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.
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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.
The fuse of the carbon bomb began to smolder sometime around the year 1800, when industrialized cities started burning coal to heat homes and power primitive engines. In 1850, about 198 million tons of carbon were released into the atmosphere.
Carbon is a curiously durable element. It can float in the sky for thousands of years without breaking down. Carbon has another important characteristic—it is translucent. That means that it blocks sunlight, just slightly, like a veil of smoke. This translucence is vitally important to life on Earth. A thin layer of compounds like carbon dioxide and water vapor in the atmosphere act like a shield, retaining some of the sun’s warmth on the surface of the planet.
The mechanics of how this works are simple and well understood. About two-thirds of the sun’s heat hits the Earth, but then bounces off into space. The remaining third of the heat is kept on Earth because the thin layer of translucent elements trap it there. For about the past 400 thousand years, carbon levels in the atmosphere bounced around in a very narrow band, between roughly 200 and 400 parts per million. This period of relative climate stability coincided with the rise of agriculture and the development of civilization.
The fuse of the carbon bomb was truly lit in 1859, when Edwin Drake hit his gusher of an oil well in Pennsylvania and began the age of oil in America. When a barrel of crude oil was burned, it released about 317 kilograms of invisible carbon dioxide into the air. In 1890, 1.3 billion tons of carbon were released into the sky. Some of it went back into the trees, some of it went into the oceans, but some of it stayed in the atmosphere.
In 1930, 3.86 billion tons of carbon were released into the atmosphere. In 1970, 14.53 billion tons of carbon were released into the atmosphere. It was joined by other industrial gases that wafted up from factories, refineries, feedlots, and fertilizer plants, gases like methane and nitrous oxide that were also invisible and seemingly harmless. Some of these gases blocked far more light than carbon, on the order of 30 to 50 times more. As more of these gases were released into the atmosphere, more heat would be trapped. This is incontrovertible.
In the 1950s, a chemist and oceanographer named Charles David Keeling installed an air monitor on top of Mauna Loa volcano in Hawaii. Its measurements showed that carbon was accumulating in the atmosphere. In 1959, carbon composed 316 parts per million in the atmosphere. In 1970, it composed 325 parts per million. In 1990, it was 354 parts per million. Concurrent with this discovery, scientists tested air samples that were trapped in tiny bubbles in the glaciers of Antarctica.
This proved that during the early millennia of human existence, carbon levels remained in the narrow band between roughly 200 and 300 parts per million. Now that carbon levels exceeded that threshold, it raised troubling questions: What would the world’s climate be like at 360 parts per million? Or at 380? Or at 400? There was no certain answer.
In 1988, a group of scientists working with the United Nations formed a consortium called the Intergovernmental Panel on Climate Change, or IPCC, which set out to synthesize the research on global climate change occurring around the world. Initially, the IPCC was very cautious and even seemed to downplay the potential risks from higher carbon concentrations. The panel said that more study was needed, and that no rash actions should be taken that might dampen the prosperity that came from burning fossil fuels.
Koch Industries, ExxonMobil, and other firms spent millions of dollars to support the idea that there was an “alternative” view about climate change between 1991 and 2009.Each ensuing IPCC report, however, became more certain than the last. Carbon concentrations were increasing, which inevitably trapped more heat in the atmosphere. Humans were responsible for the increase. The future implications were unpredictable, but could be severe. The world could expect more dramatic rainfall events and bigger storms in part because warmer air held more moisture. Areas that were parched would become drier. Weather data showed that the world was already getting warmer, as would be predicted when greenhouse gases increased.
While the scientific community was in agreement on these facts, the American public was in doubt. This wasn’t accidental. As early as 1991, Charles Koch and other executives in the fossil fuel industry helped foster skepticism about the evidence of climate change. When George H. W. Bush announced that he would support a treaty to limit carbon emissions, the Cato Institute held a seminar in Washington called “Global Environmental Crises: Science or Politics?”
The seminar featured scientists who questioned the prevailing view that humankind’s carbon emissions caused the Earth to warm, including Richard S. Lindzen, a professor of meteorology at MIT, Charles Koch’s alma mater. A brochure for the seminar featured a large-print quote from Lindzen in which he said: “The notion that global warming is a fact and will be catastrophic is drilled into people to the point where it seems surprising that anyone would question it, and yet, underlying it is very little evidence at all.”
The seminar was not a fringe event. Lindzen and other speakers at the conference were invited to join White House staffers in the Roosevelt Room while they were in town for the conference, according to an internal White House memo from Nancy G. Maynard, who worked for the president’s Office of Science and Technology Policy. Maynard’s boss forwarded the invitation to Bush’s chief of staff, John H. Sununu, under the subject line “Alternative Perspectives on Global Warming.”
Koch Industries, ExxonMobil, and other firms spent millions of dollars to support the idea that there was an “alternative” view about climate change between 1991 and 2009. These groups had a distinct advantage in the debate. It took many decades for firm scientific consensus to take shape. Scientists are, by nature, cautious and self-doubting. They were hesitant to push the narrative further than the data would support.
And the mechanisms of climate change were impossibly complex and hard to quantify. It was difficult to estimate, for example, just how much carbon the world’s oceans might be able to absorb over time, or exactly how many degrees the earth might warm over a hundred years if the atmospheric levels of carbon reached 400 parts per million. Even as the global scientific community slowly cohered around the understanding that human activity caused climate change, this cottage industry thrived—a cottage industry built to highlight all the points of uncertainty in the scientific debate.
ExxonMobil eventually abandoned this strategy, but Koch Industries persevered. In 2014, Koch Industries’ top lobbyist, Philip Ellender, said that the evidence was in doubt. “I’m not a, you know, climatologist or whatever,” Ellender said. “Over the past, I think, hundred years, the earth is warmer. Over the past roughly eighteen, it’s cooler . . . Whether or not the increases and fluctuations are anthropologic or not is still a question.”
In private, Koch Industries officials were even more dismissive of the science around climate change. One former senior Koch Industries executive, a trained scientist who only made business decisions after first analyzing reams of data, explained that he believed global warming was a hoax invented by liberal politicians who sought to use the fiction as a way to unite the populace against an invented enemy.
After the fall of the Soviet Empire in 1991, this executive explained, American elites needed a new, all-encompassing enemy with which to frighten the masses, and so they invented one with global warming. All the data on atmospheric carbon levels and rising temperatures were part of this conspiracy, the executive said.
This is what lent the sense of desperation to Phillips and his team, as they conducted their series of hearings on climate change. Phillips and his colleagues were painfully aware of the data underpinning climate change. They spent their days reading the scientific research about global climate change, and they felt like they had a window into a terrible truth that most people needed to see. This was the reason behind the parade of hearings and the celebrity appearances that they held on Capitol Hill. Their desperation derived from the fact that no one seemed to be listening.
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When Markey’s committee realized that hearings alone weren’t changing the political dynamic, they took a more provocative step. They wrote a bill of their own. The Select Committee couldn’t pass the bill or even introduce it for a vote. But the team knew that the mere existence of a bill would make the issue all the harder to ignore.
The shape of the bill reflected the politics of the time. There were many ways that the government could stanch greenhouse gas emissions. Congress could tax carbon emissions, incentivizing companies to use lower-carbon sources of energy. Or Congress could regulate carbon like a pollutant, setting strict limits on its release.
Rather than take these straightforward approaches, the committee settled on a complicated, far-reaching regulatory structure that embodied the internal paradoxes of the neoliberal philosophy that dominated policy making from the Clinton administration onward. The bill sought to dramatically expand the reach of government, while harnessing the power of private markets. In this case, the approach was called cap and trade.
There was surprisingly little dissent within the committee against this approach. “Very early on, people got the sense that this is going to be a cap-and-trade bill,” Phillips recalled. “The think tanks in town and everyone in the talking head community—no one was talking about a carbon tax. Everyone was talking about cap and trade as being the vehicle. At that time, there was sort of this consensus that it was the moderate, most economically efficient way of dealing with pollution.”
Phillips said it was also attractive because it had the advantage of enjoying bipartisan support. “It was a Republican idea,” he said.
The cap-and-trade policy was made famous under President George H. W. Bush, who used it as a way to combat acid rain. The concept was simple. The government capped the total amount of a certain pollutant that could be released. But then it gave companies a license to release that pollution. A company could pollute as much as it desired, but it paid the price to do so by purchasing pollution “credits.” If a company cut the amount of pollution it released, it could earn credits for doing so and turn around and sell them.
This created a “market” for pollution. Polluters paid to pollute, companies earned money by cutting pollution. All the while, government determined how much total pollution was allowed by setting the cap. The government could turn the screws and push the caps downward, making a stronger and stronger incentive to cut emissions.
Cap-and-trade gained support after Bush imposed it on power plants that released sulfur dioxide, which created acid rain. By 2008, emissions were 60 percent lower than they had been in 1980. More importantly, the cuts were made at much lower costs than people had predicted. The cap and trade system on sulfur dioxide was imposed in 1990.
When Ed Markey’s committee realized that hearings alone weren’t changing the political dynamic, they took a more provocative step. They wrote a bill of their own.With their bill, the Markey committee aimed to create the largest cap-and-trade system in history. The limit on greenhouse emissions affected virtually every corner of the modern economy, from automobiles, to power plants, to factories. The policy mechanisms to do so, laid out in the bill’s thousand pages, were almost impossibly complex.
Ed Markey unveiled the bill in May of 2008, giving it the consumer-friendly name of “iCAP.” After Obama became president, Nancy Pelosi became emboldened. She helped initiate a coup in the Energy and Commerce Committee. A usually perfunctory vote on the chairmanship went against Dingell. He was replaced by the California liberal Henry Waxman, who vowed to pass a law to control carbon emissions. Ed Markey and his committee, after years of agitating from their basement office, were now in a position to do more than agitate. They were in a position to govern. They had opened a pathway to push their bill through Waxman’s committee.
The iCAP bill was put on the legislative operating table in 2009 and opened back up. It would become known as the Waxman-Markey bill, an ambitious cap-and-trade system that quickly became a centerpiece of Obama’s legislative agenda. The bill had been in the works for years and had been the subject of hundreds of hours of congressional hearings.
In the early days of the Obama era, even more hearings were held. The select committee worked even harder as it drafted new language and met with members of Congress and lobbyists from the energy companies and environmental groups.
The long days of grinding work in the basement office were thrilling, in a way, for Phillips. He had the sense that he was a part of history. And he wasn’t the only one. At night, Phillips and his friends went out to drink at cheap bars. They must have felt something like the young staffers back in the 1930s, when the mighty legislative pillars of the New Deal were being put into place. They were laying the governing framework of
They were part of the strongest governing coalition in years, or perhaps decades. An acquaintance of Phillips’s, a young speechwriter named Dylan Loewe, wrote a book during that time entitled Permanently Blue: How Democrats Can End the Republican Party and Rule the Next Generation. Galley copies were passed around Washington.
People read Loewe’s prediction that the Democratic Party was in a position to hold the White House and Congress for the next quarter century, and this prediction seemed entirely believable. The Republicans had been reduced to a factional minority with no clear path back to power. The Democratic Party had the force of history at its back, pushing it forward. future generations.
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Excerpted from Kochland: The Secret History of Koch Industries and Corporate Power in America by Christopher Leonard. Copyright
