These days, companies in the south aren’t looking to find more oil—they are instead prospecting for lithium, a metal that is increasingly prized around the world as an essential ingredient in electric-vehicle batteries. “If the U.S. is to ease its dependence for lithium on other countries such as China, it may need Arkansas to lead the way,” writes The Wall Street Journal (July 21, 2023).
Exxon Mobil, a new player in the hunt for U.S. lithium, is planning to build one of the world’s largest lithium processing facilities in southern Arkansas, with a capacity to produce 75,000 to 100,000 metric tons of lithium a year. At that scale, it would equate to about 15% of all finished lithium produced globally. The prospect could have the equivalent of 4 million tons of lithium carbonate equivalent, enough to power 50 million EVs.
To push the project forward, Exxon and two of its announced competitors will have to profitably scale up the technology used to siphon lithium from brine, which has been an elusive goal across the industry. This particular geologic region, called the Smackover Formation, runs from Texas to Florida. It is rich with saltwater brine, which once bedeviled companies drilling for oil. That brine also contains small amounts of lithium, and the companies are now optimistic they can scale up technologies to extract it. Drilling for lithium with this extraction method is cleaner than traditional mining, and faces fewer regulatory risks.
The mining is expensive, though, costing about $1.5 billion to build 25,000 metric tons of capacity. The three proposed projects would create 6,000 jobs– and require 1,600 trucks by 2028.
Exxon believes it can leverage its engineering prowess to become a low-cost domestic supplier of lithium, and has had discussions with battery and EV manufacturers. The company would also benefit from U.S. green-energy subsidies, which allows for tax credits of 10% of the cost of producing lithium. The firm, generally bullish about the future of oil and natural gas, is also preparing for a future less dependent on gasoline. Last year, Exxon projected demand for auto internal combustion engine fuels could peak by 2025, while EVs, hybrids and vehicles powered by fuel cells could grow to more than 50% of new car sales by 2050.
Classroom discussion questions:
- Why is lithium an important EV supply chain component?
- What is Exxon’s strategy?