Any potential shutdown of the Dakota Access oil pipeline could literally derail grain and ethanol shipments in the Midwest, potentially costing the agriculture industry billions of dollars.
For years, a pending environmental impact statement has been hanging over the heads of the Dakota Access Pipeline, which takes oil from western North Dakota to a terminus in Illinois.
Some fear the outcome of the EIS could affect the operation of the pipeline.
A study by Elaine Kub, a commodity market analyst in South Dakota, showed the Midwest agricultural sector could suffer more than $3 billion in annual losses.
“A sudden shift like that would be really detrimental to rail congestion,” Kub said in an interview.
Her analysis of the Dakota Access impact came out in July, examining what would happen if the oil flowing through the Dakota Access pipe stopped.
But Sen. John Hoeven, R-N.D., says such a shutdown is unlikely.
Hoeven said he met with representatives from the Army Corps of Engineers, which is doing the review, in early August. He said a draft of the much-anticipated environmental review could be filed by the end of the month.
“That statement will have a variety of options in it — operate as is, operate with enhancements,” he said.
A judge in 2020 ordered the environmental review and pulled back a key permit, but the pipeline, which became operational in 2017, has continued to carry oil — the equivalent of 1,100 rail cars per day.
Hoeven said because the pipeline has been operating safely for years, a shutdown is unlikely. And when the draft is issued, there will then be a comment period, likely at least 90 days, so it will be months before anything becomes final.
“Ultimately, I believe the Corps will pick the option to continue as is, and of course, if they don’t pick that option, obviously it would end up in the courts,” he said.
Energy Transfer Partners, the company that built Dakota Access, did not comment on the situation and referred questions on the study to Kub.
Kub bases some of her analysis of the oil boom years of 2013 and 2014, before Dakota Access was built, and how oil traffic dominated the rails in North Dakota and elsewhere in the Midwest.
“We always know, of course, how much agriculture relies on efficient transportation and how transportation affects prices. But that was just such a clear demonstration of the direct relationship between freight prices and then the prices received by farmers, particularly in this region, where so much grain tends to be exported and really relies on rail transportation,” she said.
Particularly hard hit would be the ethanol industry, especially in Iowa, because the oil shipments would suck rail cars away from ethanol plants. The same goes for renewable diesel as its production ramps up.
“The processors of finished agricultural products like ethanol and renewable biodiesel, they really need those tanker cars, and they really need reliable service from the railroads to the same degree that farmers do,” Kub said.
Dave Ripplinger, a North Dakota State University professor who specializes in energy markets, said the state has built out its rail infrastructure since those boom years but a shift of oil would still be significant.
“If we go back to what was going on in the rail markets prior to DAPL being built, we had issues; congestion was one, but railcar availability and cost was the other,” he said. “When DAPL was built, all of a sudden you had that much fewer cars moving around or trains moving around, but it freed up a bunch of tanker cars.”
He said the logistics and strategy for transporting ethanol can vary from plant to plant, but “the impact on ethanol was pretty significant,” he said.
He said there are other economic development projects in the works that would rely on rail and could be affected by a pipeline shutdown.
North Dakota Agriculture Commissioner Doug Goehring noted that 83% of the state’s ag commodities get shipped by rail.
He said he is concerned about the influence of environmental activists on the Biden administration. Activists made Dakota Access Pipeline a flashpoint of protests during construction in 2016 .
“I’m really fearful about how determined they are to shut this down,” he said.
He said farmers should not only be concerned about rail shipments, but also about a spike in fuel prices.
Rising energy prices have been a driver of increased costs for other farm inputs, such as fertilizer, in recent years.
Hoeven said that if there were something in the environmental impact statement that had the potential to be impactful, a court battle is likely. And because the courts have allowed the pipeline to operate while the review was being conducted, it would likely be able to continue to operate in the next round of legal sparring.
Goehring said his office is prepared to back a legal challenge.
“We would go forward and support North Dakota’s efforts, the efforts of Attorney General (Drew) Wrigley to litigate this if the federal government tries to shut it down, or shuts it down,” Goehring said.
Source : Inforum