July 6, 2020 / 6:03 PM / a month ago

Dakota pipeline investors could face major hit after adverse ruling

BOSTON/DENVER, July 6 (Reuters) - Large investors in the Dakota Access Pipeline, including Phillips 66, could be on the hook for hundreds of millions in payments, after a U.S. court on Monday ordered the owners of the major artery to shut it down and empty it of oil.

A U.S. District Court on Monday ordered Energy Transfer LP to shut and empty the largest pipeline from the North Dakota shale oil fields within 30 days, saying the U.S. Army Corp of Engineers failed to provide an adequate environmental impact statement. The 570,000 barrel-per-day pipeline carries oil from the Bakken shale to the Midwest and Gulf Coast and has long been protested by Native American tribes and environmental groups.

Last year, the pipeline raised $2.5 billion in net proceeds from a bond offering snapped up by U.S. insurance companies and mutual funds. Dakota Access LLC and Energy Transfer Crude Oil Co LLC guaranteed repayment of the debt.

A backstop to that debt is an agreement by investors in Dakota Access LLC to contribute equity in the event of a ruling against the pipeline.

The Dakota Access ownership group is represented by Energy Transfer (38%), Phillips 66 (25%), Enbridge Inc (28%) and Marathon Petroleum Corp (9%), according to a 2019 Moody's Investors Service report that rated the bond offering "Baa2."

Phillips 66 disclosed in May that its maximum potential contribution under the equity agreement is about $631 million, according to a filing with the U.S. Securities and Exchange Commission.

Canada's Enbridge and Marathon Petroleum also are part of the agreement that could require financial support for the bonds.

Energy Transfer, Phillips 66, Marathon Petroleum and Enbridge did not immediately respond to requests for comment.

Owners of the pipeline debt include Metropolitan Life Insurance Co and mutual funds run by Vanguard Group, JPMorgan Chase & Co Inc and Blackrock Inc, SEC filings show. (Reporting By Tim McLaughlin; Editing by Aurora Ellis)

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