Energy Transfer (NYSE:ET) told its investors this week that it plans to complete an expansion of its Dakota Access Pipeline by the third quarter of next year. That project would effectively double the system's capacity from its current level of 570,000 barrels per day (BPD).
Energy Transfer and several partners initially finished up the $4.78 billion, 1,915-mile pipeline system from North Dakota to Texas in June of 2017 following several months of delays due to intense opposition to the project. The pipeline initially had 470,000 barrels of capacity, but the company has since increased it to 570,000 BPD due to strong demand for pipeline space.
Despite lower oil prices this year, which forced producers to cut back supplies, demand for future capacity was strong enough for shippers to support the expansion project with capacity commitments. That's because the pipeline offers them a more direct, cost-effective, safer, and more environmentally responsible option than to ship this oil by truck or rail.
However, while pipelines are better options for shipping oil, they pose a risk to the environment as leaks can damage ecosystems and taint drinking water. That potential impact has caused intense opposition to Dakota Access, which runs underneath Lake Oahe, a key water source in South Dakota. Because of that, the court battles to stop the pipeline didn't end after it entered service. In July, a judge ordered that the pipeline shut down until the completion of a new environmental review. While the company won a reprieve, the courts could still shut it down pending that review, which could result in a permanent closure. Because of that, the company's expansion project is a high-stake gamble, as it will either win big by doubling down on capacity or lose its entire bet.