Court Grants Dakota Access Pipeline a Short-Term Stay

The Dakota Access oil pipeline can continue to operate temporarily, according to a U.S. Appeals Court, which set aside a lower court’s order earlier this month to shut and empty the line by early August. The U.S. Court of Appeals for the District of Columbia granted Dakota Access an administrative stay while it considers whether the line should be shut due to permitting issues. The ruling allows oil to continue to flow through the 570,000-barrel-per-day pipeline, which runs from North Dakota’s oil production fields to Midwest and Gulf Coast refineries, at least through next Thursday while the pipeline’s operator, Energy Transfer LP, and its opponents file briefs. The company is appealing the lower court’s shutdown order and asking it to be blocked pending the final outcome of its appeal.

According to Dakota Access, it would lose as much as $3.5 million each day the line is idled and roughly $1.4 billion if the line is shut for all of 2021—a time period it could take to perform another environmental assessment. Draining the 1,172 mile line would take about three months and cost roughly $27 million.

Background

On July 6, the U.S. District Court for the District of Columbia ruled the U.S. Army Corps of Engineers violated federal environmental law by allowing Energy Transfer to build a portion of the line beneath South Dakota’s Lake Oahe—a source of drinking-water for the Standing Rock Sioux tribe. The pipe passes under the lake at a minimum depth of 95 feet below the bottom of the lakebed. U.S. District Judge James Boasberg ruled that the Army Corps had failed to address concerns about the risk of oil spills and ordered it to conduct a full environmental impact study that could take another year to complete. The Army Corps of Engineers granted the final easements to finish the one-mile stretch of pipeline under Lake Oahe in 2017 and the pipeline has been operating since then without any mishaps.

The federal appeals court has given the tribe until Monday to respond to Energy Transfer’s request to be allowed to continue operating pending its appeal of the shutdown. The company then has until July 23 to file its reply.

Energy Transfer believes that Judge James E. Boasberg exceeded his authority and does not have the jurisdiction to shut down the pipeline or stop the flow of crude oil because Boasberg’s justification to shut down the Dakota Access pipeline did not involve active, operating pipelines. Energy Transfer is pursuing an appeal, but if that should fail, it can ask the U.S. Supreme Court to rule on the case.

If the original ruling survives appeals, it would be the first time a major pipeline in service was ordered shut because of environmental concerns. If that were to occur, the closure will be devastating for the Bakken shale basin, which has turned North Dakota into the second-largest oil producing state in the United States and helped transform the nation into the world’s largest supplier.

The Dakota Access pipeline was fundamental to advancing North Dakota’s oil production because it served as a low-cost and efficient means of moving Bakken oil to refineries in the Midwest. Oil production grew to a record volume of 1.52 million barrels a day in November but has fallen since the coronavirus pandemic devastated demand. The state expects oil production in May to be below 1 million barrels a day for the first time since 2017. Bakken oil producers have shut in nearly 7,000 wells as oil markets face lower demand due to the pandemic.

Shutting the pipeline will mean that Bakken oil cannot be shipped economically. Dakota Access connects with Energy Transfer’s ETCO oil pipeline and provides users a means to ship barrels of oil from North Dakota to the Gulf Coast, charging from $5.50 to around $8.00 a barrel. The alternative of using rail would at least double the cost of transportation.

The environmental movement has turned its attention to pipelines, rather than wells, because they require various federal and state permits, which can be more easily disrupted through litigation. One of the laws helping that effort is the National Environmental Policy Act, NEPA.

NEPA Reform

On July 15, President Trump announced changes to the regulations that govern NEPA, in order to speed up approval for major projects like pipelines and highways. NEPA requires that the government review how pipelines, highways, and certain oil and gas projects impact the environment and nearby residential communities. The 50-year-old act was signed into law by President Richard Nixon. It requires federal agencies to consider the environmental effects of proposed projects before they are approved. It also gives the public and interest groups the ability to comment. Over its five decades, the courts have continuously tightened its requirements so that environmental analysis has become a major business not only for those doing the studies, but also for lawyers who litigate in this arena.

The new regulations are expected to reduce the types and number of projects that will be subject to review. An earlier version of the proposed rules truncated those reviews in an effort to streamline processes that can take years to complete. It also dropped a requirement that agencies consider the cumulative environmental effects of projects, such as their contribution to climate change. Instead, officials would need to consider only the “reasonably foreseeable” effects of a project.

The administration’s announced rule changes set a strict two-year time limit for agencies to issue environmental impact statements. The new regulations also require comments be submitted more quickly, and limit the topics that can be covered in those comments.

Currently, the average time for agencies to complete an environmental impact statement is 4 ½ years. According to Mary Neumayr, chair of the White House Council on Environmental Quality, this delay “deprives Americans of the benefits of modernized bridges and roads that enable them to get home to their families.”

One of the first projects to benefit from NEPA reform will be an expansion of Interstate 75 designed to reduce congestion by building new lanes just for commercial freight trucks.  Most of the original parts of the Interstate Highway System were built without NEPA application, as were the Trans-Continental Railroad and almost all of the dams and reclamation projects throughout the United States.

Conclusion

The July 6 ruling requiring the Dakota Access pipeline to stop operation has been granted a short-term stay while arguments are presented. The Dakota Access pipeline provides an important means of shipping oil from the Bakken shale basin to refineries that is an efficient and low cost means of transportation, and environmentally safer than rail or truck shipment. As such the original court decision is harmful to royalty owners, the state of North Dakota and the American consumer.

To ease the pipeline approval system, President Trump is seeking modernization of a law that has created significant delays for infrastructure projects. President Trump said he wanted to streamline an “outrageously slow and burdensome federal approval process” that can delay major infrastructure projects for years. He said the country’s infrastructure used to be the envy of the world but red tape has delayed projects making the United States “like a third world country.”

President Trump also said, “From day one, my administration has made fixing this regulatory nightmare a top priority. And we want to build new roads, bridges, tunnels, highways bigger, better, faster, and we want to build them at less cost.”

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