Baird Analyst Expects DAPL Decision To Be Reversed

Baird believes the Dakota Access Pipe Line, or DAPL, denial to be short-lived and, accordingly, recommended buying on any incremental weakness. This follows announcement by the U.S. Army Corps. of Engineers stating that it would not grant easement to cross Lake Oahe, the final permit required to complete the DAPL.

Trump Favors DAPL

Analyst Ethan Bellamy noted that the Corps have urged for the exploration of alternative routes and new environmental studies. However, the analyst also took note of a statement from Sen. John Hoeven last Thursday, which relayed President-elect Donald Trump's support for the DAPL.

According to Baird, the crux of the issue is more on reforming the flawed tribal consultation process amid social pressures relating to the history of tribal relations than any DAPL project-specific legal breaches. Energy Transfer Partners LP ETP, which is building the pipeline across four states, has not flouted judicial norms, the firm said. Therefore, the firm expects the company to prevail once the Trump administration assumes office.

When contacted by Benzinga regarding the impact the easement denial can have on Energy Transfer Partners shares, Bellamy said, "The Corps is just taking orders from the White House, which does not want to approve DAPL, despite the project meeting every regulatory requirement and passing judicial review. Without presidential overreach, the pipeline would be done by now as the Corps internally confirmed all easement hurdles had been met in July.

"We never thought there was any chance that Obama would approve DAPL on his watch, so this announcement is unsurprising. We expect Trump to reverse this decision in his first week in office. We model DAPL in service in 2Q17 and are telling clients to invest accordingly."

Ratings/Price Targets For MLPs

• Energy Transfer Equity LP ETE: Outperform/$20.
• Energy Transfer Partners LP: Outperform/$45.
• Penntex Midstream Partners LP PTXP: Outperform/$23.
• Sunoco Logistics Partners L.P. SXL: Neutral/$31.
• Sunoco LP SUN: Neutral/$29.

At Time Of Writing

• Energy Transfer Equity was down 1.70 percent to $16.19.
• Energy Transfer Partners was slipping 1.45 percent to $33.88.
• Penntex Midstream Partners was adding 0.85 percent to $16.69.
• Sunoco Logistics Partners was down 1.23 percent at $22.90.
• Sunoco was advancing 1.18 percent to $24.80.

Image Credit: By Pax Ahimsa Gethen (Own work) [CC BY-SA 4.0], via Wikimedia Commons