MAGNOLIA, AR — May 28, 2025
In a pivotal decision for Arkansas’ emerging lithium industry, the Arkansas Oil and Gas Commission voted unanimously Tuesday to approve a 2.5% royalty rate for Standard Lithium’s project in the Reynolds Brine Unit, ending months of heated debate over how much landowners should be compensated for brine-based lithium extraction.
The decision clears the way for Standard Lithium and its partners — including Equinor, Koch Technology, and the U.S. Department of Energy — to move forward with plans for a $1.5 billion lithium extraction facility in southern Arkansas, with projected annual production of 22,500 metric tons of battery-grade lithium carbonate.
Under the approved plan:
Landowners will receive a 2.5% royalty on lithium production
An additional $65.14 per acre “brine fee” brings the effective royalty to 3.01%
Payments are based on indexed market pricing, not actual sales
The hearing marked Standard Lithium’s third attempt to secure approval. Their previous proposals, including a 1.82% royalty, were rejected.
Jesse Edmonson, director of government relations for Standard Lithium, told the commission that the rate represented a 38% increase from the last proposal and was critical for maintaining Arkansas’ competitiveness in the global lithium market.
“If we can’t come to a reasonable agreement today, it will challenge the viability of this project,” Edmonson warned. “This is a significant opportunity not just for our company, but for Arkansas.”
Edmonson emphasized that the Smackover Formation is the only U.S. lithium project with a “Priority Critical Mineral Project” designation under the Trump administration, helping fast-track its permitting.
He cited an Ernst & Young report showing similar projects worldwide average royalty rates of 2.2–2.3%, with none of the 1,000+ East Texas lithium leases exceeding the royalty proposed for Arkansas — despite those leases boasting higher lithium concentrations.
Expert witnesses backed Standard Lithium’s proposal, including Joe Lowry, a 30-year lithium industry veteran, and Mervin Jebaraj, director of the Center for Business and Economic Research at the University of Arkansas. Jebaraj presented economic impact estimates showing the project could contribute $3.2 billion to the state’s economy, though those estimates excluded royalties.
Lowry warned that Chinese firms, which dominate 55% of global battery production, are flooding the market with subsidized lithium in an effort to depress prices and block U.S. competition. He argued the Arkansas project’s capital costs were unusually high and said “capital hates uncertainty,” encouraging the commission to set a clear and fair royalty.
“Whatever you can do to incentivize this is probably in your best interest,” he said.
The South Arkansas Minerals Association, represented by attorney Jim Rankin, argued for a sliding scale royalty, allowing landowners to share more equitably in profits when lithium prices rise.
Their expert, economist Jesse David, testified that the project’s value had increased from $3 billion to $5 billion as costs were revised and expectations adjusted. However, under cross-examination by Standard Lithium attorney Bob Honea, David appeared unfamiliar with core provisions of the Arkansas Brine Act.
“It would be absurd for the landowner to be paid 100% of the value of the finished product,” Honea said, pushing back on suggestions that royalties be based on post-refinement value.
Despite pushback from opponents — and passionate testimony from association members urging the commission to protect Arkansas landowners from undervaluation — the motion passed 9-0, with Commissioner Charles Wohlford citing consistency with past precedent and fairness in the indexed approach.
The decision applies only to the Reynolds Unit — approximately 20,854 acres — and does not cover future expansions. However, the commission stated it retains the right to reopen the case if new evidence emerges.
Commissioner Jim Phillips, addressing concerns from opponents and acknowledging the weight of the decision, summed it up this way:
“We have a job to do, and we put a lot of time and effort into that. This project affects more than just royalty owners. It affects our entire state — from schools to first responders to restaurants that rely on jobs like this.”
With the royalty now approved, construction and development are expected to accelerate — marking a turning point in Arkansas’ effort to become a national leader in domestic lithium production.
