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FEATURE: Wave of hearings starts in oil pipeline, federal leasing battles

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FEATURE: Wave of hearings starts in oil pipeline, federal leasing battles

Highlights

Line 3 oral arguments held March 23 in Minnesota

Biden administration kicks off leasing forum, review March 25

Federal DAPL hearing scheduled for April 9

Houston — A busy spring season of court and regulatory hearings for crude pipelines and federal oil and gas leasing kicks off March 23 with a long-shot court bid to stop the Line 3 Replacement project in Minnesota.

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A broader White House-led effort continues March 25 with the US Interior Department's forum to initiate a comprehensive review of its fossil fuels leasing program.

And then court fights attempting to shutter the Dakota Access Pipeline and Enbridge's Line 5 propane and crude pipeline in Michigan will extend into April and May and likely beyond as the scene is set over battles pitting environmentalists against the energy sector under President Biden's administration.

"We don't really know what the administration wants to do with these pipelines, and you have some environmental groups arguing Biden promised to stop them," said James Coleman, an energy law professor at Southern Methodist University. "What we do know is they will face legal challenges both from environmentalists and from states and companies supporting the oil and gas industry."

Biden's campaign pledged to cancel TC Energy's long-pending Keystone XL Pipeline project, and the president did just that on his first day in office. But Biden also had made the even bigger pledge to ban new oil and gas permits on federal lands. While many did not take that pledge literally, Biden did put a 60-day pause on most permits that expired at the end of last week. Well permitting has continued, but at a slower pace than under former President Trump.

"He's spent a lot of time walking back that campaign promise, but we don't know how far he's going to walk it back," Coleman said.

Federal lands moratorium

Biden did initiate an indefinite moratorium on new oil and gas lease sales on federal lands, which canceled scheduled lease sales in March and April onshore and in the Gulf of Mexico, while a more thorough review of the federal leasing program is conducted.

"We're going to review and reset the oil and gas leasing program," Biden said on Jan. 27. "Let me be clear, and I know this always comes up, we're not going to ban fracking."

That review starts March 25 under new Interior Secretary Deb Haaland with a public forum to discuss the issues at hand. That hearing comes after Biden's national climate adviser, Gina McCarthy, led a meeting March 22 with prominent oil and gas executives in which they pledged to work together and support some form of carbon pricing on emissions.

While the ongoing leasing moratorium won't affect US crude oil and gas production much in the near term because existing leases and drilling permits are not impacted and big producers have ample inventories of undrilled well permits, the move could still push the industry to shift its focus from federally controlled regions such as New Mexico's Delaware Basin, the Rockies and much of the deepwater Gulf of Mexico.

Heavy oil from Canada

With the cancellation for now of Keystone XL -- more than 20 states are suing Biden claiming executive overreach -- the impetus to move heavy Canadian oil sands to the US was placed on Enbridge's competing Line 3 Replacement project.

The more than $7 billion Line 3 project is finished on the Canadian side of the border and about 50% completed in the US, where construction is concentrated in Minnesota, and is slated to come online in the fall. But protests and arrests have escalated along the route, with the project on the edge of becoming the epicenter of the anti-fossil fuel movement in the US as opponents aim to pressure Biden into action.

The 370,000 b/d existing Line 3 is more than doubling to 760,000 b/d with the Line 3 Replacement as it moves Canadian crude from Alberta to Superior, Wisconsin. The pipeline runs more than 1,000 miles and would serve as a larger artery to move more heavy crude from Canada to the Midwestern US and, ultimately, to the major refining corridor along the US Gulf Coast.

A March 23 court hearing before the Minnesota Court of Appeals is for oral arguments in a long-shot bid to stop Line 3, contending that improper data was used to justify the demand for crude oil and the pipeline during an energy transition away from fossil fuels.

The court will have 90 days to make a ruling after oral arguments.

Fate of Dakota Access

Considered more precarious than Line 3, though, is the four-year-old Dakota Access Pipeline, which could be shuttered in the coming months.

A federal appeals court ruling in January said the DAPL is operating without the necessary legal permitting and that it is up to the US Army Corps of Engineers, now under the Biden administration, to determine whether it will let the Energy Transfer-operated pipeline continue to flow Bakken Shale crude during an ongoing environmental review.

US District Judge James Boasberg, who supported shuttering the pipeline last year, will lead the April 9 hearing to discuss the Corps of Engineers' plans. Either Boasberg or the Corps could order the pipeline closed.

Fight with Michigan governor

As far as Enbridge, there is the ongoing fight over Michigan Gov. Gretchen Whitmer's order to permanently close the Line 5 propane and crude pipeline by May 12.

The 68-year-old Line 5, which Enbridge is proposing to partially replace, transports up to 540,000 b/d of NGLs, including propane for home heating and crude oil from Western Canada to various hubs in the US Midwest and Eastern Canada.

Whitmer, a Democrat, ordered the shutdown of Line 5 in November, citing safety violations. Enbridge has pledged to defy the governor's order and has taken the matter to federal and state court.

What past presidential administrations have proven is that it is much easier to cancel pipeline and infrastructure projects than to get them built. Trump could not push Keystone XL through over four years, and Biden canceled it on his first day, Coleman said. Biden, however, might have just as much trouble building transmission lines for solar and wind power nationwide.

"The Biden administration has to be careful," Coleman said. "Any legal precedents set against pipelines absolutely will be used against power lines as well."