UK Deep Sea Mining Industry

Wednesday 20th February 2019 Westminster Hall

11:00

[Mrs Sheryll Murray (South East Cornwall) (Con)]

I beg to move,

That this House has considered the UK deep sea mining industry.

It is a pleasure to serve under your chairmanship, Mr Hosie. I am grateful to the Minister for coming to respond to the debate. Just a little political push from her over the next few weeks might be all that our fledgling deep sea mining industry needs to succeed and to catch up with our international competitors.

The debate is timely and important. This year, we reached a critical point in the development of the UK’s deep sea mining exploration and exploitation capabilities. A small push from the Minister’s Department could mean that the UK leads the world in the environmentally responsible exploitation of vital and valuable seabed minerals. We could secure supplies of the raw materials we need for a host of new technologies, including rechargeable batteries, as well as large tax revenues. On the other hand, neglect or bureaucratic inertia could mean that we squander a once-in-a-generation opportunity and lose out to more agile, forward-thinking countries, such as China and Belgium.

I will briefly outline why Parliament legislated for deep sea mining in 2014, what has changed since, the progress of other nations, the enormous benefit that the industry could bring to the UK and, finally, some things that the Government could do to help it to move forward. Deep sea mining has come a long way since I took the Deep Sea Mining Act 2014 through Parliament. Back then, we were concerned with making our law technically consistent with the United Nations convention on the law of the sea—UNCLOS. Actual exploration of the deep Pacific seabed, let alone exploitation, was uneconomic, yet Parliament recognised, even then, the enormous economic and strategic potential of deep sea minerals, as well as the environmental risks. We recognised that the UK must be at the forefront of setting global standards for operating in these untouched and sensitive marine environments.

In the last five years, technology has moved apace. Every year, seabed minerals, such as cobalt, grow in importance. Demand for seabed minerals, for example, for wind turbines, solar panels and rechargeable batteries, means that the economics of mining have totally changed. The commercial opportunity, and the environmental risks, are there right now. Other countries are well aware of that and have made good progress in building their industrial bases to seize this opportunity. The International Seabed Authority says it wants to complete its regulations on mineral exploitation by 2020, so that we are no longer concerned with the legal technicalities and theoretical licences.

This is happening right now, and the UK is falling behind. China, South Korea, Japan and the European Union all have well-developed deep seabed mining industries. China was just a side player five years ago but has since made great strides. It now sponsors four deep seabed mining contractors and has just applied for its fifth exploitation contract. That is more than any other country. During those same five years, the UK has sacrificed an enviably strong position.

When I took the 2014 Act through Parliament, Lockheed Martin told me that the UK was in a superb position to lead this industry, economically and environmentally, for the following reasons. First, our regulatory and legislative processes are transparent and predictable. That is crucial for industry, because it reduces the regulatory risk and allows it to plan long-term investments. Secondly, we have high environmental standards and diplomatic leadership on maritime issues. Thirdly, we have a leading and central position in the offshore oil, gas and mining industries. Fourthly, we have a world-leading financial services industry. Last but not least, we have an international reputation for innovation and engineering, and a track record of solving complex engineering challenges.

That really matters, because there are strong concerns about the security of our national supplies of cobalt and rare earth minerals. China currently has a stranglehold on the supply of those minerals. The UK is totally dependent on imports for its supply of cobalt. Cobalt is required for rechargeable batteries for electric cars, which we all know will become incredibly important very soon. Both cobalt and rare earth minerals are present in polymetallic nodules. The International Seabed Authority has granted two licences sponsored by the UK, which cover an area of 133,000 sq km—roughly the size of England. The current best estimate is that that area of seabed contains almost 1 billion tonnes of minerals. Nickel and manganese are vital for the so-called decarbonisation agenda—for electric vehicle batteries and wind farms. Unless we secure the supply of those minerals, we will have no hope of meeting the terms of the Paris agreement.

I believe that after just one deep sea mining operation, we would go from being a 100% net importer of cobalt, nickel, manganese and other rare earth minerals to being a net exporter. Deep sea mining would allow the UK to secure its own supply of those important minerals, yet through inaction we are letting China and other countries beat us to it. The frustrating thing is that the UK has incredible, world-class expertise in battery science. Two years ago, this Conservative Government launched the Faraday battery challenge, yet apparently we have not realised that if we want to be world leaders in rechargeable battery technology, we need raw materials such as cobalt. We simply do not have our own supply of the required raw materials in place.

It is important that the UK becomes a leader in this new international industry so we can ensure that high environmental standards are followed. That is especially important since the USA has not ratified UNCLOS and therefore cannot participate. We can lead not just technologically but in ensuring high environmental standards. Other nations might not have the same commitment to the environment as we have. There is a kind of gold rush under way and, just as with other gold rushes, proper environmental scrutiny could easily be neglected.

The International Seabed Authority has issued 26 different permits for mineral prospecting, of which two are British sponsored. The total area of seabed licensed by the ISA is now a massive 1.2 million sq km. The seabed is largely an unknown world, and new species are being discovered that exist nowhere else. It is one of the last untouched ecosystems in the world. It is vital that the UK leads the world in setting standards for exploration and exploitation without ruining yet another ecosystem.

The two UK-sponsored licences were granted to UK Seabed Resources Ltd, a wholly owned subsidiary of Lockheed Martin. Lockheed Martin drew up charts of the Pacific seabed nodules in the 1970s, when exploitation was completely impossible. Those charts, which we might think of as almost literal treasure maps, now form the basis for exploration and eventual exploitation. Needless to say, both those phases require significant investment.

Belgium benefited from EU funding. Unfortunately, the UK chose not to apply for that funding. Until now, Lockheed Martin has self-funded, but in view of the ongoing regulatory uncertainty, it has been obliged to slow its rate of investment.

It is worth noting that the other projects in the Clarion Clipperton belt have received financial investment from their respective Governments, which is a major reason why those projects are well advanced. Exploitation of those licences needs to reach the pre-feasibility stage by 2022. That will require fairly significant funding if we are not to fall behind further. Government funding would be highly desirable so that at least the UK is not disadvantaged compared with competitor nations.

It is also worth noting that the funding will not go to UK Seabed Resources, but to universities and other regional partners, which will conduct research once funded. The total investment for a seabed mining project is very significant, perhaps as much as £3 billion. That is about the same amount as for a similarly sized onshore mine, but the level of technical risk is higher, which is why some element of Government involvement is normally required.

The funding would not be required all at once, but in several smaller chunks. Furthermore, only about £400 million is required to reach the “bankable” feasibility phase. At that point, traditional debt finance becomes readily available. It is an energy security issue and an environmental issue, and it requires large investment.

Deep sea mining also presents a huge commercial and tax revenue opportunity. When David Cameron was Prime Minister, he called it a £40-billion opportunity, which was almost certainly an over-cautious estimate. If we invest in the industry and make it a commercial success, there will be benefits to the Exchequer in the form of tax and royalties. On current estimates, the Treasury will take £5.7 billion in tax plus £360 million in royalties over 25 years. That is about £2.8 billion at net present value, given the Treasury’s 3.5% discount rate. I have tried to show that the new deep sea mining industry in the UK would create huge commercial, environmental and tax revenue benefits for the country.

The Government could do some simple things that would have a huge impact on the prospects of the fledgling industry. I ask the Minister, in general, what steps the Government have taken, or plan to take, to pioneer the new and essential industry. Specifically, how does she plan for us to catch up with competitor nations and get back to where we should be—in front and leading the way in engineering and environmental standards? What assessment have the Government made of the risks of the economic reliance of the UK and our allies on imports of minerals such as cobalt, nickel and manganese? What is our strategy to reduce or mitigate those risks? Does deep sea mining form part of that strategy? It is now more than four years since the 2014 Act received Royal Assent, but we do not have a strategy or regulatory framework.

To turn to academia and business, how can the Government support a research programme? Can we put one together through the industrial strategy challenge fund to make UK academia and small and medium-sized enterprises world leaders in deep sea mining? If so, how? As I have tried to stress, the benefits would be rapid and large, in the form of mineral supply autonomy and environmental leadership.

Can we explore avenues for international co-operation, for example with the USA, which has not signed up to UNCLOS? Other nations look to us to show leadership in the field. As we look outwards, beyond Brexit, I sincerely hope that we will rise to the challenge.

I have tried to show how the world has changed since the Deep Sea Mining Act passed into law. I have explained what an enormous opportunity we have before us. We can ensure our mineral security and our environmental leadership in this new industry, and gain massive benefits for our industry and the Exchequer.

We are falling behind, and for want of a tiny push by the Government we are in danger of squandering a once-in-a-lifetime opportunity. I therefore urge my right hon. Friend the Minister to look for ways to drive this fledgling industry forward. This is a new, challenging task of the kind that the UK is uniquely capable of delivering. Our capable officials need political will, determination and leadership if they are to make progress. I therefore urge the Minister to work across Government to ensure the UK does not miss this generational opportunity to pioneer a new and essential industry, which potentially has huge benefits to the environment, our energy security and the Exchequer.

11:15

[The Minister for Energy and Clean Growth (Claire Perry)]

It is a pleasure to serve under your chairmanship, Mr Hosie, and to respond to the debate secured by my hon. Friend the Member for South East Cornwall (Mrs Murray), who set out her extremely interesting and detailed knowledge of the current situation and the opportunities presented by new technology. She is known to many of us as one who has an almost unique perspective on these matters. Matters maritime and mining run in the blood of Cornish men and women, and she has certainly demonstrated that she is capable of talking with great knowledge about both.

My hon. Friend was responsible for delivering the Deep Sea Mining Act 2014. A private Member’s Bill, it did some incredible work by amending the Deep Sea Mining (Temporary Provisions) Act 1981, which provided only powers to license applications in relation to polymetallic nodules—a rather niche area. Through her work, the 2014 Act extended that to apply to all minerals found in the deep sea, opening the way, as she rightly said, for the UK to sponsor applications to the ISA for all minerals in the future. It was striking that that Bill received cross-party support in Parliament. During its passage, my hon. Friend expressed the need to carry out economic exploitation in a sensitive environment with the utmost environmental concern and caution.

My hon. Friend also managed to steer the Marine Navigation Act 2013 successfully through Parliament. Again, that is a tribute to her commitment and her family’s longstanding involvement with the sea. She does a brilliant job of representing her constituency. She pointed out how we need to move forward in maritime matters and mining.

I will start by giving some context. The UN convention on the law of the sea established that the mineral resources of the seabed are the common heritage of mankind and sit beyond national jurisdiction. As my hon. Friend well knows, reserves of terrestrial minerals are dwindling. There is a rich opportunity out there, which she rightly points out is critical to many of the new technology challenges that we are facing and rising to meet. That has led to pressure on the International Seabed Authority to set out a framework for mining the seabed. There have been 29 exploration contracts so far issued from 20 countries to bodies including state-owned enterprises and commercial organisations with a state sponsor, which has been the model that the UK has put forward. I believe that it is approaching two licences so far.

The Deep Sea Mining Act, of which my hon. Friend was the proud steward, enabled the domestic deep sea mining sector to be regulated in a modern way that has due regard for the economic opportunity and aims to prevent damage to the environment. The ISA is now working towards agreeing a mining code that contains technical, financial and environmental provisions by a deadline of March 2020. The UK delegation has been leading at those negotiations.

Given your geographic interest, Mr Hosie, you will know that we have a very profound heritage in the extraction of hydrocarbons and minerals, both onshore and offshore, with the proudest tradition of high environmental standards. We will continue that commitment to transparency, science and evidence-based policy making and environmentally sound regulation to ensure the effective protection of deep sea habitats and biodiversity. The mining code, once it is in place, will enable the ISA to issue so-called “exploitation contracts”—that sounds awful. We should perhaps find a new name for them—perhaps “exploration contracts”. Of course, the UK would need to consider whether these regulations need to be supplemented with additional domestic provisions in line with the Deep Sea Mining Act 2014.

The UK has sponsored two 15-year exploration contracts on behalf of UK Seabed Resources Ltd, which is a subsidiary of Lockheed Martin, the US corporation. The contracts are for polymetallic nodules in the Clarion Clipperton fracture zone of the Pacific. As my hon. Friend has pointed out, these activities and others may allow us to access minerals and metals and achieve safety and security of supply of those materials in the long term.

Also, my hon. Friend rightly joined up the dots to point out that when we talk about our clean growth strategy and the opportunity for the UK’s economy to benefit from investment in low-carbon technologies, such as battery storage and solar energy, they require some of the self-same minerals and metals that are there to be found. If we do it carefully, this work will help us to protect our environment and meet our climate change obligations while creating hundreds of thousands of jobs.

A MOG—machinery of government—change is a very boring term. This whole area has been subject to cross-Government movement recently, and indeed it has been moved to my Department, and I am now the responsible Minister. My hon. Friend will know that I take the issues in my portfolio seriously and try to get things done. Hopefully, it will give her some comfort to know that this subject now sits within the clean growth area of the Department for Business, Energy and Industrial Strategy, having been transferred recently from my excellent colleagues in the Foreign and Commonwealth Office and the Department for Environment, Food and Rural Affairs. I mean no disrespect to them when I say that it may now form part of a more coherent view of the economic potential before us. As the responsible Minister for oil and gas in the UK as well, both onshore and offshore, I assure my hon. Friend that the proud commitment to high regulatory standards will of course apply. In BEIS, we are leading a cross-Whitehall working group to co-ordinate Government activities ahead of the finalisation of the mining code.

My hon. Friend asked me about some of the activities that the Department is undertaking. We have undertaken to analyse the potential economic value to the UK of the first two licences granted in the Clarion Clipperton fracture zone. That work should be completed this summer, ahead of the UN’s ratifications of the regulations this year. We have also made a commitment to the ISA that UK Seabed Resources Ltd, our commercial operator, will undertake a plan of work throughout the period of exploration, reporting back in a very detailed way on all of its exploration activities, including the considerable amount of work it has done on environmental exploration, so that we have a good dataset upon which to base any future regulations.

My hon. Friend will know that this is a long-term investment, so it is quite right to do the turf-rolling now and indeed to make sure that the regulations are fit for purpose. I think it is accepted that commercial-scale deep sea mining operations will probably not begin before the middle of the next decade. Having said that, she pointed out that other countries are starting to move faster than previous estimates suggested, so it may well be the case that these challenges are pulled forward and that we will need to move a little faster. However, understanding the environmental implications of mining some of the deepest seabed or seafloor regions, particularly in the Pacific, is a monumental task.

I pay tribute to the superb piece of work put together by the cross-party Environmental Audit Committee, which is chaired by the hon. Member for Wakefield (Mary Creagh). The Committee did a really superb piece of work in looking at many of these issues, including sustainable seas in general, but very specifically the opportunities and challenges of deep sea mining. That work is really well worth a read.

My hon. Friend asked me essentially what the Government’s plans are. The decision on whether or not our UK-sponsored contractor will go into production will be a commercial one, but we will need to consider—on the evidence—whether we are prepared to sponsor an exploitation licence and on what conditions such a licence should be applied.

I have mentioned before my hon. Friend’s very coherent and eloquent statements about the economic importance of deep sea mining; I suspect that she might have had something to do with persuading the former Prime Minister of the value of this activity, and she quoted some superb statistics to show why it should be examined with great interest. I emphasise, however, that we need to understand our obligations to protect the seabed as well as the water columns and the currents, because the last thing we want to do is to start treating the seas as an infinitely exploitable resource.

We will continue to ensure that effective and binding environmental standards have been adopted and adhered to before we grant any commercial exploration licences, and that the mining activity is part of a well-evidenced environmental plan. My hon. Friend knows that we will continue to use our significant global influence to promote at global level the adoption of our transparent, science-based and environmentally sound approach, and a set of principles that are based on precautionary work, rather than responsiveness.

I am pleased to report that the UK is taking a leading role in international negotiations. As my hon. Friend knows, perhaps better than many others, we have a wide range of deep sea scientific and engineering expertise, and the opportunity to onshore many of the jobs and much of the intellectual property from that is profound. The important question we need to ask ourselves is how to balance exploration in environmentally sensitive areas against the potential risks. I am confident that we can do that; we have done it in many other environments around the world and can continue to do so.

My hon. Friend asked some specific questions about funding for the proposals and about research and development investment. I am pleased to say that UK Research and Innovation would be open to accepting a deep sea mining proposal in a future industrial strategy challenge fund competition. She also asked whether we have made an economic assessment of the dependency on rare earth minerals. I do not know, but I will find out and write to her. I am sure that someone has done that analysis and I am keen to see it.

I offer my heartfelt thanks to my hon. Friend for securing such an interesting and timely debate. As the Minister responsible, I am pleased to tell her that I am committed to taking the issue forward, taking into account the opportunity and what we can do to ensure the work is done in the most environmentally sustainable manner.

Question put and agreed to.

11:27

Sitting suspended.