Koch Industries: The worst climate denier you (probably) never heard of

Page - March 29, 2010
Koch Industries is the second-largest privately-held company in the United States, a conglomerate of more than twenty companies with $100 billion in annual sales, operations in nearly 60 countries, and 70,000 employees. Koch’s industry areas span petroleum refining, fuel pipelines, coal supply and trading, oil and gas exploration, chemicals and polymers, fertilizer production, ranching and forestry products.
"My joke is that we're the biggest company you've never heard of."
- David Koch

Koch operates crude oil gathering systems and pipelines across North America. Its Flint Hills Resources subsidiary owns refineries in Alaska, Minnesota, and Texas that process more than 800,000 barrels of crude oil daily. The company owns a 3% stake in the Trans Alaska Pipeline System, 4,000 miles of oil and products pipelines in the US, and an 80,000 barrels-per day refinery in Rotterdam. In addition, Koch Industries has held multiple leases on the polluting tar sands of Alberta, Canada since the 1990s and the Koch Pipeline Company operates the pipelines that carry tar sands crude from Canada into Minnesota and Wisconsin where Koch's Flint Hill Resources owns oil refineries.

The vast majority of Koch Industries assets are controlled by Charles G. and David H. Koch, two of four sons of the company's founder, who each own 42% of the company stock. According to 2012 Forbes rankings, the Koch brothers are tied for the fourth richest American, each worth about $31 billion. Bloomberg 2013 estimates for each Koch brother's fortune amount to $44.5 billion. Bloomberg's figure ties the Koch brothers for the 7th richest person in the world, and their combined wealth tops all of the world's billionaires except for the combined Walton family fortune.

From 2007-2011, the combined wealth of the Koch brothers increased by $16 billion while employment at Koch Industries has fallen by 13,000.

Koch Corporate History

The corporation's history dates back to the 1920s when Fred Koch, father to Charles and David Koch, developed a process to refine more gasoline from crude oil. When he tried to market his invention, the major oil companies sued him for patent infringement. Koch eventually won a 15-year legal battle, but the controversy made it tough to attract many US customers.

Fred Koch went to the Soviet Union in 1929, where he persuaded Josef Stalin's authoritarian government to pay him $5 million to build oil refineries. Koch eventually grew disenchanted with Stalinism and returned to the United States and helped found the libertarian John Birch Society. Over time, Koch developed US and global pipeline and drilling equipment businesses that profited handsomely by servicing the major oil companies. Fred Koch launched Wood River Oil & Refining in Illinois (1940) and bought the Rock Island refinery in Oklahoma (1947). He folded the remaining purchasing and gathering network into his company, Rock Island Oil & Refining.

Charles Koch renamed the company Koch Industries after his father's death in 1967. As the new CEO and chairman, Charles began a series of acquisitions, adding petrochemical and oil trading service operations. Koch Industries purchased a Corpus Christi, Texas, refinery in 1981. It expanded its pipeline system, buying Bigheart Pipe Line in Oklahoma (1986) and two systems from Santa Fe Southern Pacific (1988). In 1991 Koch purchased the Corpus Christi marine terminal, pipelines, and gathering systems of Scurlock Permian (a unit of Ashland Oil). In 1992 the company bought United Gas Pipe Line (renamed Koch Gateway Pipeline) and its pipeline system extending from Texas to Florida. Koch Industries also acquired USX-Delhi Group, a natural gas processor and transporter.

Koch diversification and acquisitions

Koch Industries also diversified its industry areas under the leadership of Charles Koch. Currently, the company owns cattle ranches with a total of 15,000 head of cattle in Kansas, Montana, and Texas. In 1998 Koch bought Purina Mills, the largest US producer of animal feed. Lethargic energy and livestock prices in 1998 and 1999, however, led Koch to lay off several hundred employees, sell its feedlots, and divest portions of its natural gas gathering and pipeline systems. Purina Mills filed for bankruptcy protection in 1999 and was acquired by US dairy co-op Land O'Lakes in 2001.

Koch acquired INVISTA, creators of Lycra® fiber and Stainmaster® carpet, in 2004 for $4.2 billion from DuPont Corporation.

In 2005, Koch paid over $13 billion for the Georgia-Pacific Corporation, one of the world's largest manufacturers and distributors of tissue, pulp and paper, packaging, dimensional lumber and plywood. The acquisition gave Koch Industries its only recognizable retail products including Quilted Northern®, Angel Soft®, Brawny®, Vanity Fair® and Dixie® cups.