Appeals Court Deals Another Blow to Dakota Access Oil Pipeline

(Reuters) — A U.S. appeals court dealt a blow to the Dakota Access crude oil pipeline on Tuesday, upholding a lower court's decision to throw out a key federal permit for the line and order it to undergo a lengthy environmental review.

The decision by the U.S. Court of Appeals for the District of Columbia panel raises the chances that Energy Transfer LP's 557,000 barrel-per-day Dakota Access Pipeline (DAPL) will be shut pending environmental review.

The $3.8 billion DAPL ships about 40% of the crude oil produced from the Bakken shale region in North Dakota to refiners in the Midwest and along to exporters in the U.S. Gulf.

Energy Transfer, which operates the line, was not immediately available for comment. The company's shares were up 2.7% to $6.75 in late morning trading.

In July, the district court ruled that the U.S. Army Corps of Engineers violated federal environmental law when it permitted Energy Transfer to construct and operate a portion of DAPL that crosses Lake Oahe, a vital drinking water for native tribes that brought the suit. That court, also last year, ordered the environmental review.

The appeals court, however, did not agree with the U.S. District Court for the District of Columbia that the line should be shut outright. Shippers who use the line told Reuters on Tuesday that because the line can remain open, it is, for now, a win for Energy Transfer.

However, Earthjustice attorney Jan Hasselman, who represents the Standing Rock Sioux tribe that has opposed the line for years, said "the Biden administration can shut it down with the stroke of a pen."

Because the appeals court upheld the rulings, the Biden administration could force the line to close, said Height Capital Markets analyst Josh Price. However, he said the administration is more likely to allow the pipeline to keep operating while the review is conducted.

Supporters of DAPL said closing the line could hurt production in the Bakken shale region, which produces more than 1 million bpd of oil.

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