GloucesterTimes.com, Gloucester, MA

March 10, 2011

Potential Commerce successor has close ties to EDF

By Richard Gaines
Staff Writer

U.S. Trade Ambassador Ron Kirk, identified in multiple news reports as President Obama's potential choice as the next Commerce secretary overseeing the oceans and atmosphere, has worked on two major business deals in Texas involving the Environmental Defense Fund.

That $200 million nonprofit is known for its faith in markets, business partnerships and authorship of the Obama administration's "catch share" initiative, which treats fisheries like commodities markets.

The National Oceanic and Atmospheric Administration's new fishery management system built on those principles has set off intense ideological and political battles along the coasts, in the courts, and in Congress.

The first Texas deal involved an epic buyout of an energy company, and led to the partnering of EDF and KKR & Co., which pioneered the leveraged takeover, in a "green portfolio program."

The second deal involved Kirk and EDF's Texas chief in an the ill-fated launch of an ethical investment bank.

The transition from Commerce Secretary Gary Locke, Obama's nominee to be ambassador to China, comes with much of the U.S. fishing industry along the East and Gulf coasts in fierce resistance against re-engineering of the traditional fisheries, long featuring small, independent, owner/operator boats and businesses, into catch share systems built on trading or selling fishermen's "shares" of an assigned fish catch to larger corporations and outside investors.

EDF's former vice chairwoman, Jane Lubchenco, heads the National Oceanic Administration, reporting to the Commerce secretary. And Lubchenco has expressed that one of her goal's is the elimination of a "significant fraction of the vessels."

Locke is perceived not as a partisan allied to Lubchenco and EDF, as much as a buffer to the industry's push-back against the EDF-crafted catch share policy, which has come from a broad bipartisan coalition in Congress.

Seen as weakling

Congressman Barney Frank had derided Locke as a weakling without the courage to stand up to Lubchenco and her ideological cohorts in NOAA and EDF, while Sen. Scott Brown said earlier this week that Locke's departure "represents a real opportunity for President Obama to begin to rebuild the relationship between his administration and our fishermen."

But reports show that, in 2007, Kirk, then a lobbyist and former Dallas mayor, was hired by the KKR & Co., a private equity and buyout firm, to lead lobbying efforts ensuring that the heavily leveraged $45 billion acquisition of TXU Corp., the state's largest energy utility conglomerate, was not derailed by the Texas legislature.

Facing potentially lethal opposition based on TXU's plans to build a 11 new coal-fired plants, KKR and its partners, Goldman Sachs and Texas Pacific Group, brought in EDF and the Natural Resources Defense Council to instill environmental stewardship, evinced by the buyers' agreement to scale back new plant construction to three.

At the time, James Marston, EDF's chief in Texas, called the partnership "a turning point in the fight against global warming." But the price of possessing TXU was a crushing debt load, and when natural gas prices began dropping precipitously, KKR's gamble didn't look so good anymore.

EDF had opposed the buyout before partnering with KKR in the mitigation agreement. Out of the deal they formed a permanent subdivision of KKR.

A 'green portfolio'

"The Green Portfolio Program marries the private equity model of revitalizing companies over the long run with EDF's environmental expertise," KKR's promotional copy reads.

This winter, in the extreme cold that enveloped the south and west for long periods, Texans suffered through rolling blackouts that were attributed by some observers to the diversion of infrastructure maintenance allocations into debt service.

"The company formerly known as TXU — reborn in 2007, after the largest leveraged buyout in history, as Energy Future Holding Corp. — appears to be slowly collapsing under its own weight," wrote Forrest Wilder, the primary chronicler of the saga, in the Aug. 25 Texas Observer. "It seems that the Masters of the Universe have screwed up again..."

'One Earth Bank'

The second project pairing Kirk with EDF was One Earth Bank, a virtually stillborn effort in Austin behind a socially responsible deposit and lending institution, which reportedly failed for its late start after the onset of the global economic decline, and for inadequate capitalization.

Among its high profile backers, according to the Austin American-Statesman, were Kirk and EDF's Ron Marston.

The newspaper reported that the idea behind One Earth Bank was to "weight environmental and social considerations alongside standard underwriting criteria in granting loans," and feature a "green deposits program channel money to green building projects, clean-energy businesses and organic food companies, among other sustainable enterprises."

But having raised less than 10 percent of $23 million to $29 million in the startup plan, the Statesman reported, the green dream fell apart and in March 2009, the nascent bank board folded.

Days later, the Senate confirmed Kirk's nomination to be U.S. trade representative, a post with cabinet rank.

Questions from the Times to Kirk's office Thursday were referred to the White House, which declined comment. EDF did not return phone calls or respond to a written inquiry from the Times.

On Wednesday, the White House announced that President Obama intends to nominate Commerce Secretary Gary Locke to replace Jon Huntsman, a Republican, as ambassador to China. Huntsman resigned after signaling the possibility of running for president against Obama.

On the heels of the earlier Locke nomination rumors came reports in the Dallas Morning News, Reuters and other news outlets that Kirk, said to be a friend of the president, was under consideration to become Locke's Commerce successor.

Third choice at the time

A former governor of Washington State, Locke was Obama's third choice to head the Commerce Department. Former New Mexico Gov. Bill Richardson, first choice, withdrew after questions were raised about his political fund-raising. Sen. Judd Gregg, a New Hampshire Republican, the second choice, agreed to take the post, but after meeting with the president, rejected the nomination in February 2009, saying only that he had discovered "irresolvable conflicts" with the new president's stimulus plan to shore up the economy.

Locke was viewed initially as potential counterpoint to the ideologues at EDF and a handful of ethical philanthropies including the Pew Environment Group, the Gordon and Betty Moore Foundation and the Walton Foundation, which, combined, have distributed about $500 million to study oceans and influence fisheries policy.

EDF has received more than $30 million to advance its catch share agenda, which was launched during the presidential transition with a manifesto co-written by Lubchenco insisting catch shares were needed lest the oceans be emptied of all but "swarms of jellyfish."

Most mainstream and independent scientists scoff at that; the longtime chief scientist at NOAA, on his retirement in January, gave an interview to the Associated Press, contending the U.S. has effectively brought an end to overfishing.

But Locke took no action to stop or slow Lubchenco and EDF's re-engineering of the fisheries.

"Locke doesn't have the courage to stand up to them," Frank said in an interview on WBSM, AM 1420 of New Bedford. "He can't fend off the bureaucracy."

In January, Obama also hired Nat Keohane, EDF's environmental economist, to be special assistant to the White House's National Economic Council.

Richard Gaines canm be reached at 978-283-7000, x3464, or at rgaines@gloucestertimes.com