As onshore deposits yield lower-grade ores, the comparatively rich grades that have been prospected in subsea deposits beckon miners with appetites for high risks and rewards. Unlike most terrestrial regions, other than a few notable exceptions such as Greenland and the Canadian Arctic, the floors of the world’s oceans are predicted to contain vast, commercially exploitable ore bodies.
Until fairly recently, there was no real effort to exploit these deep seabed resources. In 1974, millionaire industrialist Howard Hughes commissioned a deepsea drillship, the Hughes Glomar Explorer, for the ostensible purpose of extracting polymetallic nodules from the seafloor of the Pacific Ocean. In reality, Glomar Explorer was part of a top secret, CIA-funded effort to raise a sunken Soviet submarine and capture its military secrets.
Due to a confluence of technological, economic, and legal developments, seabed resource extraction in deep waters no longer serves as a cover story for Cold War intrigues; it now represents an advanced front of international mineral exploration efforts and is poised to begin supplying a portion of the world’s resource needs as terrestrial and near-surface ocean deposits become depleted.
Three Types of Deposits
Deep seabed prospectors searching for ores are generally expected to seek out three types of deposits. Two of these deposits have been created when metals precipitate. The third type of deposits can be found in the crusts within seabed mountains, ridges, and plateaus.
The first precipitates of interest are ones that have been formed through accretion of dissolved metals that emit from hydrothermal vents in the ocean floor. They are rich in polymetallic sulfide ores that yield base metals such as copper, lead, and zinc, as well as silver and gold.
A different precipitate play involves deposits of polymetallic nodules rich in manganese, cobalt, nickel, and copper. These nodules, also called manganese nodules, are typically potato-sized concretions of minerals that have precipitated from the surrounding seawater. They were first discovered in the 1860s and have been a subject of interest in mining circles ever since. Large amounts of capital have been invested in identifying potential deposits and in researching and developing technology for mining and processing these nodules. Despite initial investment and successful mining of commercial quantities of high-grade nodules in 18,000 feet of water, the technology was shelved because of an excess of lower-cost terrestrial nickel production.
The final attractions are cobalt-rich ferromanganese crusts that exist on the flanks and tops of sea mountains, ridges, and plateaus, some of which are located within the U.S. exclusive economic zone off California. In addition to cobalt, these crusts typically contain high concentrations of strategically and economically important metals such as titanium, cerium, zirconium, nickel, platinum, molybdenum, tellurium, copper, and tungsten.
Technology and Economics Drive the Move Offshore
Some mining companies have been working shallow-water deposits for decades. De Beers SA, for example, has been working diamond deposits off the coast of Southern Africa since the 1960s. In an expansion of these efforts, De Beers and gold-mining major AngloGold Ashanti formed a JV in 2009 to explore and identify placer deposits in the oceans of the world, and, if successful, ultimately mine marine deposits off the continental shelf. The focus of the venture has been precious metals and phosphates, not diamonds.
U.S. efforts in the 1970s resulted in the discovery of polymetallic sulfide deposits on the ocean floor off the west coast of Mexico. These deposits, known to contain copper, lead, zinc, silver, and gold, have not been explored further due to declines in U.S. investment in technology, infrastructure, and corporate knowledge necessary for success in exploring the ocean depths.
More recently, Japanese scientists announced the discovery of an estimated 80 billion to 100 billion metric tons of rare-earth deposits in the Pacific Ocean and estimated that a seabed area of just one square kilometer could provide one-fifth of the current annual world consumption of rare-earth elements.
Legal Regimes Applicable to Deep Seabed Mining
The extraction of deep seabed mineral resources is governed by separate regulatory regimes in waters under national jurisdiction and waters beyond national jurisdiction (the “High Seas”). This section focuses on the international law governing activities in the High Seas.
I. The High Seas: U.N. Convention on the Law of the Sea
The 1982 United Nations Convention on the Law of the Sea (the “LOS Convention”) establishes a treaty regime to govern activities on, over, and under the world’s oceans. In November 1994, the LOS Convention entered into force for its signatory party States, but not for the United States.
While there have been efforts to get the United States to become a party to the LOS Convention, they have yet to succeed. The convention was first transmitted to the Senate on October 6, 1994. Although the Senate Committee on Foreign Relations reported the LOS Convention in 2007, no action has been taken by the full Senate. In the absence of Senate advice and consent, the United States cannot be a party to the convention.
Figure 1. Dark blue shading indicates Maritime Areas Outside of Exclusive Economic Zones (the “High Seas”).
The International Seabed Authority and Mineral Royalty Provisions
The LOS Convention provisions governing the commercial exploitation of deep seabed mineral resources provide for an intergovernmental body, the International Seabed Authority (ISA), to organize and control all mineral-related activities in the international seabed beyond the limits of national jurisdiction (i.e., on the High Seas).
Under the LOS Convention, party States or companies that a party State sponsors must apply to the ISA for approval of any proposed High Seas explorations. The ISA issues appropriate licenses for High Seas exploration and mineral exploitation.
Article 82 of the LOS Convention requires party States to make payments or contributions in kind with respect to the exploitation of the non-living resources on the High Seas. This provision means that oil and gas companies, as well as mining companies, would pay royalties (through a party State) on resources extracted from areas that lie beyond the 200-nautical mile (nm) exclusive economic zone that each State is granted under customary international law (i.e., a State’s “Extended Continental Shelf” or “ECS”). Therefore, if the U.S. accedes to LOS Convention, it will be required to transfer royalties generated on the U.S. continental shelf beyond 200 nm—the Extended Continental Shelf—to the International Seabed Authority.
The ISA is tasked to distribute payments and contributions to party States in accordance with equitable criteria, taking into account the interests and needs of developing States (in particular the least developed States and land-locked States), and peoples who have not yet achieved full independence or other self-governing status.
There are certain noteworthy aspects to the royalty requirements:
States are exempted from making payments or contributions during the first five years of production;
Developing States that are net importers of the mineral resource produced on their ECS are exempt from payment obligations in relation to that mineral resource; and
States have the option of making either payments or contributions in kind.
Payments and contributions are to be made annually at the rate of one percent of the value or in-kind volume of all production during that year, commencing on the sixth year of production, and increasing by one percent per year until the rate reaches seven percent on the twelfth year, and thereafter remaining at seven percent.
Recent ISA Approvals of Applications for Exploration
In July 2012, the ISA announced it had approved five new applications for seabed exploration licenses for areas in the Indian Ocean, the Atlantic Ocean, and the Pacific Ocean. Two of these applications involve exploration for polymetallic sulfide deposits and three involve polymetallic nodules.
The Republic of Korea applied to explore for polymetallic sulfides in the Central Indian Ocean;
France sponsored a private company, IFREMER, to explore for polymetallic sulfides on the Mid-Atlantic Ridge;
The United Kingdom sponsored a private company, UK Seabed Resources Ltd., to explore for polymetallic nodules in the Clarion-Clipperton Zone in the Pacific Ocean;
Kiribati sponsored a private company, Marawa Research and Exploration Ltd., to explore in the Clarion-Clipperton Zone; and
Belgium sponsored a private company, G-Tec Sea Minerals Resources NV, to explore in the Clarion-Clipperton Zone.
The approval of these applications brings the number of active exploration contracts issued by the ISA to 17.
In 2011, the ISA approved applications by sovereign nations (China and Russia) and private companies sponsored by member states (Tonga and Nauru) to explore for deposits of concentrated ores on the High Seas.
Other nations holding ISA exploration contracts include India, France, Japan, Germany, and the Interoceanmetal Joint Organization, a consortium formed by Bulgaria, Cuba, the Czech Republic, Poland, Russia, and Slovakia.
Figure 2. Exploration Areas in the Clarion-Clipperton Fractured Zone
UNCLOS Dispute Resolution Provisions
The LOS Convention established the International Tribunal for the Law of the Sea (ITLOS), based in Hamburg, Germany, as a dispute resolution mechanism in matters concerning the Convention’s interpretation and application.
A special chamber of judges within ITLOS, the Seabed Disputes Chamber (SBDC), consists of 11 members who resolve disputes involving the use of the resources found within the International Seabed Area. The SBDC exercises advisory jurisdiction over (i) disputes between State parties involving deep seabed mining activities and (ii) questions of the interpretation of the deep seabed mining area provisions and the associated annexes to the LOS Convention.
As the U.S. has not ratified the LOS Convention, U.S. companies are not bound by its terms, although companies need to consider voluntary measures to help achieve security of tenure. At the same time, U.S. companies are bound by U.S. statutory requirements, which will be described in Part II of the article.
Part II will appear in next month’s edition and cover the United States regulatory regimes governing activities in U.S. waters and those on the deep seabed outside of U.S. waters.