No Reason, Just Hate: That’s a Modern Liberal

The Left’s hatred for conservatives has become so obsessive that it is hard to engage a liberal in rational discussion of any public policy issue. Take the Keystone XL pipeline: I think it is obviously a good idea, but if a liberal wants to argue to the contrary, fine. But instead of trying to advance a rational argument, what do liberals do? They can’t talk about the pipeline except by trotting out their own pet obsessions.

Thus, Grist, a pseudo-environmental left-wing outfit, headlines: “Koch brothers could make $100 billion on Keystone XL pipeline deal.”

A new study released Sunday concludes that Koch Industries and its subsidiaries stand to make as much as $100 billion in profits if the controversial Keystone XL pipeline is given the go-ahead by President Obama.

The report, titled “Billionaires’ Carbon Bomb,” and produced by the think tank International Forum on Globalization, finds that David and Charles Koch and their privately owned company, Koch Industries, own more than 2 million acres of land in Northern Alberta, the source of the tar-sands oil that will be pumped to the United States via the Keystone XL pipeline.

If you know anything about the Keystone pipeline, that is a remarkable claim. To begin with, one hundred billion dollars is a great deal of money, even today: Exxon Mobil, a vastly larger enterprise than Koch Industries, made a $45 billion profit last year, one of the biggest ever recorded by any company. And Koch Industries has never taken a position on the Keystone pipeline; as we pointed out here, construction of the pipeline would be contrary to Koch’s economic interests:

In fact, completion of the Keystone XL project likely would be detrimental to Koch Industries. Currently, the large quantity of crude oil produced from Alberta sands flows predominantly to the Midwest, where there is a surplus of supply. This allows Koch to buy crude at Clearbrook at favorable prices. If the new pipeline project is built, Canada will have more outlets for its crude oil and the Midwest will have to compete with refineries in Texas for the product. Thus, the Keystone XL project likely would result in Koch paying higher prices for crude oil for its Pine Bend refinery.

KeystoneXLOilPipeline_update

Further, the idea that the Keystone pipeline is all about Koch Industries is absurd, in view of the fact that Koch is never mentioned as a player with respect to the Alberta oil sands. For example, here is Wikipedia’s description of the major Athabasca projects. You will note that there is no mention–zero, nada–of Koch Industries or any Koch affiliate. Click to enlarge:

AthabascaNoKoch03

So what is going on here? How can the Keystone pipeline be all about the Koch brothers, when Koch is not known as a significant Alberta player, and the underlying facts indicate that construction of a pipeline bringing Alberta oil south to Texas would actually harm Koch’s interests? To answer that question, you have to go to the report that is the subject of the Grist article. It was, as Grist says, produced by the International Forum on Globalization. Both of those organizations–Grist and IFG–are, I assume, 501(c)(4)s. It would be interesting to see the list of rich leftists who support them; but, for better or worse, that isn’t going to happen. Whoever is behind the International Forum on Globalization, one thing we know for sure is that they hate the Koch brothers. On IFG’s main web page, there are no fewer than 53 references to Koch. This is beyond obsession; more like mental illness.

If you read the IFG report, you find that it doesn’t say Koch owns two million acres of Athabasca land–an enormous amount, by the way, 3,125 square miles, much larger than the State of Delaware–as Grist claimed. Rather, IFG says that Koch leases that acreage. Is this true? It is hard to say; data on lease acreages are not publicly available, and IFG purports to rely on a former Koch employee who may have made the whole thing up.

But let’s assume it’s true. The really extraordinary thing about the IFG report is that it admits that construction of the Keystone pipeline will damage Koch’s interests by raising the price of midwestern crude oil–exactly the point that I made in the 2011 post linked above. In fact, the IFG report says that construction of the Keystone pipeline will cost Koch Industries $120 billion! Seriously, I am not kidding. Here is the quote:

Using our modest estimate that KXL will prevent on average a $20 discount to the price of a barrel of tar sands crude, FHR’s [Flint Hills Resources, a Koch subsidiary] Pine Bend refinery will miss out on $120 billion in profit ($20 x 6 billion barrels = $120 billion).

Yikes! So the whole driving force behind the Keystone pipeline is Koch Industries, a company that stands to lose $120 billion if the pipeline is built? Apart from being counterintuitive, to say the least, that is an idiotic claim, since the $120 billion loss is supposedly incurred over a period of 50 years. I don’t think that even geniuses like the Koch brothers think they can project profits that far ahead. But let’s go with IFG’s number. That being the case, how on Earth can Koch come out $100 billion ahead, as Grist’s breathless headline tells us? Here is the calculation; if it wasn’t done on the back of an envelope, it should have been:

By 8 billion barrels produced at an average gross profit per barrel due to KXL of $15, KI has made up that $120 billion loss ($15 x 8 billion barrels = $120 billion). By less than 15 billion barrels produced, KI crosses the threshold of a net profit of over $100 billion, due to KXL, on production alone ($100 billion/$15=6.67 billion barrels, 6.7 billion+8 billion<15 billion).

So, if Koch clears $15 a barrel on a mere eight billion barrels, it will break even! And if it ships a total of 14.7 billion barrels of Alberta oil on the KXL pipeline, it will be ahead of the game by $100 billion!

Well. Let’s do some math. According to the Province of Alberta, the Alberta oil sands cover an area of 54,132 square miles. Assuming that, as IFG alleges, Koch Industries has leased two million acres, or 3,125 square miles, that is around 1/18 of the total oil sands area. The Keystone XL site says that the capacity of the pipeline, if completed, will be 830,000 barrels of oil per day. Let’s assume that if Koch has actually leased 1/18 of the oil sands area, it will have access to 1/18 of that capacity (bearing in mind that we have seen no evidence that Koch produces a single barrel of oil in Alberta; in general, Koch is not in the oil extraction business).

From here on, it is just arithmetic: 830,000 barrels per day equals 303,000,000 barrels per year. If Koch gets 1/18 of that capacity, it is 16.8 million barrels per year. IFG says Koch *only* needs to sell eight billion barrels to break even on the $120 billion it will lose (over 50 years) because of the pipeline. So how long will it take Koch to break even? Eight billion divided by 16.8 million = 476 years. Yup! In a mere 476 years, Koch will break even on the Keystone pipeline!

And that assumes IFG’s facts are correct. In fact, to the best of my knowledge Koch produces no, or virtually no, oil in Alberta.

So what is going on here? Rich liberals hire kids–recent college graduates, or maybe college or high school students–to produce idiotic “research reports” that can be dismantled by anyone familiar with arithmetic, let alone the oil and gas industry, of which these kids obviously know nothing at all. The claims these reports make are completely divorced from reality, but liberals don’t seem to care. The Huffington Post headlines: “Keystone XL Pipeline Could Yield $100 Billion For Koch Brothers.” PolicyMic: “Actually, You Probably WILL Guess Who Stands to Make $100 Billion Off the Keystone XL Pipeline.” TruthDig: “Koch Brothers Stand to Make $100 Billion From Keystone Pipeline.” And, of course, the Kos Kidz are all over it.

This isn’t just stupid, it is insane. It is also, unfortunately, a good example of what modern liberalism has come to. No regard for truth, just blind hatred.

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