MRTI urges Phillips 66 to reconsider DAPL investment

Presbyterian investment group continues dialogue with oil producer

by Gregg Brekke | Presbyterian News Service

LOUISVILLE – The Mission Responsibility Through Investment (MRTI) committee of the Presbyterian Church (U.S.A.) submitted a shareholder resolution to the Phillips 66 Corporation on November 22 urging it to reconsider its investment guidelines as they pertain to the Dakota Access Pipeline (DAPL) and future projects.

At issue with Phillips’ significant investment in the $3.8 billion DAPL project are the environmental and human rights concerns raised by those opposed to the pipeline, including the Standing Rock Sioux tribe. The pipeline would run near the tribe’s territorial lands and under its waters.

Shareholder resolutions are proposals submitted by shareholders for a vote at a company’s annual meeting, and are one of the methods of MRTI’s corporate engagement strategy. For publicly held corporations in the United States, including Phillips 66, the submission and handling of resolutions are regulated by the Securities and Exchange Commission (SEC).

Identifying ongoing conflict and potential financial losses due to opposition to the project, the resolution points out the “poor environmental record” of the pipeline’s operator, Energy Transfer Partners; a “lack of tribal consultation and the inadequacy of the environmental impact review” that led to the construction; and potential human rights violations as spelled out by the UN Declaration on the Rights of Indigenous Peoples.

Rob Fohr, director of the Office of Faith-Based Investing and Corporate Engagement that advises MRTI’s work, said Phillips 66—which, through a subsidiary, owns 25 percent of the Bakken Pipeline Project— has the ability to use its influence to ameliorate the situation.

“Given the recent developments and the decision from the Army Corps of Engineers, it is even more important now that Phillips 66 do whatever it can to ensure that community relations and social risk mitigation are at the center of this process going forward,” said Fohr.

MRTI has taken the lead in issuing the shareholder resolution along with nine other faith-based and values-based investment groups. Fohr noted Phillips 66 has been an eager partner in dialogue, saying, “The company has been willing to engage on a variety of issues related to sustainability reporting, lobbying and renewable energy.”

The Rev. John Hougen, a member of the Environmental and Climate Change Issue Committee of MRTI, said opposition to DAPL at Standing Rock highlights both the importance and uniqueness of MRTI’s mission. “Because we own stock in Phillips 66, we are in a position to advocate with a company directly involved,” he said. “Further, because we have developed a relationship with Phillips 66, we know who to talk to. We believe it is being in relationships that creates positive leverage for change.”

This mission, according to Joseph Kinard, chair of the Environmental and Climate Change Issue Committee of MRTI, is bound up in dialogue and not distinct from the work of the PC(USA) or concerns raised by the General Assembly.

“If we believe what we say we believe, then we are called upon to follow the example of Jesus Christ to engage people and corporations where they are,” said Kinard. “That means in addition to addressing climate change, we raise questions with energy companies regarding the rights of Indigenous peoples, human rights and responsible supply chain management. By doing so, we advance the Presbyterian Church (U.S.A.) mission through investing responsibly and engaging wisely.”

Phillips 66 has not yet responded to the resolution, but Fohr says conversations with company officials have netted further clarification. When a representative of Phillips 66 asked Fohr if investors were concerned only about the immediacy of the DAPL project, or if future pipeline construction was also at issue, Fohr’s answer was “both.”

The resolution asks for the following action on the part of Phillips 66:

Phillips 66 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, including Indigenous rights risk, in reviewing potential acquisitions. Such a report should consider:

• Which committees, departments and/or managers are responsible for review, oversight and verification;
• How environmental and social risks are identified and assessed;
• Which international standards are used to define the company’s due diligence procedures;
• How this information informs and is weighted in acquisition decisions;
• If and how risks identified were disclosed to shareholders;
• Whether the company has an exit option in DAPL;
• Whether Phillips 66 will adjust its policies and practices so as not to become entangled with such situations in the future.

The next shareholder meeting of Phillips 66 will be in the second quarter of 2017. Fohr hopes the company will address these concerns before they come to a shareholder vote.

“This will not be the last time that the interests of corporations and Indigenous communities cross paths,” said Fohr. “We would like to see Phillips 66 lead the way by having the most transparent processes with respect to assessing and disclosing environmental and social risks so that these types of situations can be avoided on future projects.”

For now, however, DAPL construction is on hold as the Army Corps of Engineers considers alternative routes for the pipeline after its December 4 announcement that it would not grant Energy Transfer Partners the permit it needed to continue construction under the Missouri River.

“When it comes to infrastructure development in Indian Country and with respect to treaty lands, we must strive to work together to reach decisions that reflect the multifaceted considerations of tribes,” said Standing Rock Sioux Tribal Chairman Dave Archambault II. “Treaties are paramount law and must be respected, and we welcome dialogue on how to continue to honor that moving forward. We are not opposed to energy independence, economic development, or national security concerns, but we must ensure that these decisions are made with the considerations of our Indigenous peoples.”