Who Owns Produced Water in Texas?

A somewhat unsettled question in Texas law is just who owns the water that is produced in some wells along with the oil and gas. Produced water has usually been considered a waste product, and the operator/lessee had to pay to have it hauled away. However, some operators are selling the produced water to a company that recycles it and then sells it for use in fracking. That means produced water may become a valuable commodity and so the question of who owns it becomes critical.

In Cactus Water Servs., LLC v. COG Operating, LLC, 676 S.W.3d 733 (Tex. Civ. App.—El Paso 2023), pet. granted, the El Paso Court of Appeals addressed this question. COG Operating LLC (“COG”) was operating a lease in which water was produced. The surface owner, believing he owned the water, sold the rights to the produced water to Cactus Water Services LLC (“Cactus”). When Cactus served notice on COG that Cactus owned the water, COG sued Cactus.

The Court of Appeals declared that COG owned the produced water that was part of COG’s product stream. The petition for review filed by Cactus in the Supreme Court was granted. It will be interesting to see how the Texas Supreme Court rules on this question.

Interestingly, a somewhat related case was decided by the Texas Supreme Court in 1973. In Robinson v. Robbins Petroleum Corporation, Inc., 501 SW2d 865 (Tex. 1973), the Supreme Court addressed a claim by the surface owner that the salt water or brine that was produced incidental to Robbins oil production belonged to the surface owner, who had sued Robbins for damages for wrongful taking of the brine. The Court held that the brine was part of the surface estate and that if minerals were extracted from the brine, those minerals belonged to the operator.  The Court said that the lease gives the mineral owner, in this case the lessee/operator, the right to use the water, but only for operations on the leased premises. In this case, Robbins was using the water from the leased premises for operations off the leased premised without the consent of the surface owner. As a result, the Court determined that an award of damages to the surface owner was appropriate.

There is at least a potential conflict between these cases, which the Texas Supreme Court will hopefully resolve.