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Bad News For The Bakken As Obama Administration Blocks Pipeline

Dakota Pipeline

The Obama administration shocked the oil industry last week, pulling the plug on a major oil pipeline from the Bakken that had become a flashpoint between a pipeline company on the one hand, and a growing coalition of Native American tribes and environmentalists on the other.

Everyone was anxiously waiting a Friday ruling from a U.S. federal judge, who was weighing a request from the Standing Rock Sioux Tribe to stop construction on the Dakota Access Pipeline, a $3.8 billion 1,168-mile oil pipeline that would run from North Dakota to Iowa and Illinois. The pipeline would threaten sacred lands and drinking water resources for the tribe.

Dakota Access exploded into a national controversy in recent weeks, as protests against the project swelled and violence broke out after protesters were attacked by dogs. Environmentalists have been keen on turning the Dakota Access Pipeline into a rerun of the Keystone XL saga, elevating the project to a national symbol around which protestors could be rallied.

But unlike Keystone XL, it did not take eight years to grab the White House’s attention. On Friday, September 9, a federal judge ruled against the Standing Rock Sioux’s request to block construction, handing Dakota Access a victory by allowing construction to proceed. However, an hour later, something really unusual occurred. A joint letter was issued from the U.S. Department of Justice, the U.S. Army Corps of Engineers, and the Department of Interior. The letter asked the pipeline company to “voluntarily pause” construction anyway, even though the court had ruled in the company’s favor.

Energy Transfer Partners, the lead company on the Dakota Access Pipeline, saw its share price sink more than 3 percent on Friday and it was down another 2 percent during early trading on Monday.

“We appreciate the District Court’s opinion on the U.S. Army Corps of Engineers’ compliance with the National Historic Preservation Act,” the three agencies wrote. “However, important issues raised by the Standing Rock Sioux Tribe and other tribal nations and their members regarding the Dakota Access pipeline specifically, and pipeline-related decision-making generally, remain.” The agencies wrote that they will need time to determine whether or not they have to review the permitting decisions again, due to the issues raised by Standing Rock Sioux. “Therefore, construction of the pipeline on Army Corps land bordering or under Lake Oahe will not go forward at this time.”

This may seem like a bit of arcane procedural mumbo jumbo, but the effects could be far-reaching. The Obama administration said that not only would it not allow the pipeline to move forward, at least temporarily, but it also said that the conflict highlighted the potential need for nationwide reform on how infrastructure is sited on Native lands. Related: Will Norway’s Oil Fund Pull Out Of Company Running Controversial Refugee Camps?

Troy Eid, a former U.S. attorney in Colorado and expert in Indian law, told the Associated Press that the Dakota Access Pipeline “is a textbook example of how not to do a project.” The lack of consultation with the tribe blew up in the pipeline company’s face.

Now, the policy landscape could shift against the industry. Up until now, Native Americans have only been consulted on infrastructure projects, Eid said, not making actual decisions on whether or not projects move forward. Ultimately the U.S. federal government made all of the decisions. But with its Sept. 9 letter, the Obama administration could upend that arrangement, perhaps forever. "This could bog down or delay every single infrastructure project moving forward," Brigham McCown, former acting administrator for the federal Pipeline and Hazardous Materials Safety Administration, told the AP. "I don't think they even realize the can of worms they've opened."

"There is no question it will be much more difficult and costly for these projects to move forward in the future," Brian Jorde, a Nebraska lawyer who worked with Keystone XL opponents, told the AP.

The pipeline companies did not expect such a great deal of political risk to Dakota Access ahead of time. Since the pipeline does not cross an international boundary, many industry analysts thought the pipeline would not receive the level of attention – from either activists or the White House – that the Keystone XL project attracted. Related: SpaceX Explosion Reveals Hidden Opportunities In Space Investment

Opponents of the pipeline see this as a huge victory. “Our voices have been heard,” said Dave Archambault II, chairman of the Standing Rock Sioux Tribe. “The Obama administration has asked tribes to the table to make sure that we have meaningful consultation on infrastructure projects. Native peoples have suffered generations of broken promises and today the federal government said that national reform is needed to better ensure that tribes have a voice on infrastructure projects like this pipeline.”

Major pipeline projects be forced to clear a much higher bar in the future, but there are near-term effects on the industry as well. Dakota Access was supposed to be completed by the end of the year, with construction already 45 percent completed. It would carry 470,000 to 570,000 barrels of Bakken oil per day when operational, connecting North Dakota oil fields to refineries in the Midwest. From there, the oil would be much better connected to the rest of the country.

Blocking construction of Dakota Access will leave Bakken drillers without a major conduit to get their oil out. That would leave them competing for scarce pipeline space, raising costs and forcing them to discount their crude, or shipping crude by rail, a costlier alternative. "In the absence of a new alternative, (Bakken) crude will have to use the existing infrastructure to move," said Sandy Fielden, the director of research for commodities and energy at Morningstar, according to Reuters. "Producers will have to take lower prices to compete with imports.”

In short, the Bakken is already seeing oil production decline, and the disruption of Dakota Access will inflict further pain on operators in the region.

By Nick Cunningham of Oilprice.com

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  • Mchentrp on September 12 2016 said:
    Either pay the extortion they probably want or just build it and be prepared for war. The greater benefit is for energy independence and economic growth. Get the hell out of the way or get run over.
  • Barack Obama on September 12 2016 said:
    Barack here - better to be pc and gain political points than help the economy of the nation; proof that this pipeline won't harm the environment is irrelevant. Just sayin'. Now back to the golf course...
  • Mike on September 13 2016 said:
    ETP should have donated a few million dollars to The Clinton Foundation. That would have guaranteed its completion on time.
  • Ronnie on September 13 2016 said:
    These two comments are the best that people can come up with. So here is the jest of the problem. The state and the oil companies thought that they didn't have to take into account the natives points because the pipeline wasn't going through the reservation land, it was going just north of it. When the pipeline was looking to put it north of Bismarck it stated that there were water issue problem with the drinking water to Bismarck water supply so they went south of Bismarck. How do you have an issue with one and not the other. Even though all paper worked seem in order another problem is that they took historical site finding from documentation dating back to 1985 or around there. So with no recent historical documentation this became a problem also. So if you must go to war with a people pick the right ones and start with you elected official that steam roll this process though thinking that they could get away with it. If you must go to war and kick some butt lock and load i'm sure the corp whose fault it is also wouldn't mind standing up. Or is you really feel like raping and piliging
  • Ronnie on September 13 2016 said:
    i did something wrong and sent my comment before i finish.........pillaging the people that opposed the first site which might have kept the standing rock people out of it in the first place. Times are changing and out dated points of view are going with it. As the people on the front lines have shown us they are will to put there bodys in harms way to the end. And with that statement shows another reason why the president did what he did. Optics plain and simple the world is watching this country and it's claims of being supporter of human rights we have gone to war for them and now when it's our turn to support these rights we say sorry I don't think so. There is a movement out there all over this world on this very subject open you eyes and see. Colonization will come to an end and this fight is not going away anytime soon. And one last point about the extortion it would be nice to think that but here is one thing you left out of your thought process The Black Hill was settle in court and the native won that fight, So the government gave them a judgement which is now around 1 Billion dollars. And the native still refuse to take the money it's not about money it's about the land and the water.
  • Jim Decker on September 13 2016 said:
    "The pipeline would threaten sacred lands and drinking water resources for the tribe." "violence broke out after protesters were attacked by dogs."

    These are both false statements. The protesters were violent. There is no evidence that any dogs attacked anyone.

    The pipeline does not cross Sioux land. The Sioux have no sacred lands in the Dakotas since they only arrived there recently pushed to the West by the Chippewa and other tribes. A few hundred years ago, they were the mound builders in the Ohio Valley. Let them go there and interfere with anything any Ohioan wants to do. All they want is a payoff.

    No surprise that Obama would ignore the law and support them. That is what the Democrats stand for- corruption and lawlessness. #DeplorableDemocrats
  • Bill Simpson on September 13 2016 said:
    Trump wins, and any pipeline outfit which can cough up a little cash to one of his business associates/advisors will get their pipeline permit. Keystone XL is a done deal, unless Trudeau blocks it in Canada.
    That is only if he wins. Right now it is too close to call because many voters believe that change is always better.
    The majority who first demonstrated against Assad in Syria believed that change would be good. Think the million living in tents believe that today? Hundreds of thousands got changed from 98.6 degrees Fahrenheit to ground temperature. Change isn't always for the better. Things can always get worse, a lot worse.
  • AngryIndain on September 13 2016 said:
    Jim your a tool. And the others that stick to the ways of greed and are blind to whats most important. This is not just about water it is about the generations after. Such a consumer based society. And me way of thinking. Gimmie gimmie gimmie. Take what you want, not like its ever stopped you before. We are all people and humans. Simply fighting for what everyone else should be fighting for.
  • Dave on September 13 2016 said:
    Follow the money.

    If the pipeline doesn't go thru, that oil need to be shipped by rail.
    Who owns the rail?
    Who does the owner of the rail donate to?
  • W K on September 13 2016 said:
    I am not sure if I got the facts right, because who can you really believe? But somehow, in my book, it is smarter to get a permission to build in, through or over anyone's land BEFORE you start building.
    If it is true that Bismarck & Mandan said "no to the pipeline" going thru the river NORTH of Bismarck (because of drinking water intake concerns), then those living SOUTH of the river
    should be accorded the same right. The fact that the Indians do not own the specific land is of
    no concern, when it is THEIR drinking water source that's at stake.
    It's no longer the 1850's when the railroad could "railroad through anywhere", and the very idea of equal rights or basic human rights was considered "weird and strange and what not".

    On the political side, it is possible that the Obama administration interfered on behalf of Berkshire Hathaway, because the longer the pipeline is delayed, the longer the BNSF railway oil transport will remain profitable, as a totally unintended side effect. Who benefits? So many conflicting interests, one doesn't know who to accuse first.

    One should always try to come up with the most constructive comment, so here is my attempt:

    "Pipelines made of corrodable materials should never be built beneath or through a drinking water providing river, but a BRIDGE carrying the pipeline, with a leak-catching basin underneath the length of the bridge, with an automated safety shutoff valve, should be built over the river". It's not difficult to envision this. Yes, that costs more, but it will show goodwill and it will prevent trouble later.

    With all due respect to wind, solar and other energy systems, the USA, and much of the world,
    is not yet ready to do without oil. Ask any environmentalist to live without any product or service that is produced, built, packaged, serviced & delivered with the use of oil-using or oil-containing machines and components, and they get very defensive. Using a bit of reason and patience would be useful and productive on both sides.
  • oldgeezer on September 13 2016 said:
    Those of us that are native to Western North Dakota understand the boom and bust nature of our oil patch. Some of us remember all the way back to the 1950s. Our booms usually last about 7 years and our busts about 12 to 15 years. We are NO where near "peak" oil - just peak stupidity (again). High rollers come and go but we will survive and start the cycle again. Actually, no big deal.

    Obama will go away (thank God) and the pipeline will be built. It might take time but it will occur.
  • randy verret on September 14 2016 said:
    The fact that a federal judge agreed to the validity of the permit indicates (to me) that proper due diligence was done under the existing permitting process. It will be interesting to see if (somehow) ETF's consultants overlooked any significant archeological data along the route, in particular the segment in question near the Standing Rock Sioux Reservation. Since it only took about an hour after the court decision for a joint agency response, that would lead me to believe that response is PURELY political. If the Tribes can demonstrate a material oversight or fundamental flaw in the permitting process, then they should be heard. If their motives are different and this is nothing but "grand standing," then they are doing both themselves and our country a tremendous DISSERVICE. Only they know their true motive.

    On a broader front, if the media will just report FACTS and play fair and have any sense of balance, maybe we can get all this sorted out. Somehow, I'm doubtful of that. Just too good of a STORY to pass up. Regardless, the overriding danger (here) is that if private companies are going to continue to risk investing in needed infrastructure projects, they MUST have some CERTAINTY in the regulatory & permitting arena. Put another (simpler) way, just imagine what the NFL would look like next weekend if the league office had the option to just phone down to the officials on the field and arbitrarily change the rules at any time. I'd respectfully submit that would not make the game any better. Same principle applies here...
  • Albert on September 15 2016 said:
    So we forget about the war on terrorism? Every car, and even a loaf of bread requires oil. If they don't pull that oil, then oil comes from the middle east - so stopping the pipeline directly funds terrorism. Unless those people stop eating food produced by oil, and driving their cars, then the are simply funneling dollars right into the hands of terrorists.

    We pull our own oil, then no money will exist to fund the terrorist groups - the problem will then go away. Little wonder Obama wants to keep money flowing into the middle east to fund the military and justify government power over the people to fight terrorism.

    Stopping the pipeline thus funnels money directly into the terrorists hands. What ever happened to the war on terrorism? These people now have the blood of any funds that going into terrorist acts. And stopping the pipeline does zero to stop consumption - only forces people to consume blood oil from the middle east which is where 99% of terrorism comes from funded by oil.
  • Josh Jones on September 15 2016 said:
    Funny how a third of all the oil produced in North Dakota comes from the "Rez" - Fort Berthold Indian Reservation more specifically, home of the Three Affiliated Tribes; the Mandan, Hidatsa, and Arikara. Anyone who believes these protests were motivated by concern for the environment has never been to a reservation. What an absolute joke.
  • Liberty88 on October 21 2016 said:
    Ohbummer: Hey now - we just can't let a good crisis go to waste....

    I haven't finished wrecking the country that has given me this opportunity as a Kenyan native.

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