American Oil and Gas Reporter - July 2017 - 29

Anti-Industry Activists
Attack Infrastructure Projects
"In addition to calling for banks to cease project
By Going After Banks

Activist organizations opposed to oil and natural gas production
are turning to the financial sector to target energy firms and
tarnish company reputations. The divestment movement has attempted to place pressure on endowments and pension funds to
give up their holdings in coal, oil and natural gas firms. After
little success, activists have turned to the funders of energy development, placing renewed stress on banks to cut funding for
energy infrastructure projects that are critical to the supply and
use of the energy on which we all rely. Although these efforts
largely have fallen on deaf ears so far, industry must remain
diligent and prepared to combat these growing efforts.
Frustrated by the growth of U.S. oil and natural gas development, and failing to move endowments and pensions to divest,
activists are placing increased pressure on banks funding projects
such as the Dakota Access Pipeline and the Trans Mountain
Pipeline to further the keep-it-in-the-ground movement's agenda.
These organizations have put renewed pressure on banks to
withhold funding from the companies involved in these critical
projects, resulting in Seattle, Washington state and Davis, Ca.,
pulling their investments from Wells Fargo in response to the
bank's DAPL involvement.
As a result of this public pressure, ING bank "reached an
agreement" for the sale of its loan to the pipeline. Citibank publically
emphasized its "belief in the value of engagement" with the project
developers, but has hired a third-party to "strengthen its internal due
diligence on social risk" on future projects. T.D. Bank has followed
a similar path, noting it has worked to "secure an independent
human rights expert to conduct a review and advise the developers
on how to improve their social policies and procedures moving forward." Meanwhile, U.S. Bank recently became the "first major
bank to stop financing pipeline construction." The bank has
committed only to ceasing "project financing," and there is still no
reported change in how it provides corporate financing to energy
firms, but this troubling trend is worthy of attention.
Continued and expanding media attention on this issue has
created new reputational challenges for targeted banks and
projects. In addition to calling for banks to cease project funding
and individuals to close their accounts in these banks, activists
have called on pension funds to divest their holdings in companies
involved in these infrastructure projects. The California Public
Employees' Retirement System (CalPERS), for instance, was
urged to divest from Energy Transfer Partners as well as banks
financing the project, including Bank of America, Wells Fargo,
JPMorgan Chase and Citibank. CalPERS wisely rejected such an
effort, noting in February 2017, "There is considerable evidence
that divesting is an ineffective strategy for achieving social or
political goals, since the consequence is generally a mere transfer
of ownership of divested assets from one investor to another."
The chief executive officer of the Hispanic Chambers of
Commerce of San Francisco also highlighted the risk of divesting
from these projects, noting, "The small but fervered movement
to divest California public monies from companies involved
with DAPL is ill-conceived, and if successful, will prove

funding and individuals to close their accounts in
these banks, activists have called on pension

funds to divest their holdings in companies in-

volved in these infrastructure projects.

injurious to pensioners, retirees and state taxpayers."
This opposition is no surprise. According to a report commissioned by the Independent Petroleum Association of America,
divestment has no impact on targeted firms and carries substantial
impact for the funds that consider divesting. The report, by
Professor Daniel Fischel of the University of Chicago Law
School and Compass Lexicon, is the latest in a series IPAA has
commissioned for its DivestmentFacts.com campaign, and examines the impact of divestment on 11 major public pension
funds in the United States, including CalPERS, and the largest
municipal funds of San Francisco, New York and Chicago. The
results conclude that all funds would suffer significant losses as
a result of divestment, a combined $3.7 trillion loss over 50
years. For the 1.6 million Californians who rely on CalPERS,
divestment would cause a shortfall of $2.3 trillion-$3.1 trillion
in the next 50 years. The New York City Employee Retirement
System, the largest municipal public employee retirement system,
would lose as much as $692 billion over 50 years.
These real financial implications constitute only part of why
the divestment movement has failed. The value of college endowments rejecting divestment exceeds the value of those
pledging to fully divest by a ratio greater than 125-to-1, and
pension funds across the nation have said no to this costly endeavor. Still, activists continue their efforts.
IPAA is continuing its work to demystify concerns about
our industry and highlight the critical role of investing in and
supporting responsible energy development for individual endowments, banks and the broader economy. The growing
political pressure on these entities to dissolve their involvement
with the energy sector clashes with their fiduciary duty and the
importance of critical energy infrastructure, and in turn, our
modern economy.
r

SUSAN GINSBERG is vice

president of crude oil and natural gas regulatory affairs for
the Independent Petroleum
Association of America. She
covers legislation and regulation, focusing on the CFTC
and FERC. Her experience in
natural gas regulatory affairs
spans 25 years.
JULY 2017 29

http://www.DivestmentFacts.com

American Oil and Gas Reporter - July 2017

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