Battle of the Billionaires Erupts Over Keystone Pipeline

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By Lawrence Delevingne

Billionaire investors love fighting with each other over the markets, safely out of public view in sleek Greenwich or Manhattan offices. But a new political fight is pushing them into a high-profile debate over the future of energy consumption in the U.S. and they are literally taking to the streets of Washington to make their views heard.

The brawl is over an upcoming decision by the Obama administration about whether energy company TransCanada should be allowed to build a massive oil pipeline, called Keystone XL, that will ship oil sands from Northern Canada to refineries in the Gulf of Mexico. The State Department -- in charge because the project would cross an international border -- is still studying the issue and its environmental impact. A decision could come next year.

The two sides couldn't be more convinced of their positions. Former Vice President Al Gore recently called the controversial project an "atrocity." House Speaker John Boehner has said President Barack Obama should "stand up for middle-class jobs and energy security and approve the Keystone pipeline."

Likewise, prominent investors have planted themselves on opposite sides of the issue.

Two hedge fund managers are ardently and vocally against the pipeline. One is Jeremy Grantham, the relatively low-profile chairman of $108 billion money manager GMO.

In February, he was nearly arrested at a White House protest organized by the Sierra Club, for whom he is a lead supporter. His daughter Isabel was among 48 people arrested for handcuffing themselves to the White House fence, according to media reports.

A spokesman for Grantham declined to comment.

The other anti-pipeline hedge funder is Tom Steyer, the billionaire founder of $18 billion Farallon Capital Management. Steyer retired last year to devote himself to political causes; Keystone has been his top priority.

A prominent Democratic fundraiser and environmentalist, Steyer has personally lobbied President Obama and created and appeared in numerous anti-Keystone ads through his group Nextgen Climate Action. Like Grantham, he also protested in Washington at an anti-Keystone rally earlier this year.

"Climate change is the defining issue of our generation. We have a choice between investing in dirty tar sands that will worsen our climate crisis or cleaner energy that reduces our dependence on foreign fuels, brings new jobs in growing industries and preserves the planet for future generations," Steyer told CNBC.com.
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T.Boone Pickens, chairman of energy hedge fund firm BP Capital, says Steyer and other supporters are misguided because Keystone would reduce American dependence on oil from unsavory regimes.

"The Keystone pipeline, of course that's foreign also, but it's friendly foreign. The stuff coming out of the Mideast, I don't consider to be friendly," Pickens told CNBC.com.

"So I'll take friendly every time over unfriendly. But I don't have to have any Army, Navy or Marines to protect the Keystone pipeline. So you've got to be a sap not to take that oil from them. They have as much oil in Northern Alberta as the Saudis have."

Pickens dismissed environmental concerns from the pipeline itself: "It's not an environmental issue. There are pipelines all over the United States. They didn't want to cross Nebraska and there are 51 pipelines across Nebraska. So the pipeline can be laid out."

Steyer disagrees.

"Let's be clear: The oil from the Keystone XL pipeline will go through the United States, not to the United States. This is an export pipeline that will mean cheaper oil for our foreign competitors," Steyer told CNBC.com when asked about Picken's comments.

"Instead, we should be thinking differently about energy. By investing in clean energy, we can truly achieve energy independence, while creating jobs and addressing the climate crisis."

Another apparent proponent is Stan Druckenmiller, the retired founder of vaunted hedge fund firm Duquesne Capital Management. Druckenmiller is listed as a "major contributor" to FWD.us, a political advocacy group that has run ads in support of the pipeline.

FWD.us was founded by Facebook Chief Executive Mark Zuckerberg and also has support from top technology investors Mary Meeker of Kleiner Perkins Caufield & Byers; Keith Rabois of Khosla Ventures; Fred Wilson of Union Square Ventures and Flatiron Partners; and Joe Lonsdale of Formation 8.

Some members, including Elon Musk of Telsa and David Sacks of Yammer, quit FWD.us over the Keystone ads. Druckenmiller's support for the pipeline could not be directly confirmed. A spokesman did not immediately respond to requests for comment.

Environmental groups working against Keystone are happy to have some support from the investment community.

"It's a good thing to have iconic investors like Grantham and Steyer making the case against this boondoggle," Jamie Henn, communications director at climate change advocacy group 350.org, said. "It's increasingly clear that tar sands aren't just disastrous for the climate, they're also a bad investment. There's no place for a pipeline like Keystone XL in a carbon constrained world."
Steyer said his investment peers are finally engaging on the issue.

"Climate change is the biggest risk facing the world economy today. Extreme weather cost the U.S. economy $100 billion last year, and we can't afford to make the problem worse. Investors are becoming more engaged on this issue," Steyer said. "[That's] why I have teamed with Mayor Bloomberg and Hank Paulson to quantify the risks our economy faces from unmitigated climate change."

-By Follow CNBC's Lawrence Delevingne on Twitter @ldelevingne.

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tjdnorco

The important factor being overlooked here is no one in Canada wanted this pieline full of sludge going through their territory. They tried several routes no one wants it. The other factor to consider is should a foriegn company have the right to use emminent domain to seize US citizens properety to run a business through their land. Also then pipeline wil run right over the biggest aquafer in the midwest a leak could contiminate drinking water for several states. Will Canada pay to clean it up and provide water for all those people? If you want the pipeline lets run it through your town or you property.

October 28 2013 at 11:12 AM Report abuse rate up rate down Reply
burthurt

Al Gore ? Muhahaha

October 28 2013 at 11:08 AM Report abuse -1 rate up rate down Reply
Dennis

If the debate on the pipeline was strictly scientific, it would good to hear both sides. But alas, it is not. It is political and ideological. While most scientists agree that man has had an impact on global warming, the extent has never nor will never be quantified. We cannot continue to blame every weather disturbance on man's contribution to global warming. It dulls the discussion. We need to do what is best for the economic improvement of the country.

October 28 2013 at 10:58 AM Report abuse rate up rate down Reply
1 reply to Dennis's comment
mily469

sick people drinking poisoned water completely wrecks your premise.

October 29 2013 at 9:42 PM Report abuse rate up rate down Reply
Hitechceo

The US government should build the pipeline and proceeds from the endeavor should go towards the national debt. Just a thought. Some might say if the government is in charge, they might forget to hook up the receiving end. There I said it for you.

October 28 2013 at 10:49 AM Report abuse +1 rate up rate down Reply
tmlbtb

The pipeline will be built by Canadian contactors to send that product to the highest bidder on the market. We won't get jobs or oil from it. The U.S is today energy independent. But our gas and oil also goes on the world market to the highest bidder. Which is why we are still fighting two bad wars in the middle east, to protect cheap oil. Wallstreet is sacrificing American lives for their investments. And that's a fact Jack!

October 28 2013 at 10:21 AM Report abuse +1 rate up rate down Reply
SAM

Many people are of the misconception that the Keystone pipeline would mean that the US would be getting oil from Canada rather than Saudi Arabia. Proponents of the Keystone XL tar sands pipeline often cite energy security and the desirability of Canadian over Saudi or Venezuelan crude in promoting the project. But how does the pipeline enhance American energy security if much of the product it carries is refined and then exported?

Research has shown that the pipeline’s major purpose is not to provide oil for the U.S., but to serve as an export pipeline fueling international markets. New data reveals that a full 60 percent of gasoline produced in 2012 at Texas Gulf Coast refineries was exported. These are the refineries that would process the majority of the tar sands bitumen flowing through the Keystone XL pipeline, if it were built.

The changing dynamics of the U.S. oil market strongly suggest that exports would only rise over the lifetime of the pipeline. U.S. production is rising but consumption is declining and the industry will continue to maximize its profits through exports.

October 28 2013 at 9:20 AM Report abuse +5 rate up rate down Reply
1 reply to SAM's comment
k4jlp

Sam,
You are 100% correct and a smart human.

October 28 2013 at 10:23 AM Report abuse rate up rate down Reply
Tom & Eileen

Warren isn't for it, because it would interupt his billiion dollar rail transport investment, subsidized by the govt. POOOOOR ol warren got ol bama in his pocket with his billions, while we pay more for gas and oil.

October 28 2013 at 8:42 AM Report abuse rate up rate down Reply
willypfistergash

If warren buffett or george soros were for the pipeline, all you lefties would be goose stepping your way down the proposed route.

October 28 2013 at 8:10 AM Report abuse -1 rate up rate down Reply
k4jlp

nos 2001
Do you know why it was 1.79/gallon when Obama was elected? The correct answer is:
Big Oil and the Commodities Market KNEW he was probably going to win the election. It was a way to late effort on their part to make America "feel good" about things and fool them into thinking things were getting better with a Republican in the White House and Rebublican control of the House. The fall of gas prices actually started about 8 months before the 2008 election. THEY FAILED. Then according to Mitch O'connel, his main focus was to make sure Obama was a "one term President". Then it was all about making him look bad. What a fool the Republicans are to think we are that stupid and have forgot.

October 28 2013 at 7:32 AM Report abuse rate up rate down Reply
2 replies to k4jlp's comment
willypfistergash

Scratch economist off your list of career choices.

October 28 2013 at 7:59 AM Report abuse -2 rate up rate down Reply
1 reply to willypfistergash's comment
k4jlp

Mr. Gash,
My career choice was made about 35 years ago when I entered the work force. Perhaps you should consult an economist and get one to school you on how it works. If Americans HAD extra money they would SPEND IT generating demand and generating JOBS. Instead, we have seen stagnant wages, jobs sent overseas and everyday increases of the transfer of wealth from our pockets to the commodity markets and increased out of pocket health care cost.

October 28 2013 at 9:08 AM Report abuse +2 rate up rate down
jdhegnes

Forget? Most Americans have no idea that this occurred in the first place. And, even though it didn't work, the average American voter is just that stupid. It's hard to remember what you never knew.

October 28 2013 at 3:50 PM Report abuse +2 rate up rate down Reply
nos2001

wouldnt it be better and cheaper to get oil from canada and NOT from countys not our friend if this doesnt happen, the oil will go to china. thousands of jobs will be lost. with our and canadian oil we won't need ANY of the arab oil.

October 28 2013 at 7:11 AM Report abuse +3 rate up rate down Reply