Smackover Lithium, the US joint venture between Standard Lithium and Equinor, will pay a 2.5% royalty for lithium extracted in Phase 1 of its South West Arkansas (SWA) project.

The JV partners announced Thursday that their royalty rate proposal was unanimously approved by the Arkansas Oil and Gas Commission (AOGC). This is the first time the commission has approved a royalty rate for lithium from brine extraction, setting a precedent for lithium companies operating in Arkansas.

The quarterly gross royalty covers the Reynolds unit of the project, which has a planned production capacity of 22,500 tonnes/year of battery-grade lithium carbonate. First production is expected in 2028.

Smackover Lithium explains the lithium royalty will be paid to brine owners in addition to the brine fee of $65.05 per acre per year, which is also known as the “in lieu bromine royalty.” Overall, proposed royalty compensation stands at around 3% based on current lithium prices, Kallanish learns.

The approval moves the project “one step closer” to a final investment decision, Equinor says, without providing a timeframe.

Standard Lithium adds that establishing a “fair and equitable royalty” will allow brine owners to be compensated while encouraging economic development of the state’s significant lithium resource.

According to the US Geological Survey, southwestern Arkansas is estimated to hold 5-19 million tonnes of lithium reserves. If commercially recoverable, the amount of lithium present would meet the projected 2030 global demand for lithium in car batteries nine times over. The Smackover Formation, known for its oil and gas production, could soon become a major lithium production hub.

Smackover Lithium plans to apply direct lithium extraction technology to filter lithium from oilfield brines.