Produced Groundwater as a Leased Hydrocarbon Incident: Cactus Water Services, LLC v. COG Operating, LLC (Tex. 2025)

I. Introduction

The concurring opinion by Justice Busby in Cactus Water Services, LLC v. COG Operating, LLC, No. 23‑0676 (Tex. June 27, 2025), addresses a rapidly emerging and economically significant question in Texas oil-and-gas law:

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?

The dispute, in broad terms, pits:

Surface owners (and Cactus Water Services, their contractor)—claiming that groundwater remains part of the surface estate even after it is produced with oil and gas; against
The mineral lessee (COG Operating, LLC)—asserting that produced water is oil-and-gas waste under Texas law and that control over it follows the mineral lease and the operator’s statutory obligations.

The Texas Supreme Court’s majority opinion (which Justice Busby joins) establishes a clear default rule:

Groundwater is owned by the surface estate unless expressly severed.
But when that groundwater is incidentally produced with hydrocarbons under an oil-and-gas lease that does not say otherwise, the lease is construed to include the produced water as part of the hydrocarbon conveyance, giving the lessee possession and control over its disposition.

Justice Busby’s concurring opinion has two main functions:

To situate this default rule within a century of Texas groundwater and mineral jurisprudence, emphasizing continuity rather than disruption.
To delimit what the Court is not deciding—leaving significant issues about royalties, economic allocation, and implied covenants for future litigation.

This commentary explains the holding as reflected in the concurrence, analyzes the precedents and statutes relied upon, clarifies the legal reasoning, and explores likely impacts on oil-and-gas and water law in Texas.

II. Summary of the Opinion

A. The Core Holding (as reflected in the concurrence)

Justice Busby agrees with the Court’s two central propositions:

Groundwater ownership in place. Unless expressly severed, subsurface water (groundwater) is 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.
Default rule for produced water under a hydrocarbon lease. Where an oil-and-gas conveyance does not expressly address produced water, incidentally produced subsurface water is included in the hydrocarbon conveyance, and the lessee acquires possession and control over the disposition of the liquid-waste byproduct, including its constituent groundwater.

Put simply:

The groundwater in place belongs to the surface owner.
But when that groundwater is brought to the surface as a byproduct of oil-and-gas production, the default reading of an “oil and gas” or “oil, gas, and other hydrocarbons” lease is that the parties have leased to the mineral lessee the right to control and dispose of that produced water, at the lessee’s expense.

B. What the Court’s Opinion Does Not Decide

Justice Busby emphasizes three important limitations:

This is only a default rule—parties can contract around it. An oil-and-gas lease that is silent conveys control over produced water as part of the hydrocarbon bundle. But landowners and lessees are free to “strike a different deal”, allocating ownership, control, or economic benefits of produced water in some other way.
No change to the law on unleased minerals or non-hydrocarbon substances. The Court is not adopting a broad “product stream” theory under which the lessee owns everything that flows from the well. The holding is confined to water incidentally produced with leased hydrocarbons. Ownership rules for unrelated, unleased minerals produced in the same stream remain governed by Moser, Amarillo Oil, Guffey, and related authorities.
No ruling on downstream economic allocation (royalties, profits, implied covenants). The decision does not determine:
- Whether royalties are owed on produced water,
- How to allocate profits or losses from beneficial reuse or sale of produced water, or
- What implied covenants (if any) apply to the lessee’s management of leased produced water.
Those issues will have to be resolved in later cases.

III. Detailed Analysis

A. Precedents and Authorities Cited

1. Groundwater as part of the surface estate

Justice Busby grounds the analysis in a long line of cases holding that percolating groundwater belongs to the surface estate unless severed:

Houston & Tex. Cent. R.R. v. East, 81 S.W. 279 (Tex. 1904). Recognized the 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.” This foundational case established groundwater as part of the fee simple, rather than as a separate public resource.
Texas Co. v. Burkett, 296 S.W. 273 (Tex. 1927). Confirmed that “ordinary percolating waters” are the exclusive property of the surface owner, who may contract to supply water to an oil company. This decision underpins the view that absent severance, the right to groundwater is a private property right attached to the surface.
City of Corpus Christi v. City of Pleasanton, 276 S.W.2d 798 (Tex. 1955); City of Sherman v. PUC, 643 S.W.2d 681 (Tex. 1983). Both cases reaffirmed that groundwater is owned by the landowner, and addressed issues of municipal water supply and regulation premised on that private ownership.
Sun Oil Co. v. Whitaker, 483 S.W.2d 808 (Tex. 1972). Stated that “water, unsevered expressly by conveyance or reservation, has been held to be a part of the surface estate.” The case is also important for recognizing the mineral lessee’s implied right to use water reasonably necessary to develop hydrocarbons, despite that water being part of the surface estate.
Robinson v. Robbins Petroleum Co., 501 S.W.2d 865 (Tex. 1973). Involved briny subsurface water produced for its mineral content. The Court held that such water remains an incident of surface ownership “in the absence of specific conveyancing language to the contrary,” even when the mineral lessee produces it to extract minerals. This case is particularly close to the issue in Cactus Water because it deals with mineral-laden native water produced by a lessee.
Moser v. U.S. Steel Corp., 676 S.W.2d 99 (Tex. 1984). Mostly known for its “mineral” vs. “surface” classification test, but the Court also reaffirmed that groundwater is part of the surface estate, not a “mineral” subject to a standard oil-and-gas-type mineral reservation.
Coyote Lake Ranch, LLC v. City of Lubbock, 498 S.W.3d 53 (Tex. 2016). Extended the accommodation doctrine, traditionally applied to mineral estates, to groundwater estates. In doing so, the Court again treated groundwater as a discrete property interest and confirmed surface-owner rights subject to implied use rights of the dominant estate.

These authorities collectively support Busby’s premise:

“[T]he surface owner owns groundwater, which includes the percolating, mineral-laden native water found in many subsurface strata.”

2. Constitutional protection and the Water Code

Busby then anchors groundwater ownership in modern statutory and constitutional law:

Texas Water Code §§ 36.001(5), 36.002(a). Section 36.002(a) explicitly recognizes that landowners have “property rights in groundwater.” The statutes do not create ownership, but codify the common-law baseline.
30 Tex. Admin. Code § 297.1(22). An administrative definition that aligns with the recognition of groundwater as a property interest of landowners.
Edwards Aquifer Auth. v. Day, 369 S.W.3d 814 (Tex. 2012). The Court held that landowners own groundwater in place beneath their land, and that regulation of groundwater pumping is subject to the Texas Constitution’s takings clause. Busby cites Day at length (823–838) to reaffirm that:
- Groundwater ownership is protected against uncompensated takings by statutes, rules, or other governmental actions; but
- Reasonable regulation can be imposed without necessarily constituting a compensable taking.
Amarillo Oil Co. v. Energy‑Agri Prods., Inc., 794 S.W.2d 20, 26 (Tex. 1990). Cited for the proposition that statutes and regulations do not alter underlying common-law property rights; instead, they operate against that backdrop and can give rise to takings claims if they go too far.
Cedar Point Nursery v. Hassid, 594 U.S. 139 (2021); Tex. Dep’t of Transp. v. Self, 690 S.W.3d 12 (Tex. 2024). These cases are cited to show how courts evaluate whether a regulation amounts to a taking, again reinforcing that private property baselines are central.

The point of this line of authority is to emphasize that the Court’s holding in Cactus Water is not a legislative or regulatory reallocation of groundwater rights, but a contractual interpretation about what the surface owner already conveyed via the oil-and-gas lease.

3. Produced water and historical treatment of incidentally produced substances

Busby acknowledges the Court’s reliance on Guffey v. Stroud, 16 S.W.2d 527 (Tex. Comm’n App. 1929), a key precedent:

Guffey and associated doctrine. The Court there 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.” That case involved overlapping oil and gas leases and addressed entitlement to gas produced from a well drilled under an oil lease.

The broader principle for Cactus Water is that the grant of a primary mineral (here oil) can impliedly carry certain incidental substances or rights necessary for exploiting the grant. Busby and the Court extrapolate that:
“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.”

The concurrence also catalogs other cases on unleased substances produced with leased minerals:

Amarillo Oil Co. v. Energy‑Agri Prods., Inc., 794 S.W.2d 20 (Tex. 1990). A lease of “oil and casinghead gas” did not convey ownership of other gas or liquids that became commingled in the production stream. The lessee was not entitled to unrelated, unleased substances just because they flowed in the same pipeline.
Guffey v. Stroud (second aspect). The Court held that where one lessee held an oil lease and another held a gas lease, the oil lessee was not entitled to gas produced from its well; gas belonged to the gas lessee. This underscores that leases are limited by their express grants.
Moser v. U.S. Steel (again). Where a deed conveys “all minerals,” the general intent is to convey “all valuable mineral substances,” subject to the Court’s classification framework. But where, as in Cactus Water, the grant is only of “oil and gas” or “oil, gas, and other hydrocarbons,” the conveyance does not include non-hydrocarbon minerals.
Myers‑Woodward, LLC v. Underground Servs. Markham, LLC, ___ S.W.3d ___, 2025 WL 1415892 (Tex. May 16, 2025). Recently held that a lease of salt did not convey “ownership of non-salt substances or spaces adjacent to the salt.” Busby uses this to reinforce the rule that substance-specific leases remain substance-specific; the lessee acquires only what is explicitly granted plus necessary incidents, not every substance encountered.

This body of law is crucial because it allows Busby to distinguish two things:

Groundwater is ordinarily part of the surface estate.
But produced groundwater, when it is an incidental byproduct of producing leased hydrocarbons, can be treated as an incident of the hydrocarbon grant, not as an unleased co-mineral like helium or sulfur would be.

4. Statutory framework on oil-and-gas waste and beneficial reuse

The concurring opinion also addresses Texas Natural Resources Code § 122.002, a relatively recent statute on “fluid oil and gas waste”:

Definition of fluid oil-and-gas waste. “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.” (§ 122.001(2)).
Ownership transition under § 122.002. Absent contrary agreement, ownership of this fluid changes 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. Key timing: the statute addresses ownership after separation from oil and gas and after transfer for beneficial use—not the allocational step between landowner and lessee at the wellhead.

Busby’s critical point is:

“[T]he 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.”

Thus, § 122.002:

Creates default rules for ownership of fluid waste downstream in the beneficial-reuse chain; but
Does not override or define, as a matter of law, whether the surface owner or mineral lessee owns the water at the moment it is produced and separated from hydrocarbons.

5. “Developed water” doctrine in surface-water law

Busby cites a parallel doctrine from surface-water law: “developed water.” In cases like:

Guelker v. Hidalgo Cty. Water Improvement Dist. No. 6, 269 S.W.2d 551 (Tex. App.—San Antonio 1954, writ ref’d n.r.e.);
Harrell v. F.H. Vahlsing, Inc., 248 S.W.2d 762 (Tex. App.—San Antonio 1952, writ ref’d n.r.e.);

courts recognized that a person who, at its own expense, diverts, captures, or develops water can acquire a protected, exclusive right to control and use that water—even vis-à-vis third parties.

By analogy, the hydrocarbon lessee in Cactus Water:

Undertakes the cost and operational burden of drilling and producing,
Is legally obligated to handle and dispose of oil-and-gas waste safely, and
Therefore acquires, by default and absent contrary contract, possession and control over produced water as a form of “developed” or produced waste-stream fluid.

6. Open questions: royalties, profits, and implied covenants

Busby explicitly identifies unresolved questions that the Court’s opinion leaves for another day:

Royalties on produced water? He cites Sun Oil Co. (Del.) v. Madeley, 626 S.W.2d 726 (Tex. 1981), where the Court had to determine the appropriate royalty for an unnamed substance. This suggests that future cases might ask:
- If produced water begins to have positive value (for recycling, reuse, or sale), does it become a “produced substance” subject to royalty?
- Or is it simply a cost item associated with oil-and-gas production?
Profit and loss allocation. Citing French v. Occidental Permian Ltd., 440 S.W.3d 1 (Tex. 2014), Busby notes that Texas law has dealt before with allocation issues where “wastes” or injected substances later acquire value (there, CO₂ used in tertiary recovery). Similar conflicts could arise over:
- Who keeps revenue from sale of treated produced water?
- How should costs and risks of treatment be shared?
Implied covenants regarding water management. Citing Cabot Corp. v. Brown, 754 S.W.2d 104 (Tex. 1987), Busby gestures toward the possibility of implied duties:
- Could there be an implied covenant to manage water in a way that reasonably protects the lessor’s economic interests?
- Is there a duty to explore economically beneficial reuse rather than simply disposing of the water?

These citations underline that, although the Court has resolved who controls produced water as a matter of default title, it has not resolved the economic incidents attached to that control.

B. Legal Reasoning: From Groundwater Ownership to Produced Water Control

1. Step one: Surface owner owns groundwater in place

Busby begins from an uncontested baseline: under Texas law, the surface owner owns groundwater in place unless it has been expressly severed. That includes:

Percolating groundwater;
Mineral-laden water in subsurface strata; and
Brackish or briny water that might be produced or used in oil-and-gas operations.

The surface owner’s title to water is recognized by:

Common-law cases like East, Burkett, Whitaker, and Robinson;
The Water Code (especially § 36.002(a)); and
Constitutional takings jurisprudence (Day).

This is important because it means the Court is not saying that groundwater becomes part of the mineral estate by operation of law. Instead, any transfer to the mineral lessee must come from:

Express language in a lease or deed, or
Implied incidents of a grant of hydrocarbons, grounded in longstanding oil-and-gas doctrine.

2. Step two: Distinguishing in-place ownership from produced byproduct

The hard question is not “who owns groundwater in place?” but:

“[D]oes the surface owner retain ownership of groundwater produced along with hydrocarbons after the lessee has separated out the hydrocarbons? 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?”

To answer this, Busby insists the Court must avoid the unhelpful dichotomy posed by the court of appeals—“water or waste.” In reality, the produced fluid is:

Water, as a matter of property law (originally owned by the surface owner), and
Oil-and-gas waste, as a matter of regulatory and operational law, subject to Railroad Commission regulation and statutory duties on the operator.

Those dual characterizations are not mutually exclusive. The operative question is: What did the landowner convey by leasing “oil and gas” or “oil, gas, and other hydrocarbons”?

3. Step three: Interpreting the hydrocarbon grant

The Court, as described by Busby, concludes that incidentally produced water is included in the hydrocarbon conveyance. The reasoning tracks familiar oil-and-gas lease principles:

Common and ordinary meaning of the grant. When parties grant an “oil and gas lease” or a lease of “oil, gas, and other hydrocarbons,” they contemplate that:
- Any hydrocarbon production will bring up substantial volumes of water;
- The lessee will bear the duty and cost of handling, treating, and disposing of that water; and
- The lessee will need practical, exclusive control of the produced stream to comply with regulatory obligations and protect its operations from third-party interference.
Under Guffey and related doctrine, that bundle of expectations implies that the hydrocarbon grant includes the incidentally produced water as a necessary incident.
Implied rights to reasonably necessary uses and incidents. Just as a mineral lessee acquires an implied right to use as much of the surface as is reasonably necessary to develop the minerals, the lessee must also have:
- Possession and control of the produced waste stream,
- Authority to separate, store, and dispose of produced water, and
- Protection against third parties interfering with its handling of waste.
These are not new implied rights; they reflect the practical realities of oilfield operations long recognized by Texas law.
Alignment with developed water principles and regulatory duties. The lessee develops the well and produces the water at its own expense. State law treats the resulting fluid as oil-and-gas waste that the lessee must responsibly manage. Granting the lessee default control over that produced water gives legal effect to those obligations, analogous to the “developed water” doctrine in surface-water law.

Thus, while title to groundwater in place remains with the surface owner, control over groundwater once produced as a byproduct passes by default to the lessee as an implied incident of the hydrocarbon lease.

4. Step four: Emphasizing the contractual and default nature of the rule

Busby is careful to stress that this rule is not immutable. 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.’”

Key implications:

Parties remain free to contract differently. A landowner can:
- Expressly reserve ownership of produced water;
- Grant a separate produced-water interest to a third party (like a water-services company); or
- Share profits or control through a detailed contractual scheme.
Statutes and regulations do not prevent such contracting. Busby notes that nothing in the cited statutes (including Nat. Res. Code § 122.002) or regulations purports to:
- Divest landowners of groundwater ownership by operation of law, or
- Forbid private arrangements allocating produced-water rights differently.

He also prudently suggests that any party reserving or sharing ownership of produced water should spell out a practical method of volumetric determination—for example, by measurement, sampling, or accounting—akin to the burdens discussed in Humble Oil & Refining Co. v. West, 508 S.W.2d 812 (Tex. 1974), where the lessee injected non-native substances into a reservoir.

5. Step five: Rejecting the “product stream” theory while limiting the holding to water

Busby underscores that the Court does not adopt the broad theory advanced by COG and the court of appeals majority—that the lessee owns the entire “product stream” produced from the well, regardless of what it contains.

Why is this distinction important?

Consistency with unleased-mineral jurisprudence. Cases like Amarillo Oil, Guffey, and Moser make clear that:
- Ownership of unleased minerals (like certain gases, CO₂, helium, sulfur, etc.) does not transfer merely because they commingle with leased hydrocarbons.
- Only what the lease expressly grants—or what is a necessary incident of that grant—is conveyed.
Narrow scope of the Cactus Water holding. Because the leases at issue were only of “oil and gas” or “oil, gas, and other hydrocarbons,” the Court holds merely that a particular kind of incidental substance—produced groundwater—is included as an incident of that grant, given the operational necessity and historic understanding.

The Court does not hold that:
- All co-produced substances belong to the lessee; or
- Any co-produced mineral automatically becomes part of the hydrocarbon lease.

This careful narrowing preserves the doctrinal integrity of Texas mineral law while resolving the produced-water issue.

C. Impact and Future Implications

1. Immediate impact on produced-water markets and contracts

The decision provides a clear organizing principle for Texas’s rapidly developing produced-water industry:

Baseline rule. Unless the lease or related agreements say otherwise, the mineral lessee controls produced water once it comes to the surface as part of the hydrocarbon production stream.
Surface-owner agreements limited by prior leases. A surface owner (or a company like Cactus Water contracting with the surface owner) cannot validly convey control of produced water in a way that interferes with rights previously granted to the mineral lessee in the oil-and-gas lease, if that lease is silent and thus includes produced water by default.
Negotiation leverage and clarity. The ruling encourages:
- Lessees to treat produced water as a valuable or at least strategically significant asset in lease and midstream negotiations.
- Lessors to negotiate express contractual terms if they wish to:
  - Retain ownership of produced water,
  - Share in revenue from beneficial reuse, or
  - Control environmental or local impacts of water management.

2. Relationship to regulatory and environmental policy

By confirming that produced water is, by default, under the control of the mineral lessee, the Court’s decision aligns property rights with:

Regulatory responsibilities. The operator is already responsible under Railroad Commission rules and environmental statutes to manage produced water safely as “oil-and-gas waste.” The decision avoids the awkward scenario in which a party lacking that responsibility nonetheless claims property control at the wellhead.
Beneficial reuse policy under Nat. Res. Code § 122. The statute envisions a growing role for treatment and beneficial use of produced water. By clarifying that:
- Title initially lies with the operator (by default) via the lease; and
- Ownership can then pass to treatment providers or beneficial users under § 122.002, absent contrary agreement,
the Court provides a coherent property framework on which regulators and industry can build.

3. Future litigation: royalties and economic allocation

Because the Court expressly leaves open the economic incidents of produced-water control, we can anticipate:

Royalty disputes. As produced water gains commercial value (e.g., for reuse in hydraulic fracturing, industrial processing, or even municipal supply after treatment), lessors may argue:
- That produced water is a “produced substance” subject to royalty under the lease; or
- That revenue from its sale is “proceeds of production” or analogous to other residue products (like NGLs or CO₂ recovery).
Implied covenant claims. Lessors might test whether lessees have:
- An implied duty to manage produced water in a way that does not unreasonably depress the value of the mineral estate; or
- An implied obligation to pursue beneficial reuse where it is economically feasible, for the mutual benefit of lessor and lessee.
Accounting and cost-sharing disputes. When produced water is both a cost (disposal) and a potential revenue source (reuse), courts may need to adapt doctrines from cases like French v. Occidental Permian and Madeley to:
- Allocate infrastructure costs,
- Determine royalty bases, and
- Resolve claims of unjust enrichment or waste.

4. Broader doctrinal impact: reinforcing the surface–mineral framework

Doctrinally, the decision:

Reconfirms the “two-estate” model. Groundwater remains tied to the surface estate in place; oil and gas to the mineral estate. But, at the point of production, their paths cross in a way the Court resolves by reference to contract and implied incidents.
Maintains consistency with unleased-mineral law. By refusing to adopt the “product stream” theory wholesale, the Court preserves long-standing rules that:
- Unleased minerals do not change ownership merely because they are co-produced; and
- Leases are construed according to their text and the ordinary meaning of the granted substances.
Provides a model for handling other byproduct disputes. The analytical framework—grounded in:
- The nature of the grant,
- The operational necessity of control, and
- Consistency with regulatory obligations—
could be extended to other disputes over byproducts or residues of oil-and-gas production.

IV. Complex Concepts Simplified

A. Surface estate vs. mineral estate

In Texas, land ownership is often divided:

Surface estate: Everything on and under the land except what is expressly severed as minerals. This includes:
- Soil, vegetation, surface rights of access and use;
- Groundwater, unless severed; and
- Most near-surface materials unless deemed “minerals” by law or deed language.
Mineral estate: Typically includes oil and gas and, in some grants, other minerals (like uranium or sulfur). The mineral estate is often “dominant”, meaning:
- The mineral owner or lessee has an implied right to use the surface as reasonably necessary to explore for and produce minerals.

B. Implied surface-use rights of the mineral lessee

Even where a lease does not spell it out, Texas law implies that the mineral lessee may:

Enter the land,
Build roads and production facilities,
Use water (subject to reasonableness), and
Perform other acts reasonably necessary to produce oil and gas.

This implied right coexists with the surface owner’s rights, moderated by doctrines like the accommodation doctrine: the lessee must, where reasonably possible, accommodate existing surface uses.

C. Produced water vs. groundwater in place

Groundwater in place is the water stored in aquifers beneath the land—owned by the surface owner. Produced water is the water that comes to the surface as part of the fluid stream when a well produces oil and gas. It often contains:

Native formation water,
Drilling or completion fluids,
Fracturing fluids and additives, and
Dissolved minerals, salts, and sometimes hydrocarbons.

The Cactus Water holding addresses ownership and control of this produced water once it is brought to the surface and separated from hydrocarbons, not the basic ownership of groundwater in place.

D. Oil-and-gas waste and “fluid oil-and-gas waste”

“Oil-and-gas waste” is a regulatory classification used in statutes and Railroad Commission rules. It includes:

Produced water,
Drilling muds,
Completion fluids, and
Other byproduct materials from exploration and production.

“Fluid oil-and-gas waste” (Nat. Res. Code § 122.001(2)) narrowly refers to the fluid component of that waste stream—produced water, flowback, brine, etc.—and establishes when ownership transfers for purposes of beneficial reuse (e.g., for irrigation, industrial uses, or other lawful reapplications).

E. “Developed water” doctrine (surface water)

In surface-water law, the “developed water” doctrine recognizes that a person who invests in capturing or developing water—through dams, canals, or drainage projects—can gain an exclusive right to control and use that developed water against third parties, even when others might have claimed access to natural flows.

Busby uses this doctrine by analogy to support the idea that:

The lessee, who at its cost drills and produces water alongside hydrocarbons and who is tasked with regulated disposal, should have exclusive control of that produced stream by default.

V. Conclusion: Significance in the Broader Legal Context

Justice Busby’s concurrence in Cactus Water Services, LLC v. COG Operating, LLC clarifies and reinforces a significant new default rule in Texas oil-and-gas and water law:

Groundwater remains property of the surface owner in place.
But, absent express contrary lease language, groundwater incidentally produced with leased hydrocarbons is treated as part of the hydrocarbon conveyance.
The mineral lessee thereby acquires possession and control over the disposition of produced water as liquid oil-and-gas waste.

At the same time, the concurrence is explicit about what this holding does not do:

It does not alter the underlying ownership of groundwater in place or diminish its constitutional protection against takings.
It does not adopt a sweeping “product stream” theory that would transfer ownership of all co-produced substances to the lessee.
It does not resolve how royalties, profits, losses, and implied duties regarding produced water will be handled between lessors and lessees.

The decision’s significance lies in:

Providing foundational clarity at a critical moment when produced water is increasingly viewed not just as a waste to be disposed of, but as a potential resource to be treated and reused.
Aligning property rights with regulatory obligations, ensuring that the party responsible for safe waste management has the legal control necessary to fulfill that duty.
Preserving contractual freedom and doctrinal consistency across the law of groundwater, minerals, and unleased substances.

Future Texas cases will build on this framework to address the economic dimensions left open: whether and how produced water’s value will be shared between surface owners and mineral lessees, and what standards govern the lessee’s stewardship of this increasingly important resource. For now, Cactus Water establishes a critical doctrinal anchor: produced groundwater, when incidentally brought to the surface with leased hydrocarbons under a silent lease, travels with the hydrocarbons—not with the surface owner.

Produced Groundwater as a Leased Hydrocarbon Incident: A Commentary on Cactus Water Services, LLC v. COG Operating, LLC