Rare earth minerals critical U.S. national security issue ‘with potentially severe consequences'-House Rep. Coffman

U.S. House committees and representatives are getting serious about the U.S. rare earths supply chain, China's plan to create a Rare Earth OPEC, and reviving domestic rare earth mining and exploration.

RENO, NV -

Rep. Mike Coffman, R-Colorado has introduced legislation in the U.S. House of Representatives aimed at developing a domestic supply of rare earth minerals that are vital to the manufacture of critical advanced technologies such as wind turbines, hybrid vehicles and missile guidance systems.

The House Subcommittee on Investigations and Oversight of the House Committee on Science and Technology is already moving full speed ahead on the lack of a domestic supply of rare earth minerals and the lack of an REE policy for the U.S. in general.

Subcommittee Chairman Brad Miller, D-North Carolina, said, "The United States not so long ago, was the world leader in producing and exporting rare earths. Today, China is the world's leader. If we intend to foster a home-grown capability to make the devices that provide wind energy, we need to rebuild America's capability to supply its own needs in rare earth materials."

The U.S. Geological Survey says between 2005 and 2008, 91% of U.S. REE consumption came from China, which is now reducing its exports of rare earth materials. Worse for U.S. manufacturers, China is working to leverage its REE deposits to bring the manufacture of the high-value added products using rare earths to China Inner Mongolia Region.`

"We need to learn how to compete in attracting and retaining manufacturing firms that need access to rare earth elements in light of China's near monopoly, and their willingness to use their monopoly power to our disadvantage," Miller said.

Among the proposed solutions: increasing domestic REE exploration; finding new overseas suppliers; research to find substitute materials; research to reduce the amount of rare earths needed; and increased recycling of REE materials.

In a news release Thursday, National Mining Association CEO Hal Quinn said, "The march 17 announcement by DOE that it will cooperate with the Department of Defense to investigate the use of these minerals in sophisticated weapons systems is especially welcome in view of China's virtual monopoly on worldwide supplies of these materials and recent indications that China will limit exports to meet its growing domestic needs."

Terrance P. Stewart, managing partner of the Washington D.C. law Stewart and Stewart, is so concerned about China's combination of both export duties and export quotas to limit rare earth exports, he is calling for a trade action against China.

"The fact that in 2010 China has exposed export taxes on 329 product categories, including 23 rare earth categories, creates a strong case of violation by China on the export taxes alone," he told the House Subcommittee this week.

An expert on U.S.-China trade law, Stewart suggested, "China's rare earth industry has three serious problems: overcapacity, disorderly competition, and cheap exports on a large scale. It is of great urgency that we protect our rare earth resources and establish our reserve system."

China's Ministry of Industry and Information Technology (MIIT) 2009-2015 Plan "aims to micro-manage the rare earth industry, strengthen the control of strategic resources, and strictly control production capacity by both administrative and market means," Stewart advised the House Subcommittee.

"In the next six years, no rare earth mining permit will be approved, separation of newly formed rare earth smelting companies will be strictly reviewed, and existing rare earth companies will be eliminated [by judging their performance] in three areas of technology and equipment, environmental protection, and management," he explained.

China will promote merger and reorganization of companies, strengthen and enlarge its rare earth industry, form leading REE companies, establish a China Rare Earth OPEC, and "form companies with absolute dominating power in the market so that China can be the leader in controlling the international market place," Stewart warned.

In his testimony Stewart suggested Congress advocate a report for the civilian sector on whether the stockpiling of rare earth materials is appropriate or feasible.

Critical to the domestic future of rare earths is the fate of mining law reform, Stewart advised. "Certainly, the Congress will want to make sure that any legislation balances our needs for access to critical raw materials with other concerns prompting legislative modifications."

Representative Coffman's legislation, H.R. 4866, the Rare Earths Supply-Chain Technology and Resources Transformation Act of 2010 (RESTART Act) would, through a series of assessments and specific programs, attempt to reestablish a competitive domestic rare earth supply chain.

"There is no rare earth element mining taking place in North American and with worldwide demand growing exponentially the situation is only going to get worse," Coffman warned. "It is a critical national security issue with potentially severe consequences."

The RESTART Act would establish a federal REE working group to assess and monitor strategic needs, create a national stockpile, evaluate international trade practices, facilitate loan guarantees for U.S, supply-chain development, and support innovation and workforce development to support the industry.

Coffman's bill would require the Secretaries of Commerce, Defense, Energy, Interior and State to appoint an Executive Agent at the Assistant Secretary level to serve on the interagency REE working group. That body would be required to establish a baseline for REE supply-chain vulnerability. The legislation also requires the Secretary of Defense to establish a national stockpile for rare earth materials.

The U.S. Trade Representative would be required to initiate "a comprehensive review of international trade practices of the rare earth materials market." The review would include dumping, export quotes and other mechanisms used by foreign REE producers to manipulate the rare earth market.

The Secretary of Energy would be required to establish loan guarantees for the rare earth industry under the American Recovery and Reinvestment Act of 2009, Energy Efficiency and Renewable Energy.

The Secretaries of Commerce, Defense, Energy and Interior would also be required to provide basic R&D funding to academia, government labs, corporate research and development, not-for-profit research and development, and industry associations for REE projects."