FEATURE: Another Bakken oil pipeline faces shutdown while DAPL appeal is pending

Houston — Another Bakken Shale crude oil pipeline is on the verge of potential closure as a series of governmental and court rulings have threatened the operation of existing pipeline systems.

The 67-year-old Tesoro High Plains Pipeline, which transports less than 100,000 b/d of Bakken crude, was ordered shut down earlier in July when the Interior Department's Bureau of Indian Affairs unexpectedly ruled the pipeline was illegally trespassing on Native American land. An appeal is expected to be filed shortly with the Interior Board of Indian Appeals.

The High Plains ruling came the same month that a federal judge ordered the shutdown of the much larger, 570,000 b/d Dakota Access Pipeline, threatening the production and transportation of crude from the Bakken. An appeal on that decision remains pending, but the potential closures of both DAPL and High Plains could have a chilling effect on the region's crude supplies, especially since DAPL is the Bakken's largest crude artery.

Marathon Petroleum's pipeline spinoff, MPLX, which acquired the Tesoro High Plains pipeline system last year, plans to appeal the ruling by the end of next week. Marathon had acquired Andeavor, which was previously called Tesoro. High Plains is fully operational in the meantime, MPLX said.

The pipeline treks through much of North Dakota's Bakken Shale and moves into Montana, connecting along the way to Marathon's 71,000 b/d Mandan refinery and Enbridge's pipeline system, as well as various storage and rail hubs, such as Crestwood's COLT rail facility.

High Plains is a "big source of crude supply to the Mandan refinery, but there are some other options as well," said Matthew Blair, an energy analyst with Tudor, Pickering, Holt & Co. The refinery would have to likely have to operate at reduced run rates if the pipeline closes, he said July 23.

If Bakken crude differentials further widen, especially if DAPL closes, Marathon could lean more on its other Midwest refineries, Blair said. Also, PBF Energy and Par Pacific could benefit from cheaper Bakken crude at their refineries in Wyoming and the Midwest.

Legal fight

The Bureau of Indian Affairs granted the original High Plains easement way back in 1953, and it's been renegotiated and renewed every 20 years, most recently in 1993. But talks over further renewals broke down over negotiations for compensation for the Native American landowners where the pipeline stretches.

Mediation was expected to continue into August, but the Bureau of Indian Affairs opted to rule in July, essentially determining that the pipeline has trespassed on private land since the last right-of-way expired in 2013.

"The pipeline was in trespass, and they took some action," said David Conrad, spokesman for Indian Affairs in the Interior Department, declining further comment for now.

The dispute involves the Mandan, Hidatsa and Arikara Nation, as well as individual landowners.

Marathon spokesman Jamal Kheiry said MPLX still hopes to resolve the matter amicably.

"We're committed to respecting their rights and working toward a solution," Kheiry said July 23.

In the meantime, he reiterated that the pipeline is running and an appeal is forthcoming. Even if there's a shutdown, MPLX insisted it is in good shape operationally.

"The Mandan refinery has various logistics options to secure crude oil supply, and Marathon Petroleum does not anticipate disruptions to its ability to meet customer commitments in the region," MPLX said in a statement.