Billion-dollar Brine: PotlatchDeltic unveils new South Arkansas lithium deal

Smackover Formation is expected to see billions of dollars of investment in lithium play over next decade

By Wesley Brown

Feb. 7, 2025 – PotlatchDeltic Corp., the former Arkansas-based timberland owner, has joined ExxonMobil and other competitors in snapping up lease agreements to participate in the expected multibillion-dollar lithium play in south Arkansas.

PotlatchDeltic, one of the nation’s largest Real Estate Investment Trusts (REITs), owns 2.1 million acres of timberlands in Alabama, Arkansas, Georgia, Idaho, Louisiana, Mississippi, and South Carolina. On Feb. 5, PotlatchDeltic announced that it entered into a mineral lease agreement with TETRA Brine Leaseco LLC for lithium rights in Lafayette County.

Under the deal, PotlatchDeal has granted TETRA exclusive rights to conduct brine exploration and production on approximately 900 surface acres in south Arkansas county, near the Texas and Louisiana state lines. Company officials said the acreage is within a higher-grade area in the Smackover Formation, which is rich in lithium reserves.

“We view the lease with TETRA as a great first step in demonstrating the lithium potential from our brine deposits,” PotlatchDeltic President and CEO Eric Cremers said in a statement on Feb. 5.  “We estimate we have 5,000-7,000 acres with lithium-bearing opportunities that are located within the higher-grade area in the Smackover Formation, where billions in future lithium-related investments have been announced.”

The Smackover Formation, a geologic structure extending under parts of Arkansas, Louisiana, Texas, Alabama, Mississippi, and Florida, 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.

PotlatchDeltic said it anticipates an initial five-year term with TETRA for planning, engineering, and construction before potential production begins. In addition to lease payments over five years, the deal also provides for future production payments for bromine and royalty payments for the profitable extraction of lithium based on the rate to be set by the Arkansas Oil and Gas Commission (AOGC).

“Accordingly, we are currently in lease discussions with other parties. We believe we are well-positioned to drive long-term value for our shareholders through all of our natural climate solution opportunities,” stated Cremers.

In February 2018, Seattle-based PotlatchDeltic closed on a $3.3 billion deal to acquire the former El Dorado-based Deltic Timber. Today, PotlatchDeltic retains a satellite office in Union County and has more than 1,500 employees and 200 customers across its timberland and lumber manufacturing portfolio.

Lithium royalty rates still under consideration by Arkansas regulators

The Arkansas Oil and Gas Commission (AOGC) is the regulatory body responsible for establishing a royalty rate for landowners in south Arkansas for lithium extraction and production. In early November, the nine-member panel, which regulates the extraction of bromine and lithium under the authority of the state’s 1979 Brice Act, unanimously rejected an application by a cartel of lithium companies for a 1.82% royalty rate. This decision reflects the commission’s cautious approach to setting royalty rates that balance the interests of the industry and the landowners.

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 said that without a royalty agreement in hand, the companies would not be able to fully determine their production costs and long-term investments.

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.

To date, the commission has only approved industry applications for pilot projects to produce brine. The regulatory panel has also issued drilling permits to test the lithium production potential in south Arkansas, but no commercial production has been authorized.

Expected lithium boom could quickly outstrip Fayetteville Shale economic impact

According to key industry experts, lithium production and investment in the Arkansas formation could surpass the Fayetteville Shale boon in the millennium’s first decade. Between 2008 and 2012, Fayetteville Shale companies like Chesapeake Energy, Southwestern Energy, and Exxon Mobil’s XTO Energy invested nearly $13 billion in Arkansas before the play fizzled out due to declining natural gas prices, according to an economic impact study by the University of Arkansas,

Oklahoma City-based Chesapeake sold its Arkansas gas interests to BHP Billiton Petroleum in February 2011 for nearly $5 billion. Southwestern Energy, once the largest producer in the north-central Arkansas shale play, sold off most of its Fayetteville Shale acreage in late 2018 to Flywheel Energy LLC and moved most of its natural gas operations to Pennsylvania.

That $1.8 billion deal allowed Flywheel to acquire over 4,033 producing wells across over 900,000 net acres and Southwestern’s midstream gathering system with over 2,000 miles of gathering pipelines. ExxonMobil also signed a deal with Flywheel in late 2022 and exited the Arkansas shale play with the sale of 5,000 natural gas wells, pipelines, and processing properties across 381,000 acres in north central Arkansas.

Monthly dry shale gas production in the Fayetteville Shale peaked at 2.89 billion cubic feet (MMBtu) per day in November 2012, which led the nation, according to the U.S Energy Information Administration (EIA). As large-scale natural gas production ramped up in Arkansas at the turn of the century due to the new hydraulic fracturing technique, known as “fracking,” tax revenue peaked at $78.634 million in fiscal year 2015. However, by 2020, as natural gas prices fell below per MMBut, tax revenue declined to a low of $14.067 million. 

Like the Fayetteville Shale, the South Arkansas lithium play garnered national attention once 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 supply the manufacturing needs of well over a million EVs per year. Officials said discussions with potential customers, including EV and battery manufacturers, are ongoing.

On Jan. 31, ExxonMobil reported profits of $33.7 billion on yearly revenue of nearly $350 billion. In 2025, the Spring, Texas-based oil and gas and chemical producer expects capital expenditures of $27 billion to $29 billion and $28 billion and $33 billion between 2026 and 2030.

Dan Holton, ExxonMobil’s senior vice president of hydrogen and lithium, recently told the Economist in June that a “material” portion of the $20 billion that oil giant has earmarked for low-carbon investments from 2022 to 2027 will be funneled to the lithium sector. 

South Arkansas lithium deal-making ramps up

Despite no regulatory approval to begin production, top oil and gas companies, chemical manufacturers, brine producers, and some speculators have landed in south Arkansas with deals and lease arrangements in the three-county development area.

Besides ExxonMobil and PotlatchDeltic, the other key players in the Arkansas formation include thinly traded Standard Lithium Inc. of Vancouver, Canada; Woodlands, Texas-based energy services company Tetra Technologies Inc.; global chemical manufacturers Lanxess AG of Cologne, Germany; and Charlotte, N.C.-based Albermarle Corp.

Lanxess, which has three chemical manufacturing plans in the El Dorado area, first announced a nonbinding deal in 2018 with Standard Lithium to develop a pilot joint venture in the south Arkansas formation for commercial production of battery-grade lithium. Following a feasibility study in 2023, Lanxess said it would no longer pursue the possibilities of financial investment into a project entity or direct lithium source. “However, we are working on different projects targeting the battery market,” said Karsten Job, head of Lanxess’s polymer additives business.

In the event Standard Lithium produces battery-grade lithium industrially, Lanxess will supply the brine required for the extraction of lithium. In addition, Lanxess has offered to lease a plot of land to Standard Lithium for a production facility and provide certain infrastructure services. The company said details of the future cooperation are subject to ongoing negotiations.

Last month, Standard Lithium announced at a community meeting in Lewisville that the company is expected to be one of the world’s first commercial-scale direct lithium extraction (DLE) facilities. In May 2024, Equinor ASA formed a joint venture with Standard Lithium to advance DLE projects in the Smackover basin, focused on southwest Arkansas and East Texas.

“Smackover Lithium is a natural fit for the joint venture given the Smackover formation’s prolific resource and our joint venture’s commitment to adding to the incredible legacy of American energy production from this region,” said Standard Lithium CEO David Park.

On Jan. 16, Standard Lithiumand Equinor, a Norwegian oil and gas company, closed on a $225 million grant from the U.S. Department of Energy (DOE) to support construction of Phase 1 of the southwest Arkansas project, located in Lafayette and Columbia counties . The project is expected to produce 45,000 tonnes per annum of lithium carbonate. Equinor and Standard Lithium have a 55%-45% ownership stake agreement in the venture.  

Currently, that project is undergoing a feasibility study and front-end engineering design. Officials said the partnership is targeting a final investment decision by the end of 2025, with initial production commencing as soon as 2028.

Trump’s executive order could stall South Arkansas lithium projects

However, that deal could be stalled or halted due to President Trump’s Jan. 20 executive order asking the DOE and other federal agencies to eliminate the “electric vehicle (EV) mandate and shelve all grants, loans, and spending related to the renewable energy and climate change.

Under former President Biden’s first-ever U.S. National Blueprint for Transportation Decarbonization – which calls for cutting all greenhouse emissions from the transportation sector by 2050 – the DOE, Environmental Project Agency, and Department of Transportation allocated $7.5 to funding for expanded EV charging projects.

The $1.1 trillion 2021 bipartisan Infrastructure Investment and Jobs Act funds the program. It gave $5 billion for EV charging under the National Electric Vehicle Infrastructure Formula Program and $2.5 billion under the Charging and Fueling Infrastructure grant program. Both funding initiatives are part of Biden’s ambitious but nonbinding “Green New Deal” climate plan, which President Trump said has grown the federal budget deficit by $100 trillion over the next decade. However, the Congressional Budget Office estimates the cost of “going green” to be a smaller $1 trillion.

Standard Lithium and Equinor officials did not respond to the Arkansas Delta Informer’s request for comments concerning their multimillion EV deal with the Energy Department. Company officials said in a Jan. 16 statement that the project is subject to the National Environmental Policy Act and will require completion of an Environmental Assessment as part of receiving the federal grant.

Standard Lithium expects to complete the assessment this year before making a final investment decision. The company said more information, including the opportunity for public comment and review, will be shared as the process progresses beginning in 2025.