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Problematic Pipelines Final Investor Briefing September 2017 Problematic Pipelines Investor risk from bank financing of tar sands pipelines A number of banks including JPMorgan learn from the media, investor, and consumer Chase, Royal Bank of Canada, TD Bank criticism arising from DAPL and appear to Group, Barclays, and Wells Fargo risk be relying on outdated or inadequate risk opposition from Indigenous communities, assessment and mitigation frameworks. pressure from civil society groups, and These lending decisions will facilitate scrutiny from investors as a result of their the expansion of Canada’s tar sands and actual and/or potential involvement in thereby risk undermining other work by climate damaging and controversial tar sands investors, regulators, and some of the pipeline projects in Canada and the U.S. same banks to address climate risk. These projects carry many of the same This briefing outlines the financial potential risks for banks as arose with the and reputation risks banks could face Dakota Access Pipeline (DAPL) including a in arranging and providing finance for lack of and/or poor process around Free Prior companies intending to build tar sands and Informed Consent from all Indigenous pipelines. We suggest questions investors Nations and Tribes along or impacted by the should ask banks to understand whether pipeline routes and the risk of contamination the various risks are being adequately of drinking water in the event of a spill. Some assessed, mitigated, and managed. of the banks caught up in DAPL appear to be learning lessons from that controversy. Major risks for bank shareholders Dutch bank ING which divested from the DAPL project loan has confirmed its tar sands • Lack of Free Prior and Informed exclusion policy will extend to a prohibition Consent from all impacted on financing any of the tar sands pipelines. Indigenous Nations and Tribes Some lenders who were subject to criticism • Need to ensure adequate over DAPL and were participants in previous environmental & human rights syndicated credit facilities to Kinder Morgan impact assessments did not participate in the recent deal to fund • Pipeline spills impacting waterways the Trans Mountain Expansion project. • Lending decisions incompatible with However, the willingness of many banks to transition to low carbon economy arrange and/or provide financing for tar sands Consumer backlash at retail banks pipelines suggest that they have failed to • 02 The pipelines Company1 Pipeline Status Role in system Potential funders Kinder Morgan Kinder Morgan Facing increasing opposition A twin pipeline that would Credit facilities advanced Trans Mountain and legal challenges from add 590 kbpd between the in June 2017 including Expansion First Nations, the public tar sands and the Southern a CDN$4BN facility to and large municipalities BC coast for Pacific access to finance the construction (including international markets. of the pipeline2 the city of Vancouver). Additional opposition driven Lead banks: by concerns related to Royal Bank of Canada tanker traffic. The Trudeau Canadian Imperial Bank of government approved the Commerce: pipeline in December 2016, Scotiabank but in August 2017 the Toronto-Dominion Bank newly-elected provincial government in British Banks named as lenders on Columbia said it would be the pipeline construction illegal for Trans Mountain to loan: proceed with construction Bank of America on public land at this time, Bank of Montreal because it has not yet met Barclays existing conditions on its BC JPMorgan Chase environmental assessment Mitsubishi UFJ certificate related to Financial Group Indigenous consultation. Mizuho Financial Group Multiple First Nations legal National Bank of Canada challenges could block the China Construction Bank project even if formally HSBC approved. Sumitomo Mitsui Financial Group Suntrust Bank Alberta Treasury Branches FIPPGV/PX Caisse centrale Desjardins3 Bank of China Siemens United Overseas Bank Canadian Western Bank Industrial & Commercial Bank of China4 03 The pipelines Company Pipeline Status Role in system Potential funders Enbridge Line 3 The 18-mile cross border Initially increase capacity No project specific credit section is complete but from 390,000 to 760,000 facilities have yet been currently in use for the kpbd, but in its filing with advanced but the following Clipper expansion; the the Minnesota Public Utility banks currently provide rest of the line’s permits Commission, Enbridge revolving credit facilities are being reviewed by the indicated that total capacity to relevant companies in Minnesota Public Utilities would ultimately be the Enbridge corporate Commission and the U.S. 915,000 kbpd. group and who have not federal government. confirmed to Greenpeace Opposition centres Total Enbridge expansions that they will not fund tar around the sensitivity of (including Line 3), if sands pipelines5: the new route, plans for completed, would equal abandonment of the old Line some 1.1mbd of tar sands Bank of Tokyo Mitsubishi UFJ 3, and the lack of application capacity. Mizuho Bank of climate criteria as per Citibank Keystone XL. The National Export Development Energy Board approved the Canada replacement/expansion on Credit Suisse the Canadian side in April, HSBC Bank 2016. The project continues National Bank of Canada to face opposition from First Bank of America/Merrill Nations communities and Lynch environmentalists. Bank of Nova Scotia Royal Bank of Canada BNP Paribas Toronto Dominion (TD) Deutsche Bank Barclays Canadian Imperial Bank Sumitomo Mitsui Bank Wells Fargo Bank of Montreal Morgan Stanley DNB Capital/ASA JP Morgan Chase Credit Agricole Caisse centrale Desjardins6 Societe Generale Alberta Treasury Branches Bank of China China Construction Bank Corp/Tor Industrial and Commercial Bank of China UBS United Overseas Bank Limited China Merchants Bank Co Ltd/New Huntington National Bank 04 The pipelines Company Pipeline Status Role in system Potential funders TransCanada Energy East Delayed for two years due A proposed 1.1 mbpd new No project specific credit to environmental concerns eastward pipeline from facilities have yet been over beluga whale habitat the tar sands to refineries advanced but the following and the need to replace in Eastern Canada and an banks currently provide the members of the review export terminal in St John, revolving credit facilities panel and restart the NB for Atlantic access to to relevant companies in process following allegations international markets. the Enbridge corporate of a potential conflict of group and who have not interest relating to a private confirmed to Greenpeace meeting with a TransCanada that they will not fund tar lobbyist.7 Facing mounting sands pipelines: opposition from the public, significant municipal Bank of Tokyo Mitsubishi UFJ opposition (including the Mizuho Bank city of Montreal and the Toronto Dominion (TD) Montreal Metropolitan JP Morgan Chase Community), official Citibank opposition from the Quebec Credit Suisse Assembly of First Nations, Deutsche Bank and growing political Credit Agricole hesitancy in support from HSBC Bank provincial governments National Bank of Canada including an injunction from Bank of America/Merrill the province calling for a Lynch provincial environmental Bank of Nova Scotia assessment of the project. Royal Bank of Canada The National Energy Board Barclays hearings that began in June Canadian Imperial Bank 2016 have been annulled, Sumitomo Mitsui Bank and no new timeline for Wells Fargo the hearings had been Bank of Montreal established as of August Export Development 2017. Canada Alberta Treasury Branches Caisse centrale Desjardins8 05 The pipelines Company Pipeline Status Role in system Potential funders TransCanada KXL President Obama rejected Proposed 830 kbpd new As above TC’s application for a pipeline to Cushing OK Presidential permit, but for access to Gulf Coast & President Trump revived international markets the project via EO in his first few weeks in office. The Presidential permit was granted in March 2017. The Trump Admin’s approval of the permit faces litigation by a coalition of environmental groups. Filed in federal district court in MT, the first hearing has been delayed until mid-October. The pipeline still requires approval from the Nebraska Public Service Commission, which held hearings on the matter in August 2017. A final permit decision is expected in November 2017. If approved, TC has said it will assess the financial viability of the pipeline in November and construction could start 6-9 months after that. In June 2017, a syndicate of banks signed a credit agreement with Kinder Morgan which included a CDN$4bn pipeline construction loan. TransCanada (KXL and Energy East pipelines) and Enbridge Inc. (Line 3 pipeline expansion) have yet to finalise funding arrangements. 06 Human rights The proposed tar sands pipeline projects banks to forego this FPIC requirement in do not have the Free, Prior, and Informed countries like the U.S., and Canada (which impact: Consent (FPIC) of all Indigenous Nations the principles define as “Designated and Tribes along or impacted by the Countries”) assuming that in such Indigenous pipeline routes as called for in the United countries adequate protections exist under rights Nations Declaration on the Rights of law for rights of Indigenous peoples. Indigenous Peoples. Over 150 First As the DAPL controversy demonstrated Nations and Tribes across Canada and the in stark and unacceptable terms, national U.S. have signed the Treaty Alliance Against regulatory review
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