OIL SANDS

Kochs not No. 1 in Alberta, but tops in political drama

An arm of Koch Industries, the energy conglomerate run by billionaire conservative brothers, operates three crude production facilities and one active project in the Canadian oil sands on a leasehold less than half the size of Canada's largest heavy oil producer, according to Alberta provincial records.

Koch's 1.1 million acres of leased land in the carbon-rich oil sands of Alberta may pale in comparison to the upward of 2.5 million acres under lease by Canadian Natural Resources Ltd. (CNRL), which the province's energy regulator links to 39 active projects. But the political potency of oil sands investments by the Koch brothers, whose financial support for conservative candidates and groups reached the nine-figure mark during the 2012 election cycle, is growing ever stronger for environmentalists as the Keystone XL pipeline nears the end of its years-long journey to President Obama's desk.

A liberal activist group, the International Forum on Globalization (IFG), last week charged that Koch's large holdings position it to profit from an approval of the 1,179-mile KXL line, and the company fired back quickly after The Washington Post added the seemingly explosive claim that its area under lease makes Koch the largest leaseholder in the oil sands.

Koch began republishing conservative commentators' criticism of the Post's story, even paying for a link to its push-back on a prominent media industry blog. The company has long maintained that it has no direct financial stake in KXL, on which it has not reserved shipping space, and similarly sought to quash IFG's claim in October that Koch could reap a $100 billion profit from the pipeline (EnergyWire, Oct. 25, 2013).

CNRL, the self-described leading producer of Canadian heavy oil, this month reported nearly 2.5 million acres under lease in northwest Alberta in its latest quarterly financial report. A separate E&E analysis of provincewide leasing records affirmed that the company's holdings are at least that size.

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The Canadian nonprofit Pembina Institute also reported last week to NextGen Climate Action, the advocacy group steered by billionaire environmentalist and KXL foe Tom Steyer, that Koch's oil sands leases are more than 100,000 acres smaller than Suncor Energy Inc.'s and 300,000 acres smaller than those of Cenovus Energy Inc. Pembina, which focuses on more middle-of-the-road goals of limiting oil sands' environmental footprint than more politically active green groups, declined an interview request.

But a senior adviser to Steyer, Chris Lehane, underscored what some conservatives also acknowledged in their eviscerations of the Post's claims: Even if it doesn't lease the largest area in the oil sands, the company's mere presence in the area is enough to hand KXL critics fodder to pressure pro-pipeline Democrats who also happen to be on the receiving end of Koch-funded hits on the campaign trail.

Democratic Sens. Mark Begich of Alaska, Mary Landrieu of Louisiana, Kay Hagan of North Carolina and Mark Pryor of Arkansas are but a few of the moderate incumbents fighting for their electoral lives in part by touting their support for KXL's 700,000-plus barrels of new oil sands crude imports.

"Keystone-supporting Senate Democrats seem to be engaging in the politics of Keystone appeasement: Support a pipeline to send refined oil to our economic competitors while generating more dirty oil profits for the Kochs so they can spend even more money attacking those very same senators," Lehane said in a statement. "Political appeasement has been, still is and will continue to be a losing strategy when it comes to doing right by our kids."

Whether Steyer's plan to raise as much as $100 million to support climate-conscious Democratic candidates during the midterm elections would restrict him to backing only KXL opponents, however, remains unclear. Lehane last month walked back talk that NextGen might run ads against Landrieu after the group appeared to target her in a poll, describing a continued Democratic hold on the Senate as a central goal, and Steyer is said to be weighing assistance to the Iowa Senate candidacy of onetime KXL backer Rep. Bruce Braley (D) (Greenwire, Feb. 18).

The purity test that greens face this year in deciding how much to fight for pro-KXL Democrats may yet prove good practice for 2016, if Hillary Clinton -- who vaulted the pipeline from obscurity in 2010 by saying that her State Department was "inclined to" approve it -- decides to enter the presidential race.

Clinton on Saturday took a step toward assuaging activists' concerns that her previous stance on the pipeline bodes ill for her commitment to fighting climate change. The former first lady and New York senator told an Arizona panel of university students hosted by the Clinton Global Initiative that she is "hoping that there will be this mass movement that demands political change" to limit carbon emissions.

What's in a lease?

Neither Koch's 1.1-million-acre leasehold nor its three oil sands well facilities, not to mention the two additional gas production areas and one drilling disposal project that Alberta records show the company operates, can paint a complete picture of the conservative brothers' interest in the area. Seismic testing is typically performed to determine if leased land holds viable resources that companies can recover, and the Alberta Energy Regulator must evaluate and approve applications before production begins.

Koch is actively drilling at a project known as Seal South in the Peace River region, according to AER records. The company also won approval in 2012 to begin using the thermal extraction method known as steam-assisted gravity drainage to produce up to 10,000 barrels per day of oil sands crude at a project known as Gemini, though AER data show that it has yet to advance to the next stage of the process.

A third Koch project, dubbed Muskwa, remains in the application stage at AER and also could produce up to 10,000 barrels a day, according to a 2012 briefing by the Oil Sands Developers Group.

What's more, the current depressed price for Canadian oil sands crude, driven in part by the industry's difficulty in securing new long-term pipeline capacity for the heavy fuel, amounts to a financial boon for Midwestern refiners that can secure the feedstock at a discount -- such as the Koch-owned Pine Bend refinery in Minnesota. Any potential profit to Koch from KXL-driven increases in oil sands production could eventually prove offset by higher prices that Pine Bend would pay for heavy crude from the north.

Twitter: @eschor | Email: eschor@eenews.net

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