Imperial County Supports Proposed Lithium Flat Tax

This storywas published June 21, 2022 by the Calexico Chronicle.

A California bill proposing to tax lithium production in the state on a per-ton basis is finding both support and opposition in Imperial County as it approaches a vote in the Legislature, possibly this month.

At least two companies seeking to extract lithium in the Imperial Valley near the southeastern end of the Salton Sea publicly oppose the flat tax, saying it threatens to halt its project and delay the promise of jobs and an economic boon.

On the other hand, Imperial County and one newly formed coalition made up of labor, environmental, public health and business groups in the Imperial Valley say they support it.

"Commercially speaking, it’s going to hurt the Valley," said Rod Colwell, chief executive officer of Australian-based Controlled Thermal Resources, referring to the lithium flat tax proposal circulating in Sacramento. If the proposal is approved, Colwell said it could damage the viability of his company’s lithium project.

Colwell said his company and others in the industry oppose it and urge Gov. Gavin Newsom’s office to consider instead a tax based on a percentage of gross sales.

Controlled Thermal Resources and two other companies say they are on the verge of extracting lithium at a commercial level from geothermal brine in the north end of Imperial County. At least one has projected to produce enough battery-grade lithium to sell to manufacturers as early as 2024.

But as of Monday, June 20, state leaders in Sacramento were still negotiating a trailer bill that proposes a tax on lithium based on each ton produced in California. Newsom’s office and Assembly member Eduardo Garcia, D-Coachella, are involved in the negotiations and the language of the proposal may not be finalized until later this week.

To pass, the bill requires a two-thirds vote of the Legislature. A vote could happen as early as next week.

Though the bill does not specify how much money each ton of lithium the state would tax, one industry executive told The Desert Sun the figure was suggested as low as $800 per ton.

Eric Spomer, chief executive officer of San Diego-based EnergySource, told The Desert Sun that such a flat tax on each ton of lithium produced was still excessive.

EnergySource has recently gone on a public relations offensive, mailing Imperial Valley residents a letter that opposes the proposed flat tax, saying it "could very well end the potential of geothermal lithium production in Imperial County before we can even get started."

The letter, signed by Derek Benson, EnergySource’s chief operating officer, is also a call to action on behalf of the lithium industry.

"We need your help today. We need you to contact the leaders in the state legislature, including our local state representatives, and request a fair, flexible tax that ensures local revenue and advances California’s EV, emissions and climate goals," the letter states.

EnergySource has reportedly been calling residents as well.

Spomer and an executive with Berkshire Hathaway Energy did not respond to a request for additional comment.

The question of how to tax lithium production in California is the latest development in an emerging green industry buoyed by the heightening demand for electric vehicles and, by extension, the lithium-ion batteries that power them.

Imperial County may soon become a source for battery-grade lithium for electric vehicle manufacturers in the U.S. if any of three companies — Controlled Thermal Resources, EnergySource and Berkshire Hathaway Energy — successfully produce it in large quantities.

The three companies propose to do so by pumping millions of gallons of hot geothermal brine up to the surface, purify it and extract the lithium mineral through a complex chemical process. Steam generated from the hot brine would also be used to generate electricity, as it’s been done for decades in the Imperial Valley.

Unlike other countries in the world, the process of extracting lithium in Imperial County is different and will not require large excavation pits or evaporation ponds the size of football fields.

So far, the Imperial County Board of Supervisors has been active in lobbying the state to give millions in funding to help the industry succeed in the Imperial Valley. The county successfully convinced the state to pay $80 million for a San Diego State University science and technology campus in Brawley to prepare local residents going into the lithium industry.

Salton Sea-area Imperial County Supervisor Ryan Kelley, who also sits on the state’s Lithium Valley Commission, said he supports a flat, per-ton tax on lithium but emphasized that the county is not involved in any discussions related to the proposed trailer bill or the tax rate.

"I believe in an equitable price point and that the industry will succeed and thrive in the Imperial Valley. The communities will benefit from that development," Kelley said.

Additionally, Kelley said he was not worried about the impact that a flat tax would have on the lithium projects in the Imperial Valley.

"I understand what Rod is saying," Kelley said of Colwell’s comments in regard to his company’s lithium extraction project coming to a grinding halt. "And I respect his point of view but I don’t think that’s the case."

"There is a resource there that will be developed and hopefully the companies that are in the driver seat for that development are able to work with our community and our county to make sure that it has a lasting benefit for all those concerned," Kelley said.

Colwell, on the other hand, has said that adding a flat tax on each ton of lithium carbonate equivalent produced would make it more expensive for domestic buyers. Those buyers will then go to China where it is cheaper to mine it, he added.

"It just won’t be viable," Colwell said. "A commodity, like anything else, globally it puts China back in the seat. Simple as that."

When Newsom unveiled his revised budget proposal last month, Garcia and state Sen. Ben Hueso, D-San Diego, said 80 percent of lithium tax revenues would go back to Imperial County and 20 percent would go to help restore the Salton Sea.

Those in Imperial County support the 80-20 tax revenue disbursement.

But other groups closer to the Coachella Valley — Leadership Counsel for Justice and Accountability and the Sierra Club of California, for example — have lobbied state officials to instead give 70 percent to Imperial County and 30 percent to the Salton Sea.

A newly formed group called the Lithium Valley Community Coalition sent a letter to state legislators on Monday to offer its support of a per-ton lithium tax that it says will support much-needed local infrastructure, services and community benefit projects.

The coalition is made up of local groups like the Comite Civico del Valle, Imperial Valley Equity and Justice Coalition, Los Amigos de la Comunidad IV, and several union groups like the IBEW 569 and the San Diego & Imperial Counties Labor Council, AFL-CIO.

The letter was addressed to Garcia, Hueso, Senate President Pro Tempore Toni Atkins, Assembly Speaker Anthony Rendon, and other key legislators.

"These investments, as proposed, will spur the development of Lithium Valley’s new green economy and help the state transition from its dependency on fossil fuels," the letter reads. "Further, stable revenue will also facilitate the creation of much-needed high road jobs in our region which has a history of some of the highest unemployment rates in the country."