IFG’s Response to the Kochs’ countering of IFG’s special report.
IFG Point-by-Point Response to Critiques of BCB Report
The International Forum on Globalization’s recent report released in October, Billionaires’ Carbon Bomb: The Koch Brothers and the Keystone XL Pipeline, has been well received in the media and across the political spectrum. Koch Industries’ “crisis communications team” scrambled to counter IFG’s claim that they stand to make billions of dollars. Koch-created organizations such as the Center for American Freedom had immediate and incoherent responses that were echoed by several Kochtopus media manipulators.
IFG looked into the claims of three critics and the Kochtopus. There are a few critiques that IFG has taken issue with and merit a response. In contrast to what the Kochs’ and their defenders claimed, the facts still stand and our data tells the truth.
The Kochs’ and Kochtopus’ Miss the Point
The Kochs themselves, as well as their influence network quickly went to work and completely missed the point of the report. Further, they passed up a chance to clear up some of the confusion surrounding their actions.
Promptly after the release of the report, this appeared on the Koch Facts website — a PR site made to counteract negative coverage of Koch Industries in the media and give “facts” to the public. Koch Facts refers to two articles we will examine, but first they directly address three grievances that do not alter the facts in our report.
Their first point attempts to mislead people about our premise, saying that it is inaccurate because their pipeline in Port Arthur, Texas is in fact a chemical line, not one made for tar sands crude. We mention Port Arthur because of the Koch connection to the area in which the pipeline ends, near to many petrochemical factories and refineries. Our projections of Koch profits do not factor in potential profits for their pipeline subsidiary in Port Arthur.
The second point from Koch Facts shows a willingness to quibble over semantics rather than clarify Koch’s actual claims to land in Alberta. Koch Facts states: “…we do not own 2 million acres in Northern Alberta…we have very limited production”. IFG never claims that Koch Exploration Canada (KEC) owns land. By researching leases in the region and reports from former KEC employees, IFG found evidence that points to the Kochs leasing or purchasing leases of as many as 2 million acres. Whether the land is leased or purchased, the tar sands reserves are nonetheless controlled by Koch Industries. These reserves will reap them massive profits — especially if KXL increases their value. We would welcome the Kochs’ disclosing their actual acreage, holdings, and operations in the tar sands, but they instead chose to play with words.
Tim Worstall and Forbes Erroneous Assertions
Tim Worstall’s piece in Forbes, which also ran on the Chicago Tribune website, misunderstood a number of the report’s arguments. IFG would like to address Mr. Worstall’s assertions.
First, the crux of his critique rests on the erroneous premise that the cost of building the pipeline should be subtracted from the $100 billion additional profit the Kochs’ could make from the pipeline. This would only be true if TransCanada — the company building the pipeline — was a subsidiary of Koch Industries. However, Koch Industries and TransCanada are completely separate companies. No one except Worstall has suggested otherwise.
Second, Mr. Worstall insists that if the pipeline will in fact generate $100 billion in profits for anyone, then that is a very strong reason to support it. There is nothing inherently wrong with profits; except when they threaten of habitability of our climate, or the integrity of our democracy. Companies benefiting from the pipeline will bring in huge profits because our political system fails to account for what economists call “externalities”. This means that oil companies do not have to pay for the vast damages inflicted by climate change. It is absurd to suggest that the public should support hastening the march toward climate disruption so that wealthy players such as the Kochs can profit billions. Finally, Worstall’s “profit is always good” argument overlooks the glaring problem of money corrupting democracy. Many have documented the Kochs’ funding the Tea Party’s rise to power, their influence over the House Energy Committee, the Senate, and other spending to stop those who ought to be regulating them.
Powerline’s Incorrect Assumptions, Disclosure Problems
John Hinderaker, a conservative commentator at Powerline blog also based his critique on mistaken assumptions. His recurring defense of the Koch brothers is not surprising considering he was and possibly still is one of their lawyers. Protecting the Kochs from people upset at their “methods” seems to be his bread and butter. Hinderaker claims that Koch Industries is not currently a major producer of tar sands crude oil and therefore will not profit much; also he states that Koch profits due to KXL can only result from crude oil transported by the pipeline. Both of these assumptions are incorrect.
His first claim is false, regardless of whether Koch Industries is currently a producer, there is evidence they are a major landholder in the tar sands territory. When geologist Ryan Morrison stated that he helped the Kochs purchase 2 million acres in tar sands territory, Koch Industries did not dispute it, though they did dispute many other claims made in the same article by Pulitzer Prize winning Inside Climate News. The fact is that Koch Industries leases extensive land in the tar sands territory now. They currently are producing, are planning to produce, or will have others produce crude on their land for them is beside the point — they will benefit from the pipeline because of their current investment in various aspects of the tar sands, especially as production and profit-per-barrel increase as a result KXL.
Last, even if Koch never ships a single barrel of oil via KXL, they will still benefit, precisely as IFG reports. The value of the pipeline to producers and land holders in Canada is that it will, to a significant degree, alleviate the glut of crude oil stuck in the Midwest market. This will keep the price of Canadian tar sands from declining for companies like Koch as production increases. This means the calculation Hinderaker uses to discredit our findings is completely beside the point.
There is no reason to allow a pipeline that will increase the speed at which we change our climate for the worse while enriching the richest men in the world — at the expense of everyone.
END OF UPDATED TEXT – Original below.
Charles and David Kochs’ communications crisis team from the Center for American Freedom (CAF), along with Tim Worstall writing in Forbes, are countering International Forum on Globalization’s (IFG) recent report, “Billionaires’ Carbon Bomb: The Koch Brothers and the Keystone XL Pipeline,” only one day after its release and before IFG had a chance to respond to CAF’s queries.
IFG stands firmly by its findings that the Kochs could profit plentifully from the proposed Keystone XL pipeline (KXL), and that KXL is not in America’s national interest. With a decision due any day, we also wonder why a U.S. president would approve a pipeline whose biggest beneficiaries could be the very billionaires who have spent millions of dollars to undermine his efforts. The Kochs’ current net worth ($92B) exceeds that of the world’s wealthiest man, Bill Gates ($72B), according to the October 1, 2013 Bloomberg Billionaires’ Index.
Forbes’ reporter, Tim Worstall, also attacked IFG’s 2011 report by arguing that people who profit from the production of fossil fuels play no role in promoting their use, nor in financing efforts to prevent their phase out. Worstall wrote, “Oh, sure, the rich guys turn a penny or two on supplying us with these things that we desire and use but it is our desire and use which is causing the problem, not the people doing the supplying.” IFG’s 2012 report showed the Kochs outspent all other oil companies—even Exxon— to block U.S. efforts to reduce carbon emissions and advance clean energy.
CAF was created by the Kochs in 2012 to counter increasing public scrutiny of the billionaire brothers’ record spending on a sprawling political influence network whose money, organizational structure, and unprecedented scale have been mapped extensively in IFG’s online, interactive Kochtopus. CAF’s Washington Free Beacon staff writer, Lachlan Markay, came from the Heritage Foundation, where he was the conservative think tank’s first investigative reporter.
Below is IFG’s official response to their claims:
1. Forbes accepts IFG’s basic premise as valid but then challenges IFG as confusing revenues versus profits. However, it is Forbes that confuses Kochs’ costs as including KXL’s construction as well as its maintenance, which are the pipelines’ owners, Transcanada, and not to be subtracted from any Kochs’ revenues. IFG’s calculations, whose methodology is painstakingly explained in Box A on page 8 of our report, is clear that producers’ standard production costs are already included in our calculations and that we are talking about pure profit. IFG did not subtract the Kochs’ $53M given to front groups pushing for KXL’s permit, since this could more accurately be considered an “investment.”
2. Koch counters the claim of its own former geologist who helped Koch Exploration Canada to purchase two million acres, as quoted in the Pulitzer Prize winning publication, Inside Climate News. Kochfacts.com failed to counter these claims of acreage (though they made detailed attacks against other assertions in the article), and IFG’s attempts to confirm the actual amount of Koch prior to publishing “Billionaires’ Carbon Bomb” were rebuffed by KEC staff. IFG’s report acknowledges that only the Kochs know how much acreage they hold in Alberta, so we would welcome the Kochs’ full public disclosure of all acreage in Alberta, as well as their others assets involved in the tar sands trade.
3. CAF wrote to IFG: “The report notes on page 10 that Koch would have to produce 8 billion barrels of oil to offset reduced revenues for the Pipe Bend Refinery. Koch tells me that they don’t think they will accomplish that benchmark. Do IFG’s calculations suggest otherwise?” “Pipe Bend” is CAF’s apparent error for the Kochs’ Pine Bend, Minnesota oil refinery, which currently processes about one-quarter of existing tar sands imports.
IFG’s calculations are based on former Koch geologists’ reports of helping Koch purchase two million acres in Alberta (equal to 32 billion barrels of recoverable reserves), from which IFG conservatively estimates that only half of the barrels of oil from this acreage (16 billion barrels) would be profitably produced. Koch claims that it won’t surpass 8 billion barrels is, firstly, an admission of its plans to produce billions of barrels of Canadian crude from tar sands. Secondly, it stands in direct contradiction to the Kochs’ clear patterns of political spending; indeed, it is almost impossible to imagine that the profit-driven Kochs would give $53M to front groups who advocate for Keystone if KXL would be a “net negative financially for Koch,” not to mention that Koch-funded Tea Party members of the House of Representatives would include passage of KXL as one of four “core conditions” in its budget bills approved before the recent 16-day shutdown of the U.S. government. The Kochs could convincingly counter IFG’s calculations by full public disclosure of its actual acreage in Alberta, and showing conclusively that they have an amount of acreage whose potential profits will not exceed their potential reduced profits from its Pine Bend refinery.
4. Koch spokesperson Melissa Cohlima claims “Keystone XL will be a net negative financially for Koch,” due primarily to a reduced flow of Canadian crude to the company’s Pipe Bend Refinery, and that KXL will mean “less Canadian oil sands coming into our Pine Bend Refinery, thus reducing the amount of we are refining.” While IFG’s analysis anticipates (as do Canadian producers) that the price of Canadian crude will increase due to KXL, Cohlima’s claim that KXL will reduce the flow of Canadian crude is counter to the entire premise of KXL’s purpose: to increase the flow of Canadian crude to US refineries. IFG’s report only attempts to give the public some credible, quantifiable sense of scale of how much the Kochs might profit form KXL, based on information from ex-Koch employee as well as from established experts in energy investment contracted by IFG.
5. Koch counters that its Port Arthur, Texas hub of Koch Pipeline Company does not carry crude oil yet IFG does not claim that it currently carries crude oil (since KXL does not exist), nor do we include any potential KPC profits in our projections. Even if Kochs’ Port Arthur hub transports only chemicals, they could surely benefit since several categories of chemicals are created as by products from the refining process of crude oil. Only the Kochs know what they carry in their pipelines and we would welcome a commitment from Koch not to carry any Canadian crude through its pipelines.
6. IFG also notes what Koch did NOT challenge, particularly our assertion that Koch may make MUCH more money from their unregulated trading of oil derivatives due to their expanded influence over energy supplies, shipping, storage, et. al. Nor did they challenge the claim that they will spend some of their profits on expanded attacks against carbon pollution laws, labor rights, voting rights, and other extremist agendas.
The Kochs’ record makes clear that their making more money will only empower the very extremists who more and more Americans view unfavorably, and that approving the pipeline will not be in America’s national interest, nor the interest of our rapidly warming planet.