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Wells Fargo: Big Oil’s Biggest Banker

The courageous stand against the Dakota Access Pipeline, led by indigenous nations and especially the Dakota and Lakota people of the Standing Rock Sioux, has sprouted a divestment campaign targeting the pipeline’s major creditors.  A September report by Food and Water Watch noted that 38 banks have financed the companies building the pipeline, most notably Energy Transfer Partners (ETP), which owns a controlling three-quarters interest in the so-called Black Snake.

The Dakota Access Pipeline is a 1,170-mile underground monument to North America’s fracking boom linking North Dakota’s prodigious Bakken oil patch to East Coast and Gulf Coast transmission routes, and is backed by $10.25 billion in financing overall, the Food and Water Watch tally revealed.

Wells Fargo is the US’ most controversy-laden bank of the moment, owing to the revelation that it reaped hundreds of millions of dollars in extra profits by opening roughly two million bogus customer accounts from 2011 to ’15. The fact that it is the Dakota Access Pipeline’s second largest financial backer, with $467 million invested to date, is therefore an attention-grabber in itself.  But Wells Fargo also acts as Energy Transfer Partners’ so-called “administrative loan agent,” the company’s Securities and Exchange Commission filings show, giving it a qualitatively greater role in fueling the pipeline than any other bank.

Wells Fargo performs all record-keeping associated with all of ETP’s loans, handles the interest and principal payments made in connection with those loans, and monitors their ongoing administration. In other words, all bank financing ETP receives passes through Wells Fargo.

This relationship did not emerge in a vacuum.  In 2014, Wells Fargo assumed the mantle of Wall Street’s top oil and gas banker, having more aggressively ramped up its investments than any other following the 2008 economic crash. One of Wells Fargo’s executive vice presidents, Mike Johnson, bragged about the San Francisco-based banking giant’s top role in fueling these planet-cooking sectors at a 2014 investors conference, and industry analyst Thompson Reuter has also made note of it.

Wells Fargo exerts leadership within the oil and gas sector in other ways.  It organizes an annual conference for oil and gas pipeline investors, called the “Wells Fargo Pipeline, MLP, and Utility Symposium.”  This year’s gathering — the 15th annual — takes place at New York City’s Waldorf Astoria on December 6th-7th.  The keynote speaker “will address the growing challenges of building new pipeline infrastructure including rights of way, eminent domain, environmental impact and governmental approvals,” according to the brochure.

Wells Fargo’s logo consists of a red and gold six-horse stagecoach rolling along the frontier. The annual West Coast Energy Conference takes place in San Francisco, connecting leading investors and professionals to the companies on the frontier of the oil, gas and coal sectors, as well as some who are involved in renewables, all with a disproportionate emphasis  on shale oil investment.

Large financial institutions in general — including the 38 invested in the Dakota Access Pipeline — have actively cultivated the North American oil boom of recent years, yielding them hundreds of billions of dollars in new profits.  In 2014, the U.S. passed Saudi Arabia as the planet’s biggest oil producer, with the active support of the Obama administration and the US Congress. It surpassed Russia as the world’s biggest producer of oil and gas combined. Two shale oil basins in particular have helped spur the production surge: the Eagle Ford in south Texas and the Bakken oil shale in North Dakota.

Investors have noted the importance of pipeline construction. A 2012 Citibank report called “Energy 2020: North America, the New Middle East” notes that “the economic consequences” of the oil and gas industry’s “supply and demand revolution are potentially extraordinary,” and touts that “infrastructure investments ease the transport bottlenecks in bringing supply to demand centers.”

It also sounds a cautionary note: “The only thing that can stop this is politics—environmentalists getting the upper hand over supply in the U.S., for instance; or First Nations impeding pipeline expansion in Canada; or Mexican production continuing to trip over the Mexican Constitution, impeding foreign investment or technology transfers — in North America itself.”

Barack Obama has also touted the importance of pipeline construction, giving special mention to North Dakota and Colorado.  Here’s the US president at a 2012 campaign stop in Cushing, OK: “Over the last three years, I’ve directed my administration to open up millions of acres for gas and oil exploration across 23 different states. We’re opening up more than 75 percent of our potential oil resources offshore. We’ve quadrupled the number of operating rigs to a record high.”

He continued, “We’ve added enough new oil and gas pipeline to encircle the Earth, and then some. . . . In fact, the problem in places like North Dakota and Colorado is that we don’t have enough pipeline capacity to transport all of it to where it needs to go — both to refineries, and then, eventually, all across the country and around the world.  There’s a bottleneck right here because we can’t get enough of the oil to our refineries fast enough.  And if we could, then we would be able to increase our oil supplies at a time when they’re needed as much as possible.”

Wells Fargo serves as an administrative agent for numerous other pipeline companies, in addition to Energy Transfer Partners. These include the US’ largest pipeline operator, Enterprise Product Partners of Houston, as well as the second largest, Plains All American Pipeline (responsible for last year’s oil Refugio Oil Spill near Santa Barbara, CA).  Wells Fargo was sole adviser to TransCanada Corp on its July 2016 acquisition of Columbia Pipeline Group, a deal worth $13 billion including debt, bringing in Wells Fargo’s biggest fees from a single deal since at least 2000, according Thomson Reuters and Freeman Consulting Services.

As with Canadian tar sands oil and Powder River Basin coal, the Bakken shale’s Achilles’ heel is that it is located in the middle of the continent, far away from shipping terminals, refineries, and power plants.  That has led many North Dakota producers to transport crude oil by train, including to California refineries — a highly dangerous method given that Bakken oil tends to cause lethal explosions that poison and kill, such as the 2013 Lac-Mégantic, Quebec rail disaster that incinerated 47 people and sent another 1,000 to the hospital from exposure to toxic fumes.

Wells Fargo corporate communications director Jessica Ong told me in a statement for a recent story that the bank invested in the pipeline only after a review of its potential for social and environmental harm.

“The Dakota Access Pipeline project was evaluated by an independent engineer to be compliant with the ‘equator principles,’ a framework adopted by Wells Fargo in 2005 that is designed to determine, assess and manage social and environmental risks and impacts of projects,” Ong says, adding, “While we respect the differing opinions involved in this dispute, Wells Fargo does not take positions on public policy issues that do not directly affect our ability to serve our customers or support our team members.”

The Dakota Access Pipeline amounts to an assault on the rights of the Standing Rock Sioux, however.  The pipeline is chewing through sacred sites on land previously set aside by the 1868 Fort Laramie Treaty and would dig through the three-mile-wide Missouri River, potentially poisoning the water for hundreds of thousands, perhaps millions of people.  Meanwhile, state police and pipeline security guards have attacked the indigenous people who are attempting to uphold their rights with dogs, mace, tear gas and rubber bullets, while deploying tanks, military-grade choppers, sound cannons, and other implements of the military-industrial complex.

The Dakota Access Pipeline is also a collective assault, which helps explain why millions of people are supporting the Standing Rock water protectors.  The project signals to investors the US’ intention, for example, to maintain high oil production—and, by extension, high greenhouse gas emission levels.  The extraction of oil, natural gas and coal — fueled by the world’s wealthiest people — have driven the planet to catastrophe. In recent years, the earth has burned through existing temperature records. Climate change is joining war and poverty as a main cause of mass human displacement.

Big Oil’s private security thugs and the North Dakota police who have carried out their militaristic raids on the Standing Rock water protectors have played the most literal role in waging that attack.

Construction of the final stretch of the pipeline hinges on decisions by public regulatory agency representatives and policymakers, such as Barack Obama, who could use his authority to revoke the project’s federal permits but has refused to do so. The Army Corps of Engineers is the lead permitting agency for the project.

Of course, the marriage of Big Oil and the big banksters has existed virtually for as long as oil has been an industry.  One indication of this long-standing political and economic association is the composition of the National Petroleum Council, the industry-dominated policy advisory committee created by President Harry Truman in 1947.  Representative of the US’ largest banks have almost always been major members.

Food & Water Watch’s Hugh MacMillan, chief author of the group’s report “Who Funds the Dakota Access Pipeline?”, says the importance of exposing banks’ financing of the oil industry—including the pipeline—is that “it lets people know what’s happening behind the scenes.”

“The banks are providing the money to make it all happen,” he says.  “When you see the kinds of financial institutions backing the pipeline, it shows the power of the forces the tribes in North Dakota are going up against.”

 Will Parrish is an investigative journalist based in Ukiah, CA.  His web site is www.willparrishreports.com.

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Will Parrish is a freelance investigative journalist based in Northern California.  His web site is www.willparrishreports.com. Follow him on Twitter @willparrishca.

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