Arkansas regulators approved 2.5% royalty rate for south Arkansas lithium play

ExxonMobil and other energy giants poised to invest billions, but Trump mandate could stall progress

By Wesley Brown

May 30, 2025 – The Arkansas Oil and Gas Commission on Wednesday approved a 2.5% royalty rate for a joint venture to develop a lithium project that is expected to ignite a multi-billion dollar exploration and production boom in south Arkansas.

During a special hearing in Magnolia on the campus of South Arkansas University, the AOGC unanimously approved establishing a 2.5% royalty rate for the Reynolds Unit for Phase I of its Southwest Arkansas Project in Lafayette and Columbia Counties for Smackover Lithium, a joint venture between Standard Lithium Ltd. and Norwegian energy giant Equinor ASA.

The decision by the Arkansas oil and gas regulators is a colossal victory for Standard Lithium, Equinor and other energy producers that plan to invest in the south Arkansas lithium play, including the nation’s largest energy conglomerate, ExxonMobil Corp., and a long list of publicly traded and privately held corporations with billions to invest. In November, AOGC regulators unanimously rejected Standard Lithium’s applications for a 1.82 percent royalty rate, thereby postponing any planned commercial development.

During the two-day AOGC hearing on Nov. 5 and 6, the royalty application filed by Albemarle, Standard Lithium, Lanxess, Tetra, and Exxon-affiliate Saltwerx requested the 1.82% royalty to jumpstart lithium production across Lafayette, Columbia, and Union counties in 2025. They stated that without a royalty agreement in hand, the companies would not be able to determine their production costs and long-term investments fully.

However, South Arkansas landowners countered that the royalty rate filing from the lithium producers was well below their expectations.  During the hearings, the South Arkansas Minerals Association, which represents dozens of landowners and businesses in the Smackover Formation, testified that a 12.5% royal rate was “fair and equitable.” Similarly, a 12.5% royalty rate is assessed for oil and gas extraction under Arkansas law.

The facilities for the SWA project are planned to be located in Lafayette County, about 7 miles south of Lewisville, Arkansas. The brine unit that will supply lithium-bearing brine for the project spans Lafayette and Columbia counties. Subject to a positive investment decision by the two lithium producers, the project is expected to generate up to 300 construction jobs and 100 direct jobs.

This is the first royalty rate for lithium from brine extraction that has been approved by the AOGC, establishing an important precedent for lithium development companies operating in Arkansas. SWA Lithium LLC applied for a quarterly gross royalty of 2.5% earlier this month.

The lithium royalty will be paid to brine owners in addition to the brine fee, also referred to as the “in lieu bromine royalty,” of $65.05 per acre per year, making the total proposed royalty compensation approximately 3% based on current lithium prices. The AOGC granted approval during a special hearing yesterday in Magnolia, AR.

“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.”

“The AOGC’s decision to grant a reasonable royalty for Phase 1 of our SWA Project demonstrates the state’s commitment to landowners and lithium development,” said Allison Kennedy Thurmond, vice president of U.S. Lithium at Equinor. “The royalty rate is only the beginning of capital investment and moves us one step closer to our final investment decision.”

The Reynolds unit is projected to achieve a production capacity of 22,500 tonnes per year of battery-grade lithium carbonate upon reaching full commercial production, expected in 2028. Just over a year ago, Equinor and thinly-traded Standard Lithium announced a strategic partnership to accelerate the development of Standard Lithium’s large-scale lithium projects in the Smackover Formation.

That deal included Equinor’s contribution of up to $160 million, representing its total gross project-level investment and reflecting its 45% ownership stake in the two projects in southwest Arkansas and east Texas. Standard Lithium and Equinor will each own 55% and 45%, respectively, of the projects, with Standard Lithium retaining operatorship.

This investment includes a $30 million cash payment to Standard Lithium, a work program solely funded by Equinor of $60 million, and up to $70 million in payments to Standard Lithium, subject to final investment decisions before the project begins.

Four days before former President Joe Biden left office, the U.S. Department of Energy finalized a $225 million grant for the Standard Lithium-Equinor project, noting that lithium is an essential mineral necessary to address the projected growth in electric vehicles and overall battery energy storage.

Under President Biden, the Department of Energy (DOE) released a national clean energy blueprint that included incentives for electric vehicle (EV) adoption, subsidies for clean energy technologies, and billions of dollars in new funding for low-carbon infrastructure projects, including the South Arkansas lithium project.

President Trump’s DOE orders review of clean energy projects backed by Biden administration

However, that $225 million grant could be in peril after President Trump, on Friday, May 30, made good on his inauguration-day promise to cancel nearly $4 billion in clean energy funding by the DOE under the previous Democratic administration.  In an announcement by U.S. DOE Secretary Chris Wright, the Trump administration terminated 24 awards issued by the Office of Clean Energy Demonstrations (OCED) totaling over $3.7 billion in taxpayer-funded financial assistance.

Wright said after a thorough and individualized financial review of each award, DOE found that these projects failed to advance the energy needs of the American people, were not economically viable and would not generate a positive return on investment of taxpayer dollars. 

Of the 24 awards cancelled, nearly 70% (16 of the 24 projects) were signed between Election Day and January 20^th. The projects primarily include funding for carbon capture and sequestration (CCS) and decarbonization initiatives. By terminating these awards, DOE said it is generating an immediate $3.6 billion in savings for the American people.

Friday’s announcement comes more than two weeks after the DOE announced plans to initiate a case-by-case audit on May 15 of more than $15 billion in funding awarded by the Biden administration for upgrading power grids and manufacturing energy technology.

“Over the past 110 days, the Energy Department has been hard at work reviewing the billions of dollars that were rushed out the door, particularly in the final days of the Biden administration, and what we have found is concerning,” said Wright. “With this process, the Department will ensure we are doing our due diligence, utilizing taxpayer dollars to generate the largest possible benefit to the American people and safeguarding our national security.”

To comply with the Secretary’s memorandum, the DOE has begun requesting additional information needed to evaluate 179 awards. If it is determined that a project meets the DOE standards, then those projects will proceed, officials said, adding these awards total over $15 billion in financial assistance.

The DOE stated that it is prioritizing large-scale commercial projects that require more detailed information from awardees for the initial phase of this review. However, this process may extend to other DOE program offices as the reviews progress.

Under the DOE review, grant recipients are required to provide written responses and requested supporting documentation within the department’s communicated timeframes, and must cooperate with any follow-up requests, including verbal requests, promptly, to facilitate this review. 

Earlier in April, the US Department of Energy proposed shutting down its Office of Clean Energy Demonstrations and cutting some $9 billion in awards for programs related to carbon capture, direct air capture, solar, and hydrogen, according to a report by Bloomberg. 

Under the plan, which isn’t final, the $27 billion agency’s staff would be reduced to 35 employees, and about $10 billion in projects, including $3 billion for so-called hydrogen hubs, would be kept “as is” and transferred to other parts of the Energy Department.

The office employed around 250 people before President Donald Trump, a climate change skeptic, returned to office. According to media reports, the Department of Government Efficiency, led by Elon Musk, fired between 1,200 and 2,000 DOE workers in February but was compelled to hire some of those employees back following a federal court ruling to reinstate staff at several federal agencies.

ExxonMobil targets first lithium production in Arkansas in 2027

Meanwhile, despite President Trump’s mandate, ExxonMobil and several other companies still have announced their intention to invest in lithium production at the Smackover Formation, a geologic structure extending under parts of Arkansas, Louisiana, Texas, Alabama, Mississippi, and Florida, which is significant in lithium production.

According to an October 2024 report by the U.S. Geological Survey, in coordination with the Arkansas Department of Energy and Environment, 5 and 19 million estimated tons of unproduced lithium reserves lie beneath this formation. This makes it a key area for potential lithium extraction and a focus of the current industry developments.

“If commercially recoverable, the amount of lithium present would meet projected 2030 world demand for lithium in car batteries nine times over,” the report states.

Like the Fayetteville Shale, the South Arkansas lithium began attracting national attention after ExxonMobil expressed its interest in becoming a global leader in the production of lithium, a key component of electric vehicle (EV) batteries.

In November 2023, the Texas oil giant announced that it had begun its first phase of North American lithium production in southwest Arkansas. Earlier that year, ExxonMobil acquired the rights to 120,000 gross acres in the Smackover Formation.

“Lithium is essential to the energy transition, and ExxonMobil has a leading role to play in paving the way for electrification,” said Dan Ammann, president of ExxonMobil Low Carbon Solutions. “This landmark project (in Arkansas) applies decades of ExxonMobil expertise to unlock vast supplies of North American lithium with far fewer environmental impacts than traditional mining operations.”

The company is targeting its first lithium production for 2027 and is evaluating growth opportunities globally. By 2030, ExxonMobil aims to produce enough lithium to meet the manufacturing needs of well over a million EVs each year. Officials stated that discussions with potential customers, including EV and battery manufacturers, are ongoing.

Other key players multi-billion-dollar corporations that have announced planned projects in the Arkansas lithium play in the past year include Potlatch Deltic, a Seattle-based timberland REIT with deep roots in South Arkansas; Woodlands, Texas-based energy services company Tetra Technologies Inc.; global chemical manufacturers Lanxess AG of Cologne, Germany; and Charlotte, N.C.-based Albermarle Corp.

Read the Arkansas Delta Informer’s earlier story here for more information.