Smackover Lithium’s 2.5% Royalty Goes Before Oil & Gas Commission Next Week
This Week: Oil & Gas Commission to Consider Smackover Lithium’s Royalty Rate
Smackover Lithium, the joint venture between Standard Lithium Ltd. and Equinor, will make its case next week for a 2.5% gross royalty on lithium produced from brine.
The hearing is set for 9 a.m. May 28 at Southern Arkansas University, and in this week’s Lithium Link, we’ll preview that and a look at the royalty rate by the numbers.
Plus: How Standard Lithium is thinking about East Texas as a lithium play.
Let’s dive in!
A Lithium Royalty Rate Captains Up: What to Know Before the May 28 Hearing
The Arkansas Oil & Gas Commission will hold a pivotal public hearing at 9 a.m. May 28 at the Donald W. Reynolds Community Center Grand Hall at Southern Arkansas University in Magnolia. On the agenda: whether to approve a new lithium royalty rate proposed by Smackover Lithium, the joint venture between Standard Lithium Ltd. and Equinor.
The proposal:
Following the commission’s April 24 approval of its roughly 21,000-acre Reynolds brine unit in Miller and Lafayette counties, Smackover Lithium applied for a 2.5% gross royalty on lithium produced from brine, indexed to the Fastmarkets North American Index Price for technical-grade lithium carbonate.
The rate includes:
2.5% royalty on lithium.
$65.05-per-acre annual brine fee (the “in lieu bromine royalty”).
Combined, the total royalty compensation would be about 3% based on current lithium prices, according to a news release from Standard Lithium and Equinor.
Flashback:
Last November, the commission unanimously rejected a 1.82% royalty proposal jointly submitted by five companies: Standard Lithium, ExxonMobil, Albemarle, Tetra Technologies and Lanxess. The South Arkansas Minerals Association, led by South Arkansas drilling veteran Robert Reynolds, had advocated instead for a 12.5% royalty.
✅ Supporters say...
Smackover Lithium argues the new proposal is:
“Higher than comparable projects globally”.
A balanced solution that “generously compensates brine owners” while remaining viable for developers.
A key enabler for a billion-dollar lithium extraction facility near Lewisville (Lafayette County).
“The proposed royalty rate enables capital investment, infrastructure improvements, jobs, tax revenue and brings tremendous benefits to the Smackover region,” Allison Kennedy Thurmond, Equinor’s vice president for U.S. lithium, said in a news release.
❌ Opponents say...
While open to the project, landowners remain unsatisfied.
“We want this to happen,” Reynolds, who also runs Shuler Drilling Co. of El Dorado, told the Arkansas Democrat-Gazette. “This is simply a difference of business opinions in a civilized society.”
Reynolds told the Democrat-Gazette that the proposed rate is still too low, but landowners will ultimately abide by the AOGC’s ruling.
What’s next:
As we’ve heard over and over again on Lithium Link, final approval of a lithium royalty could unlock the next phase of the nascent lithium industry in Arkansas. But a rejection could prolong the regulatory limbo, stalling economic development and investment across the Smackover Formation.
“Getting the royalties right” is widely seen as the last hurdle before the lithium economy in Arkansas can truly scale.
More: Read the latest coverage from Arkansas Business, the Arkansas Democrat-Gazette, the Arkansas Times and the Arkansas Advocate.
Go deeper: Read Smackover Lithium’s complete application document, which contains a list of brine owners and holders of brine leases in the Reynolds Brine Production Unit (Exhibit B).
By the Numbers: The Lithium Royalty Debate
A quick look at the numbers that are shaping the debate around lithium payments in Arkansas, including proposed compensation rates and past rejected offers.
What We’re Reading
Lithium mining: a ‘Smackover’ the head for East Texas or the start of a new energy era? — In East Texas, they’re asking many of the same questions Arkansans are about the prospect of a direct lithium extraction industry. And Arkansas’ DLE pioneer, Standard Lithium, is working to answer them.
Standard President Andy Robinson tells the Mount Pleasant Tribune that his company has been working on getting a project started in East Texas for the past four years.
Robinson said they’ve drilled three exploration wells there. So far, they see “potentially world-class deposits.”
“Years Away”: Still, Robinson said the company is several years away from knowing exactly where mining infrastructure would go.
“In Southern Arkansas, Standard Lithium has been very community-involved by building a local workforce, helping workforce developmental programs at local colleges, and [dedicating] time and money to the K-12 STEM programs in schools around the area,” the Tribune’s Nicole Kimball writes.
“We want to earn the trust of the community because we want to be a part of the community,” Standard Lithium’s Jesse Edmonson said. “We’ve been very transparent in Southern Arkansas and we want to do the same thing in East Texas.”
More: Read the complete Tribune story.
