REGULATORY: Mining and Natural Resources Regulatory; Maritime Deep Seabed Mining: The Next Wave -- U.S. Seabed Mining Regulatory Regime

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Part I of this article appeared in the December 2012 Energy Newsletter and provided an introduction to the three principal types of seabed ore deposits, a history of exploration efforts, and an overview of the 1982 United Nations Convention on the Law of the Sea provisions governing the commercial exploitation of deep seabed mineral resources, including those of the International Seabed Authority (ISA). [1]

Part II covers the United States regulatory regimes governing activities in U.S. waters and those on the deep seabed outside of U.S. waters.

II. Mining in U.S. Waters: The Outer Continental Shelf Lands Act

Similar to the manner in which it guides the conduct of oil and gas operations, the Outer Continental Shelf Lands Act (OCSLA) governs seabed mining efforts on the U.S. continental shelf (i.e., all shelf submerged lands lying seaward of state coastal waters (3 nautical miles offshore) that are under U.S. jurisdiction). 43 U.S.C. §1331 et seq. This includes a 200-nm exclusive economic zone that is granted under customary international law and was proclaimed by President Reagan in 1983. Proclamation No. 5030, 48 Fed. Reg. 10605 (March 14, 1983).

Figure 3. United States Exclusive Economic Zone Boundaries [2]

U.S. waters and the seabed regulated under OCSLA also include areas beyond the 200-nm exclusive economic zone of the shelf. Pursuant to long-standing law and policy, the U.S. enjoys and exercises full jurisdiction over this area of its extended continental shelf. [3] This jurisdiction includes oil, gas, and hard mineral resources. The U.S. is in the process of delimiting the boundaries of its extended continental shelf through an interagency body, U.S. Extended Continental Shelf Task Force. See, e.g., continentalshelf.gov/about.html.

Figure 4. U.S. Extended Continental Shelf, Areas of Interest [4]

Operations involving seabed mining for hard minerals (any subsea minerals other than oil, gas, or sulphur) on the U.S. continental shelf are regulated under the OCSLA in three distinct parts: 1) Prospecting (30 C.F.R. 580 et seq.); 2) Leasing (30 C.F.R. 581 et seq.); and 3) Operations, including royalties (30 C.F.R. 582 et seq.).

An initial hard mineral lease lasts at least 20 years and a lease may remain in effect as long as mineral production continues. 30 C.F.R. § 581.19. A typical lease for minerals includes rights to all minerals within the leased area (except oil, gas, and sulphur). See id. § 581.8. Leases for oil and gas and other minerals are possible in the same area. See id. § 581.8(c). However, a mineral leasee may not unreasonably interfere with or endanger operations under an existing oil and gas lease. Id.

The identification of areas offered for mineral lease and the sizes of the lease tracts are to be determined by the Department of the Interior. 30 C.F.R. §§ 581.14, 581.15. The sizes of the tracts offered for lease are intended to be large enough to include potentially minable orebodies, meaning that lease tracts may be relatively large in some circumstances. See id. § 581.15.

The royalty due on minerals produced from a hard minerals lease on the U.S. continental shelf may vary and will be specified in the government’s leasing notice. 30 C.F.R. § 281.28. The royalty may be based on a percentage of the value or amount of the mineral(s) produced, a sum assessed per unit of product, or different method if included in the leasing notice. Id. Royalties may be waived, suspended, or reduced in situations where such action promotes the national interest, development, or the mine cannot successfully be operated under existing conditions. See id.

The provisions of the royalty management regulations regarding methods of valuation do not apply to all potential commodities produced by hard mineral mining operations on the outer continental shelf. In the event that the regulations to not address the specific minerals to be produced, the method of royalty calculation will be specified in the leasing notice and subsequently issued lease. See 30 C.F.R. § 581.29.

III. The High Seas: Deep Seabed Hard Minerals Resources Act

The U.S. has long held that its citizens and corporations have rights to explore and exploit the resources of the deep seabed beyond the shelf and may do so whether or not the United States accedes to the LOS Convention, provided that such activities are conducted without claiming sovereignty over any part of the deep seabed and as long as the activities are conducted with due regard to the rights of other nations. Restatement of the Law, Third, of the Foreign Relations Law of the United States, Vol. 2, § 523. These rights extend to mining activities for hard minerals of the deep seabed. Id.

In the absence of U.S. accession to the LOS Convention, the Deep Seabed Hard Minerals Resources Act (the “Resources Act”) governs conduct by U.S. nationals (citizens, vessels, and others subject to U.S. jurisdiction) that engage in exploration for, and commercial recovery of, hard mineral resources on the deep seabed outside of U.S. waters (i.e., the High Seas). See 30 U.S.C. § 1401 et seq.

This Act, implemented by the National Oceanic and Atmospheric Administration (NOAA), establishes the licensing regime applicable to U.S. deep seabed mining ventures. The application of NOAA regulations interpreting the provisions of the Resources Act is largely uncharted. The regulations outline a comprehensive regime governing the issuance of exploration and production licenses and the conduct of commercial recovery operations. See 15 C.F.R. Parts 170, 171. This regime includes:

  1. application requirements, including submission of statements of financial strength, technical experience, and commercial capabilities of applicants;
  2. licensing terms, including provisions covering freedoms of the high seas, international obligations, and safety at sea;
  3. operating terms, covering environmental protection, resource conservation, best available technology, and monitoring requirements; and
  4. enforcement provisions, including the use of observers and hearing and appeal procedures.

See id.

Future Prospects

Commentators deem it unlikely that the Senate will act to ratify the LOS Convention in the 113th Congress. The United States already exercises full jurisdiction and control over its entire continental shelf. Groves Statement, supra note 3, at 15. The U.S. claims clear title to all mineral resources lying under the extended continental shelf and currently enjoys the rights to any and all royalty revenue generated from the exploitation of such resources. Id. Without affixing a value of the mineral resources of the U.S. extended continental shelf, it would be difficult for the Senate to assess the costs, in terms of potential royalties lost, that would be associated with U.S. accession to the LOS Convention.

In the meantime, important moves are being made by private industry to advance technology necessary for deep seabed mining. Lockheed Martin, for example, recently obtained a license from the ISA, through a subsidiary of its British arm, UK Seabed Resources, to prospect for polymetallic nodules in the Clarion-Clipperton Zone. “Lockheed to Use Soviet Submarine Hunt Data in Sea Mine Plan,” BloombergBusinessweek, March 14, 2013 available at www.businessweek.com/news/2013-03-14/lockheed-to-use-soviet-submarine-hunt-data-in-seabed-mining-plan. It remains to be seen whether offshore oil and gas majors and contractors will capitalize on their knowledge and experience involving deepsea operations and move to form similar joint ventures with adventurous partners.

Whether or not the U.S. accedes to the LOS Convention, it would be wise, in the face of increased international competition, for companies to assess the applicability of the knowledge they have accumulated over decades of government-sponsored exploration activities to hard mineral development. Sinking a proverbial shovel into lucrative deposits on the U.S. continental shelf would be a good place to start.

[1] “Deep Seabed Mining Emerges from the Depths,” King & Spalding Energy Newsletter, December 2012 available at www.kslaw.com/library/newsletters/EnergyNewsletter/2012/December/article6.html.

2] Original graphic available at www.gc.noaa.gov/documents/2011/012711_gcil_maritime_eez_map.pdf.

[3] The Law of the Sea Convention: Hearing on Treaty Doc. 103-39 Before the S. Comm. on Foreign Relations, 112th Cong. 8 (2012) (statement of Steven Groves, Bernard and Barbara Lomas Fellow, Margaret Thatcher Center for Freedom, The Heritage Foundation).

See id.

Future Prospects

Commentators deem it unlikely that the Senate will act to ratify the LOS Convention in the 113th Congress. The United States already exercises full jurisdiction and control over its entire continental shelf. Groves Statement, supra note 3, at 15. The U.S. claims clear title to all mineral resources lying under the extended continental shelf and currently enjoys the rights to any and all royalty revenue generated from the exploitation of such resources. Id. Without affixing a value of the mineral resources of the U.S. extended continental shelf, it would be difficult for the Senate to assess the costs, in terms of potential royalties lost, that would be associated with U.S. accession to the LOS Convention.

In the meantime, important moves are being made by private industry to advance technology necessary for deep seabed mining. Lockheed Martin, for example, recently obtained a license from the ISA, through a subsidiary of its British arm, UK Seabed Resources, to prospect for polymetallic nodules in the Clarion-Clipperton Zone. “Lockheed to Use Soviet Submarine Hunt Data in Sea Mine Plan,” BloombergBusinessweek, March 14, 2013 available at www.businessweek.com/news/2013-03-14/lockheed-to-use-soviet-submarine-hunt-data-in-seabed-mining-plan. It remains to be seen whether offshore oil and gas majors and contractors will capitalize on their knowledge and experience involving deepsea operations and move to form similar joint ventures with adventurous partners.

Whether or not the U.S. accedes to the LOS Convention, it would be wise, in the face of increased international competition, for companies to assess the applicability of the knowledge they have accumulated over decades of government-sponsored exploration activities to hard mineral development. Sinking a proverbial shovel into lucrative deposits on the U.S. continental shelf would be a good place to start.
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[1] “Deep Seabed Mining Emerges from the Depths,” King & Spalding Energy Newsletter, December 2012 available at www.kslaw.com/library/newsletters/EnergyNewsletter/2012/December/article6.html.
[2] Original graphic available at www.gc.noaa.gov/documents/2011/012711_gcil_maritime_eez_map.pdf.
[3] The Law of the Sea Convention: Hearing on Treaty Doc. 103-39 Before the S. Comm. on Foreign Relations, 112th Cong. 8 (2012) (statement of Steven Groves, Bernard and Barbara Lomas Fellow, Margaret Thatcher Center for Freedom, The Heritage Foundation).
[4] Original graphic available at continentalshelf.gov/media/ECSposterDec2010.pdf.

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

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Topics:  Deep Seabed Mining, Mining, Natural Resources, Outer Continental Shelf

Published In: General Business Updates, Energy & Utilities Updates, International Trade Updates, Maritime Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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