BISMARCK — An effort to change North Dakota's mining laws is creating fault lines between the coal industry and landowners.
House Bill 1459 aims to create a legal framework that would boost commercial development of rare earth elements and other "critical minerals" found in the beds of North Dakota's lignite coal.
A landowner group calls the proposal unconstitutional because it affects existing contracts.
Rare earth elements are a group of 17 minerals frequently found together and ubiquitous in electronics and clean energy technologies. "Critical minerals" is a political term that refers to minerals that are considered essential for the economy or national security, which can include rare earths.
The bill would use the state's "police power" to require the legal "pooling" together of critical minerals and coal already under contract. Mineral owners would receive a 2.5% royalty rate on net profits from the mining, removal and sale of the minerals.
The mining, processing and marketing of rare earths is largely controlled by China, and that has made setting up an industry in the U.S. a challenge. Mountain Pass in California is the only U.S. rare earth mine that exists, and it has struggled to keep the lights on in recent decades due to environmental issues and Chinese competition.
There is a push from both federal and state politicians to fund research and development to create a domestic supply. Around a decade of research from state agencies has shown that high concentrations of rare earths exist in North Dakota coal, while other efforts from the University of North Dakota found extracting rare earths from lignite could be cheaper and have fewer environmental risks than refining minerals found in hard rocks such as those at Mountain Pass.
But whether there is a business case to mine for these elements in North Dakota is still up in the air because questions remain about how much of the coal has high rare earth concentrations, along with the industry being so new.
Rare earths remain in ash after coal has been burned, but the technology around extracting that is more challenging. This law would apply only to pre-combustion coal.
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The coal industry maintains that the tricky economics of developing rare earths requires the state to give it the certainty that it has the legal right to mine coal for rare earths.
Coal lobbyists say the industry is willing to negotiate around royalty rates, but the broader outline of the bill is needed for the industry to consider moving forward with rare earth development.
"We firmly believe this bill is constitutional and the state can exercise its police powers. It's done it before. ... It must do so in a limited fashion," said David Straley with North American Coal. The company operates three mines in North Dakota. He pointed to the limited nature of the legislation to existing coal leases and the public benefits of mineral development.
The Northwest Landowners Association says its members want to see the minerals developed, too, but by altering contracts between coal companies and landowners that have already been privately negotiated, the law would be unconstitutional. Landowners with coal leases agreed to receive a financial return from companies for the coal mined for electricity and, in some cases, chemical products, but in general, not specifically for rare earths.
"Their land is already being disturbed, so it's just a negotiation between the parties to figure out equitable or just compensation," said Troy Coons, the NWLA's chairman.
The group's lawyer, Derrick Braaten, also expressed skepticism on the assertion that the industry would not go forward in the state without this legislation if the market and other national incentives were right.
He said questions of whether existing contracts apply to rare earths can be figured out in court as rare earth projects develop.
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The coal industry pushed back on this.
"There'll be thousands of quiet title actions. ... They're not all going to exist the same way. Yes, there's going to be quite a few that are the same, but any one-word change in a lease is going to make it susceptible," Straley said.
HB 1459 passed 85-2-7 in the state House, but opposition picked up during committee hearings in the state Senate. Over two hours of testimony at the Senate Energy and Natural Resources Committee prompted lawmakers to ask industry and landowners to negotiate.
The two sides remained at an impasse Thursday on what a legal framework should look like.
Lawsuits are inevitable if the bill passes in its present form, Braaten said. The group has repeatedly sued the state for other laws that it argues violate property rights in the state's constitution.
Some lawmakers at the Senate Energy and Natural Resources Committee expressed frustration with NWLA on Thursday.
"What I hear here is, 'We want to litigate. We want to litigate. That's all we want to do without any answers.' I mean, at the end of the day, the people that have the (minerals) are losing," said Sen. Greg Kessel, R-Belfield.
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Coons pushed back. He said the industry should have approached landowners earlier in the legislative process.
Straley said provisions that the coal industry pushed for in the bill were added with the goal of compensating landowners as coal miners seek to develop critical minerals.
Whatever side gets its way, industry, researchers and lawmakers all expressed the feeling that the state is in a time crunch to get the industry going, noting multiple ongoing rare earth projects across the country.
"If we wait two years or wait four years, there's the risk of getting behind ... we're ready to do it now, it's just a matter of getting the financial and business pieces together," said Dan Laudal, a University of North Dakota researcher.
The committee gave both sides until Monday to keep negotiating.
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