South Dakota critical mineral exploration intersecting with hydrological and regulatory constraints

The United States Geological Survey identifies South Dakota as hosting reserves of 15 federally classified critical minerals: antimony, arsenic, barite, beryllium, cesium, fluorspar, graphite, lithium, manganese, niobium, tantalum, tellurium, tin, tungsten and vanadium. None of South Dakota’s 15 critical minerals are rare earth elements. A 2024 state Legislative Research Council analysis places many of those deposits in western counties — Custer, Fall River, Harding, Lawrence, Pennington and Perkins — and in central counties Buffalo and Lyman.

The debate sits at a documented convergence: a federal supply-chain rationale — the national-security framing of domestic critical-mineral production — is intersecting with a hydrological, regulatory, and cultural constraint set that has been the subject of tightening efforts in three consecutive South Dakota legislative sessions. The trajectory depends on the intersection of geological viability, water availability, and regulatory classification. The central analytical conclusion is that resolution of the debate will turn more on what the drill core shows and on whether the regulatory and tribal-consultation framework that has been the subject of legislative effort since 2023 narrows further, than on the national-security framing that has shaped the broader U.S. critical-mineral discourse.

Stakeholder positions and constituency dynamics

Exploration firms operate with high power, high urgency, and asserted legitimacy through economic and national-security framing. Pete Lien and Sons, Rapid City-based, is conducting the most recent critical-mineral exploration. U.S. Forest Service documents describe a plan to drill 18 holes roughly 1,000 feet deep on federal lands about 3 miles southwest of Rochford to test for graphite. Other exploration activity in the state targets lithium in pegmatite ore near Hill City and Keystone, with four lithium exploration projects underway in the central Black Hills; a separate Lawrence County licensed pegmatite mine is seeking ore that could contain niobium, tantalum, tellurium, tin, and tungsten. A separate central Black Hills exploration effort is seeking tantalum, tin, and tungsten. The most plausible alternative for exploration firms in a scenario-planning framework, if a deposit is sub-economic, is to retain mineral rights and wait for commodity prices or extraction technology to change — a hypothesis drawn from the documented mineral-rights position rather than a stated company strategy.

Rare Element Resources, in adjacent Wyoming, is the only commercial-scale analog on the documented record: roughly $170 million invested into a Bear Lodge project in northeast Wyoming, with about $100 million spent and a $70 million demonstration plant built in Upton, Wyoming. Funding sources include the U.S. Department of Energy, the state of Wyoming, and private investors. The company has spent $100 million and is seeking final federal permitting. Rare Element Resources director of business development Paul Bonifas stated in the report, “It’s no secret that China controls roughly 90% of rare earth processing, separation and production,” and described the domestication of rare-earth supply as a national-security imperative. Bonifas described the company’s market value in January 2026 as nearly $440 million — a statement carried in the report as evidence that critical-mineral projects can attract capital at commercially viable stages.

State lawmakers and regulatory bodies possess high power, high statutory legitimacy, and variable urgency. South Dakota lawmakers have engaged lithium-specific regulation across three consecutive sessions: 2023 and 2024 bills sought to reclassify lithium and add taxation; a 2025 effort to increase permitting requirements on lithium mines failed. Under current law, lithium mines can be classified like sand and gravel mines — a framework that requires less public notification and input than the hard-rock mine category, which triggers mandatory environmental and cultural impact studies. The state’s documented interest is a tax base, employment, and a regulatory framework that does not pre-emptively foreclose investment.

The hydrology constituency operates with high urgency, and legitimacy grounded in environmental stewardship. Black Hills Clean Water Alliance opposes further mining. Executive director Lilias Jarding highlighted in the report that the region is “semi-arid” and mining “uses huge quantities of water and worsens water quality”. Jarding stated, “It’s an issue of both quantity and quality of water.” Jarding argued that any type of mining can be destructive — by displacing wildlife and people — and that open-pit mining destroys the landscape and contributes to global warming. The most plausible alternative for this constituency, in a scenario-planning framework, is a sustained legal and public-opposition campaign during the operating life of any mine, if extraction proceeds without binding water-quality constraints.

The tribal and cultural constituency operates with high urgency, and legitimacy grounded in cultural protection. Native American tribal officials and the NDN Collective have registered opposition to uranium and lithium mining and to Pete Lien and Sons’ graphite exploration. The proposed Pete Lien and Sons site is close to Pe’ Sla, a Lakota ceremonial site. NDN has sponsored billboards in the Rapid City area urging the company to end its mining efforts. The most plausible alternative for this constituency, in a scenario-planning framework, is to seek consultation rights that bind federal land-management decisions in the area, with billboard and public-opinion activity as a continuing instrument of pressure.

Academic and permitting infrastructure holds high legitimacy and a technical-characterization role. South Dakota Mines professor Christopher Pellowski stated in the report that the Black Hills have long been a known locus of usable critical minerals. Pellowski noted, “Mining is important and it’s a real economic driver. … But I don’t see us at a point where we’re ready for a large commitment (of money and resources).” Pellowski added, “They’re just going to have to do this in steps. And what they’re doing now is the homework to get their heads wrapped around what’s there.” Pellowski argued that “Mining today is not the mining of 100 years ago,” and described current mining as “new and improved.” Pellowski described pegmatite rock in the Black Hills as holding lithium deposits, but said companies would need to find substantial, monetizable levels before scaling up. Pellowski’s constituency role is the technical characterization that determines whether any of the trajectories is actionable.

Silent and unrepresented parties, identified by analysis without documented direct voice in the source materials, include future downstream battery manufacturers — an adjacent domain whose supply-chain requirements drive the initial exploration but lack a voice in local permitting; non-organized local residents whose economic interests might align with mining development, unrepresented relative to organized environmental and tribal advocacy; ecological entities and species affected by habitat displacement; and future generations inheriting the region’s water table.

Scenario projections and cascading effects

The scenario framework is built on two governing axes: commercial and geological viability (driven by drill-core outcomes) and social and regulatory friction (driven by water constraints, cultural-adjacency objections, and legislative trajectory). The independence of these axes is non-trivial: high geological viability does not guarantee low friction, nor does high friction necessarily indicate poor geology.

This generates a four-quadrant scenario matrix with specific leading indicators per quadrant. The first quadrant is Accelerated Extraction (high viability, low friction): Drill core returns commercial-grade graphite or lithium; the sand-and-gravel classification persists or is widened; tribal consultation does not produce binding restrictions. Pete Lien and Sons or a successor advances to a mine-permitting stage modeled on the Wyoming Bear Lodge project. The leading indicator is drill-core assay results reported in U.S. Forest Service or company disclosures meeting an economic threshold.

The second quadrant is Protracted Contention (high viability, high friction): Drill core returns commercial-grade material, but the legislature reclassifies lithium and adjacent minerals, water acquisition rights are constrained, and Pe’ Sla-adjacent restrictions are enacted. The same deposit is developed more slowly, on a smaller footprint, with longer permitting timelines. The leading indicator is a successful 2026 or 2027 reclassification bill, or a binding water-rights ruling that names a specific project.

The third quadrant is Exploration Stall (low viability, low friction): Drill core does not return commercial-grade material; the regulatory environment remains permissive. The state has the framework for critical-mineral development but no commercial project; exploration activity continues with the next entrant. The leading indicator is drill-core assay results that fall below economic threshold.

The fourth quadrant is Regulatory Gridlock (low viability, high friction): Drill core is sub-economic; regulatory and tribal-consultation frameworks tighten anyway. Exploration activity declines, and South Dakota is positioned as a state with mapped deposits but no active commercial critical-mineral project. The leading indicator is success or failure of a 2026 or 2027 reclassification bill in combination with sub-economic drill-core data from any specific project.

A qualitative probability ranking, derived from the documented three-session legislative trajectory and the documented physical and cultural constraints, places these scenarios in the following order. Most likely is Scenario 2 (Protracted Contention). The legislative record shows consistent pressure toward restriction across 2023, 2024, and 2025; the Pe’ Sla adjacency and water concerns are documented. Plausible is Scenario 3 (Exploration Stall). The drill core is genuinely unknown; if it returns sub-economic material, political pressure to restrict is reduced and the regulatory environment is most likely to remain as it is. Less likely is Scenario 1 (Accelerated Extraction). This requires both a positive drill core and a continued failure of restriction efforts; the legislative trend makes this combination less likely than the alternatives. Least likely is Scenario 4 (Regulatory Gridlock). Restriction legislation has so far required the pressure of an active project to gain traction; without a commercial deposit, the political coalition for restriction is weaker.

A wild-card scenario, representing an extrapolation rather than a documented projection, involves a severe, multi-year drought that fundamentally alters the political economy of water. Under this scenario, water allocation for industrial or mining use becomes politically untenable regardless of geological viability or social-friction level, effectively vetoing extraction through ecological constraint rather than regulatory action. The basis for this extrapolation is the substrate’s documentation that the region is semi-arid and that mining “uses huge quantities of water” (Jarding, per the report).

Several predetermined elements exist on which the trajectories do not depend. Critical minerals will remain a federal classification, and the U.S. Department of Energy and adjacent agencies will continue to fund domestic supply-chain work. Lithium-ion battery and electric-vehicle demand will continue to draw on graphite and lithium inputs. The hydrology of the Black Hills — described by an active opposition group as semi-arid — is a physical fact, not a regulatory variable. The 18-hole Pete Lien and Sons drilling program will produce drill-core data, and that data will either confirm or fail to confirm a graphite resource at the target depth.

The critical uncertainties serving as pivot points include the grade and tonnage of what the drill core actually shows; whether the 2025 failure to increase lithium permitting requirements is followed by successful legislation in 2026 or beyond, or whether the sand-and-gravel classification persists; whether federal or tribal consultation processes are expanded in a way that imposes binding constraints on the Pe’ Sla area and adjacent sites; and whether water acquisition rights become a binding constraint on any specific project before permitting is complete.

Five scenario archetypes frame the broader possibility space. Trend Extrapolation represents a gradual increase in exploration activity, incremental regulatory tweaks, and slow expansion of mines operating under existing sand-and-gravel classifications. Orthogonal Driver involves advances in battery chemistry (solid-state, sodium-ion) reducing the criticality of graphite and lithium, collapsing the economic premise of the exploration. Discontinuity (Extremistan) features a major ecological contamination event at an existing U.S. mine triggering a federal moratorium or severe restrictive mandates on critical-mineral permitting. Reversal entails state government heavily incentivizing mining by reclassifying all critical minerals with fast-track permitting, overriding local opposition through preemption. Backcasting from Desired Future envisions a fully domesticated, environmentally sound critical-mineral supply chain; gap analysis reveals current South Dakota frameworks lack the integrated water-management and cultural-consultation protocols required to achieve it.

Strategy types assess cross-scenario robustness. Robust strategies, which perform across multiple scenarios, include baseline water-quality and quantity monitoring prior to extraction and incremental, modular exploration. Scenario-dependent strategies, which require the Accelerated Extraction quadrant, include construction of large-scale processing facilities. Contingent actions, triggered by friction escalation in the Protracted Contention quadrant, include legislative reclassification of mining categories.

Cascading effects cannot be priced in advance from the available reporting. A single commercial-grade discovery at the Rochford site would, on the documented record, alter the political economy of lithium reclassification statewide. A single high-profile water-quality incident in the Black Hills would alter it the other way. Both are observable as they begin to occur; neither is forecastable from the available reporting.

A failure pathway not priced into South Dakota discourse involves a deposit that is technically present, commercially marginal, and located in a hydrologically and culturally constrained setting. In this pathway, the regulatory cost of extracting a sub-economic resource is higher than the regulatory cost of not extracting it, and the political cost of closing the project becomes a binding constraint on the state before the project ever produces revenue. The available reporting does not allow a probability assignment to this pathway, but it does show the conditions in which it becomes relevant: drill-core results near the economic threshold, a state framework that classifies lithium as sand and gravel, and a Pe’ Sla adjacency that federal and tribal consultation processes have not yet resolved.

Analytical framing and discourse architecture

The discourse is structured by multiple, competing frames. The national-security frame relies on Bonifas’s statement that “China controls roughly 90% of rare earth processing,” and his framing of domestication as a national-security imperative. This frame is voiced by the exploration-firm constituency and anchored in federal funding rationale (DOE funding of Bear Lodge).

The economic-development frame draws on Pellowski’s assertion that “Mining is important and it’s a real economic driver” and the state’s documented interest in tax base, employment, and a non-pre-emptive regulatory framework.

The environmental-stewardship frame is built on Jarding’s water-quantity and water-quality statements, the “semi-arid” characterization, and the “any type of mining can be destructive” register from BHCWA. The frame treats the Black Hills water system as already operating near its limits.

The cultural-protection frame centers on NDN Collective and tribal-official opposition, the Pe’ Sla adjacency, and the Rapid City billboard campaign. This frame centers sites and practices that the existing regulatory framework does not currently treat as binding constraints.

The modernization or “new and improved” frame utilizes Pellowski’s statement that “Mining today is not the mining of 100 years ago.” The frame distinguishes current extraction practices from those of prior generations.

The incremental or “steps” frame employs Pellowski’s statement that “They’re just going to have to do this in steps” and the characterization of current activity as “homework.” The frame positions the present exploration phase as preparatory rather than extractive.

The capital-intensity frame references the Rare Element Resources Bear Lodge project ($170M invested, $70M demonstration plant, $100M spent, $440M market value per Bonifas in January 2026) as the documented commercial-scale analog against which South Dakota activity is implicitly measured.

The mineral-rights-position frame rests on the hypothesis that exploration firms would retain rights and wait on commodity prices or extraction technology if a deposit is sub-economic — anchored in the documented rights position, not in any stated company strategy.

The convergence frame serves as the analyst’s organizing frame: the documented intersection of supply-chain rationale with hydrological, regulatory, and cultural constraints — presented as a question of regulatory and cultural envelope, with the drill core as the hinge.

Analytical techniques used in this piece

This analysis applies the methods below. Each links to a short, plain-English explainer you can read and reuse.

Scenario Planning

Builds a small set of distinct, plausible futures to plan against.

Stakeholder Mapping

Charts the parties to a situation — their interests, power, and alignments.

Wicked Futures

Explores a long-horizon, deeply entangled future with no clean resolution.

Antifragility (Taleb)

Whether shocks break a system, leave it unharmed, or actually make it stronger.