Several years ago Standard Lithium, a Canadian and German specialty minerals company, under the flag name of the Lanxess lithium project, began testing the idea of extracting Lithium from the tail waters of a bromine extraction plant in El Dorado, Arkansas. The original wells were from the Smackover formation, an early producing oil field which basically had played out years earlier. In the 1980s, production of bromine was begun by producing the brines from the Smackover Formation and extracting bromine. The lithium test operation began in 2019.
The Smackover brines are some of the saltiest brines on the continent. Bromine “is a highly corrosive, reddish-brown, volatile liquid which, along with fluorine (F), chlorine (Cl), and iodine (I), forms a family of elements known as the halogens. The word “halogen” means salt producer.” That according to the State Geologist of Arkansas.
All along the Gulf Coast region of the southern US, a layer of fossil salt called the Louann Salt, and it appears to be the source of much of the bromine. Bromine is concentrated in ocean waters via seaweed and plankton which decomposed during the Jurassic period around 200 million years ago. It is believed that the Smackover brines were sourced from the Louann Salt below the Smackover.
There are approximately 150,000 acres of land which pays mineral owners for the extraction of the bromine on the basis of a simple per acre payment that was originally created under the administration of Governor Bill Clinton. According to SEC filings (2019)
“The LANXESS Property is presently owned by Lanxess Aktiengesellschaft (LANXESS), a specialty chemicals company based in Cologne, Germany. LANXESS owns 100% of the brine leases and brine rights on their properties, either by an executed brine lease or by operation of law, as a result of unitization by the AOGC. The land package, which is indicated on Figure 4-2, consists of 150,081.81 acres that cover over 607 km2. Of the total land package, 142,881.81 acres are ‘Unitized’ and approximately 7,200 acres occur outside the Unit boundaries (Non-Unitized). Each Unit (South, Central and West) has their own brine supply wells, pipeline network and bromine processing (separation) infrastructure.” – State geologist
“payments made to the Lessor for brine production are known as “in lieu” royalty payments, because the payments are made annually based on a statutory rate, as opposed to a true royalty based on the amount of the produced brine. The statutory in lieu royalty payment is increased or decreased annually, based on changes in the Producer Price Index. A summary of payment process for brine leases is provided in Section 4.4.”
There is an extensive discussion of the geology of the Smackover brines in the SEC Filing mentioned above. You can download this at
https://www.sec.gov/Archives/edgar/data/1537137/000119312521204052/d194326dex991.htm
The Standard Lithium pilot uses the LANXESS/Great Lakes facilities and leases to extract lithium (primarily as lithium carbonate.) If I understand the SEC filing correctly, LANXESS bought out the Great Lakes project under the name of Chemtura. This suggests that the buyers believe the project is economic as well as the existing bromine production is profitable.
I was unable to source the exact payment on leases for the brine wells but they likely are around $60 or more per acre per year. At least 10 years ago they were $52/acre per year. Again, this is not the normal oil or gas lease. When the state got involved, the settlement set the royalties.
The SEC report suggests there is a wide swath of the Gulf Coast region from the LANXESS project to southern Florida with potential for heavy brines and possibly lithium and bromine. This may not be the only brines in the USA that have potential for development. But interest in the production in South Arkansas has now created a demand for lithium projects.
Exxon had acquired the rights to a lithium deposit in Arkansas, for which it paid $100 million. And drilling permits have been issued and drilling commenced in April. From the Magnolia Reporter (Magnolia, Arkansas)
“Tetra Technologies of The Woodlands, TX, is the operator and Sewell Drilling is the contractor for the Evergreen No. 1, with a surface hole location 1,876 feet FNL and 2,061 feet FEL in Section 23-17S-23W. Permit depth is to 10,000 feet into the Smackover Limestone. Work began April 1. The site is on Columbia Road 50 near the Lafayette County line.
Arkansas Lithium Corporation of El Dorado – a division of Standard Lithium – is the operator and Reliance Well is the contractor for the Speer No. 1, 1,907 feet FNL and 1,040 feet FWL in Section 19-17S-22W. Permit depth is to 9,300 feet into the Smackover Zone.”
The area is very promising and for mineral owners the question is how to get paid appropriately. The 1980s settlement set precedence for paying a set fee in lieu of a royalty percentage but the landowner may not be forced into that and perhaps can get a share of the proceeds like a conventional oil and gas lease. It was not clear that the original agreement with the bromine leases made allowances for compensating landowners for any produced gas or oil. It is almost certain such oil will be produced in small quantities and any lease should address proper compensation for same. Certainly that should apply to any incidental gas or oil produced in the venture. In parts of the country Helium could be produced and is very valuable. As the founder of NARO, Jim Stafford, said long ago, “Look Before You Lease.” Get an experienced oil and gas attorney before signing any leases.