Bloomberg Law recently published an analysis from Guy Caruso, former administrator of the U.S. Energy Information Administration (EIA), regarding the significant impact of a Dakota Access Pipeline (DAPL) shutdown.
DAPL, which has safely transported up to 570,000 barrels of crude oil per day from the Bakken to Southern Illinois for more than three years, was ordered by a U.S. district judge in July to be shuttered until the U.S. Army Corps of Engineers performs additional environmental review.
While an appellate court has temporarily reversed the shutdown order, the pipeline’s fate is still in limbo. In his analysis, Caruso explains that a DAPL shutdown would have significant economic ramifications, threaten our infrastructure permitting process, and jeopardize American energy independence and energy security.
Regarding the economic impact, Caruso writes:
Its shutdown would force those resources to be moved by rail, a less reliable and much more costly option. And the shift could take as long as two years, according to the head of the state’s Department of Mineral Resources.
The resulting backlog would force drillers to cut production. As many as 3,000 upstream jobs would be lost, according to research by the American Petroleum Institute. Another 1,900 jobs could be sacrificed in industries that support production. In total, a shutdown may cost 7,400 jobs when impacts down the line are considered.
The blow to state coffers would be equally costly. North Dakota and Montana stand to lose $832 million of production taxes, and another $69 million in income taxes paid by producers over 13 months, the time expected to complete a new environmental assessment. The loss in tax revenue will surely be felt by public services such as schools and state programs, as well as other public infrastructure projects, which are largely supported by state revenues from the oil and gas industry.
Regarding the dangerous precedent set for future infrastructure permitting and development:
But perhaps the most concerning outcome of a DAPL shutdown is the dangerous precedent set for the future of American infrastructure development. As the Corps laid out in a recent filing, “the district court’s decision will create a new, heightened standard of judicial review that will be impossible for agencies to meet as they consider vital infrastructure projects that excite opposition from some sector of society.”
If developers meet or exceed all permitting requirements, receiving all necessary approvals from federal, state, and local agencies—the regulatory process should instill the certitude and consistency that their investment will indeed be able to operate and function as intended. Without this confidence, the incentive to invest in critical infrastructure quickly diminishes when there is a chance that legal challenges could prevail and permits may be pulled after more than three years of safe operation.
Regarding the risks to American energy independence and security:
A shutdown would hit hardworking men and women at a time when they can afford it least. And it could set back our country’s march toward increased energy security immeasurably.
Over the past two decades domestic production has wholly rewritten the U.S. energy outlook. Once reliant on foreign suppliers, U.S. total annual energy exports in 2019 exceeded total annual energy imports for the first time in 67 years, and the U.S. became a net total energy exporter. That achievement owes to robust production here at home unlocked by investment in infrastructure, notably pipelines.
Caruso concludes that rather than pandering to anti-energy activists and creating additional hurdles for infrastructure – which undermines the regulatory process, threatens jobs and economic growth, and creates uncertainty for developers – we must instead be leaning into opportunities to invest in our nation’s pipeline network. This starts with the D.C. Circuit upholding the Corps’ initial findings on DAPL, which were “grounded in evidence then and remain grounded in evidence now.”