Using Defense Production Act for mineral security ‘a start,’ Alaska leaders say

  • The Bornite multi-metal mine camp in Northwest Alaska near the end of the state-backed Ambler Mining District access road, photographed on July 24, 2021. Copper was discovered in the area in 1947 but the deposit also contains several other minerals the U.S. largely imports for its supplies. (Loren Holmes/ADN)

Late last month, President Joe Biden invoked the Defense Production Act to increase domestic production and supply of five minerals deemed critical primarily for their use in large batteries.

To many Republicans and development advocates, the move is a significant acknowledgment that production of numerous metals will have to drastically increase for countless renewable energy targets across the country to be met. The crux of the argument is that full electrification requires untold numbers of big batteries that currently each require large amounts of minerals predominantly sourced from oversees, often from China.

Sen. Lisa Murkowski said in a statement from her office that invoking the Defense Production Act to secure domestic critical mineral supply chains is an overdue and important step that should complement a host of other actions the administration should take to spur exploration and eventual mine development for graphite, manganese, cobalt, lithium and nickel.

“My hope is that this decision marks the start of a much more serious emphasis on our nation’s mineral security, and that real projects, especially mines, in states like Alaska, result from it. It is also critical that the five minerals addressed under this decision are just the start, not the end, of federal efforts to rebuild our domestic supply chains,” she said.

Federal permitting reform to decrease pre-construction time and costs for mine developers is high on the list of other issues that the Biden administration should tackle in that realm, according to Murkowski.

Murkowski, Energy and Natural Resources Committee chair Sen. Joe Manchin, D-West Virginia, and other senators urged Biden to use the Defense Production Act to spur supply chain development for those minerals in a March 11 letter.

Gov. Mike Dunleavy said he’s happy with the move by the Biden administration, but stressed that it goes against other actions the administration has taken related to mining in Alaska, most notably the decisions in February and March to reopen the environmental impact statement for the Ambler Mining District access road and subsequently suspend the right-of-way approved across federal lands for the 200-plus mile industrial road.

“Stalling development of the road to the Ambler Mining District is preventing access to the cobalt for the lithium batteries and the copper for the wires for charging stations. Beyond (electric vehicles), the Biden administration ignores the gallium and germanium also at the Ambler Mining District that will be needed for the solar panels, smartphones, and computer chips of tomorrow,” Dunleavy said. “An emergency call for critical minerals makes it timely to reverse the recent and contradictory federal decisions on Ambler.”

Passed in 1950 in response to the Korean War, the Defense Production Act has been used dozens of times by presidents since, most recently by Biden and former President Donald Trump to ramp up production of medical supplies and vaccines to fight COVID-19.

The bipartisan group of senators highlighted the effectiveness of DPA in expanding production of supplies to combat the pandemic in their letter to the president.

When it comes to mineral supply chains, the law can help provide financing for projects backed by the federal government via the Defense Production Act fund, which holds up to $750 million to ensure the country maintains an industrial base of important materials for wartime capabilities. Among other things, the money could underwrite feasibility studies for mine projects or productivity improvements at existing operations, as opposed to simply buying more minerals, according to congressional delegation staff. The designation also adds a national security component to projects in federal permitting, which could help prioritize a mine or processing facility amongst other projects being evaluated.

Resource Development Council for Alaska Executive Director Leila Kimbrell called the announcement "a step in the right direction" but said she hopes there is still a broader look at what needs to be done to improve domestic supplies of the minerals in question.

"We're encourage to hear the adminstration wants to focus on that domestic production but we're cautious in seeing how that will actually benefit Alaska," Kimbrell said.

State officials also said that while the president's memo accompanying the order highlights the need for certain minerals to support the nation's energy transition, using the DPA puts the Department of Defense in charge of procuring those minerals for national defense purposes, a likely nod to the broader need for reliable, domestic supplies of the minerals listed and others.

Department of Natural Resources Commissioner Corri Feige, who is in Washington, D.C. this week for talks about Alaska's role in national mineral security, wrote via email that the procurement and funding opportunities could be significant for Alaska. She added that the Procurement Technical Assistance Center within the University of Alaska is available to companies looking for funding or procurement help.

"There will be funding available to companies for things like new facilities to process ores with different metallurgy, rework tailings at existing mines to recover what has already been mined and not captured, and purchase updated equipment like automated mining equipment that improve safety of mining operations," Feige wrote. "With their funding, DOD seeks to improve safety in the industry and drive broader applications of technology that can assist DOD in other areas."

Feige has been meeting with staff from Alaska's congressional delegation and other members of Congress; officials from DOD and Department of Energy sub-agencies; mining industry leaders; and representatives from General Motors' supply chain division.

Alaska is also home to the Graphite Creek flake graphite deposit on the Seward Peninsula north of Nome, which the U.S. Geological Survey recently recognized as the largest graphite deposit in the country. High-quality flake graphite is a primary component of lithium-ion batteries and the U.S. currently imports all of its graphite. China is the world’s major producer.

Leaders of Graphite One, the Vancouver-based junior mining firm that owns the Graphite Creek deposit, have said they expect to release a pre-feasibility study for the mine project in the first half of this year. The company is also investigating graphite processing and recycling facilities in Washington.

Graphite One CEO Anthony Huston said the Biden administration’s action validates the company’s plan to develop a full graphite supply chain, something companies exploring for rare earth metals and other minerals elsewhere in Alaska have advanced as well.

“With this new defense designation under U.S. law, graphite joins a select group of ‘super-critical minerals’ that are essential to commercial technology and national security applications,” Huston said.

Acting Director of the Offices of Manufacturing and Energy Supply Chains and Vehicle Technology in the Department of Energy David Howell testified in April 7 Senate Energy and Natural Resources Committee hearing that the USGS Critical Mineral List — including those in Biden’s Defense Production Act order — “are key building blocks for a transition to a (carbon) net-zero energy future.”

Howell noted that Russia’s invasion of Ukraine caused prices for platinum group metals, which Russia supplies to the world, and other important commodities to spike over fears of supply disruptions.

“The supply chain assessments found that the United States has appreciable resources of many critical elements, but domestic production is frequently limited by a dated and often unclear legal and regulatory structure for mining coupled with a lack of midstream capacity to process and refine the raw materials, even in cases where it has active mining,” Howell testified. “As a result, U.S. ores frequently are shipped to other countries for refinement, relegating mid-stream profits to others and making the U.S. vulnerable to supply disruptions.”

However, longtime Alaska energy industry attorney and analyst Brad Keithley said the federal government’s financial involvement in highly competitive markets such as mineral commodities invariably leads to the government “picking winners and losers” and adds inefficiencies to those markets.

“If we thought China was an insecure source (for critical minerals), what might be appropriate would be to either raise tariffs to where we sort of hit the threshold where people develop domestic resources or just ban the imports from China,” Keithley said.

He referenced the domestic natural gas shortage of the late 1970s and 1980s that led to the Defense Production Act being invoked and eventual government purchases from the Synfuels coal gasification plant in central North Dakota for national defense.

The plant “never made economic sense but we just kept turning the gas out,” Keithley said, adding that the government-financed project indirectly impacted the ability for some of his clients to get financing for gas projects elsewhere. “To the extent that we were producing from that coal mine, we were disincentivizing the production of gas — not huge, but it was there.”

According to Dakota Gasification Co., which owns the Beulah, North Dakota plant, it remains the only commercial-scale facility producing synthetic natural gas in the country.

Elwood Brehmer can be reached at [email protected].

04/13/2022 - 2:13pm