By AINSLEY PLATT | Arkansas Advocate
Two companies have filed applications for new brine units in South Arkansas for potential lithium extraction projects, a necessary procedural move under state law that a previous royalty application ran afoul of last year.
The companies — ExxonMobil-affiliate Saltwerx LLC and SWA Lithium, which is a joint venture between Standard Lithium and Norwegian energy giant Equinor — are asking the Arkansas Oil and Gas Commission to unitize thousands of acres in South Arkansas.
Both companies aim to extract lithium from subterranean brines through a process called direct lithium extraction, or DLE. It’s part of a broader push nationally to obtain domestic supplies of lithium and other materials necessary for electronics of all kinds, from smartphones to electric vehicles.
But before extraction can begin, prospective lithium producers must first satisfy a key procedural requirement outlined in Arkansas law — establishing a lithium extraction royalty. Royalties are paid to property owners who agree to lease their mineral rights to the extraction companies. For the companies to establish a royalty they need to establish brine units. The unit and the royalty are necessary because of the language of the Arkansas Brine Conservation Act (ABCA) of 1979, and the Oil and Gas Commission has to approve the units and the royalties.
A brine unit is an area designated by the commission for the extraction and injection of underground brines, such as those found in the Smackover formation.
The part of the act specifically pertaining to royalties for substances like lithium requires producers to account for the amounts extracted from each landowner’s property in the unit and establish a “fair and equitable” royalty.
“We are excited to move our SWA Project forward with our application to form the Reynolds unit in Lafayette and Columbia counties,” wrote Jesse Edmondson, Standard Lithium’s director of government relations, in a text message.
“Establishing a unit is a necessary step to commercially produce lithium from brine in Arkansas. After the unit is established, we will file an application to set a royalty for this unit,” Edmondson said. “The SWA Project is our primary focus in Arkansas, and we look forward to completing this process to allow a final investment decision by year end.”
Both companies previously emphasized the importance of the royalty in their decision-making; it is one of the last remaining unknown variables that the companies will have to factor in as they consider the economics of potential projects and decide whether to move forward on them.
“Establishing our brine unit is a key regulatory step to unlock the lithium industry in Lafayette and Miller counties, enabling jobs and investment potential for Arkansas,” an ExxonMobil spokesperson wrote in an emailed statement.
Both companies already tried for a royalty — Saltwerx once, Standard Lithium twice — but concerns with the applications and lack of information provided to commissioners resulted in them being rejected or withdrawn.
Last year, a joint royalty application filed by Saltwerx and Standard Lithium, alongside Lanxess, Albemarle and Tetra, asked the commission to determine a royalty for an area it described as “the Smackover Limestone Formation underlying lands within Columbia, Lafayette, Miller and Union Counties.” However, the Smackover formation is a geologic feature; not mentioned in the July 2024 application were the brine units such a royalty would apply to.
Objections filed by the South Arkansas Minerals Association argued that the Brine Conservation Act required royalties to be determined on a “unit-by-unit basis.” The association is a nonprofit composed of large southern Arkansas landowners, many of whom hold mineral rights.
The association’s objections both on the issue of brine units and other aspects of the application ultimately led to a hearing presided over by an administrative law judge, who recommended how commissioners should interpret the law.
The judge, Charles Moulton, agreed with the association on the matter of whether a royalty needed to be determined on a unit-by-unit basis, pointing out that the ABCA repeatedly references units in its language.
Moulton said during the hearing that he was concerned that granting a royalty without basing it on a unit could have unintended consequences.
“The concern that I have when I read the statute and when I read the application is, is the Commission unwittingly opening up Pandora’s box by establishing a royalty on a formation when they’ve never done that before? They’ve always done it on units,” Moulton said in October.
Tom Daily, the attorney representing the applicants, told Moulton the application couldn’t be based on units because some of the joint applicants did not yet have the units those companies planned to extract brine from. He said expecting the companies to form units before they had decided whether they would move ahead with lithium extraction projects was expensive.
“If we’re told we can’t even talk to you (the commission) until you have formed your units … and the result is unfavorable, that’s a lot more money wasted,” Daily said.
“I cannot amend this application to apply to units that don’t exist yet,” Daily continued. “They will exist.”
Moulton agreed, but added that the applicants could “certainly” amend it to units that did exist. He recommended that the applicants amend their proposal to specify the units they wanted the royalty to apply to.
The applicants then amended their application days before a two-day commission hearing on the lithium royalty in November, changing the language to apply to Smackover brine from existing units, along with “proposed future units.”
At that hearing, the commission ultimately adopted Moulton’s written recommendation that “the establishment of a brine unit is a condition precedent in establishing a lithium royalty under the Brine Act.” At the time, Saltwerx and Standard Lithium didn’t yet have their own established brine units.
The Oil and Gas Commission unanimously rejected the joint application, citing a variety of concerns mostly separate from the unit establishment issue.
By obtaining a brine unit prior to filing for the royalty again — which both companies have stated they intend to do in statements and AOGC filings — the companies would resolve one of the conflicts of law that arose during last year’s proceedings.
The areas encompassed by each company’s proposed unit are vast. SWA Lithium’s proposed Reynolds Unit is approximately 20,854 acres; Saltwerx’s proposed Pine Unit is approximately 56,245 acres.
In order to ask the commission to form a unit, applicants are required to already have 75% of the mineral rights in that area under a lease agreement. If a unit is approved by the commission, the remaining 25% would be “integrated” into the unit. According to documents filed with the commission, SWA Lithium currently has 79% of the area under lease, with that number increasing to 88% if a potential brine lease transfer agreement with Saltwerx and Tetra goes through.
Saltwerx did not provide a specific percentage of leases in the area of its proposed unit, only stating that it had “in excess” of 75%.
The applications for brine unit integration will likely be heard by the commission during its April 22 meeting in El Dorado. If they are approved, royalty applications are likely to follow.
State officials have been intent on establishing a lithium industry in Arkansas, promoting the potential economic benefits the investment will generate. A bill was also filed in the Legislature last week that would grant extraction projects a variety of tax incentives until the 2030s.
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