A confluence of factors — pandemic-induced supply chain shocks, increasing resource nationalism in various parts of the world, and Russia’s invasion of Ukraine extending into its second month — has completely altered the Post-Cold War geopolitical landscape and mineral resource security calculus.
Responding to the resulting growing pressures on critical mineral supply chains and skyrocketing demand scenarios, U.S. President Joe Biden invoked the Defense Production Act (DPA) earlier today to encourage domestic production of the metals and minerals deemed critical for electric vehicle and large capacity batteries.
In Presidential Determination No. 2022-1, President Biden determines, pursuant to section 303(a)(5) of the Act, that:
- “sustainable and responsible domestic mining, beneficiation, and value-added processing of strategic and critical materials for the production of large-capacity batteries for the automotive, e-mobility, and stationary storage sectors are essential to the national defense;
- without Presidential action under section 303 of the Act, United States industry cannot reasonably be expected to provide the capability for these needed industrial resources, materials, or critical technology items in a timely manner; and
- purchases, purchase commitments, or other action pursuant to section 303 of the Act are the most cost-effective, expedient, and practical alternative method for meeting the need.”
The Presidential Determination instructs the Secretary of Defense to “create, maintain, protect, expand, or restore sustainable and responsible domestic production capabilities of such strategic and critical materials by supporting feasibility studies for mature mining, beneficiation, and value-added processing projects; by-product and co-product production at existing mining, mine waste reclamation, and other industrial facilities; mining, beneficiation, and value-added processing modernization to increase productivity, environmental sustainability, and workforce safety; and any other such activities authorized under section 303(a)(1) of the Act.”
Acknowledging that “action to expand the domestic production capabilities for such strategic and critical materials is necessary to avert an industrial resource or critical technology item shortfall that would severely impair the national defense capability” the Presidential Determination further waives “the requirements of section 303(a)(1)–(a)(6) of the Act for the purpose of expanding the sustainable and responsible domestic mining, beneficiation, and value-added processing of strategic and critical materials necessary for the production of large-capacity batteries for the automotive, e-mobility, and stationary storage sectors.”
According to a White House fact sheet released only hours before the Presidential Determination was made public, the President “is also reviewing potential further uses of DPA – in addition to minerals and materials – to secure safer, cleaner, and more resilient energy for America.”
Earlier this month, U.S. Senators Lisa Murkowski (R-AK), Joe Manchin (D-WV), James Risch (R-ID), and Bill Cassidy (R-LA) had sent a letter to President Biden urging him to take congressional and Administration efforts to bolster mineral supply chains one step further and to “invoke the Defense Production Act (DPA) to accelerate domestic production of lithium-ion battery materials, in particular graphite, manganese, cobalt, nickel, and lithium.”
“Allowing our foreign mineral dependence to persist is a growing threat to U.S. national security, and we need to take every step to address it. The 100-day report acknowledges the ‘powerful tool’ the DPA has been to expand production of supplies needed to combat COVID-19, as well as the potential the DPA could have to ‘support investment in other critical sectors and enable industry and government to collaborate more effectively,’” the Senators said in their letter, adding that “[t]he time is now to grow, support, and encourage investment in the domestic production of graphite, manganese, cobalt, lithium, nickel, and other critical minerals to ensure we support our national security, and to fulfill our need for lithium-ion batteries – both for consumers and for the Department of Defense.”
It seems President Biden was ready to take that step.
According to Bloomberg News, the addition of metals and minerals like lithium, nickel, graphite, cobalt and manganese to the list of items covered by the 1950 Defense Production Act affords mining companies access to $750 million under the Act’s Title III fund.
The National Mining Association’s President and Chief Executive Rich Nolan welcomed the move, stating that “[t]he minerals supply chain that will drive the electrification of our transportation sector and the energy transition is not only at risk from a perilous and growing import dependence, but the approaching minerals demand wave is set to strain every sector of the economy and requires an urgency in action from government and industry never before seen.”
Nolan told the Washington Post in anticipation of the Presidential Determination that the United States needs new mines and mineral processing plants: “What we need is policy to ensure we can produce them and build the secure, reliable supply chains we know we must have.”
Watch the press conference announcing the Presidential Determination here.
And for the full text of Presidential Determination No. 2022-1 click here.
ARPN will be back with additional analysis as we work through the DPA action.
