2 Possible Paths For The Dakota Access Pipeline

The Department of the Army has denied an easement for the Dakota Access Pipeline (DAPL) to cross Lake Oahe, and an alternative routing may need to be considered for the project.

Energy Transfer Partners LP ETP released a statement in which it termed the denial as an “overt and transparent political action” and indicated its determination to complete the project "without any additional rerouting in and around Lake Oahe."

2 Ways Forward

There are two alternative paths for the project, “neither of which spells doom for DAPL,” Bernstein’s Jean Ann Salisbury said in a report.

Way 1: Trump could reverse the decision when his presidency begins in January. The President-elect indicated his support of the project last week and had previously expressed support for energy infrastructure projects in general.

Salisbury mentioned, however, that there were “obstacles to overturning the project via executive action,” although a Republican-controlled Congress would likely be able to “fast-track a reversal of the Army decision.”

Way 2: Rerouting is not a deal-breaker for the project. While Energy Transfer has been extremely negative about how rerouting would impact its financials, Salisbury estimated that a "small reroute" around Bismarck may cost ~$400 million and a “larger reroute” may cost $1 billion.

The analyst maintains Outperform ratings on Energy Transfer Partners and Energy Transfer Equity LP ETE, with price targets at $39 and $18, respectively.

Image Credit: By Pax Ahimsa Gethen (Own work) [CC BY-SA 4.0], via Wikimedia Commons

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