The El Paso Court of Appeals, in the recent case of Cactus Water Services LLC v. COG Operating LLC, was faced with the issue of who owns the water produced by a hydraulic fracturing operation: the oil and gas company operating the well or the surface owner and the company the surface owner leased its water rights to?
The operator, COG, was the lessee of several mineral leases in Reeves County on which it was drilling and completing horizontal wells, which require fracing. As most of you know, the fracing process involves large amounts of water. In addition, in most shale plays, the amount of produced water is also huge. As the Court notes, the median water used per well in the Permian Basin is 42,500 cubic meters of water. That water, plus water produced along with oil and gas once a well is online, is generally considered to be “produced water”.
Produced water has historically been treated as a waste product and its disposal has been highly regulated in Texas, at great cost to operators. However, new technologies are beginning to be implemented in the oil patch that allow wastewater to be treated to make it usable and sold back to operators. Suddenly, what was a waste product is becoming a valuable commodity, especially in water starved Texas.