Voice For Liberty

Author: Guest Author

  • Reform KPERS now for the future

    By Ron Estes, Kansas State Treasurer

    The Kansas Public Employee Retirement System (KPERS) has been a major topic of discussion for the last several years. As your State Treasurer, I am a member of the KPERS Board. The Board has a fiduciary responsibility to manage the assets for the benefits of the members, and not to make positions on the legal structure. But as State Treasurer (and a Tier 1 KPERS member), I encourage the Legislature and the Governor to pass some necessary changes this year.

    KPERS is a valuable benefit for state employees, local school employees, and most local government employees. It serves over 260,000 active and inactive members and retirees. As you have heard, KPERS is projected to be $8.3 Billion short in paying promised benefits to all current employees and retirees. But let me reassure you that KPERS has $13.5 Billion in assets (approximately 62% of what is needed) today — enough to pay benefits for all current retirees and most employees that will retire in the next 10-15 years. KPERS needs a solution that addresses two critical issues: (1) makes the system solvent for all current employees and (2) provides a stable plan for all future employees. If we don’t take action now, we are at risk of having our bond rating lowered and KPERS will consume even more of our state budget at the expense of other vital state services to Kansans in the future.

    Several things have caused our retirement system to get in this condition, but the primary reason is the Legislature was given some bad advice in 1993. They were told the benefits could be raised and the contributions held low for the employers and the employees (at 4% of salary). By the late 1990’s the Legislature saw contribution levels were not high enough, and began to raise them. In order to not impact the state and local budgets too harshly they limited the annual increases. Finally, in 2009 they were forced to raise the employee contributions and created the Tier 2 level.

    Even though the KPERS investments have achieved the 8% investment rate of return over the last 30 years, these changes have not been enough to adequately fund the plan.

    I have followed the process in the legislature and the Study Commission very closely and provided input as the process has moved forward. Recently, the House of Representatives passed a bill that addresses these critical issues. House Substitute for Senate Bill 259 increases the contribution amount for the state and local government employers. It also sets requirements for Tier 1 and Tier 2 employees to be equal. Tier 1 employees will contribute at a 6% rate in exchange for an increase in benefits to 1.85% times each year worked. Tier 2 employees will continue to contribute 6% and will receive an increase in benefits to 1.85% times each year worked in exchange for the cost of living adjustment.

    In addition, the bill creates a Tier 3 for new employees hired after 2014. These new employees would have a choice to pick a Defined Contribution (DC) Option similar to a 401(k) in private industry or a Cash Balance Option. The DC Option would allow employees to contribute 6% to their own account and make their own investment decisions. In today’s world it is imperative that we give state employees the freedom and flexibility to control their retirement future.

    In the Cash Balance Option, an employee contributes 6% and the employer adds up to 4%. The employee is guaranteed a 5% return as their benefit. This is an option for employees who plan a long term career with a state or local government employer.

    I encourage the Legislature to pass and the Governor to sign a bill like 259. It is not the exact solution I would have preferred and I expect further changes as this process moves forward, but it provides choices for future employees and continues benefits promised to existing employees. It addresses both critical issues by not digging the hole any deeper for future employees, empowers those employees who wish to take control of their own retirement by giving them the flexibility to do so, and begins to close the existing funding gap. Significant structural KPERS reform must happen this year. Our state cannot afford to put this off yet again.

  • Obama vs. the American Dream

    By U.S. Representative Tim Huelskamp, who represents the Kansas first district.

    Do politics reflect culture, or does culture reflect politics?

    In a representative form of government, what happens in Washington should be a reflection of what happens in each of the communities and among the people of our country. Those elected to serve are to carry to Washington the views, ideas, and priorities of their constituents. Not the other way around.

    But increasingly, President Obama is attempting to transform the culture of our nation using manipulative political means.

    President Obama seeks to replace America’s culture of self-reliance with a culture of dependence, religious liberty with intolerance and compulsion, and the American Dream with more American debt. He relies on the politics of envy and the punishment of success to manipulate the American people into believing that without government they are missing something to which everyone is entitled regardless of effort or merit. He argues “fairness” means everyone has the same outcome, not the same opportunity.

    By standing in the way of economic recovery, the Obama Administration has forced a record number of people on to food stamps. But, the President is just fine with that. It means more Americans depend on political elites like him who merely take resources rather than produce them.

    By forcing Catholic employers to pay for or provide contraception and abortion drugs, demanding health care providers and medical students to take part in activities that violate their consciences, or censoring military chaplains to preach sermons or perform ceremonies contrary to the tenets of their faiths, the Obama Administration has signaled its willingness to trample on religious liberty. It means bureaucrats have a greater grip on the American people than churches, synagogues, and mosques. It turns an “appeal to a higher power” from a prayer to God to a call to a Washington theocracy.

    By refusing to deal with $16 trillion in debt — an I.O.U. larger than the size of the entire American economy — the Obama Administration is comfortable with indebting our children and grandchildren for spending they neither made nor consented to. All the while, Obama has displayed its contempt for those who are already shouldering a disproportionate burden of current taxes. When one percent pays 37 percent of all income taxes, the Obama Administration has the nerve to argue that it is not enough. Never mind that close to half of all Americans pay nothing in federal income taxes.

    Making acceptable a culture of dependence, intolerance for faith, and demonization and punishment of hard work and success will have profound negative consequences for our culture. But, perhaps this is why the Obama Administration is doing so.

    While those with the bully pulpit should seek to inspire greatness in the American people, all President Obama seems to do is espouse resentment. He wants Americans to envy straw men. He wants them to believe that they are but mere victims of a grand conspiracy to rid them of any and all any recognition and reward for their hard work. Simultaneously, he wants them to believe that hard work should not be recognized and rewarded; that the fruits of their labor are to be handed over to the elite government for its “wise and prudent” redistribution.

    Contrary to President Obama’s interpretation of American history and culture, America’s success story is and will continue to be the result of limited government answering the views, ideas, and priorities of its people, not the result of government telling the American people what they need. It is the result of individuals being allowed to thrive, success being rewarded, and the spirit of charity and community responding to the immediate needs of those around us. And, it is the result of generation after generation leaving things better than they found them for the next not because government says to do so, but because God so instructs.

    Congressman Tim Huelskamp represents the First District of Kansas. He serves on the House Budget, Agriculture, and Veterans’ Affairs Committees. He can be found at huelskamp.house.gov.

  • Mike Pompeo: We need capitalism, not cronyism

    In a guest column written for Americans for Prosperity, Kansas, U.S. Representative Mike Pompeo of Wichita explains why political cronyism, sometimes called crony capitalism, is wrong for our country. Pompeo coins a useful new term: “photo-op economics” to describe why some politicians support wasteful federal spending projects — as long as the spending is wasted in their districts. Then logrolling — the trading of legislative favors — applies, and those legislators who received votes from others to support wasteful spending must now reciprocate and support other wasteful spending.

    Pompeo touches on an important aspect of public policy that is not often mentioned: “Moreover, what about the jobs lost because everyone else’s taxes went up to pay for the subsidy and to pay for the high utility bills from wind-powered energy? There will be no ribbon-cuttings for those out-of-work families.” This describes the problem of the seen and unseen, as explained by Frederic Bastiat and Henry Hazlitt in the famous parable of the broken window.

    We Need Capitalism, not Cronyism

    By U.S. Representative Mike Pompeo

    The word “conservative” brings to mind family values, lower taxes, fiscal responsibility — and limited government. Limited government means a government limited in size, in its claim on national wealth, and — importantly — limited in the ends to which government’s power is used. It also means federal elected officials must act in the nation’s best interest and not allow their own parochial concerns to dominate their decision making. A big obstacle on the path to restoring limited government in America is cronyism.

    We all know the story. A flawed system has created incentives that make it easier for some companies to succeed by hiring a lobbyist rather than improving productivity or satisfying customers. Lobbyists for these businesses and the politicians who support them want the federal government picking winners and losers across our economy — so long as they are selected as “winners.” In my first term in Congress, we have eliminated earmarks that rewarded politically connected, rent-seeking advocates for federal largesse by tucking provisions into bills without adequate vetting or thorough review. But ever clever politicians have another tool — the tax code — to accomplish much the same outcome. This form of cronyism must stop too.

    “Tax earmarks” — be they deductions or credits — provide certain industries and businesses a means to gain financial advantage. Tax earmarks distort our free choices, waste tax dollars, and raise prices to provide goods and services that free markets provide more abundantly and more cheaply. They also force federal tax rates up, penalizing those who don’t receive them, because higher rates are required to capture the same revenue given all of the special interest tax earmarks now in effect. And, unlike standard earmarks, tax earmarks tend to be renewed year after year after year.

    One current fight against the insidious political tool of tax earmarks involves the energy sector. I am leading the charge to eliminate over two dozen energy tax credits tucked into the Internal Revenue Code. My proposed legislation would get rid of every single tax credit related to energy — ending tax favoritism that today goes to wind and solar, algae and electric vehicles and tax credits that go to the oil and gas industry as well. Tax subsidies miscast the role of the federal government. Energy sources are either viable without subsidies or else they do not make economic sense for taxpayers.

    Subsidies and giveaways redistribute wealth from productive, self-sustaining enterprises to unproductive, less efficient, albeit politically connected, ones. Although subsidies may have positive local effects, they penalize successful businesses — leading to less innovation, decreased productivity, fewer jobs, and higher prices for consumers. Cronyism also mistreats unsubsidized competitors, who wind up subsidizing their own competition to the detriment of their employees, consumers, and free-market competition.

    Together with tried-and-true conservative leaders like House Budget Committee Chairman Paul Ryan (WI), and Tea Party leaders like Sen. Jim DeMint (SC), and Sen. Mike Lee (UT), I am fighting to end this form of cronyism. Conservative groups including Americans for Prosperity, Americans for Tax Reform, Club for Growth, Council for Citizens Against Government Waste, Freedom Action, Heritage Action, National Taxpayers Union, and Taxpayers for Common Sense have all rallied to the side of limited government on this issue. They understand that picking winners and losers in the energy marketplace does not create long-term economic growth, and it harms our economic and political systems.

    One example of a tax earmark that should be eliminated is the Production Tax Credit (PTC) that goes to the wind industry. Yet, some Republican and Democrat members of Congress, not surprisingly from “wind states,” are pushing for yet another multi-year extension of the PTC, a multi-billion dollar handout to Big Wind. The PTC manipulates the energy market, drives up electricity bills for consumers and businesses, and creates a dangerous economic bubble. The PTC is a huge subsidy. Applied to oil companies, it would be the equivalent of giving $30 for every barrel of oil produced, according to the Heritage Foundation. The PTC has existed for the past 20 years, but it has not succeeded yet in making unsubsidized wind competitive. Politicians who pretend that a few more years of the PTC will make wind competitive could be right, but that is not a responsible bet to make with taxpayer dollars.

    Supporters of Big Wind, like President Obama, defend these enormous, multi-decade subsidies by saying they are fighting for jobs, but the facts tell a different story. Can you say “stimulus”? The PTC’s logic is almost identical to the President’s failed stimulus spending of $750 billion — redistribute wealth from hard-working taxpayers to politically favored industries and then visit the site and tell the employees that “without me as your elected leader funneling taxpayer dollars to your company, you’d be out of work.” I call this “photo-op economics.” We know better. If the industry is viable, those jobs would likely be there even without the handout. Moreover, what about the jobs lost because everyone else’s taxes went up to pay for the subsidy and to pay for the high utility bills from wind-powered energy? There will be no ribbon-cuttings for those out-of-work families.

    Here’s the data. The “green energy” 1603 grant program has given away $4.3 billion to 36 wind farms just since 2008. All together, these farms now employ 300 people. That’s $14 million per job. This is an unconscionable return on investment, especially for your tax dollars. Given that consumers also pay higher energy prices for electricity generated from wind, one has to wonder why some in Washington continue to push for Big Wind subsidies. Often the answer is that politicians care more about making good political investments than they do about making bad financial investments.

    In this respect, the PTC handout is virtually indistinguishable from the program that led to the Solyndra debacle. The Obama Administration gave 500 million taxpayer dollars to a private solar panel company to prop up a failed business model. As soon as government money ran out, the company folded. Solyndra could not attract sufficient private capital for financing because its solar panels could not compete in the consumer market. So it turned to its lobbyists in Washington and friends in the Obama Administration for its financing. The result was a skewed consumer marketplace and the waste of taxpayer dollars. Like the earmark for the Bridge to Nowhere, political allocation of your taxpayer dollars is failed policy.

    I get the game. Elected officials in Michigan want your money for electric cars. Those from California want your money for solar panels. And those from the Midwest want your money for wind turbines. In a country that has a $15 trillion national debt, annual deficits of over $1 trillion as far as the eye can see, and a $100 trillion unfunded liability in entitlement programs, this must stop.

    I believe that American ingenuity will eventually bring new energy sources to market successfully. It may be wind or algae, it may be biomass or solar. It may be the enormous natural gas and oil reservoirs that can now be reached affordably right here in North America. I also believe that American families making good choices for themselves will lead the way in deciding which new energy source or technology succeeds. Trying to pick that next great source from Washington, D.C. — and with your money — just leads to more cronyism, more debt, more bad decisions, more dependence on the Middle East and a much less limited federal government — outcomes that none of us can afford.

    Congressman Mike Pompeo represents Kansas’ 4th Congressional District.

  • Wichita, Kansas voters reject corporate welfare and cronyism

    From Americans for Prosperity, Kansas.

    Tuesday, Kansas voters made a bold statement, rejecting a plan favoring cronyism and big government, instead choosing to take a stand for fiscal responsibility.

    The Ambassador Hotel, which will receive $15 million in subsidies plus several hundred thousand annually, wanted to keep 75 percent of the guest tax they charged patrons, amounting to roughly $2.25 million in guest tax revenues over the next 15 years. The guest tax is a tax charged at Wichita hotels, otherwise used to promote convention and tourism.

    This proposed guest tax subsidy was put to a vote, a plan which voters rejected by a 61 to 39 margin.

    “The Ambassador Hotel guest tax subsidy was a prime example of political cronyism,” said Derrick Sontag, State Director of AFP-KS. “We were glad to see that voters made the right decision when presented with the facts about just how much public funding this development is receiving.”

    “The vote shows that taxpayers recognize the problems with corporate welfare and are willing to take a stand for fiscal responsibility,” Sontag said. “This victory is just one small step towards more responsible government.”

    Opponents of the tax subsidy recognize that government’s job is not to pick winners and losers, and AFP applauds those in Wichita who made their voices heard in support of limited government and the free market.

  • Kansas Senator Jerry Moran wants to pick losers in the market: His choice is big wind

    In Kansas, we have a lot of wind — no doubt about that. But the economics of wind as a source of electricity generation is another matter. There’s a split in Kansas over this. On one side are Kansas Governor Sam Brownback, who has been vocal in his support of wind power, along with Wichita Mayor Carl Brewer, who has been busy promoting Wichita as a site for wind energy-related industry. Now we see Kansas’ newest U.S. Senator Jerry Moran jumping in to promote the wind power subsidy program. Contrast this with U.S. Representative Mike Pompeo of Wichita, who has introduced legislation to end all tax credits related to energy production. It’s important to remember that the government subsidy program for wind power is in the form of tax credits, which are equivalent to grants by the government. The term “tax expenditures” is starting to see widespread usage to accurately describe the economic effect of tax credits.

    Senator Jerry Moran wants to pick losers in the market: His choice is big wind

    By Daniel Horowitz

    If I were pressed to offer one anecdote exemplifying our failure to elect consistent conservatives to Congress last November, the story of Senator Jerry Moran and Big Wind would be at the top of the list.

    In 2010, then-Congressman Jerry Moran beat former Congressman Todd Tiahrt for the Republican nomination for Senate in Kansas running as a red meat conservative. He easily won the seat in this solid Republican state and summarily joined the ‘Tea Party Caucus’ in the Senate. Nothing emblematizes the convictions of the Tea Party more than its fervent opposition to special interest handouts and government interventions in the private sector as a way of picking winners and losers. Yet, Senator Moran let the cat out of the bag last week that he has absolutely no compunction about picking winners and losers, or in the case of Big Wind, big losers.

    Last week, Senator Moran announced that he is submitting an amendment to the terrible Senate highway bill (S.1813) that would extend the 2.2 cent/ per kilowatt-hour Production Tax Credit (PTC) for another 4 years. This special interest handout to Solar and Wind is slated to expire at the end of the year. What happened to Moran’s Tea Party views? Well, he unabashedly threw them under the solar-powered bus:

    Asked about opposition to extending the credit expressed by Rep. Mike Pompeo of Wichita, Moran said: “There are members of Congress who feel we ought not to pick winners and losers, to let the markets decided. I believe it’s better to get this industry up and running, then let the country decide … rather than pull the rug out overnight.”

    Wow! At least he’s honest. I wish we had known that before the election.

    The PTC is the corporate version of the Earned Income Credit for green energy. It is among 51 ‘tax extenders’ that have either expired last December or are slated to expire this December. The PTC offers a 2.2 cent/per kilowatt-hour refundable credit for wind, solar, or geothermal. According to the Heritage Foundation, if the oil industry received a commensurate subsidy, they would get a $30 check for every barrel produced.

    Headed into the November elections, one of our most potent and popular arguments we have is to paint the Democrats with the Solyndra economy — an economy where the government intervenes to pick winners and losers, at the detriment of consumers and taxpayers. How can we effectively articulate an alternative free-market vision when we have a member of “the Tea Party Caucus” supporting Obama’s policy of picking losers in the energy sector? Talk about pale pastels!

    Folks, this is not how we win elections. Moreover, this type of special interest peddling — from energy subsidies to farm welfare — creates dependency in some of the reddest states. This is not a winning message for the future of conservatism, especially when it emanates from such a Republican state.

    There is a better way. Congressman Mike Pompeo (R-KS) introduced legislation (HR 3308) to sunset all targeted energy tax credits and grants, including those for fossil fuels and nuclear power. The bill would use the savings from the repeal of these credits (roughly $90 billion over ten years) to lower the corporate tax rate on everyone. Senator DeMint has introduced a companion bill in the Senate (S.2064).

    Every member of Congress who seeks a clean break from a centrally-planned Solyndra economy must cosponsor this bill. Additionally, as we look for more congressional candidates to endorse, it is these issues — energy and farm subsidies — that will separate the men from the boys. We must fight this election by offering voters a choice, not an echo.

    Cross-posted from The Madison Project

  • Why vote no in the Wichita Ambassador Hotel election

    By Susan Estes, Americans for Prosperity. A version of this appeared in the Wichita Eagle.

    As the February 28th special election in Wichita nears, members of Tax Fairness for All Wichitans would like citizens to have the full range of facts available as they decide how to cast their ballots.

    Most importantly, Wichitans should know that the Ambassador Hotel developer has said that renovation work will proceed and the hotel will open regardless of the outcome of the election. So whatever the impact of the hotel on jobs and downtown — all this will happen even if citizens vote no.

    That the hotel will open even if the guest tax rebate fails to pass is recognition of the large taxpayer subsidy that the hotel is receiving. The Ambassador Hotel will benefit from at least eight government programs, all of which cost the taxpayer. Voting No on February 28th simply prevents a ninth layer of taxpayer subsidy from taking effect. The other eight layers of generous taxpayer subsidies are not affected by the election.

    Regarding specifically the guest tax rebate that is the subject of the election: Supporters claim that this tax is paid by visitors to Wichita, and therefore is not a new tax that costs Wichitans.

    On the surface, this seems logical. But according to the Wichita State University study that hotel developers use, 50 percent of the Ambassador Hotel’s business is diverted away from existing hotels. These hotels — with two exceptions — pay their full share of guest tax to Wichita’s Tourism and Convention Fund. As business shifts from these hotels to the Ambassador Hotel, we can expect revenue to that fund to decline.

    The Tourism and Convention Fund is used to fund the city’s tourism promotion, but also for debt service, maintenance, and updates to Century II. The fund is running a loss of $2 million this year, and next year its balance will be near zero. As there are plans for increased spending at Century II, taxpayers across Wichita will likely have to make up for the Ambassador Hotel’s missing tax revenue.

    By the way, there are no restrictions on what the hotel owners may do with the diverted guest tax revenue. It is likely to be a source of profit for them at the expense of Wichita taxpayers.

    There are also problems with the use of the WSU study regarding the hotel, explained in more detail at dtwichita.com. As an example, supporters cite only the positive impact to one city fund while ignoring the larger negative impact the study found for the entire city. The study also fails to include the cost to taxpayers of all the eight government subsidy programs the hotel is receiving.

    Hotel boosters also say it’s important not to oppose the city council’s economic development efforts and send a negative message to future investors. This argument ignores the eight generous subsidy programs the hotel is receiving, at a cost of over $15 million. Remember, the election concerns only a ninth program.

    Finally, Voting No helps protect the principle that taxation should be for public purposes, not for private gain.

    More information may be found at dtwichita.com.

  • Who has the economic power?

    Though there is often much focus on the richest private individuals in the United States, the U.S. Congress actually has far more economic power.

    In this video, economist Robert Lawson compares the economic power of the 535 most wealthy private citizens with the spending power of the 535 members of Congress. You might be surprised by what you find out.

    As Congress continues to spend and government continues to increase in size, our economic freedom will continue to decrease. And as our economic freedom decreases, our economic opportunities and quality of life are threatened.

  • ‘Occupy Koch town’ ignores the facts

    By Melissa Cohlmia. A version of this appeared in the Wichita Eagle.

    I’ve lived in Wichita nearly all my life and know what a welcoming community this is. But with protesters arriving here this week to “speak out” against my employer, Koch Industries, it’s unlikely the red carpet will be rolled out for them given their unfounded attacks and nasty resentment of this company.

    The protesters are occupying “Koch Town” because, in their own words, they want to tell our shareholders, “No Keystone XL Pipeline.” If that is their goal, the protesters have the wrong address, like so many who perpetuate the false claim that Koch is behind the Keystone XL Pipeline project. For the record, one more time, we are not.

    Protesting Koch means protesting the livelihoods of 2,700 Kansans and 50,000 Americans who are employed by Koch companies. In these tough economic times, these jobs have provided our employees financial security during the recession and ensuing painful, slow recovery. Koch companies employ tens of thousands in manufacturing products Americans want and need — things like fiber for carpeting, clothing and air bags; building and consumer products; and petroleum-based products and building-block chemicals that make our lives better and provide much-needed energy. These are the kinds of jobs that create a robust manufacturing sector, which America needs in order to stay competitive.

    Protesting Koch also means protesting the many ways Koch companies and our employees contribute to the community. As the protesters visit our city, we invite them to take notice of the Koch Orangutan Exhibit at the Sedgwick County Zoo or the Koch Habitat Hall at Great Plains Nature Center. If they prefer something less wild, they can visit the Koch Aquatic Center at the YMCA. Or if they want to see something more creative, they could spend time at the Koch Family Sculpture Garden at the Wichita Center for the Arts. Maybe they could bowl a few frames for the Koch-sponsored “Bowl for Kids’ Sake” event to benefit Big Brothers Big Sisters.

    I am proud to work for Koch. As director of corporate communication, I’ve read and heard much about this company and its shareholders that is dishonest, distorted and derogatory. And while we continue to try to bat down the falsehoods, as quickly as we quash one, another rears its ugly head. As Winston Churchill once said, “A lie gets halfway around the world before the truth has a chance to get its pants on.”

    I ran my own small business and experienced the ups and downs that come with breaking out on my own. I met demands from customers, made profit, and put it toward my family and the causes I believed in. When I decided to join Koch, it was in part because of the values of this company – honesty, integrity, respect, a focus on real value creation. I saw that I could participate in an enterprise that was hard at work improving people’s lives on a larger scale. Since coming to Koch, I have never been asked to veer from these values.

    So, protesters, as you visit Wichita, you’ll notice we’re friendly, patriotic, and proud of our work ethic and community spirit. We won’t shout back unless it’s at a basketball game at Wichita State’s Charles Koch Arena. And we’re proud of Koch Industries and our fellow employees because this company makes a positive difference in our lives and our community.

    Melissa Cohlmia is director of corporate communication for Koch Companies Public Sector, LLC and a Wichitan.

  • Occupy Koch Town protestors ignore facts

    Below, Paul Soutar of Kansas Watchdog provides more evidence that the campaign against Wichita-based Koch Industries regarding their alleged involvement in the Keystone XL pipeline is not based on facts. Besides this article, U.S. Representative Mike Pompeo of Wichita has also written on this issue in The Democrats continue unjustified attacks on taxpayers and job creators.

    Another inconvenient fact is that if the Canadian oil is not sold to the U.S., it will be sold to and consumed in China. If we are concerned about greenhouse gas emissions leading to climate change, it should be noted that it doesn’t matter where the greenhouse gases are produced. The effect is worldwide. But as we know, the radical environmental movement cares nothing for facts in their war on capitalism and human progress.

    Facts Refute Environmentalist Claims About Keystone XL Pipeline

    By Paul Soutar. Originally published at Kansas Watchdog.

    Protesters are gathering on the Wichita State University campus this weekend for a Sierra Club-sponsored Occupy Koch Town protest against the Keystone XL oil pipeline and Koch Industries, Inc. Koch and its subsidiaries are involved in a wide array of manufacturing, trading and investments including petroleum refining and distribution.

    Many Keystone XL opponents have focused on Koch, claiming its Flint Hills Resources Canada subsidiary’s status as an intervener in the regulatory approval process in Canada proves Koch is a party to the pipeline project. Keystone XL would carry petroleum from Canadian oil sands to the U.S. Gulf coast.

    In a Jan. 25 House Energy and Commerce Committee hearing, California U.S. Rep. Henry Waxman, D-District 30, demanded that the Koch brothers, Charles and David, or a representative of Koch Industries appear before the committee to explain their involvement in the pipeline.

    Philip Ellender, president of Koch Cos. Public Sector, which encompasses legal, communication, community relations and government relations, responded to Waxman on a Koch Industries website:

    Koch has consistently and repeatedly stated (including here, here, here, and here) that we have no financial interest whatsoever in the Keystone pipeline. In addition, this fact has been verified by TransCanada’s CEO here.

    Russ Girling, CEO of TransCanada, owner and builder of the Keystone pipelines, addressed criticism of the pipeline and supposed collusion with the Koch brothers in a Nov. 1 conference call to discuss TransCanada’s earnings. “I can tell you that Koch (Industries Inc.) isn’t a shipper and I’ve never met the Koch brothers before.”A March 2010 document from Canada’s National Energy Board (NEB) approving the pipeline does not mention Koch or its subsidiary, Flint Hills Resources Canada, on any of its 168 pages.

    The report does note that on June 16, 2009, TransCanada Corporation became the sole owner of the Keystone Pipeline System, acquiring ConocoPhillips’ interest in the pipeline.

    A map of the existing Keystone and planned Keystone XL pipelines shows that Koch’s two refineries in the 48 contiguous states at Pine Bend, Minn., and Corpus Christi, Texas, are not on or near the pipeline routes. Koch also has a refinery in North Pole, Alaska.

    Koch does have substantial interests in Canadian oil though, including the thick oil sands mined in Alberta. Those interests are precisely why Flint Hills Resources Canada requested intervener status in the pipeline approval process in 2009.

    Flint Hills’ application to Canada’s National Energy Board for intervener status said, “Flint Hills Resources Canada LP is among Canada’s largest crude oil purchasers, shippers and exporters, coordinating supply for its refinery in Pine Bend, Minnesota. Consequently, Flint Hills has a direct and substantial interest in the application.”

    Critics have claimed that statement is a smoking gun proving Koch is a party to the pipeline or will benefit from its construction.

    Greg Stringham, Canadian Association of Petroleum Producers (CAPP) vice president of markets and oil sands, told KansasWatchdog, “Their intervention itself is not a trigger that says aha, they have a commercial interest or are a shipper on this pipeline.”

    The US Legal, Inc. definitions website says an intervener is, “A party who does not have a substantial and direct interest but has clearly ascertainable interests and perspectives essential to a judicial determination and whose standing has been granted by the court for all or a portion of the proceedings.”

    US Legal, Inc. provides free legal information, legal forms and help with finding an attorney for the stated purpose of breaking down barriers to legal information.

    Stringham said anyone — business, organization or individual — can be an intervener in NEB regulatory proceedings as long as they can show some potential impact, good or bad, from the proposed action. “Then they make a decision whether they’re going to actively engage through evidence and cross examination or whether they’re just there for interest, to get materials and monitor the situation.”

    Market interest

    Like Koch, Stringham said CAPP is an intervener in the pipeline approval process, because the pipeline will have a direct impact on the Canadian oil market. Stringham said:

    The fact that it’s an intervention for interest does not mean that there is a financial ownership or shipping interest. It’s really to make sure that they understand what’s going on in the process and that they have some connection to the project that can be either positive and beneficiary or potentially negative to them. That’s why I believe Koch has intervened in this process.

    The Canadian pipeline company Enbridge, Inc.; Marathon Oil Corp. and Britain’s oil giant BP are also among the 29 interveners in the pipeline application. So is the environmental activist organization Sierra Club.

    Keystone XL would compete with the Enbridge pipeline that carries the thick bitumen oil from Hardisty, Alberta, for delivery to Koch’s Pine Bend, Minn., refinery. If supplies prove insufficient for both pipelines, Stringham said, Koch could be at a competitive disadvantage since it is not a shipper on the Keystone pipelines.

    The National Energy Board’s approval document noted:

    Keystone XL shippers have indicated that they are seeking competitive alternatives, and by providing access to a new market, Keystone XL would be expanding shipper choice. The Board places considerable weight on the fact that Keystone XL shippers have made a market decision to enter into long-term shipping arrangements negotiated through a transparent competitive process. New pipelines connecting producing regions with consuming regions change market dynamics in ways that cannot easily be predicted.

    Political motivation

    On Feb.10, 2011 Reuters published an Inside Climate News article that started the Koch-Keystone explosion. The third paragraph put a political spin on the Koch claims.

    What’s been left out of the ferocious debate over the pipeline, however, is the prospect that if President Obama allows a permit for the Keystone XL to be granted, he would be handing a big victory and great financial opportunity to Charles and David Koch, his bitterest political enemies and among the most powerful opponents of his clean economy agenda.

    Former U.S. Solicitor General Theodore Olsen, in a Wall Street Journal op-ed, highlighted the political dimension of attacks on the Kochs and recent attempts to compel their testimony before Congress.

    When Joseph McCarthy engaged in comparable bullying, oppression and slander from his powerful position in the Senate, he was censured by his colleagues and died in disgrace. “McCarthyism,” defined by Webster’s as the “use of unfair investigative and accusatory methods to suppress opposition,” will forever be synonymous with un-Americanism.

    In this country, we regard the use of official power to oppress or intimidate private citizens as a despicable abuse of authority and entirely alien to our system of a government of laws. The architects of our Constitution meticulously erected a system of separated powers, and checks and balances, precisely in order to inhibit the exercise of tyrannical power by governmental officials.

    Market and environmental realities

    Canada produces about 2.7 million barrels of oil per day with about 1.6 million going to the United States. “About a million of that comes from the oil sands,” Stringham said. “All of that moves through the existing pipeline systems.”

    Two Kansas refineries, the Holly Frontier refinery in El Dorado and National Cooperative Refinery Association’s facility in McPherson, refine Canadian oil, including from oil sands, delivered over existing pipelines.

    With or without the Keystone XL, oil from Canada’s oil sands will continue to go to markets, according to Stringham. “We have been investigating a number of alternatives. Keystone XL clearly is the most direct route to get to the gulf coast and that’s why the market really spoke up and said this is what we want,” he said.

    In a 2010 op-ed in the National Journal, Charles T. Drevna, president of American Fuel & Petrochemical Manufacturers, presciently said, “Canada’s leaders have made clear that if the U.S. won’t buy their oil, they won’t abandon development of their oil sands. Instead, they have said they will ship Canadian oil across the Pacific to China and other Asian nations. That will result in America having to import more oil from other countries. Sending Canadian oil to Asia would actually increase global greenhouse gas emissions, according to a 2010 study by Barr Engineering.”

    The Barr study, Low Carbon Fuel Standard “Crude Shuffle” Greenhouse Gas Impacts Analysis (pdf), concluded that transporting oil to Asia for refining would mean not just a lost opportunity for the U.S., but increased greenhouse gas emissions because of transportation by ship instead of by pipeline and less stringent refinery emission standards.

    TransCanada has said it will continue to seek approval of the Keystone XL and work is proceeding on alternatives to Keystone XL, Stringham said. “There are other pipeline routes being investigated by Enbridge and BP and a number of others as well to move this oil,” he said.

    He said Canada’s oil market is looking at diverse opportunities beyond the United States. “We are looking to the West Coast, which could move it on to tankers. We looked at Asia, it is one of the options, but once it gets to the West Coast, it can also move to the California market,” he said.

    Stringham said a proposal for Enbridge to build a pipeline carrying oil to the West Coast has more than 4,000 interveners.

    Occupy Koch Town promotional materials say they’ll also protest against the Kansas Policy Institute. KPI helped launch KansasWatchdog.org in 2009 but is no longer affiliated with this site.