Energy Business

Obama Administration Halts Work on Dakota Access Pipeline

In a joint announcement released Friday, the U.S. Department of Justice, the Department of the Interior and the Department of the Army have stopped further work on the Dakota Access Pipeline (DAPL). The announcement followed a federal district court ruling that would have allowed work to continue.

The court ruling was the result of a suit brought by the Standing Rock Sioux Tribe against the Army Corps of Engineers for failing to consult with the tribe on the pipeline’s path as required by the National Historic Preservation Act (NHPA) and claiming that pipeline construction would cause irreparable harm. Specifically, the pipeline route includes a crossing underneath the Missouri River and would pass through areas of great cultural significance, including sacred sites and burial grounds that the NHPA was enacted to protect.

The majority owners of the DAPL are Energy Transfer Partners L.P. (NYSE: ETP) and Sunoco Logistics Partners L.P. (NYSE: SXL). The two companies formed a joint venture called Bakken Holdings that owned a 75% stake in Dakota Access LLC and Energy Transfer Crude Oil Co. (ETCO), the two firms that are developing and will own and operate the project, which consists of about 1,172 miles of new 30-inch crude oil pipeline to carry more than 470,000 barrels a day of crude from North Dakota through South Dakota and Iowa to Patoka, Illinois, and more than 700 miles of converted pipeline to move the crude from Patoka to Nederland, Texas.

In early August, Bakken Holdings sold 49% of is 75% stake in the project for $2 billion to a joint venture called MarEn Bakken that had been formed by Marathon Petroleum Corp. (NYSE: MPC) and Enbridge Energy Partners L.P. (NYSE: EEP). When the transaction is completed, Bakken Holdings will own 38.25% of the project, MarEn will own 36.75%, and wholly owned subsidiaries of Phillips 66 (NYSE: PSX) will maintain their existing 25% ownership in the project. Sunoco Logistics will be the operator of the pipeline.

The joint statement by the federal government issued Friday was a clear repudiation of the court’s decision:

The Army will not authorize constructing the Dakota Access pipeline on Corps land bordering or under Lake Oahe until it can determine whether it will need to reconsider any of its previous decisions regarding the Lake Oahe site under the National Environmental Policy Act (NEPA) or other federal laws. Therefore, construction of the pipeline on Army Corps land bordering or under Lake Oahe will not go forward at this time. The Army will move expeditiously to make this determination, as everyone involved — including the pipeline company and its workers — deserves a clear and timely resolution. In the interim, we request that the pipeline company voluntarily pause all construction activity within 20 miles east or west of Lake Oahe.

The worst case scenario for the pipeline builders is that the DAPL project will be completely rejected, as was the Keystone XL project. More likely is a compromise, at least over the issues raised by the Standing Rock Sioux, that would reroute the pipeline.

Here are a map of the pipeline route, the joint statement from the federal agencies and the district court ruling.

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