A Permian well can produce four barrels of salt water for every barrel of oil. For a century that was a disposal cost. Now it is a business, and there may be lithium dissolved in it. In 2025 the Texas Supreme Court decided who owns the water. Nobody has decided who owns what is in it.
If you own minerals in the Permian, the Eagle Ford, or anywhere else with high water cut, this affects you. And the answer the court gave is not the one most owners expect.
In Cactus Water Services, LLC v. COG Operating, LLC, decided 27 June 2025, the Supreme Court of Texas held that produced water belongs to the oil and gas lessee under a standard lease, not to the surface owner.
The reasoning turned on characterization. The court treated produced water as oil and gas waste, a byproduct of production that the operator is obliged to handle and dispose of, rather than as water in the ordinary sense belonging to the surface estate. The court put it bluntly: produced water is not water, notwithstanding that it contains water molecules.
COG, the operator, won. Cactus Water Services, which had taken a water rights conveyance from the surface owner, lost.
You cannot sell produced water rights out from under an existing oil and gas lease and expect it to stick. If you want produced water to be yours, it has to be expressly reserved in the lease. A separate conveyance to a water company after the fact does not do the job.
This is the actionable part. Produced water handling is a real revenue stream for operators in high water cut areas, and the default now clearly favours the lessee. If you are negotiating a lease, produced water is a term you can negotiate, the same way you negotiate post-production cost deductions or a Pugh clause.
Most owners never raise it. It costs nothing to raise it.
Your royalty is on oil and gas, not on water. A water disposal or recycling business built around your unit does not ordinarily pay you anything, and after Cactus Water that is the expected outcome rather than an aberration.
What is worth checking is the other direction: whether water handling costs are being charged against your royalty as post-production expenses. Lifting and disposal are ordinarily the operator's production costs, not deductible post-production expenses, and the distinction is worth money. See the royalty statement decoder.
Here is the part nobody has answered, and it may end up mattering more than the water itself.
Produced water from some formations carries commercially interesting concentrations of lithium and other dissolved elements. Extraction technology has improved enough that companies are pursuing it seriously.
An ordinary oil and gas lease conveys the right to produce oil and gas. It does not, on its face, convey lithium. So when an operator that owns the produced water extracts lithium from it, the question of who owns that lithium is not resolved by Cactus Water, and commentators reading the decision have flagged exactly this as the next fight. Some think the analysis favours the mineral owner.
We want to be careful here, because this is the kind of uncertainty that gets sold as a sure thing:
If you are selling minerals in a high water cut area and the purchase agreement conveys all minerals of every kind, you are conveying whatever the lithium answer turns out to be. That is a normal thing to do, and it should be a decision rather than an accident.
Highest water cut, and therefore highest relevance: the Delaware Basin and Midland Basin in West Texas and southeast New Mexico, the Eagle Ford, the Mississippi Lime in northern Oklahoma and southern Kansas, and the Bakken.
Separately, the Smackover in south Arkansas, northeast Texas and north Louisiana is a different situation entirely: there the brine itself is the target rather than a byproduct, Arkansas has set a royalty by ruling, and Texas has not decided who owns the lithium at all.
We will tell you what your lease actually conveys, whether produced water was reserved, and how broadly "minerals" is defined in your chain. Free, no obligation, and useful whether or not you ever sell anything.
Ask a Landman Free Lease Offer CheckCase law current as of August 2026. Cactus Water Services, LLC v. COG Operating, LLC was decided by the Supreme Court of Texas on 27 June 2025. The ownership of lithium and other elements dissolved in produced water is unresolved in Texas and in most other states. Berlin Royalties is a mineral buyer and a landman shop in Tulsa, not a law firm or a tax advisor, and this page is general information rather than advice about your interest. If real money turns on your granting clause, hire a lawyer in your state.