Defense Production Act Invoked for Critical Minerals

Apr. 5, 2022
By: Chaney A. Finn

The Defense Production Act (DPA) grants the president authority to expedite and expand the supply of materials and services from the U.S. industrial base for national and economic security. On March 31^st, the Biden Administration invoked the DPA to bolster domestic output of critical minerals to reduce the reliance on China for supply in a two-part plan to address rising energy prices and transition to long-term clean energy.

While the first part of the plan focuses on the immediate increase of oil production to mitigate the record-high oil and gas prices in the short term, the second part pertains to the long-term transition from fossil fuels to renewable energy. Critical minerals are used in the batteries of electric vehicles and in products that facilitate clean energy production, such as solar panels and windmills. By bolstering domestic critical mineral production, the U.S. strengthens national security as risk to supply chain disruptions caused by market conditions and geopolitical factors is reduced.

Unlike other uses of the Title III fund of the Defense Production Act, the government will not make loans or direct purchases of critical minerals, but rather fund feasibility studies and productivity efficiencies while upholding environmental, labor, and Tribal engagement standards, enforced by the Department of Defense. The White House memo specifies that the studies will focus on mature mining, beneficiation, and value-added processing projects at existing mining, mine waste reclamation, and other industrial facilities. These studies are intended to create sustainable production practices by increasing productivity, environmental sustainability, and workforce safety.

The Federal list of critical minerals was updated in February and now identifies 50 minerals that are critical to domestic industries which include cobalt, lithium, manganese, and nickel. Under Executive Order 14051, the Department of Energy, Department of Defense, and the State Department are directed to stockpile and maintain adequate quantities of these minerals to create a buffer against potential shortages and import dependencies.

The move comes after the America’s Supply Chains review, which reviewed vulnerabilities in critical mineral and material supply chains, found that the U.S. depends on foreign sources for these minerals, primarily China, posing economic and national security threats. Additionally, the report noted concerns that the minerals sourced from China are subject to various supply chain disruptions and are of substandard quality.

The DPA announcement builds on the recent initiative for domestic critical mineral production in response to the supply chain findings. The initiative spurred the launch of the country’s first domestic magnet supply chain as part of the $35 million award from the Industrial Base Analysis and Sustainment Program of the Department of Defense for separating and processing heavy rare earth elements, and the $140 million project by the Department of Energy to recover rare earth minerals form coal ash and other mine waste and another $3 billion investment in refining lithium, cobalt, nickel, and graphite in a battery recycling initiative. An Interagency Working Group was also formed in the Department of Interior to promote the responsible mining under strong social, environmental, and labor standards.

The Biden administration is actively looking for other ways to use the DPA to expand domestic critical mineral production along with environmental sustainability and worker safety.