The company involved in constructing the Dakota Access Pipeline (DAPL) and other partner entities lost at least $7.5 billion, according to a new case study out of CU Boulder’s First Peoples Investment Engagement Program.
The program is a partnership between the University of Colorado Law School and the Leeds School of Business. It is housed at the Center for Native American and Indigenous Studies.
Carla F. Fredericks, with CU Boulder’s American Indian Law Clinic, and Mark Meaney with the Center of Ethics and Social Responsibility, studied the financial impacts stemming from protests, boycotts, legal challenges and divestment campaigns opposing the 1,172-mile-long oil pipeline. Meaney and Fredericks argue that by considering those social risks, the companies involved could have avoided hefty financial losses.
From 2014 to 2017, DAPL faced a number of delays, primarily from opposition from the Standing Rock Sioux Tribe and other tribes with ancestral lands along the path of the proposed pipeline. Indigenous peoples and allies from all over the world joined in protests and boycotts.
As a result of those social pressures, the study shows, DAPL’s parent company, Energy Transfer Partners (ETP), saw a 20 percent decline in its stock price over that period. The S&P 500, however, grew about 35 percent.
The total cost of the project ballooned to roughly $7.5 billion with the delays, nearly double its projected initial cost.
The pipeline’s financial backers saw other losses with divestment campaigns surrounding #NoDAPL. City governments cost banks more than $4.3 billion by divesting, while individual bank account holders accounted for another $86 million loss.
“These losses show how important it is for companies to fully account for environmental, social and governance risks before projects get going,” said Meaney. “Social risks are clearly overlooked in the market.”
The study and the wider social movement underlying the opposition to DAPL, according to Meaney and Fredericks, reflect the need for companies and investors to consider how they engage with indigenous peoples.
“Across the board, this project was out of line with the existing principles outlined in the United Nations Declaration on the Rights of Indigenous Peoples and other international standards for resource development near indigenous peoples’ lands,” Fredericks said. “The losses in this study underline that companies need to take those principles into account.”
The researchers suggest companies develop processes to incorporate the concept of free, prior and informed consent as part of any development project.
To help companies get started, Meaney and Fredericks have designed a questionnaire for investors to guide their engagement with indigenous peoples.
“This study shows the importance of robust engagement between investors and indigenous peoples. Companies can and should be developing inclusive and culturally responsive due diligence processes when project development occurs on and near indigenous peoples’ lands or with their resources,” Fredericks said.