REGULATORY: Mining and Natural Resources; Oil and Gas Regulatory: Deep Seabed Mining Emerges from the Depths By Jeff Perry

by King & Spalding
Contact

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.[1]

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.[2]

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.[3]

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[4] (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.[5]

Figure 1. Dark blue shading indicates Maritime Areas Outside of Exclusive Economic Zones (the “High Seas”).[6]

File:International waters.svg

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.[7] 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.[8]

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.[9]

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.[10]

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.[11] 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[12] 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[13]

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.[14]

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.[15] The SBDC exercises advisory jurisdiction over (i) disputes between State parties involving deep seabed mining activities[16] and (ii) questions of the interpretation of the deep seabed mining area provisions and the associated annexes to the LOS Convention.[17]

Conclusion

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.
________________________________
[1] “Miners eye sea as land resources diminish,” Mining Weekly.com, October 30, 2009, available at www.miningweekly.com/article/sea-change-2009-10-30.
[2] “U.N. Approves China Sea-Floor Plan,” The Wall Street Journal, July 21, 2011.
[3] Yasuhiro Kato (2011), Deep-sea mud in the Pacific Ocean as a potential resource for rare-earth elements, Nature Geoscience 4, 535–539.
[4] United Nations Convention on the Law of the Sea (UNCLOS), 21 I.L.M. 1261. Convention adopted December 10, 1982. Entered into force November 16, 1994 [hereinafter UNCLOS].
[5] See Eugene H. Buck, Congressional Research Service, RL32185 U.N. Convention on the Law of the Sea: Living Resources Provisions (2011).
[6] Original graphic available at www.en.wikipedia.org/wiki/File:International_waters.svg.
[7] See “Issues Associated with the Implementation of Article 82 of the United Nations Convention on the Law of the Sea: ISA Technical Study No. 4,” International Seabed Authority, 2009, available at www.isa.org.jm/files/documents/EN/Pubs/Article82.pdf.
[8] Id.
[9] Id.
[10] Id. at xiv.
[11] “ISA Council Approves Five New Applications for Exploration,” July 23, 2012, available at www.isa.org.jm/en/node/770.
[12] The Clarion-Clipperton Zone lies in the Equatorial North Pacific Ocean south and southeast of Hawaii and is thought to hold major deposits of polymetallic nodules. The water depth in this region varies between about 4500-6000 meters.
[13] Original graphic available at www.isa.org.jm/files/images/CCZ_contractors-resize2.jpg.
[14] See UNCLOS, supra note 4, Annex VI.
[15] See id., Annex VI, Sec. 4.
[16] See id., Art. 188, Subpara 1 (b); Annex VI, art. 36.
[17] See id., Art. 188, Subpara. 2(a-b); Art. 288, Para. 3.


Jeffrey H. Perry
Washington, D.C.
+1 202 626 5521
jperry@kslaw.com

View Profile »

 

Written by:

King & Spalding
Contact
more
less

King & Spalding on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.