The Texas Supreme Court’s Decision Concerning Ownership of Produced Water in Cactus Water Services LLC v. COG Operating LLC: When Is Water Not Water?

As water scarcity intensifies in Texas, the legal status of "produced water"—a byproduct of oil and gas extraction—has gained increasing attention and significance. A recent decision of the Texas Supreme Court, Cactus Water Services LLC v. COG Operating LLC, addressed a novel and consequential property rights question: Who owns the produced water extracted alongside hydrocarbons? This article analyzes the Court’s decision, which held that oil and gas lessees own produced water absent express lease language to the contrary. The ruling relies upon traditional assumptions about produced water as waste, perhaps in the face of the evolving value and treatability of produced water and Texas law regarding the ownership of groundwater. Through an examination of the majority and concurring opinion and their underlying bases, this article also explores the implications for drafting future oil, gas, and groundwater rights leases, and offering practical guidance on how parties can avoid unintended conveyances of produced water.