PIPELINE BATTLE TAKES IRONIC TWIST
Public workers see stake increase in proponent of Trans Mountain amid province’s bid to block project
While the British Columbia government wages war against the Trans Mountain pipeline expansion, its own employees are invested in the U.S. company behind the $7.4-billion project.
The British Columbia Investment Management Corp. (BCI), which manages the pension funds for B.C.’s public sector workers, owns stakes in the Canadian oil and gas industry as well as pipeline companies Kinder Morgan Inc., Enbridge Inc. and Pembina Pipeline Corp. Houston-based Kinder Morgan’s Canadian subsidiary, Kinder Morgan Canada Ltd., is developing the Trans Mountain Expansion. Kinder Morgan owns about 70 per cent of the voting interests of the Canadian unit. BCI does not hold shares in Kinder Morgan Canada.
Recent disclosures filed with the U.S. Securities and Exchange Commission show BCI has increased its exposure to Kinder Morgan in recent months even as the province has escalated its efforts to block the project, according to data gleaned by the Financial Post. The most recent SEC filings show BCI purchased an additional 21,214 shares during the fourth quarter of 2017 in Kinder Morgan, which recently suspended work on the pipeline.
The purchases bring BCI’s total stake in Kinder Morgan to 1,122,716 shares, a position worth more than US$18 million at current prices. BCI’s total net assets under management as of Dec. 31 were $135.5 billion.
B.C. Premier John Horgan declined to comment on what effect his government’s opposition to the pipeline expansion might have on BCI pension investments, which also include major oilsands producers Suncor Energy Inc. and Cenovus Energy Inc., both of which have signed up to ship oil through the expanded pipeline between Alberta and B.C.
B.C. organizations that support the pipeline described the government’s stance, given BCI’s investments in the sector, as “rank hypocrisy.”
“Even if you bike to work every day, your food and supplies are delivered to you via trucks using oil and gas and in many cases your retirement funds are directly tied to this vital industry,” Kris Sims, B.C. director of the Canadian Taxpayers Federation, said in an email. “The B.C. government needs to wake up to this reality and fast before they do further damage to Canadians.”
BCI manages the pensions for the province’s teachers, provincial government and municipal government employees and also manages assets for several B.C. government agencies and bodies. All told, BCI manages pension investments for 569,000 British Columbians as well as the insurance benefit funds for 2.3 million workers in the province through WorkSafe BC.
Janice Toker, spokesperson for the Victoria-based Crown corporation, said in an email “we do not publicly discuss our investment strategy.”
A spokesperson for the provincial finance ministry said BCI “fulfils its investment role on behalf of pension boards without any direction or influence from the B.C. government or MLAs.” She confirmed BCI oversees investments for MLAs’ pensions, which would include that of Horgan.
BCI’s largest energy holding is Irving, Texas-based Exxon Mobil Corp. The fund recently purchased 90,368 shares in the super major, bringing its stake to 2,035,641 shares, worth more than US$157 million.
A breakdown from Bloomberg shows 5.8 per cent of BCI’s public investments is in the energy sector, worth about $3.8 billion.
In recent months, BCI has spent millions of dollars buying up U.S. oil and gas equities, including oilfield services companies like Halliburton Co., Helmerich & Payne Inc., and Schlumberger Ltd., as well as shale producers Midland, Texas-based Concho Resources Inc., Oklahoma City-based Continental Resources Inc. and Houston’s Occidental Petroleum Corp.
“They’re playing the biggest service companies and the biggest production growth basin,” said Rafi Tahmazian, senior portfolio manager and director at Torontobased Canoe Financial, of BCI’s recent purchase.
Many of the U.S. oil companies BCI has recently purchased have assets in the Permian basin in Texas, which is expected to lead global oil supply growth next year.
Tahmazian, whose focus is on the oil and gas sector, also said that based on the composition of BCI’s biggest energy holdings, the fund seems to be taking a generalist or “index hugging ” approach to the oil sector. BCI also recently increased its exposure to major U.S. producers such as Chevron Corp., Exxon, ConocoPhillips, Phillips 66, Exxon, and others. All told, BCI owns stock in more than 30 oil and gas companies.
“If the sector ran hard and they were not in energy because of political decisions, then they would be underperforming and they would be criticized,” Tahmazian said.
He also said it’s a good sign that BCI’s portfolio managers have made investing decisions rather than political decisions.
“There’s an irony that (BCI’s investment managers) with their investor policy statement is obligated to have energy exposure and when they go into it, without taking the time to understand the sector better, they’re owning the biggest of the big names and they happen to be on the front lines,” he said, noting the debate over an oilsands pipeline has divided the province.
In its annual report on “responsible investing ”, BCI said it was a signatory to the Climate Action plan to “take action to reduce greenhouse gas emissions, consistent with the goal of the Paris Agreement to keep global temperature rise well below two degrees Celsius.”
The fund also said it voted in favour of a human rights shareholder proposals at meetings of both Enbridge and Marathon and urged them to report on the due diligence process they follow to identify environmental and social risks, including Indigenous rights, when reviewing potential acquisitions.
“Shareholders are concerned that legal and reputational risks related to oil and gas projects have grown steadily,” according to the BCI report.
A protest sign stands outside the Kinder Morgan facility in Burnaby, B.C., last month. BCI, the pension fund manager for B.C.’s public sector staff, has increased its stake in Houston-based Kinder Morgan. Kinder Morgan’s Canadian unit is behind the...