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Smoke and Mirrors

Obama DOE Fracked Gas Export Study Contractor’s Tobacco Industry Roots

by STEVE HORN

At first, it was kept secret for months, cryptically referred to only as an “unidentified third-party contractor.”

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

LNG is the super-chilled final product of gas obtained – predominatly in today’s context – via the controversial hydraulic fracturing (“fracking”) process taking place within shale deposits located throughout the U.S. This “prize” is shipped from the multitude of domestic shale basins in pipelines to various coastal LNG terminals, and then sent on LNG tankers to the global market.

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

Alfred E. Kahn, the late “Father of Deregulation,” founded NERA in 1961 along with Irwin Stelzer, now a senior fellow and director of the right-wing Hudson Institute’s Center for Economic Policy.

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

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

She proceeded to explain,

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

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

NERA and the “Tobacco Playbook”

Many fossil fuel industry public relations flacks learned the tactics of mass manipulation by reading the “tobacco playbook,” meticulously documented in Naomi Oreskes’ and Erik Conway’s classic book, “Merchants of Doubt.”

Doubt is our product,” a tobacco industry CEO once said of the playbook, “since it is the best means of competing with the ‘body of fact’ that exists in the minds of the general public. It is also the means of establishing a controversy.”

NERA Health “Benefits” of Smoking

The University of California-San Francisco’s Tobacco Archives reveal NERA worked on behalf of the tobacco industry dating back at least to 1986.

May memo from that year written by then NERA Vice President William B. Shew (who now works at the previously mentioned Hudson Institute as an Adjunct Fellow alongside NERA Founder, Irwin Stelzer) addressed to Arnold & Porter attorney Thomas Silfen says the tobacco industry should aim to explain the so-called health “benefits” of smoking.

Most studies don’t explain “the satisfactions that induce smokers to put up with health hazards,” Shew explains in the memo. “This imbalance would be rectified by looking at the satisfaction derived from smoking.”

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

memo published in 1988 by Silfen posits that Big Tobacco has an obligation going forward to overcome its “long agony over health issues–to get the industry out of the ‘it hasn’t been proven’ trap once and for all.”

Attempt to Defeat L.A.’s Restaurant Smoking Ban 

Working alongside public relations industry giant Ogilvy-Mather and the Tobacco Institute, NERA also attempted to defeat the then-proposed smoking ban in Los Angeles County in 1990, the Tobacco Archives reveal.

SourceWatch details that the Tobacco Institute hired Ogilvy ”to provide public affairs consulting services aimed at helping the Instutitute fight cigarette excise taxes, public smoking restrictions and to help with coalition building issues,” proceeding to explain that it helped to “devise ad campaigns to take the public’s focus off the health hazards of secondhand tobacco smoke.”

Among other accolades, Ogilvy helped BP rebrand itself ”Beyond Petroluem,” a propaganda campaign which won the corporation nowinfamous for its Gulf Coast oil disaster the PR Week ”Brand of the Year” in 2001. Critics at the time called it a case of “greenwashing.”

Yet in the end, it was a case of “too little, too late” for NERA, Ogilvy and the Tobacco Institute.

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

NERA Offers Philip Morris Advertising Analytics

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

NERA/Philip Morris’ War on OSHA and Maryland Workplace Smoking Regs 

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

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

Dr. Albert L . Nichols authored a Dec. 1995 NERA economic study contracted out by Philip Morris which critiqued OSHA regulations. That study predictably concluded that OSHA’s regulations were “draconian” in nature, suggesting OSHA relied on “patently ludicrous” economic assumptions.

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

Feb. 1995 Associated Press article quotes Nichols saying that cigarette sales in Maryland “could fall by $27 million” on an annual basis if the regulations are implemented.

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

Should Firm with Big Tobacco Roots Be Trusted?

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

“Deciding to export the U.S. gas supply is a major public decision,” Deb Nardone, director of the Sierra Club’s Beyond Natural Gas Campaign, said in a press release. “We deserve a full and fair conversation about it. That’s why we deserve to know how and why DOE picked this anti-environmental, pro-corporate consultant for this crucial report.”

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

Steve Horn is a Madison, WI-based freelance investigative journalist and Research Fellow at DeSmogBlog.