Clamp a royalty on minerals and metals mined on federal lands in the United States? Congress is considering doing so as part of an effort to radically change the General Mining Law. It would be a mistake that would penalize U.S. companies and workers, make worse our dependence on foreign sources of metals and minerals critical to the national defense, and hamper efforts to reduce carbon pollution.
The most destructive effect of a bill introduced by Rep. Raul Grijalva (D-Ariz.) would be on U.S. competitiveness. As proposed, minerals and metals would be subject to a royalty of 12%, higher than rates in other mining countries.
If approved, it would lessen whatever incentives companies have to keep marginal U.S. mines in operation or invest in new ones. To remain competitive, companies would be more inclined to shift mining to countries that impose lesser royalties or none at all. The cost in dollars, forfeited jobs and lost tax revenue could be enormous.
We have a serious problem that is likely to worsen — reliance on foreign minerals has doubled in just the past two decades.
Right now the United States is 100% dependent on imports of 18 minerals and metals, most of which are designated as “critical” by the Defense or Interior departments, and 50% dependent on many others.
The Department of Defense uses 750,000 tons of minerals and metals each year and growing quantities come from overseas. These materials include rare earths, which are needed in the development of many weapons systems — laser-guidance systems, jet fighter engines, smart bombs and anti-missile systems, among others.
And minerals of all kinds — both rare earths and commodity minerals like copper and nickel —are needed for consumer products such as flat-screen televisions, cell phones and computer drives.
Global competition for minerals is likely to become much more intense as efforts are made to reduce greenhouse gas emissions.
Some of the imported minerals, such as rare earths, are components of batteries for electric vehicles, wind turbines and other so-called clean technologies that are expected to play a key role in decarbonization.
The World Bank says that, if countries follow through with the goals of the 2015 Paris Climate Agreement, thereby controlling carbon intensity in the atmosphere in a relatively short time, the demand for lithium, a key component of electric vehicles, will jump 965%; graphite, 383%; and nickel, 108%.
China supplies the largest share of imported minerals, including about 95% of the rare earths.
Although China no longer imposes quotas on the volume of rare earths it exports, as it did a decade ago for geopolitical advantage, it tightly controls the rare earth market, charging high prices for minerals such as cerium, lanthanum and dysprosium. The choice before us: Is clamping a royalty on minerals in our nation’s best interest? Or is failing to do anything about dependence on foreign minerals consistent with the American belief in self-sufficiency?
The time has come to take a hard look at the economic and political consequences of U.S. dependence on imported minerals.
Rather than exacerbate the dependence problem Congress ought to be considering how to foster increased development of critical U.S. resources. We have an estimated $6.2 trillion in untapped mineral resources, more than enough to last for decades.
Congress could, for example, overhaul the antiquated government permitting process that is so labyrinthine that mining companies must wait seven to 10 years or more to obtain approval to open a new mine on public lands.
Sen. Lisa Murkowski (R-Alaska), chair of the Energy Committee, has introduced a measure to expedite the permitting process. Instead of growing dependence on imports, her bill would help lead to more mining in the U.S. and help prepare this country for what’s expected to be an increasingly heated global competition for minerals and metals.
Imposing a high royalty on critical minerals and metals would have far-reaching implications for national security, the battle against carbon intensity and our economic well-being. Better to protect and promote production of domestic resources than to cede even more of the U.S. market to China or other foreign sources.