In a rare bipartisan critique of the Biden administration’s signature law, the Inflation Reduction Act (IRA), Senators Joe Manchin (D-WV) and John Barrasso (R-WY) raised the alarm that the U.S. was far behind in certain key segments highlighted in that law that are linked to the EV supply chain. At the heart of the matter was the mined mineral resources used to make EV batteries. Last week, Senators on the Senate Committee on Energy and Natural Resources lambasted the IRA in a hearing, all in agreement that American mining and permitting policies were a problem for building a local supply chain. Doubts have been sown on the U.S. being in charge of its green tech future.
Machin went so far as to say that the U.S. government was essentially “bribing” people and companies to go EV. And that the entire power system of those cars are nearly fully dependent on Asian multinationals, led by China.
A Fiery Opening from Manchin, Barrasso
Here are some excerpts from Manchin and Barasso’s highly critical opening remarks. [See Manchin’s opening remarks here.]
“I fully support realistic and responsible approaches to reducing emissions in the transportation sector, and EVs are an important part of that equation. But so long as China and other countries control the supply of critical minerals required for EVs, I will strongly oppose moving too quickly towards an EV-dominated future.” – Sen. Joe Manchin, Senate Energy and Natural Resources Committee hearing titled “Examining the Opportunities to Counter China’s Control of Critical Mineral Supply Chains,” Sept. 28, 2023.
When it comes to EV battery supply chain, depending on the mineral, China companies around the world mine and process anywhere from 60 percent to 100 percent of all the minerals needed for batteries and electric motors. Of the top 10 battery manufacturers, six are Chinese. Only Japan and South Korea have companies in the top 10. The U.S. and Europe have none.
China is responsible for 74 percent of the world’s cathode production, 92 percent of anode production, and 76 percent of lithium-ion battery cell production. “They simply have cornered the market.” Manchin said in his opening remarks.
“It is frustrating that the administration continues to try to water down the sourcing requirements for EV batteries clearly stated in the IRA. Through guidance the administration is attempting to cut the critical mineral sourcing percentage requirements in half…and proposing fake free trade agreements that circumvent the law,” Manchin said. “The administration still has not published the foreign entity of concern guidance required in the IRA to prevent bad actors from receiving taxpayer dollars.”
The critical mineral sourcing requirements outlined in the IRA have gone from around 40% domestically sourced to 20% and is not expected to surpass 35% by 2035, which is down by more than half, Manchin said in his opening remarks. He blamed Treasury for the cuts, and said that would make it harder to ramp up battery mineral supply chains domestically.
“The administration appears to care more about getting EVs on the road than our energy security and competition with China. I’m incredibly frustrated that the bipartisan demand for urgency seems to be going unheard,” Manchin said.
Benchmark Mineral Intelligence estimates that at least 336 new mines are needed for graphite, lithium, nickel, and cobalt to meet EV demands prior to 2035. However, an insufficient number of new mines are currently in development to meet that demand, while those projects that are under development face long timeframes and considerable risk attributed to lawsuits and the permitting process.
“If we don’t address our dependence problem and look for innovative ways to onshore the critical mineral supply chain, it will compromise our energy security and handicap us in the global marketplace,” Manchin said.
Committee Ranking Member Barrasso was just as adamant, sharing the same concerns with Chairman Manchin.
“A Biden administration official went so far as to call our mineral dependence a clear and present danger, and he met with the members of this committee just last week as we sat around to discuss the concerns that we share. That’s one of the few statements from this administration that I agree with because the projected mineral demand is increasing in an amount that is well known to all of us, and it doesn’t seem to be understood by the administration.” – Senator Joe Barrasso, Senate Energy Committee hearing, Sept. 28
Barrasso singled out copper in his opener. The world demand for copper is expected to increase by 300 percent by 2040 due to the electrification of the auto fleets happening in the U.S., Europe and China primarily.
Nickel demand is expected to increase by 1,900 percent, graphite demand is expected to increase by 2,500 percent, and lithium – arguably the main element in a car battery – is seen rising by an astronomical 4,200 percent. Much of this demand has been generated from the IRA. While the U.S. has a solid supply of lithium (in the ground at least), and while batter chemical mixtures are changing to require less nickel or cobalt, at the present time the U.S. is majority dependent on those minerals from foreign sources.
“America’s dependence on foreign minerals is not only shameful and reckless, it is unnecessary. We have more of the resources that we need right here at home, including copper, including lithium, nickel, graphite, cobalt. The Biden administration’s bone-headed policies make it clearly impossible to access them,” he said. “Our nation’s lithium reserves are estimated to be more than three times larger than China’s. Yet China’s lithium production is 27 times larger than ours. Australia has less than half of our reserves, but it produces 88 times more lithium than we do. This is ridiculous and unacceptable.”
From the Three Witnesses
Of the three witnesses on Sept. 28, Tommy Beaudreau, Deputy Secretary from the U.S. Department of the Interior [Testimony] was on the receiving end of all of the Committee’s frustrations. He was the only government official to testify.
Beaudreau spoke about a working group final report last month which included more than 60 specific recommendations to improve and accelerate the way the U.S. does site permits for new mines, oversees existing mines, and reclaims mines on federal lands. The report is the product of President Biden’s Executive Order 14017 regarding America’s supply chains and the bipartisan Infrastructure Law.
“The reasons for the president’s and Congress’ focus on mining reform are clear: we need reliable, and responsible sources for critical minerals as they are essential to the clean energy and technology revolutions that are shaping our future for the better,” Beaudreau said.
The biggest takeaway from that report is that the 150-year-old mining law signed by President Ulysses S. Grant (yes, that long ago) for accessing minerals on public lands needs to be rewritten to meet modern needs.
“I’m not saying we need to rewrite the American mineral laws every century, but maybe every other century we should take a hard look at whether these laws are providing the tools we need to meet today’s national security and economic imperatives for critical minerals. The 1872 Mining Law clearly does not do that,” he said in the only comment of the hearing that could be deemed light and comical.
Daniel Yergin, Vice Chairman of S&P Global, a business intelligence firm, spoke about copper. He called out a California regulation to pull gasoline-powered cars off the road by 2035. He doubts they’ll achieve it. Metal prices are going to go bonkers. [Testimony]
“The (California) regulations said that they’re going to go EV, and EVs use two and a half times more copper than a traditional car. You say the same thing about wind turbines. We’ve tried to examine what these mineral requirements will mean for copper and what the Inflation Reduction Act’s impact will be on minerals. This energy transition is all new consumption to feed EVs, on and offshore wind installations, solar panels, charging stations, and battery storage. It is different from traditional demand, which is, for instance, the electric wiring in your houses. We see copper demand in order to meet the various goals out there having to double by 2035 and other mineral demands growing by 23 times for the United States. And securing these minerals to meet demand will be challenging for all the reasons — capacity, trade patterns, sourcing requirements, geopolitical tensions, and the long and complicated lead times for permitting and judicial reviews for developing new mines. Since the IRA has passed, we went back and looked at our numbers again and we now think that the demand for the four minerals that we’re talking about will each increase on top of that big increase by another 12 percent to 15 percent to meet the demands that are laid out by the IRA.” – Daniel Yergin, S&P Global
Two countries produce 40 percent of the world’s copper. One of them is Peru, which has had seven presidents in the last few years. The other is Chile, which just nationalized its lithium resources, which are considered the largest in the hemisphere and maybe the world. They can do the same for copper, avoiding the risk of foreign companies buying them out and shipping those resources abroad.
“It’s very clear from everything that’s going on that the policy efforts to stoke this energy transition, that demand for minerals will be affected. Greater attention needs to be paid to securing enough supply to undergird this demand,” Yergin said.
Mark Compton, Executive Director of the American Exploration & Mining Association, told the Committee that the lack of access to mineral-rich federal lands and a lengthy inefficient federal permitting system “have resulted in our unsustainable dependence on foreign countries for nearly 50 minerals and has empowered our adversaries to weaponize minerals against us.” [Testimony]
Not just to weaponize, but also to protect, as Chile would not be charged with weaponizing lithium against foreign buyers in putting its supply fully into government hands. China, on the other hand, has done this before. They did it with Japan in 2010. This summer, they put the brakes on exports of gallium and germanium, two minerals used to make semiconductors. China has an 80% chokehold on the gallium market, and runs 60% of the germanium supply worldwide. The ban on exports went into effect in August, pulling them out of the market completely as China seeks to build its own domestic semiconductor industry in light of export restrictions from the West.
“These supply chain concerns have led to bipartisan acknowledgment of the need for more domestic mineral production. Although we may need to obtain some minerals from our allies, we must responsibly utilize our own resources whenever possible,” Compton said, adding that his group has worked closely with the Biden administration’s Interagency Working Group (IWG) on Mining Regulations, Laws, and Permitting for his entire presidency.
Unfortunately, the recommendations in the IWG report related to a reformed mining law will make exploration and mine development even harder because they propose eliminating security of land tenure and they burden future mines with the confiscatory royalty, Compton said.
“Given the skyrocketing demand for minerals, now is an especially bad time to implement such proposals. In a broader context, the IWG report, along with other administrative actions, will ultimately place more federal lands off limits to mining and increase our dependency on China and other countries for minerals.” – Mark Compton, Executive Director of the American Exploration & Mining Association
The rest of the two-and-a-half-hour session was often a verbal fist-fight, or Senators asking Beaudreau to explain why certain items, like copper, are not considered critical, and why permitting for a new Alaskan mine owned by Ambler Metals is taking so long.
Q&A Quick Glance
Senator Lisa Murkowski (R-AK) asked why the Ambler Metals mine wasn’t approved yet. It was supposed to be approved this year. Beadureau said it won’t happen until sometime in the second quarter of 2024.
Manchin: I remember the 1974 oil embargo. I remember waiting in line to get gas. I remember all that. I don’t want to be waiting in line if my battery dies, and waiting for a new battery or buy a new car. EVs are wonderful. You buy what you want. But we’re incentivizing people, almost bribing them to buy EVs and putting many in a very perilous situation.
Yergin: Normally, energy transitions take about 100 years, and we are trying to do this in 25 years. That’s never been done before, and it’s putting pressure in the system. Remember that it’s not just demand from the United States, but it’s demand from elsewhere that’s happening at the same time. So it is going to put enormous pressure on supply. We just don’t see how mining is going to catch up with that demand. Prices will rise. There’ll be shortages. It is quite concerning about just how concentrated at this point the supplies are just from a few countries.
Sen. Barrasso sailed into Beaudreau about dubious sources of supply, led by China. He also talked about child labor in The Congo, a huge source of cobalt.
Barrasso: Isn’t it better to mine lithium here than to get it from China? Isn’t it better to get cobalt from here than from slave labor working for China? Isn’t it better to mine nickel here than raiding the forests of Indonesia?
Barrasso kept berating Beadreau on this. Nickel mostly comes from Russia.
Beaudreau: As I’ve said and is the purpose of the interagency’s work, it is to advance the cause of developing reliable sourcing and supply chains for a host of critical minerals necessary for clean energy and technology development.
Barrasso asked about mining projects that were not allowed to go forward. Twin Metals of Minnesota was one. It was never an operational mine.
Beaudreau: I’m a serious person on these issues. And have a lot of experience across energy projects as well as mining projects. Fundamentally, we need a system, and we need to implement reforms that enable that type of system to develop. The main barrier to unlocking America’s resources here is litigation, and uncertainty about the permitting process. The right place to mine for some of these materials is not in the richest most abundant salmon fishery in the entire world. As a supporter of a host of economic activity, the right place to mine for some of these materials is not in the boundary waters of northern Minnesota, which is the biggest economic driver in that part of the state. And so these things do have to be viewed in context. Unfortunately, under the existing laws, the only blunt instrument available to the department — and this is why we need more tools — is something like a mineral permit withdrawal. We need to be able to have a much finer and targeted approach to the development of critical minerals.
Shortly after Barrasso, Sen. Josh Hawley (R-MO) expressed his anger over the difficulty of permits, and the closing of mines like Twin Metals Minnesota. Here, Beaudreau held his own and Hawely pivoted to the Uyghurs. He was not specific on what minerals the Uyghurs were involved in, though at least one company – Hoshine Silicon Industries – has been banned from doing business with the U.S. Hoshine is a supply of quartz that goes into making polysilicon for microchips and solar cells used in solar panel manufacturing. Bueadreau was not moved by this pivot and said, “we disagree on all of that.”
Manchin had to break it up. “You’re basically attacking every witness we have. You always have. I’m sorry, we just disagree,” he said in what was one of three heated exchanges on the day regarding mining in the U.S.
Manchin: Here’s the thing: We all agree. There’s not a person here that doesn’t understand. We are absolutely all upset. This whole thing about the Congo, I’ve been speaking to people about this over there. It’s horrible what’s going on in those mines and they want to change that. They’re going to need our help. We shouldn’t accept any child labor in these supply chains, from anywhere in the world. But all that being said, we’ve got to do more permitting here, we’ve got to do it because if we don’t, we’re allowing the EV industry to grow only with these foreign sources we are not making and processing here. My whole reason to fight this administration on this is because I do not want our transportation mode to become dependent on an unreliable supply chain. That’s what will happen.
