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25/06/2024
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Addressing Critical Minerals Challenges Requires a Strategic Solution

Whether motivated by clean energy technology ambitions or supply chain security, critical minerals initiatives have increasingly shown the importance of proactive, targeted support. But the current federal mining regulatory landscape does not allow sufficient adaptability to effectively implement such strategies, chiefly because existing processes do not manage critical minerals apart from other types of mining.

Therefore, a regulatory framework dedicated to critical minerals is necessary to coherently organize individual policies over the long term at scales commensurate with national progress toward a new technological age. Without regulating critical minerals differently, policymakers risk limiting themselves to piecemeal actions, like project grants and mapping campaigns.

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Alternatively, continuing to treat all hardrock mining as a single inseparable bucket may encourage ineffective and unnecessarily broad, industrywide reforms. This is no mere theoretical risk, as such sweeping approaches to regulatory improvement already show up in venues like the Department of the Interior’s Interagency Working Group report (IWG) and the recently passed Fiscal Responsibility Act of 2023.

The central problem is that while the U.S. Geological Survey (USGS) nominally designates the list of critical minerals based on supply chain and trade criteria, regulatory agencies use a different, older, parallel system that organizes all types of mineral commodities into classifications based instead on practical aspects of overseeing their stewardship and extraction.

The USGS and regulatory agencies perform different functions, so different classification strategies are not inherently problematic – the issue is rather that regulatory agencies do not have a classification for critical minerals that mirrors the USGS list. Instead, “locatable minerals” include nearly all hardrock minerals and are governed by the General Mining Law of 1872 (GML), “leasable minerals” include mainly energy minerals, like oil and gas, which fall under the Mineral Leasing Act of 1920 (MLA), and “saleable minerals” include industrial materials, like sand and gravel, organized under the Materials Act of 1947.

The commodities the USGS designates as critical minerals are almost exclusively hardrock minerals that are subject to the GML. For a long time, the uniform regulatory treatment of critical minerals like any other generic commodity in the hardrock mining sector was perhaps appropriate. However, intensifying supply chain risks and growth in new strategic technology sectors over the past decade or more make it increasingly timely to establish separate planning, permitting, and regulatory processes for critical minerals. A maximally ambitious approach could involve Congress establishing a new regulatory classification that matches the USGS list of critical minerals.

This new classification could pull critical minerals out from under the GML and MLA into its own jurisdiction, which would stand in parallel with and analogous to the existing categories of locatable, leasable, and saleable minerals. But at the very least, federal policy efforts to strengthen critical mineral supply chains must comprehensively target critical minerals as a category, as opposed to diluting resources across the whole hardrock mining sector or eternally playing catch-up with individual grants and fast-tracked projects.

In this article we outline a number of specific provisions for strengthening critical minerals strategies, but our fundamental recommendations involve a regulatory infrastructure that systematically distinguishes critical minerals management from other hardrock mining, which policymakers can amend or augment as national needs evolve. Labor and industry stakeholders throughout the advanced technology sectors likely understand the value of targeted regulatory support, which would otherwise be quickly diluted if applied to all of hardrock mining. Meanwhile, environmental advocates concerned about mining impacts must appreciate that efforts to incentivize and accelerate production of strategic minerals can take place in conjunction with continued commitments to environmental and social protection. In any case, we can no longer afford policies that crudely lump critical minerals together with the rest of hardrock mining in general.

As the mineral commodity industry has evolved over the last 150 years, U.S. policy has adapted to produce our now-familiar separate locatable, leasable, and saleable frameworks. As the country’s economic, political, security, and environmental priorities have shifted over this period, so too have the ways in which the federal government oversees domestic natural resource development. This history of the evolution of the existing classifications provides both a template and precedent for modifying these definitions further, as the nation’s needs continue to change. As the United States prioritizes future competitiveness in numerous energy, computing, and other advanced technologies and seeks to revitalize long-neglected domestic supply chains, a new chapter in mineral resource classification seems both timely and appropriate.

Proactive Agency Efforts

A principal benefit of a separate regulatory classification for critical minerals is that it would enable land management agencies to preemptively complete related work that is necessary for permitting new mine projects. Currently, agencies complete this work much later, after an operator has already applied to develop a mine. A separate classification would allow Congress and agencies to design, fund, and staff programs that target areas with critical minerals resources and proactively complete steps in the environmental review process, like baseline data collection, ecological assessments, and cultural resource inventories.

Agencies would uphold the same environmental due diligence that they do now, while upfront efforts would frontload a good portion of agency workload, reducing the time required for reviews once prospective mine operators begin navigating the permitting process. Reports note that mine operators often submit insufficient mine and remediation plans, extending the time required for regulatory agencies to process applications. Thus, another benefit of preemptive work is that any early data collected on the particular environmental setting of the proposed mine would already be available to operators, considered when devising plans, and incorporated into the submitted application materials.

The efficiency gains from such preemptive work could increase further if policymakers seized other opportunities to alleviate mine-permitting obstacles, like addressing legacy inconsistencies between Bureau of Land Management (BLM) and Forest Service regulations, or enabling more administrative procedures like minor modifications of mine plans to be covered by categorical exclusions, which existing regulations allow for leasable operations, but not locatable projects.

At a high level, agency reorganization around a separate classification for critical minerals could offer some benefits. The BLM, for example, is arranged into different program offices, including one dedicated to administering the GML. Policymakers could theoretically assign staff and resources to a separate program office for critical minerals projects much more systematically than would be currently feasible with ad hoc, internal agency prioritization within the much broader GML office’s hardrock mining portfolio. As things stand, efforts to bolster staff and resources as exemplified by provisions in the Inflation Reduction Act and recommendations in the IWG report may be diluted across the whole mining sector and non-mining activities that are not the intended targets of policies to support critical minerals.

Would such an organizational change leave the remaining hardrock mining program underfunded? This is not likely to be a concern. The GML program office is funded through administrative fees imposed on mine operators and is granted authority to recover those fees up to its allotted budget. So the remaining GML program office would be left with funding sources proportional to its smaller portfolio. Administrative fees are minimal, ranging up to $165 a year, but are often sufficient to fund the program while also providing a surplus to the general fund. Policymakers could in turn tailor the funding structure for a separate critical minerals program office according to national priorities. For instance, the office could charge fees to support a larger permitting workforce with increased capacity, or even outright waive fees while relying on separate federal funding should policymakers decide to prioritize attracting new mining activities.

For proactive efforts to be effective, work must prioritize feasibly small areas within land management agencies’ large jurisdictions. A barrier to this under the existing GML framework is that mine operators first choose the locations to be developed, with agencies then conducting the review process based on those selections. New regulations could allow agencies to predefine administrative parcels to focus efforts on feasibly precise areas with good potential for critical mineral development, working in tandem with USGS mapping campaigns. Coal mining management uses a similar concept known as a logical mining unit. Similar to IWG recommendations with respect to proposed leases, predefined parcels could be incorporated into programmatic environmental reviews that subsequent reviews could leverage.

Some might ask whether it would be simpler to fast-track permitting for critical minerals projects on a case-by-case basis, perhaps using the FAST-41 program, which is similarly designed to streamline permitting for critical national projects. Certainly, the FAST-41 pathway serves as an excellent example of the value of targeting specific key sectors and projects. The FAST-41 program’s recent decision to reduce the scope of FAST-41 eligible projects from all mining projects to just critical minerals mining projects is a highly appropriate application of this principle.

All of that said, FAST-41 can speed mineral development projects only to a limited degree, because the program becomes relevant only after a mine operator applies to pursue an individual mine and initiates the procedures outlined by the National Environmental Policy Act. FAST-41’s innovations – including additional agency funding available to complete environmental reviews and more direct involvement of higher level regulatory officials to improve agency responsiveness, facilitate dispute resolution, and enhance interagency coordination – all work admirably to streamline National Environmental Policy Act reviews. However, FAST-41 remains a fundamentally reactive process as opposed to a proactive approach to review, and must balance permitting priorities across a diverse range of project types instead of focusing on critical minerals in earnest. Nor is there any reason why the FAST-41 program couldn’t work fully in tandem with a separate critical minerals classification incorporating the innovative policies outlined above.

Orderly Compromise

Some public constituencies fear erosion of environmental standards in the name of a mad rush to secure mineral supplies for the clean energy transition. Many stakeholders also seek to condition policy support for the critical minerals industry upon parallel implementation of long-awaited mining policy reforms. Given such tensions, a separate classification for critical minerals also creates more opportunities for orderly compromise by allowing policymakers to implement common-sense fixes to gaps in existing mining regulations while continuing to strategically prioritize new critical mineral development.

One example involves longstanding calls by some policymakers and environmental advocates to require hardrock mining operations that occur on public lands to pay royalties – fees per unit of mined ore that the GML does not currently require. Sweeping amendments to the GML would apply royalties to all hardrock mining operations, critical minerals, and non-critical minerals.

There is a strong case that mining projects on public lands ought to contribute in return to public funds but policies to date have neglected to address this. On the other hand, national strategy calls for redoubled public-sector investment into developing domestic critical minerals supply chains, and it would make little sense to provide financial support to critical minerals mine projects only to immediately reclaim those public funds in the form of royalties.

At a time when many operations are already marginal and susceptible to market-driven closures, imposing royalties on the critical minerals sector would likely prove counterproductive. If policymakers deem potential royalty-funded initiatives, like abandoned mine land reclamation, sufficiently important to warrant imposing royalties on hardrock mining, such initiatives could likely be supported through royalties on non-critical minerals operations alone, which produce the lion’s share of hardrock mining revenue. In this hypothetical case, a separate statutory classification would allow policymakers to design a royalty schedule without a long list of exemptions for critical minerals, thereby maximizing the viability of critical minerals projects while maintaining a high societal rate of return to the public from, say, GML-administered gold mining.

Another contentious issue at the heart of tensions between resource development and environmental priorities involves the federal government’s ability to ban mining on portions of federal land. Congress, the president, and regulators possess the authority to withdraw areas from future development by mine operators.

In principle, this represents a useful tool for formalizing public sentiment in favor of conserving certain lands and protecting them against disruption from mining. In practice, many have accused federal administrations of using mineral estate withdrawals to score short-term political points. Ultimately, while the United States can arguably forgo some production of non-critical minerals in the name of protecting federal lands with high conservation value, regulatory policy should require a higher bar for critical mineral deposits that still allows for federal mineral estate withdrawals, but compels the public and policymakers alike to take a harder look at tradeoffs before proceeding.

Distinguishing critical and non-critical mineral withdrawal procedures is a particularly important factor when considering recent mining law reform proposals to transition the GML out of a claim system. Such proposals seek to address a phenomenon in which mine operators can hold mining claims under the GML indefinitely – even in areas where federal mineral estate withdrawals have banned new mining claims – because withdrawals must continue to respect valid existing rights, including those imparted by the GML. As such, withdrawals like the recent mining moratorium declared around the Grand Canyon remain subject to legacy claims scattered throughout the area that could in theory still proceed with mining operations.

In response, policymakers have proposed to transition the GML to a lease system for future projects, creating the opportunity to specify terms, like finite lease periods, a limited number of renewals, or requirements to commence production before a certain deadline. These types of provisions add exit clauses allowing agencies to prevent parcels of land from languishing indefinitely under operator possessory rights. However, lapses of lease periods or varying legal interpretations of lease terms introduce the risk that the federal government can move to withdraw lands from the federal mineral estate even when a leaseholder is still actively seeking to develop a project.

The recent revocation of the Twin Metals Minnesota nickel and copper project lease, whose standing changed in a ping-pong fashion across multiple administrations, vividly illustrates the potential shortcomings of a more widespread lease system. More stringent requirements for mineral estate withdrawals containing critical mineral deposits could help ensure withdrawals are carefully deliberated and do not sacrifice national interests in the name of short-term, political motivations.

A separate regulatory classification for critical mineral commodities could also articulate more stringent policies to ensure that products from U.S. critical mineral mining materially benefit the United States and allied downstream consumers. For instance, the regulatory process for new critical minerals projects could stipulate requirements that producers form supply contracts with customers that process ore or manufacture finished products in the United States and partner nations.

A separate framework need not apply to non-critical hardrock mining operations that are not receiving critical mineral-related support and therefore need not justify where and to whom they sell their production. A separate regulatory jurisdiction would also allow agencies to require more regular disclosure and reporting of essential mine production data for critical minerals operations, which is currently not required for hardrock minerals under the GML (CRS, 2020). Such policies can help ensure that public-sector support meant to incubate and incentivize U.S. critical minerals development genuinely benefits national interests and the American public, maximizing return on public policy efforts.

Conclusion

In summary, a separate statutory classification and regulatory framework for critical minerals could confer numerous benefits, enabling more efficient proactive review of new mining areas without altering existing strong environmental standards, facilitating direct allocation of funding and staff toward critical mineral project permitting efforts, and allowing policymakers to design policies and regulatory changes that appropriately affect critical and non-critical mineral projects differently.

Certainly, lawmakers and agencies could apply any of the policy innovations we have articulated above broadly to the existing hardrock mining regulatory framework under the GML without a separate critical minerals classification, instead stipulating various exceptions for critical and non-critical minerals operations. However, policymakers should consider the long-term clarity of U.S. mineral resource policy and consider at what point an increasingly long list of exceptions-related clauses may become more cumbersome than a new categorical distinction. In the continued absence of clear regulatory categories, every additional provision risks accumulating complications, inconsistencies, and misapplications amid political friction and ever-shifting partisan control over the national government. In contrast, a new framework will enable clearer ongoing assessment of critical mineral and other hardrock mining policies as new considerations emerge.

At the same time, a separate critical minerals classification incorporating the above-mentioned policy ideas is just part of the array of solutions for promoting more effective and efficient domestic critical minerals resource development. From regulations that restrict imports of unethical and environmentally polluting commodities that would otherwise out-compete more responsible production in the United States and partner countries, to public support for innovative new mining and extraction technologies that could revolutionize how we produce strategic commodities, the public policy toolbox offers many broader opportunities for improvements both across and beyond the realm of mine-permitting frameworks.

But as long as public-sector efforts continue to target critical minerals project by project and resource by resource in an ad hoc fashion and on a temporary basis, policymakers will remain limited to piecemeal and imprecise solutions that may not address the full scale of critical minerals supply challenges. In reality, the USGS list of critical minerals exists because we recognize that these commodities have national strategic importance. Their number and breadth demand a more systematic approach to policy optimization, funding and staff allocation, and industrial policy.

 

Source: The Breakthrough Institute

 

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