UK Deep Sea Mining Industry

Sheryll Murray Excerpts

Wednesday 20th February 2019 Westminster Hall

[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.