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And when Congress moved to strengthen regulation of the financial markets after recent collapses, Koch Industries a critical commodities and derivatives trader deployed a phalanx of lobbyists to resist proposed changes.
What’s not so effectively-recognized is the exercise of Koch Industries within the trenches in Washington, where a Heart for Public Integrity examination of lobbying disclosure files and federal regulatory information reveals a lobbying steamroller for the company’s pursuits, at occasions in battle with its public pose.
The money that Koch (pronounced “coke has spent on lobbying in Washington has soared currently, from $857,000 in 2004 to $20 million in 2008. The Kochs then spent another $20.5 million over the next two years to affect federal policy, as the company’s lobbyists and officials sought to mold, gut or kill greater than 100 potential payments or regulations.
But Koch’s diversified pursuits, and thus its lobbying actions, lengthen far past petroleum. Koch firms commerce carbon emission credit in Europe and derivatives inside the U.S. They make jet gas in Alaska from North Slope oil, and gasoline in Minnesota from the oil sands of Canada. They elevate cattle in Montana and manufacture spandex in China, ethanol in Iowa, fertilizer in Trinidad, nylon in Holland, napkins in France and rest room paper in Wisconsin.
In accordance with the newest Forbes magazine rankings, Koch had $one 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 checklist of an important personal US companies. The agency has 70,000 staff, and a presence in 60 countries and virtually every state.
Koch’s resolution to pour hundreds of thousands into lobbying Washington has put them high on the list of corporations whose lobbyists work the corridors of the nation’s capital. Last yr, Koch Industries ranked in the highest five roughly on a par with BP and Royal Dutch Shell in lobbying expenses among oil and gasoline firms, in accordance with the center for Responsive Politics.
These totals don’t include the work of the trade associations that Koch makes use of to signify its pursuits in Washington. There’s a serious industry group called the National Petrochemical & Refiners Affiliation, and obscure organizations simply just like the inexperienced-sounding National Environmental Growth Association’s Clear Air Challenge, whose membership lists Koch and two of its subsidiaries (Georgia-Pacific and Invista) with a dozen industrial giants like ExxonMobil Corp. Basic Electric Co. and Alcoa Inc.
Koch’s lobbyists are identified on Capitol Hill for sustaining 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, a variety of whom are Washington insiders with earlier expertise as congressional staffers or federal agency staff.
Gregory Zerzan is a good instance. Zerzan was a senior counsel for the Home Monetary Companies Committee before serving as an performing assistant secretary and deputy assistant secretary at the U.S. Treasury Division during the George W. Bush administration. Zerzan then labored as counsel and head of world public policy for the International 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 office $11 million throughout the last two decades, in response to the middle for Responsive Politics and generous gifts from three household foundations to universities and conservative organizations and interest groups.
In response to IRS records, the Koch foundations are important donors (having given $three.Four million from 2007 via 2009) to the Americans for Prosperity Basis, a nonprofit recognized for its support of the Tea Social gathering movement. Among the various organizations that have each obtained 1,000,000 dollars or extra over the previous 5 years from Koch foundations are the Cato Institute, the Heritage Foundation, and two conservative suppose tanks at George Mason University in Virginia: the Institute for Humane Research and the Mercatus Middle.
The Kochs primarily donate to conservative candidates and causes however have given higher than $1 million throughout the final decade to the liberal Brookings Institution. And among politicians they supported last yr was Andrew Cuomo, a Democrat elected governor of current York with $87,000 from the Koch household.
The emergence of “the Koch web political action, campaign giving, funding of groups engaged in political motion and campaigns, conferences to increase political and policy influence is a placing phenomenon,said 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 prospect.
But in a March 1 column within the Wall Road Journal, Charles Koch defended his and his company’s practices. “As a matter of principle our company has been outspoken in defense of financial freedom,Koch wrote. “This country can be better off if each firm 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 renowned as free market libertarians. But as a serious trader in energy and monetary markets, Koch Industries also is aware of the correct way to hedge.
“New or emerging markets, akin to renewable fuels, are a chance for us to create value throughout the foundations the federal government units,Flint Hills Sources President Brad Razook advised his staff within the January firm publication.
Koch Industriesstatus as an ethanol player goes beyond its new Iowa plants. Koch blends ethanol and gasoline close by, in its Minnesota refinery. By its personal account, the company’s subsidiaries, Flint Hills and Koch Provide & Trading, at the moment purchase and market about one-tenth of all of the ethanol produced within the United States.
The Kochs seem to have recognized that their actions might seem hypocritical and in a January 2011 publication the company tried to elucidate things to staff who’ve been “scratching their heads and wondering: what is going on /p>
“After all, ethanol production is closely subsidized, mandated and protected,Koch Industries acknowledged, “while Koch firms brazenly oppose such authorities programs./p>
Realism had received out. The company has the “capabilities crucial to attain success in the ethanol business,the newsletter explained. The brand new ethanol plants “fit effectively geographically with several different FHR belongings, including gasoline terminals, a widespread distribution network that includes Iowa, and the Pine Bend [Minnesota] refinery./p>
“We aren’t going to position our company and our staff at a aggressive drawback by not participating in applications that can be found to our rivals,Razook assured Koch staff.
The company has a history of pragmatism in business affairs. Koch was a pioneer importer of Russian oil to the United States, together with a 2002 shipment of Russian crude that Koch offered to the U.S. government to help fill the U.S. Strategic Petroleum Reserve. And though it opposes a cap-and-commerce resolution to international warming for the United States, Koch makes cash buying and selling emissions credits under an analogous program in Europe.
Nor is ethanol the only type of company welfare Koch Industries helps. As it ventures into biofuel production, and uses different fuels to energy its plants, the corporate has its lobbyists working “to expand the [tax] credit score for renewable electricity productionmade from biomass.
Georgia-Pacific, the company reported in 2008, was liable for more than 10 % of the entire renewable biomass electricity generated in the U.S.
In 2004 Koch Industries bought Invista, a subsidiary of DuPont, recognized for manufacturing Lycra, Stainmaster carpets and other textiles and fabrics. In 2005, as part of the similar corporate diversification and expansion technique, Koch Industries purchased the large wood and paper merchandise agency, Georgia-Pacific, adding Brawny paper towels, Angel Delicate bathroom paper, Dixie cups and dozens of factories and plants to its holdings.
Dioxin is released from incinerators, hazardous waste therapy, pesticide manufacturing, paper plants and other sources. With 165 manufacturing services across the United States, Georgia-Pacific “has a major interest in and can be considerably impacted,by the EPA’s choices on dioxin, Koch officials informed the company in April 2010.
Lots of of employees must be hired, and trucks and earth-shifting tools leased or bought. And “of the restricted variety of hazardous waste landfills working inside the United States, only a few are prepared to easily settle for dioxin-containing soil,the company famous.
“Treatment and disposal of dioxin-containing soil is already a difficult, expensive and capability-restricted problem that may only get worse if additional volumes have been generated./p>
Courtesy of the middle for Responsive Politics
The Environmental Working Group and various public health organizations, meanwhile, chastised the EPA for dragging palm oil refinery plant design 5th solution its feet, and reminded the company panel that one other arm of the federal authorities, the U.S. National Toxicology Program, and the World Health Group have already classified dioxin as a known human carcinogen.
“Twenty-five years after publishing its first assessment of dioxin the EPA has yet to ascertain a secure every day dose for human exposurefor “one of the most-studied of all chemical pollutants,the EWG told the panel. “It is EPA’s accountability to deal with this downside with resolve without regard to stress from special interests who stand to benefit financially from weak standards and rules./p>
“GP strongly disagrees with the [National Toxicology Program] panel’s conclusion to list formaldehyde, a natural component of every cell within the body, as a human carcinogen,wrote Traylor Champion, the firm’s vice president for environmental affairs, in a February 2010 letter.
“Costly control requirements are being mandated on sources which have insignificant ranges of HAP (hazardous air pollutants) emissions,a Georgia-Pacific environmental well being and safety supervisor, James Eckenrode, complained to the EPA in November 2008, when it sought to use more durable air pollution requirements on the firm’s manufacture of resins and formaldehyde.
By its Flint Hills Assets subsidiary, Koch Industries operates a refinery close to Fairbanks, Alaska. “Refineries in Alaska are geographically isolated from the remainder of the U.S. market such that benzene extraction and sale into the petrochemical market may be infeasible,the corporate argued in 2006, when the EPA proposed new clear air limits on benzene. “Benzene reductions to levels proposed on this rule would both require intensive and economically prohibitive capital upgrades at our facility or would end in a big reduction in gasoline manufacturing./p>
When Koch Industries bought Georgia-Pacific, it inherited a titanic legal responsibility relating to asbestos. Georgia-Pacific had used asbestos to make gypsum-based drywall merchandise, and starting inside the 1980s the firm turned 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 construct a $1.5 billion reserve fund for asbestos liabilities and protection prices.
In a 2008 Koch Industries publication, Common Counsel Mark Holden griped that “many of those claims are an outright abuse of the legal system that always involve individuals who usually are not sick all because of over-zealous litigators and a legal system that provides them perverse incentives./p>
The number of current claims has dropped with harder federal safety standards. However within the 110th Congress Koch lobbyists nonetheless sought to sway members on legislative proposals intending to restrict utilizing asbestos and improve public information, even Senate Resolution 462, which referred to as for a “National Asbestos Awareness Week./p>
It’s throughout the Kochscommercial interest to preserve America’s reliance on carbon-based mostly power sources. Despite current diversification, Koch remains a severe petrochemical company with refineries in North Pole, Alaska; Corpus Christi, Texas; palm oil refinery plant design 5th solution Rosemount, Minn. and Rotterdam in the Netherlands; an array of chemical plants; a coal subsidiary (the C. Reiss Coal Co.) and 4,000 miles of pipelines.
So it’s not stunning that, when the Obama administration and the Democrats on Capitol Hill proposed to regulate the emission of greenhouse gases recently, Koch Industries responded with a fervent counteroffensive.
“Oppose authorities mandates on carbon reduction provisions [and] provisions associated to local weather change, and oppose entire invoice,Koch lobbyist Robert P. Corridor wrote, listing his goals 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 Resources, Koch Carbon, Koch Nitrogen peppered the EPA and members of Congress with objections. Several labored on measures that may strip the EPA of the power to regulate greenhouse gases by way of the Clear Air Act.
Koch-supported groups like the National Environmental Development Association’s Clean Air Project joined the trouble. In a recent meeting, 5 Koch representatives joined colleagues from ExxonMobil, ConocoPhillips, Eli Lilly and different NEDA-CAP members to register concerns with EPA officials over the proposed mandatory reporting rule for greenhouse gas emissions, the report shows.
Koch’s lobbying efforts on climate change are matched by a public marketing campaign. Via three foundations the Claude R. Lambe Foundation, the Charles G. Koch Foundation and the David H. Koch Foundation funded and administered by Koch members of the household and workers, the Kochs have donated a number of million dollars in latest occasions to assume tanks and teams which have sought to discredit local weather science and EPA’s efforts to chop back greenhouse gases.
“Why are such unproven or false claims promoted the Koch Industries company e-newsletter, Discovery, requested in an article on world warming entitled, “Blowing Smoke./p>
“Scientists have perverted the peer evaluation course of, doing the whole lot potential to forestall opinions contrary to the alarmist view from being heard,the article said. People ought to adapt to international warming, not attempt to gradual or cease it, the newsletter advisable. “Since we can’t management Mom Nature, let’s work out tips about methods to get along together with her adjustments./p>
In early March, members of the Republican-led House Vitality and Commerce Committee a whole lot of whom had acquired marketing campaign contributions from Koch staff and PACs last fall voted to bar the EPA from regulating greenhouse gases under the Clear Air Act. Their motion has been endorsed by Speaker John Boehner and Republican House leaders.
Of specific concern to Koch lobbyists in Washington, in step with their disclosure forms, are measures to encourage or require the utilization of low-carbon fuels. These sources of vitality, of their manufacture and use, contribute less than other fuels to world warming.
The Koch refinery in Minnesota is designed to course of heavy “high-carbonCanadian crude oil, and is fed by a pipeline from Canada. Koch “is amongst Canada’s largest crude oil purchasers, shippers and exporters,the corporate says, with a trading and supply workplace in Calgary and a terminal in Hardisty, Alberta. A lot of the oil comes from the mining of oil sands, which have a very heavy carbon footprint as a result of the strategy releases greenhouse gases from peat lands and boreal forest, and requires quite a lot of energy to heat and sweat the oil out.
“Canadian crude generates extra greenhouse gas emissionsand so low-carbon standards “would cripple refiners that rely on heavy crude feedstocks,the Koch Industries web site notes. “It could be notably devastating for refiners that use heavy Canadian crude./p>
When lawmakers in Washington and states like California sought to handle world warming by requiring the usage of low carbon fuels, Koch Industries responded. Koch lobbyists listed the legislation as a lobbying priority on Capitol Hill. And in California, the place a large-ranging sequence of measures to slow local weather change have been launched by former Gov. Arnold Schwarzenegger, Koch joined the battle to defeat them.
A Koch subsidiary, Flint Hills Assets, donated a million dollars in assist of Proposition 23, an unsuccessful try funded by Koch and other power companies final year to stall implementation of the low-carbon standards and different remedial climate measures in California.
Koch lobbyists spend a lot of their time, in accordance with their disclosure stories, combating makes an attempt by members of Congress to curb worth-gouging, windfall profit-taking and speculation throughout the oil business. To this same finish, Koch officials labored to dilute a 2009 Federal Commerce Commission rule governing manipulation of the energy markets.
Meanwhile, Koch has lobbied to preserve just a few of the oil industry’s coveted tax breaks and credits.
One benefit is thought because the Part 199 deduction, permitted by Congress a number of years in the past to help the onerous-pressed U.S. manufacturing sector. In mild of the oil and fuel industry’s hearty profits, the Obama administration and members of Congress have sought to end the Part 199 subsidy for power firms and save the U.S. Treasury $14 billion over 10 years. However Koch lobbyists and commerce associations have labored 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 allows power corporations successfully to boost the value of their existing stock (and thus pay lower taxes on earnings from sales) when the worth of oil soars.
Below LIFO, the oil in a company’s inventory, it doesn’t matter what it really price, is valued at the price of the final-acquired (often highest-price) barrel. The LIFO rule has been a target in recent years for each Democrats and Republicans in Washington, who wish to elevate revenue with out elevating taxes.
Koch lobbyists listed the expiring Bush tax cuts as a lobbying goal last 12 months, and the Koch brothers were amongst an elite, comparatively few Americans who profited when the revenue tax cuts for those earning higher than $250,000 a year had been extended in a year-end deal.
One other of the Bush tax breaks had particular meaning for the Koch brothers. Charles Koch, 75, and David Koch, 70, are tied for fifth place, every with a net price of $21.5 billion, in the most recent Forbes rankings of the wealthiest Individuals. Included within the deal to extend the Bush tax cuts was a proposal to cut back the federal estate tax. The Kochs have, traditionally, been players in an ongoing effort by wealthy families to curb or remove the tax on inheritances.
The ultimate tax deal reached by the White Home and Republicans in Congress in December set the property tax at 35 p.c. That makes the brand new charge significantly extra favorable than in the course of the Clinton (55 p.c) and even the Bush (45 percent) years, and the bottom it’s been for the reason that nineteen thirties. If one of the patriarchs ought to die while the brand new price is in impact, it can save the Koch family billions of dollars.
One other main preoccupation of Koch Industries lobbyists throughout recent classes of Congress was the Chemical Facility Anti-Terrorism Requirements, a federal effort to identify and regulate chemical services that is likely to be vulnerable to terrorist attacks.
In 2009, the Home passed legislation that will toughen the standards, and require manufacturers like Koch to make use of safer chemicals and processes in order so as to add another level of safety and minimize the consequences of toxic releases from terrorist assaults or catastrophic accidents.
Koch opposed the modifications, claiming they “increase cost and regulatory burden whereas shifting focus away from safety and toward environmental issues.The chemical safety provisions had been listed as lobbying targets by Koch representatives in 2007, 2008, 2009 and 2010.
In accordance with EPA data, Koch has 4 services 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.
Obligatory use of safer technology would “result in even more job losses and higher shopper costs as American manufacturers battle to conform,Koch contends in an announcement on the chemical safety requirements on its webpage. The Home laws would “restructure, and likely add additional cost to safety programs presently in place for Koch companiesfacilities./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 issues (and far of the present chaos) are, at their root, the results of political failure,stated Steve Feilmeier, the chief financial officer for Koch Industries, on the top of the crash.
It isn’t stunning, then, that Koch Industries a serious player in international buying and selling markets resisted increased regulation and spent closely on lobbyists who worked to form the 2010 Dodd-Frank Act and other vehicles for financial reform. The Koch lobbyists focused, particularly, on provisions geared towards regulating systemic risk inside the monetary markets, and using derivatives.
In that point, the marketplace for trading derivatives and swaps in the vitality trade has gone largely unregulated. And in previous Congresses, Koch lobbyists labored to preserve the exemption, known as a result of the “Enron Loophole,that excused power commodity contracts from regulation.
But the Dodd-Frank law gave the Commodity Futures Buying and selling Commission and the Securities and Change Commission the authority to craft new rules to subject traders inside the power industry to increased regulation and transparency, capital and margin necessities, and supervision by a derivatives clearing home. Koch lobbyists worked to favorably form the invoice, and haven’t stopped working because it was passed.