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Dakota Access Pipeline shifts to 'solid bet' with Trump win: analyst

Washington (Platts)--9 Nov 2016 154 pm EST/1854 GMT


The controversial Dakota Access Pipeline could face another two months of delay in federal permitting but will ultimately receive the needed approval when President-elect Donald Trump takes office in January, analysts predicted Wednesday.

"Dakota Access went from being in some doubt to being a solid bet with this election," said Ethan Bellamy, senior analyst for Baird.

Pipeline sponsor Energy Transfer Partners' shares were up 11.7% Wednesday afternoon at $37.28.

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Trump's support of US oil and gas development and his close ties to Harold Hamm, CEO of key Bakken producer Continental Resources that stands to gain from improved netbacks from Dakota Access, make it highly likely he will greenlight the project, Bellamy said.

Trump also holds personal investments in pipeline sponsors Energy Transfer Partners and Phillips 66, according to a financial disclosure during the campaign.

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The $3.8 billion project to carry Bakken crude to Illinois has been beset by protests, court fights and an extended review by the Obama administration since August. While nearly all of the pipeline sections have been installed on private land, the project still needs an easement from the US Army Corps of Engineers to cross under Lake Oahe, a dammed section of the Missouri River in North Dakota.

Christi Tezak, a managing director of ClearView Energy Partners, expects the Obama administration to continue studying the possibility of a reroute, which the company might be willing to accept. Trump would then either reverse course on a proposed reroute or simply issue the needed easement "very quickly upon entering office," she said.

An approval by Trump in January could allow the company to start the pipeline about 90 days later in April, Tezak said.

ETP releases its third-quarter earnings after markets close Wednesday and will hold an earnings call Thursday. The company is also due in US district court in Washington, DC, Thursday for a status conference on a suit by the Standing Rock Sioux Tribe, which wants to stop the project based on its threat to sacred sites and drinking water supply.

ClearView Energy Partners said Trump could also attempt to revive TransCanada's Keystone XL pipeline, as he mentioned on the campaign trail.

Last year, TransCanada lost its years-long fight for a US presidential permit for the Alberta-to-Texas pipeline when President Barack Obama rejected it for a second time.

TransCanada could not immediately be reached for comment Wednesday.

Bellamy said the prospects for a revived Keystone XL look much less certain than those for Dakota Access.

"We have ample long-haul pipeline capacity, and DAPL itself would take away volumes that might otherwise have migrated to Keystone XL," he said. "Certainly the underlying economics of Keystone have eroded since its initial proposal, but we'll see how long-term KXL backers are thinking about North American oil markets based on their desire to reignite the project under a more amenable US regime."

Canadian oil sands production is not a big focus for investors right now, Bellamy said, but they could be thinking five-10 years out, when routes to either Canadian coast will remain more challenging than a southern route through the US.

Platts news and news analysis is independent, objective and neutral.

--Meghan Gordon, meghan.gordon@spglobal.com

--Edited by Derek Sands, derek.sands@spglobal.com

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