Minerals for New Technologies and Low Carbon Economies

Co-Authored by Stuart Butzier – Modrall Sperling
and Casper Herler – Borenius Attorneys, Helsinki, Finland
Originally printed in the Newsletter of the International Bar Association’s Mining Law Committee

This is a conference report from the International Bar Association’s Section on Energy, Environment, Natural Resources and Infrastructure Law Conference held in Lisbon in April 2018, focusing on the ‘Minerals for New Technologies and Low Carbon Economies’ panel.

In a 2017 report from the World Bank, The Growing Role of Minerals and Metals for a Low Carbon Future, the authors predicted a more than 1,000 per cent rise in demand for metals for energy battery storage technologies. They also projected a 200 per cent rise in demand for metal for wind and solar technologies to meet certain goals of the 2015 Paris Agreement on Climate Change, which was signed by more than 170 countries.

Correspondingly, the evolution of communication and information technologies presents dramatically shifting mineral development requirements. The minerals needed to meet these clean energy and other evolving technology-driven developments include lithium, silver cobalt, graphite, rare earth metals and key base metals such as copper, aluminium (bauxite), nickel, zinc and possibly platinum.

The IBA Section on Energy, Environment, Natural Resources and Infrastructure Law held a conference in Lisbon, Portugal, on 8–11 April 2018. A panel on minerals for new technologies and low carbon economies was moderated by Stuart Butzier and Casper Herler.

Drawing on experience, research and educated forecasting, the panel examined the formidable demand projections and some of the contours of the global challenges presented to meet them, including:

• the international, national and local legal frameworks in which developers are pursuing these metals;

• particular environmental permitting and compliance issues associated with certain metals mining and processing operations;

• the strategic implications of the minerals;

• policy debates over net carbon footprint reduction potentialities or lack thereof;

• the disparity of geological information available in developed and underdeveloped regions of the world; and

• the need for flexibility in meeting demand given uncertainties in how various technologies may develop over the first half of the 21st century.

Special attention was paid to minerals pursuits in Portugal among other European countries, on the African continent and in South America, especially Argentina, Bolivia and Chile.

Mining and Climate Change

The panel opened with John Drexhage’s presentation. Drexhage, who was the primary scrivener of the 2017 World Bank report, addressed the general topic of mining and climate change within the context of the Paris Agreement’s goal of keeping future increases in the global average temperature to well below two degrees.

Today, renewables trends continue to show strong growth globally, despite: (1) the United States’ signal of intent to withdraw from the Paris Agreement; (2) the infancy of Nationally Determined Contributions; and (3) ongoing contentious negotiations surrounding financing, commitment accelerations and operational challenges involving several important aspects of the Paris Agreement.

For the mining industry, which is a major contributor to global warming due to its energy use, matching mining-related emissions to inventories is a complex task. The Paris Agreement creates a significant potential for raising operational costs and a corresponding impetus for dramatic shifts in energy sources. Mineral resource-rich countries, such as Brazil, Canada, Chile, Colombia, Indonesia, Peru and South Africa, by the end of 2016 had already signed or ratified economy-wide greenhouse gas mitigation plans that in most cases employ land use measures.

Analysis of carbon cost impacts of various commodity production results in some ironies, including that coal generally has a lower production-related footprint than other non-fossil fuel minerals, which in turn justifies governments looking at the big picture in evaluating carbon costs and developing carbon policies and grid support measures. Governments can develop ‘climate smart’ policies for their extractive industries, such as: (1) long-term, consistent and realistic carbon pricing schemes that are rooted in core economic plans; (2) fair-minded and supportive incentive programmes for exploration and feasibility studies in ‘clean energy’ minerals and metals; and (3) partnering to enhance water systems and ecosystem resilience, land mitigation and adaptation, and local community priorities and rights where mining is active. For their part, mining companies and investors have the opportunity to be positive, constructive and credible contributors to resilient climate change policies and a ‘zero carbon’ future if they are willing to be flexible with financing and partnering with governments and civil society in developing ‘lifecycle’ approaches to operations, infrastructure development and policies that take into account climate change and decades-long investment impacts.

Indications that the mining industry is already working hard to mitigate its impacts on climate change is its trend of commitments to: (1) gaining a low carbon advantage through the electrification of operations using renewable energy resources; (2) contributing to landscape management, infrastructure planning and forest conservation; and (3) adapting to the rapidly changing material requirements and demands of a low carbon energy future as detailed in the 2017 World Bank report.

A View from a Lithium Producer

Karen Narwold, a top executive and legal counsel with a leading producer of lithium, a battery mineral that will be integral to the world’s future of low-carbon economies, provided an overview of Albemarle’s operations on four continents (Australia, Europe, North America and South America). She addressed legal challenges in each location as well as sustainable mining and governance innovations that echoed several of the themes developed by Drexhage’s talk. The company pursues lithium through brine mining and production operations at Salar de Atacama and Antofagasta in Chile and at Silver Peak, Nevada, in the United States, Spodumene ore mining and production in Greenbushes, Australia, and lithium recycling pilot operations in the European Union.

In its pursuit of sustainable mining and continuous innovation through which it enjoys a ‘licence to operate’, the company employs natural resources and environmental stewardship principles as well as agreements with communities relating to communications, development and compliance.

In Chile, solar evaporation in the desert salt flats of Salar de Atacama provide zero carbon dioxide emission opportunities for brine concentrating which, if fossil fuels were used, would result in hundreds of thousands of pounds of carbon dioxide an hour and more than one million tonnes a year. In 2017, Chilean authorities approved a lithium-yield optimisation project designed to achieve sustainable mining practices that minimise brine pumping, fresh water use, chemical components, additional water and solid wastes and energy consumption.

Under the umbrella of certain legal protections for indigenous communities, the company also partners extensively with the multiple, relatively sophisticated Chilean indigenous communities in the areas of its operations, some of whom claim certain occupied territories or consider certain features to be part of their patrimony.

At the operations in Australia, water for mineral processing is sourced from rainfall. Conservation is a high priority, with process water recovered and recycled. Lithium companies are researching alternative extraction processes, such as solvent and metal organic framework extraction, electrocoagulation, ion exchange and nanofiltration, but most have been rejected due to such concerns as the inability to fully remove harmful chemicals and the requirements for significant electric power and additional fresh water supplies. In searching for new lithium resources, factors taken into account in evaluating resource recoverability include not only technical criteria such as energy use, water needs and waste profiles, but also investment criteria, geopolitical risks and sustainability considerations in a changing world with increasing disclosure requests about climate change. Environment, society and governance (ESG) principles are now an integrated part of overall company strategies. Among the legal challenges, choices must be made from among several existing and emerging international reporting standards.

Law, Policy and the Governance of the Salars in the ‘Lithium Triangle’

Professor Ana Elizabeth Bastida of the University of Dundee School of Law provided context and shared insights from her ongoing research on law and public policy debates about the development and production of lithium commodities within what has become known as the lithium triangle in South America, an area straddling portions of Argentina, Bolivia and Chile.

The lithium triangle is estimated to contain approximately 70 per cent of the world’s lithium reserves, making it a critical target for international investment driven by the growing demand for battery minerals for energy economies that are trending towards maximisation of electric energy and away from consumption of fossil fuels and greenhouse gas emissions after the Paris Agreement and the United Nation’s establishment of the Sustainable Development Goals.

The mining sector will be instrumental in heeding calls for coherent development that integrates environmental, social and economic dimensions under policy priorities that are emerging to advance a sustainable development agenda in all three countries. In Chile, lithium is considered as a strategic mineral reserved to the state. Apart from the two companies operating in the rich Salar de Atacama, the state-owned Codelco has established a subsidiary, Salar de Maricunga SpA, to develop Salar de Maricunga. This was one of the recommendations of the National Lithium Commission, established by the Ministry of Mines in 2014, which released a report, Lithium Policy and Governance of Salt Flats, on public policy pathways for lithium development.

Pursuant to research suggesting that lithium brines in the Salars are natural dynamic ecosystems of great fragility that have a ‘hydrodynamic behaviour’, with the potential for extraction to affect concentrations in adjacent properties, the 2015 report calls for:

• a ‘paradigmatic change’ to ensure a ‘shared value’ approach among communities and projects;

• legal regime revisions to expand contracts in use for petroleum development to development of lithium; and

• innovation and technological clusters in all phases of the value chain including the fabrication of lithium products.

Bolivia – where the 2009 Constitution mandates adding value and industrialising minerals – has established agency oversight and a state-owned company centred on evaporitic resources, invested in four pilot plants to produce lithium carbonate and assembly batteries and commissioned the design of an industrial plant for lithium carbonate to a German firm in 2015.

In Argentina, as a general rule, lithium is subject to the concession regime established under the Mining Code, whereby mineral rights are granted following an objective, non-discretionary criteria on a first come, first served basis. There is also a regime whereby state-owned enterprises and entities can establish special zones for exploration and exploitation in accordance with the Mining Code, on which they call for bids. Downstream user companies are investing in lithium projects. Some provinces are pursuing initiatives to add value and have acted on the development of guidelines and the formation of a provincial state-owned company and a private–public partnership to install the first lithium-ion cell factory. The National Research Council is driving important efforts with a view to improving capacity for the construction of lithium batteries. Important questions going forward include: (1) what role will multi-stakeholder groups and innovative governance play in solving environmental and societal demands; and (2) how must existing regimes and regulatory tools adapt and evolve to advance sustainable development.

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