US lithium laws fail to keep pace with growth
Confusion over state regulations deters firms
BEIJING – China pledged on Monday to treat foreign companies the same way as domestic peers in a bid to attract more foreign investment, cooperation and expertise, as Asia’s largest economy moves to upgrade and strengthen its industrial chains.
“China will fully guarantee national treatment for foreign companies, so that more foreign companies can invest in China with confidence and peace of mind,” Vice Commerce Minister Guo Tingting said at the China Development Forum in Beijing.
Guo did not give details about how China would guarantee “national treatment,” or the equal treatment of locals and foreigners as per World Trade Organization principles.
For years, Western firms have complained of unequal access in China, a vast consumer market and also global supplier of raw materials and components. Western governments have expressed concern about “economic coercion,” and companies have considered “de-risking” supply chains and operations away from China.
China’s introduction of a broader anti-espionage law, exit bans and raids on consultancies and due diligence firms have chilled foreign fund inflows. Inbound foreign direct investment contracted 8% last year.
“A significant percentage of Chamber members have reported to us that they are treated unequally compared to their domestic counterparts,” said Jens Eskelund, president of the European Chamber of Commerce in China, giving market access, government procurement, access to subsidies and communication with the government as examples.
“The clearest indication of equal treatment will be when our members tell us they no longer experience these and other related challenges,” he added.
China will continue to open up high-level areas of industry and finance and create more market opportunities, and will firmly safeguard a multilateral trading system with the WTO at its core, Guo said.
Premier Li Qiang on Sunday said China will continue efforts to build a first-class business environment and to welcome enterprises from all over the world to invest in the country.
Stephen von Schuckmann, a board member and executive at ZF Group who oversees the auto supplier’s battery-drive operations, has said the company was committed to China, which leads the world in electric vehicle sales and production.
“Any wording and hype about an exodus in the supply chain is not what we follow,” he said in remarks published by CGTN. “We’re invested. We’re here to stay.”
“China will vigorously promote the deep integration of scientific and technological innovation and industrial innovation, and encourage foreign-invested enterprises to set up R&D centers,” said Jin.
Washington’s drive to make the United States a major global lithium producer is being held back by a confusing mix of state regulations that are deterring developers and hampering efforts to break China’s control of the critical minerals sector.
Across Texas, Louisiana and other mineral-rich states, it’s unclear who owns the millions of metric tons of lithium locked in salty brines underneath U.S. soil, how the battery metal should be valued by regulators and who ultimately should pay to process it into a form usable by manufacturers.
These legal ambiguities are the latest impediment – alongside technical challenges and sagging commodity prices – to America’s plans to produce more of its own lithium and wean the country off foreign supplies, according to interviews with regulators from seven U.S. states, legal experts, politicians, landowners, investors, royalty firms, industry executives and consultants.
Federal officials in Washington are largely powerless to force states to change regulations, leaving the Biden administration’s aggressive electrification targets beholden to the pace at which local officials update outdated statutes.
Global lithium demand is expected to outpace supply by 500,000 metric tons annually by 2030. Unless the United States boosts its own production, the country’s manufacturers will find themselves reliant on China and others for supply as the end of the decade approaches, analysts warn.
The Texas Legislature, for example, last year approved a law – supported by Standard Lithium and Chevron – that instructed the state’s oilfield regulator to craft regulations for lithium extraction from brines. But the regulator, known as the Railroad Commission of Texas, told Reuters is has no timeline for when it will finish that task.
While the 1972 Clean Water Act gives Washington regulatory power over water extraction and reinjection across the country, state officials have autonomy to govern other parts of the process.
Tetra, which also produces chemicals for water treatment and recycling, has tested more than 200 brine samples from Texas, but so far has opted not to do business in the Lone Star State due to legal uncertainty, Murphy said.
REUTERS
Regulatory risks
In Oklahoma, which has several brine deposits, the Oklahoma Corporation Commission – which oversees oil and gas development – said it has no jurisdiction over lithium production and royalties, and referred comment to the state’s Department of Mines, which said it also does not oversee lithium.
In Utah, state lawmakers and the governor approved a bill last year aimed at preventing water levels from dropping in the lithium-rich Great Salt Lake. That led Compass Minerals to abandon plans last month to produce lithium for Ford in the imperiled lake and disband its entire lithium team, saying “regulatory risks have increased significantly around this project.”
And in Louisiana, the lack of state guidelines is fueling concerns from legal experts that producers could trespass on neighboring land when they reinject brine after filtering out lithium. Reinjection is a key step to preserve underground water table levels.
The path is even murkier for water that is extracted alongside crude oil. Oil companies for decades have paid to dispose of that produced water, which contains lithium that could be sold for a profit.
With lithium demand now on the rise, landowners, oil producers and companies that oversee water disposal are tussling over ownership.
Arkansas
Legal experts told Reuters that it’s unclear how lithium will be valued for royalty payouts given the cost for equipment to filter the battery metal from brine, which unlike oil typically has no market value itself.
In Arkansas, where Tetra, Exxon, Albemarle and Standard Lithium hope to produce the battery metal within a few years, state officials have been debating a royalty structure to compensate landowners since 2018.
Shane Khoury, who oversees the body that will set the royalty rate in his role as secretary of the Arkansas Department of Energy and Environment, said the state may charge different rates depending how much lithium is in a brine deposit.
Albemarle, the world’s largest lithium producer with operations in the United States, Chile, Australia, China and elsewhere, plans to open a pilot facility in Arkansas by the end of the year and said it has chosen not to – for now – submit a royalty proposal while it watches Standard’s royalty review process.
“We’re waiting to see how (the Arkansas royalty situation) evolves,” said Netha Johnson, the Albemarle executive overseeing the company’s Arkansas lithium project. “There’s a couple of fundamental differences between the way that brine royalties could be calculated.”
California, which has giant lithium reserves in its Salton Sea region east of Los Angeles, last year imposed a flatrate tax for each metric ton of lithium. The move has pushed back development of projects slated to supply General Motors and Stellantis.
Nevada, which has the only commercial U.S. lithium operation – a small mine operated by Albemarle – has taxed minerals for more than 100 years, but at a rate based on each facility’s revenue.
Industry analysts expect regulations to be eventually set in various states, but predicting when is anyone’s guess.*
REUTERS