Our Review of the Dakota Access Pipeline Project and What's Ahead
April 27, 2017 12:00 PM
Citi is one of the 17 banks that financed the Dakota Access Pipeline (DAPL) project — an underground oil pipeline in the U.S. from North Dakota to Illinois. Construction of the pipeline raised concerns and spurred protests by indigenous peoples and environmentalists as well as many others who were concerned about the project and its potential impact. Citi recognizes the importance of the issues they have raised and will learn from this experience to improve our approach to due diligence on social risk, including on issues related to indigenous peoples.
When first approached to work on this project, Citi conducted careful due diligence under our ESRM Policy and the Equator Principles, and the project was rated a Category A for high environmental and social risk. Citi reviewed the project’s Environmental Assessment report, and, along with other banks involved, engaged an independent consultant to review the permitting and approval process to confirm compliance with U.S. laws and regulations, and to prepare a report summarizing the findings as required by the Equator Principles. Through this process, we understood that the Standing Rock Sioux tribe had raised concerns about potential impacts to their drinking water at the Lake Oahe/Missouri River crossing. We also understood that, in response, the project sponsors proposed using horizontal directional drilling to go more than 95 feet under the river crossing to minimize impacts and risks, in line with industry best practice for water crossings. Subsequently, we determined that the project met our ESRM Policy and the Equator Principles.
As the objections of the tribal and other stakeholder communities to the project escalated, Citi realized the need to directly engage with the Standing Rock Sioux tribe, as well as a number of stakeholders from the human rights, academic, investor and nongovernmental organization communities, to better understand their concerns. We greatly appreciated the constructive nature of those discussions and used what we learned from them to engage with the project sponsors, expressing our concerns and advocating for steps toward a peaceful resolution. Citi, together with TD Bank and on behalf of the other banks, spearheaded the engagement of an independent human rights expert, Foley Hoag LLP, to review the U.S. legal requirements for consultation with indigenous peoples and the project sponsors’ policies and procedures in the areas of community consultation, cultural heritage assessment and security. The review resulted in recommended improvements that project sponsors can make to these policies and procedures in line with international best practice.
Citi took away a number of key learnings from our involvement in this project that will impact how we evaluate such work in the future. Specifically, the current approach to consulting indigenous peoples in the U.S. does not align with international standards, and the policies that we have used to evaluate those consultations during due diligence are not sufficient. Accordingly, we are working with a third-party consultancy specializing in community engagement — Monkey Forest Consulting — to advise us on strengthening our internal due diligence in this area this year. We also intend to continue to maintain a direct dialogue with members of the Standing Rock Sioux tribe community and other relevant stakeholders on a regular basis going forward.
In 2017, we will strengthen our policy guidance on human rights due diligence, with a specific focus on indigenous peoples, in consultation with Monkey Forest Consulting, a third party specializing in community engagement. This guidance will help inform another 2017 key initiative, the roll out of our ESRM Watchlist, which will identify existing clients with elevated environmental and social risks, prior to new transactions, to stay ahead of emerging risks. The Watchlist will incorporate data from third-party environmental and social data providers together with further research by our internal ESRM team, and will create an early warning system allowing us to flag targeted environmental and social risks more efficiently and proactively.
We will also continue to develop and share best practices with the banking industry through our active participation in multi-stakeholder industry associations. In our role as chair of the RSPO Financial Institutions Task Force, we will help plan a series of workshops on labor standards and due diligence in palm oil. And in our new role on the steering committee of the CrossSector Biodiversity Initiative, we will contribute to the new Guiding Principles for Business on Key Biodiversity Areas.
*Tagged as: US