LINCOLN — Warren Buffett owns a railroad, but both he and an old liberal friend, Dick Holland, are rejecting claims that they railroaded the rejection of the Keystone XL pipeline.
Buffett, whose Berkshire Hathaway owns Burlington Northern Santa Fe Corp., has been the focus of several recent news reports suggesting that he helped persuade President Barack Obama to turn down the $7 billion, 1,700-mile pipeline because its rejection would shift more oil shipments to the railroad.
Buffett, who has long supported Obama, said he has never talked to the president, any member of his administration or any member of Congress about the pipeline.
"I'm not qualified to have an opinion being neither an engineer, a geologist or having any other skill that would give me special qualifications for making a decision," Buffett said in an email response to questions.
Oil producers in the booming Bakken region of North Dakota are shipping more oil via rail because of the lack of pipelines, and the BNSF stands to gain from that.
But Buffett said petroleum is "generally a very small freight item" for railroads.
Holland, a retired Omaha advertising executive and an early investor in Berkshire Hathaway, said it was uninformed "baloney" to allege that he was working with Buffett to defeat the pipeline.
Holland, who is concerned about global warming, is the primary financier of Bold Nebraska, an activist group that helped defeat the project.
"Warren and I haven't talked politics for at least five years, maybe longer," Holland said.
The head of Bold Nebraska, Jane Kleeb, was even more blunt, calling the reports "a right-wing blog conspiracy theory."
Buffett has been in the firing line of conservative groups in recent months because of his support of Obama and his outspoken backing of increasing taxes on the rich, like him.
Even Buffett's secretary became a target for criticism after Obama featured her in his State of the Union address as an example of income tax inequities.
The administration's rejection of the pipeline last month prompted a new wave of news articles describing Buffett as one of the few winners in the decision.
And the newest issue of Reason magazine, published by the free-market and libertarian Reason Foundation, criticized Buffett more broadly, saying his "crony capitalism" has helped enhance his bank holdings.
The article was written by Peter Schweizer, the author of "Throw Them All Out," a book that focused on how some members of Congress and their friends get rich from insider stock tips gleaned from the halls of the U.S. Capitol.
In the Reason article, Buffett was described as a "grandfatherly figure" who, while he seems above the political scrum, needed the $700 billion bailout of U.S. banks in 2008 to make his investment in Goldman Sachs and other banks pay off. It also pointed out that Buffett substantially increased his investment in lobbying, from $1.2 million a year to $9.8 million a year, after buying the BNSF in 2009.
Buffett pointed out that the Troubled Asset Relief Program, or TARP — the bank bailout program — was passed in 2008 under a Republican administration that he never supported.
As for his $5 billion investment in Goldman Sachs, Buffett said that happened well before the TARP vote. Anyone, he said, could have invested in banks or other stock based on statements by Federal Reserve Board Chairman Ben Bernanke that the Fed would "do whatever it takes" to help the ailing financial system.
Buffett said Schweizer made several "wild claims" about him on Greta Van Susteren's Fox interview show in December, including that Schweizer had tried to contact him, "which is not true," he said.
The political sideshow comes amid a scramble in the oil fields of Canada and North Dakota for alternatives to the Keystone XL, a 700,000-barrel-a-day pipeline that was supposed to be pumping oil as early as late 2013. The problem is especially acute in the Bakken oil fields of North Dakota, where pipelines are lacking.
More loading facilities for unit trains are being built in North Dakota, and competing pipeline companies are looking at building alternatives to the Keystone XL or reversing the flow on pipelines that now carry oil from the U.S. Gulf Coast northward.
TransCanada Inc., the developer of the Keystone XL line, is also reassessing its options, which include building a pipeline segment from Oklahoma to the Gulf Coast immediately to relieve a bottleneck of crude oil at a terminal in Cushing, Okla.
Some are urging TransCanada to build a pipeline from North Dakota to the Gulf, a project that would not require federal approval.
"In light of the State Department's decision, we're not rushing ahead to get things in place now," said TransCanada spokesman Shawn Howard. "We need some answers."
Oil producers in both North Dakota and Canada say that while they see rail shipments of oil as an important piece of the puzzle, pipelines are the safer, more efficient and longer-term answer to increasing the flow of oil to U.S. refineries.
"In the near term, rail will handle more of our oil. That's why we're seeing the incredible railcar loading facilities being built," said Ron Ness, president of the North Dakota Petroleum Council. "(But) you always want to put your product in a pipeline — it's safer and more efficient."
Greg Stringham of the Canadian Association of Petroleum Producers said pipelines are much preferred in the long term because of the larger volumes they can handle, the lack of interruptions from clogged railroad tracks and the advantage of being able to ship one-way.
But rail delivery of oil, which has been done for decades on a smaller scale, is getting a renewed look in North Dakota, where production has risen to 510,000 barrels per day. It is expected to jump to 700,000 barrels by 2013 and 1 million by 2015.
Right now, BNSF and a smaller competitor, Canadian Pacific, haul about 25 percent of the Bakken's oil, and they stand to haul even more.
The Keystone XL pipeline was supposed to carry at least 100,000 barrels of oil a day from North Dakota, and now shippers are weighing alternatives, including different pipelines and more truck and train transports.
Krista York-Woolley, a BNSF spokeswoman, said the railroad already had plans in place to increase its petroleum hauling more than four-fold, to up to 730,000 barrels of crude per day. That amount represents nine unit trains a day, each with between 60 and 100 tank cars.
But she added that the Keystone XL decision has not, as yet, prompted any new shipping orders and that while the railroad stands ready to handle any new oil, it is pure speculation as to how much that might be.
"We have not made investment or expansion commitments as a result of the Keystone decision," York-Woolley said.
Railroads have a couple of advantages over pipelines: Their infrastructure, the track, is already in place, and they can be more flexible in adjusting to changing markets than a pipeline, which has a single route. Pipelines, as evidenced by the Keystone XL, also face more environmental and regulatory hurdles, thus the renewed look at rail.
But pipelines ship oil one way, as opposed to railroads, which would require tanker trains to be moving back and forth to refineries. And that raises concerns about clogged tracks and adequate stocks of tanker cars.
Ed Greenberg of the Canadian Pacific railroad said its North Dakota business has increased from 500 carloads in 2009 to 13,000 carloads in 2011. The CP, he said, is actively working to increase that.
Although Omaha-based Union Pacific doesn't have track in the Bakken, its trains do pick up oil-tanker trains from the BNSF and CP, en route to refineries on the Gulf Coast.
Buffett, whose investment company recently purchased the Omaha World-Herald, made it clear that while he supports Obama, he's not on his regular call list for advice.
"The last time I talked to President Obama — except for saying hello at the Alfalfa Club this past weekend — was in August," Buffett said. The Alfalfa Club puts on a social event in Washington, D.C., every January for national business and political leaders.
Contact the writer:
402-473-9584, paul.hammel@owh.com
Copyright ©2012 Omaha World-Herald®. All rights reserved. This material may not be published, broadcast, rewritten, displayed or redistributed for any purpose without permission from the Omaha World-Herald.
