Brine lease offer?

Oklahoma Mineral Rights Blaine County, OK
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Received a call and subsequent follow up email (sample lease and general info) regarding a request for us to sign a Brine Lease (Blaine,OK). This new lease request is in a current producing oil and gas section we own and have leased and have division orders for. The person who contacted us stated they process waste water from the producing well(s) and extract Iodine and which we would receive royalties and it has no effect on the current producing oil and gas lease & division order(s). They also stated generally the royalties are not massive.

Questions:

  1. Any general advice about this type of lease? Typically we would opt out of the bonus for a higher % royalties. Is this still true and any other advice/guidance?
  2. Following the advice of this forum, we have stopped signing division orders for O/G. Is this the same if we get a DO for a Brine lease?

Thanks in advance for any insight.

Van Manager Deaner & Co

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Hello @deanerandco

Can you clarify that you mean Iodine vs Bromine?? I’m not familiar with Iodine leases, but I have some experience with Bromine. Under the assumption that it’s Bromine vs Iodine; here are a few thoughts.

(a) Bromine leases are typically $/acre (and in Arkansas, a producer price index) rather than the normal % of revenue. this seems to have both advantages and disadvantages. advantage - payments continue generally without decline regardless of production. negative - probably lose out on higher checks in early time production. (b) >> royalties are not massive. that’s been my experience, and is probably related to the royalty being based on acreage vs revenue. (c) The Smackover formation spans from Oklahoma/Texas all the way to Florida - though most Bromine extraction seems to be in Southern Arkansas. (d) the big players (that I’m familiar with anyway) are Lanxess and Albemarle. again, this is reflective of my experience in south Arkansas. (e) The Smackover also appears to be gearing up to be a big player in the Lithium space. XOM recently purchased over 100,000 acres in southwest AR which implies they’re going to ramp up in a big way. Lanxess already is working in this space, and has a pilot south of El Dorado that is working the Smackover. (f) >> Is this the same if we get a DO for a Brine lease? in Arkansas, there are no DO’s for brine leases; again since they are based on acreage, rather than a % of revenue.

If you did in fact mean Iodine, then my comments won’t count for much. apologies; but look forward to hearing thoughts from others in the forum.

David

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David, Thanks for the response. His call and subsequent email only talks about Iodine. One document he sent explaining the process says

What we do: • Extract iodine from waste/brine water produced from oil & gas operations at the injection site • Why it works: • Few areas in the U.S. have iodine in their produced water • unique geology • Oil and gas operator aggregates the water to one central disposal site • Need tens of thousands of barrels of water with a few hundred ppm of iodine to run through our system in order to collect iodine • Each barrel of water contains small amounts of iodine

It might be similar to Bromine, but this is new to me. I have a few other feelers out and hopefully get more info on this.

Van

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Hello:

I was also approached recently to lease acreage in Blaine Co. for extracting iodine. I wanted to attach the info I received for anyone interested, but don’t see a function to attach files here. I understand if I don’t lease, I may be force pooled, but that’s fine, I’ll probably just wait for that–may never happen anyway.

Deanerandco, can you explain why you don’t sign division orders for oil/gas anymore? I missed that info here.

By the way, a relative of mine with the last name of Deaner purchased mineral interest rights back in the 1920s-30s in Oklahoma, which my mother inherited. She’s now 91 and I manage her mineral interest.

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@Angela_Havel Hit reply and then when the box to type in shows up, the icon with the arrow and bar is used to attach documents. Mark out any personal information before uploading.

Do you have surface rights or just mineral rights? That distinction is important in this case.

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Thanks for the info Martha. Totally missed the “upload” symbol. Here’s the info sent to me by company wanting to lease for iodine production.

I have original deeds for every one of my mother’s properties EXCEPT for Blaine Co. I assume she has mineral rights for all properties. I need to learn more about the distinction between mineral and surface rights.

Iofina Presentation Printable.pdf (438.6 KB) SAMPLE LEASE PACKET - IOFINA BRINE LEASE.pdf (211.6 KB)

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Hi,

Regarding DO’s, this is for OK only. There was lengthy discussion about this and a presentation in the NARO group. This was picked up here and discussed in this forum by people I highly respect in this group. The recommendation was to NOT sign DO’s in OK as the language can highly protect the payer, etc. The presentation and recommendations are in the NARO group. I don’t want to misquote or get anything wrong, so I would refer you to that group’s discussion/presentation.

And Yes in a Dec 2020 discussion here regarding property in KS, we touched base about our common connection to the Deaner relative and their O&G legacy…

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I received the same call and offer as what’s been mentioned here. Wondering if anyone has followed up/moved forward with signing? I spoke with several knowledgeable folks in the industry and no one had seen an Iodine lease such as the sample they sent us. The only guidance I received was that the 3% royalty seemed low. Would this be a situation to negotiate a higher rate? I’d love to hear if anyone has had success doing so. Thanks!

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If you type in iodine in the magnifying glass search above, you will see another thread with iodine and bromide with more comments on the draft lease.

Here is part of it. I attended an AAPG webinar on iodine by the company that is sending out the recent leases. My impression was that I was interested in the concept but didn’t think I could do a brine lease since my wells in the Blaine sections they were interested in were already in production. I have no surface interest.

And as a mineral owner, I have the understanding that the subterranean water is the property of the owner of the surface estate before drilling. If the water is part of fluids that would come up due oil and gas operations, then the contract for any brine processing by the surface owner would have to be done BEFORE the filing of the permit for an oil and gas permit. My wells are already drilled and I have no surface, so would not apply to me.

After the drilling has commenced and without a surface agreement to the water, I understand that the operator (not the mineral owner) owns the water that is produced.

I was relying on this geologist’s read of the 2022 OK statues Title 52,-86.6, 7, 8 and the OK Brine Development Act. OK Stat tit. 17 sec 504. I have attached portions of the relevant parts.

My comments on some of the lease drafts that I have seen are: -I would never lease multiple sections on the same lease and tie them all together, Oil and gas or brine leases. Never, never…

-I would never lease surface rights and mineral rights on the same lease and I would not warrant title. Each of those estates have different rights, so I would not combine on the same lease.

-I saw no shut in clauses or time frames, so I would not want a conflict with my oil and gas lease (if it applied). The Cessation of Operations was not a good clause as I read it because it could conflict with the oil and gas lease in time frames.

-I saw so many other red flags, that there is no way I would sign that draft without an attorney taking a hard look at it. I saw the draft lease as too early in the financial brine extraction experimental cycle to conform to any OCC rulings, so won’t touch with a 10-foot pole for me.

2022 Oklahoma Stat 52 86.7.docx (20.3 KB)

Legal folks, feel free to comment…

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