Colorado resident Amanda Harper thinks Canadians would be appalled if they knew that some of their retirement savings are funding fracking operations in the small, rural community she once called home.
“I thought Canadians had more dignity than that, more respect than that,” Harper said. “Then I thought maybe the Canadian people don’t know.”
Seven years ago Harper and her husband sank their retirement savings into a 1.3-acre farm near Longmont, Colorado. Their dream was to run a farm for the first time and raise their son against the stunning backdrop of the Rocky Mountains.
They had no idea at the time that their home in Weld County would be caught up in the state’s oil and gas boom. Colorado is one of the top ten oil and gas producers in the U.S.
“We put all the money we had into this beautiful little farm,” Harper told National Observer. “My passion was to farm there, to be there for all of our lives.”
Harper found out from a neighbour in 2014 that an oil and gas company, Encana Oil and Gas, had plans to construct 12 hydraulic fracturing or fracking wells 365 metres (1,200 feet) from her home. The following year she discovered the Canada Pension Plan Investment Board (CPPIB) was buying the wells. Harper said she could hardly believe it. Her family loves Canada.
“We are hockey people. That’s the other thing I feel some sort of camaraderie with [Canadians] because of hockey,” Harper said. “And then you are going to do that to our family, our life, our world here.”
Crestone Peak Resources, a company 95 per cent owned by the Canada Pension Plan Investment Board, bought the 12 wells and other oil and gas holdings of Encana Oil and Gas in Colorado for $900 million (USD) last summer. Encana Oil and Gas is the U.S. subsidiary of Calgary-based energy producer Encana. The Broe Group based in Denver owns the other five per cent of Crestone Peak Resources.
CPPIB, which operates at arm’s length from the federal government, manages $300.5 billion in net assets owned by the Canada Pension Plan, the country’s largest public pension fund.
Hydraulic fracturing has been a controversial method of tapping unconventional sources of natural gas and oil for more than a decade. To get at these difficult-to-reach hydrocarbons, industry drills underground wells 200 to 3,000 metres vertically and 1,000 metres or more horizontally to penetrate rock-like shale. Pressurized water mixed with hundreds of toxic substances is shot down the well to break apart the shale and push natural gas or oil to the surface.
Globally, a number of public concerns have been raised about fracking, ranging from potential groundwater contamination to methane releases.
“I think Canadians would be shocked that their money that they are forced to contribute to a pension plan is being used to invest in…new fossil fuel operations by the Canada Pension Plan," said John Bennett, senior policy advisor for Friends of the Earth Canada.
Bennett said the Board is turning a blind eye to climate change when it makes new investments in the fossil fuel sector. Friends of the Earth Canada launched an initiative last summer calling on the CPPIB to stop investing in fossil fuels and to bring its investment strategy in line with Canada’s climate commitments.
CPPIB increased its shares in Kinder Morgan
Crestone Peak Resources is not the only fossil fuel company where Canada Pension Plan money has been invested. The Board increased its shares in the Houston-based pipeline company Kinder Morgan last spring. As of March 31, CPPIB said it held $8 million worth of Kinder Morgan stocks.
Dave Conover, Vice-President of Corporate Communications and Public Affairs at Kinder Morgan, Inc. sent National Observer the following statement in an email:
“CPPIB increasing its investment is consistent with other value investors who responded favorably to our commitment to fund operations and expansion projects within existing cash flow.”
Bennett was skeptical about the timing of the CPPIB investment, coming several months before Prime Minister Justin Trudeau announced that the federal government had approved Kinder Morgan's Trans Mountain pipeline expansion project to the west coast on Tuesday.
The contentious Trans Mountain pipeline project from Alberta to the Vancouver area, which would ship 890,000 barrels of oil daily. Prime Minister Justin Trudeau announced federal government approval of the project Tuesday.
“The Canada Pension Plan buying hundreds of thousands of dollars of Kinder Morgan stocks suggests they are pretty confident that stock is going to rise,” Bennett told National Observer. “And the only way that stock is going to rise is if the Kinder Morgan pipeline is built."
Oil industry bail out?
This past year, the Board also backed Wolf Midstream (99 per cent CPPIB owned) in buying a 50-per-cent stake in an Alberta pipeline from Oklahoma City-based Devon Energy Corp. for $1.4 billion and Teine Energy, an energy producer the Board is invested in, in acquiring Saskatchewan oil holdings worth $975 million from Penn West Petroleum Ltd.
“I consider that bailing out the oil industry,” Bennett said. “In most industries, when things go bad, things go down. The Canada Pension Plan saw three big companies that needed cash and provided that cash.”
One month before Penn West sold its oil assets in Saskatchewan, the Calgary-based company announced it may default on its debts and Devon Energy spent the first half of this year selling off assets to reduce its debt. Encana shares hit a 13-year low in July 2015 and last February, Moody’s Investors Service rated Encana’s bonds as junk due to the company’s high debt load (Encana jumped back to investment-grade a month later). When Encana's plans to sell its Colorado oil and gas assets to the Board were announced in October 2015, Encana was attempting to pay off $3 billion in debt.
Encana did not respond to an email from National Observer asking for comment on Bennett's accusation that the sale was a 'bail out.'
Pension funds need to "stress test" fossil fuel investments, says Jeff Rubin
Jeff Rubin, former chief economist at CIBC World Markets, recently published a report with the Centre for International Governance Innovation on divesting from the fossil fuel industry in Canada. The report concluded that at a time of global commitments to deep cuts in greenhouse gas emissions, pension funds need to “stress test” their investments in fossil fuel companies to find out if those investments can remain economically viable.
“What is important to future pensioners is not just the contributions of current and future employees, but critically the rate of return that the Canada Pension Plan gets on its billions of assets,” Rubin said. “All I’m suggesting is investing in high-cost oil is not going to get that rate of return that future pensioners are dependent on.”
CPPIB, which declined National Observer’s request for an interview, is not alone in investing public pension fund money in the fossil fuel industry.
A number of provincial pension funds have made similar investments.
Quebec’s pension fund — Caisse de dépôt et placement du Québec — owns a 16.55 per cent stake in the Alabama gasoline pipeline that exploded on Oct. 31, killing one worker and injuring five others.
Quebec environmentalists say that these types of investments need to stop.
“This is not coherent with Quebec’s action plan on climate,” Christian Simard, executive director of Nature Québec, said of the Quebec fund’s fossil fuel investments. “The vast majority of Quebecers do not want us to invest in the petroleum and gas sector in Quebec.”
Simard said a survey last month provides some evidence that Quebecers do not want their pension money invested in fossil fuels. The survey found 66 per cent of Quebecers oppose oil and gas extraction in the province and 88 per cent do not want the provincial government to sell exploration licenses to oil and gas companies.
“There is a certain moral responsibility when you invest in a company to ensure the company is in accordance with the global objectives of fighting against climate change,” Simard told National Observer. “You have a responsibility equally with problems like leaks, and environmental impacts of your property or ownership in the enterprise.”
The Caisse de dépôt et placement du Québec did not respond to National Observer's request for comments on the pipeline explosion.
Simard said Nature Québec supports the Élan Global initiative, which demands public pension funds in Quebec like the Caisse de dépôt divst from fossil fuels. The David Suzuki Foundation is also spearheading a petition to force the Caisse de dépôt et placement du Québec to divest $8.4 billion in assets from the fossil fuel sector.
Norway and California have ordered their public pension funds to divest from coal companies. Sweden is taking steps to divest from oil and gas, specifically “companies featuring substantial exposure in high-cost projects, such as oil-extraction from oil sands.”
Although the Board has yet to disclose exactly how much Canada Pension Plan money is invested in the fossil fuel industry, Dan Madge, a spokesperson for the CPPIB, told the Toronto Star last year that the Board's investments closely resemble those of the Toronto Stock Exchange (TSX) Composite. Rubin said the energy sector makes up approximately 19 to 20 per cent of the TSX.
“We had to move from our dream home”— Amanda Harper
For almost two years, Harper fought against the proposed fracking wells behind her home. When Colorado’s oil and gas regulator approved the 12 wells last summer she was faced with a tough choice: stay or move.
“I can’t live there. We had to move,” Harper said. “We can’t be there when the trucks come…It’s against every shred of my being to be there.
“We had to move from our dream home in our 50s.”
Harper and her family now live in neighbouring Boulder County, but they still own their house in Weld County. Harper is uncertain if they will ever move back. She has not given up though. Harper told National Observer she is strongly considering civil disobedience to try to stop or delay the wells.
“Broe Corp., Crestone Peak, and the CPPIB…are willing to destroy our way of life and our investment, for the benefit of their investments and the elderly in Canada,” Harper said. “Are you sure you want your pension plan to invest in places that are just going to ruin Colorado?”