Lithium in SK: Primacy of rights, revisited
BY BRIAN ZINCHUK, pipelineonline.ca
REGINA – Saskatchewan is facing a curious and perhaps perplexing dilemma. In addition to oil and gas, it is now seeing development of helium and soon lithium production, too. And in one area near Torquay, geothermal power production is also in development.
The issue then arises of who owns the rights to what. Oil and gas rights are one thing, but in recent years the province has been holding Crown land sales auctions for lithium, too. And helium’s lease rates are ridiculously low, at five cents per hectare, having been established in the 1960s and not changed since.
Core of lithium brine bearing rocks from southern Saskatchewan. Photo by Brian Zinchuk
In many ways, it could be an embarrassment of riches. But then it can also lead to serious conflicts in ownership. That’s because some of these wells could see not just the targeted resource, but several others coming up from the very same wellbore.
So what rights trump what? What is the primacy of rights? And how can this be sorted out before it all ends up in Court of King’s Bench?
The issue is gaining some serious urgency, as three lithium exploration companies are in or moving towards pilot project status, with the intention of commercialization to follow within the next year or two.
It’s an issue Pipeline Online has raised several times in 2021 and 2022, both with the Minister of Energy and Resources Jim Reiter and Premier Scott Moe.
Since then, in the spring of 2023, the Ministry of Energy and Resources convened meetings to address any possible conflicts in mineral rights between oil, gas, helium, lithium and geothermal development. Participants from numerous ministries took part, as well as helium, lithium, oil and gas developers.
On Jan. 18, 2024, the ministry responded with an update. As the responses came from collaboration from several people within the ministry, the responses are attributed to the ministry as a whole:
Pipeline Online: What is the state of this, ER meetings with stakeholders? Has there been any movement on sorting out the primacy of rights between oil, gas, helium, lithium and geothermal?
Ministry of Energy and Resources: There are many considerations when it comes to determining the best way forward in spaces when minerals are found together, as is often the case with oil, gas, helium and lithium. The Ministry of Energy and Resources has been meeting with stakeholders to determine impacts and implications for each commodity.
Pipeline Online: Are consultations ongoing, or has there been some sort of resolution?
Ministry: We continue to meet with industry partners to find a fair, balanced and transparent path forward for all parties involved. Last year, the ministry held two meetings with relevant industry stakeholders to discuss the technical feasibility of lithium and helium co-development.
On October 16, 2023, the Ministry of Energy and Resources introduced a new helium and brine mineral tenure policy. It allows overlapping tenure for Crown dispositions if there are no pre-existing helium and natural gas or brine mineral dispositions and if rights holders do not impact each other’s operations. The ministry encourages operators to use reasonable efforts to consult with each other and agree to a productive arrangement that will enable co-development. It should be noted that this only applies in the south of the province and not in the Northern Saskatchewan Administration District.
Pipeline Online: What can we expect to see on this front in 2024?
Ministry: Consultation with industry partners will continue in 2024. The Ministry of Energy and Resources is optimistic these consultations will lead to appropriate regulations and royalties for brine mineral tenure and a modernization of the helium tenure system.
Have we set the lithium royalty at 3%? That’s it? It seems mightly low. Could I get some clarification from the Ministry of ER on this? This is going to turn into a multi-billion-dollar industry, and the province is only going to get 3%?
The work being done by companies to advance lithium from brine projects in Saskatchewan is very exciting, but it is important to note that there is currently no lithium being commercially produced and the economics of this resource are not fully known. Lithium projects are being advanced in many jurisdictions worldwide and a competitive development framework, including royalties, is essential in establishing an industry in Saskatchewan.
The Ministry of Energy and Resources currently specifies a Crown royalty in leases for brine lithium production of three per cent of the value of sales, with a two-year holiday for new capacity. This rate was chosen to be consistent with Crown royalties for potash, salt, and sodium sulphate, while the holiday seeks to reduce risk for new investment in this sector. As with all commodities produced in Saskatchewan, the Ministry will review the royalty over time to ensure it is set at an appropriate level to continue to attract investment, while providing a fair return to provincial residents.
Brian Zinchuk is editor and owner of Pipeline Online. He can be reached at brian.zinchuk@pipelineonline.ca. Articles are used with permission.