[Senate Hearing 111-750]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 111-750
 
                              RARE EARTHS

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

                                HEARING

                               before the

                         SUBCOMMITTEE ON ENERGY

                                 of the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                                   TO

EXAMINE THE ROLE OF STRATEGIC MINERALS IN CLEAN ENERGY TECHNOLOGIES AND 
   OTHER APPLICATIONS, AS WELL AS LEGISLATION TO ADDRESS THE ISSUE, 
  INCLUDING S. 3521, THE RARE EARTHS SUPPLY TECHNOLOGY AND RESOURCES 
                       TRANSFORMATION ACT OF 2010

                               __________

                           SEPTEMBER 30, 2010


                       Printed for the use of the
               Committee on Energy and Natural Resources



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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

BYRON L. DORGAN, North Dakota        LISA MURKOWSKI, Alaska
RON WYDEN, Oregon                    RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota            JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana          SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington           JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey          JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas         ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
EVAN BAYH, Indiana                   JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan            BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
               McKie Campbell, Republican Staff Director
               Karen K. Billups, Republican Chief Counsel
                                 ------                                

                         Subcommittee on Energy

                  MARIA CANTWELL, Washington, Chairman

BYRON L. DORGAN, North Dakota        JAMES E. RISCH, Idaho
RON WYDEN, Oregon                    RICHARD BURR, North Carolina
MARY L. LANDRIEU, Louisiana          JOHN BARRASSO, Wyoming
ROBERT MENENDEZ, New Jersey          SAM BROWNBACK, Kansas
BERNARD SANDERS, Vermont             JROBERT F. BENNETT, Utah
EVAN BAYH, Indiana                   JIM BUNNING, Kentucky
DEBBIE STABENOW, Michigan            JEFF SESSIONS, Alabama
MARK UDALL, Colorado                 BOB CORKER, Tennesse
JEANNE SHAHEEN, New Hampshire

    Jeff Bingaman  and Lisa Murkowski are Ex Officio Members of the 
                              Subcommittee



                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Brehm, Peter, Vice President of Business Development and 
  Government Relations, Infinia Corporation, Kennewick, WA.......    24
Cantwell, Hon. Maria, U.S. Senator From Washington...............     1
Eggert, Roderick G., Professor and Division Director, Division of 
  Economics and Business, Colorado School of Mines, Golden, CO...    16
Risch, Hon. James E., U.S. Senator From Idaho....................     5
Rufe, Preston F., Formation Capital Corporation, Salmon, ID......    21
Sandalow, David, Assistant Secretary, Policy and International 
  Affairs, Department of Energy..................................     6

                               APPENDIXES
                               Appendix I

Responses to additional questions................................    39

                              Appendix II

Additional material submitted for the record.....................    61




                               RARE EARTHS


                      THURSDAY, SEPTEMBER 30, 2010

                               U.S. Senate,
                            Subcommittee on Energy,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:05 a.m. in 
room SD-366, Dirksen Senate Office Building, Hon. Maria 
Cantwell presiding.

  OPENING STATEMENT OF HON. MARIA CANTWELL, U.S. SENATOR FROM 
                           WASHINGTON

    Senator Cantwell. Good morning. The Subcommittee on Energy 
of the Energy and Natural Resources Committee will come to 
order.
    I thank everyone for being here today.
    The purpose of this hearing is to explore the role of rare 
minerals in clean energy technologies and other applications. 
It is also to understand the ramifications and vulnerabilities 
of U.S. dependence on overseas sources of these materials and 
what kind of corrective policies are appropriate.
    When people think of strategic minerals for modern 
technology, they are also thinking of the so-called rare earth 
elements, 17 elements on the periodic table with strange names 
like samarium, promethium, and europium. Rare earths are 
employed in a wide range of high-tech products that are 
increasingly essential to our modern lifestyles and our future 
economic growth and national security.
    Rare earth elements undergird our daily lives. They are 
used in the catalytic converters in cars we drove here today. 
They are the catalysts that petroleum refiners use to make 
gasoline that went into the cars. They are found in televisions 
that we watched this morning and in the BlackBerries that some 
people in the audience are using right now.
    They are essential to our national security. They are used 
in defense applications, including jet fighter engines, missile 
guidance systems, anti-missile defense, and communications 
satellites.
    Then there is the particular emphasis of today's hearing: 
clean energy technology.
    Here too, rare earth elements are finding wide application, 
particularly in the most efficient, cutting-edge applications, 
including rechargeable batters for electric vehicles, 
generators for wind turbines, and glass for solar panels.
    Beyond the official rare earths are numerous other 
strategic minerals that also play a critical role in modern 
clean energy technologies. They include copper, lithium, 
indium, gallium, selenium, cadmium, cobalt, and others.
    While not all of these are rare, the United States is 
increasingly dependent on foreign providers for many of them. 
We are not just dependent for the ore; we are dependent on 
others for many of the refining steps in the supply chain 
process.
    With such wide-ranging applications for these minerals in 
such critical technologies, the issue of ensuring a secure 
supply of strategic minerals is paramount.
    Fifteen years ago, the United States was the world's 
largest producer of rare earth elements. Since then our country 
has become almost entirely dependent on imports from China. 
Unfortunately, the Chinese industry is on track to absorb all 
Chinese rare earth production as soon as 2012. In July, China's 
Ministry of Commerce announced that China would cut its export 
quota for rare earth minerals by 72 percent, raising concerns 
around the world about supply disruptions.
    With the country pushing to increase its production of 
wind, solar panels, consumer electronics, and other products, 
the demand for rare earths is soaring. There is evidence that 
China plans to use their exclusive access to rare earths as a 
competitive advantage in clean energy products. As China's 
former President Deng Xiaoping reportedly said in 1992, ``There 
is oil in the Middle East and there is rare earth in China.''
    Fortunately, most rare earths and other strategic minerals 
are fairly widely dispersed around the world. According to 
research compiled by the Congressional Research Service, China 
holds 36 percent of the world's reserves and the U.S. holds 
about 13, and the rest is distributed in other countries.
    Experts expect capacity to be developed in the United 
States, Australia, and Canada within the next 2 to 5 years. Due 
to long lead times between discovery of deposits and producing 
elements, supply constraints are likely in the next few years.
    Then there is the fact that rare earth mining, like all 
hard rock mining, raises a host of environmental concerns. The 
last major rare earth mine in the United States was closed in 
2002, and there are a variety of reasons for that closure, but 
according to the New York Times, environmental contamination 
played a role.
    So as we are considering the prospects of resuming rare 
earth mining in this country, we must make sure we are doing 
all that we can to make sure it is done in a responsible way.
    It is also important that we look at the entire supply 
chain for rare earths and other strategic materials, not just 
mining. A major issue for the United States is the lack of 
refining, alloying, and the metal fabrication capacity to 
process any rare earths that we might produce. Even if we were 
to increase rare earth mining in the United States, we still 
have to send much of that extracted material overseas to China 
for its processing.
    So today's hearing is to discuss all of that, and I want to 
thank our witnesses for being here.
    First, we are going to hear from Secretary Sandalow, and in 
the second panel, we are going to hear from Dr. Roderick 
Eggert, who is Professor and Division Director of the Division 
of Economics and Business at Colorado School of Mines from 
Golden. Thank you for being here. Mr. Preston Rufe--I am not 
sure I am pronouncing that right. Maybe my colleague will help 
us on that. Mr. Peter Brehm who is from Infinia technology in 
Kennewick, Washington. So we appreciate all of you being here.
    I am going to turn to my colleague, the ranking member, 
Senator Risch, for his opening statement, and again thank him 
for being here so we can hold this important hearing.
    [The prepared statement of Senator Murkowski follows:]

  Prepared Statement of Hon. Lisa Murkowski, U.S. Senator From Alaska

    Thank you, Chairwoman Cantwell, for holding this important hearing 
and for allowing me to submit my written statement to its Record. I 
especially appreciate this Subcommittee's attention to S. 3521, the 
Rare Earths Supply Technology and Resources Transformation Act of 2010, 
which I introduced this past June along with five co-sponsors.
    From experience, we know that clean energy technologies face a 
range of obstacles. The credit crunch has slowed capital investment, 
disputes have arisen over which lands are suitable for infrastructure, 
and the electric grid has sometimes proved incapable of handling new 
generation. Most alternative and renewable resources are still much 
more expensive than their conventional counterparts, and many are also 
intermittent or unreliable in nature.
    Over the long run, however, our most difficult challenge may be our 
most fundamental: ensuring a stable supply of the raw materials needed 
to manufacture clean energy technologies in the first place. According 
to the U.S. Geological Survey, our nation's reliance on foreign 
minerals has ``grown significantly'' over the past several decades. In 
2009, we imported more than 50 percent of our supply of 38 different 
minerals and materials, and we were 100 percent dependent on foreign 
countries for some 19 of those commodities. That's up significantly 
from just seven mineral commodities in 1978.
    This growing dependence is important because minerals offer our 
best chance to harness the potential of clean energy. Even now, we 
import 100 percent of the quartz crystal used in photovoltaic panels, 
the indium used in LED lighting, and the rare earth elements used in 
advanced vehicle batteries and permanent magnets. The large quantities 
of minerals required for clean energy technologies only add to the 
scale of our needs. A large wind turbine can contain more than one ton 
of rare earth elements--in addition to more than 300 tons of steel, 
nearly five tons of copper, and three tons of aluminum.
    Taken together, recent trends in our nation's mineral consumption 
signal a little-known, yet rather worrisome, trend: as our demand for 
minerals has risen, so too has our dependence on foreign nations for 
their supply. And even though clean energy technologies currently 
account for a fraction of worldwide mineral consumption, we're already 
seeing strains in global supplies.
    Many countries have undertaken a 50-year, or longer, view of the 
world and continue to lock down long-term supply arrangements through 
investments in Africa, Australia, South America, and other resource-
rich locales. These actions will help emerging economies meet their 
burgeoning demand for raw materials, but it could leave our nation out 
in the cold at the very moment we realize we most need these minerals.
    Just as we've seen with our reliance on foreign oil, the United 
States' total reliance on foreign sources of rare earths puts us in a 
perilous situation. China currently accounts for 97 percent of global 
production of these incredibly important metals and has repeatedly 
followed through on plans to decrease export of them. Some have 
compared China to a one-nation OPEC for rare earths--and China's recent 
actions signal that they are well aware of their immense power over the 
supply of this sought-after commodity.
    By cutting rare earth exports, China is seeking to ensure the 
manufacture of clean technologies within its own borders. But the 
implications for energy security and job creation in America are also 
apparent: we risk a future in which wind turbines, solar panels, 
advanced batteries, and geothermal steam turbines are not made in the 
USA, but somewhere else.
    Further, what's worse is that some minerals are now being used as a 
weapon to strike back against vulnerable countries who have failed or 
who are unable to meet their own needs with domestic production. The 
latest evidence comes in the form of China's decision to halt rare 
earth exports to Japan, after Japan arrested a Chinese fishing boat 
captain involved in a collision with Japanese Coast Guard vessels.
    Some experts contend that the lack of a cap-and-trade system is at 
the root of this emerging crisis. I disagree--a price on carbon would 
do little to promote mineral production in the United States, and could 
actually hurt it. Instead, I believe that one of the main reasons why 
our nation is on the verge of falling behind in the development of 
clean energy technologies is that we have slowly but surely surrendered 
the front end of the clean energy supply chain.
    We're left with quite a paradox. Even as many of America's 
political leaders take steps to limit mining, a reliable supply of 
minerals has become essential to the manufacture of nascent energy 
technologies. If allowed to continue, we will simply trade our current 
dependence on foreign oil for an equally devastating dependence on 
foreign minerals.
    Even our environmental goals could be jeopardized. The widespread 
deployment of clean energy technologies is not only contingent upon 
breakthroughs in research and development but also the affordability of 
the raw materials used in them. If prices spike because the supply of 
raw materials is insufficient, entire technologies could fail.
    The good news is that the United States has, within its borders, 
abundant reserves of many critical minerals that we currently choose to 
import. These reserves represent an opportunity to create many new 
American jobs, and their production would help facilitate a robust 
clean technology manufacturing sector. Particularly in these tough 
economic times, we should recognize that mining jobs pay well and 
provide an excellent career path for those who pursue them.
    Understanding that we could soon face a global supply crunch, and 
that we have significant mineral reserves here at home ready to be 
developed, I introduced the Rare Earths Supply Technology and Resources 
Transformation (RESTART) Act on June 22nd, 2010. Senators Barrasso and 
Enzi of Wyoming, Senators Crapo and Risch of Idaho, and Senator Vitter 
of Louisiana have joined me as co-sponsors of this legislation, which 
would address a number of hurdles standing in the way of a resurgent 
rare earths industry.
    Specifically, the RESTART Act would:

   Promote investment in, exploration for, and development of 
        rare earths as U.S. policy;
   Establish a task force to reform permitting and regulation 
        of rare earth production;
   Require an assessment of rare earth supply chain 
        vulnerabilities;
   Seek agency recommendations on procuring and stockpiling 
        critical rare earths;
   Provide loan guarantees for rare earth production, 
        processing and manufacturing;
   Seek a review of rare earth projects related to national 
        defense capabilities;
   Prioritize funding of innovation and job training in the 
        rare earth industry; and
   Subject the sale of assets supported by taxpayer dollars to 
        Secretarial approval.

    In my view, the most important issue for Congress to address is the 
bureaucratic delays faced by those who wish to develop our domestic 
production capabilities. In country rankings, the United States ranks 
dead last in permitting delays. This is a problem that must be fixed, 
and we can do so in a way that maintains the environmental protections 
that we rightfully demand.
    I understand that many people do not want public lands to be used 
for mineral extraction or any other form of energy development. The 
truth, however, is that those views are both short-sighted and 
counterproductive. Our standard of living requires us to generate and 
consume a significant amount of energy, and that energy must be 
produced somewhere. All resources carry some cost to the environment, 
whether in carbon content or the raw materials and physical area needed 
to tap their potential. We will not see significant progress on clean 
energy technologies until we are serious about the production of the 
minerals used to produce them.
    Albert Einstein once wrote that ``in the middle of difficulty lies 
opportunity.'' Our nation faces a great challenge in the form clean 
energy technology deployment. But as we struggle to find our way 
forward, we'll also be presented with new opportunities to strengthen 
our economy and our security.
    Rare earth production is one of those opportunities. As this 
Subcommitee continues to consider ways to promote clean energy, I would 
encourage you to take the long view--and to recognize that greater 
domestic production of rare earths and other mineral commodities is 
vital to the future of our energy supply, our economic wellbeing, and 
the integrity of the environment.

        STATEMENT OF HON. JAMES E. RISCH, U.S. SENATOR 
                           FROM IDAHO

    Senator Risch. Thank you, Madam Chairman, for holding this 
meeting. This is truly an important meeting.
    Most people in America do not know what a rare earth is, 
and if you did a quiz on 100 people walking down the street, 
you would find maybe one who could even remotely describe what 
a rare earth was. But as you pointed out, the rare earths are 
absolutely critical elements in the production of many 
different products that we use today.
    One of the things that interests me is this is truly a 
national security issue. Rare earths, although a lot of the 
things that they are used for in national security uses we 
cannot talk about here, are things that are absolutely 
necessary for the defense of this country.
    As you point out, the United States has only 13 percent of 
the known reserves, but that only tells part of the picture. It 
paints only part of the picture. Although we have 13 percent, 
it is very, very difficult for entrepreneurs and miners to go 
out and extract that 13 percent because of the environmental 
restrictions in this country.
    A good example is the cobalt mining that has taken place in 
Idaho, and I have asked a witness here today who is going to 
describe an enterprise that is taking place in Idaho today. 
When I was Governor, I went and looked at and had a good tour 
of the cobalt mine that we anticipate will be opening quite 
soon in Idaho. The environmental challenges to opening that 
mine were absolutely stunning, and Formation Capital needs to 
be complimented for, No. 1, even taking this on to begin with. 
When I looked at it, it surprised me that people were willing 
to expend capital on it.
    However, as happens in a free market, the rewards as a 
result of the risks are going to be substantial for Formation 
Capital. They will contribute greatly to the national security 
of the United States and also help us with the challenges that 
the United States faces getting rare earths.
    As you pointed out, China is very, very aggressive on rare 
earths. The fact that they have the largest deposits of rare 
earths on the face of the planet is certainly a concern to us, 
but also of concern are the political issues that happen in 
China. A good example of that is that recently China got in a 
dust-up with Japan over the arrest of a fishing boat captain, 
and that trickled all the way down to the rare earths exports 
to Japan and the Chinese cutoff the exports of rare earths to 
Japan. China denies it, but Japan, who had been importing rare 
earths, can no longer get rare earths out of China.
    So these are the kind of things that cause us no end of 
concern. We are going to hear a little bit about that today.
    With that, again, thank you, Madam Chairman, for holding 
this hearing.
    Senator Cantwell. Thank you.
    Senator Barrasso, did you wish to make an opening 
statement?
    Senator Barrasso. Thank you very much, Madam Chairman. I 
will wait for the questioning.
    Senator Cantwell. Thank you very much.
    We are going to hear from the Assistant Secretary of Policy 
and International Affairs for the U.S. Department of Energy, 
the Honorable David Sandalow. Thank you very much for being 
here. We look forward to your testimony.

 STATEMENT OF DAVID SANDALOW, ASSISTANT SECRETARY, POLICY AND 
          INTERNATIONAL AFFAIRS, DEPARTMENT OF ENERGY

    Mr. Sandalow. Thank you, Chairwoman Cantwell, Ranking 
Member Risch, members of the subcommittee.
    I am here today to talk about rare earth metals, their 
importance to clean energy technologies, and the Department of 
Energy's recent work on this topic. This is an important issue, 
as both of you have just highlighted, one that needs priority 
attention in the months and years ahead.
    The administration has been focused on this issue for some 
time. At the Department of Energy, we are working to develop a 
strategy on rare earths, as I announced earlier this year. The 
administration is continuing to review S. 3521. We share the 
goal of establishing a secure supply of rare earth metals, and 
we look forward to discussions with the Congress on ways to 
address this issue as we move forward.
    Rare earth metals have many desirable properties, including 
the ability to form unusually strong, light-weight magnetic 
materials which make them valuable to a number of clean energy 
technologies. For example, neodymium is used in magnets for 
electric generators found in wind turbines.
    Ironically, rare earth metals are not, in fact, rare. They 
are found in many places on earth, including the United States, 
Australia, and Canada. In fact, the United States was the world 
leader in production of rare earths as recently as the late 
1980s. However, these rare earth metals are often difficult to 
extract in profitable quantities. This and other factors have 
led to geographically concentrated production.
    Today more than 95 percent of global production of rare 
earths comes from China. This concentration of production 
creates serious concerns, especially in light of recent events. 
While China holds 37 percent of known reserves and the United 
States holds 13 percent and there are significant reserves in 
other countries, development of new rare earth mines will 
require significant investment and time.
    It goes without saying that diversified sources of supply 
are important for any valuable material. Development of 
substitutes and policies for reuse, recycling, and more 
efficient use are also important. We must pursue these 
strategies.
    The recent maritime dispute between China and Japan in 
which there were unconfirmed reports that China threatened or 
adopted a de facto ban on such exports to Japan underscore the 
geopolitical risks associated with these issues.
    Madam Chairwoman, the world is on the cusp of a clean 
energy revolution. Other countries are seizing this opportunity 
and the market for clean energy technologies is growing rapidly 
all over the world. Around the world, investments in clean 
energy technologies are growing, helping create jobs, promoting 
economic growth, and fighting climate change. Here in the 
United States, we are making historic investments in clean 
energy. The American Recovery and Reinvestment Act was the 
largest one-time investment in clean energy in our Nation's 
history, more than $90 billion. At DOE, we are investing $35 
billion in Recovery Act funds in electric vehicles, battery and 
advanced energy storage, a smarter and more reliable electric 
grid, wind and solar technologies, among other areas.
    In recognition of the importance of rare earth elements in 
the transition to clean energy, DOE is developing a strategic 
plan for addressing the role of rare earth metals and other 
critical materials in clean energy components, products, and 
processes. As a first step in the development of that plan, we 
released a public request for information this past May. We 
received over 1,000 pages of information from about 35 
organizations, including manufacturers, mining companies, 
industrial associations, and national labs. Many organizations 
shared proprietary data that have helped us to develop a 
clearer picture of current and future demand.
    Based on these responses and analyses being conducted 
throughout the Department, our strategy is nearing completion. 
It focuses on four core technologies that will be crucial to 
our transition to a clean energy economy. Those are permanent 
magnets, batteries, photovoltaic thin films, and phosphors. A 
public draft of the strategy will be available later this fall.
    To proactively address the availability of rare earths and 
other important materials, we must take action in three 
categories. First, we must globalize supply chains for these 
materials. Second, we must develop substitutes for these 
materials. Doing so will improve our flexibility as we address 
the materials demand of the clean energy economy. Third, we 
must explore opportunities to promote recycling, reuse, and 
more efficient use of strategic materials in order to gain more 
economic value from each ton extracted. With all three of these 
approaches, we must consider all stages of the supply chain.
    In conclusion, Madam Chair, there is no reason to panic but 
every reason to be smart and serious as we plan for a growing 
global demand for products that contain rare earth metals. 
Recent events underscore this. The United States intends to be 
a world leader in clean energy technologies. Toward that end, 
we are shaping policies and approaches to help prevent 
disruptions and supply of critical materials. With focused 
attention and working together, we can meet these challenges.
    Thank you.
    [The prepared statement of Mr. Sandalow follows:]

 Prepared Statement of David Sandalow, Assistant Secretary, Policy and 
              International Affairs, Department of Energy

    Chairwoman Cantwell, Ranking Member Risch, and Members of the 
Subcommittee, thank you for the opportunity to testify today.
    I am here today to speak about rare earth metals, their importance 
to clean energy technologies, and the Department of Energy's recent 
work on this topic. This is an important issue--one that needs priority 
attention in the months and years ahead. The Administration has been 
focused on this issue for some time. The Department is working to 
develop a strategy on rare earths that I announced earlier this year 
and the Administration is continuing to review S. 3521. We share the 
goal of establishing a secure supply of rare earth metals, and we look 
forward to discussions with the Congress on ways to address this issue 
as we move forward.
    Rare earth metals have many desirable properties, including the 
ability to form unusually strong, lightweight magnetic materials. They 
also have valuable optical properties including fluorescence and 
emission of coherent light. These properties and others have made rare 
earth metals valuable in a number of clean energy technologies, among 
other important applications. For example, lanthanum is used in 
batteries for hybrid cars. Neodymium is used in magnets for electric 
generators found in wind turbines, and europium is used in colored 
phosphors for energy-efficient lighting.
    Ironically, ``rare earth'' metals are not in fact rare. They are 
found in many places on Earth, including the United States, Canada and 
Australia. In fact, the United States was the world leader in 
production of rare earth metals as recently as the late 1980s. However, 
rare earth metals are often difficult to extract in profitable 
quantities. This and other factors have led to geographically 
concentrated production. Today, more than 95 percent of global 
production of rare earths comes from China. This concentration of 
production creates serious concerns. While China holds 37 percent of 
known reserves and the United States holds 13 percent, and there are 
significant reserves in other countries, development of new rare earth 
mines will require significant investment, and it can take years before 
new sources yield significant production.
    It goes without saying that diversified sources of supply are 
important for any valuable material. Development of substitute 
materials and policies for re-use, recycling and more efficient use are 
also important. If rare earth metals are going to play an increasing 
role in a clean energy economy, we need to pursue such strategies. The 
recent maritime dispute between China and Japan, in which there were 
unconfirmed reports that China threatened or adopted a de facto ban on 
such exports to Japan, underscores the geopolitical risks associated 
with these issues.

                      GLOBAL CLEAN ENERGY ECONOMY

    This transition to a clean energy economy is already well underway. 
The world is on the cusp of a clean energy revolution. Other countries 
are seizing this opportunity, and the market for clean energy 
technologies is growing rapidly all over the world.
    Today, the Chinese government is launching programs to deploy 
electric cars in over 20 major cities. They are connecting urban 
centers with high-speed rail and building huge wind farms, 
ultrasupercritical advanced coal plants and ultra-high-voltage long-
distance transmission lines.
    India has launched an ambitious National Solar Mission, with the 
goal of reaching 20 gigawatts of installed solar capacity by 2020.
    In Europe, strong public policies are driving sustained investments 
in clean energy. Denmark is the world's leading producer of wind 
turbines, earning more than $4 billion each year in that industry. 
Germany and Spain are the world's top installers of solar photovoltaic 
panels, accounting for nearly three-quarters of a global market worth 
$37 billion last year. Around the world, investments in clean energy 
technologies are growing, helping create jobs, promote economic growth 
and fight climate change. These technologies will be a key part of the 
transition to a clean energy future and a pillar of global economic 
growth.
    Here in the United States, we are making historic investments in 
clean energy. The American Recovery and Reinvestment Act was the 
largest one-time investment in clean energy in our nation's history--
more than $90 billion. At the Department of Energy (DOE), we're 
investing $35 billion in Recovery funds in electric vehicles; batteries 
and advanced energy storage; a smarter and more reliable electric grid; 
and wind and solar technologies, among many other areas. We aim to 
double our renewable energy generation and manufacturing capacities by 
2012. We will also deploy hundreds of thousands of electric vehicles 
and charging infrastructure to power them, weatherize at least half a 
million homes, and help modernize our grid.

                              DOE STRATEGY

    In recognition of the importance of rare earth elements in the 
transition to clean energy, DOE is developing a strategic plan for 
addressing the role of rare earth metals and other materials in clean 
energy components, products and processes. As a first step in the 
development of the plan, we released a public Request for Information 
(RFI) this past May soliciting information from stakeholders on rare 
earth metals and other materials used in the energy sector. The request 
focused not only on rare earths, but also on other elements including 
lithium, cobalt, indium, and tellurium.
    We received over 1,000 pages from about 35 organizations, including 
Original Equipment Manufacturers (OEMs), mining companies, industrial 
associations, and national labs. Responses addressed supply, demand, 
technology applications, costs, substitutes, recycling, intellectual 
property, and research needs. Many organizations shared proprietary 
data on material usage that have helped us develop a clearer picture of 
current and future demand.
    Based on these responses and analyses being conducted throughout 
the Department, the strategy is nearing completion. It focuses on four 
core technologies that will be crucial to our transition to a clean 
energy economy: permanent magnets, batteries, photovoltaic thin films, 
and phosphors. A public draft of the strategy is expected to be 
available later this fall.
    I can broadly outline the approach we are taking to proactively 
address the availability of rare earths and other important materials 
required to support and expand clean energy development.
    First, we must globalize supply chains for these materials. To 
manage supply risk, we need multiple, distributed sources of clean 
energy materials in the years ahead. This means taking steps to 
facilitate extraction, refining and manufacturing here in the United 
States, as well as encouraging our trading partners to expedite the 
environmentally-sound creation of alternative supplies.
    Second, we must develop substitutes for these materials. Doing so 
will improve our flexibility as we address the materials demands of the 
clean energy economy. In order to meet this objective, we will need to 
invest in R&D to develop transformational magnet, battery electrodes 
and other technologies that reduce our dependence on rare earths. DOE's 
Office of Science, Office of Energy Efficiency and Renewable Energy, 
and the ARPA-E program are currently conducting research along these 
tracks.
    Third, we must explore opportunities to promote recycling, re-use 
and more efficient use of strategic materials in order to gain more 
economic value out of each ton of ore extracted and refined. Widespread 
recycling and re-use could significantly lower world demand for newly 
extracted rare earths and other materials of interest. For example, we 
could develop a process to recycle terbium and europium in the 
phosphors of compact and conventional fluorescent light bulbs. 
Neodymium could be recycled from hybrid and electric vehicles. 
Additionally, recycling and re-use could reduce the lifecycle 
environmental footprint of these materials, another critical priority.
    With all three of these approaches, we must consider all stages of 
the supply chain: from environmentally-sound material extraction to 
purification and processing, the manufacture of chemicals and 
components, and ultimately end uses.
    Managing supply chain risks is by no means simple for a company, 
much less a country. At DOE, we focus on the research and development 
angle. From our perspective, we must think broadly about addressing the 
supply chain in our R&D investments, from extraction of materials 
through product manufacture and eventual recycling. It is also 
important to think about multiple technology options, rather than 
picking winners and losers. We work with other federal agencies to 
address other issues, such as trade, labor and workforce, and 
environmental impacts. We are already closely working with our 
interagency partners to address these important issues.

                               CONCLUSION

    One lesson we have learned through experience is that supply 
constraints aren't static. As a society, we have dealt with these types 
of issues before, mainly through smart policy and R&D investments that 
reinforced efficient market mechanisms. We can and will do so again. 
Strategies for addressing shortages of strategic resources are 
available, if we act wisely. Not every one of these strategies will 
work every time. But taken together, they offer a set of approaches we 
should consider, as appropriate, whenever potential shortages of 
natural resources loom on the horizon.
    So in conclusion, there's no reason to panic, but every reason to 
be smart and serious as we plan for growing global demand for products 
that contain rare earth metals. Recent events underscore this. The 
United States intends to be a world leader in clean energy 
technologies. Toward that end, we are shaping the policies and 
approaches to help prevent disruptions in supply of the materials 
needed for those technologies. This will involve careful and 
collaborative policy development. We will rely on the creative genius 
and entrepreneurial ingenuity of the business community to meet an 
emerging market demand in a competitive fashion. With focused 
attention, working together we can meet these challenges.

    Senator Cantwell. Senator Risch is amazed at your precise 
ending of your testimony at 5 minutes.
    Senator Risch. Somebody called it a world book record.
    [Laughter.]
    Mr. Sandalow. Thank you, Senator.
    Senator Cantwell. Mr. Sandalow, your position and title as 
it relates to this--obviously, trade is an important aspect of 
this issue and keeping markets open and functioning. So what 
degree are you involved in that? What other parts of our 
executive branch are taking the role and responsibility in 
shaping that, and will that be part of this report and 
recommendation?
    Mr. Sandalow. Thank you, Chairwoman.
    Within the executive branch, the U.S. Trade 
Representative's Office has the lead on trade issues, and the 
Commerce Department plays a very significant role as well. The 
Department of Energy is involved in our discussions of these 
issues and we participate in interagency discussions on trade 
matters when they involve clean energy, and both the U.S. Trade 
Representative's Office and the Department of Commerce look to 
the Department of Energy, for example, for expert information 
on these topics. But those two Departments or agencies would be 
in the lead on trade issues.
    Senator Cantwell. So by your first recommendation, you are 
calling for globalization of supply chains. What do you think 
are the actions that we would be taking as a Government to help 
in the globalization of the supply chain?
    Mr. Sandalow. That is part of the interagency discussion on 
these topics, as well as our own review within the Department 
of Energy. They could include diplomatic discussions. They 
could include additional investments here in the United States.
    About a century ago, Winston Churchill said that security 
depends upon variety and variety alone in the supply of oil, 
and he was talking about making sure that we have supply from 
all over the world. The same principle applies to critical 
materials today.
    Senator Cantwell. In your recommendation, you are talking 
about ARPA-E programs. What is the magnitude or what are some 
of the areas of R&D that you think we need to be involved in?
    Mr. Sandalow. At the Department of Energy today, we have a 
total of approximately $15 million being invested in research 
and development in these areas. That includes the ARPA-E 
program, as you just mentioned. It includes our science 
program. It includes our energy efficiency and renewable energy 
program. The areas that have been the primary focus so far have 
been in magnets and looking at the alternatives and more 
efficient use of these materials in magnets. There are a 
variety of other important applications and ways that research 
and development can make a difference here, and as part of our 
strategic review, we are looking at how to best prioritize our 
research and development in this area.
    Senator Cantwell. Not to steal from Dr. Eggert's testimony, 
because we want to hear it, but he does make recommendations 
similar to EIA and getting information into the markets. Do you 
agree with that? I do not know if it is the market is not 
collecting enough data or it is not a primary market function, 
so that just like with oil, although I would personally say 
that EIA needs to do a lot more aggressive job given the 
potential manipulation of markets to collect even more data, 
but it is certainly a model. So do you agree with that 
assessment?
    Mr. Sandalow. Senator, I do strongly agree that we need 
more and better information on this topic. We learned a lot 
within the Department of Energy from this response to the 
request for information that we issued last spring. So I think 
we need to find better ways to make sure that we are gathering 
the important information on this topic. As it escalates in 
importance, I am hearing on a bipartisan basis everybody 
believes it is a very important issue, and we need to have the 
best information on it.
    Senator Cantwell. But I think he is recommending--and we 
will hear from him, but I think his point is that without this 
kind of information about what truly is happening in the 
marketplace, it is hard to understand the functioning of these 
markets or shortages or supply issues. Will that be part of the 
recommendation, what kind of organization and the types of 
information? You know, we just recently upgraded what EIA 
should be responsible for in collecting. So it would be great 
if the agency would make a recommendation to us on the kinds of 
structure of this information and data collection.
    Mr. Sandalow. Thank you, Senator. It has certainly been one 
of the topics we are discussing, and I appreciate your input on 
this and we will reflect that as we move forward on the 
strategy.
    Senator Cantwell. Thank you.
    Senator Risch.
    Senator Risch. Thank you, Madam Chairman.
    Mr. Sandalow, I am truly impressed with the sensitivity and 
the Department's stance on this issue of how important it is. 
What I want to focus on is what America can do. How do we 
resolve this? So I have a few questions in that regard.
    The first one is do you believe that the State Department 
and Defense Department share your sensitivity, the Department 
of Energy's sensitivity, to this issue and the full comport of 
the seriousness of the situation?
    Mr. Sandalow. Senator, needless to say, I do not want to 
speak for my colleagues, but we have had a number of 
interagency discussions on this and they are coming to the 
table very engaged on this issue.
    Senator Risch. I appreciate that.
    The next area of inquiry I would have would be what are you 
doing as far as coordinating with other agencies when there is 
an opportunity to go get these rare earths. I would suspect 
that probably you are aware of instances where people who are 
mining or companies that want to mine face the regulatory 
challenges of going and getting this material. Understandably 
we have to be sensitive to the environment. On the other hand, 
there has got to be a way to do this and balance both of those 
so that we can have a market in these rare earths. Are you 
coordinating? Is your agency coordinating with the EPA, with 
the Forest Service, with the BLM, with the agencies that are on 
the ground that should be making these things work?
    Mr. Sandalow. Yes, Senator, we are. The Executive Office of 
the President has coordinated interagency discussions on this 
topic and, in particular, the Office of Science and Technology 
Policy. There has been a regular process looking at these 
issues, including the set of issues you just identified. This 
has certainly been an issue of growing attention in the time 
that I have been in Government service in about the past year 
and a half, and certainly, I think recent events underscore the 
importance of even greater attention to it.
    Senator Risch. I agree with that. I think greater attention 
needs to be given to it. I would say this. I appreciate the 
three points that you made, for instance, the global supply 
chain, and I also appreciate the remarks of the chairman 
regarding market-making. But there really is no market. I mean, 
there is a monopoly today, and until we can actually produce 
some of the material, we cannot make a market.
    So I think the focus needs to be at this time how do we go 
get this. How do we encourage miners to go get this? How do we 
get the free market system to go out there and go get these 
materials and bring them into the marketplace so that indeed we 
can have a global supply? So I would encourage the focus to be 
in that regard at this point, and that is, working with the 
various agencies that license, that monitor, that regulate this 
industry.
    Thank you very much. Thank you, Madam Chair.
    Senator Cantwell. Thank you.
    Senator Udall. Thank you, Madam Chair.
    Good morning, Mr. Secretary.
    Let me move to the downstream manufacturing supply chain. 
We are paying a lot of attention to the access we need to the 
rare earth resources in their raw forms, but we also need to 
look at the supply chain, the oxides and metals and alloys and 
magnets. What do you see as the DOE's role in helping to 
rebuild those phases in the supply chain?
    Mr. Sandalow. It is a very important question, Senator. So 
thank you for asking it.
    This issue is not just about mining. This issue is about 
the entire supply chain from mining and refining to 
incorporation of these metals into components and then into 
final products that go to consumers.
    At the Department of Energy, we are paying a lot of 
sustained attention to the clean energy technology supply chain 
from the beginning to the end. Our role in this, I believe, is 
critical going forward. We are looking in our strategic review 
not just at the mining and extracting side of this issue, but 
at the entire supply chain. So we are looking at policies that 
will help to rebuild this type of capability within the United 
States and believe it is of utmost importance.
    Senator Udall. Do you think that, similar to what China is 
doing, if we developed a rare earth supply chain, that we then 
would be able to attract more manufacturing interests like 
China is doing? Perhaps we would do it in a different, more 
American free market with open arms way, but it is an 
intriguing thought, given the way that China is using this to 
gain advantage.
    Mr. Sandalow. I think this is an important part of building 
up the new clean energy technology which is going to create 
jobs for Americans. It is already creating tens and hundreds of 
thousands of jobs around this country. I think in order to do 
that, we need to look at the entire supply chain. It is 
critical in magnets that go into motors and generators. It is 
critical in phosphors for lighting. It is critical for 
batteries and a variety of areas. It is absolutely central.
    Senator Udall. Something to really keep in mind I believe.
    Let me turn to Colorado. I want to thank you for your work 
with Molycorp which is based in Colorado. They are looking to 
apply to the loan guarantee program for advancing their 
prospects into the second phase.
    Other than the loan guarantee program, what other 
mechanisms and approaches have you identified that would help 
support the development of the rare earths supply chain in the 
U.S.? If so, what are some examples? If you have not, have you 
begun to identify ways that the DOE can increase its 
assistance?
    Mr. Sandalow. Thank you for the question, Senator.
    One category is research and development, and the 
Department of Energy has a budget in these areas and 
extraordinary expertise, some of the best scientists in the 
country within our national lab system. So we are looking at 
how to prioritize that research and development and how to 
right-size it and make sure that this issue receives the 
priority that it deserves.
    Another category of tools is one that Chairwoman Cantwell 
pointed to, which is information gathering and how do we make 
sure that we have the best information on these issues.
    A third category are financial instruments. You identified 
one, which is the loan guarantee program. There are potentially 
others that might be possible in order to support the 
development of this industry.
    So I think we need to look at all of these going forward.
    Senator Udall. Yes, I think it is important to note that at 
this point Molycorp, although there might be others would 
disagree, appropriately so, really is on the leading edge of 
this, and it speaks to the fact that we do not have much 
underway right now and we need to accelerate that.
    That leads to my final question. I think you have spoken to 
this in your testimony, and it is really why we are here and 
why it is important that the chairwoman and the ranking member 
convened this hearing.
    If we lose access to rare earth materials, what does that 
do to our broader energy policy objectives? What contingency 
plans are you developing, if any?
    Mr. Sandalow. Let me answer that question. I want to just 
mention a fourth very important category of policies that occur 
to me, Senator, which is education and training. One of the 
issues that we have here is that the work force of the United 
States has not been fully developed in order to work on these 
issues. I know the Colorado School of Mines is one of the 
leading institutions in this whole area and building up the 
expertise through institutions like the Colorado School of 
Mines I think is an extremely important set policies.
    In terms of the implications, I think they are potentially 
very serious. I think if we lose access to these, it could 
interrupt the development of clean energy technologies. It 
could interrupt commerce. I think that we need to be sure that 
we proceed along the strategy that we have been talking about, 
globalizing supply chains, developing substitutes, and more 
efficient reuse and recycling.
    Senator Udall. In other words, losing access is just not 
acceptable and would be very, very detrimental to the 21st 
century American energy economy, as well as all the other 
applications.
    Thank you, Madam Chairwoman.
    Senator Cantwell. Thank you.
    Senator Barrasso. Thank you very much, Madam Chairman.
    It is good to see you again. Thank you for being here 
today.
    There is a rare earth project under development in Wyoming. 
It is an exciting project. It has the potential to create jobs. 
It will help reduce our dependence on China for strategic 
minerals.
    Rare earth elements are an essential part of wind turbines, 
critical for the batteries and the magnets used in hybrids and 
electric vehicles, as you know. To me this is also a national 
security issue. Rare earth elements are used in jet fighter 
engines, in missile defense, and in satellites. The United 
States is 100 percent reliant on imports right now of rare 
earth elements, and strategic minerals are an important but 
often overlooked part of the energy debate.
    The rare earth project in Wyoming is primarily located on 
Federal land. Not surprisingly, the permitting process has 
become a big hurdle. Litigation, Government red tape, those 
things discourage investment in mining operations throughout 
the West. Today the Western Caucus, which several of us are 
members of, released a report called The War on Western Jobs. 
It details the Government regulations that are undercutting 
jobs in the West.
    So I wanted to talk a little bit about domestic production. 
From an economic and a national security standpoint, how 
important is it to have domestic extraction and refining 
capacity for strategic metals?
    Mr. Sandalow. Domestic production is very important, 
Senator. I think it is a critical part of our overall strategy 
for globalizing supply chains, and we need to have this 
production capacity here in the United States.
    Senator Barrasso. In the testimony, you mentioned steps to 
facilitate extraction, refining, and manufacturing here in the 
United States. Could you give us a little of the specifics in 
terms of what steps you suggest?
    Mr. Sandalow. Senator, we have a strategy under development 
at the Department of Energy. It is not yet final, and so I do 
not want to prejudge what my boss will ultimately decide it 
ought to include. But I think the topics that we have been 
focusing on include research and development strategy of the 
Department of Energy, which is central. It includes education 
and training. It includes information, and it includes 
different possible financial instruments.
    Senator Barrasso. Can you include in that list considering 
streamlining the permitting process to promote American 
production of rare earth elements?
    Mr. Sandalow. Senator, the regulations that you were 
referring to earlier are not--if I understand correctly what 
they were, they are not within the regulatory jurisdiction of 
the Department of Energy. So that would not be part of our 
strategy per se, although we are involved in discussions with 
interagency colleagues on these issues.
    Senator Barrasso. You mentioned recycling a bit. I do not 
know what our current capacity is to recycle some of the rare 
earth elements. Can you talk a little bit about that and how 
feasible it is to really do that sort of on the larger scale?
    Mr. Sandalow. Currently our capacity is low. Products are, 
in general, not designed to facilitate the recycling and the 
capture, and markets are not structured in order to do that. 
But potentially this could contribute greatly to our security 
if we were able to redesign these products in a way to do that 
and then recapture the rare earth metals. It is an important 
area of research.
    Senator Barrasso. Great.
    I think last time you were here with this committee, you 
testified about electric vehicles to some degree. I think you 
mentioned driving to work every day in a plug-in electric 
hybrid and noted the importance of electric vehicles in overall 
reducing our dependence on foreign oil.
    So as far as the amount of rare earth elements that are 
used, how do traditional gas-powered cars compare to electric 
and hybrids, do you know?
    Mr. Sandalow. In electric motors and batteries of the type 
that are found in plug-in electric vehicles, there are rare 
earth metals that are critical that would not be found in a 
traditional internal combustion engine. There are rare earth 
metals and other critical materials used in internal combustion 
engines and in the refinery processes for petroleum, as has 
already been mentioned in this hearing. But there is an 
additional increment that is used in electric vehicles.
    Senator Barrasso. I mean, I know that like a Prius has 
about 10 pounds of one specific rare earth element and I did 
not know if the Department had done some calculations about how 
many pounds overall of rare earth elements you would need to 
try to replace all of the gas-powered cars on the road today 
with electric or with hybrids. It just seems it is a big 
volume.
    Mr. Sandalow. That is the type of analysis we have 
underway, Senator. I do not have those numbers right now at the 
tip of my tongue, but that is exactly the type of question that 
we are looking at as part of our strategy.
    Senator Barrasso. Thank you.
    Thank you, Madam Chairman.
    Senator Cantwell. Thank you.
    We are going to move to the next panel, but Mr. Sandalow, 
my colleague, Senator Udall, mentioned the loan guarantee 
program, and I should have mentioned earlier that part of this 
hearing is Senator Murkowski's bill, S. 3521. I do not know if 
you have any views that you want to give us on that. Part of 
that is, I think, qualifying for the loan guarantee program. 
That might be the main focus of that legislation. But do you 
have any comments on her bill that has been before us today?
    Mr. Sandalow. The administration is continuing to review 
that bill. We strongly support the goal of securing a supply of 
rare earth metals, which is reflected in that bill. Currently 
the loan guarantee program does not provide authority for loans 
purely on the mining and extracting of rare earth metals. So it 
is an important issue and it is part of the discussion 
internally at the Department of Energy and within the 
administration.
    Senator Cantwell. OK, thank you. Thank you very much for 
your testimony. Unless anybody has any other questions, thank 
you.
    We will move to our second panel, and I would like to 
welcome Dr. Roderick Eggert. As I said earlier, he is Professor 
and Division Director of the Division of Economics and Business 
at Colorado School of Mines in Golden, Colorado. Mr. Preston 
Rufe, Environmental Manager at Formation Capital Corporation 
from Salmon, Idaho. Mr. Peter Brehm, Vice President, Business 
Development for Infinia, Kennewick, Washington.
    Thank you all very much for being here today and for your 
testimony. We have copies of your testimony. So if you could 
keep your remarks to 5 minutes, that would be much appreciated. 
So welcome and thank you for being here.
    Mr. Eggert, we are going to start with you.

    STATEMENT OF RODERICK G. EGGERT, PROFESSOR AND DIVISION 
 DIRECTOR, DIVISION OF ECONOMICS AND BUSINESS, COLORADO SCHOOL 
                      OF MINES, GOLDEN, CO

    Mr. Eggert. Good morning, Madam Chairman and members of the 
committee. My name is Rod Eggert. I am a mineral economist from 
Colorado School of Mines. As you noted, I provided written 
testimony. In my oral remarks, let me highlight two aspects of 
that testimony.
    First, a National Research Council study that was published 
in 2008 called Critical Minerals and the U.S. Economy. I 
chaired the committee that prepared this report. It provides a 
broad context for current concerns. Of particular note, let me 
draw your attention to the conceptual framework in this 
analysis. It is a framework for assessing criticality. It talks 
about how to measure and evaluate the degree of supply risk 
associated with a particular element or mineral. It also talks 
about the importance in use or the difficulty of substituting 
away from an element should its supply be constrained.
    This document also prepared a preliminary assessment of the 
criticality, quote/unquote, of 11 potential critical minerals. 
We did not assess the entire periodic table. We only looked at 
11 possible critical elements at that time, which was about 3 
years ago. At this point, we identified indium, manganese, 
niobium, platinum group metals, and the rare earth elements 
from among the 11 that were more rather than less critical, in 
other words, more difficult to substitute away from and subject 
to a greater degree of supply risk.
    I might note that earlier this year the European 
Commission, using a very similar methodology to ours, 
identified 15 critical raw materials from the perspective of 
the European Community, and the European Commission named many 
of the elements that we have heard so far today.
    My written testimony also contains my personal views which 
are contained in a paper that was published earlier this year 
in the National Academies Issues in Science and Technology. Let 
me emphasize two of several points among my personal views.
    First of all, although markets are not panaceas, I think it 
is important that we do not forget that markets provide 
significant incentives for managing supply risks, although on 
the supply side and on the demand side--and on the demand side, 
I am thinking about the incentives that users face to, in 
effect, provide their own insurance against the supply risk 
over the longer term, figuring out and studying ways to 
substitute away from elements subject to supply risk.
    Let me also highlight that my paper argues, nevertheless, 
there are useful and important roles for Government and I 
identify four areas in which I suggest concentrating Government 
activities.
    The first area, encouraging undistorted international trade 
when there are trade restrictions, export restrictions imposed 
by exporting countries.
    Second, I support improving the regulatory approval 
processes for domestic resource development. Let me be clear, 
however, that I am really not in favor of special treatment for 
a particular resource or a particular element. So I would not 
give special treatment to rare earths, for example. I think it 
is a broader issue, one that deals with domestic resource 
development generally and also relates to, I think even more 
broadly, developments throughout the economy and the difficulty 
of siting and permitting new developments.
    My third and fourth areas for policy recommendation focus 
on the Government's role in facilitating the provision of the 
information, something Dr. Sandalow mentioned, information 
which provides the basis for decisions by both private and 
public participants. Also the Government has an important role 
to play in facilitating research and development throughout the 
supply chain, in other words, from mine through disposal and 
importantly recycling.
    Thank you very much. I would be happy to answer questions 
when that opportunity arises.
    [The prepared statement of Mr. Eggert follows:]
   Prepared Statement of Roderick G. Eggert, Professor and Division 
Director, Division of Economics and Business, Colorado School of Mines, 
                               Golden, CO

    Good morning, Madam Chairman and members of the Committee. My name 
is Rod Eggert. I am Professor of Economics and Business at Colorado 
School of Mines. My area of expertise is the economics of mineral 
resources. I begin my testimony by describing the context for current 
concerns about critical minerals and clean energy technologies. I then 
present perspectives on these concerns from two published documents: a 
2008 study of the National Research Council (NRC)\1\ on critical 
minerals (I chaired the committee that prepared this report), and a 
2010 paper with my personal views on critical minerals, published in 
the National Academies' Issues in Science and Technology. Finally, I 
briefly describe the activities of a panel on which I serve now, 
organized under the auspices of the American Physical Society. This 
panel's work focuses on critical elements for emerging energy 
technologies.
---------------------------------------------------------------------------
    \1\ The National 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 1863 to advise the government on matters of science and technology.
---------------------------------------------------------------------------
                                CONTEXT

    Mineral-based materials are becoming increasingly complex. In its 
computer chips, Intel used 11 mineral-derived elements in the 1980s and 
15 elements in the 1990s; it may use up to 60 elements in the future. 
General Electric uses some 70 of the first 83 elements of the periodic 
table in its products. Moreover, new technologies and engineered 
materials create the potential for rapid increases in demand for some 
elements used previously and even now in relatively small quantities. 
The most prominent examples are gallium, indium and tellurium in 
photovoltaic solar cells; lithium in automotive batteries; and rare-
earth elements in permanent magnets for wind turbines and hybrid 
vehicles, as well as in compact-fluorescent light bulbs.
    These technological developments raise two concerns. First, there 
are fears that supply will not keep up with the explosion of demand due 
to the time lags involved in bringing new production capacity online or 
more fundamentally the basic geologic scarcity of certain elements. 
Second, there are fears that supplies of some elements are insecure due 
to, for example, U.S. import dependence, export restrictions on primary 
raw materials by some nations, and industry concentration. In both 
cases, mineral availability--or more precisely, unavailability--has 
emerged as a potential constraint on the development and deployment of 
emerging energy technologies.

          MINERALS, CRITICAL MINERALS, AND THE U.S. ECONOMY\2\
---------------------------------------------------------------------------
    \2\ This section of my testimony draws on testimony Steven Freiman 
and I prepared (and Dr. Freiman delivered) for the hearing before the 
Subcommittee on Investigations and Oversight of the House Committee on 
Science and Technology, ``Rare Earth Minerals and 21st Century 
Industry,'' March 16, 2010.
---------------------------------------------------------------------------
    It was in this light that the standing Committee on Earth Resources 
of the National Research Council initiated a study and established an 
ad hoc committee, which I chaired, to examine the evolving role of 
nonfuel minerals in the U.S. economy and the potential impediments to 
the supplies of these minerals to domestic users. The U.S. Geological 
Survey (USGS) and the National Mining Association sponsored the study, 
the findings of which appear in the volume Minerals, Critical Minerals, 
and the U.S. Economy (National Academies Press, 2008).
    The report provides a broad context for current discussions and 
concerns. It defines a ``critical'' mineral as one that is both 
essential in use (difficult to substitute away from) and subject to 
some degree of supply risk. The degree to which a specific mineral is 
critical can be illustrated with the help of a figure (Figure 1).* The 
vertical axis represents the impact of a supply restriction should it 
occur, which increases from bottom to top. The impact 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).\3\
---------------------------------------------------------------------------
    * Figures 1 and 2 have been retained in subcommittee files.
    \3\ 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 horizontal axis represents supply risk, which increases from 
left to right. Supply risk reflects a variety of factors including: 
concentration of production in a small number of mines, companies, or 
nations; market size (the smaller the existing market, the more 
vulnerable a market is to being overwhelmed by a rapid increase in 
demand); and reliance on byproduct production of a mineral (the supply 
of a byproduct is determined largely by the economic attractiveness of 
the associated main product). Import dependence, by itself, is a poor 
indicator of supply risk; rather it is import dependence combined with 
concentrated production that leads to supply risk. In Figure 1, the 
hypothetical Mineral A is more critical than Mineral B.
    Taking the perspective of the U.S. economy overall in the short to 
medium term (up to about a decade), the committee evaluated eleven 
minerals or mineral families. It did not assess the criticality of all 
important nonfuel minerals due to limits on time and resources. Figure 
2 summarizes the committee's evaluations. Those minerals deemed most 
critical at the time of the study--that is, they plotted in the upper-
right portion of the diagram--were indium, manganese, niobium, 
platinum-group metals, and rare-earth elements.\4\
---------------------------------------------------------------------------
    \4\ Earlier this year, using a very similar analytical framework 
and definition of ``critical'' minerals, the European Commission 
identified fourteen critical raw materials from the perspective of 
European users: antimony, beryllium, cobalt, fluorspar, gallium, 
germanium, graphite, indium, magnesium, niobium, platinum-group metals, 
rare earths, tantalum, and tungsten (Critical raw materials for the EU, 
report of the Ad-hoc Working Group on defining critical raw materials, 
Brussels, European Commission, June 2010).
---------------------------------------------------------------------------
    Any list of critical minerals reflects conditions at a specific 
point in time. Criticality is dynamic. A critical mineral today may 
become less critical either because substitutes or new sources of 
supply are developed. Conversely, a less-critical mineral today may 
become more critical in the future because of a new use or a change in 
supply risk.
    Although the study did not make explicit policy recommendations, it 
made three policy-relevant recommendations, which I quote below:

          1. The federal government should enhance the types of data 
        and information it collects, disseminates, and analyzes on 
        minerals and mineral products, especially as these data and 
        information relate to minerals and mineral products that are or 
        may become critical.
          2. The federal government should continue to carry out the 
        necessary function of collecting, disseminating, and analyzing 
        mineral data and information. The USGS Minerals Information 
        Team, or whatever federal unit might later be assigned these 
        responsibilities, should have greater authority and autonomy 
        than at present. It also should have sufficient resources to 
        carry out its mandate, which would be broader than the Minerals 
        Information Team's current mandate if the committee's 
        recommendations are adopted. It should establish formal 
        mechanisms for communicating with users, government and 
        nongovernmental organizations or institutes, and the private 
        sector on the types and quality of data and information it 
        collects, disseminates, and analyzes. It should be organized to 
        have the flexibility to collect, disseminate, and analyze 
        additional, nonbasic data and information, in consultation with 
        users, as specific minerals and mineral products become 
        relatively more critical over time (and vice versa).
          3. Federal agencies, including the National Science 
        Foundation, Department of the Interior (including the USGS), 
        Department of Defense, Department of Energy, and Department of 
        Commerce, should develop and fund activities, including basic 
        science and policy research, to encourage U.S. innovation in 
        the area of critical minerals and materials and to enhance 
        understanding of global mineral availability and use.

           ``CRITICAL MINERALS AND EMERGING TECHNOLOGIES''\5\
---------------------------------------------------------------------------
    \5\ Roderick G. Eggert, ``Critical Minerals and Emerging 
Technologies,'' Issues in Science and Technology, volume XXVI, number 
4, 2010, pp. 49-58. The paper discusses minerals for national defense 
as well as for emerging energy technologies. In this testimony, I do 
not discuss military or defense issues.
---------------------------------------------------------------------------
    In this recent paper, I examine the concerns about (un)availability 
of mineral-derived elements as a constraint on the development and 
diffusion of emerging technologies. I make four major points.
    First, we are not running out of mineral resources, at least any 
time soon. The world generally has been successful in replenishing 
mineral reserves in response to depletion of existing reserves and 
growing demand for mineral resources. Reserves are a subset of all 
mineral resources in the earth's crust. Reserves are known to exist and 
both technically and commercially feasible to produce. Reserves change 
over time. They decline as a result of mining. They increase as a 
result of successful mineral exploration and development and 
technological advancements in mineral exploration, mining, and mineral 
processing. Over time, reserve additions generally have at least offset 
depletion for essentially all mineral resources.
    Second, rather than focusing on running out of mineral resources, 
it is more useful to consider the constraints imposed on emerging 
technologies by the costs, geographic locations, and time frames 
associated with mineral production. Costs are important because over 
time production tends to move to lower-quality mineral deposits--those 
that are less rich in mineral, deeper below the surface, in more remote 
locations, or more difficult to process. The result is higher costs for 
users, unless technological improvements are sufficient to offset these 
cost increases. Thus the constraint that mineral availability sometimes 
imposes on users is one of higher costs rather than physical 
unavailability.
    Geographic location of production also is important. Other things 
being equal, supply risks are greater, the more concentrated production 
is in a small number of mines, companies, or companies. Concentrated 
production leaves users vulnerable to opportunistic behavior by 
producers, either in the form of higher prices or physical 
unavailability of an essential raw material. I have been careful not to 
say that import dependence is a risk factor. In fact, import dependence 
can be good if foreign sources of a mineral are available at lower 
costs than domestic sources. Rather it is the lack of diversified 
supply, domestic or foreign, that leads to supply risk, especially if a 
foreign source leaves us vulnerable to geopolitical risks.
    Time frames are important in understanding supply risks. In the 
short to medium term (one or a few years, up to about a decade), supply 
risks are determined by the characteristics of existing sources of 
supply or new facilities that are sufficiently far along that they are 
reasonably certain of coming into production within a few years--are 
they diversified or concentrated, are there geopolitical risks, how 
important is byproduct production (which responds only weakly to 
changes in the price of the byproduct), is there excess or idled 
capacity that could be restarted quickly, is there low-grade material 
or scrap from which an element could be recovered?
    Over the longer term (beyond a decade), mineral availability is 
largely a function of geologic, technical, and environmental factors. 
Does a resource exist in a geologic sense or in scrap that could be 
recycled? Do technologies exist to recover and use the resource? Can 
users recover a resource in ways that society considers environmentally 
and socially acceptable?
    Third, although markets are not panaceas, they provide effective 
incentives for dealing with concerns about reliability and availability 
of mineral resources. Markets provide incentives for investments that 
re-invigorate supply and reduce supply risk. There are minor manias now 
in exploration for mineral deposits containing rare-earth elements and, 
separately, lithium. Markets encourage users of mineral-based elements 
to obtain ``insurance'' against mineral supply risks. Users have the 
incentive to manage supply risks in the short to medium term by, for 
example, maintaining stockpiles, diversifying sources of supply, 
developing joint-sharing arrangements with other users, or developing 
tighter relations with producers. Over the longer term, users might 
invest in new mines in exchange for secure supplies or, undertake 
research and development to substitute away from those elements subject 
to supply risks.
    Fourth, despite the power of markets, there are useful and 
important roles for governments. To ensure mineral availability over 
the longer term and reliability of supplies over the short to medium 
term, I recommend that government activities focus on:

   Encouraging undistorted international trade. The U.S. 
        government should fight policies of exporting nations that 
        restrict raw-material exports to the detriment of U.S. users of 
        these materials.
   Improving regulatory approval for domestic resource 
        development. Although foreign sources of supply are not 
        necessarily more risky than domestic sources, when foreign 
        sources are risky, domestic production can help offset the 
        risks associated with unreliable foreign sources. Developing a 
        new mine in the United States appropriately requires a pre-
        production approval process that allows for public 
        participation and consideration of the potential environmental 
        and social effects of the proposed mine. This process is costly 
        and time consuming--arguably excessively so, not just for mines 
        but for developments in all sectors of the economy. I am not 
        suggesting that mines be given preferential treatment, rather 
        that attention be focused on developing better ways to balance 
        the various commercial, environmental, and social 
        considerations of project development.
   Facilitating the provision of information and analysis. 
        Echoing the recommendation of the 2008 NRC report on critical 
        minerals cited earlier, I support enhancing the types of data 
        and information the federal government collects, disseminates 
        and analyzes. Sound decision making requires good information, 
        and government plays an important role in ensuring that 
        sufficient information exists. In particular, I (and the 2008 
        NRC committee) recommend (a) enhanced focus on those parts of 
        the mineral life cycle that are under-represented at present 
        including: reserves and subeconomic resources, byproduct and 
        coproduct primary production, stocks and flows of materials 
        available for recycling, in-use stocks, material flows, and 
        materials embodied in internationally traded goods and (b) 
        periodic analysis of mineral criticality over a range of 
        minerals. In addition, we suggest 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.
   Facilitating research and development. Again echoing the NRC 
        report on critical minerals, I recommend that federal agencies 
        develop and fund pre-commercial activities that are likely to 
        be underfunded by the private sector acting alone because their 
        benefits are diffuse, difficult to capture, risky and far in 
        the future. Over the longer term, science and technology are 
        key to responding to concerns about the adequacy and 
        reliability of mineral resources--innovation that both enhances 
        our understanding of mineral resources and mineral-based 
        materials and improves our ability to recycle essential, scarce 
        elements and substitute away from these elements. In 
        particular, I (and the NRC committee) recommend funding 
        scientific, technical, and social-scientific research on the 
        entire mineral life cycle. We recommend cooperative programs 
        involving academic organizations, industry, and government to 
        enhance education and applied research.

    To sum up my personal views, the current situation with critical 
minerals and emerging energy technologies deserves attention but not 
panic. By undertaking sensible actions today, there is no reason to 
expect that the nation will be in crisis anytime soon. But I also am 
aware that without a sense of panic, we may not undertake these 
sensible actions.

                    AMERICAN PHYSICAL SOCIETY STUDY

    Finally, the issues of interest to this Committee are also of 
interest to the members of the American Physical Society (APS), a 
leading professional society of physicists. APS, through its Panel on 
Public Affairs, established a panel of experts a year ago to prepare a 
discussion paper on Critical Elements for New Energy Technologies. The 
panel, on which I serve, will issue its paper and recommendations later 
this year. The study is a joint activity of APS and the Materials 
Research Society, with additional support from the Energy Initiative at 
the Massachusetts Institute of Technology.
    Thank you for the opportunity to testify today. I would be happy to 
address any questions the subcommittee may have.

    Senator Cantwell. I am getting coaching here from my 
colleague from Idaho. Mr. Rufe, thank you very much for being 
here.

 STATEMENT OF PRESTON F. RUFE, FORMATION CAPITAL CORPORATION, 
                           SALMON, ID

    Mr. Rufe. Good morning. Thank you. Thank you for the 
opportunity to come speak to you this morning about the role of 
strategic minerals in clean energy technologies and more 
specifically the role of cobalt in clean energy technologies, 
as well as other strategic applications.
    The importance of a sound policy regarding the domestic 
production of these materials is underscored, as you have 
already heard, by the recent events that occurred between China 
and Japan, spurred by the reported incident involving a Chinese 
fishing boat--threatens China to use their role as either the 
current major provider or emerging major provider of strategic 
minerals in the world to leverage that role to influence or in 
the form of political power. So any energy policy we adopt must 
address the development and production, the responsible 
development and production, of domestic sources.
    Current policies like the Department of Energy's loan 
guarantee program are successful in jump-starting the 
manufacturing of clean energy technologies like rechargeable 
batteries, such as those plants that are being started up there 
in Michigan and Tennessee, Kentucky, and others. But they do 
not address, again, the supply for the base materials. Any 
policy that fails to address the supply for the base materials 
will hamstring any manufacturing efforts.
    The Western Governors Association recognized this and they 
adopted a policy resolution regarding the adoption of a 
national minerals policy urging the legislature to adopt a 
policy on national minerals, which is essentially to effect the 
supply of domestic sources through responsible mining and 
refining.
    Strategic minerals, specifically cobalt, are ubiquitous in 
the technologies we rely on day to day. The fastest growing use 
of cobalt is in rechargeable batteries, specifically 
chemistries like nickel metal hydride and lithium ion which are 
found in our portable electronics. Telephones, portable 
computers, hybrid electric vehicles, all electric vehicles all 
rely on those chemistries. Those chemistries rely on cobalt for 
their function. In fact, virtually all rechargeable battery 
chemistries currently in production rely on cobalt for their 
function.
    Cobalt is also largely used for super-alloy production. 
Super-alloys are those products that are alloy metals that are 
exposed to extremely high pressures and temperatures such as 
turbine engines, jet turbine engines, gas turbines for land-
based power generation. It is used extensively as a catalyst 
for coal to liquid technologies, gas to liquid technologies, 
fuel desulfurization, thereby cleaning our air.
    Permanent magnets like those named for their primary rare 
earth element constituents also rely on cobalt for their 
function, particularly reliant on the cobalt for retaining 
their magnetic properties in high-temperature environments.
    There is a promising new technology being researched at 
MIT, and it has to do with storing solar energy for use of 
solar power during nighttime hours.
    But despite all these uses, we have currently no production 
capability in the U.S. That is to say, that the U.S. consumes 
20 percent of the world's supply of cobalt and produces none. 
Moreover, the U.S. consumes 60 percent of the world's supply of 
high purity cobalt. There is a very limited supply left in our 
strategic reserve.
    Cobalt is primarily produced as a byproduct from copper and 
nickel mining. Two of the greatest sources exist in the 
Democratic Republic of Congo and Zambia. As we already heard, 
China is emerging as one of the major controllers of the 
element cobalt also. Our supply is essentially controlled by 
entities that are either unfriendly to the U.S. or politically 
unstable. As I mentioned that reliance on high purity cobalt--
it is estimated that approximately 80 percent of the world's 
supply of high purity cobalt is controlled by a single foreign 
company.
    However, there is a domestic source here in the United 
States that is in the process of being developed in Idaho. That 
is the Idaho Cobalt Project which involves both an underground 
mine and a high purity refining capability. When in production, 
this project will be the only U.S. domestic source.
    We must reenergize effective policies regarding the 
exploration, development, and production of strategic minerals 
to effect U.S. security and eliminate this precarious state of 
dependency.
    Thank you.
    [The prepared statement of Mr. Rufe follows:]

 Prepared Statement of Preston F. Rufe, Formation Capital Corporation, 
                               Salmon, ID

    While you will hear a lot of testimony today regarding the Rare 
Earth Elements (REEs), this testimony focuses on another strategic 
mineral absolutely essential to the successful deployment of clean 
energy technologies and other strategic applications like national 
defense and energy security; this strategic mineral is the essential 
element, cobalt. This testimony includes a discussion on current and 
projected uses of cobalt, cobalt supply and demand, and the need to re-
energize U.S. strategic mineral policy. Recently, Formation Capital 
Corporation, U.S., responded to a Request for Information from the U.S. 
Department of Energy regarding REEs and other materials used in energy 
technologies. Given the similarity in subject matter, our response to 
that RFI is enclosed with this testimony for your review.*
---------------------------------------------------------------------------
    * Documents have been retained in subcommittee files.
---------------------------------------------------------------------------
                       CURRENT AND PROJECTED USES

    The fastest growing use of cobalt is in the production of 
rechargeable batteries. Virtually all mainstream battery chemistries 
require significant amounts of cobalt. Both hybrid electric vehicles 
(HEVs) and all electric vehicles (EVs) rely on electrical storage 
capacity to function. In addition to HEVs and EVs, electronics such as 
computers, cell phones, portable tools, and power supply backups also 
rely on NiMH or Li-Ion technology for their rechargeable batteries. The 
rechargeable battery demand in the U.S. is growing and has already 
overtaken other cobalt applications in terms of percentage of use.
    Cobalt is also the essential element needed in almost every form of 
clean energy production technology being developed today. Gas to liquid 
(GTL), coal to liquid (CTL), clean coal, oil desulfurization, 
photovoltaic cells (or solar panels), wind turbines, gas turbines, and 
fuel cell technologies all require cobalt. As a catalyst, cobalt is 
essential for cleaning traditional carbon-based energy sources as well 
as reducing dependence on foreign sources of carbon-based energy 
sources through leveraging domestic sources available in coal, gas-
shales, and oil-shales. Cobalt catalysts are responsible for cleaning 
our current automobile fuel, through removal of sulfur, thereby keeping 
our air cleaner.
    Super-alloy is a general term for alloy metals that are used in 
elevated temperature and/or elevated pressure environments and are used 
extensively in the aerospace sector. The U.S. national defense, as well 
as our robust civil air transportation backbone, relies on cobalt to 
provide reliable, safe, and efficient jet propulsion. Needed to 
construct evermore light and powerful jet engines operating at higher 
and higher temperatures, cobalt is the essential element used in 
turbine blades to retain their structural integrity while being 
subjected to torturous corrosion, temperatures and pressures. 
Typically, a high bypass, turbofan jet engine of the 40,000 lb. thrust 
class requires 110 to 132 pounds of cobalt in each finished engine. 
Major users of high-purity cobalt include General Electric, Boeing, 
Pratt & Whitney, Rolls Royce, and other aerospace companies. Today, 
super-alloys account for almost half the U.S. annual consumption of 
cobalt.
    Cobalt is not a competitor or replacement for other strategic 
minerals like REEs. On the contrary, it is the symbiotic relationship 
that cobalt and other minerals share that makes so many technologies 
effective. A great example of this relationship is that of cobalt and 
certain REEs in the production of permanent magnets. Permanent magnets 
are needed to make wind turbines and other land based clean energy 
production technologies. Cobalt's extremely high Curie temperature 
allows these permanent magnets to maintain their magnetic properties at 
high temperatures. While some permanent magnets contain cobalt as a 
primary constituent, other magnets often named for their REE primary 
constituents also rely on cobalt in their production. While some 
permanent magnets are finished in the U.S. for enduse, they are largely 
manufactured overseas in Asian markets.
    Research being conducted at MIT shows an exciting projected use of 
cobalt in synthesizing photosynthesis to produce carbon-free energy by 
separating hydrogen and oxygen for use in fuel cells. This process, 
which uses dissolved cobalt and phosphate to split the water molecule, 
can be coupled with solar and wind power generation technologies to 
provide power storage during periods of darkness or no wind thereby 
making clean, carbon-free energy available 24 hours a day.

                            SUPPLY & DEMAND

    With no current domestic primary production (i.e., mining and 
refining) of cobalt in the U.S. and stockpiled supplies available in 
the strategic reserve dwindling, the U.S. is completely dependent on 
foreign supplies; although, a very small fraction of production does 
occur as a by-product of other metal production and recycling. As of 
December, 2009, the strategic reserve contained only 293 tonnes of 
cobalt. With the U.S annual demand for cobalt accounting for nearly 20% 
of the world's annual supply of approximately 60,000 tonnes, the 
remaining strategic reserve is insignificant.
    Most cobalt production comes as a by-product of other metal 
production such as nickel and copper. Many of the largest producers of 
cobalt as a by-product are located in countries that are either 
unstable or unfriendly to the U.S. Two of the largest cobalt by-product 
producers are the Democratic Republic of Congo and Zambia. With on-
going political and civil strife in the regions, the mines are 
sometimes forced to shut down and, once shuttered, these operations can 
take years to re-open. China has rapidly become the world's largest 
producer of refined cobalt and is growing into the world's largest 
consumer. China has the potential to become the virtual OPEC of cobalt 
refining, potentially controlling major producers both domestically in 
China as well as Africa. China's latest move to potentially limit REE 
exports to Japan is further evidence of this monopoly.
    According to the Cobalt Development Institute (CDI), the demand for 
portable electronic device rechargeable batteries has doubled over the 
past several years. Increasing numbers of HEVs and EVs drives the 
demand for rechargeable batteries ever higher. The deployment of more 
and more clean energy production technologies further swell demand. In 
fact, the growing demand for cobalt in battery and catalyst use has 
surpassed super-alloys as the primary demand for cobalt. Furthermore, 
the demand in the battery and catalyst sectors has shifted from the 
U.S. and Europe to Asia and is evidenced by the battery and catalyst 
production in Asian countries. This shift, however, may reverse as 
large-scale battery production operations in the U.S. take hold, such 
as those starting up in Michigan and Tennessee.
    The rapid growth of the Chinese industrial and consumer base, along 
with increasing competition for cobalt in the emerging clean energy 
sector, further strains the U.S. already tenuous position of foreign 
dependency. Moreover, it is estimated that approximately 80% of the 
high-purity cobalt market, that is the purity of cobalt needed in 
super-alloys and many high-tech applications, is controlled by a single 
foreign company. With U.S. demand for high-purity cobalt at 60% of the 
world's supply and no currently operating domestic sources or 
refineries, we are completely dependent on other countries for our 
supply of high-purity cobalt.
    There is, however, at least one primary source of high-purity 
cobalt in the U.S. being developed in Idaho. The Idaho Cobalt Project 
includes development of an underground mine and refinery. Cobalt was 
formerly mined in this area from the early 1900's until the 1970's. 
When in production, the Idaho Cobalt Project mine and refinery will be 
the only U.S. domestic, primary source of high purity cobalt.

                                 POLICY

    The importance of re-energizing effective policies regarding the 
exploration, development, and production of strategic minerals in 
support of clean energy technology development is underscored by the 
U.S.' precarious position of dependency. The Western Governors 
Association (WGA) recently adopted policy resolution 10-16, titled 
``National Minerals Policy.'' This policy resolution states, ``WGA 
urges the federal government to fund an effort by the U.S. Geological 
Survey and state geological surveys to identify potential, domestic REE 
deposits and other critical minerals for alternative energy 
technologies.'' As you now know, the U.S. demand for strategic minerals 
and REEs for clean energy technologies, as well as other uses, vastly 
outpaces the limited or non-existent production in the United States 
today.
    The challenge of permitting a new mine in the U.S. must be weighed 
by companies exploring or trying to develop strategic mineral deposits 
domestically. Additionally, uncertainties regarding policies towards 
mining can further hamper efforts to develop domestic sources. A vital 
component of effective energy policy must include the development of 
the essential minerals required to effect U.S. energy security.
    Cobalt is essential for the future of the U.S.' national defense 
and energy security. While demand for cobalt increases globally, the 
supply continues to be controlled by an exclusive group of countries or 
foreign companies that may not be friendly to the U.S. or are 
politically unstable. The U.S.' cobalt dependency can only be remedied 
through effective application of policy that makes the domestic 
production of cobalt, via environmentally sustainable mining and 
refining, a priority.

    Senator Cantwell. Thank you very much for your testimony.
    Mr. Peter Brehm, thank you very much for being here. We 
look forward to your testimony.

     STATEMENT OF PETER BREHM, VICE PRESIDENT OF BUSINESS 
  DEVELOPMENT AND GOVERNMENT RELATIONS, INFINIA CORPORATION, 
                         KENNEWICK, WA

    Mr. Brehm. Thank you, Madam Chairman and Ranking Member 
Risch and members of the subcommittee. I am Peter Brehm, the 
Vice President of Business Development and Government Relations 
for Infinia Corporation. We are headquartered in the State of 
Washington and we have operations in New Mexico, Michigan, and 
California, as well as Spain, India, and Japan. We have over 
130 employees, 100 of whom are based at our headquarters in the 
Tri-Cities in Washington State. Notably being nearby, we have 
several key business partners, supplies, and consultants in and 
from Idaho. It is an honor to appear before you and testify on 
behalf of Infinia.
    First, let me tell you a little bit about our firm. Infinia 
has developed and manufactures the PowerDish, a unique, high-
performance solar power system that uses a Stirling engine and 
a parabolic mirror to convert sunlight into heat and resulting 
heat into electricity. Our system is not PV- or solar panel-
based, but instead a unique U.S.-developed and manufactured 
concentrating solar power system. Each PowerDish produces 3 
kilowatts of power. Our systems do not consume water which is 
in short supply in the West, nor do they need flat or graded 
ground to operate. Through scalability, we can size our 
projects to fit within existing transmission and distribution 
constraints.
    Notably, we manufacture here in the United States, and at a 
time when the auto industry is facing historic difficulties, 
our technology is perfectly suited to being manufactured on 
automotive supplier assembly lines. In fact, virtually our 
entire supply chain is the automobile industry suppliers, most 
of which are based in the hard-hit Midwest, including Michigan, 
Ohio, Indiana, and Iowa, but notably a major supplier in Utah.
    Although our primary focus is the commercialization of the 
PowerDish solar power system, we are actually a very 
diversified renewable and alternative energy technology 
developer and manufacturer. In addition to our solar power 
system, we have over a dozen renewable and alternative energy 
development programs in such diverse areas as tactical and 
remote power systems, combined heat and power, coolers, and 
cryocoolers.
    With significant interest in investment in such a broad 
range of renewable energy and alternative energy technologies, 
Infinia brings a rather unique perspective to this hearing. Not 
only do we use rare earth metals in our core technology, but 
many of our customers also use rare earth metals or closely 
related materials.
    As technical background, Infinia's core technology are 
Stirling Cycle devices, including Stirling engines which 
convert heat into electricity and Stirling coolers and 
cryocoolers which convert electricity into cooling. The key 
component of all of the above-described Stirling Cycle devices 
is a linear alternator, and this is where rare earth metals 
come into play.
    The linear alternators use what are known as permanent 
magnets and the most powerful and compact permanent magnets use 
rare earth metals. In our case, we currently use neodymium 
magnets. Additionally, we also use some small samarium-cobalt 
magnets.
    Rare earth magnets in our linear motors or alternators are 
a critical part of all Stirling engines, cryocoolers, heat 
pumps, and air conditioners we are currently developing. 
Neodymium-based magnets provide the highest possible energy 
product and represent Infinia's major need for rare earth 
metals. Samarium magnets are also required for some 
applications. Samarium-cobalt magnets are also the only 
possible alternative to neodymium-iron-boron magnets. These 
have reduced but acceptable performance but still use rare 
earth metals. Any other alternatives will increase system size 
and weight and reduce power and efficiency to levels that are 
not viable for practical applications.
    Access to and a commercial supply of rare earth metals is 
of critical importance to Infinia, our suppliers, and 
customers. Policies to ensure this supply are of great 
interest. It should be noted that in spite of the impression, 
as other panelists have made given by their names, rare earth 
metals are reasonably available and we have never had an issue 
securing neodymium or samarium. The potential problem is the 
supply is concentrated and apparently, considering recent 
events, subject to political disruption.
    The loss or disruption of the rare earth metals supply 
would be catastrophic to Infinia in terms of price spikes, 
production volume, and related supply chain disruptions that 
would drastically limit our ability to develop and manufacture 
our products. Weight and efficiency are insurmountable hurdles 
with respect to alternative materials. Rare earth metals are 
simply a necessity for development, manufacturing, and 
advancement of Infinia's technology, as well as many other 
modern essentials.
    Infinia strongly supports efforts such as S. 3521 to help 
ensure the supply of rare earth metals. However, we are 
concerned that one aspect of this proposed legislation is to 
extend the DOE loan guarantee program to domestic rare earth 
metals production. While we conceptually strongly support 
broadening the DOE loan guarantee program to encompass a 
domestic rare earth metals supply, we are troubled that this 
may jeopardize loans needed by other renewable energy projects. 
Recent testimony by the DOE's loan guarantee program management 
appears to indicate that DOE does not have adequate funding to 
support the existing pipeline of renewable energy-related DOE 
loan guarantee projects and proposals, much less an expanded 
pipeline that might result from S. 3521 or similar legislative 
or regulatory proposals.
    As the committee is keenly aware, funding representing over 
half of the DOE loan guarantee program has already been 
reallocated on two separate occasions. The DOE loan guarantee 
program and adequate funding for this program is of great 
import to Infinia and our renewable energy industry colleagues.
    On a related note, we would also like to bring to the 
attention of the committee that there are promising U.S.-
invented and developed technologies, namely high temperature 
superconducting motors and generators, that require virtually 
no rare earth metals and are direct substitutes for similar 
traditional motors requiring rare earth metals. The irony is 
that we do have the world's leading high temperature 
superconducting industry here, and based on recent budget 
direction, it appears that DOE is looking to slowly terminate 
that program.
    Thank you.
    [The prepared statement of Mr. Brehm follows:]

     Prepared Statement of Peter Brehm, Vice President of Business 
 Development and Government Relations, Infinia Corporation, Kennewick, 
                                   WA

    Madam Chairman, Ranking Member Risch and Members of the 
Subcommittee, I am Peter Brehm, the Vice President of Business 
Development & Government Relations for Infinia Corporation. We are 
headquartered in the State of Washington, and we have operations in New 
Mexico, Michigan and California, as well as Spain, India and Japan. We 
have over 130 employees, 100 of whom are based at our headquarters in 
the Tri-Cities in Washington State. Notably, being nearby, we also have 
several key business partners, suppliers and consultants in and/or from 
Idaho. It is an honor to appear before you and testify on behalf of 
Infinia.
    Let me first tell you a bit about my firm. Infinia has developed 
and manufactures the PowerDishTM, a unique, high-performance 
solar power system that uses a Stirling engine and a parabolic mirror 
to convert sunlight, which is free, into electric power, which is 
valuable. Our system is not a PV or solar panel-based system, but 
instead a unique U.S.-developed and manufactured Concentrating Solar 
Power system. Each PowerDishTM produces 3 kW of grid-quality 
AC electricity. Our systems do not consume water--which is in short 
supply in the West--nor do they need flat or graded ground to operate. 
And through scalability, we can size our projects to fit within 
existing transmission and distribution system constraints.
    Notably, we manufacture here in the United States and, at a time 
when the auto industry is facing historic difficulties, our technology 
is perfectly suited to being manufactured on automotive supplier 
assembly lines. In fact, virtually our entire supply chain is 
automobile industry suppliers, most of which are based in the hard-hit 
Midwest including, Michigan, Ohio, Indiana and Iowa.
    Although our primary focus is the commercialization of the 
PowerDishTM solar power system, we are actually a very 
diversified renewable and alternative energy technology developer and 
manufacturer. In addition to our solar power system, we have over a 
dozen renewable and alternative energy development programs funded by 
the Department of Defense (DOD), Department of Energy (DOE) and 
commercial partners in such diverse areas as tactical power systems, 
remote power systems, combined heat & power systems, coolers, 
cryocoolers and air conditioners.
    With such a diverse portfolio of technologies, Infinia is a member 
of several renewable and alternative energy related trade associations. 
We are a member of, and I represent Infinia on the Board of Directors 
for the Solar Energy Industries Association (SEIA) and the Commercial 
Coalition for the Application of Superconductors (CCAS). Infinia is 
also a member of the United States Clean Heat & Power Association, the 
Clean Technology and Sustainable Industries Association, the Washington 
State Clean Technology Alliance and the Large-Scale Solar Association 
among others. On a related note, I was appointed by Governor Christine 
Gregoire in 2009 to the Washington State Clean Energy Leadership 
Council, which advises Washington State's Governor and Legislature on 
Clean Energy Policy.
    With significant interest and investment in such a broad range of 
renewable and alternative energy technologies, Infinia brings a 
somewhat unique perspective to this hearing. Not only do we use Rare 
Earth Metals (REM) in our core technology, but many of our customers 
also use Rare Earth or closely related materials.
    As technical background, Infinia's core technology are Stirling 
Cycle devices including Stirling engines which covert heat into 
electricity and Stirling coolers, cryocoolers, heat pumps and air 
conditioners which convert electricity into heat, cooling and 
cryocooling. The key component of all of the above described Stirling 
Cycle devices is a linear alternator.
    This is where the Rare Earth Metals come into play. The linear 
alternators use what are known as permanent magnets and the most 
powerful and compact permanent magnets use REM's. In our case, we 
currently use Neodymium magnets which are made of the REM Neodymium. 
Additionally, we also use some small Samarium-cobalt magnets which use 
the REM Samarium.
    As an example, the tables and pictures* below describe the REM used 
by Infinia's PowerDishTM. As the slides indicate REM's are 
vital to our products.
---------------------------------------------------------------------------
    * Tables and graphics have been retained in subcommittee files.
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    Rare earth magnets in our linear motors or alternators are a 
critical part of all Stirling engines, cryocoolers and heat pumps/air 
conditioners being developed or commercialized by Infinia. Neodymium 
based magnets provide the highest possible energy product and represent 
Infinia's dominant need for rare earth elements. Samarium is required 
for some applications with magnets that operate at significantly 
elevated temperatures. Samarium/cobalt magnets are the only possible 
alternative to the neodymium/iron/boron magnets. These have reduced but 
acceptable performance, but they still use a rare earth element. Any 
other alternatives such as Alnico magnets will increase system size and 
weight and reduce power and efficiency to levels that are not viable 
for practical applications.
    Access to and a commercial supply of REM's is clearly of critical 
importance to Infinia, our suppliers and our customers. Policies to 
ensure this supply are of great interest. It should be noted that, in 
spite of the impression one might get from their name, REM's are 
reasonably available and we (and to the best of our knowledge, our 
vendors) have never had an issue securing the Neodymium or Samarium. 
The problem is the supply is concentrated and apparently, considering 
recent events, subject to political disruption.
    The loss or disruption of the REM supply would be catastrophic to 
Infinia in terms of price spikes, production volume and related supply 
chain disruptions that would drastically limit our ability to develop 
and manufacture our products. Weight and efficiency are insurmountable 
hurdles when alternatives are assessed for Infinia's Stirling cycle 
devices. REM's are simply a necessity for the development, 
manufacturing and advancement of Infinia's technology, as well as many 
other modern essentials.
    Infinia strongly supports efforts such as S.3521 to help ensure the 
supply of REM's. However, we are concerned that one aspect of this 
proposed legislation is to extend the DOE Loan Guarantee Program to 
domestic REM production. While we conceptually support broadening the 
DOE Loan Guarantee Program to encompass a domestic REM supply chain, we 
are troubled that this may jeopardize loans needed by other renewable 
projects. Recent testimony by the DOE's Loan Guarantee Program 
management appears to indicate that DOE does not have adequate funding 
to support the existing pipeline of renewable energy related DOE loan 
guarantee projects and proposals, much less an expanded pipeline that 
might result from S.3521 or similar legislative or regulatory 
proposals.
    As the committee is keenly aware, funding representing over half of 
the authorization for the DOE's Loan Guarantee Program has already been 
reallocated on two separate occasions apparently leaving the DOE's Loan 
Guarantee Program insufficient funding to support its existing backlog 
of projects and proposals--one of which is a proposal by Infinia to 
invest in our automotive industry supply chain in Washington State, 
Utah, Michigan, Indiana and several other states. The DOE Loan 
Guarantee Program and adequate funding for this program is of great 
import to Infinia and our renewable energy industry colleagues.
    On a related note, we would also like to bring to the attention of 
the committee that there are promising U.S. invented and developed 
technologies, namely High Temperature Superconducting (HTS) motors and 
generators, that require virtually no REM's and are direct substitutes 
for similar traditional motors and generators requiring large 
quantities of REM's. The development and commercialization of these and 
other HTS applications would significantly reduce the demand for REM's, 
which would lessen the threat and/or effect of supply disruptions.
    Despite the value of HTS technologies, the DOE appears to be in the 
process of winding down and ultimately terminating the HTS program. We 
would respectfully like to suggest, especially considering the recent 
disruptions to the supply of REM's, that the committee strongly 
encourage the DOE to rethink their apparent decision to wind down and/
or terminate the DOE's High Temperature Superconducting program.
    Thank you for the opportunity to testify on behalf of Infinia and 
our renewable energy industry colleagues.

    Senator Cantwell. Thank you for your testimony.
    We are going to start with you, Dr. Eggert, if we could. On 
this issue in your testimony, you talked about a USGS mineral 
information team, or whatever group would be assigned for this 
information gathering, should have greater authority and 
autonomy than at present. What are you thinking about? What are 
we trying to capture by giving them greater authority and 
autonomy?
    Mr. Eggert. The National Research Council report and the 
committee that I chaired recommended that the minerals 
information function have the designation of, it is either, 
primary or principal statistical agency which gives it the 
authority to require the submission of data that it requests. 
At present, the minerals information function is hampered by 
the voluntary nature of their requests or responding to their 
requests. In some cases, particularly with very small markets 
like many of the rare elements, not just rare earths, but the 
rare elements more generally, that is a significant issue, and 
there is a lack of transparency in these markets generally.
    Senator Cantwell. So collecting all the information and 
requiring that so we can have a clear idea about the markets 
and the possible shortages.
    Mr. Eggert. The supply risks from a policy perspective.
    Senator Cantwell. The supply risks.
    Mr. Eggert. That is right, yes.
    Senator Cantwell. You also talked about pre-commercial 
activities by the Federal Government in R&D. Are there 
particular areas there that you think we need to focus on?
    Mr. Eggert. There are areas both on the supply side and the 
demand side. I think on the supply side, research and 
development especially related to recycling is important. 
Earlier in the supply chain, research and development related 
to the processing of rare earth, if we are talking about rare 
earths, rare earth ores and concentrates, is where the 
principal challenge occurs at present in the production of rare 
earths. On the demand side, it would be research related to 
primarily material substitution, material science sort of 
research.
    Senator Cantwell. Is cobalt the key area there, or where do 
you think we need to be looking at substitution possibilities?
    Mr. Eggert. It potentially could be in any of the elements 
that satisfy two conditions, subject to a high degree of supply 
risk and also at present very difficult to substitute away from 
without losing functionality in the product. I mean, I would 
include rare earths in that. I would include cobalt in that 
list. I do not have a comprehensive list of elements in my 
mind, but it certainly would include both rare earths and 
cobalt and probably some others.
    Senator Cantwell. Then just last on the foreign policy 
question, I mean, you obviously want us to be aggressive about 
making sure we have a level playing field. But you also talk 
about the lack of a diversified supply base domestically and 
foreign supply. Are there other things that we should be doing 
to encourage the larger global supply in addition to what we 
would do here to stabilize--is that what you meant by ``rather 
it is a lack of diversified supply, domestic and foreign, that 
leads to the supply risk''?
    Mr. Eggert. I guess that was part of my main point that 
import dependence by itself need not be subject to supply risk, 
but it can be when there is geopolitical risk or a concentrated 
supply. I think our primary responsibility certainly should be 
thinking about the domestic possibilities for production, but 
there may be opportunities for diplomatic initiatives 
associated with international developments. I guess I am not 
thinking about our investing public funds overseas.
    Senator Cantwell. No, and I was not suggesting that either. 
I was just interested in where you thought, obviously, you 
could balance out because the challenge in the next few years 
to deal with this from a supply chain perspective takes time. 
So I did not know if there were other things that we could be 
doing in the short term to balance out the clout or the issues 
with China.
    Thank you.
    Senator Risch. Thank you, Madam Chairman.
    Mr. Eggert, you made one comment that I want to test a 
little bit here. You indicated that you were opposed to special 
treatment when it comes to mining or processing or what have 
you of certain of the rare earths. I understand that that is 
probably a politically correct position to take.
    But assume for theoretical purposes and general purposes--
and for obvious reasons we are going to have to talk in 
theoretical purposes--we find a rare earth that is necessary 
for our nuclear arsenal or, for that matter, for modern 
conventional weapons for the smart weapons that we have and the 
only place we can get it here is in the United States. Would 
you have any difficulty with a policy of the Government that 
did treat the extraction and processing of the mineral 
differently than maybe other things due to the important 
national security of that particular rare earth?
    Mr. Eggert. Certainly if there were a specific circumstance 
where the impact of not having supply was sufficiently large, 
then sure, in theory one could imagine relaxing environmental 
standards in that specific situation.
    Senator Risch. Let us move past the theory. Are you aware 
of any of those rare earths that we have a need for now that 
are very important to our national security?
    Mr. Eggert. I have to say I am not an expert on defense 
applications. My impression from what I have read is that there 
are a number of defense systems that do depend critically on 
some of the rare earths.
    Senator Risch. Your reading is correct.
    Mr. Rufe, could you describe for the committee, please--
give us the executive summary, but perhaps you could describe 
the regulatory challenges that you faced and still face in 
bringing this cobalt project into production.
    Mr. Rufe. Thank you, Senator Risch. That is an excellent 
point to discuss.
    The timeframe it takes a project to go from its exploration 
phase into production averages somewhere between 6 and 7 years 
in the United States. That is quite a contrast to other 
countries where it might take in the timeframe of a few years.
    The biggest hurdle that companies face in developing 
projects today is regulatory uncertainty. Because of the 
timeframe it takes to go from start to finish, so to speak, the 
environment is changing and not environment in the literal 
sense so much as the environmental regulatory environment, if 
you will, is changing rapidly. So not knowing what you are 
going to have to deal with when you actually get the project 
into production at day one is leading companies to great 
concern about the investing into projects in the United States.
    Some of the greatest issues--the most important issues that 
mining companies deal with as far as developing mining projects 
is in water quality, largely water quality. By changing water 
quality regulations and standards, as we are able to detect 
lower and lower levels of constituents in water, we see a 
moving bar on what the standard is. It does not necessarily 
equate to better, cleaner, or more environmentally friendly 
conditions. It just means there are lower numbers, and that 
makes it very difficult and very challenging for projects to 
move forward, constantly adapting technologies, new 
technologies, to counter these requirements as they grow into 
place.
    Senator Risch. Thank you very much. As I noted, when I was 
Governor, I visited that site and went over the challenges that 
you people were facing there. I am truly amazed that you have 
gotten to the point that you have gotten, and you are to be 
congratulated.
    The last challenge I heard was that one of the Federal 
agencies had thrown a huge bond requirement at you. Have you 
gotten past--after all the things that you got, finally at the 
very end they put a bar that you could not cross. Have you 
resolved that?
    Mr. Rufe. Senator, unfortunately, we have not yet resolved 
that issue, and I appreciate you bringing that up because that 
is the greatest issue that we still are faced with prior to 
moving into construction. In fact, there is a move out there 
under the CRCLA Act, section 108, I think it is section B to 
promulgate additional financial assurance requirements for 
mining projects. In many cases, it is either duplicative, 
redundant sort of financial assurance requirements that are 
already required by Federal land management agencies like the 
Forest Service, the Bureau of Land Management, and other State 
agencies. That too presents a tremendous risk for future 
projects. So we have not yet resolved that. It is actually an 
issue that is kind of bouncing back and forth between the 
Washington office of the Forest Service and now back to the 
Salmon office where we are working with the local 
representatives there to resolve. But the point is that 
projects that are facing massive financial assurance 
requirements is detrimental to the economics of these projects.
    Senator Risch. Thank you. I wish we had more time to spend 
on that.
    Can I ask one more question please, Madam Chairman, of Mr. 
Brehm?
    Senator Cantwell. Yes.
    Senator Risch. Briefly, could you tell us--you have heard 
our discussion today about the brouhaha between China and Japan 
and how Japan got cutoff from the rare earths. If that same 
thing happened between the United States and China--for 
instance, if we got in a row over the currency or the Dalai 
Lama or one of those things, and they cut us off--what is that 
going to do to your business, to Infinia's business?
    Mr. Brehm. We really have no alternatives to samarium, 
cobalt, and the neodymium magnets. So if we would lose the 
supply, we could not produce while that supply was not 
available.
    Senator Risch. Thank you for your indulgence, Madam 
Chairman.
    Senator Cantwell. Thank you.
    Senator Udall. Thank you, Madam Chairman.
    I would draw attention for my friend from Idaho to an 
article yesterday: Pentagon Losing Control of Bombs to China, 
Neodymium Monopoly. I will get a copy of this to you.
    Senator Risch. Thank you. I think I have read it already.
    Senator Udall. You are always ahead of me, but I think your 
points about the DOD and their involvement are very, very 
important ones.
    Senator McCain is here. He and I both sit on the Armed 
Services Committee, and this may be something that we need to 
also consider in the Armed Services Committee.
    Let me follow up on Senator Risch's questioning. I come at 
this truly with an open mind, and I did, Mr. Rufe, develop some 
concerns as you talked about the long processes involved, 
particularly on the financial side and the guarantees.
    I have heard from Molycorp--I mentioned Molycorp as a 
Colorado-based company--that they believe the environmental 
regulations that are in place are appropriate, are balanced, 
and that they can develop rare earths and adhere to the 
permitting and environmental regulations that are in place. 
Maybe each one of you could comment in turn about proposals to 
relax environmental regulations. I think it is important, of 
course, to maintain clean air and clean water and the things 
that we value, particularly in the West, but all over our 
country. If you would, if you would each comment.
    We will start with Mr. Eggert. By the way, welcome. It is 
always nice to have a Coloradan here in Washington, D.C.
    Mr. Eggert. Thank you very much. It is my pleasure to be 
here.
    I would distinguish between relaxing environmental 
standards and making the approval process more efficient. What 
I would emphasize is improving the efficiency of the process 
rather than relaxing the standards.
    Mr. Rufe. To piggyback on Mr. Eggert's comments, the 
relaxation of regulatory requirements I do not believe is the 
appropriate response. Rather, it is establishing some certainty 
as far as what those regulations will be today and 5 to 10 
years into the future. That is the greatest risk that we face. 
Eliminating redundancy, streamlining, as Mr. Eggert said, 
streamlining that process, reducing the duplicity that we are 
seeing. One of those, as I mentioned, is the potential 
redundancy of financial assurance requirements through the 
multiple Federal agencies involved in a mining process.
    Senator Udall. Fair enough.
    Mr. Brehm.
    Mr. Brehm. Of course, I am not an expert on environmental 
regulations as they apply to mining. But I would echo both Mr. 
Rufe and Mr. Eggert's point, that businesses like certainty. I 
do not think they are really saying anything negative about the 
regulatory regime. It is just it is a moving target and 
difficult to hit. We all want clean water. We do not want a 
situation, for example, in Senator Risch's home State--I am a 
big fan of northern Idaho and Lake Pend Oreille. There are 
still signs up there you cannot eat the fish because of mercury 
left over from mining in the 1800s. So I think really more 
certainty would do everything for you, I would assume.
    Senator Udall. Thank you for those concise and insightful 
comments.
    Mr. Eggert, let me turn back to you. We hear often that 
rare earths are not actually that rare, but that they occur 
naturally everywhere. What is rare about them, though, is 
finding them in a concentration high enough and large enough to 
mine economically. At current prices, what do you believe is an 
ore grade that can be mined economically? How high would prices 
have to go before lower grade deposits become economical? If 
you want to take that for the record, too, we would be happy to 
provide you with that.
    Mr. Eggert. Let me say I am not a mining engineer, and even 
though my undergraduate degree is in geology, I cannot comment 
on ore grades in rare earth deposits.
    I would also say that at present, prices for most rare 
earths have spiked. I think they have increased something like 
700 percent over the last 8 or 9 months, but those are likely 
to be temporary, although how temporary one cannot be sure.
    I think the biggest issue at present is that the Chinese 
rare earth deposits are of sufficient quality that they 
potentially could supply most world demand at prices below what 
would be necessary for at least many other potential rare earth 
mines. So I think the conundrum facing many private investors 
in rare earths is the fact that the prices could fall if 
Chinese producers decided to, all of a sudden, relax the export 
restrictions and flood the market.
    Senator Udall. I see my time has expired. Let me end with a 
comment which will lead to a question for you all for the 
record, which is I understand China has more than 6,000 
scientists and researchers devoted to rare earth research and 
development and applications. We only have one institution of 
higher learning in our country that offers a course in rare 
earths. That is at the Colorado School of Mines. To be fair, I 
think you all just announced plans to offer that course just a 
couple of weeks ago. So it is clear we have got a lot of work 
to do. I will direct a question for the record to all of you on 
that in that vein.
    Senator Cantwell. Thank you.
    Senator McCain. Thank you, Madam Chairman, and thank you 
for holding this hearing because it comes in light of some 
interesting international events that have taken place. 
Obviously, I am referring to the Chinese restriction of rare 
earth materials to Japan in light of the confrontation that 
just took place between China and Japan. 97 percent--is that 
correct, Mr. Eggert--of the rare earth products come from 
China?
    Mr. Eggert. Approximately 97 percent of the raw material 
comes from China, yes.
    Senator McCain. Yet there is some evidence that some of the 
rare earth materials are in the United States of America. To 
wit, I specifically point out the Painted Desert. There is 
information that some of that rare earth material may be there, 
as well as other places in the country. Is that true? Do you 
know, Mr. Eggert?
    Mr. Eggert. Yes. There are a number of rare earth-bearing 
mineral deposits in the United States and a number of other 
countries.
    Senator McCain. Is that your view, Mr. Rufe and Mr. Brehm?
    Mr. Rufe. Yes, Senator, it is.
    Mr. Brehm. I believe we probably have the second largest 
deposits after China.
    Senator McCain. So we have the second largest deposit, and 
yet there is virtually no production.
    This molybdenum--I am not in an area of my total expertise, 
but there is a little bit of production in the United States. 
Is that true, Mr. Eggert?
    Mr. Eggert. Molybdenum.
    Senator McCain. Yes.
    Mr. Eggert. Yes, there is quite a bit of molybdenum 
production in the United States.
    Senator McCain. Is that the only one of rare earths that is 
a significant production?
    Mr. Eggert. Molybdenum, I think strictly speaking, is not 
considered a response element. It is in a different part of the 
periodic table.
    Senator McCain. OK. Then I will retract my question.
    So you said that there would be a situation where the 
Chinese might dump on the market and that would reduce the 
costs, but from their recent action, it may be more likely that 
they would certainly hold back to keep the cost of rare earths 
high. Certainly they are doing that to the Japanese right now. 
If trade conflicts escalate between the United States and 
China, to wit, the House acting just yesterday on the situation 
of currency imbalance, you could see further restraints on the 
part of the Chinese.
    So that leads me to the important part of our conversation. 
What do we need to do in order to stimulate--and I understand 
it takes a number of years, if we started today, to get some of 
this rare earth materials in production. What do we need to do? 
Suppose you had a magic wand and said, OK, this is the 
environment we need to create to have the United States play a 
role in rare earth materials and resources if only to satisfy 
our defense needs which, as you know, require some of these 
materials. Mr. Eggert?
    Mr. Eggert. My written testimony covers this issue 
generally. I would emphasize, in response to your question, the 
importance of education and training because we really have a 
deficit in terms of the work force and the intellectual 
infrastructure----
    Senator McCain. Yes, but that does not start production.
    Mr. Eggert. You are right. You are right.
    I also am in favor of improving the regulatory environment 
and the regulatory process through which new mines are 
permitted. But as I also said, I am really not in favor of 
special--under most circumstances, in favor of special 
treatment for specific elements.
    Senator McCain. Mr. Rufe.
    Mr. Rufe. I can speak specifically, Senator, to the Idaho 
Cobalt Project, Formation Capital's effort in Salmon, Idaho. We 
are able to produce cobalt at the low end of the cost spectrum 
across the world's supply of cobalt. We are able to produce 
there. But if there was a magic wand, as you put it, I think it 
would have to be in the financial area to provide the, for 
example, loan guarantees to finance these efforts.
    Senator McCain. Is that not a chicken or egg thing? Because 
financial backing is not going to come unless they see a clear 
path toward return on their investment, which right now, at 
least the people I talk to, is impeded--maybe Mr. Brehm has a 
view--by the vast regulatory thicket they have to go through 
and congressional action sometimes blocking specific projects 
from moving forward. We have that case of a copper mine in 
Arizona. Go ahead.
    Mr. Rufe. Yes, sir. No doubt that that may be the case. 
Certainly in instances of our national security, the return on 
investment is not necessarily measured in terms of dollars. So 
interpreting your question in that manner, that is why I 
answered the way I did.
    Senator McCain. We do not expect the Federal Government to 
get into the mining business, but we hope to create an 
environment where businesses and enterprises can go in and get 
into that business and provide us with much needed strategic 
materials.
    Mr. Brehm. Again, Senator, we are a customer of the 
material, not so much a supplier.
    But I think this hearing is a great first step. Personally 
and from Infinia's point of view, what we really appreciate 
about this hearing is that there have been a number of 
questions that indicate you Senators are looking at the entire 
supply chain, and we think that is very important.
    As I mentioned earlier, certainly we are actually 
conceptually very supportive of expanding the loan guarantee 
program to include mining of this material so long as there is 
an increase in the authorization because recently the loan 
guarantee program has been going the other way.
    But again, from just a core business concept, regulatory 
certainty I think would go a long way. So for the investors in 
Mr. Rufe's project, if they knew--like many industries, if you 
had a road map and you knew exactly when and what it would cost 
you to get the mine permitted, I think the return would be--it 
is the uncertainty of the return cost by the regulatory 
uncertainty, I would assume.
    Senator McCain. I thank you.
    I thank you, Madam Chairman. As Senator Udall pointed out, 
I think we need to look at this issue from a national security 
standpoint clearly since there are materials that go into the 
production that are vital in the production of many of our 
weapons systems. Clearly the numbers indicate that these 
materials are going to become scarcer and scarcer, not to 
mention the possibility that we would have China take action 
such as they just took against Japan. It could have significant 
impact.
    So I thank you for holding the hearing, Madam Chairman, and 
I do not think this issue is going away for a while.
    Senator Cantwell. Nor do I. Thank you, Senator McCain. I 
thank you and Senator Udall, actually all my colleagues from 
the West participating in this hearing this morning. It is an 
important issue, and I am sure we will continue to dialog about 
it both from a national security and clean energy perspective.
    I wanted to go back to the recycling issue for a second. 
Mr. Eggert, is there any number, idea, concept about the 
recycling end of this and the potential for materials from 
recycling?
    Mr. Eggert. The potential is large, but up until now, there 
has been very little recycling of rare earth elements and most 
of the rare elements in the lists of elements in this category 
that one sees, largely because these elements are used in small 
quantities in much larger and bulkier products, and it is 
technically quite difficult to separate the rare earth element, 
for example, from the product in many cases. So there needs to 
be work to improve the technical efficiency of recycling rare 
elements from products and back at the product design stage in 
really designing for recycling.
    Senator Cantwell. So what do we need to do to get a sense 
of how big that potential or opportunity is?
    Mr. Eggert. I guess it would start with information and 
look at the degree to which there are rare earths and other 
rare elements in our waste dumps, and I think at present we do 
not really know.
    Senator Cantwell. Mr. Rufe, the Molycorp at Mountain Pass 
in California had some substantial environmental issues. I 
mean, they had leaks from a waste pipe into their evaporative 
ponds. They broke the wastewater pipe when they were trying to 
clean out the mineral scale inside the pipe. The scale had 
above average levels of radioactivity from participating 
minerals, resulting in environmental contamination when the 
pipe burst. I mean, to make matters worse, they were on public 
lands. So this mine was closed in 2002 in part due to the 
environmental issues, the fact the mine had reached its 
capacity as well on wastewater ponds, and since that time, the 
operator has had to address these and other environmental and 
safety issues.
    How are the cobalt mine operations differing from the 
mining of rare earths, and how can we be assured that cobalt 
that you are hoping to produce will not cause the same 
environmental damage?
    Mr. Rufe. To start, the cobalt is not a radioactive 
element, nor is it found with a predominant quantity of 
radioactive elements. So that is not largely a concern.
    The major issues that have occurred in the past on historic 
mining properties where there is legacy contamination and 
ongoing cleanup are directly attributable to historic mining 
practices. For example, waste management is largely the 
greatest concern or the greatest cause of contamination today 
at these legacy sites. That was essentially because the removal 
of rock and the management of waste was nearly indiscriminate 
in its placement. It was a matter of convenience, whereas 
today's mining practices use very deliberate geochemical 
testing and monitoring programs along with placement in 
specially engineered facilities to prevent those type of 
situations from occurring. Specifically, the Idaho Cobalt 
Project incorporates a series of different mitigation measures 
to mitigate against those sorts of risks, and those largely are 
in the modern design of the facility.
    Senator Cantwell. What about other rare earths and mining 
practices?
    Mr. Rufe. Largely the same issues exist as far as the 
management of the mine wastes, where they are placed, how they 
are handled, and I cannot speak specifically to some of the 
rare earth production facilities. I am not familiar with some 
of the extraction techniques that are used to concentrate those 
ores, but largely it is focused in waste management for most 
mine operations.
    Senator Cantwell. I just was discussing with my colleagues 
here. Obviously, updating the 1872 Mining Law I think could be 
very helpful in making sure that we have good practices on the 
books.
    Mr. Eggert or Mr. Brehm, any other comments about mining 
practices and environmental safety?
    Mr. Brehm. Again, we are a consumer.
    Senator Cantwell. Thank you.
    My colleague, Senator Risch, do you have any more 
questions?
    Senator Risch. Just briefly, Madam Chairman. You would be 
very impressed with the plan that the Cobalt Project has in 
Idaho, and as Mr. Rufe has indicated, they were saddled with 
having to pick up not only a plan that took care of their waste 
management, but as he pointed out, there was a legacy there 
that had to be dealt with and done by people who were not bad 
people. They were just people who handled things differently 
than we do today and did what they did at the time. As a result 
of that, they have had to pick up part of that. So the fact is 
their operation there is going to make the environment better 
than were they not there and the legacy contamination just 
stayed.
    So having said that, thanks again for holding this--well, I 
guess jointly holding this hearing. I think that we have just 
scratched the surface here. I think this is a really--as has 
been pointed out, my large concern is national security, but 
this is an issue that is something that deserves the attention 
of the U.S. Congress, and certainly the agencies of the 
executive branch need to focus on this and be a facilitator as 
opposed to a prohibitor of mining these rare earths. This is 
only going to get more critical as time goes on and 
particularly as manufacturing continues to mature in the clean 
energy area and, for that matter, a lot of other areas. So we 
will continue to monitor it and I think this hearing has been 
very helpful in helping raise the level of the understanding of 
the challenges that we face. Thank you, Madam Chair.
    Senator Cantwell. Thank you, Senator Risch, and thank you 
for being here and allowing us to get this hearing done. It is 
important that we continue to have a discussion on this issue, 
and clearly this committee plays an important role. While this 
policy has many ramifications and many issues, as our 
colleagues from the Armed Services Committee pointed out, and 
obviously issues of the administration's foreign policy, I do 
think the impetus of this hearing originally was Senator 
Murkowski's bill, 3521, and there is some discussion there that 
we have received testimony on today.
    But ultimately I think it starts with information. 
Information is power and having more accurate information about 
these markets and these minerals and where we are today and 
where we can go in the future is critical and is the 
jurisdiction of this committee. So clearly, whether it is EIA 
or other organizations, getting that responsibility, as Mr. 
Eggert said, is not just a voluntary function, but getting 
accurate information, and making sure that we have that I think 
is going to be critical.
    So we will have many more opportunities to move forward on 
this legislation. Hopefully, we can do so in a bipartisan 
fashion and show results for making sure that the United States 
has the access to these materials that it needs.
    So with that, the hearing is adjourned.
    [Whereupon, at 11:25 a.m., the hearing was adjourned.]


                               APPENDIXES

                              ----------                              


                               Appendix I

                   Responses to Additional Questions

                              ----------                              

     Responses of David Sandalow to Questions From Senator Cantwell

    Question 1. In Mr. Brehm's testimony he mentions that for some 
clean energy technologies that rely on rare earths there are potential 
substitutes that do not require, or require significantly lower 
quantities of, rare earths.
    According to a report recently published by the U.S. Geological 
Survey, there is research going on in this area of substitutes.
    The report cites research at the University of Nebraska that has 
the goal of developing a permanent magnet that does not require rare 
earths at all.
    It also mentions researchers at the University of Delaware that are 
trying to create a new magnetic material based on ``nano-composite'' 
magnets. If successful, this process could slash the use of rare earths 
in magnets by 30 or 40 percent.
    And according to recent press reports, Japan's New Energy and 
Industrial Technology Development Organization (NEDO) and Hokkaido 
University have developed a hybrid vehicle motor using only inexpensive 
ferrite magnets that don't need rare earths.
    Can you please elaborate on this idea of substitutes for rare 
earths? Do you think that non-rare earth alternatives can be as 
effective as technologies that use rare earths?
    Answer. Substitutes for rare earths can occur at different steps in 
the manufacturing supply chain. In some cases, it may be possible for 
manufacturers to replace a rare earth element with a different material 
(or other rare earth) that provides the same functional properties but 
is cheaper or more abundant. An example of this type of substitution 
occurs in NiMH batteries, which are used in most Hybrid-Electric 
vehicles. Battery manufacturers substitute less expensive mischmetal (a 
rare earth alloy of cerium, lanthanum, praseodymium and neodymium in 
varying proportions) in place of more expensive pure lanthanum with 
little sacrifice of battery performance. In other cases, manufactures 
could substitute entire parts of components containing rare earths with 
other technologies. Examples of this type of substitution could include 
substituting rare earth permanent magnet motors in electric vehicles 
with other types of motors, or substituting lithium-ion batteries, 
which contain no rare earth elements, for NiMH batteries in vehicles. 
Still another option is substitution of the entire end use application. 
An example of this type of substitution would be the replacement of 
fluorescent light bulbs containing rare earth phosphors with light 
emitting diodes that use little or no rare earth elements. Through the 
EERE Solid State Lighting program, DOE has taken national leadership in 
support of new technologies with the potential to develop LED and OLED 
alternatives to phosphor based fluorescent lighting. One critical area 
for these future technologies is advanced crystal growth for LEDs. In 
its inaugural round of funding, ARPA-E supported an advanced 
ammonothermal crystal growth project which if successful, would 
substantially improve the efficiency and quality of white LED bulbs.
    The effectiveness of substitutes varies by individual technologies. 
Effectiveness must also be judged against a number of different 
criteria, including both the cost and functionality of the substitutes. 
Timeframe is also important, since substitution may involve significant 
changes to product designs and manufacturing production lines. For 
example, substitution of a rare earth magnet motor in an electric 
vehicle with a different type of motor would likely require substantial 
vehicle redesign, new suppliers and changes to assembly lines. However, 
automakers already make these types of changes periodically when they 
update existing car models. In the long run, DOE believes that cost-
effective substitution is possible for most energy applications that 
use rare earths.
    Question 2. Do you see substitutes as a truly preferential option, 
or merely tolerable as a ``next best'' option to rare earths?
    Answer. DOE believes that substitution is possible for most energy 
applications that use rare earths given sufficient time to develop new 
technologies. This may include substitution of base materials, 
components or the entire end-use application. The decision to 
substitute for rare-earth content must ultimately be based on how the 
substitution affects the overall cost and performance of the end-use 
application. This calculation should also take into account the supply 
risks associated with all of the materials used in the system, not just 
rare earth elements. Therefore, the potential for substitution will 
vary over time and for each technology.
    Question 3. Are there certain types of technologies or applications 
that have greater potential for having effective substitutes without 
rare earths than others?
    Answer. Energy related technologies and applications with the 
greatest potential for effective substitutes are those where the 
substitutes are likely to provide substantial cost and performance 
improvements beyond the simple fact that they use less rare earth 
elements. One example is the potential substitution of lithiumion (Li-
ion) batteries for nickel metal hydride (NiMH) batteries (which contain 
lanthanum, praseodymium and neodymium) in electric-drive vehicles. Li-
ion batteries are currently more expensive than NiMH, but potentially 
offer superior energy density, cold-weather performance, abuse 
tolerance, and recharging rates. Another example is the substitution of 
light emitting diodes (LEDs) for fluorescent light bulbs. LEDs contain 
a fraction of the rare earth phosphor content of fluorescent bulbs, and 
they also have the potential for greater efficiency and longer life. 
Both substitute technologies--Li-ion batteries and LED light bulbs--are 
already likely to grow in market share based purely on their 
performance advantages. The fact that they use little or no rare earths 
would serve only to accelerate the substitution process.
    Question 4. Is there particular research that you can think of that 
would be helpful for DOE to pursue or support when it comes to 
developing rare earth substitutes?
    Answer. DOE has identified a number of research priorities related 
to both finding rare earth substitutes and reducing the amount of rare 
earth required for a given application. Research priorities for 
substitutes include:

   Magnets and motors: Advanced power electronics which enable 
        induction motors with superior performance to permanent magnet 
        motors.
   Phosphors and lighting: Research into alternative phosphor 
        materials, including the use of quantum dots. Also, research 
        into Organic LEDs that use no rare earths, with improvements to 
        luminous efficacy, cost, and color rendering.
   Batteries: Research into lithium-ion and other battery 
        chemistries, as well as over the horizon battery technologies 
        which would utilize only earth abundant materials such as iron 
        or zinc, and have performance/cost ratios which are 5-10 times 
        better than Li-ion batteries.

    Research priorities for reducing rare earth content include:

   Magnets and motors: Research into opportunities to get the 
        same performance with less rare earth content. This includes 
        the development of high-flux soft magnets and nano-structured 
        permanent magnets, including core-shell structures and 
        composites.
   Phosphors and lighting: Research into non-organic LEDs, 
        which use significantly less phosphors than fluorescent bulbs.

    Question 5. Mr. Sandalow, in my view and experience, any time there 
are constraints on the supply of a commodity the conditions are ripe 
for excessive market speculation and sometimes manipulation. We have 
seen this in recent years in the markets for oil, electricity, natural 
gas, and other commodities. I am concerned about the possibility for 
the same issues to arise in the market for rare earths.
    For example, is it possible that the Chinese could deliberately 
withhold rare earths supply from the global market today, prompting the 
U.S. and other countries to invest billions of dollars in developing 
alternative sources of supply, only to flood the market with cheaper 
product in the future, and put U.S. projects out of business? I'm 
concerned this type of manipulation is possible.
    One powerful antidote to market manipulation is transparency and 
the promulgation of good information about the market. When market 
participants have good information about prices, producers, production 
rates, stockpiles, etc., they are able to plan and make sound 
decisions. Bubbles and shortages are far less likely to develop because 
it is much harder to manipulate a market that is exposed to the light 
of day.
    Can you comment on the current level of transparency in the markets 
for rare earths and strategic minerals? How confident are we in our 
knowledge of the details of all aspects of the supply chains for 
strategic minerals?
    Answer. The current level of transparency in markets for rare 
earths is very low. Rare earths are not traded on any global metal 
exchanges, such as the New York Mercantile Exchange (NYMEX) or London 
Metal Exchange (LME). Instead, bilateral agreements negotiated directly 
between producers and consumers are the standard. Reference prices for 
rare earths are mainly reported by the trade press with varying 
reliability. While we are confident in our general knowledge of the 
supply chain, our knowledge of specific details is limited. We would 
benefit from increasing the amount of detailed information about the 
supply chain.
    Question 6. What is the current extent of DOE's market intelligence 
gathering efforts? Does the EIA follow the markets for rare earths and 
other strategic minerals closely? How reliable is their information?
    Answer. DOE's current market intelligence on critical minerals is 
mainly limited to open source reporting from industry, academia, and 
other research organizations. Most rare, precious, minor, and specialty 
metals and their alloys are traded through bilateral contracts based on 
negotiated pricing between parties. Certain elements such as rare 
earths, gallium, tellurium, indium, and lithium are not traded on major 
exchanges such as the London Metal Exchange, which means there is no 
spot or futures market. The result is a fragmented market with 
information principally derived from producers, consumers, and traders. 
The nature of the process limits price disclosure in these markets and 
the prices of specialty metals quoted by traders and consultants vary 
widely in their reliability.
    Question 7. Because of their strategic importance do you think it 
would be worthwhile to expand EIA's data collecting and processing 
capacity for these materials? Do you believe additional information 
gathering would be helpful?
    Answer. This question has been referred to the U.S. Energy 
Information Administration (EIA) for response. EIA's mission is to 
collect, analyze, and disseminate independent and impartial energy 
information to promote sound policymaking, efficient markets, and 
public understanding of energy and its interaction with the economy and 
the environment. EIA currently aids in the understanding of energy-
related demand for rare earth minerals by collecting data and 
developing projections and scenarios that provide insight into the 
future demand for energy technologies that use these materials, such as 
wind turbines and electric vehicles. While EIA does conduct some 
equipment surveys, detailed data on material inputs are not currently a 
part of these surveys.
    While rare earth minerals are used in conventional energy 
activities such as petroleum refining as well as in emerging ``clean 
energy'' technologies, they are also used extensively outside the 
energy sector. For example, while neodymium permanent magnets are used 
in both wind turbines and electric vehicles, they also are used in 
glass coloring applications, fertilizers, and permanent magnets for 
non-energy products such as microphones, speakers, and headphones. To 
that end, any energy-related analysis or data collection that EIA might 
pursue would only address a limited segment of the demand for rare 
earths.
    The United States Geological Survey (USGS) has ongoing data 
collection responsibilities and professional expertise in assessing and 
reporting supply and demand data for nonfuel minerals, including the 
rare earths. In addition, several programs in the Department of 
Commerce are engaged in tracking and projecting developments within 
individual industries, including non-energy sectors that are 
significant users of rare earths. It would seem important to draw on 
relevant expertise throughout the government by pursuing increased data 
collection and analysis efforts related to the supply and aggregate 
markets for rare earth minerals. EIA would focus its contributions on 
issues concerning energy-related uses of rare earths and the possible 
implications of rare earth supply issues for our energy future.
    Question 8. Mr. Sandalow, I was pleased that you mentioned the 
importance of reuse and recycling in your testimony. According to the 
Environmental Protection Agency, ewaste--composed of consumer 
electronics like TVs, video equipment, computers, audio equipment, and 
phones--makes up almost 2% of the municipal solid waste stream.
    Although electronics compose a small percentage of municipal waste, 
the quantity of electronic waste is steadily increasing. In 1998, the 
National Safety Council Study estimated about 20 million computers 
became obsolete in one year. By 2007, EPA estimated that that number 
had more than doubled.
    From 1999 through 2005, the recycling rate for consumer electronics 
was about 15%. For 2006-2007, the recycling rate increased slightly, to 
18%, possibly because several states started mandatory collection and 
recycling programs for electronics.
    The trend is in the right direction, but it still leaves 82% of 
obsolete consumer electronics going into landfills.
    The Mining and Minerals Policy Act of 1970 declared that it is in 
the national interest of the United States to foster the development of 
the domestic mining industry ``. . .including the use of recycling and 
scrap.''
    Can you please elaborate on the potential for reuse and recycling 
of rare earths and other strategic minerals from products that have 
reached the end of their useful life (whether consumer products or 
industrial products)? How significant could this be as a source of 
these materials?
    Answer. There are several factors that drive the viability of reuse 
and recycling. First is the value of the component material. Second is 
the ease of disassembly or separation. Third is the quantity of 
material that can be gathered easily from a logistical perspective. 
These factors play out differently for various elements and 
applications. For example, relatively high value rare earth phosphors 
could be recycled from existing streams of fluorescent lights that are 
currently collected due to their mercury content. This recycling could 
potentially meet a significant fraction of current demand. However, 
where the demand is now ramping up, recycling cannot meet current 
demand. For example, the increasing use of neodymium magnets in wind 
turbines and electric vehicles means that wind turbines and vehicles 
currently at the end of their useful life will not contain the 
quantities of neodymium required for today's wind turbines and 
vehicles. Today's vehicles and wind turbines can be designed for future 
recycling, however.
    Question 9. Do you plan to address the issue of reuse and recycling 
in your strategic plan? Do you plan to develop recommendations for how 
to increase the rates of reuse and recycling? Are there any lessons to 
be learned from efforts to recycle strategic minerals in other 
countries?
    Answer. Recycling and reuse will be addressed in DOE's Strategy, 
including both research and policy.
    Question 10. Mr. Sandalow, in your testimony you highlighted the 
effort, currently underway, of your team at DOE to develop a strategic 
plan for addressing the role of rare earths and other materials in 
clean energy components, products, and processes.
    I am aware that other parts of the Administration have been working 
on other studies as well, including the Energy Information 
Administration and the President's Task Force on rare earths being 
hosted by the Office of Science and Technology Policy.
    Could you please elaborate on where you are in the process of 
developing your strategic plan and what types of issues you are 
addressing?
    Answer. DOE is developing an agency-wide Critical Materials 
Strategy addressing rare earth elements and other materials important 
for a clean energy economy, with a late 2010 release expected. The 
Strategy will discuss goals and key technologies to advance clean 
energy, the supply chain perspective (including intellectual property 
issues), current DOE research investments, and historical supply and 
demand of materials of interest. Approaches to proactively address the 
availability of rare earths include globalizing supply chains, 
developing substitutes, and improving material use efficiency 
(including recycling).
    Question 11. How will your plan fit into the work being conducted 
by the President's Task Force?
    Answer. DOE is actively participating in the OSTP-led working group 
with other key interagency players, including the Departments of 
Defense, Commerce, Interior, State, Justice and the EPA. This working 
group meets regularly and will help align strategies and programs on 
this issue. DOE's work has already benefitted from these interagency 
discussions, particularly with DOD and USGS. DOD is currently working 
on an assessment of rare earths in defense applications. USGS has been 
an invaluable source of data and information.
    Question 12. Will the strategic plan apply to additional critical 
minerals beyond rare earths, such as cobalt or copper, that are also 
vital to the success of clean energy technologies?
    Answer. Yes, the Strategy will not only address rare earth 
elements, but other materials important to a clean energy economy. 
Specifically, the Strategy will focus primarily on elements such as 
indium, gallium, and tellurium, which are used in solar photovoltaic 
thin films, as well as cobalt and lithium, which are used in batteries 
for electric vehicles.
    Question 13. Can you give us any kind of preview of what 
recommendations might be in the plan? Do you envision some of your 
recommendations requiring federal legislation to enact?
    Answer. In general, the Strategy will consider three approaches: 
globalizing supply chains; developing substitutes; and reusing, 
recycling, and improving material use efficiency.
    Question 14. Mr. Sandalow, you made only passing reference to 
Senator Murkowski's bill, S. 3521 in your testimony. I would be very 
interested in hearing your views and the position of DOE on this 
legislation.
    As I'm sure you know, the bill would establish a strategic task 
force, composed primarily of cabinet level officials, to streamline 
efforts to increase rare earth production in the United States.
    It also calls for the Secretary of Energy to issue guidance to the 
rare earth industry on how to obtain DOE loan guarantees for projects 
to re-establish the domestic rare earths supply chain.
    What are your views on these and other provisions in the bill?
    Answer. The Administration is continuing to review S. 3521. We 
share the goal of establishing a secure supply of rare earth metals, 
and we look forward to discussions with the Congress on ways to address 
this issue as we move forward.
    Question 15. Do you agree with the bill's emphasis on domestic 
production as the best way to alleviate our rare earths supply 
concerns?
    Answer. In our view, a three-pronged approach of globalizing supply 
chain, developing substitutes, and promoting recycling, reuse and more 
efficient use is necessary to address our rare earth supply concerns. 
Rebuilding U.S. capacity to produce rare earths contributes to 
globalizing supply sources of rare earths which reduces supply risks, 
as would continuous diplomatic efforts to better ensure supply. At the 
same time, research labs within the government and in the private 
sector can develop ways to substitute for, recycle, and/or reduce use 
of rare earths. Some inroads have already been made from such 
investments on both the government and industry sides in R&D.
    Question 16. Do you agree that increasing domestic production of 
rare earths constitutes a national security imperative such that it 
should be streamlined and receive Federal financial support through 
mechanisms such as loan guarantees?
    Answer. To alleviate potential supply disruptions of rare earths, 
it is advisable to increase domestic production of rare earths. It is 
estimated that the U.S. has the world's third largest reserve of rare 
earths. The U.S. also has some of the most advanced requirements for 
environmental safeguards and community rights over mining. However, it 
takes about seven years or longer in the U.S. to complete the permit 
process from exploration to mine operation.\1\ Permitting times vary 
around this timeframe depending on whether the mine is situated on 
Federal lands or private lands and depending on state and local 
regulations. This is very long compared to most countries; the process 
takes one to two years in Australia, for instance. It is worth 
exploring how to simplify the permitting process of rare earth mines in 
the U.S. without compromising the environmental review process.
---------------------------------------------------------------------------
    \1\ GAO, ``Rare Earth Materials in the Defense Supply Chain,'' 
April 1, 2010; Robert Matthews, ``Permits Drag on U.S. Mining 
Projects,'' Wall Street Journal, February 8, 2010.
---------------------------------------------------------------------------
    Question 17. Mr. Sandalow, I understand that in your role as 
Assistant Secretary of the international office at DOE, you have 
visited China many times and visited with many energy officials and 
scientists during these trips.
    During any of these visits, did you sit down with senior government 
official to discuss the issues you brought up in your testimony related 
to rare earths and other critical minerals?
    Answer. Yes, on several occasions.
    Question 18. The July decision by the Chinese government to further 
reduce exports quotas for rare earths certainly gives policy makers 
cause for concern.
    In your opinion, do you think the Chinese will continue to ratchet 
down their exports to other countries, both exports of raw rare earths 
and processed rare earths for industrial applications?
    Answer. Chinese Foreign Minister Yang Jiechi recently told 
Secretary of State Hillary Clinton that China intends to be a 
``reliable supplier'' of rare earth metals. This is welcome. I believe 
the United States government must be prepared for a wide range of 
scenarios in this area in the years ahead. The United States is 
interested in working with like-minded trading partners to determine 
the best way forward to ensure reliable supplies of rare earths from 
all sources. We are prepared to work bilaterally and multilaterally (at 
the G20, APEC, the WTO and other fora) to seek progress on the issue. 
Our goal is to support the rules-based global trading system, and make 
sure that industries that need rare earths in their production 
processes have an open and reliable marketplace from which to procure 
them.
    Question 19. What do you think their rationale is for putting such 
trade restrictions in place?
    Answer. I would prefer not to speculate on Chinese government 
motivations. As stated above, I believe it would be prudent for the 
United States to be prepared for a wide range of scenarios in this area 
in the years ahead.
    Question 20. Do you have any confidence that bilateral negotiations 
might result in the easing of export restrictions in the short term?
    Answer. Chinese Foreign Minister Yang Jiechi recently told 
Secretary of State Hillary Clinton that China intends to be a 
``reliable supplier'' of rare earth metals. The U.S. government 
welcomes that statement. Whether this will involve easing of current 
export restrictions is uncertain, and we continue to urge China to 
ensure that its policies on rare earths are transparent and consistent 
with its international obligations.
    Question 21. Mr. Sandalow, I noted that several times in your 
written testimony you referred to the importance of ``environmentally 
sound'' extraction of rare earth materials. You mentioned it once in 
reference to domestic projects, and again in the context of encouraging 
our international trading partners to develop ``environmentally sound'' 
sources of supply.
    In reading about rare earths mining operations, it has not 
impressed me as an ``environmentally sound'' process. The Mountain Pass 
mine in California closed in 2002, in part for environmental reasons. 
According to a recent article on the mine\2\, when it was in full 
operation it used to routinely dump wastewater in the desert.
---------------------------------------------------------------------------
    \2\ http://www.eenews.net/Landletter/2010/07/22/archive/
1?terms=mining+rush+on+for+rare+
earths
---------------------------------------------------------------------------
    In China practices seem to be even worse, with the Economist 
magazine reporting that ``Horror stories abound about poisoned water 
supplies and miners.''\3\
---------------------------------------------------------------------------
    \3\ http://www.economist.com/node/16944034?story--id=16944034
---------------------------------------------------------------------------
    I'd like to understand better what you, and the DOE, are thinking 
of when you refer to ``environmentally sound'' extraction. What does 
that really mean? Is it actually possible? To what degree can 
extraction of rare earths be made ``environmentally sound''?
    Answer. We should be pursuing mining practices and processes that 
conserve resources and prevent pollution to the air, water and land. 
This will improve worker health and safety; improve air quality and 
water quality; reduce the need for handling and disposal of radioactive 
substances; and reduce soil and groundwater contamination. Preventing 
pollution can also save money over the long run. U.S. technology and 
know-how gained from mine operations can help promote safe and 
responsible mining in other countries, further contributing to 
diversity of supply.
    Question 22. How do you suggest we encourage the use of 
environmentally sensitive extraction methods, whether in the U.S. or 
overseas?
    Answer. This is primarily a role for EPA and/or the Department of 
the Interior, through their permitting processes.
    Question 23. Is DOE engaged in any research that could lead 
improved environmental practices at rare earths mines? Would DOE 
consider such a line of research to fall within its purview, 
considering the importance of these minerals to clean energy technology 
development?
    Answer. DOE is not currently engaged in rare earth mining research.
    Question 24. Mr. Sandalow, in your testimony you outline, in broad 
strokes, the approach DOE is taking to address the availability of rare 
earths and other important materials to support and expand clean energy 
development. One of the components of DOE's approach is to develop 
substitutes for these materials. You argue that to develop substitutes, 
we will need to invest in R&D to develop transformational magnets, 
battery electrodes, and other technologies.
    Yet the U.S. Geological Survey, in its most recent Mineral 
Commodity Summaries, indicates that while substitutes to rare earths 
are available for many applications, they are generally less effective.
    However, According to recent press reports, Japan's New Energy and 
Industrial Technology Development Organization (NEDO) and Hokkaido 
University have developed a hybrid vehicle motor using only inexpensive 
ferrite magnets that don't need rare earths.
    Can you be more specific about the potential you see for developing 
substitutes for rare earths?
    Answer. Substitutes for rare earths can occur at different scales. 
In some cases, it may be possible for manufacturers to replace a rare 
earth element with a different material (or other rare earth) that 
provides the same functional properties but is cheaper or more 
abundant. An example of this type of substitution occurs in NiMH 
batteries, which are used in most Hybrid-Electric vehicles. Battery 
manufacturers substitute less expensive mischmetal (a rare earth alloy 
of cerium, lanthanum, praseodymium and neodymium in varying 
proportions) in place of more expensive pure lanthanum and still 
achieve adequate battery performance. In other cases, manufacturers 
could substitute entire parts of components containing rare earths with 
other technologies. Examples of this type of substitution could include 
substituting rare earth permanent magnet motors in electric vehicles 
with other types of motors, or substituting lithium-ion, iron or zinc 
batteries, which contain no rare earth elements, for NiMH batteries in 
vehicles. Still another option is substitution of the entire end use 
application. An example of this type of substitution would be the 
replacement of fluorescent light bulbs containing rare earth phosphors 
with light emitting diodes that use little or no rare earth elements. 
The effectiveness of substitutes varies by individual technologies. 
Effectiveness must also be judged against a number of different 
criteria, including both the cost and functionality of the substitutes. 
Timeframe is also important, since substitution may involve significant 
changes to product designs and manufacturing production lines. In the 
long run, DOE believes that cost-effective substitution is possible for 
most energy applications that use rare earths, though it is important 
to keep in mind that substitutes for rare earths could also have supply 
risks of their own.
    Question 25. You indicate that research to develop substitutes for 
rare earths and other critical minerals is being pursued at DOE's 
Office of Science, the Energy Efficiency and Renewable Energy Program, 
and ARPA-E. Can you please discuss these efforts more detail? How much 
support are these programs receiving? Have they shown any results yet? 
If so, for what applications?
    Answer. While there have been a number of relevant individual 
projects supported by the Office of Science, EERE, and ARPA-E, these 
have not been part of a unified DOE Strategy. This is one reason DOE 
launched the process to develop a Critical Materials Strategy earlier 
this year. More information on these topics will be included in DOE's 
Strategy when released soon. In the near term, these offices are 
working together to engage the scientific and business communities in 
the U.S. and abroad regarding rare earth technology development 
opportunities through workshops, direct discussions and public forums. 
The goal is to identify the highest priority R&D opportunities to 
ensure a long-range U.S. competitiveness in energy sectors, especially 
those which may currently be dependent on foreign resources for rare 
earths and related critical materials.
    Question 26. Other than trying to develop substitutes, is DOE 
pursuing any other research tracks involving rare earths?
    Answer. The Office of Science supports fundamental research related 
to the structure and properties of materials containing rare earth 
additions. These studies include research on both known and new 
magnetic materials, superconducting materials, and other materials that 
are relevant to energy applications. The research focuses on the 
synthesis of highest quality materials, often in single crystal form; 
advanced characterization methods, especially neutron and magnetic x-
ray scattering; and theory/modeling. The ultimate goal of the research 
is to understand and control the materials functionality at atomic 
length scales. The detailed theoretical understanding is used to 
identify new materials with optimal properties.
    Question 27. Who owns the intellectual property for rare earth 
processing? (i.e. Who benefits from licensing this technology to new 
mining operations like Molycorp's?)
    Answer. The landscape of intellectual property for rare earth 
processing is complex and changing. While much of the intellectual 
property (IP) is held overseas at this time, this may change as R&D 
leads to processing innovation.
    Question 28. Is this U.S. technology, or must it be acquired from 
overseas? Is the IP for processing rare earths unique, or is it common 
to processing other hard rock minerals?
    Answer. The landscape of intellectual property for rare earth 
processing is complex and changing. While much of the IP is held 
overseas at this time, this may change as R&D leads to processing 
innovation.
    Question 29. Are there active efforts underway to improve rare 
earth processing technologies? Is this an area that would benefit from 
additional R&D?
    Answer. Yes, at DOE national labs, universities, and in private 
companies. Yes, this area would benefit from additional R&D.

    Response of David Sandalow to Question From Senators Murkowski, 
                          Barrasso, and Risch

    Question 1. In June 2010, you testified before the Senate Energy & 
Natural Resources Committee about S. 3495, legislation to promote the 
deployment of electric vehicles. A similar measure was introduced less 
than a month before that hearing, and the actual bill we focused on was 
introduced exactly one week prior to it. At the time, we greatly 
appreciated your submission of testimony that clearly articulated the 
Department of Energy's views and positions on many of the programs that 
S. 3495 would create.
    By contrast, your testimony at a hearing on September 30, 2010 
related to the rare earths supply chain and S. 3521, which we 
introduced to address issues associated with that supply chain, failed 
entirely to articulate the Department's views and positions on the 
measure. The aforementioned hearing on S. 3495 was noticed exactly one 
week in advance, while the hearing on S. 3521 was noticed a full two 
weeks in advance and our bill was introduced over 3 months ago. We 
would also note that S. 3521 is just 15 pages in length, while the 
electric vehicle bill you testified on in June spans 74 pages.
    Your Department had considerable time and notice to review S. 3521. 
You also had much less text to review. Despite this, your written 
testimony said virtually nothing about the legislation. Even when 
pressed by the Subcommittee Chairwoman to make a statement about the 
bill during the hearing, you merely responded that DOE is continuing to 
review it. This lack of feedback not only impairs our Committee's 
ability to refine S. 3521; it also makes it more difficult to believe 
that DOE, and the Administration as a whole, are making progress on a 
coherent Strategy to address the challenges we face regarding the rare 
earth supply chain.
    Could you please explain why, exactly, the Department failed to 
provide any feedback on our legislation? Is it a result of insufficient 
staff, a lack of Departmental understanding about these issues, or 
something else? To the extent that you have had an opportunity to 
review S. 3521 since the hearing, can you more fully articulate the 
Department's views on the measure?
    Answer. With respect to S.3521, my September 30 testimony stated 
that the Administration shares ``the goal of establishing a secure 
supply of rare earth metals, and we look forward to discussions with 
Congress on ways to address this issue as we move forward.'' I believe 
this is a topic with substantial potential for bipartisan cooperation 
to advance U.S. interests and look forward to working with Congress as 
it considers this and any related legislation in the months ahead.
     Responses of David Sandalow to Questions From Senator Stabenow
    Question 1. Whether it's manipulating its currency or illegally 
subsidizing its clean energy industry, China is ignoring the rules. I 
know USTR filed a case against China on its export restrictions of raw 
materials, but WTO cases take time. I've seen the process play out with 
the auto parts case. While waiting for the WTO process to play out, 6 
companies when out of business. Unfortunately, on this issue of rare 
earths, we don't have time. We're in a race. With China having imposed 
an even harsher export quota on its Rare Earth Elements, what are we 
doing to hold China accountable? How can DOE help USTR?
    Answer. The U.S. Trade Representative is currently investigating 
claims by the United Steelworkers that China's rare earth export 
restraints disadvantage U.S. clean energy companies. The USTR will 
decide whether to launch a formal WTO challenge against China on these 
and other claims no later than January 13, 2011. DOE staff are 
assisting USTR with technical aspects of the investigation. Chinese 
Foreign Minister Yang Jiechi recently told Secretary of State Hillary 
Clinton that China intends to be a ``reliable supplier'' of rare earth 
metals. The U.S. government welcomes that statement. Other U.S. 
government officials have discussed these issues with Chinese 
government officials as well.
    Question 2. China shrewdly recognized the need to invest in the 
mining and production of these rare earths. Like I said, we're in a 
race now playing catch-up. What is the Department of Energy doing to 
find more domestic sources of these rare earths as well as alternatives 
that do not rely on these materials?
    Answer. DOE's work on rare earth metals includes research on 
alternatives. This work is a growing priority, with considerable 
attention devoted to development of DOE's first-ever Critical Materials 
Strategy, to be released soon. DOE does not have regulatory 
jurisdiction over mining activities.
    Question 3. Mr. Brehm, of Infinia Corporation, mentions in his 
testimony that alternatives to rare earth elements are expensive and 
not as effective. However, he then proceeds to say that a technology 
called the ``High Temperature Superconductor'' can be used in motors 
and generators that require virtually no rare earth elements. However, 
despite these qualities DOE is not continuing to help develop and 
commercialize this technology.
    Can you speak to this and explain why DOE is not pursuing this sort 
of alternative that does not rely on rare earth elements? Is DOE 
looking at other technologies that would be less dependent on rare 
earth elements?
    Answer. With the FY 2011 budget request, the Department's Office of 
Electricity Delivery and Energy Reliability (OE) is winding down its 
involvement in high temperature superconductivity (HTS) wire research. 
The Department continues to see a role for superconductivity technology 
in the modernization of the grid. However, after investing over $600 
million over the past 20 years, the Department believes that the HTS 
wire research has reached a point that provides meaningful technical 
value and that second generation HTS wire technology can be 
successfully transitioned to the U.S. manufacturing base. While OE's 
investment in HTS wire research is ending, the Department believes 
superconductivity technology holds promise in energy applications. For 
example, ARPA-E recently competitively awarded a HTS Superconducting 
Magnet Energy Storage System project under its grid-scale storage 
program. DOE is also supporting research into other kinds of 
technologies using less or no rare earths, including lithium ion 
batteries as a substitute for NiMH or LED's as a substitute for 
fluorescent lamps.
     Responses of David Sandalow to Questions From Senator Bennett
    Question 1. Mr. Sandalow, you mentioned that steps need to be taken 
``to facilitate extraction, refining, and manufacturing here in the 
United States.'' I wholeheartedly agree.
    What specific steps are being taken by the Administration to 
facilitate these goals and promote new domestic mining and mineral 
development?
    Question 2. What is the Administration doing to reduce the 
regulatory burden on current and prospective mining operations?
    Question 3. What is the Administration doing to expedite new 
mineral development applications?
    Question 4. What is the Administration doing to make federal land 
available to new mineral leases?
    Answers 1-4. Domestic mining and mineral development is a subject 
under the jurisdiction of the Department of the Interior. The 
Department of the Interior has noted that balance and coordination are 
two important requirements for successful mineral development. We need 
a balanced approach to reforming the Mining Law of 1872 that will 
generate a fair return to the American taxpayer, and ensure that 
development occurs in a manner consistent with the need for mineral 
resources and the protection of the public, public lands and water 
resources. Coordination between relevant government agencies is also a 
key requirement. The USGS provides land managers, including BLM and the 
U.S. Forest Service, with scientific information that serves as a 
foundation for decision making and that enables managers to ensure that 
an appropriate balance is maintained between the public expectation of 
protection of Federal lands and the public desire for economic growth 
based on resource extraction and energy independence.
                                 ______
                                 
       Response of Preston F. Rufe to Question From Senator Udall

    Question 1. China has more than 6,000 scientists and researchers 
devoted to rare earth research, development and applications. In this 
country, only one institution of higher learning offers a course in the 
rare earths--that is at the Colorado School of Mines. Clearly, we need 
to restore both our production capability as well as our information 
and knowledge base in rare earth RD&D. What suggestions do you have in 
this regard?
    Answer. Loan guarantees and grants are effective tools for the 
stimulation of developing domestic capabilities; however, of the two, 
loan guarantees present the lowest cost to the taxpayer. Currently, 
loan guarantee programs, such as those offered through the U.S. 
Department of Energy, are available for the development of clean energy 
technologies manufacturing but are not available for the production of 
requisite raw materials (i.e., mining and refining). Loan guarantees 
and grants will greatly assist in energizing the responsible 
development of strategic mineral sources.
    Education programs at institutions of higher learning are largely 
influenced by the respective demand for their programs. Targeted 
scholarship, internship, co-ops fellowships, and work programs that 
focus on strategic elements and clean energy technologies will provide 
incentives to students considering studies in those fields. The U.S. 
Department of Energy currently offers such programs in other fields 
such as nuclear science, why not in areas related to clean energy 
technology and strategic minerals? Moreover, targeted private industry-
university research partnerships could further expand our domestic 
knowledge base.

    Responses of Preston F. Rufe to Questions From Senator Cantwell

                          RECYCLING AND REUSE

    Shifting gears a bit, I would like to take a moment to focus on 
reuse and recycling of critical minerals. It seems that many, if not 
most, critical minerals can be recycled from waste industrial and 
commercial technologies once the life of the product is complete.
    Question 1. Do you know of any opportunities where we can convert 
existing industrial manufacturing facilities into facilities that can 
be utilized for the processing of rare earths for clean energy 
technology (e.g. batteries, magnets, etc) or for recycling programs for 
the recovery of the critical minerals that we have discussed here 
today?
    Answer. Formation Capital Corporation, U.S. is the final steps of 
financing to construct the Idaho Cobalt Project (i.e., cobalt mine) and 
retrofit/refurbishment to establish a cobalt processing facility (i.e., 
refinery), both located in the State of Idaho. The refinery, located in 
Kellogg, Idaho, was formerly used in the processing of silver-copper-
antimony ore concentrate. The refinery is a zero-liquid discharge 
facility that uses a much more environmentally friendly process than 
traditional smelting and pyrometallurgical refining methods. This 
facility can and will be converted to produce super alloy-grade cobalt 
from the ore mined and concentrated at the Idaho Cobalt Project. Plans 
to expand the facility's capabilities to include recycling rechargeable 
batteries are also being considered. The author is unaware of any other 
existing hydrometallurgical facilities in the U.S. capable of 
conversion to produce high-purity cobalt.
    Domestic, cobalt recycling capabilities are limited but do 
currently exist. Although published in 1998, the USGS Open File Report 
02-299, Cobalt Recycling in the United States in 1998, by K. B. Shedd 
(Shedd, 1998) presents a valid and comprehensive view of the various 
aspects of cobalt recycling. Domestic, cobalt recycling capacity 
primarily consists of alloy scrap and battery recycling. For more 
information on the specifics of cobalt recycling, the reader is 
directed to (Shedd, 1998).
    Question 2. How can the U.S. best go about developing a domestic 
rare earth recycling program? Are incentives or grant programs needed 
to jumpstart such a program?
    Answer. The economic viability of a metals recycling program is 
predominantly controlled by the price of the new commodity and the cost 
of recycling. To some extent, environmental regulations that require 
the diversion of a particular item or material from landfills (e.g., 
nickel-cadmium batteries) facilitate some viable recycling efforts. 
Instituting laws or at least incentives, that require ethical raw 
material sourcing from responsible mines and countries with 
established, strong environmental laws; and requiring mandatory product 
``end of life recycling'' would help provide for long-term stability 
and availability of raw materials.
    With no domestic source currently in production, recycling foreign 
produced cobalt provides the only domestic cobalt supply, almost 
entirely in chemical forms. However, when in production, the Idaho 
Cobalt Project will supply approximately three million pounds 
(3,000,000 lbs) of super-alloy grade cobalt, annually. Once again, loan 
guarantee programs would certainly aid in jumpstarting opportunities 
for the domestic production of raw materials.
    Question 3. Do you see particular challenges associated with 
recycling rare earths and other critical minerals? If so, could these 
be overcome? What would have to be done to do so?
    Answer. Recycling cobalt is technologically feasible and is a 
proven process. Cobalt is a high value metal and has been recycled 
extensively since the early 1980's. The problem is that there are no 
large quantities of scrap to be recycled and, according to The U.S. 
Geological Survey, Mineral Commodity Summaries, January 2010, in 2009, 
recycled scrap accounted for only 24% of U.S. reported consumption.

                      ALTERNATIVES TO RARE EARTHS

    Question 4. In Mr. Brehm's testimony he mentions that for some 
clean energy technologies that rely on rare earths there are potential 
substitutes that do not require, or require significantly lower 
quantities of, rare earths.
    According to a report recently published by the U.S. Geological 
Survey, there is research going on in this area of substitutes.
    The report cites research at the University of Nebraska that has 
the goal of developing a permanent magnet that does not require rare 
earths at all.
    It also mentions researchers at the University of Delaware that are 
trying to create a new magnetic material based on ``nano-composite'' 
magnets. If successful, this process could slash the use of rare earths 
in magnets by 30 or 40 percent.
    And according to recent press reports, Japan's New Energy and 
Industrial Technology Development Organization (NEDO) and Hokkaido 
University have developed a hybrid vehicle motor using only inexpensive 
ferrite magnets that don't need rare earths.
    Can you please elaborate on this idea of substitutes for rare 
earths? Do you think that non-rare earth alternatives can be as 
effective as technologies that use rare earths?
    Answer. Although not one of the 17 so-called rare earth elements, 
current substitutes for cobalt generally result in decreased 
performance. Known as ``Curie temperature'', cobalt is an essential 
metal for alloying as it maintains its magnetism at a higher 
temperature than all other ferromagnetic elements, along with its 
corrosion and wear resistance. Therefore, unless the process 
temperatures are reduced where these alloys are employed, such as 
turbines and permanent magnets, substitutes for Questions for Mr. Rufe 
Senate Energy Subcommittee cobalt yield metals with lower or decreased 
functionality. Unfortunately, decreasing the temperature that some 
processes operate at can be counterproductive and yield lower 
efficiencies (e.g., jet turbine engines). However, all technologies 
continue to evolve and composite materials that do not contain metals 
(i.e., ceramics) may hold promise for future substitutions, where 
possible.
    Question 5. Do you see substitutes as a truly preferential option, 
or merely tolerable as a ``next best'' option to rare earths?
    Answer. Regarding substitutes for cobalt, in most applications 
there is a major loss of efficiency and reliability for those areas 
where substitution is possible. The U.S. Geological Survey, Mineral 
Commodity Summaries, January 2010 also points out that substitutions 
for cobalt often result in degraded performance; however, the Summary 
goes on to list several applications where substitutions are possible. 
In applications such as jet engines there are no current acceptable 
substitutes known.
    Research since the early 1980's focused on reducing the quantity of 
cobalt required for a particular application or product, with the 
easiest substitutions already completed. For example, consider lithium 
ion (Li-Ion) rechargeable batteries: In 1995 a good-quality Li-Ion 
battery contained approximately 60% cobalt by weight; the very best 
still do, however many applications can now efficiently utilize newer 
battery chemistries that contain between 10-20% cobalt, by weight. 
Although current chemistries contain less cobalt per weight of battery, 
the current challenge facing the global cobalt supply is producing 
these batteries in the massive quantities needed to support clean 
energy development.
    Question 6. Are there certain types of technologies or applications 
that have greater potential for having effective substitutes without 
rare earths than others?
    Answer. Regarding cobalt, the most likely candidates for substitute 
materials is in the rechargeable battery sector. New and evolving 
battery chemistries are still being explored. Future research may yield 
rechargeable batteries that do not require as much or any cobalt yet 
exceed current discharge capacities and stability in various 
applications; however, this is less likely to occur as previous 
research has resulted in demonstrating that cobalt is in-fact needed to 
maximize efficiency and dependability.
    Question 7. Is there particular research that you can think of that 
would be helpful for DOE to pursue or support when it comes to 
developing rare earth substitutes?
    Answer. Once again regarding cobalt, the science surrounding 
construction of rechargeable batteries is well understood; however, 
there are many innovative energy storage technologies that are just now 
emerging through research. For example, research conducted at 
Massachusetts Institute of Technology demonstrated a functional energy 
storage technology that does not require rechargeable batteries nor any 
rare earth elements for energy storage and can operate at non-toxic or 
benign environmental conditions. Capable of storing energy produced 
from solar photovoltaic systems, the technology relies on cobalt and 
phosphate to catalyze the hydrolysis of water. The hydrogen and oxygen 
produced is subsequently re-combined using proven fuel-cell technology 
to produce power during hours of darkness. Additional support for 
researching novel energy storage technologies would be helpful to 
develop alternative energy storage techniques.

              S. 3521 AND LOAN GUARANTEES FOR RARE EARTHS

    Question 8. One of the purposes of today's hearing is to consider 
Senator Murkowski's bill S. 3521, the Rare Earths Supply Technology and 
Resources Transformation Act.
    As I'm sure you know, this bill would formally establish a national 
policy of promoting investment in, exploration for, and development of 
rare earths.
    To that end, it would establish a cabinet-level task force to help 
expedite permitting and regulation of rare earth production.
    It also calls for the Secretary of Energy to issue guidance to the 
rare earth industry on how to obtain loan guarantees for projects to 
re-establish the domestic rare earths supply chain.
    Can you please comment on the bill in general. Do you support it? 
Do you believe it would be effective in rebuilding a rare earths supply 
chain in the U.S.? How do you think the bill could be improved?
    Answer. The Bill, in general, focuses on REEs, however, virtually 
all REE applications require other constituents to function. Focusing 
on REEs is important and vital; however, is too singular in its view of 
what are truly strategic minerals. A more comprehensive approach, such 
as that suggested by the Western Governors Association, that addresses 
a National Minerals Policy is needed to effectively address building or 
re-building the U.S. critical mineral supply chain.
    We believe that cobalt, indium, gallium and other strategic and 
critical metals should also be included in the bill. Including other 
strategic minerals would help to ensure a functioning industry is 
built-up without missing key components that would become the new 
problem metals without domestic production. In short, including other 
strategic and critical metals would avoid swapping one problem for 
another.
    [this appears to be a typo] easons. In your testimony you state 
very clearly that the United States' dependence on imports is not 
necessarily bad, unless there is a lack of diversified supply, domestic 
or foreign, that leads to supply risk, especially if a foreign source 
leaves us vulnerable to geopolitical risks.
    The current situation with China seems to illustrate precisely the 
kind of risk you refer to. You go on to state that the government and 
policy makers should encourage undistorted international trade, while 
at the same time fighting policies of exporting nations that restrict 
raw-material exports to the detriment of US consumers of these 
materials.
    Question 9. Do you have suggestions as to how we can go about 
pursuing this goal?
    Answer. The subject matter of this question is outside of my 
expertise.
    Question 10. Do you, or other economists, anticipate that the 
Chinese rare earth production or export could slow further in the near 
term for any reason--for example, strengthened environmental 
regulations?
    Answer. The subject matter of this question is outside of my 
expertise.
    Question 11. Do you think that the US can build refining or other 
value-added production infrastructure in a timeframe to compete with 
existing infrastructure in China?
    Answer. The average timeframe required to develop a new mine in the 
U.S. is 6 to 7 years after discovery of an economic ore body. The 
exploration, discovery and initial engineering to establish an economic 
ore body can take many more years. Usually multiple sites need to be 
explored before an ore body gets discovered. Historically, only around 
one prospect in 1,000 actually hosts an economic ore body. Providing 
adequate funding to U.S. and State geological surveys could accelerate 
the exploration process.

                   GLOBAL SUPPLY CHAIN ISSUES/COBALT

    Question 12. In your testimony you discuss the specific importance 
of cobalt to US national security in two fronts: clean energy and 
energy security, and national defense. Some illustrative examples that 
you noted in these two categories were cobalt's use in clean energy 
technologies such as solar panels, wind turbines and fuel cells, but 
also its use in high-performance jet engines for light, advanced 
aircraft.
    You were also very clear in your testimony to single out the uses 
and needs of cobalt from the other rare earths.
    Do you recommend cobalt management and procurement policies 
separate from those for other rare earths?
    Answer. The U.S. needs a comprehensive policy that encompasses 
strategic minerals like cobalt, the rare earth elements, and others. 
For example, the Western Governors Association policy resolution 10-16, 
titled ``National Minerals Policy.'' This policy must seek to evaluate 
current risks associated with the supply chain and then focus efforts 
on minerals of strategic importance to enable responsible development 
of domestic sources. The policy must establish regulatory certainty and 
eliminate redundant financial assurance obligations that improperly 
burden responsible development. Policies that focus exclusively on the 
rare earth elements, and not including cobalt and other strategic 
minerals, are excessively narrow in focus.
    Policies that do not take a comprehensive approach will yield 
situations where foreign dependency continues to constrain the supply 
chain of the multiple strategic minerals essential to support 
successful clean energy and other manufacturing endeavors.
    Question 13. Which element of US national security would suffer 
most in the face of prospective cobalt shortages, domestic clean energy 
deployment or national defense?
    Answer. Dependence on foreign sources for strategic minerals 
jeopardizes both the national defense and energy security of the U.S. 
Cobalt is a strategic mineral, so designated by the Defense Logistics 
Agency (DLA). The remaining cobalt stockpile in the strategic reserve 
managed by the DLA is waning. With only a nominal reserve available, 
any supply disruptions threaten national defense applications, 
particularly super-alloy grade applications such as jet engine 
production.
    However, as noted in my testimony, the fastest growing use of 
cobalt is in rechargeable battery manufacturing. Rechargeable batteries 
are the essential energy storage component of clean energy technologies 
like solar and wind, as well as hybrid electric, all electric vehicles, 
and a plethora of portable electronic devices (e.g., cellular phones). 
These clean energy technologies rely on rechargeable batteries and 
virtually all battery chemistries in production rely on cobalt for 
their function. Thus, given the rapidly expanding use of cobalt in 
clean energy technology manufacturing, continued expansion will be 
adversely constrained by a prospective cobalt supply shortage.
    Question 14. Do you recommend that the U.S. seek to secure the 
entire rare earth supply chain, including manufacturing, for national 
security, and to protect the emerging domestic clean-tech industry? Or 
do you recommend the U.S. re-establish strategic, global rare earth 
dominance? Or Both?
    Answer. The U.S. should seek to increase, or in some cases create, 
a productive domestic supply chain of strategic minerals such as cobalt 
and the rare earth elements. The first step in promoting such a policy 
must include the identification and development of domestic resources. 
This can be influenced by funding U.S. and State geological surveys to 
conduct preliminary exploration and locate domestic sources, as 
suggested by the Western Governors Association Policy Resolution 10-16.
    Ensuring a minimum percentage of U.S. requirements are met from 
domestic production, refining and processing will make sure that basic 
supplies can be met during periods of crisis, be it political, 
economic, environmental or other. Moreover, this policy must also seek 
to leverage existing capabilities of countries friendly to U.S. 
interests to supplement some percentage of U.S. requirements from 
primary domestic production. Additionally, re-furbishing, re-
establishing, or creating national stockpiles for strategic minerals 
should also require a minimum percentage of domestic, ethically sourced 
material.

              U.S. RARE EARTHS SUPPLY CHAIN REVITALIZATION

    Question 15. You have all testified to the importance domestic rare 
earth supply chain revitalization, given our current dependence on 
Chinese imports and the strategic importance of these materials.
    It is worth noting, as you have in your testimony, that the U.S. 
was once a leading producer of rare earths, but that our domestic rare 
earth supply chain has become dormant in the face of lower-cost 
production overseas. [Please note that much of the ``lower cost 
production'' of cobalt results from foreign suppliers not being 
subjected to the same regulatory scrutiny and environmental compliance 
laws that exist in the U.S. Moreover, these major foreign cobalt 
suppliers are not equally burdened with financial assurance obligations 
for end-of-project reclamation. This is not to suggest that the U.S. 
should lower the standard but rather streamline the process, remove red 
tape and define a realistic, fair system for determining reclamation 
financial assurances that do not unfairly penalize a domestic 
producer.]
    It is clear that U.S. dependence on the small group of foreign 
nations which currently make up the global rare earth supply chain is 
not ideal from the point of view of our domestic manufacturing 
capabilities, or our national security.
    As you have noted, re-establishing a robust US rare earth supply 
chain is a cogent solution to this problem. However, bringing on-line 
the extraction, refining, alloying and other processing capabilities 
necessary for domestic rare earth production, not to mention hiring and 
training personnel with the necessary expertise, are not tasks that can 
be accomplished overnight.
    It may be several years before a US rare earths supply chain can 
begin to meet our domestic demands. Therefore, we must continue 
consider the impact of continued rare earths imports, or even 
shortages, in the near term.
    Which US industries / strategic interests do you think will suffer 
most in near-term, assuming projected shortages materialize?
    Answer. As discussed above, national defense and energy security 
will likely suffer the most in near-term, should projected shortages 
materialize.
    Question 16. Which aspects of a US rare earth supply chain can be 
brought back online most quickly (mining, refining, alloying, etc.) and 
are all of the stages of the rare earth supply chain necessary to have 
here in the US?
    Answer. Developing new mines on public lands in the U.S. is a 6-7 
year process and involves a host of permitting challenges that must be 
overcome in order to obtain the necessary permissions to start a new 
mining operation. The magnitude of the ordeal further complicates 
efforts to finance startup operations. Refining and manufacturing, on 
the other hand, often take place outside public lands and do not 
necessarily require the same timeframe for startup.
    There are existing facilities in the U.S. that, with significant 
improvement, could be adapted or retrofitted to process other 
materials. For example, the hydrometallurgical facility that will be 
used by the Idaho Cobalt Project to refine super-alloy grade cobalt was 
previously used as a silver-copper-antimony refinery. Although 
significant retrofit is required, much of the existing infrastructure 
will be used in processing cobalt and may also be capable of processing 
REE's.
    Question 17. Further, is a domestic production necessary to secure 
the critical minerals supply chain?
    Answer. Domestic production is preferable to foreign production for 
the many reasons outlined above. However, the primary concern with 
strategic minerals like cobalt and the rare earth elements is that they 
are currently or becoming dominantly controlled by entities that may 
not be friendly to U.S. interests. According to the U.S. Geological 
Survey, in addition to rare earth elements, China is also currently the 
largest supplier of cobalt to the U.S.
    Clearly, at least a minimum percentage of U.S. requirements being 
met by domestic production would be superior to total dependence on 
foreign sources to ensure U.S. national security and to carry out U.S. 
energy policies.
    Question 18. Are federal financial incentives or legislation 
required to expedite the redevelopment of production and refining of 
rare earths domestically?
    Answer. The ongoing state of economic depression presents a very 
challenging financing climate for companies seeking financing for new 
operations. This is even more pronounced for unique commodities such as 
cobalt and REE's as they are not among the typical ``bank financed'' 
metals, such as gold, silver and copper. Expanding financial incentives 
in the form of loan guarantees for mining, refining, and other 
operations, in addition to manufacturing, that are related to critical 
minerals could greatly expedite the redevelopment of domestic capacity.
    Question 19. If the U.S. does re-establish its rare earth mining 
capacity, how can we be confident that the domestic manufacturing 
capability will also be available to use those minerals?
    Answer. Once again, a comprehensive approach must be employed. The 
entire supply chain must be energized to promote a productive domestic 
strategic minerals manufacturing capacity. A comprehensive approach 
should include all strategic metals required: from the mining process, 
to initial processing, to refining, and to manufacturing.
                                 ______
                                 
     Response of Roderick G. Eggert to Question From Senator Udall

    Question 1. China has more than 6,000 scientists and researchers 
devoted to rare earth research, development and applications. In this 
country, only one institution of higher learning offers a course in the 
rare earths--that is at the Colorado School of Mines. Clearly, we need 
to restore both our production capability as well as our information 
and knowledge base in rare earth RD&D. What suggestions do you have in 
this regard?
    Answer. My four general suggestions for public policy in this area 
are: (1) work toward undistorted international trade, (2) improve the 
efficiency of the preproduction approval process for domestic mineral 
production, (3) facilitate the collection, publication, and analysis of 
information on rare earth and other essential elements, and (4) 
facilitate research and development (R&D) activities throughout the 
supply chain for rare earths, including recycling, as well as for 
materials R&D on possible substitutions away from rare earths and other 
critical elements.
    Domestic production capability: I would not focus narrowly on 
domestic production capabilities but rather emphasize more-diversified, 
global production capabilities in ``friendly'' countries (i.e., those 
nations that we consider secure and reliable trading partners). With 
mines such as Mountain Pass (California), the United States would 
become part of a more-diversified global supply chain.
    Information and knowledge: The United States has lost its 
leadership role in developing intellectual and human capital related 
not only to rare earths but more generally in minerals and materials 
throughout the entire supply chain (geology, mining, metallurgy, 
materials science, recycling). In re-invigorating the intellectual 
infrastructure in this area, the federal government plays an important 
role through funding for research and related educational activities. 
Faculty and students follow the funding. For both basic and applied 
research, two specific types of partnerships are worth considering: 
between universities and the national labs, and between universities 
and private companies.

   Responses of Roderick G. Eggert to Questions From Senator Cantwell
    China has recently shown its willingness to restrict exports of 
rare earth elements for foreign policy reasons. In your testimony you 
state very clearly that the United States' dependence on imports is not 
necessarily bad, unless there is a lack of diversified supply, domestic 
or foreign, that leads to supply risk, especially if a foreign source 
leaves us vulnerable to geopolitical risks.
    The current situation with China seems to illustrate precisely the 
kind of risk you refer to. You go on to state that the government and 
policy makers should encourage undistorted international trade, while 
at the same time fighting policies of exporting nations that restrict 
raw-material exports to the detriment of US consumers of these 
materials.
    Question 1. Do you have suggestions as to how we can go about 
pursuing this goal?
    Answer. I think joining with the Japanese, Europeans and perhaps 
other nations through the World Trade Organization is the appropriate 
vehicle for working to eliminate trade distortions.
    Question 2. Do you, or other economists, anticipate that the 
Chinese rare earth production or export could slow further in the near 
term for any reason--for example, strengthened environmental 
regulations?
    Answer. I think there is a lack of information, at least outside of 
China, on this issue. A number of credible observers state that two 
developments are possible over the next decade or so: (a) growth in 
Chinese domestic use of rare earths will make China a net importer of 
rare earths even if existing levels of Chinese rare-earth production 
stay the same, and (b) Chinese adoption of western-style environmental 
and worker-health-and-safety regulations will lead to less Chinese 
production. In addition, there were reports in the press this week that 
Chinese rare-earth deposits may be depleted in the next 10-15 years but 
I do not have an opinion about the credibility of these reports.
    Question 3. Do you think that the US can build refining or other 
value-added production infrastructure in a timeframe to compete with 
existing infrastructure in China?
    Answer. It will be several years before the United States becomes a 
significant producer of rare-earth metals. Molycorp's Mountain Pass 
mine could be operating at full capacity in less than five years. My 
understanding is that, initially at least, Mountain Pass will (a) mine 
the ore containing rare earths, (b) separate the various rare earths 
from one another and produce rare-earth concentrates, and (c) ship the 
concentrates to China for conversion to rare-earth oxides and, in turn, 
rare-earth metals that can be used in magnets and other applications. 
In other words, Molycorp does not now have the capability (including 
the intellectual property) to convert concentrates into rare-earth 
oxides and then metals. Molycorp's long-term goal, however, is to 
produce oxides, metals, and even rare-earth magnets.
    Any US rare-earth mines other than Mountain Pass will take longer 
than five years to come into full production.
    Question 4. Which element of US national security would suffer most 
in the face of prospective cobalt shortages, domestic clean energy 
deployment or national defense?
    Answer. I am not an expert on cobalt. My impression is that it is 
relatively more important in military (national defense) applications 
than in clean-energy technologies.
    Question 5. Do you recommend that the U.S. seek to secure the 
entire rare earth supply chain, including manufacturing, for national 
security, and to protect the emerging domestic clean-tech industry? Or 
do you recommend the U.S. re-establish strategic, global rare earth 
dominance? Or Both?
    Answer. I think a secure rare-earth supply chain is important, even 
essential. Not all parts of this supply chain need to be physically 
located in the United States. We should develop those domestic mineral 
deposits that have a comparative advantage over foreign deposits. We 
should strive to develop the human capital and intellectual property 
that allows us to innovate at all stages of the supply chain.

          CULTIVATING BETTER MARKET DATA ON CRITICAL MINERALS

    Question 6. Dr. Eggert, in my view and experience, any time there 
are constraints on the supply of a commodity the conditions are ripe 
for excessive market speculation and sometimes manipulation. We have 
seen this in recent years in the markets for oil, electricity, natural 
gas, and other commodities. I am concerned about the possibility for 
the same issues to arise in the market for rare earths.
    For example, is it possible that the Chinese could deliberately 
withhold rare earths supply from the global market today, prompting the 
U.S. and other countries to invest billions of dollars in developing 
alternative sources of supply, only to flood the market with cheaper 
product in the future, and put U.S. projects out of business? I'm 
concerned this type of manipulation is possible.
    What you suggest, Chinese flooding the market, is a possibility at 
least conceptually and is a fear that, I believe, is discouraging the 
financing of investment in rare-earth mines outside of China. However, 
I am not sure that we have a good idea about the sustainability of low-
cost Chinese production, especially if Chinese officials implement 
environmental and worker-health-and-safety rules similar to ours.
    One powerful antidote to market manipulation is transparency and 
the promulgation of good information about the market. When market 
participants have good information about prices, producers, production 
rates, stockpiles, etc., they are able to plan and make sound 
decisions. Bubbles and shortages are far less likely to develop because 
it is much harder to manipulate a market that is exposed to the light 
of day.
    Can you comment on the current level of transparency in the markets 
for rare earths and strategic minerals? How confident are we in our 
knowledge of the details of the market?
    Answer. Markets for rare earths and some other rare metals are not 
transparent at the moment. The number of participants (buyers and 
sellers) is small. As a result, each participant tends to view 
information as a source of competitive advantage and tries to keep 
information confidential. We are not confident in our knowledge of 
details of the market.
    Question 7. Do you think it would be worthwhile and useful to 
expand our capacity to collecting and process data on the markets for 
these materials?
    Answer. Yes. I think it is important not only to expand our 
capabilities with respect to market data (production, consumption, 
prices, etc.) but also data and information on subeconomic resources, 
material flows over the lifecycle of a product, and resources embodied 
in goods that potentially could be recycled.

                      PERMITTING MINING OPERATIONS

    Question 8. You have both testified that the process by which mines 
can be permitted and opened should be cleaner and more straightforward. 
I do note that you were careful to state that these permits should not 
be fast-tracked and that all environmental regulations must be complied 
with in the permitting process.
    Exactly what parts of the process are you referring to in your 
testimony?
    Answer. I am not an expert on permitting. But the process typically 
takes too long and involves an un-necessarily large number of 
administrative agencies.
    Question 9. In either of your opinions, how can this process be 
improved?
    Answer. I am not sure. Some changes may require legislation but 
others may be possible at the initiative of the relevant agencies.

              U.S. RARE EARTHS SUPPLY CHAIN REVITALIZATION

    Question 10. You have all testified to the importance domestic rare 
earth supply chain revitalization, given our current dependence on 
Chinese imports and the strategic importance of these materials.
    It is worth noting, as you have in your testimony, that the U.S. 
was once a leading producer of rare earths, but that our domestic rare 
earth supply chain has become dormant in the face of lower-cost 
production overseas.
    It is clear that U.S. dependence on the small group of foreign 
nations which currently make up the global rare earth supply chain is 
not ideal from the point of view of our domestic manufacturing 
capabilities, or our national security.
    As you have noted, re-establishing a robust US rare earth supply 
chain is a cogent solution to this problem. However, bringing on-line 
the extraction, refining, alloying and other processing capabilities 
necessary for domestic rare earth production, not to mention hiring and 
training personnel with the necessary expertise, are not tasks that can 
be accomplished overnight.
    It may be several years before a US rare earths supply chain can 
begin to meet our domestic demands. Therefore, we must continue 
consider the impact of continued rare earths imports, or even 
shortages, in the near term.
    Which US industries / strategic interests do you think will suffer 
most in near-term, assuming projected shortages materialize?
    Answer. The near-term risks are greater for defense/military 
sector.
    Question 11. Which aspects of a US rare earth supply chain can be 
brought back online most quickly (mining, refining, alloying, etc.) and 
are all of the stages of the rare earth supply chain necessary to have 
here in the US?
    Answer. Mining (re-opening of the Mountain Pass Mine). Subsequent 
stages in the supply chain will take longer.
    Question 12. Further, is a domestic production necessary to secure 
the critical minerals supply chain?
    Answer. Domestic production is one way to achieve security of 
supply. For rare earths, what is critical is a more-diversified global 
supply that does not depend on a limited number of sources in one 
country--in this case, China. Having said this, the United States has 
several promising mineral deposits containing rare-earth elements, and 
these deposits could serve as the starting point for domestic 
production of rare-earth oxides, metals, and permanent magnets and 
other products.
    Question 13. Are federal financial incentives or legislation 
required to expedite the redevelopment of production and refining of 
rare earths domestically?
    Answer. Eventually the Mountain Pass Mine is likely to re-open and 
operate at full capacity on its own, without federal financial 
incentives. However, lenders still are recovering from the financial 
crisis and are reluctant to lend to projects to such as Mountain Pass 
without including a substantial risk premium in the interest rate 
charged to borrowers. Thus progress toward re-opening Mountain Pass has 
stalled due to the mine owner's reluctance to borrow money at a steep 
interest rate. Federal loan guarantees would significantly lower the 
interest rate at which Mountain Pass could borrow money and likely 
speed up the process of mine re-opening.
    Question 14. If the U.S. does re-establish its rare earth mining 
capacity, how can we be confident that the domestic manufacturing 
capability will also be available to use those minerals?
    Answer. As the question implies, a mineral resource by itself does 
not create competitiveness in those activities using the mineral 
resource as an input--in this case, the production of oxides, metals, 
magnets, and other products. The other important inputs in this case 
include intellectual property and human resources for using rare 
earths, both of which are lacking in the United States at present.

                          RECYCLING AND REUSE

    Question 15. Shifting gears a bit, I would like to take a moment to 
focus on reuse and recycling of critical minerals. It seems that many, 
if not most, critical minerals can be recycled from waste industrial 
and commercial technologies once the life of the product is complete.
    Do you know of any opportunities where we can convert existing 
industrial manufacturing facilities into facilities that can be 
utilized for the processing of rare earths for clean energy technology 
(e.g. batteries, magnets, etc) or for recycling programs for the 
recovery of the critical minerals that we have discussed here today?
    Answer. Recycling of post-consumer scrap containing rare earths is 
an important potential source of rare-earth supply. But at present it 
is not carried out to any large degree due to technical challenges that 
need to be overcome. Small amounts of rare earths are reportedly being 
recovered from some permanent magnet scrap (U.S. Geological Survey).
    Question 16. How can the U.S. best go about developing a domestic 
rare earth recycling program? Are incentives or grant programs needed 
to jumpstart such a program?
    Answer. Funding for research and development programs, probably 
through joint work involving universities, national (federal) research 
labs, and the private sector.
    Question 17. Do you see particular challenges associated with 
recycling rare earths and other critical minerals? If so, could these 
be overcome? What would have to be done to do so?
    Answer. The important challenges are technical and economic. The 
technical challenges relate to the difficulty of separating and 
recovering very small amounts of an element (the rare earth or other 
critical mineral) that are incorporated into and part of modern 
engineered materials. It is useful to think of two types of recycling 
of post-consumer scrap: functional, in which the recycled element is 
re-used to take advantage of the same chemical or physical property as 
in its original application (e.g., rare earths used again in permanent 
magnets); and non-functional, in which the recycled element or material 
is used in a different, lower-valued applications (e.g., plastic from 
beverage containers used in outdoor decks or road material). Both types 
of recycling are valuable. Functional recycling is typically more 
difficult to achieve than non-functional recycling. Research is 
necessary to overcome the technical challenges.
    The economic challenge is to carry out recycling for a profit. The 
initial technological breakthrough often works only at a bench (or 
laboratory) scale and is expensive. Usually it is only through 
experience that costs are reduced and the scale of operation increased.

                      ALTERNATIVES TO RARE EARTHS

    Question 18. In Mr. Brehm's testimony he mentions that for some 
clean energy technologies that rely on rare earths there are potential 
substitutes that do not require, or require significantly lower 
quantities of, rare earths.
    According to a report recently published by the U.S. Geological 
Survey, there is research going on in this area of substitutes.
    The report cites research at the University of Nebraska that has 
the goal of developing a permanent magnet that does not require rare 
earths at all.
    It also mentions researchers at the University of Delaware that are 
trying to create a new magnetic material based on ``nano-composite'' 
magnets. If successful, this process could slash the use of rare earths 
in magnets by 30 or 40 percent.
    And according to recent press reports, Japan's New Energy and 
Industrial Technology Development Organization (NEDO) and Hokkaido 
University have developed a hybrid vehicle motor using only inexpensive 
ferrite magnets that don't need rare earths.
    Can you please elaborate on this idea of substitutes for rare 
earths? Do you think that non-rare earth alternatives can be as 
effective as technologies that use rare earths?
    Answer. Substitution comes in two basic forms. The first is 
material-for-material or element-for-element (e.g., aluminum for steel 
in cans, palladium for platinum in catalytic converters). Typically, 
this type of substitution changes both the costs and performance of the 
engineered material. By ``performance,'' I mean the chemical or 
physical properties of the material, such as strength, corrosion 
resistance, electrical conductivity, ability to operate at high 
temperatures, etc. Some substitutions result in a small loss of 
performance but a big reduction in costs. Others result in improved 
performance at about the same costs. Only rarely is material-for-
material as simple as directly substituting one material or element for 
another with no other changes to the material; rather, substituting one 
material or element for another requires also modifying other aspects 
of the material or product.
    The second type of substitution is resource-saving--using less of a 
material or element in an application but achieving the same 
performance (e.g., thinner-walled aluminum cans made possible by 
improved aluminum-rolling capabilites, less indium per flat-panel 
display because of improvements in manufacturing efficiencies and 
reductions in the amount of indium being wasted).
    Both types of substitution are important to consider when thinking 
about rare earths.
    Question 19. Do you see substitutes as a truly preferential option, 
or merely tolerable as a ``next best'' option to rare earths?
    Answer. I think substitution is one of several important options to 
consider.
    Question 20. Are there certain types of technologies or 
applications that have greater potential for having effective 
substitutes without rare earths than others?
    Answer. This question is outside my area of expertise.
    Is there particular research that you can think of that would be 
helpful for DOE to pursue or support when it comes to developing rare 
earth substitutes?
    All aspects of the supply chain are important, including social-
science research on material flows and life-cycle costs.

              S. 3521 AND LOAN GUARANTEES FOR RARE EARTHS

    Question 21. One of the purposes of today's hearing is to consider 
Senator Murkowski's bill S. 3521, the Rare Earths Supply Technology and 
Resources Transformation Act.
    As I'm sure you know, this bill would formally establish a national 
policy of promoting investment in, exploration for, and development of 
rare earths.
    To that end, it would establish a cabinet-level task force to help 
expedite permitting and regulation of rare earth production.
    It also calls for the Secretary of Energy to issue guidance to the 
rare earth industry on how to obtain loan guarantees for projects to 
re-establish the domestic rare earths supply chain.
    Can you please comment on the bill in general. Do you support it? 
Do you believe it would be effective in rebuilding a rare earths supply 
chain in the U.S.? How do you think the bill could be improved?
    Answer. As I noted in my written testimony, domestic production is 
one of several responses to supply risks and increased demand, and this 
bill would work toward re-establishing domestic production. It likely 
would be effective, at least in part. Government by itself will not re-
establish a domestic supply chain.
    I offer the following specific comments on the bill, including 
suggestions for improvement:

    --Philosophy: De-emphasize the priority given to self-sufficiency 
            in rare-earths production. What is critical for rare-earth 
            users, including the military and developers of clean-
            energy technologies, is a more-globalized and diverse 
            supply chain for rare earths than exists at present.
    --Scope: Broaden the focus of the bill, including the mandate of 
            the Task Force, to include not just rare earths but other 
            elements that are critical to military and emerging clean-
            energy technologies, such as gallium, indium, platinum-
            group elements, tellurium, and others. I support the idea 
            of a Task Force, but have no view on which departmental 
            Secretary should chair the Task Force.
    --Expedited Permitting: I do recommend that rare-earth deposits be 
            given special treatment in permitting. Rather, I support 
            efforts to make the permitting process more efficient for 
            all types of mineral production in the United States.
    --Stockpiles: I do not support economic stockpiles--that is, those 
            that might be funded or maintained by the federal 
            government on behalf of private-sector users. Private users 
            (manufacturers) have sufficient incentive to maintain their 
            own stockpiles if they believe stockpiles are the best way 
            to deal with supply risks. As for national-defense (or 
            military) stockpiles, I think it is appropriate to require 
            the Department of Defense to assess whether stockpiles are 
            the best way to deal with their supply risks.
    --Loan Guarantees: I commented on this issue below.
    --Innovation, Training, Workforce Development (Section 7): A key 
            part of the bill, which I support. I know my support for 
            these provisions could be interpreted as self serving, as I 
            am a university professor and potentially could benefit 
            from these provisions. I strongly believe, nevertheless, 
            that innovation, training, and workforce development all 
            represent what economists call ``public goods,'' which 
            markets by themselves will under-supply from the 
            perspective of society as a whole--because the benefits of 
            public goods are diffuse, difficult for private individuals 
            and organizations to fully capture, risky, and far in the 
            future.

    Question 22. Could you please comment on the Loan Guarantee 
provisions in particular? Is this provision necessary? If rare earths 
are in such high demand, why is it necessary, or appropriate, for the 
Federal government to subsidize investment in rare earths projects?
    Answer. I repeat here an answer I gave to a previous question: 
``Eventually the Mountain Pass Mine is likely to re-open and operate at 
full capacity on its own, without federal financial incentives. 
However, lenders still are recovering from the financial crisis and are 
reluctant to lend to projects to such as Mountain Pass without 
including a substantial risk premium in the interest rate charged to 
borrowers. Thus progress toward re-opening Mountain Pass has stalled 
due to the mine owner's reluctance to borrow money at a steep interest 
rate. Federal loan guarantees would significantly lower the interest 
rate at which Mountain Pass could borrow money and likely speed up the 
process of mine re-opening.''
    More broadly, and considering the processing of rare-earth ores 
subsequent to mining, I believe there is a strong case for loan 
guarantees to encourage investment in new and relatively untested 
technologies associated with processing of rare-earth ores. But I 
believe loan guarantees for this purpose already are possible without 
new legislation.
    If we think of loan guarantees as a form of national insurance 
against future supply disruptions, then they are a relatively low-cost 
form of insurance.
    Finally, let me say that I am sympathetic to the implication of the 
question--that is, that markets will go a long way toward taking care 
of the problem. As I emphasized in my written testimony, markets 
provide powerful incentives for producers and users to respond to 
increased demand as well as supply risks. The areas that public policy 
should emphasize are those in which markets have problems--that is, 
international trade, inefficient domestic processes for regulatory 
approval, information, and research and development.

                         INTELLECTUAL PROPERTY

    Question 23. According to a July article on rare earths mining in 
the Land Letter, ``reviving Mountain Pass will require more than a 
half-billion dollars to retool the mine's aging separation plants, 
build a new gas-fired power generator and water recycling units, and 
acquire expensive technology licenses to convert the rare earth 
minerals into usable metals, alloys and magnets.''
    Who owns the intellectual property for rare earth processing? (i.e. 
Who benefits from licensing this technology to new mining operations 
like Molycorp's?)
    Answer. My impression is that Chinese interests hold much of the 
intellectual property but I am not an expert in this area.
    Question 24. Is this U.S. technology, or must it be acquired from 
overseas? Is the IP for processing rare earths unique, or is it common 
to processing other hard rock minerals?
    Answer. See answer to previous question. A significant portion of 
the intellectual property for processing rare earths is unique, or at 
least represents a significant modification to more-common methods for 
other minerals.
    Question 25. Are there active efforts underway to improve rare 
earth processing technologies? Is this an area that would benefit from 
additional R&D?
    Answer. This is a very important area for additional R&D. There is 
relatively little (some might say `essentially no') R&D occurring in 
this area in the United States today.
                                 ______
                                 
         Response of Peter Brehm to Question From Senator Udall

    Question 1. China has more than 6,000 scientists and researchers 
devoted to rare earth research, development and applications. In this 
country, only one institution of higher learning offers a course in the 
rare earths--that is at the Colorado School of Mines. Clearly, we need 
to restore both our production capability as well as our information 
and knowledge base in rare earth RD&D. What suggestions do you have in 
this regard?
    Answer. Public and private investment in technical education and 
research is both appropriate and desirable, as well as good public 
policy. Targeted public and private investment in strategic research is 
equally appropriate and desirable. A combination of Federal, State, 
local and commercial investment and collaboration in rare earth RD&D 
should be encouraged and adequately funded.

      Responses of Peter Brehm to Questions From Senator Cantwell

                          RECYCLING AND REUSE

    Question 1. Shifting gears a bit, I would like to take a moment to 
focus on reuse and recycling of critical minerals. It seems that many, 
if not most, critical minerals can be recycled from waste industrial 
and commercial technologies once the life of the product is complete.
    Do you know of any opportunities where we can convert existing 
industrial manufacturing facilities into facilities that can be 
utilized for the processing of rare earths for clean energy technology 
(e.g. batteries, magnets, etc) or for recycling programs for the 
recovery of the critical minerals that we have discussed here today?
    Answer. Many applications of rare earth materials use only very 
small amounts, which will make recycling challenging. The obvious 
exceptions are batteries and magnets, as highlighted in the Senator's 
question.
    Infinia is a consumer of rare earths primarily through the 
permanent magnets used to make the linear alternators for our Stirling 
engine and coolers. We are not familiar with any opportunities to 
convert existing industrial facilities into rare earth processing or 
recycling facilities, but we believe it is likely such facilities do 
exist and that such recycling initiatives are worthwhile pursuing.
    Question 2. How can the U.S. best go about developing a domestic 
rare earth recycling program? Are incentives or grant programs needed 
to jumpstart such a program?
    Answer. Most recycling programs will require public policy support 
to start-up and become self-sustaining. It would be appropriate and 
desirable to establish policies, such as incentives and grants, to 
encourage rare earth and critical mineral recycling.
    Question 3. Do you see particular challenges associated with 
recycling rare earths and other critical minerals? If so, could these 
be overcome? What would have to be done to do so?
    Answer. As mentioned above, the major challenge will be that only 
small quantities of rare earths and critical minerals are used in many 
applications, particularly those related to electronics. Recycling of 
rare earths and critical minerals from batteries and magnets should be 
more straightforward and feasible.

                      ALTERNATIVES TO RARE EARTHS

    Question 4. In Mr. Brehm's testimony he mentions that for some 
clean energy technologies that rely on rare earths there are potential 
substitutes that do not require, or require significantly lower 
quantities of, rare earths.
    According to a report recently published by the U.S. Geological 
Survey, there is research going on in this area of substitutes.
    The report cites research at the University of Nebraska that has 
the goal of developing a permanent magnet that does not require rare 
earths at all.
    It also mentions researchers at the University of Delaware that are 
trying to create a new magnetic material based on ``nano-composite'' 
magnets. If successful, this process could slash the use of rare earths 
in magnets by 30 or 40 percent.
    And according to recent press reports, Japan's New Energy and 
Industrial Technology Development Organization (NEDO) and Hokkaido 
University have developed a hybrid vehicle motor using only inexpensive 
ferrite magnets that don't need rare earths.
    Can you please elaborate on this idea of substitutes for rare 
earths? Do you think that non-rare earth alternatives can be as 
effective as technologies that use rare earths?
    Answer. Research in this arena is promising and our developing 
nanotechnology capabilities show great promise. It is certainly 
feasible and perhaps even likely that non-rare earth alternatives can 
be developed that will be as effective as technologies that use rare 
earth. Scarcity and supply constraints routinely lead to technological 
innovation. However, the timeline is uncertain.
    Question 5. Do you see substitutes as a truly preferential option, 
or merely tolerable as a ``next best'' option to rare earths?
    Answer. There is rarely a ``silver bullet'' as alternatives are 
likely to come with their own set of issues. However, it is certainly 
reasonable to be optimistic that substitutes will eventually be at 
least viable and perhaps even preferred for the reasons mentioned in 
the answer to the previous question.
    Question 6. Are there certain types of technologies or applications 
that have greater potential for having effective substitutes without 
rare earths than others?
    Answer. We do not have expertise in this area, but it would be 
reasonable to expect that applications using larger quantities of rare 
earths and critical minerals, such as magnets and batteries, would have 
greater potential for having effective substitutes.
    Question 7. Is there particular research that you can think of that 
would be helpful for DOE to pursue or support when it comes to 
developing rare earth substitutes?
    Answer. High Temperature Superconducting (HTS) technologies tend to 
use dramatically less (1/100th to 1/1000th the amount of) rare earth 
materials as compared to conventional technologies. For example, a HTS 
wind turbine or hydro-power generator would use 1/1000th as much rare 
earth material as a permanent magnet wind turbine or hydropower 
generator. Unfortunately, it appears the DOE is winding down its HTS 
program in FY-2011 with plans to end the DOE HTS program by FY-2012.

              S. 3521 AND LOAN GUARANTEES FOR RARE EARTHS

    Question 8. One of the purposes of today's hearing is to consider 
Senator Murkowski's bill S. 3521, the Rare Earths Supply Technology and 
Resources Transformation Act.
    As I'm sure you know, this bill would formally establish a national 
policy of promoting investment in, exploration for, and development of 
rare earths.
    To that end, it would establish a cabinet-level task force to help 
expedite permitting and regulation of rare earth production.
    It also calls for the Secretary of Energy to issue guidance to the 
rare earth industry on how to obtain loan guarantees for projects to 
re-establish the domestic rare earths supply chain.
    Can you please comment on the bill in general. Do you support it? 
Do you believe it would be effective in rebuilding a rare earths supply 
chain in the U.S.? How do you think the bill could be improved?
    Answer. Infinia does support Senator Murkowski's initiative, and we 
do believe it would be effective in rebuilding a rare earth supply 
chain in the U.S. As mentioned in our original testimony, our major 
concern is that the DOE Loan Guarantee Program (LGP) has recently lost 
a considerable amount of its appropriations and is inadequately funded 
for existing programs. While we support inclusion of the rare supply 
chain in the DOE LGP program, we strongly encourage additional funding 
authorization and appropriations.

      Responses of Peter Brehm to Questions From Senator Stabenow

    Question 1. While China holds most of the commercial supply of rare 
earth materials, I also realize that China is in a race with American 
companies to manufacturing clean energy technologies such as wind, 
solar and advanced batteries. I am sure that Infinia and other solar 
companies face enormous pressure from companies in China.
    Could China use its supply of rare earth materials to attract 
manufacturers to China? Does the location of the supply and factor in 
to your long-term plans at all?
    Answer. Yes. Based on recent events, China clearly sees political 
value in their near monopoly position in the supply of rare earth 
metals. The next logical step is to use this potential monopoly to 
create downstream industries surrounding these materials and develop 
internally and/or attract manufacturers of products that use these rare 
earth materials in China.
    For example, this has happened with respect to oil in Saudi Arabia. 
The Saudi's have wisely used their enormous supply of oil to 
dramatically grow their refining and petrochemical industries. 
Developing countries do not just want to export raw materials; they 
want to do value added manufacturing.
    Question 2. Infinia is a rather unique supply chain for a solar and 
renewable technology manufacturer and I applaud your efforts to help to 
diversify our automotive supply chain with a clean energy industry. Can 
you please tell us what the impact on your supply chain would be if 
access to these rare earth metals would be limited for political or 
other supply disruptions?
    Answer. No current commercially viable alternative exists for our 
components that utilize these rare earth metals. Should supply of these 
metals be disrupted for political or other reasons, it would severely 
impact Infinia and our supply chain.

                              Appendix II

              Additional Material Submitted for the Record

                              ----------                              

 Statement of Steven J. Duclos, Chief Scientist and Manager, Material 
                   Sustainability, GE Global Research

                              INTRODUCTION

    Chairman Bingaman 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 Lighting, 
Energy, Transportation, Aviation, Motors and Healthcare products.

          A) GE Lighting utilizes Cerium, Terbium, and Europium in 
        synthesizing efficient phosphors for fluorescent lamp products, 
        which are critical in the Department of Energy's transition 
        from inefficient incandescent lamps.
          B) GE Energy uses Neodymium, Samarium, Dysprosium, and 
        Terbium in permanent magnets for compact and efficient 
        generators in GE's most advanced 2.5 MW wind turbines.
          C) GE also uses permanent magnets in technology prototypes 
        for traction motors for our hybrid locomotives, high-speed 
        motors and generators for aviation applications, high speed 
        motors for turbo-expanders, high power density motors for PHEVs 
        and EVs, ultra high-efficiency industrial motors, as well as 
        compressor motors for GE Oil and Gas business.
          D) GE Healthcare uses rare earth materials for scintillators 
        in both Computed Tomography (CT scan) and Positron Emission 
        Tomography (PET scan) health imaging technologies.
          E) GE Aviation uses small quantities of rare earth permanent 
        magnet materials for defense technologies in guidance systems.
          F) Small amounts of rare earths are used in materials and 
        coatings in aircraft engines and power generation turbines.

    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 US 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 Bingaman, I commend you for convening this hearing to 
discuss an issue that is vital to the future well being of US 
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, defense, healthcare, and transportation. What I would like to 
do now is share with you GE's strategy to address its critical 
materials needs, as well as outline a series of recommendations for how 
the Federal government can strengthen its support of academia, 
government, and industry in this area.

                      UNDERSTANDING MATERIAL RISKS

    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 US 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.

                 STRATEGIES TO MINIMIZE MATERIAL RISKS

    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. 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:

          1) 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. To enable a 
        diversified supply chain for US industry, the federal 
        government can play an important role in strengthening the 
        domestic rare earth supply chain. Without a domestic supply 
        chain, US industry, including clean energy technologies and 
        defense technologies, are dependent on global suppliers and 
        subject to market decisions made by global suppliers.
          2) 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.
          3) An optimal solution is to develop technology that either 
        greatly reduces the use of the atrisk 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 two illustrative recent 
        examples.

                  a. 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.
                  b. 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 multiyear 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, GE 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.

          4) Another approach to minimizing the use of an element over 
        the long term is to develop recycling technologies that extract 
        at-risk elements from both end-of-life products and 
        manufacturing yield loss. Related to this is developing 
        technologies that 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.
          5) 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 users of Terbium, a rare 
        earth element. Light emitting diodes (LEDs) use roughly one-
        seventieth 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 must also be 
        considered. This example shows how a systems approach can 
        minimize the risk of raw materials constraints.

    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.

   RECOMMENDATIONS FOR THE FEDERAL GOVERNMENT AND COMMENTS ON S.3521

    Based on GE's broad experience in commercial applications that 
utilize rare earth materials, our experience conducting materials 
supply risk assessment, and developing innovative solutions to mitigate 
supply risk, GE offers the comments and recommendations below to 
improve S. 3521.
    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. GE is supportive of Federal government efforts to 
reinvigorate the domestic supply chain of rare earth materials in the 
US. A bolstered domestic rare earth supply chain would diversify 
suppliers for US industry, reduce reliance on global suppliers, and 
would have a positive direct impact on domestic employment. 
Furthermore, we believe the Senate and House versions of the RESTART 
bill favorably complement H.R. 6160 ``Rare Earths and Critical 
Materials Revitalization Act.'' We believe this legislation should 
address the following general recommendations:

          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 US 
        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.

    GE offers the following specific comments regarding S.3521. 1) In 
Section 6, in addition to revitalizing the domestic rare earth supply 
chain, it is recommended that the bill explicitly incorporate the need 
to revitalize US manufacturing capability. 2) In Section 7, we also 
recommend that the bill encourage rare earth conservation and 
innovative technology development by supporting applied research aimed 
at rare earth recycling and reduction technologies, support for 
development of rare earth replacement materials, and support for 
development of systems that replace or minimize rare earth elements.

                               CONCLUSION

    In closing, we believe that a more coordinated approach and 
sustained level of investment from the Federal government to support 
the domestic rare earth supply chain, 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 Bingaman and members of 
the committee, thank you for your time and the opportunity to provide 
our comments and recommendations.
                                 ______
                                 
     Statement of Mark A. Smith, Chief Executive Officer, Molycorp 
                             Minerals, LLC

                              INTRODUCTION

    Chairwoman Cantwell, Ranking Member Risch and Members of the 
Subcommittee, thank you for the opportunity to share my observations, 
experiences, and insights on the subject of rare earths; on global 
supply and demand; on the work we are doing at our facility at Mountain 
Pass, California; and on the latest regarding our plan to deliver to 
America a complete rare earth ``Mine-to-Magnets'' manufacturing supply 
chain in the next two years.
    I'm the Chief Executive Officer of Molycorp, Inc., a rare earths 
technology company that serves as the Western Hemisphere's only 
producer of rare earths. Molycorp owns the rare earth mine and 
processing facility at Mountain Pass, California, one of the richest 
rare earth deposits in the world. 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 
decades.
    It has been remarkable to watch the applications for rare earths 
explode--particularly in the clean energy and clean-tech sectors. The 
U.S. invented rare earth processing and manufacturing technology. But 
as rare earth-based technologies have become more and more essential to 
our modern standard of living, America has become almost completely 
dependent on China for access to rare earth oxides, metals, alloys and 
permanent magnets that, in many ways, form the heartbeat of high-tech.
    Fortunately, our nation is on the cusp of effectively reversing our 
near-total dependence on foreign nations for rare earths.
    Molycorp has produced rare earths for nearly 58 years. We are 
engaged now in modernizing and re-building our rare earth separations 
and processing facilities at Mountain Pass so that we can dramatically 
increase production of American rare earths in the fastest time frame 
possible. We are executing a ``Mine to Magnets'' strategy to rebuild 
the rare earth oxide, metal, alloy, and magnet manufacturing 
capabilities that our country has lost in the past decade. This effort 
will help to address rare earth access concerns as well as help to 
catalyze clean tech manufacturing job creation in the U.S.

                       FREQUENTLY ASKED QUESTIONS

    I am frequently asked several questions from policymakers at both 
the state and federal level regarding rare earths and Molycorp's plans. 
Those questions are:

          1. How large is the rare earth resource at Mountain Pass?
          2. Is Mountain Pass producing rare earth materials right now 
        and, if so, can you increase production in the near-term?
          3. Will Molycorp be able to produce sufficient rare earths to 
        place America in a position of effective rare earth 
        independence?
          4. What types of rare earths and rare earth products are you 
        going to produce?
          5. Do you plan to manufacture critical rare earth products 
        like permanent rare earth magnets in this country?
          6. How quickly can you make all of this happen?

    Let me provide answers to each of these important questions on the 
occasion of the Subcommittee's hearing.
    First, the rare earth ore deposit at Mountain Pass is one of the 
richest in the world, both in terms of its size and its richness of 
rare earth content, or ``ore grade.'' While we have secured a 30-year 
operating permit from the State of California, we expect to be 
producing American rare earths for many years beyond that. In short, 
America is blessed with a huge abundance of rare earths at Mountain 
Pass.
    Second, in terms of current rare earth production, Molycorp is now 
producing 3,000 tons per year of rare earths materials at Mountain 
Pass. That level of production positions us--and the U.S.--as the 
second largest commercial producer of rare earths in the world, behind 
China. Our 3,000 tons may be a far cry from the more than 100,000 tons 
per year now produced in China. But those 3,000 tons per year of 
American rare earths are coming at a time when China's export policies 
are creating actual shortages of rare earth. Rare earth dependent 
industries in the U.S. and elsewhere are scrambling now for every ton 
of product they can find. Molycorp is doing all that it can to help 
supply rare earths to as many customers in the United States and abroad 
as we can.
    While Molycorp will be heavily engaged over the next two years in 
constructing a new, state-of-the-art rare earth separations facility at 
Mountain Pass, we plan to continue to produce rare earths from our 
large supply of previously mined ore in our stockpile. And, we are 
working hard to increase that production even as we focus on building 
our new facility. The way we see it, continued production of American 
rare earths is, quite simply, an imperative for America, both in terms 
of clean energy technology development and our national defense.
    Third, is Molycorp capable of producing sufficient rare earths to 
place America in a position of virtual rare earth independence? The 
answer is yes--with a caveat.
    Our new production facility will be producing at a rate of 20,000 
tons per year of rare earth oxide equivalent by the end of 2012. 
Current U.S. consumption is estimated to be about 15,000 tons per year 
of REO equivalent. So, while we continue to stress that rare 
earthdependent industries should seek, as much as possible, to maintain 
multiple sources of supply, Molycorp's production will effectively 
reverse America's near-total dependence on foreign rare earths. We will 
help America accomplish this in only two years.
    The caveat I will add is this: global demand for rare earths is 
projected to grow dramatically in the next five years, from the current 
124,000 tons per year to an estimated 225,000 tons per year in 2015.
    However, those growth projections do not, in our view, fully take 
into account the potentially explosive rise in demand that will be 
driven by two technology sectors in particular: permanent magnet 
generator wind turbines and hybrid vehicles (including hybrids, plug-in 
hybrid and all-electric vehicles). Those technologies have the 
potential to drive demand to entirely new levels, which is going to 
require both Molycorp to increase production as well as other non-
Chinese producers around the world.
    The good news from the perspective of U.S. production capacity is 
that Molycorp has the ability, under our current operating permits, to 
double our 20,000 tons per year of production to 40,000 tons per year. 
Our new facility has been designed to allow for modular expansion, 
which means that, depending upon market conditions and with sufficient 
additional capital investment, we will be able to achieve a doubling of 
our production within only 12-18 months.
    Can we produce even more than 40,000 tons per year? Absolutely, 
although it would require securing new operating permits to allow that 
level of production. And, again, increasing our production is dependent 
upon market conditions and on the economics associated with the 
increased investment that is required.
    Four: what types of rare earths will Molycorp produce?
    We will produce all nine of the most commercially significant rare 
earths, including lanthanum, cerium, neodymium, praseodymium, samarium, 
europium, gadolinium, dysprosium, and terbium.
    But let me also help the Members of the Subcommittee dispel a 
common misperception about the production of rare earths from different 
ore bodies. It is sometimes claimed--or promoted--that some rare earth 
ore bodies can produce only certain types of rare earths and not 
others.
    The simply geologic fact is this: all significant rare earth 
deposits contain all 15 of the rare earths in the lanthanide series--
light rare earths, medium rare earths, and heavy rare earths. The 
proportional distribution of each rare earth can vary slightly in each 
ore body, but all rich ore bodies, such as Mountain Pass, can produce 
all of the rare earths.
    The key to producing different rare earths is dependent upon three 
factors:

          1) The total amount, or ``richness,'' of rare earths in the 
        ore body, expressed as a percentage and known as ``ore grade. 
        We have found, after more than half a century of doing the 
        highly challenging chemical separations of rare earths, that 
        ores with a two percent or less ore grade are highly unlikely 
        to ever be economically separated into individual rare earths.
          2) The physical characteristics of the rare earth ore. Some 
        ore bodies are more conducive to physical separation of 
        individual rare earth elements, while others are not. There are 
        ore deposits being discussed today that will probably stay in 
        the ground because they will be found to be too difficult or 
        expensive to process and separate.
          3) In today's economic and political environment, successful 
        chemical separation of rare earths requires high recovery 
        rates, high process efficiencies, and environmental superiority 
        in performance.

    Fortunately, Molycorp excels in all three areas.

          1) We have a rare earth resource at Mountain Pass with a very 
        high ore grade--an average of 8.25 percent. This is one of the 
        highest average ore grades in the world for a deposit this 
        size. By contrast, China's largest producing mines average in 
        the 4-6 percent range for ore grade.
          2) Our ore has physical characteristics that allow us to 
        achieve exceptionally efficient chemical separation of 
        individual rare earths.
          3) The new separations technologies we are deploying at 
        Mountain Pass will cut our production costs so much that we 
        will be able to produce rare earth oxides at about one-half of 
        the cost of the Chinese--all while we dramatically shrink the 
        environmental footprint of U.S. rare earth production.

    Finally, we get asked often if we plan to deploy in the U.S. the 
full rare earth magnet manufacturing supply chain. The answer here is 
simple: yes.
    By the end of 2012, Molycorp will have manufacturing operations on 
U.S. soil that include production of high-purity rare earth oxides; 
rare earth metals; rare earth alloys; and rare earth permanent magnets. 
A graphic representation* of the rare earth manufacturing supply that 
Molycorp is building is seen below.
---------------------------------------------------------------------------
    * All graphics have been retained in subcommittee files.
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              FINANCING OUR ``MINING TO MAGNETS'' STRATEGY

    With a total project cost of $511 million through the alloy 
production phase, the capital intensity of a project of this size and 
scope is substantial, particularly in a climate where credit markets 
are contracting and interest rates remain largely prohibitive for a 
project like this.
    We successfully overcame the first critical financing hurdle when, 
on July 29th of this year, Molycorp completed a highly successful 
Initial Public Offering (IPO) of stock to the capital markets. We 
raised a total of $379 million in that effort. While this does not 
cover the entire cost of our project, it has provided Molycorp with the 
resources necessary to accelerate our hiring and begin execution of the 
project.
    To raise the remaining funds necessary to complete the ``mining to 
magnets'' strategy, Molycorp is pursuing several forms of potential 
debt financing to fully fund the project, including vendor financing 
for certain essential equipment and traditional project financing. 
Because the latter involves financing terms that remain relatively 
prohibitive, we have submitted an application to the U.S. Department of 
Energy's Loan Guarantee Program. With interest rates through that 
program of three to four percent and far more reasonable payback terms 
than traditional debt, this is the preferred source of financing for 
our project. It will do much to help us maintain the accelerated 
timeline that is critical given the global supply challenges ahead. We 
submitted our DOE application on June 24th, and we were informed in 
July that we had cleared the initial review. We are now engaged in the 
second phase of the process, and will submit our second phase 
application by December 31, 2010.

     ENVIRONMENTAL STEWARDSHIP AS A DRIVER 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. While we 
believe that such a path by China is highly unlikely to occur again--
given China's everincreasing consumption of its own production--we have 
spent the better part of the past eight years preparing to weather any 
such storm.
    In a nutshell, 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.
    Our scientists have developed several groundbreaking new 
technologies and applications that will dramatically shrink the 
environmental footprint of rare earth production at Mountain Pass. 
These technologies will:

   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;
   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%;
   Recycle our reagents. By doing so we effectively eliminate 
        waste water, the need for traditional evaporation ponds, and 
        the need for daily truckloads of reagent deliveries to our 
        facility (a significant carbon reduction).
   Our new water recycling and treatment processes reduce the 
        mine's fresh water usage from 850 gallons per minute (gpm) to 
        less than 50 gpm--a 94% 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. Quite simply, our commitment to energy and resource 
efficiencywill enable us to beat China on price. These improvements 
result in major reductions to our operating costs, and based on current 
cost data, we will be able to produce rare earths at an average of 
$1.27 per pound of REO and the Chinese price is $2.54 per pound, half 
the cost of the Chinese product.
    At the same time, we significantly distinguish ourselves from the 
Chinese rare earth industry, which has been plagued by a history of 
significant environmental degradation. China is just beginning to 
recognize and rectify their environmental issues and, combined with 
rising wages in China, it will contribute to further upward pressure on 
their pricing.

                   RESPECT FOR INTELLECTUAL PROPERTY

    The processes of rare earth alloy production and permanent magnet 
manufacture are covered by U.S. patents that are held by foreign 
corporations, some of which do not expire until after 2020. That means 
that any U.S. company that intends to produce rare earth alloys and 
magnets need to acquire licenses or enter into joint ventures with 
those who have access to these patents. This is precisely what Molycorp 
is doing. We have several letters of intent to form joint ventures in 
these areas, and we fully anticipate executing agreements that will 
allow us to conduct these operations on U.S. soil by 2012.

               RARE EARTHS AS A CATALYST FOR JOB CREATION

    Access to rare earths is obviously essential. But without 
rebuilding each phase of the supply chain and reestablishing the 
manufacturing capacity to produce rare earth metals, alloys, and 
magnets, the U.S. will find itself in a continued dependence on China 
for key technological building blocks.
    Viewed through this lens and as evidenced above, 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. 
We believe, and we are seeing already, that the U.S. can experience a 
similar jobs boost by rebuilding the rare earths supply chain within 
its borders, and utilize it to attract manufacturing opportunities down 
the value chain.

                      LEGISLATIVE RECOMMENDATIONS

    We applaud Sen. Murkowski's effort to raise the government's 
awareness and understanding of rare earths and the supply challenges 
ahead, and the effort to address a variety of near-term concerns, 
including interagency coordination, vulnerability assessments, and 
stockpiling. While there is much in the legislation that we agree with, 
we would like to make the following recommendations:

   Establish the ``Rare Earth Policy Task Force'' (REPTF) at 
        the White House Office of Science and Technology Policy (OSTP): 
        Molycorp recommends that the REPTF outlined in Sec. 3 of the 
        legislation be centered at OSTP. Not only is this task force 
        already underway at OSTP (bolstered in part by existing, but 
        underutilized, policy that puts OSTP in charge of critical 
        minerals oversight), it is arguably the most effective agency 
        to manage the REPTF's work, particularly given the breadth of 
        rare earth applications across advanced technologies and the 
        resulting issues that cut widely across numerous agencies. As 
        currently drafted, the legislation establishes a focus for the 
        REPTF that is too narrow, and it underutilizes the potential of 
        the REPTF. Mining is obviously a part of rare earth production, 
        but the vast majority of the rare earths supply chain has more 
        to do with chemistry, technology, and manufacturing than 
        mining. While the REPTF can help to improve the efficiency of 
        government efforts to bring new projects on-line, it should 
        understand the broader, emerging trends in the industry, paying 
        particular attention to supply forecasting, current and 
        emerging applications, recycling, substitution/minimization, 
        workforce issues, and technological advancements throughout the 
        supply chain and how it impacts the federal government's work 
        across the represented agencies. To this end, annual reports 
        should also be issued to the House Science and Technology 
        Committee and the Senate Commerce, Science and Transportation 
        Committee
   Do not relax the required permitting or regulatory process 
        for rare earth projects: While Molycorp supports efforts to 
        ensure that permitting and regulatory processes move forward 
        smoothly and efficiently, it does not support any efforts to 
        reduce or eliminate the environmental protections necessary for 
        project approval. The environmental degradation at the rare 
        earth mines in China is not reflective of what is possible in 
        the rare earths industry. Environmental permitting and 
        attention to sustainability are necessary for the long term 
        health of the industry. Through its focused attention to energy 
        and resource efficiency and environmental stewardship, Molycorp 
        is proving that rare earth operations can be both 
        environmentally superior and globally cost competitive.
   Enhance the research and development (R&D) and education 
        elements of the legislation: We support Sec. 7 of the 
        legislation and its effort to direct agency resources and 
        attention to rare earth R&D and workforce development, but we 
        think this is an area of the legislation that could go even 
        further. While most of the legislation addresses the nation's 
        near-term challenges related to rare earths, Sec. 7 is what 
        will help to create and sustain a viable rare earths industry 
        in the U.S and ensure a stable supply of talented engineers, 
        scientists, chemists, etc., that will help the U.S. regain its 
        once dominant position in the industry. We encourage the 
        Committee to work with industry, academics, researchers, and 
        non-profit organizations to identify additional ways that the 
        federal government can support and accelerate technological 
        advancements and educational opportunities in this area. We 
        also encourage the Committee to collaborate with the House 
        Science and Technology Committee, which recently moved similar 
        legislation on rare earth R&D and education.
   Specify how the Defense Production Act (DPA) can be utilized 
        to support rare earth projects: Currently, Sec. 6 of the bill 
        calls for the DoD to describe past, present and future rare 
        earth-related projects under the DPA authority, and provide a 
        justification to Congress if there are none. Rather than 
        stopping there, the bill should instruct DoD to provide a 
        description/analysis of how academic institutions, researchers, 
        private industry, etc., can utilize the DPA to provide support 
        for rare earth projects. Given current DoD study already 
        underway, Congress should use those findings to conclusively 
        determine the support that can be achieved under current law.

                               CONCLUSION

    Thank you for the opportunity to submit this testimony. We are 
available to any Member of the Committee, or of the full Senate, to 
answer any additional questions you may have. Molycorp looks forward to 
working with the Committee, and with the Congress and the 
Administration, as we move America toward a position of greater rare 
earth independence over the next two years.
    Thank you very much.

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