LITHIUM BRINE MINING IN THE USA: REGULATORY FRAMEWORK AND CHALLENGES

• Jurisdiction: Derecho Internacional

International Mining and Oil & Gas Law, Development, and Investment (April 2017)
CHAPTER 12D
LITHIUM BRINE MINING IN THE USA: REGULATORY FRAMEWORK AND CHALLENGES
Terry Hammons
Vice President
Deputy General Counsel
Corporate and Chief Regional Counsel
Albemarle Corporation
Charlotte, NC

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TERRY HAMMONS is Albemarle Corporation's Vice President, Deputy General Counsel, Corporate and Chief Regional Counsel, responsible for the company's worldwide Corporate legal activities, including all strategic transactions (M&A, joint ventures and venture capital), and supporting the Lithium GBU Resources team. In addition, Mr. Hammons manages the legal support for the company's Corporate Governance, SEC, Treasury and Tax functions, as well as serving as the worldwide chief regional legal counsel with direct responsibility for the South America region. Mr. Hammons was born in Pittsburgh, Pennsylvania, US A. He received a B. A. in English from the College of William & Mary, and a J.D., cum laude, from the Georgetown University Law Center in 1999. Prior to joining Albemarle, he spent twelve years with a Fortune 500 global industrial gases company in roles of increasing responsibility in both the legal department and on the business side. And before that, he practiced corporate and securities law at Hunton & Williams in Virginia and Arnold & Porter in Washington, D.C. He specialized in venture capital and private equity investments, mergers and acquisitions, and securities offerings.

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TABLE OF CONTENTS

I. INTRODUCTION

II. OVERVIEW OF USA LAWS APPLICABLE TO MINING

III. OBTAINING LITHIUM MINING CLAIMS

A. Locating A Mineral Claim for Lithium

1. Federal Law Location Requirements

2. State Law Location Requirements

B. Financial and Feasibility Standards for a Valid Mining Claim

IV. WATER RIGHTS ARE ALSO REQUIRED AND GOVERNED BY STATE LAW

V. SUSTAINABLE MINING AND NEW TECHNOLOGY

A. Proven Technology

B. The False Promise of New Technology

VI. CONCLUSIONS

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Albemarle Corporation ("Albemarle") is a global specialty chemicals company with leading positions in lithium, bromine, and refining catalysts. Albemarle has lithium mines, refining, and production in the United States of America ("USA"), Chile, and Australia, and is exploring developing a new lithium mine in Argentina. Albemarle powers the potential of companies in many of the world's largest and most critical industries, from energy and communications to aerospace and electronics.

Albemarle acquired the only lithium producer in the USA in January 2015. The mine and processing facility is located in Silver Peak, Nevada. There, lithium is extracted from brine using a series of solar evaporation ponds. At Silver Peak we do not add any chemicals, as with traditional salars in Chile and Argentina, other salts drop out as the salt solution becomes more concentrated, leaving only the lithium. This lithium-rich solution is then processed at a nearby plant into lithium carbonate or lithium hydroxide and further processed at various international locations into battery-grade lithium and other lithium products.

This paper examines the USA legal framework for lithium brine mining, generally, regulatory challenges arising from federal land management, local expectations, and sustainable development issues. It includes several examples from the Silver Peak lithium operations, but also reflects Albemarle's international experience, its multi-national collaboration, and future challenges.

I. INTRODUCTION

In the USA much of the mining activity occurs on federally managed lands. Though historically it was possible to patent land for mining purposes and thereby

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convert it to private property, public lands have not been available for new mineral patent applications for over two decades. Mining may also occur on privately-owned lands or a combination of public and private lands. For example, the Silver Peak operation is situated on a combination of patented (private) and public lands. However, because the most challenging regulatory regimes apply to public lands, this paper focuses on lithium brine mining on federal lands.

Lithium deposits do occur in solid form, but lithium brine deposits--including the sole commercial deposit in the United States--make up almost sixty percent¹ of global lithium sources. Where lithium is dissolved in brine--water saturated or strongly impregnated with salts and minerals--"mining" requires groundwater pumping and processing. Consequently, as addressed in the following sections, both mining approvals and water rights are needed to produce lithium from brine.

II. OVERVIEW OF USA LAWS APPLICABLE TO MINING

Mineral resources on federal land may be locatable under the General Mining Laws² or they may be leasable under Mineral Leasing Acts, including the Mineral Leasing Act of 1920,³ the Geothermal Steam Act of 1970,⁴ the Mineral Leasing Act for Acquired Lands of 1947,⁵ and the Acts referenced in 30 U.S. C. ? 505. Or the

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resources might be saleable under the Materials Act of 1947.⁶ Depending upon the type of mineral resource, it may be a load claim or a placer claim.⁷ Where lithium is found mixed in a brine solution and is the primary valuable mineral targeted for extraction, it is a locatable mineral subject to the General Mining Laws.⁸ Lithium claims are placer claims.⁹

The owner of an unpatented mining claim on federally managed land has the right to extract minerals from the ground, but the United States maintains fee simple title to the land.¹⁰ The possessory rights associated with a valid unpatented mining claim are real property and treated as such under the law.¹¹ However, the owner's "possessory right" is limited to activities that are "reasonably incident to prospecting, mining and processing operations."¹² The locator's possessory rights are also subject to the United States' rights as the legal title holder to the lands on which an unpatented claim is located, including the right to manage the surface of the mining

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claim for other purposes and to dispose of mineral rights not covered by the mining claim location (e.g., by issuing leases in leasable minerals such as oil and gas or potassium).¹³ Further, until a patent is granted, the United States retains the right to inquire into the extent and validity of the rights claimed under an unpatented mining claim, including the right to initiate a validity examination.¹⁴

Regarding the mineral estate, the mining claim owner possesses the exclusive right to minerals within the vertical plane of the claim location.¹⁵ Owners of lode claims may also have extra-lateral rights to the entire depth and length of veins, lodes, and ledges even outside the vertical plane of the lode claim location. Placer claims do not include such extra-lateral rights.¹⁶ Since the owner of an unpatented claim lacks title, unpatented mining claims remain subject to the government's broad authority to manage public lands.¹⁷ This includes compliance with the General Mining Laws, the Federal Land Policy and Management Act (FLPMA).¹⁸ Once a valuable mineral has been identified, the owner has the right to continue the mining operation until it has exhausted the valuable mineral.

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Mentioned here, but beyond the scope of this paper, any proposed mine development will be subject to myriad environmental legal requirements, including the National Environmental Policy Act (NEPA)¹⁹ (triggering an Environmental Impact Statement²⁰ if the proposal is a "major federal action that may significantly affect the quality of the human environment"). To the extent that there are known or likely to be cultural resources present, the mining activity may be subject to the Archaeological and Historic Preservation Act (AHPA) and the National Historic Preservation Act (NHPA)²¹ (requiring a cultural resources survey and associated reporting). Other limitations may also apply.²² And environmental permits are required for operations, including under the Clean Air Act (CAA),²³ the Clean Water Act (CWA),²⁴ the Solid Waste Disposal Act (SWDA),²⁵ and the Resource Conservation and Recovery Act (RCRA).²⁶ The state where the mining activities occur may also have state-specific mining laws.

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III. OBTAINING LITHIUM MINING CLAIMS

To establish rights in locatable minerals, such as lithium, unless mineral entry has been restricted, a citizen of the United States (or one who has declared their intent to become a citizen) may enter the public domain at will, search for minerals and establish ownership rights in any valuable deposits of such minerals. According to the US Bureau of Land Management ("BLM") there are nineteen states²⁷ in which federal lands are open to mineral entry under the General Mining Law, subject to withdrawal or segregation from mineral entry.²⁸

As discussed in the next section, a locator who complies with the federal and state statutory requirements for locating a mining claim--physically staking the claim on open public land, making a discovery of valuable minerals, and filing the required documents--automatically acquires the full rights and interest in the claims, without any action by the government.²⁹

A. Locating A Mineral Claim for Lithium

A mining claim is required to mine any locatable mineral subject to the General Mining Law of 1872.³⁰ The locator must locate the mining claim pursuant to both

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federal and state requirements.³¹ To get to that stage, the locator will likely have engaged first in exploration. Under the Federal Land Policy and Management Act,³² ("FLPMA"), a disturbance of under five acres of land (generally for exploration purposes, but uses could include drilling wells) can be approved by simply filing a notice and posting a reclamation bond.³³ If the exploration identifies leasable, locatable (these laws would apply for lithium), or saleable minerals in projected...