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In North Dakota's rich but remote Bakken oilfields, prices are plummeting, and production is sliding.

 

Producers in the region have been hit by the same oil downturn that has staggered both the U.S. and international oil and gas industry.

 

The rocky state of the industry has raised questions over the viability of energy companies and future projects — including oil pipelines such as the one slated to cut across 346 miles of Iowa farmland.

 

Officials with Energy Transfer Partners, the company behind the Dakota Access pipeline, also known as the Bakken pipeline, have maintained that work will begin this spring, although they have released no specific timeline for construction.  A spokeswoman for Energy Transfer did not return a reporter's calls Wednesday.

 

But energy experts say it would be wrong to assume that the oil industry's problems place the Bakken pipeline in jeopardy.

 

"What you have to consider is that any pipeline project by definition is a long-term investment. It's in the ground. It stays down there for decades. The economics are probably done for 25, 30 years," said Andrew Slaughter, executive director for the Center for Energy Solutions at consultant firm Deloitte. "The timing is unfortunate, obviously, but over a 25- or 30-year life, I'm sure they would have anticipated periods of downturns and periods of upturns."

Oil flowing by Jan. 1?

 

After months of controversy over the proposed pipeline, the Iowa Utilities Board voted 3-0 earlier this month to approve the pipeline, which will run diagonally across 18 Iowa counties. It will connect North Dakota's producers to Patoka, Ill., and then with refineries in the South.

 

Opponents to the project have vowed to continue fighting it in court, and on Wednesday the Iowa Tribe of Kansas and Nebraska said its sovereign rights demand it be consulted on the project.

 

Pipeline officials, meanwhile, are moving forward.

 

On a recent earnings call, executives with Energy Transfer Partners said they expect to have oil flowing in the pipeline by Jan. 1.

 

The company recently asked the Iowa Utilities Board to expedite issuing a state permit needed to start construction, but the board declined.

 

Whenever it starts, construction will begin as energy companies face declining prices for oil, a glut in oil supply and a challenging market that has already resulted in layoffs and bankruptcies.

'It's not about the now'

 

While drivers may have relished the lower cost to fill up at the pump, bottom-dollar prices from ramped-up production in North America and the stagnant global economy have  left the oil and gas industry reeling.

 

In March 2011, Bakken oil was selling for about $95.51 per barrel. It's now going for less than a third of the price, at $27.32 per barrel — well below the break-even point, experts say.

 

As oil prices have slid, many energy companies scaled back planned investments and laid off workers, . In a recent study, Slaughter, of Center for Energy Solutions, projected that as many as one-third of oil producers were at risk of falling into bankruptcy this year because of low commodity prices.

 

MORE: Complete coverage on the Bakken oil pipeline

 

But the price of oil is subject to cyclical booms and busts, Slaughter said. And the industry has bounced back from price declines before.

 

The Bakken formation is one of North America's core areas for oil production, and Slaughter expects activity to ramp up there as soon as prices recuperate.

 

"It’s not about the now. It is about future needs," said Tom Seng, an assistant professor of energy business at the University of Tulsa.

 

Seng described the pipeline as "strategic" since it would offer refiners a new source of oil, while providing producers in the Bakken formation a new way to transport their oil.

 

"When you look at the project, it does have strategic value for both ends of the pipeline," Seng said.

More pipelines than supply?

 

But decreased oil production also decreases the need for massive pipelines, said Howard Learner, president and executive director of the Environmental Law and Policy Center, a Midwestern environmental advocacy group.

 

Essentially, more pipelines are competing for a smaller pool of supply, he said.

 

"I can’t tell you which of the pipelines are going to be able to lock up enough customers and enough financing," Learner said. "But there does not seem at present to be enough oil supply to justify all the new pipelines being proposed."

 

IOWA POLL: More Iowans back Bakken pipeline than oppose it

 

March counted 476 active rigs drilling for new oil wells, down by more than half since the same month last year, according to the Baker Hughes Rig Count. And the number of active rigs in North Dakota has fallen dramatically, from 205 in March 2012 to 32 this month, according to the state's Department of Mineral Resources.

 

"It’s all primarily due to oil price," department spokeswoman Allison Ritter said of the declining rig count. "At sub-$30 (a barrel) oil, it’s not economic to drill oil."

 

Still, Ritter said her department sees oil prices rebounding.

 

"All the oil prognosticators are saying 2016 is going to be rough for the oil industry, but it’s not a matter of if oil prices rebound, it’s a matter of when," she said. "Then it’s a matter of when it rebounds, what’s the magic price" to make drilling viable again.

 

Positives of a pipeline

 

Tom Petrie, chairman of Denver-based Petrie Partners, an investment banking firm that provides financial advising to the oil and gas industry, said the Dakota Access pipeline has "intrinsic merit."

 

Aside from being safer and cheaper than transporting oil via rail, Petrie said pipelines offer stability to the American oil market, which he expects will soon rebound.

 

"The low price that we have today is not the new norm going forward, from everything I can see," Petrie said. "If we have pipelines built and they’re built on the new normal that’s likely to evolve, then I think we’ll have a better ability to meet our needs cost effectively and not be as dependent (on foreign oil) as we were in the '70s, '80s and '90s."

 

Ed Hirs, an energy fellow at the University of Houston, likewise said the production slowdown in the Bakken oilfields is likely temporary.

 

"Even though drilling in the Bakken has gone to virtually nil right now, there is oil in place that will stay in place," he said. "Essentially it's oil in storage, ready to be accessed whenever the price environment gets to the level that it's economical to produce."

 

As drilling slows, Hirs expects the current over-supply to reverse into a shortage. That will cause prices to rebound, possibly reaching pre-downturn levels.

 

"The demand curve for oil is very steep," he said.

 

And he said research in the industry and in academia has demonstrated a need for more pipelines.

 

The economics are "really insulated from the price of the product," Hirs said. "You’re just moving the product from one place to the other."

 

Energy acquisition

 

Energy Transfer Partners’ parent company, Energy Transfer Equity, is acquiring fellow pipeline company Williams Co. 

 

The merger is expected to close in the second quarter of this year, but the deal has become mired in financial concerns and internal disputes, according to The New York Times. 

 

Stock prices for both Energy Transfer Equity and Williams are down 50 percent to 60 percent over the last 12 months. How the deal turns out could put financial pressure on Energy Transfer.

 

Given with the rocky state of the energy industry, including bankruptcies filed by a number of energy companies, the viability of the merger has been questioned, the Times reported in February.

 

“While speculation around the merger remains high, we continue to believe it will go through,” Stifel, Nicolaus & Co. analyst Selman Akyol, wrote in a research note late last month.

 

Tom Petrie, chairman of the investment banking firm Petrie Partners, said there "are real issues" about the merger's financing.