Arkansas oil and gas regulators unanimously approved a second lithium royalty rate Monday during a special hearing in Magnolia.
The approval marks another stage in what officials and industry believe will be a lucrative industry extracting the mineral from South Arkansas’ subterranean brine, thousands of feet below the surface. Lithium is an essential element in batteries that power electric vehicles, equipment and cell phones.
Saltwerx, a subsidiary of ExxonMobil, applied for the royalty last month, just days after the Arkansas Oil and Gas Commission approved an identical royalty for Standard Lithium and Equinor’s joint venture.
Exxon’s newly-approved royalty rate — 2.5% — and the broader royalty payment structure are identical to Standard Lithium’s. Much of the language in the application itself was also identical.
The royalty applies only to the Pine Unit, a geographical area encompassing parts of Lafayette and Miller Counties.
“We’re pleased that Arkansas has taken an important first step to help kickstart the domestic lithium industry,” an ExxonMobil spokesperson said in an emailed statement. “While this is just the beginning and the road ahead is complex, this can open the door to new economic opportunities, including jobs, investment, and long-term growth for the region.”
This was its second royalty application.
Both Standard Lithium and ExxonMobil were two of the parties to the so-called “Big 5” royalty application that the commission unanimously shot down in November. The only difference between the November application and the two applications the AOGC has now approved is the royalty rate. In the November application, it was 1.82%. In the two that have been approved this year, it is 2.5%.
The companies vying for the rights to the brines have said they plan to use a process called direct lithium extraction (DLE). The process would allow the companies to separate the lithium from the brine, which would eventually be turned into a variety of lithium products such as lithium carbonate or lithium hydroxide.
But before that extraction can begin, a royalty has to be paid to the owners of the mineral rights underlying the brine units. State brine law says a royalty must be “fair and equitable,” and that a substance must be “profitably extracted” in order for a royalty to be paid. The commission determines if a company’s proposed royalty meets that bar.
As in last month’s Standard Lithium-Equinor royalty hearing, few people objected during Monday’s hearing to Exxon’s proposed royalty. A number of entities submitted letters of support — primarily business groups and local governments that stand to benefit from lithium extraction in the area.
A group of property owners and mineral rights holders, the South Arkansas Minerals Association, objected to Exxon’s royalty application, as it has for the three previous royalty applications that have gone before the commission.
Alan Perkins, attorney for the association, questioned the lack of financial information put forth by the company.
“It’s difficult to understand, for me, how we went from a hearing where we had a full feasibility study available and yet that wasn’t enough for the commission to make a decision, to where we are today, where we have a table with three or four lines and some very simple math,” Perkins said.
Exxon received a determination that it had the potential to profitably extract in April, when the regulator approved the formation of its Pine Unit — another requirement before a royalty can be determined. In November, commissioners said they had not received enough information to justify the 1.82% royalty rate, with one saying that the information they wanted would have to be provided during a unitization hearing anyway.
Six written objections, including the minerals association’s, were submitted to the commission prior to the hearing, according to the AOGC’s website.
Latwon Whitby of Forrest City, the only person to speak at the hearing other than Perkins, told commissioners it was “essential that our interests are protected.”
He told the Advocate his family has owned mineral rights in the Pine Unit’s area for generations. He expressed frustration that Exxon insisted their royalty was “fair and equitable,” despite not, in his view, providing any evidence to back it up.
“It seemed to me that they were just wanting to get a project up and running so that they won’t go to another state,” Whitby said after the commission voted to approve the royalty.
Prospective lithium extractors have raised the specter of taking their business to Texas or Louisiana on multiple occasions since last year, with Standard Lithium saying after the November hearing that Arkansas would lose its “first-mover advantage” if their royalty proposals weren’t given the green light.
“This decision reinforces the Commission’s commitment to fairness and consistency in Arkansas’s emerging lithium industry,” said Commission Chairman Jerry Langley in an emailed statement distributed by the Arkansas Department of Energy and Environment. “By aligning with the structure approved last month for production in new areas of the state, we’re creating a reliable and competitive foundation for growth in this vital sector.”
