The Biden administration expanded a critical tax credit under the Inflation Reduction Act on Thursday to juice the production of critical minerals — a response to growing bipartisan anxiety on Capitol Hill that could offer a boost for at least one vulnerable Senate Democrat.
The Treasury Department’s final rules for the Advanced Manufacturing Production Credit, also known as 45X, now includes a 10 percent tax cut for mineral production, following a steady drumbeat of calls to tweak and expand the credit to boost domestic mining.
The rules also cut taxes for producers of solar and wind components, batteries and certain critical mineral projects.
Top Biden officials expect the new rules to incentivize critical mineral production in the U.S. in the face of a yearslong Chinese stranglehold over global mineral supply, they said during a call with reporters Wednesday. China currently accounts for 60 percent of worldwide production of critical minerals and 85 percent of the world’s processing.
“The U.S. has major deposits of critical minerals, like lithium and palladium. Extracting and processing them here in America, as opposed to relying on China, Russia and other countries with weak worker and environmental protections, is an economic and national security priority for us,” said Deputy Treasury Secretary Wally Adeyemo.
“The Biden-Harris administration understands how important onshoring the production of critical minerals [is] to developing a secure clean energy supply chain, and today’s rules represent a major step forward in that effort,” Adeyemo said.
But while many clean energy and domestic manufacturing advocates applauded the final credit Thursday, the mining community said the rules are helpful but fall short.
“Treasury’s decision to limit the credit to those producers who also refine materials will prevent many important projects from benefiting from the credit as Congress intended,” said Rich Nolan, president and CEO of the National Mining Association.
Most troubling to the mining sector is that companies that only mine in the U.S. — but don’t process the ore themselves — won’t have access to the tax credit. Under the rule, processing plants can also import raw materials from abroad.
“The Treasury Department and the IRS decline to amend the final regulations to expressly include the term ‘extraction,’ as the action of extraction alone does not produce an eligible component,” the rule reads.
The tax credits come less than two weeks from the presidential election, as the Biden administration races to issue billions of dollars of clean energy grants. Officials said the credits and grants will help decarbonize the U.S. economy by midcentury.
Democratic contender for the White House Vice President Kamala Harris is likely to push forward the Biden agenda on clean energy if she wins, while a victory at the polls for GOP nominee Donald Trump could mean more federal support for fossil fuels. On the campaign trail in recent days, Trump has criticized wind, solar and hydrogen energy.
Inflation Reduction Act tax credits directly impact the profit margins for clean energy projects.
In the final months of the administration, lawmakers and companies are pressuring Treasury to tweak other credits, like one for geothermal energy.
Experts say more than $75 billion has been invested since the passage of the IRA in U.S. clean energy systems that are now operational.
“Make no mistake about it: The real power of the Inflation Reduction Act is that it’s private-sector led,” said John Podesta, a top climate adviser to President Joe Biden. “We need literally trillions of dollars of investment if we’re to stave off the worst effects of the climate crisis.”
Solar Energy Industries Association CEO Abigail Ross Hopper said the credit is “one of the most influential policies we have to onshore the solar supply chain.”
Earlier in the week, Treasury finalized a similar credit under the CHIPS and Science Act, a 2021 law to boost semiconductor production.
The final tax credit language Thursday also gives a $35 credit per kilowatt-hour for battery cell producers and perks for offshore wind that industry hopes can boost the fledgling sector.
Montana politics
The critical minerals component could provide a boost for Democratic Sen. Jon Tester of Montana, who is facing a difficult reelection against Tim Sheehy, a combat veteran and businessman.
Earlier this month, international mining company Sibanye-Stillwater announced it was laying off hundreds of workers at its platinum and palladium mines in Montana, blaming cratering prices, “Russian dumping” and weak tax incentives under the Inflation Reduction Act — namely 45X.
Within hours, Tester called on the administration to expand the credit to include the cost of mining and floated legislation to block Russian imports.
“The Montanans working at the Stillwater mine are the best in the business and I had the honor of sitting down with many of them recently in Columbus to get their input on how best to support them,” Tester said in a statement Thursday.
“Bolstering domestic mining will not only boost our economy — it will strengthen our supply chains and our national security. I’m glad to see the Administration is listening to our calls to ensure American mines like the one in Stillwater receive additional support and keep more Montanans in their jobs,” Tester added.
But Republican Sen. Steve Daines of Montana, an outspoken critic of the administration’s mining policies, said in a statement that the new rules are insufficient to boost the mining sector and accused the Biden administration of pursuing a “radical environmental agenda” that prompted layoffs in his state.
“While this announcement is a positive step, it falls short of putting American miners before foreign suppliers and has every appearance of a cynical and desperate political attempt to get votes right before the election,” said Daines. “Montana’s mining families will see through it. If Biden and Harris were serious about helping our miners they would have reversed their anti-mining policies years ago.”
Some experts think control of the Senate next Congress could be determined by the Montana race. Nevada and Arizona — also mining states — also face tight Senate races this cycle.
Democratic Sen. Catherine Cortez Masto of Nevada also applauded the Biden administration for tweaking the tax credit. “I’m happy to see the administration heed my call [to] make much-needed updates to their 45X tax credit guidance,” she said. “Now, this credit will do what we intended for it to do — create jobs, reduce our reliance on China and power our whole clean energy economy.”
Adeyemo with the Treasury Department said the final rules allow material costs to be included when calculating the 45X credit for critical minerals and electrode active materials, as well as mining and extraction costs, the official said.
The final rules also clarify the definition and confirm credit amounts for eligible components, including solar energy components, wind energy components, inverters, qualifying battery components and applicable critical minerals. Lastly, he said the language includes safeguards to prevent potential fraud, waste or abuse, including safeguards against duplicating credits of the same component.
White House national climate adviser Ali Zaidi called the final rules for the 45X credit a “game changer” for the nation’s ability to cultivate and rely on minerals mined and processed in the U.S.
What about mining?
The Treasury rules are being lauded as a boost for processing and smelting but insufficient for a U.S. mining sector that’s lagged for years.
Abigail Hunter, executive director of SAFE’s Center for Critical Minerals Strategy, said the Treasury language supports domestic processing facilities and creates reliable buyers for miners, helping the U.S. compete in the short term.
“The final rule is a game-changer for companies refining, smelting and processing materials at home — especially in today’s low-price market,” Hunter said.
“The midstream is the most concentrated node of the supply chain — and also where the United States can compete in the short term without resource constraints,” she added. “Supporting domestic processing facilities creates reliable buyers for miners, or alternatively incentivizes them to co-locate future mining and processing operations domestically.”
Ben Steinberg, spokesperson for the Battery Materials & Technology Coalition, welcomed Treasury including the direct and indirect raw material costs in the production tax credit for both applicable critical minerals and electrode active materials. “We applaud Congress and the administration for their efforts to make this production tax credit a viable tool for industry over the long term,” he said.
But Nolan with the National Mining Association said supply chain security “begins in the mine” and criticized Treasury’s decision to limit the credit to those producers that also refine materials.
“We have an urgent need to level the playing field for American producers against Chinese and Russian efforts to dominate global mineral supplies by flooding the markets with oversupply of cheap minerals produced under questionable environmental, labor and safety standards; by making U.S. processed, foreign sourced materials available for the credit we’re not solving the problem,” Nolan said in a statement.
“Made-in-America should also mean mined-in-America,” he continued. “And the miners who secure the very first link in our supply chains should benefit from the same credits as the entities that refine their materials.”
In recent years, U.S. authorities have been ramping up efforts to assess domestic mineral supply. A U.S. Geological Survey report this week shows big lithium deposits in Arkansas.
