Koch Industries

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Coordinates: 37°45′04″N 97°17′15″W / 37.751074°N 97.2873639°W / 37.751074; -97.2873639

Koch Industries, Inc.
Type Private
Industry Conglomerate
Founded 1940 (1940)
Founders Fred C. Koch
Headquarters Wichita, Kansas, U.S.
Area served Worldwide
Key people Charles Koch
(Chairman & CEO)
David H. Koch
(Executive VP)
Products Asphalt, chemicals, commodities trading, energy, fibers, fertilizers, finance, minerals, natural gas, plastics, petroleum, pulp and paper, ranching[1]
Revenue Increase US$ 115 billion (2012)[2]
Owners Koch family (84%)
Employees 70,000 (2013)[1]
Subsidiaries Georgia-Pacific, Invista, Flint Hills Resources
Website Kochind.com

Koch Industries, Inc. /ˈkk/ 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[1] of petroleum, chemicals, energy, fiber, intermediates and polymers, minerals, fertilizers, pulp and paper, chemical technology equipment, ranching,[3] finance,[citation needed] 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.[4]

In 2013, Forbes called it the second largest privately held company in the United States (after Cargill), with an annual revenue of $115 billion,[5][6][7] down from the largest in 2006. If Koch Industries were a public company in 2013, it would have ranked 17 in the Fortune 500.[8]

Fred C. Koch, after whom Koch Industries, Inc. is named, co-founded the company in 1940 and developed an innovative crude oil refining process.[9] 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.[10] Charles and David H. Koch each own 42% of Koch Industries. Charles has stated that the company would go public "over my dead body".[5]

History[edit]

Predecessor companies[edit]

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.[11][12] 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."[13] According to Charles G. Koch, "Virtually every engineer he worked with [there] was purged."[12]

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.[14] 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.[9][15]

Koch Industries[edit]

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 the Pine Bend Refinery in Minnesota, a crude oil-gathering system in Oklahoma,[12] and some cattle ranches.[16] 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.[11] 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.[14] 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.[11]

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.

Recent News[edit]

In April 2014, Koch Industries and the private equity arm of Goldman Sachs agreed to acquire printing ink producer Flint Group for around $3 billion.[17]

Subsidiaries[edit]

Among Koch Industries' subsidiaries across various industries[18] are:

Georgia-Pacific[edit]

Main article: Georgia-Pacific

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.[19]

INVISTA[edit]

Acquired from DuPont, INVISTA is a polymer and fibers company that makes "Stainmaster" carpet, and "Lycra" fiber, among other products.

Koch Pipeline Company LP[edit]

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).”[20] Koch Pipeline and its affiliates currently maintain a 4,000-mile network of pipelines.

Flint Hills Resources LP[edit]

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).[21] 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.[22] It also operates fuel terminals in Wisconsin (4 locations), Texas (6), and one each in Iowa and Minnesota.[23]

In March 1999, Koch Petroleum Group acknowledged that it had negligently discharged 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.[24]

In April 2001, the company reached a $20 million settlement in exchange for admitting to covering up environmental violations at its refinery in Corpus Christi, Texas.[25][26]

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.[27]

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.[28] 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."[29] The EPA described the process as a "model for other companies."[30]

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.[31]

In May 2014, Flint Hills Resources announced a definitive agreement to purchase PetroLogistics, a Houston-based manufacturer of chemical and polymer grade propylene.[32]

Koch Fertilizer, LLC[edit]

Koch Fertilizer, LLC, which is one of the world’s largest makers of nitrogen fertilizers.[33] Koch Fertilizer owns or has interests in fertilizer plants the United States, Canada, Trinidad and Tobago, Venezuela, and Italy, among others.[34][35] 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.[36] In 2011, the firm acquired the British fertilizer firm J&H Bunn Limited.

Koch Agricultural Company[edit]

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.[37]

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.”[38]

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.[39]

Environmental and safety record[edit]

Bloomberg reports that from 1999 to 2003, Koch Industries was assessed "more than $400 million in fines, penalties and judgments."[40] 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".[41]

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."[42][43][44][45][46][47]

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."[48] 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".[40][49]

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.[50][51] In 2001, Koch Industries was fined $20 million, of which $10 million was a criminal fine and $10 million to clean up the environment.[52]

Legal issues[edit]

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.[40] 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.”[40] Koch Industries’ general counsel, Mark Holden, gave a different account of the events to Jennifer Rubin of the Washington Post.[53] 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.”[53]

In May 2011, cyber-pranksters anonymously released a fake Koch Industries press release. Koch Industries filed suit claiming among other things that the cyber-pranksters had infringed on Koch Industries' trademark.[54] The identity of cyberpranksters were revealed to be Youth for Climate Truth.

Political activity[edit]

Koch Industries has spent more than $50 million to lobby in Washington between 2006 and October 2011, according to the Center for Responsive Politics.[40]

The company has opposed the regulation of financial derivatives and limits on greenhouse gases.[40] It sponsors free market foundations and causes.[55][56]

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.[57] 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.[58][59] Koch Industries replied saying the Greenpeace report "distorts the environmental record of our companies."[60][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.[22] According to Koch Industries, "LCFS would cripple refiners that rely on heavy crude feedstocks to provide the transportation fuels that keep America moving."[61]

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."[62] 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.

See also[edit]

References[edit]

  1. ^ a b c "Koch Industries Welcomes 2009 Leadership Kansas Class" (PDF). Retrieved 2011-07-23. 
  2. ^ "Koch Overview". kochind.com. 3 November 2011. Retrieved 2011-07-23. 
  3. ^ "Koch Industries, Inc. – Industry Areas". Kochind.com. Retrieved 2011-07-23. 
  4. ^ Continetti, Matthew (April 4, 2011). "The Paranoid Style in Liberal Politics". The Weekly Standard. 
  5. ^ a b Fisher, Daniel (Mar. 13, 2006). "Mr. Big", pp. 24–26. Forbes. Online summary for calendar year 2005 at [1].
  6. ^ "America's Largest Private Companies". Forbes. 8 November 2007. Retrieved 2011-07-23. 
  7. ^ "Forbes rankings for 2009". Forbes.com. 2009-10-28. Retrieved 2011-07-23. 
  8. ^ "The Principled Entrepreneur". The American. July–August 2007. Retrieved 23 February 2010. 
  9. ^ a b "Summary of Koch Industries History". sec.gov. U.S. Securities and Exchange Commission. 14 November 2005. Retrieved 18 February 2010. 
  10. ^ The Top 10 Forbes Asia October 19, 2009
  11. ^ a b c Koch, Charles C. (2007). The Science of Success: How Market-Based Management Built the World's Largest Private Company. John Wiley & Sons, Inc. p. 6. ISBN 978-0-470-13988-2. 
  12. ^ a b c Daniel Fisher (13 March 2006). "Mr. Big". Forbes. Archived from the original on 8 December 2012. 
  13. ^ Koch, Fred C. (1960). A Business Man Looks at Communism. Wichita, Kansas. 
  14. ^ a b J. Howard, Marshall II (1994). Done in Oil: An Autobiography. College Station: Texas A&M University Press. p. 254. ISBN 0-89096-533-1. 
  15. ^ Bruce Upbin; Brandon Copple (14 December 1998). "Creative destruction 101". Forbes. 
  16. ^ John, Lincoln (1989). Rich Grass and Sweet Water. College Station: Texas A&M University Press. ISBN 0-89096-387-8. 
  17. ^ "Koch, Goldman agree to buy ink maker Flint in $3 billion deal". Reuters. 10 April 2014. Retrieved 11 April 2014. 
  18. ^ Koch Industries website, Industry Areas, accessed Aug 25 2010,
  19. ^ Georgia Pacific website, accessed March 11, 2011, Georgia-Pacific Company Overview
  20. ^ "History". Koch Pipeline Company, L.P. Retrieved 12 April 2012. 
  21. ^ Flint Hills Resources website, accessed March 11, 2011, FHR Asphalt
  22. ^ a b Dembicki, Geoff (March 22, 2011). "The Kochs: Oil Sands Billionaires Bankrolling US Right". The Tyee (Vancouver, B.C.). Retrieved 2011-08-21. 
  23. ^ Koch Industries website, accessed March 11, 2011, http://www.fhr.com/newsroom/contact.aspx?ID=9
  24. ^ "Koch Petroleum Group Sentenced for Minnesota Pollution" (Press release). Environmental Protection Agency. 9 March 2000. Retrieved 2010-06-14. 
  25. ^ "Koch Pleads Guilty to Covering up Environmental Violations at Texas Oil Refinery". justice.gov. U.S. Department of Justice. 9 April 2001. Retrieved 30 May 2010. 
  26. ^ Don Richards (22 January 2001). "DOJ Reduces Indictments Against Koch Industries". ICIS. 
  27. ^ US Dept of Commerce, Commerce Dept Fines Kansas Firm, June 3, 2003 press release, http://www.bis.doc.gov/news/2003/kansasfirmfined.htm[dead link]
  28. ^ Jessica Harper (18 November 2009). "Flint Hills is coming out of murky waters". Dakota County Tribune (Dakota County, Minnesota). 
  29. ^ "Inside EPA's Clean Air Report". InsideEPA. Retrieved 23 April 2011. 
  30. ^ "Flint Hills Resources, LP Agrees to Transition Its Texas Flexible Permits to Federally Approved Clean Air Act Permits – Transition affects facilities in Corpus Christi, Port Arthur and Longview". EPA. Retrieved 27 April 2011. 
  31. ^ EPA Press Release, EPA Fines Flint Hills Resources Alaska, Dec 13 2006, accessed Aug 25 2010, http://yosemite.epa.gov/opa/admpress.nsf/b0789fb70f8ff03285257029006e3880/6b191200b3ce87e2852572430062f987!OpenDocument
  32. ^ "PetroLogistics LP Agrees To Be Acquired By Flint Hills Resources, LLC". HOUSTON and WICHITA, Kan.: PRNewswire. 2014-05-28. Retrieved 2014-05-28. 
  33. ^ Koch Fertilizer website, accessed March 11, 2011, http://www.kochfertilizer.com/
  34. ^ Yasha Levine (1 September 2010). "7 Ways the Koch Bros. Benefit from Corporate Welfare". The New York Observer. 
  35. ^ "Fertilizers". 
  36. ^ "Koch Industries says no word on Venezuela takeover". Reuters. 11 October 2010. 
  37. ^ Koch Industries website, accessed March 11, 2011, Ranching
  38. ^ "The History of Matador Ranch". Matador Ranch. Retrieved 12 April 2012. 
  39. ^ "Lone Star Land Steward Awards Winners Announced" (Press release). Texas Parks & Wildlife. 6 May 2010. Retrieved 2010-06-14. 
  40. ^ a b c d e f Loder, Asjylyn; David Evans (3 October 2011). "Koch Brothers Flout Law With Secret Iran Sales". Bloomberg Markets Magazine. Retrieved 5 October 2011. 
  41. ^ Bloomberg's Exposé on Koch Industries Reveals ... What Exactly? Daniel Indiviglio| 4 October 2011
  42. ^ http://www.epa.gov/compliance/resources/cases/civil/cwa/kochcwa.html
  43. ^ "Koch Brothers Flout Law Getting Richer With Secret Iran Sales". Bloomberg. 
  44. ^ http://newsok.com/3-agencies-file-suit-against-koch-government-claims-300-oil-spills-occurred/article/2498899
  45. ^ "Koch Pipeline Company L.P. - Newsroom". Kochpipeline.com. 2000-01-13. Retrieved 2011-07-23. 
  46. ^ By Ralph K.M. Haurwitz and Jeff Nesmith (2001-07-23). "Austin news, sports, weather, Longhorns, business". Statesman.com. Retrieved 2011-07-23. 
  47. ^ "Koch Agrees to $35 Million Settlement in Two Environmental Cases". Safety Online. 17 January 2000. 
  48. ^ NTSB report PIPELINE ACCIDENT SUMMARY REPORT, PIPELINE RUPTURE, LIQUID BUTANE RELEASE, AND FIRE.LIVELY, TEXAS AUGUST 24, 1996 pages 12-13
  49. ^ National Transportation Safety Board (6 November 1998). "Pipeline Rupture, Liquid Butane Release, and Fire Lively, Texas August 24, 1996". Retrieved 8 March 2013. 
  50. ^ http://www.justice.gov/opa/pr/2000/September/573enrd.htm
  51. ^ "U.S. Indicts Koch Industries on Pollution Violations in Texas". The New York Times. 29 September 2000. 
  52. ^ KOCH PETROLEUM FINED $20 MILLION IN POLLUTION CASE The New York Times April 10, 2001
  53. ^ a b Rubin, Jennifer (3 October 2011). "Koch responds to Bloomberg". The Washington Post. Retrieved 5 October 2011. 
  54. ^ "SUMMARY JUDGMENTS: Our daily legal-news aggregator for May 11, 2011" Thompson Reuters News and Insight
  55. ^ Secretive Republican Donors Are Planning Ahead by Kate Zernike published October 19, 2010, New York Times
  56. ^ Pulling the Wraps Off Koch Industries By LESLIE WAYNE; Published: November 20, 1994; New York Times; " Their donations reflect their belief in libertarian and free market philosophies or their personal interests."
  57. ^ OpenSecrets, Summary of Koch Industries
  58. ^ Vidal, John (30 March 2010). "US oil company donated millions to climate skeptic groups, says Greenpeace". The Guardian (London). 
  59. ^ "Secretly Funding the Climate Denial Machine". Global Warming. Washington: Greenpeace. 2010-03-29. Retrieved 2010-04-01. 
  60. ^ Covert Operations The billionaire brothers who are waging a war against Obama. by Jane Mayer . newyorker.com . August 30, 2010
  61. ^ http://www.kochind.com/ViewPoint/lowCarbon.aspx Low Carbon Fuel Standards
  62. ^ Why Koch Industries is Speaking Out, Wall Street Journal, March 1, 2011

External links[edit]