Royalty Ruling Lets Lithium Plans Roll On

An aerial view of a Standard Lithium's test well in the Smackover geological formation. (Standard Lithium)

Standard Lithium finally has a royalty rate to pay mineral owners, and one of Arkansas’ biggest potential energy industries is poised to go commercial.

The Arkansas Oil & Gas Commission voted 9-0 on May 28 to set a royalty rate of 2.5% for battery-grade lithium products extracted from the Smackover geological formation. The formation, which runs through south Arkansas and several other states, has long been a hotbed of oil and gas production and the brine bromine industry.

The ruling means mineral rights owners will get 2.5% of the market value of lithium carbonate equivalents derived from their holdings.

That’s up from a 1.82% proposal that commissioners rejected last year as too low. A royalty rate is a legal prerequisite for selling Arkansas-sourced lithium in the battery ingredients market.

Smackover Lithium, a partnership between Standard Lithium of Vancouver, British Columbia, and Equinor of Norway, won the royalty approval. Local officials in Columbia and Lafayette counties rejoiced with them.

The South Arkansas Minerals Association argued for a higher rate, a sliding scale starting at 4%, but didn’t fight the 2.5% proposal as aggressively as it had the 1.82% rate.

Robert Reynolds, the association’s president and a half-century veteran of Arkansas’ oil, gas and brine fields, summed it up this way for Arkansas Business: “Landowners are just business- people, looking forward to bigger and better things.”

That’s not to say that many mineral owners weren’t bitterly disappointed.

Joshua Gaines, who owns 45 acres and their brine rights, called the 2.5% rate ridiculously low. “I’d laugh you off my property with that offer,” he told commissioners at the hearing, which was held in Magnolia.

But commissioners like Charles Wohlford, a Fort Smith oilman, and Jim Phillips of Smackover saw 2.5% as fair and competitive. Phillips signaled that he agreed with arguments that if costs in Arkansas grow too high, Standard might consider moving its operations to east Texas.

Standard’s South West Arkansas Project plans to pump brine from nearly 2 miles underground through pipelines to a planned plant south of Lewisville.

The facility would refine the briny metal into lithium carbonate, valuable in battery-making.

Construction of the $1.5 billion production facility is expected to begin this year or next, with production commencing in 2028, Standard officials said. Contractors are expected to hire about 300 construction workers, and the finished plant will employ about 100 Arkansans in its first phase, officials said. The project won a $225 million grant from the U.S. Department of Energy in January. That fact was cited to undermine arguments that Standard might abandon Arkansas.

Smackover Lithium hopes to eventually double the Lewisville facility’s capacity and job count.

It’s noteworthy that the royalty applies only to what the commission dubbed the Reynolds Unit, 20,840 acres that Standard Lithium has leased in Columbia and Lafayette counties.

A lithium rate is still pending for gigantic tracts held by rival lithium miners Exxon Mobil, Albemarle Corp. and Lanxess Corp. in south Arkansas.

Valarie Clark, Lafayette County judge, told the Magnolia Reporter that she’s grateful to have some certainty. “… [W]e’re excited to get started on this project and watch Lafayette County move forward,” she said. “We’ve had conversations with different business owners, just wanting to kind of branch out. But there was uncertainty until the royalty was set.”