Background

Over the last two centuries, the United States has seen substantial economic progress, partly due to technological breakthroughs made possible by minerals mined in Montana.

Starting in the late 1800s, copper was discovered in Butte, quickly propelling the fledgling city to national importance and dubbing it the “Richest Hill on Earth.” The large copper deposits fueled America’s industrial revolution, helping Butte to earn its reputation as “the town that plumbed and electrified America.” By 1896, Butte was producing 26% of the world’s copper supply. The city’s mineral wealth eventually grew so large that new immigrants to America recounted being told, “Don’t stop in America, go straight to Butte!” This trend continued well into the 20th century, as Montana’s minerals became instrumental in both WWI and WWII. 

With a reputation that precedes it, Montana proudly earned the nickname “The Treasure State.” For nearly 100 years, that title went unchallenged, but that all changed at the dawn of the 21st Century. Despite the increasing importance of minerals, ever cleaner mining techniques, and an abundance of deposits to pull from, Montana slowly lost its long held position to nations like China.

Now with greater skepticism towards maintaining our reliance on adversarial nations with few environmental protections, a massive increase in demand for energy in America, and a looming technological boom that will be reliant on critical minerals, eyes have once again turned back to Montana. 

In this iteration of the Montana 2050 Project, I will be looking at how Montana can leverage our abundant critical minerals, attract the companies that rely on them and reclaim our place as The Treasure State.

What Are Critical Minerals?

The United States Congress defined a critical mineral in the Energy Act of 2020 as any non-fuel mineral, element, substance, or material designated as critical by the Secretary of the Interior, acting through the Director of the USGS that is: 1) essential to the economic or national security of the United States; 2) has a vulnerable supply chain; 3) and serves an essential function in manufacturing a product.

Importantly, critical minerals have no viable substitutes, meaning that if their supply chain were to face disruption the United States economy and national security would be put in significant jeopardy.

A 2022 analysis by the U.S. Government identified 50 minerals that met these requirements. Some of these minerals are particularly important yet are still relatively common, like copper, while others are exceedingly rare, earning them the name “rare earth elements.”

What are Critical Minerals used for?

Electricity Generation: Critical minerals are vital to electricity production, especially clean energy.

A 2021 study found that since 2010, “the average amount of minerals needed for a new unit of power generation capacity has increased by 50% as the share of renewables in new investment has risen.” Another study from the World Bank Group estimates critical mineral demand will increase by nearly 500% by 2050. With a massive wind energy potential, Montana’s wind energy portfolio could by itself be a massive driver of demand for critical minerals.

Energy Transmission: Not only are critical minerals needed in energy production, but minerals like aluminum and copper are essential for the transmission of energy. This is especially important in large geographic areas where supply and demand are considerable distances apart. Montana is currently facing a daunting transmission bottleneck, with nearly all transmission lines at capacity. Breaking through this bottleneck will not only take abundant minerals but it will in itself require reforms.

Semiconductors: Semiconductors are the material basis that allow microchips to function. Semiconductors are so integral to creating microchips that the two have become synonymous with each other. 

Semiconductors make nearly all modern technology possible, including innovations like Artificial Intelligence and Data Centers. The demand for the electronics semiconductors power is staggering, being used by American adults, on average, more than 12 hours a day.

Once dominated by the US, most semiconductors are now manufactured outside of the country. Many of these regions are now highly vulnerable to geopolitical turmoil and supply chain disruptions, like those seen during the Covid-19 Pandemic.

The overwhelming majority of semiconductors are currently produced close to the upstream supply chain in Southeast Asia. However, Montana’s burgeoning semiconductor industry and a greater leveraging of abundant mineral resource wealth could attract other steps in the critical mineral supply chain.

Vehicles: Modern vehicles, especially hybrid and electric vehicles are heavy users of critical minerals. For example, electric vehicle batteries require critical minerals like lithium, cobalt and nickel for their energy storage capabilities.

Farm Equipment: Modern farm equipment is replete with critical minerals. From minerals needed to make strong lightweight alloys that are corrosion resistant, to advanced sensors and computing systems used in tractors and advanced monitoring systems, critical minerals are as vital to modern farming as water.

Photonics: The photonics industry has seen a major boom over the past decades, especially in Montana. This cutting edge industry is heavily reliant on rare earth elements, with industry reports calling them “the lifeblood of the photonics industry.” The same industry report explains that elements “such as erbium, ytterbium, yttrium, neodymium, thulium and europium are vital optically active ingredients at the heart of many lasers, optical amplifiers and phosphors.”

Where are critical minerals found?

Critical mineral deposits are found around the world but are typically concentrated in certain regions due to geologic formations. While the U.S. has abundant critical minerals reserves, over 80% of our nation’s supply of critical minerals comes from foreign sources. Of the 50 critical minerals, the U.S. currently imports over half of its consumption for 43 of them. There is currently no domestic production for at least 14 of these critical minerals. The table below shows some of the nations currently supplying the most critical minerals.

Of increasing importance, the U.S. has almost entirely lost its market dominance of rare earth elements (REE). About forty years ago, the U.S. had the largest market share of REE extraction and production, but by 2000, the United State’s market share dropped to 6% while China’s skyrocketed to 85%.

What does the critical mineral supply chain entail?

As the definition of critical minerals laid out by congress points out, it is not just the mining of the minerals themselves that we should worry about, but also the disruption to any part of the supply chain. Each step represents a new value-add, meaning that whoever performs each step gains economic benefits – all of which could be happening in America. 

The following are the general steps necessary to make a critical mineral usable:

1. Exploration
2. Planning
3. Project Permitting
4. Mining
5. Processing
6. Refining
7. Manufacturing

The critical minerals supply chain, especially in manufacturing for products like semiconductors, is particularly capital-intensive and cost-sensitive. Delays, unpredictable regulatory environments and unexpected costs at any step can be detrimental. Consequently, to reduce costs, nearly the entire critical minerals supply chain has moved to Southeast Asia to be close to vital supply chain bottlenecks controlled by China. Research shows that this is not because of China’s “innate resource wealth but [due] to its dominance in the realm of smelting, refining, and processing,” a key step in the process. 

China and surrounding regions dominate nearly the entire critical mineral supply chain because China holds a near monopoly on a few important steps. Businesses, especially those that are cost-sensitive, frequently move to be closer to the supply chain. This is known as the proximity effect, in which businesses locate near earlier steps in the supply chain to benefit from more advantageous cost arrangements and to better customize inputs with suppliers.

The impact of the proximity effect is threefold. First, it creates a synergistic supply chain that grows faster and can outcompete other firms. Second, it can generate a considerable amount of jobs as the entire supply chain grows. Third, it fosters economic growth and prosperity, continually creating new supply chain opportunities.

This demonstrates that whichever place dominates key steps in the supply chain, like mining and processing, will likely attract the rest of the supply chain, including manufacturing. For Montana, this proximity effect would accelerate high-tech industry growth, create job opportunities across the supply chain, and foster economic growth across the entire state.

The Montana Advantage

Abundant Critical Minerals

Montana didn’t earn its nickname as “The Treasure State” by accident, under the surface lies a treasure trove of critical minerals. The reason for Montana’s mineral abundance has to do with unique geology, found nowhere else in the world. A history of volcanic and hydrothermal activity, and plate tectonics has created the perfect conditions for stores of critical minerals, some of which have earned the title of being “world-class ore bodies.”

Although Montana already has at least four mines or facilities that produce critical minerals, the magnitude of our mineral wealth grows with each passing year as researchers and private industry survey the state. The map below results from recent surveys, demonstrating moderate to high mineral potential in major regions across the state.

Widely known for its significant coal deposits, the eastern portions of Montana are also heavily laden with rare earth element deposits. Meanwhile, in the western part of the state there is a high presence of mineralization leading to mineral density rivaled by few other places in the world.

The photo below zooms in on the map, providing a clearer view of the abundance of minerals present.

The reason for the high mineralization is due to a geologic formation known as a sedimentary basin, a relatively rare occurrence. Known as the “Belt Basin,” Geologist Charles M. Ross explains just how unique it is:

“The U.S. is blessed with one such Proterozoic aged sedimentary basin – the Belt Basin of northwestern Montana and northern Idaho. Nowhere else in the U.S. (including Alaska) do such rocks occur. The metal endowment of the Belt Basin, include not just the total number of ounces, pounds, and tons, but also the incredible variety of metals – a virtual Periodic Table of the Elements – is surpassed by only a small handful of Proterozoic basins elsewhere on the planet.”

Below is a map of where the Belt Basin occurs.

These maps brings up two important points:

1. Only 82% of Montana’s geology has been mapped, meaning that there are still large portions of Montana that could have significant deposits that have yet to be discovered.
2. Many of the critical minerals identified by these surveys are found at abandoned mines. Discoveries of rare earth elements, like those recently made at the Berkeley Pit, highlight the potential of leveraging existing mines to increase critical mineral production.

The increased mining for critical minerals in Montana would also likely attract other segments of the supply chain seeking proximity to the source.

Geopolitical Stability

Over the last 3 years, there has been a massive push by the United States government and private companies to stabilize the supply chain for critical minerals and the products that use them, and reduce our dependence on adversarial nations like China. Montana’s geopolitical stability makes it an excellent destination for companies looking to bring back the critical minerals supply chain to America.

Montana’s Challenges

Energy Supply

Every step of the supply chain of critical minerals is particularly energy intensive. For example, some of the largest energy consumers in the state of Montana are large industrial metal mines. Some of the next largest energy consumers are manufacturers, refineries and processing companies. Without affordable, always-available power, Montana won’t be able to attract any of the steps in the critical minerals supply chain.

Unfortunately, reliability of energy supply is the exact problem Montana faces. One of the biggest threats to Montana’s energy supply is the mismatch of electric loads due in part to “increasingly variable, non-dispatchable energy supply portfolios,” such as wind and solar. Without dispatchable power that can be immediately turned on, Montana’s grid may not be able to meet peak demand.

To make matters worse, these challenges with reliability are occurring at the exact time when it is expected that “electrification of the transportation sector and other parts of the economy” will increase in coming years. This growing demand, coupled with a lack of a way to quickly increase energy supply will further undermine reliability and increase prices.

Industries across the state are already feeling this impact. For example, REC Silicon, an employer of nearly 300 Butte-Silver Bow residents, is cutting back on manufacturing in Butte due to forecasts of “sustained high electricity costs.”

Regardless of how you look at it, Montana needs more affordable, always-available power.

Permitting Process

Complex and unclear permitting processes are often cited as one of the biggest barriers to critical mineral mining. Similarly, industry leaders in semiconductor manufacturing cite permitting processes as one of the biggest barriers they face when looking to open a new facility.

Unfortunately, projects in Montana face a particularly bureaucratic and unclear permitting system. With nearly 30% of land in Montana being federally owned, projects may be required to go through both state and federal permitting processes. Both of which are so vague that they frequently lead to litigation that can delay or stop projects even after meeting substantive regulations.

Canada and Australia, two countries with similarly stringent environmental regulations, have an average mine permit approval time of 2 years, while the U.S. averages 7 to 10 years. Montana’s permitting process is particularly punitive to mineral development, accounting for more Montana Environmental Policy Act (MEPA) lawsuits over the last 10 years than any other category.

For example, the Black Butte Copper Mine is by far the most environmentally responsible copper mine in Montana history. Yet the mine still went through 14 years of planning, permitting and litigation before questions about the permitting process were finally resolved.

Regardless of how you look at it, current permitting processes will be one of the largest barriers to growing the critical mineral supply chain in Montana. Without reforms entrepreneurs will likely look to other states to do business.

Montana’s Opportunity

While Montana’s abundant critical minerals have already positioned it to attract the supply chain, leaders can do more to make our state more appealing.

Reform The Permitting Process

Nearly every step of the critical minerals supply chain, from mining to end product manufacturing will likely be required to go through a permitting process. Likewise, the energy required to make these projects possible will likely need to go through a long and bureaucratic permitting process. If Montana wants to take advantage of our abundant critical minerals and attract the supply chain that uses them, then policy makers should take serious steps towards streamlining and simplifying procedural laws like the Montana Environmental Policy Act and the National Environmental Policy Act.

Continue Business Friendly Policies

Over the last few years Montana has engaged in several efforts to help position itself as being more business friendly. One measure, The Red Tape Relief Initiative, led to the reduction of 1,114 “excessive, outdated and unnecessary” regulatory restrictions since 2021. Other reforms, like increasing the business equipment tax exemption and restructuring the corporate taxes in favor of companies with in-state facilities, have helped increase our appeal to businesses. By continuing with policies that lock-in red tape relief or attract cutting edge industries, Montana can outpace other states in entrepreneurship.

With a few reforms, Montana can leverage its critical minerals to revitalize both the US and Montana economies, enhance national security, and reduce dependence on countries like China that have few environmental protections.

Montana 2050 Vision

Montana has the potential to become a one-stop shop for critical minerals. By enabling mining, Montana can leverage the proximity effect to attract the processing and refining steps, which will attract the manufacturing steps, which will drive the demand for more Montana critical minerals.

As Frontier Institute’s President and CEO, Kendall Cotton recently put it: “In 25 years, Montana energy companies could be installing wind turbines and solar panels built in Montana, with semiconductors and photonic technology manufactured in Montana, utilizing Rare Earth Elements extracted and processed in Montana, to export clean Montana-made energy to power the nation.”

By making reforms that enable more critical mineral utilization, Montana can attract the rest of the steps in the supply chain, jumpstart our high tech industry, create high quality jobs, and foster economic growth throughout the 21st century.

Our state does not have to be left in the technological dust. With some meaningful reforms, Montana can regain its rightful place as the Treasure State and become a major leader in the economy of 2050.