In an effort to boost the domestic mining industry for critical minerals, on March 31, 2022, President Biden issued Presidential Determination 2022-11, the Memorandum on Presidential Determination Pursuant to Section 303 of the Defense Production Act of 1950, as amended (“Presidential Determination”). The Presidential Determination states that sustainable and responsible domestic mining, beneficiation, and value-added processing of strategic and critical materials for the production of large-capacity batteries, including lithium, nickel, cobalt, graphite, and manganese, are essential to national defense. The Presidential Determination will allow the Department of Defense (“DoD”) to pursue various investment, purchase commitment, and purchase vehicles to support strategic and critical material mining and production in the United States pursuant to Title III of the Defense Production Act (“DPA”).
Defense Production Act Title III
The DPA Title III, Section 303 authorities are intended to provide the President broad latitude in supporting critical domestic industrial base capabilities. While other parts of the DPA concern loans, prioritization orders, and allocation orders, Title III is focused on alternative domestic investment options. It is concerned with the expansion of productive capacity and supply in the United States rather than prioritized procurement or allocation. Under Title III generally, the Government may:
- make provision for purchases of or commitments to purchase an industrial resource or critical technology item for Government use or resale;
- make provision for the development of production capabilities, the increased use of emerging technologies in security program applications, and the rapid transition of emerging technologies;
- make subsidy payments for raw or nonprocessed materials from high-cost sources under certain conditions;
- encourage the exploration, development, and mining of strategic and critical materials;
- make provision for the development of substitutes for strategic and critical materials, components, technology, and other resources to aid national defense;
- procure and install additional equipment, facilities, processes, or improvements to plants, factories, and other industrial facilities owned by the federal government;
- procure and install Government-owned equipment in privately-owned plants, factories, and other industrial facilities;
- provide for the modification or expansion of privately-owned facilities, including the modification or improvement of production processes;
- permit agencies engaged in procurement for national defense to restrict solicitations to reliable and/or domestics sources; to stockpile critical components; and to develop substitutes for critical components or technology.
Title III, Section 303 requires certain determinations to be made by the President before the authorities therein become available.
Effect of Presidential Determination 2022-11
Pursuant to the Presidential Determination, the DoD is to exercise DPA Title III, Section 303 authorities, including purchases, purchase commitments, equipment transfer, and facility modification, among other things, to encourage private industry to meet this government need for domestic production of critical materials. This authority is to be exercised in consultation with the Departments of Interior, Agriculture, and Energy, and other agencies as deemed appropriate. DoD is required to support feasibility studies for the strategic and critical material projects undertaken, which are to address mature mining, beneficiation, and value-added processing projects; by-product and co-product production at existing mining, mine waste reclamation, and other industrial facilities; and mining, beneficiation, and value-added processing modernization to increase productivity, environmental sustainability, and workforce safety.
This action follows a June 2021 report on defense critical supply chain vulnerabilities conducted by DoD and the Departments of Commerce, Energy, and Health and Human Services pursuant to Executive Order 14017, which recommended the Government use the DPA to boost domestic mineral production. The Department of Energy’s June 2021 National Blueprint for Lithium Batteries has called for the United States and its partners to establish a secure supply chain for lithium and other electric vehicle battery components by 2030. And the Presidential Determination comes on the heels of the Administration’s Infrastructure Investment and Jobs Act that also included significant measures such as grants, loan guarantees, and streamlined regulations to address domestic critical minerals supply chain vulnerabilities. The development of domestic supply chains for critical minerals, which are key components in renewable energy applications and electric vehicle batteries, is essential for the Biden administration to meet its goal of having the U.S. government transition to a zero-emission vehicle fleet by 2035 and net-zero emissions economywide by 2050.
You can access Crowell & Moring’s primer webinar here discussing the DPA. Additionally, you can find Crowell & Moring’s summaries of the DPA here and Defense Priorities and Allocations System (DPAS) here.