The U.S. government offered Canada-based Lithium Americas a financial lifeline Thursday to develop a Nevada lithium deposit that contains the largest-proven lithium reserves in North America.

Citing a need to secure a domestic supply of lithium for electric car batteries, the Biden administration agreed to provide a $2.26 billion conditional loan for the construction of a lithium carbonate processing plant at Thacker Pass in Humboldt County, Nevada. It’s the largest federal investment in a lithium mine to date.

The conditional loan from the U.S. Department of Energy will provide the vast majority of the capital needed to fund the first phase of development, Lithium Americas said in a statement Thursday. Under federal law, the funds provided by the DOE can’t be used for the excavation of an open-pit mine, but can be used for lithium processing facilities.

Lawsuits and delays have plagued the construction of the planned lithium mine in Nevada for years. Lithium Americas had initially planned to begin lithium production at Thacker Pass by 2026, but several permitting issues and litigation by Nevada tribes and conservation groups helped delay the project. Lithium production at Thacker Pass is now expected to run at full capacity in 2028.

Construction costs for the planned lithium mine have also increased since the company’s initial estimate. The company cites higher engineering costs, an agreement to use union labor, and housing construction for workers and their families in the remote region for revising the estimated cost by more than $660 million, from $2.27 billion to nearly $2.93 billion.

Lithium Americas hopes to extract lithium from clay at Thacker Pass, something never done before at commercial scale. The novel technique may also repel more risk averse investors. 

Despite the delays and higher costs, the massive DOE loan could help attract additional investors for later phases. 

As per the agreement, the $2.26 billion DOE loan won’t close until Lithium Americas secures full financing for the project. In a statement on Thursday, Lithium Americas said they expect to meet the conditions of the loan by the second half of 2024.

General Motors already pledged $650 million for the project, on the condition that Lithium Americas can secure sufficient capital to fund the development expenditures for Thacker Pass.

Jonathan Evans, President and CEO of Lithium Americas, said the federal loan is “a significant milestone for Thacker Pass, which will help meet the growing domestic need for lithium chemicals and strengthen our nation’s security.”

“The United States has an incredible opportunity to lead the next chapter of global electrification in a way that both strengthens our battery supply chains and ensures that the economic benefits are directed toward American workers, companies and communities,” Evans said.

Construction at the site — just south of the Nevada-Oregon border — started March 2023, after a federal judge cleared most legal challenges to the mine. Lithium Americas said it plans to start major construction on the mine as soon as the federal loan closes and final environmental reviews are completed, a process that will take three years.

If finalized, the mine is expected to produce enough lithium carbonate to support the production of batteries for up to 800,000 electric vehicles annually — the equivalent of 317 million gallons of gasoline consumption per year, according to the DOE.

The project has the support of some – but not all – tribes in the region. Larina Bell, the acting chairwoman of the Fort McDermitt Paiute Shoshone Tribe, said she believes Lithium Americas has acknowledged the tribe’s interests and will mitigate potential impacts to natural resources.

“Thacker Pass will provide important economic and employment opportunities for members of our Tribe,” Bell said in a statement. “Through our meetings with Lithium Americas, we have recognized their goal of securing a domestic supply of the lithium mineral, a key component of batteries that are essential in the transition to renewable energy and to build sustainable resiliency against climate change.”

According to the DOE, the project is expected to create 1,800 jobs during the construction period, and 360 jobs in operations to produce up to 40,000 metric tonnes of battery-grade lithium carbonate per year for use in lithium-ion batteries.

John Hadder of Great Basin Resource Watch, a conservation group that lost its efforts to block the project in court, argued the federal government shouldn’t use “taxpayer dollars bailing out a bad mine project that is not competent to attract investors.”

“It seems clear that without a government handout the company is unable to attract sufficient investors. There could be a number of reasons including the fact that this company is new at this business and the permitting process for Thacker Pass was very poorly done, which casts a shadow over the project,” Hadder said.