PIPE­LINE BAT­TLE TAKES IRONIC TWIST

Pub­lic work­ers see stake in­crease in pro­po­nent of Trans Moun­tain amid prov­ince’s bid to block project

Ottawa Citizen - - FP OTTAWA - GE­OF­FREY MOR­GAN

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.

BEN NELMS/BLOOMBERG

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...

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