Why Pres. Trump’s Actions On Pipelines Are Important

By Luke Geiver | January 25, 2017

Checkout the detailed story on the elements of President Donald Trump’s actions on the Dakota Access Pipeline and Keystone XL pipeline and you’ll get a great understanding of what the actions have done. The next important question is: what will the actions do in the future?

The obvious answer is related to the possible construction or completion of each pipeline. But, after they are complete (and really before they are even complete), the pipelines will play an important role in the way shale play’s across North American are developed including the pace at which they are developed.

The current well economics, geologic formation offerings—I’m referring to stacked production pay zones—and access to gathering, shipping, storage and refining infrastructure of the Permian Basin are making the area of West Texas and parts of bordering New Mexico a hot place for investment right now. Investors, operators and midstream managers are all making financial commitments of major proportions to get into the region, especially the western Permian Basin that houses the Delaware Basin and its multiple producing zones including the Wolfcamp A and Wolfcamp B.

EUR’s and initial rates of returns at $50 oil there are attractive and can bring a range of 40 percent IRR and up for most operators there. In the Williston Basin, many well EURs are better than the Permian, and so too can the IRR’s be (this of course varies and the opposite can be said as well). Because of the Permian’s stacked pay, large inventory block possibilities and proximity to infrastructure, several operators are eyeing the Permian as the place to be. In a clear second, the Bakken offers the next best place to be. Just look at stories we’ve ran or others we haven’t from the past month. Several include operators leaving a basin—the Bakken or Eagle Ford included—to enter or at least add the Permian to their focus areas.

When you read the latest on the DAPL or Keystone XL and you are thinking of the Bakken, remember the paragraph above. Added infrastructure in the Bakken, infrastructure that can move more oil for cheaper and can prop up the price Bakken producers get for a barrel of oil, will only help the competitiveness of the Bakken with every other play, certainly including the Permian.

And, there is more to the DAPL and Keystone XL than just what it might mean for the Bakken. According to energy lawyer Scott Marrs, regional managing partner of Akerman's Texas offices, Trump’s executive orders are step in the right direction for the overall U.S. energy industry. “President Trump’s action makes it clear that the nation’s energy industry is under new management and that protecting the nation’s energy infrastructure will take precedence over existing environmental policies,” Marrs said.

The actions by Trump will also have these significant impacts on the U.S. economy:

-encouraging the use of American materials, parts and labor to build these projects

-requiring that the governmental process to approve (or reject) such projects be streamlined

-increase the efficiency of shale oil transportation and refinement

-increase the ability of the U.S. to capitalize on its extensive oil and gas reserves