The Arkansas Oil and Gas Commission voted unanimously to keep Albemarle Corp. of Charlotte, North Carolina, as one of five co-applicants in a lithium royalties docket that drew hours of testimony on Monday.
The commission, meeting in El Dorado to set a payment rate for mineral rights owners in south Arkansas’ Smackover Brine formation, disregarded an administrative law judge’s preliminary recommendation to consider dropping Albemarle from the application.
The other four co-applicants in the case — Standard Lithium, Lanxess, Tetra Technologies and Saltwerx, a subsidiary of Exxon Mobil — all have defined “brine units” in Union, Columbia and Lafayette counties.
Albemarle, in the opinion of Administrative Law Judge Charles Moulton, had never expressly classified any of its Arkansas operational areas as “brine units” under the Arkansas Brine Conservation Act of 1979.
Commissioner Charles Wohford asked if the commission could simply follow 45 years of precedent and declare Albemarle, the world’s largest lithium producer, as a regulated entity and an “interested party” in the royalty docket. In the proceeding, the co-applicants sought commission approval of a 1.82% royalty rate. Objecting parties, who were also heard from Monday, argued that the rate is too low to be fair to landowners.
“In all honesty, commissioner, you can do whatever you want,” Moulton told Wohford. “If you’re asking me whether it’s legal or not, that’s another thing entirely.”
Wohford suggested that at some point, the commission “accepted an operating area as a unit, and it’s better to have folks regulated than unregulated.”
Moulton replied that even if the commission had accepted Albemarle’s operations as a brine unit, “when I asked specifically during the [preliminary] hearing, does Albemarle have a unit, the answer was no.”
Wohford moved to accept all of Moulton’s pre-hearing recommendations but to keep Albemarle in the docket, and all of his fellow commissioners voted to carry the motion. The other commissioners are Chair Jerry Langley of Smackover; Vice Chairman Chris Weiser of Magnolia; Randy Lawson of Bentonville; Robert Liner of Fort Smith; Jim Phillips of Smackover; Tim Smith of Fort Smith; Mark Thomas of Magnolia and Bennie Westphal of Fort Smith.
The rest of the morning and afternoon sessions, which ran until 5 p.m., focused on statements and testimony in favor of the 1.82% royalty rate that the five publicly traded companies proposed, and to cross-examination by counsel for objectors.
Alan Perkins of Little Rock appeared, representing the South Arkansas Minerals Association, a nonprofit group. Patrick Hickey also questioned witnesses for the co-applicants, representing landowners and trusts held by Simmons Bank of Pine Bluff.
Witnesses like Remi Loiseau of Saltwerx and Robert Ylagan of Exxon said the royalty rate proposal would pay mineral rights owners 1.82% of the value of lithium carbonate equivalent as gauged by Fastmarkets, creator of a price index that reports market prices of lithium carbonate. The 1.82% would be multiplied by the number of tons produced by a brine area, and by the percentage of the brine acreage owned by mineral rights holders.
Attorney Thomas A. Dailey of Fort Smith led the charge for the co-applicants, arguing in his opening statement that the 1.82% rate is identical to one the commission set in 2007. That rate was for three salts extracted from the brine in addition to bromine, the flame retardant element that has been the cornerstone of the brine industry for 50 years.
In 2007, the commission “set a royalty rate for the salts, and the methodology that it used is the exact same methodology that these co-applicants are proposing to use today for lithium,” Dailey said. “It was fair and equitable, the commission so found, and we believe it is fair and equitable today.”
Perkins and Hickey emphasized that the co-applicants, citing their need to safeguard competitive secrets, are refusing to give the commission the cost figures it needs to decide whether the proposed rate is safe. Perkins also bore down on Fastmarkets representative Grace Asenov, noting that basing a royalty rate on her company’s research would be less accurate for specific Arkansas projects than basing it on sales numbers actually supplied by Arkansas lithium producers.
The royalty hearing is to resume today at 9 a.m. with a decision on the royalty application expected by noon.
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