“America is now a global leader when it comes to taking serious action to fight climate change. And frankly, approving this project would have undercut that global leadership. And that’s the biggest risk we face — not acting.”
– President Obama, “Statement by the President on the Keystone XL Pipeline,” November 6, 2015.
” … if Keystone had been in operation it would have lowered Koch Industries’ overall profits by $260 million per year.”
– Charles Koch, Good Profit (New York: Crown Business, 2015), p. 46.
In 1959, Fred Koch purchased an interest in Great Northern Refinery in Minnesota to turn Canadian crude oil into refined products for the Midwest. At the beginning (1955), the facility refined 25,000 daily barrels. Full control by Koch Industries came in 1959. Today, the renamed Pine Bend Refinery has a daily capacity of 339,000 barrels of crude oil that can be turned into 14 million gallons of petroleum products.
Rumors have abounded that Charles Koch’s support for the Keystone XL Pipeline (TransCanada) was tied to his own pocket. More profits, even huge profits, for Koch Industries, a cottage industry proclaimed. But Koch Industries’ philosophy of Principled Entrepreneurship supports a legal right to enter service and complete. Good profit is about creating consumer value, not cronyism, and Keystone XL is about getting underpriced, partially locked-in crude oil to new markets (Gulf Coast refineries in particular).
President Obama’s State Department rejected TransCanada’s application last Friday. Ironically, the President in an opportunity-cost sense probably increased the coffers of Koch Industries between $200 and $300 million per year.
Charles Koch explained as much in his new book, Good Profit (pp. 46–47):
Our belief that crude oil from the Canadian oil sands benefits the U.S. economy is why we are in favor of the Keystone [XL] Pipeline. Some of our critics allege we will earn a $20 billion profit if the Keystone Pipeline is built, but that is pure fantasy.
We estimate that Keystone would increase the price we pay for Canadian crude by roughly $3 per barrel because it would lower transportation costs to destinations other than our refinery. Recently we have been buying roughly 240,000 barrels per day of Canadian crude to run in our Minnesota refinery. Our Canadian crude oil production has been less than 100 barrel per day. Thus, if Keystone had been in operation it would have lowered Koch Industries’ overall profits by $260 million per year.
For the pipeline to make even one dollar more profitable (let alone $20 billion)–rather than less profitable–we would have to increase our Canadian production more than two-thousand-fold–which is far beyond the realm of possibility.
Will these facts change the narrative from Koch profiting from building the final leg of the Keystone project–and losing from it not being built?
Maybe not. “The cancellation of Keystone XL would be a stab in the heart to Koch Industries,” stated Tina Casey of Clean Technica earlier this year. And in a new report highlighted just last month, the International Forum on Globalization concluded that “building Keystone XL pipeline could mean roughly $100 billion in profits for the Koch brothers.”
The future of oil transportation will not be dimmed by the Keystone rejection. Oil sands will not go away but wait their turn in the marketplace (and might increasingly go to more polluting refineries in China in the process).
Koch, meanwhile, will measurably profit from Obama’s obstructionism of Keystone XL.
President Obama said, “Thanks, in part, to the investments we’ve made, there are already parts of America where clean power from the wind or the sun is finally cheaper than dirty conventional power.” Yet, his climate change ally Bill Gates, in the November issue of The Atlantic magazine makes clear that this is a “misleadingly mindless statement.”
When President Obama has to rely on lies to promote his climate agenda, you know it’s a bad idea. Wind and solar are about producing expensive unreliable electricity that has not hope of making any difference in global climate; Keystone is an oil pipeline. The US uses almost zero oil for electrical production. The two are unrelated except by lobbyists who want to fool people who don’t know where electricity comes from.