CPPIB Watch: A quarterly update on CPPIB-owned fossil fuel companies (July - September 2024)
Canada’s national pension manager, the Canada Pension Plan Investment Board (CPPIB), claims it’s committed to net zero emissions by 2050. Yet this quarter saw the CPPIB pour $1.2 billion into a 16,000-km oil and gas pipeline company– CPPIB’s fifth fossil fuel investment of the year.
Do you want the Canada Pension Plan to invest in a safe climate future? CPPIB is hosting public meetings across Canada this fall and you have a chance to have your voice heard. Get in touch with Shift to find out more.
CPPIB’s continued investment in fossil fuels contradicts the statements of its own leadership. In July, a CPPIB portfolio company announced a final investment decision of $1 billion to increase gas production to power the petrochemical industry. In August, CPPIB used $1.2 billion from our national pension fund to buy a 16,000-km oil and gas pipeline company. This summer also saw CPPIB become the co-owner of California’s largest oil and gas producer and featured in Oil and Gas Investor as “key to the story” of fracking expansion in Ohio.
That’s why Canadians have good reason to be skeptical of CPPIB’s Chief Sustainability Officer unironically(?) saying in July that investors need to “focus on absolute emissions [reduction]” so as “to reduce climate risk in the real economy.” Investing in companies that expand fracking production, build and operate pipelines and gas plants, and undermine government climate policy is the opposite of "reducing climate risk in the real economy." It's locking-in the use of fossil fuels for decades to come, jeopardizing Canadians' retirement security in a safe climate future.
With that in mind, here’s Shift’s quarterly recap of what some of the fossil fuel companies financed or owned by CPPIB have been up to:
Wolf Midstream announced a final investment decision of $1 billion to increase fossil fuel production.
The Commonwealth LNG project hit legal roadblocks, including failure to assess lifecycle emissions.
The controversial merger of California Resources Corporation and Aera Energy raised concerns about the clean-up of oil and gas wells and made CPPIB a co-owner of California’s largest oil producer.
Tallgrass Energy: CPPIB announced it would pour $1.2 billion into the 16,000-km U.S. pipeline network operator.
Civitas Resources got approval to drill up to 166 new fracking wells in Colorado.
A profile of Encino Energy in Oil and Gas Investor highlighted CPPIB’s US$300 million backing of the expansion of fracking in Ohio.
Nephin Energy is exploring options to transform itself into a clean energy company as Ireland’s Corrib offshore gas field approaches depletion.
Through Enel S.p.A, CPPIB acquired “energy transition infrastructure” in Italy, including 23 battery storage projects, but also three gas turbines.
Read on for the details.
Wolf Midstream makes final investment decision of $1 billion to increase fossil fuel production
Wolf Midstream is 99% owned by CPPIB, with two CPPIB Managing Directors on Wolf’s board.
Wolf Midstream announced on July 2 a final investment decision of approximately $1 billion to increase fossil fuel production capacity. The additional investment will see Wolf build the NGL North Phase Two project, significantly increasing the natural gas liquids (NGL) production capacity of the company’s NGL North System, which will feed Alberta’s growing petrochemical industry.
Wolf Midstream is inexplicably included in CPPIB’s ‘Sustainable Energies Group’, a portfolio grouping that appears to be designed to obscure the significant risks and harms of fossil fuel linked companies held by the fund.
See Shift’s statement for the full story.
Commonwealth LNG project hits legal roadblocks, including failure to assess lifecycle emissions
An LNG project partially financed by CPPIB is hitting legal roadblocks. CPPIB helped finance the Commonwealth LNG project on the Louisiana coast through its US$100 million investment in Kimmeridge Energy Fund VI in 2022. But in July, a US Court of Appeals returned the approval of the project to the Federal Energy Regulatory Commission for reconsideration, finding that the energy regulator failed to fully and adequately assess the cumulative and direct environmental, health and climate impacts that would be caused by the LNG terminal, particularly its lifecycle greenhouse gas emissions.
In August, environmental and community groups filed a lawsuit against the Louisiana Department of Energy and Natural Resources’ and Office of Coastal Management’s permit that allows the construction of the Commonwealth facility, arguing that the permit for Commonwealth LNG’s natural gas liquefaction plant was issued without an adequate assessment of adverse impacts on the environment, public health and safety.
Controversial merger of CRC and Aera raises concerns about well clean-up, makes CPPIB co-owner of California’s largest oil producer
In July, CPPIB became the co-owner of California’s largest oil producer when Aera Energy merged with California Resources Corporation (CRC) in a deal valuing the combined company at US$2.1 billion. CPPIB acquired a 49% stake in Aera Energy in 2023 in a deal reportedly valued at US$400 million. A Managing Director from CPPIB’s dubiously-named “Sustainable Energies” group has joined CRC’s board of directors.
While CRC claims to be “building a carbon management business”, CRC’s release says California “has a high demand for oil and will continue to do so for decades” and emphasizes that the deal will double the company’s oil production.
Neither Aera Energy, CRC nor CPPIB have disclosed a credible plan to align the company’s operations with net-zero emissions — which requires the phase-out of oil and gas production.
The merger approval was marred by controversy, with legislators and environmental groups claiming that California’s regulators ignored AB-1167, a law that requires oil and gas well operators to clean and cap wells and provide financial assurance via a bond to ensure the wells are not left abandoned.
If regulators had applied the law to the merger, CRC would have been required to put up an estimated $2.4 billion bond to guarantee Aera’s wells will be plugged, according to an analysis of state data. In comparison, that’s about eight times the total value of all outstanding clean-up bonds for all oil companies in the state. Instead, Aera will continue operating as a CRC subsidiary with only a $3 million bond.
The regulator’s decision also came after Aera spent about $250,000 lobbying in California in the first quarter of the year, including on “1167 implementation,” according to the company’s lobbying disclosure form.
Tallgrass Energy: CPPIB pours $1.2 billion into 16,000-km U.S. pipeline network operator
In yet another risky bet on climate failure, CPPIB announced in August that it would invest $1.2 billion in Denver-based Tallgrass Energy, which operates over 16,000 kilometres of oil and gas pipelines across 14 states.
CPPIB’s investment in Tallgrass Energy further entrenches Canada’s $632 billion national retirement fund’s exposure to the continued operation and expansion of fossil fuel infrastructure. This is a high-risk gamble that the world will continue its dependence on oil and gas and fail to limit global heating to 1.5℃ above pre-industrial levels.
Contrary to CPPIB’s commitment to net-zero emissions by 2050 across all scopes, Tallgrass Energy has no net-zero target and no plan to phase out its pipeline assets in line with global climate goals.
CPPIB cynically calls Tallgrass an “energy infrastructure company”, obscuring the fact that its core business is transporting oil and gas. The Tallgrass acquisition was brokered by CPPIB’s dubiously-named “Sustainable Energies” group – a portfolio that includes renewable energy, energy efficiency and conservation, and agriculture companies, but also oil and gas producers, pipeline companies, gas-fired power producers and carbon capture utilization and storage infrastructure for oil and gas.
See Shift’s statement for the full story.
Civitas Resources gets approval to drill up to 166 new fracking wells
CPPIB is the second largest shareholder in the Denver-based oil and gas company, holding a nearly 10% stake.
Despite widespread public opposition and concerns about the climate, health, water and environmental impacts of fracking, Denver-based Civitas Resources received approval from Colorado's energy regulator to drill up to 166 new wells near suburban neighbourhoods, a community’s reservoir and a large industrial waste disposal site. The fracking approval devastated local communities, but received praise from the American Petroleum Institute.
Encino Energy’s Oil and Gas Investor profile highlights CPPIB’s backing of the company’s expansion
Encino Energy is 98% owned by CPPIB.
Houston-based oil and gas company Encino Energy is featured in the October 2024 cover story of Oil and Gas Investor magazine. According to the company’s Chief Operating Officer, CPPIB "liked the look" of Ohio oil production and "was key to the story" of the company's expansion plans in the Utica Oil Play, backed by a US$1 billion commitment from CPPIB in 2017. More recently, CPPIB invested up to US$300 million in Encino Acquisition Partners, announced this past Earth Day, to expand fracking in Ohio. The company's COO says CPPIB is "very long-term focused", with Encino now expanding its fracking operations underneath wildlife protection areas in a state that officially declared fossil gas to be "green energy."
In contradiction to CPPIB’s support for fossil fuel expansion via Encino Energy, CPPIB’s Net Zero approach states that “Climate change is here. We have to think and act differently” and “The CPP Fund’s performance will be influenced by how well CPP Investments adapts to the global economy’s transition to net zero.”
Nephin Energy explores options to transform depleted Irish offshore gas field into clean energy company
Nephin Energy, owned by CPPIB, holds a 43.5% stake in the Corrib gas field. Two CPPIB Managing Directors sit on Nephin Energy's Board of Directors.
Ireland's Corrib offshore gas field is expected to be depleted in the next five years. In a positive gesture toward decarbonization, Nephin Energy and Vermilion Energy, the companies that own and extract fossil gas from the field, are exploring options for how best to re-purpose their Irish operations. The gas field operators are reportedly studying the viability of developing wind farms, wave energy, energy storage, hydrogen and/or sustainable fuels. Corrib currently meets about 20% of Ireland's fossil gas demand.
Pension fund capital may well play a role in the early retirement and phase-out of fossil fuel assets, but it is yet to be seen if CPPIB can help develop, finance and implement a credible, science-based plan for the transformation of Nephin Energy, while continuing to generate strong returns for Canadian pensions.
Through Enel S.p.A, CPPIB acquired “energy transition infrastructure” in Italy, including 23 battery storage projects, but also three gas turbines
CPPIB provided €200 million in financing to support Sosteneo’s acquisition of energy storage and gas turbine projects in Italy.
In June, CPPIB invested approximately €200 million in mezzanine financing to support Sosteneo’s acquisition of a 49% share in Enel Libra Flexsys, which owns and operates a portfolio of 23 battery energy storage projects and three gas turbines in Italy. Energy storage is a profitable industry that’s critical to the energy transition. But CPPIB’s investment contracts Sosteneo into gas-fired electricity generation agreements for 15 years, locking-in the use of fossil gas and exposing the Canada Pension Plan to the prolonged use of fossil fuels. A CPPIB Managing Director claimed that gas turbines “support Italy’s energy transition efforts”, when in fact fossil gas must be rapidly phased out to achieve global climate targets.
The continued burning of fossil fuels is destroying the places and communities we love
Our national pension manager is continuing to fund fossil fuel expansion while communities in Canada are evacuated due to wildfires and flooding is causing death and destruction in multiple parts of the world– all in a year that’s on track to be even hotter than last year, which was the hottest year on record. All of these unnatural disasters are driven primarily by the burning of coal, oil and gas.
CPPIB claims to be investing in our retirement security. But how much longer can CPPIB expect Canadians to believe this when our national pension manager is funding the fossil fuels driving the climate crisis?