Per a U.S. court order, Energy Transfer LP ET is asked to shut down its Dakota Access oil pipeline, emptying 570,000 barrels per day (bpd) within 30 days. In response to this ruling, the company plans to pursue all available legal and administrative processes to avoid a shutdown and if these efforts fail, it will then consider a further appeal to challenge the court directive.
The court believes that the U.S. Army Corps of Engineers violated the National Environmental Policy Act (NEPA) by granting an easement to Energy Transfer for constructing and operating a segment of the oil pipeline beneath Lake Oahe in South Dakota as the company was unable to produce an adequate Environmental Impact Statement (EIS).
In an immediate filing Entergy Transfer seeks a temporary stay on the order. The firm argued that the steps required to close the pipeline down safely and empty it of oil will be time-consuming and expensive enough, meaning that the process will take well more than 30 days.
Legal Challenges Impact Pipelines
According to the Association of Oil Pipe Lines (AOPL), if this decision is not reversed, Americans will be deprived of affordable energy.
Energy Transfer believes that this ruling will hamper the country’s crude supply system along with negatively impacting several significant industries. It will also inflict more damages on an economy, which is already struggling due to the pandemic.
Steadily declining oil and gas prices as well as demand, thanks to the COVID-19 pandemic, hit the global oil and gas industry hard, and the pipelines segment is no exception.In addition, the increasing legal hassles, delay in the projects and expansion of the project budget are adversely impacting the economic viability of pipeline projects. In fact, the court gave a green signal to many pipeline projects excluding the Keystone XL pipeline, which has to abide by the arduous environmental review process.
After investing billions and working almost six years at a stretch to complete the Atlantic Coast Pipeline project, the Dominion Energy D along with partner Duke Energy DUK decided to discontinue the endeavor. Theproject was scheduled to begin commercial services in early 2022, running behind schedule for nearly three years and a half due to legal uncertainties. Mired in legal woes, the project is grappling with unpredictability and undue escalation in costs. The total project expense also jumped to $8 billion from the original budget of $4.5-$5 billion, thereby affecting the economic viability of the project.
Zacks Rank & Key Pick
The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A better-ranked stock from the same space is Oasis Midstream Partners LP OMP. The Zacks Consensus Estimate for the company’s 2020 earnings has been unchanged in the past 30 days. It has a trailing four-quarter positive earnings surprise of 32.11%, on average. Also, the stock sports a Zacks Rank #1, currently.
Price Performance
Since July 2, units of the firm have lost 9.4% compared with the industry’s 3.3% decline.
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