A flat-rate tax on lithium produced in California’s Salton Sea will see up to a $800 levy placed on every tonne of the lithium-ion battery material produced in the US state.
The tax— due to begin January of 2023 and be reviewed each year— will be liable on each metric ton of extracted lithium carbonate equivalent mined from geothermal fluid, spodumene ore, rock, minerals, clay, or any other naturally occurring substance in the state.
Bill SB125 aims to impose a tax of $400 per tonne for the first 20,000 tonnes of lithium produced annually, $600 per tonne for the next 10,000 tonnes, and $800 per tonne with output of 30,000 tonnes or more, reported news outlet Reuters.
Extracting lithium from the region is already a costly venture due to high concentrations of impurities in geothermal brines and could force mining firms to move to other states with large deposits of lithium-rich brines such as Utah and Arkansas.
California officials say the tax is needed to help restore the Salton Sea region, which was heavily “damaged” during the 20th century by heavy pesticide use from farming.
Lithium mining in California
There are 11 commercial plants at the Salton Sea field producing geothermal energy, which pumps hot fluids from deep underground and converts the heat into power.
The idea is to extract lithium from the brine before the cooled fluid is reinjected underground.
However, the proposed flat-rate tax will delay deliveries of the battery metal to General Motors and Stellantis and may push some mining companies to exit the state entirely, reports Reuters.
The tax, which will affect three Salton Sea-area lithium developers: EnergySource Minerals, Controlled Thermal Resources (CTR) and BHE Renewables, a division of Warren Buffett’s Berkshire Hathaway.
EnergySource Minerals has halted discussions with potential financiers and a major automaker; CTR, which has contracts to supply lithium to GM by 2024 and Stellantis by 2025, said the tax would force the company to miss those delivery deadlines, reported Reuters.
CTR plans to produce 60,000 tonnes of lithium by mid-2024 at its Hell’s Kitchen project in California; the company received $4.5 million in grants from California in 2020 for lithium research.
In June, CTR announced it would supply 25,000 metric tons per year of lithium hydroxide over the course of a 10-year term of the agreement with Stellantis’ who will use the material at its North American electrified vehicle production plant.
BHE Renewables, which received $15 million in federal government research funding, does not oppose the flat-rate lithium tax.