As Oil Prices Fell, Texas Campaign Donations Followed

As a political newcomer, Ron Hale struggled to stand out this year in a crowded race to join the Texas Railroad Commission, which regulates oil and gas. Perhaps a billboard, radio spot or other expensive advertising may have helped.

But in the lead up to the Republican primary, Hale, who runs a private security firm, did the unthinkable: He says he told a handful of folks who run mom-and-pop petroleum companies to keep the small donations they offered his campaign.

The reason? Plunging oil prices that have brought Texas drilling fields to a near standstill.

“From my perspective, it was easier to tell them no,” said Hale, who raised fewer than $3,000 and spent thousands of his own dollars before a third place finish on Super Tuesday. “I know how bad they were hurting down there.”

Hale’s was hardly the only Texas campaign touched by the dramatic downturn in the oil and gas sector.

Campaign contributions from petroleum interests help fuel the state’s power and relevance in Republican national politics. But operatives are seeing early signs that the collapsing oil market has also depressed the sector's political contributions.

Evolving campaign finance laws and fundraising practices make it difficult to make cycle-to-cycle to comparisons. But what is clear from nearly two dozen interviews with state and national Republican operatives, candidates and oil industry insiders is that donors are increasingly telling campaigns “no.”

“The sense I get is, it has had some adverse impact on political contributions,” said U.S. Rep. Bill Flores, R-Bryan and a former drilling company executive. “My expectation is that it will continue to get more pronounced the longer oil prices stay down.”

Oil and gas companies mostly donate to Republicans, and there is no widespread panic within GOP circles that the party or its candidates are lagging in fundraising. Even still, operatives say they have not seen anything like this in years.

Consider the Republican race for railroad commissioner.

Ahead of the 2014 primary, with West Texas crude prices trading at around $100 per barrel and shale fields rumbling with activity, donors poured more than $1.5 million into the accounts of four candidates, roughly half from the petroleum sector.

Two years later, another seat is open, but the landscape looks vastly different.

Now, prices are hovering around $36. They even dipped below $30 earlier this year. That free fall has stacked hundreds of rigs, triggered tens of thousands of layoffs and left many oilfield companies wading in a flood of red ink. And as operators choke back production, some are also pinching pennies with political campaigns. 

Ahead of Super Tuesday, Hale wasn't the only candidate dealing with that reality. John Greytok, a longtime Austin attorney and lobbyist, took in about $187,000 to lead the pack in fundraising. But only $4,000 of that haul came from oil and gas connections. Former state Rep. Wayne Christian followed with $43,000.  That sum included nearly $32,000 from three industry officials — the most by far in a seven-way race that was whittled down to a runoff between Christian and real estate magnate Gary Gates, who has self-funded his campaign.

Those closely following the contest say several factors played a role in the spending slowdown: The crowded field meant a runoff was all but guaranteed, prompting some donors to adopt a wait-and-see approach. And Commissioner David Porter’s sudden exit from the race prompted several candidates to launch campaigns at the last minute, limiting time to fundraise. But the impact of the industry's financial turmoil cannot be ignored, observers say. 

State and national fundraisers say perennial donors outright turned down donations or reduced their giving. The most oft-cited reasons were they needed to make payroll, or to avoid the unseemliness of making political donations while laying off employees in the fields. 

But like Hale, some campaign staffers are not even making the money asks anymore of those with ties to the oil industry, citing discomfort with asking for or giving political donations during economic distress.

The same goes for some West Texas bundlers, who one Texas fundraiser said are increasingly reluctant to put their friends on the spot financially. The fundraiser pointed to Midland, the West Texas city largely built on oil booms, as an increasingly difficult place to raise money.

Flores pointed to another city across the state. 

“Primarily, Houston at this point,” he said. “Texas in general, but Houston in particular.”

Several Republican operatives rolled their eyes over how often the sluggish economy comes up during fundraising. The pain in the oil patch has clearly contributed but it's also provided another excuse not to give.

“I think people are going to use the challenging commodity environment as an excuse not to get involved in this race,” said one consultant to a current statewide official who asked that his name not be used so he could speak more freely. “Donors will typically use any excuse that they can think of not to give money. This is an easy one.”

There is, however, one realm of politics where there are few signs of slowdown: federal super PACs.

Super PACs are political organizations that allow for unlimited donations, as long as there is no direct coordination with a candidate. And at least seven Texas families with ties to the energy industry rank among the biggest presidential super PAC individual donors, according to The Center for Responsive Politics. The top 50 ranked on the list include fortunes based on natural gas, like the Wilks family of Cisco and Trevor Rees-Jones of Dallas. The list also includes oil and gas investor Toby Neugebauer, who now lives in Puerto Rico and is the son of retiring U.S. Rep. Randy Neugebauer of Lubbock. 

Jack Ladd, Jr. is a Midland native and former political strategist. He noted that the donors at the super PAC level may have made their money in oil but have since diversified their fortunes. He and other Republicans say these donors have achieved a level of wealth where they can take the financial hits in stride.

“They have so many assets, not just in the oil industry,” Ladd said. “They personally won’t be too affected [by the downturn] and they probably won’t want to see their influence wane."