DAPL shutdown would 'shock' economy: Energy Transfer

A shutdown of Energy Transfer's 570,000 b/d Dakota Access crude pipeline (DAPL) will cause an "immediate economic shock" and severe rail congestion, the company said today.

North Dakota's oil producers would lose $378mn-$676mn in revenue each month from May-December 2021 from shut in oil production, Energy Transfer said in a filing to the US District Court for the District of Colombia. The loss for the entire year would be $3bn-5.4bn.

The state of North Dakota would lose $770mn-$1.4bn in tax revenue from oil production this year and $1.1bn-$2.5bn in 2022, the filing said.

DAPL faces a possible shutdown order after a federal district court threw out a key easement last year and ordered a new environmental review in a long-standing case that started before the line went into service in 2017.

US district court judge James Boasberg on 9 April gave Energy Transfer a 10-day extension to update information on the possible economic impact of a shut down. The plaintiffs in the case — the Standing Rock Sioux and other Native American tribes — have until 23 April to inform the court if they will respond. Boasberg is expected to rule on a shut down after all filings are in.

A DAPL shut down would cost the pipeline $3.44mn-$4.28mn per day, about 10pc higher than a previous estimate in November 2020, Energy Transfer said in the most recent filing.

The company also cited the economic impact a shut down would have on the MHA Nation, an affiliation of three Native American tribes who own substantial oil and gas reserves on the Fort Berthold Indian Reservation. About 80pc of the MHA Nation budget is made up of oil and gas royalties and tax revenues. The "substantial shut-ins" caused by a DAPL shut down would translate to estimated losses exceeding $160mn over a one-year period and more than $250mn in two years, the filing said.

The company also said that a DAPL shut down would cause producers to shift large amounts of crude to rail cars which would displace products such as grain that are currently transported by rail. This could cause "a catastrophic disruption" to agricultural freight movement, according to a study cited in the Energy Transfer filing.

DAPL moves Bakken crude to Patoka, Illinois, where it connects to another Energy Transfer pipeline to Nederland, Texas. It is the largest crude pipeline out of the Bakken shale.

Shutdown could boost Gulf coast flows

A DAPL shutdown could funnel more railed crude toward the US Gulf coast and Cushing, Oklahoma, North Dakota Pipeline Authority director Justin Kringstad said last week. The majority of railed Bakken crude has recently moved to the West coast (70pc) and East coast (29pc), with very little railed supply moving to the Gulf coast or Cushing, Kringstad said.

The start of DAPL in 2017 de-emphasized railed crude in the Bakken but about 10 railed crude terminals have remained active and stand to gain business in the event of a pipeline shutdown. US railroad BNSF serves the majority of those terminals, and Canadian Pacific (CP) reaches a handful of them.

Two of the biggest Bakken rail terminals would stand to pick up substantial volumes.

Hess, the largest Bakken producer, has an integrated system of pipelines, terminals and rail assets that gives it multiple options. Its facilities can access DAPL and Enbridge pipelines, as well as the Tioga rail terminal. Tioga connects directly to BNSF's tracks, and Hess' midstream affiliate owns 550 newly constructed DOT-117 rail-cars.

Crestwood, which operates the Colt terminal in Epping, North Dakota, is also a prominent Bakken crude-by-rail player. Colt, also located on the BNSF rail line, has 1.2mn bl of storage capacity and can load 160,000 b/d of crude.

The underlying DAPL lawsuit contends that the US Army Corps of Engineer's original environmental review failed to adequately study certain issues related to potential oil spills from the pipeline.

The Army Corps, acting on behalf of President Joe Biden's administration, told Boasberg earlier this month that it would not immediately act to shut DAPL despite the court ruling that vacated the easement under Lake Oahe in North Dakota. But the agency kept the option open.

The state of North Dakota yesterday asked the court to allow it to intervene as a defendant in the DAPL case saying that its interests are no longer adequately represented by the Army Corps.

By Eunice Bridges and Chris Baltimore