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The multi-faceted investment is defense-oriented, but could also support domestic clean energy.
MP Materials is the national champion of American rare earths, and now the federal government is taking a stake.
The complex deal, announced Thursday, involves the federal government acting as a guaranteed purchaser of MP Materials’ output, a lender, and also an investor in the company. In addition, the Department of Defense agreed to a price floor for neodymium-praseodymium products of $110 per kilogram, about $50 above its current spot price.
MP Materials owns a rare earths mine and processing facility near the California-Nevada border on the edges of the Mojave National Preserve. It claims to be “the largest producer of rare earth materials in the Western Hemisphere,” with “the only rare earth mining and processing site of scale in North America.”
As part of the deal, the company will build a “10X Facility” to produce magnets, which the DOD has guaranteed will be able to sell 100% of its output to some combination of the Pentagon and commercial customers. The DOD is also kicking in $150 million worth of financing for MP Materials’ existing processing efforts in California, alongside $1 billion from Wall Street — specifically JPMorgan Chase and Goldman Sachs — for the new magnet facility. The company described the deal in total as “a multi-billion-dollar commitment to accelerate American rare earth supply chain independence.”
Finally, the DOD will buy $400 million worth of newly issued stock in MP Materials, giving it a stake in the future production that it’s also underwriting.
Between the equity investment, the lending, and the guaranteed purchasing, the Pentagon, and by extension the federal government, has taken on considerable financial risk in casting its lot with a company whose primary asset’s previous owner went bankrupt a decade ago. But at least so far, Wall Street is happy with the deal: MP Materials’ market capitalization soared to over $7 billion on Thursday after its share price jumped over 40%, from a market capitalization of around $5 billion on Wednesday and the company is valued at around $7.5 billion as of Friday afternoon.
Despite the risk, former Biden administration officials told me they would have loved to make a deal like this.
When I asked Alex Jacquez, who worked on industrial policy for the National Economic Council in the Biden White House, whether he wished he could’ve overseen something like the DOD deal with MP Materials, he replied, “100%.” I put the same question to Ashley Zumwalt-Forbes, a former Department of Energy official who is now an investor; she said, “Absolutely.”
Rare earths and critical minerals were of intense interest to the Biden administration because of their use in renewable energy and energy storage. Magnets made with neodymium-praseodymium oxide are used in the electric motors found in EVs and wind turbines, as well as for various applications in the defense industry.
MP Materials will likely have to continue to rely on both sets of customers. Building up a real domestic market for the China-dominated industry will likely require both sets of buyers. According to a Commerce Department report issued in 2022, “despite their importance to national security, defense demand for … magnets is only a small portion of overall demand and insufficient to support an economically viable domestic industry.”
The Biden administration previously awarded MP Materials $58.5 million in 2024 through the Inflation Reduction Act’s 48C Advanced Energy Project tax credit to support the construction of a magnet facility in Fort Worth. While the deal did not come with the price guarantees and advanced commitment to purchase the facility’s output of the new agreement, GM agreed to come on as an initial buyer.
Matt Sloustcher, an MP Materials spokesperson, confirmed to me that the Texas magnet facility is on track to be fully up and running by the end of this year, and that other electric vehicle manufacturers could be customers of the new facility announced on Thursday.
At the time MP Materials received that tax credit award, the federal government was putting immense resources behind electric vehicles, which bolstered the overall supply supply chain and specifically demand for components like magnets. That support is now being slashed, however, thanks to the One Big Beautiful Bill Act, which will cancel consumer-side subsidies for electric vehicle purchases.
While the Biden tax credit deal and the DOD investment have different emphases, they both follow on years of bipartisan support for MP Materials. In 2020, the DOD used its authority under the Defense Production Act to award almost $10 million to MP Materials to support its investments in mineral refining. At the time, the company had been ailing in part due to retaliatory tariffs from China, cutting off the main market for its rare earths. The company was shipping its mined product to China to be refined, processed, and then used as a component in manufacturing.
“Currently, the Company sells the vast majority of its rare earth concentrate to Shenghe Resources,” MP Materials the company said in its 2024 annual report, referring to a Chinese rare earths company.
The Biden administration continued and deepened the federal government’s relationship with MP Materials, this time complementing the defense investments with climate-related projects. In 2022, the DOD awarded a contract worth $35 million to MP Materials for its processing project in order to “enable integration of [heavy rare earth elements] products into DoD and civilian applications, ensuring downstream [heavy rare earth elements] industries have access to a reliable feedstock supplier.”
While the DOD deal does not mean MP Materials is abandoning its energy customers or focus, the company does appear to be to the new political environment. In its February earnings release, the company mentioned “automaker” or “automotive-grade magnets” four times; in its May earnings release, that fell to zero times.
Former Biden administration officials who worked on critical minerals and energy policy are still impressed.
The deal is “a big win for the U.S. rare earths supply chain and an extremely sophisticated public-private structure giving not just capital, but strategic certainty. All the right levers are here: equity, debt, price floor, and offtake. A full-stack solution to scale a startup facility against a monopoly,” Zumwalt-Forbes, the former Department of Energy official, wrote on LinkedIn.
While the U.S. has plentiful access to rare earths in the ground, Zumwalt-Forbes told me, it has “a very underdeveloped ability to take that concentrate away from mine sites and make useful materials out of them. What this deal does is it effectively bridges that gap.”
The issue with developing that “midstream” industry, Jacquez told me, is that China’s world-leading mining, processing, and refining capacity allows it to essentially crash the price of rare earths to see off foreign competitors and make future investment in non-Chinese mining or processing unprofitable. While rare earths are valuable strategically, China’s whip hand over the market makes them less financially valuable and deters investment.
“When they see a threat — and MP is a good example — they start ramping up production,” he said. Jacquez pointed to neodymium prices spiking in early 2022, right around when the Pentagon threw itself behind MP Materials’ processing efforts. At almost exactly the same time, several state-owned Chinese rare earth companies merged. Neodymium-praseodymium oxide prices fell throughout 2022 thanks to higher Chinese production quotas — and continued to fall for several years.
While the U.S. has plentiful access to rare earths in the ground, Zumwalt-Forbes told me, it has “a very underdeveloped ability to take that concentrate out away from mine sites and make useful materials out of them. What this deal does is it effectively bridges that gap.”
The combination of whipsawing prices and monopolistic Chinese capacity to process and refine rare earths makes the U.S.’s existing large rare earth reserves less commercially viable.
“In order to compete against that monopoly, the government needed to be fairly heavy handed in structuring a deal that would both get a magnet facility up and running and ensure that that magnet facility stays in operation and weathers the storm of Chinese price manipulation,” Zumwalt-Forbes said.
Beyond simply throwing money around, the federal government can also make long-term commitments that private companies and investors may not be willing or able to make.
“What this Department of Defense deal did is, yes, it provided much-needed cash. But it also gave them strategic certainty around getting that facility off the ground, which is almost more important,” Zumwalt-Forbes said.
“I think this won’t be the last creative critical mineral deal that we see coming out of the Department of Defense,” Zumwalt-Forbes added. They certainly are in pole position here, as opposed to the other agencies and prior administrations.”
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His administration has zeroed in on $18 billion of projects that just so happen to be in Chuck Schumer and Hakeem Jeffries’ hometown.
The shutdown punishment has begun, and it’s aimed at New York City.
Russ Vought, the director of the Office of Management and Budget announced Wednesday on X that “roughly $18 billion in New York City infrastructure projects have been put on hold to ensure funding is not flowing based on unconstitutional DEI principles.” That includes funding for the Second Avenue Subway extension and the Gateway Program, a proposed rail tunnel connecting New York City and New Jersey.
While Vought did not refer to the government shutdown specifically in his announcement, the timing is, shall we say, noteworthy, not least because the Democrats’ two top congressional negotiators — Representative Hakeem Jeffries and Senator Chuck Schumer — are both from New York. Secretary of Transportation Sean Duffy later made the link explicit, clarifying in a statement that the real issue with the two projects was a recently released rule — as in, published on Tuesday — “barring race- and sex-based contracting requirements from federal grants.”
There would be a review of the two projects “to determine whether any unconstitutional practices are occurring,” Duffy said, and “until USDOT’s quick administrative review is complete, project reimbursements cannot be processed.” Those reviews “will take more time” thanks to the shutdown, he wrote, reaching his denouement, as “without a budget, the Department has been forced to furlough the civil rights staff responsible for conducting this review.”
The politics behind this gambit are obvious. President Trump has consistently threatened to withhold funding from states, cities, and institutions controlled by or connected to his political opponents.
“I think they very much understand the political dynamics of trying to make an example of New York. They understand where Chuck Schumer lives,” Jackson Moore-Otto, transportation fellow at the Center for Public Enterprise, told me.
The White House wasn’t exactly running away from the political implications of the denial of funding on Wednesday.Vice President J.D. Vance arched a metaphorical eyebrow during a press conference, saying that “I'm sure that Russ is heartbroken about the fact that he is unable to give certain things to certain constituencies.”
Trump has also specifically threatened federal funding for New York City if Democratic nominee Zohran Mamdani wins the upcoming mayoral election.
Duffy himself could not have been any more obvious about what he is trying to achieve by slowing down this funding. “This is another unfortunate casualty of radical Democrats’ reckless decision to hold the federal government hostage to give illegal immigrants benefits,” his statement said, while also specifically calling out the two Democratic congressional leaders, saying that the delayed review was “thanks to the Chuck Schumer and Hakeem Jefferies [sic] shutdown.”
The legality of this — and its legitimate connection to the shutdown — is not so clear.
“It’s pure political maneuvering if you read the statement closely,” David Super, a law professor at Georgetown, told me. “They’re trying to blame the shutdown for slowing their review, but they’re also effectively saying that they’re considering New York in violation of their standards.”
Super also flagged several constitutional and legal issues with the action.
“The funding allocated through laborious means to the Hudson tunnel and Second Avenue Subway is a property right that entities in New York have,” he told me. “The idea that that can be interfered with because someone wants to do an investigation is a blatant violation of due process.”
While it is possible that purported civil rights violations could lead to funding being blocked, “that would have to be established through procedure, not suspicions that they’re doing something wrong,” Super said.
The new rule Duffy referenced addresses a specific set of programs established under the Small Business Act that are designed to give organizations controlled by “socially and economically disadvantaged individuals,” i.e. “women and members of certain racial and ethnic groups,” a shot at winning government contracts.
The DOT argues that under these programs, “two similarly situated small business owners may face different standards for entering the program, based solely on their race, ethnicity, or sex,” and that the rules and legislation defining them violate equal protection as set out in recent federal court decisions and Trump executive orders.
The rule that Duffy cites as justification for his actions is itself constitutionally suspect, Super said. “The Administrative Procedure Act requires public comment on new rules, subject to limited exceptions,” which this did not have.
The slapdash way the rule has been rolled out could open up the DOT to lawsuits, whether from the Metropolitan Transit Authority, which oversees the New York City subway, or another entity involved with the Hudson tunnel project.
“Courts throughout history have insisted public comment is important,” Super said. The DOT is “violating procedures for issuing this policy and violating due process in the way they apply it.”
Moore-Otto also pointed out that the DOT release makes no specific claim that these projects are violating the rule.
“What they’re saying, it appears to me, is, New York might be doing this thing that we’ve just decided is illegal and we’re going to cut off your funding and it’s going to take longer because our lawyers aren’t being paid,” he said.
And there are broader issues around infrastructure policy at play beyond the obvious political gamesmanship, Moore-Otto pointed out. Duffy’s announcement links the supposedly unconstitutional women and minority contracting practices to the high costs that plague American infrastructure projects, saying they’re a “waste of taxpayer resources.”
But, Moore-Otto argued, what really ails U.S. infrastructure projects are extensive administrative reviews and the start-stop nature of project development.
“I think people would broadly agree the U.S. takes too much time and money to deliver infrastructure projects, and they are trying to invoke this as a pretext,” Moore-Otto said. “What strikes me as noteworthy is that when we look at why the U.S. does, in fact, take so long and use so much money building, while the rest of the world builds faster and cheaper, is that there’s a lot of stopping and starting of these infrastructure projects.”
“Assuming it’s a prolonged delay, it’s going to probably drive up costs — even though they’re saying it is a cost saving measure,” Moore-Otto added. “I think that should not be lost on anybody.”
On a potential deregulatory slowdown, community solar’s dimming, and Pope Leo on climate
Current conditions: Tropical Storm Imelda is set to gain intensity this week and whip the southeastern U.S. with soaking rain and storm surge • Frigid night air is forecast across northern New England • Typhoon Bualoi is flooding broad swaths of Vietnam, Thailand, and Laos.
The federal government is closed.Kent Nishimura/Getty Images
The federal government shut down at 12:01 a.m. this morning after President Donald Trump and Republicans failed to reach a deal with Democrats in Congress on a bill to keep its funding flowing. That could slow the Environmental Protection Agency’s deregulatory effort, E&E News reported Tuesday. “The political crisis that threatens to shutter much of the federal bureaucracy at midnight comes as Administrator Lee Zeldin is racing to unravel high-profile rules on things like climate science, vehicle pollution, power plants, oil and gas wells, and carbon emissions reporting,” reporter Jean Chemnick wrote. An abrupt halt to the agency’s activities would at the very least set back Zeldin’s reform effort, including an agency reorganization set to begin this month.
The Department of the Interior, meanwhile, sent employees an email Tuesday warning that the agency “has contingency plans in place for executing an orderly shutdown of activities that would be affected by any lapse in appropriations forced by Congressional Democrats.” Neither Interior nor the EPA had published updated shutdown plans taking into account staff reductions under the current Trump administration as of Tuesday.
When the Department of Defense bought a 15% stake in MP Materials, the continent’s only active rare earths mine, The Economist called it the most significant entry by the federal government into a private market since the railroads were nationalized in World War I. (Biden administration officials were admittedly jealous, as Heatmap’s Matthew Zeitlin reported.) Now the Trump administration has taken another share of a major mineral project. The Department of Energy’s Loan Programs Office said Tuesday that it had renegotiated a multi-billion-dollar loan to back construction of Lithium Americas’ Thacker Pass lithium mine in Nevada. The project, on track to become the Western Hemisphere’s largest lithium producer by 2028, will transform a remote stretch of high Nevada desert into a lithium clay mine, harvesting from one of the world’s richest known deposits.
Under the new deal, the federal government will take a 5% equity stake in Lithium Americas and an additional 5% ownership of the company’s joint venture with General Motors. The Energy Department called its stakes “part of the overall collateral package on a loan, helping to reduce repayment risk for taxpayers.” But the announcement said the “revised agreement” includes “robust loan amendments,” notably “more than $100 million of new equity.”
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Community solar installations are plunging. After a record-breaking 2024, installations of new panels in small-scale cooperative or community solar projects dropped 36% in the first half of this year compared to the same period last year. The passage of the One Big Beautiful Bill Act slashed the cumulative five-year outlook for community solar by 8% compared to the outlook before the legislation repealed vast chunks of the Inflation Reduction Act. That’s according to a new analysis from Wood Mackenzie.
Yet Jeff Cramer, the chief executive of the Coalition for Community Solar Access, said states are stepping up “with historic expansions like New Jersey’s 3,000 megawatts and Massachusetts’ 900 megawatts.” He added: “These bright spots show what’s possible when policymakers work to unlock capacity. At the same time, this report makes clear the challenges ahead — from federal uncertainty to interconnection delays and program caps — that must be addressed to realize the full potential of community solar and deliver the resilient, affordable power communities are asking for.”
Most Americans say that rising electricity prices have at least “a decent amount” of impact on household finances. “Still, for about 40% of the country, those high prices are more a pinch than a pain,” Heatmap’s Robinson Meyer wrote. That’s the finding of a new Heatmap Pro poll on rising rates. The results had some predictable outcomes, including that more than 70% of voters with household incomes below $50,000 said rising bills were a problem with “a lot of" impact on spending. Upward of 62% of voters earning less than $100,000 described similar issues, as did 59% of white voters without a college degree.
It’s been difficult for “Vatican-watchers” to pin down Pope Leo XIV’s views on most issues. But “on climate change,” The New York Times wrote on Tuesday, “it is clear that he is moved by the topic, and particularly its disproportionate harm to poor and vulnerable people.” The world is about to get a lot more clarity on his views. On Wednesday, the Pontiff is scheduled to give his first address on climate change at a conference taking place at the Papal Palace of Castel Gandolfo.
The remarks come on the 10th anniversary of Laudato Si, a groundbreaking papal document written by the late Pope Francis that overhauled the Catholic Church’s teachings on climate change. The 2015 encyclical was widely credited with pushing forward carbon-cutting negotiations at the global climate summit in Paris that year.
Africa's biggest petrostate is having a solar boom. Nigeria became Africa’s second-largest importer of solar panels over the past year by overtaking Egypt. The imports total 1.7 gigawatts. “It is a response to a problem … You can’t rely on a 24/7 grid in most parts of Nigeria at the moment,” Ashvin Dayal, senior vice-president of power at Rockefeller Foundation, which backed the mini-grid project, told the Financial Times. “Demand is booming for reliable, affordable electricity both for inside the home, but also to run small businesses, to run agricultural appliances, to increase productivity and incomes.”
Rob debriefs with colleagues on the latest climate news.
It’s been a busy few weeks for climate and energy. New York Climate Week brought hundreds of events — and thousands of people — to the city to discuss decarbonization and energy policy. The New Jersey governor’s race has raised the salience of electricity rates. And suddenly everyone is talking about energy affordability.
On this week’s episode of Shift Key, Rob is joined by his colleagues at Heatmap to discuss some of the biggest topics in energy and climate. What did they take away from New York Climate Week? What do the new politics of affordability mean for climate policy? And what are the benefits — and hazards — of arguing for climate policy by talking about how clean energy is cheap energy?
This Heatmap reporter roundtable features Heatmap’s deputy editor Jillian Goodman and its staff writers, Emily Pontecorvo and Matthew Zeitlin. Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap, and Jesse Jenkins, a professor of energy systems engineering at Princeton University. Jesse is off this week.
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Here is an excerpt from our conversation:
Jillian Goodman: I want to back up a minute and just ask, what are we talking about when we’re talking about goldplating? What constitutes gilding the utility infrastructure, and what is not getting built because we’re doing all of this goldplating?
Matthew Zeitlin: Well, it’s funny, right? You’ll never read an IRP where they’ll be like, Alright, here’s our goldplated spending. What the advocates would say is that it’s often distribution, transmission and distribution spending that’s going across their territory and it’s not bringing down prices. I mean, again, it’s a completely subjective — well, not completely subjective. It is a subjective claim.
Goodman: Part of what’s motivating my question is, are we talking about things like installing smart meters?
Zeitlin: Well, in California, there’s been backlash to undergrounding. You know, it’s funny, because the utility structure makes it so anything good you want to do, the people have to pay for. So like even undergrounding electricity lines has become quite controversial in the American West because it’s so expensive.
Now, is that goldplating? Or is that climate resilience to decrease the chance of wildfires? Is it resilience? Is it building up climate resilience to the more wildfires caused by higher temperatures?
Emily Pontecorvo: I will just point out, it is also a policy choice by public service commissions and those who put people on those commissions to give the utility the rate of return that they get. There’s a lot of advocacy around lowering that rate of return, and also to put the degree of the cost of that goldplating on ratepayers that they do. They could have investors share more of that cost, and they’re just scared to do that. The utilities kind of scare them away from doing that. But it is possible. It’s in their power, at least.
Mentioned:
Everything that happened at Heatmap’s Climate Week event
Matthew on the peril for Democrats of running on electricity prices
Emily on the Greenhouse Gas Protocol
Arjun Krishnaswami in Utility Dive
Jillian’s downshift; Emily’s downshift; Matthew’s quasi-upshift; Rob’s downshift.
This episode of Shift Key is sponsored by …
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Music for Shift Key is by Adam Kromelow.