Need some advice. Landman is offering me $10 net mineral acre that he calls a bonus. 3% royalty on 32 acres of mineral rights for drilling for lithium. Not sure if that’s reasonable for 32 acres or not. Not sure how to find out what the owners are getting that’s located next to my acres. Not sure if it will produce enough money to justify lawyer fees to let one look at it. The thirty two acres is being divided between three siblings. This is all new to me and any advice would be appreciated.
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What state are you leasing in. Some states have a minimum lithium royalty set and others are still flexible. Do you own the surface acreage or mineral acreage or both?
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Bowie County Texas. I do not own the surface rights but that didn’t seem to bother him because we are being lumped in with several other acres in that area. Just not sure we will make enough to justify attorney fees. It’s all new to me.
Welcome to the forum , if you could please share the state, county, and Section , Township, Range , Not sure we can help, lithium is a new mineral and every state is different on there payments , I have some in Arkansas, but hopefully you can get a answer! Thanks for joining, good luck .
It’s in Bowie County Texas. Out in a very rural area. 3% seems low, but not sure what it should be. Thanks for you help.
We did some close to there, our first bonus offer was $250/acre and our original royalty they offered 1/32nd but they came up to 1/16th.
Anything with $10 and 3% goes in the trash bin at my house
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Be very cautious about lithium leases. It would be wise to get a good oil and gas attorney to look at the language of the lease as to whether it is a brine lease for an aquifer or it is for produced water from an oil and gas well. Recent TX Supreme Court ruling just changed who owns produced water from a producing well. It is now the mineral estate.
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Lithium leases are in their infancy and a lot of offers will be speculative with the hope of flipping. Lithium lease forms are also undeveloped and I would guess that a lot of landmen are just presenting oil and gas forms with lithium inserted. Be careful to be sure that oil, gas, other minerals and sulphur are not included, or you could end up with a very low royalty rate on oil and gas. You should also be careful that the lithium lease depths to not interfere with oil and gas leases. A lot of unknowns here. How deep is any potential lithium. If the same depth as oil and gas, what happens to the oil or gas? You would not want it to be a by-product that you are not compensated for. If there is no lithium activity is the county, why tie up your rights? This is not an area I am personally experienced in, but I think a property owner needs to carefully research.
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Supreme Court Tx ruled the produced water is owned by the Operator/producer.
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Exactly. The operator leases from the mineral estate.
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So if we exclude Lithium as and excluded mineral in our Oil & Gas Lease. How would we know if the Operator is selling the produced water for Lithium? Just hope they went through and reviewed their leases, caught it, AND THEN decided to try to pay me on it?
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That is the tricky part right now. The legislature has to catch up to the Tx SC order and require the metering and measuring of lithium. Personally, I would want lithium and other rare earth minerals included in my oil and gas leases at 20-25% just like oil and gas in the production stream, but likely that lithium royalties may be lower in the 2.5-8% range and will need their own clause. Was just at the TX NARO convention in Austin last week where this was a huge topic for several of the speakers as to how this will be handled. Lithium is now certified as a “critical mineral” in Texas.
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Here is an excellent summary of the TX Supreme Court’s decision from a prominent TX attorney and landman trainer, Alyce Hoge, J.D. CPLTA, CDOA AAPL member. She has been a speaker at NARO (National Association of Royalty Owners) events. She has given permission for me to share the summary.
"ALICE HOGE Land Training NEWSLETTER 7/29/25
In a recent Texas Supreme Court ruling, the ownership of produced water—a byproduct of oil and gas extraction—was put to the test. The case, Cactus Water Services, LLC v. COG Operating, LLC, addressed a dispute between COG Operating and Cactus Water Services over 52 million barrels of produced water from the Collier family’s 37,000-acre lease in Reeves County, Texas, within the Permian Basin. The court’s decision clarifies who holds rights to produced water and how these rights can impact landowners, operators, and water services companies alike.
Case Background: Who Owns the Water?
The Collier family leased their land to COG Operating, which drilled 72 horizontal wells generating a significant amount of produced water. Historically, oil and gas operators are responsible for managing and disposing of this wastewater. The Colliers entered into produced water lease agreements (PWLAs) with Cactus Water Services, granting them rights to the produced water that COG had disposed of elsewhere. However, COG Operating sued Cactus, arguing that it owned the produced water.
At the core of the dispute was this critical question: Who owns produced water? Texas law has long held that surface owners have rights to water, but produced water—generated during oil and gas extraction—complicated this doctrine. The court’s decision would settle the issue.
The Court’s Decision: Produced Water Belongs to the Operator
In a landmark ruling, the Texas Supreme Court sided with COG Operating. The Court ruled that produced water is an inherent byproduct of oil and gas production, and unless explicitly reserved in the lease agreement, it is part of the rights granted to the operator. Therefore, COG Operating was deemed to be the rightful owner of the produced water.
The Court clarified that, while surface owners typically own the water on their land, produced water—which is generated as a byproduct during the extraction of oil and gas—falls under the mineral estate and belongs to the operator. This decision establishes a default rule in Texas law: unless a lease explicitly reserves rights to the produced water, it is considered part of the oil and gas rights and thus controlled by the operator.
Why Did Cactus Want the Produced Water?
So, why did Cactus Water Services want to purchase the produced water? Traditionally, produced water has been regarded as a waste product of oil and gas operations. However, the value of produced water is increasing, particularly as fresh water resources become scarcer and more expensive in areas like the Permian Basin. Cactus Water Services sought to purchase the produced water to treat and recycle it for use in hydraulic fracturing (fracking). By recycling produced water, oil and gas operators can save money on purchasing fresh water and help meet environmental regulations concerning water usage.
In addition, Cactus may have been looking ahead to the potential extraction of minerals like lithium from the produced water. While the concentration of lithium in the Permian Basin is relatively low, advances in extraction technology could make lithium recovery from produced water an economically viable process in the future.
COG’s Position: Retaining Control Over Disposal
COG Operating, however, wanted to retain control over the produced water to manage its disposal and reuse. The operator argued that produced water is part of the oil and gas extraction process, and thus it should fall under the rights granted to them in the lease.
By keeping the rights to the produced water, COG could manage how and where it is disposed of, or recycled, without being restricted by a third party. COG’s decision to fight for control over the produced water likely stemmed from the costs and logistics involved in water management. Additionally, retaining control could allow COG to profit from the treated water, whether by recycling it for fracking or by selling it to other operators.
The Impact on Landmen: Key Takeaways
The court’s decision in Cactus Water Services v. COG Operating carries several important implications for landmen, particularly when negotiating oil and gas leases:
- Clarity on Water Rights: The ruling establishes that produced water, unless explicitly reserved in a lease, is part of the mineral estate and belongs to the operator. Landmen must be diligent in understanding produced water rights if the issue is raised by the mineral owner.
- Emerging Value of Water Resources: As water recycling becomes a more prominent industry trend, landmen must be prepared to handle water management clauses in their leases. This case reinforces the potential value of produced water and its growing importance in oil and gas operations.
- Environmental Considerations: The rising interest in sustainable water practices means that landmen should consider how produced water management could play a role in long-term negotiations. As regulations tighten, operators may be increasingly willing to enter into water recycling agreements.
- Lithium and Mineral Extraction: While lithium extraction from produced water was not a central issue in this case, the future potential of extracting minerals from produced water adds another layer of complexity. Landmen working in lithium-rich regions, like the Permian Basin, will need to stay informed about this evolving area.
Looking Ahead
The Texas Supreme Court’s decision in Cactus Water Services, LLC v. COG Operating, LLC provides much-needed clarity on who owns produced water, but also sets the stage for ongoing questions about how this valuable resource will be managed in the future. With the potential for water recycling, disposal revenue, and lithium extraction, landmen will need to stay ahead of these trends and ensure that water rights are carefully addressed in lease negotiations.
As this legal landscape continues to evolve, it’s essential for landmen to be proactive and strategic in navigating water management and ownership rights in the context of oil and gas leases."
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The Texas Supreme Court’s new ruling in a case involving Water. It is Cactus Water Services v. COG Operating, LLC a dispute over ownership of produced water.
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The TX SC case is about produced water and the minerals in it. See the above article. Brine leases for lithium only from aquifers may belong to the surface owner. Have to be careful which kind of lease you are presented with.
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Currently in Texas for the lithium/brine that’s about 10K feet underground, they go by mineral rights as opposed to surface rights.
Is there any indication the Texas legislature may take another look at it?
TX NARO legislative committee was very involved this past session in looking at bills that would impact mineral owners. The legislature may have to circle back and clarify some laws to match the TX SC ruling for produced water from oil and gas leases. Still need clarity on lithium coming from salt water aquifers. That was the surface owner in the past.
Thanks for getting permission from Alice and sharing her content!
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Hey Jimmy, I also have land in Arkansas and inherited land in Columbia County and Exxon Mobile offered the following for lithium. they told us we can lease this acreage for $400 per acre for a 5 year lease. then there is a 10 year option at $75 per acre annually. Being completely new to oil and gas and starting to learn, I truly don’t understand what that means. Could you explain it a little to me please.