EMERALD PARK – For several years, incentives for oil and gas development have been adapted for new, emerging commodities, namely lithium and helium. But in this past spring’s provincial budget, the Saskatchewan Party government decided to take a new tack, hiving them off into new critical minerals incentives.

And the implementation of those new incentives was announced on Aug. 9 at Arizona Lithium’s facility in Emerald Park by Minister of Energy and Resources Jim Reiter.

The new incentives are fundamentally similar to the existing oil and gas ones.

The new and updated incentives are the Critical Minerals Processing Investment Incentive (CPMII) and Saskatchewan Critical Minerals Innovation Incentive (SCMII). They will replace the usage of the Oil and Gas Processing Investment Incentive (OGPII) and Saskatchewan Petroleum Innovation Incentive (SPII), effective Aug. 1.

Minister of Energy and Resources Jim Reiter

 

Noting the lithium drilling activity that’s been taking place in southeast Saskatchewan, Reiter said, “It’s very exciting in these industries right now.

He noted, “We’re taking what we’ve learned about attracting investment from the oil and gas industry, and applying those things that we’ve learned, those principles, to the critical mineral sector.

“Prior to this month, lithium and helium projects were eligible under those two oil and gas investment incentive programs. But now, as of August, lithium and helium projects that were conditionally approved under these older programs are going to be automatically transferred to the new critical minerals programs. In addition to supporting development and Saskatchewan’s emerging lithium and helium industries, these incentives will also support development of nine other critical minerals identified with the strong potential to diversify Saskatchewan production in areas such as copper, zinc, magnesium, nickel and rare earth elements.”

Reiter spoke of growing global demand for critical minerals, and said Saskatchewan’s goal is to double the number of critical minerals produced in this province by 2030.

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Saskatchewan Mining Association

Pam Schwann, president of the Saskatchewan Mining Association and who acted as MC, said, “It really works as a partnership to have a willing partner to attract the investment. And I’d really like to acknowledge the work the Government of Saskatchewan does, and the open door that they have, not just the ministers, but the senior officials as well. It’s a great partnership, and Saskatchewan is a great place to invest in. So, thank you, Minister Reiter.”

Zach Maurer, holding up a sample of lithium extracted from a well near Torquay

 

Arizona Lithium

Zach Maurer, executive director of Arizona Lithium, is heading up the Perth, Australia based company’s Prairie Lithium project in Saskatchewan. (Last year Arizona Lithium purchased Prairie Lithium, which was founded by Maurer). Arizona Lithium has been the leader in lithium development in Saskatchewan, as Prairie Lithium drilled the first targeted lithium well in both Saskatchewan and Canada in September, 2021.

Maurer said, “At Arizona Lithium, we’re building the Prairie Lithium brine project in southeast Saskatchewan. That’s 390,000 acre project where we lease subsurface mineral rights just south of Weyburn and west of Estevan. And earlier this year, after years of exploration and development on the project, we released our pre feasibility study.

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“Later in in May, we announced that we had started drilling the production and disposal wells required for the project. And then earlier this week, we’d announced that we had been successful in making the battery grade lithium carbonate actually from a pilot plant that operated here in the facility earlier this year.”

Maurer held up a jar of white powder produced from the pilot plant which operated in their Emerald Park facility, extracted from lithium-rich brine from its Torquay area wells.

He continued, “So more important to today, last month, we announced that the Prairie Lithium brine project had been conditionally approved for up to $19 million in transferable royalty credits. So again, providing that confidence to the investment community that, once finalized, every eligible dollar we spend results in 15 per cent back to us through a transferable royalty credit. So as many of you may or may not know, North America still only produces less than one per cent of the total global lithium supply. And in Saskatchewan, we’ve got a really unique advantage here to help ease our reliance on that foreign supply. And as Minister Reiter noted in his speech, that advantage we have is being able to piggyback on the well-developed skills, services and infrastructure as a result of our oil and gas industry here in the province. So developing these lithium brines is very similar to an oil and gas process.”

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He spoke of the commonalities with the long-standing oil and gas sector. “When we drill our wells, we use the same drilling rigs as the oil and gas companies, as they use. We produce the salt water, lithium brine, to surface. We extract the lithium from the brine using a process called direct lithium extraction technology, or DLE. The extracted lithium can be converted into the battery grade lithium carbonate, and the lithium-depleted brine can be safely disposed of back underground.

“So overall, this process utilizes far less land, far less fresh water, and generates far less waste than what you would see in conventional lithium evaporation pond processing mines in South America, hard rock strip mines in Western Australia.”

He added, “We are currently drilling our production and disposal wells down on our project near Torquay. We’re going to be continuing to drill all fall, and in parallel to that, finalizing the design of our facility, and with the support of these investment incentives, going into production on our first pad, producing lithium at site by the end of 2025. So, exciting stuff in the industry.”

Asked about where the white powder in the jar came from, Maurer said, “Where this came from was brine from one of our exploration wells that we had drilled in late 2022. It was that brine that we used on a direct lithium extraction pilot plant here in the facility this past winter. And off of the lithium extraction pilot plant, you create a lithium concentrated solution, and that concentrated lithium solution is what then gets converted into this battery grade lithium product.”

Donna Bowles, North American Helium

North American Helium

Donna Bowles, vice president of land and stakeholder relations at North American Helium, said the company was founded in 2013, and is the leading company focused on exploration production of helium from underground fields of inert nitrogen in Saskatchewan.

She said, “The company’s mission is to continuously grow its reliable and geopolitically secure helium supply, which will support the Government of Saskatchewan’s critical mineral strategy and Helium Action Plan.

“The government’s ongoing support to the helium industry through incentives which I believe don’t exist anywhere else in other regions, is what sets Saskatchewan above all other regions for critical minerals exploration and processing. Support and incentives through the programs such as OGPII and SPII and for helium and lithium processing is what has led North American helium to invest close to half a billion dollars In Saskatchewan.

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“NAH has utilized the incentive programs for six of its purification facilities under the OGPII program, including Canada’s largest purification healing facility located at Battle Creek, and two projects under the SPII program. Our recently completed Antelope Lake facility and any new future helium processing facilities will benefit from the incentives under the new CMPII program.

“NAH continues to believe that Saskatchewan has an abundance of sustainable helium and remains committed to work with the province to develop a world class Canadian based helium hub. Since the commissioning of our first facility in 2020, we now have nine processing facilities in operation, and plan to add up to two new helium processing facilities a year going forward, the CMPII and the SCMII incentives have been and continue to be essential for us to attract new investment to funding to execute on our growth plans, NAH is well along the path of being a major contributor to the critical mineral strategy, goal of doubling the number of critical minerals produced in the province, as well as its helium action plan, goal of producing 10% of the helium supply by 2030,” Bowles said.

 

Program details

The CMPII and SCMII programs provide support for projects involving 11 critical minerals – helium, lithium, aluminum, cobalt, copper, gallium, magnesium, natural graphite, nickel, rare earth elements and zinc.

Helium and lithium were previously covered under the OGPII and SPII programs, but with the launch of these new critical minerals incentives, they will now be supported under the new CMPII and SCMII programs. Any helium and lithium project applications that were conditionally approved under OGPII and SPII will be automatically transitioned into the new CMPII and SCMII.

According to the Ministry of Energy and Resources, “The CMPII offers Crown royalty or freehold production tax credits — valued at 15 per cent of project costs and up to a maximum of $75 million per project — on processing and refining facilities for the 11 noted critical minerals. Examples of eligible projects include, among others, facilities that process or refine lithium, copper, cobalt or nickel, a facility that liquifies or processes helium, a facility that processes or refines aluminum or an aluminum smelting facility.

“The SCMII offers Crown royalty or freehold production tax credits — valued at 25 per cent and up to a maximum of $5 million per project — on innovative, commercial-scale critical minerals projects. This incentive is open to pilot projects and commercial-scale projects. Examples of eligible activities include, among others: managing harmful environmental impacts; increasing processing capacity; and commercializing a qualifying material from the byproducts or waste products processed from a different mineral.”

And that’s significant, as several lithium exploration companies have been conducting lithium pilot projects with a move towards commercialization in the next few years. On the helium side, North American Helium already has nine helium purification facilities and is building out additional two per year, while Royal Helium intends on building its first helium plant at Val Marie.

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“These incentive programs offer the project owners credits to apply against the royalties or taxes they would owe to the Government of Saskatchewan. The credits are transferable based on privately negotiated contract terms. That means non-oil, gas and helium producers can benefit from the program because they can monetize the credits by selling and transferring them to oil, gas and helium producers,” the ministry said in a handout.

Asked what the difference was between the previous programs and the new ones, Reiter said OGPII and SPII will continue, having been extended for another five years in the last budget. He said, “We wanted to put more onus on critical minerals as well. So we’ve taken helium and lithium out of those two programs. And I would describe it as kind of running parallel

“OGPII is essentially production, SPII is essentially innovation,” he said.

The intention is to do the same with critical minerals.

Assistant Deputy Minister Cory Hughes said, “What we’ve done is build on we’ve seen the success, not only in attracting investment, but also allowing companies to raise capital in the oil and gas, helium and lithium industries. And this is just an opportunity to expand that into some high priority critical minerals, to continue to deliver on our critical minerals plan of and the four key goals, especially around entry or increasing the amount of critical minerals being produced in the province.”

Asked if this takes money away from the oil and gas incentives, Hughes explained, “As Minister said, the programs run parallel, they both draw off of the same amount. But we have increased the amount in the SPII program to be appropriate on what we anticipate new applications are and there was sufficient capital in the OGPII budget. But of course, as demand comes on these programs, we certainly revisit the amounts available.”

When asked if other helium companies have expressed interest in the incentives, Hughes said, “We’re working with all of industry, and we continue to ensure that all of industry is aware of the programs and that and how they may apply for them.”

OGPII has 15 approved projects with investments totaling $300 million and royalty credits worth $41 million. Eight more OGPII projects are conditionally approved with investments totaling $1.3 billion and royalty credits equaling $163 million, if all projects move ahead, according to the ministry. In a handout, it said, “SPII currently has nine approved projects, with investments totaling $80 million and royalty credits worth $18 million. Five more SPII projects have been conditionally approved, with investments totaling $133 million and royalty credits equaling $20 million, if all projects move ahead.

“The OGPII program provides support for associated gas gathering systems, gas processing facilities, flare-to-power generation projects and helium purification facilities.

“SPII supports a range of innovative projects in the oil and gas, lithium and helium sectors, including piloting new extraction technologies, scaling new processing technologies, improving recovery efficiencies and reducing emissions.”

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Value chain

Moving up the value chain in the helium industry means not just purifying it to 99.999 per cent purity (“Five nines”), but going the next step in processing. That would be liquefying the compressed gas into a liquid state. And getting one of those facilities in this province was identified in the 2021 Helium Action Plan.

Pipeline Online asked, with North American Helium’s nine purification facilities already, is it getting close to the critical mass where they would start looking at a liquefaction facility in Canada? And would these programs incentivize that?

Bowles responded, “We’ve been certainly assured that a liquefier, because it is the first of its kind in Canada, would qualify under these two programs, which is very helpful.

“North American Helium has looked into a liquefier. You need critical mass for that, and we don’t think we’re big enough, right now, to do it ourselves. We are certainly working with the other helium companies, to help encourage growth with them, and it’d be a collective thing that could feed the liquefier.

“But we certainly have done engineering studies, feed studies on what that is. It’s very expensive item. We’re working closely with the federal government as well as provincial peers to see how we can finance this, $75 million to $100 million for this project, which is a big bite for a company our size.”

She said they’re about three quarters of the way to having the critical mass needed for a liquefaction facility, so they’re getting close.

Lithium processing

When it comes to value-added on the lithium side, Maurer said, “I think in most realities, it will be a lithium carbonate or hydroxide or an intermediate product that we will ship out of province. The reason being that it’s a carbonate, or lithium carbonate or lithium hydroxide that goes into the cathode of a battery. And as we know, a lot of those cathode manufacturing facilities are being built elsewhere in North America, so, more than likely, that’s the product that will be exported. And then there’s also opportunity, before we get to a lithium carbonate or lithium hydroxide, to stop at a lithium chloride or a lithium sulfate.

“So there’s a number of intermediate products that could be exported. And as the supply chains in lithium continue to develop, will get more clarity on what product is going where.”

Paul Lloyd, Arizona Lithium’s managing director who is based in Australia, spoke of the scale of the Saskatchewan lithium resource.

“The consumption of lithium carbonate last year was 1 million tons worldwide. By 2030, we need 3 million tons of this material to support the EV revolution, renewable power, storage, etc.

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“So in the industry, we talk about critical minerals. It’s a couple of words that are thrown around. This really is a critical mineral, because we don’t know where that 2 million is coming from, and that’s only 2030. You take it to 2040 you’ve got a massive deficit. So, with Saskatchewan just in our resource, having 6.3 million tonnes, and there’s a lot more there as well, we have a huge resource. And of course, North America is the home of the EV revolution, you will find that the demand for this commodity will be driven by North America, and North America has a little cocoon for lithium carbonate in the fact that there’s no production to speak of, a little bit in Nevada, but nowhere else in this country and or in this continent.

“So, the Chinese do control the supply of this material, and that is a strategic concern. So it’s a critical mineral, but it’s also a strategically important mineral. So I think the importance of Saskatchewan to contribute to that critical mineral is very significant. We are talking about innovation here with this brine production that Zach was talking about, and that innovation is close to commercial application, and it will change the market for lithium very quickly. So there’ll be a lot more attention on places like Saskatchewan for brine production. So we look forward to the future.”

Paul Lloyd, left, and Minister Jim Reiter

China issue

In a broader perspective, many of the identified critical minerals, including helium, have the vast majority of their processing or production based in China. And historically, control of resources like oil and scrap iron drove Japan to attack Pearl Harbour in 1941. Pipeline Online asked, “Now, China has control many of the strategic minerals for the next century. How does Canada fit into that? And how does Saskatchewan fit into that? So if they decide not to play nicely someday, because of a trade war for United States, whatever, how do we make sure we don’t end up with nothing?”

Reiter responded, “That’s the concern exactly what you state.”

He added, “Yeah, we have had a number of discussions with the federal government on this and our provincial colleagues around the country recently, about a month ago, I think it was.

“Energy resource ministers from across the country met in Calgary and had a number of meetings over a number of days there. And this was certainly on the agenda, and I think for the very reasons you’re stating, that’s part of the reason,

“You know, I talked about economic drivers, that’s paramount our government, but the reasons you stated, it’s also the reasons why the whole critical minerals, the exploration strategy we announced last year, what we’re announcing today, what we announced at budget time. It’s so important, it’s important that North America does step up and we become more focused on critical minerals. It’s for security. So you summarized it nicely.”

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Tremendous potential

Reiter said, “We’ve got tremendous potential in Saskatchewan. We have a tremendous opportunity for these industries to take off. There’s going to be worldwide demand growing. We have 27 of the 34 critical minerals on the Canadian critical minerals list. And what it’s going to do is it’s going to create economic growth.

“And the reason that’s important is because as these companies, we’re talking about incentives to try to get these companies to invest here, right? Because they’re going to profit, which means the government’s going to profit, which means the people of Saskatchewan profit, which means that money is going to flow to what are priorities for everyone in this province; for health care, for education, for social services, for highways, for parks, for all, all the services that people this province want and deserve. That that’s what growth is about. It’s not growth for growth’s sake. It’s growth to get the economic benefit, to to advantage all the people of Saskatchewan.”

 

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