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"Financial Disaster": Could Dakota Access Pipeline Lose Its Contracts with Oil Companies on Jan. 1?

StoryDecember 05, 2016
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Guests
Clark Williams-Derry

director of energy finance at the Sightline Institute.

Michael Vendiola

a member of the Swinomish Indian tribal community.


Throughout November, protesters held dozens of demonstrations worldwide at banks to demand they divest from the $3.8 billion Dakota Access pipeline. Already, the largest bank in Norway, DNB, has been pressured to sell its assets in the companies behind the pipeline, and it’s considering whether to terminate three separate loans the bank has made to finance the project. Meanwhile, a new report has exposed the "Rickety Finances Behind the Dakota Access Pipeline." Published by the Institute for Energy Economics and Financial Analysis and the Sightline Institute, it spotlights a potential economic weakness of the project: the January 1 deadline by which Energy Transfer Partners had promised oil companies it would have completed construction. Missing the January 1 deadline opens up the possibility the pipeline company may lose its contracts with oil companies. We speak with co-author Clark Williams-Derry, director of energy finance at the Sightline Institute, and Michael Vendiola, member of the Swinomish Indian tribal community who helped organize a protest at Wells Fargo in solidarity with Standing Rock and with the Canadian First Nations resisting another major oil pipeline—the Kinder Morgan Trans Mountain expansion project.


TRANSCRIPT
This is a rush transcript. Copy may not be in its final form.

AMY GOODMAN: We’re going to turn now to our last segment. Across the world, protesters have been targeting banks, demanding they divest from the $3.8 billion Dakota Access pipeline. This is a member of the Bellingham #NoDAPL Coalition at a Wells Fargo branch in Washington state Saturday.

MICHAEL VENDIOLA: We, the Bellingham #NoDAPL, No Dakota Access Pipeline, Coalition, are here in attendance today, December 3rd, 2016, at the Wells Fargo branch in Bellingham, Washington, to protest the institution’s investment in the Sunoco Logistics, Energy Transfers and Energy Transfer Equity. We refuse to be silent community members in your decision to support the destructive fossil fuel economy, in general, and the Dakota Access pipeline, in particular.

AMY GOODMAN: This comes as a new report exposes "The Rickety Finances Behind the Dakota Access Pipeline," as they say, published by the Institute for Energy Economics and Financial Analysis and the Sightline Institute. It spotlights a potential economic weakness of the project: the January 1st deadline by which Energy Transfer Partners had promised oil companies it would have completed construction. Missing the January 1st deadline opens up the possibility the pipeline company may lose its contracts with oil companies.

Well, for more, we go to Seattle, Washington, where we’re joined by Clark Williams-Derry, director of energy finance at the Sightline Institute, a co-author of the new report, "The Rickety Finances Behind the Dakota Access Pipeline." And we’re joined by Michael Vendiola, a member of the Swinomish Indian tribal community who helped organize a protest at Wells Fargo Saturday in solidarity with Standing Rock, as well as with the Canadian First Nations resisting another major oil company—the Kinder Morgan Trans Mountain expansion project.

We welcome you both to Democracy Now! Let’s begin with Clark. Tell us—summarize your findings. Why do you talk about the "rickety financing" of the Dakota Access pipeline?

CLARK WILLIAMS-DERRY: That’s a good question. So, really, the—one of the fundamental findings of our report was that the oil market has changed dramatically since the pipeline was first proposed in early 2014. Back then, oil prices were at $100 a barrel or more, and oil production in North Dakota was rising. It kept rising and rising. And all the forecasts said that oil prices were going to remain high and that oil production in North Dakota was going to remain robust. But almost as soon as the companies signed up its first set of shippers, the first commitments from oil companies to ship through the pipeline, you started to see oil markets collapse. You saw prices fall from $100 a barrel down to $50 a barrel. And as that happened, oil companies in North Dakota started to pull back. They stopped—they weren’t drilling as much. A lot of them were starting to lose money from some of their oil projects in the Bakken region in North Dakota. And so, what you started to see is a decline in production. You’ve already seen a 20 percent dip in production in the Bakken region since oil prices started to collapse. And it’s still collapsing. It’s still declining by a percent or two every month. And if those declines—that decline in production continues, well, it’s not clear that the pipeline’s capacity is going to be needed at all. There have already been a bunch of pipelines built and approved. There’s a lot of—there’s refining capacity in the region. There’s oil-by-rail capacity in the region. The extra capacity of the Dakota Access pipeline just may not be necessary. And that poses a real risk for the company.

AMY GOODMAN: So, January 1st, this deadline—what happens if oil shippers, oil companies choose to renegotiate their contracts?

CLARK WILLIAMS-DERRY: Yeah, that’s something that’s come up in the court—in court cases several times now. The lawyers for the Dakota Access company have said that they have a—that their committed shippers have the right to terminate their contracts if the company doesn’t meet its January 1st deadline. We don’t know. We’ve actually heard a few things suggesting that, oh, it’s just an informal deadline, but they’ve argued very clearly to the courts that it’s not informal, that this is an actual contractual deadline. If some of the shippers were to pull out of the Dakota Access pipeline at that point, well, you could see—it could start to create a financial disaster for the company. The company really depends on those contracts. You can actually imagine that some of the oil shippers might be thinking, well, you know, with production down, with prices down, maybe this would be a great time to pull back from our commitments to the pipeline. And, in fact, I think the investors in those companies should be encouraging the oil shippers to pull back, to take a second look and to think about whether it makes sense for the long run. In a region where oil production is falling, you don’t want to make a seven-to-10-year commitment to keep shipping oil through the pipeline. You’re just going to wind up wasting money.

AMY GOODMAN: Michael Vendiola, you were one of the organizers of the Wells Fargo protest on Saturday. On Sunday, the decision came down by the Obama administration, the Army Corps of Engineers, to deny the easement under the Missouri. Your response to that and what your plans are now, from the United States to Canada?

MICHAEL VENDIOLA: Sure. We’re—you know, we’re excited that the Obama administration has made this decision, but we’re also wary of policy that’s put forward. We’re in alignment with the Standing Rock Sioux and the Sacred Stone Camp, and we’re going to be following their lead and seeing where—as this progresses. You know, we’ve signed treaties with the federal government, and we know that those treaties can be betrayed. So, this is just another so-called agreement that is put forth, which could be turned over as soon as another president comes in. So, our strategy right now is to follow the lead of "water is life." You know, that’s what we’re organizing under as the banner that has been put forth by the Standing Rock Sioux and the Sacred Stone Camp. And so, our—you know, to be cliché, we’re trying to hit them in the pocketbooks.

AMY GOODMAN: So, which are the banks that you are targeting, Michael?

MICHAEL VENDIOLA: Yes, our action this past Saturday was against Wells Fargo. We’re looking at Chase Bank, U.S. Bank, Bank of America. We have a list of 17 banks that are investors within the Energy Transfer Partnerships and putting the Dakota Access pipeline together. So—

AMY GOODMAN: The Canadian prime minister has just announced that the government had cleared the way for Kinder Morgan’s Trans Mountain expansion project, a pipeline. Your response and how you’re linking it to DAPL, the Dakota Access pipeline?

MICHAEL VENDIOLA: Right. You know, that looks to be the West Coast version of DAPL. And it’s a—we feel like it’s—you know, it’s a travesty. And really, we were working on providing testimony. And we, as in the Coast Salish tribes of Washington state, were invited to give testimony to—on the Kinder Morgan project. And we feel a bit betrayed by this decision by the prime minister to go forward with this, after we had given a consolidated testimony that this would greatly impact—

AMY GOODMAN: Well, clearly, another issue we have to cover, but we have to wrap up now. Michael Vendiola, thank you for joining us. And, Clark Williams-Derry, we’ll link to your report, "The Rickety Finances Behind the Dakota Access Pipeline."

That does it for our show. Tonight we’re celebrating our 20th anniversary here in New York City at Riverside Church. Tune in at 7:00 p.m. for our special live stream of Democracy Now!’s celebration with Harry Belafonte, Noam Chomsky, Patti Smith, Danny DeVito, Danny Glover, Tom Morello, Juan González, Patti Smith and others. You can watch right here at democracynow.org or on your station.

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