California flarin'

1 minute read

Private equity owned Ameredev comes out as sector leading in terms of flaring of methane in the Permian Basin. Surprisingly, our analysis finds that key financiers, through an EnCap fund, are a number of Californian public pension funds.

We believe that unnecessary CO2 emissions are not in the interest of those funds' beneficiaries. Nor are massive flaring efforts good for PE exit valuations. A recent report shines a light on the efforts of private-equity owned Ameredev to achieve an almost perfect batting average for flaring residual fossil gas from its oil production; but, the question relates to the identities of the asset owners providing capital for this flaring effort.

Public sources indicate that the key financier is the EnCap Energy Capital Fund XI LP fund. Various public pension funds are the key investors in the EnCap XI fund, with Californian pension funds playing a dominant role. Investments in flaring-intensive oil production are likely to accelerate climate change.

A pension fund party could argue that such acceleration has some balance sheet benefits by reducing future pension liabilities, especially in fire-stricken states such as California. But we opine that this does not properly reflect a holistic, or indeed legal, perspective on fiduciary duty.