Jul 9, 2025 Current Resources

Negative Prices, Rising Flaring Signal Pipeline Gridlock in Permian

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.

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By Alex Kimani - Jul 08, 2025, 5:00 PM CDT

Permian gas prices remain volatile and frequently negative in 2025.
Despite the launch of the Matterhorn Express pipeline, gas flaring has surged to nearly 500 million cubic feet per day.
New pipeline projects like Palo Duro and Blackcomb aim to relieve the bottleneck, but won’t be operational until 2026.

Previously, we reported that natural gas at the Waha hub was selling for near-zero or sub-zero prices for much of 2024 thanks in large part to excess natural gas production in the Permian Basin coupled with limited takeaway capacity due to a shortage of gas pipelines. Indeed, prices at the hub spent half the year in negative territory, sinking to all-time low -$7/mmbtu at the end of August.

This has become a recurrent challenge in recent years ever since the Permian Shale boom led to a surge in associated gas production. Consequently, Permian gas infrastructure became saturated, sometimes forcing producers to pay for someone to take their gas so that they can focus on something more valuable: crude oil. Unfortunately, the Permian continues to struggle with a deluge of gas in the current year, despite the startup of the pivotal Matterhorn Express in 2024.

And now the Permian Basin has to contend with a major environmental hazard: gas flaring.

June 2025 saw the third consecutive monthly uptick in natural gas flaring across the basin as production continues to outpace existing pipeline takeaway capacity. While the mid-2024 startup of the Matterhorn Express pipeline provided short-term relief, regional growth now signals renewed constraints.

Last year, Maria Paz Urdaneta, commodities analyst with East Daley Analytics, predicted that Matterhorn Express’ start-up would redirect Permian natural gas to South Texas and, for a brief window, shift market leverage from pipelines to shippers. The Matterhorn would also relieve pressure on Permian gas prices caused by the takeaway bottleneck. However, the analyst warned that the relief could be short-lived: Urdaneta predicted that Permian Basin producers are likely to increase production once Matterhorn enters service, triggering more takeaway constraints that could send natural gas prices back into negative territory by the second half of 2026. In reality, this scenario appears to be unfolding earlier than expected, with negative pricing already recorded throughout much of 2025.

Even with the Matterhorn pipeline, production growth in the Permian continues to challenge existing infrastructure, leading to price volatility and, at times, negative gas prices. According to East Daley Analytics’ latest model, current Permian gas production is well above total effective egress capacity, leading to the flaring of nearly 500 million cubic feet of gas per day, equivalent to the emissions profile of 2.2 million cars if extended over the course of one year.

Natural gas flaring in the United States is heavily regulated and significantly reduced in many areas. While routine flaring is prohibited in some states and on federal lands, exceptions and variances are often granted for safety, operational needs, or emergencies. The U.S. has also committed to the global initiative of ending routine flaring by 2030.

According to the International Energy Agency (IEA)..’’Flaring results in the release of substantial volumes of potent GHGs, including methane, black soot and nitrous oxide. Venting causes even worse environmental damage than flaring.’’ The IEA estimates that ~140 billion cubic meters of natural gas is flared globally each year, making the practice a major source of CO2 emissions, methane and black soot. In 2022, flaring resulted in 500 Mt CO2 equivalent annual GHG emissions. The IEA says that the elimination of all non-emergency flaring by 2030 would cut global CO2 emissions by 365 Mt per year.

Meanwhile, upcoming projects like the Palo Duro?Oklahoma pipeline and the Blackcomb will take time to take effect while pipeline operators such as Kinder Morgan (NYSE:KMI) and Targa Resources (NYSE:TRGP) are racing against rising environmental scrutiny and Texas Railroad Commission leniency on flaring permits. Last month, Midstream II LLC launched a binding open season as it looks to gauge shipper demand for its proposed 275-mile Palo Duro (PD) natural gas pipeline that will link residue markets at Waha with Mid-Continent outlets in the Anadarko Basin. The project intends to repurpose the existing 16-inch pipe on the company’s gathering header into western Oklahoma that runs from Nolan County to Wheeler County, Texas. Midstream aims to seek fast-tracked interstate authority from the Federal Energy Regulatory Commission since no new pipeline will be constructed, with the company targeting Q1 2026 for the pipeline to commence operations.

“This Open Season marks a key milestone for the Palo Duro Pipeline and underscores our commitment to delivering scalable, market-responsive infrastructure,” said Matt Flory, Producers Midstream’s chief executive officer. “The pipeline's unique interconnectivity and strategic positioning creates a much-needed additional outlet for constrained Permian gas, while also supporting the rapid growth of AI-driven power solutions and other emerging sources of demand.”

On the other hand, a WhiteWater-backed investor group has already reached a final investment decision (FID) on the Blackcomb Pipeline. The 42-inch gas line will transport up to 2.5 Bcf/d of gas over ~365 miles from the Permian when it comes online in 2H26.

By Alex Kimani for Oilprice.com

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