Posted by: bmeverett | February 21, 2015

The Keystone Pipeline on The Blacklist


One of my favorite shows on television is “The Blacklist” on NBC. The premise of the show is that Raymond “Red” Reddington, a former spook turned good-hearted master criminal, helps the FBI track down the world’s worst criminals, those on the FBI’s Blacklist. Red, played by James Spader, is a wonderful mix of amiability, sophistication, compassion, menace and violence. His motives are always unclear, but combine a sense of criminal self-interest with social responsibility, a kind of modern-day Robin Hood. Most of the villains on the Blacklist are really, really bad, including cyberterrorists, organ thieves, mass murderers and assorted psychos. The most recent episode, which aired February 12, adds to the list of horrific criminals one of the Left’s favorite bad guys.

The plot of the episode is as follows. A CIA agent masquerading as a priest in Uzbekistan is captured by a shadowy terrorist group called the SRU, under the leadership of a man named Ruslan Denisov. But wait. It turns out that the terrorists are actually a local human rights/environmental group fighting against (you guessed it!) an American oil company. Twenty-five years previously, a corrupt Soviet-era Uzbek politician had enriched himself by giving a sweetheart deal to Anecca Oil Corporation to build an oil pipeline in Uzbekistan. Since its construction, the pipeline has been leaking toxic chemical like mad, killing hundreds of local citizens and causing massive outbreaks of cancer. Rather than fix the problem, Anecca, with the active connivance of the CIA, has used its massive corporate power to cover it up. No worries, Red makes sure that the Company’s criminal malfeasance comes to light. At the end of the program, Red explains that Denisov may be temporarily imprisoned by the Uzbek authorities for his actions, but he will ultimately emerge a hero for having chased the American company out of the country, to be replaced by (get this) a French oil company which will presumably operate the pipeline responsibly.

I’m sure this scenario seems perfectly plausible to a generation of Americans taught by their schools and by Hollywood that US corporations should be lumped together with terrorists in terms of the harm they do in the world. I understand that this show is fiction, but fiction often informs or reinforces people’s views of the world, so let’s consider whether this plot makes any sense. I have six separate criticisms.

First, pipelines are not particularly difficult to build and operate. Leaks do occur, but operators have extensive high-tech systems to locate and repair leaks very quickly. It’s no more in their interest to build faulty pipelines than it is for Boeing to build airplanes that crash. The episode’s premise is analogous to an engineering company that builds a bridge that periodically fails and dumps cars into the water. People know how to build bridges, and their operators take extensive care to maintain them. There are some leaky pipelines in the world, such as the Soviet-era pipelines moving natural gas from Siberia to Western Europe, but these are generally operated by corrupt and inefficient state companies, rather than private companies, which tend to take care of their assets.

Second, pipelines in and of themselves are not generally desirable investments for oil companies. Most integrated oil companies, like ExxonMobil or Shell, see pipelines as simply a way to move their oil and natural gas to market. It’s the oil production that makes the profit, not the delivery system.

Third, in this Blacklist episode, Denisov says, “Almost 25 years ago, my country sold an American company – Anecca Oil – the rights to build a pipeline from Tashkent to the Andijan Region. The price was absurd. The Uzbek people received a fraction of the value.” Oil and gas production often involves “producer surplus” also called “economic rent”, i.e., a revenue stream in excess of the cost required to provide a market return to investors. Virtually all oil and gas contracts are structured to give the investor an acceptable return with all the producer surplus going to the government. Pipelines almost never involve economic rent. It’s tough enough just to ensure sufficient revenue to keep the pipeline operating and provide a basic return to the owners. These are not big revenue streams for host governments, any more than a bridge or a road would be.

Fourth, in my forty years in the oil business, I have never seen a case where a government official gave an oil company a “sweetheart” deal in return for a bribe. Such an action would quickly become obvious, probably to the press and the public but at the very least to all the other corrupt officials in the government. The normal mechanism for stealing oil and gas revenue is to give the oil company a deal on commercial terms which can stand up to public scrutiny and then to steal or divert money out of the national treasury. Such theft is much easier to accomplish, particularly in autocratic countries, since such diversions of funds can more easily be hidden. Furthermore, this system allows other corrupt officials to get their share of the funds, so the oligarchs are all satisfied with the arrangement. It’s also worth noting that governments can easily change the contract if they conclude that the terms are unfavorable. Oil companies don’t like this, but there’s often little they can do. Forced “renegotiation” of contracts has occurred recently in Russia, Venezuela, Kazakhstan and even in the United States.

Fifth, one of the FBI agents says about the massive fatalities and illnesses caused by the pipeline leak, “No company can ignore this. It’s bad for business.” The other agent replies, “Only if someone can prove the truth. Anecca spends a fortune on lobbyists to make sure that doesn’t happen.” Seriously? Denisov can organize a violent band of Uzbek terrorists to try to force Anecca to clean up the mess, but they can’t pick up the phone and call the New York Times? Anyone who believes that lobbyists can keep the Times from reporting an anti-corporate story has never read the paper. How did BP do in hiding the Deepwater Horizon disaster from the press? How about Union Carbide and Bhopal?

Red himself sums up the story line when he says, “Somewhere 6,000 miles away, a group of bean-counters in a board room did a cost-benefit analysis and concluded that these people aren’t worth the cost of responsibly maintaining their pipeline.” Here you have, folks, the anti-corporate view in a nutshell: American corporations are run by people who would kill for a buck. There are, of course, corporate malefactors, but business people are highly representative of the society as a whole and no more inclined to practice unethical self-interest than other segments of society, like government, entertainment, sports, academics, the press or the clergy.

I have no insight into NBC’s motives in airing this episode, and it may be pure coincidence that this story line appears right when Congress has sent the Keystone Pipeline authorization to the President. You can decide for yourself.

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