Eco-activists crank up pressure on banks financing Trans Mountain Expansion pipeline

Equator Principles state banks shouldn’t finance projects opposed by indigenous groups like BC First Nations

The North American oil and gas industry missed the significance of the Standing Rock opposition to the Dakota Access pipeline, which is only becoming obvious now as eco-activist groups ramp up the next campaign – against British Columbia’s Trans Mountain Expansion – using new techniques that include pressuring financial institutions to withhold capital from the project.

Leadnow.ca says it has over 23,000 signatures on a petition opposing the TD Bank’s participation in the TMX financing. The group sent out an email in late March to raise funds for a “media stunt” at the TD annual general meeting in Toronto. “Picture barrels of spilling oil, actors playing TD executives, and hard-hitting signs and banners,” the pitch said. $10,000 would “rent a giant jumbotron truck to display messages from Leadnow community.”

Leadnow is remarkably candid in its fundraising email:

If we make TD the newest Kinder Morgan punching bag, it will serve as a warning shot to all investors considering backing the pipeline: if you do business with Kinder Morgan, you’ll face protests and brand attacks. For investors, this means delays, headaches, added costs that just aren’t worth it. If we convince TD to drop Kinder Morgan — while scaring potential investors out of backing Kinder Morgan — it could sink Kinder Morgan for good. If they don’t secure financial backing in mere months, they’ll have to push back their construction start date, and they can’t afford more delays.

Leadnow did not respond to an interview request from North American Energy News.

Industry will be tempted to dismiss this campaign. It shouldn’t. This is the beginning of a war, not an inconsequential skirmish.

And this particular strategy is more worrying to banks than one might think.

The TD Bank Financial Group – along with 88 other financial institutions in 37 countries – is a signatory to the “Equator Principles,” which set out a framework for global financial institutions to assess social and environmental risk on their investments and lending clients.

The banks agree to not provide funds for projects that don’t meet the Equator Principles standards.

Dr. Praveen Kumar, executive director of the Gutierrez Energy Management Institute in Houston, Texas, says that the application of the principles is open to interpretation.

“The interpretation is obviously quite subjective, but definitely the principle is there that loans can be re-sanctioned until the syndicate partners, the financial institutions, certify that the project does not violate the Equator Principles about environmental and social risk,” he said in an interview.

European banks are generally more “activist” on social and environmental risk than North American institutions, according to Praveen.

“The continental banks tend to be activist on social issues and I think part of that is that the European Union’s tendency to be more activistic,” he said.

“Directly or indirectly there is pressure on banks – even on large multinational corporations – to support what you’d call socially responsible behaviour.  I would include the international banks as one of those things.”

Late in 2016, lenders to Energy Transfer Partners (the Texas-based pipeline company building Dakota Access to transport Bakken oil) “engaged an independent human rights expert to review the various aspects of the Dakota Access Pipeline’s approval process,” according to a statement from Norwegian bank DNB.

In Jan., DNB updated its statement to say that Trump’s election didn’t change the bank’s attitude toward Dakota Access, and its “main focus now is the ongoing investigation in regards to how indigenous rights are safeguarded in the process.”

Given the role that indigenous opposition has played in the BC pipeline battles over the past decade, First Nation protests against Kinder Morgan may give TD and other lenders pause.

 I asked TD for comment and their spokesperson referred me to CEO Bharat Masrani at the shareholder meeting where Leadnow intended to present its petition:

“We believe conventional energy sources like oil and gas will — for the foreseeable future — sustain our economy, create jobs and support a standard of living that our customers and communities want. The transition to a lower-carbon economy will be gradual. So we continue to engage in the responsible development of natural resources…At the same time, we have been early and active supporters of the lower carbon economy.”

Leadnow knows exactly where TD is vulnerable: “TD invests millions in branding themselves as a friendly and socially responsible bank, and they don’t want their brand associated with environmental destruction.”

Will the Leadnow campaign against TD work?

Praveen notes that banks enter into covenants that protect lenders from delays ( perhaps those caused by eco-activist and indigenous protest) and other financial setbacks, any of which might provide the pretext to allow a bank to withdraw funding without facing financial penalties or legal action.

A reasonable conclusion might be that the likelihood of Leadnow’s campaign working is in direct proportion to the amount of people it can mobilize and the public attention it can attract. If eco-activists start protesting outside TD branches, will pressure quickly mount for the bank to reconsider its support of Trans Mountain Expansion?

Maybe, but maybe not.

One of the reasons big banks sign on to the Equator Principles and focus on green lending is to give them cover when a controversial project does arise.

I’m not being cynical and suggesting that this is the only reason TD adopted ethical lending practices, but one would be naive to think it wasn’t part of the reason.

So, we’ll watch this campaign carefully, especially as opposition to Trans Mountain Expansion mounts. If Standing Rock is any guide, the protest is going to be raucous, and that could change the political – and business – calculations for any number of the actors involved in the pipeline project, including the banks.

Trans Mountain responded after publication with this comment:

In March 2017, Trans Mountain re-confirmed its strong commercial support for the Project and is pleased to have all available long-term firm service capacity contracted with a diverse group of 13 customers. This demonstrates the continued support for and much-needed access to new markets the Project provides to Canadian producers.

Kinder Morgan has been open about the fact that we are considering various financing options for the expansion of the Trans Mountain Pipeline, including entering into a joint venture with one or more third parties or an  IPO. 

We’re confident in the interest from the investment community and we’re continuing to move forward with all aspects of planning in order to begin construction in September 2017.   

Next steps for the Project include arranging acceptable financing and a final investment decision by Kinder Morgan.