Susan Rice, the troubled potential nominee to replace Hillary Clinton as Secretary of State, seems to have a peculiar interest in Canadian energy companies. Earlier this week On Earth, a magazine published by the environmental group Natural Resources Defense Council, reported that an unusually large part of her and her husband’s personal wealth is tied up in Canadian energy companies and banks that stand to gain significantly if the U.S. State Department approves the Keystone XL pipeline to bring oil from Canada through the United States for export through ports on the Gulf of Mexico. (The “XL” project is an extension of the overall Keystone project which includes pipelines to bring Canadian oil to U.S. based refineries that became operational in 2010.)
The personal portfolio of Rice and her Canadian-born husband Ian Cameron includes shares in two large Canadian energy companies, Cenovus and EnCana. Until 2009, EnCana was both an oil and natural gas company. It then spun off its oil assets in the newly formed Cenovus entity. It is likely that Rice obtained the shares of Cenovus as a result of an original investment in EnCana.
Both EnCana and Cenovus are large Canadian energy firms with links to Keystone. EnCana entered into a joint venture with ConocoPhillips known as Wood River which owns refineries in the U.S. built to process oil that comes from Canada via one completed part of the Keystone pipeline project. Cenovus now owns that interest in the Wood River project. The Toronto Globe and Mail reported in 2011 that Cenovus was “banking” on overall approval of the pipeline project “underscore[ing] the high stakes” if the project were not approved.
It turns out that Rice and her husband were also willing to wager a substantial part of the assets of their family foundation on the prospects of those very same two energy companies. A filing with the IRS by the Rice-Cameron Family Foundation reveals that the Foundation has most (approximately 80%) of its investments in typical diversified stock and bond funds. These are valued at approximately $750,000. But the remaining 20%, valued at about $180,000, is invested in EnCana and Cenovus. Those companies are the only direct equity investments made by the Foundation. A copy of the filing can be found here.
Also of interest is that the Foundation filing is for the tax year ending November 30, 2011, so unlike the older 2009 disclosure document provided by On Earth, the IRS filing (called a “Form 990”) indicates a continuing interest in Canadian energy prospects lasting until late 2011.
My own view about Ambassador Rice is that her potential nomination as Secretary of State should be opposed because she represents the “relativist” world view that animates Obama’s approach to foreign policy. To date, Obama has not been able to put a significant institutional piece of the national security apparatus outside the White House in the hands of a loyal “relativist.” This would change if Rice, a hard core loyalist of both Obama and Valerie Jarrett, were put in charge of the Department of State.
But it is also quite odd to see this information about her approach to investing. What appears to be a heavy bet on a major energy transaction is a high risk strategy that would not be typical for a family foundation or even for someone with the resources that Rice and Cameron own personally. Diversity is the norm for the assets of foundations and other non-profit entities. Rice and her husband are trustees of the Foundation and owe it a fiduciary duty. Normally that duty mandates diversity of assets. Here, however, they have put nearly 20% of the Foundation’s assets into just two companies, both with links to the controversial Keystone project, although that appears to be no longer the case for EnCana.
Another troubling aspect of the interest of RIce in the international oil industry is the fact that oil companies are notorious for being bad actors in the global economy, an issue I explored in my article The PetroChina Syndrome. In the past, for example, there were large protests about the investment of Talisman, a Canadian oil company, in Sudan. There are also allegations that some of the companies held in the Rice and Cameron personal portfolio do business with Iran. At a minimum one would have expected Rice to divest her holdings in this controversial sector while serving the public as a diplomat.