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Far from being an epicenter of ‘cleantech,’ the Bay Area actually is host to some of the largest oil corporations exploiting Canada’s oil sands.

Sidney Martin Blair, Bechtel's man in Canada, an early proponent of mining the oil sands of Alberta.

Sidney Martin Blair, Bechtel’s man in Canada, an early proponent of mining the oil sands of Alberta.

In 1951 Sidney Martin Blair, the vice president of Bechtel Canada, visited Alberta at the behest of the regional government to examine the economic case for mining the thick deposits of bitumen resting underneath much of the boreal forests and grasslands that reach up and around frigid Lake Athabasca. Blair was no stranger to what are known popularly today as the tar, or oil sands. In 1924 Blair, who grew up in the northern clime of Canada’s interior, submitted his thesis for a Master of Science degree from the University of Alberta: “An Investigation of the Bitumen Constituent of the Bituminous Sands of Northern Alberta.” His later study of the oil sands for Alberta came to be known as the Blair Report and served as the founding document for what is becoming one of the largest industrial projects in human history, and one of the most dire environmental threats we have ever faced.

On the economic end Blair concluded, importantly, that extraction of a barrel of oil from the Alberta sands had reached a cost of $3.10, while that same barrel would be worth $3.50 in the regional and Western U.S. markets. It was still high above the cost of pumping sweet crude from plentiful wells in Canada and south of the border in America’s abundant oil plays of Colorado, Texas, Utah, and Wyoming, but the price arrangements were headed toward more parity over the long-term, Blair and others surmised. Easy to drill gushers would disappear by the 1980s in the United States, leading to increasing imports of more expensive oil, and finally to the fracking boom which requires much higher levels of capital and investment to squeeze petroleum from fickle rock formations. The economic price per barrel of oil from Alberta’s bituminous sands would only become more attractive.

Blair’s affiliation with Bechtel was no accident. The secretive corporation was by the 1940s a major player in the petroleum industry, building pipelines and other infrastructure for oil giants, and national oil corporations all over the world. Bechtel’s close ties to the U.S. military and CIA gave the company access to the highest levels of government in the Middle East, South America, Europe, and Asia, where newly rich princes and anti-communist dictators flush with cash, and with U.S. foreign aid, sought to build gargantuan energy projects. The Bechtels and their close associates made billions many times over.

Where once existed a Boreal forest, now an open pit oil sands mine worked by shovels and trucks.

Where once existed a Boreal forest, now an open pit oil sands mine worked by shovels and trucks.

The Bechtel family viewed Canada’s oil sands as a potential source of profits many years before the regional government and oil corporations were willing to invest. Blair gave Bechtel entry when the time came; in 1962 Bechtel began construction of the Athabasca Tar Sands project in Alberta’s northern reaches for the Greater Canadian Oil Sands company. It was the first large scale attempt to mine and refine the bitumen into oil and other hydrocarbon products. Imitators, from smaller independent companies to the big majors like Exxon and Chevron, would eventually pile aboard.

Over the next several decades Bechtel built many of the “upgrading facilities” as the giant cookers that heat and separate the filthy mixture of bitumen, sand, and water, are called. Today Bechtel, along with its subsidiary Bantrel, remains one of the largest oil sands engineering firms in the world. Bantrel designs and Bechtel builds. Over the last two decades Bantrel designed and Bechtel built several massive upgraders for Suncor, the corporate successor of the Greater Canadian Oil Sands company.

Picture 2Suncor’s open pit mines lie northwest of Fort McMurray. Miles of scraped-bare earth crawl with one-hundred ton shovel excavators and trucks capable of hauling four-hundred tons of earth across miles of devastated moonscape to waiting crushers and conveyors. The tar sands mines are visible from space, probably even from the moon.

Suncor’s bitumen is processed on site resulting in the equivalent of over 300,000 barrels of oil equivalent extracted each day. In-situ extraction, a process of pumping oil from deeper sand deposits after its is heated and precipitated into thick veins within the soil using steam and other injectants, provides another 100,000 barrels, much of which is piped to a refinery in Denver.

Suncor aspires to produce a million barrels of oil a day from its tar sands holdings. Bechtel will likely build the facilities.

Bechtel today actually plays second string to another San Francisco corporation when it comes to providing engineering and construction services to exploit the oil sands. Last year URS, the giant engineering company that Dianne Feinstein’s husband Richard Blum once owned a big stake in, bought out Flint Energy Services, a Canadian oil and gas production services provider, for $1.25 billion. Flint is less well-known that other oil services companies like Schlumberger and Halliburton, but it does the same work.

In-situ oil sands mining utilizes steam and other heated injectants to emulsify bitumen deep in the ground. It is then pumped to the surface and piped to nearby separation and treatment plants. As much as 80 percent of Canada's tar sands is too deep to pit mine, meaning that in-situ extraction is of paramount importance to the fossil fuel industry's plans.

In-situ oil sands mining utilizes steam and other heated injectants to emulsify bitumen deep in the ground. It is then pumped to the surface and piped to nearby separation and treatment plants. As much as 80 percent of Canada’s tar sands is too deep to pit mine, meaning that in-situ extraction is of paramount importance to the fossil fuel industry’s plans.

One of URS’s biggest and newest oil sands contracts is a $130 million project to lay 43 miles of pipes that will shoot steam deep underneath the surface of the Wood Buffalo region, a remote and mostly forested plain northeast of Fort McMurray. This single in-situ tar sands project will extract 85,000 barrels of bitumen a day according to the application filed by Canadian Natural Resources, Inc. URS is carrying out several similar projects to heat up enormous expanses of the Canadian landscape far beneath the surface in order to liquify and suck out bitumen.

The in-situ tar sands extraction method is less destructive to the immediate landscape than open pit mining, but it poses the greater risk in terms of climate change. Approximately 80 percent of the oil sands are buried too deep to excavate. Thus in-situ extraction methods being engineered by URS and Bechtel are being used to tap these hundreds of billions of barrels equivalent of oil. Needless to say, if this happens levels of CO2 in the atmosphere will surpass the counts that most scientists say will lead to catastrophic rises in global temperatures.

The roads, pipelines, and “pads” —the patches of cleared earth upon which drilling rigs operate and where valves and other machinery are built— required for in-situ oil sands mining are also visible from satellite photos of the region. From high above the roads and pads of the region’s in-situ oil plays look like tan nets cast over the landscape, covering hundreds of square miles, cutting wild boreal forests into neat, logical grids.

Expansion of the open pits and in-situ fields of the tar sands will all happen regardless of whether the Keystone XL pipeline is approved, but URS noted in their annual report for the last year that such a decision would impact their earnings as it would significantly restrict expansion. “Should the proposed Keystone XL pipeline project application be denied or delayed by the federal government,” explained the company, “then there may be a slowing of spending in the development of the Canadian oil sands.”

Martin Koffel, CEO of URS Corp. URS is also one of the largest U.S. military contractors, and co-operates the multiple sites within the U.S. nuclear weapons complex, including the nation's two primary weapons design and testing labs.

Martin Koffel, CEO of URS Corp. URS is also one of the largest U.S. military contractors, and co-operates the multiple sites within the U.S. nuclear weapons complex, including the nation’s two primary weapons design and testing labs.

Regardless, San Francisco’s URS is going all in for the tar sands. On a recent conference call URS’s long-time CEO Martin Koffel said, “Flint, in our view, is the perfect fit for us, given our long-held ambition to expand our position in the oil and gas market.” Koffel noted that 20 percent of URS Corp’s revenues are now dependent upon oil and gas projects, and most of these will involve the Canadian oil sands, or fracking projects in the United States. “We’re more than enthusiastic about this sector,” said Koffel.

Other Bay Area corporate giants have been eager to invest in the tar sands in recent years. San Ramon-headquartered Chevron owns interests in the Athabasca Oil Sands Project near Fort McMurray, an operation that pipes out over a quarter million barrels each day. Chevron has been one of the most aggressive oil and gas corporations in the political sphere. The company has contributed millions in recent years to campaigns aimed at gutting state and federal environmental laws. Chevron’s army of lobbyists are active on Capitol Hill and across various oil and gas-rich states pressing to keep lucrative subsidies in place, and to prevent climate change and other environmental bills from being considered. Chevron is also one of the sponsors of MIT’s Energy Initiative, the pro-oil, gas, and coal think tank from which Obama’s current Energy Secretary Ernest Moniz hails.

Fluor Corporation, an engineering rival of URS, has an office in the East Bay city of Dublin that employs approximately one hundred engineers. When it opened its Dublin office in 2008, Fluor cited its proximity to Chevron’s East Bay operations and headquarters as a deciding factor for the move.

Fluor’s global headquarters is in Irving, Texas, just one mile down the road from another of the company’s key clients, the world’s largest oil corporation, ExxonMobil. Fluor’s East Bay office employes about one hundred engineers who plug away full-time on oil and gas projects. For Chevron Fluor is designing and building facilities at the Muskeg River Mine, a giant oil sands site 75 miles northwest of Fort McMurray that will spit out 155,000 barrels of bitumen each day for three decades. This will result in a total of 1.6 billion barrels of bitumen that will be refined into upwards of billion barrels equivalent of oil.

That the San Francisco Bay Area is now an epicenter of oil sands engineering and services is ironic given the region’s reputation for environmentalism, and strong pushes for renewable energy development by various local governments. San Francisco, Sonoma County, Marin County, and Richmond are all developing community choice aggregation programs to replace PG&E as their utility, and to develop local renewable sources of electricity. San Francisco’s Board of Supervisors voted just last month to urge the city’s pension system to divest about half a billion dollars from stocks in oil, gas, and coal companies, some of them the same corporations named above. Berkeley’s mayor is urging similarly, and is even pressing California’s massive public employees pension system CalPERS to divest its stock and bond portfolios from fossil fuel energy companies.

The Bay Area’s business community plays up its green credentials, even if it’s undeserved. Every company touts “sustainability” as a major goal. Even URS and Bechtel both publish glossy annual sustainability reports touting beach clean ups, community garden volunteer days, light bulb replacements in their offices, and the number of their employees who bike or take the train to work.

If they succeed in their quest to exploit Canada’s mostly un-tapped oil sands, in the not-too distant future URS and Bechtel employees might be cleaning up beaches that have shifted miles inland from calamitous rises in sea level, and they might be biking to work in 120 degree heat.

According to James Hansen, the recently retired chief climate scientist of NASA, the oil sands are an end game for the environment.

“Canada’s tar sands, deposits of sand saturated with bitumen, contain twice the amount of carbon dioxide emitted by global oil use in our entire history,” wrote Hansen in a New York Times op-ed last year.

“If we were to fully exploit this new oil source, and continue to burn our conventional oil, gas and coal supplies, concentrations of carbon dioxide in the atmosphere eventually would reach levels higher than in the Pliocene era, more than 2.5 million years ago, when sea level was at least 50 feet higher than it is now. That level of heat-trapping gases would assure that the disintegration of the ice sheets would accelerate out of control. Sea levels would rise and destroy coastal cities. Global temperatures would become intolerable. Twenty to 50 percent of the planet’s species would be driven to extinction. Civilization would be at risk.”

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Obama’s ‘Green’ Billionaire Friend Made a Small Part of His Fortune Investing in Oil and Gas Companies

Tom Steyer speaking at the Democratic National Convention in 2012.

Tom Steyer speaking at the Democratic National Convention in 2012.

Hosting Obama during his visit to San Francisco last week was Tom Steyer, the former head of Farallon Capital Management. Steyer, who is a billionaire (probably the 344th wealthiest person in America if you trust the Forbes rankings), has been a liberal bankroller of the Democratic Party for many years now. More recently Steyer has been positioning himself to be policy maker for team Obama; Steyer recently was rumored to have been included on the short list for Energy Secretary. Various press clippings from the past couple years state that Steyer’s fundraising for Obama and the Democrats is now driven by his newly invigorated concern for environmental issues. Steyer is said to be very concerned with climate change, and the ecological impact of oil and gas.

Three years ago, while still head of Farallon Capital, Steyer jumped into politics in a big way by funding a campaign against California Proposition 23. Had it passed, that ballot initiative would have gutted the Global Warming Solutions Act of 2006, California’s greenhouse gas reduction plan. Prop 23 was supported by Valero, Tesoro, and Koch Industries, among other oil and gas interests. Steyer told a Forbes reporter he “got pissed” that no one was “stepping up” to fight back, so he dropped a couple million to advertise against the out of state oil lobby. In the end Steyer’s money helped. Prop 23 was defeated. Steyer retired from Farallon last year, and in a letter to his investors (mostly wealthy individuals, pension funds, and endowments) he said he would “focus on giving back,” through philanthropy and the Democratic Party. Steyer’s primary source of power through philanthropy and the Democrats is his money. His enormous personal fortune enables him to fund state or even national-level political campaigns, all by himself if need be.

Steyer’s money is an interesting subject. Farallon Capital, which Steyer founded back in 1986, and closely managed for several decades, minted a lot of money off oil and gas investments, among other environmentally destructive business ventures. Among the oil and gas companies that Steyer and Farallon financed and got rich from were Energy Partners, Ltd., Link Energy LLC, Halcon Resources Corporation, Devx Energy, Inc., and a gold mining company named Global Gold Corporation. In each case, Steyer’s team bought up large, or even controlling interests in the companies, or acquired corporate debt. Most of the companies were in financial straits when Farallon bought them. Farallon’s partners then used their position as the new owners of equity or debt extract value from the corporation as it restructured itself through asset sales and reorganization. In several cases the bankrupted company was turned around and rebuilt into a profitable oil and gas firm. In the process Steyer and Farallon ironically helped save and rebuild a few major oil and gas drillers, or helped sell-off oil and pipeline assets to bigger players in the energy industry.

A map of EPL's "East Bay" oil leases off the shore of Louisiana, near a channel of the Mississippi River.

A map of EPL’s “East Bay” oil leases off the shore of Louisiana, near a channel of the Mississippi River.

One of these investments was Energy Partners Ltd., a medium-sized New Orleans-based oil and gas drilling company operating in the Gulf of Mexico. In the early 2000s Energy Partners (EPL) was rapidly expanding. The company took on lots of debt to grow fast, but Hurricanes Gustav and Ike shut down some of the EPL’s operations, starving it of cash. A drop in oil and gas prices in 2008 drove the company over the edge.

Farallon Capital swooped in after the collapse of EPL’s stock price and de-listing from the New York Stock Exchange, purchasing over 2 million shares in the company in late 2009. Tom Steyer was listed as the “senior managing member” of the Farallon funds that held the stock, and was therefore classified as a “beneficial owner” of the company. EPL’s stock price eventually increased after the company reorganized itself through Chapter 11 Bankruptcy. Farallon sold some of its stock in EPL in 2010, netting a significant profit. Today EPL is pumping 17,000 barrels daily from oil from wells just offshore of Louisiana. The company operates in shallow waters, and its service ships traverse the networks of canals that have seriously damaged Louisiana’s wetlands, leading to coastal erosion and vulnerability to hurricane storm surge.

A map of EPL's oil leases in the Gulf of Mexico. EPL is one of the largest oil drillers in the region.

A map of EPL’s federal oil leases in the Gulf of Mexico. EPL is one of the largest oil drillers in the region.

Two of Farallon’s other oil and gas company investments include Link Energy (formerly EOTT), and Halcon Resources.

EOTT, a was a subsidiary of Enron that bought, transported, stored, and sold crude oil and natural gas, using an extensive 8,000-mile pipeline network, a fleet of 238 semi-trucks, and tanks capable of storing 9.9 million barrels in various locations across North America. The company also had natural gas facilities, a refinery, and other industrial holdings, including facilities in California.

Enron’s collapse in 2001 led EOTT to split off as an independent LLC, but the company, despite an attempt to reorganize itself in bankruptcy, never emerged in-tact. Farallon acquired $7.3 million in unsecured 11% Notes issued by EOTT leading up to the company’s bankruptcy, making Farallon one of the company’s largest creditors. This was a big gamble on Farallon’s part. Steyer’s team was assuming that either the reorganization, or liquidation of EOTT would prove highly profitable, and that the company’s notes and stock were being undervalued due to uncertainty around it’s bankruptcy. As part of EOTT’s reorganization, holders of the 11% Notes took a haircut of about 44 percent of their principle. In exchange they received LLC Units, essentially stock in the company. Farallon’s take was about 2.4 million in LLC Units.

EOTT changed its name to Link Energy in 2003 in an attempt to erase the taint of Enron from its reputation, but company’s reorganization attempts floundered. Throughout 2003 Link cleaved off parts of its operations and infrastructure in various sales in order to pay off liabilities, including debt owed to creditors like Farallon. Valero bought Link’s natural gas liquids operations for $20 million. Other sales provided cash, but ultimately Link sold its core assets to Plains All American for $273 million, effectively dissolving the company in an effort to pay off Farallon and a small group of other creditors and investors.

Screen shot image from Halcon Resources web site. The company drills for oil and gas in multiple states using hydraulic fracturing among other techniques.

Screen shot image from Halcon Resources web site. The company drills for oil and gas in multiple states using hydraulic fracturing among other techniques.

Halcon Resources was once called Ram Energy Resources, Inc. Steyer and his colleagues at Farallon gambled on Ram’s bankruptcy in an investment strategy resembling the EOTT play. In November of 2005 Farallon scooped up Ram Energy Resources, Inc. shares as the company entered bankruptcy, paying about $5.50 per share. Multiple Farallon Funds were used to buy about 12.9% of the company. Once again Tom Steyer was listed as a “beneficial owner” and “managing member.” Today Farallon owns about 1.7 million shares of Halcon Resources, a $12.5 million stake. Halcon Resources today drills for oil and gas in North Dakota, Montana, east Texas, Ohio, Pennsylvania, utilizing, among other methods, hydraulic fracturing, or “fracking,” as it is commonly known. Halcon transports its oil and gas to refineries via Shell Oil and Sunoco pipelines that cross parts of the United States.