CPPIB Watch: A quarterly update on CPPIB-owned fossil fuel companies (April - June 2024)
Canada’s national pension manager, the Canada Pension Plan Investment Board (CPPIB), claims it’s committed to net zero emissions by 2050. Yet CPPIB has tens of billions of dollars invested in fossil fuel companies that lack credible transition plans and are expanding and prolonging the use of oil and gas– the primary drivers of climate-wrecking emissions. The actions of these companies do not appear to align with CPPIB’s climate commitments, and expose our national retirement savings to unacceptable risks as the climate crisis worsens and the transition away from fossil fuels accelerates.
Here’s what some of CPPIB’s fossil fuel companies have been up to in the last quarter:
Encino Energy: CPPIB marked Earth Day by committing US$300 million to Encino Energy’s expansion of fracking in Ohio;
Teine Energy: the CPPIB-owned Canadian oil and gas company publicly called for the withdrawal of the federal government’s proposed oil and gas emissions cap and announced it will design and deliver "Oil and Gas high school courses" in Saskatchewan.
Allete: CPPIB’s proposed acquisition of US Midwest utility player Allete could be a smart investment in renewable energy and electricity distribution and transmission assets, but also exposes the Canada Pension Plan to a lignite coal mine and a fleet of coal- and gas-fired power plants;
Aera Energy: Proposed merger of CPPIB-owned Aera Energy and California Resources Corporation could expose CPPIB to oil and gas cleanup liabilities and escalating regulatory risks
Calpine is going big on battery storage in California, while building new gas plants in Texas;
Wolf Carbon Solutions US, which is 99% owned by CPPIB, is facing headwinds after Illinois imposed a two-year moratorium on carbon capture and storage, delaying Wolf’s controversial CO2 pipeline project in the US Midwest.
Civitas Resources: CPPIB sold 7 million shares in Civitas Resources, but still owns a 10% stake in the Denver-based oil and gas producer;
Nedgia: Spain's largest fossil gas distributor, Nedgia, launched a renewable natural gas project that will absorb biomethane from a local landfill;
Read on for the details.
CPPIB marked Earth Day by committing US$300 million to fracking expansion in Ohio
Encino Acquisition Partners is 98% owned by CPPIB, with a CPPIB Managing Director on Encino’s board.
While CPPIB has still reported nothing about the April 2024 investment, Houston-based oil and gas company Encino Acquisition Partners LLC (Encino Energy, or EAP) announced CPPIB’s commitment to “EAP’s accelerated development of the Utica oil play.” This investment makes a mockery of CPPIB’s net-zero emissions commitment. The International Energy Agency and Intergovernmental Panel on Climate Change are clear that oil and gas expansion must cease immediately and production must be rapidly phased out in order to limit global heating to 1.5°C by 2050.
EAP is one of Ohio's largest oil and gas producers. It was recently granted licenses to frack under two protected state wildlife areas. EAP 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. Ohio’s recent fracking approvals appear to be influenced by an oil industry front group, Consumer Energy Alliance, that's under investigation by the state's Attorney General's office for fraudulently submitting letters in support of fracking on state public lands.
Read Shift’s statement for the full story.
Teine Energy fighting climate policy and putting oil and gas into high school curriculum
Teine Energy is 90% owned by CPPIB.
In March, Teine Energy signed on to an open letter from the Calgary Chamber of Commerce Canada's Minister of Environment and Climate Change calling for the withdrawal of the proposed oil and gas emissions cap and a delay to the proposed Clean Electricity Regulations, two crucial climate policies to drive down emissions in the oil and gas and electricity sectors, respectively. This advocacy against climate policy by a CPPIB portfolio company directly hinders CPPIB’s own net-zero commitment.
Teine Energy’s climate obstruction did not deter the Saskatchewan government (which says “As much as the federal government would like to think we're going to be moving away from oil and gas, it isn't going to be happening anytime soon") from tapping Teine to produce oil and gas high school courses. The courses consist of 50 hours of "online theory" and 50 hours of work placement and seem to prepare high school students for disappearing jobs in a dead-end industry. Public reaction against putting Teine in charge of education for Saskatchewan high school students was swift: The Saskatoon Star Phoenix said “it now appears the province has sold a sliver of its education system to an oil company for propaganda purposes,” while the Regina Leader-Post asked “isn’t there at least a perception problem of corporate indoctrination of high school kids?"
CPPIB is proposing a US$6.2-billion acquisition of a utilities conglomerate that includes a coal mine and fossil fuel power plants
If approved by regulators, CPPIB would become the 40% owner of Allete.
CPPIB’s proposed acquisition of Allete could become a smart investment in a major US electric utility player– but not without a clear and credible climate-aligned transition plan for all of Allete’s fossil fuel subsidiaries. CPPIB’s announcement does not include any mention of the actions required to retire Allete’s risky, climate-polluting coal and gas assets in line with CPPIB’s net-zero commitment and global climate goals.
As part of a proposed US$6.2-billion deal to acquire Allete, subject to approval by regulators, CPPIB is planning to invest in a valuable and growing portfolio of renewable energy and electricity distribution and transmission assets across the US Midwest. But the deal would also invest Canada’s national retirement fund in a lignite coal mine in North Dakota, a particularly poor-quality source of energy that must be phased out rapidly in line with climate obligations. In addition, CPPIB’s acquisition of Allete would include a fleet of coal- and gas-fired power plants that must also be phased out to align with Paris climate goals and increasingly stringent federal and state clean energy targets in the US.
Shift supports the use of public pension capital to increase investment in renewable energy and electrification and to accelerate the decarbonization of electric utilities. But the fossil fuel assets acquired through such deals must be rapidly phased out to align with safe net-zero emissions pathways. Allete subsidiary and lignite coal mine operator BNI Energy has no net-zero target and no phase-out plan, while other electric and gas utilities in the Allete group of companies appear to have inadequate transition plans to phase out their coal- and gas-fired power generation and gas distribution assets. This exposes CPPIB to considerable stranded asset risk and keeps fossil fuel assets operating for longer than permitted to limit global temperature increase to 1.5℃.
Read Shift’s statement for the full story.
Proposed merger would make CPPIB part owner of California’s largest oil and gas producer– and its multi-billion-dollar clean-up liabilities
Aera Energy is 49% owned by CPPIB, with a CPPIB Managing Director on Aera’s board.
CPPIB is propping up a California oil and gas company that stands to own 40% of the state’s idle oil wells, even as stricter state regulation on well cleanup and a new court ruling bring to light the financial perils linked with such investments. In February, California Resources Corporation (CRC) revealed plans to acquire Aera Energy, which would create the state’s largest oil and gas company. If the deal is approved by regulators, CPPIB would own about 11% of the combined company.
The merger would expose CPPIB’s investment to new regulations, including a bond requirement for CRC to cover the massive cost of plugging its idle wells. Furthermore, a recent Kern County court ruling increases the stringency of well permitting requirements, which could impede the new company’s growth.
As the Aera/CRC merger comes to a shareholder vote on June 26, CRC has so far refused to provide California regulators with an estimate of the cost of plugging the combined company’s oil wells. The Sierra Club estimates the cost to clean up just the portion of CRC/Aera’s wells that are no longer in production to be $3.5 billion. If active wells are included too, the cost would be billions more. This raises the question of who will pay to clean up the multi-billion-dollar environmental mess left behind by California’s largest oil producers– a CPPIB-owned oil company or California taxpayers?
“It’s hard to understand why CPP Investments would expose its fund to California’s largest oil and gas producer when the state is implementing some of the toughest climate policies in the world,” Shift’s Senior Manager Patrick DeRochie told The Energy Mix. “Even if California oil and gas producers weren’t facing massive cleanup liabilities and escalating regulatory, legal, financial and political headwinds, the oil industry is facing inevitable, terminal, structural decline. Climate-smart investors won’t touch these companies with a 10-foot pole, so CPP Investments is really bucking the trend here.”
A study on CPPIB’s net-zero commitment published by faculty members of the Harvard Business School this spring includes a short case study of CPPIB’s decision to purchase a 49% stake in Aera Energy in 2023. The Aera case study mentions a debate within CPPIB’s Sustainable Energies team, with staff raising concerns about the investment’s alignment with CPPIB’s net-zero commitment, the profitability of Aera’s transition strategy, and the company’s ability to generate enough cash flow to fulfill its environmental obligations, including well abandonment and reclamation.
Calpine is building battery storage, but won’t leave gas in the past
Calpine is 13.4% owned by CPPIB, with a CPPIB Managing Director on Calpine’s board.
Calpine, the largest producer of power from fossil gas and geothermal resources in the US, is planning a 680-megawatt battery storage project in California, spread across the repurposed site of a decommissioned gas-fired power plant. Once powered up, the project will provide energy storage and discharge capabilities for utilities Southern California Edison, Peninsula Clean Energy and San Diego Gas & Electric.
While energy storage is a smart investment for Canada’s national retirement fund and for the planet, Calpine is simultaneously planning to build new fossil fuel infrastructure that would lock in more gas use for decades to come. As Texas baked under life-threatening heat this spring, Calpine was proposing to build over 1,000 megawatts of new gas-fired power generation in the Lone Star State.
Wolf Carbon Solutions facing headwinds from a CCS moratorium in Illinois
Wolf Midstream is 99% owned by CPPIB, with two CPPIB Managing Directors on Wolf’s board.
Wolf Carbon Solutions US, a subsidiary of Wolf Midstream, a carbon capture and storage (CCS) company owned by CPPIB, is facing headwinds after the state of Illinois imposed a two-year moratorium on the controversial technology in May. The Illinois moratorium shines a spotlight on the challenges facing the CCS industry, and the risks CPPIB is taking by investing Canada's national retirement fund in this expensive, controversial, unproven, ineffective technology.
Wolf announced a partnership in 2022 with agriculture and food processing company Archer-Daniels-Midland (ADM) on a project to supposedly capture, compress, transport and store 12 million tonnes of CO2 per year from ADM's ethanol facilities and cogeneration plants in the US Midwest, with spare capacity to store CO2 from other emitters. The project's been bogged down in the regulatory process since then, largely due to environmental and safety concerns from farmers, landowners and community members.
Now, Illinois lawmakers have passed sweeping regulations on the state's CCS industry, including a moratorium of up to two years on pipelines transporting CO2, or until federal authorities pass new pipeline safety guidelines. The new rules break down into three categories: requirements for how carbon emissions must be captured, regulations around pipeline construction, and rules for what happens once the carbon is stored underground. The legislation establishes a “do no harm standard,” which would prevent polluting facilities from pumping more emissions to take advantage of federal tax credits for CCS. It also requires that CCS facilities store more carbon pollution than they produce.
CPPIB sells 7 million shares in Civitas Resources
But CPPIB still holds a 10% stake in “Colorado’s first carbon-neutral energy producer”.
In May, CPPIB sold nearly 7 million shares in Civitas Resources. While this is a significant divestment, CPPIB still holds a 10% stake in the Denver-based oil and gas company, which falsely claims to be "the first carbon-neutral oil and gas producer in Colorado." The claim ignores Civitas’ scope 3 emissions– the emissions that come from Civitas’ oil and gas being burned– and relies on dubious carbon offsets. Canada's national pension manager has no policies in place to stop investing in new oil and gas production, which is fundamentally incompatible with Paris climate agreement goals.
Nedgia to use a tiny amount of RNG in Spain
Nedgia is 12% owned by CPPIB.
Spain's largest fossil gas distributor, Nedgia, announced this spring that it launched its first-ever reverse flow station near Barcelona. This will reportedly allow the station to absorb biomethane captured from a local landfill and inject up to 70 GWh annually of "renewable natural gas" (RNG) into Spain’s fossil gas distribution network. This is the equivalent of the gas needed to power 14,000 households, a tiny fraction of the gas distributed by Nedgia.
RNG may be a short-term solution that offsets a limited amount of fossil gas production and use, but it prolongs the use of gas pipelines, delays the transition to zero-carbon alternatives like electric heating, and does nothing to prevent the emissions caused from RNG's end-use.
Ongoing fossil fuel expansion cannot align with CPPIB’s mandate
It should be obvious that achieving CPPIB’s mandate is dependent on stabilizing global temperatures at relatively safe levels, while avoiding exposing the Canada Pension Plan to stranded fossil fuel 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 making risky bets on dangerous distractions like CCS that prolong the use of fossil fuels, CPPIB is betting the Canada Pension Plan against an accelerating energy transition and putting Canadians’ retirement security at risk from catastrophic climate change.