Vacating Dakota Access’ permits right now would not only deepen North Dakota’s current economic crisis, it would put the future of its entire energy industry in doubt, according to a brief the state has filed urging a District Court Judge in Washington, D.C. not to suspend the pipeline’s permits while it undergoes further, court-ordered environmental review.
Dakota Access was ordered to do a more extensive environmental study after Judge James Boasberg ruled that the U.S. Army Corps of Engineers should have conducted a full-scale Environmental Impact Study under the National Environmental Policy Act, since the project was controversial. The judge has set a hearing to consider whether he should vacate the pipeline’s permits while that review is conducted.
North Dakota’s brief includes declarations from North Dakota Department of Mineral Resources Director Lynn Helms, State Tax Commissioner Ryan Rauschenberger, North Dakota Pipeline Authority Justin Kringstad, and Director of the North Dakota Director Office of Management and Budget Joe Morissette.
They argue that the state has very little refining capacity for the oil and gas it produces, making its energy sector dependent on affordable means of transportation to markets outside of the state.
Dakota Access carried 40 percent of the state’s crude oil to market in February.
If Dakota Access were to be shut in, it would take two years to divert 500,000 barrels of oil from Dakota Access to rail transport, according to the brief. That would lead to the shut-in of nearly 8,700 active oil and gas wells, decreasing over time to a final loss of 70,000 barrels per day and an estimated 1,450 oil wells shut in.
It would cost between $25,000 to $50,000 on average to return each well to production, and costs can range as high as $400,000 in some cases. Historically, 50 to 80 percent of wells shut down are permanently abandoned.
Each of the wells shut in would be 1.6 full-time jobs lost.
When Dakota Access opened, North Dakota drilling activity increased 20 percent, due to operators shifting from other basins to the Bakken. That decision was based on the ability to affordably transport crude oil to favorable markets. If the pipeline is shut down, some operators would reverse that course, likely resulting in the loss of at least four to five drilling rigs and an associated 600 to 750 full-time jobs.
This, in turn, would also mean seven to nine fewer new wells per month, with an associated job loss of 11 to 14 new full-time jobs per month, based on a study wit the North Dakota State University Department of Agriculture and Applied Economics and the Vision West project.
Meanwhile, given that the COVID-19 pandemic has reduced demand for oil, it’s likely that most of Dakota Access pipeline’s crude oil could not be diverted to rail due to current economic conditions. That would deepen the disruption, and likely lead to permanent job losses of between 4,475 to 7,175 full time jobs.
North Dakota is a small state, ranking just 48th in population and 46th in Gross Domestic Product, but it produces 12 percent of the nation’s oil, and is America’s No. 2 oil producer.
Energy is a substantial portion of the state’s economy, and many jobs are reliant, in spider web fashion, on the industry.
Meanwhile, the state was projected to collect $4.9 billion in oil and gas taxes for the 2019-2021 biennium, while all other sources were just $3.7 billion.
North Dakota has tried to insulate its economy from short-term dips in the market, but those steps would not be sufficient to absorb a long-term shock, such as shutting down the Dakota Access pipeline would cause.
In addition, the pipeline itself has been a direct source of additional tax revenue for both counties and the state. The pipeline’s operation resulted in $312 million more dollars in tax revenue, according to figures listed in the brief.
Counties along the Dakota Access route, meanwhile, assess property taxes on the line. Williams County collects $2.2 million and McKenzie County $1.52 million.
Shutting in the pipeline would not only be economically catastrophic to North Dakota, however. Fourteen other states have filed a brief outlining the harm and disruption vacating the Dakota Access permits would cause them.
Indiana is leading that effort. They are joined by Montana, Alabama, Arkansas, Iowa, Kansas, Kentucky, Louisiana, Nebraska, Ohio, South Dakota, Texas, Utah and West Virginia.
They argue that shutting in the pipeline will likely lead to rotting grain, higher food prices, and ultimately, food shortages, at a partcularly inopportune time, given that there are already supply chain issues amid the coronavirus pandemic.
“Many Amici States produce large amounts of grain currently shipped by rail—grain that will suffer displacement, owing to competition with higher-revenue oil for access rail transport, if the Dakota Access Pipeline is shut down,” the brief states. “Such competition is likely to revisit the market conditions that obtained before the pipeline became operational in 2017, namely intractable railroad congestion, rotting grain, higher food prices and, ultimately, a potential for food shortages.”
In addition, the states argue that pipeline transportation is safer than rail transportation of crude oil.
“Data show that pipeline transport of crude have yielded fewer accidents, injuries and deaths than truck and rail shipments, such that pipeline transport is both cheaper and less likely to cause widespread destruction—such as the rail accident that incinerated much of the town of Lac- Mégantic, Quebec, with Bakken crude,” the brief states.
The “egg has already been scrambled,” the states argue, and the permits should not now be vacated.
“The widespread economic and safety disruptions that would arise from vacatur would far outweigh any actual harm caused by the short-term lack of an environmental impact statement, which, after all, is a procedural agency obligation designed to provide more public information, but which does not itself hold the prospect of changing the substantive outcome of the Corps’ ultimate decision about the easement.”