Chile okays lithium miner SQM's plan to remedy water violations

SANTIAGO (Reuters) - Chile’s environmental regulator on Monday approved a $25 million compliance plan by SQM, ending a multi-year investigation by authorities that found the Chilean miner had overdrawn lithium-rich brine from the Atacama salt flat.

FILE PHOTO: An aerial view shows the brine pools of SQM lithium mine on the Atacama salt flat in the Atacama desert of northern Chile, January 10, 2013. REUTERS/Ivan Alvarado

The plan requires the world’s number two producer of lithium to reduce its extraction of brine.

The decision is unlikely to have a major impact on SQM’s total output of the ultralight battery metal, as the reduction represents a relatively small percentage of the total authorized to SQM by regulators.

The case has, however, fanned tensions in the arid region of northern Chile, as soaring demand for lithium has forced producers like SQM SQM_pb.SN to compete for scarce water with sprawling copper mines, a booming tourism industry and indigenous communities.

Atacama’s salt flat sits in the world’s driest desert and supplies more than one-third of the global supply of lithium, a key ingredient in the batteries that power electric vehicles.

The regulator-approved plan includes a new online system to monitor SQM’s extraction rates of brine, which holds lithium in suspension, as well as its use of fresh water used in industrial processes.

“The compliance plan presented by SQM prioritizes the protection of the environment over production, and proposes a reduction in the extraction of brine that exceeds the amount over-drawn [by SQM],” said the SMA regulator in a statement.

The company has also agreed to shut down one of its freshwater wells in an area where authorities said native algarrobo trees and desert vegetation were dying from lack of water.

A spokeswoman for SQM said the company had expected a favorable outcome in the case, adding it was still reviewing the near 100-page resolution.

The Atacama region is the most cost-efficient place in the world to mine the battery metal, and SQM and rival Albemarle have each staked much of their future production on the salt flat.

The initial charges against SQM, filed by the SMA in 2016, exposed concern by both lithium miners and several government agencies over just how much brine is left beneath the flat, and how long it will last.

Chilean regulators last year said they were preparing major new restrictions on the extraction of water from the salt flat to stem an impending water crisis.

Reporting by Dave Sherwood, additional reporting by Fabian Cambero, Editing by Marguerita Choy and Rosalba O’Brien