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The Undermining Role and Unfair Influence of Tax-Exempt Foundations

DRBC fracking ban - Tom Shepstone ReportsTom Shepstone
Shepstone Management Company, Inc.


Tax-exempt foundations, especially supposed charities, are undermining our energy security and exercising completely unfair influence over government policy.

A new study, financed by a foundation itself, is out from Northeastern University that provides some much needed perspective on the role of tax-exempt foundations in fractivism.  The study is entitled “Strategic philanthropy in the post‐Cap‐and‐Trade years: Reviewing U.S. climate and energy foundation funding” and is available here.

The study isn’t intended to delve into fractivism per se and doesn’t even mention tax-exemption. Yet, for the reader who knows the background, it lays out, in depth, much of the problem. Tax-exempt foundations, under the guise of being charities to which others can often secretly donate, are exercising unfair influence over energy policy throughout surreptitious lobbying and they’re undermining our energy security in the process.

tax-exempt foundations

Nathaniel and Laura Baxter-Simons’ home in Kailua, Hawaii.

Matthew Nisbet is the author of the study. He presents a lengthy and sometimes tedious examination of the role tax-exempt foundations have played in influencing climate and energy policy. His perspective is one of suggesting how these foundations might need to alter direction. He tries to play it down the middle and largely does so, but clearly has sympathies for the supposed motives of many of these foundations. It also appears, though, he’s learned some things in the process of his research that are making him wonder. Take this sentence for example:

Despite the emerging boom in shale gas drilling or “fracking,” there was similarly limited funding provided for the evaluation of natural gas as a cleaner alternative to coal, or on limiting the risks from drilling.

There are also these observations, which serve to provide an overview of the major funders of fractivism and their differing objectives and strategies:

By 2010, many experts were warning that renewable energy and related storage technologies were unlikely to be scalable, reliable, or effective in shifting the U.S. and world economy completely away from fossil fuels, and that government investment in natural gas generation, nuclear energy, and carbon capture and storage would be needed…

Efforts to close down coal‐fired power plants were aided by the expansion in shale gas drilling or “fracking,” which dramatically lowered the cost of natural gas energy production, and made older coal power plants increasingly costly for companies to keep in operation. Yet environmental organizations were split in their views of natural gas as a bridge fuel. EDF joined in a partnership with natural gas industry members to conduct research on limiting methane leaks and pollution from drilling. In contrast, the Sierra Club and dozens of grassroots organizations waged campaigns to ban or restrict drilling in Pennsylvania, New York, and other states…

The Park Foundation and Rockefeller Brothers Fund (#28 environmental grantmaker) are notable for supporting strategies that directly target the fossil fuel industry by way of communication, media, and mobilization campaigns. The Wallace Global Fund has played a key role in coordinating the fossil fuel divestment movement (Williams, 2016). Along with Park, both the Heinz Endowments (#26) and Schmidt Family Foundation have prioritized stricter regulation and/or bans on natural gas fracking…

Specific to natural gas fracking, $6.8 million was provided to restrict or ban drilling, $2.1 million to protect drinking water supplies; and $3.9 million for research on health and environmental impacts. To support efforts to ban/restrict fracking, Schmidt ($3.3 million), Hewlett ($1.5 million), Park ($1.1 million), and Heinz ($1 million) were the leading funders. Schmidt gave to a mix of national‐ and state‐based groups. Hewlett gave primarily to the Colorado Conservation Fund ($1.3 million). Park gave primarily to groups working in New York state, and Heinz to groups in Pennsylvania. Relative to protecting drinking water supplies, major funders included Heinz ($1 million) for efforts in Pennsylvania; and Park ($760,000) for work in North Carolina and New York. Major funders of research on fracking’s health and environmental impacts included Heinz ($2.7 million), Park ($780,000), and Schmidt ($390,000). These funds were given to a mix of universities and environmental groups…

What was most interesting to me, though—as none of the above was unknown here at NaturalGasNOW or to our regular readers—was Nisbet’s focus on the Energy Foundation, the role of which is seldom fully appreciated. Here’s what he had to say (emphasis added):

Launched in 1991, the Energy Foundation has been the main instrument that a network of influential U.S. philanthropists has used to define a portfolio of policy options, political strategies, and energy technologies to address climate change. Set up by way of large block grants from the Rockefeller Foundation, Pew Charitable Trusts, and MacArthur Foundation, and supported in later years by the Hewlett Foundation, Packard Foundation, and other funders, the principal function of the Energy Foundation has been to leverage money in a highly concentrated pattern on behalf of policies that shift markets, industry, and consumers in the direction of renewable energy

The Energy Foundation was an early example of the strategic philanthropy paradigm, an approach to funding in which grantmakers are strongly proactive in seeking solutions to complex social problems like climate change. Strategic philanthropy not only involves the pooling of grant investments on behalf of specific outcomes, but also a much higher degree of oversight over grantees

In 2006, seeking to deepen its commitment to strategic philanthropy, the Hewlett Foundation along with several other funders hired a consulting firm to produce the report Design to Win: Philanthropy’s Role in the Fight against Global Warming… The report called for philanthropists to triple climate and energy funding from $210 million in 2007 to more than $600 million annually over the next decade…

In 2008, drawing on this roadmap, the sponsoring foundations established ClimateWorks, a regranting organization intended to invest more than $1 billion worldwide. Funders either financing ClimateWorks directly and/or coordinating their own giving based on the Design to Win report included Hewlett, the Energy Foundation, Packard Foundation, Kresge Foundation, McKnight Foundation, the Sea Change foundation, the Doris Duke Charitable Foundation, and the Oak Foundation. Between 2008 and 2011, the network of foundations distributed more than $368 million to support actions to address climate change…

Notice the single mention of the Sea Change Foundation in Nisbet’s study. This is unfortunate, as the Sea Change Foundation is, for all practical purposesthe Energy Foundation. It’s funders, in turn, are the renewables hedge fund investors Nathaniel Simon and his wife. They also have suspect connections to Russians engaged in mischief to defend their own natural gas turf. Putting aside this, though, the obvious conflict of interest with respect to the Sea Change Foundation and its progeny, the Energy Foundation, the Nat Simons conflict of interest is the real story that needs to be researched.

These conflicts exist all over the place and, of course, there is the relentless attempt of patricians and the entire gentry class to signal their virtues and prove they somehow deserve the wealth they inherited. And, there’s Eric Schmidt of Google who imagines (perhaps correctly) he’s one of masters of the universe now and ripped off taxpayers for Ivanpah. In yet other cases, the foundations have been taken over by ideologues, resulting in such bizarre events as the Doris Duke Charitable Foundation funding Josh Fox from tobacco money.

tax-exempt foundations

The home run line of Nisbet’s research, though, is the one where he notes “strategic philanthropy not only involves the pooling of grant investments on behalf of specific outcomes, but also a much higher degree of oversight over grantees.” What this means, of course, is that these foundations are leveraging tax-exempt charitable contributions to lobby (a word used by Nisbet) and do politics. When Josh Fox or the CELDF or the Delaware Povertykeepert are engaging in outrageous political antics, they are doing it at the direction, more or less, of foundations and individuals getting a tax break as charities. It’s out of control. It’s a total violation of tax-exemption policy. It’s criminal. It’s a conspiracy. It’s time to rein in these tax-exempt foundations across the board.


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