Background

Critical minerals are used in a wide variety of important products that affect national security and critical infrastructure. They are important for manufacturing across nearly all sectors, including for solar panels, wind turbines, electric cars, and other high-tech and consumer products.

Following on work that begun in the Obama administration, the Trump administration has increasingly prioritized addressing vulnerabilities in the critical minerals supply chain. In December 2017, the president issued Executive Order 13817, "A Federal Strategy to Ensure Secure and Reliable Supplies of Critical Minerals.” The executive order, in part, directed the Department of the Interior (DOI) to publish a list of critical minerals. Hogan Lovells analysis of that executive order can be found here.

DOI issued a list of 35 unranked critical minerals in May 2018 after working with the U.S. Geological Survey, the Bureau of Land Management, and other federal agencies. These minerals were designated as critical because they are (1) "essential to the economic and national security of the United States," (2) have supply chains that are "vulnerable to disruption," and (3) serve "an essential function in the manufacturing of a product, the absence of which would have significant consequences for our economy or our national security." They include minerals in which China has a dominant supply, including rare earths.

According to the Congressional Research Service[1], the United States is 100 percent reliant on imports of 14 minerals on the list. The United States is also 75 percent reliant on imports of 10 other minerals on the list. China, on the other hand, is ranked as the leading producer of 16 minerals on the list. As a result, the United States heavily relies upon imports of critical minerals from China. Reducing U.S. dependence on these imports will require significant effort.

Rising tensions with China and the COVID-19 pandemic's impact on supply chains have coalesced to heighten concerns about the critical mineral supply chains. For example, the U.S. Congress has introduced several bills to incentivize U.S. production and has held hearings such as the Senate Energy and Natural Resources Committee 24 June 2020 hearing on the "Impact of COVID-19 on the Mineral Supply Chain."

Summary of the executive order

• Section 1
  • Directs DOI, in consultation with other agencies, to investigate U.S. undue reliance on critical minerals from foreign adversaries.
  • Requires DOI to submit a report to the president by the end of November containing the results of this investigation and recommended executive action including the imposition of tariffs or quotas, import restrictions against China and other nonmarket foreign adversaries, or other appropriate action.
  • Directs DOI to submit a report to the president by 1 January 2021 and every 180 days thereafter regarding the state of the threat posed by U.S. reliance on critical minerals from foreign adversaries and recommending any additional actions.
• Section 2
  • Directs relevant agencies to prioritize the expansion and protection of the domestic supply chain for minerals and the establishment of secure critical mineral supply chains for the purpose of, among other things, expanding commercially viable critical minerals mining and developing a resilient domestic supply chain.
  • Directs relevant agencies to identify the legal authorities and appropriations that can be used to accomplish these goals and to submit a report by the end of October. A second report will follow by the end of November that includes respective agency strategy on how to meet these goals.
  • Directs the Office of Science and Technology Policy to submit a report by the end of November that describes the federal government's research and development activities related to the mapping, extraction, processing, and use of minerals and that identifies future research and development needs and funding opportunities to strengthen domestic supply chains for minerals.
  • Directs the Department of State to submit a report by mid-November detailing existing and planned efforts and policy options to strengthen and protect the domestic critical mineral supply chain as well as those of U.S. allies by, in part, consulting with allies and the private sector and promoting responsible minerals sourcing, labor, and business practices. 

• Section 3

• • Directs the DOI to consider whether it has the authority under Executive Order 13603, §306 to establish a program to provide grants to procure or install equipment for the domestic production and processing of critical minerals
• Section 4
  • Directs the Department of Energy (DOE) to publish guidance by the end of October on which projects supporting the domestic critical mineral supply chain are eligible for certain loan guarantees, loans, and funding awards pursuant to Title XVII of the Energy Policy Act of 2005 and Advanced Technology Vehicles Manufacturing incentive program established by Section 136 of the Energy Independence and Security Act of 2007 (ATVM statute).
  • Directs DOE in developing this guidance to consider: 1) whether provisions of Title XVII can be interpreted to promote the domestic supply chain for minerals; 2) the meaning of certain key terms in 42 U.S.C § 161513(a), which, in part, directs the secretary to only make guarantees to projects that "avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases"; and 3) whether the ATVM statute can be interpreted to promote expansion of the domestic supply chain for minerals.
  • Directs DOE by the end of December to propose for notice and comment a rule or rules to revise current regulations to expand and protect the domestic critical mineral supply chain pursuant to Title XVII of the Energy Policy Act of 2005 and the ATVM statute.
• Section 5
  • Directs relevant federal departments and agencies to use all available authorities to accelerate the issuance of permits and the completion of projects in connection with expanding and protecting the domestic mineral supply chain.
• Section 6
  • Directs DOI, DOE, and the Environmental Protection Agency to identify any authorities that can be used to accelerate and encourage the development and reuse of historical coal waste areas, material on historic mining sites, and abandoned mining sites for the recovery of critical minerals.
• Section 7
  • Amends Executive Order 13817 to require periodic updates to the critical mineral list.
• Section 8 and 9
  • Outlines general provisions and defines "critical minerals" as those listed by DOI pursuant to Executive Order 13817 and "supply chain" to include the exploration, mining, concentration, separation, alloying, recycling, and reprocessing of minerals.

Next steps

It is not yet clear what concrete steps the administration will take as a result of the sweeping reporting requirements and analysis that agencies have been instructed to undertake within the next few months. This executive order has the potential to bring greater business opportunities to current and future U.S. mining companies and processors of these critical minerals. For other stakeholders, this executive order may increase the cost of doing business, particularly if future executive actions address the overreliance on imported critical minerals from certain countries, including China. These measures could include, but are not limited to: tariffs, quotas, or other import restrictions, which in turn could produce shortages of those minerals and delays in producing components that require them, such as renewable energy equipment and batteries. 

The executive order should also be considered in the context of recent Department of Defense (DOD) funding decisions related to rare earths. As an example, MP Materials, which owns the Mountain Pass mine in California, the only rare earths mine operating in the United States, was awarded funding by DOD to create a rare earths separation facility.[1] However, this funding was temporarily put on hold due in part to concerns over a roughly 10 percent ownership stake in MP Materials by a Chinese investor. The funding has resumed, although concerns remain over Mountain Pass' two previous bankruptcies and the mine's dependence on shipping raw materials to China for conversion into magnets and other materials.

Given the uncertainty created by this executive order and other government decisions related to the critical minerals industry, all stakeholders are advised to review all reports required by this order and monitor any resulting federal actions.

For further information or assistance, please contact any of the Hogan Lovells lawyers identified below.

Authored by: Kelly Ann Shaw, Jared Wesse, Amy Roma, Mary Anne Sullivan, Warren Maruyama, Molly Newell, Rob Matsick and Juliya Grigoryan

[1]               "The Pentagon wants to end its reliance on China for rare earth minerals. But can it be done?", Politico (3 August 2020).

[1]               Congressional Research Service, Critical Minerals and U.S. Public Policy (28 June 2019).