A recurring theme in recent commentary on the Dakota Access Pipeline is that it’s becoming an increasingly high-risk investment, and that all the political controversy and uncertainty in the news surrounding the pipeline will result in investor flight — in the end, leaving the unfinished pipeline as a “stranded asset.”
In the specific case of DAPL, the Obama administration’s denial of an easement in November has delayed completion of the project until — at best — some indefinite time in 2017. Advocates of the project warn that delay of completion past New Years caused a number of contracts to expire, leaving oil producers free to abandon their commitment to use the pipeline. And even with an oil industry- and pipeline-friendly Trump administration, the highly visible public opposition to DAPL combined with the bureaucratic uncertainty involved in overturning the Army Corps of Engineers’ decision, and the declining profitability of unconventional oil recovery, mean investors will be taking a second and third look at the wisdom of keeping their money in such a shaky ventury or investing in similar projects in the future.
Even without a political decision by the Obama administration, continued obstruction by water protectors might well have delayed completion of the Missouri River crossing into this year.
And in any case — again, even without official political vetos — large-scale demonstrations with non-violent direct action to hinder construction seem to be becoming a standard feature of all new pipeline projects. Just today, I saw in the news that Energy Transfer Partners is planning to build a new stretch of pipeline in Louisiana — the Bayou Bridge project — to carry oil from the completed DAPL to the Gulf. A public hearing in Baton Rouge was packed by hundreds of people, and anti-pipeline activists promise that if construction is approved Atchafalaya Basin will become the next Standing Rock.
We can safely predict that every projected pipeline route that comes near vulnerable water resources, populations, or significant natural or cultural landmarks, will become the site of tent cities and extremely ugly confrontations between highly unsympathetic paramilitary police forces and non-violent local populations. The costly delays and hiring of rent-a-cops will become a standard feature of every pipeline project, figuring into the cost projections of prospective investors. And where multiple unfinished projects are planned in coordination with each other, the uncertainty of completing any one project or rendering it unfeasibly costly — as with DAPL and Bayou Bridge — will increase the uncertainty of the other projects as well.
Also entering into the lifetime cost calculations of planners and potential investors in future pipeline projects will be the unavoidable fact that even after completion, pipelines will pass through hundreds or thousands of miles of sparsely populated and indefensible country, and include numerous pumping stations and other vulnerable chokepoints that cannot be effectively defended without making total costs prohibitive. Another potential cost is the divestment movement, with mutual funds, university endowments and the like threatening to dump billions in securities from companies that invest in pipelines.
For that matter, oil company, pipeline company and investment company executives might just get tired of being splashed with oil every time they go to church or the country club or eat out at a restaurant. As Utah Phillips observed, the people killing our Mother Earth have names and addresses.
Unconventional recovery methods like shale fracking and tar sands were already only marginally profitable at best, simply because of basic principles of physics like Energy Return on Energy Investment (EROEI). Such expensively recovered oil produces a much smaller margin of net energy over and above the energy costs of extraction and refining, compared to older high-EROEI reserves like Saudi light sweet crude, and the profitably recoverable portions of such reserves are considerably smaller than reserves in the Persian Gulf projected to go offline. In the meantime, solar energy’s cost per watt continues to drop, and renewable energy production capacity grows exponentially, further reducing demand for costly unconventional fossil fuels.
When you add to these facts — which have been on the table for some time — the additional costs of direct action and obstruction by protestors, it’s a totally different world for potential pipeline investors. And probably one they don’t want to live in.
