Warren Buffett’s coal problem

Warren Buffett
Warren Buffett

Last winter, I traveled to southeastern Montana (brr!) to report on a battle over a coal mine being proposed by Arch Coal, America’s second-biggest coal company, and a coal-carrying railroad that’s needed to transport the coal from the mine to coal-burning power plants, either in the U.S. or in Asia. The railroad, called the Tongue River Railroad, is owned by Arch Coal, by the BNSF Railway, which is a unit of Warren Buffett’s Berkshire Hathaway and by the candy billionaire Forrest Mars Jr.

It’s a fascinating story, for a bunch of reasons. The coal mine and the railroad are interdependent; both will be built, or neither will be. They need the approval of state and federal regulators. And opposing them are an unlikely coalition of Montana cattle ranchers, members of the northern Cheyenne tribe, a small Amish farming community that recently moved to to the state in search of peace and quiet, and some very determined environmental activists from the Northern Plains Resource Council, the National Wildlife Federation and the Sierra Club.

My story was as just published in the May/June issue of by Sierra, the magazine of the Sierra Club, under the headline, Warren Buffett’s Coal Problem. Like the Sierra Club, I think this coal mine is a bad idea–a very bad idea–and that’s one reason why I wanted  to write the story.

Most stories I do have shades of grey. (No, not 50 Shades of Grey!) Is Walmart good for the planet, or not? Is nuclear power a viable climate solution? Will GMO foods have feed the world, or ruin agriculture? Should the government subsidies electric cars? All of these, in my mind, are complicated questions. As a longtime reporter for newspapers and magazines, I’m trained to see both sides. And I can understand and respect the arguments of people on opposite sides of them.

Southeastern Montana isn't a tourist destination, but it's beautiful
Southeastern Montana isn’t a tourist destination, but it’s beautiful

This coal mine is different. The world needs to burn less coal, not more, to deal with the threat of climate change. (Here’s why.)This coal will most likely be shipped to China, which is suffering from terrible air pollution. Ranchers who own land that’s needed by the railroad don’t want to sell it, but they may not have any choice; the railroad owners plan to use the state’s power of eminent domain to force the ranchers to sell, if the rail-line owners can’t negotiate deals with the ranchers. The way of life of the ranchers, some of whose families have tended the land for more than a century, and the Cheyenne, who have been their even longer, is threatened by a coal company and a railroad that will extract coal from the area for a couple of decades and then leave. I wanted to give the ranchers a chance to be heard in my story. “Why should we give up our property rights for a coal mine?” one rancher asked me.  Good question.

Having said that, Warren Buffett’s role here, as well as his broader impact on energy and climate change, is more complex. Buffett, as my story in Sierra notes, has backed solar and wind power through Berkshire’s Mid American Energy Holdings, a big utility company. Matter of fact, the last time I reported about Warren Buffett was for a 2009 FORTUNE cover story called Warren Buffett Takes Charge, about his investment in the Chinese electric car and solar energy company BYD. What’s more, as a common carrier, the BNSF Railway has an obligation to carry coal on its lines.

So what’s the problem? A couple of things, in my view. First, there’s no obligation for Buffett and BNSF to build the Tongue River Railroad, a 42-mile rail line that would link Arch’s Otter Creek coal tracts to the BNSF’s main lines. You could argue that Berkshire should build the line because it will be profitable and increase shareholder value, but we rightly expect CEOs and, especially Buffett, to hold themselves to a higher standard.

Unlike his good friend Bill Gates, Buffett has been virtually silent on the issue of climate change (while speaking out on other public policy issues, like taxation.) Worst of all, BNSF has lobbied on the wrong side of the issue–opposing regulation of coal through industry groups like the American Coalition for Clean Coal Electricity and pushing for coal export facilities in the Pacific Northwest. The railroad touts itself as environmentally friendly but its chairman, Matthew Rose, has ducked questions about climate. At the very  least, Buffett and his company need to be held accountable for being powerful friends of coal.

Like many people, I’m a fan of Warren Buffett. I like his modesty and lack of pretense. I admire his generosity. But his support for coal puts a stain on his reputation, in my view. I invite you to read my story and let me know what you think, on the Sierra site or in the comments below.

Comments

  1. jordan says

    Developing countries can provide their people with the ability to use power through coal. Are you going to deny them affordable and reliable electricity? Deny their hospitals electricity, for example, because you are armchair quarterbacking their lives? You claim this issue is really that black and white.

    • Marc Gunther says

      Is coal really an “affordable” energy solution for China. The air pollution problems there are severe. And poor people are far more likely to suffer from global climate change than we rich people are.

      Also, why should the government here use power of eminent domain to advance the private interests of a railroad and coal company?

  2. says

    Mark, for some more gray in the Warren Buffett/BNSF picture, you should check out the series on BNSF the Minneapolis Star-Tribune ran 18 months ago. They should have won the Pulitzer for it. I think their Pulitzers this year were consolation prizes.

  3. Tom Stamey says

    They are going to burn coal whether it comes from the US or not. That coal will provide jobs that the US badly needs. Just one new job will provide income for almost 10 individuals in some form of business. People like you and Sierra club have no business telling somebody else they can’t work and provide for their family.
    Until you and all greenies give up your car, your airplane rides, anything made of , or with oil (even toothpaste), or transported by it or electricity (using coal) you have no damn business interfering in other peoples lively hoods or private lives.

    • Marc Gunther says

      The problem is, burning coal – the dirtiest form
      of energy – imposes costs and risks on all of us.

      And shouldn’t the ranchers in Montana have the right to hold onto the land their families have worked for more than a century?

      • Ed Reid says

        Marc,

        A typical railroad right-of-way is 100′ wide, or approximately 1/50th of a mile. Therefore, a 42 mile rail line would occupy less than 1 square mile of land. That land area is trivial, relative to the total number of acres of land owned by the ranchers who would be affected. However, the affects of the rail line could be greater if contiguous grazing area was divided by the right-of-way.

        The Fifth Amendment to the US Constitution requires that the ranchers be compensated for the land converted to railroad right-of-way, although there is very little land involved and it has relatively low value. The larger issue would likely be provisions to keep the cattle from crossing the tracks, while providing the ability for the ranchers to move cattle between the grazing areas on either side of the right-of-way.

        I understand that you are more interested in depriving the owners of the coal of the opportunity to exploit the resource for profit than you are in the loss of ~1 square mile of ranch land to railroad right-of-way.

        • Marc Gunther says

          Ed, you are right that the amount of land is relatively small but you also identify a big concern of the ranchers–that the disruptive effects of the rail line on their cattle would be a big problem for them. Apparently getting cattle under or over the railroad right-of-way is no easy feat. They don’t see why their interests should be trumped by a coal mine.

  4. Tom Stamey says

    They don’t have to give up the land they own. Why on earth don’t you know that? Now if they sold mineral rights or bought land without the mineral rights then they should have thought about that before buying the land. If they did not they have no place to complain.

    And I also urge you to look at land already reclaimed in Wyoming. It looks like it did before the stip mining took the coal.

    You talk about risks: people in Texas, New Mexico,PA., La, Okla., and to a certain extent California have provided energy and jobs for americans for decades, in fact for almost a century. We had oil wells surrounding our towns, in our school yards, some on Court House lawns, etc. And not only did we live through it, our longivity incresed just a yours did. Now it is you folks turn. Stop being so self centered saying “not in my back yard” and realize jobs is what drives this country and particulary energy jobs. It allows you to live a life of luxury compared to the rest of the world. Grow up.

    • Marc Gunther says

      I believe you’re mistaken: The ranchers do have to give up their land for the rail line, which has the state’s power of eminent domain behind it, assuming it gets federal regulatory approval. This isn’t about the mineral rights. It’s about using state power to advance a private interests.

      The risk to which I was referring are climate change risk. They’ll be felt in everyone’s backyard.

  5. Sibley says

    Marc,

    If you really want to find some grey with the issue, calculate whether the positive climate effect of the small reduction in cattle production would stack up against the negative climate effect of the small increase in coal production. That’s a complicated question – the ranchers might go ranch elsewhere, and the coal buyers might buy very close to the same amount of coal at only ever so slightly higher global prices without this coal on the market. Further, you imply that the ranching may be going away permanently for a temporary coal mining activity. So who knows – you might be surprised by the result.

    It’s very clear that burning more coal is net negative for people around the world. So is eating beef – for the same climate change reason, among others. Would you feel as sorry for small scale coal miners if they were being forced to give up their multi-generation mine due to a new rail line to transport feedlot beef? I have a hunch that you wouldn’t, perhaps exposing an incremental bias (admittedly that’s a fantasy question, but you see my point).

    So as bad as the coal is, I’ll at least see it as a silver lining that some meat production would be going away!

    • Marc Gunther says

      Ok, Sibley, you got me with this one! I can’t figure out how to even begin to do the calculations BUT my own thinking about beef cattle shifted after spending time with the ranchers who impressed me as very caring stewards of their land. In fact, they would love to find a way to keep their beef on pasture–a lot of the negative impacts accrue when beef are “finished” in feedlots and fed lots of corn and create lots of manure–but that for now the options for doing that are limited.

      I do recognize meat production as a big environmental issue and I’m at work on stories about companies that are trying to deliver alternatives–BeyondMeat and, in a different way, Hampton Creek Foods, which makes a plant-based egg substitute.

  6. Clint McRae says

    There are several misconceptions within these comments. First, the Surface Transportation Board, a federal entity made up of 3 appointed members in Washington DC, decide if these projects fall within public convenience and neccessity. Another parameter is if the rail line is a common carrier as opposed to a single use. Second, if the STB permits a project, FEDERAL eminent domain can be used to take private land. The law states that a “reasonable offer” must be made to a landowner for the surface. According to whom? If an agreement can’t be reached, the eminent domain process begins. These projects can then commence before an agreement is ever reached. This is wrong. The question then becomes, what is the value of land not for sale?

    If the issue is the public benefit for projects like this, then we would argue for “wheelage” or a royalty on every ton of coal hauled on these lines. Instead of considering landowners such as ourselves as obstacles, break a paradigm and look at landowners as partners. If the response is that the railroad cannot afford this, then public need comes into question.

    We can negotiate crossings of the railroad, but what the public does not know, is that the landowner is required to prove that he has liability insurance before any crossing negotiations can begin. The landowner is not only responsible for the maintenance of the crossing, if anyone is injured or killed on these crossings, the landowner, not the railroad, is liable.

    I live in an area active with coal development. In our community, we have reclaimed land with contaminated water that killed 6 cows in a matter of days. We hav 4 coal fired power plants that have ash ponds in two watersheds that have been leaking for 30 years, contaminating wells of homeowners and businesses in Colstrip, as well as contaminating stockwater wells nearly a mile away from the ponds. The costs of production are being passed on to agriculture, and we are sick of it. All of this has happened within 10 miles of my house.

    Lastly, as landowners, we are not the least bit interested on having our land federally condemned by a private, for profit corporation so coal can be exported to China. The Otter Creek tracts and the Tongue River Railroad are highly speculative, and we as landowners should not be faced with federal condemnatin for a speculative venture. We can do better.

    • Marc Gunther says

      Clint, thank you for your comment.

      To others reading here–Clint was one of the rancher-landowners who I met in Montana. I think he’s done a great job here of explaining why “eminent domain,” a power of the government, should not be used to take land at whatever price for a railroad whose only purpose is to serve the narrow interests of a coal company and a railroad company.

      • Ed Reid says

        I suspect that the SCOTUS majority which decided Keho might disagree. However, it is interesting that the project which caused the Keho issue has not been built.

  7. Robert Delfs says

    This is an excellent piece, which I did not see when it first appeared. Like you, I find my feelings about Buffet more complicated now.

    I haven’t seen many updates to this story by anyone — one piece in Washington Spectator, some stuff from local papers in Billings. Will you write about this again?

    Robert Delfs

    • Marc Gunther says

      Yes, I hope to revisit this story before too long. I am especially interested in the use of the government’s power of eminent domain to make way for a railroad that will serve private interests.

  8. Paul Van Tricht says

    Dear Marc:
    The draft Environmental Impact Statement for the Tongue River Railroad was just released by the Surface Transportation Board which must approve the building of all new railroads. It has a large number of defects. Among those defects is its failure to address or even mention the effects that the proposed railroad would have on a unique religious community, an Old Order Amish community, in the Tongue River Valley. The current preferred route and alternative routes would destroy this community through the use of federal eminent domain laws and as a result violate the federal Religious Freedom Restoration Act of 1993, Pub. L. No. 103-141, 107 Stat. 1488 (November 16, 1993), codified at 42 U.S.C. § 2000bb through 42 U.S.C. § 2000bb-4 (also known as RFRA), a federal law that “ensures that interests in religious freedom are protected.”

    I plan to contest the current route of the Tongue River Railroad based on this law and I am seeking individuals and groups who will try to defend the Tongue River Amish Community from destruction by the Tongue River Railroad and the federal Surface Transportation Board.

    Below you will find a newspaper article which describes Tongue River Railroad and the plight of the Tongue River Amish Community followed by a brief discussion of the Religious Freedom Restoration Act.
    Amish community concerned over planned Tongue River railroad

    February 11, 2013 9:59 am • By JOHN S. ADAMS Great Falls Tribune

    COLSTRIP (AP) — David Borntreger and his family moved from Missouri to a remote corner of southeastern Montana in 1997 to escape the increasing pressures of the modern world.
    Borntreger, his brother, Levi, and their families are members of a small Amish settlement about 120 miles east of Billings.
    They raise cattle and sheep on their farm along the banks of the Tongue River. Their children attend school in two small schoolhouses. The Amish don’t use electricity, so they construct their buildings without the aid of power tools, and they work the land with horse-drawn implements.
    “We came west because it’s not as thickly populated,” David Borntreger said. “Besides having a liking to go to the West, we thought it would be a good opportunity here to have our children grow up on agriculture land. We were hoping we could have a lifestyle from agriculture.”
    Now that simple lifestyle is threatened by a proposed railroad owned by a coal giant and two of the world’s wealthiest men. The proposed line would bisect their land and cause immeasurable disruption to farm and ranching operations, the Borntregers said.
    The proposed Tongue River Railroad would open Montana’s vast Otter Creek Coal Tracts — located some 15 miles to the south of the Borntregers’ farm — to strip mining.
    According to the project’s supporters, the railroad would haul an estimated 20 million tons of coal annually from Arch Coal Inc.’s planned mine near the Northern Cheyenne Indian Reservation to Midwest power plants.
    The Tongue River Railroad Co. is owned by billionaire investor Warren Buffett’s BNSF Railway Co., Arch Coal and billionaire candy bar magnet Forrest Mars Jr.
    Mars, a landowner along one of the previous Tongue River routes, bought a third of the railroad in 2011 after fighting it for years. The proposed route that once crossed his land is now off the table.
    Critics say domestic demand for coal is dwindling, and they fear the newest proposal, called the “Colstrip Alternative,” is aimed at shipping Otter Creek coal to export terminals on the West Coast bound for Asian markets. Arch Coal owns the Otter Creek coal leases, one-third of the railroad and 38 percent of a proposed Longview, Ore., coal export terminal.
    BNSF spokeswoman Suann Lundsberg said the Colstrip Alternative is now the railroad company’s preferred route because it’s shorter and would have less of an impact on the Tongue River Valley and would affect fewer landowners.
    Lundsberg said she couldn’t comment on the destination for Otter Creek coal because the railroad doesn’t decide where freight goes.
    “That’s a decision that is made by the company who is shipping the coal,” Lundsberg said.
    In this case that company is Arch Coal, one of the railroad’s co-owners. Arch Coal spokeswoman Kim Link referred questions to Lundsberg.
    Landowners along the route could face condemnation if the plan is approved, but Lundsberg said it’s premature to talk about eminent domain.
    Nonetheless, landowners are concerned about the future of their property.
    “I don’t think we ought to sacrifice my ground or my neighbors’ ground so some corporation can make a profit by shipping coal to Asia,” said Clint McRae, one of the Borntregers’ neighbors.
    McRae’s great-grandfather homestead the valley 135 years ago, and the McRaes have been fighting the railroad for more than 30 years. The latest proposal would cross approximately nine miles of McRae’s ranch, which he said would make it difficult and costly to move cattle and fight fires. Last summer a wildfire burned more than 200,000 acres in Rosebud and Powder River counties, including nearly 8,000 acres of McRae’s ranch.
    “We lost a lot of ground last year with that fire,” McRae said. “We can’t cross railroad tracks with a firefighting engine. If we can’t get across those tracks, we’re going to lose a lot more.”
    The federal Surface Transportation Board is conducting an environmental review of the proposed railroad. Last fall, the agency held 10 public “scoping” meetings to provide information on the project and to solicit public comments. The Borntregers said at the time of the meetings they were unaware the company planned to cross their land. They received a letter from a surveying company a month after the final meeting that contained an aerial photo of their property. A red line on the photo shows the proposed Colstrip Alternative rail route less than 100 feet from Levi Borntreger’s back door.
    “I was at that meeting, and at the time they had the railroad drawing showing it went right on past here,” Levi Borntreger said. “After the meeting, we got a letter from the surveyors showing it going right through my hay barn. We can’t live that close to a railroad.”
    The Borntregers said one of their biggest concerns is the impact the railroad and the upstream coal mines would have on the Tongue River. They rely on clean water from the river to irrigate their crops. They harvest ice from the river in the winter that they sometimes use as late into the year as September.
    Salt water from upstream coal bed methane drilling has already degraded their crops, David Borntreger said.
    “If they put in that coal mine, it’s going to contaminate the Tongue River even more,” he said. “If we don’t have irrigation, we’re dry farmers. We’d get maybe one crop of hay a year. With irrigating, we get up to seven ton per acre.”
    McRae said he noticed the Colstrip Alternative on a map the STB provided to the public at one of the public meetings last fall, but he said the map wasn’t detailed enough for him to be able to provide any substantive comments on the proposed route. At that time, the Colstrip Alternative wasn’t designated as the company’s preferred alternative.
    According to Lundsberg, on Dec. 17 — after the last scoping meeting —the railroad filed a revised permit application with the STB designating the Colstrip Alternative as the preferred route.
    McRae said the railroad must have known at the time of the September scoping meetings that the Colstrip Alternative was to be the preferred alternative.
    “We started getting these maps a few weeks after the scoping hearing showing our property line and the proposed rail line,” McRae said. “This is information they should have given us prior to those scoping hearings. My neighbor and I had no idea this is what they were planning.”
    Lundsberg said the STB has been studying the Colstrip Alternative since the original proposal in the 1980s, but it wasn’t until Dec. 17 that the Tongue River Railroad filed a revised application with the STB identifying that route as railroad’s preferred route.
    “Those maps have always been available at the STB’s website,” Lundsberg said.
    The Borntregers point out that they don’t have access to any websites. They don’t have or use electricity, much less computers and the Internet. The only communication they have with the outside world is a single community telephone in a shack at the end of a long dirt driveway leading into their property.
    “With the lifestyle we live, we have no need for a phone in the home,” Levi Borntreger said. “I go out there maybe twice a week to check and see if there are any messages on the voice mail.”
    David Borntreger said the land they have now is sufficient to support the Amish families’ simple lifestyle. If the railroad is built, that would change.
    “It would be different if the track was here and then we moved to it,” David said. “We moved to this area for the peace and quiet. That will all change if this railroad comes.”
    Lundsberg said it’s too early in the process to know the precise routing of any of the proposed routes.
    “The routing is subject to change based on survey and engineering work that is required as part of the environmental process,” Lundsberg said.
    The Surface Transportation Board is reviewing the input it received during the scoping process and will issue a Final Scope of Study once it is completed.
    The Religious Freedom Restoration Act.
    The Act, which was part of the basis for the US Supreme Court’s decision in the Hobby Lobby case which struck down portions of Obamacare, is very short. It provides:
    a) In General: Government shall not substantially burden a person’s exercise of religion even if the burden results from a rule of general applicability, except as provided in subsection (b).

    b) Exception: Government may substantially burden a person’s exercise of religion only if it demonstrates that application of the burden to the person
    1. is in furtherance of a compelling governmental interest; and
    2. is the least restrictive means of furthering that compelling governmental interest.

    The Act applies to federal agencies such as the Surface Transportation Board.
    The draft Environmental Impact Statement does not even mention the Amish Community let alone show a “compelling governmental interest” for allowing the Tongue River Railroad to destroy the Amish Community in the Tongue River Valley through the use of federal eminent domain law. The statement does not discuss an alternative route, a “least restrictive means,” which will not destroy the community.
    Will you and/or your group help defend the Tongue River Amish Community?
    Contact Information:
    The Tongue River Amish Community does not have the internet or a telephone. It postal address is
    1550 Tongue River Road
    Forsyth, MT 59327
    The Website for the Tongue River Railroad’s Application to the Surface Transportation Board and EIS is: http://www.tonguerivereis.com/

    Surface Transportation Board:
    Daniel R. Elliott, Chairman
    Deb Miller, Vice Chair
    Ann D. Begeman, Board Member
    Surface Transportation Board
    395 E. Street, SW
    Washington, DC 20423
    Email: blodgettk@stb.dot.gov

    Victoria Rutson, Director (She is in charge of Environmental Impact Statement. She is the person who approves the FINAL environmental impact statement. )
    Office of Environmental Analysis
    Surface Transportation Board
    395 E, Street, SW
    Washington, DC 20423

    Email: rutsonv@stb.dot.gov
    Phone: 202-245-0295

    ICF International (This is the company that actually wrote the DRAFT environmental impact statement. This company was selected by Tongue River Railroad from a group of companies approved by the Surface Transportation Board. ICFI is paid by Tongue River Railroad.)

    Their contact person for the Draft Tongue River Environmental Impact Statement is:

    Elizabeth Diller
    Phone: 561-429-6209
    Email: Elizabeth.diller@icfi.com
    Please forward this email to anyone who would find this interesting.
    Paul Van Tricht , email: pauljvantricht@gmail.com
    1134 N. 24th ST.
    Billings, MT 59101-0219
    Ph: 406-371-5350

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