In a move that should keep the Dakota Access Pipeline (DAPL) in operation for the time being, the U.S. Court of Appeals for the D.C. Circuit has stayed part of an order issued last month that would have required the crude oil system to empty pending further environmental review.
However, in a decision filed Wednesday, the appeals court ruled against DAPL operator Energy Transfer LP by upholding the previous court’s decision to vacate the pipeline’s easement to cross Lake Oahe. The large reservoir is behind the Oahe Dam on the Missouri River that begins in central South Dakota and continues north into North Dakota.
“At this juncture, appellants have failed to make a strong showing of likely success on their claims that the district court erred in directing” the U.S. Army Corps of Engineers to prepare an environmental impact statement (EIS) for the pipeline, the appeals court found.
Last month, District Court Judge James Boasberg of the District of Columbia turned heads in the energy industry when he ordered DAPL to temporarily halt operations and empty within 30 days while the Army Corps prepared an EIS. Boasberg’s ruling found that the Army Corps violated the National Environmental Policy Act when it granted an easement for the 570,000 b/d DAPL to cross beneath Lake Oahe.
Energy Transfer pushed back on the order, opting to hold off on emptying the 1,172-mile pipeline and filing a motion to stay pending appeal. The pipeline’s sponsors subsequently secured an administrative stay to temporarily avoid a shutdown as the case moved to the appeals court.
The appeals court’s decision Wednesday arrived as Energy Transfer was rolling out its 2Q2020 financial results. During a conference call with analysts, general counsel Tom Mason said as a result of the decision “no court order stops Dakota Access from continuing to operate the pipeline.
“…The Court of Appeals also ordered an expedited schedule for determining the merits of the appeal by the Army Corps and Dakota Access as to whether an Environmental Impact Statement will be required,” Mason said. “…We believe our legal positions are strong, and we are confident that the pipeline will continue to operate.”
Analysts, including those at ClearView Energy Partners LLC, concluded that DAPL is “not free and clear yet” in its legal battle. The order “upholds the vacatur of the authorizations by Judge Boasberg but sets aside his ruling to empty the pipeline…as failing to meet the requirements for ‘injunctive relief,’” the analysts said in a note to clients Wednesday. “That said, we would caution that a future stay of operations is not off the table this fall.”
According to Raymond James & Associates Inc. analysts, “The likelihood of DAPL remaining operational has increased significantly…By our read, it will be pushed to the Army Corps to allow the pipeline to continue operations (or not) during the review. As such, we expect DAPL will remain in operation in the interim.”
Morgan Stanley & Co. LLC analysts called it “crisis averted” for DAPL, though they identified potential threats to the pipeline’s continued operation in the not-too-distant future.
If presumptive Democratic nominee Joseph R. Biden Jr. “is elected president, we believe there is a significant probability that he would, through appointments made to the Army Corps, direct the Army Corps to conduct an extensive review of the environmental impacts relating to DAPL,” the Morgan Stanley team said. “It is possible that such a review will result in the Army Corps not issuing an EIS, in which case DAPL would be required to shut down.”
While the court proceedings continue to play out, analysts at Tudor, Pickering, Holt & Co. (TPH) said the continued operation of DAPL in the interim “screens favorably” for the sponsors, as well as for “midstream operators with significant Bakken throughput exposure.” The decision is also favorable for the Bakken production outlook “given reduced basin takeaway concerns.”
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