Just so everybody's aware, we have two exits directly to my right, your left, and there's one exit to the back of the room. There's no drills planned for today, so if you do hear an alarm of any kind, it's real. Plan to move. I wanted to also just note that there are direct staircases at those exits with ushers in the event of an emergency. Before getting into some of the detail, I just want to introduce myself. I'm Brett Magill, Director of Investor Relations here at Plains. I just want to thank everybody for taking the time to be here. For those on the webcast that are participating, we appreciate your time and hope to have a constructive discussion today. We will be making forward-looking statements throughout the presentation and be referencing multiple non-GAAP financial measures.
Reconciliations of those financial measures are included on our website, as disclosed on the link on this slide. Before diving into the presentation, let me just give a quick overview of the day and the agenda. Willie Chiang is going to kick us off with some commentary around our positioning for the long term, and followed by Harry Pefanis, President and Chief Commercial Officer, to share some comments on our strategic overview. Jeremy Goebel, EVP of Commercial, will discuss commercial strategy and some recent updates on the commercial front. Followed by Chris Chandler, EVP Chief Operating Officer. He'll talk to you about operating excellence initiatives and key capabilities of our system and the complementary elements of that to our overarching commercial endeavors. We'll take a break for about 20, 25 minutes. It'll be about 3:00 P.M. when we start the break. We'll return back about 3:20 P.M.
At that point, Roy Lamoreaux will provide some discussion on ESG and what we internally refer to as the more broad social responsibility efforts. Then conclude with Al Swanson in a financial update. Al's our EVP and Chief Financial Officer. He'll lead us into a Q&A session at that point. We'll do an extended Q&A. Up here, we'll have all of our presenters come sit. We have several members of our management team here as well, and we'll have microphones passed to the audience. If you are participating on the webcast, you can submit an email question if you do want to participate. Then an alternative, if you're in the room here, you could write a question on a note card that's sitting in front of you and pass it to the aisle, and we'll do our best to address the question.
Before I open it up to Willie, I just wanted to provide a little bit of overview on our financial structure. Many of you in this room are very familiar with this structure, but just in an effort to level set the discussion, I'll start at the bottom and work my way up in the structure. We have two public securities. PAA is our public MLP security, K-1 security. It's where 100% of our assets and operations reside. We have, sitting above that, the GP entity, which is Plains AAP. It's a private entity, but it does have a public security, PAGP, which sits above that in the structure. PAGP has essentially checked the box to be taxed as a C corp. It's a 1099 security, but with one-for-one economic parity to the PAA security, so no IDRs, complete economic alignment across the structure.
One thing I will point out is that we do have a voting structure across the three equity positions that represent a one share, one vote approach. With that, and I will say that Al will share some additional commentary on the details of the structure in his section. With that, I will go ahead and introduce Willie Chiang, our Chief Executive Officer, who's going to open up with some comments on our positioning. Willie, thank you.
Good afternoon, everyone. Thanks, Brett. I want to echo my thanks for the attendance for everyone here and also those on the webcast. We've got an exciting story to tell you about our future here today, and we're going to spend some time on it. I'd like to kind of kick it off and give you a structure of what we're going to chat about. We believe we've got the right business model, the right asset base, the right financial strategy, and most importantly, we've got the right team. We've gone through a transition here of management, and we've got the right team to kind of carry this forward. We've been resilient through the cycle, and we think this positioning that we're going to share with you today really sets us up well for the long term.
We've got a number of senior leaders here that Brett introduced, and they're going to share their thoughts and give you their individual perspectives on everything we're doing here. We really hope to leave you with a better understanding of the capabilities of our asset. We think it differentiates us with the integrated system from lease all the way to end markets. It's really helped us, particularly in this competitive market, as well as with the recently announced project that Jeremy's going to cover a little more in detail. Then most importantly, we hope we'll be able to instill some enthusiasm to you to share our enthusiasm as we go forward. My comments are going to be pretty general on our overview of the company, which many of you know, but again, I think that'll level set things.
I do want to spend some time on our observations on the macro industry dynamics, both on the supply side and the demand side. I'll tee up the positioning. Again, show you a lot of maps of where our assets are. Again, hoping to show you the differentiated offering that we bring. Then before I kick it off to others, I'm going to suggest some takeaways that I think you should take away from today. You've seen this map of our assets. This is an asset base that's been built over 2 decades. We've gone through many business cycles, and as you think about what we've done, we've built grassroots assets, we've acquired, we've rationalized, we've optimized, and we've even grown through divestitures over the last number of years.
We've got a great asset footprint in most of the key basins in North America, with really a legacy position in the Permian. We've got pipe in the ground, which we think gives us a differentiated offering to be able to do projects in a capital-efficient manner. Our calling card is the ability to aggregate supply through our lease business. It's ensuring flow assurance, quality segregation, you'll hear a lot more about that later, the last one is access to multiple markets. I always share the path of where we've been over the last five years. When you think about the Permian Basin, it was really two key markets. It was local markets and then up to Cushing. Really in the last five-plus years, we've now opened up the Permian to many different markets.
If you think about it's going to be eight-plus, and most importantly, access to water, which gets us access to global markets. On the lower right, you'll see some focus areas. These are the things we're going to talk about today. We've really got a broad system, and the capabilities of it really give us the opportunity to get a lot of reliability benefits, and it's something we've focused on, particularly with the constrained systems over the past number of years. How do we improve our reliability? How do we get more barrels through at lower costs? It gives us a lot of optimization flexibility, which you heard me talk about. We continue to build out our project base with strong return projects that give us the long-term growth.
We're able to do that, again, through our system with the offerings of pieces of pipe that perhaps have surplus capacity that really offer an opportunity for capital efficient, not only for Plains, but for the industry. We've spent a lot of years developing long-term relationships. Long-term relationships are important to us. We work with a lot of producers, we work with the refiners, and we also work with our peers. If you just think about it for a moment, in the last three or four years, in light of the competitive market, we've actually created over a dozen strategic JVs. I know you've heard of many of them. Harry's going to touch a bit more on them.
What that really does is it gives us the alignment with partners, and it gives us the surety of common interest in a pipeline, whether it serves a refinery or brings barrels out of a supply push project, getting barrels out of a basin. As we think of this going forward, the strategic JVs really ultimately give us, I think, it's another differentiating point for us as we go forward. Through this period, we've also been able to de-lever our balance sheet, Al will talk quite a bit more about that, but I think it really positions us well going forward. Let me move to the macro side and share some observations about demand. If you look on the left-hand side of this chart, it really shows global demand. You're all aware that it's roughly 100 million barrels a day of liquids in the world.
You can see over the last 20 years, it's really grown pretty consistently at 1-1.5 million barrels a day, or in today's numbers, roughly 1%-1.5% growth a year. Our view is over the long term, we're very constructive. We're constructive demand overall, and we think going through the long term, we're going to see continued growth of this through multiple years. A big part of the reason is if you look on the right-hand side, the demographics of the world. We've got the U.S. with roughly 300 million people. We've got Asia with roughly 3 billion people, and that's really China and India. Both consume 20 million barrels a day today.
While we live in the U.S. and we see life as we see it here, there's a lot of people that want our lifestyle. When you think about what energy does, it really creates quality of life. It creates freedom of movement, heating, air conditioning, clothing. If we're able to get 10% improvement in Asia, or people are able to increase their quality of living, that's 20 million barrels a day. I get a lot of questions about electric vehicles, renewables, efficiency, and our view is that we need all of the above going forward because there's a large demographic that really wants to achieve just a portion of the quality of life we've got. This slide here shows the growth of supply. It's a macro view. You've seen our slide where we talk about the top 10 countries in the world.
The top 10 countries supply roughly 70% of the global liquids needs. When you think about the top producer, it's actually the U.S. If you think about the Permian Basin, it's number 5. It is the fifth-largest country producing liquids for the world. Shown on this slide really just shows you the difference between 2012 and 2019 on the growth wedges of production for the different regions. You can see across the rest of the world, the growth is really pretty minimal. If you look at the U.S., you can see 20 million barrels a day of total liquids at the end of 2019, growing from the green line in 2012 pretty significantly. If you combine that with the Permian Basin, you can see where the Permian Basin is a piece of that.
You can see the Permian is really the driver not only of the U.S. growth, but actually of the world growth as well. Again, with the soft blue line, you can see the demand sink ultimately is Asia. Now looking at crude growth. You can see the growth in the North America. This is U.S. and Canada, and this is the past five years and the next five years. You can see we've grown roughly 4.6 million barrels a day over the past five years and going forward, greater than 5 million barrels a day. Again, with two-thirds of that growth forecasted to be in the Permian Basin. We've got the Permian Basin growing roughly 3.3 million barrels a day in the next five years, which, if you do the math, is roughly 600,000-650,000 barrels a day of growth per year.
We do expect further growth in other basins, Harry has a slide that he'll show that outlines the growth in different basins. Let me take a different cut on this growth. This is the same period of time, but it shows the growth by quality of crude. From the bottom up, the bottom is the heaviest, that's the 25-40 degree API crude, to 40-45, which is kind of a medium grade. Then anything above 45, we call light grade, which is the green and the light green. From today's point, which is illustrated by the black line, you can see the growth profile in barrels. Today, the refineries are fairly full with the light crude slate, with light crudes.
Going forward, what we think is going to happen is slowly some of that middle grade, that 40-45 barrel, the light barrels that are in that are going to get displaced. Ultimately, when you think about exports, the U.S. refineries are at capacity, may have slight growth, but all the barrels that are going to be produced going forward are ultimately going to get exported to global markets. When you think about that, we think there's going to be a differentiation of the light barrels moving offshore, which really highlights the need for segregation, and we'll have a few more slides to talk about that. The point on this really is we see barrels ultimately leaving, being the incremental barrel for the world, meeting the incremental demand, which is going to be in Asia.
This slide here really just shows you more on the demand side, this shows NGLs on the left and crude on the right. Again, it's a look back and a look forward. You can see on the NGLs, and over the last period of time we've grown, it's about 1.6 million of exports of NGL, with roughly 400,000 barrels a day going to Asia, as illustrated by the green wedges of the pie. Then going forward, NGLs grows to 2.5 million barrels a day plus over the next five years. On the right-hand side, you'll see crude, the significant growth of crude exports. Now recall, there was really a trajectory-changing moment when the export ban got lifted in late 2015. You can see there was very little exported before then.
We're at 2.5 million-3 million barrels a day, rough numbers today. Going forward, all that supply growth that I showed you in the last couple of wedges ultimately heads to export. When you look at the pie, obviously in 2015, there was no exports at all, and we've got roughly 40% or 1 million barrels a day of today's numbers are, in 2018, is being exported. A significant trajectory upwards and really a key driver of a lot of our strategies. Now let me shift back to our business model. You perhaps have seen this slide. This really breaks down our EBITDA into our fee-based segments, which is the lower right in blue, and our S&L segment, our margin-related businesses on the top.
A couple of points I'd like to highlight on this slide really is if you look at our growth over the last decade plus, you can see the growth in the fee-based business, which is really the driver for our growth going forward. The S&L activities above, I get a lot of questions about what's the role of S&L. S&L actually is an enabler. We view it as an enabler of our business. We think it differentiates us. We're buying barrels every single day in the market, so we see the price signals. We understand the different markets. What you'll see there is a lump there in about 2011 through 2014 of significant margin-based revenue. A lot of that was really around the constraints that were built, the constraints between Midland and Cushing and the large differentials.
By being able to capture that, you can in some sense say that that was a signal. We hopefully saw signals to be able to build out infrastructure first, then most importantly, we essentially convert that S&L, that margin-based income into fee-based income to the lower right. In 2017, you can see S&L was a very low year. We've had another constraint period over the last two years, 2018 and 2019. As we've guided before, as more pipelines get built, as we expect them to do later this year, the additional capacity will then take, we think, regional basis and take it back to normal. We've set the expectation that 2020 S&L earnings should be meaningfully less than what we've been able to achieve the last two years.
Overall, we expect our fee base to continue to drive our long-term growth, it also provides us a lot of operating leverage, again, which you'll see in further slides, also drives our ability to not only fund our CapEx, but also to increase our distributions. Al's going to cover this a lot more in detail, but we've shared our updated financial policy with you in April, it really hit the mark as far as accomplishing our de-leveraging efforts that we announced in 2016. We've completed that, now we've decided to continue to take our leverage down further. You can see all of our efforts really give us the ability to strengthen our balance sheet further, improves our credit profile going forward. We're still shooting for the mid-BBB. Our leverage is going to improve, also have some significant healthy coverage.
What this will allow us to do, it really allows us the ability to be able to fund our CapEx, particularly the equity portions of that going forward. We've got some great returns on the CapEx that we'll share with you as we go forward. Certainly meeting our 300 to 500 basis points over weighted average cost of capital with potential upside, as you'll see with the integration of a lot of our systems. This allows us to continue to take cash back to our equity holders through our distribution increase, as well as the opportunity, perhaps, if the market presents, even to buy back some shares in an opportunistic sense. The balance of today's presentation are really going to be focused around these nuggets.
At the top, Harry's going to chat a little bit about strategic positioning, not only for across the company on what we're trying to do. Then you're going to hear Jeremy Goebel talk about our commercial strategy, give you some updates, not only on Red Oak, but some other key projects that we've got. Chris is going to talk about our operating strategy and the capabilities. Then Al's going to finish off with financial strategy and kind of fill in some of the gaps of the story I just told. Big picture, as I think about this, these strategies here really are the things that are going to allow us to continue to grow going forward and put us in the position where we have a lot of flexibility on what comes, not only in the next three years, but years beyond that.
As you listen to our comments today and the slides, I want you to think about this. Our belief on the macro view is long-term constructive. We think the U.S. and Canada, North America, is really going to be the incremental provider of energy for the world. You'll see that we think our assets are well-positioned to capitalize on this. We've built our business over a number of decades, and we continue to want to position ourselves for further growth over the next number of decades. In the four focus areas of capital discipline and efficiency, I think you're going to see how our assets allow us to do things that not only are strong returns, but again, if you think about our assets, there's a strategic defensive aspect to what we do as well.
Being able to protect what we've got in the core areas, yet still retain the ability to have flexibility to grow further around it. Our execution capabilities has been a key focus for us, not only over the last number of years, but going forward as we complete some of these projects. You're going to hear a lot about the importance of long-term partners, on being able to find the right partners, not only producers and refiners, but to be able to anchor our projects with acreage dedication. You'll see the increases in acreage that we've gotten along with MVCs on some of these key projects. Again, at the base of it all is having the financial flexibility for us to take ourselves forward. That's all I have for now.
Why don't I ask Harry Pefanis to come up and share with you our strategic efforts.
Thanks, Willie. Willie just hit on this just a second ago, but just to reiterate, in Chris's section, he'll be talking about our drive, how do we improve our performance and our assets and provide safe, reliable operations. Jeremy will cover how we position ourselves to really capture our share of the growth in North America. Between the two of them, they'll cover how we optimize our assets in achieving these goals. Lastly, Al will cover our financial strategy. This is a slide, or we've used some version of this slide for a number of years, just talking about our basic business model. It really starts from kind of a ground-up understanding of the fundamentals. We have a team that focuses on each of the major basins.
We try and build out our view of what we see developing in each one of these basins and try and assess in different scenarios, where do we think crude's going to flow. That ultimately leads us to are there assets that are required in this area or are there already sufficient assets? If so, are there opportunities to make acquisitions? Lastly, we're always trying to optimize our position in these areas. When we look at sort of the key operational requirements in this environment, Willie touched on this a little while ago, but it really starts again with having the supply aggregation function. That drives a lot of our projects and a lot of our growth.
To be able to aggregate supply, we look at, think first thing from a producer standpoint is they want to make sure they have flow assurance, and then they want to make sure they're able to capture the right value for their assets, and providing the segregation allows that to occur. We look at you have to provide access to the markets that shippers or producers want to go to, and that's what drives a lot of our takeaway projects. Sitting here today, we've used a version of this map a lot of times as well. You can see we have a highly integrated system that extends from northwestern Canada all the way down to the Gulf Coast.
You can see we're in all the major liquid-producing areas, but not only that, we think there's a fair amount of production upside in each one of these areas as well. A couple things to take away from here is most of the growth is going to occur in the Permian, so that's why we've got a lot of focus in the Permian Basin. When you look at areas like the Rockies, the Williston, the SCOOP/Stack, a lot of that crude is going to move towards Cushing. That's been the other driver to our focus is how do we create takeaway solutions out of Cushing to make sure we can provide valuable solutions to our shippers? That infrastructure didn't occur overnight. It was over a number of years, combination of a lot of projects and acquisitions.
As Willie pointed out, a lot of these projects have been joint venture opportunities. You can see a number of them are here. We've announced three joint ventures this year, Capline, Red Oak, and Wink to Webster. We continue to try and drive towards trying to find capital-efficient, right-sized solutions in each one of these areas. I'm going to flip back to this map and really just show we showed the growth, but not only do we have a presence, you can see we have a meaningful footprint in each area. We provide a lot of transportation services, and we have a meaningful commercial footprint in our lease acquisition efforts. What that leads to, that footprint, it really provides us with the background or the opportunity to create what we'll call capital-efficient expansion projects.
A lot of these are brownfield projects where we can add pump capacity, extend laterals into different areas, make different connections at our terminals, extend into new markets, repurpose pipelines, reverse directions, lots of alternatives that the footprint provides us with. It also allows us to be the first mover in a lot of these areas. That's what allowed us when you think about expanding into the Delaware Basin, there was nothing in the Delaware Basin a few years ago, but our Permian Basin footprint allowed us to be a first mover. Also, our aggregation supply allowed us to be a first mover in a lot of these takeaway solutions. It also puts us in a position where a lot of our shippers or a lot of refiners see value in doing joint ventures with us. Likewise, we see value in these joint ventures as well.
It's really created the opportunity to develop, again, what we'll call capital-efficient expansion projects. Before we delve into some of our assets at a little deeper level, I just want to step back and think of the environment where we've been in. Over the last few years, we've had a lot of production growth, a lot of logistical constraints that's created large differentials in a lot of areas, and it's been great to be on the takeaway capacity. It's also attracted a lot of money to the space and a lot of capital has been deployed to create de-bottleneck solutions for the logistics. You know what happens in that situation is you end up with the capital. We attract a lot of capital, you end up building a lot of pipe, and you end up with some overcapacity. That's just sort of a natural phenomenon.
We'll step up, we'll have a little bit too much capacity, but we're in areas where we see production growth, so the capacity will fill up until there's a need to develop additional projects. Like I said, it's also driven us to look for capital-efficient solutions, and that's what's driven us to a lot of these joint venture opportunities, is to try and consolidate and right-size takeaway capacity so that we recognize there's additional infrastructure that's going to be developed, but let's do it in a way that makes a lot of sense from a capital deployment standpoint. Stepping away from the commercial standpoint, when we look at what's going on from a technological standpoint, there's been a lot of advances in both the manufacturing, I should say, in all three, the manufacturing of pipeline, the constructions of pipelines, and then really the assessment of pipelines.
This technology is going to lead to having better assets in the ground. We think about it, the technology's improved so much, and it'll continue to improve, but we can start seeing conditions in the pipe that we weren't able to see a few years ago. That could lead to higher maintenance capital requirements over time. We think that also, like I said, will result in better quality assets in the ground, and over time, we should see or we hope to see reduced risk in operating pipelines. Of course, the other trend that we see and we think we'll continue to see is there'll be opposition to the development of fossil fuels. We don't think that's going away.
Roy will touch on this a little later, but he'll touch on some of the efforts that we had to expand our outreach and to really become a little more transparent in some of our disclosures. I'm going to close with just kind of outlining our commercial strategy, and I'll turn it over to Jeremy. As Willie said, it really starts with our lease gathering activities. That commercial presence creates the opportunity to develop business development projects and support those projects. Once we have the supply that we aggregate, we try and create optionality through our interbasin pipeline systems and our terminals, and it gives our shippers different alternatives to go to different markets. It also provides us with the capacity to develop long-term or long-haul pipeline solutions. When we develop these takeaway solutions, what we're looking for is to go to liquid markets.
We take pipelines to Cushing or we go to the Gulf Coast. We want to not only just go to an export facility or to go to Gulf Coast refiners, we want to have the flexibility to have multiple options at those locations, and that's what attracts shippers, we think, to our pipeline system. I'll switch to talk a little bit real quickly about our NGL business. That market has changed over time. It used to be a lot of it was domestic, but with the ramp in production and the development of export facilities, the market's changed, and we've changed our approach to the NGL business as well. We've really started to concentrate on supply that's around our assets.
If you think about it, we have low-cost supply, and probably the lowest cost supply in North America, in Western Canada, and try and optimize and move that to higher value markets. We've really tried to simplify the contract structure, recognizing that the market has changed. We've implemented a number of changes to the way we secure and sell our product, and it's really just a simpler model. Lastly, we use instruments in the market to help hedge our position. We're always looking forward. We're not going to capture the top market. There's location differential. We're not trying to top tick everything, but we're trying to create opportunities where we can utilize our assets and take advantage of the markets that exist to help fill our assets, and that's a lot of the strategy that's deployed.
With that, I'll turn it over to Jeremy and let him take a deeper dive into this.
Thanks everybody for their time today. My name is Jeremy Goebel, and I work in the commercial group here at Plains. I'm going to spend some time just diving into a little bit more detail on a few slides on how we execute on this commercial strategy, how we identify opportunities, how we execute on those opportunities, and then show that in practice, how we use those strategies. I will also take some time to update you on the recent projects we have done, the ones we are doing, and what we see next. From a commercial strategy focus, what leverage system to sanction projects means, that means we spend some time in front of our customers. We do our fundamental work, as Harry mentioned. When those two things intersect, we have a long-term belief in a movement. Customers are looking for that movement.
We look to optimize and design an asset or a long-term business around that idea. We've now got alignment with our customers. We've got alignment with our fundamentals. We look at first our asset base. How do we leverage that from a capital-efficient brownfield manner? Next, we look at, okay, if that doesn't necessarily work, that could be on the gathering side, extending a lateral, as Harry mentioned. How do we get to maybe a greenfield project, a bigger project that now links our existing asset base to a new market or moves where fundamentals are moving? That's how we mean in a capital-efficient manner. We're intersecting our fundamental view, customer demand, getting those barrels to a new market. That's where our projects come from and how we think about it.
First, brownfield capital efficient, next greenfield. All in all, we have strict return requirements, which Al will talk about. With the capital efficient high return brownfield and the strategic accretive greenfield, we try to keep our tariffs very competitive so we don't have those cliffs. We start to look for strategic partners to help us backstop it, one from a financing, but also skin in the game, have a long-term partner. Those include long-term flow assurance, so we're not constantly chasing the treadmill on our assets. Next concept, which we'll talk about in detail, is how do we match supply and demand? What does that mean from an asset standpoint? How do we create that flexibility that keeps barrels on the system? Last concept is when we do have an asset with additional space, we look to secure supply or demand to keep that full.
It's called fill the pipe strategy. We have that internally. First, you sanction a project with something that meets an attractive return threshold. Next, you fill the rest of that and you really increase return. We'll talk about each of the individual projects that we've just recently done and are doing and showing you how we're executing on that strategy. First, from a cartoonish standpoint, what does it look like? This is ideally what we're trying to do. We're using our assets, our lease gathering to sanction gathering projects. We're working with third parties that gather. We're getting them into a supplier and aggregation hub. Think of this as Midland. Think of this as Wink. We'll show you some more details in smaller scale. You get a bunch of commitments together.
You can now attract the marketers and refiners in addition to producers to ship on your pipelines. It creates the ability for third-party services for storage. It creates demand for segregation in different hubs, and it ultimately creates demand for the linkage, that long-haul pipe between the supply hub and the demand hub. At the demand hub, the key, as Harry mentioned, was you've got to have market optionality. You have to have connectivity to those end markets. Plains' philosophy is a little different than most. We connect to almost anyone and everyone at those demand centers, whether it be ratable refining demand or export markets, because we want to ultimately create an asset that has the best price at the end. Whether it be for our market affiliate, third-party shippers, we're trying to have lowest cost supply, highest value demand.
Ultimately, we can charge a competitive tariff and keep our lines full. That's the strategy. What does that look like in practice? This is our Permian Basin system. It's effectively that front end, that supply aggregation. We've got aggregation. What we started with, as Harry mentioned, it started with a bunch of acquisitions. In the Permian, JAL, Wink, Odessa, Midland, Colorado City, Wichita Falls, Cushing, that's the Basin Pipeline system. It's not a Midland to Cushing system. It's the backbone of what we built. As the southern Midland Basin built out, you see the aggregation lines down there. As it moved west, we quickly jumped on that. We had the Wink terminal. We had the Basin system. We were the first one to offer capacity in that area.
You'll see as we've built our system, we built out west before most could because we had that backbone through a series of acquisitions. The third dimension here is quality. You see all of those different locations with dots. That's where we have tankage, over 15 million barrels of storage inside the Basin. As you move west, that's your highest condensates. As you move a little bit north into the east of that's your state line area. That's where you're starting to see that WTL barrel. This Permian Basin system, we now have over 1 million barrels a day moving through our Wink facility at different qualities, all moving towards Midland, Crane, the export pipes. This header system provides market optionality within the Basin, and then at each of the aggregation centers as you move west, you've now got connections to connecting carriers.
You can monetize your barrels, whether it be our marketing affiliate or our customers. They really value that aggregation. The scale of the system also allows you to have small brownfield projects to add connections, to add liquidity. As you're going to see, that liquidity that Harry talked about at each of those locations make us a natural partner for the next long-haul pipes. What does that look like? What are some of the details? We talked about we have a series of acquisitions that built the backbone. The growth hit the Permian Basin. We had less than half a million acres of dedications. That provides lease supply. That can either be to the pipeline as a third-party shipper or to our marketing affiliate, which then creates liquidity that we can sell at ultimate destinations.
In the last five years, really after the last downturn, we put an intense focus on monetizing our space, filling the pipe with acreage dedications where fundamentally we viewed they were worth taking. Building out the system, expanding it west, expanding it south. We've now got over 2 million acres captured, and that's the liquidity on the system. Tariff volumes have risen from 1,300 barrels a day, 1.3 million barrels a day to over 3.7 million barrels a day. This is the lifeblood of the system, as you'll see, and helped us build the rest of the platform. We've talked about one end. We've talked about the aggregation end. We've also said at the destination point, we need a real ability to liquidate the barrels, sell the barrels to multiple markets. That creates the ultimate flow assurance from the lease.
You have barrels to get into the aggregation point. You have a pipe in between, but if you can't sell them, it pushes everything back. We've got quality control, a lot of storage. We've got flow assurance because we have multiple markets to sell into. Cushing and St. James are two of the assets we've continued to build. Cushing storage is up over 26 million barrels and growing. Vast majority of that is third-party. It's operational storage for refineries. It's additional storage for shippers on our export pipelines, or it's producers looking to market within the terminal because we have all the buyers and sellers there. It's very little Plains marketing. We may originally build some assets, but ultimately, we turn them over to third parties. That's the Cushing model. St. James, very similar.
We're now selling all the storage to third parties because there's incremental demand. Capline reversal is another potential opportunity for this asset base. You see we're up. We recently announced another expansion at St. James to get to over 15 million barrels of storage. We're excited about St. James. There's two or three other assets that we have now that we're looking to commercialize into terminals that could ultimately be of this scale. We're very excited about our facilities business and all these long-haul pipelines you see us building create more opportunities for storage and additional services on a pull-through basis. What are we doing around the Gulf Coast? Some look to us and say, "What's your export strategy?" Ultimately, the market dictates where barrels will go. St. James, we announced an expansion of the docks.
If you look at our asset base, we're basically building connectivity for all of our customers back at the lease to get to any and all end markets. We're not going to pick where they go. The markets will decide where the barrels should flow, and we'll have connectivity of them. Mobile, St. James, Corpus, that's more of a direct refinery, direct export tie-in. You'll see the split between indirect and direct capacity. Ultimately, we're connected to the vast majority of whether it be end-user demand like refineries, petrochemical, splitters or end export facilities. In addition, the indirect concept is we can connect to other hubs that'll attract the barrels. They want the liquidity, and they can use their distribution network. It all depends on what the most capital-efficient solution for our customers is. You can see around Houston and Beaumont, we're largely indirect.
If you look at Wink to Webster, if you look at Red Oak, we're starting to tie more and more into direct connections there because they want that liquidity to go directly to their refinery or to their end market. We're going to increase that percentage as we push more barrels from our supply position into it. What does it look like in aggregate? We talked about all the individual components. Now we build up to what the answer looks like. The red represents all the gathering assets. That's the liquidity that the end users or the producers can access. All the export locations are the blue dots. Now we tie any Permian barrel can show up in Cushing, Wichita Falls, Colorado City, Beaumont, Houston, Corpus Christi, Ingleside. Now we've created the options. We gathered the lease. We secured the lease commitments.
We're pushing them to the markets that the committed shippers want, and we're doing it in a capital-efficient manner. Sunrise 2 was originally built on some Cushing movements, but since then, we've added markets in Longview. We're adding markets at Beaumont and Houston and Corpus Christi as part of the Red Oak process. You're seeing we're adding more and more market options as they develop. We're able to monetize a lot of space early, create the long-term options, and then fill the pipes. Same strategy for each of these, and we'll talk about them in more detail. Each of these projects, we've talked about the industrial logic of why we built each of the assets. Really the next step is how do you execute on the deal? You identify an idea. You have potential willing partners.
How do you ensure long-term alignment and not get three or five-year commitments, and then the pipelines are empty? Well, what we saw was a trend beginning in that 2013 time period that midstream became the lines became gray. Producers, refiners started to get into the midstream value chain. You can either compete with them or side with that capital, side with the strategic demand on the demand pull, or on the supply push basis, you can make them part of the project. We got in the middle of that, and as Willie and Harry mentioned, we started to attract partners. This is a list of 15 that we've done, and you can see there's some on the left-hand that are producers and peers, some on the right side, on the demand side, marketers, refiners.
Each of these had their unique industrial logic, and at Plains, we developed the skill set to find that common ground between the shippers, find that common ground between the end users and ourselves to where we can have an attractive return and longer term have alignment with our customers. What does that look like in a specific project? Wink to Webster. This is a perfect example. We're a long supply at Midland, Exxon's long demand downstream. We can figure a way to sanction a very good project from Wink to Midland directly to Gulf Coast refinery access. We get an attractive return above our cost of capital. Most recently, you've seen an LOI executed with MPLX to join as a shipper.
We're going to continue to add more direct access to refining demand, bring in strategic alignment to those shippers, and continue to increase project returns to well in excess of our cost of capital. Next, most recently you've seen the Red Oak Pipeline JV. We're excited about this project. It's got a lot of ancillary benefits in addition to the inherent return of the project. It's a 50/50 owned project between PAA and PSX, Phillips 66 Partners. The scope is originally a 30-inch pipeline from Cushing to Corpus with Midland connectivity through Sunrise that has leased capacity for the Red Oak project, an additional 20-inch connectivity to both the Houston and Beaumont markets. If we think about that cartoon, look what just happened. We've just built a cartoon that now aggregates from Midland, from Cushing. It distributes to all Gulf Coast destinations.
We've built exactly what we said we would through this asset. It's got pull-through from the Rockies to Cushing. It's got pull-through from the Mid-Continent to Cushing. It's got pull-through from Midland, and then distribution to all markets. This is the big version of all the little ones we've been building. That's what this project is, and we'll talk about some of the other additional benefits we can bring to this project. The Red River expansion is another one we announced. This one's a very interesting project. It's got great returns for Plains longer term. It's strategic alignment with a partner. Once again, Cushing's bottlenecked. Individuals are looking long-term supply instead of from the Gulf Coast to inland markets. We had the Red River project sanctioned as an attractive return, we found a way to fund an expansion.
There's $130 million sell down, we need to spend another $30 million of capital, $40 million of capital to get from 150,000 barrels a day to 235,000 barrels a day. We're keeping our cash flow neutral to positive, we collect effectively an additional $90 million-$100 million to fund the rest of our capital program or deleverage. This is another one. We've attracted a long-term strategic partner. We've created additional capacity to monetize, and we've got alignment with Delek longer term, it's a good relationship. In the end, each of these deals that we do, and we've got a happy partner. We do a good deal. The next deal comes to you because they want to find another way to work with us. What's next?
We've created all this demand out of Cushing for Red River, Diamond Capline that we're working on, the light expansion from Cushing to St. James, the heavy expansion from Patoka down, Red Oak, Red River. We've got to push additional barrels through. We have the opportunity to push barrels down Saddlehorn, do an expansion. We're actively working on it. Once we get those done, we'll create more demand at Cushing for storage and services, more pull through to the pipelines we've just committed to, more liquidity at Cushing, and then at St. James, you may have some additional opportunities for storage and distributions to end markets. Going further upstream above Saddlehorn, you can see we've got two cross-border pipelines. We've got the Western Corridor system, which has underutilized capacity and brownfield expansion opportunities.
We're going to look to fill that and push it towards Cushing, either through our assets, potentially through the Liberty assets. We're likely to find a way to move those barrels. In light of the Enbridge announcement recently, Line 3 being held up, some of the other issues in Canada on export, we're going to look to monetize and figure a way to get those barrels to Cushing and eventually Gulf Coast destinations. We're excited about that. You can see we're now pushing further upstream of Cushing to Saddlehorn, to Western Corridor, which could be Powder River Basin, to Canada, bring those barrels down, leverage the system, increase returns of those existing assets. Not only greenfield, but this is brownfield expansion opportunities, lower cost, increased throughput, pull-through benefits through our entire system. Last but not least is our Canadian NGL business. We're really excited about the business.
It's made significant strides. Our focus, as Harry mentioned, is on our lowest cost equity barrels from a supply standpoint, really concentrating and focused on what we do best. We acquired the lowest cost, optimizing our west to east system, improving our contract profile on our sales basis to where we have the optionality and not necessarily our customers, which prevents a significant floor on the downside while retaining a significant portion of the upside. We're excited of all that. The next thing we're going to look to do is, are there additional higher value end markets we can look to? We have supply. We're currently optimizing it now. Are there other things we can do? That's probably the next step that we look towards on the NGL side. With that, I'll turn it over to Chris.
Okay. Thanks, Jeremy. Good afternoon. I'd like to spend a few minutes sharing details of our operating strategy. We think of operating strategy in four areas. These are a commitment to operating excellence, our people, our assets, and our systems, our operational capability and quality segregation, and finally, our project execution capabilities. We believe that these will deliver long-term success for Plains, and I'd like to share some details on each of them. Let's start with our commitment to operating excellence. You might ask, what is operating excellence? It starts with safety and environmental performance. What's safety? Safety is personal safety and it's process safety. Personal safety is ensuring that our employees and contractors do not get injured on the job. Process safety is making sure the process or the equipment does not injure our people. What's environmental to us?
Environmental is operating above and beyond the minimum regulatory requirements. It's placing a top priority on asset integrity and targeting zero releases. It's working closely with regulators to share and implement best practices across the industry. These two, safety and environmental, are built on top of reliability and optimization. To us, reliability is operating with a high level of uptime and the elimination of equipment failure and unplanned shutdowns. This benefits safety, this benefits environmental, benefits the customer, and benefits our bottom line. Finally, what's optimization? Optimization to us is optimizing our network of assets from a capacity standpoint, an efficiency standpoint, and an optionality standpoint. We earn our license to operate every single day in every community where we operate. We operate in a highly regulated industry, as you can see in the middle of this slide. How do we do it?
How do we keep track of the numerous requirements that are applied to our business? We call it OMS, our Operations Management System. It actually consists of nine elements and 32 sub-elements. These contain the performance standards and the processes by which we operate at Plains. Ultimately, we are accountable externally. Roy's going to share the work that we're doing in the environmental, social, and governance area during the next presentation. After operating excellence, we move to people, assets, and systems. Plains has 5,000 hardworking and dedicated employees across North America. These employees help us transport 2 billion barrels of oil per year and drive 40 million miles. We have 40 pipeline controllers that are working 24 hours a day, seven days per week, 365 days a year to safely operate our assets.
For our assets, our business spans North America, from the Montney and Duvernay plays in Canada to the U.S. Gulf Coast. From Corpus Christi to St. James, Louisiana, to Mobile, Alabama, to Tampa, Florida, we transport hydrocarbons to markets. How do we do this? We do this through 18,000 miles of pipelines, storage capacity of 140 million barrels of hydrocarbons, and 60 billion cubic feet of natural gas storage. We can process over 300,000 barrels a day of natural gas liquids and condensate and nearly 7 billion cubic feet of natural gas. It's quite a set of assets that we've built over the last 20 years. Speaking of transporting hydrocarbons to market, we have three examples here. These include we move Canadian crude to the U.S. Gulf Coast.
We move NGLs extracted from natural gas at Empress, Alberta, to satisfy cooking and heating demand in the United States. These are value chain solutions for our customers, whether they're producers, refiners, or consumers. Let's dive into the Delaware Basin in a little more detail. I want to share our capability there. You've heard our calling card, supply aggregation, quality segregation, flow assurance, and market access. This capability has brought customers to Plains, and it supported significant investments in the Permian by Plains over the last few years. From the end of 2017 to the end of 2019, we expect to add over 2 million barrels a day of Permian system capacity. The key projects are shown on the right side of this slide.
They are things like our Sunrise II JV that goes from Midland to Wichita Falls, our Crane to McCamey system, our Wink to Midland system, our Advantage JV that delivers crude into Crane, Texas, our Wink to McCamey system, and our Alvord to Wink system. I will provide updates on Cactus II and Wink to Webster later in this section. Red Oak, of course, you heard Jeremy talk about, we just announced yesterday. Capacity additions backed by contractual commitments can lead to growth in tariff volumes. We have grown our tariff volumes from 1.5 million barrels per day in 2014 to over 4 million barrels a day in the last quarter. This has been across all segments of our system, gathering intrabasin and long-haul pipes, with the projects I just mentioned and several others. Tremendous growth there.
I wanted to share some additional detail around our quality segregation capabilities. Crude quality, as you know, varies by well and by basin. A typical system might gather this crude into common headers and put it into common storage tanks. Unfortunately, this can mix a high-quality crude with a low-quality crude and create a stream that has lower value to a purchaser, like a refiner. What do we do at Plains? Most of our systems have the capability for segregation all the way back to the lease. If you combine this with dedicated terminalling, the different crude streams can be segregated and shipped in batches to the market. The diagram on this slide shows how we do this. Once we have the crude segregated at our origin terminals, we can ship it in our pipelines 1 grade at a time, as shown on the slide here.
At Plains, we provide this service to our customers. We currently ship multiple grades down Cactus to Corpus Christi and multiple grades to Cushing and to Houston. Again, this allows producers to obtain the highest value for their crude and refiners to purchase and process a consistent and predictable crude quality. This is what draws partners to Plains. As you have seen, our growth at Plains has been a combination of organic growth and growth via acquisitions. Organic growth can provide tremendous value for Plains, and this project execution capability is a key part of our strategy. We have placed over 4,000 miles of pipe into service over the last five years, and we plan to add another 1,800 miles over the next three years. I wanted to provide updates on two of our projects as I close out my part of the presentation.
Cactus II is 670,000 barrels a day of capacity from Orla and Wink in Midland and Crane and McCamey to Corpus Christi and Ingleside. This project is progressing on schedule for initial service by the end of the third quarter of 2019. We have over 90% of the pipe in the ground, and we are working diligently towards completion. Wink to Webster is our joint venture with Exxon, as you heard from Jeremy. This is a 36-inch pipe that could have capacity up to 1.5 million barrels per day. This, of course, connects Exxon's Permian production to Exxon's Gulf Coast refining demand. This is progressing towards a first-half 2021 startup. Pipe is currently being produced at two mills in the U.S., and environmental permitting is well underway on this project.
As a matter of fact, we've contracted or issued purchase orders for over 50% of the budgeted project cost for this project. We feel quite comfortable about its progress. This concludes a review of our operating strategy. Thank you for your interest in Plains. Brett's going to come up with some additional instructions.
Thank you, Chris. We're running a little bit ahead of schedule. We're going to go ahead and move to a break. Just a quick reminder, we are going to have a Q&A session after the financial update section. If you do want to participate in that in the room, you can do that through a passed microphone or through submitted questions in note card form or email. At this point, we're going to take a break, and we'll reconvene here probably about 25 minutes from now, a little before 3:00 Eastern Time.
Hello, everybody. If you could start making your way back to your seats, we're going to get started here in just a minute. We're going to kick it off again with a rousing topic here. My name is Roy Lamoreaux. I'm Vice President of Investor Relations, Communications, and Government Relations for Plains. I also head up and chair the ESG or social responsibility working group. I wanted to give you just an overview of our ESG activities. We use ESG and social responsibility somewhat interchangeably. Really, we've been focused on, throughout the company, doing the right thing for many, many years. Ultimately, from a corporate philosophy, generally, our view has been, Greg Armstrong would say frequently, a whale only gets harpooned when it comes up to blow.
Historically, we have really been focusing on doing good and being good, not necessarily looking good. You saw that in even our presentation materials, et cetera. It was really just a focus on trying to deliver what we saw as long-term value for our unit holders and very focused on the communities in which we operate and doing the right thing in those communities. We hadn't focused a lot of effort in communicating about those efforts to the investment community. Increasingly, we've seen banks and other financial stakeholders requesting more information relative to our social responsibility efforts. We've really doubled down on this activity. We'll be providing more disclosure. For us right now, it's about really disclosing what we're already doing more than it is about changing what we're doing. We do have executive direction and oversight of this effort.
Al Swanson, our Executive Vice President and Chief Financial Officer, chairs the executive review of the ESG and social responsibility efforts. I chair the working group, which is a vice president level working group. It includes multiple disciplines within the organization, from environmental, safety, human resources. We have cross-border collaboration with our Canadian group as well, so that we get the best of both organizations. We're really, as I mentioned, focused on improving our disclosure, and I'll get into that a little bit more throughout the presentation. Our ESG activities are really built on our values. Safety and environmental stewardship, ethics and integrity, accountability, and respect and fairness. We also have three main pillars for ESG. The first is reporting, community building, and business integration. I'll talk a little bit more about each of these, as well as the governance elements of social responsibility and ESG.
With respect to reporting, as I mentioned, if you look at our ESG scores and some of the agencies that rate companies, generally, you'd see that we don't rate very well. Yet when we meet with banks and with investors, we've actually had them tell us that they think that we're top quartile. There's obviously a discrepancy there. What it appears to us as we've really benchmarked against peers and looked at it, the rating agencies, and talked to the banks, and looked at AOPL and AOPI, it's really about, for us, providing more disclosure. We've added a social responsibility section to our website. We've been providing a fair amount of disclosure up in Canada for some time. We've actually had our fifth annual report to stakeholders that was published this year.
As we go into the balance of 2019, we expect to increase the metrics that we disclose by about fivefold on the ESG front, as well as going through the policy-related disclosures in this area. With respect to business integration, this is really all about embedding our practices and ensuring best practices throughout the organization, making sure that our practices are meeting our policies. The first part of it is that it's really our ESG efforts are embedded within our OMS activities. As Chris mentioned, this is really a defined plan and way of systematically going through our business and making sure that we're operating in an effective way. Stakeholder engagement and outreach is really a part of that activity.
As Chris mentioned, we've got a very active effort of meeting with stakeholders all along our rights of way, even before construction, during construction, and after construction, and have ongoing efforts to ensure that we're engaging the communities, that they know about pipeline safety, and that they understand the benefits that we bring to the community when we come and operate in their communities. A big part of that, as we'll talk about with the community-building element, is really that we want to be a good citizen in the areas that we do operate. We have included safety and environmental metrics as part of our compensation going forward. We actually began that last year.
There's two different metrics that all of our employees get updated on or are part of, it really boils down into our bonus metrics, and that's the total reportable injury rates, or TRIR, as well as federally reportable releases. We've targeted year-over-year reductions in both of those metrics. We track that on a monthly basis and provide updates to employees. We're all very focused on ensuring that we're continuously improving in those areas. Really, the employees are key to this, making sure that we're all communicating and we're all aware of what the needs are within the organization, and really what the requirements of our communities are and the opportunities that we have to improve.
With respect to community building, we've got, as Chris mentioned, about 5,000 employees all across the U.S. and Canada in many areas, and in many cases, in rural communities throughout North America. Our employees can provide a leadership role in many communities in which we operate. They're very engaged in volunteer efforts, as well as the company directly supports causes throughout North America. We also will match employee contributions to worthy causes throughout our footprint. We've become more involved, as I mentioned, in stakeholder engagement all across our rights of way on new pipeline projects as well as existing assets.
We've stood up actually a government relations function within the last couple of years that's much more focused and engaged on federal issues, state issues, and local issues, and coordinating those activities among the various groups within the company and ensuring that we're engaging with elected officials and those of influence where we operate. We've also made significant social responsibility investments along new pipeline rights of way. In the appendix is just an example of Diamond, one of the elements of Diamond in preserving habitat for an endangered bat community. We also have first responder grant programs. It's been a very successful program. We started it with Diamond. It was a million-dollar grant program that enabled first responders, so police and fire departments, to apply for grants for equipment and for training. It's really helped the readiness of these first responder organizations in our areas.
It's a dual benefit in that they're ready for emergencies in the communities. They're also ready for response operations for any needs that we may have as well. It's been a great relationship with first responders. In many cases, you may think that this is not that big of a deal, but in many cases you'll have a first responding organization, maybe a volunteer fire department with a pretty limited budget, and our grant may equal their whole annual budget in a year. It can make a big impact on their preparedness and ability to respond. We've gotten a lot of really positive feedback from that. Given the success of that, we've actually extended that into each of our large long-haul projects.
We've embedded that community benefit element, we've also extended that into our ongoing operations and managed that with our damage prevention and public awareness group that's going and helping people and first responders, training them for responses. That's been a real positive. We've also engaged with a number of nonprofits. Several of their logos are on this page. We're really focused on trying to make sure that we're a good citizen where we do operate. With respect to governance, as Brett mentioned, we've got a one share one vote organization throughout the company. We've got three different entities, all of them. There's no IDRs, and we get the benefits very similar to a C corp structure in that regard. We have a unified board of directors that's really aligned with the interests of the unitholders. Significant equity ownership across PAA, PAGP, and PAA.
The eight of the directors, of the 13 directors, are actually elected on rotating three-year terms. The majority of those are independent. Our compensation of executives, as well as throughout the company, is generally lower base pay with more at-risk compensation that we think aligns with unitholders. We think that we've made some pretty good progress with regard to the way that we've kind of engaged with the public on ESG metrics. We would welcome feedback on this as we kind of advance our efforts on providing more disclosure. Would welcome any feedback as we go forward. With that, I'm going to turn it over to Al.
Thanks, Roy. During my part of the presentation, I'm going to touch on our financial strategy, also touch on guidance, kind of some historical performance, as well as touch on our weighted average cost of capital, historical returns, and then kind of wrap up with just touching on PAGP and the kind of the tax attributes in it. Our financial strategy, there's parts of this that have been in place really since inception, 20 years of the partnership. There are some important changes that we just rolled out in April. I'd like to think, and we all believe that internally, that some of the changes that we've made really embrace what a number of folks would refer to as kind of midstream 2.0, recognizing probably a more conservative financial position.
We clearly continue and have been for a number of years, target to achieve and maintain mid-BBB credit ratings at all agencies, Moody's, Fitch, and S&P. The credit metrics that we quote there we think are commensurate with that. Obtaining mid-BBB, probably the key one is the leverage metric, long-term debt to adjusted EBITDA. We recently lowered that in April by a half a turn, 3.0-3.5. It historically had been above that. We recognize that various people do different calculations against that, whether it's including the preferred, et cetera. Roughly, just as a rule of thumb, rating agency formulas would generally add a half a turn to three-quarters of a turn to that. If we were at the low end of the range, their metric might look at us as 3.5-3.75.
It's one we're very much focused in on, and we're also focused in on looking ahead and recognizing that S&L can create some positive trailing periods and some weaker periods. We're very much focused on maintaining our leverage across kind of those cycles, and looking at it on a more normalized basis. The next major bullet there, long-term sustainable minimum annual distribution coverage of 130%, 130%. We got a lot of questions around what does that mean? Clearly, the takeaway is that we want to run higher coverage. We want to minimize the need to access equity markets. The reality of it is, and I'll show you in a few slides, I think 2018, we ended up a little over 200% coverage. This year we'll be over 190% coverage.
Clearly, we're continuing to try to use that higher coverage to over-fund our capital program such that we can bring leverage down over time. We are looking at the 130 as kind of a floor, though. It's a minimum, and it needs to be sustainable across a few years. Do we think we really need to have the range be 130 to 200 kind of plus percent? The answer would be no. That's one of the areas we've gotten a lot of questions on. We would be comfortable. We don't feel like we need to run 190 or 200% coverage. We don't think we really need to run sustainably over 150% coverage. Probably a better way to think of it is we'll run higher coverage for a few years while we continue to migrate leverage down.
As illustration, we would be comfortable kind of in a 130 floor to a 150 kind of band. Again, we think the business is sustainable. More and more of our cash flow is coming from fee-based sources. That's one way to look at it. Clearly, we are looking at an annual cycle, so we will obviously declare distributions quarterly, but we're looking to make changes to that on an annual basis instead of quarterly basis. When it comes to capital allocation, we articulated in the April kind of financial policy update that we view it as there's four components to that. Clearly leverage management, leverage reduction, distributions, and distribution growth being obviously a primary one as a midstream entity and as an MLP. Funding our growth capital, again, in a way to not have to go issue common equity being a key part of it.
The fourth one being opportunistic equity buybacks. Clearly, there's been, over the last six months, a lot of feedback, a lot of enthusiasm about buying in shares. Clearly, we recognize that as a component of our capital allocation strategy. We do think probably in the near to medium term, the first three will be more of a priority to us. If we do look at share repurchases, it would be on an opportunistic basis. The funding of growth capital really didn't change much other than over the last few years using retained cash flow versus equity issuance. It's probably been a key part of it. What we are trying to say here is that we intend to minimize the use of issuing common equity to fund what we call routine growth capital programs. I'll use another kind of an example here.
Probably over the last seven or eight years, our growth capital programs have averaged $1.5 billion, $1.6 billion per year. That excludes acquisition capital. We do not believe that they will retain at those levels as the infrastructure continues to get built out in North America. Clearly, for us, maybe 2020 will be a little higher than what we thought before the announcement yesterday with Red Oak, but we do think our capital programs will migrate lower. I'll use an example. It won't be probably $1.5 billion plus, but if our routine programs average $750 million to $1 billion a year, our intent would be able to fund that 55%, which would be kind of $400 million to $550 million of the equity component without having to access the equity capital markets.
Clearly, if we got into a situation, once we get into that more sustainable capital program, we will look at other alternatives to fund that capital above that kind of more recurring nature, whether it be asset sales, strategic JVs, as the team kind of walked through here. Also equity markets, be it common, preferred, structured equity or private equity into assets. We think we have a number of tools to do it, but that kind of walks through how we're thinking of that routine funding or routine programs. As far as our return thresholds, this is another one we've had some questions of late. Historically, we've targeted for over a decade, 300 to 500 basis points above our weighted average cost of capital. We look at it on an unlevered basis. Weighted average cost of capital changes really daily.
The 300 to 500 as a target or as an indicator really hasn't. I have a slide later. I'll spend probably more time than you care to walking through that. Maintain liquidity and just kind of the risk side of our debt maturity profile are the final pieces. As far as where we're at, we've made an awful lot of progress over the last few years, as you can tell by this chart. Roughly 2 turns off our leverage. We're at a point where we feel very good about it. In April, we declared kind of quote, completion of our August 2017 de-leveraging plan. Clearly, we've managed debt lower over this period of time. We've grown our fee-based cash flow. Part of this getting here a little quicker and why it looks very low, our leverage relative to our new target is S&L performance.
S&L has had a strong period. We've got guidance out for roughly $450 million this year, but on a trailing basis, what goes into those formulas, it's more than $450 million. When I look at 3.1, and you've just heard me talk about migrating our leverage lower, and we're already at kind of the lower end of the band. We're looking ahead and thinking of what this calculation will look at as some of those trailing S&L periods come off. When I look at our leverage, I look at it as being at the high end of our range or actually above it. Again, that is why we are talking about continuing to migrate our leverage lower because we're looking ahead and thinking of what S&L may be in 2020, 2021. I think this is a pretty important point here.
On the S&L front, when it comes to leverage and that coverage, we fully intend to have our assumptions be from a financial standpoint that we're going to assume a fairly modest amount of contribution from that and try to make all of our surprises be positive surprises. I think Jeremy touched on it. We use that excess S&L cash flow to reduce debt, fund capital. Maybe one day it'll fund an opportunistic share repurchase. That's how we're approaching that. Committed liquidity at March 31st, very solid. A little over $3 billion. Strong retained cash flow, as I mentioned. Note maturity profile, one of the other financial strategies. A pretty good profile. 10.5 average years, $9 billion of notes, all fixed, 4.5% average coupon. We're pretty pleased with the profile. We do have $1 billion maturing over the next six to seven months.
We would look to refinance at least a part of that in the markets later this year. Obviously, assuming market conditions are appropriate. This chart, kind of a little bit of historical segment performance. Willie touched a little bit on it, but this will be a little bit more detail on it, along with our guidance. Similar format, I apologize, that I've used for the last few years. Top part of the graph shows 5 years actual, our current guidance by segment. Growth in the fee-based segments, principally transportation. More variation in S&L, as Willie touched on earlier. Again, S&L being stronger in 2018 and 2019 than what we're assuming it's going to be going forward, and that is important from those financial aspects. What's driving transportation growth?
I'll touch a little bit more on it on the next slide, but it's really production growth across a lot of basins, as well as the investments we've made. Clearly, asset sales have come in the fee-based segments. We've sold a little over $3 billion. That's been impacted through this period. Again, a good track record of growing our fee-based cash flows. The bottom three charts are really the detail for the top chart that equal the segment EBITDA numbers. Transportation, the bars are volumes. The line is unit margins for each of the segments. Transportation, what you can see is growing volumes. I think Jeremy and Chris touched on that extensively. Significant growth there. Unit margins in kind of a $0.65-$0.70 per barrel band. Facility segment, a little less growth over the entire period. It had some early, so a little pretty consistent results.
It's one where we've seen less of our investment dollars go into facilities. We're building a lot of pipelines, a little less on facilities, although we've announced a few expansions here recently. Overall, it's got a little bit less investment going into it. Then secondarily, asset sales on a proportional basis probably impacted that segment a little bit more. The S&L results you see kind of flat to growing volumes, slightly growing volumes. This year, we've cut back some of our NGL activities, as you heard earlier. We actually have reduced volumes. We think we'll actually see better profits. You can see really the variation is in unit margins. Again, the reminder, we're running our company assuming that 2020 is going to be meaningfully below the $450 million this year.
This slide is one to really take on the transportation and the growth, touch a little bit on the future stuff. The segment profit is on the line. You can see from just under $1 billion to just over $1.7 billion from our guidance over this five-year period, roughly 75% growth. Where it's been driven from is the Permian. The Permian volumes are up about 200% over that period of time. The other regions are actually down slightly. Asset sales have a big part of that. Transportation segment has been our growth engine for a number of years, and quite frankly, we expect it will be for the next three to five years as well. What's driving that? You heard a lot about this today, I just tried to put it on one slide.
We have assets in a lot of these basins. These basins we expect to grow, not maybe as meaningfully as the Permian, that one chart I think Harry walked through. We expect to see growth in the Eagle Ford. We expect to see growth in the Bakken, in Canada, in the Rockies. We have assets that can benefit. Our teams are focused on driving growth, capturing our fair share of that. The Permian, we expect to have meaningful growth. I think the number was over three million barrels a day of production growth. A lot of that is going to come from the Delaware. We have substantial acreage dedicated, as Jeremy walked through.
That is part when we look out over the next 2020, 2021, 2022, we see that as being a part of why we have some confidence in continued growth in this segment. The capital projects, I think you've heard about most all of these. Cactus Red River, Wink to Webster, now Red Oak, the other three Capline, Diamond, Saddlehorn, all potential. Those projects, again, will be additive to this growth as we go ahead. Probably less in 2020 than they will be in 2021, 2022. That is what will drive this engine going forward as well. I can't say all that without a little bit of a caveat.
We do expect to see some offset, some headwinds as a result of it by lower spot volumes on several assets in the Permian due to the capacity that'll come online between now and, say, the next 12 months. The two assets that's pretty easy to identify, Basin and BridgeTex. We expect to see lower spot volumes move on those lines. I will just remind you, I think it was touched on earlier in the presentation. On Basin Pipeline, there's really two movements. What I call an intrabasin movement, when you see our breakout gathering intrabasin long-haul, that pipeline basically can bring Delaware Basin crude into Midland and Colorado City. If it's getting off at those assets, feeding other systems, other pipelines, that's an intrabasin movement to us. The long-haul movements are really what goes out of Colorado City up to Wichita Falls or to Cushing.
What we're saying here is we expect to see less movement on those spot movements on the long hauls to Wichita Falls, although that's being potentially abated a degree with some of the Red Oak project, up into Cushing as well. We do expect to see continued growth on the intrabasin movements as product is coming from the Delaware into Midland. That helps to offset that, but we are assuming that we'll see some lower volumes on those assets. We do have a few contract renewals, not overly material, but they will act to either remove some volume or we'll see some tariff pressure on those. Again, fairly modest in the near term. Ultimately, that's how we're looking at 2020 and beyond is continued growth for our EBITDA, driven by our transportation segment.
In the very near term, there's a little bit of tempering of that growth. On a just everything I've been doing is kind of on a segment basis, but just taking it up a little bit. Clearly, the transportation segment driving EBITDA growth 80%. This is just 2018 actual to 2019 guidance. Overall, 6% up. Net income up 10%. Most of the unit metrics up 10%-12%. Distributions up 15%. We did a 20% increase. Three-quarters of it will be reflected this year. Coverage, 200%, a little over in 2018, a little under in 2019. Again, all of 2019 is based on our current guidance. A little deeper on a couple of those DCF and adjusted net income. I'll go through this hopefully pretty quickly. The absolute entity-level numbers on the left, per unit numbers on the right. It shows five years of actual, our current guidance.
Clearly through the downturn in the last several years, we remained a very profitable company. DCF over $1.5 billion during that period of time average. 2018, stronger than the prior four years. 2019, stronger than that, at least based on our guidance. Net income, $1.2 billion. 2018 stronger, 2019 stronger yet. Again, I know as we went through the cycle, we did remain very profitable. It's just our growth was clearly hampered. When you look at it on a per unit basis, 2016 and 2017, kind of the trough. Growth in per unit numbers in 2018, and as I walked through on the other slide, we expect growth in 2019. $271 of DCF. Net income $210. When you think of valuation, roughly where our stock price was yesterday, the DCF yield is one way I look at it. It was about 11.5%.
We're not necessarily happy with our valuation. On a P/E basis, I know frequently you don't hear P/E for midstream, but that would be 11 times earnings. Again, profitable organization. We're not pleased with the value yield, a little over 6%. Again, probably the takeaway message here is we are focused on driving per unit value, and ultimately we hope that gets reflected in the valuation. Capital program. I think if you recall last year, it looked very similar. 80%-85% invested in the Permian. Again, we've put a pretty big bet on the Permian. We like that. This year's program, $1.35 billion. You can kind of see the highlights of it there.
We did have two new announcements, I think last quarter, in a St. James expansion and a terminal up in Alberta that actually is very good because it's actually bringing more volume to the pipe, as well as the return on the investment on the terminal. Just things we're continuing to try to increase cash flow on our existing asset base. You can see the announced developing down below. Red River has been sanctioned since quarter end, and we provided this guidance. I think Jeremy touched on it. Cash this year, the CapEx will go up, but the sales proceeds are significantly above what our CapEx budget will go. We brought in Red Oak. There will be some spend this year, but principally be a 2020, 2021 investment.
We do expect to see some change as we next update this year's guidance, but we don't expect it to be overly material. Ultimately, as we look at, I think I touched on it earlier, when we look at 2020, we don't have 2020 CapEx guidance out yet. We'll do that later in the year. Red Oak and Wink to Webster will dominate those numbers. Probably won't be as much of a fall off as what we would have thought a few months back. Shifting gears a little bit to cost of capital. I went back and looked because I was curious. Including this year, the last 10 Investor Day meetings, I've had a slide like this eight times. I don't know why I keep doing it. The approach is pretty similar.
Other than at one point we had a distribution level and a growth. We went to a DCF per common unit concept. This calculation shows our kind of beginning of the year DCF per unit, some growth to it, divide by average unit price. I think that was kind of based on a May average trading value. Get a little over 12% cost of equity. I think we can all pick at that and debate it, et cetera. On a debt side, we look at 10-year fixed rate debt. 4.25% was what we could do the day we drafted this slide. 55/45, which is again, a rule of thumb. You get to 8.6%. That approach has been pretty consistent for a long time in how we thought of our cost of capital.
I think this approach is a little better when we shifted to a DCF per unit number. When I look back at those other seven slides before this one, the range of that cost of capital was 6.5% on the low end, 8.6% on the high end. This year was the high. If you went in and looked at the equity cost, this year's equity cost is by far the high. Bigger spread between the cost of equity and the cost of debt today than there's probably been in over a decade. As we think about our return thresholds over this, as we're evaluating a project like a Red Oak, the first cut is what is 300 to 500 over that weighted average cost of capital? What's the risk in the cash flow? Low-risk asset, higher-risk asset? That will govern it. What's the term of the contracts?
There's a lot of things that we go through as we think about returns above our cost of capital. When you take this, and if we can make an investment and generate 400 basis points above it, that produces a very good answer on the incremental equity. My little simple formula down there on just the weighting, the ROE, I got to ask the question. It's a cash concept, not a GAAP concept. The reality of it is that it would generate high teens, low 20% return on that incremental equity dollar investment on a cash basis, not depreciation, not anything else. That's how we approach this. The next slide, I'll touch a little bit on our scorecard around that, but we believe investing and generating those returns, we should be making the investments when they make sense.
The weighted average cost of capital varies, but we've held pretty constant to the three to 500. We don't try to limit ourselves to that. We want more. If we can generate a project that meets these hurdles and has upside, if Jeremy and his team can work to fill the pipes up, do all that stuff, we like that. We would prefer to take that approach as we look at it. This is actually a new slide. I said the last one we have been using for a while. This one's a new one. Return on invested capital, it's kind of our definition. I just walked through an unlevered return hurdle. This is an unlevered return hurdle, but it's based on dollars in investments we made 20 years ago. The simple formula, adjusted EBITDA over average invested capital.
Average invested capital is just a simple beginning of the year, end of the year, weighted 50/50. The footnote describes what's in it. It's every dollar we've invested that's on our balance sheet. The All American Pipeline we purchased 20 years ago would be in these numbers. Line fill, goodwill, if we did an acquisition, gross intangibles, depreciation doesn't reduce the numbers. We've taken that approach, recognize that there's other ways to look at it. The average has been just under 13%. Clearly, the last five years is below that, partially due to the industry events we just went through and discussed. As a rule of thumb, you can pick at the formulas that roughly $1 billion of invested capital or $100 million of EBITDA would change the numbers 40 basis points. Our invested capital at year-end 2018 was just under $25 billion.
It was $24 billion and change. We recognize this is an imperfect kind of approach. One year our supply and logistics may overperform. One year it comes down. It'll create noise between the years. I do think an averaging concept would be the best way to look at this. I know there's a number of sell side research reports that have attempted to do similar on a three or five-year basis and how much capital you invest, what's your EBITDA change? Valid concept, imperfect, just like this is imperfect. I think the message here is we're focused on returns on our investments. We're focused on returns above our cost of capital. As we challenged ourself, and you probably heard more times than you care to today about investing into our core brownfield.
The reality of it is part of that came from as we challenged ourselves and went back and looked at individual investments we've made and where we've been really successful and where we haven't been so successful. A couple of them I note on the bottom slide here, that would be what we'd think of as more of a step out. Natural gas storage, which the original entree was over a decade ago. Again, the capital burdens us forever. The other one being crude oil by rail. If we wouldn't have done those two investments, that last five-year average, if you just averaged up that chart, it would be 11% for those five years. It would have been 130 basis points above it, or 12.3%.
The only reason for kind of walking through this like this is our focus is on our core, what are we good at, and doing our very best to avoid those mistakes. Getting close to the finish line. PAGP, kind of another shift. Its assets and tax attributes. Its only asset is the common units it owns in PAA. It owns 167 million common units. It has 167 million Class A shares outstanding, effectively a one-to-one linkage. Brett mentioned it's taxed as a C corp. Investors get a K-1. It's a very convenient form of ownership if you want to own a midstream investment. The tax attributes are probably a bit of a difference between us and some others. We do not expect the entity to pay corporate income taxes for more than 10 years. Cash distributions today are a return of capital, reduce your basis.
You don't pay tax until you sell the unit, and we expect that to stay for more than eight years. Kind of my wrap-up slide. I apologize I took a little bit too long, but significant progress over the last few years. Our updated strategy, we think, embraces what we hear our investors want, i.e. the midstream 2.0 kind of model. We're very much focused on continuing to reduce leverage. Again, don't let the three one make you think we're done. We're not. Improving our financial flexibility and getting our ratings back to mid-BBB. On a capital allocation front, again, near-term focus will be on the three parts: investing in our core business through capital-efficient projects, distributions and distribution growth, and managing our leverage. Opportunistic share buybacks will come
Which is not in the near term. On the capital investment front, hopefully what you've heard is a keen focus on investment in core and returns on our investments. Roy, I think we're doing Q&A next.
Find a seat.
We have a couple different ways that you can give us questions when we've got microphones in the room, that you can raise your hand and bring it. I've got a couple of questions that we've received that we'll start with so we can get things queued up, you can also pass cards to the aisle. A reminder, we do have a reception after this, so if you have a question that won't have broad interest, we'd encourage you to focus that question to the reception, just so that we all don't have to wade through a question that probably won't have a broad interest. With that, I was going to mention we've got, obviously, the presenters here.
We also have several members of our senior and executive management team here with us that we'll pass the microphone to if there's a question that would pertain to them. Jason Balish, you might raise your hand, who's the President of our Plains Midstream Canada. Tyler Rimbey, Executive Vice President of Commercial for Plains Midstream Canada. We also have Dean Gore here, who's Vice President of Environmental and Regulatory Compliance, and he's my other ESG brother. We're happy to have him here with us. I'll start it out. This is a question on kind of the potential impact of recent commodity price changes and volatility. Jeremy?
Well, the first part is what did everybody plan for? We had volatility in the first half of the year, but effectively, producers budgeting was $50-$55 a barrel. In essence, when we planned at the beginning of the year, we felt from a producer standpoint, that was kind of the range of cash flow that would be recycled back into the ground. After our discussions beginning this year, really after the rout in equities at the end of last year, the producers were anything over $55 a barrel, they're going to look to either heal their balance sheets or they would look to redistribute it, whether it be through distribution, return to shareholders. We effectively viewed this recent volatility. We thought $66 was too high. $53 is about where the industry was planning for.
Now, you're about to get a boon specifically to the Permian. You'll have an increase in realized price that starts in the second half of the year. That should improve cash flow. We think that will offset some of it. Ultimately view the decline in prices, specifically to the Permian, where we have the higher leverage. We've seen a bit of a slowdown in completions, but we think that cadence will increase as a result of new capacity coming online and increased realized prices or some staging of completions. The rig count's about where we expected. Now, if it continues to slide and prices continue to slide, we'll plan for it. We think a couple things. One, there's been a significant amount of hedging when prices ran up, which will provide some buffer from a cash flow standpoint.
Two, our contract profile allows some surety for us on what we would see as returns.
Great. Do we have? Okay. Shneur, will you go ahead and state your name and firm?
Shneur Gershuni with UBS. Two questions. First, with respect to the new project that was just announced yesterday, I was wondering if you can talk about the financing plan with respect to it. Will you and PSX be contributing equal amounts of capital? Will you consider project-level financing at the project level?
The investment itself is the 50/50 JV financially. With respect to financings, I think we're in the early stages. Will they consider it? Absolutely, but they'll consider multiple options, and we'll look at what's the most attractive. We're not viewing it as off-balance sheet financing as a way to avoid credit metrics. We're looking at it as what's the best cost to capital for us to finance the project.
Great, a follow-up question, maybe sticking with Jeremy. Every time investors see an announcement of pipeline CapEx in the Permian, the knee-jerk reaction is overbuild. I think you touched on this a little bit with respect to the new project, but it doesn't strike me as really being an overbuild type of situation or risk of an overbuild, and it seems that it's more connected to Liberty in freeing up some of your bottleneck capacity at Wichita Falls. I was just wondering if you can sort of walk through this, or is it really just a lot more incremental capacity out of the Permian as people fear?
Good question. I think part of the attractiveness of the project has fit us well. The pull through at Midland, the pull through at Cushing. It's sized appropriately out of Midland to stay within the existing stack of takeaway capacity. Part of Sunrise, when we initiated service in October, November of last year, was adding optionality at Wichita Falls, connecting it to Red River. It already had connectivity to PE1. It's connectivity to Red Oak. It's going to help fill part of our system, but it takes capacity in the existing stack and just better utilizes it, I would say. We wanted to make sure there wasn't another project potentially built that wasn't necessary. There will be an overbuild just because of the nature of-
Step changes in capacity, but we want to make sure the industry is right-sized. It's a comfortable area where producers can get high realized prices, but not so much to where there's a destruction of capital.
Maybe I'd add something to that. When we look at our regional strategies and what's going on, in many cases, it'd be easy to say, we don't have to do this. Again, if you're planning for the long term, you're looking at the risk to your own pipelines. There's been a lot of projects that we haven't participated in, and the example I would give, if it's a gathering system that we wouldn't get the benefit of as far as an integrated pull-through, there's some things that we haven't done. When you think about some of the projects that we've announced, these are core to our business. It allows a lot of upstream and downstream benefits potentially down the road, and you sanction them at a decent return to start with. We should be doing these. Al talked about our capability to fund this.
A lot of these are really how do we think about where we're headed for the long term? Should we plan this or should we not? The projects that we've announced are ones we decided we needed to plan.
Great. In the back of the room.
Hey, David Amoss with Heikkinen. Just curious how comfortable you guys are with Cactus II coming online, making the connection to the boat. If you could walk through how you see all that unfolding. It seems like there's a lot going on in Corpus.
Yeah, why don't I ask Chris? Can you handle the first piece of it?
Sure
Jeremy jump in?
From a project execution side, construction's on schedule. Like I mentioned in my prepared remarks, we have over 90% of the pipe in the ground, we're confident in our ability to bring it online by the end of the third quarter of 2019. We'll have full service over to Corpus Christi in 2020.
From a commercial standpoint, the shippers on Cactus II are very comfortable with their positions at the docks. I think we've aligned ourselves with some of the larger exporters in the basin, we feel very comfortable with their ability to move it. Tankage, pumps, as Chris said, execution, we feel comfortable with. There'll be a stage in increasing over time of capacity, we're going to make sure it's something that's done in an operationally efficient manner, that staging will also go as tanks and dock capacity in the Corpus area's ready for it. We're not just going to hurry up and wait.
Good. I had a submitted question here. It says, "Can you share some detail on the changes that you've made to your NGL business and your strategy going forward? And as a corollary, other Canadian NGL peers seem to have grown more than you. How should we think about your competitive positioning?
Tyler or Jason, you want to comment?
Go, Tyler.
Tyler?
Sure. Thanks. Great couple of questions. What we've done on the NGL side of the business is really threefold. We really look to simplify our business, look to restructure our customer contracts and our customer volume profiles, and then really looking to scale out our fee-for-service business. If I can just step back just for a minute and just kind of give you a little bit of context. When I talk about simplifying our business, we typically produce about 25 million barrels a year of Natural Gas Liquids out of our frac facilities. Additionally, to that, in the past, we would then go out and buy an additional 50 million barrels of product, leaving us something like 75 million barrels of product to sell in any given year.
We've decided to actually just focus around our key producing assets using cheap Alberta natural gas, converting that cheap Alberta natural gas into spec products, and staying fairly happy with just selling our 25 million barrels of production. We do that, and then we do have to optimize our storage assets. We do a little bit of third-party buying and selling. What we've done is we've taken our business from being a 70 million barrel a year business on the sell side down to something like 35 million barrels a year this year. Really simplifying our business. It's reduced our customer count in half. We've gone from something like 1,500 different customers down to 750 customers. Our transaction counts and our staff have gone down tremendously. That's part of the simplification.
In terms of contract structure, if I take a look at the years past, we would sell purity products like propane and butane to our customers. In previous years, customers could flex their volumes across a season, November through March, and had a lot of flexibility on pricing. The kind of numbers I'm talking, over 90% of our customers had flexible take on volume and had flexible pricing terms. What we've done is we've completely changed the way that we sort of operate with our customers. We're now selling our product at something like 92% on firm volumes. The customers have to lift in a firm basis monthly on either fixed differential or fixed price contracts. Really taking the variability out of our earnings stream and really allowing us to align our hedges with our sales and purchase activity.
The third bit that we've done, given we've gone from a 70 million barrel business down to something like a 25 million-35 million barrel business, we've opened up a bunch of spare capacity in our assets, whether it's storage assets or terminalling or rail assets. We're now making those assets available for a fee-for-service basis for some of our customers. We're getting great take-up on that. Any of our slack capacity that we've created by doing less activity, we're getting actually a real fee for service on longer-term basis to give us a more stable cash flow. What that serves to do with that whole simplification of our business is now we're getting laser-focused around our production, 25 million barrels a year of NGLs, and finding the best premium markets that we can in big bulk ways. It's allowing the team to start to think bigger.
NGLs have become quite a global business, with exports having just sort of come out of the fray in the last couple of years. We're now a global market, and what we've got the team focused on now is how do we scale up and look at premium market access that might include global access through some of our existing assets like St. James and Corpus Christi, for example.
Good. Thank you.
Harry, did you want to cover the other bit around?
Sure
competitors?
Yeah. When you look at sort of the growth profile, maybe some of the other legacy entities in Canada on the NGL space.
There are parties out there that have a footprint in Western Canada that sort of replicate our footprint, say, in the Permian on crude. We're not going to try and go out and develop greenfield projects where third parties have the ability to develop brownfield projects. What we've tried to do is we've tried to concentrate our activity around our core assets at Fort Saskatchewan and Empress, and do sort of bolt-on type of expansions in those areas. I think that is probably where we'll continue to focus our activity in Western Canada. Really.
Great
looking at moving from west to east and taking advantage of the infrastructure we have in Sarnia.
Great. Okay.
Jeremy Tonet, J.P. Morgan. I just want to pick up on Red Oak a bit here. I think as you noted, it seems like it's the cartoon in action, if you will, with regards to the pull through the system. I just wanted to build on that. It seems like if you're paying a lease yourself, if you're leveraging your upstream intrabasin, leveraging your upstream gathering, it seems like it's really kind of coming all together for you guys. You target 3 to 500 basis points over your cost of capital, but it seems like if you're pulling all this together, this project might head towards the high end of that, or could you just help us think through the type of returns that you see on this project?
That's a good question. I'd say we're certainly in that range from where we sanctioned it, but the pipeline's not full, and we have additional pull-through benefits which haven't been quantified in that. The intent is just like Wink to Webster. We get the project announced, we have a base return that we're very comfortable with, shippers and credit we're very comfortable with, an asset base we're very comfortable with. The ancillary benefits are additive, and there's additional optimization efforts from a capital standpoint as well as a shipper standpoint. We're going to go seek those and try to get in excess of that 3 to 500 basis points above cost of capital.
Great. Thanks. It seems like in the marketplace, at least in our investor conversations, there's a good amount of concern with regards to Cactus I with the competing pipelines coming online at the end of the year. I know some of the contracts are migrating from Cactus I to Cactus II. I was just wondering what comments you could provide with regards to the stability you see in the volumes in the pipe, the competitiveness, and what type of EBITDA risk could be there.
Yeah. Let me just take a simple approach to it. We do have contracts that roll off of Cactus I. Some of them do go on to Cactus II. When we look at sort of our fundamental flows, we see volume moving to the Gulf Coast. We see the opportunity to continue to move crude on Cactus I down into Gulf Coast markets.
I'd say to add to that, the capacity that would roll is small relative to the total, and it was the expansion space done at market rates as opposed to the initial contracts that were done at higher rates to sanction the project. From a cash flow impact, we're not going to necessarily see as big of an impact as you may think on the tariff side.
Hi. Keith Stanley from Wolfe Research. When you look at Capline today and the project, how important is it for Line 3 to come on reasonably on schedule for just the financial contribution to that project?
Yeah. Part of the driver for Capline was the expectation that over time, we'd see Canadian volumes move into Patoka, whether it's through Keystone Express or Line 3. Line 3 certainly has potential to contribute to volumes on Capline, but it's not a driver for sanctioning Capline. When we put our forecast of 2021, 2022, it was with the expectation that it was going to probably take a little longer than what the market may have thought for Canadian volumes to reach Patoka.
Okay. One follow-up, just on Cactus II, it says you're 90% contracted on the initial capacity. Can you say how much of that is MVC versus acreage dedications?
I think we disclosed that last year at Analyst Day, I think it's in the neighborhood of 425,000 barrels a day of MVC and 100,000 barrels a day of acreage. I have another submitted question, I'll sneak in here.
One point to make is the contract structure heavily incentivizes the acreage dedication to be met. The way it's structured is that's the outsized one, there's tariffs incentive in space to where we're indifferent. The production already exceeds the acreage dedications in both cases.
Keith, one other thing on Capline reversal, right? There's really two phases. There's a light barrel Diamond over and down, which we expect to be completed late 2020, then the heavy that we were talking about is the 2022 number.
There's also light capacity out of Patoka.
I guess we're ready.
You guys are sort of creating your own weather when you think about the SNL impact from bringing Cactus Two and some other pipelines coming online. There's a lot of moving parts there. Can you help us understand, on a net basis, the combination of new Cactus Two revenue or margin versus the loss of marketing, the loss of Basin flows, and the loss of potentially some spot barrels on BridgeTex? How do you think about the timeframe on a net basis?
I think the guidance for this year fully reflects our views of how that impacted, and we'll give guidance later in the year for 2020. Red Oak gives some indication that we continue to optimize our system and will continue to do so. I don't think we're going to specifically work towards guidance during this meeting today. That's not the intent.
Hi, Jean Ann Salisbury from Bernstein. Just a couple more on Red Oak. Will Red Oak interconnect with Wink to Webster and have access to that end market in 2021?
We're not going to talk about that at this point. The projects are independent. Could there be capital synergies and ways to work together? Potentially, but that's not included in any of our base returns or expectations for either project.
Okay. Makes sense. I think from what I understand, currently, there are two pipelines that take crude from Corpus to Houston now. I'm a little surprised that there's customer demand to take crude the other way. Does that suggest that people, or you expect for Houston exports to get congested?
Think about it in a different way. Are there any pipelines that connect Cushing to Corpus today? The answer is no. This adds more grades and more access to avoid some of the Houston congestion. The pipelines that currently connect Corpus to Houston are really Eagle Ford gathering lines to Houston, and those lines don't typically move any Permian. There may be some that's part of the Gray Oak project that do move, but the inherent build for those assets was to move for Eagle Ford barrels to move in that direction. It's not necessarily swimming upstream. It's really a new service, a unique service of a bullet line from Cushing to Corpus to add additional light takeaway capacity to the Corpus market and additional grades.
Ultimately, when you look at loading bigger and bigger vessels, you're going to want more grades than just the Permian barrels and the Eagle Ford barrels. Now it gives a broader mix, and it allows you to accelerate some of the larger vessels coming to Corpus.
Look, just touching on that a little bit is some of those grades that move from Corpus over to Houston are specific grades going to a specific refinery or splitter. What Jeremy said, it's not necessarily swimming upstream.
Hi, Michael Blum, Wells Fargo. We've got three really quick ones. On SNL, you said you expect it in 2020 to be meaningfully below 2019. It's a little bit of a different-- historically, we've kind of talked about a base of $100 million. I just want to know if that's still kind of a good number, or is there going to be a new number you're going to put out next year?
We actually haven't disclosed a number in the past that I know of, Al, have we?
No, we don't have a quote baseline for that segment. What I can tell by pulling a lot of y'all's reports that it seems like you've interpreted it to be $100 million-$175 million generally. No, we don't have a baseline number out.
Al, you talked about how you think now, given the new announcements on the projects, that 2020 CapEx probably won't be materially lower than 2019. Does that also assume some Capline spending in 2020?
Yes.
Just last quick one. Is the gas storage business a divestiture candidate as a source of funding for next year? Thanks.
I'd say from a divestment standpoint, we've been opportunistic. We sold the Bluewater assets because there was a demand for utilities to purchase those assets at much higher than they were worth to us. It worked for them. It worked for us. We're not necessarily have a divestiture target. We're meeting our leverage requirements where they are. We'll be opportunistic. The intent of selling an asset for less than what we think it's worth, that's not on the table. If someone were to approach us with the same type structure, would we consider it? Maybe, but it's not necessarily on the block or being sold. What I would say is I think I used asset sales as one of the tools, JVs, equity, various forms.
When we look at the capital program with all the projects that were discussed today, we don't see that we have a gun to our head to sell assets to fund it, to go to the common equity markets to fund it. Again, we're continuing to try to look at investments that make sense. Those are tools that may be used if we have incremental need beyond what we can see. The asset sales program is kind of independent of capital funding. It is a tool, but we aren't going to tie the two directly together.
Michael, one other point on that is when you think of asset sales, they may not be 100% asset sales of an entire facility. It could be strategic sell downs of a piece of project we have if people bring volumes and commitments too.
Can you guys give your thoughts about the potential for gravity differentials or quality differentials out of the Permian as all this new light sweet comes into the market, and how you guys can potentially take advantage of that?
Sure. It started in April of 2017. We started marketing barrels down to Corpus for unique purposes. That's continued to today. In February of this year, we expanded the segregations of WTL and created more liquidity, and additional markets have created. It's early in the process of discovery for differentials. As Gulf Coast capacity comes online and each of the committed shippers looks for a physical barrel, you could see significant volatility in those differentials. We're not going to plan on that, but we'd be opportunistic to the extent there is opportunities.
I think our intent is to provide quality segregation, provide consumers with the barrels that they want, the quality that they want, and if there's opportunistic places for us to make money or also for us to provide unique blends or barrels for individual segregations, we'll do that in the associated storage and pipeline tariffs associated with it.
Were you asking specifically for the gravities? Because yeah, WTI is going to be under 44 gravity. WTL, 44.1. Somewhere between 49 and 50, depending on the connecting carriers. The condensate is going to be over 49 or 50. We could see a scenario, and we sort of developed our system so that maybe that 44 to 49 or 50 WTL gets divided into two different categories. We could see more demand for a 45 or 46. We could see some price differentiation between that and, say, a 48 or 49. That segregation doesn't exist today, but we set up our system to be able to handle that.
Hey. Spiro Dounis from Credit Suisse. A two-part question on the Basin pipeline. I believe coming off Sunrise, it was about 100,000 barrels a day or so that was being routed into Basin to go up to Cushing. Just with Red Oak now, does that go on to that pipeline and away from Basin? Second part of the question is just around the optionality for the Basin pipeline. At some point, could we see that actually get reversed on that northern section to go from Cushing down to Wichita Falls and then feed Red Oak from there? Thanks.
The way to think about the Basin Pipeline system as we walk through, it's JAL to Wink to Odessa to Midland. There's a lot of segments upstream of that. There's Colorado City, Wichita Falls. You can see Wichita Falls ties into Red River Pipeline. Wichita Falls ties into Permian Express. Wichita Falls ties into some Mid-Continent refiners. It ties, ultimately, into Red Oak. We're going to optimize that system. Right now, the intent is to continue the way we're doing, but you'll see we've continued to layer on. We sold the UJI to a partner in that system to monetize a section of the pipeline. We have basically leased a significant portion of the capacity on Sunrise Pipeline to basically have the industry provide a capital-efficient solution for that additional takeaway. As we build additional markets, you can see that Wichita Falls will attract more barrels, whether it be from the Mid-Continent.
We can look to fill portions of that northern segment from the Mid-Continent. There's lots of options. We're going to let the market ultimately dictate. Right now, it's going to move in that direction and continue to move there because the industry is going to need an outlet to Cushing for a significant period of time. If the Gulf Coast gets congested because we put too many barrels there, the outlet's going to be Cushing. We see that Wichita Falls creating optionality to multiple markets. It can be the Longview markets, which could be St. James, North Louisiana, Mid-Valley. It could be the Red Oak markets, which are Houston, Beaumont, Mid-Atlantic. It could be Cushing. We see that really developing as an option. I'm not necessarily sure it makes sense to turn that around and get rid of that option.
It probably makes sense because you could ultimately use short-haul capacity potentially on Red Oak to move barrels from Cushing to Wichita Falls even. There's lots of options in the system the way it is. We'll ultimately let the market decide. This is another step in us continuing to build the optionality of the system and capitalize.
To get to your question, Valero owns 20% of Sunrise Pipeline. That's not going to be part of Red Oak. We had an open season that combined Sunrise Pipeline capacity with Basin Pipeline capacity. That's not part of the Red Oak system. Red Oak is a capacity that is not already committed to those types of projects. Like Jeremy said, who knows what'll happen as the markets develop in the U.S. For now, we expect to run Basin Pipeline in northbound service.
Got it. That's helpful. Second one, maybe for you, Al. Just around some of your comments earlier around your average returns over time and just thinking about that going forward. You mentioned a few factors playing into how to look at the outlook here. Some contracts rolling off. At the same time, you're also going to be bringing your CapEx down to more normalized levels. If we do the real simple math, I think I backed into coming down to CapEx of about $1 billion a year at your returns historically. Suggest maybe 5% EBITDA growth kind of longer term. Does that make sense to you? Does that sound right? Are you sort of strategically pivoting here more towards maybe slower EBITDA growth, but more free cash flow generation?
Yeah. I don't know about the exact calculations you did. I think what you heard today is our system has capacity in it, and we think we can continue to grow using that capacity in multiple basins, underutilized pipes. Sometimes it takes some capital investment to do it, but the capital investment into a Capline or a Diamond is highly accretive capital for us to be investing this brownfield stuff. We think ultimately we can drive those returns. That incremental investment for us, we need it to be above our return hurdles or in line with our return hurdles. What you heard Jeremy say is the base investment in Red Oak is there, and we work hard to increase those. We think our asset base, latent asset base today has capacity to grow.
There's a few areas where in the near term we'll see volumes come off. Ultimately, the focus is on driving and improving that. That one calculation I did, it's like turning the big ocean liner, right? It takes a lot to move that meaningfully. That's a history calculation. The takeaway should be the focus of the management team now is to drive those returns and do returns that are at or above those hurdles that we have. We think if we do that, we drive shareholder appreciation. Did that answer it?
Hi. Vikram Bagri from Jefferies. If I look at slide 51 in your presentation, it shows that no capacity is being added on intrabasin system and gathering through 2021. I just wanted to understand what kind of exit rate you expect in Permian Basin at the end of this year, and what kind of utilization will there be on these assets, and when will you look to expand or spend capital on these assets going forward? As a follow-up, I think I heard Al saying that the capital program next year won't be down as much as you initially thought. My interpretation, it's going to be down even though you'll have Capline, you'll have new assets that you announced, associated opportunities with Capline, and some little bit of capital on these intrabasin and gathering assets. Even including all that, capital program will be down next year.
Did I understand that right?
On the first one, we have acreage dedications and commitments upstream, as we add those, we add capacity. I think you see step changes coming online. It doesn't always require incremental investment. Take Wink, for instance. A significant portion of this addition is we put the first leg of Cactus II on. When you start to swing barrels in that direction, you create capacity to Midland. It doesn't always require incremental investment, right? We can move 500,000 barrels a day plus from Wink down to Cactus II when that starts up, freeing capacity to Midland. It doesn't always require. We try to balance the line capacity in and out. I think Willie's done several presentations where he showed capacity in the Wink, capacity out, aggregation capacity. You see how we balance that. It's going to be based on demand and commitments.
We're very disciplined in how we do that. You can see how it doesn't always. Because of the interconnected nature of the system, which I tried to walk through, us connecting two dots could free up capacity in other, we're going to balance the system that way. It'll be a very systematic, disciplined means of investing. It doesn't work of what does basin production do, you have to expand to do it. We can create capacity other ways. I'm not necessarily sure I understood the second part of your question. I apologize.
I think what I was trying to say is that we would have expected our 2020 capital program to come down off of the $1.35 billion that we're at now. We may see some of these projects will add a little bit to it. We just closed the sale for $130 million. What we're saying is we just added a pretty large project. Our 50% share of it is $1.2 billion. A big chunk of that investment will come in 2020. We don't know for sure whether we'll, as a partner group, decide to use some project financing on it or not. What I was trying to say is we probably would expect 2020 post after yesterday to not come down as much because we committed to make those investments into Red Oak. That's what we're trying to say.
We do think our capital program doesn't stay at $1.5 billion or more going out in time. This industry is getting to where a lot of the pipes are getting built, we would expect it to come down. It's just it may be delayed from 2019 coming down one more year, so to speak. We don't know exactly what that'll be. The example I used was $750 million to $1 billion. We don't think it's going to stay at $1.5 billion in perpetual times is what I was trying to say.
You'll still see a lot of activity in the Permian, even if you're not seeing takeaway pipes. I think you'll see the activity in the gathering and in the intrabasin segment of our pipes.
got a submitted question I'm going to hit, then we'll come back to the group here. You've expanded to the point you have a strong crude oil position in many areas. At some point, you may hit the wall on crude oil growth. Are there plans to diversify beyond crude oil, or would you be willing to diversify further?
Well, let me take a shot at that one. We certainly aren't going to diversify just for diversification's sake. I think what we've done today is outlined a lot of capability around our system on crude. As we think about the capabilities and the spend of our system, I think there's a lot of value still left in the system that we can extract. I thought where you were going with this, Vikram, is as we look at this, we look at this all the time, right? We actually break it up into segments, part of our whole strategy is to figure out how are we utilizing everything we can in our system. I think there's opportunities there. I also think there's going to be opportunities in perhaps some aggregation of other crude assets that can bolt on to our existing systems.
Again, having the position that we have gives us the flexibility to have a lot of options as we look at that. As far as further diversification outside our commodity, there are opportunities probably to work with people on things. Some of this is going to be difficult because if you have a footprint, for example, on us with the crude side, it's difficult for others to compete against that. For us to step in meaningfully into another commodity, it would be a very careful decision that we'd have to consider. Again, you don't want to get into something in a small way and not be able to grow it, and then ultimately not have a successful transaction.
Christine Cho, Barclays.
For the Red Oak pipeline, should we think that you're happy with that 50/50 JV? Meaning, is there any way that you would add more partners to that?
I think the history would tell you that we'll be opportunistic. If there's someone that brings substantial strategic value to the pipeline, we would consider selling down one for strategic alignment, it's going to have to bring substantial value because we're happy with the returns the way they are. I'd say we're going to continue to look and evaluate that, it's certainly a possibility, if history would tell you something, it's we're going to listen to those discussions.
Okay. Several years ago, part of the issue that the sector had was all of these pipelines came on, and we were over-contracted on MVCs. It exceeded production. Production's a lot higher today, but there are a lot of pipelines coming on, and they're all saying they're contracted with MVCs. Do you guys foresee, even if it's for a short period of time, a scenario where we are going to be over-contracted again? If that's the case, is there any lessons learned from the past experience that could have it actually be an opportunity for you and not the opposite?
Yeah. Well, I'll answer part of it, allow Jeremy answer part of it. There's always going to be, I'll say, a little chaos when new pipelines come into service. Probably one of the learnings that we've seen is that overcapacity is not a great alternative, and that's what's driven a lot of the consolidation and a lot of the joint ventures to be developed. That being said, there are still going to be several pipelines that come into service between, say, July 1st of this year and early 2021. It's going to come in 2 clumps, one late 2019, early 2020, and then the other in 2021. Like I said, I think there's the potential to be a little chaos when that happens.
Yeah. The way to think about that is, in 2013 or 2014, we had a lot of our supply on month-to-month contracts. We've since built out a lot of pipeline capacity, and the graphs you've seen largely dedicated by acreage dedications or volume commitments. Those are on term supply. I think our supply is in a different situation than it was then. That means we don't have nearly as much margin or tariff risk associated with that. We will be long when potential others are short. That should present some opportunities. We'll be opportunistic in how we look at that, but it's going to be fierce competition for the physical barrel in those periods, as Harry said, when it's chaotic. We would hope to use our assets and put ourselves in a position to maybe fare better than some.
Thank you.
The other thing to keep in mind about that period was you had overcapacity coming on as the production profile changed meaningfully, i.e., oil hit 20s, production rigs went down. At least for the near future, the production profile is continuing roughly in line as Jeremy mentioned earlier. That will be a different dynamic than what happened a few years back.
Okay. I've got a submitted question. It says, "What would the cost be to reverse Capline, and what's the timeline once it goes FID for implementation?
I think we've disclosed the timing. The timing's going to be the second half of 2020 for light service. From a capital standpoint, we're finalizing the estimates on Diamond and Capline, and when we formally update guidance, we'll update that as well.
2022 for the heavy is also when.
Okay. Looks like everybody's ready for cocktails. Are there any other questions in the room that we want to hit? Thank you. Willie, I think you were going to wrap people.
Sure. I'll tell you what. You guys can just stay here. We spent quite a bit of time talking about our system today. Can you just put up the next slide here just on the closing.
Yep
Comments? I'm not going to go through all of these, but hopefully what you heard is ultimately we believe that there's an incredible opportunity for the U.S. to participate in the resource and supply for the world. Spent quite a bit of time talking about our asset base, probably more so than we have in the past. We wanted to share with you kind of the blocking and tackling of how our assets work, and as we sanction these projects, the capabilities that's there beyond. We've shared a return number, which we haven't done so in the past. What you should take from that is the capital discipline as we evaluate these opportunities. We are looking at the returns. We want it to be accretive. Again, we've got the capabilities to sanction projects kind of at the level and have the upside opportunity.
I think what you heard from Al is we're really in a pretty good shape as far as how we think about our balance sheet and the trajectory, and we feel we've got more variables at our control now than certainly we had over the last number of years, and it feels good to be where we are right now. With that, I would thank all of you for attending, for your ongoing interest. As always, we're very open to feedback. If this doesn't scratch the itch for the format next time we do this, please give us some feedback, and we're always trying to continuously improve. With that, thank you very much.
Thank you. There is a cocktail reception just up the stairs. We would encourage, since we're ending a little bit early, for those of you that were going to leave, come catch up with us for a few minutes before you head out. Thank you.