New York energy czar has large fossil-fuel holdings

New York State’s energy and finance czar, Richard Kauffman, champions the state’s aggressive move into renewable energy, but his private investment portfolio contains sizable holdings in fossil-fuel based companies, including several with business before the state.

A Newsday review of his 2015 financial disclosure statement filed May 13 shows that Kauffman, chairman since 2013 of the New York State Energy Research and Development Authority, where he draws a $157,595 annual salary, has 19 direct stock and investment partnerships in such energy companies.

They include three that are registered to lobby the administration of Gov. Andrew M. Cuomo and other state agencies and a Danish energy company that led Kauffman to recuse himself from further meetings or decisions relating to its wind-energy plans, the analysis shows.

Kauffman and his wife’s fossil-fuel investments are valued at as much as $3 million, according to the financial statement. They include holdings in Phillips 66, Chevron, Valero and Sunoco Logistics and some of the largest crude-oil and natural gas exploration, refining, pipeline and storage companies in the country, according the disclosure. At least one company, Denver-based Antero Midstream Partners, supplies water systems and other services for hydrofracking, a natural-gas extraction process banned in New York.

Kauffman’s portfolio of fossil-fuel holdings could complicate his role as New York’s chief strategist and promoter of the state’s conversion to renewable energy sources, two Long Island state assemblymen said.

“I’m flabbergasted,” said Assemb. Steve Englebright (D-Setauket), who chairs the assembly environmental conservation committee. “It does sound contradictory to the stated purpose of this administration to dramatically scale back the state’s carbon footprint. I can only say that it certainly looks peculiar and problematic.”

The energy research and development authority said Kauffman has not played any role in state issues involving the fossil-fuel companies with interests in the state. His investments in those companies did not require that he recuse himself because he is not actively involved in state dealings with them.

“To recuse or distance himself from New York State dealings and other matters where he never had a role and has no investments is wholly unnecessary,” the agency said in a statement.

More broadly, the authority said Kauffman’s investments are managed by Goldman Sachs and that he has been minimally involved in investment decisions. The agency said Kauffman has made “only two significant investments on his own”: In Clean Feet Investors, a “socially responsible investment” fund, and Generation Investment, an investment management partnership chaired by former U.S. Vice President Al Gore.

However, Assemb. Fred Thiele (I-Sag Harbor) said Kauffman’s holdings create “a situation where the public will wonder whether or not he is promoting the interest of the public or his own economic interests. He has a fiduciary role in his job as a public official. When you have that responsibility you cannot serve two masters.”

The energy research and development authority said Kauffman recused himself this summer from meetings and decisions with Danish-energy giant Dong Energy because of his holdings in a Goldman Sachs subsidiary, Danish Energy Investors, that controls about 14 percent of Dong.

That removed Kauffman, a former partner at Goldman Sachs who chaired the firm’s Global Financing Group, from contact with the world’s largest wind-energy developer just as New York State, and the authority specifically, move to launch a multipronged initiative for offshore wind energy. Dong and the authority are expected to bid for the wind energy area in mid-December.

As state energy czar, Kauffman manages and oversees New York’s “entire energy portfolio,” according to the authority, including the state Department of Public Service, the New York Power Authority and the Long Island Power Authority. This summer, the Public Service Commission, which Kauffman also oversees, passed a Clean Energy Standard that seeks to shift 50 percent of the state’s energy sources to renewables by 2030.

“Richard Kauffman is the latest example of a thorny problem — when a governor plucks a well-invested and knowledgeable expert to become the policymaker, and such expert stands to profit . . . by such policymaking,” said Manhattan attorney Ravi Batra, a former member of the state’s Joint Commission on Public Ethics.

Russ Haven, legal affairs counsel for the watchdog New York Public Interest Research Group, said that where even the appearance of a conflict of interest arises, Kauffman should get a ruling from the state ethics commission.

“In that role in government you need to be transparent and make sure the public is 100 percent confident you’re acting in its interest,” Haven said. “The best thing to do is to have someone independent take a look at it.”

Susan Lerner, executive director of Common Cause, a nonprofit watchdog group, said Kauffman should go further.

“The public needs to be assured in some manner that the head of an agency is not financially benefiting from his intimate knowledge of the industry he’s regulating,” Lerner said. In saying that his investments are being managed by Goldman Sachs, Lerner said. “It behooves him to clarify what ‘management’ means.”

The ethics commission, which conducts such reviews, said it couldn’t comment on whether Kauffman has requested such an approval.

As Cuomo’s hand-picked chairman of energy and finance, Kauffman is the most senior and visible official behind the state’s aggressive shift to renewables. Among the projects he is spearheading is the Greenbank, a $1 billion fund that backs outside investment in New York’s renewable growth.

Kauffman’s wife is Ellen Jewett, a former managing director at BMO Capital Markets who spent more than 20 years at Goldman Sachs specializing in airport infrastructure financing.

Together, their holdings are valued at a total of between $72 million and $90 million, according to a Newsday analysis of documents received through a Freedom of Information Law filing. The disclosures report holdings in broad ranges.

The state energy research and development authority said Kauffman divested all direct ownership of Goldman Sachs shares when he worked for the Department of Energy in 2010.

But his most recent disclosure statement still listed up to $75,000 in Goldman Sachs Group stock owned by his wife. And his investment portfolio, which contains dozens of individual investments in Goldman hedge funds, bonds and partnerships, is managed by Goldman Sachs under a special arrangement by the company for former executives.

In 2013, Goldman Sachs made a $500 million investment with SolarCity, one of the nation’s largest solar-energy companies, to fund “an attractive financing structure to further lower the cost of capital of financing solar,” the 2013 announcement from SolarCity said. “The financing can make it easier to fund projects for schools, municipalities and other organizations that are not publicly rated.”

New York has invested some $750 million to fund a “gigafactory” for SolarCity as part of the state’s Buffalo Billion initiative, a project to revitalize Western New York that was the center of federal corruption charges filed in September against nine people, including two top state officials. One of them, former Cuomo aide Joseph Percoco, was indicted in the case last Tuesday.

Also, SolarCity is a preferred vendor for the New York Power Authority’s K-Solar program, which is expected to bring solar panels to hundreds of schools in the state.

The state energy research and development authority said Kauffman has no dealings with Goldman Sachs

“Mr. Kauffman divested all of his direct stock holdings in Goldman Sachs in 2010 and left the firm over a decade ago,” the authority said. “He has had no relationship or communications regarding any of Goldman Sachs’ strategic business or management decisions and/or investments made by the firm.”

Among the more than 200 funds, bonds, stocks and partnerships listed in his state financial disclosure statement, the Kauffmans own between $75,000 and $100,000 in stock in Williams Partners LP, owner of a large network of interstate natural gas pipelines and one of the investors in the Constitution Pipeline company, which is seeking to construct a 125-mile natural gas pipeline in New York.

Williams Companies has hired the politically connected firms Tonio Burgos & Associates and the Elk Street Group to lobby the governor’s office, the Public Service Commission and the Department of Environmental Conservation on 16 separate bills, and “issues relating to natural gas pipelines and hydraulic fracturing,” according to state lobbying records.

New York has thus far denied the permits Constitution needs for the pipeline project. In April, the state Department of Environmental Conservation denied a water quality permit for the pipeline because the application lacked adequate information about whether the project would meet water quality standards.

The energy research and development authority said Kauffman has “no interaction” with any of the gas and oil companies in which he is invested with the exception of a meeting he had with Williams Partners and Tonio Burgos in March 2014 about the Constitution pipeline and other issues.

The authority noted there were two other people in the meeting, that Kauffman has met with “hundreds of companies” in his role as chairman and that he has “no siting authority” for the pipeline.

As previously reported in Newsday, Kauffman’s portfolio also contains a stake of up $500,000 in a Goldman Sachs subsidiary known as Danish Energy Investors, a Cayman Islands registered company with an interest in Danish oil and gas giant Dong Energy. Dong describes itself as the world’s largest wind-energy developer.

Danish Energy Investors owns 13.39 percent of Dong Energy and has a seat on Dong’s board but “they are not involved in our day-to-day business,” said Dong spokesman Tom Lehn-Christiansen. Dong is “owned by Goldman Sachs, so please direct those questions to Goldman Sachs.”

Goldman Sachs declined to comment.

The authority said Kauffman “proactively and formally” recused himself from any future meetings with Dong, after the state announced June 2 that the authority would be the state’s lead agency to bid for an 81,000 acre federal wind-energy area south of Long Island.

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.