Fate of Dakota Access Pipeline at Stake at Friday Court Hearing

NEW YORK (Reuters) — The fate of the Dakota Access pipeline could be decided at a U.S. court hearing Friday, where federal regulators could set in motion a months-long shutdown of the line while the Biden Administration completes an environmental review.

The market has been increasingly worried about a possible shutdown as the White House aims to reduce the nation’s reliance on fossil fuels and address concerns of minority communities harmed by carbon emissions. Biden’s administration has restricted oil-and-gas leasing on federal lands and canceled permits for the proposed Canada-to-U.S. Keystone XL line and a U.S. Virgin Islands refinery expansion.

Energy Transfer’s Dakota Access Pipeline (DAPL) ships up to 570,000 barrels of North Dakota’s crude production to the U.S. Midwest and Gulf Coast. It has been in danger of shutting down since a D.C. court threw out a key permit last summer that allowed it to operate under a water source used by Native American tribes.

The U.S. Army Corps of Engineers, which is in charge of issuing permits for pipelines to travel under waterways, is expected to detail plans for DAPL at the hearing before the U.S. District Court for the District of Columbia.

That court canceled the line’s permit in July and ordered it to undergo a more thorough environmental review. The Corps has allowed DAPL to operate since as it assessed its options and brought the Biden administration up to speed.

“It is more likely than not that the pipeline gets shut down, at least temporarily,” said Glenn Schwartz, analyst at energy consultancy Rapidan Energy Group, which put the odds at a temporary shutdown at 70%.

The line has been in operation since 2017, when incoming President Donald Trump fast-tracked the permitting process and allowed the line to enter service despite opposition from environmental groups and Native American tribes. Trump lost his bid for re-election in November to Biden.

Environmental groups and Native American tribes say the pipeline threatens a drinking water supply and should not continue to run, and they have ramped up pressure on the White House to shut the line.

Since its permit to cross under Lake Oahe was thrown out, DAPL has been legally trespassing on federal land, and the Army Corps must now decide if the line should continue running. A district court could order the line shut if the Army Corps chooses not to pursue a closure.

If the line were to be shut, oil shippers out of the Bakken region in North Dakota and eastern Montana would have to rely on existing smaller pipelines and shipping by rail.

“U.S. crude markets would be shaken up by the shutdown of the primary link from the Bakken to Midwest and Gulf Coast markets,” wrote analysts at BTU Analytics.

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