US court orders shutdown of Dakota pipeline: Update 3

  • Market: Crude oil
  • 07/06/20

Adds details on Energy Transfer motion to stay

A federal judge today ordered Energy Transfer to shut down the 570,000 b/d Dakota Access crude pipeline (DAPL) and drain oil from the line within 30 days, as a result of a long-standing legal battle over its environmental permitting.

The shutdown will cut off a major conduit of crude from the Bakken shale basin in North Dakota to the US midcontinent and the Gulf coast. It is a major defeat for the oil industry and the administration of president Donald Trump.

US district court judge James Boasberg also threw out a federal easement allowing the pipeline to cross under the Missouri river, citing the "seriousness" of errors underlying the project's permit.

A new environmental review is expected to take about 13 months, according to the court.

The ruling is a win for the Standing Rock Sioux tribe and other Native American groups who contend in the underlying lawsuit that the Army Corps of Engineers failed to adequately study certain issues related to potential oil spills from the pipeline, which went into service in June 2017.

Energy Transfer filed an emergency motion to provisionally stay the court's decision and set an expedited briefing schedule for a motion to stay pending appeal.

A temporary stay is warranted because the ruling requires the shutdown of a major interstate pipeline requiring a number of expensive steps before the court is likely to have a ruling on the stay motion, Energy Transfer said.

In particular, a number of time-consuming and expensive steps are required to shut the pipeline down safely and empty it of oil in a process that "would require well more than 30 days," the company said.

Energy Transfer said earlier today thatBoasberg's ruling is not supported by the law or the facts of the case and that the judge exceeded his authority in ordering the shutdown.

If the line is shut, billions of dollars in tax and royalty revenue will be lost by state, local and tribal governments in North Dakota, South Dakota, Iowa and Illinois, the company said. "Farmers will suffer as crude transportation will move to rail, displacing corn, wheat and soy crops that would normally be moved to market" by rail, Energy Transfer said.

Opponents of the pipeline said the ruling was historic. "It took four long years, but today justice has been served at Standing Rock," said attorney Jan Hasselman who represents the tribe as part of the Earthjustice environmental law group. "If the events of 2020 have taught us anything, it is that health and justice must be prioritized early on in any decision-making process if we want to avoid a crisis later on" he said.

Boasberg on 25 March ordered the Army Corps of Engineers to conduct a new environmental review for the contested DAPL easement and said it would consider a request to cease operations on the line during the study.

DAPL moves Bakken crude to Patoka, Illinois, where it connects to another Energy Transfer pipeline to Nederland, Texas.

Industry groups told the district court in recent filings that a sudden shutdown of DAPL would be detrimental to the North Dakota economy and would lead to widescale shut-ins of the state's oil production, in part because there is not enough rail takeaway capacity to replace the pipeline flows. They also said that the court should consider the impacts of a DAPL shutdown under normal conditions, because any shutdown of the pipeline is likely to outlast the temporary market dislocations caused by the Covid-19 pandemic and the resulting recession.

US energy secretary Dan Brouillette said it is disappointing that "an energy infrastructure project that provides thousands of jobs and millions of dollars in economic revenue has been shut down by the well-funded environmental lobby" using the US court system to further its agenda.

Boasberg said in the ruling today that "at least some immediate harm to the North Dakota oil industry should be expected from a DAPL shutdown, even if its effects are tempered by a decreased demand for oil." But the court also said those effects "do not tip the scales decisively in favor" of keeping the line open during the new environmental review.

About three dozen US lawmakers asked the court to shut down the line while the new environmental review is pending. The lawmakers — all Democratic members of the House or Senate — said that shutting the line will ensure that federal agencies abide by requirements under the National Environmental Policy Act (NEPA).

The initial startup of DAPL was delayed for months in 2016 and 2017 amid large protests led by the Standing Rock tribe and regulatory delays. Since its startup in June 2017, the line has been expanded amid record-high production in North Dakota and growing demand to export US crude.

Energy Transfer is planning to nearly double capacity on the line to 1.1mn b/d by adding pumping stations.

The judge's ruling on DAPL comes just a day after another large US pipeline project was cancelled. The developers of the $8bn Atlantic Coast natural gas pipeline said they are pulling out of the project after years of permitting delays drove up construction costs and threatened its economic viability.


Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
02/23/24

Panama urges fleet to avoid Red Sea, keep AIS on

Panama urges fleet to avoid Red Sea, keep AIS on

New York, 23 February (Argus) — The Panama Maritime Authority said today it "strongly recommends" all Panama-flagged vessels avoid transiting the Red Sea because of the increasing threat of Houthi attacks on commercial vessels, while warning vessels against turning off their automatic identification system (AIS). Some ship operators have chosen to disable their vessel's AIS to avoid detection by the Houthis with varying levels of success when transiting the region. That puts these vessels out of compliance with "international requirements related to position reporting," the authority said in a notice. More than 120 commercial and private vessels flagged by Panama were transiting the Suez Canal, the Red Sea, and the Gulf of Aden on Friday, according to vessel tracking data reliant on AIS. "All vessels hoisting the Panama flag before, during and after transiting the Red Sea, Gulf of Aden and Persian and their approaches must keep the AIS and long-range identification (LRIT) on except in those cases in which the captain considers that the safety of the vessel could be compromised or when a safety incident is imminent," the notice said. "The Panama Maritime Authority may sanction violations of such provisions in accordance with national legislation, if they do not formally report through LRIT and AIS to our administration at the appropriate time." The authority said the Bahamas-flagged vessel Galaxy Trader had operated without its AIS for 24 hours, traveling 250 nautical miles through the region, before being attacked by Houthis anyway. For vessels continuing to transit through the region, recommendations by the authority include traveling by night to avoid detection and installing searchlights to scan for the small vessels that likely act as spotters, the appearance of which have preceded Houthi missile attacks . But traveling by night comes with another risk. "At night, small and slow boats without a wake are difficult to detect on radar," the authority warned. "Don't stop if threatened and present a challenging target through proactive maneuvers." The Panamanian flag is flown by the plurality of flagged ships in operation at 17pc of the global fleet, represented by over 8,000 vessels, according to the state-owned Panama Ship Registry. By Ross Griffith Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Read More
News

Fire breaks out at S-Oil's Onsan plant in South Korea


02/23/24
News
02/23/24

Fire breaks out at S-Oil's Onsan plant in South Korea

Singapore, 23 February (Argus) — A fire broke out at South Korean private-sector refiner S-Oil's Onsan plant on 23 February, affecting operations at a crude distillation unit (CDU). The fire broke out at a pump linking refinery units. The 580,000 b/d Onsan plant's 250,000 b/d No.3 CDU was impacted, sources close to the refiner said. No casualties have been reported thus far. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Canal disruptions spur fast steaming: UN


02/22/24
News
02/22/24

Canal disruptions spur fast steaming: UN

New York, 22 February (Argus) — Ship operators are increasingly speeding up their vessels to offset the lengthier voyages around the Cape of Good Hope necessary to avoid the conflict-afflicted Suez Canal and drought-plagued Panama Canal, according to a UN Conference on Trade and Development (UNCTAD) report published today. "The disruption in the Red Sea and Suez Canal, combined with factors linked to the Panama Canal and the Black Sea and leading to rerouting vessels through longer routes are causing vessel sailing speeds to increase," the UNCTAD said. "This is a means for ship operators to ensure schedule integrity and manage the fleet capacity." The jump in steaming speeds is a departure from record slow steaming speeds hit last year among the dry bulker segment as shipowners attempted to reduce emissions per the International Maritime Organization's (IMO) new environmental regulations, which kicked off in 2023. "An increase from 14 to 16 knots would increase ship (fuel oil) consumption per mile by 31pc," the UNCTAD said. "These trends could erode the environmental gains that had been achieved through slow steaming." The Argus -assessed carbon cost of freight (CCF), which ship operators have to pay to comply with the EU ETS, of a 65,000 dwt long range (LR1) refined products tanker traveling from Ras Tanura in the Middle East to Rotterdam was at 46¢/t on Wednesday, assuming a Suez Canal transit under nominal conditions, for a lumpsum of $30,223. The same fee to shipowners could hit as high as 96¢/t, or $62,129 lumpsum, assuming a 31pc increase in consumption from a two-knot increase in speed alongside the additional two weeks of travel time to avoid the Suez Canal around the Cape of Good Hope. Traders shift to rail Some traders looking to move commodities between the Atlantic and Pacific basins are adjusting their focus away from seaborne routing altogether, with rail traffic jumping in the US since the start of the year because of the rising danger near the Suez Canal and the ongoing drought restrictions at the Panama Canal, according to the UNCTAD. "In the United States, demand for rail transport services has surged as a result in recent weeks, as shippers no longer have the option of going through the Suez Canal as an alternative to the Panama Canal," the UNCTAD said. "The land bridge, which connects the ports of Los Angeles and Long Beach in the United States by rail with the wider North American hinterland, is the other main competitor for the Panama Canal." The move mirrors major container shipping giant Maersk, long a preferred client of the Panama Canal because of the large amount of traffic it pushed through the waterway, choosing earlier this year to halt many Panama Canal transits in favor of discharging two separate vessels on either side of Panama and swapping their cargoes by rail instead. West coast South America countries like Chile, Peru and Ecuador funnel 22pc, 22pc and 26pc of their total foreign trade volumes through the Panama Canal, according to the UNCTAD, and buyers in these countries of refined oil products like diesel and gasoline sourced from the US Gulf coast will need to continue to vie for booking slots at the Panama Canal in the absence of a rail connection. Those without slots will need to win auctions, which jumped above $500,000 lumpsum in early February per Argus assessments for the medium range (MR) tankers utilizing the Panamax locks, to secure passage. By Ross Griffith Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Teekay sees volatile 2024 in tight tanker market


02/22/24
News
02/22/24

Teekay sees volatile 2024 in tight tanker market

Houston, 22 February (Argus) — Persistent volatility and increased long-haul trade across the globe will support crude tanker rates this year amid a stretched and aging global fleet, midsize tanker specialist Teekay said today. Increased long-haul crude trade flows from the Americas to east Asia, as well as continued shipments from Russia to India and China, likely will increase tonne-mile demand in 2024, Teekay chief executive Kevin Mackay said Thursday on an earnings call. With oil demand growth concentrated in Asia-Pacific and oil production growth led by the US, Brazil and Guyana, voyages between the two regions are expected to increase, he said. Route diversions due to Houthi attacks in the Red Sea are also expected to increase tanker demand, especially for Suezmaxes, Mackay added. A Suezmax voyage from Iraq to the Mediterranean is about 4,000 nautical miles, or 13 days, via the Suez Canal, compared with about 12,000 nautical miles, or 40 days, via the Cape of Good Hope, he said. The 590,000 b/d Trans Mountain Expansion (TMX) oil pipeline project, expected to come online in the second quarter of 2024, will create additional Aframax demand in Vancouver, British Columbia, Mackay said, but it is uncertain where the increased cargoes will land. "We'll have to wait and see how the oil trading environment picks up on that oil and where they can probably make the best margins," Mackay said. "The only sure thing is that you can only load an Aframax out of Vancouver." Yearly profits double Teekay reported a profit of $111.7mn in the fourth quarter, down from $146.4mn in the same period in 2023 after rates fell year on year and the company had more vessels dry docked. Still, full-year profit more than doubled to $513mn, up from $229mn in 2022. Teekay operates a fleet 42 tankers — 25 Suezmax tankers and 17 Aframax or Long Range 2 tankers. By Tray Swanson Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Indonesia’s PIS issues spot Suezmax freight tender


02/22/24
News
02/22/24

Indonesia’s PIS issues spot Suezmax freight tender

Singapore, 22 February (Argus) — Indonesia's Pertamina International Shipping (PIS) has issued a spot Suezmax vessel freight tender to move 1mn bl of crude oil for late-March loading. PIS — a wholly-owned subsidiary of Indonesian state-owned refiner Pertamina — is seeking a vessel loading from Girassol, Angola to two discharge ports in Indonesia's Balongan and Balikpapan, with 21-22 March loading dates. The tender will close at 6pm Singapore time (10am GMT) on 22 February with validity until 7.15pm. The shipment can have a maximum unavoidable transportation loss of up to 0.07pc, according to the tender. Suezmax shipment rates from west Africa towards India have fallen from this year's high. Argus- assessed lumpsum rates for 130,000t shipments from the west Africa region to the east coast of India fell to $4.5mn on 21 February, from $5.7mn on 10 January. Suezmaxes especially are choosing to stay in the Mediterranean and northwest Europe after discharging in Europe instead of going to west Africa or the US Gulf, where high vessel supply and limited activity continue to weigh on rates. By Sean Zhuang Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.