[4] Butia arenicola was collected by the Swiss physician and botanist Émile Hassler in Paraguay, in sandy plains in the highlands of the Cordillera de Altos in January 1898 – 1899.
[9] Glassman further determined a group of specimens collected by William Andrew Archer and Augusto Gehrt in 1936 in Jaraguari, Mato Grosso do Sul, to be S. aff.
arenicola a specimen collected by Amaro Macedo in 1950 at a locality likely to be Nova Ponte along the Rio Verde, in Água Clara, Mato Grosso do Sul.
[13] In 2009 Irene M. Gauto recognised this taxon as a distinct species, despite otherwise following Henderson et al. in her work acquiring a Masters in Biology degree at the University of Geneva.
He, along with R. Pimenta, collected a specimen in 2012 in between the municipalities of Água Clara and Três Lagoas in Mato Grosso do Sul, Brazil, which he identified as B. arenicola.
[4][12] In 1979 Glassman provided a key which contrasted this species with Butia capitata (in which he included B. odorata), in which he considered the main difference to be the small trunk, the generally smaller dimensions of the pinnae, spathe, spadix, as well as a one-seeded fruit and tiny 2mm petiolar teeth as opposed to 11 cm-long spines in B. capitata.
[4] In his 2017 key to the genus, Marcelo Piske Eslabão also contrasts it to B. matogrossensis, distinguishing it from this species by yellow instead of red fruit, and smaller spathes and pistillate flowers.
[15] It grows in the state of Mato Grosso do Sul in Brazil[4][12] and specimens have been collected in the departments of Amambay,[15] Canindeyú,[14] Central,[14] Cordillera,[14][15] Itapúa,[15] Misiones[15] and San Pedro[14][15] in Paraguay.
[5][10] Gauto et al. state their belief in 2011 that this taxon is endemic to Paraguay; it is unclear if that means they disregarded the Brazilian specimens determined as Butia arenicola by Glassman as misidentified, or were unaware of them.
Within this estimated extent of occurrence, it was calculated to occupy some 10,000 km2 (the area of occupancy), giving it an abundance of 57%, which is rather average within the genus Butia.
The areas it grows in have marked seasonal differences, with a cooler, very wet winter where the surface may temporarily be flooded in low-lying places, and hot and dry summers with often prolonged droughts.
They consider it probable that it has a wider distribution than at that time known, and that it is likely under-collected, although they mention that so little collection of this taxon has occurred that the low amount of specimens they used in their calculations may cause their method of estimating the population to show a larger extent of occurrence than may actually be the case.
[15] The only known population to be found protected within a nature conservation area is at the Yacyretá Dam Island Reserve at Parque Nacional Lago Ypacarai in Itapua, Paraguay, with three known localities here.