JurisdictionUnited States
Mining Law

Chapter 12

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Scot W. Anderson
Hogan Lovells US LLP
Denver, CO
Hon. Harrison H. Schmitt
former NASA astronaut
Noah Zedek
University of Denver Sturm College of Law

SCOT W. ANDERSON is a partner in the Denver office of Hogan Lovells US LLP. Scot Anderson's practice focuses on commercial transactions, regulatory advice, and project development involving the oil and gas, mining, and energy industries. He represents clients with projects on throughout the United States, on federal and Indian lands, and internationally. Mr. Anderson was previously the global head of the Hogan Lovells Energy and Natural Resources Industry Sector, and is currently the President of the Rocky Mountain Mineral Law Foundation. He has taught courses on mining law and investment at the University of Denver and the Centre for Energy, Petroleum and Mineral Law and Policy at the University of Dundee, and has been a guest lecturer at the Colorado School of Mines. Together with Korey Christensen and Julia La Manna, he co-authored The development of natural resources in outer space, published in 2018 in the Journal of Energy and Natural Resources Law, which was awarded the Willoughby Prize. He is also a co-author of a chapter, Policy and Legal Processes and Precedent for Space Mining, that is forthcoming in Springer's Handbook on Space Resources, and two papers on space mining that will be published in the near future by the Environmental Law Institute. Mr. Anderson received his law degree from the University of Iowa School of Law, and has a doctorate in philosophy from the University of Colorado. He did his undergraduate studies at Augustana College in Rock Island, Illinois.

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1. Introduction

The Apollo Moon landings ended almost 50 years ago, and since then human activity in outer space has stayed closer to the Earth. Robots, however, have had more far-flung adventures, visiting asteroids and comets, flying across the surface of Mars, and taking samples and sending data back from the Moon. We are in the era of "New Space," with an increased focus on commercial operations in outer space following those related to telecommunications in near space, and the continued robust participation in those operations by private companies. All these activities require fuel and equipment and materials and energy, and there is increasing interest in developing natural resources in outer space to meet these needs.

As technology advances, both governments and private enterprise are considering extraterrestrial business opportunities, including mineral and other resource development in space. Mining companies operating in outer space will need to address the same legal and commercial considerations that arise in earth-bound mining projects, but in another complex physical environment and outside the jurisdiction of any single Nation. This paper will review the existing international legal framework for resource development in outer space, and actions by some countries to create domestic laws to facilitate space mining. Both the international framework and domestic laws working within that framework give rise to competing interpretations and potential controversies. The paper also discusses the future of resource development on the Moon, on Mars, and on asteroids, and the opportunity to develop legal strategies for providing a commercial and legal framework for resource development.

2. What Every Miner Wants (even in outer space)

When assessing a mining project, every miner and every mining investor looks for an economically viable resource, security of tenure, a clear fiscal regime, bankability, and enforceability.

a. Economically viable resource

All other issues related to commercial resource development are moot without a recoverable resource that can be mined, processed, shipped, and utilized with a competitive return on investment. In the case of space resources, other than the location of satellites in earth-orbit, economic viability has yet to be demonstrated, although some analyses1 suggest that fusion power based on lunar helium-3 may be able to compete with other energy technologies, given appropriate development, launch, and operating costs.

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b. Security of Tenure

Security of tenure refers to the exclusive right to carry out exploration and the right to mine what has been discovered, and clear and objective obligations and standards to maintain those rights.2 Right to exclusivity plays a key role in security of tenure. Also, the standards for security of tenure can vary based on the level of development of the mining industry and the economy where a mine operation exists. Nations with developed mining industries typically use well developed mapping systems to facilitate record keeping. The process of registration allows parties to review and confirm where mining rights have been granted and where they are being exercised. Where the mining industry is less developed, pathways to ensuring exclusivity may be uncertain. Sometimes, an operator may establish exclusivity only after commencing the mining operation. A mining investor will be less enthusiastic about making a mining investment when faced with uncertainty concerning security of tenure.

c. Fiscal Regime

Miners also look for assurance that a prospective operation will be subject to clear fiscal obligations. In most countries, minerals are owned by the State and managed in a manner to benefit the government. Some countries decide not to develop their minerals or to do so in a very limited manner. Most of these countries have a well-developedeconomy, and have the luxury of keeping their minerals in the ground. For countries with developing economies, however, there is a substantial advantage to developing mineral resources as a way to build and expand the country's economy. As a result, resource rich countries want to develop a fiscal regime that strikes a balance between (i) securing a fair return on making its resources available to investors and (ii) being able to attract investors with the capital and expertise necessary to develop those minerals. A fiscal regime applicable to mineral development has several elements: royalties, bonus payments, annual rentals, income taxes, value added or goods and services taxes, and import and export duties. Finding the right balance among the totality of the elements of a fiscal regime is critical. And again, a miner or investor may be less inclined to pursue a project where there is some doubt about the fiscal framework applicable to the project and its long term stability.

d. Bankability

Investors in mining operations seek a return on their investment. Mining projects are unusual, because they require a large amount of capital, invested over a long period of time, to allow exploration, permitting, and construction of a mine. Revenues are slow to arrive, which means that the revenues must be substantial to provide a net present value sufficient to justify the project. A mining company typically prepares a feasibility

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study to show that a mining project is economically viable. A feasibility study is a comprehensive technical and economic study of a mineral project that includes mineral reserves, access rights, mining, processing, metallurgical, infrastructure, economic, marketing, legal, environmental, social and governmental factors.3 A feasibility study is considered "bankable" when the economic analysis in the feasibility study shows a project that would be capable of attracting financing.4 The project may not actually seek financing, but the fact that the project is suitable for financing is good evidence that the project is a good investment. Like an earth-bound miner, a miner operating in outer space will want to know that the project will be attractive to investors, and provide a proper return on investment.

e. Enforceability

Mining companies on Earth often engage in mining projects in countries other than their home nation. In those circumstances, the mining company assesses local law, international treaties, and bilateral investment agreements to assess whether its mining rights will be enforced. The mining investor will also review the dispute resolution processes available to it should a dispute arise. Under the primary international space treaty, the 1967 Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, Including the Moon and Other Celestial Bodies, commonly called the "Outer Space Treaty," mining in space is not directly subject to the legal jurisdiction of any single nation, which makes this analysis more complex. Indirectly, however, nations maintain jurisdiction over their citizens and their enterprises. Space miners want assurance that their rights to conduct mining operations or enter into agreements with other companies will be enforceable. Where an operation is located in an area outside the jurisdiction of a nation (for example, in the deep sea), miners will look to international treaties and customary international law to understand their obligations and to enforce their rights in the event of a dispute.

3. Mining in Outer Space

Every miner seeks to develop a valuable mineral deposit. Fortunately for prospective space miners, potential mineral targets abound. Interest in extraterrestrial mining starts at the Moon, but parties have investigated Mars and asteroids as other opportunities for resource extraction.

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a. The Moon

There is a lot of ice on the Moon - about 600 million metric tonnes of ice have been suggested in permanently shadowed craters at the lunar poles.5 Ice on the Moon can be processed to generate oxygen or hydrogen for rocket fuel and used for drinking water.6 The Moon regolith is also rich hydrogen, oxygen, and carbon, so the production of water and methane constitute additional opportunities. The lunar regolith also is rich in helium-3, an isotope of helium that can be used...

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