Replies to This Discussion

Permalink Reply by Joe B. Lovelace on May 22, 2023 at 4:33

Thanks for posting this Skip.  A good overview of current activities.  Brine leasing is ongoing by multiple parties in Cass County.

Permalink Reply by Rock Man on May 22, 2023 at 4:45

I wouldn't be surprised if some of the best references for Smackover water may be from universities that had students doing graduate level research and theses / publications on water chemistry.

Permalink Reply by Josh Ellis on August 17, 2023 at 4:22

Do the companies offering brine leases intend to produce oil and gas as well?

It appears that the sample lease attached is drawn up for the owner of the mineral estate. In Texas, surface water, which the Texas Water Code defines as "water percolating below the surface of the earth" and would include brine, belongs to the surface owner. Texas courts treat produced water from oil & gas production differently and that would belong to the minreal estate. It seems like depending on how the water is extracted, whether it is part of oil & gas production or whether it is mining operation for the brine only, could determine who owns the minerals trapped in the brine. 

Paragraph 18 hints to this in its definition of "brine." 

Permalink Reply by Skip Peel - Mineral Consultant on August 17, 2023 at 4:33

Josh,  several lessees whose lease forms we have reviewed toss in a three sixteenth royalty O&G rights clause seemingly as just asking for the moon as long as they are prospecting from willing mineral owners.  I doubt that those companies plan to drill any O&G wells but they will happily assign their development rights to a company that does if they get lucky and someone thinks there is economic recoverable oil or gas associated with the lands leased.  It is a mistake for anyone to execute such a lease.  There should be separate leases and both should be reviewed by an attorney experienced in mineral/O&G law specific to the state in question.

Permalink Reply by Josh Ellis on August 17, 2023 at 4:37

That's interesting. Full disclosure, I am an oil & gas attorney in the area and just starting to get calls about these leases. This is the first one I've seen though. I feel like there are lot of issues yet to be determined. 

Permalink Reply by Skip Peel - Mineral Consultant on August 17, 2023 at 4:45

Scroll through the discussion thread and find the lease forms that have been attached.  Arkansas has more fully developed regulations while Texas is just getting started.  The Texas legislature only decided late in the last session to give regulatory authority to the Railroad Commission and the Commission has yet to set up the process of permitting brine wells and associated infrastructure. Mineral owners need O&G attorneys to get up to speed ASAP on how to draft protective and beneficial lease language in an Exhibit A to the lease forms currently circulating.  In addition to compensation related to production volumes, there needs to be some reasonable term to brine leases.  Unlike O&G, the ability to transport and process brine will take some years to come on line but the extravagant term lengths in these early leases are ridiculous.  Since timing is uncertain, investors are asking to tie up development rights for far too long.  I am advising mineral owners to wait and not allow anyone to pressure them into a lease this early in the land rush.

Permalink Reply by Damon Baxter on October 26, 2023 at 6:56

This will get HEAVILY litigated. 

Permalink Reply by Skip Peel - Mineral Consultant on October 26, 2023 at 7:25

I expect you are correct, Damon.  When there is money at stake, all parties will be trying to get their share.   And that of any of their competitors that they can.

Permalink Reply by Skip Peel - Mineral Consultant on May 22, 2023 at 4:27

Question Rock Man.  Since the Smackover is a thick sequence, might the concentration of brine and lithium vary by depth?

Permalink Reply by Rock Man on May 22, 2023 at 4:40

The Smackover has variable gross thickness depending on the area - but in this gross thickness, there are variable intervals of reservoir (porosity and perm) that can contain water and have the properties for it to flow to the surface.

• e.g., 800' of gross Smackover may only contain 200' of actual porosity and perm that could contain water. 

Water properties will vary by depth, formation temperature and area. And especially in relationship to other stratigraphy (e.g., Salt) that may be the source of the lithium.

No easy answer for your question. 

Permalink Reply by Skip Peel - Mineral Consultant on May 22, 2023 at 4:55

As I expected.  Thank you.

Permalink Reply by Skip Peel - Mineral Consultant on June 4, 2023 at 11:57

Here is the lithium leasing article that was published in the Cass County Citizens Journal-Sun of May 31.

Cass%20County%20Citizens%20Journal-Sun%20Lithium%20article.pdf

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