Senate Infrastructure Gets Serious About EV Battery and Rare Earth Supply Chain

Let’s hope this becomes more action than talk. But by the looks of what is written inside the recently passed $550 billion Senate infrastructure bill, a bipartisan group is getting serious about the EV battery supply chain, and the rare earths that are quickly becoming the must-have resource in a high-tech, post-fossil fuels world.

Lithium, nickel, and cobalt are some of the prime materials used in making the new, long-range batteries that power cars. Rare earth minerals like neodymium are used to manufacture navigational equipment on American fighter planes.

Some U.S. companies are in the business of mining for rare earths, such as USA Rare Earth in Texas, which is also a lithium miner, and the rare earth Mountain Pass mine in California.  That one is owned by MP Materials and it offloads a lot of what it digs up to be processed in China. As it stands, China controls around 87% of the global processing of rare earths.

According to the U.S. Geological Survey’s estimates, China is home to at least 35% of the world’s rare earth mineral deposits. The U.S.: 1.2%.

Most of the world’s lithium, a key ingredient for Tesla batteries, for example, is mined in Australia, followed by Chile and then China in third place.

Cobalt is almost entirely from the Congo, mined in conjunction with Chinese miners that then process the rock back in mainland China.

To get a better sense of the U.S. available resources, Sec. 40201 of the Senate infrastructure bill will spend $320 million between 2022 and 2026 to do geological surveys to find rare earth and other mineral deposits that can be used in new energy supply chains.

This is mandatory if the U.S. does not want to go from becoming relatively independent on fossil fuels, to wholly dependent on foreign resources for transportation fuel, let alone the power grid itself.

Sec. 40205 calls for $140 million in 2022 to go to college partners for research on rare earth processing.

The Senate bill states that “critical minerals are fundamental to the economy, competitiveness, and security of the United States.”

Moreover, it looks like the Senate wants to exclude China sourcing from any government grants under a new Battery Material Processing Grant Program (under the Office of Fossil Energy), loans or purchasing orders involving EV batteries.

Under Sec. 40207 “Battery Processing and Manufacturing”, the bill says that “foreign entities of concern” – which includes anyone on sanctions lists or deemed by Washington to be bad actors due to espionage and other issues, will be excluded. If that’s not singling out China, what is?

The U.S. cannot make up resources out of thin air. And environmental regulations may make it unattractive for miners to dig up the ground for the new rocks and minerals everyone now wants for their auto fleet. So recycling used batteries and battery factory floor waste into making new battery materials will be just as important. Tesla co-founder JB Straubel’s Redwood Materials is in the business of recycling battery waste. As is Canadian company American Manganese.

The Senate bill takes a full picture look at the EV battery supply chain, which includes the type of work these two above firms are doing now.

The purpose of new grants under the Office of Fossil Energy, and funding to university geology departments is to “ensure that the United States has a viable battery materials processing industry to supply the North American battery supply chain; expand the capabilities of the United States in advanced battery manufacturing; enhance national security by reducing the reliance of the United States on foreign competitors for critical materials and technologies; and
enhance the domestic processing capacity of minerals necessary for battery materials and advanced batteries.”

The U.S. has a long way to go on this. We are not high on the list of resource-rich countries, so far, when it comes to the key starting materials used in next-gen vehicles. If we are going to move away from fossil fuels, where the U.S. is clearly resource rich, then it is urgent for Washington to make sure new energy-related resources are stacked at home, just like oil and gas are today.

Overall, the Senate bill calls for more grants to eligible entities in order to “carry out one or more demonstration projects in the United States for the processing of battery materials.” It also calls for funding to help companies construct “one or more new commercial-scale battery material processing facilities in the United States.”

Grants will range from $50 million to $100 million. Priorities are for American-based manufacturers and American-owned businesses. And, require that those recipients of government funds “do not use battery material supplied by or originating from a foreign entity of concern.”

“The federal government needs to think in terms of complete supply chains for important products, and minerals like lithium and rare earths. These are an essential part of a US supply chain for national security and also for large parts of the US economy,” said CPA chief economist Jeff Ferry. “Research and exploration are a good start, but after that we need to set the terms of engagement to make it economical to mine and process these materials here.”