Dakota Access Pipeline Divestiture and Climate Change Politics

By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She now spends much of her time in Asia and is currently researching a book about textile artisans. She also writes regularly about legal, political economy, and regulatory topics for various consulting clients and publications, as well as scribbles occasional travel pieces for The National.

The Financial Times reports today on last-ditch efforts to thwart the Dakota Access Pipeline (DAPL) in Dakota pipe lenders under pressure to withdraw:

A number of banks funding the controversial $3.7bn Dakota Access Pipeline have pulled out of the project, following environmental and human rights concerns from the public and big investors that it would contaminate drinking water and damage sacred burial sites of the Standing Rock Sioux tribe.

Efforts to force divestiture focus on two prongs: those banks funding the project, and on states and cities– such as Seattle, Washington; Eugene, Oregon; and Providence, Rhode Island– that invest in lenders, such a Wells Fargo Bank– that have financed the project, as discussed in this recent opinion piece in The Guardian, We can resist the Dakota pipeline through a powerful tool: divestment.

Impact on DAPLProject

The impact of these moves is unlikely to thwart DAPL — especially as Trump has provided a full-speed ahead for construction of both the DAPL and Keystone XL pipelines, as I discussed more thoroughly in this post, Trump Approves Keystone XL Pipeline, Making Good on Campaign Promise.

I shouldn’t neglect to note that the way for Trump ’s DAPL policy was cleared by his predecessor, who as usual, while virtue-signalling his support for the #noDAPL cause, failed to stop construction of the pipeline during his presidency, as I discussed in this previous post, Obamamometer Whispers DAPL Sweet Nothings to Lure Progressives.

Now, with huge amounts of money at stake, contracts in place, and most of the pipeline built, it would take a massive intervention by a severely avenging Jehovah to prevent DAPL’s completion. Which, at the risk of stating the obvious, is extremely unlikely– as there’s been no clear sign of  Jehovah weighing in on US policy matters at this time (as much as such intervention might be welcome in some quarters).

But I am intrigued by the success that #noDAPL advocates have had in pressing various European lenders to pull the plug in DAPL. Allow me to quote at length from the FT’s account:

In March ING, the Dutch bank, sold its $120m loan to the oil pipeline and divested its $220m shares in Energy Transfer Partners (ETP), the company leading the project construction. BNP Paribas, the French bank, followed suit and sold off the same size loan in April. The loans make up part of the $2.5bn credit line funded by 17 banks.

Scandinavian banks and asset managers have added their weight. DNB, the Norwegian bank, cut its involvement in the pipeline, which runs from North Dakota to Illinois….

The bank’s asset manager, DNB Asset Management, divested from the companies behind the pipeline last November, while Nordea, the Nordic bank, banned its fund managers from investing in the companies building the pipeline. Nordea’s decision came after Donald Trump, US president, decided to continue the disputed project, in January. The pipeline starts transporting oil in May. Odin Fund Management, the Norwegian asset manager, and Storebrand, a sustainable investment manager in Norway, have also divested.

With DAPL expected to start transporting oil this month, these perhaps seemingly quixotic divestiture efforts nonetheless suggests  a weak ray of optimism for stopping or at very least slowing future pipeline projects –a cheering message, in light of my post from yesterday, Oklahoma Governor Mary Fallin Signs Law Imposing Hefty Fines and Lengthy Jail Terms for Anti-Pipeline Protests, discussing how a state that is a leading fossil fuel industry stronghold has implemented draconian measures designed to suppress anti-pipeline protest and dissent. While this policy and other state initiatives to ban or circumscribe protests– currently under consideration by at least 19 US states– will surely face constitutional challenge, they will certainly have a chilling effect on protest, whether or not they are ultimately upheld by courts. And this in turn will force opponents of pipeline projects to focus on other means of slowing or stymieing future pipeline construction– or indeed, promoting other measures to address the threat posed by climate change.

I should emphasize that the belated investor anti-DAPL effort aims not scupper the pipeline completely, but to reroute  it away from Standing Rock Sioux territory, again as reported by the FT:

Many of the sell offs come after a group of more than 130 investors, led by Boston Common Asset Management, sent a letter to the banks in February requesting a reroute of the 1,100-mile pipeline away from the Standing Rock Sioux territory. They highlighted the reputational damage and potential legal risks of financing the pipeline. The number of investors has since risen to over 160, representing $171bn assets under management.

Now, please do not accuse me of Panglossianism in suggesting this late to the party initiative will derail the DAPL. I certainly don’t want to underestimate the magnitude of the huge lobbying resources that fossil fuel interests are currently deploying to promote this project, and, more broadly, the unchecked further exploitation of fossil fuels. Certainly, massive amounts of money continue to be spent to ensure the status quo with respect to fossil fuels proceeds unchecked (see, for example, Fossil Fuel Companies Spend Big to Boost GOP in Heated Special Elections for Congress). And  please note, that despite the cratering of oil prices, major fossil fuel exploitation projects proceed apace– such as effort to open Alaska to fracking, as reported this week in this DeSmogBlog piece, After Years’ Long Push, Fracking Has Quietly Arrived in Alaska.

I note in passing that many banks that have pulled the plug are European– and that European countries in general have in general been more open to in assessing climate change risk than has been the case in the US (and certainly when compared to the climate change denialists  Trump has installed in key positions in the Environmental Protection Agency and in the White House staff).

South Africa and Divestiture

I’m old enough to remember in real time the hard-fought efforts to force universities to to divest themselves of their investments in companies that invested in or otherwise participated in South Africa’s apartheid regime.  Might that serve as a model for those investors– both within and outside the United States– to shape the course of pipeline politics, or more broadly, with respect to climate change?

The Trump administration is currently actively debating pulling out of initiatives such as the Paris Climate Accords, as discussed in today’s post, Road to Trump’s Climate Change Hell Paved by Obama and Clinton.  Although the anti-DAPL investment efforts have peaked too late to have any meaningful impact on DAPL’s construction, campaigns that focus on diverting investment in other pipeline projects– or even more broadly, on other fossil fuel investments– might show some promise, in the absence of US government initiatives.

I should mention that the FT article notes that some investors– such as  Calpers– have rejected a straight divestment strategy, in favor of an “engagement” strategy to raise their concerns about the pipeline’s routing. Their concern is that by making a formal divestment, investors lose any influence. I’m not convinced that this engagement alternative is not simply an effort to have one’s cake and eat it too– but will concede that it least pays some lip service to the objective of  forcing some change.

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11 comments

  1. a different chris

    laugh at you/fight you/you win…. Make them spend a lot of their ill gotten gains, whilst alternative power is growing way faster than anybody expected – we don’t have (and won’t be able) to legislatively stop the crap that will come out of DAPL, we need to make it everybody’s last choice for energy.

    And for that we need a Congress that won’t subsidize it. That may be way harder than the technical challenge.

  2. John k

    What about divesting in the present apartheid country, the one that must not be named?

  3. rjs

    i just checked a few details i’d gotten foggy on; oil went under the Missouri river March 28 and presumably they’re filing the rest of the length now…interstate deliveries of oil start May 14, which means by that date it will be pressurized and flowing the entire length…

    Platts had an article on how much they’re getting to ship that oil…surprised me, they’re charging almost as much as by rail…

    https://www.platts.com/latest-news/oil/washington/dakota-access-etco-oil-pipelines-to-start-interstate-21463845?utm_campaign=plattsbulletinemailtemplate_dyncontent%20-%20new%20eg&utm_medium=email&utm_source=eloqua

    Dakota Access’ uncommitted rate is $6/b to move Bakken crude from one of several field points to Patoka, Illinois, and $7.50/b from the field to Nederland, Texas.
    Shippers that sign a five-year agreement to move at least 5,000 b/d from the field to Illinois would pay $5.25/b.
    Seven-year committed rates from the Bakken field points to Texas range from $5.60/b for more than 90,000 b/d to $6.50/b for 5,000-29,999 b/d.
    Ten-year committed rates from the Bakken to Texas range from $5.50/b for more than 90,000 b/d to $6.25/b for 5,000-29,999 b/d.

  4. lezmaz

    Lots of things to ponder in this great post.

    A few weeks ago I heard an investment strategist at private bank say that America’s natural gas industry was weakening the Saudi cartels and had helped to stabilize oil prices. This, they felt, was an “ultimate validation of fracking” and would “be a huge growth dividend in the American economy.”

    Fracking.

    No mention of the DAP, violation of human rights or any other alternative energy sources.

    I still agree with ‘a different chris.’ Alternative energy is unstoppable. Eventually the mega corporations will simply buy out the courageous pioneers and take credit for leading the way.

    In the meantime, I’m in the process of leaving Chase and moving to First Republic. Nobody will care but I’ll feel better.

    1. Sam Pyeatte

      Alternative energy will stop itself due to the inability to supply base-load power for industrial requirements – cheap power on demand 24-7, and lots of it.

  5. song for karen

    The banks sold the loans… to who? To some other bank. What other bank? To some other bank that these first banks are tied to in a thousand other ways? Sharing the same board members, having multiple deals and contracts with, providing services for, servicing loans for, etc etc etc??

    Divestment of this type IMHO suffers from lack of information parity. It is impressive to get some banks to divest. But it is difficult to know who owns what, or where the money flows go in and out. That is the difference with South Africa – it is relatively easy to target an entire country. Not so easy to target an entire shale gas formation.

    Like when people tried to ‘boycott Venezuelan oil’ a few years back by boycotting certain gasoline stations — the oil is all mixed together in a refinery, it is completely impossible to boycott a single source of oil.

    With DAPL, the financial interest in the pipeline are not just investors in the pipeline construction… it’s also the owners of the mineral rights, who are spread all over the country, and in the companies who buy the petroleum that is delivered by the pipeline – which again could be dozens of companies spread all over. By the time it gets to your car/house it has been mingled with all the other product from all the rest of the world.

    Not to mention the State of North Dakota, which like many states with petroleum, derives a significant percentage of income from taxes on that petroleum.

    That is where the real money comes. Day by day, barrel by barrel, the mineral owners and the product resellers and the state are the ones who stand to make the most. How can there be a boycott of them? A bit of a different horse color.

    1. Left in Wisconsin

      The banks sold the loans… to who? To some other bank.

      Isn’t this the key point? Divestment is not flushing investment down the toilet. It is selling off an investment (at an acceptable price) to another investor who perceives the purchase to be a good investment. I don’t see how that makes any difference to anything, except allowing the divester to reap some positive PR.

      1. Leslie

        Are there any economists/sociologists on the left who’ve written about divestment and/or socially responsible investing? Undoubtedly I indulge in good ole fashioned conscience-laundering about this. And I get that some of the worst corporate overlords have enjoyed the opportunity to greenwash. And I get also that there’s a hell somewhere that consists only of 24/7 Ted Talks on capitalist conversion-experiences. All that being pretty obvious, does anyone know of a genuine leftist critique/exploration of the use of investing as a force to sanction or reward?

  6. john c. halasz

    The divestment campaign against apartheid South Africa took 15 years to bear any fruit. We don’t have that much time. Furthermore, the Union of South Africa was subject to increasingly stringent international sanctions, (which generally don’t work, this case being an exception that proves the rule, for a variety of circumstantial reasons). And it was a matter of an unsustainable situation with 4 mn whites lording it over 20+ mn blacks and other non-whites. And if the analogy were to hold, just what would play the equivalent role of the Cuban Army in Angola? The divestment campaign among Anglo-American liberals, aside from being counterbalanced by support for U.of S.A. by their domestic conservative opponents, was probably the least significant factor in the only partially successful ending of the apartheid regime. It’s a typical example of the moralistic self-congratulation of Western liberals serving to deny and ignore the agency of subaltern others.

    The divestment campaign of McKibben is just a further instance of his weak, confused and economically ignorant self-appointed leadership of the climate movement. It amounts to soft denialism, ginning up enthusiasm for a mis-directed effort, without having any real and proportionate economic effect, thereby counter-productively giving activists the illusion that they are actually doing something rather than just spinning their wheels, if not resting on their laurels.

  7. rrh

    Can’t wait for my sail powered automobile so that I can “sail” to the store for goods that have been delivered by Clipper Ship 18 Wheelers. Fossil fuels will be around for decades until affordable technology can be used. And remember to consider income inequality when it comes to Tesla’s versus Ford’s Focus. Not everyone can afford the fossil fuel avoiding technology. And just how is most of the electricity that powers a Tesla made: Natural Gas, Coal and some Nuclear–very little solar or wind.

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