Big Oil’s scorched-earth legal approach to climate change
By Keith Stewart, March 14, 2016
I want to believe the oil company CEOs who say they’ve seen the light and now support action on climate change. I really do.
But it’s hard to take them at their word when their lawyers are simultaneously engaged in what one legal scholar has called “the first case in which a party has challenged the constitutional validity of any federal greenhouse gas regulations.”
A consortium of seven oil companies is challenging the right of the federal government to adopt a regulation designed to substitute renewable energy for fossil fuels — in part on the grounds that “that the production and consumption of petroleum fuels is not dangerous and does not pose a risk to human health or safety”, and so, “there is no evil to be suppressed”.
Those words are taken from a 2014 legal ruling against the companies. The judge in that case went on to refute their argument at length: “The evil of global climate change and the apprehension of harm resulting from the enabling of climate change through the combustion of fossil fuels has been widely discussed and debated by leaders on the international stage. Contrary to Syncrude’s submission, this is a real, measured evil, and the harm has been well documented.”
Or maybe not. Syncrude was back in court last November to appeal that ruling.
Few Canadians have heard of Syncrude because it’s a consortium of oil companies that jointly operate three massive tar sands mines. Suncor became Syncrude’s largest shareholder when it bought Canadian Oil Sands earlier this year, but the mines’ day-to-day operations are managed by Imperial Oil, the Canadian subsidiary of ExxonMobil.
It’s no surprise to see Exxon involved in this case; the company has a long history of opposing action on climate change. Exxon is now under investigation in New York and California for publicly claiming that the science of global warming was too murky to warrant policy action by governments — even as the company redesigned its drill rigs and pipelines destined for the Canadian Arctic based on company scientists’ predictions of a warming world. Exxon also was the only major oil player not on stage with Alberta Premier Rachel Notley as she announced the province’s ambitious new climate policy.
Yet it’s surprising to see companies like Suncor — which are trying to rebrand themselves as climate leaders — involved in such legal shenanigans. In his assessment of the original case, University of Calgary law professor Nigel Bankes wrote that this litigation “suggests that at least the sector of big oil represented by the Syncrude interests will fight federal greenhouse gas regulations in all of its forms and that it will fight them hard.
“There was no stone left unturned in this litigation. Counsel for Syncrude pursued every possible avenue, no matter how small the chance of success or creative the argument. Big carbon may be just like big tobacco in protecting its turf.” — University of Calgary law professor Nigel Bankes
That doesn’t sound like something climate leaders ought to do.
As the largest shareholder, Suncor should tell their colleagues to withdraw this appeal. They should then take the money they were spending on lawyers and use it to map out how their businesses can thrive in a world that has moved beyond fossil fuels.
Keith Stewart is the head of the climate and energy campaign at Greenpeace Canada, and teaches a course on energy policy at the University of Toronto
Would Saving A Livable Climate Destroy Buffett’s Fossil Fuel Empire?
By Joe Romm, March 11, 2016 8:00 AM
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.
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.
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.
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?
Energy companies are canceling their tar sands projects.
By Brian Palmer | March 6, 2015
Shell withdrew its application to extract tar sands from Canada’s Pierre River mine last week. The cancellation is news in itself, but the oil company’s decision to walk away from a massive seven-year project says a great deal about the viability of tar sands generally. Last year, the Canadian Association of Petroleum Producers cut its 2030 tar sands production forecast by 400,000 barrels per day. Last week, the energy consultancy Wood Mackenzie predicted that cash flows from tar sands would drop $21 billion in the next two years. The industry is undeniably shrinking.
Tar sands won’t disappear tomorrow, of course—most of the expense comes in opening the mine, so producers will keep operating their existing mines for several decades. New mines, however, are economically unfeasible. It’s difficult to break even in the tar sands business at current low oil prices. Over the medium term, the lack of pipeline access challenges any prospects for profitability. (That’s why the industry is so desperate for the Keystone XL and Energy East pipelines.) Looking deeper into the future, the specter of carbon taxation is enough to scare energy executives away.
All this is good news for the climate. Tar sands are the most carbon-intensive form of energy on the planet, emitting three or four times more greenhouse gas than conventional crude oil (which isn’t exactly good for the environment either). Here’s a brief rundown of all the canceled or deferred Canadian tar sands projects in recent months, and how much carbon they could have pumped into the atmosphere.
Pierre River Mine Company: Shell Stated reason for withdrawal: “Our current focus is on making our heavy oil business as economically and environmentally competitive as possible.” Projected barrels per day: 225,000 Carbon saved from the atmosphere each day, in tons: 21,000
Corner Oil Sands Project Company: Statoil Stated reason for withdrawal: “Costs for labor and materials have continued to rise in recent years…Market access issues also play a role, including limited pipeline access.” Projected barrels per day: 40,000 Carbon saved from the atmosphere each day, in tons: 3,700
Christina Lake Expansion Company: MEG Energy Stated reason for withdrawal: None given Projected barrels per day: 150,000 Carbon saved from the atmosphere each day, in tons: 14,000
Narrows Lake Company: Cenovus Stated reason for withdrawal: None given Projected barrels per day: 130,000 Carbon saved from the atmosphere each day, in tons: 12,200
Grand Rapids Company: Cenovus Stated reason for withdrawal: None given Projected barrels per day: 180,000 Carbon saved from the atmosphere each day, in tons: 16,800
Telephone Lake Company: Cenovus Stated reason for withdrawal: None given Projected barrels per day: 90,000 Carbon saved from the atmosphere each day, in tons: 8,400
MacKay River Expansion Company: Suncor Stated reason for withdrawal: “Cost management has been an ongoing focus…In today’s low crude price environment, it’s essential we accelerate this work.” Projected barrels per day: 40,000 Carbon saved from the atmosphere each day, in tons: 3,700
Joslyn Mine Company: Total Stated reason for withdrawal: “Costs are continuing to inflate when the oil price and, specifically, the [net profit] for the oil sands are remaining stable at best—squeezing the margins.” Projected barrels per day: 160,000 Carbon saved from the atmosphere each day, in tons: 15,000
* * *
Tally that up and these canceled or postponed projects represent nearly 95,000 tons of carbon dioxide staying in the ground rather than floating into the atmosphere. That’s the equivalent of taking 6.6 million cars off the road. Murmurs in the energy industry suggest that several other projects will soon be deferred or canceled, as oil prices show few signs of recovering. Stay tuned.