Berkshire Hathaways Pipeline Payday | The American Conservative


In the last few days of January, after newly sworn in President Joe Biden promptly put his lead ax in the Keystone XL pipeline, an announcer began to circulate on Facebook. Over a nondescript image of a pipeline segment scaling a vaguely Midwest-looking hill, the post claimed:

The Keystone pipeline. Canceled on the first day of Biden. Warren Buffett[[[[sic]]owns the railroad which now carries all the oil. Warren Buffet donated $ 58 million to the Biden campaign. Warren Buffet would lose billions in transportation fees when the pipeline is completed. Do you see how politics work? It’s not an environmental problem, it’s a money problem …

It paints a beautiful picture. The pieces all fit together and pretty much match our prior knowledge of the players involved. You don’t call him Quid Pro Joe for nothing, do you? And it would hardly be the first time Berkshire Hathaway used political clout to kill a pipeline project, like Arthur Bloom’s work on the Atlantic Coast Pipeline here at TACshows. Fortunately, the truth and democracy arbitrators are quick to dispel our illusions. Fact-checking by Politifact, Reuters and Associated Press rate the post as false and point to some important evidence.

The first is pretty important: Warren Buffett didn’t donate $ 58 million to Joe Biden’s campaign. That’s not really a surprise. $ 58 million is a huge part of the change, even as a hypothetical percentage of Biden’s $ 1.69 billion in campaigns – the largest in American history. Buffett is known for cutting tiny checks, even for the candidates he really loves. Hillary Clinton, which is essentially what you would get if you plugged Warren Buffett’s fantasies into the computer Strange sciencepulled just under $ 25,000 from the Omaha Oracle. Joe Biden, Whose free days could even make Hillary appear charismatic could hardly have expected to multiply that number by a factor of 2,320.

In fact, Buffett didn’t even make one small According to his assistant Debbie Bosanek, quoted in the fact-checking, to make a donation to Biden’s 2020 campaign or to publicly support the candidate. This is despite Buffett’s reported personal affinity for the new president and Biden’s former number two in Buffett’s beloved Obama administration. Some have suggested that the mega-investor’s unusual silence this cycle – he went as far as speaking on stage at a Clinton rally – was due to fear that pro-Trump consumers were already in one rocky moment in the middle of the pandemic alienating Berkshire Hathaway. Whether that explains or not, it is safe to say that Buffett’s stinginess during the campaign season gives no indication of an aversion to President Biden.

Even so, the avarice is real, and it hits the viral claim a pretty damned blow. And the concrete claim was hardly credible at first. If you were going to pay a politician to kill a project you don’t like, wouldn’t you be a little less obvious? But the atmosphere of dirty power at the top of our politico-economic system is getting harder to deny every day. We live under a kind of loose, elusive oligarchy – a nebulous network of interdependent power brokers in government and business – that can rarely be tied to hard money. You scratch Warren Buffett’s back because he’s Warren Buffett, not because he bought you six and a half minutes of television commercials.

Even if we allow some flexibility in terms of the tough claims, the fact checkers challenge the general principle. Warren Buffett has publicly expressed his support for the 2013 Keystone XL project on several occasions Omaha World Herald Staff writer Steve Jordon, who wrote a weekly column on Buffett from 2008 to 2018 (not much happens in Omaha), stated in 2014 that “[Buffet’s] The pro-pipeline stance has puzzled opponents who believe this does not contradict his support for former President Barack Obama, who blocked the project during his tenure, and his philanthropic support for humanitarian works. “

But the special support for Keystone XL should confused observers; The daylight between Warren Buffett and Barack Obama is usually invisible to the naked eye. A clear disagreement on such a high profile topic should warrant a second look. Scattered, throwaway comments on non-committal support from CNBC, etc. Interviews over the years have been unquestionably taken as evidence of Buffett’s genuine commitment to the pipeline project. The fact that Warren Buffett is a very smart man, apparently, has hardly been taken into account and could ponder the things he says on national television.

In fact, Buffett has set a pattern on these matters. In 2011, President Barack Obama proposed the Buffett Rule (named after superfan and super donor Warren), a minimum tax rate of 30 percent for Americans with an annual income of over $ 1 million. Buffett himself had called for a higher tax rate for the super-rich in a 2011 demand for the super-rich New York Times. The White House Obama was happy to play, and a Democratic Senate followed suit with the Paying a Fair Share Act of 2012. A legal filibuster knocked the bill dead on arrival. Of course, Buffett could hardly have feared he would ever do his desired tax hike would get. But even if it had happened, as Arthur Laffer emphasized at the time, the “effective tax rate on his real income would hardly budge”, since “Buffett shields almost all of his real income from federal income tax and this makes clear his belief that he is with his Wealth can do more good than Uncle Sam. “It’s easy to ask for higher taxes when you know you don’t have to pay, and it’s a great PR to start. The same goes for an oil pipeline that would ultimately flake off.

But that brings us to the final objection. Would the Keystone XL pipeline really hurt Berkshire Hathaway’s bottom line at first? The fact checkers say no again. To defend the claim, they take a number out of context: Only about 3 percent of Canada’s exported crude oil is transported by rail (4 percent by truck and a whopping 93 percent by pipeline). From that small number, combined with Buffett’s public rejection of Keystone XL as a competitor to his railroad, the conclusion is that Berkshire Hathaway – a multinational holding company that is in the top 10 largest corporations in the world by virtually every standard – doesn’t have one real Skin in the game here.

It’s a deceptively small number for a lucrative company that no sane investor would ever want to lose. After all, 3 percent of the oil export capacity of the fourth largest crude oil producer in the world is not exactly a mom and pop operation. That figure equates to well over 41 million barrels of crude oil in 2019 alone (the last year for which the Canadian government released data). Taking into account transportation costs of $ 10-15 a barrel by rail, Berkshire Hathaway’s oil transportation company runs an industry of roughly half a billion dollars. Percentages are difficult. Warren Buffett’s net worth of $ 85 billion is only one fortieth (give or take) of 1 percent of the world’s total wealth. That doesn’t mean that if I had the chance, I wouldn’t take his place.

Even if you admit this high rating at the present moment, many will argue that, if not already a thing of the past, transport by rail is at least on the way to the door. Pipelines are the future. With the Keystone XL project – an extension of an existing pipeline system – which was crucially canceled by the president, oil will only flow through the pipelines we already have. However, this ignores an important, obvious question: why was the Keystone XL project initiated in the first place? It wasn’t just for fun.

The Keystone XL pipeline project was created due to existing pipelines couldn’t handle it increasing oil exports. Insufficient transportation capacity created an export bottleneck, which in turn resulted in more crude oil being shipped from the US to Canada on freight trains that are both more expensive and significantly more dangerous – prone to accidents that harm both people and the environment – than their pipeline Alternative. In 2008, 9,344 wagons filled with crude oil arrived in the United States. by 2014 that number had risen to 540,383. (A single car holds about 650 barrels on average.) Volume has changed significantly since the 2014 peak, but it’s safe to say this is hardly a dying industry. The facts are clear, if impractical: In the absence of an expanded pipeline infrastructure, oil does Travel by train. In other words, it requires remembering years of controversial public debates about the relative risks of one versus the other. A single, typical headline from the Washington Post in October 2018: “As Canada’s pipeline plans stall, more oil is moving by rail – leading to well-known fears. “

So the claim that the transportation of oil by rail is practically irrelevant contains very little water. What is Berkshire Hathaway’s real commitment here? Even if the freight train business is booming against the fact checkers, does Warren Buffett care? John Mitchell, whose incompetence (coupled with Ben Bradlee’s malice) overthrew the greatest president this nation has ever seen, at least had the right idea here: watch what they do, not what they say. Yes, Warren Buffett did said– especially while Barack Obama, who never wanted to push the project, occupied the Oval Office – Keystone XL might be a good idea. However, the notoriously cautious investor’s oil haulage business has been run with very little apparent doubt. That said, corporate decision-makers seem pretty confident that they can rely on it at least 40 million barrels travel on their rails every year, and possibly many more.

In late 2009 (the year Obama took office, by the way), Berkshire Hathaway took over the Burlington Northern Santa Fe Railway Company for a total of $ 44 billion. The acquisition itself may have nothing to do with Keystone – oil is an even smaller part of the rail business than the other way around – but at the same time, it can hardly be unimportant to the current discussion that Berkshire Hathaway owns the largest single cargo, its rail network on the continent. On another point for the Facebook members and against the professional fact checkers, excess oil that would have really run through Keystone XL is We will cross our northern border via the Buffett railroad lines.

More interesting than the railroads themselves, however, are the wagons in which the oil is transported. Since 2013 – two years before President Obama blocked the Keystone Project when the pipeline controversy was just emerging – Berkshire Hathaway has owned 100 percent of the Marmon Group, a holding company whose main business is rail tank cars. Two of the most important subsidiaries are the Union Tank Car Company (UTLX) in the USA and its Canadian subsidiary Procor. Each is the largest tank car company in its country. This would of course be an unwise investment if the rail freight operator were to be overtaken by the expansion of the pipeline.

However, this does not seem to be the case at all. In 2015 (the year Obama finally cracked down on Keystone XL), the Union Tank Car Company acquired 25,000 new cars, increasing its total inventory by 20 percent. In the same year, the Federal Railroad Administration imposed new, stricter regulations for tank wagons that are used to transport dangerous substances such as crude oil. The expensive process of retrofitting or the even more expensive process of building a new one would be required of any business that wanted to stay in the supposedly fading business. UTLX wasted no time and was the first to produce new, FRA-compliant DOT-117 tank wagons that were heavily protected from fire, spillage and other nasty accidents.

However, despite these new regulations, accidents have not been completely eliminated. In June 2018, 14 retrofitted tank cars were derailed while carrying crude oil from Canada on a BNSF line and spilled 230,000 gallons in a state waterway. Berkshire Hathaway had a simple solution: simply banning the use of retrofitted cars – many of which, including the derailed ones, were owned by ConocoPhillips – and only allowed newly built DOT-117s on its rails. A lucky coincidence for colleague from Berkshire Hathaway, UTLX. The above-mentioned pipeline bottleneck had increased leasing rates for tankers by more than 150 percent.

The facts add up to two undeniable conclusions, both of which fly in the face of so-called fact-checking. First, Keystone’s cancellation will result in more crude oil going south by rail. Canadian production volumes and our dependence on Canadian imports are only increasing. In view of the limited capacity of the pipelines, volume increases without pipeline expansions inevitably force dependency on the railways. Second, that shift will greatly benefit Berkshire Hathaway, which owns both the railways that carry the oil and the cars that carry it.

Just like in Virginia, when powerful people affiliated with the company killed the Atlantic Coast Pipeline, it’s Berkshire Hathaway the Winner in this game. The losers, again like in Virginia, are the workers involved: the Keystone XL project murder kills around 11,000 jobs. Again, if you take a percentage, the scale is tiny – only 0.007 percent of US jobs cost according to Biden’s decision. not nearly enough to have a meaningful impact on the economy’s performance statistics for his first year in office. But on a human level, it’s devastating.

Struggling communities in the Midwest eagerly viewed the Keystone Project as an opportunity for economic recovery. This resuscitation is not coming. nor are the jobs or the money the pipeline promised to deliver. We are told – with enough force to cast a little doubt – that no one benefits from their suffering. But if a young South Dakotan is sitting at home unemployed, he can take a short walk to the train tracks – owned by the BNSF, of course. If he waits long enough, a freighter has to roll south. Like everything else, it won’t bother stopping in his small town, but if it goes through slowly enough, he may be able to spot the ubiquitous yellow “UTLX” affixed to the black’s sides – all new, leaking – proof , fireproof – tank wagons with oil from the north.

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