Lease Operator Owns ‘Produced Water,’ SCOTX Says

The Texas Supreme Court on Friday settled a first-of-its-kind dispute over ownership of “produced water,” ruling in favor of the drilling operator over the surface estate holder in a Reeves County case.

“We hold that a deed or lease using typical language to convey oil-and-gas rights, though not expressly addressing produced water, includes the 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 court said in an opinion written by Justice John Devine.