Texas continues to drive the development of US energy law and policy in 2025. Federal initiatives aimed at grid reliability and energy security, combined with state-level legislative changes, reflect a recalibration of priorities. The legal and regulatory landscape now emphasises conventional energy expansion, accountability for legacy assets and a reassessment of renewable energy incentives.

Federal Direction: Reliability and Natural Gas

At the national level, the policy emphasis has shifted towards firm power and energy independence. The US Department of Energy’s expanded use of Section 202(c) of the Federal Power Act, to ensure grid reliability, demonstrates a more active federal role in dispatch and capacity planning. That shift favours conventional generation – particularly natural gas and coal – at a time when renewables still face reliability constraints and infrastructure challenges.

The new administration is rolling back elements of the previous administration’s climate and clean energy programme. The Environmental Protection Agency (EPA) has proposed repealing greenhouse gas emissions standards for the power industry. Credits tied to carbon capture, hydrogen and related technologies with hydrocarbon links are being reduced or eliminated. These adjustments signal an approach that supports emissions reduction through technologies compatible with existing energy infrastructure, rather than through an abrupt transition away from fossil fuels.

Federal leasing and permitting policy also supports new development. The Bureau of Land Management has announced plans to open additional federal lands for oil and gas production, while the government’s decision to lift the pause on new liquefied natural gas (LNG) export authorisations reinforces natural gas as a bridge fuel for domestic load growth and international markets. This trend parallels global demand pressures as Europe continues to seek reliable alternatives to Russian energy supplies.

Produced Water: Ownership and Regulatory Clarity

Texas remains a focal point for produced-water regulation. The Texas Supreme Court’s 2025 decision in Cactus Water Services v COG Operating confirmed that, under standard lease language, produced water belongs to the mineral lessee unless the lease specifies otherwise. The decision resolved a long-standing ambiguity but left some issues open for future negotiation and litigation.

Complementing that ruling, the Texas Legislature enacted new laws, effective 1 September 2025, to promote reuse and strengthen oversight. House Bill 49 provides liability protection for beneficial reuse under defined conditions, Senate Bill 1145 authorises the Railroad Commission to issue permits for land application, and Senate Bill 2122 revises fee structures and definitions for oil and gas waste facilities. Together, these measures expand opportunities for reuse while clarifying regulatory authority. Ownership of brine minerals and produced water remains a nuanced area, but operators now have greater certainty in structuring contracts and compliance strategies.

Legacy Wells and Environmental Accountability

Plugging and abandonment of legacy wells continue to present operational and financial challenges. Senate Bill 1150 sets firm deadlines for wells that have been idle for 15 years or more, with enforcement beginning in September 2027 and limited extensions available. The legislation responds to a growing inventory of inactive and orphan wells, as well as costly brine blowouts that underscored the need for stronger oversight.

Both federal and state regulators hold prior owners jointly liable if current operators fail to fulfil remediation obligations. This joint-and-several liability framework has become a frequent source of litigation, particularly in bankruptcies where cleanup costs attach to former operators. Bonding, asset transfers and environmental indemnity provisions now require closer attention in transactional due diligence.

Renewables Regulation: A New Permitting Framework

Texas is also re-evaluating the role of renewables within its energy portfolio. Senate Bill 819 proposes a new state-level permitting process for wind and solar projects of 10 megawatts or more. The bill would require environmental impact statements, establish setback rules subject to neighbour waivers, impose annual impact fees and restrict certain local tax abatements.

If enacted, this framework could alter project financing and scheduling. Developers are reviewing force majeure and change-in-law clauses in anticipation of new permitting risk. Case law on whether permitting delays qualify as force majeure remains inconsistent, underscoring the need for careful drafting.

Market Dynamics: Drilling and Investment

Drilling activity continues to expand across the Permian Basin, Eagle Ford, and other US basins as both public and private operators increase investment. The Permian Basin remains the most active and profitable region in the country, while South Texas production has rebounded modestly. Federal efforts to make more land available for exploration and production have added further momentum.

Private capital plays a critical role in this growth. Independently owned companies have historically driven much of the drilling activity, often outpacing major producers. As global demand rises, large integrated companies have also begun reinvesting heavily in domestic assets.

Infrastructure, Disputes and Environmental Liabilities

The surge in drilling and production brings corresponding increases in disputes over environmental liabilities, remediation obligations and royalty calculations. Litigation involving plugging and abandonment costs, bonding requirements and cleanup contracts continues to grow. Disputes between buyers and sellers of oil and gas assets often hinge on indemnity language and post-closing remediation responsibility.

Midstream construction and refurbishment disputes have also become more common, reflecting the scale of capital investment in pipelines and terminals. Royalty litigation is expected to rise as drilling accelerates – particularly in the Permian, where new leases often command royalty rates of 25%, double historical norms.

The Water–Energy Nexus

The intersection of water rights and energy production has become increasingly significant. Hydraulic fracturing depends on access to large volumes of water and generates substantial produced water requiring treatment or disposal. As operators expand shale development, water sourcing, reuse and disposal are central to both regulatory compliance and operational efficiency. Recent legislative changes promoting produced-water reuse represent an effort to balance environmental stewardship with production realities.

Global Trade and Domestic Demand

Texas remains the hub for US energy exports, with LNG infrastructure expanding along the Gulf Coast. Exports continue to grow even as domestic demand rises. Industrial growth, manufacturing expansion and the rapid spread of AI and data centres have increased electricity consumption across the country. Meeting both domestic and export demand will require continued production growth and investment in infrastructure.

Outlook: Gradual Transition and Legal Precision

The current energy landscape reflects an evolution rather than a revolution. Investment in oil and gas continues to outpace new renewable projects as policymakers focus on reliability and affordability. Natural gas remains the most practical transition fuel – low in emissions, abundant and politically feasible. Nuclear energy may regain attention as technologies mature, but public acceptance remains limited.

For Texas and national operators alike, success in this environment depends on legal precision. Produced-water ownership, environmental liability and permitting risk now sit at the centre of project planning and investment decisions. As the policy pendulum swings towards reliability and domestic production, the companies best positioned to succeed will be those that align legal structure with operational strategy – anticipating the next phase of regulatory and market change.