U.S. House Science, Space, and Technology Committee Chairman Lamar Smith (R-Texas) and Energy Subcommittee Chairman Randy Weber (R-Texas) sent a letter Friday to the Trump administration asking for a probe into whether Russia is bankrolling U.S. anti-fracking groups in an effort to sway public opinion against the U.S. shale industry and strengthen Russia’s global market share. Rep. Smith states bluntly in the letter,
“If you connect the dots, it is clear that Russia is funding U.S. environmental groups in an effort to suppress our domestic oil and gas industry, specifically hydraulic fracking.”
The Congressmen allege state-sponsored Russian entities have used a shell company to funnel “tens of millions of dollars” of Russian money to radical environmental groups such as the Sierra Club, League of Conservation Voters and Natural Resources Defense Council. Rumors of such meddling have circulated for years, and they gained considerable legitimacy when private speeches by Hillary Clinton and a U.S. intelligence report — made public in October and January, respectively — made direct reference to Russian efforts to undermine U.S. shale (more on that in a bit).
Specifically, Smith states in the letter that Russia has “established an elaborate scheme” that funnels funds through Bermuda-based shell company Klein Ltd., whose founding members have deep ties to both Russia and the energy industry. The letter notes that multiple reports show this money is then funneled to U.S.-based nonprofit Sea Change Foundation, which subsequently funnels it to U.S. NGO’s, such as the Sierra Club, to “execute a political agenda driven by Russian entities,” according to the letter. The letter alleges $23 million of such funding has been passed from Klein Ltd. to Sea Change in an effort to fight U.S. fracking, a figure that was first reported in 2015 by Business Insider. From the letter,
“According to Sea Change’s IRS Form 990, Klein contributed $23 million to Sea Change in 2010 and 2011 amounting to 49% of total contributions that Sea Change received in that time period.
“[T]his money appears to move in the form of anonymous donations. Sea Change then passes the money originating in Russia to various U.S. 501 organizations such as the Sierra Club, League of Conservation Voters Education Fund, and others. These funds are dispersed as grants that will be used to execute a political agenda driven by Russian entities. The purpose of this circuitous exchange of foreign funds is to shield the source of the money.
“Klein is a Bermuda-based corporation apparently established to act only as a pass through for foreign funds. Klein, according to reports, was formed in March 2011, by two attorneys of a Bermuda based law firm, Wakefield Quin. The firm provides a number of services, including those necessary to facilitate the operations of a shell company like Klein.”
Background: Allegations of Russian Meddling Are Bipartisan
Smith and Weber’s letter might be easy to dismiss as a partisan attempt to distract the public from the “other” Russian interference dominating the news if not for the fact that Democrats have also raised red flags about the issue. Documents leaked last October reveal Democratic presidential candidate Hillary Clinton also believed Russians were bankrolling U.S. anti-fracking propaganda. Transcripts of a number of private Clinton speeches confirmed long-held suspicions the Russians have been funding what she called “phony” anti-fracking efforts across the globe. As Clinton put it in a 2014 speech sponsored by tinePublic:
“We were up against Russia pushing oligarchs and others to buy media. We were even up against phony environmental groups, and I’m a big environmentalist, but these were funded by the Russians to stand against any effort, oh that pipeline, that fracking, that whatever will be a problem for you, and a lot of the money supporting that message was coming from Russia.”
Even the New York Times reported in 2014 that there was circumstantial evidence that Russia was backing anti-fracking groups in Eastern Europe in an effort to curtail shale development there and preserve its market share. Clinton discussed Russia’s motivation for these actions in a 2014 speech at the Palais des Congrès de Montréal that was made public,
“So how far this aggressiveness goes I think is really up to us. I would like to see us accelerating the development of pipelines from Azerbaijan up into Europe. I would like to see us looking for ways to accelerate the internal domestic production. Poland recently signed a big contract to explore hydraulic fracturing to see what it could produce. Apparently, there is thought to be some good reserves there. And just really go at this in a self-interested, smart way. The Russians can only intimidate you if you are dependent upon them.”
And of course, the Office of the Director of National Intelligence (ODNI) released a report in January that concluded Russia used its state-funded television network, Russia Today (RT), as a platform to push anti-fracking disinformation aimed at harming the U.S. shale industry and protecting Russia’s global market share.
Russia’s Motive is Clear
Simply stated, the U.S. shale revolution has presented a direct threat to Russia’s global market share. As the following EIA chart shows — thanks to fracking — we have surpassed Russia in petroleum and natural gas hydrocarbon production the past six years.
Most notably, the U.S. has quickly emerged as a major LNG exporter in 2017, exporting LNG to 25 countries, including countries such as Poland, the Netherlands and Lithuania — all of which were once forced to purchase Russian natural gas at elevated prices via pipeline. As a Wall Street Journal editorial recently noted,
“As long as pipelines were the only transportation option, outfits like Gazprom were able to force their customers to take gas at inflated prices. Increased competition and energy diversification in Europe, where 14 NATO countries now buy 15% or more of their oil and gas from Russia, will also decrease Russia’s leverage as the region’s dominant producer.”
According to The Washington Examiner, Russian natural gas exports account for 68 percent of Russia’s revenue in 2013, so the U.S. shale industry’s threat to state-owned Gazprom’s market share is very real, as the Wall Street Journal also notes,
“The U.S. is now emerging as the world’s energy superpower and U.S. oil and gas exports are rebalancing global markets.”
“Thanks largely to the domestic hydraulic fracturing revolution, the U.S. has been the world’s top natural gas producer since 2009, passing Russia, and the top producer of oil and petroleum hydrocarbons since 2014, passing Saudi Arabia. By now this is well known.”
So it’s no wonder why Russian president Vladimir Putin has said places that allow fracking “no longer have water coming out of their taps but a blackish slime” and Russian state-owned gas company Gazprom has said fracking poses “significant environmental risks” to water supplies.
Predictably, the U.S. anti-fracking groups named in the letter have either ignored the accusations or outright dismissed them. Sierra Club Legislative Director Melinda Price told E&E News the letter was pathetic and said the claims are “absurd and false smears.” Notably, Sierra Club supported natural gas as recently as 2009, which begs the question: What exactly motivated it to drastically change its position?
All this circumstantial evidence considered, there’s a lot more to this story that remains to be uncovered.