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'No' for Now: U.S. Army Denied Dakota Pipeline Easement

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'No' for Now: U.S. Army Denied Dakota Pipeline Easement PART 2 OF 3

Dakota Pipeline Permit Denial Could Impact Energy Transfer

Market performance

Stock of Energy Transfer Group companies—those involved directly or indirectly in the Dakota Access Pipeline project—fell on December 5, 2016, following the announcement. However, the decline was less than expected due to hopes of the pipeline getting a permit after Donald Trump assumes office in January.

Energy Transfer Partners (ETP), Sunoco Logistics Partners (SXL), and Energy Transfer Equity (ETE) fell 1.7%, 1.9%, and 2.5%. At the same time, the Alerian MLP ETF (AMLP) fell 0.5%.

Dakota Pipeline Permit Denial Could Impact Energy Transfer

Energy Transfer Partners and Sunoco Logistics already lost ~17% and ~27% of their market value since the beginning of the protest. Energy Transfer Equity, which depends on Energy Transfer Equity and Sunoco Logistics for distribution income, fell~15%.

Possible impact on Energy Transfer

The Dakota Access Pipeline is part of a $4.8 billion Bakken Pipeline project that would move crude oil from the Bakken Shale formation to refineries on the Gulf Coast. The Dakota Access Pipeline is a 1,172-mile, 30-inch, crude oil pipeline that’s expected to carry 470,000 barrels per day of oil from the Bakken Shale in North Dakota to refining markets in Illinois. The project is supported by long-term, fee-based contracts. The project is in the advanced stage and most of the pipeline has been laid. Only the section near the Missouri River is left for drilling.

The Dakota Access Pipeline is an important project for Energy Transfer Equity (ETE) and its subsidiaries to grow their distributable cash flows and resume distribution growth. Together, Energy Transfer Partners and Sunoco Logistics Partners own a majority stake in the project.

Energy Transfer Equity’s earnings depend on distribution income from its subsidiaries and announced reductions in incentive distribution rights to support its growth plans. Completing projects is important for Energy Transfer Group to lower its massive leverage.

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