Biden eyes Cold War-era defense law to boost mining sector

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WASHINGTON, March 30 (Reuters) - U.S. President Joe Biden could invoke a Cold War-era defense law as soon as this week to encourage domestic production of minerals needed to make electric vehicle batteries, according to two sources familiar with the matter.

Such an order under the Defense Production Act is expected to help companies access government funding for feasibility studies for new projects that extract lithium, nickel and other EV metals, or to make existing facilities more productive.

The funds would not be used to dig new mines or buy minerals for government stockpiles, nor would invoking DPA let the mining industry bypass regulatory or permitting standards. It was not immediately clear how much funding could be allocated.

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Biden's economic program has prioritized fighting climate change and stimulating domestic manufacturing using electric vehicles. Administration officials have said national security has been harmed by dependence on fossil fuels from other countries, including Russia, which is also a major nickel producer.

Last month, Biden voiced support for new U.S. mines, but said they must benefit host communities and not damage the environment.The president also said the Pentagon would boost its reserves of certain EV metals, a plan likely to require sourcing from overseas mines due to low U.S. production.

"We must ensure that we secure the materials necessary for the clean energy economy in a way that holds to our strong environmental, labor, Tribal engagement standards and does not leave us reliant on unreliable and unsustainable foreign supply chains," one of the sources said.

Securing enough raw materials to make electric vehicle batteries has been a major obstacle, with domestic mines facing extensive regulatory hurdles and environmental opposition. Biden blocked a proposed Minnesota copper mine earlier this year, and his administration is heightening scrutiny on other proposed mines.

The DPA gives the Pentagon wide berth to procure equipment necessary for national defense. Invoking it would essentially be a declaration that relying on rival nations for EV battery building blocks would constitute a national security threat.

Biden's predecessor, Donald Trump, invoked the DPA in 2019 to build up a stockpile of rare earths, the specialized minerals used to make magnets found in weaponry and EVs.

Biden's use of the DPA would show the United States "will support responsible domestic mining, processing and recycling of battery materials as a matter of national importance," said Todd Malan of Talon Metals Corp(TLO.TO), which has a deal to supply Tesla Inc (TSLA.O) from a Minnesota nickel mine it is developing.

The National Mining Association, an industry trade group, said the expected order from Biden may be limited in scope, but would send a strong signal to global markets.

"Unless we continue to build on this action ... we risk feeding the minerals dominance of geopolitical rivals," said Rich Nolan, the NMA's president.

Several industry executives said the decision shows Biden is taking the looming supply shortage seriously and they were eager for details on how Biden would use DPA to boost domestic EV metals production.

"This is a good signal, and we're glad about it," said James Calaway, chairman of ioneer, which is developing a lithium and boron mine in Nevada.

Biden has made broad use of the DPA in his presidency, including using it to stimulate manufacturing of supplies used in the response to COVID-19.

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Reporting by Trevor Hunnicutt in Washington and Ernest Scheyder in Houston; Editing by Sandra Maler and David Gregorio

Our Standards: The Thomson Reuters Trust Principles.

Thomson Reuters

Covers the future of energy and transportation including electric vehicle and battery technology, with a focus on lithium, copper, cobalt, rare earths and other minerals, politics, policy, etc. Previously covered the oil and natural gas, including a stint living in North Dakota’s Bakken shale oil patch.