FORT WORTH, Texas—Barry Smitherman knows the numbers: The Texas rig count has fallen 57% from last October and commodity prices have been cut in half.

The conclusion from the former chairman of the Texas Railroad Commission: The midstream sector is on the cusp of the next big wave in the unconventional energy revolution, especially for those operating in Texas plays like the Permian Basin.

His seemingly contrarian perspective is based on the logical progression of the phenomenon. Technology, primarily the combination of horizontal drilling and hydraulic fracturing, triggered the huge run-up in natural gas production. Technology repeated the effect for liquids.

The industry is experiencing “an optimization in the oil and gas patch where the best operators are using the best techniques, the longest laterals, the best profit-combinations, the most efficient use of water, reducing drilling times from weeks to days, sticking with the heart, the best parts of the Permian Basin and the Eagle Ford,” Smitherman told a crowd attending the midstream program at Hart Energy’s DUG Permian Basin Conference and Exhibition. “I think the future is incredibly bright.”

Smitherman, now an Austin-based partner with Vinson & Elkins LLP, bases his sunny outlook on his belief in two emerging trends—exports and the migration from coal to natural gas as the energy source of choice to generate electricity.

“I expect that we will be exporting significant amounts of natural gas, condensate and yes, eventually liquid, from Texas,” he said.

LNG export facilities are already on track to be ready to ship product at some point late in 2015, and midstream operators are moving forward with plans to move condensate, but the federal government does not allow the export of U.S.-produced crude oil except under certain circumstances, such as to Canada.

“While there is presently a ban on exporting crude, the laws of economics can only be suspended by politicians for a limited period of time,” Smitherman said. “I know this because I was once one of them. It is a compelling argument for us to able to export crude. The world needs it; we have it.”

He elaborated on his point later in response to a question, noting that he did not expect the ban to be lifted during the Obama administration. He also said geopolitical conditions such as unrest in the Middle East bolster his argument. The U.S. offers a stable government, stable regulatory model and the proven resources desirable in a global trading partner. He also thinks it makes sense for the huge Texas Gulf Coast refining complex.

“Most of our refining capability has historically been configured to handle heavier crude coming from either Mexico or Venezuela or Africa, and the perfect trade for us is to export light sweet and to continue to import heavy,” Smitherman said. “That would keep our refining operations going and allow our producers to export large quantities.”

Upcoming regulations from the U.S. Environmental Protection Agency (EPA) intended to curb emissions of greenhouse gases will create a major opportunity for the midstream in Texas, he said. Natural gas has been gaining market share in power generations as a result of its drop in price along with shut-ins for coal-fired plants scheduled for maintenance.

Smitherman told the crowd that the grid operator estimated the retirement of between 8,000 megawatts and 11,000 megawatts of coal-fired generation in the state by 2020 as a result of compliance with the EPA regulations.

“While we do run natural gas successfully to the existing natural gas-fired, combined cycle plants, we will need to build new plants, and they may not always be located at the end of a pipeline or adjacent to an existing midstream facility,” Smitherman said. “This will provide, I predict, great opportunity, for not only upstream gas developers but also midstream pipe developers to reconstruct and reconfigure our infrastructure so that we can burn a lot of natural gas to make electricity.”

Contact the author, Joseph Markman, at jmarkman@hartenergy.com.