Dakota Access Pipeline Fails to Receive Construction Permit
Last week, the Obama administration, denied a permit for the construction of a key section of the 1,172 mile Dakota Access Pipeline ("DAPL"). This announcement – jointly made by the U.S. Department of Justice, the Department of the Interior and the Department of the Army – came shortly after a federal judge ruled in favor of construction of this $3.7 billion project, in spite of protests by Native American tribes.
Why the Protest?
Environmental and indigenous activists have been protesting against the construction of the oil pipeline due to the possibility of the pipeline contaminating drinking water. In particular, the Standing Rock Sioux – a tribe living close to the proposed pipeline – and other activists argued that the pipeline crossing under the Missouri River threatens their primary source of drinking water alongside passing over their ancestral lands.
Tribal leaders are skeptical that an accident or a spill could potentially contaminate farmland and drinking water for millions. The tribes and their representatives believe that they were not adequately consulted on these issues and hence, filed a federal lawsuit in July against the U.S. Army Corps of Engineers.
Current Situation
The decision by the Obama Administration to disapprove the permit for construction is undoubtedly a significant victory for the protesters. This implies that sponsors of the controversial Dakota Pipeline would have to halt operations along the 40-mile stretch in North Dakota. However, activity on other sections of the pipeline could proceed as planned.
However, the long struggle to block the project is far from over. Given that the federal government has not rejected the project plan and has suggested further review on the matter, it remains to be seen how the events unfold once Donald Trump takes office.
About the Pipeline
Primarily owned by Dallas-based pipeline operator Energy Transfer Partners L.P. ETP, the Dakota Access Pipeline has a capacity to transport over 470,000 barrels of crude daily from North Dakota's prolific Bakken formation through South Dakota and Iowa to an existing pipeline in Patoka, IL.
Bakken Holdings – formed by Energy Transfer Partners and another pipeline operator Sunoco Logistics Partners L.P. SXL – owns 75% of the pipeline. Downstream operator Phillips 66 PSX controls the remaining 25%.
Per a deal announced last month, Enbridge Energy Partners L.P. EEP and Marathon Petroleum Corp. MPC are also likely to own a minority interest in the pipeline.
Bottom Line
This issue is unlikely to be resolved any time soon and a protracted legal battle is in the offing. Nonetheless, Braskem S.A. (BAK is an energy stock that warrants a look by virtue of its favorable Zacks Rank #1 (Strong Buy) and might be a suitable investment option. You can see the complete list of today’s Zacks #1 Rank stocks here.
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