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Permalink Reply by Skip Peel - Mineral Consultant yesterday

Royalty hearing video:  https://www.youtube.com/watch?v=tNESJzGO7Dk

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Permalink Reply by Skip Peel - Mineral Consultant yesterday

Standard Lithium wins battle over lithium extraction royalty after Oil & Gas Commission unanimously approves proposal

nwaonline.com  by Brett Barrouquere |

Mineral rights and landowners in southern Arkansas will receive a 2.5% royalty for lithium extracted from brine on their property after the Arkansas Oil and Gas Commission voted 9-0 on Wednesday to approve the payment rate.

The vote came after a four-plus hour meeting at Southern Arkansas University in Magnolia during which commissioners heard from Standard Lithium, the company planning to do the extraction, landowners hoping for a different royalty structure and a variety of business and public officials in the area.

The decision ends a multi-year dispute between the company and landowners in Columbia and Lafayette counties in what’s known as the Smackover Formation, an area stretching from east Texas through Arkansas and into the western Panhandle of Florida.

Commissioner Charles Wohlford, backed by Commissioner Jim Phillips, moved to approve the 2.5% royalty, saying tying the payment to an indexed, marketable product makes sense.

“For me personally this royalty is fair, it’s consistent and it’s competitive,” Wohlford said.

The approved rate was the third one by pitched Standard Lithium and a hike from the 1.82% payment rejected by the state last year as not meeting the law’s requirement that royalty payments be “fair and equitable.”

Landowners in southern Arkansas, led by the South Arkansas Minerals Association, sought a sliding scale royalty payment, with a floor of about 4% and rising depending upon how much the extracted lithium sells for.

Much of the hearing focused on the profitability of lithium extraction and what royalty rate would allow the company to make money on the process.

Jesse Edmonson, director of government relations for Standard Lithium, said the company is spending $1.5 billion on the project, which will create 300 construction jobs as the plant is built and another 100 permanent jobs once it opens in 2028. Edmonson said 65% of the mineral rights owners live outside Arkansas, with only 17% being in-state residents.

“No one has better royalty rates than the royalty rates in Arkansas,” Edmonson said.

Later in the hearing, Jackson Braswell, the public affairs manager with Weyerhaeuser, a timber giant that owns 1.2 million acres in Arkansas, said the company has gotten better offers to mine timberland in the state.

“This proposal would not be line with the dynamics of the market,” Braswell said.

The hearing at times got testy, with Eamon Mahoney, vice president of the South Arkansas Minerals Association, saying Standard Lithium was dragging its feet in hopes that the commission would get frustrated and approve a low royalty payment.

“If we’re dependent on Standard Lithium … to do the right thing and propose a fair and equitable rate, we’re going to be here a long time,” Mahoney said. “We are giving up something. We’re giving up a little piece of Arkansas and we’re sending it all over the place in the form of this lithium.”

Phillips replied that the commission was considering the third pitch from Standard Lithium after the two sides couldn’t reach a compromise.

“That’s what this commission wanted, for y’all to work it out. Y’all couldn’t do it,” Phillips said “I don’t want you to get the impression that we’re just going to get tired and make a decision.”

Phillips told Mahoney and representatives from Standard Lithium that more than just the desires of the mineral rights owners at the hearing and the company are taken into consideration. There are other landowners who could be impacted by the vote, he said.

“We also have to consider the people who can’t afford to be here. There’s a whole bigger picture,” Phillips said.

One landowner, speaking during the public comment part of the hearing, described Standard Lithium’s proposal as “corporate greed.”

Joshua Gaines, who said he owns 45 acres with mineral rights in southern Arkansas, said Standard Lithium wants to make a show of funding educational and training efforts in the area, but use the money made by not paying the landowners to do it.

“They want it for free. They just want to take it,” Gaines said. “The decision you all make about this lithium royalty thing will affect people like me, who wear overalls to work everyday.”

Gaines suggested commissioners reject Standard Lithium’s proposal and look to oil royalties, which have been set for decades

“So 2.5% is laughable,” Gaines said. “I’d laugh you off my property with that offer.”

Bob Honea, an attorney representing Standard Lithium at the hearing, said the company has more than 1,000 mineral rights deals in Texas with better royalty rates. Arkansas has a chance to get in early on lithium extraction, but if royalty payments are too high, it could bring a quick end to the industry, he said.

“You don’t want to kill the goose that laid the golden egg,” Honea said. “That head start is going to evaporate if we don’t move fast.”

James Rankin, the attorney for South Arkansas Minerals Association, a group of landowners in the area, noted that the two prior royalty proposals from Standard Lithium were rejected because there wasn’t enough information to justify the payment scale.

The company failed again to provide enough information, Rankin said, and it threatened to leave the state if it didn’t get approval.

“Standard Lithium is sitting before you saying give us what we want or we’ll take our toys and go to Texas,” Rankin told commissioners. “That’s not going to happen.”

Standard Lithium, working with Equinor, a Norwegian energy company, is hoping to use a process called direct lithium extraction to create lithium carbonate from the salty brine in the Smackover Formation.

The administrations of both President Donald Trump and former President Joe Biden supported Standard Lithium’s work in Arkansas, with Biden’s team giving the company a $225 million Department of Energy development grant. The Trump administration gave the work project priority development in one of his initial executive orders.

Both administrations considered lithium a “critical mineral.”

 

 

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Permalink Reply by Skip Peel - Mineral Consultant yesterday

I watched a good portion of the hearing and thought that the expert representing the mineral owners laid out a compelling case for a graduated royalty based on the price of lithium as an alternative to the originally proposed one eighth royalty.  The experts for SWA (Standard Lithium and Equinor) were much less persuasive and made veiled comments about E TX having greater lithium concentrations.  The attorney for the mineral owners highlighted this in his closing statement.

I expected some follow up questions and debate among the commissioners but that didn't happen.  A motion to approve the 2.5% royalty for the unit was quickly made and seconded and a unanimous vote followed.  I thought to myself, the fix was in.

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