Against the backdrop of ongoing supply chain challenges around the globe, the urgency of untangling and securing critical mineral supply chains essential to a net zero carbon emissions future is becoming increasingly clear.

Following on the heels of the Biden Administration invoking the Defense Production Act for the “Battery Criticals” – lithium, cobalt, graphite, nickel and manganese – the energy provisions in the just passed Inflation Reduction Act are indications that this urgency has begun to resonate with U.S. policymakers, and sends a strong signal to investors that the U.S. is serious about “building the secure, responsible industrial base our economy and national security needs.”

Faced with mounting pressures in the global push towards renewable energy, automakers have been taking steps of their own to build out American EV battery manufacturing.

Toyota, which is building a cell-production facility in North Carolina, has announced an additional investment of $2.5 billion on top of the already committed $1.3 billion.  South Korean battery maker LG and Japanese automaker Honda have announced an investment of $4.4 billion into a joint venture in the United States, with mass production of advanced lithium-ion battery cells to start by the end of 2025.  Panasonic is considering a $4 billion investment into constructing a plant in Oklahoma, and north of the border, recent public filings indicate that Tesla is looking to set up a new advanced manufacturing facility in Canada.

Friends of ARPN can guess what comes next.  As the Wall Street Journal’s Stephen Wilmot wrote last week, “[a]ll this means car makers can perhaps start to relax where they will get EV batteries. The tougher question now is where they will get battery materials.” He adds: “[a]nother wave of investment in inputs such as processed lithium and nickel needs to follow – and with a new urgency.”

As ARPN already pointed out, the Inflation Reduction Act’s requirement that will exclude EVs with material inputs from “foreign entities of concern” from eligibility for the $7,500 tax credit included in the bill, poses a serious challenge because the auto industry is so heavily reliant on battery materials and components from China.  With China being the global hub for battery-mineral refining, says Wilmot, “this will be hard for automakers to work around.”

Not surprisingly, automakers are increasingly lobbying governments to reform the U.S. mine permitting system.  Metal Tech News’s Shane Lasley points to a recent letter penned by Ford Motor Company’s chief government affairs officer Christopher Smith to the U.S. Department of Interior, in which he laments that “[t]oday’s lengthy, costly and inefficient permitting process makes it difficult for American businesses to invest in the extraction and processing of critical minerals in the United States.” Smith calls on the federal government to alleviate the challenges within the U.S. mine permitting framework, which Ford considers “unacceptable and well beyond the requirements facing Australian and Canadian companies, where responsible mining is a given and a prerequisite for obtaining mining permits.”

However, this is far from the only challenge automakers and the mining sector are faced with in their quest to support the green energy transition, as an inter-departmental “tug-o-war” is adding fuel to the fire.  As Lasley writes in an equally insightful piece:

“While the departments of Commerce, Defense, and Energy are forging ahead with programs and investments aimed at ensuring America has the minerals and metals needed to support the clean energy objectives outlined by the White House, and enabled by the Bipartisan Infrastructure Law and Inflation Reduction Act, DOI is pumping the breaks on a domestic project that would produce the requisite raw materials.

The Interior Department’s yanking of the permits to build a road that would connect the rich deposits of cobalt, copper, zinc, and other metals in Alaska’s Ambler Mining District to markets demanding sustainable supplies of these mined materials underscores a disconnect within the Biden Administration.”

Alaska Governor Mike Dunleavy had lamented DOI’s lack of acknowledgement of Alaska as a potential source and blasted the Ambler Mining District decision and called for federal permitting reform during the recent critical minerals summit held in Alaska, which we covered here:

“This administration must speak with one voice. It wants critical minerals, or it doesn’t. It wants the lower energy prices, or it doesn’t.  It wants to create jobs in the U.S. or it doesn’t.  It wants to protect the environment or it doesn’t. It cares about human rights, or it doesn’t. (…) The disjointed federal permitting process doesn’t just hurt Alaskans (…), it hurts every industry, and every state. (…) 

If we set ambitious goals for EVs or renewables without permitting the production of critical minerals here, those minerals will still be produced, they just won’t be produced in here in America or Alaska, they’ll be produced by child labor, potentially, they’ll be produced without environmental standards, potentially, they’ll be produced at the expense of the American worker, to the benefit, potentially, of our adversaries.”  

As for the IRA bill, the Wall Street Journal points out, “[h]ow far and how fast EV and battery makers need to scramble [to meet the law’s requirements] depends on how the Treasury Department interprets the Inflation Reduction Act. This process, which will be subject to intense lobbying over the coming months, could weaken some of the strings attached.”

However, the pressure to diversify supply chains away from adversaries is here to stay – and with that, the federal government will have to take steps to foster greater predictability in the mining sector to unleash the United States’ mineral potential.  As U.S. Senator Lisa Murkowski told attendees of last month’s Alaska critical minerals summit, the rest of the world won’t wait for us, and “other countries” are moving now to implement “longer-term policies that allow them to focus on what it means to be sticking with a policy, and a view, and a vision towards dominance.”