Daily Blog

Dream On - The Challenges Posed by Shutting Down the Dakota Access Crude Pipeline

A federal judge’s order that the 570-Mb/d Dakota Access Pipeline be taken out of service for a year or more starting August 5 has the potential to wreak more havoc for producers in the Bakken Shale at a time when they are still reeling from drastic, COVID-related production curtailments. While those production cuts have opened up at least some capacity on other takeaway pipelines out of western North Dakota and crude-by-rail terminals may be able to ramp up their operations, that may not be enough to make up for the loss of DAPL — still more well shut-ins may be required. Then there’s the matter of taking the 1,172-mile, 30-inch-diameter pipeline offline in only four weeks’ time — it involves much more than flipping a switch and may not even be possible within that time frame. Today, we consider the hurdles and implications of removing DAPL from service.

The Bakken production area was hit hard by the crude oil price crash of 2014-15; production there fell from just under 1.2 MMb/d in December 2014 to just under 900 Mb/d two years later, according to the North Dakota Oil & Gas Division. But that was nothing compared to what the Bakken has experienced the past few months, what with the demand destruction caused by the coronavirus pandemic and the resulting drop in oil prices. From early 2017 to early 2020, production soared to more than 1.4 MMb/d, spurred at least in part by the end of pipeline takeaway constraints in June 2017 with the start-up of DAPL, which provided straight-shot, low-cost access to the Patoka, IL, hub, and, from there on the Energy Transfer Crude Oil Pipeline (ETCOP) to Nederland, TX — an easy path to Gulf Coast refinery and export markets. This spring, though, Bakken producers slammed on the brakes, slashing their crude output to less than 1 MMb/d for the first time in almost three years.

We understand that many of these same producers were making plans to restart their shut-in wells this summer when a U.S. District Court judge in Washington, D.C., issued a stunning decision, namely that DAPL needs to be shut down and emptied by August 5 and that the pipeline needs to stay offline until the U.S. Army Corps of Engineers (the Corps) completes an environmental impact statement (EIS) assessing the pipeline’s crossing of a large reservoir near a Sioux reservation in South Dakota. The Corps has estimated that it will take 13 months to prepare the EIS.

Join Backstage Pass to Read Full Article

Learn More