Social Cost and Material Loss: The Dakota Access Pipeline

Abstract

This case study examines the numerous impacts attendant to the Dakota Access Pipeline (DAPL) project to highlight the costs that companies, financial institutions and investors linked to the project faced by not respecting the human rights of indigenous peoples. This case study thus serves as a basis for the assertion that social risk resulting from the absence of adequate human rights protections can have material impacts. The case study used multiple methods to quantify the material losses including a holistic cost assessment and, in part, an event study methodology. The results revealed that most DAPL tied entities experienced significant financial losses because of their association with the project. Significantly, this case study estimates that the costs incurred by Energy Transfer Partners, DAPL’s parent company, and other firms with ownership stake in DAPL for the entire project are not less than $7.5 billion, nearly double what the project was estimated to cost at the outset. The case study data points to several conclusions: notably that all entities must conduct thorough due diligence and disclosure on social risks related to human rights prior to any business transaction on or near indigenous lands; that costs accumulate to local communities, to taxpayers and to tribal governments as well as larger firms; and, that the #NoDAPL movement grew out of a growing social movement of indigenous peoples pushing for respect for their human rights as to development of their lands, territories, and resources.