the end of Clinton’s presidency, he signed a law bestowing permanent normal trade relations on China, opening the gates yet wider for companies to shift jobs overseas. Clinton also repealed key banking regulations from the New Deal, like the 1933 Glass-Steagall Act, which created a division between commercial banks that took deposits and investment banks that gambled through speculation. He eliminated decades’ worth of rules to restrict risky financial trading in commodities and derivatives contracts. Banks grew larger than ever before.
All the while, the overall size and burden of the federal government continued to grow for most Americans and small businesses. A libertarian group called the Competitive Enterprise Institute marked the increase by tallying the number of pages in the Federal Register, which records rules and regulations. In 1986, there were just more than forty-seven thousand pages. By 1995, there were more than sixty-seven thousand. The burden of these rules fell disproportionally on smaller companies, the CEI found.
There was no longer any clear consensus about the balance of power between government and private enterprise. The New Deal era was over, but it hadn’t been replaced by a new laissez-faire system. It was replaced, instead, by a theory with an appropriately vague and misleading name: neoliberalism. Neoliberal policies sought free-market reforms like NAFTA but retained federal entitlement programs and heavy defense spending. Its hallmarks were massively complex laws and programs that tried to thread the needle of unshackling markets while preserving a role for the state.
Companies that could exploit this complexity thrived. Koch Industries did it as well as anyone. There was no better example of this than Koch’s manipulation of the Clean Air Act, a sprawling set of rules that imposed a perpetual regulatory burden on oil refineries. Oil refineries were a prime target of the Clean Air Act when it was passed because they are a major source of toxic pollution like benzene and smog-producing gases. In 1970, the Clean Air Act put a strict limit on how much pollution the refineries could release.
But a loophole in the act dictated that the regulations would only apply to new oil refineries, not the existing ones. Any refinery already doing business in 1970 was “grandfathered” in to the era of clean air enforcement. This was seen as a way to avoid penalizing existing oil refineries that were built before the era of pollution controls. Congress appears to have thought that the grandfathering clause would be temporary: it was believed at the time that most oil refineries would last about forty years before their equipment wore out. Koch’s Pine Bend refinery, for example, was built in the mid-1950s. It might have been retired as early as 1995.
The old refineries were not phased out, however. The opposite happened. Companies like Koch exploited an obscure bureaucratic program called New Source Review that allowed them to expand their existing refineries. The rule stated that any major new equipment added to an old refinery must comply with the newest clean air standards. But compliance was in the eye of the beholder. Oil refineries and their teams of attorneys fought over the definition of critical terms like “new” and “significant.”
The refiners took advantage of another loophole. The Clean Air Act exempted new sources of pollution from regulation if companies could prove that curbing the pollution would be unreasonably expensive. This was easy to exploit. The oil refiners all cited the best available technology as the current technology they were already using. Any advances beyond that were arguably too expensive. This created a downward spiral: new pollution control technologies never became cheaper because there was no market for them.
Oil companies expanded their existing refineries during the 1980s and 1990s, gaming the New Source Review program and prohibiting any new refiners from entering the game. The EPA, which enforced the Clean Air Act, pushed for the New Source Review process to be updated, but the update didn’t happen. As a result, Koch Industries rapidly expanded its refineries in Minnesota and Texas during the 1990s without obtaining permits that would have limited pollution from the plants, according to data compiled by attorneys at the EPA and the Department of Justice.
DOJ attorney Dianne Shawley later prosecuted Koch and other refineries for illegal expansion. The company was able to exploit the New Source Review in part by overwhelming state regulators who enforced the Clean Air Act on behalf of the EPA. The local regulators were simply not equipped to analyze the reams of data and legal documents heaped upon them when Koch