From the Arkansas Advocate:
After a third attempt, a lithium royalty has been set for the first time in Arkansas.
The Arkansas Oil and Gas Commission voted unanimously on Wednesday to approve an application by SWA Lithium, a joint venture between Canada-based Standard Lithium and Norwegian energy company Equinor, to set a 2.5% royalty on lithium extracted from brine.
The royalty applies only to the Reynolds Unit, which encompasses parts of Columbia and Lafayette Counties.
You can read a breakdown of the now-approved application here.
The royalty structure proposed by the joint venture was identical to the structure proposed in a rejected 2024 royalty application. At least 100 people and companies objected to last year’s application — but only a half dozen submitted written objections this time around.
This time, Standard Lithium was able to overcome concerns about whether its proposed royalty was fair and equitable, as required under state law.
Commissioner Charles Wohlford, who extensively questioned applicants during the November hearing, made the motion to approve the latest application, noting when making the motion that he believed the proposal was fair, consistent and competitive.
Unlike during the previous royalty hearing, the joint venture presented more concrete projections about what it would cost to build the first phase of its SWA Project, also known as Smackover Lithium.
Jesse Edmondson, Standard Lithium’s director of government affairs, said at the start of the hearing that a failure to set the royalty this time would be detrimental to the venture’s ability to proceed.
Wednesday’s hearing moved swiftly compared to the November hearing, which lasted two days and saw dozens of objections and public comments.
Only six formal written objections were submitted to the commission prior to Wednesday’s hearing, and only two individuals spoke against the 2.5% proposed royalty. Barely anyone spoke in favor of the 1.82% royalty rate that had been offered in November, but far more spoke in favor of the 2.5% rate — mostly elected officials and economic and educational leaders in South Arkansas, whose institutions stand to gain from commercial lithium extraction, which an approved royalty brings closer to reality. All those who spoke in favor highlighted the positive economic impacts the project is expected to have on the area.
Joshua Gaines, a mineral rights owner living in Columbia County who said he was speaking on behalf of “the little guy,” was one of the two who spoke in opposition to the Standard Lithium-Equinor royalty. In his comments to the commission, he lambasted “corporate greed” and said that since the joint venture would be profiting on his minerals, he and other mineral rights owners deserved a fair share.
He took issue with the commission setting a hearing at 9 a.m. on a Wednesday — a time, Gaines said, that most local people would not be able to attend. Gaines said he had to take the day off work to attend, but added that many people wouldn’t have that option.
Meanwhile, Emon Mahony, the vice president of the South Arkansas Minerals Association, which represents mineral-rights holders, urged the commission to ignore outside pressure to approve the application. He accused prospective lithium companies of purposefully low-balling proposed royalties to pressure the commission to accept a royalty that wasn’t fair and equitable.
“I know that the longer this drags on, the more pressure you’re going to feel to take the easy number that they’re putting in front of you on that day,” Mahony said. “Pressure will eventually get to you, and mineral owners won’t get a fair deal.”
Commissioner Jim Phillips took issue with that. After Mahony finished, Phillips invoked the words of former AOGC commissioner Mike Davis, saying he and his fellow commissioners leave their friendships at the door when making decisions. Royalty owners were not the only people the commission had to consider in its decision, Phillips said.
“We also have to consider the people that can’t afford to be here; the mom-and-pops, the restaurants, the severance tax that goes to the cops, the police, the firemen, the schools,” Phillips said. “I mean, there’s a whole bigger picture.”
“We get pressure from the state; we get pressure from elected officials,” Phillips continued. “I’m getting a lot of pressure, but it’s from myself, to get this right and to get it done” so it’s fair to everyone.
Andy Robinson, president and chief operating officer of Standard Lithium, said he was “really pleased” by the commission’s vote. The goal is to make a final decision on whether to move forward with the project by the end of the year, Robinson confirmed.
Having more clarity as to the costs of the full-fledged project allows the companies to begin seeking the financing needed to pay for the rest of the project, Robinson said after the hearing. The company estimates the cost at upwards of $1 billion. The venture has already obtained $225 million in federal funding from the U.S. Department of Energy.
Robert Reynolds, president of the mineral owners group, said the result wasn’t what they hoped for. Whether SAMA objects to future royalty applications filed by other companies, Reynolds said, would depend on the terms proposed in those applications.
In an emailed statement sent out immediately after the conclusion of the hearing, Department of Energy and Environment Secretary Shane Khoury said the approval was “a huge step forward” for the state’s nascent lithium industry.
“Lithuim brine extraction in Arkansas is unique — it enables Arkansas to unleash its energy and critical mineral potential in a way that results in minimal surface impact to the Natural State,” Khoury said.
In the same emailed statement, commission chairman Jerry Langley declared mission accomplished, after saying last year that the commission had one shot to get the royalty matter right.
“Throughout this process, all parties wanted a payment structure that is fair, consistent, and competitive, and today’s approval accomplishes this goal,” Langley said.
