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Jan. 17, 2007

Architects of an Earmark: The Story of the RPSEA Rip-Off

Statement of Laura MacCleery, Director of Public Citizen’s Congress Watch Program 

Today we are releasing a report detailing the creation of an enormous subsidy to already-wealthy oil companies that was slipped into the 2005 energy bill without the knowledge of most lawmakers – even most of the Senate-House conferees. This giveaway, slated to go to a consortium named the Research Partnership to Secure Energy for America, or RPSEA, will cost taxpayers as much as a billion dollars.

The story of the RPSEA earmark is a case study in how industries use backdoor access to secure millions in public money. We are calling on Congress to repeal it.

Our report reflects hours of interviews with the people who engineered the RPSEA earmark, including face-to-face meetings and scores of e-mails. We also ensured that the point of view of those interviewed is represented in the report.

The story of the earmark began around 2000, when a plan for taxpayers to subsidize gas industry research was hatched by the Gas Research Institute (GRI), a research group that once received more than $200 million in annual subsidies from a surcharge that gas pipeline operators collected from customers.

As deregulation diversified the gas pipeline industry in the late-1990s, pipeline operators balked at continuing to subsidize gas institute research. The Federal Energy Regulatory Commission mediated a compromise calling for the subsidy to be phased out by 2004. The research institute board voted to pursue a new source of federal money to replace its lost revenue stream.

The institute broached its idea of a new taxpayer-funded revenue stream to Melanie Kenderdine, who was then a top policy aide to President Clinton’s Energy Secretary, Bill Richardson. Kenderdine advised the group that Congress would be unlikely to approve an allocation straight from federal coffers to GRI. She recommended a federal measure that called for a competitive process. She also suggested that a consortium including universities and non-profits would be best positioned to secure the contract.

Kenderdine’s recommendation laid out a path that she would help the group to follow, even eventually helping to write the legislation.

Today, Kenderdine describes herself as “the principal architect” of the research consortium program created by the legislation and “co-founder of RPSEA,” which was created in anticipation of the legislation’s enactment. Kenderdine also hired Drew Maloney, a former energy specialist on former Rep. Tom DeLay’s staff, to lobby the issue.

GRI changed its name to the Gas Technology Institute (GTI) in 2000 and hired Kenderdine in March 2001, shortly after she cleared out her DOE office. Kenderdine oversaw a lobbying budget of more than $2 million between 2002 and 2005, a dramatic increase from the group’s $60,000 to $140,000 annual lobbying budgets in the late 1990s. These expenditures included money for two other lobbyists who previously held influential positions in the government: Maloney and C. Kyle Simpson, who was also an alumnus of the Department of Energy.

In summer 2005, the energy bill at last appeared likely to pass. A provision for federal funding for research into ultra-deepwater exploration and other unconventional forms of exploration was included in the House-passed version of the bill but was stripped out by the Senate. It was not in the bill when the conference committee signed off on it in the wee hours of the morning on July 26, 2005.

But then, sometime between 3 a.m. and noon that day, a quartet of leaders of the conference committee slipped the provision into the bill to be presented to the House and Senate for final passage. These leaders were favorites of companies and trade associations that were either members of RPSEA at that point, as Halliburton was, or eventually joined the consortium. These four members of Congress received more than $325,000 in political contributions from these RPSEA members between the 2000 and 2004 election cycles.

RPSEA’s offices eventually were established in Sugar Land, Texas, DeLay’s hometown, although its books were kept at GTI’s Chicago-area offices. DeLay, who ranked sixth among House members in RPSEA-member contributions, played a key role in ensuring that $50 million a year in funding would be guaranteed for all 10 years.

The House passed the bill on July 28, 2005, and the Senate followed suit the next day. The bill required an “open, competitive process” to choose a consortium to manage the 10-year research effort. But it laid down tight deadlines for submission of a proposal, making it unlikely RPSEA would face competition.

In the end, only one group applied — RPSEA. The Energy Department announced RPSEA’s selection in May 2006 and signed a contract with the group for $375 million in December 2006.

GTI will be paid $1 million a year to help run the consortium. GTI will also be eligible, with approval of the Energy Department, to apply for research grants from the consortium. In short, GTI created RPSEA, is a member of RPSEA, funded RPSEA, will be paid to help administer RPSEA and will be eligible to apply for grants administered by RPSEA.

Congress should repeal this provision and conduct a full and open debate on whether the money is being well-spent. The story is a case study in how money allocated by lawmakers is arranged in last-minute, backroom deals that lack any real consideration of public priorities. The House of Representatives discusses cutting oil and gas subsidies tomorrow. While the RPSEA subsidy is not part of HR 6, we urge Congress to repeal this wasteful spending program in future legislation.

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