CPPIB’s Fossil Fuel Companies - January-March 2024 Updates
Canada’s national pension manager, the Canada Pension Plan Investment Board (CPPIB), claims it’s committed to net zero emissions by 2050. Yet as documented in Shift’s 2023 Canadian Pension Climate Report Card, the CPPIB has tens of billions invested in fossil fuel companies that are expanding and prolonging the use of oil and gas. The actions of these companies do not appear to align with the CPPIB’s climate commitments, and expose our national retirement savings to unacceptable risk as the fossil fuel industry faces terminal decline and the energy transition accelerates.
Here’s what some of the CPPIB’s fossil fuel companies have been up to in the last quarter:
Encino Energy is planning to frack under a protected wildlife area and explore for oil and gas on school property in Ohio;
Private equity fund Kimmeridge Fund VI invested in fracked gas assets and a proposed LNG terminal, but is now running up against U.S. President Biden’s LNG pause;
Aera Energy, California’s second largest oil and gas producer, is set to merge with California Resources Corporation and become the state’s largest producer;
Civitas Resources’ drilling plans are being thwarted and facing opposition in Colorado;
Calpine is building new gas plants in Texas and California;
Nephin Energy and Nedgia are undertaking “renewable natural gas” initiatives in Ireland and Spain, respectively; and
VoltaGrid, which plays a prominent role in the fossil fuel supply chain, is misleadingly classified as part of CPPIB’s “Sustainable Energies” portfolio.
Read on for the details.
Encino Energy wants to frack under protected wildlife areas and explore for oil and gas on school property
Encino Energy, a CPPIB-owned oil and gas company, is planning to frack for oil and gas underneath protected wildlife areas in Ohio, despite statewide health and environmental concerns and an ongoing investigation into potentially fraudulent support for fracking expansion. Encino also successfully pressured Ohio’s Cambridge City School Board to approve a lease agreement that allows the company to explore for oil and gas on school property.
Encino is 98% owned by CPPIB and a Managing Director in CPPIB’s “Sustainable Energies” group sits on Encino’s Board of Directors. “I think many Canadians would be shocked and disappointed if they learned our national retirement fund is being used to frack for oil and gas underneath a protected wildlife area,” Shift’s Patrick DeRochie told Canada’s National Observer. “And it just really begs the question: What in the world is CPPIB doing with our collective retirement savings and not telling us about?”
CPPIB’s Kimmeridge Fund VI investment runs up against Biden’s LNG pause
In January, the Biden administration placed an immediate pause on pending export permits for LNG. A White House statement from President Biden said, “This pause on new LNG approvals sees the climate crisis for what it is: the existential threat of our time." The pause threatens CPPIB’s US$100 million investment in Kimmeridge Fund VI, made in 2022. In August 2023, Kimmeridge used this private equity fund to make an investment in Commonwealth LNG, a proposed export terminal on Louisiana's Gulf Coast. Kimmeridge also bought a portfolio of gas assets in Texas, and Commonwealth LNG agreed to purchase Kimmeridge’s fracked gas. At the end of February 2023, Commonwealth LNG postponed a final investment decision on the proposed LNG facility and is now targeting commercial operations by the end of 2028 -- by which point demand for all fossil fuels, including gas, is predicted to peak and begin to decline.
Aera Energy backs “carbon management” and announces a merger
In January, California’s second largest oil and gas producer and CPPIB-owned company Aera Energy backed a US$47-billion "Carbon Management Business Park", which has been criticized by a Stanford University engineering professor as having “no purpose except to keep the oil and gas companies in business.” In early 2023, CPPIB purchased a 49% stake in Aera Energy, making promises to invest in renewable energy to power the oil company’s production, stating vague intentions to capture some amount of carbon from Aera’s facilities, and speculating about using unproven concentrated solar technology to extract oil. None of these intentions serve to lower the emissions produced from burning the oil and gas that Aera produces. CPPIB’s head of sustainable energy subsequently told the Globe & Mail that Aera’s “oilfields are mature and that there is a plan to ramp down production over time.” CPPIB has provided no further details on how it will achieve a Paris-aligned wind-down of Aera’s oil and gas production.
In February 2024, Aera Energy announced plans to merge with California Resources Corporation (CRC). The combined company would become California’s largest oil and gas producer. If the merger is approved by regulators, CPPIB will own 11% of the combined company and have a seat on its board. Environmental groups and consumer advocates are raising concerns about the Aera-CRC merger and the combined company’s idle well clean-up liabilities. For example, non-profit public advocacy group Consumer Watchdog is calling for California’s energy regulator to require CRC to “put up the hundreds of millions of dollars in bonding needed to acquire Aera’s wells so that consumers are not left holding the bag on their eventual plugging.” Stay tuned for Shift’s analysis of the Aera/CRC merger, and its implications for the energy transition and Canada’s national pension fund.
Civitas Resources drilling plans get thwarted
In February, Colorado's oil and gas regulator rejected a proposal from Extraction Oil & Gas, a subsidiary of Civitas Resources, to drill 18 new wells in a heavily-populated area of the state. CPPIB is the largest shareholder in Civitas, which claims to be “Colorado’s first carbon-neutral energy producer”. Civitas is also proposing to develop a 166-well oil and gas project in suburban Denver that is facing regulatory scrutiny and community opposition because it could imperil a decades-long, multimillion-dollar effort to prevent carcinogenic chemicals stored on one of the U.S.’s most contaminated industrial sites from leaking into groundwater.
Calpine secures US$1 billion to build battery storage-- but is also building new gas plants
Calpine, of which CPPIB owns a 13% stake, has secured US$1 billion in debt financing for a utility-scale battery storage project in California. Meanwhile, the company is also building new gas plants in Texas and California, prolonging and expanding the use of gas for decades to come.
Nephin Energy and Nedgia: “Renewable Natural Gas” initiatives
Nephin Energy, whose main business is producing 30-40% of Ireland’s fossil gas from the offshore Corrib gas field, is 43.5% owned by CPPIB. Two CPPIB Principals sit on Nepgin’s board of directors. The Corrib gas field is expected to run out of producible gas in the 2030s, and Ireland’s government has banned new gas exploration and production licenses. In February, Nephin launched a new company, “Nephin Renewable Gas” to develop biomethane plants that would capture methane from agricultural operations and inject it into the gas pipeline network.
Meanwhile, Nedgia, Spain’s largest fossil gas distribution company, 12% owned by CPPIB, has also announced a “renewable natural gas” (RNG) initiative. While RNG (or biomethane) projects could incrementally reduce emissions from the agricultural sector, the fuel still produces greenhouse gas pollution when burned and is not a credible alternative to electrifying the economy and retiring fossil gas pipeline networks in the medium- to long-term.
VoltaGrid is another example of CPPIB greenwashing
In March, CPPIB provided hundreds of millions of dollars to its portfolio company VoltaGrid, a Houston-based energy management and power generation company. While VoltaGrid offers a range of energy services and solutions, such as renewable energy, microgrids, energy storage and load management, the company’s core business is in the fossil gas industry. One of VoltaGrid’s main products is a 2.5-MW fossil gas generator that produces “low carbon” on-site mobile power, particularly for oil and gas production. The company also operates five compressed natural gas (CNG) terminals across the U.S., including the largest CNG terminal in the Permian Basin. And VoltaGrid claims that its “net zero carbon offsets” can help companies “achieve carbon neutrality today”—without actually slashing emissions from their actual operations. Despite its prominent role in the fossil fuel supply chain, VoltaGrid is included in CPPIB’s “Sustainable Energies” portfolio. A CPPIB Managing Director sits on VoltaGrid’s board of directors. CPPIB’s ongoing financing of VoltaGrid is another example of greenwashing from Canada’s national pension manager. Fossil gas is not “low carbon”. Electrifying oil and gas production is not a climate solution. And offsets allow polluting companies to keep polluting while making false net-zero claims.
Ongoing fossil fuel expansion cannot align with the CPPIB’s mandate
It should be obvious that achieving the CPPIB’s mandate is dependent on stabilizing global temperatures at relatively safe levels, while avoiding exposure of the fund to stranded assets. Canadians require a livable planet on which to retire, and climate scientists and energy modellers are clear that limiting global temperature increase to 1.5°C and avoiding catastrophic impacts to our ecosystems, economy and financial system requires fossil fuels to be rapidly phased out. With its own companies continuing to expand oil and gas production and build out fossil fuel infrastructure, the CPPIB is making an alarming bet on the world failing to limit global heating to safe levels, putting the Canada Pension Plan at risk from an accelerating energy transition and Canadians’ retirement security at risk from catastrophic climate change.