Supreme Court
Cactus Water Servs., LLC v. COG Operating, LLC
- Case number: 23-0676
- Legal category: Oil and Gas
- Subtype: Leases
- Set for oral argument: March 18, 2025
Case Summary
This dispute concerns whether the mineral lessee or the surface estate holder owns the “produced water” from oil and gas operations.
COG is the mineral lessee under four leases with two surface owners in Reeves County. COG’s operations focus on hydraulic fracking, which involves pumping large quantities of water into wells to extract oil and gas. The fluid that returns to the surface contains a mixture of various minerals. Once the oil and gas are removed, the remaining fluid is known as produced water. Until recently, produced water was disposed of as a byproduct of oil and gas operations. Now, produced water can be treated and recycled for other uses.
Years after executing the mineral leases with COG, the surface owners executed Produced Water Lease Agreements with Cactus. These leases conveyed to Cactus the produced water from oil and gas operations on the land. Cactus informed COG of its leases. COG sued Cactus, seeking a declaratory judgment that under the mineral leases, COG owned the produced water from its operations. Cactus counterclaimed, asserting its right of ownership under the PWLAs. The trial court granted summary judgment in COG’s favor and declared that COG owned the produced water that was part of COG’s product stream. The court of appeals affirmed. It concluded that produced water is waste as a matter of law, and COG has the exclusive right to the produced water.
Cactus filed a petition for review. It argues that the court of appeals erred because the surface estate owns all subsurface water absent an express conveyance. Here, Cactus argues, the only express conveyances of the produced water were to Cactus in the PWLAs. The Supreme Court granted the petition.
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