The Money Pipeline But the Mill Valley hedge fund’s North Dakota oil investment is only one tributary to a river of investment capital flowing from the San Francisco Bay Area to the Dakota Access Pipeline and the associated fracking boom. These investors include other hedge and pension funds, as well as San Francisco–based Wells Fargo. The bank was the largest U.S.-based financier of oil and gas production and infrastructure as of 2014, according to a presentation given by Wells Fargo executive vice president Mike Johnson. A recent report from the nonprofit Food & Water Watch notes that 38 banks, Wells Fargo among them, have directly financed the controversial Dakota Access pipeline. The financial sector’s stake in the project helps reveal “the tangle of interests” fueling the United States’ ongoing dependence on fossil fuels, said Food & Water Watch senior researcher Hugh MacMillan, chief author of the report. “When you see the kinds of financial institutions backing the pipeline, it shows the power of the forces the tribes in North Dakota are going up against,” he says.
OIL MONEY SPO Partners’ unassuming location in Mill Valley belies its role as one of the country’s largest investors in oil and natural gas fracking, including the controversial Dakota Access Pipeline project.
Fracking Boom During the last decade, oil companies developed the ability to drill to depths of 5,000 to 10,000 feet before turning their bits sideways, cutting horizontal lines into previously inaccessible rock formations. By fracturing, or “fracking,” deeply buried layers of hydrocarbon-rich shale formations, they force natural gas and oil to the surface. These techniques have revolutionized oil and gas production, yielding hundreds of billions of dollars in profits to investors. In 2014, the U.S. passed Saudi Arabia as the planet’s biggest oil producer. It has surpassed Russia as the world’s biggest producer of oil and gas combined. Two shale oil basins in particular have helped spur the production surge: the Eagle Ford in south Texas and the Bakken. Large financial institutions have actively cultivated the North American oil boom. A 2012 Citibank report called “Energy 2020: North America, the New Middle East” notes that “the economic consequences” of the oil and gas industry’s “supply and demand revolution are potentially
extraordinary,” and touts that “infrastructure investments ease the transport bottlenecks in bringing supply to demand centers.” It also sounds a cautionary note: “The only thing that can stop this is politics—environmentalists getting the upper hand over supply in the U.S., for instance; or First Nations impeding pipeline expansion in Canada.” As with Canadian tar sands oil (see “Crude Awakening,” June 8), the Bakken shale’s Achilles’ heel is that it is located in the middle of the continent, far away from shipping terminals and most oil refineries. That has led many North Dakota producers to transport crude oil by train, including to California refineries, a highly dangerous method given that Bakken oil is especially prone to lethal explosions. The Dakota Access Pipeline would improve North Dakota oil producers’ ability to compete economically, notes North Dakota Petroleum Council communications director Tessa Sandstrom. It would also reduce deliveries by train, she says, making them safer and freeing up rail lines for farmers to bring their
commodities to market. “This pipeline resolves issues that are big concerns among North Dakotans,” Sandstrom says. “It’s also a legal pipeline at this point, and we think it should go forward.” But the extraction of oil, natural gas and coal has driven the planet to the precipice of climate catastrophe. In recent years, the earth has burned through existing temperature records, causing Arctic permafrost to disappear at alarming rates, a process that releases much more carbon dioxide and methane into the atmosphere, thus fueling a dire feedback loop of potentially ever-greater planetary warming. Vulnerable human populations are already being displaced as the ecological fabric that has sustained them unravels. National and global efforts to cap and reduce greenhouse gas emissions include treaties, taxes and investments in alternative-energy sources and non-automobile transportation. But infrastructure investments that require large, long-term commitments of capital are also crucial indicators of national intent, which is why President Barack Obama choose to ) 16
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a lot more money if the company can supply the Dakota Access Pipeline,” says Antonia Juhasz, a San Francisco–based oil and energy analyst and author who has studied hedge funds and the North Dakota oil boom. Wall Street tycoon John Paulson, a key member of Donald Trump’s economic policy council, is also a major investor in Oasis Petroleum. According to Oasis Petroleum’s most recent financial filings, SPO Partners owns the largest share of the company, while Paulson’s hedge fund owns the fourth largest. Trump himself has invested between $3 million and $15 million in Paulson’s hedge funds, a 2015 federal campaign disclosure form reveals, raising the possibility that the Republican candidate is also an investor in Oasis Petroleum.
October 26-November 1, 2016