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Dakota Access Pipeline Loses Appeal, Fueling Shutdown Fight (3)

Jan. 26, 2021, 3:23 PM; Updated: Jan. 26, 2021, 6:55 PM

Energy Transfer LP’s infamous Dakota Access oil pipeline suffered another blow Tuesday when a judge upheld a decision to scrap a key permit, threatening a system that has already been up and running for more than three years.

The ruling doesn’t force the project to shut down, but that risk remains.

The U.S. Court of Appeals for the District of Columbia Circuit agreed with a lower court that the Army Corps of Engineers fell short of the National Environmental Policy Act when it allowed Dakota Access to cross a federal reservoir in North Dakota—and that the violation warranted scrapping the easement.

But the D.C. Circuit reiterated its previous ruling that the lower court went a step too far in ordering the pipeline to shut down.

Two Paths

Energy Transfer pared earlier gains of as much as 7.2% after news of the court decision. It was 1% higher at $6.64 at 1:37 p.m. in New York.

Two potential pathways remain for halting operations: First, tribes opposed to Dakota Access have a pending request for the lower court to issue a fresh shutdown order under a different legal standard. Second, tribes and environmentalists are pushing President Joe Biden’s administration to exercise its separate authority to pause pipeline operations.

“It’s time for the Biden administration to keep its promises to Indian country and shut down this illegal pipeline,” Earthjustice lawyer Jan Hasselman, who represents Standing Rock, told Bloomberg Law. “It never should have been authorized in the first place, and it cannot be allowed to operate for another day until these issues are fully resolved.”

Energy Transfer didn’t immediately respond to a request for comment. The company could attempt to challenge Tuesday’s ruling—or any subsequent shutdown order—at the U.S. Supreme Court.

Biden scrapped a key permit for the proposed Keystone XL pipeline on his first day in office but hasn’t addressed several other controversial projects, including Dakota Access.

What’s Next

Tuesday’s decision is a defeat for Dakota Access, leaving a cloud of legal uncertainty that stems from District Judge James E. Boasberg’s July decision to invalidate the project’s easement. Without that authorization, the oil pipeline is technically encroaching on federal land.

The Trump administration opted to forgo any enforcement action to address the encroachment. But advocates have pushed the Biden administration to use the situation to force Dakota Access to halt operations during an environmental review process.

The D.C. Circuit’s decision leaves the shutdown question in the hands of the Biden administration and the district court.

“It may well be—though we have no occasion to consider the matter here—that the law or the Corps’s regulations oblige the Corps to vindicate its property rights by requiring the pipeline to cease operation and that the Tribes or others could seek judicial relief under the APA should the Corps fail to do so,” Judge David Tatel wrote for the unanimous three-judge panel.

“But how and on what terms the Corps will enforce its property rights is, absent a properly issued injunction, a matter for the Corps to consider in the first instance, though we would expect it to decide promptly,” he concluded.

ClearView Energy Partners analyst Christine Tezak said that part of the ruling suggests it’s “more likely that the Corps would pursue a temporary cessation of operations even in the absence of an injunction from Judge Boasberg.”

NEPA Review

The D.C. Circuit’s decision also upholds an underlying legal analysis from U.S. District Court for the District of Columbia that said the Army Corps violated the National Environmental Policy Act.

The agency should have addressed disputes over the pipeline’s potential oil spill risks by conducting an in-depth environmental impact statement, instead of the narrower environmental assessment it performed, the district court said.

Tatel wrote that “several serious scientific disputes mean that the effects of the Corps’s easement decision are likely to be ‘highly controversial.’” Under NEPA regulations that were in place at the time of Dakota Access’s approval, agencies must conduct a full-fledged environmental impact statement when a project’s impacts are disputed by experts.

Officials from the Standing Rock Sioux and other tribes raised numerous concerns about the pipeline’s impacts that went unresolved by the Army Corps, the D.C. Circuit said. That means the Army Corps must continue working on the court-ordered analysis—a process that could stretch into 2022 and may ultimately pose another risk for the pipeline’s long-term operation.

“We are pleased that the D.C. Circuit affirmed the necessity of a full environmental review, and we look forward to showing the U.S. Army Corps of Engineers why this pipeline is too dangerous to operate,” Standing Rock Sioux Tribe Chairman Mike Faith said in a statement.

The pro-pipeline GAIN Coalition said it’s glad the D.C. Circuit allowed Dakota Access to stay in service during the new environmental analysis and called on the Biden administration to “take politics out of the process.”

Fraught History

Dakota Access has faced legal challenges from the Standing Rock Sioux, Cheyenne River Sioux, and other nearby tribes since the Army Corps issued critical approvals in 2016. The project crosses within a half-mile of the Standing Rock Indian Reservation and beneath a major drinking water source for the tribes.

The Obama administration withheld a final permit for Dakota Access in late 2016 in response to public outcry, but President Donald Trump quickly greenlighted construction when he took office in 2017. The pipeline started service later that year, delivering oil from North Dakota shale fields to an oil hub in Illinois.

The federal district court has issued multiple incremental rulings over the years finding that the Army Corps violated the National Environmental Policy Act in both its original analysis of the pipeline’s impacts, and in a court-ordered supplement. In July 2020, District Judge James E. Boasberg went a step further and ordered Dakota Access to shut down while the Army Corps conducted a new analysis.

The D.C. Circuit later sidelined that order for not applying the proper legal test. The tribes have since asked the district court to issue a fresh shutdown order that meets the appellate court’s standard.

The case is Standing Rock Sioux Tribe v. Army Corps of Engineers, D.C. Cir., No. 20-5197, 1/26/21.

—With assistance from Simon Casey (Bloomberg News).

(Adds Energy Transfer stock information in fifth paragraph.)

To contact the reporter on this story: Ellen M. Gilmer in Washington at egilmer@bloomberglaw.com

To contact the editors responsible for this story: Anna Yukhananov at ayukhananov@bloombergindustry.com; Rebecca Baker at rbaker@bloombergindustry.com

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