Discovery

january 2011 THE QUARTERLY NEWSLETTER OF KOCH COMPANIES Creating real value – and real jobs If nations made New Year’s resolutions, , which trails only Georgia for the Elsewhere, Koch announced job creation would probably be at the most Koch company jobs of any state, is four international expansions last year, top of many lists this year, especially for seeing especially strong growth among including projects in Australia, Brazil, countries with high unemployment. Koch business interests. Mexico and the U.K. Across all of Koch Industries, there are Flint Hills Resources is completing In all, Koch companies have completed currently more than 50,000 employees $350 million in refinery upgrades at its more than $32 billion in acquisitions and in the United States Corpus Christi investments since 2003, including $3 bil- and another 17,000 Koch companies support more complex and lion just last year. internationally. recently opened Fundamentals “And that doesn’t than 200,000 jobs in the U.S. a new fuels Although governments tend to subsidize include the more terminal (above) – Harrah Analytics the kind of short-term job creation that than 2,000 open near Austin. can lead to temporary growth, Koch’s positions we’re trying to fill,” said A new sulfur prilling unit in Corpus focus is on long-term growth and the Dale Gibbens, KII’s vice president Christi, operated by FHR, enables Koch creation of real jobs. for human resources. Sulfur to market product in Asia, Europe and South America. “Real jobs,” notes , KII’s But those totals are only the beginning. chairman and CEO, “are those that create Harrah Analytics, an independent Koch Pipeline Co. is expanding its South real value by effectively and efficiently research company, recently studied the Texas system to move more crude oil and producing what people want. Real jobs direct economic effects of Koch’s U.S.- condensate to Corpus Christi. increase our overall quality of life.” based jobs. In 2012, KPL plans to complete Using formulas provided by the U.S. a 16-inch pipeline connecting Koch companies have completed more than Department of Commerce and the Eagle Ford crude oil producers $32 billion in acquisitions and investments Bureau of Economic Analysis, Harrah with Corpus Christi. That project then calculated the indirect and induced will include the construction of since 2003, including $3 billion last year. effects of those jobs. storage tanks, pumps and truck receipt stations. The result was a total of more than It is productivity that determines how 200,000 jobs nationwide. Texas is also a growth market for those jobs should be rewarded. , which is looking to fill at Do the math “Wages can only rise when productivity least 100 open positions at its manufac- rises,” Koch says. State by state, the multiplier effect of turing facilities and engineering office. “Governments (and voters) need to Koch jobs is significant. In October, the governors of Louisiana realize that anything that decreases or In Georgia, for example, four jobs bene- and Arkansas both celebrated Georgia- impedes productivity – such as subsidies fit from every Koch company employee. Pacific’s announcement that it would and mandates – will only hurt employ- In Texas, the multiplier is 5.6 jobs per invest $500 million in new technology ment in general and cost the economy Koch company employee. for two mills, one in each state. jobs in the long run.” www.kochind.com/newsroom/jobs

this issue… New compliance vision pg 4 2010 Year in Review pg 5 Why buy ethanol? pg 9 Picture perfect at 75 pg 11 Postal Pipeline

Why would Koch want to participate in I grew up in Oklahoma and received an Wilmington, Del., in 1901. the U.S. ethanol market? From all that AgEcon degree from OSU in 1992. I TheCangarda was re-launched in Cali- I read, ethanol in the U.S. cannot be have known about Koch my entire life. fornia in 2007 and later sailed through produced economically versus gasoline But I’ve never actively researched you. the Panama Canal. It is now based in and only is used because of government In 2001, my husband and I moved to New England. subsidy. This seems inconsistent with Western Australia to start our own beef The historic restoration of theCangarda “growth through the economic means.” cattle feedlot about two hours inland is of particular importance to Coen and Paul Snyder from Perth. We invested our life savings its staff, as we feel this brings us back to Senior systems analyst - INVISTA and built up our business to two-thirds our roots. Coen was established in 1912 Chattanooga, Tenn. of its planned and approved design. with most of our early burner installa- tions aboard seagoing ships. Then the state’s Department of Environ- ment and Conservation shut us down Being a member of one of the Koch when we actively campaigned against family of companies, we hope this Australia’s so-called Carbon picture finds its way into the picture Reduction Scheme. portrait for Mr. Koch. We knew that this horrendous new Matthew N. Hall tax would cause severe difficulties for Applications engineer - Coen Co., our business. We are now engaged in a Woodland, Calif. battle of epic proportions as we try to bring this out-of-control government bureaucracy into line. I hear that Al Gore promoted a demean- FHR’s ethanol plant in Shell Rock, Iowa. ing website about Koch Industries Many Koch company employees have asked the same because of its public stand on the same question following Flint Hills Resources’ recent purchase issue. I have not visited that website, but of ethanol plants in Iowa. For an in-depth analysis of that I went straight to yours. decision, see the story “Why buy ethanol?” on page 9. I applaud your commitment to free mar- ket enterprise, and I commend Charles G. Koch’s “Evaluating a president” article in October’s Discovery. Your website is informative, exciting and honest. It was an absolute pleasure and a breath of fresh air to “tour” your business and your minds. I will be sharing your website and Perspectives This photo of the Cangarda was one of 11,088 images articles prolifically. used to create Charles Koch’s 75th birthday portrait. All the best for your continued success. For more about that portrait, see page 11. Janet H. Thompson Narrogin Beef Producers Letters and other submissions become the property of Koch Narrogin, Western Australia Industries, Inc., and may be reproduced in whole or in part, including your name, for any purpose and in any manner. Letters may be edited for length or clarity.

In 2006, Coen Co. (part of Koch Chem- Discovery January 2011 | Volume 17 | Number 1 ical Technology Group) sold a burner Editorial Board Questions? Comments? system to Rentech Boiler Systems of Philip Ellender Contact: Rod Learned Rich Fink 316.828.6136 Abilene, Texas. Jeff Gentry [email protected] About 60 FHR volunteers, including Lynn Kram and Dale Gibbens Ambrey Gartner, helped clean up a section of the Rentech then sold that system to Dr. Mary Beth Jarvis Publication Design: Charles Koch Deanna Crockett Bluffs near in Robert McNeil, who installed the Jim Mahoney Koch Creative Group October. This annual project is in its 11th year. equipment as part of his restoration of Dave Robertson the steam-sail yacht Cangarda, built in www.kochind.com ©2011, Koch Industries, Inc. Koch is an EOE. M/F/D/V 2 International News

Versailles - Implementing wastewater purification plans fit Rotterdam - KS&T’s refinery celebrates processing its Berazategui - INVISTA employees help commemorate for a king. 250 millionth barrel. 50 years of independence.

France – When King Louis XIV began delivery at the end of 2012 and start-up completed their fifth consecutive year transforming Versailles from a hunting of the plant is expected in 2013. without a lost-time injury. lodge into a palace, the area had perhaps When completed, this project will be Argentina – A golden anniversary is always 1,000 residents and little infrastructure. Koch Membrane Systems’ largest mem- something to celebrate, especially if it Today, the community of Versailles is brane bioreactor installation in Europe. involves parades, sporting events and a home to almost 90,000 residents and PURON membranes have become quite visit from the president. its famous palace and gardens attract an popular in , where KMS has had The city of Berazategui enjoyed all of estimated 7 million visitors per year. 13 orders and start-ups in the last 12 that and more on Nov. 4 as its citizens Among the utilities that serve this thriving months, including several large-scale celebrated the fiftieth anniversary of their Paris suburb is a large wastewater treat- municipal projects. independence and the founding of their ment plant at Carré de Reunion, next to the The Netherlands – Employees at Koch Sup- city as a part of Buenos Aires province. famous gardens at the Palace of Versailles. ply & Trading’s Rotterdam refinery had Known for its ranching and meat packing This large plant processes an average of lots to celebrate in December. industries, Berazategui is also home to 43,500 cubic meters (close to 11.5 mil- On Dec. 2, the refinery reached an opera- an INVISTA plant. That facility, built in lion gallons) of wastewater per day. tional milestone by processing its 250 mil- 1963, produces nylon 6,6 polymer. Because of rising demand for water and lionth barrel of crude oil and condensate. On Nov. 4, Nestor Samman, site man- stricter effluent quality requirements Four days later, it achieved its highest-ev- ager, Diego Almada, site controller imposed by the European Community, er single day throughput: 83,621 barrels. and Fabiana Iasenza, human resources the plant is in need of improvements. December was also the best month for manager, presented the mayor, Juan Jose In September, the Veolia Group of OTV throughput in the plant’s history. It pro- Mussi, with a congratulatory plaque on France SNC chose Koch Membrane cessed an average of 78,800 barrels per behalf of all INVISTA employees. Systems to provide PURON® membrane day. The previous record was 78,649. “We think it’s important to participate in bioreactor modules for upgrading the Thanks to that record-setting month, these activities,” said Samman, “because Versailles facility. 2010 ended up being a profitable and they strengthen our community relations. Most conventional wastewater treatment record year for total throughput, beat- And besides, we are citizens, too!” plants use a three-step process. First, ing the previous annual total by almost Many INVISTA employees from Beraza- coarse solids are screened out of the wa- 150,000 barrels. tegui were in the crowd of 10,000 people ter. The remaining solids are then treated “Relative to FHR’s U.S. refineries, we are watching a parade that was attended by with bacteria before the water is further a small facility,” noted Louis du Rieu, site Dr. Cristina Fernandez de Kirchner, the purified in a third step. manager. “Given our size, processing a president of Argentina. By using PURON technology, the last quarter of a billion barrels is significant INVISTA also sponsored the 24th annual two steps can be combined into one. and something we achieved sooner as a Berazategui Bicycle Race, one of the The membranes provide a more effective result of the team’s effort to achieve high region’s most important sporting events. barrier against bacteria and are better at run rates when the market conditions Winners crossed the finish line under an removing suspended solids. favored that.” INVISTA banner and employees from This technology will also help expand the The facility also celebrated a safety mile- the Berazategui plant presented LYCRA® capacity of the existing plant. stone in 2010. In August, Koch employ- fiber shirts to the race winners in the Elite The PURON modules are scheduled for ees and contractors working at the site and Under-23 categories. 3 New compliance vision Last year, the corporate compliance team Moving target KII Compliance & Ethics Vision rolled out an updated version of the KII Butz believes that more complicated and Ensure excellence in all areas of compliance, Compliance and Ethics Vision. ever-changing regulations are some of ethics and EHS in order to enhance long-term “For years we’ve had an absolute commit- the greatest challenges we face in today’s business success and benefit society. ment to 10,000 percent compliance,” said business environment. Tom Butz, director of corporate compli- Flint Hills Resources experienced this in ance and environmental health and safety Texas last year when the EPA declared the for Koch Industries. state emissions permits that the Corpus “That vision – of having 100 percent of Christi refinery had been abiding by were our people doing the right thing 100 per- no longer sufficient. cent of the time – has been an important “It’s always difficult for a business to find contributor to our success.” that the rules have changed in the middle So why update the vision? of the game. But the reality these days is “Because our old vision, with its focus that we see that sort of thing happening on existing laws and regulations, was not more and more often. enough to get us to the level of perfor- Georgia-Pacific’s summer safety campaign and other safety mance we want to achieve. We’ve got to initiatives helped reduce lost-time injuries significantly. think beyond that. Overall, Georgia-Pacific had 55 fewer LTIs in 2010. “Compliance, while essential, is no longer that may not be adequately addressed by enough. We need to go beyond compli- existing laws and regulations. ance to achieve compliance excellence, and that requires a new way of thinking.” “We also want to eliminate risks that could cause serious harm to people or the Defining excellence environment, or threaten the survival of Butz uses the example of injury reporting the business,” said Butz. to help explain the difference between “Both of those outcomes – compliance compliance and compliance excellence. With more than 100 STAR sites in OSHA’s Voluntary and risk management – are extremely “If you are timely and accurate in reporting Protection Program, Koch companies rank third in important. We want to absolutely protect and tracking every workplace injury, you’re the U.S. (behind GE and the U.S. Postal Service). and benefit our communities and em- probably in full compliance with the law, ployees, as well as preserve and enhance but you may still be suffering injuries. “Something that is perfectly acceptable long-term company success.” “What we want to do is not only accu- today can become open to challenge or “It doesn’t matter which Koch company rately report injuries – which is what the question tomorrow.” you work for. We all need to share in KII’s law requires – but eliminate them. Butz believes that compliance excellence vision for compliance and act in accordance “To do that, we’ve got to continue to is yet another example of Koch’s commit- with our MBM® Guiding Principles.” think beyond existing rules and laws. ment to continuous improvement. Beyond compliance It’s not enough to just follow the law. “We agree with W. Edwards Deming Compliance excellence requires that What we want is an absolute commit- that the need for continuous improve- employees not only know the compliance ment to compliance excellence.” ment is unending,” notes Butz. As Dem- requirements for their roles, but be able ing put it: “You never get out of to identify and manage compliance risks. this hospital.” “We want to move ahead by striving to Purpose of compliance identify and manage risks that aren’t ef- According to the KII Compli- fectively addressed through existing laws ance and Ethics Vision, the and regulations. purpose of compliance is to “That’s why we’re going to be working enhance long-term business suc- even harder to ensure absolute excellence cess as well as to benefit society. in all areas of compliance. “Ultimately, our goal is to “Compliance excellence is a clear way to ensure compliance and strive enhance our success and benefit everyone.” Koch ranches in and Texas won three environmental awards last year. to manage those risks, if any, www.kochind.com/ehs 3 4 11 Georgia-Pacific announces plans to purchase Grant Forest Products assets in the U.S. and .

12 A 7.0 earthquake devastates Haiti’s capital; relief supplies donated by GP arrive the following week.

2010YEAR IN REVIEW

January 11 February

6 July 17

6 Koch Knight celebrates its 100th anniversary.

14 Koch Nitrogen announces plans for a new control center at its Enid, Okla., plant.

30 Georgia-Pacific acquires pulp mill assets in 17 FHR announces plans to acquire two Iowa Perdue Hill, Ala. ethanol plants in Menlo and Shell Rock. 2 Tom Carey, Koch Industries’ chief financial officer 1 Koch Europe begins trading , from 1961 to 1988, dies at age 81. power and emissions.

5 Crude oil trades at its lowest price of the year: 21 The U.S. House passes the Senate version of a $69.59 per barrel. highly controversial Health Care Bill, 219-212.

10 Georgia-Pacific announces the donation of 682 31 Georgia-Pacific announces plans for a $500 acres of land outside its Wauna, Ore., mill to the million investment in “third generation” Nature Conservancy. papermaking technology.

24 INVISTA enters an agreement making Lowe’s the exclusive home improvement retailer for STAINMASTER® carpet.

24 March 31

August 23 September

7 Koch Sulfur Products begins global marketing of prilled sulfur from its new Corpus Christi facility.

23 Founder’s Day is celebrated at Koch company sites around the world, including Atlanta (above).

28 Koch Pipeline announces another expansion of its South Texas crude oil-carrying capacity. 14 Airborne ash from the eruption of Eyjafjallajokul volcano in Iceland shuts down many of Europe’s busiest airports for five days.

20 BP’s Deepwater Horizon oil rig topples and explodes in the Gulf of Mexico, killing 11 and creating the largest oil spill in U.S. history.

26 KCTG completes its sale of Canada-based IRIS Power to Qualitrol.

26 Koch Membrane is named the Water Technology Company of the Year at a conference in Paris.

April 26 May

14 October 1

8 U.S. 30-year mortgage interest rate averages hit a 1 Charles G. Koch celebrates his 75th birthday. record low: 4.27%. 3 QE2 – The Federal Reserve pushes an additional 10 Venezuela announces it has expropriated Koch $600 billion into the U.S. financial system. Minerals’ Fertinitro assets. 9 INVISTA announces a new operations goal of reducing 14 Matador Ranch is awarded two of Texas’ highest energy intensity by 20 percent by the year 2020. environmental stewardship honors. 10 FHR’s Mustang Ridge terminal opens.

20 INVISTA announces plans to double the capacity of 12 U.S. natural gas inventories peak at an all-time high its Shanghai plant, Asia’s largest airbag fiber facility. of 3.843 trillion cubic feet. 1 Chase Koch marries Annie Breitenbach. 2-6 10th annual Flint Hills Resources International Children’s Festival for the Performing Arts in 3 David H. Koch’s 70th birthday. St. Paul, Minn. 3 INVISTA Performance Surfaces & Materials announces $14 million in R&D investments. 7 The euro trades at a four-year low vs. the U.S. dollar: $1.1876. 6 Parliamentary elections in the U.K. end Labour’s 13-year rule and usher in the first coalition government since World War II. 14 The EU announces plans for a trillion-dollar bailout of Europe’s troubled economies. 20 Crude oil trades at $64.24 bbl, its lowest price for the year. 26 Georgia-Pacific acquires OSB facilities of Grant Forest Products.

1 June 7

November 2 December

2 KS&T’s Rotterdam refinery processes its 250 millionth barrel of crude. 7 Salvation Army Angel Tree campaigns in Atlanta and Wichita serve a total of 1,556 needy family members. 12 FHR’s Peru, Ill., chemical plant celebrates 900 consecutive days without a recordable incident. 16 Koch Pipeline Co. receives shareholder approval to build a 16-inch pipeline in Texas for transporting Eagle Ford Shale crude oil. 23 FHR’s Corpus Christi facility reaches a safety milestone: 10 years (3,652 days) without a lost-time injury. 31 Koch Pipeline Co. finishes the year with zero lost-time injuries or recordable incidents. The Energy Tax Act creates Congress enacts various The Tax Reform Act increases the an ethanol subsidy of 40 tax benefits for ethanol ethanol subsidy to a record-high cents per gallon. producers and blenders. 60 cents per gallon. Why buy ethanol? 1978 1980-84 1984 Last August, Flint Hills Resources an- nounced its plans to purchase two etha- nol plants in Iowa. That transaction was completed less than a month later. Then, early this month, FHR announced plans to buy two more ethanol plants, also in Iowa. That transaction is expected to close this quarter. All of this investment in ethanol facilities has left some employees scratching their heads and wondering: what is going on? After all, ethanol production is heavily subsidized, mandated and protected by tariffs, while Koch companies openly op- pose such government programs. So, why buy Iowa ethanol plants?

Reality check Built in 2008, this second-generation ethanol plant in Menlo, Iowa, is one of two purchased by FHR in September. Prior to these acquisitions, FHR and KS&T were already significantly involved based nor helpful to society in general; Coming to conclusions however, they are – especially in the case in the ethanol business. Brad Razook, president of Flint Hills Re- of ethanol – the law. In fact, Koch’s ethanol trading business sources, has answered plenty of questions currently purchases and markets about There are stringent federal requirements from employees ever since the September one-tenth of all the ethanol produced in that call for blending biofuels such as purchase of the Iowa ethanol plants. ethanol into U.S. transportation fuels. the United States. His answers to those questions are usu- What’s more, FHR believes the capa- The federal Renewable Fuels Standard ally simple and straightforward. will require blending 15 billion gallons bilities necessary to be successful in the “Because of government mandates, we of biofuels by next year. ethanol industry are very similar to the believe ethanol will be part of the trans- proven operations and commercial skills Ten years later, the annual requirement portation fuels market for years to come. it has developed in its fuels business. will jump to 36 billion gallons. That’s a We also want to remain competitive,” said FHR has made a point of focusing on 200 percent increase over 2009 levels. Razook. “It’s really as simple as that. advantaged ethanol plants in the Midwest Some states are even more aggressive “We are always going to oppose govern- where corn production is significant. and have approved significantly higher ment policies we believe are inconsistent FHR’s recent acquisitions fit well ethanol mandates. with liberty and economic freedom. geographically with several other FHR For example, in 2005, Minnesota’s legis- assets, including fuel and termi- lature upped that state’s ethanol require- Ethanol Facts nals, a widespread distribution network ment to 20 percent or the highest blend · Ethanol was used as engine fuel as early as 1826. that includes Iowa, and the Pine Bend (currently 10 percent) allowed by the refinery, where ethanol is blended with U.S. Environmental Protection Agency. · Iowa is the largest producer of ethanol in the U.S. gasoline before delivery to customers. Generally speaking, refiners are respon- · A bushel of corn yields about 2.8 gallons of ethanol. So to say that FHR is a newcomer to sible for blending. ethanol would be inaccurate. And the amount · A gallon of E100 ethanol yields 81,800 BTUs of energy. A gallon of gasoline yields 114,000 BTUs. In reality, the issue for many employees is of ethanol FHR probably more philosophical. and other refin- · FHR’s ethanol plants each produce about 110 million ers need to buy gallons per year. They know Koch Industries is a stead- or produce fast supporter of market-based business to meet state · Each plant processes an average of 107,632 bushels policies and economic freedom, and and federal of corn per day. always has been. requirements · Each plant employs about 50 people. Mandates, subsidies, protective tariffs continues to and over-regulation are neither market- increase. Timeline and facts sources: FHR, U.S. Energy Information Administration, U.S. EPA 9 The EPA requires the year-round use of The ethanol subsidy The Energy Policy Act requires that U.S. gasoline The Energy Independence and Security reformulated gasoline (typically made with is reset at 51 cents contain a minimum volume of renewable fuel, Act requires the use of 36 billion ethanol) in smoggy metro areas. per gallon. primarily ethanol made from corn. gallons of renewable fuels by 2022.

1995 2005 2005 2007

But we are also going to abide by the law, Jatropha is an ined- and ethanol is required by law.” ible plant that can Noteworthy Razook is especially concerned about how thrive in marginal government requirements for renewable soils and produces fuels and potential low carbon fuel stan- seeds with a very The United States Constitution – dards could affect the employees at FHR. high oil content. It A Graphic Adaptation – by Hennessy is capable of yield- and McConnell. “Once a law is enacted, we are not going ing four times as The U.S. Constitution, formally adopted to place our company and our employees much biofuel per in 1787, is the oldest written constitution at a competitive disadvantage by not par- acre as corn. Jatropha seeds. ticipating in programs that are available still used by any nation. to our competitors. “In spite of becoming more involved in subsidized and mandated products,” Ra- When it was written, the Constitution “This is why our team made such an effort zook concluded, “we continue to oppose broke new ground by affirming that the to identify and acquire state-of-the-art, any government interventions that waste source of power comes from the gov- competitively advantaged ethanol plants.” resources and undermine productivity. erned, not the government. Razook says the real goal of FHR’s etha- “This is just as true when interventions There is no short- nol business is to build upon the solid help us as when they hurt us.” age of books about position that these plants have already the Constitution. achieved and improve their profitability Good neighbor The U.S. Library so that they can compete in any market Something happened last October that has of Congress lists environment, subsidized or not. lots of folks in Iowa talking about FHR. thousands of titles on the subject. “We are excited by the large number of On Oct. 14, a 59-year-old corn farmer from value-added opportunities and innova- Anita, Iowa, was killed in a combine fire. What makes this book different tions that we see are possible,” Razook Earlier in the year, that farmer contract- from most of those said, “and we really look forward to see- ed to deliver 100,000 bushels of corn to titles is its format. ing what we can do with these assets.” the ethanol plant in Menlo, one of the Vision two plants FHR acquired in September. It is a graphic novel that not only explains essential concepts Razook also reminds employees about the Four days after his tragic death, 400 people in words but in images. showed up at his farm with 14 combines, recent updating of FHR’s vision, which Despite what some might consider a less- now includes a significant emphasis on more than 40 semi-trucks and other equipment to help harvest his corn crop. than-serious format, the book provides renewable fuels and their value chains. solid insight regarding the development of “Regardless of how they come about, new They were intent on helping the farmer’s the Constitution and its 27 amendments. family live up to his commitment. or emerging markets, such as renewable It also answers some intriguing questions fuels, are an opportunity for us to create After the trucks were loaded with corn, that few have thought to ask. value within the rules the government sets. they headed to the FHR plant in Menlo, How many times have people tried to “Based on what we “The government requires where they were surprised to receive special treatment. amend the Constitution? (More than believe the rules will renewable fuels to be 10,000.) Are filibusters mentioned in the be, our new vision blended with transportation FHR employees ushered volunteer Constitution? (No.) If the president-elect drives us to innovate fuels. Our focus on the drivers to the head of the line and dies before inauguration, who becomes and create step-out several plant employees stayed after president? (The vice president-elect.) opportunities based renewables value chain will hours to help unload and complete on existing technolo- position us for the future.” the job. As an engaging introduction to America’s gies and products.” Brad Razook most essential document, this graphic By six o’clock that night, all adaptation does a commendable job. For example, in addition to President, FHR 100,000 bushels of contracted corn traditional corn-based ethanol production, had been delivered and some strong rela- FHR has also invested in a seed genetics tionships in Iowa had been cemented. company, SG Biofuels. “We knew these were great employees “It is of great importance in a republic… to guard the society against the oppression

This California company, based in San before we bought the plant,” said Razook. True

Diego, is a leader in the development of “What they did that day really under- of its rulers.” economically viable biofuel production scored our MBM® Guiding Principles, Too - Federalist No. 51 from jatropha seeds. especially principle nine, respect.” Looking Back

Egypt Peru Singapore Jordan Picture perfect Last August, Koch Industries’ president he held up a packet of GP paper towels There were plenty of individual touches, and COO, Dave Robertson, sent a featuring Thirst Pockets technology. too, including the rearrangement of indi- confidential e-mail to thousands of Koch made it a point to send in vidual photos for better effect. company employees around the world. two photos taken with his older brother For instance, the twinkle in Charles’ eye “In this case,” explained Robertson, last summer in San Francisco. was created using a picture of his wife, “confidential meant every- Award-winning Liz, taken last spring at the marriage of one but Charles Koch.” photographer Sue their son, Chase. The e-mail shared plans for a Marxer sent in several Tent meeting unique birthday present hon- photos taken at the On Nov. 1, Charles Koch’s 75th birthday, oring Charles Koch’s 75th Beaverhead Ranch in more than 2,000 Wichita-based Koch birthday in November. Montana. company employees gathered in a giant “We want to surprise him,” In addition to these, tent erected on the parking lot across Robertson wrote, “by creat- dozens of pictures from INVISTA’s headquarters. ing a photomosaic portrait… from The program that created from thousands of albums and the cor- morning included pictures supplied by Koch porate archives were comments from company employees.” considered. Rich Fink, CEO Those pictures could be of Applying the Brake of KCPS, and a anything, as long as they video produced were work-related. To ensure 10,000 by Koch scholars percent compliance, The photos that immediately This photomosaic was created from at the Charles G. Brooke Peoples of began pouring in were both 11,088 quarter-inch-square images. Koch Foundation. Koch Companies Pub- amazing and amusing. The biggest Employees get a close-up look at the lic Sector tracked down release forms for portrait on display in Wichita. For Mr. Koch every image with more than one person. surprise was a visit from Steve Bridges, famous for his Employee photos were forwarded from After weeks of preparation, Daniel Brake impersonations of George W. Bush on dozens of countries, including Spain, of Koch Creative Group had the unenvi- the Leno and Letterman TV shows. Canada, Korea, Australia, Brazil, China able task of arranging the photos for the (To view his Koch performance, employ- and Italy. final product. ees can visit the home page of D-Net.) Some of the photos included large groups To make certain his computer-assisted When it came time for Robertson to of employees gathered at a Koch facility. process would work, Brake created a pro- unveil the birthday portrait, he spoke for Others were as simple as a self-portrait totype using dozens of personal photos. thousands of Koch company employees taken with a mobile phone. The success of that trial run led to high when he said: “Charles, we hope you A Koch Supply & Trading employee hopes for the finished product. enjoy this portrait. shared a photo taken atop a camel during Although a sophisticated computer “And I hope you understand how a business trip to . program did much of the sorting, many hard it is to come up with a birthday A Georgia-Pacific employee submitted a hours of cropping and rendering time present for a man who could buy just picture taken at Machu Picchu, Peru. In it, were required to assemble the images. about anything.” 11 Dr. Richard H. Fink Perspective KII Executive Vice President and CEO, Koch Companies Public Sector, LLC There were lots of questions prior to the that should qualify as a cut is when actual continually overestimate revenues and November elections in the United States. spending is reduced. underestimate expenses. This is wishful Were politicians getting the message? To help accomplish this essential goal, thinking on a frightening scale. Did they agree with most Americans that Congress must refuse any further Most states are also guilty of raiding non- spending was out of control? Was it too bailouts – including those requested by general funds, over-issuing bonds, delaying late to save the nation from bankruptcy? states, pension funds or corporations. expenditures and underfunding pensions As the votes were tallied, Congress would also improve our nation’s rather than eliminating non-core spending the answer became appar- economic health if it scaled back the enor- as the best defense against fiscal crisis. ent. There was a dramatic mous regulatory burdens that it continues Uncertainty change in the political to pile on businesses of every size. landscape at the federal as One of Koch Industries’ advantages as Even though regulatory overreach has al- well as the state level. a private company is the ability to think ready had negative consequences, govern- and act with a long-term perspective. We Those election results ment agencies are pushing for even more need elected officials to do the same. have prompted plenty of dramatic controls and burdens. new questions, including The recent vote on the so-called Bush tax the most important of all: Favoritism cuts was a glaring example of short-term what will these elected Many companies – in fact, even entire in- thinking. Instead of taking a hard look officials do now? dustries – have petitioned Congress for spe- at tax rates or the need to simplify and clarify the tax code, Congress approved a Are they ready to address cial treatment and advantages in the form “temporary” two-year plan. the significant problems of subsidies, mandates for their products or facing our economy because of govern- punitive tariffs on their competitors. Two years may seem like a long time to a ment mismanagement? Rather than competing by serving the politician, but it is not nearly long enough to give the private sector – the real engine Essential issue needs of customers more efficiently and effectively, too many businesses seek to lock of economic growth – confidence for It’s fairly easy to talk about what our in advantages through government favors. long-term investment. politicians should do, but it’s much harder This amounts to little more than cor- When the rules are continually changing, to predict what they will do. porate welfare that undermines the businesses of all sizes find it difficult to What they should do is stop bankrupting long-term prosperity of the country and predict costs and thereby justify the hir- the country by overspending and over- wastes valuable resources. ing of new workers or making extensive regulating. These are both heavy burdens capital investments. Governments should not choose winners we can no longer bear. and losers. The market is much more More than 220 years ago, James Madison The issue of runaway spending – which fair and efficient at sorting through those (who later became our fourth president) many analysts agree was the major con- issues, with the winners being those who warned about the consequences of such cern of most voters last November – has more effectively satisfy customers. fickle government policies. long been a bipartisan problem. Rather than forcing products or pro- “Great injury results from an unstable Both Democrat and Republican majorities grams upon us, federal policymakers, in government,” wrote Madison in the Fed- have looked the other way when hard de- particular, should promote economic eralist Papers 62. With an “inconstant cisions needed to be made. Consequently, freedom by letting consumers decide. government, no great improvement or we have an epidemic of budget deficits. laudable enterprise can go forward.” Consumers “vote” every day by buying The federal government already has over the products and services they want. By If our elected officials do not deal with a trillion-dollar annual deficit and, by overriding those choices, governments our economic problems promptly and some estimates, more than $100 trillion create inefficiency and mal-investments. properly, we will face even more serious in unfunded liabilities. State budget problems in the very near future. State of affairs deficits routinely total in the billions. The 2010 elections were all about putting Clearly, the essential first step must be State governments must also change their a stop to government overspending. business-as-usual approach. to cut government spending. By that I However, voters must not become mean absolute spending, not just the rate Most states are required to have a bal- complacent. We must continually and of spending increases, must be cut. anced budget. Unfortunately, they have effectively communicate with our elected Too often politicians have relied on deployed an extensive bag of tricks for officials, letting them know we will stand reducing the rate of spending increases avoiding that fiscal responsibility. by them when they cut spending. But if and called it a cut. In reality, the only thing When it comes to creating budgets, they they don’t, we won’t. 12