Lithium In Southern Arkansas Smackover
Lithium is a mineral that has high global value due to its primary role in the production of batteries, such as electric car batteries, and increased demand worldwide. In October 2024, the United States Geological Survey (USGS) in coordination with the Arkansas Department of Energy and Environment (ADEE) released a study of the amount of lithium present in the brine of the Smackover Formation, which spans across the entirety of southern Arkansas. Their research found that there was nine times the amount of lithium within the basin to satisfy the International Energy Agency’s projection of global lithium demand, with low-end estimates at around five million tons.
This has launched the region into the spotlight, with national and global energy companies seeking to get involved with the potential lithium boom. However, this has also placed many southern Arkansas landowners into unknown territory.
What Are Mineral Rights?
Mineral rights refer to the legal ownership of the minerals beneath the surface of a parcel of land, like oil, gas, and lithium. This is different from surface rights, which deals with the legal ownership of the property above-ground and all things on it, like your home, trees, barns, and sheds. As a landowner, you can convey your mineral rights separately from your surface rights to energy companies seeking to extract the below-ground resources with a mineral lease or deed.
What is a Mineral Lease? What is a Mineral Deed?
Sub-surface rights are typically conveyed through either a mineral lease or a mineral deed. Mineral deeds transfer the entirety of the ownership of the minerals and all rights to the minerals by permanently transferring them from one the seller to the buyer. Learn more about properly conveying oil, gas, and mineral interest through mineral deeds here.
On the other hand, mineral leases temporarily grant entities the rights to access the land and extract the sub-surface minerals for a specific period of time, with the landowner still retaining full ownership rights to the minerals themselves. Under a mineral lease, the entity accessing the minerals will typically pay royalties, rental payments, or both to the landowner. Learn more about negotiating mineral royalty payments here.
Lithium Discovery and the Changing Discussion Around Mineral Leases/Deeds in Arkansas
The lithium found in the Smackover Formation was found within the brine, which is kind of like extremely salty water. A common byproduct of the oil and gas industry, brine contains high amounts of salt and other minerals, like lithium. However, lithium does not currently fit into the existing Arkansas legal framework, leaving some ambiguity in how landowners and production companies can proceed.
Arkansas Code Section 15-76-315
Title 15 of the Arkansas Code contains laws regarding oil, gas, and brine. Within Title 15 is Chapter 76 Section 315, focusing on brine production and its valuation. However, this statute was designed around the traditional brine elements, like bromine, because brine was not deemed to have any distinct commercial value outside of the commercial sale of bromine. The statute also states that the value of brine must be a “fair and reasonable market value” as determined by the operator of the unit, with no compensation ever allowed to go below $32 per acre per year.
Unlike the commercial market for bromine, lithium’s global market demand is high, but there is no history of lithium production in Arkansas, meaning there is no historical sales data for unit operators to rely on for market pricing purposes.
As of the publication of this article, the Arkansas Oil and Gas Commission (AOGC) is preparing to enter complex proceedings involving the valuation of lithium and its pricing, which will have broad and sweeping impacts on both landowners and producers alike.
Arkansas Brine Conservation Act of 1979 and the Additional Substances Provision
The Arkansas Brine Conservation Act of 1979, otherwise known as the Brine Act, was first written with the purpose of authorizing the AOGC to regulate and establish the production of brine. As mentioned, brine was not commercially distinct from the extraction and production of bromine at the time of adoption of the Brine Act, so all of the production and sale of brine was linked to bromine with no room for the inclusion of other minerals within the brine, like lithium.
Eventually, the “Additional Substances Provision” was added to the Brine Act (1995). This Amendment kept the commercial brine market entwined with the market for bromine, but allowed for the creation of additional markets for other substances extracted from brine – which would include lithium. If the AOGC finds a commercial market for lithium exists, and presumably it will, then lithium will be permitted to be extracted and sold commercially within Arkansas.
However, this has created additional royalty requirements for producers. The royalties paid by a brine producer to a mineral owner for additional substances are in addition to the foundational royalties of the brine itself. Therefore, producers must now not only pay a royalty for the additional substance, but they must also pay another royalty for the extraction of the brine. This potentially creates significant economic opportunities for landowners and mineral rights owners.
Strohacker Doctrine
The “Strohacker Doctrine” is also worth mentioning. The concept was created in a foundational oil, gas, and mineral case in Arkansas called Missouri Pac. R. R. Co. v. Strohacker. In the case, a landowner sought to quiet title to the oil and gas rights under their land between two companies, Iron Mountain and Southern Railway Company. Both companies had made numerous conveyances of the land, which they acquired through a land grant, but Iron Mountain had also reserved “all coal and mineral deposits” for themselves. The Supreme Court of Arkansas stated that only the minerals that were contemplated by the parties at the time the reservations were made within the deed were actually reserved.
The doctrine was relied upon again in Stegall v. Bugh, a case where brine was not classified as a mineral that could be contemplated under the general phrase “minerals,” because it is majority salt water. This was reaffirmed in a 2002 case called D.M. Riche, Inc. v. McGowen Working Partners, Inc.
Therefore, as of 1955, all parties seeking to obtain rights to brine and the minerals within it, like lithium, should explicitly mention brine within the deed title and language to ensure that it is included in a conveyance or reservation. Since brine does not fit within the historically contemplated definition of a mineral, it is highly likely that it has never been covered under a standard oil, gas, and mineral lease or deed as used throughout the state, which have typically never mentioned brine or lithium at all. Therefore, if the word “brine” is absent, the lease or deed must be renegotiated and rewritten to include brine, and thus including lithium, in the language and context of the deed.
What Does This Mean for Arkansas Landowners?
Many landowners in southern Arkansas are beginning to realize the dramatic impacts that the discovery of lithium will have on their land. As these landowners begin to weigh their options, there are a few things they need to consider:
- The Impacts of Extracting to Your Land. Sub-surface extraction of any kind is not possible without some kind of environmental impact. As the landowner, it is important to consider your desired use of the land, and whether an extraction project would cause serious disruptions to that use. If your goals for the land can be accomplished alongside the introduction of a brine extraction project, there are significant economic benefits to allowing it to take place on your land.
- Whether to Use a Lease or A Deed. If your land use would not be inhibited by the introduction of brine extraction and processing, it is important to consider which document structure is right for you: a mineral deed or a mineral/mining lease. A deed will transfer all sub-surface rights and ownership entirely to the other party with the inclusion of some form of bulk payment to the seller, while a lease will only allow the other party access for a limited amount of time and include either a gross or net royalty.
- Consult with a Real Estate Attorney. Though brine extraction is not new to Arkansas, lithium-specific extraction is. Current Arkansas laws require a deep understanding of the complexities of mineral rights and how to properly convey them. Landowners should seriously consider consulting a real estate attorney familiar with mineral rights in order to ensure their rights are protected and they receive an acceptable value of their minerals.
Arkansas Lithium Attorneys
The best way for a landowner to ensure their rights are protected in lithium negotiations and documents is to work with a skilled and knowledgeable attorney. Contact Avenue Legal Group to discuss your lithium-related questions and concerns, and for help navigating the process of new mineral deed or lease negotiations in the State of Arkansas.
Have Questions?
Contact Us