Industry executives: California lithium metal tax will affect auto supply chain

California's proposed flat tax on lithium produced in the Salton Sea region will affect battery metal supplies from General Motors and Stellantis and could prompt some mining companies, industry executives told the media. Exit the state entirely.

As California tries to lead the green energy revolution and pushes to phase out gasoline-powered vehicles, supply tensions are building as lithium supplies fail to meet surging demand.

Privately held EnergySource Minerals has stopped talks with a financial institution and a major automaker while California is discussing a lithium tax, said Eric Spomer, CEO of privately held EnergySource Minerals, who declined to name the automaker."This tax will kill our industry," he said. "We are willing to pay the tax and contribute to the local community, but it has to be a reasonable tax."

The tax, which will affect three lithium developers in the Salton Sea region, has been signaled by Governor Gavin Newsom that he supports it."This policy framework benefits everyone, including communities and industry, and it prioritizes equity and innovation to power California's efforts to help the entire world transition to clean energy," said Alex Stack, a spokesman for California's governor.

Rod Colwell, CEO of Controlled Thermal Resources (CTR), said the company has both GM and Stellantis lithium supply contracts that expire in 2024 with GM and 2025 with Stellantis.Colwell said the tax would prevent them from delivering on time to both companies.GM declined to comment, and Stellantis did not immediately respond to a request for comment.

Image credit: CTR

Colwell revealed that CTR plans to produce 60,000 tons of lithium in California by mid-2024, enough to power about 6 millionelectric vehicles, making them the largest lithium producer in the United States.However, the company's current plan has encountered challenges.

U.S. Department of Energy Secretary Jennifer Granholm has previously praised the nascent lithium industry in the Salton Sea, as the region will deploy a geothermal brine process that is more efficient than open pit mines and brine evaporation ponds, the two most common existing methods of producing lithium. Environmental friendly.The Energy Department did not respond to a request for comment.

California officials say the state needs a tax to revitalize the Salton Sea region, one of the state's poorest areas that was devastated in the 20th century by years of heavy use of pesticides in agricultural production.They also said the flat rate would make it easier for the state topredictincome.

The proposal would impose a tax of $400 per ton on the first 20,000 tons of lithium produced annually, $600 per ton on the next 10,000 tons, and $800 per ton whenproductionreaches 30,000 tons or more.

California Assemblyman Eduardo Garcia, whose district includes the Salton Sea region, said a flat rate would be more appropriate."We believe that people living in and around these communities should see immediate benefits from lithium production," he said.

Lithium industry executives said they supported the state's measure, but preferred a 2 percent rate or less because they believed a flat rate could be economically damaging when metal prices fall in the future.

The negotiated prices paid by most automakers for lithium can vary widely from spot prices, trading at close to $77,500 a tonne this month, but only close to $6,750 in 2020, Fastmarkets data shows.

Mining executives say extracting lithium from the region is already a costly endeavor due to high concentrations of impurities in the geothermal brine, and they may consider moving to other states with large deposits of lithium-rich brine, including Utah and Utah. Arkansas."If California passes the tax, we'll fight or go," Colwell said.