Issue 14: Will California’s flat tax kill Lithium Valley projects?

Lithium industry CEOs say the state is proposing a flat tax that could kill development projects in the U.S. and specifically those in Imperial County.

Jun 10, 2022

California Seeks $800 to $1,200 Flat Fee on Every Ton of Lithium

California officials have spelled out their most specific terms yet on how much tax they want to attach to lithium extracted in the Imperial Valley and industry CEOs are not liking what they’re hearing, The Desert Sun reported this week.

Here are the takeaways from this new reporting:

Gov. Gavin Newsom, Assemblyman Eduardo Garcia and state Sen. Ben Hueso told the Desert Sun that they are seeking an $800 to $1,200 flat tax on every ton of lithium extracted in the Imperial Valley.
To date, none of the three companies in the Imperial Valley — Controlled Thermal Resources (CTR), EnergySource, and Berkshire Hathaway Renewables — have produced enough lithium to sell commercially. That could come until 2024 or 2023 at the earliest.
Given that, at minimum, these companies could produce up to 20,000 tons of battery-grade lithium per year, the state’s proposed flat tax could generate anywhere between $16 million to $24 million in annual tax revenue.
Previously, the state took away the authority to tax lithium away from Imperial County, whose leaders had hoped to control. At the same time, the state proposed to give 80% of those tax revenues to Imperial County and 20% to the state.
The Desert Sun now reports that industry leaders are against a flat tax and instead propose a 0.5% to 1% fee on all gross revenue, which would generate far less than the millions in tax revenues.
If battery-grade lithium extracted out of the Imperial Valley sells at $15,000 per ton, a 1% fee would generate $150 per ton, which would $3 million in tax revenue for 20,000 tons produced each year.
While industry CEOs are vehemently against the flat tax proposal, officials in Sacramento say the state is willing to negotiate a lower rate for the first year of production.
All that considering that the state has already helped cover the cost for valuable research into the region’s lithium — which is due before the end of the year — and given that it is willing to offer $45 million in sales tax exemptions, $1.05 billion in energy grants, hundreds of millions in geothermal transmission, and $80 million for an SDSU campus that would train local workers in the industry.
Rod Colwell, CEO of CTR, said the incentives the state is offering, including funding for a proposed SDSU campus to train workers, are “not helpful to us.”

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CTR Gave $9,800 to IID Division 3 Candidate Gina Dockstader

Votes in California’s primary on Tuesday are still being counted but one IID seat that is key to the so-called Lithium Valley may have a decided winner: Gina Dockstader.

Dockstader is among four candidates to run in the IID seat that oversees the north end of Imperial County where three companies are seeking to extract lithium from underground reservoirs.

As of today, Dockstader was leading with 510 votes (or 37.8%) over her rivals Ramon Castro with 317 votes, Don Campbell with 298, and Maria Nava-Froelich with 223.

Another key detail that makes Dockstader stand out from her competitors is the fact that she was the only recipient in the race to receive two $4,900 donations from Controlled Thermal Resources, the Australian-based company building a geothermal and lithium extraction plant just outside of Niland.

In total, according to the Calexico Chronicle, Dockstader raised $89,021 — the most raised by any candidate in the Imperial Valley in this primary election.

Stellantis Wants to Buy Lithium Hydroxide from CTR

Last week, the new electric vehicle maker Stellantis signed a “binding offtake agreement” to get its supply of battery-grade lithium from Controlled Thermal Resources, one of the three companies seeking to extract lithium in the Imperial Valley.

Under the agreement, according to a statement from the company, CTR will supply Stellantis with up to 25,000 metric tons per year of lithium hydroxide over the 10-year term of the agreement.

That makes Stellantis the second electric vehicle manufacturer after General Motors to sign an agreement with CTR to supply battery-grade lithium.

Back in July 2021, GM said it became the first investor in CTR by putting up an undisclosed sum of money to help the Australian-based company with startup costs. That deal also allowed GM to claim “first rights” on lithium produced in the first stage of CTR’s Hell’s Kitchen project.

Given that CTR might generate up to 20,000 tons of battery-grade lithium in its first year — if the technology works — it is hard to imagine a scenario where both Stellantis and GM would come out happy with the results.

Several industry experts outside the Imperial Valley have expressed skepticism that any company in the region will initially produce as much lithium at a commercial level.

Movements to Watch

The Lithium Valley Commission will meet again on Thursday, June 16, from 1 p.m. to 5 p.m. in person at the Calipatria High School Library in Calipatria and via Zoom. At this meeting, the state-appointed commission will hold a workshop on the challenges of extracting, processing and producing lithium from geothermal brine.