Sharpe: Dakota Access Pipeline, the irony

George Sharpe
Merrion Oil & Gas Investment Manager
George Sharpe, Merrion Oil and Gas investment manager

The Dakota Access Pipeline… The Agony of the Irony
September, 2016

Webster defines irony as “a situation that is contrary to what is expected and is often amusing as a result.”  Ironically, the Native American tribe and environmental extremists opposing the Dakota Access Pipeline (a 1,172-mile line to carry crude oil from North Dakota to refineries in Indiana) could end up with alternatives that are far worse for the environment, not to mention our pocket books and national security.  Unfortunately, there is nothing funny about it.  Let’s compare the facts to the fiction being spread by the fear mongers, and then let’s look at the ironic results should their “anti-everything” efforts be successful.

1.    If you google the Dakota Access Pipeline, the very first result is “Sign the Petition telling Obama to stop the pipeline from passing through tribal lands.” Get this… the pipeline doesn’t even cross the Standing Rock Sioux reservation (the tribe that has teamed up with Earthjustice and other environmental groups to oppose the pipeline).  Given that fact, a District Judge, “after scrutinizing the permitting process with particular care,” denied the tribes request to halt the pipeline.  Not surprisingly, the Obama administration has jumped in to halt the construction while it “reconsiders any of its previous decisions.”

2.    Even though it’s off their reservation, the Sioux are claiming that it will disturb lands that hold “sacred artifacts.”  Hmmm?  The route, as required by the government, has been thoroughly inspected by accredited archaeologists, who did not find any artifacts, sacred or not.  Believe me, if one pottery shard had been found, the pipeline would have been moved to avoid the arch site.

3.    The second objection being pursued by the suing Sioux and their environmental advisers is concern about water contamination.  Apparently there are a number of water crossings, including one boring under the Missouri River.  However, these borings are routine, and there are thousands of similar river crossings throughout the U.S.  While some older pipelines have shallow crossings that have some risk of exposure, this pipeline will be 90 feet below the bottom of the river and will be constructed using the latest technology for leak detection and control.  Of the thousands of similar river crossings, this will be the safest of the bunch.

4.    Now for the irony.  By opposing infrastructure projects like this pipeline and by pushing to ban fracking, the “Keep it in the Ground” obstructionists are focused on eliminating the domestic supply of oil and natural gas.  However, that does nothing to the demand side of the equation, which frankly, is where the bulk of the CO2 emissions occur.  I don’t see any of them volunteering to park their SUV’s and walk to the protests.  As long as America needs oil, the supply will come from somewhere and it will be transported somehow.  Eliminating supply sources here in the U.S. will only mean that oil will be more expensive and less reliable… it won’t mean we will actually use any less.  As shale plays like the Bakken in North Dakota have proliferated, America has reduced its dependency on imports from close to 70 percent to less than 50 percent, resulting in a freefall in the price of oil from over $100 per barrel to less than $50 per barrel.  If the environmental obstructionists have their way, that trend would reverse, and somehow “big greedy oil” will be to blame for the $4 per gallon gasoline prices.

U.S. Oil Production and Imports

5.    Here’s some tangential irony.  The U.S. Department of Energy’s enclosed chart of production vs imports is shamelessly attempting to credit the Obama administration with the recent domestic production growth.  Ironically, despite the millions the government receives from royalties, his administration has been an ever increasing roadblock.  As a result, ALL of the production increase has been from state and private lands, while production on federal lands is down during the same time period.  And the obstructionists cheer! 

Oil production on federal versus private and state lands

6.    Back on topic, the final irony is the fact that of all the means available to transport crude oil, pipelines are by far the safest.  The Fraser Institute compared pipelines to truck or train transport using data from the U.S. Department of Transportation from 2005 to 2009.  They found that the rate of injury requiring hospitalization among pipeline workers was 30 times lower than rail workers and 37 times lower than trucking.  When it came to spills, road transport had nearly 20 incidents per billion-ton-mile, rail had 2 incidents, and pipelines had only 0.6 incidents.  Of course oil that comes from the Middle East comes by sea.  Shipping spills don’t happen all that often, but they can make a bit of a mess.

The bottom line is that America needs North Dakota’s oil instead of oil from unstable areas such as Venezuela, Nigeria, and the Middle East.   This pipeline is the optimum way to get it to the refineries and into our lives.  Once the pipeline is installed, unlike trucks or trains going by every day, the neighbors won’t even know it’s there.  The opponents aren’t trying to optimize the location of the line to reduce the impact on the Sioux, their goal is to shut down the line, and ultimately to eliminate the domestic production of oil and natural gas.

They had better be careful.  They might just get what they hope for.