The construction and operation of energy infrastructure in North America requires respect for rigorous standards of environmental review and the human rights of Indigenous Peoples.
Environmental and human rights due diligence are essential to assessing the full risk of an asset acquisition. When such risks are not adequately considered, decisions can be made that lead to reputational, regulatory and financial loss.
The UN Declaration on the Rights of Indigenous Peoples sets out international standards for Indigenous Peoples’ rights including the right to Free, Prior, and Informed Consent prior to the approval of any projects affecting their traditional territory. Human rights due diligence expectations are outlined in Principles 17 to 21 of the UN Guiding Principles on Business and Human Rights.
Marathon Petroleum (Marathon) through MPLX Inc. has invested $500 million in the Bakken Pipeline Project consisting of the Dakota Access Pipeline (DAPL) and Energy Transfer Crude Oil Pipeline via a joint venture with a subsidiary of Enbridge, Inc. that together own 36.75% of the Bakken Pipeline Project.
Marathon’s investment is threatened by potential environmental liability or reputational damage resulting from the absence of a social license to operate. The pipeline’s operator, Energy Transfer Partners (ETP), has a poor environmental record, with recent water contamination lawsuits in New Jersey, Vermont, Pennsylvania, Louisiana, and Puerto Rico.
The agreement to acquire Marathon’s ownership in DAPL was reached five days after the project was approved by the US Army Corps of Engineers. However, in the months preceding the agreement, the SRST and other Native American tribes, as well as three federal agencies, raised concerns about the lack of tribal consultation and the inadequacy of the environmental review. Marathon and its shareholders should have been aware of the risks posed by community opposition, lawsuits challenging the pipeline, and the establishment of an opposition camp.
Inadequate social risk management delayed operation of DAPL by six months, generated significant media controversy, and triggered regulatory uncertainty that still jeopardizes the pipeline. In June 2017, a federal court determined that the US Army Corps of Engineers approved DAPL without adequately considering the impacts of an oil spill on hunting and fishing rights, or environmental justice. In the wake of the ruling, parties submitted new arguments about whether the pipeline should operate during a new environmental review.
We request that Marathon prepare a report to shareholders, at reasonable cost and omitting proprietary information, that describes the due diligence process used to identify and address environmental and social risks in reviewing potential acquisitions. Such a report should consider:
• Which committees, departments and/or managers are responsible for review, oversight and verification of environmental and social risks;
• How environmental and social risks are identified and assessed;