This episode explores a brand new Texas Supreme Court decision in Cactus Water Services, LLC v. COG Operating, LLC (No. 23-0676 (June 27, 2025)) that definitively resolves the characterization of produced water ownership.

Summary by Trey Wilson, Texas Real Estate and Water Law Attorney in San Antonio

The Court affirmed that produced water is an inherent and inescapable byproduct of oil and gas production, and its ownership, possession, custody, control, and disposition are implicitly conveyed to the mineral-estate lessee (the oil and gas operator) as part of the hydrocarbon rights.

For a surface owner to retain ownership of produced water, an express reservation in the mineral conveyance is required.

1. Produced Water is Classified as "Oil-and-Gas Waste," Not Surface Water.

• The central dispute hinged on whether produced water is legally "water" (part of the surface estate) or "waste" (an incidental byproduct of mineral production).
• The Court unequivocally classified produced water as "oil-and-gas waste," stating, "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."
• Despite containing water molecules, produced water is characterized as a "hazardous, even toxic, mixture produced with hydrocarbons and separated from them after extraction at the wellbore."
• Statutory and regulatory frameworks treat "water" and "produced water" differently.
• Produced water is subject to specialized regulations governing its disposal, treatment, and reuse due to its contaminants. The Court emphasized: "Water is something that must be protected from oil-and-gas waste; the two are not interchangeable."

2. Ownership of Produced Water is Implicitly Conveyed to the Mineral Lessee.

• The Court held 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."
• This conclusion is rooted in the "necessarily incidental" doctrine: hydrocarbon production "necessarily contemplates and encompasses the right to produce and manage the resulting waste."
• Historically, the "right to consume the value of property is generally a right of ownership, not use."
• Therefore, 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."

3. Subsequent Innovations and Beneficial Uses Do Not Alter Original Conveyances.

• A key aspect of the ruling is that emerging technologies for the beneficial reuse and recycling of produced water do not retrospectively change the scope or intent of past conveyances.
• The Court explicitly states, "subsequent innovations do not change the parties’ expectations or the deal that was struck."
• Interpretation of the conveyance must be "as of the transfer of rights, not through a modern lens."

4. Express Reservation is Required for Surface Owners to Retain Ownership.

• The Court clarified that if surface owners wish to retain ownership of produced water, "the reservation or exception from the mineral conveyance must be express and cannot be implied."
• Texas law presumes "an intent to sever the mineral and surface estates, convey all valuable substances to the mineral owner... and to preserve the uses incident to each estate." Any reservation "must be by clear language."

5. Produced Water is Distinct from Groundwater; Mineral Lessee's Rights are Ownership, Not Usufructuary.

• The Court rejected Cactus's argument that produced water is simply "water" belonging to the surface estate, distinguishing it from cases concerning groundwater ownership (e.g., Edwards Aquifer Authority v. Day and Sun Oil Co. v. Whitaker). These prior cases pertain to "ownership of groundwater in situ or extracted through water wells for use as water," not "waste byproducts of oil-and-gas production."

Case: Green v. Century Oak Wind Project, LLC

Court: Court of Appeals of Texas, Eleventh District, Eastland

Date: December 12, 2024

Case Number: No. 11-23-00125-CV

Overview This case involves an appeal by landowners challenging the trial court's dismissal of their nuisance lawsuit against the developers of a wind turbine project on a neighboring property.

The trial court dismissed the case based on Rule 91a of the Texas Rules of Civil Procedure, which allows for dismissal of cases with no basis in law or fact. The Appellants claimed the wind farm constituted private and public nuisances. The appellate court partially reversed and remanded the case.

Holding: The Court of Appeals affirmed the dismissal of the aesthetic-based nuisance claims (daytime and nighttime visual), and the common nuisance claim. However, it reversed the dismissal of the claims based on auditory, tactile and wildlife impacts, finding the Appellants' pleadings met the minimal requirements of a cause of action. These claims were remanded back to the trial court to be tried.

Significance: This case underscores strict limitations on nuisance claims, particularly aesthetic complaints, and the need for specific factual allegations to establish culpable conduct on the part of a defendant. The court noted that

III. Factual Background /Procedural History

Key Legal Principles

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San Antonio Real Estate Lawyer

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Case: Pedernales Electric Cooperative, Inc. (PEC) v. Samuel S. White, Janette Barlow, Gregory Colon and Stephanie Colon (Landowners)

Significance: This case establishes a precedent for broadly interpreting easement language in favor of grantees, especially in the context of public utilities. It reinforces the right of easement holders to adapt their use to technological advancements and meet evolving public needs, as long as such actions align with the overarching purpose of the easement.

Court: Texas Court of Appeals, Third District Austin

Date Decided: December 11, 2024

Subject: Interpretation of an easement for an electric transmission line; Permissibility of voltage upgrades and associated construction within easement boundaries.

Summary: This case examines whether PEC's upgrade of an existing electric transmission line involving increased voltage, taller steel poles and larger conductors, fell within the scope of a decades-old easement agreement. The trial court favored the Landowners, issuing a permanent injunction against the higher voltage and awarding damages. The 3rd Court of Appeals reversed, ruling that the upgrade was permissible under the broad language of the easement.

Important Ideas:

Outcome:

The Court of Appeals reversed the trial court's judgment, dissolved the permanent injunction against PEC, and rendered judgment in favor of PEC. The Landowners were denied any damages or attorney's fees.

Contact: Trey Wilson Real Estate Lawyer in San Antonio

Case: JBrice Holdings, L.L.C. v. Wilcrest Walk Townhomes Ass'n

Court: Supreme Court of Texas

Date: April 22, 2022

Summary: This case concerns the legality of a homeowner's association (HOA) prohibiting short-term rentals within a townhome community. The Supreme Court of Texas ultimately ruled in favor of the homeowner, JBrice Holdings, finding that neither the community's deed restrictions nor the Texas Property Code authorized the HOA to impose such a ban.

Outcome: The Supreme Court of Texas reversed the lower court's decision, vacated the injunction against short-term rentals, and remanded the case for consideration of attorney's fees.

Implications:

This case provides important guidance for Texas HOAs and property owners regarding short-term rentals. HOAs seeking to regulate or prohibit such rentals must ensure their deed restrictions explicitly address the issue. Additionally, the case highlights the importance of carefully drafting deed restrictions and the potential consequences of broad language that may unintentionally limit an HOA's authority.

Main Themes:

Key Facts and Findings:

Important Quotes:

Case: George Lesieur v. Timothy & Sandra Fryar, Cynthia Morales d/b/a Morales Realty, and Cynthia Gonzalez

Court: Texas Court of Appeals, Fourth Court of Appeals, San Antonio

Date: March 10, 2010

Significance: This case highlights the critical role of pre-purchase inspections in real estate transactions. The court's ruling suggests that buyers who conduct thorough inspections, even if those inspections identify potential issues, may have a limited ability to claim reliance and causation against sellers for undisclosed defects. The dissent, however, raises important questions about the degree of similarity required between inspection reports to negate a buyer's claims, emphasizing that seemingly minor wording differences can convey significantly different levels of concern about a potential defect.

Main Issue: Did the buyer's pre-purchase inspection negate the elements of causation and reliance in his claims of fraud and misrepresentation against the sellers and their real estate agents regarding undisclosed foundation issues?

Themes:

Key Facts:

Court's Holding:

Dissent:

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Case: Dayston, LLC (Appellant) v. Jonathan D. Brooke (Appellee)

Court: Court of Appeals of Texas, Eastland

Date: October 8, 2020

Case Number: No. 11-18-00288-CV

Significance: Highlights the importance of precise and complete property descriptions in real estate contracts. This case serves as a reminder that even with clear intent between parties, failing to meet the Statute of Frauds’ requirements can render an agreement unenforceable.

Summary: This case concerns a Farm and Ranch Contract (Agreement) for the sale of real property between Dayston, LLC (seller) and Jonathan D. Brooke (buyer). Brooke sued Dayston, seeking to void the Agreement due to an inadequate property description and the return of earnest money. The trial court granted summary judgment in favor of Brooke, declared the Agreement void, and ordered the earnest money returned.

Main Themes:

Important Ideas and Facts:

Key Quotes:

Outcome:

The Court of Appeals affirmed the trial court’s decision, finding that the Agreement’s property description was insufficient under the Statute of Frauds. Extrinsic evidence presented by Dayston was inadmissible to cure the deficient description, rendering the Agreement void. As a result, Brooke was entitled to the return of his earnest money.

Case: Albert v. Fort Worth & W. R.R.

Court: Supreme Court of Texas

Date: February 16, 2024

Significance:

This case clarifies the application of prescriptive easement principles in Texas, highlighting the importance of open, notorious, continuous, and exclusive use adverse to the landowner's rights for the required period. It also distinguishes between using the same "way" and using the property "in the same way" for exclusivity purposes.

Parties:

Facts:

This case involves a dispute over a gravel road crossing that connects Albert's property to a highway, crossing over railroad tracks owned by Western. The property was originally part of a larger tract severed in 1887. While a previous owner obtained a license for personal and agricultural use of the crossing in the 1950s, subsequent owners, including Albert, continued using the crossing for various purposes without a license for over five decades. Western objected to this use beginning in 2006 but never physically blocked the crossing.

Procedural History:

The trial court, based on a jury verdict, found Albert entitled to easements by necessity, estoppel, and prescription over the crossing. Additionally, the jury found no trespass by Albert. The court of appeals reversed, finding insufficient evidence for the easements and that the lack of an easement constituted trespass.

Issues:

Holding:

The Supreme Court of Texas held that sufficient evidence supports the jury's finding of a prescriptive easement.

Reasoning:

The court emphasized the following evidence:

Conclusion:

The Supreme Court affirmed the court of appeals' reversal of the estoppel and necessity easements but reversed the finding regarding the prescriptive easement. They remanded the case back to the court of appeals to address the easement's boundaries and permitted uses.

Key Quotes:

Southwestern Electric Power Co. v. Lynch

Court: Supreme Court of Texas

Date Decided: February 28, 2020

Case Citation: 595 S.W.3d 678

Parties:

Significance:

Procedural History: The Landowners filed a declaratory judgment action to fix the width of SWEPCO's easements at thirty feet. The trial court ruled in favor of the Landowners, and the Court of Appeals affirmed. SWEPCO appealed to the Texas Supreme Court.

Issue:

Holding:

Facts:

Reasoning:

Jurisdiction:

Easement Scope:

Key Quotes:

Disposition:

Contact:

Trey Wilson, Real Estate Attorney

210-354-7600

www.SanAntonioRealEstateLawyer.com

Case: Crosstex North Texas Pipeline, L.P. v. Andrew Gardiner and Shannon Gardiner

Court: Supreme Court of Texas

Date: June 24, 2016

Citation: 505 S.W.3d 580

Subject: Private Nuisance

Main Themes: This case grapples with defining "nuisance" under Texas law, clarifying its elements, and outlining the different standards of liability for causing a nuisance.

Significance: This case provides much-needed clarity to the complex area of private nuisance law in Texas. It defines "nuisance," distinguishes it from a cause of action, outlines different liability standards, and provides guidance on proving and remedying nuisance claims. This decision is significant for landowners, businesses, and legal practitioners dealing with land-use conflicts and environmental concerns in Texas.

Most Important Ideas/Facts:

"A condition that substantially interferes with the use and enjoyment of land by causing unreasonable discomfort or annoyance to persons of ordinary sensibilities attempting to use and enjoy it." (Holubec v. Brandenberger, 111 S.W.3d 32, 37 (Tex. 2003)).

Quotes:

Case: Uptown Cars, Inc. v. Newcastle Management Trust and Jerry Landers

Court: Texas Court of Appeals, Third District, at Austin

Case No.: 03-22-00422-CV

Date: October 31, 2024

Subject: Dispute over easement rights to access Lake Travis.

Summary: This case involves a dispute between a non-waterfront property owner, Uptown Cars, Inc. (Uptown), and its waterfront neighbors, Newcastle Management Trust and Jerry Landers (Neighbors), concerning easement rights to access Lake Travis. Uptown sought declarations that its express easement grants it the right to build a road and boat dock on Neighbors’ property and that it holds a prescriptive easement to maintain a boat dock. The trial court ruled that the express easement grants Uptown access to the lake but does not allow for construction of a road or dock. It also rejected Uptown’s prescriptive easement claim.

Main Themes and Key Findings:

1. Scope of Express Easement:

2. Prescriptive Easement Claim:

3. Extinguishment of Easement:

Conclusion:

The appellate court affirmed the trial court’s ruling on the scope of the express easement, finding it did not grant Uptown the right to construct structures. However, it reversed the summary judgment on Uptown's prescriptive easement claim, sending it back for trial. The court also reversed the attorney’s fee awards and remanded the issue for reconsideration after the resolution of the prescriptive easement claim.

Next Steps:

The case will return to the trial court for further proceedings on the prescriptive easement claim. If Uptown successfully establishes this claim, it may obtain the right to maintain a boat dock on Neighbors’ property. The court will then reconsider the issue of attorney’s fees, taking into account the outcome of the prescriptive easement claim.

Contact: Trey Wilson, Real Estate Lawyer in San Antonio; 210-354-7600; www.SanAntonioRealEstateLawyer.com