In this episode, we dive into a timely and fascinating topic: the growing importance of lithium extraction in the United States and what it means for mineral owners. In fact, long-time listener, Barb R. shared a news story about Standard Lithium Ltd’s discovery of the highest confirmed lithium grade brine in North America in Cass County, Texas. This discovery has sparked conversations about the ownership of lithium mineral rights and who owns the valuable minerals found in produced water and the potential impact on royalties. Whether you have minerals in the Smackover Formation or anywhere else in the United States, be sure to listen to learn how you can navigate this developing landscape to make sure you get paid for these valuable minerals.
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Listener Email
Long time listener, Barb, wrote in to give us a head’s up on the issue of companies pursuing lithium in East Texas and looking to lease minerals where the ownership of lithium in produced water is not reserved by the mineral owner. Because Texas law “provides that any party that takes possession of produced water to treat it for a subsequent beneficial use takes title to that water” this means the operator may be able to take full advantage of the value of the lithium contained in that produced water. It is possible that if lithium is not reserved by the mineral owner, they may be missing out on this opportunity due to this legal “loophole.” Of course, this is being shared for informational purposes only and should to be construed as legal advice so be sure to get with your attorney if you have any questions.
Hi Matt —
I hope you had a great conference a few weeks ago —
I was searching your past podcasts for information on Lithium and mineral rights holders, and think this may be an opportunity for a future podcast, particularly for those folks who have Eastern Texas holdings —
Apparently, Standard Lithium Ltd announced in late March that they believe they’ve found the highest confirmed lithium grade brine in North America. Much of it appears to be centered in Cass County, Texas.
There’s a bit of a trick here, though — and this is directly from a NARO [National Association of Royalty Owners] thread:
“I read news articles about recent efforts to extract lithium from “produced” water from the Smackover formation in Cass county. A few years back the state of Texas passed legislation that gives ownership of produced water to the producer; unless the o&g lease specifies otherwise. We had our attorney add language to our lease addendum, reserving interest in lithium and other extracted minerals for this possibility. You can search topics under Cass county discussion group to learn more about this area.”
One of my family members was just contacted about her lease with one of the two main players in the area, urging her to switch her lease to them when her lease expires in 6 1/2 months. They also offered a significant amount to buy out her lease – and actually “rounded up” their calculation, which immediately raised a red flag in my mind. That’s when I began researching to find out what was going on in the area.
You would be doing your listeners with Texas holdings a great service by giving them a “heads up” so that they know what’s happening in the area. They could be so impressed by the buy out figure that they could miss the bigger picture ——
I’m wondering what other states might require mineral rights holders to ensure they have lithium covered in their rights – especially with brine….
Just a suggestion.
Thanks. Barb
Listener Email
Lithium’s Soaring Demand and Domestic Production
Lithium is a chemical element with the symbol Li and atomic number 3. It is a soft, silvery-white alkali metal. Like other alkali metals, “lithium is highly reactive and flammable, and must be stored in vacuum, inert atmosphere, or inert liquid such as purified kerosene or mineral oil. Due to its solubility as an ion, it is present in ocean water and is commonly obtained from brines. Lithium metal is isolated electrolytically from a mixture of lithium chloride and potassium chloride.
Lithium and its compounds have several industrial applications, including heat-resistant glass and ceramics, lithium grease lubricants, flux additives for iron, steel and aluminum production, lithium metal batteries, and lithium-ion batteries. These uses consume more than three-quarters of lithium production.”
The increased demand for lithium, primarily driven by its crucial role in battery production, has led to a push for domestic production. For instance, Elon Musk aims to boost Tesla’s lithium hydroxide supply for their electric vehicles. While most lithium production currently occurs outside the United States, the potential for domestic extraction is gaining momentum. Musk’s plans for a lithium refinery near Corpus Christi, Texas, indicate the significance of this move. Establishing refining capacity within the country’s borders ensures greater energy security and control over the entire lithium supply chain.
In the past direct lithium extraction took months where water was stored in evaporation ponds to get rid of the excess water to leave a highly concentrated lithium brine that could be processed. Technological innovations have reduced the time required to process the lithium brine using continuous processing to extract lithium from produced water to a high purity lithium chloride solution. It is then further processed to convert it to battery grade lithium hydroxide which is what is used in lithium ion batteries.
Understanding the Smackover Formation
Lithium is found in varying concentrations in produced water from oil & gas wells but the recent focus is on the Smackover formation in the southern US reaching from East Texas, southern Arkansas, Louisiana, Mississippi, and the Florida Panhandle. The formation is approximately 600 miles long and 60 miles wide.
However, it’s crucial to note that lithium can be found in varying concentrations in produced water and oil and gas reserves across different regions. Therefore, even if your minerals are not located within the Smackover Formation, there may still be valuable lithium deposits nearby.
In addition to Lithium extraction, there may be the potential to profit from the extraction of other valuable minerals. One example could be Bromine that apparently has also been extracted from produced water from the Smackover formation.
The Importance of Lease Language and Ownership
With the emerging value of lithium and other minerals found in produced water, it’s vital for mineral owners to review and update lease agreements accordingly. Traditionally, oil and gas leases primarily focused on hydrocarbon minerals, but reserving rights to additional minerals, such as lithium, can ensure owners do not miss out on potential royalties. Furthermore, the ownership of produced water is another critical aspect to consider. In some states, groundwater is owned by the surface estate, which raises questions about the ownership of valuable minerals contained in that water. As the industry evolves, litigation and case law will shape the clarity surrounding these ownership rights.
Conclusion
As the demand for lithium continues to rise, mineral owners must stay informed and proactive in protecting their interests. The growing focus on domestic lithium production presents an opportunity for owners to maximize their royalties. By working closely with qualified attorneys and ensuring lease language includes provisions for reserving rights to valuable minerals, such as lithium, mineral owners can navigate this evolving landscape confidently. While it is still early days for lithium production in the United States, monitoring developments, legal precedents, and industry trends will be essential for those seeking to unlock the potential wealth of lithium and other valuable minerals. Stay tuned for more insights on the Mineral Rights Podcast as we explore the ever-changing world of mineral ownership.
Resources Mentioned in this Episode
- Lithium – Wikipedia
- Mineral Production to Soar as Demand for Clean Energy Increases
- Produced Water in Texas … Who Owns It? | Energy & the Law
- 5 things to know about the lithium refinery Elon Musk’s Tesla is building near Corpus Christi
- 5 things to know about the lithium refinery Elon Musk’s Tesla is building near Corpus Christi
- Oil and Gas: Two lithium wells under way in western Columbia County | Public Records | magnoliareporter.com
- MRP 6: How to Negotiate an Oil and Gas Lease
- MRP 76: Leasing Mineral Rights for Mining Potash and Other Critical Minerals
- MRP 140: What Royalty Owners Need to Know About Bitcoin Mining With Natural Gas
- MRP 164: Advancements in Drilling With Dr. Bill Eustes
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