Tag Archives: DAPL

Explainer: The Dakota Access Pipeline faces possible closure

By Devika Krishna Kumar and Stephanie Kelly

(Reuters) – A U.S. court could order the Dakota Access Pipeline (DAPL) shut in coming weeks, disrupting deliveries of crude oil, and making nearby rail traffic more congested.

WHAT IS DAPL?

The 570,000-barrel-per-day (bpd) Dakota Access pipeline, or DAPL, is the largest oil pipeline out of the Bakken shale basin and has been locked in a legal battle with Native American tribes over whether the line can stay open after a judge scrapped a key environmental permit last year.

A federal judge ordered the U.S. Army Corps of Engineers to update the court on its environmental review of the pipeline by May 3 and decide if it believes the line should shut during the process.

WHAT IS THE DISPUTE?

Native American tribes long opposed to DAPL say the line endangers Lake Oahe, a critical water source. Pipeline construction under the lake was finished in early 2017 and the line is currently operating. But a judge last year vacated a key permit allowing that service, raising the possibility that the line could close while a thorough environmental review was completed.

Dakota Access oil pipeline’s operators plan to ask the U.S. Supreme Court to intervene, according to a court filing last week.

WHAT ARE THE CHANCES THAT THE LINE WILL CLOSE?

So far, the U.S. Army Corps of Engineers has not requested the line to be closed, even after the federal permit was canceled. It expects to complete the environmental review by March. Market analysts believe there is some chance the judge orders the line closed, and there is concern about the disruption that would cause.

WHAT WILL OIL PRODUCERS DO IF THE LINE IS CLOSED?

The U.S. shale boom created more demand for rail transport of crude in North Dakota, the second-biggest oil producing state in the country. Outbound rail traffic rose by almost 300% between 2002 and 2015, a North Dakota Department of Transportation report showed.

However, rail is expensive and takes longer to ship, making pipelines the preferred shipping method. If DAPL were to shut, producers would be pushed toward crude by rail again, BTU Analytics said.

WHAT COULD HAPPEN FOR FARMERS IF THE LINE IS SHUT?

If shippers divert oil shipments onto railcars, it will create transport bottlenecks in the region, especially in North Dakota, which relies on rail to transport over 70% of its agricultural production, economists and industry sources said.

“Probably more grain would be piled on the ground until the time it could be moved by rail,” said Jeff Thompson, a farmer in South Dakota and a director of the South Dakota Soybean Association, which supports DAPL.

In 2019, North Dakota led the nation in the production of all dry edible beans, canola, durum wheat, and spring wheat. The state is a captive rail market, which means there are no other economically viable options to deliver agricultural products, said Stu Letcher of the North Dakota Grain Dealers Association.

ARE RAILROADS PREPARED?

Railroads have improved load capacity over the last decade in response to past constraints, said Bill Wilson, professor at North Dakota State University and a member of the North Dakota Soybean Council.

“I would be surprised that, if DAPL was shut down, that the railroads were not capable of handling that added business,” Wilson said.

BNSF Railway, which operates the greatest number of route-miles in North Dakota, is prepared to handle any increase in rail traffic if the DAPL is shut, the company said.

The other major railroad serving the region, Canadian Pacific Railway Ltd, is committed to delivering for customers across all businesses, said spokesman Andy Cummings.

(Reporting by Devika Krishna Kumar and Stephanie Kelly in New York; Editing by Aurora Ellis)

Dakota Access oil pipeline users downplay need for line to investors

By Laila Kearney and Devika Krishna Kumar

NEW YORK (Reuters) – The largest oil pipeline out of the Bakken shale formation in North Dakota could be forced to shut this week, and the companies that use it are telling investors they can survive without it. But in legal filings, they have made its closure seem dire.

The 570,000 barrel-per-day (bpd) Dakota Access Pipeline (DAPL) is facing a federal court order to be closed and drained pending a new environmental assessment. A decision on whether it can remain running while a legal battle continues is expected any day. The pipeline is critical for moving oil out of North Dakota, the second-largest crude-producing state, trailing only Texas.

Numerous industry groups and states issued legal statements in support of DAPL both prior to and after a judge last month ordered the line, operated by Energy Transfer LP, closed by early August.

Before opening in 2017, producers and refiners relied on a patchwork of pipelines and rail to get oil out of the region.

But on recent earnings calls and fillings, companies including Marathon Petroleum Corp and Continental Resources Inc, the largest Bakken producer, said they have plenty of alternatives should the line be shut.

“It would not have a major impact on moving all of our production if DAPL were shut in, and the cost to us would be a few dollars per barrel,” said John Hess, chief executive officer of Hess Corp, which transports about 55,000 bpd of oil on DAPL, on an earnings call last week.

However, in an April court filing, the company said it “does not have other practical options to transport the crude oil that is currently being shipped on DAPL.”

A source familiar with the company’s thinking said Hess has since found alternatives for shipping its oil.

The differing statements come down to the need to reassure investors, experts said.

“They really shouldn’t do that,” said Ted Borrego, who has practiced oil and gas law for over 45 years and teaches at the University of Houston Law Center. “But a big chunk of what you need to be able to drill wells is money, and if you’ve got investors that are nervous, they tend to sit on their wallets.”

Last month, a U.S. district court judge found fault with one of the pipeline’s permits and ordered DAPL shut and drained by Aug. 5. That order was delayed by an appeals court, which is still deciding whether DAPL can remain in use during the appeals process.

Energy Transfer did not immediately respond to a request for comment.

Producers and refiners that use Bakken oil relied for years on rail transit due to the lack of pipelines. North Dakota output peaked at 1.5 million bpd in late 2019 and is at about 1 million bpd as of August, according to the state’s Department of Mineral Resources.

“The loss of the pipeline has less of an impact if production is reduced,” said Sandy Fielden, analyst at financial services firm Morningstar.

Privately, shippers and executives say ramping up rail shipments takes time and rail cannot handle the same volume as pipelines. One unit train can carry between 50,000 and 90,000 barrels of oil, far less than DAPL’s daily capacity.

“No producer wants DAPL to close,” said one shipper on the line, who spoke on the condition of anonymity.

In May, 52 million barrels of crude was transported from the PADD 2 region that includes North Dakota to the U.S. Gulf Coast, compared with just 351,000 barrels shipped via rail, according to U.S. Energy Information Administration data.

Continental Resources said in a legal filing in June that shutting the line could cost between $4 and $7 a barrel extra, boosting costs for all producers and shippers by $832 million to $1.5 billion annually. Bakken oil currently costs about 20 cents less than U.S. benchmark crude.

Executives on the company’s earnings call on Tuesday said they were confident that the line would remain open.

(Additional reporting by Arathy S Nair; Editing by Marguerita Choy)

Only the hardiest remain at Dakota protest camp

A couple of the remaining activists, hold up signs as they grapple with plunging temperatures that make conditions more difficult at the protest camp in Cannon Ball, North Dakota,

By Valerie Volcovici

CANNON BALL, N.D. (Reuters) – Two weeks after a victory in their fight against the Dakota Access Pipeline, most protesters have cleared out of the main protest camp in North Dakota – but about 1,000 are still there, and plan to remain through the winter.

These folks say they are dug in at the Oceti Sakowin Camp in Cannon Ball, North Dakota, despite the cold, for a few reasons. Most are Native Americans, and want to support the tribal sovereignty effort forcefully argued by the Standing Rock Sioux, whose land is adjacent to the pipeline being built.

Others say they worry that Energy Transfer Partners LP <ETP.N>, the company building the $3.8 billion project, will resume construction without people on the ground, even though the tribes and the company are currently locked in a court battle.

Future decisions on the 1,172-mile (1,885-km) pipeline are likely to come through discussions with the incoming administration of Donald Trump, or in courtrooms.

“I’ve seen some of my friends leave but I will be here until the end and will stand up to Trump if he decides to approve the permit,” said Victor Herrald, of the Cheyenne River Sioux Tribe in South Dakota, who has been at the camp since August.

At one point the camp had about 10,000 people, including about 4,000 veterans who showed up in early December – just before the U.S. Army Corps of Engineers denied a key easement needed to allow the Dakota Access Pipeline to run under Lake Oahe, a reservoir formed by a dam on the Missouri River.

After the Corps decision, Standing Rock chairman Dave Archambault asked protesters to go home. The camp’s population now runs from 700 to 1,000, depending on the day, and many come from the nearby Standing Rock reservation where they live.

Those left say they are there to “show our strengths,” as Bucky Harjo, 63, of the Paiute tribe, from Reno, Nevada, put it, while the tribe deals with the legal battle.

Logistics are key for those still at the camp, located on federal land. Theron Begay, a Navajo journeyman who is a certified construction worker and heavy machine operator, has been put in charge of winterizing the camp. He is training volunteers to build structures that can withstand sub-zero temperatures and bitter winds, as well as compost toilets.

Some people at the camp have gotten pneumonia, and they and others went to an emergency shelter that was built three miles away to escape the cold.

Because the Oceti Sakowin camp is located on a flood plain, waste from the camp poses risks to the nearby Cannonball River. Tribal leaders have said the camp may need to move if it wants to remain active. Begay said the structures can be “disassembled like a puzzle in two hours” and re-established on drier ground.

North Dakota’s Governor Jack Dalrymple said in a Tuesday statement that he and Archambault recently met to discuss reducing tensions between the tribe and law enforcement. They are discussing reopening the nearby Backwater Bridge on state highway 1806, which has been blockaded since Oct. 27, when activists set vehicles on fire.

Harjo said he will leave “when I see the drill pad removed and DAPL out of here, and when they reopen 1806 and when we are free to go at our own will and not be targeted on the highway.”

NEXT STEPS

Tom Goldtooth, executive director of the Indigenous Environmental Network, and a constant presence in the camp, said the protest is transitioning “to the next level of our campaign” to stop the pipeline.

Some still at the camp worry that if they leave, Energy Transfer Partners will restart construction. ETP asked a federal judge on Dec. 9 to overrule the government’s decision and grant the easement. The judge declined that request; the parties are due back in court in February. The Army Corps is considering alternatives, which could take months.

Trump, who owned ETP stock through at least mid-2016, according to financial disclosure forms, could order the Army Corps to grant the permit. His choice for U.S. Energy Secretary, former Texas Governor Rick Perry, is on ETP’s board. Standing Rock Sioux representatives met with members of Trump’s transition team this week to urge the incoming president to deny the easement.

Protesters who remain at the camp are still receiving donations of money and supplies from people across the United States. On a recent visit to the camp’s emergency shelter it was filled with boxes delivered via Amazon.com.

Goldtooth said tribal leaders are talking about an exit plan for the camp. “We will continue to provide infrastructure support to those who stay here,” he said. “We’ll make sure they’re safe and warm.”

(Reporting By Valerie Volcovici in Cannon Ball, N.D., additional reporting by Andrew Cullen and Ernest Scheyder; Writing by David Gaffen; Editing by Andrew Hay)