In Orange County cities like Irvine, along with agencies like the South Coast Water District, officials have directly and indirectly invested millions of public dollars into the fossil fuel industry hoping to boost their coffers with the returns and fund government services.
But that might soon end, as officials across those governing bodies — and across Southern California — have signaled they may reconsider the fiscal strategy, following an offshore oil pipeline leak that eventually smeared tar across Orange County’s iconic coastline in October.
It comes as cities across the county have also increasingly called for the elimination of offshore drilling from California’s coast.
In Irvine, a split City Council voted at their Nov. 23 meeting to explore ways of discontinuing the city’s oil and gas holdings, among other types of investments deemed incompatible with city values, following a council discussion which disclosed this fact:
The city has $5 million staked on the major oil and gas company known as the Exxon Mobil Corporation (ExxonMobil), said City Treasurer Don Collins during the meeting when the issue came up.
“We have seen devastating fires, oil spills, and the growing severity of our drought, and I just want to make sure we’re not investing in companies running counter to our values,” said Irvine Mayor Farrah Khan during the meeting.
She and fellow council members Tammy Kim and Larry Agran all voted in support of the city’s annual investment policy in general, for the year 2022.
But their approval hinged on the condition that City Hall starts finding “any and all investments that are with companies that are countering our environmental and social objectives” and “immediately begin the process to divest from those entities and identify” new investment opportunities, Khan said before the vote.
Council members Mike Caroll and Anthony Kuo voted against that direction, without saying anything.
There also seemed to be uncertainty on the idea from the city treasurer.
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Collins before the vote defended the ExxonMobil investments as having sound compliance with state and local policies and said he preferred the council wait to vote until the state releases clearer guidance on divestment.
“There are a few cities that have implemented (divestment) policies, as well as restrictive policies that wind down to the interpretation of an individual,” he said. “I’d like to table this until the state or federal government comes out with more clear guidelines we can follow, as opposed to my interpretation or your interpretation of what’s right and wrong.”
Khan, in response, said, “Are we not able, as a city, to decide what we invest in?”
“We are … but, for example, you’re asking me about Exxon and investment in Exxon, and I’d ask you are you aware they’re investing $1 billion a year and supporting over 100 entities that are looking for alternative energy sources?” Collins responded.
Khan replied, “I think I would be supportive of ExxonMobil if they were a renewable energy company and not an oil company as they are today, no matter how much they invest” in renewable energy.
“I would not argue with you at all, however, they are transitioning, and, as you are quite aware, so is British Petroleum and Shell, not to mention the fact — well — I’m not going to get into an argument about who is controlling oil in this country,” Collins said.
Before the vote, Agran said, “this is not really that difficult a matter.”
“Why do we wait for the state to lead us? We ought to lead so that other cities follow, other institutions follow, the state itself (follows),” he added.
A discussion on fossil fuel industry divestment is also on the horizon for the South Coast Water District — as early as this upcoming January.
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The agency provides water and wastewater services to approximately 35,000 residents annually along the county’s southern coast, including Dana Point, South Laguna Beach, and areas of San Clemente and San Juan Capistrano.
“An increasing number of agencies have sent requests” to the state’s public employee retirement system, CalPERS, asking the agency to divest from fossil fuel companies as part of its investment strategy — “so I hope you can join them,” said local environmentalist Hoiyin Ip to agency board directors at a Nov. 18 meeting.
CalPERS is the largest government employee retirement fund in the U.S. — administering pensions for 1.8 million members, such as those from the South Coast Water District — and has been criticized for its investment in fossil-fuel holdings.
Specifically, a statewide divestment advocacy group known as Fossil Free CA says the agency has made $30 billion in investments in the fossil fuel industry. Miriam Eide, a coordinating director for the group, said in a Thursday email that figure is based on an analysis of investment data by a third-party research group.
CalPERS did not respond when asked about the accuracy of that figure on Thursday.
Asked for the agency’s stance on divestment in a phone interview, CalPERS spokesperson Wayne Davis said, “we believe that engagement is the proper approach. We have had great success in engaging with public companies.”
The agency also staked its position in a public statement online, saying it’s been most effective at outreaching to companies on “environmental, social, and governance … topics, including climate change, natural resource availability, and respect for human rights.”
“Engagement yields real results,” the agency writes, adding that divestment “increases risk” while losing the agency money and its “voice” as a shareowner of such corporations, “thereby losing our best avenue for influencing a company to act in line with our core values and principles.”
The agency’s website also states: “The call for divestment has become an increasingly popular tool for promoting an important cause or belief. As laudable as the underlying motivations may be, divestment has unintended consequences for the CalPERS fund, our Board and our members.”
CalPERS listed companies like ExxonMobil, among other oil and gas corporations, under its annual investment report for the year 2020.
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In response to the comments by Ip — a member of the Sierra Club — South Coast Water District board directors and staff suggested the divestment issue be brought for discussion at a future meeting.
“We should have it on the (Administration & Finance) committee,” said Board Director Wayne Rayfield during the Nov. 18 meeting.
“Definitely,” said the agency’s General Manager Rick Shintaku.
Asked on Dec. 2 for an update on when that conversation could come, district spokesperson Sonja Morgan said the plan is to bring it back to the Administration & Finance committee in January next year.
In neighboring San Diego County, the City of Encinitas unanimously voted in September to urge CalPERS to take such divestment action and update the city’s own investment policy which doesn’t have any direct fossil fuel holdings.
However, the city has invested in firms that do, through its participation in “pooled funds,” according to a city staff report.
Similarly, 1.26% of the South Coast Water District’s investment portfolio accounts for holdings in JP Morgan Chase & Co, according to its holdings report as of September. The institution has been identified by the Sierra Club environmental lobbying organization as the “world’s largest banker of fossil fuels.”
Ip during the meeting praised that 1.26% investment figure as an indicator of the water district’s “quaint” reliance on fossil fuel holdings.
In Laguna Beach, however, city officials also face calls to pull similar investments out of fossil-fuel supportive banks.
The City Council is expected to discuss its investment policy in general at its next meeting on Dec. 14.