The Dakota Access Pipeline is currently mired in a legal battle that has no definitive end in sight. Earlier this month, the extremely divisive pipeline that has been the subject of widespread protests and sociopolitical conflict from its inception, was ordered by a district court to shut down operations and dry out by August 5.
This ruling immediately sparked huge waves of both celebration and backlash, as well as a near-immediate appeal. As long as the matter remains tied up in litigation, however, a U.S. appeals court has ruled that the Dakota Access Pipeline can continue running. Despite this temporary permission to continue business as usual, this litigious quagmire is causing local oil companies to ask a lot of questions and reconsider their business model as “the oil industry is grappling with uncertainty as it ponders how to keep shipping Bakken crude to market,” as described by North Dakota’s Bismarck Tribune.
As the oil industry waits with bated breath to see what will be the outcome of the Dakota Access Pipeline appeal, oil transportation has become a hot topic of conversation. If this pipeline can be shut down, why not others? What happens then? “Many observers anticipate a shutdown could result in a resurgence of trains carrying Bakken crude,” reports the Bismarck Tribune, “a prospect that has rail safety advocates and farmers concerned.” If the Dakota Access Pipeline is shut down, experts project that the shuttering of this major oil artery “would eventually prompt oil companies to ship another 200,000 barrels per day of Bakken crude via rail, the equivalent of about three more oil trains leaving the region each day.”
In the past, the idea of transporting oil and gas by rail has been criticized by environmentalists and other concerned parties, even earning the somewhat alarmist moniker of “bomb trains.” These concerns are far from unfounded, however. “You don’t need to look too far,” however, “to find plenty of cautionary tales from previous experiments in sending oil and gas by rail, from spills, explosions, and accidents to a runaway oil train in Quebec that killed nearly 50 people when it derailed in a small town in 2013,” Oilprice reported last year. Less extreme, but still a problem, oil transport hitting the road causes major traffic jams for the ag sector. “When oil train shipments soared in 2013 and 2014, they caused headaches for farmers and grain elevators seeking to ship crops via trains across the same tracks,” reported the Tribune.
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While many of the drawbacks to transporting oil and gas by train are legitimate, the practice has plenty of benefits as well. Proponents argue that it’s necessary to close pipeline gaps and deliver enough fuel to the thirsty Northeast, where current pipelines infrastructure is insufficient to meet demand. Furthermore, this development could help to offset the steep decline of coal shipments by rail.
Both sides of this argument are likely to see a resurgence of headlines in coming months as the Bakken debacle gets settled. “Whether more oil trains hit the tracks depends on the outcome of the latest legal maneuvering over the pipeline, writes the Bismarck Tribune. “At the moment, the order to shut down the line is on an “administrative” hold as the case moves to a panel of judges on a federal appeals court.”
If more oil were to be shipped by sea, however, there would likely be widespread celebration in the oil tanker industry, which has been suffering thanks to COVID-19. “From an absolute perspective, global oil transportation is still down substantially,” Ben Nolan, an analyst at Stifel Nicolaus, told Investing.com. “Near term, an increase in OPEC production should drive rates higher, but it won’t take too long for that to be offset by floating storage and cargo movements that are way down.”
If more pipelines go the way of the Dakota Access, we will start to see a lot of contention over whether that offset oil hits the road or the waves, and what that means for competing industries, other sectors that use the same land, and some very real environmental concerns.
By Haley Zaremba for Oilprice.com
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