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New Regulations In Permian Could Deter Drilling

The EPA is considering a new label for parts of the Permian Basin that could deter or slow oil and gas drilling in certain parts of the prolific Permian Basin.

According to a regulatory notice, the EPA could label parts of the Permian Basin as violating federal air quality standards for ozone. If the EPA does indeed label parts as violating the standards, state regulators would need to find a way to clean up the air quality—and they would have three years to come up with a plan to do that. Their plans could include keeping new industrial facilities from making the air quality even worse and making sure current sites have the proper technology to keep the air quality at acceptable levels.

The EPA is facing a potential lawsuit from WildEarth Guardians over the matter, who brought the air quality issue to the EPA's attention last March.

The possible regulatory action adds yet another element of uncertainty to the oil industry, which is already facing an unknown future while being chastised for not investing more to produce more—whether that's refining or drilling.

"Creating uncertainty on permitting and inserting unnecessary regulatory barriers will only negatively impact the production necessary to meet the needs of consumers," Todd Staples, president of the Texas Oil and Gas Association, told Bloomberg.

The Permian Basin is responsible for the lion's share of the oil produced in the United States. In its latest Drilling Productivity Report, the EIA forecast that the Permian Basin's July production will climb to 5.316 million bpd, out of the total 8.901 million bpd produced across the seven most prolific U.S. basins. In June, the Permian is set to produce 5.232 million bpd, according to the EIA. The next most prolific basin, the Eagle Ford, is set to produce 1.152 million bpd this month.

By Julianne Geiger for Oilprice.com

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