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Permalink Reply by Skip Peel - Mineral Consultant on July 26, 2024 at 10:26

Big Oil seizes lithium opportunities   

Posted By: Colin McClelland July 26, 2024

Mining companies could benefit in cash and technology as major fossil fuel companies such as ExxonMobil (NYSE: XOM), Occidental Petroleum (NYSE: OXY) and Equinor (NYSE: EQNR) invest in lithium, a potential lifeline amid the battery metal’s low prices and oversupply.

ExxonMobil, which has produced some lithium in a pilot project, signed a preliminary agreement last month to send lithium to South Korea-based SK On, a battery maker that’s building plants to supply Hyundai and Ford in the United States. That followed the oil giant’s US$100-million purchase of drilling rights on 485 sq. km of lithium brine assets in Arkansas’ Smackover Formation from Galvanic Energy.   

Also in June, Occidental Petroleum said it’s forming a joint venture with a unit of Warren Buffett’s Berkshire Hathaway (NYSE: BRK.B) to produce battery-grade lithium from the brine of 10 geothermal power plants in California. It’s begun feasibility testing.   

Chevron (NYSE: CVX) says it’s exploring lithium extraction, and Reuters reported the third-largest petroleum company by market value was speaking with International Battery Metals (CSE: IBAT; US-OTC: IBATF) about licensing brine technology.  

Norwegian state oil company Equinor said in May it could pay as much as US$133 million for a 45% stake in Standard Lithium’s (TSXV: SLI) projects in Arkansas and Texas. Standard started a commercial-scale demonstration plant in April. Vulcan Energy Resources (ASX: VUL) told The Northern Miner by email it has oil majors, but wouldn’t say which ones, investing in its €1.3 billion ($2 billion) Zero Carbon lithium project in Germany.   

‘Makes sense’

“The move into lithium makes a lot of sense for these large international energy companies,” Rhidoy Rashid, a senior associate at London-based data and analysis firm Energy Aspects said by email. “Unlike some other niche metals, lithium is relatively abundant, so the resource needed to match rising demand for batteries is there, it just needs to be efficiently extracted. The expertise these companies can bring may also help to ramp up lithium supplies from areas where it was previously uneconomic to extract the metal.”   

Oil companies are investing exclusively in brine projects (as opposed to hard rock) that may use direct lithium extraction (DLE), which resembles pumping crude in some aspects. They’re tapping their own core capabilities in subsurface exploration, drilling and chemical processing. They have much deeper pockets with market values that dwarf their mining cousins. Their diversification into green metals can help lift a mining sector that attracted stock market investors when the metal price was high but have since abandoned it.

“Oil companies offer the technology and skills need to identify, characterize and produce lithium-bearing brines from deep underground,” Terry Braun, president of North American operations for SRK Consulting, said by email. The firm has 45 offices globally and has operated in more than 150 countries.  

“The challenge of economically extracting a marketable lithium product once the brine is at the surface is formidable,” Braun said. “Even with the technical expertise of most major oil companies.” 

US$1-billion move

ExxonMobil is aiming to supply enough of the battery metal to power 1 million vehicles by 2030. It has said a “material” part of its US$20-billion budget for low-carbon projects through 2027 will be spent on lithium.  

“It has to be over US$1 billion if it is going to be material,” chairman and CEO Darren Woods said on an April 30 conference call. “We are looking at very large markets into the billions.”   

Lithium brines are often found in depleted oil wells, like the Leduc field in Alberta where E3 Lithium (TSXV: ETL; US-OTC: EEMMF) is advancing its US$2.5-billion Clearwater project on Canada’s largest resource of the battery metal. The project between Calgary and Edmonton could produce 32,250 tonnes a year of lithium hydroxide monohydrate over half a century, according to a prefeasibility study issued on June 26.  

ExxonMobil’s Canadian subsidiary, Imperial Oil (TSX: IMO), has invested $6.4 million for stock and warrants equal to 4.3% of E3.  

There is only one commercial DLE operation so far outside of China after companies struggled to lower costs and improve technologies. Arcadium Lithium (NYSE: ALTM; ASX LTM) has been using DLE at its Hombre Muerto operations in Argentina since the 1990s. Most brine operators like Albemarle (NYSE: ALB) and SQM (NYSE: SQM) the world’s two largest lithium producers, use traditional evaporation ponds.   

Pros and cons

However, DLE is gathering pace because it can produce lithium in hours or days vs months or years on a fraction of the land and process brines with lower lithium concentrations.   

US Magnesium is using DLE from International Battery Metals for a project in Utah and CleanTech Lithium (AIM: CTL) started a DLE pilot plant in Chile. In Canada besides E3, Volt Lithium (TSXV: VLT), EMP Metals (CSE: EMPS; US-OTC: EMPPF) and LithiumBank Resources (TSXV: LBNK; US-OTC: LBNKF) have all started DLE testing.   

These operations, which in E3’s case, would siphon lithium-laden water from the same wells that used to produce oil, then pump it back into the reservoirs after extracting the battery metal. Even permit requirements and the separation process using water and reinjecting it into wells are more akin to the oil industry than hard rock mining.   

However, some experts have expressed concerns about the environmental impact of oil companies extracting lithium, likening the process to fracking because it injects liquid underground that could potentially enter water supplies. Marco Tedesco, a climate scientist at Columbia University, has said high water usage and potential pollution are linked to DLE. Some environmentalists have criticized oil companies for greenwashing their operations.   

“It pains us to even cover a company like ExxonMobil, as its history in environmentalism is as filthy as the oil it drums up,” Scooter Doll at energy transition website Electrek wrote when the oil giant started lithium drilling. “While this is welcomed news to an extent, it’s not difficult to see the motive behind ExxonMobil’s expansion into lithium, and it sure as hell isn’t about saving the planet.”  

Oversupply

While companies use long-term metal pricing to gauge project economics, the surge in oil major investing comes as battery-grade lithium carbonate has plunged to around a three-year low. It was US$11,825 a tonne on Friday, down from US$40,675 a year ago, according to The Wall St. Journal. It had been approaching US$76,000 a tonne in January last year.   

“The commercial scale economics for the majority of DLE projects are unknown at the present time,” SRK’s Braun said. “DLE technologies or other non-conventional metallurgical flow sheets present a technical risk that could negatively impact project economics and the ability of the mining company to pay the lender.”  

A glut in lithium is expected to continue for close to a decade even as demand increases because of more electric vehicles hitting the market, analysts at FitchSolutions BMI said on a June 27 webcast. The oversupply will force scores of companies to adopt cost-saving technology like DLE and/or face takeover threats, they said.   

“We expect no return to previous highs for lithium,” Sabrin Chowdhury, head of BMI commodities analysis, said from Singapore. “Prices will remain below the peaks of 2022 and 2023 for at least five to 10 years.”   

Demand

Global lithium production increased 23% last year to 180,000 tonnes, according to Statista. Energy Aspects’ Rashid says oil major investments in lithium are key for the world to meet rising demand and climate-change fighting goals.   

“It is crucial that lithium supplies are unlocked if the world is to keep pace with net zero ambitions,” the analyst told The Northern Miner. “We think global lithium production needs to almost triple by 2030 to keep up with the level of electric vehicle adoption required to maintain pace with decarbonization targets.” 

The lower price has caused some producers such as Albemarle, which has both hard rock and brine operations, to slash costs and delay projects. That could expose some assets to M&A and provide more opportunities for oil companies to invest. Miners may seek out oil companies as their projects face funding and other headwinds.   

Braun says success in DLE technology suits oil companies because of their resources for tests on brines from projects and their capacity to build large projects, starting with DLE pilot programs to assess economic feasibility.  

“Oil companies invest significant capital and time to develop, test and deploy new technologies at commercial scale,” Braun said. “This is a strategic advantage over companies that have less capital or time to prove a commercial scale DLE application.” 

 

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Permalink Reply by Joe B. Lovelace on September 9, 2024 at 4:43

This article is a great read in that it focuses on the technology of Dr. John Burba that likely will bring to scale the refinement of lithium from Smackover brine.  The link may not get you to the article on the Texas Monthly website so I have attached it in pdf.  

https://www.texasmonthly.com/news-politics/lithium-mining-boom-nort...

Attachments:

• The Lone Star Lithium Boom.pdf, 3.8 MB

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Permalink Reply by Lisa on September 10, 2024 at 11:54

Where do I find the PDF? I’m interested in reading this.

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Permalink Reply by Joe B. Lovelace on September 10, 2024 at 14:00

It is shown as an attachment at the bottom

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Permalink Reply by Skip Peel - Mineral Consultant on September 28, 2024 at 9:35

I'm bumping this discussion to keep it on the main page.

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Permalink Reply by Skip Peel - Mineral Consultant on September 30, 2024 at 2:31

Dozens of mineral rights holders file objections to Arkansas' proposed lithium royalties

September 29, 2024 by Ainsley Platt  eldoradonews.com

Inequitable. Faulty premise. Meager. Unconstitutional.

All of these words have been used to describe the application to set lithium extraction royalties in Arkansas by five companies, in addition to the process in which those royalties are determined, by those who are in opposition to a 1.82% royalty that objectors across the board appear to have deemed to be grossly insufficient.

Dozens of additional landowners -- ranging from families to regional banks such as Simmons Bank to massive multimillion dollar companies to the city attorney of Oakland, Calif. -- have filed objections over the past two weeks to the proposal, which was supposed to be considered by the Arkansas Oil and Gas Commission during its September meeting this past week. The application was removed from the docket Sept. 20 after the applicants requested and were granted a delay in order to address multiple challenges to the legality of the application.

At least 74 individual landowners and businesses have objected to the royalty, either directly or through an attorney.

And as it turns out, some of the objecting mineral rights owners have received higher royalty offers for lithium -- and they said at least some of those offers came from one of the five co-applicants for the royalty. Those companies are Albemarle, Standard Lithium, Lanxess, Tetra and Exxon-affiliate Saltwerx.

Andrew Blackburn -- a mineral manager for Argent Mineral Management, a company that manages mineral rights nationwide including in southwest Arkansas -- said that one of his company's clients had received an offer of a brine royalty for 6.25% by one of the co-applicants for a lease in Cass County, Texas, which is underlain by the same lithium-rich brine aquifer under southwest Arkansas, although he declined to identify which one as he did not want to damage relations with the company.

"Right now, it feels like the industry is taking the approach of, 'Hey, trust us with this number' rather than being transparent," Blackburn said. "This 'Hey, trust us' approach leads us only to distrust.

"It's disappointing how the industry is trying to push this through without really providing a basis for it."

Weyerhaeuser, a timberland company that owns 1.2 million acres of timberland in Arkansas, wrote in a letter signed by its senior director of natural gas, oil and CCS, Phillip Blower, that formally objects to the royalty proposal that "Weyerhaeuser has received offers (for leases in Arkansas and Cass County, Texas) ranging anywhere from 3% to 10% cost free, including an offer from one of the Co-Applicants to this proceeding that falls in that range."

"We understand operators of these projects and facilities must be profitable," Blower continued in the letter. "However, it is apparent from where we sit that these Co-Applicants are attempting to take advantage of what they perceive to be a regulated system to maximize their own profits at the expense of the mineral owners."

The application outlining the five companies' proposed royalty structure speaks in depth about how the royalty reflects in part the costs of operating a potential extraction project, with the applicants arguing that because of the "enormous investment" and "significant capital and cost" the applicants will take on in order to process the extracted lithium, the value of the brine and unextracted lithium that the royalty rate pays for is of "minimal value."

Blower rebutted this in his letter.

"By allowing the Co-Applicants to recover their costs from the mineral owner and not make that owner an equal proportionate owner in any project is unfair on its face, especially under the Co-Applicants proposal wherein basically everything they do is considered a trade secret and not subject to review by the mineral owners," Blower wrote.

Blower continued, disputing multiple assertions made by the applicants. He raised Weyerhaeuser's objections to the 1.82% proposal since, he wrote, Standard Lithium had an agreement with another of the applicants, Tetra, to pay them a 2.5% royalty. Blower questioned why Tetra "deserves a higher royalty than the mineral owners from the same land and free from the cost of development that they are asking landowners to be burdened with?"

"We know that (Arkansas Oil and Gas Commission) works diligently to determine fair and appropriate compensation in cases such as this, and we believe a proposal of 1.82% royalty, with allowances for further deductions is unreasonably low and by no means equitable for all parties," the company said in a written statement through a spokesperson when contacted by the Arkansas Democrat-Gazette.

PotlatchDeltic, another timberland company with a significant Arkansas footprint, also submitted a written objection, signed by CEO Eric Cremers, which said that the proposed royalty "unfairly rewards the developers" at the expense of others. Cremers wrote that the company believed that a fair royalty rate was "crucial" for the sustainability and growth of a successful lithium industry.

And similar to Weyerhaeuser and Argent Mineral Management's client, PotlatchDeltic was in "active discussions with other lithium brine developers who have offered royalty rates over five times greater than what was proposed in this most recent application."

Like Blower, Cremers took issue with multiple aspects of the application. He said the citation by the applicants of a 17-year-old Arkansas Oil and Gas Commission decision to justify its 1.82% royalty "should not be applicable and is not appropriate for determining current royalty rates." Similar to many other objectors, he pointed out the high projected returns estimated in the preliminary and definitive feasibility studies conducted by Standard Lithium as additional evidence that "the economic benefits ... are not shared fairly with the landowner."

In particular, Cremers pushed back against the applicants' assertion that the royalty should reflect the "minimal value" of lithium before it is processed.

"We vehemently disagree with this idea, and a comparison to lumber manufacturing (of which we have considerable experience) helps explain why," Cremers wrote. "By themselves, logs have little value (just like lithium brine). It is the manufacturing process that turns the logs into valuable wood products. Today, over 60% of the cost to make lumber is from the cost of those logs."

"Despite logs having minimal value on their own, wood products manufacturers like us pay considerable sums of money for them to produce something more valuable, such as lumber," Cremers continued. "Yet, even with this very high input cost, we continue to invest in our business ... The bottom line is that the Developers can afford to pay more for the lithium brine raw mineral," compensating mineral rights owners fairly while still earning "respectable" returns.

PotlatchDeltic declined to comment further on its objection when contacted by the Democrat-Gazette.

Elizabeth Anderson, executive director of the Farmers Bank Foundation and a member of the family that owns the bank, expressed dismay over a royalty rate that she called "a slap in the face."

"My main concern is just that we're not stuck with a rate for eternity, and that we go in with negotiable rates," Anderson said, echoing many other objectors who also want rates that can increase or decrease depending on how profitable the extraction operation is. "It's extremely low on something that is extremely valuable."

Right now, the price of lithium is in a slump. But Anderson said that it will eventually come back up again, and "then you have royalty owners still stuck at the 1.82%" despite much higher profitability.

In the meantime, however, Anderson said it might be time for the state to revisit the Arkansas Brine Act, which sets out the requirements from brine royalties, because of its age and the changes that have occurred since it was first passed into law.

Other mineral rights owners, such as Lexi Reid and Sara Robinson-Medina, have found themselves struggling to understand the complicated mineral leasing landscape in Arkansas. Both inherited mineral rights in Columbia County from deceased family members and both have expressed frustration that they are stuck in leases that they know next to nothing about. Robinson-Medina doesn't even have copies of the lease, despite having received checks -- never totaling more than $6 -- from Lanxess and its predecessor, Great Lakes Chemical, on multiple occasions.

"Everything is leaning towards (the applicants) and in their favor," Robinson-Medina said. "We want our fair share."

Reid is in a slightly different situation. Her father was a geologist, and therefore knew what he needed to know to properly manage the family's leases. After he died, Reid said she was left with reams of paperwork that dated back decades, and very little idea of what to do next.

Reid's great-great grandfather "took a lot of time in writing his wills and sending all of this stuff to his family to make sure that everybody's gonna be OK. I don't believe that when he passed away, he thought, you know, in a hundred years his family farm would only be giving his family $250," she said.

Reid now lives in Colorado, but she stills owns about 10 acres of land in Columbia County. She filed her objection expressing frustration with what she already sees as a very low royalty that pays her $250 a year for her brine, while asking for a more "realistic payment by this company who makes multi million dollars per year on our resources," she wrote in her objection.

In an interview, Reid said that she primarily wants to make informed decisions. Currently, she doesn't feel like she can do that with how little information there is about how the applicants calculated the royalty. She said she doesn't know much about the laws or regulations that govern brine leases and payments in Arkansas either, and only recently discovered that she still owned the 10 acres of land itself and not just the underlying mineral rights.

"I'm just a little baby landowner that doesn't, you know, have a whole lot of say in the world," Reid said. "I just want to make sure I'm not getting screwed over. ... It's our minerals, it's our land."

Anderson, Blackburn, and many other objectors in letters to the commission emphasized that they enthusiastically support growing an industry for lithium in southwest Arkansas, with Anderson saying that she "wants this to happen more than anything." But Anderson also pointed to the recent announcement for $225 million in federal funding for Standard Lithium to build out its operations in the state.

"They're basically coming to Arkansas for free, but they don't want to pay Arkansans," Anderson said.

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Permalink Reply by Skip Peel - Mineral Consultant on October 2, 2024 at 0:50

Arkansas Energy & Environment, Oil & Gas Commission

5301 Northshore Drive, North Little Rock, AR 72118

 The September Arkansas Oil and Gas Commission hearing scheduled to hear an Application filed by Albemarle Corporation, Saltwerx LLC, SWA Lithium LLC, LANXESS Corporation, and TETRA Technologies, Inc. (“Applicants”) in Docket No. 050-2024-09 was continued at the request of the Applicants. The Commission Hearing to hear this Application will be at a Special Commission Hearing scheduled for November 4, 2024. In this matter, the Applicants are seeking a Commission Order approving the method for fairly and equitably accounting to brine mineral interest owners for the anticipated profitable extraction of lithium ions from the Smackover Limestone Brine produced from lands in Columbia, Lafayette, Miller, and Union Counties.

Answers to Frequently Asked Questions

Why did I receive a letter regarding a hearing on September 24, 2024 and for a re-scheduled hearing on November 4, 2024 on Docket No. 050-2024-09?

The Applicants submitted a notice of hearing to the known mineral interest owners in these counties who may be affected by any Order issued by the Commission on this docketed matter. If you received a letter, you are a known mineral interest owner who may be affected. You are being given notice so that you can attend any hearing in this matter or otherwise participate if you choose to do so.

What is this hearing about?

Pursuant to Ark. Code Ann. § 15-76-315(c), in addition to any other amounts due and owing, the producers of any unit shall account separately and on a fair and equitable basis to each owner in the unit for all substances which are found by the Commission to be profitably extracted from brine by a producer and which were not extracted by a producer on January 1, 1979. Applicants assert that they anticipate the ability to profitably extract lithium from brine in units located in Columbia, Lafayette, Miller and Union Counties, and have requested that the Commission determine how the Applicants will account on a fair and equitable basis to all affected mineral interest owners for the profitable extraction of lithium ions from brine. During the hearing, the Applicants will ask the Commission to set a fair and equitable royalty rate.

Interested parties who object to the proposed interest rate can state their objections.

Where will the November 4, 2024 hearing be held?

El Dorado Conference Center, 311 South West Avenue, El Dorado, Arkansas.

Do I have to attend the hearing?

No. Attendance and participation in the hearing is completely voluntary.

How can I participate in the hearing?

Mineral interest owners may submit comments or objections to the Commission by email at:

objections@aogc.state.ar.us or they may personally attend the hearing and present their comment or objection at the hearing.

I cannot come to the hearing. Is there any way to view the live hearing?

The Arkansas Oil and Gas Commission has provided the following live stream link for the general public to view the live hearing:

https://www.youtube.com/@arkansasdepartmentofenergy6731

 

Link to AR O&G Commission Lithium Page:  https://www.aogc.state.ar.us/lithium/default.aspx

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Permalink Reply by Joe B. Lovelace on October 17, 2024 at 7:52

For those with mineral ownership in Texas and following Brine/Lithium leasing, we have been aware of the requirement of SB 1186 that the Texas Railroad Commission issue rules for Brine Production Projects and Wells.  A proposed rule has been issued for public comment.  It should be read in light of the difference in permitting for Oil & Gas Wells and Brine Production Projects and Wells.  

Clarification on Proposed Rulemakings: New §3.82 and amendments to various rules in Chapter 3 regarding Brine Production Projects and Wells, and amendments to §1.201 regarding time periods for permit processing

At its open meeting on October 15, 2024, the Railroad Commission proposed two rulemakings. The first, proposed new §3.82, implements the requirements of Senate Bill 1186 (88th Legislature, Regular Session, 2023). The second, proposed amendments to §1.201, updates time periods for permitting processing. The proposals will be published in the Friday, November 1, 2024, issue of the Texas Register. Clarification on the comment deadline: Please note that due to holiday scheduling, comments on the proposals will be accepted until 12:00 noon, Monday, December 2, 2024. The PDF versions of the proposals are available at the link below. For more information on these and other rulemakings, or to access the online comment form for any proposed rulemakings, please see the Proposed Rules page at this link: http://www.rrc.texas.gov/general-counsel/rules/proposed-rules/ Any rulemaking actions taken at Commission conferences in the future will also be sent via this email list. If you have questions about your Rules email list subscription or wish to unsubscribe, please email me at kellie.martinec@rrc.texas.gov.  Thank you for your interest in the Commission. Kellie Martinec, Rules Coordinator Office of General Counsel Railroad Commission of Texas kellie.martinec@rrc.texas.gov or rulescoordinator@rrc.texas.gov

Attachments:

• prop-new-3-82-amend-ch3-various-101524-sig.pdf, 711 KB

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Permalink Reply by Lisa on October 28, 2024 at 4:53

We got a new offer today on a lithium lease in Franklin County. WAY higher than a few years ago. The offer is indirectly from Standard Lithium. I told him we are still hesitant, but if interested, we’d involve an oil-and-gas attorney. Anyone else getting calls?

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Permalink Reply by Skip Peel - Mineral Consultant on October 28, 2024 at 5:25

Thanks, Lisa.  Can you share the royalty in the lease offer?  The fact that leases are being offered by several companies including Standard Lithium at royalty fractions considerably higher than the 1.82% that the 5 companies have requested in Arkansas under cuts their argument that 12.5% is too high for them to make a profit.

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Permalink Reply by Rock Man on October 28, 2024 at 7:28

Interest in Franklin County very positive- pushing the "trend" wesy

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Permalink Reply by Lisa on October 28, 2024 at 11:26

The over-the-phone verbal numbers mentioned were $200/acre signing bonus (up from $60) and $175/acre/year (up from $40). We’ve discussed in the past that we would want a percentage for the royalty, and that we would use a O&G attorney for help for protecting us.

He mentioned renegotiation in five years— so I assume it’s a five year lease. He discussed lots of surface control for us.

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