- Nauru, which sponsors a company to mine the seabed for minerals in ungoverned waters, has triggered a rule with the International Seabed Authority that requires it to allow seabed mining in two years, regardless of whether regulations have been written.
- Advocates have expressed concerns that the main beneficiary of the move is a Canadian company that is in the process of publicly listing its stock in the US, which is not governed by ISA regulations.
- Seabed mining has never been attempted before, and scientists worry that a shortened deadline to design regulations may sideline environmental protection in the world’s largest inhabited zone.
- Among the outstanding questions over regulations is the issue of royalties: how will sponsoring states and other countries benefit from the “common heritage of mankind”?
A Canadian company may become the first to receive a license to mine the deep Pacific after the island nation of Nauru triggered a last-resort procedure to expedite the creation of standards governing deep-sea mining.
However, the body tasked with writing those regulations, the International Seabed Authority (ISA), is still far from finalizing the rules on a wide range of issues, including environmental protection and how the world’s countries will benefit financially from extracting resources from an area considered “the common heritage of mankind.”
The timing of Nauru’s triggering of the “two-year” rule has about who benefits in bringing forward the deadline for writing regulations that will govern mineral extraction over an area eight times the size of Alaska that is home to ecosystems barely understood by science.
Nauru, which sponsors a subsidiary of Canada-based The Metals Company (previously known as DeepGreen) to mine manganese nodules in the Pacific Ocean’s Clarion-Clipperton Zone, told the ISA at the end of June that the company would apply to mine the deep sea, setting a two-year deadline to complete exploitation regulations.
TMC has hinted it would support the two-year rule since last year, when it announced it would go public. Nauru has said in a statement that it made the decision to use the rule independently.
“Nauru believes that we have a duty to the international community to carry out this request to bring this certainty for the benefit of all stakeholders, and to ensure that polymetallic nodules are considered as part of the solution for the global transition from fossil fuels and towards renewable energy,” the statement reads.
What is the ‘two-year rule’?
The rule requires countries that have signed the U.N. Convention of the Law of the Sea (UNCLOS) to consider deep-sea mining exploitation permits, regardless of whether authorities have established regulations to govern the practice — a practice that scientists say will do permanent damage to life in a vital but little-understood ecosystem.
The ISA plans to resume discussions at the end of the year, but with the coronavirus pandemic still occupying the attention of the world, observers have doubts that the process will meet the deadline.
“I think there’s a serious possibility that it won’t be finished in two years,” says Duncan Currie, an ocean lawyer for the Deep Sea Conservation Coalition.
There are an “enormous” number of issues that have only just begun to be considered, he says, which lack clarity for the foreseeable future. Because seabed mining has not been attempted at scale before, there are still many outstanding questions regarding technology, royalties, and environmental protection.
“I think it may put undue stress on environmental regulations,” says Craig Smith, oceanography professor emeritus at the University of Hawai’i, who has worked with the ISA since its creation in 1994. “I think it would be bad for environmental protection if mining were to start without a really well-conceived set of exploitation regulations in place.”
Pressure to complete regulations has already been mounting on the ISA, which has worked closely with players in the burgeoning industry to understand business goals, such as cost and production expectations. The U.N. organization, based in Jamaica, stands to benefit from mining revenue through royalties while also playing a management and regulatory role, Smith says.
“So at the same time they have to regulate it and protect the environment from serious harm, and those are conflicting responsibilities,” he says. “And in reality, it’s impossible to do deep-sea mining without causing harm to the seafloor and even water column habitats. Particularly manganese nodule mining will have impacts over thousands of square kilometers minimum.”
TMC, the ISA, and Nauru’s permanent mission to the ISA did not respond to requests for comment.
Before Nauru triggered the two-year rule, it faced strong economic headwinds. Lionel Aingimea, Nauru’s president, told the U.N. last year that deep-sea mining should be a tool to help the national economy recover from the impacts of the COVID-19 pandemic.
“UNCLOS, as the constitution of all ocean activities, had the foresight to provide opportunity for developing state like mine to participate in new seafloor mineral industries and balance the historical disparities that exist between the North and South,” Aingimea told the U.N. General Assembly last year.
An island country of 11,000 people, Nauru has lost 80% of its land mass to destructive phosphate mining led by European companies. After clamping down on financiers that treated the country as a tax haven, the country’s economy began to pick up when Australia contracted the state to detain asylum-seekers heading to Australia. While Nauru has managed to fully vaccinate its population against COVID-19, the government has said disruption of international supply chains has put Nauru’s economy in dire straits again.
“In our view, Nauru has been taken advantage of and persuaded that mining is quite lucrative,” says Maureen Penjueli, the executive director of the Pacific Network on Globalisation (PANG), a Fiji-based regional NGO. “This makes them very easy prey for multinational companies such as DeepGreen, who are quite aware of this kind of desperate positioning of countries like Nauru.”
TMC owns two other companies that intend to mine the seabed, sponsored by Tonga and Kiribati, two other Pacific Island nations. The company’s Nauru subsidiary is Nauru Ocean Resources Inc. (NORI). TMC plans to be listed on the New York Stock Exchange in the third quarter of this year. The U.S., where the stock will be traded, has not signed the UNCLOS, and so is not bound by ISA rules. TMC has told investors that it plans to begin mining in 2024. Michael Lodge, the secretary-general of the ISA, told the BBC earlier this month that mining would only start around 2026.
Who will benefit?
Without regulation, it’s unclear how royalties will be collected and how the benefits of deep-sea mining will be distributed. Because mining would take place in areas outside national borders that are designated “the common heritage of humankind,” on paper the resources and their economic benefits should be shared by all, likely through a royalties system that is yet to be finalized.
In pursuit of those funds, countries around the world are involved in discussions, and opinions vary widely on how royalties should be divided. For example, the African Group within the ISA, a regional coalition of African countries, has opposed some royalty systems that it feels are guided only by profit-seeking, rather than promoting other systems that would put it on par with land-based mining.
The taxes and royalties placed on deep-sea minerals can determine how much is mined on land and from the seabed, but the African Group has said it would only support mining the seabed if it was demonstrably beneficial to humankind.
NORI and other contractors, however, can enter directly into royalty tax agreements with their sponsoring state. According to the public agreement between NORI and Nauru, NORI and TMC are not required to pay any taxes. Tonga’s agreement with its TMC subsidiary, Tonga Offshore Mining Limited, indicates that it would receive less than 1% of the revenue from each ton of ore mined.
“Here in the Pacific, it has been promoted as [a source of] significant amounts of money, billions of dollars in terms of revenue, but ISA hasn’t resolved the questions of revenue and who stands to benefit the most,” Penjueli said.
Related listening from Mongabay’s podcast: Hear this author and others discuss the implications of deep sea mining, listen here:
‘Nauru is left with the liability’
TMC, and DeepGreen before it, has long had a close relationship with the Nauru government. The company’s CEO, Gerard Barron, addressed the ISA General Assembly from Nauru’s seat in 2019. DeepGreen said last year that it offers Nauru and other countries “an opportunity to participate in the benefits of this new resource opportunity to diversify and develop their economies.”
Currie says the two-year rule cannot be separated from TMC’s listing on the New York Stock Exchange.
“It is absolutely mission critical for DeepGreen to demonstrate to investors that they will get a contract in time to make good on their stated intention to seabed mine by 2024,” he said. “I think it’s sophistry to say that Nauru decided to do it [trigger the rule] on its own. It was a sovereign decision, but undoubtedly at the strong urging of DeepGreen.”
TMC has never mined nor has it tested its mining equipment, yet the company is set to go public, valued at $2.2 billion. Upon DeepGreen’s merger with a public financing company, SOAC, to become The Metals Company, it will be valued at $2.9 billion. In contrast, the sponsoring states will not receive any money until mining begins.
“There’s absolutely the dynamic that Nauru is left with the liability if seabed mining were to take place, whereas DeepGreen makes huge amounts of money,” Currie says.
There is still some gray area in the interpretation of the two-year rule. The ISA Council, which consists of representatives from 30 countries in five different groups, must consider the application, but they may also, by two-thirds majority, overturn a licensing decision. The rule also indicates that in the absence of specific ISA exploitation rules, the governing rules of UNCLOS, which encompasses the ISA, may be applied to assess licenses.
There is also the possibility that TMC simply declines to apply for a license, although that may conflict with messaging to shareholders. If research shows that deep-sea mining would do more harm than good, the Nauru government said in its statement that NORI would not apply for an exploitation contract.
TMC has said its operations are crucial to stopping runaway greenhouse gas emissions that have heated the atmosphere and threatened the ocean and low-lying Pacific Island states. The target metals, like nickel, cobalt and manganese, are often used in electric vehicle and grid storage batteries, which are gaining popularity in places with high energy consumption rates. As a result, Penjueli says, it doesn’t make sense to put all the responsibility on Pacific Island states, which have historically shouldered the burden of ocean conservation activities that benefit the world.
“I think that is where we need to shift the debate, this cannot just be about Pacific Island countries making these kinds of decisions and statements at this stage,” Penjueli says. “We need to push back, because we know that those minerals are being sold under the green technology revolution which are demanded by the more affluent countries.”
Banner image: A jellyfish seen during the Deepwater Exploration of the Marianas expedition on April 24, 2016, while exploring Enigma Seamount at a depth of ~3,700 meters. Image by NOAA.
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