The Energy Transition Is Sending Mineral Demand Soaring. Will the U.S. Rise to the Occasion to Meet it?

The Energy Transition Is Sending Mineral Demand Soaring. Will the U.S. Rise to the Occasion to Meet it?
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The following is a Q&A between RealClearEnergy and Rich Nolan, president and CEO of the National Mining Association.

RCE: Hardrock mining and critical minerals have received a tremendous amount of attention for their importance to the green energy and electric vehicle (EV) supply chains. Yet, there’s a new proposal included in the reconciliation package that would impose significant new royalties and fees on domestic mining. How would those proposals impact domestic production?

Rich Nolan: That’s exactly the heart of the matter – if enacted, these proposals take the U.S. out of the game when it comes to the global race for critical minerals. New royalties and fees – an 8% gross royalty on new production, 4% on existing operations and a new dirt tax on every piece of dirt moved – will crush the competitiveness of the industry when we know we need responsible, domestic production for everything from the energy transition to the EV revolution. The hardrock mining industry is already paying between 40% to 50% of earnings in federal, state and local royalties, taxes, and other fees. This punitive, partisan proposal – coming in reconciliation where there will be no opportunity for the thoughtful debate this agenda deserves – is just the opposite of what we need to reshore production and build secure supply chains.

RCE: Is there room for compromise or willingness for compromise on royalties?

Rich Nolan: From the industry’s perspective, absolutely. The mining industry has publicly committed to working in a bipartisan way towards finding a compromise on royalties that keeps the industry competitive. But an 8% gross royalty would be one the highest in the world – a non-starter. And that’s just one piece of this. The inevitable consequence will be an increasing mineral import reliance – likely on China, other geopolitical rivals or other parts of the world – fewer American jobs, and a far weaker, less secure industrial base. Nothing could be further from President Biden’s “Build Back Better” agenda.

RCE: You bring up President Biden. Thinking of his agenda, it’s easy to think of EVs and his ambition to win the EV race. If this proposal becomes law, how will that agenda be impacted?

Rich Nolan: U.S. mineral import reliance has doubled in just the past two decades and that has come before the surge in mineral demand we know is coming from the energy transition and, particularly, from EV deployment. The International Energy Agency is projecting lithium demand growing 40-fold by 2040, followed by soaring demand for graphite, cobalt and nickel. Copper demand is going to double. There’s no getting to where we want to go without embracing the need and opportunity for increased domestic mining. President Biden’s recent EV executive order warned that China is cornering the global market on battery and EV production and using control of material supply chains to do it.

Included in the Bipartisan Infrastructure bill are steps to improve mine permitting, to better leverage the Department of Energy’s loan guarantee program to encourage mineral production. That’s the right path. We have to be working to support the competitiveness of U.S. mining, not undercut it.

RCE: What do you say to the assertion that the U.S. can meet its mineral needs from allies or through ramping up mineral and material recycling?

Rich Nolan: This is not an either-or situation, it’s all. Yes, we should work with our allies. And, yes, we should ramp up recycling to help meet demand. Both those actions alone won’t scratch the surface in meeting anticipated mineral needs. We have to be clear-eyed about the scale of the demand on the horizon and that we cannot meet it without a concerted effort to ramp up domestic production. Our allies are already implementing strategies to boost the competitiveness of their mining industries. The urgency and focus to align U.S. mining policy with our energy and climate policies is missing; we have to change that and do it very quickly. 

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