“The Kochs stand to make around $100 billion if the government approves the Keystone XL pipeline.”
— Thom Hartmann during a segment on his RT show Nov. 7
Opponents of the Keystone XL pipeline are stoking fear about the project by connecting it to two of the biggest bogeymen in politics: Charles and David Koch.
The claim goes that the Koch brothers stand to make $100 billion if the pipeline gets built. The figure, which would double the Kochs’ net worth, has bounced around liberal news organizations and was repeated this month by progressive radio talk show and TV host Thom Hartmann on his RT show.
The $100 billion estimate is far from a neutral analyst’s prediction, based instead on the far-out calculations of a group that wants the pipeline, and the Koch brothers, to fail. Here’s what you need to know.
First, let’s put $100 billion in perspective. That’s an enormous sum, half as much as Facebook’s value, about the same as the Dominican Republic’s gross domestic product and approximately equal to the Kochs’ combined, reported net worth.
If the brothers had a sure windfall on their hands, you might think they would be actively promoting the pipeline or at least be positioned to pounce by reserving space in it or actively drilling in the area.
But the Kochs have repeatedly told reporters and Democratic lawmakers that the company has no involvement in the pipeline and is not a proposed customer. For the record, “we are supportive of it,” Koch Industries spokesman Rob Tappan told PunditFact, an affiliate of PolitiFact. Pipeline builder TransCanada has also tried swatting down Koch connections, saying Koch Industries has “absolutely nothing” to do with the pipeline.
Koch Industries is, however, a major player in the Canadian oil market. The Washington Post identified the company in April as the largest foreign leaseholder of acres of Canadian oil sands.
An Alberta Energy spokesman told us the agency could not confirm the Post’s analysis of Koch-leased lands — estimated to be between 1.12 million and 1.47 million acres.
Even so, the considerable amount of land leased by the Kochs does not automatically signal that the Kochs will get a sure payout. Many of the Koch land leases, the Post reported, came before Keystone was ever proposed, the company has not reserved space in the pipeline as is typical, and the pipeline route would not run near Koch-owned refineries.
How you get $100 billion
The origin of the Keystone = $100 billion for the Kochs line stems from a 2013 report from the International Forum on Globalization. While that group may sound neutral, it in fact opposes “free-market” institutions such as the World Trade Organization, International Monetary Fund and North American Free Trade Agreement. The group also makes no secret of its opposition to the pipeline and Koch Industries. It produced an October 2013 report, “The Billionaires’ Carbon Bomb: Koch brothers and Keystone XL.”
Experts we consulted were struck by the report’s bias, with chapters devoted to victims of “Koch greed” and the Kochs’ vast web of nonprofit spending for political aims, as well as its calculation that the Keystone XL pipeline carries “$100 billion in potential profits” for the Kochs. Experts in energy, economics and business called the methodology behind the figure “absurd” and “puzzling.”
In an email, International Forum on Globalization executive director Victor Menotti (notable for his arrest during anti-WTO protests in 1999) said his group kept the methodology “simple to give people a credible idea of what Koch has at stake with Keystone.”
The group came up with two different numbers — experts didn’t vouch for either — and multiplied them together to come up with Kochs’ potential profits.
The group assumed that the land leased by Koch would contain 15 billion barrels of “profitable-to-produce” Canadian tar sands oil, a guesstimate extrapolated from the yield of oil from a 374,000-acre parcel sold in 2006.
The group assumed a $15 gross production per barrel due to Keystone XL.
Multiply one by the other and subtract $120 billion for money the Kochs would lose from refining that oil and you get $90 billion. Round it up by $10 billion and you get headlines.
We consulted four experts in energy economics and the petroleum industry to review the forum’s report and offer their analysis. They all pointed out major flaws.
Our ruling
As we’ve shown, the Kochs hold oil leases in Canada and could benefit from the Keystone XL pipeline. But trying to extrapolate their oil-sands leases into a specific profit figure is sheer folly.
The authors of the report that tried to do so made so many assumptions and mistakes that experts deemed their analysis “absurd.”
We rate it Pants On Fire!
About the Author