Trump Vows Prompt Review of Obama Dakota Pipeline Rejection

(Bloomberg) -- President-elect Donald Trump backs the Dakota Access Pipeline and will review a decision by the Obama administration to deny a permit needed to complete the $3.8 billion project, a spokesman said.

After weeks of protests from Native Americans and environmental activists, the Army Corps of Engineers announced Sunday that it was refusing to let Energy Transfer Partners LP build a section of the project under Lake Oahe in North Dakota and would begin a lengthy environmental review. But that decision runs headlong into the pledge from Trump to greenlight new energy infrastructure.

The pipeline "is something we support construction of, and we will review the situation when we are in the White House to make the appropriate determination at that time," Jason Miller, a spokesman for the Trump transition team, told reporters Monday.

Trump has pledged to overhaul the nation’s energy policy in a way that favors oil and natural gas producers. He has also said he will find a way to reverse the Obama administration’s rejection of TransCanada Corp.’s Keystone XL pipeline, and overturn environmental regulations he blames for quashing energy production.

Not Waiting

Last week, Trump intervened with United Technologies Corp. to keep part of a Carrier air-conditioning plant in Indiana rather than moving to Mexico, a sign he plans to use the office of the president to intervene with specific business decisions even before his Jan. 20 swearing-in.

Energy Transfer asked a judge Monday to step in and clear the way for construction of the final section, accusing the U.S. government of bowing to political pressure. The company filed for summary judgment in federal court, saying the Army Corps’ decision Sunday “completely contradicted” earlier approvals.

“An agency cannot grant permission to cross federal land after concluding that the project satisfies all legal requirements and then announce -- due to raw political calculations made after the fact -- that permission was never granted,” the company’s lawyers said in the filing.

Easement Issuance

If that doesn’t work, a Trump administration has wide leeway to reverse direction. Christine Tezak, managing director of research at ClearView Energy Partners LLC in Washington, says the new administration could do an expedited environmental review, but even that could delay the project until mid to late 2017.

"Since the Obama administration was improvising and finding new rationale to justify not issuing the easement, it would seem to provide the incoming administration the ability to find rationale to reverse it," Tezak said in an interview. "Anything is possible."

But, Thomas Cape of Evercore says Trump could move quickly to reverse the Army Corps decision, and the pipeline could still be put online within the first three months of 2017. The permit would allow completion of the final section of the pipeline, which spans four states. The project was originally slated to be operational at the end of this year.

Congressional Intervention

Congress, too, may get involved. Republicans’ attempt to speed a final decision on the proposed Keystone XL pipeline backfired in 2012, when Obama rejected an application for the project, citing a "rushed and arbitrary deadline."

Several bills already pending in Congress aim to speed up permitting of major energy infrastructure projects by streamlining reviews required under the National Environmental Policy Act. Senators Rob Portman and Claire McCaskill pushed through a measure requiring federal agencies to coordinate their reviews, shortening the window for opponents to challenge permit decisions.

Asked Monday if lawmakers will challenge the Army Corps decision, House Majority Leader Kevin McCarthy said, "I think we’ll get a new administration, we’ll get new eyes, and there’s always a possibility."

Native Americans and environmentalists have challenged the Army Corps’ initial approval of the project in court, and a change in course by Trump could give fodder to that challenge -- or another one. Protests against the crude-oil pipeline have resulted in hundreds of arrests and clashes at the Standing Rock site near the Missouri River.

The standoff over the Dakota Access pipeline is emblematic of a broader effort by environmentalists to stall those pipelines, which they say hurt the nation’s progress in reducing its reliance on fossil fuels.

Trump Vows Prompt Review of Obama Dakota Pipeline Rejection

Energy Transfer Partners and Sunoco Logistics Partners LP called the move “a purely political action” in a statement Sunday, adding that they are fully committed to bringing the project to completion.

“This is nothing new from this administration, since over the last four months, the administration has demonstrated by its action and inaction that it intended to delay a decision in this matter until President Obama is out of office,” the companies said in the statement.

Trump’s Holdings

Trump has had a financial interest in two companies involved in the pipeline, according to the financial disclosure form he released in May 2016. Trump owned between $500,000 and $1 million of stock in Energy Transfer Partners LP, which earned him $15,000 to $50,000 in income in 2015. He has sold those shares, spokeswoman Hope Hicks confirmed Monday. He also owns between $100,000 and $250,000 worth of shares in Phillips 66, which has a major stake in the project.  

Energy Transfer owns the project with Phillips 66 and Sunoco Logistics. Marathon Petroleum Corp. and Enbridge Energy Partners LP announced a venture in August that would also take a minority stake in the pipeline.

The pipeline could help cut costs for drillers in North Dakota’s Bakken shale region that have turned to more costly rail shipments when existing pipes filled up. Dakota Access, with a capacity of about 470,000 barrels a day, would ship about half of the current Bakken crude production and enable producers to access Midwest and Gulf Coast markets.

‘Tremendous Courage’

Dakota Access has been central to the intensifying debate over the need for new pipelines in the U.S. It has become a rallying point for the anti-fossil fuel movement and has drawn intense opposition from Native Americans who say it’ll damage culturally significant sites.

“We wholeheartedly support the decision of the administration,” Dave Archambault II, tribal chairman of the Standing Rock Sioux Tribe, said in a statement on Sunday. “In a system that has continuously been stacked against us from every angle, it took tremendous courage.”

Environmental Protection Agency Administrator Gina McCarthy said the denial was driven by concerns that the environmental review of project was not substantive enough and is not part of broader backlash against energy infrastructure.

“Issues have been raised that are a great concern to many people, and it is appropriate we use the current system to make sure we’re looking at all the environmental impacts,” including impacts on tribal sacred sites, McCarthy told reporters Monday at a Christian Science Monitor event.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.