(1971–1973)
Public policy concerning labor unions has, in little more than a century, moved from one extreme to the other. . . . [Unions] have become the only important instance in which governments signally fail in their prime function: the prevention of coercion and violence.
—Friedrich A. Hayek, 1960
Married life ain’t hard when you got a union card,
A union man has a happy life when he’s got a union wife.
Oh, you can’t scare me, I’m sticking to the union,
I’m sticking to the union ’til the day I die.
—Lyrics of the folk song “Union Maid” by Woody Guthrie, 1940
Bernard Paulson arrived for his first day on the job at the Pine Bend refinery in 1971.
As he drove to work, Paulson traveled down two-lane country roads that passed through a sparsely populated landscape of rolling corn and soybean fields. The refinery is located near the tiny town of Rosemount, Minnesota, about twenty miles south of Minneapolis and Saint Paul. Good-paying jobs were scarce in this place. The local kids were raised on farms, and when they graduated from public high school—if they graduated from high school—they didn’t have many job options other than farming. There was a smattering of industrial plants throughout the area: an ammonia plant near Rosemount and a paper plant across the river in Wisconsin, for example. But these jobs didn’t pay a lot. The best source of jobs throughout the 1960s was at the Great Northern Oil Company, which had just recently been renamed the Koch Refining Company. Jobs at the refinery were sought after. They were union jobs, with union benefits. A guy could get hired at the refinery right out of high school and soon make the kind of steady wage that supported a mortgage and a family.
The refinery played a towering role in the local economy, and it dominated the landscape as well. As Paulson drove nearer to the refinery, he would have been able to see this for himself. The refinery became visible on the horizon many miles before Paulson arrived there, and it was an arresting sight. After passing many miles of rolling hills, small farmhouses, tractors, and grain silos, the refinery came into view and looked very much like the skyline of a small city. But there was something alien, even ominous about this skyline. The towers in the skyline didn’t have any windows. They spewed clouds of white steam and gas, and some of them, on the south end of the refinery, spewed columns of flame into the sky. The gargantuan torches burned so steadily that airline pilots used them as a landmark when they approached the local airport.
To reach the refinery gates, Paulson drove along a highway that ran roughly parallel to the Mississippi River, which was hidden behind a dense stand of pine and oak trees. Great Northern was smart to locate the refinery where it did, near a big, wide spot in the Mississippi called Pine Bend. In this part of Minnesota, rivers are not scenic waterways but industrial transit tools. The river afforded passage for giant barges toting mountains of grain or coal, or, when they were loaded at Koch Refining, crude oil and asphalt. The barges took these commodities down south at a much cheaper rate than either rail or road, at least when the river wasn’t frozen over during Minnesota’s brutal winters.
Paulson pulled off the highway onto an access road that led to the refinery’s front gate. At the base of the giant towers, there was a squat office building made of beige bricks, just north of a parking lot where Paulson steered his car. This was the refinery’s main office, where Paulson would work. As he drove into the lot, he noticed that the parking spots were marked by signs with employees’ names on them. The spots were apparently reserved for individuals, and he saw that the best parking spot, the one nearest the sidewalk to the office door, had his name on it. Paulson had arrived early, as he always did, and most of the parking spots were empty. He pulled in to the best spot—the one marked with his name—and turned off his car.
Paulson walked down the sidewalk and into the double glass doors of the office building. One of the first things he told his assistant that first day was to get rid of the reserved parking spots.
“I said: ‘If you want the best spot, you get here early.’ ”
Bernard Paulson often wore cowboy boots to work. They were a parting gift from his employees back in Texas, and he wore them with pride because they reminded him how well he’d gotten along with employees in the past. He considered himself a good leader, and a fair leader, even if he was tough.
He saw very quickly that Charles Koch had been correct. Paulson’s leadership skills were needed, and needed desperately, at the Pine Bend refinery. Paulson saw this when he started doing the rounds at Pine Bend. Unlike most managers, he came to work on Saturdays. He arrived early on the weekends, just like he did on the weekdays, and he walked the grounds to inspect operations firsthand. What he saw often appalled him. He came across employees who were sleeping. He stopped and watched them sleep next to the large machines where superheated petrochemicals passed through pipes under extreme pressure—enough pressure to cause an explosion if a problem went undetected for too long. Paulson woke up the employees, and he didn’t do it gently.
Sleeping on the job in an oil refinery is not like sleeping on the job at a car factory. The Pine Bend refinery covered seven hundred acres, and it was a landscape of winding pipes, giant tanks, and looming towers with walkways between them. This was a dangerous landscape, a massive circulatory system full of inflammable liquids under high pressure. The refinery was divided into different “units,” or different machines that each had a unique function. Each unit, in turn, had a team of operators who oversaw it. There were usually three operators per unit, men who would sit for long shifts—sometimes ten-hour shifts, sometimes longer—babysitting the complex and dangerous chemical reactions happening inside the machinery. If everything went well, it was a mundane job. If things didn’t go well, it could quickly turn into a disaster.
Oil arrived at the refinery by pipeline, and it was stored in giant, white tanks. This crude oil was then moved into the giant “boiler” units, which were giant furnaces that heated the oil to around 700 degrees Fahrenheit. Running the boilers is a dangerous and vital job. When a young man named Lowell Payton was hired at the Pine Bend refinery, he noticed that there was a tall, thick wall around the boiler. He asked what that wall was for, and he remembers his boss telling him: “That’s so if the boiler blows up, your body won’t be found fifty miles away.”
After the oil is heated up, it undergoes a series of chemical reactions that seem to border on alchemy. Oil looks like nothing more than shiny black goo, but it contains a remarkably diverse set of chemicals. The heat unwinds the chemical chains that kept these riches together and breaks free a rainbow of compounds like gasoline, butane, kerosene, propane, diesel fuel, and an almost countless array of petrochemicals that are used to make everything from clothing to lip balm and plastic building material. This chemical unwinding happens inside the most visible part of an oil refinery: the giant towers. The towers are called fractionators because they break the crude oil into fractions, or its component parts. The heated crude oil is pumped into the bottom of the towers, where it is vaporized. The oil vapors float up through the fractionating tower like smoke through a chimney. Along the way, the different components of oil are captured on a series of trays inside the tower. One tray separates out kerosene, another gasoline, and so on. Vaporized crude oil is like the apocryphal buffalo that the Plains Indians used to hunt: every piece is used, nothing is left to waste. One of the biggest skills for oil refining is figuring out how to squeeze every possible drop of every possible petrochemical out of the crude without wasting anything to evaporation.
Paulson knew this business very well, and he was obsessed with running the refinery as efficiently and profitably as possible. But he wanted order among the men who worked in the units. Paulson was tall and imposing, and when he toured the refinery grounds, he walked like a navy admiral inspecting the deck of a battleship. He was often trailed by two assistants, and he wasn’t shy about barking orders or using crude language.
This might have been intimidating, or even frightening, to many employees. But the refinery employees were not afraid of Bernard Paulson. They were not afraid of anybody, in fact. They had the union to back them.
Employees at Pine Bend were organized under the auspices of a powerful labor union called the Oil, Chemical and Atomic Workers Union—or the OCAW, for short. They belonged to a local chapter called the OCAW Local 6-662.
Men took an oath when they joined the OCAW. They raised their right hand and they pledged allegiance to the union. More specifically, they pledged their allegiance to their fellow union brothers and sisters. For these men, it was union first, company second. The OCAW men gathered for meetings in rented halls, where they held votes on union contracts and discussed their problems with certain supervisors or managers. They drank regularly at a little bar south of the refinery called the House of Coates, which was built to look like a log cabin or large hunting lodge.
The union president, Joseph Hammerschmidt, was known for drinking heroic quantities of alcohol at the House of Coates and then talking at very high volume about the refinery’s management and what he planned to do to that management. Hammerschmidt was a union man down to the level of his DNA; he was a “hard case,” as his fellow workers called him. Everybody at the refinery knew that it was Hammerschmidt who led contract negotiations with a nearby company called Red Wing Pottery, which also employed OCAW members. During the negotiations, Hammerschmidt refused to believe that Red Wing Pottery was really in the financial trouble it claimed to be in. Even when Red Wing showed him the company books, Hammerschmidt refused to believe the books were genuine. The OCAW couldn’t reach a contract agreement with Red Wing, and Red Wing’s owners were forced into bankruptcy. Hammerschmidt seemed proud of this fact. It was like a scalp on his wall. No damn company was going to boss around the OCAW.
Hammerschmidt carried himself like a provincial governor while he belted back shots of whiskey with his union friends at the House of Coates, and he had reason to act like that. Like a governor, Hammerschmidt had real power. The OCAW was a strong union in itself, but maybe even more important was the fact that the OCAW was located in a heavily unionized state. This was important: the OCAW didn’t just draw power from itself; it drew power from an interlocking web of loyalty oaths with other unions in the state. The police were unionized, the truckers were unionized, the teachers were unionized, the newspaper reporters were unionized, the chemical workers were unionized. The OCAW men were loyal to their own union, and the union was, in turn, loyal to other unions in the state. If one union went on strike, the other unions would support it. Men like Hammerschmidt could put a company out of business if they felt like it. Red Wing Pottery was proof of that. And the OCAW wasn’t shy about using this power to its members’ benefit.
During the 1950s and 1960s, the OCAW negotiated a framework of rules at the Pine Bend refinery that did far more than provide higher pay and benefits for the union members. The rules gave the OCAW a large measure of control over the refinery’s operations.
Paulson saw the fruits of this arrangement shortly after he took over as the plant manager.
When an OCAW employee found a broken valve while inspecting the refinery, for example, that employee didn’t fix the valve. Instead, he sat down and radioed for help. The union had broken the workforce down by specialty skills—or by “trades,” to use the union terminology—and the men only performed work that fell within their trade. When an employee found the broken valve, he called someone whose trade was insulation to come and unwrap the insulation around the pipe. Then he’d call a guy from the electrical trade to check the wiring or shut off electricity to the problem area. And these employees who came to help fix the valve had to drive a truck to the site (the refinery covered seven hundred acres, after all), and there was a union rule that prohibited any union employee from riding in a vehicle with a supervisor. To satisfy this rule, the refinery had a union guy whose job was to sit in a pickup truck and ferry people around the refinery. As the different tradesmen were called on the radio, the pickup truck driver went to collect them—first the insulation specialist, then the electrician—and take them down to the problem site. The truck driver job was one of the cushier positions that the union carved out for its members. Only after the different tradesmen were called, and were ferried down to the site, and did their work one by one, only then could the leaky valve be fixed.
There were also rules for overtime pay that even the OCAW men found amusingly absurd. One rule stated that a shift worker needed to be given at least two hours of notice if he was going to be asked to stay late and work. If he didn’t get that notice, then he received a bonus payment worth two hours’ work plus time and a half. Thanks to this rule, it was often hard to locate anyone at the refinery around two in the afternoon, exactly two hours before the four o’clock shift change came around. The control rooms were empty at two. Then everyone suddenly reappeared at their desks at two fifteen—available to stay late and work overtime if asked, but in need of the bonus payment to do it.
Even longtime union members recognized that these rules were too good to be reasonable. “It’s crazy—I don’t know how they got what they got. The union had management by the balls,” recalled Ernie Tromberg, who was hired at the refinery in 1956 when he was still in his early twenties.
Paulson talked often to Charles Koch on the telephone. He told his boss what he was seeing in the refinery. This might not have been news to Charles Koch. He had seen the union operate firsthand. For at least one summer when he was younger, Charles Koch had worked at Pine Bend and must have seen the near impunity enjoyed by union bosses like Joseph Hammerschmidt. Koch couldn’t have been shocked as Paulson relayed over the phone what he was seeing in the plant. The union put at risk everything that Charles Koch was hoping to build. “He told me, ‘I’m worried that the union is going to take this company down,’ ” Paulson recalled.
Shortly after arriving at the refinery, Paulson was given his chance to fight the OCAW. The union contract was set to expire at the end of 1972. Negotiating a new contract would give Paulson, and Charles Koch, a chance to rewrite the refinery rules and make the place operate as they believed it should.
In April of 1972, Paulson made his first move. He scheduled Hammerschmidt to work on Easter Sunday.
Hammerschmidt, apparently, did not want to work on Easter. So Hammerschmidt did what was commonly done in those days. He told Paulson no. He wasn’t going to work Easter Sunday.
Hammerschmidt could be forgiven if he thought that his open insubordination would not be challenged or punished, because that’s how things worked at Pine Bend: if the union guys were unhappy about something—say, the disciplining of a fellow worker—they simply dropped what they were doing. They walked to the front office and took a seat until the matter was resolved, and management usually caved to their demands. It seemed that Paulson would have caved as well because he wasn’t popular with the employees. The cowboy boots, the military-style inspections, waking the guys up and embarrassing them on Saturday mornings—all of it had soured the employees on Paulson. He recalls hearing what the union men were saying behind his back: “They were going to jam those boots ‘down Paulson’s ass and send him back to Texas.’ ”
When the shift began on Easter, and Hammerschmidt wasn’t there, Paulson fired him immediately. In the eyes of the OCAW, Paulson had just declared war.
In the late fall and early winter of 1972, it was time for Koch Refining Company and the OCAW to negotiate a new labor contract.
There was a regular calendar and set of traditions that surrounded these contract negotiations. A labor contract is a broad agreement between a union and a company that sets out the terms of employment at the workplace, from the level of wages to the value of extra benefits like health care coverage. The contract even laid out workplace rules, like the procedures for firing a worker or the means by which an employee could file a grievance to complain about abuses by management. The labor contracts typically lasted about three years. When the contracts were set to expire, a group of Koch Refining lawyers would go into a meeting room and sit down across the table from a group of negotiators selected by the OCAW. The union negotiators were almost always refinery employees rather than lawyers or negotiating experts. When it came to bargaining with the company, the union men relied on their personal knowledge of how the refinery worked. They knew what to ask for, and they knew what they could offer in return. To get what they wanted, the union men relied on their collective willpower. They stood together, ready to walk off the job as a group if management did not agree to their requests.
During his first meeting with the OCAW team, Paulson sat down in the meeting room, flanked by his company lawyers. Across the table sat Joseph Hammerschmidt, the union president. Even though Hammerschmidt had been fired, the union insisted that he be present for the negotiations. The union had already filed a grievance over Hammerschmidt’s firing, and, in the meantime, he was still a member.
After everybody was settled, Paulson presented his offer.
Koch would unilaterally rewrite all the work rules inside the refinery. The seniority system the union enjoyed would be gone. The rules that barred employees from doing work in different “trades” would be gone. The employee shuttle truck? Gone. The rule about a bonus payment for overtime without two hours’ notice? Gone. And then Paulson showed the union men that there would be precious little room for negotiation. These were the new rules. This was how things would work at the refinery. End of story.
This might have seemed like a bluff; like a way for Paulson to start the contract negotiations with a Texas swagger. But after Christmas, and into the first frigid days of the new year, it became clear to the union that Paulson was not bluffing. He was not going to negotiate.
In the eyes of the OCAW men, there was no choice as to what to do next.
On January 9, 1973, at four in the afternoon, the entire unionized workforce left their stations and walked off the property grounds. They walked out through the parking lot and then through a wide gate that led outside the refinery property. As they passed through the gate, the gate became something entirely new. It became a picket line. Crossing the picket line marked a moment of no return. After they left the gate, the OCAW men became locked out of the refinery. They became locked out from their jobs. They became unemployed.
The refinery inside that gate had provided the men with everything they had: the income that fed their kids and paid down their mortgages. It made a middle-class life possible for them. And none of the men knew if they would ever get back inside or if their job would ever be open to them again. Bernard Paulson and Charles Koch had made it clear at the negotiating table: Koch Refining planned to break the OCAW. And the union men had to make it clear to Bernard Paulson and Charles Koch: the OCAW could not be broken.
This wasn’t an easy thing to do. None of the OCAW men were happy about using their jobs as a bargaining chip. Joseph Quinn, for example, had a wife and five children. Quinn didn’t see his kids a lot—he missed at least five Christmas mornings in a row because he’d been working at the refinery. His wife, Rita, handed out the presents without him. But through his absence, Quinn gave his kids a life that he had never known. He and Rita owned a tidy home in suburban Minneapolis, near Rosemount. Their kids went to good public schools. They didn’t work long days in the farm fields under the hot summer sun, as Joseph Quinn had done growing up in western Minnesota.
But Quinn didn’t question his union when the OCAW told him to walk off the job. There was a simple idea that motivated his obedience: solidarity. Solidarity encapsulated everything that the union stood for and everything that made the union strong. Quinn hadn’t learned about solidarity growing up. He was raised by a farmer, so he learned about individual accomplishment and the value of hard work. Quinn’s dad taught him that unions were Communist front groups and that unions encouraged laziness. But when he moved to Minneapolis, the only jobs available to Quinn were union jobs. When Quinn raised his right hand and pledged allegiance to the OCAW, he pledged solidarity to his union brothers at the refinery. But the pledge didn’t sink in too deeply; Quinn just wanted the job.
Then Quinn got in trouble for the first time.
One of his jobs at the refinery was to check on the level of crude oil in the big white tanks on the south end of the plant. This was a critical job because the tanks could overflow if their levels weren’t closely monitored. At the end of one shift, Quinn was unable to check on the oil in one tank because men were welding some equipment there. After the men left, he went to check the oil levels, but a fellow worker was urinating near the hatch that Quinn was supposed to check, so Quinn backed off to give him privacy. The end of his shift came, and Quinn still hadn’t checked the level of that oil tank. He told his manager as much, and his manager told him not to worry about it.
“The next thing I knew, that big, beautiful white tank was black, covered completely in oil,” Quinn recalled. The tank had overflowed, and it would not have done so if Quinn had checked the oil levels as he was supposed to.
Quinn was suspended without pay for three days for the transgression. The paycheck that covered his mortgage, that fed his kids, would be about one-third short of what it should be. He couldn’t afford to take a financial hit like that, and he didn’t think it was fair that he should need to. So Quinn filed a union grievance over the punishment. A grievance is a formal complaint that only union members can file. It is a complaint that is handled somewhat like a lawsuit, with the union acting as the employee’s personal legal team. Without a union, there are no formal grievances—an employee can simply complain and he or she is on their own to persuade the boss to take their complaint seriously. With a grievance, the employee has the union on their side.
After Quinn filed his grievance, he was summoned to the refinery offices. He went into a meeting room and found a company lawyer there, who wanted to discuss Quinn’s punishment. But Quinn wasn’t alone. There was a representative of the OCAW sitting at the table next to him. As Quinn and the company lawyer were talking over the issue, the OCAW man kept interrupting. He kept correcting Quinn, kept interjecting new details into the story. Quinn disagreed vehemently with some of those details, even though the details skewed the story to Quinn’s benefit. Quinn even started to argue with the OCAW man as the company lawyer sat there and watched. Finally, the company lawyer called an end to the meeting, seemingly in exasperation. It was hard to get a straight answer about anything with the pushy OCAW man sitting right there.
A few days after that meeting, Quinn was called to the front office once again. This time it was only his manager there. His manager pointed to the desk, where there was a check made out to Quinn in the amount of the wages he had lost from the three days he was suspended. “He told me, ‘Don’t take this as a victory.’ But there was the victory right there on his desk!” Quinn recalled. Quinn happily took that check and cashed it.
The episode taught Quinn an important lesson. The OCAW negotiator had made the grievance process hellish for the company lawyer and had chosen to fight for just three days’ wages for just one guy. Thanks to that episode, Quinn understood what solidarity meant: “I saw how things really work.” When it came time to walk off the job, Quinn walked off the job. He didn’t question the OCAW, because the OCAW hadn’t questioned him. It was all for one and one for all.
When the strike began, Joseph Quinn helped organize the picket line. The refinery employees took scheduled shifts to picket at the refinery’s three main gates to ensure that the picket line was staffed around the clock. The OCAW organized much of this activity out of a small trailer parked just outside the refinery property. Guys lounged and played cards outside the trailer. Others showed up to get picket signs that they would hold during their shift, signs bearing slogans like: “Koch For Slavery” and “OCAW LOCAL 6-662—ON STRIKE.” It was Quinn’s job to make sure the shifts ran smoothly and that the signs were always available.
The striking employees carried placards and signs, but the picket line was far more than a simple form of public protest. It was an economic weapon that had been employed to great effect over one hundred years of American labor struggles. The goal of the picket line was to financially strangle Koch Refining Company.
The picket line was a barricade designed to stop any truck traffic going in or out of the refinery—a barricade that would effectively shut the refinery down. A huge proportion of products made at the refinery were shipped out by big tanker trucks that took heating oil to nearby school buildings or gasoline to nearby service stations. If the trucks couldn’t come and go, Koch couldn’t sell its products. The OCAW aimed to starve the company out, forcing it back to the negotiating table in a weakened position.
The tanker truck drivers—and even the cops who patrolled the road outside the refinery—belonged to the Teamsters union, which meant that crossing the picket line was akin to violating their own sacred oath of solidarity. The picket line worked. On a typical day at the refinery, about two hundred tanker trucks passed through the gates to pick up fuel and ship it out. That number dropped to near zero after Quinn helped get the OCAW picketers organized and standing in shifts.
The union had cut off the oxygen supply of cash to Koch’s refinery. They knew that the owner, Charles Koch, was losing enormous amounts of money for every minute the OCAW was on strike. It seemed certain that Charles Koch would have no choice but to fold. He might hold out for a week or two to save face, but there was no way Koch could hold out for long.
These union men clearly had no idea who they were dealing with.
Bernard Paulson was prepared. He had set up a cot in his office, a cot where he would sleep for most of the next nine months, rarely leaving the refinery, rarely leaving his post. He had also stockpiled food. The refinery had a large cafeteria near the office building, and when the union workers walked off the job, Paulson gave an order that the cafeteria was to be open twenty-four hours a day. A skeleton crew of nonunion workers would be living inside the refinery gates, and Paulson made sure that the cafeteria was open to them whenever they needed to eat. And they would need to eat at odd times during the strike because there weren’t going to be any more eight-hour shifts. Running the refinery would now be an around-the-clock job. There wouldn’t be regular mealtimes.
Paulson did more than just stockpile food. He had also quietly built the workforce he needed. Many members of this new workforce were the nonunion supervisors who worked at the refinery. They would each now do the job of two or three men, working sixteen-hour shifts. But even that wouldn’t be enough. So Paulson started making phone calls back to Texas, back to the oil-patch state where Paulson had friends and employees who thought the world of him. He called these old friends and asked them to come up to Minnesota to work. Shortly after the picket line was erected outside the refinery gates, Paulson arranged for helicopters to fly these workers into the refinery. The helicopters swooped in low over the refinery fences and landed on the refinery grounds to drop off his new workers from Texas and Oklahoma and other states where unions were not only rare but widely hated. Inside the main office building, Paulson converted a large room in the basement into a barracks for the new workers.
On the picket line, the OCAW men watched as the helicopters passed over them, hovered, and landed inside, delivering the workers who would replace them. The picket line was becoming symbolic.
But even with Paulson’s new workforce, it wasn’t easy to keep the refinery going. Paulson needed to run giant machines called reformers, for example, which made a vital chemical for Koch’s fuel products. The reformers could not be started with the simple press of a button, however. They needed tank loads of hydrogen to spark their ignition. After running out of hydrogen, Paulson knew he couldn’t convince any local truckers to break the picket line and deliver more to him. So he called some old friends of his at Amoco, and they told him about a solution: he could use natural gas—which came into the refinery via pipeline—to ignite the reformers. It was a tricky, complicated process, but Paulson and his team figured out how to make it work. Soon he had all the reformers firing, and the fractionating towers were running at full steam.
On the first night of the strike, however, one of the boiler units—the large furnaces that superheated oil before it was sent to the fractioning towers—wasn’t working right. The mechanical problems inside the boiler went unnoticed for many hours because the unit was understaffed. Usually the boiler was monitored by three employees, but Paulson had to run the unit with fewer. The boiler malfunction grew worse until the system collapsed with an incendiary blast. It was a small miracle that nobody was killed—the explosion tore a gaping hole in the side of the boiler. The unit was shut down in a panic, the valves were closed to stop the flow of oil and prevent a fire that could have engulfed the property. The salaried supervisors went out and inspected the boiler. It was a total loss.
A manager came into Paulson’s office and told him the news. The boiler couldn’t be fixed, the manager said, at least not without help from the unionized operators who ran the machines. Koch would need to bring the operators back from the picket line for the repair job. “He said, ‘We’ve lost the strike. I want my operators back,’ ” Paulson recalled. “And I said to him, ‘If you believe that, hit the effing road.’ ”
Paulson again called one of his friends in Texas, waking him in the middle of the night. He said he needed an urgent favor and told his friend about the explosion. Paulson’s old friend hustled a team together and got them on a plane to Minneapolis. From there, the team was flown by helicopter into the refinery. The unit was up and running again within about a week.
At night, before he went to bed, Paulson walked around the refinery to make sure his men were doing well. He dropped into the monitoring rooms where the men were staring at screens, gaunt from spending unending hours on the job. The pressure on them was tremendous. Everyone knew that there was a potential catastrophe waiting to happen every minute of every day. The boiler explosion was proof of that. Now, with a skeleton crew overseeing them, the boilers were firing and pumping out superheated, flammable fuels throughout the refinery. It was almost reckless to run the refinery so short-staffed, when just a few minutes of inattention could get people killed. One employee quit after suffering from exhaustion and an anxiety attack that left him nearly catatonic.
When Paulson walked his rounds at night, he made sure to exude confidence to keep the spirits of his employees high. “They said it was very important, my demeanor, during that strike,” Paulson recalled. “One of our salespeople, during that time, he called me Patton. He said, ‘All you lack are those two ivory-handled revolvers.’ ”
Weeks passed. The men on the picket line kept their positions at all hours. They choked off truck traffic going into the refinery. But standing outside the refinery gates, they could see that the fractionating towers were still spewing steam, and the flare towers were still shooting out flames.
The picket line was not able to stop every truck. Paulson’s workers from Texas and Oklahoma passed in and out of the refinery. Even some of the local nonunion truck drivers began to break the picket line, delivering and gathering fuel.
Ernie Tromberg, an OCAW employee who worked in one of the fractionating towers, watched the anger boil over among his coworkers as “scab” drivers approached. The union men stood in front of the trucks and waved their placards. But the scab trucks inched forward slowly, haltingly, heading into the refinery. Tromberg saw his coworkers assemble “jacks,” thorny balls made of outward-facing metal spikes and nails, and throw them on the ground in front of approaching trucks. Paulson estimates that Koch spent $100,000 (or about $593,000 when adjusted for inflation in 2018), to replace truck tires in the first few months of the strike alone.
Koch Refinery hired a private company called Wackenhut to police the gates, and the private guards looked like teenagers with rented badges. They only made the picketers angrier. Tromberg was standing near a truck as it passed when he heard the unmistakable tink of a jack being thrown into the truck’s wheel well. A young Wackenhut guard approached Tromberg from behind and accused him of throwing the jack. The guard escorted Tromberg over to a state police trooper, but the officer said there was nothing he could do because he hadn’t witnessed the event. Tromberg saw that the Wackenhut guards were helpless to do much of anything, and the picketers realized it.
An atmosphere of lawlessness began to surround the picket line. When scab drivers edged closer to the gates, the union men jumped up on the running boards of the trucks and pounded on the windows. When that didn’t stop the trucks, they grew more violent. “We had some pretty tough guys working there. They would open the doors and pull out drivers,” recalled Lowell Payton, a unionized worker who picketed outside the gates.
When the workers got violent, Paulson seized on their mistake. He went to court and filed a motion that would bar the OCAW from picketing in front of the refinery. Paulson’s lawyers argued that the OCAW’s property destruction and violence went far beyond the scope of legal union activity. A local district court judge agreed with the company and handed down a temporary restraining order against the union. The restraining order didn’t bar picketing outright, but it greatly limited what the union could do. The judge said the union must now be limited to having four men stand with picket signs at the refinery, where there had been dozens before. These four men would be prohibited from doing anything intimidating or violent. The unionized police officers at the site couldn’t stand back and remain neutral: they had a judge’s injunction to enforce. The judge’s order smothered the picketing.
As the third week passed and then the fourth week, the reality of the strike began to sink in. The men at the plant still had mortgages to pay and kids to support. They sought out part-time jobs in secret, and many of them found work, but it didn’t pay what the refinery had paid. As the strike dragged on, the OCAW members began to see just how easy it might be for them to fall from the middle class. They saw how easy it might be to lose their home, lose their car, endanger the economic future of their kids. And they knew who was responsible for this danger. They blamed Bernard Paulson. Many of the men began to hate Paulson and his Texas cowboy boots and his superior bearing. The men gathered at the Coates bar and drank and talked about what they might do. And their anger boiled over.
On Friday night, February 23, more than thirty union men gathered outside the refinery. Paulson and his employees had been camped inside the gates for about six weeks, and they couldn’t stay inside forever. The union men knew this, and they were waiting outside when a caravan of Paulson’s employees, packed inside a row of cars, drove out through the refinery gates. The union men pounded on hoods, broke car windows, and screamed at the workers inside. The picketers had been practicing a technique to tip the cars over by gathering in groups and rocking the cars from side to side. They tried this technique on the cars that passed. Someone fired gunshots into the refinery during the melee. No one was hit, and no one was able to determine who fired the gun.
Around this time, Bernard Paulson’s wife was alone at the couple’s home, taking care of their six children. One night a man called her house and asked if Paulson was there. She said he wasn’t and asked if she could take a message. The caller said she could, and he told her the message was that soon Mr. Paulson would not be breathing anymore. Then the caller hung up, leaving Mrs. Paulson alone with her thoughts and six sleeping children.
Bernard Paulson did not bend. He kept working, sleeping on the cot in his office. He was not going to quit; he was not going to back down in the face of threats.
Whenever Paulson needed encouragement, he picked up the phone and called Wichita.
“I worked directly for Charles, and we consulted several times a day. It was with his backing,” Paulson recalled. “He knew exactly what I was doing and why I was doing it.”
On the night of March 15, Paulson went to his office, laid down on his cot, and pulled up the covers before drifting off to sleep. He was exhausted, and he slept soundly. While he slept, someone carried out a plan that might have killed him and every employee to whom he had just said good night.
A set of railroad tracks ran along the west side of the refinery. The tracks carried tanker cars of crude oil and ran right into the middle of the refinery complex where the trains could load and unload fuel. At night, the tanker cars and diesel engines were often parked in a small depot outside the refinery, waiting for the next day’s delivery. It was common practice for railroad companies to leave the diesel engines idling throughout the night because it takes a lot of fuel to start the vehicles. Some of the refinery employees would have known this because a handful of them had once worked for the railroad. These men knew how the trains worked and knew where they were parked.
In the dark hours just after midnight on March 15, someone snuck between the train cars and engines near the refinery. The saboteur jumped up to the doorway of one of the diesel engines and climbed inside. It is unknown whether it was one person or a group of people who did this, but whoever went inside the engine knew how to operate it. They knew where to find the throttle and how to engage it. They pushed the throttle forward and leapt out of the train as it began to chug forward.
The diesel engine picked up momentum as it traveled down the track. The cab was empty, and there were no employees at the depot to spot the engine as it headed over empty cropland and gathered speed. At roughly one in the morning, the train was speeding directly toward the refinery. The tracks it rode led directly to the center of the plant, into a nest of pipes and silos and towers filled with flammable fuel.
Bernard Paulson woke up in his office to the phone ringing. He answered it and heard an employee shouting on the other end. Paulson was half asleep and trying to make sense of what he was hearing. There had been some kind of accident. A train crash. Paulson quickly dressed and ran out of his office. There were men shouting outside, and he ran toward them.
Then he saw a surreal thing. A diesel engine, lying on its side, in the middle of the refinery grounds. The giant train engine was still running.
When the train engine came hurtling through the refinery, it had been heading straight toward a large refining tower. But there were mechanisms set into the train tracks, called derailers, that acted as a safety stop to prevent damage from runaway trains. The engine hit the derailers at a high speed and the mechanisms did their job, flipping the steel engine onto its side and off the track, sending it skidding over the refinery grounds.
If the derailers had not been in place, if the train had kept going, it would have crashed directly into a series of gasoline lines, pumps and pipes. It is likely that an inferno would have engulfed the refinery and killed many of the men who were working there. Paulson could have been burned alive in his office. The wreck was roughly two hundred feet from where he’d been sleeping.
Paulson tried to absorb what he was seeing as he circled the diesel engine. One of his employees on shift at the time had worked on train lines before, and he climbed into the fallen engine and shut it off. Paulson stared at the wreckage and thought of all the people who had just narrowly avoided death. And he thought to himself: Who could do something like that? The wreck sent a clear message. If Koch aimed to destroy the OCAW, the OCAW would destroy Koch.
The union’s violence was driven in part by anger. But it was also driven by fear. The union men might have had strength in numbers, but, in many important ways, the union was not as powerful as it once had been.
The strength of modern American unions rested largely on one significant piece of New Deal legislation passed in 1935, called the Wagner Act. The law gave workers the legal right to join a union and legally obligated companies to bargain with them. The act also created a federal agency to oversee union disputes, called the National Labor Relations Board. With these new legal protections, the ranks of union membership swelled. By the 1950s, labor unions were an accepted, almost inevitable part of mainstream American life, with more than one-third of US workers belonging to a union. The impact of the unions was felt even by workers who didn’t belong to them—the very presence of unions affected nonunion companies. These companies knew that their wages and working conditions had to be generous enough to ward off the threat that their employees would defect or start a union of their own. This system started to corrode during the 1960s, however, and it corroded partly from within.
Unions were formed to protect the little guy, but by the late 1960s, many unions had become bloated power structures that lost the sympathy of their own members. Union leaders became union “bosses,” many of them overpaid and corrupt. Violence and thuggery became all too common hallmarks of organized labor campaigns. Public approval of unions began to plummet, according to opinion polls. At the same time, companies in heavily unionized states began to move their factories down to southern, nonunion states. Rather than negotiate with unions, these companies started sneaking out the back door.
In spite of their militancy and their arrogance, union leaders like Joe Hammerschmidt were losing their power by the early 1970s. This added an element of toxicity to their efforts and a level of desperation to their actions.
Koch Refining Co., on the other hand, acted methodically and patiently. The actions reflected the thinking of the man in charge.
Charles Koch traveled to Pine Bend, and when he arrived, he entered the refinery compound quietly. The media did not report his presence, and it appears that none of the picketers outside knew he was there.
Koch walked the grounds with Bernard Paulson and saw for himself the toll that the strike had taken. The refinery looked like a disaster site. Equipment was being run far past the required time for maintenance. The staff was minimal. Provisions were sparse. And the OCAW was not going to give up its fight.
It might have seemed unreasonable for Koch to ask Paulson to continue this fight. Paulson and his team were risking their lives each night of the strike. The refinery’s previous owners, including Fred Koch, would almost certainly have surrendered and headed back to the negotiating table.
But Paulson didn’t want to back down. And Paulson saw that Charles Koch didn’t want to back down, either. Koch and Paulson retired to Paulson’s office, which now resembled the quarters of a field general. Near Paulson’s desk was the cot where he slept most nights, the telephone always nearby. The two men sat down, and together they worked through a new budget for the refinery. With pen and paper, they sketched out new projections of revenue and production for the year.
After the crash, Bernard Paulson went back to the negotiating table with the OCAW. His position had not softened, but the union’s had. When Paulson sat down at the table, there was somebody missing: Hammerschmidt had been replaced by the OCAW’s new local president, a man named John Kujawa. Paulson felt that Kujawa was more reasonable than Hammerschmidt had been; he was less militant, more likely to listen to Paulson’s demands.
Roughly one week after the diesel train sabotage, Kujawa and Paulson began a bargaining session, overseen by a Minnesota judge who acted as a mediator. The session went on for six days. The major point of contention was not money or benefits, but work rules at the refinery. Paulson was insistent that Koch be given more control over the operations, while Kujawa and his team fought to maintain the rights the union had bargained for over the last twenty years.
At noon on March 26, the talks ended with no agreement.
On the night of April 17, an OCAW man was driving near the refinery when he pulled over to the side of the road and removed a hunting rifle from his car.
He took aim at the electrical substation of the refinery, a large patch of electrical transformers and wires that was essentially a miniature power plant that kept electricity flowing through the plant. The man opened fire. He sent several armor-piercing bullets into the substation. One of the slugs penetrated a large transformer, which began leaking oil from its punctured hull. Employees in the refinery heard the shots, and knew quickly what they were. They called police, and a witness described the parked car where they believed the shots were coming from. The rifleman got back in his car and drove away. Police soon pulled him over because he was driving erratically and appeared to be drunk. The rifle was in the backseat, and he was arrested.
On June 2, 1973, John Kujawa traveled to Washington, DC, to testify before Congress. A joint House and Senate committee was investigating national fuel shortages, and part of the inquiry examined the supply disruptions in Minnesota caused by the strike at Pine Bend. Almost six months into the strike, it appeared that Koch and the OCAW were no closer to an agreement than they were when the strike began.
Kujawa and Paulson continued to meet even though neither seemed to have faith in the process. Paulson even flew to Washington to meet with Kujawa and his team of OCAW negotiators. The two camps met at the US Department of Labor, and during their session, the US secretary of labor himself came into the room to talk with the opposing negotiators. The secretary’s message was clear: “Let’s work this thing out.”
During the negotiations, Koch’s team and the union’s team were sent to separate conference rooms. A mediator shuttled back and forth between the rooms passing demands and counterdemands back and forth. The sessions went on through the night. At one point, Paulson laid down on a conference table and fell asleep while waiting for the courier to return from the OCAW’s room.
It was useless. Even prodding from the labor secretary could not push the two sides to an agreement. The kernel of the dispute still remained the work rules at the refinery. It was a fight over control, and neither side would budge.
Koch Refining Company offered a $25,000 reward for information leading to the arrest of whoever had sent the diesel train crashing into the plant. But the money never induced anyone to come forth with information about the diesel engine sabotage. The reward was never collected, and an arrest was never made. And the picket line remained outside the refinery even as the employees entered their seventh month without a paycheck from Koch.
But Bernard Paulson and Charles Koch seemed to understand something intuitively. They understood that solidarity had its limits. The OCAW’s cohesion was unbreakable. But the OCAW would be weaker if it stood alone. In fact, it was doubtful if the OCAW would be able to stand at all if it was alone. Isolating the union would prove to be the only way to beat it. During the summer and fall of 1973, that’s exactly what happened.
At that time, Paulson needed to perform maintenance at the refinery and install new equipment. The repairs could be delayed no more. But the companies in Minnesota that could do the specialized work were largely unionized, and they would not cross the picket line to do the job. Paulson had faced this problem before, during his days in Texas. When he ran the refinery there, he often hired both union and nonunion companies to do maintenance work at the facility. During one project, Paulson had two companies—one unionized and the other nonunion—working at the refinery simultaneously. The unionized firm said it would walk off the job unless the nonunion firm agreed to let its workers organize. It was a high-pressure ultimatum, and Paulson responded by calling the union president personally.
“I knew him. I knew he’d come from Oklahoma. So I got him on the phone. I said, ‘You damn Oklahoma squirrel hunter,’ ” Paulson recalled. “I said: ‘Look. You go ahead with what you’re trying to do, and I will only do one of these units at a time. I will do it nonunion, and you union guys won’t even be in the plan.’ So he backed down from that.”
Now, in Minnesota, Paulson used a similar tactic. He let the local maintenance and repair companies know that he needed work to be done at Pine Bend, which was the state’s largest refinery and an important source of work. He also let the companies know that if they refused to do this work now, when he needed it, then he would never call them again. If they refused, Koch would only use nonunion maintenance companies in the future.
The outside unions buckled. They accepted the work Paulson was offering them. Paulson built a special entrance into the refinery for these companies, one far away from the main picket line out front. The work began, and the OCAW picket line was weakened that much more.
Next, Paulson put a wedge between the Teamsters union, which handled trucking and shipping at the refinery, and the OCAW. The Teamsters still refused to cross the picket line, so Paulson arranged a cunning system that allowed the Teamsters to work with Koch Refining anyway. Paulson used a small parking lot near the refinery as a transit point. The Teamsters pulled into the lot and got out of their trucks. Nonunion truck drivers who worked for Koch Oil in the South were waiting for them there, and as the Teamsters got out of their trucks, the Koch Oil drivers got in. The Koch Oil drivers then took the trucks down the road and into the refinery, past the gauntlet of the picket line where men beat on the truck windows and threw their jacks beneath the wheels. Thanks to this arrangement, the Teamsters did business with Koch without technically violating the picket line. The oil was flowing in, the gasoline was flowing out, and support for the OCAW was ebbing away by the day.
John Kujawa, the OCAW president, did not talk about work when he got home. His wife, Martha Ann, knew very little about the negotiations he was leading with Koch Refining. John often spent the weekends and evenings drinking with his friends. When he was home, he was silent.
But Martha Ann could see the tension building in him. He was in turmoil inside. His drinking was intense.
Kujawa was in an impossible position. If he pushed for an agreement to end the strike, he would be labeled a traitor or a sellout. If he failed to meet Koch’s demands, or at least some of them, the employees he represented might never get their jobs back.
Then Bernard Paulson dropped a bombshell on Kujawa during their negotiations. Paulson said that he was prepared to break an unwritten agreement that refinery owners had long honored: he was prepared to hire in nonunion replacement workers. It was exceedingly rare for any company to make such a move, which violated all principles of collective bargaining. Doing so would alienate Koch Refining from any unionized worker it dealt with in Minnesota. And it would effectively destroy the OCAW local 6-662.
As August turned to September, Kujawa began pressing his union to end the strike. But working with his own union members was almost as difficult as working with Paulson. Martha Ann Kujawa said internal tensions were so heated that she believed her husband might be in danger. John never confided in her what was going on, but she saw things that concerned her.
“I was looking out the window of the duplex that we lived in and he was being followed home by somebody. And they were threatening him. He was walking on the sidewalk and he started speeding up and came to the house quickly. And I thought that was strange,” she recalled. “I wouldn’t even be a bit surprised if his life was in danger.”
By September 15, Kujawa had helped the union come to a tentative agreement with Koch. The agreement caved to many of Koch’s demands, but the union leaders argued that it was the best deal the members could get after nine months of being on strike.
On the evening of September 17, the OCAW workers gathered in a junior high school near the oil refinery. They were presented with the contract that Kujawa had negotiated. It was time for them to vote on it, time to decide whether they were willing to end the strike and move on. Kujawa pointed out that pay and benefits were not even the primary issues in the negotiations. The main dispute was over how much control Koch’s management would have over the employees. The members voted to reject the contract, 149 to 103.
After the vote, Paulson gave the Teamsters an ultimatum: “Either you guys start coming across [the picket line], or we are going to go nonunion with all of our deliveries. Even after this strike is over,” he remembers telling them. The Teamsters came around to Paulson’s rationale. In mid-September they drove across the picket line. In doing so, they broke the back of the OCAW. Even decades later, feelings were raw about that betrayal. Lowell Payton, an OCAW man who stood for months out on the picket line, was still bitter decades later when he recalled watching the Teamster-driven trucks roll past the picket line. “Teamsters are no better than an egg-sucking dog,” Payton said.
On the evening of September 23, the OCAW gathered again at the junior high school to vote on the contract. They voted this time to accept the contract, by at least 140 to 100.I The contract would last sixteen months, only seven months longer than the strike itself.
Paulson felt that the OCAW had no choice but to agree to it. “They could see they were, you know, losing everything,” he said.
OCAW workers like Ernie Tromberg and Joe Quinn were shocked when they returned to the refinery. The place was in terrible shape. Most of the OCAW men who went back to work remember the massive overtime payments they received as they worked long days to get the refining equipment back into good working order.
But many of the employees did not come back. The bitterness ran too deep. Tromberg said that Koch lost many of its best engineers and operators after the strike; the people who knew the Pine Bend facility most intimately. Kujawa later lost his reelection bid to be president. Joe Quinn replaced him.
Paulson retained his job as head of the plant, and he said that each new union president was more “reasonable” than the last. The days of Joseph Hammerschmidt were over. The union members knew who was truly in charge, and they knew that Charles Koch would not back down to demands as his predecessors had done.
The OCAW agreed to significant changes in its relationship with Koch Refining. The work shuttle that ferried employees around was gone. A new rule imposed mandatory overtime, meaning that a manager could simply tell a shift worker that he must stay and work late, or come in on a Saturday, rather than request those extra hours from him.II The work rules of old, which required that workers of certain “trades” could only work on the tasks that fit their skills, were jettisoned.
The grievance process, by which employees could appeal their boss’s decision, was defanged. There would be no more cash payments if an employee won a grievance fight. There would be no more checks like the one that Joe Quinn received to compensate for lost wages or other penalties. Instead, if an employee won a grievance fight, he or she would be allotted enough overtime work to cover the amount they were owed—in other words, if an employee won a grievance, he earned the right only to work extra hours to earn back the money Koch owed him.
Employees at the Pine Bend refinery remain unionized to this day.III But the strike of 1973 broke the union’s power. This fit into a pattern that was being played out across the United States between 1973 and 1993. Unions disbanded and broke apart. Solidarity became an artifact. The remaining unions became something like a shadow human resources department. They offered employment services like health insurance and credit union membership, but they seldom went on strike for better wages or working conditions.
Charles Koch won the labor battle at Pine Bend. In doing so, he took greater control over an asset that would become the fountainhead of profits for his company.
Decades later, former Koch Industries executives would refer to the Pine Bend refinery with a sense of admiration, and almost awe. Virtually all of them would use the term “cash cow” when describing the facility. The years would prove that Charles Koch was remarkably insightful—or remarkably lucky—when he purchased Pine Bend in 1969. In the 1960s, the refinery had profited in part by exploiting a loophole in US oil programs, but even after those loopholes were closed, the refinery was in a prime position.IV It was one of the few refineries in the United States that had access to a special form of Canadian oil that was very cheap, and it sold the gasoline it made into a retail market that was particularly expensive. Charles Koch was able to exploit this opportunity to the fullest.
But in 1973, after beating the OCAW, Charles Koch didn’t have any time to celebrate.
On September 24, the St. Paul Pioneer Press carried a story on the front page with the headline “Employees End Koch Strike.” But just a few weeks later, on November 26, that same newspaper carried a headline that was much larger. That headline read: “Nixon Asks [for] Wide Energy Power.”
For Charles Koch, the true age of volatility had just arrived.
I. At least one news report put the tally at 144 to 100.
II. This rule cut both ways for the union. While it reduced the freedom of workers to set their own schedule, the majority of them seemed to approve of the mandatory overtime provision. There is a culture of working long shifts at the refinery, and employees enjoyed the pay bumps that overtime brought them. Most of the labor disputes about overtime at the refinery revolved around who got it and did not, rather than how much overtime work was required.
III. The OCAW eventually merged with the larger United Steelworkers union, which currently represents the employees.
IV. The refinery had once benefited from a special importing arrangement with Canada, outlined in the previous chapter.