Murky waters: Wading through Texas law and the future of produced water

I. Introduction

Texas produces more than just oil and gas. Every day, millions of gallons of produced water are generated as a byproduct of oil and gas production. Once viewed strictly as a waste product, produced water is now at the center of a growing conversation about resource recovery, sustainability, and innovation. Adding to the ongoing discussion, the Texas Supreme Court issued a landmark decision in June in the case of Cactus Water Services, LLC v. COG Operating, LLC¹, ruling that under the typical deed or lease language conveying oil and gas rights, produced water is a part of the conveyance, even though not expressly addressed.

While Cactus v. COG aligned with existing industry practices, it likely signaled the beginning of a broader wave of legal disputes over the ownership and use of produced water. This Article will explore the history of produced water as a byproduct of oil and gas production and examine Texas’ growing water challenges. This Article will also discuss the potential for extracting valuable minerals from produced water and highlight emerging alternative uses for this once-overlooked resource.

II. Background

The concept for fracking itself dates back to 1862 but was not popularized until the beginning of the 21^st century, accompanied by innovations in fracking fluid and horizontal drilling.² Hydraulic fracturing, in simple terms, involves the blasting of fracking fluid into a horizontal well at a pressure high enough to create new fractures or open existing ones in the surrounding rock, to allow the oil or gas to flow back to the surface.³ Fracking fluid is typically a mixture of sand, water, and chemicals.⁴ After its injected and returns to the surface through the well, the hydrocarbons are separated, any recovered water is stored, and the remaining fluid, or produced water, is then taken to facilities to be disposed of or treated.⁵

Produced water under Section 122.001(2) of the Texas Natural Resource Code is defined as fluid oil and gas waste. Because of such designation, the handling of produced water requires appropriate permits, infrastructure, and regulated disposal, which comes with burdensome expenses and potential liability on behalf of an operator-lessee.⁶ Under Statewide Rule 46 covering fluid injection into productive reservoirs, or injection wells, a permit is required prior to any injection.⁷ During the permitting process, a notice and opportunity for a hearing shall be provided to the government and any affected persons, and a significant amount of information must be provided to the Texas Railroad Commission (RRC).⁸ This rule also sets forth the requirements for the injection wells.⁹ The more popular method of disposal of produced water is into disposal wells, which are governed by Statewide Rule 9.¹⁰ This rule states that every applicant who proposes to dispose of saltwater or other oil and gas waste into one of these wells must obtain a permit from the Texas Railroad Commission, and the disposal shall be in line with the requirements set forth in Statewide Rule 9.¹¹

The Texas Legislature strives to keep rules current. This past legislative session, the Legislature passed a series of bills aimed at modernizing the handling and reuse of produced water, rules that are set to go into effect September 1, 2025.¹² To name a few, House Bill 49 relates to the treatment and beneficial use of fluid oil and gas waste and adds new tort immunity for entities involved in the beneficial use.¹³ House Bill 4426 changes the permit duration and renewal processes for commercial surface disposal facilities, establishing clearer guidelines. Finally, Senate Bill 1145 authorizes the Railroad Commission to issue permits for the land application of produced water, tasking the Railroad Commission with establishing clear regulatory standards that are expected to address application methods, water quality thresholds, monitoring protocols, and site-specific environmental conditions.¹⁴ Not only is the Texas Legislature taking aim at the legislative framework, they are also funding a large study based out of Texas Tech University, called the Texas Produced Water Consortium. The Consortium has the purpose of bringing together information and resources to study the economics and technologies related to the beneficial uses of produced water, including environmental and public health considerations.¹⁵ In recent years, the Texas Legislature has shown a growing commitment to addressing produced water and supporting future technological developments in its treatment and reuse.

With all the innovation and new legislation, the Texas Supreme Court is also diving into the produced water conversation. This past March, a question of first impression was raised in Cactus Water Services, LLC, v. COG Operating, LLC. In Cactus, an oil and gas producer and a third-party water company were at odds over the ownership of the produced water.¹⁶ Under the law at the time of the conveyances at issue, COG Operating, LLC, the producer, was charged with proper handling and disposal of produced water.¹⁷ Cactus Water Services, LLC, the third-party water company, contended that once the hydrocarbons were separated, the remaining water mixture, or produced water, belonged to the surface owner.¹⁸ The Texas Supreme Court ultimately held that under typical lease language conveying oil and gas rights, produced water is a part of the conveyance, even though not expressly addressed. Therefore, absent express language otherwise, produced water belongs to the operator, not the surface owner.¹⁹

III. Why should we care?

While produced water is increasingly at the center of both the courts and the Legislature, why should we care? Texas is confronted with two emerging problems tied to produced water: (1) an escalating water crisis driven by persistent drought and (2) the decreasing viability of traditional disposal methods. At the same time, advances in technology now allow for secondary recovery from produced water, enabling the extraction of valuable minerals and effectively turning trash into treasure.²⁰ Further, alternative uses of produced water have piqued the interest of operators, offering the potential to generate additional revenue streams while simultaneously lowering disposal costs.

Drought and water crisis

Typically, water used in fracking is surface or groundwater.²¹ However, Texas is facing a water crisis. The Texas Water Development Board State Water Plan indicates Texas could face a 6.9 million acre-feet shortage of water by the year 2070.²² To put this in perspective, in 2022 Texas used 15.2 million acre-feet.²³ If no water management strategy is put in place and Texas experiences another record high drought, approximately twenty-five percent of Texans could have less than half the municipal water supplies they need.²⁴

Texas’ water shortage is even more pressing for West Texas and the Panhandle. About fifty-five percent of water used in Texas is sourced through aquifers, which are being stressed at record levels.²⁵ The Ogallala Aquifer, specifically, is one of the world’s largest aquifers, supplying groundwater to eight states, including Oklahoma, New Mexico, and Texas.²⁶ In 2019, more than 4.4 million acre-feet were pumped from the Ogallala Aquifer, accounting for sixty-seven percent of water pumped from major aquifers.²⁷ Currently, we are drawing from this aquifer at 6.5 times its recharge rate.²⁸ However, the current approach to the Ogallala Aquifer is one of “managed depletion.”²⁹ Managed depletion is a strategy that involves deliberately using the aquifer until it is effectively exhausted.³⁰ While the Ogallala Aquifer is primarily used for irrigation,³¹ this intentional depletion is accelerating Texas’s path toward a serious water shortage.

The Ogallala Aquifer isn’t the only major water source in the Panhandle and West Texas.³² The Pecos Valley and the Edwards-Trinity Plateau Aquifers supply most of West Texas. While mainly supplying water for irrigation,³³ both aquifers could face the same issues plaguing the Ogallala Aquifer if something is not done.

Dwindling disposal practicality

Drought conditions aren’t the only water problem Texas currently faces. For decades, producers disposed of produced water via deep well injection.³⁴ Approximately 70% of produced water in the state of Texas is disposed of via deep well injection through saltwater disposal wells (SWD) permitted by the RRC.³⁵ Injection occurs several thousand feet below the groundwater table, where the water will, in theory, not encounter fresh water.³⁶ The produced water is under extreme pressure when injected at deep depths, ultimately preventing waste migration through the subsurface rock formations and trapping the water until it evaporates.³⁷ While effective, disposal via injection comes with both monetary expenses³⁸ and environmental concerns.

The link between seismic activity and produced water disposal wells has caused the RRC to tighten restrictions on deep injection disposal.³⁹ In response, producers have shifted to injecting water into shallower rock.⁴⁰ Water levels in this shallow rock have become so substantial, they risk breaching wells, swelling and rupturing the ground, and contaminating water sources.⁴¹ The RRC has acknowledged this problem, and in May of 2025 announced enhanced guidelines to go in effect June 1, 2025, for disposal wells in the Permian Basin.⁴² These guidelines place limits on the maximum water pressure, limits on the maximum daily water injection volume, and require operators to assess old or unplugged wells to ensure that produced water does not escape through wellbores.⁴³

With decreases in water availability and tightening of guidelines by the Railroad Commission on the disposal of produced water in both shallow and deep injection zones, something has to be done to address Texas’ water woes.

Alternative uses of produced water

In the Permian Basin alone, daily water production from horizonal wells is about 1,547 acre-feet.⁴⁴ By 2042, it is estimated to increase to 1,935 acre-feet. The current practice is to dispose of this water, but new technology could breathe life into this waste.⁴⁵

1. Reuse for enhanced oil recovery

   Enhanced oil recovery can occur via waterflooding. Waterflooding is a secondary recovery method that involves injecting water into a reservoir formation to displace residual oil.⁴⁶ Waterflooding is aimed at maintaining reservoir pressure while driving the oil towards production wells.⁴⁷ Waterflooding techniques extend a field’s productive life, resulting in the recovery of 20% to 40% of the original oil in place.⁴⁸ Produced water, instead of groundwater, can be injected into reservoirs as a secondary flood.⁴⁹ Utilizing produced water for secondary recovery methods, such as waterflooding, reduces the demand on freshwater resources, and allows for preservation of groundwater for essential uses, recycling a costly byproduct of oil and gas production and reducing overall disposal costs.

2. Reuse by irrigation

   Beneficial reuse of produced water is gaining traction as a strategy to address water scarcity and reduce reliance on freshwater resources.⁵⁰ Although still in the early stages of development,⁵¹ treated produced water has the potential to be used for irrigation.⁵² Preliminary studies found that produced water had minimal negative effects on plant development and even improved soil carbon levels, pH, and micronutrient availability, suggesting that crops such as cotton, alfalfa, and hay could potentially thrive under these circumstances.⁵³

3. Reuse by municipalities

   Along with irrigation, produced water may be used for municipality purposes. While seemingly unconventional, these uses range from cement production⁵⁴ to firefighting to dust suppression for roads and landfills. Another potential use for treated produced water may be used to “unleash” American energy by using the water for cooling of data centers⁵⁵ that house vast numbers of servers which generate substantial heat. Treating and reusing produced water transforms a costly waste disposal challenge into a valuable resource. By eliminating the need for large-scale disposal, a former burden may be turned into an asset with beneficial uses across agriculture, industry, and municipalities.

   Along with the reuse of produced water, extraction of valuable minerals from the waste may also prove to be lucrative in coming years.

4. Extraction of valuable materials

   As previously described, produced water is a mixture of fracking fluid, hypersaline brine, residual hydrocarbons, and other substances of varying concentrations.⁵⁶ While produced water contains many minerals, lithium has stood out amongst the rest. Currently, the global lithium market sits around $24 billion but is expected to rise anywhere from $55 to $75 billion by 2030.⁵⁷ With reports of high concentrations of lithium within Texas’ produced water, Direct Lithium Extraction (DLE) is an emerging method designed for lithium extraction. DLE is a method that pulls lithium from produced water, like a magnet attracting only lithium ions, leaving most other minerals and water behind.⁵⁸ This method is significantly more efficient than other traditional lithium extraction techniques, such as hard rock mining spodumene ore and solar evaporation, and offers a more favorable environmental impact.⁵⁹ As demand for lithium continues to surge, the efficient extraction of lithium from produced water positions Direct Lithium Extraction as a transformative solution.

IV. Conclusion

Produced water, once dismissed as a burdensome byproduct of oil and gas operations, is now at the forefront of legal, environmental, and technological innovation in Texas. As Texas grapples with intensifying water scarcity and the diminishing feasibility of traditional disposal methods, produced water offers a promising, multi-faceted solution. Emerging technologies present an opportunity to reframe produced water not as waste, but as a resource. Moving forward, embracing innovation, regulatory clarity, and new practices will be critical in transforming Texas’ water challenges into long-term opportunities.

1. Cactus Water Servs., LLC v. COG Operating, LLC, No. 23-0676 (Tex. June 27, 2025).
2. Melissa Denchak, Fracking 101, Natural Resources Defense Council (April 19, 2019) https://www.nrdc.org/stories/fracking-101
3. Id.
4. Produced Water: A Comprehensive Overview, Select (last visited: August 14, 2025), https://www.selectwater.com/produced-water/. Chemical additives introduced during the drilling and production process include biocides, surfactants, and friction reducers.
5. Jackie Benton, Recycling Fracking Water, Fiscal Notes from Texas Comptroller (October 2015), https://comptroller.texas.gov/economy/fiscal-notes/archive/2015/october/fracking.php.
6. Section 81.0531 of the NRC authorizes the Texas Railroad Commission (RRC) to impose a penalty of up to $10,000 per day for each violation related to improper disposal.
7. 16 TEX. ADMIN CODE E §§ 3.46.
8. Id.
9. Id.
10. 16 TEX. ADMIN CODE E §§ 3.9.
11. Id.
12. Ashleigh K. Myers, JC Freeman, Water, Reused: Texas Reshapes Liability and Regulatory Rules on Produced Water, Leaves Ownership Questions Unanswered, Pillsbury (June 9, 2025), https://www.pillsburylaw.com/en/news-and-insights/texas-produced-water-liability-regulatory-rules-ownership.html.
13. Id.
14. Id.
15. Rusty Smith, et. al., Beneficial Use of Produced Water in Texas, Texas Produced Water Consortium Report to the Texas Legislature 2024, Texas Produced Water Consortium by Texas Tech University (October 16, 2024), https://www.depts.ttu.edu/research/tx-water-consortium/.
16. Cactus, 2025 Tex. LEXIS 591 (June 27, 2025).
17. Id. at 7.
18. Id. at 2.
19. Id. at 29.
20. Ewa Knapik, Grzegorz Rotko & Marta Marszalek, Recovery of Lithium from Oilfield Brines—Current Achievements and Future Perspectives: A Mini Review, MDPI Energies Journal (September 15, 2023), https://www.mdpi.com/1996-1073/16/18/6628.
21. Alejandra Martinex and Jayme Lozano Carver, Texas is running out of water. Here’s why and what state leaders plan to do about it., The Texas Tribune (March 13, 2025), https://www.texastribune.org/2025/03/13/texas-water-explained-supply-demand/. Groundwater is water that is stored underground in aquifers, where surface water is water from lakes, rivers, and reservoirs.
22. Texas Produced Water Consortium, supra note 15 at 9.
23. Historic Water Use Summary and Data Dashboard, Texas Water Development Board (last visited: August 14, 2025), https://www.twdb.texas.gov/waterplanning/waterusesurvey/dashboard/index.asp.
24. Texas Produced Water Consortium, supra note 15 at 10.
25. Water is Good for Texas, Economy Notes from Texas Comptroller (2022), https://comptroller.texas.gov/economy/economic-data/water/2022/aquifers-snap.php.
26. What is the Ogallala Aquifer?, Nebraska Corn Board (last visited: August 14, 2025), https://nebraskacorn.gov/cornstalk/sustainability/aquifer-101/.
27. Water is Good for Texas, supra note 25.
28. Dylan Baddour, To ease looming West Texas water shortage, oil companies have begun recycling fracking wastewater, The Texas Tribune (December 19, 2022), https://www.texastribune.org/2022/12/19/texas-permian-basin-fracking-oil-wastewater-recycling/#:~:text=Oil%20and%20gas%20companies%20are%20increasingly%20reusing,wastewater%20into%20disposal%20wells%20triggers%20more%20earthquakes.
29. Id.
30. Id.
31. Water is Good for Texas, supra note 25.
32. Id.
33. Id.
34. Martha Pskowski and Dylan Baddour, Companies aim to release more treated oilfield wastewater into rivers and streams, The Texas Tribune (April 29, 2024), https://www.texastribune.org/2024/04/29/texas-treated-produced-water-disposal-discharge-rivers/#:~:text=For%20decades%2C%20oil%20drillers%20have,spurring%20a%20search%20for%20alternatives.
35. Texas Produced Water Consortium, supra note 15 at 16. Atlas Scientific, Produced Water Treatment Methods, (November 8, 2024), https://atlas-scientific.com/blog/produced-water-treatment/.
36. What is a Saltwater Disposal Well?, Rogue Energy Services (July 25, 2022), https://rogueenergyservices.com/what-is-a-saltwater-disposal-well/.
37. Id.
38. Texas Produced Water Consortium, supra note 15 at 7. Presently, the cost of disposal via injection is estimated to be between $0.60-0.70 per barrel, which drastically outweighs current capital and marketing costs to treat produced water for beneficial reuse, with the average cost of treatment ranging from $2.55 to $10 per barrel. While the difference in price per barrel is extreme, the margin is expected to narrow with technological advances. Market Snapshot: Produced Water Management, Dawnbreaker (last visited: August 14, 2025), https://www.dawnbreaker.com/2022/12/21/market-snapshot-produced-water-management/#:~:text=Presently%2C%20the%20cost%20of%20disposing,(CAGR)%20of%205.2%25.
39. Id.
40. Permian Basin wastewater risks threaten oil output, GlobalData via Yahoo! Finance (May 23, 2025), https://finance.yahoo.com/news/permian-basin-wastewater-risks-threaten-142329163.html?guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAGJToiQQ4Q7Hh25QZxKYrq7vi9jf2ZmoRTTeot6CJ0U3NGN0JxHZZe0UOoAwMbrvPnmwR9CjW-7U8c8voC3zGmGvTkyUInJvcqyRwgvyWBQGCM-t_r2MQuKHrAshj16LEAPrM69ZPlYBmzrvdCp16OhUGSe64kMwU3ZS1u2rG53s&guccounter=2.
41. Id.
42. RRC Issues Enhanced Guidelines for Permian Basin Disposal Wells, Texas Railroad Commission (May 16, 2025), https://www.rrc.texas.gov/news/05162025-permian-disposal-wells-guidance-release/.
43. Id.
44. Texas Produced Water Consortium, supra note 15 at 8.
45. Id.
46. Waterflooding, Society of Petroleum Engineers (January 29, 2025), https://onepetro.org/spe/general-information/2292/Waterflooding.
47. Id.
48. Jie Cao, et. al., Analysis of Waterflooding Oil Recovery Efficiency and Influencing Factors in the Tight Oil Reservoirs of Jilin Oilfield, MDPI (May 13, 2025), https://www.mdpi.com/2227-9717/13/5/1490.
49. Basic Information about Water Reuse, United States Environmental Protection Agency (updated April 8, 2025), https://www.epa.gov/waterreuse/basic-information-about-water-reuse.
50. Jamiya Barnett, How Water Reuse Can Address Scarcity, Environmental and Energy Study Institute (December 17, 2024), https://www.eesi.org/articles/view/how-water-reuse-can-address-scarcity.
51. Leslie Lee, Can Treated Produced Water Safely Irrigate Crops?, Texas Water Resources Institute (August 1, 2025), https://twri.tamu.edu/blog/2025/08/01/can-treated-produced-water-safely-irrigate-crops/. In research funded by WaterBridge Operating, LLC, produced water will be treated in a three-step process by a water industry partner, using absorption, regeneration, and membranes.
52. Id.
53. Id.
54. Laura Slansky, Four Steps to Quickly Evaluate Produced Water Reuse Option Viability, Environmental Protection (June 1, 2019), https://eponline.com/articles/2019/06/01/four-steps-evaluate-produced-water-reuse-viability.aspx.
55. Benoit Morenne, The Oil Patch’s ‘Manhattan Project’: How to Fix Its Gargantuan Water Problem, The Wall Street Journal (April 21, 2025), https://www.wsj.com/business/energy-oil/the-oil-patchs-manhattan-project-how-to-fix-its-gargantuan-water-problem-aebda706.
56. Grzegorz Rotko, et. al., Oilfield Brine as a Source of Water and Valuable Raw Materials—Proof of Concept on a Laboratory Scale, MDPI (May 21, 2024), https://www.mdpi.com/2073-4441/16/11/1461?.
57. Lithium Market Size, Share & Trends Analysis Report, Grand View Research (last visited August 14, 2025), https://www.grandviewresearch.com/industry-analysis/lithium-market. These projections are largely driven by demand for lithium-ion batteries in electric vehicles and energy storage systems.
58. Amit Kumar, et. al., Lithium Recovery from Oil and Gas Produced Water: A Need for a Growing Energy Industry, ACS Publications (June 5, 2019), https://pubs.acs.org/doi/10.1021/acsenergylett.9b00779.
59. A Better Way: IBAT’s DLE Technology vs. Traditional Extraction, IBAT International Battery Metals (last visited: August 14, 2025), https://www.ibatterymetals.com/direct-lithium-extraction/vs-traditional-extraction.