Koch defends environmental record after huge pollution fine

Friday, January 14th 2000, 12:00 am

By: News On 6

WICHITA, Kan. (AP) -- Paul Jackson could smell the gasoline long before he reached the area where the Koch Industries pipeline had burst, spilling 79,000 gallons into a nearby creek. It was June 2, 1994. Jackson, president of Sedgwick County Rural Water District No.1, immediately shut down the line carrying water to Kechi, just north of Wichita. He remembers Koch doing everything it could to help, shipping in water and paying for problems in the tiny rural community. "They didn't give us a minute's trouble on any of this," he said. "We were very nervous about this situation and they really eased our minds."

He was more than a little surprised to learn the spill was one of 300 across the nation involved in a landmark $35 million settlement announced Thursday by the Environmental Protection Agency. The government said it was the biggest civil fine ever levied under the Clean Water Act. Koch Industries, one of the country's largest oil pipeline operators, agreed to pay the penalties for leaking 3 million gallons of oil into lakes and streams in six states, including Oklahoma. The settlement singled out leaks from 1990 to 1997.

The settlement resolved two lawsuits charging that for years Koch's pipeline subsidiary had left thousands of miles of pipeline in disrepair, leading to hundreds of oil leaks. Koch, based in Wichita, operates more than 35,000 miles of oil and gas pipeline in the United States and Canada. Koch has refineries in Texas and Minnesota through its Koch Petroleum Group subsidiary.

Besides Kansas, the spills polluted waterways in Texas, Oklahoma, Kansas, Louisiana and Missouri, according to the EPA. EPA Administrator Carol Browner called Koch's actions "egregious violations" and said the fine "sends a strong message that those who try to profit by polluting our environment pay a price." "This record civil penalty puts those who transport hazardous materials on notice," added Attorney General Janet Reno. "We will not let you foul our water and spoil our land by breaking the law."

Koch Industries, through its pipeline subsidiary, said the settlement was "fair and reasonable" and that it will avoid any additional litigation. The government originally had sought between $71 million and $214 million in penalties, according to the company. "We have always sought to operate our pipelines with the highest safety and environmental standards," said Pat McCann, the subsidiary's senior vice president. The government, in the complaints filed in 1995 and 1997, claimed Koch could have prevented most of the spills, caused mainly by corrosion, through prompt maintenance and safe operations.

Under the settlement, Koch must examine 2,500 miles of pipeline and repair defects. This is the same company whose state-of-the-art pipeline monitoring system was recently honored by the Smithsonian Institute as one of the nation's leading technological innovations. As a privately held company, Koch Industries does not have to report annual profits and revenues. It has been estimated the company's had $30 billion in revenue last year from an array of businesses from oil refining and transporting to chemical production and cattle ranching.

Under the settlement, Koch pays $30 million in fines, half of which will go into the federal trust fund for cleaning up oil spills; the other half goes to the state of Texas, which had joined in the lawsuits. An additional $5 million goes to preserve wetlands in Kansas and Oklahoma, conduct a pipeline safety study and aid environmental programs in Texas.

Browner said the fine was the largest ever against a single company under the Clean Water Act, surpassing a $12.6 million fine against Smithfield Foods Inc. in 1997 for dumping hog waste into Chesapeake Bay. There have been larger settlements, involving air or water pollution, but they generally have focused all or largely on cleanup costs. These include the 1989 Exxon tanker disaster in Alaska and last year's $150 million settlement -- all cleanup expenditures -- with General Electric Co., over toxic chemical pollution of a river in Massachusetts.

Two years ago, the EPA reached a $1 billion settlement --including $100 million in penalties -- with seven diesel engine manufacturer accused of tampering with air pollution control devices. In the Kechi case, the EPA said the spill resulted in benzene contamination of surrounding groundwater for more than two years. That was news to Jackson, who said no one ever notified him. Not that he was too worried -- his water district buys its water wholesale from Wichita.

Among the other Koch cases cited by the EPA was the spill of 221,000 gallons of oil into a creek in Payne County, Okla., in 1992. A 1994 pipeline rupture also sent 90,300 gallons of oil into a Texas creek, contaminating areas along Nueces Bay and Corpus Christi Bay. On its Web page, Koch Industries touts its environmental record, saying it has spent $980 million for environmental protection at refineries and other facilities since 1990. It claims to have reduced pipeline leaks by more than 90 percent over the past decade.

The penalties handed down Thursday are the latest in a series of problems for the company. Last month, a jury in Tulsa, Okla., found that Koch had underreported thousands of oil purchases. Damages haven't yet been assessed, but the judge could fine the company a maximum of $214 million on the 24,587 claims the jury found to be false.