The recent Bloomberg Businessweek story, “The Billionaire Behind the Dakota Access Pipeline is a Little Lonely,” about Kelcy Warren and his company, Energy Transfer Partners (ETP), confirmed what many of us in the human rights community already know – ignoring the social risks of an investment or a project is just bad business.
When the FPIEP studied the controversy around the Dakota Access Pipeline, we tried to calculate the total costs of social pressure to DAPL—not just for ETP, but also for ETP’s shareholders, the banks that financed DAPL, taxpayers and local communities. In our 2018 case study, Social Cost and Material Loss: The Dakota Access Pipeline, we estimated that there were at least $7.5 billion in cumulative losses that could, and should, have been avoided.
But in reading the Bloomberg story, it seems that the DAPL project wasn’t an isolated incident but rather a continuation of a troubling trend in how ETP and other companies do business. Why aren’t companies taking human rights more seriously?
One of our main research findings focused on how companies must implement a human rights-based approach when conducting due diligence on new investments or projects. Specifically, companies should secure the free, prior and informed consent (FPIC) from tribes and communities along the route of any pipeline project. FPIC, as defined by the United Nations, allows indigenous peoples to give or withhold consent to a project that may affect them or their territories. This widely accepted global standard is aligned with international human rights treaties and would allow companies to better comply with their responsibilities to respect human rights during all phases of the project, and to manage their reputational, social and material risks.
However, it is clear that ETP has repeatedly failed to meet this FPIC standard, and continues to pay the price.
While the article notes that Energy Transfer and Mr. Warren are learning from past mistakes, the article also talks about how many projects have proceeded seemingly without new or more robust consideration of the impacts of pipeline construction on potentially affected communities. For example, the response to the issues with the Mariner East project, as with the DAPL controversy, appeared reactive and inconsiderate to individuals living in those communities. The article also highlights Mr. Warren’s public statements that if some the issues with the Dakota Access Pipeline (DAPL) controversy been addressed earlier, there might have been a different outcome. While Energy Transfer notes that there are always safety and environmental issues with pipeline infrastructure, the article also shows that the company has not updated their approach in a way that truly accounts for all potential risks and reflects intentional engagement with communities prior to construction.
Humans rights issues, such as those highlighted on an international stage throughout the DAPL controversy, must be considered as part of any due diligence process. The Free, Prior and Informed Consent Due Diligence Questionnaire developed by me and my team is just one tool that investors can use to this end, and represents an important step for ETP, and others, towards fully operationalizing their internal and external commitments to human rights.
We agree with Mr. Warren’s conclusion that the Dakota Access Pipeline controversy precipitated a new era for infrastructure projects in the United States. The days of “profitable invisibility” may, indeed, be past. However, this shift is ultimately one that will only benefit communities and the public as more infrastructure projects are planned across the United States.
ETP may never learn their lesson, but other companies just might. Their investors and shareholders will thank them.