Illustration: Shoshana Gordon/Axios
The Treasury Department will allow mineral mining and processing costs to be eligible for a highly sought IRA production tax credit in final rules announced Thursday, reversing earlier guidance that had excluded extraction.
Why it matters: The 45X production tax credit is seen as crucial to spurring U.S. manufacturing and on-shoring clean energy supply chains.
- The department's final rules are a win for the mining industry and electric vehicle makers. They argued that extraction accounts for a major component of their overall supply chain costs.
Driving the news: Initial proposed guidance excluded extraction costs. But Treasury sought comments on the magnitude of those costs and how to avoid applying the credit to the same mineral twice.
- Administration officials said Thursday they resolved those concerns by installing safeguards.
- The rule now requires that the processor claiming the credit must have also mined the mineral itself and prohibiting a product that has received credit in the past from being counted again.
What they're saying: Allowing extraction costs to qualify "will help accelerate the build-out of the domestic critical minerals supply chain," Deputy Treasury Secretary Wally Adeyemo told reporters in a conference call.
- "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," he said.
Yes, but: The mining industry supported the guidance but criticized Treasury for limiting the credit to producers who also refine materials.
- "Made-in-America should also mean mined-in-America, 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," Rich Nolan, president and CEO of the National Mining Association, said in a statement.
Friction point: Lobbying on the issue was fierce because the stakes are high: The 10% tax credit for critical minerals is permanent — a rare incentive, as many other IRA tax credits are scheduled to expire and Congress would need to renew them.
- Supporters of adding mining costs contended that lawmakers clearly contemplated extraction to be part of the equation, given that it's the start of the supply chain.
- Tesla told Treasury that raw materials costs were the "key driver" of processing costs.
The other side: Environmental groups had pressed the Biden administration to continue to exclude extraction, saying the IRA intended for the credit to apply only to processed materials.
- A coalition of advocacy groups also raised concerns to Treasury about mining's effect on tribes and environmental justice communities.
- "The Biden administration must uphold its commitment to not repeat the mining injustices of the past in the rush to extract and produce critical minerals," the groups said.
Context: The guidance, coming less than two weeks before the election, could aid swing-state Democrats who pressed Treasury to allow eligibility for extraction costs.
- Particularly vulnerable is Montana Sen. Jon Tester, who has been contending with announced layoffs at a palladium and platinum mine in his home state.
- The company, Sibanye-Stillwater, cited 45X's exclusion of its costs as a key headwind.
