Koch industries web of influence
Koch spends tens of millions trying to shape federal policies that affect their global business empire. The Center for Public Integrity digs deep into the Koch's influence and finds it extends beyond the highest levels of U.S. government to Canada and Europe.
The Kochs primarily donate to conservative candidates and causes but have given more than $1 million in the last decade to the liberal Brookings Institution. And among politicians they supported last year was Andrew Cuomo, a Democrat elected governor of New York with $87,000 from the Koch family.
The emergence of “the Koch web — political action, campaign giving, funding of groups engaged in political action and campaigns, conferences to expand political and policy influence — is a striking 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 more than two weeks, to comment on the firm’s lobbying efforts. Koch’s representatives declined the opportunity.
But in a March 1 column in The Wall Street Journal, Charles Koch defended his and his company’s practices. “As a matter of principle our company has been outspoken in defense of economic freedom,” Koch wrote. “This country would be better off if every company would do the same. Instead, we see far too many businesses that paint their tails white and run with the antelope.”
The Koch brothers are renowned as free market libertarians. But as a major trader in energy and financial markets, Koch Industries also knows how to hedge.
As its corporate officials and publicists decried ethanol as a costly government boondoggle, the Kochs bought four ethanol plants in Iowa in recent months, with a combined annual capacity of 435 million gallons. In Washington (where ethanol tax subsidies cost the Treasury some $6 billion annually) Koch representatives lobbied Congress on ethanol and other biofuel subsidies.
“New or emerging markets, such as renewable fuels, are an opportunity for us to create value within the rules the government sets,” Flint Hills Resources President Brad Razook told his employees in the January company newsletter.
Koch Industries’ status as an ethanol player goes beyond its new Iowa plants. Koch blends ethanol and gasoline nearby, in its Minnesota refinery. By its own account, the company’s subsidiaries, Flint Hills and Koch Supply & Trading, currently buy and market about one-tenth of all the ethanol produced in the United States.
The Kochs seem to have recognized that their actions might seem hypocritical and in a January 2011 newsletter the company tried to explain things to employees who have been “scratching their heads and wondering: what is going on?”
“After all, ethanol production is heavily subsidized, mandated and protected,” Koch Industries acknowledged, “while Koch companies openly oppose such government programs.”
Realism had won out. The company has the “capabilities necessary to be successful in the ethanol industry,” the newsletter explained. The new ethanol plants “fit well geographically with several other FHR assets, including fuel … terminals, a widespread distribution network that includes Iowa, and the Pine Bend [Minnesota] refinery.”
“We are not going to place our company and our employees at a competitive disadvantage by not participating in programs that are available to our competitors,” 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, 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-trade solution to global warming for the United States, Koch makes money trading emissions credits under a similar program in Europe.
Nor is ethanol the only form of corporate welfare Koch Industries supports. As it ventures into biofuel production, and uses alternative fuels to power its plants, the company has its lobbyists working “to expand the [tax] credit for renewable electricity production” made from biomass.
Georgia-Pacific, the company reported in 2008, was responsible for more than 10 percent of all the renewable biomass electricity generated in 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, known for manufacturing Lycra, Stainmaster carpets and other textiles and fabrics. In 2005, as part of the same corporate diversification and expansion strategy, Koch Industries bought the giant wood and paper products firm, Georgia-Pacific, adding Brawny paper towels, Angel Soft toilet paper, Dixie cups and dozens of factories and plants to its holdings.
Koch has since worked, on Capitol Hill and in various regulatory proceedings, to dilute or halt tighter federal regulation of several toxic byproducts that could affect its bottom line, including dioxin, asbestos and formaldehyde, all of which have been linked to cancer.