Barack Obama has widely touted his “Buffett Rule,” a plan which increases taxes on the wealthy because of an alleged issue of unfairness when it comes to taxing the wealthy versus the poor. It is so named the “Buffett Rule” because Warren Buffett is supposed to have paid a lower tax rate than his secretary. Interestingly, while tooting its horn against wealthy people taking advantage of the system, the Obama administration has made a move which will greatly help Warren Buffett further increase his already enormous wealth: denying the Keystone XL pipeline permit.
The Keystone XL is a pipeline which would enable 700,000 barrels of crude oil to be pumped per day from Canada to Texas. What does this have to do with Buffet? With the permit denied, the only option left to transport the oil is via railroad. One of the key railroads which will be running this oil is the Burlington Northern Santa Fe, a railroad which Buffett acquired in 2009. As Krista York-Wooley, a spokeswoman for BNSF, put it, if Keystone XL “doesn’t happen, we’re here to haul.”
Running the oil via railroad will cost much more than running it through the pipeline. Captive shippers have previously complained about the higher rates BNSF has been charging due to the premium Buffett’s Berkshire Hathaway paid for the company. BNSF’s higher rates have even affected the cost of shipping food on the railroad. Recently, The National Association of Wheat Grower’s past President Wayne Hurst testified to the Surface Transportation Board that growers are increasingly concerned about the higher cost of shipping on the BNSF railroad.
Buffet also stands to profit from the rising oil costs in the United States. Coal is a major alternative to oil and its derivative, natural gas. Coal also plays a large role in the profits of BNSF. In fact, hauling coal made up a quarter of BNSF’s revenue during 2009, and BNSF railway cars hauled coal more than any other single material. BNSF plans $3.9 billion in capital spending this year, as the company boosts capacity for coal shipments. If oil and natural gas had won out through approval of the Keystone XL pipeline, this could have had a significant negative impact on BNSF’s large coal business.
The Keystone XL permit was denied after loud opposition from environmentalists, this despite the fact that three years of environmental impact studies were conducted by the State Department that determined the pipeline would have “no significant impacts.” Among the groups leading the charge for no pipeline was the group “Bold Nebraska.” The “Bold Nebraska” campaign was funded to a great extent by Dick Holland, an old Buffett friend and associate. Both are big Democratic Party contributors.
Warren Buffett has benefited from the denial of the permit for the pipeline, there is no doubt. Instead of the benefiting the nearly 20,000 people that would have been employed from the pipeline construction, Obama’s denial is benefiting a man with a net worth of 44 billion dollars who also happens to be a large Obama supporter. The environmental costs of the pipeline are not a good reason to deny the permit, either, according to Obama’s own State Department impact statements. The benefits of the pipeline are clear; what is unclear is why the pipeline was rejected and why Warren Buffett should benefit at the cost of the country.