The U.S. Department of Energy's Office of Critical Minerals and Energy Innovation awarded $75 million on July 2, 2026 to five pilot-scale projects extracting rare earth elements, germanium, gallium, and aluminum from coal and coal-based feedstocks. The awardees include the University of North Dakota, Peabody Energy, and three other industrial partners, and represent the first tranche under a broader $275 million initiative announced in November 2025. Managed by NETL, the projects are designed to bridge the gap between bench-scale research and commercial pilot production at existing domestic industrial facilities.
Introduction
On July 2, 2026, the U.S. Department of Energy's Office of Critical Minerals and Energy Innovation announced $75 million in conditional awards to five pilot-scale projects focused on recovering rare earth elements, germanium, gallium, and aluminum from coal and coal-based feedstocks. The selections, managed by DOE's National Energy Technology Laboratory, constitute Topic Area 1 of the agency's "Mines and Metals Capacity Expansion" funding opportunity and represent the first tranche of a larger $275 million initiative announced in November 2025.
The five awardees are: the University of North Dakota, piloting extraction at the Falkirk lignite mine near Underwood, North Dakota; Valor Metals, Inc. of New York, commercializing an electrochemical liquid-liquid extraction technology; CONSOL Innovations, LLC of Canonsburg, Pennsylvania, advancing a coal waste tailings facility; American Resources Corporation of Fishers, Indiana, applying its proprietary process technology to coal-based feedstocks; and Peabody Energy Corporation of St. Louis, advancing its Wyoming Rare Earths Project at the Rawhide mine north of Gillette.
The awards sit inside a significantly larger federal spending architecture. They trace back to a roughly $1 billion initiative DOE announced in August 2025 to advance mining, processing, and manufacturing technologies across critical mineral supply chains. A second topic area covering all industries, not only coal, will be announced at a later date, and a separate $134 million program targeting unconventional feedstocks such as mine tailings and e-waste issued its own awards on June 2, 2026 to Colorado School of Mines and Phoenix Tailings.
DOE has been explicit about the conditional nature of these selections. Award negotiations between the agency and each applicant are ongoing, and DOE may cancel negotiations and rescind any selection for any reason during that process. Award amounts are also subject to change. These caveats matter in a policy environment where federal funding announcements have sometimes preceded years of administrative delay, but the breadth and velocity of the current DOE program suggest a degree of institutional commitment that distinguishes this cycle from earlier critical minerals efforts.
Why Coal Waste: The Science and Economics of an Overlooked Feedstock
The case for treating coal waste as a rare earth feedstock rests on a convergence of geochemistry, industrial history, and urgency. U.S. coal combustion and processing since 1950 has generated over 2 billion metric tons of coal ash, a fraction of the country's estimated 4.4 billion tons of total coal waste. Research published in the International Journal of Coal Science and Technology in November 2024 by a University of Texas at Austin team estimated that accessible U.S. coal ash deposits contain approximately 11 million tons of rare earth elements, with conservative extraction scenarios valuing recoverable REEs at $8.4 billion and optimistic scenarios reaching $97 billion. When yttrium and scandium are included, the total potential value across all coal ash reaches an estimated $165 billion.
The enrichment dynamic is particularly important. Coal ash has concentrated rare earth elements at four to ten times higher levels than the original coal seams from which the material derived, a consequence of the thermal concentration process during combustion. This means that while REE grades in raw coal are modest, the ash and tailings streams that utilities and miners have been managing as liability items for decades can carry economically meaningful concentrations of neodymium, dysprosium, and other target elements.
Technical challenges remain substantial, and DOE's framing of these as pilot-scale projects rather than commercial deployments reflects that reality honestly. Recovering a bulk concentrate from coal ash or tailings is a solvable problem at bench scale; producing magnet-grade separated oxides that meet the purity specifications of permanent magnet manufacturers is a different and considerably harder task. Success depends on feedstock composition stability, recovery rates across variable ore types, the cost and chemistry of impurity removal, permitting timelines for any new processing infrastructure, and whether downstream separation capacity exists to absorb intermediate concentrate.
The inclusion of germanium and gallium alongside rare earth elements is especially significant given the current geopolitical context. China imposed export licensing requirements on both elements in 2023, years before the broader April 2025 rare earth restrictions, and the Western supply response has been slow. Coal and coal byproducts represent one of the few domestic feedstock streams with documented concentrations of these semiconductor-critical materials, and the DOE program is effectively the first federal commitment at pilot scale to test whether coal-derived germanium and gallium can be produced economically in the United States.
Project Profiles: From Lignite in North Dakota to PRB Scale in Wyoming
The University of North Dakota project at the Falkirk mine represents the most mature technical program among the five awardees. UND's College of Engineering and Mines has conducted REE extraction research on North Dakota lignite for nearly a decade, and the program's pilot plant has already produced quantities of separated material sufficient to validate real-world application, according to statements from Senator Kevin Cramer's office. Lignite coal is lower in energy content than bituminous or sub-bituminous grades but has long been recognized as carrying elevated concentrations of heavy rare earth elements relative to other coal types, including dysprosium and terbium, the elements facing the most acute supply disruption from China's export controls.
Senator Cramer, who arranged a visit by Under Secretary of War for Acquisition and Sustainment Michael Duffey to UND in May 2026, has framed the project explicitly in terms of defense supply chain resilience. In an earlier letter to the Departments of Energy and Defense, Cramer wrote that the lignite rare earths project would "supply the heavy rare earths enabling U.S. production of the highest-value permanent magnets, while also providing other defense-critical minerals like gallium, germanium, scandium, and synthetic graphite." Senator John Hoeven added that the selection "builds on North Dakota's leadership in energy innovation and will help strengthen our domestic critical minerals supply chain."
Peabody Energy's Wyoming Rare Earths Project at the Rawhide mine offers a different value proposition rooted in industrial scale rather than research depth. Peabody describes itself as moving more earth annually across its Powder River Basin operations than any other coal miner, and the company has been evaluating rare earth and critical mineral recovery through internal testing and flowsheet development with technology partners, work reflected in its FY2025 10-K filing with the SEC. The pilot facility at Rawhide would produce market-ready mixed rare earth concentrate as an intermediate product suitable for further refining into oxides and metals. Peabody projects 55 new jobs once the facility is complete and noted in its July 7 press release that the DOE selection complements a separate $6.25 million grant from the Wyoming Energy Authority awarded in February 2026. CEO Jim Grech stated that the combined funding "reflects the meaningful progress Peabody has made in advancing promising unconventional rare earth and critical mineral opportunities."
Valor Metals is the most technologically distinctive of the five awardees. Its electrochemical liquid-liquid extraction platform, known as e-LLE, represents a departure from the conventional hydrometallurgical approaches that dominate rare earth processing. Electrochemically mediated separations can in principle offer selectivity advantages over traditional solvent extraction and may require less reagent volume, though the technology has not yet been demonstrated at sustained pilot scale for coal-derived feedstocks. CONSOL Innovations, a subsidiary of CONSOL Energy, brings Pennsylvania coal waste tailings as its primary feedstock, a material stream with well-documented REE concentrations in Appalachian coal basin research. American Resources Corporation, which has positioned itself for several years around carbon and critical mineral recovery from coal-based materials, is applying its existing process framework to the pilot context.
Fitting the $75 Million Into DOE's Larger Critical Minerals Architecture
The July 2 announcement did not arrive in isolation. Over the preceding fourteen months, DOE's Office of Critical Minerals and Energy Innovation has deployed funding across multiple programs with distinct but complementary objectives, and understanding where the coal-based pilot awards fit requires mapping the broader landscape.
The foundational commitment was a roughly $1 billion initiative announced in August 2025 intended to advance and scale mining, processing, and manufacturing technologies across critical mineral supply chains. The November 2025 "Mines and Metals Capacity Expansion" funding opportunity, carrying $275 million, is the instrument through which coal and industrial feedstock recovery is being funded, with the $75 million constituting Topic Area 1 and a second tranche for all industries pending. Separately, a $134 million Rare Earth Elements Demonstration Facility program, announced in December 2025 and awarded in June 2026, targets larger-scale facilities: Colorado School of Mines will build a plant near the Gramercy alumina refinery in Louisiana to process red mud, the critical mineral-rich bauxite waste product, while Phoenix Tailings will operate a facility in Ardmore, Oklahoma producing high-purity rare earth metals from domestic industrial waste streams. DOE described the $134 million as the largest pure REE grants ever issued by the federal government, with target annual output ranging from 150 to 1,000 metric tons of rare earth elements per facility.
On May 19, 2026, DOE awarded $45.7 million across 19 projects focused on novel technologies for magnesium and rare earth element processing, filling specific gaps in the processing technology pipeline. The $75 million coal-based pilot awards followed six weeks later. Taken together, these tranches represent a deliberate sequencing: bench-scale research has been funded for years under earlier DOE fossil energy programs; the current cycle is specifically designed, in the agency's own framing, to bridge the gap between bench-scale proof-of-concept and commercial pilot production.
Assistant Secretary Audrey Robertson articulated the program's commercial logic directly: "American industrial facilities have the potential to produce valuable critical materials from coal and coal byproducts. By investing in these facilities, we can increase domestic critical materials production and help mitigate the financial risk of commercial deployment." The explicit mention of financial risk mitigation reflects a recognition that private capital has been reluctant to fund the middle stages of the critical minerals supply chain at a moment when price signals are powerful but supply chain uncertainty remains high.
Building on my analysis of the Pentagon's $725 million commitment to Energy Fuels in July 2026, the DOE coal feedstock awards are part of a coordinated federal posture in which the Departments of Energy and Defense are simultaneously de-risking multiple nodes of the supply chain: mine-to-concentrate, concentrate-to-separated-oxide, oxide-to-metal, and metal-to-magnet. The coal feedstock program addresses the earliest node, creating new domestic feedstock optionality that did not previously exist at pilot scale.
China's Export Regime and the Supply Disruption That Makes Coal Feedstocks Strategically Relevant
The strategic logic of investing in coal-derived rare earths is inseparable from China's current export control posture. China mines approximately 60 percent of global rare earth elements and processes roughly 90 percent of global refining and separation capacity. Its share of rare earth-based permanent magnet manufacturing runs to approximately 94 percent. The United States was 67 percent net import reliant on foreign rare earth sources in 2025 and 100 percent reliant on foreign sources for scandium and yttrium specifically.
China's April 4, 2025 export restrictions on seven rare earth elements, including terbium, dysprosium, lutetium, scandium, and yttrium, imposed an export licensing regime that has driven severe supply compression for ex-China buyers. Chinese yttrium exports to the United States fell from 333 tons in the eight months before restrictions to just 17 tons in the eight months between April and December 2025. Neodymium-praseodymium oxide prices surged roughly sixfold between January and June 2026. While a temporary suspension of the October 2025 controls was agreed at the APEC Busan Summit, that suspension runs only through November 10, 2026, providing no durable certainty for procurement planners.
Project Blue research director David Merriman has noted that "the ex-China market will continue to face bottlenecks in the supply of heavy rare earth products over 2026 and 2027 as alternative suppliers are constructed and commissioned," singling out yttrium, lutetium, terbium, and dysprosium as the elements facing the most acute disruption. These are precisely the elements that UND's lignite program targets through its heavy rare earth focus, and their presence in coal-derived feedstocks gives the DOE program a strategic specificity that goes beyond generic supply chain diversification.
Germanium and gallium amplify the argument. Both elements face Chinese export licensing that predates the 2025 rare earth restrictions and have seen sharp price increases in Western markets as a result. Coal and coal byproducts represent one of the few domestic feedstock streams with documented natural concentrations of these semiconductor materials. For applications ranging from fiber optics and infrared optics to compound semiconductors used in defense electronics, the ability to produce domestically sourced germanium and gallium at pilot scale would represent a material improvement in supply chain resilience that no amount of recycling or demand reduction can fully substitute.
What Pilot Scale Actually Means, and What Comes Next
The DOE's framing of these projects as pilot-scale is both accurate and important to preserve in any assessment of their near-term impact. None of the five awardees will produce commercial volumes of separated rare earth oxides or metals as a direct result of this funding. A successful pilot demonstrates technical feasibility at meaningful throughput, generates the process data needed to design a commercial plant, validates recovery rates and product quality under sustained operating conditions, and establishes the cost basis that investors and offtake partners need to commit capital to a full-scale facility. All of that takes time, typically two to four years from pilot commissioning to a credible commercial feasibility study.
The Observer Research Foundation has noted plainly that "until the middle of the supply chain is genuinely domestic, federal funding can buy progress, not independence," and that assessment applies here. A mixed rare earth concentrate produced at Peabody's Rawhide pilot or a separated heavy rare earth fraction from UND's Falkirk facility will still require further processing at a separation and metallization facility to become magnet-grade material. As I reported in July 2026, the Saskatchewan Research Council is on track to commission the largest heavy rare earth metallization facility outside China by December 2026, and USA Rare Earth's Wheat Ridge hydromet plant is targeting first production of separated dysprosium and terbium oxides in Q3 2026. Those downstream facilities represent the receiving end of a supply chain whose upstream coal-derived feedstock segment the DOE is now funding.
The sequencing also matters for capital formation. Private investors in new REE processing capacity need confidence that qualified feedstocks will be available at predictable volumes and compositions. DOE-funded pilot data from coal-based programs, if successful, creates exactly that kind of documented supply optionality, which in turn lowers the risk profile for downstream separation investments. Rare Earth Exchanges has observed that "DOE is investing in optionality," and that framing is precisely right: the $75 million buys not a supply chain but a set of data points that could, by 2028 or 2029, support commercial investment decisions.
Environmental considerations will continue to shape the program's political durability. DOE and project proponents are careful to emphasize that the feedstocks in question are existing coal waste streams, not new combustion, positioning the program as waste remediation as much as mineral extraction. Critics from environmental groups have questioned whether federal dollars flowing to coal operators reinforce a declining industry's business model regardless of the specific application. The Wyoming Mining Association's Travis Deti offered the industry response succinctly: "Of course this all translates into jobs and revenue." Both characterizations are accurate, and the tension between them will define the political sustainability of the program as projects move from selection through negotiation to actual construction.
Conclusion: Progress on the Feedstock Layer, but the Integration Challenge Remains
The DOE's $75 million award to five coal-based feedstock projects is the most concrete federal commitment to date that America's vast coal waste inventory can contribute meaningfully to critical minerals supply. Taken together with the $134 million REE Demonstration Facility program, the $45.7 million technology gap awards, and the broader $1 billion initiative from which all of these descend, the federal government has now committed well over $350 million in the past twelve months specifically to the extraction, processing, and demonstration stages of the rare earth supply chain.
The five projects cover a useful range of feedstock types (lignite, bituminous tailings, Powder River Basin coal byproducts), technology approaches (electrochemical extraction, hydrometallurgy, direct physical processing), and organizational structures (research university, pure-play startup, established coal operators). That diversity is appropriate at the pilot stage because it preserves optionality: no single technology is obviously correct for all coal-derived feedstock types, and the program's design implicitly acknowledges that.
The harder problem remains integration. Producing a concentrate is not the same as producing a separated oxide, which is not the same as producing a metal, which is not the same as producing an alloy, which is not the same as producing a magnet. The United States currently lacks sufficient domestic capacity at the separation, metallization, and alloy stages to absorb even the volumes that a successful set of coal-based pilots might generate by 2029. Closing those midstream gaps is the central challenge that the DOE and DOD programs are collectively attempting to address, and the coal feedstock awards are one piece of a much larger puzzle whose other pieces are still being assembled. The direction of travel is clear; the pace is the variable that will determine whether domestic supply chain integration arrives before the November 2026 expiration of China's current suspension of its October 2025 export controls, or well after it.