New report warns of risks to banks betting on tar sands pipelines

A new report by Greenpeace and Oil Change International warns of major banks’ exposure to financial and reputational damage due to their financing of tar sands pipelines. The report, In the Pipeline: Risks for Funders of Tar Sands Pipelines, is the first report to examine in depth the range of risks related to all three proposed tar sands pipelines including legal challenges, opposition from Indigenous and local communities, threats to drinking water and economic vulnerability.

JPMorgan Chase, the TD Bank Group and Barclays are among the world’s major banks financing tar sands pipelines and the companies behind them (Kinder Morgan’s Trans Mountain Expansion, TransCanada’s Keystone XL, and Enbridge’s Line 3 expansion).

Alex Speers-Roesch, Oil Campaigner at Greenpeace Canada, said: “Stronger climate regulations, widespread public protest and a failure to properly consult with Indigenous Peoples have already helped nix two major tar sands pipelines (see Notes 1 & 2). The same risks plague the remaining three proposed pipelines, making them a high-risk, low-reward bet for their financial backers, including TD and Desjardins.”

Among the major risks identified in the report are:

• Lack of free, prior and informed consent (FPIC) from all Indigenous communities impacted by the pipelines. On-the-ground resistance is already unfolding along the routes of the Kinder Morgan and Line 3 pipeline expansions. JPMorgan Chase’s human rights policy states that the bank expects its clients to align with FPIC requirements, raising questions about Chase’s continued pipeline lending.

• Negative environmental impacts, including the contamination of drinking water from leaks. The companies proposing to build the three new tar sands pipelines have seen one spill a week, on average, in the U.S. since 2010. New pipelines threaten thousands of watercourses, aquifers and bodies of water with spills. Kinder Morgan’s Trans Mountain Expansion goes through a UNESCO World Heritage site, Jasper National Park, which appears to contravene TD’s policy of not financing projects that operate in such sites.

• Tar sands pipelines’ economic success is dependent on tar sands expansion. Low oil prices and structural changes in oil demand, including Asian and European markets’ shift away from fossil fuel vehicles, raise questions about the long-term viability of the tar sands, and pipelines dependent on their expansion.

• Short-term lending decisions undermine bank and investor action on climate.  The three proposed pipelines could add almost 2 million barrels per day to pipeline capacity. Facilitating the expansion of the tar sands and enabling decades-long carbon-lock in risks fatally undermining JPMorgan Chase’s policies, which recognize the goals of the Paris Agreement, as well as TD’s work with the UN to better assess and disclose climate risks and opportunities and Barclays’ plans to develop a sustainable approach for its global energy client portfolio.

The report, therefore, recommends that banks do not finance or arrange financing (including the issuance of securities), related to new tar sands pipelines. Existing funders are encouraged to sell their stakes in full or not renew credit facilities. The report further provides bank investors with a list of questions to pose to management to understand whether risks are being properly managed.

Hannah McKinnon Director, Energy Futures and Transitions Program at Oil Change International, said: “Keeping the tar sands afloat is an inexcusable ethical decision and a reckless financial one. Banks need to decide which side of history they want to be on. The world is moving on from fossil fuels and banks that miss the memo are going to be left with two things: a worthless portfolio of stranded assets and the reputational cost of knowingly financing the climate crisis.”

Another report commissioned earlier this month by the Secwepemc Nation in British Columbia, whose land Kinder Morgan’s new pipeline is slated to cross, further details risks related to Indigenous assertions of their rights and title over unceded land.

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Read the full report: https://priceofoil.org/2017/10/30/in-the-pipeline-tar-sands-risks-report/

Note to Editors: 

• Note 1: Enbridge’s Northern Gateway was cancelled by the federal government in November 2016.

• Note 2: TransCanada’s Energy East was cancelled by the company in October 2017.