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News and Features: Features

William Koch

Delay, delay, delay

BY: Bruce Mohl
Photographs By: Mark Randall
Issue: Spring 2013


CommonWealth’s Bruce Mohl interviewed William Koch by phone from his office in West Palm Beach on Feb. 20. Koch was with Brad Goldstein, his media representative. What follows is a lightly edited transcript of the conversation.

 

WILLIAM KOCH: I’m sorry we’re calling you so late. I was just trying to make a little money here.

COMMONWEALTH: Should we just dive into it?

KOCH: Brad Goldstein is sitting here next here to me to make sure I don’t shoot my mouth off in the wrong way. I have no luck at that.

CW: I’m taping the conversation so I just wanted to let you know that.

KOCH: If we say something is off the record, will you respect that?

CW: Absolutely. No problem.

KOCH: Thank you.

CW: I’ve been reading a lot about Cape Wind lately. I read your Wall Street Journal op-ed from May 2006 and Jim Gordon’s response. You characterized it as him approaching you to become an investor in Cape Wind. He says he approached you with the idea of becoming a supporter of Cape Wind and you brought up the idea of investing. Can you give me an idea of how those meetings came about and where they took place?

KOCH: Oh boy. I remember he called me on the phone and asked me to be a supporter of it. He blew a little smoke at me. You’re familiar with that expression, aren’t you? Saying your reputation as a big sailor, your reputation on the Cape would really help us get this project off the ground. And then he went through his spiel, his salesmanship, on how Cape Wind is so environmentally friendly, global warming, and all that stuff. And I was blunt with him. I said, “Hey, Jim, I’ve looked at the alternative energy business. I’ve used all those BS arguments myself. I know what’s really going on there,” to get him off that. And then he came back and said they really, really want me to be as supporter. I honestly said: “What’s in it for me if I’m a supporter?” And then he said, “Well, of course we’ll let you invest in the company.”  I said, “Oh, that’s interesting. I’ll think about it.” I think I also told him at that time that I live on the Cape and that the wind farms would be visual pollution for me. …In Colorado they have a phrase called the view shed and in Colorado it’s extremely important to the people to have a good view shed. And I may have brought that up at that time. I may be conflating a couple of conversations.  (Goldstein whispers “Came to Homeport, right?”) Then he came down and had dinner with me at the Cape. He brought me a mockup of what they would look like to show how miniscule they’d look. We had a nice dinner and a nice conversation, some nice bottles of wine.

CW: Where was the dinner?

KOCH: At my house. He came to my house. I think I complimented him on coming up with a project like this because one of the reasons why I got out of the alternative energy business was because I couldn’t find any more what I call fat projects. The alternative energy business is uneconomical unless you get a government subsidy or a government-enforced contract. On one plant we were making $50 million a year primarily because we were selling alternative energy on a fat contract to Southern California Edison at 15 cents a kilowatt hour when the market at that time was 3 cents a kilowatt hour. At 3 cents I wouldn’t have closed the plant down, but I would have never started a plant up. The return on investment would have been very, very small. It would have been in the single digits or the decimal point digits.

CW: How did things end at end of dinner?

KOCH: To be blunt with you, I just delayed giving him an answer. I said I wanted to think about it. I was funding the alliance at the time. (Goldstein interrupts and notes Koch wasn’t the sole funder of the Alliance.) I was one of the contributors. I wasn’t funding the whole thing, but I was funding a large portion of it. I was a big contributor but there was an anonymous family that was a big contributor, too. I’m still not funding the whole thing. I’ve never funded the whole thing. I’ve just been a huge contributor. I just want to make that clear.

CW: Were you affiliated with the Alliance back in 2002-2003 when you had the meetings with Gordon?

KOCH: I’d have to go back and look. There was a time when the Alliance approached me for money and they didn’t want my advice. I told them at the time when they were hitting me up for money that the way to come at this thing was not on environmental reasons but on economic reasons. I’ll give you an example. We at one time were the largest supplier of green energy to southern California.  Socal Edison had on its bill a box that homeowners could check off if they wanted green energy. If they checked the box off, they were then charged an extra 2 cents a kilowatt hour. They would share one cent of that with us. Over 15 years, guess how much green energy I sold to Southern California Edison?

CW: How much?

KOCH: Zero. No one would pay. What that said to me was that California wanted green energy but homeowners didn’t want to pay for it. When it comes down to dollars and cents, people want the cheapest energy possible. I said to this group at the Alliance, attack it on economic reasons, don’t attack it on environmental reasons. They ignored me. In fact, there was one woman who was the head of it who said we just gave Jim Gordon the fact that his energy would be cheaper. I said that’s stupid. I didn’t participate in it. I didn’t join it until they recruited a new person to come in and run it. He was an ex-environmentalist. I think he was head of the Cousteau Society. Charles Vinick came in and took it over and he was sympathetic to the economic reasons, but he was still going after the environmental stuff, so I gave him some money, not a lot. Then he left and they put in another guy who did attack it on economic reasons, but he alienated a bunch of the other donors. So then Audra [Parker] was put in charge and Audra was very good, so I’ve been supporting it more and more. (Goldstein says Koch did economic modeling on Cape Wind and presented the result to Gordon.

I’d been in the alternative energy business. We had owned seven power plants, almost all of them except for one was alternative energy. I owned three in Nevada, two in the Phillippines, two in Costa Rica, and I had an investment in a wood-fired power plant in Maine. So we knew the economics of these plants pretty well. I had my staff put together an economic analysis of an offshore wind farm and found out that unless you got a huge government subsidy it wasn’t going to be economical. You’d have to get 25 cents a kilowatt hour when the market in Massachusetts was 7 or something. I looked at it and said this is uneconomical unless you get some real fat contracts or a big government subsidy.

CW: Your Wall Street Journal op-ed said it wasn’t going to work. Did you communicate that to Gordon?

KOCH: Yeah, I believe I did. I told him it wasn’t a project I was interested in. I also told him, I hate to say it, that I didn’t want it in my backyard. At one time I asked to see his model and he said, Bill, before I open my kimono and show you everything, I’ve got to have your agreement that you will support the project. I said I’m not going to give you that but I’ll do my own model. I didn’t think it would work because I didn’t think he’d get that fat of a contract. Also, I thought his capital estimates were very low because he was putting these windmills in an extremely hostile environment and you don’t know what the maintenance costs will be. You don’t know what the construction costs will be, although he claims he had all that down firm. I think General Electric wasn’t going to make the size of turbine he was planning to use. Or Siemens either. And I didn’t think he could get funding for it from banks. What we would do when we were going to build a project was we would do all the engineering and all the studies and then we would go get a contract from somebody to buy the power at a predetermined price or a price that escalated, and then we’d go get bank financing to put up the plant. At one point we could only get 50 percent of the financing. When these projects became in vogue and hot, you could get 80 percent financing. Later, when so-called PURPA contracts were no longer given, you couldn’t get any financing.

CW: So you tell Gordon your opinion and you parted ways. This would have been 2002-2003. After that, did you decide to oppose the project?

KOCH: I think I told him I didn’t want to look at them, something simple like that. He knew I was funding the Alliance. When Audra got on the board, I became a cochairman of the Alliance. One of Jordan’s PR guys said Bill Koch is a hypocrite because he said, “I wished I thought of it.” At the time, I must admit I did say that because we couldn’t find any fat contracts. If you’re in the alternative energy business, what you want to do is sell it at an above-market price and get a fat contract. I said, gosh, he’s found a way to do that. He’s a good entrepreneur, and I still say that, he’s a very good entrepreneur and a brilliant marketer.

Later on, as I kept financing [the Alliance], Jim kept in touch with me. He’d call me once every six months and tell me about his progress, how good it was going, and how I ought to back out of it. He even made an offer to me that he would, when the project got approved, he would pay back all the money that I’d spent on fighting him. I said, well, thank you for that. I must admit I kind of yessed him to death. I said I’d think about it and I never got back to him. He then came down here to Palm Beach once and wanted to have drinks with me. He reiterated that and I told him I was buying more property on the Cape for a family compound and the windmills would interfere with the aesthetics of the Cape. In addition to that, they cost too much. They’d up my power bill. He gave me his good line that it would save the environment and do all these wonderful things and it was going to get done etc. etc. I complemented him on how well he had done in getting this through the political process and then I said I’d think about it and get back to him. He said, “Bill, that’s your way of saying no,” which was right.

Then he called me up right before the end Of the year and said, “Bill, I’ve got to tell you this. Some of these environmentalists are madder than hell that this project isn’t going to go ahead and they’re going to start playing dirty and they’re going to go after you and stop all your projects.” He said support this project or they’re coming after you. I said to Jim, well, thank you for telling me that, but the environmentalists are already after me. I’ve had the Turkish government after me. I’ve had the IRS after me, and I’ve had a $50 billion-a-year corporation after me. I’ve had the Turkish mafia after me, so bring it on baby.

CW: What year was that?

KOCH: That was last year, 2012. People have threatened me before and it hasn’t gotten them anywhere. I said I’d think about it Jim. He’s called me up several times since then but I haven’t returned his call. My plan is to write him a note saying, “Jim, I’m against your project for the following reasons: One, it doesn’t make economic sense. Two, it’s going to run up my bill. Three, it’s going to destroy a beautiful environment.” "I'm against your project for the following reasons: One, it doesn't make economic sense. Two, it's going to run up my bill. Three, it's going to destroy a beautiful environment."

CW: You mentioned a fat contract. When you wrote your Wall Street Journal op-ed, he didn’t have any contracts. They came along in 2010 and 2012.

KOCH: That was because of your governor.

CW: The contracts set requirements that the two major utilities in Massachusetts have to buy more than two-thirds of Cape Wind at a fixed price with an inflation adjustment. Is that the sort of fat contract you were talking about?

KOCH: I was talking about either a fat contract or a government subsidy or a government-mandated requirement. When I talked to Jim Gordon about that, he explained to me that in Massachusetts there was a requirement to buy so much alternative energy and then he explained that that requirement escalated. That’s another form of government subsidy via mandate. When I was in the business, all you had to do was mandate that we commit alternative energy to a power plant or a power company distributor like Southern California Edison. They had to buy it according to a certain formula, which was the power company’s estimated avoided cost escalated with time for 10 years. Then the price fluctuated with whatever the market was and whatever the avoided cost of the power company was. At that time, the avoided cost started off at 7 or 8 cents and then escalated to 16 or 17 or 18 cents. That turned out to be a huge fat contract, and they were stuck with it even though their avoided cost went to 3 cents. To make this business work, you either have to have a government mandate that people have to buy the power or you get a huge fat contract that is forced on the power people by the government. Now Jim Gordon was telling me there was this requirement in Massachusetts that they had to buy so much of their power from alternative energy and he had gotten crafted in that definition of alternative energy that most of it was going to be his wind power. He excluded some other things like wood chips or hydro, things like that. So he manipulated the government, like you get a government contract and the requirements of the contract are so stiff that only one person can fill it. That’s a standard trick. He had those deals. He said because he was going to be the 80 percent supplier of alternative energy he was going to get an above-market price because there’d be demand from other people for that alternative energy. That was his selling point to me when I was first talking to him. In 2010 or so, he got these two state government-mandated contracts, which are fat –huge, huge, hugely fat – 25 cents a kilowatt hour I was told. My thinking at the time was that I didn’t think it would work. I thought he was too clever on getting this state requirement on alternative energy and he couldn’t get a bankable contract so therefore he couldn’t raise the money to do it. He could raise some of the money but not all of it, so he was probably going to have to dip into his own pocket to the tune of $500 million or a billion dollars to get it financed. Any investor who looked at that said this is still a highly risky deal so I’m not going to finance it and put some money in. So he right now is in a position where he needs government guarantees or government loans to get the damn thing financed. His capital costs have doubled from what I understand. He originally estimated it was going to be less than a billion dollars. Now it’s either $2 billion or $3 billion.

CW:  The contracts Cape Wind signed with the utilities start at 18.7 cents per kilowatt hour, including power, capacity, and Renewable Energy Credits.  It’s well above market rates. He’s got contracts for 75 percent of his project. If he scales it back a bit, why can’t he put together financing when he has buyers paying well above market.

KOCH: There’s a risk to it. I haven’t read his contracts. In the contracts I had, there was a clip date where you went off these fat prices and then they fluctuated with the utility’s avoided cost, which is another way of saying wholesale market.

CW: He’s got 15 years on his contract.

KOCH: Well, that’s a pretty damn good thing. On the other hand, there’s a risk that he’ll never get it built from an investor’s point of view because he hasn’t got all the permits and the Alliance has done a very good job of delaying him. Christ, this has been delayed for 10 years and any rational guy would have said there’s a time value of money and say why am I doing this. After 10 years, you look at this and say, God, there must be some other reason he’s doing it because otherwise he’s throwing good money after bad if there’s still a big risk he can’t get it done. Unfortunately, in some of my projects that the environmentalists have fought, there are lots of ways to drag it out. When you drag something out, your costs just eat away at you. I think he’s got more than $200 million invested in this now. Maybe it’s $60 million or $50 million, but, either way, it’s a significant amount of money in development costs. He’s not that rich a guy to be able to fund it all himself or to even fund the portion of the equity that has to be put up by the investors.

CW: So you’re saying he’s got fat contracts, but legal opposition and delays add to the risk, so people won’t finance construction. Is that what you’re saying?

KOCH: So far I think that’s been the case. Also, he’s got a huge political risk. He’s relying on government to guarantee everything, but what happens if the government says we’re cutting back? What happens if the government says why should we finance this project that’s basically a political feel-good project. You know the reality of it is, and one of the things that bothered me about it, is that when you’re in the power business most of your costs are in the capital. Your cost of producing the electricity, at least at our geothermal plants, was very low. So we wanted to have it operate as much as possible because that was all free cash coming in. We gave the operators a big bonus if they kept it operating. We had one of the highest operating rates in the country because of that – 97 to 98 percent of the time. It was costing us 1 or 2 cents a kilowatt hour to produce it and we were selling it for 15 cents, so every hour we kept it operating we had a lot more money coming in. The problem with wind is that you’re only generating power when Mother Nature wants you to generate it, when the wind blows. But people want power when they want it, not when the wind is blowing. So you have to build what they call a peaking plant right next to it so you can guarantee your customers that they’ll have all the power they need. If you look at it, a peaking plant will probably be natural gas. The so-called CO2 he’s saving is a fiction because he’s generating CO2 when it’s not blowing. Having lived on the Cape and having sailed a lot, I tell you man, he’s done some wind studies that showed it will operate at 50 percent capacity. Well, that’s pretty damn poor when you’re comparing it to a gas-fired plant, a geothermal plant, or even a coal plant. Having done a lot of sailing, and a lot of sailing off Cape Cod and on Nantucket Sound, you spend a lot of time with no wind.

CW: I am not aware of Gordon having to build a peaking plant.

KOCH: I think it was in the press. He was doing it in New Bedford. Brad? He was talking about building a gas-fired plant in New Bedford.

CW: If you didn’t have the view issue, but the deal was the same – contracts with utilities, approvals etc. –would you invest in Cape Wind today?

KOCH: No. I would not. There’s one very simple reason. The government can change its mind and then you’re out of business. The only place I would build an alternative energy plant right now would be on an island where the cost of power was very high. You could then have your price be a little bit below the price of the alternative source of generating electricity. For example, we looked at St. Croix, where they were generating all their power with oil. We could have priced an alternative energy plant there for, say, 10 percent less than the cost of an oil-fired plant. That would make money and it would make economic sense, unless they discovered natural gas off the island. But on this island we were looking at people had explored for natural gas and didn’t find any. That’s the only way I’d do it now….I have learned one hard lesson in my life: Don’t rely on the federal government, except with taxes. They’ll tax you to death but relying on government to help you make a lot of money is a fool-hardy thing unless you’re a politician and take graft.

CW: There is a feeling in Massachusetts that Cape Wind is inevitable. As an opponent, how will you block it? What’s your strategy?

KOCH: There are two strategies. One is to just delay, delay, delay, which we’re doing and hopefully we can win some of the bureaucrats over. But he’s got the blessing of virtually every president, including Bush. In fact, I’ll tell you something. I’ve become friendly with George W. and I asked him why he was in favor of wind power on Cape Cod. He said he wanted to tweak the noses of Kerry and Kennedy. He’s honest about it. He mainly wanted to tweak the nose of Kennedy. Kerry flip-flopped, as you know. Kennedy sails there so that was tweaking Kennedy’s nose. The other way is to elect politicians who understand how foolhardy alternative energy is. If you look at it economically, alternative energy cannot compete economically heads-up with coal, gas, or even with nuclear. My experience is people want cheap power and if they start getting the bill for alternative energy they’ll squawk. In 1999 and 2000, there were brownouts in California. California is about the greenest state you can imagine. They were nixing every coal plant and every other type of fossil fuel plant. Well, the brownouts came, people screamed we want our power, and lo and behold California eased up a lot of their restrictions. The concept of getting alternative energy that’s going to save the earth is not consistent with what people want. That’s a fact, even though you may disagree with that. Developing countries are importing coal like crazy. Why? Because they want cheap power. One of the things that fueled the United States’ industrial growth was cheap power.

CW: What do you say to Gordon and others who acknowledge the wind power is more expensive but needed to combat global warming and climate change?

KOCH: I’m on one of the boards of the American Academy of Science and Engineering. I’m on what’s called the President’s Council. It’s a very nice organization. I have nothing to say about who wins their awards. It’s the most prestigious scientific or engineering or medical awards you can get. The President’s Council is just an organization to get top business people involved and raise some money from them. They had a global warming session in San Diego, somewhere in California, maybe San Francisco. But anyway they had all these scientists come there and talk about global warming. They had three or four scientists get up and show these computer models that were going to predict how global warming is going to fry the earth and how CO2 is going up. At the end of it I asked some questions. Do your models take into account an asteroid hitting the earth? Do your models take into account a volcano belching? A volcano puts out tons of CO2 and SO2. Does your model take into account the fluctuation of the Gulf Stream? And one guy said his model is perfect. He took great pride in it. But one of the guys that heads his organization who has an MIT doctorate basically said, “We just don’t know what’s going to happen.” Now if you look at the earth and look at CO2 concentration, at times it’s been 10,000 times what it is today. If you look at the ice ages, they go through a cycle. Are you familiar with the Wood’s Hole theory of global warming?

CW: No

KOCH: Well, I’ll explain it to you. The main conveyor belt of heat in the world is the Gulf Stream. It starts in Africa, comes over to, say, the Virgin Islands and then it comes north along Florida, only a mile offshore from where we are now, hits Cape Hatteras, then it goes up to Bermuda, then to England and the North Sea. The salinity in the North Sea causes it to shrink and then it comes back down and becomes the Labrador Current. It brings down all the cold water and a lot of nutrients and forms this great, huge conveyor belt. Water holds a thousand times more heat than the air does. That’s the main transfer of heat. It’s what keeps Europe warm. It’s also what keeps Cape Cod warm.

They have measured the salinity of the North Sea and they are monitoring it. They have found that the salinity is dramatically changing. It’s getting less and less. They are predicting that when the salinity reaches a certain point the Gulf Stream will not sink. In fact, it will be like a door slamming shut and the Gulf Stream will then come up to Florida and go across to Spain and become much smaller. They have correlated that by taking temperature readings at the ice cap and measuring CO2 and all that kind of stuff with ice ages. The Gulf Stream can then change within a five-year period. It becomes a real dramatic shift and they’ve plotted this out and it happens every 110 years. Then what happens, when the Gulf Stream shifts, Europe gets cold and an ice age may advance, or it gets into a mini-ice age. It gets very, very cold and then the ice cap at the North Pole builds up and the salinity increases greatly in the North Sea and then all of a sudden it will switch again in a five-year period. They plotted this. The last change was in 1863. That was a time period when Cape Cod had no summer. It snowed on the Fourth of July. If you look at Washington crossing the Delaware, he’s pushing away ice. Their theory is that what’s going to happen is global warming caused by mankind is going to shorten these periods of either very warm temperatures or very cold temperatures. Instead of 110 years it might be 50 years or 70 years because global warming is going to cause the ice caps to melt, change the salinity, cause the shift, then it will get cold and go back up and global warming again will cause it to melt again.

They’ve plotted this out. So their view is that global warming is going to result in a mini-ice age, not in the earth burning up. If you look at it, when the earth had 10,000 times the amount of CO2 in the atmosphere, all these coral reefs built up. The sea became a sink for the CO2. So all that is somewhat counterintuitive, but they said the earth adjusts itself. In fact, there’s a theory called the Gaia, which means the earth is always self-adjusting. When something gets out of line, the earth adjusts back to it. The whole point is we don’t know. The other thing is that a comet hitting the earth can change the environment tremendously. For example, the comet that hit the Gulf of Mexico 60 million years ago and wiped out all the dinosaurs and there was nuclear winter for two years. It wiped out almost all the big mammals on the earth. Or a volcano can spew things out. We can’t predict all those things. All mankind can do is adapt.

We had a consultant – a big one in Chicago, I think – do a bunch of studies on how you get rid of CO2 in the atmosphere. Sequestering CO2 costs $60 per ton of CO2. Planting a tree costs only 10 cents per ton of CO2. If mankind was worried about CO2, rather than paying Jim Gordon $500 million a year and making him wealthy, why don’t you plant a hell of a lot of trees because trees and bushes take CO2 and convert it into oxygen. What Jim Gordon is feeding off is perception, not reality. The perception is that windmills are good because the wind is free. That’s a very simple perception. But the reality is putting his windmills up is going to cost a hell of a lot of money that we could take away from other purposes, such as feeding our families, getting good medical care, getting a good education, etc. etc. That’s another reason I’m no longer in the alternative energy business. I appreciate the government making me wealthy, helping to fund my America’s Cup campaign through all this stuff, and letting me buy fancy art. But I look at it now and say that was a good spin in my life. I’m glad I’m out of it now. I’m sorry to be philosophical and too damn windy, but …

CW: How are you opposing Cape Wind? Is the alliance the primary vehicle or are you also doing lobbying in Washington?

KOCH: We made the mistake of hiring some lobbyists. The mistake is that a lobbyist is only interested in his best interest, not in our best interest. So I don’t use lobbyists anymore. Lobbyists are like lawyers, you know, they make work for themselves and send you huge bills. Their idea of lobbying is, Bill, send me $10,000 so I can give it to this senator’s campaign so I can have a good relationship with him and that’ll end up being good for you. We did hire a lobbyist. Unfortunately, a lot of our business is influenced regularly by government, too damn much by government. And so we have to play in that game. A little bit of the sideline we gave them was to combat some of the lobbying that Jim Gordon was doing.  I wish he were working for me, lobbying for me on some of my projects. He’s done a masterful job and he’s sold a great line of BS. Masterful. I’ve really got to compliment him on that. Brad said he thinks he’s brilliant. I do, too. But I think he’s made the mistake of falling in love with this project, which I don’t know how he’s ever going to get his money out. Unless the project comes through, then it might be an annuity for him for the rest of his life. Unless you can get a politician in as president who will stop all this crazy subsidizing of businesses, these Solyndra-type projects. We did that for awhile, but it was not productive so we stopped it.

CW: How much of a role do you play at the Alliance?

KOCH: Brad just said as much a role as I want. [Goldstein interjects that he said “not as much as you want. They don’t listen to you.”] They’re listening to me now. Initially, they ignored me and even when Glen Whatley was there he did his own ignoring of me. But he did a good job, actually. I don’t play that much of a role now. I don’t go to the meetings anymore. If the meeting is convenient for me, I’ll listen to it on the phone. I have one of the guys who works for me, he lives on Cape Cod, he goes in my stead. As I said in one of the papers, Cape Wind is an irritant to me. It’s not going to affect my lifestyle or my business. It will just make Cape Cod less appealing for me. "Cape Wind is an irritant to me. It's not going to affect my lifestyle or my business. It will just make Cape Cod less appealing for me"

CW: And yet you’re buying more property on Cape Cod.

KOCH: Yes, that’s true so I’d like to protect that value. I’m running a $4 billion business. I’ve started a high school down here in West Palm Beach. Fortunately, it’s very successful, although it requires a lot of money. I’m building my own western town in Colorado so I can entertain my wife’s family. She has 43 immediate relatives. And I can entertain my customers and suppliers and my kids can have a family compound there. I’ve got an expedition going at the US Naval Academy that I’m working on this year. I’ve got another expedition going with the America’s Cup collection I have in San Francisco this summer.  And then I’ve got an exhibition that we’re doing at the Smithsonian around my western collection. Then I’ve got six kids, of which four are 16 or less. Dealing with a 16-year-old son or daughter is pretty tough. I just have too many bloody projects going. I’ve got to allocate my time where I can get an economic and emotional return.

CW: How much money have you put into the alliance?

KOCH: I don’t know off the top of my head, but I know it’s well over a million bucks. I could dig it out. I’ve done a statistical analysis on how much has been given to it to try to get them to broaden their base. They’ve done a very good job. They have a lot of other donors. Like any other project, there is donor fatigue. I’ve gone through donor fatigue, too.

CW: You’ve mentioned your goal is to delay the project and elect politicians opposed to subsidies. What about in Massachusetts, where Cape Wind has received enormous support from Gov. Patrick?

KOCH: I’ve been out of Massachusetts since 1988 or 1987 or something. I never did have much political sway there, but I didn’t want any. None of my businesses were in Massachusetts, although my headquarters was. I got into a big tax lawsuit with Gov. Dukakis, which I won in a lower court, lost in the appeals court, and then won in the highest court. Dukakis changed the law to try to retroactively tax me because I took advantage of one of their subchapter S laws. I said I’m moving out of here if you do that, and I moved out, taking all my employees and charitable donations. I still love the Cape, but I only spend a couple months a year there now. I’m way behind the eight ball in Massachusetts. I don’t know how to get any traction with them because I really have nothing to offer to Massachusetts politicians except money. I suggested to the Alliance that they hire a lobbyist. They have, but I don’t even know who it is or how much they’ve done or whether they’ve been effective. Unfortunately, if you’re in any kind of battle in the states, you have to deal with local politicians. That’s all part of the game now. It’s all part of what I call performance area. In the America’s Cup, I had to deal with the America’s Cup organizing committee because they set the rules. I haven’t invested much in Massachusetts. We’ve started our own Washington office because Washington affects us much more than Massachusetts does. I left it up to the Alliance to do it. Unfortunately, Gordon, he’s scored a lot of home runs and touchdowns there and we haven’t gotten to the starting line.

There’s so much wind power coming out of Canada that Canada could supply wind power at a much cheaper price. But Gordon’s got all the regulations set so that Canada wind doesn’t count in their definition of alternative energy. He’s very, very clever. He’s done a masterful job. You’re familiar with levelized cost, aren’t you? Well, his levelized price is 24 or 25 cents a kilowatt hour. Last time I heard, the wholesale market was 10 cents, so that’s 2½ times the wholesale market.

CW: How do you think your struggle with Jim Gordon over Cape Wind will end?

KOCH: To tell you the truth, I don’t know. I’ve given up trying to predict what government will do. I do not know.  One of my competitors in the America’s Cup said that I had perseverance. I took that as a compliment. I will say that of Jim Gordon. He has perseverance, amazingly so. I don’t know. I just don’t know.

CW: But you’re not giving up?

KOCH: No, I’m not giving up. Why should I? As long as the Alliance is doing a good job, I’m going to help support it.

CW: Thanks.

KOCH: What magazine will this come out in?

CW: CommonWealth magazine.

KOCH: If you write a good article, we’ll invite you down to the Cape.

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