In 2016, Energy Transfer Partners—the company behind the Dakota Access Pipeline—became a poster child of corporate greed when it ignored the Standing Rock Sioux Tribe’s pleas to keep a 1,172-mile pipeline off their land or, at the very least, to conduct a proper environmental assessment before building it.
Apparently, the company’s decision to ignore those pleas cost it—and the banks invested in the project—a whopping $8.1 billion from August 2016 to September 2018, according to a report the University of Colorado at Boulder’s First Peoples Investment Engagement Program recently released.
The project was originally supposed to cost $3.8 billion, but it wound up costing an extra $3.7 billion due to protests and loss of market capital. On top that, a hardcore divestment campaign led by opponents got people to close 150,000 checking and savings accounts with 17 banks involved with the project, including Wells Fargo and Citigroup. That led to an additional $4.4 billion in losses.
People weren’t the only ones to take their money out of this project; cities like Seattle and Davis, California did, too. Three banks—BNP Paribas, ING, and DNB—sold their shares in the project’s original $2.5 billion loan.
The enormity of the loss was surprising to author Mark Meaney, the executive director of the university’s Center for Ethics and Social Responsibility.
“If you look at it, you can see just how much such a large firm like Energy Transfer Partners suffered as a result of failing to adequately consult based on free prior and informed consent principles,” he told Earther. “That material loss was a direct consequence of a failure to consult with indigenous peoples on the impact their project may have on the land and, specifically, the water.
The team of legal experts compared stock prices during monumental events throughout the controversy to expected prices that likely would’ve materialized if Energy Transfer Partners had addressed the concerns of environmental and tribal activists. In short, they found that ignoring social impacts, even if it’s technically legal, can hurt a business’ bottom line.
For example, when protests on construction sites first started gaining attention in April 2016, Energy Transfer Company’s stock dropped more than 6 percent from its expected return. And when 2,000 veterans headed to North Dakota to show solidarity in December 2016, the stock value dropped more than 5 percent. The company’s stock price saw a general downward trend between March 2016 and October 2017.
Energy Transfer Partners seems unfazed by this loss. “We are pleased with the positive impact this project has had on the performance of our Partnership as reported in our recent earnings calls,” spokesperson Alexis Daniel wrote in an email to Earther. In fact, the company is so pleased that it is currently working on increasing the amount of oil it ships through the line from 500,000 barrels a day to 570,000.
However, as the report notes, the company was worried about financial losses that could result from a delay back in 2016. The report’s conclusions include the cost of the delays that resulted from court proceedings, which totaled anywhere from $1.85 billion to $2.25 billion. On top of all that, Energy Transfer Partners suffered costs related to the protests themselves, which the report lists at $300 million.
Even if Energy Transfer Partners doesn’t care about these losses, some banks certainly do. The Equator Principles Association, which determines minimum standards for environmental and social risk for its 93 financial institution members (including many of the banks that invested in the project), asked the First Peoples Investment Engagement Program to consult with it to ensure that none of its members suffer these losses again. The association wants to improve its social impact strategies. Any reasonable business that cares about its profit should.
“The banks lost a good deal of money, and as a consequence of that, they want to know how it is they can avoid doing so in the future,” Meaney said.
A large piece of that is engaging with indigenous communities and gaining their consent for any development project, he went on. This investment program hopes to teach more corporations how to properly do that so that they benefit and people benefit, too.