DAPL Economics: Investor Concerns and Market Forces Work Against the Project

Opposition to the Dakota Access Pipeline (DAPL) is having an impact, even on the mainstream financial sector.

Give Steven Heim and Boston Common Asset Management part of the credit.

Heim is not a name you will recognize, but he is an important behind-the-scenes player. He works for the Boston Common Asset Management, a company committed to the “global commons” and “dedicated to the pursuit of financial return and social change…”

According to Tim Brennan, Treasurer and CFO of the Unitarian Universalist Association (UUA), a community opposed to the pipeline, Heim “has been a leader in getting investors organized around DAPL.”

Here is the background on how Heim and Boston Common have been working to stop DAPL, and other updates from the financial sector.

Boston Common Helps Organize the Financial Fight

On Sept. 16, Boston Common issued a statement supporting Standing Rock Nation, and stating it was troubled by how Energy Transfer Partners approached the nation’s concerns. “The pipeline threatens to destroy sacred places and burial grounds and contaminate drinking water for the Tribe,” Boston Common said.

On Nov. 7, Boston Common announced it was “crafting shareholder proposals for three of the five primary companies in the Dakota Access Pipeline project: Marathon Petroleum, Phillips 66, and Enbridge.” It worked with First Peoples Worldwide to educate investors about DAPL.

[Heim] organized meetings or conference calls between the Chairman of the Standing Rock Sioux Tribe or other tribal representatives, and investors, such as the Interfaith Center on Corporate Responsibility, the Investors and Indigenous Peoples Working Group, major pension funds, and Wall Street analysts.

On Dec. 12, Boston Common published: DAPL: Join us in engaging banks and financiers! Heim and Lauren Compere of Boston Common had met with three of the four major lenders to the Dakota Access Pipeline, it said. Those included TD Bank and Citibank, both of which expressed concern “for the manner in which Energy Transfer Partners has handled the project.”

Financial Institutions Pressured into Public Statements

It is significant milestone that DAPL has drawn enough controversy and coverage that a number of major lending institutions connected to the project have felt compelled to make a public statement. Heim provided the following links.

Credit Agricole issued a statement Nov. 25. It seemed cautious and dismissive of Standing Rock’s concerns, stating that the U.S. courts confirmed that the project is legal and that the tribes have no land rights to stop it. It continued:

To calm the situation, the US federal government has nevertheless put a hold on delivering certain permits and a new pipeline route is under review concerning the most sensitive areas.

We are monitoring the situation closely and continue to use all our action resources to favour a satisfying resolution to the problem.

Others stated human rights concerns. Citibank’s Nov. 30 statement included the following:

Citi has been closely monitoring developments related to the Dakota Access Pipeline (DAPL), and we continue to be concerned about the situation. Throughout this process, and consistent with our commitment to sustainability and respect for human rights, we have remained engaged with Energy Transfer Partners and Sunoco Logistics to discuss our concerns and advocate for constructive dialogue with the Standing Rock Sioux Tribe in an effort to come to a resolution.

TD Bank’s Dec. 1 statement included the following:

TD has been listening to concerns from the community about DAPL and we will continue to advocate that Energy Transfer Partners (ETP) engage in constructive dialogue and work toward a resolution with community members, including the Standing Rock Sioux Tribe. TD played an active role in helping to secure Foley Hoag LLP, an independent human rights expert, to conduct a review on behalf of the lenders and advise on recommended improvements ETP and Sunoco Logistics can make to their social policies and procedures moving forward.

ING Bank’s statement included a comment on the police force used on water protectors:

We are concerned about this. Mr. Maina Kiai, the UN Special Rapporteur on the rights to freedom of peaceful assembly and association, accused the US security forces of using excessive force. ING is calling on the parties involved to reach a peaceful solution. …

For more, here are statements from DNB First Bank, and Societe Generale.

Market Forces Working Against DAPL, Too

Heim also provided us with a link to Sightline Institute’s report: Dakota Access Pipeline Driven by ‘High-Risk Financing’ in Overbuilt Region: Little-known economic weaknesses in controversial project developer

The report says DAPL is financially weak and raises questions about whether the pipeline is needed at all, given the drop in oil prices and Bakken production.

Issued in November, the report’s executive summary said DAPL faces a looming financial deadline.

The pipeline’s principal backer, Energy Transfer Partners (ETP), has conceded in court proceedings that it has a contractual obligation to complete the project by January 1, 2017. If it misses this deadline, companies that have committed long-term to ship oil through the pipeline at 2014 prices have the right to rescind those commitments—and may well exercise that right. …

This is significant because oil prices began falling soon after shippers committed to DAPL, and forecasters say it could be a decade before prices rebound.

It is clear that DAPL missed its Jan. 1 deadline. Less clear is how the contracts will shake out. The report’s summary concluded:

If production continues to fall, DAPL could well become a stranded asset—one that was rushed to completion largely to protect favorable contract terms negotiated in 2014.

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