[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]





                        STRATEGIC AND CRITICAL
                           MINERALS POLICY:
                      DOMESTIC MINERALS SUPPLIES
                       AND DEMANDS IN A TIME OF
                      FOREIGN SUPPLY DISRUPTIONS

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

                           OVERSIGHT HEARING

                               before the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                         Tuesday, May 24, 2011

                               __________

                           Serial No. 112-33

                               __________

       Printed for the use of the Committee on Natural Resources







         Available via the World Wide Web: http://www.fdsys.gov
                                   or
          Committee address: http://naturalresources.house.gov




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                     COMMITTEE ON NATURAL RESOURCES

                       DOC HASTINGS, WA, Chairman
             EDWARD J. MARKEY, MA, Ranking Democrat Member

Don Young, AK                        Dale E. Kildee, MI
John J. Duncan, Jr., TN              Peter A. DeFazio, OR
Louie Gohmert, TX                    Eni F.H. Faleomavaega, AS
Rob Bishop, UT                       Frank Pallone, Jr., NJ
Doug Lamborn, CO                     Grace F. Napolitano, CA
Robert J. Wittman, VA                Rush D. Holt, NJ
Paul C. Broun, GA                    Raul M. Grijalva, AZ
John Fleming, LA                     Madeleine Z. Bordallo, GU
Mike Coffman, CO                     Jim Costa, CA
Tom McClintock, CA                   Dan Boren, OK
Glenn Thompson, PA                   Gregorio Kilili Camacho Sablan, 
Jeff Denham, CA                          CNMI
Dan Benishek, MI                     Martin Heinrich, NM
David Rivera, FL                     Ben Ray Lujan, NM
Jeff Duncan, SC                      John P. Sarbanes, MD
Scott R. Tipton, CO                  Betty Sutton, OH
Paul A. Gosar, AZ                    Niki Tsongas, MA
Raul R. Labrador, ID                 Pedro R. Pierluisi, PR
Kristi L. Noem, SD                   John Garamendi, CA
Steve Southerland II, FL             Colleen W. Hanabusa, HI
Bill Flores, TX                      Vacancy
Andy Harris, MD
Jeffrey M. Landry, LA
Charles J. ``Chuck'' Fleischmann, 
    TN
Jon Runyan, NJ
Bill Johnson, OH

                       Todd Young, Chief of Staff
                      Lisa Pittman, Chief Counsel
                Jeffrey Duncan, Democrat Staff Director
                 David Watkins, Democrat Chief Counsel
                                 ------                                

              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

                       DOUG LAMBORN, CO, Chairman
               RUSH D. HOLT, NJ, Ranking Democrat Member

Louie Gohmert, TX                    Peter A. DeFazio, OR
Paul C. Broun, GA                    Madeleine Z. Bordallo, GU
John Fleming, LA                     Jim Costa, CA
Mike Coffman, CO                     Dan Boren, OK
Glenn Thompson, PA                   Gregorio Kilili Camacho Sablan, 
Dan Benishek, MI                         CNMI
David Rivera, FL                     Martin Heinrich, NM
Jeff Duncan, SC                      John P. Sarbanes, MD
Paul A. Gosar, AZ                    Betty Sutton, OH
Bill Flores, TX                      Niki Tsongas, MA
Jeffrey M. Landry, LA                Vacancy
Charles J. ``Chuck'' Fleischmann,    Edward J. Markey, MA, ex officio
    TN
Bill Johnson, OH
Doc Hastings, WA, ex officio
                                 ------                                











                                CONTENTS

                              ----------                              
                                                                   Page

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

Statement of Members:
    Holt, Hon. Rush D., a Representative in Congress from the 
      State of New Jersey........................................     4
        Prepared statement of....................................     5
    Lamborn, Hon. Doug, a Representative in Congress from the 
      State of Colorado..........................................     1
        Prepared statement of....................................     3
    Markey, Hon. Edward J., a Representative in Congress from the 
      State of Massachusetts.....................................     6
        Prepared statement of....................................     7

Statement of Witnesses:
    Eggert, Dr. Roderick G., Professor and Director, Division of 
      Economics and Business, Colorado School of Mines...........    13
        Prepared statement of....................................    15
    Jaffe, Dr. Robert, Morningstar Professor of Science, 
      Massachusetts Institute of Technology......................    21
        Prepared statement of....................................    22
    Latiff, Robert H., President and Consultant, R. Latiff 
      Associates.................................................    24
        Prepared statement of....................................    26
    McGroarty, Daniel, President, American Resources Policy 
      Network....................................................    32
        Prepared statement of....................................    34
    Quinn, Hal, President and CEO, National Mining Association...     8
        Prepared statement of....................................    11
    Richardson, Ed, President, U.S. Magnetic Materials 
      Association, and Vice President of Thomas & Skinner........    27
        Prepared statement of....................................    29

Additional materials supplied:
    The New York Times article entitled ``Supplies Squeezed, Rare 
      Earth Prices Surge'' submitted for the record..............    50
    The Wall Street Journal article entitled ``China Tightens 
      Rare-Earth Rules'' submitted for the record................    52
                                     


 
  OVERSIGHT HEARING ON THE ``STRATEGIC AND CRITICAL MINERALS POLICY: 
  DOMESTIC MINERALS SUPPLIES AND DEMANDS IN A TIME OF FOREIGN SUPPLY 
                             DISRUPTIONS.''

                              ----------                              


                         Tuesday, May 24, 2011

                     U.S. House of Representatives

              Subcommittee on Energy and Mineral Resources

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Subcommittee met, pursuant to call, at 9:07 a.m. in 
Room 1324, Longworth House Office Building, Hon. Doug Lamborn, 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Lamborn, Coffman, Benishek, 
Rivera, Duncan of South Carolina, Gosar, Flores, Johnson, Holt, 
and Markey [ex-officio].
    Also Present: Representative Labrador.
    Mr. Lamborn. The Chairman notes the presence of a quorum, 
which under Rule 3[e] is two Members. The Subcommittee on 
Energy and Mineral Resources is meeting today to hear testimony 
on an oversight hearing on Strategic and Critical Minerals 
Policy: Domestic Minerals Supplies and Demands in a Time of 
Foreign Supply Disruptions.
    So, please have a seat, and I will be introducing you all 
shortly, and at the appropriate time explaining how the 
testimony process works for those of you who may not have done 
this before. But it will be a few minutes before we get there 
and so I wanted to make sure that you are comfortable.
    Under Rule 4[f], opening statements are limited to the 
Chairman and Ranking Member of the Subcommittee. However, I ask 
for unanimous consent to include any other Members opening 
statements in the hearing record if submitted to the Clerk by 
close of business today. Hearing no objection, so ordered.
    Mr. Lamborn. I also ask for unanimous consent that the 
Gentleman from Idaho, Mr. Raul Labrador, a Member of the Full 
Natural Resources Committee, be allowed to join us on the dais, 
and participate in the hearing when he arrives. Without 
objection, so ordered. Now I will recognize myself for five 
minutes, and then the Ranking Member.

 STATEMENT OF HON. DOUG LAMBORN, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF COLORADO

    Mr. Lamborn. We are here today to discuss the Nation's 
Strategic and Critical Minerals Policy and opportunities for 
improvement so the United States can better meet domestic 
needs, create jobs, and strengthen our economy and national 
security by decreasing our foreign dependence on mineral 
materials.
    Today, we will gain valuable insight from the mining 
industry, users of mineral commodities, an American Resources 
advocate, and the Chairman of two National Research Council 
Reports published in 2008, and a 2011 report, issued by the 
American Physical Society and the Materials Research Society.
    Rare-earth elements are important components for renewable 
energy technologies, telecommunications, medical devices, and 
maybe most importantly, military technology. They are used to 
make very small and powerful magnets.
    In fact, if you will allow me to demonstrate. I have two 
such magnets in my hands here today, neodymium, and these are 
very powerful and are difficult to pull apart, and you should 
be careful when you do so because you can squeeze your finger 
when they let loose.
    So, this is an example of a very small, but powerful, 
magnet that is not found in normal magnetic minerals that we 
just use in everyday use. Magnets like these can be used in the 
military drones that have played an important part in the war 
on terrorism.
    The industrialization of China and India is driving demand 
for non-fuel mineral commodities, sparking a period of resource 
nationalism.
    Steps taken by China to restrict exports of mineral 
commodities needed for the industrialization of their country 
highlights the need for the United States to assess the state 
of our Nation's mineral policies, and the opportunities to 
produce these and other strategic and critical minerals 
domestically.
    According to the National Resource Council, one of the 
primary advantages the United States possesses over our 
strongest industrial competitors is our domestic resource base. 
In other words, we have a lot of mineral resources that could 
be developed.
    The United States is among the world's largest producer of 
many important metals and minerals, particularly copper, gold, 
lead, molybdenum, silver, and zinc, and we still have 
substantial domestic reserves for these metals and rare earth 
elements.
    Yet, domestic mineral exploration stagnated or declined 
during most of the 1990s and 2000s, even though global mineral 
exploration trends were strongly positive. In 1993, we 
attracted 20 percent of the worldwide minerals exploration 
budget. Today, we attract about 8 percent.
    Without increased domestic exploration, significant 
declines in United States mineral production are unavoidable as 
present reserves are exhausted. We will continue to ship 
American jobs overseas and forfeit our economic competitiveness 
unless we take steps to develop our own mineral resources.
    The lack of exploration expenditures and other factors have 
led to an increased dependence on foreign imports. For example, 
25 years ago, the United States was dependent on foreign 
sources for 30 non-fuel mineral materials, 6 of which were 
entirely imported to meet the Nation's requirements, and 
another 16 of which were imported to meet more than 60 percent 
of the Nation's needs.
    By last year our import dependence for non-fuel minerals 
more than doubled from 30 to 67 commodities. Eighteen of those 
commodities were imported entirely to meet the Nation's 
requirements, and another 25 of those were imported to the tune 
of 50 percent or more.
    You can see on the screen to your right and left a 
breakdown of some of these key 67 commodities, and how much is 
imported. While much of the focus has been on rare earth 
elements because of China's restrictions on exports, they 
currently produce about 96 percent of the world's rare earth 
elements.
    These metals are not the only ones that should be of 
concern to us. For example, at a 2006 Subcommittee hearing on 
the energy and mineral requirements for renewable and 
alternative fuels used for transportation and other purposes, 
Robyn Storer stated that by 2016 less than half of the world 
demand for copper mine supply can be met from production from 
existing mines, and that the world needs the equivalent of 30 
new major mines by 2016 to meet the projected demand growth.
    The worldwide economic downturn in 2008 and 2009, and the 
slow recovery has stayed that dire projection, but has not 
eliminated it. The United States has abundant copper resources, 
and could benefit greatly from development of projects like 
Resolution Copper in Arizona.
    Developing our Nation's mineral resources is not only an 
integral part of an all-of-the-above energy plan, but it will 
create long-term family wage jobs, stimulate our economy, and 
reduce our foreign dependence on mineral resources.
    I look forward now to hearing from our witnesses. I will 
explain the procedures shortly, but now I would like to 
recognize the Ranking Member for five minutes for an opening 
statement. Mr. Holt.
    [The prepared statement of Chairman Lamborn follows:]

          Statement of The Honorable Doug Lamborn, Chairman, 
              Subcommittee on Energy and Mineral Resources

    We are here today to discuss the Nation's Strategic and Critical 
Minerals Policy and opportunities for improvement so the United States 
can better meet domestic needs, create jobs and strengthen our economic 
and national security by decreasing our foreign dependence on mineral 
materials.
    Today we will gain valuable insight from the mining industry, users 
of mineral commodities, an American Resources advocate and the Chairmen 
of two National Research Counsel Reports published in 2008 and a 2011 
report issued by the American Physical Society and the Materials 
Research Society.
    Rare-earth elements are important components for renewable energy 
technologies, telecommunications, medical devices and maybe most 
importantly military technology.
    They are used to make very small and powerful magnets--if you allow 
me to demonstrate with these two small magnets here--magnets that are 
used in the military drones that have played an important role in the 
war on terrorism.
    The industrialization of China and India is driving demand for non-
fuel mineral commodities, sparking a period of resource nationalism.
    Steps taken by China to restrict exports of mineral commodities 
needed for the industrialization of their country highlights the need 
for the Unites States to assess the state of our Nation's mineral 
policies and the opportunities to produce these and other strategic and 
critical minerals domestically.
    According to the National Research Council, one of the primary 
advantages the United States possesses over our strongest industrial 
competitors is our domestic resource base--in other words we have a lot 
of mineral resources that could be developed.
    The United States is among the world's largest producer of many 
important metals and minerals, particularly copper, gold, lead, 
molybdenum, silver, and zinc; and we still have substantial domestic 
reserves of these metals including rare earth elements.
    Yet, domestic mineral exploration stagnated or declined during most 
of the 1990's and 2000's even though global mineral exploration trends 
were strongly positive. In 1993 we attracted twenty percent of the 
world-wide minerals exploration budget, today we attract about eight 
percent.
    Without increased domestic exploration, significant declines in 
U.S. mineral production are unavoidable as present reserves are 
exhausted. We will continue to ship American jobs overseas and forfeit 
our economic competitiveness unless we take steps to develop our own 
mineral resources.
    The lack of exploration expenditures and other factors has led to 
an increased dependence on foreign imports. For example, 25 years ago 
the United States was dependent on foreign sources for 30 non-fuel 
mineral materials, 6 of which were entirely imported to meet the 
Nation's requirements and another 16 of which were imported to meet 
more than 60 percent of the Nation's needs.
    By last year our import dependence for non-fuel mineral materials 
more than doubled from 30 to 67commodities, 18 commodities were 
imported entirely to meet the Nation's requirements, and another 25 
commodities required imports of more than 50 percent (figure 1--on 
screen).
    While much of the focus has been on rare earth elements because of 
China's restrictions on exports--they currently produce about ninety-
six percent of the world's rare earth elements. These metals are not 
the only ones that should be of concern to us.
    For example, at a 2006 subcommittee hearing on ``The Energy and 
Mineral Requirements for Renewable and Alternative Fuels Used for 
Transportation and Other Purposes'' Robyn Storer stated that ``by 2016 
less than half of world demand for copper mine supply can be met from 
production from existing mines''. . .and that. . .``the world needs the 
equivalent of 30 new major mines by 2016 to meet the projected growth 
in demand.''
    The world-wide economic downturn in 2008 and 2009 and slow recovery 
has stayed that dire projection but not eliminated it.
    The United States has abundant copper resources and could benefit 
greatly from development of projects like Resolution Copper in Arizona. 
Developing our Nation's mineral resources is not only an integral part 
of an all-of-the-above energy plan but it will create long-term family 
wage jobs, stimulate our economy and reduce our foreign dependence on 
mineral resources.
    I look forward to hearing from our witnesses today.
                                 ______
                                 

 STATEMENT OF HON. RUSH D. HOLT, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF NEW JERSEY

    Mr. Holt. Thank you, Mr. Chairman. In recent years, the 
issue of rare earth elements and critical minerals has come to 
widespread attention, and we have witnessed, I think, a growing 
realization that allowing our domestic rare earth supply chain 
to disintegrate over the past couple of decades may be a threat 
to both our national security and our economic competitiveness.
    It was nearly 20 years ago that Chinese President Deng 
Xiaoping famously noted that while the Middle East has its oil, 
China has its rare earths. So, China's march to monopoly of 97 
percent of the world's rare earth minerals, ores, and oxides 
began.
    At the same time, the United States has gone from the 
world's leading producer to near total reliance on imports of 
rare earths. This has serious repercussions for the military. 
These minerals are essential for guidance systems, and lasers, 
and satellite communication, and radar, and sonar, and all 
sorts of other things.
    And the Department of Defense is currently working on a 
report on its plan to ensure near-term availability, and I am 
not sure that anybody is really looking at long-term 
availability. So, I look forward to that report from the DoD. 
But it is more than a national security concern. There are 
implications for the development of clean energy. Over the next 
couple of decades, the global market for sustainable energy 
products and equipment is going to be a multi-multi-trillion 
dollar industry.
    And if American companies and workers are to participate in 
this rapidly growing sector for access to rare earths, and the 
ability to domestically refine and process reliable supplies 
will be critical.
    A hybrid vehicle, for example, contains a couple of pounds 
of neodymium in its motor, and nearly 25 pounds of lanthanum in 
its battery. Those are just two of the 17 minerals categorized 
as rare earths.
    Several hundred pounds of these might be used for advanced 
magnets for the large wind turbines, for example. So, China has 
the ability to shut down the production of almost all of these 
products if it wishes, and based on current Chinese exports 
quotas and tariffs, as well as the unofficial earth embargo to 
Japan last fall, relying completely on China for these critical 
minerals is clearly not a sound approach for our country.
    It is clear that China is acting as they see it 
strategically to dominate the entire clean energy supply chain, 
from mine to solar module, and it is vital to America's 
economic competitiveness that we, too, develop a long-term 
strategy for competing in this and other high tech sectors.
    The strategy must include a plan for securing reliable 
supplies of critical minerals. So, we need the United States 
Geological Survey, and Geological Surveys from around the 
world, too provide the best and most transparent data on 
critical mineral resources in the ground.
    We need the Department of Energy researching mineral and 
material substitutes, developing reuse and recycling methods, 
and improving technologies for critical mineral extraction and 
refining.
    We need the Department of Defense to develop a plan for 
securing adequate supplies to meet national security 
requirements now and into the future. So, let us be clear. An 
over-simplified ``Mine, Baby, Mine'' mantra will not create a 
domestic supply chain.
    It will not develop substitute materials, and it will not 
enhance in the long run our national security and economic 
competitiveness. Moreover, since rare earths--maybe at some 
point we should make it clear that rare earths aren't rare--
just difficult to acquire.
    But since rare earth deposits are typically found 
associated with radioactive elements, haphazard and imprudent 
mining can leave us with contaminated water supplies, and 
radioactive superfund sites around the country.
    So, it is an important hearing, and I hope the first of 
many on this subject. As the Chairman said, I think it is 
possible to find some common ground, and this need not be a 
partisan issue. I thank the witnesses for being here today, and 
I look forward to your testimony.
    [The prepared statement of Mr. Holt follows:]

       Statement of The Honorable Rush D. Holt, Ranking Member, 
              Subcommittee on Energy and Mineral Resources

    Over the past year, the issue of rare earth elements and other 
critical minerals has jumped to the front burner. We have witnessed a 
collective realization--rightly I believe--that allowing our domestic 
rare earth supply chain to disintegrate over the past two decades may 
be a threat to both our national security and economic competitiveness.
    In 1992, the Chinese president Deng Xiaoping [shou-ping] famously 
noted that ``the Middle East has its oil, but China has rare earth.'' 
So began China's march to monopoly producer of 97 percent of the 
world's rare earth mineral ores and oxides. At the same time, the U.S. 
has gone from the world's leading producer to near total reliance on 
imported rare earths.
    This has serious repercussions for our military. Rare earth 
minerals are essential to our missile guidance systems, lasers for 
enemy mine detection, satellite communications, and radar and sonar 
systems. The Department of Defense is currently working on a report on 
its plan to ensure near-term availability of rare earth minerals, and I 
look forward to that report.
    But this is more than a national security concern. It also has 
significant implications for the development of clean energy. Over the 
next two decades, the global market for sustainable energy products and 
equipment is estimated to be worth more than $12 trillion. If American 
companies and workers are to participate in this rapidly growing 
sector, access to rare earths and the ability to domestically refine 
and process reliable supplies of these minerals will be absolutely 
critical.
    Today, a hybrid vehicle contains 2 pounds of neodymium in its motor 
and nearly 25 pounds of lanthanum in its battery. Those are just two of 
the 17 minerals categorized as rare earths. Several hundred pounds of 
these minerals may be used to make the advanced magnets needed in a 
large wind turbine. Today, China has the ability to shut down 
production of all of these products if it wishes. Based on current 
Chinese export quotas and tariffs, as well as the unofficial rare earth 
embargo to Japan last fall, relying completely on China for these 
critical minerals is clearly not a sound approach.
    It is clear that China is acting strategically to dominate the 
entire clean energy supply chain, from mine to solar module. It is 
vital to America's economic competitiveness that we too develop a long-
term strategy for competing in this and other high-tech sectors. This 
strategy must include a plan for securing reliable supplies of critical 
minerals.
    So we need the U.S. Geological Survey, and geological surveys from 
around the world, providing the best and most transparent data on 
critical mineral resources in the ground. We need the Department of 
Energy researching material substitutes, developing reuse and recycling 
methods, and improving technologies for critical mineral extraction and 
refining. We need the Department of Defense to develop a plan for 
securing adequate supplies to meet national security requirements in 
the near-term. But let's be clear. An over-simplified ``Mine Baby 
Mine'' mantra will not create a domestic supply chain, it will not 
develop substitute materials, and it will not enhance our national 
security or economic competitiveness. Moreover, since rare earth 
deposits are typically found among radioactive uranium, thorium, and 
radon, a haphazard ``Mine, Baby, Mine'' strategy could leave us with 
contaminated water supplies and radioactive Superfund sites across the 
country.
    This is a very important hearing and, I hope, the first of more on 
the subject.I thank the witnesses for being here today and look forward 
to their testimony.
                                 ______
                                 
    Mr. Lamborn. OK. Thank you, Representative Holt. At this 
point, I would like to have a moment of silence. Our Chairman, 
Doc Hastings, unfortunately lost his mother in the last day or 
so. So, if we could have a moment of silence, it would be 
appreciated.
    [Pause.]
    Mr. Lamborn. Thank you. So, the Chairman of the Full 
Committee is not with us. We are graced with the presence of 
our Ranking Member of the Full Committee. So, if you have an 
opening statement, Mr. Markey, we would like to hear it.

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

    Mr. Markey. Thank you, Mr. Chairman, very much. And I also 
appreciate your foresight in using the word strategic in the 
title of today's hearing. It underscores the importance of 
dealing with this resource challenge with a long-term national 
purpose in mind.
    We can mine every last rare earth molecule from the 
National Mall to the California coast, but if we are shipping 
all that ore back across the Pacific to be refined and 
processed into valuable alloys in China, and assembled into 
solar panels, i-Pods, and missile guidance systems in China, 
then we have completely missed the opportunity.
    Against all odds, American manufacturing is charging back, 
anchored by a strong domestic auto industry that has reoriented 
around technology and innovation. United States manufacturing 
has now expanded for 21 consecutive months.
    I know that all of us are happy to see this recovery 
happening, but it is time to take stock of how we are going to 
maintain this growth. Our workers are competitive globally, not 
because they will work for the lowest wages, but because they 
are the most productive because they innovate.
    They find ways to work smarter instead of harder, and that 
is why this hearing is so important. This is all about building 
blocks of the high-tech economy. A Nation that wishes to 
compete in high-tech, value-added manufacturing, in the 21st 
Century must have a reliable source of critical minerals.
    One agency which this Committee has jurisdiction over that 
I believe must be more fully utilized to help solve the 
critical minerals challenge is the United States Geological 
Survey.
    This is why I have introduced a bill, along with 
Representative Hank Johnson, that directs the United States 
Geological Survey to work with other Geological Surveys to 
identify and quantify global rare earth deposits, improve our 
understanding of the distribution and formation of these 
deposits, analyze the state of the rare earth supply chain, and 
recommend steps to ensure supply.
    I believe that H.R. 1314, the Resource Assessment of Rare 
Earths, or RARE Act, is an important first step that this 
Committee could take to bring valuable government resources and 
expertise to bear on this problem.
    I hope to work with the Majority on this and other 
legislation that address the critical mineral challenge. I 
thank you, Mr. Chairman, for holding this hearing.
    [The prepared statement of Mr. Markey follows:]

     Statement of The Honorable Edward J. Markey, Ranking Member, 
                     Committee on Natural Resources

    I thank the Chairman.
    And I also appreciate his foresight in using the word ``strategic'' 
in the title of today's hearing. It underscores the importance of 
dealing with this resource challenge with a long-term national purpose 
in mind.
    ``Drill, Baby, Drill'' or ``Mine, Baby, Mine'' doesn't really 
capture the type of solutions we need in this area. We can mine every 
last rare earth molecule from the National Mall to the California 
coast. But if we're shipping all that ore back across the Pacific to be 
refined and processed into valuable alloys in China and assembled into 
solar panels, iPods, and missile guidance systems in China, then we 
will have completely missed the opportunity.
    Against all odds, American manufacturing is charging back. Anchored 
by a strong domestic auto industry that has re-oriented around 
technology and innovation, U.S. manufacturing has now expanded for 21 
straight months.
    I know all of us are happy to see this recovery happening. But it's 
time to take stock of how we're going to maintain this growth. Our 
workers are competitive globally not because they'll work for the 
lowest wages, but because they are the most productive. They innovate. 
They find ways to work smarter, instead of harder.
    That's why this hearing is so important today. This is all about 
the building blocks of the high-tech economy. A nation that wishes to 
compete in high-tech, value-added manufacturing in the 21st Century 
must have a reliable source of critical minerals.
    One agency which this committee has jurisdiction over that I 
believe must be more fully utilized to help solve the critical minerals 
challenge is the U.S. Geological Survey. That is why I have introduced 
a bill along with Representative Hank Johnson that directs the USGS to 
work with other geological surveys to identify and quantify global rare 
earth deposits, improve our understanding of the distribution and 
formation of these deposits, analyze the state of the rare earth supply 
chain, and recommend steps to ensure supply. I believe H.R. 1314--the 
Resource Assessment of Rare Earths, or RARE Act--is an important first 
step that this committee could take to bring valuable government 
resources and expertise to bear on this problem.
    I hope to work with the majority on this and other legislation that 
address the critical mineral challenge.
                                 ______
                                 
    Mr. Lamborn. OK. And thank you, Representative Markey. I 
look forward now to hearing from our witnesses. Let me 
introduce them. From our left to right, Hal Quinn, President 
and CEO of the National Mining Association; Dr. Roderick 
Eggert, Director and Professor of the Division of Economics and 
Business at the Colorado School of Mines in our State, myself 
and Representative Coffman here; Dr. Robert Jaffe, Morningstar 
Professor of Science at the Massachusetts Institute of 
Technology; Robert Latiff, President and Consultant, R. Latiff 
Associates; Ed Richardson, President of the Magnetic Materials 
Association, and Vice President of Thomas and Skinner; and 
Daniel McGroarty, President of the American Resources Policy 
Network.
    Like all of our witnesses, your written testimony will 
appear in full in the hearing record. So, I ask that you keep 
your oral statements to five minutes as outlined in the 
invitation letter that we sent you and under Committee Rule 
4[a],
    Our microphones are not automatic, and so you have to push 
the button in front of you, and you will see a timer that 
counts down from five minutes to zero, and that is when your 
time has run out.
    After four minutes a yellow light will come on for the last 
minute. Then I would ask that you stop and we go on to the next 
witness. Then we will alternate between the Majority and the 
Minority to ask questions of any one of you for up to five 
minutes per Representative, and if your schedule allows, it 
would be nice to have a second round of questions.
    In any case, we do have to be out of here sometime before 
11 o'clock, because at that point, we need to be over at the 
House, and I assume that all of us are interested, and need, 
and want to be there for a Joint Session of Congress to hear 
the Prime Minister of Israel address Congress. So, that will be 
our deadline.
    At this point, why don't we start with our first witness. 
Mr. Quinn, you may begin.

          STATEMENT OF HAL QUINN, PRESIDENT AND CEO, 
                  NATIONAL MINING ASSOCIATION

    Mr. Quinn. Good morning, Mr. Chairman, Ranking Member Holt, 
and Ranking Member Markey, and Members of the Subcommittee. I 
want to thank the Subcommittee for holding this hearing to 
address a serious challenge to our economic and national 
security; the availability of critical minerals that are the 
building blocks of our society.
    Now, the definition of critical minerals may vary depending 
upon one's perspective, whether it is examining national 
security implications, our capabilities for continued 
innovation, and the development of new technologies.
    But from a broader perspective, ensuring that our domestic 
mining industry performs to its full potential is critical to 
our economic success. The United States mining industry 
produces $64 billion in raw materials, that is then consumed in 
finished products that add $2.1 trillion, or 14 percent to our 
GDP.
    Now consider if we had produced to our resource potential 
for just copper, rhenium, and iron ore, basic ingredients for 
the core sectors of our economy, an additional $32 billion of 
revenue would have been realized, and then converted into an 
additional $1 trillion in economic output for finished 
products.
    Today, less than half the mineral needs of United States 
manufacturing are met from domestically mined minerals. Our 
import dependence for key minerals and commodities has doubled 
over the past two decades. If you had done a time series on 
that chart earlier, you would have seen it increasingly become 
blue over the last 20 years.
    The economic and geopolitical perils posed by our Nation's 
oil import dependency is well understood. Less appreciated is 
the peril posed by our growing dependence on foreign sources of 
minerals.
    Rare earth elements present a contemporary lesson. Twenty 
years ago the United States was a major producer of rare 
earths. Today, China supplies more than 95 percent of the world 
demand.
    With that control, China has changed its business model 
from exporting rare minerals to exporting finished products 
using rare earth elements, such as electric motors, computers, 
batteries, and wind turbines.
    In short, China has leverage in its commodity control so 
that it can provide price and supply preference to domestic 
consumers, including companies that move their manufacturing 
and research facilities to China.
    The value proposition is clear. Instead of selling for the 
creation of hundreds of jobs derived from rare earths, or from 
buying rare earths, why not employ millions throughout the 
value added chain and seize the economic and technological 
advantages that come with building out your manufacturing 
capabilities.
    There exists the real potential for a rare earths story to 
become an all too common experience for other natural or rare 
earths commodities. You are presently in the midst of an 
unprecedented super cycle demand for minerals. The cycle is 
fueled by a start transformation of nations from agrarian-based 
societies to industrial and urban commercial centers.
    Growing urbanization and industrialization in developing 
the world means more demand for minerals to build the 
infrastructure and supply the products for a population with 
growing aspirations.
    These trends have already translated to major shifts in 
global sources of demand and supply for key commodities. We as 
a Nation have become increasingly marginalized in the front end 
of the mineral supply chain, and the consequences are severe 
for our Nation's global competitiveness.
    What the rare earths experience should teach us is that 
when secure and reliable sources of minerals supply disappear 
from our shores, so do the downstream industries, innovation, 
and technology that require them.
    The good news is that the United States has resources and 
the know how to meet more of its domestic mineral needs. Our 
mineral endowment is immense and inevitable. According to the 
United States Geological Survey, when it comes to key minerals, 
what is left to be discovered in the United States is almost as 
much as what has been discovered.
    Our resource potential in business advantages should 
provide us a leg up globally, and yet by several measures we 
are performing below our potential. I had previously mentioned 
that our Nation's import dependency continues to increase.
    So, finding new resources and delineating our economic 
potential is critical to keep the commodity pipeline flowing. 
However, the percentage of worldwide exploration spending 
commanded by the United States has dropped from 20 percent in 
1993 to a mere 8 percent today.
    That is a leading indicator where future development 
capital will be deployed. Until recently the United States was 
a global leader in value added mining to the Nation's GDP. We 
have now slipped to second, but more of concern is that the 
ratio of our capital expenditures to the value added of mining 
to the economy lags so substantially that it may jeopardize the 
United States's current overall GDP rank.
    So, while the United States has one of the greatest mineral 
endowments, our ability to get these minerals into the supply 
chain to help meet more of America's needs is compromised by 
some policies that place high hurdles in our lane of the global 
race to remain competitive.
    Let me just quickly mention three; access to mineral lands. 
The 12 Western States are the source of much of our Nation's 
mineral endowment. Federal lands compromise almost 40 percent 
of the land area in the United States.
    Half of that is either off-limits or under restrictions for 
mineral development. Unknown amounts of resources on adjacent 
State and private lands are also sterilized because of those 
restrictions.
    The United States mining struggles under the highest 
statutory taxation rate. Federal and State taxes combined 
result in a 41 percent tax rate for United States metals 
mining.
    Many countries that we compete against for development 
capital have already instituted their rate cuts, or targeted 
reforms to attract investments in mining. The Federal 
regulatory burden has recently been estimated to cost the 
United States economy $1.75 trillion.
    On average that amounts to $8 thousand per employee. But 
while regulatory costs can solely drown out an enterprise, the 
uncertainties and delays in obtaining permits to commence 
operations can crush a mining enterprise before it even gets 
into the dirt.
    Permit delays pose the highest hurdle for domestic mining, 
with necessary government authorizations now taking close to 10 
years. If commodities super cycles are historically measured in 
20 years in duration, the 10 years that it takes to obtain 
permits leaves the United States mining still in the starting 
blocks with the race halfway over.
    America's drift away from the greater self-sufficiency and 
the basic building blocks of our economy compromises our 
economic and national security, and surrenders the country's 
inherent advantage of rich reserves of metals and minerals.
    This hearing is a good starting point for addressing head-
on the larger issue of how our country can produce more 
minerals to meet a greater share of our domestic needs, and we 
thank you for holding this hearing, Mr. Chairman.
    [The prepared statement of Mr. Quinn follows:]

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

    Good morning. I am Hal Quinn, president and chief executive officer 
of the National Mining Association (NMA). NMA is the national trade 
association representing the producers of most of the nation's coal, 
metals, industrial and agricultural minerals; manufacturers of mining 
and mineral processing machinery, equipment and supplies: and 
engineering and consulting firms, financial institutions and other 
firms serving the mining industry.
    I want to thank the Subcommittee for holding this hearing to 
address a serious challenge to our economic and national security--the 
availability of the critical minerals that are the building blocks of 
our society. And these minerals are critical. Using one metric, the 
value added from industries consuming the $64 billion in raw materials 
from U.S. minerals mining translates into $2.1 trillion, or 14 percent, 
of our GDP. Yet today, less than half of the mineral needs of U.S. 
manufacturing are met from domestically mined resources. And when 
secure and reliable mineral supply chains disappear from our shores so 
do the downstream industries, related jobs, innovation and technology 
that depend on them.
    Overall, the United States' import dependence for key mineral 
commodities has doubled in the span of two decades. This is not a 
sustainable trend, particularly in a highly competitive world economy 
in which the demand for minerals continues to grow. These dynamics has 
led NMA to launch a new education and outreach effort, Minerals Make 
Life, and we are ready to work with our elected leaders to ensure 
public policies and procedures address the challenges before us.
The Backdrop
    Fast growing economies led by China and India have created an 
historic super cycle for commodities--one we have not seen on such a 
scale since the American Industrial Revolution more than a century ago. 
Metals are at the epicenter of this historic transformation of nations 
from agrarian-based societies to industrial and urban commercial 
centers. Consider the following megatrends:
          For the first time in our history, more than half of 
        humanity lives in urban areas. It is forecast that more than 70 
        percent will be located in urban centers in the next 40 years. 
        In China, alone, we are witnessing the largest internal 
        migration in human history with perhaps 625 million Chinese 
        living in cities by 2015. By 2025, there will be at least 29 
        mega-cities globally with more than 10 million people. These 
        cities all require tremendous infrastructure to electrify, 
        connect and transport their citizenry.
          At the same time, we are in the middle of an 
        unprecedented explosion in the world middle class, and the pace 
        will continue to pick up significantly. Some estimate that 25 
        percent of China's population qualifies as middle class--more 
        people than the entire U.S. population today. And, China's 
        middle class is expected to double in the next decade. Entre to 
        the middle class brings with it expectations for better medical 
        care, more goods and services, improved housing, safe drinking 
        water and other hallmarks of a better life. All depend on 
        minerals.
          What we see in China is also underway in other 
        emerging countries such as India, Indonesia and Brazil. The 
        demographics all point to sustained momentum behind these 
        trends.
The Peril
    It is important that we understand these critical trends because 
they will shape our future, presenting opportunities and challenges for 
both U.S. mining and the nation. These trends point to enormous growth 
and job-creation opportunities if U.S. mining is allowed to perform to 
its potential. If we do not, and become increasingly marginalized, the 
consequences are severe for our nation's global competitiveness as we 
become more reliant upon extended and unstable supply chains for what 
we can produce here.
    Recognizing that resource constraints can limit its growth, China, 
for one, has developed a comprehensive and multi-faceted strategy for 
assuring future supplies of minerals.
    A powerful example of China's aggressive strategy to ensure access 
to needed minerals involves rare earth elements (REE). REEs are valued 
for their magnetic and optical properties and used in weapons systems, 
computers and energy technologies. Twenty years ago, the United States 
was the major producer of REEs. Today, China supplies more than 95 
percent of world demand. China also recognizes the benefits of forward 
integration to its economy and technological advancement. As a result, 
it has changed its business model from exporting rare earth minerals to 
exporting finished products using REEs such as electric motors, 
computers, batteries and wind turbines. While the U.S. is reviving its 
REE production capability, we have let the situation go on far too long 
for these and other minerals commodities.
    America's drift away from greater self-sufficiency for the basic 
building blocks of our economy compromises our economic and national 
security and ignores this country's rich reserves of metals and 
minerals. It is time for policymakers to meet head-on the larger issue 
of how our country can produce more domestic minerals to meet a greater 
share of our needs.
The Potential
    The United States has the resources and the know-how to meet more 
of its domestic mineral needs. From a global perspective, the United 
States enjoys inherent advantages. Our mineral endowment is immense and 
enviable. Our bench is long and deep. According to the United States 
Geological Survey, when it comes to copper, silver and zinc and other 
key minerals ``what is left to be discovered in the U.S. is almost as 
much as what has been discovered.''
    Beyond our rich mineral endowment, we also enjoy several other 
inherent advantages. We have a global-leading workforce in terms of 
skill and productivity. We possess top quality rail and port 
infrastructure for moving commodities to market. We enjoy an 
electricity infrastructure that is top of class in terms of quality, 
reliability and cost--thanks to abundant and low-cost coal. And the 
depth of our capital markets allows access to the capital necessary to 
find and develop new resources.
The Performance
    Our resource potential and business advantages should provide us a 
leg-up globally. And yet, by several measures we are performing below 
our potential.
          When viewed through the lens of resource potential, 
        we are punching below our global weight. If we had produced to 
        our resource potential for copper, molybdenum, and iron ore--
        basic ingredients for key sectors of our economy--an additional 
        $32 billion of revenue would have been registered in 2008--and 
        multiply that by the value added to the GDP by major industries 
        that convert these materials into finished products, and U.S. 
        mining could have been the starting point for an additional $1 
        trillion in economic output.
          Finding new resources and delineating their economic 
        potential is critical to keeping the commodity pipeline 
        flowing. Here again, we see a disturbing trend with the 
        percentage of worldwide exploration spending commanded by the 
        U.S. dropping from 20 percent in 1993 to only 8 percent today. 
        The percentage of global exploration spending is a leading 
        indicator of where future development capital will be deployed. 
        If you do not put the money in the ground, you cannot get the 
        minerals out.
          Until recently, the U.S. was the global leader in 
        value added of mining to the nation's GDP. We have now slipped 
        to second, but more concerning is that when we look at the 
        ratio of our capital expenditures to the value add of mining to 
        the economy, we lag so substantially that absent significantly 
        higher investments, the U.S. is unlikely to maintain its 
        current overall GDP rank.
The Public Policy
    So while the United States has one of the world's greatest mineral 
repositories, our ability to get these minerals into the supply chain 
to help meet more of America's needs is threatened. Numerous public 
policies have placed high hurdles in our lane of the global race to 
remain competitive.
          Access
    Twelve western states are the source of much of our nation's 
mineral endowment. Federal lands comprise almost 40 percent of the land 
area in those states. Half of that is either off-limits or under 
restrictions for mineral development. Unknown amounts of resources on 
adjacent state and private lands are also sterilized because of federal 
land restrictions. Both the elected and unelected continue to propose 
placing more of these lands off-limits.
          Taxes
    U.S. mining struggles under the world's highest statutory taxation 
rate. And our payments to local, state and federal government in 2008, 
the last year for which we have complete data, resulted in a 41 percent 
effective tax rate for U.S. metals mining operations, according to an 
analysis by PricewaterhouseCoopers. Many of the countries we compete 
against for development capital have already instituted rate cuts or 
targeted reforms to attract investments in mining. Here in the United 
States, we more often see proposals that would add additional taxes or 
fees on mining and eliminate the percentage depletion allowance that 
allows us to secure the enormous financial commitments necessary for 
capital intensive enterprises.
          Regulatory Burden
    The federal regulatory burden has recently been estimated to cost 
the U.S. economy $1.75 trillion annually. On average that amounts to 
about $8,000 per employee. The intensity is higher for an industry such 
as mining that must make regulatory filings and obtain government 
approvals for even the slightest changes in operating plans.
    Regulatory costs can slowly drown an enterprise. But the 
uncertainties and delays in obtaining permits to commence operations 
can crush the mining enterprise before it even gets in the dirt. Permit 
delays pose the highest hurdle for domestic mining with necessary 
government authorizations now taking close to 10 years to secure. If 
commodity cycles are historically 20 years in duration, the 10-years it 
takes to obtain permits leaves U.S. mining still in the starting blocks 
with the race half way over.
Crafting Solutions
    As Congress investigates long-term solutions and strategies to 
address our nation's mineral needs, it must also consider that many of 
today's emerging technologies rely on combinations of a variety of 
different minerals--not just single commodities. As new applications 
are found, markets for mineral commodities will expand considerably 
along with demand. For example, as cell phone technology has advanced, 
so too have the number of minerals needed to send an e-mail, take a 
photo or capture video. Today, cell phones are made from as many as 42 
different minerals, televisions can be composed of 35 different 
minerals and computers are built from 66 different minerals.
Conclusion
    An overreliance on imported minerals coupled with flat production 
at home, places the United States at greater risk of supply disruptions 
in an increasingly minerals-competitive world. Minerals are the 
building blocks of our future. Achieving sustainable economic growth 
will require a steady supply of minerals that will enable American 
corporations--large and small--to develop and make the technologies 
that will propel our economy, enable our country to compete globally, 
and improve the quality of our lives. The technologies that define 
innovation today all depend on minerals--lifesaving medical devices, 
smart phones and advanced energy technologies alike require minerals to 
function. The United States' ability to continue to innovate will 
depend on how we meet tomorrow's needs.
                                 ______
                                 
    Mr. Lamborn. OK. Thank you for your comments. Now, Dr. 
Roderick Eggert from the Colorado School of Mines.

   STATEMENT OF DR. RODERICK EGGERT, DIRECTOR AND PROFESSOR, 
  DIVISION OF ECONOMICS AND BUSINESS, COLORADO SCHOOL OF MINES

    Dr. Eggert. Thank you very much. Good morning, Mr. 
Chairman, and Members of the Committee. My name is Rod Eggert. 
I am a Professor at the Colorado School of Mines. I chaired the 
National Research Council Committee that prepared the 2008 
report, Minerals, Critical Minerals, and the United States 
Economy.
    This report described the broad context for current 
concerns about strategic and critical minerals. In particular, 
let me highlight three aspects of the report. First, 
definitions. The report defined a critical mineral, or a 
critical element, as one that is both essential in use, or 
difficult to substitute away from, and also subject to supply 
risk.
    And which specific minerals or elements is strategic 
depends on and varies from industry to industry, from country 
to country, and over time.
    Second, a conceptual framework. The report articulated a 
conceptual framework for assessing the degree of criticality of 
specific elements or minerals, and at the time identified 
indium, magnesium, niobium, platinum group elements, and rare 
earth elements, as critical.
    Third, policy relevant recommendations. The report did not 
make specific policy recommendations, but it did express and 
affirm an important Federal rule in collecting, and 
disseminating, and analyzing information about critical mineral 
markets and the science behind them. and also a critical 
Federal role in research, especially pre-competitive research.
    Let me use the rest of the time to articulate for personal 
propositions. First, the issues are broader than rare earths, 
despite the prominence of rare earths over the last year or so 
in the news.
    There are perhaps 15 or 20 elements that arguably are 
critical or strategic. Point number two. Each element has its 
own story, although import dependence can be a source of risk, 
by itself import dependence need not be risky if foreign 
sources are varied and otherwise secure.
    Different elements have different constraints on 
availability, and are different supply risks, and in some cases 
are import dependence related to geopolitical risks. In other 
cases, basic geologic scarcity may be a source of a constraint; 
technical limitations on the ability to process; extract and 
process an element may be a constraint.
    Reliance on byproduct production, or environmental, or 
social concerns, all can be sources of unavailability if you 
will.
    Point number three. Markets are responding to concerns 
about availability and security of supply, and timelines can be 
significant. Markets provide powerful incentives for affected 
parties to respond.
    On the supply side, there has been a minor mania of 
exploration for rare earths. There has been a significant 
increase in interest in recycling research over the last 
several years, but the timelines are significant; 5 to 15 years 
or so to take a mineral exploration project from its initial 
stages to actually operating a mine.
    On the demand side, markets encourage users of mineral-
based elements to obtain "insurance" against mineral supply 
risks. In the short- to medium-term users can, for example, 
maintain stockpiles, diversify sources of supply, develop 
joint-sharing arrangements with other users, or develop tighter 
relations with producers. Over the longer term, users might 
invest in new mines in exchange for secure supplies or, 
undertake research and development to substitute away from 
those elements subject to supply risks.
    Point number four. But there are important roles for the 
Federal Government today in encouraging undistorted 
international trade where trade restrictions are the problem, 
and in improving the regulatory approval processes for domestic 
resource development when there are opportunities to create 
value through domestic mineral production and downstream 
processing activities.
    And, finally, there is an important Federal role in 
facilitating the provision of information and analysis in 
education, and in pre-competitive research activities. Thank 
you very much for the opportunity to testify. I look forward to 
responding to your questions.
    [The prepared statement of Dr. Eggert follows:]

   Statement of Roderick G. Eggert, Professor and Division Director, 
 Division of Economics and Business, Colorado School of Mines, Golden, 
                                Colorado

    Good morning, Mr. Chairman, members of the Committee, ladies and 
gentlemen. My name is Rod Eggert. I am Professor of Economics and 
Business at Colorado School of Mines. My area of expertise is the 
economics of mineral resources. I participated in two activities 
relevant for today's hearing. I chaired the committee of the U.S. 
National Research Council (NRC) that prepared the 2008 report Minerals, 
Critical Minerals, and the U.S. Economy. I served as a member of the 
committee of the American Physical Society and the Materials Research 
Society (APS/MRS) that prepared the 2011 report Energy Critical 
Elements: Securing Materials for Emerging Technologies.
    I organize my remarks into three sections. First, I describe the 
context for current concerns about strategic and critical minerals. 
Second, I summarize the 2008 NRC report on critical minerals identified 
above. Third, I present my personal views on strategic and critical 
minerals, which are significantly shaped by the NRC and APS/MRS 
studies.
Context
    Mineral-based materials are becoming increasingly complex. In its 
computer chips, Intel used 11 mineral-derived elements in the 1980s and 
15 elements in the 1990s; it may use up to 60 elements in the future. 
General Electric uses some 70 of the first 83 elements of the periodic 
table in its products. In contrast, as recently as two or three decades 
ago, a typical household owned products containing perhaps 20 elements.
    Moreover, new technologies and engineered materials create the 
potential for rapid increases in demand for some elements used 
previously and even now in relatively small quantities. The most 
prominent--although by no means only--examples are gallium, indium and 
tellurium in photovoltaic solar cells; lithium in automotive batteries; 
and rare earth elements in wind turbines, hybrid vehicles, compact-
fluorescent light bulbs, and a number of defense and military 
applications.
    These technological developments raise two concerns. First, there 
are fears that supply will not keep up with the explosion of demand due 
to the time lags involved in bringing new production capacity online or 
more fundamentally the basic geologic scarcity of certain elements. 
Second, and more-directly relevant to today's hearing, there are fears 
that supplies of some elements are insecure due to, for example, import 
dependence, export restrictions on primary raw materials by some 
nations, industry concentration, or the reliance on byproduct 
production that characterizes the supply of some strategic and critical 
minerals. In both cases, mineral availability--or more precisely, 
unavailability--has emerged as a potential constraint on the 
development and deployment of emerging and important technologies, 
especially in the clean-energy and defense sectors.
Minerals, Critical Minerals, and the U.S. Economy
    It was in this light that the standing Committee on Earth Resources 
of the National Research Council initiated a study and established an 
ad hoc committee, which I chaired, to examine the evolving role of 
nonfuel minerals in the U.S. economy and the potential impediments to 
the supplies of these minerals to domestic users. The U.S. Geological 
Survey (USGS) and the National Mining Association sponsored the study, 
the findings of which appear in the volume Minerals, Critical Minerals, 
and the U.S. Economy (NRC 2008).
    The report provides a broad context for current discussions and 
concerns. It defines a `critical' mineral as one that is both essential 
in use (difficult to substitute away from) and subject to some degree 
of supply risk. Under this definition, `strategic' minerals are the 
subset of critical minerals essential in military applications.
    The degree to which a specific mineral is critical or strategic can 
be illustrated with the help of a figure (Figure 1). The vertical axis 
represents the impact of a supply restriction should it occur, which 
increases from bottom to top. The impact of a restriction relates 
directly to the ease or difficulty of substituting away from the 
mineral in question. The more difficult substitution is, the greater 
the impact of a restriction (and vice versa). The impact of a supply 
restriction can take two possible forms: higher costs for users (and 
potentially lower profitability), or physical unavailability (and a 
``no-build'' situation for users).\1\
---------------------------------------------------------------------------
    \1\ When considering security of petroleum supplies, rather than 
minerals, the primary concern is costs and resulting impacts on the 
macroeconomy (the level of economic output). The mineral and mineral-
using sectors, in contrast, are much smaller, and thus we are not 
concerned about macroeconomic effects of restricted mineral supplies. 
Rather the concern is both about higher input costs for mineral users 
and, in some cases, physical unavailability of an important input.
---------------------------------------------------------------------------
    The 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.
    Any list of critical minerals reflects conditions at a specific 
point in time. Criticality is dynamic. A critical mineral today may 
become less critical either because substitutes or new sources of 
supply are developed. Conversely, a less-critical mineral today may 
become more critical in the future because of a new use or a change in 
supply risk.
    Although the study did not make explicit policy recommendations, it 
made three policy-relevant recommendations, which I quote below:
        1.  The federal government should enhance the types of data and 
        information it collects, disseminates, and analyzes on minerals 
        and mineral products, especially as these data and information 
        relate to minerals and mineral products that are or may become 
        critical.
        2.  The federal government should continue to carry out the 
        necessary function of collecting, disseminating, and analyzing 
        mineral data and information. The USGS Minerals Information 
        Team, or whatever federal unit might later be assigned these 
        responsibilities, should have greater authority and autonomy 
        than at present. It also should have sufficient resources to 
        carry out its mandate, which would be broader than the Minerals 
        Information Team's current mandate if the committee's 
        recommendations are adopted. It should establish formal 
        mechanisms for communicating with users, government and 
        nongovernmental organizations or institutes, and the private 
        sector on the types and quality of data and information it 
        collects, disseminates, and analyzes. It should be organized to 
        have the flexibility to collect, disseminate, and analyze 
        additional, nonbasic data and information, in consultation with 
        users, as specific minerals and mineral products become 
        relatively more critical over time (and vice versa).
        3.  Federal agencies, including the National Science 
        Foundation, Department of the Interior (including the USGS), 
        Department of Defense, Department of Energy, and Department of 
        Commerce, should develop and fund activities, including basic 
        science and policy research, to encourage U.S. innovation in 
        the area of critical minerals and materials and to enhance 
        understanding of global mineral availability and use.
Four Propositions
    I organize my personal views around four propositions. First, the 
issues are broader than rare earths, despite the prominence of rare 
earths in the news over the last year. Exactly which minerals are 
`critical' (essential in use, subject to supply risk) varies from 
industry to industry, nation to nation, and over time. A number of 
recent studies suggest possible critical elements. Each list reflects a 
specific context.
    In the field of energy, the U.S. Department of Energy (2010) 
identifies five rare earths (dysprosium, europium, terbium, neodymium, 
and yttrium) and indium as especially critical to wind turbines, 
fluorescent lighting, electric vehicles, and photovoltaic thin films. A 
study by the American Physical Society and Materials Research Society 
(APS/MRS, 2011) focusing on energy technologies identifies the same six 
elements as possibly critical, plus several other rare earths, the 
platinum-group elements, and several elements important for 
photovoltaics (gallium, germanium, selenium, tellurium), as well as 
cobalt, helium, lithium, rhenium, and silver.
    For military hardware and defense systems, Parthemore (2011) 
identifies the following elements as critical: gallium, lithium, 
niobium, the rare-earth elements, rhenium, and tantalum.
    For European industry, the European Commission (2010) identifies 
fourteen elements or families of elements as critical: antimony, 
beryllium, cobalt, fluorspar, gallium, germanium, graphite, indium, 
magnesium, niobium, the platinum-group elements, rare earths, tantalum, 
and tungsten.
    The Japan Oil, Gas and Metals National Corporation (JOGMEC) 
maintains joint government-industry stockpiles for seven elements 
(chromium, cobalt, manganese, molybdenum, nickel, tungsten, and 
vanadium) deemed especially important for Japanese industry and for 
which there are significant supply risks. JOGMEC is closely monitoring 
several others (gallium, indium, niobium, platinum, rare earths, 
strontium, and tantalum).
    Over time, which materials are critical changes--with advances in 
materials science and engineering that reduce reliance on specific 
elements, and with advances on the supply side that relax supply 
constraints.
    Second, each element has its own story, and import dependence by 
itself need not be risky. From all the attention rare earths have 
received, one might think that geopolitical risks and import dependence 
are the only cause for concern about availability and supply risk. 
Geopolitical risks and import dependence certainly are important for 
those elements with geographically concentrated production, where one 
or a small number of companies or governments might act 
opportunistically or unpredictably to the disadvantage of users. But 
import dependence by itself need not be risky if foreign sources are 
numerous and diversified, and if the associated foreign governments 
believe in undistorted international trade.
    Different elements have different constraints on availability, as 
APS/MRS (2011) illustrates. Although essentially no element is in 
danger of being used up (or depleted) in a geologic sense, some 
elements are not significantly concentrated by geologic process above 
their average crustal abundance. Germanium--used in fiber optics, 
infrared optics, and photovoltaic cells--is an example. Germanium is 
not especially rare on average in the earth's crust but rarely is 
present as the main component in minerals.
    In other cases, technical limitations constrain the availability of 
an element. Rare-earth elements actually are not very rare 
geologically. They exist in a number of minerals, such as eudialyte, 
that at present are not a source of supply because existing methods of 
mineral processing and extractive metallurgy are inadequate (both 
technically and commercially) to remove the rare earths from other 
elements and, in turn, separate the specific rare-earth elements from 
one another.
    Byproduct supply is another source of supply risk. Indium, for 
example, is produced as a byproduct of zinc production. Tellurium is a 
byproduct of copper refining. The key insight here is that the 
availability of indium, tellurium, and other byproducts is strongly 
influenced by the commercial attractiveness of the byproduct's 
associated main product (zinc in the case of indium, copper for 
tellurium). A significant increase in the price of a byproduct may not 
result in a significant increase in the production of the byproduct, 
once the available byproduct is recovered from a main-product ore.
    Environmental and social concerns are factors influencing the 
availability of an element. The point is not to dispute that mineral 
production can have negative consequences for the natural environment 
or local communities; it can and does in some circumstances. Rather the 
point is: processes to ensure that mineral production occurs in ways 
that are consistent with standards for environmental protection and 
respect for society can (a) increase the time lag between an unexpected 
increase in demand and new production capacity to meet this demand and 
(b) redirect the location of production away from nations with stricter 
(or less-predictable) environmental and social rules to nations with 
less-strict (or more-predictable) rules.
    Third, markets are responding, but time lags can be significant. 
Markets provide powerful incentives for investments that re-invigorate 
supply and reduce supply risk. There are minor manias now in 
exploration for mineral deposits containing rare-earth elements and, 
separately, lithium. Over the next five to ten years, a number of non-
Chinese rare-earth mines are likely to begin production. However, given 
the long lead times between initial exploration and mining (which can 
range anywhere from five to fifteen years or more), only those rare-
earth projects in advanced exploration or development prior to the 
rare-earths crisis of the last year will be producing rare earths in 
the next few years.
    Increased recycling also can be an important response to 
constraints on supply. Recycling comes in two forms. The most obvious 
comes from recycling of products at the ends of their lives--for 
example, recovering ferrous and nonferrous metals from junked 
automobiles. Less obvious but very important is the recycling of 
manufacturing scrap or waste.
    On the demand side, markets encourage users of mineral-based 
elements to obtain ``insurance'' against mineral supply risks. In the 
short- to medium-term users can, for example, maintain stockpiles, 
diversify sources of supply, develop joint-sharing arrangements with 
other users, or develop tighter relations with producers. Over the 
longer term, users might invest in new mines in exchange for secure 
supplies or, undertake research and development to substitute away from 
those elements subject to supply risks.
    Fourth, there are essential roles for government. To ensure mineral 
availability over the longer term and reliability of supplies over the 
short to medium term, I recommend that government activities focus on:
          Encouraging undistorted international trade. The 
        governments of raw-material-importing nations should fight 
        policies of exporting nations that restrict raw-material 
        exports to the detriment of users of these materials.
          Improving regulatory approval for domestic resource 
        development. Foreign sources of supply are not necessarily more 
        risky than domestic sources. But when foreign sources are 
        risky, domestic production can help offset the risks associated 
        with unreliable foreign sources. Developing a new mine in the 
        United States appropriately requires a pre-production approval 
        process that allows for public participation and consideration 
        of the potential environmental and social effects of the 
        proposed mine. This process is costly and time consuming--
        arguably excessively so, not just for mines but for 
        developments in all sectors of the economy. I am not suggesting 
        that mines be given preferential treatment, rather that 
        attention be focused on developing better ways to assess and 
        make decisions about the various commercial, environmental, and 
        social considerations of project development.
          Facilitating the provision of information and 
        analysis. I support enhancing the types of data and information 
        the federal government collects, disseminates and analyzes. 
        Sound decision making requires good information, and government 
        plays an important role in ensuring that sufficient information 
        exists. In particular, I recommend (a) enhanced focus on those 
        parts of the mineral life cycle that are under-represented at 
        present including: reserves and subeconomic resources, 
        byproduct and coproduct primary production, stocks and flows of 
        materials available for recycling, in-use stocks, material 
        flows, and materials embodied in internationally traded goods 
        and (b) periodic analysis of mineral criticality over a range 
        of minerals. At present, the markets for most strategic and 
        critical minerals are less than completely transparent, in 
        large part because the markets are small and often involve a 
        relatively small number of producers and users, many of which 
        find it to their competitive advantage to keep many forms of 
        information confidential.
          Facilitating education and research. I recommend that 
        the federal government develop and fund pre-commercial 
        activities that are likely to be underfunded by the private 
        sector acting alone because their benefits are diffuse, 
        difficult to capture, risky and far in the future. Over the 
        longer term, science and technology are key to responding to 
        concerns about the adequacy and reliability of mineral 
        resources--innovation that both enhances our understanding of 
        mineral resources and mineral-based materials and improves our 
        ability to recycle essential, scarce elements and substitute 
        away from these elements.

           Education and research go hand in hand. Educational 
        programs, especially those at the graduate level, educate and 
        train the next generation of scientists and engineers. On the 
        supply side, education and research in the geosciences, mining, 
        mineral processing and extractive metallurgy, environmental 
        science and engineering, manufacturing, and recycling can help 
        mitigate supply risks and increase mineral availability. On the 
        demand side, improvements in materials design--fostered by 
        education and research in materials science and engineering--
        can ease the pressures imposed by those elements or minerals 
        subject to supply risks or limited availability. Government, in 
        addition to simply funding education and research, can play an 
        important role in facilitating collaborations among 
        universities, government research laboratories, and industry.
    A common conclusion of almost all recent studies on strategic and 
critical minerals is to urge governments to improve and expand 
activities related to information and analysis, education, and research 
(for example, APS/MRS 2011, European Commission 2010, NRC 2008).
    A number of other government interventions in markets have been 
proposed, such as military or economic stockpiles of rare earths and 
other critical elements; loan guarantees for investments in mines and 
processing facilities; and special, fast-track environmental permitting 
for mines that would produce rare earths or other critical minerals. 
These more-direct market interventions, although perhaps advisable in 
specific circumstances, are more controversial and less compelling in 
general as responses to the challenges of critical minerals.
    To sum up my personal views, the current situation with strategic 
and critical minerals requires attention but not panic. By undertaking 
sensible actions today, there is no reason for crises to develop. But I 
also am aware that without a sense of panic, we may not undertake these 
actions.
    Thank you for the opportunity to testify today. I would be happy to 
address any questions you have.
Notes
    This testimony draws on the documents cited in the reference list, 
especially APS/MRS (2011), Eggert (2010), and NRC (2008). The testimony 
is a revised and modified version of related testimony I presented 
before (a) the Subcommittee on Energy, Committee on Energy and Natural 
Resources, U.S. Senate, September 30, 2010, on the role of strategic 
minerals in clean-energy technologies and other applications and (b) 
the Committee on Industry, Research, and Energy of the European 
Parliament, Brussels, January 26, 2011.
References
American Physical Society and Materials Research Society (APS/MRS). 
        Energy Critical Elements: Securing Materials for Emerging 
        Technologies (Washington, D.C., American Physical Society, 
        2011). Available online at: www.aps.org.
Eggert, Roderick G. ``Critical Minerals and Emerging Technologies,'' 
        Issues in Science and Technology, volume XXVI, number 4, 2010, 
        pp. 49-58. Available online at: www.issues.org.
European Commission. Critical raw materials for the EU, report of the 
        Ad-hoc Working Group on defining critical raw materials 
        (Brussels, European Commission, June 2010). Available online 
        at: http://ec.europa.eu.
Japan Oil, Gas and Metals National Corporation website, 
        www.jogmec.go.jp, accessed May 13, 2011.
Parthemore, Christine. Elements of Security: Mitigating Risks of U.S. 
        Dependence on Critical Minerals (Washington, D.C., Center for a 
        New American Security, 2011). Available at: www.cnas.org.
U.S. Department of Energy, Critical Materials Strategy (Washington, 
        D.C., Department of Energy, December 2010). Available online 
        at: www.energy.gov.
U.S. National Research Council (NRC). Minerals, Critical Minerals, and 
        the U.S. Economy (Washington, D.C., National Academies Press, 
        2008). Available online at www.national-academies.org.



    Mr. Lamborn. All right. Thank you for your testimony. Next 
is Dr. Robert Jaffe of the Massachusetts Institute of 
Technology.

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

    Dr. Jaffe. Mr. Chairman, Mr. Holt, Mr. Markey, and Members 
of the Committee, thank you for the opportunity to testify. I 
am a Professor of Theoretical Physics at the Massachusetts 
Institute of Technology, and I am here to discuss the study on 
Energy Critical Elements that I chaired on behalf of the 
American Physical Society and the Materials Research Society.
    Our study focused on chemical elements critical to new 
technologies that have the capacity to transform the way that 
we harvest, transport, store, and use energy. First, let me 
assure you the sky is not falling. The world is not going to 
run out of any of these elements anytime soon.
    However, the problem of critical elements is serious and 
very real. While rare earths are perhaps the flavor of the 
month, a host of other elements are posed to present problems 
in the near future.
    If appropriate steps are not taken, we face possible 
disruptive short-term constraints on the supply of some 
elements not presently mined, or refined, or traded in large 
quantities, that are critical to the deployment of potentially 
game-changing element technologies.
    In our report, we refer to these as energy critical 
elements or ECEs. Constraints on the availability of these 
elements would limit the competitiveness of both United States 
industries and  scientific enterprises.
    It is our view that with careful stewardship by the 
government, coupled with the imagination of fundamental 
research, and the initiative of the United States industry, the 
problem of ECE availability can be managed for the foreseeable 
future.
    To accomplish this, we recommend a three-component 
approach, including information gathering, research, and 
recycling. But first let me say a few words about what we do 
not recommend.
    First, the United States cannot mine its way to ECE 
independence. Yes, we should certainly pursue domestic mining 
where economically appropriate, but not with the expectation 
that mining alone will solve the problem.
    Many ECEs are simply not found here in economically viable 
deposits, and others are produced much more efficiently for a 
variety of reasons in other countries. Free international trade 
with a diverse set of suppliers works to everyone's advantage.
    Second, we can't rely on stockpiling either. We found 
stockpiling anchors us to the status quo, and discourages 
innovation. Stockpiles have proved a poor way to moderate price 
fluctuations and stabilize markets, often with unintended 
negative consequences.
    Note, however, that we did not consider defense stockpiles 
which may be motivated by other considerations. In developing 
our recommendations, we took a lesson from industry.
    In 2006, General Electric projected the demand for rhenium 
an important ingredient in high performance turbines would out-
pace world supply in a few years. Instead of stockpiling, 
General Electric reduced its immediate need for new rhenium 
with extensive recycling, technologically sophisticated.
    And then began an intensive multi-year research program to 
develop an alternative alloy. By 2010, they had succeeded. 
General Electric succeeded, but many smaller United States 
companies, and university and national labs, who don't have the 
information gathering network, needed to recognize an impending 
supply disruption, and can't afford to carry out substitutional 
research, and can't engage in extended recycling.
    Consequently, in general, we recommend the following. One, 
the government should closely monitor worldwide resources and 
make that information broadly available. Accurate information 
about availability will allow us to see beyond the price spikes 
and plan for the future.
    Among other things the Federal information gathering 
entities should be designated a principle statistical agency, 
similar to the Bureau of Labor Statistics.
    Two, the government should promote fundamental research 
aimed at the twin goals of increasing supplies and decreasing 
dependencies on ECEs. It is especially important to support 
fundamental research on earth abundance substances.
    The goal should be to enable United States manufacturers or 
lab researchers to smoothly shift to a substitute in advance of 
supply disruptions.
    Third, cell phones and i-Pods end up discarded at the back 
of sock stores. Discarded electronics contain ECEs in 
concentrations that exceed some of the richest ores. Those 
dispersed products should be gathered into a resource so that 
ECEs can be extracted for reuse.
    Both industry and government need to explore means to 
stimulate recycling. To summarize, information gathering, 
research, and recycling.
    Over the past two months, I have worked with a research 
fellow at the Heritage Foundation, and a resident scholar at 
the American Enterprise Institute, to draw attention to our 
panel's recommendations.
    Although this might not be the typical collaboration for an 
MIT professor, it indicates that our recommendations identify 
an appropriate role for government and are physically 
responsible.
    Several House bills have been introduced to address the 
materials availability issue. In particular, the recently 
introduced Hultgren bill has provisions on the full triad of 
recommendations that our committee supported, and is closely 
aligned with the point of view that I have described here.
    Together, these bills present the full range of options 
from which an effective policy regarding critical elements can 
be crafted. Thank you for the opportunity to testify.
    [The prepared statement of Dr. Jaffe follows:]

   Statement of Dr. Robert Jaffe, Professor of Theoretical Physics, 
                 Massachusetts Institute of Technology

    Mr. Chairman and members of the committee, thank you for the 
opportunity to testify today.
    I am a Professor of Theoretical Physics at MIT but I'm not here to 
deliver a lecture on quarks. I'm here to discuss a study on Energy 
Critical Elements that I chaired on behalf of two leading scientific 
organizations: the American Physical Society and the Materials Research 
Society.
    Our study focused intensely on elements critical to new 
technologies that have the capacity to transform the way we transport, 
store, or use energy. Please note that we did not consider defense-
related issues. I enclosed a full copy of the report for the record, 
but this morning I'll simply highlight a few key recommendations.
    First, let me first reassure you--the sky is not falling. The world 
is not going to run out of any of these elements anytime soon. However: 
the problem of critical elements is serious and very real. While rare 
earths are the ``flavor of the month'', a host of other elements are 
poised to present problems in the future.
    If appropriate steps are not taken, we face possible disruptive 
short-term constraints on supply of some elements that are not 
presently mined, refined, or traded in large quantities, but are 
critical to the deployment of potentially game-changing energy 
technologies. Casualties might include things ranging from important 
petroleum refinery catalysts to state-of-the-art wind turbines or 
market competitive solar panels. In our report we refer to these 
elements as ECEs: Energy-Critical Elements.
    Constraints on availability of these elements would limit the 
competitiveness of both U.S. industries and the domestic scientific 
enterprise.
    It is our view that with careful stewardship by the government, 
coupled with the imagination of fundamental research and the initiative 
of U.S. industry, the problem of ECE availability can be managed for 
the foreseeable future.
    To accomplish that, we recommend a three component approach: 
information, research, and recycling.
    But first, let me say a few words about what we don't recommend.
    The U.S. can't mine its way to ECE independence. Yes, we should 
certainly pursue domestic mining when economically appropriate--but not 
with the expectation that mining alone will solve the problem. Many 
ECEs are simply not found here in economically viable deposits, and 
others are produced more efficiently--for a variety of reasons--by 
other countries. Free international trade with a diverse set of 
suppliers works to everyone's advantage.
    We can't rely on stockpiling either. We found that stockpiling is a 
disincentive to innovation because it anchors us to the status quo. 
Stockpiles have proved a poor way for governments to try to moderate 
price fluctuations and stabilize markets, often with unintended 
negative consequences. Note, however, that we did not consider defense 
stockpiles, which may be motivated by other considerations.
    In developing our recommendations for the most effective way to 
address this issue, we took a lesson from industry.
        Case Study: General Electric has for many years tracked the 
        market for an exceptionally rare metal, rhenium, which is 
        critical to its advanced turbines used both in jet engines and 
        modern natural-gas fired power plants. In 2006, General 
        Electric projected that demand for rhenium would outpace 
        worldwide supply within a few years. Instead of stockpiling, GE 
        reduced its immediate need for new rhenium by a wide-ranging 
        recycling program, and began an intensive, multiyear research 
        program to develop an alternative alloy. By 2010 they had 
        found, tested, and certified several new alloys that use less 
        rhenium. Meanwhile the price of rhenium had risen 20-fold to 
        over $10,000/kg.

        Lesson: GE succeeded, but many smaller U.S. companies and 
        university & national labs: 1) do not have the information 
        gathering network needed to recognize an impending supply 
        disruption; 2) can't afford to carry out substitutional 
        research; and, 3) can't engage in extensive recycling.
    Consequently, in general, we recommend the following:
        1)  The government should closely monitor worldwide resources 
        and make that information accessible to U.S. industries and 
        labs. Accurate information about availability will allow the 
        scientific enterprise to see beyond the price spikes and plan 
        for the future. This can be achieved by, among other things, 
        elevating the federal information gathering entity to a 
        ``Principal Statistical Agency'' similar to the Bureau of Labor 
        Statistics and the Energy Information Administration.
        2)  The government should also promote fundamental research 
        aimed at the twin goals of increasing supplies and decreasing 
        our dependence on ECEs. It is especially important to support 
        fundamental research on earth-abundant substitutes for ECEs. 
        The goal should be a broad understanding of the advantages and 
        disadvantage of technologies based on alternative materials, in 
        order to enable U.S. manufacturers or lab researchers to more 
        smoothly shift to a substitute in advance of supply 
        disruptions.
        3)  Cell phones and iPods end up discarded in the back of sock 
        drawers, yet they all contain ECEs in concentrations that 
        exceed the richest ores. Those dispersed products could be 
        gathered into a resource--an urban mine--so the ECEs can be 
        extracted for reuse. There are various paths to achieve this: 
        government could help increase recycling by enabling greater 
        consumer awareness and industry could stimulate it by providing 
        consumer incentives.
    We believe that this triad of information gathering, research, and 
recycling will provide the U.S. with the best safeguard against 
disruptions.
    I believe that these steps can be implemented with a budget-neutral 
approach that respects the distinction between activities that belong 
in the private sector and those that fall to government. As a result, 
I've been able to team with a Research Fellow at the Heritage 
Foundation and a Resident Scholar at the American Enterprise Institute 
to draw attention to this approach. Although this might not be the 
typical collaboration for an MIT professor, it indicates that our 
recommendations identify an appropriate role for government and are 
fiscally responsible.
    Several House bills have been introduced to address the minerals 
availability issue. The Johnson-Markey bill rightly emphasizes the 
importance of information gathering. The Coffman bill addresses rare 
earth elements and primarily addresses near-term issues. The Miller 
bill emphasizes some of the research and information gathering efforts 
recommended in the APS/MRS report. The recently introduced Hultgren 
bill has provisions on our full triad: information, research, and 
recycling, and is closely aligned with the point of view I have 
described here. Together these bills present the full range of options 
from which an effective policy regarding critical elements can be 
crafted.
    Thank you for the opportunity to testify.
                                 ______
                                 
    Mr. Lamborn. OK. Thank you for your testimony. Mr. Latiff.

STATEMENT OF ROBERT LATIFF, PRESIDENT AND CONSULTANT, R. LATIFF 
                           ASSOCIATES

    Mr. Latiff. Thank you Mr. Chairman, and thank you, 
Committee, for this opportunity to testify on this very timely 
and important topic. The subject of critical and strategic 
materials is one in which I have had a strong interest, both as 
a materials scientist and in my long military career in the 
acquisition of military weapons systems and technology.
    I might note here that I am also a research professor at 
George Mason University. Having retired from the Air Force, I 
was fortunate in 2007 to have been asked to chair the National 
Academy's Committee on Assessing the Need for a National 
Defense Stockpile.
    I have since remained active in urging the government and 
the industry to be more proactive on the issues of mineral and 
materials availability and related topics. I have spoken 
frequently to representatives and groups in the Department of 
Defense, the aerospace industry, and in the intelligence 
community, and at major materials and manufacturing 
conferences.
    I am also now honored to act as the Chairman of the 
National Materials and Manufacturing Board of the National 
Academies, and as such, remain actively engaged in reviewing 
research on these topics.
    I must emphasize, however, here that my testimony, unless 
specifically related to Academy studies, reflects my opinion 
and not those of the Academies. By way of summary, the 
Committee on Assessing the Need for a National Defense 
Stockpile was formed in response to a request from DoD, having 
been mandated by the House Armed Services Committee.
    The Academies published the Stockpile Committee results in 
a report entitled, Managing Materials for A Twenty-First 
Century Military. The major conclusions of the Committee were 
that the National Defense Stockpile was ineffective, and that 
the model used to calculate materials needed was outdated and 
needed to be replaced, that legislation and regulations were in 
need of review, that previous studies and recommendations had 
been ignored, and that the DoD did not adequately understand 
its own materials needs, and had no system in place to 
determine them.
    The report concluded that the DoD had not made critical and 
strategic materials a priority. Additionally, the Committee 
emphasized the criticality of the United States Geological 
Survey in maintaining accurate mineral availability 
information.
    Interesting, the report highlighted the growing concern at 
that time and the need for DoD to pay attention to rare earth 
materials. The DoD, in its April 2009 report to Congress on 
this topic, addressed many of the issues raised by the Academy 
report.
    To its credit the DoD suspended sales of many of the 
materials in the stockpile pending a thorough analysis of 
future need. It has taken action to revise its modeling system, 
and has created or is in the process of creating a strategic 
materials management program.
    What is unclear at this point is any progress by DoD 
officials on a systematic approach to determining their overall 
need for specific materials. This has become especially urgent 
recently in the clamor for rare earths, but is equally 
important for all materials needed in United States weapons 
systems.
    To the last point, I have written and spoken frequently on 
the need to maintain perspective in our critical minerals 
planning, and add that it is not only the rare earth materials 
about which we should be concerned, but also a broader range of 
important critical materials.
    It is not only materials availability to which we should 
pay attention and work to mitigate disruption. We must also pay 
more attention to the importance of material recycling, and at 
least not dismiss out-of-hand a consideration of stockpiling, 
where appropriate.
    While clearly we must have access to the materials, we also 
need to have facilities and an ability to process those 
materials once we have them, and be able to manufacture a 
product with the resulting materials. Assuring an ability to 
mitigate supply disruptions seems to be a necessary, but 
obviously insufficient, activity if we are then forced to 
depend on foreign sources of materials processing and 
manufacturing.
    I should note here that other countries are in fact taking 
or considering comprehensive measures to strength their 
materials and manufacturing positions. I am more familiar and 
impressed by the work of the European Commission, even to the 
extent of supporting their national materials policy.
    At home, recent Congressional and Executive Branch interest 
in these activities are extremely welcome. Finally, numerous 
sources of data indicate a growing concern about the relative 
production of scientists, engineers, and technicians, in the 
United States, as compared to the emerging economies of China, 
India, et cetera.
    Naturally, I have a particular concern about the materials 
sciences and related fields, and manufacturing and its related 
fields. In both, the United States has given up much of its 
historical lead.
    The National Academies have highlighted this issue as well, 
in a 2005 report, entitled, The Globalization of Materials 
Research and Development, and of course, in the widely read and 
often quoted Rising Above the Gathering Storm.
    It is of interest that here is a growing recognition by 
many that processing and manufacturing capabilities diminish, 
so, too, do fertile grounds for innovation and creativity.
    I am honored by this invitation to testify before the 
Committee and applaud its interest in taking action on this 
important issue.
    [The prepared statement of Mr. Latiff follows:]

  Statement of Robert H. Latiff, President and Consultant, R. Latiff 
                               Associates

    I would like to thank the Committee for the opportunity to testify 
on this very timely and very important topic. The subject of critical 
and strategic materials is one in which I have had a strong interest, 
both as a materials scientist and in my long career in acquisition of 
major military weapons systems and technology. Having retired from the 
US Air Force, I was fortunate, in 2007, to have been asked to chair the 
National Academies' Committee on Assessing the Need for a National 
Defense Stockpile. I have since remained active in urging the 
government and industry to be more proactive on the issues of mineral 
and materials availability and related topics. I have spoken frequently 
to representatives and groups in the Department of Defense, the 
aerospace industry, and the intelligence community, and at major 
materials and manufacturing conferences. I am also now honored to act 
as the current Chairman of the National Materials and Manufacturing 
Board of the National Academies and, as such, remain actively engaged 
in reviewing research on these topics. I must emphasize, however, that 
my testimony here today, unless specifically related to published 
Academy studies, reflect my opinions alone, and not the position of the 
National Academies.
    By way of summary, the Committee on Assessing the Need for a 
National Defense Stockpile was formed in response to a request from 
DOD, having been mandated by the House Armed Services Committee. The 
Academies published the Stockpile Committee results in a report 
entitled Managing Materials for a Twenty First Century Military. The 
major conclusions of the Committee were that the National Defense 
Stockpile was ineffective, that the model used to calculate materials 
needs was outdated and needed to be replaced, that legislation and 
regulations were in need of review, that previous studies and 
recommendations had been ignored, and that the DOD did not adequately 
understand its own materials needs and had no system in place to 
determine them. The report concluded that the DOD had not made critical 
and strategic materials a priority. Additionally, the Committee 
emphasized the criticality of the US Geological Survey in maintaining 
accurate mineral availability information. Interestingly, the report 
highlighted the growing concern and need for DOD to pay attention to 
the rare earth materials. The DOD, in its April 2009 Report to Congress 
on this topic, addressed many of the issues raised by the Academy 
report. To its credit, the DOD suspended sales of many materials 
pending a thorough analysis of future need, it has taken action to 
revise its modeling system, and has created a strategic materials 
management program. What is unclear at this point is any progress by 
DOD officials on a systematic approach to determining their overall 
needs for specific materials. This has become especially urgent 
recently in the clamor for rare earths, but is equally important for 
all materials needed in US weapons systems.
    To the last point, I have written, and spoken frequently, of the 
need to maintain perspective in our critical minerals planning and add 
that it is not only the rare earth materials about which we should be 
concerned, but also a broader range of important critical materials. It 
is not only materials availability to which we should pay attention and 
work to mitigate disruption. We must also pay more attention to the 
importance of critical material recycling and at least not dismiss, out 
of hand, a consideration of stockpiling, when appropriate. While 
clearly we must have access to the materials, we also need to have 
facilities and an ability to process those raw materials once we have 
them and be able to manufacture a product with the resulting processed 
materials. Assuring an ability to mitigate supply disruptions seems to 
be a necessary but obviously insufficient activity if we are then 
forced to depend on foreign sources of materials processing and 
manufacturing which could just as easily be disrupted. I should note 
here that other countries are in fact taking or considering 
comprehensive measures to strengthen their materials and manufacturing 
positions. I am most familiar and am impressed by the scope of the work 
of the European Commission, even to the extent of supporting the 
formulation of a National Minerals Policy. At home, recent 
Congressional and Executive Branch interest in and activities in this 
area are extremely welcome.
    Finally, numerous sources of data indicate a growing concern about 
the relative production of scientists, engineers, and technicians in 
the US as compared to the emerging economies of China, India, etc. 
Naturally, I have a particular concern about the materials sciences and 
related fields and manufacturing engineering and its related fields. In 
both, the US has given up much of its historical lead. The National 
Academies have highlighted this issue as well, in a 2005 report 
entitled The Globalization of Materials Research and Development and, 
of course, in the widely read and often quoted Rising Above the 
Gathering Storm. It is of interest that here is a growing recognition 
by many experts that as processing and manufacturing capabilities 
diminish, so too do fertile grounds for innovation and creativity.
    I am honored by the invitation to testify before the Committee and 
applaud its interest in taking action on this important issue.
                                 ______
                                 
    Mr. Lamborn. Thank you for your words, and now Mr. 
Richardson of the Magnetic Materials Association.

STATEMENT OF ED RICHARDSON, PRESIDENT OF THE MAGNETIC MATERIALS 
       ASSOCIATION, VICE PRESIDENT OF THOMAS AND SKINNER

    Mr. Richardson. Chairman Lamborn, Ranking Member Holt, 
Distinguish Members of the Subcommittee, thank you for the 
opportunity to testify today. I represent the Untied States 
Magnetic Materials Association, a trade association dedicated 
to the reestablishment of the entire supply chain of materials 
used in magnet systems.
    These systems play a vital role in the health of the United 
States defense industrial base and renewable energy. Our 
association represents all segments of the United States 
magnetic industry and rare earth supply chain, including 
miners, processors, metal and alloy producers, and finished 
magnet manufacturers.
    My comments today will relate to strategic-level rare earth 
issues and the challenges we face in accessing reliable 
supplies of the critical materials. It is common knowledge that 
rare earth materials play a critical role in the basic 
functionality of key green technologies, such as hybrid cars 
and wind turbines.
    They are essential to electronic consumer goods, such as 
flat screen televisions and disk drives. Rare earth products 
are necessary in vital military technology, such as munitions, 
missiles, radar surveillance, and avionics.
    Often overlooked is the global market for rare earth 
materials and the value chain itself. Today's domestic rare 
earth supply chain consists of one company capable of mining 
and separating rare earth elements into oxides; no active rare 
metal makers; two companies that can make limited quantities of 
rare alloy, and one rare earth permanent magnet maker.
    The United States is largely dependent on foreign sources 
for these critical materials. China firmly controls 97 percent 
of the world's rare earth oxide supply, nearly 100 percent of 
commercial sales of rare earth metal, and over 75 percent of 
neo magnet production.
    This dominance allows China to wield considerable 
influence. For instance, merely a rumor of an expert ban on 
rare earths to Japan sent a chill through the industry last 
summer.
    China has linked access to its markets and resources with 
moving operations to China, and providing them with key 
technologies. The members of the USMMA could feasibly provide a 
secure, non-Chinese source of the supply to the United States 
in as little as 12 months, but policy and funding decisions 
will need to be made to do so.
    With little guaranteed domestic demand for many rare earth 
metals and alloys, and the lack of a single licensed producer 
of neo magnets, the future of the domestic rare earth industry 
remains uncertain.
    To mitigate the impact of foreign supply disruptions, the 
USMMA is a strong proponent of a manufacturing first strategy. 
By establishing the ability to manufacture rare earth end 
products, the manufacturing first strategy creates downstream 
demand for rare earth elements.
    This provides incentives for commercial interests to fill 
in the domestic value chain, while leveraging raw material from 
ally nations and domestic producers. By supporting the 
manufacturing first strategy, the United States government 
could signal to industry that it will not stand by as China 
attempts to dominate the global rare earth magnet industry.
    Through our advocacy efforts, the USMMA has identified 
numerous misperceptions in the media, academia, and sometimes 
on Capitol Hill. To counter these misperceptions, the USMMA 
released a myth-fact paper earlier this month. I would like to 
share with you a few of the points.
    First, it has been said rare earths are not rare. This is 
not totally accurate. While rare earths are abundant in the 
earth's crust, the ability to locate concentrations that are 
economically viable for extraction and processing is rare.
    Second, some believe United States capabilities can come 
online rapidly to fill the supply gap. However, mining and 
extraction is only a small part of the rare earth value chain. 
Aside from the 10 year average permitting time for a rare earth 
mine, concentration and separation facilities are extremely 
complex and can cost upwards of $500 million per location.
    Third, recent reports from market analysts and previous 
statements from the Department of Defense suggest that supply 
will soon equal or exceed demand for rare earths. While demand 
will be met for some of the more prevalent elements, shortages 
for materials like the heavy rare earth dysprosium will 
continue.
    Fourth, some suggest that substituting, recycling, or 
reusing rare earths is a viable alternative. While the USMMA 
supports efforts in all these areas, they are not a panacea. 
Currently, no viable alternatives are available for many 
materials. R&D, though promising, faces a development cycle of 
up to a decade for commercialization.
    Finally, some suggest that stockpiling will further 
restrict an already tight supply. The bipartisan RESTART Act, 
H.R. 1388, and the Rare Earth Inventory Plan included in the 
Fiscal Year 2012 National Defense Authorization Act, would 
require planning for a limited vendor-managed inventory of rare 
earth materials to support our national security.
    This inventory would likely constitute a tiny fraction of 
global demand, but provide an insurance policy for the United 
States. Rare earths are an example of the broader strategic and 
critical materials issues that our Nation faces. Solutions are 
possible.
    The USMMA has suggested a six-point plan to close those 
gaps, which can be applied to other strategic and critical 
materials. It includes: (1) establish a baseline through a 
government supply and demand analysis; (2) team with allied 
nations to provide critical raw materials to supplement 
existing domestic mining and separation capability; (3) ensure 
fair trade practices; (4) invest in domestic manufacturing 
capability through programs such as the Defense Production Act; 
(5) establish an inventory of rare earth material using the 
Defense National Stockpile; and (6) invest in research, 
development, and education.
    Because this is a Natural Resources Committee, we would add 
a seventh item. Establish an interagency task force to address 
the often bureaucratic lengthy permitting process. We do not 
support circumventing appropriate rules and regulations, but we 
do encourage focusing resources and finding efficiencies to 
support the process.
    In closing, China will continue to leverage its global 
dominance in the strategic and critical material supply chain 
until the United States and its allies can commit to action 
that will counter-balance this influence.
    The United States needs to begin to take the steps 
immediately to eliminate this current and growing threat to our 
economic and national security.
    [The prepared statement of Mr. Richardson follows:]

                Statement of Ed Richardson, President, 
                  U.S. Magnetic Materials Association

    Chairman Lamborn, Ranking Member Holt, distinguished Members of the 
Subcommittee,
    Thank you for the opportunity to testify today. I represent the 
United States Magnetic Materials Association, a trade association 
dedicated to the reestablishment of the entire supply-chain of 
materials used in magnet systems. These systems play a vital role in 
the health of the U.S. defense industrial base and in the future 
potential of renewable energy in our nation. Our Association represents 
all segments of the U.S. magnet industry and rare earth supply-chain, 
including miners, processers, metal and alloy producers and finished 
magnet manufacturers. My comments today will relate to strategic-level 
rare earth issues and the challenges we face in accessing reliable 
supplies of the critical materials needed to support our industry.
    When you hear about the crumbling infrastructure in the United 
States, it's not just roads, bridges, and sewer pipes. It's advanced 
industrial technologies, as well as the supply chain of critical 
materials to support those technologies. Frankly, we've lost many of 
the key capabilities to produce these technologies domestically--losing 
our nation's technological edge in the global marketplace. This 
situation absolutely holds true when it comes to advanced 
applications--both energy and defense--that use rare earth oxides, 
alloys, metals, or magnets
The Rare Earth Value Chain
    It is common knowledge that rare earth materials play a critical 
role in the basic functionality of key green technologies such as 
hybrid cars, wind turbines, and compact fluorescent lights. They are 
essential to digitized and miniaturized electronic consumer goods such 
as flat screen televisions, mobile phones, and disc drives. Rare earth 
products are necessary in vital military technologies such as 
munitions, missiles, radar surveillance, and avionics. Discussion 
forums at think tanks, in academia, and in the media often raise these 
issues.
    Less frequently discussed is the global market for rare earth 
materials and the value chain itself. This value chain consists of 
three distinct elements:
          The miners of rare earth oxides, such as Molycorp in 
        California and Lynas in Australia, both of whom are in the 
        process of starting new operations;
          The processors that turn the oxides into usable 
        alloys, such as Great Western Technologies and Santoku America; 
        and
          The magnet manufacturers such as Electron Energy 
        Corporation that take those metals and alloys and produce 
        finished products.
    It is important to note that most assets that make up the rare 
earth value chain do not exist here in the United States. In fact, 
today's U.S. rare earth supply-chain consists of one company capable of 
mining and separating rare earth elements into oxides, no active rare 
earth metal makers, two companies that can make limited quantities of 
rare earth alloy, and one rare earth permanent magnet maker.
    Thomas & Skinner, for instance, had made sintered neodymium iron 
boron permanent magnets--used in several missile systems--but like 
other producers, got out of this business years ago and do not have a 
plant to make these magnets today. Companies such as Thomas & Skinner 
and Arnold Magnetic Technologies have publically stated their desire to 
reenter this market if and when market conditions support it.
Foreign Sources
    The United States is largely dependent on foreign sources for these 
critical materials. China firmly controls 97 percent of the world's 
rare earth oxide supply, nearly 100 percent of commercial sales of rare 
earth metal, and over 75 percent of neodymium iron boron magnet 
production.
    This monopolistic power enables them to wield considerable 
influence. For instance, merely a rumor of an export ban on rare earths 
to Japan sent a chill through the industry last summer. China has 
linked access to its markets and resources with moving operations to 
China and providing them with key technologies. On May 19, the Wall 
Street Journal reported that China is once again expanding its export-
quota systems and imposing higher taxes on rare earth materials. This 
further constricts an already tight supply. Moreover, this announcement 
contains a worrisome new requirement that export limits, which once 
only applied to concentrates and then expanded to oxides and metals, 
will now include ferroalloys. This demonstrates yet another move down 
the supply-chain from natural resources to value-added processes.
    As they continue to reduce export quotas and expand the materials 
covered, manufacturers must make the hard choice of either relocating 
to China to access raw materials or risk severe uncertainty regarding 
long-term availability of supply.
    Thankfully, there are companies in ally countries that can assist 
in this dilemma. For instance, Less Common Metals currently has a metal 
processing and alloying operation in the UK. Through its members, the 
USMMA has joined together existing global assets to provide non-Chinese 
rare earth elements, metals, alloy and magnets. The members of the 
USMMA could feasibly provide a secure, non-Chinese source of the supply 
to the United States in as little as 12 months, but policy and funding 
decisions will need to be made to do so. With little guaranteed 
domestic demand for many rare earth metals and alloys, and a lack of a 
single licensed producer of neodymium iron boron magnets, the future of 
the domestic rare earth industry remains uncertain.
Manufacturing First Approach
    To mitigate the impact of foreign supply disruptions, the USMMA is 
a strong proponent of a ``Manufacturing First'' strategy. By 
establishing the ability to manufacture rare earth end products, the 
``Manufacturing First'' strategy creates downstream demand for rare 
earth elements. This provides incentives for commercial interests to 
fill in the domestic value chain for rare earth elements while 
leveraging oxides available from ally nations and domestic producers 
coming online. By supporting the ``Manufacturing First'' strategy, the 
U.S. government could signal to industry that it will not stand by as 
China attempts to dominate the global rare earth magnet industry. In 
addition, this approach provides U.S. manufacturers an alternative to 
Chinese suppliers. This would be the first critical step in decreasing 
U.S. industry's dependence on foreign suppliers.
    Perhaps of greatest concern is the total lack of any current 
capability to make sintered neodymium iron boron magnets. As I noted, 
there are currently no U.S. producers of these magnets; this is due to 
the inability to obtain the necessary license from the current patent 
holder. This imperils U.S. national security in particular because this 
patent holder, as a matter of policy, will not produce defense-specific 
magnets. This leaves our defense supply-chain largely dependent on 
China for access to these key materials.
Moving Forward Through Increased Understanding
    In sum, much of our most critical and strategic technologies are 
dependent on foreign suppliers to make them work. And this is a 
situation that should make anyone--whether in the U.S. government, 
military, industry, or general public--very uncomfortable.
    Through our advocacy efforts, the USMMA has identified numerous 
misperceptions in the media, academia and sometimes on Capitol Hill. To 
counter these misperceptions, the USMMA released a Myth-Fact paper 
earlier this month. I'd like to share with you a few:
          First, it has been said ``rare earths aren't rare.'' 
        This is not totally accurate. While rare earths are abundant in 
        the earth's crust, the ability to locate concentrations that 
        are economically viable for extraction and processing is rare.
          Second, some believe U.S. capabilities can come 
        online rapidly to fill the supply-gap. However, mining and 
        extraction is only a small part of the rare earth value-chain. 
        Aside from the 10-year average permitting time for a rare earth 
        mine, concentration and separation facilities are extremely 
        complex and can cost upwards of $500 million per location.
          Third, recent reports from Goldman Sachs and previous 
        statements from the Department of Defense suggest that supply 
        will soon equal or exceed demand for rare earths. While this is 
        true for some of the more prevalent elements, a long-term 
        global shortage for materials like the heavy rare earth 
        dysprosium will not be mitigated in the foreseeable future.
          Fourth, some suggest that substituting, recycling or 
        reusing rare earths is a viable alternative. While the USMMA 
        supports efforts in all these areas, they are not a panacea. 
        Currently, no viable alternatives are available for many 
        materials and R&D, though promising, faces a development cycle 
        of up to a decade for commercialization. Furthermore, many 
        systems using rare earths, such as weapons, are legacy systems 
        that will be in inventory for decades. This also applies to 
        commercial technologies and refining capabilities that will 
        both require increasing quantities of rare earths.
          Finally, some suggest that stockpiling, as proposed 
        in H.R. 1388, the Coffman RESTART bill, will further restrict 
        an already tight supply. This is a misinterpretation of what 
        Mr. Coffman is proposing. The RESTART Act and the Rare Earth 
        Inventory Plan included in the FY12 National Defense 
        Authorization bill would require planning for a very limited 
        vendor-managed inventory of rare earth materials such as alloy 
        and magnets that would be available to support our national 
        security in the event of a crisis. This inventory would likely 
        constitute a tiny fraction of global demand and be 
        inconsequential in the market, but provide an ``insurance 
        policy'' for the United States.
    Rare earths are an example of the broader strategic and critical 
materials issues our nation faces. Solutions are possible. We hope this 
committee will address these challenges and help close the gap on other 
critical materials. The USMMA has suggested a six-point plan to close 
those gaps, which can be applied to other strategic and critical 
materials. It includes:
        1.  Establish a baseline by thorough supply-demand analysis 
        conducted by the U.S. Government
        2.  Team with ally nations to provide critical raw materials to 
        ensure a reliable source of supply supplements existing and 
        future domestic mining and separation capabilities
        3.  Ensure fair trade practices are enforced by the United 
        States Trade Representative
        4.  Invest in domestic capability through programs such as the 
        Defense Production Act to close critical supply-chain gaps
        5.  Establish domestic manufacturing capability through tools 
        such as the Defense National Stockpile that both incentivize 
        industry investment and address national security concerns; and
        6.  Invest in future innovation through research, development 
        and education
    Because this is the Natural Resources Committee, we would add a 
seventh item to that list: establish an interagency Task Force to 
address the often bureaucratic and unnecessarily lengthy permitting 
process. We do not support shortcuts that circumvent appropriate rules 
and regulations, but we do encourage expediting applications by 
focusing resources and finding efficiencies to support the process.
    In closing, China will continue to leverage its global dominance in 
the strategic and critical material supply chain until the United 
States and its allies commit to action that will counterbalance this 
influence. The US needs to begin to take steps immediately to eliminate 
this current and growing threat to our economic and national security.
                                 ______
                                 
    Mr. Lamborn. OK. Thank you.
    Mr. Holt. Mr. Chairman, at this point, I would like to 
raise a parliamentary inquiry.
    Mr. Lamborn. Can I say one thing first?
    Mr. Holt. Yes.
    Mr. Lamborn. Our last speaker will be Daniel McGroarty of 
the American Resources Policy Network. And I have been told by 
staff that he was invited at the last minute, and so we 
appreciate your ability to be here given the lateness of the 
request. And now, Mr. Ranking Member, did you have a comment?
    Mr. Holt. Yes. Mr. Chairman, is it not true that Committee 
Rule 4[a] applies, which requires that each witness to appear 
must submit to the Committee at least two working days before 
the appearance written testimony, and failure to do so could 
result in barring the testimony? I believe that applies.
    Mr. Lamborn. I do.
    Mr. Holt. I am not trying to make trouble here, and will 
agree to the witness continuing. I just want to make the point 
that having the testimony in advance is really important for 
the Committee and the Committee staff to be able to prepare for 
the hearing.
    And I don't know whether this was because the witness was 
invited too late, or the witness was slow in providing the 
testimony, I don't know. All I know is that without the 
prepared testimony that it makes it more difficult for us.
    Mr. Lamborn. Well, Mr. Holt, that is a point well taken, 
and we certainly don't want to blame the witness, because he 
was invited late. So, we will blame it on the Committee, the 
staff, myself, for not having been far enough in advance on 
that.
    Mr. Holt. Thank you, Mr. Chairman.
    Mr. Lamborn. But that is a point well taken.
    Mr. Holt. I withdraw my parliamentary objection and 
inquiry.
    Mr. Lamborn. OK. Thank you. Now to you, Mr. McGroarty.

           STATEMENT OF DANIEL McGROARTY, PRESIDENT, 
               AMERICAN RESOURCES POLICY NETWORK

    Mr. McGroarty. My thanks to the Members of the Subcommittee 
for the opportunity to testify today. My organization, the 
American Resources Policy Network, is a newly launched experts 
forum dedicated to informing public opinion and public policy 
on the importance of developing United States mineral 
resources.
    I am also a member of the Board of Directors of Colorado 
Rare Earths, a publicly held development company. The subject 
before this Subcommittee, the concept of critical minerals, and 
the potential for supply disruption, has become front page 
news, particularly after the de facto embargo imposed by China 
against Japan last fall, in the wake of a dispute over claims 
involving mineral rights beneath the East China Sea.
    Some consider this a case of China test firing a resource 
weapon. Others point to China's rapid growth as the reason that 
it is cutting back exports and using more rare earths at home.
    In the end, whether China withholds its rare earths or 
consumes them, the result is the same--a shortage of metals 
critical to our technological and economic development, as well 
as our national security.
    In April, I took part in a Rare Earths Markets conference 
in Sanya, China. My informal conversations with Chinese 
attendees followed a well-worn track. They hear that the United 
States is studying the rare earths, issuing reports, and 
writing bills.
    They hear that American companies are taking steps to 
develop rare earths mines. Their immediate question is do you 
have your permits? How many tons will the mines produce? How 
soon? The message is, unmistakably, if there is a resource 
race, China is in full sprint. They see us standing at the 
starting line.
    This issue goes well beyond the rare earths, and take what 
I call the single scariest page. We have already seen it in any 
government document: page 6 of the United States Geological 
Survey's annual report, 18 metals, a hundred percent dependent, 
and 13 more, 80 to 99 percent dependent.
    Compare that with foreign oil, where the United States 
imports only 57 percent. In fact, if oil were on the United 
States Geological Survey's list, it would appear in forty-
second place.
    Look further down that list and you will see mainstay 
metals like copper, in increasing demand, and at increasing 
risk. In addition to its commercial uses, copper is critical 
for defense applications. DoD reports show that copper ranks 
second behind aluminum in annual consumption for defense 
industrial applications.
    Compared to near 100 percent dependency for rare earths, 
the fact that the United States today imports 30 percent of the 
copper that we consume may seem manageable, even acceptable, 
but to put that number in perspective, look back to 1993--the 
year the last metric ton of copper was sold out of the National 
Defense Stockpile.
    In 1993, United States mines produced 1.8 million metric 
tons of copper, roughly 60 percent more than 2010. Our net 
import dependency was 7 percent, not 30 percent, as it is 
today.
    As for disruption, the key concern of this Subcommittee, an 
OSD study lists copper as a metal that has--and I quote--
already caused some kind of significant weapon system 
production delay for DoD.
    If the United States were to simply stop mining copper 
today, there are known copper prospects in a number of 
countries--Chile, Peru, the Philippines--that might step up 
supply, or demand might be met through mines in Russia, Angola, 
Afghanistan, Democratic Republic of the Congo, or China, 
including decisions taken in Beijing to exploit copper reserves 
in the Tibet Autonomous Region. There is also copper in 
Pakistan and Iran.
    With the exception of Pakistan, rated partly free, all of 
the latter group are rated not free in the current Freedom 
House index. So, while the world copper market does offer 
choices, we might find those choices unpalatable from a policy 
perspective.
    In the end, base metals and technology metals are not so 
easy to separate. Take rhenium, as you have already heard. 
Rhenium isn't mined, but rather recovered during the processing 
of copper and molybdenum, captured in the flue-dust thrown off 
by the roasters. Otherwise, rhenium goes up in smoke.
    Rhenium is used today in jet engines, like those in the 
Boeing 777, and in the national security sphere, you will find 
rhenium in rocket thrusters that reposition satellites, high 
performance test engines that power the F-15, F-16, F-18, and 
the new F-35 Joint Strike Fighter, as well as in stealth 
aircraft.
    Global rhenium production is minuscule; 52 tons worldwide. 
That is roughly the weight of about two dozen SUVs, but the 
need is critical. The United States imports 86 percent of its 
rhenium, much of it in recent years from Chile and Kazakhstan.
    Once again, we face critical questions about a critical 
material. Will the market supply sufficient rhenium for our 
commercial and national security needs? Are we comfortable with 
the geopolitical risk implicit in 86 percent foreign 
dependency?
    Should we add rhenium to the National Defense Stockpile, or 
instead advise American copper and moly producers to invest in 
technologies necessary to capture rhenium now lost in the 
roasting process?
    Similar questions can be asked about several dozen 
minerals, and it is my hope through this Subcommittee that they 
will be. We cannot maintain our modern economy without a steady 
supply of metals and minerals.
    Those that we do not possess here at home, we must source 
from other countries, but those that we possess, but choose not 
to produce, perpetuate needless foreign dependence, leverage 
that other nations may use to America's disadvantage. We must 
recognize resource security as a national strategic imperative. 
Thank you.
    [The prepared statement of Mr. McGroarty follows:]

               Statement of Daniel McGroarty, President, 
                   American Resources Policy Network

    My thanks to the members of the House Sub-Committee on Energy and 
Mineral Resources for the opportunity to testify today. I am Daniel 
McGroarty, President of the American Resources Policy Network 
(www.AmericanResources.org), a newly-launched experts organization 
dedicated to informing the public--and ongoing policy debates--on the 
importance of developing U.S. mineral and metals resources and reducing 
American dependency on foreign sources of supply. I am also a member of 
the Board of Directors of Colorado Rare Earths, a public-held company 
currently developing Rare Earths properties, with the aim of adding to 
the domestically produced supply of metals critical to our green-tech 
economy and our cutting-edge defense systems. The subject before this 
sub-committee--the concept of critical metals and minerals, and the 
potential for supply disruption--is an issue of enduring interest to 
me.
The Rare Earths
    In recent months, the Rare Earths have put this issue on the front 
page--particularly since last fall, with the apparent embargo imposed 
by China against Japan, in the wake of a dispute over claims involving 
mineral rights beneath the East China Sea.
    With China providing 97% of the world's Rare Earths supply, that 
episode underlined for the U.S. the dangers of resource dependency, and 
sparked an acceleration of interest in the U.S. policymakers.
    Whether this episode constituted a test-firing of China's 
``resource weapon,'' or whether the shut-off was due to more benign 
factors continues to be debated. Even if there were no geo-strategic 
motive behind China's supply interruption, there is the fact that 
Chinese demand for Rare Earths--and dozens of other metals and 
minerals--is surging, with only a minor pause due to the global 
economic downturn. With 1.3 billion people and an 8 to 9 percent annual 
economic growth rate, Chinese mining officials have begun to float the 
possibility that China may be a net importer of Rare Earths as early as 
2015.
    So, whether China withholds its Rare Earths supply for geo-
strategic purposes, or consumes an ever-increasing amount of the metals 
it used to export to the so-called ``Rest of the World,'' the result 
will be the same: A shortage of a group of metals critical to our 
technological and economic development, as well as our national 
security.
    In April, I presented as a panelist--the only American presenter--
at the 2011 Rare Earths Markets Seminar, in Sanya, China. I'd like to 
share with the sub-committee a recurring theme in my informal 
conversations with the Chinese attendees. Ideology aside, for a Chinese 
technocrat, pragmatism rules the day. They hear that the U.S. is 
studying the Rare Earths situation, issuing reports, preparing bills 
and even considering participating in a possible WTO action. They also 
hear that American companies--Molycorp being the most prominent, but 
others including Colorado Rare Earths--are pressing forward to develop 
rare earths mines. But their immediate question is: When will mining 
begin? Do you have your permits? How much will the mine produce? They 
simply do not take the U.S. seriously on this issue--not compared to 
Australian companies or Canadian companies--and that's an ominous sign. 
The message was unmistakable: If there's a resource race, China is in 
full sprint, and they see us standing at the starting line.
Profile of Dependency
    And the Rare Earths are simply the most prominent group of metals 
where the U.S. has a significant dependency. Consider what I call the 
single scariest page in any document to come off the presses of the 
U.S. Government Printing Office: Page 6 of the U.S. Geological Survey's 
(USGS) Mineral Commodity Summaries, 2011. There you'll find a chart 
titled: ``2010 U.S. Net Import Reliance for Selected Nonfuel Mineral 
Materials.''
    The Rare Earths, taken as a group, are just 1 of 18 metals and 
minerals for which the U.S. is 100% dependent on foreign sources of 
supply. Add another 13 metals and minerals for which our dependency is 
80 to 99 percent.
    Compare that with foreign oil, where the U.S. imports ``only'' 57%.
    In fact, if oil were on the USGS list, it would appear in 42nd 
place--with 41 metals and minerals above it.
    The names may be exotic--indium, thorium, vanadium, tantalum, 
germanium--but the industrial sectors affected constitute a cross-
section of the U.S. economy, from aircraft engines, auto batteries, 
compact fluorescent bulbs and flat-screen displays to the wind turbines 
we hope will power clean energy and weapons systems we count on to 
protect us.
Copper: A Mainstay Metal
    So-called technology metals may grab the spotlight, but mainstay 
metals like copper are also seeing rising demand. This may run counter 
to our own personal perceptions--as we think of PVC replacing copper 
pipe in household plumbing, or fiber optics displacing copper wire in 
telecomm--but that's misleading. Copper continues to be a critical 
material in electronics, building construction, durable goods and 
automobiles. In the last category, for instance, hybrid vehicles 
require double the amount of copper as gas-fueled automobiles.
    Copper is critical for defense applications as well.
    Department of Defense reports show that, by volume, copper ranks 
second--behind aluminum--in annual consumption for defense industrial 
applications.
    But what about the general level of U.S. dependency for foreign-
sourced copper?
    Compared to near 100 percent dependency for Rare Earths, the fact 
that the U.S. today imports 30 percent of the copper we use from 
foreign sources may seem manageable, even acceptable. But to put that 
number in some historical perspective, I ask the sub-committee to look 
back to 1993--the year the last metric ton of copper was sold out of 
the National Defense Stockpile.
    In 1993, U.S. Mines produced 1.8 million metric tons of copper--
roughly 60% more than in 2010. Our net import dependency was 7%--not 
30% as it is today. Half of what we did import came from Canada. Today 
60% of our copper imports come from Chile, Peru and Mexico.
    While total reserves are not a perfect proxy for exploration 
efforts, nonetheless--since 1993, world copper reserves have more than 
doubled. Over that same period, U.S. copper reserves have declined--
from 15% of the world total, to just over 5%.
    I do not present these statistics as an argument for a return to 
the stockpile concept as it existed at the close of the Cold War. My 
purpose is to suggest that the realities that prevailed less than 20 
years ago--when we effectively stopped thinking about the strategic 
aspects of mineral and metals supply--no longer pertain.
    As for disruption--the key concern of this sub-committee--OSD 
Defense Planning Scenarios show that copper is among the metals 
vulnerable to PSD--Peacetime Supply Disruption. Another OSD study lists 
copper as a metal that has--and I quote--``already caused some kind of 
significant weapon system production delay for DoD.'' According to 
MIT's Dr. Elisa Alonso--one of American Resources Policy Network's 
experts--``. . .the risk of copper disruption is significantly greater 
than for other major metals (e.g., iron and aluminum) and is at or near 
to a historical high.''
    Now, to be sure, we live in a globalized economy, and indeed--if 
the U.S. were to simply stop mining copper today--there are known 
copper prospects in a number of countries. We might turn to Chile, Peru 
and the Philippines for increased copper supply. Then again, world 
demand might be met via development of known copper reserves in Russia, 
Angola, Afghanistan, DRC Congo, or China--including decisions taken in 
Beijing to exploit copper reserves in the Tibet Autonomous Region. And 
there is copper in Pakistan and Iran. With the exception of Pakistan--
rated ``Partly Free''--all of the latter group are rated ``Not Free'' 
in the current Freedom House index. So while the world copper market 
does offer choices, we may well find many of those choices unpalatable 
from a policy perspective.
Rhenium: Where Base and Technology Metals Meet
    In the end, the so-called base metals and technology metals are not 
so easy to separate. Take my third example this morning: Rhenium, a 
relatively obscure element, Atomic Number 75 on the Periodic Table.
    In the commercial economy, rhenium is used to process lead-free 
gasoline, in gas-to-liquid power plants and in jet engines like those 
found on the Boeing 777. In the national security sphere, rhenium is 
used in the small rocket thrusters that reposition satellites in geo-
sync orbit, as a super-alloy in the high-performance jet engines that 
power the F-15, F-16, f-18 and the new F-35 Joint Strike Fighter--as 
well as in stealth aircraft. Rhenium is prized for its ability to 
retain its strength, shape and conductive properties at extremely high 
temperatures.
    While global copper production is 16,000,000 metric tons and global 
rare earths production is more than 100,000 metric tons--rhenium 
production is 52 tons, worldwide. That's roughly the weight of a dozen 
SUVs.
    The catch is that rhenium isn't mined; rather, it is recovered--
extracted as a by-product during the processing of copper and 
molybdenum, by special scrubbers that capture rhenium particles in the 
flue-dust thrown off by the roasters.
    Right now, the U.S. imports 86 percent of its annual rhenium 
requirement, much of it in recent yearsfrom Chile and Kazakhstan. More 
could be done to capture rhenium from domestic copper and moly mining, 
which otherwise literally goes ``up in smoke.''
    Once again, the U.S. has critical questions to ask about a critical 
material. Will the market supply sufficient rhenium for our commercial 
and national security needs? Are we comfortable with the geo-political 
risk implicit in an 86% dependency on foreign supply? Should we add 
rhenium to the National Defense Stockpile--or otherwise incentivize 
American copper and moly producers to invest in the technologies 
necessary to capture rhenium now lost in the roasting process?
    These same sorts of questions can be asked about several dozen 
metals and minerals, and it is my hope they will be.
Encouraging Domestic Supply
    Whether we are talking about copper, rare earths, rhenium or others 
among the dozens of metals and minerals where the U.S. presently relies 
on significant levels of foreign supply, it is time to consider whether 
U.S. policy is impairing our ability to develop domestic supply--and 
how we can remove obstacles that will allow the U.S. to achieve a 
greater degree of resource independence.
    Clearly, the U.S. Congress is turning its attention to critical 
metals. Remedies under discussion range from reviving the National 
Defense Stockpile to utilizing loan guarantees, and re-examining a 
mining permitting process that routinely runs 7 or 8 to 10 years to 
bring a new American mine into production. In the House, several bills 
on Rare Earths have been introduced, including Congressman Mike 
Coffman's RESTART Act, which, among its provisions, directs that 
federal agencies expedite the permitting process for Rare Earths 
``without waiving environmental laws.'' A comprehensive review of U.S. 
permitting processes is also central in the draft bill being circulated 
by Senator Lisa Murkowski. The argument for such a review is evident in 
independent reports like the Behre Dolbear Group's ``2011 Ranking of 
Countries for Mining Investment'' survey--known in mining circles as 
the ``Where Not to Invest'' Report--where the U.S. once again ranks 
worst--dead last--among 25 mining nations in the length of its 
permitting process.
    Critics of U.S. mining will assert that any re-assessment of our 
permitting practices will involve weakening or watering down our 
requirements--the assumption being that a process that lasts a decade 
or more is the price we pay for safe and environmentally sound mining 
projects. The choice will be cast as trading developed nation standards 
for a 3rd World ``anything goes'' approach. From a public policy 
perspective, that's not at all the case. Australia, for instance--one 
of the world's most prosperous nations, and no one's candidate for a 
country that is an environmental scofflaw--manages to permit new mining 
projects in one to two years.
    Reviewing our own permitting process with an eye towards 
rationalizing that process is not at all a matter of cutting corners--
quite the contrary: Mining projects developed here in the U.S. are, on 
balance, likely to be conducted with higher standards of safety, 
against stronger environmental strictures, with better benefits to the 
surrounding communities than projects in many parts of the world. And 
projects developed here will lessen if not eliminate the ``surety of 
supply'' issue and fear of materials disruption that concerns this sub-
committee.
    We cannot maintain our modern economy without a steady supply of 
metals and minerals. Those we do not possess here at home, we must 
source from other countries. But those we possess but choose not to 
produce perpetuate a needless foreign dependence--leverage that other 
nations may well use to America's disadvantage.
    I commend the Congressmen and -Women who called today's hearing, a 
step that suggests critical metals and their continued supply are 
beginning to receive the attention they deserve--given their importance 
to our economy, our technological progress and our national security. 
Thank you.
                                 ______
                                 
    Mr. Coffman [presiding]. Thank you, Mr. McGroarty, for your 
testimony, and I thank everyone for their statements. We will 
now begin questioning. Members are limited to five minutes for 
their questions, but we may have additional rounds. I now 
recognize myself for five minutes.
    I have been actively involved in legislation regarding 
today's hearing topic over the last few years. Just last month, 
I reintroduced the RESTART Act, the Rare Earths Supply Chain 
Technology and Resources Transformation Act, to avert a United 
States rare earths supply chain crisis, by restoring our 
Nation's production of rare earth metals.
    In essence, the legislation would focus on the United 
States supply chain--as we in our country often rely on 
unreliable foreign suppliers. During the House Armed Services 
Committee markup of the Defense Authorization Act earlier this 
month, I offered an amendment that requires the Defense 
Department within what we use to call the Defense National 
Stockpile, to develop a plan to establish an inventory of rare 
earth oxides, metals, alloys, and magnets, for defense 
purposes.
    These rare earths are absolutely critical to the 
functionality of numerous weapons systems. An inventory would 
help assure defense manufacturers that they will have access to 
a reliable domestic supply to meet national security 
requirements.
    I ask the witnesses to consider the advantages and 
challenges of creating such an inventory. My legislation also 
focuses on expediting the permit process here in the United 
States.
    I know that some of you have discussed this in your 
testimony, but could you elaborate on this problem? Go ahead 
and proceed. Why don't we start with Professor Eggert.
    Dr. Eggert. Thank you very much. With regard to stockpiles, 
in general, it is important I think to distinguish between 
economic stockpiles and defense stockpiles. As I understand it, 
your legislation focuses on defense stockpiles.
    My personal view is that I would look toward the analysts 
at the Defense Department and those who have studied this 
specific issue, and if they believe that stockpiling is an 
important part of a series of activities to secure supplies, 
then I would support that.
    Mr. Coffman. Good. Anyone else? Yes.
    Mr. Latiff. Yes, sir. The question of the stockpiling is an 
excellent one. I have not read the legislation, but I would 
actually support that. Having managed major weapons systems for 
many years, I can tell you, and as you probably already know, 
that any disruption in the supply of material for the 
manufacture of a weapons system can only lead to increased 
costs and an increased schedule.
    So, having a stockpile of these most critical ones is 
probably a very good idea. Number two, the type of stockpile is 
really at question, and whether or not it is a stockpile of 
materials, or perhaps a rolling inventory, might be a pertinent 
question to ask as well.
    Mr. Richardson. Mr. Coffman, I would just add that from our 
perspective the USMMA thinks a stockpile is a very important 
part of the solution. We think that there are ways to stockpile 
metals that can quickly then be used in the case of a defensive 
need.
    It is not necessarily advantageous to stockpile neodymium 
oxides, for instance. A better way might be to stockpile a 
generic neodymium boron alloy, and stockpiling alloys would 
give us capabilities beyond what we have today.
    Mr. Coffman. My time is limited. Mr. McGroarty, could you--
I have been concerned that China is not a reliable trading 
partner, and I wondered if you could--well, the fact that they 
have a near monopoly status on these rare earth metals puts us, 
the United States, in a vulnerable position. Could you comment 
on that?
    Mr. McGroarty. Thank you, Mr. Coffman. I can draw attention 
to the speculation about what China particularly did last fall 
when there was some controversy, but clearly in retrospect, and 
fairly quickly in retrospect, it seems like imports to Japan 
were cut off.
    This had to do with a controversy in the East China Sea, 
which interestingly involves mineral rights, at least in part, 
underneath the sea. Their intentions, I think, in China, and 
perhaps not a single line that the Chinese government follows 
on these issues, many people--and I was inclined in this 
direction, and thought that this could have been kind of a test 
fire of a resource weapon, and China cracked the whip if you 
will when they had this dispute with Japan, I wonder in 
retrospect if that was wise, because it seemed to raise concern 
and interest in the United States and other countries about the 
surety of supply, and may have sparked, and did spark, an 
accelerated interest in coming up with the remedy that did not 
involve dependence on the Chinese.
    That said, the Chinese are growing at 8 to 9 percent. These 
are technology metals, particularly in the rares. The Chinese, 
we know, want to build their own green manufacturing base.
    They are looking to not just mine metals and export them, 
but to bring manufacturing to where the metals, particularly in 
the north of China, that is economic, and that is not national 
security. They are growing at this rapid rate, and they are 
using more and more of these metals.
    My sense in some of the interaction at the conference when 
I was in China last month, there is actually a strong 
contingent in China that is actually encouraging non-Chinese 
development, because they may want to be a buyer of rare 
earths.
    They may want to see a non-Chinese supply that they can buy 
into, and certain Chinese companies have been State-supported 
companies and interested into buying into non-Chinese sources 
of rares. It is a whole different issue.
    So, it has got a national security edge, and it has got an 
economic edge, and either one argues for more pressure in terms 
of our access to supply.
    Mr. Coffman. Thank you for your testimony. The Chair now 
recognizes the Ranking Member for five minutes.
    Mr. Holt. I thank the Chair. I would like to pursue the 
broad questions of research and education here. It seems to me 
that it is not just supply, but it has to do with identifying 
deposits, concentrating, and refining, as much as anything.
    And, Professor Eggert, I would like to begin with you. What 
conceivable advances are there in--and let us talk about rare 
earths, or you can choose some other minerals if you want, in 
identifying deposits that haven't been identified?
    I mean, is there a lot of work yet to be done in 
understanding where these things are, and then in 
concentrating, refining, and developing other sources outside 
of these recalcitrant countries?
    Is there research to be done that we have a reasonable 
expectation of being productive?
    Dr. Eggert. If we look at rare earths in particular, my 
view is that we should, in balancing research on the demand 
side, and substitutional research, yes.
    Mr. Holt. Well, I wanted to get to that in a moment.
    Dr. Eggert. Well, versus the supply side, and that there is 
relatively more opportunity on the supply side than the demand 
side in the following sense. Rare earths are a relatively young 
resource in terms of our devoting any attention to discovering 
minable deposits.
    There are probably two deposits, the Mountain Pass deposit 
in California, and the Baiyun Obo Mine in China that probably 
account for 40 to 50 percent of all the rare earths ever mined 
in the world, and so we have not spent a lot of time looking 
for them.
    Mr. Holt. Right, and if I am not mistaken, they may be 40 
or 50 percent of the rare earths that are acquired and mined, 
but a rather small fraction of the rare earths that might or 
are expected to be out there?
    Dr. Eggert. That is right. There is significant room for 
progress in the geologic science aspect of this issue. Also, 
arguably the greatest supply constraint of rare earths relates 
to mineral processing and extraction of metallurgy, and the 
separating of the rare earths from one another. They like to be 
together. We don't do a good job at present of separating them.
    Mr. Holt. Well, again, that is what I was getting at. So, 
there is research work to be done. Who does that, and what is 
the role of the United States Geological Survey, for example, 
in supporting such research?
    How much is the private sector doing now, and who supports 
the doctoral students, or the research students that you might 
have at the Colorado School, for example?
    Dr. Eggert. At present, there is very little, if any, 
Federal support for graduate education in economic geology, 
mineral processing, and extractive metallurgy. There is some 
support from industry, and clearly industry is doing work, 
research, related to geology and extractive metallurgy.
    But it is in the realm of recompetitive research activities 
that I think we are missing out on the opportunity for.
    Mr. Holt. And what about the United States Geological 
Survey?
    Dr. Eggert. The United States Geological Survey is 
undertaking research related to geologic aspects of rare 
earths. It probably could be enhanced, and I would certainly 
support that.
    Mr. Holt. OK. Dr. Jaffe, for end-use research, what is the 
role of the Department of Energy? What is the Office of Science 
and Technology Policy doing to promote or categorize, or direct 
the end-use research? Do you have any thoughts on that?
    Dr. Jaffe. Well, historically, the Office of Science and 
the Department of Energy has supported energy and the basic 
energy sciences relating to materials and materials 
fabrication, and determining the properties of materials that 
would make them useful as possible substitutes for rare 
materials.
    This has not to my knowledge been reconstituted in the 
recent past in order to provide more emphasis on these emerging 
shortfalls. Typically, the characterization of materials is 
done in a university and national lab environment, and a 
relatively half-hazard way, focused on individual end-users, 
and not on analyzing a wide spectrum of materials looking for 
earth abundant substitutes. That kind of research would be 
needed.
    Mr. Holt. Thank you, Dr. Jaffe. And let me just say to the 
Chair that I hope that we can have continuing hearings 
involving representatives of our trade negotiators, and the 
State Department, as well as the Department of Energy, and the 
Department of Defense, and even agencies that are outside of 
our jurisdictions, so that we can have a good understanding of 
really what the problem is, and how we can address the problem 
on the supply side and the demand side. Thank you.
    Mr. Coffman. Thank you, Mr. Holt. Mr. Thompson for five 
minutes.
    Mr. Thompson. Thank you, Mr. Chairman. Thank you, 
gentlemen, for your testimony. Dr. Eggert, you state in your 
written testimony that these rare earth materials are 
specifically needed for some energy technology, such as solar 
cells, wind turbines, hybrid vehicles, CFLs with the light 
bulbs.
    Are there other--what is the impact on other manufacturing 
or potential manufacturing within the United States for the 
application of technologies utilizing the rare earth or the 
other minerals that were in question today?
    Dr. Eggert. The main concern is what I would call the 
specter of unavailability, and the idea that an essential 
element that is needed usually in only small quantities creates 
a no build situation for a manufacturer.
    In most cases the issue is not so much one of high prices 
resulting from shortages, but rather the essentialness of the 
element for a specific application, and the knock on effects in 
terms of production, profitability, and so on.
    Mr. Thompson. Very good. When you look at the application, 
and I know that we are looking at our dependence, foreign 
dependence on these, but I have to believe that maybe even some 
industries that we have lost, maybe if we had a ready supply of 
this the application of this new technology and these minerals, 
with the proper supply, we could repatriate some industries 
back to the country.
    It has been made clear by several panelists that none of 
these materials are anywhere near being depleted, but I agree 
that it is important that we do what we can to recycle these 
materials.
    Dr. Jaffe, you suggested consumer incentives to help 
recycle materials and devices such as cell phones and i-Pods. 
Do you have any specific ideas?
    Dr. Jaffe. Well, there are a variety of ideas that are 
being tried out in the European Union, including rental rather 
than purchase of materials. So, your cell phone comes to you 
from a company, and then when you are finished with it, they 
take it back.
    Another example that is being done here in the United 
States for the Solar Corporation, which is one of the leading 
manufacturers of thin film photovoltaics, which use both exotic 
and toxic compounds.
    They use tellurium, which is very rare, and cadmium, which 
is toxic, and they create a bond when they sell the solar 
panels, the bond assuring repatriation, or repossession of 
those solar panels when their lifetime is finished, so that 
they can not only control the toxic cadmium, but also reuse the 
very valuable tellurium.
    This is in a very early stage, and our report urged that 
the Committee on Critical Minerals of the National Science and 
Technology Committee within OSTP carry out a study of these 
different alternatives so that one could shape a more effective 
policy.
    Mr. Thompson. Professor Eggert, you suggested in your 
testimony that we should encourage undistorted international 
trade of these raw materials. Do you believe that such a policy 
could have a negative effect on our own domestic supplies?
    Dr. Jaffe. I am not an economist, I have to say, but my 
impression is that international trade without artificial 
constraints works to the advantage of all the members. We would 
be just as happy to sell our supplies of molybdenum, where we 
are a major player, as we should be, to buy supplies of 
chromium or cobalt, where we have very little.
    Mr. Thompson. Professor, can I have your thoughts?
    Dr. Eggert. Well, I, like most people in the academic, or 
in the economics community, support undistorted international 
trade. We should buy raw materials from the cheapest source.
    Having said that, when there are supply risks, our end game 
with regard to rare earths should be a more diversified global 
set of suppliers, and not simply undistorted international 
trade that leads us prone to supply risks.
    Mr. Thompson. Thank you. A final question for Mr. Latiff. 
You mentioned that it is unclear at this point that any 
progress is being made by the Department of Defense officials 
on a systematic approach to determining their overall needs for 
specific materials.
    Do you believe that any other specific departments or 
agencies should also be determining their future needs for 
these materials?
    Mr. Latiff. Yes, sir, I do. Clearly, the Department of 
Energy, and my focus primarily with the work that I have done 
has been on the Department of Defense, and the criticality of 
the defense systems, as I said, number one, their availability, 
and number two, their costs. But, yes, sir, I do.
    Mr. Thompson. OK. Thank you, Mr. Chairman.
    Mr. Coffman. Mr. Duncan of South Carolina for five minutes.
    Mr. Duncan. Thank you, Mr. Chairman. Virtually every time 
that I walk into this Committee room, it seems as though the 
Administration is tampering with three sources that belong to 
the American people.
    Our Nation's natural resources don't belong to the 
President or his cabinet. It is time that they are returned to 
where they belong, and that is to this Nation and our citizens.
    And over the past month, we have celebrated huge victories 
in this Committee dealing with energy, and putting the Gulf of 
Mexico back to work, but in doing some research and listening 
to some of the testimony, I understand that 22 percent of the 
rare earth minerals are used in the refining of hydrocarbons.
    So, unfortunately, it is clear to see that if we do not 
halt the rapid overreach of government agencies, we will not 
ever have the opportunity to use domestically produced oil here 
in the United States because we won't be able to refine it due 
to the rare earth minerals that are used in that process, and 
not being able to tap those American resources either.
    So, we will continue to lose this valuable market to other 
countries as we see the increase of stringent regulations. Many 
rare earth minerals that can be found in our Western States can 
be used in the refining of oil.
    And it could be counterproductive to produce and explore 
for oil here in this country, but have it shipped to another 
country to be refined, where they do have access to these rare 
earth minerals.
    I appreciate you gentlemen testifying today on this. So, 
what is next? Well, we have a mine here and not there 
philosophy, like we have a drill there and not there philosophy 
with this Administration--and where the President will applaud 
Brazil for their mining efforts. It is just amazing.
    So, not being from a Western State, and not fully 
understanding the impact of owning huge swaths of land out 
there that could be utilized for mining efforts for rare earth 
minerals, the question I have for you is what can we do to open 
up more Federal lands?
    What sort of barriers do we need to overcome that stand in 
the way of the industry's ability to access these lands for 
exploration and development? So, I lay that out there for any 
of you gentlemen. Maybe the Mining Association would be better, 
but what can we do to increase access to those Federal lands?
    Mr. Quinn. Thank you, Mr. Duncan. I think the first thing 
we need to do, before we start headlong putting more lands off-
limits, is to take a look at those lands that people want to 
put off-limits. We need to get a serious evaluation of their 
resource potential, what is there, and then delineate its 
potential.
    And then make some real decisions, real judgments, on 
whether we are going to put those lands off-limits to resource 
development. It is also the same question with perhaps lands 
that have been placed under certain restrictions, and not 
totally off-limits, but with certain restrictions.
    They should be re-examined in terms of what their resource 
potential is, and decide whether the restrictions that have 
been placed on them years ago still should apply based on our 
current needs for resources.
    So, those are two things with respect to access. I have 
also talked about permitting and regulatory burdens, and that 
is something that the government should bring a real sense of 
urgency to.
    And as I said, if it is taking us 10 years to get a mine 
fully authorized, we are still in the starting blocks halfway 
through the race. If I have a large billion dollar proposition 
to build a mine, which is what it would really take to scale, 
and in today's climate for many commodities, if I can get those 
authorizations in other countries like Chile and so forth in 18 
months to 24 months, it is rather clear where I am going to put 
my capital, because I will get a return eight years sooner than 
I will here in this country.
    Mr. Duncan. Mr. Chairman, in the essence of time, I will 
yield my time back so that the Western States can maybe ask 
questions. Thank you.
    Mr. Lamborn [presiding]. Well, we appreciate those 
questions and so thank you very much. Next we have on the list 
Mr. Flores of Texas.
    Mr. Flores. Thank you, Mr. Chairman. I have to agree with 
Mr. Duncan's comments to start with. It seems like it is deja 
vu all over again. We hear continuing testimony from witnesses 
in industry and in business, and consumers, about the things 
that we do as a country that reflect a lack of foresight when 
it comes to taxation, regulation, restriction to our access to 
public lands.
    They continue to damage our economy, and damage our way of 
living, and to bankrupt the future of our kids and grandkids, 
and I am quite frankly fatigued from hearing us continuing to 
go that wrong direction. Mr. McGroarty, did I pronounce that 
correctly?
    Mr. McGroarty. Yes.
    Mr. Flores. Your comments were particularly poignant, I 
thought, when you talked about what you heard in China, and I 
want you to repeat what you heard, that they understand that we 
talk a lot, but what was their question again, where were the 
permits? Can you repeat that?
    Mr. McGroarty. Mr. Flores, you are absolutely right, and it 
is done in a very courteous way, and with a lot of respect, but 
there is a certain impatience there when you are having the 
conversations.
    Idealogy aside, a Chinese diplomat is an extraordinary 
pragmatic individual at this point, in the year 2011. We would 
have a discussion, and I was one of less than a handful, that--
--
    Mr. Flores. Keep it short.
    Mr. McGroarty. There were nine Chinese presenters, and they 
would immediately cut in and say how many million tons, how 
soon, where are your permits. They were telling us basically 
that we are doing this, and you are talking about it.
    Mr. Flores. OK. That reminds me of that commercial that 
some of us have seen on t.v., where you have the Chinese 
laughing about how we drove our country toward bankruptcy, and 
they owned us because of the fact that they financed us.
    Mr. Quinn, in your testimony, you talked about the fact 
that it takes 10 years to get a permit domestically, vis-a-vis 
18 months to 2 years in some other countries, such as 
Australia.
    Can you tell me, and just give us, that if you were to 
write legislation today and wave the regulatory wand, or the 
legislative wand, what are the four or five things that you 
would do that would fix that permitting process overnight?
    Mr. Quinn. Well, the first thing is to eliminate some 
duplication that we have. We have Federal to Federal 
duplication, in terms of looking at the same environmental 
issues and similar issues.
    We have State and Federal duplication with State agencies, 
delegated authority to implement certain Federal laws with the 
Federal Government, and that overseeing them is actually quite 
a bit of what they are doing, and second-guessing it.
    So, I would take a look at minimizing duplication. I would 
look at putting some accountability into the process, where 
timelines or deadlines are set, and also in terms of evaluating 
an agency's performance based on accountability.
    Agencies are not, to my knowledge, rated on their ability 
or their effectiveness in issuing authorizations.
    Mr. Flores. And I assume that what we are doing wrong that 
Australia is doing correctly--I mean, is the Australia model 
the correct analog for us to follow?
    Mr. McGroarty. Well, I think perhaps in some cases. I think 
that one of the things that strikes me is that people believe 
that when our companies are doing business overseas that 
somehow we are performing at a lower level, in terms of 
environmental stewardship, which is not the case.
    Our companies export their environmental values and 
stewardship to the countries that are hosting them. So, it is 
not a matter that the regulations are less stringent or 
anything like that, but they are more efficient, and they have 
a certain sense of urgency about the importance of putting 
projects and employing people, and I think that is a big 
difference there.
    Mr. Quinn. It sounds like they recognize not only the 
urgency, but the critical economic impact of a particular 
industry on their own economy, and I would sure applaud our 
regulatory bodies feeling the way in this country, both at the 
State and Federal level.
    Dr. Eggert, and this is a little bit of an off-the-wall 
question, and we have only got a few seconds left, but when you 
look at our investment, and our educational infrastructure when 
it comes to rare earth metals.
    And I may be going out of your area of expertise, but how 
do you feel about our investment in higher education in terms 
of mining processing, recycling, disposal of these rare earth 
metals? Are we just not there, or do we need to invest in 
higher rates?
    Dr. Eggert. I feel strongly that we need to reinvigorate 
and invest in these areas. We have lost as a Nation most of our 
institutional capacity to educate geologists, mining engineers, 
mineral processors, extractive metallurgists, and so on.
    Mr. Quinn. Thank you very much, and I yield back eight 
seconds.
    Mr. Lamborn. Every eight seconds counts. Next, Dr. 
Benishek, from Michigan.
    Mr. Benishek. Thank you, Mr. Chairman, for calling this 
hearing. As a physician, I know firsthand how rare earth 
minerals are critical to the development of life saving 
technologies, and I am concerned about our country's ability to 
mine these minerals.
    In addition, Michigan's First District is the home of many 
minerals. We have iron mining and the potential for copper 
mining, and nickel, gold. There is a lot of mining potential in 
my mineral-rich district.
    And my question is actually for Mr. Quinn. A topic often in 
Congress is that United States industries, including the mining 
industry, are faced with some of the world's highest taxation 
rates makes it extremely difficult to compete with foreign 
countries on a global scale.
    How does the United States tax burden compare with other 
major mineral producing countries?
    Mr. Quinn. Thank you, doctor. It is actually the highest 
effective rate, around 41 percent when you combine Federal and 
State taxes, in terms of the metals industry. Other countries 
that were close to that level have already taken measures to 
reduce their rates, and also make other adjustments in their 
tax system to attract new capital for mining.
    Mr. Benishek. What would be the first step that you would 
do if you were in my place to get an increase in production 
here in this country?
    Mr. Quinn. Well, I think the highest hurdle that we have 
currently is delays in permitting, and people like to say that 
if you have plenty of time, then you can mine here in the 
United States.
    Unfortunately, we don't have that time, and if it takes you 
10 years or more to actually get your capital on the ground, 
and then to get a return on it, then that capital is going to 
go somewhere else.
    So, permitting would probably be the number one, and number 
two, I would look at the tax burdens, and regulatory burdens, 
on the industry. I am not saying that we would be supporting 
reductions in the existing regulatory framework, but I think in 
terms of going forward, there should be some clear assessment 
of cost benefit, in terms of new regulations, new standards.
    I mean, let's be frank. In China, they are worried about 
where they are going to put their billion people in the cities, 
and here in the United States, we are still trying to track 
down the latest part per billion on some substance, and there 
is a stark difference how they approach their particular 
economic needs. I think that there is a balance here that we 
can find that is better.
    Mr. Benishek. Well, I agree with you. We need to have the 
potential for jobs here in this country, and I want a clean 
environment as well, but there is certainly a balance that 
doesn't exclude mining from our industrial base.
    I look forward to working on this Committee to help 
streamline these rules. Maybe we can get something going here 
this year. Thank you very much, sir, for your testimony, and I 
yield back the remainder of my time.
    Mr. Lamborn. Thank you, and next we have Representative 
Gosar from Arizona.
    Dr. Gosar. Thank you. Mr. McGroarty, in your testimony--and 
we are going to switch up a little bit here--you state that 
United States mines produced 1.8 metric tons of copper in '93, 
roughly 60 percent more than they produced last year.
    In the same time period, you stated that world copper 
reserves have more than doubled, but the United States reserves 
have declined from 15 percent to 5 percent. What accounts for 
the drastic decrease over less than 20 years?
    Has the United States simply tapped a larger proportion of 
its ore deposits than the rest of the world, or are we just 
failing to get these projects off the ground?
    Mr. McGroarty. Congressman Gosar, that is a very good 
question. The answer has to do with exploration budgets, and 
how much time on tasks, and how many dollars does the United 
States mining industry put into exploring and expanding United 
States copper reserves.
    There is a general decrease, and most of the exploration 
money is going into gold and silver, or gold and diamonds 
rather, and less so into copper. There is an issue about 
exhausting the current resource and not replacing it.
    You had testimony several years ago about the fact that we 
would need many--upwards of a dozen--new mines brought on to 
replace mines that are basically reaching end of life of mine.
    I think it ties back to some of the points that Mr. Quinn 
has made. If the permitting process in the United States is 
extraordinarily long, capital requires very, very high, and 
companies just looked elsewhere in the world to develop the 
resource.
    Dr. Gosar. Well, I am glad that you brought that up, and I 
asked because I recently introduced Legislation H.R. 1904, a 
bill that would open up the third largest undeveloped copper 
resource in the world.
    How critical to our national security is it to ensure 
deposits like the one located in Central Arizona can be opened 
up for production? And considering the prevalence of copper in 
alternative technologies, like hybrid cars, solar panels, wind 
turbines, isn't the meteoritic rise on our dependence for 
foreign minerals such as copper over the past 20 years an 
alarming national security risk?
    If we are truly trying to reduce our dependence on foreign 
fuels isn't it critical that we use domestic resources to 
construct alternative energy infrastructure?
    Mr. McGroarty. I would agree. The signals are there. I 
mentioned the OSD study that indicates without any specificity 
that there has already been some sort of program disruption, 
and copper is one of the metals that was mentioned in that 
category.
    That is not a new study. It was from several years ago. So, 
the signal is being sent, and your indication about the 
increasing utility copper is true as well. Cooper has been used 
in automobiles for a long, long time, but the hybrids use 
something like twice the amount of copper.
    So, cars that we want to encourage people to drive are 
going to create a larger requirement rather than a smaller 
requirement.
    Dr. Gosar. I think you are right. I think the average 
turbine uses over four tons of copper just in matrices of 
alternative energy if I am not mistaken. So, thank you. You 
know, permitting in my district, is a concern, because I have 
the actual numbers.
    I mean, when we start looking at this, the average number 
for a NEPA to be processed in my District One in Arizona is 5.9 
years and growing, and it seems that we have increased numbers 
of lawsuits that have been curtailed.
    I would like to start with you first and ask you how has 
the lawsuits using the Equal Access to Justice funding affected 
your ability to actually mine, and have access to these ores?
    Mr. McGroarty. My understanding of the permitting process 
is limited to my involvement with the Rare Earths Company in 
Colorado, and so I yield to others on the panel, who maybe have 
a better idea. But generally speaking time is money.
    Dr. Gosar. Mr. Quinn, can you answer that question for me, 
please?
    Mr. Quinn. In terms of how it has impacted, what I can say 
is this. You basically have a law there that pays people, and 
has the taxpayer reimburse people to stop the projects. I don't 
have any metrics on how much money has been spent in that 
regard.
    As you are inferring, Congressman, that ample opportunity 
for opponents to mining projects to slice and dice them through 
the litigation process.
    Dr. Gosar. Isn't it true that it is basically an ecological 
terrorism type aspect when we know that one envelope with one 
postage stamp on the last day of a recourse could be starting 
the whole process all over again?
    Mr. Quinn. Well, I could certainly say this. That a low 
level investment can stop a huge investment. A postage stamp 
and a signature on a protest can stop a billion dollar project.
    Dr. Gosar. Thank you. I have more questions, but I will 
take them on the next round.
    Mr. Lamborn. OK. Thank you. Next we have Representative 
Johnson from Ohio.
    Mr. Johnson. Well, thank you, Mr. Chairman, for holding 
this important hearing on how critical and strategic minerals 
are so essential to our economy, and I thank the panel for 
joining us today.
    Those minerals are essential not only to our economy and 
our livelihood, but to national security as we have heard. 
These rare earth minerals are important components to a large 
amount of consumer products, and more importantly, to national 
defense.
    That is why I think that it is so important that we remove 
any barriers to mining these important minerals, and I have a 
few questions. The United States of America is home to some of 
the world's greatest mineral deposits.
    Yet, as you, Mr. Quinn, and the mining industry, are all 
too aware, accessing these minerals is no easy feat. What can 
we look to do to ensure that we have the ability to 
domestically mine these critical minerals? What are our 
barriers, and how do you think we can break them down?
    Mr. Quinn. Well, as I mentioned before, there are a number 
of programs and laws that actually entice placing more of these 
areas off-limits, or either totally off-limits, or to severe 
restrictions.
    I think we can reexamine how those laws are applied going 
forward. We have a better understanding before those decisions 
are made about what the resource potential of those lands are, 
and those that are already off-limits, maybe those from time to 
time merit some reconsideration based on what the growing needs 
are of this country and changing values.
    And also we have the same issue in terms of some of the 
private lands. There are laws out there that authorize parties 
to try to petition to have private lands put off-limits to 
future development.
    Mr. Johnson. OK. Thank you. As you mentioned in your 
testimony also, Mr. Quinn, less than half of the mineral needs 
of the United States manufacturing are met from domestically 
mined resources.
    Obviously, when we are unable to provide the components 
necessary for a healthy and viable manufacturing industry, our 
ability to be a leader in manufacturing, and manufacturing 
innovation, is at risk.
    What do you suggest we do to ensure that the United States 
remains not only a key producer of critical minerals, but also 
remain at the forefront of innovation and new technology in the 
manufacturing arena?
    Mr. Quinn. Well, I think there are a number of public 
policy hurdles in our way in terms of having or maintaining a 
healthy and a viable minerals industry here, and as you are 
inferring, Mr. Johnson, that if we cut off the front end of the 
supply chain, the minerals part, over time the rest of that 
value added chain will go off-shore as well.
    We just heard from various Members today about the rare 
earths story. I think that is instructive about what happens 
when the beginning of the supply chain gets cut off, and the 
innovation and the technology goes and follows suit on that, 
and downstream also goes offshore to where it can source 
reliably.
    And as Dr. Eggert has said, sometimes prices are an issue, 
but actually it is having a dependable supply, because if you 
are going to set up a manufacturing system, you don't want to 
have that up and down based on a commodity risk, in terms of 
supply.
    Mr. Johnson. OK. The answers to your questions kind of 
highlight for me what we have heard not only in this hearing, 
but in other hearings as well. Our regulatory process, and the 
lack of aggressive movement forward with the robust permitting 
process, is really hampering our ability across the board.
    Not only in this arena, but in others. It is almost as if 
those regulatory agencies have become the Department of No, you 
can't. I would like to see, and I urge that not only the 
Administration, but the Congress, force these regulatory 
agencies that if you are going to deny a permit for health or 
safety reasons, that is OK.
    But don't just say no. If you say no, you have to come to 
the table with ideas on how to move that process forward, and 
how to solve the problem, and not simply to be an impediment. 
Do you think that would help?
    Mr. Quinn. Absolutely, Mr. Johnson. Sometimes they just say 
no without the adequate reasons, and even worse, sometimes they 
say nothing for years, and they keep sending you back for more 
information, and you keep asking did I bring the right rock 
back, and they keep saying we will tell you when we see it.
    And you presided as I recall over several hearings several 
weeks ago where that is exactly the issue, and where we have 
people worn out, and an industry worn out, where at the end of 
the day, we have more permits actually withdrawn than actually 
issued.
    Mr. Johnson. I thank you for that, and Mr. Chairman, I 
yield back.
    Mr. Lamborn. Thank you. And I will ask my questions now, 
except that I want to instead defer or yield three minutes to 
the gentleman from Arizona.
    Dr. Gosar. Mr. Eggert, you know, my colleague, Mr. Holt, 
talked about recycling these metals and rare earths. I am a big 
recycler, but there is no way that we can keep up with demand 
by recycling.
    We ought to be looking at both sides of this story. One is 
to recycle, but two is to explore, and use environmental 
stewardship in mining. What is alarming to me is what seems to 
be going on--and I am concerned about it--is that foreign 
governments are cornering the market and artificially inflating 
the market.
    A good example would be what we are undergoing now with 
OPEC, and then China with the rare earths. In regards to these 
special elements that we are involved with, I have a company 
that has revolutionized the electric motor, and they are very 
dependent upon these magnets.
    How do you foresee or how do you see our current 
environmental standards and this moving bar helping extort the 
American taxpayer and the American consumer in regards to 
production of these revolutionary type of discoveries?
    Dr. Eggert. Could you repeat the last portion of the 
question? I didn't hear the key part of the question.
    Dr. Gosar. How is the American consumer and the industry 
being extorted by artificially raising prices by foreign 
markets?
    Dr. Eggert. Well, when one or a small number of powerful 
producers can act opportunistically to raise prices, or to 
restrict availability, either you pay the higher price, and it 
increases your costs, and reduces your profitability, or in the 
case of physical unavailability, one faces the choice of not 
building, or in cases where there is an effort to redirect 
investment of manufacturing facilities to other locations, 
manufacturing can be redirected and relocated.
    Dr. Gosar. Mr. McGroarty, can you address that a little bit 
for me, please?
    Mr. McGroarty. Congressman, you raise an interesting 
question. My thought goes to how one would cost out lost 
innovation as well. Unavailability of resources, the general 
sense that one would not be pursuing and exploring new 
applications, because you don't feel that you can outsource the 
components, the precursor metals. It has to have some sort of 
drag effect. I don't know how one would measure it. I am not an 
economist.
    Dr. Gosar. But you could really agree with me that the 
American taxpayers are going to be one fronting this, because 
it is artificially inflated?
    Mr. McGroarty. Yes, I think so. You have phrased it in 
terms of the consumers, and I am thinking also what would the 
consumer not have five years from now, and how would they even 
know that they don't have it.
    Dr. Gosar. So, it is our own Federal Government that is 
standing in the way of that marketplace?
    Mr. McGroarty. I think the Federal Government can make 
changes and talk about permitting.
    Dr. Gosar. Thank you.
    Mr. Lamborn. All right. That concludes the question portion 
of this hearing. We are going to wrap up now. I would like to 
submit for the record two articles from the New York Times 
regarding the issue of Chinese mineral embargoes. Without 
objection.
    Mr. Lamborn. And I want to thank the witnesses for being 
here today and taking up their valuable time to come and help 
us understand this important issue. While today's hearing was 
focused on what we know from the National Research Council 
Reports and our expert witnesses, there is still much we don't 
know.
    We don't know what areas are open for mineral development 
or minerals requirements for domestic manufacturing 
infrastructure and national defense. We don't know fully the 
status of the workforce with mining and materials expertise, or 
a decent assessment of permitting timelines for projects on 
Federal lands, with its associated litigation and hurdles to 
domestic development, but we need these answers.
    Later this week, I will be introducing legislation to 
direct the Department of the Interior to prepare a series of 
reports to get the answers that we need to address the 
challenges laid out in this hearing today.
    The goal of this legislation is to increase both our 
understanding of our national mineral needs and the barriers to 
meeting our needs with domestic production. Our national 
mineral policy is failing our Nation.
    It is failing to keep us supplied with the resources that 
we need to defend our Nation, build our infrastructure, create 
jobs, secure our manufacturing base, and keep our economy 
healthy.
    Today is the beginning of an effort to right the course and 
to restore America's leadership in minerals and materials 
technology. Members of the Committee may have additional 
questions for each of you witnesses for the record, and I would 
ask that you would respond to these in writing.
    And if there are no further questions, without objection, 
we stand adjourned.
    [Whereupon, at 10:48 a.m., the Subcommittee was adjourned.]

    [Additional material submitted for the record follows:]

     [The New York Times article entitled ``Supplies Squeezed, 
Rare Earth Prices Surge'' submitted for the record follows:]
Supplies Squeezed, Rare Earth Prices Surge
By KEITH BRADSHER
Published: May 2, 2011
HONG KONG--Rare earth prices are reaching rarefied heights.
    Malaysia has delayed granting an operating permit for the refinery 
in Kuantan as it reviews disposal plans for radioactive waste.
    World prices have doubled in the last four months for rare earths--
metallic elements needed for many of the most sophisticated civilian 
and military technologies, whether smartphones or smart bombs.
    And this year's increases come atop price gains of as much as 
fourfold during 2010.
    The reason is basic economics: demand continues to outstrip efforts 
to expand supplies and break China's chokehold on the market.
    Neodymium, a rare earth necessary for a range of products including 
headphones and hybrid electric cars, now fetches more than $283 a 
kilogram ($129 a pound) on the spot market. A year ago it sold for 
about $42 a kilogram ($19 a pound).
    Samarium, crucial to the manufacture of missiles, has climbed to 
more than $146 a kilogram, up from $18.50 a year earlier.
    While the price inflation is a concern to manufacturers, consumers 
in many cases will barely notice the soaring cost of rare earths. Even 
though the materials are crucial to the performance of everyday 
equipment like automotive catalytic converters and laptop computer 
display screens, rare earths typically are used only in trace 
quantities.
    One exception is the Toyota Prius hybrid car, whose manufacture 
uses a kilogram of neodymium.
    Toyota has been raising prices for the Prius, but has cited demand 
for the car and economic conditions. While acknowledging that rising 
prices for raw materials in general have affected the company's overall 
financial results, Toyota has declined to provide a breakdown of the 
role of rare earths. (Production problems stemming from the Japanese 
earthquake and tsunami have also crimped supplies of Prius cars, which 
are made only in Japan.)
    The high prices for rare earths reflect turmoil in the global 
industry that mines and refines them. China, which controls more than 
95 percent of the market, has further restricted exports so as to 
conserve supplies for its own high-tech and green energy industries. 
That is despite the World Trade Organization's ban on most export 
restrictions.
    Meanwhile, an ambitious effort to open the world's largest rare 
earth refinery in Malaysia, which had seemed certain to begin operating 
by this autumn, is tied up over regulatory reviews of the disposal 
plans for thousands of tons of low-level radioactive waste the plant 
would produce annually. Public opposition to the refinery is evident in 
the weekly protest demonstrations now being held.
    At the same time, Japanese companies are finding it harder than 
originally hoped to recycle rare earths from electronics and to begin 
rare earth mining and refining in Vietnam.
    Although rare earths are crucial to the supply chains of some of 
the world's biggest manufacturers, the industry that mines and refines 
them has long been characterized by small, entrepreneurial companies. 
Lately, though, soaring prices have contributed to industry 
consolidation.
    Last month, for example, Solvay, a big Belgian chemical-industrial 
corporation announced that it would pay $4.8 billion to acquire Rhodia 
of France, a technological leader in making complex chemicals based on 
rare earths.
    That same day, April 4, Molycorp, the only American company 
currently producing rare earths, said it had paid $89 million for a 
more than 90 percent stake in Silmet of Estonia, a much smaller company 
that is Rhodia's only European rival in rare earth processing.
    In Malaysia, where the giant rare earth refinery is under 
construction near the eastern port of Kuantan, regulators are delaying 
approval for an operating permit amid public concern about naturally 
occurring low-level radioactive contamination of the rare earth ore, 
which will be mined in Australia.
    Raja Dato Abdul Aziz bin Raja Adnan, the director general of the 
Malaysian Atomic Energy Licensing Board, said the board had asked the 
Lynas Corporation of Australia, which is building the refinery, to 
provide additional documentation before accepting its application for 
an initial operating permit. It will take up to six months to review 
the application, Raja Adnan said, and Lynas will not be allowed to 
bring any raw material to the plant until a permit is issued.
    But Nicholas Curtis, Lynas's executive chairman, said that he 
believed the company could obtain the necessary approvals before 
September and that his company was sticking to its plan to begin 
feeding Australian ore into the Malaysian refinery's kilns by the end 
of that month.
    The Malaysian government also announced last week that it would 
appoint a panel of international experts to review the safety of 
Lynas's plans. The company said it welcomed the move.
    But Fuziah Salleh, an opposition legislator who represents downtown 
Kuantan and has been leading weekly protests, is mistrustful.
    ``The people's concerns are that the independent panel will be 
formed by the government to prove that they are right,'' she wrote in 
an e-mail message.
    Toyota Tsusho, a materials purchasing unit of the Toyota Group, has 
separately encountered complex local regulations as it seeks to open 
rare earth mining and processing operations in Vietnam. The project was 
announced last October during a Chinese embargo on rare earth shipments 
to Japan. Takeshi Mutsuura, a spokesman, said that Toyota Tsusho now 
hoped to reach a contract in Vietnam this summer and start production 
in early 2013.
    As recently as last autumn, there were also ambitious hopes in 
Japan to recycle rare earths from electronics waste. Dowa Holdings 
tried then to come up with ways to separate rare earths at a recycling 
factory in northwest Japan but found the task significantly more 
difficult than recycling other, more widely available precious metals. 
The recycling factory is now recovering 19 other metals instead, 
including cobalt and lithium.
    All of this has left the world even more dependent on China. The 
Chinese government last autumn showed a willingness to use that near 
monopoly as a trade weapon, halting shipments to Japan from late 
September to mid-November, during a territorial dispute over islands in 
the East China Sea.
    Although Beijing has officially denied that it imposed a Japanese 
embargo last fall, China's own trade data released since then show that 
its shipments to Japan suddenly fell to zero in October for rare earth 
metals, and to nearly zero for rare earth oxides--which are more 
processed chemical compounds. At the beginning of this year China 
reduced its rare earth export quotas to all countries, while raising 
export taxes on some rare earths to 25 percent, from 15 percent 
previously.
    Since April 1, China has also raised taxes on rare earth mining 
companies to the equivalent of $8 for each kilogram of refined product; 
rare earths were previously taxed like many other nonferrous minerals 
in China, at less than 50 cents a kilogram.
    One of the biggest questions hanging over the rare earths industry 
is whether the United States, the European Union and Japan will file a 
World Trade Organization case against China, challenging its export 
quotas and duties. James Bacchus, a former chairman of the W.T.O. 
appeals tribunal in Geneva, said that Chinese trade data shows a 
virtually complete halt in shipments to Japan last autumn could be 
cited to buttress any W.T.O. filing by rare earth-importing countries.
    China denies violating the W.T.O. ban on export restrictions, 
saying that it qualified for an exception to the ban for environmental 
protection and conservation of natural resources. But China has done 
little to restrict its own industries' consumption of rare earths, 
usually a prerequisite for invoking an environmental defense.
    A version of this article appeared in print on May 3, 2011, on page 
B1 of the New York edition with the headline: Supplies Squeezed, Rare 
Earths Surge.
                                 ______
                                 
    [The Wall Street Journal article entitled ``China Tightens 
Rare-Earth Rules'' submitted for the record follows:]
China Tightens Rare-Earth Rules
THE WALL STREET JOURNAL, ASIA BUSINESS
MAY 19, 2011, 8:21 P.M. ET
    BEIJING China moved to tighten its control over rare-earth metals 
Thursday by expanding its export-quota system and imposing higher taxes 
on the minerals, which are used in such high-tech applications as 
laser-guided weapons and hybrid-car batteries.
    It also said it will get tough with companies that resell export 
quotas and won't approve any new projects or the expansion of existing 
ones in rare-earth separation over the next five years.
    The measures were announced separately by the State Council, or 
cabinet, and the Commerce Ministry in an apparently coordinated 
offensive in a sector that has become highly politicized.
    China, which supplies around 95% of the world's rare-earth metals, 
has been tightening its control over the sector by raising the 
threshold for entry, imposing stricter environmental standards and 
slashing export quotas. First-half 2011 quotas total 14,508 metric 
tons, down about 35% from the same period last year, according to the 
Ministry of Commerce.
    These measures have boosted rare-earth prices and made export 
quotas much more valuable.
Opinion
    Rare-Earths Showdown Looms
    In the latest move, Beijing said it is raising the tax on light 
rare-earth ores to 60 yuan ($9.22) per ton, from a range of 40 fen to 
30 yuan per ton, as of April 1, while lifting the tax on heavy ores to 
30 yuan per ton, also from a range of 40 fen to 30 yuan per ton.
    ``[China will] greatly increase rare earth taxes and refine its 
pricing mechanism to reduce the excessive profits in the rare earth 
mining industry,'' the State Council said.
    China will also raise the threshold for companies applying for 
export quotas, though it didn't say whether this will reduce the number 
of qualified exporters. China granted quotas to 22 Chinese companies 
and 10 foreign companies this year.
    The Commerce Ministry said it will start imposing export quotas on 
ferroalloys containing more than 10% rare-earth minerals by weight, 
effective Friday.
    This year, China began imposing 25% tariffs on exports of alloys 
with more than 10% rare earth content.
    Prior to the latest announcements, China had issued export quotas 
for rare-earth primary products, including minerals and oxides, but its 
quotas didn't include alloys.
    Rare earth alloys include rare-earth ferrosilicon?with 17%-37% 
rare-earth content?which is used as an additive in steel and iron 
smelting, and magnesium rare earth, which contains 2%-10% of rare-earth 
elements yttrium and gadolinium and is used in the aviation, automotive 
and defense sectors.
    Rare earths, comprising 17 elements, are usually categorized into 
two kinds?heavy rare earth, also called ion-absorbed rare earth, which 
is abundant in southern China, and light rare earth, which is found in 
northern China.
    Heavy rare earths are more valuable, giving exporters an incentive 
to ship overseas for higher returns.
    The State Council said it ``clearly forbids'' the resale of quotas 
and has promised to improve the system of allocating quotas. People 
familiar with the situation have said previously that some companies 
with export quotas make big profits by re-selling export quotas.
    Beijing also pledged to combat illegal rare-earth mining and mining 
above quota levels, as well as improve the export-monitoring system to 
stamp out smuggling.
    China is also building strategic stockpiles of rare-earth metals, 
an effort that could give Beijing increased power in influencing global 
prices and supplies.
    The State Council said it will halt approvals of rare-earth 
separation projects in the next five years and ``resolutely ban'' 
capacity expansions at existing plants.
--Yajun Zhang

                                 
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