Nationwide News On Lithium.
Late last month, Reuters reported that a complex mix of state regulations could impede America's push to become a global lithium source.The news service said doubts about mineral rights to underground brines--like those Standard Lithium Ltd. and Lanxess AG are using to produce test batches of powdered lithium in south Arkansas--could pose problems for companies working to create a multibillion-dollar new pipeline for battery material.
Gov. Sarah Huckabee Sanders says south Arkansas could become a global capital of lithium production as companies like Exxon Mobil, Tetra Technologies and Albemarle start work on a vast infrastructure to pump brine to the earth's surface, strip it of precious elements and pump it back deep underground.
But as Reuters reported, questions about who owns the brine rights and what they should be paid in royalties remain unanswered in Arkansas and other lithium-rich states.
Landowners have been waiting years for the Arkansas Oil & Gas Commission to establish a royalty on lithium brine, even though the state has long had a royalty for brine used in bromine production. The commission is set to address lithium royalties in an April 23 meeting, but no definite answer is likely right away.
Lanxess and Standard had proposed royalties for mineral rights owners of up to $900 per ton for lithium carbonate selling at $60,000 a ton, but prices for the element tumbled after that proposal. Goldman Sachs estimates an average price of about $13,500 per ton for lithium carbonate this year, and about $14,300 per ton for lithium details. One suggestion has been to set hydroxide. Both compounds are used in different royalty rates for brines holding making lithium ion batteries, key to the emerging electric vehicle market. But prices could still skyrocket by 2030, just about the time lithium production in Arkansas could be taking off.
"Global lithium demand is expected to outpace supply by 500,000 metric tons annually by 2030," Reuters reported, and if the U.S. can't boost domestic production, battery makers will have to turn to China. Still, price clarity is elusive.
Texas' lack of a royalty price has put off both Standard Lithium, which is backed by Koch Industries of Wichita, Kansas, and Tetra, Exxon's partner in an Arkansas lithium project. "We're taking a measured approach to Texas," Robert Mintak, Standard's CEO, told Reuters. He is far more optimistic about Arkansas' regulatory environment, but again, there are those pesky doubts on royalties.
State officials have been working on a formula for mineral rights owners since 2018, but the devil is in the details. One suggestion has been to set different royalty rates for brines holding various concentrations of lithium.
Dave Gibbs, president and CEO of Mission Creek Resources LLC, which has an operations center in Magnolia, told Arkansas Business that the oil and gas industry had "a very long run in establishing what is fair and reasonable in royalties."
But he said that when a barrel of oil is pumped up, the industry pays royalties based on the value of crude oil, not on the gallons of jet fuel or motor oil or lighter fluid that refinement produces.
"Right now all the conversations about lithium are all based on the final refined value as lithium carbonate," Gibbs said. South Arkansas brines are 200 to 500 parts per million lithium, a tiny fraction compared with a whole barrel of water. "People are running around saying that lithium is worth tens of thousands of dollars per ton, but that's refined lithium, which is a very far thing from a barrel of brine. That's going to be the big battle: How do you set a royalty on the unrefined brine?"
Kyle Massey
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| Title Annotation: | ENERGY |
|---|---|
| Author: | Massey, Kyle |
| Publication: | Arkansas Business |
| Geographic Code: | 1U7AR |
| Date: | Apr 8, 2024 |
| Words: | 616 |
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