Cactus Water Services, LLC v. COG Operating, LLC resolves a high-stakes dispute over the ownership of produced water--a vexing byproduct of oil and gas production that is increasingly being viewed as a resource rather than waste--and its constituents.
On June 27, 2025, the Texas Supreme Court issued its long-awaited decision in Cactus Water Services, LLC v. COG Operating, LLC, No. 23-0676, resolving a high-stakes dispute over the ownership of produced water--a vexing byproduct of oil and gas production that is increasingly being viewed as a resource rather than waste--and its constituents. The Court held that, unless expressly reserved, a deed or lease conveying oil and gas rights also conveys produced water as part of the mineral estate. The decision not only reinforces the ownership of produced water under Texas oil and gas law, but also offers insight into how emerging practices such as direct lithium extraction (DLE) from produced water might be treated under existing legal frameworks.
Background
The crux of this case is whether produced water belongs to the surface or mineral estate. Under Texas law, groundwater is owned by the surface owner, irrespective of the minerals contained in the groundwater. Coyote Lake Ranch, LLC v. City of Lubbock, 496 S.W.3d 53 (Tex. 2016); Robinson v. Robbins Petrol. Corp., 501 S.W.2d 865 (Tex. 1973). However, certain minerals, including lithium, are part of the mineral estate.
COG Operating, an oil and gas operator in the Permian Basin and mineral lessee, brought a declaratory judgment action against Cactus Water Services, a company that had acquired purported rights to produced water through a produced water lease granted by the surface owners, including the right to sell all water “produced from oil and gas wells and formations [on the covered properties].” COG, which had operated the lease and managed the transportation and disposal of produced water for years prior to the Cactus’s lease, argued that it owned the produced water as part of its mineral leasehold rights.
Reprinted courtesy of Ashleigh Myers, Pillsbury, Robert A. James, Pillsbury and Jillian Marullo, Pillsbury
Ms. Myers may be contacted at ashleigh.myers@pillsburylaw.com
Mr. James may be contacted at rob.james@pillsburylaw.com
Ms. Marullo may be contacted at jillian.marullo@pillsburylaw.com