Concerns About Flaring in the Permian Flare Again

What’s the issue?

It seems that every couple of years there is a nagging concern that the level of flaring in the Permian basin will lead a regulator to crack down on the practice in a manner that will inhibit the production of oil from the region.

Why does it matter?

Because most of the gas produced in the region is merely a byproduct of the production of oil, the concern is legitimate. However, neither New Mexico nor Texas has taken any actions that would restrict oil production from the region.

What’s our view?

While New Mexico has recently adopted definitive regulations about flaring, the initial reports show that the major producers are already complying with the legal standard due to take effect in 2026. Perhaps the biggest threat to watch right now, however, is a rule being considered by the Biden administration to limit ozone emissions, but even that measure seems to be delayed. So for now, this should not harm production in the near term. We will look again in 2024.

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