Brine Time: Texas’ Latest in Lithium Law

Development 1: The Texas Supreme Court heard oral arguments on Cactus Water Services, LLC v. COG Operating, LLC, in March and is currently reviewing the case.

The case examines the novel issue of whether the mineral lessee or surface owner holds the ownership rights to produced water generated by oil and gas operations.¹ This dispute between COG Operating (“COG”), plaintiff and mineral lessee, and Cactus Water Services (“Cactus Water”), defendant and lessee of a produced water lease granted by the surface owners, could potentially impact lithium harvesting from produced water.² As the lessee under an oil and gas lease, COG operated the lease and handled and paid for the transportation and disposal of produced water for years.³ Subsequently, the surface owners executed a lease purporting to give Cactus Water rights to water produced during oil and gas operations.⁴ That lease included the rights to sell all water “produced from oil and gas wells and formations [on the covered properties].”⁵ COG initiated a lawsuit seeking a declaration that COG, not Cactus Water, owned and had rights to the produced water.

In July 2023, the Texas Court of Appeals in El Paso ruled that produced water resulting from oil and gas operations rightfully belonged to the mineral lessee, because the produced water was oil and gas waste as opposed to groundwater owned by the surface estate.⁶ On January 31, 2025, the Texas Supreme Court granted petition for review.⁷

Third parties filed a total of thirteen amicus briefs.⁸ Among the third parties joining the discourse as amici curiae are: Texas and Southwestern Cattle Raisers Association; Texas Farm Bureau; Texas Land & Mineral Owners Association; South Texans’ Property Rights Association; Texas Civil Justice League; Permian Basin Petroleum Association; Texas Oil & Gas Association; Texas Independent Produced Water Association; Standard Lithium, Ltd.; Texas Landowners Council; Deep Blue Midland Basin LLC; NGL Energy Partners LP; Aris Water Solutions, Inc.; and WaterBridge Operating LLC.⁹

The Supreme Court heard oral arguments on March 18, 2025, but no opinion has yet been issued.¹⁰

Development 2: The Texas Railroad Commission adopted a rule and amendments concerning brine projects and wells.

The Texas Railroad Commission (“RRC”) adopted a new rule, and amendments to current rules, regulating lithium brine mining.¹¹ These changes follow the adoption of Senate Bill 1186, which amended the Texas Water Code to clarify that brine mining falls within the RRC’s jurisdiction and instructed the RRC to adopt the rules necessary to administer and regulate brine mining.¹² The new rule and amendments were adopted, and most went into effect on February 18, 2025.¹³

The RRC’s new rule, Section 3.82, regulates brine production projects and associated brine production wells, which could be used to extract lithium.¹⁴ Section 3.82 also encompasses Class V spent brine return injection wells used for the reinjection of spent brine in association with brine production projects.¹⁵ Notably, the new rule expressly excludes from its scope production projects and wells extracting oil, gas, any product of oil or gas, or produced water.¹⁶

The rule outlines the general requirements for covered wells, the brine production permit application process, and the consequences of any violations.¹⁷ The rule also provides spacing, acreage, density and field rules.¹⁸

The new amendments clarify the requirements of sections related to brine production and injection.¹⁹ In some places, the amendments add references to brine resources, spent brine return injection wells, and geothermal resources.²⁰ For example, amendments to Section 3.81 clarify the definition of the term “brine mining injection well,” as used in that section.²¹

Development 3: The Texas Senate considers proposal to clarify ownership of “brine minerals.”

Senate Bill 1763 (“S.B.1763”) proposes a new chapter to the Texas Natural Resources Code and Water Code to clarify what constitutes, and who rightfully owns, “brine minerals.”²²

The proposed chapter defines brine minerals as “interstitial particles and solutes,” including lithium. The chapter would establish that the owner of the mineral estate “owns the brine minerals below the surface of the land as real property,” unless expressly provided otherwise.²³

The bill also proposes amendments to current sections of the Water Code. First, the bill would add a definition of brine to Section 27.002, which regulates injection wells.²⁴ The proposed definition defines “brine” as a subterranean liquid or semiliquid and the particles within it, and excludes ground water, surface water, and produced water from the definition.²⁵ The bill would additionally revise the definition of “brine mining” and “Class V brine injection well” in Sections 27.036(a) and (d) to account for the proposed definitions of brine and brine minerals.²⁶

Lastly, the bill would require the RRC to adopt rules establishing reporting requirements for operators of brine production wells and injection wells used for brine mining.²⁷

The Senate read S.B.1763 for the first time on March 13, 2025, after which they referred it to the Natural Resources Committee.²⁸ The Senate presented the bill at a public hearing on March 19, 2025, on which day the committee also took testimony.²⁹ The bill is currently pending in committee.³⁰ If enacted, S.B.1763 would take effect September 1, 2025.³¹

¹ Cactus Water Servs., LLC v. COG Operating, LLC, 676 S.W.3d 733 (Tex. App.—El Paso 2023, pet. granted).

² See One Man’s Trash is Another Man’s Treasure: Ownership of Produced Water in Texas, Vinson & Elkins (Feb. 7, 2024), https://www.velaw.com/insights/one-mans-trash-is-another-mans-treasure-ownership-of-produced-water-in-texas/. Chapter 122.002 of the Texas Natural Resources Code provides statutory guidance on the ownership of produced water, but the relevant version of the statute was not adopted until after the mineral leases at issue in Cactus Water were signed. See Cactus Water Servs., 676 S.W.3d at 740 n.4. The decision in Cactus Water will be most relevant to determine produced water ownership in cases with similar lease language signed prior to the adoption of the relevant version of the statute.

³ Id. at 736.

⁴ Id.

⁵ Id.

⁶ Cactus Water Servs., LLC v. COG Operating, LLC, 676 S.W.3d at 740–41.

⁷ Cactus Water Servs., LLC v. COG Operating LLC, Texas Judicial Branch (last visited Mar. 26, 2025) https://www.txcourts.gov/supreme/case-summaries/23-0676-cactus-water-servs-llc-v-cog-operating-llc/.

⁸ See CACTUS WATER SERVICES, LLC v. COG OPERATING, LLC, SCOTXBlog (last accessed Mar. 28, 2025), https://data.scotxblog.com/scotx/no/23-0676; see, e.g., TSCRA Submits Second Amicus Brief on Landowner Rights Court Case, Texas & Southwestern Cattle Raisers Association (Jan. 29, 2025) https://tscra.org/tscra-submits-second-amicus-brief-on-landowner-rights-court-case/.

⁹ See CACTUS WATER SERVICES, LLC v. COG OPERATING, LLC, SCOTXBlog (last accessed Mar. 28, 2025), https://data.scotxblog.com/scotx/no/23-0676.

¹⁰ Id.

¹¹ See 16 Tex. Admin Code § 3.82. The amendments include amendments to 16 Tex. Admin. Code §§ 3.1, 3.5, 3.7, 3.12, 3.13, 3.16, 3.17, 3.32, 3.36, 3.73, 3.78, 3.81, 3.82 (2025).

¹² Tex. Water Code § 27.036.

¹³ See 16 Tex. Admin Code §§ 3.1, 3.5, 3.7, 3.12, 3.13, 3.16, 3.17, 3.32, 3.36, 3.73, 3.78, 3.81, 3.82; see also 50 Tex. Reg. 803, 835 (2025) (adopted Jan. 29, 2025) (R.R. Comm’n of Tex.).

¹⁴ 16 Tex. Admin Code § 3.82(a)(1).

¹⁵ Id.

¹⁶ Id.

¹⁷ See 16 Tex. Admin Code §§ 3.82(c)–(k).

¹⁸ Id.

¹⁹ Office of General Counsel, Adoption of new 16 TAC §3.82, relating to Brine Production Projects and amendments to various other rules in Chapter , R.R. Comm’n of Tex. (Jan. 29, 2025) https://rrc.texas.gov/media/aqjbcmbs/adopt-new-3-82-amend-ch3-various-brine-01192025-sig.pdf

²⁰ Id.

²¹ Id.

²² Tex. S.B. 1763, 89th Leg., R.S. (2025).

²³ Id.

²⁴ Id.

²⁵ Id.

²⁶ Id.

²⁷ Id.

²⁸ TX SB1763 | 2025-2026 | 89th Legislature, https://legiscan.com/TX/bill/SB1763/2025 (last visited March 20, 2025).

²⁹ Id.

³⁰ Id.

³¹ Tex. S.B. 1763, 89th Leg., R.S. (2025).