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Source: The Crude Truth Substack.
Rey Trevino, Pecos Operating, The Crude Truth Podcast
Earlier in the week, I released the podcast “Water Shortage in Texas? Texas Land and Water: Big Plans with Commissioner Dr. Dawn Buckingham”.
It prompted me to do a deeper dive into the challenges facing our exploration and production teams in the Permian Basin.
The Crude Truth: Water Management Challenges Threaten Permian Basin Oil Production
The Permian Basin, spanning West Texas and southeastern New Mexico, is the beating heart of U.S. oil production, pumping out roughly 6.5 million barrels per day (bpd) in 2025—nearly half of America’s crude output. But beneath the surface of this shale juggernaut lies a growing crisis that could throttle its dominance: water. For every barrel of oil extracted, the Permian produces three to ten barrels of highly saline, chemical-laden wastewater, known as produced water. Managing this deluge—through treatment, disposal, or recycling—has become a logistical, financial, and environmental challenge that threatens to slow oil production growth in the coming years. This article dives into the complexities of water management in the Permian, exploring treatment and disposal practices, their escalating costs, and their potential to reshape the basin’s oil boom.
The Water Tsunami: A Byproduct of Permian Prosperity
The Permian’s meteoric rise as the world’s most prolific oilfield has come with an equally staggering surge in produced water. In 2024, the basin generated over 20 million barrels of water daily, a figure projected to climb to 26 million by 2030 and potentially 32 million by 2035. In the Delaware sub-basin, water-to-oil ratios can hit 10:1, meaning some wells produce ten times more water than oil. This wastewater, a mix of fracking fluids, formation brine, and chemicals, is far from benign—it’s often toxic, saline, and difficult to manage.
Historically, operators disposed of produced water by injecting it into saltwater disposal (SWD) wells, pumping it deep underground into non-producing formations. In 2022, over 5 billion barrels of Permian produced water were disposed of this way, a sixfold increase from 2010. But this once-simple solution is hitting hard limits, driven by geological, regulatory, and economic pressures.
Disposal Challenges: Seismicity and Capacity Constraints
The primary method of produced water disposal—SWD wells—is under siege. Injecting massive volumes of water into shallow formations, like the San Andres in the Midland sub-basin or the Delaware Mountain Group in the Delaware sub-basin, has led to overpressurization. This has triggered seismic activity, with earthquakes becoming more frequent and intense in the Permian. Since 2017, seismic events linked to injection have prompted regulatory crackdowns. In New Mexico, the Oil Conservation Division imposed a moratorium on new shallow SWD wells in 2016 to protect producing formations and curb seismicity, pushing operators toward costlier deep disposal wells or cross-border transport to Texas, where shallow injection remains less restricted.
Texas regulators, including the Railroad Commission, have also tightened rules, issuing stricter guidelines in 2025 to address “widespread” underground pressure increases that risk toxic leaks and surface blowouts. These restrictions force operators to either truck wastewater to distant disposal sites, recycle it, or treat it for alternative uses—all of which inflate costs. Trucking, for instance, can cost $2.50 per barrel compared to $0.30 per barrel for pipeline transport.
Capacity is another bottleneck. The Permian’s 2,000+ SWD wells, 80% of which target shallow zones, are struggling to keep pace with rising water volumes. Analysts warn that suitable disposal sites are dwindling, with the basin potentially running out of viable injection zones in the coming decades. This scarcity exacerbates pressure buildup, further limiting disposal options and driving up costs.
The Cost of Water: A Growing Burden on Profitability
Water management is no longer a minor line item in the Permian—it’s a major operational expense that can rival drilling costs. In 2018, disposal and transport costs in the Permian averaged $5.11 per barrel of oil produced, soaring to $9.44 in the Delaware sub-basin due to higher water cuts. By 2025, estimates suggest water disposal costs could add $6 per barrel to operators’ breakeven prices, potentially curbing oil supply growth by 400,000 bpd.
A 2019 Wood Mackenzie study highlighted the economic toll, projecting that rising water management costs could increase breakeven prices in the Midland and Delaware sub-basins by $3 to $6 per barrel under aggressive cost scenarios. For operators already grappling with oil price volatility—WTI crude hovered around $72-$75 per barrel in early 2025—these costs erode margins, especially for smaller producers with less infrastructure.
Disposal isn’t the only expense. Sourcing freshwater for fracking, once cheap, has become pricier as demand outstrips the region’s scarce groundwater. Freshwater prices hit $1-$2 per barrel in the mid-2010s, prompting operators to seek alternatives. Trucking availability, pipeline infrastructure, and proximity to SWD wells further influence costs, with remote sites facing steeper logistics bills.
Recycling: A Partial Solution with Economic Promise
Faced with disposal constraints and freshwater scarcity, Permian operators are increasingly turning to recycling. In 2023, the basin hit a milestone: more produced water was recycled for fracking than sourced from fresh or brackish supplies. New Mexico operators now meet 75% of their fracking water needs with recycled water, while Texas operators hit 45%, up from 40% and 20% in 2019, respectively.
Recycling is economically compelling. Treating produced water for reuse costs $0.15-$0.20 per barrel, compared to $0.25-$1 for disposal. It also reduces reliance on SWD wells, mitigating seismic risks and freeing up disposal capacity. Companies like Chevron and Coterra Energy have leaned heavily into recycling, slashing transportation and disposal costs. Midstream firms, such as WaterBridge and Select Water Solutions, are expanding treatment facilities and pipeline networks to support this shift.
However, recycling has limits. The high salinity and chemical complexity of produced water make mass treatment challenging with current technologies. Even under optimistic projections, recycling can’t absorb the Permian’s full water volume—disposal remains essential for the foreseeable future. Moreover, recycling infrastructure requires significant upfront capital, which can deter smaller operators.
Alternative Uses: A Distant Dream?
With disposal capacity strained and recycling unable to fully bridge the gap, the industry is exploring alternative uses for treated produced water. Pilot projects, backed by the Texas Produced Water Consortium, are testing whether treated wastewater can be used for irrigation, industrial cooling, or even potable water. In 2025, the EPA announced plans to explore recycling produced water for AI data center cooling, fire control, and other non-oilfield applications.
These initiatives face steep hurdles. Treating produced water to safe standards is energy-intensive and costly—estimates range from $2.55 to $10 per barrel, far exceeding municipal ($0.40/bbl) or irrigation ($0.03/bbl) water prices. Distribution requires massive pipeline infrastructure, and public skepticism about the safety of treated wastewater persists. While California has experimented with using treated produced water for irrigation, health concerns linger, and scaling such efforts in the arid Permian remains a long-term prospect.
The Production Impact: A Slowing Permian?
The water crisis is already reshaping Permian operations. Regulatory restrictions on SWD wells, coupled with rising disposal costs, are forcing operators to rethink strategies. Some are diverting drilling capital to water infrastructure, potentially slowing rig activity. Others face the risk of shutting in wells if water tanks fill up due to insufficient disposal or recycling capacity.
Analysts project Permian oil output growth will slow in 2025, rising by 250,000-300,000 bpd compared to 380,000 bpd in 2024. Water management challenges are a key factor, alongside geological limits as the basin’s core drilling zones near depletion. Wood Mackenzie’s aggressive scenarios suggest water costs could reduce production by 400,000 bpd by 2025, a significant dent in a basin producing 6.5 million bpd.
The Delaware sub-basin, with its higher water cuts, is particularly vulnerable. Operators there report water disposal costs of about $2 per barrel of oil produced, a figure that could climb as disposal options dwindle. Smaller operators, lacking the capital for recycling infrastructure or long-distance trucking, may struggle most, potentially leading to consolidation or reduced drilling.
Looking Ahead: Innovation or Bottleneck?
The Permian’s water challenge is a microcosm of the shale industry’s broader reckoning with sustainability and cost. Operators are responding with innovation—AI-driven analytics to optimize injection rates, mobile treatment systems, and advanced chemical treatments to improve recycling efficiency. Midstream companies are building out pipelines and treatment facilities, while regulators and consortia explore beneficial reuse.
Yet, the scale of the problem is daunting. Without significant investment in infrastructure and technology, water management could become a growth-limiting factor, as warned by industry experts. The Permian’s ability to maintain its global dominance hinges on balancing oil production with sustainable water practices. As one executive put it, “The Permian is as much a water and gas business as it is an oil business.”
For now, the industry’s resilience, fueled by past high oil prices and technological ingenuity, has kept the Permian pumping. But the water tsunami is rising, and operators who fail to adapt risk being swept under.
The Crude Truth is clear: water, not oil, may dictate the Permian’s future. And I firmly believe that innovation, investment, and excellent management will keep the crude flowing. As I wrote this story, it adds significant validation to my interview with Dr. Dawn Buckingham and all the great work she is doing for the great state of Texas.
Sources:
- High Country News, 2020
- B3 Insight, 2023
- Wood Mackenzie, 2018
- Hart Energy, 2019
- Journal of Petroleum Technology, 2019 & 2025
- American Oil & Gas Reporter, 2023
- Reuters, 2025
- Bloomberg, 2025
- Texas Tribune, 2022 & 2024
- Posts on X, May 2025
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