Cenovus CEO calls U.S. court order on Dakota pipeline 'disturbing'
Pourbaix says halting pipeline's operation could have implications for power lines, highways in U.S.
A U.S. judge's order to shut down the Dakota Access pipeline for additional environmental review — more than three years after it began pumping oil — is a "pretty disturbing decision" that could have implications for future infrastructure development like power lines and highways, says the CEO of Cenovus Energy.
On Monday, U.S. District Judge James Boasberg in Washington, D.C. wrote that he was "mindful of the disruption" that shutting down the pipeline would cause, but that it must be done within 30 days.
Alex Pourbaix, president and chief executive of Calgary-based Cenovus, said he was surprised by the decision to halt a pipeline that had been operating for three years, suggesting the impact could ripple out into future development of a variety of infrastructure projects in the United States.
"My general observation of it is that going forward, if that would be the new standard, I think it's going to be incredibly difficult for anybody to invest in any kind of infrastructure," he said during a presentation to TD Securities' virtual energy conference on Tuesday.
"And not just pipeline infrastructure, high-voltage power lines, highways, you name it. If there's an opportunity to come back on that, those regulatory decisions, years after the fact, I think that's a real significant problem."
Pourbaix said it was a "pretty disturbing decision," one he believes means producers in North Dakota's Bakken region are going to have to look at rail options for moving their oil.
The chief executive of Calgary-based Enerplus, which produces oil in the region, said there is a "robust" rail infrastructure for shipping crude if it can't be moved by the pipeline.
Ian Dundas told the same conference it wouldn't be a matter of whether companies can sell their oil, but how it would affect price and what the cost of rail transportation would be.
"There is a lot of rail capacity," he said, adding that before the pipeline was built there was a point when close to a million barrels of oil per day were being moved by rail from North Dakota.
According to the ruling, the U.S. Army Corps of Engineers violated the National Environmental Policy Act (NEPA) when it granted an easement to Energy Transfer to construct and operate a segment of the oil pipeline beneath Lake Oahe in South Dakota, because they failed to produce an adequate Environmental Impact Statement.
The court ordered Energy Transfer to shut and empty the 570,000 barrel-per-day line within 30 days, closing off the biggest artery transporting crude oil out of North Dakota's Bakken shale basin to Midwest and Gulf Coast regions.
"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," it said.
It is rare for regulators or officials to force an oil pipeline to be drained, unless it is in the aftermath of a spill, oil market sources told Reuters.
Energy Transfer said it was looking at legal and administrative measures to avoid a shutdown, and was considering an appeal if those efforts fail.
The Dakota Access pipeline was the subject of months of protests in 2016 and 2017, sometimes violent, during its construction near the Standing Rock Sioux Reservation that straddles the North Dakota-South Dakota border.
The Standing Rock Sioux pressed litigation against the pipeline even after it began carrying oil from North Dakota across South Dakota and Iowa and to a shipping point in Illinois in 2017. The pipeline crosses beneath the Missouri River, just north of the reservation, where it draws its water.
Separately on Monday, the U.S. Supreme Court did not allow construction to begin on TC Energy Corp's Keystone XL oil sands pipeline, which is backed with investment from the Alberta government, and partially left in effect a ruling that blocks the use of a key federal permit that allows dredging work on pipelines across water bodies.
With files from Reuters and The Associated Press