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Permalink Reply by Skip Peel - Mineral Consultant on April 28, 2025 at 4:47

I am flooded daily with articles on lithium startups and battery technology.  Sometimes I wish I have never created those internet alerts.  They are so many!  All first world countries are investing in battery research and working to secure their own supply of lithium.  US automaker Ford just announced a battery breakthrough.  The interest in lithium supply has doubled since the trade war uncertainties kicked in.  No country wishes to rely on another for its lithium and tariffs are unpredictable and costly for those who will need lithium.

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Permalink Reply by Lisa 15 hours ago

https://www.globenewswire.com/news-release/2025/05/06/3075074/0/en/...

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Permalink Reply by Lisa 15 hours ago

This wasn’t as high as I expected! Is it the beginning of the conversation or close to the end?

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Permalink Reply by Skip Peel - Mineral Consultant 15 hours ago

Thanks, Lisa. It is unclear from the article if Smackover Lithium had any private negotiations with the South Arkansas Mineral Owners group or the other major opponents to the original royalty request.  Considering that there are confirmed reports of lease offers in E TX with a royalty of 6.5%, the 2.5% does seem low.  I expect that a public statement from the major opposers will be forthcoming shortly.  This continuing royalty dispute could have the effect of moving DLE interest to Texas.

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Permalink Reply by Skip Peel - Mineral Consultant 6 hours ago

How would you define, Fair and Equitable?

Standard Lithium files application to establish lithium royalty

The proposed 2.5% royalty represents an increase over last year’s requested rate

By: Ainsley Platt - May 6, 2025  arkansasadvocate.com

A joint venture looking to extract lithium from South Arkansas brine wells has increased its proposed royalty rate to mineral rights owners to 2.5%.

After a resounding defeat of a 1.82% royalty rate in November, Standard Lithium and its partner, Equinor, submitted a new royalty application Friday to the Arkansas Oil and Gas Commission to establish a “fair and equitable” payment to rights holders. 

The request comes after the joint venture obtained commission approval in April for its Reynolds Unit, a geographic area that encapsulates parts of Miller and Lafayette counties, which resolved one of a number of sticking points that prevented the establishment of a royalty last year.

Standard Lithium and Equinor are asking the commission to approve a royalty structure identical to the one Standard Lithium proposed in conjunction with four other companies last year — except for the higher proposed royalty rate of 2.5%.

Jesse Edmondson, the director of government affairs for Standard Lithium, said the new proposed rate is “as generous to brine owners” as could be managed while still allowing the project to be feasible.

“The increase from 1.82% to 2.5% is 37%,” he said. “So it’s a 37% increase in the lithium royalty that we have offered.”

Whatever the royalty ends up being, he said, it is essential that it is “fair to all sides.” The 1.82% that was proposed last year, he said, was “right in the middle of the lane,” whereas the 2.5% rate proposal is, in the companies’ view, “on the high side of global benchmarks.”

“We feel like this is a best-offer scenario that we’re presenting to the state,” Edmondson said. “We have to be globally competitive in terms of being able to go out and raise money. We’ve got to be globally competitive with China once in production, year in, year out. The state of Arkansas has to be competitive with other regions in the United States, like Texas, that are trying to build projects.”

Standard Lithium and Equinor’s SWA Lithium project has already been awarded hundreds of millions in federal funding to build up a lithium extraction operation in South Arkansas as part of federal investments into critical minerals and other supply chains that have increasingly become concentrated in China. Lithium is a key component of rechargeable batteries, including those used in electric vehicles.

“Working with landowners and the AOGC to establish a fair and equitable royalty is key to the SWA Project’s success,” Standard Lithium CEO David Park said in a written statement. “The proposed royalty generously compensates brine owners, is fair for industry, and encourages development of the Smackover resource. The royalty is only the beginning of the economic impact this project will have for South Arkansas and the rest of the state.”  

Companies looking to extract lithium from the Smackover formation have emphasized the economic impact such ventures could have on South Arkansas communities, from employment to tax revenue. Standard Lithium said last year that the real benefits would come from infrastructure improvements, tax revenue and the like.

Local institutions such as South Arkansas University have started workforce training programs to supply the workers needed for extraction. Business leaders said last year the operations could be boons for local coffers and employment — although recent sales tax exemptions passed by Arkansas legislators for lithium extraction operations could complicate that math.

That didn’t stop rights owners from expressing major concerns last year that the 1.82% royalty was too low. Many recounted in written and oral testimony that they received practically nothing from existing bromine leases, and wanted to be sure they were receiving their fair share.

A former Oil and Gas commissioner, Mike Davis, expressed the importance of the royalty during the November meeting’s public comment period.

“But in the long run, as each one of y’all know, when the drilling rigs are gone, when the completion process is complete, you’ve got two things left. You have the maintenance and you have the royalty income,” Davis said. “For the majority of the citizens and for the state of Arkansas itself, the real benefit to the mineral owners and royalty owners and citizens of the state of Arkansas will be the royalty that you gentlemen determine.”

’Fair and equitable’

The state law that governs brine extraction stipulates that if a substance is profitably extracted from brine, a “fair and equitable” royalty must be paid to the mineral rights owners in the extraction area. The law gives the commission the authority to approve the rate.

That requirement led to a months-long back-and-forth between the companies involved in last year’s application and those who objected to the companies’ proposal for a variety of reasons, ranging from assertions that the proposed 1.82% royalty rate wasn’t high enough to complaints that the companies hadn’t been transparent enough with potential royalty beneficiaries.

The 2024 application by the “Big 5,” as the South Arkansas Minerals Association called them, was jointly filed by Standard Lithium, Lanxess, Tetra Tech, Albemarle and ExxonMobil-affiliated Saltwerx.

The new proposed royalty, if approved by the commission, would apply only to SWA Lithium’s Reynolds Unit, which is part of the first phase of the larger SWA Lithium project.

The proposed 2.5% royalty rate is the only feature of the new royalty structure that differs from the application submitted in November. Under the Standard Lithium-Equinor proposal, the royalty payment calculation includes the volume of “lithium carbonate equivalent” (LCE) in the brine used by Standard Lithium for extraction, the market price of lithium carbonate and an individual mineral rights owner’s proportional interest in the unit.

A joint venture looking to extract lithium from South Arkansas brine wells has increased its proposed royalty rate to mineral rights owners to 2.5%.

After a resounding defeat of a 1.82% royalty rate in November, Standard Lithium and its partner, Equinor, submitted a new royalty application Friday to the Arkansas Oil and Gas Commission to establish a “fair and equitable” payment to rights holders. 

The request comes after the joint venture obtained commission approval in April for its Reynolds Unit, a geographic area that encapsulates parts of Miller and Lafayette counties, which resolved one of a number of sticking points that prevented the establishment of a royalty last year.

Standard Lithium and Equinor are asking the commission to approve a royalty structure identical to the one Standard Lithium proposed in conjunction with four other companies last year — except for the higher proposed royalty rate of 2.5%.

Jesse Edmondson, the director of government affairs for Standard Lithium, said the new proposed rate is “as generous to brine owners” as could be managed while still allowing the project to be feasible.

“The increase from 1.82% to 2.5% is 37%,” he said. “So it’s a 37% increase in the lithium royalty that we have offered.”

Whatever the royalty ends up being, he said, it is essential that it is “fair to all sides.” The 1.82% that was proposed last year, he said, was “right in the middle of the lane,” whereas the 2.5% rate proposal is, in the companies’ view, “on the high side of global benchmarks.”

“We feel like this is a best-offer scenario that we’re presenting to the state,” Edmondson said. “We have to be globally competitive in terms of being able to go out and raise money. We’ve got to be globally competitive with China once in production, year in, year out. The state of Arkansas has to be competitive with other regions in the United States, like Texas, that are trying to build projects.”

Standard Lithium and Equinor’s SWA Lithium project has already been awarded hundreds of millions in federal funding to build up a lithium extraction operation in South Arkansas as part of federal investments into critical minerals and other supply chains that have increasingly become concentrated in China. Lithium is a key component of rechargeable batteries, including those used in electric vehicles.

“Working with landowners and the AOGC to establish a fair and equitable royalty is key to the SWA Project’s success,” Standard Lithium CEO David Park said in a written statement. “The proposed royalty generously compensates brine owners, is fair for industry, and encourages development of the Smackover resource. The royalty is only the beginning of the economic impact this project will have for South Arkansas and the rest of the state.”  

GET THE MORNING HEADLINES.

 

Companies looking to extract lithium from the Smackover formation have emphasized the economic impact such ventures could have on South Arkansas communities, from employment to tax revenue. Standard Lithium said last year that the real benefits would come from infrastructure improvements, tax revenue and the like.

Local institutions such as South Arkansas University have started workforce training programs to supply the workers needed for extraction. Business leaders said last year the operations could be boons for local coffers and employment — although recent sales tax exemptions passed by Arkansas legislators for lithium extraction operations could complicate that math.

That didn’t stop rights owners from expressing major concerns last year that the 1.82% royalty was too low. Many recounted in written and oral testimony that they received practically nothing from existing bromine leases, and wanted to be sure they were receiving their fair share.

A former Oil and Gas commissioner, Mike Davis, expressed the importance of the royalty during the November meeting’s public comment period.

“But in the long run, as each one of y’all know, when the drilling rigs are gone, when the completion process is complete, you’ve got two things left. You have the maintenance and you have the royalty income,” Davis said. “For the majority of the citizens and for the state of Arkansas itself, the real benefit to the mineral owners and royalty owners and citizens of the state of Arkansas will be the royalty that you gentlemen determine.”

’Fair and equitable’

The state law that governs brine extraction stipulates that if a substance is profitably extracted from brine, a “fair and equitable” royalty must be paid to the mineral rights owners in the extraction area. The law gives the commission the authority to approve the rate.

That requirement led to a months-long back-and-forth between the companies involved in last year’s application and those who objected to the companies’ proposal for a variety of reasons, ranging from assertions that the proposed 1.82% royalty rate wasn’t high enough to complaints that the companies hadn’t been transparent enough with potential royalty beneficiaries.

The 2024 application by the “Big 5,” as the South Arkansas Minerals Association called them, was jointly filed by Standard Lithium, Lanxess, Tetra Tech, Albemarle and ExxonMobil-affiliated Saltwerx.

The new proposed royalty, if approved by the commission, would apply only to SWA Lithium’s Reynolds Unit, which is part of the first phase of the larger SWA Lithium project.

The proposed 2.5% royalty rate is the only feature of the new royalty structure that differs from the application submitted in November. Under the Standard Lithium-Equinor proposal, the royalty payment calculation includes the volume of “lithium carbonate equivalent” (LCE) in the brine used by Standard Lithium for extraction, the market price of lithium carbonate and an individual mineral rights owner’s proportional interest in the unit.

Edmondson said extensive work went into determining that structure last year, and feedback from the commission in November and stakeholders in the region indicated that the structure itself was not an issue.

“So we just thought, ‘OK, why reinvent the wheel if everybody agrees that that part was fully acceptable and was quite good,’” Edmondson said. 

The proposed 2.5% rate reflects some of Commissioner Charles Wohlford’s comments on the application last year before he and the rest of the commissioners voted to deny the so-called “Big Five” application.

Wohlford said during deliberations that the applicants in November were arguing that, with the addition of a statutorily required per-acre payment on top of the 1.82% royalty, they would really be paying 2.5%. He disagreed with that logic, he said, because some mineral rights owners already receive those payments from other mineral extractors and wouldn’t receive an additional per-acre payment.

“Since owners within existing units are already receiving the in-lieu-of royalty, that is kind of an erroneous calculation there,” Wohlford said.

The in-lieu-of royalty — which is different from the lithium royalty — is a per-acre payment that companies extracting brine must make to mineral rights owners. It is adjusted with inflation. Currently, the in-lieu-of royalty is around $65. Meanwhile, a lithium royalty is considered an “additional substances” royalty; any lithium royalty that ultimately gets approval by the commission would be added on top of the inflation-adjusted in-lieu-of royalty.

Wohlford added that the testimony given by the applicants showed that there were offers of higher royalties outside of Arkansas. An increase to 2.35%, he said as an example, wouldn’t look like a lot on paper, but would be “significant” in terms of how much rights owners get paid. 

Commissioner Bennie Westphal also spoke in favor of a higher royalty rate.

“I think that both parties … should try to work with the benchmark of about 2.5% royalty on the finished LCE product. That’s my opinion,” he said.

But, perhaps most important, the commissioners appeared to agree in November that over the two-day hearing, the applicants did not provide enough information to demonstrate that the 1.82% royalty was “fair and equitable.” Attorneys representing the applicants pushed back against commissioners who asked for more, repeatedly citing U.S. antitrust laws to justify the lack of data provided.

Edmondson said the company believes they will be able to justify the 2.5% royalty to the commission when it meets May 28 at South Arkansas University in Magnolia. 

“Establishing a royalty for the SWA Project allows us to continue the path towards a final investment decision,” said Allison Kennedy Thurmond, Equinor’s vice president for US Lithium, in a written statement. “The proposed royalty rate enables capital investment, infrastructure improvements, jobs, tax revenue and brings tremendous benefits to the Smackover region.”

 

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