Koch Industries
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| Type | Private |
|---|---|
| Industry | Conglomerate |
| Founded | 1940 |
| Headquarters | Wichita, Kansas, USA |
| Area served | Worldwide |
| Key people | Charles G. Koch (Chairman, CEO, & 42% owner) David H. Koch (Executive VP, & 42% owner) |
| Products | Petroleum Chemicals Energy Asphalt Natural gas Plastics Fibers Minerals Fertilizers Ranching Pulp and paper Finance Commodities trading[1] |
| Revenue |  US$100 billion (2009)[citation needed] |
| Employees | 80,000 (2009)[1] |
| Website | Kochind.com |
Koch Industries, Inc./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 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,[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 16 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 after they bought out their brothers, Frederick and William, for $1.1 billion in 1983.[8] 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".[3]
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 USSR to be "a land of hunger, misery, and terror."[11] According to Charles G. 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 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.[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 H. Koch. Having started as a technical services manager, David became president of Koch Engineering in 1979.[9]
Subsidiaries
Among Koch Industries’ 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, “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.[16]
- Invista, a polymer and fibers 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. 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.
- Flint Hill Resources LP, 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 Hill 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).[17] 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. It also operates fuel terminals in Wisconsin (4 locations), Texas (6), and one each in Iowa and Minnesota.[18]
- Koch Fertilizer, LLC, says that it is one of the world’s largest makers of nitrogen fertilizers.[19] Koch Fertilizer owns or has interests in fertilizer plants the United States, Canada, Trinidad and Tobago, Venezuela, and Italy, among others.[20][21] In October 2010, a plant in Venezuela was nationalized by the government.[22]
- Koch Agricultural Company’s Matador Cattle Company division operates three ranches totaling 425,000 acres 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.[23]
Environmental and safety record
Koch Industries' subsidiaries are regulated by many local, state and federal agencies around the globe.
Environmental designations
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.[24]
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.[25] Koch Industries' headquarters in Wichita has been certified for meeting the Energy Star standards for superior energy efficiency and environmental protection. As of 2010[update] it is the only Wichita office building to be so recognized.[26][27] 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.[28][29]
Koch's Matador Ranch in Texas earned the Lone Star Land Steward award for outstanding natural resource management in 2010.[30] The Montana ranch has earned several environmental stewardship awards, including the EPA Regional Administrator's award.[31]
Pipeline accidents
Koch's Sterling butane pipeline had a leak in Lively, Texas, on August 24, 1996. Two teenagers on the way to report the leak drove into the unseen butane cloud, and were killed when the gas exploded and burned. The National Transportation Safety Board concluded that severe external pipeline corrosion was the cause of the failure, and recommended to Koch to improve corrosion evaluation procedures. Although Koch distributed pamphlets about safety around the pipelines, they failed to maintain an up-to-date mailing list. Only 5 out of 45 residences in the area of the accident had received pamphlets. The families of the dead had not.[32][33]
Pollution and resource fines
In March 1999, Koch Petroleum Group, a Koch Industries subsidiary, pled guilty to charges that it had negligently dumped hundreds of thousands of gallons of aviation fuel into wetlands near the Mississippi River from its refinery in Rosemount, Minnesota, and that it had also 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.[34]
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.[35]
In January 2000, a 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.[36][37][38] The spills resulted in more than three million gallons of crude oil leaking into ponds, lakes, streams and coastal waters.[39]
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.[40][41] 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.[42][43]
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.[44]
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.[45]
In 2007, Koch Nitrogen's plant in Enid, Oklahoma, was listed as the third highest company releasing toxic chemicals in Oklahoma, according to the EPA, ranking behind Perma-Fix Environmental Services in Tulsa and Weyerhaeuser Co. in Valliant.[46] The facility produces about 10% of the US national production of anhydrous ammonia, as well as urea and UAN.[47]
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.[48][49] Prior to the settlement, the company had disclosed to the EPA more than 680 violations after auditing 12 facilities acquired from DuPont in 2004.[50][51]
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