On the other side of a freshly painted gate, Mayor Parnell Vann pointed out a squat blue spire of valves, bolts and pressure gauges attached to a long-dormant well—a telltale sign someone means to bring it back to life. On the thick-wooded back roads, crisscrossing fields where oil drillers gave up long ago, Vann found two more similar wells that day.

These days, companies in the area 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 this quiet corner of southwest Arkansas to lead the way.

Exxon Mobil XOM 1.76%increase; green up pointing triangle, a new player in the hunt for U.S. lithium, is planning to build one of the world’s largest lithium processing facilities not far from Magnolia, with a capacity to produce 75,000 to 100,000 metric tons of lithium a year, according to people familiar with the matter.

At that scale, it would equate to about 15% of all finished lithium produced globally last year, according to one analyst.

The Wall Street Journal reported in May that Exxon purchased 120,000 gross acres in the area for a price tag of more than $100 million. A consultant for the seller had estimated the prospect could have the equivalent of 4 million tons of lithium carbonate equivalent, enough to power 50 million EVs.

The giant project could be built in stages, with modular trains constructed together or in separate locations near its future lithium production sites in South Arkansas, people familiar with the matter said.

To push the project forward, Exxon will have to profitably scale up the technology used to siphon lithium from brine, which for years has been an elusive goal across the industry.

Other companies including Standard Lithium SLI -3.85%decrease; red down pointing triangle and Tetra Technologies TTI 1.45%increase; green up pointing triangle are planning to build capacity in the area.

The attraction is what is known as the Smackover formation, a geologic trend that runs from Texas to Florida and is rich with saltwater brine, which once bedeviled companies drilling for oil. That brine also contains small amounts of lithium, and the companies are increasingly optimistic they can scale up technologies to extract it.

Mining companies’ efforts to shore up domestic supplies have run into hurdles in recent years. But companies drilling for lithium say their extraction methods are cleaner than traditional mining, and face fewer regulatory risks.

In an interview at a lithium demonstration plant near El Dorado, Ark., Standard Lithium Chief Executive Robert Mintak said the Smackover could become as significant to domestic lithium production as the Permian Basin of West Texas and New Mexico has been for U.S. oil output.

“The economics will be better, though,” Mintak said. “And the resource will last longer. There’s a more favorable environment for where the product is going [compared with oil].”

Tetra Technologies, a company that is planning to extract the chemical bromine from brine in the region, is studying the feasibility of building a plant that would add thousands of tons of lithium extraction capacity, and recently drilled its second test well near Magnolia. “It’s going to be a pretty big boom in Southwest Arkansas,” said Brady Murphy, Tetra’s CEO.

These are expensive bets. Mintak estimated it currently costs about $1.5 billion to build 25,000 metric tons of capacity, after inflation boosted the prices of construction materials.

Vancouver-based Standard Lithium, backed by Koch Industries, is studying the feasibility of building the first commercial U.S. lithium extraction facility, with a capacity of 6,000 metric tons a year. It wants to begin construction in early 2024.

It has also proposed building a 30,000-ton plant just west of Magnolia, where Mintak said the concentration of lithium is about twice as high as its current location. Construction could potentially begin in the next few years.

Put together, the three companies’ projects would require around 6,000 jobs and north of 1,600 trucks by 2028, according to a person familiar with the matter. 

An influx of workers and trucks could give Magnolia and nearby counties an economic shot in the arm after years of decline. But the prospect is also concerning, Mayor Vann said, because the town of 12,000 is facing a shortage of new houses, and many of the region’s limited roads, water and sewage systems are unprepared. The town is home to a state college, Southern Arkansas University, but its surrounding areas are largely rural.

“No one is listening right now,” he said. “But when it blows up, it’s going to be too late.”

In Magnolia, named for a tree that blooms once or twice a year, a bright two-story mural depicts oil field workers clutching rig equipment and twisting valves, recalling the period when the region was a thriving community hub of oil field activity. That all changed after the 1980s oil bust, and a series of mill closures and company departures in the years since.

“We’ve just about dried up to nothing,” said Valarie Clark, a judge in nearby Lafayette County.

Now the economic winds are shifting again.

At Stephens Country Store in Magnolia, manager Edie Mobbs said at least three companies in the past couple of years have asked whether they can buy the mineral rights on 80 acres she and her husband own. She has so far decided not to sell, just in case they want to lease the land.

“I’m wondering if it’s not because somebody knows something we don’t know,” she said.

Some worry the city’s potential growth could bring crime and drug abuse. Magnolia’s City Council, led by Vann, recently passed an ordinance to install an entertainment district near the town’s main square, which would allow restaurant patrons to carry open containers of alcohol from one venue to another.

Michael Seabaugh, senior pastor at Magnolia’s Central Baptist Church, said those activities should be kept away from the town’s large churches, just off the square. A few hundred voters agreed, signing a petition aimed at putting the issue up for a ballot vote.

Seabaugh said area residents have a tendency to feel left behind or passed over.

“That breeds a cynicism and a desperation,” he said. “Which is what I think is typified in the entertainment district. This is a desperation move.”

Mark Williams, an owner of Murphy’s Jewelers in Magnolia, is in favor of the entertainment district because he believes it would bring more foot traffic to the town square. And the city needs a way to attract incoming workers, he said.

Williams said he can recall one company decades ago that gave up on pumping oil from his family’s land because of the large amounts of saltwater bubbling from the earth. That same saltwater is now an asset.

“It’s amazing how things can turn in 40 years,” he said.

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, people familiar with the matter said. The company would also benefit from green-energy subsidies included in the Inflation Reduction Act, which allows for tax credits of 10% of the cost of producing lithium.

Exxon, which is generally bullish about the future of oil and natural gas, is also preparing for a future less dependent on gasoline. Last year, it projected light-duty vehicle demand for 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.

Not that anyone in Magnolia would ever be caught dead in one. For all the town buzz about lithium, local officials, shopkeepers and others said they couldn’t see themselves driving an EV.

“They don’t appeal to me whatsoever,” said Columbia County Judge Doug Fields. But Fields noted Magnolia is poised to get its first EV charging stations soon, just outside of town square.

“I don’t mind them parking there,” he said with a laugh.