Appellate court puts Dakota Access pipeline back in business

Just when you thought the entire brouhaha over the Dakota Access Pipeline was finished, last month we learned that a court had ordered the project to be shut down yet again. The stated purpose was yet another environmental review, though the pipeline has already received a clean bill of health in multiple such studies in the past. That put the nation’s oil producers into what analysts described as “a holding pattern” where production from the Bakken shale region was slashed by half a million barrels per day and oil prices sank below the break-even point.

That situation appears to have been resolved this week. The Court of Appeals for the District of Columbia Circuit has ruled that the plaintiffs in the case had not shown sufficient cause to grant the request. The three-judge appeals panel did, however, allow the new environmental review to move forward. The process is expected to take at least a year. (Associated Press)

A federal appeals court on Wednesday reversed a judge’s order that shut down the Dakota Access pipeline pending a full environmental review.

The U.S. Court of Appeals for the District of Columbia Circuit sided with pipeline owner Energy Transfer to keep the oil flowing, saying a lower-court judge “did not make the findings necessary for injunctive relief.”

But the appellate court declined to grant Energy Transfer’s motion to block the review, saying the company had “failed to make a strong showing of likely success.”

The appeals court said it expects the parties to “clarify their positions” in the lower court.

You can tell that all of this maneuvering has far more to do with politics than environmental concerns by the way the plaintiffs reacted to the ruling. The attorney for EarthJustice, the group representing several Native American tribes bringing the suit, described the court’s decision as containing “more to like than dislike.” He noted that the environmental review would move forward and there would be “a new permit during the next administration.”

The implication here is clear. The plaintiffs are anticipating a Biden victory in November and the departure of Donald Trump (a strong advocate for the pipeline) from the Oval Office. The Dakota Access pipeline was tied up in legal red tape for years under the Obama administration, with Joe Biden vigorously supporting his boss in blocking progress on the project. So they are no doubt anticipating a potential Biden administration taking up the battle once again and getting the EPA to shut down production. And they’re probably correct in that prediction.

We had a good look at what the future holds last month when there was even the threat of the pipeline being shut down. As noted above, production decreased massively. Many workers in North Dakota were furloughed as the rigs were idled, impacting the entire state’s economy. And we shouldn’t ignore what it would cost to shut the pipeline down. It will take at least three months to empty the five million barrels of oil it holds when full. After that, Texas-based Energy Transfer (the owner) estimates that it will cost $67.5 million per year to keep the pipeline lubricated and in good repair while it’s inoperative.

Unfortunately, the American oil and gas industry has been a victim of its own success in recent years. Having grown to the point where the United States is now the dominant player in the global oil market, we’ve managed to produce so much black gold that oil prices are hovering at or below the break-even point. It doesn’t take much of a disruption in either supply or demand to destabilize the entire system. And that’s exactly what the “Keep It In The Ground” crowd is counting on. With an ally like Joe Biden controlling the EPA, they’ll probably get their wish. And then our global leadership in the oil and gas market will evaporate, along with all of the jobs and economic stimulus that goes with it.