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Permalink Reply by Skip Peel - Mineral Consultant on March 26, 2025 at 9:01

There is no royalty hearing at this time on the Arkansas O&G Commission agenda.  The April agenda has not been published.  I'm not sure that Arkansas's royalty decision will be relevant for Texas.  At this point Texas has no definitive court decision on the ownership of brine.  The legislature has not ruled and the existing case law I believe is being appealed.  Texas lessees and lessors are on their own to strike a deal for a brine lease.  Standard Lithium has announced that the highest concentrations of lithium that they have sampled are in Franklin County.

Excerpt.

The Smackover Lithium JV, in partnership with Equinor, continues the successful mineral leasing program in East Texas (“ETX”). SLI first started extensive mineral leasing in the most prospective areas of the Smackover Formation in East Texas in 2022. Since the formation of the JV in May 2024, it has continued to grow the acquired lease position, and is now actively leasing within a total area of 185,000 acres across several Counties in East Texas;

The first ETX project area of approximately 67,000 acres has been identified. This project area is centered on Franklin County, and the Company has previously drilled three exploratory boreholes in and adjacent to this project area and reported the highest known lithium in brine grades in North America (maximum lithium grade of 806 mg/L reported). Some of the existing wells will be resampled during Q2 and Q3 of this year, and it is expected that a maiden Inferred Resource Report for this highly prospective lithium resource will be published in Q3 of this year;

 

https://finance.yahoo.com/news/standard-lithium-provides-corporate-...

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Permalink Reply by Lisa on March 26, 2025 at 10:02

Thanks for the article!! I’m off to read it!

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Permalink Reply by Lisa on March 26, 2025 at 9:57

In entering a lease, I’m just looking for royalty examples from Texas landowners around me and Arkansas’s final decision just to inform what I ask for. I know I’m on my own as a Texas landowner, and I’m glad for the freedom— but it’s a lot of responsibility to be educated and up-to-date.

Right now, I’m leaning towards the bonus they’ve offered plus a percentage royalty instead of the flat fee offered. Some folks in our county got 12.5% but with a different company than is leasing in my particular area (joined acreage). My understanding is that the company offering us a lease is unwilling to go to 12.5%. I want to be educated when I start the bargaining process.

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Permalink Reply by Skip Peel - Mineral Consultant on March 26, 2025 at 10:12

Leases are not being filed in the public record, only memorandums of lease so royalty rates are simply rumors at this point.  I would think that 12.5% appears to be the top of the market currently for royalty.  Bonus offers are not widely reported however my rule is, the more acres - the higher the bonus.  I also usually advise to not warrant title but that can depend on how strong the chain of title is recorded in the public record and how sure the owner is on their title.  I suspect you know that , Lisa.

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Permalink Reply by Lisa on March 26, 2025 at 10:19

I actually don’t know what “warrant the title” means. I inherited the land from my dad, who inherited from his dad, who inherited . . . back to my great great grandfather. Is that the chain of title?

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Permalink Reply by Skip Peel - Mineral Consultant on March 26, 2025 at 10:41

Texas title can be quite complicated when it comes to mineral ownership since the mineral ownership can be severed from the surface estate in perpetuity.  If you lease with a warrant of title that means you are obligated to defend the title against anyone who might claim an interest.  A complete chain of title would be recorded in the public record back to the person who acquired the right and even further back to confirm that he/she received a full 100% of the right.  Often times all the way back to the sovereign.

Where money is involved or anticipated sometimes unknown heirs can come out of the woodwork.  Many Texas families failed to record successions with accurate descriptive lists at the passing of each owner.  If there were numerous heirs over the generations or children from multiple marriages, it can be a headache.

If you own the surface and the entire mineral right, you should be okay no matter how the ownership of brine is eventually settled in Texas.  Right now it is a "ground water" question and the surface owner holds the rights to the ground water.  In that case, the mineral estate does not own the brine or its constituent elements as far as I can tell.

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Permalink Reply by Tar Heel yesterday

My family has been receiving brine royalty checks from Albermarle for many years.  (About $15 per year).  With the "Lithium Rush", should I expect a new lease for the lithium, or are we held by the old brine lease?

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Permalink Reply by Skip Peel - Mineral Consultant yesterday

Hard to offer an informed opinion without reviewing the lease language.  Is the royalty clause specifically tied to bromine?  The wording is important.  Any idea when the lease was executed?

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Permalink Reply by Tar Heel yesterday

Great questions. I need to go find that lease. The lease execution would have been some time before 1992.  Thanks for the questions.  They are pointing me in the right direction.

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Permalink Reply by Skip Peel - Mineral Consultant yesterday

I'm sure a number of AR lessors would be interested in an examination of a 1992 lease targeted at bromine as to whether it covers over brine elements.  I doubt lithium was a factor in the legal construction of your lease.

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Permalink Reply by Skip Peel - Mineral Consultant 11 hours ago

Since it is a 1992 lease, there is a good chance it was filed in the public record.  If you can not find a copy, check there.

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Permalink Reply by Skip Peel - Mineral Consultant 6 hours ago

Companies file application for lithium brine unit with Arkansas regulators; royalties come next

By: Ainsley Platt - April 2, 2025  arkansasadvocate.com

Two companies have filed applications for new brine units in South Arkansas for potential lithium extraction projects, a necessary procedural move under state law that a previous royalty application ran afoul of last year.

The companies — ExxonMobil-affiliate Saltwerx LLC and SWA Lithium, which is a joint venture between Standard Lithium and Norwegian energy giant Equinor — are asking the Arkansas Oil and Gas Commission to unitize thousands of acres in South Arkansas. 

Both companies aim to extract lithium from subterranean brines through a process called direct lithium extraction, or DLE. It’s part of a broader push nationally to obtain domestic supplies of lithium and other materials necessary for electronics of all kinds, from smartphones to electric vehicles.

But before extraction can begin, prospective lithium producers must first satisfy a key procedural requirement outlined in Arkansas law — establishing a lithium extraction royalty. Royalties are paid to property owners who agree to lease their mineral rights to the extraction companies. For the companies to establish a royalty they need to establish brine units. The unit and the royalty are necessary because of the language of the Arkansas Brine Conservation Act (ABCA) of 1979, and the Oil and Gas Commission has to approve the units and the royalties.

A brine unit is an area designated by the commission for the extraction and injection of underground brines, such as those found in the Smackover formation. 

The part of the act specifically pertaining to royalties for substances like lithium requires producers to account for the amounts extracted from each landowner’s property in the unit and establish a “fair and equitable” royalty. 

“We are excited to move our SWA Project forward with our application to form the Reynolds unit in Lafayette and Columbia counties,” wrote Jesse Edmondson, Standard Lithium’s director of government relations, in a text message.

“Establishing a unit is a necessary step to commercially produce lithium from brine in Arkansas. After the unit is established, we will file an application to set a royalty for this unit,” Edmondson said. “The SWA Project is our primary focus in Arkansas, and we look forward to completing this process to allow a final investment decision by year end.”

Both companies previously emphasized the importance of the royalty in their decision-making; it is one of the last remaining unknown variables that the companies will have to factor in as they consider the economics of potential projects and decide whether to move forward on them.

“Establishing our brine unit is a key regulatory step to unlock the lithium industry in Lafayette and Miller counties, enabling jobs and investment potential for Arkansas,” an ExxonMobil spokesperson wrote in an emailed statement.

Both companies already tried for a royalty — Saltwerx once, Standard Lithium twice — but concerns with the applications and lack of information provided to commissioners resulted in them being rejected or withdrawn.

Last year, a joint royalty application filed by Saltwerx and Standard Lithium, alongside Lanxess, Albemarle and Tetra, asked the commission to determine a royalty for an area it described as “the Smackover Limestone Formation underlying lands within Columbia, Lafayette, Miller and Union Counties.” However, the Smackover formation is a geologic feature; not mentioned in the July 2024 application were the brine units such a royalty would apply to.

Objections filed by the South Arkansas Minerals Association argued that the Brine Conservation Act required royalties to be determined on a “unit-by-unit basis.” The association is a nonprofit composed of large southern Arkansas landowners, many of whom hold mineral rights. 

The association’s objections both on the issue of brine units and other aspects of the application ultimately led to a hearing presided over by an administrative law judge, who recommended how commissioners should interpret the law. 

The judge, Charles Moulton, agreed with the association on the matter of whether a royalty needed to be determined on a unit-by-unit basis, pointing out that the ABCA repeatedly references units in its language.

Moulton said during the hearing that he was concerned that granting a royalty without basing it on a unit could have unintended consequences.

“The concern that I have when I read the statute and when I read the application is, is the Commission unwittingly opening up Pandora’s box by establishing a royalty on a formation when they’ve never done that before? They’ve always done it on units,” Moulton said in October.

Tom Daily, the attorney representing the applicants, told Moulton the application couldn’t be based on units because some of the joint applicants did not yet have the units those companies planned to extract brine from. He said expecting the companies to form units before they had decided whether they would move ahead with lithium extraction projects was expensive.

“If we’re told we can’t even talk to you (the commission) until you have formed your units … and the result is unfavorable, that’s a lot more money wasted,” Daily said.

“I cannot amend this application to apply to units that don’t exist yet,” Daily continued. “They will exist.”

Moulton agreed, but added that the applicants could “certainly” amend it to units that did exist. He recommended that the applicants amend their proposal to specify the units they wanted the royalty to apply to.

The applicants then amended their application days before a two-day commission hearing on the lithium royalty in November, changing the language to apply to Smackover brine from existing units, along with “proposed future units.”

At that hearing, the commission ultimately adopted Moulton’s written recommendation that “the establishment of a brine unit is a condition precedent in establishing a lithium royalty under the Brine Act.” At the time, Saltwerx and Standard Lithium didn’t yet have their own established brine units. 

The Oil and Gas Commission unanimously rejected the joint application, citing a variety of concerns mostly separate from the unit establishment issue. 

By obtaining a brine unit prior to filing for the royalty again — which both companies have stated they intend to do in statements and AOGC filings — the companies would resolve one of the conflicts of law that arose during last year’s proceedings.

The areas encompassed by each company’s proposed unit are vast. SWA Lithium’s proposed Reynolds Unit is approximately 20,854 acres; Saltwerx’s proposed Pine Unit is approximately 56,245 acres.

In order to ask the commission to form a unit, applicants are required to already have 75% of the mineral rights in that area under a lease agreement. If a unit is approved by the commission, the remaining 25% would be “integrated” into the unit. According to documents filed with the commission, SWA Lithium currently has 79% of the area under lease, with that number increasing to 88% if a potential brine lease transfer agreement with Saltwerx and Tetra goes through.

Saltwerx did not provide a specific percentage of leases in the area of its proposed unit, only stating that it had “in excess” of 75%. 

The applications for brine unit integration will likely be heard by the commission during its April 22 meeting in El Dorado. If they are approved, royalty applications are likely to follow.

State officials have been intent on establishing a lithium industry in Arkansas, promoting the potential economic benefits the investment will generate. A bill was also filed in the Legislature last week that would grant extraction projects a variety of tax incentives until the 2030s. 

 

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