Can a Billionaire Who Got Rich Investing in Big Oil Fight Big Oil?

(BusinessWeek featured the above photo of billionaire Tom Steyer holding a jar of tar-sands oil. The article, titled “Tom Steyer: The Wrath of a Green Billionaire,” lauded his crusade to stop construction of the proposed Keystone XL pipeline, which would transport tar-sands oil from Canada to the Gulf of Mexico. As Darwin Bondgraham reports, part of Steyer’s fortune came from investments in companies that produce tar-sands oil. Image source: BW)

During an April fundraising swing through San Francisco, billionaire Tom Steyer reportedly leaned on President Barack Obama to nix the Keystone XL pipeline. Surrounded by other wealthy Bay Area executives in Steyer’s Sea Cliff home, Obama also got an earful about the need to fund clean renewable energy investments.

Steyer retired from his hedge fund Farallon Capital last year to get more involved in politics and philanthropy, with a focus on the environment. In 2010, he funded an ad blitz that helped scuttle Prop 23, an oil-industry law that would have sabotaged California’s carbon reduction policy. Last year, Steyer spent millions more to campaign for Prop 39, which closes corporate tax loopholes and spends the money on clean-energy research.

Billionaire Tom Steyer hopes to be a champion of the environment, but he made his fortune in part by investing in oil, gas and mining.

But Steyer’s political influence and power come from previous investments that included oil, gas, and mining companies.

Filings with the Securities and Exchange Commission show that while Steyer was senior managing partner at Farallon, the firm owned stock in 10 oil and gas companies for a total value of $440 million, or about 10 percent of Farallon’s publicly disclosed equity portfolio.

“Amongst the reasons Tom left Farallon last year was because he had become uncomfortable with the fact that the fund was invested in virtually every sector of the global economy, including fossil fuels,” said Chris Lehane, Steyer’s spokesperson.

Climate-change activists welcome Steyer’s contributions to the fight against Big Oil, but they note that his inordinate power is itself part of a deeper problem.

“In ideal world, we’d see regular people having a greater influence than big money,” said David Turnbull of Oil Change International, which tracks energy money in politics. “But I don’t begrudge Tom Steyer for using his money to make positive change.”

Steyer ran Farallon for 27 years and built a reputation for posting huge yearly returns. Its profits came from numerous strategies in real estate, stock, and corporate debt markets.

A Farallon spokesperson said she could not break down which investments were most profitable due to SEC rules that prevent hedge funds from advertising or otherwise making their business dealings known. The firm otherwise declined to comment.

Among Farallon’s largest fossil-fuel holdings as of last year were a $211 million stake in Nexen Inc. and $117 million in shares of Kinder Morgan, Inc.

Nexen is a Canadian oil and gas company that drills in the North Sea, offshore West Africa, and North America. The Chinese state-owned CNOOC acquired it this year. Kinder Morgan is a oil and gas pipeline operator, and the third largest U.S. energy company by value. Farallon’s other holdings include BP and offshore driller McMoran Exploration.

Steyer’s Farallon was hands-on in extracting earnings from fossil-fuel companies. In the 2000s, Farallon bought shares, or acquired debt, in distressed oil and gas companies, including Energy Partners, Ltd., and Halcon Resources Corporation. Filings with the SEC show that Farallon owned upwards of 7 percent of the shares of Halcon Resources (formerly known as Ram Energy), and 10 percent of EPL’s stock, giving Farallon a controlling interest in both.

Hedge funds and private equity groups reap huge profits from coal, oil and gas. So does the Democratic Party.

EPL underwent bankruptcy in 2009. Ram Energy neared bankruptcy before it was bought and renamed Halcon Resources. Today both are profitable. EPL is an offshore driller in the Gulf of Mexico, and Halcon drills for oil and gas in several U.S. states. It’s unclear how much Farallon earned from its role as a provider of capital to each company during their reorganizations.

“When Tom departed Farallon, he directed that his investments be divested and re-invested in a new fund that does not include investments in either tar sands or coal, and which considers the environmental impact of all of its investments,” said Lehane. “Tom is advocating that others, including his former partners, pursue a similar approach.” Lehane added that Steyer supports colleges and universities who also withdraw capital from tar sands and coal companies.

Farallon’s investment in Nexen was directly tied to the tar sands.

Its website explains that Nexen is a “major player in Canada’s oil sands,” another name for the massive project that will ship tar-sands oil through the proposed Keystone XL. On Nexan’s board is an executive of TransCanada, the firm behind the pipeline.

Farallon’s investments in dirty energy are not unique. Hedge funds and private equity groups reap huge profits from coal, oil and gas. The same goes for the Democratic Party.

Congressional Democrats have taken $31 million in campaign contributions from the oil, gas, and coal industries, according to the Center for Responsive Politics. While this pales in comparison to the Republican’s $90 million, it’s enough to influence key legislators and tame any kind opposition that Steyer hopes to rally in the Democratic Party.

“What our analysis shows is that those politicians, whether Democrats or Republicans, who take the most money from these companies are clearly voting in the interest of the fossil-fuel industry,” said Turnbull. “Big Oil has more influence than almost anyone.”

 

Darwin Bondgraham is a sociologist and journalist who writes about political economy. His writing has appeared in Counterpunch, Truthout, Z Magazine and others. Follow him @DarwinBondGraham and @WashSpec.