Stalled plans to turn a remote corner of California into a critical minerals and clean energy mecca have been dealt another setback.
A state appeals court ruled this week that Imperial County’s approval of the Hell’s Kitchen lithium and geothermal energy project failed to show it has enough water supply from the dwindling Colorado River to sustain its operation, or to address the potential air quality impacts of diverting more water from the polluted Salton Sea, which has been shrinking for years.
If the decision stands, it would clash with California and federal policies to amp up critical minerals production, potentially sparking intervention by state policymakers to try and obtain an adequate water supply, one expert said.
“Given the fact that California as a state has a vested interest in developing the mineral supply chain … and there’s these local challenges, I do think that this is going to come to a head,” said Beia Spiller, an energy economist with Resources for the Future, an environmental and economics research organization. “The only clear solution here is that the state is maybe going to try to step in.”
The ruling came the same day that county supervisors — desperate to kickstart lithium production — voted to potentially refund developers hundreds of millions of dollars in future tax revenue for projects that are successfully built. The concessions are another sign of the fraught efforts to make “Lithium Valley” a reality.
California has invested aggressively in critical minerals and supply chain production, especially in the Imperial Valley. The rural county is a study in contrasts, dominated by a wealthy water district and a few hundred large growers, while many of its 180,000 largely Latino residents work in low wage jobs, particularly in its north end, where state and county officials want to unleash an industrial boom.
About 200 miles southeast of Los Angeles along the Mexico border, Imperial County has one of the state’s highest unemployment rates but also sits atop one of the world’s major deposits of lithium and other critical minerals, enough to power over 375 million electric vehicle batteries. Boiling brine containing the minerals can also be used to create relatively clean geothermal steam power, and Controlled Thermal Resources is now marketing that energy from its Hell’s Kitchen project for data centers.
But seesawing lithium prices, unproven extraction technologies, and site specific challenges like the availability of land have delayed projects globally, experts like Spiller say. In northern Imperial County, that includes flushing the minerals out of the gritty liquid buried a mile underground. That requires Colorado River water, in a blisteringly hot, arid region with huge demands for that supply.
The environmental health group Comité Civico del Valle and environment advocates Earthworks filed suit in 2024, claiming the county and Controlled Thermal Resources did inadequate reviews of the Hell’s Kitchen project near the Salton Sea. A Superior Court judge ruled against the groups.
But the California Fourth District Court of Appeal reversed parts of that decision this week, finding that the county’s environmental impact report does not contain “insufficient evidence” that the project could secure enough water from the Imperial Irrigation District for the lithium project’s expected lifespan. The panel found that Controlled Thermal Resources repeatedly offered conflicting lifespans for the facility, and didn’t show it has enough water for 50 years. The ruling also noted that the Imperial Irrigation District said that the project’s water supply assessment was “incomplete and contains inaccurate data.”
The three-judge opinion also chastised the county for not adequately addressing possible future mandatory Colorado River cuts, and said the plaintiffs’ “concerns about the impact of the Project’s water use on air quality” had merit.
The opinion noted that “Water from the Colorado River is the sole source of fresh water for the County of Imperial … and in particular, for agriculture in the Imperial Valley. That water supply is not unlimited.”
The decision partially vacated the lower court’s decision, and said it should be rewritten to include mandates necessary to achieve compliance with the California Environmental Quality Act that address the appeals court findings, including demonstrating that enough water is available for Hell’s Kitchen to operate. The decision could potentially be appealed to California’s Supreme Court. The groups who won the appeal said they are not opposed to responsible projects.
“We urge lithium developers in California to avoid additional delays by following the law and respecting public health, water and air quality,” said Jared Naimark, Western mining senior manager at Earthworks.
“This decision is not against lithium development,” said Luis Olmedo, Comité Civico del Valle’s executive director. “Imperial Valley can lead the clean energy transition, while also protecting our water resources, public health and communities. Projects of this scale must be supported by credible evidence, not assumptions.”
Lauren Rose, spokesperson for Controlled Thermal Resources, said in a text message that the company had no immediate response to the ruling.
County officials said that they are consulting with their attorneys to evaluate possible next steps. The county said in a statement online that it “remains committed to supporting responsible lithium and geothermal development.”
California has already given more than $400 million to Imperial County to develop lithium and train the necessary local workforce. Developers there can also take advantage of up to $1 billion in statewide green energy incentives. County supervisors on Tuesday voted 3-2 to add to that, by refunding as much as half of its sales tax and lithium production tax revenues to any developer that actually gets a lithium project built.
“We’re really looking to improve our competitiveness,” said Bari Bean, the county deputy CEO for natural resources, said at the Board of Supervisors meeting. “What’s happening right now across the country and around the world is that projects are looking at other locations and the incentives they offer. From Tennessee to Arkansas to Nevada.”
The new incentive program would only reimburse completed projects part of their expenses, Bean noted.
The paybacks would be hefty — up to $105 million for a project that completes early deadlines. But Bean said if a developer paid about $700 million in construction and lithium production taxes, the county would still take in nearly $600 million.
“The goal is to actually build projects and bring the jobs and the revenue and the benefits and the infrastructure to our community,” said Bean.
Several residents and community advocates assailed the new incentive proposal at the meeting.
Anahí Araiza, an organizer with Imperial Valley Equity & Justice, said, “Adoption of this program is hypocritical and a continued effort to sell off our community to the highest bidder.”
She said, “The governor has proposed as much as $400 million in additional state funding, and up to a billion dollars more in green energy tax credits. This is not an industry starving for capital. It is one that is most heavily subsidized in this state.”
Araiza added, “We still don’t have commercial lithium production in this county … It is asking us once again to sacrifice our community further with no concrete investment.”
But construction union representatives, an economic development official and a Brawley farmer testified at the meeting in support of the incentives program, saying it could bring badly needed jobs and new taxes to the county. Imperial County had a 17.6% unemployment rate in June, compared to 5.2% statewide.
“We need to develop these projects. We need to bring private investment, construction, commercial production, jobs, jobs, jobs,” said Peggy Price, chair of the Board of Supervisors, who then voted yes for the new incentives.
