Analysts say that Koch Industries, alongside ExxonMobil, BP, ConocoPhillips, Total and other industry titans, stands to profit handsomely as pipelines that connect Alberta's landlocked oil to global markets come online, either through new construction or flow reversals. Plans have been floated to build more than 10, miles of pipeline over the next five years to carry more than 3. That includes the Keystone XL pipeline , which has become a political flashpoint in America.
Howard Marshall, the late company director and family loyalist wrote in his autobiography. The company has been especially tight lipped about its substantial achievements in developing Canada's heavy oil resources, even with its own employees. Koch corporate publications, facts sheets and websites are similarly silent.
Although many smaller tentacles of the company's sprawling interests are detailed in the employee newsletter Discovery, the issues available online don't contain a single overt mention of the company's oil sands activities. The names of the two subsidiaries currently at the heart of the company's Canadian oil sands development activities— Koch Exploration Canada L.
Only once is there a hint that Canadian oil might be of importance to the company. A map in the January issue of Discovery shows "highlights of recent international acquisitions, expansions and investments" of the company's global operations. A small purple dot marks a spot in Western Canada, annotated in small type with the words: "One million acres of property, mostly in Alberta. We also need to find out who will benefit.
World of Change: Athabasca Oil Sands
The paper also reported that nine of the 12 new Republicans on the panel signed a pledge distributed by a Koch-founded and funded advocacy group, Americans for Prosperity, to oppose regulation of greenhouse gases. Heavy oil is part of the Koch family heritage. The career of the company's patriarch, Fred Koch, was defined by a discovery he made in , five years after graduating as a chemical engineer from MIT: an improved thermal cracking process for converting heavy oil into gasoline.
A consortium of larger oil companies sued Koch for patent infringement and blocked him from selling his process in the United States. He then turned to the Soviet Union, where he helped Joseph Stalin build 15 refineries. David Koch has said that his father had no idea who the Bolsheviks were when they arrived at his west Texas office asking for his help. After some of Fred Koch's Russian associates died at the hands of Stalin, Koch became a lifelong opponent of communism.
In he helped found the John Birch Society, and in he self-published a page anti-communist screed called A Businessman Looks at Communism that he sold for 25 cents a copy. He went on to build a modest fortune around pipelines and refineries within an entity finally called Rock Island Oil and Refining Company. After Koch died in , the company was renamed in his honor by the four grateful sons who inherited it.
Recovering the Oil
Charles Koch, then 32 years old, became chairman and CEO. It had been built in in Rosemount, Minn. Howard Marshall II. It was designed to refine heavy, sour Canadian crude oil and when it opened it could handle 25, barrels a day. In court papers , feuding Koch family members refer to the feedstock for the Pine Bend refinery as "garbage crudes" from Canada whose value lay in their ability to deliver high margins. In , Moody's Investors Services gave the Koch subsidiary that owns Pine Bend an A1 rating, citing the group's "strong capitalization and strategic importance to Koch Industries" and its refinery that can "process low-grade crude into higher value products.
Charles Koch secured a controlling interest in Pine Bend in In his book he called that acquisition "one of the most significant events in the evolution of our company. By the turn of the century Pine Bend was refining , barrels a day and its thirst for Canadian oil had made Koch Industries the world's number one exporter of oil out of Canada, ahead of Mobil and Amoco. As the demand for heavy crude continues to grow at Koch's Minnesota refinery, we intend to meet that demand with heavy crude from Canada.
Today Pine Bend receives up to , barrels a day of heavy oil from western Canada. The facility covers 1, acres and has 10 miles of its own roads, as well as thousands of miles of pipe. This single Koch refinery is now responsible for an estimated 25 percent of the 1. Figures published in by Canada's National Energy Board show that Koch wasn't permanently displaced as Canada's number one exporter until , after Exxon and Mobil merged and took the top spot. The company dropped to number three in , after Conoco and Phillips Petroleum merged.
In the National Energy Board stopped releasing company-specific information, but in a newsletter Koch told its employees that the Pine Bend refinery had had a record year. On the website of Flint Hills Resources, a Canadian subsidiary of Koch Industries that now handles its Canadian oil export business and owns the Pine Bend refinery, Koch still claims to be "among the largest processors of Canadian crude in the United States.
InsideClimate News' research shows that Koch Industries has been buying and selling mineral leases for large holdings in Western Canada's tar sands region since the late s. It is difficult to piece together the full extent of the company's holdings because most Canadian land sales records aren't publicly available, and because land agents commonly make purchases on behalf of oil companies without revealing the companies' names.
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Court documents from the Koch family dispute in the s show that at that time the company held 50, acres of leases in the Cold Lake area of Alberta, making it the sixth largest landholder there. In , the company acquired an additional 44, acres in shallower zones thought to contain gas reserves that could be used to develop its oil sands leaseholds.
Upgrading Oil Sands and Heavy Oil
Periodic government announcements of some Alberta land sales, available online beginning with the year , show that Koch has bought about 10, acres in its own name over the last 15 years. In , Koch put up for sale more than , acres "with 47 billion barrels of oil resource estimated to be in place," according to a sale announcement released by Koch Exploration Canada Corporation.
That year the company also embarked on a buying spree. Geologist Ryan Morrison, who left Koch Exploration Canada in , has written that he was directly involved in helping the company purchase two million acres of leases in Alberta's three primary oil sands regions of Athabasca, Cold Lake and Peace River between and He also wrote that Koch is one of the largest holders of oil sands assets in Alberta.
Koch has made efforts to develop some of its leaseholdings. Canada's Energy Resource Conservation Board maintains various lists, each hundreds of pages long, of well pads and other facilities that have been established on leaseholds in the oil sands region. InsideClimate News found that almost well sites and facilities tracked by regulators under the Koch name are scattered across the oil sands regions.
One of Koch Industries' fundamental business capabilities has been transporting oil, ever since its founding as Rock Island Oil and Refining, which was built around oil gathering assets.
Over the span of four decades in Canada the company came to own four "feeder" pipeline systems, three in Alberta and one in Saskatchewan that by the late s had a throughput of more than , barrels per day. Koch retained almost half the shares and maintained control as the general partner. As a publicly traded company, Koch Pipelines had to conduct business with transparency unusual for the private company.
The company's first annual report made rare public disclosures about its energy-related interests in Canada. Koch expanded its feeder system and increased Canadian oil exports to Montana refineries, rewarding shareholders with tens of millions of dollars in annual distributions. But throughput on the system remained flat and Koch sold its interests in Koch Pipelines was renamed Inter Pipeline, which today can handle more than , barrels of oil sands crude a day. In , Koch also established a presence in Hardisty, Alberta, an oil transport hub.
It built five storage tanks with a combined total capacity of , barrels for blending feedstock for the refinery in Pine Bend. The regulator who granted the permit noted that "the flexibility and confidentiality afforded by the operation of its own facility was of the utmost importance" to Koch Industries. Koch said its facility would handle custom-blended products "involving unconventional diluents and heavy oils," as well as 85, barrels a day from various sources, including 30, barrels from Suncor through a year supply contract.
Suncor was the first company to start commercial oil sands production in Alberta, and the contract with Koch, its largest to that point, was an important milestone in Suncor's growth. Return to Book Page. Unlike conventional oil resources, "unconventional oil" resources have been known to exist only for the last few decades and are available in limited areas of the world.
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The most commonly known "unconventional oils"--oil sands, heavy oil, and bitumen--are found primarily in the western United States, Canada, and Venezuela. Only recently has serious consideration has been g Unlike conventional oil resources, "unconventional oil" resources have been known to exist only for the last few decades and are available in limited areas of the world. Only recently has serious consideration has been given to North American resources for meeting the increasing demands for transportation fuel.
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Banerjee discusses the importance of these unconventional oils and provides an introduction for those beginning their journey in the still unexplored unconventional hydrocarbon resources of the world. This new book is an important educational tool for anyone in the petroleum industry--whether upstream, downstream, or pipeline--who would like to learn the fundamentals of the most commonly known unconventional oils: oil sands, heavy oil, and bitumen. Get A Copy. Hardcover , pages. More Details Friend Reviews. To see what your friends thought of this book, please sign up. Lists with This Book.
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Sort order. Mar 01, Fernando Guerra rated it it was amazing Recommends it for: energy scientist and engineers. Shelves: science. It's a good book to inquire about heavy oil and bitumen processing, as the title clearly states. I liked the fact that it rarely goes off topic, staying concise and clear throughout the whole text. It's a bit outdated nothing serious , but technology-related texts usually are after a few years, even months after publishing. Overall it's a very enlightening read. Apr 16, Matthew MacLennan rated it it was amazing Shelves: chemistry , engineering , oil-sands.
This work stays on a fairly general level, but explains it pretty well.