Oil And Gas Pipelines Set To Suffer Under Biden

When U.S. President Joe Biden killed a high-profile, controversial oil pipeline project on his first day in office, he set the stage for more complicated and lengthy environmental reviews for all oil and gas infrastructure.   

President Biden’s decision to scrap the Presidential permit for the Keystone XL oil pipeline was not entirely unexpected, considering the campaign promises and the focus on clean energy and strengthened environmental policies.

The killing of Keystone XL and the climate executive orders that followed in President Biden’s first ten days in office are sending a message to the oil and gas industry: energy infrastructure with poor environmental credentials will not fly in this Administration.

At risk are not only proposed pipeline projects, but also operating pipelines with steel in the ground, such as the infamous Dakota Access Pipeline, analysts say.

Challenges To Pipeline Permitting Increase

Last week’s Executive Order on Tackling the Climate Crisis at Home and Abroad directed relevant authorities “to ensure that Federal infrastructure investment reduces climate pollution, and to require that Federal permitting decisions consider the effects of greenhouse gas emissions and climate change.”

The strengthened environmental impact scrutiny, including on siting and permitting processes in progress, is set to make the entire environmental and permitting reviews more complicated, with longer lead times from project to definitive approval from all relevant authorities, including federal agencies. Related: Russia Is The Biggest Winner In The OPEC+ Deal

“Overall, one would expect much more intensive and difficult environmental review and permitting processes for pipelines, including potential rejection of requests altogether,” Michael Drysdale, an attorney at the law firm Dorsey & Whitney, told Energy Intelligence’s Bridget DiCosmo.

“On his first day, Biden also revoked four of Trump’s executive orders intended to streamline and accelerate infrastructure permitting, suggesting that securing approvals could become more complex and protracted,” said Ed Crooks, Vice-Chair Americas at Wood Mackenzie.

In its rush to streamline approvals for pipelines, the Trump administration had opened up the projects to more litigation from opponents and climate activists. President Biden’s killing of Keystone XL adds another factor on top of the ongoing legal and regulatory hurdles to smooth approval of pipeline projects—potential opposition from the federal government, Wood Mac says.

Operating Pipelines Are Not Out Of The Woods Either

The Administration’s shift to clean energy is not only complicating the future of proposed oil and gas infrastructure. It also creates additional challenges to the operation of existing pipelines that are already mired in legal troubles, such as the Dakota Access Pipeline.

Climate activists and some indigenous organizations rejoiced at the killing of Keystone XL and are now calling on President Biden to take action on Dakota Access, Enbridge’s Line 3 expansion and replacement program, and Enbridge’s Line 5 replacement plan in Michigan.

Activists protested last Friday in St Paul, Minnesota, demanding that President Biden revoke the permits for Line 3 after killing Keystone XL.

Enbridge has just started construction on the Line 3 oil pipeline replacement in Minnesota after receiving all necessary approvals and permits, while indigenous groups continue to seek to delay or stop the works with lawsuits. 

Last week, a federal U.S. appeals court upheld a lower court’s decision to require the U.S. Army Corps of Engineers to carry out a much more extensive and lengthy review of the environmental impact near the Standing Rock Sioux Reservation. Since the summer of 2020, DAPL and Energy Transfer are fighting a legal battle after a judge vacated the permit for the pipeline in July. Related: Oil Prices Continue To Rise As Bullish News Mounts

The latest court ruling came a week after President Biden took office and killed Keystone XL. Activists and the Standing Rock Sioux and other tribal groups had appealed to President Biden a day before his inauguration to take executive action to shut down Dakota Access.

“The ball is now in the Biden administration’s court,” Jan Hasselman, an attorney representing Standing Rock, told Grand Forks Herald after the court ruling on DAPL.

But the ongoing litigation over DAPL’s permit is not over yet, and the courts could rule in favor of activists and tribal groups even without the Administration’s executive action.

Analysts are not unanimous in their opinion whether the Biden Administration would proceed with sweeping executive orders regarding oil and gas infrastructure. Some say that killing Keystone XL was the low-hanging fruit and showing commitment to the climate agenda on the President’s first day in office. But others say that this could be the start of “the new normal,” as Southern Methodist University energy law professor James Coleman told Bloomberg Law.

Environment vs Jobs?

The pipeline saga and controversy spilled onto two portions of society that had rallied behind President Biden’s campaign—union workers and environmental activists. Climate advocates, emboldened by the end of Keystone XL, want more action from the Administration on shutting down pipelines, while trade unions Teamsters and North America’s Building Trades Unions (NABTU) criticized President Biden’s decision to stop the Canada-U.S. oil pipeline project.

“Environmental ideologues have now prevailed, and over a thousand union men and women have been terminated from employment on the project,” said NABTU.

“It will reduce good-paying union jobs that allow workers to provide a middle-class standard of living to their families. America needs access to various forms of energy that can keep its economy running in the years ahead. This decision will hurt that effort,” Teamsters said. 

By Tsvetana Paraskova for Oilprice.com

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