Energy Transfer executives expressed confidence the much-litigated Dakota Access Pipeline will remain open as it faces potential closure from pending lawsuits and a heightened US Army Corps of Engineers review under the new Biden administration.
Speaking late Feb. 17 on an earnings call, Energy Transfer co-CEO Thomas Long insisted, "We do not see a scenario where the pipeline will be shut in."
"We are still in America with the rule of law," Long said. "The Army Corps gave us guidance early on in the permit process about the best locations to construct the pipeline to have the least impact on the environment."
A federal appeals court ruling in January essentially confirmed the nearly four-year-old Dakota Access Pipeline is operating illegally without the necessary legal permitting, and that it is up to the Corps of Engineers, now under President Joe Biden, to determine whether it will let the Energy Transfer-operated pipeline continue to flow crude oil while the environmental review determines whether the needed easement is deserved.
The Corps of Engineers on Feb. 9 was granted a two-month delay until a newly scheduled April 9 court hearing to potentially decide whether to shutter the main Bakken Shale crude artery. The delay could give the Biden administration an ample timetable to consider how it might take the unprecedented step to close the 570,000 b/d pipeline, at least temporarily, while a more stringent, court-ordered Environmental Impact Statement, or EIS, review is conducted that could be completed as early as late this year.
Energy Transfer General Counsel Thomas Mason said it is too early to know whether a decision will be made on April 9 or later by either the Corps of Engineers or US District Judge James Boasberg.
"I think they've been very professional throughout the last five years of our dealings with them," Mason said of the Corps of Engineers. "And they, if left alone from political interference, I think will continue to make good decisions as they proceed."
However, Mason also noted Biden's early executive order actions on climate change.
"The Biden administration has put out executive orders that talk about agencies evaluating climate change," Mason added. "I don't know if this will affect the EIS process at all. It's too early to tell on that."
The DAPL case is closely watched by industry and environmental observers alike because it could potentially set a standard for attempting to close existing pipelines and other fossil fuel infrastructure.
In the meantime, Bakken crude differentials have strengthened in recent weeks as traders have considered the potential shuttering of the major pipeline system. Such a closure likely would hamper rebounding production volumes in the Bakken and redirect more barrels to ship by costlier rail services.
One of Biden's first-day actions on Jan. 20 included canceling the controversial Keystone XL Pipeline project planned by TC Energy. However, acting on Keystone XL was a campaign pledge by Biden, and he has never publicly commented on DAPL, even though Vice President Kamala Harris and Biden's Interior secretary nominee, Deb Haaland, have both supported shuttering DAPL.
Judge Boasberg previously ordered the pipeline closed last summer before his ruling was undone in the appellate court. But the appeals court has now agreed with Boasberg that the federal easement was granted illegally in early 2017 under the Trump administration, and the court is leaving the interim status of the pipeline's operations up to the Corps of Engineers or Boasberg.
How did we get here?
In 2016, construction of the DAPL temporarily became the epicenter of the US environmental movement against fossil fuels, as climate activists teamed up with Native American tribes that wanted to protect their lands and waterways, specifically at Lake Oahe.
Headline-grabbing protests, security clashes and arrests ensued.
In December 2016, outgoing President Barack Obama blocked the completion of the pipeline in a largely symbolic gesture that was quickly overturned after Trump was sworn in, and the pipeline came online later in 2017.
Behind the scenes, the legal fights continued over the fast-tracked environmental permitting the pipeline received under both Obama and former President Donald Trump. Judge Boasberg stunned industry observers when he ordered the pipeline shut in July 2020. One month later, the shutdown order was halted on appeal.
Even with the pipeline's fate in question, operator Energy Transfer has still moved forward with expanding the crude pipeline's capacity by the end of 2021. Early construction work, including surveying and concrete pouring to build new pumping stations, began late last year.
The pipeline is on track to move about 750,000 b/d of crude capacity by the end of September as part of a capacity expansion project, according to Energy Transfer. The company has planned to expand Dakota Access to 1.1 million b/d. But, with the ongoing coronavirus pandemic hurting crude demand, the expansion is taking a phased-in approach.
