has the estate of arnold lobel been compensated for this?
It also helps that this is not commercial and doesn't have negative impact on the originals.
This is 100% fair use by the standard.
Copyright law varies internationally, which is especially tricky given we have the internet which can transfer copyrighted material between jurisdictions in the blink of an eye, but this is how one jurisdiction might approach it:
In Germany, there has been a long standing legal dispute between the band Kraftwerk and the musician Moses Pelham about him sampling 2 seconds from Kraftwerk's track "Metall auf Metall" (if you search for this term, you will get a lot of results about the dispute) without permission. This disputed has steadily escalated until it reached European Court of Justice who delivered a judgement establishing a principle that Moses Pelham's use of the sample was legal, and covered by the copyright exemption for "pastiches" (a term that has been mentioned several times in this discussion already).
Wikipedia article (German): https://de.wikipedia.org/wiki/Rechtsstreit_zwischen_Moses_Pe...
Press release by the Court of Justice (PDF): https://curia.europa.eu/site/upload/docs/application/pdf/202...
The actual judgement: https://infocuria.curia.europa.eu/tabs/jurisprudence?sort=DO...
A rather long expert opinion from before the judgement (PDF): https://freiheitsrechte.org/uploads/documents/Englische-Doku...
So, this work here might be a pastiche, meaning a European court might find that there is no compensation due. Or not, who knows, I am not a court and not even a lawyer.
§ 51a Karikatur, Parodie und Pastiche
Zulässig ist die Vervielfältigung, die Verbreitung und die öffentliche Wiedergabe eines veröffentlichten Werkes zum Zweck der Karikatur, der Parodie und des Pastiches. Die Befugnis nach Satz 1 umfasst die Nutzung einer Abbildung oder sonstigen Vervielfältigung des genutzten Werkes, auch wenn diese selbst durch ein Urheberrecht oder ein verwandtes Schutzrecht geschützt ist.
Translation:
Section 51a Caricature, parody and pastiche
It is permitted to reproduce, distribute and communicate to the public a published work for the purpose of caricature, parody and pastiche. The authorisation under sentence 1 includes the use of an illustration or other reproduction of the work used even if this is itself protected by copyright or a related right.