Koch Industries’ Internet Of Affect

At an EPA listening to final summer season, representatives from Koch Industries argued that moderate levels of the toxic chemical dioxin should not be designated as a most cancers threat for people.

When members of Congress sought increased safety at chemical plants to guard in opposition to terrorist assaults, Koch Industries lobbyists prowled Capitol Hill to voice their opposition.

And when Congress moved to strengthen regulation of the financial markets after latest collapses, Koch Industries a serious commodities and derivatives trader deployed a phalanx of lobbyists to resist proposed modifications.

Charles and David Koch, the owners of the country’s second-largest private company, are libertarians of long standing, who contend that authorities regulations, taxes and subsidies stifle individual initiative and hamper American competitiveness. Lately, the Kochs have performed an increasingly public role as monetary angels for conservative causes, politicians and foundations.

What’s not so nicely-known is the activity of Koch Industries in the trenches in Washington, the place a Heart for Public Integrity examination of lobbying disclosure files and federal regulatory information reveals a lobbying steamroller for the company’s interests, at instances in battle with its public pose.

The cash that Koch (pronounced “coke has spent on lobbying in Washington has soared in recent years, from $857,000 in 2004 to $20 million in 2008. The Kochs then spent another $20.5 million over the subsequent two years to affect federal policy, as the company’s lobbyists and officials sought to mold, gut or kill greater than 100 prospective payments or rules.

Oil is the core of the Koch business empire, and the company’s lobbyists and officials have successfully fought to preserve the industry’s tax breaks and credits, and to defeat makes an attempt by Congress to regulate greenhouse gases.

Hydrorefining Process EquipmentHowever Koch’s diversified interests, and thus its lobbying activities, extend far beyond petroleum. Koch corporations commerce carbon emission credits in Europe and derivatives in the U.S. They make jet fuel in Alaska from North Slope oil, and gasoline in Minnesota from the oil sands of Canada. They increase cattle in Montana and manufacture spandex in China, ethanol in Iowa, fertilizer in Trinidad, nylon in Holland, napkins in France and bathroom paper in Wisconsin.

In response to the most recent Forbes magazine rankings, Koch had $a hundred billion in revenues in 2009 on a par with corporate giants like IBM or Verizon and stood an in depth second to Cargill Inc. on the record of the most important private US firms. The agency has 70,000 workers, and a presence in 60 countries and virtually each state.

Koch’s choice to pour millions into lobbying Washington has put them excessive on the list of corporations whose lobbyists work the corridors of the nation’s capital. Last year, Koch Industries ranked in the top five roughly on a par with BP and Royal Dutch Shell in lobbying expenses among oil and fuel firms, in line with the center for Responsive Politics.

These totals don’t embody the work of the commerce associations that Koch uses to characterize its pursuits in Washington. There’s a major trade group known as the Nationwide Petrochemical & Refiners Affiliation, and obscure organizations just like the inexperienced-sounding Nationwide Environmental Growth Association’s Clear Air Mission, whose membership lists Koch and two of its subsidiaries (Georgia-Pacific and Invista) with a dozen industrial giants like ExxonMobil Corp., General Electric Co. and Alcoa Inc.

Koch’s lobbyists are identified on Capitol Hill for maintaining a low profile. There are not any former U.S. senators or Home committee chairmen on the payroll. The firm had 30 registered lobbyists in 2010, lots of whom are Washington insiders with earlier experience as congressional staffers or federal company employees.

Gregory Zerzan is an efficient example. Zerzan was a senior counsel for the House Monetary Companies Committee earlier than serving as an appearing assistant secretary and deputy assistant secretary at the U.S. Treasury Division in the course of the George W. Bush administration. Zerzan then labored as counsel and head of worldwide public coverage for the Worldwide Swaps and Derivative Affiliation earlier than becoming a member of Koch Industries as a lobbyist.

Koch clout is augmented by campaign donations to events and candidates for federal workplace $eleven million within the final two many years, according to the center for Responsive Politics and generous gifts from three family foundations to universities and conservative organizations and interest teams.

Based on IRS data, the Koch foundations are essential donors (having given $three.Four million from 2007 by means of 2009) to the Individuals for Prosperity Foundation, a nonprofit known for its help of the Tea Celebration movement. Among the many organizations which have every received one million dollars or more during the last five years from Koch foundations are the Cato Institute, the Heritage Foundation, and two conservative think tanks at George Mason College in Virginia: the Institute for Humane Research and the Mercatus Middle.

The Kochs primarily donate to conservative candidates and causes but have given more than $1 million in the final decade to the liberal Brookings Institution. And amongst politicians they supported last 12 months was Andrew Cuomo, a Democrat elected governor of recent York with $87,000 from the Koch household.

The emergence of “the Koch web political action, campaign giving, funding of teams engaged in political motion and campaigns, conferences to broaden political and policy affect is a hanging phenomenon,stated Norman Ornstein, a scholar at the conservative American Enterprise Institute.

The center asked Koch Industries and its lobbyists in Washington, in a dozen emails and telephone calls over greater than two weeks, to touch upon the firm’s lobbying efforts. Koch’s representatives declined the chance.

However in a March 1 column within the Wall Avenue Journal, Charles Koch defended his and his company’s practices. “As a matter of precept our firm has been outspoken in protection of financial freedom,Koch wrote. “This country would be higher off if each company would do the same. As an alternative, we see far too many businesses that paint their tails white and run with the antelope./p>


The Koch brothers are famend as free market libertarians. However as a serious trader in vitality and monetary markets, Koch Industries additionally knows the way to hedge.

As its corporate officials and publicists decried ethanol as a expensive government boondoggle, the Kochs purchased 4 ethanol plants in Iowa in recent months, with a combined annual capability of 435 million gallons. In Washington (where ethanol tax subsidies value the Treasury some $6 billion yearly) Koch representatives lobbied Congress on ethanol and other biofuel subsidies.

“New or emerging markets, comparable to renewable fuels, are a chance for us to create worth within the foundations the federal government units,Flint Hills Resources President Brad Razook told his workers in the January company newsletter.

Koch Industriesstanding as an ethanol participant goes beyond its new Iowa plants. Koch blends ethanol and gasoline nearby, in its Minnesota refinery. By its personal account, the company’s subsidiaries, Flint Hills and Koch Supply & Buying and selling, presently purchase and market about one-tenth of all of the ethanol produced within the United States.

The Kochs appear to have acknowledged that their actions might seem hypocritical and in a January 2011 newsletter the company tried to explain issues to workers who’ve been “scratching their heads and wondering: what is going on?/p>

“After all, ethanol manufacturing is closely subsidized, mandated and protected,Koch Industries acknowledged, “while Koch firms brazenly oppose such authorities packages./p>

Realism had gained out. The company has the “capabilities vital to achieve success in the ethanol industry,the publication defined. The new ethanol plants “fit well geographically with several different FHR belongings, together with gasoline terminals, a widespread distribution community that features Iowa, and the Pine Bend [Minnesota] refinery./p>

“We are not going to place our company and our employees at a aggressive disadvantage by not collaborating in programs that can be found to our competitors,Razook assured Koch staff.

The company has a historical past of pragmatism in business affairs. Koch was a pioneer importer of Russian oil to the United States, including a 2002 shipment of Russian crude that Koch sold to the U.S. government to help fill the U.S. Strategic Petroleum Reserve. And though it opposes a cap-and-commerce solution to world warming for the United States, Koch makes money trading emissions credit under an identical program in Europe.

Nor is ethanol the only type of corporate welfare Koch Industries supports. Because it ventures into biofuel production, and makes use of different fuels to energy its plants, the company has its lobbyists working “to increase the [tax] credit for renewable electricity productionmade from biomass.

Georgia-Pacific, the company reported in 2008, was answerable for more than 10 p.c of all of the renewable biomass electricity generated within the U.S.


Koch’s efforts to limit regulation of toxic substances illustrate the breadth of its lobbying operation.

In 2004 Koch Industries purchased Invista, a subsidiary of DuPont, recognized for manufacturing Lycra, Stainmaster carpets and other textiles and fabrics. In 2005, as a part of the identical corporate diversification and expansion technique, Koch Industries bought the giant wooden and paper merchandise firm, Georgia-Pacific, adding Brawny paper towels, Angel Mushy rest room paper, Dixie cups and dozens of factories and plants to its holdings.

Koch has since labored, on Capitol Hill and in numerous regulatory proceedings, to dilute or halt tighter federal regulation of several toxic byproducts that could affect its backside line, including dioxin, asbestos and formaldehyde, all of which have been linked to most cancers.

Dioxin is released from incinerators, hazardous waste treatment, pesticide manufacturing, paper plants and different sources. With 165 manufacturing facilities across the United States, Georgia-Pacific “has a major interest in and will probably be considerably impacted,by the EPA’s decisions on dioxin, Koch officials advised the company in April 2010.

A whole bunch of employees would have to be employed, and trucks and earth-transferring gear leased or bought. And “of the limited variety of hazardous waste landfills operating in the United States, very few are prepared to just accept dioxin-containing soil,the corporate famous.

“Treatment and disposal of dioxin-containing soil is already a difficult, expensive and capacity-limited downside that might solely get worse if additional volumes were generated./p>

Courtesy of the center for Responsive Politics

It’s been three a long time for the reason that environmental catastrophes at Love Canal, N.Y., and Occasions Seashore, Mo., introduced the American public to the dangers of dioxin. However in the EPA listening to at the Washington Hilton last July, toxicologist John M. DeSesso, a advisor talking on behalf of Georgia-Pacific, told the agency that the scientific studies on widespread levels of publicity are nonetheless inconclusive. He urged additional research.

The Environmental Working Group and quite a lot of public health organizations, meanwhile, chastised the EPA for dragging its toes, and reminded the agency panel that one other arm of the federal authorities, the U.S. Nationwide Toxicology Program, and the World Health Organization have already categorised dioxin as a recognized human carcinogen.

“Twenty-5 years after publishing its first assessment of dioxin the EPA has yet to establish a secure every day dose for human exposurefor “one of essentially the most-studied of all chemical pollutants,the EWG informed the panel. “It is EPA’s accountability to address this drawback with resolve without regard to strain from special interests who stand to benefit financially from weak standards and regulations./p>

It isn’t simply dioxin that has drawn Koch’s interest. On Capitol Hill, and in regulatory proceedings, Koch lobbyists and officials have resisted tighter authorities regulation of a gallery of toxic and carcinogenic substances, like asbestos, formaldehyde and benzene.

“GP strongly disagrees with the [Nationwide Toxicology Program] panel’s conclusion to listing formaldehyde, a pure part of each cell in the physique, as a human carcinogen,wrote Traylor Champion, the firm’s vice president for environmental affairs, in a February 2010 letter.

“Costly management necessities are being mandated on sources which have insignificant ranges of HAP (hazardous air pollutants) emissions,a Georgia-Pacific environmental health and security supervisor, James Eckenrode, complained to the EPA in November 2008, when it sought to apply more durable air pollution standards on the firm’s manufacture of resins and formaldehyde.

Through its Flint Hills Assets subsidiary, Koch Industries operates a refinery close to Fairbanks, Alaska. “Refineries in Alaska are geographically isolated from the rest of the U.S. market such that benzene extraction and sale into the petrochemical market could be infeasible,the corporate argued in 2006, when the EPA proposed new clean air limits on benzene. “Benzene reductions to ranges proposed on this rule would both require in depth and economically prohibitive capital upgrades at our facility or would end in a major reduction in gasoline production./p>

When Koch Industries purchased Georgia-Pacific, it inherited a titanic liability concerning asbestos. Georgia-Pacific had used asbestos to make gypsum-based mostly drywall merchandise, and beginning in the 1980s the agency became a goal for more than 340,000 claims by plaintiffs who said they suffered lung and different diseases, including mesothelioma, a deadly most cancers. By 2005, the company was spending $200 million a 12 months and had to build a $1.5 billion reserve fund for asbestos liabilities and protection costs.

In a 2008 Koch Industries publication, Basic Counsel Mark Holden griped that “many of these claims are an outright abuse of the authorized system that usually involve individuals who will not be sick all because of over-zealous litigators and a legal system that provides them perverse incentives./p>

The number of latest claims has dropped with more durable federal security requirements. However within the 110th Congress Koch lobbyists still sought to sway members on legislative proposals intending to limit using asbestos and enhance public data, even Senate Resolution 462, which called for a “National Asbestos Consciousness Week./p>

International WARMING AND LOW CARBON Gasoline Standards

It’s in the Kochscommercial interest to preserve America’s reliance on carbon-based energy sources. Despite current diversification, Koch remains a significant petrochemical company with refineries in North Pole, Alaska; Corpus Christi, Texas; Rosemount, Minn., and Rotterdam within the Netherlands; an array of chemical plants; a coal subsidiary (the C. Reiss Coal Co.) and four,000 miles of pipelines.

So it is not stunning that, when the Obama administration and the Democrats on Capitol Hill proposed to regulate the emission of greenhouse gases in recent years, Koch Industries responded with a fervent counteroffensive.

“Oppose government mandates on carbon reduction provisions [and] provisions related to climate change, and oppose entire invoice,Koch lobbyist Robert P. Corridor wrote, listing his targets on the 2008 lobbying disclosure type.

The firm’s lobbying expenditures soared in 2008 as Koch Industries and its subsidiaries Georgia-Pacific, Invista, Flint Hills Sources, Koch Carbon, Koch Nitrogen peppered the EPA and members of Congress with objections. A number of labored on measures that will strip the EPA of the ability to regulate greenhouse gases by means of the Clear Air Act.

Koch-supported groups just like the Nationwide Environmental Improvement Association’s Clear Air Venture joined the trouble. In a recent meeting, five Koch representatives joined colleagues from ExxonMobil, ConocoPhillips, Eli Lilly and other NEDA-CAP members to register considerations with EPA officials over the proposed mandatory reporting rule for greenhouse fuel emissions, the file shows.

Koch’s lobbying efforts on climate change are matched by a public marketing campaign. Through three foundations the Claude R. Lambe Foundation, the Charles G. Koch Foundation and the David H. Koch Basis funded and administered by Koch relations and staff, the Kochs have donated several million dollars lately to assume tanks and teams which have sought to discredit climate science and EPA’s efforts to scale back greenhouse gases.

“Why are such unproven or false claims promoted?the Koch Industries company newsletter, Discovery, requested in an article on international warming entitled, “Blowing Smoke./p>

“Scientists have perverted the peer overview course of, doing all the pieces possible to forestall opinions opposite to the alarmist view from being heard,the article stated. Humans ought to adapt to international warming, not attempt to sluggish or cease it, the publication really helpful. “Since we can’t control Mom Nature, let’s determine learn how to get along together with her changes./p>

In early March, members of the Republican-led House Energy and Commerce Committee many of whom had acquired campaign contributions from Koch workers and PACs last fall voted to bar the EPA from regulating greenhouse gases beneath the Clear Air Act. Their action has been endorsed by Speaker John Boehner and Republican House leaders.

Of particular concern to Koch lobbyists in Washington, according to their disclosure kinds, are measures to encourage or require the use of low-carbon fuels. These sources of power, in their manufacture and use, contribute lower than different fuels to world warming.

The Koch refinery in Minnesota is designed to process heavy “high-carbonCanadian crude oil, and is fed by a pipeline from Canada. Koch “is among Canada’s largest crude oil purchasers, shippers and exporters,the company says, with a buying and selling and provide office in Calgary and a terminal in Hardisty, Alberta. Much of the oil comes from the mining of oil sands, which have a very heavy carbon footprint as a result of the method releases greenhouse gases from peat lands and boreal forest, and requires an excessive amount of energy to heat and sweat the oil out.

“Canadian crude generates extra greenhouse gasoline emissionsand so low-carbon requirements “would cripple refiners that rely on heavy crude feedstocks,the Koch Industries website notes. “It can be particularly devastating for refiners that use heavy Canadian crude./p>

When lawmakers in Washington and states like California sought to deal with international warming by requiring the usage of low carbon fuels, Koch Industries responded. Koch lobbyists listed the laws as a lobbying precedence on Capitol Hill. And in California, the place a wide-ranging sequence of measures to slow climate change had been launched by former Gov. Arnold Schwarzenegger, Koch joined the fight to defeat them.

A Koch subsidiary, Flint Hills Resources, donated a million dollars in help of Proposition 23, an unsuccessful attempt funded by Koch and other energy corporations final yr to stall implementation of the low-carbon requirements and other remedial climate measures in California.

Vitality Trade TAX BREAKS

Koch lobbyists spend much of their time, based on their disclosure experiences, combating attempts by members of Congress to curb worth-gouging, windfall revenue-taking and speculation in the oil business. To this similar finish, Koch officials worked to dilute a 2009 Federal Commerce Commission rule governing manipulation of the vitality markets.

In the meantime, Koch has lobbied to preserve among the oil industry’s coveted tax breaks and credit.

One profit is thought as the Section 199 deduction, authorized by Congress several years in the past to help the exhausting-pressed U.S. manufacturing sector. In mild of the oil and gas industry’s hearty profits, the Obama administration and members of Congress have sought to end the Section 199 subsidy for vitality companies and save the U.S. Treasury $14 billion over 10 years. However Koch lobbyists and commerce associations have worked to preserve the deduction.

One other industry tax break that drew the assist of Koch representatives is the venerable “LIFO(last-in, first-out) accounting rule. It permits power firms successfully to raise the worth of their present stock (and thus pay decrease taxes on earnings from sales) when the value of oil soars.

Below LIFO, the oil in a company’s inventory, no matter what it actually cost, is valued at the price of the final-acquired (normally highest-value) barrel. The LIFO rule has been a target in recent times for both Democrats and Republicans in Washington, who would like to raise income with out elevating taxes.


Koch lobbyists listed the expiring Bush tax cuts as a lobbying objective last yr, and the Koch brothers have been amongst an elite, relatively few Americans who profited when the earnings tax cuts for those incomes greater than $250,000 a year had been prolonged in a year-finish deal.

Another of the Bush tax breaks had particular meaning for the Koch brothers. Charles Koch, 75, and David Koch, 70, are tied for fifth place, each with a net worth of $21.5 billion, in the newest Forbes rankings of the wealthiest People. Included within the deal to extend the Bush tax cuts was a proposal to reduce the federal estate tax. The Kochs have, traditionally, been players in an ongoing effort by wealthy families to curb or eliminate the tax on inheritances.

The final tax deal reached by the White Home and Republicans in Congress in December set the estate tax at 35 percent. That makes the brand new rate significantly more favorable than through the Clinton (fifty five percent) and even the Bush (forty five %) years, and the lowest it’s been since the 1930s. If one of many patriarchs should die while the brand new rate is in impact, it will save the Koch household billions of dollars.

TERRORISM AND National Security

One other main preoccupation of Koch Industries lobbyists during current periods of Congress was the Chemical Facility Anti-Terrorism Standards, a federal effort to establish and regulate chemical amenities that could possibly be susceptible to terrorist attacks.

In 2009, the House passed laws that will toughen the requirements, and require manufacturers like Koch to make use of safer chemicals and processes so as to add another stage of protection and decrease the effects of toxic releases from terrorist attacks or catastrophic accidents.

Koch opposed the adjustments, claiming they “increase value and regulatory burden whereas shifting focus away from safety and towards environmental issues.The chemical safety provisions have been listed as lobbying targets by Koch representatives in 2007, 2008, 2009 and 2010.

Based on EPA records, Koch has four amenities that use chlorine dioxide—in Palatka, Fla.; Zachary, La.; New Augusta, Miss.; and Camas, Wash. It has an Invista plant that uses formaldehyde in LaPorte, Texas. Its Flint Hills refinery in Corpus Christi, Texas, makes use of hydrofluoric acid in refining gasoline.

Mandatory use of safer expertise would “result in much more job losses and better consumer costs as American manufacturers struggle to comply,Koch contends in a press release on the chemical security requirements on its website. The Home laws would “restructure, and sure add additional cost to security programs at the moment in place for Koch companiesservices./p>


Koch pulls no punches when assigning the blame for the good financial meltdown of 2008: It was the government’s fault, not the markets.

“Almost all of those problems (and much of the present chaos) are, at their root, the results of political failure,stated Steve Feilmeier, the chief monetary officer for Koch Industries, on the height of the crash.

It is not stunning, then, that Koch Industries a significant participant in worldwide buying and selling markets resisted increased regulation and spent heavily on lobbyists who labored to form the 2010 Dodd-Frank Act and different vehicles for financial reform. The Koch lobbyists focused, specifically, on provisions aimed at regulating systemic risk within the monetary markets, and using derivatives.

Koch Industries started out trading crude oil more than 4 a long time ago, however its trading group has since branched into commodities, derivatives and different danger management merchandise.

In that time, the market for buying and selling derivatives and swaps in the power trade has gone largely unregulated. And in past Congresses, Koch lobbyists labored to preserve the exemption, recognized because the “Enron Loophole,that excused energy commodity contracts from regulation.

But the Dodd-Frank regulation gave the Commodity Futures Trading Fee and the Securities and Trade Fee the authority to craft new guidelines to subject traders in the power business to increased regulation and transparency, capital and margin requirements, and supervision by a derivatives clearing home. Koch lobbyists labored to favorably form the bill, and haven’t stopped working since it was passed.

Leave a Reply