Permian Basin Crude and NG may be limited by water.

Soaring Permian Basin crude and natural gas production is creating significant opportunities, but challenges are also cropping up that could impact the rate of development in the region. Lack of sufficient pipeline capacity has been an issue for more than a year, and Jason Newman, partner in Baker Botts' energy litigation team, added power shortages and produced water to the list of issues. "What to do with all that produced water?" he said in a phone interview from his Houston office.

Permian Basin producers are dealing with water issues, "especially in some parts, like Reeves County, where the Texas Railroad Commission seems reluctant to grant disposal well permits," he said. He said reluctance may stem from concerns about induced seismicity in the area, which has seen 54 earthquakes in the last year. Newman sees more private equity funding coming into the area to address the produced water issue. But he said, those companies need to recognize that "whether it's the operator or a company contracted to haul and dispose of the water, that water has to go somewhere." Infrastructure constraints are being addressed, with new pipelines or pipeline expansions underway or planned. Pipeline companies face challenges in planning and constructing new pipelines because, he said, the pipelines are hard to build "unless you get early acreage dedications from operators to fund the project. If you can't get anchor shippers lined up, the economics of the project change overnight." See the whole story by Mella McEwen in the Midland Reporter-Telegram HERE.