The Money Behind Fossil Fuel Exports

Goldman Sachs, Berkshire Hathaway, and Bank of America.

If you follow the debates over coal exports or oil trains or pipeline expansions, you might think you’re watching a contest between local communities and the energy sector. But the truth is that standing right behind the fossil fuel companies is a second Goliath. Some of the financial sector’s heaviest hitters are deeply enmeshed in fossil fuel export plans.

Here are just a handful of examples.

Goldman Sachs. Perhaps best known in the Northwest is the link between the would-be coal exporter of Bellingham and the “vampire squid” of finance: SSA Marine and Goldman Sachs. Since 2007, Goldman Sachs Infrastructure Partners has owned a 49 percent stake in Carrix, SSA Marine’s parent company. (The remaining 51 percent is privately held.)

Bank of America. Other major banks have a direct stake in coal exports. As Rainforest Action Network has documented extensively and repeatedly, Bank of America is a major financial backer of US coal mining companies like Peabody and Arch, both of which design to export large volumes of coal from new coal terminals in the Northwest.

Berkshire Hathaway. BNSF Railways, the dominant railroad in most of the Northwest, is advocating so heavily for coal exports that its top executives, including CEO Matt Rose, meet with local government officials and editorial boards to shill for the projects. Many do not realize that BNSF has been wholly owned by Berkshire Hathaway since 2009 when Warren Buffett’s company purchased the portion of company it did not already own for an estimated $44 billion. (Goldman Sachs acted as a major financial adviser to BNSF for the transaction.) It’s hard to overstate the connection between the railroad and the money, as Rose is the heir apparent to the Berkshire Hathaway leadership mantle when Buffett moves on.

Warren Buffett, again. Buffett is also a major player in the crude oil-by-rail projects that are transforming the oil industry across North America. Canada’s Financial Post reports:

Buffett has a controlling stake in Union Tank Car, and has emerged as a major beneficiary of the crude-via-rail boom as the owner of BNSF Railway Co. — one of North America’s largest railway companies. BNSF reportedly earned US$272-million from crude shipments alone in 2012.

In other words, Buffett owns both the railroad and the oil tanker cars that run on it. That gives his company a very large financial stake in moving unconventional oil supplies, like those found in the Bakken formation, that are not well served by pipelines.

The question for opponents of fossil fuel exports, then, is not so much how to overcome the colossi of King Coal and Big Oil, but how to make Big Finance back away slowly. Because when the money goes away, the projects will vanish too.

Update 8/20/13: Warren Buffett is buying a $500 million stake in Suncor Energy, a major producer of tar sands oil.

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Comments

  1. David Kershner says:

    Will the growing fossil fuel divestment campaign help encourage Big Finance to back away from financing fossil fuel exports? It likely could, suggests the below article in Yale University’s Environment 360 publication, by turning public opinion against such investments.
    http://e360.yale.edu/feature/can_a_divestment_campaign_move_the_fossil_fuel_industry/2629/

  2. J Williams says:

    Bill Gates is on the board of Berkshire-what’s the Gates/Fossil fuel connection? Huge personal profit I’m sure.

  3. Stephan Michaels says:

    An excellent question, J Willimas. I am told that because Gates is a donor to some of the enviro groups, they shy away from his outing his potential involvement.

    Eric, David, any inSight here? Is Bill Gates also invested in Canadian Rail? Anybody ever vet this piece from NRDC’s ‘On Earth?’

    http://www.onearth.org/article/coal-on-a-roll

    • Eric de Place says:

      Bill Gates owns a 12% equity stake in Canadian National Railway (usually called CN Rail) worth an estimated $4.7 billion. His investment actually occurs through two vehicles: the Bill & Melinda Gates Foundation (roughly 2%) and a private investment firm he controls (10%). Source: http://business.financialpost.com/2012/12/12/bill-gates-ups-cn-rail-stake-to-12/

      Last year, a CN official told me that Gates is the single largest shareholder in the company.

      I did not include mention of this in the article because the linkage between Gates and fossil fuel exports seems to me highly attenuated. CN’s revenues are, I believe, far less dependent on coal than BNSF’s. Also, unlike BNSF, CN does not to my knowledge play an aggressive advocacy role for fossil fuel shipments. Finally, even at 12% Gates is very far from a controlling interest in the firm. It’s not really comparable to Berkshire Hathaway’s involvement with BNSF.

  4. James Adcock says:

    You ought to “dot the eyes and cross the tees” and finish making the connection between Warren Buffett, and coal trains.

    Namely that that cute, cuddly, and oh ever so green animated Gecko on TV is owned and operated by the same guy who runs the coal trains.

    It’s not a Gecko – it’s a Chameleon!

    Its not dirty coal – it’s a clean, green Gecko!

    So, if you insure with Geico and the Geico Gecko Chameleon, then you are supporting coal trains. If Warren Buffett learns that coal trains hurt his primary business of insurance, then maybe the story might change – at least a little bit.

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