On Monday, a district court in the United States ruled that the Dakota Access pipeline to shut down pending an environmental review that will take it offline until late 2021.
Energy Transfer Partners, the pipeline’s owner, failed to obtain a key permit called an Environmental Impact Statement (EIS) from the US Army Corps of Engineers, ruled a DC district court judge, faulting the Corps for its determination that an EIS wasn’t necessary.
The pipeline connects the rich Bakken shale fields in North Dakota, continues through South Dakota and Iowa to an oil terminal near Patoka, Illinois. Native American tribes led by the Standing Rock Sioux and environmental groups protested the pipeline’s construction because a portion of the pipeline runs beneath South Dakota’s Lake Oahe. The reservoir is a source of drinking water for the Standing Rock Sioux Tribe.
Triple Pipeline Whammy
The Dakota Access project wasn’t the only pipeline to suffer a setback. On Sunday, the utility companies Dominion and Duke Energy cancelled their proposed US$8 billion Atlantic Coast Pipeline, which would have ferried natural gas from West Virginia to North Carolina, because of what they said was a battery of legal obstacles that still loomed in spite of a major Supreme Court win only three weeks ago.
Then on Monday evening, the US Supreme Court rejected a request by the Trump administration to allow parts of the troubled Keystone XL oil pipeline to begin construction after being blocked earlier by a federal judge. This latest snag means the pipeline will resume construction in 2021 at the earliest.
The trio of developments are only the latest in a series of setbacks for pipeline builders. The difficulty of building fossil fuel infrastructure is rising as well-funded environmental groups increasingly take aim at the complicated environmental permits that pipelines typically require.
Furthermore, the delays to 2021 mean that a potential Joe Biden presidency may result in the indefinite postponement or cancellation of such energy infrastructure. At that point, the environmental hurdles may become too high for energy companies to clear – heading off any hopes for revived shale production after the COVID-19 blow to oil prices.
Without the pipeline, a large portion of Bakken production would need to return to the practice of moving large volumes by rail. This is much more costly, further increasing pressure on producers.
Protests against new energy projects in the US are also becoming increasingly sophisticated and effective. Environmental and community activism, which has already stalled Canadian energy development, is also taking root in the United States.
Oil demand could further slide if a ‘second wave’ of COVID-19 re-emerges in the key energy markets of the US, China, and Southeast Asia. Demand has already fallen from an average of 100 billion barrels per day to around 89 billion bpd.
These scenarios spell nothing but bad news for US shale producers, who are already deep in debt and increasingly sour to investors. Shale pioneer Chesapeake Energy filed for bankruptcy protection in late June – becoming the highest profile casualty of the COVID-19 induced crisis.