Arkansas Oil & Gas Commission to Weigh New Lithium Royalty Proposal

A screengrab from the second day of the Arkansas Oil & Gas Commission's hearing on lithium royalty rates on Nov. 5, 2024 (Arkansas PBS)

The Arkansas Oil & Gas Commission will take up a new royalty rate proposal for landowners leasing their rights to lithium extractors in southwest Arkansas.

The commission will meet May 28 in Magnolia to consider Smackover Lithium LLC’s application for a 2.5% royalty rate on lithium brine.

Smackover Lithium is a joint venture between Standard Lithium of Canada and Equinor of Norway. Standard has been producing battery-grade lithium products in Arkansas for more than three years, but no Arkansas-sourced lithium can be sold before the commission sets a “fair and equitable” royalty to compensate landowners with lithium brine beneath their acres.

Standard was one of five companies rejected when they asked the commission for a 1.82% rate last November. The other joint applicants in that attempt were Exxon Mobil, Albemarle, Tetra Technologies and Lanxess Corp. All but Exxon have been major players in extracting and refining the flame retardant bromine from Arkansas underground brines.

A 9-0 No Vote

The commission unanimously rejected that proposal after a two-day hearing in El Dorado. Members agreed with landowners that the 1.82% royalty was too low.

The South Arkansas Minerals Association, led by Robert Reynolds of El Dorado, a longtime brine driller, had proposed a 12.5% royalty.

On May 6, Smackover Lithium announced that it had applied a royalty application all its own. It covers the newly designated Reynolds Brine Unit, part of its “South West Arkansas Project” in Lafayette and Columbia counties. The commission will hear the proposal at 9 a.m. May 28 at the Donald W. Reynolds Community Center Grand Hall at Southern Arkansas University in Magnolia. AOGC commission hearings are open to the public.

“The application proposes a quarterly gross royalty of 2.5% that will be based on the total amount of lithium produced and the average FastMarkets North American Index Price for technical grade lithium carbonate,” the joint venture said in its announcement.

Smackover Lithium declared that the proposed rate is “higher than comparable projects globally” on a lithium carbonate equivalent basis.

Other Compensation

It said the lithium royalty will go to brine owners in addition to a brine fee. That fee, often called the “in lieu bromine royalty,” is $65.05 per acre per year. The combination makes “the total proposed royalty compensation approximately 3% based on current lithium prices,” Smackover Lithium said.

David Park, the former Koch executive who is Standard’s CEO, spoke out for the royalty in a statement.

“Working with landowners and the AOGC to establish a fair and equitable royalty is key to the SWA Project’s success.” He said the royalty “generously compensates brine owners, is fair for industry, and encourages development of the Smackover resource.”

Allison Kennedy Thurmond, Equinor’s vice president for U.S. Lithium, said settling on a royalty is key to final investment decisions on Smackover Lithium’s plans to build a billion-dollar extraction facility south of Lewisville.

“The proposed royalty rate enables capital investment, infrastructure improvements, jobs, tax revenue and brings tremendous benefits to the Smackover region,” she said in a news release.

Reynolds said he had no immediate comment on the royalty proposal. “The South Arkansas Minerals Association is analyzing the application,” he told Arkansas Business.