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66-649 PDF 2011

STRATEGIC AND CRITICAL 

MINERALS POLICY: 

DOMESTIC MINERALS SUPPLIES 

AND DEMANDS IN A TIME OF 

FOREIGN SUPPLY DISRUPTIONS 

OVERSIGHT HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY AND 

MINERAL RESOURCES 

OF THE

COMMITTEE ON NATURAL RESOURCES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

Tuesday, May 24, 2011 

Serial No. 112-33 

Printed for the use of the Committee on Natural Resources 

( 

Available via the World Wide Web: http://www.fdsys.gov 

or 

Committee address: http://naturalresources.house.gov 

(II) 

COMMITTEE ON NATURAL RESOURCES 

DOC HASTINGS, WA, Chairman 

EDWARD J. MARKEY, MA, Ranking Democrat Member 

Don Young, AK 

John J. Duncan, Jr., TN 

Louie Gohmert, TX 

Rob Bishop, UT 

Doug Lamborn, CO 

Robert J. Wittman, VA 

Paul C. Broun, GA 

John Fleming, LA 

Mike Coffman, CO 

Tom McClintock, CA 

Glenn Thompson, PA 

Jeff Denham, CA 

Dan Benishek, MI 

David Rivera, FL 

Jeff Duncan, SC 

Scott R. Tipton, CO 

Paul A. Gosar, AZ 

Rau ́l R. Labrador, ID 

Kristi L. Noem, SD 

Steve Southerland II, FL 

Bill Flores, TX 

Andy Harris, MD 

Jeffrey M. Landry, LA 

Charles J. ‘‘Chuck’’ Fleischmann, TN 

Jon Runyan, NJ 

Bill Johnson, OH 

Dale E. Kildee, MI 

Peter A. DeFazio, OR 

Eni F.H. Faleomavaega, AS 

Frank Pallone, Jr., NJ 

Grace F. Napolitano, CA 

Rush D. Holt, NJ 

Rau ́l M. Grijalva, AZ 

Madeleine Z. Bordallo, GU 

Jim Costa, CA 

Dan Boren, OK 

Gregorio Kilili Camacho Sablan, CNMI 

Martin Heinrich, NM 

Ben Ray Luja ́n, NM 

John P. Sarbanes, MD 

Betty Sutton, OH 

Niki Tsongas, MA 

Pedro R. Pierluisi, PR 

John Garamendi, CA 

Colleen W. Hanabusa, HI 

Vacancy 

Todd Young, Chief of Staff 

Lisa Pittman, Chief Counsel 

Jeffrey Duncan, Democrat Staff Director 

David Watkins, Democrat Chief Counsel 

SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES 

DOUG LAMBORN, CO, Chairman 

RUSH D. HOLT, NJ, Ranking Democrat Member 

Louie Gohmert, TX 

Paul C. Broun, GA 

John Fleming, LA 

Mike Coffman, CO 

Glenn Thompson, PA 

Dan Benishek, MI 

David Rivera, FL 

Jeff Duncan, SC 

Paul A. Gosar, AZ 

Bill Flores, TX 

Jeffrey M. Landry, LA 

Charles J. ‘‘Chuck’’ Fleischmann, TN 

Bill Johnson, OH 

Doc Hastings, WA, ex officio 

Peter A. DeFazio, OR 

Madeleine Z. Bordallo, GU 

Jim Costa, CA 

Dan Boren, OK 

Gregorio Kilili Camacho Sablan, CNMI 

Martin Heinrich, NM 

John P. Sarbanes, MD 

Betty Sutton, OH 

Niki Tsongas, MA 

Vacancy 

Edward J. Markey, MA, ex officio 

(III) 

CONTENTS 

Page 

Hearing held on Tuesday, May 24, 2011 ............................................................... 1 

Statement of Members: 

Holt, Hon. Rush D., a Representative in Congress from the State of 

New Jersey ................................................................................................... 4 

Prepared statement of ............................................................................... 5 

Lamborn, Hon. Doug, a Representative in Congress from the State of 

Colorado ......................................................................................................... 1 

Prepared statement of ............................................................................... 3 

Markey, Hon. Edward J., a Representative in Congress from the State 

of Massachusetts ........................................................................................... 6 

Prepared statement of ............................................................................... 7 

Statement of Witnesses: 

Eggert, Dr. Roderick G., Professor and Director, Division of Economics 

and Business, Colorado School of Mines ..................................................... 13 

Prepared statement of ............................................................................... 15 

Jaffe, Dr. Robert, Morningstar Professor of Science, Massachusetts 

Institute of Technology ................................................................................. 21 

Prepared statement of ............................................................................... 22 

Latiff, Robert H., President and Consultant, R. Latiff Associates ............... 24 

Prepared statement of ............................................................................... 26 

McGroarty, Daniel, President, American Resources Policy Network ........... 32 

Prepared statement of ............................................................................... 34 

Quinn, Hal, President and CEO, National Mining Association ................... 8 

Prepared statement of ............................................................................... 11 

Richardson, Ed, President, U.S. Magnetic Materials Association, and Vice 

President of Thomas & Skinner .................................................................. 27 

Prepared statement of ............................................................................... 29 

Additional materials supplied: 

The New York Times article entitled ‘‘Supplies Squeezed, Rare Earth 

Prices Surge’’ submitted for the record ....................................................... 50 

The Wall Street Journal article entitled ‘‘China Tightens Rare-Earth 

Rules’’ submitted for the record ................................................................... 52 

(1) 

OVERSIGHT HEARING ON THE ‘‘STRATEGIC 

AND CRITICAL MINERALS POLICY: DOMESTIC MINERALS SUPPLIES AND DEMANDS 

IN A TIME OF FOREIGN SUPPLY DISRUPTIONS.’’ 

Tuesday, May 24, 2011 

U.S. House of Representatives 

Subcommittee on Energy and Mineral Resources 

Committee on Natural Resources 

Washington, D.C. 

The Subcommittee met, pursuant to call, at 9:07 a.m. in Room 

1324, Longworth House Office Building, Hon. Doug Lamborn, 

[Chairman of the Subcommittee] presiding. 

Present: Representatives Lamborn, Coffman, Benishek, Rivera, 

Duncan of South Carolina, Gosar, Flores, Johnson, Holt, and 

Markey [ex-officio]. 

Also Present: Representative Labrador. 

Mr. LAMBORN. The Chairman notes the presence of a quorum, 

which under Rule 3[e] is two Members. The Subcommittee on 

Energy and Mineral Resources is meeting today to hear testimony 

on an oversight hearing on Strategic and Critical Minerals Policy: 

Domestic Minerals Supplies and Demands in a Time of Foreign 

Supply Disruptions. 

So, please have a seat, and I will be introducing you all shortly, 

and at the appropriate time explaining how the testimony process 

works for those of you who may not have done this before. But it 

will be a few minutes before we get there and so I wanted to make 

sure that you are comfortable. 

Under Rule 4[f], opening statements are limited to the Chairman 

and Ranking Member of the Subcommittee. However, I ask for 

unanimous consent to include any other Members opening statements in the hearing record if submitted to the Clerk by close of 

business today. Hearing no objection, so ordered. 

Mr. LAMBORN. I also ask for unanimous consent that the 

Gentleman from Idaho, Mr. Rau ́l Labrador, a Member of the Full 

Natural Resources Committee, be allowed to join us on the dais, 

and participate in the hearing when he arrives. Without objection, 

so ordered. Now I will recognize myself for five minutes, and then 

the Ranking Member. 

STATEMENT OF HON. DOUG LAMBORN, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF COLORADO 

Mr. LAMBORN. We are here today to discuss the Nation’s 

Strategic and Critical Minerals Policy and opportunities for 

improvement so the United States can better meet domestic needs, 

create jobs, and strengthen our economy and national security by 

decreasing our foreign dependence on mineral materials. 

2 

Today, we will gain valuable insight from the mining industry, 

users of mineral commodities, an American Resources advocate, 

and the Chairman of two National Research Council Reports published in 2008, and a 2011 report, issued by the American Physical 

Society and the Materials Research Society. 

Rare-earth elements are important components for renewable 

energy technologies, telecommunications, medical devices, and 

maybe most importantly, military technology. They are used to 

make very small and powerful magnets. 

In fact, if you will allow me to demonstrate. I have two such 

magnets in my hands here today, neodymium, and these are very 

powerful and are difficult to pull apart, and you should be careful 

when you do so because you can squeeze your finger when they let 

loose. 

So, this is an example of a very small, but powerful, magnet that 

is not found in normal magnetic minerals that we just use in everyday use. Magnets like these can be used in the military drones that 

have played an important part in the war on terrorism. 

The industrialization of China and India is driving demand for 

non-fuel mineral commodities, sparking a period of resource nationalism. 

Steps taken by China to restrict exports of mineral commodities 

needed for the industrialization of their country highlights the need 

for the United States to assess the state of our Nation’s mineral 

policies, and the opportunities to produce these and other strategic 

and critical minerals domestically. 

According to the National Resource Council, one of the primary 

advantages the United States possesses over our strongest industrial competitors is our domestic resource base. In other words, we 

have a lot of mineral resources that could be developed. 

The United States is among the world’s largest producer of many 

important metals and minerals, particularly copper, gold, lead, 

molybdenum, silver, and zinc, and we still have substantial domestic reserves for these metals and rare earth elements. 

Yet, domestic mineral exploration stagnated or declined during 

most of the 1990s and 2000s, even though global mineral exploration trends were strongly positive. In 1993, we attracted 20 percent of the worldwide minerals exploration budget. Today, we 

attract about 8 percent. 

Without increased domestic exploration, significant declines in 

United States mineral production are unavoidable as present reserves are exhausted. We will continue to ship American jobs overseas and forfeit our economic competitiveness unless we take steps 

to develop our own mineral resources. 

The lack of exploration expenditures and other factors have led 

to an increased dependence on foreign imports. For example, 25 

years ago, the United States was dependent on foreign sources for 

30 non-fuel mineral materials, 6 of which were entirely imported 

to meet the Nation’s requirements, and another 16 of which were 

imported to meet more than 60 percent of the Nation’s needs. 

By last year our import dependence for non-fuel minerals more 

than doubled from 30 to 67 commodities. Eighteen of those commodities were imported entirely to meet the Nation’s requirements, 

3 

and another 25 of those were imported to the tune of 50 percent 

or more. 

You can see on the screen to your right and left a breakdown of 

some of these key 67 commodities, and how much is imported. 

While much of the focus has been on rare earth elements because 

of China’s restrictions on exports, they currently produce about 96 

percent of the world’s rare earth elements. 

These metals are not the only ones that should be of concern to 

us. For example, at a 2006 Subcommittee hearing on the energy 

and mineral requirements for renewable and alternative fuels used 

for transportation and other purposes, Robyn Storer stated that by 

2016 less than half of the world demand for copper mine supply 

can be met from production from existing mines, and that the 

world needs the equivalent of 30 new major mines by 2016 to meet 

the projected demand growth. 

The worldwide economic downturn in 2008 and 2009, and the 

slow recovery has stayed that dire projection, but has not eliminated it. The United States has abundant copper resources, and 

could benefit greatly from development of projects like Resolution 

Copper in Arizona. 

Developing our Nation’s mineral resources is not only an integral 

part of an all-of-the-above energy plan, but it will create long-term 

family wage jobs, stimulate our economy, and reduce our foreign 

dependence on mineral resources. 

I look forward now to hearing from our witnesses. I will explain 

the procedures shortly, but now I would like to recognize the Ranking Member for five minutes for an opening statement. Mr. Holt. 

[The prepared statement of Chairman Lamborn follows:] 

Statement of The Honorable Doug Lamborn, Chairman, 

Subcommittee on Energy and Mineral Resources 

We are here today to discuss the Nation’s Strategic and Critical Minerals Policy 

and opportunities for improvement so the United States can better meet domestic 

needs, create jobs and strengthen our economic and national security by decreasing 

our foreign dependence on mineral materials. 

Today we will gain valuable insight from the mining industry, users of mineral 

commodities, an American Resources advocate and the Chairmen of two National 

Research Counsel Reports published in 2008 and a 2011 report issued by the American Physical Society and the Materials Research Society. 

Rare-earth elements are important components for renewable energy technologies, 

telecommunications, medical devices and maybe most importantly military technology. 

They are used to make very small and powerful magnets—if you allow me to demonstrate with these two small magnets here—magnets that are used in the military 

drones that have played an important role in the war on terrorism. 

The industrialization of China and India is driving demand for non-fuel mineral 

commodities, sparking a period of resource nationalism. 

Steps taken by China to restrict exports of mineral commodities needed for the 

industrialization of their country highlights the need for the Unites States to assess 

the state of our Nation’s mineral policies and the opportunities to produce these and 

other strategic and critical minerals domestically. 

According to the National Research Council, one of the primary advantages the 

United States possesses over our strongest industrial competitors is our domestic 

resource base—in other words we have a lot of mineral resources that could be 

developed. 

The United States is among the world’s largest producer of many important 

metals and minerals, particularly copper, gold, lead, molybdenum, silver, and zinc; 

and we still have substantial domestic reserves of these metals including rare earth 

elements. 

4 

Yet, domestic mineral exploration stagnated or declined during most of the 1990’s 

and 2000’s even though global mineral exploration trends were strongly positive. In 

1993 we attracted twenty percent of the world-wide minerals exploration budget, 

today we attract about eight percent. 

Without increased domestic exploration, significant declines in U.S. mineral production are unavoidable as present reserves are exhausted. We will continue to ship 

American jobs overseas and forfeit our economic competitiveness unless we take 

steps to develop our own mineral resources. 

The lack of exploration expenditures and other factors has led to an increased 

dependence on foreign imports. For example, 25 years ago the United States was 

dependent on foreign sources for 30 non-fuel mineral materials, 6 of which were 

entirely imported to meet the Nation’s requirements and another 16 of which were 

imported to meet more than 60 percent of the Nation’s needs. 

By last year our import dependence for non-fuel mineral materials more than doubled from 30 to 67commodities, 18 commodities were imported entirely to meet the 

Nation’s requirements, and another 25 commodities required imports of more than 

50 percent (figure 1—on screen). 

While much of the focus has been on rare earth elements because of China’s 

restrictions on exports—they currently produce about ninety-six percent of the 

world’s rare earth elements. These metals are not the only ones that should be of 

concern to us. 

For example, at a 2006 subcommittee hearing on ‘‘The Energy and Mineral 

Requirements for Renewable and Alternative Fuels Used for Transportation and 

Other Purposes’’ Robyn Storer stated that ‘‘by 2016 less than half of world demand 

for copper mine supply can be met from production from existing mines’’. . .and 

that. . .‘‘the world needs the equivalent of 30 new major mines by 2016 to meet the 

projected growth in demand.’’ 

The world-wide economic downturn in 2008 and 2009 and slow recovery has 

stayed that dire projection but not eliminated it. 

The United States has abundant copper resources and could benefit greatly from 

development of projects like Resolution Copper in Arizona. Developing our Nation’s 

mineral resources is not only an integral part of an all-of-the-above energy plan but 

it will create long-term family wage jobs, stimulate our economy and reduce our foreign dependence on mineral resources. 

I look forward to hearing from our witnesses today. 

STATEMENT OF HON. RUSH D. HOLT, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF NEW JERSEY 

Mr. HOLT. Thank you, Mr. Chairman. In recent years, the issue 

of rare earth elements and critical minerals has come to widespread attention, and we have witnessed, I think, a growing realization that allowing our domestic rare earth supply chain to disintegrate over the past couple of decades may be a threat to both 

our national security and our economic competitiveness. 

It was nearly 20 years ago that Chinese President Deng Xiaoping 

famously noted that while the Middle East has its oil, China has 

its rare earths. So, China’s march to monopoly of 97 percent of the 

world’s rare earth minerals, ores, and oxides began. 

At the same time, the United States has gone from the world’s 

leading producer to near total reliance on imports of rare earths. 

This has serious repercussions for the military. These minerals are 

essential for guidance systems, and lasers, and satellite communication, and radar, and sonar, and all sorts of other things. 

And the Department of Defense is currently working on a report 

on its plan to ensure near-term availability, and I am not sure that 

anybody is really looking at long-term availability. So, I look forward to that report from the DoD. But it is more than a national 

security concern. There are implications for the development of 

clean energy. Over the next couple of decades, the global market 

5 

for sustainable energy products and equipment is going to be a 

multi-multi-trillion dollar industry. 

And if American companies and workers are to participate in this 

rapidly growing sector for access to rare earths, and the ability to 

domestically refine and process reliable supplies will be critical. 

A hybrid vehicle, for example, contains a couple of pounds of neodymium in its motor, and nearly 25 pounds of lanthanum in its 

battery. Those are just two of the 17 minerals categorized as rare 

earths. 

Several hundred pounds of these might be used for advanced 

magnets for the large wind turbines, for example. So, China has 

the ability to shut down the production of almost all of these products if it wishes, and based on current Chinese exports quotas and 

tariffs, as well as the unofficial earth embargo to Japan last fall, 

relying completely on China for these critical minerals is clearly 

not a sound approach for our country. 

It is clear that China is acting as they see it strategically to 

dominate the entire clean energy supply chain, from mine to solar 

module, and it is vital to America’s economic competitiveness that 

we, too, develop a long-term strategy for competing in this and 

other high tech sectors. 

The strategy must include a plan for securing reliable supplies 

of critical minerals. So, we need the United States Geological Survey, and Geological Surveys from around the world, too provide the 

best and most transparent data on critical mineral resources in the 

ground. 

We need the Department of Energy researching mineral and 

material substitutes, developing reuse and recycling methods, and 

improving technologies for critical mineral extraction and refining. 

We need the Department of Defense to develop a plan for securing adequate supplies to meet national security requirements now 

and into the future. So, let us be clear. An over-simplified ‘‘Mine, 

Baby, Mine’’ mantra will not create a domestic supply chain. 

It will not develop substitute materials, and it will not enhance 

in the long run our national security and economic competitiveness. 

Moreover, since rare earths—maybe at some point we should make 

it clear that rare earths aren’t rare—just difficult to acquire. 

But since rare earth deposits are typically found associated with 

radioactive elements, haphazard and imprudent mining can leave 

us with contaminated water supplies, and radioactive superfund 

sites around the country. 

So, it is an important hearing, and I hope the first of many on 

this subject. As the Chairman said, I think it is possible to find 

some common ground, and this need not be a partisan issue. I 

thank the witnesses for being here today, and I look forward to 

your testimony. 

[The prepared statement of Mr. Holt follows:] 

Statement of The Honorable Rush D. Holt, Ranking Member, 

Subcommittee on Energy and Mineral Resources 

Over the past year, the issue of rare earth elements and other critical minerals 

has jumped to the front burner. We have witnessed a collective realization—rightly 

I believe—that allowing our domestic rare earth supply chain to disintegrate over 

the past two decades may be a threat to both our national security and economic 

competitiveness. 

6 

In 1992, the Chinese president Deng Xiaoping [shou-ping] famously noted that 

‘‘the Middle East has its oil, but China has rare earth.’’ So began China’s march 

to monopoly producer of 97 percent of the world’s rare earth mineral ores and oxides. At the same time, the U.S. has gone from the world’s leading producer to near 

total reliance on imported rare earths. 

This has serious repercussions for our military. Rare earth minerals are essential 

to our missile guidance systems, lasers for enemy mine detection, satellite communications, and radar and sonar systems. The Department of Defense is currently 

working on a report on its plan to ensure near-term availability of rare earth minerals, and I look forward to that report. 

But this is more than a national security concern. It also has significant implications for the development of clean energy. Over the next two decades, the global 

market for sustainable energy products and equipment is estimated to be worth 

more than $12 trillion. If American companies and workers are to participate in this 

rapidly growing sector, access to rare earths and the ability to domestically refine 

and process reliable supplies of these minerals will be absolutely critical. 

Today, a hybrid vehicle contains 2 pounds of neodymium in its motor and nearly 

25 pounds of lanthanum in its battery. Those are just two of the 17 minerals categorized as rare earths. Several hundred pounds of these minerals may be used to 

make the advanced magnets needed in a large wind turbine. Today, China has the 

ability to shut down production of all of these products if it wishes. Based on current 

Chinese export quotas and tariffs, as well as the unofficial rare earth embargo to 

Japan last fall, relying completely on China for these critical minerals is clearly not 

a sound approach. 

It is clear that China is acting strategically to dominate the entire clean energy 

supply chain, from mine to solar module. It is vital to America’s economic competitiveness that we too develop a long-term strategy for competing in this and other 

high-tech sectors. This strategy must include a plan for securing reliable supplies 

of critical minerals. 

So we need the U.S. Geological Survey, and geological surveys from around the 

world, providing the best and most transparent data on critical mineral resources 

in the ground. We need the Department of Energy researching material substitutes, 

developing reuse and recycling methods, and improving technologies for critical mineral extraction and refining. We need the Department of Defense to develop a plan 

for securing adequate supplies to meet national security requirements in the nearterm. But let’s be clear. An over-simplified ‘‘Mine Baby Mine’’ mantra will not create 

a domestic supply chain, it will not develop substitute materials, and it will not enhance our national security or economic competitiveness. Moreover, since rare earth 

deposits are typically found among radioactive uranium, thorium, and radon, a haphazard ‘‘Mine, Baby, Mine’’ strategy could leave us with contaminated water supplies and radioactive Superfund sites across the country. 

This is a very important hearing and, I hope, the first of more on the subject.I 

thank the witnesses for being here today and look forward to their testimony. 

Mr. LAMBORN. OK. Thank you, Representative Holt. At this 

point, I would like to have a moment of silence. Our Chairman, Doc 

Hastings, unfortunately lost his mother in the last day or so. So, 

if we could have a moment of silence, it would be appreciated. 

[Pause.] 

Mr. LAMBORN. Thank you. So, the Chairman of the Full Committee is not with us. We are graced with the presence of our 

Ranking Member of the Full Committee. So, if you have an opening 

statement, Mr. Markey, we would like to hear it. 

STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MASSACHUSETTS 

Mr. MARKEY. Thank you, Mr. Chairman, very much. And I also 

appreciate your foresight in using the word strategic in the title of 

today’s hearing. It underscores the importance of dealing with this 

resource challenge with a long-term national purpose in mind. 

We can mine every last rare earth molecule from the National 

Mall to the California coast, but if we are shipping all that ore 

7 

back across the Pacific to be refined and processed into valuable 

alloys in China, and assembled into solar panels, i-Pods, and missile guidance systems in China, then we have completely missed 

the opportunity. 

Against all odds, American manufacturing is charging back, anchored by a strong domestic auto industry that has reoriented 

around technology and innovation. United States manufacturing 

has now expanded for 21 consecutive months. 

I know that all of us are happy to see this recovery happening, 

but it is time to take stock of how we are going to maintain this 

growth. Our workers are competitive globally, not because they will 

work for the lowest wages, but because they are the most productive because they innovate. 

They find ways to work smarter instead of harder, and that is 

why this hearing is so important. This is all about building blocks 

of the high-tech economy. A Nation that wishes to compete in hightech, value-added manufacturing, in the 21st Century must have a 

reliable source of critical minerals. 

One agency which this Committee has jurisdiction over that I believe must be more fully utilized to help solve the critical minerals 

challenge is the United States Geological Survey. 

This is why I have introduced a bill, along with Representative 

Hank Johnson, that directs the United States Geological Survey to 

work with other Geological Surveys to identify and quantify global 

rare earth deposits, improve our understanding of the distribution 

and formation of these deposits, analyze the state of the rare earth 

supply chain, and recommend steps to ensure supply. 

I believe that H.R. 1314, the Resource Assessment of Rare 

Earths, or RARE Act, is an important first step that this Committee could take to bring valuable government resources and expertise to bear on this problem. 

I hope to work with the Majority on this and other legislation 

that address the critical mineral challenge. I thank you, Mr. Chairman, for holding this hearing. 

[The prepared statement of Mr. Markey follows:] 

Statement of The Honorable Edward J. Markey, Ranking Member, 

Committee on Natural Resources 

I thank the Chairman. 

And I also appreciate his foresight in using the word ‘‘strategic’’ in the title of today’s hearing. It underscores the importance of dealing with this resource challenge 

with a long-term national purpose in mind. 

‘‘Drill, Baby, Drill’’ or ‘‘Mine, Baby, Mine’’ doesn’t really capture the type of solutions we need in this area. We can mine every last rare earth molecule from the 

National Mall to the California coast. But if we’re shipping all that ore back across 

the Pacific to be refined and processed into valuable alloys in China and assembled 

into solar panels, iPods, and missile guidance systems in China, then we will have 

completely missed the opportunity. 

Against all odds, American manufacturing is charging back. Anchored by a strong 

domestic auto industry that has re-oriented around technology and innovation, U.S. 

manufacturing has now expanded for 21 straight months. 

I know all of us are happy to see this recovery happening. But it’s time to take 

stock of how we’re going to maintain this growth. Our workers are competitive globally not because they’ll work for the lowest wages, but because they are the most 

productive. They innovate. They find ways to work smarter, instead of harder. 

That’s why this hearing is so important today. This is all about the building 

blocks of the high-tech economy. A nation that wishes to compete in high-tech, 

8 

value-added manufacturing in the 21st Century must have a reliable source of critical minerals. 

One agency which this committee has jurisdiction over that I believe must be 

more fully utilized to help solve the critical minerals challenge is the U.S. Geological 

Survey. That is why I have introduced a bill along with Representative Hank Johnson that directs the USGS to work with other geological surveys to identify and 

quantify global rare earth deposits, improve our understanding of the distribution 

and formation of these deposits, analyze the state of the rare earth supply chain, 

and recommend steps to ensure supply. I believe H.R. 1314—the Resource Assessment of Rare Earths, or RARE Act—is an important first step that this committee 

could take to bring valuable government resources and expertise to bear on this 

problem. 

I hope to work with the majority on this and other legislation that address the 

critical mineral challenge. 

Mr. LAMBORN. OK. And thank you, Representative Markey. I 

look forward now to hearing from our witnesses. Let me introduce 

them. From our left to right, Hal Quinn, President and CEO of the 

National Mining Association; Dr. Roderick Eggert, Director and 

Professor of the Division of Economics and Business at the Colorado School of Mines in our State, myself and Representative Coffman here; Dr. Robert Jaffe, Morningstar Professor of Science at the 

Massachusetts Institute of Technology; Robert Latiff, President and 

Consultant, R. Latiff Associates; Ed Richardson, President of the 

Magnetic Materials Association, and Vice President of Thomas and 

Skinner; and Daniel McGroarty, President of the American 

Resources Policy Network. 

Like all of our witnesses, your written testimony will appear in 

full in the hearing record. So, I ask that you keep your oral statements to five minutes as outlined in the invitation letter that we 

sent you and under Committee Rule 4[a], 

Our microphones are not automatic, and so you have to push the 

button in front of you, and you will see a timer that counts down 

from five minutes to zero, and that is when your time has run out. 

After four minutes a yellow light will come on for the last 

minute. Then I would ask that you stop and we go on to the next 

witness. Then we will alternate between the Majority and the Minority to ask questions of any one of you for up to five minutes per 

Representative, and if your schedule allows, it would be nice to 

have a second round of questions. 

In any case, we do have to be out of here sometime before 11 

o’clock, because at that point, we need to be over at the House, and 

I assume that all of us are interested, and need, and want to be 

there for a Joint Session of Congress to hear the Prime Minister 

of Israel address Congress. So, that will be our deadline. 

At this point, why don’t we start with our first witness. Mr. 

Quinn, you may begin. 

STATEMENT OF HAL QUINN, PRESIDENT AND CEO, 

NATIONAL MINING ASSOCIATION 

Mr. QUINN. Good morning, Mr. Chairman, Ranking Member 

Holt, and Ranking Member Markey, and Members of the Subcommittee. I want to thank the Subcommittee for holding this 

hearing to address a serious challenge to our economic and 

national security; the availability of critical minerals that are the 

building blocks of our society. 

9 

Now, the definition of critical minerals may vary depending upon 

one’s perspective, whether it is examining national security implications, our capabilities for continued innovation, and the development of new technologies. 

But from a broader perspective, ensuring that our domestic mining industry performs to its full potential is critical to our economic 

success. The United States mining industry produces $64 billion in 

raw materials, that is then consumed in finished products that add 

$2.1 trillion, or 14 percent to our GDP. 

Now consider if we had produced to our resource potential for 

just copper, rhenium, and iron ore, basic ingredients for the core 

sectors of our economy, an additional $32 billion of revenue would 

have been realized, and then converted into an additional 

$1 trillion in economic output for finished products. 

Today, less than half the mineral needs of United States manufacturing are met from domestically mined minerals. Our import 

dependence for key minerals and commodities has doubled over the 

past two decades. If you had done a time series on that chart earlier, you would have seen it increasingly become blue over the last 

20 years. 

The economic and geopolitical perils posed by our Nation’s oil import dependency is well understood. Less appreciated is the peril 

posed by our growing dependence on foreign sources of minerals. 

Rare earth elements present a contemporary lesson. Twenty 

years ago the United States was a major producer of rare earths. 

Today, China supplies more than 95 percent of the world demand. 

With that control, China has changed its business model from exporting rare minerals to exporting finished products using rare 

earth elements, such as electric motors, computers, batteries, and 

wind turbines. 

In short, China has leverage in its commodity control so that it 

can provide price and supply preference to domestic consumers, including companies that move their manufacturing and research facilities to China. 

The value proposition is clear. Instead of selling for the creation 

of hundreds of jobs derived from rare earths, or from buying rare 

earths, why not employ millions throughout the value added chain 

and seize the economic and technological advantages that come 

with building out your manufacturing capabilities. 

There exists the real potential for a rare earths story to become 

an all too common experience for other natural or rare earths commodities. You are presently in the midst of an unprecedented super 

cycle demand for minerals. The cycle is fueled by a start transformation of nations from agrarian-based societies to industrial and 

urban commercial centers. 

Growing urbanization and industrialization in developing the 

world means more demand for minerals to build the infrastructure 

and supply the products for a population with growing aspirations. 

These trends have already translated to major shifts in global 

sources of demand and supply for key commodities. We as a Nation 

have become increasingly marginalized in the front end of the mineral supply chain, and the consequences are severe for our Nation’s 

global competitiveness. 

10 

What the rare earths experience should teach us is that when secure and reliable sources of minerals supply disappear from our 

shores, so do the downstream industries, innovation, and technology that require them. 

The good news is that the United States has resources and the 

know how to meet more of its domestic mineral needs. Our mineral 

endowment is immense and inevitable. According to the United 

States Geological Survey, when it comes to key minerals, what is 

left to be discovered in the United States is almost as much as 

what has been discovered. 

Our resource potential in business advantages should provide us 

a leg up globally, and yet by several measures we are performing 

below our potential. I had previously mentioned that our Nation’s 

import dependency continues to increase. 

So, finding new resources and delineating our economic potential 

is critical to keep the commodity pipeline flowing. However, the 

percentage of worldwide exploration spending commanded by the 

United States has dropped from 20 percent in 1993 to a mere 8 

percent today. 

That is a leading indicator where future development capital will 

be deployed. Until recently the United States was a global leader 

in value added mining to the Nation’s GDP. We have now slipped 

to second, but more of concern is that the ratio of our capital expenditures to the value added of mining to the economy lags so 

substantially that it may jeopardize the United States’s current 

overall GDP rank. 

So, while the United States has one of the greatest mineral endowments, our ability to get these minerals into the supply chain 

to help meet more of America’s needs is compromised by some policies that place high hurdles in our lane of the global race to remain 

competitive. 

Let me just quickly mention three; access to mineral lands. The 

12 Western States are the source of much of our Nation’s mineral 

endowment. Federal lands compromise almost 40 percent of the 

land area in the United States. 

Half of that is either off-limits or under restrictions for mineral 

development. Unknown amounts of resources on adjacent State and 

private lands are also sterilized because of those restrictions. 

The United States mining struggles under the highest statutory 

taxation rate. Federal and State taxes combined result in a 41 percent tax rate for United States metals mining. 

Many countries that we compete against for development capital 

have already instituted their rate cuts, or targeted reforms to attract investments in mining. The Federal regulatory burden has recently been estimated to cost the United States economy $1.75 trillion. 

On average that amounts to $8 thousand per employee. But 

while regulatory costs can solely drown out an enterprise, the uncertainties and delays in obtaining permits to commence operations 

can crush a mining enterprise before it even gets into the dirt. 

Permit delays pose the highest hurdle for domestic mining, with 

necessary government authorizations now taking close to 10 years. 

If commodities super cycles are historically measured in 20 years 

in duration, the 10 years that it takes to obtain permits leaves the 

11 

United States mining still in the starting blocks with the race halfway over. 

America’s drift away from the greater self-sufficiency and the 

basic building blocks of our economy compromises our economic 

and national security, and surrenders the country’s inherent advantage of rich reserves of metals and minerals. 

This hearing is a good starting point for addressing head-on the 

larger issue of how our country can produce more minerals to meet 

a greater share of our domestic needs, and we thank you for holding this hearing, Mr. Chairman. 

[The prepared statement of Mr. Quinn follows:] 

Statement of Hal Quinn, President and CEO, National Mining Association 

Good morning. I am Hal Quinn, president and chief executive officer of the 

National Mining Association (NMA). NMA is the national trade association representing the producers of most of the nation’s coal, metals, industrial and agricultural minerals; manufacturers of mining and mineral processing machinery, equipment and supplies: and engineering and consulting firms, financial institutions and 

other firms serving the mining industry. 

I want to thank the Subcommittee for holding this hearing to address a serious 

challenge to our economic and national security—the availability of the critical minerals that are the building blocks of our society. And these minerals are critical. 

Using one metric, the value added from industries consuming the $64 billion in raw 

materials from U.S. minerals mining translates into $2.1 trillion, or 14 percent, of 

our GDP. Yet today, less than half of the mineral needs of U.S. manufacturing are 

met from domestically mined resources. And when secure and reliable mineral supply chains disappear from our shores so do the downstream industries, related jobs, 

innovation and technology that depend on them. 

Overall, the United States’ import dependence for key mineral commodities has 

doubled in the span of two decades. This is not a sustainable trend, particularly in 

a highly competitive world economy in which the demand for minerals continues to 

grow. These dynamics has led NMA to launch a new education and outreach effort, 

Minerals Make Life, and we are ready to work with our elected leaders to ensure 

public policies and procedures address the challenges before us. 

The Backdrop 

Fast growing economies led by China and India have created an historic super 

cycle for commodities—one we have not seen on such a scale since the American 

Industrial Revolution more than a century ago. Metals are at the epicenter of this 

historic transformation of nations from agrarian-based societies to industrial and 

urban commercial centers. Consider the following megatrends: 

• For the first time in our history, more than half of humanity lives in urban 

areas. It is forecast that more than 70 percent will be located in urban centers 

in the next 40 years. In China, alone, we are witnessing the largest internal 

migration in human history with perhaps 625 million Chinese living in cities 

by 2015. By 2025, there will be at least 29 mega-cities globally with more 

than 10 million people. These cities all require tremendous infrastructure to 

electrify, connect and transport their citizenry. 

• At the same time, we are in the middle of an unprecedented explosion in the 

world middle class, and the pace will continue to pick up significantly. Some 

estimate that 25 percent of China’s population qualifies as middle class— 

more people than the entire U.S. population today. And, China’s middle class 

is expected to double in the next decade. Entre to the middle class brings with 

it expectations for better medical care, more goods and services, improved 

housing, safe drinking water and other hallmarks of a better life. All depend 

on minerals. 

• What we see in China is also underway in other emerging countries such as 

India, Indonesia and Brazil. The demographics all point to sustained momentum behind these trends. 

The Peril 

It is important that we understand these critical trends because they will shape 

our future, presenting opportunities and challenges for both U.S. mining and the nation. These trends point to enormous growth and job-creation opportunities if U.S. 

mining is allowed to perform to its potential. If we do not, and become increasingly 

12 

marginalized, the consequences are severe for our nation’s global competitiveness as 

we become more reliant upon extended and unstable supply chains for what we can 

produce here. 

Recognizing that resource constraints can limit its growth, China, for one, has developed a comprehensive and multi-faceted strategy for assuring future supplies of 

minerals. 

A powerful example of China’s aggressive strategy to ensure access to needed 

minerals involves rare earth elements (REE). REEs are valued for their magnetic 

and optical properties and used in weapons systems, computers and energy technologies. Twenty years ago, the United States was the major producer of REEs. 

Today, China supplies more than 95 percent of world demand. China also recognizes 

the benefits of forward integration to its economy and technological advancement. 

As a result, it has changed its business model from exporting rare earth minerals 

to exporting finished products using REEs such as electric motors, computers, batteries and wind turbines. While the U.S. is reviving its REE production capability, 

we have let the situation go on far too long for these and other minerals commodities. 

America’s drift away from greater self-sufficiency for the basic building blocks of 

our economy compromises our economic and national security and ignores this country’s rich reserves of metals and minerals. It is time for policymakers to meet headon the larger issue of how our country can produce more domestic minerals to meet 

a greater share of our needs. 

The Potential 

The United States has the resources and the know-how to meet more of its domestic mineral needs. From a global perspective, the United States enjoys inherent advantages. Our mineral endowment is immense and enviable. Our bench is long and 

deep. According to the United States Geological Survey, when it comes to copper, 

silver and zinc and other key minerals ‘‘what is left to be discovered in the U.S. 

is almost as much as what has been discovered.’’ 

Beyond our rich mineral endowment, we also enjoy several other inherent advantages. We have a global-leading workforce in terms of skill and productivity. We possess top quality rail and port infrastructure for moving commodities to market. We 

enjoy an electricity infrastructure that is top of class in terms of quality, reliability 

and cost—thanks to abundant and low-cost coal. And the depth of our capital markets allows access to the capital necessary to find and develop new resources. 

The Performance 

Our resource potential and business advantages should provide us a leg-up globally. And yet, by several measures we are performing below our potential. • When viewed through the lens of resource potential, we are punching below 

our global weight. If we had produced to our resource potential for copper, 

molybdenum, and iron ore—basic ingredients for key sectors of our economy— 

an additional $32 billion of revenue would have been registered in 2008—and 

multiply that by the value added to the GDP by major industries that convert 

these materials into finished products, and U.S. mining could have been the 

starting point for an additional $1 trillion in economic output. • Finding new resources and delineating their economic potential is critical to 

keeping the commodity pipeline flowing. Here again, we see a disturbing 

trend with the percentage of worldwide exploration spending commanded by 

the U.S. dropping from 20 percent in 1993 to only 8 percent today. The percentage of global exploration spending is a leading indicator of where future 

development capital will be deployed. If you do not put the money in the 

ground, you cannot get the minerals out. • Until recently, the U.S. was the global leader in value added of mining to the 

nation’s GDP. We have now slipped to second, but more concerning is that 

when we look at the ratio of our capital expenditures to the value add of mining to the economy, we lag so substantially that absent significantly higher 

investments, the U.S. is unlikely to maintain its current overall GDP rank. 

The Public Policy 

So while the United States has one of the world’s greatest mineral repositories, 

our ability to get these minerals into the supply chain to help meet more of America’s needs is threatened. Numerous public policies have placed high hurdles in our 

lane of the global race to remain competitive. 

• Access 

Twelve western states are the source of much of our nation’s mineral endowment. 

Federal lands comprise almost 40 percent of the land area in those states. Half of 

that is either off-limits or under restrictions for mineral development. Unknown 

13 

amounts of resources on adjacent state and private lands are also sterilized because 

of federal land restrictions. Both the elected and unelected continue to propose placing more of these lands off-limits. • Taxes 

U.S. mining struggles under the world’s highest statutory taxation rate. And our 

payments to local, state and federal government in 2008, the last year for which we 

have complete data, resulted in a 41 percent effective tax rate for U.S. metals mining operations, according to an analysis by PricewaterhouseCoopers. Many of the 

countries we compete against for development capital have already instituted rate 

cuts or targeted reforms to attract investments in mining. Here in the United 

States, we more often see proposals that would add additional taxes or fees on mining and eliminate the percentage depletion allowance that allows us to secure the 

enormous financial commitments necessary for capital intensive enterprises. • Regulatory Burden 

The federal regulatory burden has recently been estimated to cost the U.S. economy $1.75 trillion annually. On average that amounts to about $8,000 per employee. 

The intensity is higher for an industry such as mining that must make regulatory 

filings and obtain government approvals for even the slightest changes in operating 

plans. 

Regulatory costs can slowly drown an enterprise. But the uncertainties and delays 

in obtaining permits to commence operations can crush the mining enterprise before 

it even gets in the dirt. Permit delays pose the highest hurdle for domestic mining 

with necessary government authorizations now taking close to 10 years to secure. 

If commodity cycles are historically 20 years in duration, the 10-years it takes to 

obtain permits leaves U.S. mining still in the starting blocks with the race half way 

over. 

Crafting Solutions 

As Congress investigates long-term solutions and strategies to address our nation’s mineral needs, it must also consider that many of today’s emerging technologies rely on combinations of a variety of different minerals—not just single commodities. As new applications are found, markets for mineral commodities will expand considerably along with demand. For example, as cell phone technology has 

advanced, so too have the number of minerals needed to send an e-mail, take a 

photo or capture video. Today, cell phones are made from as many as 42 different 

minerals, televisions can be composed of 35 different minerals and computers are 

built from 66 different minerals. 

Conclusion 

An overreliance on imported minerals coupled with flat production at home, places 

the United States at greater risk of supply disruptions in an increasingly mineralscompetitive world. Minerals are the building blocks of our future. Achieving sustainable economic growth will require a steady supply of minerals that will enable 

American corporations—large and small—to develop and make the technologies that 

will propel our economy, enable our country to compete globally, and improve the 

quality of our lives. The technologies that define innovation today all depend on 

minerals—lifesaving medical devices, smart phones and advanced energy technologies alike require minerals to function. The United States’ ability to continue 

to innovate will depend on how we meet tomorrow’s needs. 

Mr. LAMBORN. OK. Thank you for your comments. Now, Dr. Roderick Eggert from the Colorado School of Mines. 

STATEMENT OF DR. RODERICK EGGERT, DIRECTOR AND 

PROFESSOR, DIVISION OF ECONOMICS AND BUSINESS, 

COLORADO SCHOOL OF MINES 

Dr. EGGERT. Thank you very much. Good morning, Mr. Chairman, and Members of the Committee. My name is Rod Eggert. I 

am a Professor at the Colorado School of Mines. I chaired the National Research Council Committee that prepared the 2008 report, 

Minerals, Critical Minerals, and the United States Economy. 

This report described the broad context for current concerns 

about strategic and critical minerals. In particular, let me highlight 

three aspects of the report. First, definitions. The report defined a 

14 

critical mineral, or a critical element, as one that is both essential 

in use, or difficult to substitute away from, and also subject to supply risk. 

And which specific minerals or elements is strategic depends on 

and varies from industry to industry, from country to country, and 

over time. 

Second, a conceptual framework. The report articulated a conceptual framework for assessing the degree of criticality of specific elements or minerals, and at the time identified indium, magnesium, 

niobium, platinum group elements, and rare earth elements, as 

critical. 

Third, policy relevant recommendations. The report did not make 

specific policy recommendations, but it did express and affirm an 

important Federal rule in collecting, and disseminating, and analyzing information about critical mineral markets and the science 

behind them. and also a critical Federal role in research, especially 

pre-competitive research. 

Let me use the rest of the time to articulate for personal propositions. First, the issues are broader than rare earths, despite the 

prominence of rare earths over the last year or so in the news. 

There are perhaps 15 or 20 elements that arguably are critical 

or strategic. Point number two. Each element has its own story, although import dependence can be a source of risk, by itself import 

dependence need not be risky if foreign sources are varied and otherwise secure. 

Different elements have different constraints on availability, and 

are different supply risks, and in some cases are import dependence related to geopolitical risks. In other cases, basic geologic scarcity may be a source of a constraint; technical limitations on the 

ability to process; extract and process an element may be a constraint. 

Reliance on byproduct production, or environmental, or social 

concerns, all can be sources of unavailability if you will. 

Point number three. Markets are responding to concerns about 

availability and security of supply, and timelines can be significant. 

Markets provide powerful incentives for affected parties to respond. 

On the supply side, there has been a minor mania of exploration 

for rare earths. There has been a significant increase in interest in 

recycling research over the last several years, but the timelines are 

significant; 5 to 15 years or so to take a mineral exploration project 

from its initial stages to actually operating a mine. 

On the demand side, markets encourage users of mineral-based 

elements to obtain ′′insurance′′ against mineral supply risks. In the 

short- to medium-term users can, for example, maintain stockpiles, 

diversify sources of supply, develop joint-sharing arrangements 

with other users, or develop tighter relations with producers. Over 

the longer term, users might invest in new mines in exchange for 

secure supplies or, undertake research and development to substitute away from those elements subject to supply risks. 

Point number four. But there are important roles for the Federal 

Government today in encouraging undistorted international trade 

where trade restrictions are the problem, and in improving the regulatory approval processes for domestic resource development when 

15 

there are opportunities to create value through domestic mineral 

production and downstream processing activities. 

And, finally, there is an important Federal role in facilitating the 

provision of information and analysis in education, and in precompetitive research activities. Thank you very much for the 

opportunity to testify. I look forward to responding to your 

questions. 

[The prepared statement of Dr. Eggert follows:] 

Statement of Roderick G. Eggert, Professor and Division Director, Division 

of Economics and Business, Colorado School of Mines, Golden, Colorado 

Good morning, Mr. Chairman, members of the Committee, ladies and gentlemen. 

My name is Rod Eggert. I am Professor of Economics and Business at Colorado 

School of Mines. My area of expertise is the economics of mineral resources. I participated in two activities relevant for today’s hearing. I chaired the committee of 

the U.S. National Research Council (NRC) that prepared the 2008 report Minerals, 

Critical Minerals, and the U.S. Economy. I served as a member of the committee 

of the American Physical Society and the Materials Research Society (APS/MRS) 

that prepared the 2011 report Energy Critical Elements: Securing Materials for 

Emerging Technologies. 

I organize my remarks into three sections. First, I describe the context for current 

concerns about strategic and critical minerals. Second, I summarize the 2008 NRC 

report on critical minerals identified above. Third, I present my personal views on 

strategic and critical minerals, which are significantly shaped by the NRC and APS/ 

MRS studies. 

Context 

Mineral-based materials are becoming increasingly complex. In its computer 

chips, Intel used 11 mineral-derived elements in the 1980s and 15 elements in the 

1990s; it may use up to 60 elements in the future. General Electric uses some 70 

of the first 83 elements of the periodic table in its products. In contrast, as recently 

as two or three decades ago, a typical household owned products containing perhaps 

20 elements. 

Moreover, new technologies and engineered materials create the potential for 

rapid increases in demand for some elements used previously and even now in relatively small quantities. The most prominent—although by no means only—examples are gallium, indium and tellurium in photovoltaic solar cells; lithium in automotive batteries; and rare earth elements in wind turbines, hybrid vehicles, compact-fluorescent light bulbs, and a number of defense and military applications. 

These technological developments raise two concerns. First, there are fears that 

supply will not keep up with the explosion of demand due to the time lags involved 

in bringing new production capacity online or more fundamentally the basic geologic 

scarcity of certain elements. Second, and more-directly relevant to today’s hearing, 

there are fears that supplies of some elements are insecure due to, for example, import dependence, export restrictions on primary raw materials by some nations, industry concentration, or the reliance on byproduct production that characterizes the 

supply of some strategic and critical minerals. In both cases, mineral availability— 

or more precisely, unavailability—has emerged as a potential constraint on the development and deployment of emerging and important technologies, especially in the 

clean-energy and defense sectors. 

Minerals, Critical Minerals, and the U.S. Economy 

It was in this light that the standing Committee on Earth Resources of the National Research Council initiated a study and established an ad hoc committee, 

which I chaired, to examine the evolving role of nonfuel minerals in the U.S. economy and the potential impediments to the supplies of these minerals to domestic 

users. The U.S. Geological Survey (USGS) and the National Mining Association 

sponsored the study, the findings of which appear in the volume Minerals, Critical 

Minerals, and the U.S. Economy (NRC 2008). 

The report provides a broad context for current discussions and concerns. It defines a ‘critical’ mineral as one that is both essential in use (difficult to substitute 

away from) and subject to some degree of supply risk. Under this definition, ‘strategic’ minerals are the subset of critical minerals essential in military applications. 

The degree to which a specific mineral is critical or strategic can be illustrated 

with the help of a figure (Figure 1). The vertical axis represents the impact of a 

supply restriction should it occur, which increases from bottom to top. The impact 

16 

1When considering security of petroleum supplies, rather than minerals, the primary concern 

is costs and resulting impacts on the macroeconomy (the level of economic output). The mineral 

and mineral-using sectors, in contrast, are much smaller, and thus we are not concerned about 

macroeconomic effects of restricted mineral supplies. Rather the concern is both about higher 

input costs for mineral users and, in some cases, physical unavailability of an important input. 

of a restriction relates directly to the ease or difficulty of substituting away from 

the mineral in question. The more difficult substitution is, the greater the impact 

of a restriction (and vice versa). The impact of a supply restriction can take two possible forms: higher costs for users (and potentially lower profitability), or physical 

unavailability (and a ‘‘no-build’’ situation for users).1

The horizontal axis represents supply risk, which increases from left to right. Supply risk reflects a variety of factors including: concentration of production in a small 

number of mines, companies, or nations; market size (the smaller the existing market, the more vulnerable a market is to being overwhelmed by a rapid increase in 

demand); and reliance on byproduct production of a mineral (the supply of a byproduct is determined largely by the economic attractiveness of the associated main 

product). Import dependence, by itself, is a poor indicator of supply risk; rather it 

is import dependence combined with concentrated production that leads to supply 

risk. In Figure 1, the hypothetical Mineral A is more critical than Mineral B. 

Taking the perspective of the U.S. economy overall in the short to medium term 

(up to about a decade), the committee evaluated eleven minerals or mineral families. 

It did not assess the criticality of all important nonfuel minerals due to limits on 

time and resources. Figure 2 summarizes the committee’s evaluations. Those minerals deemed most critical at the time of the study—that is, they plotted in the 

upper-right portion of the diagram—were indium, manganese, niobium, platinumgroup metals, and rare earth elements. 

Any list of critical minerals reflects conditions at a specific point in time. Criticality is dynamic. A critical mineral today may become less critical either because 

substitutes or new sources of supply are developed. Conversely, a less-critical mineral today may become more critical in the future because of a new use or a change 

in supply risk. 

Although the study did not make explicit policy recommendations, it made three 

policy-relevant recommendations, which I quote below: 

1. The federal government should enhance the types of data and information 

it collects, disseminates, and analyzes on minerals and mineral products, especially as these data and information relate to minerals and mineral products that are or may become critical. 

2. The federal government should continue to carry out the necessary function 

of collecting, disseminating, and analyzing mineral data and information. 

The USGS Minerals Information Team, or whatever federal unit might later 

be assigned these responsibilities, should have greater authority and autonomy than at present. It also should have sufficient resources to carry out its 

mandate, which would be broader than the Minerals Information Team’s current mandate if the committee’s recommendations are adopted. It should establish formal mechanisms for communicating with users, government and 

nongovernmental organizations or institutes, and the private sector on the 

types and quality of data and information it collects, disseminates, and analyzes. It should be organized to have the flexibility to collect, disseminate, 

and analyze additional, nonbasic data and information, in consultation with 

users, as specific minerals and mineral products become relatively more critical over time (and vice versa). 

3. Federal agencies, including the National Science Foundation, Department of 

the Interior (including the USGS), Department of Defense, Department of 

Energy, and Department of Commerce, should develop and fund activities, 

including basic science and policy research, to encourage U.S. innovation in 

the area of critical minerals and materials and to enhance understanding of 

global mineral availability and use. 

Four Propositions 

I organize my personal views around four propositions. First, the issues are broader than rare earths, despite the prominence of rare earths in the news over the last 

year. Exactly which minerals are ‘critical’ (essential in use, subject to supply risk) 

varies from industry to industry, nation to nation, and over time. A number of recent studies suggest possible critical elements. Each list reflects a specific context. 

In the field of energy, the U.S. Department of Energy (2010) identifies five rare 

earths (dysprosium, europium, terbium, neodymium, and yttrium) and indium as especially critical to wind turbines, fluorescent lighting, electric vehicles, and photoVerDate Nov 24 2008 10:01 Nov 02, 2011 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6621 L:\DOCS\66649.TXT Hresour1 PsN: KATHY
17 

voltaic thin films. A study by the American Physical Society and Materials Research 

Society (APS/MRS, 2011) focusing on energy technologies identifies the same six elements as possibly critical, plus several other rare earths, the platinum-group elements, and several elements important for photovoltaics (gallium, germanium, selenium, tellurium), as well as cobalt, helium, lithium, rhenium, and silver. 

For military hardware and defense systems, Parthemore (2011) identifies the following elements as critical: gallium, lithium, niobium, the rare-earth elements, rhenium, and tantalum. 

For European industry, the European Commission (2010) identifies fourteen elements or families of elements as critical: antimony, beryllium, cobalt, fluorspar, 

gallium, germanium, graphite, indium, magnesium, niobium, the platinum-group 

elements, rare earths, tantalum, and tungsten. 

The Japan Oil, Gas and Metals National Corporation (JOGMEC) maintains joint 

government-industry stockpiles for seven elements (chromium, cobalt, manganese, 

molybdenum, nickel, tungsten, and vanadium) deemed especially important for Japanese industry and for which there are significant supply risks. JOGMEC is closely 

monitoring several others (gallium, indium, niobium, platinum, rare earths, strontium, and tantalum). 

Over time, which materials are critical changes—with advances in materials 

science and engineering that reduce reliance on specific elements, and with advances on the supply side that relax supply constraints. 

Second, each element has its own story, and import dependence by itself need not 

be risky. From all the attention rare earths have received, one might think that geopolitical risks and import dependence are the only cause for concern about availability and supply risk. Geopolitical risks and import dependence certainly are important for those elements with geographically concentrated production, where one 

or a small number of companies or governments might act opportunistically or unpredictably to the disadvantage of users. But import dependence by itself need not 

be risky if foreign sources are numerous and diversified, and if the associated foreign governments believe in undistorted international trade. 

Different elements have different constraints on availability, as APS/MRS (2011) 

illustrates. Although essentially no element is in danger of being used up (or depleted) in a geologic sense, some elements are not significantly concentrated by geologic process above their average crustal abundance. Germanium—used in fiber optics, infrared optics, and photovoltaic cells—is an example. Germanium is not especially rare on average in the earth’s crust but rarely is present as the main component in minerals. 

In other cases, technical limitations constrain the availability of an element. Rareearth elements actually are not very rare geologically. They exist in a number of 

minerals, such as eudialyte, that at present are not a source of supply because existing methods of mineral processing and extractive metallurgy are inadequate (both 

technically and commercially) to remove the rare earths from other elements and, 

in turn, separate the specific rare-earth elements from one another. 

Byproduct supply is another source of supply risk. Indium, for example, is produced as a byproduct of zinc production. Tellurium is a byproduct of copper refining. 

The key insight here is that the availability of indium, tellurium, and other byproducts is strongly influenced by the commercial attractiveness of the byproduct’s associated main product (zinc in the case of indium, copper for tellurium). A significant 

increase in the price of a byproduct may not result in a significant increase in the 

production of the byproduct, once the available byproduct is recovered from a mainproduct ore. 

Environmental and social concerns are factors influencing the availability of an 

element. The point is not to dispute that mineral production can have negative consequences for the natural environment or local communities; it can and does in some 

circumstances. Rather the point is: processes to ensure that mineral production occurs in ways that are consistent with standards for environmental protection and 

respect for society can (a) increase the time lag between an unexpected increase in 

demand and new production capacity to meet this demand and (b) redirect the location of production away from nations with stricter (or less-predictable) environmental and social rules to nations with less-strict (or more-predictable) rules. 

Third, markets are responding, but time lags can be significant. Markets provide 

powerful incentives for investments that re-invigorate supply and reduce supply 

risk. There are minor manias now in exploration for mineral deposits containing 

rare-earth elements and, separately, lithium. Over the next five to ten years, a number of non-Chinese rare-earth mines are likely to begin production. However, given 

the long lead times between initial exploration and mining (which can range anywhere from five to fifteen years or more), only those rare-earth projects in advanced 

18 

exploration or development prior to the rare-earths crisis of the last year will be 

producing rare earths in the next few years. 

Increased recycling also can be an important response to constraints on supply. 

Recycling comes in two forms. The most obvious comes from recycling of products 

at the ends of their lives—for example, recovering ferrous and nonferrous metals 

from junked automobiles. Less obvious but very important is the recycling of manufacturing scrap or waste. 

On the demand side, markets encourage users of mineral-based elements to obtain ‘‘insurance’’ against mineral supply risks. In the short- to medium-term users 

can, for example, maintain stockpiles, diversify sources of supply, develop joint-sharing arrangements with other users, or develop tighter relations with producers. 

Over the longer term, users might invest in new mines in exchange for secure supplies or, undertake research and development to substitute away from those elements subject to supply risks. 

Fourth, there are essential roles for government. To ensure mineral availability 

over the longer term and reliability of supplies over the short to medium term, I 

recommend that government activities focus on: 

• Encouraging undistorted international trade. The governments of raw-material-importing nations should fight policies of exporting nations that restrict 

raw-material exports to the detriment of users of these materials. 

• Improving regulatory approval for domestic resource development. Foreign 

sources of supply are not necessarily more risky than domestic sources. But 

when foreign sources are risky, domestic production can help offset the risks 

associated with unreliable foreign sources. Developing a new mine in the 

United States appropriately requires a pre-production approval process that 

allows for public participation and consideration of the potential environmental and social effects of the proposed mine. This process is costly and time 

consuming—arguably excessively so, not just for mines but for developments 

in all sectors of the economy. I am not suggesting that mines be given preferential treatment, rather that attention be focused on developing better ways 

to assess and make decisions about the various commercial, environmental, 

and social considerations of project development. 

• Facilitating the provision of information and analysis. I support enhancing 

the types of data and information the federal government collects, disseminates and analyzes. Sound decision making requires good information, and 

government plays an important role in ensuring that sufficient information 

exists. In particular, I recommend (a) enhanced focus on those parts of the 

mineral life cycle that are under-represented at present including: reserves 

and subeconomic resources, byproduct and coproduct primary production, 

stocks and flows of materials available for recycling, in-use stocks, material 

flows, and materials embodied in internationally traded goods and (b) periodic 

analysis of mineral criticality over a range of minerals. At present, the markets for most strategic and critical minerals are less than completely transparent, in large part because the markets are small and often involve a relatively small number of producers and users, many of which find it to their 

competitive advantage to keep many forms of information confidential. 

• Facilitating education and research. I recommend that the federal government develop and fund pre-commercial activities that are likely to be underfunded by the private sector acting alone because their benefits are diffuse, 

difficult to capture, risky and far in the future. Over the longer term, science 

and technology are key to responding to concerns about the adequacy and reliability of mineral resources—innovation that both enhances our understanding of mineral resources and mineral-based materials and improves our 

ability to recycle essential, scarce elements and substitute away from these 

elements. 

Education and research go hand in hand. Educational programs, especially 

those at the graduate level, educate and train the next generation of scientists and engineers. On the supply side, education and research in the geosciences, mining, mineral processing and extractive metallurgy, environmental science and engineering, manufacturing, and recycling can help mitigate supply risks and increase mineral availability. On the demand side, improvements in materials design—fostered by education and research in materials science and engineering—can ease the pressures imposed by those elements or minerals subject to supply risks or limited availability. Government, 

in addition to simply funding education and research, can play an important 

role in facilitating collaborations among universities, government research 

laboratories, and industry. 

19 

A common conclusion of almost all recent studies on strategic and critical minerals is to urge governments to improve and expand activities related to information 

and analysis, education, and research (for example, APS/MRS 2011, European Commission 2010, NRC 2008). 

A number of other government interventions in markets have been proposed, such 

as military or economic stockpiles of rare earths and other critical elements; loan 

guarantees for investments in mines and processing facilities; and special, fast-track 

environmental permitting for mines that would produce rare earths or other critical 

minerals. These more-direct market interventions, although perhaps advisable in 

specific circumstances, are more controversial and less compelling in general as responses to the challenges of critical minerals. 

To sum up my personal views, the current situation with strategic and critical 

minerals requires attention but not panic. By undertaking sensible actions today, 

there is no reason for crises to develop. But I also am aware that without a sense 

of panic, we may not undertake these actions. 

Thank you for the opportunity to testify today. I would be happy to address any 

questions you have. 

Notes 

This testimony draws on the documents cited in the reference list, especially APS/ 

MRS (2011), Eggert (2010), and NRC (2008). The testimony is a revised and modified version of related testimony I presented before (a) the Subcommittee on Energy, 

Committee on Energy and Natural Resources, U.S. Senate, September 30, 2010, on 

the role of strategic minerals in clean-energy technologies and other applications 

and (b) the Committee on Industry, Research, and Energy of the European Parliament, Brussels, January 26, 2011. 

References 

American Physical Society and Materials Research Society (APS/MRS). Energy 

Critical Elements: Securing Materials for Emerging Technologies (Washington, 

D.C., American Physical Society, 2011). Available online at: www.aps.org. 

Eggert, Roderick G. ‘‘Critical Minerals and Emerging Technologies,’’ Issues in 

Science and Technology, volume XXVI, number 4, 2010, pp. 49–58. Available online at: www.issues.org. 

European Commission. Critical raw materials for the EU, report of the Ad-hoc 

Working Group on defining critical raw materials (Brussels, European Commission, June 2010). Available online at: http://ec.europa.eu. 

Japan Oil, Gas and Metals National Corporation website, www.jogmec.go.jp, 

accessed May 13, 2011. 

Parthemore, Christine. Elements of Security: Mitigating Risks of U.S. Dependence on 

Critical Minerals (Washington, D.C., Center for a New American Security, 

2011). Available at: www.cnas.org. 

U.S. Department of Energy, Critical Materials Strategy (Washington, D.C., Department of Energy, December 2010). Available online at: www.energy.gov. 

U.S. National Research Council (NRC). Minerals, Critical Minerals, and the U.S. 

Economy (Washington, D.C., National Academies Press, 2008). Available online 

at www.national-academies.org. 

20 

Mr. LAMBORN. All right. Thank you for your testimony. Next is 

Dr. Robert Jaffe of the Massachusetts Institute of Technology. 


66649.001.eps 66649.002.eps
21 

STATEMENT OF DR. ROBERT JAFFE, MORNINGSTAR PROFESSOR OF SCIENCE, MASSACHUSETTS INSTITUTE OF 

TECHNOLOGY 

Dr. JAFFE. Mr. Chairman, Mr. Holt, Mr. Markey, and Members 

of the Committee, thank you for the opportunity to testify. I am a 

Professor of Theoretical Physics at the Massachusetts Institute of 

Technology, and I am here to discuss the study on Energy Critical 

Elements that I chaired on behalf of the American Physical Society 

and the Materials Research Society. 

Our study focused on chemical elements critical to new 

technologies that have the capacity to transform the way that we 

harvest, transport, store, and use energy. First, let me assure you 

the sky is not falling. The world is not going to run out of any of 

these elements anytime soon. 

However, the problem of critical elements is serious and very 

real. While rare earths are perhaps the flavor of the month, a host 

of other elements are posed to present problems in the near future. 

If appropriate steps are not taken, we face possible disruptive 

short-term constraints on the supply of some elements not 

presently mined, or refined, or traded in large quantities, that are 

critical to the deployment of potentially game-changing element 

technologies. 

In our report, we refer to these as energy critical elements or 

ECEs. Constraints on the availability of these elements would limit 

the competitiveness of both United States industries and scientific 

enterprises. 

It is our view that with careful stewardship by the government, 

coupled with the imagination of fundamental research, and the initiative of the United States industry, the problem of ECE availability can be managed for the foreseeable future. 

To accomplish this, we recommend a three-component approach, 

including information gathering, research, and recycling. But first 

let me say a few words about what we do not recommend. 

First, the United States cannot mine its way to ECE independence. Yes, we should certainly pursue domestic mining where economically appropriate, but not with the expectation that mining 

alone will solve the problem. 

Many ECEs are simply not found here in economically viable deposits, and others are produced much more efficiently for a variety 

of reasons in other countries. Free international trade with a diverse set of suppliers works to everyone’s advantage. 

Second, we can’t rely on stockpiling either. We found stockpiling 

anchors us to the status quo, and discourages innovation. Stockpiles have proved a poor way to moderate price fluctuations and 

stabilize markets, often with unintended negative consequences. 

Note, however, that we did not consider defense stockpiles which 

may be motivated by other considerations. In developing our recommendations, we took a lesson from industry. 

In 2006, General Electric projected the demand for rhenium an 

important ingredient in high performance turbines would out-pace 

world supply in a few years. Instead of stockpiling, General Electric 

reduced its immediate need for new rhenium with extensive recycling, technologically sophisticated. 

22 

And then began an intensive multi-year research program to develop an alternative alloy. By 2010, they had succeeded. General 

Electric succeeded, but many smaller United States companies, and 

university and national labs, who don’t have the information gathering network, needed to recognize an impending supply disruption, and can’t afford to carry out substitutional research, and can’t 

engage in extended recycling. 

Consequently, in general, we recommend the following. One, the 

government should closely monitor worldwide resources and make 

that information broadly available. Accurate information about 

availability will allow us to see beyond the price spikes and plan 

for the future. 

Among other things the Federal information gathering entities 

should be designated a principle statistical agency, similar to the 

Bureau of Labor Statistics. 

Two, the government should promote fundamental research 

aimed at the twin goals of increasing supplies and decreasing dependencies on ECEs. It is especially important to support fundamental research on earth abundance substances. 

The goal should be to enable United States manufacturers or lab 

researchers to smoothly shift to a substitute in advance of supply 

disruptions. 

Third, cell phones and i-Pods end up discarded at the back of 

sock stores. Discarded electronics contain ECEs in concentrations 

that exceed some of the richest ores. Those dispersed products 

should be gathered into a resource so that ECEs can be extracted 

for reuse. 

Both industry and government need to explore means to stimulate recycling. To summarize, information gathering, research, and 

recycling. 

Over the past two months, I have worked with a research fellow 

at the Heritage Foundation, and a resident scholar at the American 

Enterprise Institute, to draw attention to our panel’s recommendations. 

Although this might not be the typical collaboration for an MIT 

professor, it indicates that our recommendations identify an appropriate role for government and are physically responsible. 

Several House bills have been introduced to address the materials availability issue. In particular, the recently introduced 

Hultgren bill has provisions on the full triad of recommendations 

that our committee supported, and is closely aligned with the point 

of view that I have described here. 

Together, these bills present the full range of options from which 

an effective policy regarding critical elements can be crafted. Thank 

you for the opportunity to testify. 

[The prepared statement of Dr. Jaffe follows:] 

Statement of Dr. Robert Jaffe, Professor of Theoretical Physics, 

Massachusetts Institute of Technology 

Mr. Chairman and members of the committee, thank you for the opportunity to 

testify today. 

I am a Professor of Theoretical Physics at MIT but I’m not here to deliver a lecture on quarks. I’m here to discuss a study on Energy Critical Elements that I 

chaired on behalf of two leading scientific organizations: the American Physical Society and the Materials Research Society. 

23 

Our study focused intensely on elements critical to new technologies that have the 

capacity to transform the way we transport, store, or use energy. Please note that 

we did not consider defense-related issues. I enclosed a full copy of the report for 

the record, but this morning I’ll simply highlight a few key recommendations. 

First, let me first reassure you—the sky is not falling. The world is not going to 

run out of any of these elements anytime soon. However: the problem of critical elements is serious and very real. While rare earths are the ‘‘flavor of the month’’, a 

host of other elements are poised to present problems in the future. 

If appropriate steps are not taken, we face possible disruptive short-term constraints on supply of some elements that are not presently mined, refined, or traded 

in large quantities, but are critical to the deployment of potentially game-changing 

energy technologies. Casualties might include things ranging from important petroleum refinery catalysts to state-of-the-art wind turbines or market competitive solar 

panels. In our report we refer to these elements as ECEs: Energy-Critical Elements. 

Constraints on availability of these elements would limit the competitiveness of 

both U.S. industries and the domestic scientific enterprise. 

It is our view that with careful stewardship by the government, coupled with the 

imagination of fundamental research and the initiative of U.S. industry, the problem of ECE availability can be managed for the foreseeable future. 

To accomplish that, we recommend a three component approach: information, research, and recycling. 

But first, let me say a few words about what we don’t recommend. 

The U.S. can’t mine its way to ECE independence. Yes, we should certainly pursue domestic mining when economically appropriate—but not with the expectation 

that mining alone will solve the problem. Many ECEs are simply not found here 

in economically viable deposits, and others are produced more efficiently—for a variety of reasons—by other countries. Free international trade with a diverse set of 

suppliers works to everyone’s advantage. 

We can’t rely on stockpiling either. We found that stockpiling is a disincentive to 

innovation because it anchors us to the status quo. Stockpiles have proved a poor 

way for governments to try to moderate price fluctuations and stabilize markets, 

often with unintended negative consequences. Note, however, that we did not consider defense stockpiles, which may be motivated by other considerations. 

In developing our recommendations for the most effective way to address this 

issue, we took a lesson from industry. 

CASE STUDY: General Electric has for many years tracked the market for an exceptionally rare metal, rhenium, which is critical to its advanced turbines used 

both in jet engines and modern natural-gas fired power plants. In 2006, General 

Electric projected that demand for rhenium would outpace worldwide supply 

within a few years. Instead of stockpiling, GE reduced its immediate need for 

new rhenium by a wide-ranging recycling program, and began an intensive, 

multiyear research program to develop an alternative alloy. By 2010 they had 

found, tested, and certified several new alloys that use less rhenium. Meanwhile 

the price of rhenium had risen 20-fold to over $10,000/kg. 

LESSON: GE succeeded, but many smaller U.S. companies and university & 

national labs: 1) do not have the information gathering network needed to recognize an impending supply disruption; 2) can’t afford to carry out substitutional research; and, 3) can’t engage in extensive recycling. 

Consequently, in general, we recommend the following: 

1) The government should closely monitor worldwide resources and make that 

information accessible to U.S. industries and labs. Accurate information 

about availability will allow the scientific enterprise to see beyond the price 

spikes and plan for the future. This can be achieved by, among other things, 

elevating the federal information gathering entity to a ‘‘Principal Statistical 

Agency’’ similar to the Bureau of Labor Statistics and the Energy Information Administration. 

2) The government should also promote fundamental research aimed at the 

twin goals of increasing supplies and decreasing our dependence on ECEs. 

It is especially important to support fundamental research on earth-abundant substitutes for ECEs. The goal should be a broad understanding of the 

advantages and disadvantage of technologies based on alternative materials, 

in order to enable U.S. manufacturers or lab researchers to more smoothly 

shift to a substitute in advance of supply disruptions. 

3) Cell phones and iPods end up discarded in the back of sock drawers, yet they 

all contain ECEs in concentrations that exceed the richest ores. Those dispersed products could be gathered into a resource—an urban mine—so the 

ECEs can be extracted for reuse. There are various paths to achieve this: 

24 

government could help increase recycling by enabling greater consumer 

awareness and industry could stimulate it by providing consumer incentives. 

We believe that this triad of information gathering, research, and recycling will 

provide the U.S. with the best safeguard against disruptions. 

I believe that these steps can be implemented with a budget-neutral approach 

that respects the distinction between activities that belong in the private sector and 

those that fall to government. As a result, I’ve been able to team with a Research 

Fellow at the Heritage Foundation and a Resident Scholar at the American Enterprise Institute to draw attention to this approach. Although this might not be the 

typical collaboration for an MIT professor, it indicates that our recommendations 

identify an appropriate role for government and are fiscally responsible. 

Several House bills have been introduced to address the minerals availability 

issue. The Johnson-Markey bill rightly emphasizes the importance of information 

gathering. The Coffman bill addresses rare earth elements and primarily addresses 

near-term issues. The Miller bill emphasizes some of the research and information 

gathering efforts recommended in the APS/MRS report. The recently introduced 

Hultgren bill has provisions on our full triad: information, research, and recycling, 

and is closely aligned with the point of view I have described here. Together these 

bills present the full range of options from which an effective policy regarding critical elements can be crafted. 

Thank you for the opportunity to testify. 

Mr. LAMBORN. OK. Thank you for your testimony. Mr. Latiff. 

STATEMENT OF ROBERT LATIFF, PRESIDENT AND 

CONSULTANT, R. LATIFF ASSOCIATES 

Mr. LATIFF. Thank you Mr. Chairman, and thank you, Committee, for this opportunity to testify on this very timely and important topic. The subject of critical and strategic materials is one 

in which I have had a strong interest, both as a materials scientist 

and in my long military career in the acquisition of military 

weapons systems and technology. 

I might note here that I am also a research professor at George 

Mason University. Having retired from the Air Force, I was fortunate in 2007 to have been asked to chair the National Academy’s 

Committee on Assessing the Need for a National Defense Stockpile. 

I have since remained active in urging the government and the 

industry to be more proactive on the issues of mineral and materials availability and related topics. I have spoken frequently to 

representatives and groups in the Department of Defense, the aerospace industry, and in the intelligence community, and at major 

materials and manufacturing conferences. 

I am also now honored to act as the Chairman of the National 

Materials and Manufacturing Board of the National Academies, 

and as such, remain actively engaged in reviewing research on 

these topics. 

I must emphasize, however, here that my testimony, unless specifically related to Academy studies, reflects my opinion and not 

those of the Academies. By way of summary, the Committee on Assessing the Need for a National Defense Stockpile was formed in 

response to a request from DoD, having been mandated by the 

House Armed Services Committee. 

The Academies published the Stockpile Committee results in a 

report entitled, Managing Materials for A Twenty-First Century 

Military. The major conclusions of the Committee were that the 

National Defense Stockpile was ineffective, and that the model 

used to calculate materials needed was outdated and needed to be 

replaced, that legislation and regulations were in need of review, 

25 

that previous studies and recommendations had been ignored, and 

that the DoD did not adequately understand its own materials 

needs, and had no system in place to determine them. 

The report concluded that the DoD had not made critical and 

strategic materials a priority. Additionally, the Committee emphasized the criticality of the United States Geological Survey in maintaining accurate mineral availability information. 

Interesting, the report highlighted the growing concern at that 

time and the need for DoD to pay attention to rare earth materials. 

The DoD, in its April 2009 report to Congress on this topic, 

addressed many of the issues raised by the Academy report. 

To its credit the DoD suspended sales of many of the materials 

in the stockpile pending a thorough analysis of future need. It has 

taken action to revise its modeling system, and has created or is 

in the process of creating a strategic materials management program. 

What is unclear at this point is any progress by DoD officials on 

a systematic approach to determining their overall need for specific 

materials. This has become especially urgent recently in the clamor 

for rare earths, but is equally important for all materials needed 

in United States weapons systems. 

To the last point, I have written and spoken frequently on the 

need to maintain perspective in our critical minerals planning, and 

add that it is not only the rare earth materials about which we 

should be concerned, but also a broader range of important critical 

materials. 

It is not only materials availability to which we should pay attention and work to mitigate disruption. We must also pay more attention to the importance of material recycling, and at least not dismiss out-of-hand a consideration of stockpiling, where appropriate. 

While clearly we must have access to the materials, we also need 

to have facilities and an ability to process those materials once we 

have them, and be able to manufacture a product with the resulting materials. Assuring an ability to mitigate supply disruptions 

seems to be a necessary, but obviously insufficient, activity if we 

are then forced to depend on foreign sources of materials processing and manufacturing. 

I should note here that other countries are in fact taking or considering comprehensive measures to strength their materials and 

manufacturing positions. I am more familiar and impressed by the 

work of the European Commission, even to the extent of supporting 

their national materials policy. 

At home, recent Congressional and Executive Branch interest in 

these activities are extremely welcome. Finally, numerous sources 

of data indicate a growing concern about the relative production of 

scientists, engineers, and technicians, in the United States, as compared to the emerging economies of China, India, et cetera. 

Naturally, I have a particular concern about the materials 

sciences and related fields, and manufacturing and its related 

fields. In both, the United States has given up much of its historical lead. 

The National Academies have highlighted this issue as well, in 

a 2005 report, entitled, The Globalization of Materials Research 

26 

and Development, and of course, in the widely read and often 

quoted Rising Above the Gathering Storm. 

It is of interest that here is a growing recognition by many that 

processing and manufacturing capabilities diminish, so, too, do fertile grounds for innovation and creativity. 

I am honored by this invitation to testify before the Committee 

and applaud its interest in taking action on this important issue. 

[The prepared statement of Mr. Latiff follows:] 

Statement of Robert H. Latiff, President and Consultant, 

R. Latiff Associates 

I would like to thank the Committee for the opportunity to testify on this very 

timely and very important topic. The subject of critical and strategic materials is 

one in which I have had a strong interest, both as a materials scientist and in my 

long career in acquisition of major military weapons systems and technology. Having retired from the US Air Force, I was fortunate, in 2007, to have been asked to 

chair the National Academies’ Committee on Assessing the Need for a National Defense Stockpile. I have since remained active in urging the government and industry 

to be more proactive on the issues of mineral and materials availability and related 

topics. I have spoken frequently to representatives and groups in the Department 

of Defense, the aerospace industry, and the intelligence community, and at major 

materials and manufacturing conferences. I am also now honored to act as the current Chairman of the National Materials and Manufacturing Board of the National 

Academies and, as such, remain actively engaged in reviewing research on these 

topics. I must emphasize, however, that my testimony here today, unless specifically 

related to published Academy studies, reflect my opinions alone, and not the position of the National Academies. 

By way of summary, the Committee on Assessing the Need for a National Defense 

Stockpile was formed in response to a request from DOD, having been mandated 

by the House Armed Services Committee. The Academies published the Stockpile 

Committee results in a report entitled Managing Materials for a Twenty First Century Military. The major conclusions of the Committee were that the National Defense Stockpile was ineffective, that the model used to calculate materials needs was 

outdated and needed to be replaced, that legislation and regulations were in need 

of review, that previous studies and recommendations had been ignored, and that 

the DOD did not adequately understand its own materials needs and had no system 

in place to determine them. The report concluded that the DOD had not made critical and strategic materials a priority. Additionally, the Committee emphasized the 

criticality of the US Geological Survey in maintaining accurate mineral availability 

information. Interestingly, the report highlighted the growing concern and need for 

DOD to pay attention to the rare earth materials. The DOD, in its April 2009 Report to Congress on this topic, addressed many of the issues raised by the Academy 

report. To its credit, the DOD suspended sales of many materials pending a thorough analysis of future need, it has taken action to revise its modeling system, and 

has created a strategic materials management program. What is unclear at this 

point is any progress by DOD officials on a systematic approach to determining 

their overall needs for specific materials. This has become especially urgent recently 

in the clamor for rare earths, but is equally important for all materials needed in 

US weapons systems. 

To the last point, I have written, and spoken frequently, of the need to maintain 

perspective in our critical minerals planning and add that it is not only the rare 

earth materials about which we should be concerned, but also a broader range of 

important critical materials. It is not only materials availability to which we should 

pay attention and work to mitigate disruption. We must also pay more attention to 

the importance of critical material recycling and at least not dismiss, out of hand, 

a consideration of stockpiling, when appropriate. While clearly we must have access 

to the materials, we also need to have facilities and an ability to process those raw 

materials once we have them and be able to manufacture a product with the resulting processed materials. Assuring an ability to mitigate supply disruptions seems 

to be a necessary but obviously insufficient activity if we are then forced to depend 

on foreign sources of materials processing and manufacturing which could just as 

easily be disrupted. I should note here that other countries are in fact taking or considering comprehensive measures to strengthen their materials and manufacturing 

positions. I am most familiar and am impressed by the scope of the work of the European Commission, even to the extent of supporting the formulation of a National 

27 

Minerals Policy. At home, recent Congressional and Executive Branch interest in 

and activities in this area are extremely welcome. 

Finally, numerous sources of data indicate a growing concern about the relative 

production of scientists, engineers, and technicians in the US as compared to the 

emerging economies of China, India, etc. Naturally, I have a particular concern 

about the materials sciences and related fields and manufacturing engineering and 

its related fields. In both, the US has given up much of its historical lead. The National Academies have highlighted this issue as well, in a 2005 report entitled The 

Globalization of Materials Research and Development and, of course, in the widely 

read and often quoted Rising Above the Gathering Storm. It is of interest that here 

is a growing recognition by many experts that as processing and manufacturing capabilities diminish, so too do fertile grounds for innovation and creativity. 

I am honored by the invitation to testify before the Committee and applaud its 

interest in taking action on this important issue. 

Mr. LAMBORN. Thank you for your words, and now Mr. Richardson of the Magnetic Materials Association. 

STATEMENT OF ED RICHARDSON, PRESIDENT OF THE 

MAGNETIC MATERIALS ASSOCIATION, VICE PRESIDENT OF 

THOMAS AND SKINNER 

Mr. RICHARDSON. Chairman Lamborn, Ranking Member Holt, 

Distinguish Members of the Subcommittee, thank you for the opportunity to testify today. I represent the Untied States Magnetic 

Materials Association, a trade association dedicated to the reestablishment of the entire supply chain of materials used in magnet 

systems. 

These systems play a vital role in the health of the United States 

defense industrial base and renewable energy. Our association represents all segments of the United States magnetic industry and 

rare earth supply chain, including miners, processors, metal and 

alloy producers, and finished magnet manufacturers. 

My comments today will relate to strategic-level rare earth issues 

and the challenges we face in accessing reliable supplies of the critical materials. It is common knowledge that rare earth materials 

play a critical role in the basic functionality of key green technologies, such as hybrid cars and wind turbines. 

They are essential to electronic consumer goods, such as flat 

screen televisions and disk drives. Rare earth products are necessary in vital military technology, such as munitions, missiles, 

radar surveillance, and avionics. 

Often overlooked is the global market for rare earth materials 

and the value chain itself. Today’s domestic rare earth supply 

chain consists of one company capable of mining and separating 

rare earth elements into oxides; no active rare metal makers; two 

companies that can make limited quantities of rare alloy, and one 

rare earth permanent magnet maker. 

The United States is largely dependent on foreign sources for 

these critical materials. China firmly controls 97 percent of the 

world’s rare earth oxide supply, nearly 100 percent of commercial 

sales of rare earth metal, and over 75 percent of neo magnet production. 

This dominance allows China to wield considerable influence. For 

instance, merely a rumor of an expert ban on rare earths to Japan 

sent a chill through the industry last summer. 

28 

China has linked access to its markets and resources with moving operations to China, and providing them with key technologies. 

The members of the USMMA could feasibly provide a secure, nonChinese source of the supply to the United States in as little as 12 

months, but policy and funding decisions will need to be made to 

do so. 

With little guaranteed domestic demand for many rare earth 

metals and alloys, and the lack of a single licensed producer of neo 

magnets, the future of the domestic rare earth industry remains 

uncertain. 

To mitigate the impact of foreign supply disruptions, the 

USMMA is a strong proponent of a manufacturing first strategy. 

By establishing the ability to manufacture rare earth end products, 

the manufacturing first strategy creates downstream demand for 

rare earth elements. 

This provides incentives for commercial interests to fill in the domestic value chain, while leveraging raw material from ally nations 

and domestic producers. By supporting the manufacturing first 

strategy, the United States government could signal to industry 

that it will not stand by as China attempts to dominate the global 

rare earth magnet industry. 

Through our advocacy efforts, the USMMA has identified numerous misperceptions in the media, academia, and sometimes on Capitol Hill. To counter these misperceptions, the USMMA released a 

myth-fact paper earlier this month. I would like to share with you 

a few of the points. 

First, it has been said rare earths are not rare. This is not totally 

accurate. While rare earths are abundant in the earth’s crust, the 

ability to locate concentrations that are economically viable for extraction and processing is rare. 

Second, some believe United States capabilities can come online 

rapidly to fill the supply gap. However, mining and extraction is 

only a small part of the rare earth value chain. Aside from the 10 

year average permitting time for a rare earth mine, concentration 

and separation facilities are extremely complex and can cost upwards of $500 million per location. 

Third, recent reports from market analysts and previous statements from the Department of Defense suggest that supply will 

soon equal or exceed demand for rare earths. While demand will 

be met for some of the more prevalent elements, shortages for materials like the heavy rare earth dysprosium will continue. 

Fourth, some suggest that substituting, recycling, or reusing rare 

earths is a viable alternative. While the USMMA supports efforts 

in all these areas, they are not a panacea. Currently, no viable alternatives are available for many materials. R&D, though promising, faces a development cycle of up to a decade for commercialization. 

Finally, some suggest that stockpiling will further restrict an already tight supply. The bipartisan RESTART Act, H.R. 1388, and 

the Rare Earth Inventory Plan included in the Fiscal Year 2012 

National Defense Authorization Act, would require planning for a 

limited vendor-managed inventory of rare earth materials to support our national security. 

29 

This inventory would likely constitute a tiny fraction of global demand, but provide an insurance policy for the United States. Rare 

earths are an example of the broader strategic and critical materials issues that our Nation faces. Solutions are possible. 

The USMMA has suggested a six-point plan to close those gaps, 

which can be applied to other strategic and critical materials. It 

includes: (1) establish a baseline through a government supply and 

demand analysis; (2) team with allied nations to provide critical 

raw materials to supplement existing domestic mining and separation capability; (3) ensure fair trade practices; (4) invest in domestic manufacturing capability through programs such as the Defense 

Production Act; (5) establish an inventory of rare earth material 

using the Defense National Stockpile; and (6) invest in research, 

development, and education. 

Because this is a Natural Resources Committee, we would add 

a seventh item. Establish an interagency task force to address the 

often bureaucratic lengthy permitting process. We do not support 

circumventing appropriate rules and regulations, but we do encourage focusing resources and finding efficiencies to support the process. 

In closing, China will continue to leverage its global dominance 

in the strategic and critical material supply chain until the United 

States and its allies can commit to action that will counter-balance 

this influence. 

The United States needs to begin to take the steps immediately 

to eliminate this current and growing threat to our economic and 

national security. 

[The prepared statement of Mr. Richardson follows:] 

Statement of Ed Richardson, President, 

U.S. Magnetic Materials Association 

Chairman Lamborn, Ranking Member Holt, distinguished Members of the Subcommittee, 

Thank you for the opportunity to testify today. I represent the United States Magnetic Materials Association, a trade association dedicated to the reestablishment of 

the entire supply-chain of materials used in magnet systems. These systems play 

a vital role in the health of the U.S. defense industrial base and in the future potential of renewable energy in our nation. Our Association represents all segments of 

the U.S. magnet industry and rare earth supply-chain, including miners, processers, 

metal and alloy producers and finished magnet manufacturers. My comments today 

will relate to strategic-level rare earth issues and the challenges we face in accessing reliable supplies of the critical materials needed to support our industry. 

When you hear about the crumbling infrastructure in the United States, it’s not 

just roads, bridges, and sewer pipes. It’s advanced industrial technologies, as well 

as the supply chain of critical materials to support those technologies. Frankly, 

we’ve lost many of the key capabilities to produce these technologies domestically— 

losing our nation’s technological edge in the global marketplace. This situation absolutely holds true when it comes to advanced applications—both energy and 

defense—that use rare earth oxides, alloys, metals, or magnets 

The Rare Earth Value Chain 

It is common knowledge that rare earth materials play a critical role in the basic 

functionality of key green technologies such as hybrid cars, wind turbines, and compact fluorescent lights. They are essential to digitized and miniaturized electronic 

consumer goods such as flat screen televisions, mobile phones, and disc drives. Rare 

earth products are necessary in vital military technologies such as munitions, missiles, radar surveillance, and avionics. Discussion forums at think tanks, in academia, and in the media often raise these issues. 

Less frequently discussed is the global market for rare earth materials and the 

value chain itself. This value chain consists of three distinct elements: 

30 

• The miners of rare earth oxides, such as Molycorp in California and Lynas 

in Australia, both of whom are in the process of starting new operations; 

• The processors that turn the oxides into usable alloys, such as Great Western 

Technologies and Santoku America; and 

• The magnet manufacturers such as Electron Energy Corporation that take 

those metals and alloys and produce finished products. 

It is important to note that most assets that make up the rare earth value chain 

do not exist here in the United States. In fact, today’s U.S. rare earth supply-chain 

consists of one company capable of mining and separating rare earth elements into 

oxides, no active rare earth metal makers, two companies that can make limited 

quantities of rare earth alloy, and one rare earth permanent magnet maker. 

Thomas & Skinner, for instance, had made sintered neodymium iron boron permanent magnets—used in several missile systems—but like other producers, got out 

of this business years ago and do not have a plant to make these magnets today. 

Companies such as Thomas & Skinner and Arnold Magnetic Technologies have 

publically stated their desire to reenter this market if and when market conditions 

support it. 

Foreign Sources 

The United States is largely dependent on foreign sources for these critical materials. China firmly controls 97 percent of the world’s rare earth oxide supply, nearly 

100 percent of commercial sales of rare earth metal, and over 75 percent of neodymium iron boron magnet production. 

This monopolistic power enables them to wield considerable influence. For instance, merely a rumor of an export ban on rare earths to Japan sent a chill 

through the industry last summer. China has linked access to its markets and resources with moving operations to China and providing them with key technologies. 

On May 19, the Wall Street Journal reported that China is once again expanding 

its export-quota systems and imposing higher taxes on rare earth materials. This 

further constricts an already tight supply. Moreover, this announcement contains a 

worrisome new requirement that export limits, which once only applied to concentrates and then expanded to oxides and metals, will now include ferroalloys. This 

demonstrates yet another move down the supply-chain from natural resources to 

value-added processes. 

As they continue to reduce export quotas and expand the materials covered, manufacturers must make the hard choice of either relocating to China to access raw 

materials or risk severe uncertainty regarding long-term availability of supply. 

Thankfully, there are companies in ally countries that can assist in this dilemma. 

For instance, Less Common Metals currently has a metal processing and alloying 

operation in the UK. Through its members, the USMMA has joined together existing global assets to provide non-Chinese rare earth elements, metals, alloy and 

magnets. The members of the USMMA could feasibly provide a secure, non-Chinese 

source of the supply to the United States in as little as 12 months, but policy and 

funding decisions will need to be made to do so. With little guaranteed domestic demand for many rare earth metals and alloys, and a lack of a single licensed producer of neodymium iron boron magnets, the future of the domestic rare earth industry remains uncertain. 

Manufacturing First Approach 

To mitigate the impact of foreign supply disruptions, the USMMA is a strong proponent of a ‘‘Manufacturing First’’ strategy. By establishing the ability to manufacture rare earth end products, the ‘‘Manufacturing First’’ strategy creates downstream demand for rare earth elements. This provides incentives for commercial interests to fill in the domestic value chain for rare earth elements while leveraging 

oxides available from ally nations and domestic producers coming online. By supporting the ‘‘Manufacturing First’’ strategy, the U.S. government could signal to industry that it will not stand by as China attempts to dominate the global rare earth 

magnet industry. In addition, this approach provides U.S. manufacturers an alternative to Chinese suppliers. This would be the first critical step in decreasing U.S. 

industry’s dependence on foreign suppliers. 

Perhaps of greatest concern is the total lack of any current capability to make sintered neodymium iron boron magnets. As I noted, there are currently no U.S. producers of these magnets; this is due to the inability to obtain the necessary license 

from the current patent holder. This imperils U.S. national security in particular 

because this patent holder, as a matter of policy, will not produce defense-specific 

magnets. This leaves our defense supply-chain largely dependent on China for access to these key materials. 

31 

Moving Forward Through Increased Understanding 

In sum, much of our most critical and strategic technologies are dependent on foreign suppliers to make them work. And this is a situation that should make anyone—whether in the U.S. government, military, industry, or general public—very 

uncomfortable. 

Through our advocacy efforts, the USMMA has identified numerous 

misperceptions in the media, academia and sometimes on Capitol Hill. To counter 

these misperceptions, the USMMA released a Myth-Fact paper earlier this month. 

I’d like to share with you a few: 

• First, it has been said ‘‘rare earths aren’t rare.’’ This is not totally accurate. 

While rare earths are abundant in the earth’s crust, the ability to locate concentrations that are economically viable for extraction and processing is rare. 

• Second, some believe U.S. capabilities can come online rapidly to fill the supply-gap. However, mining and extraction is only a small part of the rare earth 

value-chain. Aside from the 10-year average permitting time for a rare earth 

mine, concentration and separation facilities are extremely complex and can 

cost upwards of $500 million per location. 

• Third, recent reports from Goldman Sachs and previous statements from the 

Department of Defense suggest that supply will soon equal or exceed demand 

for rare earths. While this is true for some of the more prevalent elements, 

a long-term global shortage for materials like the heavy rare earth dysprosium will not be mitigated in the foreseeable future. 

• Fourth, some suggest that substituting, recycling or reusing rare earths is a 

viable alternative. While the USMMA supports efforts in all these areas, they 

are not a panacea. Currently, no viable alternatives are available for many 

materials and R&D, though promising, faces a development cycle of up to a 

decade for commercialization. Furthermore, many systems using rare earths, 

such as weapons, are legacy systems that will be in inventory for decades. 

This also applies to commercial technologies and refining capabilities that will 

both require increasing quantities of rare earths. 

• Finally, some suggest that stockpiling, as proposed in H.R. 1388, the Coffman 

RESTART bill, will further restrict an already tight supply. This is a misinterpretation of what Mr. Coffman is proposing. The RESTART Act and the 

Rare Earth Inventory Plan included in the FY12 National Defense Authorization bill would require planning for a very limited vendor-managed inventory 

of rare earth materials such as alloy and magnets that would be available to 

support our national security in the event of a crisis. This inventory would 

likely constitute a tiny fraction of global demand and be inconsequential in 

the market, but provide an ‘‘insurance policy’’ for the United States. 

Rare earths are an example of the broader strategic and critical materials issues 

our nation faces. Solutions are possible. We hope this committee will address these 

challenges and help close the gap on other critical materials. The USMMA has suggested a six-point plan to close those gaps, which can be applied to other strategic 

and critical materials. It includes: 

1. Establish a baseline by thorough supply-demand analysis conducted by the 

U.S. Government 

2. Team with ally nations to provide critical raw materials to ensure a reliable 

source of supply supplements existing and future domestic mining and separation capabilities 

3. Ensure fair trade practices are enforced by the United States Trade Representative 

4. Invest in domestic capability through programs such as the Defense Production Act to close critical supply-chain gaps 

5. Establish domestic manufacturing capability through tools such as the Defense National Stockpile that both incentivize industry investment and address national security concerns; and 

6. Invest in future innovation through research, development and education 

Because this is the Natural Resources Committee, we would add a seventh item 

to that list: establish an interagency Task Force to address the often bureaucratic 

and unnecessarily lengthy permitting process. We do not support shortcuts that circumvent appropriate rules and regulations, but we do encourage expediting applications by focusing resources and finding efficiencies to support the process. 

In closing, China will continue to leverage its global dominance in the strategic 

and critical material supply chain until the United States and its allies commit to 

action that will counterbalance this influence. The US needs to begin to take steps 

immediately to eliminate this current and growing threat to our economic and national security. 

32 

Mr. LAMBORN. OK. Thank you. 

Mr. HOLT. Mr. Chairman, at this point, I would like to raise a 

parliamentary inquiry. 

Mr. LAMBORN. Can I say one thing first? 

Mr. HOLT. Yes. 

Mr. LAMBORN. Our last speaker will be Daniel McGroarty of the 

American Resources Policy Network. And I have been told by staff 

that he was invited at the last minute, and so we appreciate your 

ability to be here given the lateness of the request. And now, Mr. 

Ranking Member, did you have a comment? 

Mr. HOLT. Yes. Mr. Chairman, is it not true that Committee Rule 

4[a] applies, which requires that each witness to appear must submit to the Committee at least two working days before the appearance written testimony, and failure to do so could result in barring 

the testimony? I believe that applies. 

Mr. LAMBORN. I do. 

Mr. HOLT. I am not trying to make trouble here, and will agree 

to the witness continuing. I just want to make the point that having the testimony in advance is really important for the Committee 

and the Committee staff to be able to prepare for the hearing. 

And I don’t know whether this was because the witness was invited too late, or the witness was slow in providing the testimony, 

I don’t know. All I know is that without the prepared testimony 

that it makes it more difficult for us. 

Mr. LAMBORN. Well, Mr. Holt, that is a point well taken, and we 

certainly don’t want to blame the witness, because he was invited 

late. So, we will blame it on the Committee, the staff, myself, for 

not having been far enough in advance on that. 

Mr. HOLT. Thank you, Mr. Chairman. 

Mr. LAMBORN. But that is a point well taken. 

Mr. HOLT. I withdraw my parliamentary objection and inquiry. 

Mr. LAMBORN. OK. Thank you. Now to you, Mr. McGroarty. 

STATEMENT OF DANIEL McGROARTY, PRESIDENT, 

AMERICAN RESOURCES POLICY NETWORK 

Mr. MCGROARTY. My thanks to the Members of the Subcommittee for the opportunity to testify today. My organization, the 

American Resources Policy Network, is a newly launched experts 

forum dedicated to informing public opinion and public policy on 

the importance of developing United States mineral resources. 

I am also a member of the Board of Directors of Colorado Rare 

Earths, a publicly held development company. The subject before 

this Subcommittee, the concept of critical minerals, and the potential for supply disruption, has become front page news, particularly 

after the de facto embargo imposed by China against Japan last 

fall, in the wake of a dispute over claims involving mineral rights 

beneath the East China Sea. 

Some consider this a case of China test firing a resource weapon. 

Others point to China’s rapid growth as the reason that it is cutting back exports and using more rare earths at home. 

In the end, whether China withholds its rare earths or consumes 

them, the result is the same—a shortage of metals critical to our 

technological and economic development, as well as our national 

security. 

33 

In April, I took part in a Rare Earths Markets conference in 

Sanya, China. My informal conversations with Chinese attendees 

followed a well-worn track. They hear that the United States is 

studying the rare earths, issuing reports, and writing bills. 

They hear that American companies are taking steps to develop 

rare earths mines. Their immediate question is do you have your 

permits? How many tons will the mines produce? How soon? The 

message is, unmistakably, if there is a resource race, China is in 

full sprint. They see us standing at the starting line. 

This issue goes well beyond the rare earths, and take what I call 

the single scariest page. We have already seen it in any government document: page 6 of the United States Geological Survey’s 

annual report, 18 metals, a hundred percent dependent, and 13 

more, 80 to 99 percent dependent. 

Compare that with foreign oil, where the United States imports 

only 57 percent. In fact, if oil were on the United States Geological 

Survey’s list, it would appear in forty-second place. 

Look further down that list and you will see mainstay metals 

like copper, in increasing demand, and at increasing risk. In addition to its commercial uses, copper is critical for defense applications. DoD reports show that copper ranks second behind aluminum in annual consumption for defense industrial applications. 

Compared to near 100 percent dependency for rare earths, the 

fact that the United States today imports 30 percent of the copper 

that we consume may seem manageable, even acceptable, but to 

put that number in perspective, look back to 1993—the year the 

last metric ton of copper was sold out of the National Defense 

Stockpile. 

In 1993, United States mines produced 1.8 million metric tons of 

copper, roughly 60 percent more than 2010. Our net import dependency was 7 percent, not 30 percent, as it is today. 

As for disruption, the key concern of this Subcommittee, an OSD 

study lists copper as a metal that has—and I quote—already 

caused some kind of significant weapon system production delay for 

DoD. 

If the United States were to simply stop mining copper today, 

there are known copper prospects in a number of countries—Chile, 

Peru, the Philippines—that might step up supply, or demand might 

be met through mines in Russia, Angola, Afghanistan, Democratic 

Republic of the Congo, or China, including decisions taken in Beijing to exploit copper reserves in the Tibet Autonomous Region. 

There is also copper in Pakistan and Iran. 

With the exception of Pakistan, rated partly free, all of the latter 

group are rated not free in the current Freedom House index. So, 

while the world copper market does offer choices, we might find 

those choices unpalatable from a policy perspective. 

In the end, base metals and technology metals are not so easy 

to separate. Take rhenium, as you have already heard. Rhenium 

isn’t mined, but rather recovered during the processing of copper 

and molybdenum, captured in the flue-dust thrown off by the roasters. Otherwise, rhenium goes up in smoke. 

Rhenium is used today in jet engines, like those in the Boeing 

777, and in the national security sphere, you will find rhenium in 

rocket thrusters that reposition satellites, high performance test 

34 

engines that power the F-15, F-16, F-18, and the new F-35 Joint 

Strike Fighter, as well as in stealth aircraft. 

Global rhenium production is minuscule; 52 tons worldwide. That 

is roughly the weight of about two dozen SUVs, but the need is 

critical. The United States imports 86 percent of its rhenium, much 

of it in recent years from Chile and Kazakhstan. 

Once again, we face critical questions about a critical material. 

Will the market supply sufficient rhenium for our commercial and 

national security needs? Are we comfortable with the geopolitical 

risk implicit in 86 percent foreign dependency? 

Should we add rhenium to the National Defense Stockpile, or instead advise American copper and moly producers to invest in technologies necessary to capture rhenium now lost in the roasting 

process? 

Similar questions can be asked about several dozen minerals, 

and it is my hope through this Subcommittee that they will be. We 

cannot maintain our modern economy without a steady supply of 

metals and minerals. 

Those that we do not possess here at home, we must source from 

other countries, but those that we possess, but choose not to 

produce, perpetuate needless foreign dependence, leverage that 

other nations may use to America’s disadvantage. We must recognize resource security as a national strategic imperative. Thank 

you. 

[The prepared statement of Mr. McGroarty follows:] 

Statement of Daniel McGroarty, President, 

American Resources Policy Network 

My thanks to the members of the House Sub-Committee on Energy and Mineral 

Resources for the opportunity to testify today. I am Daniel McGroarty, President of 

the American Resources Policy Network (www.AmericanResources.org), a newlylaunched experts organization dedicated to informing the public—and ongoing policy 

debates—on the importance of developing U.S. mineral and metals resources and reducing American dependency on foreign sources of supply. I am also a member of 

the Board of Directors of Colorado Rare Earths, a public-held company currently developing Rare Earths properties, with the aim of adding to the domestically produced supply of metals critical to our green-tech economy and our cutting-edge defense systems. The subject before this sub-committee—the concept of critical metals 

and minerals, and the potential for supply disruption—is an issue of enduring interest to me. 

The Rare Earths 

In recent months, the Rare Earths have put this issue on the front page—particularly since last fall, with the apparent embargo imposed by China against Japan, 

in the wake of a dispute over claims involving mineral rights beneath the East 

China Sea. 

With China providing 97% of the world’s Rare Earths supply, that episode underlined for the U.S. the dangers of resource dependency, and sparked an acceleration 

of interest in the U.S. policymakers. 

Whether this episode constituted a test-firing of China’s ‘‘resource weapon,’’ or 

whether the shut-off was due to more benign factors continues to be debated. Even 

if there were no geo-strategic motive behind China’s supply interruption, there is 

the fact that Chinese demand for Rare Earths—and dozens of other metals and minerals—is surging, with only a minor pause due to the global economic downturn. 

With 1.3 billion people and an 8 to 9 percent annual economic growth rate, Chinese 

mining officials have begun to float the possibility that China may be a net importer 

of Rare Earths as early as 2015. 

So, whether China withholds its Rare Earths supply for geo-strategic purposes, 

or consumes an ever-increasing amount of the metals it used to export to the socalled ‘‘Rest of the World,’’ the result will be the same: A shortage of a group of metVerDate Nov 24 2008 10:01 Nov 02, 2011 Jkt 000000 PO 00000 Frm 00038 Fmt 6633 Sfmt 6621 L:\DOCS\66649.TXT Hresour1 PsN: KATHY
35 

als critical to our technological and economic development, as well as our national 

security. 

In April, I presented as a panelist—the only American presenter—at the 2011 

Rare Earths Markets Seminar, in Sanya, China. I’d like to share with the sub-committee a recurring theme in my informal conversations with the Chinese attendees. 

Ideology aside, for a Chinese technocrat, pragmatism rules the day. They hear that 

the U.S. is studying the Rare Earths situation, issuing reports, preparing bills and 

even considering participating in a possible WTO action. They also hear that American companies—Molycorp being the most prominent, but others including Colorado 

Rare Earths—are pressing forward to develop rare earths mines. But their immediate question is: When will mining begin? Do you have your permits? How much 

will the mine produce? They simply do not take the U.S. seriously on this issue— 

not compared to Australian companies or Canadian companies—and that’s an ominous sign. The message was unmistakable: If there’s a resource race, China is in 

full sprint, and they see us standing at the starting line. 

Profile of Dependency 

And the Rare Earths are simply the most prominent group of metals where the 

U.S. has a significant dependency. Consider what I call the single scariest page in 

any document to come off the presses of the U.S. Government Printing Office: Page 

6 of the U.S. Geological Survey’s (USGS) Mineral Commodity Summaries, 2011. 

There you’ll find a chart titled: ‘‘2010 U.S. Net Import Reliance for Selected Nonfuel 

Mineral Materials.’’ 

The Rare Earths, taken as a group, are just 1 of 18 metals and minerals for which 

the U.S. is 100% dependent on foreign sources of supply. Add another 13 metals and 

minerals for which our dependency is 80 to 99 percent. 

Compare that with foreign oil, where the U.S. imports ‘‘only’’ 57%. 

In fact, if oil were on the USGS list, it would appear in 42nd place—with 41 metals and minerals above it. 

The names may be exotic—indium, thorium, vanadium, tantalum, germanium— 

but the industrial sectors affected constitute a cross-section of the U.S. economy, 

from aircraft engines, auto batteries, compact fluorescent bulbs and flat-screen displays to the wind turbines we hope will power clean energy and weapons systems 

we count on to protect us. 

Copper: A Mainstay Metal 

So-called technology metals may grab the spotlight, but mainstay metals like copper are also seeing rising demand. This may run counter to our own personal perceptions—as we think of PVC replacing copper pipe in household plumbing, or fiber 

optics displacing copper wire in telecomm—but that’s misleading. Copper continues 

to be a critical material in electronics, building construction, durable goods and 

automobiles. In the last category, for instance, hybrid vehicles require double the 

amount of copper as gas-fueled automobiles. 

Copper is critical for defense applications as well. 

Department of Defense reports show that, by volume, copper ranks second—behind aluminum—in annual consumption for defense industrial applications. 

But what about the general level of U.S. dependency for foreign-sourced copper? 

Compared to near 100 percent dependency for Rare Earths, the fact that the U.S. 

today imports 30 percent of the copper we use from foreign sources may seem manageable, even acceptable. But to put that number in some historical perspective, I 

ask the sub-committee to look back to 1993—the year the last metric ton of copper 

was sold out of the National Defense Stockpile. 

In 1993, U.S. Mines produced 1.8 million metric tons of copper—roughly 60% 

more than in 2010. Our net import dependency was 7%—not 30% as it is today. Half 

of what we did import came from Canada. Today 60% of our copper imports come 

from Chile, Peru and Mexico. 

While total reserves are not a perfect proxy for exploration efforts, nonetheless— 

since 1993, world copper reserves have more than doubled. Over that same period, 

U.S. copper reserves have declined—from 15% of the world total, to just over 5%. 

I do not present these statistics as an argument for a return to the stockpile concept as it existed at the close of the Cold War. My purpose is to suggest that the 

realities that prevailed less than 20 years ago—when we effectively stopped thinking about the strategic aspects of mineral and metals supply—no longer pertain. 

As for disruption—the key concern of this sub-committee—OSD Defense Planning 

Scenarios show that copper is among the metals vulnerable to PSD—Peacetime Supply Disruption. Another OSD study lists copper as a metal that has—and I quote— 

‘‘already caused some kind of significant weapon system production delay for DoD.’’ 

According to MIT’s Dr. Elisa Alonso—one of American Resources Policy Network’s 

36 

experts—‘‘. . .the risk of copper disruption is significantly greater than for other 

major metals (e.g., iron and aluminum) and is at or near to a historical high.’’ 

Now, to be sure, we live in a globalized economy, and indeed—if the U.S. were 

to simply stop mining copper today—there are known copper prospects in a number 

of countries. We might turn to Chile, Peru and the Philippines for increased copper 

supply. Then again, world demand might be met via development of known copper 

reserves in Russia, Angola, Afghanistan, DRC Congo, or China—including decisions 

taken in Beijing to exploit copper reserves in the Tibet Autonomous Region. And 

there is copper in Pakistan and Iran. With the exception of Pakistan—rated ‘‘Partly 

Free’’—all of the latter group are rated ‘‘Not Free’’ in the current Freedom House 

index. So while the world copper market does offer choices, we may well find many 

of those choices unpalatable from a policy perspective. 

Rhenium: Where Base and Technology Metals Meet 

In the end, the so-called base metals and technology metals are not so easy to 

separate. Take my third example this morning: Rhenium, a relatively obscure element, Atomic Number 75 on the Periodic Table. 

In the commercial economy, rhenium is used to process lead-free gasoline, in gasto-liquid power plants and in jet engines like those found on the Boeing 777. In the 

national security sphere, rhenium is used in the small rocket thrusters that reposition satellites in geo-sync orbit, as a super-alloy in the high-performance jet engines 

that power the F–15, F–16, f-18 and the new F–35 Joint Strike Fighter—as well 

as in stealth aircraft. Rhenium is prized for its ability to retain its strength, shape 

and conductive properties at extremely high temperatures. 

While global copper production is 16,000,000 metric tons and global rare earths 

production is more than 100,000 metric tons—rhenium production is 52 tons, worldwide. That’s roughly the weight of a dozen SUVs. 

The catch is that rhenium isn’t mined; rather, it is recovered—extracted as a byproduct during the processing of copper and molybdenum, by special scrubbers that 

capture rhenium particles in the flue-dust thrown off by the roasters. 

Right now, the U.S. imports 86 percent of its annual rhenium requirement, much 

of it in recent yearsfrom Chile and Kazakhstan. More could be done to capture rhenium from domestic copper and moly mining, which otherwise literally goes ‘‘up in 

smoke.’’ 

Once again, the U.S. has critical questions to ask about a critical material. Will 

the market supply sufficient rhenium for our commercial and national security 

needs? Are we comfortable with the geo-political risk implicit in an 86% dependency 

on foreign supply? Should we add rhenium to the National Defense Stockpile—or 

otherwise incentivize American copper and moly producers to invest in the technologies necessary to capture rhenium now lost in the roasting process? 

These same sorts of questions can be asked about several dozen metals and minerals, and it is my hope they will be. 

Encouraging Domestic Supply 

Whether we are talking about copper, rare earths, rhenium or others among the 

dozens of metals and minerals where the U.S. presently relies on significant levels 

of foreign supply, it is time to consider whether U.S. policy is impairing our ability 

to develop domestic supply—and how we can remove obstacles that will allow the 

U.S. to achieve a greater degree of resource independence. 

Clearly, the U.S. Congress is turning its attention to critical metals. Remedies 

under discussion range from reviving the National Defense Stockpile to utilizing 

loan guarantees, and re-examining a mining permitting process that routinely runs 

7 or 8 to 10 years to bring a new American mine into production. In the House, 

several bills on Rare Earths have been introduced, including Congressman Mike 

Coffman’s RESTART Act, which, among its provisions, directs that federal agencies 

expedite the permitting process for Rare Earths ‘‘without waiving environmental 

laws.’’ A comprehensive review of U.S. permitting processes is also central in the 

draft bill being circulated by Senator Lisa Murkowski. The argument for such a review is evident in independent reports like the Behre Dolbear Group’s ‘‘2011 Ranking of Countries for Mining Investment’’ survey—known in mining circles as the 

‘‘Where Not to Invest’’ Report—where the U.S. once again ranks worst—dead last— 

among 25 mining nations in the length of its permitting process. 

Critics of U.S. mining will assert that any re-assessment of our permitting practices will involve weakening or watering down our requirements—the assumption 

being that a process that lasts a decade or more is the price we pay for safe and 

environmentally sound mining projects. The choice will be cast as trading developed 

nation standards for a 3rd World ‘‘anything goes’’ approach. From a public policy 

perspective, that’s not at all the case. Australia, for instance—one of the world’s 

37 

most prosperous nations, and no one’s candidate for a country that is an environmental scofflaw—manages to permit new mining projects in one to two years. 

Reviewing our own permitting process with an eye towards rationalizing that 

process is not at all a matter of cutting corners—quite the contrary: Mining projects 

developed here in the U.S. are, on balance, likely to be conducted with higher standards of safety, against stronger environmental strictures, with better benefits to the 

surrounding communities than projects in many parts of the world. And projects developed here will lessen if not eliminate the ‘‘surety of supply’’ issue and fear of materials disruption that concerns this sub-committee. 

We cannot maintain our modern economy without a steady supply of metals and 

minerals. Those we do not possess here at home, we must source from other countries. But those we possess but choose not to produce perpetuate a needless foreign 

dependence—leverage that other nations may well use to America’s disadvantage. 

I commend the Congressmen and -Women who called today’s hearing, a step that 

suggests critical metals and their continued supply are beginning to receive the attention they deserve—given their importance to our economy, our technological 

progress and our national security. Thank you. 

Mr. COFFMAN [presiding]. Thank you, Mr. McGroarty, for your 

testimony, and I thank everyone for their statements. We will now 

begin questioning. Members are limited to five minutes for their 

questions, but we may have additional rounds. I now recognize myself for five minutes. 

I have been actively involved in legislation regarding today’s 

hearing topic over the last few years. Just last month, I reintroduced the RESTART Act, the Rare Earths Supply Chain Technology and Resources Transformation Act, to avert a United States 

rare earths supply chain crisis, by restoring our Nation’s production of rare earth metals. 

In essence, the legislation would focus on the United States supply chain—as we in our country often rely on unreliable foreign 

suppliers. During the House Armed Services Committee markup of 

the Defense Authorization Act earlier this month, I offered an 

amendment that requires the Defense Department within what we 

use to call the Defense National Stockpile, to develop a plan to establish an inventory of rare earth oxides, metals, alloys, and 

magnets, for defense purposes. 

These rare earths are absolutely critical to the functionality of 

numerous weapons systems. An inventory would help assure defense manufacturers that they will have access to a reliable domestic supply to meet national security requirements. 

I ask the witnesses to consider the advantages and challenges of 

creating such an inventory. My legislation also focuses on expediting the permit process here in the United States. 

I know that some of you have discussed this in your testimony, 

but could you elaborate on this problem? Go ahead and proceed. 

Why don’t we start with Professor Eggert. 

Dr. EGGERT. Thank you very much. With regard to stockpiles, in 

general, it is important I think to distinguish between economic 

stockpiles and defense stockpiles. As I understand it, your legislation focuses on defense stockpiles. 

My personal view is that I would look toward the analysts at the 

Defense Department and those who have studied this specific issue, 

and if they believe that stockpiling is an important part of a series 

of activities to secure supplies, then I would support that. 

Mr. COFFMAN. Good. Anyone else? Yes. 

38 

Mr. LATIFF. Yes, sir. The question of the stockpiling is an excellent one. I have not read the legislation, but I would actually support that. Having managed major weapons systems for many years, 

I can tell you, and as you probably already know, that any disruption in the supply of material for the manufacture of a weapons 

system can only lead to increased costs and an increased schedule. 

So, having a stockpile of these most critical ones is probably a 

very good idea. Number two, the type of stockpile is really at question, and whether or not it is a stockpile of materials, or perhaps 

a rolling inventory, might be a pertinent question to ask as well. 

Mr. RICHARDSON. Mr. Coffman, I would just add that from our 

perspective the USMMA thinks a stockpile is a very important part 

of the solution. We think that there are ways to stockpile metals 

that can quickly then be used in the case of a defensive need. 

It is not necessarily advantageous to stockpile neodymium 

oxides, for instance. A better way might be to stockpile a generic 

neodymium boron alloy, and stockpiling alloys would give us capabilities beyond what we have today. 

Mr. COFFMAN. My time is limited. Mr. McGroarty, could you—I 

have been concerned that China is not a reliable trading partner, 

and I wondered if you could—well, the fact that they have a near 

monopoly status on these rare earth metals puts us, the United 

States, in a vulnerable position. Could you comment on that? 

Mr. MCGROARTY. Thank you, Mr. Coffman. I can draw attention 

to the speculation about what China particularly did last fall when 

there was some controversy, but clearly in retrospect, and fairly 

quickly in retrospect, it seems like imports to Japan were cut off. 

This had to do with a controversy in the East China Sea, which 

interestingly involves mineral rights, at least in part, underneath 

the sea. Their intentions, I think, in China, and perhaps not a single line that the Chinese government follows on these issues, many 

people—and I was inclined in this direction, and thought that this 

could have been kind of a test fire of a resource weapon, and China 

cracked the whip if you will when they had this dispute with 

Japan, I wonder in retrospect if that was wise, because it seemed 

to raise concern and interest in the United States and other countries about the surety of supply, and may have sparked, and did 

spark, an accelerated interest in coming up with the remedy that 

did not involve dependence on the Chinese. 

That said, the Chinese are growing at 8 to 9 percent. These are 

technology metals, particularly in the rares. The Chinese, we know, 

want to build their own green manufacturing base. 

They are looking to not just mine metals and export them, but 

to bring manufacturing to where the metals, particularly in the 

north of China, that is economic, and that is not national security. 

They are growing at this rapid rate, and they are using more and 

more of these metals. 

My sense in some of the interaction at the conference when I was 

in China last month, there is actually a strong contingent in China 

that is actually encouraging non-Chinese development, because 

they may want to be a buyer of rare earths. 

They may want to see a non-Chinese supply that they can buy 

into, and certain Chinese companies have been State-supported 

39 

companies and interested into buying into non-Chinese sources of 

rares. It is a whole different issue. 

So, it has got a national security edge, and it has got an economic edge, and either one argues for more pressure in terms of 

our access to supply. 

Mr. COFFMAN. Thank you for your testimony. The Chair now recognizes the Ranking Member for five minutes. 

Mr. HOLT. I thank the Chair. I would like to pursue the broad 

questions of research and education here. It seems to me that it is 

not just supply, but it has to do with identifying deposits, concentrating, and refining, as much as anything. 

And, Professor Eggert, I would like to begin with you. What conceivable advances are there in—and let us talk about rare earths, 

or you can choose some other minerals if you want, in identifying 

deposits that haven’t been identified? 

I mean, is there a lot of work yet to be done in understanding 

where these things are, and then in concentrating, refining, and developing other sources outside of these recalcitrant countries? 

Is there research to be done that we have a reasonable expectation of being productive? 

Dr. EGGERT. If we look at rare earths in particular, my view is 

that we should, in balancing research on the demand side, and substitutional research, yes. 

Mr. HOLT. Well, I wanted to get to that in a moment. 

Dr. EGGERT. Well, versus the supply side, and that there is relatively more opportunity on the supply side than the demand side 

in the following sense. Rare earths are a relatively young resource 

in terms of our devoting any attention to discovering minable deposits. 

There are probably two deposits, the Mountain Pass deposit in 

California, and the Baiyun Obo Mine in China that probably account for 40 to 50 percent of all the rare earths ever mined in the 

world, and so we have not spent a lot of time looking for them. 

Mr. HOLT. Right, and if I am not mistaken, they may be 40 or 

50 percent of the rare earths that are acquired and mined, but a 

rather small fraction of the rare earths that might or are expected 

to be out there? 

Dr. EGGERT. That is right. There is significant room for progress 

in the geologic science aspect of this issue. Also, arguably the greatest supply constraint of rare earths relates to mineral processing 

and extraction of metallurgy, and the separating of the rare earths 

from one another. They like to be together. We don’t do a good job 

at present of separating them. 

Mr. HOLT. Well, again, that is what I was getting at. So, there 

is research work to be done. Who does that, and what is the role 

of the United States Geological Survey, for example, in supporting 

such research? 

How much is the private sector doing now, and who supports the 

doctoral students, or the research students that you might have at 

the Colorado School, for example? 

Dr. EGGERT. At present, there is very little, if any, Federal support for graduate education in economic geology, mineral processing, and extractive metallurgy. There is some support from inVerDate Nov 24 2008 10:01 Nov 02, 2011 Jkt 000000 PO 00000 Frm 00043 Fmt 6633 Sfmt 6602 L:\DOCS\66649.TXT Hresour1 PsN: KATHY
40 

dustry, and clearly industry is doing work, research, related to geology and extractive metallurgy. 

But it is in the realm of recompetitive research activities that I 

think we are missing out on the opportunity for. 

Mr. HOLT. And what about the United States Geological Survey? 

Dr. EGGERT. The United States Geological Survey is undertaking 

research related to geologic aspects of rare earths. It probably could 

be enhanced, and I would certainly support that. 

Mr. HOLT. OK. Dr. Jaffe, for end-use research, what is the role 

of the Department of Energy? What is the Office of Science and 

Technology Policy doing to promote or categorize, or direct the enduse research? Do you have any thoughts on that? 

Dr. JAFFE. Well, historically, the Office of Science and the Department of Energy has supported energy and the basic energy 

sciences relating to materials and materials fabrication, and determining the properties of materials that would make them useful as 

possible substitutes for rare materials. 

This has not to my knowledge been reconstituted in the recent 

past in order to provide more emphasis on these emerging shortfalls. Typically, the characterization of materials is done in a university and national lab environment, and a relatively half-hazard 

way, focused on individual end-users, and not on analyzing a wide 

spectrum of materials looking for earth abundant substitutes. That 

kind of research would be needed. 

Mr. HOLT. Thank you, Dr. Jaffe. And let me just say to the Chair 

that I hope that we can have continuing hearings involving representatives of our trade negotiators, and the State Department, as 

well as the Department of Energy, and the Department of Defense, 

and even agencies that are outside of our jurisdictions, so that we 

can have a good understanding of really what the problem is, and 

how we can address the problem on the supply side and the demand side. Thank you. 

Mr. COFFMAN. Thank you, Mr. Holt. Mr. Thompson for five minutes. 

Mr. THOMPSON. Thank you, Mr. Chairman. Thank you, gentlemen, for your testimony. Dr. Eggert, you state in your written testimony that these rare earth materials are specifically needed for 

some energy technology, such as solar cells, wind turbines, hybrid 

vehicles, CFLs with the light bulbs. 

Are there other—what is the impact on other manufacturing or 

potential manufacturing within the United States for the application of technologies utilizing the rare earth or the other minerals 

that were in question today? 

Dr. EGGERT. The main concern is what I would call the specter 

of unavailability, and the idea that an essential element that is 

needed usually in only small quantities creates a no build situation 

for a manufacturer. 

In most cases the issue is not so much one of high prices resulting from shortages, but rather the essentialness of the element for 

a specific application, and the knock on effects in terms of production, profitability, and so on. 

Mr. THOMPSON. Very good. When you look at the application, and 

I know that we are looking at our dependence, foreign dependence 

on these, but I have to believe that maybe even some industries 

41 

that we have lost, maybe if we had a ready supply of this the application of this new technology and these minerals, with the proper 

supply, we could repatriate some industries back to the country. 

It has been made clear by several panelists that none of these 

materials are anywhere near being depleted, but I agree that it is 

important that we do what we can to recycle these materials. 

Dr. Jaffe, you suggested consumer incentives to help recycle materials and devices such as cell phones and i-Pods. Do you have any 

specific ideas? 

Dr. JAFFE. Well, there are a variety of ideas that are being tried 

out in the European Union, including rental rather than purchase 

of materials. So, your cell phone comes to you from a company, and 

then when you are finished with it, they take it back. 

Another example that is being done here in the United States for 

the Solar Corporation, which is one of the leading manufacturers 

of thin film photovoltaics, which use both exotic and toxic compounds. 

They use tellurium, which is very rare, and cadmium, which is 

toxic, and they create a bond when they sell the solar panels, the 

bond assuring repatriation, or repossession of those solar panels 

when their lifetime is finished, so that they can not only control the 

toxic cadmium, but also reuse the very valuable tellurium. 

This is in a very early stage, and our report urged that the Committee on Critical Minerals of the National Science and Technology 

Committee within OSTP carry out a study of these different alternatives so that one could shape a more effective policy. 

Mr. THOMPSON. Professor Eggert, you suggested in your testimony that we should encourage undistorted international trade of 

these raw materials. Do you believe that such a policy could have 

a negative effect on our own domestic supplies? 

Dr. JAFFE. I am not an economist, I have to say, but my impression is that international trade without artificial constraints works 

to the advantage of all the members. We would be just as happy 

to sell our supplies of molybdenum, where we are a major player, 

as we should be, to buy supplies of chromium or cobalt, where we 

have very little. 

Mr. THOMPSON. Professor, can I have your thoughts? 

Dr. EGGERT. Well, I, like most people in the academic, or in the 

economics community, support undistorted international trade. We 

should buy raw materials from the cheapest source. 

Having said that, when there are supply risks, our end game 

with regard to rare earths should be a more diversified global set 

of suppliers, and not simply undistorted international trade that 

leads us prone to supply risks. 

Mr. THOMPSON. Thank you. A final question for Mr. Latiff. You 

mentioned that it is unclear at this point that any progress is being 

made by the Department of Defense officials on a systematic approach to determining their overall needs for specific materials. 

Do you believe that any other specific departments or agencies 

should also be determining their future needs for these materials? 

Mr. LATIFF. Yes, sir, I do. Clearly, the Department of Energy, 

and my focus primarily with the work that I have done has been 

on the Department of Defense, and the criticality of the defense 

42 

systems, as I said, number one, their availability, and number two, 

their costs. But, yes, sir, I do. 

Mr. THOMPSON. OK. Thank you, Mr. Chairman. 

Mr. COFFMAN. Mr. Duncan of South Carolina for five minutes. 

Mr. DUNCAN. Thank you, Mr. Chairman. Virtually every time 

that I walk into this Committee room, it seems as though the Administration is tampering with three sources that belong to the 

American people. 

Our Nation’s natural resources don’t belong to the President or 

his cabinet. It is time that they are returned to where they belong, 

and that is to this Nation and our citizens. 

And over the past month, we have celebrated huge victories in 

this Committee dealing with energy, and putting the Gulf of Mexico back to work, but in doing some research and listening to some 

of the testimony, I understand that 22 percent of the rare earth 

minerals are used in the refining of hydrocarbons. 

So, unfortunately, it is clear to see that if we do not halt the 

rapid overreach of government agencies, we will not ever have the 

opportunity to use domestically produced oil here in the United 

States because we won’t be able to refine it due to the rare earth 

minerals that are used in that process, and not being able to tap 

those American resources either. 

So, we will continue to lose this valuable market to other countries as we see the increase of stringent regulations. Many rare 

earth minerals that can be found in our Western States can be 

used in the refining of oil. 

And it could be counterproductive to produce and explore for oil 

here in this country, but have it shipped to another country to be 

refined, where they do have access to these rare earth minerals. 

I appreciate you gentlemen testifying today on this. So, what is 

next? Well, we have a mine here and not there philosophy, like we 

have a drill there and not there philosophy with this Administration—and where the President will applaud Brazil for their mining 

efforts. It is just amazing. 

So, not being from a Western State, and not fully understanding 

the impact of owning huge swaths of land out there that could be 

utilized for mining efforts for rare earth minerals, the question I 

have for you is what can we do to open up more Federal lands? 

What sort of barriers do we need to overcome that stand in the 

way of the industry’s ability to access these lands for exploration 

and development? So, I lay that out there for any of you gentlemen. 

Maybe the Mining Association would be better, but what can we 

do to increase access to those Federal lands? 

Mr. QUINN. Thank you, Mr. Duncan. I think the first thing we 

need to do, before we start headlong putting more lands off-limits, 

is to take a look at those lands that people want to put off-limits. 

We need to get a serious evaluation of their resource potential, 

what is there, and then delineate its potential. 

And then make some real decisions, real judgments, on whether 

we are going to put those lands off-limits to resource development. 

It is also the same question with perhaps lands that have been 

placed under certain restrictions, and not totally off-limits, but 

with certain restrictions. 

43 

They should be re-examined in terms of what their resource potential is, and decide whether the restrictions that have been 

placed on them years ago still should apply based on our current 

needs for resources. 

So, those are two things with respect to access. I have also talked 

about permitting and regulatory burdens, and that is something 

that the government should bring a real sense of urgency to. 

And as I said, if it is taking us 10 years to get a mine fully authorized, we are still in the starting blocks halfway through the 

race. If I have a large billion dollar proposition to build a mine, 

which is what it would really take to scale, and in today’s climate 

for many commodities, if I can get those authorizations in other 

countries like Chile and so forth in 18 months to 24 months, it is 

rather clear where I am going to put my capital, because I will get 

a return eight years sooner than I will here in this country. 

Mr. DUNCAN. Mr. Chairman, in the essence of time, I will yield 

my time back so that the Western States can maybe ask questions. 

Thank you. 

Mr. LAMBORN [presiding]. Well, we appreciate those questions 

and so thank you very much. Next we have on the list Mr. Flores 

of Texas. 

Mr. FLORES. Thank you, Mr. Chairman. I have to agree with Mr. 

Duncan’s comments to start with. It seems like it is deja vu all 

over again. We hear continuing testimony from witnesses in industry and in business, and consumers, about the things that we do 

as a country that reflect a lack of foresight when it comes to taxation, regulation, restriction to our access to public lands. 

They continue to damage our economy, and damage our way of 

living, and to bankrupt the future of our kids and grandkids, and 

I am quite frankly fatigued from hearing us continuing to go that 

wrong direction. Mr. McGroarty, did I pronounce that correctly? 

Mr. MCGROARTY. Yes. 

Mr. FLORES. Your comments were particularly poignant, I 

thought, when you talked about what you heard in China, and I 

want you to repeat what you heard, that they understand that we 

talk a lot, but what was their question again, where were the permits? Can you repeat that? 

Mr. MCGROARTY. Mr. Flores, you are absolutely right, and it is 

done in a very courteous way, and with a lot of respect, but there 

is a certain impatience there when you are having the conversations. 

Idealogy aside, a Chinese diplomat is an extraordinary pragmatic 

individual at this point, in the year 2011. We would have a discussion, and I was one of less than a handful, that—— 

Mr. FLORES. Keep it short. 

Mr. MCGROARTY. There were nine Chinese presenters, and they 

would immediately cut in and say how many million tons, how 

soon, where are your permits. They were telling us basically that 

we are doing this, and you are talking about it. 

Mr. FLORES. OK. That reminds me of that commercial that some 

of us have seen on t.v., where you have the Chinese laughing about 

how we drove our country toward bankruptcy, and they owned us 

because of the fact that they financed us. 

44 

Mr. Quinn, in your testimony, you talked about the fact that it 

takes 10 years to get a permit domestically, vis-a-vis 18 months to 

2 years in some other countries, such as Australia. 

Can you tell me, and just give us, that if you were to write legislation today and wave the regulatory wand, or the legislative wand, 

what are the four or five things that you would do that would fix 

that permitting process overnight? 

Mr. QUINN. Well, the first thing is to eliminate some duplication 

that we have. We have Federal to Federal duplication, in terms of 

looking at the same environmental issues and similar issues. 

We have State and Federal duplication with State agencies, delegated authority to implement certain Federal laws with the Federal Government, and that overseeing them is actually quite a bit 

of what they are doing, and second-guessing it. 

So, I would take a look at minimizing duplication. I would look 

at putting some accountability into the process, where timelines or 

deadlines are set, and also in terms of evaluating an agency’s performance based on accountability. 

Agencies are not, to my knowledge, rated on their ability or their 

effectiveness in issuing authorizations. 

Mr. FLORES. And I assume that what we are doing wrong that 

Australia is doing correctly—I mean, is the Australia model the 

correct analog for us to follow? 

Mr. MCGROARTY. Well, I think perhaps in some cases. I think 

that one of the things that strikes me is that people believe that 

when our companies are doing business overseas that somehow we 

are performing at a lower level, in terms of environmental stewardship, which is not the case. 

Our companies export their environmental values and stewardship to the countries that are hosting them. So, it is not a matter 

that the regulations are less stringent or anything like that, but 

they are more efficient, and they have a certain sense of urgency 

about the importance of putting projects and employing people, and 

I think that is a big difference there. 

Mr. QUINN. It sounds like they recognize not only the urgency, 

but the critical economic impact of a particular industry on their 

own economy, and I would sure applaud our regulatory bodies feeling the way in this country, both at the State and Federal level. 

Dr. Eggert, and this is a little bit of an off-the-wall question, and 

we have only got a few seconds left, but when you look at our investment, and our educational infrastructure when it comes to rare 

earth metals. 

And I may be going out of your area of expertise, but how do you 

feel about our investment in higher education in terms of mining 

processing, recycling, disposal of these rare earth metals? Are we 

just not there, or do we need to invest in higher rates? 

Dr. EGGERT. I feel strongly that we need to reinvigorate and invest in these areas. We have lost as a Nation most of our institutional capacity to educate geologists, mining engineers, mineral 

processors, extractive metallurgists, and so on. 

Mr. QUINN. Thank you very much, and I yield back eight seconds. 

Mr. LAMBORN. Every eight seconds counts. Next, Dr. Benishek, 

from Michigan. 

45 

Mr. BENISHEK. Thank you, Mr. Chairman, for calling this hearing. As a physician, I know firsthand how rare earth minerals are 

critical to the development of life saving technologies, and I am 

concerned about our country’s ability to mine these minerals. 

In addition, Michigan’s First District is the home of many minerals. We have iron mining and the potential for copper mining, 

and nickel, gold. There is a lot of mining potential in my mineralrich district. 

And my question is actually for Mr. Quinn. A topic often in Congress is that United States industries, including the mining industry, are faced with some of the world’s highest taxation rates 

makes it extremely difficult to compete with foreign countries on a 

global scale. 

How does the United States tax burden compare with other 

major mineral producing countries? 

Mr. QUINN. Thank you, doctor. It is actually the highest effective 

rate, around 41 percent when you combine Federal and State taxes, 

in terms of the metals industry. Other countries that were close to 

that level have already taken measures to reduce their rates, and 

also make other adjustments in their tax system to attract new 

capital for mining. 

Mr. BENISHEK. What would be the first step that you would do 

if you were in my place to get an increase in production here in 

this country? 

Mr. QUINN. Well, I think the highest hurdle that we have currently is delays in permitting, and people like to say that if you 

have plenty of time, then you can mine here in the United States. 

Unfortunately, we don’t have that time, and if it takes you 10 

years or more to actually get your capital on the ground, and then 

to get a return on it, then that capital is going to go somewhere 

else. 

So, permitting would probably be the number one, and number 

two, I would look at the tax burdens, and regulatory burdens, on 

the industry. I am not saying that we would be supporting reductions in the existing regulatory framework, but I think in terms of 

going forward, there should be some clear assessment of cost benefit, in terms of new regulations, new standards. 

I mean, let’s be frank. In China, they are worried about where 

they are going to put their billion people in the cities, and here in 

the United States, we are still trying to track down the latest part 

per billion on some substance, and there is a stark difference how 

they approach their particular economic needs. I think that there 

is a balance here that we can find that is better. 

Mr. BENISHEK. Well, I agree with you. We need to have the potential for jobs here in this country, and I want a clean environment as well, but there is certainly a balance that doesn’t exclude 

mining from our industrial base. 

I look forward to working on this Committee to help streamline 

these rules. Maybe we can get something going here this year. 

Thank you very much, sir, for your testimony, and I yield back the 

remainder of my time. 

Mr. LAMBORN. Thank you, and next we have Representative 

Gosar from Arizona. 

46 

Dr. GOSAR. Thank you. Mr. McGroarty, in your testimony—and 

we are going to switch up a little bit here—you state that United 

States mines produced 1.8 metric tons of copper in ’93, roughly 60 

percent more than they produced last year. 

In the same time period, you stated that world copper reserves 

have more than doubled, but the United States reserves have declined from 15 percent to 5 percent. What accounts for the drastic 

decrease over less than 20 years? 

Has the United States simply tapped a larger proportion of its 

ore deposits than the rest of the world, or are we just failing to get 

these projects off the ground? 

Mr. MCGROARTY. Congressman Gosar, that is a very good question. The answer has to do with exploration budgets, and how 

much time on tasks, and how many dollars does the United States 

mining industry put into exploring and expanding United States 

copper reserves. 

There is a general decrease, and most of the exploration money 

is going into gold and silver, or gold and diamonds rather, and less 

so into copper. There is an issue about exhausting the current resource and not replacing it. 

You had testimony several years ago about the fact that we 

would need many—upwards of a dozen—new mines brought on to 

replace mines that are basically reaching end of life of mine. 

I think it ties back to some of the points that Mr. Quinn has 

made. If the permitting process in the United States is extraordinarily long, capital requires very, very high, and companies just 

looked elsewhere in the world to develop the resource. 

Dr. GOSAR. Well, I am glad that you brought that up, and I 

asked because I recently introduced Legislation H.R. 1904, a bill 

that would open up the third largest undeveloped copper resource 

in the world. 

How critical to our national security is it to ensure deposits like 

the one located in Central Arizona can be opened up for production? And considering the prevalence of copper in alternative technologies, like hybrid cars, solar panels, wind turbines, isn’t the 

meteoritic rise on our dependence for foreign minerals such as copper over the past 20 years an alarming national security risk? 

If we are truly trying to reduce our dependence on foreign fuels 

isn’t it critical that we use domestic resources to construct alternative energy infrastructure? 

Mr. MCGROARTY. I would agree. The signals are there. I mentioned the OSD study that indicates without any specificity that 

there has already been some sort of program disruption, and copper 

is one of the metals that was mentioned in that category. 

That is not a new study. It was from several years ago. So, the 

signal is being sent, and your indication about the increasing utility copper is true as well. Cooper has been used in automobiles for 

a long, long time, but the hybrids use something like twice the 

amount of copper. 

So, cars that we want to encourage people to drive are going to 

create a larger requirement rather than a smaller requirement. 

Dr. GOSAR. I think you are right. I think the average turbine 

uses over four tons of copper just in matrices of alternative energy 

47 

if I am not mistaken. So, thank you. You know, permitting in my 

district, is a concern, because I have the actual numbers. 

I mean, when we start looking at this, the average number for 

a NEPA to be processed in my District One in Arizona is 5.9 years 

and growing, and it seems that we have increased numbers of lawsuits that have been curtailed. 

I would like to start with you first and ask you how has the lawsuits using the Equal Access to Justice funding affected your ability to actually mine, and have access to these ores? 

Mr. MCGROARTY. My understanding of the permitting process is 

limited to my involvement with the Rare Earths Company in Colorado, and so I yield to others on the panel, who maybe have a better idea. But generally speaking time is money. 

Dr. GOSAR. Mr. Quinn, can you answer that question for me, 

please? 

Mr. QUINN. In terms of how it has impacted, what I can say is 

this. You basically have a law there that pays people, and has the 

taxpayer reimburse people to stop the projects. I don’t have any 

metrics on how much money has been spent in that regard. 

As you are inferring, Congressman, that ample opportunity for 

opponents to mining projects to slice and dice them through the 

litigation process. 

Dr. GOSAR. Isn’t it true that it is basically an ecological terrorism 

type aspect when we know that one envelope with one postage 

stamp on the last day of a recourse could be starting the whole 

process all over again? 

Mr. QUINN. Well, I could certainly say this. That a low level investment can stop a huge investment. A postage stamp and a signature on a protest can stop a billion dollar project. 

Dr. GOSAR. Thank you. I have more questions, but I will take 

them on the next round. 

Mr. LAMBORN. OK. Thank you. Next we have Representative 

Johnson from Ohio. 

Mr. JOHNSON. Well, thank you, Mr. Chairman, for holding this 

important hearing on how critical and strategic minerals are so essential to our economy, and I thank the panel for joining us today. 

Those minerals are essential not only to our economy and our 

livelihood, but to national security as we have heard. These rare 

earth minerals are important components to a large amount of consumer products, and more importantly, to national defense. 

That is why I think that it is so important that we remove any 

barriers to mining these important minerals, and I have a few 

questions. The United States of America is home to some of the 

world’s greatest mineral deposits. 

Yet, as you, Mr. Quinn, and the mining industry, are all too 

aware, accessing these minerals is no easy feat. What can we look 

to do to ensure that we have the ability to domestically mine these 

critical minerals? What are our barriers, and how do you think we 

can break them down? 

Mr. QUINN. Well, as I mentioned before, there are a number of 

programs and laws that actually entice placing more of these areas 

off-limits, or either totally off-limits, or to severe restrictions. 

I think we can reexamine how those laws are applied going forward. We have a better understanding before those decisions are 

48 

made about what the resource potential of those lands are, and 

those that are already off-limits, maybe those from time to time 

merit some reconsideration based on what the growing needs are 

of this country and changing values. 

And also we have the same issue in terms of some of the private 

lands. There are laws out there that authorize parties to try to petition to have private lands put off-limits to future development. 

Mr. JOHNSON. OK. Thank you. As you mentioned in your testimony also, Mr. Quinn, less than half of the mineral needs of the 

United States manufacturing are met from domestically mined resources. 

Obviously, when we are unable to provide the components necessary for a healthy and viable manufacturing industry, our ability 

to be a leader in manufacturing, and manufacturing innovation, is 

at risk. 

What do you suggest we do to ensure that the United States remains not only a key producer of critical minerals, but also remain 

at the forefront of innovation and new technology in the manufacturing arena? 

Mr. QUINN. Well, I think there are a number of public policy hurdles in our way in terms of having or maintaining a healthy and 

a viable minerals industry here, and as you are inferring, Mr. 

Johnson, that if we cut off the front end of the supply chain, the 

minerals part, over time the rest of that value added chain will go 

off-shore as well. 

We just heard from various Members today about the rare earths 

story. I think that is instructive about what happens when the beginning of the supply chain gets cut off, and the innovation and the 

technology goes and follows suit on that, and downstream also goes 

offshore to where it can source reliably. 

And as Dr. Eggert has said, sometimes prices are an issue, but 

actually it is having a dependable supply, because if you are going 

to set up a manufacturing system, you don’t want to have that up 

and down based on a commodity risk, in terms of supply. 

Mr. JOHNSON. OK. The answers to your questions kind of highlight for me what we have heard not only in this hearing, but in 

other hearings as well. Our regulatory process, and the lack of aggressive movement forward with the robust permitting process, is 

really hampering our ability across the board. 

Not only in this arena, but in others. It is almost as if those regulatory agencies have become the Department of No, you can’t. I 

would like to see, and I urge that not only the Administration, but 

the Congress, force these regulatory agencies that if you are going 

to deny a permit for health or safety reasons, that is OK. 

But don’t just say no. If you say no, you have to come to the table 

with ideas on how to move that process forward, and how to solve 

the problem, and not simply to be an impediment. Do you think 

that would help? 

Mr. QUINN. Absolutely, Mr. Johnson. Sometimes they just say no 

without the adequate reasons, and even worse, sometimes they say 

nothing for years, and they keep sending you back for more information, and you keep asking did I bring the right rock back, and 

they keep saying we will tell you when we see it. 

49 

And you presided as I recall over several hearings several weeks 

ago where that is exactly the issue, and where we have people 

worn out, and an industry worn out, where at the end of the day, 

we have more permits actually withdrawn than actually issued. 

Mr. JOHNSON. I thank you for that, and Mr. Chairman, I yield 

back. 

Mr. LAMBORN. Thank you. And I will ask my questions now, except that I want to instead defer or yield three minutes to the gentleman from Arizona. 

Dr. GOSAR. Mr. Eggert, you know, my colleague, Mr. Holt, talked 

about recycling these metals and rare earths. I am a big recycler, 

but there is no way that we can keep up with demand by recycling. 

We ought to be looking at both sides of this story. One is to recycle, but two is to explore, and use environmental stewardship in 

mining. What is alarming to me is what seems to be going on—and 

I am concerned about it—is that foreign governments are cornering 

the market and artificially inflating the market. 

A good example would be what we are undergoing now with 

OPEC, and then China with the rare earths. In regards to these 

special elements that we are involved with, I have a company that 

has revolutionized the electric motor, and they are very dependent 

upon these magnets. 

How do you foresee or how do you see our current environmental 

standards and this moving bar helping extort the American taxpayer and the American consumer in regards to production of these 

revolutionary type of discoveries? 

Dr. EGGERT. Could you repeat the last portion of the question? 

I didn’t hear the key part of the question. 

Dr. GOSAR. How is the American consumer and the industry 

being extorted by artificially raising prices by foreign markets? 

Dr. EGGERT. Well, when one or a small number of powerful producers can act opportunistically to raise prices, or to restrict availability, either you pay the higher price, and it increases your costs, 

and reduces your profitability, or in the case of physical unavailability, one faces the choice of not building, or in cases where there 

is an effort to redirect investment of manufacturing facilities to 

other locations, manufacturing can be redirected and relocated. 

Dr. GOSAR. Mr. McGroarty, can you address that a little bit for 

me, please? 

Mr. MCGROARTY. Congressman, you raise an interesting question. My thought goes to how one would cost out lost innovation as 

well. Unavailability of resources, the general sense that one would 

not be pursuing and exploring new applications, because you don’t 

feel that you can outsource the components, the precursor metals. 

It has to have some sort of drag effect. I don’t know how one would 

measure it. I am not an economist. 

Dr. GOSAR. But you could really agree with me that the American taxpayers are going to be one fronting this, because it is artificially inflated? 

Mr. MCGROARTY. Yes, I think so. You have phrased it in terms 

of the consumers, and I am thinking also what would the consumer 

not have five years from now, and how would they even know that 

they don’t have it. 

50 

Dr. GOSAR. So, it is our own Federal Government that is standing in the way of that marketplace? 

Mr. MCGROARTY. I think the Federal Government can make 

changes and talk about permitting. 

Dr. GOSAR. Thank you. 

Mr. LAMBORN. All right. That concludes the question portion of 

this hearing. We are going to wrap up now. I would like to submit 

for the record two articles from the New York Times regarding the 

issue of Chinese mineral embargoes. Without objection. 

Mr. LAMBORN. And I want to thank the witnesses for being here 

today and taking up their valuable time to come and help us understand this important issue. While today’s hearing was focused 

on what we know from the National Research Council Reports and 

our expert witnesses, there is still much we don’t know. 

We don’t know what areas are open for mineral development or 

minerals requirements for domestic manufacturing infrastructure 

and national defense. We don’t know fully the status of the workforce with mining and materials expertise, or a decent assessment 

of permitting timelines for projects on Federal lands, with its associated litigation and hurdles to domestic development, but we need 

these answers. 

Later this week, I will be introducing legislation to direct the Department of the Interior to prepare a series of reports to get the 

answers that we need to address the challenges laid out in this 

hearing today. 

The goal of this legislation is to increase both our understanding 

of our national mineral needs and the barriers to meeting our 

needs with domestic production. Our national mineral policy is failing our Nation. 

It is failing to keep us supplied with the resources that we need 

to defend our Nation, build our infrastructure, create jobs, secure 

our manufacturing base, and keep our economy healthy. 

Today is the beginning of an effort to right the course and to restore America’s leadership in minerals and materials technology. 

Members of the Committee may have additional questions for each 

of you witnesses for the record, and I would ask that you would respond to these in writing. 

And if there are no further questions, without objection, we stand 

adjourned. 

[Whereupon, at 10:48 a.m., the Subcommittee was adjourned.] 

[Additional material submitted for the record follows:] 

[The New York Times article entitled ‘‘Supplies Squeezed, Rare 

Earth Prices Surge’’ submitted for the record follows:] 

Supplies Squeezed, Rare Earth Prices Surge 

By KEITH BRADSHER 

Published: May 2, 2011 

HONG KONG—Rare earth prices are reaching rarefied heights. 

Malaysia has delayed granting an operating permit for the refinery in Kuantan 

as it reviews disposal plans for radioactive waste. 

World prices have doubled in the last four months for rare earths—metallic elements needed for many of the most sophisticated civilian and military technologies, 

whether smartphones or smart bombs. 

51 

And this year’s increases come atop price gains of as much as fourfold during 

2010. 

The reason is basic economics: demand continues to outstrip efforts to expand 

supplies and break China’s chokehold on the market. 

Neodymium, a rare earth necessary for a range of products including headphones 

and hybrid electric cars, now fetches more than $283 a kilogram ($129 a pound) on 

the spot market. A year ago it sold for about $42 a kilogram ($19 a pound). 

Samarium, crucial to the manufacture of missiles, has climbed to more than $146 

a kilogram, up from $18.50 a year earlier. 

While the price inflation is a concern to manufacturers, consumers in many cases 

will barely notice the soaring cost of rare earths. Even though the materials are crucial to the performance of everyday equipment like automotive catalytic converters 

and laptop computer display screens, rare earths typically are used only in trace 

quantities. 

One exception is the Toyota Prius hybrid car, whose manufacture uses a kilogram 

of neodymium. 

Toyota has been raising prices for the Prius, but has cited demand for the car and 

economic conditions. While acknowledging that rising prices for raw materials in 

general have affected the company’s overall financial results, Toyota has declined 

to provide a breakdown of the role of rare earths. (Production problems stemming 

from the Japanese earthquake and tsunami have also crimped supplies of Prius 

cars, which are made only in Japan.) 

The high prices for rare earths reflect turmoil in the global industry that mines 

and refines them. China, which controls more than 95 percent of the market, has 

further restricted exports so as to conserve supplies for its own high-tech and green 

energy industries. That is despite the World Trade Organization’s ban on most export restrictions. 

Meanwhile, an ambitious effort to open the world’s largest rare earth refinery in 

Malaysia, which had seemed certain to begin operating by this autumn, is tied up 

over regulatory reviews of the disposal plans for thousands of tons of low-level radioactive waste the plant would produce annually. Public opposition to the refinery is 

evident in the weekly protest demonstrations now being held. 

At the same time, Japanese companies are finding it harder than originally hoped 

to recycle rare earths from electronics and to begin rare earth mining and refining 

in Vietnam. 

Although rare earths are crucial to the supply chains of some of the world’s biggest manufacturers, the industry that mines and refines them has long been characterized by small, entrepreneurial companies. Lately, though, soaring prices have 

contributed to industry consolidation. 

Last month, for example, Solvay, a big Belgian chemical-industrial corporation announced that it would pay $4.8 billion to acquire Rhodia of France, a technological 

leader in making complex chemicals based on rare earths. 

That same day, April 4, Molycorp, the only American company currently producing rare earths, said it had paid $89 million for a more than 90 percent stake 

in Silmet of Estonia, a much smaller company that is Rhodia’s only European rival 

in rare earth processing. 

In Malaysia, where the giant rare earth refinery is under construction near the 

eastern port of Kuantan, regulators are delaying approval for an operating permit 

amid public concern about naturally occurring low-level radioactive contamination 

of the rare earth ore, which will be mined in Australia. 

Raja Dato Abdul Aziz bin Raja Adnan, the director general of the Malaysian 

Atomic Energy Licensing Board, said the board had asked the Lynas Corporation 

of Australia, which is building the refinery, to provide additional documentation before accepting its application for an initial operating permit. It will take up to six 

months to review the application, Raja Adnan said, and Lynas will not be allowed 

to bring any raw material to the plant until a permit is issued. 

But Nicholas Curtis, Lynas’s executive chairman, said that he believed the company could obtain the necessary approvals before September and that his company 

was sticking to its plan to begin feeding Australian ore into the Malaysian refinery’s 

kilns by the end of that month. 

The Malaysian government also announced last week that it would appoint a 

panel of international experts to review the safety of Lynas’s plans. The company 

said it welcomed the move. 

But Fuziah Salleh, an opposition legislator who represents downtown Kuantan 

and has been leading weekly protests, is mistrustful. 

‘‘The people’s concerns are that the independent panel will be formed by the government to prove that they are right,’’ she wrote in an e-mail message. 

52 

Toyota Tsusho, a materials purchasing unit of the Toyota Group, has separately 

encountered complex local regulations as it seeks to open rare earth mining and 

processing operations in Vietnam. The project was announced last October during 

a Chinese embargo on rare earth shipments to Japan. Takeshi Mutsuura, a spokesman, said that Toyota Tsusho now hoped to reach a contract in Vietnam this summer and start production in early 2013. 

As recently as last autumn, there were also ambitious hopes in Japan to recycle 

rare earths from electronics waste. Dowa Holdings tried then to come up with ways 

to separate rare earths at a recycling factory in northwest Japan but found the task 

significantly more difficult than recycling other, more widely available precious metals. The recycling factory is now recovering 19 other metals instead, including cobalt 

and lithium. 

All of this has left the world even more dependent on China. The Chinese government last autumn showed a willingness to use that near monopoly as a trade weapon, halting shipments to Japan from late September to mid-November, during a territorial dispute over islands in the East China Sea. 

Although Beijing has officially denied that it imposed a Japanese embargo last 

fall, China’s own trade data released since then show that its shipments to Japan 

suddenly fell to zero in October for rare earth metals, and to nearly zero for rare 

earth oxides—which are more processed chemical compounds. At the beginning of 

this year China reduced its rare earth export quotas to all countries, while raising 

export taxes on some rare earths to 25 percent, from 15 percent previously. 

Since April 1, China has also raised taxes on rare earth mining companies to the 

equivalent of $8 for each kilogram of refined product; rare earths were previously 

taxed like many other nonferrous minerals in China, at less than 50 cents a kilogram. 

One of the biggest questions hanging over the rare earths industry is whether the 

United States, the European Union and Japan will file a World Trade Organization 

case against China, challenging its export quotas and duties. James Bacchus, a 

former chairman of the W.T.O. appeals tribunal in Geneva, said that Chinese trade 

data shows a virtually complete halt in shipments to Japan last autumn could be 

cited to buttress any W.T.O. filing by rare earth-importing countries. 

China denies violating the W.T.O. ban on export restrictions, saying that it qualified for an exception to the ban for environmental protection and conservation of 

natural resources. But China has done little to restrict its own industries’ consumption of rare earths, usually a prerequisite for invoking an environmental defense. 

A version of this article appeared in print on May 3, 2011, on page B1 of the New 

York edition with the headline: Supplies Squeezed, Rare Earths Surge. 

[The Wall Street Journal article entitled ‘‘China Tightens RareEarth Rules’’ submitted for the record follows:] 

China Tightens Rare-Earth Rules 

THE WALL STREET JOURNAL, ASIA BUSINESS 

MAY 19, 2011, 8:21 P.M. ET 

BEIJING China moved to tighten its control over rare-earth metals Thursday by 

expanding its export-quota system and imposing higher taxes on the minerals, 

which are used in such high-tech applications as laser-guided weapons and hybridcar batteries. 

It also said it will get tough with companies that resell export quotas and won’t 

approve any new projects or the expansion of existing ones in rare-earth separation 

over the next five years. 

The measures were announced separately by the State Council, or cabinet, and 

the Commerce Ministry in an apparently coordinated offensive in a sector that has 

become highly politicized. 

China, which supplies around 95% of the world’s rare-earth metals, has been 

tightening its control over the sector by raising the threshold for entry, imposing 

stricter environmental standards and slashing export quotas. First-half 2011 quotas 

total 14,508 metric tons, down about 35% from the same period last year, according 

to the Ministry of Commerce. 

These measures have boosted rare-earth prices and made export quotas much 

more valuable. 

Opinion 

Rare-Earths Showdown Looms 

53 

In the latest move, Beijing said it is raising the tax on light rare-earth ores to 

60 yuan ($9.22) per ton, from a range of 40 fen to 30 yuan per ton, as of April 1, 

while lifting the tax on heavy ores to 30 yuan per ton, also from a range of 40 fen 

to 30 yuan per ton. 

‘‘[China will] greatly increase rare earth taxes and refine its pricing mechanism 

to reduce the excessive profits in the rare earth mining industry,’’ the State Council 

said. 

China will also raise the threshold for companies applying for export quotas, 

though it didn’t say whether this will reduce the number of qualified exporters. 

China granted quotas to 22 Chinese companies and 10 foreign companies this year. 

The Commerce Ministry said it will start imposing export quotas on ferroalloys 

containing more than 10% rare-earth minerals by weight, effective Friday. 

This year, China began imposing 25% tariffs on exports of alloys with more than 

10% rare earth content. 

Prior to the latest announcements, China had issued export quotas for rare-earth 

primary products, including minerals and oxides, but its quotas didn’t include 

alloys. 

Rare earth alloys include rare-earth ferrosilicon?with 17%-37% rare-earth content?which is used as an additive in steel and iron smelting, and magnesium rare 

earth, which contains 2%-10% of rare-earth elements yttrium and gadolinium and 

is used in the aviation, automotive and defense sectors. 

Rare earths, comprising 17 elements, are usually categorized into two 

kinds?heavy rare earth, also called ion-absorbed rare earth, which is abundant in 

southern China, and light rare earth, which is found in northern China. 

Heavy rare earths are more valuable, giving exporters an incentive to ship overseas for higher returns. 

The State Council said it ‘‘clearly forbids’’ the resale of quotas and has promised 

to improve the system of allocating quotas. People familiar with the situation have 

said previously that some companies with export quotas make big profits by re-selling export quotas. 

Beijing also pledged to combat illegal rare-earth mining and mining above quota 

levels, as well as improve the export-monitoring system to stamp out smuggling. 

China is also building strategic stockpiles of rare-earth metals, an effort that 

could give Beijing increased power in influencing global prices and supplies. 

The State Council said it will halt approvals of rare-earth separation projects in 

the next five years and ‘‘resolutely ban’’ capacity expansions at existing plants. 

—Yajun Zhang 

Æ