- Plug pulled on gas and oil pipelines as prices slip
- Risks to investing in fossil fuels appear to rise with court ruling against Dakota Pipeline
- Environmentalists hail decision to stop Dakota Pipeline a day after Duke and Dominion scuttle Appalachian pipeline
Oil and natural gas companies are reeling after a pair of multibillion-dollar pipeline projects were stopped, leading one company to sell its gas assets, highlighting growing risks to fossil fuel investors and raising prospects for renewable energy.
A federal judge Monday ordered the controversial Dakota Access oil pipeline emptied while an environmental review is completed. Construction on a gas pipeline under the Appalachian Mountains was canceled over the weekend by owners Duke Energy and Dominion Energy, who said that despite the U.S. Supreme Court upholding its rights to build the project, they saw only delays and uncertainty. Dominion is also selling its gas transmission and storage assets to Warren Buffett’s Berkshire Hathaway Energy, and today trimmed its 2020 operating earnings guidance.
The Supreme Court Monday also declined to permit construction of a part of the Keystone XL pipeline that had been blocked. Meanwhile, oil prices have dropped 30% this year, despite climbing in recent weeks. Natural gas prices have fallen steadily over the past year, slipping 21% this year.
Closure of the 1,200 mile Dakota Access, which carries Bakken Shale oil past the Standing Rock Sioux Reservation, was hailed by environmentalists who see it as a warning to big energy companies.
“The past 24 hours have sent a loud and clear message to fossil fuel corporations still committed to constructing dangerous pipelines — the future does not belong to you,” Greenpeace USA Climate Director Janet Redman said in a statement. U.S. Senator Bernie Sanders called for an end to dependence on fossil fuels, and former Democratic presidential candidate Tom Steyer said the pipeline halts were “big wins for our planet.”
U.S. District Judge James Boasberg in Washington, in his decision to halt Dakota, acknowledged economic harm will result. The court filing says the pipeline might lose as much as $643 million in the second half of the year and $1.4 billion in 2021 if shut down.
“At least some immediate harm to the North Dakota oil industry should be expected,” he wrote. “The Court does not take lightly the serious effects that a DAPL (Dakota Access Pipeline) shutdown could have for many states, companies, and workers.”
Pipeline operator Energy Transfer said the ruling “is not supported by the law or the facts of the case” and that it plans to appeal.
Damage was immediate for investors in Energy Transfer, whose stock slumped 12% on fears the company will be required to pay out millions after it raised $2.5 billion in bonds last year. Insurance companies and mutual funds bought the bonds, according to Reuters, which said pipeline investors will contribute equity in the event of a shutdown.
Shares in the Atlantic Coast pipeline builders also dropped. Dominion fell 11% and Duke fell 2.5%.
Such court rulings are raising fears among investors of the costs of so-called stranded assets, or useless infrastructure that continues to require costs for upkeep. Energy companies transitioning away from carbon-based fuels are creating such assets that insurers, companies and bondholders may end up paying for if they go unused.
Meanwhile, shares in solar panel maker First Solar rose 7.1% Monday. Solid growth in solar and other renewables is expected this year.