Industry front group that ran McCrory's offshore drilling campaign accused of lawbreaking in pipeline promotion

The oil and gas industry front group that played a key role in North Carolina Gov. Pat McCrory's push to drill the Atlantic has been accused of using fraudulent tactics to promote a gas pipeline.

A leading front group for the energy industry is coming under scrutiny for fraudulent and potentially illegal activity in its campaign to promote a gas pipeline through Ohio and Michigan into Canada.

Based in Houston, the Consumer Energy Alliance was created and operated by HBW Resources, a high-powered lobbying firm that represents energy interests, and it gets funding from industry groups including the American Petroleum Institute.

A Facing South investigation published last year found that HBW Resources and the Alliance have been instrumental in running the Outer Continental Shelf Governors Coalition, a group led by Pat McCrory (R) of North Carolina that promotes oil and gas drilling off the Atlantic Coast. The Alliance disclosed its role in directing the Coalition, which includes governors from eight other states, only after Facing South and others revealed their involvement.

Now the industry-backed Alliance is facing allegations that it engaged in potentially criminal activity in its efforts to promote the Nexus Gas Transmission Pipeline in the Midwest. Opponents of the pipeline project say that a slew of letters submitted to the Federal Energy Regulatory Commission (FERC) shortly before a public comment period closed in August were generated by the Alliance, and included potentially hundreds of names from people who didn't consent to their names being used — and in some cases, people who aren't even alive.

Terry Lodge, an attorney representing groups opposed to the pipeline, and pipeline opponent Paul Wohlfarth were tracking the comment letters submitted to federal officials and began contacting signers.

One letter allegedly in support of the pipeline came from a man who died in 1998. Another came from a woman who suffers from dementia and whose son said she would have been unable to write such a letter. In all, Wohlfarth spoke with 14 people whose signatures or those of family members were found on pro-pipeline letters to FERC but who said they did not sign them. He found 200 other letters with very similar language, leading him to suspect the number of fraudulent letters could be higher.

The massive Nexus project would deliver 1.5 billion cubic feet of Appalachian shale gas per day over 225 miles from Ohio to Canada. Houston-based Spectra Energy, an Alliance member, is a partner in the pipeline project along with Michigan-based DTE Energy.

The Alliance's last major campaign involved working with the pro-offshore drilling Governors Coalition, led by McCrory. As public records obtained by Facing South revealed, the Alliance was responsible for "executing all day-to-day administrative, writing and research needs" for the group and helping direct "internal and external communication and media engagement. The Alliance and governors' group suffered a setback earlier this year when the Obama administration released a five-year offshore drilling plan that excluded the Atlantic.

Lodge and Wohlfarth are concerned that federal officials evaluating the Nexus Pipeline project will merely tally the number of comments submitted in favor and in opposition to the pipeline, without examining their validity.

"It appears that there is a belief, which may be accurate, that the Commission will take note of total numbers of comments for [and] against construction of the pipeline," Wohlfarth said in a formal declaration submitted to FERC. "Therefore, it is likely that the docket is being treated as the ballot box for this popularity determination, and it is deliberately, intentionally and fraudulently being stuffed by persons or entities unknown for the purpose of boosting the seeming public support for the pipeline."

Lodge also asserts that CEA's dubious process for gathering and submitting pro-pipeline comments could be a crime. He filed requests for an investigation with FERC, the inspector generals of the U.S. Environmental Protection Agency (EPA) and the Department of Energy, and the U.S. Postal Inspection Service. He pointed out that it's a federal felony to knowingly make a false representation to a federal agency under Section 1001 of Title 18 of the U.S. Code. Among the high-profile people who've been convicted under the law are businesswoman Martha Stewart, former Illinois Gov. Rod Blagojevich and financier Bernard Madoff.

It's unclear who has the authority to resolve the issue. Lodge told Facing South that the FERC staffer managing the Nexus Pipeline case said people who believe their signature was improperly used by the Alliance could file a letter in the Nexus docket to refute it, while the EPA Inspector General said the agency has no jurisdiction. Lodge is still waiting for a response from the other agencies.

In its response to Lodge's complaint filed with FERC, the Alliance called the allegations of fraud or false statements "wildly overblown." It said that the signatures were collected by means of automated phone calls made to residents of counties affected by the project. It acknowledged that this can be problematic, though it called the resulting errors "inadvertent":

[I]t is implicit in the nature of any automated phone survey that from time to time there will be instances where the person who answers the phone and responds to the survey is not the person listed in the telephone company's records as the householder. This would explain the inadvertent error that can occur when a supporting letter is generated in the name of the person listed as householder, but someone else actually answers the phone. So, even though the householder — in whose name the support letter was generated — may not be competent or even in agreement, the person who answered did respond affirmatively and authorize support for the Project. Similarly, in some instances the respondent may not fully understand the presented question, unintentionally answer it in the wrong way and later change his or her mind. Or, in some cases, the respondent may forget that the survey even took place, let alone that he or she gave the authorization for his comments to be filed with the Commission. CEA regrets any such misunderstanding or miscommunication that may have occurred.

McCrory's office did not immediately respond to a request for comment about the Alliance's actions.

This is not the first time the Alliance has been accused of using fraud to get its way. In 2014, the group coordinated a petition campaign in Wisconsin that attacked net metering and defended utility companies' proposed fixed-rate price increases. The petition included the names of 2,500 state residents who allegedly supported the utilities' proposals, but the Madison Capital Times discovered that some people on the Alliance petition were in fact against it. State utility regulators subsequently excluded the petition from the record.

In addition, an Alliance leader recently raised ethical concerns with North Carolina political observers. Real Jobs NC, an outside political group founded by Art Pope and other Republican mega-donors in 2010, held a Republican fundraising event in Raleigh on Oct. 7, with McCrory, who's up for re-election, slated to appear as a "special guest." The event may have violated campaign finance laws that bar candidates from coordinating with outside political committees, though McCrory ended up not attending because of Hurricane Matthew. The invitation for the fundraiser was sent out by Michael Whatley, the Alliance's executive vice president and the "W" in HBW Resources.