Inflation Reduction Act could provide a boost for mining; will it be enough?
The Inflation Reduction Act (IRA) includes a number of provisions that look to advance the transition to green energy and provides a number of incentives for the development and processing of critical minerals in the United States.
Tucked into the 700-page legislation is an extension of the consumer tax credits for electric vehicle (EV) purchases that includes stipulations that at least 40 percent of the critical metals in the EV battery must come from the United States or a Free Trade Agreement (FTA) partner. That percentage rises to 80 percent in 2026. Furthermore, vehicles are only eligible for the credit if final assembly takes place in North America and no critical minerals are sourced from a foreign entity of concern: that is, China, Russia, etc. These provisions could help provide needed investment not only to the EV sector, but to the domestic mining industry that will supply the minerals.
“The domestic rare earth industry will benefit directly and indirectly from the Inflation Reduction Act,” Matt Sloustcher, vice president of communications and policy at MP Materials, told Mining Engineering. “This credit will help level the playing and complement a $700 million investment we are making over the next few years to restore the full rare earth supply chain in the United States. Indirectly, the bill will grow both the domestic market and the domestic manufacturing of EVs and other technologies that depend on rare earth materials and magnets to function.”
While these incentives are intended to spark mining and processing of critical minerals, the legislation is far from the magic pill that will fix all of the United States’ supply chain issues overnight.
Most of us in the mining industry are well aware that America’s supply chain for EV development is severely lacking, and that the United States does not currently have anywhere near the capacity to mine and process the needed critical minerals that are being called for, not to mention to manufacture the end product.
“You can’t just snap your fingers and make it happen,” John Uhrie told me. He is currently chief operating officer with Energy Fuels and has worked across many commodities during his career including copper, gold and zinc. “When you look at all of the critical materials needed, I worry not just about establishing the supply chain in the United States, but I worry about the world being able to find the materials to meet the demand.”
Some estimates say demand for critical minerals is set to skyrocket by 400–600 percent over the next several decades, and, for minerals such as lithium and graphite used in EV batteries, demand could increase by as much as 4,000 percent.
The problem is, the United States and its allies are not producing nearly enough of these materials, and in some cases, none at all. Uhrie said the supply-chain problem comes down to three “P’s” — permitting, processing and people.
“A lot of these materials are out there,” he said. “But we need the permits that will allow us to make use of the resources that we have here in the United States.
“The next issue, in my opinion, is the processing,” Uhrie said. “It’s not enough to go out and mine the metal, we have to be able to process it as well and currently we do not have the capacity to turn the material into a final resource.”
Part of the processing issues is the lack of smelters in the United States, which have been phased out in recent decades, Uhrie said.
And finally, there is the issue of the people supply chain. SME is active in supporting mining and mineral processing education programs, but the pipeline of professors is small.
“We have done reasonably well at bringing back the mining engineering programs, but the sector that is at risk in my opinion is extractive metallurgy,” said Uhrie. “We need to find a way to replace the professors who are retiring with people who will teach the next generation.”
Uhrie said the IRA can be a step in the right direction but that it won’t change things overnight.
“Symbolically, the bill is a strong statement that domestic manufacturing and supply chains are critical,” said Sloustcher.
On Sept. 22, SME’s THRIVE Conference will focus on critical and battery metals and the electrification of society with a one-day conference in Reno, NV. Uhrie is the program chair of that conference and said it will offer great insight to all of the issues around the transition to a green economy.
“We will talk about climate change, CO2 and energy storage and production,” said Uhrie. “We will talk through a lot of the large commodities, and we will talk about the processing and smelting and how important that is. We will have discussions about permitting, and finally the criticality, and what the government is thinking about.”