[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.
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\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\
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\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.
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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\
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* 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\
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\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).
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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\
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\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.
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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.*
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* Documents have been retained in subcommittee files.
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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.
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* 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.
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* 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.