Resolved by updating the latest R and R studio.
The solution was to reinstall the latest versions or R and R studio. I was hesitant to do so in the first place but it turns out the local R IDE should not impact R sessions/packages running in the organization's VM.
Original Problem: Open a new R session, Open a new RMD file, click knitr. I was expecting this to just knit the default RMD document generated by R as an HTML. There were no changes to the default RMD code.
Original Error:
Error in strsplit(Sys.getenv("R_LIBS")) :
argument "split" is missing, with no default
Calls: .libPaths ... Sys.glob -> path.expand -> path.expand -> unlist -> strsplit
Execution halted
Solution: Update to the latest version of R and R studio. Open a new R session, try to knit the default RMD as html document. (Relevant packages will be reinstalled in the new version of R you just updated.) The document should knit successfully.