Two developments emerged late last week in the state’s formative lithium production industry, and both could shape the course of companies’ plans to pull the battery-making metal from the brine fields of south Arkansas.
First, an administrative law judge decided on Thursday to delay an Arkansas Oil & Gas Commission hearing that was to consider setting a royalty rate on what lithium mineral owners would be paid for the battery-grade lithium extracted from their brinelands. The hearing, which had been set for Tuesday morning in El Dorado, is postponed to a yet-unset date.
The hearing officer, Administrative Law Judge Charles Moulton agreed to delay the royalty hearing “to a date agreeable to all parties.” Five publicly traded companies chasing lithium in south Arkansas sought the delay after the South Arkansas Minerals Associated objected to their application for rights owners to be paid roughly 1.82% of the value of finished lithium products derived from their lands. The companies — Standard Lithium, Albemarle, Lanxess, Tetra Technologies and Saltwerx, an Exxon Mobil subsidiary, are also fighting subpoenas from the South Arkansas Minerals Association for them to present data and witnesses to back up their request to what landowners see as a lowball royalty request.
$450M in Potential Grants
In the other development, on Friday the U.S. Department of Energy conditionally awarded $450 million in grant money for Standard’s Southwest Arkansas lithium plant project, a partnership with Equinor of Norway, and a project by TerraVolta in the same region.
Both are projects to pump brine to the surface from the Smackover shale formation and use new technology to directly draw out the lithium and refine it into battery-making materials.
The 2021 Infrastructure and Jobs Act will provide the money if the companies invest matching funds and meet other criteria. The infrastructure law aims to make the United States globally competitive in producing essential metals, including lithium.
The DOA named TerraVolta and Standard’s partnership, formed as SWA Lithium LLC, among 25 domestic projects earmarked for more than $3 billion in federal money. According to a DOE news release, it and the applicant companies “will undergo a negotiation process” before it issues any funds.
“DOE may cancel negotiations and rescind the selection for any reason during that time,” the release said. TerraVolta and Standard would each have to bring their own $225 million to the table, if that’s the amount the government eventually offers.
Global Perspective
Foreign companies, notably China, Australia, Argentina and Chile, dominate lithium production, and China is far and away the leader in refinement, according to Robert Reynolds, chairman of the South Arkansas Minerals Association and president of Shuler Drilling Co. of El Dorado.
“Virtually all of lithium processing, whether they’re taking hard rock lithium from Australia or brine lithium from Chile and Argentina, the processing into lithium carbonate and other lithium products is done in China,” Reynolds told Arkansas Business.
Over the past five years, Arkansas and national officials have grown increasingly suspicious of China and its motives. That’s one reason the Biden Administration’s infrastructure agenda supports domestic production projects.
In its own news release Standard Lithium, headquartered in Vancouver, British Columbia, said that if the federal grant comes through, the $225 million will pay for building the first phase of its “South West Arkansas project.” The company plans to build a direct extraction commercial plant on 118 acres it bought in Lafayette County, about 7 miles south of Lewisville. Standard Lithium owns 55% of that project, with Equinor holding a 45% stake. Standard has a separate partnership with Lanxess for its test extraction plant in El Dorado. It hopes to expand that pilot facility into a commercial production plant as well.
TerraVolta, Texarkana
TerraVolta, of Houston, dubbed its Arkansas effort Project Liberty Owl. The company hopes to create 125 in lithium development around Texarkana.
“Over the past 24 months, we have accumulated one of the largest land positions in the Smackover trend and confirmed the highly advantageous resource,” Jamie Liang, the company president and CEO, said in a news release. “Today we are thrilled to have the U.S. Department of Energy endorse Project Liberty Owl as we begin the design and engineering for this facility in the Texarkana region.” He said the company will hire American workers “to harness domestic lithium resources and supply the U.S. economy’s need for EVs, grid-scale batteries and consumer products.”
John Raymond, chairman of the Energy Minerals Group and TerraVolta, said the project “represents a real-world solution to the current gap in the domestic U.S. lithium supply chain.” Construction of the $1 billion facility is expected to start in 2028, the company said.
Standard Lithium’s CEO, longtime Koch Industries veteran David Park, said in a statement that the government’s “cost share” demonstrates “continued support for investing in secure and sustainable supply chains of domestic lithium production.”
No Arkansas-sourced lithium can be sold commercially, however, until the Oil & Gas Commission fulfills its duty to establish a “fair and equitable” royalty rate for mineral rights owners.
Leases Cited
The South Arkansas Minerals Association insists the royalty rate should be far higher than the 1.82% the industry leaders proposed. It is seeking to force the companies to defend their proposed rate, according to Little Rock attorney Alan Perkins.
“We went out and we did the best search we could, and we found some leases [for lithium royalties] already in place,” Perkins said in a telephone interview. “The highest that we were able to locate provide for a 10% royalty on that lithium.”
Perkins filed leases along with his objection to the public companies application for the 1.82% royalty rate. In the wake of Perkins’ objection, the lithium extraction company asked for more time, and they got it.
The commission will still meet Tuesday on non-royalty matters.
Moulton, the administrative law judge and hearing officer, granted the delay request in an email to lawyers for both sides and to officials at the Arkansas Department of Energy and Environment. The AOGC is part of that agency.
“This will provide opposing parties an opportunity to respond to the Motions and I will work with all parties to schedule the requested pre-hearing,” Moulton continued.
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