South Arkansas landowners will once again face off with major multinational companies seeking to extract lithium-rich brine from the Smackover Basin on Friday as the two sides continue to spar over how much the property owners should be paid for the mineral rights to their land. The two sides will meet in front of the Arkansas Oil and Gas Commission, which has regulatory oversight of lithium extraction in the state.
Friday’s meeting could determine whether the lithium companies are able to move forward with regulatory approval of an application filed at the end of July, or whether the companies have to go back to the drawing board. That application, filed by Albemarle Corporation, ExxonMobil, Standard Lithium, Lanxess and Tetra Technologies Inc., would set a blanket royalty rate of 1.82% for thousands of acres across four counties in south Arkansas.
The landowners say the rate is too low. (In October, when Lanxess and Standard Lithium suggested a rate of 1.25-1.67% for a specific extraction project, landowners countered with a proposal of 12.5%.) They also argue that a blanket royalty rate that applies to all future lithium extraction would illegally skirt the state’s rulemaking process, among other legal challenges.
The royalty question has devolved into a dispute over whether the joint application submitted to regulators is against Arkansas law, and dozens of landowners have filed objections. The lithium companies cannot begin extracting lithium for profit until a royalty rate is established by the state Oil and Gas Commission.
The Oil and Gas Commission originally scheduled a hearing on the joint application for September but postponed it until November at the request of the lithium companies. The companies also requested Friday’s pre-hearing, where they will seek to get clarification on legal objections by landowners. They will also seek to convince the commission that they should not have to produce witnesses on their operations and financial disclosures.
“A successful pre-hearing outcome would recommend and enable the Commission to hear the applicant’s proposal and set a royalty basis while protecting competitively sensitive information,” an ExxonMobil spokesperson said in a statement emailed to the Arkansas Times. “This approach would be the most efficient path to advancing Arkansas’ emerging lithium industry and one which is well aligned with the statutes of Arkansas.”
Charles Moulton, the hearing officer for the Oil and Gas Commission, told the Arkansas Times that he will hear legal arguments from the companies and the landowners at Friday’s pre-hearing. He will then make a recommendation on whether the commission should accept the landowners’ arguments about the legality of the joint royalty application or move forward with considering the merits of the application.
South Arkansas Minerals Association, a collection of landowners, will make the case that the application is an “unlawful” violation of the Administrative Procedures Act. The law, which governs actions by state agencies like the Oil and Gas Commission, defines a rule as any “agency statement of general applicability and future effect.” The landowners argue that the joint application would in effect create a rule applied to all potential instances where lithium is extracted and sold in Arkansas.
Alan Perkins, the lawyer representing South Arkansas Minerals Association, was unavailable for comment. In previous interviews with the Arkansas Times, Perkins said he does not think the joint application has a legal basis.
After the pre-hearing, the lithium company’s joint application is set to be heard Nov. 4. But if the Oil and Gas Commission sides with landowners on the rulemaking question this week, commissioners would presumably reject the application.
“What we are hoping for is to get as much clarification that we can about the objections,” Jesse Edmondson, Director of Government Relations at Standard Lithium, said. “If we are all going to go through a huge effort to show up for the Nov. 4 hearing, it’s going to be a huge waste of time if we all show up, and in the first five minutes of the hearing, they side with the [landowner] objections and throw out the entire application.”
Along with clarity on the legal objections brought forth by landowners, the companies also want the Oil and Gas Commission to allow them to exclude financial disclosures and lease information from the application hearing on Nov. 4.
None of the lithium companies have made final investment decisions on whether to start projects in Arkansas yet. And Edmondson cautioned that while lithium companies were drawn to south Arkansas because of an established regulatory environment for extracting saltwater brine, they are concerned that a high royalty rate owed to landowners will prevent projects from being competitive.
“All of the companies that are serious about developing projects, we are all in agreement that a fair royalty would be in the low single digits,” Edmondson said. “And that’s not because we just picked that number, it’s because we are aware of our global competitors and we are aware of what projects pay in North America.”
Despite warnings from industry, Standard Lithium received a $225 million grant from the United States Department of Energy to invest in their facility close to Lewisville, Arkansas. And ExxonMobil has acquired the mineral rights for 120,000 acres of land in south Arkansas.
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Publish date : 2024-10-09 08:34:00
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