USA: Koch Industries Indicted for Air, Hazardous Waste Violations

WASHINGTON, DC -- A Texas based oil conglomerate and four of its employees were indicted last week on 97 counts of violating federal clean air and hazardous waste laws. The charges come less than one year after the company was slapped with the largest civil penalty ever levied under federal environmental statutes.

The 97 count indictment, handed down on Thursday by a federal grand jury in Corpus Christi, Texas, charges Koch Industries, Inc. Koch Petroleum Group, L.P., and four corporate employees with violating a host of federal environmental laws at an oil refinery near the Gulf of Mexico.

If convicted, Koch Industries and its subsidiary Koch Petroleum Group face a maximum statutory penalty of $48.5 million, or a civil fine of up to $352 million, say officials from the U.S. Department of Justice. The four corporate employees named in the indictment face a combined total of 100 years in prison and $50 million in fines, officials said.

"Companies that produce dangerous pollutants simply cannot focus on profit and efficiency at the expense of a community's health," said Lois Shiffer, Assistant Attorney General in charge of the Justice Department's Environment and Natural Resources Division. "We will continue to find and prosecute those who would flout our environmental laws."

Koch has denied the allegations embodied in the 97 count indictment. Koch spokesman Jay Rosser said the Justice Department is "unjustly charging" the company and its "hardworking employees" who discovered an issue with a "new complex regulatory requirement" and took steps to correct it.

"The government has got this one wrong," Rosser said. "Koch and these employees acted responsibly, and the government's characterization of our actions is not consistent with the facts."

The government contends that Koch and its employees conspired to violate the federal Clean Air Act by making false statements about its benzene emissions to officials from the U.S. Environmental Protection Agency (EPA) and the Texas Natural Resource Conservation Commission (TNRCC).

Benzene, an organic chemical found naturally in crude oil, was added to the EPA's list of hazardous air pollutants in 1977 after scientific studies linked benzene exposure to increased incidence of leukemia in humans.

Under a provision of the Clean Air Act, industrial operations such as the Koch refinery are required to submit an annual report to federal and state regulators certifying that their facilities comply with benzene regulations. Koch was required to comply with the federal benzene standards by April 1993, but Koch Petroleum Group applied for and received a compliance waiver until January 1995.

The indictment alleges that in 1995, Koch Industries and Koch Petroleum were informed by an employee that the Corpus Christi refinery had at least 91 metric tons of uncontrolled benzene in its liquid waste streams, some 15 times greater than the facility's permitted six metric ton limit.

The indictment charges Koch Industries and Koch Petroleum with violating the Clean Air Act by, among other things, failing to install required emission control devices in 1995 on certain waste management units, such as its oil-water separators, wastewater sewers, and oil and wastewater tanks.

In addition, the indictment alleges that a device that Koch Petroleum installed in January 1995 to destroy benzene fumes from two oil-water separators, the Thermatrix Thermal Oxidizer, could not handle the high levels of benzene routed to it, and would often shut down for extended periods of time.

When the Thermatrix shut down, the West Plant continued to operate and Koch Industries and Koch Petroleum intentionally vented large amounts of untreated benzene fumes directly to the atmosphere through a bypass stack, the indictment charges. Koch Industries and Koch Petroleum did not report these releases to the National Response Center.

As a result, Koch Industries and Koch Petroleum were charged with violating the Comprehensive Environmental Response, Compensation and Liability Act for failing to immediately report the discharge of a hazardous substance.

The defendants then made false and misleading statements to the Texas Natural Resource Conservation Commission to conceal the extent of the refinery's Clean Air Act violations, and falsely certified that the refinery complied with the benzene regulations, the indictment alleges.

Koch was quick to refute the allegations.

"The government's announcement ... alleging that the community's health was compromised is based on unsupportable claims and is irresponsible," Rosser said. "Air quality monitors near our facility and years of scientific data confirm that the health and safety of our employees and neighbors were never compromised."

Rosser's point was echoed by Jane Barrett, Koch's lead attorney on the case and a former environmental crimes prosecutor with the U.S. Justice Department.

"We must remember that this is simply a collection of unproven allegations," Barrett said. "This is merely the beginning of a legal process - one which will confirm that Koch and these employees acted responsibly."

Koch acknowledges that an "issue" arose in 1995 regarding its compliance with benzene regulations, but the company maintains that it investigated the matter and voluntarily reported it to the TNRCC.

Koch implemented a "compliance solution" to address the issue by early 1996, and the refinery has not had a significant safety incident since that time, the company emphasizes.

Don Clay, Koch Petroleum Group's vice president of environment and regulatory affairs, suggested that the company was the victim of over-regulation.

"This is about a responsible company doing its best to comply with hundreds of local, state and federal environmental rules, including the new complex requirements at issue here," said Clay, a former EPA assistant administrator. "This is certainly not an appropriate matter for the Justice Department to pursue in this way."

The EPA just three months ago lauded Koch's efforts to voluntarily cut its refinery emissions, Clay noted. And last month, the Occupational Safety and Health Administration (OSHA) awarded the company STAR status in its voluntary pollution production program, Clay added.

Those accomplishments have been completely ignored by the Justice Department, lamented Clay.

"The government is trying to portray a Koch that does not reflect who we are, or the record of good performance we've achieved," Clay said.

According to the U.S. Federal Election Commission, Koch has donated thousands of dollars to the presidential campaign of Republican nominee George W. Bush. As governor of Texas, Bush was instrumental in establishing a voluntary pollution compliance program for Texas industries such as Koch.

But while Koch has made a documented effort to reduce its air emissions, other aspects of the company's environmental record are more troubling.

In January, the Justice Department and the EPA imposed a $30 million fine against Koch Industries, the largest civil penalty ever levied against a company under federal environmental laws. That fine stemmed from Koch's negligence in causing more than 300 oil spills that polluted waters in six states.

Koch Industries, headquartered in Wichita, Kansas, owns and operates extensive underground and above ground pipelines that transport crude oil and related products in the Midwest. Most of the spills at issue in the January settlement occurred in Oklahoma, Texas and Kansas. In one case, almost 100,000 gallons of oil was spilled in Texas, causing a 12 mile oil slick on Nueces Bay and Corpus Christi Bay.

The landmark fine, "sends a strong message that those who try to profit from polluting our environment will pay the price," EPA administrator Carol Browner said at the time.

According to the indictment handed down last week, one of Koch's goals in allegedly conspiring to violate the Clean Air Act was to maximize profits and avoid shutting down the refinery, which did not meet environmental standards.

• 106 Money & Politics
• 107 Energy