As environmentalists, Native Americans and those opposed to the Dakota Access pipeline (DAPL) celebrated the White House’s denial of a construction permit to Energy Transfer Partners (ETP) this weekend, North Dakota’s oil and gas industry will continue efforts to build a cheaper way to transport the state’s energy resources to the rest of the country.
Jo-Ellen Darcy, the civil works assistant secretary for the U.S. Army Corps of Engineers, released a statement on the agency’s decision on Sunday, stating “there’s more work to do” regarding research on alternative routes for the contested pipeline.
Though it seems that the rejection advantages the Standing Rock Sioux tribe and its allies, the legal reality is that ETP will likely receive the approval it needs once Republican President-elect Donald Trump takes office in January.
“This is nothing new from this administration, since over the last four months, the administration has demonstrated by its action and inaction that it intended to delay a decision in this matter until President Obama is out of office,” the consortium of companies leading the project said in the statement to Bloomberg.
Reporting from The Wall Street Journal shows that Trump himself has between $500,000 to $1 million invested in ETP and the company’s CEO, Kelcy Warren, donated $100,000 to Trump’s presidential campaign – which gives weight to arguments recently launched by 2008 GOP Vice Presidential Nominee Sarah Palin claiming that the new president’s business policies may lead to “crony capitalism.”
ETP is set to benefit from its proximity to the Trump apparatus as soon as he is sworn in next month. And that’s literally what ETP has said in the near past.
“I’m pretty confident that worst case, January 20th, [Inauguration Day], we get our easement and proceed,” the company’s CEO, who has also insisted that the line will not be rerouted no matter what, told the WSJ in November.
But hotly contested issues aside, building DAPL will nearly halve per-barrel transportation costs from North Dakota to refineries in Houston, Texas, and St. James, Louisiana. From the current $9-$11 range, costs will fall to $5-$5.50 – a sizeable cut in today’s $50-barrel market.
The state’s industry has seen a 20 percent drop in production over the past two years, twice the size of the effect of the oil price crisis in Texas and Oklahoma. The $3.8 billion pipeline, which would cut through ancestral Native American lands and risk local water supplies, has been designed to reduce the financial affects of rail-based oil transport and make North Dakota a viable production center once again. Related: Will Solar Stocks See A DotCom Style Bubble?
During a press conference last month, Lynn Helms of North Dakota’s Department of Mineral Resources said that the real benefit of the line is that it gives “a known value to the transport costs, as opposed to costs that can be all over the map and change very quickly.”
This is why, even though oil companies with signed contracts to use the DAPL will have the option to withdraw from their commitments if it is not built by January 1st, it is unlikely that a swift abandonment of the project by ETP’s costumers will ensue.
Trump’s support means the pipeline is by no means doomed, and the economics of U.S. energy transport practically mandates DAPL’s construction.
For North Dakota’s oil barons, it’s a waiting game, and for them, it’s better late than never.
By Zainab Calcuttawala for Oilprice.com
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