Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on Saturday

Very good.  When a land/mineral owner has enough acreage to be in a good negotiating position, it pays to not get in a rush and to initiate a back forth proposal counter proposal discussion. And remember competition for leases always makes offers more aggressive.  Competition often increases over time.

Permalink Reply by Joe B. Lovelace on Saturday

This is not legal advice nor is it wording added to an executed lease, as I could not come to an agreement with Cass County Brine, aka, Standard Lithium in 2021.  It is here for discussion only.

Royalty. Lessee shall pay to Lessor a production royalty for the “brine” produced or removed from the leased premises, or any lands it is pooled with, the same being 1/5th of the gross value received on “brine”, including any product, products or elements extracted therefrom, without deduction for post-production cost. Also, a 1/5th royalty will be paid on the gross value received from any oil, gas and associated hydrocarbons that may be produced incidentally with the production of “brine”.

Permalink Reply by Rock Man on Saturday

I would add clause as to "cost free" for brine / lithium production and subsequent re-injection of the stripped fluids

Permalink Reply by Skip Peel - Mineral Consultant on Saturday

Thanks, Joe and Rock Man.  Good suggestions.  As to the current rejection by SL, we are far away from production in any commercial quantity and the company has little incentive to accept anything beyond their standard offer and lease agreement now.  I'm sure that will change over time as actual full scale production nears.  At least for those who own significant acreage that would be included in a brine unit boundary.  Those with small to modest acreage should be careful in how far they attempt to push lease terms.  Before full production nears we should have a better understanding of what terms SL and other lithium companies are willing to accept.

Permalink Reply by Rock Man on Saturday

Agree it will be interesting to see how lease language could evolve over time.

One thing that that may become an issue in the future is environmental clauses tied to penalties for H2S / sour gas emissions and odor on the surface

As well as any associated gas that may be flared during the production / extraction process

Permalink Reply by Skip Peel - Mineral Consultant on Saturday

Yes, H2S should be on everyone's radar and leases should address it.  I hadn't thought about associated Smackover gas.  If there was a sufficient quantity, it might power a DLE plant.

Permalink Reply by Rock Man on Saturday

Good point about associated gas running plant and/or injection - compressor pumps moving the fluid .

Of course, any H2S in the gas will probably mean that gas will need to be treated / stripped of that content before it is put into power generation (thinking the H2S would damage any equipment)

Lots of moving parts here - and many are not being considered 

Permalink Reply by Lisa on Sunday

What is H2S?

The GeoFrame leases near us include a royalty on the geothermal energy produced from the drilling process.

Permalink Reply by Rock Man on Sunday

H2S = hydrogen Sulfide / highly poisonous gas

Very common in Smackover in your part of Texas

The GeoFrame lease clause @ royalty on geothermal energy is great to see!

Permalink Reply by Skip Peel - Mineral Consultant on Sunday

H2S in low concentrations just smells bad.  Like rotten eggs.  In higher concentrations it kills people.  The skull and crossbones signs around wells with H2S ain't kidding.  It is also highly corrosive so eats through metal.  No one should live close to or downwind from high concentrations of hydrogen sulfide.  Most of the deaths each year are people that have to work in close proximity to the wells.

Permalink Reply by Lisa on Sunday

Wow! H2S sounds scary and awful! Are there other types of drilling where H2S was an issue and it’s all been done safely?

There was question about Brine and other elements. Our attorney has a tight statement in our/his response. It’s great— but we don’t know that they’ll accept it.

Permalink Reply by Skip Peel - Mineral Consultant on Sunday

H2S concentrations vary.  In small concentrations it's just smelly.  In higher concentrations the source needs to be far from people.  That's why sour gas wells have fences around them and warning signs.  What is unknown at this time is how the brine will be transported from supply wells to plants.  Fiberglass pipelines have been mentioned once I believe.  Fiberglass must be more impervious to the corrosive effects of H2S. The O&G industry has been dealing with H2S for decades and they understand the risk and how to address it.  Still there is some risk involved.

Just me but I wouldn't lease without language covering other elements.  The US has a need for many rare earth elements.  And it's a long time before any lithium will be produced.  Just as with O&G leases, you and your heirs may live with those terms for decades to come.

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