Supreme Court of Texas

══════════
No. 23-0676
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Cactus Water Services, LLC,

Petitioner,

v.

COG Operating, LLC,

Respondent

═══════════════════════════════════════
On Petition for Review from the
Court of Appeals for the Eighth District of Texas
═══════════════════════════════════════

Argued March 18, 2025

JUSTICE DEVINE delivered the opinion of the Court.

JUSTICE BUSBY filed a concurring opinion, in which Justice

Lehrmann and Justice Sullivan joined.

Justice Young did not participate in the decision.

In the oilfields of West Texas, where the Permian Basin continues

to yield vast quantities of hydrocarbons, another resource has quietly
risen in legal and commercial significance: produced water. Long
considered a burdensome and costly byproduct of oil-and-gas production,
this briny mixture of drilling, fracking, and formation fluids has
emerging beneficial-use applications if properly processed and treated.
Government regulators and industry players have historically treated
produced water as oil-and-gas waste and placed the burden of proper
handling and disposal on the mineral estate’s oil-and-gas operator. But
as its potential utility increases, so too does the question that now finds
its way to this Court: who owns produced water under an oil-and-gas
conveyance that does not expressly address the matter?
This first-of-its-kind dispute pits a mineral-estate lessee and
operator of producing wells under oil-and-gas leases against a
surface-estate lessee asserting a claim to the produced water collected
at or near the wellhead. The hydrocarbon lessee contends that, under
Texas law and long-standing industry practice, conveyance of the right
to produce oil and gas—whether by deed or lease—necessarily includes
the liquid-waste byproducts entrained with the hydrocarbons absent an
express reservation or exception; accordingly, the surface owners’
subsequent conveyances of produced water were legally ineffective. The
produced-water lessee counters that once the hydrocarbons have been
separated after production at the well, the remaining watery mixture,
being neither oil nor gas, is surface-estate water owned by the
landowner absent an express conveyance of water rights. In this
declaratory-judgment action, the lower courts sided with the
hydrocarbon lessee, as do we.
Produced water is an inherent and inescapable byproduct of
oil-and-gas production. Hydrocarbons cannot be extracted without
simultaneously generating liquid waste, and production cannot continue
without disposing of this hazardous—sometimes toxic—solution. When
the underlying hydrocarbon leases were executed, and for decades
before, it was understood, expected, and contemplated that the well

2
operator was legally obligated to dispose of produced water, thereby
consuming the value of entrained water molecules. The right to
consume the value of property is generally a right of ownership, not use.
A conveyance that presupposes the disposition of water molecules
entrained with hydrocarbon production necessarily factors that
disposition into the transaction along with the benefits and burdens of
transferring disposal rights. Though the parties are free to strike a
different deal, subsequent innovations do not change the parties’
expectations or the deal that was struck.
Texas law has long recognized that the hydrocarbon producer’s
possession and control over the disposition of liquid-waste byproduct is
necessarily incidental to, and therefore encompassed in, a conveyance of
oil-and-gas rights. 1 The conveying parties, who are presumed to
contract in reference to the law, 2 understood that disposal of liquid
waste meant consumption of the capital value, if any, of constituent
water. 3 That being so, it would have been incumbent on the

1 See Brown v. Lundell, 344 S.W.2d 863, 866-67 (Tex. 1961) (“It was
necessarily incident to production operations here that the salt water be
separated from the oil and that it be disposed of” and “[t]he right of the lessee
in exploring for and producing oil and gas embraces only the doing of those
things expressly granted or necessarily implied in the lease as necessarily
incidental thereto. All property rights not [so] granted are reserved in the
lessor.”).
2See XOG Operating, LLC v. Chesapeake Expl. Ltd. P’ship, 554 S.W.3d
607, 612 (Tex. 2018) (noting that contracting parties “are presumed to know
the law and to have stated their agreement in light of it”).
3 See Guffey v. Stroud, 16 S.W.2d 527, 528 (Tex. [Comm’n Op.] 1929)
(stating that “[t]he grant of the oil carried with it a grant of the . . . water
. . . essential to the enjoyment of the actual grant of the oil” and employing a
literary analogy describing such a grant as including the right to waste or

3
surface-estate owners to expressly reserve property rights in that
incidentally produced liquid-waste byproduct if they intended to retain
ownership. They did not. Courts cannot employ a backward-looking
construction of the conveyances that is informed by new technologies
offering the potential for recycling and reuse that were not within the
parties’ contemplation at the time of the conveyances. Because the court
of appeals correctly concluded that the right to produced water was
included in the conveyances to the hydrocarbon lessee, 4 we affirm its
judgment.
I
Between 2005 and 2014, COG Operating, LLC acquired four
hydrocarbon leases from two surface owners covering approximately
37,000 acres in Reeves County, Texas. The leases grant COG the
exclusive right to explore for, produce, and keep “oil and gas” or “oil, gas,
and other hydrocarbons.” 5 With some variances in phrasing, each lease

consume). We express no view regarding ownership of any nonhydrocarbon

minerals included in liquid-waste byproduct, as no such substances are in
dispute here.
4 676 S.W.3d 733, 734-35 (Tex. App.—El Paso 2023).
5 The 2005 and 2010 Collier Leases state that the lessors “have
GRANTED, DEMISED, LEASED and LET, and by these presents do GRANT,
DEMISE, LEASE and LET exclusively unto the said Lessee, its successors and
assigns, for the sole and only purpose of investigating, exploring, prospecting,
drilling, mining and operating for oil and gas and other hydrocarbons, and of
laying pipelines and of building tanks, power stations and structures thereon,
to produce, save, take care of, store and treat products produced hereunder,
and then transport those products from the [leased] land[.]” The lessors under
these leases include several individuals in addition to the surface owner.
The 2010 Balmorhea Lease declares that the lessor “hereby grants,
leases and lets exclusively unto Lessee for the purpose of investigating,

4
grants COG the right to conduct comprehensive oil-and-gas operations,
including the construction of pipelines, tanks, and other essential
infrastructure. The leases say nothing directly about oil-and-gas
waste. 6 With respect to “water,” three of the leases expressly prohibit
any use of water except in extremely limited circumstances: either
(1) “[n]o water from any source [on the premises] . . . for any purpose
without written consent of Lessor” or (2) no water “on or under” the land
except water from a COG-drilled water well used only on-lease but not
“for water flooding, secondary recovery operations or camp operations.”
The fourth lease is silent about water use.
COG’s operations on the leased property are concentrated in the
Delaware Basin, a subregion of the Permian Basin. This geologic
formation is characterized by dense shale and low permeability,
necessitating the use of hydraulic fracturing—or “fracking”—as the
principal method of production. Fracking involves injecting vast
quantities of pressurized fluid, proppants, 7 and chemicals into

exploring, prospecting, drilling and mining for and producing oil, gas, and
other hydrocarbons, conducting exploration, geologic and geophysical surveys
by seismographs, core test, gravity and magnetic methods, injecting gas, water
and other fluids, and air into subsurface strata, laying pipe lines, building
roads, tanks, power stations, telephone lines and other structures thereon, to
produce, save, take care of, treat, transport and own said products, the [leased
land].”
The 2014 Collier Lease states that the lessor “hereby exclusively grants,
leases and lets unto Lessee for the purpose of investigating, exploring,
prospecting, drilling and producing oil and gas, from the [leased land].”
6 See infra note 50.
7Coastal Oil & Gas Corp. v. Garza Energy Tr., 268 S.W.3d 1, 6-7 (Tex.
2008) (explaining that proppants, like sand, ceramic beads, or bauxite, “lodge

5
subterranean formations to fracture the rock and release trapped
hydrocarbons for production through the wellbore. The most common
type of fracturing fluid is water. A portion of the injected fluid returns
to the surface as “flowback,” 8 bringing with it a mixture of hydrocarbons,
emulsified brine, and a complex mélange of substances that varies
depending on the particular formation and the fracking fluid’s chemical
composition. 9 Here, those substances include a hazardous brew of
potassium, strontium, barium, iron, carbon dioxide, hydrogen sulfide,
and chloride.
At the surface, COG mechanically separates the oil and gas,
leaving a mixture of fracking fluid, hypersaline brine, residual

themselves in the cracks, propping them open against the enormous

subsurface pressure that would force them shut as soon as the fluid was gone”).
8 Estimates of how much fracking water remains underground vary
depending on the formation. See, e.g., OHIO DEP’T OF NAT. RES., DIV. OF OIL &
GAS RES. MGMT., Flowback (Wastewater) from Hydraulic Fracturing,
https://dam.assets.ohio.gov/image/upload/ohiodnr.gov/documents/oil-gas/
factsheet/wastewater-flowback_0815.pdf (last visited June 21, 2025) (“Most of
the water used in fracturing remains thousands of feet underground, however,
about 15-20 percent returns to the surface through a steel-cased wellbore and
is temporarily stored in steel tanks or lined pits. The wastewater which
returns to the surface after hydraulic fracturing is called flowback.”).
9 See Coastal Oil, 268 S.W.3d at 6-7 (describing the fracking process);
Bethel Oil & Gas, LLC v. Redbird Dev., LLC, 258 N.E.3d 470, 479 (Ohio Ct. App.
2024) (describing the composition of “residual waste fluids” produced by the
hydraulic fracturing process); AM. GEOSCIENCES INST., What is Produced
Water? (“Produced water can also contain varying amounts of oil residues, sand
or mud, naturally occurring radioactive materials, chemicals from frac fluids,
bacteria, and dissolved organic compounds.”) (citing Richard W. Healy et al.,
The Water-Energy Nexus—An Earth Science Perspective, U.S. GEOLOGICAL
SURV. (Apr. 10, 2015), https://pubs.usgs.gov/circ/1407/),https://profession.
americangeosciences.org/society/intersections/faq/what-produced-water/ (last
visited June 21, 2025).

6
hydrocarbons, and other substances of varying concentrations. 10 This
solution, known in the industry as “produced water,” can carry serious
risk to human health and the environment and must be treated and
disposed of in accordance with applicable regulatory standards.
Hydrocarbons cannot be produced without generating this hazardous
adjunct—and vice versa. Under the law at the time of the conveyances,
and to this day, the well operator—in this case, COG—has been charged
with proper handling and disposal of produced water. 11 Waste disposal
is authorized only with a permit or in accordance with sanctioned
methods. 12 As a contaminant, produced water must be kept separate
from surface and subsurface water, 13 and the well operator is subject to
penalties and other liability for improper disposal. 14
To facilitate waste-handling operations, COG entered into a
surface-use compensation agreement (SUCA) in 2015 and multiple
right-of-way agreements (ROWs) between 2013 and 2016 with the

10Martha Pskowski & Dylan Baddour, Companies Aim to Release More

Treated Oilfield Wastewater into Rivers and Streams, TEX. TRIB. (Apr. 29, 2024),
https://www.texastribune.org/2024/04/29/texas-treated-produced-water-dispos
al-discharge-rivers/ (observing that produced water “can be ten times saltier
than seawater and is often laced with leftover fracking chemicals”).
11 16 TEX. ADMIN. CODE §§ 3.8(a)(26), (b), (d)(5), .13(a)(1).
12 Id. § 3.8(d)(1)–(6).
13 Id. § 3.8(b) (“No person conducting activities subject to regulation by
the commission may cause or allow pollution of surface or subsurface water in
the state.”).
14 Id. § 3.8(a)(17), (d)(5) (the generator of oil-and-gas waste has
responsibility for disposal), (h) (authorizing penalties in accordance with state
law).

7
landowner for three of the hydrocarbon leases. 15 These agreements
allowed COG to (1) construct tank battery sites to gather, store, and
transport “oil, gas, other petroleum products, water, and/or any other
liquids, gases or substances which can be transported through a
pipeline”; (2) lay “[f]resh water lines, produced water lines and flow
lines”; and (3) lay pipelines for the “transportation of oil, gas, petroleum,
produced water and any other oilfield related liquids or gases.” COG’s
tank batteries can only separate and store up to 24 hours’ worth of
produced water, and then it must be handled elsewhere for production
to continue.
Since the dawn of the petroleum era, the burden and expense of
liquid-waste disposal has been an unwanted, but quotidian, fact of
oil-and-gas production. 16 “Disposing of produced water is one of the
largest operation costs for an oil well” 17 and a significant factor in well

15The SUCA was amended from time to time thereafter to include

additional tracts but otherwise remained unchanged.
16Benjamin W. Sebree, Ownership of Produced Water Under Texas Law:
Waste or Water?, 4 TEX. TECH. J. ENERGY L. PRAC. 1, 5 (2024); David Wethe &
Kevin Crowley, ‘Disposal Nightmare’: In Permian Basin, Every Barrel of Oil
Means Four Barrels of Toxic Water, DALL. MORNING NEWS (Aug. 29, 2018),
https://www.dallasnews.com/business/energy/2018/08/29/disposal-nightmare-in-pe
rmian-basin-every-barrel-of-oil-means-four-barrels-of-toxic-water/; see Turner v.
Big Lake Oil Co., 96 S.W.2d 221, 226 (Tex. 1936) (“One of the by-products of oil
production is salt water, which must be disposed of without injury to property
or the pollution of streams.”); Brown v. Lundell, 344 S.W.2d 863, 866-67
(Tex. 1961) (observing that separation and disposal of saltwater are necessary
and incident to oil-and-gas production).
17Brett Walton, Permian Oil Boom Uncorks Multibillion-Dollar Water
Play, CIRCLE OF BLUE (Feb. 15, 2019), https://www.circleofblue.org/2019/world
/permian-oil-boom-uncorks-multibillion-dollar-water-play/.

8
profitability. 18 Under its leasehold interests, COG has drilled 72
horizontal wells targeting deep formations several thousand feet below
groundwater reservoirs. 19 These wells, all classified as oil wells by the
Railroad Commission, 20 have generated nearly 52 million barrels of
produced water. COG has managed disposal of this byproduct both
independently and through third parties. From December 2018 to
March 2021, COG paid nearly $21 million in disposal fees to a
third-party contractor. COG has exclusively borne all disposal
expenses.
Although disposal is the norm, recent technological innovations
have given new purpose to produced water as a potentially lucrative
commodity. 21 Reusing it as drilling or fracking fluid, on or off the leased

18BENCHMARK MEASUREMENT SOLS., What Is Produced Water? (Apr. 5,

2021), https://oilinwatermonitors.com/what-is-produced-water/.
See TEX. WATER CODE § 35.002(5), (6) (defining “groundwater” and
19

“groundwater reservoir”).
20 The Railroad Commission determines whether a well is classified as
an oil well or a gas well based on data such as gas/oil ratios and the composition
of the constituent components of the produced fluid. See, e.g., TEX. NAT. RES.
CODE §§ 81.051 (delineating the Railroad Commission’s jurisdiction),
86.002(5), (6) (providing relevant definitions including “gas well” and “oil
well”); 16 TEX. ADMIN. CODE §§ 3.27–.28, .49, .52–.53 (governing matters such
as data and reporting for gas and oil wells).
21See TEX. PRODUCED WATER CONSORTIUM, Beneficial Use of Produced
Water in Texas, at 7 (2024), https://www.depts.ttu.edu/research/tx-water-
consortium/TXPWCFINALDRAFT.pdf. The Texas Produced Water
Consortium was established on June 18, 2021, by Senate Bill 601 “to bring
together information resources to study the economics of and technology
related to, and the environmental and public health considerations for,
beneficial uses of fluid oil and gas waste.” TEX. EDUC. CODE § 109.202.

9
premises, is one repurposing option. 22 If sufficiently treated to meet
safety and environmental standards, 23 produced water can potentially
be recycled and reused for other beneficial purposes. 24 But treating and
recycling is much more costly than disposal and, therefore, remains
economically less attractive. 25 According to the record before the Court,

22 See 16 TEX. ADMIN. CODE § 3.8(d)(7)(B) (pertaining to “[a]uthorized

recycling,” including “[t]reated fluid” used as “makeup water for a hydraulic
fracturing fluid treatment(s), or as another type of oilfield fluid to be used in
the wellbore of an oil, gas, geothermal, or service well”).
23 AM. GEOSCIENCES INST., supra note 9 (“Differences in composition
affect how produced waters are treated, used, and/or disposed.”).
24 In 2021, the Legislature directed the Railroad Commission to adopt
rules and establish standards to encourage commercial recycling of liquid
oil-and-gas wastes. See TEX. NAT. RES. CODE § 122.004. Pursuant to that
mandate, the Railroad Commission issued a “Produced Water Beneficial Reuse
Framework for Pilot Study Authorization” in January 2024. R.R. COMM’N OF
TEX., Produced Water Beneficial Reuse Framework for Pilot Study
Authorization (Jan. 8, 2024), https://www.rrc.texas.gov/media/
nznn2wsj/240108-produced-water-framework-final.pdf. The objective of the
pilot study program is to evaluate “the efficacy” of recycling and reuse efforts
“on a limited scale” to determine “whether the activity can be successfully
implemented on a larger scale” practically, logistically, and economically. Id.
at 3. The Railroad Commission subsequently adopted revisions to 16 Texas
Administrative Code Chapter 4, Subchapter B relating to commercial recycling
and adopted new Subchapter A relating to oil-and-gas waste management,
both with a stated effective date of July 1, 2025. 50 TEX. REG. 33, 65-103
(2025).
25 In 2024, the Texas Produced Water Consortium reported to the
Legislature that “the cost of disposal via injection . . . drastically outweighs the
current capital and operating costs required to treat produced water to
beneficial reuse qualities, even offset by the potential value of that treated
water to external users such as irrigated agriculture and municipalities,
among others.” TEX. PRODUCED WATER CONSORTIUM, supra note 21, at 7; see
Produced Water: A Texas Sized Issue, BioSqueeze (Oct. 8, 2024),
https://web.archive.org/web/20250216222033/https://biosqueeze.com/blog/prod
uced-water-a-texas-sized-issue#expand] (“The chemical complexity of the
water, with its high salinity and variability, makes treatment for reuse both

10
COG does not reuse produced water from its operations for any purpose,
either on or off lease, or receive any compensation for its use elsewhere.
And if COG is unable to expeditiously move produced water offsite for
disposal, production from its wells must cease. 26 Here lies the genesis
of the present dispute.
In 2019 and 2020, the surface owners executed “produced water
lease agreements” (PWLAs) with Cactus Water Services, LLC. 27 These
agreements purport to convey “all right, title and interest in and to”
“water from oil and gas producing formations and flowback water
produced from oil and gas operations” on the lands covered by COG’s
leases. Employing a narrow definition of “water,” the PWLAs expressly
exclude water unrelated to oil-and-gas production:
“Water” means any and all water contained in and
produced from geologic formations under the Subject
property through any wellbores drilled for the production
of oil, gas, and natural gas liquids . . . whether
economically productive or not, regardless of salinity.

difficult and expensive.”); Pskowski & Baddour, supra note 10 (“Treating

[hypersaline produced water], which . . . is often laced with leftover fracking
chemicals, has been uneconomical so far, especially compared with the low cost
of injection disposal.”); see also Carlos Nogueras Ramos, Can Texas Clean Up
Fracking Water Enough to Use for Farming? One Company Thinks So, TEX.
TRIB. (May 1, 2025), https://www.texastribune.org/2025/05/01/
texas-water-crisis-oil-gas-fracking-farming/ (describing produced water as “all
but unusable—unless treated” for beneficial reuse, including as fracking fluid,
while observing that the wide variety of contaminants makes that process
“highly complicated and unpredictable”).
26 See TDC Eng’g, Inc. v. Dunlap, 686 S.W.2d 346, 348-49 (Tex. App.—
Eastland 1985, writ ref’d n.r.e.) (observing that the well operator “must dispose
of the salt water (which is produced with the oil) in order to produce the oil”
and had the right to do so).
27Cactus is the lessee under one PWLA and the assignee of rights under
the other.

11
 “Water” excludes all water originating from shallow
geological intervals that do not and have never produced
oil, other hydrocarbon liquids, and/or natural gas
anywhere in the [Delaware/Permian] Basin. “Water” also
excludes water purposely and directly produced from . . .
freshwater aquifers. 28

But like most surface-estate owners, Cactus possesses no permits,

no infrastructure, and no ability to handle, transport, or dispose of
produced water. Cactus has no assets other than the PWLAs and owns
no pipelines, disposal wells, or processing facilities, nor has it committed
to acquiring such infrastructure. Nonetheless, in March 2020, Cactus
notified COG of its claimed rights under the PWLAs and asserted an
entitlement to produced water from COG’s oil wells. That interaction
did not go well.
In short order, COG sued for a declaration that COG, not Cactus,
owns and has the exclusive right to possession, custody, control, and
disposition of its production stream, including produced water. COG
asserted that, absent a declaration of these rights, hydrocarbon
production could not continue without capitulating to the demands of a
middleman with no skin in the game. Cactus responded in kind, seeking
a declaration that it alone owns produced water from COG’s oil-and-gas
wells and has the exclusive right to sell or transfer it off the leased
premises. 29 Other claims and counterclaims, both in tort and equity,

28 Emphases added.
29Cactus has subsequently disclaimed ownership of the portion of
produced water attributable to fracking fluid COG has injected into its wells
but only to the extent COG can identify each owner’s aliquot share of the
commingled produced-water solution with reasonable certainty. See infra
note 36.

12
were also asserted. The surface owners, who were joined as necessary
parties, filed answers but no counterclaims. 30
COG and Cactus both moved for summary judgment on their
respective declaratory-judgment claims. The central issue was whether
COG’s claimed rights were baked into the express conveyance of
oil-and-gas rights or whether produced water was part of the surface
estate because no water rights were expressly and separately conveyed
to COG. After a hearing on the cross-motions, the trial court ruled in
COG’s favor, and the parties nonsuited their other claims. The trial
court then issued the following declarations in a final judgment:
• “COG owns the oil, gas and other products contained in
commercial oil and gas bearing formations that are produced from
COG wells on the four leases”;
• “COG has the right to exclusive possession, custody, control and
disposition of the product stream produced from COG[’s] wells”;
and
• “Cactus has no rights in or to the product stream from COG wells”
so long as the hydrocarbon leases are in effect.
Cactus appealed, and a divided court of appeals affirmed, holding
that produced water constitutes oil-and-gas waste that belongs to the
mineral lessee, not groundwater that belongs to the surface estate. 31
The court arrived at that conclusion after consulting the legal backdrop
and industry practice that contextualized the transaction and confirmed

30 See TEX. CIV. PRAC. & REM. CODE § 37.006(a) (“When declaratory
relief is sought, all persons who have or claim any interest that would be
affected by the declaration must be made parties.”).
31 676 S.W.3d 733, 738, 740-41 (Tex. App.—El Paso 2023) (framing the
decisive question as “whether ‘produced water’ is, as a matter of law, water or
if it is waste”).

13
the understanding that groundwater and produced water are not the
same. 32 In determining that the PWLAs were ineffective, the court
explained that “nothing in the mineral leases suggests the parties
intended to assign rights at a molecular level, following both extraction
from the well and post-production processing,” or “to reserve oil and gas
waste produced through COG’s drilling operations.” 33 The dissent
argued that the granting language in the hydrocarbon leases conveyed
oil, gas, and hydrocarbons produced from the leased lands but not
subsurface water incidentally recovered and separated from produced
hydrocarbons. 34
We granted Cactus’s petition for review to address this important
issue of first impression. 35
II
Texas law has developed a sophisticated framework governing
the respective rights of surface and mineral owners under severed
estates. Though historical and regulatory practices have squarely
placed control of waste handling and disposal in the mineral developer’s
hands, emerging disputes about who actually owns produced water have

32 Id. at 735-37, 739-40.

33 Id. at 741.
34 Id. at 742 (Palafox, J., dissenting).
35Among the third parties submitting amicus curiae briefs are Aris
Water Solutions, Inc.; Deep Blue Midland Basin LLC; NGL Energy Partners
LP; Permian Basin Petroleum Association; South Texans’ Property Rights
Association; Standard Lithium, Ltd.; Texas and Southwestern Cattle Raisers
Association; Texas Civil Justice League; Texas Farm Bureau; Texas Land &
Mineral Owners Association; Texas Landowners Council; Texas Independent
Produced Water Association; Texas Oil & Gas Association; and WaterBridge
Operating LLC.

14
raised a cavalcade of questions. 36 Chief among them: have waste
generators been merely “using” produced water without “owning” it?
Recent legislative enactments have undertaken to quell uncertainty and
cultivate a growing focus on reuse and stewardship, but none are of
assistance here. 37
In this dispute, ownership of produced water depends on the scope
of the language employed in the granting clauses of COG’s leases, which
specifically name only “oil and gas” or “oil, gas, and other hydrocarbons.”
Interpretation of the hydrocarbon leases presents a question of law that
comes to us following cross-motions for summary judgment on

36 Because processing out the oil and gas leaves a mixed solution with
similar management, treatment, and disposal needs, the terms “produced
water” and “flowback fluid” are often used collectively and interchangeably.
Cactus acknowledges that COG owns the injected fluids comprising a
significant portion of the liquid waste generated with oil-and-gas production if
COG can make a proper allocation of its share of the commingled solution with
reasonable certainty. See supra note 29.
37 In 2019, the Legislature amended section 122.002 of the Natural
Resources Code to state that whoever takes possession of “fluid oil and gas
waste”—including produced water—to treat it for “subsequent beneficial use”
owns it “unless otherwise expressly provided by an oil and gas lease” or other
“legally binding document.” TEX. NAT. RES. CODE §§ 122.001–.002. Whether
the statute changed the law—permissibly or not—or merely codified it is a
matter of some debate. But as the court of appeals recognized in this case, that
amended statute “does not assign ownership rights here” because it was
adopted after the hydrocarbon leases were signed. See 676 S.W.3d at 740 n.4.
The court nonetheless viewed the statute as “codif[ying] the understanding
that under Texas law, produced water is oil and gas waste byproduct, not
regarded as ‘water’ as Cactus claims.” Id.
Other new and significant pieces of legislation demonstrating the
state’s commitment to finding new solutions for produced water management
are summarized in the Texas Produced Water Consortium’s most recent report
to the Legislature. See TEX. PRODUCED WATER CONSORTIUM, supra note 21,
at 5.

15
declaratory-judgment claims. 38 In this procedural posture, “each party
bears the burden of proving its entitlement to judgment as a matter of
law.” 39 “When the trial court grants one motion and denies the other,
as in this case, we determine all questions presented and render the
judgment the trial court should have rendered.” 40
As is often the case, the parties here agree the leases in question
are unambiguous, and that is certainly true as to the issue presented.
Resolution of the ownership dispute ultimately depends not on any
uncertainty about the lease language but on what set of established
principles governs conveyance of the unnamed substance in dispute:
produced water. Water, unlike oil and gas, is not considered part of the
mineral estate. 41 Unless expressly severed, subsurface water remains
part of the surface estate subject to the mineral estate’s implied right to
use the surface—including water—as reasonably necessary to produce
and remove the minerals. 42 A conveyance of water is not effected by
implication. But if an unnamed substance is part and parcel of an
oil-and-gas conveyance, there is no need to list it separately because any

38Devon Energy Prod. Co. v. Sheppard, 668 S.W.3d 332, 343 (Tex. 2023)
(mineral leases are contracts and are construed according to the intent
expressed in the language).
39 Id. at 342-43.
40 Id. at 343 (internal quotation marks and citation omitted).
41 Sun Oil Co. v. Whitaker, 483 S.W.2d 808, 811 (Tex. 1972); Hous. &
Tex. Cent. R.R. Co. v. East, 81 S.W. 279, 281 (Tex. 1904).
42 Sun Oil, 483 S.W.2d at 811; Getty Oil Co. v. Jones, 470 S.W.2d 618,
621 (Tex. 1971).

16
such substance would already be included in what was clearly and
expressly conveyed. 43
Under Texas law, “the general intent of parties executing a
mineral deed or lease is presumed to be an intent to sever the mineral
and surface estates, convey all valuable substances to the mineral owner
regardless of whether their presence or value was known at the time of
conveyance, and to preserve the uses incident to each estate.” 44 Any
“reservation” or exception must be “by clear language” and cannot be
implied. 45 Furthermore, the right of the lessee to explore for and
produce oil and gas embraces not only what was expressly granted but
also what was “necessarily implied in the lease as necessarily incidental
thereto.” 46 In discerning intent, we consider lease language in light of
“the facts and circumstances surrounding the [instrument’s]
execution” 47 but only to the extent the context is “objectively

43 See, e.g., Garrett v. Dils Co., 299 S.W.2d 904, 906 (Tex. 1957)
(“[S]hould there be any doubt as to the proper construction of the deed, . . . [the
deed should] be held to convey the greatest estate permissible under its
language.”); Sharp v. Fowler, 252 S.W.2d 153, 154 (Tex. 1952) (describing as a
“sound elementary principle of conveyances” that “a deed passes whatever
interest a grantor has in the land, in the absence of [l]anguage showing an
intention to grant a less estate”).
44Moser v. U.S. Steel Corp., 676 S.W.2d 99, 102 (Tex. 1984) (emphasis
added). The mineral conveyances here were only of “oil and gas” or “oil, gas,
and other hydrocarbons,” and no other minerals are at issue here.
45 Sharp, 252 S.W.2d at 154.
46 Brown v. Lundell, 344 S.W.2d 863, 866 (Tex. 1961).
47 Sun Oil Co. v. Madeley, 626 S.W.2d 726, 731 (Tex. 1981).

17
determinable” and “informative, rather than transformative,” of the
instrument’s text. 48
In this case, the court of appeals framed the parties’ disagreement
as being about “whether ‘produced water’ is, as a matter of law, water
or if it is waste.” 49 We think it beyond cavil, and not in genuine dispute,
that produced water is, and was at the time of the conveyance,
oil-and-gas waste. While the leases do not mention or define “waste” or
“produced water,” 50 this textual silence is not unexpected. The
production of liquid waste is an inevitable and unavoidable byproduct of
oil-and-gas operations; one cannot occur without the other. Accordingly,
it goes without saying that granting the right to produce hydrocarbons
necessarily contemplates and encompasses the right to produce and
manage the resulting waste. 51

48 URI, Inc. v. Kleberg County, 543 S.W.3d 755, 767-68 (Tex. 2018).
49 676 S.W.3d 733, 738 (Tex. App.—El Paso 2023).
50 The leases vary in their discussion of COG’s pollution responsibilities,
including requiring COG to prevent contamination of “any and all surface and
subsurface water bearing strata”; prevent contamination of the surface “from
salt water or other contaminating substances flowing over or seeping onto the
same”; comply with all applicable environmental laws; and indemnify and hold
the surface owner harmless from damages related to pollution. One of the
leases also grants COG the right to construct “water wells, disposal wells,
injection wells, [and] pits” on the leased premises as COG deems necessary to
“treat” the “production,” while two others disallow “dumping of trash or fluids
of any sort, except at such disposal sites, if any, as may have been designated
by Lessor as such.” The SUCA and ROWs that were executed ancillary to the
hydrocarbon leases mention but do not define produced water.
51 Brown, 344 S.W.2d at 87-88 (lessee had the right to dispose of
wastewater generated by its oil-and-gas production subject to liability for
improperly doing so); Turner v. Big Lake Oil Co., 96 S.W.2d 221, 226 (Tex.
1936) (lessee had a duty to dispose of the saltwater byproduct of oil operations

18
 Absent a special definition, the scope of a conveyance depends on
the common and legal meaning of its language. 52 At the time of the
conveyances, and for decades before, the law was well-established:
produced water is liquid oil-and-gas waste, and operators bear the
burden, right, and duty of possessing, handling, and disposing of it. The
statutory and regulatory authority that contextualizes the conveyances
confirms the understanding and expectation that waste and
hydrocarbon production go hand in hand. 53 Then and now, applicable
laws define “oil-and-gas waste” in terms that include produced water:
• “waste that arises out of or [is] incidental to the drilling for
or producing of oil or gas, including . . . salt water, brine,
sludge, drilling mud, and other liquid, semiliquid, or solid
waste material”; 54
• “waste arising out of or incidental to drilling for or
producing of oil, gas, or geothermal resources . . . . The
term includes but is not limited to salt water, brine, sludge,
drilling mud, and other liquid or semi-liquid waste
material”; 55 and

without injuring property or polluting streams as a “necessary part of the oil

business” and could therefore construct facilities on the surface estate to do so
subject to liability in negligence for improper disposal).
52Wessely Energy Corp. v. Jennings, 736 S.W.2d 624, 626 (Tex. 1987)
(“The law[] existing at the time a contract is made becomes a part of the
contract and governs the transaction.”).
53 The statutory and regulatory treatment of produced water forms part
of the legal framework against which the parties contracted but does not alter,
or purport to alter, what the leases say.
54 TEX. NAT. RES. CODE § 91.1011; see Act of May 19, 1983, 68th Leg.,
R.S., ch. 967, § 7, sec. 91.1011, 1983 Tex. Gen. Laws 5251, 5260-61.
55 TEX. WATER CODE § 27.002(6); see Act of May 13, 1977, 65th Leg.,
R.S., ch. 870, § 1, sec. 27.002, 1977 Tex. Gen. Laws 2207, 2323.

19
 • “[m]aterials to be disposed of or reclaimed which have been
generated in connection with activities associated with the
exploration, development, and production of oil or gas or
geothermal resources . . . . The term ‘oil and gas wastes’
includes, but is not limited to, saltwater, other mineralized
water, sludge, spent drilling fluids, cuttings, waste oil,
spent completion fluids, and other liquid, semiliquid, or
solid waste material.” 56
The Legislature reaffirmed this understanding in 2013 by
comprehensively defining “fluid oil and gas waste” as referring to “waste
containing salt or other mineralized substances, brine, hydraulic
fracturing fluid, flowback water, produced water, or other fluid that
arises out of or is incidental to the drilling for or production of oil or
gas.” 57 Judicial precedent further confirms that an express grant of oil
and gas includes the right to separate, handle, and properly dispose of
saltwater incidentally produced with the leased minerals. 58 Finally, the
transaction documents support a construction of the leases as assigning

56 16 TEX. ADMIN. CODE § 3.8(a)(26).

57 TEX. NAT. RES. CODE § 122.001(2) (emphasis added).
58 See Brown v. Lundell, 344 S.W.2d 863, 866-67 (Tex. 1961) (observing
that separation and disposal of oil-and-gas wastewater are necessary and
incident to production and therefore included in the conveyance of the right to
explore for and produce oil); Turner v. Big Lake Oil Co., 96 S.W.2d 221, 226
(Tex. 1936) (identifying saltwater as “[o]ne of the by-products of oil production”
that must be disposed of as “a necessary part of the oil business” “without
injury to property or the pollution of streams”). We express no view regarding
the ownership of any other substances in what the trial court and court of
appeals called the “product stream.” 676 S.W.3d 733, 737, 741 (Tex. App.—El
Paso 2023). Nor do we express any view regarding the hydrocarbon lessors’
rights, if any, under the hydrocarbon leases.

20
to COG pollution-control responsibilities that presuppose its right to
possession, custody, control, and disposition of produced water. 59
But according to Cactus, this is all beside the point because
produced water, even if waste, is also the surface estate’s water. Its
ownership claim to produced water rests on a seductively simple
proposition: because the solvent in produced water includes molecules
of subsurface water, the solution is water such that some potentially
segregable part still belongs to the surface estate and thus can be leased
to third parties. To support this conclusion, Cactus relies on Edwards
Aquifer Authority v. Day, 60 Robinson v. Robbins Petroleum Corp., 61 and
Sun Oil Co. v. Whitaker, 62 which affirm that a landowner owns
groundwater, whether fresh or saline, under its land. Cactus asserts
that the mineral estate’s rights to produced water have always been only
usufructuary in nature—an implied right to reasonable and necessary
use—and that this is all COG has acquired under the hydrocarbon
leases.
Cactus is correct in what it says about our groundwater cases, but
that precedent is simply inapplicable to the question before us: whether
incidentally produced liquid waste was included in the hydrocarbon
conveyances. Edwards Aquifer, Robinson, and Sun Oil do not address
waste byproducts of oil-and-gas production. Each case focuses on
ownership of groundwater in situ or extracted through water wells for

59 See supra note 50.

60 369 S.W.3d 814, 832 (Tex. 2012).
61 501 S.W.2d 865, 867-68 (Tex. 1973).
62 483 S.W.2d 808, 811 (Tex. 1972).

21
use as water. But as we explained in Guffey v. Stroud, “The grant of the
oil carried with it a grant of the way, surface, soil, water, gas, and the
like essential to the enjoyment of the actual grant of the oil,” including
the right to consume or waste the same. 63 As discussed above, the
common and ordinary meaning of a grant of hydrocarbons includes the
water incidentally produced with those substances at the mineral
lessee’s expense, which the lessee is required to properly dispose of free
from third-party interference. 64
Despite its colloquial appellation, produced water is not water.
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. Statutes and regulations treat water and
produced water differently and distinctly because they are distinct and
different. Produced water is a hazardous, even toxic, mixture produced
with hydrocarbons and separated from them after extraction at the
wellbore. Unlike water, produced water is subject to laws distinctly
focused on oil-and-gas production and environmental safety concerns.

63 16 S.W.2d 527, 528 (Tex. [Comm’n Op.] 1929).

64 The record in this case shows that any interference with the disposal
obligation risks shutting down hydrocarbon production as well as substantial
liability for the hydrocarbon lessee.

22
Water is something that must be protected from oil-and-gas waste; 65 the
two are not interchangeable. 66
Although Cactus acknowledges COG’s right to possess and
dispose of produced water, it views these rights as usufructuary in
nature. Usufructuary rights allow someone to use and enjoy another’s
property without owning it, if the property is not damaged or
diminished. 67 The right to destroy, dispose of, or consume property is
generally inconsistent with a merely usufructuary right. 68 Instead, the
right to the capital value of property, including by means of

65 See TEX. NAT. RES. CODE § 91.101(a) (requiring the Railroad

Commission to adopt and enforce rules to “prevent pollution of surface water
or subsurface water,” including from “oil and gas waste”); 16 TEX. ADMIN. CODE
§ 3.8(b) (“No person conducting activities subject to regulation by the
commission may cause or allow pollution of surface or subsurface water in the
state.”); see also 16 TEX. ADMIN. CODE §§ 3.8(a)(26), (d)(1), (d)(5)(B), .13(a)(1)
(water protection).
66 As several amici point out, many things are composed mostly or
largely of water but are not commonly understood to be water. See, e.g., Brief
of Amicus Curiae Permian Basin Petroleum Association at 8-9 (listing several
substances with substantial water components that are not commonly
considered to be water: blood plasma (90% water), vodka (60%), whiskey (60%),
and concrete (up to 23%)).
67 Usufruct, BLACK’S LAW DICTIONARY at 1864 (12th ed. 2024) (“A right
for a certain period to use and enjoy the fruits of another’s property without
damaging or diminishing it . . . .”).
68 Cf. Acker v. Guinn, 464 S.W.2d 348, 352 (Tex. 1971) (noting that
destruction or substantial impairment is not ordinarily contemplated as
reasonable use of the surface for mineral production). The right to destroy
one’s own property has ancient origins. See Lior Jacob Strahilevitz, The Right
to Destroy, 114 YALE L.J. 781, 787 (2005) (“Under Roman law, the ability to
destroy one’s own property was considered an important right of ownership. A
Roman’s property rights consisted of the jus utendi fruendi abutendi: the rights
to use the principal (i.e., the property), to use the income generated by the
property, or to completely consume and destroy the property.”).

23
“consumption, waste, or destruction,” is inherent in property
ownership. 69 When the hydrocarbons were leased, conveyance of the
specifically named minerals included transferring the entrained water
molecules to the lessee along with the right to dispose of them in
accordance with the law. 70 Although industry methods are evolving to
better manage waste byproducts, that does not change the original scope
of the conveyance, which must be interpreted as of the transfer of rights,
not through a modern lens. 71
Furthermore, if either party genuinely believed otherwise, the
leases or other transaction documents would likely include provisions
facilitating the transfer of produced water from the hydrocarbon lessee

69 Evanston Ins. Co. v. Legacy of Life, Inc., 370 S.W.3d 377, 383
(Tex. 2012) (describing the bundle of various rights associated with property
ownership).
70 Cf. Bowden v. Phillips Petrol. Co., 247 S.W.3d 690, 706 (Tex. 2008)
(“[H]aving bought and paid for such gas [the lessee] owned the same, including
all of its constituent elements, and therefore had the lawful right to make such
use of it as it might deem proper.” (internal quotation marks and citation
omitted)); Guffey v. Stroud, 16 S.W.2d 527, 528 (Tex. [Comm’n Op.] 1929)
(stating that “[t]he grant of the oil carried with it the grant of the . . . water
. . . essential to the enjoyment of the actual grant of the oil” and indicating, by
rejecting Shylock’s rule from The Merchant of Venice, that such a grant is not
merely usufructuary such that the lessee may consume or waste incidentally
produced water: “The bond for a pound of flesh, if valid, did carry with it by
necessary implication of law as much Christian blood as was necessary to be
shed in the operation.”).
71 Bowden, 247 S.W.3d at 698 (“Although the dispute in this lawsuit
arose in modern times, we interpret the obligations and rights of the parties
according to their expressed intent when they entered the agreement.”); id. at
706 (observing that “sophisticated parties in today’s market might enter a
contract that distinguishes the forms and components of natural gas” but the
gas royalty agreements at issue “were entered long before extraction and sale
of natural gas liquids was commonplace”).

24
to the surface owner. Produced water is a regulated substance that
requires appropriate permits, proper handling, and disposal, including
essential infrastructure. The absence of any provisions for transferring
possession and custody of produced water to the surface owner confirms
the conclusion that the leases conveyed exclusive possession, custody,
control, and disposition of produced water as part of the hydrocarbon
production rights.
Other lease provisions bear this out. For example, the
hydrocarbon leases give the lessors the option to take delivery of gas in
kind but only if the lessors provide certain equipment or construct
essential facilities, including securing necessary permits. 72 There are
no similar provisions in the leases, SUCA, or ROWs that contemplate
the transfer of other hazardous substances from the producing party, let
alone produced water. 73 The leases, when construed as a whole and in
connection with the other transaction documents, do not reflect an

72 The 2005 and 2010 Collier leases state that, if the lessor elects to take
or have its share of royalty gas “in kind,” “such gas shall be metered through a
meter furnished by Lessor” and “Lessor also agrees to secure any authority or
permit required from any governmental agency having jurisdiction [and] make
all necessary reports to any such agency.” The 2014 Collier lease similarly
states: “Whenever Lessor takes its royalty share of oil or gas in kind, it shall
construct or cause to be constructed, such facilities as may be necessary in
connection with such taking in kind at or near Lessee’s facilities, at Lessor’s
sole cost and expense.” The 2010 Balmorhea lease conditions the lessor’s
receipt of gas in kind on the lessor’s bearing the cost of any facilities required
to take its royalty share of gas in kind and providing the metering equipment.
73See Ft. Worth Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d 831,
840 (Tex. 2000) (“[I]nstruments pertaining to the same transaction may be
read together to ascertain the parties’ intent, even if the parties executed the
instruments at different times and the instruments do not expressly refer to
each other.” (footnotes omitted)).

25
understanding or intent that produced water is anything other than a
waste byproduct necessarily included in the hydrocarbon conveyance.
COG’s rights to those water molecules as a constituent of produced
water is as an owner, not a usufruct.
In asserting the contrary, Cactus points out that several of the
hydrocarbon leases explicitly restrict COG’s water usage and from this
posits that the leases are clear that no water produced from on or under
the land could have been included in the conveyance. But the express
limitations on water use only further emphasize the distinction between
water molecules entrained in hydrocarbon production and the common
understanding of water. Under the water-use restrictions, COG could
not “use” the entrained water to produce hydrocarbons without the
lessor’s written consent under one lease or at all under two others. But
the hydrocarbons could not be produced without entrained water
molecules. If produced water were water, as Cactus says, the leases’
express water-use constraints would be irreconcilable with a supposed
right to use that water to produce the conveyed minerals. 74 The
water-use limitations would frustrate, not facilitate, the production of
minerals.
Cactus’s best authority, Robinson v. Robbins Petroleum Corp., 75
is distinguishable in critically important ways. In that case, a failed oil
well was converted into a water well from which the mineral lessee

74See, e.g., Bowden, 247 S.W.3d at 701 (“[T]here is no implied covenant

when the oil and gas lease expressly addresses the subject matter of an
asserted implied covenant.”).
75 501 S.W.2d 865 (Tex. 1973).

26
extracted saltwater for flooding operations on other tracts. 76 The
mineral lease had a provision allowing free use of water, but only for
on-lease operations. 77 The surface owner claimed ownership of the
saltwater because “water is part of the surface estate according to the
ordinary and normal use of the words conveying or reserving
minerals.” 78 But the mineral lessee claimed ownership of the solution
based on the solute—salt—being a mineral, which distinguished it from
freshwater cases like Sun Oil v. Whitaker. 79
In holding that saltwater is not a mineral even though it contains
a dissolved mineral, we explained: “We are not attracted to a rule that
would classify water according to a mineral contained in solution. Water
is never absolutely pure unless it is treated in a laboratory. It is the
water with which these parties are concerned and not the dissolved
salt.” 80 We then offered a hypothetical that Cactus finds dispositive of
its argument that produced water is the property of the surface estate
regardless of its constituents:
If a mineral in solution or suspension were of such value or
character as to justify production of the water for the
extraction and use of the mineral content, we would have a
different case. The substance extracted might well be the
property of the mineral owner, and he might be entitled to
use the water for purposes of production of the mineral. In
either case the water itself is an incident of surface
ownership in the absence of specific conveyancing language

76 Id. at 866.
77 Id.
78 Id. at 867.
79 Id.
80 Id.

27
 to the contrary. And in our case the saline content has no
consequence upon ownership. 81

Though a hypothetical is not a holding, there is a superficial appeal to

Cactus’s argument. Robinson, however, cannot bear the weight Cactus
supposes.
Robinson is a water case, not a produced water or waste case. The
saltwater produced there was not part and parcel of oil-and-gas
production; 82 it was produced from a water well. Due to its potential
contamination from chemicals and hydrocarbons, produced water is
subject to a specialized regulatory scheme that includes environmental
and energy-law considerations. Under that scheme, produced water, as
a waste byproduct, is subject to unique disposal, treatment, and reuse
regulations in adherence to state oil-and-gas and environmental
standards. This distinction in both the nature of the resource and the
regulatory oversight, which provide context for our interpretation of the
conveyance here, renders the holding in Robinson inapplicable to the
legal complexities surrounding produced water.

* * *
“Although mineral leases are contracts, they are subject to legal
and regulatory restrictions,” 83 and parties are presumed to contract in

81 Id. (citations omitted).

82 Saltwater or brine can, of course, be oil-and-gas waste when it arises
from or is incidental to oil-and-gas production. See supra notes 54–57.
83Endeavor Energy Res., L.P. v. Discovery Operating, Inc., 554 S.W.3d
586, 595 (Tex. 2018).

28
reference to the law. 84 We hold that a deed or lease using typical
language to convey oil-and-gas rights, though not expressly addressing
produced water, includes that substance as part of the conveyance
whether the parties knew of its prospective value or not. That being so,
if the surface owner actually wants to retain ownership of constituent
water incidentally and necessarily produced with hydrocarbons, the
reservation or exception from the mineral conveyance must be express
and cannot be implied. The conveyances here include no such
reservation or exception. Accordingly, we affirm the court of appeals’
judgment that COG, not Cactus, has the right to possession, custody,
control, and disposition of the constituent water in the liquid waste from
its hydrocarbon production.

John P. Devine
Justice

OPINION DELIVERED: June 27, 2025

84 See XOG Operating, LLC v. Chesapeake Expl. Ltd. P’ship, 554 S.W.3d
607, 612 (Tex. 2018).

29
 Supreme Court of Texas
══════════
No. 23-0676
══════════

Cactus Water Services, LLC,

Petitioner,

v.

COG Operating, LLC,

Respondent

═══════════════════════════════════════
On Petition for Review from the
Court of Appeals for the Eighth District of Texas
═══════════════════════════════════════

JUSTICE BUSBY, joined by Justice Lehrmann and Justice Sullivan,

concurring.

When a landowner has leased its “oil and gas” or “oil, gas, and
other hydrocarbons,” and those leases limit the lessee’s right to use
water, who owns groundwater that is mixed with oil when it is produced:
the landowner or the lessee? I agree with the Court that “[u]nless
expressly severed, subsurface water remains part of the surface estate
subject to the mineral [lessee’s] implied right to use the surface—
including water—as reasonably necessary to produce and remove the
minerals.” Ante at 16. We have held for more than a century that the
surface owner owns groundwater, which includes the percolating,
mineral-laden native water found in many subsurface strata.1 The
Water Code recognizes this ownership, TEX. WATER CODE §§ 36.001(5),
36.002(a); see also 30 TEX. ADMIN. CODE § 297.1(22), and our
Constitution protects it against uncompensated takings by statute, rule,
or other governmental action. Edwards Aquifer Auth. v. Day, 369
S.W.3d 814, 823-838 (Tex. 2012).2
But absent language in the lease expressly addressing the matter,
does the surface owner retain ownership of groundwater produced along
with hydrocarbons after the lessee has separated out the hydrocarbons?

1 See, e.g., Coyote Lake Ranch, LLC v. City of Lubbock, 498 S.W.3d 53,
63 & n.43 (Tex. 2016); Moser v. U.S. Steel Corp., 676 S.W.2d 99, 101-02 (Tex.
1984); City of Sherman v. Pub. Util. Comm’n of Tex., 643 S.W.2d 681, 686 (Tex.
1983); Robinson v. Robbins Petroleum Co., 501 S.W.2d 865, 867 (Tex. 1973)
(holding that although briny subsurface water might be produced “for the
extraction and use of the mineral content” by a mineral lessee, the “water itself
is an incident of surface ownership in the absence of specific conveyancing
language to the contrary”); Sun Oil Co. v. Whitaker, 483 S.W.2d 808, 811 (Tex.
1972) (“Water, unsevered expressly by conveyance or reservation, has been
held to be a part of the surface estate.”); City of Corpus Christi v. City of
Pleasanton, 276 S.W.2d 798, 802 (Tex. 1955); Texas Co. v. Burkett, 296 S.W.
273, 278 (Tex. 1927) (“[O]rdinary percolating waters . . . are the exclusive
property of the owner of the surface of the soil.”); Houston & Tex. Cent. R.R. v.
East, 81 S.W. 279, 281 (Tex. 1904) (discussing cases applying rule that “the
owner of land is the absolute owner of the soil and of percolating water, which
is a part of, and not different from, the soil”).
2 These statutes and regulations do not alter common-law property
rights. See, e.g., Amarillo Oil Co. v. Energy–Agri Prods., Inc., 794 S.W.2d 20,
26 (Tex. 1990). Such rights form the background against which courts evaluate
any allegation that government action amounts to an unlawful taking. See
Cedar Point Nursery v. Hassid, 594 U.S. 139, 160, 161 (2021); Tex. Dep’t of
Transp. v. Self, 690 S.W.3d 12, 27 (Tex. 2024). As we have recognized,
government regulations can impose certain obligations or limitations on a
property owner without going so far as to require compensation for a taking.
See Day, 369 S.W.3d at 838-843.

2
Or was the burden of the produced water’s disposal—and the
consumption of any capital value—conveyed to the lessee as part of its
lease of hydrocarbons? In answering these questions, it is not helpful to
focus—as the court of appeals majority did—on whether fluids produced
along with hydrocarbons are “water or . . . waste.” 676 S.W.3d 733, 738
(Tex. App.—El Paso 2023). The answer, of course, is both: the fluids
include groundwater originally belonging to the landowners, and they
are also classified by statute and rule as oil-and-gas waste, which the
lessee has a duty to handle and dispose of safely. Ante at 16, 19, 21.
Instead, our focus must be on whether the landowners leased this
groundwater to the lessee.
I agree with the Court that “incidentally produced” subsurface
water “was included in the hydrocarbon conveyances.” Ante at 21. We
have long recognized that a “grant of the oil carried with it a grant of
the . . . water . . . essential to the enjoyment of the actual grant of the
oil.” Guffey v. Stroud, 16 S.W.2d 527, 528 (Tex. [Comm’n Op.] 1929). As
the Court explains, “the common and ordinary meaning of a grant of
hydrocarbons includes the water incidentally produced with those
substances at the mineral lessee’s expense, which the lessee is required
to properly dispose of free from third-party interference.” Ante at 22.3

3 I note that in the surface-water context, some Texas courts have

adopted the analogous doctrine of “developed water.” This doctrine grants a
permittee that diverts water—at its own expense—the exclusive right to
control that water and apply it to permissible uses, protecting that exclusive
right against third-party interference. See, e.g., Guelker v. Hidalgo County
Water Improvement Dist. No. 6, 269 S.W.2d 551, 553 (Tex. App.—San Antonio
1954, writ ref’d n.r.e.); Harrell v. F.H. Vahlsing, Inc., 248 S.W.2d 762, 768-770
(Tex. App.—San Antonio 1952, writ ref’d n.r.e.); see also Edmond R. McCarthy,

3
 Because I agree with the Court on these two central points, I join
its opinion. That opinion is a narrow one, and I write separately to make
clear what we do not decide today.
First, the Court’s holding is simply a default rule: “an oil-and-gas
conveyance that does not expressly address the matter” conveys to the
hydrocarbon lessee “possession and control over the disposition of
liquid-waste byproduct,” including “constituent water.” Ante at 2, 3.
The landowners and the hydrocarbon lessee “are free to strike a different
deal” regarding ownership of groundwater produced with and then
separated from hydrocarbons. Id. at 3. Importantly, none of the
statutes or regulations the Court identifies prevent the parties from
doing so, nor do they purport to divest the landowners of their
groundwater ownership by operation of law.4

Jr., Mixing Oil and Gas with Texas Water Law, 44 TEX. TECH L. REV. 883,
889-890 (2012); Frank R. Booth, Ownership of Developed Water: A Property
Right Threatened, 17 ST. MARY’S L.J. 1181, 1196 (1986).
4 The Court observes that after these leases were made, the Legislature
enacted and later amended Section 122.002 of the Natural Resources Code to
create default rules for ownership of fluid oil-and-gas waste when a lease,
contract, or other legally binding document does not provide otherwise. Fluid
oil-and-gas waste is defined as “waste containing salt or other mineralized
substances, brine, hydraulic fracturing fluid, flowback water, produced water,
or other fluid that arises out of . . . production of oil or gas.” TEX. NAT. RES.
CODE § 122.001(2). Thus, the fluid addressed by the statute arises once the oil
or gas is separated from it by the lessee or its agent. And the statute provides
that ownership of this fluid changes hands not at this point of separation, but
(absent contrary agreement) when it is used by or transferred to a person who
takes possession of it for the purpose of treating it for a subsequent beneficial
use. Id. § 122.002(1). Accordingly, the statute would not affect any agreement
between a landowner and its hydrocarbon lessee regarding the landowner’s
continued ownership of the groundwater component of fluid oil-and-gas waste.

4
 Of course, parties who strike such a deal would be well advised to
agree upon a practical method for determining how much of the
liquid-waste byproduct of production the landowner continues to own.5
But we have been directed to no authority that would prevent a
landowner who retains ownership of the water from obtaining any
permits necessary to transport, treat, and sell or otherwise dispose of it,
or from contracting with the lessee or a permitted third party to do so
on its behalf.
Second, the Court does not break any new ground regarding
ownership of unleased minerals or other substances that may be
produced along with leased minerals. Ante at 3 n.3, 20 n.58. We have
explained that the general intent of parties executing a lease of “all
minerals” or “oil, gas, and other minerals” is to “convey all valuable
[mineral] substances to the mineral owner”—that is, “all substances
within the ordinary and natural meaning of th[e] word” mineral. Moser
v. U.S. Steel Corp., 676 S.W.2d 99, 102 (Tex. 1984). But as the Court
rightly points out, the conveyances here were only of “oil and gas” or “oil,
gas, and other hydrocarbons.” Ante at 17 n.44. Accordingly, no
non-hydrocarbon minerals were leased. See, e.g., Myers-Woodward,
LLC v. Underground Servs. Markham, LLC, ___ S.W.3d ___, 2025 WL
1415892, at *6 (Tex. May 16, 2025) (holding lease of salt did not convey
“ownership of non-salt substances or spaces adjacent to the salt”).
Applying such leases, we have held that production of unleased minerals

5See ante at 12 n.29, 15 n.36; cf. Humble Oil & Ref. Co. v. West, 508
S.W.2d 812, 818-19 (Tex. 1974) (discussing lessee’s burden when it injects
non-native substances into stratum).

5
along with leased minerals does not transfer ownership of the unleased
minerals to the lessee. Amarillo Oil Co. v. Energy–Agri Prods., Inc., 794
S.W.2d 20, 25-27 & n.6 (Tex. 1990) (holding lease of only oil and
casinghead gas did not convey ownership of other gas or liquids that
became mixed with product stream during production); Guffey, 16
S.W.2d at 528-29 (holding that, where oil lessee drilled a well that
produced gas and the same land was subject to a gas lease with a
different entity, the oil lessee was not entitled to the gas produced from
that well); see MAURICE H. MERRILL, THE LAW RELATING TO COVENANTS
IMPLIED IN OIL AND GAS LEASES 197 (2d ed. 1940).6
Third, having held that the leases here include groundwater
produced with hydrocarbons, the Court does not go on to address the
mineral lessee’s obligations to the landowners with respect to this leased
groundwater. Ante at 20 n.58. And rightly so, as no claims between the
landowners and lessee are presently before us. Id. at 12-13.
Thus, it is unclear whether the net financial result for those
parties of holding that produced groundwater is leased will be much
different from holding that it is not. For example, will the lessee owe
royalties on the produced groundwater it leased? Cf. Sun Oil Co. (Del.)
v. Madeley, 626 S.W.2d 726, 728 n.1 (Tex. 1981) (determining applicable
royalty for unnamed substance). If not, how should the parties account
for any profit or loss realized from beneficial reuse or disposal of the
water? Cf. French v. Occidental Permian Ltd., 440 S.W.3d 1, 8-10 (Tex.

6 The Court also does not adopt the contrary theory advanced by COG
and the court of appeals majority—that the lessee owns the entire “product
stream.” Ante at 20 n.58.

6
2014). And does the lessee owe any implied covenants with respect to
management of the water given that the leases do not expressly address
the issue? See, e.g., Cabot Corp. v. Brown, 754 S.W.2d 104, 106 (Tex.
1987). These questions and more remain to be answered in future cases
as a result of the Court’s holding today. Our opinion should not be read
to settle them.
With these observations, I join the opinion of the Court.

J. Brett Busby
Justice

OPINION FILED: June 27, 2025