electric vehicles

Barely noticed in the firehose stream of presidential activity since the inauguration was a brief Oval Office mention of cutting a deal with Ukraine for access to its critical minerals. Securing steady access to uranium, the rare earth elements, and other critical minerals is a natural priority for an America First agenda, so President Trump’s February 3 statement is unlikely to be his last. Changes to the tax code, permitting reform, regulatory incentives, and partnerships with allies as well as troubled nations are among the actions to watch for.

A Bipartisan Issue

Leaders of both parties agree that action is needed. “Whether it’s critical minerals with China … or uranium from Russia, we can’t be dependent on them,” Secretary of the Interior Doug Bergum asserted in his confirmation hearing. “We’ve got the resources here. We need to develop them.” Virginia Senator Mark Warner (D, VA) recently charged, “China dominates the critical mineral industry and is actively working to ensure that the U.S. does not catch up.” He urged, “The U.S. must, alongside allies, take meaningful steps to protect and expand our production and procurement of these critical minerals.” President Biden’s State Department was even more blunt, asserting that China is intentionally oversupplying lithium to “lower the price until competition disappears.”

Several recent developments have increased U.S. policymakers’ concerns about future supplies of critical minerals. New technologies, including artificial intelligence, promise to dramatically boost demand. China, meanwhile, is using new export control laws to curtail exports to the United States. A resurgent war in the eastern provinces of the Democratic Republic of the Congo (DRC), ostensibly over tribal rivalries, is actually a fight over the country’s rich mineral resources. These include gold and diamonds, but also coltan, an ore from which tantalum is extracted. Tantalum is extremely valuable for its use in the capacitors found in smartphones, laptops, and medical equipment.

The number of minerals in question (51), the usual number of steps in the production chain (4), and the variety of international agreements, public laws, private initiatives, and emerging technologies add up to a dizzyingly complex set of issues. Nevertheless, the bipartisan alignment evident in the above statements signals that impacted industries should watch closely for fast-moving legislative and regulatory developments.

Market Overview

Critical minerals are essential for a long list of industrial and defense-related needs. Attention is often focused on the 17 ‘rare earth elements,’ (REEs) but the U.S. Geological Survey (USGS) has a broader list of 50 mineral commodities that are critical to the nation’s economy and national security. Uranium is excluded by a statutory definition but is often tracked in parallel. Together, these 51 elements are used for a far wider array of products than is often recognized. The 17 REEs alone are also needed for oil refining, guided missiles, radar arrays, MRI machines, computer chips, hydrogen electrolysis, lasers, aluminum manufacturing, cameras, jet engines, satellite manufacturing, and a long list of other advanced applications.Continue Reading What President Trump Might Do on Critical Minerals

On October 5, 2022, the Treasury Department and the IRS issued notices requesting comments on different aspects of the energy tax benefits in the Inflation Reduction Act (“IRA”). All comments are due by Friday, November 4, either electronically on www.regulations.gov or alternatively by mail to the IRS. Written comments submitted after that date will be considered as long as such consideration will not delay the issuance of guidance.

In each case, the Notices focus on a subset of the IRA expanded and enhanced existing consumer and business energy tax credits and the new credits, including tech-neutral production and investment tax credits, a clean hydrogen production credit, a nuclear power production tax credit, and credits for producing necessary components for clean energy production, among others. The Notices solicit general comments, but also focus on specific definitional and operational issues. The requests emanate from, among other things, the new domestic production and sourcing requirements in the IRA, including requirements for sourcing critical minerals for the manufacturing of electric vehicles and for constructing certain qualified facilities using materials produced in the United States. Requests also arise in reference to the new two-tiered credit structure, where, for many of these credits, taxpayers are eligible for a higher credit (typically five times the base amount) if they meet certain wage and apprenticeship requirements. And one Notice focuses on the new direct pay or transferability feature for some credits, which essentially results in a cash payment to the taxpayer regardless of whether they have any tax liability in the year in which the credit is claimed.Continue Reading IRS issues notices requesting comments on IRA clean energy tax credits

This year the impact of climate change has been more visible than ever before. Temperatures in the UK reached an unheard-of 40+ degrees C; rivers in Germany and China have run dry, creating problems for transport and hydro-electric power creation; one-third of Pakistan is under flood-water. This feeling of crisis has been compounded by Russia’s invasion of Ukraine and the consequent ever-rising gas prices.  These factors have combined to focus international political and public attention on the urgency of the energy transition. 

The success of the energy transition will depend on access to significantly increased quantities of rare earth metals and minerals, which are central to the production of permanent magnets used in electric vehicles (EVs) and wind turbines. According to the IEA, meeting current energy policies will require a doubling of current levels of mineral extraction and refining by 2040.  Reaching the Paris target of 1.5 degrees C will require a quadrupling by 2040.  Attaining Net Zero by 2050 requires a six-fold increase by 2040.

Can this be done?

Proven reserves of rare earth elements (REE) are assessed to be sufficient (just) to meet the needs of the energy transition. The question is therefore whether a solution can be found to the inefficiency of their extraction and use; and whether mining and processing activities across the value and supply chains can be expanded quickly enough to meet this projected growth.Continue Reading Elemental Risk: the Threat to Electric Vehicles

In a series of prior blog posts, we previously highlighted the historic implications of the Inflation Reduction Act (IRA) for the U.S.’s international climate commitments, as well as for private companies navigating the energy transition.  Shortly after our series published, the Senate passed the IRA on Sunday August 7th with only minor modifications to the bill’s $369 billion in climate and clean energy spending.  Today, the House passed the IRA without any further changes, and soon hereafter President Biden is expected to sign it into law. 

However, this is only the beginning of the road; the IRA will have sweeping implications beyond the four corners of its pages.  In the coming months and years, we expect to see intense jockeying over agency rulemakings that will shape the IRA’s implementation, as well as determine its ultimate success as an energy policy.  

I. Congressional Permitting Reform

As an initial matter, it seems Congress has not finished its work revamping the nation’s climate and energy laws.  As part of his agreement to support the IRA, Senator Joe Manchin (D-WV) announced that “President Biden, Leader Schumer and Speaker Pelosi have committed to advancing a suite of commonsense permitting reforms this fall that will ensure all energy infrastructure, from transmission to pipelines and export facilities, can be efficiently and responsibly built to deliver energy safely around the country and to our allies.”  While the exact contours of this legislation are not currently known, Senator Manchin’s office recently released a legislative framework, which includes proposals to, among other things:Continue Reading House Passes Inflation Reduction Act, Marks a New Era for Climate Policy