SMACKOVER LITHIUM GROUP – TEXAS
Lithium from brine is an evolving energy play based on Direct Lithium Extraction (DLE). The DLE process for extracting lithium and other elements with value from Smackover (SMK) formation water is becoming the most economic and environmentally friendly means of sourcing domestic lithium for use in modern battery technologies. Leasing is ongoing and extraction plants are in the design/development stage. Different states will have somewhat different regulatory and legal frameworks.
Note that lithium concentrations in the Smackover section can be highly variable plus reservoir quality for an effective water source can be equally inconsistent. As a result, not all areas may be prospective for lithium mining (DLE). One also needs to keep in mind that variable H2S concentrations are a normal product associated with the Smackover reservoir and any produced fluids.
The counties in Texas that are prospective for Smackover lithium production are Cass, Morris, Titus, Franklin, Hopkins, Hunt, Camp, Marion, Rains, Navarro, Wood, Van Zandt, Kaufman, Limestone and Upshur Counties.
Last Lease Details
We have an energy attorney out of San Antonio advising but no one really knows much about these details and how they will play out. Talking to him is helpful but expensive by the minute!!
I at least need help forming better questions.
Are you guys interested in helping me parse out some vocabulary!!!?
Skip Peel - Mineral Consultant
Lisa, I'm in the same predicament as the attorney. I know what post production costs are deducted in O&G leases but not in Lithium. They will not be the same and the Big 3 haven't mentioned anything of that subject in their official announcements. You might be able to negotiate language such that no post production deductions would exceed a set percentage of your gross but what that percentage might be is unknowable based on the little we know. Your attorney might ask some questions of SL as to whether there will be costs deduction beyond the DLE process. For example the lithium produced by DLE will likely be shipped to a refinery. Will the refining costs be passed on to you? Would transportation costs be involved? If the gross price is based on the purchase price by an end user, would there be transportation costs deducted for shipping to the end user (battery plant)? These deducts would be similar with the deductions in O&G leases but I have no idea if they would apply to your lithium royalties. You should not get in any hurry and your attorney should ask these types of questions to help inform his/her amendments to the standard form SL lease. All this no knowing is maddening.
Aug 22
Lisa
I think what you suggested about a percentage limit to the costs is reasonable!!
The other issue is our attorney feels strongly about the percentage being on the brine— not just the sources lithium. Brine is defined elsewhere as everything in the brine water— making all the possible minerals. That seems like a hill worth dying on.
Aug 22
Lisa
Aug 22