Release Date: June 2009
Next Release Date: To Be Determined 

This report provides an assessment of foreign ownership of energy assets in the United States. Section 657, Subpart 8 of the U.S. Department of Energy Organization Act (Public Law 95-91) requires an annual report to Congress which presents: “a summary of activities in the United States by companies which are foreign owned or controlled and which own or control United States energy sources and supplies ….” The Energy Information Administration intends the information in this report for use by the U.S. Congress, U.S. Government agencies, industry analysts, and the general public.

Findings

• The U.S. electricity generating capacity owned by foreign direct investors fell 19 percent in 2006 as the largest foreign direct investor in the previous year sold much of its capacity to a domestic investor. However, five other foreign direct investors increased their U.S. capacity by about 10 percent or more.
• Foreign direct investors decreased their ownership of U.S. crude oil distillation capacity by 2.0 percent in 2006, almost entirely because the second-largest foreign direct investor sold its share of a refinery with a capacity of 270 thousand barrels per day to its domestic joint-owner.
• For the fourth year in a row, crude oil and natural gas liquids production and natural gas production in the United States by foreign direct investors declined in 2006. Oil production fell off largely because of reduced output by the top foreign direct investor; natural gas production dropped largely because of declines by the (same) largest investor and to a lesser extent by a mid-level investor.
• Net capital flows from foreign direct investors into the U.S. petroleum industry and the U.S. electric power generating industry were a modest 2.6 and 2.2 percent, respectively, of the total direct capital flow into the United States by investors in 2006.

Background and Definitions

Foreign direct investment (FDI) in the United States is defined as the ownership or control, directly or indirectly, by one foreign direct investor of 10 percent or more of the voting securities of an incorporated U.S. business enterprise or the equivalent interest in an unincorporated U.S. business enterprise (or asset). Ownership or control of less than 10 percent of the voting securities of a business is not considered to be direct investment. In this report, an FDI-affiliate company or FDI affiliate is a U.S. business in which there is foreign direct investment.[1] All of the information in this report is from publicly available sources. This report describes the role of direct foreign ownership of U.S. energy enterprises with respect to their energy operations, capital investments, and net foreign investment flows (including net loans). For a discussion of acquisitions and divestitures of U.S. energy assets by foreign direct investors in 2006, see “Acquisitions and Divestitures by Foreign Direct Investors in U.S. Energy 2006.”[2]

FDI is one measure of the continuing influence or control of foreign companies or individuals over the management and disposition of U.S. assets of production.[3]However, determining influence or control of a company is often a complex and subjective process in which many factors other than the percentage of voting rights or ownership must be considered. While holding 10 percent or more of a company’s voting rights suggests control of that company, it does not guarantee it.[4]




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[1] The FDI-affiliate companies included in this report include all of the U.S. energy companies (meeting minimum reporting requirements) that could be determined to be FDI affiliates from publicly available information by the Energy Information Administration.

[2] Energy Information Administration, (Washington, DC , May 2008). 

[3] The U.S. International Investment and Trade in Services Survey Act stipulates that “ownership or control of 10 percent or more of an enterprise’s voting securities is considered evidence of a lasting interest in or a degree of influence over [the enterprise’s] management sufficient to constitute direct investment.” Alicia M. Quijano, “A Guide to BEA Statistics on Foreign Direct Investment in the United States,” Survey of Current Business (Washington, DC, February 1990), p. 29.

[4] The percentage amount is, of necessity, arbitrary, because no exact percentage of ownership is necessary to achieve control of a company. Even ownership of greater than 50 percent of a company may not be sufficient for control, because the approval of more than a majority of owners may be required for some actions to be taken. For further discussion and a comprehensive analysis of FDI in the United States, see Edward M. Graham and Paul R. Krugman, Foreign Direct Investment in the United States, 3rd ed., (Washington, DC: Peter G. Peterson Institute for International Economics, 1995).