Throwing Oil on Regental Waters

Oil field in Venice/Marina del Rey area back in the day

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University of California faculty to vote on fossil fuel divestment following years-long campaign

By Joshua Emerson Smith, June 3, 2019, San Diego Union-Tribune

Climate scientists, economists and professors across the University of California system will vote this month on whether the academic institution should ditch millions of dollars in stocks and bonds currently invested in fossil fuel companies.

The UC Board of Regents has the ultimate say on divesting from fossil fuels, but faculty and student organizers throughout the 10-campus system see this vote as their best chance to date to pressure top decision makers.

If the UC system scrubbed its roughly $12 billion endowment of all major fossil fuel companies, it would likely represent the most significant divestment by a public university in the history of the global movement.

“How does the UC system stack up? It is huge,” said Brett Fleishman, director of finance campaigns for 350.org, the group that spearheaded the global divestment movement in 2012.

“If we have some of the world’s leading scientists and economists all saying, ‘Yeah, this is a good idea that’s the zeitgeist that we’re all looking for,” he added.

The campaign to divest from corporations such as ExxonMobil, Gazprom and Shell is one the fastest growing campaigns in the fight against climate change, drawing in faith-based organizations, philanthropic foundations, governments and pension funds. To date, it has recorded more than 1,000 pledges on behalf of investment funds worth more than $8 trillion.

Still, critics of fossil fuel divestment are not hard to find — including many deeply concerned about climate change. They argue the impacts are negligible and alienating oil, gas and coal companies doesn’t help rein in greenhouse gases.

“While this measure sends a signal to the industry, it is too blunt a signal,” David Victor, a professor of global politics at UC San Diego, who studies climate-change policies. “It targets all fossil fuel companies without recognizing that a growing number of these companies are now part of the solution.”

Divestment has had no meaningful impact on the stock value of fossil fuel companies, said Robert Pollin, a professor of economics at the University of Massachusetts Amherst, who has been studying the issue in depth.

“Our estimate of what’s actually been divested is somewhere in the range of $36 billion,” he said. “That’s not nothing, but we’re talking an industry with private assets in the range of $5 trillion.”

Supporters don’t dispute that their campaign is largely symbolic, but they argue that divestment sends a powerful message.

“That’s the whole point of this, to get people discussing it,” said Eric Halgren, a neuroscience professor at UC San Diego, who spearheaded the most recent push by faculty for divestment. “The value of it is not going to be destroying the financial well being of the companies.”

Even if divestment poses no serious risk to fossil fuel corporations, the industry has tried to tamp down the movement. The Independent Petroleum Association of America, for example, runs an anti-divestment messaging campaign through a website called Divestment Facts.

The petroleum association’s website posts frequent updates on major votes against divestment, such as recently by the Church of Scotland, and highlights those that oppose large divestment proposals, such as a bill in New York State Legislature that would divest the state’s $200 billion Common Retirement Fund.

The group mainly argues that divestment will have little impact while hurting the performance of institution’s stock portfolios.

“The challenge for fossil fuel divestment is it does nothing to address climate change,” said Matt Dempsey, a spokesman for the industry. “It’s all cost for no climate gain.”

At the same time, those supporting UC’s divestment have said that continuing to invest in fossil fuel companies is the real financial risk. They have argued that oil and gas companies are headed for a financial crash because governments eventually restrict fracking and other types of extraction activities out of concern for the environment.

“If they can’t extract those reserves and sell them and make profits, then their stock price will plummet,” said Clair Brown, professor of economics at UC Berkeley. “That’s the risk. When will the market wake up and properly evaluate the stranded assets?”

Other economists have downplayed concerns the bottom could abruptly fall out of the fossil fuel industry.

“Stock prices are difficult to forecast,” said Ivo Welch, chair of the finance department at the UCLA Anderson School of Management. “In general, not investing in these or those stocks only reduces diversification benefits and increases administrative costs.

Many professors in the UC system will get their chance to weigh in when all 10 divisions of the Academic Senate vote in June on what is known as a memorial. The memorial, if adopted, would be drafted into an official letter and sent to the Board of Regents. It reads:

“The U.C. academic senate petitions the regents to divest the university’s endowment portfolio of all investments in the 200 publicly traded fossil fuel companies with the largest carbon reserves.”

The board has in recent years made some concessions to climate change activists within the university system, including selling off $200 million in coal and oil sands investments in 2015. The UC system has also committed greening up its buildings to go carbon neutral by 2025, including on its five medical centers and three national labs.

Officials, however, have stopped short of dumping all holdings in fossil fuel companies.

The UC Office of the President, including the Chief Investment Officer Jagdeep Bachher, declined multiple requests for comment. None of the 26 members of the Board of Regents returned interview request made through the UC’s top administrative channels. In the past Bachher has express skepticism about the value of fossil fuel divestment.

While it’s unclear how the Regents would respond, the UC system has a history of divestment dating back to the anti-apartheid campaign against the South African government.

Following sustained student-led protests at UC Berkeley, the Board of Regents was eventually pressured into voting in 1986 for divestment from companies doing business with the apartheid government. Several years later, jailed South African President Nelson Mandela credited the UC students with shifting the international conversation around apartheid.

The fossil fuel divestment campaign on UC campuses was similarly started by students, officially kicking off in 2012 with the broader effort by 350.org. The movement slowly drew support from the faculty. UC San Diego’s Senate division approved a divestment resolution by 3-to-1 margin in 2016, following similar efforts by UC Santa Cruz and UC Santa Barbara.

However, the votes didn’t bring the pressure on the Regents that many had hoped for. For a while the divestment movement fizzled, especially as the students most involved graduated.

“We also had all kinds of trouble corroding across the campus,” said John Foran, a professors of sociology at UC Santa Barbara. “It would come and go depending on what the students do.”

Somewhere along the way, UCSD’s Halgren and others realized that to officially petition the Regents to act on the issue they needed to pass a system-wide vote.

“Regents are basically politicians,” Halgren said. “They want to do the right thing, but they want be liked, and they want to keep their power. I think they want to do it, but they need cover.” 
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**Scroll down for a comment on this assumption about politics and Regents.**
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In February, UC San Francisco passed its own memorial, with all campuses except UC Irvine following suit. That set up the vote of the full Academic Senate that will be held electronically starting June 1 and slated to wrap up before the end of the month.

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Editorial note: Apart from the UC pension financing issue, yours truly is not sure that the proponents of divestment have looked carefully at California "politics." California is a major oil-producing state. Unions in particular have been concerned about the threat of various "green" policies on jobs in that sector. You may have noticed that in spite of the "progressive" influence in the California Democratic Party (which in California is the ruling party), at the recent state convention delegates in the end picked an establishment union leader, Rusty Hicks, to head the state party. For more on this issue, see the items below:
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https://www.latimes.com/politics/la-pol-ca-california-democratic-party-leader-election-20190601-story.html

"(Hicks) has spoken frequently about orienting the party more toward addressing issues important to the millions of Californians who are registered as Democrats rather than the select thousands who make up its fiercest activist ranks."
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https://www.politico.com/states/california/story/2019/06/01/labor-anger-over-green-new-deal-greets-2020-contenders-in-california-1027570

"Brian D’Arcy, business manager of the powerhouse International Brotherhood of Electrical Workers in Los Angeles, says that (Mayor) Garcetti’s (green policy) is just the latest on the environmental front that’s pushing his members toward the GOP — and into the arms of Trump, who effectively wooed blue-collar Rust Belt workers on his way to a 2016 presidential win. 'I’m getting hate mail and blowback from our workers, saying the Democratic Party is doing nothing for us,' D’Arcy says, sitting surrounded by his union members in a hall in Los Angeles as they prepared to protest on the streets. Asked if members might gravitate toward Trump, D’Arcy sighed and said, 'It’s already happening.' He said he has heard from scores of members who are so angered about the issue they are considering sitting out the election — or even casting a ballot for Trump."
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https://www.latimes.com/politics/la-pol-ca-california-climate-change-unions-20170920-story.html

"No contour of California's vast landscape inspires such passionate devotion as its coastline, so state lawmakers recoiled when President Trump announced in April that he wanted to expand offshore drilling. The outrage was channeled into a proposal for preventing any new infrastructure along the water, pipelines or otherwise, for additional oil production. But the day before a key Sacramento committee hearing this summer, Sen. Hannah-Beth Jackson (D-Santa Barbara) received some bad news about her legislation — it was opposed by a politically powerful labor group whose members' paychecks depend on the steady flow of oil. In a letter to lawmakers, the top lobbyist for the State Building and Construction Trades Council of California said he feared harming projects that "maintain and create new employment opportunities." The legislation, Senate Bill 188, stalled the following day, an unceremonious defeat for a proposal announced with much fanfare months earlier. 'I was startled,' said Jackson, who represents a region with a painful history of oil spills but said she recognizes the jobs that fossil fuels provide. 'I don't think people say I love oil so much. It's I have to feed my family.'"

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Reproduced from daily email service from CALmatters:

Oil, hardhats and a wedge issue Whatmatters/CALmatters, 4-10-19

The oil industry and its workers are combating a number of bills.

California’s oil industry and unionized building trades workers are teaming up to combat legislation that they say threatens the industry and the jobs it provides.

·  More than 100 oil workers, many of them earning $100,000 a year, came to the Capitol to buttonhole legislators Tuesday, and gathered for lunch at the State Building and Construction Trades Council of California with oil industry lobbyists.

·  Trades council president Robbie Hunter told the crowd that if legislators over-regulate oil in California, the demand would be filled by refineries in India and wells in Saudi Arabia, where there are no strict environmental standards.

Hunter: “We’re going to stand our ground. We’re going to fight.”

This year’s bills would:

·  Impose an oil severance tax.

·  Require that the state fully transition to zero-emission vehicles by 2040.

·  Ban new drilling within a half-mile of a residence, school, childcare facility, playground, hospitals or health clinics. That bill by Assemblyman Al Muratsuchi, a Democrat from Rolling Hills Estates, would significantly restrict drilling in Beverly Hills and Long Beach.

Catherine Reheis-Boyd, president of the Western States Petroleum Association, attended the lunch: “It’s really important that we all join together and have a common voice of reason, and a voice that balances the economy and environment, and economic prosperity.”

Wedge issue: The fight over oil divides the Democratic constituencies of environmentalists who seek to restrict carbon-based fuels and end fracking, and building trades union leaders, who generally are aligned with Democrats.
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Editorial conclusion: Before playing politics, it's advisable to understand the game and the other players.