Texasis awash in billions of gallons of produced water, the waste water brought to the surface in oil and gas drilling and hydraulic fracturing.
Most produced water is injected into disposal wells. But since these wells were linked to earthquakes, companies are seeking alternatives. The race is on to turn produced water from a waste stream into a valuable product. These new enterprises are raising thorny legal questions about produced water and who owns it.
On 27 June, the Texas Supreme Court ruled in Cactus Water Services v. COG Operating. The Court’s ruling in favor of COG stated that the drilling company that holds the oil and gas lease, not the surface owner, owns the produced water. The ruling, signed by Justice John Devine, said that produced water is oil and gas waste and, therefore, part of the mineral rights estate, not the surface estate.
The justices wrote that, if a landowner wants ownership of the produced water, that must be agreed to directly in leases.
“[P]roduced water is not water,” the court wrote. “While produced water contains molecules of water, both from injected fluid and subsurface formations, the solution itself is waste—a horse of an entirely different color.”
“It’s a really new issue of whether produced water has any value,” said John McFarland, an oil and gas and mineral rights attorney at Graves, Dougherty, Hearon & Moody in Austin. “It’s been considered a waste and costs a huge amount of money to get rid of.”
McFarland said the ruling was “not surprising” and a “practical” outcome for how to handle ownership of produced water.