In remote Nevada valley, race for more lithium comes down to water
There is an otherworldly feel to the crystalline-blue evaporation ponds that sit in Clayton Valley, an arid area in Nevada’s least populated county, Esmeralda. From above, the ponds look like a grid of pooled water arranged in a gradient that moves from a deep-sea blue to a light-sky tone.
The man-made desert pools contain what is naturally underneath the ground: water.
Pumps, drilled deep into the Earth, pull brine from an underground aquifer, and pipes move the salty water into the expansive holding ponds. This is not just any water. It is rich in lithium, a mineral needed for electric cars and large-scale storage batteries, technologies in high demand as countries and industries seek to decarbonize national economies and electric grids.
In the United States, policymakers see these pools and the valley surrounding them as playing a central role. The ponds are part of the Silver Peak mine, an operation run by Albemarle, a global lithium player based in North Carolina. For many years, this mine was the country’s only active domestic lithium source. As lithium prices have skyrocketed, more mines have looked to come online — and Albemarle is looking to expand its footprint and operations in Clayton Valley.
During a recent media tour of Silver Peak, Karen Narwold, Albemarle’s executive vice president and chief administrative officer, said the expansion could double output. Currently, Silver Peak can produce about 5,000 metric tons of lithium per year (one metric ton is about 2,205 pounds).
“The current demand for lithium is probably around half a million,” Narwold noted. “So this is a relatively small site, but very important from the standpoint of a U.S. domestic supply chain.”
“Customers,” she added, “are asking for more and more lithium, all the time, as you see [electric vehicle] demand increasing,” and the expansion of Silver Peak could help fill the supply gap.
Yet Albemarle is not the only player in Clayton Valley. SLB, a global oilfield services company formerly known as Schlumberger, holds mining claims for a lithium project next to Albemarle’s existing ponds. The company, eyeing a pivot from fossil fuels to renewable energy, argues that its plant would extract lithium more efficiently and sustainably, all with a smaller water footprint.
Behind the scenes is a contentious and ongoing administrative battle over water rights and the laws that govern mining in the West. At issue is which company has the legal right to extract the lithium concentrated within the valley’s salty waters — and on what terms mining takes place.
Representatives with SLB’s Nevada project have argued that Albemarle has used its large water holdings to actively prevent competition in Clayton Valley, effectively wielding “monopoly” power and shutting out other players with federal claims to mine lithium using new extraction methods.
The settlement of those water rights and mining claims could have major implications for how the race for lithium in Nevada, and in the United States, unfolds. In total, about 30 companies are involved with mining proposals in Clayton Valley, according to the Nevada Division of Minerals.
The division, which tracks more than 17,000 claims for lithium, has seen a roughly 58 percent annual increase in lithium claims. Lithium companies are exploring areas across Nevada, from Dixie Valley to Railroad Valley. Still, Clayton Valley is an area that continues to capture interest.
“There’s a lot of contention there between the entities in Clayton Valley and who has rights to this, that and the other,” noted Mike Visher, the division’s administrator. “At the end of the day, everyone is trying to determine what assets they have — and what’s the value of that asset.”
A water dispute
Here, in Clayton Valley, water rights are everything. Once the brine is pulled from the ground, it is left to sit in the large ponds. Over roughly a year and a half, the brine is transferred to different holding ponds and left to evaporate. With little precipitation and a lot of sunlight, the Silver Peak mine relies on evaporation to get a more concentrated solution. That salty solution is eventually piped to a nearby processing and production facility, where it ends up as a white lithium powder.
All of this is done at scale, and continuously. Albemarle has about 70 wells operating every day, Narwold said. To expand, the company added 22 wells, and it could bring additional evaporation ponds online. The mine includes about 23 ponds. The company, Narwold said, could build two to five new ponds or bring old ponds online by dredging the salt that amasses as a byproduct.
Those investments are to prepare for more brine coming into the system. By the end of the year, Albemarle plans to use all its water rights to produce more lithium, bolstering a domestic supply chain for a mineral increasingly seen as critical for the global economy. Yet SLB is challenging Albemarle’s plans, and its hold on Clayton Valley. SLB argues it has rights to tap into the water.
Two companies with big backing, effectively competing for the same water: Albemarle supplies Tesla and SLB’s operation is strategic partners with Panasonic Energy of North America.
In much of the West and in Nevada, water is regulated on a “first in time, first in right” basis. In the face of scarcity, those who claimed water rights first — or are “senior” — have the priority to use all their water before those who received water rights more recently. But there are important caveats: Water must be put to use within a certain amount of time, or you could lose your right.
That condition, known as “use it or lose it,” is meant to prevent speculators who might otherwise hoard water rights — for financial gain or competitive advantage — without ever using them. At the end of the day, while water in Nevada can be put to private use, water belongs to the public.
For more than half a decade, the courts and regulators have been grappling with this issue and the question of who is entitled to profit off of Clayton Valley’s water and the lithium concentrated in it.
Albemarle holds the rights to almost all the water rights in all of Clayton Valley — about 20,000 acre-feet in total (an acre foot is the amount of water that can fill an acre to a depth of one foot).
“Our position quite simply has been there is no water to be given to anyone because we have all the water rights,” Narwold said at the Silver Peak tour in October. “And we’ve been operating for many years here and can successfully show that we’re actually making a commercial product.”
There’s a catch to that: Over the years, the Silver Peak mine has only used about 60 percent of its water allotment. That means Albemarle might be running afoul of the “use it or lose it” rule.
SLB’s Nevada project argues that Albemarle has speculatively held onto water rights it never put to use. In a filing this year, a lawyer for Pure Energy Minerals, SLB’s partner, said that “for over three decades, Albemarle has been permitted to hold excess water hostage in Clayton Valley though it has never been able to put that water to use, nor is it permitted to do so.”
“Albemarle is undoubtedly engaging in speculation that is against Nevada water policy and the anti-speculation doctrine adopted by the Nevada Supreme Court,” Pure Energy Minerals wrote.
Through a subsidiary, Pure Energy Minerals had applied for a series of water rights, water that Albemarle has not used in the past. Those rights, pending approval by state regulators, would help NeoLith Energy — an SLB subsidiary — fully develop its lithium project in Clayton Valley.
That lithium project would rely on direct lithium extraction, a closed-loop system whereby brine would be pumped from the aquifer, processed and put back in the ground. If successful, some industry observers hope the direct extraction process could speed up lithium processing using a smaller water footprint, with an estimated 80 percent of the water recycled back into the aquifer.
NeoLith Energy has mining claims for its project, and 50 acre-feet of permitted water rights for a pilot plant. The company, operations manager Richard Morrison said, also received a state mine permit, and crews are beginning to work on constructing the facility. But for a full build-out of the project, NeoLith Energy needs more water, water Albemarle now plans to use for its expansion.
“The issue is not water availability,” Morrison said during an interview. “The issue is maintaining a monopoly through holding water hostage, and it has been. And that's not just been for us.”
Pending legal questions
For several years, Pure Energy Minerals has challenged Albemarle’s claims to use most of the water in the valley. Pure Energy Minerals took particular aim at state decisions giving Albemarle “extensions of time,” legal exemptions to the “use it or lose it” condition. In total, Albemarle has received 21 extensions since the 1980s, according to a recent filing from Pure Energy Minerals.
In August 2020, a district court judge sided with Pure Energy Minerals, remanding one of those extensions back to state regulators for further deliberations. That, Morrison observed, was when Albemarle started to get serious about its plans to expand, suggesting water was a key motive.
“Before that, everything’s been very ceremonial,” he said.
Two challenges to state decisions — an extension of time in 2017 and 2018 — are now pending before water regulators, according to Micheline Fairbank, a deputy administrator at the Division of Water Resources. Fairbank said the state agency expects to rule on the issue later this year.
She said the issue has been fraught since about 2014, when companies began exploration and staking mining claims in Clayton Valley. These claims come with their own set of rights under an 1872 federal mining law, a rulebook written more with panning gold, not pumping brine, in mind.
That began about eight years of litigation involving state regulators and companies active in Clayton Valley, what Fairbank described as “one of the more challenging resource management areas we have in the state.” No matter how regulators rule, their decisions often end up in court.
The state agency, she said, “is really kind of caught in the middle.”
As NeoLith Energy has challenged Albemarle’s water holdings, Albemarle has pushed back against their claims to water rights, filing an extensive protest letter with state regulators. The letter expresses concerns with its proposed water use, its process and raises concerns that it might contaminate the groundwater aquifer (these concerns, Morrison said, are unfounded).
“We’ve been very transparent about what’s being used,” Morrison said, noting the company has worked with state regulators. “What goes back into the aquifer is as clean as what comes out.”
The fight over water is unlikely to be resolved any time soon. Water decisions from the state are subject to judicial appeal, and those with mining claims in Clayton Valley face many unanswered legal questions. Visher, the administrator of the state’s minerals division, said everyone working in the valley has “opinions of what they’re entitled to” when it comes to water and mineral rights.
“The claimant believes that under the mining law, they are entitled to the mineral that’s located under their claim,” he said, referencing the General Mining Act of 1872. “Albemarle contends that ‘No, because we have the water rights, we have the rights to all of the lithium in the basin.”
“And that’s going to end up in the courts at some point, most likely,” Visher added.
In the meantime, Albemarle is pushing forward, with a goal of expanding by the end of the year.
When asked about water, Narwold noted the pending issues, but she said that “until someone tells us we don’t have the water, the default is that we have all those water rights and we can pump them. That’s part of the expansion here, making sure we’re using all those water rights.”