A company 95% owned by the Canada Pension Plan Investment Board, Crestone Peak Resources, spent more than US$607,250 to shape the results of state elections in Colorado in 2018, supporting “pro-business” candidates and political action committees bent on blocking tougher regulation of controversial oil and gas fracking operations in the state.
“Nearly half, $300,000, went to the pro-Republican Senate Majority Fund, while $200,000 went to Better Colorado Now, in support of Republican gubernatorial candidate Walker Stapleton, a member of the Bush political dynasty,” the Globe and Mail reports. “Crestone gave $100,000 to Protect Colorado, which said it opposed ‘any ban or restriction on hydraulic fracturing’.”
At the time, Jason Oates, a lobbyist and spokesperson for Crestone Peak Resources, said “it was in Crestone’s interest to keep” an existing set of fracking regulations the company described as already the strictest in the U.S, but permitted fossil operations within breathing distance of schools and homes, the Globe says. “We needed to fully allow those to work out.”
The code of conduct for CPPIB, which invests and is mandated to protect the retirement funds of more than 20 million Canadians, “says the fund must avoid favouring any political group or political position,” the Globe writes. “However, the code is focused on CPPIB itself and its employees, not companies owned by the fund.”
“Canadians don’t want this,” Adam Scott, director of Toronto-based Shift:Action, told The Energy Mix. “They don’t want their pensions invested in companies that are causing harm, both to the climate and to communities, and the more they learn about the behaviour of CPP in its investments, the more they’re speaking out against it.”
Read The Energy Mix’s feature interview with Adam Scott here.
Cynthia Williams, Osler Chair in Business Law at Osgoode Hall Law School, whose paper two weeks ago went into detail on Crestone’s behaviour and potential conflicts of interest, told the Globe there are “ethical questions” about a company held by CPPIB trying “to shape politics to support its oil and gas investments in Colorado, even as the government of Canada has committed to working to transition to a low-carbon economy.”
“We don’t see any contradiction whatsoever,” countered CPPIB senior managing director Michel Leduc. “To be abundantly clear, there are attractive opportunities in the oil and gas sector that remain today and, we believe, into the future,” he told the Globe, and the companies CPPIB invests in are free engage in politics in accordance with local laws.
Williams’ analysis earlier this month for the Canadian Climate Law Initiative traces Crestone’s formation to October 2015, when CPPIB announced it was buying a 95% stake in Colorado fracking assets then owned by Calgary-based Encana Corporation (which has since packed its bags, pulled its head office out of Canada, and rebranded as Ovintiv). Even then, the deal pointed to financial challenges that are becoming familiar with shale oil and gas operations, with the purchase price falling from $900 million to $609 million by July 2016.
“A number of factors explain the decline,” Williams writes. “Well productivity was 30% less than when the transaction was initially being negotiated, the price of oil had dropped to US$34 per barrel, Encana’s stock was down to $5 per share, and local communities’ resistance to shale oil and gas extraction—fracking—was intensifying.”
But then-CPPIB CEO Mark Wiseman saw the global oil price crash beginning in 2014 as an opportunity for the fund. “Wiseman said the resulting decline in oil prices will put pressure on some of the less financially sound energy companies, potentially creating some opportunities for acquisition,” the Globe reported in November that year.
Williams traces CPP’s use of Canadians’ retirement funds to establish Crestone, placing its senior staff in board and senior executive roles and intervening heavily in the 2018 state election in Colorado. “Presumably this kind of political intervention into another country’s elections, in order to protect oil and gas interests, is not what many Canadians would expect, or countenance, from CPPIB at the time, or CPP Investments now,” she writes.
It’s a “perfectly correct statement of corporate law” to say that CPP and Crestone are separate companies, she adds. But it’s “an imperfectly correct answer to the ethical questions about CPPIB using its heft, based on the involuntary monetary contributions of millions of citizens and other people working in Canada, to try to shape politics to support its oil and gas investments, in Colorado, even as the Government of Canada has committed to working to transition to a low-carbon economy.”
Leduc said the CPPIB’s code of conduct “appropriately reflects the clear lines between operator and institutional investor,” contending that “we do not engage in political donations.”
The Globe says CPPIB emphasizes the C$6.6 billion it invests in renewable energy, compared to $11.6 billion in fossil companies. And Leduc actually pitched CPPIB’s continuing fossil investments as a noble commitment to the transition off carbon, contrasting businesses like Crestone with the investors—1,158 of them around the world, according to 350.org—that have adopted divestment policies.
“While other investors are abandoning the [fossil] energy industry altogether or establishing unmovable targets to sell down, we swim against the current because the industry is an integral part of the evolution taking place now,” he told the Globe. “History will no doubt fairly judge investor strategies that helped the transition—perhaps less generous on those walking away at delicate junctures.”
The Globe story goes deep on the community impacts of Crestone’s fracking operations, including an utterly chaotic response to a rig fire last year and a documented case in September 2017 where the company vented volatile organic compounds—many of which may have been toxic or carcinogenic—within 25 metres of an elementary school playground. Under the state regulations Crestone apparent found so onerous at the time, the company was fined US$10,000 for what was called a “moderate” violation.
That incident at the 400-student Aspen Ridge Elementary School in Erie, CO was one of 20 violation notices Crestone received from the Colorado Oil and Gas Conservation Commission, which “has received more than 1,100 citizen complaints about Crestone since September, 2015, citing noise, smells, air quality, or other matters,” the Globe says.
Crestone lobbyist Oates attributed those complaints to Erie, citing it as “one specific community that has very organized anti-oil and gas groups associated with it.”
“This is not just Erie activists causing oil and gas headaches,” replied civil engineer and retired U.S. Air Force Reserve Colonel Bryon Bednar, who lives next door to another site Crestone wants to develop. “It’s a statewide issue of people saying enough is enough.”