Dept. of Alternative Facts: Solving a Crisis of One’s Own Making

crisis (n) a turning point for better or worse

Presidential whim or will prompted President Obama to stop the approval of the right of way of the Dakota Access Pipeline near the point of crossing of the Missouri river just north of the Standing Rock Sioux reservation.  Whim or will prompted President Trump to reverse President Obama’s order, thus allowing Energy Transfer Partners (ETP) to procede with construction.  Beyond the images of protestors in tents and officials in military style vehicles awaiting their exit, a number of questions beg answering.

First, what is the purpose of building infrastructure, such as pipelines, which promote fossil fuel production?  Once something is built, it tends to be used at the expense of other infrastructure that might promote different behavior and consequences.  We want to get a return on our investment.  But, if we invest in fossil fuels, we will have little incentive to find other ways to generate energy.  If we invest in solar, wind, and water projects, we will use those.  Whether you advocate renewable versus non-renewable energy sources has to do with a variety of assumptions that you make about energy sources, the physical and social environment, and sustainable living.  I doubt I will convert anyone from their existing positions on this topic.

Second, who is invested in completing this pipeline?  Most immediately, ETP has spent over $3 billion, with expectation that they would get approval for this location for crossing the pipeline (which is underground before and after the Missouri River and Lake Oahe).  Enbridge Energy Partners and Marathon Petroleum have smaller investments in aspects of the project.  Several other companies looked into pipeline proposals from the oil-fields in the Dakotas to refineries in the Mid-West region, but decided to not pursue them.  Thus ETP is the primary company which would benefit from completing this project.

Of course, building projects require construction loans, based in the assumption that once the project is finished, they can repay the interest and principle of the loan.  Thirty-eight banks have lent money to four subsidiaries of ETP.  Thus, the banks want ETP to succeed in order to get their money back.  Of course, a basic principle of capitalism is that if someone makes a poor business decision, possibly based on faulty assumptions, that person (or company) should be allowed to fail.  ETP and the banks want their $3 billion back.  They do not want to own up to having assumed the route was secure before they had the approval.  But, a common political game to partially build something, then claim that some group is preventing you from completing your project.

Third, why was this route chosen, if the land easements were not secured (the point in contention is about 1000 feet under federal government responsibility)?  The initial route options included some that traveled north of this region, closer to Bismark, ND.  These routes were not approved by the Army Corp of Engineers.  The rationale was that a pipeline near Bismark would threaten the water source for those region.  This southern route was selected, arguing that fewer people would be at risk if a leak occurred.  Yet, Lake Oahe is the water supply for the Standing Rock Sioux, and 2.5 million people are downstream from the point where ETP plans cross under the Missouri River.  This begs the question, if the project threatened Bismark’s residents, why does not threaten those down river from the southern route?

Fourth, if 99% of the route is no private land, and none of the route crosses the Standing Rock Sioux reservation, why are Native American tribes outraged?  One criticism of the protests over the past year was that it was co-opted by many other groups and Native American tribes which do not have direct concern in the matter.  We like to forget, ignore, or be ignorant of how our federal government has treated treaties with Native American tribes.

In 1851, the USA and Sioux nation signed the Fort Laramie Treaty, which established the boundaries of the Standing Rock Sioux territory.  In 1862, the USA carried out military activity (aka war) with the Sioux and Cheyenne nations, because the USA believed that the Black Hills contained gold.  The USA military “won” and required the Sioux to relinquish the land north of the existing boundaries of the Standing Rock Sioux reservation.  This land included the “private land” which ETP has easements on up to the federal land crossing the Missouri River and Lake Oahe.  The issue did not die out with the generation involved in the 1862 conflict.  In 1980 the Supreme Court ruled that the federal land grab was illegal because the Sioux were not compensated for the land.  The solution was for the federal government to offer the Standing Rock Sioux financial compensation.  They have refused payment for over 35 years, simply asking to have the treaty honored, and the land returned to the reservation.  Thus, many acres along the route of the pipeline are under disputed private ownership.

Finally, what is the economic justification of the pipeline and refinery project?  The major claims are that the pipeline will create a safer route for the crude oil coming from the oil-fields (rather than railroad transport), and will add to the USA’s energy independence.  When the project was pitched to the banks in 2014, crude oil prices were between $80 to $100 per barrel.  The Dakota oil-fields can be profitable when the price for oil is above $60.  Not too long after the project was started, prices dropped and remained in the mid-$50’s level.  Certainly, prices will fluctuate, but the likelihood that the demand for oil will drive the price up is speculative and not on the horizon.  Thus, ETP is risking building a pipeline that will not be profitable enough to turn on.  Furthermore, the USA is an energy exporter at this point, thus more extraction of fossil fuels adds the glut in world markets.

But, once a pipeline is laid, it is hard to justify not turning it on.  When is it is not making money, who is going to have the diligence to assure that it runs safely.  Just ask WV coal miner’s who have lost coal mining momentum to the federally funding railroad lines to the Dakota coal fields… have to make good on that investment in a railroad to nowhere.

Oh, and did ETP assure the easements through a lot of Iowa farmer’s fields?   No.


About hermitsdoor

Up here in the mountains, we have a saying, "You can't get there from here", which really means "We wouldn't go the trouble to do that". Another concept is that "If you don't know, we ain't telling." For the rest, you'll have to read between the lines.
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3 Responses to Dept. of Alternative Facts: Solving a Crisis of One’s Own Making

  1. Laurie Graves says:

    I agree. Oil is so twentieth century. Onward!

  2. Great questions, and excellent perspective, Oscar. Thank you.

    • hermitsdoor says:

      This is my cynical view of bureaucracies and business: create a crisis that justifies your position, mission, or product/service. These folks are technical writers, not creative writers. More posts to come.

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