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Koch Industries’ Net Of Influence
And when Congress moved to strengthen regulation of the monetary markets after current collapses, Koch Industries — a major commodities and derivatives trader — deployed a phalanx of lobbyists to resist proposed adjustments.
What’s not so properly-known is the activity of Koch Industries in the trenches in Washington, where a Middle for Public Integrity examination of lobbying disclosure recordsdata and federal regulatory data reveals a lobbying steamroller for the company’s interests, at instances in battle with its public pose.
The money 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 following two years to influence federal coverage, as the company’s lobbyists and officials sought to mold, intestine or kill more than a hundred potential bills or rules.
But Koch’s diversified interests, and thus its lobbying activities, lengthen far past petroleum. Koch companies commerce carbon emission credit in Europe and derivatives within the U.S. They make jet gasoline 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.
According to the newest Forbes journal rankings, Koch had $100 billion in revenues in 2009 — on a par with corporate giants like IBM or Verizon — and stood a close second to Cargill Inc. on the listing of the largest personal US companies. The firm has 70,000 workers, and a presence in 60 countries and almost each state.
Koch’s resolution scully oil tank gauges to pour thousands and thousands into lobbying Washington has put them high on the listing of firms whose lobbyists work the corridors of the nation’s capital. Final 12 months, Koch Industries ranked in the highest five — roughly on a par with BP and Royal Dutch Shell — in lobbying bills amongst oil and gas corporations, in line with the middle for Responsive Politics.
These totals do not include the work of the trade associations that Koch uses to symbolize its pursuits in Washington. There’s a major business group referred to as the Nationwide Petrochemical & Refiners Affiliation, and obscure organizations just like the green-sounding National Environmental Growth Association’s Clean Air Project, whose membership lists Koch and two of its subsidiaries (Georgia-Pacific and Invista) with a dozen industrial giants like ExxonMobil Corp. Common 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 House 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 agency workers.
Gregory Zerzan is an efficient instance. Zerzan was a senior counsel for the Home Financial Providers Committee earlier than serving as an acting assistant secretary and deputy assistant secretary at the U.S. Treasury Division during the George W. Bush administration. Zerzan then worked as counsel and head of world public coverage for the Worldwide Swaps and Derivative Affiliation before becoming a member of Koch Industries as a lobbyist.
Koch clout is augmented by marketing campaign donations to events and candidates for federal workplace — $11 million within the last two decades, in accordance with the middle for Responsive Politics — and generous gifts from three family foundations to universities and conservative organizations and interest teams.
In accordance with IRS records, the Koch foundations are essential donors (having given $3.Four million from 2007 by 2009) to the Individuals for Prosperity Basis, a nonprofit recognized for its support of the Tea Celebration motion. Among the many organizations which have each obtained a million dollars or more over the past 5 years from Koch foundations are the Cato Institute, the Heritage Basis, and two conservative suppose tanks at George Mason College in Virginia: the Institute for Humane Studies and the Mercatus Heart.
The Kochs primarily donate to conservative candidates and causes but have given greater than $1 million in the final decade to the liberal Brookings Establishment. And amongst politicians they supported last year was Andrew Cuomo, a Democrat elected governor of recent York with $87,000 from the Koch family.
The emergence of “the Koch web — political motion, campaign giving, funding of groups engaged in political action and campaigns, conferences to broaden political and policy affect — is a striking phenomenon,” said Norman Ornstein, a scholar at the conservative American Enterprise Institute.
The middle asked Koch Industries and its lobbyists in Washington, in a dozen emails and phone calls over greater than two weeks, to touch upon the firm’s lobbying efforts. Koch’s representatives declined the opportunity.
But in a March 1 column in the Wall Road Journal, Charles Koch defended his and his company’s practices. “As a matter of principle our firm has been outspoken in protection of economic freedom,” Koch wrote. “This country would be better off if each firm would do the same. As a substitute, we see far too many businesses that paint their tails white and run with the antelope.”
The Koch brothers are famend as free market libertarians. But as a serious trader in vitality and monetary markets, Koch Industries also is aware of easy methods to hedge.
“New or emerging markets, resembling renewable fuels, are a chance for us to create value within the foundations the federal government units,” Flint Hills Resources President Brad Razook told his employees within the January firm e-newsletter.
Koch Industries’ status as an ethanol participant 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 Supply & Buying and selling, presently purchase and market about one-tenth of all of the ethanol scully oil tank gauges produced in the United States.
The Kochs seem to have recognized that their actions may appear hypocritical and in a January 2011 newsletter the company tried to clarify issues to staff who’ve been “scratching their heads and questioning: what is going on ”
“After all, ethanol manufacturing is heavily subsidized, mandated and protected,” Koch Industries acknowledged, “while Koch firms openly oppose such government programs.”
Realism had won out. The company has the “capabilities mandatory to be successful in the ethanol business,” the publication defined. The new ethanol plants “fit nicely geographically with several different FHR assets, including gas … terminals, a widespread distribution network that features Iowa, and the Pine Bend [Minnesota] refinery.”
“We usually are not going to place our company and our workers at a competitive disadvantage by not taking part in packages that are available to our opponents,” Razook assured Koch staff.
The corporate 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 assist fill the U.S. Strategic Petroleum Reserve. And though it opposes a cap-and-trade resolution to world warming for the United States, Koch makes money trading emissions credits underneath a similar program in Europe.
Nor is ethanol the only type of corporate welfare Koch Industries supports. Because it ventures into biofuel production, and uses different fuels to power 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 accountable for more than 10 p.c of all the renewable biomass electricity generated within the U.S.
In 2004 Koch Industries purchased Invista, a subsidiary of DuPont, known for manufacturing Lycra, Stainmaster carpets and different textiles and fabrics. In 2005, as part of the identical corporate diversification and enlargement technique, Koch Industries purchased the enormous wooden and paper products agency, Georgia-Pacific, adding Brawny paper towels, Angel Delicate toilet paper, Dixie cups and dozens of factories and plants to its holdings.
Dioxin is launched from incinerators, hazardous waste treatment, pesticide manufacturing, paper plants and different sources. With 165 manufacturing amenities throughout the United States, Georgia-Pacific “has a big interest in and will likely be significantly impacted,” by the EPA’s decisions on dioxin, Koch officials instructed the company in April 2010.
Hundreds of staff would have to be employed, and trucks and earth-transferring equipment leased or bought. And “of the limited variety of hazardous waste landfills working in the United States, very few are prepared to accept dioxin-containing soil,” the corporate noted.
“Treatment and disposal of dioxin-containing soil is already a challenging, costly and capacity-restricted problem that might only get worse if extra volumes have been generated.”
Courtesy of the middle for Responsive Politics
The Environmental Working Group and numerous public health organizations, in the meantime, chastised the EPA for dragging its feet, and reminded the agency panel that one other arm of the federal government, the U.S. Nationwide Toxicology Program, and the World Health Group have already classified dioxin as a recognized human carcinogen.
“Twenty-five years after publishing its first assessment of dioxin … the EPA has yet to establish a safe every day dose for human exposure” for “one of the most-studied of all chemical pollutants,” the EWG told the panel. “It is EPA’s accountability to handle this drawback with resolve … with out regard to pressure from particular interests who stand to learn financially from weak standards and laws.”
“GP strongly disagrees with the [Nationwide Toxicology Program] panel’s conclusion to list formaldehyde, a natural part 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 management requirements are being mandated on sources which have insignificant levels 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 tougher air pollution standards on the firm’s manufacture of resins and formaldehyde.
By its Flint Hills Resources subsidiary, Koch Industries operates a refinery near 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 would be infeasible,” the company argued in 2006, when the EPA proposed new clear air limits on benzene. “Benzene reductions to levels proposed on this rule would either require in depth and economically prohibitive capital upgrades at our facility or would end in a significant reduction in gasoline manufacturing.”
When Koch Industries purchased Georgia-Pacific, it inherited a titanic liability concerning asbestos. Georgia-Pacific had used asbestos to make gypsum-based drywall products, and beginning in the 1980s the agency became a goal for more than 340,000 claims by plaintiffs who said they suffered lung and other diseases, together with mesothelioma, a deadly cancer. By 2005, the corporate was spending $200 million a 12 months and had to construct 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 legal system … that always contain people who should not sick … all due to over-zealous litigators and a legal system that provides them perverse incentives.”
The number of recent claims has dropped with tougher federal safety requirements. But in the 110th Congress Koch lobbyists nonetheless sought to sway members on legislative proposals intending to restrict the usage of asbestos and enhance public knowledge, even Senate Resolution 462, which known as for a “National Asbestos Awareness Week.”
It’s in the Kochs’ commercial interest to preserve America’s reliance on carbon-based energy sources. Regardless of recent diversification, Koch stays a serious petrochemical firm with refineries in North Pole, Alaska; Corpus Christi, Texas; 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 is not shocking 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 authorities mandates on carbon discount provisions … [and] provisions related to local weather change, and oppose entire invoice,” Koch lobbyist Robert P. Corridor wrote, listing his targets 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 Resources, Koch Carbon, Koch Nitrogen — peppered the EPA and members of Congress with objections. Several worked on measures that may strip the EPA of the ability to regulate greenhouse gases through the Clean Air Act.
Koch-supported groups just like the National Environmental Growth Association’s Clean Air Venture joined the trouble. In a latest meeting, 5 Koch representatives joined colleagues from ExxonMobil, ConocoPhillips, Eli Lilly and other NEDA-CAP members to register concerns with EPA officials over the proposed necessary reporting rule for greenhouse gas emissions, the document reveals.
Koch’s lobbying efforts on climate change are matched by a public campaign. By way of three foundations — the Claude R. Lambe Foundation, the Charles G. Koch Basis and the David H. Koch Basis — funded and administered by Koch members of the family and staff, the Kochs have donated several million dollars in recent times to assume tanks and teams that have sought to discredit climate science and EPA’s efforts to reduce greenhouse gases.
“Why are such unproven or false claims promoted ” the Koch Industries firm e-newsletter, Discovery, asked in an article on international warming entitled, “Blowing Smoke.”
“Scientists have … perverted the peer assessment process, doing every part attainable to forestall opinions opposite to the alarmist view from being heard,” the article mentioned. People should adapt to world warming, not attempt to gradual or cease it, the e-newsletter beneficial. “Since we can’t management Mother Nature, let’s determine tips on how to get along together with her modifications.”
In early March, members of the Republican-led Home Power and Commerce Committee — many of whom had acquired marketing campaign contributions from Koch workers 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 Home leaders.
Of specific concern to Koch lobbyists in Washington, in accordance with their disclosure forms, are measures to encourage or require the usage of low-carbon fuels. These sources of power, of their manufacture and use, contribute lower than other 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 company says, with a buying and selling and provide workplace 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 process 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 more greenhouse gasoline emissions” and so low-carbon standards “would cripple refiners that rely on heavy crude feedstocks,” the Koch Industries web site notes. “It could be particularly devastating for refiners that use heavy Canadian crude.”
When lawmakers in Washington and states like California sought to deal with world 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 sequence of measures to sluggish climate change had been launched by former Gov. Arnold Schwarzenegger, Koch joined the combat to defeat them.
A Koch subsidiary, Flint Hills Assets, donated one million dollars in support of Proposition 23, an unsuccessful attempt funded by Koch and other vitality corporations final 12 months to stall implementation of the low-carbon standards and other remedial local weather measures in California.
Koch lobbyists spend much of their time, in accordance with their disclosure reports, combating makes an attempt by members of Congress to curb value-gouging, windfall revenue-taking and speculation in the oil trade. To this same finish, Koch officials labored to dilute a 2009 Federal Trade Fee rule governing manipulation of the power markets.
In the meantime, Koch has lobbied to preserve some of the oil industry’s coveted tax breaks and credit.
One benefit is known as the Part 199 deduction, approved by Congress several years in the past to help the onerous-pressed U.S. manufacturing sector. In light of the oil and fuel industry’s hearty income, the Obama administration and members of Congress have sought to finish the Section 199 subsidy for vitality firms and save the U.S. Treasury $14 billion over 10 years. But Koch lobbyists and trade associations have labored to preserve the deduction.
One other industry tax break that drew the support of Koch representatives is the venerable “LIFO” (final-in, first-out) accounting rule. It permits power firms effectively to lift the worth of their current stock (and thus pay decrease taxes on earnings from gross sales) when the price of oil soars.
Under LIFO, the oil in a company’s stock, no matter what it truly cost, is valued at the cost of the final-acquired (usually 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 objective last yr, and the Koch brothers have been among an elite, comparatively few Americans who profited when the revenue tax cuts for these incomes more than $250,000 a 12 months have been extended in a yr-end deal.
One other of the Bush tax breaks had particular that means for the Koch brothers. Charles Koch, 75, and David Koch, 70, are tied for fifth place, every with a net scully oil tank gauges value of $21.5 billion, in the newest Forbes rankings of the wealthiest Americans. Included in the deal to increase the Bush tax cuts was a proposal to cut back the federal estate tax. The Kochs have, historically, been players in an ongoing effort by wealthy families to curb or eradicate the tax on inheritances.
The ultimate tax deal reached by the White House and Republicans in Congress in December set the estate tax at 35 %. That makes the brand new charge significantly more favorable than through the Clinton (55 percent) and even the Bush (forty five %) years, and the lowest it’s been since the nineteen thirties. If one of the patriarchs ought to die while the brand new rate is in impact, it would save the Koch household billions of dollars.
Another main preoccupation of Koch Industries lobbyists during latest sessions of Congress was the Chemical Facility Anti-Terrorism Standards, a federal effort to determine and regulate chemical facilities that could possibly be vulnerable to terrorist attacks.
In 2009, the House passed laws that may toughen the requirements, and require manufacturers like Koch to use safer chemicals and processes so as to add another level of safety and reduce the effects of toxic releases from terrorist assaults or catastrophic accidents.
Koch opposed the changes, claiming they “increase value and regulatory burden whereas shifting focus away from security and towards environmental considerations.” The chemical security provisions had been listed as lobbying targets by Koch representatives in 2007, 2008, 2009 and 2010.
According to EPA information, Koch has four facilities that use chlorine dioxide—in Palatka, Fla.; Zachary, La.; New Augusta, Miss.; and Camas, Wash. It has an Invista plant that makes use of formaldehyde in LaPorte, Texas. Its Flint Hills refinery in Corpus Christi, Texas, makes use of hydrofluoric acid in refining gasoline.
Mandatory use of safer technology would “result in even more job losses and higher shopper prices as American manufacturers battle to conform,” Koch contends in an announcement on the chemical security standards on its webpage. The Home laws would “restructure, and sure add further price to safety applications presently in place for Koch companies’ facilities.”
Koch pulls no punches when assigning the blame for the great monetary meltdown of 2008: It was the government’s fault, not the markets.
“Almost all of those problems (and far of the current 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 isn’t stunning, then, that Koch Industries — a significant player in worldwide trading markets — resisted elevated regulation and spent heavily on lobbyists who worked to form the 2010 Dodd-Frank Act and different automobiles for monetary reform. The Koch lobbyists centered, in particular, on provisions aimed toward regulating systemic threat in the monetary markets, and the use of derivatives.
In that point, the market for buying and selling derivatives and swaps within the energy business has gone largely unregulated. And in past Congresses, Koch lobbyists labored to preserve the exemption, identified because the “Enron Loophole,” that excused vitality commodity contracts from regulation.
However the Dodd-Frank law gave the Commodity Futures Buying and selling Commission and the Securities and Alternate Fee the authority to craft new guidelines to subject traders in the energy business to elevated regulation and transparency, capital and margin requirements, and supervision by a derivatives clearing house. Koch lobbyists labored to favorably form the bill, and have not stopped working since it was handed.
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