Every year, in December, Charles Koch hosted a private party at his home. It was a gathering for the elite group of Koch Industries employees who donated the maximum legal amount of money to Koch Industries’ political action committee. As the evening got underway, a parade of cars drove through the gates into the wooded compound of Charles Koch’s childhood home. The attendees parked their cars in neat rows on the spacious lawn and walked up the driveway through the winter wind and into the warm, brightly lit entryway.
There was a cheerful cacophony inside, with about 200 people milling around in large rooms and hallways. The attendees were employees, executives, and their spouses, dressed in their holiday best, eating heavy hors d’oeuvres from the trays carried by uniformed waiters. Charles and David Koch held court in the living room, sometimes standing side by side, as guests filed past to pay their respects. Charles was courteous and smiling. But he also had a habit of managing the party like a company meeting.
When David Koch and a guest began talking at length about David’s art collection, Charles Koch interrupted to remind the pair that there were guests waiting behind them in the line. “Charles says, ‘David, you’ve got to move it along,’” one guest recalled. “That’s kind of Charles. It’s kind of like ‘This is the process. We’re greeting everybody. We’re having pleasantries.’ And then they move.”
There was a sense of exclusivity, of special belonging, that animated the people in the room. The holiday party was held around the time of the annual board meeting, so many board members and senior executives found time to attend. To receive an invite, an employee needed to donate $5,000 during the year to Koch’s PAC. The money was bundled and donated en masse to political candidates who were favored by Koch’s PAC officials. It was understood that the PAC always needed donations and that Charles Koch paid close attention to its performance.
Having one’s name listed in federal campaign disclosures was something akin to being listed in a country club directory. It looked good. There was another, unspoken perk to donating: it indicated that the employee in question had just finished a profitable year and had a big bonus to show for it. When employees didn’t show up from one year to the next, it created suspicion that maybe their bonuses hadn’t been so fat.
While the gathering was always festive, there was an air of tension hanging over the party in 2009. The attendees had put lots of money into the PAC during the previous election—a total of $2.6 million in 2008—and yet Barack Obama still won and Democrats held large majorities in Congress. Virtually every political cause that Koch Industries cherished was in retreat. The Republican Party seemed in danger of becoming a permanent minority. The Libertarian Party didn’t even rate as a political afterthought.
In the corner of Charles Koch’s living room, there was an elevated area that held a bookcase, filled with collector’s editions of Charles Koch’s favorite thinkers, like Hayek and von Mises. The collection seemed like a museum piece now, a collection of antiques that were being left behind by the march of history. The guests stood in clusters near the books, commiserating about the state of politics, the free-falling markets, and waiting to hear what Charles Koch might say about it all.
Every year, Charles Koch made a short speech at the party. Sometimes he was joined by Richard Fink, the top executive over Koch’s political operations. Charles Koch’s speeches tended to be anodyne and courteous. He thanked the gathered employees for their support and reminded them how vital it was to maintain economic freedom in the United States, both for the long-term health of Koch Industries and for the populace.
In 1998, the Koch Industries PAC spent just over $800,000. In 2006 it spent $2 million. In 2008 it spent $2.6 million—and yet Barack Obama still won.
In 2009, however, Charles Koch’s speech was urgent. He felt that the future of America was imperiled. He thanked his guests for their contributions, but the guests understood that the political fight was just beginning.
One threat from the Obama administration seemed more dangerous than the rest. It was the threat of a massive new regulatory regime to limit greenhouse gas emissions that trapped heat in the Earth’s atmosphere. The threat of such had been slowly building for decades, under both Republican and Democratic administrations. Charles Koch fought against it the entire time. Now the threat appeared to be imminent.
While both Obama and his Republican opponent, Senator John McCain, campaigned on a promise to limit uncontrolled carbon emissions, Obama made carbon control a pillar of his platform. Since the very month Democrats took control of Congress in 2006, they started working on a carbon-control regime. That effort was well under way, with a proposed law working its way through Congress that was more than a thousand pages long. With their wide majorities in the House and Senate, Democrats were ready to hand the bill to a president who was eager to sign it.
There was a belief, within Koch Industries, that the carbon-control regime could put the company out of business. It was impossible to overstate the stakes of the coming fight. The bill in Congress sought to wholly reorganize America’s energy system. If this happened, there was reason to believe that the world would follow America’s lead. There were already two global treaties seeking to impose carbon limits worldwide—one signed in Rio de Janeiro in 1992 and the other in Kyoto in 1997—and the American regulatory regime could be quickly incorporated into this global framework.
A carbon-control regime would expose Koch to a brand-new regulatory structure, but it could also choke off decades of future profits as the world shifted away from burning fossil fuels. Koch’s sunk investment in the fossil fuel business was measured in billions of dollars, reflected in the value of its two oil refineries, pipelines, and other assets. The future revenue to be derived from these assets arguably numbered in the trillions of dollars in future decades.
In 1989, Charles Koch was caught unprepared when the US Senate investigated oil theft on Indian reservations in Oklahoma. Charles Koch learned from the experience. Things were very different in 2009. As recently as 1998, Koch Industries spent as little as $200,000 a year on lobbyists in Washington, DC. By 2005, Koch was spending $2.19 million. When the Democrats took over Congress in 2006, the spending exploded, reaching $3.97 million in 2006, then $5.1 million in 2007.
The prospect of an Obama presidency intensified the effort. Koch Industries spent $20 million on lobbying in 2008. Koch augmented these lobbying expenditures with campaign donations. In 1998, the Koch Industries PAC spent just over $800,000. In 2006 it spent $2 million. In 2008 it spent $2.6 million.
Even these expenditures didn’t come close to capturing the size of Charles Koch’s political machine. Since at least 1974, Charles Koch had envisioned a political influence machine that was multifaceted, including think tanks, university research institutes, industry trade associations, and a parade of philanthropic institutions to support it financially. The machine was a reality now.
The think tanks and academic programs were funded through nonprofit foundations such as the Charles G. Koch Charitable Foundation and the Claude R. Lambe Charitable Foundation. In 2008 alone, the Charles Koch Foundation gave out $8.39 million in grants and gifts, while the Lambe Foundation gave $2.56 million. These grants supported conservative scholars and paid for supposedly independent policy reports released by Washington think tanks. The libertarian Cato Institute think tank, which Charles Koch cofounded and continued to support, operated with annual revenue of $23.7 million in 2008, up from $17.6 million in 2001.
In later years, this political operation became known as the “Kochtopus,” a name that evoked a many-tentacled entity that seemed to grasp every lever of policy making. This nickname gave the Koch political apparatus an air of invincibility, as if it were an unbeatable juggernaut with which Charles and David Koch could buy off politicians, write policies, and tame the federal government to their wishes.
This caricature failed to recognize a central truth about the market for influence in Washington, DC: there is no straight line between spending money and getting what you want. The market for influence and policy outcomes was a murkier and more complex market than any other in which Koch operated.
The market for influence and policy outcomes was a murkier and more complex market than any other in which Koch operated.
That night, at his home in Wichita, Charles Koch made it clear that he was determined to win in this market, just as Koch Industries had won in so many others. The survival of the company seemed at stake.
At that very moment, the biggest source of trouble for Koch Industries was a small group of dedicated liberal congressional staffers working long hours in an obscure basement office in Washington. This team had been laboring for years to write the thousand-page law controlling greenhouse gas emissions. The team was composed of underpaid, overworked idealists. One of them was a workaholic named Jonathan Phillips. Phillips didn’t know much about Charles Koch at that time. Which helps explain why Phillips was still optimistic that history was on his side.
In a different world, Jonathan Phillips could have ended up as a Koch Industries employee. He fit the Koch mold. He was entrepreneurial, idealistic, and thoroughly midwestern. The first time he was old enough to vote for president, in 2000, he voted for George W. Bush. Like so many Koch employees, he was trim and athletic. Phillips had short blond hair, and his blue eyes projected an air of absolute sincerity when he spoke.
Phillips might have become a perfectly respectable conservative if he hadn’t served in the Peace Corps, which took him from the cozy confines of suburban Chicago to a tent in Mongolia. He gained a broader view of the world and America’s role in it. He lived amid extreme poverty and developed nuanced views about capitalism. He watched from overseas as George Bush launched an invasion of Iraq that was strategically disastrous and morally troubled.
Phillips returned home from the Peace Corps and tried to figure out how he could help make the world a better place. He enrolled in the John F. Kennedy School of Government at Harvard and, after graduation, got a job on Capitol Hill as a congressional staffer in the House of Representatives. This is how Phillips found himself in the center of an effort to redraw America’s energy system.
In the winter months of 2009, Phillips worked in the Longworth House Office Building, a towering stone complex near the US Capitol. The hallways inside the Longworth Building were austere and cold, lined with marble and capped with vaulted ceilings. Every morning, Phillips walked past these grand corridors to a stairwell that took him to the basement. Down there, the floors were made of varnished cement and the ceiling was covered in exposed ducts, pipes, and vents. Phillips walked to a set of doors that looked like they might conceal a utility closet. This was the headquarters for the Select Committee on Energy Independence and Global Warming.
The Committee on Global Warming was formed in 2007, one of Nancy Pelosi’s first official acts after she became the Speaker of the House. Creating a select committee sounds mundane, but it was actually a radical act of rebellion, at least in congressional terms. To understand why, it’s important to understand the structure of Congress.
It’s common to think of the US House of Representatives as a single organization with 435 members who propose laws and then vote on them. In fact, the House is a collection of smaller governing bodies, each with its own authority, called committees. There’s a committee to write tax law and another to write environmental law, for example. Each committee has a chairperson, who acts as the committee’s CEO. Bills in the House are written by committees, then passed by a vote of the committee members. This structure gives tremendous power to committee chairs, and it explains why any bill to limit greenhouse gas emissions never had a chance of passing.
The committee that oversaw climate change was the House Committee on Energy and Commerce, which in 2007 was led by the Michigan Democrat John Dingell Jr. Dingell had been chair of the committee, or the ranking Democrat on the committee, since 1981, and he wasn’t friendly to any bills that might limit carbon emissions. Dingell wasn’t just close to the Detroit automakers in his home state, he was the Detroit automakers, owning more than $500,000 worth of stock in the auto industry.
Almost immediately, the Committee on Global Warming started to agitate and provoke virtually everyone in Congress.
Rather than push Dingell to pass a climate change bill, Pelosi just went around him and created the new House Committee on Global Warming and Climate Change out of thin air and stowed it in the basement of the Longworth Building. Dingell was less than enthusiastic. “These kinds of committees are as useful and relevant as feathers on a fish,” he told a reporter.
So Pelosi put the Massachusetts congressman Ed Markey in charge of her new subcommittee. Markey was a passionate advocate for environmental regulation, and from the very beginning, Markey seemed dedicated to getting real results. He hired in the most talented staffers he could find and he immediately set to work to break down the barriers that had prevented climate change regulation for years.
Ed Markey built a team that resembled one of those motley groups of experts who are drawn together to pull off a bank heist. There was Jon Phillips, an expert in renewable-energy legislation. There was Joel Beauvais, a well-paid attorney and Clean Air Act expert who took a horrific pay cut to help the committee write its carbon control bill. There was Ana Unruh Cohen, a onetime congressional staffer who later studied climate change policy for the Center for American Progress, a liberal think tank. There was Michael Goo, a congressional staffer who seemed to know everyone in the House. And there was Jeff Sharp, a onetime lobbyist and campaign worker who specialized in communications.
Everyone on the team knew that they were overworked and underpaid. But they felt like they were part of something big. Lots of people came to Washington to change the world. This committee was on the precipice of actually doing it.
Almost immediately, the Committee on Global Warming started to agitate and provoke virtually everyone in Congress. The committee didn’t have the authority to pass bills, but it had the authority to hold hearings, which it began to do at a militant pace. Phillips spent a great deal of his time booking hearing rooms and bringing in experts to testify.
Sharp, the communications guy, helped calibrate the hearings to generate as much media attention as possible. Along with experts and politicians, the committee began inviting celebrities to testify. Phillips met the actor Rob Lowe and ushered him around the Capitol before Lowe testified at a hearing on electric cars.
“We were always looking for celebrities. We’re always looking for, like, tearful stories,” Phillips recalled. “We’re always looking for ways to connect emotionally with people to raise the profile of the issue. It’s as much a communications apparatus as it is a fact-finding mission.”
Jonathan Phillips and his teammates weren’t driven by the hunger for attention. They were driven by a cause. They truly believed that the future existence of human life on Earth was hanging in the balance. To understand their dedication to this cause, it is useful to consider the story that the committee was trying to communicate through its marathon series of hearings.
This was a story of an unprecedented geological event that was initiated by humankind. It could be described as the detonation of a gigantic carbon bomb. The essence of this story would become a contested battlefield in itself, with groups like Koch Industries spending millions of dollars to sow doubt about the basic facts of the matter and the broader meaning of those facts.