Steve Roberts is a partner and Nicole Kelly is an associate at Holtzman Vogel Baran Torchinsky & Josefiak.
Ready or not, we are in an election year. If you have not already been bombarded, you are about to be on the receiving end of numerous ads, calls and texts telling you who to vote for, who definitely not to vote for, and why Senator Smith up for re-election this fall might just hate America.
Even if you find political ads dreadful, in an environment where almost every issue becomes a political one, it is important for energy companies to consider how to use the opportunities presented in an election year to become involved in choosing candidates who support their industry and advocating for issues that could make or break their corporation. From renewable energy to infrastructure siting and funding to the future of the grid, everything is on the ballot in this presidential election year.
If the thought of being engaged politically as a company has interested you, the question of how to start getting involved is often the hardest first step for groups and companies new to political advocacy. The following ways can kick-start your company’s efforts in the political space.
Pay-to-play and other legal considerations
Prior to starting any political activity, it’s critically important that you understand the energy industry’s unique constraints on political engagement. Political and issue advocacy by energy companies is often regulated differently by state and local governments; these companies are often government contractors, and further, states sometimes put extra restrictions on utility companies given their special status to governments and citizens.
Though political activity can be extremely effective, politics itself is also a highly regulated industry. Before engaging in any political activity, it is important to have experienced political law counsel, who can point you in the right direction and make sure you stay out of any legal pitfalls which would jeopardize your business.
One of the biggest areas of compliance considerations in the energy and utility industries are with “pay-to-play” laws. Aimed at being anti-corruptive, these complex laws regulate political contributions and activities to companies or contractors which seek or hold government contracts. Many states and localities have their own rules in this space, with some being as strict as outright prohibiting a utility or government contractor from making a contribution, to others simply requiring special disclosure forms. The strictest of these laws completely ban a company from a government contract or bid, which again highlights the importance of hiring competent counsel.
Corporate PACs
Often the first – and sometimes only – step a company takes on its road to political engagement is to establish a corporate PAC. On the federal level, i.e., president, U.S. senators, U.S. representatives, contributions directly from a corporation to a campaign are prohibited. However, corporations are permitted to set up their own corporate PACs, or political action committees, which can solicit contributions from certain company employees and members, and in turn can be contributed to federal candidates.
Corporate PACs are very popular. They are fairly easy to set up and administer, and by making a contribution from a company’s PAC to a candidate, it directly shows the candidate that the company supports their efforts. Downsides to this tool include PAC contribution limits — both incoming and outgoing — as well as a limited pool of people, even within your own company, who can be solicited for contributions.
It is important to note that some states allow companies to make contributions directly to candidates. However, if a company is looking to get involved on a national level, corporate PACs are great first steps into the arena.
Super PACs and electioneering communications
Independent expenditures are communications, i.e., ads, that expressly advocate for the election or defeat of a clearly identified candidate that are not coordinated, or at the request of a candidate. PACs that make independent expenditures are frequently referred to as “Super PACs.”
The convenient and most known quality of Super PACs is the lack of contribution limits. Indeed, assuming no restrictions on company activity, a company could give $100 million to a Super PAC. Unlike “regular” PACs, this means any company can use its general treasury funds to make direct-to-voter ads, and spend unlimited amounts, simply by contributing to a Super PAC which supports its goals, or by even starting its own Super PAC.
This, however, requires careful implementation: Super PACs must be operated independently of candidates. The level of permissible coordination varies based on jurisdiction, but big consequences exist for breaking these rules.
Electioneering communications
Depending on the type of ad designed to fit a company’s political goals, many companies and groups engage in federal electioneering communications. These are simply targeted ads that are broadcast over certain mediums, reference a clearly identified federal candidate, and occur within 30 days of a primary or 60 days of a general election. Electioneering communications are effective because they show a company’s direct support for a particular candidate, but they do carry their own compliance and disclosure obligations.
Issue and grassroots advocacy
What about ads we have all seen which do not either directly support a candidate, but they call on the public to take action? These types of ads are known as issue ads and/or grassroots advocacy, and include efforts to influence legislation through an attempt to affect the opinions of the general public. Common examples of these ads include “Call Senator XYZ to tell him not to vote for legislation which would raise prices on electric vehicles for consumers.”
Many companies that have specific issues — such as a bad bill in the state legislature or encouraging a U.S. Senator to vote in favor of a bill — choose to engage in issue advocacy. These communications are very effective at catching the attention of legislators, and are great for relationship building. These tools are effective to both your company’s lobbying operation as well as its efforts at political advocacy.
Like other forms of advocacy, issue ads are not regulation-free. Though these ads are not as “political” or candidate-focused compared to other advocacy tools, on the state level, registration and reporting under state grassroots lobbying laws may be required. And you’ll need to make sure your lobbyists don’t coordinate these communications with a member of the legislative or executive branch.
501(c)(4) organizations — so-called “dark money”
Exhaustingly referred to by the media as “dark money groups,” 501(c)(4)s are “social welfare” tax-exempt organizations that can be politically active. These organizations may be attractive to companies that do not necessarily want to be disclosed as backing or opposing particular public communication, or even those that fear negative consequences about publicly supporting/opposing an issue. Unlike other political tools discussed so far, in most circumstances if administered properly, 501(c)(4)s are not required to disclose their donors.
While these are often derided, they provide an effective vehicle for like-minded entities to group together and become even more politically effective. 501(c)(4) groups can be set up to support/oppose a singular issue and last a single election cycle, or they can have broad mission statements and be politically active all over the country over multiple cycles. Similar to Super PACs, these groups cannot directly coordinate with candidates, but the benefit again here is that corporate contributions are permitted which means companies can use general treasury funds to directly fuel the 501(c)(4).
501(c)(4) groups can be efficient to set up, but cannot make contributions directly to federal candidates. Further, due to the tax-exempt status of the organizations, the organizations cannot use 100% of the funds contributed on political efforts.
Conclusion
Bottom line: your company needs political and legislative allies. Whether you are an oil and gas company, renewable energy firm, energy manufacturing group, private investor in the space, or simply someone who is paying attention in the utility and energy sectors, there are many ways you can become politically active and effective. Strategically implementing any combination of the above tactics to elevate your company’s voice in this election cycle may lead to a winning result on election night this fall.
