Dunedin dumps on big oil

Dunedin councillors have decided that oil companies are responsible for global warming.

They’ve just voted for the city to sell its investments in oil extraction companies, saying the activity is unethical.

In doing this, they equate drilling for oil with other unethical pursuits, like the munitions, tobacco, gambling or pornography industries—but not, apparently, including the prostitution… err, trade profession calling sector. Nor alcohol.

They will maintain investments in retail outlets for fossil fuels. That’ll send a message. I don’t know what message.

This will have no effect on oil companies, their exploration, production or profits. According to the Mayor of Dunedin, Dave Cull, however, this isn’t the point. The intention is simply the ‘encouragement’ of ‘the need to transition to a low-carbon economy.’

According to a financial report provided to the councillors before the vote, it could trim $170,000 a year off the council’s income. Which will have to be found from rates.

I should point out that the good councillors of Dunedin forget that oil companies do not sell used petrol. They actually keep it in quite good condition so that their customers can burn it instead.

So it is their customers who should be asked to stop using it, not the big oil companies, because they don’t use it. They merely find and supply it.

Still, it’s easier to pick on the big petrol sign. Much harder to carry an argument to thousands of people.

They’re wasting their time. As long as people want to drive their cars and warm their houses, they’ll find petrol and oil somewhere.

UPDATE: Sat 17 May 2014 10:00 am

In comments, Andy linked to this video (thanks, mate) by the Dunedin council to attract oil exploration teams to set up there. I haven’t found the date it was produced, although a portion was posted to YouTube in January this year.

What does the video say about oil exploration and the council’s (previous) attitude towards it?

The city council is 100% supportive of your exploration initiative.

We understand the requirements for an oil and gas supply base, and we’re confident that the success of the Norwegian oil exploration ports can be replicated here in Dunedin. In fact, we’re so convinced that this is an ideal location for your base, we built a computer model to demonstrate the area’s suitability.

Then at the end:

The city of Dunedin is the clear choice. We’re ready for your development, for your active participation in our progressive city. Dunedin is ready and waiting for you.

Now the city says their business is not merely undesirable, it’s actually unethical. Any greater change in direction is scarcely possible. From paragon to pariah in a twinkling. Although only those councillors will feel embarrassment who remember the earlier strategy to support the oil business—those with memories longer than seven minutes.

The others will continue driving to council meetings oblivious to the needs of their city and their people. And the lost opportunities.

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Andy
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Andy

As I pointed out in the previous thread, Dunedin did quite a bit of work to promote their area to the exploration industry, complete with full scale videos with computer animations

Typical councils though, they forgot what they were speaking about 10 mins ago.

Richard C (NZ)
Guest
Richard C (NZ)

>”They’ve just voted for the city to sell its investments in oil extraction companies” >”it could trim $170,000 a year off the council’s income” Too many questions. How much of what O&G stocks are they holding? Could be a few very good earners or a truckload of mediocre. $170,000 a year is the difference in return between their O&G stocks and the “ethical” alternatives for the same investment sum. So they’re either giving up exceptional returns from a moderate investment or mediocre returns from an inappropriately large value holding. Or somewhere in between. And what will they buy instead with the proceeds that’s squeaky clean (i.e. fossil fuel free in every way) but earning $170,000 a year less? Is there a capital gain/loss from the long held O&G stocks they sell? And what is the comparative capital gain/loss potential/risk for the “ethical” alternatives? Not much wriggle room there. The Italian mafia loved laundering in the renewables sector, presumably an “ethical” investment category, because the subsidized returns were better than crime for a while there. Carbon credits tanked. An ethical sector does not necessarily exclude unethical operators or boondoggles and may even attract both… Read more »

Alexander K
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Alexander K

I had the feeling, while passing through Dunedin many years ago, that some officious soul who had learnt their speech patterns from the cook on the Muppet show, would demand my passport before I could proceed North. I was still suffering culture shock after spending a few days in Invercargill.
Actually, my maternal Grandmother lived in Dunedin for many years and I have fond childhood memories of being thrilled by rides with my great aunt, Gran’s sister, who insisted that the only way her 8-cylinder Hudson of late Twenties vintage should be driven was flat-out.

Andy
Guest
Andy

Ethical investments include bird killing bat chomping wind turbines that push people into fuel poverty, destroy property values, kill off tourism, make people sick, don’t reduce CO2 emissions to any degree, and require massive amounts of non recyclable material for their construction.

I presume.

Andy
Guest
Andy

According to Councillor MacTavish on her Facebook page, they are still welcoming the oil and gas industry to Dunedin., despite their deccion on their investment portfolio

Richard C (NZ)
Guest
Richard C (NZ)

Indirect investment is ethical (even “encouragement”). Direct investment isn’t. Apparently.

Andy
Guest
Andy

In response to the Youtube clip I posted, Cllr Jinty MacTavish replies on Facebook

This was made in 2008 or 2009, Andy and Dave, prior to me being on Council. I think it’s fair to say that we have a very different council now, and I’m not sure that this would be made today. We don’t have a formal view on O&G, as it’s outside of our jurisdiction, although individual councillors certainly have their own views! We have submitted on Block Offers, raising issues pertaining to the lack of BC analysis in terms of climate change, issues around risk, and distribution of benefits etc, but we have not taken a position formally.

I originally came across this issue from the ProGas Otago FB page

Richard Treadgold
Guest

Nice analysis, good points. The significant point is nobody is examining why fossil fuels are considered unethical. The science is done on that!

Richard Treadgold
Guest

Yes, of course. What point are you trying to make?

Richard Treadgold
Guest

Now that’s good. She takes no responsibility for the abrupt change, though she voted for it and must be aware of the unsettling effect on business, both the oil companies and local businesses who have goods and services to sell. Does Block Offers refer to exploration blocks? What is BC analysis?

Andy
Guest
Andy

The point I am trying to make is that there is not a lot of rational thought going on here. We can claim fossil fuels are unethical, yet any criticism of so called Reneables, biofuels , etc falls on deaf ears

We have dumbed down society into a set of bumper sticker slogans that can be shared as ” memes” on Twitter and Facebook.

Andy
Guest
Andy

Block offers refers to the offshore block permits, issued by the government

CB = cost-benefit analysis

Presumably they have some cost associated with the externalities of CO2 emissions “causing climate change” that they factor into their decisions

Richard C (NZ)
Guest
Richard C (NZ)

>”some cost associated with the externalities”

The ‘Social Cost of Carbon’. Very contentious and highly manipulated in the US:

https://www.climateconversation.org.nz/open-threads/climate/economics/#comment-214789

Hasn’t reared it’s ugly head in NZ to the same extent thankfully.

>”CB = cost-benefit analysis”

With all the focus on cost (although just what is the NZ Social Cost of Carbon?), but benefit all but neglected e.g. (from ‘Fools with fuels’ thread):

World Grain Yields vs. CO2 vs. Global Temperatures:

http://c3headlines.typepad.com/.a/6a010536b58035970c01a511933417970c-pi

And another: being able to drive to Council meetings in a fossil fueled car. That’s a benefit surely?

Richard C (NZ)
Guest
Richard C (NZ)

>”drive to Council meetings”

I suppose they all might “walk the talk” now – literally.

But I doubt that.

Richard Treadgold
Guest

Ah, yes. Just as I suspected! I agree.

Richard C (NZ)
Guest
Richard C (NZ)

>The intention is simply the ‘encouragement’ of ‘the need to transition to a low-carbon economy.’ But not to greenwash at all? And anyone tipped into making the transition by this action? Then, Picturesque Dunedin: or Dunedin and its neighbourhood in 1890 ‘A Brief Review of the Leading Industries of Dunedin’ Aerated Waters, etc. Breweries. Bone Mills, etc. Brushes. Basket-Making Bee-Hives, etc. Biscuits, Confectionery, Preserves, etc., etc. [continues….] In order that the majority of the manufacturing industries may thrive, it is absolutely necessary, so long as steam is the motive power, that a good supply of fuel should be available. In this matter Dunedin is exceptionally favoured. Within a reasonable distance of the city there are numerous mines from which the requisite quantity of coal and lignite can be obtained. These mines are situated at Green Island, Kaitangata, Shag Point, and other places. They are generally worked by drives into the sides of the hills, and not by sinking a perpendicular shaft, as is usual in the coal-pits of Great Britain. An excellent bituminous coal is also brought round from the West Coast by the Union Steam Shipping Company’s regular line of vessels. To… Read more »

Richard C (NZ)
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Richard C (NZ)

>”Education and Research….Contributed $351 million in GDP in 2012…….The University of Otago last contributed $800 million in 2012, about 16% of Dunedin’s GDP.”

Not sure what’s going on here. Either $351m or $800m is incorrect.

Richard C (NZ)
Guest
Richard C (NZ)

No mention of the buyers of the stocks they’re selling i.e. when Dunedin divests from oil extraction, other entities invest in oil extraction (who? and didn’t they get the message?).

The intent is therefore offset by normal market dynamics. Buyers (many more than actually settle on the trade) are queued to buy in order of bid, and if the stocks on offer are good enough, will climb over each other to get them. That’s demand in action. I doubt Dunedin will have any trouble selling into such a liquid market (no pun intended – take either meaning).

If Dunedin wants to sell, the market says “what’s your offer”. It doesn’t say “what’s your intent”.

Richard C (NZ)
Guest
Richard C (NZ)

So the son or daughter of a wealthy owner of a fossil fuel driven logistics company goes to study at Otago and hands over dad’s cash to pay the fees in Dunedin’s #1 key economic sector.

Is it ethical for the University to accept that fossil fuel tainted cash for fees in Dunedin’s intended low carbon economy i.e. does the medium of exchange nullify the environmental concern or not?

If it does, then oil extraction investment is also ethical. If it doesn’t, then it’s not ethical to accept any payment of monies earned primarily by the aid of fossil fuels.

Maybe more acceptable if the cash were in form of ‘greenbacks’ of course.

Andy
Guest
Andy

If we accept the concept of “social cost of carbon” (for sake of argument) does it imply that fossil fuel extraction is “unethical”?

Maybe this is something University of Otago students angst about into the small hours

mwhite
Guest
mwhite

http://www.portotago.co.nz/publications/Port%20Otago%20Supply%20Base%20Logistics%20Brochure.pdf

pdf presentation Dunedin, Your Southern Supply Base.

Check tools – General – modified – 02 June 2010 01:16:56

Andy
Guest
Andy

In researching central heating systems for our new house build project, I noticed that coal fired stoves are still permitted in Otago but not in Canterbury

Coal is still the cheapest way to heat your home.
See this Dunedin dealer, for example
http://www.mckenzieheating.co.nz/coal-boilers-dunedin

Presumably these are “ethical”? Can DCC please provide some advice?

Douglas
Guest
Douglas

Riichard
You say
“Hasn’t Dunedin already transitioned to a low-carbon economy?
The fuel in 1890 was coal.
The fuel in 2012 was fees.”

Ha ha – I think that the ‘fuel’ for Dunedin’s economy in 2012 is debt – student debt as well as Dunedin’s council own debt of $650m.

Richard C (NZ)
Guest
Richard C (NZ)

>”Dunedin’s council own debt of $650m”

Thanks for the number Douglas, saved me the effort.

It seemed odd that the council even had investments (let alone O&G) when it is usual to be carrying a load of debt. I wasn’t aware that councils invested beyond cash earning interest so news to me.

Is it the council’s business to be investing funds sourced from rate income (or whatever other source they might have) in say, the stockmarket?

And is it ethical?

Richard C (NZ)
Guest
Richard C (NZ)

>”If we accept the concept of “social cost of carbon” ”

Wrong premise in my view. Should be “social cost [and benefit] of carbon”

Richard C (NZ)
Guest
Richard C (NZ)

Heh, page 3:

“Planning is underway for the construction of an International Logistics Hub and
Offshore Supply Base to support the oil industry in the southern part of New Zealand”

Richard C (NZ)
Guest
Richard C (NZ)

>”Is it the council’s business to be investing funds sourced from rate income (or whatever other source they might have)…..” Ah, from the ODT article: The Waipori Fund • Established after the Dunedin City Council in 1998 sold its 100% holding in Waipori Power Generation Ltd and its 42% holding in United Electricity Ltd. • After repaying associated debt, the council was left with just over $56m cash. • That became known as the Waipori Fund, which has been a significant contributor to council coffers since. • Provides a source of revenue that can be used to offset rates. • The last annual return to the council recorded, to the end of the last financial year in June 2013, was $7.5m. http://www.odt.co.nz/news/dunedin/302303/opponents-query-cost-visionary-decision ‘Waipori Fund improves to $76.3m’, 5 Sep 2013 […]……the result, coupled with predictions of more stable international markets ahead, prompted Cr Lee Vandervis to question whether the time was right to consider cashing in the fund. The money could then be used to pay down council debt, he suggested. […] The fund’s directors had also expressed concern at the declining real value of the fund. The concerns had prompted suggestions the… Read more »

Richard C (NZ)
Guest
Richard C (NZ)
Richard C (NZ)
Guest
Richard C (NZ)

I note this from up-thread:

Tourism (#3): Generated $225 million to [Dunedin] GDP in 2012.
Employs 3,523 people across 580 establishments.

Given a good proportion of those tourists arrived from overseas by fossil-fueled aircraft this sector is, by the new DCC ethical criteria, environmentally dirty and shouldn’t be invested in. But I don’t see the “encouragement” to move from this particular high carbon economic activity to a low carbon alternative (employing 3,500+ people) – whatever that is.

Richard C (NZ)
Guest
Richard C (NZ)

DDC sold Waipori Power Generation Ltd. Surely the rationale for that sale is the answer to all the angst about what to do with the proceeds. That’s assuming the rationale was sound in the first place of course.

Or did DDC just sell because that’s what you do with an asset like that?

Andy
Guest
Andy

Otago has a thriving coal industry. Transitioning to lower carbon gas would appear to fit the criteria of “transitioning to a low carbon economy”

Even Michael Mann has publically supported natural gas development in the USA.

Richard Treadgold
Guest

The only consistency in this hysterical issue is the lack of reason.

Richard C (NZ)
Guest
Richard C (NZ)

‘Council moves to protect fund’
Home » News » Dunedin
By Debbie Porteous on Tue, 22 May 2012

For the past two years, councillors setting the council’s annual budget have taken a distribution of about $4 million from the fund on the basis of an estimated surplus that has not actually occurred.

That meant money had to come off the principal of the fund, against council policy to protect the fund.

http://www.odt.co.nz/news/dunedin/210128/council-moves-protect-fund

# # #

I still don’t know what the rationale for selling Waipori Generation actually was. That would be deep in council records I suppose.

Richard Treadgold
Guest

RC,

I still don’t know what the rationale for selling Waipori Generation actually was.

Nor the rationale for buying, acquiring or constructing it.

Douglas
Guest
Douglas

Richard
The government forced the DCC to sell either its generating capacity at Waipori or transmission services. It chose to sell it generation capacity thus establishing its Waipori Fund to be invested its proceeds to mitigate the negative effect on rate demands.

http://www.auroraenergy.co.nz/content/companymilestones.php
1998 – Dunedin Electricity’s owner sells its shares in Waipori Power and United Electricity, effecting full ownership separation of line and energy activities.

Delta Utility Services Ltd is formed, to separate competitive asset servicing activities from Dunedin Electricity’s regulated delivery business.

1998 The “Electricity Industry Reform Act” is passed, requiring ownership separation of “wires” and “supply” businesses.

Richard C (NZ)
Guest
Richard C (NZ)

>The “Electricity Industry Reform Act”

OK, this explains why generation was sold (lines and retail preferred). Thanks Douglas. So whatever they do with the fund it is to “to mitigate the negative effect on rate demands”.

Tauranga has a similar TECT consumers trust which returns some of what consumers have paid for electricity each year. Unfortunately that fund also turned into a distribution to a long list of deserving causes e.g. beach lifesaving.

I haven’t read the WAIPORI FUND: ETHICAL INVESTMENT REVIEW in detail yet (distracted by earning a living), but given the problems the fund has had with nil annual returns my first impression is that the beneficiary is the funds manager more than anyone else at present. Maybe it’s the entire investment placement rather than the ethical concerns that should be looked at.

Douglas
Guest
Douglas

Richard says
. “Maybe it’s the entire investment placement rather than the ethical concerns that should be looked at.”.

The competence or honesty of the fund manager was not of primary concern to the council. It was done through its own treasury financial systems. Some of that investment was in ‘big oil’. This was considered by the Mayor, David Cull and a green tinged councillor, Jinty McTavish as being ‘unethical’. So now the council has agreed that this is so. Now is in the process of divesting itself of this investment. One presumes that the council will define ‘ethical investments’ for treasury’s guidance and the ratepayer’s edification.. It is however, a purely political decision.

Douglas
Guest
Douglas

Richard
The inepitude continues….

### dunedintv.co.nz May 19, 2014 – 6:52pm
Waipori Fund income reduced by almost a million dollars
Some Dunedin City Councillors were left fuming at a meeting held today. The Waipori Fund income was reduced by close to a million dollars because of a volatile exchange rate. As the council heard the disappointing results it was news those sat around the table did not want to hear.

Richard C (NZ)
Guest
Richard C (NZ)

ETHICAL INVESTMENT REVIEW,

Screening Process – “Exxon Mobil as a large oil producer has been screened out, while shipping companies that may transport oil are not”,

Neither shipping or airline companies that consume vast quantities of oil and derivatives, that would include cruise lines and airlines feeding Dunedin’s tourism.

Still, at least we know that it’s only oil extraction that’s unethical. Once oil is extracted it’s then environmentally benign, ethical, and fair investment game, apparently.

But I just get a sliver of thought that I’m detecting a hint of duplicity somewhere…….

Richard Treadgold
Guest

No, no, RC, you’re worrying needlessly. It’s all above board. You’re right, it’s only the extraction that’s unethical. The use, the burning, the carbon dioxide fouling and thickening the atmosphere, that’s all fine.

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