By Ernest Scheyder and Stephanie Kelly
HOUSTON (Reuters) -U.S. Senator Joe Manchin said on Friday he is "totally opposed" to allowing Chinese battery maker CATL to access U.S. tax dollars that finance electric vehicle purchases as part of its partnership with Ford Motor (NYSE:F) Co.
The blunt statements from Manchin, who wrote the Inflation Reduction Act (IRA) in a bid to develop a domestic EV battery industry, come amid rising tension over how the landmark legislation is implemented and who can benefit.
In response to Manchin's comments, Ford defended the CATL deal and said it will own the U.S. facility making the battery and no one else will get U.S. tax dollars. "Making these batteries here at home is much better than continuing to rely exclusively on foreign imports, like other auto companies do," said a company spokesperson.
Ford's shares were off 2.5% in afternoon trading.
Under the IRA, consumers can receive $7,500 in tax credits for purchasing an EV, although the new law also allows the rebate to be kept by the company involved if the vehicle is leased. A 12% royalty that is included in the Ford-CATL partnership would send $900 of the $7,500 tax credit to CATL, Manchin told the CERAWeek energy conference in Houston.
"I'll be damned if I'm going to give them $900 out of $7,500, to let it go to China for basically a product we started," said Manchin, a West Virginia Democrat who chairs the Senate Energy and Natural Resources Committee.
CATL's advanced and low-cost batteries could be reverse-engineered, Manchin said, arguing the technology may have originated in the United States. Manchin added he has talked extensively with Ford executives as well as Jon Huntsman (NYSE:HUN), a member of Ford's board of directors and former U.S. ambassador to China, about the CATL deal.
"You're telling me we don't have the smart people and the technology, and we can't get up to speed quick enough? That doesn't make sense," said Manchin, who did not specify what steps he might take to block CATL from accessing funds.
It was the first time that Manchin raised an objection to the Ford-CATL licensing agreement.
Ford's agreement with CATL is part of the U.S. automaker's stated intent to boost annual EV production to 600,000 vehicles by late 2023 and more than 2 million by the end of 2026.
U.S. Senator Marco Rubio, a Florida Republican, introduced legislation on Thursday that would block tax credits for EV batteries produced using Chinese technology. Rubio has also called for the Biden administration to review the Ford-CATL agreement.
OIL AND MINERALS
Manchin and Senator Lisa Murkowski, Republican of Alaska, told the CERAWeek conference that U.S. permitting reform is needed to achieve the goals of the IRA and other recent legislation.
The Biden administration should greenlight a ConocoPhillips (NYSE:COP) oil project in northern Alaska, Murkowski said, adding the project was needed for U.S. energy security.
A decision is "imminent," and could come at any hour, she said at the conference.
If the administration rejects the development or does not make it economically viable for ConocoPhillips to go through with the project, "legislation is always something we have to reckon with," Murkowski told reporters.
Both senators said that while Africa and other parts of the globe may want to deepen trade ties with the United States to take advantage of the IRA, the legislation's true aim is boosting American mining and EV supply chains.
"There are extraordinary mineral opportunities in many places around the globe," said Murkowski. "But we are not focusing what we have here at home and what we're doing to help facilitate that first. That's part of my beef."
Murkowski derided the U.S. Department of Energy's decision last summer to lend $102.1 million to Syrah Resources Ltd for a graphite processing plant in Louisiana that will source the metal from Mozambique.
"Tell me why we're so eager to help facilitate that and why we're not willing to kind of step it up and say, 'Well, what do we have here at home?'"
ENERGY SECURITY
After Iran and Saudi Arabia agreed on Friday to re-establish relations after seven years of hostility, Murkowski warned about a realignment of global energy alliances following Russia's invasion of Ukraine last year. The invasion prompted U.S. and other governments to impose sanctions on Russian oil.
"When you see alliances come together over energy that cause us concern, we need to wake up here in this country," Murkowski said.
Manchin addressed President Joe Biden's budget proposal this week that would scrap billions of dollars in oil and gas industry subsidies, saying a conversation is needed around what happens if the price of oil and gas falls and makes it uneconomical for companies to produce energy.
Manchin earlier on Friday said he would not support the nomination of Laura Daniel-Davis as assistant secretary of the Department of Interior, saying she supported higher royalty rates for Alaskan oil production.