Navigating The Emerging Lithium Rush: Legal Experts Consider Potential New Sector In Alberta
Western Canada has the resources, workforce and technical expertise to help meet both current and future lithium demand, according to a paper recently published in the Journal of Energy and Natural Resources Law.
But in order to flourish, a lithium extraction industry still requires strong political appetite in Alberta and other western provinces.
Several companies are actively working on scrubbing lithium from lithium-enriched brines by purifying wastewater from oil and gas operations or through standalone extraction facilities.
“It’s really about just ensuring our policies and our laws aren’t going to stifle innovation in some of the new energy areas or development of critical strategic minerals,” said Brady Chapman, co-author of the paper on Canadian lithium mining and critical and strategic minerals (CSMs) for cleantech battery storage technologies. “We see potential here, but we also see how it could be undermined by us looking to the past, trying to just hang on to traditional oil and gas.”
For their paper, Rudiger Tscherning, assistant professor in the Faculty of Law at the University of Calgary, and Chapman, a former student of Tscherning’s, examine, in particular, whether the existing oil and gas-focused regulatory regimes can support the lithium industry as a new subsurface participant, and what might be needed to secure critical and strategic minerals for a cleantech sector in Alberta.
“There’s that old, established oil and gas legal and regulatory regime, and then you have new subsurface entrants through lithium extraction, for example, that potentially could go up against a very-much established and dominant regime,” Tscherning told the Bulletin. “When we talk about tension, there’s certainly a risk of legal disputes, which is something that contradicts to what may perhaps be the perception of ours — we don’t actually like disputes.
“We don’t like uncertainty, and if there’s one thing that a new industry needs and must be able to rely upon, it’s legal certainty, or at least policy certainty.”
Therefore, Tscherning and Chapman make several recommendations, including quite specific recommendations to the Oil and Gas Conservation Act (OGCA) that governs the Alberta Energy Regulator (AER). The goal of their paper is to encourage the creation of certainty and the reduction of disputes and litigation risks within the provincial regime.
“Practically, we hope our paper can go before [legislators],” Chapman told the DOB. “The Alberta government is revamping its whole mineral strategy…. Our hope is our paper will be before them. We’ve made a few efforts to get it before them so it can have some role in influencing whatever legislation may be coming back down the pipe shortly.”
Despite their call for greater regulatory and contractual clarity, in their paper Tscherning and Chapman note how Western Canada is “ripe with opportunity” to commercialize a more sustainable lithium extraction industry from its subsurface brines, which increases government-level interest in development of such an industry.
Tscherning said: “This is really something that could become sort of an ‘Alberta model,’ as we like to call it, and could really spur a lithium-extraction industry in replication in other jurisdictions as well, which of course would be something that works very positively for the province in terms of promoting that expertise.”
According to their paper, lithium-ion batteries are efficient and have rapid charging and discharging rates, making them ideal for the large-scale implementation of renewable energy sources necessary to meet baseload power demands for the energy transition. Therefore, a CSM such as lithium may be more than a precious resource. It may be a needed resource if the world is to transition into a truly low-carbon and sustainable future.
The paper concludes that Alberta’s regulatory landscape is not as clear-cut as it possibly could be to encourage lithium as a new subsurface participant, which may undermine government intentions to encourage broader diversification of the energy sector by, for example, attracting a lithium-extraction industry.
Further, conclude the authors, lithium, as an emerging sector, must navigate the dominant oil and gas industry via specific contractual considerations, and clarity from the provincial government could address certain legal uncertainties so as to hopefully avoid lengthy disputes.
Any lithium-extraction scheme an operator pursues must receive AER approval, pursuant to the OGCA, and right now in a dispute a regulatory decision would lean in favour of oil and gas, by design, Chapman added. “That’s a very, kind of, pointed example of where you may need to see some changes to allow this industry to develop.”
Why Alberta lithium matters
On an “extremely high level,” Tscherning and Chapman aim to help Alberta find a way to be part of the energy transition and Canada’s move towards a net-zero economy. While it might seem odd, considering Alberta is a typical oil and gas jurisdiction, Tscherning said, the province also has lithium, which is critical to electric vehicle transportation battery storage, as well as strategic security engineering, and even for cellular telephones.
Currently, lithium is mainly produced through hard-rock mining and brine operations, with the former facing certain environmental and social issues, and the latter being applicable in the Alberta context, he told the DOB. It might even be worth thinking about attracting manufacturing for EV batteries and energy storage technologies, either within Alberta or in Canada more generally, through a bourgeoning lithium industry.
“We went ‘deep underground,’ and we went into our areas of interest in terms of the legal issues in particular. We really looked at introducing a new source of energy, or a ‘new commodity’ if that’s what you want to call lithium, right in the backyard of oil and gas lands here in Alberta. That really got us to go underground into the subsurface, and then with it, all the legal and [regulatory] issues that are manifold that come with that.”
As part of an industrial refocus, Tscherning and Chapman suggest Alberta could attract a Tesla Inc. “gigafactory” to benefit from a localized supply chain of domestic lithium, mitigating global supply-security risks. Such potential for locally-sourced lithium likely influenced Tesla’s decision to build a gigafactory in the State of Nevada, they add.
“We won’t be able to cater to all the lithium supplies in Canada or around the world for purposes of the net-zero energy transition through battery storage by extracting this from Alberta,” Tscherning said, adding, however, Alberta can offer “environmental and social familiarity” for companies willing to pay a premium for a Canadian product.
“How can we address low oil prices? How can we find a balance? In my opinion, that’s what is really the long game. It’s about finding balance between natural gas and oil extraction, and continuing with the economy, but also finding ways of introducing new income streams such as through lithium extraction.”
The lithium advantage
In their paper, Navigating the emerging lithium rush: lithium extraction from brines for clean-tech battery storage technologies, Tscherning and Chapman consider novel extraction of lithium from subsurface brines as both a critical and strategic mineral, contextualizing it, and then analyzing Alberta’s laws, determining whether a traditional oil and gas jurisdiction is prepared for lithium extraction from subsurface as the “new player” in the regional economy.
“What we ultimately found was that there are regulatory concerns, subsurface conflict concerns,” Chapman (who is now an articling student) told the DOB. He said if a conflict between lithium extractors and oil and gas operators comes before the AER, then the priority likely favours the latter, which stifles a new industry that should be complementary.
“In discussions we’ve had with [lithium producers], they keep suggesting that other than the actual scrubbing of the lithium, which is certainly a unique technology, everything else is about drilling wells, extracting water and pumping it back in the ground, which is something with which [Alberta] is very familiar.”
Lithium often comes from reservoirs that no longer are extracting oil and gas, noted Chapman. Further, he said, water has long been seen as a waste product by oil and gas operators, and not necessarily something from which they can extract value. In some cases, producing lithium from brines changes this.
“That kind of becomes unique, as well, in terms of how the contracts are set up and regulations are set up for there to be value in what is traditionally seen as being waste.”
Lithium is found in brines worldwide, Chapman added, thus there is also an advantage to having “Alberta-made, Canadian-made technology” that can be exported. In the same way Western Canada’s oil and gas expertise is valued globally, mastering brine extraction domestically could mean the potential to sell that expertise internationally.
“Even if we’re only extracting a certain part of it, then if they need lithium extracted from brines in Germany [for example], then we can also assist them in that regard.”
Tscherning and Chapman eventually plan to host a webinar on issues raised within their recently-published paper.