The US Treasury allows miners to access clean energy manufacturing subsidies

Last December, Washington issued proposed rules for manufacturers to access the so-called 45X tax credit, created by President Joe Biden’s 2022 climate change law, the Inflation Reduction Act, which provides a credit of 10% production for products made in the United States. These draft rules excluded raw materials from production costs in favor of processing. For example, mining lithium would not have received the credit, but processing that lithium into a usable form to build a battery would.

The mining industry cried foul, pointing out that processing is impossible without first extracting a mineral.

Citing “stakeholder feedback,” the Treasury Department reversed itself Thursday, saying that “material costs and extraction costs” would be eligible for the tax credit under the 45X final rules, “provided certain conditions”.

“The Biden-Harris administration understands the importance of critical minerals production to developing clean and secure energy supply chains,” said Wally Adeyemo, assistant secretary of the Treasury, in a call with reporters. “Not only will this help incentivize additional mining, but it will mean that the mining that already exists is more profitable and they can make more investments in those mines,” he said.

The final rules state that the credit can only be obtained once an “eligible component” has been created, essentially favoring mining companies that own processing facilities. Mining should take place in the United States, officials said.

“The act of extraction alone does not produce an eligible component,” the Treasury Department said in the 177-page final rule.

That may help Sibanye Stillwater, which mines and processes palladium in Montana and had pushed for the 45X expansion to offset Russian competition. But several proposed nickel mines in the US, for example, would not be eligible because the US does not yet have a nickel smelter.

Ali Zaidi, the White House’s national climate adviser, gave the hypothetical example of a lithium hydroxide processor that also operates a lithium mine. That company would be eligible for a credit of 10 percent per metric ton for mining and another 10 percent per ton for processing, he said.

“This is absolutely a game changer for our ability to lean on mineral security,” Zaidi said.

The credits would begin to phase out in 2030 and end after 2032 for clean energy components. Critical mineral credits will not be phased out.

The National Mining Association, whose members include Lithium Americas, ioneer Ltd and other mining companies that do not process metals, said it welcomed the updated rules but was disappointed they were tied to processing.

“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, CEO of the trade group.

(Reporting by Nichola Groom and Ernest Scheyder; Additional reporting by Timothy Gardner; Writing by Ernest Scheyder; Editing by Leslie Adler)