Dakota Access pipeline shutdown during review

Ellen M. Gilmer and Rachel Adams-Heard Bloomberg News (TNS)
A water protector prays as he and others defend a sacred site near Turtle Island against the Dakota Access Pipeline near the Missouri River at the Standing Rock Indian Reservation.

The Dakota Access pipeline must shut down by Aug. 5, a district court ruled Monday in a stunning defeat for the Trump administration and the oil industry.

The decision, which shuts the pipeline during a court-ordered environmental review that's expected to extend into 2021, is a momentous win for American Indian tribes that have opposed the Energy Transfer LP project for years. It comes just a day after Dominion Energy Inc. and Duke Energy Corp. scuttled another project, the Atlantic Coast natural gas pipeline, after years of legal delays.

Environmentalists have increasingly used the courts to try to block additional investment in fossil fuel infrastructure while they push for a clean energy transition. Tribes, landowners and other project opponents have also complained about local impacts from construction and potential spills on or near their land.

The sophisticated legal onslaught has led to delays and disruptions for several other pipelines, including Keystone XL. But Monday's court order, if upheld on appeal, marks the first time a major, in-service oil pipeline will be forced to shutter because of environmental concerns.

The U.S. District Court for the District of Columbia said a crucial federal permit for Dakota Access fell too far short of National Environmental Policy Act requirements to allow the pipeline to continue operating while regulators conduct a broader analysis the court ordered in a previous decision.

The ruling scraps a critical permit from the Army Corps of Engineers, and requires the pipeline to end its three-year run of delivering oil from North Dakota shale fields to an Illinois oil hub. Judge James E. Boasberg said Dakota Access must shut down the pipeline and empty it of oil by Aug. 5.

"Today is a historic day for the Standing Rock Sioux Tribe and the many people who have supported us in the fight against the pipeline," tribal Chairman Mike Faith said in a statement. "This pipeline should have never been built here. We told them that from the beginning."

Boasberg acknowledged that the ruling would cause major disruptions for Dakota Access and the North Dakota drillers that supply its oil.

"Yet, given the seriousness of the Corps' NEPA error, the impossibility of a simple fix, the fact that Dakota Access did assume much of its economic risk knowingly, and the potential harm each day the pipeline operates, the Court is forced to conclude that the flow of oil must cease," he wrote, referring to the National Environmental Policy Act.

The Army Corps referred questions about the ruling to the Justice Department, which didn't immediately respond to requests for comment, including on whether it intends to appeal the ruling. Energy Transfer also didn't immediately respond.

"The decision is likely to be enormously disruptive," said Katie Bays, co-founder of Washington-based Sandhill Strategy LLC. The Army Corps' 18-month timeline for addressing flaws in its environmental review makes Energy Transfer "vulnerable to a change in administration and a more draconian policy towards oil pipelines," she said.

ClearView Energy Partners analyst Christine Tezak said that "there is a strong possibility that the new Biden Administration could decide to not reissue the authorizations now that the permits have been vacated."

The ruling will also fuel litigation against other projects, as it "just totally overturns that conventional wisdom" that courts will never force in-service pipelines to shut down, said Southern Methodist University law professor James W. Coleman.

"There's no legal rule that says you won't shut down an existing pipeline but people felt like that was such a constant that they could count on it," he said.

Coleman assigned 50% odds to the prospect that the U.S. Court of Appeals for the District of Columbia Circuit would stay the lower court's decision. Some analysts speculated odds as low as 30%.

The pro-pipeline GAIN Coalition argued that Monday's decision jeopardizes energy security, and said it's confident "common sense will prevail and this decision will be stayed or overturned."

The American Petroleum Institute called for permitting reform.

"Our nation's outdated and convoluted permitting rules are opening the door for a barrage of baseless, activist-led litigation, undermining American energy progress and denying local communities the environmental, employment and economic benefits modern pipelines provide," the oil industry group said.