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Permalink Reply by Skip Peel - Mineral Consultant on October 2, 2024 at 12:26

Prehearing regarding lithium royalties application set for Oct. 11

An Arkansas Oil and Gas Commission spokesperson confirmed Wednesday the prehearing for the lithium royalties application, where applicants and objectors to the application will make their arguments before an administrative law judge, will take place at 9 a.m. Oct. 11.

The meeting will be at the Department of Energy and Environment headquarters in North Little Rock, and will be streamed online via the department's YouTube channel.

The prehearing will be held "like any other hearing," spokesperson Carol Booth said in an email.

Administrative Law Judge Charles Moulton will then make a recommendation on a course of action to the Oil and Gas Commission, which will consider it at the two-day hearing scheduled for Nov. 4 and 5 in El Dorado.

At least 74 mineral rights owners are formally opposed to the royalties application submitted by the five companies, with one of the common arguments being the 1.82% royalty is too low compared to the potential profits the companies stand to make.

On the flip side, applicants say the royalty meets the "fair and equitable" standard enshrined in state law, saying in the application that the companies will have to take on significant risk and capital expenditures to make a lithium extraction industry in Arkansas a reality.

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Permalink Reply by Skip Peel - Mineral Consultant on October 9, 2024 at 1:55

Production Services will drill Pantera Minerals' first lithium brine well

Pantera Minerals Limited, an Australian-listed mineral exploration company, has signed a Master Services Agreement with Production Services Inc. of Magnolia.

Production Services, an oil and gas services led by President Therral Story, will undertake the re-entry of Pantera Minerals’ first well at its the Smackover Lithium Brine Project in Lafayette County.

Pantera said in a statement that the agreement marks a significant step in Pantera’s plan to advance its lithium brine exploration efforts in the highly prospective Smackover Formation.

In May, Perth-based Pantera said it had increased its lithium brine leases to more than 18,570 acres located west of ExxonMobil’s leases in southern Lafayette County.

The rig agreement between Pantera and Production Services will result in re-entry and testing at a well that is expected to commence in mid-October.

The re-entry test will focus on sampling brine from the upper Smackover Formation to evaluate lithium concentrations. The lithium grade obtained from these samples will provide the most accurate data to date, supporting the company's resource modelling efforts and guiding the location of a second well.

The first re-entry well is strategically positioned to allow for both production and disposal, creating an opportunity for Pantera to operate a pilot plant in 2025, the company said.

Barnaby Egerton-Warburton, executive chairman of Pantera Minerals, said, “The company is extremely excited with the imminent testing of lithium brine grade at its Arkansas Smackover Lithium Brine Project. With the contracting of a work-over rig we are now in the final stages of preparation for our first well. The company believes the Australian market place is not correctly valuing the potential upside of the company’s project, but is aware of many corporate eyes on the company, its project and its progress.

“The company continues to see aggressive leasing surrounding its exclusive abstract area and now sees its position surrounded by both large listed and privately funded groups,” he said.

Pantera will continue to collaborate with SLB on the design of the testing procedure, with the well re-entry scheduled to start later this month. The brine samples obtained will be tested by multiple Direct Lithium Extraction (DLE) technology providers, with a focus on identifying the most efficient method for processing the lithium-rich brine. The results of these tests will inform future exploration and resource definition activities, including the planning of a second well and potential pilot plant operations in 2025.

 

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Permalink Reply by Rock Man on October 9, 2024 at 3:51

Great to see. I wonder if the re-entry well is already cased? That makes things easier.

Perforate and extensive flow test to get good take on formation water characteristics.

Wonder if it has associated H2S?

Side note - drove through Luling (Tx) last night / the H2S rotten egg odor pervasive through the entire town and surrounding area around the old shallow oil field (which produces with about a 99% water cut)

I point this out since this is a concern of mine for any water "mining" operations in this area

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Permalink Reply by Skip Peel - Mineral Consultant on October 21, 2024 at 11:45

U.S. Geological Survey report on Arkansas Lithium

Excerpt.  Link to full article follows.

https://www.usgs.gov/news/national-news-release/unlocking-arkansas-...

Using a combination of water testing and machine learning, a U.S. Geological Survey-led study estimated between 5 and 19 million tons of lithium reserves are located beneath southwestern Arkansas. If commercially recoverable, the amount of lithium present would meet projected 2030 world demand for lithium in car batteries nine times over. 

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Permalink Reply by Sam Goodman on October 21, 2024 at 12:25

USGS says Southwest Arkansas has enough lithium "to replace U.S. imports and more"

https://www.magnoliareporter.com/news_and_business/local_business/a...

Using a combination of water testing and machine learning, a U.S. Geological Survey-led study estimated between 5 and 19 million tons of lithium reserves are located beneath southwestern Arkansas.

The USGS said in a statement issued Monday, October 21, 2024 that if commercially recoverable, the amount of lithium present would meet projected 2030 world demand for lithium in car batteries nine times over.

The study’s novel methodology, carried out collaboratively by the USGS and the Arkansas Department of Energy and Environment’s Office of the State Geologist, made it possible to quantify the amount of lithium present in brines located in a geological unit known as the Smackover Formation.

Extracting lithium from brines co-produced during oil and gas operations provides an opportunity to extract a valuable commodity from what would otherwise be considered a waste stream, the statement said.

Several companies, including Standard Lithium, Albemarle Corporation, ExxonMobil, Tetra Technologies. Pantera Minerals and TerraNova are in various stages of lithium brine leasing, exploration, financing and pilot plant refinements and construction for potential lithium production in Southwest Arkansas.

Albemarle and Lanxess, or their predecessors, have had brine wells in Union and Columbia counties since the 1960s, using the salt water for the production of the chemical element bromine, which is used in a wide variety of applications.

Standard Lithium, working with Lanxess in El Dorado, has pioneered the use of Direct Lithium Extraction (DLE) to strip lithium from brine after Lanxess has processed the brine for bromine. The brine is then pumped back into the Smackover Formation to maintain pressure.

“Lithium is a critical mineral for the energy transition, and the potential for increased U.S. production to replace imports has implications for employment, manufacturing and supply-chain resilience. This study illustrates the value of science in addressing economically important issues,” said David Applegate, USGS director.

The Smackover Formation is a relic of an ancient sea that left an extensive, porous, and permeable limestone geologic unit that extends under parts of Arkansas, Louisiana, Texas, Alabama, Mississippi, and Florida. It dates to the Jurassic geological time period and is known for its rich deposits of oil and bromine. In recent years, the Smackover Formation has also gained attention for potential lithium in brines—high-salinity waters associated with deep salt deposits.

“Our research was able to estimate total lithium present in the southwestern portion of the Smackover in Arkansas for the first time. We estimate there is enough dissolved lithium present in that region to replace U.S. imports of lithium and more. It is important to caution that these estimates are an in-place assessment. We have not estimated what is technically recoverable based on newer methods to extract lithium from brines,” said Katherine Knierim, a hydrologist and the study’s principal researcher.

Global demand for lithium, a critical mineral essential for battery production, has increased substantially in recent years. This trend is projected to persist as the transition from fossil fuels to electric and hybrid vehicles intensifies, underscoring the mineral's growing significance in energy technology advancements.

The U.S. relies on imports for more than 25% of its lithium. The USGS estimates there is enough lithium brought to the surface in the oil and brine waste streams in southern Arkansas to cover current estimated U.S. lithium consumption. The low-end estimate of 5 million tons of lithium present in Smackover brines is also equivalent to more than nine times the International Energy Agency’s projection of global lithium demand for electric vehicles in 2030.

The USGS predictive model provides the first estimate of total lithium present in Smackover Formation brines in southern Arkansas, using machine learning, which is a type of artificial intelligence. Samples from Arkansas were analyzed by the USGS Brine Research Instrumentation and Experimental lab in Reston, VA, and then compared with data from historic samples within the USGS Produced Waters Database of water from hydrocarbon production. The machine learning model was then used to combine lithium concentrations in brines with geological data to create maps that predict total lithium concentrations across the region, even in areas lacking lithium samples.

"The USGS – and science as well-- works best as a partnership, and this important research was possible because of our strong partnership with the Office of the Arkansas State Geologist,” said Dr. Knierim.

Since 1879, the USGS has been the nation’s primary source of impartial scientific information on geologic, energy and mineral resources. The USGS also tracks lithium production, demand and imports in the U.S. as part of its role mandated by the Energy Act of 2020 to maintain the whole of government List of Critical Minerals.

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Permalink Reply by Rock Man on October 21, 2024 at 14:22

More ammo for mineral owners to lobby for higher royalties

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Permalink Reply by Sam Goodman on October 22, 2024 at 9:43

The New York Times - Arkansas May Have Vast Lithium Reserves, Researchers Say

https://www.nytimes.com/2024/10/21/business/energy-environment/arka...

Researchers at the United States Geological Survey and the Arkansas government announced on Monday that they had found a trove of lithium, a critical raw material for electric vehicle batteries, in an underground brine reservoir in Arkansas.

With the help of water testing and machine learning, the researchers determined that there might be five million to 19 million tons of lithium — more than enough to meet all of the world’s demand for the metal — in a geological area known as the Smackover Formation. Several companies, including Exxon Mobil, are developing projects in Arkansas to produce lithium, which is dissolved in underground brine.

Whether lithium harvesting takes hold in the region will depend on the ability of those companies to scale up new methods of extracting the valuable battery ingredient from salty water. The processing technique that Exxon and others are pursuing in Arkansas, known as direct lithium extraction, generally costs more than more conventional methods do, according to the consulting firm Wood Mackenzie.

Energy and mining companies have long produced oil, gas and other natural resources in the Smackover, which extends from Texas to Florida. And the federal and state researchers said lithium could be extracted from the waste stream of the brines from which companies extracted other forms of energy and elements.

The energy industry, with the Biden administration’s encouragement, has been increasingly working to produce the raw materials needed for the lithium-ion batteries in the United States. A few projects have started recently, and many more are in various stages of study and development across the country.

Most of the world’s lithium is produced in Australia and South America. A large majority of it is then processed in China, which also dominates the manufacturing of electric vehicle batteries.

“The potential for increased U.S. production to replace imports has implications for employment, manufacturing and supply chain resilience,” David Applegate, the director of the United States Geological Survey, said in a statement announcing the study. “This study illustrates the value of science in addressing economically important issues.”

Federal researchers also have identified other potential resources that could produce large quantities of lithium, including the Salton Sea in Southern California, where Berkshire Hathaway Energy and other companies are working to extract lithium from hot liquid pumped up from an aquifer more than 4,000 feet below the ground by geothermal power plants.

Exxon Mobil recently drilled exploratory wells in Arkansas and was evaluating whether it could extract lithium in a cost-competitive way, Dan Ammann, the president of the company’s Low Carbon Solutions business, said in an interview last month.

“We know we have an attractive resource. We’re working on understanding that cost equation, understanding the supply-and-demand picture,” Mr. Ammann said at the time.

Exxon said last year that it aimed to enter production in 2027 and to be churning out enough lithium by 2030 to supply more than a million electric vehicles per year.

Lithium is already extracted from brine in Chile, one of the world’s largest producers of the metal. Companies operating there typically place brine in large ponds until the liquid has evaporated, leaving behind various minerals. That process is relatively cheap, but it takes time and may affect freshwater supplies.

Several companies are hoping that direct lithium extraction will allow them to more efficiently remove lithium from brine with the help of filters and other tools. Such an approach would use less land and could have a smaller environmental impact than evaporation ponds have. But it could take mining and energy companies years to perfect the technology and apply it at a large scale.

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Permalink Reply by Ben Barnhill on October 22, 2024 at 1:45

Skip, is the Smackover Lithium plan likely to extend into northeast Louisiana, specifically Union Parish et al?

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Permalink Reply by Skip Peel - Mineral Consultant on October 22, 2024 at 10:25

Ben, I don't know for sure.  I have been unable to identify any recent Smackover leasing that would indicate an interest in north Louisiana.  This "play" is very early in its life and there is still much unknown about the most productive areas and the royalty framework.  I have reason to believe that there are other Ark-La-Tex formations that are "water prone" and may have economic concentrations of lithium.  This will all play out over the next three years with commercial production getting underway in late 2026 or 2027.  That is if lithium based batteries are not overtaken by some other better battery tech.

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Permalink Reply by Joe B. Lovelace on October 24, 2024 at 13:17

Another article re Lithium extraction.

https://www.yahoo.com/news/vast-deposit-white-gold-arkansas-1921310...

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Permalink Reply by Joe B. Lovelace on November 2, 2024 at 8:12

Lithium Royalties Proposal Amended

Alterations made to meet state law

Texarkana Gazette

1 Nov 2024

AINSLEY PLATT

The companies asking the Arkansas Oil and Gas Commission to approve their proposal for lithium royalties submitted an amended application to the commission Tuesday afternoon, which made changes that appeared to address some of the recommendations made by an administrative law judge earlier this month.

The changes to the application come after a recommendation from hearing officer Charles Moulton to commissioners that the companies amend the application to align with state law, which he said required an application for royalties to be based on the brine units that the applicants want the royalty to be applied to. Brine units are defined in state law and created by the commission as areas where brine is produced from the earth.

However, the amended application did not remove Albemarle — one of the co-applicants which already produces bromine from brine in Columbia County and mines for lithium in other countries — as a party. This was despite Moulton’s recommendation that the company would not have standing, barring a determination from the commission that the state law governing royalties applies to Albemarle’s voluntary production units.

The original application said that the companies sought to establish a royalty rate for “extraction of lithium ion from Smackover Limestone Formation Brine produced from lands within” Columbia, Lafayette, Miller and Union counties, which would then be applied to the co-applicants’ operations.

The original application only referred to the Smackover formation — a geological feature — where the companies were hoping to extract.

Moulton said at the conclusion of the October pre-hearing that the Arkansas Brine Act referred to “units” multiple times, and that the original application — which sought a royalty for the Smackover Limestone Formation in specific counties — did not meet the bar established in state law.

The amended application tweaked the language referencing where the royalty would apply, changing the wording to “extraction of lithium ion from the Smackover Limestone Formation brine produced from lands within existing units, whether formed by order of the Commission or pursuant to authority contained within brine leases, and proposed future units.”

Albemarle also remained as an applicant, despite questions as to whether it had the legal standing to request a royalty — as evidenced by the language in the amended application referring to “authority contained within brine leases,” as Albemarle does not have a commission-formed brine unit.

With the language changes, it appears that the co-applicants are holding out for a commission determination that Albemarle’s voluntary operating area is “synonymous” with a commission-formed brine unit. Moulton, in his recommendations, said such a determination was necessary for Albemarle to have standing.

The companies — Albemarle, Lanxess, Standard Lithium, Tetra and Exxon-affiliate Saltwerx — all aim to extract lithium from the salt brines trapped thousands of feet below the earth in a geologic formation known as the Smackover formation. It’s part of a larger drive nationwide to build out the U.S.’ battery supply chain to make it less reliant on foreign nations, especially China, and has led to hundreds of millions of dollars in federal funding being awarded provisionally to companies in Arkansas.

Standard Lithium and Albemarle did not respond to a request for comment.

But before extraction can begin, prospective lithium producers must first satisfy a key procedural requirement outlined in Arkansas law — establishing a lithium extraction royalty.

That requirement has led to a months-long back-and-forth between the companies and those who object to the companies’ proposal for a variety of reasons, ranging from assertions that the royalty isn’t high enough to complaints that the companies haven’t been transparent enough with potential royalty beneficiaries.

The disagreement led to a September hearing date for the application to be moved to next week, to give Moulton time to hear and consider legal arguments made by the co-applicants in response to an objection filed by the South Arkansas Minerals Association, which, among other things, said that Albemarle did not have standing in the application due to the way that its brine production area was created.

The association, which represents some mineral rights owners, also said that the application, which originally did not refer to any specific area where brine is extracted — otherwise known as a brine unit — was required to be on a unit-by unit basis according to state law.

Robert Reynolds, the president of the association, said that he was still reviewing the amended application and determining the differences between it and the original one.

Moulton, after hearing each side’s legal arguments earlier in October, issued a memo with recommendations for the commission. He determined that certain aspects of the co-applicants’ arguments, which were the opposite of those made by the association, did not have merit, but sided with them on certain arguments.

In addition to his determinations on Albemarle’s standing and whether the application needed to apply to brine units, he also determined that state law appeared to require that the commission determine that lithium can be extracted from brine “profitably” before determining a royalty.

The commission will hear the full application next Monday in El Dorado. Gov. Sarah Huckabee Sanders announced Wednesday that she had appointed a special commissioner, Glen Fritsche of Fort Smith, specifically for the lithium royalty application.

The new application, in addition to the changes to include existing brine units, also aims to apply the proposed royalty to “proposed future units.”

This change came after an attorney for the co-applicants said at the pre-hearing that requiring companies without a formed brine unit to wait for a royalty determination until a unit was formed could impose prohibitive costs on potential producers, who he said would have to spend large sums of money to form the unit before they would even know how much it would cost to run a contemplated extraction operation.

An Exxon Mobil spokesperson said the company believes that “royalties should be set for both existing and future units to ensure consistency and stability.”

“When developing these projects there is significant expenditure before a unit is formed. Without the predictability of knowing the rules of engagement upfront, it will be more challenging to invest and develop new projects,” the spokesperson wrote in an emailed statement.

The “proposed future units” area is largely to the west and south of Magnolia.

It is not currently clear whether the Arkansas Brine Act’s provisions for royalties can be applied to “proposed future units” if there is not yet a proposal for the creation of the unit. Moulton did not explicitly address the issue in his recommendations to the commission, but did establish the following:

“The Hearing Officer finds that — consistent with the language of (the Arkansas Brine Act) — the establishment of a brine unit is a condition precedent in establishing a lithium royalty under the Brine Act,” Moulton wrote in his recommendations.

Lanxess and Standard Lithium by extension both have existing brine units formed by the commission, as does Tetra. Albemarle and Exxon-affiliated Saltwerx do not.

 

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Permalink Reply by Skip Peel - Mineral Consultant on November 2, 2024 at 12:08

Thanks, Joe.

Charles Moulton may be an experienced “hearing officer” but he doesn’t sound like an administrative law judge with a background in mineral law or O&G operations.  For full disclosure, I did not listen to the entire quite lengthy hearing as I believe I heard all I needed to hear after a little over an hour and a half.

 

For those wondering about the distinction between units formed or approved by the Commission and the voluntary brine unit formed and operated by Albemarle, a commission approved drilling and production unit includes the right of the operator to force pool or integrate all mineral owners within the unit boundary including those that are not leased.  A voluntary unit is just what the name implies.  The unit operator has leased all the mineral rights within the unit boundary and all those lessors have consented to being compensated based on their proportionate ownership.  In both cases, all owners of mineral rights within the unit boundary are paid on their proportionate percentage of the unit acres regardless of where wells are drilled within the unit. 

 

This whole question of brine production is based on the Smackover formation which may be a mistake.  It is quite possible that other formations contain commercial concentrations of lithium.  A brine unit should have the same requirements under the same regulations regardless of the formation that is unitized.  The Commission possibly sets up future problems if lithium is found in other formations.  A drilling and production unit not only has a surface footprint size and shape, it has a depth definition.  Think of units as a wedding cake with multiple layers.  The same cake could have multiple units based on which layer is being produced.  It is also problematic to just approve a unit based on a formation name without an accompanying depth definition.  There are over a thousand Haynesville Shale units in NW LA but each includes a depth definition based on existing wells with electric well logs in the vicinity.  The reason for this is that the Haynesville Formation may be ~10,000’ in depth on the north end of the fairway and 12,500’ in depth or more in the far south.  The Haynesville Shale, like all regional formations, has a dip.  In NW LA the formation dips, grow deeper, from north to south.

 

Royalty based on a state imposed administrative rule neglects the fact that not all brine units will have the same concentrations of lithium.  Should those mineral owners with higher concentrations of lithium in their unit be paid the same as those owners with lower concentrations?  There is significant variation in lithium concentrations and brine volumes across the multiple county area of SW AR.  Oil and Gas leases for owners within the unit can have lease terms that vary widely based on a number of factors.  There are no regulations of which I am aware that require a lessee to offer the same lease terms to all mineral interests within an O&G unit.  This negates any advantage a particular mineral owner may have or who may be a more skillful negotiator.  For example, one who would engage an experienced attorney.  Or have a confirmed greater lithium concentration.

 

If state law requires that the Commission determine whether lithium can be extracted “profitably” and the co-applicants are unwilling to share their financial calculations, how would that be done?  Could the co-applicants share that information with the Commission but not make it public?  Would the co-applicants even be willing to share that information with the Commission?  Would the Commission choose to make a determination of profitability without the financial information? 

 

There are lots of critical questions to be answered with little obvious background information to guide the Commissioners.  We are unlikely to ever know the behind the scenes politics and wheeling and dealing taking place.

 

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