Alright I got something working kind of.

However not the exact result I am looking for





Where I actually want the mask to be applied to the tiles of the other textures.
I am having trouble thinking of how to explain this.

Code:
with GLMaterialLibrary1 do
  begin
    with AddTextureMaterial('grass_alpha', 'grass_alpha.jpg') do
    begin
      Material.Texture.TextureMode := tmModulate;
      Material.BlendingMode := bmAdditive;
      Texture2Name := 'grass_texture';
    end;

    with AddTextureMaterial('grass_texture', 'grass_texture.jpg') do
    begin
      //Material.Texture.MappingMode := tmmCubeMapReflection;
    end;

  end;

  with GLMaterialLibrary2 do
  begin
    // Pass : 1
    with AddTextureMaterial('Pass1', 'dirt_texture.jpg') do
    begin
      //Material.Texture.TextureMode := tm;
      //Material.BlendingMode := bmAdditive;
      //Texture2Name := 'TestGrass';
    end;

    // Pass : 2
    with TGLLibMaterial.Create(GLMaterialLibrary2.Materials) do
    begin
      Name := 'TestGrass';
      Material.MaterialLibrary := GLMaterialLibrary1;
      Material.LibMaterialName := 'grass_alpha';
      //material.Texture.TextureMode := tmBlend;
      //Material.BlendingMode := bmAdditive;
    end;
  end;
and then the I have a material in the GLMaterialLibrary1 that has a shader that blends all of the materials in GLMaterialLibrary2 to create its texture.

Any suggestions?