Dakota Access Pipeline: Down but Not Out

December 6, 2016

On Dec. 4, 2016, the U.S. Army Corps of Engineers announced that it will not decide on Dakota Access LLC’s easement application until the Corps prepares an environmental impact statement. The decision is significant in that it marks at least a temporary win for the multitude of protestors opposing the pipeline’s proposed route under Lake Oahe in North Dakota. However, the victory may prove to be pyrrhic if the incoming administration reverses the Corps’ decision.

Dakota Access LLC is a subsidiary of Energy Transfer Partners LP. Other partners include Enbridge, Marathon Petroleum and Phillips 66. In 2014, Dakota Access announced the construction of a 1,172-mile-long, $3.8 billion pipeline that will transport up to 570,000 barrels of oil per day from shale-play areas in Bakken and Three Forks, North Dakota, across South Dakota and Iowa, to an existing crude oil market near Patoka, Illinois. The 30-inch-diameter pipeline requires a 50-foot permanent easement and a 150-foot temporary construction easement over primarily private land. Dakota Access was largely successful in obtaining voluntary easements from landowners, and more than 90 percent of the pipeline is already constructed.

However, approximately 3 percent of the pipeline route lies along federally regulated areas. Relevant here is a 20-mile section of the pipeline that will cross Lake Oahe, a federally regulated water body, which requires the Corps to decide whether to grant Dakota Access’ easement application. Lake Oahe is a manmade lake formed when the Corps dammed the Missouri River near its point of confluence with the Cannonball River. According to Dakota Access’ plans, the pipeline would run parallel, at a distance of 22 to 300 feet, to a pre-existing natural gas easement under Lake Oahe, and will be constructed using the less-disruptive horizontal directional drilling method.

Importantly, Lake Oahe sits approximately one-half mile upstream from the northern boundary of the reservation of the Standing Rock Sioux Tribe. The surrounding areas hold great historical, cultural and spiritual significance to the Sioux tribe, which has occupied portions of the Dakota Great Plains since long before the first settlers arrived. Moreover, Lake Oahe provides the tribe’s water supply, as well as a source of irrigation, fishing and recreation. The Sioux tribe, accordingly, has mounted significant legal, political and social opposition to the pipeline’s construction.

Since Dakota Access announced its proposed pipeline route, a large group of protesters has formed at the Lake Oahe site. Although the protesters claim to be non-violent, their vast numbers and frequent incursions onto private land have resulted in several confrontations with police. These clashes — and the protests generally — have garnered significant media attention.

On July 25, 2016, the Corps granted Dakota Access permission to cross Lake Oahe, pursuant to the River and Harbors Act (RHA). This decision was accompanied by an environmental assessment under the National Environmental Policy Act (NEPA) and corresponding regulations. An environmental assessment contains the applicant’s findings, which the Corps must then verify. This process is permissible where the Corps makes a threshold finding that the applicant’s proposed crossing does not constitute a major federal action that would have significant environmental impacts.

Two days after the Corps’ initial decision granting the easement, the Sioux tribe sued the Corps in the U.S. District Court for the District of Columbia. The tribe sought a declaration that the Corps had violated the Administrative Procedures Act (APA). It also sought preliminary and permanent injunctions that would force the Corps to withdraw its permits.

On September 9, the federal court denied the Sioux tribe’s motion for preliminary injunction, concluding that the tribe is not likely to succeed on the merits of its APA claim (under the Clean Water Act, the RHA or the National Historic Preservation Act), and that the tribe will not suffer irreparable harm if the pipeline is constructed. The Sioux tribe failed to proffer any specific historical or cultural sites that would be destroyed because of Dakota Access’ grading and clearing along its proposed pipeline route. One month later, the court of appeals affirmed the district court’s decision.

Despite the Corps’ legal opposition to the Sioux tribe’s motion for preliminary injunction, the Obama administration nevertheless ordered the Corps to halt Dakota Access’ construction efforts at Lake Oahe, ostensibly to undertake further analysis of the issues. The Corps took the position that, although it had permitted a crossing under the RHA, it had not granted Dakota Access an actual easement as required by the Mineral Leasing Act (MLA), and therefore pipeline construction was not fully permitted. The Corps also invited the Sioux tribe to provide further information and analysis during in-person meetings held Dec. 2.

The Corps’ actions prompted Dakota Access, which had intervened in the federal case, to cross-claim against the Corps for a declaration that the authorization previously granted under the RHA was sufficient to permit pipeline construction under Lake Oahe. Since then, Dakota Access has also filed a motion to expedite a decision on its cross-claim and a motion for summary judgment, both of which remain pending.

On Dec. 4, the Corps issued a memorandum setting forth its position: “In addition to the [RHA] permission, the proposed crossing of Corps property required the granting of a right-of-way (easement) under the [MLA]. To date, the Army has not made a final decision on whether to grant the easement pursuant to this section.” The Corps then outlined provisions of NEPA requiring consideration of reasonable alternatives to recommended actions involving “unresolved conflicts.”

Based on the record before it, the Corps concluded that “a decision on whether to authorize the Dakota Access Pipeline to cross Lake Oahe at the proposed location merits additional analysis, more rigorous exploration and evaluation of reasonable siting alternatives, and greater public and tribal participation and comments.” The best method to accomplish this, according to the Corps, is via an environmental impact statement, which applies to proposals “significantly affecting the quality of the human environment” and is subject to notice and comment. Indeed, the environmental impact statement is a lengthy administrative process that could result in significant delays for a pipeline that was planned to be operational by next spring.

Upon receiving news of the Corps’ Dec. 4 memorandum, the Sioux tribe and other protesters erupted in celebration. However, that celebration could be tempered when President-elect Trump takes office Jan. 20. In the last 24 hours, the Trump transition team has voiced its support for the Dakota Access pipeline’s construction, which comports with Trump’s previous support for the Keystone XL pipeline. At the same time, however, Trump officials have reserved any comment on whether they will reverse the Corps’ decision requiring an environmental impact statement, explaining that the president-elect needs time to undertake a comprehensive review of the issues.

The new administration’s decision on this issue, which, given the mounting pressure by both proponents and opponents of the pipeline, will likely come sooner rather than later, could signify a new policy direction from the federal government. If President-elect Trump reverses the preceding administration’s decision, the oil and gas industry could reasonably expect at least four years of regulatory easing and potential investment opportunities in the near and medium terms.