Obama Judge Shuts Down Dakota Access Pipeline

This morning U.S. District Judge James Boasberg, an Obama appointee, ordered the shutdown of the Dakota Access pipeline.  He also ordered that it be emptied of oil by Aug. 5. Expect an almost immediate appeal.

Judge Boasberg wrote that he was “mindful of the disruption,” but he stood by his previously articulated position that the original environmental review, completed by the Army Corps of Engineers in 2015/16, wasn't thorough enough since it:

[D]id not adequately consider the impacts of an oil spill on fishing rights, hunting rights, or environmental justice, or the degree to which the pipeline’s effects are likely to be highly controversial.

At issue is the Missouri River which the pipeline crosses just north of the Standing Rock Sioux Reservation, which straddles North and South Dakota. The Sioux and various environmentalist groups argued that the pipeline could contaminate the river, and the Obama administration took their side against the Corps. Obama spent years slow walking the project because of the environmentalists' concerns.

In answer to those concerns, Kelcy Warren, CEO of Energy Transfer Partners, which owns the pipeline, stated:

[W]e're not on any Indian property at all... We're on private lands. That's number one. Number two, this pipeline is new steel pipe... It's going to go 90 feet to 150 feet below the lake's surface. It's thick wall pipe, extra thick, by the way, more so than just the normal pipe that we lay. Also, on each side of the lake, there's automated valves that, if in the very, very unlikely situation there were to be a leak, our control room shuts down the pipe, encapsulates that small section that could be in peril. So, that's just not going to happen.... there is no way there would be any crude to contaminate their water supply. They're 70 miles downstream.

Which is to say, this pipeline doesn't violate native property rights and it is as safe as it can reasonably expected to be. Consequently, after the 2016 election this was one of many stalled projects that Donald Trump greenlit on the strength of the existing environmental reviews.

But now, after the construction has been completed and crude has been pumping through the pipeline for three years, it is being shut down pending yet another environmental review -- if the ruling stands. Workers will be laid off and the company will take a serious financial hit, no easy burden in the present economic climate. As for the oil, somewhat less of it might be pumped -- the ultimate goal of the greens -- or else it will go into storage until it can be moved to the refinery some other way. Very likely by rail.

Seven years ago, on July 6, 2013, in Lac-Mégantic, Quebec, a seventy-four car freight train carrying crude oil crashed and exploded. Forty seven people were killed in what was called possibly "the most devastating rail accident in Canadian history.”

It is important that we mourn for and with those effected by this tragedy, but we must also note that it is within our power to reduce the chances of such a thing happening again by making sure that more oil is carried across this continent via pipeline, which is significantly safer than rail.

Unfortunately attacking pipelines is a common tactic of the environmentalist left. This is precisely because they are able to safely move large amounts of oil over long distances, and for the Greenies, the safe transport of oil goes against their most fervently held beliefs.

Hopefully all of this is quickly sorted out such that the pipeline can get pumping again. Because as Lac-Mégantic reminds us, the human and environmental costs when something goes wrong with those trains is incalculable.

The Coming Covid Curveball

It seems like every morning we wake up to the news that some entity, public or private, is unveiling a "bold new initiative" in response to "the unique challenges posed by the COVID-19 pandemic," which everyone who has been paying attention knows they've wanted to do already.

Take baseball. I'm a big baseball fan, but not of current MLB commissioner Rob Manfred, a man who doesn't seem particularly fond of the game he presides over. Others have noticed this -- here's an article from a few months back entitled Does Rob Manfred Hate Baseball? and another called Rob Manfred Is Ruining Baseball. The gist of them is that Manfred, worried that baseball is less exciting than the other major sports, has spent his five years as commissioner whittling away at the things that make the game unique. For the most part his rule changes have been aimed at making the games shorter, but his efforts have been for naught -- the average game is now three minutes longer than it was when he took over, and viewership is down.

This, of course, hasn't deterred Manfred. He's pushed ahead with plans to, for instance, institute a new, Reality TV informed playoff format whereby,

The team with the best record in each league would get a first-round bye, and then the other two division winners and the wild-card club with the best record could end up picking their opponents in a televised seeding showdown.

This is, to put it mildly, gimmicky as hell.

For the most part Manfred's tinkering has been confined to the edges of the game, and he would probably tell you that that's why it hasn't had the desired effect. That, unfortunately, he has been cursed with conservative, history obsessed fans who are resistant to alterations which make today's game less like the one played by Joe DiMaggio and Hank Aaron. Which is to say, he'd probably dislike me as much as I dislike him.

But a man can dream, and for years we've heard whispers that Manfred's great aspirations included increasing offense by imposing the Designated Hitter on the National League, which has resisted this innovation since the 1970s; starting extra-innings with a runner on second base to speed things up (or, a fan might say, limit the amount of baseball fans were getting for free); and contracting the Minor Leagues, so that MLB resources could be directed away from entertaining yokels in, say, Dayton, OH or Montgomery, AL, and towards virtue signalling social justice initiatives which get lots of applause from the great and the good.

And then came the miracle Rob Manfred had been been praying for: the Wuhan novel coronavirus, which, thanks to the incompetence of politicians like Andrew Cuomo and Bill de Blasio, spread like "a fire through dry grass” throughout the nursing homes of the northeastern United States (as healthcare analyst Avik Roy has pointed out, 42 percent of U.S. deaths from Covid-19 have occurred in the 0.6 percent of the population who reside in nursing homes and assisted living facilities).

But, more to the point, it gave him an excuse to make big changes to the game purportedly for the sake of player safety. And what changes did he implement? Imposing the DH on the National League; beginning extra innings with a runner on second; and the elimination of up to forty-two minor league teams.

I think that this is a pretty good (and comparatively innocent) illustration of what is going on across America right now.

California, for instance, raised its gasoline tax again this month, so that it now sits at 50.5 cents per gallon. Why would California's politicians be so foolish as go ahead with this hike during an economy-destroying pandemic (what you might call Pulling a Trudeau)? Well,

“Driving is way down, so in theory this is a great time to catch up on highway investment,” observed Ronald Fisher, an economics professor at Michigan State University. While less driving temporarily means less revenue from a gas tax, it also means less disruption from road work. Fisher also pointed out that the state typically contracts with private companies to perform such infrastructure repairs, which means proceeds from the higher gas tax could actually serve as a stimulus for the California economy in the form of job creation.

Right...

In another example from the Golden State, Gov. Gavin Newsom has formed a Recovery Task Force to address California's dire financial situation in the wake of the pandemic. It is co-chaired by uber-environmentalist and failed Democratic Presidential candidate Tom Steyer (a bad sign), and, shockingly, it has concluded that green energy has the potential to be a “huge job creator," according to Steyer. As if this were something which had just occurred to him. Environmentalist Hal Harvey concurs,

[Steyer's] right. Clean energy can be the economic engine for California.... The path is clear: Decarbonize the electric grid, then electrify everything—creating good jobs and thriving clean tech industries along the way.

Which is to say that the powers that be are using this moment of disruption to enact their preexisting agendas. They're taking advantage of your exhaustion, your inclination to give in, in the hope that sometime soon everything will go back to normal. And that's why we need to be especially vigilant right now.

At the center of baseball is a psychological game between pitchers and batters, where the former works to make the latter think that one pitch is coming his way, and then throws him another. Fastball inside, fastball outside, fastball inside, fastball outside. And then comes the curve, and the batter who isn't looking out for it finds himself walking slowly back to the dugout.

Keep yours eyes open. Don't let them sneak the curve past you.

Fitch Downgrades Canada's Credit Rating

Fitch Ratings, one of the big three global credit rating agencies, has announced it's downgrading Canada's credit rating from AAA to AA+. This is due to the tremendous debt -- roughly a quarter of a trillion dollars -- the Canadian government took on to prop up the economy during the COVID-19 lockdowns.

Though the Trudeau government was quick to argue that Canada's economy remains strong and that the country in an ideal position to turn things around, this does have the potential to significantly increase the cost of government borrowing and of doing business. That danger, moreover, will be amplified if, as some think, there are further downgrades to come:

David Rosenberg... has been predicting a downgrade on Canada’s sovereign debt since late April and thinks this won’t be the last. “The real question is: What took so long?’ .... Canada’s excessively leveraged national balance sheet has looked a lot like China, Italy and Greece for quite a while.” While Ottawa may appear to be in “solid” financial shape to some, this has “masked bloated debt ratios” in households, business sectors, and most of the provinces, he said. “This won’t be the last ratings cut, I can assure you,” said Rosenberg.

Now, it is true that governments worldwide have responded to the pandemic by racking up what would normally be unthinkable amounts of debt. Consequently, it is likely that Canada won't be the only country to have its rating downgraded.

But one thing that makes Canada unique is the shame that its governing elite feels about one of the pillars of its economy. As Dan McTeague of Canadians for Affordable Energy said the other day in an excellent piece on Erin O'Toole's environmentalist pitch in the CPC leadership contest,

Rather than championing Canada's hydrocarbon industry and creating economic growth with our country’s wealth of natural resources, O’Toole’s policies seem most focused on maintaining the what-seems-to-be-required, green-is-god image of so many politicians.... Our natural resources are an asset to this country, not a liability. They keep energy affordable, and give us one of the highest standards of living. O’Toole and other political candidates seem determined to remain blind to that fact.

You would hope that this turn of events would cause Canada's governing class to thank its lucky stars for the energy sector, a potential launchpad for recovery. But unfortunately they'll probably keep just hoping for pats on the head from similarly green-obsessed organizations like the UN  -- and how's that been working out for them?

Eventually someone is going to have to grow up and start taking things seriously.

Oil and Gas: Students Educate their Teachers

In a letter well worth reading, students at various universities across the country, members of a group called Students for Canada (SEC), addressed Prime Minister Justin Trudeau, encouraging him to rescue and promote Canada’s ailing energy sector. The letter is a powerful, meticulously documented and near-irrefutable report meant to counter an earlier petition by 265 academics—which I have referenced in a previous article for The Pipeline—urging Trudeau to shut down the oil and gas industry entirely. 

The letter brilliantly reverses the relation of authority. These students know infinitely more than the profs, technological and economic illiterates who proceed from purely ideological motives, whereas their student adversaries base their thesis on actual realities. The two lead authors of the student letter are candidates in the Department of Earth and Atmospheric Sciences; the competencies of the two lead authors of the academic letter are in Political Science and Sociology. This should tell us something about relevant expertise. (Ironically, the University of Alberta is home to both the students and the pedagogues.)

Offering a vista of unexpected hope for the return of intellectual sanity to an ideological wasteland, these students have largely managed to resist the left-wing and “social justice” curriculum of the indoctrination factories our universities have become. In four pages of resource-rich material and dispositive evidence, they have exhibited not only an informed concern for the country’s welfare, but a thorough familiarity with the complexities and minutiae of energy production, industry safety standards, employment issues, technological innovation and bread-and-butter outcomes, all benefiting the country’s future political stability and economic prospects.

They advocate fumigating the language around the Canadian energy sector. “The use of the terms ‘tar sands’, ‘war’, ‘dead’ and ‘bail out’ tend to… trigger… anger and divisiveness.” Loaded language is a sure-fire way to preempt debate. Reputable contributors to a contentious issue need to invoke clarity of expression and neutral terminology. “Members of Geothermics understand that carefully chosen words can encourage people to listen and critically think about the issue to promote integrated solutions, especially if the issue involves oil and gas.” After all, “how can the Canadian oil and gas industry be ‘dead’ when Canadian Energy companies provide social benefits and are continuously developing clean innovations?”

They argue that “Canada has founded one of the most sustainable hydrocarbon development strategies in the world,” from which other countries with similar oil reserves could learn. They explain that “global energy demands will continue to increase in the future and that renewable energies are not in a position to replace [fossil fuels] for decades to come.” Indeed, “the totality of renewables supply only 7% of global demand (International Energy Agency, 2019)…illustrat[ing] that oil and gas are valuable natural resources, just like lithium, copper, uranium and iron ore, etc., needed to manufacture goods, medical supplies, electronics, outdoor gear, renewables etc.” They point out that Canada was “ranked number one for Sustainable Development in 2019 relative to the world's top oil exporters (sdgindex.org).” The concern often cited by opponents of energy extraction and delivery regarding methane leaks “is being continually mitigated with the decades of improvement created by companies subject to Canada’s oil and gas sector regulations.”  

Further, the construction of Liquefied Natural Gas facilities is projected to add billions in new government revenue as well as “provide for additional health care, schools, infrastructure and many other services to be filled by future graduating students.” In addition, “the geological and engineering knowledge from the oil industry is directly transferable towards geothermal energy exploration, which is based on exploiting moving fluids within the earth to capture/harness a different source of energy.” Another technological breakthrough “requiring advanced geoscience and engineering is the use of compressed air stored within sealed underground caverns,” which can be recuperated to operate turbines generating electricity. These are only some of the energy sector positives listed by the students. 

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The writers make only one mistake in regarding carbon as a destructive element and promoting the technology of carbon capture and storage in order to stimulate the production of clean energy, thus misunderstanding the relation of carbon to fertility and verdant life. Research and development in oil and gas, they maintain, entails “consequences for all energy sources, such as the societal, ecological and geological impact of dams, the utility of land dedicated to solar farms, [and] the societal and ecological impacts of mining rare earth minerals for solar panels, batteries and wind turbines.” 

I'm renewable!

The argument is ingenious, detailing how oil and gas will lead to solar and wind. This may or may not be so, but if intended as a tactical gesture, a sop to the Greenies, it’s clearly bound to fail. Radical environmentalists are concession-proof. Moreover, wind farms, solar installations and SpongeBob-looking photovoltaic panels disfiguring the landscape do not seem a reasonable innovation in countries already burdened by six months of dark winter and unreliable weather patterns. One way or another, there is no immediate foreseeable replacement for oil and gas, as the students themselves admit. By the same token, the anti-carbon brief is wholly misguided. It is the staple delusion of the global warming/climate change/extreme weather industry and its hundreds of millions of gullible adherents.

Robert Zubrin has shown in a profoundly researched book, Merchants of Despair, that there exists robust scientific proof derived from ice core data and isotopic ratios in marine organism remains that Earth’s climate is a stable system, that CO2 emissions create surplus plant growth that in turn absorbs atmospheric carbon dioxide—the proper form of carbon storage—thus restoring climate equilibrium over the long haul, and that under conditions of cyclical global warming agricultural productivity naturally increases and human life immensely improves.

Gregory Wrightstone’s Inconvenient Facts, which puts paid to the anti-carbon crusade, is equally essential reading. Wrightstone, a geoscientist of 35 years experience, shows that the real threat to humankind is not carbon or Thermageddon but “a group of men (and women) intent on imposing an agenda based on seriously flawed science.” Bruce Bunker’s more recent The Mythology of Global Warming is as close to a clincher as one could hope to find. Relying on reams of proven scientific data from the geologic record, Bunker concludes: “The premise that CO2 emissions are causing catastrophic global warming is a total myth.” His pages need to be studied. I should also mention Alan Fensin, an electronic engineer and NASA design consultant, who in Global Warming, The Carbon Dioxide Hoax, a very accessible account, demolishes the fable that a “small trace gas called carbon dioxide [is] responsible for controlling our climate.”

Writing in the Wall Street  Journal back in 2007, Princeton physicist William Happer also highlighted the fact that “Life on earth flourished for hundreds of million years at much higher CO2 levels than we see today.” CO2 levels during the Ordovician Age of 440 million years ago were ten times higher than they are at present, yet the earth prospered. As Science Daily reports, “The Ordovician geologic period included a climate characterized by high atmospheric carbon dioxide (CO2) levels, warm average temperatures and flourishing life.” (These finding are disputed by left-wing sites like Skeptical Science; physicist John Droz Jr., writing in MasterResource: A Free-Market Energy Blog, demolishes its falsifications definitively.)

The students can be pardoned for their single lapse from scientific rigor and environmental fact. They are young and still have a lifetime of research and study ahead of them, enabling them to correct errors and incorporate ever more facts and discoveries into their world picture—and to find erudite and honorable teachers like Zubrin, Wrightstone and Bunker, among others. They represent the best hope for the future of climatology and environmental studies—and for the recovery and growth of Canada’s energy production. They are in their way a major part of the country’s energy sector—its mental energy sector—which augurs well for the morrow if they can preserve their integrity, pursue their adventure into truth and withstand the ideological inroads of a faux-environmentalist pathology. Their minds are in the right place, which is more than can be said for their politically-correct preceptors. 

Erin O'Toole, Environmentalist

Back in March I drew your attention to an article by Canadian Tory insider Ken Boessenkool which argued, in the wake of an election which saw the Conservative Party of Canada (CPC) pick up 26 seats, that the party needed to go all in on environmentalism.

Vote for us, the Conservatives said, and we’ll cut your taxes.

Vote for us, the Liberals said, and we will address climate change.

This worked wonders across western Canada, in rural Ontario, around Quebec City, and in a smattering of ridings in Atlantic Canada. But new polling for Clean Prosperity conducted by Conservative pollster Andrew Enns from Leger suggests climate change was a key reason why the Conservatives failed to gain ground in the 905.

I pointed out at the time that this was specious reasoning, since the Conservatives are less likely than ever to win in the Greater Toronto area  because of the collapse of the New Democratic Party as a viable electoral (and vote-splitting) force, not to mention the fact that the polling he cited was done by the carbon-tax activist group Canadians for Clean Prosperity. It isn't that surprising that their conclusion was Canadians Love Carbon Taxes!

Shockingly, Erin O'Toole, purported co-front runner in the CPC Leadership race, seems not to have read my post. (He must have skipped his press clippings that morning). That is, he sounds like he's going all in on the Boessenkool theory. At last week's leadership debate, his opponents hammered O'Toole's plan to introduce a "national industrial regulatory and pricing regime" as being a carbon tax-like scheme that would harm consumers and the oil and gas industry alike.

O'Toole [replied that] the party needs a serious environmental platform for the next election. "I'm the only one who has a detailed plan. It's disappointing to see Mr. MacKay attack that. If we're not clear on the environment in the next election ... we're not going to be able to get pipelines built," O'Toole said.

It's a surprising tack for True Blue O'Toole to take. His whole campaign is built upon contrasting himself with the Mr. Progressive Conservative, Peter MacKay, but here he is going all in on alienating the west.  Maybe he figures he can get away with it because they have no where else to go -- what are they going to do, vote Liberal?

But O'Toole is counting his chickens before they're hatched. He isn't leader yet, and western Canadian party members can still give that title to someone else, perhaps Derek Sloan or Leslyn Lewis.

Hopefully they do something to make it clear to O'Toole or MacKay or whoever wins that the party's base can't be ignored.

The Vatican vs. Fossil Fuels

Pope Francis has turned out to be the most radical of modern popes, a social-justice warrior who regularly injects his opinions regarding various climatological and energy issues that have only the most tenuous connections to matters of faith of morals. And away we go:

The Vatican urged Catholics on Thursday to disinvest from the armaments and fossil fuel industries and to closely monitor companies in sectors such as mining to check if they are damaging the environment. The calls were contained in a 225-page manual for church leaders and workers to mark the fifth anniversary of Pope Francis’ landmark encyclical “Laudato Si” (Praised Be) on the need to protect nature, life and defenseless people.

The compendium suggests practical steps to achieve the goals of the encyclical, which strongly supported agreements to contain global warming and warned against the dangers of climate change. The manual’s section on finance said people “could favor positive changes ... by excluding from their investments companies that do not satisfy certain parameters.” It listed these as respect for human rights, bans on child labor and protection of the environment.

There is certainly some theological justification to the Pope's view that all life matters, to coin a phrase, and that protection of the earth is a part of that. But to unhesitatingly adopt climate-change "science" with acknowledging the leftist politics behind it and then give it the imprimatur of the Holy See is surely taking it too far.

Called ‘Journeying Towards Care For Our Common Home’, one action point called on Catholics to shun “shun companies that are harmful to human or social ecology, such as abortion and armaments, and to the environment, such as fossil fuels." Another section called for the “stringent monitoring” of extraction industries in areas with fragile ecosystems to prevent air, soil and water contamination.

The document urges Catholics to defend the rights of local populations to have a say in whether their lands can be used for oil or mineral extraction and the right to take strong stands against companies that cause environmental disasters or over-exploit natural resources such as forests.

Benedict XVI's still-mysterious abdication in 2013 continues to be more and more regrettable.

When 'Social Justice' Comes to Investing

Trillions of dollars sit in private trusts, pension and retirement accounts, and charitable endowments, and they are targets of those who wish to reshape domestic investments, corporate governance and means of energy production. I recall years earlier when people and outfits who wished to accomplish such things bought stock and made pests of themselves at shareholders meetings, or ran well-funded public relations campaigns against investment in South African companies or nuclear energy, to take two historical examples of “active shareholding.” In recent years they’ve devised another means: pressuring trustees of these funds and fiduciary investment managers to consider Environmental, Social and corporate Governance (ESG) analyses in their investment buys. A quick Google search shows a number of providers vying to assist (for fees ) trustees in making such investments.

The most detailed explanation of the history and pitfalls of this strategy—economic and legal—is in this Stanford Law Review article:  The authors, Max M. Schanzenbach and Robert H. Sitkoff, are writing for a very specific audience and you are encouraged to read it all if you want a more complete analysis, but here’s a short take on it as it involved institutional investors, index funds , endowments and trust companies. Such investing may well place trustees at risk of violating their fiduciary duty of loyalty under which they must consider only the interests of the beneficiary.

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Fiduciaries motivated, even in part, by any other thing—sense of ethics, benefit to third parties, for example -- violate their duty of loyalty. While trustees of a charitable endowment whose settlor or beneficiaries okay such considerations, might do this without violating the rule of loyalty, trustees of institutional investors, trust companies and even index funds run a risk if they do.
In the first place, the very concept ESG investing lacks precise definition.

All told, the fluidity of the ESG rubric means that assessment and application of ESG factors will be highly subjective. Like any form of active investing, risk-return ESG investing necessarily involves subjective judgments in the identification of relevant factors, assessing whether they are good or bad from an investor’s perspective, and how much weight to give each factor. However, this subjectivity makes both application and empirical evaluation of ESG investing challenging and highly contextual. As some astute commentators recently noted, “the breadth and vagueness of the factors as a whole, and the likelihood that different factors bear on different investments, present barriers to their widespread use as investment guides.

What are the social and environmental impacts of a firm’s products or practices? Is a gas pipeline better for the wildlife in the area it runs through than a solar or wind farm? (No one’s surveying the views of the caribou in Alaska who seem to love the pipeline, or the avian communities fried or turned to pate by solar and wind farms.)What are the environmental costs to producing the glass and aluminum to create solar panels or the cost of disposing of no longer useful wind turbines ?

The favorable empirical results regarding environmental and social factors, however, are not uniform. A significant concern is that managers may invoke ESG factors to enact their own policy preferences at the expense of shareholders—an agency problem for which there is also some empirical evidence. Another concern is that the extent of a firm’s regulatory and political risks may not be reflected in its ESG scoring. For example, companies pursuing alternative energy sources may score high on ESG factors but still face significant political and regulatory risk owing to heavy reliance on current government policy. Indeed, one of the Commissioners on the Securities and Exchange Commission (SEC) has suggested that the SEC has not yet taken a position on ESG disclosure in part because defining ESG factors is value laden and would involve confronting contentious political issues.

And then there’s corporate governance. Some corporate governance issues are obvious—lack of a sound auditing and accounting operation or frequent litigation losses for bad labor practices or unhealthy products. The social factors are even more subjective and not well validated by empirical evidence. The effect of sex and race diversity on the corporate board doesn’t seem measurable or even relevant to how prudent an investment might be in a company. The number of factors one might consider under this category seems inexhaustible.

The fluidity of the ESG parameters and the obvious subjectivity involved in weighing them should concern trustees. Aside from subjecting them to litigation for losses due to erroneous assessments on ESG investments, trustees can be removed, enjoined, forced to repay the trust for losses and so forth for breaching their duty of loyalty to the trust. To defend against such claims, the trustee who picks and chooses among investments on the basis of ESG strategies, must have documented analyses showing he’s made a realistic risk-loss return estimate and must also reevaluate these analyses regularly, a costly undertaking. So, to take an example near at hand, if President Obama made the cost of fracking higher through regulatory constraints on it and the trustee eschewed investing in such companies under his analysis of risk-reward, President Trump’s support for fracking certainly changes the equation. So does the I hope temporary dislocation of that market due to the Wuhan virus shutdowns. The trustee has to reconsider original action and readjust the portfolio. The risk-reward equation has shifted.

If independent analysis shows the ESG models the trustee relied upon resulted in statistically significant under-performance, the fiduciaries who relied upon those models may well have breached their duty of loyalty and be subject to litigation by the beneficiaries of the trust. And any claims that ESG investment strategies provide superior returns are far from certain. Even more troublesome in the authors’ view is this: if corporations draw a lot of ESG investment on the grounds that they are undervalued from a risk-reward standard by their lights, they may soon become overvalued. Contrarian strategies seem then to be attractive.

Going belly-up for climate change.

A few months ago, concerns were highlighted in a dispute involving the trustees of the California State Pension Fund (Calpers) and other major pension funds.

In the last two years, its directors have opposed proposals to sell stocks in private prisons, gun retailers and companies tied to Turkey because of the potential for lost revenue and skepticism about whether divestment forces social change. One of these directors is now urging the system, also known as Calpers, to end its ban on stocks tied to tobacco, a policy in place since 2000. “I do see a change,” said that director, California police sergeant Jason Perez, in an interview. “I think our default is to not divest.”

Calpers isn’t the only system wrestling with these new doubts. Rising funding deficits are prompting public officials and unions across the U.S. to reconsider the financial implications of investment decisions that reflect certain social concerns.

The total shortfall for public-pension funds across the U.S. is $4.2 trillion, according to the Federal Reserve. New York state’s Democratic comptroller and unions representing civil service workers oppose a bill in the Legislature to ban fossil fuel investments by the state pension fund. In New Jersey, Gov. Phil Murphy, a Democrat, vetoed legislation last year that would have forced divestment of state pension dollars from companies that avoid cleaning up Superfund sites by declaring bankruptcy...

The board now plans a comprehensive review, scheduled for 2021, of all of Calpers’ existing divestment policies, which include bans on investments in companies that mine thermal coal, manufacturers that make guns illegal in California and businesses operating in Sudan and Iran. 

And then there are outfits like Black Rock which seemingly to court millennial investors are weighing such factors. Is it, in danger of violating its duty of loyalty? Bernard Scharfman thinks they may be.  He hints that this virtue-signaling may be an effort to draw in Millennial investors, and discusses the practical limitations of Black Rock’s stated plan to weigh companies’ stakeholder relationships in weighing investments. He says this sort of shareholder activism may breach the duty it owes to its own investors:

So while Black Rock’s shareholder activism may be a good marketing strategy, helping it to differentiate itself from its competitors, as well as a means to stave off the disruptive effects of shareholder activism at its own annual meetings, it seriously puts into doubt Black Rock’s sincerity and ability to look out only for its beneficial investors and therefore may violate the duty of loyalty that it owes to its current, and still very much alive, baby-boomer and Gen-X investors. In sum, if I were running the Department of Labor or the Securities and Exchange Commission, I would seriously consider reviewing Black Rock’s strategy for potential breaches of its fiduciary duties.

If people really want to put their money into virtue-signaling instead of reasonable returns, why doesn’t someone just create a Virtue Fund? Investors would agree not to hold the managers of it accountable for losses as long as the investments tickle their fancy. That would leave those of us such as the Calpers beneficiaries who rely on secure returns to use more traditional measures of risk and reward (like debt-equity, dividends and price-earnings ratio) which have an historical measure of efficacy.

Trudeau Loses Bid for Security Council Seat

I must say that I find this hysterical:

Canada loses bid for seat on UN Security Council

The Liberal government lost a four–year bid for a UN Security Council seat Wednesday, a humbling experience after a high-profile campaign led by the prime minister. Canada finished third, behind Norway and Ireland in the race for two seats on the Security Council. After the vote Justin Trudeau... said it had been a worthwhile exercise. “We listened and learned from other countries, which opened new doors for cooperation to address global challenges, and we created new partnerships that increased Canada’s place in the world,” he said.

Uh-huh. As if, had it gone the other way, we wouldn't all have been subjected to the incessant bleating of "Canada's back!" from the loyal Trudeaupians in the Canadian media, like Rosemary Barton?

Now, as Matt Gurney points out, Canada's losing this contest doesn't really matter. Unless...

Unless you count the millions of public dollars that Trudeau eagerly spent in campaigning for the seat. And the fact that he compromised Canadian principles, breaking a longtime pattern of not supporting anti-Israel resolutions at the UN while sweet-talking some pretty unsavoury world leaders in an attempt to win their votes. Not to mention the vast government resources he marshalled in pursuing his vanity project, even as Canada was dealing with a pandemic crisis of historic proportions.

Which is to say, Trudeau expended a lot of political and actual capital to demonstrate that he's beloved throughout the world and he ended up with egg on his face.

Even funnier, remember last week when we discussed Greta Thunberg's letter encouraging the UN electorate to lean on Canada and Norway for emission reduction concessions in exchange for votes? If it was actually leaned on, Norway has apparently ignored it, as it's just announced that they are full steam ahead on oil production since the price-per-barrel is on the rise.

What's next for Justin? Well, he'll probably get back to kicking the oil and gas industry for a bit, to vent some frustration. And then maybe he'll turn his focus to a snap election in the fall. Hopefully the Conservatives will have an actual leader by then.

Big Chiefs Vie for Supremacy in B.C.

If you want to get your way out west in the 21st century, but can't win at the ballot box, becoming a public nuisance is the next best thing. That's the message coming out of this past weekend's hi-jinks in Minneapolis, New York, Philadelphia, D.C., and elsewhere. It's also the message of the agreement the Liberal government in Ottawa and the socialist NDP government in British Columbia have recently struck with a handful of hereditary chiefs of the Wet’suwet’en Nation.

In case the pandemic and the George Floyd riots have pushed the recent history of the Wet’suwet’en out of your mind, let me quickly remind you of their situation. They are a First Nations community based in northwestern British Columbia, Canada, who found themselves at the center of a firestorm back in February. Protests erupted across Canada "in solidarity" with the Wet’suwet’en, who objected to the construction of the Coastal GasLink pipeline across their land. Or, at least, that was the narrative pushed by Canadian media. In reality, as Mike Smyth explained in B.C's The Province at the time,

The First Nations directly impacted by the Coastal GasLink pipeline — and the thousands of Indigenous people they represent — largely support the project. All 20 First Nations along the pipeline route have signed benefit-sharing agreements with the pipeline company through their elected band councils. That includes the multiple elected councils of the Wet’suwet’en First Nation. But the protesters have aligned themselves with five Wet’suwet’en hereditary chiefs opposed to the pipeline, and not the 13,000 Indigenous British Columbians represented by all the band councils that support it.

In fact, as I wrote back in February, roughly one-third of the people working on the pipeline are native, and a great many of the Wet’suwet’en people stand behind the elected chiefs who signed onto the original agreements with TC Energy. They were critical of those five hereditary chiefs who -- as Wet’suwet’en member Troy Young put it -- chose to do "everything via media and not following proper protocol." And they were grateful for the job opportunities afforded them by resource development on their land, and concerned about the consequences of killing or altering a multi-billion dollar project at such a late stage (Troy Young again: "If the project were to be halted, the loss would be probably insurmountable. Nobody's ever going to invest here again").

But the media delivered. Canadian news outlets like the CBC churned out wall-to-wall, breathless coverage of the plight of the five hereditary chiefs on the one hand (who, they continuously suggested, were really more legitimate than the elected chiefs, since democracy is a western import, although there has been a system in place for the election of chiefs for nearly 150 years) and of the occasional arrest of protesters for such minor offences as blockading major rail lines and arson). By the end of the month the federal and provincial governments felt compelled to sit down with the hereditary chiefs to hammer out a new agreement, with construction suspended while they did so.

And then the virus and the lockdowns came, sucking up all of the media oxygen for months. But while everyone was looking elsewhere, BC and Ottawa were continuing to negotiate. And then, without an announcement, a Memorandum of Understanding was agreed to by both sides in March, the details of which are only now coming out. And, from what we've seen of it, it has the potential, as Gary Mason writes in The Globe and Mail, first, "to fundamentally alter politics in this country forever," and second, "to be viewed, ultimately, as a horribly one-sided sellout by British Columbia and Ottawa."

The memorandum recognizes the hereditary chiefs over and above the elected chiefs, who weren't involved in the negotiations. This detail is remarkable, because it involves a significant shift in the locus of Indigenous power and and heightens the internal tensions among the Wet’suwet’en. But the more dramatic aspect of the agreement is that it recognizes the Wet’suwet’en as having title over its territory. As the hereditary chiefs explained in pitching the agreement to their people, “You will be the first Indigenous Nation in Canada to have recognition of your Aboriginal title over your territory by agreement.”

What that means in practice is to be worked out in negotiations over the next several months, but one key aspect of it seems to be that, at least as Mason reads that section, "the hereditary chiefs will have exclusive domain over natural-resource development" on that 22,000 square kms (13,670 square miles) of land. To get such a significant concession in a negotiation, you'd imagine that the hereditary chiefs would have to give up quite a lot. Well, you would be wrong -- at least in their words, they conceded “Absolutely nothing.” Including, as Mason emphasizes, "any promise to not continue blocking the [Coastal GasLink] pipeline from crossing their territory." He continues,

There are so many potential land mines in this agreement, it’s hard to know where to begin. But let’s start with how it gives power to hereditary chiefs over elected chiefs and their councils. In many cases, elected chiefs represent a new generation of Indigenous leadership. The hereditary chiefs who signed this agreement appear to be able to use their new power to stop the pipeline from crossing their land.... Hereditary chiefs elsewhere are undoubtedly going to see this agreement as precedent-setting. They will insist on the same powers. And that has the potential to undermine many other royalty-sharing agreements that elected band councils have signed with resource companies.

Getting here required good bit of of dirty pool from the hereditary chiefs. According to Chris Selley,

They have stripped pro-pipeline hereditary chiefs of their titles and installed anti-pipeline replacements. They did not keep promises — echoed by provincial and federal politicians — to at least run the memorandum of understanding by the rank and file. They wouldn’t even distribute draft copies.

And, of course, it has meant ignoring the wishes of ordinary members of the Wet’suwet’en nation. That being so, why are Victoria (capital of B.C., located just 75 miles across the water from Seattle) and Ottawa moving ahead with it? As Selley puts it,

[F]or the governments involved, this wasn’t about offering the Wet’suwet’en a better future. It was about putting out a fire: [Among other things, a] group of Mohawks thousands of kilometres away in eastern Ontario had blockaded CN’s main line in solidarity with the hereditary chiefs; and the Ontario Provincial Police, armed with an injunction demanding the blockade end, refused to lift a finger. Something had to give. Somebody had to get screwed, and it was the rank-and-file Wet’suwet’en. For no good reason whatsoever, the hereditary chiefs now hold all the keys to their future. It’s an appalling and appallingly predictable result.

We shall see what the outcome of all of this is. The details of the agreement are still being negotiated, and then it must be ratified by both sides. But it isn't looking good for the legitimately elected Wet’suwet’en leaders, nor their thousands of followers who are sick of the publicity and the games and just want to work. At this point the lesson of all of this, in Selley's words, is "make friends with the Ontario Mohawks. They pretty much run the country."

A Plastic-Cup Toast to Oil and Gas

As states begin to reopen and bundles of sun-pale, previously isolated Americans pour out of their homes seeking to lap up an abundance of Covid-killing UV rays at parks, pool parties and protests across the country, it’s time to give a nod to the oil and gas industry for delivering to us the many spittle-protecting plexi-glass partitions, painted warning/closure signs in our parks, PPE of every kind, and medical equipment that are providing us the necessary protection through the ‘duck and cover’, ‘phase 2’ period of the re-opening of the U.S. economy. Regardless of one’s opinion about the various re-opening strategies (and there are many opinions), there is no question that without the diligent and on-going work of the men and women of the industry from extraction to transportation to refining of our nation’s oil and gas resources, our lives have been made better during this grueling lock-down period.

As I returned to the west coast from one of the most prolific shale plays in the US (in my gasoline-fueled car with rubber tires), I was struck by the juxtaposition of the deep disdain many in this part of the country have for the oil and gas industry, on one hand, while simultaneously surrounding and covering themselves with every kind of petroleum-based product, to avoid the statistically unlikely event of contracting or transmitting ‘the corona’, on the other hand.

On both coasts, the impact of the products derived from the oil and gas industry on our lives has never been so visibly ubiquitous to the public, nor so plainly positive. Without these products, America and the world would be hesitant to get back to normal economic and social activity. While many love to hate the industry, it’s impossible to ignore its positive impact throughout our lives. Whether it’s the computer screens through which many now participate in Zoom meetings to our virtual happy hours with friends on Facebook, or our Netflix binge-watching, life is made better because of oil and gas. Whether it’s the face shields and gloves our ER docs and nursing staff are wearing in emergency rooms, or the PPE our dentists are wearing while finally cleaning our teeth, life is made better because of oil and gas. As countless diners pick up their delicious carry-out meals packed in all sorts of oil and gas industry-derived packaging, cutlery, straws and libation-filled cups, it is clear life is made better because of oil and gas.

So while we anxiously await the return of our collective pre-Covid lives…and they will return …let us take a moment to acknowledge in big and small ways that our lives are decisively better because of the men and women of the oil and gas industry. A simple thank you would be brilliant, and I’ll bet even appreciated.