Tag Archives: Powder River Basin

Would Saving A Livable Climate Destroy Buffett’s Fossil Fuel Empire?

Repost from Think Progress – Climate Progress

Would Saving A Livable Climate Destroy Buffett’s Fossil Fuel Empire?

By Joe Romm, March 11, 2016 8:00 AM
BNSF oil train derailment in 2013. CREDIT: BRUCE CRUMMY, AP

Billionaire Warren Buffett has bet the future of his company Berkshire Hathaway on dirty energy. In recent years he has been building a vertically-integrated fossil fuel empire — one that develops, delivers, processes, and burns the most climate-destroying fuels.

The final part of this series on Buffett looks at how BNSF Railways is the engine of his carbon-intensive conglomerate, creating a massive risk for shareholders in this increasingly carbon-constrained world — a risk the “Oracle of Omaha” needs to be far more upfront about.

Is Warren Buffett “The Profiteer” of “Climate Killers”?

When Rolling Stone named Warren Buffett one of its 17 “Climate Killers” in 2010, they called him “The Profiteer.” They zeroed in on his recent purchase of “Burlington Northern Santa Fe railroad for $26 billion — the largest acquisition of Buffett’s sto­ried career.”

Why? BNSF is “the nation’s top haul­er of coal, shipping some 300 million tons a year.” That is especially convenient for Buffett because, as noted in Part 2, Berkshire Hathaway Energy has four major utilities that still rely on coal for over half their electricity generation.

CoalValueImage
CREDIT: BNSF

But BNSF is so much more than just the top hauler of coal. As their website proudly attests “BNSF is the largest transporter of crude oil in North America” — and we all know how well the whole crude-by-rail thing has been going.

2015 “has already been the costliest by far for crude train explosions,” BloombergBusiness reported in December. A “BNSF train that derailed and exploded in Illinois” last March “carrying highly explosive crude from North Dakota” created some $5.5 million in damage.

From 2010 through mid-2014, oil shipped by rail in the United States increased from about one million barrels of oil every month to 25 million! At the same time, Canadian imports increased 50-fold, as we’ve reported. BNSF was a driving force behind that explosion.

oil-overtime
CREDIT: EIA DATA

Also, last October we learned about “what is believed to be the largest frac sand unit train to date in North America.” You guessed it: “The 150-car unit train, operated by BNSF, carried 16,500 tons of frac sand used in hydraulic fracturing.”

Warren Buffett Bets Big On The Tar Sands

But wait, there’s more. You may recall from Part 1 that last year, the billionaire spent $240 million buying another chunk of Canadian tar sands giant Suncor, upping his overall bet on the climate-destroying liquid fuel to $1.1 billion — a fact Buffett does not share with shareholders in his list of Berkshire Hathaway’s climate risks.

On top of that, as BNSF’s website also proudly attests, the railroad “is positioned to act as a gateway to the Canadian oil sands.” Seriously.

Indeed several years ago, a BNSF employee magazine explained how invested the railway was in all aspects of tar sands (aka bitumen) development. The key point is that “Before bitumen can move through a pipeline to its destination, it must be blended with diluents (diluting agents),” lighter weight hydrocarbons like natural gasoline or butane:

BNSF has been moving single carloads of diluents from U.S. refineries to the Canadian border…. The inbounds are then interchanged with Canadian railroads, then moved to Edmonton, with the final move to the oil sands’ processing center via pipeline.

Last year, BNSF moved about 9,000 carloads of diluents for the project, with the majority of loads originating from the Gulf Coast, California, and Kansas. This year, about 12,000 carloads are anticipated to move.

There’s more: Beyond shipping diluents, “BNSF has also transported turbines, other large machinery and pipes for use at the drilling sites.”

There’s still more to this empire. In 2015, Buffett “nearly doubled Berkshire’s position in Phillips 66,” one of the country’s leading oil (and gas) refiners and processors. The company has 15 refineries which can refine a total of 2.2 million barrels of crude per day.

In January of this year alone, Buffett spent a staggering $832 million to buy yet more Phillips 66 stock. At more than $5 billion, it is his sixth-largest holding. He now owns 14 percent of the “Number 7” company on the Fortune 500 list.

Phillips 66 is a major co-owner of the Wood River Refinery in Illinois, which in recent years made investments “to expand the capacity to handle the bitumen from the Alberta oil sands by nearly 700%.” Also not coincidentally, for the last year, Phillips 66 has been trying to get California planning commissioners to let it build a 1.3-mile rail spur to its Santa Maria refinery. Why? As the Sierra Club explained last month, “The oil giant seeks to transport tar sands crude from Canada in mile-long trains — each laden with over 2 million gallons of dirty crude.”

Both A Livable Climate And Buffett’s Empire Cannot Thrive

Yes, the Oracle of Omaha has a thing for the Canadian tar sands. But more than that, over the last several years he has built a vertically-integrated fossil fuel empire — one that develops, delivers, processes, and even burns the most carbon-intensive fossil fuels. It would be a brilliant strategy except for two small details.

First, climate science makes clear we have to leave most fossil fuels — and virtually all of the most carbon-intensive — in the ground to avoid global catastrophic warming. Second, over the past 18 months, the leading nations of the world unanimously agreed on a plan whose goal is to do just that, and the overwhelming majority of them made detailed pledges to slow or reverse carbon-intensive growth and replace it with carbon-free growth.

The domestic and international coal market has already collapsed as a result of growing environmental concerns and low-cost alternatives including renewables. If the world follows through on its plans to keep total warming below 2°C — a big “if,” for sure — then coal is going to continue to be squeezed out of the market in the coming decades and oil will almost certainly follow the same fate, peaking in demand by 2030, as I discussed last month.

Now whether or not you believe the world is going to achieve the plan it unanimously embraced in Paris in December, surely Buffett ought to at least mention to his shareholders the risks to Berkshire Hathaway if the world does. Yet, his latest annual letter to shareholders dismisses the risk of climate change.

Here is all Buffett says about the coal risk: “To begin with an obvious threat, BNSF, along with other railroads, is certain to lose significant coal volume over the next decade.” But he quickly dismisses this as a problem that is not “crucial to Berkshire’s long-term well-being.”

Last summer, BNSF executive chairman Matthew K. Rose noted the decline in U.S. coal transport and consumption. He said of his company’s major investment to upgrade its rail service to and from the coal-rich Powder River Basin, “That leaves us with millions of dollars in investment in what will eventually be stranded assets.”

Certainly, from a short-term business perspective, investing in oil-by-rail and tar-sands-by-rail to replace coal-by-rail appears to make sense. But what are the risks those investments will eventually become stranded assets, too? Low oil prices aren’t good for crude-by-rail, as BloombergBusiness explained in December. And aggressive climate action, which could well give us peak demand within 15 years, is not bullish for oil prices.

BNEFoilpeak1-16
CREDIT: BLOOMBERG

Rather than informing shareholders about any of these risks, Buffett asserts the reverse: “Both BHE [Berkshire Hathaway energy] and BNSF have been leaders in pursuing planet-friendly technology.” Seriously?

I discussed in Part 2 how, despite BHE’s own investments in renewables, BHE is working to crush solar energy in Nevada and around the western United States. And it remains a huge user of coal. And as we’ve seen BNSF is a major deliverer of coal….

But here is how Buffett defends the fairly ludicrous claim that BNSF is somehow one of the “leaders in pursuing planet-friendly technology”:

BNSF, like other Class I railroads, uses only a single gallon of diesel fuel to move a ton of freight almost 500 miles. That makes the railroads four times as fuel-efficient as trucks!

Yes, BNSF is a very fuel-efficient way of delivering vast amounts of climate-destroying fuels to market.

Finally, is it only a coincidence that after outperforming the market for decades, the stock of Berkshire Hathaway has actually underperformed the S&P 500 over the last five years?

Again, if serious global climate action ultimately keeps oil prices low and renders much of the tar sands uneconomic, then Buffett’s carefully constructed fossil fuel empire is going to keep suffering — and deservedly so. After all, leading climate activists have been urging major investors to disinvest in fossil fuels for years. Buffett is doing the exact reverse!

BOTTOM LINE: Between Berkshire Hathaway and a livable climate, only one can thrive. That’s not a tough choice, is it?

Wyoming Oil Spills in 2014 Already Double Amount Spilled In 2013

Repost from Associated Press on Huffington Post GREEN

Wyoming Oil Spills Total 220,000 Gallons In 2014, Already Double Amount Spilled In 2013

By Mead Gruver, 09/19/2014 
WYOMING OIL SPILL
FILE – In this May 22, 2014 file photo provided by the U.S. Bureau of Land Management, a 25,000-gallon oil spill burns in the Powder River Basin southeast of Buffalo, Wyo., after officials deliberately ignited the crude in what they say was their best cleanup option in the rugged area. State records show the 25,000-gallon spill was one of three big oil spills in northeast Wyoming last spring that involved a storage tank and two pipelines owned by Casper-based Belle Fourche Pipeline. | ASSOCIATED PRESS

CHEYENNE, Wyo. (AP) — An oil boom in Wyoming has a filthy side effect: A string of accidents from a remote gulley in the Powder River Basin to a refinery in downtown Cheyenne already has made this year the state’s worst for oil spills since at least 2009, state records show.

Almost 220,000 gallons of oil already has spilled in Wyoming this year, more than double the 90,000 gallons all last year. About 165,000 gallons spilled in 2010, the previous worst year since the Wyoming Department of Environmental Quality began tracking spills in a database that year.

“There’s a lot more production,” Joe Hunter, the department’s emergency response coordinator, said Thursday. “If you’re producing more, there’s going to be more opportunities for releases. We’re doing what we can to just make sure the things get cleaned up.”

Much of the oil spilled lately has been in the Powder River Basin, epicenter of Wyoming’s nascent oil boom. Oil production in the basin has doubled in the past five years as companies tap the Niobrara Shale and other deep formations with horizontal drilling and hydraulic fracturing.

All the while, large volumes of oil spill on Wyoming’s remote landscapes with little public awareness. None of the federal or state agencies with purview over oil infrastructure and public lands in Wyoming actively notifies the public about oil spills except in extreme cases.

“Unless it’s going to have an impact on public health, that’s where we would notify the public,” Department of Environmental Quality spokesman Keith Guille said Thursday.

The biggest spills in Wyoming this year haven’t affected waterways, posed no risk to the public and promptly were cleaned up, according to Guille.

Guille said the department is working on developing a publicly accessible spills database. Such public disclosure could help the state agency encourage companies to work harder to prevent oil spills, said one environmental advocate.

“I think they’re more likely to be more careful. It’s a deterrent,” said Jill Morrison with the Powder River Basin Resource Council landowner advocacy group.

Department of Environmental Quality records disclosed in response to a request by The Associated Press show several recent oil spills weren’t inconsequential in scale. Three within a month last spring totaled more than 100,000 gallons and originated with infrastructure owned and operated by a single company, Casper-based Belle Fourche Pipeline:

— On April 30, a malfunction caused a 210,000-gallon oil storage tank owned by Belle Fourche in Campbell County to overflow, spilling 70,000 gallons of crude near a drilling site;

— On May 19, corrosion at a damaged section of a Belle Fourche pipeline spilled 25,000 gallons of oil that flowed three miles down an ephemeral drainage in Johnson County;

— On May 23, heavy equipment damaged one of the company’s pipelines in Crook County, spilling about 9,000 gallons of oil.

The Department of Environmental Quality isn’t pursuing fines against Belle Fourche or HollyFrontier, owner of a Cheyenne refinery where 70,000 gallons of oil spilled July 13, Hunter said.

The refinery spill happened when a severe thunderstorm dumped heavy rain and hail on a crude oil storage tank and cause the tank’s floating roof to collapse. The oil remained on site and was cleaned up quickly, according to Hunter.

The department decides whether to pursue fines against companies on a case-by-case basis, Hunter said.

“If we think there’s negligence, we’ll absolutely, 100 percent go after a violation. If surface water is obviously impacted, that’s grounds for seeking enforcement,” he said.

“You can’t really just say, you know, they met this number, so we’re going after enforcement. You’ve got to look at circumstances, was there negligence, could this be prevented?”

A message seeking comment from HollyFrontier wasn’t immediately returned Thursday.

Bob Dundas, environmental coordinator for Belle Fourche Pipeline, said Thursday he would forward a reporter’s message to somebody else in the company who could comment. Nobody at the company called by press time.

“It looks like if we’re going to have more oil production, we’d better step up enforcement,” Morrison said. “We want to be looking at how we’re going to prevent this increase in oil spills.”