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Executive Summary

• The surface estate owns produced water as a matter of law in Texas. However, if a producer transfers produced water to another party for the purpose of treating that wastewater for “subsequent beneficial use,” the water becomes the property of the person who takes possession of it. (Chapter 122 of the Texas Natural Resources Code).
• A key flaw in the statute is that Chapter 122 does not address how, if at all, the producer would need to split revenues with the surface owner for a sale or a for-value transfer of produced water.
• Barring contractual arrangements to the contrary, a producer would likely only need to split those revenues from the sale of produced water remaining after subtracting treatment and handling costs necessary to make the water marketable.
• Strong policy and economic drivers support greater reuse of produced water.
• For instance, recycling larger volumes of produced water and integrating it with other non-potable supplies such as brackish water and municipal effluent would displace the use of potable fresh water for fracs, increasing local water security and extracting greater value from produced water that would otherwise have been injected into a deep disposal well.
• Recycling a larger proportion of produced water can also reduce—or ideally, preempt—problems with induced seismicity related to produced water disposal.
• Landowners who make money from freshwater sales and saltwater disposal well royalties may oppose greater produced-water recycling.

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