In the wake of the United States government’s landmark intervention earlier this month to delay the Dakota Access pipeline, the project began to assume the significance of the multi-year battle over the Keystone XL pipeline, with advocates pro and con underscoring the importance of the delay and one fossil news outlet suggesting the issue will only be resolved by the next U.S. president.
Oil Change International Research Director Lorne Stockman said the 570,000-barrel-per-day pipeline would carry more than half of the current output from North Dakota’s Bakken shale formation, representing greenhouse gas emissions equivalent to 29.5 coal plants or 21.4 million cars. Which means that “building a large, new pipeline that reduces the cost of delivering a large oil reserve to market would undermine our climate goals,” he writes.
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“The first response of pipeline proponents to estimates of GHG emissions from North American pipelines will be to claim that the crude will go by rail if there are no pipelines,” he predicts. “By asserting that the oil would flow with or without a pipeline, proponents will try to argue that the additional GHG emissions would be zero.” But one team of industry analysts calculated that Dakota Access would cut the cost of delivering Bakken crude by 47%, from US$15 to $7 per barrel—a significant amount in a US$50/barrel global market that it “boosts profits and cash flow and can be put toward future investment in more drilling and more production,” Stockman notes.
In fact, “an extra $7 per barrel could be the deciding factor for whether it’s worth drilling a new well or not.”
In a separate analysis, Reuters warned that the U.S. government decision could mean “greater delays in getting a quick route to ship oil to the Gulf of Mexico.” An extended fight over the project “would affect producers who had counted on demand for oil to be rapidly shipped to the U.S. Gulf, as well as shippers who could find themselves stuck with crude, putting them at risk of unloading it at a loss.”
The head of the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) under George W. Bush, Brigham McCown, said a decision to reroute Dakota Access could be expensive. “It could delay a project by years,” he told Reuters. “If you’re moving the pipeline to an area that’s far enough, you may need to go through the regulatory process again and get permits like ones for water and endangered species. It takes time.”
Meanwhile, with limited oil storage capacity in North Dakota, shipments will have to move through “the more arduous rail routes to the east and west coasts, or through pipelines in the Rocky Mountains en route to Oklahoma and eventually Texas,” the news agency notes.
But if it proceeded, Stockman said the US$4.8-billion project would “shut in” the investment dollars required to build it, and therefore the carbon output it would enable. Compared to rail terminals, pipelines are expensive to build and cheaper to operate, he explains. So “shutting down a $4.8 billion pipeline investment before it’s paid off is rare. If markets change due to climate policy, perhaps because of new policies that reduce oil use or rapid market adoption of alternatives such as electric vehicles, [pipeline] companies are likely to keep the oil flowing by cutting tariffs” on the oil they carry.
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