman of the board of the Richmond Tea Party, said it took the agency two-and-a-half years, until July 2012, to approve his group’s application to be a social welfare group in part because it sent the group two more rounds of questions in addition to those asked in the application.
“If you have to do something two and three times, there’s no question you’re going to get into a backlog,” Jaggard said. “Our application we had sent to them was complete with all the information they requested. So make a determination, a thumbs up or thumbs down. They made work for us, and they made work for themselves.”
That, he added, is reason enough to believe the agency doesn’t need more money.
Republican congressional members leading efforts to investigate the IRS said the only inappropriate pressure exerted on the agency was by President Barack Obama and Senate Democrats, who repeatedly criticized political spending by social welfare nonprofits.
IRS employees “were intimidated by their own [colleagues’] politics,” said Rep. Darrell Issa, R-Calif., chairman of the U.S. House Committee on Oversight & Government Reform.
“If they think congressional oversight is intimidation, well, they have more coming,” Boustany said.
In addition to the political pressure, the rules regarding activities of nonprofits aren’t very clear.
“I can’t blame [social welfare nonprofits] because the law was not clear on what is political activity and how much is allowed,” said Marv Friedlander, a 41-year veteran of the IRS who retired in 2009 as chief of the exempt organization division’s technical branch.
Without easy-to-understand rules, regulators’ jobs became harder, and “they were stuck,” Friedlander said.
Late last year, the IRS attempted to tackle the unclear rules by defining “political activity” for social welfare groups. But it scrapped the proposal earlier this year after receiving about 169,000 comments — many critical.
Members of Congress from both sides of the aisle criticized the rules, noted Rep. Elijah Cummings, D-Md.
“At some point, we have to let people do their jobs,” he said of IRS exempt organizations division employees.
Koskinen, the new IRS commissioner, said the IRS is working on new rules that will not only create a definition, but say how much political activity is allowed.
“We’d be much better off if we had clearer definitions and a clearer roadmap,” he said.
The IRS' new proposal isn’t expected until early next year — after the mid-term elections — at which point the IRS will hold hearings and ask for more public comments.
‘Dark money’ proliferates
Nonprofits have spent $26 million on 2014 elections as of July 2 — more than double what they had spent at this point in the 2012 election cycle, a presidential election year, according to data from the Center for Responsive Politics.
Millions of dollars more have been spent by social welfare nonprofits on politically charged "issue ads" that don't directly advocate for or against candidates, and therefore, aren't reported to the FEC.
Said Robert Maguire, a political nonprofit investigator at the Center for Responsive Politics: “The amount of 'dark money' this cycle will far eclipse what we saw in the last midterms and probably even the totals we saw in the last presidential elections.”
Meanwhile, the exempt organizations division is in limbo, and employees fear doing anything controversial as congressional hearings into the tea party issue continue.
“While we have a duty to oversee, it can very well have a chilling effect,” Cummings said.
As part of a reorganization of the nonprofit regulation division, about 45 employees will be shifted to the chief counsel’s office, IRS spokesman Grant Williams said.
There are no guarantees the attorneys being moved will continue working exclusively on nonprofit issues, Ripperda, the exempt organizations director, said in a recent interview. “The counsel is still in the process of structuring that. We don’t know that yet.”
The changes will happen by year-end.
What’s clear is that written opinions on nonprofit regulation issues will now be drafted by the IRS chief counsel, a political appointee.
“If you wanted to take politics out of the thing, you just put the politics in there completely,” said Debra Kawecki, a former senior attorney for the nonprofit regulation division.
Marc Owens, the exempt organizations division director from 1990 to 2000, put it this way: “They are setting the stage for an even more cataclysmic situation.”
With the reorganization under way, congressional scrutiny continuing and pressure to do more work with fewer resources, employees say morale is at an all-time low.
“We spend all our time processing applications, doing some auditing, and nothing is left over,” said a current IRS exempt organizations employee familiar with this work.
Kawecki, who left seven years ago, said even then the Cincinnati office, which processes most of the applications, was overwhelmed trying to keep pace: “The last year when I was there, we took cases from them and did them in the national office [in D.C.] because they were just swamped.”
Commissioner bites back
Some employees are encouraged by Koskinen, a turnaround expert with experience in the private and public sectors who has shown himself to be a bulldog at times.
At a recent hearing in which members of Congress grilled him about the tea party scandal, with one accusing him of lying under oath, Koskinen stood firm. He refused to apologize when asked and corrected his questioners on several occasions when he believed they were making misleading statements.
In addition to his recent announcement of bigger plans for the IRS’ new rules on political activity for social welfare groups, he has said the agency recently restarted audits of social welfare groups that were suspended last year — despite the heat it’s getting from Congress about the issue.
“We tend to look at it a lot from the political side. The real question is also what are your social welfare activities? Primarily, are all your activities, are they social welfare? So we will look at that as well as the other side of the coin,” Koskinen said in an interview.
IRS officials declined to comment on the record beyond what Koskinen said, citing several reasons: regulations the agency is drafting on nonprofit political activity, lawsuits filed against the agency and ongoing investigations by congressional committees, the Department of Justice and the U.S. Treasury's inspector general.
"Accordingly, it is inappropriate for the IRS to comment at this time on these matters," IRS spokesman Bruce Friedland said.
The U.S. Treasury provided a brief statement that in part reads: "The IRS and Treasury work together to implement the tax code in a manner that is effective and fair." The White House did not respond to requests for comment.
Meanwhile, others worry Congress won’t budge on funding and won’t let the IRS do its job.
“Congress has made it clear that nobody is to stick their neck out” to regulate nonprofit political activity, said Cheryl Chasin, who retired from the IRS about three years ago and whose email on politicized social welfare groups was referenced in a congressional report.
A recent IRS manager familiar with exempt organization issues places the blame squarely on Congress.
“It’s them. They write the rules. … They have ruined people’s lives,” said the former employee, who asked not to be identified for fear of reprisal. “If this is what happens [when you regulate,] who is going to ever want to do it?”
For its part, Crossroads GPS has spent tens of millions of dollars on political candidate advertisements since its inception, although none yet in 2014. Dozens of other 501(c)(4) nonprofit groups also are spending big on candidate advocacy. The IRS largely remains idle.
Crossroads GPS maintains its activities comply with federal law, and that its primary purpose isn’t political. Representatives from the organization did not return requests for comment.
With no foreseeable action by regulators, the nonprofit spending trend is expected to continue into the midterm elections this fall unabated, and the donors to these groups still largely a mystery.
Increasingly aggressive scrutiny by both Capitol Hill and the Obama administration is drawing new attention to the Center for Public Integrity’s landmark investigation of campus sexual assault.
Published in a six-part series starting in 2009, “Sexual Assault on Campus: A Frustrating Search for Justice”— done in collaboration with National Public Radio — showed that campus judicial proceedings regarding allegations of sexual assault were often confusing, shrouded in secrecy and marked by lengthy delays.
Those who reported sexual assaults encountered a litany of institutional barriers that either assured their silence of left them feeling victimized again. Even students found “responsible” for sexual assaults often faced little punishment, while their victims’ lives were frequently turned upside down.
In recent months there has been action on a variety of fronts aimed at both assisting schools and putting pressure on them, which has led to a new round of media attention.
In late April, a federal task force unveiled recommendations for helping colleges and universities respond to the problem, while offering detailed guidance and unveiling a new website to make public federal enforcement data on campus sexual assault.
In early May, the U.S. Department of Education’s Office for Civil Rights released a list of the 55 higher education institutions under investigation for possible violations of federal law over the handling of sexual violence and harassment complaints.
In Congress, Sen. Claire McCaskill, D-Mo., has led a group of senators researching ways the issue might be addressed legislatively. In early July, her office released a survey which found that many schools hadn’t investigated an alleged sexual assault in years, and that coordination between campuses and area law enforcement agencies was weak.
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The U.S. Senate could soon force its members to electronically file their campaign finance reports, but most senators remain unwilling to instantly disclose their political dollars, according to a Center for Public Integrity review of Federal Election Commission filings.
Only 21 senators — a bipartisan group that ranges from Sen. Thad Cochran, R-Miss., to Sen. Elizabeth Warren, D-Mass. — voluntarily e-filed unofficial copies of their second-quarter campaign finance reports to the FEC by Tuesday's deadline. The reports covered funds raised and spent between April 1 and June 30.
Unlike presidential hopefuls, U.S. House candidates and political groups, Senate candidates file campaign finance reports on paper with the Secretary of the Senate. That office, in turn, scans them and forwards them to the FEC, which then pays a private contractor to manually input data the reports contain.
The process costs taxpayers about $500,000 each year, according to the Congressional Budget Office. The most reliable way to immediately view the senators' reports upon their filing? Physically view paper copies at the U.S. Capitol.
Sen. Jon Tester, D-Mont., has sponsored bipartisan legislation that would change that.
And in June, Tester's bill — known as the Senate Campaign Disclosure Parity Act— was incorporated into an appropriations bill, which was favorably reported out of committee, as the watchdog organization Citizens for Responsibility and Ethics in Washington previously noted.
Tester spokeswoman Marnee Banks said she was "hopeful" that the disclosure language would remain part of the appropriations bill as it moves forward.
"Sen. Tester sees the appropriations process as a way to move a bill that increases transparency, brings the Senate into the 21st century and saves taxpayers' money," Banks added.
A floor vote on the appropriations legislation has not yet been scheduled.
In addition to Tester, Cochran and Warren, senators who e-filed their second quarter reports include:
While this bloc of e-filing senators represents only about one-fifth of the Senate, its membership has more than doubled in size from mid-2011, when only nine senators electronically filed copies of their campaign finance reports.
The Internal Revenue Service’s nonprofit regulation division has been systematically weakened — stripped of resources and authority — by Congress. And it’s all but quit regulating politically active nonprofits in a meaningful and consistent way.
That’s the grim takeaway from a Center for Public Integrity investigation published Tuesday.
Since then, many readers have asked what can be done.
Three potential fixes surfaced most frequently in interviews with more than two-dozen current and former IRS employees, as well as with lawyers and campaign reform advocates:
Find a better funding source for nonprofit regulation. The IRS’ exempt organizations division is ill-equipped to regulate the onslaught of political spending by nonprofits since the Supreme Court’s Citizens United v. Federal Election Commission decision in 2010. The nonprofit regulation division’s budget shrunk 6 percent since Citizens United, from $101.2 million during 2010 to $95.4 million during 2013. Division staffing dropped more than 8 percent, from 900 in 2010 to 824 in 2013.
But relying on Congress for additional funding will likely prove futile, as demonstrated by many lawmakers’ desiretofurtherslash the IRS’ budget. Some former employees suggest using revenue from an existing tax on private foundations to help pay for nonprofit regulation. That was the intent of the tax, approved by law roughly 40 years ago. But Congress never appropriated the money for that cause. The tax could be applied to a broader range of nonprofit.
“The funding source should come from the sector. There was an old national association of securities dealers funded by fees from securities dealers,” said Marc Owens, who worked in the exempt organizations division for 25 years, including his final 10 as its director.
The private foundation tax amounted to more than $400 million during fiscal year 2012. That amount would have been more than enough to cover the entire Tax Exempt and Government Entities Division’s $270 million budget that year — including the exempt organizations unit’s portion, $101 million, according to IRS data.
Do more to limit political activity by nonprofits. The IRS’ nonprofit regulation division could more often reject or revoke tax-exempt status for highly political nonprofits — forcing them to register as political groups organized under Section 527 of the Internal Revenue Code. Political “527 groups” are tax exempt like 501(c)(4) social welfare groups and 501(c)(6) trade associations, but unlike them, they must disclose their donors.
When Section 527 was created, “everybody thought that would be it,” and questions related to political activity by nonprofits would be mostly resolved, said Milt Cerny, who worked at the IRS for nearly three decades, starting in 1960.
The agency could also require social welfare and other nonprofits to spend much smaller amounts supporting or opposing candidates. Such a change could be part of regulations the IRS is drafting to clarify rules on political activity by the groups. The proposed regulations are expected to be unveiled in early 2015.
Officials at public interest groups say they hope the Center for Public Integrity’s report will embolden the agency — particularly when it comes to advancing new rules and winning over legislators who have attempted to postpone the regulations.
The Center’s reporting "gives valuable insight to why clear rules are necessary at the IRS," Emily Peterson-Cassin, Public Citizen’s Bright Lines Project coordinator, wrote in an email Wednesday. "Our hope is that the agency takes this kind of work into account as they come up with new rules.”
Fred Wertheimer, president of reform group Democracy 21, added in an email to supporters and others that changes to “flawed regulations could bring an end to the misuse of [nonprofits] laundering ‘dark money’ into our elections.”
Nonprofits have spent more than $32 million directly on 2014 elections as of Wednesday — more than double what they had spent at this point in the 2012 election cycle, a presidential election year, according to data from the Center for Responsive Politics.
Create a regulatory agency for nonprofits — one separate from the IRS. Autonomy for such an agency is key here, proponents argue, especially since politicians who oversee the IRS benefit from some nonprofit political spending.
“The agency has never committed itself to effectively regulating [nonprofits]. Part of the reason, of course, is that Congress does not want effective regulation,” Paul Streckfus, who worked in the exempt organizations division for six years, wrote Wednesday in his trade publication, EO Tax Journal. “Would moving [nonprofit regulation] out of the IRS fix all the problems? No, but it would allow the always beleaguered IRS to spend more time and resources on its primary function, collecting revenue.”
A new nonprofit regulatory agency could be modeled after the United Kingdom’s Charity Commission, which touts its autonomy and “quasi-judicial” approach on its website. It says it’s “completely independent of Ministerial influence and also independent from the sector it regulates.” There is a similar commission in Australia.
Streckfus’s hope: President Barack Obama’s next State of the Union address highlights the need for a new regulatory agency for nonprofits.
A congressman who has been criticized for being too close to the financial industry Thursday declared that his broad support for payday lending firms is about “trying to make sure individuals have dignity and aren’t ripped off.”
Rep. Gregory Meeks, D-N.Y., spoke to a breakfast meeting at the National Press Club for Master Your Card, MasterCard’s “public education” effort to show consumers, small businesses and governments more ways to use electronic payments.
Meeks was dubbed a member of the “banking caucus” in a Center for Public Integrity investigation released in April. Just before he spoke, the group heard from Rep. Steve Stivers, R-Ohio, another “banking caucus” member and former megabank lobbyist.
Meeks told the crowd that efforts to tighten oversight of high-cost, short-term loans targeting poor people will “take options off the table,” driving consumers to neighborhood loan sharks.
“If you’re focused on that market, you’ll make money,” Meeks told the group, mostly employees of financial companies and industry-supported nonprofits focused on “financial inclusion.”
The event marked the rollout of a paper written for MasterCard by an MIT professor and subtitled “How emerging electronic payment technology can provide financial services to underserved communities.”
Financial access and financial inclusion have become buzzwords in the industry as companies strive to cultivate new revenue streams in the wake of the 2008 economic meltdown. Financially underserved people already provide $89 billion in fees and interest income for the industry, according to a 2012 study by the Center for Financial Services Innovation, one of the breakfast’s sponsors.
Ten million American households lack bank accounts, either by choice or because of banks’ background-check systems and other barriers to access. The group skews poor and non-white; many live in in inner cities or rural areas that lack bank branches.
If the industry can “mainstream” more of them — for example, by encouraging them to use electronic payments instead of cash — these people will provide billions more in new revenue. Thursday’s “expert briefing” breakfast was titled “Electronic Payment Technology: A Gateway to Mainstream Financial Services for the Underserved.”
The Center identified Meeks, Stivers and nine other House members as the financial industry’s go-to lawmakers on the Financial Services Committee. The members work closely with Washington’s 2,000 financial lobbyists, writing letters, proposing industry-friendly legislation, holding hearings and threatening agency budgets as they pressure regulators to ease up on banks.
Meeks has raised $1.2 million from the financial industry since the 2010 election cycle including $6,500 from MasterCard. Stivers has raised $2.6 million including $2,000 from MasterCard.
The teen whose arms had been severed was still in shock, but he managed to muster a smile and embrace visitors with his bandaged stumps. Evilio Gonzalez had fallen off and then under a train he was riding on — a vain attempt to leave Honduras, cross through Mexico and get into the United States.
I met Evilio 10 years ago, while I was a reporter based in Latin America for the Atlanta Journal-Constitution and the Cox Newspapers chain. Catholic nuns at the eight-bed Rosa de Tepeyac Hospital in Mexico City were caring for the youth’s wounds and shattered spiritual health. Among others in the clinic was Edgar Suniga, 14, whose left leg had been severed.
“Compared to what Jesus Christ suffered, this is nothing,” Evilio told me, demonstrating how the nuns were helping him learn to draw with his toes.
That same year, in Guatemala City, I also met Drik Borgan Godoy de Leon, a teen who spoke of his struggle to extricate himself from a gang. The 18-year-old was shot dead, just two months after our interview. I also met in Sandra Zayas, a beleaguered special prosecutor of crimes against women and children. One of her cases involved the murder of two Guatemalan sisters, 11 and 14, who were chopped to pieces because the elder sister spurned a gangster’s advances.
Since I reported those stories, the grip that organized crime has on Central American countries has tightened further. Justice systems remain notoriously incapable of handing the crisis.The region has a long history of stark inequality, dictatorships and brutal civil wars that led to massacres of many poor inhabitants, including mass killings of Guatamala's Maya native peopl in the 1980s. The United States invested billions in military spending during that time to support select regimes in the area and is now financing drug war efforts there.
Many of the minors who are now turning themselves in at the U.S.-Mexico border speak of joining parents in “El Norte,” or talk of how they dream of finding a job. But more and more are now speaking of the horror at seeing friends and relatives killed, raped, extorted and the pressure they receive to serve gangs — or else.
Here is some illuminating information about deteriorating conditions in Central America, long in the making, and the U.S. debate over how to deal with the influx of minors showing up at the border.
A Syracuse University project known as TRAC released a report this week analyzing more than 100,000 juvenile cases filed in the nation’s immigration courts over the last 10 years. Only 43 percent of kids in these cases were or are currently represented by lawyers who help plead for asylum or another form of legal status, according to TRAC, the acronym for the university’s Transactional Records Access Clearinghouse.
Immigration courts are clogged with backlogs, but juvenile cases only represent about 11 percent of all cases currently pending.
Kids, like adults, do not have the right to the appointment of attorney in immigration proceedings.
But TRAC found that having a lawyer increased the odds that kids would win their claims against deportation: In cases that have been resolved, nearly half the children who had attorneys — 47 percent — were allowed to remain in the United States. When children did not have legal representation, courts allowed only one in 10 to remain here.
A group of civil rights advocates filed suit this month arguing that it is an unconstitutional violation of due process not to provide minors with legal representation in immigration hearings, as the Center for Public Integrity reported.
Meanwhile, a debate is raging over whether a 2008 anti-trafficking law Congress approved — a reauthorization of existing legislation — has spurred more migration of children. Foreign nationals have a right to request asylum apart from this law. But the law establishes procedures for minors who are not with parents when they are taken into custody by Border Patrol agents.
Within 72 hours of their detention, such children are supposed to be transferred to shelters supervised by the U.S. Department of Health and Human Services. There they are supposed to have an opportunity to speak to social workers and receive a talk about their legal rights and options. Those options include asking for an immigration hearing before a judge rather than being deported immediately. Deportations of non-Mexican or Canadian children can take many days to coordinate in conjunction with their consular officials.
Mexican or Canadian children, by contrast, can be handed overto child-welfare officials in their countries within hours if they volunteer to be returned during screenings that Border Patrol agents are obliged to perform of these children. Mexican and Canadian minors can also ask to be transferred to a shelter and request an immigration hearing. But after quick screenings, many end up quickly returned at various ports of entry.
Legislative proposals — with some bipartisan support — are emerging in Congress to alter the anti-trafficking act, a move that's dividing lawmakers. Changes to the law could give Border Patrol agents a role in screening Central American children shortly after they're detained and then deporting them more quickly if they agree to being removed.
As the Center has reported, the Obama Administration has also supported the idea of streamlining interviews of minors, with officials suggesting that many children are not likely to qualify for asylum or other forms of legal status.
Speedy screenings that end in children agreeing to leave are controversial because Mexican minors have been deported back to dangerous circumstances, including servitude as drug "mules" and as sex workers, as the Center found in 2011. An in-depth report by the Texas legal aid group Appleseed, which led observations of such screenings, also found that kids were sent back to perilous conditions in Mexico.
For years, researchers who study Central America have warned that organized crime was gaining strength.
A Congressional Research Service report in February of this year surveyed the gang problem in El Salvador, Guatemala and Honduras and the struggle to address it. The U.S. Department of Justice has archived many reports assessing the growing threats of gangs. The Washington Office on Latin America also has a wealth of studies over the years warning of the need to address dysfunctional justice systems and continuing migration of kids and families that are divided. A 2010 report explores brutal practices by people smugglers.
Thousands of Central American adults hold temporary “protective” visas in the United States due to natural disasters, but cannot legally being their children into the United States to live with them. The children are left behind in precarious circumstances—just one of the “push and pull” factors that help explain why children migrate, as an analyst with the Brookings Institution wrote.
The nonpartisan Migration Policy Institute also has produced a number of pieces describing the complex roots and difficult choices for addressing the influx of minors. In 2006, a report on the history of violence and migration explained that U.S. officials often resisted giving asylum to certain Central Americans during the civil wars in the 1980s.
“The United States,” the report says, “sided with conservative governments in El Salvador and Guatemala, labeling its actions anticommunist, and invested billions of dollars. When hundreds of thousands of Salvadorans and Guatemalans fled their homelands and sought asylum in the United States, this aid became the primary reason for denying the refugees' tales of torture, forced recruitment, and other crimes. To accord them political asylum would have undermined the U.S. government's policies.”
The United Nations High Commissioner for Refugees produced a report this year called “Children on the Run,” as the Center for Public Integrity reported in March. The report presents surveys of children explaining growing fear of violence and personal threats that U.N. officials argue constitutes a refugee crisis.
Congress has recently inundated the Federal Election Commission with demands for information connected to the Internal Revenue Service tea party targeting scandal and the unrelated political activities of a former FEC employee.
The result: Dramatically delayed responses to Freedom of Information Act requests logged by members of the press and public who seek unpublicized information from the FEC — the federal government's election law enforcer and regulator.
"The agency has been receiving a higher than normal volume of FOIA requests recently, which is impacting our response times," FEC staffer Deborah Foresman wrote today in response to questions about the status of a Center for Public Integrity FOIA request filed on May 1 that seeks various agency emails.
The FEC on May 19 promised in writing to respond to the Center for Public Integrity's request by June 13 — saying it needed time to "appropriately examine a large quantity of separate and distinct potentially responsive records."
The FEC has yet to produce the records, and until today, the agency had not communicated about the request for nearly two months.
By law, the FEC has 20 business days to respond to FOIA requests. During its 2013 fiscal year, it took the FEC an average of 16.3 days to process "simple" FOIA requests, the agency stated in a recent report.
Asked what people or entities are responsible for the workload uptick resulting in FOIA request delays, FEC Vice Chairman Ann Ravel pointed to Capitol Hill.
"The FEC has received many requests and subpoenas from congressional committees," Ravel said. "Attorneys have been detailed to work on reviews of documents and emails."
Ravel added that the FEC — already strapped for funding and resources— has invested in new software to process "the large number of emails going back many years to be able to expedite the process."
FEC Chairman Lee Goodman and the FEC press office did not immediately return requests for comment.
Officials at the U.S. House's Committee on Ways and Means and Committee on Oversight and Government Reform, both of which are investigating the IRS' targeting of tea party and other conservative groups, also did not immediately return requests for comment.
Lois Lerner, the former IRS exempt organizations division director at the center of the House investigations, worked at the FEC from 1981 to the early 2000s. In late 2000, the FEC appointed Lerner acting general counsel. Lerner joined the IRS in 2001 and resigned in 2013.
Republicans on the Committee on Oversight and Government Reform are also investigating the case of April Sands, a former FEC attorney accused of campaigning for President Barack Obama while on the job.
An FEC report indicates the agency "generally receives less than 100 FOIA requests per year" — for example, 87 during its 2013 fiscal year, 60 during its 2012 fiscal year. At the end of its 2013 fiscal year, the agency reported 12 "backlogged" requests.
Because of cost concerns and the relatively low number of requests, the FEC does not employ an online system to track FOIA requests it receives. Nevertheless, the agency says it "strives to provide requesters with detailed status update information as quickly as possible."
Lara Dieringer, program coordinator for the nonpartisan National Freedom of Information Coalition at the University of Missouri, urged the FEC not prioritize congressional requests over those from the press or general public.
"FOIA is for the citizens," Dieringer said. "Freedom of information should hold no priority, except for the order in which requests come in."
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This report is part of a joint project by the Center for Public Integrity and InsideClimate News
BISMARCK, N.D. — North Dakota’s Heritage Center makes for a jarring sight in this Midwestern prairie capital. The newly-expanded museum consists of four interlocking cubes of stone, steel and glass, a gleaming architectural statement poking out of the otherwise drab Capitol grounds. Each cube features a gallery devoted to an era of North Dakota’s history, but the state’s present is everywhere.
The legislature approved the dramatic $52 million expansion in 2009, but required the museum to come up with $12 million of that to supplement state money, and more than half has come from energy companies — including a $1.8 million gift from Continental Resources Inc. that put its name on one of the galleries. The gifts have “given us a chance to do some things that we’ve never really had a chance to do,” said Merl Paaverud, director of the State Historical Society.
Oil development has transformed this state to the point where it’s hard to find a place or person that hasn’t been touched by the boom. Energy companies have drilled more than 8,000 wells into western North Dakota’s rugged prairie since the beginning of 2010, quadrupling the state’s oil production. From July 2011 through June 2013, the state collected $4 billion in oil taxes, and is expecting a $1 billion surplus for the current biennium, not including an oil-funded sovereign wealth fund that will approach a balance of $3 billion. North Dakota is in the uncommon position of facing a labor shortage, spurring a state-run campaign to attract workers, paid for in part by Hess Corp.
In addition to the tax revenue they’ve brought, the oil companies have showered the state with additional money — new millions for universities, museums, hospitals and other charitable causes. They’ve also given hundreds of thousands to politicians, making the sector the largest single source of those contributions. The oil industry is the top contributor to Gov. Jack Dalrymple, according to the National Institute on Money in State Politics, and gave money in all but 10 of the 75 legislative races held in 2012.
“I don’t think most people know how pervasive the influence of the oil industry is in the Capitol,” said Jim Fuglie, a former state tourism director and former head of the state Democratic-Nonpartisan League Party. “Nothing this big has happened since homestead days. This is a game changer for North Dakota.”
Put another way, the state’s modern history has been rewritten by the energy industry in just four short years. And while few want to argue with the prosperity — the cascading cash, the budget surplus, the new hospital wing, the abundant jobs — the clout and swagger of the oil companies, arguably the most powerful force in modern politics, has unsettled the traditionally amicable and moderate politics of this state of just 725,000 people. Whether through campaign cash, charitable donations or larger contributions to the economy, the industry has gained a level of influence that’s hard to overstate. Each significant attempt to tighten regulatory oversight or restrict some of the industry’s more wasteful practices in the last legislative session either failed or passed only after being stripped of its core. Any talk about clamping down on the pace of drilling has been quickly snuffed out.
The results have been making headlines for a couple of years now: oil field spills by the thousands, billowing clouds of dust kicked up by an endless stream of trucks pounding on deteriorating roads, radioactive waste left to degrade in vacant buildings, skyrocketing crime rates and housing costs and methamphetamine abuse and prostitutes in a land where few outsiders wished to venture just a few years back. Many landowners and local officials in the state’s western oil fields — political conservatives for the most part — see an industry allowed to operate where and when it pleases, at any given speed, and to pollute with virtual impunity. Drillers wastefully burn off nearly a third of the natural gas that’s produced with the oil without paying royalties or taxes because they haven’t installed the pipelines and processing plants to capture it. As recently as 2009, there were just 451 oil field spills statewide, but last year there were at least 1,782. Just a fraction result in punishment: authorities issued 15 fines for spills in 2013, mostly for incidents from previous years.
State officials caution that aggressive regulation would slow development and jeopardize, well, everything. They also highlight a handful of recently adopted rules, part of an effort to adjust an antiquated regulatory system to the modern technologies and massive scale of the oil industry. The state has indeed adopted many new regulations to cover drilling, but just who wrote them and how much difference they’ll make is up for debate. The Industrial Commission, which oversees drilling, recently announced a set of rules to limit flaring, the practice of burning natural gas at the well site. The rules should start reducing the amount of gas drillers waste, but they are based on a set of proposals that regulators solicited from the oil companies themselves.
Since retiring five years ago, Fuglie, the former tourism director, has maintained a political blog, and he characterizes state leaders as so giddy with new riches that they’ve ignored the boom’s destructive effects.
“We’ve been so poor for so long, then all of a sudden, we won the goddamn lottery,” he said. “You know what happens to lottery winners who aren’t prepared to spend a lot of money. You read about them three years later. They’re in court, or they’re in bankruptcy, or they’re divorced, or their kids committed murder or took drugs. That’s the way we are.”
All or nothing
Don Morrison is one of North Dakota’s most prominent environmentalists, but he’s hardly a treehugger. He is the executive director of the Dakota Resource Council, a grassroots group of mostly farmers and ranchers that tries to protect land for its members, many of whom have leased mineral rights to energy companies and are supportive of drilling as long as it’s done responsibly. Unlike in other states, there’s been no organized movement here to fight hydraulic fracturing, or fracking, the high pressure injection of water, chemicals and sand into the earth to shatter the rock and release oil and gas. Towns here have not tried to ban the practice, as they have in Colorado, Pennsylvania and even Texas. Residents are largely supportive of the oil industry — an industry-sponsored poll found that 83 percent of respondents support oil development. Advocates like Morrison have mostly asked for smaller-bore measures — increasing the distance between homes and wells or tightening the rules on flaring — but even these proposals have sometimes drawn strident reactions from politicians.
In December, Attorney General Wayne Stenehjem, a Republican who sits on the three-member Industrial Commission, proposed placing buffer zones of up to two miles around 18 “extraordinary” sites — scenic buttes and state or national parks — within which any proposals to drill would undergo a public comment period for individuals or public agencies to weigh in on details of the development.
Backers noted that the proposal did not ban drilling anywhere, but would merely solicit public input to help mitigate impacts. But opponents of the proposal attacked. State Rep. Roscoe Streyle, a Republican from Minot, which is not in the oil fields, wrote a commentary for the Bismarck Tribune in which he called the proposal “a direct attack against the free market capitalist system and … very anti-oil development,” before going on to write that the state “should be thanking the industry every day and working with it, not against it.” Harold Hamm, CEO of Continental Resources, warned that the company’s commitment to the state depended on the outcome of the proposal. In comments submitted to the Industrial Commission, the North Dakota Petroleum Council, the industry’s lobbying group, said the process could allow “radical environmentalists … to delay or obstruct development.” The council asked that the commission “further define” the comment process on public lands and remove it altogether from private property. In March, the commission did pretty much exactly that, approving a comment process only for public lands, covering about 600,000 acres, or half the original area.
After the vote, Stenehjem mentioned that he had recently seen the movie Gravity, in which the main character spends most of the film stranded in space, alone. “Now I know how Sandra Bullock felt,” he said.
Clay Jenkinson, a columnist for The Bismarck Tribune, wrote that he was “deeply saddened to see the Industrial Commission throw its immense weight (as usual) behind the dynamics of wholesale development.” The following month, in comments to a local chamber of commerce, Lt. Gov. Drew Wrigley reportedly mocked Jenkinson’s critiques, saying, “You don’t have a God-given right to never see a well head going up and down.”
In an interview, Wrigley said he’s a friend of Jenkinson’s and that his comments were taken out of context. “I was joking,” he said. “It wasn’t a serious pointed comment at Clay.”
The rhetoric around the “extraordinary places” proposal contributed to an atmosphere in which dissent is discouraged, Morrison said, an uncharacteristic mood for a state that has long maintained an odd mix of conservative and progressive politics. “There is a set line that everybody has to toe, which is the oil companies are the ticket to the future and don’t say anything bad about them.” Morrison is thin and bald, with black rimmed glasses and a neatly trimmed white mustache, and he has a tendency to giggle when he gets excited. “Our state leaders set up a conversation that, it was all or nothing. There was absolutely no room for anyone in the middle, none. And that was just weird.”
Morrison was speaking from his office on the basement floor of a small brick building on the western edge of Bismarck, above the Missouri River. On the wall of the waiting room hung a framed drawing of Theodore Roosevelt’s face with a quote: “Here is your country. Cherish these natural wonders, cherish the natural resources, cherish the history and romance as a sacred heritage, for your children and your children’s children. Do not let selfish men or greedy interests skin your country of its beauty, its riches or its romance.”
Roosevelt lived his ranching days in western North Dakota, in an area now surrounded by oil activity, and many of the area’s residents embody his conservationist spirit, even while maintaining mostly conservative political views. Corporate interests have long held sway in the state, but there’s also a populist tradition dating back to the 19th century (North Dakota has the only state-run bank in the country) that seems to have waned in recent years.
In the mid 1970s, at the height of a coal mining boom that tripled the state’s production, then-Gov. Art Link, a Democrat, pushed through a set of extraction taxes and tough reclamation laws to cover coal production. Morrison, who was working for the lieutenant governor at the time, said there was robust debate about how best to exploit the resources, but that nothing of the sort was tolerated in recent years. “If any politician dared to say, well maybe we should make the oil companies do such and such, he was immediately branded as a radical and weirdo, and not a legitimate part of the conversation.”
A political force
Since the drilling boom began about five years ago, oil and gas companies have grown into the most potent force in state politics. In 2012, the industry gave at least $495,000 to political candidates. That may not sound like much, but candidates for the North Dakota House raised an average of about $4,500 that year, and it comprises more than 8 percent of all contributions to candidates, more than any other sector gave, according to an analysis of data collected by the National Institute on Money in State Politics. As recently as 2008, the industry gave about $200,000. The vast majority of that money, 95 percent in 2012, has gone to Republicans, and it’s helped the party stretch its traditional hold on the legislature to a two-thirds majority in both houses.
North Dakota’s 36th Legislative District, which surrounds Dickinson, attracted some of the most money of any race in 2012. Each district has two representatives and one senator, and the three candidates from each party often run together, effectively as one slate. A retiring GOP senator left an open seat. The Republicans turned to Kelly Armstrong, son of local oilman Mike Armstrong, and he raised a total of $20,750, the third most of any Senate candidate, with $17,500 of that coming from oil company PACs or people tied to the drilling. Of that, $4,000 came from his father, and $10,000 came from Thomas and John Jordan, a father and son who live in California. Thomas, who is retired, started Jordan Winery and also Jordan Oil and Gas, which has partnered with the elder Armstrong’s company. John Jordan now runs the winery and said he has no stake in his father’s oil company but does own a share in two wells operated by Mike Armstrong. He is also one of the most prolific super-PAC donors in the country over the past couple of years, but said he and his father contributed to Armstrong’s campaign because they have been friends for decades.
All together, the three Republican candidates in the district raised more money from oil interests, $20,000, than the Democrats did from all donors combined, $19,900 — and the GOP swept the district by historic margins. “We were pretty much outgunned,” said Richard Brauhn, the Democratic Senate candidate, who raised $1,975 and mustered just 25 percent of the vote.
Armstrong did not respond to messages left at his office and on his cell phone.
But the biggest money by far went into the 2012 gubernatorial race. Jack Dalrymple raised at least $370,000 from oil interests, more than 10 percent of the total $3.6 million he raised, making the sector the largest contributor to his campaign, according to a Center analysis of data collected by the National Institute on Money in Politics. Democratic candidate Ryan Taylor did not receive any identifiable oil and gas money, and raised a total of just $650,000. Last year, Dalrymple, who is not up for reelection until 2016, raised $27,775 from the industry, 45 percent of all the money his campaign took in.
By contrast, environmental groups gave nothing to state candidates in 2012, according to the National Institute on Money in State Politics. The only contribution classified as pro-environmental policy is $500 to Ryan Taylor’s campaign from an Eileen Brady, of Portland, Oregon, who could not be reached for this article.
Fuglie, the retired Democratic tourism director, said the money that oil companies have poured into politics in recent years is “almost unheard of” in North Dakota, where running a campaign is far cheaper than in other parts of the country. “Half a million dollars in contributions has a huge impact on the outcome of the election, and the industry knows that,” he said, speaking in particular of the disparity in the gubernatorial race. “What the industry did was they went and bought themselves a friend.”
A damn good relationship
In North Dakota, the gubernatorial contributions raise a particular concern for some not just because of their scale, but because the governor chairs the three-member Industrial Commission, which makes the ultimate decision on all regulatory matters. In 2011, for example, Dalrymple received $1,000 from ConocoPhillips as the commission was considering an application by the company to pool several of its leases, a move the company said would mitigate impacts but which several landowners opposed. The commission eventually approved the application (Democrats fought unsuccessfully to have a grand jury examine the case).
The other members are the attorney general, currently Stenehjem, and the state’s agriculture commissioner, Republican Doug Goehring. In his last election, in 2010, Stenehjem raised at least $12,000 from oil interests, more than from any other sector except the Republican State Leadership Committee, a national group. In the same election, Goehring raised at least $22,000 from oil interests, second only to the agricultural sector.
Dalrymple was not available for an interview for this article, but in response to questions, he did supply a written statement, saying his administration listens “to the needs of all North Dakota citizens and businesses,” and that “providing a responsive state government is by no means an open door to undue influence.” He also said the Industrial Commission has adopted “some of the state’s most stringent regulations,” including prohibiting drillers from storing liquid waste in open pits for most wells and increasing the bond companies must purchase as collateral on each well from $20,000 to $50,000. He did not respond to a question asking about the potential for conflicts of interest in accepting contributions from companies with applications before the Industrial Commission but said the ConocoPhillips approval helped protect a state park.
A review of any of the major regulatory questions before the legislature last session, however, suggests that state government tended to be more responsive to the appeals by the oil industry than by landowners out west who wanted stricter regulation.
Last session, a constituent convinced Sen. Bill Bowman, a Republican representing the oil fields region, to introduce a bill increasing the minimum distance allowed between wells and homes, from 500 feet to 1,000 for sites with multiple wells, and 750 feet for single wells. Morrison’s group, along with a second landowner group, was among the bill’s chief supporters. At the committee hearing, four landowners came to testify in favor of the bill, saying it would help reduce risks to their health from flares and other equipment that emit hazardous pollutants, and would protect them in the event of an accident. The director of the state Grain Growers Association spoke in favor, and, in a House hearing on a parallel bill days later, so did a representative of the North Dakota Farmers Union and several other landowners, who presented a petition with 415 signatures.
But Ron Ness, head of the North Dakota Petroleum Council and the industry’s chief lobbyist, told lawmakers that the move would force companies to disturb more land when they drilled and would cause more conflicts with landowners. Lynn D. Helms, the director of the Department of Mineral Resources, the agency under the Industrial Commission that actually carries out regulation, testified neutrally but said there was no science to support increasing the distance and that doing so could lead to less orderly development. The Senate bill died after the hearing, and the House version survived only after landowners, in a last-ditch effort to achieve what they could, introduced an amendment that essentially gutted the bill: it left the minimum distance the same, but said that for wells within 1,000 feet of a home, if a landowner requests, regulators may require oil companies put flares or other equipment on the far side of the well, rather than between the well and a home. The governor later signed the amended version.
Lobbyists turned out in droves, several lawmakers said. Oil and pipeline companies hired 27 lobbyists that session, compared to 23 for conservationist groups. But nearly everyone interviewed for this article said the only one that really matters is Ness, who has, in the words of Senate Majority Leader Rich Wardner, “a damn good relationship with the Legislature.”
In an interview, Ness said his industry does not always get its way, but has provided thousands of jobs and helped revive the state. “We have been searching for decades for a renaissance of rural America,” he said, trying but failing to keep people in the state’s farmland, until now.
But for the farmers and ranchers who testified, the Bowman bill was just another defeat. Brenda Jorgenson, a Dakota Resource Council member who lives near White Earth, on the northeastern edge of the drilling, was among them. She’s battled with state regulators and drillers for years over development near her home, which she says has led her to develop rashes and neurological problems. “The burden of proof is all on us, the landowners,” she said. “Everything is on us.”
North Dakota’s meal ticket
Sen. Wardner sees a different picture. Sitting in a Perkins Restaurant in his home town of Dickinson, on the southern edge of the drilling, Wardner displayed a binder full of colored charts and graphs showing exactly where $5.3 billion in estimated oil tax revenue is going for the two-year period that began July 2013: $342 million in property tax relief, $682 million to infrastructure, $586 million back to cities and counties in the oil fields, $564 million to two school trust funds. “We’re able to take care of needs now,” he said.
Last session, Wardner, a Republican, backed a bill that would have cut the 11.5 percent oil tax by two points, something the industry has been pushing for years. The measure passed the Senate but died in the House after Democrats generated public outrage by characterizing the move as a reckless squandering of revenue (people from all sides point to the bill’s failure as the only major defeat the industry has suffered in recent years). Wardner said the tax cut was intended to encourage the industry to stick around. Fresh in everyone’s minds is the last oil boom, in the early 1980s, which quickly went bust, leaving state finances in shambles. The state hiked the oil tax by 6.5 percentage points, to its current rate, at the start of that boom in 1980, and Wardner and others cite the move as reason to cut it now.
The recent tax cut push began in 2011, when former Gov. Ed Schafer, a Republican, toured the state holding town hall style meetings calling for the change. At first, it wasn’t clear who was paying for the tour, which was organized by a nonprofit called Invest in North Dakota. But tax filings show that $300,000 came from a conservative, Iowa-based nonprofit called American Future Fund, a prominent player in national politics. The organization is not required to disclose its donors, but previous reporting has shown it’s accepted millions of dollars from conservative groups and individuals and was one the most effective outside spending groups of the 2010 election cycle. Later in 2011, Continental Resources appointed Schafer to its board of directors, a position he still holds, and the company has awarded him with more than $1.1 million in cash and stock since.
In an interview, Schafer said he was not involved in fundraising for the group, but that it drew on wide support from the oil industry and other companies and individuals. He pointed out that the state’s oil taxes are among the highest in the country and that a lower rate would help North Dakota retain investment.
Oil and gas companies have given tens of millions of dollars in charitable contributions in the state over the past few years, focusing in particular on education. In 2011, Hess Corp. gave $25 million to launch a new state program to help high school students prepare for college. John Hess, the company’s chairman and CEO, is an honorary co-chair of the steering committee, along with the governor. In June, the University of North Dakota announced a $5 million gift from the company that will pay for three new high-tech laboratories at its College of Engineering and Mines, with each lab sporting Hess’s name. Right next door is the university’s Harold Hamm School of Geology and Geological Engineering, a renaming of its geology department announced in 2012 after Continental and Hamm, the company’s CEO, donated $10 million to the school.
That same year, Dalrymple appointed Kathleen Neset to the state’s Board of Higher Education, which oversees the university system. Neset runs an oil field consulting business that, among other work, hosted this summer’s One Million Barrel Celebration, an event organized by the Petroleum Council, the industry group, to mark a milestone in the growth of the state’s oil production. In May, Neset brought her colleagues at the education board (none of whom are in the oil business) on an oil field tour, where the university’s chancellor told reporters he wants to be more responsive to the industry, saying, “Higher education is absolutely vital to the development of this industry.” In June, the Petroleum Council hosted its annual Teacher Education Program, four days of classes and tours for primary and secondary school teachers. A 2009 Petroleum Council report on the event noted the importance of educating tomorrow’s workforce and of influencing the state’s “future leaders [who] might translate their knowledge into a positive public opinion of the industry and ultimately effectuate favorable public policy towards the industry.”
There’s little doubt the gifts will improve and expand education for many North Dakotans. John Roper, a Hess spokesman, noted that his company has been working in North Dakota since the 1950s. “It’s important for us to support the state,” he said. Jack Ekstrom, a spokesman for Whiting Petroleum, which has given at least $100,000 to the University of North Dakota’s foundation, said the contributions are a way for the company to support its employees in the state.
But some critics of government’s relationship with the business are concerned that the flood of industry money has stifled debate. Sebastian Braun is the chair of the Department of American Indian Studies at the University of North Dakota, in Grand Forks, and he’s been trying for years to team up with scientists at the university to measure air and water quality as part of his research on the effects the drilling.
“Pretty much every time I talked to someone the answer would be, ‘That would be interesting, but I don’t want to do it, because someone might disagree,’ ” he said. Braun has never experienced direct pressure to avoid researching a topic, and he doesn’t think industry money has bought direct control over research. But it has bought a mood, he said, in which none of his colleagues are willing to rock the boat.
Peter Johnson, a spokesman for the university, said industry gifts do not buy influence and that there’s no pressure to avoid topics that may be viewed as critical of the oil development, pointing to two faculty projects looking into social impacts of the drilling, including Braun’s work.
Wardner doesn’t deny the oil industry’s influence in the state’s corridors of power. “They get the benefit of the doubt, absolutely,” he said. But he argues that’s for good reason. Wardner was a school administrator in the ’80s and ’90s, and he described watching colleagues get laid off at Dickinson High School as residents fled the area and funding was slashed. He also led the local chamber of commerce for eight years until 2006, where they would celebrate if they added two or three jobs in town. “You gotta understand that before they came, we’re grasping for ways to keep this town alive. Sixteen thousand and dying. Now, it’s almost 30,000,” he said. “Most people would rather have this growing, with a vibrant economy, and they know who’s responsible. The oil is.”
There are only four roads into the western oil fields, and one of them, Highway 22, heads straight north from Dickinson. Almost immediately, trucks begin to dominate the traffic. Warehouses line the road, labeled with the logos of oil field giants like National Oilwell Varco and Marathon Petroleum. Wells appear. Pretty soon, nearly every vehicle is connected to the drilling — most of them semi-trucks — and a well or drilling rig is always within sight. The farther in you get, the more Wardner’s vibrant economy becomes an all-encompassing notion.
Some of the most intensive drilling activity is centered around New Town, which sits within the boundaries of the Fort Berthold Indian Reservation and also in the district of state Rep. Kenton Onstad, the Democratic House minority leader. On a bright June day, Onstad was driving a white Chevy Silverado down a gravel section-line road — the land here is divided into a grid of 640 acre sections — lined with well after well, one every few hundred feet for a mile. Down another road, he pointed out a well that he said had been drilled in a flood zone, just a couple of hundred feet from a creek that ran directly into Lake Sakakawea, a dammed stretch of the Missouri River that provides drinking water and irrigation to much of the state. The Department of Mineral Resources has essentially rubber-stamped drilling permits as they come in, he said, ignoring whether they’re in environmentally sensitive areas or whether roads could handle the traffic.
Residents of Ross, about 30 miles north of New Town, awoke one day last year to find Oasis Petroleum hauling drilling waste to a giant pit located near the town’s municipal water well. A Department of Mineral Resources field inspector had approved the site even though it was in a protected area, within which any industrial development that could contaminate the water is restricted, a fact the inspector could have discovered by checking a publicly available map on the state Health Department website.
“This is readily available to the general public. Why wasn’t this used as part of the permitting process?” said Wade Enget, state’s attorney for Mountrail County, which includes Ross. “They didn’t really have an answer for that.”
After county officials alerted the department of the mistake, Oasis stopped hauling waste to the site and eventually closed the pit. Helms, the chief regulator, met with town leaders and told them it was an oversight, local media reported. In an emailed response to questions, Department of Mineral Resources spokeswoman Alison Ritter said the pit was originally approved for another location but was moved after an inspector found shallow groundwater at the first site. Ritter said it was a mistake that field staff did not have access to the mapping data, one they have since corrected.
But it’s cases like these that worry Onstad. “It isn’t that we’re going to prevent a disaster,” he said, it’s just a question of when it will happen. “We were open for business, boy.”
Helms, the chief regulator, defends his agency’s overall approach. “We look at all of the impacts of that drilling and where it’s going to be placed,” he said in an interview. “We have developed a system where we do look at the impact to the road, to the railroad crossings, to water resources, to farmland, to pastureland.”
Many of the struggles seem minor. Companies will regularly upgrade dirt roads on their own to handle the traffic, but then townships or county governments become responsible to maintain them, and they don’t necessarily have the funds to do so. Well sites often leave patches of farmland between the well and the road that are too small for farming equipment, and farmers have to negotiate payments for the land, which they can’t farm for the decades-long life of the well but still have to pay taxes on.
Gary Satterthwaite, a 70-year-old retired rancher, lives about 12 miles north of New Town, where he owns some 3,500 acres, which he now rents out. Only a small percentage of the land is good enough to farm — the rest used for grazing — but the family has long had a lease with Whiting Petroleum, and in in 2012, the company informed him they were going to place a new well smack in the middle of one of his good farming fields. Even though it covered just a portion of the field, the well effectively took the whole area out of production, he said. “They left us 100 yards on one end and 300 yards on the other. It’s a very narrow field, and they just basically cut it into small pieces where it’s not economical to farm.” Satterthwaite owns a share in a family trust that controls the oil underneath his land, and so he receives royalties from the well. He also negotiated what he called “fair market value at this time,” for the loss of the field. But he feels like the drilling is taking from him his farm and his livelihood. He asked the company to move the well a few hundred feet, he said, with no luck. “The oil companies are in charge.”
In an email, Ekstrom, the Whiting spokesman, said the company doesn’t comment on private contractual transactions.
Many residents also complain that regulators are reluctant to issue fines. While the Department of Mineral Resources oversees drilling, the Health Department enforces the state’s environmental laws, so the two agencies effectively share oversight duties. Last year Mineral Resources issued eight fines and the Health Department issued 38, though all but 10 of those were part of a larger agreement on air emissions with the industry and not for individual incidents.
That is a significant jump from 2009, before the boom began. That year, the Health Department issued just one oil field fine and the Department of Mineral Resources issued three.
But over the same period, the rate of drilling has more than quadrupled, with 2,254 wells drilled last year. Regulators say they have ramped up enforcement to keep pace with the drilling, but critics argue that the baseline was already unacceptably low, noting that fewer than 1 percent of spills result in fines.
When regulators do issue fines, companies often negotiate them down to a fraction of the original amount. In August of last year, Continental Resources was fracking a well when an accident allowed oil, gas and fluids to spew out of the ground for three days, according to a Department of Mineral Resources complaint issued in October. The department sought a $75,000 fine for the incident, but Continental fought back, denying the allegations. In December, the parties took the case before an administrative law judge. On March 14, the department and Continental reached an agreement saying that the violations were unintentional. Continental paid a $7,500 fine, with the rest waived as long as the company didn’t commit a similar violation for a year, and purchased a $20,000 bond to guarantee it completed a cleanup of the site.
Helms said these agreements allow the department to settle cases quickly and ensure that companies do not repeat violations. In the vast majority of cases, he said, verbal or written notices are enough to get a company to clean a spill or fix a problem on its own, and no fine is necessary. “It’s that last remaining one percent or so where the person clearly doesn’t have any respect for our laws or rules, and we will issue a complaint.”
In an effort to keep pace with the drilling, the state has nearly doubled the Department of Mineral Resources’ budget since 2009 to $22.7 million this biennium. It’s added 37 staff members over that period, a 66 percent increase, with 30 field inspectors now compared to 12 in 2009. Over the same period, the number of wells in operation has increased by roughly 150 percent, to 10,892.
The Health Department’s environmental health section has not fared as well. Its budget has barely budged since 2009, up $2 million to $50.5 million for the two-year period beginning in July 2013 (most of the department’s funding comes from the federal government, however, and the state’s share has actually doubled). The increase has allowed the department to hire eight new staff, a 5 percent increase, two fewer than the department requested. The workload has increased “significantly more” than that, said Dave Glatt, the head of the Health Department’s environmental health section. “You just dedicate the staff to the core areas with the highest priority,” he said.
Glatt said his staff focuses on getting companies compliant, rather than on fines, but that they’re beginning to realize they may need to come down harder. “It’s an evolving process,” he said. “I don’t think we’re there yet, but I think we’re getting close.”
While even Majority Leader Wardner acknowledges that state regulators should perhaps issue more — and more significant — fines, Democrats have been sharper in their critique, which they generally aim at elected officials rather than bureaucrats. State Sen. Connie Triplett pointed to a recent case in which the Public Service Commission, which has jurisdiction over pipelines and is made up of three elected commissioners, decided not to fine Hiland Operating, a pipeline company chaired by Harold Hamm, after discovering it had been operating a pipeline in the state for two years without a permit. Randy Christmann, one of the commissioners, who received $1,000 in campaign contributions from Hamm in 2012, said at the time that the commission didn’t want to discourage investment.
“The companies know there isn’t much risk with making mistakes in North Dakota,” said Triplett.
Nearly three years ago, a picture began circulating on the Internet showing a satellite image of the middle of the country. The photograph, taken at night, showed what looked like a sprawling megalopolis glowing in western North Dakota. The lights were flares of natural gas, many of which burn for months or years. The fossil-fuel rich rock formation that energy companies are tapping, known as the Bakken, holds both oil and gas, and there’s no way to extract one without the other. But while oil can be trucked away from a well site, gas requires pipelines and processing plants, and North Dakota has few of either. Because the oil is worth much more than the gas, and because energy companies have been racing to drill before their five-year leases with mineral owners expire, the drillers stand to make more money drilling as fast as they can even if they’re wasting gas they might otherwise sell. The gas they burned off in 2012 was worth about $1 billion, according to a report by Ceres, an advocacy group that pushes for sustainable investing, and released the greenhouse gas equivalent of one million cars. Flares also emit noxious pollutants including benzene, a known carcinogen.
North Dakota addresses flaring in two ways: administrative rules restrict flaring on a field by field basis — generally by limiting production if companies flare for more than 60 days — while state law allows companies to flare for up to a year without paying royalties or taxes. Those limits are much less stringent than in other states — even oil-friendly Texas allows for just 10 days — but the Department of Mineral Resources has issued countless waivers to the rules, Ritter said, allowing companies to continue flaring because they demonstrated that capturing the gas was not economically feasible. Ritter said comparing North Dakota to other states is unfair. For one thing, drillers in North Dakota were looking for oil, not gas, and Texas has many gas fields and, therefore, a large infrastructure prepared to handle extra gas from oil wells. Officials also point to North Dakota’s harsh climate as a limitation, noting that companies can dig for pipelines for barely half the year.
The waste has caused increasing consternation among many people in North Dakota and across the country, though, including Robert Harms, who at first seems like an unlikely candidate for agitator. Harms is the chairman of the North Dakota Republican Party, former general counsel for two Republican governors, and he’s spent years as a lobbyist and consultant for the oil industry. He’s also been an outspoken critic of flaring, which he says has made the western part of the state look “like a freaking huge birthday cake.”
Last year, Harms lobbied the state legislature for the Environmental Defense Fund, a national advocacy group that hadn’t had much presence in the state but wanted to reduce flaring. Harms brings a complex mix of interests to the debate. He had previously worked with companies that wanted to install generators or other equipment at well sites to use the flared gas. He still represents oil field service firms, including some pipeline companies. His family comes from the heart of the oil fields and they own minerals. He said an environmental group is “not something I would typically align myself with.” But where the Environmental Defense Fund sees an environmental problem, Harms sees bad economic policy.
In concert with the Dakota Resource Council, Harms pushed a number of bills last session that would have either shortened the length of time companies could flare or restricted the Department of Mineral Resources’ ability to grant waivers to its rules. But in the end, Harms’ ties to the industry and chairmanship of the state’s governing party didn’t help much.
When Sen. Tim Mathern, a Democrat, introduced a bill to remove the ability for companies to get a waiver from the one-year limit on flaring, Harms and the Dakota Resource Council spoke in favor. Ron Ness, of the Petroleum Council, followed, and told a Senate committee about the difficulties his members faced. Early estimates of the volume of gas proved too low, he said, and while energy companies have been investing billions of dollars in new pipelines, gaining easements and building the infrastructure takes time. He urged the committee instead to consider incentives to encourage capturing the gas. The next day, the committee voted the bill down.
As it turned out, a bill was working its way through the legislature that would do just what Ness had suggested. The House had passed a measure that offered tax cuts for companies finding alternative methods of capturing the gas. When it reached the same Senate committee, Harms convinced lawmakers to adopt an amendment that shortened the allowable time to flare without paying taxes and royalties to six months. But when the two chambers met in a conference committee to work out details, two representatives stood firm against the amendment. Rep. Glen Froseth, a Republican from the same district as Onstad, said the incentives would work and stressed the need “to keep this oil industry going.” (Froseth raised $2,300 from oil interests in 2012, out of a total $8,350.) Eventually, the senators yielded and the amendment failed. The result, in Harm’s words, was “window dressing.”
“The political will just didn’t exist, and I think the industry was resistant to any of those changes,” said Harms, sitting in Peacock Alley, one of Bismarck’s main political watering holes, where lawmakers and lobbyists mingle during the state’s short, biennial legislative session. He was wearing a light brown suit that accentuated his long frame, with a “Reagan Republican” pin in the lapel. “The industry has a fair amount of influence, as you would expect it to. They’ve been here for 60-plus years … I’m a big fan of the oil industry. I represent people in it. My family grew up in it … So the western part of the state is pretty friendly to the oil industry. And you’d expect an industry that’s been here that long to have lots of friends and lots of influence, appropriately. It isn’t universally true, but if the industry opposes a bill, it’s going to have a more difficult time getting passed.”
Even among friends, though, patience is wearing thin on flaring. The towering flames of gas can burn as loud as jet engines. Some residents who live near flares have complained of headaches, nausea and other symptoms. While they’re only one of many sources of emissions, many residents complain of deteriorating air quality across the region.
“We had to check the wind everyday, because you don’t know what was in that stuff,” said Jorgenson, the farmer and rancher near White Earth, who has wells near her home that have flared on and off for years. “It just interferes with the normal things in your life like going for walks, hanging out the laundry. I used to go cross-country skiing, horseback riding. Our horses don’t want to go anywhere near those wells.”
A couple of years back, the health department realized that the models the oil companies had been using to estimate emissions from well drilling and operation had been too low. As a result, thousands of wells had been emitting toxic pollutants like benzene and toluene for years, potentially at levels above the allowable limits. The state worked with oil companies to revamp their models, and has reached consent agreements with 32 companies since the beginning of 2013. The companies agreed to install better equipment to cope with the emissions and to pay a collective total of $2.6 million for the violations.
Glatt, of the Health Department, said his division’s monitoring network has detected a slight increase in particulate pollution in the region, but not to unhealthy levels. The Dakota Resource Council and other critics say that the monitors are too few to notice any problems — only one is located in the heart of the drilling region, and it was put there in 2012. The monitors measure ambient air quality and likely would not reflect more localized problems caused by flares, they say.
Glatt said he understands people’s concerns, but that the state’s monitoring system, set under guidelines from the federal Environmental Protection Agency, continues to show compliance with federal standards. “There’s a lot of wind, and there’s a lot of dispersion out there, so I really don’t think there’s enough [pollution] that it’s changing the air quality.”
Perhaps. But in July, the Industrial Commission announced that it would institute targets for reducing flaring, and would require that companies curtail their oil production if they are not hitting those targets.
The goals, however — cutting flaring to 26 percent of all the gas produced by the end of this year and dropping the limit gradually to no more than 10 percent by 2020 — were set by the industry itself, in a series of recommendations it gave to the commission. Companies also must now submit plans for capturing the gas when they apply to drill a well, another recommendation from the industry.
The rule has met mixed reviews. Notably, the targets are percentage-based, meaning the total volume of flared gas may not drop as quickly as the figures suggest, since production continues to increase. Dan Grossman, regional director of the Environmental Defense Fund’s Rocky Mountain office, was happy to see the commission tie production to statewide flaring targets, a move he said the industry fought. Grossman said the rule is a good start, but that North Dakota still has a long way to go to catch up with other oil and gas producing states. “They’re all below 10 percent,” he said. The federal Bureau of Land Management is also developing rules for wells on federal lands.
In an interview before the rules were announced, Helms, the regulator, defended his department’s approach to flaring, saying that the wells turned out to produce far more gas than anyone expected and that there simply was no feasible way to capture more of it.
“We try really hard not to give the industry any more input into the rulemaking than we give the landowner groups,” Helms said. “I will say that typically, when industry comments on rule making, they have engineers and geologists and lots of technical experts at their disposal, and so their comments are often much more to the point and make a huge difference in terms of what the final rule comes out like.”
Morrison, of the Dakota Resource Council, put it a different way. “How do things work? North Dakota state government says, ‘What should we do?’ And then the industry comes back and tells them how to do it.”
Dan Kalil, 57, wears a broad, Wilford Brimley-style mustache, and is, in his words, “a conservative and a conservationist.” He doesn’t belong to either political party, but he is a longtime county commissioner in Williams County, which includes Williston, the biggest town in the oil fields, and he’s fed up. Early one morning over eggs at the county courthouse cafe, Kalil described a state of constant churning chaos, where drillers do what they want and regulators are unresponsive at best.
“The attitude is, we’re sitting in Bismarck, we don’t care,” he said. “At five o’clock down there, those people clock out and go home …. It’s never over up here. The day is never over, the pressure’s never over, the stress is never over, and the noise is never over.”
Kalil said the state failed the people in the oil fields by allowing the drilling to proceed faster than the region could cope with it, a sentiment shared by many here. But the Mineral Resource Department’s Helms said the state constitution prohibits them from withholding leases purely to control the pace of development, not only to protect oil companies’ right to drill, but also mineral owners’ right to exploit their property.
And there lies the rub. Because mineral rights can be sold separately from the land above them, many here do not own the oil below their farms. In some cases, mineral owners live hundreds of miles away in other states. If they lease their land, there’s nothing a surface owner can do to stop the drilling, even if it wreaks havoc on a treasured way of life for folks like Kalil, whose grandfather came to the area a century ago as part of the homestead movement led by the Northern Pacific Railway.
There’s an old farmstead on Kalil’s property where his son used to take a packed lunch and a BB gun and spend the day catching frogs. Then one day an oil company plopped a well right next to it. “He was just so upset at this intrusion, losing his favorite place,” he said. “We didn’t need the countryside run over. We’ve just been trammeled.” Kalil speaks in low, understated tones, belying any agitation. “I’m upset that the state has allowed the industrialization of western North Dakota. I thought this was paradise. I counted myself so lucky to have been born here. Everything I wanted in life was here. I had no desire to go anywhere else,” said Kalil. “All I wanted to do was farm and ranch, from the time I could stand up. And it’s stolen the future for a lot of people who wanted to retire here, who wanted to live out their days here. It’s stolen mine.”
Data reporter Ben Wieder contributed to this story
Candidates who had planned to run against Obamacare this fall and use skyrocketing rate increases as an “I-told-you-so” talking point may not have as much to work with as they had hoped.
While health insurers in some states will indeed increase the cost of their policies, early evidence suggests that most increases won’t be any higher than they were before the Affordable Care Act was passed. And millions of Americans will be able to pay considerably less next year for the exact same coverage they have now.
A big part of the reason that many people will be able to get better deals is increased competition.
Most of the big for-profit health insurers, ever mindful of their bottom lines and profit margins, decided to offer policies on the new health insurance exchanges in only a few states last year. Now that they have a better understanding of the new marketplace that the ACA established, they’re jumping in, at least where they think they can make money.
Leading the pack is UnitedHealth Group, the country’s biggest health insurer. The company offered 2014 policies in only about a dozen states. During a call with investors last week, UnitedHealth CEO Stephen Hemsley said the company will compete for 2015 Obamacare business in twice that many states.
“We want to make sure we don’t go in too late,” he said. “We’re thinking this is about the right time.”
Even the nonprofit co-op plans that debuted in about half the states this year are expanding into new markets. Residents of New Hampshire, Idaho and West Virginia will have co-ops to choose from for the first time when the Nov. 15 open enrollment date for 2015 coverage arrives, thanks to co-ops in neighboring states opting to cross state lines. Ohioans will also have a new co-op to choose from. And based on preliminary rate filings, the Ohio co-op, InHealth Mutual, is besting its established competitors by almost 25 percent.
Here’s what’s expected in a handful of states where information is available, based on published reports of preliminary filings and company announcements:
Residents of some states may not find lower-cost plans, of course, especially if the dominant plans kept their rates artificially low for 2014 in order to undercut competitors or if the states’ regulators allowed policyholders to remain in their non-ACA-compliant plans for an additional year.
In Iowa, for example, CoOpportunity Health notified customers that it would seek a 14.3 percent increase for 2015. Coventry Health Care said it would also seek a rate increase for its Iowa customers. CoOpportunity blamed its proposed increase on a marketplace distorted by the state’s decision to allow “grandfathered” plans to be sold for another year.
Tennessee residents were able to take advantage of some of the country’s lowest rates this year, primarily because Blue Cross Blue Shield of Tennessee — which has an 88 percent market share — priced their policies too low to make a profit. Now the company is seeking a 19 percent increase.
Company spokesman Roy Vaughn said the rate increase would allow the company to “break even” in 2015.
The Blue Cross plan in Georgia, however, which priced its policies considerably higher than it’s counterpart in Tennessee, has requested an average decrease in premiums of 7 percent.
The big unknown at this point is what will happen to rates in the new states where UnitedHealth will offer coverage on the exchanges for the first time. If the company proposes rates lower than competitors, we can expect those competitors to adjust their premiums downward.
Whether people will actually shop for the best deals remains to be seen. The federal government recently announced that most folks who enrolled in coverage through the exchanges in 2014 would be automatically re-enrolled for 2015 unless they take action to change plans. It’s clear that many of them could save some serious money if they look at the new options that will be available in many states.
In 2013, Scott Talbott, then-chief lobbyist for the Financial Services Roundtable, likened the signing of sweeping financial reforms under Dodd-Frank in 2010 to “halftime.”
Even now, on the fourth anniversary of President Obama’s signing of Dodd-Frank into law, bank lobbyists and a core group of lawmakers dubbed by the Center for Public Integrity in April as the “banking caucus,” have made it clear that there is still time left on the clock to undermine key provisions in the financial reform law.
Rep. Jeb Hensarling, R-Texas, named by the Center’s April report as the captain of the banking caucus, offered what might serve as a pep talk on July 16.
“We can never, ever accept a Dodd-Frank world, nor should we,” he said at a conference organized by the Mercatus Center and the Cato Institute.
Hensarling, chairman of the House Financial Services Committee, and the 10 other members of Congress featured in the Center’s investigation, have done their best to derail Dodd-Frank.
At least 30 bills have been proposed to the House during the 113th Congress, aimed at chipping away at aspects of Dodd-Frank. Members of the banking caucus sponsored or cosponsored 20 of those laws. At least 16 have been referred to the House Financial Services Committee and three have been passed to the Senate.
Most measures will stall upon reaching the Senate Banking Committee, which supports Dodd-Frank.
The Consumer Financial Protection Bureau, created by Dodd-Frank, is a favorite target for opponents of financial reform. Ten proposed laws over the past year have been aimed at disassembling some aspect of the CFPB.
The bills range from the trivial to the systemic. The Bureau Research Transparency Act, for example, asks that the CFPB provide any studies or data when publishing a related research study, while the CFPB Data Collection Security Act would limit the bureau’s ability to collect and hold important data.
Attacks on the CPFB have been steady almost since its inception. A proposal before the 112th Congress to change the CFPB leadership structure from a single director to a commission has resurfaced as the “Responsible Consumer Financial Protection Regulations Act of 2013.”
Another method to put the future of the CPFB in question is to change its funding. The House Appropriations Committee’s fiscal year 2015 Financial Services and General Government Appropriations bill includes a provision to change the bureau’s funding source from the Federal Reserve to Congress beginning in 2016. The bill passed the house on July 16.
Finance-related industries, related political action committees and dark money groups have donated almost $248 million to political campaigns, according to data from the Center for Responsive Politics, more than any industry.
While most of these proposals probably don’t have much of a chance of becoming law, when combined with the at least 50 appearances by senior CPFB officials before Congress, they do reflect the type of pressure that has made meaningful financial reform difficult.
According to the Davis Polk Regulatory Tracker, 45 percent of Dodd-Frank’s specific deadlines have passed without finalized rules.
With so many interesting stories related to energy, and North Dakota in particular, how did you come up with this story, about the expanding influence of oil and gas in state politics?
I actually did my first reporting on the oil boom in late 2011. I have continued to keep an eye on the state and during that period it was becoming big national news. All of the stories talked about the sheer scale of development, both the positives and the drawbacks as well as the social impacts and infrastructure of development.
But the one thing I noticed is that oil and gas were able to basically operate how they wanted. What really struck me, one of the most noticeable things was the steep rise in the amount of money given to politicians in North Dakota.
North Dakota is a small state. Running a political campaign is comparatively cheaper, and people know each other, campaigning there is very different than most places in the country. For 2012 there was more than twice as much money than in previous elections and it really seemed to start changing politics in the state.
North Dakota has seen similar booms in the past. In the 1970s it was coal mining and in the 1980s it was an oil boom. How do those periods compare to what is going on now?
Critics of what’s happening now point to those periods as examples of a more responsible way to do things. In the 1970s, they passed extraction taxes and laws to ensure that after mining was done, the companies cleaned up and the state benefited from it. In the 1980s they raised the oil tax to 11.5 percent.
People think now it’s a different attitude, it's 'let's not pay attention to a lot of these issues and let's just get what we can from the boom when we can get it.'
Why should people outside of North Dakota care about this story?
The oil and gas boom going on in North Dakota is arguably the biggest thing going on in the U.S. energy scene today, and to a large degree, is responsible for the record surge in domestic energy. What was interesting to me is that this is happening in people's backyards. It was time to close the loop on that, and see how our policies impact real people.
Where are the environmental voices in North Dakota?
They are few and far between. A lot of people in the state do support the oil and gas industry and drilling, and that’s worth noting. But more and more people are starting to question the way things are going, in particular the issue of flaring. People in the state are really getting fed up with this.
Some national environmental organizations are starting to get involved, the Environmental Defense Fund hired a local lobbyist who I actually interviewed because he is a Republican who previously worked for the energy industry. He is one of those people who saw this flaring issue and felt he had to get involved.
In the article, the chairman of the North Dakota Petrolium Council, Ron Ness, says the industry doesn’t always get its way, can you think of an example of that?
There’s really only one that people pointed out to me, and that’s cutting the oil taxes. North Dakota doesn’t have the highest taxes, but they are pretty high at 11.5 percent, plus various incentives. The industry has been pushing to cut that and a tax cut was pushed last session that the Senate passed. But Democrats who are a minority in both the Senate and House, characterized the cut as a reckless squandering of public money, and the public outcry was enough that the House didn’t pass it.
That was pretty much the only major example I would say. None of the tighter regulations passed without being amended or gutted of their original intent.
One of those is the "extraordinary places" example, when the attorney general proposed a buffer zone around certain places, where the Industrial Commission can solicit public input about drilling. The industry asked not to allow it on private property and to restrict the buffer in public places, and the commission pretty much did what the industry asked.
Is there any concern for accidents?
There are a lot of spills. The state says most of the spills are contained, and that may be, but a lot of those are not contained. Last year there were 1,700 spills of wastewater and oil. The state points out major spills were contained, but wastewater from wells is very saline — and very harmful. The only option is to dig out land and replace it. There are cases where it hasn’t been cleaned out for years yet, and there are farmers who have lost chunks of their property.
Another concern is air quality. A lot of people who live near flares have reported health issues, very similar to what was reported in Texas, and the state hasn’t done any testing of local issues like that, so there’s no way to know whether that is related to flares. The state has air quality monitoring network — eight to ten around the state, but only one in the heart of the drilling area. If I have a well 700 feet from my home and there’s a flare on it, there’s no monitoring it at the local level.
How has the boom influenced other parts of North Dakota, beyond politics and the environment?
Back when I decided to do this story about oil and gas in the state, I wanted to take a look at what influence if any that has in civil society, beyond politics. A lot of sources were mentioning big gifts to museums and this state Heritage Center, and I started to look and saw that a lot more money had been introduced to these institutions.
The University of North Dakota, for example, received $10 million from Continental Resources and their CEO Harold Hamm, and in return they renamed their geology department the Harold Hamm School of Geology and Geological Engineering.
At North Dakota's Heritage Center, the state approved a $52 million revamping of the center and said $12 million must come from private donations. At least $6.5 million came from energy companies based on gifts that were made publicly.
You see these names everywhere. It's not that the oil industry is buying direct influence. It's not like they are controlling the exhibits, but I talked to a professor of anthropology at the University of North Dakota who talked about trying to team up with other professors to study air and water quality and he couldn’t find one professor that would partner with him. They all said, 'that would be interesting, but I don’t want to get into it.' It’s not wanting to bite the hand that feeds you.
What questions remain?
In a more general sense, over the last several years, what some have seen as the chaos of development, the deteriorating roads, the thousands of spills, the burning off a third of the gas, some officials have said this is part of the early stages of development and that things will get better. So the question then is, is this true and will things get better?
Flaring is a good example of that. Nearly a third of the gas that wells produce gets burned off, the companies have said they were not really prepared for how much gas was going to come out of these wells. The state has just introduced a new set of rules to limit flaring, so we are still waiting to see if these rules are going to be effective or not.
You operate a political committee.
But you're not certain whether your brainstorm, put into action, would violate federal law and expose you to penalties.
Used to be that you'd file what's called an advisory opinion request with the Federal Election Commission. Advisory opinions, according to the FEC, are "official commission responses to questions regarding the application of federal campaign finance law to specific factual situations."
These days, however, an historically low number of people are asking the frequently gridlocked FEC for its formal opinion.
To wit: The six-member commission — three Republican appointees, three Democratic — has received only 10 advisory opinion requests this year, according to a Center for Public Integrity review.
That puts the FEC squarely on pace to receive 19 advisory opinion requests and tie its second-lowest yearly total since the commission's creation in 1975. The commission also received just 19 in 2013, edging out its lowest annual total — 15 — in 2002.
During the past three decades, the average number of FEC advisory opinion requests for one year is about 36. The agency has never received fewer than 20 during two consecutive years.
Four factors may be contributing to the decline in these requests.
First, it's increasingly likely the FEC won't formally respond to an advisory opinion request.
During 2013, commissioners deadlocked on three of 19 advisory opinion cases — 16 percent — presented to them.
While such a failure-to-rule rate is hardly overwhelming in a political vacuum, it would have been unheard of at the FEC just a few years ago.
Consider, for example, that the commission deadlocked on just one of the 170 advisory opinion request cases — half of one percent — presented to it from 2000 to 2005, FEC vote tallies indicate.
Secondly, the full commission sometimes reaches a conclusion, but it can't agree on the details or a rationale.
Take a case brought in April by Enterprise Holdings Inc., the corporate parent of rental car brands Enterprise, National and Alamo.
The company asked the FEC to rule on whether its employees could use payroll deductions to contribute to its federal political action committee. And the full commission, in a 6-0 vote, approved a formal response affirming they could.
But commissioners couldn't quite agree on a technical matter: whether it should state, straight up, that federal election law would trump New York state election law in the event that New York, one day, would chose to regulate the matter. So it simply didn't address the issue in its ruling. The FEC's three Republicans, however, felt compelled to issue their own statement arguing that yes, federal law would indeed supercede state law should a conflict arise.
Likewise, in May, the FEC concluded in a 6-0 decision that a political action committee could accept up to $100 worth of Bitcoin per contributor during an election.
After the vote, however, FEC Chairman Lee Goodman, a Republican, and Commissioner Ellen Weintraub, a Democrat, publicly disagreed on whether the agency would treat the digital currency like cash or an in-kind contribution. Also left unsaid is what the FEC would do to a committee that accepted $1,000 or $2,000 during an election — still well below the legal maximum for cash donations.
Attorney Joe Sandler seemed to be flummoxed following a deadlocked vote by the FEC on a client's request that small political advertisements it intended to be displayed on mobile phones be exempt from stringent federal disclosure rules. Small screens, Sandler and his colleagues at law firm Sandler Reiff Lamb Rosenstein & Birkenstock P.C. argued, made it impractical for political committees to include disclaimer text within their already tiny ads. Commission Democrats sharply disagreed.
The FEC ultimately didn't prohibit Washington, D.C.-based Revolution Messaging, whose generally left-leaning clients include organizations such as the Democratic Congressional Campaign Committee, MoveOn.org and Planned Parenthood, from proceeding with its mobile advertising plans. But it didn't say it could, either — sans disclaimers.
"It's created risk and uncertainty that doesn't need to be there," Sandler lamented afterward. "We've had a dysfunctional commission for some time now. It's frustrating."
Thirdly, the FEC is doling out fewer and fewer civil penalties for breaking election laws.
So, if there's a good chance the agency won't punish a perceived campaign transgression, why go through the bother and expense of preemptively seeking a formal ruling?
Fourthly, the FEC might simply rule against someone requesting an advisory opinion. In that case, the requestor may have been better off never seeking the agency's guidance in the first place and taking its chances.
In interviews with the Center for Public Integrity, both Goodman, the FEC chairman, and Vice Chairman Ann Ravel, a Democrat, downplayed the dip in advisory opinion requests.
Goodman noted that the FEC has of late received several advisory opinion requests, some of which have been formally accepted by the commission and others of which are still under review for completeness and validity. He said this indicatedthe "regulated community still views the advisory opinion process as an important outlet for getting answers to their compliance questions.
"Nevertheless," Goodman added, "I understand that some may be frustrated by the process, particularly when many noncontroversial requests for guidance are denied the four votes necessary to issue an opinion."
Ravel said she does worry that some political candidates and committees don't see the value in spending time and money seeking guidance from an FEC that may not provide it.
But she, too, noted that that the summer uptick in advisory opinion requests activity, even if it remains low overall this year, proves politicos still value the FEC's official word.
"Even though this may be fewer than historic average, the fact that so many are now pending seems to indicate that the regulated community is not shunning the process," Ravel said.
Late last year, the FEC's three Democratic appointees blocked conservative attorney Dan Backer from obtaining a favorable ruling for a client, the Tea Party Leadership Fund. Perhaps unsurprisingly, Backer blames Democrats for poisoning the advisory opinion process.
"If you ask for an AO, it’s because you want an answer, and the inability to get even reasonable questions answered by Democrats makes doing so pointless, public and expensive," he said, adding that strong, deregulatory federal court rulings this decade in Citizens United v. Federal Election Commission and others give many political actors courage that their politicking is beyond FEC sanction.
For Brett Kappel, an election law attorney at Arent Fox LLP, the entire commission has an image problem.
"The public perception that the FEC is hopelessly deadlocked has definitely put a damper on the regulated community’s willingness to seek advisory opinions," he said.
On Thursday, the FEC has its next opportunity to rule on a high-profile advisory opinion case.
That's when attorneys representing political committees controlled by Rep. Paul Ryan, R-Wis., are slated to argue the commission should grant Ryan's groups its official blessing to use campaign funds to purchase copies of Ryan's upcoming book, which, in turn, would be given away as freebies to supporters and donors.
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