Koch Industries’ Internet Of Influence
And when Congress moved to strengthen regulation of the financial markets after recent collapses, Koch Industries — a significant commodities and derivatives trader — deployed a phalanx of lobbyists to resist proposed modifications.
What’s not so effectively-known is the exercise of Koch Industries in the trenches in Washington, where a Middle for Public Integrity examination of lobbying disclosure files and federal regulatory records reveals a lobbying steamroller for the company’s interests, at times in battle with its public pose.
The cash that Koch (pronounced “coke”) has spent on lobbying in Washington has soared lately, from $857,000 in 2004 to $20 million in 2008. The Kochs then spent another $20.5 million over the subsequent two years to influence federal policy, as the company’s lobbyists and officials sought to mold, intestine or kill greater than 100 prospective bills or regulations.
However Koch’s diversified pursuits, and thus its lobbying actions, lengthen far beyond petroleum. Koch companies trade carbon emission credit in Europe and derivatives within the U.S. They make jet fuel 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 toilet paper in Wisconsin.
In accordance with the most recent Forbes journal rankings, Koch had $a hundred billion in revenues in 2009 — on a par with company giants like IBM or Verizon — and stood an in depth second to Cargill Inc. on the record of the most important personal US corporations. The firm has 70,000 workers, and a presence in 60 countries and almost each state.
Koch’s resolution to pour hundreds of thousands into lobbying Washington has put them high on the list of firms whose lobbyists work the corridors of the nation’s capital. Final yr, Koch Industries ranked in the top 5 — roughly on a par with BP and Royal Dutch Shell — in lobbying expenses amongst oil and gas corporations, in line with the center for Responsive Politics.
These totals don’t include the work of the commerce associations that Koch makes use of to represent its interests in Washington. There’s a major business group called the National Petrochemical & Refiners Affiliation, and obscure organizations just like the inexperienced-sounding Nationwide Environmental Development Association’s Clean Air Venture, 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 recognized on Capitol Hill for maintaining a low profile. There aren’t any former U.S. senators or Home committee chairmen on the payroll. The agency had 30 registered lobbyists in 2010, lots of whom are Washington insiders with earlier experience as congressional staffers or federal agency staff.
Gregory Zerzan is an effective instance. Zerzan was a senior counsel for the Home Monetary Providers Committee earlier than serving as an appearing assistant secretary and deputy assistant secretary at the U.S. Treasury Department through the George W. Bush administration. Zerzan then worked as counsel and head of worldwide 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 workplace — $eleven million within the last two a long time, based on the center for Responsive Politics — and generous gifts from three family foundations to universities and conservative organizations and interest groups.
Based on IRS records, the Koch foundations are essential donors (having given $3.Four million from 2007 by means of 2009) to the Individuals for Prosperity Foundation, a nonprofit recognized for its support of the Tea Celebration movement. Among the many organizations that have each obtained 1,000,000 dollars or more over the last 5 years from Koch foundations are the Cato Institute, the Heritage Basis, and two conservative assume tanks at George Mason University in Virginia: the Institute for Humane Research and the Mercatus Center.
The Kochs primarily donate to conservative candidates and causes but have given greater than $1 million within the last decade to the liberal Brookings Establishment. And among politicians they supported last 12 months was Andrew Cuomo, a Democrat elected governor of latest York with $87,000 from the Koch family.
The emergence of “the Koch net — political motion, marketing campaign giving, funding of groups engaged in political action and campaigns, conferences to develop political and policy influence — is a placing phenomenon,” said Norman Ornstein, a scholar on the conservative American Enterprise Institute.
The middle asked Koch Industries and its lobbyists in Washington, in a dozen emails and phone calls over more than two weeks, to touch upon the firm’s lobbying efforts. Koch’s representatives declined the chance.
But in a March 1 column within the Wall Avenue Journal, Charles Koch defended his and his company’s practices. “As a matter of principle our firm has been outspoken in protection of financial freedom,” Koch wrote. “This country can be higher off if every firm would do the identical. As an alternative, we see far too many companies that paint their tails white and run with the antelope.”
The Koch brothers are renowned as free market libertarians. However as a serious trader in vitality wholesale fertilizer and financial markets, Koch Industries also is aware of how you can hedge.
“New or emerging markets, similar to renewable fuels, are a chance for us to create worth within the principles the government sets,” Flint Hills Resources President Brad Razook informed his employees within the January company publication.
Koch Industries’ standing as an ethanol player goes past its new Iowa plants. Koch blends ethanol and gasoline close by, in its Minnesota refinery. By its personal account, the company’s subsidiaries, wholesale fertilizer Flint Hills and Koch Provide & Buying and selling, currently purchase and market about one-tenth of all of the ethanol produced within the United States.
The Kochs seem to have acknowledged that their actions might seem hypocritical and in a January 2011 e-newsletter the corporate tried to explain things to workers who have been “scratching their heads and questioning: what’s going on ”
“After all, ethanol production is heavily subsidized, mandated and protected,” Koch Industries acknowledged, “while Koch firms brazenly oppose such authorities applications.”
Realism had received out. The company has the “capabilities obligatory to achieve success in the ethanol trade,” the publication explained. The brand new ethanol plants “fit properly geographically with several other FHR assets, together with gasoline … terminals, a widespread distribution community that includes Iowa, and the Pine Bend [Minnesota] refinery.”
“We should not going to position our company and our staff at a competitive disadvantage by not participating in packages that are available to our rivals,” Razook assured Koch employees.
The company has a history of pragmatism in commercial affairs. Koch was a pioneer importer of Russian oil to the United States, together with a 2002 shipment of Russian crude that Koch sold to the U.S. government to help fill the U.S. Strategic Petroleum Reserve. And although it opposes a cap-and-commerce solution to global warming for the United States, Koch makes cash trading emissions credits below a similar program in Europe.
Nor is ethanol the one form of corporate welfare Koch Industries supports. Because it ventures into biofuel production, and uses different fuels to energy its plants, the corporate has its lobbyists working “to develop the [tax] credit score for renewable electricity production” made from biomass.
Georgia-Pacific, the company reported in 2008, was liable for greater than 10 % of all of the renewable biomass electricity generated within the U.S.
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 same company diversification and enlargement strategy, Koch Industries purchased the giant wood and paper merchandise agency, Georgia-Pacific, adding Brawny paper towels, Angel Smooth toilet paper, Dixie cups and dozens of factories and plants to its holdings.
Dioxin is launched from incinerators, hazardous waste remedy, pesticide manufacturing, paper plants and different sources. With 165 manufacturing facilities across the United States, Georgia-Pacific “has a big curiosity in and shall be considerably impacted,” by the EPA’s decisions on dioxin, Koch officials advised the company in April 2010.
Hundreds of workers must be hired, and trucks and earth-moving equipment leased or bought. And “of the limited number of hazardous waste landfills operating in the United States, only a few are willing to accept dioxin-containing soil,” the corporate noted.
“Treatment and disposal of dioxin-containing soil is already a difficult, costly and capacity-limited drawback that may only get worse if extra volumes have been generated.”
Courtesy of the center for Responsive Politics
The Environmental Working Group and quite a few public well being organizations, meanwhile, chastised the EPA for dragging its feet, and reminded the company panel that one other arm of the federal government, the U.S. National Toxicology Program, and the World Well being Group have already classified dioxin as a identified human carcinogen.
“Twenty-5 years after publishing its first assessment of dioxin … the EPA has but to establish a safe each day dose for human exposure” for “one of the most-studied of all chemical pollutants,” the EWG advised the panel. “It is EPA’s duty to deal with this problem with resolve … without regard to stress from particular interests who stand to learn financially from weak standards and regulations.”
“GP strongly disagrees with the [National Toxicology Program] panel’s conclusion to record formaldehyde, a pure part of every 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 requirements are being mandated on sources that have insignificant levels of HAP (hazardous air pollutants) emissions,” a Georgia-Pacific environmental well being and safety manager, James Eckenrode, complained to the EPA in November 2008, when it sought to use 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 remainder of the U.S. market such that benzene extraction and sale into the petrochemical market could be infeasible,” the company argued in 2006, when the EPA proposed new clean air limits on benzene. “Benzene reductions to levels proposed in this rule would either require intensive and economically prohibitive capital upgrades at our facility or would result in a major discount in gasoline production.”
When Koch Industries purchased Georgia-Pacific, it inherited a titanic legal responsibility concerning asbestos. Georgia-Pacific had used asbestos to make gypsum-based drywall products, and beginning in the 1980s the agency turned a goal for more than 340,000 claims by plaintiffs who mentioned they suffered lung and other diseases, including mesothelioma, a deadly most cancers. By 2005, the company was spending $200 million a yr and had to build a $1.5 billion reserve fund for asbestos liabilities and defense prices.
In a 2008 Koch Industries publication, General Counsel Mark Holden griped that “many of those claims are an outright abuse of the authorized system … that always contain people who will not be sick … all due to over-zealous litigators and a authorized system that gives them perverse incentives.”
The number of new claims has dropped with harder federal security standards. However in the 110th Congress Koch lobbyists nonetheless sought to sway members on legislative proposals intending to restrict using asbestos and enhance public knowledge, even Senate Decision 462, which referred to as for a “National Asbestos Awareness Week.”
It’s in the Kochs’ business curiosity to preserve America’s reliance on carbon-primarily based power sources. Regardless of recent diversification, Koch remains a serious 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 surprising that, when the Obama administration and the Democrats on Capitol Hill proposed to regulate the emission of greenhouse gases lately, Koch Industries responded with a fervent counteroffensive.
“Oppose government mandates on carbon reduction provisions … [and] provisions related to local weather change, and oppose total invoice,” Koch lobbyist Robert P. Hall wrote, itemizing his goals on the 2008 lobbying disclosure kind.
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. Several worked on measures that might strip the EPA of the ability to regulate greenhouse gases by the Clean Air Act.
Koch-supported groups like the National Environmental Growth Association’s Clear Air Project joined the effort. In a current assembly, five Koch representatives joined colleagues from ExxonMobil, ConocoPhillips, Eli Lilly and other NEDA-CAP members to register considerations with EPA officials over the proposed necessary reporting rule for greenhouse fuel emissions, the document exhibits.
Koch’s lobbying efforts on local weather change are matched by a public campaign. Through three foundations — the Claude R. Lambe Basis, the Charles G. Koch Basis and the David H. Koch Basis — funded and administered by Koch family members and workers, the Kochs have donated a number of million dollars in recent years to suppose tanks and groups that have sought to discredit local weather science and EPA’s efforts to reduce greenhouse gases.
“Why are such unproven or false claims promoted ” the Koch Industries company newsletter, Discovery, asked in an article on global warming entitled, “Blowing Smoke.”
“Scientists have … perverted the peer evaluation process, doing the whole lot doable to forestall opinions contrary to the alarmist view from being heard,” the article mentioned. Humans ought to adapt to international warming, not try to slow or stop it, the publication beneficial. “Since we can’t control Mom Nature, let’s figure out methods to get alongside together with her adjustments.”
In early March, members of the Republican-led House Power and Commerce Committee — lots of whom had received marketing campaign contributions from Koch employees and PACs final fall — voted to bar the EPA from regulating greenhouse gases underneath the Clear Air Act. Their action has been endorsed by Speaker John Boehner and Republican House leaders.
Of specific concern to Koch lobbyists in Washington, based on their disclosure types, are measures to encourage or require the use of low-carbon fuels. These sources of energy, in their manufacture and use, contribute lower than different fuels to international warming.
The Koch refinery in Minnesota is designed to course of heavy “high-carbon” Canadian crude oil, and is fed by a pipeline from Canada. Koch “is among 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 method releases greenhouse gases from peat lands and boreal forest, and requires quite a lot of power to heat and sweat the oil out.
“Canadian crude generates more greenhouse gasoline emissions” and so low-carbon standards “would cripple refiners that rely on heavy crude feedstocks,” the Koch Industries webpage notes. “It could be notably devastating for refiners that use heavy Canadian crude.”
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 priority on Capitol Hill. And in California, the place a wide-ranging series of measures to sluggish local weather change have been launched by former Gov. Arnold Schwarzenegger, Koch joined the fight to defeat them.
A Koch subsidiary, Flint Hills Resources, donated 1,000,000 dollars in support of Proposition 23, an unsuccessful attempt funded by Koch and different energy firms last yr to stall implementation of the low-carbon requirements and other remedial local weather measures in California.
Koch lobbyists spend a lot of their time, in keeping with their disclosure reviews, combating makes an attempt by members of Congress to curb worth-gouging, windfall revenue-taking and hypothesis within the oil trade. To this identical end, Koch officials labored to dilute a 2009 Federal Commerce Commission rule governing manipulation of the energy markets.
In the meantime, Koch has lobbied to preserve a few of the oil industry’s coveted tax breaks and credit.
One profit is understood because the Section 199 deduction, permitted by Congress a number of years in the past to assist the hard-pressed U.S. manufacturing sector. In light of the oil and gasoline industry’s hearty earnings, the Obama administration and members of Congress have sought to end the Section 199 subsidy for power companies and save the U.S. Treasury $14 billion over 10 years. But Koch lobbyists and commerce associations have labored to preserve the deduction.
Another trade tax break that drew the assist of Koch representatives is the venerable “LIFO” (final-in, first-out) accounting rule. It permits power companies effectively to boost the worth of their current stock (and thus pay decrease taxes on profits from sales) when the price of oil soars.
Under LIFO, the oil in a company’s stock, no matter what it truly value, 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 would like to boost income without raising taxes.
Koch lobbyists listed the expiring Bush tax cuts as a lobbying goal final year, and the Koch brothers had been amongst an elite, comparatively few People who profited when the earnings tax cuts for those incomes greater than $250,000 a year have been prolonged in a yr-end deal.
One other of the Bush tax breaks had special meaning for the Koch brothers. Charles Koch, seventy five, and David Koch, 70, are tied for fifth place, each with a internet value of $21.5 billion, in the most recent Forbes rankings of the wealthiest Americans. Included within the deal to increase the Bush tax cuts was a proposal to cut back the federal estate tax. The Kochs have, historically, been gamers in an ongoing effort by rich households to curb or eliminate 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 price significantly more favorable than during the Clinton (fifty five percent) or even the Bush (45 %) years, and the bottom it’s been for the reason that thirties. If one of many patriarchs ought to die while the new rate is in impact, it would save the Koch household billions of dollars.
Another major preoccupation of Koch Industries lobbyists during current sessions of Congress was the Chemical Facility Anti-Terrorism Requirements, a federal effort to determine and regulate chemical amenities that may very well be susceptible to terrorist assaults.
In 2009, the House passed legislation that would toughen the standards, and require manufacturers like Koch to make use of safer chemicals and processes so as to add another degree of safety and reduce the consequences of toxic releases from terrorist attacks or catastrophic accidents.
Koch opposed the modifications, claiming they “increase value and regulatory burden while shifting focus away from security and towards environmental issues.” The chemical safety provisions were listed as lobbying targets by Koch representatives in 2007, 2008, 2009 and 2010.
In keeping with EPA data, 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.
Necessary use of safer know-how 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 security standards on its web site. The Home legislation would “restructure, and certain add extra price to safety applications at present in place for Koch companies’ amenities.”
Koch pulls no punches when assigning the blame for the good monetary meltdown of 2008: It was the government’s fault, not the markets.
“Almost all of those problems (and far of the present chaos) are, at their root, the result of political failure,” stated Steve Feilmeier, the chief financial officer for Koch Industries, at the top of the crash.
It is not surprising, then, that Koch Industries — a serious participant in worldwide trading markets — resisted increased regulation and spent closely on lobbyists who worked to shape the 2010 Dodd-Frank Act and different autos for monetary reform. The Koch lobbyists centered, specifically, on provisions aimed toward regulating systemic threat within the financial markets, and the use of derivatives.
In that time, the marketplace for trading derivatives and swaps within the energy business has gone largely unregulated. And in previous Congresses, Koch lobbyists labored to preserve the exemption, identified because the “Enron Loophole,” that excused vitality commodity contracts from regulation.
But the Dodd-Frank law gave the Commodity Futures Buying and selling Fee and the Securities and Trade Fee the authority to craft new rules to topic traders in the vitality trade to elevated regulation and transparency, capital and margin necessities, and supervision by a derivatives clearing home. Koch lobbyists worked to favorably form the bill, and haven’t stopped working since it was handed.
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