The U.S. government is taking significant steps to expand the national stockpile of critical minerals, including lithium and rare earth elements, essential for renewable energy technologies and military applications. As part of this initiative, Treasury Secretary Scott Bessent revealed plans for the government to acquire stakes in companies that supply these minerals, a notable shift in policy. Historically, the U.S. has maintained a stockpile of minerals, but this new approach introduces taxpayers as shareholders in the mining sector.
Mining is known for its cyclical nature, often characterized by periods of boom and bust. Taxpayers now face potential financial risks associated with these investments. Congress is urged to exercise oversight and disclose the risks involved, ensuring that taxpayers receive a fair return on their investments. A significant concern is the potential oversupply of critical minerals, fueled by taxpayer subsidies, which could lead to a drastic decline in value.
The term “rare earth” can be misleading, as these minerals are relatively abundant. According to the U.S. Geological Survey, the supply of these elements may soon exceed demand. Former President Donald Trump noted in a conversation with the Australian prime minister on October 21, 2023, that the U.S. could soon have an oversupply of critical minerals, potentially reducing their value to as low as $2 due to the influx of government funding. This funding includes $13 billion in direct grants and $350 billion from the Department of Energy aimed at supporting mining and related projects.
Three companies, Trilogy Metals, LithiumAmericas, and MP Materials, have already received public financing through these initiatives, raising questions about the risks associated with taxpayer investments in mining projects. Typically, publicly traded companies must disclose specific risks to their investors, including the potential for profitability. However, in March, an executive order signed by the president directed public funds toward mining projects without requiring the usual investor disclosures. This lack of transparency could result in taxpayers absorbing losses from ventures that may never yield profit.
Congressional oversight is essential to monitor these developments and address any conflicts of interest between the agencies managing taxpayer shares and those permitting mining operations. A critical issue in U.S. mineral supply chains is the outdated 1872 Mining Law, which governs domestic mining practices. Unlike other nations, the U.S. allows individuals, both domestic and foreign, to privatize public minerals without compensating American taxpayers, the rightful owners of these resources.
To address these challenges, Congress is encouraged to support the Mining Waste, Fraud and Abuse Prevention Act, introduced by Senator Ben Ray Luján (D-N.M.). This legislation aims to modernize the mining regulatory framework, providing greater mineral security and ensuring fairness for taxpayers.
In addition to legislative reforms, enhancing the mineral supply chain requires a focus on innovation, recycling, and alternative materials. The Department of Energy’s Critical Materials Institute has developed industrial motor magnets made from bismuth and manganese, which perform comparably to rare earth-based alternatives. Rather than favoring specific mining companies, the government should channel efforts into research and development to foster technological advancements.
In conclusion, while stockpiling minerals may not represent an innovative approach, encouraging the development of new technologies can effectively secure the mineral supply chain. By prioritizing oversight and modernizing mining laws, the U.S. can better navigate the complexities of mineral supply while safeguarding taxpayer interests. The focus should be on sustainable and responsible practices, rather than mere financial stakes in private mining enterprises.
