Jobs, Tax Revenues Could Be Lost if Dakota Access Pipeline is Shut Down – Study

Mark Green
Posted September 2, 2020

While the U.S. Army Corps of Engineers completes a new environmental report on the Dakota Access pipeline (DAPL) in North Dakota, there’s new research showing that shuttering the pipeline would cut oil production from the prolific Bakken shale region, kill thousands of jobs and cost state and local governments millions in tax revenues generated by energy production.

The environmental effects of Dakota Access’ crossing under Lake Oahe are being studied anew after the corps was ordered to do so by a federal court. The review is expected to take 13 months. Although legal challenges surrounding DAPL are pending, an appeals court overturned the lower court’s order to halt operations and empty the pipeline while the environmental review is ongoing.

While we all wait for the review, an ICF analysis commissioned by API shows what halting Dakota Access operations would mean to production and economies. If Dakota Access were shut down, the analysis found:

• Oil production – In a shutdown scenario, about 115 million barrels of crude oil would not be produced, with corresponding output losses of associated natural gas and natural gas liquids.
• Jobs and drilling activity – Average loss of 3,000 direct upstream jobs in an initial shutdown period, resulting from depressed drilling activity and other industry investments. Job losses increase to 4,900 when indirect jobs in other sectors related to oil and natural gas production – steel workers who make drilling pipe, workers who mine fracking sand and others – are included and 7,400 when counting direct jobs, indirect jobs and induced jobs supported by the spending of direct and indirect workers in the economy, such as restaurants, grocery stores and others.
• Tax revenues – Loss of $852 million in state production taxes to North Dakota and Montana, plus $69 million in income taxes paid by oil and natural gas companies to the two states. That’s a total of $912 million over the analysis period. 

The numbers are quite stark. They support what we’ve said before (see here and here) – that Dakota Access is a vital crude oil production lifeline for the Bakken, safely taking it to refineries in the Midwest and Gulf region that turn it into products used by millions and consumers and businesses. From ICF’s analysis:

The startup of DAPL in 2017 was a major boost to Bakken producers, providing an efficient and low-cost transportation route to major refining centers in the Midwest and Gulf Coast regions. With DAPL in place, Bakken-Williston production grew rapidly, rising from about 1.07 million b/d in the first quarter of 2017 to 1.51 million b/d by first quarter of 2020.

However, while production suffered earlier this year because of lower demand caused by the pandemic, producers have since started to restore operations that were shut-in. “The potential court-ordered shutdown of DAPL puts this recovery at risk,” the analysis says.

A couple of charts from the analysis show potential severe impacts of losing DAPL. First, impacts on jobs:

The orange line shows significant job losses in the aftermath of a shutdown, compared to job projections with now shutdown. The chart below shows revenues losses from reduced production in a shutdown scenario:

The chart above is especially critical for North Dakota, which funds more than half of its budget from oil production. Funding for public schools, higher education and other public services could be severely impacted, officials said in this legal brief.

The larger message from the analysis is a reminder of the interconnected nature of our modern economy, whose leading energies sources are oil and natural gas. Blocking new infrastructure or threatening existing pipelines with closure risks wide, rippling effects – in producing zones and with consumers and communities. Paul G. Afonso, API senior vice president and chief legal officer:

“The district court’s order to stop the flow and empty the Dakota Access Pipeline was unprecedented and harms American consumers. America’s regulatory process ensures that infrastructure projects are designed, constructed and operated in a way that protects communities and the environment – it is not an outlet for activist campaigns against development of any kind.

“ICF’s new analysis validates that shutting the Dakota Access Pipeline – which has been operational for three years – could result in the loss of thousands of middle-class sustaining jobs and deprive the states of North Dakota and Montana of more than $900 million in desperately needed state and local tax revenue to fund public safety, education and public parks. These extensive and irreparable impacts underscore why [Dakota Access] is so important for businesses and working families to continue to benefit from the safe delivery of American energy.”