The Supreme Court has handed down its opinion in Cactus Water Services, LLC v. COG Operating, LLC, a dispute over ownership of produced water. Its holding: COG, the operator, owns the produced water.
Between 2005 and 2014, the Colliers granted leases covering 37,000 acres of land in Reeves County to COG. The leases granted lease of only “oil and gas” or “oil, gas and other hydrocarbons.” COG has drilled 72 horizontal wells, and production from those wells has generated nearly 52 million barrels of produced water. Between December 2018 and March 2021 COG paid nearly $21 million in disposal fees to a third party to dispose of the produced water.
In 2019 and 2020 the Colliers signed “produced water lease agreements” with Cactus Water Services, conveying to Cactus water from oil and gas producing formations and flowback water under the lands covered by the COG leases. Cactus then notified COG of its claim to the produced water, and COG sued for a declaration that it, not Cactus, owns the produced water. The trial court agreed with COG, and the court of appeals affirmed with one dissent. 676 S.W.3d 733 (Tex.App.—El Paso 2023). Cactus obtained review in the Supreme Court.