|Founder(s)||Fred C. Koch|
|Headquarters||Wichita, Kansas, U.S.|
|Key people||Charles de Ganahl Koch
(Chairman & CEO)
David H. Koch
|Products||Asphalt, chemicals, commodities trading, energy, fibers, fertilizers, finance, minerals, natural gas, plastics, petroleum, pulp and paper, ranching|
|Revenue||US$ 115 billion (2012)|
|Owner(s)||Koch family (84%)|
|Subsidiaries||Georgia-Pacific, Invista, Flint Hills Resources|
Koch Industries, Inc. // is an American multinational corporation based in Wichita, Kansas, United States, with subsidiaries involved in manufacturing, trading and investments. Koch also owns Invista, Georgia-Pacific, Flint Hills Resources, Koch Pipeline, Koch Fertilizer, Koch Minerals and Matador Cattle Company. Koch companies are involved in core industries such as the manufacturing, refining and distribution of petroleum, chemicals, energy, fiber, intermediates and polymers, minerals, fertilizers, pulp and paper, chemical technology equipment, ranching, finance, commodities trading, as well as other ventures and investments. The firm employs 50,000 people in the United States and another 20,000 in 59 other countries.
In 2013, Forbes called it the second largest privately held company in the United States (after Cargill), with an annual revenue of $115 billion, down from the largest in 2006. If Koch Industries were a public company in 2013, it would have ranked 17 in the Fortune 500.
Fred C. Koch, after whom Koch Industries, Inc. is named, co-founded the company in 1940 and developed an innovative crude oil refining process. His sons, Charles Koch, chairman of the board and chief executive officer, and David H. Koch, executive vice president, are principal owners of the company after they bought out their brothers, Frederick and William "Bill" Koch, for $1.1 billion in 1983. Charles and David H. Koch each own 42% of Koch Industries, and Charles has stated that the company will publicly offer shares "literally over my dead body".
- 1 History
- 2 Subsidiaries
- 3 Environmental and safety record
- 4 Legal activity
- 5 Political activity
- 6 See also
- 7 References
- 8 External links
In 1925, Fred C. Koch joined MIT classmate Lewis E. Winkler at an engineering firm in Wichita, Kansas, which was renamed the Winkler-Koch Engineering Company. In 1927 they developed a more efficient thermal cracking process for turning crude oil into gasoline. This process threatened the competitive advantage of established oil companies, which sued for patent infringement. Temporarily forced out of business in the United States, they turned to other markets, including the Soviet Union, where Winkler-Koch built 15 cracking units between 1929 and 1932. During this time, Koch came to despise communism and Joseph Stalin's regime. In his 1960 book, A Business Man Looks at Communism, Koch wrote that he found the USSR to be "a land of hunger, misery, and terror." According to Charles G. Koch, "Virtually every engineer he worked with [there] was purged."
In 1940, Koch joined new partners to create a new firm, the Wood River Oil and Refining Company, which is today known as Koch Industries. In 1946 the firm acquired the Rock Island refinery and crude oil gathering system near Duncan, Oklahoma. Wood River was later renamed the Rock Island Oil & Refining Company. Charles G. Koch joined Rock Island in 1961, having started his career at the management consulting firm Arthur D. Little. He became president in 1966 and chairman at age 32, upon his father's death the following year.
The company was renamed Koch Industries in honor of Fred Koch, the year after his death. At that time, it was primarily an engineering firm with part interest in a Minnesota refinery, a crude oil-gathering system in Oklahoma, and some cattle ranches. In 1968, Charles approached Union Oil of California about buying their interest in Great Northern Oil Company and its Pine Bend Refinery but the discussions quickly stalled after Union asked for a large premium. In 1969, Union Oil began trying to market their interest in Great Northern by telling potential buyers that Koch's controlling interest could be thwarted by currying favor with another owner, J. Howard Marshall II. When Marshall discovered this he threw his lot in with Koch, they together acquired a majority interest in the company and ultimately bought Union's interest. Ownership of Pine Bend refinery led to several new businesses and capabilities, including chemicals, fibers, polymers, asphalt and other commodities such as petroleum coke and sulfur. These were followed by global commodity trading, gas liquids processing, real estate, pulp and paper, risk management and finance.
In 1970, Charles was joined at the family firm by his brother David H. Koch. Having started as a technical services manager, David became president of Koch Engineering in 1979.
Among Koch Industries' subsidiaries across various industries are:
Georgia-Pacific is a paper and pulp company that produces "Brawny" paper towels, "Angel Soft" toilet paper, "Mardi Gras" napkins and towels, "Quilted Northern" toilet paper and paper towels, "Dixie" paper plates, bowls, napkins and cups, "Sparkle" paper towels, and "Vanity Fair" paper napkins, bowls, plates and tablecloths. The Atlanta-based company has operations in 27 states.
Acquired from DuPont, INVISTA is a polymer and fibers company that makes "Stainmaster" carpet, and "Lycra" fiber, among other products.
Koch Pipeline Company LP
Koch Pipeline Company LP, which owns and operates 4,000 miles (6,400 km) of pipeline used to transport oil, natural gas liquids and chemicals. Its pipelines are located across Wisconsin, Minnesota, Texas, Missouri, Iowa, Oklahoma, Louisiana, and Alberta, Canada. The firm operates offices in Wichita, Kansas, St. Paul, Minnesota and Corpus Christi, Texas.
In 1946 Wood River Oil Co. (a precursor company to Koch Industries) purchased Rock Island Oil and Refining Co. As a part of the transaction, it acquired a crude-oil pipeline in Oklahoma. As a result of construction and investments, Wood River acquired other pipelines in the U.S. and Canada. “In the ensuing years,” according to Koch Pipeline's website, “the company bought, sold and built pipeline systems transporting crude oil and refined products, as well as natural gas, natural gas liquids and anhydrous ammonia (for fertilizer).” Koch Pipeline and its affiliates currently maintain a 4,000-mile network of pipelines.
Flint Hills Resources LP
Flint Hills Resources LP, originally called Koch Petroleum Group, is a major refining and chemicals company based in Wichita, Kansas. It sells products such as gasoline, diesel, jet fuel, ethanol, polymers, intermediate chemicals, base oils and asphalt. It operates oil refineries in six states. Flint Hills has chemical plants in Illinois, Texas and Michigan. The firm is also a major manufacturer of asphalt used for paving and roofing applications. It operates 13 asphalt terminals located in six states including Alaska (2 terminals), Wisconsin (2), Iowa (3), Minnesota (4), Nebraska (1), and North Dakota (1). The firm manages the purchasing of domestic crude oil from Texas and Colorado offices, has four ethanol plants across Iowa, operates three refineries in Alaska, Texas, and Minnesota, and has a refinery terminal in Alaska. The Minnesota refinery can process 320,000 barrels (51,000 m3) of crude a day, most of which comes from Alberta, Canada, and handles one quarter of all Canadian oil sands crude entering the U.S. It also operates fuel terminals in Wisconsin (4 locations), Texas (6), and one each in Iowa and Minnesota.
In March 1999, Koch Petroleum Group acknowledged that it had negligently dumped hundreds of thousands of gallons of aviation fuel into wetlands from its refinery in Rosemount, Minnesota, and that it had illegally dumped a million gallons of high-ammonia wastewater onto the ground and into the Mississippi River. Koch Petroleum paid a $6 million fine and $2 million in remediation costs, and was ordered to serve three years of probation.
In June 2003, the US Commerce Department fined Flint Hills Resources a $200,000 civil penalty. The fine settled charges that the company exported crude petroleum from the US to Canada without proper US government authorization. The Commerce Department’s Bureau of Industry and Security said from July 1997 to March 1999, Koch Petroleum (later called Flint Hills Resources) committed 40 violations of Export Administration Regulations.
In 2005, Koch's Flint Hills Resources refinery was recognized by the Environmental Protection Agency's Clean Air Awards program for reducing air emissions by 50 percent while expanding operations. The EPA has worked with Flint Hills Resources to develop "strategies for curtailing so-called 'upset' emissions, in what agency and company sources say could lead to guidance to minimize such emissions from petroleum refineries and other industrial facilities." The EPA described the process as a "model for other companies."
In 2006, Flint Hills Resources was fined nearly $16,000 by the EPA for 10 separate violations of the Clean Air Act at its Alaska oil refinery facilities, and required to spend another $60,000 on safety equipment needed to help prevent future violations.
Koch Fertilizer, LLC
Koch Fertilizer, LLC, which is one of the world’s largest makers of nitrogen fertilizers. Koch Fertilizer owns or has interests in fertilizer plants the United States, Canada, Trinidad and Tobago, Venezuela, and Italy, among others. Koch Fertilizer was formed in 1988 when the Koch companies purchased the Gulf Central Pipeline and ammonia terminals connected to the pipeline. The next year, the Koch Nitrogen Company was formed in order to market ammonia. The next few years saw purchases of various ammonia facilities in Louisiana, Canada, and elsewhere, and ammonia sales agreements with firms in Australia, the U.K., and other countries. The year 2010 saw the founding of Koch Methanol, LLC, and Koch Agronomic Services, LLC. In October 2010, a plant in Venezuela was nationalized by the government. In 2011, the firm acquired the British fertilizer firm J&H Bunn Limited.
Koch Agricultural Company
Koch Agricultural Company's Matador Cattle Company division operates three ranches totaling 425,000 acres (1,720 km2) located in Beaverhead, Montana, Matador, Texas and the Flint Hills of eastern Kansas. There are more than 15,000 head of cattle raised on the ranches.
The Matador Land and Cattle Company was founded in 1882 by Scottish investors, whose acquisition included 2.5 million acres in four Texas counties. In 1951, the company was sold to Lazard Frères & Co., which in turn sold some of the Texas land to Fred C. Koch. In 1952 Koch formed Matador Cattle Company, and later one of his companies purchased part of Matador Ranch, which was brought together with other Koch ranches in Montana and Kansas. Today, according to the ranch's website, it “is owned and operated by Matador Cattle Company, a division of Koch Agriculture Company, which is an indirect, wholly-owned subsidiary of Koch Industries.”
Koch's Matador Ranch in Texas earned the Lone Star Land Steward award, an award sponsored by Chevron, Toyota and the Texas and Southwestern Cattle Raisers Association for outstanding natural resource management in 2010.
Environmental and safety record
Bloomberg reports that from 1999 to 2003, Koch Industries was assessed "more than $400 million in fines, penalties and judgments." Daniel Indiviglio, in a reaction piece appearing in The Atlantic argues that the Bloomberg article is biased and misleading, asserting that the Bloomberg team "only found eight instances of alleged misconduct by a giant multinational over the span of 63 years".
In 2000, for its 300 reported oil spills which had taken place across six states, Koch paid the largest civil fine ever imposed on a company under any federal environmental law for the illegal discharge of crude oil and petroleum products. In a settlement with the U.S. Justice Department and the state of Texas, the company agreed to pay a "$30 million civil penalty, improve its leak-prevention programs and spend $5 million on environmental projects."
In 1996, an 8-inch-diameter steel LPG pipeline operated by Koch Pipeline Company ruptured near Lively, Texas and began leaking butane gas. The vapor cloud ignited when two residents drove their pickup truck through the flammable vapors to get to a neighbor's house to call 9-1-1 to report the leak. The two were killed in the explosion, and approximately 25 families were later evacuated from the neighborhood without injury. An investigation conducted by the NTSB found that the pipe section which failed had not been shown to have excessive corrosion in a 1995 inspection. Regulations at the time did not provide criteria for "adequate cathodic protection." Koch also stated that the bacteria-induced corrosion acted quicker than had ever previously been recorded in the industry. The explosion was the only event of its kind in the company’s history. In 1999, a Texas jury found that negligence had led to the rupture of the Koch pipeline and awarded the victims' families $296 million - "the largest compensatory damages judgment in a wrongful death case against a corporation in U.S. history".
In 2000, a federal grand jury returned a 97-count indictment against Koch Industries and its individual employees for environmental crimes relating to excess emissions of 85 metric tons of benzene, a known carcinogen. In 2001, Koch Industries was fined $20 million, of which $10 million was a criminal fine and $10 million to clean up the environment.
In 2008, Koch Industries discovered that the French affiliate Koch-Glitsch had violated bribery laws allegedly securing contracts in Algeria, Egypt, India, Morocco, Nigeria and Saudi Arabia after an investigation by Ethics Compliance officer, Egorova-Farines. After Koch Industries' investigative team looked into her findings, the four employees involved were terminated. A Bloomberg article states that Egorova-Farines reported her findings immediately, and even after Koch’s investigators substantiated the findings, her “superiors removed her from the inquiry in August 2008 and fired her in June 2009, calling her incompetent.” Koch Industries’ general counsel, Mark Holden, gave a different account of the events to Jennifer Rubin of the Washington Post. Holden stated that Egorova-Farines failed to promptly share the findings, choosing instead to give the information to a manager at Koch-Glitsch who was later fired for bribery. Rubin writes that, according to Holden, “Egorova-Farines was not fired but instead ran into performance problems, left the company to go on leave and never returned.” Egorova-Farines sued Koch-Glitsch for wrongful termination in France. Rubin writes that she lost and “was ordered to pay costs for bringing a frivolous case.”
In May 2011, a Utah judge dismissed a Koch Industries lawsuit alleging that Youth For Climate Truth, in releasing a fake Koch Industries press release, had infringed on Koch Industries' trademark.
According to the Center for Responsive Politics, many of Koch Industries' contributions have gone toward achieving legislation on energy issues, defense appropriations and financial regulatory reform. Koch Industries has been criticized by the environmentalist group Greenpeace for the role they allege the company plays in affecting climate change policy in the United States, along with other major producers of oil and petroleum like ExxonMobil and Chevron. Koch Industries replied saying the Greenpeace report "distorts the environmental record of our companies."[context?]
One policy proposal to control global warming that Koch Industries has come out against is Low Carbon Fuel Standards, such as were passed in 2007 in California. According to Koch Industries, "LCFS would cripple refiners that rely on heavy crude feedstocks to provide the transportation fuels that keep America moving."
The Koch Industries website includes an opinion piece from the Wall Street Journal by Charles Koch, one of the company's owners, "Why Koch Industries is Speaking Out." The article states: "Because of our activism, we've been vilified by various groups. Despite this criticism, we're determined to keep contributing and standing up for those politicians, like Wisconsin Gov. Scott Walker, who are taking these challenges [deficit spending by governments] seriously."
The company also funds the political action committee KochPAC.
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