Mineral Rights in Lithium Extraction

As global demand for lithium skyrockets, oil and midstream companies have a unique opportunity to turn produced water into a valuable resource. But before jumping into lithium extraction, there’s a critical piece of the puzzle that can’t be overlooked: mineral rights.

Mineral rights determine who owns the valuable minerals, like lithium, found in produced water. For companies looking to diversify and tap into the booming lithium market, understanding how these rights apply is essential. Without clear rights or agreements, legal hurdles could delay or derail extraction projects.

In this post, we’ll break down why mineral rights matter in lithium extraction and what oil and midstream companies need to know before moving forward.

Mineral rights are usually divided into two categories: surface rights and subsurface rights. Most oil and gas companies operate under subsurface mineral rights agreements that cover the extraction of oil and gas. But when it comes to lithium extraction from produced water, the key question is whether those same rights extend to minerals dissolved in water, like lithium.

The answer depends entirely on the specific language in the agreements. In some cases, lithium extraction rights may already fall under existing mineral rights. In other cases, new negotiations or amendments may be needed to secure those rights.

Understanding whether midstream companies handling produced water have the legal authority to extract lithium is critical. Lithium extraction can unlock major new revenue streams, but only if the contracts allow it. Before proceeding, all stakeholders, including landowners and government entities, must be aligned.

The shift toward extracting lithium from produced water offers exciting opportunities for oil and midstream companies, but it also presents challenges. One key hurdle is navigating the legal complexities of mineral rights agreements. Many of these agreements were crafted without lithium in mind, meaning companies must carefully review and potentially renegotiate their contracts to include rights to extract lithium.

In most cases, the mineral rights holder owns subsurface minerals, including lithium, whether trapped in rock or dissolved in produced water. If a law designates an entity other than the mineral rights holder as the owner of produced water (such as an oil and gas operator), that entity controls the management of the water but does not automatically own the minerals within it. Ownership of lithium can vary depending on contracts or state laws. For example:

• Texas: A 2019 measure (HB 3246, amending Section 122.002) determines ownership of produced water. When a person takes possession of fluid oil and gas waste to treat it for beneficial use and transfers the treated product or byproduct, ownership transfers to the recipient. However, under Texas PROPERTY CODE, TITLE 6, CHAPTER 75, lithium may still be considered a mineral. The mineral rights owner could dispute ownership and be entitled to the lithium, regardless of whether the produced water is owned by its handler.
• Oklahoma: Under the Oil and Gas Produced Water and Waste Recycling Reuse Act, produced water remains the property of the oil and gas producer until it is officially transferred. However, Oklahoma SENATE BILL NO. 184 defines "mineral" as a range of substances, potentially including lithium. As a result, mineral rights holders could claim ownership of the lithium in the produced water and be entitled to it.

Another challenge is ensuring compliance with local regulations, which vary by region or state. Some areas have specific rules governing lithium extraction, while others have not yet fully addressed the issue. Staying informed about regulatory developments and working with legal and regulatory experts is essential for companies looking to integrate lithium extraction into their operations.