Unlocking Lithium: A Regional Outlook on Brine Production
8
Minutes
Written by
Bryce Winters, Bryan Francque, Blake Armand & Grant Stetz
Lithium, a crucial element for powering the modern world's batteries, has long been associated with regions like South America and Australia. However, a significant shift is underway as innovative technologies redefine the landscape of lithium production.
We decided to delve into the regional outlook for lithium brine production across the United States to identify opportunities and challenges in various states.
Outlook In The Eastern United States
Innovative technologies are currently being developed for extraction of lithium from brines, which has the potential to open lithium exploration in the Eastern United States as extraction processes become more efficient and cost-effective. This could potentially open exploration opportunities East of the Mississippi River which have not been historically known for lithium deposits.
We see this as a possibility because there are several areas that have historical oil, gas, and mineral resource plays that could prove to be viable for future lithium extraction, especially from hydraulic fracturing brine currently underlying the Marcellus and Utica shale play.
As viability is constantly evolving due to market forces and technological breakthroughs, it is not unlikely that the Eastern United States may soon emerge as a profitable area for lithium extraction.
While large deposits are purported to reside within Lithium-bearing rock formations throughout Maine and the Carolinas, the emergence of lithium extraction from hydraulic fluid brine opens the already formidable oil and gas areas of the Marcellus and Utica fields to further profitability.
Case Law In The Eastern US
Typically, brine produced during oil and gas extraction is considered a waste product. Ownership of the waste generally falls to the producer, who is responsible for proper disposal according to regulations set by the DEP. Injection brine water requires a permit from the DEP, and that permit typically outlines the specific conditions and potential limitations on ownership rights.
So who owns the brine?
In most eastern states, mineral rights, including those for lithium brine, can be separate from surface land ownership. This means the person who owns the mineral rights, not necessarily the landowner, would own the lithium brine.
However, many eastern states lack specific regulations, which creates uncertainty for potential developers.
Leases for oil and gas production might not explicitly cover lithium extraction from associated brines, so new agreements with landowners might be necessary for companies to claim lithium.
Outlook In The Arkansas/Louisiana/Texas Region
Arkansas
Arkansas appears to be the best opportunity in the United States, and possibly the world, for lithium extraction due to the brine industry already existing in the Smackover formation to produce bromine.
Some companies already have a process to extract large volumes of brine, with some of the major brine producers already set to produce brine for lithium extraction.
Arkansas has been dealing with the different ownership of minerals for over eighty years stemming from the 1941 case Missouri Pacific Railroad Co. v. Strohacker, where the court ruled that a reservation of "all coal and mineral deposits" in a deed in the 1890’s did not encompass oil and gas, as they weren't commercially recognized minerals at the time.
The Strohacker Doctrine states that a grant or reservation of a mineral interest covers only those minerals that were considered commercially recognized minerals at the time of the conveyance.
Fast forward to 1955 when chemists discovered high concentrations of bromine in the produced brine in Smackover formation oil wells. Bromine is found in many household products such as a fire retardant and purifier for swimming pools.
Although Strohacker resolved the dispute over oil and gas ownership, it was also applied in D.M. Riche v. McGowan Working Interest Partners, where the court ruled that a 1938 deed reserving minerals and water failed to reserve brine because of Strohacker.
Arkansas title has many oil and gas reservations beginning early in the twentieth century. So what’s Strohacker’s impact on brine ownership?
Since the discovery of brine as a commercial product in 1955, the Arkansas brine industry has recognized January 1, 1955, as brine’s Strohacker date. Only generic mineral severances occurring after this date will affect brine ownership.
However, since mineral ownership for oil and gas dates back to the early twentieth century, there are some complications with mineral severance, and several title issues need to be considered, such as:
- Whether a generic reservation means that brine is also reserved after 1955 if it simply states oil, gas, and other minerals.
- Whether an oil and gas lease after 1955 covers brine rights, or if it needs to specifically state brine.
- Whether you can begin brine title on January 1, 1955, with the surface owner since this is the brine Strohacker date.
Even with many issues still to be considered, Arkansas has a lot of promise for lithium extraction.
Oklahoma
There are some very promising resources indicated within Oklahoma's Smackover Formation. A pilot well in Cass County found concentrations that were double the concentrations found in Arkansas.
At the time of writing, Galvanic Energy holds promising lithium brine prospects in the Smackover. While not yet extracting lithium, they are exploring and evaluating the resource.
Currently, the jurisdiction over lithium production and royalties is unclear, as neither the Oklahoma Corporation Commission nor the Department of Mines oversees lithium. It remains to be determined who owns the lithium in brine extracted alongside oil and gas. Existing oil leases may not explicitly cover lithium, which would require new agreements with landowners.
Louisiana
The Smackover Formation in North Louisiana, as well as some other areas in the state, show potential for exploration. There are even some who think lithium could be the next Haynesville Shale.
While there are no active lithium projects in the area that we’re aware of at the moment, landowners will likely be fielding calls from potential speculators who want to flip their leases to production companies for a quick profit.
It does not appear that case law concerning brine ownership exists in Louisiana yet. Much like other parts of the country, brine has historically been viewed as a non-profitable byproduct of producing oil and gas.
However, on March 1, 2024, legislation was proposed under Senate Bill 285, which would revise the Mineral Code to include brine as a mineral to which the Mineral Code applies. The bill would also grant the Office of Conservation the authority to establish units for brine.
We’ll be watching these developments closely.
Texas
We’ve seen some great potential for lithium development in East Texas (Smackover Formation), the Gulf Coast Basin, Central Texas Basement, and Trans-Pecos Texas.
The Permian Basin in Texas and New Mexico is also attracting interest for its lithium-rich brine. Estimates suggest it could hold substantial lithium resources. Pilot projects are underway to assess the feasibility of extraction using Direct Lithium Extraction (DLE) technology.
Koch Industries-backed Standard Lithium said in October 2023 that it had drilled a Texas brine well with lithium concentrations nearly as high as those found in parts of Chile, which has the world's largest lithium reserves. However, Standard can't touch that lithium until regulations are set. Robert Mintak, Standard's CEO, has said that the company is “taking a measured approach to Texas.”
In Texas, the law differentiates between surface estate owned by the surface owner and mineral estate owned by the mineral rights owner.
Brine produced from oil and gas operations technically falls under the surface estate but can be used by the operator for developing the mineral estate. However, transporting brine beyond the original lease for other purposes is considered an unreasonable use of the surface estate (Robinson v. Robbins Petroleum Corp., 1973).
Ownership of lithium within the brine remains unresolved.
While technically a mineral, Texas courts have historically excluded "water" from mineral grants (Fleming Foundation v. Texaco, Inc., 1960).
Given the absence of current case law and legislative clarity, the common legal advice is to secure agreements from the surface owner with an annual rental compensation structure and separate agreements from mineral owners with a royalty compensation structure.
Outlook In The Rocky Mountain Region
Despite promising lithium resources in Colorado and Montana, we’re not currently aware of any active mining that is currently happening in the Rocky Mountains.
Outlook In The American West Region
Arizona
Arizona is another state with promising lithium resources, but it's in the early stages of development.
Some active projects in the state are the Big Sandy Lithium Project and the Willcox Playa Project.
Unfortunately, there isn't currently any definitive case law regarding brine ownership specifically for lithium extraction in Arizona.
Unlike Nevada and New Mexico, where ownership of brine for lithium extraction is established through claims, Arizona's brine ownership situation is less clear-cut. It’s still being defined, particularly regarding lithium extraction.
Early indications are that brine rights in Arizona might be determined through State Land Ownership. This means that if the brine deposit is located beneath state land, the Arizona State Land Department will manage ownership rights. Similarly, companies might need to acquire water rights to access and extract brine from underground sources.
California
Lithium mining in California is a hot topic with both promise and controversy.
Overall, California represents an opportunity to develop a domestic source of this critical mineral, but it needs to be done responsibly. Finding the right balance between economic development and environmental protection will be key to its success in this state.
There’s currently a project in the Salton Sea integrating a geothermal power plant with lithium production. Additionally, companies like Controlled Thermal Resources (CTR) are operating pilot facilities testing DLE (Direct Lithium Extraction) to extract lithium from the brines without traditional lithium mining methods. This has the potential to be a more sustainable approach.
However, California imposed a flat-rate tax per metric ton of lithium, which has delayed many projects.
There isn't currently a wealth of case law directly addressing brine ownership in California. Lithium extraction is a recent development in the state, so legal disputes haven't had time to reach the court system yet.
So far, the focus for lithium extraction in California is on geothermal brines, a byproduct of geothermal energy production. Ownership of geothermal resources, including the associated brines, depends on the location.
For geothermal resources on federal or state land, the Bureau of Land Management (BLM) or the California Department of Conservation's Division of Oil, Gas, and Geothermal Resources (DOGGR) manages leasing rights. Companies can then acquire leases for geothermal exploration and development, which includes access to the brine.
New Mexico
New Mexico is currently in the exploration phase, with several promising projects underway.
There is no large-scale lithium mining happening in New Mexico yet, but exploratory projects include the Alkali Flat Lithium Project (SW New Mexico), where Lancaster Resources aims for a "climate-positive" approach to lithium extraction from brine. There’s also the New Mexico Lithium Project (near Lightning Dock geothermal plant), where Parkway Minerals explores lithium extraction from geothermal brine. Lastly, in the Lordsburg Playa Lithium Project, Arizona Lithium holds a permit to explore lithium-bearing brines in the Playa.
Finding specific case law on brine ownership for lithium extraction in New Mexico is difficult, as no major legal disputes related to brine ownership for lithium have reached the court system yet. Current brine ownership in New Mexico for lithium is primarily acquired through claims on federal or state land.
Brine rights depend on the specific brine deposit and its intended use. Brines are typically found in underground reservoirs beneath playa lakes (dry lake beds). Ownership here works similarly to Nevada, where companies acquire rights to the brine through claims on federal land managed by the Bureau of Land Management (BLM) or on state land managed by the New Mexico State Land Office.
Nevada
Nevada is currently at the forefront of lithium mining in the United States, holding significant potential, while also facing environmental and social challenges.
Active projects include the Thacker Pass Lithium Mine, Silver Peak Lithium Mine, and the Rhyolite Ridge Lithium-Boron Project, which has the largest known lithium and boron deposits in North America.
Unlike some other states, Nevada has a bit more history with brine extraction, particularly for minerals like lithium.
While there might not be case law specific to ownership of brine for lithium extraction (a recent development), brine extraction in Nevada has a longer history than other states. Existing case law might be related to brine ownership for other minerals. Nevada Division of Minerals (NDOM) regulates exploration and production of minerals in Nevada.
Companies can acquire rights to extract brine through either placer mining claims for existing brine deposits or water rights for extracting brine from underground sources. Brine rights in Nevada are managed by the Bureau of Land Management (BLM) and the Nevada Division of Minerals. These agencies oversee the permitting process for brine extraction and ensure compliance with environmental regulations.
Utah
Utah is sitting on a treasure trove of lithium, particularly in brine deposits found in the Paradox Basin and the Great Salt Lake, both of which have active projects.
However, they have faced opposition due to water usage concerns. (It should be noted that recent press releases indicate that Compass Minerals is planning to halt their Great Salt Lake lithium project, at least for now.)
Under the General Mining Law of 1872, Lithium is a locatable mineral on Federal land. Placer claims are generally used to locate potential lithium brine deposits. Lode claims are generally used to locate potential lithium clay or hard rock resources.
Ownership of brine rights depends on the specific location and source. Regulations for lithium extraction from brine, especially from the Great Salt Lake, are still evolving.
The Great Salt Lake itself is considered public trust water, meaning the State of Utah has responsibility for managing it for the benefit of the public.
If the resource is located under private land, the mineral owner owns the brine rights. For brines on federal or state land, the Bureau of Land Management (BLM) or the Utah Division of Oil, Gas and Mining (DOGM) manages leasing rights. Companies can then acquire leases for brine exploration and development.
Co-Development with Oil and Gas
The potential for co-development of lithium brine and oil and gas resources is gaining traction due to several benefits:
- Resource Potential
Overlapping Formations: Many oil and gas reservoirs also contain lithium-rich brine. Co-development allows for simultaneous extraction and utilization of this lithium resource.
Reduced Exploration Costs: Existing infrastructure and data from oil and gas exploration can be leveraged to assess lithium potential, potentially reducing exploration costs.
- Economic Benefits
Diversification and Revenue Generation: Oil and gas companies can diversify and generate new revenue streams through lithium extraction and processing.
Job Creation: Co-development could create new jobs in the lithium extraction and processing sectors.
Examples of Co-Development
- Prairie Lithium (Canada): Utilizing existing oil and gas wells for lithium brine extraction in Saskatchewan.
- E3 Metals (Canada): Repurposing abandoned oil and gas wells for lithium extraction in Alberta.
- Standard Lithium (Arkansas): Leverages the established brine production industry for bromine extracted from the Smackover Formation, which also holds significant lithium potential.
Overall, co-development with oil and gas presents a promising avenue for increasing domestic lithium production and economic benefits. However, responsible and sustainable development requires navigating technical complexities, addressing environmental concerns, and establishing a robust regulatory framework.
Brine Extraction Process
- Extraction: The process for brine is much like oil and gas; it’s extracted from a central location in the unit and transported to a facility nearby for the extraction of lithium from the brine.
- Return of Brine to Formation: After extracting the lithium from the brine, it’s returned to the formation and injected back at locations strategically situated on the perimeter of the unit, allowing for the de-brominated brine (“tail brine”) to push the higher concentrations of unproduced brine/lithium towards the extraction point.
- Brine Production Rates: Wells producing brine can produce approximately 20,000 barrels of brine per day.
- Units: To produce brine, units will need to be much larger than oil and gas units due to the volume of brine needed to produce enough lithium to make a project economical.
- Minimum Acreage: Some states have minimum acreage requirements that applicants need to meet before the approval of a brine unit. For example, Arkansas has a 75% minimum requirement for brine ownership and a 1,200-acre minimum acreage requirement for approval to set a brine unit.
Challenges and Uncertainties of Lithium Mining in the USAs with any new energy endeavor and associated technology development, there are still uncertainties regarding the viability of lithium brine extraction in the US.
Environmental Concerns
- Water Usage: Brine extraction is water-intensive, raising concerns about exacerbating water scarcity and impacting local water resources.
- Brine Disposal: Improper disposal can contaminate soil and water bodies.
- Land Disturbance: Exploration and extraction activities can disrupt ecosystems, damage landscapes, and impact biodiversity.
It’s crucial that we implement sustainable water management, responsible brine management and treatment, minimize land disturbances, and implement effective restoration plans.
Technical Complexities
- Low Lithium Concentration: Brine often has low lithium concentrations, requiring sophisticated and energy-intensive extraction and processing technologies for commercial viability.
- Separation Challenges: Extracting lithium from brine involves complex separation processes.
- Limited Infrastructure: Many potential resources are located in remote areas with limited access to infrastructure. Building and upgrading infrastructure can be expensive and time-consuming.
Developing efficient and sustainable methods is crucial for viability.
Economic Considerations
- High Upfront Costs: Establishing brine extraction operations requires significant investments.
- Volatile Market Prices: Fluctuations in lithium prices can impact project viability.
- Long Lead Times: Developing mines and processing facilities can take several years, hindering rapid response to demand surges.
- Royalty vs. Rental Payments: Compensation for Lithium ownership has not been set in certain states. Typical brine leases include a yearly rental payment in lieu of a traditional mineral royalty payment as seen in oil and gas.
There’s still significant risk in lithium extraction.
Social and Regulatory Hurdles
- Community Concerns: Local communities may have concerns about potential environmental and social impacts, leading to opposition and delays.
- Stringent Regulations: Stringent environmental regulations and lengthy permitting processes can add complexity and delays.
- Geopolitical Tensions: Reliance on foreign sources raises geopolitical concerns. Expanding domestic production can offer greater control over this critical resource.
- Lithium Ownership: Ownership of brine/lithium may vary from state to state. In Arkansas, brine is classified as a mineral, but in Texas, brine is not considered a mineral, suggesting that its ownership lies with the surface owner. This will likely be determined in court in the near future.
Social and regulatory success requires open communication and striking a balance between responsible development and efficient permitting.ConclusionThe landscape of lithium production in the United States is experiencing a significant shift, fueled by technological advancements and the pursuit of new opportunities. States across the country are actively exploring their lithium brine potential, with some already initiating projects and others in early development stages. Co-development with oil and gas resources offers a promising avenue for boosting domestic lithium production and economic benefits, albeit with technical and environmental complexities. Despite the challenges, unlocking the domestic potential of lithium holds the key to enhancing energy security, driving economic growth, and fostering sustainability as the world transitions to renewable energy and electric vehicles.
