Midland Reporter-Telegram

by Mella McEwen

As efforts to reuse produced water have intensified, questions have arisen over who owns that produced water: The driller who produced it or the landowner?

The Texas Supreme Court recently issued a ruling in the case Cactus Water Services LLC v. COG Operating LLC that the water belongs to the driller that holds the oil and gas lease because it is oil and gas waste and belongs to the mineral estate. If the landowner wants the water, it must be part of the lease agreement, justices wrote.

“In Cactus v. COG, the Texas Supreme Court’s landmarkuling provides much needed legal clarity in a growing area of commercial interest, affirming long-standing industry practice that the right to produce oil and gas includes the produced water byproducts that come with it — unless a lease clearly says otherwise,” Ben Shepperd, president of the Permian Basin Petroleum Association, told the Reporter-Telegram.

“PBPA weighed in during the deliberations of the Court on this case with an amicus curiae brief arguing for this ultimate conclusion," Shepperd said. "The Court’s decision is a win for property rights, economic rights and environmental rights. Further, clarifying this issue will simplify ownership concerns regarding the utilization of treated, produced waterboth in and outside the oil and gas industry."

Amanda Brock, chief executive officer of Aris Water, called the decision an important development for the state’s energy industry and “crucially for how we manage water responsibly.

“This legal clarity is vital for long-term planning, for investing in advanced water treatment and for continuing to build out a strong water midstream sector here in Texas,” she told the Reporter-Telegram. Not only does the ruling provide legal clarity, “It also strongly supports the industry’s ongoing efforts to lessen its environmental footprint and optimize resource utilization."

Ed Longanecker, president of the Texas Independent Producers and Royalty Owners Association, commented to the Reporter-Telegram: “This court decision is an important development and component of a much broader topic related to oil and natural gas operations that have collectively been a focal point from a policy, environmental and operational standpoint for TIPRO and our members for many years on issues related to recycling, disposal, innovation and reuse. This will provide legal clarity and regulatory certainty that will help drive further innovation within our industry related to produced water and beneficial reuse."

Produced water has always been a challenge for the industry, often just seen as a costly waste product, Brock noted.

"(With new technologies), we’re increasingly recognizing it as a valuable resource with huge potential for reuse. This decision empowers mineral lessees to integrate produced water management right into their core operations, fostering a more holistic and efficient approach to water stewardship. It provides greater certainty in our contracts and encourages further investment in the infrastructure needed to collect, treat and beneficially reuse this water, ultimately reducing our reliance on freshwater sources,” Brock said..

The case stems from the Collier family leasing 37,000 acres of land in the Permian Basin’s Reeves County to COG Operating. The company drilled 72 horizontal oil and gas wells that generated more than 52 million barrels of produced water. The Colliers then signed “produced water lease agreements” with Cactus Water Services, giving Cactus rights to produced water COG had disposed of elsewhere. COG then sued Cactus, arguing it owned the produced water.

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