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New poster child for stranded assets: Dakota Access Pipeline



ImpactAlpha, July 7 – A federal judge ordered a shutdown within 30 days of the Dakota Access Pipeline on Monday, citing an Army Corps of Engineers “error” in omitting a full environmental impact statement. The contested pipeline, opposed by the Standing Rock Sioux Tribe and a broad coalition of activists, was increasingly an economic millstone as the price and production of North Dakota shale oil has cratered.

Another sign that pipelines are increasingly unviable: The cancellation on Sunday of the Atlantic Coast Pipeline, a 600-mile natural gas pipeline that would have cut under the Appalachian Trail and generated 67 million tons of climate pollution each year.

Developers Dominion Energy and Duke Energy cited legal uncertainty and ballooning costs, just weeks after the U.S. Supreme Court allowed the pipeline to proceed. But the Appalachian shale region has been one of the biggest losers in a global fossil fuel glut.

Mispriced risk: The fossil fuel industry’s $100 trillion blindspot

“Building more gas infrastructure now without a clear justification is a recipe for stranded assets,” said Lila Holzman of As You Sow.

Write-off watch

The end of the Atlantic Coast Pipeline reflects the changing capital expenditures in energy. Duke is writing off its $2.0 billion to $2.5 billion investment to date and investing in renewables, battery storage, energy efficiency and grid projects as part of a $56 billion capital investment plan. Dominion is largely exiting the transmission business with the sale of its natural gas pipeline and storage assets to Warren Buffet’s Berkshire Hathaway.

“Any investor thinking of putting cash into fossil fuel infrastructure projects should be warned they’re tossing their money away,” tweeted 350.org’s Bill McKibben.

Write-downs of stranded fossil fuel assets are here – and getting bigger

Financial fallout

The ruling on the Dakota Access Pipeline is the latest twist in a long-running battle over the 1,172 mile DAPL, which runs under the Missouri River adjacent to tribal lands. The ruling is certain to be appealed. Banks including Wells Fargo, JPMorgan Chase and Bank of America have financed more than two-thirds of the project. Even after the shutdown, pipeline owners Dakota Access LLC and Energy Transfer Crude Oil will be on the hook for payments from a $2.5 billion bond issued last year.

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