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"The BP oil crisis has highlighted the significant financial risks presented by deepwater drilling and, as a fiduciary, we must be concerned about the possibility of future accidents and try to find ways to mitigate these risks."
Ottawa (16 August 2010) – The head of the investment fund that manages BC’s large public sector pension plans is urging federal regulators to impose "strong rules" on offshore petroleum drilling in Canada.
In a recent letter to the National Energy Board (NEB), which regulates drilling off Canada's coasts, Doug Pearce, chief executive officer of the British Columbia Investment Management Corporation (BCIMC) encourages the NEB not to be swayed by the "short-term profitability view" of energy companies lobbying against tougher environmental safeguards.
BCIMC manages four public sector pension funds with about $80 billion in assets on behalf of 450,000 active and retired employees in the province.
"We understand that corporations often feel driven to satisfy the shorter-term needs of some investor appetites, but with the clear and appropriate policy signals we are suggesting from the NEB, companies would be encouraged to seek a more sustainable approach to their pursuit of oil and economic prosperity," Pearce notes in the letter to NEB.
Calling the collapse of BP's stock price since the Gulf of Mexico oil spill "one of the greatest environmentally-related destructions of shareholder value in history," the BCIMC chief is recommending that oil companies be forced to drill simultaneous relief wells when operating in deep waters around the country, whether it’s in the Far North or the Atlantic.
Pearce acknowledges that the request will undoubtedly trigger a strong response from oil companies, which would see such a law as very costly to comply with.
In the letter to the NEB, Pearce states that after BP’s disaster, “for investors like [BCIMC] to more confidently provide capital to the offshore drilling industry, particularly deep water drillers, we must be assured of better long-term outcomes.” One way to achieve this is by creating “a more robust safety and environmental culture. That means ignoring the short-term losses that might result from additional drilling costs and focusing instead on avoiding the catastrophic losses from another Macondo-style spill.”
Pearce says BP's stock market decline, as well as the suspension of its dividend payment to investors, has had a "profound impact on the value of institutional investment portfolios like ours.” The pension funds that BCIMC manages held more than $100-million in BP shares as of its latest update in March, 2009.
"The BP oil crisis has highlighted the significant financial risks presented by deepwater drilling and, as a fiduciary, we must be concerned about the possibility of future accidents and try to find ways to mitigate these risks."
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