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Koch, Inc.

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Koch, Inc.
Company typePrivate
IndustryConglomerate
Founded1940
HeadquartersWichita, Kansas, USA
Area served
Worldwide
Key people
Charles G. Koch (Chairman, CEO, & 42% owner)
David H. Koch (Executive VP, & 42% owner)
ProductsPetroleum
Chemicals
Energy
Asphalt
Natural gas
Plastics
Fibers
Minerals
Fertilizers
Ranching
Pulp and paper
Finance
Commodities trading[1]
RevenueIncreaseUS$100 billion (2009)[citation needed]
Number of employees
80,000 (2009)[1]
WebsiteKochind.com

Koch Industries, Inc. (pronounced /ˈkoʊk/) is an American private energy conglomerate based in Wichita, Kansas, with subsidiaries involved in manufacturing, trading and investments. Koch also owns Invista, Georgia-Pacific, Flint Hill Resources, Koch Pipeline, Koch Petroleum Group, Koch Fertilizer, Koch Engineering, Koch Minerals and Matador Ranching 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,[2] finance, commodities trading, as well as other ventures and investments.

In 2008, Forbes called it the second largest privately held company in the United States (after Cargill) with an annual revenue of about $98 billion,[3][4][5] down from the largest in 2006. If Koch Industries were a public company in 2007, it would rank about sixteenth in the Fortune 500.[6]

Fred C. Koch, for whom Koch Industries, Inc. is named, co-founded the company in 1940 and developed an innovative crude oil refining process.[7] His sons, Charles G. Koch, chairman of the board and chief executive officer, and David H. Koch, executive vice president, are principal owners of the company. Charles and David Koch each own 42% of Koch Industries, and Charles has stated that the company will publicly offer shares "literally over my dead body".[3]

Koch Industries is also known for its sponsorship of free-market foundations and causes.[8]

Corporate history

Predecessor companies

In 1925, Fred C. Koch joined an 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 Josef Stalin's regime.[9][10] In his 1960 book, A Business Man Looks at Communism, Koch wrote that he found the Soviet Union to be "a land of hunger, misery, and terror."[11] According to Charles Koch, "Virtually every engineer he worked with [there] was purged."[10]

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.[12] Charles 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.[7][13]

Koch Industries

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,[10] and some cattle ranches.[14] 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.[9] 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.[12] 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.[9]

In 1970, Charles was joined at the family firm by his brother David Koch. Having started as a technical services manager, David became president of Koch Engineering in 1979.[9]

Subsidiaries

Among Koch Industries’ better known subsidiaries across various industries[15] are:

  • Georgia Pacific paper and pulp company, maker of Brawny paper towels, Angel Soft toilet paper, Mardi Gras napkins and towels and Quilted Northern toilet paper.
  • Invista, a fiber and resin company that makes Stainmaster carpet, and Lycra fiber, among other products.
  • Koch Pipeline Company LP, that owns and operates 4,000 miles of pipeline used to transport oil, natural gas liquids and chemicals.
  • Flint Hill Resources LP, that operates oil refineries in six states and has interests in a Belgian plant.

Environmental and safety record

Koch Industries' subsidiaries are regulated by many local, state and federal agencies around the globe.

Environmental designations

In 2005, Koch's Flint Hills Resources refinery was recognized by the EPA's Clean Air Awards program for reducing air emissions by 50 percent while expanding operations.[16] Koch Industries' headquarters in Wichita has been certified for meeting the Energy Star standards for superior energy efficiency and environmental protection. As of 2010 it is the only Wichita office building to be so recognized.[17][18] A Tulsa, Oklahoma site of the Koch-owned John Zink Company site was part of the EPA's National Environmental Performance Track program from 2003 until 2009 when the program was suspended.[19][20]

Koch's Matador Ranch in Texas earned the Lone Star Land Steward award for outstanding natural resource management in 2010.[21] The Montana ranch has earned several environmental stewardship awards, including the EPA Regional Administrator's award.[22]

In 2010, Koch Industries was ranked 10th on the list of top US corporate air polluters, the “Toxic 100 Air Polluters,” by the Political Economic Research Institute at the University of Massachusetts Amherst.[23][24]

Fines

In March 1999, Koch Petroleum Group, a Koch Industries subsidiary, pled guilty to charges that it had negligently allowed aviation fuel to leak into waters near the Mississippi River 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 the Dakota County Park System a $6 million fine and $2 million in remediation costs, and was ordered to serve three years of probation.[25]

In 1999, a federal jury found that Koch Industries had stolen oil from government and American Indian lands, had lied about its purchases more than 24,000 times, and was fined $553,504.[26]

In January 2000, Koch Industries subsidiary, Koch Pipeline, agreed to a $35 million settlement with the U.S. Justice Department and the State of Texas. This settlement, including a $30 million civil fine, was incurred for the firm's three hundred oil spills in Texas and five other states going back to 1990.[27] The spills resulted in more than three million gallons of crude oil leaking into ponds, lakes, streams and coastal waters.[28]

In 2001, the company reached two settlements with the government. In April, the company reached a $20 million settlement in exchange for admitting to covering up environmental violations at its refinery in Corpus Christi, Texas.[29][30] That May, Koch Industries paid $25 million to the federal government to settle a federal lawsuit that found the company had improperly taken more oil than it had paid for from federal and Indian land.[31][32]

In June 2003, the US Commerce Department fined Koch Industries subsidiary Flint Hill 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 Hill Resources) committed 40 violations of Export Administration Regulations.[33]

In 2006, Koch Industries’ subsidiary Flint Hill 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.[34]

In 2009, Koch subsidiary Invista agreed to pay a $1.7 million civil penalty and spend up to $500 million to correct self-reported environmental violations at its facilities in seven states.[35][36] Prior to the settlement, the company had disclosed to the EPA more than 680 violations after auditing 12 facilities acquired from DuPont in 2004.[37][38]

Lively Texas accident

On August 24, 1996, a pipeline carrying butane gas operated by Koch Industries subsidiary Koch Pipeline Group ruptured near Lively, Texas, a small rural town about 40 miles southwest of Wichita Falls. The highly flammable butane vapor ignited as a pickup truck carrying a young woman and man, the two drove into it in their residential area, and the resulting fire killed them. The National Transportation Safety Board determined that the “probable cause of the accident was the failure of Koch to adequately protect its pipeline from corrosion.” As a result of NTSB’s investigation, it required Koch Pipeline to make a number of safety improvements and to conduct public education.[39]

Political activity

From 2005 to 2008, Koch industries donated $5.7 million on political campaigns and $37 million on direct lobbying to support fossil fuel industries.[citation needed] Greenpeace says that Koch Industries donated nearly $48m to climate opposition groups between 1997-2008.[40] According to Greenpeace, Koch Industries is the major source of funds of what Greenpeace calls "climate denial".[41] Koch Industries and its subsidiaries spent more than $20 million on lobbying in 2008 and $12.3 million in 2009, according to the Center for Responsive Politics, a nonpartisan research group.[42][43]

See also

References

  1. ^ a b c Koch Industries Welcomes 2009 Leadership Kansas Class
  2. ^ Koch Industries, Inc - Industry Areas
  3. ^ a b Fisher, Daniel (Mar. 13, 2006). "Mr. Big", pp. 24–26. Forbes. Online summary for calendar year 2005 at [1].
  4. ^ Forbes - America's Largest Private Companies
  5. ^ http://www.forbes.com/2009/10/28/largest-private-companies-business-private-companies-09_land.html Forbes rankings for 2009
  6. ^ "The Principled Entrepreneur". The American. July–August 2007. Retrieved 23 February 2010.
  7. ^ a b "Summary of Koch Industries History". sec.gov. U.S. Securities and Exchange Commission. 14 November 2005. Retrieved 18 February 2010.
  8. ^ "Advancing Market-Based Public Policy". kochind.com. Koch Industries. Retrieved 18 February 2010.
  9. ^ a b c d 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. {{cite book}}: Cite has empty unknown parameter: |coauthors= (help)
  10. ^ a b c Daniel Fisher (13 March 2006). "Mr. Big". Forbes.
  11. ^ Koch, Fred C. (1960). A Business Man Looks at Communism. Wichita, Kansas. {{cite book}}: Cite has empty unknown parameter: |coauthors= (help)CS1 maint: location missing publisher (link)
  12. ^ a b J. Howard, Marshall II (1994). Done in Oil: An Autobiography. College Station: Texas A&M University Press. p. 254. ISBN 0890965331. {{cite book}}: Cite has empty unknown parameter: |coauthors= (help)
  13. ^ Bruce Upbin; Brandon Copple (14 December 1998). "Creative destruction 101". Forbes.
  14. ^ John, Lincoln (1989). Rich Grass and Sweet Water. College Station: Texas A&M University Press. ISBN 0-89096-387-8.
  15. ^ Koch Industries website, http://www.kochind.com/IndustryAreas/default.asp, accessed Aug 25 2010,
  16. ^ Jessica Harper (18 November 2009). "Flint Hills is coming out of murky waters". Dakota County Tribune.
  17. ^ "Koch Industries Inc., Earns Prestigious Energy Star for Efficiencies at Wichita Complex" (Press release). Koch Industries. 17 June 2008. Retrieved 2010-05-31.
  18. ^ "ENERGY STAR Labeled Offices in Kansas". energystar.gov. U.S. Environmental Protection Agency. Retrieved 30 May 2010.
  19. ^ "Process and Pollution Control". kochenergy.com. Koch Industries. Retrieved 30 May 2010.
  20. ^ "Performance Track Final Progress Report" (PDF). epa.gov. U.S. Environmental Protection Agency. May 2009. Retrieved 30 May 2010.
  21. ^ "Lone Star Land Steward Awards Winners Announced" (Press release). Texas Parks & Wildlife. 6 May 2010. Retrieved 2010-06-14.
  22. ^ "EPA Honors Koch Ranch for Environmental Excellence; Award is Ranch's Fourth Major Environmental Honor in 1999" (Press release). Koch Industries. 7 June 1999. Retrieved 2010-06-14.
  23. ^ Toxic 100 Air Polluters Press reelase, March 31, 2010, http://www.peri.umass.edu/toxic_press/
  24. ^ Mayer, Jane (August 30, 2010). "Covert Operations: The billionaire brothers who are waging a war against Obama". The New Yorker.
  25. ^ "Koch Petroleum Group Sentenced for Minnesota Pollution" (Press release). Environmnetal Protection Agency. 9 March 2000. Retrieved 2010-06-14.
  26. ^ CBS News, Blood and Oil, Nov 27 2000, http://www.cbsnews.com/stories/2000/11/27/60II/main252545.shtml
  27. ^ "Koch Agrees to $35 Million Settlement in Two Environmental Cases". Safety Online. 17 January 2000.
  28. ^ "Koch Industries to Pay Record Fine for Oil Spills in Six States" (Press release). Environmnetal Protection Agency. 13 January 2000. Retrieved 2010-06-14.
  29. ^ "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.
  30. ^ Don Richards (22 January 2001). "DOJ Reduces Indictments Against Koch Industries". ICIS.
  31. ^ CBS (27 November 2000). "Blood and Oil". 60 Minutes.
  32. ^ Russell Ray (20 June 2001). "Tribe Likely to Get Piece of Settlement in Osage County, Okla., Oil Squabble". Tulsa World.
  33. ^ US Dept of Commerce, Commerce Dept Fines Kansas Firm, June 3, 2003 press release, http://www.bis.doc.gov/news/2003/kansasfirmfined.htm
  34. ^ EPA Press Release, EPA Fines Flint Hill Resources Alaska, Dec 13 2006, accessed Aug 25 2010, http://yosemite.epa.gov/opa/admpress.nsf/b0789fb70f8ff03285257029006e3880/6b191200b3ce87e2852572430062f987!OpenDocument
  35. ^ "United States Announces Largest Settlement Under Environmental Protection Agency's Audit Policy" (Press release). U.S. Department of Justice. 9 April 2009. Retrieved 2010-05-31.
  36. ^ "United States Announces Largest Settlement Under Environmental Protection Agency's Audit Policy" (Press release). U.S. Environmental Protection Agency. 13 April 2009. Retrieved 2010-05-31.
  37. ^ Levi Wolters (13 April 2009). "Invista to correct EPA violations". Wichita Business Journal.
  38. ^ "Invista, Agencies File Agreement" (Press release). Invista. 13 April 2009. Retrieved 2010-05-31.
  39. ^ National Transportation and Safety Board, Pipeline Accident Summary Report, Aug 24 1996, http://www.ntsb.gov/publictn/1998/par9802s.pdf
  40. ^ Vidal, John (30 March 2010). "US oil company donated millions to climate sceptic groups, says Greenpeace". The Guardian. London.
  41. ^ "Secretly Funding the Climate Denial Machine". Global Warming. Washington: Greenpeace. 2010-03-29. Retrieved 2010-04-01.
  42. ^ http://www.opensecrets.org/lobby/clientsum.php?year=2008&lname=Koch+Industries&id= Center For Responsive Politics, www.opensecrets.org
  43. ^ http://www.opensecrets.org/lobby/clientsum.php?year=2009&lname=Koch+Industries&id= Center For Responsive Politics, www.opensecrets.org
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