[Editor’s note: This story was updated at 12:50 p.m. CT Jan. 26.]
A U.S. appeals court dealt a blow to the Dakota Access crude oil pipeline on Jan. 26, upholding a lower court's decision to throw out a key federal permit for the line and order a lengthy environmental review that will determine if it can keep operating.
The decision is the latest in a series of legal and regulatory setbacks for the U.S. energy industry. In the last week, regulators denied permits to notable natural gas pipelines, while the new Biden administration effectively killed the Keystone XL pipeline project and is soon expected to limit oil and gas drilling on federal lands.
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The Jan. 26 court ruling raises the chances that Energy Transfer's 557,000 bbl/d Dakota Access Pipeline (DAPL) will be shut pending environmental review.
Supporters of DAPL said closing the primary artery for delivering crude from North Dakota's Bakken field, could hurt output in the shale region, which produces more than 1 million bbl/d of oil.
The U.S. Court of Appeals for the District of Columbia ruling means the U.S. Army Corps of Engineers will have to conduct another environmental review that could take months. The line can remain open, however, as the appeals court disagreed with a lower court ruling that ordered the line shut.
Energy Transfer, which operates the line, was not immediately available for comment. The company's shares were up 2.7% to $6.75 in afternoon trading.
In July, the district court ruled that the U.S. Army Corps of Engineers violated federal environmental law when it permitted Energy Transfer to construct and operate a portion of DAPL that crosses Lake Oahe, a vital drinking water source for native tribes that brought the suit.
Attorneys for the Standing Rock Sioux tribe, which has long opposed DAPL, say the Biden administration could shut the line now. The Standing Rock tribe has filed for an injunction to shut the pipeline while the environmental review is underway.
"We look forward to showing the U.S. Army Corps of Engineers why this pipeline is too dangerous to operate," said Standing Rock Sioux Tribe Chairman Mike Faith.
Shippers who use the line told Reuters on Jan. 26 that because the line can remain open, it is, for now, a win for Energy Transfer.
Because the appeals court upheld the rulings, the Biden administration could force the line to close, said Height Capital Markets analyst Josh Price. However, he said the administration is more likely to allow the pipeline to keep operating while the review is conducted.
U.S. President Joe Biden has vowed to boost renewable energy development in the U.S. and reduce carbon emissions. He canceled Keystone XL oil pipeline's permit last week on his first day in office, killing the long-gestating project and prompting rising calls from environmentalists to move against other large pipeline projects.
"Especially after the Keystone XL decision, the pressure is increasing for the Biden administration to take action here," said Jan Hasselman, attorney at Earthjustice, who represents the Standing Rock Sioux.
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