As the Smackover (SMK) Lithium (Li) play picks up steam we need to acknowledge that from regulatory and legal standpoints, there will be significant differences between the play in South Arkansas and in East Texas. Very soon we expect to know more about royalty provisions and regulatory guidelines. From past experience with dissimilarities between Texas and Louisiana mineral laws and regulatory statutes governing the Haynesville Shale, we hope to limit confusion and make it easier to access the information that will be pertinent to land and mineral owners.
In order to help members and quests to the website and to avoid confusion, we will start two new discussions, one for Texas and one for Arkansas. There is an abundance of information in the original SMK Lithium discussion threads and members may want to click on them and then save them to their computer bookmarks/favorites to be able to access them in the future as they will eventually rotate off the main page. After 24 hours, comments in those discussions will be closed but the replies will remain available in the website archive. Archived discussions are available by using the search box in the upper right corner of all website pages.
GoHaynesvilleShale.com was one of the first resources for mineral owners to learn basics, share information and generally provide a place where mineral owners could become more informed managers of their mineral assets in the age of the Internet. The website is pleased to continue to provide those services to those who will benefit from the SMK Lithium Play. Please keep in mind two things. You are a key part of the on the ground intelligence network by letting your friends and neighbors know about GoHaynesvilleShale.com and encouraging them to participate in site discussions. And since GoHaynesvilleShale.com is free for all to use, please consider a donation to help keep the website online.
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Lisa, if you don't mind me asking, which DLE company did you sign with?
Seems to me, like has historical occurred with O&G, the early lithium leasing is being way low-balled. That's sorta been the standard protocol for "plays" over the years. Plus, the largest landowners tend to be inked first. Ask the old-timey landowners what they got for their "oil" back in the '20s & '30s, etc. Total low-ball. And some of those inconsequential bonuses and ridiculous royalty percentages are still in effect today. Such HBPs can be a curse, which the trusting country folk initially thought were good deals in Louisiana/TX/Ark. Of course, way back, not many people used lawyers and signed away rights for peanuts, which stuck with 'em for decades, with sum still bemoaning the old HBP leases. Heartbreaking. Yeah, and I know 'cause it happened in my family. So, if it was me, at such low-ball peanut terms, I'd pass and tell them to come back when they had a "fair & reasonable" offer, which is a Pentagon-type procurement term. In other words, seems to me that right now there's very little money garnered by landowners leasing their lithium. If it was me, I'd wait until the "play" got much more mature and the prices went up to legit O&G leasing terms in the 21st Century. Just saying. (Of course, the naysayers will argue that low-balling is needed to develop this new resource and make the lithium play viable. And that would mimic the similar argument used back during the first oil boom in the ArkLaTex.) Just saying.
Chevron Enters Domestic Lithium Sector to Support U.S. Energy Security
Leverages subsurface, drilling, and resource extraction capabilities and strengths
https://www.businesswire.com/news/home/20250617717350/en/Chevron-En...
HOUSTON--(BUSINESS WIRE)--Chevron U.S.A. Inc., a subsidiary of Chevron Corporation (NYSE: CVX), announced today the acquisition of two leasehold acreage positions. The first from TerraVolta Resources, whose investor is an affiliate of The Energy & Minerals Group (EMG), and the second from East Texas Natural Resources (ETNR) LLC.
The estimated leasehold position includes ~125,000 net acres and is situated across regions where the Smackover Formation is present, specifically spanning Northeast Texas and Southwest Arkansas. This formation is of particular interest due to its notably high lithium content and marks Chevron’s first step toward establishing a commercial-scale, domestic lithium business.
Future development will aim to utilize the direct lithium extraction (DLE) process, a set of advanced technologies employed to extract lithium from brines produced from the subsurface. Chevron seeks to deploy this emerging technology, which allows for faster and more efficient production and is expected to have a smaller environmental footprint compared to traditional extraction methods.
“This acquisition represents a strategic investment to support energy manufacturing and expand U.S.-based critical mineral supplies,” said Jeff Gustavson, president of Chevron New Energies. “Establishing domestic and resilient lithium supply chains is essential not only to maintaining U.S. energy leadership but also to meeting the growing demand from customers. This opportunity builds on many of Chevron’s strengths including subsurface resource development and value chain integration.”
Lithium is a key component supporting the trend toward electrification and can contribute to building a resilient, lower carbon energy system that meets growing energy demand, while balancing reliability and affordability.
Media Contact:
Kelly Russell
936-333-4077
kellyrussell@chevron.com
Permalink Reply by Joe B. Lovelace on This is significant information that pulls back the curtains on the LLCs taking Brine Leases (ETNR) in Cass County and showing Chevron with its balance sheet of $ to invest going forward.
Permalink Reply by Joe B. Lovelace The Longview News-Journal recently published an article highlighting lithium leasing activity in Franklin County by GeoFrame Energy and its plans for a lithium extraction facility . {attached}
GeoFrame recently filed with the Texas Railroad Commission a W-1, which is an application for a permit to drill a geothermal well.
The W-1 and Well Plat are attached.
https://www.jdsupra.com/legalnews/from-waste-to-wealth-texas-suprem...
On June 27, 2025, the Texas Supreme Court issued its long-awaited decision in Cactus Water Services, LLC v. COG Operating, LLC, No. 23-0676, resolving a high-stakes dispute over the ownership of produced water—a vexing byproduct of oil and gas production that is increasingly being viewed as a resource rather than waste—and its constituents. The Court held that, unless expressly reserved, a deed or lease conveying oil and gas rights also conveys produced water as part of the mineral estate. The decision not only reinforces the ownership of produced water under Texas oil and gas law, but also offers insight into how emerging practices such as direct lithium extraction (DLE) from produced water might be treated under existing legal frameworks.
Background
The crux of this case is whether produced water belongs to the surface or mineral estate. Under Texas law, groundwater is owned by the surface owner, irrespective of the minerals contained in the groundwater. Coyote Lake Ranch, LLC v. City of Lubbock, 496 S.W.3d 53 (Tex. 2016); Robinson v. Robbins Petrol. Corp., 501 S.W.2d 865 (Tex. 1973). However, certain minerals, including lithium, are part of the mineral estate.
COG Operating, an oil and gas operator in the Permian Basin and mineral lessee, brought a declaratory judgment action against Cactus Water Services, a company that had acquired purported rights to produced water through a produced water lease granted by the surface owners, including the right to sell all water “produced from oil and gas wells and formations [on the covered properties].” COG, which had operated the lease and managed the transportation and disposal of produced water for years prior to the Cactus’s lease, argued that it owned the produced water as part of its mineral leasehold rights.
The Texas Supreme Court agreed, holding that “produced water is not water” subject to traditional groundwater ownership by the surface estate. Rather, produced water is an oil and gas waste byproduct necessarily included in the conveyance of oil and gas rights. “While produced water contains molecules of water, both from injected fluid and subsurface formations, the solution itself is waste—a horse of an entirely different color.” Thus, the Court held, produced water belongs to the mineral estate owner absent an express reservation to the contrary. Because produced water is an unavoidable byproduct of hydrocarbon production—and its handling is both a legal obligation and an operational necessity—the rights to it pass with the mineral estate unless clearly retained by the surface owner.
In COG’s leases—as is typical in Texas oil and gas leases—the granted interests were defined as “oil and gas” and “oil, gas, and other hydrocarbons.” Without an express reservation of produced water, the Court held that this granting language conveyed to COG “the right to possession, custody, control, and disposition of the constituent water in the liquid waste from its hydrocarbon production.”
Implications for Lithium and Other Critical Mineral Extraction
Oil and gas drillers inject a mixture of water, chemicals and other fluids into wells to dislodge underground hydrocarbons. The resulting produced water returns to the surface, typically laden with dissolved constituents such as salts, heavy metals, and naturally occurring elements—including lithium. Notably, lithium is the lightest metal and highly soluble in water, making produced water a potentially valuable source of this critical mineral. (For more on extracting lithium from brine, see Lithium for Batteries from Geothermal Brine.) Historically, most produced water is reinjected into subsurface disposal wells, but such practices have increasingly been linked to induced seismicity, prompting operators to explore alternatives.
As interest in critical mineral recovery accelerates—especially in Texas, where produced water volumes are vast, salinity levels are high, and there are abundant lithium reserves—the concept of using DLE technologies to harvest lithium (and other minerals) from produced water has gained traction among investors, operators and regulators. Conceptually, DLE presents a dual opportunity: transforming a legally and logistically burdensome waste stream into a revenue-generating resource, while reducing reliance on injection disposal. Further, it has relatively minor surface impact compared to traditional extraction techniques.
But Texas law had not definitively answered whether lithium and other minerals in produced water belong to the mineral or surface estate. This legislative session, the Texas Legislature considered—but ultimately did not pass—SB 1763, which would have classified minerals contained within produced water, such as lithium, as part of the mineral estate. The Cactus Water ruling now clarifies that the oil and gas lessee holds the right to possess and control the produced water itself, including the ability to transport, treat and dispose of it. (For a deeper look at recent legislative developments affecting liability protections in produced water handling, see Texas Legislature Expands Liability Protections for Produced Water Operations.)
One critical question the Court did not expressly address is who owns the lithium and other critical minerals dissolved in produced water. However, the Court’s reasoning can ostensibly be extended to support the view that ownership of these constituents follows ownership of the produced water itself. Because the Court confirmed that produced water is part of the mineral estate, it follows that the constituent elements within that waste stream, including dissolved minerals, would also belong to the mineral estate, absent an express reservation or contrary agreement.
The Court emphasized that the parties “understood that disposal of liquid waste meant consumption of the capital value, if any, of constituent water,” suggesting that any potential value inherent in the water and its contents was part of what the mineral estate owner controlled. The Cactus Water decision further clarifies that the oil and gas lessee holds the right to possess, manage and dispose of the produced water, reinforcing the notion that control over the water includes control over its dissolved contents.
While the Court stopped short of definitively stating that minerals like lithium are conveyed with the mineral estate, its reasoning points in that direction. Nonetheless, this issue remains legally nuanced. Traditional oil and gas leases often do not address ownership of non-hydrocarbon minerals, raising the possibility of future disputes or the need for further legislative or judicial clarification.
Lithium Royalties: The Next Legal Frontier
While Cactus Water clarifies ownership of produced water, it leaves open the critical question of how to structure and value royalties for lithium and other critical minerals extracted from that water. As DLE technologies move from pilot projects to commercial deployment, operators, mineral owners and surface owners will need to confront the absence of a standardized royalty framework for lithium produced in this unconventional context.
In Texas, royalties for oil and gas typically fall between 12.5% and 25% of the value of production, depending on the lease terms. By contrast, royalty provisions in water disposal agreements (where they exist) tend to be minimal or fixed-fee based. Lithium extracted from produced water does not neatly fit into either paradigm. It is a high-value mineral historically unaccounted for in traditional lease structures, and its production may involve entirely different economics, infrastructure and processing timelines.
Establishing an appropriate royalty structure for lithium will require careful balancing of interests. Landowners and mineral holders may seek compensation aligned with prevailing royalty rates for valuable subsurface commodities, while operators may argue for lower rates to account for the technological risks and processing costs associated with DLE. Regulatory agencies may also enter the conversation, particularly if public lands or seismic concerns are involved.
Until more precedents emerge, parties should approach lithium royalty negotiations with a focus on transparency, detailed revenue-sharing mechanisms, and clear delineation of costs. Leases that are expressly tailored for lithium recovery should avoid relying on boilerplate oil and gas royalty language and instead define valuation benchmarks, pricing indices and audit rights specific to lithium and other critical minerals.
As DLE projects advance, royalty terms may become a flashpoint for litigation or legislative scrutiny, making proactive structuring a key risk management strategy.
Conclusion
The Texas Supreme Court’s decision in Cactus Water provides long-awaited clarity on the ownership of produced water under Texas law, with far-reaching implications for oil and gas operators, midstream companies, water management service providers, and parties exploring critical mineral recovery. By affirming that produced water is part of the mineral estate absent an express reservation, the Court has provided a legal foundation for mineral lessees to assert control over both the water itself and its potentially valuable constituents, such as lithium.
As demand for domestic sources of critical minerals grows, driven by clean energy goals, battery manufacturing and national security priorities, produced water is quickly emerging as a strategically important resource. The evolving market for direct lithium extraction and similar technologies positions produced water not only as an environmental and operational challenge, but also as a potential asset.
In light of the Cactus Water decision, stakeholders should take proactive steps to protect and optimize their interests:
Ultimately, the Cactus Water ruling represents a pivotal moment for Texas energy and mineral law, aligning traditional oil and gas principles with emerging technologies and the accelerating energy transition. Stakeholders who act now to secure their rights and plan for future recovery efforts will be best positioned to capitalize on this shift.
Permalink Reply by Skip Peel - Mineral Consultant The moment may be "pivotal" but it falls far short of settling this issue. This narrow ruling grants the rights to "produced water" to the well operator instead of the surface estate. What is at stake in East Texas is the ownership of "formation water" which should rightfully be owned by the mineral estate. In much of East Texas where leasing is ongoing for SMK brine, there are no wells and therefore no O&G lease. It would follow from the ruling that the mineral estate owns the water at depth until it grants a lease to an operator who produces oil and/or gas with the produced water being a byproduct of that production. If there is one or more elements in produced water not covered in the O&G lease, how is a mineral owner compensated?
Courts can only rule narrowly on what is before them as in the case of COG and Cactus. The screaming need is for a ruling that the mineral estate owns the geological water at depth and then the mineral owner knows how to negotiate a lease. The leases in East Texas that are obviously chasing lithium often have royalty clauses for oil and gas. Some of the ones we have discussed here are for a quarter (25%). Does that royalty apply to lithium? Does a lease for brine that does not include a mention of oil and gas cover "produced water" or "formation water"? This is one big screw up and straightening it out is imperative for all parties involved. Without a suit before a court, this will go on and on unless the legislature steps in and passes a law that clarifies the ownership.
In researching the decades-old Tuscaloosa Trend and the immense wealth it has generated for many, I find it deeply troubling that this resource-rich formation runs directly beneath one of the poorest communities in North Baton Rouge—near Southern University, Louisiana—yet neither the university ( that I am aware of) nor local residents appear to have received any compensation for the minerals extracted from their land.
This area has suffered immense environmental degradation…
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