Wednesday, September 17, 2014

How State Public Money Pays for Coal Exports and Oil Trains


Tracking public fund investments in fossil fuel projects.

Sightline Daily  by Eric de Place and     
September 17, 2014

Communities across Oregon and Washington are growing increasingly agitated about the risks of fossil fuel export. Proposed coal terminals generated unprecedented opposition from local residents and, more recently, dramatic increases in oil train traffic have many questioning the grave safety risks associated with a cargo so prone to explode. Yet at the very same time, the state governments of both Oregon and Washington are bankrolling coal, oil, and gas infrastructure.

In some cases, the subsidies and expenditures are known but relatively small. But in other cases, large quantities of public money fund the very same facilities so bitterly opposed by the taxpayers that the states are supposed to be investing for.

The governors of each state have voiced strong concern about—and even outright opposition to—major fossil fuel infrastructure projects. Yet, while Governors Inslee and Kitzhaber preach a sustainable future for our region, another wing of the executive branch is quietly betting public money on a vastly different vision.

The Oregon Investment Council (OIC) and the Washington State Investment Board (WSIB) oversee all public investments made for their respective states. These little-known governing bodies manage the funds that will be used for public employee pensions and retirement accounts, labor and industry insurance and care coverage, the state guaranteed college tuition program (in Washington), developmental disability programs, and the like. They invest the monies in a variety of financial instruments, a major portion of which are private equity funds.

Normally, once invested, funds are very difficult to track. But private equity funds pitch investors like the OIC and WSIB on specific portfolios of investments, highlighting not only the overarching theme of the investment package but often specific companies. While state funds are combined with other monies, investors have a much more specific idea about where their dollars are going. They can’t claim ignorance about its final destination.

In other words, it allows us to follow the money.


Washington State Investment Board

Since 2010, WSIB has invested billions (seriously, billions with a “b”) in private equity funds focused on fossil fuel investments, many of which can be directly linked to energy projects in the Northwest.

Through a $250 million investment (p.3) in Stonepeak Infrastructure Fund, WSIB funded Tidewater Transportation and Terminals in December 2012. Tidewater, a Vancouver, Washington-based firm, later signed a deal with Ambre Energy to barge coal downriver from Boardman to Port Westward, Oregon, for its proposed Morrow Pacific coal export project.

From the same fund, WSIB also invested in an oil train project, the Casper Crude to Rail facility, in October 2013. This Wyoming-based project is a major oil shipment hub moving mostly Bakken shale oil, the volatile crude involved in numerous oil train explosions. While we cannot link individual oil trains to specific rail facilities, we do know that Casper Crude to Rail serves West Coast oil refiners, including Tesoro, Shell, and Phillips 66, all of which have major oil-by-rail projects planned for the Northwest.

In 2012, WSIB invested another $250 million in Global Infrastructure Fund II (p.2). A major component of this fund’s portfolio was the Ruby Pipeline, a Kinder Morgan project to ship natural gas from Wyoming to the West Coast. (Kinder Morgan is a huge energy company with a notoriously bad track record, including the deadliest fish kill in a decade on the Willamette River and bribing a Portland ship captain to dump contaminated potash in the Pacific Ocean.) The Ruby Pipeline would deliver gas to a pipeline hub at Malin, Oregon, from which it would be moved (p.4) to a controversial liquefaction and export site planned at Coos Bay, Oregon.


Oregon Investment Council

In 2012, Oregon invested alongside Washington. OIC put $100 million into the same Stonepeak Infrastructure Fund that the Evergreen State funded. Through Stonepeak, the state of Oregon bankrolled the very same Northwest fossil fuel centers: Casper Crude to Rail—with its West Coast-bound oil trains—and Tidewater—with its designs on Columbia River coal barges that Governor Kitzhaber vociferously opposes.

In 2013, Global Partners acquired an oil train facility at Port Westward on the Columbia River. Bankrolling this purchase was a $70 million loan from a “lender of last resort” and longtime OIC investment partner, GSO Capital. OIC has invested hundreds of millions with GSO. Some of those funds were deployed to provide the loan to the Port Westward project (although they were likely mixed with money from other investment funds).
The site has been a lightning rod in the region, especially after it was revealed that site operators brought in five times more oil than they were legally allowed. (Rather than pare back operations at the site, Oregon authorities subsequently issued a permit allowing Global Partners to ship nearly 120,000 barrels per day, making it by far the largest operating oil-by-rail facility in the Northwest.)
And OIC continues to make major investments with another company that is focused on developing the Northwest for fossil fuel exports, Blackstone Capital. Earlier this year, Blackstone Capital sold $962 million worth of American Petroleum Tankers to Kinder Morgan (p.11), a firm that has hatched plans for a (now-scotched) coal export terminal on the Columbia River and a major oil pipeline expansion in British Columbia. It’s entirely possible that Oregon’s public money helped pay for the ships that Kinder Morgan would use to export North American fuel.

We have an obligation to safeguard the public monies we hold in trust for firefighters, schoolteachers, and health care providers. We must protect the value of the investments as well as the economy and natural heritage that sustains us. At a time when the Northwest is choosing whether to become a carbon export hub of global consequence or a thin green line of climate protection, the way we spend our money says a great deal about our priorities.

At the moment, it looks like we’re betting the farm on coal and oil.

Thanks to Cass Martinez, a diligent and informed citizen of the Northwest who first piqued our curiosity, and to Ben Serrurier for his perspicacious finance suggestions.

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