Exxon Gets U.S. Export Bank Financing for PNG LNG Project After Paying for Travel

Mark Drajem (Business Week)

 Exxon Mobil Corp. and
its partners in the $15 billion Papua New Guinea gas project last year paid the
travel expenses for employees of the U.S. Export-Import Bank as it considered
whether to help fund the venture.

The four workers ran up
$97,367 in bills traveling to London, Tokyo and the South Pacific, according to
data compiled by the bank. They flew business class, viewed the project’s route
by chartered aircraft and were entertained by costumed villagers.

Eleven months later, the bank
approved $3 billion in financing for the liquefied natural gas facility, the
biggest transaction in the agency’s 75 years.

Exxon Mobil, the biggest U.S.
oil producer, isn’t alone in picking up the travel tab for the Washington-based
bank. In the past two years, the bank accepted $366,865 for employee trips,
according to information provided under a Freedom of Information Act request.
Workers visited projects sponsored by companies including Newmont Mining Corp.,
ConocoPhillips, Saudi Aramco and Barrick Gold Corp.

Such travel should be banned
because the money may influence the bank’s decisions on billions of dollars in
financing, said Craig Holman, a legislative representative at Public Citizen,
an advocacy group based in Washington.

“This is probably standard
operating procedure, but it’s clearly an ethics violation,” Holman, whose
organization monitors spending by lawmakers and government officials, said in
an interview. “It’s clearly a conflict of interest.”

‘Standard Industry Practice’

The U.S. Export-Import Bank,
which provides financing to expand U.S. trade, has let employees take
company-paid research trips since at least 1993, following “standard industry
practice” for lenders, Phil Cogan, a vice president of the bank, said in an
interview. Corporate-funded trips are permitted only for examining overseas
projects such as power plants, not for U.S. exporters such as aircraft maker
Boeing Co., he said.

All trips are reviewed by an
agency ethics officer and must follow federal travel restrictions, Cogan said.
Payments go to the bank, not the employees, and if companies such as Exxon
didn’t pay, taxpayers would have to, he said.

The bank’s policy isn’t shared
by government agencies such as the Food and Drug Administration and the Federal
Aviation Administration, which prohibit staff travel paid by companies with
business pending before them.

The Consumer Product Safety
Commission barred such travels after criticism in 2007 that its chairmen’s
trips to conferences were paid for by makers of toys and appliances it
regulates.

The Export-Import Bank
provides government-backed loans or guarantees to banks offering credit to
exporters. As private credit dried up in the recession, the bank’s support to
U.S. companies grew 50 percent, to $21 billion, in the 12 months ended Sept. 30
from the previous fiscal year.

Tropical Forests

The Papua New Guinea project
will supply fuel to China, Japan and Taiwan, according to Exxon. The venture
calls for a 430-mile (692-kilometer) pipeline that would cut through tropical
forests and run undersea, and a liquefaction plant near the capital of Port
Moresby.

“Without the funding from
Ex-Im and others, this project would not have gone forward,” Steve Kane, senior
finance manager for the project, told an Export-Import Bank conference on March
11.

Exxon owns 33.2 percent of the
venture. Oil Search Ltd. of Port Moresby has 29 percent, Santos Ltd. of
Adelaide, Australia, 13.5 percent, and Tokyo-based Nippon Oil Corp. 4.7
percent. Also among those with stakes in the project are an agency of the Papua
New Guinea government and local landowners.

The development will triple
Papua New Guinea’s exports and double its gross domestic product, Oil Search,
that country’s biggest oil producer, says on its Web site. The nation of 6.2
million, whose people speak more than 800 languages, has an $8.2 billion
economy, according to the World Bank.

Six-Day Trip

An account of a six-day trip
to Australia and Papua New Guinea in January 2009 by Export-Import Bank
workers, with photos they took of the costumed dancers, was posted on the
bank’s Web site.

Margaret Ross, a spokeswoman
for Irving, Texas-based Exxon, referred questions to Miles J. Shaw, a spokesman
for the venture. Shaw, who is based in Port Moresby, said in an e-mail that
Exxon and partners hosted the Export-Import Bank employees, and said it’s
“normal practice.”

Most U.S. government agencies
follow guidelines, set by the General Services Administration, that prohibit
corporate- sponsored travel if the circumstances “would cause a reasonable
person with knowledge of all the facts relevant to a particular case to
question the integrity of agency programs or operations.”

Consumer Panel

The Export-Import Bank
“essentially mimics” the GSA guidelines, Cogan said. The bank’s regulations say
corporate- funded travel is allowed when the bank’s interest in having
employees attend such meetings “outweighs concern” about the appearance of
conflicts of interest.

The Consumer Product Safety
Commission was criticized by lawmakers such as Representative Ed Markey, a
Massachusetts Democrat, in 2007 because chairmen during the Bush administration
went to 30 conferences paid by industries regulated by the agency. CPSC
employees can no longer accept industry-funded trips, spokesman Scott Wolfson
said in an e- mail.

The Overseas Private
Investment Corporation, a government entity that funds overseas projects as
does the Export-Import Bank, charges companies a processing fee for
applications and uses some of that money to pay for staff travel, spokesman Tim
Harwood said.

Saudi Aramco

Saudi Aramco and Houston-based
ConocoPhillips paid more than $30,000 to fly bank staff members to London and
Seoul to investigate whether the U.S. lender would finance expansion of the
Saudi Arabian Yanbu refinery, the bank’s data show. The project is seeking to
borrow $7.7 billion. John Roper, a ConocoPhillips spokesman, declined to
comment.

Toronto-based Barrick Gold
spent $4,608 on Export-Import Bank employee travel, according to the data. Vince
Borg, a company spokesman, said the practice was “typical in the business.”

An Indonesian joint venture
involving Greenwood Village, Colorado-based Newmont Mining paid $14,000 for a
staff member’s trip last April. The Export-Import Bank official was monitoring
an investment it made in the Batu Hijau copper mine, company spokesman Omar
Jabara said in an e-mail.

Doug Norlen, policy director
for Pacific Environment, a San Francisco-based group fighting the Exxon
project, said the company-sponsored travel “shatters the illusion of
independent due diligence.”

“It’s disturbing to hear the
bank doesn’t think it’s a problem for employees to be flown out and wined and
dined by the company they are scrutinizing,” Norlen said in an interview.