The U.S. Geological Survey (USGS) recently discovered a significant lithium reserve beneath southwestern Arkansas. Through water testing and artificial intelligence, the agency found as much as 19 million tons of lithium — enough to supply the nation's green tech transition.

"Our research was able to estimate total lithium present in the southwestern portion of the Smackover in Arkansas for the first time.  We estimate there is enough dissolved lithium present in that region to replace U.S. imports of lithium and more," said Katherine Knierim, a hydrologist and the study's principal researcher.

The Smackover Formation is a leftover of an ancient sea that formed a porous and permeable limestone geologic unit that extends across the Southern U.S. states. Rich in oil and bromine, it has recently attracted attention for brine water — high-salinity waters that are a common byproduct of oil exploration.

Given the synergies, large oil producers such as Exxon Mobil (NYSE:XOM) are already active in Arkansas. The company plans to begin extraction by 2027 and produce enough lithium for one million electric vehicles annually by 2030 through Direct Lithium Extraction (DLE) technology, which offers a quicker, more environmentally friendly method than traditional mining.

DLE also has high profitability potential, as demonstrated by Canadian pioneer Volt Lithium, which recently produced the first battery-grade lithium from brine in the Permian basin. The company estimates production costs at $2,900 per ton, even from low-concentration brine, while current prices hover around $10,500 per ton.

Despite significant lithium resources in the form of brine and clay deposits such as Thacker Pass in Nevada, domestic production has yet to catch up to domestic consumption. The U.S. imports 25% of its lithium, mainly from Australia and South America.

The reasons include environmental concerns and opposition from the Indigenous population, as prospective deposits often crisscross disputed sites. With inert bureaucracy and high capex costs, the average mine development in the U.S. is 29 years.

Still, with heavyweights such as Exxon committed to tapping into Arkansas' and both local and federal decision-makers keeping a friendly stance toward battery metals — this Southern state might reach its goal of becoming an epicenter of U.S. lithium production.

Lithium stocks rallied on the news, with Piedmont Lithium (NASDAQ:PLL) climbing 17% yesterday before giving back most of those gains today.

Major lithium ETFs Global X Lithium & Battery Tech ETF (NYSE:LIT) and Amplify Lithium & Battery Technology ETF (NYSE:BATT) had modest gains between 2% and 3% Wednesday morning before running out of steam.