Page 9 - NorthAmOil Week 28

NorthAmOil COMMENTARY NorthAmOil
Pipeline jitters overshadow return of curtailed output
North American producers are restoring some of the output they curtailed in recent months, while concern mounts over the fate of both future and existing pipelines
NORTH AMERICA
WHAT:
New worries have arisen over the fate of oil pipelines in the US as curtailed production is being restored.
WHY:
Recent court decisions threaten the under- construction Keystone XL and existing Dakota Access pipelines.
WHAT NEXT:
The Dakota Access case raises concerns over the risk to already operational pipelines.
PRODUCERS in both the US and Canada are bringing some of their output back online, hav- ing shut it in over recent months in response to low crude demand and prices. However, some of the emerging optimism about a more stable price environment is being dampened by new worries about the implications of recent pipeline setbacks. Other obstacles to the North American oil industry’s recovery could also prove signi - cant, but pipeline problems are once again in the spotlight, overshadowing the nascent recovery.
Problems in the pipeline
Two significant setbacks to pipeline projects came last week. On July 6, the US Supreme Court upheld a lower court’s ruling that blocked a per- mit required by the Keystone XL pipeline. e permit covers dredging work on pipelines across bodies of water, and it was revoked in April, just over two weeks a er operator TC Energy said it would proceed with construction on the long-delayed Keystone XL.
e pipeline now faces further delays, with the case being returned to the US 9th Circuit Court of Appeals for further consideration and a more in-depth environmental review poten- tially required. Court papers led by TC Energy showed that most construction on the US por- tion of the pipeline – which would run from Alberta to Nebraska – could be delayed until 2021 as a result of the Supreme Court’s decision. And some are now speculating that the project could be cancelled altogether.
Also on July 6, a judge ordered that the already operational Dakota Access pipeline be emptied and shut down while a more robust environmental review is conducted on it. (See NorthAmOil Week 27) e ruling came as a signi cant blow to an industry that had come to believe pipeline battles are won once any given project enters service. However, Dakota Access received a temporary reprieve on July 14, when a US Appeals Court granted the pipe- line an administrative stay. is means oil can keep owing through the 570,000 barrel per day (bpd) pipeline until at least July 23 while
operator Energy Transfer and the US Army Corps of Engineers appeal against the ruling, which had required Dakota Access to be emptied and shut down by early August.
The appeals court has given the Standing Rock Sioux tribe until July 20 to respond to Energy Transfer’s request to be allowed to con- tinue operating pending its appeal of the shut- down. e company then has until July 23 to le its reply.
Exports of Canadian oil go almost entirely to the US. e pipeline passes beneath Lake Oahe, and members of the Standing Rock Sioux con- tend that it could contaminate their drinking water and sacred land in the event of a spill. US District Judge James Boasberg’s ruling that Dakota Access be shut was made on the grounds that the Army Corps had failed to address con- cerns about the risk of oil spills in allowing the pipeline to pass under Lake Oahe.
While the stay comes as a welcome develop- ment for Energy Transfer, the battle is far from over and will be closely watched. It may cause some tight oil producers in North Dakota – which depend on the takeaway capacity Dakota Access provides – to rethink their plans for
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