The crude oil market in the Rockies region is seeing major shifts in asset ownership, highlighted by Plains All American’s acquisition of Powder River Basin assets from Silver Creek Midstream. This deal follows Enbridge’s recent buyout of Tallgrass’s regional assets, including the Pony Express pipeline. The centerpiece of Plains deal is the Powder River Crude Services (PRCS) system, the largest gathering network by volume in the basin, which has historically moved approximately 100,000 barrels per day (see graph below). The Plains and Enbridge acquisitions highlight the critical value of oil infrastructure through the Rockies corridor, a dynamic detailed in the co-authored study Roundabout! with RBN Energy (Novi Labs) earlier this year.
Beyond the gathering infrastructure, Plains also acquired Silver Creek’s 49% non-operating stake in the PRG pipeline system, which consists of the Powder River Express and Iron Horse short-haul transport lines. Because Enbridge acquired the other 51% controlling interest last week, the two midstream operators now find themselves joint owners of these crucial trunk lines. PRG moves barrels from PRCS gathering Pronghorn terminal to long-haul transmission pipelines in the Guernsey area, including Pony Express and Saddlehorn (in which Plains holds a 40% interest). By acquiring upstream infrastructure like PRCS, Plains may be able to exert greater influence over barrels near the wellhead, setting the stage for an increasingly competitive environment as both sides vie for volumes to feed their respective long-haul pipelines (see figure below).
Operationally, Plains has several options to optimize this new footprint and attract barrels over to its own systems. One potential play would be reversing flows on the PRCS Foxtail gathering line. This 8-inch line currently moves barrels from producing areas in Natrona County to the main PRCS trunklines, where barrels flow into PRG and down to Guernsey. Reversing this line would allow Plains to push barrels into its wholly owned Rocky Mountain North (a 12-inch line) and Bighorn Pipeline systems for delivery into Casper, Guernsey, or Fort Laramie where barrels could connect into Saddlehorn (see figure below). While Plains would forgo its share of pipeline tariffs on their 49% PRG ownership, capturing the full fee structure across its own pipelines could present a lucrative incentive to divert crude flows away from Enbridge-controlled routes.
Both the Foxtail and PRG routes also provide connectivity to Plains’ wholly owned Cheyenne pipeline in Guernsey, Wyoming. Utilizing this capacity with Plains' Cowboy Pipeline and their Saddlehorn interest downstream could allow barrels to also connect to the White Cliffs Pipeline in which Plains holds a 36% interest. This path offers yet another route to transport barrels to Cushing, Oklahoma, strictly on Plains-affiliated infrastructure.
This operational flexibility may sharpen the rivalry between Plains and Enbridge as both compete for market share in the Rockies. While Enbridge appears to hold the advantage in downstream egress optionality through its Pony Express and Platte pipelines, delivering into both Cushing, Oklahoma, and Wood River, Illinois, Plains now possesses critical leverage with upstream infrastructure close to the wellhead. With the Powder River Basin offering extensive untapped drilling inventory that becomes highly economical during periods of elevated oil prices, dealmaking and optimization projects are likely to continue across the region.
