California, New York Pension Funds Demand Detail on Oil Groups Spill Plans
Investors including state pensions demanded that oil-drilling operators make public their contingency plans for spills such as the one that spewed 4.1 million barrels of crude into the Gulf of Mexico.
The investors sent letters to the chief executive officers at 27 oil and gas producers such as Exxon Mobil Corp and insurance companies including American International Group Inc., asking them to detail their capability to prevent or respond to an accident, as well as what they learned from the Gulf spill. U.S. states, through their public pension funds, invest in such companies as ConocoPhillips and Chevron Corp.
The leak in the Gulf of Mexico, the world’s worst accidental spill, began after the Deepwater Horizon drilling rig, leased by BP Plc from Transocean Ltd., exploded off the coast of Louisiana on April 20, killing 11 workers. BP plans to start pumping cement into the crippled well today in an effort to permanently seal the well from the bottom.
“The Gulf tragedy provided dramatic evidence that investors and pensioners have high stakes in deepwater oil exploration,” California State Treasurer Bill Lockyer told reporters during a conference call today. “In my state alone, the nation’s two largest public employee pension funds have seen the value of their BP holdings plummet by $349 million,”
The total amount of oil estimated to have escaped into the ocean from the spill is about 16 times the amount from the Exxon Valdez, which leaked an estimated 257,000 barrels in a 1989 accident off Alaska.
The California Public Employees Retirement System, the largest public pension in the U.S. with more than $210 billion of assets under management, has more than $3 billion invested in energy-producing companies, almost half of that in Exxon, ConocoPhillips and Chevron. Lockyer is a trustee of the fund.
“Investors have a right to full disclosure of the risks associated with oil companies’ offshore operations, and the prevention, response and governance measures they have in place to minimize those risks,” Lockyer said.
London-based BP reported a record quarterly loss of $17.2 billion when it announced earnings on July 27 after booking a $32.2 billion pretax charge related to the oil spill. The company said it would expand asset sales to raise as much as $30 billion during 18 months to help pay for cleanup costs and liabilities from the environmental disaster, which also cost Chief Executive Officer Tony Hayward his job.
New York’s $132.6 billion State Common Retirement Fund has about $2 billion invested in the 27 companies, said Comptroller Thomas P. DiNapoli.
“Investors are by definition risk-takers, but our risks need to be calculated and measured,” DiNapoli said. “Investors have a right to know that our companies are taking all necessary steps to maximize opportunities without sacrificing safety. We believe improved practices and policies to mitigate risk will ultimately improve the bottom line, which is good for all investors.”