Without Clear State Regulation, The U.S. Will Lose the Lithium Arms Race

By Sabrina Conte, KBH Energy Center Graduate Fellow

Lithium is necessary to technological innovation—but it is also a glaring strategic vulnerability for the United States.

As a key component of lithium-ion batteries, lithium powers crucial technologies, from smartphones to military satellites to backup power storage in data centers. Due to its widespread use in electric vehicles, lithium is also a critical material for enabling the energy transition.

Worryingly, however, demand for lithium is on pace to exceed supply from announced projects by nearly 40% in 2035. And for the U.S., supply chain pressure is compounded by the location of the resource itself. Lithium is obtained either through hard rock mining of lithium-rich minerals or by extracting the mineral from brine pumped from underground wells. But deposits are unevenly distributed across the world, meaning that a majority of lithium production is concentrated in just a few countries: Australia, China, Argentina and Chile. Chinese companies dominate the supply chain further downstream, controlling by some estimates 70% of the world’s processing and 75% of its lithium-ion battery manufacturing. The U.S. has just one operational lithium mine, which contributes less than one percent of global production.

It is increasingly evident that lack of control over lithium supply and processing is a national security weakness. Russia and China have shown that they are willing and able to leverage their control over the supply of critical minerals against their geopolitical rivals. In June 2025, Russia seized a lithium deposit from Ukraine shortly after the latter signed a deal to provide investment opportunities in rare earth mineral extraction to the U.S. In October 2025, China placed export restrictions on lithium battery materials, using its dominance in the sector as an economic lever in its ongoing trade war with the Trump administration.

There is reason to be optimistic, however, that this security gap can be plugged. The U.S. has promising sites for lithium production—in particular, the Smackover Formation, an oilfield spanning hundreds of miles from East Texas to Florida which contains massive lithium-rich brine deposits. The Formation produced the highest reported concentration of lithium-in-brine in North America, igniting a wave of leasing activity and commitments by major energy companies, including Exxon, to extracting lithium on-site.

Federal efforts to support domestic lithium production in sites like the Smackover have been powerful, fast-moving, and bipartisan: both the Biden Trump administrations have taken steps to onshore by awarding producers hundreds of millions of dollars in government funding, streamlining mineral permitting, entering into mineral leases on federal lands, and acquiring equity stakes in domestic producers. However, regulatory power mainly rests with the states, which are responsible both for prescribing rules for lithium extraction in their jurisdiction and defining ownership rights over lithium and the brines that contain it.

Unfortunately, state laws have not developed on-pace, creating legal uncertainty that undercuts efforts to onshore production. In some states, for example, it is unclear whether any authority has responsibility over the mineral at all: both the Oklahoma Corporation Commission (the authority regulating oil and gas) and the state Department of Mines denied any jurisdiction over lithium in Oklahoma. In other states—most notably in Texas, which sits on part of the Smackover—unclear ownership rules have tied up project development.

Ownership of naturally occurring lithium brines in Texas rests with the surface estate. Additionally, the Texas Supreme Court recently clarified that producers who hold oil-and-gas rights under existing leases have the right to produced water (waste fluid from oil and gas drilling activities that can contain lithium). However, whether the “constituent” minerals within the brine or produced water are conveyed to the mineral estate upon severance or remain with the surface estate is still unsettled. As matters stand, developers must obtain permission from (and negotiate compensation with) each of the potential owners before they can extract lithium from brines. Efforts by Texas legislators to clarify brine ownership have been unsuccessful: a bill that would accord rights in brine minerals to mineral owners as a matter of law ultimately failed to pass.

The situation in Texas reflects a broader issue: regulation of lithium production in the United States is too fragmented and developing too slowly to meet ongoing needs. Failure to clarify ownership rights, in particular, has led to uncertainty and increased risk for companies hoping to capitalize on the growing demand for lithium where reserves are abundant. More broadly, however, lack of regulatory clarity hampers efforts to shore up the lithium supply chain and close a crucial security vulnerability. Given China’s dominance in the lithium and lithium-ion battery industries, catching up is a monumental task where speed is of the essence. State legislators should work quickly to fill these regulatory gaps.