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Koch Brothers' Political Activism Protects Their 50-Year Stake in Canadian Heavy Oils

Long involvement in Canada's tar sands has been central to Koch Industries' evolution and positions the billionaire brothers for a new oil boom.

May 10, 2012
Deatil: Koch Athabasca Leaseholds 2009

Over the last decade, Charles and David Koch have emerged into public view as billionaire philanthropists pushing a libertarian brand of political activism that presses a large footprint on energy and climate issues. They have created and supported non-profit organizations, think tanks and political groups that work to undermine climate science, environmental regulation and clean energy. They are also top donors to politicians, most of them Republicans, who support the oil industry and deny any human role in global warming.

What is less well documented are the many Koch businesses that benefit from the brothers' efforts to push the center of American political discourse rightward, closer to their own convictions. At the top of the list are the Koch family's long and deep investments in Canada's heavy oil industry, which have been central to the company's initial growth and subsequent diversification since 1959.

Because Koch Industries is a privately held company, the public has little access to information about the depth and diversity of its Canadian oil sands holdings. Over the past several months, however, InsideClimate News has pieced together a rough picture of the company's involvement in the industry, using published reports from the National Energy Board of Canada; documents and data extracted from the website of Canada's Energy Resource Conservation Board; securities disclosures and filings of Koch businesses in Canada; court documents from an inheritance battle that pitted Charles and David Koch against their two other brothers; Canadian and U.S. media reports; company newsletters and press releases; and two books, one written by Charles Koch and the other the autobiography of a long-time Koch company director.

These sources reveal that Koch Industries has touched virtually every aspect of the tar sands industry since the company established a toehold in Canada more than 50 years ago. It has been involved in mining bitumen, the hydrocarbon resin found in the oil sands; in pipeline systems to collect and transport Canadian crude; in exporting the heavy oils to the U.S.; in refining the sulfurous, low-grade feedstock; and in the subsequent distribution and sale of a variety of finished products, from jet fuel to asphalt. The company has also created or collaborated with other companies that have become leading players in the development of Alberta's oil resources, and it remains deeply invested in western Canada’s oil patch.

Koch Industries declined to answer any questions for this story.

Bitumen from Canada's tar sands is dirtier and thicker than conventional oil. Extracting and processing this unconventional fossil fuel creates far more greenhouse gases than drilling for the light, sweet oil most Americans are familiar with. Environmentalists, supported by many scientists, want tighter regulations imposed on this crude to minimize its role in the U.S. economy as part of a larger effort to move beyond petroleum.

The oil industry is fighting these efforts in court, in public and behind the scenes. A turn toward clean fuels, or the regulation of greenhouse gas emissions, or the adoption of a tax on carbon would diminish sales and profits for the major players in the oil sands, including the Kochs. Most of Canada's oil exports end up in the United States.

The Kochs are also active in Canadian politics.

Their company recently added another lobbyist in Alberta to lobby the provincial government about energy and resource development issues. The Kochs have also been longtime contributors to the Fraser Institute, an influential policy shop closely allied with Prime Minister Stephen Harper and as bullish as he is on the development and export of oil sands crude to global markets. They contributed $500,000 between 2007 and 2010 alone. 

Today Koch Industries has both upstream and downstream interests:

• The company is one Canada's largest crude oil purchasers, shippers and exporters, with more than 130 crude oil customers.

• It is among the largest U.S. refiners of oil sands crude, responsible for about 25 percent of imports.

• It is one of the largest holders of mineral leases in Alberta, where most of Canada's tar sands deposits are located.

• It has its name attached to hundreds of well sites across Alberta tracked by Canadian regulators.

• It owns pipelines in Minnesota and Wisconsin that import western Canadian crude to U.S. refineries and also distribute finished products to customers.

• It owns and operates a 675,000 barrel oil terminal in Hardisty, Alberta, a major tar sands export hub.

• And this year it kicked off a 10,000 barrel-a-day mining project in Alberta that could be the seed of a much larger project.

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