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Energy Transfer's Dakota Access Pipeline Wins a Temporary Reprieve to Keep Flowing

By Matthew DiLallo – Updated Jul 15, 2020 at 10:09AM

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The controversial oil pipeline still might have to shut down if it loses an appeal.

A federal appeals court will allow the Dakota Access Pipeline to continue shipping oil for the time being. The temporary administrative stay will allow the pipeline's operator Energy Transfer (ET -6.89%) to keep the oil flowing, pending its appeal of a judge's order to shut down and drain the system by Aug. 5. That closure would remain in effect until the completion of another environmental review, which could take 13 months.  

The District of Columbia's U.S. Circuit Court of Appeals, which issued the administrative stay, made it clear that it's temporary and "should not be construed in any way as a ruling on the merits." Instead, it will allow the pipeline, which has been operating since 2017, to continue shipping oil until the court rules on the appeal.

If Energy Transfer and its partners win, they'll be able to maintain the pipeline's operations during the environmental review. If not, they'll need to shut the line down, while likely appealing the ruling to the U.S. Supreme Court.

A judge holding gavel in courtroom.

Image source: Getty Images.

The temporary stay is a positive development for Energy Transfer and its partners, which vowed to fight so that oil could continue flowing through the pipeline. Losing this battle would be costly since a shutdown would affect their cash flow and force the owners to inject new equity into the partnership, which would have a major impact on their finances.

Meanwhile, a long-term pipeline shutdown would affect oil producers in the Bakken region, which rely on it to ship their production from North Dakota to refineries in the Midwest and Gulf Coast. Given its importance to pipeline companies and oil producers, the court's eventual ruling will likely be a needle-moving event for the industry.

Matthew DiLallo owns shares of Energy Transfer LP. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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