Report: Oil Market Downturn Might Doom The Dakota Pipeline
The Dakota Access Pipeline is at risk of becoming an abandoned project due to historically low oil prices, according to a report published Wednesday by an energy research firm.
The report, “The High-Risk Financing Behind the Dakota Access Pipeline: A Potential Stranded Asset in the Bakken Region of North Dakota,” states the controversial pipeline is likely to fall flat because of a glut of pipelines in North Dakota’s Bakken region.
“While the Dakota Access Pipeline has gained notoriety for questions it raises about tribal sovereignty and its impact on drinking water, we’ve found serious, less-publicized problems around the finances and economics of the project,” Cathy Kunkel, an IEEFA energy analyst and lead author of the report, said in a press statement announcing the findings.
The company responsible for constructing the line, Energy Transfer Partners (ETP), won’t be able to complete the DAPL at its Jan. 1 deadline, the report states, namely because a series of roadblocks placed in front of them by the courts and the Obama administration.
The Army Corps of Engineers moved to delay the $3.8 billion project Tuesday despite having reviewed more than 1,200 pages of environmental and cultural analysis over the past three years, as well as consulting with 55 American Indian tribes nearly 400 times.
The missed deadline will likely trigger investors and contractors to renegotiate the terms of the contracts they initially signed with ETP, potentially leaving the pipeline in legal limbo, according to the authors of the report, which was published by the Institute for Energy Economics and Financial Analysis.
The renegotiated contracts could be hampered still further by fledgling oil markets.
“If oil prices remain low and Bakken oil production continues to collapse, DAPL’s capacity will quickly become superfluous,” Clark Williams-Derry, co-author of the report and director of energy finance for the Sightline Institute, said in a statement.
He added: “The Bakken oil industry has already over-invested in infrastructure for moving oil, and the Dakota Access Pipeline could simply add to the glut.”
A dramatic uptick in U.S. production has contributed to a global collapse in the price of oil. The price of a barrel of oil was has plummeted from $104.95 in 2014 to $45.24 per barrel two years later. The average oil price over that two-year period is $43 per barrel.
Opponents of the DAPL have worked night and day to stymie the pipeline’s construction. They claim the line would harm Standing Rock Sioux tribe’s only source of drinking water and potentially desecrate the tribe’s sacred sites.
The tribe’s concerns were reviewed thoroughly by two separate federal courts, both of which determined the pipeline could move forward.
Ironically, the pipeline risks being defeated by low oil prices and a glut of oil infrastructure in the Bakken region, not by environmental activists.
The Army Corps of Engineers moved to delay the $3.8 billion project again despite having reviewed more than 1,200 pages of environmental and cultural analysis over the past three years, as well as consulting with 55 American Indian tribes nearly 400 times.
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