Are you wondering why everyone’s talking about the NDAA? Read on to learn how Department of Defense spending policy is set and how the current one will impact critical minerals, energy, climate and forestry.
Although it seems counterintuitive, everyone in the critical minerals, energy, climate and forestry space should always be watching what the Department of Defense (DoD) spends money on.
DoD has quietly been addressing climate risk and alternative energy sources in its portfolio for a while now, regardless of the political controversies around these topics elsewhere. It is one of the government’s biggest spenders of R&D money. It is one of the world’s largest landowners, landlords, and equipment purchasers. Its coastal bases face threats from rising waters and extreme weather. Thousands of troops in Afghanistan and Iraq lost their lives in fuel convoys, which Forbes highlighted as a threat as early as 2009. For DoD this isn’t a political consideration, it’s a security risk management process, and it has a vested interest in these topics.
What we talk about when we talk about defense bills: the NDAA vs. defense appropriations
This week, the Senate is taking up the annual DoD policy legislation – the National Defense Authorization Act (NDAA) – for fiscal year 2024, which starts October 1, 2023. This year, bill passage is making news because of controversy over social issues included in the bill the House passed. Prompt signature of the final bill may be at risk for the first time in over 60 years.
The NDAA sets policy and can create or modify programs. But any policy that requires funding can’t happen unless money is also appropriated. The annual defense appropriations bill is what dictates how DoD spends its money (with some exceptions).†
The NDAA and defense appropriations are on parallel tracks. The committees coordinate, but the two bills are separate and may emphasize different priorities. The House Appropriations Committee approved its defense language in June. The Senate Appropriations Committee is marking up its language today, in late July.
The defense appropriations bill is also much more high level. It won’t include the policy detail you find in the NDAA. So digging into the NDAA is worthwhile – even if it doesn’t have the final say on spending.
If you want more on how Congress works before you continue, see our recent post here. Sign up for email alerts here so you don't miss any of our publications and reach out if you'd like to discuss how we can help you and your organization.
FY2024 NDAA for critical minerals and climate: studies and procurement requirements rule the day
This year shows continuity – you will not see many new funding measures or new programs. But the focus is instructive: Congress is grappling with these topics and seeking policy solutions by requiring further studies.
Remember the House and Senate have different bills at this point. They will need to agree on a single document in conference. If you'd like our full table of critical minerals, energy, climate and forestry-related provisions, click here. For the TL;DR version, below are topics present in the House and Senate bills that may get new or additional attention in the new year:
General Industrial Base Policy
A public-private partnership pilot program to accelerate scaling of small and non-traditional businesses for the defense industrial base. Up to 80% loan.*
Directing procurement to allied nations or the domestic base. This was a major area of unity in the House and Senate. Several provisions either forbid acquisition from certain countries or encourage domestic production and acquisition from allies. China is a major target of these measures, as expected.*
Studies, studies, and more studies. The House leaned into this particularly hard, but the Senate included quite a few studies, as well. The draft bills include studies on aluminum-scandium, boron, graphite, magnesium, niobium oxide, rhodium, titanium, tungsten—and more generally on sourcing critical minerals from the seafloor and studying and metals used in additive manufacturing.*
End-of-life equipment recycling for recovery of rare earth elements and other strategic and critical materials.*
Ability to stockpile rare earth minerals over multiple years in anticipation of potential shortages.*
Batteries & Energy Storage
Development of next-generation lithium-ion batteries.*
Fuel cell R&D for next-generation combat vehicles.
Renewable Energy & Fuels
Hydrogen fuel source R&D for next-generation combat vehicles.
FY24 Energy Resilience and Conservation Investment Program (ERCIP) projects.
Forest & Wood Products
One year extension of pilot program on increased use of sustainable building materials in military construction.*
Continuing education curriculum on sustainable building materials for members of military planning, design, and acquisition workforce.*
Sustainability & ESG
Prohibition of use of funds to form ESG or climate reporting and disclosure (or similar) advisory committees.*
Prohibition of requiring any contractor to disclose climate data to receive funds.*
Want the full table we created of provisions of interest, with details on House vs. Senate support? Download it here.
When the NDAA and defense appropriations bills will pass – and what happens if they don’t
I’m taking bets! Just kidding. Jokes aside, it’s unlikely either bill passes by October 1, the start of the 2024 fiscal year. Instead, they’ll probably pass right at the end of the calendar year. A continuing resolution extending existing spending and policy will close the gap.
Timing is everything, and the looming 2024 presidential election will be the main consideration here. Since both parties are in government, neither will want to appear incapable of governing too close to the election. This makes some type of compromise likely.
If the NDAA doesn’t pass, DoD can do without it for a time. But if a program’s authorization expires, that specific program will be stopped. Emergency funding for DoD Covid relief a few years ago is an example of a new program that would have been stopped if the NDAA hadn't passed. If an appropriations bill doesn’t pass, it has more dire and overarching immediate consequences. Without funding, the government shuts down.
Whew, "short" summary concluded! For those of you who want more details, or are simply looking to win the next pub trivia round about the NDAA's impact on critical minerals, energy, climate and forestry, download our table here.
Stay tuned for follow-up posts unpacking authorizing vs. appropriating bills and discretionary vs. mandatory spending! Sign up here so you don't miss any of our publications and reach out if you'd like to discuss how we can help you.
† The NDAA sits with the House Armed Services Committee (HASC, rhymes with “mask”) and Senate Armed Services Committee (SASC, rhymes with “HASC”). They are the authorizing committees that set policy for DoD and provide oversight of the department. The NDAA is an authorizing bill that sets annual policy for the Department of Defense. It can create or change programs, and it authorizes spending – kind of like how a credit card limit authorizes how much you can put on that card. Authorizing bills can also authorize mandatory spending (see below).
Spending policy for DoD sits with the House and Senate Appropriations Committees for discretionary spending (see below). Specifically, authority rests with their respective Defense Subcommittees.
Discretionary spending is spending the government is required to approve each year. It accounts for just 25-30% of total federal spending each year. By comparison, mandatory spending, like social security or medicare, is required to be paid out. It can only be changed if Congress changes the laws that created the programs.
*Indicates language is different in the House and Senate versions of the bill, or that it was introduced by one Chamber but not the other. Want the full table we created of provisions of interest, with details on House vs. Senate support? Download it here. In the meantime, keep an eye on the conference process to see which language makes it to the final bill.