Environmentalists and Native Americans have every right to celebrate the decision by the Secretary of the Army Corps of Engineers this week to turn down a permit for the controversial $3.8 billion pipeline project running through North Dakota.

However, all isn't lost for pipeline operatorsEnergy Transfer Partners (ETP) and Sunoco Logistics Partners (SXL) . Long-term energy investors need to know the facts.

Stocks of both companies fell nearly 2% each on Monday, the day after the announcement. With President-elect Donald saying he supports the Dakota Access Pipeline, the companies could still manage to build the nearly 1,170-mile pipeline.

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Indeed, his support could prove critical for the pipeline and investors counting on the project.

The Army Corps of Engineers acknowledges that the courts have ruled that the project is legal, but it declined the permit anyway.

The pipeline is complete except for a segment planned to run under Lake Oahe. Building this stretch required permission from federal authorities.

The Army Corps of Engineers has already suggested that the best way to complete work expeditiously and responsibly is to explore alternate routes.

Environmentalists and local Native American tribes are happy with the decision by the Army Corps of Engineers for two major reasons. The Standing Rock Sioux tribe and others have long maintained that the pipeline disturbs sacred tribal sites and endangers local drinking water.  

But pipeline operators say that the 30-inch diameter pipeline connecting the Bakken and Three Forks production areas in North Dakota to Patoka, Illinois, will allow light sweet crude oil from North Dakota to reach major refining markets cost effectively and directly.

Energy Transfer Partners and Sunoco Logistics Partners are master limited partnership affiliates of billionaire Kelcy Warren'sEnergy Transfer Equity. That stock lost nearly 2.5% on Monday.

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Many, including pipeline operators, see the move as being politically motivated.

The Army Corps of Engineers is probably playing it safe, delaying a decision until President Barack Obama leaves office. Once Trump is sworn in, it will be his decision.

It is worth noting that Trump won both North and South Dakota in the presidential election.

For Energy Transfer Partners and Sunoco Logistics, there are some risks. The pipeline may require additional rerouting in and near Lake Oahe, which would incur extra costs and there would be time overruns.

Analysts, however, are confident that Energy Transfer Partners and Sunoco Logistics will be successful in completing the project without rerouting. The pipeline developments could have a bearing on important companies with interests in the Dakotas, such as EOG Resources, Hess,Marathon Oil and Whiting Petroleum.


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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.