Charlotte, NC — The internet is not known as a purveyor of truth. (In case you didn’t know.)
The false information can take many forms. Maybe it’s the fake Robin Williams quote your aunt shared on Facebook. Or perhaps it’s the nutty Qanon conspiracies you see in your Twitter feed. Sometimes it’s more subtle—the news headline that says something that’s actually not in the article. (Editors write headlines, not reporters, and you’d be surprised how many editors flub headlines.)
Recently there was a meme going around claiming that President Joe Biden spiked construction of the Keystone XL pipeline on his first day because of political donations from Warren Buffett, the billionaire investor who runs the multinational conglomerate Berkshire Hathaway.
The meme (which I won’t link to because I don’t want to get slapped down for spreading fake news) went like this:
The Keystone pipeline. Cancelled by Biden on first day. Warren Buffet owns the railroad that is now transporting all that oil. Warren Buffet donated 58 million to Biden campaign. Warren Buffet would lose billions in transport fees if the pipeline is completed. See how politics works? It is not an environmental issue, it is a money issue…
The meme contains information that is demonstrably false. Nevertheless, it was shared enough that it captured the attention of Reuters, who fact-checked the meme.
Keystone Pipeline Background
As Reuters notes, the post is referring to the Keystone XL Pipeline, a project Biden canceled by executive order on his first day in office. The action was essentially a nail in the coffin to a project that would have carried 830k barrels of heavy oil-sands crude from Alberta to Nebraska per day.
The meme is clearly wrong on multiple points. For starters, it doesn’t even spell Buffett’s name correctly. More importantly, the assertion that Buffett donated $58 million to the Biden campaign is bogus.
Public records show Buffett didn’t donate to any political campaign in 2020, let alone a $58 million sum, and a spokeswoman for Buffett confirmed this.
“Mr. Buffett gave no money to the Biden presidency campaign in 2020,” Buffett assistant Debbie Bosanek told Reuters. “He files all filing requirements for political contributions and made no contribution to any PAC.”
So score one for Reuters for setting the record straight (and correctly spelling Buffett’s name).
The news agency also correctly pointed out that Buffett donated to congressional Democrats in 2019, though they declined to say how much. (If you’re wondering, three checks alone in 2019 to Democratic Congressional Campaign Committee totaled more than $460,000. A hefty sum, to be sure—though one Buffett would hardly feel.)
Unfortunately, from here Reuters fact check goes off the rails.
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.”
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.
“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 Newsreported 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.
“The horrible truth … is train transport is far more dangerous,” energy writer Brian Westenhaus has pointed out.
As just one example, forty-two people were confirmed dead in the 2013 Quebec train disaster, and several more are presumed dead.
“No pipeline failure has ever come close to this level of human death and suffering,” Westenhaus points out.
The US State Department confirms that rail is a more dangerous way to transport oil compared to pipelines.
The environmental impact of rail is also worse. Research shows the spill rate for hazardous material transported by rail is 33 timeshigher than pipelines. Scholars at Carnegie Mellon University and the University of Pittsburgh also found that locomotive transport causes twice as much pollution as pipelines.
A Case of Unproductive Entrepreneurship?
Why would anyone spike an oil pipeline capable of transporting more than 300 million barrels of crude a year when moving oil by pipeline is cheaper, safer, and more environmentally friendly than moving it by rail?
Reuters never asks this question, though it concedes moving oil by rail is less efficient. (There are also benefits to moving oil by rail, of course, especially over short distances.) But one reason, perhaps, is that the pipeline was spiked because of its low cost and efficiency.
It’s been observed that in modern America there are two primary types of entrepreneurs: market entrepreneurs and political entrepreneurs.
“A pure market entrepreneur, or capitalist, succeeds financially by selling a newer, better, or less expensive product on the free market without any government subsidies, ” writeseconomist Thomas DiLorenzo.
Essentially, market entrepreneurs create value for society by serving the wants and needs of consumers. A political entrepreneur, on the other hand, “succeeds primarily by influencing government to subsidize his business or industry, or to enact legislation or regulation that harms his competitors.”
Essentially, improved efficiency is good for consumers and for an economy as a whole, but it can be harmful to less efficient competitors. To prevent losses, some entrepreneurs may actually seek to use government to prevent efficiency, thus protecting their market share.
Reuters assured us this is not the case with Buffett. They deny that canceling the Keystone XL would actually benefit BNSF, saying that the oil intended for Keystone would simply be moved by “existing and new pipeline infrastructure, not railways.”
This claim defies both common sense and an abundance of research, however.
Bloomberg, for example, had published research showing that trains could expect to carry 125,000 more barrels of Canadian crude each day (an increase of more than 40 percent) if the Keystone XL was scrapped.
More recently, rail executives themselves have said they expect to see crude-by-rail shipments increase because of Biden’s executive order.
None of this means Warren Buffett had anything to do with Biden’s decision to spike the Keystone Pipeline. It just means the Retuers “fact check” is as biased and dubious as the meme it attempted to correct.
Buffett does stand to profit from the cancelation of the Keystone pipeline and perhaps a great deal. BNSF remains a money machine at Berkshire Hathaway, and it’s preposterous to think that canceling a pipeline that was expected to deliver 300 million barrels of crude each year will not result in increased rail transport of crude (even if other pipelines pick up much of the slack.)
These potential profits stand to benefit from the fact that shipping oil by train doesn’t operate under the same price restraints as oil pipelines, which are regulated much like utilities by the federal government.
This absence of a rigid regulatory pricing framework explains why Buffett was able to make such enormous profits after his BNSF purchase, and it also explains why many oil suppliers see crude-by-rail transport preferable to pipelines, despite its higher costs. (As the video below shows, suppliers are willing to pay higher short term costs for greater shipping flexibility.)
As for Buffett, on one hand he has shown he possesses the lobbying chopsto avoid many of the federal regulations that plague his competitors and other parts of the transportations sector. On the other hand, one should be careful about levying accusations not grounded in facts, and it’s worth noting that publicly Buffett has actually voiced support for the Keystone XL pipeline, saying it was “good for the country.”
Ultimately, we don’t know why the Keystone Pipeline was shut down. Biden’s executive order offers little explanation beyond platitudes, such as claims that the pipeline “would undermine US climate leadership.”
And perhaps that’s the answer. The Keystone XL may have simply become a symbol of dirty, nasty oil, which meant it had to go—even if there’s little dispute that spiking the pipeline increases pollution and energy costs and puts more lives at risk.
On the other hand, it’s not unreasonable to suspect that unproductive entrepreneurship may have played a role. When attempting to solve a mystery, police often start with a simple question: Cui bono? Incentives matter, as any economist will tell you.
Whatever the answer, the real lesson of the Keystone XL pipeline is that when politicians make decisions instead of entrepreneurs acting within the marketplace, everyone loses.
Well, almost everyone.
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.
Bylines: Newsweek, The Washington Times, MSN.com, The Washington Examiner, The Daily Caller, The Federalist, the Epoch Times.
This article was originally published on FEE.org. Read the original article.