My wife has recently been in contact with a firm about a lithium royalty lease in Hopkins county. It looks like there was some previous discussions in the forum but they were all closed within 90 days for no activity. We are curious as to the going royalty rates and bonus payments. We are somewhat familiar with oil and gas leases but have no experience with lithium. Any comments would be appreciated.
Lithium royalty rates are much lower than oil and gas and vary from state to state. The market is fairly fluid on them right now as the technology and companies working on it are still emerging. The first draft leases that I have seen were not very good (in my opinion). The wording looked like it had been copied and pasted from various oil and gas leases and was contradictory from paragraph to paragraph, so be very careful. Would suggest that an experienced oil and gas or surface attorney review any lease. Various state legislations are working on bills regarding lithium.
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We are about to sign a lease in Franklin/Titus. We are working with a lawyer— but we need to decide the royalty percentage. I’m curious what others are getting. We’ve been advised 3.5% would be possible, but that we should try to find what others are getting.
I can’t help you with the royalty rate, but I can say that, for me, it would be important to know if the royalty being offered is cost free or cost bearing. I’ve heard of some companies that offer 1/16th royalty and another offered 1/8th, but both cases are cost bearing. The royalty owners, in my opinion, will never see the full royalty amount because of deductions. Check your lease to see what can be deducted if it is, in fact, a cost bearing royalty.
Our royalties percentage is on gross. Our lawyer explained to us how the language of our lease protects us from almost all production costs— but I couldn’t explain it if I had to!!
Who is the operator and/or brokerage company who proposed the lease?
Our contact is with a landman but the contract is being offered by Stamdard Lithium.