Saturday, November 12, 2011

Koch Industries 3,667% Return on Its Tea Party Investment

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By Peter Cohan

Koch Industries has gotten a tremendous return on its investment in the Tea Party. As the details of the April 8 budget deal emerge, it's become clear that $1.65 billion of the $38.5 billion in budget cuts that kept the U.S. government hostage was a fraction of Koch's ransom payment.

After all, Koch is a $100 billion privately held refining, chemicals, plastics and textiles company, that has contributed at least $45 million to the Tea Party through various Political Action Committees. And Koch is not going to be satisfied until it has zeroed out the Environmental Protection Agency (EPA) budget so it can exercise what it believes is its right to pollute.

While the last-minute budget deal was vague on the details last week, it has become clearer who will pay the price for the Tea Party's electoral victory last November (TPM provides a list of all the cuts). According to the Wall Street Journal, the $38.5 billion deal includes a 16% cut in the EPA's budget, taking it down to $8.7 billion. Those cuts will make it harder for states to enforce environmental laws and includes the following initiatives that will gut the EPA:

  • Cut $1 billion from programs to build sewage-treatment and drinking-water plants;
  • Slash by 33%, or $149 million, a federal fund for buying land for environmental purposes; and
  • Reduce by 13%, or $49 million, programs related to climate change.
557 Million Reasons Why Koch Wants To Gut The EPA

Why is Koch eager to wipe out the EPA and why would it love to cut the $8.7 billion left in its budget? That's easy, Koch has an outstanding record when it comes to polluting -- including repeated spills from its oil pipelines and thwarted efforts to dump Dioxin -- the genetic-mutation-causing chemical in Agent Orange -- into a river in Florida. How so? In these three examples alone, the EPA has required Koch to pay $51.5 million in fines and $505 million in facilities upgrades:

  • $1.5 million in EPA fines and $500 million in facilities upgrades. In 2009, the EPA announced that Koch would pay $1.5 million in fines and invest $500 million to add pollution control equipment to 12 plants in which the EPA found 680 violations of water, air, hazardous waste, emergency planning and preparedness laws.
  • $30 million EPA fine for 300 oil spills. In January 2000, the EPA and the U.S. Justice Department required Koch to pay a $30 million fine and to spend $5 million on pipeline upgrades after 300 oil spills from Koch pipelines and facilities in six states -- Texas, Oklahoma, Kansas, Missouri, Louisiana and Alabama. Among the spills was one 100,000 gallon oil spill in Texas that "caused a 12-mile oil slick on Nueces Bay and Corpus Christi Bay."
  • $20 million Justice Department settlement for benzene release. In late 2000, Koch faced 97 counts of covering up the illegal releases of 91 tons of benzene, a carcinogen, from its refinery in Corpus Christi. Koch agreed to settle the charges, that could have included $350 million in fines, in exchange for a guilty plea for falsifying documents, and a $20 million settlement.
Koch is also being stymied by the EPA in its efforts to dump cancer causing chemicals from one of its Florida toilet paper plants. After all, Georgia-Pacific wants to dump waste from one of its Florida plants into Florida's Saint John's River. And according to the Florida Independent, "Georgia-Pacific has long come under fire as one of the St. Johns River’s top point-source polluters." Moreover, it reports that Koch has not been able to build a pipeline to pollute that river even more with Dioxin -- the genetic-mutation-causing chemical in Agent Orange -- due to its war of words with the EPA.

Koch appears to be a very successful company. And it even has its own management philosophy -- dubbed Market Based Management (MBM). According to an interview with MBM's author, Charles Koch, between 1960 and 2009, Koch's book value rose 2,500-fold -- 17.1 times the 146-fold growth of the S&P 500. It's an impressive, if self-reported, performance.

And that performance seems to have given Koch the ability to delude itself big time. A key principle of MBM, according to Koch, is "integrity and compliance. Without them, we cannot create real value or survive as a company. We place integrity first. In addition, we strive for 10,000 percent compliance, which means 100 percent of employees fully complying 100 percent of the time with all environmental, health, safety and other applicable laws and regulations 100% compliance and 100% integrity."

In comparing Koch's record of violating environmental laws and paying record fines for these violations, I wonder how Koch would reconcile its words with its deeds.

But if its self-reported returns on investment are accurate, then it's pretty clear that Koch 3,667% return on its Tea Party investment so far is only the beginning. If it can zero out the EPA, or even cripple it enough to practice its unfettered right to pollute, it will have succeeded in achieving 10,000% compliance by eliminating the environmental laws the violation of which has cost it at least $51.5 million in fines and $505 million in pollution control investment.

If those laws go away, then it can keep doing what it has been doing and will have no legal limits on how much it can pollute. The only question then will be whether the Americans who live next to its polluting plants and pipelines will have any ability to stop what Koch can do in pursuit of its interests to profit and pollute.

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