Dumping coal stock was easy, oil not so much

Hundreds of people supporting the coal industry turned out for a hearing on regulation in Salt Lake City last month.
Hundreds of people supporting the coal industry turned out for a hearing on regulation in Salt Lake City last month. The Associated Press

The decision by the California State Teachers’ Retirement System board last week to unload its remaining coal holdings was significant, but mostly for its symbolism.

As required by legislation carried by Senate President Pro Tem Kevin de León last year, CalSTRS is selling a $1.5 million stake in four coal companies. The decision was easy. The $1.5 million, dust in CalSTRS’ $186 billion portfolio, was all that remained of $40 million in coal holdings from last spring, The Bee’s Dale Kasler reported last week. Coal stock prices have tanked as companies confront falling natural gas prices.

The California Public Employees’ Retirement System had $83 million in coal stock as of October, a fraction of its $293 billion portfolio. It doesn’t plan to divest until 2017.

Divestment aside, California won’t fully extricate itself from coal for years. Several Southern California utilities import power from coal-fired plants in Utah and Arizona. The Los Angeles Department of Water and Power, for one, gets 40 percent of its electricity from coal. That won’t change until well into the next decade.

At Gov. Jerry Brown’s behest, meanwhile, California is contemplating entering into an arrangement to operate the electricity grid in concert with Western states, including Wyoming, Utah and Montana.

These strange bedfellow states exploit coal, no matter that it emits greenhouse gases, and are challenging Obama administration regulations that would force power plant emission reductions, stands that are anathema to California’s stated policy.

The California Independent System Operator, which oversees the grid, is opening hearings on the implications of a merger this week. Advocates of the deal say California could export excess solar power and displace electrons generated by coal, an attractive notion. The reverse also could be true. If the merger proceeds, California could find itself importing more electrons generated from coal, and that would be unacceptable.

“Any regionalization proposal should maintain – and not weaken – the renewable portfolio standard,” de León and incoming Assembly Speaker Anthony Rendon told Brown in a letter last week. They’re right. California should enlist other states in the fight against climate change. But California has come too far to cede authority to coal states.

The pension funds will lose little if anything by selling off coal investments, but divestment is a policy that should not be done lightly.

CalSTRS estimates its stock has underperformed standard indexes by 1.41 percent since it complied with a legislative directive that it divest from tobacco stocks in 2010 and a board order that it sell firearms stocks after the slaughter at Sandy Hook Elementary School. That equates to about $4 billion, according to spokesman Ricardo Duran.

Pension funds have a duty to get solid returns. They also have an obligation to taxpayers who ultimately fund civil servants’ pensions. Morality should have a role.

The CalSTRS board was right to insist that the teachers’ pension fund divest from companies that make firearms that are illegal in California, especially after one was used to massacre 26 students and educators at Sandy Hook. Tobacco stocks remain a solid investment, but tobacco companies sell a deadly product.

Although this state’s policy clearly is to combat climate change, divestment decisions involving other fossil fuels should not be rash. Any attempt to unload oil stock would be complex. California refineries and the San Ramon-based Chevron employ huge numbers of workers. And at least for now, alternatives to petroleum are far less available than are substitutes for coal.