Brad Handler, equity analyst at investment bank Jefferies, confirmed that the cold-blooded critter is, in fact, impacting stocks.
"It's a cause of concern, and just because a company is up and running that doesn't automatically guarantee that it can continue to operate," he told CNBC. "They're concerned that there may be litigation to force operations to cease or change."
The Permian basin underlying West Texas and southeastern New Mexico is the epicenter of a rebound in U.S. drilling activity, thanks to its relatively low-cost production. Miners have piled into West Texas in order to produce sand close to the Permian demand center.
However, some of mining areas overlap with the dunes sagebrush lizard habitat, a tiny part of Texas and New Mexico, and there's lately been signs of renewed efforts to protect the reptile.
The lizard was once a candidate for the endangered species list, but the U.S. Fish & Wildlife Service decided in 2012 not to designate the critter. It's reason: New Mexico and Texas had made "unprecedented commitments to voluntary conservation agreements," making an endangered listing unnecessary.
But that scheme is now under threat from the influx of sand miners, according to Robert Gulley, head of the Texas Comptroller's Division of Economic Growth and Endangered Species Management. In a letter to the Fish and Wildlife Service sent last month, he warned that 15 so-called frac-sand companies are mining or have plans to mine in four countries with dune sagebrush lizard populations, and just four have taken measures protect them, the Texas Tribune reported.
On Monday, animal conservation group Defenders of Wildlife released a report concluding that mining plans could disturb or destroy 10 percent of the lizard's habitat and adjacent buffer zones.
"Our analysis of satellite images shows that the rush on frac sand mining in the Permian Basin threatens to push the dunes sagebrush lizard towards extinction," Ya-Wei Li, vice-president of endangered species conservation for the group said. "Unfortunately, if the sand mining companies do not refrain from developing in lizard habitat, we might see the extirpation of the Texas populations in the near future."
Investors and industry watchers are concerned about Hi-Crush Partners in particular, said Handler, the Jefferies analyst. That is in large part because the frac-sand firm has assets that overlap with habitats, he said.
Hi-Crush Partners 3-month stock performance, source: FactSet
However, he notes that Hi-Crush has documented its efforts to find the lizards and has not been able to find any significant populations around its mines. Jefferies finds Hi-Crush's arguments "compelling," he added.
Hi-Crush Partners did not immediately return a request for comment.
The lizard issue could be a net positive for some stocks. If it causes a slowdown in mining growth in West Texas, that could ease investors' concerns about rising supply and falling prices, which have weighed on frac-sand stocks, Handler explained. That would benefit miners like Smart Sand that primarily mine in Illinois and Wisconsin. They'd get all the benefits of price increases with none of the exposure to lizard habitats.
Ultimately, Handler says there's relatively low risk that a judge would put significant limits on mining, at least initially, should the issue go to court. A court would likely want a thorough examination of risks to the lizard's habitat before disrupting work on a large scale, he said.WATCH: EPA fracking study downplayed risks to US water supply