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The violent escalation of the standoff over construction of the Dakota Access Pipeline (DAPL) transcends stated local issues of water quality and tribal vs. private land rights, to become a symptom of significant challenges facing the U.S. energy industry going forward, analysts told Hart Energy.
Law enforcement officers arrested 141 protesters during an operation to clear an encampment at a construction site in Morton County, N.D., on Oct. 27. The protesters—members of the Standing Rock Sioux Tribe, environmental activists and other sympathizers—claim that the routing of the petroleum liquids pipeline under the Missouri River would put the tribe’s water supply at risk. The tribe also contends that private land in the area purchased by Energy Transfer Partners LP (NYSE: ETP) belongs to the tribe according to terms of the 1851 Fort Laramie Treaty.
“While the public face of these protests against the Dakota Access Pipeline is Native American tribe members [or proxy interests], the underlying grassroots coordination is through environmental advocates supportive of a ‘keep-it-in-the-ground’ policy,” veteran Washington-based energy analyst John Kneiss told Hart Energy. He believes those environmental interests were emboldened by the Obama administration’s denial of a trans-boundary permit by TransCanada Corp. (NYSE: TRP) to build the Keystone XL Pipeline.
“The Obama Administration clearly and abruptly altered the decision-making process when it essentially ordered the [U.S. Army] Corps of Engineers to pull back on the easement already issued,” he said. “Fundamentally, this is already a public policy conflict that drives the current administration’s programs on Clean Power Plan, renewables, etc., and will significantly influence our energy markets going forward regardless of which administration occupies the White House.”
The government’s decision to issue a permit and then ask Energy Transfer to voluntarily halt construction is disturbing as well to Greg Haas, director of integrated energy research at Stratas Advisors.
“Government regulators have a responsibility to adhere to the legal processes and regulations that are in place that already allow for significant input from all stakeholders around a given infrastructure project,” he said, “rather than arbitrarily and capriciously changing course midstream after permits are duly granted and privately driven investments are committed and construction has begun.”
The 30-inch, $3.7 billion pipeline, designed to transport 470,000 barrels per day of Bakken oil 1,172 miles to Patoka, Ill., has been the center of a national controversy for months. The line, which is 60% complete, was rerouted so that its crossing under the river was moved from near Bismarck, N.D., to land near the reservation of the Standing Rock Sioux Tribe.
The tribe claimed that it had no input into the U.S. Corps of Engineers’ process of approving construction permits and sued under Section 106 of the National Historic Preservation Act. A federal appeals court denied the motion and the Corps has contended that it adhered to provisions of the act, including meeting more than 250 times with stakeholders.
Unexpected federal policy changes further complicate and prolong the already difficult process of putting together large infrastructure projects, the analysts said.
“Unfortunately, these protests—triggered and helped by the undermining federal regulatory decision-making that changes the rules after the fact—create business uncertainty and challenges in planning, financing, and then construction,” Kneiss said.
Ironically, the environmentalist approach in this case undermines a project with the best chance of both bolstering economic development and protecting the environment.
“This pipeline is foremost among those needed in the U.S. since it would carry petroleum liquids in a far safer manner than the alternative—nonstop surface movements of rail tanker cars through cities, over water, through road crossings and across the countryside,” Haas said.
The struggle over DAPL should be seen as instructive as the industry devises strategy for future projects.
“Pipeline companies will need to increasingly operate with ever greater reliability and plan routes and expansions that minimize external impacts and interferences with alternate land or other resource owners and uses,” Haas said.
But even intricate planning cannot completely fend off a movement that is absolutely opposed to the use of fossil fuels and the possibility of its growing influence in Washington.
“Presuming that Secretary Clinton gets elected, I believe that her administration will be pushed by the [Bernie] Sanders-[Elizabeth] Warren element to put up hurdles and quite high bars of expanded environmental assessments and stricter criteria before infrastructure permits are granted,” Kneiss said. While the Democratic nominee is considered more moderate and supportive of President Obama’s “all-of-the-above” strategy, the party platform contains limited openness to any energy supply beyond renewables.
For the moment, though, the conflict at the construction site does not appear to be over. The leader of the Standing Rock Sioux Tribe promised on Oct. 28 that “we won’t step down from this fight.”
Dave Archambault II, chairman of the tribe, insisted in a statement that “this is about our water, our rights and our dignity as human beings.”
With strong support from a national environmentalist movement, the grievances of regional players will likely continue to challenge the oil and gas industry.
“The cultural environment to place infrastructure, and the NIMBY [not in my backyard] attitude, in my view,” said Kneiss, “will make such projects more difficult to accomplish.”
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