The former head of market intelligence at the Toronto Stock Exchange is blasting a recent decision by the New York State Common Retirement Fund to divest its oil sands holdings based on the fund’s goal to be net-zero greenhouse gas emissions by 2040.

Not only is the move hypocritical — given that the fund is divesting $7 million from Canadian oil sands companies while keeping $670 million invested in major hydrocarbon producers ExxonMobil and Chevron — but Gina Pappano says the divestment movement itself hurts Canadians and does nothing to address concerns about climate change.

Here’s an open letter from Pappano, Executive Director of InvestNow, to New York State Comptroller Thomas DiNapoli.

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Dear Mr. DiNapoli,

This letter is regarding your recent announcement that the New York State Common Retirement Fund will restrict investments in oil sands companies.

In your own words, “We have carefully reviewed companies in the oil sands industry and are restricting investments in those that do not have viable plans to adapt to the low-carbon future. Companies responsible for large greenhouse gas emissions like those in this industry, pose significant risks for investors.”

Oil sands companies are in the industry that fuels every other industry. Every industry uses energy. A quick review of the Fund’s top holdings by value reveals companies such as Alphabet, Amazon, Facebook, Microsoft, Apple, all huge tech companies that require an abundance of cheap and reliable energy to run their operations.

Further down the list, we see more companies that rely heavily on the hydrocarbon industry to operate, such as Boeing and 3M. And while the Fund is making an example of divesting its approximately $7 million in oil sands holdings, it has made no such announcement regarding its $670 million combined investment in major hydrocarbon companies ExxonMobil and Chevron.

In fact, all the companies in the Fund’s domestic and international equity portfolio are interdependent on the hydrocarbon sector in one way or another.

To eliminate an entire sector from the Fund’s investment portfolio is folly, does not align with the interests of beneficiaries and runs contrary to the fiduciary duty of the Fund.

To use environmental, social and governance (ESG) criteria as the justification is misleading.

Canadian hydrocarbon companies have high environmental standards and are the largest investors in innovation in Canada – leading to ever-improving environmental performance. They provide high paying jobs and contribute a host of other social benefits. On governance, they adhere to the highest measures of transparency and reporting. To restrict investments in these companies is not ESG investing.

The divestment attack on oil sands companies is first and foremost an attack on publicly listed companies. As divestment has no effect on the demand for hydrocarbons, its effect will be to shift the source of supply for that demand.

If the oil and gas that society wants and needs is not provided by Canadian listed private sector companies, it will come increasingly from state-owned suppliers from such countries as Saudi Arabia, the Gulf States, Russia, and Iran. The result will be a market served by companies with low standards on ESG, from countries where serious human rights abuses are common, that are not even remotely approaching the standards of public transparency or accountability to citizens that exist in Canada.

Competitive, transparent markets in free and open societies are the best guarantee for good performance by resources companies, and Canada offers all of this.

The focus of the Fund should be on investment in innovative, transparent companies, not divestment from them. Canadian hydrocarbon companies are investing about three times more than the average firm in emissions reduction technologies. Restricting institutional investment impedes innovation, innovation which could lead to game-changing processes and technologies which is perhaps the biggest risk of all.

Sincerely,

Gina Pappano

Executive Director

InvestNow Inc.

The unaltered reproduction of this content is free of charge with attribution to Canadian Energy Centre Ltd. 

Despite the reality of cold winters and the need for oil and natural gas to survive them—to say nothing of the use of such products by American businesses, the military and hospitals—Minnesotans have recently been subject to the same anti-oil and gas advocacy that Canadians (who also live in a cold climate) have seen for two decades.  

For those not paying attention, one Canadian company, Enbridge, is replacing a Canada-U.S. oil pipeline in existence since the 1960s. The 1,097-mile (1,765 kilometre) crude oil pipeline, Line 3 as it is known, runs from Edmonton, Alberta to Superior, Wisconsin with a portion of it through Minnesota. (Construction started in Minnesota in December 2020 following completion of the parts of the line located in Canada, North Dakota, and Wisconsin.) This has engendered some curious claims.  

One anti-oil activist argues Line 3 is not a replacement project given it’s a bigger pipeline with a new route and thus should never have been approved. The Minnesota governor, Tim Walz, has argued the pipeline is no longer needed because, he claims, demand for crude oil that the pipeline carries is decreasing.               

Reality check: These claims—and many others—are diversionary tactics, reflective of reflexive opposition to oil and natural gas as products. They are not reasoned analyses.  

When a company, after half a century, wants to decommission a pipeline and replace it with another, safer and more efficient one, that’s a replacement pipeline. Misleading claims to the contrary are akin to arguing your new 2021 automobile, which replaces your 1975 Pinto, is not a “replacement” when it clearly is.   

Also, the Line 3 Replacement Project does not expand flows on the pipeline; it allows capacity to be restored to previous rates, which Enbridge voluntarily restricted in 2008 to maintain pipeline integrity.   

As for Governor Walz’ oil demand argument, U.S. oil consumption is rebounding, according to the U.S. Energy Information Administration. Total consumption was 20.5 million barrels per day in 2019, 18.1 million barrels per day in 2020, forecast to be just under 19.5 million barrels per day this year, and over 20.4 million barrels daily in 2022. Unless Walz thinks that the American economy will stall out in 2022 (or collapse), it appears annual U.S. oil consumption two years from now will surpass the 2019 totals.   

Beyond spurious claims about the Line 3 Replacement Project, there has been little analysis of the strong energy-related links between Minnesota and Canada. Here are some relevant facts on the importance of oil and gas and other energy to Minnesota’s economy.  

In 2019, the total value of the trade flows of energy products between Minnesota and Canada was nearly C$8.3 billion, or about US$6.4 billion. The vast majority of that was Canadian oil and gas, with over $7 billion in conventional crude oil and $481 million in natural gas in that figure, while Minnesota sent $134 million worth of energy products north in 2019 including gasoline, diesel and biodiesel fuels.  

Minnesota does not have its own source of petroleum but oil has a significant, positive impact on the state. The reason is due to Minnesota’s location and how it acts as key hub for the oil pipeline network.   

The Minnesota House of Representatives’ Research Department describes the key aspects of oil pipelines and refineries and their importance to the state this way: “The state’s strategic location between the oilfields of western Canada and North Dakota and the refining centers of the Midwest, the Gulf of Mexico, and the eastern coasts of the United States and Canada, has greatly magnified the role it plays in meeting America’s demand for petroleum products.”  

That memo also notes that Canada’s crude oil exports to the United States “grew by 81 per cent between 2007 and 2017, reaching 1.25 billion barrels per year” and “two-thirds of those Canadian imports are shipped through Minnesota.”  

Also, from that memo: Minnesota has two refineries which produce more than two-thirds of the state’s petroleum products; 70 per cent of those products are refined from Canadian crude oil with additional oil from North Dakota’s Bakken oil fields; an extensive system of pipelines brings crude oil to Minnesota’s refineries and which then distributes refined products throughout the state. There are 25 major petroleum storage terminals located along the routes of these pipeline with 15 of those in Minnesota.  

Does all this trans-border energy flow benefit Minnesotan workers? Yes. According to the US Bureau of Labour Statistics, the annual mean income for those employed in the pipeline transportation sector in Minnesota was US$73,500 in 2019. That was 32 percent higher than the mean income for all occupations in Minnesota, at $55,890.  

Of course, given that Minnesota has no oil of its own, there is another benefit to importing oil (and natural gas): use by Minnesotans themselves, in order to power automobiles and transport trucks, heat homes, power businesses, and for use in hospitals and by the military. It’s why in 2017 alone, five billion gallons of petroleum products were produced or imported into Minnesota.  

Oil is a long way from not mattering to Minnesotans, or any other American.  

Mark Milke and Lennie Kaplan are with the Canadian Energy Centre, an Alberta government corporation funded in part by carbon taxes. They are authors of the report, Energy Trade Flows Between Minnesota and Canada: A Primer on the Line 3 Replacement Project.