Domestic search is on for critical minerals as EV demand surges

The growing demand for electric vehicles is spurring states to explore domestic sources for critical minerals in an effort to mitigate possible supply-chain issues that could arise with most battery components coming from abroad.

The push is coming across the country, from California to North Carolina, both in states rich in such minerals and those that aren’t.

Rodney Sobin, a senior fellow at the National Association of State Energy Officials, said states are exploring mining lithium and looking at whether they can extract rare-earth metals from coal waste, among other policies under consideration.

“We and the states all recognize that there are … concerns about vulnerabilities considering that much of the supply chain for key minerals comes from China,” Slobin said in an interview. “So the opportunity to develop resources domestically and within states is very important.”

According to IHS Markit, one in four new passenger car sales will be fully electric by 2030. That’s thanks in part to states — including California and New York — seeking to lower their carbon emissions by phasing out gas and diesel car sales by 2035.

Also driving demand are the incentives provided by the federal government in laws including the Inflation Reduction Act. It included a raft of EV production and consumer tax incentives. One provides a $7,500 tax credit for EVs if portions of critical battery materials are extracted or processed in the United States.

The world’s top-producing nations of lithium, cobalt and rare-earth elements control more than three-quarters of global output, according to the International Energy Agency.

In 2019, the Democratic Republic of the Congo was responsible for 70% of cobalt production and China was responsible for 60% of rare earth production. Most industrial processing operations are done in China, which refined 35% of the nickel, 50 to 70% of the lithium and cobalt, and nearly 90% of rare-earth elements.

California is exploring a proposed lithium-mining project in the Salton Sea area. The project would extract lithium from brine, which is a byproduct of geothermal power plants that exist there now.

Lithium is a valuable component of high energy-density rechargeable lithium-ion batteries. There is currently only one operating lithium mine, located in Nevada. Other battery metals include cobalt, manganese, nickel, and phosphorus.

With legislation passed in August requiring California to be carbon neutral by 2045, the project could help the state achieve that goal by providing clean geothermal power and a key component of EV batteries.

The state also sees the project as a source of funds for the economic development of the Salton Sea area, a former tourist destination that has fallen on hard times. To that end, the state enacted a tax on lithium ranging from $400 to $800 per ton, based on how much is produced.

A state report, released in September, recommended continued funding research to advance lithium-recovery technologies and funding a state agency to establish a centralized permit and regulatory-reporting tracking system for state lithium projects, including lithium battery component manufacturing and recycling.

North Carolina and Tennessee are also exploring lithium projects.

Rare earths are used in permanent magnets that power the traction motors found in EVs, robotics, wind turbines, drones and other advanced motion technologies. There is currently only one rare-earths mine, located in California.

In coal country, West Virginia is exploring whether rare earth metals can be extracted from coal waste such as acid mine drainage, which tends to pollute the surrounding water. The state was awarded $140 million in the 2021 bipartisan infrastructure law to demonstrate the feasibility of a full-scale integrated rare-earth element extraction and separation facility.

In March, the state enacted a law clarifying that anyone who extracts rare earths from acid drainage may profit from it. The law was designed to encourage private-sector investment.

States are also courting battery manufacturers to set up shop, including foreign companies. Ohio has agreed to provide Honda and LG Energy Solutions Ltd. $156 million in state incentives to build a $3.5 billion battery manufacturing facility in Fayette County.

The Ohio Tax Credit Authority agreed Monday to provide a $71.3 million tax credit for the project.

Michigan is slated to provide about $700 million for Gotion, a Chinese battery manufacturing company, which will build a nearly $2.4 billion plant in Big Rapids. The state will also provide $230 million for Michigan-based Our Next Energy to build a $1.6 billion battery manufacturing plant.