Permian Drillers Paid to Remove Gas While Oil Production Hit Records

In April 2026, West Texas drillers faced an unprecedented situation: they were paying buyers to take their natural gas. At the Waha Hub, prices dropped to a record low, turning gas into a financial burden rather than an asset. Despite this, oil production in the Permian Basin continued to hit new highs, defying the economic logic of negative gas prices.

The root cause of the problem was a lack of pipeline capacity. As production surged, pipelines couldn't keep up, forcing drillers to either heavily discount their gas or pay to have it removed. Spring maintenance further exacerbated the issue, leading to a surge in flaring as operators burned off excess gas. Even burning it was more economical than paying to transport it.

Oil production couldn't stop because gas and oil are inseparable in the extraction process. With crude oil trading above $70 a barrel, the financial incentive to keep pumping oil outweighed the cost of negative gas prices. This phenomenon, first observed in 2019, has become more frequent as production outpaces infrastructure.

By July 2026, new pipeline capacity finally relieved the pressure, pushing Waha prices back into positive territory. However, the excess gas simply shifted the problem to other markets, like the Henry Hub. Long-term solutions, such as the Hugh Brinson pipeline, are still under construction to address the growing gap between production and takeaway capacity.