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Permalink Reply by Skip Peel - Mineral Consultant on Friday

The fight over lithium royalties continues in SW Arkansas, 1.82% now off the table

• BY LIZ SWAINE | Staff writer shreveportbossieradvocate.com

After nearly a day and a half of hearings, it took less than five minutes for members of the Arkansas Oil and Gas Commission to unanimously deny a royalty request made by a group of companies that have become known as the "Big 5."

Standard Lithium, Lanxess, ExxonMobil/Saltwerx LLC, Albemarle Corp. and Tetra Technologies Inc. had filed jointly to set the royalties on lithium-containing brine in the state at 1.82%. Landowners countered with 12.5%.

A royalty decision is needed before the companies can begin extracting brine in southwest Arkansas that contains economically feasible amounts of lithium. Lithium is used in a variety of commercial purposes but is currently needed in large supply for EV batteries.

According to the U.S. Geological Survey, an arm of the U.S. Department of the Interior, the lithium in southern Arkansas could meet nine times the expected global demand for the element in car batteries in 2030.

While not back at square one, there is a deep chasm between what landowners believe the brine is worth and what the companies are willing to pay, says Shreveport-based mineral consultant Skip Peel.

In the Arkansas landowners' favor, Peel says, is their knowledge of what some of the companies are paying East Texas landowners for brine royalty and leases — a significantly higher amount than the 1.82% rate offered to Arkansas landowners.

The East Texas leases need context, the companies said, as many of them come with deductions that the companies said would ultimately net the owners the same 1.82%.

Peel says southwestern Arkansas landowners are also familiar with the Haynesville Shale gas play in Louisiana and Texas in which leases of $5,000 to $10,000 an acre and 25% royalties were not uncommon.

There is a significant difference in the East Texas and Arkansas brine, Peel says.

"Most of what we've got in southwest Arkansas is basically 250 to 300 (milligrams per liter)." In East Texas, "There's a range, basically 600 to 800, it's twice or better than the concentration per liter than southwest Arkansas has."

He says the Big 5 used that in what he heard as an implied threat to build their facilities in Texas.

"It's hard to really understand, or for me to understand, just how the veiled threat of 'We'll just take our ball and leave Arkansas and go to East Texas' landed with those commissioners," he said.

Attorney G. Alan Perkins in Little Rock has been representing the South Arkansas Mineral Association. He says the group is pleased that the AOGC rejected the proposed 1.82%, because it was not "fair and equitable."

"The Commissioners sent a firm message to the industry applicants that they need to disclose more economic information about their projects to support a future royalty application," he said. "Our clients are supportive of extracting lithium from the rich brine resources of the Smackover formation in south Arkansas, so long as it is fair to the mineral owners as well as the industry."

So what happens next?

Perkins thinks the companies are anxious to move forward, but the process is ultimately a slow one because of notice and regulatory requirements, and even a quick response might not come before the AOGC until early next year.

Peel agrees, and said he believes the Big 5 are "huddled up" for a quick response.

"They're going to pay the $65 an acre they have to, because that's part of the existing regulations," he said. "The question is, what will they pay over and above that as a royalty on the lithium?"

Email Liz Swaine at Liz.Swaine@theadvocate.com.

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Permalink Reply by Rock Man on Friday

Good summary article of this situation. It will be interesting to see how this whole issue evolves over time not only in Arkansas but in NE Texas (Cass County et al).

As I reviewed comments about these hearings, I was surprised to hear nothing (or next to nothing) about H2S issues associated with any Smackover related lithium extraction operations.

I am not very familiar with H2S concentrations in Smackover waters in Arkansas, but I know that this inert and noxious compound is present in variable and oftentimes high concentrations in NE Texas. 

Anyone researching H2S will find out that it doesn't take very high concentrations (in ppm) to be dangerous or even fatal.

But even in VERY small concentrations (technically not dangerous), the rotten eggs odor associated with this compound is extreme and pervasive. Just ask the residents of Luling (Tx) as well as various Permian Basin areas about this omnipresent smell (which over time tends to numb one's olfactory nerves).

Any lithium extraction method will involve moving a LOT of Smackover formation water from source wells through extraction processing equipment and then back to injection wells. Lots of fluid being moved - and is there such a thing as a totally "closed" system that contains 100% of all H2S related compounds (and odors)?

Anyone leasing their minerals for brine extraction in this area needs to be aware of this issue.

Are you trading your clean air / non stinky air for a royalty check? And negatively impacting one's property values due to "gee, it stinks in this area" reaction of potential buyers?

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Permalink Reply by Skip Peel - Mineral Consultant on Friday

Thanks for the reminder, Rock Man.  H2S is an extreme danger to those in close proximity to the source.  Usually that means employees of the operator or someone trespassing on a production location.  Also in this specific case, pipelines and re-injection locations  As Rock Man states, it can be fatal.  The much greater concern for anyone living in the vicinity is the noxious odor and the impact on someones ability to smell not to mention the impact on their property values.  Landowners need to know the risks and the consequences.

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