Arkansas O&G Commission unanimously denies royalty rate application for lithium extraction

The Arkansas Oil and Gas Commission denied the royalty rate application from five companies seeking to extract lithium-rich brine in south Arkansas, a move that will require the companies to come up with another rate proposal and that will cause more delays for the commercial extraction of the mineral. 

The five companies – Standard Lithium, Exxon Mobil, Albemarle, Tetra Technologies, and Lanxess Corporation – proposed a rate of 1.82%, which landowners in south Arkansas have argued is too low. During a much anticipated nearly two-day Oil and Gas Commission hearing that began Monday in El Dorado, the companies presented hours of expert witness testimony to make their case for the proposed payout. 

The Oil and Gas commissioners voted 9-0 Tuesday afternoon to deny the application. The rate would have been a minimum rate set for over 500,000 acres of land the lithium companies have leased. The royalty rate would be multiplied by the amount of lithium carbonate produced and the price of the lithium to determine an annual royalty payout to the mineral rights owners.


Commercial extraction cannot begin until a royalty rate is set. The companies submitted the application for the 1.82% proposal in July.

The South Arkansas Minerals Association, a group representing property owners who have leased the mineral rights to more than 100,000 acres of their land, proposed royalty rates of 12.5%, a payout that the lithium industry said would prevent operations in Arkansas from being globally competitive.  

“I appreciate the commission seeing through the issues, and if given the choice between ‘yes’ to that application and ‘no’, I would have to pick no,” Robert Reynolds, president of South Arkansas Minerals Association, said after the decision came down. “They were not in a position to make a type of compromise or something better. The commission did their job, they were hard at work and they paid attention to it. They were not wrong.”


The companies sought to convince the Oil and Gas Commission that a higher royalty rate would impact the financial viability of their projects in the Smackover Formation, a region of mineral-rich land that includes part of south Arkansas. 

Half a dozen company representatives testified on the merits of their application, but stopped short of disclosing financial information, including projected profits, revenues and costs of their projects. They also did not disclose information on their leasing activities throughout the hearing. 

The companies were subpoenaed by the commission in October to provide witnesses who could testify on those topics. The commission’s subpoenas are not legally binding.


“I think it was the right decision because they didn’t have enough information to make a decision on a unit by unit basis,” Alan Perkins, attorney for South Arkansas Minerals Association, said at the end of Tuesday’s hearing. “It’s unfortunate that the companies will have to wait, but we’d all be better off if we could come to an agreement. If the issues don’t get resolved, they won’t get a royalty. They need to think carefully about what the commission told them in denying their application.”

After less than ten minutes of deliberation, the commission denied the royalty application without offering an amendment to the application. The commissioners indicated that they would like the companies offer a higher royalty payout and more transparency on each of their projects.

The companies revised their royalty application last week to include the locations of potential projects.

According to the United States Geological Survey, south Arkansas may have enough lithium to supply global demand for the mineral in 2030. The lithium rush in south Arkansas is part of a broader movement to source critical minerals in the U.S. for the country’s clean energy transition. Lithium is used in batteries that power electric vehicles and store excess energy produced from renewable resources, like solar and wind.

Standard Lithium Chief Operating Officer Dr. Andy Robinson, a geoscientist, cautioned the commission that Standard Lithium may leave Arkansas without a favorable royalty rate, saying they may look to invest their capital instead in east Texas, another region with lithium-rich brine.

*In a statement sent to the Arkansas Times Tuesday afternoon, a spokesperson for Standard Lithium reiterated that sentiment: “We are disappointed in the decision today, and at a minimum this delays our development plans in Arkansas.  Arkansas is quickly losing its first-mover advantage to other projects domestically, and, in particular, to the Smackover opportunities in East Texas.  We appreciate the time and consideration given to this complex issue by the commissioners, and are still sincerely optimistic we can find a path forward in Arkansas in the very near future that is fair to both mineral owners and producers.”

Standard Lithium has also received a $225 million conditional grant from the U.S. Department of Energy to invest in their Arkansas project to help secure a domestic supply chain of lithium. 

“We think the co-applicants [the companies] have submitted a proposal that meets the standard of a fair and equitable royalty, and the reason that that number was chosen, the 1.82%, is not accidental,” Thomas Dailey, an attorney representing the lithium companies, said in his closing statement to the commission. “It was chosen because that is the precedent that the commission set in an earlier hearing. And because when that calculation was made, it compared to the brine royalty that existed and the market value of bromine.” 

“Everyone here wants this to happen. We just want it to be fair. What if you adopt 1.82%? Here’s what’s going to happen: We will appeal that. And there are big problems with that in my opinion because you haven’t provided any economic information or based this decision on any specific unit in Arkansas,” Perkins, the attorney for the landowners, said in his closing statement.

This story has been updated with a statement from Standard Lithium.

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