Category — Energy Companies
[Editor note: This article first appeared in the October 2010 issue of Discovery, the quarterly newsletter of Koch Companies, Inc. This company's values include an adherence to free-market capitalism, in opposition to political capitalism or rent-seeking, currently the fashion at a number of major U.S. corporations. (Also see "The Future of Economic Freedom"). ]
We live in an era when many people–including policymakers and media celebrities–view businesses and corporations with disdain or intense suspicion. Their way of thinking begs a simple question: What is the primary role of business?
Is it to create jobs and provide benefits? Help advance a social agenda? Or just to make as much money as possible, by exploiting customers and employees?
As a matter of principle, Koch companies believe there is only one reason for any business to exist: creating value.
“Value creation,” says Charles Koch, “involves making people’s lives better.
“It means contributing to prosperity in society. If a company’s not doing that – enhancing the well-being of society – then it needs to go out of business.
“We all tend to pursue our own interests, but in a true market economy we can only prosper long-term by providing others with what they value.”
History and sound theory have both shown that the only way to consistently create value for society is to faithfully follow a set of reality-based principles.
For Koch companies, those are the 10 MBM® Guiding Principles, which include integrity, compliance, value creation, humility and respect. [Read more →]
January 17, 2011 8 Comments
In line with conservative values, and with the passion of a local Tea Party leader, U.S. Senator LeMieux (R–FL) is behind his state’s lawsuit against the federal government’s healthcare reform law. He also has a national debt clock on his WEB SITE, and his headline platforms include reducing government waste and improving transparency and accountability from soup to nuts.
So can we feel assured this senator upholds these values across the board?
No, unfortunately, when it comes to the failed government experiment with politically correct renewable energy.
Senator LeMieux has co-sponsored a bill–along with 25 of his closest friends across the aisle–to extend the ARRA 1603 tax credits, doling out 30% of project costs up front to so-called “renewables.”
So what goes? Florida is not a big renewables state. Florida voters are rebelling against Big Government, as recently shown at the polls. Florida is also a marginal solar state and has dismal wind resources.
Floridians should be furious. [Read more →]
December 7, 2010 5 Comments
[Editor note: In a sea of political capitalism and rent-seeking by corporations, it is refreshing to see a principled defense of capitalism from the business sector. This piece from the current issue of Discovery, the quarterly publication of Koch Industries, Inc., is reprinted here in honor of today's important elections.]
On Nov. 2, the United States will hold an important mid-term election.
At stake will be control of the U.S. Congress, 39 state governorships and thousands of other state and local offices.
High unemployment, record deficits, a sluggish economy and a swelling federal government have become flash point issues for millions of concerned Americans of every political persuasion.
For the nearly 50,000 Koch company employees in the United States, this election is an opportunity to help decide the future of economic freedom.
A Heavy Hitter
According to the International Monetary Fund, the United States accounts for about one-fourth of the world’s total output of goods and services, and one-fifth of the world’s purchasing power.
Like it or not, what’s bad for the United States – including misguided federal policies that undermine economic freedom – is usually bad for the rest of the world.
What has proven to be best for all societies is economic freedom.
Citizens on every continent enjoy more prosperity, cleaner environments, longer lives and higher literacy rates in economically free societies.
That’s why, for more than 40 years, Koch Industries has openly and consistently supported the principles of economic freedom and market-based policies.
Unfortunately, these values and principled point of view are now being strongly opposed by many politicians (and their media allies) who favor ever-increasing government.
Government – like fire, water, chemicals and most everything – is productive at some level and destructive at others. [Read more →]
November 2, 2010 5 Comments
“The BP incident highlights big differences in how socially responsible funds prioritize various causes. Some of these managers considered BP’s stance on climate change a strong positive. ‘BP was the first to break the logjam on climate change policy’ and had been a leader on alternative energy, says Mark Regier, director of stewardship investing for MMA Praxis.”
- Quoted in Eleanor Laise, “Oops: ‘Socially Responsible’ Funds Hold Big Stakes of BP,” Wall Street Journal, July 17–18, 2010.
The greenwashing strategy of BP and Enron has been the subject of three recent posts at MasterResource:
Don’t believe that “Beyond Petroleum” BP fooled the politically correct after Enron and even all the way up to the Deepwater Horizon explosion/Gulf spill of May 2010? Then consider the Wall Street Journal’s “Oops: ‘Socially Responsible’ Funds Hold Big Stakes of BP” (reprinted below as Appendix A). [Read more →]
July 20, 2010 3 Comments
Harvard Business Review Article: BP as Environmental Role Model (Part III on global warming as the great environmental distraction)
“Such [progressive] leadership [on climate change] may give BP Amoco better access to government-controlled oil deposits and more operating flexibility.”
- Kimberly O’Neill Packard and Forest Reinhardt, “What Every Executive Needs to Know About Global Warming,” Harvard Business Review, July/August 2000.
The Worldwatch Institute sang the praises of BP’s it’s-a-problem, we-can-solve-it approach to climate change. Far Left environmentalist Joe Romm featured John Browne/BP in his book Cool Companies as a leading example of corporations going green for profits and virtue.
Both Worldwatch and Romm were wrong–dead wrong–about BP, just as they were also wrong about climate-alarmist Enron and Ken Lay.
It turns out that a lot of political profit-making and greenwashing was going on at both rogue companies. Remember what Jeff Skilling told one of Enron’s coal executives who complained that the company’s greenwashing was hurting his division:
“We are a green company, but the green stands for money.” [Read more →]
July 1, 2010 7 Comments
BP’s ‘Beyond Petroleum’: Climate Alarmism as the Great Environmental Distraction (Part II: Why the ‘greenwashing’?)
[Editor note: Part I in this series examined praise for BP and Enron from the Worldwatch Institute. Part III examines a Harvard Business Review article linking BP's 'beyond petroleum' strategy to special government favor, including drilling on government domain.]
Consumer boycotts of Shell and pressure from Greenpeace … [and] speculation that Shell might shift its position on climate change led BP CEO John Browne to look more closely at climate change. He decided to set a new company policy that would set BP apart from the competition—the product differentiation strategy.
- Gary Gardner, “Accelerating the Shift to Sustainability.” In Worldwatch Institute, State of the World 2001 (New York: W. W. Norton, 2001), p. 101.
With great big blobs of oil washing up on the shore, it is almost comical—no, it is comical—to see some of BP’s erstwhile friends in academia and other centers of high-minded thought running for cover. To cite one example, thanks to BP sponsorship, 300 researchers in white lab coats at Berkeley are busily searching for ways to make green fuels that will reduce our dependence on oil. In 2007, BP set up the Energy Biosciences Institute, saying it would spend $500 million over the next ten years to support research into plant-based fuels at Berkeley and two other universities. This is the largest corporate donation ever for university research.
- Andrew Wilson, “Beyond Pathetic.” The Weekly Standard, June 28, 2010.
For more than a decade, Left environmentalists and trendy business ethicists have touted BP’s “beyond petroleum” mantra as an example of public-interested corporate progressivism.
For example, Joe Romm in Cool Companies: How the Best Businesses Boost Profits and Productivity by Cutting Greenhouse Gas Emissions (Island Press: 1999) devotes several pages near the end of the book to “climate leadership at British Petroleum.”
Romm refers to John Browne’s “remarkable May 1997 speech at Stanford University” (p. 206) before describing this episode:
Browne noted in a February 1998 speech that immediately after the Kyoto conference, he wrote to all 350 leaders within the BP group, the people who run BP’s business units, to get their ideas on how BP could reduce carbon emissions. Browne said, “Two weeks ago I got the response and I was stunned by it. It consisted of 200 pages of the most detailed and serious proposals…. Every single one reflected the view that we were doing the right thing in trying to tackle our own emissions and to make a positive constructive contribution to the public debate” (p. 207).
Romm continues: “One of the primary messages of this book [is what] Browne has learned… ‘It is clear how frequently environmental logic and commercial logic coincide” (p. 207).
But now we know what happens when a corporation gets distracted and tries to be all things to all people. It happened to Ken Lay and Enron, and it happened to BP.
Tony Hayward cut back BP’s renewables push, which put pressure on the company’s ‘beyond petroleum’ greenwash. But evidently Hayward did not or could not do enough to reverse the unfocused corporate culture toward safety and true environmentalism. [Read more →]
June 29, 2010 2 Comments
They Loved BP and Enron: Climate Alarmism as the Great Environmental Distraction (Part I: Worldwatch Institute quotations)
[Editor note: Part II in this three-part series delves into the reasons that BP tried to rebrand itself as "beyond petroleum." Part III examines a Harvard Business Review article linking BP's 'beyond petroleum' strategy to special government favor, including drilling on government domain.]
“A growing number of corporations are moving beyond denial to acceptance and action on climate change, some seeking competitive advantage by anticipating rather than responding to future policy changes.”
- Seth Dunn and Christopher Flavin, “Moving the Climate Change Agenda Forward.” In State of the World 2002 (New York: W. W. Norton, 2002), p. 25.
Just imagine if John Browne had used the time and resources BP spent on climate alarmism and ‘beyond petroleum’ on real safety and environmental issues.
BP might still have a capitalization of $150 billion and not face a potential worst-case scenario of bankruptcy and ruin. And more importantly, the U.S. Gulf would not be in an environmental crisis.
Just imagine if Enron’s Ken Lay had used the time and resources spent on climate alarmism and forced energy transformation on accounting, risk control, and the real things that promote business sustainability. (Lay was a big Christopher Flavin/Worldwatch fan too.)
Enron might still be with us today.
Diverted management attention has an opportunity cost. Left environmentalists lobbied and praised BP and Enron for putting form over substance. A few shouted ‘greenwashing’, but most applauded their coveted split within the fossil-fuel industry on climate and energy.
Enron is no longer around. Instead it has become the poster child of political capitalism run amuck. And the Deepwater Horizon accident–for which, in an effort to save about $5 million, BP will pay tens of billions of dollars–may sink BP as an independent company.
What an irony: fake environmentalism driving out real environmentalism. Climate and energy reality, anyone?
June 28, 2010 10 Comments
John Browne’s 1997 Stanford University Speech: The “Beyond Petroleum” Beginning (and beginning of the end of BP?)
“Stephen H. Schneider, a climate researcher and Stanford professor who wrote the first popular book on global warming, said [that Browne's] speech was a welcome change of direction for an industry that has, until now, denied that global warming is a problem. ‘They’re out of climate denial,’ Schneider said.”
- Quoted in Glennda Chui, “BP Official Takes Global Warming Seriously,” San Jose Mercury News, May 20, 1997, sec. A. 20.
Then BP CEO John Browne’s speech at Stanford University in May 1997 marked the beginning of the company’s “green” (or to critics, greenwashing) approach to product differentiation and corporate governance. Left environmentalists applauded heartily–and would continue to do so until the Deepwater Horizon accident of April 2010.
Browne’s speech began by begging the question and proceeded to a non sequitur. It begged the question by assuming that anthropogenic global warming was bad and it leapt to the conclusion that corporations and for governments must fight it. In Browne’s make-believe world, there was no such thing as analytic failure or government failure–just market failure.
Today, we know what John Browne did not want to know 13 years ago. We know that the climate is far too complex to pretend to ‘stabilize’ through marginal changes in carbon dioxide (CO2) emissions. We know that government mitigation policies are all pain and no gain. We know that oil, gas, and coal are the real deal–and wind and solar are pretend, press-release energies that might even be CO2 positive.
We also know that the global warming issue resulted in incalculable intellectual fraud, grotesque corporate rent-seeking, and the waste of the environmental dollar (there are real, here-and-now ecological issues that deserve the global warming buck).
We also know, painfully, that BP put form over substance and took their eye off the ball. Beyond Petroleum was a failed corporate strategy that resulted in heedless, dumb cost-cutting that put profits losses ahead of people and the environment.
Reality can be a harsh mistress. BP went after an environmental fad, basked in the glow of the Left environmental movement, and now may have destroyed itself in the process. As with Enron, another ‘progressive’ ’green’ company, the Left environmentalists got what they deserved.
If only John Browne had given a Lee Raymond-type speech and had conducted BP’s business in the manner of its more reality-grounded brethren. The blame for the fatal attraction goes deep, and it lands at the doorstep of the mainstream environmental movement that got BP into greenwashing.
John Browne’s speech follows verbatim.
The world in which we live is no longer defined by ideology. The old spectrums of left to right and radical to conservative are still with us, but ideology is no longer the ultimate arbiter of analysis and action. Governments, corporations, and individual citizens have all had to redefine their roles in a society no longer divided by an Iron Curtain. A new age demands a fresh perspective on the nature of society and responsibility. [Read more →]
June 19, 2010 17 Comments
[Editor note: Some important facts are emphasized in this post: the Gulf oil spill occurred on property owned and managed by the federal government, and the operator-at-fault (BP) has been the most politically active in its industry. Sheldon Richman is editor of The Freeman magazine and www.thefreemanonline.org, where this article first appeared.]
With some 7,000 barrels of oil spilling into the Gulf of Mexico each day from BP’s exploded Deepwater Horizon well, offshore drilling and oil-industry regulation have returned to the front pages.
The familiar old trap is set: Do you want unfettered markets and oil spills or government regulation and safety? The implied premise is that the oil industry operates in a free market. So, the argument goes, the only alternative is government regulation.
On first glance that story is plausible.
From USA Today:
The company that owns the offshore well spewing crude oil in the Gulf of Mexico and other major oil companies spearheaded a campaign to thwart a government plan to impose tighter regulations aimed at preventing similar disasters, according to government records.
Tighter regulations would have required that drillers perform independent audits and hazard assessments designed to reduce accidents caused by human errors, but the federal Minerals Management Service (MMS) has so far not imposed the rules in the face of near unanimous opposition from oil companies.
Oil executives — including BP, which leased the rig that exploded April 20 — argued that the industry had a solid environmental record and most companies had voluntarily adopted similar safeguards to protect against a major spill. They also said the new rules would have been too costly.
So: the MMS wanted to regulate, but the industry said it could regulate itself at lower cost, insisting it was a good steward of the environment. This is not to say that MMS was right and the companies wrong. For reasons provided below, government regulation is fatally flawed. Further, this is not just a simple matter of regulation. More fundamentally it’s a matter of ownership. The government has proclaimed itself the owner of the offshore positions where oil companies drill. In a free market those positions would be homesteaded and managed privately with full liability. In the absence of a free market and private property, built-in incentives that protect the public are diminished if not eliminated. Bureaucrats and “political capitalists” are not as reliable as companies facing bankruptcy in a fully freed market. [Read more →]
May 27, 2010 5 Comments
April saw two devastating disasters in the energy industry: a methane explosion at the Upper Big Branch mine in Montcoal, West Virginia that claimed 29 lives, and another explosion at the Deepwater Horizon drilling rig in the Gulf of Mexico, which took 11 more. The latter incident, because of the tens of thousands of gallons of oil now pouring from the ocean floor each day, will impact the Gulf region for years if not for decades to come.
These tragedies are a terrible reminder of the trial-and-error nature of life. Humans have accomplished many wonders over the millennia – wonders that ended the vicious cycle of crushing poverty that has been mankind’s lot throughout most of history.
But these accomplishments have often come at a very high price. Because it is in our nature to strive to better our condition and that of our children, life will never be without risk. As terrible as the consequences of failure can be, it brings with it the seeds of hope. Hope that we can learn from our mistakes and, if not succeed next time, at least not fail in the same way. From such tragic lessons come knowledge and strength. [Read more →]
May 3, 2010 10 Comments