Posted on April 5th, 2021
Posted in Uncategorized
On April 9th of this year, there will be a federal court hearing on the Dakota Access Pipeline (DAPL) to determine whether its continued operation conforms with environmental policy and regulation. This follows a federal appeals court ruling in January that found the DAPL to be operating illegally without the necessary legal permitting. The April 9th hearing could result in the closing, at least temporarily, of the 570,000 bpd pipeline in the Bakken.
The closure of the DAPL, which has expansion plans to eventually increase capacity to 1.1 MMbpd, would have a substantial impact on immediate operations and production costs as well as setting a potential legal precedent for the closure of Oil & Gas and other Energy infrastructure. The closure of the Keystone XL Pipeline and litigious action against other pipeline infrastructure in the region has already forced a dramatic increase in costlier rail transport of crude products. Closure of the DAPL would further exacerbate this situation.
Plaintiffs in the hearing assert the approval for the DAPL was issued in 2017 without due diligence and appropriate permitting processes and are seeking, at a minimum, a shutdown of the pipeline while the United States Army Corps of Engineers can conduct and provide a court-ordered Environmental Impact Statement. Such a review could easily extend well into 2022. While production in the Bakken remains well below pre-Covid production levels, pipeline capacity in Canada and the northern United States remains at a premium. Further restrictions to transport capacity would likely have significant immediate and long-term effects on operator P&Ls, local and regional economies, field development, and policy making.
On January 27th, President Biden issued an Executive Order on Tackling the Climate Crisis at Home and Abroad. That Order and subsequent actions have certainly appeared to affirm that this current Administration will not tolerate energy infrastructure with poor or insufficient environmental credentials. The cascading impacts of making large, sweeping changes – especially without appropriate alternatives in place – will be momentous. We must as an industry and as a society be prepared to mitigate these impacts now while championing effective and economical environmental stewardship for all of our future energy projects.