Tied to the Rails: US Chamber President Tom Donohue and Union Pacific (part II)

Last week I raised questions about US Chamber of Commerce President Tom Donohue's potential conflict of interest on the subject of climate change because of his ties to giant coal transporter Union Pacific Railroad (UNP), which opposed the American Clean Energy and Security (ACES) Act.

E&E's Christa Marshall wrote an excellent in-depth piece on this, and the story was also reported by the National Journal, Mother Jones and Climate Progress.

But this also got me thinking. Union Pacific owns a joint rail line with BNSF. The two railroads transport coal for Peabody Energy, Arch Coal and other coal companies.

Since a significant portion of Union Pacific's revenues are hauling coal, Union Pacific board members - who have fiduciary responsibility for the company - also have to concern themselves with the financial well-being of the coal companies that are Union Pacific's customers. And Union Pacific's partnership with BNSF on the Joint Line connects at least some of the two company's interests together, since it is also in BNSF's interests to keep the coal rolling. According to E&E News, BNSF earned $4 billion on the joint line last year - about 22% of the company's total revenue.

Which ties Mr. Donohue pretty clearly to the rails that carry US coal, and the cargo riding on those rails. Which is no small tie.

The combined market capitalization of these companies is $73.5 billion (Union Pacific: $31.1 billion (ticker symbol UNP); BNSF: $28.2 billion (BNI); Peabody: $10.5 billion (BTU); and Arch Coal $3.6 billion (ACI).)

The combined lobby power of these railroad and mining companies is also significant, with nearly $6.6 million spent on lobbying during the first half of 2009, including (but not limited to) lobbying on climate. (Source: Senate public disclosure website; counting only disclosure reports that listed climate legislation.) This doesn't count whatever lobbying is done on behalf of these interests through membership groups or trade associations.

Naturally, it is difficult to say what exact effect Donohue's ties to UP, and by extension, these other interests, have on US Chamber policy. It would be egregious indeed if Mr. Donohue were to use his position as President and CEO of the US Chamber to position the Chamber to advance the interests of Union Pacific, over the interests of the other members of the Chamber.

But, it seems that the Union Pacific Code of Conduct for its directors - Mr. Donohue included - may require just that. As it states:

"Directors may not engage in any conduct or activities that are inconsistent with the Company's best interests or that disrupt or impair the Company's relationship with any person or entity with which the Company has or proposes to enter into a business or contractual relationship."  

Which seems to pretty clearly suggest that Mr. Donohue has been and would be barred from taking any position or action that UP doesn't consider in its interests - that is, unless Donohue's fellow board members have considered and waived the potential conflict.

If not, does this also mean that the Chairman and CEO of the US Chamber of Commerce - and thus by extension, the Chamber itself - is barred from any conduct or activities that are contrary to UP's interests?

In response to questions from E&E's Marshall, U.S. Chamber of Commerce spokesman Eric Wohlschlegel said, "All of the chamber's policy decisions go through our policy committees. It's a democratic process."

But that doesn't necessarily match up with perceptions of some US Chamber members. Johnson & Johnson raised concerns with the Chamber's position on climate in a now well-known letter to Chamber President Donohue in April of 2009, saying

"We recognize that Chamber members have varying perspectives on climate change legislation. We would appreciate if statements made by the Chamber would reflect the full range of views, especially those of Chamber members advocating for Congressional action. We are hopeful that a consensus can be reached that reflects the views of the range of Chamber members."

At that time, too, the Chamber's response suggested a democratic process, with Bill Kovacs, the Chambers' vp for the environment, technology and regulatory affairs, saying that a Chamber committee had just discussed climate legsilation for three hours and that "At the end of the debate, there were no members asking to change our policy."

Which as I pointed out at the time, was not how some of the Chambers' members saw it. As Roll Call then reported, a spokesperson with PNM Resources disputed the idea that members of the Chambers Energy and Environment committee had even had a debate, saying:  

"In my opinion it is inaccurate to call it a debate, and it is especially inaccurate to say that there was no call for changes to the policy when there were a number of members who stated the chamber policy did not represent their corporate position and they were therefore interested in how to change that policy."

Perhaps hearing some of those big corporate members urge the Chamber to change its position on climate policy would be contrary to the interests of Union Pacific. Given that a number of corporations are stuck with the Chambers' position, it looks like Mr. Donohue isn't the only one tied to the rails.