Will Warren Buffett Really Make Billions Off The Keystone Pipeline’s Demise? It’s Complicated

Keystone Pipeline Cancelation Won’t Help Buffett?

Reuters spends a lot of time attempting to refute a central claim of the meme: that Buffett “would lose billions in transport fees” if the Keystone pipeline is completed.

As Reuters admits, Berkshire Hathaway does in fact own one of the largest railroad networks in North America: the Burlington Northern Santa Fe Corp, which runs 32,500 route miles crossing 28 states and several Canadian provinces. The news agency also admits trains on the BNSF carry lots of energy (especially oil and coal).

However, Reuters argues that Berkshire Hathaway does not stand to benefit from the demise of the Keystone XL.

“Railroads such as BNSF,” Reuters says, “are not the principle way oil is transported from Canada to the United States.”

Forty-two people were confirmed dead in the 2013 Quebec train disaster, and several more are presumed dead.

Industry experts are quoted, and they note the inefficiencies of transporting oil via rail.

“It’s expensive to transport crude by rail, especially over long distances,” Ben Cahill, a senior fellow in the Energy Security and Climate Change Program at the Center for Strategic and International Studies, told Reuters. ”Operators prefer to use pipelines and use rail only as a backup.”

In short, Reuters says, “rail infrastructures cannot compete with existing pipelines” and “cancellation does not appear to mean a lucrative jump in business for crude-by-rail that might benefit Berkshire Hathaway’s BNSF railway.”

The Other Side of the Story

Before explaining what Reuters left out, let me say I’m not suggesting Buffett, a brilliant investor and businessman, had anything to do with the spiking of the Keystone XL pipeline.

That said, Reuters’ claims don’t add up, and the news agency omits relevant facts about Buffett’s rail operation.

As a bit of history, Buffett purchased BNSF in a $44 billion deal in 2009. Months later, in an interview with Charlie Rose, the sage of Omaha admitted the price tag was steep.

'Buoyed by an onshore oil boom, Burlington Northern Sante Fe has become a cash machine for Mr. Buffett,' Investment News reported in 2015.

“You don’t get bargains on things like that,” Buffett said in the interview.

But the truth is, Buffett did get a bargain (at least in hindsight). In just a few short years BNSF had become Berkshire Hathaway’s “single biggest profit driver,” Business Insider reported.

How did it happen? Oil transport had a lot to do with, Investment News reported in 2015.

“Buoyed by an onshore oil boom, Burlington Northern Sante Fe has become a cash machine for Mr. Buffett,” the news outlet reported. “The railroad had sent more than $15 billion in dividends to Berkshire through Sept. 30, according to quarterly regulatory filings. More stunning: The business is on pace to return all the cash Mr. Buffett spent taking it private by the end of this year.”

None of these facts made it into Reuters’ “fact check.”

Nor did the article discuss the adverse impact of shipping oil by rail. Those exploding oil trains are more common than people realize (see them in pictures), and the human and environmental costs are real and exceed the costs of moving oil by pipeline.

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Jonathan Miltimore is the Managing Editor of FEE.org. His writing/reporting has been the subject of articles in TIME magazine, The Wall Street Journal, CNN, Forbes, Fox News, and the Star Tribune. ...

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