The Elements of Innovation Discovered
The Elements of Innovation Discovered
Metal Tech News - May 29, 2025
The Arkansas Oil and Gas Commission agreed to a 2.5% royalty for the lithium extracted during the first phase of production at Smackover Lithium's South West Arkansas project.
The Smackover Formation (blue) consists of permeable limestone saturated with lithium-rich brine.
Smackover Lithium's South West Arkansas is one of five projects being advanced in the area.
Settling a longstanding dispute between lithium developers and local landowners, the Arkansas Oil and Gas Commission (AOGC) voted 9-0 in favor of a 2.5% royalty rate for lithium drawn up from underground brine reservoirs during the initial phase of production at Smackover Lithium's South West Arkansas project.
Southern Arkansas has become a hotbed for lithium exploration and development work due to its strategic position over the Smackover Formation, the buried relic of an ancient sea saturated with lithium-enriched brines that stretches from Florida into Texas.
The Smackover Formation (blue) consists of permeable limestone saturated with lithium-rich brine.
The U.S. Geological Survey estimates that the Arkansas portion of the Smackover Formation, alone, hosts between 5 million and 19 million tons of lithium – enough for the batteries in 650 million to 2.5 billion average-sized electric vehicles.
Lithium companies and landowners wanting to maximize their profits have been at an impasse over a fair royalty rate for lithium produced from this reservoir.
Last year, Smackover Lithium and four other companies filed a joint application with AOGC for a 1.82% lithium royalty, which was considered too low to meet the state's fair and equitable royalty requirements and was rejected by the commission.
On the other side of the negotiating table, the owners of land over the Smackover Formation proposed a 4% base royalty that would increase with higher lithium prices.
Greg Jones, a mining analyst for BMO Capital Markets, said the rates proposed by landowners would put a strain on the lithium projects in southern Arkansas.
"We assume a 2.5% royalty in our base case, within the range of royalties applied in other jurisdictions," Jones penned in a research note last year.
Smackover Lithium, a joint venture co-owned by North American minerals company Standard Lithium (55%) and Norwegian energy company Equinor (45%), submitted an application to AOGC for lithium royalty for phase-one product at South West Arkansas that met the base rate put forward by the BMO analyst.
Smackover Lithium's South West Arkansas is one of five projects being advanced in the area.
After more than four hours of deliberation, with input from both industry and landowners, the commission voted 9-0 in favor of the royalty proposed by Smackover.
Standard Lithium, which pointed out that the total royalty fee comes to around 3% at current lithium prices when you add in a "brine fee" that must also be paid to landowners, was happy with the commission's decision.
"We thank the AOGC for granting royalty rate approval for Phase 1 of our SWA Project," said Standard Lithium CEO David Park, "Establishing a fair and equitable royalty will allow brine owners to be compensated while encouraging economic development of the state's significant lithium resource."
Smackover Lithium points out that in addition to generating royalties for local landowners, the $1.5 billion it is investing in the project will bolster the economy and result in around 300 jobs during construction and 100 permanent jobs when the project reaches production – currently slated for 2028.
"The royalty rate is only the beginning of capital investment and moves us one step closer to our final investment decision," said Allison Kennedy Thurmond, vice president for US Lithium at Equinor.
Once commercial production is achieved, the Reynolds unit of the South West Arkansas project is expected to produce 22,500 metric tons of lithium carbonate per year, enough for the batteries in roughly 500,000 average-size EVs.
With more than 17 years of covering mining, Shane is renowned for his insights and in-depth analysis of mining, mineral exploration, and technology metals.
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