Global Standards, Corporate Diagrams and Indigenous Agency: ExxonMobil in Russia and Alaska

5.1 Exxon Neftegas Limited in Russia: The Sakhalin-1 project and Indigenous Communities

Sakhalin Island is situated off the east coast of Russia in the Sea of Okhotsk. Sakhalin has a population of roughly 511,000 residents, of whom approximately 3,000 are Indigenous peoples.²⁵ Villages inhabited by Indigenous peoples in two municipal districts are situated in proximity to extractive infrastructure: Nogliki district which has six villages with 1135 Indigenous residents; and Okha district, which has five villages with 1457 Indigenous residents from the Nivkh, Uilta, Nanai, and Evenk peoples. Some of these Indigenous people participate in an obshchina, an Indigenous organization involved in traditional economic activities, such as fishing, reindeer herding, hunting, foraging, and artistic work.

In 1993, Exxon Neftegas Limited (ENL), a subsidiary of ExxonMobil, began the Sakhalin-1 oil and gas development project in an agreement with the Japanese company SODECO. It is owned by ENL (30%), SODECO (30%), RN-Astra (8.5%) and Sakhalinmorneftegaz-Shelf (11.5%) (both affiliates of state-owned Rosneft Company), and India’s Oil and Natural Gas Corporation ONGC Videsh Ltd (20%). Sakhalin-1 represented one of the largest foreign direct investments in Russia at that time.²⁶ In 1996, the companies and the Russian government signed a production sharing agreement. Construction started in 2004, and the first oil was produced in 2010.²⁷ As of 2018, the project had exported 100 million tons of crude oil. The complex includes onshore and offshore oil rigs as well as processing facilities and shipment terminals. There is a second large oil and gas consortium on the island: Sakhalin-2, operated by Sakhalin Energy, a partnership of Royal Dutch Shell, Mitsui, and Mitsubishi Corporation. In 2007, Gazprom bought a 50% plus 1 share in Sakhalin Energy from Royal Dutch Shell.

5.2 ExxonMobil in Alaska: The Point Thomson Project and Indigenous Communities

Point Thomson is an oil and gas project historically operated by ExxonMobil (with a 62% share), with stakes also held by British Petroleum (32% share) and ConocoPhillips (5% share, sold in 2017), with a handful of other minority shareholders who left the project over the years.²⁸ Point Thomson is located 60 miles east of Prudhoe Bay and 60 miles west of the village of Kaktovik. The project borders the Arctic National Wildlife Refuge’s northwestern corner. Point Thomson has received $4 billion in investment from ExxonMobil.²⁹ Construction started in 2008, pipelines were built in 2013, production modules were installed in 2014–2016, and production began in 2016. Point Thomson produces natural gas condensate, which then travels by pipeline to the Trans-Alaska Pipeline System.³⁰ The project is estimated to contain over 226.5 billion cubic feet of natural gas, 25 percent of the North Slope’s proven natural gas reserves.³¹

The village of Kaktovik (Inuuniagviat Qaaqtuvigmiut) is situated on Barter Island, adjacent to the Arctic National Wildlife Refuge (ANWR), and accessible only by air or boat. The Kaktovik Inupiat have been living in the area for thousands of years, but year-round settlement of the area in the modern era began in the 1920s. As of 2016, the village had 262 residents.³² Through passage of the 1971 Alaska Native Claims Settlement Act (ANCSA), Alaska Native Corporations were granted either surface rights (the Kaktovik Iñupiat Corporation, at the village level) or both surface and subsurface property rights (the Arctic Slope Regional Corporation (ASRC)).³³ However, the federal government retained control of significant portions of land, including the Arctic National Wildlife Refuge. Local residents are simultaneously involved in market and subsistence economies, including tourism related to polar bear viewing³⁴ and hunting marine mammals, such as bowhead whales, walrus, and seal, as well as caribou. Prior to the Point Thomson installation, Kaktovik residents had not been directly exposed to the effects of oil development.

5.3 Adapting Global Standards and Corporate Policies to Local Conditions

ExxonMobil has constructed a diagram of standardized corporate policies that extend from its node of global governance design towards sites of implementation. These policies guide its engagement with Indigenous communities in benefit-sharing. The company’s actions in two sites of extraction demonstrate the tensions between maintaining a standardized approach and the need to address local conditions. First, in both cases the company centers its benefit-sharing around grant programs to support traditional economic activities and Indigenous cultural activities, although these programs are implemented differently in the two sites. In addition, in both cases, ExxonMobil consistently supports STEM education for Indigenous youth through grants, as well as through the provision of resources and equipment for health and education programs from the company directly. Second, ExxonMobil employs Indigenous community liaisons to serve as intermediaries who distribute information on company projects and grant applications, collect grievances, and organize community consultations. However, few Indigenous workers from the villages are hired by the company to work on the extractive projects. Finally, the company employs Indigenous wildlife monitors to assess environmental impacts on Indigenous traditional economic activities – salmon fishing and some reindeer herding on Sakhalin and caribou and whale hunting in Kaktovik.

5.4 Benefit-Sharing Policies

A broad view of benefit-sharing encompasses transfers of resources from extractive industries to Indigenous peoples in forms ranging from the distribution of tax revenues to employment and community grants. Some benefit-sharing arrangements fulfill commitments made in a TNC’s global node of governance design, while others are developed at the request of local stakeholders. We review these areas below.

Taxation is one aspect of benefit-sharing. The Sakhalin-1 project has generated over $16 billion for the Russian government in the form of lease, tax and royalty payments, including more than $6.6 billion to the Sakhalin regional budget.³⁵ ExxonMobil pays taxes to the U.S. federal and Alaskan state governments and to the North Slope Borough (NSB) for its infrastructure in Prudhoe Bay. In both sites, significant tax revenue flows to regional governments -- in Alaska to the NSB, and in Sakhalin, ExxonMobil and Sakhalin Energy signed a production sharing agreement which provides funding to the regional government instead of the federal until their initial investments are paid.

Indigenous organizations are more directly involved in the distribution of tax revenues in the North Slope than in Sakhalin. Kaktovik residents receive tax revenue from oil companies, including ExxonMobil, through redistribution by the NSB and the state of Alaska. In 2019 the NSB spent $77.8 million on infrastructure and services – such as airports, landfills, natural gas infrastructure – for eight villages, including Kaktovik.³⁶ The NSB also provides emergency services, road maintenance, utilities and medical services, finances village schools and a college in Utqiagvik.³⁷

Employment is one possible ancillary benefit for communities at sites of extraction. However, employment numbers tend to be modest in both cases. ENL asserts that since 2002, almost 300 Russian citizens, mostly from the city of Yuzno-Sakhalinsk have been trained and hired as technicians on Sakhalin. As mentioned above, the company also employs Indigenous people as community liaisons and environmental monitors of the salmon and gray whale populations. In Alaska, with the exception of wildlife monitors, ExxonMobil only employs four Indigenous people from Kaktovik.³⁸

Central to the diagram designed to implement ExxonMobil’s corporate governance commitments are benefit-sharing programs in the form of grant programs in both locations. The programs to channel resources to the communities are similar in principle, but take slightly different forms in the two regions. In Sakhalin, a grant program overseen by a tripartite partnership (comprised of representatives from the company, the Sakhalin regional government, and the Indigenous peoples) has developed over time, suggesting that regional government officials play a more significant role in company-community relations in Russia than in Alaska. In Kaktovik, ExxonMobil helped found the Kaktovik Community Foundation (KSF), run by an Indigenous manager based in Anchorage to play a similar role in channeling funding for community projects. Anyone can contribtue to the KCF, but in practice ExxonMobil has primarily used it to transfer resources to the community.

In Sakhalin, the grant program developed over time as ENL’s initial focus on compensation for damages shifted first to an informal funding arrangement between the company and the Association of Indigenous Peoples of Sakhalin Oblast [Region] and finally developed into a tripartite system of consultation between the company, government officials, and Indigenous representatives. ENL employs six Indigenous liaisons (two from Yuzhno-Sakhalinsk and four from nearby villages) to facilitate the grant program and to serve as intermediaries between the company and local community. Since the start of the Sakhalin-1 project, the consortium has contributed over $35 million for more than 1500 social projects (Sakhalin-1).³⁹ Indigenous representatives participate in the grant awarding committee, which consists of representatives from the government, the company and Indigenous Peoples. Routine participation in grant decisions has facilitated the institutionalization of Indigenous organizations over time, and stimulated growth in the number and capacity of Indigenous NGOs and obshchinas.⁴⁰ For example, the NGO Kihk-Kikh, which is formally registered as a non-profit, receives grant funding itself and also serves as an intermediary to channel resources to other small Indigenous culture groups. In Sakhalin the consortium contributed significantly to transportation and social infrastructure during the early stages of the Sakhalin-1 project, including the construction and/or modernization of roads, bridges, hospital equipment, and an airport in Nogliki, some of which the company needed to support its own operations.⁴¹ The Sakhalin-1 consortium, including ENL, provides charitable support for education, healthcare and culture,⁴² with all companies contributing to STEM education (a global priority for ExxonMobil) such as the Eureka project for high school students and annual participation in the All-Russia School Olympic games.⁴³

As mentioned above, KCF was established by ExxonMobil prior to the start of the Point Thomson project to channel resources to the area.⁴⁴ The foundation, which is technically independent but relies on ExxonMobil as its primary funder, for example, used $120,000 from the company to install new storage cellars for the community to preserve traditional foods as warming temperatures and coastal erosion have threatened traditional ice cellars.⁴⁵ Currently, the KCF supports local college students by providing approximately six scholarships annually for two- or four-year degree or vocational training programs.⁴⁶ Students who receive a STEM education have the opportunity to seek employment at the Point Thomson project. The KCF also plans to construct a new museum and cultural center.⁴⁷ Villagers mention several important benefits that the community receives from ExxonMobil, including donated funds for education, a seismic test to identify gravesites on the western edge of the island, and support for the community’s Nalukatak celebrations following successful whaling expeditions.

The Point Thomson project also employs a local community liaison who works part-time, assisting with meetings and relaying concerns.⁴⁸ According to one municipal leader, representatives from the Point Thomson project work with the community more effectively than other oil companies. However, the same leader also points out that “We always are very meticulous in talking to oil corporations, because they are prone to giving false promises.”⁴⁹ Despite numerous meetings held between the Native Village of Kaktovik, the incorporated city of Kaktovik, and Alaska Native Corporations to discuss oil development in Kaktovik, a community leader who is generally satisfied with the interaction with ExxonMobil suggests there is a need for even more communication.⁵⁰

ExxonMobil often publicizes its commitment to respecting Indigenous cultures. ENL, as a subsidiary, has highlighted its role in revitalizing Indigenous cultures by sponsoring festivals and holidays for Sakhalin communities. The majority of grant-funded projects focus on Indigenous culture and traditions, such as sponsoring Indigenous artists’ travel to Moscow and abroad and helping to support native languages. For example, ENL contributed to the Okha Art museum and purchased traditional Indigenous objects and display cases (Sakhalin-1, 2019a). In Kaktovik, the company held discussions with the tribal government (the Native Village of Kaktovik) and the community on projects related to cultural resources, including the digital mapping of an eroding cemetery.⁵¹ In a widely publicized project, Exxon transferred historical Kaktovik artifacts from the Canadian Museum of History to the Museum of the North at the University of Alaska, Fairbanks.⁵² The company then organized transportation for community members’ to travel to Fairbanks to see these artifacts.⁵³

Environmental protection is another component of ExxonMobil’s diagram.⁵⁴ The environmental commitments expressed in various corporate policies are based on international agreements and guidelines as well as local stakeholders’ demands. A persistent concern among Indigenous peoples on Sakhalin has been the impact of extraction on salmon migration and spawning grounds.⁵⁵ ENL employs Indigenous people in temporary positions at the exploration stage of project development to monitor wildlife populations; in Kaktovik wildlife monitors are employed annually during the whaling season. In response to legal requirements from the U.S. Fish and Wildlife Service and stakeholder requests, ExxonMobil also sponsors significant monitoring of species such as caribou and polar bear, vegetation, and fish populations as well as water levels on Alaska’s North Slope. The Point Thomson project conducts biannual meetings to communicate with the local community, where project representatives explain how the operations will develop and answer questions about possible impacts on wildlife. At some of these meetings, the community has also raised broader issues related to benefit sharing.

6.1 Standardizing Extractive Projects: Lowering Transaction Costs and Risks

As a node of global governance design, a TNC adopts commitments from other global nodes and develops a standardized set of policies and programs to engage Indigenous communities. This standardized approach is designed in part to reduce the costs of project development and to minimize risks of community opposition. As a for-profit enterprise, ExxonMobil’s commitment to global standards in its corporate policies and programs is an aspect of risk management. For ExxonMobil, a key source of similarity across geographic sites of implementation is the use of a team of specialists to initiate new projects, regardless of their location. The ExxonMobil Development Company employs community relations experts who specialize in the construction stage of project development and who move from country to country over the course of their careers. These experts are charged with upholding corporate standards and ensuring that the company complies with the rules and regulations at the site of implementation⁵⁶ and develops best practices to apply to each successive project.⁵⁷ A primary objective of this work is to minimize the risk of negative publicity by engaging in benefit-sharing, community outreach, and philanthropy. As one ExxonMobil representative stated, “One of the first things I was taught was that I wasn’t joining an oil and gas development company as much as I was joining a risk management company.”⁵⁸ Still, some global standards are more likely to be upheld than others. For example, ExxonMobil rarely mentions the principle of Free, Prior and Informed Consent (FPIC) it its Citzenship and Sustainabilty reports, even though this principle is endorsed in both UNDRIP and the ILO nodes of global governance. Regarding both Sakhalin-1 and Point Thomson, ExxonMobil has only relied on consultations with communities and community liaisons.

6.2 Land, Minerals, and Self-Governance

Differences in the ownership of land and mineral rights and in governance institutions can shape the implementation of the diagram. In Sakhalin, as elsewhere in Russia, all land and mineral resources are owned by the state; therefore, Indigenous peoples’ involvement in natural resource management is limited.⁵⁹ The laws that guide public participation in oil development, and specifically Indigenous participation, are the 1993 Russian Constitution (notably Article 19), the Law on Ecological Expertise, and the Land Code. These laws are applicable to all citizens, not exclusively to Indigenous populations. Under Law No. 82-FZ On the Guarantee of the Rights of Indigenous peoples of the Russian Federation (1999), Indigenous people may receive compensation for land damaged by extractive industries if the land has been designated as a territory of traditional nature use; in some cases, regional governments have developed regulations requiring compensation. However, these rules are not in effect on Sakhalin where state-owned lands are shared among multiple users. Instead, Sakhalin’s Indigenous fishermen, reindeer herders and hunters participate in benefit-sharing arrangements with companies.⁶⁰ Indigenous enterprises in Sakhalin tend to be small, family-based entities. In contrast, Alaska Native Corporations are powerful for-profit entities that may own significant land and mineral resource rights. Under ANCSA, Alaska Native people were allowed to join Alaska Native Corporations – one at the village level and one at the regional level. Residents born before 1971 received 100 shares that can be inherited or gifted,⁶¹ while Alaska Native Corporations could choose to distribute shares to those born after 1972.⁶² For the Point Thomson project, ExxonMobil has a contract for services with the Indigenous-led ASRC in Prudhoe Bay. Almost all Indigenous residents of Kaktovik are ASRC shareholders and therefore receive indirect benefits from ExxonMobil. In 2019, in ASRC the dividend per share was $70, a significant sum, especially for families with children, but in 2021 annual distribution declined to $40 per share.⁶³ Kaktovik residents also receive shares from the Kaktovik Inupiat Corporation, which has some limited contracts with ExxonMobil. Relative financial support to Indigenous communities on Sakhalin tends to be much lower than on the North Slope.

The number and type of Indigenous organizations and institutions that play a role in governing local communities and natural resources or advocating on behalf of Indigenous peoples differ in the two cases. The North Slope of Alaska is characterized by multilayered governance with a high level of self-government and Indigenous leadership. In the Alaskan case, the North Slope Borough is a municipality with an elected leadership that is primarily Indigenous. It has the authority to tax energy company infrastructure in Prudhoe Bay. In addition, multiple federal agencies, such as the Bureau of Land Management and Fish and Wildlife Service, are involved in the governance of natural resources on federal lands and waters. Compared to the North Slope of Alaska, Sakhalin hosts few Indigenous-led institutions involved in the governance of natural resources. In Sakhalin, the regional government is led by ethnic Russians but includes Indigenous peoples who are employed in some municipalities, in addition to Indigenous representatives in the State Duma. Sakhalin’s Regional Council of the Authorized Representatives of the Indigenous Minorities of the North, an organization established after the Green Wave campaign consisting of elected Indigenous representatives from different groups, represents Indigenous communities in negotiations and company consultations, but the organization is not involved in resource management. Over time the institutionalization of Indigenous organizations has deepened, in part due to grants from ENL and Sakhalin Energy. In Sakhalin, the availability of funding for Indigenous programs over the past decade has fostered Indigenous enterprises as well as their involvement in resource management.⁶⁴ Compared to other parts of Russia, Sakhalin Indigenous peoples’ organizations are now well-institutionalized and highly engaged in negotiations with both oil companies and governments, especially around benefit-sharing.⁶⁵

6.3 Indigenous Agency: Activism and Allies

While ExxonMobil’s implementation of corporate policies broadly follows a similar template with some adaptation to local institutions, there has been change over time in the company’s approach to benefit-sharing – notably, a shift in programs in Sakhalin in the early 2000s.⁶⁶ The development of ExxonMobil’s benefit-sharing programs came in response to Indigenous activism and the model of Sakhalin Energy. An Indigenous-environmental grassroots campaign stretched from the sites of implementation to the global level, targeting the European Bank of Reconstruction and Development (EBRD), the investment bank which financed the Sakhalin-2 project, in order to put pressure on Sakhalin Energy, operator of the Sakhalin 2 project. The campaign was successful in that it contributed to a Sakhalin Indigenous Minorities Development Plan. The Plan, evaluted and renewed every five years, is designed to foster greater respect of Indigenous peoples’ rights and allow them to participate in some aspects of benefit-sharing. These policy changes, as well as continued local Indigenous mobilization, later shaped ExxonMobil’s engagement with Indigenous communities on Sakhalin and, according to interviewees, reverberated in Kaktovik, Alaska, encouraging fuller implementation of ExxonMobil’s own governance commitments.

In Sakhalin, in response to Indigenous and environmental activism, ExxonMobil’s approach to benefit-sharing shifted from one largely focused on compensation for damages to a more robust grant-based strategy with the involvement of Indigenous people in distributing resources to their communities and in monitoring impacts of the project’s operations on the salmon population. In the period from 1999 to 2001, Russia’s State Department of Environment and Natural Resources demanded compensation from ENL and the Sakhalin-1 project for damage to reindeer pastures, among other environmental impacts.⁶⁷ Instead of formal compensation, the company voluntarily provided funds to reindeer herders in the Nogliki District to purchase supplies and improve local infrastructure.⁶⁸ In the following year, to protect the company from the regional government’s persistent requests for compensation on behalf of Indigenous peoples, ENL devised an alternative approach.⁶⁹ In 2002, ENL and the Association of Indigenous Peoples of Sakhalin Oblast jointly created an advisory committee for a grant program to provide funds to support cultural and social projects for Sakhalin’s Indigenous population.⁷⁰

At the same time, disruptions linked to extraction led to Indigenous mobilization. The Sakhalin-1 and Sakhalin-2 projects constructed pipelines that crossed more than 1,000 salmon spawning streams, causing concern among Indigenous people about salmon fishing, a traditional economic activity.⁷¹ Activists charged that ENL’s contractors violated multiple environmental rules.⁷² The Green Wave campaign against oil development on Sakhalin emerged in 2005–2006 simultaneously at the site of implementation, where it was led by Indigenous activists, and through a transnational environmental NGO-led network pressuring the EBRD to review the projects, thereby creating a new forum of negotiation. In January 2005, several hundred Indigenous people from five Sakhalin districts, along with Sakhalin Environment Watch and several other environmental NGOs, demanded an ethnological impact assessment and compensation from the oil and gas consortia.

The campaign for greater consultation and transparency, as well as environmental protection, indirectly served to force a renegotiation of elements of ExxonMobil’s diagram. Due to the nature of its financing, Sakhalin Energy, head of the Sakhalin-2 project, was more vulnerable to the Green Wave campaign than ENL. In January 2007, the EBRD canceled a USD $300 million loan for Phase 2 of the Sakhalin-2 project due to violations of both Russian national legislation and global standards.⁷³ ENL did not rely on international financial institutions as it was financed direclty by ExxonMobil. However, the Green Wave campaign influenced the benefit-sharing practices of both the Sakhalin-1 and Sakhalin-2 consortia. Under pressure from the regional government and the Association of Indigenous Peoples of Sakhalin Oblast, ENL adopted most of Sakhalin Energy’s new benefit-sharing strategies following negotiations with the Regional Council of Authorized Representatives of the Indigenous Peoples of Sakhalin Oblast.⁷⁴ In response to stakeholders’ demands, in 2012 ENL again changed its grant program to more closely match the tripartite arrangement between Indigenous peoples’ representatives, the Sakhalin regional government, and the company, created by Sakhalin Energy for the Sakhalin-2 project.⁷⁵ This three-way agreement allowed more input for each party when distributing funds to Indigenous populations.

In this case, we see that over time ENL’s minimalist approach to voluntary compensation for damages developed into a more multifaceted model of benefit-sharing. Indigenous activism, widespread praise for Sakhalin Energy’s approach, and government pressure created incentives for ENL to develop a similar style of collaboration, such as formal procedures for grant applications and a greater role for Indigenous representatives in grant decision-making. Thus, implementation of global standards and corporate policies has evolved not only due to stakeholder resistance at the site of implementation, but in response to other actors in the GGN. This changing model has then gone on to influence benefit-sharing practices at other sites, including Kaktovik, near Point Thomson, in Alaska.

A decade later, similar aspects of this renegotiated diagram have been enacted in the TNC on the North Slope of Alaska, including the creation of the Kaktovik Community Foundation. An interviewee at ExxonMobil’s headquarters claimed that lessons learned in Sakhalin were taken into account by the company in developing community relations in Point Thomson.⁷⁶ In its corporate documents, Exxon emphasizes the TNC’s sensitivity to Indigenous interests: “In the vicinity of our Point Thomson Project in northern Alaska, we work with the local communities and government authorities to understand their concerns and avoid conflicts with their traditional lifestyle. Through a comprehensive assessment and regular engagement, we have identified several areas of concern to the local people, and we have adopted corresponding measures to address these concerns.”⁷⁷ At the time of our field work, ExxonMobil had not encountered significant community resistance, and interviewees expressed few grievances directly tied to the Point Thomson facility. Company representatives asserted that ExxonMobil cooperates with the NSB as well as the municipality and Indigenous peoples in Kaktovik on issues ranging from wildlife monitoring to cultural preservation.⁷⁸

The role of environmental NGOs and their cooperation with Indigenous communities on Sakhalin Island and Alaska’s North Slope also differ across the two cases, however. In Sakhalin, environmental NGOs supported Indigenous rights during the Green Wave campaign, alongside a global campaign to preserve Western Pacific grey whales. This Indigenous-environmental alliance in Sakhalin has weakened over time. With the exception of the 1989 Exxon Valdez oil spill in Alaska’s Prince William Sound,⁷⁹ ExxonMobil’s operations in Alaska have not elicited the level of Indigenous and environmental protests that occurred during the Green Wave movement on Sakhalin. While Kaktovik residents express greater on-going concern about harm to marine mammals and other wildlife, Alaska Natives from the North Slope generally do not cooperate with environmental NGOs, in part due to past NGO campaigns against seal and whale hunting, and tend to have an adversarial relationship with federal wildlife agencies, with some interviewees expressing the sentiment that these are colonizing institutions that negatively intervene in Indigenous stewardship and management of natural resources.