Arkansas Sets 2.5% Lithium Royalty, Clearing Path for Pantera’s Smackover Project
The Arkansas Oil & Gas Commission has approved a 2.5% lithium royalty for brine projects, providing Pantera Lithium with regulatory clarity and a competitive fiscal framework that enhances its Smackover Project’s commercial prospects.
- AOGC establishes 2.5% mineral owner lithium royalty for Smackover Formation
- Royalty applies only upon lithium product sale, not at extraction
- Rate is globally competitive and lower than other lithium brine jurisdictions
- Arkansas offers a six-year severance tax exemption on saltwater brine
- Decision materially de-risks Pantera’s Smackover Project and supports funding talks
Regulatory Clarity Arrives for Lithium Development
In a significant regulatory milestone, the Arkansas Oil & Gas Commission (AOGC) has approved a 2.5% mineral owner royalty on lithium production from brine projects within the Smackover Formation. This decision, announced on May 29, 2025, sets a clear and balanced fiscal precedent for lithium developers in the region, including Pantera Lithium Ltd, which is advancing its Smackover Project in Southwest Arkansas.
The royalty is structured to be payable only upon the sale of lithium carbonate, lithium hydroxide, or equivalent final products, rather than at the point of brine extraction. This approach protects early-stage project economics by allowing developers to retain margins during the initial processing phases, a crucial factor for capital-intensive lithium brine operations.
Competitive Framework Enhances Investment Appeal
At 2.5%, the royalty rate is notably lower than recent increases seen in other lithium-producing jurisdictions, where fiscal changes have often dampened investor confidence and project viability. Arkansas’s decision positions the state as a pro-development and investment-friendly jurisdiction, offering regulatory certainty alongside community and government support.
Pantera Lithium’s mineral leases are largely aligned with this royalty regime, providing both the company and mineral owners with transparency and a direct financial benefit from future lithium sales. This alignment is expected to facilitate more accurate economic modelling and strengthen Pantera’s negotiating position with infrastructure partners, offtake agreements, and capital providers.
Additional Incentives Bolster Project Economics
Complementing the royalty framework, Arkansas has enacted legislation granting a temporary severance tax exemption on saltwater brine from July 1, 2028, through June 30, 2033. This six-year tax holiday further enhances the economic potential of lithium projects like Pantera’s by reducing operational costs during a critical development phase.
Executive Chairman and CEO Barnaby Egerton-Warburton described the AOGC’s decision as a “game-changer,” emphasizing that the combined fiscal clarity and tax incentives bring Pantera closer to commercialisation. The company anticipates that these developments will accelerate engagement with regulators, partners, and investors as it seeks to unlock the full value of its Smackover asset.
Looking Ahead
While the royalty approval and tax exemption represent major steps forward, Pantera’s journey toward production will still require navigating financing, infrastructure, and market dynamics. However, the establishment of a clear and competitive fiscal regime in Arkansas significantly de-risks the project and sets a positive tone for the U.S. lithium supply chain’s growth.
Bottom Line?
Arkansas’s new lithium royalty framework marks a pivotal moment, setting the stage for Pantera’s next phase of growth and investor engagement.
Questions in the middle?
- How will Pantera leverage the royalty clarity to secure project financing and partnerships?
- What impact will the six-year severance tax exemption have on Pantera’s production timeline and costs?
- Could Arkansas’s fiscal framework attract more lithium developers to the Smackover Formation?
