Even I've been a little surprised by the strong reaction to my column on Tuesday about Pennsylvania's sizable investment, through its teacher retirement funds, in the company that's building the Dakota Access pipeline (DAPL). This is the outfit whose security guards sicced attack dogs last weekend on Native American protesters, who say that construction is desecrating sacred tribal lands and that the risk of oil spills is unacceptable.
On Wednesday, a state lawmaker -- Rep. Leanne Krueger-Braneky, a Delaware County Democrat, called on the Pennsylvania State Employee Retirement System, or PSERS, to divest its 5-million-share investment -- which in June was listed as worth roughly $192 million -- in Energy Transfer Partners, or ETP, the firm building the pipeline and a leader of the energy consortium.
Here's an excerpt:
My tax dollars, as well as tax dollars of my constituents and Pennsylvanians across the state, are helping finance this highly environmentally questionable project and pay the salaries of a private security force that partakes in 1960s-era intimidation tactics.
It's an embarrassment to our taxpayers that Pennsylvania has any type of association with such disgusting displays of bullying, but thankfully we have recourse. I am asking the board at PSERS to immediately divest all of the state's shares in ETP as a show of solidarity with those who are simply exercising their constitutional right of peaceful protest and assembly. Our state, which holds such a distinctive place in the founding of our nation, cannot lower itself to enabling the type of jackboot thuggery we're seeing in North Dakota.
Krueger-Braneky isn't the only Pennsylvanian voicing objections. The environmental group Food and Water Watch is gathering petitions from other state residents who want PSERS to pull its money from ETP and the Dakota pipeline. Some activists may voice their objections in person at PSERS board meeting slated for Friday in Mechanicsburg.
Some citizens contacted PSERS about the state pipeline investment. The pension authority said it doesn't condone violence at the pipeline construction sites in North Dakota . Well, that's something. Here's some more of the response:
Since 2008, PSERS investment in ETP has returned an annualized positive return of 9.76%.
For the calendar-year-to-date PSERS' investment in ETP has earned a positive return of over 50%.
Overall, PSERS' MLP investment strategy has a time weighted annualized return of over 15% since its inception in 2008.
Pipelines provide an essential conduit to move energy to market and are generally the safest and most effective way to move hydrocarbons. The Dakota Access Pipeline will greatly reduce train and truck traffic and hauling that has grown throughout the area.
As fiduciaries, PSERS must operate and invest its assets solely for the exclusive benefit of its members. Using the System's assets to advance a policy agenda against fossil fuel investments could violate PSERS' fiduciary duty.
* The mission of PSERS is to maintain a financially sound System, prudently invest the assets and effectively manage the resources of the organization. It is not to assert our influence to promote a moral, political or social agenda, no matter how worthy a cause may be.
* Historically, PSERS has taken the position that investment and divestment based on moral, political, or social grounds generally violates the board's fiduciary duty of loyalty. That does not mean, however, that the moral, political, or social issues that underlie most divestment requests cannot be considered. They can, but only as they impact the economic analysis of the proposed investment action.
Translation: We're making money here, so it's all good.
And it's true that trying to gauge the moral impact of every investment would be a difficult burden for PSERS or any governmental pension or investment fund. Even a fairly dispassionate investment in an S&P 500 index fund commits public dollars to a lot of things that somebody finds immoral -- cable companies that market porn videos, or cigarette companies, or even the dreaded Big Soda. But the PSERS response also raises some questions about things that frankly I still don't get.
-- Divestment isn't the only tool in the PSERS shed. If the pension authority truly doesn't condone the violence that occurred over the weekend, why -- as a significant owner -- didn't it make its viewpoint more forcefully known to top executives at ETP. PSERS is the largest public investor in the company, according to the available records, so why not be a voice for good?
-- If PSERS doesn't make political or moral value judgments, why are they telling people that pipelines are a better way to transport oil than rail? Because that sure sounds like a political judgment.
-- By giving themselves a moral lobotomy, PSERS practically implies that it's forced to invest in energy companies such as ETP. But that's not true. As noted earlier, no other governmental or quasi-governmental fund in the United States, including much larger ones such as California, have as big a share in the pipeline giant as does the Commonwealth of Pennsylvania. And despite its "fiduciary duty," PSERS with its big investments in energy reported missing its targeted return earlier this year.
If history bars PSERS from morally objecting to fossil fuel investments, history can change. For one thing, we live in a uniquely historic moment of climate change -- with rising sea levels beginning to wreak havoc and with global warming intensifying floods like the one that just battered Baton Rouge. And other states are reacting; in 2015, California enacted a law banning its main state pension funds -- CalPERS and CalSTRS -- from investing in thermal coal, and anti-fossil-fuel activists are pushing for more. Pennsylvania doesn't have a great track record of environmental leadership -- but there's no reason why that history can't be altered.
Every November, we send politicians to Harrisburg with one overarching goal: To do the right thing. Why is it so unreasonable to ask for the tax dollars we send to Harrisburg to do the right thing as well?