Quoted in the CBC again. This is related to a lot of other big-picture issues, but if you are down for a bit of a technical tax law rant on how western Canada ought to be able supply a large portion of North America’s future lithium demand, but the government is standing in the way, then keep reading. Otherwise have a nice day.
So, you can look it up and fact-check me on this but my understanding is that by 2030-35 global projected demand for lithium is about 3 million tons. NA (Canada, US and Mexico) demand will be about 1 million tons. Western Canadian Lithium brines could produce about 200,000 to 600,000 tons but who knows, because we can’t get the exportation financed…
Lithium brines are effectively the left-over sea water from the inland sea that occupied the centre of NA in dinosaur times. It also contained oil and gas, so all over western Canada over the past 80 years we have drilled thousands of wells 2km down, extracted the brines, taken the oil and gas out, and then pumped the brine back down where it belongs. Fast forward to the 1980s and smart people figured out the the brines were full of lithium, but it was the 80s, so who cares? Fast forward to today and now we care. We care a lot. Because, from what I understand, lithium brines could produce perhaps 20% to 60% of NA demand…
Also, if you think about it for 2 seconds, lithium is very light metal so it does not mineralize well, so you have mine and refine tons of it per kilo, all of which takes energy and money. So lithium mines are not green at all, they are downright enviro-ugly, regardless of what anyone says about the “long term”.
But pumping brines up exiting wells, extracting the lithium chemically, and putting the brine back where it has been for millions of years is cheap and only about 100 times more environmentally efficient? But someone should fact-check me on that.
So the government of Canada created the Critical Minerals Exploration Tax Credit (CMETC) that gives a 30% credit for every $1 spent on exploring for Critical Minerals, which is good. Unfortunately, the government also just removed any tax credits for oil and gas exploration. Only, technically, they did not remove the credits for “oil and gas” per se. Specifically, the Income Tax Act only allows credits for effectively “non-embedded industrial minerals”. Oil and gas are “embedded industrial minerals”. The problem is that lithium brines, are also “embedded” because they lie in “embedded” between layers of sedimentary rock, where they have been for the past 350 million years.
All that needs to be done to allow CMETCs to apply to western Canadian lithium brines is have 4 words added to the definition of “Mineral Resource” in paragraph 248(1)”Mineral Resource”(d)(i) to include “, or any critical mineral …” at the end,. Once that happens, provincial CMETCs also apply and brine projects can therefore be financed through Flow-Through Shares (which is a different tax rant for another day), which finance 65%+ of all mining exploration and Canada. Effectively, we have a significant and more environmentally friendly part of the lithium demand solution available, but the Ministry of Finance has to get off its ass and add four words to the Income Tax Act!!!!!!!
So I attend the Canada-US Law Institute’s seminar on Critical Minerals in DC last week. I ask a question to the panel about why the government of Canada has not changed to Income Tax Act to activate the tax benefits for lithium brines, and then I button-holed Alex, the CBC reporter, Diane Francis from the National Post, and also Peter MacKay and every other person there I could get to listen for 2 minutes about how important these “4 words” are, trying to get something moving on this issue.
And I got quoted in the CBC on it. The quote does not do the importance of the issue justice, but it is a start. It is definitely a start. I will keep you posted because this matters. And it is entirely non-political… really, this is just a comment on Canadian tax law.