Judge orders temporary shutdown of controversial Dakota Access Pipeline

New York(CNN Business) The Dakota Access Pipeline must shut down by August 5 during an in-depth environmental review of the controversial project, a district court ruled Monday in a defeat for the Trump administration.

The rare shutdown of an operating pipeline marks a major win for the Standing Rock Sioux Tribe and environmental groups that have fought fiercely for years against the oil pipeline.

In its decision, the United States District Court for the District of Columbia vacated an easement granted by the US Army Corps of Engineers that allowed Dakota Access to build a segment of the pipeline beneath Lake Oahe in North Dakota and South Dakota.

The court had previously ruled the Corps violated the National Environmental Policy Act when it granted the easement because it had failed to produce an Environmental Impact Statement.

Now, the court is saying the pipeline must be shut down and emptied while the environmental impact report is prepared. The Corps has said it will take approximately 13 months to create such a report.

"Fearing severe environmental consequences, American Indian Tribes on nearby reservations have sought for several years to invalidate federal permits allowing the Dakota Access Pipeline to carry oil under the lake," Judge James Boasberg wrote in the ruling. "Today they finally achieve that goal — at least for the time being."

Energy Transfer (ET), which developed the pipeline, said in a statement the "ill-thought-out" ruling is "not supported by the law or the facts of the case" and that Judge Boasberg "exceeded his authority." The company, whose shares tumbled 7% on Monday, said it plans to file a motion to stay the decision and potentially seek an appeal from the Court of Appeals.

Stretching more than 1,100 miles, the pipeline carries crude from the Bakken shale oil field of North Dakota to a key hub in Illinois, where it can be transported to refineries on the Gulf Coast or East Coast.

The court acknowledged that the shutdown will cause "disruption," but said the "seriousness of the Corps' deficiencies outweighs the negative effects of halting the oil flow for the thirteen months" the review is estimated to take. The National Environmental Policy Act of 1970 (NEPA) requires agencies to consider the environmental consequences of their actions, including permit approvals.

"Today is a historic day for the Standing Rock Sioux Tribe and the many people who have supported us in the fight against the pipeline," said Mike Faith, chairman of the Standing Rock Sioux Tribe, said in a statement. "This pipeline should have never been built here. We told them that from the beginning."

Energy Transfer warned shutting down the pipeline would cause billions of dollars in lost tax and royalty revenue for states, local and tribal governments.

"Shutting down this critical piece of infrastructure would throw our country's crude supply system out of balance, negatively impact several significant industries, inflict more damage on an already struggling economy, and jeopardize our national security," the company said in its statement.

Energy Transfer argued that shutting the pipeline would "ironically" cause "increased environmental risks" because crude would need to travel by rail instead.

In 2013, 47 people died and dozens of buildings were destroyed in Quebec during a derailment of a runaway train carrying crude oil.

If Biden wins, pipeline could be in trouble

The ruling marks a setback for President Donald Trump's energy dominance agenda. Within days of taking office in January 2017, Trump signed executive actions that advanced both Dakota Access and the Keystone XL pipeline.

"It is disappointing that, once again, an energy infrastructure project that provides thousands of jobs and millions of dollars in economic revenue has been shut down by the well-funded environmental lobby, using our Nation's court system to further their agenda," Energy Secretary Dan Brouillette said in a statement.

Brouillette said the Trump administration will "continue fighting for the expansion of American energy infrastructure, well-paying jobs for the American people, and the strengthening of our energy security and reliability."

But Bob McNally, president of consulting firm Rapidan Energy Group, said the ruling shows the court's "frustration with what it regards as the Trump administration's lackadaisical handling" of environmental reviews has "finally boiled over."

The ruling also suggests the fate of the pipeline could now be linked to the November presidential election.

"If Donald Trump wins DAPL could restart after 10-12 months assuming a robust NEPA review was followed," McNally, a former energy official under President George W. Bush, told CNN Business in an email. "If [Joe] Biden wins, we think DAPL is effectively dead."

After months of protests and lawsuits, the Dakota Access Pipeline started operating in June 2017. The $3.7 billion project spans 1,172 miles and carries crude from North Dakota's shale fields to Illinois.

Opponents have argued the pipeline could contaminate drinking water and destroy burial and prayer sites of Native Americans.

"It took four long years, but today justice has been served at Standing Rock," said Jan Hasselman, an Earthjustice attorney representing the Standing Rock Sioux Tribe, said in a statement. "If the events of 2020 have taught us anything, it's that health and justice must be prioritized early on in any decision-making process if we want to avoid a crisis later on."

'Terrible ruling'

Supporters of Dakota Access slammed the decision.

"Today's order to shut down Dakota Access jeopardizes our national and energy security and raises significant concerns for the future of American energy infrastructure investment," Craig Stevens, a spokesman for the GAIN Coalition, which promotes key infrastructure investments, said in a statement.

Stevens noted that since launching three years ago, the Dakota Access Pipeline has safely transported more than half a million barrels of crude per day.

"Despite its safe operation and having received the necessary permits and approval from both state and federal regulators, Judge Boasberg has decided to side with environmental activists to shut in our nation's critical natural resources," Stevens said.

Republican Senator Kevin Cramer of North Dakota warned of "devastating consequences" to his state and to the nation's energy security.

"This terrible ruling should be promptly appealed," Cramer wrote in a statement.

The ordered shutdown of Dakota Access comes just a day the cancellation of the Atlantic Coast Pipeline, a natural gas pipeline announced in 2014. Dominion Energy and Duke Energy (DUK) said they decided that ongoing delays, litigation and expected cost increases threatened the viability of the project, which faced intense criticism and legal challenges from environmental and other groups.

Richmond, Virginia-based Dominion (D) is pledging to become a "pure-play" regulated clean energy company. The utility announced a $10 billion deal Sunday to sell natural gas transmission and storage assets to Warren Buffett's Berkshire Hathaway (BRKA).

The American Petroleum Institute, which represents oil and gas companies said the ruling proves America's permitting system is broken.

"Between the Atlantic Coast Pipeline cancellation and now the ruling to shut down the Dakota Access Pipeline -- we are deeply troubled by these setbacks for US energy leadership," said Mike Sommers, CEO of the American Petroleum Institute. "Our nation's outdated and convoluted permitting rules are opening the door for a barrage of baseless, activist-led litigation, undermining American energy progress and denying local communities the environmental, employment and economic benefits modern pipelines provide."