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Wednesday, February 23, 2011

The other Koch Brother: Bill's got a lot of money. Different agenda.

The North Fork Valley, near where Bill Koch has consolidated his power.

Oh to be the geeky younger brother. It’s never easy. But try to be the geeky younger brother to two ideologue billionaires who are trying to take over the world and, with the help of the Supreme Court and a lot of bought-off politicians, seem to be succeeding. The big brothers in this case are David and Charles Koch, owners of Koch Industries, the second-largest privately owned company in the U.S., and among the nation’s top polluters. In recent years, the Koch Brothers have been expanding their empire deep into American politics. Thanks to the Citizens United Supreme Court decision, they’ve been able to freely fund Tea Party and ultra-conservative organizations to the tune of millions of dollars. Now they’re also heavily funding the anti-union push in Wisconsin, and have become the bane of liberals everywhere.

And then there’s William, one of two other Koch Brothers. Like his older brothers, Bill is a billionaire. Like his brothers, he’s a fossil-fuel-powered corporate titan and an ardent consumer of political influence. Nevertheless, the tendency to throw Bill into the same category as his older brothers is simply unfair. For one thing, he’s been at odds with his siblings for much of the last three decades, even spending a good deal of time battling them in court. For another thing, Bill Koch is much more complicated than Charles and David. He’s more opportunistic, less ideologically constrained and, in some ways, maybe even more powerful. And while his older brothers seem to be bent on creating a whole new ├╝ber-capitalistic political order, Bill’s goals are harder to decipher: He’s donated to Al Gore’s campaign and Richard Pombo’s, fought against wind power and owns coal mines, and over the past two decades has amassed a tremendous amount of influence on the aspen and oak covered high plateaus, and in the rural towns below, of the North Fork Valley of Western Colorado. Now he seems to be reaching for more.

Like so many American success stories of the 20th Century
, the Koch family’s was built on oil. Fred Koch, the father of Bill, Charles, David and Freddie, figured out a new way to refine oil (or possibly stole the idea from other oil companies), and got rich developing the method in the Soviet Union in the 1920s and 1930s. He returned to the U.S. in the 1940s and started the Rock Island Oil & Refining Company. When Fred died in 1967 Charles, the second oldest brother, took the helm of the company and changed the name to Koch Industries. Today, the company rakes in some $100 billion per year and has 70,000 employees.

Bill never really fit into the family or the family corporation’s mold. As a youngster, he was reportedly jealous of his older brothers’ athletic prowess and success, which caused problems all through childhood and then again when Bill, Charles and David were all at MIT (a fourth brother, Freddie, went to Harvard, studied playwriting, and remains out of the limelight). Later, when Bill joined Koch Industries as a consultant and then as President of Corporate Development, the old family friction continued. Things didn’t go well for Bill, and in 1982 he attempted a corporate coup-de-tat on his brothers. It failed, and he was canned. But Bill sued the company and David and Charles, ultimately walking away with a reported $260 million.

Koch used that cash to found the Oxbow Group, a huge energy conglomerate that today has nearly $4 billion in annual sales, according to the company website, and operates all over the world. Oxbow is often spun as an “alternative energy” company. Such a claim is hard to swallow after seeing Somerset, Colorado, though. There, a smattering of small time-battered houses hug the windy highway in a steep valley where the sun rarely shines during the winter. The houses’ walls of this Western slice of Appalachia are all streaked black. A faded sign squeezed between highway and houses proclaims this a UMWA town, even though the union was busted long ago. And the futuristic yet primitive machinations of a giant coal mine loom over the town, stretching their way up hillsides that constantly move because millions of tons of their innards have been extracted. Just up from the dingy post office, the huge loading tower rises up over the town. On its coal-stained sides it reads: Oxbow.

One of Oxbow’s early ventures was the Sanborn Creek Mine, here in Somerset, in Western Colorado. In 2003, after a fire and a fatality in Sanborn Creek, Oxbow developed the Elk Creek Mine, which today loads some 5 million tons of low-sulfur coal into mile-long trains that snake their way to power plants in the East. Oxbow’s primary products are coal and petroleum coke -- not exactly alternative energy.

Koch’s victory against his brothers and the fortune it got him were apparently not enough. In 1989, he again went after Charles and David in court, only this time he did it on behalf of the federal government. Bill alleged that Koch Industries had under-measured and undervalued the oil and gas that it produced on tribal and federal lands in, among other places, Colorado, Oklahoma, Utah and California. Thus, the company had underpaid its royalties, ripping off the federal taxpayer and the tribes. It was hardly a new practice, nor did it go away – the Mineral Management Service scandals of recent years, besides being soaked in sex and drugs, were really about oil companies skipping out on royalties, even as the feds sat by and did nothing. Long before that, again with the feds turning a blind eye, companies had been stealing oil and gas from tribes. It’s telling that it took Bill Koch -- not federal regulators -- to notice the problem and to drag Koch Industries to court.

The jury ruled that Koch Industries was liable for more than $200 million in underpayments. The company actually paid about one-tenth of that amount. For his part, Bill Koch walked away with $7 million. He had filed what’s known as a “qui tam,” in which the plaintiff is entitled to a share of the cash. Despite this obvious self-interest, the fact that Bill actually stood up for the feds on this issue demonstrated a clear, if only occasional, ideological break from his regulation-hating brothers.

When he wasn’t busy collecting legal victories against his siblings, Bill was collecting other, more tangible things. He spent half a million dollars on four bottles of wine that purportedly once belonged to Thomas Jefferson (they turned out to be fakes). His stockpile of art includes notables by Monet, Degas, Picasso and even Modigliani’s Reclining Nude. And in 1992, he spent a bundle of cash to develop a carbon-fiber sailboat that got him an America’s Cup to add to his collection of trophies.

Meanwhile, Koch kept amassing power in Western Colorado. In 2001, Oxbow formed Gunnison Energy, its natural gas production branch, which operates in the southern flank of the gas-rich Piceance Basin not far from the coal mine. It currently produces 560,000 MCF of natural gas each year, making it a relatively small player in the Basin, but it has drilling rights on more than 100,000 acres of leases. That, combined with the Elk Creek Mine, make Oxbow an economic powerhouse in an economically depressed region. The mine – one of three big ones working the same coal deposit -- employs 400 or so workers, who pull in salaries that are three to four times higher, on average, than the per capita income of Delta County*. Gunnison Energy also provides a handful of lucrative jobs on the rigs.

That bought the companies political influence without them even trying. The long fought-over 2001 Roadless Rule and its various iterations hovered over Oxbow’s operations as a potential threat for nearly a decade. Then, last year, U.S. Agriculture Secretary Tom Vilsack gave Elk Creek Mine an exemption from the rule, allowing the company to bulldoze into a roadless area to drill wells to vent methane** as the mine expands its reach. The local environmental group and most regional politicians supported the exemption because of the mine’s economic influence. But regional and national groups opposed it, saying it weakened an already beleaguered rule. Two years earlier, Gunnison Energy had defied the same rule when federal land managers allowed the company to build the Bull Mountain Pipeline through a stretch of roadless forest, despite outcry from environmental groups. The company and the feds argued that the roads associated with the line’s construction are not permanent, and therefore don’t violate the rule. The pipeline’s completion last year opened the door to significantly more gas development in a previously relatively undeveloped area.

Bill Koch is unusual among ultra-rich art collectors
in that he chooses the art himself, rather than having a professional pick out the pieces most likely to gain value. He has a personal and aesthetic, not just financial, attachment to the pieces he buys, carting a big chunk of his collection back and forth between his Palm Beach, Fla., home and his Cape Cod summer place each year. He seems to view the North Fork region of Colorado similarly; rather than just using it as a distant place from which to extract minerals and dollars, he also actually lives there sometimes. In 2006, Koch spent some $8 million for a 5,000-acre ranch on an undulating plateau in the shadow of the spectacular Ragged Range, about a dozen miles upstream from the Elk Creek Mine. From parts of the ranch, at night, one can see Gunnison Energy drill rigs on adjacent mesas, pillars of sharp lights tearing apart the darkness. Koch runs Longhorn cattle here, rides horses and hosts hunting expeditions.

But last year, a proposed land exchange that would enlarge the ranch was the subject of a local controversy, which tested the limits of Koch’s regional influence. And though opponents of the land exchange tried to fire up the opposition by associating Koch with his Tea Partying brothers, the fallout from the controversy actually showed that Koch is not anywhere near as ideologically constrained as his siblings.

The problem started because a strip of public land slices through the middle of Koch’s ranch, allowing the public to pass through the boundaries of “his” ranch without even trespassing. So, like many a wealthy landowner in such situations, Koch, with the help of The Western Land Group, arranged a swap. Koch would give up a total of 991 acres of land in Dinosaur National Monument, on the Utah border, and in Curecanti National Recreation Area, over the mountains near Gunnison, in exchange for the 1,840-acre strip of public land. While such deals are often handled administratively, this one involved several land management agencies, meaning it has to go through Congress. Last year, with backing from Gunnison County commissioners*** and conservation groups, U.S. Rep. John Salazar, D-Colo., introduced the legislation in the House, with Colorado Democrats Michael Bennett and Mark Udall, along with Utah Republican Orrin Hatch, sponsoring the Senate version.

When Delta County residents caught wind of the proposal, though, they were outraged. Led by former High Country News publisher Ed Marston, they accused exchange proponents of keeping the deal secret. They said it would take away local access to a Wilderness area while not benefiting locals in return. Some worried that Koch was just buying the land in order to drill it for natural gas. Others accused him of trying to lock up the land just to keep others from drilling in his backyard.

Emerging from the scuffle – and mentioned in nearly every media account of the controversy -- was the fact that Koch and Oxbow employees were collectively the biggest donors to Salazar’s campaign. Koch, his wife Bridget, Oxbow’s employees and Oxbow’s Political Action Committee donated a combined total of nearly $70,000 to Salazar’s campaigns, a significant chunk for a representative in a rural district such as this one. Less known was the fact that Udall and Hatch, the other sponsors of the exchange legislation, also benefited from Oxbow’s largesse, though to a lesser extent. Salazar put the bill on hold, promising to revisit it later, with more public hearings. Despite all of Koch’s money, however, Salazar lost his bid for re-election. The exchange is dormant, lest someone like Tipton, the Republican who beat Salazar, takes it up.

And who knows, he just might. Koch and his colleagues didn’t donate to the Tipton campaign directly. But in the weeks leading up to the election, both Koch and his wife gave big bucks – a total of $60,800 – to the National Republican Congressional Committee. The Committee, in turn, spent $763,000 in opposition to Salazar, according to the Center for Responsive Politics. This isn’t unusual behavior for Koch. While his brothers aim all their money at ideological allies, Bill’s political spending is more erratic. He’s given to the campaigns of Democrats Ted Kennedy, Patrick Kennedy, Salazar, Udall, Bill Nelson and Hillary Clinton. He’s funded Republicans Lamar Alexander, Bob Dole and John McCain. He gave money to Al Gore. And he gave money to the nemesis of environmental regulations, Richard Pombo.

Koch even became a full-on environmental activist – in the manner of Wyoming oil baron turned anti-windpower activist Diemer True. Koch bankrolled the Alliance to Protect Nantucket Sound, which was created to fight against Cape Wind, a huge offshore wind facility. The facility is planned to stick out of the ocean off of Cape Cod, in view of Koch’s summer place. So Koch joined forces with a host of unlikely allies to try to stop construction, reportedly spending well over $1 million on the cause. Last year, however, Koch lost the battle when the Department of Interior gave the go-ahead to the wind facility. Making that decision was none other than Ken Salazar, John Salazar’s brother.

Still, Koch’s not one to take such defeats lying down. After he discovered that the Thomas Jefferson wine bottles he had spent a fortune on were inauthentic, he went after auction houses, dragging them to court. And even as Salazar was getting trounced in the election, potentially jeopardizing Koch’s bid to consolidate his ranch, Koch simply went out and bought some more land. In the fall of 2010, he purchased 2,400 acres in the North Fork Valley in Delta County for $7 million.


 * The work is also unusually hazardous: Elk Creek has had 130 employee or contractor injuries since 2001, two miners died here (one at Elk Creek and one in 2000 at its Oxbow-owned predecessor, Sanborn Creek), and the company’s been slapped with more than 2,000 citations from the Mining Safety and Health Administration over the last decade, adding up to more than $1.5 million in penalties. The mine’s “operator incident rate” has been higher than the national rate during five of the last nine years.

** The North Fork coal mines are all underground mines, as opposed to open pit/surface mines. Methane builds up in the miles-long tunnels and so, for safety’s sake, the methane must be vented via vertical tunnels from up above. Roads into roadless areas are needed to drill the vents. Ironically, the mines vent the methane – an extraordinarily potent greenhouse gas – directly into the air. Meanwhile, Gunnison Energy drills for the same stuff nearby to pipe and sell to market. Efforts to require the mine to capture and use its methane have not been successful.

*** This issue, and Koch’s influence here in general, have been complicated by political boundaries that don’t match up with demographic or topographic realities. Koch’s ranch and his coal mine lie, and much of his gas and oil activity takes place, in Gunnison County. That means Gunnison County gets the property tax revenue from Koch’s operations, and that Gunnison County citizens are the ones who were asked for their opinion on the land exchange. That’s in spite of the fact that Koch’s holdings are all isolated from the population, government and most of the infrastructure of Gunnison County, and are much more intimately connected with neighboring Delta County.

11 comments:

  1. Thanks for clarifying Peace. I believed the Koch presence in town to be that of the "Evil" Kochs. This guy maybe not so evil.

    He's payrolling quite a few Paonians with his replica "Wild West Town". He's building a large warehouse in the middle of town next to Chaco's original space. Maybe he'll put in a bowling alley/donut shop?

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  2. Thanx for this piece, obviously alot of people on the western slope are curious about Koch and his intentions- it's easy to demonize him-I hope this piece gets out---he sounds more complex than his brothers, given to capriciousness, piques of conscience, or the dictates of changing whim-be it art,(I love that he is suing the auction house over the wine-always been problematic that auction houses aren't liable for fakes) or politics-which somehow humanizes him. My mom actually just wrote a letter to Bill,concerning the warehouse Jay mentioned, asking him to consider some sort of hedge or landscaping to mitigate the impact on the neighborhood...keep you posted.

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  3. Nice piece Jonathan! Thanks for that. I will pass it along.

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  4. Very interesting post, definitely one to pass along. Another case where the west would have benefited if the government had followed John Wesley Powell's advice and drawn the political boundaries along the river drainages. He was actually talking about state boundaries, but here, the straight line between Delta and Gunnison counties is a similar case in point.

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  6. Maybe a limited number of good things to come from his presence in my home area of Western Colorado, but we are losing large chunks of land and water to his kind; the very rich. Us natives are a minority and not liking it.

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  7. Why oh why does he feel the need to have Army Tanks at his property? Drove over Kebler last week and saw them for the first time.

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  8. "There, a smattering of small time-battered houses hug the windy highway in a steep valley where the sun rarely shines during the winter."

    Oh how poetic, but the town is in a canyon, so of course he sun rarely shines. Did Koch build the canyon???

    "When Delta County residents caught wind of the proposal, though, they were outraged."

    Really? I don't remember any outrage. Curiosity? Yes. Anyone is going to be curious if a billionaire buys property in their home town. Joe Cocker lives in the North Fork Valley too. He also has a large estate. He also has a "Personal and Asthetic" view of it. So does everybody else that lives there. It's a beautiful place.

    "...stretching their way up hillsides that constantly move because millions of tons of their innards have been extracted."

    You really didn't do your homework, did you? Take a look at the "constantly moving hillsides" you speak of. Where are they? Do you know WHERE the coal is actually mined? Do you know how longwall mining actually works? Do you know anything about Mining in the North Fork Valley at all??

    I could go on about your pejorative tones towards his "hunting expiditions" he hosts, (he's not the only one in the valley that has hunting camps. It's kind of another important part of Delta County's economy) and about how you think he's trying to take over the valley like some kind of evil warlord...but I have more important things to do.

    Have fun protesting or occupying or whatever else you hippies call it these days

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  9. I would hate to see how Delta county would do financially without coal.

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  10. Thanks because of this bit, certainly a lot of individuals around the traditional western downward slope are interested in Koch and his awesome objectives- it's not hard to demonise him or her-I really hope this kind of bit receives away---this individual seems more complicated as compared to their siblings, fond of arbitrariness, piques regarding mind, or even the demands regarding transforming impulse-whether it be artwork,(I really like that he's suing the actual ah on the wine beverages-for ages been challenging which public sale properties are certainly not accountable for reproductions) or perhaps national politics-which usually for some reason humanizes your pet.

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