The ABCs of CPP – T

The chief executive of the Canada Pension Plan Investment Board (CPPIB), Mark Machin, appeared before the House of Commons finance committee on June 11, 2018, informing the committee that the Board has been consulted by the federal government’s financial advisor about the possibility of the CPPIB investing in the Trans Mountain Pipeline. He told the committee, “There’s been no political pressure applied.”

It’s safe to assume that whenever the federal government goes to the CPPIB with a ‘request’ the ‘pressure’ is implied, as the government appoints the members of the CPPIB board.

Mr. Machin has said he thinks it ‘likely’ that he and his fellow board members will ‘take a look’ at the stalled pipeline project, because, “…there are a limited number of investment opportunities of its [the pipeline’s] magnitude.” Machin went on to tell the finance committee that, “…the Canada Pension Plan Investment Board has had both good and bad experiences with pipelines and will use its usual approach [editor’s emphasis] when deciding whether to put money into Trans Mountain.”

It’s time to tell Mr. Machin that the Board’s ‘usual approach’ (looking only at the financial quality of the asset) is insufficient.

All issues associated with the pipeline that are not profit-related, including environmental and social issues, are deemed to be ‘outside the CPPIB’s mandate.’ But these areas are rife with risks–financial, social, and environmental.

If the CPPIB were to invest in the Trans Mountain Project today, exactly what would they be buying-into? Speculation and promises aside, the existing Trans Mountain Pipeline is an outdated, 1960s era single pipeline joining the oil fields of Alberta to tidewater in British Columbia. It has been the source of many leaks during its lifetime, the most recent one in June 2018.

Before the Government of Canada’s recent purchase of the pipeline from the U.S. firm Kinder Morgan for $4.5 billion, Kinder Morgan had secured leases for much of the land an expanded pipeline would traverse. In additional, they were able to negotiate agreements with indigenous chiefs of some, but not nearly all, of the indigenous tribes whose lands the pipeline will cross.

This is what the CPPIB would be investing-in–nothing more. Before a spadeful of earth can be turned the project will face lawsuits attempting to halt its construction from the Province of British Columbia, and from the many First Nations tribes that were not consulted and have not given permission for the pipeline to cross their lands. The court battles could potentially last for decades.

If the Government of Canada cannot find a buyer for the pipeline (and it’s by no means certain that it can), the only way it will be built is if it’s undertaken by the federal government. Some experts believe the expense of expanding the pipeline could cost the Canadian taxpayers as much as $20 billion. If the giant Kinder Morgan corporation found the Trans Mountain Pipeline to be ‘too risky’ an investment, given its uncertainties, why would anyone else, including Canadian taxpayers, want a stake in it?

The CPPIB must be clearly told that the people of Canada do not want their pension funds invested in this risky pipeline expansion project.

Oil from Canada’s tar sands requires an enormous amount of energy and water to extract it from the sand it’s mixed with. This makes it among the most expensive oil in the world to produce. At current and projected prices for oil, it’s by no means clear that extracting oil from the tar sands can continue to be done profitably. The waste water left behind by the extraction fills tailing ponds with oily, polluted water that kills wildlife, mostly birds, who interact with it. Then there’s the contentious issue of pipelines. The Canadian government desires to see a pipeline built to carry bitumen from Alberta’s tar sands to a port on B.C.’s West Coast. This pipeline, named the Trans Mountain Pipeline, is being opposed by a number of Canadians, particularly those from B.C., including First Nations groups–all of whom will potentially be affected if the pipeline crosses their lands. It is far from certain that this pipeline will ever be built.

A number of people, most recently American Al Gore, have called the tar sands “Dirty Oil”, for the harm its extraction does to the environment.

Yet with all of these risks, real and potential, the CPPIB continues to invest in the tar sands, seemingly without concern.