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GOP lawmaker looks to reintroduce lithium tax bill

The old Etta Mine near Keystone. Spodumene crystals, which contain lithium deposits, are visible along the rockface.
Lee Strubinger
The Etta Mine is a retired lithium mine near Keystone. Spodumene crystals, which contain lithium deposits, are still visible along the rockface.

The Republican lawmaker who brought a failed lithium mining tax proposal last session is working on another piece of legislation.

That comes as one company has already announced intentions to search for lithium in two areas of the Black Hills.

South Dakota taxes gold and silver, as well as energy producing minerals like coal, oil and gas, and uranium.

Rep. Kirk Chaffee brought a bill last session to tax lithium, which is an element used for battery storage and is seen as a crucial in the transition to a green economy.

Chaffee’s bill failed, however he said he’s working on another mineral tax bill. Chaffee, who is a former Meade County assessor, said he’s going to propose a bill that creates a fair and equitable tax.

Courtesy Photo
Rep. Kirk Chaffee

“I could have a taxation where I’m taxing houses. Or, I could be really selective and say I’m only taxing single-family ranch houses," Chaffee said. "I think that’s where we’re currently at with the mineral stuff. We’re... very specific. I want to say let's broaden that up a little bit.”

Interest in mineral exploration has grown significantly in the last few years. According to the Bureau of Land Management, since 2019, the number of new mining claims has increased 18-fold.

According to a recent paper by the Legislative Research Council, if those claims turn to mines, the extracted minerals will get removed without being subject to a severance tax. Nearby states have a broader severance tax on metals, minerals and ores extracted from the ground.

China dominates the market for lithium and other minerals seen as crucial for a green energy transition.

Midwest Lithium has indicated its subsidiary companies will explore for lithium near Hill City and Keystone. A spokesperon said a state lithium tax would offset incentives to produce minerals domestically.

“Certainly, this material is going to come from somewhere," COO Michael Schlumpberger said. "I would sure hate for South Dakota to miss out on the opportunity and to strengthen the value chains and supply chains that are somewhat in peril because they’re concentrated in the hands of the few.”

The lithium tax proposal passed in the House, but failed in the Senate last session.

Gov. Kristi Noem’s office declined to comment on potential legislation next session. However, in her first campaign for governor, Noem signed a pledge to veto efforts to increase taxes.

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.