Kochs invest in company set to benefit from coal and nuclear bailout

Billionaire industrialists see a chance to make a profit.

The Pleasants Power Station is scheduled to be shut down unless owner FirstEnergy Solutions gets a bailout from the Trump administration. CREDIT: Michael Williamson/The Washington Post via Getty Images
The Pleasants Power Station is scheduled to be shut down unless owner FirstEnergy Solutions gets a bailout from the Trump administration. CREDIT: Michael Williamson/The Washington Post via Getty Images

Koch Industries Inc., the petrochemical giant that turned Charles and David Koch into billionaires, has made a significant bet on utility company FirstEnergy Corp., recent filings show. This is despite  FirstEnergy’s continued effort to have the government help bail out its aging coal and nuclear plants — a policy move traditionally opposed by Koch.

An investment vehicle for Koch Industries called Spring Creek Capital LLC purchased 20,052 shares of FirstEnergy stock, valued at about $682,000, during the first quarter of 2018. The investment by Spring Creek Capital is listed on FirstEnergy’s website under institutional investors.

Advertisement

A financial news website reported Monday the purchase of shares in FirstEnergy based on the most recent 13F filing with the Securities and Exchange Commission by Spring Creek Capital.

“This is a clear-cut case of the Koch brothers publicly opposing government bailouts for FirstEnergy on the one hand, then turning around and investing in the same bailout-seeking regulated utility when they saw a chance for profit,” Dave Anderson, policy and communications manager for the Energy & Policy Institute, a nonprofit utility watchdog group, said Monday in an email to ThinkProgress.

The news of Koch’s investment comes after Trump ordered the Department of Energy earlier this month to find a way to force grid operators to buy electricity from coal and nuclear plants at risk of retirement, something for which FirstEnergy had long lobbied.

Advertisement

The Koch brothers have long opposed government subsidies for energy regardless of the source. Across the nation, organizations funded by the Kochs regularly lobby against legislation or regulatory actions that would reward one energy sector over another.

In Ohio, the Koch-funded Americans for Prosperity has been fighting attempts to bail out FirstEnergy Corp.’s nuclear and coal plants, claiming subsidies distort the market for electricity by shifting costs upon ratepayers.

“It is unacceptable to force Ohioans to pay close to $1,000 over the next 16 years to bailout the state’s nuclear industry,” the Koch-funded Americans for Prosperity said in March 2017 testimony on a pro-nuclear subsidiy bill in Ohio.

The Koch brothers’ fundamental opposition to government subsidies for Akron, Ohio-headquartered FirstEnergy and other utilities seeking handouts, though, doesn’t seem to have prevented them from investing in those same companies.

Since Donald Trump became president, the chief executive of FirstEnergy has been making the rounds to get government relief for his company. FirstEnergy CEO Charles Jones reportedly met with Energy Secretary Rick Perry more than a year ago, according to new documents obtained by the Energy & Policy Institute.

Advertisement

FirstEnergy spokesperson Jennifer Young said in an email to ThinkProgress that she does not have the details of the content of any meetings that FirstEnergy officials have held with the Trump administration.

“FirstEnergy executives have met with federal officials on several occasions to discuss the importance of baseload generation plants and the need to identify solutions that help keep these vital facilities in operation,” Young said.

Also in 2017, President Trump met with Jones in Huntington, West Virginia, according to a letter from Murray Energy CEO Robert Murray dated August 4, 2017. Murray Energy is a major supplier of coal to power plants owned by FirstEnergy subsidiary FirstEnergy Solutions.

“We have requested that President Trump direct Energy Secretary Rick Perry to invoke Section 202(c) of the Federal Power Act declaring an emergency on the electric power grid,” Murray wrote in his August 4 letter to John McEntee, special assistant and personal aide to Trump.

“FirstEnergy is on the verge of bankruptcy, as we advised President Trump in the Oval Office four weeks ago, in Youngstown nine days ago, as well as last evening,” Murray also said in the letter.

FirstEnergy’s generating subsidiary, FirstEnergy Solutions, filed for bankruptcy on March 31, only two days after asking Perry’s Department of Energy (DOE) to rescue its coal and nuclear plants by declaring an “emergency” in the power industry. FirstEnergy Solutions claimed in its letter to Perry that “the nation’s security is jeopardized if DOE does not act now” to keep the plants open.

After a full-scale lobbying blitz by FirstEnergy, the White House issued the highly controversial statement on June 1 that said Trump had directed Perry to “prepare immediate steps to stop the loss” of what the administration described as “fuel-secure sources” in a reference to coal and nuclear power plants.

Advertisement

Once again, Americans for Prosperity — funded by Koch, which as of earlier this year owns shares in FirstEnergy — announced its opposition to the wide-scale subsidies proposed by Trump.

On Sunday, Americans for Prosperity tweeted a link to an op-ed published in the Washington Examiner that opposed the Trump administration’s coal and nuclear bailout proposal. In the tweet, Americans for Prosperity wrote: “Forcing utility companies to buy their power sources from coal and nuclear plants? How is that freedom?”

Hypocrisy in political circles is not uncommon. But Koch Industries’ decision to buy shares of FirstEnergy — after the company lost significant value during the latter stages of 2017 — is one of the most brazen examples of billionaire investors and political ideologues wanting to have it both ways.

“The Koch brothers are now banking big on a failing coal company that’s doing anything it can to get a billion dollar bailout from taxpayers,” Mary Anne Hitt, senior director of Sierra Club’s Beyond Coal campaign, said Monday in a statement emailed to ThinkProgress. “Whether it is by attacking life-saving clean air and climate protections or by trying to pad their pockets with taxpayer cash, it is clear these corporate polluters are sticking together to do the one thing they do best: put their profits before the needs of everyone else.”

Aside from coal industry executives and nuclear plant owners, the Trump administration’s proposal remains extremely unpopular in the energy industry. Industry trade groups such as the American Petroleum Institute and the American Wind Energy Association are part of a broad coalition opposed to the bailout.

The Trump administration, however, is standing behind its proposal to funnel money to these two well-established sources of energy, sectors that have already received huge government handouts over the past several decades.

A high-ranking administration official, Vincent DeVito, counselor to Interior Secretary Ryan Zinke for energy policy, said last December in a speech at a conference sponsored by the far-right Heartland Institute that “unlike the previous administration, we are not going to favor one type of energy over another. We are letting the market decide, as it should.”

Speaking to reporters on Monday after a speech at the Atlantic Council, a Washington think tank, DeVito was singing a different tune. He said he supports Trump’s policy of favoring coal and nuclear plants over other types of energy.

“There’s no daylight between Secretary Zinke and I and there’s no daylight between the president and me” on the issue of propping up coal and nuclear plants, DeVito said, emphasizing that Interior Secretary Ryan Zinke and he agree with with the White House directive.

Since the Department of the Interior owns a major share of a coal-fired power plant, it can also attempt to put Trump’s pro-coal vision into practice without interfering in wholesale power markets. The department is waging a campaign to save a coal-fired power plant: the Navajo Generation Station, a 43-year-old coal plant in northern Arizona in which a division of the Interior Department owns a 24.3 percent stake.

The Interior Department’s position on the Navajo station goes against the stance of the plant’s other owners who are tired of losing money on the facility. They voted in February 2017 to close the plant when their 50-year lease with the Navajo Nation expires in 2019.

Central Arizona Project officials have said it is cheaper to buy power on the market from natural gas plants than to take power from three-unit, 2,250-megawatt coal-fired Navajo Generating Station.

But as DeVito noted on Monday, Timothy Petty, appointed by Trump last year as assistant secretary for water and science at the Interior Department, wrote a letter to the Central Arizona Project on June 1, telling the agency’s leaders that they are bound by law to take the coal plant’s power.

In his letter, Petty said the utility doesn’t have that choice. The Colorado River Basin Project Act of 1968 requires that the canal must use the Arizona coal plant as its power source, read the letter.