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House panel advances lithium severance tax

Chynna Lockett
Republican Representative Kirk Chaffee

A House panel is advancing a bill to tax lithium mining profits.

Lithium is a crucial element for batteries that power electric cars. Its value has skyrocketed and is now one of the world’s most in-demand minerals. About 40,000 acres of public land in the Black Hills are under a lithium mining claim.

There is currently one permitted lithium mine near Custer.

A severance tax is not levied on the element, which enjoys a classification like gravel.

Republican Rep. Kirk Chaffee wants to change that. He wants a 4.5 percent severance tax on lithium and to distribute 80 percent of the funds to counties.

“Taxing lithium, it can be viewed as a new tax. Or it can be viewed as tax similar to other properties already done. So, that’s going to be the hurdle," Chaffee said. "I think the simple premise is we have out-of-state interest mining our resources and they’re not paying a tax. That’s really the argument, right there.”

The bill moves lithium into the classification of an “energy mineral” alongside coal, oil and natural gas.

But lithium itself does not produce energy—it is used to store energy.

Gov. Kristi Noem’s Department of Revenue opposes the reclassification of lithium. Jason Evans is with the Department of Revenue. He said it is inappropriate to tax lithium as an energy mineral.

“It seems to me the bill is simply trying to fit the proverbial square peg into a round hole simply for the sake of taxation," Evans said. "We don’t do that with other substances that are mined in South Dakota, such as gravel, quarts, bentonite. We certainly shouldn’t do that with lithium.”

Evans said the tax distribution formula is different from other minerals and creates undue complexity.

The House Taxation Committee passed the bill onto the House floor.

Lee Strubinger is SDPB’s Rapid City-based news and political reporter. A former reporter for Fort Lupton Press (CO) and Colorado Public Radio, Lee holds a master’s in public affairs reporting from the University of Illinois-Springfield.