Biden Blocking Mines Needed For His Green Dream

The United States could be a major global lithium producer if it were not for policies and regulations by the federal and state governments, which are hampering efforts to break China’s control of the critical minerals sector. Global lithium demand is expected to outpace supply by 500,000 metric tons annually by 2030 due to the push for a “clean” energy transition. Unless the United States can increase its lithium production, the country’s manufacturers will be reliant on China and others for supply as the end of the decade approaches. According to the U.S. Geologic Survey, identified lithium resources in the United States—from continental brines, claystone, geothermal brines, hectorite, oilfield brines, and pegmatites—total 12 million tons, out of 98 million tons worldwide, but the United States is still dependent on imports for over 25 percent of its needs. This number will grow as battery use grows to meet the Biden Administration’s drive for electric vehicles and the conversion of the U.S. electrical grid to one dependent upon intermittent and weather-driven renewable generation requiring backup.

Biden Administration Interferes with Critical Mineral Production

President Biden talks about wanting domestic production of critical minerals, but his administration has focused on making it more difficult to mine in the United States. It has revoked federal leases; used regulatory action to delay or revoke mining, air pollution, and water quality permits; and labeled a flowering plant “endangered” as ways to delay or cancel metal mines in the United States. Further, a study by finance company MSCI estimates that the majority of U.S. reserves for cobalt, lithium, and nickel are located within 35 miles of Native American reservations, causing a potential conflict with President Biden’s stated commitment to racial equity and “environmental justice.” In April 2022, the Department of Interior reversed a Trump administration decision that limited the scope of compensatory mitigation the Department could force upon projects on federal land as a condition of receiving a permit. Under the new guidance, opponents in the federal government could assess mitigation located far from the project, giving bureaucrats a blank check to request whatever they wish of a permit seeker with little controls or relationship to the project. Rather than rule on merits and science of a project, government agents are allowed to essentially require permit applicants to do “whatever the market will bear.” Details on two lithium mines pursuing development are below.

Ioneer Ltd.’s lithium mine in Nevada, which could supply 22,000 metric tons of lithium annually (enough for 370,000 electric cars), has seen increased costs as environmentalists claim the mine threatens Tiehm’s buckwheat, a rare flowering plant. While the Trump administration’s Interior Department refuted that claim, finding that it was actually squirrels who were threatening the buckwheat, environmentalists asked the Biden administration to list the buckwheat as an endangered species. Interior regulators subsequently proposed a listing to that effect. Ioneer changed its mine plan to avoid the buckwheat and has spent more than $1 million on botanists, greenhouses and related studies.

The Thacker Pass Lithium mine in Nevada could produce a quarter of today’s global lithium demand and support the production of batteries for up to 800,000 electric vehicles annually. It may be on track now that a judge dismissed challenges by a coalition of nearby indigenous communities, environmental groups, and a local rancher who argued Interior’s environmental review downplayed the likely effects on groundwater, streams, and a threatened species of trout and because of the mine’s location, which reportedly borders the sacred site of a massacre of more than two dozen Native Americans in 1865. The latest estimated total cost of phase one construction for the mine has been revised upward to $2.93 billion based on several factors, including the use of union labor for construction, updated equipment pricing and development of an all-inclusive housing facility for construction workers because of its remoteness. The company already spent $193.7 million on the project during the year that ended December 31 due to legal delays and environmental reviews. Mechanical completion of phase one is targeted for 2027 with full production anticipated sometime in 2028.

State Laws and Regulations Affecting Lithium Production

Across Texas, Louisiana and other mineral-rich states, developers are looking to mine lithium from salty brines in underground mines.  But, in many cases, it is unclear who owns the lithium in the brines, how the battery metal should be valued by regulators and who ultimately should pay to process it into a form usable by manufacturers.

For example, last year, the Texas legislature approved a law that instructed the state’s oilfield regulator to develop regulations for lithium extraction from brines. But the regulator, the Railroad Commission of Texas, has no timeline for when it will finish that task. The Commission plans to release its rules for public comment once they are formulated, after which the three commissioners will vote on them.

While the 1972 U.S. Clean Water Act gives Washington regulatory power over water extraction and reinjection across the country, state officials have autonomy to govern other parts of the process. Tetra has tested more than 200 brine samples from Texas, but so far has opted not to do business in the Lone Star State due to legal uncertainty.  Standard Lithium had drilled a Texas brine well with lithium concentrations nearly as high as those found in parts of Chile, which has the world’s largest lithium reserves, but Standard cannot produce the lithium until regulations are set.

In Oklahoma, which has several brine deposits, it is unclear who sets regulations dealing with lithium production. The Oklahoma Corporation Commission – which oversees oil and gas development – has no jurisdiction over lithium production and royalties, nor does the state’s Department of Mines.

In Utah, the state legislature and governor approved a bill last year to prevent water levels from dropping in the lithium-rich Great Salt Lake, which led Compass Minerals to abandon plans to produce lithium from the lake for Ford and disband its entire lithium team, as the regulatory risks had increased significantly.

In Louisiana, the lack of state guidelines is causing concerns that producers could trespass on neighboring land when they reinject brine after filtering out lithium. Reinjection is a key step to preserving underground water table levels. The Louisiana Department of Energy and Natural Resources does not have existing statutes related to lithium.

Water that is extracted alongside oil can contain lithium and can be sold for a profit. Oil companies for decades have paid to dispose of that water. With lithium demand increasing, landowners, oil producers, and companies that oversee water disposal are fighting over ownership. Last year, a Texas state appeals court ruled that COG Operating controls the water that it extracts alongside oil, but the ruling only applied to that specific case. Oilfield leases do not necessarily include clauses for who owns other minerals extracted alongside oil, generating questions as to whether lithium is covered by existing leases or if companies need to negotiate new contracts with landowners.

It is also unclear how lithium will be valued for royalty payouts given the cost for equipment to filter the battery metal from brine, which typically has no market value. In Arkansas, where Tetra, Exxon, Albemarle and Standard Lithium hope to produce the battery metal within a few years, state officials have been debating a royalty structure to compensate landowners since 2018. The state could charge different rates depending how much lithium is in a brine deposit. Albemarle, the world’s largest lithium producer with operations in the United States, Chile, Australia, China and elsewhere, plans to open a pilot facility in Arkansas by the end of the year, but is waiting to see how the Arkansas royalty situation evolves. Exxon also has not submitted a royalty proposal despite spending more than $100 million in Arkansas and on a Houston test facility as part of its attempt to produce lithium, but hopes the state’s royalty will be uniform across the state.

California, which has giant lithium reserves in its Salton Sea region east of Los Angeles, last year imposed a flat-rate tax for each metric ton of lithium, which has pushed back development of projects slated to supply General Motors and Stellantis. California’s governor and legislators have defended the tax as a necessary way to ensure all residents benefit from the energy transition, even though the tax goes to the government.

Nevada, which has the only commercial U.S. lithium operation – a small mine operated by Albemarle – has taxed minerals for more than 100 years, at a rate based on each facility’s revenue.

Conclusion

Federal and state laws and regulations, or lack thereof, are hampering lithium production in the United States, which is needed for Biden’s energy transition. Biden’s environmental reviews and permit approvals have delayed the development of lithium mines and caused their costs to increase. Mineral-rich states have not provided laws and regulations regarding lithium ownership, valuation, processing and royalties, delaying the development and production of lithium in their states. Industry analysts expect regulations to be eventually set in those states, but it is unclear when that might occur. In the meantime, U.S. manufacturers will be dependent on imports from China and elsewhere, to meet their lithium needs.

*This article was adapted from content originally published by the Institute for Energy Research.