Landowners in Arkansas are calling on the Arkansas Oil and Gas Commission to reject a joint application filed by five lithium companies that would establish a royalty rate for extracting lithium-rich brine in southern Arkansas. The property owners argue that the companies’ proposal would unlawfully bypass the state’s formal rulemaking process.
The lithium industry in Arkansas is still in its early stages, but tensions between landowners and companies are already rising over how much landowners should be paid for leasing their mineral rights. The five major players in this emerging industry—Albemarle Corporation, ExxonMobil, Standard Lithium, Lanxess, and Tetra Technologies Inc.—filed a joint application on July 26, proposing a royalty rate of 1.82%. The Arkansas Oil and Gas Commission will review the application during its meeting on September 24.
The companies cannot begin extracting lithium for commercial purposes until the commission sets a royalty rate. However, the gap between what the lithium companies are proposing and what landowners are demanding is significant.
Back in October, when Lanxess and Standard Lithium initially proposed a rate of 1.25-1.67% for a specific project, landowners countered with a demand for 12.5%. That application was eventually withdrawn. Now, the two companies have teamed up with Exxon, Albemarle, and Tetra to push for a standard rate for all lithium extraction on leased lands.
But landowners aren’t having it. In a letter sent to the Arkansas Oil and Gas Commission on Tuesday, the landowners’ attorney argued that the joint application should be dismissed entirely.
“We’re aware of the objection,” said Jesse Edmondson, spokesperson for Standard Lithium. “We believe the Arkansas Oil and Gas Commission will make the right call. Our application meets legal requirements and proposes a fair royalty for all involved.”
ExxonMobil also defended the joint application, stating that the proposed rate ensures that mineral owners benefit from lithium development in southern Arkansas.
The South Arkansas Minerals Association, a group representing local landowners, refers to the five companies behind the joint application as “the Big Five.” The association’s members include large landowners like Murphy Oil Corporation, Mahony Corporation, and Triangle Industries.
Attorney Alan Perkins, who represents the landowners, argued that approving the joint application would amount to creating a new rule without following the proper rulemaking procedures required by Arkansas law.
“The Big Five are trying to force through a minimal royalty rate for the entire region,” Perkins wrote in the letter. “This approach violates state law.”
Landowners Say Joint Application Violates Rulemaking Process
The crux of the landowners’ argument is that the joint application from the lithium companies would effectively create a new rule, but without the transparency and public input typically required by Arkansas law.
The companies are asking the Arkansas Oil and Gas Commission to approve a single royalty rate for all future lithium extraction in the Smackover Formation, a geological area in southern Arkansas. However, Perkins pointed out that setting such a broad standard amounts to rulemaking, which requires a formal process involving public hearings and input.
Perkins emphasized that the first application filed by Lanxess and Standard Lithium followed the proper procedure, focusing on a specific project and providing financial data that allowed landowners to respond with their own proposals. In contrast, the joint application provides no detailed financial information or projections for individual projects, leaving landowners in the dark about the economics of the proposal.
“The companies are asking for a blanket rate, but haven’t offered any specific financial data for us to evaluate,” Perkins said. “They’re avoiding transparency.”
In fact, Standard Lithium is the only company involved in the joint application that has made its financial projections public, further raising concerns among landowners about the lack of transparency.
The Stakes: Oil and Gas Royalties vs. Lithium Royalties
At the heart of the dispute is the question of whether royalty rates for lithium should be closer to the 1-2% historically paid for brine extraction or the higher rates of 11-12% common in the oil and gas industry.
Lithium companies argue that the risks associated with this new industry, combined with the experimental technology used for lithium extraction, make it difficult to afford higher royalty rates. They claim that the landowners’ brine, by itself, has little value without the technology they’ve developed to extract lithium from it.
In December 2023, representatives from Tetra Technologies and Standard Lithium told the commission that a 12.5% royalty rate would stifle investment in lithium production.
However, landowners see it differently. They want a fair payout for the resources beneath their land. Some have already been offered royalty rates as high as 10%—far higher than the 1.82% the companies are proposing in their joint application.
As reported by the Arkansas Times, Standard Lithium’s own pre-feasibility study shows that even with a 12.5% royalty rate, the company expects to see a return on investment more than double that of most mining operations.
As the debate continues, all eyes are on the Arkansas Oil and Gas Commission, which will decide whether to accept or reject the lithium companies’ joint application. For now, the future of lithium extraction in Arkansas remains uncertain.
