Commerce Secretary Hugh McDonald Outlines Arkansas’ Lithium Priorities
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Arkansas Department of Commerce Secretary Hugh McDonald says the top priorities for Arkansas as it cultivates a lithium mining industry are to:
set a fair royalty for extracting lithium from brine and
find its niche in the complex lithium battery supply chain.
In a video interview with Lithium Link, McDonald, a former Energy Arkansas president and CEO, also said that state lawmakers must help the industry by figuring out how to meet its needs for more electrical power and financial incentives to encourage certain supply chain players to invest in Arkansas.
Royalty Rate
Setting a royalty plan would be a key milestone in the development of Arkansas' lithium extraction industry. Arkansas already has a royalty for brine used in bromine production. In Part 1 of our conversation, McDonald said he expects policymakers — working through the Arkansas Oil & Gas Commission — to decide on a lithium extraction royalty by the end of the year.
Last month, Arkansas’ biggest lithium companies — including Albemarle Corp. of Charlotte, North Carolina; Saltwerx, an affiliate of global energy giant ExxonMobil; and Standard Lithium Ltd. of Vancouver — filed a joint application with the commission to set the royalty rate for extracting the mineral from brine in the Smackover Formation in Arkansas.
The companies proposed a 1.82% royalty rate as part of an overall royalty plan. But the South Arkansas Minerals Association, a group of landowners whose members include Murphy Oil Corp. and other companies, has proposed a rate of 12.5%, according to the Arkansas Times.
“I think we’ll get that right at the end of the day,” McDonald told Lithium Link. “It’s got to be fair. It’s got to be certain for the producers. It’s got to be competitive — we can’t kill the industry before it starts. We’ve got to have a royalty structure that actually incentivizes their investment in the state …”
What’s next: The Oil & Gas Commission is scheduled to hear the companies’ application on Sept. 24 in El Dorado.
Niche Player
Arkansas must also find its place in the vast lithium supply chain, McDonald said. And while there has been significant investment in the downstream areas of the supply chain — electric vehicle assembly, battery assembly and packaging — there’s been a funding gap in mid- to upstream areas of the supply chain, closer to the lithium source.
It’s in that area of the supply chain that Arkansas will likely focus its economic development efforts, McDonald said:
“They call it the P-CAM or the CAM — Precursor Cathode Active Materials — or the actual cathode active materials … all those things that make up the guts of the battery, there’s a supply problem there … in the country,” he said.
“You’re going to see us, the state, focus on the midstream and upstream side of that, where there is a role to play, where we’re close to the resource — that is an advantage for us … — and hopefully by … end of September, October we’ll be zeroing in on that and talking about it more publicly.”
Building out those areas of the supply chain, McDonald said, will only help Arkansas make its case to play host to whatever other lithium end-use cases emerge, be it electric vehicle batteries or something else entirely.
Incentives and Power
In Part 2 of our conversation, McDonald shared how state legislators must work with the industry to help it grow.
In two separate editorials in recent weeks, Arkansas State Chamber of Commerce CEO Randy Zook and a pair of state legislators, Rep. Rick Beck and Sen. Ben Gilmore, have written that lawmakers must partner with and support the new industry.
McDonald said legislators must support financial incentives to help Arkansas attract and develop companies in that mid- to upstream area of the supply chain. And they must think about how to increase southwest Arkansas’ transmission generation capacity to literally power the industry there.
Moving Forward
McDonald said Arkansas is maintaining the momentum it generated earlier this year when it hosted the first Arkansas Lithium Innovation Summit in Little Rock.
The summit was the brainchild of Standard Lithium Ltd., but the state’s other major lithium players — ExxonMobil, Albemarle and Tetra Technologies — signed on.
Those companies, along with the Commerce Department and the Venture Center of Little Rock, quickly organized the summit, which took place in February.
You can see photos from the summit here.
“We were hoping to get 250 to 300 attendees, and we would have checked the boxes, you know — a major victory,” McDonald said. “The fire marshal shut us down at 700. It was very good.”
The group that organized the summit — including the companies, the Commerce Department and the Venture Center — continues to meet regularly. McDonald said there will be a second summit, sometime after next year’s legislative session.
Near Term: McDonald expects to continue working on other ways to grow the industry and visiting with companies who are only now starting to consider Arkansas as an attractive lithium frontier. Arkansas, he said, has a good story to tell in terms of infrastructure, resources, location, workforce, overall business environment — and a willingness to give what could be a transformative new industry a chance.
More: See the Arkansas Economic Development Commission’s landing page for companies interested in Arkansas’ lithium industry.
