[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
                        RARE EARTH MINERALS AND 
                         21ST CENTURY INDUSTRY 

=======================================================================

                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON INVESTIGATIONS AND
                               OVERSIGHT

                  COMMITTEE ON SCIENCE AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 16, 2010

                               __________

                           Serial No. 111-86

                               __________

     Printed for the use of the Committee on Science and Technology


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

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                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                   HON. BART GORDON, Tennessee, Chair
JERRY F. COSTELLO, Illinois          RALPH M. HALL, Texas
EDDIE BERNICE JOHNSON, Texas         F. JAMES SENSENBRENNER JR., 
LYNN C. WOOLSEY, California              Wisconsin
DAVID WU, Oregon                     LAMAR S. SMITH, Texas
BRIAN BAIRD, Washington              DANA ROHRABACHER, California
BRAD MILLER, North Carolina          ROSCOE G. BARTLETT, Maryland
DANIEL LIPINSKI, Illinois            VERNON J. EHLERS, Michigan
GABRIELLE GIFFORDS, Arizona          FRANK D. LUCAS, Oklahoma
DONNA F. EDWARDS, Maryland           JUDY BIGGERT, Illinois
MARCIA L. FUDGE, Ohio                W. TODD AKIN, Missouri
BEN R. LUJAN, New Mexico             RANDY NEUGEBAUER, Texas
PAUL D. TONKO, New York              BOB INGLIS, South Carolina
STEVEN R. ROTHMAN, New Jersey        MICHAEL T. McCAUL, Texas
JIM MATHESON, Utah                   MARIO DIAZ-BALART, Florida
LINCOLN DAVIS, Tennessee             BRIAN P. BILBRAY, California
BEN CHANDLER, Kentucky               ADRIAN SMITH, Nebraska
RUSS CARNAHAN, Missouri              PAUL C. BROUN, Georgia
BARON P. HILL, Indiana               PETE OLSON, Texas
HARRY E. MITCHELL, Arizona
CHARLES A. WILSON, Ohio
KATHLEEN DAHLKEMPER, Pennsylvania
ALAN GRAYSON, Florida
SUZANNE M. KOSMAS, Florida
GARY C. PETERS, Michigan
JOHN GARAMENDI, California
VACANCY
                                 ------                                

              Subcommittee on Investigations and Oversight

                HON. BRAD MILLER, North Carolina, Chair
STEVEN R. ROTHMAN, New Jersey        PAUL C. BROUN, Georgia
LINCOLN DAVIS, Tennessee             BRIAN P. BILBRAY, California
CHARLES A. WILSON, Ohio              VACANCY
KATHY DAHLKEMPER, Pennsylvania         
ALAN GRAYSON, Florida                    
BART GORDON, Tennessee               RALPH M. HALL, Texas
                DAN PEARSON Subcommittee Staff Director
            JAMES PAUL Democratic Professional Staff Member
           KEN JACOBSON Democratic Professional Staff Member
            TOM HAMMOND Republican Professional Staff Member
























                            C O N T E N T S

                             March 16, 2010

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Bart Gordon, Chairman, Committee on 
  Science and Technology, U.S. House of Representatives..........    11
    Written Statement............................................    12

Statement by Representative Brad Miller, Chairman, Subcommittee 
  on Investigations and Oversight, Committee on Science and 
  Technology, U.S. House of Representatives......................    11
    Written Statement............................................    14

Statement by Representative Paul C. Broun, Ranking Minority 
  Member, Subcommittee on Investigations and Oversight, Committee 
  on Science and Technology, U.S. House of Representatives.......    15
    Written Statement............................................    15

                               Witnesses:

Dr. Stephen Freiman, President, Freiman Consulting, Inc.
    Oral Statement...............................................    17
    Written Statement............................................    21
    Biography....................................................    24

Dr. Steven J. Duclos, Chief Scientist and Manager, Material 
  Sustainability, General Electric Global Research
    Oral Statement...............................................    25
    Written Statement............................................    26
    Biography....................................................    30

Dr. Karl A. Gschneidner, Jr., Anson Marston Distinguished 
  Professor, Department of Materials Science and Engineering, 
  Iowa State University
    Oral Statement...............................................    30
    Written Statement............................................    33
    Biography....................................................    46

Mr. Mark A. Smith, Chief Executive Officer, Molycorp Minerals, 
  LLC
    Oral Statement...............................................    47
    Written Statement............................................    49
    Biography....................................................    61

Mr. Terence Stewart, Esq., Managing Partner, Stewart and Stewart
    Oral Statement...............................................    62
    Written Statement............................................    63
    Biography....................................................    68

Discussion
  Early Warning for Material Supply Problems.....................    68
  How to Compete With China......................................    70
  Prioritizing Responses to Shortage.............................    70
  Role of Federal Agencies.......................................    71
  Improving Research Infrastructure..............................    73
  Funding for Rare Earth Research................................    73
  Domestic Sources of Rare Earths................................    74
  Expanding U.S. Workforce.......................................    75
  Dependence on Foreign Products.................................    75
  Maintaining a Complete Supply Chain............................    76
  Keeping Manufacturing in the U.S...............................    77
  Balancing Private and Public Needs.............................    78
  Chinese Industrial Strategy....................................    78
  Funding Models for Materials Research..........................    78
  Timeframe for Re-Starting Domestic Production..................    79

              Appendix: Answers to Post-Hearing Questions

Dr. Stephen Freiman, President, Freiman Consulting, Inc..........    82

Dr. Steven J. Duclos, Chief Scientist and Manager, Material 
  Sustainability, General Electric Global Research...............    83

Dr. Karl A. Gschneidner, Jr., Anson Marston Distinguished 
  Professor, Department of Materials Science and Engineering, 
  Iowa State University..........................................    85

Mr. Mark A. Smith, Chief Executive Officer, Molycorp Minerals, 
  LLC............................................................    87

Mr. Terence Stewart, Esq., Managing Partner, Stewart and Stewart.    88


             RARE EARTH MINERALS AND 21ST CENTURY INDUSTRY

                              ----------                              


                        TUESDAY, MARCH 16, 2010

                  House of Representatives,
      Subcommittee on Investigations and Oversight,
                       Committee on Science and Technology,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 2:01 p.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Brad 
Miller [Chairman of the Subcommittee] presiding.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

                            hearing charter

Purpose

    The United States, as part of its strategy to reduce emissions from 
electricity generation and transportation, is investing significant 
funds in renewable energy technologies such as wind power and hybrid 
vehicles. The American Recovery and Reinvestment Act provides $2.3 
billion for advanced energy manufacturing facilities, including wind 
turbine manufacturing plants. The Act further makes available $2 
billion ``. . . for Advanced Battery Manufacturing grants to support 
the manufacturing of advanced vehicle batteries and components . . .'' 
Yet these investments may fail to prompt the desired outcome--a buoyant 
industry producing renewable energy systems--for lack of rare earth 
minerals.\1\
---------------------------------------------------------------------------
    \1\ These minerals were named ``Rare Earths'' at the time of their 
discovery as they were originally found in the form of oxides (bound 
together with oxygen; compounds were called ``earths'' by scientists in 
the late 18th Century). ``Rare'' reflected the fact that the Swedish 
scientists who originally separated the various compounds had not 
encountered them before. Today, the name is somewhat misleading in that 
``. . . even the two least abundant, thulium and lutetium, are nearly 
200 times as abundant as gold . . ..'' Committee on Critical Mineral 
Impacts on the U.S. Economy, Minerals, Critical Minerals and the U.S. 
Economy (Washington: National Research Council, 2008); p. 133 
(hereafter cited as NRC Report).
---------------------------------------------------------------------------
    The United States finds itself dependent on the People's Republic 
of China for a commodity without which it would be hard to compete in 
high-technology industries. With a near-monopoly in supplies of rare 
earths, the Chinese government threatens to limit exports and tries to 
induce manufacturing firms to locate their facilities in Inner 
Mongolia. The main American supplier is seeking funding to restart its 
mining operation, which closed in 2002, having suffered from low prices 
as China expanded into the market and from a late start on renewing its 
environmental permits in California. Support for research has 
diminished.
    This hearing by the Subcommittee on Investigations and Oversight 
will examine these intertwined threads to determine ways of redressing 
the expected imbalance between available supplies of rare earths and 
the Nation's need for them. The hearing will also ask why the policy 
structure put in place thirty years ago precisely to identify and 
respond to situations like this before they became acute bottlenecks 
failed to do its job.

Witnesses

Dr. Stephen W. Freiman
President, Freiman Consulting, Inc.
Member, National Research Council Committee on
Critical Mineral Impacts on the U.S. Economy

    Dr. Freiman will present the findings and recommendations of the 
most recent National Research Council study evaluating potential 
responses to fluctuations in the supply-demand balance for minerals and 
materials. The Council included rare earth minerals among the cases 
analyzed, concluding that there are sufficient supply risks for rare 
earths to be classified as a critical resource. Dr. Freiman, a 
materials scientist, served as Chief of the Ceramics Division and 
Director of the Materials Science and Engineering Laboratory during a 
career at the National Institute of Standards and Technology that 
spanned 28 years. A specialist in the fracture of brittle materials, he 
has published more than 150 scientific papers.

Dr. Steven Duclos
Chief Scientist and Manager, Material Sustainability
General Electric Global Research

    Dr. Duclos will testify on the process underlying General 
Electric's Materials Sustainability Initiative, which assesses the 
company's businesses for risks posed by lack of raw materials. If a 
problem is identified, are there steps to reduce that risk by finding 
substitutes, reducing the need for the material or recycling? Terbium, 
one of the rare earths, was identified as a high risk for GE by the 
Initiative. Dr. Duclos managed the company's Optical Materials 
Laboratory, working with GE units to develop advanced materials. He 
came to GE from a post-doctorate position at the AT&T Bell Labs 
studying superconductivity in buckminsterfullerene, the form of carbon 
popularly known as ``buckyballs.''

Dr. Karl A Gschneidner, Jr.
Anson Marston Distinguished Professor
Department of Materials Science and Engineering
Iowa State University

    Dr. Gschneidner's testimony will focus on current studies of rare 
earths and the processes needed to convert the ores into industrially-
useful materials. He has also been asked for comments to recommend 
improvements in the existing U.S. research program. In addition to his 
professorship at Iowa State University, Dr. Gschneidner holds the 
position of Senior Metallurgist at the Ames National Laboratory of the 
Department of Energy. He has researched the properties of rare earth 
minerals, has served as the Senior Editor of the Handbook of the 
Physics and Chemistry of Rare Earths since 1976 and was for years 
Director of the Ames Laboratory Rare Earth Information Center. Dr. 
Gschneidner is currently funded by DOE to design a refrigerator using 
magnets to control temperatures. He was elected to the National Academy 
of Engineering in 2007.

Mr. Mark Smith
Chief Executive Officer
Molycorp Minerals, LLC

    Mr. Smith's company is focused on restarting the mine in Mountain 
Pass, California, holding the primary source of rare earth minerals in 
the United States. The mine was previously owned by the mining 
subsidiary of the Chevron Corporation, which acquired it as part of its 
purchase of the Union Oil Company of California. Mr. Smith, who served 
as head of Chevron's mining subsidiary, left to become President and 
CEO of Molycorp in April 2006 and negotiated to buy the Mountain Pass 
mine from his old company in 2007. Operations at the mine were halted 
after accidental spills and failure to complete environmental permits 
required by the State of California. Mr. Smith has been asked to 
describe his plan for restoring mining operations and for expanding the 
company into the production of magnets for next-generation wind turbine 
generators.

Mr. Terence Stewart, Esq.
Managing Partner
Stewart and Stewart

    Mr. Stewart has an extensive history in international trade and 
customs law. He is a leading expert on the World Trade Organization and 
has assisted industry and labor groups with trade issues. Given China's 
outsized role in the rare earths market and its efforts to increase its 
influence in high-technology industries, Mr. Stewart has been invited 
to present his insights into China's policies and actions on resource 
issues and into their ramifications for U.S. industry and the economy.

Background

    In November 2009, the Australian Broadcasting Corporation 
summarized the rare earths issues quite succinctly:

         The rare earth metals story is one lens through which we can 
        view changing world economics, the ways and the pitfalls of how 
        China integrates with the capitalist world, and global trade. 
        China provides more than 90% of the world's supply of rare 
        earths. The business media in particular is full of stories of 
        how if the Chinese hold back on their supply of rare earths, 
        your iPhone won't work. And more, much more. Climate change 
        comes into it, too, because the green technologies are very 
        dependent on rare earths.\2\
---------------------------------------------------------------------------
    \2\ Stan Correy. ``Background Briefing: Rare Earths and China.'' 
Australian Broadcasting Corporation transcript, November 15, 2009. 
Accessed at http://www.abc.net.au/rn/backeroundbriefing/stories/2009/
2738774.htm, January 28, 2010.

    The current issues relating to rare earths supply and demand 
represent the latest instance of a continuing story in which what was 
an obscure, commodity mineral or material suddenly assumes outsized 
importance. Industry finds new uses that strain supplies, and American 
firms find that there are no domestic suppliers. In 1985, the Office of 
Technology Assessment (OTA) published Strategic Materials: Technologies 
---------------------------------------------------------------------------
to Reduce U.S. Import Vulnerability in response to concerns that

         Three nations, South Africa, Zaire, and the U.S.S.R., account 
        for over half of the world's production of chromium, cobalt, 
        manganese, and platinum group metals. These metals are 
        essential in the production of high-temperature alloys, steel 
        and stainless steel, industrial and automotive catalysts, 
        electronics, and other applications that are critical to the 
        U.S. economy and the national defense . . ..\3\
---------------------------------------------------------------------------
    \3\ Strategic Materials: Technologies to Reduce U.S. Import 
Vulnerability (Washington, DC: U.S. Congress, Office of Technology 
Assessment, OTA-ITE-248, May 1985); p.3.
---------------------------------------------------------------------------
    At that time, OTA identified the following as options for the 
Federal Government to pursue: increase exploration for domestic 
sources, find new overseas suppliers, find substitutes or reduce the 
need. Many of these same options apply to the case of rare earth 
minerals--although the unique properties that make these elements 
valuable may not be found in any substitute materials or minerals.\4\
---------------------------------------------------------------------------
    \4\ NRC Report, p. 131.

---------------------------------------------------------------------------
The Global Rare Earths Playing Field

    The United States Geological Survey's Minerals Information Team 
annually publishes Mineral Commodity Summaries, collecting information 
on supply, demand and market activity on some 90 minerals and 
materials, among them the rare earths. In January 2010, the most recent 
summary for the rare earths was issued, with data current to 2008.\5\ 
USGS reported there that the United States was completely dependent on 
imports: between 2005 and 2008, 91% of its consumption came from China, 
3% from France, 3% from Japan, 1% from Russia and 2% from other 
sources. The estimated cost of processed ore suitable for extracting 
rare earths rose from $6.61 to $8.82 per kilogram between 2007 and 
2008, then dropped back to $5.73 during 2009.\6\
---------------------------------------------------------------------------
    \5\ James B. Hedrick, ``Rare Earths,'' in Mineral Commodity 
Summaries 2009 (Reston, VA: United States Geological Survey; January 
2010); pp. 128-129.
    \6\ Ibid., p. 128.
---------------------------------------------------------------------------
    USGS issued the following assessment of global rare earths supply: 
\7\
---------------------------------------------------------------------------
    \7\ Ibid., p. 129.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
    

    Actions by the Chinese government (see the next section) and 
growing world investment in renewable energy equipment have 
reinvigorated efforts to identify new sources for rare earths. Molycorp 
restarted its separation plant in 2007 and is processing residual 
materials from its mine tailings. Australia has begun production at its 
Mt. Weld deposit. Evaluation of the economic viability of producing in 
Canada and Malawi is underway.\8\ An Australian mining company is also 
studying a deposit in Greenland that could satisfy some 25% of world 
needs over the next fifty years.\9\ Still, as Mr. Smith of Molycorp 
notes, it takes significant funding and time to bring new mines into 
production, and volatility in a commodity market can upset even well-
laid plans.
---------------------------------------------------------------------------
    \8\ Ibid.
    \9\ Leo Lewis, ``Greenland Challenge to Chinese Over Rare Earth 
Minerals,'' London Times, October 5, 2009; p. 39.

---------------------------------------------------------------------------
China and the Global Market

    Indications that China intended to reduce exports of the rare earth 
materials is a major reason that this issue has recently gained 
prominence. Reports last year indicated that the Ministry of Industry 
and Information Technology had submitted the draft of a six-year plan 
to the State Council of China that contemplated deepening existing cuts 
in shipments of minerals like dysprosium.\10\ The ministry stated that 
it was concerned that China lacked enough of the minerals to meet its 
own needs.\11\ The Japanese Ministry of Economy, Trade and Industry had 
earlier developed a ``Strategy for Ensuring Stable Supplies of Rare 
Metals'' after the threat that China might limit supplies came to the 
attention of the Cabinet in Tokyo.\12\
---------------------------------------------------------------------------
    \10\ Keith Bradsher, ``China Tightens Grip on Rare Minerals,'' New 
York Times, September 1, 2009; p. B1. See also Ambrose Evans-Pritchard, 
``World Faces Hi-Tech Crunch as China Eyes Ban on Rare Metal Exports,'' 
Telegraph.co.uk on August 24, 2009 at 5:58 PM BST. Accessed at http://
www.telegraph.co.uk/finance/commentlambroseevans-pritchard/
6082464/World-faces-hi-tech-crunch-as-China-eves-ban-on-rare-metal-
exports.html, October 15, 2009.
    \11\ Feiwen Rong and Xiao Yu, ``Shortage of Rare Earths Used in 
Hybrids, TVs May Loom in China,'' Bloomberg News on September 3, 2009 
at 4:54 AM EDT. Accessed at http://www.bloomberg.com/apps/
news?pid=20601080&sid=afn.hOk6eEHq, October 17, 2009.
    \12\ Ministry of Economy, Trade and Industry, ``Announcement of 
'Strategy for Ensuring Stable Supplies of Rare Metals,'' July 28, 2009. 
Accessed at http://www.meti.go.jp/english/press/data/
20090728-01.html, October 15, 2009.
---------------------------------------------------------------------------
    The rare earths issue showcases two major elements of China's 
strategy for economic development:

          the targeting of critical industries that are to be 
        kept under government control; and

          the use of subsidies and other incentives to attract 
        foreign investment that will result in moving China's 
        production up the value chain, bringing advanced technology 
        into the country, and generating sophisticated exports.

    Non-ferrous metals, the category into which rare earths fall, 
represent one of six industries that the Chinese government considers 
most central to economic performance and growth. The other five of 
these ``Heavyweight Industries'' are machinery; automobiles; 
information technology; construction; and iron and steel. Plans to keep 
the nation's economy under control call for state ownership of the 
three largest firms in each industry.\13\
---------------------------------------------------------------------------
    \13\ A similar plan is in place for the country's seven 
``Strategic'' industries: armaments; power generation and distribution; 
oil and petrochemicals; telecommunications; coal; civil aviation; and 
shipping. The firms in this sector are to be subject to ``absolute 
control'' by the government, while, in the ``Heavyweight'' sphere, the 
government is looking for no more than a ``dominant presence.'' U.S.-
China Economic and Security Review Commission, Hearing on China's 
Industrial Policy and its Impact on U.S. Companies, Workers, and the 
American Economy, testimony of George Haley, March 24, 2009.
---------------------------------------------------------------------------
    China's government has long been aware of its rare earths deposits' 
potential value and thought of them in strategic terms. An official 
publication quotes a 1992 statement by then-Paramount Leader Deng 
Xiaoping that ``there is oil in the Middle East; there is rare earth in 
China.'' In conjunction with a 1999 visit to Inner Mongolia, where 
China's largest deposit of rare earth minerals is located, then-
President Jiang Zemin wrote: ``Improve the development and applications 
of rare earth, and change the resource advantage into economic 
superiority.'' \14\
---------------------------------------------------------------------------
    \14\ ``Rare Earth: An Introduction,'' Baotou National Rare Earth 
Hi-Tech Industrial Development Zone, accessed at http://www.rev.cn/en/
int.htm, January 29, 2010.
---------------------------------------------------------------------------
    Although China has reportedly abandoned a provision in its Rare 
Earths Industry Development Plan 2009-15 that would have placed an 
absolute ban on the export of five of the 17 rare earths, a ban on 
exports of raw ores continues, as does the progressive lowering of 
exports quotas on other forms of the materials that began in 2006. 
Officials in China make no secret of their desire to bring the 
manufacturing of the high-value-added products containing rare earths 
into China. ``We want rare-earth industries to locate in Inner 
Mongolia,'' Zhao Shuanglin, vice chairman of Inner Mongolia Autonomous 
Region, stated in September 2009.\15\ At around the same time, Zhang 
Peichen, the deputy director of Baotou Rare Earth Research Institute in 
Inner Mongolia, predicted: ``Rare earth usage in China will be 
increasingly greater than exports.'' \16\
---------------------------------------------------------------------------
    \15\ Chuin-Wei Yap, ``Will China Tighten `Rare Earth' Grip?,'' Wall 
Street Journal, September 3, 2009; p. C12.
    \16\ Bradsher, loc. cit.
---------------------------------------------------------------------------
    While its current near-monopoly in rare earths gives it a potent 
stick, China has had outstanding success in using the carrot to enlist 
foreign-based corporations' help in building up its economy. For the 
past 15 years or more, multinational companies have shown themselves 
eager to establish a presence in China to gain access to the country's 
potentially huge market. But that is not the only reason they have 
sited production and, more recently, research capacity there. ``China 
has attracted the world's largest manufacturers by offering discounted 
land, energy, and taxes to relocate in China and to use China as a 
global export platform,'' according to the U.S.-China Economic and 
Security Review Commission. As a result, ``more than half of China's 
exports originate from foreign-invested manufacturing enterprises 
located in China.'' \17\
---------------------------------------------------------------------------
    \17\ U.S.-China Economic and Security Review Commission, 2009 
Report to Congress (Washington: U.S. Government Printing Office, 
November 2009); p. 43.
---------------------------------------------------------------------------
    ``Preferential Policies'' designed to attract foreign firms to the 
Baotou National Rare Earth Hi-Tech Industrial Development Zone, located 
less than 100 miles from China's huge rare earths mine at Bayan Obo in 
Inner Mongolia, include both funding mechanisms and significant tax 
incentives. For example, ``hi-tech enterprises'' and venture capital 
companies are exempt from income tax for their first five years 
operating in the Zone, then pay at only half of the regular 15 percent 
rate during a second five-year period. They receive breaks on VAT and 
operations taxes as well.\18\ The Baotou Industrial Development Zone's 
Web site lists 25 options on a page titled ``Projects Seeking 
Investment,'' many of them focusing on rare earths and several of them 
in the area of ``green technologies.'' Among these projects are:
---------------------------------------------------------------------------
    \18\ ``Preferential Policies,'' Baotou National Rare Earth Hi-Tech 
Industrial Development Zone, accessed at http://www.rev.cn/en/pre.htm, 
January 29, 2010.

---------------------------------------------------------------------------
          ``Nickel Hydrogen Power Battery Polar Plate'';

          ``Hydrogen-Store Alloy Powder Cathode Material of Ni-
        Hydrogen Power Battery'';

          ``Industrialization of Rare Earth Ceramic Piston 
        Ring'';

          ``Production Line of Rare Earth Giant 
        Magnetostrictive Alloy'';

          ``The Technology of Special Rare Earth Ceramic 
        Thermocouple Tube'';

          ``Industrialization of Nanometer Crystal Rare Earth 
        Alloy Magnetic Powder''; and

          ``Annual Production of 200000 Units of Magnet Motor 
        for Electric Bicycle.\19\
---------------------------------------------------------------------------
    \19\ ``Catalog,'' Baotou National Rare Earth Hi-Tech Industrial 
Development Zone, accessed at http://www.rev.cn/en/pro.htm, January 29, 
2010.

---------------------------------------------------------------------------
Reviving Research

    Iowa State University (ISU) became a hub of rare earth research as 
its contribution to the Manhattan Project.\20\ Dr. Gschneidner carries 
on the tradition in rare earth research, focusing today on the behavior 
of rare earths at low temperatures or in high magnetic fields. He is 
currently receiving funds from the Department of Energy to build a 
refrigerator that achieves cooling by magnetism, employing magnets 
containing rare earths. Dr. William McCallum has recently begun seeking 
a cheaper or more readily available substitute for the rare earths 
incorporated into the permanent magnet used in a hybrid vehicle's 
generator. If his project is successful, a potential bottleneck for 
hybrid vehicle manufacturers will be eliminated. These are elements of 
the broader effort on magnet development at the Lab.\21\ Both Drs. 
Gschneidner and McCallum served as director for the Rare Earth 
Information Center at Ames. Established as an information clearinghouse 
on the minerals by the Atomic Energy Commission in 1966, it was closed 
in 2002.
---------------------------------------------------------------------------
    \20\ The first chain reaction, initiated December 2, 1942, used 
natural uranium, which is very low in the fissionable isotope U-235. 
When a U-235 atom splits, rare earths may be among the resulting 
fragments. Because these might soak up the excess neutrons in the 
reactor that would sustain the chain reaction, research was needed on 
how to separate rare earths from uranium and plutonium. Iowa State 
succeeded in developing separation methods that could produce rare 
earths that were sufficiently purified to permit the needed research 
program. Harry J. Svec, ``Prologue,'' in Gschneidner and Eyring, eds., 
Handbook on the Physics and Chemistry of the Rare Earths, Vol. 11 
(Amsterdam: Elsevier Science Publishers, BV, 1988); p. 15. In 1947, the 
newly-formed Atomic Energy Commission chose the school as the home for 
the Ames National Laboratory and appointed Dr. Frank Spedding as its 
first director. Spedding, a leader in rare earth chemistry, improved 
his original processing methods to the point where Ames became the 
major supplier to the scientific community and the AEC laboratories. 
Spedding oversaw an extensive basic research effort characterizing the 
properties of rare earths in solutions and continued to develop 
industrial-scale processing for these materials. Ibid., p. 16.
    \21\ Communication from Iver Anderson, Senior Metallurgist, Ames 
National Laboratory, January 7, 2010.
---------------------------------------------------------------------------
    In discussing the needs for research in minerals and materials, the 
NRC Committee on Critical Mineral Impacts on the U.S. Economy drew 
heavily on a 2006 industry study by the Industrial College of the Armed 
Forces.\22\ That analysis placed rare earths in a category recommended 
for government support to develop materials offering superior 
properties for defense and commercial applications. Designers and 
engineers prefer materials with well-understood properties, but this 
conservative tendency can stymie innovation by limiting the opportunity 
to improve performance or efficiency. Agencies like NASA and the 
Department of Defense invest in studies of materials to put real-world 
data into the handbooks that program managers consult when writing 
system specifications. The decision to employ a new material often 
requires reworking existing production methods or introducing entirely 
new processes. Perfecting these can consume years, and the government 
may be alone in its willingness to support a project lasting that 
long.\23\
---------------------------------------------------------------------------
    \22\ Lt. Col Carl Buhler, USAF et al. Strategic Materials: AY 2005-
2006 Industry Study Final Report. Industrial College of the Armed 
Forces, National Defense University, Ft. McNair, Washington, D.C., 
2006. (hereafter cited as ICAF Report)
    \23\ Ibid., pp. 6-9.
---------------------------------------------------------------------------
    The NRC report notes: ``Many government efforts specifically focus 
on innovative research in materials specialties. These efforts support 
a variety of worthwhile research in materials science. However, 
individual agencies award many of these grants on an individual or 
somewhat ad hoc basis that is not the product of a coordinated research 
strategy. In particular, they rarely address mineral information needs 
or consider mineral supply and demand data or criticality, either short 
or long term.'' \24\ The panel therefore calls for:
---------------------------------------------------------------------------
    \24\ NRC Report, p. 195.

          Theoretical geochemical research to better identify 
---------------------------------------------------------------------------
        and quantify virgin stocks that are potentially minable;

          Research on extraction and processing technology to 
        improve energy efficiency, decrease water use, and enhance 
        material separation;

          Research on remanufacturing and recycling technology, 
        key components in increasing the rate and efficiency of 
        material reuse; and

          The characterization of stocks and flows of 
        materials, especially imports and exports, as components of 
        products, and of losses upon product discard. This lack of 
        information impedes planning on many levels.\25\
---------------------------------------------------------------------------
    \25\ Ibid., p. 192.

    This proposed program is consistent with the research effort 
required by the National Materials and Minerals Policy, Research and 
Development Act of 1980.\26\
---------------------------------------------------------------------------
    \26\ 30 U.S.C. 1602(2).

---------------------------------------------------------------------------
The Policy Framework

    Thirty years ago, the National Materials and Minerals Policy, 
Research and Development Act was enacted because

         . . . [T]he United States lacks a coherent national materials 
        policy and a coordinated program to assure the availability of 
        materials critical for national economic well-being, national 
        defense, and industrial production, including interstate 
        commerce and foreign trade . . ..\27\
---------------------------------------------------------------------------
    \27\ 30 U.S.C. 1601(a)(6).

    The Congress declared it the President's responsibility to 
coordinate a plan of research and other actions that would ``. . . 
promote an adequate and stable supply of materials necessary to 
maintain national security, economic well-being and industrial 
production with appropriate attention to a long-term balance between 
resource production, energy use, a healthy environment, natural 
resources conservation, and social needs.\28\ Our current situation 
with rare earth minerals indicates that successive Administrations 
failed to carry out this policy.
---------------------------------------------------------------------------
    \28\ 30 U.S.C. 1602.
---------------------------------------------------------------------------
    The 1980 Act directed development of a plan that would, among other 
outcomes, produce continuing assessments of demand for minerals and 
materials in the economy; conduct a ``vigorous'' research and 
development effort; collect, analyze and disseminate information; and 
cooperate with the private sector and other nations.\29\ In April 1982, 
President Reagan delivered a response to that directive.\30\
---------------------------------------------------------------------------
    \29\ 30 U.S.C. 1603.
    \30\ ``National Materials and Minerals Program Plan and Report to 
Congress,'' April 1982.
---------------------------------------------------------------------------
    Dissatisfied with the plan and its implementation, Congress decided 
in the National Critical Materials Act of 1984 to establish a National 
Critical Materials Council in the Executive Office of the President to 
serve as the focal point for critical materials policy. The Council was 
tasked to assist the President in carrying out the requirements of the 
1980 Act.\31\ Yet by 1989, as the first Bush Administration took 
office, reports indicated that the Council was effectively moribund and 
that President Reagan's final budget request recommended that it be 
eliminated.\32\ Senator Harry Reid took strong exception to the view of 
Acting Council Chairman Thomas Moore ``. . . that there is no need for 
a centralized agency like the council because other agencies already 
are authorized to address critical material issues.'' \33\ The Council 
survived that brush with extinction, but ultimately succumbed to a 
recommendation by President Clinton's science advisor, Director of the 
Office of Science and Technology Policy (OSTP) Dr. John Gibbons, to 
terminate the Council and transfer its responsibilities to the National 
Science and Technology Council (NSTC) established within OSTP by 
Executive Order 12881.\34\ Funding for the Critical Materials Council 
was dropped in the Fiscal Year 1994 General Government Appropriation 
Act.\35\
---------------------------------------------------------------------------
    \31\ 30 U.S.C. Chapter 30.
    \32\ ``New budget to cut NCMC, R&D at Mint and land purchases,'' 
Metals Week, January 16, 1989; p. 3.
    \33\ Marilyn Werber, ``Senator Blasts Plan to Abolish NCMC,'' 
American Metal Market, April 6, 1989; p. 2.
    \34\ Ex. Ord. 12881, ``Establishment of the National Science and 
Technology Council,'' November 23, 1993; 58 Fed. Reg. 62491. Dr. 
Gibbons tied the reorganization both to President Clinton's decision to 
reduce staff within the White House and to the National Performance 
Review conducted by Vice President Gore. Bill Loveless, ``Gibbons to 
Propose Formation of Science and Tech Council,'' Federal Technology 
Report, September 2, 1993; p. 1.
    \35\ Public Law 103-123, October 28, 1993.
---------------------------------------------------------------------------
    In 1995 and 1996, the NSTC published reports on The Federal 
Research and Development Program in Materials Science and Technology. 
No equivalent report has been produced since, however, and inquiries 
made of OSTP failed to locate the ``long-range assessments of materials 
needs related to scientific and technological concerns'' or 
``scientific and technical changes over the next five years'' whose 
annual preparation the statute requires.\36\ It empirically 
demonstrates the failure to implement the responsibilities assigned by 
Congress in the 1980 Act through multiple administrations. The 
Committee has learned that the situation with rare earth supplies has 
galvanized OSTP to convene a group of senior officials and subject-
matter experts from a number of Federal agencies to discuss the 
potential utility of White House coordination in the matter. The 
Committee has decided to revisit policy issues it thought it had 
settled decades ago to determine how to avoid finding ourselves in 
similar straits in the future.
---------------------------------------------------------------------------
    \36\ 30 U.S.C. 1604(b)(2) and (3).

---------------------------------------------------------------------------
Appendix: The Value of Rare Earth Minerals

    The subject of today's hearing is the 15 elements found in the so-
called lanthanide series of the Periodic Table.\37\ The U.S. Geological 
Survey describes them as ``iron gray to silvery lustrous metals that 
are typically soft, malleable, ductile, and usually reactive, 
especially at elevated temperatures or when finely divided.'' \38\
---------------------------------------------------------------------------
    \37\ As scandium and yttrium fail within the same period (column) 
on the Periodic Table, they are often counted as rare earths. The 
actinide series (the elements between actinium and lawrencium) can also 
be included, but they are noted mostly for their radioactive properties 
and are not the subject of the hearing.
    \38\ James D. Hedrick, 2007 Minerals Yearbook. Rare Earths (Reston: 
U.S. Geological Survey, 2009); p. 60.1.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    These elements are normally obtained as byproducts from mining for 
other materials. The chemical properties of these elements are quite 
similar, which complicates separating them; the production process must 
be tailored to the composition of the ore extracted from a given 
deposit.
    Industry tends to divide these into ``light'' and ``heavy'' 
elements, moving from lanthanum to the right along the row. The 
``heavy'' elements tend to have greater economic value. One aspect of 
the supply problem for the United States is that the Mountain Pass 
deposit lacks many of the heavier elements, whereas the major Chinese 
producer, the Bayan Obo mine, can provide the more valuable dysprosium 
and terbium.
    Rare earths contribute to a number of industries, usually 
incorporated into metal alloys to enhance electrical or magnetic 
capabilities. The hearing today will consider their major contributions 
to renewable energy applications. Electrical generators need magnets; a 
smaller magnet producing a stronger field can reduce the final size of 
a wind turbine even as its power output increases. Combining neodymium 
with iron and boron, or samarium with cobalt, can produce these more 
efficient components. Hybrid automobiles, such as Toyota's Prius or the 
new Chevrolet Volt, depend on rechargeable batteries. Incorporating 
lanthanum into the nickel-metal-hydride battery electrolyte enhances 
the power output, resulting in increased vehicle range even as the 
battery itself gets smaller and lighter.
    The following chart gives some sense of the breadth of other uses:

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
    

    Having applied the criticality matrix developed as part of their 
study, the NRC committee concluded:

         The relatively high composite weighted score for REs [rare 
        earths] of 3.15 . . . [on a scale of 1-4] reflects the 
        diversity of applications for the RE family, the importance of 
        those applications, and the steady growth in consumption and 
        has led our committee to suggest that disruptions in the 
        availability of REs would have a major negative impact on our 
        quality of life . . .. In our view, most of the applications 
        are somewhat to very important since substitutes are generally 
        less effective.\39\
---------------------------------------------------------------------------
    \39\ NRC Report, p. 133.
---------------------------------------------------------------------------
    Chairman Miller. This hearing will now come to order. Good 
afternoon. Welcome to today's hearing entitled Rare Earth 
Minerals and 21st Century Industry.
    Before we begin, we have a request from the gentleman from 
Colorado, Mr. Coffman, to join the Subcommittee for this 
hearing, and unless there is an objection--hearing none, I 
would like to invite him to join us on the dais, which he is 
already there. You may remain where you are, and I will remind 
folks that non-committee members are only recognized for 
questions after all committee members have been recognized--
which will not be that much of a problem today, it does not 
look like.
    We will now recognize Mr. Gordon is here, and I understand 
that he has votes in another committee shortly, so we will 
recognize him first so he may go to vote.
    Chairman Gordon. Thank you, Chairman Miller, and Ranking 
Member Broun for having this hearing, and I want to thank the 
staff for doing a good job in gathering this material. I do 
want to attend as much as I can. I will be back after these 
votes.
    Last September, I saw an article on this issue \1\ that 
raised a number of questions in my mind about whether the 
committee--this committee and Congress were doing enough to 
support American business and American jobs.
---------------------------------------------------------------------------
    \1\ Keith Bradsher. ``China Tightens Grip on Rare Minerals.'' New 
York Times, September 1, 2009; pp. B1, B4.
---------------------------------------------------------------------------
    Rare earth minerals are an essential component of a wide 
array of emerging industries: clean energy, telecommunications, 
and our defense industry. And I noticed that one country, and 
we are not here to beat up on that one country, but nature made 
one country seem to have about 90 percent of these rare earth 
materials, and they seem to be trying to capture the rest of--
or a large part of that other ten percent, which gives me 
pause.
    This is not the first time the committee has been concerned 
with the competitive implications of materials such as rare 
earths. In 1980, 30 years ago, this committee established a 
national minerals and materials policy.\2\ One core element in 
that legislation was the call to support for a vigorous, 
comprehensive and coordinated program for the materials 
research and development.
---------------------------------------------------------------------------
    \2\ Public Law 96-499, the National Materials and Minerals Policy, 
Research and Development Act of 1980; enacted October 21, 1980.
---------------------------------------------------------------------------
    Unfortunately, over successive administrations, the effort 
to keep the program going fell apart. Now, it is time to ask 
whether we need to revive and coordinate an effort to level the 
playing field on rare earths.
    In particular, I want to learn if there is a need for 
increased research and development to help address this 
Nation's rare earth shortage or if we need to re-orient the 
research we already have underway.
    Based on my review of the written submissions, it appears 
that we could benefit from more research both in basic and 
applied materials.
    The rare earths are not the only materials in which the 
United States is largely or exclusively dependent on foreign 
sources. According to the U.S. Geological Survey, there are 18 
other minerals \3\ and materials where the United States is 
completely dependent on foreign sources.
---------------------------------------------------------------------------
    \3\ U.S. Geological Survey. Mineral Commodity Summaries 2009 
(Washington: Government Printing Office, 2009; p. 6.
---------------------------------------------------------------------------
    And a bit of a collateral subject that I would like for you 
to address is, there are those minerals and elements that 
aren't rare or close to being rare, but go through periods of 
time where they are being very vogue in using manufacturers. So 
they can become--or our resources can become strained during 
those periods of time. And then a new manufacturing process 
comes in and they may go down. Do we need to have some kind of 
inventory? Do we need to be watching out for those other?
    So Mr. Chairman and Mr. Broun, thank you for having this 
hearing. I think this is going to be very informative and 
hopefully can lead us to some potential legislation that would 
be good for our national defense and our national 
competitiveness.
    [The prepared statement of Chairman Gordon follows:]
               Prepared Statement of Chairman Bart Gordon
    I'd like to thank Chairman Miller for calling this hearing. Last 
September, I saw an article on this issue that raised a number of 
questions in my mind about whether the Committee and the Congress were 
doing enough to support American business and American jobs.
    Rare earths are an essential component in a wide array of emerging 
industries.
    This is not the first time the Committee has been concerned with 
the competitive implications of materials such as rare earths. In 1980_
30 years ago_this Committee established a national minerals and 
materials policy. One core element in that legislation was the call to 
support for ``a vigorous, comprehensive and coordinated program of 
materials research and development.''
    Unfortunately, over successive administrations, the effort to keep 
that program going fell apart. Now, it is time to ask whether we need 
to revive a coordinated effort to level the playing field in rare 
earths.
    In particular, I want to learn if there is a need for increased 
research and development to help address this Nation's rare earth 
shortage, or if we need to re-orient the research we already have 
underway.
    Based on my review of the written submissions, it appears that we 
could benefit from more research both in basic and applied materials 
sciences.
    Rare earths are not the only materials in which the U.S. is largely 
or exclusively dependent on foreign sources. According to the U.S. 
Geological Survey, there are eighteen other minerals and materials 
where the United States is completely dependent on foreign sources.
    Someone needs to be telling us what's going on with those before we 
read about it in the New York Times. Legislation may be the best way to 
institutionalize a renewed focus and expanded commitment to identifying 
shortages and needs before they become a crisis.
    Again, Mr. Chairman, I appreciate you holding this hearing and 
expect a stimulating discussion. I yield back my time.

    Chairman Miller. Thank you, Mr. Gordon. I neglected to 
mention in my quick introduction that this is an issue in which 
Mr. Gordon has shown a great interest and that this hearing is 
at Mr. Gordon's urging. It is one of the habits of highly 
effective subcommittee chairs to pay attention to what the Full 
Committee Chair urges, and I have done so in this case.
    The usual order would be Democrat, Republican, Democrat, so 
you want me to go? All right.
    Well, I also want to welcome everyone to this hearing on 
something that most of us have either never heard of or 
promptly forgot after our test on the periodic table in high 
school chemistry. Dr. Broun may have taken it up in medical 
school, but for me, if I was exposed to it at all, it was some 
considerable time ago.
    Today we will be discussing rare earth elements, which 
really aren't all that rare, but rare earth elements are 
crucial to making the magnets and batteries needed for the 
energy industry of the 21st century. With a little of one of 
those elements you can get a smaller, more powerful magnet, or 
an aircraft engine that operates at higher temperatures or a 
fiber-optic cable that can carry your phone call much greater 
distances.
    The United States, not so long ago, was the world leader in 
producing and exporting rare earths. Today, Mr. Gordon 
delicately said another nation--or one nation--controlled much 
of the world's market. I will be less delicate and name the 
nation. China is the world's leader. We are having this hearing 
in part to recognize that the Chinese have some different ideas 
about how to get the greatest benefit from this suddenly 
valuable commodity beyond simply digging it up and selling it 
to those who want to use it in their high-tech manufacturing. 
China appears to view rare earths as one of the incentives they 
can offer a technology firm scouting for a new plant location. 
How do we compete in attracting and retaining manufacturing 
high-tech firms that need access to rare earth elements in 
light of China's current near monopoly and their willingness to 
use their monopoly power to our disadvantage?
    The most immediate step would be to get some competition 
back into the supply of rare earths. One of our witnesses, Mr. 
Mark Smith, is proposing to do just that. His company owns a 
mine that could produce, has in the past, many rare earth 
elements if it were to reopen. He will describe today not only 
what it would take to restart the mine but also his intent to 
augment America's capability to produce the magnets needed for 
electrical generators in wind turbines.
    From what he has told us in preparation for the hearing, he 
has found it hard to get help in making his vision a reality. 
If we intend to rebuild America's capability to supply our own 
needs in rare earth materials, if we intend to foster a home-
grown capability to make the devices that provide wind energy, 
we can't succeed unless Mr. Smith and others like him succeed.
    Further, are we investing enough in research, as Mr. Gordon 
said, looking into ways to recover and recycle those materials 
and looking for alternatives or synthetic options? Are there 
efficiencies that could be gained in the use of rare earth 
minerals? For example, if you work with rare earths at the 
nanoscale level, could you get the same improvements in 
material performance using micrograms where today you need 
kilograms? There aren't a lot of places where people are 
currently working to answer those questions even as the answers 
could go far in helping the United States compete in the 
alternative energy technology industries springing up around 
the world.
    This is not the first time this committee has wrestled with 
rare earth and critical materials issues. It is the first time 
in my service here but not the first time the committee has 
struggled with the issue.
    Our committee established a national policy in minerals and 
materials three decades ago. That 1980 law requires a 
continuing assessment of mineral and materials markets to alert 
us to looming problems such as supply disruptions, price spikes 
and the like.
    Four years later we followed up by establishing the 
Critical Materials Council \4\ to assure that someone was 
minding the store. However, you won't find the Critical 
Materials Council in the White House organization chart today. 
It disappeared into the National Science and Technology Council 
in 1993,\5\ and the high level attention to rare earths, and 
other materials, dropped off as a priority.
---------------------------------------------------------------------------
    \4\ See Title II of Public Law 98-373, the National Critical 
Materials Act of 1984; enacted July 31, 1984.
    \5\ See Executive Order 12881; November 23, 1993 (58 Fed. Reg. 226, 
pp. 62491-62492).
---------------------------------------------------------------------------
    While preparing for this hearing, we have learned that the 
Office of Science and Technology has recently organized a new 
interagency committee to respond to our rare earth problems. An 
obvious question arises. If the Critical Materials Council had 
been maintained, might we be in a better position now to 
protect our Nation's interests in a strong rare earths 
industry? How can we reverse the result of that history of 
neglect?
    The Subcommittee thanks the witnesses for helping us 
address these issues, and I anticipate an interesting 
discussion when the questions begin.
    [The prepared statement of Chairman Miller follows:]
               Prepared Statement of Chairman Brad Miller
    Welcome to our hearing this afternoon on something most of us have 
never heard of at all, or promptly forgot after our test on the 
Periodic Table in high school chemistry. Today we will be discussing 
rare earth elements, which aren't really all that rare. Rare earth 
elements are crucial to making the magnets and batteries needed for the 
energy industry of the 21st Century. With a little of one of these 
elements you can get a smaller, more powerful magnet, or an aircraft 
engine that operates at higher temperatures or a fiber-optic cable that 
can carry your phone call much greater distances.
    The United States, not so long ago, was the world leader in 
producing and exporting rare earths. Today, China is the world's 
leader. We're having this hearing in part to recognize that the Chinese 
have some different ideas about how to get the greatest benefit from 
this suddenly-valuable commodity beyond simply digging it up and 
selling it to those who want to use it in their high-tech 
manufacturing. China appears to view rare earths as one of the 
incentives they can offer a technology firm scouting for a new plant 
location. How do we compete in attracting and retaining manufacturing 
firms that need access to rare earth elements in light of China's 
current near monopoly, and their willingness to use their monopoly 
power to our disadvantage?
    The most immediate step would be to get some competition back into 
the supply of rare earths. One of our witnesses, Mr. Mark Smith, is 
proposing to do just that. His company owns a mine that could produce 
many rare earth elements if it were to reopen. He will describe today 
not only what it will take to restart the mine, but also his intent to 
augment America's capability to produce the magnets needed for 
electrical generators in wind turbines. From what he has told us in 
preparation for the hearing, he's found it hard to get help at making 
his vision a reality. If we intend to rebuild America's capability to 
supply its own needs in rare earth materials, if we intend to foster a 
home-grown capability to make the devices that provide wind energy, we 
can't succeed unless he and others like him succeed.
    Further, are we investing enough in research looking into ways to 
recover and recycle these materials and looking for alternatives or 
synthetic options? Are there efficiencies that could be gained in the 
use of rare earth materials? For example, if you work with rare earths 
on the nanoscale level, could you get the same improvements in material 
performance using micrograms where today you need kilograms? There 
aren't a lot of places where people are currently working to answer 
these questions even as the answers could go far in helping America 
compete in the alternative energy technology industries springing up 
around the globe.
    This is not the first time the Committee has wrestled with rare 
earth and critical materials issues.
    Our Committee established a national policy in minerals and 
materials three decades ago. That 1980 law required a continuing 
assessment of mineral and materials markets to alert us to looming 
problems such as supply disruptions, price spikes and the like.
    Four years later we followed up by establishing the Critical 
Materials Council to assure that someone was minding the store. 
However, you won't find the Critical Materials Council in the White 
House organization chart today; it disappeared into the National 
Science and Technology Council in 1993 and high level attention to rare 
earths, and other materials, fell away as a priority.
    While preparing for this hearing, we have learned that the Office 
of Science and Technology Policy has recently organized a new 
interagency committee to respond to our rare earth problems. An obvious 
question arises: if the Critical Materials Council had been maintained 
might we be in a better position to protect our nation's interests in a 
robust rare earths industry? How can we reverse the result of that 
history of neglect?
    The Subcommittee thanks the witnesses for helping us address these 
issues and I anticipate an interesting discussion later. I now 
recognize Dr. Broun, our Ranking Member, for his opening remarks.

    Chairman Miller. I should let everyone be on notice that 
the rule in this Subcommittee is that current Members of the 
Committee can take credit for all the work of our predecessors, 
but we get none of the blame for any mistakes that they have 
made.
    I now recognize Dr. Broun, our Ranking Member, for his 
opening statement.
    Mr. Broun. Thank you, Mr. Chairman. Let me welcome our 
witnesses here today, and I thank you all for participating.
    The topic of today's hearing, Rare Earth Minerals, is 
timely and important. Rare earths are slated to play an 
increasingly important role as we seek to meet our future 
energy needs, to remain competitive in the international 
marketplace and to continue to defend our Nation. Rare earths 
are essential elements in renewable technologies, such as wind 
turbine magnets, compact fluorescent light bulbs and hybrid 
vehicle batteries. They are also used in technologies critical 
to national security like lasers, aircraft engines, and fiber 
optics. After the closure of the Mountain Pass Mine in the 
1990s, the United States became dependent upon foreign sources 
for rare earths with China currently producing roughly 95 
percent of the world's supply. They have created a near 
monopoly and are actively exploiting that advantage.
    While China recently eased its export quotas for rare 
earths, over the past three years, they have steadily cut 
export quotas saying they need additional supplies to develop 
their own domestic clean energy in high-tech sectors.
    I hope today's hearing will call attention to the current 
state of dependence that our Nation finds itself in. We have 
assembled an experienced panel to provide insight into how we 
can ensure that we have access to rare earths in the future. 
What industrial information is needed to guarantee continued 
availability of critical minerals, what role the Federal 
Government should play, and what further research and 
development needs to be done in that area.
    With that, Mr. Chairman, I yield back my time so that we 
can hear from this esteemed panel.
    [The prepared statement of Mr. Broun follows:]
           Prepared Statement of Representative Paul C. Broun
    Thank you Mr. Chairman.
    Let me welcome our witnesses here today and thank them for 
appearing.
    The topic of today's hearing_Rare Earth Minerals_is timely and 
important. Rare Earths are slated to play an increasingly important 
role as we seek to meet our future energy needs, remain competitive in 
the international marketplace, and continue to defend our Nation.
    Rare Earth Minerals are essential elements in renewable 
technologies such as wind turbine magnets, compact fluorescent light 
bulbs, and hybrid vehicle batteries. They are also used in technologies 
critical to national security like lasers, aircraft engines, and fiber-
optics.
    After the closure of the Mountain Pass mine in the 90s, the United 
States became dependent upon foreign sources for rare earths. With 
China currently producing roughly 95% of the world's supply, they've 
created a near monopoly and are actively exploiting that advantage. 
While China recently eased its export quotas for Rare Earths, over the 
past three years they have steadily cut export quotas, saying they need 
additional supplies to develop their own domestic clean energy and 
high-tech sectors. I hope today's hearing will call attention to the 
current state of dependence our nation finds itself in.
    We have assembled a superb panel to provide insight into how we can 
ensure that we have access to Rare Earths in the future, what 
industrial information is needed to guarantee continued availability of 
critical minerals, what role the Federal Government should play, and 
what further research and development needs to be done in the area.
    With that Mr. Chairman, I yield back my time so that we can hear 
from this esteemed panel.

    Chairman Miller. Thank you, Dr. Broun. At the time of Mr. 
Gordon's opening statement and mine, China controlled 90 
percent of rare earths, and by the time of Dr. Broun's, it had 
grown to 95 percent. That should give us a sense of the urgency 
with which we need to address this issue.
    I now ask unanimous consent for any additional opening 
statements submitted by members to be included in the record. 
Without objection, that is so ordered.
    It is now my pleasure to introduce our witnesses. First, 
Dr. Stephen Freiman is currently a member of the National 
Research Council Committee on Critical Mineral Impacts on the 
U.S. Economy. Dr. Steve Duclos is Chief Scientist and Manager 
of Material Sustainability at General Electric Global Research. 
Dr. Duclos managed GE's optical materials laboratory where he 
worked to develop advanced materials. Dr. Karl Gschneidner is 
Anson Marston Distinguished Professor at the Department of 
Materials Science and Engineering at Iowa State University and 
a Senior Metallurgist at the Ames National Laboratory. And Mr. 
Terence Stewart is a managing partner at the law firm of 
Stewart and Stewart, specializing in international trade and 
customs issues.
    I would now like to recognize the gentleman from Colorado, 
Mr. Coffman, to introduce our final witness today. Mr. Coffman?
    Mr. Coffman. Thank you, Mr. Chairman. Chairman Miller and 
Ranking Member Broun, thank you for allowing me to introduce 
Mark Smith today. I first became aware of the looming crisis of 
the rare earth mineral supply and manufacturing capability last 
year. In my subsequent study on the problem, I quickly learned 
that the greatest concentration of rare earth minerals, now 
known as the Mountain Pass Mine in California, and the company 
working that mine is headquartered in my district, in Greenwood 
Village, Colorado. That company is Molycorp Minerals, Limited 
Liability Corporation, and I spoke about the rare earth supply 
chain problem with Chief Executive Officer Mark Smith.
    Prior to Molycorp, Mr. Smith was the President and Chief 
Executive Officer of Chevron Mining, Incorporated. Mr. Smith 
was appointed President and Chief Executive Officer in April 
2006. Prior to this appointment, Mr. Smith was the Vice 
President for Unocal Corporation where he was responsible for 
managing the real estate remediation and mining divisions. Mr. 
Smith worked for Unocal for over 22 years.
    Mr. Smith received his Bachelor of Science degree in 
agricultural engineering from Colorado State University in 1981 
and his Juris Doctorate from Western State University College 
of Law in 1990. He is a registered professional engineer and an 
active member of the State Bar of California and Colorado. Mr. 
Smith and his wife live in Denver, Colorado.
    As he will testify, the U.S. has significant rare earth 
resources at Molycorp's rare earth mine at Mountain Pass, 
California. However, the U.S. no longer possesses the 
manufacturing capability to convert its raw rare earth minerals 
into the critical metals and magnets that power so many key 
technologies. I hope we can work with industry through 
knowledgeable leaders such as Mr. Smith to address the crucial 
need for rare earth mineral supply and industrial capability.
    Mr. Chairman, I yield back.
    Chairman Miller. Thank you, Mr. Coffman. As our witnesses 
should know, you will each have five minutes for your spoken 
testimony, your oral testimony. Your written testimony will be 
included in the record for the hearing. When all have completed 
your spoken testimony, we will begin with questions, and each 
member will have five minutes to question the panel.
    This committee is a Committee on Investigations and 
Oversight, although this hearing is more really like a 
legislative than investigative hearing, but it is our practice 
to receive testimony under oath. Do any of you have any 
objection to taking an oath? The record should reflect that all 
nodded in the negative, they had no objection.
    You also have the right to be represented by counsel. Do 
any of you have counsel here? And the record should reflect 
that all nodded in the negative with the exception of Mr. Smith 
who said no. And we ask you these questions to put you at ease.
    If you would now please stand and raise your right hand. Do 
you swear to tell the truth and nothing but the truth? The 
record should reflect that all the witnesses said yes and have 
taken the oath. Let us now begin with Dr. Stephen Freiman. Dr. 
Freiman, you are recognized for five minutes.

     STATEMENT OF DR. STEPHEN FREIMAN, PRESIDENT, FREIMAN 
                        CONSULTING, INC.

    Dr. Freiman. Thank you, Mr. Chairman. I retired as Deputy 
Director of the Materials Science Engineering Laboratory at the 
National Institutes of Standards and Technology to start a 
small consulting business. I served on the Committee on 
Critical Mineral Impacts on the U.S. Economy of the National 
Research Council and am testifying in place of the Committee 
Chairman, Dr. Roderick Eggert, who could not be present today.
    As you observed, mineral-based materials are ubiquitous--
aluminum in jet aircraft, steel in bridges and buildings, and 
lead in batteries to name but a few examples.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    

    The slide that you see illustrates the expanded use of new 
minerals over the years in important technologies such as 
computer chips.
    The emergence of new technologies and engineered materials 
creates the prospect of rapid increases in demand for some 
minerals previously used in relatively small quantities in a 
small number of applications such as lithium in automotive 
batteries, rare earth elements in permanent magnets and compact 
fluorescent light bulbs and indium and tellurium in 
photovoltaic solar cells.
    At the same time the supplies of some minerals seemingly 
are becoming increasingly fragile due to more fragmented supply 
chains, increased U.S. import dependence, export restrictions 
by some nations on primary raw materials, and increased 
industry concentration.
    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 to examine the range of 
issues important in understanding the evolving role of non-fuel 
minerals in the U.S. economy and the potential impediments to 
the supplies of these minerals to domestic users. The U.S. 
Geological Survey and the National Mining Association sponsored 
the study, the findings of which appear in the volume Minerals, 
Critical Minerals, and the U.S. Economy.\6\
---------------------------------------------------------------------------
    \6\ National Research Council. Committee on Critical Mineral 
Impacts on the U.S. Economy. Minerals, Critical Minerals, and the U.S. 
Economy (Washington: National Academy Press, 2008).
---------------------------------------------------------------------------
    In my testimony today, I highlight two parts of the report, 
its analytical framework and empirical findings and its 
recommendations.
    The analytical framework begins by defining critical 
minerals as those that are both essential in use--that is, 
difficult to substitute away from, and subject to supply risk. 
The idea is illustrated in the slide that you see, a 
criticality matrix. The horizontal axis represents the degree 
of supply risk associated with a particular mineral, which 
increases from left to right. Supply risk is higher, the 
greater the concentration of production in a small number of 
companies, mines, et cetera. The smaller the existing market, 
the greater the reliance on byproduct production of a mineral 
and the smaller the reliance on post-consumer scrap as the 
source of supply.
    Import dependence by itself is a poor indicator of supply 
risk. Rather it is import dependence combined with concentrated 
production and perhaps geopolitical risk, the first of the four 
factors above, that lead to supply risk.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    

    In the next slide, the hypothetical mineral A is subject to 
greater supply than mineral B. So the overall risk of 
criticality increases as one moves from the lower-left to the 
upper-right corner of the diagram.
    Implementing the framework requires specifying a 
prospective timeframe. From the perspective of a mineral-using 
company, for example, will likely be different than that of a 
national government. The degree of criticality in the short to 
medium term, one to a few years, up to a decade, depends on 
existing technologies and production facilities. Substituting 
one material for another in a product typically is difficult in 
the short term, due to constraints imposed by existing product 
designs and production equipment. In contrast, over the longer 
term, the degree of criticality depends much more importantly 
on technological innovation and investments in new technology 
and equipment on both the demand side and the supply side.
    Taking the perspective of the U.S. economy overall and in 
the short to medium term, the Committee evaluated 11 minerals 
or mineral families. It did not assess the criticality of all 
important non-fuel minerals due to limits on time and 
resources.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    

    Slide three summarizes the Committee's evaluations, and I 
am sure you have trouble seeing it, but of the 11 minerals 
those deemed most critical, those that plot in the upper-right 
portion of the diagram, are indium, magnesium--manganese, 
rather--niobium, platinum group metals and rare earth elements.
    A final point: criticality is dynamic. A critical mineral 
today may become less critical either because substitutes of 
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 change in supply risk. Such could be 
the case with lithium which the committee did not evaluate as 
one of the more non-critical minerals.
    It should be recognized, however, that this analysis tool 
can be no better than the quality and timeliness of the date 
used to create it. And in the interest of time, the committee 
had several recommendations which you have in your written 
document, and I don't think I need to read them to you. I would 
just say, however, that my personal opinion that research and 
development in topics, such as recycling of specialty materials 
used in small quantities in emerging uses as well as enhanced 
coordination of research efforts between departments and 
agencies as suggested in the National Materials and Minerals 
Policy Research and Development Act of 1980 would also be very 
beneficial.
    Thank you for allowing me to testify today, and I will be 
happy to answer any questions the Subcommittee may have.
    [The prepared statement of Dr. Freiman follows:]
                 Prepared Statement of Stephen Freiman
    Good afternoon, Mr. Chairman and members of the Committee. My name 
is Dr. Stephen Freiman. A few years ago I retired as Deputy Director of 
the Materials Science and Engineering Laboratory at the National 
Institute of Standards and Technology to start a small consulting 
business. I served on the Committee on Critical Mineral Impacts on the 
U.S. Economy of the National Research Council (NRC). The Research 
Council is the operating arm of the National Academy of Sciences, 
National Academy of Engineering, and the Institute of Medicine of the 
National Academies, chartered by Congress in 1 863 to advise the 
government on matters of science and technology.
    Mineral-based materials are ubiquitous--aluminum in jet aircraft; 
steel in bridges and buildings, and lead in batteries, to name but a 
few examples. The emergence of new technologies and engineered 
materials creates the prospect of rapid increases in demand for some 
minerals previously used in relatively small quantities in a small 
number of applications--such as lithium in automotive batteries, rare-
earth elements in permanent magnets and compact-fluorescent light 
bulbs, and indium and tellurium in photovoltaic solar cells. At the 
same time, the supplies of some minerals seemingly are becoming 
increasingly fragile due to more fragmented supply chains, increased-
U.S. import dependence, export restrictions by some nations on primary 
raw materials, and increased industry concentration.
    It was in this light that the U.S. Geological Survey (USGS) and the 
National Mining Association sponsored a National Research Council study 
to examine the range of issues important in understanding 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 
study was conducted under the purview of the NRC's standing Committee 
on Earth Resources. The findings of the study are contained in the 
volume Minerals, Critical Minerals, and the U.S. Economy (National 
Academies Press, 2008).
    In my testimony today, I highlight two parts of the report: its 
analytical framework and empirical findings, and its recommendations. 
In addition, I provide answers to the questions you posed in your 
letter of invitation to me.

Analytical Framework

    The analytical framework begins by defining critical minerals as 
those that are both essential in use (difficult to substitute away 
from) and subject to supply risk. The idea is illustrated in Figure 1, 
a `criticality matrix.' The horizontal axis represents the degree of 
supply risk associated with a particular mineral, which increases from 
left to right. Supply risk is higher (1) the greater the concentration 
of production in a small number of mines, companies, or countries, (2) 
the smaller the existing market (the more vulnerable a market is to 
being overwhelmed by a rapid increase in demand due to a large new 
application), (3) the greater the reliance on byproduct production of a 
mineral (because the supply of a byproduct is determined largely by the 
economic attractiveness of the associated main product), and (4) the 
smaller the reliance on post-consumer scrap as a source of supply. 
Import dependence, by itself, is a poor indicator of supply risk; 
rather it is import dependence combined with concentrated production 
and perhaps geopolitical risk (the first of the four factors above) 
that lead to supply risk. In Figure I, the hypothetical mineral A is 
subject to greater supply risk than mineral B.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Figure I. The Criticality Matrix. Source: Minerals, Critical 
Minerals, and the U.S. Economy (National Academies Press, 2008).
    The vertical axis represents the impact of a supply restriction, 
which increases from bottom to top. Broadly speaking, the impact 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\
---------------------------------------------------------------------------
    \1\ When 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.
---------------------------------------------------------------------------
    The overall degree of criticality increases as one moves from the 
lower-left to the upper-right corner of the diagram. The hypothetical 
mineral A would be relatively more critical than mineral B.
    Implementing the framework requires specifying a perspective and 
time frame. The perspective of a mineral-using company, for example, 
will likely be different than that of a national government. The degree 
of criticality in the short to medium term (one or a few years, up to a 
decade) depends on existing technologies and production facilities. 
Substituting one material for another in a product typically is 
difficult in the short term due to constraints imposed by existing 
product designs and production equipment. Short-term supply risks are a 
function of the nature and location of existing production. In 
contrast, over the longer term (a decade or more), the degree of 
criticality depends much more importantly on technological innovation 
and investments in new technology and equipment on both the demand side 
(material substitution) and the supply side (mineral exploration, 
mining and mineral processing, and associated technologies).
    Taking the perspective of the U.S. economy overall and in the short 
to medium term, 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. Of the eleven minerals, those deemed most 
critical--that is, they plot in the upper-right portion of the 
diagram--are indium, manganese, niobium, platinum-group metals, and 
rare-earth elements.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Figure 2. Criticality Evaluations for Selected Minerals or Mineral 
Families. Source: Minerals, Critical Minerals, and the U.S. Economy 
(National Academies Press, 2008).
    A final point: 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. Such could be the case with lithium, which the committee 
did not evaluate as one of the more-critical minerals in its analysis 
two years ago (Figure 2); if demand for lithium in batteries increases 
significantly and new sources of supply are in politically risky 
locations, then lithium could plot in the more-critical region of the 
figure in the future.

Recommendations

    The committee made three 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.

Questions from the Subcommittee on Investigations and Oversight

What are the major gaps in current Federal policy for minerals and 
        materials?

    The committee report does not address this broad question. It does 
identify gaps in minerals information and recommends enhanced 
collection, dissemination and analysis of 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. 
The committee report recommends periodic analysis of mineral 
criticality over a range of minerals.

Which aspects of research and development in minerals and materials 
        require enhanced Federal support, and what form should this 
        support take?

    See Recommendation 3 above. As part of its detailed discussion of 
this recommendation, the committee report also recommends funding 
scientific, technical, and social-scientific research on the entire 
mineral life cycle. It recommends cooperative programs involving 
academic organizations, industry, and government to enhance education 
and applied research.

How should the Federal Government improve the collection of information 
        on minerals and materials markets?

    See Recommendation 2 above. As part of its more detailed discussion 
of this recommendation, the committee report suggests that the Federal 
Government consider the Energy Information Administration, which has 
status as a principal statistical agency, as a potential model for 
minerals information, dissemination, and analysis. Whatever agency or 
unit is responsible for minerals information, it needs greater autonomy 
and authority than at present.

Facing dynamic changes in supply and demand for particular minerals and 
        materials in a global economy, what are the most useful 
        contributions the Federal Government can employ to assist 
        industry?

    My personal opinion is that Federal. minerals and materials policy 
should focus on: (1) encouraging undistorted international trade, (2) 
ensuring that policies and procedures for domestic mineral development 
appropriately integrate commercial, environmental, and social 
considerations, (3) facilitating provision of information on which 
private and public decisions are made, and (4) facilitating research 
and development, including on recycling of specialty materials used in 
small quantities in emerging uses.
    Thank you for the opportunity to testify today. I would be happy to 
address any questions the subcommittee may have.

                     Biography for Stephen Freiman
    Dr. Freiman graduated from the Georgia Institute of Technology with 
a B. ChE. and a M. S. in Metallurgy. After receiving a Ph.D. in 
Materials Science and Engineering from the University of Florida in 
1968, Dr. Freiman worked at the IIT Research Institute and the Naval 
Research Laboratory. He joined NIST (then NBS) in 1978. From 1992 to 
2002 Dr. Freiman served as Chief of the Ceramics Division at NIST. 
Prior to his leaving NIST in 2006 to start a consulting business 
(Freiman Consulting Inc.), Dr. Stephen Freiman served for four years as 
Deputy Director of the Materials Science and Engineering.
    Dr. Freiman has published over 200 scientific papers focusing 
primarily on the mechanical properties of brittle materials. He was the 
first Chairman of the ASTM Subcommittee addressing brittle fracture and 
a past Chair of the Steering Committee of the Versailles Project for 
Advanced Materials and Standards. Dr. Freiman served as Treasurer, and 
President of the American Ceramic Society, and is a Fellow and 
Distinguished Life Member of the Society.

    Chairman Miller. Thank you, Dr. Freiman. Dr. Steven Duclos.

STATEMENT OF DR. STEVEN J. DUCLOS, CHIEF SCIENTIST AND MANAGER, 
   MATERIAL SUSTAINABILITY, GENERAL ELECTRIC GLOBAL RESEARCH

    Dr. Duclos. Chairman Miller, Ranking Member Broun, and 
Members of the Committee, it is my privilege to share with you 
GE's thoughts on how we manage shortages of materials critical 
to our manufacturing and what steps the government can take to 
help industry minimize the risk associated with these 
shortages.
    This hearing addresses an issue that is critical to the 
future wellbeing of U.S. manufacturing. Without development of 
new supplies and focused research in materials and 
manufacturing, such supply challenges could undermine efforts 
to meet the Nation's future needs in defense, energy, health 
care and transportation.
    I would like to share with you GE's strategy to address its 
material needs as well as outline a series of recommendations 
for how the government can strengthen its support of industry 
in this area.
    GE uses 70 of the first 83 elements on the periodic table. 
As Chief Scientist and Manager of Material Sustainability at GE 
Global Research, is it my job to understand the latest trends 
in materials and to work with our businesses to manage our 
materials needs in a sustainable way.
    To evaluate risks associated with material shortages, GE 
uses a modification of the assessment tool developed by the 
National Research Council in 2008. Risks are quantified by 
element in two categories, price and supply risk and impact of 
a restricted supply to GE. Those elements deemed to have high 
risk in both categories are identified as materials needing 
further study and a detailed plan to mitigate supply risks. For 
this assessment, we extensively used data from the U.S. 
Geological Survey's mineral information team as well as in-
house knowledge of supply dynamics.
    There is a broad spectrum of strategies that can be 
implemented to minimize the risk of those elements identified 
as being at high risk. These include, number one, improvements 
in the global supply chain, including the development of 
alternate sources, long-term supply agreements and development 
of inventory of materials. Number two, improvements of material 
utilization in manufacturing and reduction of manufacturing 
waste. Number three, development of recycling technologies that 
extract at-risk elements from both end-of-life products and 
manufacturing yield loss. This includes the design of products 
that are more easily recycled and service which improves 
materials service life. Number four, development of materials 
and systems technologies that either greatly reduce or even 
eliminate the need for the element altogether. Several examples 
of these are discussed in my written testimony where GE has 
successfully taken this approach. This includes the replacement 
of helium with boron in neutron detectors and the reduction by 
a factor of two in the use of rhenium content in superalloys 
for our jet engines, a development that leveraged past research 
programs supported by DARPA, the Air Force, the Navy and NASA.
    And finally, number five, reassessment of the entire 
system. Often more than one technology can address a customer's 
need, and each will use a different subset of the periodic 
table. The solution to the materials constraint can involve 
using a new or alternate technology. An example is the 
development of energy-efficient LED lighting technologies as 
supported by the Department of Energy that offer a 70-times 
reduction in the use of rare earth elements for lighting.
    Attention needs to be paid to all five of these solutions 
outlined above. The shorter term sourcing and manufacturing 
solutions are critical to buy time for the more optimal 
recycling and material substitution solutions. They tend to be 
longer term, higher risk and require risk mitigation strategies 
involving parallel paths. The government can help by enabling 
public/private collaborations that provide both materials 
understanding and resources that enable these material 
substitution approaches. Anticipated growth in the use of rare 
earths for efficient energy and transportation technologies 
mandates that we develop the full range of five solutions 
outlined above.
    We make the following recommendations for the government to 
strengthen its support of efforts to minimize the increasing 
risk associated with material shortages.
    Number one, appoint a lead agency with ownership of early 
risk assessment and authority to fund the five solutions. The 
government needs to enhance its ability to monitor, assess and 
coordinate a response to identified issue.
    Number two, sustained funding for research focusing on 
material substitutions to lay the foundation upon which 
solutions are developed. Collaborative efforts between 
academia, government laboratories and industry will help ensure 
that manufacturing compatible solutions are available to 
industry in time to avert disruptions in U.S. manufacturing.
    Number three, with global economic growth resulting in 
increased pressure on material stocks, it is imperative that 
there be a sustained support of the government to develop the 
full set of solutions outlined in this testimony, new material 
sources, recycling technologies, manufacturing efficiency, 
alternate materials and new system solutions.
    In closing, we believe a more coordinated approach and 
sustained investment from the government in materials and 
manufacturing technologies is needed to provide industry with 
the flexibility that makes U.S. manufacturing less vulnerable 
to material shortages. Thank you for your time, and I look 
forward to answering your questions.
    [The prepared statement of Dr. Duclos follows:]
                 Prepared Statement of Steven J. Duclos

Introduction

    Chairman Miller and members of the Committee, it is a privilege to 
share with you GE's thoughts on how we manage shortages of precious 
materials and commodities critical to our manufacturing operations and 
what steps the Federal Government can take to help industry minimize 
the risks and issues associated with these shortages.

Background

    GE is a diversified global infrastructure, finance, and media 
company that provides a wide array of products to meet the world's 
essential needs. From energy and water to transportation and 
healthcare, we are driving advanced technology and product solutions in 
key industries central to providing a cleaner, more sustainable future 
for our nation and the world.
    At the core of every GE product are the materials that make up that 
product. To put GE's material usage in perspective, we use at least 70 
of the first 83 elements listed in the Periodic Table of Elements. In 
actual dollars, we spend $40 billion annually on materials. 10% of this 
is for the direct purchase of metals and alloys. In the specific case 
of the rare earth elements, we use these elements in our Healthcare, 
Lighting, Energy, Motors, and Transportation products.
    Nowhere in the company is our understanding of materials more 
evident than at GE Global Research, the hub of technology development 
for all of GE's businesses. Located just outside of Albany NY, GE 
scientists and engineers have been responsible for major material 
breakthroughs throughout our 110-year history. One of GE's earliest 
research pioneers, William Coolidge, discovered a new filament 
material, based on ductile tungsten, in 1909, which enabled us to bring 
the light bulb to every home. Just four years later, he developed a 
safe x-ray tube design for medical imaging. In 1953, GE scientist 
Daniel Fox developed LEXAN plastic, which is used in today's CDs and 
DVDs. It was even used in the helmets that U.S. astronauts Neil 
Armstrong and Buzz Aldrin wore when they walked on the moon. More 
recently, GE scientists created a unique scintillator material, called 
Gemstone, which is the key component in GE Healthcare's newest High-
Definition Computed Tomography (CT) medical imaging scanner that 
enables faster and higher resolution imaging.
    Because materials are so fundamental to everything we do as a 
company, we are constantly watching, evaluating, and anticipating 
supply changes with respect to materials that are vital to GE's 
business interests. On the proactive side, we invest a great deal of 
time and resources to develop new materials and processes that help 
reduce our dependence on any given material and increase our 
flexibility in product design choices.
    We have more than 35,000 scientists and engineers working for GE in 
the U.S. and around the globe, with extensive expertise in materials 
development, system design, and manufacturing. As Chief Scientist and 
Manager of Material Sustainability at GE Global Research, it's my job 
to understand the latest trends in materials and to help identify and 
support new R&D projects with our businesses to manage our needs in a 
sustainable way.
    Chairman Miller, I commend you for convening this hearing to 
discuss an issue that is vital to the future well being of U.S. 
manufacturing. Without development of new supplies and more focused 
research in materials and manufacturing, such supply challenges could 
seriously undermine efforts to meet the nation's future needs in 
energy, healthcare, and transportation. What I would like to do now is 
share with you GE's strategy to address its materials needs, as well as 
outline a series of recommendations and indeed, a framework, for how 
the Federal Government can strengthen its support of academia, 
government, and industry in this area.

Comments and Recommendations

    The process that GE uses to evaluate the risks associated with 
material shortages is a modification of an assessment tool developed by 
the National Research Council in 2008. Risks are quantified element by 
element in two categories: ``Price and Supply Risk'', and ``Impact of a 
Restricted Supply on GE''. Those elements deemed to have high risk in 
both categories are identified as materials needing further study and a 
detailed plan to mitigate supply risks. The ``Price and Supply Risk'' 
category includes an assessment of demand and supply dynamics, price 
volatility, geopolitics, and co-production. Here we extensively use 
data from the U.S. Geological Survey's Minerals Information Team, as 
well as in-house knowledge of supply dynamics and current and future 
uses of the element. The ``Impact to GE'' category includes an 
assessment of our volume of usage compared to the world supply, 
criticality to products, and impact on revenue of products containing 
the element. While we find this approach adequate at present, we are 
working with researchers at Yale University who are in the process of 
developing a more rigorous methodology for assessing the criticality of 
metals. Through these collaborations, we anticipate being able to 
predict with much greater confidence the level of criticality of 
particular elements for GE's uses.
    Once an element is identified as high risk, a comprehensive 
strategy is developed to reduce this risk. Such a strategy can include 
improvements in the supply chain, improvements in manufacturing 
efficiency, as well as research and development into new materials and 
recycling opportunities. Often, a combination of several of these may 
need to be implemented.
    Improvements in the global supply chain can involve the development 
of alternate sources, as well as the development of long-term supply 
agreements that allow suppliers a better understanding of our future 
needs. In addition, for elements that are environmentally stable, we 
can inventory materials in order to mitigate short-term supply issues.
    Improvements in manufacturing technologies can also be developed. 
In many cases where a manufacturing process was designed during a time 
when the availability of a raw material was not a concern, alternate 
processes can be developed and implemented that greatly improve its 
material utilization. Development of near-net-shape manufacturing 
technologies and implementation of recycling programs to recover waste 
materials from a manufacturing line are two examples of improvements 
than can be made in material utilization.
    An optimal solution is to develop technology that either greatly 
reduces the use of the at-risk element or eliminates the need for the 
element altogether. While there are cases where the properties imparted 
by the element are uniquely suitable to a particular application, I can 
cite many examples where GE has been able to invent alternate 
materials, or use already existing alternate materials to greatly 
minimize our risk. At times this may require a redesign of the system 
utilizing the material to compensate for the modified properties of the 
substitute material. Let's look at a few illustrative recent examples.
    The first involves Helium-3, a gaseous isotope of Helium used by GE 
Energy's Reuter Stokes business in building neutron sensors for 
detecting special nuclear materials at the nation's ports and borders. 
The supply of Helium-3 has been diminishing since 2001 due to a 
simultaneous increase in need for neutron detection for security, and 
reduced availability as Helium-3 production has dwindled. GE has 
addressed this problem in two ways. The first was to develop the 
capability to recover, purify and reuse the Helium-3 from detectors 
removed from decommissioned equipment. The second was the accelerated 
development of Boron-10 based detectors that eliminate the need for 
Helium-3 in Radiation Portal Monitors. DNDO and the Pacific Northwest 
National Lab are currently evaluating these new detectors.
    A second example involves Rhenium, an element used at several 
percent in super alloys for high efficiency aircraft engines and 
electricity generating turbines. Faced with a six-fold price increase 
during a three-year stretch from 2005 to 2008 and concerns that its 
supply would limit our ability to produce our engines, GE embarked on 
multi-year research programs to develop the capability of recycling 
manufacturing scrap and end-of-life components. A significant materials 
development effort was also undertaken to develop and certify new 
alloys that require only one-half the amount of Rhenium, as well as no 
Rhenium at all. This development leveraged past research and 
development programs supported by DARPA, the Air Force, the Navy, and 
NASA. The Department of Defense supported qualification of our reduced 
Rhenium engine components for their applications.
    By developing alternate materials, we created greater design 
flexibility that can be critical to overcoming material availability 
constraints. But pursuing this path is not easy and presents 
significant challenges that need to be addressed. Because the materials 
development and certification process takes several years, executing 
these solutions requires advanced warning of impending problems. For 
this reason, having shorter term sourcing and manufacturing solutions 
is critical in order to ``buy time'' for the longer term solutions to 
come to fruition. In addition, such material development projects tend 
to be higher risk and require risk mitigation strategies and parallel 
paths. The Federal Government can help by enabling public-private 
collaborations that provide both the materials understanding and the 
resources to attempt higher risk approaches. Both are required to 
increase our chances of success in minimizing the use of a given 
element.
    Another approach to minimizing the use of an element over the long 
term is to assure that as much life as possible is obtained from the 
parts and systems that contain these materials. Designing in 
serviceability of such parts reduces the need for additional material 
for replacement parts. The basic understanding of life-limiting 
materials degradation mechanisms can be critical to extending the 
useful life of parts, particularly those exposed to extreme conditions. 
It is these parts that tend to be made of the most sophisticated 
materials, often times containing scarce raw materials.
    A complete solution often requires a reassessment of the entire 
system that uses a raw material that is at risk. Often, more than one 
technology can address a customer's need. Each of these technologies 
will use a certain subset of the periodic table--and the solution to 
the raw material constraint may involve using a new or alternate 
technology. Efficient lighting systems provide an excellent example of 
this type of approach. Linear fluorescent lamps use several rare earth 
elements. In fact, they are one of the largest consumers of Terbium, a 
rare earth element that along with Dysprosium is also used to improve 
the performance of high-strength permanent magnets. Light emitting 
diodes (LEDs), a new lighting technology whose development is being 
supported by the Department of Energy, uses roughly one-hundredth the 
amount of rare earth material per unit of luminosity, and no Terbium. 
Organic light emitting diodes (OLEDs), an even more advanced lighting 
technology, promises to use no rare earth elements at all. In order to 
``buy time'' for the LED and OLED technologies to mature, optimization 
of rare earth usage in current fluorescent lamps can also be 
considered. This example shows how a systems approach can minimize the 
risk of raw materials constraints.
    In addition to high efficiency lighting, GE uses rare earth 
elements in our medical imaging systems and in wind turbine generators. 
Rare earth permanent magnets are a key technology in high power density 
motors. These motors are vital to the nation's vision for the 
electrification of transportation, including automobiles, aircraft, 
locomotives, and large off-road vehicles. The anticipated growth in the 
use of permanent magnets and other rare earth based materials for 
efficient energy technologies mandates that we develop a broad base 
solution to possible raw material shortages. These solutions require 
the development of the sourcing, manufacturing efficiency, recycling, 
and material substitution approaches outlined above.
    Based on our past experience I would like to emphasize the 
following aspects that are important to consider when addressing 
material constraints:

        1)  Early identification of the issue--technical development of 
        a complete solution can be hampered by not having the time 
        required to develop some of the longer term solutions.

        2)  Material understanding is critical--with a focus on those 
        elements identified as being at risk, the understanding of 
        materials and chemical sciences enable acceleration of the most 
        complete solutions around substitution. Focused research on 
        viable approaches to substitution and usage minimization 
        greatly increases the suite of options from which solutions can 
        be selected.

        3)  Each element is different and some problems are easier to 
        solve than others--typically a unique solution will be needed 
        for each element and each use of that element. While basic 
        understanding provides a foundation from which solutions can be 
        developed, it is important that each solution be compatible 
        with real life manufacturing and system design. A specific 
        elemental restriction can be easier to solve if it involves few 
        applications and has a greater flexibility of supply. Future 
        raw materials issues will likely have increased complexity as 
        they become based on global shortages of minerals that are more 
        broadly used throughout society.

    Given increasing challenges around the sustainability of materials, 
it will be critical for the Federal Government to strengthen its 
support of efforts to minimize the risks and issues associated with 
material shortages. Based on the discussion above, we make the 
following recommendations for the Federal Government:

        1)  Appoint a lead agency with ownership of early assessment 
        and authority to fund solutions--given the need for early 
        identification of future issues, we recommend that the 
        government enhance its ability to monitor and assess industrial 
        materials supply, both short term and long term, as well as 
        coordinate a response to identified issues. Collaborative 
        efforts between academia, government laboratories, and industry 
        will help ensure that manufacturing compatible solutions are 
        available to industry in time to avert disruptions in U.S. 
        manufacturing.

        2)  Sustained funding for research focusing on material 
        substitutions--Federal Government support of materials research 
        will be critical to laying the foundation upon which solutions 
        are developed when materials supplies become strained. These 
        complex problems will require collaborative involvement of 
        academic and government laboratories with direct involvement of 
        industry to ensure solutions are manufacturable.

        3)  With global economic growth resulting in increased pressure 
        on material stocks, along with increased complexity of the 
        needed resolutions, it is imperative that the solutions 
        discussed in this testimony: recycling technologies, 
        development of alternate materials, new systems solutions, and 
        manufacturing efficiency have sustained support. This will 
        require investment in long-term and high-risk research and 
        development--and the Federal Government's support of these will 
        be of increasing criticality as material usage grows globally.

Conclusion

    In closing, we believe that a more coordinated approach and 
sustained level of investment from the Federal Government in materials 
science and manufacturing technologies is required to accelerate new 
material breakthroughs that provide businesses with more flexibility 
and make us less vulnerable to material shortages. Chairman Miller and 
Members of the Committee, thank you for your time and the opportunity 
to provide our comments and recommendations.

                     Biography for Steven J. Duclos
    Steven Duclos is a Chief Scientist at the General Electric Global 
Research Center in Niskayuna, New York, and manages GE's Material 
Sustainability Initiative. The Material Sustainability initiative 
addresses GE's risks in the availability and sustainability of the 
company's raw material supply, by developing technologies that reduce 
the use, support the recycling, and enable substitution of lower-risk 
materials.
    From 2000 to 2008 Dr. Duclos managed the Optical Materials 
Laboratory, also at GE GRC. The laboratory is responsible for 
development of advanced materials for a broad spectrum of GE 
businesses, including its Lighting and Healthcare businesses. From 1994 
to 2004 Dr. Duclos served on the Executive Committee of the New York 
State Section of the American Physical Society. Prior to joining the GE 
Global Research Center in 1991 he was a post-doc at AT&T Bell 
Laboratories in Murray Hill, New Jersey.
    Dr. Duclos received his B.S. degree in Physics in 1984 from 
Washington University in St. Louis, M.S. degree in Physics from Cornell 
University in Ithaca, New York in 1987, and Ph.D. in Physics from 
Cornell in 1990. He is the recipient of an AT&T Bell Laboratories Pre-
doctoral Fellowship and the 1997 Albert W. Hull Award, GE Global 
Research's highest award for early career achievement.

    Chairman Miller. Thank you, Dr. Duclos. Dr. Gschneidner.

   STATEMENT OF DR. KARL A. GSCHNEIDNER, JR., ANSON MARSTON 
 DISTINGUISHED PROFESSOR, DEPARTMENT OF MATERIALS SCIENCE AND 
               ENGINEERING, IOWA STATE UNIVERSITY

    Dr. Gschneidner. Good afternoon, Mr. Chairman, members of 
the Subcommittee, ladies and gentlemen. I am pleased to have 
this opportunity to present my views on the rare earth crisis 
and what can be done to alleviate this situation.
    My brief responses to your questions are as follows. More 
detailed information will be found in my written statement.
    The first question was, how has rare earth research at the 
Ames Laboratory changed over time? Rare earth science and 
technology at Ames Laboratory, the U.S. Department of Energy, 
had its beginning in World War II when Iowa State College 
assisted the war effort by supplying 1/3 of the uranium metal, 
two tons, necessary to make the first nuclear reactor go 
critical at the University of Chicago in 1942. By the end of 
the war, two million pounds of uranium and 600,000 pounds of 
thorium were produced for the Manhattan Project.
    Work on rare earths was a natural outgrowth of the war 
effort. Initially there was a wide spectrum of research being 
carried out. This includes separation, analytical, solid state 
chemistry; process, physical and mechanical metallurgy; 
ceramics; and condensed matter physics. Many successes were 
achieved and technology was turned over to industry, but as 
science matured, programmatic changes occurred and a number of 
research areas were phased out. This included separation and--
chemistry, process and mechanical metallurgy, and ceramics. The 
remaining areas are still strong, but the power person levels 
have diminished.
    However, the establishment of the Materials Preparation 
Center, a DOE Basic Energy Scientist Specialized Research 
Center, has alleviated some of this degradation in process 
metallurgy.
    I would like to mention a new and exciting development, the 
revolutionary method of preparing neodymium master alloy to 
make a neodymium-iron-boron permanent magnet. The cost of this 
master alloy is about half of that of neodymium. Furthermore, 
it is a very green technology with no byproducts compared to 
conventional processes which have byproducts which need to be 
disposed of in an environmentally safe manner.
    I have in my hand the second neodymium-iron-boron magnet 
made which was just produced within the last month, and so they 
are working with that technology.
    The second question, what would be required to conduct a 
robust program of basic research on rare earths? We are well-
aware of the impact of Chinese activities in the rare earth 
market as noted by other invited speakers at this House 
hearing. In addition to forcing the United States and rare 
earth permanent magnet manufacturers out of business, the 
country now faces a shortage of trained scientists, engineers, 
technicians and a lack of innovations in a high-tech area which 
are critical to our country's future needs.
    A research center which alleviates both of these problems 
is the best way to solve this rare earth crisis, an educational 
institute which has a long and strong tradition of carrying out 
research on all aspects of rare earth materials with a strong 
educational component would be an ideal situation. A National 
Research Center on Rare Earths and Energy should be established 
with Federal and state support, supplemented by U.S. industry 
as the rare earth industry revitalizes. The center would employ 
about 30 full-time employees. This research center would be a 
national resource for rare earth science technology and 
applications and would provide support of research activities 
at other institutions via subcontracts complementing the 
activities of the center.
    The major emphasis of the center would be directed basic 
research; proprietary research paid by the organizations that 
request it, would also be a part of the center's mandate. The 
center would have an advisory board made up of representatives 
from the university, government, industry and the general 
public to oversee, guide and refocus as needed the research 
being conducted.
    I would like to suggest to this House committee they 
consider a second national center on research on magnetic 
cooling. Cooling below room temperature accounts for 15 percent 
of the total energy consumed in the United States. Magnetic 
refrigeration is new, advanced, highly technical, energy 
efficient, green technology for cooling and climate control, 
for refrigerating and freezing. See Section 6.5 of my written 
response. It is about 20 percent more efficient as a green 
technology because it eliminates harmful gases and reduces 
energy consumption. If we were able to switch all cooling 
process to magnetic refrigeration at once, we would reduce the 
energy consumption by five percent. There are a lot of hurdles 
that need to be overcome, and the United States needs to put 
together a strong, cohesive effort to retain our disappearing 
leadership in this technology by assembling a National Center 
for Magnetic Cooling.
    Europe and China are moving rapidly in this area. Denmark 
has assembled a Magnetic Refrigeration National Research Center 
at Riso, so far the only one in the world. This center should 
be structured similar to what has been posed for the National 
Research Center on Rare Earths and Energy. The question is, are 
we going to give up our lead position and be a second-rate 
country or will we lead the rest of the world? I hope and pray 
that our answer is that we are going to show the world that we 
are number one.
    Question three, how can knowledge on rare earth be 
transferred to domestic companies? Knowledge is exported from 
research institutes, universities to industry through transfer 
of intellectual property and know-how. Research findings are 
disseminated as published articles in journals, presentations 
at conferences and electronic media and, if exciting enough, 
via news conferences, press releases, assuming the new results 
are not patentable. If research has some potential commercial 
value, this new information should be made available as soon as 
possible after filing a patent disclosure. However, before a 
patent disclosure is filed, one could disseminate the results 
to companies that might be interested by contacting them to 
say, one, if they are interested, two, if they would sign a 
nondisclosure agreement, and if they answer yes to both one and 
two, then the information could be disclosed to them.
    The second highly effective route is the transfer of the 
skills and knowledge gained by university students to their 
industrial employers after graduation.
    The fourth and last question is, how actively are U.S. 
scientists researching extraction, processing, substitution, 
recycling, and how is this compared to other countries? Rare 
earth research in the USA--and mineral extraction, rare earth 
separation, processing of oxides into metal, metallic alloys, 
and other useful forms, substitution, recycling is virtually 
zero. Today, some work is carried out at various DOE 
laboratories on rare earth and actinide separation chemistry 
directed toward treating waste nuclear products and 
environmental clean-up of radioactive minerals in the soils. 
This research may be beneficial to improving the rare earth 
separation processes on a commercial scale.
    Some research at various universities might be considered 
to be useful in finding substitutes for a given rare earth 
metal in a high-tech application, but generally the particular 
rare earth properties are so unique it is difficult to find 
another substitute. And finally, the Chinese have two large 
research laboratories which have significant research and 
development activities that are devoted to the above topics. 
They are the General Research Institute for Nonferrous Metals 
in Beijing, and the Baotou Research Institute of Rare Earth in 
Baotou, Inner Mongolia. The former is a much larger 
organization than the Baotou group, but the rare earth activity 
is smaller. The Baotou Research Institute is the largest rare 
earth research group in the world. Baotou is located about 120 
miles from the large rare earth deposit in Inner Mongolia.
    Thank you for allowing me to participate in this House 
committee hearing this afternoon. Thank you.
    [The prepared statement of Dr. Gschneidner follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
    
             Prepared Statement of Karl A. Gschneidner, Jr.

1. Introduction

    The Ames Laboratory (AL) is the smallest of DOE's (Department of 
Energy) seventeen national laboratories. It is a single-program 
laboratory with about 78% of DOE's funding from the Office of Basic 
Energy Sciences (BES). Additional non-DOE income of about $7M is 
derived from contracts, grants, Cooperative Research and Development 
Agreements (CRADAs) and Work for Others (WFO) arrangements.
    The AL is fully integrated with Iowa State University (ISU) and its 
buildings are right on the campus and several are directly connected 
with ISU buildings. All AL personnel are ISU employees, and many of the 
lead scientists (23) have joint appointments with various academic 
departments. There are about 140 scientists and engineers, 260 graduate 
and undergraduate students, another 240 visiting scientists, facility 
users, and associates, and 180 support personnel, for a total of about 
440 employees (or about 300 full-time equivalent employees) and 410 
associates (non-payroll). Of the scientific staff about 20% are 
directly involved in rare earth research and development activities, 
including materials science, condensed matter physics, and materials 
chemistry.

2. A Brief History--How Did Rare Earths get to Ames?

    Many persons may wonder how the Mecca of rare earths a 
ever ended up on the picturesque ISU campus--an oasis amongst the corn 
and soy bean fields of central Iowa. The story begins in late 1930s 
when Frank H. Spedding was searching for a permanent academic position 
after receiving his Ph.D. from the University of California in 1929 
under G.N. Lewis. His Ph.D. thesis dealt with the physical properties 
of rare earth materials at low temperature. He spent a number of years 
in temporary jobs, including two years in Europe, where he worked with 
several Nobel prize winners, including Niel Bohr. In 1937, while he was 
occupied at Cornell University working with a future Nobel prize 
winner, Hans Bethe, he was offered a permanent position at ISU b 
as an associate professor, and he remained at ISU until he retired in 
1972. Frank Spedding was primarily a spectroscopist, but he had to 
separate and purify his rare earth samples from the other rare earth 
elements in order to carry out his optical measurements, which are very 
sensitive to the presence of other rare earth impurities. Based on his 
experience with rare earth (or 4f) chemistry he was asked by A.H. 
Compton of the University of Chicago to work with actinide (or 5f) 
materials to assist the team of physicists to build the first nuclear 
reactor under the stands of Stagg Field at the University of Chicago. 
Spedding was appointed the Director of Chemistry in the Chicago 
Project. One of the main goals of the Project was to purify uranium 
from its ores and then to convert the oxide to the metal--six tons were 
needed, which seemed like mission impossible since only a few grams of 
uranium metal had been produced before World War II. By late summer in 
1942 the delivery of the uranium was behind schedule and Frank Spedding 
offered to use a different approach to make the metal via a 
metallothermic reduction of uranium tetrafluoride, UF4. It 
was successful, and as an added bonus it was purer than the metal 
produced by other organizations. By November, the ISU team sent two 
tons of uranium cylinders (2" diameter  2" long) to Chicago. The 
addition of these two tons to the four tons delivered previously 
allowed the reactor to go critical on December 2, 1942. This stellar 
contribution to the Manhattan Project was recognized when ISU and 
Spedding's team were awarded the ``Army and Navy E for Effort with four 
stars'' pennant on October 12, 1945; the only university (college) in 
the country to receive this prestigious honor. Since the Ames ingots 
were purer and less expensive to produce, the Manhattan District asked 
three companies to take over the Ames fluoride process and make large 
amounts of uranium for the Oak Ridge and Hanford reactors. But since it 
took time to get the facilities up and running the ISU group was asked 
to continue to produce uranium metal. More than two million pounds were 
produced by the end of World War H, and by December 1945 industry took 
over. The Ames process, albeit somewhat modified, is still in use today 
[1].
---------------------------------------------------------------------------
    a Coined by Chemical and Engineering News in the 1970s.
    b At that time ISU was known as Iowa State College, but 
I will use ISU in this presentation. The name change officially 
occurred in 1959.
---------------------------------------------------------------------------
    Soon thereafter, a new requirement arose in the war effort. Thorium 
metal was needed for another type of reactor, and Spedding and his co-
workers were asked to develop a process for making thorium metal. Again 
they were successful and the Ames thorium process was turned over to 
industry. In the meanwhile, 600,000 pounds of thorium were produced 
[1].
    During the late war years, research on developing methods of 
separating the rare earth elements was begun at several Manhattan 
District laboratories because some of the rare earth elements were 
among fission products which would absorb neutrons because of their 
high neutron capture cross-section and eventually would cause the 
reactor to shut down. Also the pure rare earth elements were needed to 
study their chemical and metallurgical behaviors to help actinide 
chemists and physicists understand the trans-uranium elements because 
of the expected similarities in the properties of the two series of 
elements. It was during these years that Spedding and co-workers 
developed the ion exchange method for separating rare earths, which was 
in commercial use for many years after World War H, until displaced by 
liquid-liquid extraction procedures. The ion exchange process is still 
in use today to obtain the very highest purity rare earth elements 
(99.9999% pure), which are primarily used in optical applications such 
as lasers and optical signal multipliers [1].
    On May, 17, 1947 the Ames Laboratory became one of the Atomic 
Energy Commission (AEC) laboratories to promote the peaceful uses of 
atomic energy and to do research to increase our understanding and 
knowledge of the chemistry, physics, and nuclear behavior of the lesser 
known and uncommon elements, including the rare earths [1].
    Additional information about the Ames Laboratory and Frank H. 
Spedding during World War II and the early post-World War II years can 
be found in several articles authored by I.E. Goldman [2,3,4] and 
papers by J.D. Corbett [5] and by S.R. Karsjen [6].

3. The Golden Age of Rare Earth Research

    The time span of the 1950s through the 1970s was the golden age of 
rare earth research at the Ames Laboratory. At that time there was a 
very wide spectrum of research being carried out ranging from 
separation chemistry to analytical chemistry to process and physical 
metallurgy to solid state experimental physics to theoretical first 
principle calculations.

3.1 Separation Chemistry

    The discovery of using ion exchange chromatography to separate and 
purify the rare earths was further refined and improved in the 1950s 
through the 1960s. A large pilot plant was set up to supply researchers 
at the Ames Laboratory and other organizations, including many of the 
AECs national laboratories, with high purity individual rare earths, to 
carry out fundamental and applied research on various chemical 
compounds and the pure metals (see Sec. Sec. 3.3-3.6). In addition 
these ion exchange columns were used to separate the other rare earths 
from yttrium (also a rare earth element) which was to be used in the 
nuclear aircraft (see Sec. 3.3).

3.2 Analytical Chemistry

    In order to verify the chemical purity of the separated products 
new and more sensitive chemical and physico-chemical analytical methods 
were developed to detect impurities of both rare earth and other non-
rare earth elements at the part per million level. This included wet 
chemistry, atomic emission and atomic absorption spectroscopy, laser 
ion mass spectrometry, vacuum and inert gas fusion, and combustion 
analysis. This research also led to the development of inductively 
coupled plasma (ICP)-atomic emission (AE) in the late 1970s, and ICP-
mass spectrometry (MS), which occurred in the early 1980s. The ICP-MS 
technology was turned over to industry and today is still one of the 
most versatile and utilized analytical techniques, see Sec. 5.

3.3 Process Metallurgy

    This was one of the strengths of the Ames Laboratory in this time 
period. The pure rare earth elements, after separating them on the ion 
exchange columns, were converted to their respective rare earth oxides. 
The oxide was converted to the fluoride which was then reduced to the 
pure metal by calcium metal. These two processes were the critical 
steps for preparing high purity metals with low concentration of 
interstitial impurities, especially oxygen, carbon, nitrogen, and 
hydrogen. The reduced metals were further purified by a vacuum casting 
step and for the more volatile rare earth metals further purification 
was carried out by distillation or sublimation. Generally, kilogram 
(2.2 pounds) quantities were prepared at the Ames Laboratory. Industry 
adopted the Ames process with some minor modifications to prepare 
commercial grade rare earth metals, and it is still in use today. This 
method is still being carried out at the AL under the auspices of the 
Materials Preparation Center (MPC), see Sec. 6.1.
    In the late 1950s the AEC asked the Ames Laboratory to prepare pure 
yttrium metal for the proposed nuclear aircraft. A nuclear reactor 
would be used to heat gases to propel an airplane much like a jet 
engine. This aircraft would carry atomic weapons for months at a time 
without landing. The yttrium was to be hydride to form YH2 
which is used to absorb the neutrons produced by the fission of uranium 
protecting the crew from radiation. As part of this project the AL 
produced 65,000 pounds of YF3 and 30,000 pounds of yttrium 
metal. The yttrium metal was cast into 85 pound, 6 inch diameter ingots 
to ship to the General Electric Co. facilities in Cincinnati, Ohio.
    In the mid-1950s, Spalding and A.H. Daane and their colleagues 
developed a new technique for preparing high purity metals of the four 
highly volatility rare earths--samarium, europium, thulium, and 
ytterbium--by heating the respective oxides with lanthanum metal and 
collecting the metal vapors on a condenser. This process has also been 
turned over to industry and is used by AL's Materials Preparation 
Center today (Sec. 6.1).

3.4 Physical Metallurgy

    Research in the physical metallurgy area encompassed: determining 
melting points, crystal structures, vapor pressures, low temperature 
heat capacities, elastic constants, and magnetic properties of the pure 
metals and various intermetallic compounds; and phase diagram and 
thermodynamic properties studies; crystal chemistry analyses; and 
alloying theory of rare earth-based materials. This was another strong 
focus area in the AL in the 1950s-70s era which is still active today 
but at reduced level.
    Closely related, but not strictly physical metallurgy, was research 
on the mechanical behavior (tensile and yield strengths, ductility, and 
hardness) of the metals and some of their alloys, and also oxidation 
and corrosion studies, especially yttrium in conjunction with the 
nuclear aircraft project. From the information gained from the 
mechanical property measurements, processes were developed to fabricate 
the rare earth metals and their alloys at room and elevated temperature 
into a variety of shapes and forms, e.g. rolled sheets.

3.5 Materials and Solid State Chemistry, and Ceramics

    The chemical activity, in addition to separation and analytical 
chemistry Sec. 3.1 and Sec. 3.2) was another area in which the AL was 
considered to be world class, even though the manpower levels were 
smaller than above noted areas of analytical chemistry, process and 
physical metallurgy. Research was focused on the sub-stoichiometric 
rare earth halides, and interstitial impurity stabilized compounds 
including the halides. X-ray crystallography was an important tool in 
this focus area to characterize these compounds. John D. Corbett was 
the lead scientist and is still active today.
    Investigations of ceramic materials were important in many of the 
studies and advances in process and physical metallurgy, not only for 
their refractory properties, but also because of the need to contain 
the molten metals without contamination. Rare earth oxides and 
sulfides, because of their intrinsic stability, were candidate 
materials to contain the molten rare earths, uranium, thorium and other 
non-rare earth metals.

3.6 Condensed Matter Physics

    The AL was very strong in this area from the very beginning and 
still is today. Research under the leadership of Sam Legvold was 
concentrated on the magnetic behavior of the metals and the intra-rare-
earth alloys. This work was strongly coupled with neutron scattering 
studies at both the Ames Laboratory and Oak Ridge National Laboratory, 
and also with the theorists. The theoretical efforts included first 
principle calculations (Bruce Harmon) and phenomenological approaches 
(Sam Liu). Superconductivity was also another active topic of research, 
but most of the effort was concentrated on non-rare-earth compounds.

3.7 Interdisciplinary Research

    Two of the main strengths of the Ames Laboratory are magnetism and 
X-ray crystallography of rare earth and related materials. In part this 
is due to cooperative research efforts that cut across the disciplines 
of physics, materials science, and chemistry. Frank Spedding was one of 
the leaders in this approach to scientific research, which was rare in 
the 1950s.

4. Interactions with Industry

    As mentioned above in Sec. 3 much of the research and development 
efforts were turned over to industry--the uranium and thorium metal 
production, the ion exchange separation processes, and the analytical 
techniques (especially ICP-MS). In addition, K.A. Gschneidner, Jr. 
established the Rare-earth Information Center (RIC) in 1966 with the 
initial support of the forerunner of BES, and later by industry 
(starting in 1968), which totaled about 100 companies world-wide in 
1996. RIC's mission was to collect, store, evaluate and disseminate 
information about new scientific discoveries, industrial developments, 
new commercial products, conferences, books and other literature, 
honors received by rare earthers, and to answer information inquiries. 
RIC published two newsletters--a quarterly (available free) and a 
monthly (available to supporters of RIC), and occasional reports. In 
1996 the directorship was turned over to R.W. (Bill) McCallum. But RIC 
ceased operation in August 2002--when industry support dwindled 
significantly as China forced many companies out of the rare earth 
markets with extreme price reductions and, simultaneously, a down-turn 
in the economy dried up state and Federal support.
    Because of the expertise of individual AL scientists and/or some 
unique AL analytical or processing capability, many organizations, 
including industrial companies, asked the AL to perform applied 
research as Work for Others projects or CRADAs. Many of these non-DOE 
projects include the rare earths. One of these cases is discussed in 
more detail in Sec. 6.5. In addition to these individual interactions, 
the AL established the Materials Preparation Center (MPC) in 1981 to 
provide unique metals, alloys and compounds to worldwide scientific and 
industrial communities; and to perform unusual processes for 
fabricating materials which could not be done elsewhere, see Sec. 6.1. 
The functions carried out by the MPC over the nearly 30 years of its 
existence are an outstanding example of AL-industry interactions.
    Over the years various industrial organizations have sent their 
staff scientists and engineers to work at Ames Laboratory getting 
firsthand experience on a particular technology. These arrangements may 
be part of CRADAs or Work for Others projects.
    In 2009 ISU became a research member of the Rare Earth Industry and 
Technology Association (REITA) to implement rare earth technology and 
promote commercialization of the rare earths for military and civilian 
applications.

5. Technology Transfer and Patents

    The Ames Laboratory (AL) has been awarded 300 patents, of which 
about 45 are concerned with rare earth materials. Ten patents deal with 
the rare earth-base permanent magnets and four with magnetic 
refrigeration materials. Before the passage of the Stevenson-Wydler 
Technology Innovation Act of 1980 (P.L. 96-480) and the Dayh-Dole Act 
of 1980 (P.L. 96-517) all patent rights were turned over to the U.S. 
Government. After the Acts became law, the AL (a GOCO--government 
owned, contractor operated laboratory) began to license the various 
technologies developed at the AL via the Iowa State University Research 
Foundation (ISURF).
    The combination of inductive coupled plasma with atomic emission 
spectroscopy in 1975 and later with mass spectrometry in 1984 was a 
quantum jump in increasing the sensitivity for detecting and 
determining trace elements in various materials. The two analytical 
methods were developed at the AL to improve the speed and lower the 
limits of detecting various rare earth impurity elements in a given 
rare earth matrix. This technique was soon applied to other impurities 
in a variety of non-rare-earth materials, e.g. detection of poisons 
such as mercury and arsenic in drinking water. The ICP-MS and ICP-AE 
technologies were turned over to industry and are now a standard 
analytical tool in over 17,000 analytical laboratories worldwide. It is 
a rapid and accurate method for 80 elements, and in some cases allows 
the detection of an impurity down to the parts per trillion level. 
Today there are at least six companies that manufacture ICP-MS 
instruments.
    In addition to the various technology transfers noted in the 
previous paragraph and in sections 2, 3.1-3.3, one of the more recent 
success stories is concerned with Terfenol. Terfenol is a magnetic 
iron-rare-earth (containing dysprosium-terbium) intermetallic compound 
which has excellent magnetostrictive properties. When a magnetic field 
is turned on Terfenol will expand and when the magnetic field is 
removed it relaxes to its original shape and size. There are many 
applications for this material including sonar devices for detecting 
submarines, oil well logging, vibration dampers, audio speakers, etc. 
The magnetostrictive properties were discovered in the early 1970s at 
the Naval Ordinance Laboratory in Maryland. Shortly thereafter the Navy 
contracted the AL to grow single crystals and Terfenol samples with 
preferred orientations. The AL was successful and designed a procedure 
for making the orientated material to maximize the amplitude of the 
magnetostrictive effect. Patents were issued and in the late 1980s 
ISURF licensed the processing technology to Etrema, a subsidiary of 
Edge Technologies, Inc. in Ames, Iowa. Today Etrema is a multimillion 
dollar business.

6. Where We are Today 1980-2010

    With the Ames Laboratory's successes, some of the golden-age 
research was no longer deemed to be basic research and funding dried 
up. In addition key personnel started to retire. As a result of these 
two events a number of AL capabilities were phased out completely. 
These include: analytical chemistry, separation chemistry, process 
metallurgy, and ceramics. The excellent analytical capabilities were 
slowly reduced and completely lost by the 2000s, except for inert gas 
fusion and combustion analysis. The rare earth research activities in 
physical metallurgy and condensed matter physics areas have also 
suffered some downsizing to about half the level of what it was in the 
pre-1980 era, but what is left is still first class state-of-the-art 
basic research.
    In the following sections important activities that are still 
ongoing are described. Other research that had been completed in the 
1980s and may play in important role in the future activities of a new 
national rare earth research center, is also noted.

6.1 Materials Preparation Center

    As an outgrowth of the Ames Laboratory's interactions with 
industry, other DOE laboratories, universities, other research 
organizations, the Materials Preparation Center (MPC) was established 
in 1981 to provide high purity metals (including the rare earths, 
uranium, thorium, vanadium, chromium); and intermetallics, refractory, 
and inorganic compounds, and specialty alloys; none of which are 
available commercially in the required purity or form/shape needed by 
the request or on a cost recovery basis. The MPC is a BES specialized 
research center with unique capabilities in the preparation, 
purification, processing, and fabrication of well-characterized 
materials for research and development. The Center is focused on 
establishing and maintaining materials synthesis and processing 
capabilities crucial for the discovery and development of a wide 
variety of use-inspired, energy-relevant materials in both single 
crystalline and polycrystalline forms, spanning a range of sizes with 
well-controlled microstructures. There are four functional sections 
within the MPC: (1) high purity rare earth metals and alloys; (2) 
general alloy preparation; (3) single crystal synthesis; and (4) 
metallic powder atomization. Each area is provided scientific and 
technical guidance by a Principal Investigator (PI) whose individual 
expertise is aligned with the function of each section. The original 
director was F. (Rick) A. Schmidt who retired in 1993 and turned over 
the directorship to Larry L. Jones.
    In 2008 the MPC filled 183 external materials requests from 111 
different scientists at 88 academic, national and industrial 
laboratories worldwide. Internally the Center provided materials, and 
services for 53 different research projects that totaled 1092 
individual requests.

6.2 Nd2Fe14B Permanent Magnets
    The announcement of the simultaneous discovery of the high strength 
permanent magnet materials based on Nd2Fe14B by 
scientists at General Motors in the USA and at Sumitomo Special Metals. 
Co., Ltd. in Japan in November of 1983 set off a flurry of activities 
everywhere. The lead scientist at General Motors was John Croat (an ISU 
graduate), who was Frank Spedding's last graduate student. DOE/BES 
funding for research on these materials at the AL started in 1986 and 
lasted through 1998. U.S. Department of Commerce (DOC) funding for gas 
atomization processing work on Nd2Fe14B alloys, 
through the ISU Center for Applied Research and Technology, was 
received from 1988 through 1993. Funding was renewed at the AL in 2001 
under the auspices of DOE/EERE's Vehicle Technology (formerly 
FreedomCar) program.
    Notable achievements in the BES funded project included: (1) 
demonstrating that the Nd2Fe14B compound can be 
prepared by a thermite reduction process that is competitive with other 
methods of the permanent magnet material; (2) developing methods for 
controlling the solidification microstructure of melt spun 
Nd2Fe14B which leads to large energy products 
(the larger the energy product the better the permanent magnet 
properties); (3) proposing a model for the rapid solidification of a 
peritectic compound to explain the solidification microstructure of 
melt spun Nd2Fe14B; and (4) developing a model 
for hysteresis in exchange coupled nanostructure magnets. In 1996 the 
AL team headed by R.W. (Bill) McCallum c received the DOE 
Materials Science Award for ``Significant Implications for DOE Related 
Technologies, Metallurgy and Ceramics'' (items 2 and 3 above). A year 
later this same team won an R&D-100 Award for Nanocrystalline Composite 
Coercive Magnet Powder (see Sec. 7.1). In the DOC funded project, an 
alternative rapid solidification process, gas atomization, was 
developed for making fine spherical Nd2Fe14B 
powders, for which the AL (Iver Anderson and Barbara Lograsso) received 
an R&D-100 award in 1991 (see Sec. 7.1). They also received the Federal 
Laboratory Consortium Award for Excellence in Technology Transfer for 
gas atomization processing of Nd2Fe14B to enable 
improved molding of bonded magnets. The AL thermite reduction process 
(item 1), which was developed by F. (Rick) A. Schmidt, J.T. Wheelock 
and Dave T. Peterson under MPC research, was selected for one of the 
1990 IR-100 (changed to ``R&D 100'' in 1991) Awards for new innovative 
research for potential commercialization.
---------------------------------------------------------------------------
    c Other team members were K. Dennis, M. Kramer and Dan 
Branagan, who moved to DOE's INEEL laboratory.
---------------------------------------------------------------------------
    The Vehicle Technology research funded by SERE is on-going and 
includes design of improved Nd2Fe14B permanent 
magnets which can operate at high temperature, enabling more powerful 
and more efficient motors. This project also is developing further the 
high temperature RE magnet alloys for powder processing, intended for 
injection molded bonded magnets for mass production of hybrid and 
electrical vehicles. Based on initial success with both aspects of the 
RE magnet project, in 2009 SERE expanded their support into the high 
risk task of identifying non-rare-earth magnet alloys with sufficient 
strength for vehicle traction motors.

6.3 Nd2Fe14B Scrap Recovery

    As manufacturers began to make the Nd2Fe14B 
material, it soon became apparent there was a great deal of waste 
magnet material being generated because grinding, melting and polishing 
the magnets into a final form/shape. Much of the magnet material is 
mixed with oils and other liquids used in these operations--this 
material is known as ``swarf''. The team of scientists at AL headed by 
F. (Rick) A. Schmidt developed two different processes to recover the 
neodymium metal: a liquid metal extraction process to treat the solid 
materials; and an aqueous method for treating the swarf. Both processes 
were patented, but the patents have since expired.

6.4 High Temperature Ceramic Oxide Superconductors

    In the mid-1980s another major discovery occurred and had an 
enormous impact on the rare earths as well as science and technology in 
general--the discovery of the oxide superconductor with transition 
temperatures greater than that of liquid nitrogen 77 K (195 C). One 
of the key superconductors was 
YBa2Cu3O7, also known as ``1:2:3''. It 
is utilized today in electrical transmission lines, electrical leads in 
low temperature high magnetic field apparati and other superconducting 
applications. The AL had a strong tradition in superconducting research 
well before this discovery, and when they learned of it the condensed 
matter physicists and materials scientists immediately began research 
on these ceramic oxide superconductors. A National Superconducting 
Basic Information Center was established at AL in 1987 with financial 
support from DOE's BES. It was headed by John R. Clem, a theorist who 
continues to consult with American Superconductor. The experimentalists 
worked diligently on various aspects of the 1:2:3 and other oxide 
superconductors to understand the processes by which they are formed 
and to prepare high purity well characterized materials for physical 
property studies, which would assist the theorists to understand the 
fundamental nature of these superconductors. This work laid the ground 
work for the development of a method of fabricating the rare earth 
1:2:3 materials into filaments and flexible wires. Most of the research 
on these oxide superconductors at AL has stopped and most of the know-
how has been turned over to industry. However, AL scientists are still 
at the forefront of the field studying the new high temperature 
superconductors: the rare-earth-arsenic-iron-oxide-fluoride and the 
MgB2 materials.

6.5 Magnetic Cooling

    Magnetic cooling is new, advanced, highly technical, energy 
efficient, green technology for cooling and climate control of 
buildings (large and homes), refrigerating and freezing food 
(supermarket chillers, food processing plants, home refrigerator/
freezers). The AL team headed by K.A. Gschneidner, Jr. and V.K. 
Pecharsky has been involved with magnetic cooling since 1990, when 
Astronautics Corporation of America (ACA) asked Gschneidner to develop 
a new magnetic refrigerant material to replace the expensive GdPd 
refrigerant they were using for hydrogen gas liquefaction (a DOE 
sponsored research effort). The AL team was successful and showed that 
a (Dy0.5Er0.5)Al2 alloy was about 1000 
times cheaper and 20% more efficient than GdPd. A patent was issued for 
this new magnetic refrigerant material. This work was recognized as the 
best research paper presented at the 1993 Cyrogenic Engineering 
Conference. A few years later AL teamed up with ACA and designed, 
constructed and tested a near room temperature magnetic refrigerator. 
In 1997 they demonstrated that near room temperature magnetic 
refrigeration is competitive with conventional gas compression cooling 
technology and is about 10% more efficient, and is a much greener 
technology because it does not employ ozone depleting, or greenhouse, 
or hazardous gases [7]. This work was funded by BES's Advanced Energy 
Project program. Additional research on magnetocaloric materials was 
supported by BES after the Advanced Energy Project ended in 1998. But 
in 2005 BES funding for this research was terminated because they 
thought it was no longer basic research, i.e. it was too applied. Since 
then some work has continued on magnetocaloric materials under a work 
for others subcontract with ACA who has a Navy contract to build 
shipboard cooling machines, and a few SBIRs which are being funded by 
EERE.
    This research on magnetic cooling is a good example of AL's 
response to a problem encountered by industry which was successfully 
solved, and then later, this work led to a whole new cooperative AL-
industry project on near room temperature magnetic refrigeration.

6.6 Neutron Scattering

    Neutron scattering is a powerful tool in determining magnetic 
structures of magnetic materials and it compliments magnetic property 
measurements made by standard magnetometers. The rare earth research at 
AL has benefited from interactions with the neutron scatterers. In the 
early 1950s Frank Spedding and Sam Legvold of the AL had a close 
relationship with the neutron scattering group headed by Wally Koeller 
at Oak Ridge National Laboratory neutron scattering facility and 
furnished single crystals of the rare earth metals. Recognition and 
demand for neutron scattering resulted in a 5MW reactor being 
constructed locally for Ames Laboratory. Scientists used this reactor 
for extensive measurements of the electronic interactions in rare earth 
and other magnetic materials. Because of a large jump in the cost of 
operating and fueling this reactor, it was shut down in 1978. The 
relationship with the neutron scattering effort at Oak Ridge was 
enhanced and continued for many years up to about 1980, shortly before 
the death of the three scientists in 1983-84. To this day a dedicated 
neutron scattering facility, run by AL scientists, operates at the Oak 
Ridge High Flux Isotope Reactor (HFIR). It is still of great benefit to 
AL scientists studying rare earth materials.

6.7 X-ray Magnetic Scattering
    X-ray magnetic scattering is a fairly new tool, which was developed 
in the early 1990s, to study magnetic structures. It is fortunate that 
this new tool became available because a few of the rare earth 
elements, especially gadolinium, readily absorb neutrons and neutron 
scattering measurements are very difficult if impossible to make. Thus, 
X-ray magnetic scattering has been especially useful in determining the 
magnetic structures of gadolinium compounds.
    In more recent years scientists have improved the X-ray magnetic 
scattering technique, which is called X-ray magnetic circular 
dischroism (XMCD). The AL scientists have been on the forefront by 
applying the latest experiments and theoretical tools to help elucidate 
complex electronic interactions underlying bulk magnetic properties. 
The AL team, led by Alan Goldman (experiment) and Bruce Hannon 
(theory), has been pioneers in the development and application of XMCD 
on rare earth materials. This tool gives valuable and direct 
information about the itinerant electrons responsible for coupling the 
individual localized magnetic moments of each rare earth atom in a 
solid. The stronger the microscopic coupling the stronger the bulk 
magnet, and the more useful it can be in applications. Such experiments 
and powerful computers are essential for helping AL scientists in their 
latest ``materials discovery'' initiative to accelerate the discovery 
of new magnetic materials for industry.

6.8 Emerging Technologies

    One of the new and exciting, ongoing developments at Ames 
Laboratory is a revolutionary method of preparing rare earth-based 
master alloys for energy and other applications. In addition to 
lowering costs of the starting material, the processing technique also 
reduces energy consumption by 40 to 50% and is a very green technology. 
The work on preparing Nd2Fe14B magnet material 
began about a year ago with financial support from AL patent royalties, 
and it has been reduced to practice--we have prepared a state-of-the-
art permanent magnet on February 5, 2010, see attached figure. It is a 
one step process going from the neodymium oxide to the neodymium master 
alloy, and since the end-products are completely utilized, there are no 
waste materials to dispose of. The conventional process also starts 
with the neodymium oxide but takes two steps to obtain the neodymium 
metal, and there are waste products associated with both steps which 
need to be disposed of in an environmentally friendly manner. The step 
to prepare the Nd2Fe14B magnet material is 
essentially the same in either case. This processing technique was 
invented by F. (Rick) A. Schmidt and K.A. Gschneidner, Jr. A 
provisional patent has been filed.
    A modification of this process should enable us to prepare a 
lanthanum master alloy to prepare lanthanum nickel metal hydride 
batteries, which are used in hybrid and electrical vehicles. Likewise, 
we believe this process can be used to make magnetic rare earth 
refrigerant alloys (see Sec. 6.5).

7. Kudos

    The Ames Laboratory scientific achievements and their science/
engineering leaders have been recognized by several organizations 
including DOE.

7.1 R&D-100 Awards (former IR-100 Awards)

    Industrial Research magazine annually identifies the nation's top 
100 technological innovations, called the ER-100 Awards before 1991 and 
now are called the R&D-100 Awards. These awards are also known as the 
``Oscars of Science''. Over the past 25 years AL has received 17 R&D-
100 Awards. Of these three are involved with rare earths, in particular 
the Nd2Fe14B permanent magnet materials. These 
are listed below.

        1990:  ``Thermite Reduction Process to Make Rare-earth Iron 
        Alloys'' F. (Rick) A. Schmidt, John T. Wheelock and Dave T. 
        Peterson

        1991:  ``HPGA (High Pressure Gas Atomization)'' Iver Anderson 
        and Barbara Lograsso

        1997:  ``Nanocrystalline Composite Coercive Magnet Powder'' 
        R.W. (Bill) McCallum, Kevin Dennis, Matt Kramer, and Dan 
        Branagan


        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 
        

    Left: Our KAA-1-34 composition. 60/40 by vol. 
Nd2Fe14B/PPS (poly(phenylene sulfide). Hot 
pressed at 300 C and magnetized with a 2T electromagnet. The second 
bonded permanent magnet prepared.
    Center: Practice magnet of similar composition. The surface is 
boron nitride coating from the die used to compact the 
Nd2Fe14B particles in the polymer.
    Right: First Bond permanent magnet. 30/70 by vol. 
Nd2Fe14B/diallyl phthalate sample mounting 
material. Hot pressed and sealed with thin layer of epoxy.

7.2 National Academies Members

    Six Ames Laboratory scientists have been named to the National 
Academy of Sciences and the National Academy of Engineering. Frank H. 
Spedding was elected in 1952 and John D. Corbett in 1992 to the 
National Academy of Sciences. The four National Academy of Engineering 
members are: Donald O. Thompson--1991, Dan Schechtman--2000, R. Bruce 
Thompson--2003, and Karl A. Gschneidner, Jr.--2007. Of the six three 
(Spedding, Corbett and Gschneidner) were heavily involved in the rare 
earth science and technology of rare earths during their careers. 
Corbett and Gschneidner are still actively engaged in research and 
development activities. Spedding died in 1984 but was still active 
until shortly before his passing.

7.3 Department of Energy Awards

    Scientists at AL have won several DOE, (mostly from BES) awards for 
their scientific achievements. These are listed below.

        1982  K.A. Gschneidner, Jr. and K. Ikeda for quenching of spin 
        fluctuations

        1991  I.E. Anderson and B.K. Lograsso received the Federal 
        Laboratory Consortium Award for Excellence in Technology 
        Transfer for high pressure gas atomization of rare earth 
        permanent magnet alloys

        1994  B.J. Beaudry for thermoelectric materials 
        characterization from DOE's Radioisotope Power Systems Division

        1995  J.D. Corbett for sustained outstanding research in 
        materials chemistry

        1995  A.I. Goldman, M.J. Kramer, T.A. Lograsso, and R.W. 
        McCallum for sustained outstanding research in solid state 
        physics

        1996  D. Branagan, K.W. Dennis, M.J. Kramer, R.W. McCallum for 
        studies on the solidification of rare earth permanent magnets

        1997  K.A. Gschneidner, Jr. and V.K. Pecharsky for 
        contributions to the advancement of magnetic refrigeration

        2001  K.A. Gschneidner, Jr. and V.K. Pecharsky received the 
        ``Energy 100 Award'' for research on magnetic refrigeration as 
        one of the 100 discoveries between 1997 and 2000 that resulted 
        in improvements for American consumers.

Acknowledgements

    The author wishes to thank his colleagues and associates for 
assisting him in putting this report together. They are: A.H. King, 
Director, Ames Laboratory; and K.A. Ament, I.E. Anderson, J.D. Corbett, 
D.L. Covey, K.B. Gibson, B.N. Harmon, S.L. Joiner, S.R. Karsjen, L.L. 
Jones, T.A. Lograsso, R.W. McCallum, V.K. Pecharsky, F.A. Schmidt, and 
C.J. Smith.

References

1. H.J. Svec, pp. 1-31 ``Prologue'' in Handbook on the Physics and 
        Chemistry of Rare Earths, vol. 11, K.A. Gschneidner, Jr. and L. 
        Eyring Eds., Elsevier Science Publishers (1988).

2. J.A. Goldman, ``National Science in the Nation's Heartland. The Ames 
        Laboratory and Iowa State University, 1942-1965'', Technology 
        and Culture 41, 435-459 (2000).

3. J.A. Goldman, ``Mobilizing Science in the Heartland: Iowa State 
        College, the State University of Iowa and National Science 
        during World War II'', The Annals of Iowa 59, 374-397 (Fall 
        2000).

4. J.A. Goldman, ``Frank Spedding and the Ames Laboratory: The 
        Development of a Science Manager'', The Annals of Iowa 67, 51-
        81 (Winter 2008).

5. J.D. Corbett, ``Frank Harold Spedding 1902-1984'', Biographical 
        Memories 80, 1-28 (2001); The National Academy Press, 
        Washington, DC.

6. S.R. Karsjen, ``The Ames Project: History of the Ames Laboratory's 
        Contributions to the Historic Manhattan Project, 1942-1946'', 
        published by Ames Laboratory Public Affairs, Iowa State 
        University, Ames, Iowa (2003).

7. K.A. Gschneidner, Jr. and V.K. Pecharsky, ``Thirty Years of Near 
        Room Temperature Magnetic Cooling: Where we are Today and 
        Future Prospects'', Intern. J. Refrig. 31, 945-961 (2008).

            QUESTION 2: BASIC RESEARCH PROGRAM

    In the 1990s the Chinese flooded the marketplace with low priced 
raw rare earth products (mixed and separated rare earth oxides) and as 
a result, not only did the primary rare earth producers in the United 
States and the rest of the world shut down, but technical personnel 
with expertise in rare earth mining, refining, extraction, etc. found 
employment in other industries. Soon thereafter the Chinese began 
manufacturing higher value rare earth products, including rare earth 
permanent magnet materials, and in time, all of the 
Nd2Fe14B magnet manufacturers in the United 
States also went out of business. This also resulted in a brain drain 
of scientists and engineers in this field, and also in all high-tech 
areas involving other rare earth products, such as high energy product 
permanent magnet materials, metallic hydrogen storage and rechargeable 
battery materials. Some of these experts have moved on to other 
industries, others have retired, and others have died, basically 
leaving behind an intellectual vacuum.
    In the late 2000s the Chinese game plan changed, and they have 
started to exercise export controls on a variety of rare earth 
products, and signaled that they intend to consume all the rare earths 
mined in China internally in the next three to five years. This change 
will allow the rare earth producers and manufacturers to supply the 
needed products, but this presents several problems which have been 
cited by others at this House Committee hearing. One of these is the 
shortage of trained scientists, engineers, and technicians. Another 
need is innovations in the high tech areas which are critical to our 
country's future energy needs. A research center which alleviates both 
of these problems is the best way to work our way through the rare 
earth crisis facing the USA. An educational institution which has a 
long and strong tradition in carrying out research on all aspects of 
rare earth materials--from mining and purification to basic discovery 
and applications over a number of disciplines (i.e. chemistry, 
materials, physics, and engineering) with a strong educational 
component (undergraduate, graduate and post doctoral students) would be 
the ideal solution. A National Research Center on Rare Earths and 
Energy should be established at such an institution initially with 
Federal and, possibly, state support, and as the U.S. rare earth 
industry matures in five to ten years, supplemented by industrial 
financial support. The center would employ about 30 full time 
employees--group leaders; associate and assistant scientists and 
engineers; post docs, graduate and undergraduate students; and 
technicians plus support staff. This research center will be a national 
resource for the rare earth science, technology and applications, and 
therefore, it would also provide broad support of research activities 
at other institutions (universities, national laboratories, non-profit 
research centers, and industry) who would supply intellectual expertise 
via subcontracts to complement the activities at the center.
    The major emphasis of the center would be goal oriented basic 
research, but proprietary research directly paid by the organizations 
that request it would also be part of the center's mandate. The center 
would have an advisory board to oversee, guide and refocus as needed 
the research being conducted. The advisory board would be made up of 
representatives from the university, government, industry and the 
general public.
    I would like to suggest to this House subcommittee that they 
consider .a second national center, the National Research Center for 
Magnetic Cooling. Cooling below room temperature accounts for 15% of 
the total energy consumed in the USA. As noted in my response to the 
first question, magnetic refrigeration is a new advanced, highly 
technical, energy efficient green technology for cooling and climate 
control of buildings,-ships, aircraft, and refrigerating and freezing 
(Sec. 6.5). We have shown that magnetic cooling is a refrigeration 
technology competitive with conventional gas compression cooling. 
Magnetic cooling is 10 to 20% more efficient, and it is a very green 
technology because it eliminates hazardous and greenhouse gases, and 
reduces energy consumption. If we were able to switch all of the 
cooling processes to magnetic refrigeration at once we would reduce the 
nation's energy consumption by 5%. But there are a lot of hurdles that 
need to be overcome and the USA needs to put together a strong, 
cohesive effort to retain our disappearing leadership in this 
technology, by assembling a National Research Center for Magnetic 
Cooling. Europe and China are moving rapidly in this area, and Denmark 
has assembled a magnetic refrigeration national research center at 
Riso--so far the only one in the world. The U.S. Center should be 
structured similar to what has been proposed in the above paragraphs 
for the National Research Center on Rare Earth and Energy. The question 
is, are we going to give up our lead position and be a second rate 
country, or will we be leading the rest of the world? I hope and pray 
that the answer is, we are going to show the world that we are number 
one.

            QUESTION 3: KNOWLEDGE TRANSFER

    Knowledge is transferred from a research organization to industry 
through two primary routes. The first is the transfer of intellectual 
property. Research findings carried out at universities, colleges, non-
profit organizations, and DOE and other Federal laboratories are 
disseminated as published articles in peer-reviewed journals and in 
trade journals, presentations at national and international 
conferences, electronic media, or their organization's web site, and if 
exciting enough, via news conferences and press releases assuming the 
new results are not patentable. If, however, the research has some 
potential commercial value, this new information/data should be made 
available as soon as feasibly possible after filing a patent 
disclosure. However, before the patent is filed one could disseminate 
the results to companies that might be interested by contacting them 
directly to see: (1) if they are interested, (2) if they would sign a 
non-disclosure agreement, and (3) if they answer yes to both (1) and 
(2) then the information could be disclosed to them. However, all the 
companies must be treated equally and fairly.
    The second route is highly effective when the research organization 
is connected with a university. This is exemplified by Ames Laboratory 
and Iowa State University. AL employs a significant number of ISU 
students in part time positions either as graduate research assistants 
or undergraduate research helpers. These science and engineering 
students, particularly at the bachelors and masters levels, transfer 
the skills and process the knowledge gained in working in the 
laboratory to their employers after they graduate.

            QUESTION 4: U.S. RESEARCH ON RARE EARTH MINERALS

    Rare earth research in the USA on mineral extraction, rare earth 
separation, processing of the oxides into metallic alloys and other 
useful forms (i.e. chlorides, carbonates, ferrites), substitution, and 
recycling is virtually zero. As is well-known, research primarily 
follows money; but prestige and accolades are other drivers; or when 
someone serendipitously comes up with an exciting idea for a research 
project. The lack of money and excitement accounts for the low level of 
research on the above topics.
    Today some work on rare earth and actinide separation chemistry is 
directed toward treating waste nuclear products and environmental 
clean-up of radioactive materials in soils is being carried out at 
various DOE laboratories. This research may be beneficial to improving 
rare earth separation processes on a commercial scale.
    Some research at various universities might be considered to be 
useful in finding substitutes for a given rare earth element in a high 
tech application. But generally the particular rare earth's. properties 
are so unique it is difficult to find another element (rare earth or 
non-rare earth) as a substitute.
    The Chinese have two large research laboratories which have 
significant research and development activities devoted to the above 
topics. They are the General Research Institute for Nonferrous Metals 
(GRINM) in Beijing, and the Baotou Research Institute of Rare Earths 
(BRIRE) in Baotou, Inner Mongolia. GRINM is a much larger organization 
than the Baotou group, but the rare earths activity is smaller than 
what is carried out at BRIRE. The Baotou Research Institute of Rare 
Earths is the largest rare earth research group in the world. Baotou is 
located about 120 miles from the large rare earth deposit in Inner 
Mongolia and is the closest large city to the mine. This is the reason 
why BRIRE is located in Baotou.

                 Biography for Karl A. Gschneidner, Jr.
    Karl A. Gschneidner, Jr. was born on November 16, 1930 in Detroit, 
Michigan, and received his early education at St. Margaret Mary grade 
school and St. Bernard high school. He attended the University of 
Detroit, 1948-1952 and graduated with B.S. in Chemistry. He went to 
graduate school at Iowa State College (became Iowa State University in 
1959) and in 1957 obtained a Ph.D. degree in Physical Chemistry 
studying under Distinguished Professor Frank H. Spedding and Professor 
Adrian H. Daane. He then worked in the plutonium research group at the 
Los Alamos Scientific Laboratory from 1957 through 1963. In 1963 he 
joined the Department of Metallurgy as an Associate Professor, and 
jointly as a group leader at the Ames Laboratory of Iowa State 
University. He was promoted to a full professor in 1967, and named a 
Distinguished Professor in 1979. In 1966 he founded the Rare-earth 
Information Center and served as its Director for 30 years. He was also 
the Program Director for Metallurgy and Ceramics at the Ames Laboratory 
from 1974 to 1979. He taught mostly graduate level courses, including 
x-ray crystallography, the physical metallurgy of rare earths, and 
alloying theory.
    Gschneidner, sometimes known as ``Mr. Rare Earths'', is one of the 
world's foremost authorities in the physical metallurgy, and the 
thermal, magnetic and electrical behaviors of rare earth materials, a 
group of chemically similar metals naturally occurring in the earth's 
crust. His work lately has taken him into the field of magnetic 
refrigeration, a developing technology that has the potential for 
significant energy savings with fewer environmental problems than 
existing refrigeration systems.
    Gschneidner has over 450 refereed journal publications and nearly 
300 presentations to leading scientific gatherings worldwide to his 
credit. Holder of more than a dozen patents, he has been honored with 
numerous awards by governmental, professional, and industrial bodies, 
including recognition for his Ames Lab team's research in magnetic 
refrigeration by the U.S. Department of Energy in 1997 and with an 
Innovative Housing Technology Award in 2003.
    In addition to the National Academy of Engineering, Gschneidner is 
also a Fellow of the American Society for Materials-International, The 
Minerals, Metals and Materials Society, and the American Physical 
Society. In 2005, he was honored for 53 years of outstanding 
contributions to his field with a symposium at Iowa State that was 
attended by some of the world's leading experts in rare earth 
materials, many of them his former students or collaborators. He 
maintains an active research program with Ames Laboratory.

    Chairman Miller. Thank you, Dr. Gschneidner. Mr. Smith for 
five minutes.

   STATEMENT OF MR. MARK A. SMITH, CHIEF EXECUTIVE OFFICER, 
                     MOLYCORP MINERALS, LLC

    Mr. Smith. Thank you. Chairman Miller, Ranking Member 
Broun, other distinguished Members of the Subcommittee. I would 
like to thank you for the opportunity to be here today.
    This is the first committee to hold a hearing specifically 
on this issue, and I want to commend you for your leadership in 
this regard.
    It has been remarkable, in my 25 years in this business, to 
see the use of rare earths literally explode in front of our 
eyes. However, while rare earth-based technologies have become 
more and more essential and more and more a part of our 
everyday lives, the United States--as well as the rest of the 
world--has become almost completely dependent on China for 
access to the rare earth resources and the metals, alloys and 
magnets that derive from them.
    A combination of three factors should make this situation 
one of urgent concern to policymakers: first, the 
indispensability of rare earths in clean energy and defense 
technologies; two, the almost complete dominance of rare earth 
production by China; and three, China's accelerating 
consumption of their own rare earth resources.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    

    On the screen in front of you is a slide that just touches 
the surface of some of the uses of rare earths in the world 
today. On the clean energy side, rare earths are used in the 
advanced nickel hydride batteries for hybrid cars as well as 
the rare earth permanent magnets that power the highly 
efficient next generation of wind turbines and the electric and 
hybrid vehicle motors and generators. Rare earth phosphors are 
what illuminate compact fluorescent light bulbs which are 
currently mandated in the European Union.
    On the defense side, missile guidance systems, electronics, 
communications and surveillance equipment, just to name a few 
applications, all require rare earths. None, let me repeat, 
none of these technologies will work without rare earths, and 
yet each is tied directly to some of the Nation's highest 
national priorities today.
    [The information follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    

    On the screen in front of you now I have provided a 
simplified version of a wind turbine supply chain from a rare 
earth perspective. With the exception of our historic rare 
earth mineral production at the very start, none of the 
capabilities in the green box really exist in the United States 
today. The result is a supply chain capability gap in the 
United States that has the potential to become a very serious 
strategic and economic disadvantage. Today, China actually 
produces over 97 percent of the world's rare earth oxides. They 
produce almost 100 percent of the associated metals and 80 
percent of the rare earth magnets. For the last 15 years, 
China's production has been able to satisfy their own internal 
needs as well as those of the rest of the world. However, it is 
predicted that rapid Chinese demand growth, coupled with lower 
and lower Chinese government-controlled export quotas, will 
continue to decrease the amount of rare earths available to the 
rest of the world, thereby creating a serious supply gap. 
Forecasts conclude that this shortage could occur by 2012, and 
with China's recently announced commitment to be the world's 
largest producer of wind energy and electric vehicles, this 
will certainly not help that timeframe.
    In order to truly break our near-total dependence on China, 
Molycorp has developed its mining-to-magnet strategy. Molycorp 
has 57 years of experience in the rare earth industry and has a 
world-class ore deposit at its rare earth facility in Mountain 
Pass. We have invested over $20 million in process technology 
improvements in advance of our restart project, and the 
resulting efficiencies will drastically improve our overall 
cost competitiveness, as well as our environmental stewardship.
    We also believe that our mine-to-magnets project could 
create an estimated 900 new direct jobs as well as 700 
temporary construction jobs in the United States, not to 
mention the multiplier effect this will have in both green and 
defense technological industries in this country.
    Molycorp is the only rare earth company outside of China 
that stands shovel-ready. We are uniquely well-positioned to 
rebuild the rare earth supply chain from mining to magnets, and 
we can do it in the shortest timeframe possible.
    The Federal Government clearly has a role to play. As you 
consider legislation, there are four areas I think you can have 
the greatest impact on. The first is Federal loan guarantees. 
We applied for the DOE's loan guarantee program in the fall of 
2009, and our application was recently rejected as ineligible. 
The DOE contends that this project goes too far upstream and 
that their program was not intended to cover projects that go 
all the way back to mining. Congress will need to provide 
legislative direction or new legislative language clarifying 
the use of loan guarantees for strategically vital supply chain 
projects.
    Second, the Federal Government and this committee in 
particular can play a pivotal role in reestablishing our world 
class rare earth knowledge and expertise the way it used to be.
    Number three, as noted earlier, the White House OSTP is 
working with the Departments of Commerce, Defense and State to 
lead a collaborative interagency effort on this issue. We are 
very encouraged by this effort, but the imminent global supply 
and demand challenge clearly necessitates more urgency by the 
Administration right now.
    And finally, Federal funding support for competitive grants 
specifically directed at the rare earth research and technology 
industry, including recycling, will certainly help to further 
expand the United States' capabilities in the rare earth world.
    Thank you, Mr. Chairman, for this time today, and I would 
be happy to answer any questions later.
    [The prepared statement of Mr. Smith follows:]
                  Prepared Statement of Mark A. Smith

Introduction

    Chairman Miller, Ranking Member Broun, and Members of the 
Subcommittee, I want to thank you for the opportunity to share my 
observations, experiences, and insights on the subject of rare earths, 
the critical role they play in the technologies that will shape our 
future, the looming supply challenges that are ahead of us, and the 
work we are doing at our facility at Mountain Pass, California. This is 
the first Committee to hold a hearing specifically on this important 
topic, and I want to commend you for your leadership and forethought.
    I'm the CEO of rare earths technology company Molycorp Minerals, 
LLC. Molycorp owns the rare earth mine and processing facility at 
Mountain Pass, California, one of the richest rare earth deposits in 
the world, and we are the only active producer of rare earths in the 
Western Hemisphere. I have worked with Molycorp and its former parent 
companies, Unocal and Chevron, for over 25 years, and have watched 
closely the evolution of this industry over the past decade. It has 
been remarkable to watch the applications for rare earths explode. 
However, as rare earth-based technologies have become more and more 
essential, the U.S., which invented rare earth processing and 
manufacturing technology, has become almost completely dependent on 
China for access to rare earths and, more' specifically, the metals, 
alloys and magnets that derive from them.
    On its face it may not seem any more disconcerting than any other 
material dependency. However, it is the combination of three key 
factors that make this situation one of urgent concern to policymakers: 
1) the indispensability of rare earths in key clean energy and defense 
technologies; 2) the dominance of rare earth production by one country, 
China, and 3) China's accelerating consumption of their own rare earth 
resources, leaving the rest of the world without a viable alternative 
source.
    The development of clean energy technology is a top national 
priority, as these innovations are key to our broader national 
objectives of greater energy security and independence, reduced carbon 
emissions, long term economic competitiveness, and robust job creation. 
Yet all of these crucial national objectives become less achievable if 
we lack access to rare earth resources.
    Our company has produced rare earths for 57 years, and we are in 
the process of restarting active mining and down-stream processing at 
Mountain Pass. We are redeveloping our facilities to dramatically 
increase our production, and we are executing a strategy to rebuild the 
rare earth metal and magnet manufacturing capabilities that our country 
has lost in the past decade. This effort will help to address rare 
earth access concerns and may help to catalyze clean tech 
manufacturing, but the lingering question is how quickly we can make 
this happen, as the looming supply concerns seem to accelerate every 
day.
    Below I offer my perspective on rare earths and their applications, 
America's rare earth capability gap, the global supply concerns and 
their implications, our work at Molycorp to expand our domestic rare 
earth access, and the role the Federal Government can play to help 
address the looming supply concerns.

Rare Earth Elements and Key Applications

    Rare earths are a group of 17 elements (atomic numbers 57-71 along 
with Sc and Y) whose unique properties make them indispensable in a 
wide variety of advanced technologies. One rare earth in particular--
neodymium (Nd)--is used to create the very high powered but lightweight 
magnets that have enabled miniaturization of a long list of consumer 
electronics, such as hard disk drives and cell phones. While high-tech 
applications such as these have dominated the usage of rare earths over 
the past decade, it is their application in clean energy technologies 
and defense systems that has brought heightened attention to rare 
earths.
    Rare earths are indispensable in a wide variety of clean energy 
technologies. Rare earth metals are used in the advanced nickel-metal 
hydride (NiMH) batteries that are found in most current model hybrids; 
powerful rare earth magnets enable next generation wind turbines, 
electric vehicle motors, and hybrid vehicle motors and generators; and 
rare earth phosphors are what illuminate compact fluorescent light 
bulbs. On the defense side, missile guidance systems, military 
electronics, communications and surveillance equipment all require rare 
earths. None of these technologies will work without rare earths, and 
yet each of these technologies is tied closely to some of the nation's 
highest national priorities, our energy and national security.
    The list of rare earth applications is long and varied, but there 
are additional applications that are worth noting specifically. The 
automotive sector is a big user of rare earths. Cerium is used to 
polish glass and provides protection from UV rays. In the 1970s, rare 
earths replaced palladium for use in catalytic converters, and if 
palladium were still used today, cars would be significantly more 
expensive. They are also used in petroleum refining and as diesel 
additives.
    At Molycorp, we have also found a use for cerium in water 
filtration. We have developed proprietary water filtration technology 
that has applications in industrial wastewater treatment, clean water 
production in the developing world, and the recreation and backpacking 
market.
    The diagram below offers a broader view of rare earths' 
applications:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Despite their name, rare earths are not rare. If you were to go 
outside right now and grab a handful of dirt from the ground, it would 
contain rare earths. However, it is far more difficult to find rare 
earths in a concentration high enough to be mined and separated 
economically. When rare earths are extracted from the ground, the ore 
contains all of the rare earths, and it is through highly complex 
separation processes that each individual rare earth oxide can be 
produced. It is this separation process that largely drives the cost of 
rare earth production. Ore bodies that contain rare earths at 
percentages in the low single digits cannot be mined economically under 
current prices for rare earths.
    Thus, today, there are only 3 known and verified locations where a 
sufficiently high concentration of rare earths exists: Baotou, China; 
Mountain Pass, California, where Molycorp's mine is located; and Mt. 
Weld, Australia, which has a rich ore deposit but none of the 
infrastructure necessary to begin extraction, separation, and 
distribution to market. Given these circumstances, Molycorp's mine at 
Mountain Pass is clearly one of the only rare earth resources in the 
world that is immediately minable, economically viable, and can provide 
a near-term source of rare earth materials. With supply concerns 
becoming increasingly imminent, the greatest challenge facing Molycorp 
is the speed at which we can bring these needed resources online. I 
will discuss this in further detail later in this testimony.

Industrial Supply Chain and America's Capability Gap

    One of the biggest challenges in raising awareness and 
understanding about rare earths is that they are found so early in the 
industrial supply chain that it is difficult to contemplate their usage 
in products that we see every day. To illustrate this point, consider 
the example of the new generation of wind turbines, which employ rare 
earth-based permanent magnet generators with reliability and efficiency 
improvements of 70% over the current industry standard. Below is a 
simplified supply chain:


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    Once the rare earths are mined, they are separated and converted to 
oxides and then converted into metals. The metals are then manufactured 
into alloys and magnet powders. The powders are then bonded or. 
sintered to form the magnets required for turbine production. The 
turbine, in turn, is included in the windmill assembly, and the final 
product is installed. All of the functions within the green box are 
necessary to be able to produce the magnets required for this clean 
energy technology and so many others. However, other than the rare 
earth mineral extraction and conversion to oxides, the other 
manufacturing capabilities in the green box no longer exist in the 
United States. The U.S. did at one time possess all of these 
capabilities, and in fact, these technologies largely originated here. 
However, over the past decade as American manufacturing has steadily 
eroded, the U.S. has ceded this technological ground to competitors in 
China, Japan and Germany.
    China has become particularly dominant, and some would contend that 
it has been by design. In the early 1990s, China's Deng Xiaoping was 
quoted as saying, ``There is oil in the Middle East; there is rare 
earth in China.'' \1\ China realized that it had a significant natural 
resource advantage, and through the development of new applications in 
an ever-expanding number of advanced technologies, China helped to grow 
the market for rare earths from 40,000 tons in the early 1990s to 
roughly 125,000 tons in 2008. It is over that same period that, due to 
a variety of factors, the U.S. ceased active mining of rare earths.
---------------------------------------------------------------------------
    \1\ Cox, Clint. (2006, October 10). Rare earth may be China's 
checkmate. Retrieved from the Anchor House web site on February 5, 2010 
at http://www.theanchorsite.com/2006/10/.
---------------------------------------------------------------------------
    While the U.S. still possesses the technical expertise, we have 
lost the necessary infrastructure to manufacture the rare earth metals 
and magnets that fuel next generation technologies. The last rare earth 
magnet manufacturer in the U.S. was a company called Magnaquench, 
formerly located in Valparaiso, Indiana, and owned by General Motors. 
Magnaquench and all of its U.S. assets were sold to a Chinese company 
in the early 2000s in an effort to help GM gain access to the Chinese 
market.\2\ Two domestic companies can produce small quantities of rare 
earth based alloys but none can convert the rare earth oxides to metal. 
The result is a significant rare earth ``capability gap'' in the U.S. 
that has the potential to quickly become a major strategic and economic 
disadvantage.
---------------------------------------------------------------------------
    \2\ Moberg, David. (2004, January 23). Magnet Consolidation 
Threatens Both U.S. Jabs and Security. Retrieved from the In These 
Times web site on February 5, 2010 at http://www.inthesetimes.com/
article/685/.

---------------------------------------------------------------------------
Global Supply Concerns and Implications for the U.S.

    Today, the production of rare earths, and the metals and magnets 
that derive from them, is overwhelmingly dominated by China. At 
present, China produces 97% of the world's rare earth supply, almost 
100% of the associated metal production, and 80% of the rare earth 
magnets. Complicating this picture even further, China's national 
consumption of rare earth resources is growing at an intense pace, 
consistent with their meteoric GDP growth, and it is leaving the rest 
of the world with less of these critical materials just as the clean 
energy economy is beginning to gain momentum. As the chart below from 
rare earths research firm, the Industrial Minerals Company of Australia 
(IMCOA) demonstrates, China's massive production has been able to 
satisfy both their own internal needs and those of the rest of the 
world. However, as the blue line indicates Chinese demand for its own 
rare earths will soon match, if not eclipse, its own internal supply, 
and with global demand (in yellow) growing at a parallel pace, there is 
a significant production gap--around 60,000 tons--that must be filled 
in a very short timeframe.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] 

    IMCOA's previous forecasts concluded that this critical shortage 
for the rest of the world outside of China would occur by 2012, but 
China has recently said that it intends to be the world's largest 
producer of wind energy and electric vehicles and has committed $150 
billion and $29 billion to these two respective clean technology 
sectors (by comparison, the entire amount of stimulus funding under the 
American Recovery and Reinvestment Act directed at all areas of clean 
energy deployment was $60 billion). The new, more efficient wind 
turbines that use rare earth permanent magnet generators require around 
2 tons of rare earth magnets per windmill. The rare earth industry has 
never seen this level of demand. To date, rare earth producers like 
Molycorp have filled orders by the pound or kilogram, not by the ton. 
If China's commitment holds true, this will vastly accelerate their 
consumption of rare earths and speed up the date when the rest of the 
world will find its access to rare earths severely limited.
    Around the same time that China was outlining its clean energy 
investments, it also began to consider steps to reduce the availability 
of its rare earths to the rest of the world. As if the demand forecasts 
weren't disconcerting enough, China heightened international supply 
concerns last fall when its Interior Ministry signaled that it would 
further restrict its exports of rare earth resources. China has been 
steadily decreasing its exports by an average of 6% per year since 
2002, but these new restrictions portend a more aggressive effort to 
use its own resources domestically. This critical issue was featured on 
the front page of the New York Time's business section on August 31, 
2009, and I've included the article for the Committee's record.
    Finally, in late December, China announced that it will begin to 
stockpile rare earths. It is our estimation that if they are announcing 
it officially to the rest of the world, it is highly likely that the 
stockpiling has been occurring for some time. Regardless, it will have 
a further depressive effect on global supply.

Energy Security and Global Competitiveness

    Disruption in the global supply of rare earths poses a significant 
concern for America's energy security and clean energy objectives, its 
future defense needs, and its long-term global competitiveness. Rare 
earths may not be familiar to most people, hidden deep in the 
industrial supply chain, but they are absolutely indispensable for so 
many of the advanced technologies that will allow us to achieve 
critical national objectives.
    Efforts to decrease U.S. dependence on foreign oil and develop a 
clean energy economy, as well as the jobs that come with it, have 
received broad bipartisan support, and few would disagree that the U.S. 
must diversify its sources of energy and slow the demand for fossil 
fuels. Wind power and electric vehicles (EVs) have emerged as 
technologies that will play important roles in these efforts, and the 
U.S. has indicated it intends to be a leader in both. As noted above, 
the most efficient wind turbines require multiple tons of rare earths, 
and as the U.S. moves to increase the percentage of power that comes 
from wind, there will be a commensurate increase in domestic demand for 
rare earths. The American automotive industry is expanding the number 
of hybrid, plug-in hybrid (PHEV), and full electric vehicle (EV) models 
in an effort to produce far more fuel efficient products, and yet many 
of the advanced batteries that power hybrids and PHEVs utilize several 
kilograms of rare earth metals in each unit. The motors and generators 
in these new vehicles also use several kilograms of rare earth 
permanent magnets. Similar implications exist for our national defense 
capabilities. From military communications equipment to missile 
guidance systems, rare earths enable a long list of advanced defense 
technologies. We have had extensive discussions with the Department of 
Defense (DOD), and they are paying far greater attention to this 
concern. In fact, the FY 2011 DOD Authorization signed into law last 
October included a provision requiring the Department to submit a 
report to Congress no later than April 1, 2010, assessing the usage of 
rare earth materials in DOD's supply chain, looking at projected 
availability for use by DOD, the extent to which the DOD is dependent 
on rare earth materials, steps that the Department is taking to address 
any risks to national security, and recommendations for further action.
    Access to rare earths is obviously essential, but without 
rebuilding the manufacturing capacity to produce rare earth metals and 
magnets, the U.S. could find itself dependent on China for key 
technological building blocks. But even this scenario presumes that the 
U.S. has the manufacturing capabilities to put Chinese rare earth 
materials to use in final products. Right now, given the current state 
of U.S. manufacturing, it is unfortunately more likely that we would 
become a raw material supplier to Chinese manufacturers.
    Viewed through this lens, the domestic development of rare earth 
resources and manufacturing capabilities is not only a strategic 
necessity but also a potential catalyst for job growth in the clean 
energy and advanced technology manufacturing sectors. If these 
resources and capabilities were built up domestically, it could have a 
multiplier effect on downstream, value added manufacturing. Consider 
China's experience. It has to create 10-15 million jobs a year just to 
accommodate new entrants into its job market, and it has viewed the 
rare earths industry as a ``magnet'' for jobs. China repeatedly 
attracted high-tech manufacturers to move to its shores in exchange for 
access to rare earths among other enticements. The U.S. could 
experience a similar jobs boost by making a concerted effort to rebuild 
the clean energy supply chain, beginning with rare earths, within its 
borders.

Molycorp Minerals' Mining to Magnets Strategy

    Molycorp Minerals has been in the rare earths business for 57 
years, and while the company and its facilities have changed ownership 
over the years, it has remained one of the world's only viable sources 
of rare earth minerals. On October 1, 2008, a group of U.S. based 
investors, including myself, formed Molycorp Minerals, LLC, and we 
acquired from Chevron its rare earth assets at Mountain Pass, which the 
U.S. Geological Survey has deemed ``the greatest concentration of rare 
earth minerals now known.'' From the outset, we have sought to combine 
this world-class rare earth deposit with a ``mining to magnets'' 
strategy. Our redevelopment of Mountain Pass is the starting point of a 
broader effort to reestablish domestic manufacturing of the rare earth 
metals, alloys and magnets that enable and are indispensable to the 
clean energy economy and advanced technology manufacturing.
    Our work at Mountain Pass provides a timely, well-planned, and 
economically viable means to address the rare earth access challenges 
on the shortest timeline possible. While Molycorp has been processing 
existing rare earth stockpiles since 2007, it has invested $20 million 
to begin the restart of active mining. Our team matches this remarkable 
natural resource with 57 years of rare earth mining, milling, and 
processing experience. We have obtained the necessary 30-year mine plan 
permit, and the Environmental Impact Report for the mining-to-oxides 
portion of the redevelopment has been reviewed and approved by all 
applicable Federal, state, and local agencies. Molycorp's footprint 
will be limited to its privately-held land, using state-of-the-art 
technologies for water treatment and mineral recovery. Through new 
advances in our production processes, Molycorp will produce 20,000 
tons, or 40,000,000 pounds, of rare earth oxides per year, and our 
increased production and capabilities can potentially create 900 new 
jobs for the hard hit San Bernardino-Riverside and Henderson-Las Vegas 
regions of California and Nevada. Molycorp is the only domestic rare 
earth provider that stands ``shovel-ready'' to create jobs and commence 
the mining-to-magnets work required to meet multiple customer-specific 
product demands.
    Access to the raw, rare earth minerals is obviously essential, but 
as noted earlier, it resolves only part of the challenge. As part of 
our mining to magnets development, we will build out the metals, 
alloying and magnet powder manufacturing capabilities. We would also 
establish the production of rare earth permanent magnets, all here in 
the United States. Our company is uniquely well-positioned to rebuild 
these early steps in the clean energy supply chain and fully extend the 
value and capabilities of the rare earth resources at Mountain Pass.

Environmental Stewardship as a Source of Cost-Competitiveness

    Many industry observers question how a U.S. producer of rare earths 
can ever compete with the Chinese, when the possibility always lingers 
that the Chinese could flood the market and dramatically depress rare 
earth prices, a practice they have demonstrated previously. We have 
spent the better part of the past 8 years developing the answer to this 
question. We changed the orientation of our thinking and discovered 
that by focusing principally on energy and resource efficiency, we 
could make major improvements in our cost competitiveness while at the 
same time advance our environmental stewardship.
    We will incorporate a wide variety of manufacturing processes that 
are new to the rare earth industry, which will increase resource 
efficiency, improve environmental performance, and reduce carbon 
emissions. Specifically:

          Our overall processing improvements will almost cut 
        in half the amount of raw ore needed to produce the same amount 
        of rare earth oxides that we have produced historically. This 
        effectively doubles the life of the ore body and further 
        minimizes the mine's footprint;

          Our extraction improvements will increase the 
        processing facility's rare earth recovery rates to 95% (up from 
        60-65%) and decrease the amount of reagents needed by over 30%;

          Our reagent recycling, through proprietary technology 
        that Molycorp has developed, could lead to even greater 
        decreases in reagent use;

          Our new water recycling and treatment processes 
        reduce the mine's fresh water usage from 850 gallons per minute 
        (gpm) to 30 gpm a 96% reduction;

          Finally, the construction of a Combined Heat and 
        Power (CHP) plant--fueled by natural gas--will eliminate usage 
        of fuel oil and propane. This will significantly reduce the 
        facility's carbon emissions, reduce electricity costs by 50%, 
        and improve electricity reliability.

    These process improvements fundamentally reverse the conventional 
wisdom that superior environmental stewardship increases production 
costs. At the same time, we significantly distinguish ourselves from 
the Chinese rare earth industry that has been plagued by a history of 
significant environmental degradation, one that it is just beginning to 
recognize and rectify.

Need for Federal Leadership

    Over the past year, I have spent a significant amount of time in 
Washington meeting with Members of Congress and their staffs as well as 
officials in a variety of Federal agencies to direct greater attention 
to this issue. I'm pleased to report, just over one year since we began 
our efforts, that the Federal Government is beginning to take 
meaningful steps toward understanding and addressing our rare earth 
vulnerabilities. The question remains, however, if it will be able to 
make its assessments, determine the required actions, and execute them 
within a timeline that seems to be accelerating daily.
    In each of these meetings, and as this Committee has also inquired, 
I am asked what role the Federal Government should play in tackling 
this pressing concern, and I believe that there are 4 areas where it 
can have the greatest near- and long-term in impact: 1) federally based 
financing and/or loan guarantee support for highly capital intensive 
projects like ours; 2) assistance rebuilding America's rare earth 
knowledge infrastructure (university-based rare earth research, 
development of academic curricula and fields of study, training and 
exposure to the chemical and physical science related to rare earths, 
etc.); 3) increased interagency collaboration at the highest levels on 
the impact of rare earth accessibility on major national objectives; 
and 4) funding competitive grants for public and private sector rare 
earth research. I'll explore each in greater depth below:

          Financing support: Given the size, scale, ambition, 
        and necessity of Molycorp's redevelopment efforts, we submitted 
        an application for the Department of Energy's Loan Guarantee 
        Program (LGP). We believed that the program was well-suited for 
        our project, particularly given that the project's substantial 
        implications closely match the program's paramount objectives. 
        Traditional bank financing in the current climate--with very 
        short repayment periods and interest rates near double digits--
        is not economically feasible. The LGP offers longer term 
        financing and lower interest rates and would allow Molycorp to 
        accelerate development in the near-term while ensuring rare 
        earth resource availability in the long term. However, the DOE 
        summarily rejected our application in December, saying that the 
        project did not qualify as a ``New or Significantly Improved 
        Technology.'' We reviewed the relevant portion of the Rule, 
        Section 609.2, and our project meets every one of the stated 
        criteria. We requested further discussion with the DOE to 
        understand how it came to its conclusion and how Molycorp might 
        proceed. After almost two months, the DOE finally responded to 
        our request. During the meeting, the DOE contended that this 
        project goes ``too far upstream'' and that the program was not 
        intended to cover mining projects. We have yet to find the 
        legislative or regulatory language that provides such a 
        limitation. However, it appears we may need to ask Congress for 
        legislative direction or possibly new legislative language 
        specifically authorizing the use of loan guarantees for 
        strategically important projects like this. Our frustrations 
        with the loan guarantee notwithstanding, I still believe that 
        this kind of financing support is exactly what a project like 
        ours needs. We will be in a very strong position to both raise 
        our portion of the capital to execute the project and repay the 
        loan well-within the required timeline. We will continue to 
        pursue this financing support despite the DOE's current 
        position.

          Rebuilding the rare earth knowledge infrastructure: 
        The United States used to be the world's preeminent source of 
        rare earth information and expertise, but it has ceded that 
        advantage over the past decade, as its position in the industry 
        has become subordinate to China and other countries in East 
        Asia. The Federal Government, and the House Science and 
        Technology Committee in particular, can play a pivotal role in 
        reestablishing that institutional knowledge and expertise and 
        sharing it with a wider audience of researchers, scholars, and 
        practitioners here in the U.S. and abroad. At Molycorp, we are 
        fortunate to have a team of 17 rare earth researchers and 
        technologists who are second to none in the world, but almost 
        all of them had no previous expertise in rare earths prior to 
        joining Molycorp. It will be difficult for the U.S. to 
        reestablish its preeminence without a concerted effort to 
        attract the brightest scientists and researchers to the field 
        of rare earths. Rebuilding the knowledge infrastructure and the 
        research support will go a long way toward that goal. Dr. 
        Gschneidner, who I'm honored to testify with today, is regarded 
        as the father of rare earths, and his work at Ames Laboratory 
        and Iowa State University as well as the great work being done 
        by Dr. Eggert and his colleagues at the Colorado School of 
        Mines can serve as the foundation on which to expand America's 
        rare earth expertise. As a reminder of the rest of the world's 
        interests and actions in this regard, the Korea Times recently 
        reported that Korea is developing rare earth metals for 
        industrial use at a government-funded research center.

          Interagency Cooperation: Over the past several 
        months, we have been very pleased to learn about efforts within 
        many Federal agencies to direct specific attention to rare 
        earth issues. We have been in direct contact with the 
        Departments of Defense, Commerce, and State, and each is 
        examining this issue within the unique context of their 
        agencies' work. It is also worth noting that the Commerce 
        Department convened a group of stakeholders from both the 
        government and the private sector in December, 2009, which 
        included representatives from DOD, GAO, USTR, and OSTP. We have 
        also had multiple discussions with the Office of Science and 
        Technology Policy directly and have been very appreciative of 
        their engagement on this issue. In fact, OSTP, along with 
        Commerce, is facilitating interagency collaboration going 
        forward. While we are encouraged by these recent efforts, it is 
        our hope that the agencies and the White House recognize that 
        the global supply-demand challenges are approaching at an 
        increasingly rapid pace and that their efforts should reflect 
        the requisite urgency.

          Funding support for rare earth research: Part of 
        China's success in growing and dominating the market for rare 
        earths can be attributed to their efforts to find and 
        commercialize new applications for rare earth materials. 
        Federal funding support for competitive grants specifically 
        directed at, rare earth research will help to expand the U.S.'s 
        ability to do the same. This has the potential to broaden the 
        economic impact of rare earths, and contribute to the goal 
        mentioned above of reestablishing America's superior expertise 
        in rare earth research.

Conclusion

    The global rare earth supply concerns facing the U.S. and all other 
countries outside China are obviously disconcerting, but they are not 
insurmountable. A combination of geologic good fortune and an 
accelerated effort to ramp up domestic production and rebuild lost 
manufacturing capabilities could provide a solution for the U.S. and 
ensure that our leading national objectives are not jeopardized. At 
Molycorp, our ``mining to magnets'' strategy is far more than an 
approach to a new business, it is a cause with far reaching 
implications. If executed effectively, it could prove to be catalytic 
for our development of a clean energy economy and the resurgence of 
domestic manufacturing. This project will have meaningful and 
significant impact on leading national priorities, and as such, we 
stand ready to work with Congress and the Administration to find ways 
to accelerate our work at Mountain Pass and bring these needed 
capabilities online as soon as possible.
    Thank you once again for the opportunity to share my perspective on 
rare earths, and I look forward to working with the Committee in the 
weeks and months to come as it continues to examine this important 
topic and determine potential actions.


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                      Biography for Mark A. Smith

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    Mark A. Smith is Chief Executive Officer, member of the Board of 
Directors and a shareholder of Molycorp Minerals, LLC. Prior to 
Molycorp Minerals, Mr. Smith was the president and chief executive 
officer of Chevron Mining Inc. a wholly-owned subsidiary of Chevron 
Corporation. Mr. Smith was appointed President and Chief Executive 
Officer in April 2006. Chevron Mining Inc. operated five mines one of 
which was the Mountain Pass, CA Rare Earth mine.
    Prior to this appointment, Mr. Smith was a vice president for 
Unocal Corporation, where he was responsible for managing the real 
estate, remediation and mining divisions. Mr. Smith worked for Unocal 
for over 22 years.
    Mr. Smith received his Bachelor of Science degree in agricultural 
engineering from Colorado State University in 1981 and his Juris 
Doctor, cum laude, from Western State University, College of Law, in 
1990. He is a registered professional engineer and an active member of 
the State Bar of California and Colorado. Mr. Smith and his wife live 
in Denver, Colorado.

    Chairman Miller. Thank you, Mr. Smith. Dr. Broun and I are 
worried what percentage of rare earths the Chinese will control 
by----
    Mr. Smith. It is growing every day.
    Chairman Miller. --the end of the hearing.
    Mr. Smith. 97.3 to be precise.
    Chairman Miller. Mr. Stewart for five minutes.

   STATEMENT OF MR. TERENCE STEWART, ESQ., MANAGING PARTNER, 
                      STEWART AND STEWART

    Mr. Stewart. Mr. Chairman, members of the Subcommittee, 
good afternoon. China's policy on rare earth minerals is 
similar to that nation's actions on a large number of other raw 
materials. The general goals seem to be reducing availability 
of supply for global customers as well as making foreign 
purchases more expensive through the imposition of export 
duties, export licenses and other trade-impeding measures. 
China's policy encourages foreign investors to move production 
and investment to China and ensures low price supplies for 
targeted rapid-growth sectors within China.
    Last year the United States filed a WTO case against 
China's export restraints on numerous raw materials critical to 
U.S. manufacturers and workers. The raw materials subject to 
export restraints are used in some of the key industries 
identified in China's industrial policies such as steel, 
aluminum and chemicals. China's most recent 5-year plan, which 
goes through 2010, continues to focus development in certain 
strategic sectors and to ensure a leading role for state-owned 
enterprises in many of those sectors.
    Recently the European Chamber in China reviewed the massive 
problems of overcapacity in a number of important industries in 
China including steel, aluminum, cement, chemicals, oil 
refining, wind power equipment, shipbuilding, flat glass and 
photovoltaics. This overcapacity, coupled with export 
restraints on key raw materials, effectively shifts the burden 
of adjusting global excess capacity from China to trading 
partners by limiting access to affordably priced key raw 
materials. Moreover, limiting access to key raw materials can 
be used to force investment within China.
    According to the 2009 U.S.-China Economic and Security 
Review Commission in an annual report to Congress, China is 
targeting rare earth dependent components of key strategic 
industries for production within China including many of the 
green technologies reviewed earlier. China is attempting to 
make significant cuts to rare earth exports through a 
combination of export duties and export quotas. These actions 
are intended to raise prices outside of China, and in an 
indication that commissions reach the common number, they found 
that China currently produces 93 percent of rare earth 
minerals, somewhere between 90 and 97----
    Chairman Miller. The trend is heading in the right 
direction now.
    Mr. Stewart. China's export restraints have understandably 
caused concern in many countries, including our own.
    So what can be done? First and foremost, the United States 
and its trading partners should bring a second trade action 
against China on the range of export restraints being imposed 
on rare earth minerals. Such restraints are in clear violation 
of obligations that China undertook to become a member of the 
World Trade Organization in 2001. At that time, China agreed to 
limit the use of export taxes to 84 product categories, none of 
which included rare earth minerals. In 2010, China is imposing 
export taxes not on 84 products, but on 329 product categories 
including 23 rare earth mineral categories, a plain violation 
of their commitments.
    On the domestic front, it is my understanding that both the 
government and the private sector are taking actions to 
understand the nature of the potential problems as well as 
looking for alternative sources of supply. For example, the 
National Defense Authorization Act for Fiscal Year 2010 \7\ 
requires the Comptroller General to deliver a report by this 
April 1st on rare earth materials in the defense supply 
chain.\8\ Obviously, understanding the national security 
implications of Chinese rare earth policies is critical.
---------------------------------------------------------------------------
    \7\ Public Law 118-84; enacted October 28, 2009. The study was 
authorized in Section 843.
    \8\ See GAO Report GAO-10-617R (April 14, 2010).
---------------------------------------------------------------------------
    The Chairman and Members of this Subcommittee might want to 
advocate creation of a similar report for the civilian sector 
to help Members of Congress understand the challenges facing 
the American economy from the current reliance on China's 
supply and what legislative approaches might be pursued to 
safeguard our commercial as well as our military interests.
    A positive trend in recent years has been renewed interest 
in developing rare earth mineral resources outside of China 
including in North America, obviously the Molycorp example 
being one of the key elements. Reports are encouraging, 
although cost structures with environmental needs versus China 
remain important challenges. The Government through the 
Committee on Foreign Investment in the United States must help 
ensure that mines in the United States are not purchased by 
foreign interests whose governments have limited supply to U.S. 
users and that any new mines receive priority attention in 
terms of various government licenses and reviews.
    Finally, the USGS indicates that for most rare earth 
minerals there are substitute products available, although 
known substitutes are less effective currently than the rare 
earth minerals themselves. The United States Government can 
support efforts to develop alternative solutions to current 
rare earth needs, both through publicly financed research and 
through tax policies and other actions to support private 
sector research.
    Thank you very much.
    [The prepared statement of Mr. Stewart follows:]
                 Prepared Statement of Terence Stewart
    Mr. Chairman and members of the Subcommittee. Good afternoon. I am 
pleased to appear this afternoon as part of your hearing on rare earth 
minerals and 21st century industry to try to address three questions 
that I understand are of interest to the Subcommittee:


        1.  How do Chinese actions in the rare earths sector fit into 
        China's policies on strategic industries and economic 
        development?


        2.  Are there policies that the Federal Government can adopt, 
        or strategies that the U.S. private sector can adopt, that can 
        help assure a consistent and sustainable domestic supply of 
        economically and militarily critical materials such as rare 
        earths?


        3.  Are there policies that the Federal Government can adopt, 
        or strategies that the U.S. private sector can adopt, that 
        would support firms dependent on rare earth elements to retain 
        their manufacturing capacity in the U.S.?

    Let me start with some acknowledgments on my limitations as a 
witness on rare earth minerals. First, my background and expertise is 
on international trade law matters, including the World Trade 
Organization, and manufacturing competitiveness issues. Others on the 
panel today are the experts on minerals in general or rare earth 
minerals policies.
    Our firm, over the years, has looked at many aspects of the U.S.-
China relationship and has prepared for the U.S.-China Economic and 
Security Review Commission various studies looking at the trade and 
manufacturing impacts of China's practices. For example, on March 24, 
2009 I testified at a hearing before the Commission on ``China's 
Industrial Policy and its Impact on U.S. Companies, Workers and the 
American Economy.''
    Rare earths are not part of the current WTO challenges brought by 
the U.S., the EU and Mexico of China's export restraints on various 
materials. (see WT/DS394/1, China--Measures Related to the Exportation 
of Various Raw Materials, request for consultations by the United 
States) Purchasers of rare earths are concerned about similar types of 
restraints imposed by China on rare earth minerals and that there have 
been discussions by the U.S. with key allies about a possible future 
case. Inside U.S.-China Trade, October 21, 2009, ``U.S. and Allies 
Discuss Rare Earth Metals Action at WTO.''
    Now let me turn to the questions of interest to the Subcommittee.

China's Actions on Rare Earth Minerals

    What China is doing on rare earth minerals mirrors what it is doing 
on a large number of other raw materials: reducing availability of 
supply for global customers and/or making purchases more expensive 
through the imposition of export duties, export licenses, etc. The 
objective can be to encourage foreign investors to move investment to 
China to produce downstream products in the Middle Kingdom versus 
overseas, or to ensure low priced supplies for sectors in China 
targeted for rapid industrial growth.
    China's most recent five-year plan (covering 2006-10) continues to 
focus development in certain sectors and to ensure a leading role for 
state-owned enterprises (``SOEs'') in certain sectors.
    Specific guidance regarding SOEs was provided in December 2006 by 
the National Development and Reform Commission (NDRC) when it issued a 
guiding opinion on state-owned assets restructuring. The opinion states 
that SASAC's state-owned assets should concentrate on ``important 
industries and key areas'' (i.e., strategic industries). The opinion 
then explained that the ``important industry and key areas'' shall 
``mainly include industries that involve national security, large and 
important infrastructures, important mineral resources, important 
public utilities and public services, and key enterprises in the pillar 
industries and high-tech industries.''
    Seven important industries and key areas were identified: defense, 
electric power and grid, petroleum and petrochemical, 
telecommunications, coal, civil aviation, and shipping. Basic and 
pillar industries where the state would also maintain an important role 
included equipment manufacturing, auto, information technology, 
construction, iron and steel, non-ferrous metals, chemicals, and 
surveying and design.
    The counterpart to rapid development of key industries is 
maintaining low prices and ready availability of key raw materials. Not 
surprisingly, the cases filed by the US, the EU and Mexico against 
Chinese export restraints on certain raw materials involve raw 
materials used in some of the key industries identified in China's 
industrial policies--steel, aluminum and chemicals. As the USTR press 
release of November 28, 2009, announcing the panel request against 
China indicated, ``The materials at issue are: bauxite, coke, 
fluorspar, magnesium, manganese, silicon metal, silicon carbide, yellow 
phosphorus and zinc, key inputs for numerous downstream products in the 
steel, aluminum and chemical sectors across the globe.''
    A corollary to keeping prices at home low is the ability to force 
trading partners to shutter capacity in downstream industries. For 
example, a study came out in December 2009, published by the European 
Chamber, entitled ``Overcapacity in China: Causes, Impacts and 
Recommendations.'' http://www.europeanchamber.com.cn/view/static/
?sid=6388. The European Chamber in China reviewed the massive problems 
of overcapacity in a number of important industries including steel, 
aluminum, cement, chemicals, refining, wind power equipment, ship 
building, flat glass, and photovoltaics. While the causes of 
overcapacity in China are varied as reviewed in the study, when coupled 
with export restraints on key raw materials, China can apply pressure 
on trading partners to make the adjustments for excess capacity created 
in China by limiting access at affordable prices to key raw materials 
or preempting development of key new technologies in the U.S. and 
elsewhere.
    And control of key raw materials can be used to attract foreign 
investment by limiting access to such materials to those with a local 
presence. As discussed on one Web site, China is apparently offering to 
give ample supplies of rare earth minerals to companies that invest in 
China, even as China moves to limit or eliminate availability of 
product for export.

         Chinese officials have made it very clear: If foreign 
        manufacturing companies move their facilities to China, they 
        will be guaranteed a steady supply of rare earths. Many 
        technology companies are reluctant to do this because they want 
        to protect their intellectual property, but will the temptation 
        of an endless REE supply be too much? Companies continue to 
        move operations to China, but the tension still exists.

    Clint Cox, The Anchor House, Inc. (Research on Rare Earth 
Elements), December 17, 2009, http://theanchorhouse.com (page 5).
    When one looks at China, one sees all of the effects and/or 
purposes behind the wide ranging export restraints applied to rare 
earths and other materials. A series of articles in the last four 
months of 2009 reflects a range of concerns and purposes behind the 
draft ``2009-2015 Rare Earth Industry Development Plan'' from the 
Ministry of Industry and Information Technology:

         [A]s early as 1998, China has started to limit the export 
        quantities of rare earth products, and implemented the 
        differentiating principle of ``forbid, encourage, and 
        restrict:'' forbid the export of rare earth raw materials; 
        restrict oxides and metals by using export quota; encourage 
        downstream rare earth products, such as high value-added 
        products like magnetic materials and fluorescent powder.

    However, under the increasing global demand and China's 
increasingly reduced number of eligible export companies and export 
quotas, some companies with large quotas started to sell their quotas 
illegally. In addition, some developed countries' companies started to 
invest and establish factories in tungsten, antimony, and other rare 
earth reserves areas, bought large quantities of raw materials, 
processed them simply before shipping them overseas for further 
processing or storage, thereby effectively evaded China's export 
control. From 1990 to 2008, China's rare earth export grew almost 10 
times, but the average export price has lowered to about 60% of the 
original price.
    All these demonstrate that China's rare earth industry has three 
serious problems: overcapacity, disorderly competition, and cheap 
export on a large scale. It is of great urgency that we protect our 
rare earth resources and establish our reserve system.
    MIIT's 2009-2015 Plan aims to macro-manage the rare earth industry, 
strengthen the control of strategic resources, and strictly control 
production capacity, by both administrative and market means. In the 
next six years, no new rare earth mining penult 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 the three areas of technology and 
equipment, environmental protection, and management.
    At the same time, industry access standards will be higher, 
elimination of outdated capacity will be accelerated through ``shut 
down, pause, merger, transfer.'' Promote merger and reorganization of 
companies, strengthen and enlarge rare earth industry, form leading 
rare earth companies, establish a ``China Rare Earth OPEC,'' form 
companies with absolute dominating power in the market so that China 
can be the leader in controlling international market price.
    Of course, to accomplish this, merely depending on controlling 
resources and export is not enough. More importantly, we must grasp 
rare earth core technology patents, rare earth application market, rare 
earth products standards. Therefore, we must start from the technology 
innovation, invest more in technology, and at the same time value 
intellectual property, implement IP strategies, and seize the 
commanding ground of technology. Break out of the technology 
restrictions of foreign-invested enterprises, and establish our own 
rare earth ``high-way'' industry chain.
    ``2009-15 Rare Earth Industry Development Plan'' Has Been Passed, 
Hardware Business Web site (an electronic business Web site formed by 
Wenzhou Shengqi Internet Technology, Co., Ltd.), November 6, 2009 
(unofficial translation).
    China is attempting to make significant cuts to both rare earth 
exports. China has implemented its program to limit foreign 
availability of rare earths through a combination of both export duties 
and export quotas. These actions will raise prices outside of China by 
curtailing supplies and by raising import prices (with all relevant 
taxes or duties).

         The quota for rare earth materials was 31,300 MTs in 2009, 
        down 8.33% from 2008. This is the fifth year since China 
        started decreasing its rare earth export.

         As a corresponding policy to the annual 35,000 MTs quota from 
        2009 to 2015 proposed by MIIT, China will restrict its mineral 
        annual production to 130,000 to 170,000 MTs and its rare earth 
        smelting products' production to 120,000 to 150,000 MTs from 
        2009 to 2015.

    ``2009-15 Rare Earth Industry Development Plan,'' China Suppliers' 
Web site (under the guidance of State Council Information Office, 
Internet Promotion Division; MOFCOM Department of Market Operation 
Regulation; National Development and Reform Commission, International 
Cooperation Center), September 4, 2009 (unofficial translation).
    For 2010, the Chinese export duty and quota programs are reviewed 
in a series of documents issued in late 2009.
    Included as Exhibit 1 to this testimony is an unofficial 
translation of the export duty rate chart for 2010, which is an 
attachment to a notice titled ``State Council Customs Tariff 
Commission's Notice on the Implementation of the 2010 Tariff 
Schedule,'' Customs Tariff Commission Pub. [2009] No. 28, December 8, 
2009. The exhibit shows export duties being assessed on 329 products in 
2010 including many rare earth items (e.g., items 47, 89-92, 122-139 
(export duties of 10-25%)).
    Exhibit 2 to this testimony is an unofficial translation to the 
Ministry of Commerce of the People's Republic of China (MOFCOM) Trade 
Letter [2009] No. 147, December 29, 2009, ``2010 1st Batch Export Quota 
Distribution for Rare-Earth Materials in General Trade.'' The total 
quota for the ``1st batch'' is 16,304 MT, with allocations given to 
twenty-two companies. A month and a half earlier, MOFCOM had published 
``Notice on Application Criteria and Procedures for 2010 Rare-Earth 
Materials Export Quota.'' MOFCOM Pub. [2009] No. 94, November 6, 2009. 
An unofficial translation is included as Exhibit 3.
    The U.S.-China Economic and Security Review Commission (USCC) has 
done great work summarizing the general problem of export restrictions 
found in China as well as the USCC's understanding of how this problem 
plays out with rare earths. I have quoted the USCC at length because 
nobody has synthesized this data better. A complete excerpt of the 
USCC's views from its 2009 Report to Congress is available in Exhibit 
4.
    Regarding China's general export restrictions, the USCC states in 
its 2009 Report to Congress,

         Export restrictions or export quotas, especially on energy and 
        raw materials, have two general effects: First, they suppress 
        prices in the domestic market for these goods, which lowers 
        production costs for industries that use the export-restricted 
        materials; and second, these restrictions increase the world 
        price for the raw materials that are affected by limiting the 
        world supply, thereby raising production costs in competing 
        countries.

    U.S.-China Economic and Security Review Commission (USCC) 2009 
Report to Congress, at 62. Available at http://www.uscc.gov/
annual-report/2009/annual-report-full 
09.pdf.
    While specifically addressing China's restrictions on the export of 
rare earth minerals, the USCC notes,

         China appears to be tightening its control over the supply of 
        rare earth elements, valuable minerals that are used 
        prominently in the production of such high-technology goods as 
        flat panel screens and cell phones, and crucial green 
        technologies such as hybrid car batteries and the special 
        magnets used in wind turbines. USCC 2009 Report to Congress, at 
        63.

    This reduction in supply by China is problematic because, according 
to the USCC, ``China accounts for the vast majority--93 percent--of the 
world's production of rare earth minerals, and for the last three years 
it has been reducing the amount that can be exported.'' 2009 Report to 
Congress, at 63. China admits that rare earth elements are ``the most 
important resource for Inner Mongolia,'' which contains 75 percent of 
China's deposits. Id. Accordingly, the USCC cautions that by limiting 
exports and controlling production, the Chinese government is 
attempting to ``consolidate its rare earths industry, with the aim of 
creating a consortium of miners and processors in Inner Mongolia.'' Id. 
And according to the USCC, these tighter limits on exports of rare 
earths will place foreign manufacturers at a disadvantage compared to 
the domestic producers, whose access will not be so restricted. Id.

Policies and Solutions for Government and Private Sector Consideration

    First and foremost, the U.S. and its trading partners should be 
considering a second trade action against China on the range of export 
restraints being imposed on rare earths (and possibly other products). 
The U.S. and others were concerned about China's use of export 
restrictions during China's negotiations for accession to the World 
Trade Organization. China agreed to limit the use of export taxes to 84 
product categories (none of which included rare earth items) at rates 
no higher than included in Annex 6 of the Protocol of Accession. The 
fact that in 2010 China has imposed export taxes on 329 product 
categories, including twenty-three rare earth categories, creates a 
strong case of violation by China on the export taxes alone. Other 
violations from the use of export quotas are likely as well. Hopefully, 
Congressional interest will help move the Administration towards a 
second case on an expedited basis.
    On the domestic front, it is my understanding that both the 
government and the private sector are taking actions to understand the 
nature of the potential problems as well as looking for alternative 
sources of supply.
    For example, it is my understanding that the National Defense 
Authorization Act for Fiscal Year 2010, Public Law 111-84, requires the 
Comptroller General to deliver a report to the House and Senate 
Committees on Armed Services by April 1st this year on ``rare earth 
materials in the defense supply chain.'' Section 843, 50 USC app. 2093 
note. The nature of the report suggests that it is likely to provide 
important options that should be considered by the Government to 
safeguard the military needs of the country moving forward in this 
area. Section 843(b) is reprinted below:

         (b) Matters Addressed.--The report required by subsection (a) 
        shall address at a minimum, the following:

                 (1) An analysis of the current and projected domestic 
                and worldwide availability of rare earths for use in 
                defense systems, including an analysis of projected 
                availability of these materials in the export market.

                 (2) An analysis of actions or events outside the 
                control of the Government of the United States that 
                could restrict the access of the Department of Defense 
                to rare earth materials, such as past procurements and 
                attempted procurements of rare earth mines and mineral 
                rights.

                 (3) A determination as to which defense systems are 
                currently dependent on, or projected to become 
                dependent on, rare earth materials, particularly 
                neodymium iron boron magnets, whose supply could be 
                restricted

                         (A) by actions or events identified pursuant 
                        to paragraph (2); or

                         (B) by other actions or events outside the 
                        control of the Government of the United States.

                 (4) The risk to national security, if any, of the 
                dependencies (current or projected) identified pursuant 
                to paragraph (3).

                 (5) Any steps that the Department of Defense has taken 
                or is planning to take to address any such risk to 
                national security.

                 (6) Such recommendations for further action to address 
                the matters covered by the report as the Comptroller 
                General considers appropriate.

    Historically, the U.S. maintained a strategic stockpile of critical 
materials for national defense. Presumably, one of the issues that will 
be addressed in the report is the extent to which stockpiling rare 
earth materials is appropriate or feasible.
    The Chairman and Members of this Subcommittee might want to 
advocate creation of a similar report for the civilian sector. Such a 
report would obviously be helpful to Members of Congress in 
understanding the challenges facing the American economy from the 
current reliance on China as the source of supply and what legislative 
approaches might be pursued to safeguard our commercial and military 
interests.
    Press accounts suggest that in recent years there has been renewed 
interest in developing rare earth mineral resources outside of China 
and that several mines are in the process of being reactivated or 
developed. See, e.g., ``New USGS Rare Earth Report Includes Thorium 
Energy, Inc.,'' Earth Times, Oct. 8, 2009; http://www.earthtimes.org/
articles/show/new-usgs-rare-earth-report-includes-thorium-energy-
inc,991131.shtml; ``Canadian firms set up search for rare-earth 
metals,'' New York Times, Sept. 9, 2009, http://www.nytimes.com/2009/
09/10/business/global/10mineral.html?r=1&scp=10&sq=br
    Possible American sources of rare-earths include a separation plant 
at Mount Pass, CA. Bastnasite concentrates and other rare-earth 
intermediates and refined products continue to be sold from mine stocks 
at Mountain Pass. Exploration for rare earths continued in 2009; 
however, global economic conditions were not as favorable as in early 
2008. Economic assessments continued at Bear Lodge in Wyoming; Diamond 
Creek in Idaho; Elk Creek in Nebraska; and Lemhi Pass in Idaho-Montana.
    Thus, government and the private sector may have additional sources 
of supply of rare earths beyond China, although the challenge may be 
overall cost of supply, particularly in countries like the U.S. or 
Canada where environmental needs are more likely to be addressed at 
present than in China.
    Presumably, the government, under CFIUS, can help ensure that mines 
in the U.S. are not purchased by foreign interests whose governments 
have limited supply to U.S. users and that new mines receive priority 
attention in terms of various government licenses and reviews.
    I note that the Senate Committee on Energy and Natural Resources 
held a hearing last summer on mining law reform. The hearing had a 
number of witnesses who talked about the ability to improve the U.S. 
ability to supply more of its rare earth mineral needs and what 
challenges they faced based on various pending bills. Mining Law 
Reform, S. Hrg. 111-116, 111th Cong., 1st Sess. (July 14, 2009)(S. 796; 
S. 140). Certainly, the Congress will want to be sure that any 
legislation balances our needs for access to critical raw materials 
with the other concerns prompting legislative modifications.
    Finally, the USGS indicates that for most rare earth minerals there 
are substitute products available, although known substitutes are less 
effective than the rare earth minerals. The U.S. government can support 
research efforts into the development of alternative solutions to 
current rare earth needs both directly through basic and applied 
research and through tax policies and other actions to support private 
sector research.
    Thank you for the opportunity to appear today. I would be pleased 
to respond to any questions.

                     Biography for Terence Stewart
    Terry Stewart is the Managing Partner of Stewart and Stewart. Mr. 
Stewart's practice focuses on international trade matters (litigation, 
negotiations, policy) and customs law. He has worked with various U.S. 
industries and labor unions to solve trade matters in the U.S. and 
abroad, including representing agricultural, industrial and services 
groups. He is a currently a member of the Advisory Council to the U.S. 
Court of Appeals for the Federal Circuit and a member of the Steering 
Group of the International Trade Committee of the American Bar 
Association's International Law Section. Mr. Stewart is one of 
America's leading academic experts on the WTO system and has advised 
several governments on their WTO accession processes.
    In recent years, Mr. Stewart has written extensively on trade 
relations with the People's Republic of China, including volumes on the 
WTO accession commitments undertaken and progress made in meeting those 
commitments over time, a review of intellectual property protection 
within China and steps being taken to address problems in enforcement, 
and reports on subsidies provided to major sectors of the Chinese 
economy.
    Mr. Stewart is the editor of the 2009 book, Opportunities and 
Obligations: New Perspectives on Global and U.S. Trade Policy; and 
author and editor of numerous other publications. Previously, he was 
best known for editing a four-volume treatise on The GATT Uruguay 
Round: A Negotiating History (1986-92)(Vols. I-III); and The End Game 
(Vol. IV) published in July 1996 by the American Bar Association.
    Mr. Stewart is an adjunct professor at Georgetown University Law 
Center where he currently teaches a graduate seminar on the WTO. He 
received his law degree from Georgetown University, his masters in 
Business Administration from Harvard University, and his bachelors from 
the College of the Holy Cross.

    Chairman Miller. Thank you, Mr. Stewart. At this point we 
will begin our first round of questions. Typically I would 
recognize myself, but I would be happy to recognize--well, I 
will do what is typical then. I will recognize myself for five 
minutes.

               Early Warning for Material Supply Problems

    The questions are probably somewhat redundant to your oral 
testimony, but we did pass a law 30 years ago that called upon 
the President to establish early warning systems for material 
supply problems. That didn't work. That is why we are having 
this hearing today. What would have been needed to warn us 
about the problems that we have with rare earth, with the 
Chinese controlling 90, 93, 95, 97, way too much of the earth's 
supply, at least commercially available rare earths? And how do 
we keep everyone interested in the materials issues when there 
ceases to be a crisis? That is sort of a problem with Congress. 
There is either complete inactivity or frenzy, with little in 
between. How can we keep our attention on the need for the 
necessary supply of rare earths? Any of you may begin. Mr. 
Smith?
    Mr. Smith. Thank you, Mr. Chairman. I think that the answer 
rests in the ability to look at things from a full supply chain 
concept. It is very difficult to talk to people about rare 
earths in the world today. We go and talk to defense 
contractors that work for the Department of Defense, and 
sometimes we have to go down nine different tiers before we 
find the party that actually purchases the rare earths. So I 
don't think that anybody has done anything intentionally here, 
but these things are very ubiquitous, they only use very, very 
small quantities, and I think we have to continue to look at 
things on a full supply chain basis, not on an element-by-
element basis.
    Chairman Miller. Dr. Freiman?
    Dr. Freiman. We argued, in the report that I spoke to, that 
one of the things that was needed--and I spoke to it when you 
saw the diagram--that what is needed is up-to-date data that we 
can rely on. As you hear, technology moves quickly and changes 
in availability move quickly as well. And we felt that what was 
needed was an agency which had the autonomy and the authority 
to collect the necessary data, rapidly, and to disperse that to 
the people who need it so that you could keep up-to-date on 
what was really the situation with respect to not just rare 
earths but, in our case, many of the critical minerals.
    Chairman Miller. Dr. Duclos?
    Dr. Duclos. I would certainly agree with that, and as I 
said in my verbal testimony, you know, appointing a lead agency 
that is able to do that assessment is absolutely critical--but 
recognize that the assessment itself is just a very start and 
represents a relatively small part of actually solving the 
problem, which will involve bringing in the research into the 
various areas that I describe in my verbal testimony.
    The issue with the rare earths came on very gradually 
through the '90s, systematically but gradually, and I think 
without an agency assessing these things quantitatively over 
time, you won't see these gradual increases in the crisis level 
unless you do that.
    Chairman Miller. Anyone else? Dr. Gschneidner?
    Dr. Gschneidner. I would just sort of like to recite a 
little bit of history concerning Magnequench--which was 
established by General Motors, of course, to make motors for 
the magnets and so forth. Eventually, the Chinese bought a good 
percentage of that, and they didn't think too much about it. 
Then as they got a higher percentage of it, the union in 
Anderson, Indiana, said that they were opposed to this thing. 
The Chinese said, well, we won't move the factory out of 
Anderson for five years. Well, when the fifth year came up, 
right at the end of the time, they moved everything, lock, 
stock and barrel, out of Anderson, Indiana. So we lost lots of 
jobs. And the reason why I know that is a number of my students 
and post-docs have worked there at Magnequench. And so we know 
what happened to that, and I think the government probably 
should have interfered and said, no, we are not going to allow 
you to sell the whole thing. But again, it is the same thing as 
the other gentleman made. How do you get the warning signal out 
to the government to stop this sort of action?

                       How to Compete With China

    Chairman Miller. Thank you, Dr. Gschneidner. Mr. Smith, 
Molycorp has to compete in a market economy. China doesn't play 
by those rules and are quite willing to subsidize, provide 
funds, to develop, to mine, to make commercially available rare 
earth minerals to gain a strategic advantage. Is being in a 
subsidy war the only response that we have to the way China 
plays?
    Mr. Smith. Absolutely not, Mr. Chairman. I think our best 
attack is actually technology. Molycorp sat for about ten years 
when the Chinese came in and flooded the United States' rare 
earth markets with lots of product and low prices. We sat there 
for about ten years and whined and cried about the low wages 
that the Chinese had to pay, et cetera. We finally got over 
that, and we used our own American ingenuity to figure out 
process technologies that drastically cut our costs in 
producing these materials, and we feel that with these new 
technologies, we can in fact be the lowest-cost producer in the 
world. But we do need help in that regard. I have 17 scientists 
and engineers that are competing with over 6,000 Chinese 
scientists, and I can't find any students from any university 
in the United States that have any rare earth experience or 
curricula today.
    Chairman Miller. My time is expired, and I recognize Dr. 
Broun for five minutes.

                   Prioritizing Responses to Shortage

    Mr. Broun. Thank you, Mr. Chairman. Today's testimony 
highlighted several themes for rare earth research and 
development. We have heard about the need to reconstitute our 
Nation's rare earth knowledge base and infrastructure. 
Witnesses have highlighted the need to find new applications 
and uses for rare earths as well as identifying efficiencies in 
its production.
    We have also heard of the need to find substitutes and 
technologies that greatly reduce the use of rare earths. We 
probably won't all agree on how to prioritize these topics as I 
doubt Mr. Smith will want to focus on eliminating the need for 
a product that his company has invested hundreds of millions of 
dollars in developing. Understanding that you may disagree, how 
would you prioritize these topics and are there any additional 
areas of focus you would suggest? We will start here and go 
down. Dr. Freiman?
    Dr. Freiman. Well, I think prioritizing is quite difficult, 
and I won't attempt to do that. But one of the main outcomes of 
our committee was a recognition that what we can do in helping 
not just rare earth but other critical minerals is, as I 
mentioned earlier, is to know well in advance what the change 
in the availability will be, and I think that is a critical 
point.
    We also emphasized the need for more research and 
development and more coordination between agencies in what is 
going on so we understand what each other is doing. As most of 
you know, there was this coordination present, certainly I know 
in the materials area, for many years and it sort of has 
disappeared at the OSTP level. And putting that back together 
again and developing that kind of agency coordination in 
research and development, certainly in rare earths, and we hear 
that that is starting to go on now, but in other critical 
minerals I think is an important factor.
    Dr. Duclos. I would like to point out that there are 17 
rare earths in the periodic table, and each one of its 
applications is different. And the solution will be different 
for each one of the 17. And with that in mind, that is why we 
recommend the five solutions, going from certainly developing 
new sources, all the way to developing technologies that 
eliminate the use. It will be different, and we have seen 
within GE on materials not necessarily dealing with rare earths 
but other rare elements.
    They have to take a number of the solutions in order to 
make it all work. So I don't think there is a single answer to 
the question except that all five of these areas of work are 
absolutely needed.
    Mr. Broun. Anybody else? Mr. Smith?
    Mr. Smith. Thank you. I would concur with Dr. Duclos. I 
think that we have to balance the many needs of the rare earth 
world, and we are not adverse to finding substitutes for rare 
earths, either, contrary to what may seem quite obvious.
    But on the other hand, I can use the rare earth magnets as 
an example. The permanent rare earth magnets, the neodymium-
iron-boron type, have been around for well over 20, close to 30 
years now. We have been researching for this entire time for a 
substitute for those magnets, and we haven't found one yet. But 
that doesn't mean that we should stop. The problem we have in 
between is that we have got about a two- or three-year window 
here before a major supply gap occurs between what China can 
supply to the rest of the world and what the rest of the world 
needs for their own needs. And we need to prioritize that right 
now as an immediate need that we have to address because the 
research will take a lot of time. But we certainly advocate 
research on all aspects, including replacement.
    Mr. Broun. Mr. Stewart, quickly. I have about run out of 
time. I have another question or two I want to ask.
    Mr. Stewart. Just very quickly, while I support those 
positions, the WTO process is about a two-year process and 
should get started immediately to get our trading partners to 
honor the commitments that they have made as well.

                        Role of Federal Agencies

    Mr. Broun. OK. Thank you so much. Dr. Freiman pointed out 
in his testimony that the Federal Government should enhance the 
types of data and information it collects, disseminates, and 
analyzes on minerals and on mineral products. His committee 
also suggested the Energy Information Administration as a 
model. What agency or office should be tasked with that 
responsibility, Dr. Freiman?
    Dr. Freiman. I would point out we chose not to select an 
agency. We didn't feel that was our business.
    Mr. Broun. No recommendation whatsoever?
    Dr. Freiman. No. No. We pointed out that whoever was 
chosen, they need to have enough authority to be able to demand 
that they could collect the kind of data and information they 
need in a timely manner.
    Mr. Broun. Anybody else want to suggest an agency?
    Dr. Gschneidner. I would suggest the United States 
Geological Service. They have done an outstanding job for the 
last 20 years of pointing out this problem, with rare earths in 
particular, and I think what we need to do is to figure out how 
to communicate their results better amongst all the parties.
    Mr. Broun. Thank you. Mr. Chairman, my time is expired. I 
yield back.
    Chairman Miller. And now the regular order, the Full 
Committee Chairman, Mr. Gordon, for five minutes.
    Mr. Gordon. Thank you, Mr. Miller. You know, it is somewhat 
rare also that Mr. Miller and Dr. Broun can be in such strong 
agreement, so I think that we are onto something here and I 
want to thank the committee for being here. As Mr. Smith 
pointed out, this is the first of these type of hearings, and 
hopefully this will pull back the curtain.
    Now, in this committee, we don't have jurisdiction on WTO 
and some tax benefits and that sort of thing. So I want to try 
to bring this discussion back to what we can do here, and 
listening to you, it seems that we should appoint or anoint a 
lead agency to try to collect and assess data. We need to have 
some type of research. Although you didn't say it, I would say 
also workforce in terms of potentially through the National 
Science Foundation having fellowships and grants for those 
students that would go into the rare research area.
    And so I want to get your suggestions on what else within 
our sort of jurisdiction, which is the research and deployment, 
what public/private role should be played, and when it comes to 
research, is a research center adequate or do you have more 
than one for more different elements or do we parcel this 
around to various universities? How should we approach that? 
And I will open it up for the field.
    Dr. Duclos. One area that this agency could do is actually 
collect sensitive information. I think you can imagine, for a 
corporation that has challenges in these areas, it is not 
exactly something that we talk about publicly, and therefore 
the data collection can be done, for example, by an agency in 
confidence and then can use that data to help prioritize the 
materials that need immediate attention. And so long as that 
can lead to--as I said, the assessing of the situation is just 
the first part.
    Mr. Gordon. Well, it seems to me if you are collecting data 
and trying to determine what is immediate need, you are ten 
years behind.
    Dr. Duclos. You know, what you can do, and in fact this is 
what we do, we use this criticality diagram matrix that Dr. 
Freiman discussed to quantify where the elements are on this 
table, and then we do that annually, OK? So we can see them 
moving around. We can tell generally which direction the 
elements are going and have some hope of seeing it a little bit 
in advance what the----

                   Improving Research Infrastructure

    Mr. Gordon. Let me go back in terms of research. Would we 
want a single research center? Is there already something at 
NIST or elsewhere that we would build upon? Do we need to have 
multiple? Do we need to make this university based and what is 
the private/public sector partnerships? What should there be 
there?
    Dr. Gschneidner. I would like to address that question. 
First of all, I don't think you want to spread it out too far 
because things you have criticality as far as people, groups, 
and so forth and I think advocate a strong center which can 
then tie together research that is being carried out at other 
places and so forth, and I think a university is a good place 
to start because you can be training students which will go 
into industry eventually and help them out.
    I think one thing you don't want to do is divide the rare 
earth, the 17 elements, into 17 research centers. Even though 
they may be somewhat different, there is a lot of commonality 
in there which can be used. I mentioned earlier today that 
neodymium-iron-boron magnet here using a new process which is 
very energy efficient in green technology. We have also just 
made last week, made the measurements on a lanthanum-nickel 
hydride battery material which is very competitive with what 
you can get from industry. So what we learned there applies to 
some of the other elements.
    So I think a strong center, and it should be well-funded 
because if you underfund it, it is not going to do the job you 
want it to do.
    Mr. Gordon. And is there an existing place? Is there an 
existing Federal agency again like NIST or a national lab that 
would be a lead agency here?
    Dr. Gschneidner. Well, one possibility of course is the 
Department of Energy because they have already funding--and 
that is a critical need in this country, and possibly the 
military would be another place to fund such a center.
    Mr. Gordon. Thank you. I am sorry. We have got a vote on 
again.
    Chairman Miller. OK. In our regular order, Ms. Dahlkemper 
is recognized for five minutes.

                    Funding for Rare Earth Research

    Ms. Dahlkemper. Thank you, Mr. Chairman, and thank you to 
the witnesses for being here today. A very interesting topic of 
discussion.
    I want to just kind of go on with the Chairman's discussion 
here, Dr. Gschneidner. Right now your laboratory is being 
funded by the DOE. Where else is the DOE funding this kind of 
research in this country?
    Dr. Gschneidner. Well, a smattering of things at Oak Ridge, 
at Los Alamos. There is some up in Hanford up in there. There 
is also Argonne. You know, there are specialized areas or 
research where people are doing this. But there is really--I 
mean, we are the most coherent laboratory devoted to rare earth 
materials, but there is a lot of research being carried out. 
And also they fund a number of universities. But it is usually 
one or two groups at a university. It is very small. It is not 
critical----
    Ms. Dahlkemper. So of the percentage of their dollars going 
to this, how much of it would be going to your lab, do you 
think? Do you have any idea? Coming out of DOE.
    Dr. Gschneidner. From all of DOE? Well, I will talk from 
basically----
    Ms. Dahlkemper. You said you are the most concentrated.
    Dr. Gschneidner. Well, our laboratory gets about $16 
million. Maybe 25 percent of that might go into rare earth 
materials, different people in the laboratory, something like 
that.
    Ms. Dahlkemper. Do you think the research is adequate for 
what we need to do in terms of energy and----
    Dr. Gschneidner. No.
    Ms. Dahlkemper. Can you give me any idea by how much more 
we would need? Do you have any----
    Dr. Gschneidner. Well, I think a research center is 
something like I mentioned in here of about 30 people, full-
time equivalence. You probably should be funding that center 
alone by about $5 million per year, something like this with a 
5-year lead time to show that they can produce what they claim 
they want to do.
    Ms. Dahlkemper. Dr. Freiman, you wanted to say something?
    Dr. Freiman. Yes, briefly I was going to say one of the 
things I think we don't know is what research has been carried 
out over the past few years or even numbers of years in this 
area of rare earths. It is scattered about, National Science 
Foundation, Department of Energy, et cetera, and one of the 
things that would be nice to know right now is, you know, what 
has been done and therefore what could be done now or in the 
future in this area.
    Ms. Dahlkemper. So again, having a central lead agency that 
can collect all that data and bring that together?
    Dr. Freiman. Right.
    Ms. Dahlkemper. Dr. Duclos, did you want to say something?
    Dr. Duclos. Yeah, I just wanted to give you an idea of this 
sort of funding that it takes to solve some of these. These are 
very challenging problems. But generally, in our experience, 
and we have been through a number of challenges here in terms 
of materials, you are probably talking something between $5 and 
$50 million per element per application for a solution.
    Ms. Dahlkemper. And obviously we have huge budget concerns 
here. What would be the ramifications if we were not able to 
fund at the level you think we need to fund?
    Dr. Duclos. Well, what you do is you go through those five 
solutions. You take the shorter term ones, the quicker ones, 
and then you know, basically challenge yourself to ensure that 
you have a supply and work the best you can without doing the 
longer term, more expensive work that is the cleaner solution.

                    Domestic Sources of Rare Earths

    Ms. Dahlkemper. Mr. Smith, a question for you. Mountain 
Pass Mine. If you go back in, if you have domestic production, 
can you get all 17 rare earth minerals out of your locations 
that you have and how soon to supply the American, you know, 
the U.S. needs?
    Mr. Smith. Understood. Thank you. We have all 15 of the 
lanthanide rare earths in our ore body. We can recover nine of 
those economically at today's prices, and we can start doing 
that as early as 2012.
    Ms. Dahlkemper. And the others?
    Mr. Smith. Prices will have to go up before they are 
economic to recover.
    Ms. Dahlkemper. And then there are two that you do not have 
supplies?
    Mr. Smith. Right, yttrium and scandium.
    Ms. Dahlkemper. OK. And those are only found in?
    Mr. Smith. They are found in various places, China being 
one, Canada has some yttrium.
    Ms. Dahlkemper. OK. So they are found in other countries 
besides China?
    Mr. Smith. Correct, although not in the quantities and the 
concentrations that they are found in China.

                        Expanding U.S. Workforce

    Ms. Dahlkemper. I did want to ask you just one more 
question. I have just a few seconds left here, but if I am back 
talking to students in my district, because you talked about 
having an issue with not being able to find the educated people 
that you need to work in your industry; what should I tell them 
to do?
    Mr. Smith. Tell them to go into rare earths and that we 
would like to hire them as interns as soon as possible. We can 
use all the people that we can get that have rare earth 
experience. We found none when we went out to hire, and we went 
ahead and took a risk, hired people with zero experience and 
about three-and-a-half years later, they became very productive 
in our organization.
    Ms. Dahlkemper. And are there programs out there in 
different educational institutions----
    Mr. Smith. No, they will have to be established.
    Ms. Dahlkemper. OK. Thank you very much.
    Mr. Smith. Thank you.
    Chairman Miller. Thank you. Mr. Coffman is now recognized 
for five minutes.

                     Dependence on Foreign Products

    Mr. Coffman. Thank you, Mr. Chairman. Mr. Smith, I come to 
the rest of the panel, so I come to this committee via being on 
the Armed Services Committee where I became alarmed about the 
need and the supply for rare earth elements for advanced 
weapons systems.
    The one question that I have, Mr. Smith, to ask you a 
question, even if the Mountain Pass Mine is reopened, will the 
United States still be dependent upon foreign rare earth 
products? I think you mentioned there are two that we would 
still be dependent on.
    Mr. Smith. Yttrium and scandium, yes. And we would still be 
dependent on other countries like China for portions of our 
supply needs. For instance, dysprosium is a very critical rare 
earth element needed for neodymium-iron-boron magnets. It is 
part of the alloy, and it allows the magnet to be used in a 
higher temperature application. Mountain Pass can produce a 
quantity of that material, but it will likely not be enough to 
suit the full needs of the United States relative to the hybrid 
vehicle industry.
    Mr. Coffman. OK. Because I read an analysis where at full 
production that your mine could produce 20,000 tons of rare 
earth metals or elements. Is that figure correct?
    Mr. Smith. That is correct. That is our design capacity 
right now, and we can, with existing permits in hand, we can 
actually double that production to 40,000 tons per year.
    Mr. Coffman. How long would it take you to get to full 
production?
    Mr. Smith. We think it would take us until about the middle 
of 2012 to reach our full, 20,000 ton, design capacity right 
now.
    Mr. Coffman. But I understand, if I hear some of the 
testimony from today is that China, its demand will meet its 
supply in the vicinity of 2012 and that we will have to 
drastically curb exports. Am I correct in that?
    Mr. Smith. That is very, very accurate. The problem will 
be, they will produce enough for themselves, and it will be the 
rest of the world that has to find their alternative supply.
    Mr. Coffman. Anybody else on the panel? Yes?
    Dr. Gschneidner. I would like to address this product of, 
you know, yttrium and scandium, for example. The Canadians have 
several mines up there which are rich, and of course, the 
disposing point that Mark pointed out, but they are a little 
bit behind Molycorp in getting their products up. So I mean, as 
far as I am concerned, maybe the Canadians will like it. They 
are almost another state of the United States. Actually, there 
is no problem getting materials from them.
    Australia has some mines. We have a representative right 
back here from the Australian group, and they have several good 
mines with materials and they are probably about a year or two 
behind Molycorp, so these materials are coming.
    Scandium is a little bit rarer but a lot of it comes from 
Russia. China has some, too, but I don't think it is a real 
critical problem, but it could be in the future. We don't have 
much scandium. There aren't very good ore sources of scandium. 
That is the problem, I think.

                  Maintaining a Complete Supply Chain

    Mr. Coffman. It would seem that the first phase of that 
supply chain in terms of mining, it seems that Molycorp may be 
able to bridge the gap in terms of China. But I also have a 
concern about the other levels of the supply chain in terms of 
the processing, and it seems that we have a real deficit in 
that area, and I think Dr. Gschneidner, I think you had 
mentioned the plant in Indiana that was moved to China. And so, 
can somebody speak to where we are in terms of that next step 
in the supply chain in terms of processing? Mr. Smith, would 
you like to address that first?
    Mr. Smith. Thank you, Congressman Coffman. To my knowledge, 
there are not a whole lot of activities in that regard, other 
than Molycorp's mining-to-magnets strategy where we will put in 
the conversion capabilities to go from oxides to metals. We 
will have the capability of taking the metals and alloying 
them, and we will have the capability of producing neodymium-
iron-boron magnets here in the United States.
    Mr. Coffman. That is great. Yes?
    Dr. Gschneidner. Well, as I told you, we were preparing 
these neodymium-iron-boron magnet material, and that was one of 
the things we had come up with--a new process for making these 
metals. And Molycorp, of course, is quite interested and wants 
to obtain licenses for our technology but will also bring in a 
battery. So we are already solving part of that problem, but we 
are training people, too, at the same time. So this will help 
the supply train down the road. But again, it takes four years 
to get a Ph.D. out and two years for a Master's, so you just 
can't hit a light switch button and they pop up. But there are 
people out there that are reasonably well-trained and could 
move in pretty fast.
    Mr. Coffman. Mr. Chairman, I am afraid I am out of time. I 
yield back.

                   Keeping Manufacturing in the U.S.

    Chairman Miller. Thank you, Mr. Coffman. I will now 
recognize myself for a second round of questions. I agree with 
Mr. Coffman. I am worried about sophisticated weapons systems 
that may need rare earth minerals, but I am also concerned 
about manufacturing jobs. My part of North Carolina has seen 
the loss of a great many manufacturing jobs that were less-
skilled, cut-and-sew jobs in the apparel industry, but our hope 
has been to replace those jobs with highly skilled jobs in very 
sophisticated, innovative industries.
    China seems to be using the leverage of their rare earths 
to say if you need these minerals, these rare earth minerals in 
your products, come build your plant here. Mr. Stewart, you are 
nodding. This is the area you work in. What can we do to 
respond to that?
    Mr. Stewart. Well, it is unusual for a country that has 
joined the WTO to take on specific obligations in the export 
arena because most countries do not maintain these types of 
restrictions or impediments. So just as the United States has 
brought the first case dealing with, I think, eight or nine raw 
materials that are used in steel and aluminum and chemicals, 
the most direct approach is to take a second case, at least on 
rare earth products, to the WTO. It is a process that could 
take two years to resolve, but the resolution of that should be 
a very clear finding that China is not permitted to close its 
markets. It is doing this in a whole range of products. There 
was an article in the New York Times yesterday talking about 
how China is taking advantage of the rules in the WTO and the 
rules in the IMF to maximize their advantage.\9\ Well, that is 
what countries should do. They should be looking after their 
own interests. As a commercial power, we should be looking 
after our interest which is to see that China is not allowed to 
violate the commitments they have made without their being a 
cost, and the cost is to bring them in line, which would 
require them to take the taxes off, take the quotas off, and in 
fact make the products available to the highest bidders 
globally as most raw materials are done.
---------------------------------------------------------------------------
    \9\ Keith Bradsher. ``China Uses Rules on Global Trade to Its 
Advantage.'' New York Times, March 15, 2010: pp. A1, A10.
---------------------------------------------------------------------------

                   Balancing Private and Public Needs

    Chairman Miller. Industry's need seems to be more of a 
short-term solution how to get production started again. 
Government seems to be more focused on what the long-term risk 
is of not having these minerals available. How can we kind of 
allocate our time and energy between industry and government to 
address both? Dr. Duclos.
    Dr. Duclos. Well, actually, I would say that industry's 
interest is both short and long term. To the point earlier, I 
think an answer is technology, technology in developing systems 
and materials technologies that reduce the use of the material, 
technologies that involve recycling because, as I think 
everyone has seen, even if we develop all the sources of the 
rare earths that we--and it depends a little bit, rare earth by 
rare earth. But even if we develop all the sources of rare 
earths that we see around the world today, we are still not 
going to have enough in the sort of 5- to 10-year timeframe.
    The solution is to minimize the use of these materials and 
develop those technologies. That is the long-term solution. The 
short-term solution is to certainly develop these sources which 
we absolutely need, but the long term is to do the technology 
development, recycling materials development.
    Chairman Miller. I will yield back my remaining 40 seconds. 
Mr. Coffman, do you have an additional round?

                      Chinese Industrial Strategy

    Mr. Coffman. Thank you, Mr. Chairman. Just to any Member of 
the Committee, this strategy which China has deployed to secure 
really what is a strategic resource for its domestic industry, 
is this in any way calculated to rare earth metals that is 
different than any other commodity that China seeks to control 
for its own industrial base, in your view? Yes, Mr. Stewart.
    Mr. Stewart. Well, it is similar to some of the strategies 
they have employed on other products where they have a dominant 
share of global supply, but there are specific documents that 
have come out at the provincial and central government level, 
both laying out their strategy to be dominant players in these 
products and the downstream use of those products and to force 
investment through these kinds of strategies. So while it is 
similar to what they have been trying to do in some others 
because these are perceived as high-growth sectors, obviously 
is the reason that it is of such great concern to us and many 
other countries.
    Mr. Coffman. Very well. Anybody else? Mr. Smith?
    Mr. Smith. I guess it wouldn't be a full rare earth hearing 
if we didn't hear this quote, but there was a Chinese premier 
back in the 1980s that said the Middle East has oil and China 
has rare earths.
    Mr. Coffman. Anybody else? Thank you so much for your 
testimony today. Mr. Chairman, I yield back the balance of my 
time.

                 Funding Models for Materials Research

    Chairman Miller. Thank you. Mr. Smith, when you said there 
was a Chinese from here, I thought you were starting a 
limerick.
    I will now recognize myself for five minutes, although I 
will not use five minutes. With other technologies we need to 
develop, we feel some urgency about developing high-speed 
computing and nanotechnology. We do instruct OMB to publish, to 
make budget requests for all agencies contributing to the 
programs as a whole and publish an explanation with the 
President's request to Congress. Is that a model that we should 
follow for materials research for rare earths? Any of you? Not 
a topic you have thought a lot about. OK.
    Then I think, Mr. Coffman, unless you want another round of 
questioning?

             Timeframe for Re-Starting Domestic Production

    Mr. Coffman. Mr. Chairman, yes, I have a question for Mr. 
Smith. I understand so we are talking full production in your 
California mine by 2012?
    Mr. Smith. Correct, the middle of 2012.
    Mr. Coffman. And obviously you seem to be the only game in 
town in the United States. Am I correct in that?
    Mr. Smith. So far that is correct.
    Mr. Coffman. Now, is there anything that, I mean, 
unforeseen--not necessarily unforeseen. You can't control that. 
But is there anything that would in fact inhibit you or delay 
that capability of bringing that mine on line at that 20,000 
ton capability?
    Mr. Smith. There is only one thing that the company needs 
right now, Congressman Coffman, and that is the capital to put 
the project into play, and that is what we are working on very 
hard as we speak.
    Mr. Coffman. How hard is that? I mean, in your view, how 
hard is that?
    Mr. Smith. I think that there will be challenges just 
because of the current climate in the banking industry where 
project financing is a very difficult way to finance things 
right now. If you can get the money at all, it is going to be 
at very high interest rates and it is going to be at very short 
terms, and that is where the DOE loan guarantee program comes 
in to help the problem because they do offer lower interest 
rates and longer payback periods, and that is a much more 
attractive form of capital to use.
    Mr. Coffman. So in your view, that would seal the deal in 
terms of your ability to go forward?
    Mr. Smith. There is no doubt in my mind.
    Mr. Coffman. Give me a timeframe because it seems to me 
that we have a problem here in the sense that if in fact these 
timeframes are right where China, its demand catches up with 
the supply in 2012, and I have heard that from a variety of 
sources.
    Mr. Smith. Right.
    Mr. Coffman. Your mine needs to come on line in the 
vicinity of 2012, and you think you could have full production 
of 20,000 tons which meets the U.S. demand for the rare earth 
elements that you would produce out of your mine. If in fact 
those things don't occur, it would seem to me that that would 
be an extraordinary escalation of price in these rare earth 
elements because where in fact would we get them from at that 
time?
    Mr. Smith. There would only be one place, although there 
are other mines that are certainly trying to open right now in 
other countries. But we are the only game in the United States 
right now. It is absolutely imperative that we get this 
operation up and running by 2012. The one thing I have learned 
in my 28 years in this business is that forecasters are never 
accurate in what they forecast, so is it precisely 2012 or is 
it 2013, 2014, I don't know. But I think that we can meet the 
window given the trends that we see today, but we do need to 
get going on our project and get going on it immediately.
    Mr. Coffman. Mr. Smith, according to your business plan, 
when do you have to have your financing in place in order to be 
in full production in the vicinity of 2012?
    Mr. Smith. It would have to be in place this summer in 
order to have the full production on line and running by the 
middle of 2012. Every day we do not have the financing in 
place, it will be another day or so delay on the other end.
    Mr. Coffman. OK. Thank you, Mr. Chairman. I yield back the 
balance of my time.
    Chairman Miller. Thank you, Mr. Coffman. I think that is a 
fine note to end on, Mr. Coffman's call for a more active role 
for government in the economy. And before we bring the hearing 
to a close, I want to thank our witnesses for testifying before 
the Subcommittee today. Under the rules of the committee, the 
record will remain open for two weeks for additional statements 
from the members and for answers to any follow-up questions the 
Subcommittee may have for the witnesses and for the submission 
of extraneous materials. The witnesses are excused, and the 
hearing is now adjourned.
    [Whereupon, at 3:25 p.m., the Subcommittee was adjourned.]
                               Appendix:

                              ----------                              


                   Answers to Post-Hearing Questions




                   Answers to Post-Hearing Questions
Responses by Stephen Freiman, President, Freiman Consulting, Inc.

Questions submitted by Chairman Brad Miller

Q1.  In developing the ``criticality matrix,'' and in applying it to 
the test cases discussed in the report, your committee appears to have 
gone through many of the steps that an ``early warning'' organization 
would take. If that's true, what should Congress learn from your 
experience that it can apply in setting up similar capabilities within 
the Government?

A1. To use the matrix as a tool in an early-warning system, the 
evaluation method must be become more quantitative. That is, it will be 
important to base the placement of minerals within the matrix on more 
quantitative indicators of supply risk and impact of a supply 
disruption than the committee was able to do in its testing of the 
matrix (e.g., to employ and adapt the matrix in a manner similar to the 
approach used by General Electric). As I noted in my testimony, the 
matrix is only as good as the input data. The Federal Government's 
access to data and information about some of the rarer minerals and 
metals will need to improve because at present many of these markets 
are not very transparent (e.g., rare earths, antimony, indium, etc.). 
As the committee noted in its recommendations, whatever agency is 
tasked with collecting mineral data, it must have the authority to 
require such submissions, as occurs with Principal Statistical Agencies 
such as the Energy Information Agency.

Q2.  If the ``early warning systems for material supply problems'' 
required under the National Materials and Minerals Policy Act of 1980 
are finally established, which Federal agencies should play a role in 
them, and what roles should they play?

A2. The 1980 Act calls out the Departments of the Interior, Commerce, 
and Defense as having principal roles. I would add the Department of 
Energy and the National Science Foundation(?), and possibly the 
Department of Transportation, since a number of applications of 
critical minerals relate to automobiles, etc. The roles of each of the 
agencies will differ, e.g. Interior (USGS) would be expected to play 
the lead role in collecting and analyzing mineral data, Commerce would 
have a dual role, through NIST in measurement and fundamental data and 
through Commerce's role in analyzing international trade. An important 
aspect in implementing the 1980 Act would be to reestablish a 
coordination of activities of the agencies through OSTP.

Q3.  As the former deputy director of the National Institute of 
Standards and Technology's Materials Science and Engineering 
Laboratory, how would you say the Laboratory can contribute to a 
national research program for rare earth minerals?

A3. The mission of the NIST laboratories is to conduct research that 
advances the nation's technology infrastructure. As such, within the 
Materials Science and Engineering Laboratory there are ongoing efforts 
in developing and maintaining databases on crystal structure and phase 
diagrams, both of which will be important in any research program on 
rare earths.
    In addition, the Technology Innovation Program provides cost-shared 
awards to industry, universities, and consortia for research on 
potentially revolutionary technologies that address critical national 
and societal needs.

Q4.  Given your knowledge of Federal capabilities in materials 
research, which agencies would you see as able to contribute to the 
development and execution of a research program as called for by the 
1980 Act (30 U.S.C. 1603 (2))?

A4. As the committee noted in its recommendations, and included in my 
testimony, a number of Federal agencies, including the National Science 
Foundation, Departments of the Interior, Defense, Energy, and Commerce 
should develop and fund activities to encourage U.S. innovation in the 
area of critical minerals. These same agencies should coordinate such 
programs as noted in number (2) above.
                   Answers to Post-Hearing Questions
Responses by Steven J. Duclos, Chief Scientist and Manager, Material 
        Sustainability, General Electric Global Research

Questions submitted by Chairman Brad Miller

Q1.  What information does the Government need, and what information 
should government and users of minerals be sharing, in order to 
maximize the lead times it will have for deciding which of the 
strategies you described at the hearing should be pursued in a 
particular case?

A1. From a manufacturing perspective the sourcing, recycling, 
manufacturing efficiency, materials substitution, and systems 
strategies outlined in my testimony will only be carried out on 
materials that the U.S. considers both critical to the country's 
defense and manufacturing base and at risk from a supply and demand 
perspective. To assess which materials fall into this category an 
assessment could be done that is similar to the one proposed by the 
National Research Council in Minerals, Critical Minerals, and the US. 
Economy in 2008. The government would need to update and expand the 
list of elements considered by the NRC panel, but the assessment 
metrics used by this panel remain viable. Collection in confidence of 
anticipated future use of materials by industry in the three to five 
year timeframe, as well as augmenting current supply information 
collected by USGS with anticipated future supplies, would greatly 
improve the accuracy of evaluation of future supply and demand risks. 
For those materials deemed to be at greatest risk the government could 
then solicit business and technology solutions along the strategies 
outlined in my testimony. Government support of the longer term, higher 
risk solutions would enable industry to pursue a greater breadth of 
solutions that would minimize the risk of disruption to U.S. 
manufacturing. By completing this assessment annually the government 
would better understand the progression of elements along the 
criticality diagram, which could lead to an early warning on future 
risks.

Q2.  If GE were interested in partnering with an academic institution 
or a government facility to develop a substitute material (or find a 
replacement) for something like Rhenium, what would it be looking for 
in that partner and what resources would that partner bring to the 
collaboration?

A2. Pre-competitive information, such as materials property databases, 
material property testing capability, and basic understanding of 
material behavior in systems is important to accelerate the insertion 
of new and substitute materials into OEM systems. Specific details of 
resources that a partner could bring to such a collaboration would 
depend greatly on the material to be reduced since each substitution 
effort tends to be unique to both the element and the application.

Q3.  Would General Electric's materials scientists be interested in 
collaborating with the type of Centers proposed by Dr. Gschneidner?

A3. Since GE uses permanent magnets in a wide array of products the 
company would welcome the opportunity to participate in the type of 
Center that Dr. Gschneidner has proposed. In addition to providing 
material science know-how, the company would provide a critical role in 
ensuring that the properties, cost, and reliability of developed 
substitute materials and processes are compatible with the systems in 
which they would be used.

Q4.  As you serve as the ``early warning system'' for General Electric, 
what advice would you give a counterpart in the Federal Government 
trying to provide the same service for the Nation?

A4. The assessment of risks related to supply and demand should be made 
as quantitatively as possible. National and international data is 
available on both the supply and demand sides of the equation, and 
development of a quantitative risk rating, similar to that discussed in 
the invited contribution to this hearing Operationalizing the Concept 
of Criticality by Dr. Thomas Graedel of Yale University, would aid 
building the risk assessment. Such an assessment should include a 
specific recent elemental challenge, perhaps one from among the rare 
earths. Comparison of the position on the criticality diagram of this 
recent elemental risk would provide a useful relative level of risk of 
the other elements assessed. In addition, future material supply 
scenarios, akin to those built for economies, could be built for those 
elements and materials indicated to be at high risk on the criticality 
diagram. Such scenario building may help elucidate which of the risk 
reduction processes are most likely to lead to a solution. Finally, 
since the assessment is only the start of the process it needs to be 
done expeditiously, to allow time for new sources, recycling, efficient 
manufacturing, and material research on substitutions to be developed.

                   Answers to Post-Hearing Questions

Responses by Karl A. Gschneidner, Jr., Anson Marston Distinguished 
        Professor, Department of Materials Science and Engineering, 
        Iowa State University 

Questions submitted by Chairman Brad Miller

Q1.  What level of funding would you consider necessary to support the 
two Centers you proposed in your testimony?

            NATIONAL RESEARCH CENTER ON RARE EARTHS AND ENERGY

A1. The National Research Center on Rare Earths and Energy (NRCREE) 
should be composed of five research groups covering the following five 
areas of greatest need:

        1.  Process Metallurgy and Scrap Recovery

        2.  Permanent Magnet Materials

        3.  Battery and Electronic Materials

        4.  Catalytic Materials

        5.  Materials for Nano Science and Nano Technology

    A typical research group would consist of a group leader; staff 
scientist(s); post-doctoral, graduate and undergraduate students; 
technical and secretarial support.
    The NRCREE would also have critical in-house analytical chemistry 
and characterization expertise (x-ray diffraction, and optical, 
electron, atomic force and magnetic force microscopy) as a support 
group shared by all research groups.
    NRCREE would also initiate and support projects in important areas, 
not covered by the five research groups at other universities, non-
profit research groups, national laboratories, and industry. Some 
potential topics may be separation science, optical and photonic 
research, organometallic chemistry, analytical chemistry.
    NRCREE would have a full-time director and a part-time associate 
director (probably one of the group leaders), an advisory board made up 
of representatives of the university, government, industry and general 
public.
    The cost would be $10M per year. The Center should be funded for 
five years and reviewed in its fourth year for extension for an 
additional five year term.
    The NRCREE would need a new building for offices and laboratories. 
There would be some special space requirements for the Process 
Metallurgy and Scrap Recovery Group because it would be involved in 
scaling up metallurgy production from laboratory size to bench scale to 
a full pilot plant scale. In addition a special handling facility would 
be needed for hydrofluoration process, which uses hazardous HF 
(hydrogen fluoride) gas, to prepare the fluorides which are later 
reduced to the metals. The cost of this building is $60M.

            NATIONAL RESEARCH CENTER FOR MAGNETIC COOLING

    The National Research Center for Magnetic Cooling (NRCMC) would be 
a fully integrated center devoted to bringing the energy efficient 
magnetic cooling (air conditioning/climate control, refrigeration and 
freezing) from the exploratory stage to commercial products. Today 
there are about 30 individual (a few persons at the most) laboratories 
scattered around the world (including about 5 in the USA) working on 
various aspects related to magnetic refrigeration but there is only one 
group (Denmark) which is concerned with the complete technology. The 
NRCMC would consist of five research groups devoted to the following 
areas:

        1.  Modeling and Theory

        2.  Magnetocaloric Materials

        3.  Regenerator Design and Fabrication

        4.  Magnetic Arrays

        5.  Cooling Machines

    A typical group would consist of a group leader; staff 
scientist(s); post-doctoral, graduate and undergraduate students; 
technical and secretarial support.
    The NRCMC would also have a key characterization capabilities (x-
ray diffraction; optical, electron, atomic force and magnetic force 
microscopy; and magnetic property and thermal transport measurements) 
support group.
    NRCMC would also initiate and support projects in important areas 
not covered by the five research groups at other universities, non-
profit research groups, national laboratories, and industry. Some 
topics might be exploratory research on special fabrication techniques 
and unusual magnetocaloric materials.
    NRCMC would have a full-time director and a part-time associate 
director (probably one of the group leaders), an advisory board made up 
of representatives of the university, government, industry and general 
public.
    The cost would be $9M per year. The Center should be funded for 
five years and reviewed in its fourth year for extension for an 
additional five year term.
    The NRCMC would need a new building for offices and laboratories. 
Some special facilities would need to be considered, for example 
fabrication equipment for fabrication of regenerators, and machine 
shops for prototyping cooling machines. The cost of this building is 
$50M.

            SPECIAL COMMENTS

    The above estimates were made on the assumption that the two 
Centers would not be co-located. If, however, they were located on the 
same campus, they should be combined into one building which would 
result in some cost savings. For example, the operating expenses would 
be reduced because the NRCREE and NRCMC could share the 
characterization support group personnel and facilities, also the 
administrative cost could be reduced, i.e. instead of a sum of $19M per 
year, the operating costs for the two Centers it could be reduced to 
$18M per year. Also the cost of the buildings, one instead of two, the 
combined building would be $95M (compared to $110M for separate 
buildings).
    There are also additional advantages because persons carrying out 
research and development activities on permanent magnets in the NRCREE 
would have access to the NRCMC scientists and engineers designing 
permanent magnet arrays and vice versa, this would be an important 
synergism. There may be some other indirect interactions, but there is 
essentially no overlap between the missions of the two Centers.

Q2.  Which Federal Agencies, other than the Department of Energy, could 
contribute to the research programs you would contemplate for the 
proposed Centers?

A2. The Department of Defense (DOD) and National Institute for Science 
and Technology (NIST) are logical choices of Federal agencies which 
could contribute to the research programs of NRCREE and NRCMC. For 
example, at the present time the Office of Naval Research (DOE) is 
funding a project for cooling electronic hardware on seafaring vessels, 
and the U.S. Air Force has funded a few (at least one) SBIR for 
magnetic cooling below about 200 C. As far as I am aware NIST has one 
internal (quite small) project on magnetic cooling. All three of these 
projects would complement research carried out at the NRCMC.

Q3.  Given your knowledge of Federal capabilities in rare earths 
research, which agencies do you regard as able to contribute to the 
development and execution of a research program as called for by 
Section 1603(2) of the National Materials and Minerals Policy Act of 
1980?

A3. The best Federal agency to develop and execute a research program 
called for by Section 1603(2) of the National Materials and Minerals 
Policy Act of 1980 would have been the U.S. Bureau of Mines, Department 
of Interior, but unfortunately all of the research laboratories were 
closed down in 1995 when the Bureau of Mines went out of existence. 
Today there is no Federal agency that could easily undertake the tasks 
required in Section 1603(2). But with some realignment and priority 
changes one of the following Federal agencies should be able to 
accomplish the goals of this act: DOE, DOD, NIST and NSF.
                   Answers to Post-Hearing Questions
Responses by Mark Smith, Chief Executive Officer, Molycorp Minerals, 
        LLC

Questions submitted by Chairman Brad Miller

Q1.  As you are planning to operate throughout the rare earths supply 
chain, can you tell us what processes in your production chain need 
immediate increases in R&D support?

A1. Re-establishing for America a domestic ``mining-to-magnets'' supply 
chain, on which Molycorp is focused virtually round-the-clock, involves 
deploying five fundamental steps of production: 1) rare earth mining 
and milling; 2) oxide production; 3) oxide-to-metals production; 4) 
metal alloying; and 5) magnet manufacture. All of these steps are 
integrally linked to one another, and failure at any one step will 
prevent the U.S. from building a full domestic supply chain. Molycorp 
is investing significant capital and research and development across 
all five steps of production. The new technologies and processes that 
we are developing and seeking to deploy at each step of production are 
contributing to lowering production costs and improving environmental 
performance. In other words, we are finding that investment in 
``green'' process technologies at each step of production is a key 
driver to lowering costs and will help the U.S. become the low-cost 
producer of rare earth materials and products. This is why investment 
is needed across the entire production chain, as opposed to any single 
step.

Q2.  Would you be interested in collaborating with the type of Center 
Dr. Gschneidner proposed at the hearing?

A2. Absolutely. As I testified, virtually all analyses show that the 
U.S. and the world will need both to increase production of rare earth 
materials and products as well as find economic paths to rare earth 
recycling and substitution technologies.


Questions submitted by Representative Kathleen Dahlkemper

Q1.  If you are successful in developing the new magnet production 
capability, how likely are we to see a repeat of the Magnaquench 
episode, where the Defense Department and General Motors set up a 
domestic magnet producer only to see its facilities shipped off to 
China?

A1. Molycorp is committed to establishing and operating the entire rare 
earth magnet supply chain on U.S. soil. If we are successful in 
establishing this supply chain, and if we are able to compete 
successfully in the global market--as we are confident of doing--the 
odds of another Magnaquench happening as a result of investment in our 
project are practically zero. That is because we, as a company, believe 
very strongly that America's national and economic security demand that 
the entire rare earth magnet supply chain be established and maintained 
here in America. This is our goal and our commitment.

Q2.  What will guarantee that the benefits that come from investing in 
your project will be captured for and kept in the U.S. domestic 
economy?

A2. If Molycorp is successful in re-establishing a domestic mining-to-
magnets supply chain on U.S. soil, then the benefits of that supply 
chain will clearly flow to the U.S. economy, including re-establishing 
a manufacturing base for many end-use products using rare earth 
elements. Moreover, studies have clearly shown that research and 
development activities closely follow industrial bases. Hence, our 
establishment of the entire supply chain will actually foster research 
related activities relating to rare earths. Perhaps more importantly, 
the U.S. will reap substantial long-term benefits from a reduction of 
our dependence on foreign countries for these strategic materials.
                   Answers to Post-Hearing Questions
Responses by Terence Stewart, Esq., Managing Partner, Stewart and 
        Stewart

Questions submitted by Chairman Brad Miller

Q1.  What are the leading trade considerations that should shape a U.S. 
national policy for minerals and materials?

A1. Any new U.S. policy on minerals and materials would presumably be 
focused on tracking (1) use and anticipated growth in demand, (2) 
availability, (3) development of additional sources, (4) development of 
alternative products and (5) risks to availability.
    WTO rules already in place should reflect the types of trade 
considerations of importance to the U.S. and any policy it has or 
develops on minerals and materials to increase availability (Item 2). 
These rules could be bolstered by ongoing negotiations within the WTO 
(Doha negotiations) and in bilateral and plurilateral talks with major 
trading partners.
    As a general matter, international trade rules and ongoing 
negotiations look to open markets and limit restrictions on access to 
materials and to limit distortions flowing from government largesse. 
While there are exceptions that can be important from a national 
security perspective, the key element of a proactive policy is the need 
to eliminate discrimination in availability of products or access to 
markets or raw materials.
    More specifically, Article I of GATT 1994 deals with most favored 
nation treatment of goods on a market access perspective (this means no 
discrimination between WTO members); Article III of GATT 1994 requires 
the provision of national treatment (requiring governments to treat 
foreign goods the same as domestic goods once imported) and Article XI 
of GATT 1994 seeks to eliminate limitations on both imports and exports 
outside of duties, taxes and other charges. Moreover, some countries in 
their accession protocols have undertaken specific commitments not to 
apply export taxes or duties. This includes China as it pertains to 
rare earth minerals, as my testimony at the hearing reviewed.
    Hopefully, the current U.S. challenge to China's export duties, 
quotas and licensing requirements on certain raw materials that are not 
rare earth minerals will confirm the vitality of these considerations 
vis-a-vis China within the WTO. If China fairly implements any adverse 
determination, that may eliminate at least one source of trade concern 
for the U.S. on minerals and materials.
    Probably it will be necessary for the U.S. to bring a second WTO 
case against China dealing with rare earth minerals, to provide 
additional pressure on China, and to provide a path forward to a 
positive resolution of the rare earths dilemma faced by the United 
States.
    There are trade considerations as well for subsidies which can, of 
course, be used to develop capacity, new uses and alternative materials 
(issues (1), (3) and (4) above). Trade considerations prohibit export 
subsidies for most countries and subsidies which are ``contingent, 
whether solely or as one of several other conditions, upon the use of 
domestic over imported goods.'' Article 3.1(b) of the Agreement on 
Subsidies and Countervailing Measures. At the same time, domestic 
subsidies for mineral and materials production and development are 
permitted where such subsidies are either general in reach or not 
causing injury to foreign producers (serious prejudice; nullification 
or impairment of benefits; injury to the domestic industry of another 
member). The U.S. should be vigilant in pursuing trade actions against 
trading partners who engage in the use of prohibited subsidies or use 
domestic subsidies in a manner harmful to U.S. manufacturing. This is 
particularly true for minerals and materials.

Q2.  Which elements of the nation's trade apparatus should participate 
in or contribute to the development of the ``early warning system'' for 
materials and minerals bottlenecks discussed at the hearing?

A2. The U.S. Trade Representative's office prepares annually a National 
Trade Estimate in cooperation with input from other government agencies 
and our embassies and consulates overseas and information from the 
business community reviewing barriers to U.S. exports. Actions and 
policies by many of our trading partners are reviewed annually. This 
report could be modified to have a section within the overall report as 
well as a section in every country that looks at actions by foreign 
governments that affect any of the five policy issues on minerals and 
materials.
    In addition, the U.S. Department of Commerce and the U.S. Trade 
Representative put out an annual report on subsidy practices of our 
trading partners. In the past, the report has focused on particular 
industries where there was Congressional interest. Requiring a section 
in this report that examines the subsidy practices of trading partners 
on minerals and metals would be an important step to take.
    Finally, historically there has been a so-called ``special 301'' 
provision in law to address annually concerns on intellectual property 
laws and protections amongst our trading partners. Through a statutory 
change, a special 301 provision could require an annual evaluation of 
government policies affecting availability, non-discrimination, 
national treatment, development and subsidy issues and require 
consultations with nations viewed as creating artificial barriers to 
minerals and materials.

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