The U.S. government’s efforts to make the United States the world’s leading lithium producer are hampered by complex state regulations that discourage developers and hamper efforts to break China’s dominance in the critical mineral sector.
In Texas, Louisiana and other mineral-rich states, regulators are trying to determine who owns the millions of tons of lithium trapped in salt water beneath U.S. soil. It is unclear how it will be evaluated and who will ultimately pay for the processing of the results. Can also be used by manufacturers.
These legal ambiguities, along with technical challenges and low commodity prices, are a major challenge to increasing domestic lithium production and increasing demand from foreign sources, according to interviews with regulators, legal experts, politicians and landowners in seven U.S. states. The latest hurdle to US plans to cut off supplies has emerged. , investors, royalty companies, industry executives, and consultants.
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Federal officials in Washington have little power to force states to change regulations, and the Biden administration’s aggressive electrification goals will depend on the pace at which local officials update outdated laws.
Global lithium demand is expected to exceed annual supply by 500,000 tonnes by 2030. Analysts have warned that unless the United States ramps up its own production, its manufacturers will become dependent on China and other countries for supplies as the decade draws to a close.
For example, the Texas Legislature last year, backed by Standard Lithium and Chevron, approved legislation directing the state’s oil field regulator to develop regulations for extracting lithium from brine. But the regulator, known as the Texas Railroad Commission, told Reuters there is no timetable for when it will complete that task.
A lithium evaporation pond is seen at the Albemarle lithium production facility in Silver Peak, Nevada, on October 6, 2022. (Reuters/Carlos Barria)
“Where do we start in terms of working with local authorities to acquire brine mineral rights in Texas,” said Brady Murphy, CEO of Tetra Technologies, which is partnering with Exxon Mobil to produce lithium. “I don’t even know if it’s okay. I’m confused.”
The Texas Railroad Commission told Reuters that once the rules are developed, they will be released for public comment and then three commissioners will vote on them.
The American Clean Water Act of 1972 gives Washington regulatory authority over water withdrawal and reinjection across the country, but state officials have autonomy to control other parts of the process.
Murphy said Tetra, which also makes chemicals for water treatment and recycling, has tested more than 200 brine samples from Texas but has so far declined to issue a loan due to legal uncertainty. It says it has chosen not to do business in the Star State.
Standard Lithium, backed by Koch Industries, announced last October that it had drilled a brine well in Texas with lithium concentrations similar to those found in parts of Chile, which has the world’s largest lithium reserves. But Standard cannot touch that lithium until regulations are in place.
“We are taking a cautious approach to Texas,” Standard CEO Robert Mintak said.
regulatory risk
In Oklahoma, which is home to several brine deposits, the Oklahoma Corporation Commission, which oversees oil and gas development, says it has no jurisdiction over lithium production and royalties, and has filed a lawsuit with the state Department of Mines for not overseeing lithium. I asked for a comment. .
In Utah, the state Legislature and governor approved a bill last year aimed at preventing water levels in the lithium-rich Great Salt Lake from declining. As a result, Compass Minerals last month abandoned plans to produce lithium for Ford at the endangered lake and disbanded its entire lithium team, saying it had “significantly increased the regulatory risks surrounding this project.”
And in Louisiana, legal experts are concerned that a lack of state guidelines could trespass on adjacent property when producers re-inject brine after filtering lithium. There is. Reinjection is an important step in maintaining water table levels.
“Whether they have the right to do that will probably have to be challenged in court,” said Keith Hall, director of the Mineral Law Institute at Louisiana State University.
The Louisiana Department of Energy and Natural Resources told Reuters there are no existing laws related to lithium.
For water extracted along with crude oil, the path is even more uncertain. For decades, oil companies have paid to dispose of produced water containing lithium, which could be sold for a profit.
As demand for lithium now increases, landowners, oil producers and companies that oversee water treatment are fighting over ownership.
The Texas Court of Appeals ruled last year that COG Operating has control over the water it extracts with its crude oil, but that ruling only applied to that specific case. Additionally, not all oilfield leases include provisions regarding ownership of other minerals extracted along with the oil, making it difficult to determine whether lithium will be covered by existing leases or whether companies will be able to negotiate with landowners on new The question arises whether it is necessary to negotiate a contract.
“Until this issue is resolved, there will be a chilling effect on capital spending,” said Jamie Rimes, a mineral contract attorney at Liscoe & Lewis LLP.
arkansas
Legal experts told Reuters how lithium, unlike oil, typically has no market value on its own, would be valued for royalty payments, given the cost of equipment to filter battery metals from salt water. Ruka said it was unclear.
In Arkansas, where Tetra, Exxon, Albemarle and Standard Lithium aim to produce battery metal within the next few years, state officials have been debating a royalty structure to compensate landowners since 2018.
Shane Cooley, who as secretary of the Arkansas Department of Energy and Environment oversees the group that sets user rates, said the state could charge different fees depending on the amount of lithium contained in brine deposits.
Albemarle, the world’s largest lithium producer with operations in the United States, Chile, Australia, China and elsewhere, announced it has chosen not to file royalties for now, with plans to open a testing facility in Arkansas by the end of the year. Provide recommendations while monitoring the standard royalty review process.
“We’re watching to see how (the Arkansas royalty situation) develops,” said Nesa Johnson, an Albemarle executive who oversees Albemarle’s Arkansas lithium project. “There are some fundamental differences in how salt water fees are calculated.”
Exxon has also not submitted a royalty proposal despite spending more than $100 million on test facilities in Arkansas and Houston as part of its aggressive lithium efforts, although the state’s royalties are He said he hopes to see uniformity across the board.
California, which has huge lithium reserves in the Salton Sea region east of Los Angeles, last year imposed a flat tax on each ton of lithium. The move delayed development of the project, which was scheduled to supply General Motors and Stellantis. California’s governor and lawmakers have defended the tax as a necessary tool to ensure all residents benefit from the energy transition.
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Nevada, which has the only commercial lithium operation in the United States (a small mine operated by Albemarle), has taxed the mineral for more than 100 years, but the rate is based on each facility’s revenue.
Industry analysts expect that various states will eventually enact regulations, but it’s anyone’s guess when.
“Uncertainty is the scariest thing,” said one owner of lithium-rich land across multiple states, who asked not to be named to avoid offending regulators. “How can we develop these projects and attract financial support without a regulatory regime in place?”
