This article first appeared on GuruFocus.
Chevron (NYSE:CVX) and other Permian producers are navigating a quiet but growing crisis in America’s most prolific oil patch. After regulators restricted deep wastewater injection due to earthquake risks, the industry pivoted to shallow disposal zones to keep production on track. That shift may have bought timebut it’s now backfiring. Wells long thought dead are erupting with toxic brine, lawsuits are multiplying, and academic research is pointing to a disturbing trend: pressure is building underground, and it’s looking for ways to escape.
Satellite data, university studies, and court filings reviewed by Bloomberg all suggest the Permian’s shallow formations are under growing strain. Some areas have swelled nearly a foot, while others have sunk. Regulators allowed the move to shallow disposal as a stopgap in early 2024, but internal documents show they had already identified containment risks, surface breakouts, and aquifer threats. Chevron, Kinder Morgan, and others are now under pressureboth legally and geologicallyas legacy wells rupture and claims of contamination pile up. Meanwhile, the Railroad Commission of Texas maintains it hasn’t eased standards, though it did expedite permits in the wake of production curbs.
From an investment lens, this isn’t just an environmental flashpointit’s a potential production bottleneck. More than 80% of water disposal in key Permian zones has already shifted to shallow layers, and the cost of alternatives like recycling, desalination, or long-haul piping is steep. Chevron says it’s committed to being part of the solution, but pressure is risingunderground and on the balance sheet. Investors should watch closely: this could mark a turning point in how Texas oil flows, and at what cost.
