owns and has the exclusive right to possession, custody, control, and disposition of its production stream, including the produced water ( Id.) . Both the trial and appellate court held for COG ( Id. at 13). II. Differing Opinions On review, Cactus and COG had differing conclusions on why they owned the produced water. COG contended that under Texas law and long-standing practice, the language used in the Leases to convey to them oil and gas rights included liquid waste byproducts incorporated with the hydrocarbons, despite any express reservation or exception. Therefore, they were the true owners of the produced water ( Id. at 2). Cactus, however, contended that once the hydrocarbons were separated, the remaining watery mixture was surface wastewater ( Id.) . Surface/ground water is owned by the surface owner, absent any express conveyance of water rights ( Id.) . III. The Supreme Court Weighs In Presented with the question of who owns produced water under an oil-and-gas conveyance that does not expressly address the matter, the Supreme Court of Texas ultimately held that the operator, not the surface owner, owns produced water. In its June 27, 2025 opinion, the Texas Supreme Court held that Cactus’ argument rested on a ‘seductively simple’ proposition, asserting that surface owners retain ownership of produced water merely because it contains water molecules ( Id. at 21). The Court examined the definition of “water,” and considered how “produced water” might fall within that scope (Water, unlike oil and gas, is not considered part of the mineral estate and remains part of the surface estate subject to the mineral estate’s implied right to use the surface as reasonably necessary to produce and remove minerals. Id .). Cactus supported its argument with cases such as Edwards Aquifer Authority v. Day ( 369 S.W.3d 814, 832 (Tex. 2012)), Robinson v. Robbins Petroleum Corp. ( 501 S.W.2d 865, 867- 68 (Tex. 1973)), and Sun Oil Co. v. Whitaker ( 483 S.W.2d 808, 811 (Tex. 1972)), all of which affirm that a landowner owns groundwater under its
land. However, the Court found these precedents inapplicable, noting that they focus on ownership of groundwater in its original place found or through water wells for use of water, and not to the byproducts of oil and gas production. The Court relied on several key distinctions between water and produced water. First, produced water cannot be defined as “water,” as it cannot be handled in the same manner. Produced water is an oil and gas byproduct, also referred to as liquid waste, and is a regulated substance which must be handled and disposed of properly. The characteristics of produced water have been described as hazardous, even toxic, and the handling of such waste is highly regulated and requires appropriate permits and infrastructure. Comically, produced water has been identified as a contaminant, and, as a result, should be kept separate from surface and subsurface water (16 TEX. ADMIN CODE E §§ 3.8(a)(26), (“Oil and gas wastes -- Materials to be disposed of or reclaimed which have been generated in connection with activities associated with the exploration, development, and production of oil or gas or geothermal resources… The term ‘oil and gas wastes’ includes, but is not limited to, saltwater, other mineralized water, sludge, spent drilling fluids, cuttings, waste oil… and waste generated in connection with activities associated with gasoline plants, natural gas or natural gas liquids processing plants, pressure maintenance plants or repressurizing plants…”), (b) (“No pollution. No person conducting activities subject to regulation by the commission may cause or allow pollution of surface or subsurface water in the state.”)). Second, the Court emphasized the principle that “waste and hydrocarbon production go hand in hand” ( Cactus at 19). The Court cited to Brown v. Lundell ( 344 S.W.2d 863, 866-67 (Tex. 1961)), wherein the separation and disposal of oil and gas wastewater was deemed necessary and incident to the production [of oil and gas] (Cactus at 20). Important to note, COG’s tank batteries can only separate and store up to 24 hours’ worth of produced water, which must then be handled and transported elsewhere for production to continue ( Id. at 8). Disposal of such waste has been an unwanted, but important, part of oil and
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G rowth T hrough E ducat i on - J uly / A ugus t / S ept ember 2025
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