Philly company Sunoco is deeply invested in contentious Dakota pipeline
The Obama administration's decision to block completion of the contentious Dakota Access Pipeline has direct impact on Sunoco Logistics Partners LP, the Newtown Square company that would operate the $3.8 billion crude-oil pipeline.
Sunoco Logistics and its parent company, Energy Transfer Partners LP, which are on the hook for more than $2 billion in the project, denounced the decision by the U.S. Army Corps of Engineers to block the pipeline from crossing the Missouri River as a "purely political action."
"This is nothing new from this administration, since over the last four months the administration has demonstrated by its action and inaction that it intended to delay a decision in this matter until President Obama is out of office," the companies said in a statement released late Sunday.
A spokesman for president-elect Donald Trump said Monday that the new administration would review the permit denial after it takes office. The Corps declined to grant ETP an easement to build under Lake Oahe, a dammed part of the Missouri River in North Dakota. The agency said it would begin a lengthy environmental review to determine whether to reroute the pipeline.
Trump spokesman Jason Miller told reporters Monday that the pipeline "is something we support construction of, and we will review the situation when we are in the White House to make the appropriate determination at that time."
The 470,000-barrel-a-day pipeline, which is mostly completed, is designed to transport crude oil from North Dakota shale fields 1,172 miles across four states to a terminal in Patoka, Ill., where the oil can be transferred to an existing pipeline to the Gulf Coast, or to oil trains for East Coast destinations.
The underground 30-inch pipeline would be built on private land in southern North Dakota, but would cross under federally controlled Lake Oahe near the Standing Rock Sioux Reservation. The tribe says the pipeline threatens drinking water and cultural sites. Other tribes and environmental activists have rallied to the Sioux cause.
The pipeline would compete with oil trains that now move most of the Bakken production to refineries. It would dramatically reduce the cost of transporting oil out of the Bakken formation, making the Dakota crude more competitive and presumably more attractive to drillers.
Sunoco Logistics and ETP own 75 percent of the Bakken Pipeline Project, which includes the Dakota Access Pipeline as well as the 700-mile pipeline connecting the Illinois terminal to the Gulf Coast. Phillips 66 owns the remainder of the project.
In August, ETP and Sunoco announced the sale of about half their stake of the Bakken Pipeline for $2 billion to a joint venture of Enbridge Energy Partners LP and Marathon Petroleum Corp.
The sale is not believed to have closed because it is contingent upon the project's getting all approvals. Sunoco Logistics would receive $800 million from the sale.
Without the sale, ETP and Sunoco's exposure on the project is about $2.65 billion, including $1.6 billion of equity and $1 billion of debt financing, Philip C. Adams, an analyst for Gimme Credit LLC, said in a report Monday.
ETP and the president-elect have a shared history. Trump disclosed in 2015 that he owned ETP partnership units valued at $500,000 and $1 million. He reported the value in May at no more than $50,000. Trump's spokesman recently told reporters that he sold the holdings in July.
Kelcy L. Warren, the chief executive of ETP, contributed $3,000 to Donald Trump's campaign and $100,000 to political action committees that supported Trump.
During a call with investment analysts on Nov. 21, when ETP and Sunoco announced plans to merge, Warren denounced the government's opposition to Dakota Access as "unlawful."
Sunoco and ETP on Sunday did not hide their displeasure with the outgoing Obama administration in their joint statement.
The companies contend that they have "done nothing but play by the rules." The pipeline largely follows an existing natural gas pipeline route, and makes numerous other river crossings. It would be horizontally drilled 90 feet beneath Lake Oahe rather than laid on the lake bed. The Corps in July granted a permit for the Lake Oahe crossing, but had not yet granted an easement.
With thousands of protesters encamped near the site, the Corp's decision Sunday to block the project "is just the latest in a series of overt and transparent political actions by an administration which has abandoned the rule of law in favor of currying favor with a narrow and extreme political constituency," the companies said.
The companies have fought injunctions against the project and prevailed in U.S. District Court, and have asked the U.S. Court of Appeals to intervene. They said they remain "fully committed" to building the project without any additional rerouting in and around Lake Oahe.