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Warren Buffett

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This article is part of the Tobacco portal on Sourcewatch funded from 2006 - 2009 by the American Legacy Foundation.

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Warren E. Buffett "has been Chief Executive Officer of Berkshire Hathaway Inc., since 1970. Mr. Buffett is a controlling person of Hathaway Inc. Mr. Buffett served as Chief Executive Officer of Salomon Inc. from August 18, 1991 to June 3, 1992 and Chief Executive Officer of Salomon Brothers Inc. from August 18, 1991 to May 27, 1992. He has been Chairman of Berkshire Hathaway Inc., a holding company of See's Candy Shops, Inc. since 1970. He served as Interim Chairman of Salomon Inc. from August 18, 1991 to June 3, 1992 and interim Chairman of Salomon Brothers Inc. from August 18, 1991 to May 27, 1992. Mr. Buffett has been a Director of Washington Post Co., since May 1996 and serves as Lead director and previously also served as its Director from 1974 to 1986. He has been a Director of Berkshire Hathaway Inc. since 1965. He has been a Director of MidAmerican Energy Holdings Co. since March 2000. He serves as a Director of The Gillette Company. He has been a Director of Citigroup Global Markets Holdings Inc., (formerly, Salomon Inc.) since 1987. Mr. Buffett is also a Life Trustee of The Urban Institute. and serves as Director of Grinnell College. He served as a Director of Coca-Cola Co., from 1989 to April 2006." [1] His wife is Susan T. Buffett.

Warren Buffett and tobacco

During the RJR-Nabisco, Inc. hostile takeover fight in the late 1980s, Buffett was quoted as telling Salomon Brothers he liked the profit-making potential of selling cigarettes. "I'll tell you why I like the cigarette business," he explained to Salomon-Chairman John Gutfreund in 1987, according to the book "Barbarians at the Gate." "It costs a penny to make. Sell it for a dollar. It's addictive. And there's fantastic brand loyalty."

However, by 1994, Buffett had changed his stance on tobacco. Shares of cigarette stocks were dropping in price at that time, due to increased smoking restrictions and government inquiries into the cigarette business. Speaking to shareholders at Berkshire Hathaway Inc.'s annual meeting in Omaha, Nebraska in April 1994, Buffett said investments in tobacco are "fraught with questions that relate to societal attitudes and those of the present administration...I would not like to have a significant percentage of my net worth invested in tobacco businesses," said Buffett.[2]

Warren Buffett and coal

Buffett's holdings include the $44 billion purchase of the Burlington Northern Santa Fe Railway in 2009, and 90 percent of MidAmerican Energy, a utility that operates 11 coal-fired power plants, four of them in Wyoming. In November 2010, Warren Buffett and billionaire Bill Gates, a Berkshire director, visited the Black Thunder Mine in Wyoming, the biggest coal mine in the country. On March 22, 2011, Secretary of Interior Ken Salazar opened 750 million-2.4 billions tons of coal on public lands in Wyoming's section of the Powder River Basin.[3][4] It was reported in March 2012 that it was unlikely Buffett was interested in investing in the coal sector.[5]

Mid-American Energy

In 2007, Buffett's PacifiCorp, a subsidiary of his MidAmerican Energy, cancelled six proposed coal-fired power plants. These included Utah's Intermountain Power Project Unit 3, Jim Bridger Unit 5, and four proposed plants previously included in PacifiCorp's Integrated Resource Plan. The cancellations came in the wake of pressure from regulators and citizen groups, including a petition drive organized by Salt Lake City commercial real estate broker Alexander Lofft and directed at Buffett personally. The 1,600 petitioners, who described themselves in a letter to Buffett as "a collection of citizens, business owners and managers, service professionals, public servants, and organization representatives ... your friends and new customers here in Utah," explained that, in their view, any further expansion of coal generation in Utah would "compromise our health, obscure our viewsheds, shrink and contaminate our watersheds, and thin out our most beloved snowpack," concluding that "our attractiveness as a place to live and work is also threatened, and so is our economic competitiveness as a major metro area and a state, compromising our recent gains in income and property values."[6]

BNSF Railway

In November 2009 Berkshire Hathaway bought Burlington Northern Railroad, known as BNSF Railway, for $34 billion.[7] According to BNSF's website, the coal the railway hauls each year could produce more than 10 percent of the nation's total electricity. BNSF supplies 60 utilities in 28 states, as well as power plants in Canada, Mexico, Asia, and Europe. In 2008, BNSF transported 297 million tons of coal.[8] 90% of the coal BNSF transports is mined in the Powder River Basin.[9]

Warren Buffett and Bill Gates visit federal coal lands shortly before new leases announced

In November 2010, Warren Buffett and billionaire Bill Gates, a Berkshire director, visited the Black Thunder Mine in Wyoming. Buffett was quoted later as saying that he found the trip to the Black Thunder Mine “fascinating.” Neither gave interviews during the tour, but some speculated that the trip was an indication that the two were looking to invest in the project.[10] However, in the past Bill Gates has stated that coal and natural gas must be phased out by 2050.[11] As the CEO of Berkshire Hathaway, Buffett also owns the Burlington Northern Santa Fe Railroad that transports most of Wyoming's vast coal supply around the country, along with the utility company, MidAmerican Energy, which operates 11 coal-fired power plants, including four in Wyoming.[3]

On Dec. 14, 2010, Bill Gates and Warren Buffett met with President Obama's Oval Office and discussed ways to improve the economy. According to author Jeff Biggers, on Jan 6, 2011, Wall Street analysts said Buffett was betting "big" on Coal. In a Feb. 26, 2011 annual Berkshire Hathaway Shareholder Letter, Buffet said his coal-transporting railroads (nearly 300 million tons of coal a year) "will increase Berkshire's 'normal' earning power by nearly 40% pre-tax and by well over 30% after-tax." On March 22, 2011, citing the nuclear tragedy in Japan and world energy needs, Secretary of Interior Ken Salazar opened 750 million-2.4 billions tons of coal on public lands in Wyoming's section of the Powder River Basin.[3][12]

Buffett Profiled in Rolling Stone Magazine

In the January 2010 edition of Rolling Stone Magazine, journalist Tim Dickinson profiled the top 17 United States "polluters and deniers who are derailing efforts to curb global warming". Below is an excerpt from the article titled "Climate Killers" about Warren Buffett.[13]

Despite being a key adviser to Obama during the financial crisis, America's best-known investor has been blasting the president's push to curb global warming — using the same lying points promoted by far-right Republicans. The climate bill passed by the House, Buffett insists, is a "huge tax — and there's no sense calling it anything else." What's more, he says, the measure would mean "very poor people are going to pay a lot more money for their electricity." Never mind that the climate bill, according to the nonpartisan Congressional Budget Office, would actually save Americans with the lowest incomes about $40 a year.
But Buffett, whose investments have the power to move entire markets, is doing far more than bad-mouthing climate legislation — he's literally banking on its failure. In recent months, the Oracle of Omaha has invested billions in carbon-polluting industries, seeking to cash in as the world burns. His conglomerate, Berkshire Hathaway, has added 1.28 million shares of America's biggest climate polluter, ExxonMobil, to its balance sheet. And in November, Berkshire placed a huge wager on the future of coal pollution, purchasing the Burlington Northern Santa Fe railroad for $26 billion — the largest acquisition of Buffett's storied career. BNSF is the nation's top hauler of coal, shipping some 300 million tons a year. That's enough to light up 10 percent of the nation's homes — many of which are powered by another Berkshire subsidiary, MidAmerican Energy. Although Berkshire is the largest U.S. firm not to disclose its carbon pollution — and second globally only to the Bank of China — its utilities have the worst emissions intensity in America, belching more than 65 million tons of CO2 into the atmosphere in 2008 alone.
As a savvy investor, Buffett would only buy a coal-shipping railroad if he felt certain that Congress will fail to crack down on climate pollution. "Whatever hurts coal also hurts the railroad business," observes Peter Gray, a corporate climate attorney at the international law firm of McKenna Long & Aldridge. "Mr. Buffett must believe that efforts to adopt cap-and-trade legislation will fail."
That's a strange position for the billionaire to take, given that he's promised to donate more than 80 percent of his fortune to the Bill & Melinda Gates Foundation. "As someone who is giving so much money to international development, Buffett ought to know better," says Joe Romm, who served as an assistant energy secretary under Bill Clinton. "He ought to have spent a great deal of time considering the greatest threats to developing countries — which would have quickly educated him about climate change."[13]

Death and disease attributable to fine particle pollution from MidAmerican Energy coal plants

In 2010, Abt Associates issued a study commissioned by the Clean Air Task Force, a nonprofit research and advocacy organization, quantifying the deaths and other health effects attributable to fine particle pollution from coal-fired power plants.[14] Fine particle pollution consists of a complex mixture of soot, heavy metals, sulfur dioxide, and nitrogen oxides. Among these particles, the most dangerous are those less than 2.5 microns in diameter, which are so tiny that they can evade the lung's natural defenses, enter the bloodstream, and be transported to vital organs. Impacts are especially severe among the elderly, children, and those with respiratory disease. The study found that over 13,000 deaths and tens of thousands of cases of chronic bronchitis, acute bronchitis, asthma, congestive heart failure, acute myocardial infarction, dysrhythmia, ischemic heart disease, chronic lung disease, and pneumonia each year are attributable to fine particle pollution from U.S. coal plant emissions. These deaths and illnesses are major examples of coal's external costs, i.e. uncompensated harms inflicted upon the public at large. Low-income and minority populations are disproportionately impacted as well, due to the tendency of companies to avoid locating power plants upwind of affluent communities. To monetize the health impact of fine particle pollution from each coal plant, Abt assigned a value of $7,300,000 to each 2010 mortality, based on a range of government and private studies. Valuations of illnesses ranged from $52 for an asthma episode to $440,000 for a case of chronic bronchitis.[15]

Table 1: Death and disease attributable to fine particle pollution from MidAmerican Energy coal plants

Type of Impact Annual Incidence Valuation
Deaths 234 $1.7 billion
Heart attacks 362 $39.6 million
Asthma attacks 4,305 $0.22 million
Chronic bronchitis 152 $67.5 million
Asthma ER visits 229 $.08 million
Hospital admissions 167 $3.9 million

Source: "Health Impacts - annual - of Existing Plants," Clean Air Task Force Excel worksheet, available under "Data Annex" at "Death and Disease from Power Plants," Clean Air Task Force. Note: This data includes the following plants owned by MidAmerican Energy and subsidiary PacifiCorp: Council Bluffs Energy Center, Laramie River Station, Louisa Generating Station, Riverside Generating Station (Iowa), Ottumwa Generating Station, Dave Johnston, Jim Bridger, Carbon, Hunter, Huntington, Naughton, and Wyodak.

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References

  1. Warren Buffett-, Business Week, accessed December 9, 2007.
  2. Warren Buffett cools on his attraction to tobacco business. Wallace, Jenell. Bloomburg News, Princeton. April 25, 1994. Philip Morris Bates No. 2023652158/2160
  3. 3.0 3.1 3.2 "All the President's (Coal) Men: Bill Gates, Warren Buffett and Obama's Wyoming Giveaway" HuffPo, March 28, 2011.
  4. "Coal mining to expand on public lands in Wyoming" Jim Spellman, CNN.com, March 22, 2011.
  5. "The new Buffett rule: Buy coal stocks? No." Paul R. La Monica, CNNMoney, March 16, 2012.
  6. "The Education of Warren Buffett: Why did the guru cancel six coal plants?" Ted Nace, Gristmill, April 15, 2008
  7. Samantha Bomkamp, "Buffett's big bet: $34B on 2nd-largest railroad" Associated Press, November 3, 2009
  8. "BNSF Markets and Services - Coal" BNSF Railway Website, November 2009
  9. Sioban Hughes and Mark Peters, Buffett's Burlington Bid A Bet On Coal's Continued Role, Wall Street Journal, November 3, 2009.
  10. "Warren Buffett is Betting Big on Coal" Jim Fink, Investing Daily, January 6, 2011.
  11. "Bill Gates: ban coal and invest in clean energy technology" Mongabay.com, February 12, 2010.
  12. "Coal mining to expand on public lands in Wyoming" Jim Spellman, CNN.com, March 22, 2011.
  13. 13.0 13.1 "The Climate Killers" Tim Dickinson, Rolling Stone Magazine, January 2010.
  14. "The Toll from Coal: An Updated Assessment of Death and Disease from America's Dirtiest Energy Source," Clean Air Task Force, September 2010.
  15. "Technical Support Document for the Powerplant Impact Estimator Software Tool," Prepared for the Clean Air Task Force by Abt Associates, July 2010


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