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The Governor's Race
In 1994, the Bush-Lay relationship entered a new phase when the younger George Bush entered the race for the Texas governor's mansion. Bush faced an uphill battle against then-Gov. Ann Richards. A popular incumbent, Richards had earned national attention for her sharp wit and irreverent style, which suited her Texas constituents. Early polls gave Richards 65 to 75 percent approval ratings.
Bush was little more than the oldest son of a former president. Despite helpful family connections in both business and political circles, Bush had flopped in the oil business, though he was able to land a position as part owner of the Texas Rangers. Still, in early 1994, national political observers gave his younger brother Jeb Bush, who was challenging another popular incumbent, Lawton Chiles in Florida, a better chance for victory. (Jeb would lose in 1994 only to come back and win in 1998).
George Bush ran a hard-hitting campaign, suggesting that Richards was soft on crime. Critical to the campaign was getting his message out, and critical to that effort was money. Bush turned to his fathers old political benefactor, Ken Lay. Enron and Lay contributed $146,500 to the Bush campaign, seven and a half times more than they contributed to the Richards campaign. Lay also publicly endorsed Bush. [Texans for Public Justice]
On Election Day, Bush won the governors mansion by a margin of 53.5 percent to 46 percent. Bush didn't forget his debt to Ken Lay.
Bush appointed Patrick Wood III, a supporter of energy deregulation, to be chairman of the Texas Public Utility Commission in February 1995. Wood's bio included a stint as an engineer for Arco Indonesia and a position as an attorney with the Baker & Botts law firm, run by former Secretary of State James Baker. Lay endorsed Wood and his appointment was a major boost to Enron's efforts to deregulate the Texas energy market. (http://www.puc.state.tx.us/about/pastcomm.cfm)
By September 1995, the Texas Senate passed SB 373, which called for the restructuring of the states wholesale electricity market. Throughout the political battle, Bush was deregulations top cheerleader in Texas, putting the state ahead of others in the region. "Texas is the only southern state to adopt retail deregulation," the Washington Post reported. [Aug. 21, 2001]
Bushs support of Enron was not limited to deregulation. He also served as an advocate for Enrons interest in getting the U.S. taxpayer to back its overseas investments.
In March 1997, Lay wrote Bush a letter asking that the governor contact every member of the Texas congressional delegation and urge support for federal agencies that gave export credits and loan guarantees to U.S. companies operating abroad. "Export credit agencies of the United States are critical to U.S. developers like Enron, who are pursuing international projects in developing countries," Bush's letter said. [NYT, June 30, 2000]
Congress voted a four-year reauthorization to fund the work of the Export-Import Bank through 2001. Though these federal programs are unpopular with many free-market advocates, only two out of 32 members of the conservative Texas congressional delegation voted against reauthorization.
Over the years, Enron has emerged as a leading beneficiary of these federal programs, receiving a total of $1.6 billion in loans and other backing from the Export-Import Bank and the taxpayer-funded Overseas Private Investment Corp.
In 1997, Bush also intervened on Enron's behalf with a call to Gov. Tom Ridge of Pennsylvania. At the time, Enron was vying to sell electricity in Pennsylvania, which was deregulating its energy market.
Bush placed the call at the personal request of Lay, who later told the New York Times, "I called George W. to kind of tell him what was going on. And I said that it would be very helpful to Enron if he could just call the governor and tell him this is a serious company, this is a professional company, a good company."
During the bidding process, Enrons main rival, PECO Energy Co., accused Enron of attempting to rig Pennsylvanias energy market. PECOs vice president, Thomas P. Hill, described Enrons scheme as a way to "simply take the money from the pockets of Pennsylvanians and drop it" into the coffers of Texans. [Foster Electric Report, Oct. 15, 1997]
Bush aides deny that Bush called Ridge as a favor to Lay. They portray the intervention as a governor lending his name to benefit a Texas company. During the 2000 presidential campaign, however, Bush spokesman Dan Bartlett acknowledged the importance of the friendship between Bush and Lay in Bushs decision to call Ridge. "The fact that [Lay] heads this company is secondary to their personal relationship," Bartlett said. [NYT, June 30, 2000]
Whatever the motivation, Bushs phone call appears to have worked. Enron cracked into the Pennsylvania energy market and used it as a regional foothold. In the late 1990s, Enron competed for contracts throughout the Northeast and rode the wave of deregulation to win contracts from Maine to California.
Back home in Texas, Enron also was enjoying favorable treatment on environmental policy. Enron, along with other companies, benefited from a loophole in the states 1971 Clean Air Act, which exempted 828 older facilities from cleaning up their emissions. At stake were hundreds of thousands of tons of toxic emissions per year and company profits.
Public pressure was mounting in Texas to do something about its status as a top polluting state, and the clean air loophole was becoming a major issue. Instead of endorsing a plan to close the loophole and require facilities to clean up their emissions, Bush created a panel of big polluters to devise a solution to the problem. The plan that the polluters designed averted mandatory actions, in favor of voluntary compliance.
Enron was one of the beneficiaries. In 1997, the grandfather loophole allowed Enron to release 3,299 tons of air pollution, most of it emitted from the Enron Methanol facility near Houston, according to information from the Texas Natural Resource Conservation Commission.
Two years later, in late September and early October of 1999, the Enron plant was partly responsible for air pollution that reached 251 parts of ozone (smog) per billion, twice the national standard. In 1999, the five highest recorded levels of smog in the U.S. were all measured in and around Houston. Residents, including school children, have reported severe breathing problems. [http://www.pirg.org/reports/enviro/smog and The Progressive, 9/1/00]
The Bush plan to close the grandfather loophole became nationally recognized for its shortcomings. "Only one permit has been issued resulting in 74 tons of pollution reduction," according to the Texas Campaign for the Environment. "This constitutes less than .01% of the 597,749 tons of grandfathered emissions." [Texas Campaign for the Environment]
Partly because of the plans futility, Texas became the nations most polluted state as measured by data collected by the Environmental Protection Agency.
Despite the failure of the voluntary strategy, the Bush campaign in 2000 touted it as Bush's greatest environmental achievement.