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



 
                        FEDERAL PERSPECTIVE ON A

                  NATIONAL CRITICAL MATERIALS STRATEGY

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



                                HEARING

                               BEFORE THE

                   SUBCOMMITTEE ON INVESTIGATIONS AND

                               OVERSIGHT

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                         TUESDAY, JUNE 14, 2011

                               __________

                           Serial No. 112-24

                               __________

 Printed for the use of the Committee on Science, Space, and Technology


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






                  U.S. GOVERNMENT PRINTING OFFICE
66-924                    WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001




              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                    HON. RALPH M. HALL, Texas, Chair
F. JAMES SENSENBRENNER, JR.,         EDDIE BERNICE JOHNSON, Texas
    Wisconsin                        JERRY F. COSTELLO, Illinois
LAMAR S. SMITH, Texas                LYNN C. WOOLSEY, California
DANA ROHRABACHER, California         ZOE LOFGREN, California
ROSCOE G. BARTLETT, Maryland         DAVID WU, Oregon
FRANK D. LUCAS, Oklahoma             BRAD MILLER, North Carolina
JUDY BIGGERT, Illinois               DANIEL LIPINSKI, Illinois
W. TODD AKIN, Missouri               GABRIELLE GIFFORDS, Arizona
RANDY NEUGEBAUER, Texas              DONNA F. EDWARDS, Maryland
MICHAEL T. McCAUL, Texas             MARCIA L. FUDGE, Ohio
PAUL C. BROUN, Georgia               BEN R. LUJAN, New Mexico
SANDY ADAMS, Florida                 PAUL D. TONKO, New York
BENJAMIN QUAYLE, Arizona             JERRY McNERNEY, California
CHARLES J. ``CHUCK'' FLEISCHMANN,    JOHN P. SARBANES, Maryland
    Tennessee                        TERRI A. SEWELL, Alabama
E. SCOTT RIGELL, Virginia            FREDERICA S. WILSON, Florida
STEVEN M. PALAZZO, Mississippi       HANSEN CLARKE, Michigan
MO BROOKS, Alabama
ANDY HARRIS, Maryland
RANDY HULTGREN, Illinois
CHIP CRAVAACK, Minnesota
LARRY BUCSHON, Indiana
DAN BENISHEK, Michigan
VACANCY
                                 ------                                

              Subcommittee on Investigations and Oversight

                   HON. PAUL C. BROUN, Georgia, Chair
F. JAMES SENSENBRENNER, JR.,         DONNA F. EDWARDS, Maryland
    Wisconsin                        ZOE LOFGREN, California
SANDY ADAMS, Florida                 BRAD MILLER, North Carolina
RANDY HULTGREN, Illinois             JERRY McNERNEY, California
LARRY BUCSHON, Indiana                   
DAN BENISHEK, Michigan                   
VACANCY                                  
RALPH M. HALL, Texas


                            C O N T E N T S

                        Wednesday, June 14, 2011

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

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

                           Opening Statements

Statement by Representative Randy Hultgren, Acting Chairman, 
  Subcommittee on Investigations and Oversight, Committee on 
  Science, Space, and Technology, U.S. House of Representatives..    19
    Written Statement............................................    20

Statement by Representative Donna F. Edwards, Ranking Minority 
  Member, Subcommittee on Investigations and Oversight, Committee 
  on Science, Space, and Technology, U.S. House of 
  Representatives................................................    21
    Written Statement............................................    22

Statement by Representative Brad Miller, Subcommittee on 
  Investigations and Oversight, Committee on Science, Space, and 
  Technology, U.S. House of Representatives......................    23

                               Witnesses:

Dr. John P. Holdren, Director, Office of Science & Technology 
  Policy (OSTP), Executive Office of The President of the United 
  States
    Oral Statement...............................................    24
    Written Statement............................................    25

Mr. David Sandalow, Assistant Secretary for Policy and 
  International Affairs, U.S. Department of Energy (DOE)

    Oral Statement...............................................    28
    Written Statement............................................    29

Mr. Jeff L. Doebrich, Program Coordinator (Acting), Mineral 
  Resources Program, U.S. Geological Survey (USGS)
    Oral Statement...............................................    31
    Written Statement............................................    32

             Appendix I: Answers to Post-Hearing Questions

Dr. John P. Holdren, Director, Office of Science & Technology 
  Policy (OSTP)..................................................    50

Mr. David Sandalow, Assistant Secretary for Policy and 
  International Affairs, U.S. Department of Energy (DOE).........    53

Mr. Jeff L. Doebrich, Program Coordinator (Acting), Mineral 
  Resources Program, U.S. Geological Survey (USGS)...............    72

            Appendix II: Additional Material for the Record

Letter submitted Dr. John P. Holdren, Director, Office of Science 
  & Technology Policy (OSTP), in response to Representative Dan 
  Benishek.......................................................    80


                        FEDERAL PERSPECTIVE ON A


                  NATIONAL CRITICAL MATERIALS STRATEGY

                              ----------                              


                  HEARING DATE (INCLUDING DAY OF WEEK)

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

    The Subcommittee met, pursuant to call, at 2:39 p.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Randy 
Hultgren presiding.


                            hearing charter

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

               SUBCOMMITTEE ON INVESTIGATIONS & OVERSIGHT

                     U.S. HOUSE OF REPRESENTATIVES

                ``The Federal Perspective on a National

                     Critical Materials Strategy''

                         tuesday, june 14, 2011
                          2:00 p.m.--4:00 p.m.
                   2318 rayburn house office building

Purpose

    On June 14, 2011, the Subcommittee on Investigations and Oversight 
has invited officials from the Administration to discuss the federal 
perspective on a national critical materials strategy. This includes 
rare earth elements as well as other critical materials.

Background

    A recent report by the American Physical Society (APS) and 
Materials Research Society (MRS) defines energy critical elements (ECE) 
as: ``a class of chemical elements that currently appear critical to 
one or more new, energy-related technologies. A shortage of these 
elements would significantly inhibit large-scale deployment, which 
could otherwise be capable of transforming the way we produce, 
transmit, store, or conserve energy.'' \1\
---------------------------------------------------------------------------
    \1\ ``Energy Critical Elements: Securing Materials for Emerging 
Technologies,'' a report by the American Physical Society and the 
Materials Research Society, February 2011, available at: http://
www.aps.org/policy/reports/popa-reports/loader.cfm?csModule=security/
getfile&PageID=236337 (hereinafter APS/MRS Report)
---------------------------------------------------------------------------
    Located primarily around the center of the Periodic table (Appendix 
2), there are several reasons why these elements may be considered 
critical beyond the role they play in electronics and advanced 
technologies such as electric cars, wind turbines and photovoltaic 
cells. The joint APS and MRS study explains elements may be critical 
because they might be ``intrinsically rare in Earth's crust, poorly 
concentrated by natural processes, or currently unavailable in the 
United States.'' \2\ While many energy critical elements also play 
important roles in national defense, this hearing is primarily focused 
on the commercial and energy applications of these materials.
---------------------------------------------------------------------------
    \2\ Ibid.
---------------------------------------------------------------------------
    Within the definition of energy critical elements are a group of 
seventeen chemical elements that are commonly found together, and 
referred to as the rare earth elements. On the Periodic table, fifteen 
of these elements are located in the Lanthanide series (see below), 
which make up a row of elements with atomic numbers in ascending order 
from 57 to 71. The other two are Yttrium (atomic number 39) and 
Scandium (atomic number 21). A list of the rare earth elements below, 
and their common end uses, is available in Appendix 3.


    Rare earths share similar--yet unique--chemical and physical 
properties that make them critical components of advanced technologies 
such as high powered magnets, petroleum refining catalysts, batteries, 
and lasers among others. Like other critical elements, rare earths are 
important components of everyday items such as cell phones, 
blackberries, hybrid cars, etc.
    Rare earths are further classified into two categories--light and 
heavy. The lighter elements--basically the first half of the Lanthanide 
series--are more abundant and have a larger market. The heavier 
elements--the second half of the Lanthanide series--are scarcer, but 
equally, if not more critical, even with a smaller market share.
    Despite the terminology, rare earths are actually abundant in the 
Earth's crust. They are however, expensive and difficult to mine, as 
the process of separating and isolating each individual rare earth 
element is highly complex and cumbersome--both financially as well as 
logistically. When initially extracted from the ground as an ore, rare 
earths are mixed together. The mixed rare earths have to be chemically 
extracted from the ore concentrates, and further chemically separated 
from any other metals that exist in the ore. The remaining mix of rare 
earths then undergoes an additional process to isolate each individual 
rare earth in a ``separation plant.'' \3\ These are expensive 
facilities to build, and can ``easily involve hundreds of repetitive 
steps taking up to a month to finish a single batch of material, and 
although batches can be run almost continuously the size of the plant 
must reflect the optimum large batch size for producing enough volume 
to make a profit, by selling the resulting commercially pure separated 
chemical compounds.'' \4\
---------------------------------------------------------------------------
    \3\ Jack Lifton, ``In Xanadu Did Goldman Sachs Decree A Rare Earths 
Surplus For All To See,'' Technology Metals Research, May 6, 2011, 
available at: http://www.techmetalsresearch.com/2011/05/in-xanadu-did-
goldman-sachs-decree-a-rare-earths-surplus-for-all-to-see/
    \4\ Ibid.
---------------------------------------------------------------------------

International Production

China
    From the 1960s to the 1980s, the United States was the dominant 
producer in the world of rare earths. But the intensive nature of rare 
earths mining ultimately led to the demise of this industry. The 
process of mining and separating rare earth elements presents 
environmental challenges. It creates ``hundreds of gallons of salty 
wastewater per minute, consuming huge amounts of electricity, requiring 
toxic materials for the refining process and occasionally unearthing 
dirt that is radioactive.'' \5\ Combined with China's lower 
environmental standards, labor costs, and government backing of an 
industry of interest to that nation, the U.S. couldn't remain 
competitive, and ultimately ceded authority of this industry to the 
Chinese. The result is that today, China produces about 97% of the 
world's rare earth oxides--demonstrating the success of a vision 
eloquently encapsulated in the following 1992 quote by Deng Xiaoping, 
the architect of China's economic transformation, ``There is oil in the 
Middle East; there is rare earth in China.'' \6\
---------------------------------------------------------------------------
    \5\ Tiffany Hsu, ``High-tech's Ace in the Hole,'' Los Angeles 
Times, February 20, 2011, available at: http://articles.latimes.com/
2011/feb/20/business/la-fi-rare-earth-20110220/3 (hereinafter Hsu 
Article)
    \6\ Paul Krugman, ``Rare and Foolish,'' New York Times, October 17, 
2010, available at: http://www.nytimes.com/2010/10/18/opinion/
18krugman.html
---------------------------------------------------------------------------
    But as China's interest in the industry has expanded, so too has 
its control. Since 2006, ``the Chinese Commerce Ministry has been 
reducing export quotas, as well as limiting and cutting the number of 
firms that are allowed to export rare earths in their raw form. In 
2006, 47 Chinese companies had permits to export rare earths, but by 
2010, only 22 companies were allowed to do so.'' \7\
---------------------------------------------------------------------------
    \7\ Ming Hwa Ting, ``China's Rare Earth Motives,'' The Diplomat, 
June 5, 2011, available at: http://the-diplomat.com/new-leaders-forum/
2011/06/05/chinas-rare-earth-motives/ (hereinafter Ting Article)
---------------------------------------------------------------------------
    Understandably, with a reduction in permits has come a reduction in 
exports. According to the U.S. Chamber of Commerce, ``Last year, China 
slashed exports by 72%, and then by another 35% for the first half of 
2011.'' \8\
---------------------------------------------------------------------------
    \8\ Bill Kovacs, ``Rare Earth Elements and our Clean Energy 
Future,'' ChamberPost, April 19, 2011, available at: http://
www.chamberpost.com/2011/04/rare-earth-elements-and-our-clean-energy-
future/
---------------------------------------------------------------------------
    Moreover, as of 2007, China has established export taxes on rare 
earths. ``Originally set at between 15 percent to 25 percent, depending 
on the oxide or concentrate being exported, the rates on many more rare 
earth products are expected to be raised by 25 percent in 2011.'' \9\
---------------------------------------------------------------------------
    \9\ Ting Article, supra, note 7
---------------------------------------------------------------------------
    China claims these measures are necessary to protect its 
environment from rogue mining operators, and to sustain its rare earths 
industry. To that end, China issued guidelines earlier this year that 
lifts rare earth elements to the level of national strategic reserves. 
Additionally, existing mines are forbidden from expanding capacity, 
China is setting up a strategic stockpile system for rare earth metals, 
and it aims to concentrate 80 percent of the country's heavy rare earth 
mining assets in the hands of its three largest companies over the next 
couple of years. \10\
---------------------------------------------------------------------------
    \10\ Tony Zhu, ``China Tightens Control of Rare Earth Industry,'' 
Business China, May 20, 2011, available at: http://en.21cbh.com/HTML/
2011-5-20/wNMjMyXzIxMDIwNA.html
---------------------------------------------------------------------------
    China's actions have created tense relations with American 
technology and renewable energy industries, leading the U.S. Trade 
Representative's office to say that ``if China continues to rebuff 
requests to ease export limits on rare earths, it may take the dispute 
to the World Trade Organization.'' \11\ And, an analyst at the Heritage 
Foundation had the following to say:
---------------------------------------------------------------------------
    \11\ Hsu Article, supra, note 5

      ``Beijing already faces a losing case at the World Trade 
Organization (WTO) for its rare earth export quotas. A Chinese embargo 
would take at least a few months to have an effect and would trigger 
WTO sanctioned retaliation that would match or exceed the dollar value 
of rare earth exports. Trade disruptions from that point would harm the 
PRC far more than the U.S., given the much greater volume of Chinese 
shipments to America and the jobs associated with them.'' \12\
---------------------------------------------------------------------------
    \12\  Derek Scissors, ``Rare Earths: The U.S. Government Should not 
Manage Supply,'' Heritage Foundation Web Memo No. 3201, March 21, 2011, 
available at: http://thf--media.s3.amazonaws.com/2011/pdf/wm3201.pdf
---------------------------------------------------------------------------
Japan

    China's willingness to take advantage of its near monopoly on rare 
earth elements isn't restricted to export quotas and taxes, nor are its 
policies directed solely to the United States. While China is the 
world's largest producer of rare earth elements, Japan conducts a great 
deal of the world's rare earth processing, and is therefore vulnerable 
to Chinese export restrictions. Last year, China suspended exports of 
rare earths to Japan in retaliation for Japan's detention of a Chinese 
fishing boat captain accused of deliberately ramming two Japanese 
patrol boats in disputed waters. \13\ While Japan kept custody of the 
fisherman during its investigation, the Chinese government kept raising 
diplomatic stakes in demanding his freedom, leading to an increasingly 
tense stand-off between the two nations. Japan eventually relented, and 
let the Chinese captain go, claiming that the negative impact on the 
Japan-China relationship wasn't worth the cost. China, meanwhile, 
denied any embargo on rare earth shipments to Japan--even though it 
took almost two months before shipment of the minerals resumed. \14\
---------------------------------------------------------------------------
    \13\  Keith Bradsher, ``Amid Tension, China Blocks Crucial Exports 
to Japan,'' New York Times, September 22, 2010, available at: http://
www.nytimes.com/2010/09/24/business/global/24rare.html
    \14\ Keith Bradsher, ``China Restarts Rare Earth Shipments to 
Japan,'' New York Times, November 19, 2010, available at: http://
www.nytimes.com/2010/11/20/business/global/20rare.html
---------------------------------------------------------------------------
Australia
    Prior to the Japanese incident, in 2009, China sought to expand its 
influence in other countries. Flush with the cash flow of a bustling 
economy, the Chinese made multiple unsuccessful bids to purchase 
significant shares of several companies in Australia's resource 
industry:

      A $400 million bid for a controlling stake in a rare 
earths miner fell through;

      For national security reasons, Australia's Defense 
Department intervened in a proposed joint venture between an Australian 
subsidiary of a Chinese company and an Australian outback mining 
venture;

      In a separate deal, again for national security reasons, 
Australian Treasurer Wayne Swan rejected Minmetals' (a Chinese state-
owned firm) $2.6 billion offer for OZ Minerals;

      A $19.5 billion discussion between Chinese-owned metals 
firm Chinalco and Rio Tinto broke down after Rio backed away from the 
deal; and

      China Nonferrous Metal Mining (Group) Company ended 
negotiations to purchase Lynas Corporation because Australia's Foreign 
Investment Review Board required the Chinese company's ownership stake 
to be below 50% while maintaining a minority of board seats on Lynas. 
\15\
---------------------------------------------------------------------------
    \15\ Rob Taylor, ``China Drops Lynas Bid; Further Strains 
Australia-China Relations,'' Mineweb, September 24, 2009, available at: 
http://mineweb.com/mineweb/view/mineweb/en/
page72068?oid=89761&sn=Detail

    The Lynas negotiation attracted a great deal of attention given the 
leverage the Chinese would have had in a company that owns significant 
deposits of undeveloped rare earths. Had China been successful in this 
endeavor, it would have further tilted the playing field in its favor, 
despite the 97 percent control it already enjoys in the production of 
rare earth oxides.

Domestic Production

    The combination of China's aggressive actions--strong-arming Japan, 
aggressive purchase bids in Australia, reducing the number of rare 
earth export permits and quotas, and increasing taxes on these 
exports--has prompted numerous countries to call for a more diversified 
rare earths market and greater domestic exploration and production. As 
China's economy and industry grows, its own need for these rare earth 
materials is increasing. Because of this, it is possible that China 
could cease rare earth exports, or become a rare earth importer at some 
point in the future.
    These circumstances have led to a renewed interest in domestic 
production of rare earth elements. Although ``[r]are earth element 
reserves and resources are found in Colorado, Idaho, Montana, Missouri, 
Utah, and Wyoming . . . [t]here is no rare earth mine production in the 
United States.'' \16\ The company best positioned to reconstitute 
domestic production is Molycorp Minerals, LLC. Based in Colorado, the 
company owns a mine in Mountain Pass, California, a site that once 
allowed Molycorp to hold the title of largest producer of rare earths 
in the world. But the mine shut down in 2002, as a result of low priced 
Chinese imports, strict environment regulations in the U.S., and 
liabilities associated with environmental contamination. \17\ 
Nevertheless, proving its value, China has attempted to buy the mine 
three times after it shut down in 2002. \18\
---------------------------------------------------------------------------
    \16\ Marc Humphries, Rare Earth Elements: The Global Supply Chain, 
CRS, September 30, 2010, available at http://www.crs.gov/Products/R/
PDF/R41347.pdf (hereinafter Humphries/CRS Report)
    \17\ Keith Bradsher, ``Challenging China in Rare Earth Mining,'' 
New York Times, April 21, 2010, available at: http://www.nytimes.com/
2010/04/22/business/energy-environment/22rare.html
    \18\ Ibid.
---------------------------------------------------------------------------
    In his testimony before this Subcommittee last year, Mark Smith, 
Molycorp's Chief Executive Officer, outlined the company's approach 
toward restarting the mine, and establishing itself as a competitive 
business. According to Mr. Smith:

      Many industry observers question how a U.S. producer of rare 
earths can ever compete with the Chinese, when the possibility always 
lingers that the Chinese could flood the market and dramatically 
depress rare earth prices, a practice they have demonstrated 
previously. We have spent the better part of the past eight years 
developing the answer to this question. We changed the orientation of 
our thinking and discovered that by focusing principally on energy and 
resource efficiency, we could make major improvements in our cost 
competitiveness while at the same time advance our environmental 
stewardship.

      We will incorporate a wide variety of manufacturing processes 
that are new to the rare earth industry, which will increase resource 
efficiency, improve environmental performance, and reduce carbon 
emissions. Specifically:

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

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

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

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

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

      These process improvements fundamentally reverse the conventional 
wisdom that superior environmental stewardship increases production 
costs. At the same time, we significantly distinguish ourselves from 
the Chinese rare earth industry that has been plagued by a history of 
significant environmental degradation, one that it is just beginning to 
recognize and rectify. \19\
---------------------------------------------------------------------------
    \19\ Mark A. Smith, CEO, Molycorp Minerals, LLC, Testimony, House 
Science and Technology Subcommittee on Investigations and Oversight, 
March 16, 2010 (hereinafter Smith Testimony)

    From a financial perspective, Molycorp's efforts are receiving 
favorable marks thus far. By the end of last year. \20\ Molycorp 
claimed it had secured all the permits it needed to begin mining ore 
this year. Molycorp is spending over $500 million on its 2,200-acre 
facility, and by 2014, plans to dig about 40,000 tons of dirt a year, 
compared to its current 3,000 tons. \21\
---------------------------------------------------------------------------
    \20\ ``Update 1--Rare Earth Producer Molycorp Wins OK for Mine,'' 
Reuters, December 13, 2010, available at: http://af.reuters.com/
article/metalsNews/idAFN1321376420101213
    \21\  Hsu Article, supra, note 5
---------------------------------------------------------------------------
    Moreover, as part of its `mine-to-magnets' strategy, Molycorp and 
Hitachi Metals Ltd. agreed to ``form a joint venture to produce rare-
earth alloys and magnets, moving Molycorp a step closer to establishing 
a rare-earth manufacturing chain in the U.S.'' \22\ This deal would 
expand Molycorp's business beyond just mining. Hitachi owns a host of 
patents on neodymium iron boron (NdFeB) permanent magnets, which 
advances Molycorp's `mine-to-magnets' strategy. These powerful magnets 
have played an essential role in miniaturizing consumer electronics 
(cell phones), and are key components of lightweight, high-power motors 
and generators (wind turbines, hybrid and electric vehicles.)
---------------------------------------------------------------------------
    \22\ Tess Stynes, ``Molycorp, Hitachi Metals Reach Rare Earth 
Deal,'' Wall Street Journal, December 21, 2010, available at: http://
online.wsj.com/article/SB10001424052748703581204576033382079826492.html
---------------------------------------------------------------------------
    From Japan's perspective, where Hitachi is based, this venture 
would provide the country with some place other than China for a supply 
of rare earths. Separately, Molycorp also struck a deal with Sumitomo 
Corporation, another Japanese company, which ``agreed to buy $100 
million, or more than 3%, of Molycorp's shares and provide $30 million 
in financing as part of a seven-year rare-earth supply agreement.'' 
\23\
---------------------------------------------------------------------------
    \23\ Ibid.

Interagency Working Group

    Since March 2010, OSTP, in coordination with the National Economic 
Council and the National Security Council, has been hosting an 
interagency working group on critical and strategic mineral supply 
chains, which includes the topic of supply constraints on rare earth 
elements. The group is initially focusing on four areas:

      Defining, screening and prioritizing critical materials;

      Prioritizing federal research and development;

      Review of domestic and global policies that affect the 
supply of critical and strategic minerals (e.g., permitting, export 
restrictions, recycling, stockpiling, etc.) and consideration of 
methods to mitigate risks through industrial or diplomatic processes; 
and

      Transparency of resource supply and demand information.

    Participants in this group include: Department of Energy, 
Department of Defense, U.S. Geological Survey, Department of Commerce, 
Environmental Protection Agency, Department of Justice, Department of 
State, and the U.S. Trade Representative.
    At this time, there are no plans to develop a collaborative report 
or document to reflect the dialogue and/or exchange of ideas between 
the participating agencies.
    Last December, DOE officials published the ``Critical Materials 
Strategy'' report, and indicated that they plan to release an update at 
the end of this year. The 2010 report examined the role of rare earths 
and other materials in the clean energy economy. In the report, DOE 
describes plans to:

    i.  develop its first integrated research agenda addressing 
critical materials;

    ii.  strengthen its capacity for information-gathering on this 
topic; and

    iii.  work closely with international partners, including Japan and 
Europe, to reduce vulnerability to supply disruptions and address 
critical material needs. \24\
---------------------------------------------------------------------------
    \24\ Critical Materials Strategy, U.S. Department of Energy, 
December 15, 2010, available at: http://www.energy.gov/news/documents/
criticalmaterialsstrategy.pdf (hereinafter DOE Report)

    With respect to its critical materials strategy, the DOE report 
---------------------------------------------------------------------------
identifies three points:

      First, diversified global supply chains are essential;

      Second, substitutes must be developed;

      Third, recycling, reuse and more efficient use could 
significantly lower world demand for newly extracted materials. \25\
---------------------------------------------------------------------------
    \25\ Ibid.

    The follow-up report ``will include additional analysis of rapidly-
changing market conditions. It will analyze the use of critical 
materials in other technologies, such as fluid cracking catalysts in 
petroleum refineries. Finally, the updated strategy will identify 
specific steps forward for substitution, recycling and more efficient 
use of materials identified as critical.'' \26\ There is a need for 
data on recycling efforts by industry, as well as understanding the 
potential for substitute materials. Stories such as Toyota's plans to 
switch from rare earths to a special induction motor in its Prius, \27\ 
and GE's success in developing a new alloy to replace Rhenium, a 
critical material in its turbine engines, are encouraging. \28\
---------------------------------------------------------------------------
    \26\ DOE Announces Second RFI on Rare Earth Metals, March 22, 2011, 
available at: http://www.energy.gov/news/10193.htm
    \27\ Hsu Article, supra, note 5
    \28\ APS/MRS Report, supra, note 1
---------------------------------------------------------------------------
    It would also be beneficial to Congress and private industry if the 
Administration would address the issue of mining permits. Highlighting 
the seriousness of this subject, during testimony before a House 
Natural Resources Subcommittee on Energy and Mineral Resources hearing 
on May 24, Mr. Hal Quinn, President and CEO of the National Mining 
Association, made the following observation:

      ``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 ten years to secure. If 
commodity cycles are historically 20 years in duration, the ten-years 
it takes to obtain permits leaves U.S. mining still in the starting 
blocks with the race half way over.'' \29\
---------------------------------------------------------------------------
    \29\ Hal Quinn, President and CEO, National Mining Association, 
Testimony, House Natural Resources Subcommittee on Energy and Mineral 
Resources, May 24, , available 2011 at: http://
naturalresources.house.gov/UploadedFiles/QuinnTestimony05.24.11.pdf

Funding Streams

    Funding for rare earths and critical materials R&D is spread 
throughout several DOE programs, making it difficult to isolate 
specific budget numbers. The following is a list of programs and sub-
programs from which funds may be used relative to rare earths and 
critical materials projects: Office of Energy Efficiency and Renewable 
Energy; Advanced Research Projects Agency-Energy; Industrial 
Technologies Program; Next Generation Materials Program; Next 
Generation Manufacturing Processes; Manufacturing Energy Systems 
Program; Energy Efficiency Partnership; and Industrial Technical 
Assistance Program.
    Additionally, the USGS Mineral Resources Program supports funding 
for the collection, analysis, and dissemination of minerals information 
in the U.S. and around the world.
    For examples of rare earths and critical material budget details, 
please see Appendix 4, which includes selected information from DOE's 
2010 ``Critical Materials Strategy'' Report.

Statutory History

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

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

    The Congress declared it the President's responsibility to 
coordinate a plan of research and other actions that would ``.promote 
an adequate and stable supply of materials necessary to maintain 
national security, economic well-being and industrial production with 
appropriate attention to a long-term balance between resource 
production, energy use, a healthy environment, natural resources 
conservation, and social needs.'' \31\ Our current situation with rare 
earth minerals indicates that successive Administrations failed to 
carry out this policy.
---------------------------------------------------------------------------
    \31\ 30 USC 1602
---------------------------------------------------------------------------
    The 1980 Act directed development of a plan that would, among other 
outcomes, produce continuing assessments of demand for minerals and 
materials in the economy; conduct a ``vigorous'' research and 
development effort; collect, analyze and disseminate information; and 
cooperate with the private sector and other nations. \32\
---------------------------------------------------------------------------
    \32\ 30 USC 1603
---------------------------------------------------------------------------
    Four years later, dissatisfied with the inaction to the 1980 law, 
Congress decided in the National Critical Materials Act of 1984 to 
establish a National Critical Materials Council in the Executive Office 
of the President to serve as the focal point for critical materials 
policy. The Council was tasked to assist the President in carrying out 
the requirements of the 1980 Act. \33\ In 1993, through Executive Order 
12881, \34\ the National Critical Materials Council was terminated, and 
its responsibilities transferred to the National Science and Technology 
Council, located within the Office of Science and Technology Policy.
---------------------------------------------------------------------------
    \33\ 30 USC Chapter 30
    \34\ Ex. Ord. 12881, ``Establishment of the National Science and 
Technology Council,'' November 23, 1993; 58 Fed. Reg. 62491. Dr. 
Gibbons tied the reorganization both to President Clinton's decision to 
reduce staff within the White House and to the National Performance 
Review conducted by Vice President Gore. Bill Loveless, ``Gibbons to 
Propose Formation of Science and Tech Council,'' Federal Technology 
Report, September 2, 1993; p. 1
---------------------------------------------------------------------------
    In 1995 and 1996, the NSTC published reports on the Federal 
Research and Development Program in Materials Science and Technology. 
No equivalent report has been produced since, however, nor has OSTP 
produced the ``long-range assessments of materials needs related to 
scientific and technological concerns'' or ``scientific and technical 
changes over the next five years'' whose annual preparation the statute 
requires. \35\
---------------------------------------------------------------------------
    \35\ 30 USC 1604(b) (2) and (3)
---------------------------------------------------------------------------
    Somewhere along the way, there appears to have been a failure in 
communication between the two branches of government given that 
multiple Administrations have disregarded responsibilities assigned by 
Congress in the 1980 Act.
    During its hearing on rare earths last March, this Subcommittee 
revisited policy issues it thought had been settled decades ago to 
determine how to avoid finding ourselves in similar straits in the 
future. The full Committee on Science and Technology even held a mark-
up in September on H.R. 6160, the Rare Earths and Critical Materials 
Revitalization Act of 2010, introduced by Rep. Kathleen Dahlkemper a 
day before the mark-up. Among its provisions, Rep. Dahlkemper's bill 
repealed the National Critical Materials Act of 1984, and amended parts 
of the National Materials and Minerals Policy, Research and Development 
Act of 1980. On September 29, the House approved the bill by a vote of 
325-98.
    This year, a number of Members have introduced legislation 
regarding rare earths and critical materials, with at least two of them 
repealing the 1984 Act. (See Appendix 1.)

Issues

R&D Portfolio
    The federal government funds a number of research and development 
programs related to rare earths and critical materials. Recent reports 
recommend establishing research and development efforts focused on 
geological deposit modeling, mineral extraction and processing, 
material characterization and substitution, manufacturing, recycling, 
and life-cycle analysis. The private sector has a strong incentive to 
conduct this research as well; however, its focus is primarily on 
applied research rather than basic or fundamental research. In times of 
fiscal austerity, some have suggested prioritizing research and 
development activities in such a manner that precludes duplication, and 
prevents the crowding-out of private sector work. In other words, the 
federal government should not only identify what research needs to be 
conducted to enhance the critical element supply chain, but also what 
research is actually appropriate for government support versus private 
sector investment.
Information
    Another recommendation for the U.S. government involves improving 
information related to discovered and potential resources, production, 
use, trade, disposal, and recycling. Currently, USGS provides the 
majority of data on element and mineral supplies; however, the agency 
has very little information on current and future demands. DOE projects 
the potential demand for energy critical elements, but not for all 
applications. In order to gather, analyze, and disseminate information 
on both supply and demand, reports have recommended that a ``Principal 
Statistical Agency'' should be tasked with regularly surveying emerging 
technologies and the supply chain throughout the Periodic table, with 
an aim of identifying critical applications, as well as potential 
shortfalls.
Loan Guarantees
    A number of federal incentives were proposed to address shortfalls 
in domestic rare earth element production, most notably loan 
guarantees. Because access to capital was limited after the financial 
downturn, potential rare earth producers applied for DOE loan 
guarantees, and several legislative proposals sought to expand similar 
programs for rare earth elements. Despite the limited access to 
capital, concerns have been raised about the necessity of such 
incentives, given the high demand for rare earth elements.
Stockpiling
    Recent proposals direct the federal government to stockpile certain 
rare earth elements and critical materials, especially those vital to 
national security and defense. The Defense National Stockpile maintains 
and manages strategic and critical materials, but proposals have 
suggested similar non-defense stockpiling efforts in addition to this 
effort. Conversely, other proposals have suggested that stockpiling is 
not necessary for non-defense related purposes other than helium.
Permitting
    Arguments have been made for a streamlined permitting process for 
miners of rare earths and critical materials, as it can take as long as 
ten years to obtain the necessary approval. Any effort to revitalize a 
domestic rare earth industry that can compete with China is contingent 
upon minimizing administrative burdens. Ensuring that the permitting 
process is expedited in a manner that respects public health and 
safety, and the environment, is key to the industry's long term 
viability.

Witnesses:

  Dr. John P. Holdren, Director, Office of Science & Technology 
Policy (OSTP), Executive Office of The President of the United States

   Dr. Holdren has been invited to talk about the interagency working 
group on critical and strategic mineral supply chains, which is 
comprised of OSTP, National Economic Council and the National Security 
Council. Dr. Holdren will describe the group and its objectives, 
especially with respect to any research and development plans relative 
to rare earths and critical materials.

  Mr. David Sandalow, Assistant Secretary for Policy and 
International Affairs, U.S. Department of Energy (DOE)

   Mr. Sandalow will discuss DOE's participation in the above-mentioned 
interagency working group, and address DOE's activities relative to 
rare earths and critical materials, especially with respect to any 
research and development plans.

  Mr. Jeff L. Doebrich, Program Coordinator (Acting), Mineral 
Resources Program, U.S. Geological Survey (USGS), U.S. Department of 
the Interior

   Mr. Doebrich will explain USGS' participation in the interagency 
working group, and provide an overview of USGS' research activities 
relative to rare earths and critical materials.

                               APPENDIX 1

HOUSE BILLS

  Rep. Leonard Boswell--H.R.618, Rare Earths and Critical 
Materials Revitalization Act of 2011, introduced February 10, 2011:

Establishes in the DOE a research, development, and commercial 
application program.

Directs the Secretary of Energy to:

    1.  support new or significantly improved processes and 
technologies (as compared to those currently in use in the rare earth 
materials industry),

    2.  encourage multidisciplinary collaborations and opportunities 
for students at institutions of higher education, and

    3.  submit an implementation plan to Congress.

Amends the Energy Policy Act of 2005 to authorize the Secretary to make 
loan guarantee commitments for the commercial application of new or 
significantly improved technologies for specified projects.

Amends the National Materials and Minerals Policy, Research and 
Development Act of 1980 to:

    1.  instruct the Director of the Office of Science and Technology 
Policy to coordinate federal materials research and development through 
the National Science and Technology Council (instead of, as currently 
required, the Federal Coordinating Council for Science, Engineering, 
and Technology, which is now defunct);

    2.  modify the duties of the Secretary of Commerce regarding 
critical needs assessment; and

    3.  repeal specified reporting and other duties of the Secretaries 
of Defense and of the Interior.

Repeals the National Critical Materials Act of 1984.

  Rep. Brad Miller--H.R.952, Energy Critical Elements Renewal 
Act of 2011, introduced March 8, 2011:

Establishes in the Department of Energy (DOE) a research, development, 
and commercial application program.

Directs the Secretary of Energy to:

    1.  support new or significantly improved processes and 
technologies (as compared to those currently in use in the energy 
critical elements industry);

    2.  encourage multidisciplinary collaborations and opportunities 
for students at institutions of higher education;

    3.  collaborate with the relevant agencies of foreign countries 
with interests relating to energy critical elements;

    4.  establish a Research and Development Information Center to 
catalogue, disseminate, and archive information on energy critical 
elements; and

    5.  submit an implementation plan to Congress.

Directs the President, acting through the Office of Science and 
Technology Policy, to coordinate the actions of federal agencies to:

    1.  promote an adequate and stable supply of energy critical 
elements;

    2.  identify energy critical elements and establish early warning 
systems for supply problems;

    3.  establish a mechanism for the coordination and evaluation of 
federal programs with energy critical element needs; and

    4.  encourage private enterprise in the development of an 
economically sound and stable domestic energy critical elements supply 
chain.

Amends the Energy Policy Act of 2005 to authorize the Secretary to make 
loan guarantee commitments for the commercial application of new or 
significantly improved technologies for specified rare earth materials 
projects.

Amends the National Materials and Minerals Policy, Research and 
Development Act of 1980 to:

    1.  instruct the Director of the Office of Science and Technology 
Policy to coordinate federal materials research and development through 
the National Science and Technology Council (instead of, as currently 
required, the Federal Coordinating Council for Science, Engineering, 
and Technology, which is now defunct);

    2.  modify the duties of the Secretary of Commerce regarding 
critical needs assessment; and

    3.  repeal specified duties of the Secretaries of Defense and of 
the Interior.

Repeals the National Critical Materials Act of 1984.

  Rep. Henry C. ``Hank'' Johnson, Jr--H.R.1314, RARE Act of 
2011, introduced April 1, 2011:

Directs the Secretary of the Interior, through the Director of the 
USGS, to submit a comprehensive report on global rare earth element 
resources and the potential future global supply of such resources.

Requires the report to include recommendations on areas of need for 
future geologic research related to rare earth elements and other 
minerals that are critical based on the impact of a potential supply 
restriction and the likelihood of one.

  Rep. Mike Coffman--H.R.1388, Rare Earths Supply Chain 
Technology and Resources Transformation Act of 2011, introduced April 
6, 2011:

Establishes in the Department of the Interior a task force which shall 
report to the President through the Secretary of the Interior. The task 
force will be composed of Secretaries or their designees from the 
following agencies: Interior, Energy, Agriculture, Defense, Commerce, 
State, OMB, the Chairman (or designee) of the Council on Environmental 
Quality, and other members the Secretary of Interior considers 
appropriate.

The Task Force will review and report on ways for federal agencies to 
expedite the permitting process and reduce barriers to investment and 
development of the domestic rare earth industry. The Task Force shall 
then submit this report to the President, the Senate Committee on 
Energy and Natural Resources, the House Committee on Energy and 
Commerce, and the House Committee on Natural Resources.

Using funds from the sale of excess materials in the National Defense 
Stockpile, the President, acting through the Secretary of Defense, 
shall establish a neodymium iron boron magnet alloy and dysprosium iron 
alloy inventory to be managed by the Administrator of the Defense 
Logistics Agency Strategic Materials. The Secretary of Defense shall 
encourage domestic neodymium iron boron magnet manufacturing capability 
by seeking to enter into a long-term supply contract with such producer 
of such magnets and ensure that a sintered neodymium iron boron magnet 
producer who is awarded any such long-term contract establishes 
manufacturing capability for only military-use magnets for sale to the 
National Defense Stockpile.

  Rep. Doug Lamborn--H.R.2011, National Strategic and Critical 
Minerals Policy Act of 2011, introduced May 26, 2011:

Directs the Secretary of the Interior to coordinate a government wide 
assessment of the Nation's mineral resources and availability to meet 
current and future strategic and critical mineral needs.

Requires the Secretary of the Interior to evaluate factors impacting 
domestic mineral development, including workforce, access, permitting 
and duplicative regulatory requirements as well as identify areas for 
improvement.

Directs the Interior Department to assemble the report within six 
months.

Requires an annual progress report, beginning one year after the date 
of enactment of the Act for the following two years, outlining the 
progress made in reaching the policy goals described in the bill.

  Rep. Randy Hultgren--H.R. 2090, to improve assessments of and 
research about energy critical elements, and for other purposes, 
introduced June 2, 2011:

Instructs the Secretary of the Interior and Secretary of Energy (acting 
through the Energy Information Administration) to improve assessments 
of energy critical elements that covers discovered and potential 
resources, production, use, trade, disposal and recycling. This entity 
will be designated a ``principal statistical agency'' and will make 
this information available to the public.

Directs the Secretary of Energy in coordination with the Secretary of 
Interior to establish a research program to advance basic research and 
enable expanded availability of energy critical elements. Requires the 
National Science and Technology Council to submit a report to the 
Science committee on the status of these endeavors.

SENATE BILLS

  Sen. Mark Udall--S.383, Critical Minerals and Materials 
Promotion Act of 2011, introduced February 17, 2011:

Directs the Secretary of the Interior, acting through the USGS, to 
establish a research and development program to:

    1.  provide data and scientific analyses for research on, and 
assessments of the potential for, undiscovered and discovered resources 
of critical minerals and materials in the United States and other 
countries;

    2.  analyze and assess current and future critical minerals and 
materials supply chains; and (3) cooperate with international partners 
to ensure that the research and assessment programs provide analyses of 
the global supply chain of critical minerals and materials.

Directs the Secretary of Energy to conduct a research, development, and 
demonstration program to strengthen the domestic critical minerals and 
materials supply chain for clean energy technologies, and to ensure the 
long-term, secure, and sustainable supply of critical minerals and 
materials sufficient to strengthen the national security and meet the 
clean energy production needs of the United States.

Directs the Secretary of Energy to promote the development of the 
critical minerals and materials industry workforce in the United States 
by supporting:

    1.  critical minerals and materials education by providing 
undergraduate and graduate scholarships and fellowships at institutions 
of higher education, including technical and community colleges;

    2.  partnerships between industry and institutions of higher 
education, including technical and community colleges, to provide 
onsite job training; and

    3.  development of courses and curricula on critical minerals and 
materials.

Expresses the policy of the United States to promote an adequate and 
stable supply of critical minerals and materials necessary to maintain 
national security, economic well-being, and industrial production with 
appropriate attention to a long-term balance between resource 
production, energy use, a healthy environment, natural resources 
conservation, and social needs. Directs the President take specified 
steps to implement such policy.

  Sen. Kay Hagan--S.421, Powering America's Lithium Production 
Act of 2011, introduced February 28, 2011:

Amends the Energy Independence and Security Act of 2007 to require the 
Secretary of Energy (DOE) to provide grants to eligible entities for 
research, development, demonstration, and commercial application of 
domestic industrial processes that are designed to enhance domestic 
lithium production for use in advanced battery technologies.

Defines an ``eligible entity'' as:

    1.  a private partnership or other entity that is organized in 
accordance with federal law and engaged in lithium production for use 
in advanced battery technologies;

    2.  a public entity, such as a state, tribal, or local governmental 
entity; or

    1.  a consortium of such entities.

Requires such eligible entities to use such grants to develop or 
enhance:

    1.  domestic industrial processes that increase lithium production, 
processing, or recycling for use in advanced lithium batteries; or

    1.  industrial process associated with new formulations of lithium 
feedstock for use in such batteries.

  Sen. Lisa Murkowski--S.1113, Critical Minerals Policy Act, 
introduced May 26, 2011:

The bill provides clear programmatic direction to help keep the U.S. 
competitive and will ensure that the federal government's mineral 
policies--some of which have not been updated since the 1980s--are 
brought into the 21st century.

The legislation starts by directing USGS to establish a list of 
minerals critical to the U.S. economy and, pursuant to those 
designations, outlines a comprehensive set of policies that will 
bolster critical mineral production, expand manufacturing, and promote 
recycling and alternatives--all while maintaining strong environmental 
protections.

To avoid the duplication of authorities related to critical minerals, 
two previous Acts of Congress are repealed, in whole or in part: the 
National Critical Minerals Act of 1984 and the National Materials and 
Minerals Policy, Research, and Development Act of 1980.

A savings clause to clarify that nothing in this Act displaces the 
authorizations included under ``Geological Survey'' of the first 
section of the Organic Act of March 3, 1879.

Authorizes a total of $106 million for the various activities, 
programs, authorizations, and requirements of the Act.
                            APPENDIX 2 \36\
---------------------------------------------------------------------------
    \36\ APS/MRS Report, supra, note 1

    
    
                            APPENDIX 3 \37\
---------------------------------------------------------------------------
    \37\ Humphries/CRS Report, supra, note 16

    
    
                               APPENDIX 4

Rare Earth Elements and Critical Material Funding

Department of Energy

The following information is from Chapter 4 of DOE's 2010 ``Critical 
Materials Strategy'' report:

      Several U.S. Department of Energy (DOE) data and information 
programs, research and development (R&D) programs and financial 
instruments address rare earths and other key materials. Current 
programs focus on the component and end-use technology stages of the 
supply chain and address both the economic and the innovation 
dimensions of the clean energy sector.

      DOE also supports R&D addressing specific materials and 
alternatives across the supply chain. In Fiscal Year (FY) 2010, the 
Office of Science, the Office of Energy Efficiency and Renewable Energy 
(EERE) and the Advanced Research Projects Agency-Energy (ARPA-E) 
together provided approximately $15 million for research on rare earth 
materials and possible substitutes for magnets. An additional $35 
million was spent by ARPA-E on next generation battery technologies 
that don't require rare earths.

      At the basic science end of the pipeline, the Materials Sciences 
and Engineering (MSE) Division of the Office of Basic Energy Sciences 
supports broad-based, fundamental materials research. MSE seeks to 
illuminate the atomic basis of materials properties and behavior and 
improve materials performance at acceptable costs through innovative 
design, synthesis and processing. This research was funded at a level 
of about $5 million/year in FY 2010.

      Most of the supported work has been performed at Ames Laboratory. 
A key component of the Ames Laboratory program is the Materials 
Preparation Center (MPC). The MPC was established in 1981 to provide 
high purity metals (including the rare earths, uranium, thorium, 
vanadium, chromium); and intermetallics, refractory, inorganic 
compounds and specialty alloys; none of which are available 
commercially in the required purity or form/shape needed by the 
requestor on a cost recovery basis.

      Moving along the pipeline to applied research via feasibility 
research, technology development and demonstration, ARPA-E supports two 
initial projects totaling $6.6 million specifically targeted to 
developing substitutes for rare earth magnets. The goal of this $4.4 
million project is to develop materials to allow the United States to 
fabricate the next generation of permanent magnets (PMs) with magnetic 
energy density (maximum energy product) up to two times higher than the 
current value of the strongest commercially available neodymium-iron-
boron (Nd-Fe-B) magnets. If successful, this project will lead to 
cheaper, more energy-efficient, more power-dense magnets for deployment 
in a wide range of clean energy technologies.

      In another ARPA-E project, General Electric Global Research (GE) 
is developing next-generation permanent magnets with a lower content of 
critical rare earth materials. For the $2.2 million project, GE is 
developing bulk nanostructured magnetic materials with a dramatic 
increase in performance relative to state-of-the-art magnets. These new 
magnets will increase the efficiency and power density of electric 
machines while decreasing dependence on rare earth minerals.

      Addressing the challenge of rare-earth and critical-materials-
containing batteries, particularly in the emerging hybrid and electric 
vehicle transportation sectors, the Batteries for Electric Energy 
Storage in Transportation (BEEST) program invested $35 million in 
first-of-kind demonstration of new batteries and storage chemistries, 
structures and technologies.

      The Office of Energy Efficiency and Renewable Energy (EERE) is 
supporting an applied magnet research project valued at $2 million (FY 
2010) at Ames Laboratory. This project is focused on fabricating high-
performance, cost-effective PMs that can be used for traction motors 
with an internal PM rotor design.

      In addition to the magnet material research, EERE's Vehicle 
Technologies Program supports two projects valued at a total of $1.4 
million (FY2010) at Oak Ridge National Laboratory investigating 
alternative motor designs that do not use rare earth PMs.

      In addition, in 2009, the Vehicle Technologies Program awarded 
$9.5 million to Toxco, to expand an existing battery recycling facility 
in Ohio and become the first U.S. facility to recycle lithium-ion 
vehicle batteries.

      For wind power applications, reducing magnet size by developing 
higher flux density magnets is more important than consistent 
properties at elevated temperatures. EERE's Wind and Water Technologies 
Program is supporting QM Power, Inc., with to develop a higher flux 
density PM generator. There are also much larger investments within 
EERE in battery, PV and lighting R&D that have key materials use 
implications.

      The Loan Guarantee Program (LGP) was established under Title XVII 
of the Energy Policy Act (EPAct) of 2005. The LGP is authorized to 
provide loan guarantees to support domestic manufacturing of component 
technologies that use critical materials if those technologies meet the 
statutory tests. Projects supported by the program have the potential 
to affect market demand for key materials.

      The Advanced Technology Vehicles Manufacturing (ATVM) Loan 
Program provides loans to automobile and automobile part manufacturers 
to re-equip, expand or establish manufacturing facilities in the United 
States to produce advanced technology vehicles or qualified components, 
and for the associated engineering integration costs. Vehicles with 
efficiency standards that will contribute to a clean energy economy are 
included in the definition of advanced technology vehicles. The ATVM 
lacks authority to directly support extraction and production of key 
materials. However, the ATVM issued loans to companies for projects 
that may affect the market demand of nickel metal hydride (NiMH) or 
Lithium ion batteries and NdFeB permanent magnet motors. These 
companies include Ford Motor Company ($5.9 billion), Nissan North 
America ($1.6 billion), Tesla Motors ($465 million) and Fisker 
Automotive ($529 million). \38\
---------------------------------------------------------------------------
    \38\ DOE Report, supra, note 24

Since this report was published, there have been two notable additions 
---------------------------------------------------------------------------
according to DOE congressional affairs staff:

      ARPA-E issued a $30 million funding announcement for 
projects on rare earth alternatives in green technologies being funded 
out of the FY 2011 appropriations; and

      A $20 million request to create a critical materials 
innovation hub in the FY 2012 appropriations request.

US Geological Survey

According to USGS congressional liaison office, USGS' FY 2012 request 
of $44.2 million for its Mineral Resources Program represents ``about 
an 18 percent reduction from the FY 2010 enacted level of $53.8 
million. As a result, [USGS] will eliminate collection, analysis, and 
dissemination of minerals information for about 180 other countries; 
domestic minerals information activities will continue. This is the 
information that goes into the Mineral Commodity Summaries and Volume 
III-Area Report: International, of the Minerals Yearbook. In addition, 
[USGS] will eliminate mineral resources research and field studies in 
Alaska and will eliminate about 50 scientific and technical positions 
[out of a total of about 350] across the United States.''
    Mr. Hultgren. The Subcommittee on Investigations and 
Oversight will come to order. Good afternoon. Welcome to 
today's hearing titled ``The Federal Perspective on a National 
Critical Materials Strategy.'' Chairman Broun is unable to 
attend due to a family emergency, so I am sitting in for him 
today. You will find in front of you packets containing our 
witness panel's written testimony, biographies, and Truth-in-
Testimony disclosure.
    I recognize myself for five minutes for an opening 
statement.
    The subject of today's hearing is one which this 
Subcommittee is very familiar with. A little over a year ago, 
under the then-Democratic majority, the Investigations and 
Oversight Subcommittee held a hearing on rare earth minerals. 
Rare earths, as most of you know, possess unique physical and 
chemical properties that make them particularly suitable for 
use in advanced technologies such as high-powered magnets, 
petroleum refining catalysts, batteries, and lasers, among 
others. They are also important components in everyday items 
that everyone in this room probably has right now, such as cell 
phones and Blackberrys.
    This Committee did some very good work last year as we 
heard from industry folks, academics, and scientists. Today, we 
follow up on that work and take the next step in this process 
by hearing from government officials.
    I am pleased to welcome our distinguished guests. While 
they represent different agencies within the Administration, 
they are here today because of their collaboration on an 
interagency working group on critical and strategic materials 
supply chains.
    Critical materials include rare earth elements which are 
more widely recognized today than they were when this Committee 
last addressed this topic. That the issue is still of interest 
to Congress is evident by the number and variety of bills 
introduced in both the House and the Senate. I myself recently 
introduced H.R. 2090, the Energy Critical Elements Advancement 
Act, and Mr. Miller from the Democratic side has a bill also.
    In 1980, the National Materials and Minerals Policy, 
Research and Development Act was enacted because the United 
States lacked a coherent national materials policy and a 
coordinated program to assure the availability of materials 
critical for our national economic well being, national 
defense, and industrial production, including interstate 
commerce and foreign trade. Thirty-one years later, this 
Committee is presented with similar issues and, to quote Yogi 
Berra, ``it's deja vu all over again.''
    Our witnesses today will provide us with some insight into 
the Administration's perspective on critical materials. Dr. 
Holdren will discuss the activities of the interagency working 
group that was created last year. Mr. Sandalow and Mr. Doebrich 
will discuss their respective agencies' involvement in the 
group, as well as provide us with an overview of their 
agencies' responsibilities relative to the topic of this 
hearing.
    Taking it a step further, I look forward to some honest 
conversations about appropriate roles that should and shouldn't 
be played by the Federal Government. While I appreciate the 
need for federal research, I believe we should distinguish 
between basic and applied research, recognizing that the 
government may have a role to play in the former, but that it 
should not duplicate nor preempt work that is rightfully done 
by industries.
    For about 2 decades, the price of rare earths and critical 
materials were low, perhaps artificially so, because of Chinese 
policies. As a result of these policies and our own stringent 
rules regarding environmental standards, U.S. suppliers were 
unable to compete. Now that the Chinese have restricted 
exports, prices have gone up because non-Chinese suppliers have 
all but vanished. These policies have led to various 
international trade protests that remain unresolved.
    Conversely, there are those who say that we shouldn't fret 
over these conditions because the financial markets will 
ultimately correct the situation. The expansion of Lynas 
Corporation in Australia and the growth of Molycorp in the 
United States provide hope that alternatives to Chinese rare 
earths will be available shortly. In the interim, though, we 
still need a plan, one that should assess issues such as 
stockpiling, permitting, researching and development, workforce 
development, recycling, information gathering, and 
manufacturing and production incentives. I look forward to 
exploring these options and hearing from our government 
witnesses today.
    The Chair now recognizes Ms. Edwards for an opening 
statement.
    [The prepared statement of Representative Hultgren 
follows:]
           Prepared Statement Acting Chairman Randy Hultgren
    The subject of today's hearing is one which this Subcommittee is 
very familiar with. A little over a year ago, under the then-Democratic 
Majority, the Investigations and Oversight Subcommittee held a hearing 
on rare earth minerals. Rare earths, as most of you know, possess 
unique physical and chemical properties that make them particularly 
suitable for use in advanced technologies, such as high powered 
magnets, petroleum refining catalysts, batteries, and lasers, among 
others. They are also important components in everyday items that 
everyone in this room probably has right now, such as cell phones and 
blackberries.
    This Committee did some very good work last year, as we heard from 
industry folks, academics, and scientists. Today, we follow up on that 
work, and take the next step in this process by hearing from government 
officials.
    I am pleased to welcome our distinguished guests. While they 
represent different agencies within the Administration, they are here 
today because of their collaboration on an interagency working group on 
critical and strategic materials supply chains. Critical materials 
include rare earth elements, which are more widely recognized today 
than they were when this Committee last addressed the topic.
    That the issue is still of interest to Congress is evidenced by the 
number and variety of bills introduced in both the House and Senate. I 
myself recently introduced H.R. 2090, the Energy Critical Elements 
Advancement Act, and Mr. Miller from the Democratic side has a bill 
too.
    In 1980, the National Materials and Minerals Policy, Research and 
Development Act was enacted because the United States lacked a 
``coherent national materials policy and a coordinated program to 
assure the availability of materials critical for national economic 
well-being, national defense, and industrial production, including 
interstate commerce and foreign trade.'' Thirty-one years later, this 
Committee is presented with similar issues, and to quote Yogi Berra, 
``it's deja-vu all over again.''
    Our witnesses today will provide us with some insight into the 
Administration's perspective on critical materials. Dr. Holdren will 
discuss the activities of the interagency working group that was 
created last year, and Mr. Sandalow and Mr. Doebrich will discuss their 
respective agencies' involvement in the group, as well as provide us 
with an overview of their agencies' responsibilities relative to the 
topic of this hearing.
    Taking it a step further, I look forward to some honest 
conversations about appropriate roles that should--and shouldn't--be 
played by the federal government. While I appreciate the need for 
federal research, I believe we should distinguish between basic and 
applied research, recognizing that the government may have a role to 
play in the former, but that it should not duplicate, nor preempt work 
that rightfully should be done by industries.
    For about two decades, the price of rare earths and critical 
materials were low, perhaps artificially so, because of Chinese 
policies. As a result of these policies, and our own stringent rules 
regarding environmental standards, U.S. suppliers were unable to 
compete. Now that the Chinese have restricted exports, prices have gone 
up because non-Chinese suppliers have all but vanished. These policies 
have led to various international trade protests that remain 
unresolved.
    Conversely, there are those who say that we shouldn't fret over 
these conditions because the financial markets will ultimately correct 
the situation. The expansion of Lynas Corporation in Australia, and the 
growth of Molycorp in the United States, provides hope that 
alternatives to Chinese rare earths will be available shortly.
    In the interim though, we still need a plan, one that should assess 
issues such as: stockpiling, permitting, research and development, 
workforce development, recycling, information gathering, and 
manufacturing and production incentives. I look forward to exploring 
these options, and hearing from our government witnesses today.
    I now turn to the Ranking Member from Maryland.

    Ms. Edwards. Thank you, Mr. Chairman. And thank you in 
advance to our witnesses today. I want to thank the Chairman 
for taking up this important issue. And I also want to 
acknowledge the work of the former Chairman of the 
Subcommittee, Mr. Miller, who held the first hearing on this 
matter for the Committee and who also worked with his then-vice 
chair, Kathy Dahlkemper from Pennsylvania, to craft legislation 
designed to help address the shortage of rare earth elements.
    Rare earths are just one class of materials that are 
crucial to our economy and our national security. This 
Committee has a 30-year-long history of trying to establish an 
ongoing institutionalized focus on potential shortages of such 
materials, but at different times, both Republican and 
Democratic administrations have let this matter slip off the 
table. That said, I congratulate the Obama Administration for 
grasping the challenge of critical materials and organizing to 
develop a coherent set of policies. I am very pleased to see 
Dr. Holdren here today to talk about those efforts.
    The public focus on shortages is largely on rare earth 
elements, but tomorrow, the challenge may indeed be scarce 
isotopes or metals or minerals. I think we need to recognize 
that government should have an ongoing capacity to work to 
identify potential shortages and adopt policies designed to 
avoid or diminish the disruptions that come with shortages. 
Some argue that rare earth element--that the rare earth element 
story will end up validating the power of markets to address 
demand. It is true that there are aggressive efforts underway 
in Malaysia, the United States, and other places to develop 
rare earth extraction capacity. However, even if those efforts 
prove fruitful, the reality is that China's aggressive use of 
access to their rare earth reserves will have succeeded in 
moving manufacturing facilities and jobs to China. Once there, 
those facilities are highly unlikely to move away.
    Further, there is nothing to keep China from reversing its 
rare earth policies if they face competitors. At the moment, 
China has cut export quotas to create incentives for farms to 
move there and to capture exorbitant profits from those 
reserves they do export. There is nothing to stop the Chinese 
Government from reversing course in the future and flooding 
markets with rare earths to drive their competition out of 
business. And when faced with a state-controlled economy the 
size of China's, we cannot assume that markets alone can solve 
our problems.
    I want to warn that those who blame our loss of mining and 
rare earths on environmental regulations that they are 
overlooking the reality that the key lever the Chinese use to 
win a virtual global monopoly in mining in the first place was 
cutthroat pricing. That said, rare earth mining and processing 
has proven to be a very dirty business in the past with 
pollution, including radioactive waste, a trademark of this 
industry. I expected our work to develop a domestic industry 
that will not ignore the real dangers inherent in earth mining 
and process and that we will see Molycorp and others set a 
global standard for environmental compliance and safety.
    I look forward to the testimony today and hope that this 
marks the beginning of an ongoing dialogue about how to protect 
our jobs, our economy, and our national security for unfair 
trade practices and resource scarcities.
    I would like to yield my remaining time to my distinguished 
colleague, Mr. Miller of North Carolina.
    [The prepared statement of Ms. Edwards follows:]

         Prepared Statement of Ranking Member Donna F. Edwards
    I want to thank the Chairman for taking up this important issue. I 
also want to acknowledge the work of the former Chairman of this 
Subcommittee, Mr. Miller, who held the first hearing on this matter for 
the Committee, and who worked with his then-Vice Chair, Kathy 
Dahlkamper, to craft legislation designed to help address the shortage 
of rare earth elements.
    Rare earths are just one class of materials that are crucial to our 
economy and our national security. This Committee has a thirty year-
long history of trying to establish an ongoing institutionalized focus 
on potential shortages of such materials, but at different times 
Republican and Democratic administrations have let this matter slip off 
the table.
    That said, the Obama Administration is to be congratulated for 
grasping the challenge of critical materials and organizing to develop 
a coherent set of policies. I am very pleased to see Dr. Holdren here 
to talk about those efforts.
    The public focus on shortages is largely on rare earth elements, 
but tomorrow the challenge may be scarce isotopes or metals or 
minerals. I think we need to recognize that the government should have 
an on-going capacity to work to identify potential shortages and adopt 
policies designed to avoid or diminish the disruptions that come with 
shortages.
    Some argue that the rare earth element story will end up validating 
the power of markets to address demand. It is true that there are 
aggressive efforts underway in Malaysia, the United States and other 
places to develop rare earth extraction capacity.
    However, even if those efforts prove fruitful, the reality is that 
China's aggressive use of access to their rare earths reserves will 
have succeeded in moving manufacturing facilities and jobs to China. 
Once there, those facilities are unlikely to move away. Further, there 
is nothing to keep China from reversing its rare earth policies if they 
face competitors.
    At the moment, China has cut export quotas to create incentives for 
firms to move there and to capture exorbitant profits from those 
reserves they do export. There is nothing to stop the Chinese 
government from reversing course in the future and flooding markets 
with rare earths to drive their competition out of business.
    When faced with a state-controlled economy the size of China's, we 
cannot assume that markets alone can solve our problems. I want to warn 
that those who blame our loss of mining in rare earths on environmental 
regulations that they are overlooking the reality that the key lever 
the Chinese used to win a virtual global monopoly in mining in the 
first place was cut-throat pricing.
    That said, rare earth mining and processing has proven to be a very 
dirty business in the past, with pollution-including radioactive 
wastes-a trademark of this industry. I expect that our work to develop 
a domestic industry will not ignore the real dangers inherent in rare 
earth mining and process and that we will see Molycorp, and others, set 
a global standard for environmental compliance and safety.
    I look forward to the testimony today and hope that this marks the 
beginning of an ongoing dialogue about how to protect our jobs, our 
economy and our national security from unfair trade policies and 
resource scarcities.
    I would like to yield my remaining time to my distinguished 
colleague, Mr. Miller of North Carolina.

    Mr. Miller. Thank you, Ms. Edwards.
    Ensuring reliable and stable supply of energy-critical 
elements is obviously vital to our national security and our 
economic interest, and this has been an issue of interest to me 
for some time. As both Ms. Edwards and Mr. Hultgren have said, 
I chaired a Committee hearing--a Subcommittee hearing on this a 
year ago. As a result of that hearing, this Subcommittee did 
develop legislation. Our Democratic staff did great work. Ms. 
Dahlkemper, who was the vice chair of the Committee introduced 
the legislation, and I have introduced that--very similar 
legislation again that is based upon the work of the 
Subcommittee last year.
    But that really was not the first legislation of this kind. 
We are not new to this issue. We recognize the importance of 
critical materials in the '80s and past National Materials and 
Minerals Policy, Research and Development Act. I say ``we''--I 
mean Congress, but obviously I was not here then. But Executive 
Branch efforts really have been nonexistent for almost two 
decades now. It is time that we do start focusing on the issue. 
We cannot allow ourselves to lose the competitive advantage 
that we have had in the past or have those materials--access to 
those materials used to leverage other economic advantages. And 
I look forward to working with the Office of Science and 
Technology Policy, the Department of Energy, and I am glad that 
they are paying attention to this issue as well.
    Thank you very much.
    Mr. Hultgren. Thank you, Ms. Edwards and Mr. Miller. If 
there are members who wish to submit additional opening 
statements, your statements will be added to the record at this 
point.
    At this time, I would like to introduce our panel of 
witnesses: first, Dr. John Holdren, Director of the Office of 
Science and Technology Policy; next, Mr. David Sandalow is the 
Assistant Secretary for Policy and International Affairs at the 
U.S. Department of Energy; and Mr. Jeff Doebrich is the Acting 
Program Coordinator for the Mineral Resources Program at the 
U.S. Geological Survey. Thank you all for being here.
    As our witnesses should know, spoken testimony is limited 
to five minutes each, after which the members of the Committee 
will have five minutes each to ask questions. Your written 
testimony will be included in the record of the hearing.
    It is the practice of the Subcommittee on Investigations 
and Oversight to receive testimony under oath. Do any of you 
have any objection to taking an oath? Let the record reflect 
that all witnesses were willing to take an oath.
    You may also be represented by counsel. Do any of you have 
counsel here with you today? Let the record reflect that none 
of the witnesses have counsel.
    If all of you would now please stand and raise your right 
hand.
    Do you solemnly swear or affirm to tell the whole truth and 
nothing but the truth, so help you, God?
    Let the record reflect that all the witnesses participating 
have taken the oath. Thank you very much. You may be seated.
    I now recognize our first witness, Dr. Holdren. Thank you.

     STATEMENT OF DR. JOHN P. HOLDREN, DIRECTOR, OFFICE OF

         SCIENCE & TECHNOLOGY POLICY, EXECUTIVE OFFICE

             OF THE PRESIDENT OF THE UNITED STATES

    Dr. Holdren. Well, Chairman Hultgren, Ranking Member 
Edwards, members of the Subcommittee, I want to start by 
thanking you for the opportunity to testify today on 
administration policies and interagency efforts for addressing 
the issues that surround the production and use of critical 
materials.
    There is, as you have already mentioned, a number of you, a 
long history of concerns about the availability of critical 
materials, which we call that because their supply is highly 
concentrated in either one country or in a few corporate 
entities, and because they are used in the production of goods 
that are important economically or for national security.
    The Executive Office of the President in this 
Administration has been focused on this issue for well over a 
year--since March 2010, in fact. The Office of Science and 
Technology Policy in close coordination with the National 
Economic Council, the U.S. Trade Representative, and the 
National Security Council has been convening--as you mentioned, 
Mr. Chairman--an interagency working group to develop the 
necessary understanding of the critical materials situation and 
to focus Administration thinking and resources on risk 
mitigation.
    Four points have emerged from that process as key to 
understanding the overall situation. The first one is that 
concentrated production does not necessarily mean the reserves 
are equally concentrated. China currently accounts for about 95 
percent of world production of the rare earth elements but is 
host to only a third to a half of the known reserves. In 
situations of that kind, market forces will work over the long 
term to mitigate risks as other suppliers come into the market 
to take advantage of higher prices and new demand.
    Second point is that market size does not necessarily 
predict disruptive potential. For example, the U.S. market for 
raw oxide forms of rare earths is small. It is only about $170 
million a year or about 1/1000 of a percent of U.S. GDP. But 
these rare earths serve as vital ingredients in many advanced 
technologies in the commercial and defense domains, including 
the emerging clean energy sector, which are worth much more.
    Third, the risks of supply disruptions depend on what form 
of the material is deemed critical: raw minerals, metals, 
alloys, components, or finished goods. For any given material, 
a detailed analysis of the entire supply chain is necessary in 
order to identify where the vulnerabilities are and to identify 
effective mitigation measures.
    Fourth, in the short term, the Administration can use trade 
relations and diplomacy to foster the diversification of supply 
of critical materials, as well as taking steps to facilitate 
domestic production. In the long term, the greatest 
opportunities to reduce the risks associated with critical 
materials are through investments in research and innovation.
    In the rest of my time, I want to elaborate on some agency 
and interagency activities that are currently underway and 
contemplated to address those issues. First of all, it is 
important to identify proactively and continuously which 
materials are critical based on an agreed-upon set of criteria. 
A number of departments, agencies, and outside entities, 
including the National Academy of Sciences, have been and are 
conducting such analyses and developing frameworks that will 
ultimately allow us to anticipate material shortfalls before 
they actually happen in the market.
    Second, given the growing interdependence among countries 
supplying and using these resources, a shared and accurate 
understanding of global raw material flows, location of 
resources, and material demand is essential. The OSTP convened 
interagency process is investigating the best ways to 
accomplish that.
    Third, USTR is closely examining China's policies, 
restricting exports of raw materials including rare earths, and 
continues to press China to remove those restrictions both 
through bilateral dialogues and through international venues.
    Fourth, and for the longer term, the Administration 
proposes to initiate additional research activity on critical 
materials issues. The President's fiscal year 2012 budget 
includes $20 million for a DOE innovation hub in that domain, 
and I suspect that Assistant Secretary Sandalow will describe 
that hub and other relevant DOE R&D activities in more detail.
    In closing, let me emphasize that the Obama Administration 
is taking the topic of critical materials and their supply 
chains very seriously indeed. Federal agency efforts are being 
coordinated through the White House-led interagency process as 
I mentioned. We remain in close communication with the 
scientific, technical, and business communities, and certainly 
we look forward to working with this Subcommittee, with the 
full Committee, and with other Members of Congress to improve 
our national capabilities in this domain.
    I will be happy to try to answer any questions you have. 
Thank you.
    [The prepared statement of Dr. Holdren follows:]

Prepared Statement of Dr. John P. Holdren, Director, Office of Science 
and Technology Policy, Executive Office of the President of the United 
                                 States
    Chairman Broun, Ranking Member Edwards, and members of the 
Subcommittee, thank you for the opportunity to testify today on the 
Administration policies and interagency efforts for addressing the many 
complex issues associated with the production and use of critical 
materials.
    While recent events may have precipitated this hearing, there is a 
long history of concerns over the availability of critical materials. 
Many materials are referred to as ``critical'' because supply is highly 
concentrated in either one country or by a few corporate interests, and 
because they are used in the production of goods that are important 
economically or for national security. Today, there is particular 
concern about materials like platinum, tellurium, and rare earth 
elements because they are essential to the manufacture of products in 
key high-growth sectors, including clean energy, consumer electronics, 
and defense, among others.
    The Executive Office of the President (EOP) has been focused on 
this issue for some time. Since March 2010, the Office of Science and 
Technology Policy (OSTP), in close coordination with the National 
Economic Council (NEC), the Office of the U.S. Trade Representative 
(USTR), and the National Security Council (NSC), has been convening an 
interagency working group to develop the necessary understanding of the 
critical-materials situation and to focus Administration thinking and 
resources on risk mitigation. First, I would like to go through some 
key themes that have emerged as part of this interagency process-themes 
that will provide the necessary backdrop for our discussion today. Then 
I will turn my attention to administration action areas already under 
way.

Production is only indicative of short-term market risk

    Concentrated production does not necessarily imply concentrated 
reserves. China currently accounts for about 95 percent of world 
production of the rare earth elements (REE), but is host to only a 
third to half of known reserves. The high concentration of current 
production creates short-term risks and vulnerabilities, such as high 
commodity prices and supply disruptions, but in the longer term normal 
market forces will work to mitigate these risks, as other suppliers 
come into the market to take advantage of the higher prices and new 
demand.

Access to critical materials is vital for emerging industries,

like clean energy

    The U.S. market for the raw oxide form of REE is small-only about 
12 percent of global trade, or $170 million per year. But these REE 
serve as vital ingredients in many advanced technologies in both the 
commercial domain (including electric vehicles, lighting, computers, 
wind turbines, ceramics, and medical imaging) and the defense domain 
(including avionics, radar, precision-guided munitions, and lasers). 
Supply shortages of critical materials are of concern because they can 
stall production of high-growth industries such as the emerging clean 
energy sector.

In assessing risks of supply disruptions, the entire supply chain

must be considered

    The risks of supply disruptions depend on what form of the material 
is deemed critical-raw minerals, metals, alloys, components, or 
finished goods. For example, most electronic components and finished 
goods containing rare earths are manufactured abroad, so there is 
probably little cause for concern in the domestic electronics industry 
if only the raw metals and oxides are being restricted, so long as the 
U.S. companies can continue to buy the REE-containing components and 
goods from other countries. In another example, the United States has 
the largest reserves of tellurium, a materials used in high-efficiency 
solar technologies, and there is a high level of producer diversity of 
this material. However, global production of tellurium has not 
increased with growing global demand, potentially limiting the market 
development of promising new photovoltaic technologies. For any given 
material, a detailed analysis of the entire supply chain is necessary 
to identify potential vulnerabilities and effective mitigation 
measures. In some cases, domestic manufacturing is as important as 
domestic mining.

Long-term planning and innovation provide the best opportunity to

mitigate supply risks

    Concentration of the production of critical materials can cause 
painful price spikes and supply disruptions. In the short term, the 
Administration can use trade relations and diplomacy to foster the 
diversification of critical material supply, as well as take steps to 
facilitate domestic production. In the long term, the greatest 
opportunities to reduce the risks associated with critical materials 
are through investments in R&D and innovation. The OSTP-convened 
interagency process is addressing these core themes in both the short 
and long-term. Presently this interagency effort is organized around 
the following sets of activities:

      identifying critical materials based on common and agreed 
criteria;

      promoting more detailed and transparent collection of 
information on global resource supply and demand to facilitate the 
proper functioning of markets;

      establishing federal research and development priorities 
and establishing R&D roadmaps; and

      reviewing-in coordination with our colleagues in the NEC, 
USTR, NSC and Federal agencies-domestic and global policies that affect 
the supply of critical materials (permitting, export restrictions, 
recycling, stockpiling, etc.) and pursuing remedies for roadblocks.

    In what follows, I elaborate on the agency and interagency 
activities currently underway and contemplated in each of these 
domains.

Identifying critical materials based on agreed criteria

    Identifying which materials are critical based on an agreed set of 
criteria should be done proactively and continuously. The National 
Academy of Sciences and the American Physical Society/ Materials 
Research Society recently published reports that include methodologies 
for defining critical minerals. In its 2010 Critical Materials 
Strategy, the Department of Energy (DOE) developed a methodology for 
assessing energy-critical materials. Concurrently, the Department of 
Defense (DOD) is conducting a congressionally mandated assessment of 
demand for individual rare earth elements from defense applications 
with an interim report due in July 2011. In support of this effort, the 
USGS recently completed a DOD-funded inventory of known domestic rare-
earth reserves and resources. These analyses and frameworks provide the 
foundation for developing a robust and on-going analytical capability, 
one that allows the Federal government to anticipate material 
shortfalls in multiple civilian and defense related sectors long before 
they happen in the market. Our newly established interagency working 
group formed a sub-group co-chaired by the Departments of Energy and 
Defense to perform this task.

Depth and transparency of information

    The growing interdependence between countries supplying and using 
raw materials underlines the importance of ensuring that global markets 
are open and well-functioning, on the basis of known material flows, 
clear price signals, and fair and transparent regulations. A shared and 
accurate understanding of global raw materials flows, location of 
resources, and material demand is essential to ensure the smooth 
functioning of materials markets. Data availability for many critical 
raw materials is limited due to relatively small market sizes and a 
limited number of producers. In addition, assessing the supply and 
demand outlook is complicated because many critical raw materials are 
mined or coproduced with other materials. More accurate and timely 
market information will help industry and governments make better 
strategic decisions. The OSTP-convened interagency process can support 
the collection, dissemination, and quality assurance of global 
information that builds on existing government data-collection 
processes. For example, enhanced cooperation among national geological 
services could substantially improve collective knowledge on the 
availability of raw materials and facilitate the identification of 
resource location.

Federal R&D needs and priorities

    The Department of Energy is initiating new R&D activity on these 
issues. The President's FY 2012 Budget includes a proposal for a DOE 
Energy Innovation Hub ($20 million) on critical materials to help 
reduce U.S. reliance on materials such as rare earth elements (REE). 
The Hub activity will focus on finding ways to reduce the content of 
such critical materials in existing components; identifying new 
chemical compositions, material designs, and approaches that are not 
reliant on critical materials; and pursuing technologies that decrease 
the cost of separating critical elements from recycle streams and ores. 
Furthermore, DOE's Advanced Research Projects Agency-Energy (ARPA-E) 
issued a solicitation in FY 2011 to fund early-stage technology 
alternatives that reduce or eliminate dependence on rare earths by 
developing substitutes in two key areas: electric vehicle motors and 
wind generators. Up to $30 million will be made available for this 
program area.

Addressing global trade policies

    In October 2010, USTR initiated an investigation into allegations 
concerning China's export restraints on REE, tungsten, and antimony, 
pursuant to a petition brought by the United Steelworkers under Section 
301 of the Trade Act of 1974, as amended. Although no formal action was 
taken by USTR under Section 301 on the REE allegations, USTR is closely 
examining China's policies restricting exports of raw materials, 
including REE, and continues to press China to remove its export 
restraints on REE and other raw materials. Moreover, the United States 
is actively working through international organizations such as the 
World Trade Organization (WTO), the G-20, the Organization for Economic 
Cooperation and Development (OECD), and through bilateral dialogues to 
increase transparency about problematic export restraint policies in 
China and other countries, and to reduce barriers to global trade and 
investment in raw materials.
    In closing, let me emphasize again that the Executive Office of the 
President and the Federal agencies are taking the topics of critical 
materials and critical mineral supply chains very seriously. The 
Federal agency efforts are coordinated through the EOP-led interagency 
process. Despite that process being in its infancy, we have developed a 
shared understanding of the problems and issues of critical materials 
with our interagency partners, have formulated a game plan for 
addressing both short and long-term concerns with critical materials 
and are executing on that plan. We remain in close communication with 
the scientific, technical, and business communities; and we look 
forward to continuing to work with this committee and other members of 
Congress to help ensure growth in our national capabilities in this 
domain.
Thank you.

    Mr. Hultgren. Thank you, Dr. Holdren. Thank you for being 
here.
    I now recognize our next witness, Mr. Sandalow. Thank you.

                STATEMENT OF MR. DAVID SANDALOW,

        ASSISTANT SECRETARY FOR POLICY AND INTERNATIONAL

               AFFAIRS, U.S. DEPARTMENT OF ENERGY

    Mr. Sandalow. Thank you, Mr. Chairman, Ranking Member 
Edwards, and members of the Subcommittee. I join Director 
Holdren in thanking you for holding a hearing on this important 
topic today.
    Earlier this year, I visited the Mountain Pass Mine in 
Southern California. I was impressed by the facility and its 
potential to provide a domestic source of rare earth metals. 
According to the facility's owners, the mine will produce at an 
annual rate of about 19,000 tons of rare earth by the end of 
2012 and 40,000 rare earth--tons of rare earth by the end of 
2014 and doing that using modern technologies at a globally 
competitive cost. Now, that is an important step in the right 
direction.
    The issue of critical materials is important and needs 
priority attention in the months and years ahead. At the 
Department of Energy, we share the goal of establishing a 
stable, sustainable, and domestic supply of critical minerals, 
and we look forward to working with the Congress on this issue 
as we move forward.
    Members of the Committee, the world is on a cusp of a clean 
energy revolution. Here in the United States, we are making 
historic investments in clean energy. The American Recovery Act 
was the largest one-time investment in clean energy in our 
Nation's history. At DOE, we are investing $35 billion in 
Recovery Act funds in electric vehicles, batteries, and 
advanced energy storage, a smarter and more reliable electric 
grid, wind and solar technologies, among many other areas.
    Now, other countries are also seizing this opportunity. For 
example, the Chinese Government is launching a program to 
deploy electric cars in over 25 major cities while building 
huge wind farms, ultra-supercritical advanced coal plants, 
ultra high voltage long-distance transmission lines and more. 
India has launched an ambitious national solar mission, and in 
Europe, strong public policies are driving sustained 
investments in clean energy.
    In recognition of the importance of certain materials in 
the transition to clean energy, DOE is working to address the 
use of critical materials in clean energy components in 
products and processes. As a first step, last year we released 
a critical materials strategy, the first of its kind ever 
released by the Department of Energy. The report found that 
four clean energy technologies--wind turbines, electric 
vehicles, photovoltaic cells, and fluorescent lighting--use 
materials at risk of supply disruptions in the next five years. 
In the report, five rare earth elements--dysprosium, neodymium, 
terbium, europium, and yttrium, as well as indium--were 
assessed as the most critical in the short term. For this 
purpose, criticality was a measure that combined the importance 
of the clean energy economy and the risk of supply disruption.
    Our critical materials strategy highlighted three pillars 
to address the challenges associated with these materials in 
the clean energy economy. First, substitutes must be developed. 
Second, recycling, reuse, and more efficient use can 
significantly lower global demand for newly-extracted 
materials. And finally, diversified global supply chains are 
essential. That means encouraging other nations to expedite 
alternative supplies and exploring other potential sources of 
materials, in addition to facilitating environmentally sound 
extraction and processing right here in the United States 
because domestic production is the most secure. With all three 
of these approaches, we must consider all stages of the supply 
chain from sound material extraction to purification and 
processing to manufacture of chemicals and components and 
ultimately to end uses.
    This year, DOE is updating our analysis. We have in recent 
months sent out to the public a request for information and, in 
the process, received back over 500 pages of information from 
over 30 respondents with a variety of information on multiple 
topics. One lesson we have learned through this experience is 
that supply constraints aren't static. As a society, we have 
dealt with these types of issues before, mainly through smart 
policy and R&D investments that reinforced efficient market 
mechanisms. We can and will do so again.
    We must be smart and serious as we plan for a growing 
global demand for products that contain critical minerals. With 
focused attention, working together we can meet these 
challenges. Thank you.
    [The prepared statement of Mr. Sandalow follows:]

Prepared Statement of David Sandalow, Assistant Secretary of Energy for 
      Policy and International Affairs, U.S. Department of Energy
    Chairman Broun, Ranking Member Edwards, and Members of the 
Subcommittee, thank you for the opportunity to testify today about the 
Federal perspective on a national critical materials strategy and the 
Department of Energy's ongoing work on this topic.
    Earlier this year I visited the Mountain Pass Mine in southern 
California. I was impressed by the facility and its potential to 
provide a domestic source of rare earth metals. According to the 
owners, the mine will produce at an annual rate of about 19,000 tons of 
rare earths by end of 2012 and 40,000 tons by early 2014, using modern 
technologies at a globally competitive cost. That's an important step 
in the right direction.
    The issue of critical minerals is important and needs priority 
attention in the months and years ahead. The Department shares the goal 
of establishing a stable, sustainable and domestic supply of critical 
minerals, and we look forward to discussions with the Congress on ways 
to address this issue as we move forward.

GLOBAL CLEAN ENERGY ECONOMY

    historic investments in clean energy. The American Recovery and 
Reinvestment Act was the largest one-time investment in clean energy in 
our nation's history--more than $90 billion. At the Department of 
Energy (DOE), we're investing $35 billion in Recovery funds in electric 
vehicles; batteries and advanced energy storage; a smarter and more 
reliable electric grid; and wind and solar technologies, among many 
other areas. We aim to double our renewable energy generation and 
manufacturing capacities by 2012. We are working to deploy hundreds of 
thousands of electric vehicles and charging infrastructure to power 
them, weatherize at least half a million homes, and help modernize our 
grid.
    Other countries are also seizing this opportunity, and the market 
for clean energy technologies is growing rapidly all over the world. 
For example, the Chinese government is launching programs to deploy 
electric cars in over 25 major cities. They are connecting urban 
centers with high-speed rail and building huge wind farms, 
ultrasupercritical advanced coal plants and ultra-high*voltage long-
distance transmission lines. India has launched an ambitious National 
Solar Mission, with the goal of reaching 20 gigawatts of installed 
solar capacity by 2020.
    In Europe, strong public policies are driving sustained investments 
in clean energy. Denmark earns more than $4 billion each year in the 
wind turbine industry. Germany and Spain are the world's top installers 
of solar photovoltaic panels, accounting for nearly three-quarters of a 
global market worth $37 billion in 2009. Around the world, investments 
in clean energy technologies are growing, helping create jobs, promote 
economic growth and fight climate pillar of global economic growth.

DOE STRATEGY

    In recognition of the importance of certain materials in the 
transition to clean energy, DOE has begun to address the use of 
critical materials in clean energy components, products and processes. 
As a first step, DOE released its Critical Materials Strategy last 
December. The report found that four clean energy technologies-wind 
turbines, electric vehicles, photovoltaic cells and fluorescent 
lighting-use materials at risk of supply disruptions in the next five 
years. In the report, five rare earth elements (dysprosium, neodymium, 
terbium, europium and yttrium), as well as indium, were assessed as 
most critical in the short term. For this purpose, ``criticality'' was 
a measure that combined importance to the clean energy economy and the 
risk of supply disruption.
    The Critical Materials Strategy highlighted three pillars to 
address the challenges associated with critical materials in the clean 
energy economy. First, substitutes must be developed. Research and 
entrepreneurial activity leading to material and technology substitutes 
improves flexibility to meet the material demands of the clean energy 
economy. Second, recycling, reuse and more efficient use can 
significantly lower global demand for newly extracted materials. 
Research into recycling processes coupled with well-designed policies 
will help make recycling economically viable over time. Finally, 
diversified global supply chains are essential. To manage supply risk, 
multiple sources of material are required. This means encouraging other 
nations to expedite alternative supplies and exploring other potential 
sources of material (such as existing mine here in the United States. 
With all three of these approaches, we must consider all stages of the 
supply chain: from environmentally-sound material extraction to 
purification and processing, the manufacture of chemicals and 
components, and ultimately end uses.
    Since the Critical Materials Strategy was released last year, DOE's 
work in this area has ramped up considerably. Earlier in 2011, ARPA-E 
issued a $30 million Funding Opportunity Announcement (FOA) on Rare 
Earth Alternatives for magnets in wind turbines and motors. EERE's 
Vehicle Technology and Wind Programs have also issued relevant FOAs 
this year. In addition, the President's FY 2012 budget supports a 
Critical Materials Hub. These activities build on DOE's longstanding 
expertise on these topics. For example, the Office of Basic Energy 
Sciences (BES) has funded research at Ames Laboratory on the production 
of high quality rare earth magnets, magnetic technologies, synthesis 
technologies and superconductors for a number of years. The Office of 
Energy Efficiency and Renewable Energy (EERE) has funded several 
projects at Ames Laboratory and Oak Ridge National Laboratory 
addressing alternate magnet and motor designs.
    This year, DOE will update its analysis in light of rapidly-
changing market conditions. DOE is analyzing the use of critical 
materials in petroleum refineries and other applications not addressed 
in last year's report. In addition, DOE may identify specific 
strategies for materials identified as critical, including strategies 
with respect to substitution, recycling and more efficient use. In 
support of this year's analysis, DOE issued a Request for Information 
that focused on critical material content of certain technologies, 
supply chains, research, education The RFI closed last month. We 
received nearly 500 pages of responses from 30 organizations, including 
manufacturers, miners, universities, and national laboratories. Many 
organizations shared proprietary data on material usage that will help 
us develop a clearer picture of current and future market conditions.
    Within this larger context, we do intend to address domestic 
production of critical materials in our 2011 report. Production within 
the United States is important for at least three reasons. First, 
domestic production is the most secure. Second, the United States' 
considerable reserves of some critical materials could add 
significantly to total global production and to greater diversity in 
the global supply of these materials. Third, U.S. technology and best 
practices developed during mine operations can help promote safe and 
responsible mining in other countries, further contributing to supply 
diversity and the sustainable development of resources. With regard to 
mining in the United States, it is important to point out that permits 
are not the only requirements that can extend the time required to open 
a mine. The required accumulation of hundreds of millions of dollars of 
capital for mine development can also lead to delay.
    Managing supply chain risks is by no means simple. At DOE, we focus 
on the research and development angle. From our perspective, we must 
think broadly about addressing the supply chain in our research and 
development (R&D) investments, from extraction of materials through 
product manufacture and eventual recycling. It is also important to 
think about multiple technology options, rather than picking winners 
and losers. We work with other Federal agencies to address other 
issues, such as trade, labor and workforce, and environmental impacts.
    The White House Office of Science and Technology Policy has been 
convening an interagency effort on critical materials and their supply 
chains. In fact, this group met last week to discuss a number of 
important developments on these topics.

CONCLUSION

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

    Mr. Hultgren. Thank you, Mr. Sandalow.
    I now recognize our final witness, Mr. Doebrich.

               STATEMENT OF MR. JEFF L. DOEBRICH,

         ACTING PROGRAM COORDINATOR, MINERAL RESOURCES

    PROGRAM, U.S. GEOLOGICAL SURVEY, U.S. DEPARTMENT OF THE 
                            INTERIOR

    Mr. Doebrich. Good afternoon and thank you for the 
opportunity to appear before you today to discuss the role of 
the USGS in informing decisions regarding a national critical 
minerals strategy.
    The USGS is responsible for conducting research and 
collecting data on a wide variety of non-fuel and mineral 
resources. We conduct research to understand the geologic 
processes that concentrated known mineral resources at specific 
localities in the earth's crust, and to estimate quantities, 
qualities, and areas of mineral resources. We collect, analyze, 
and disseminate data and information on current production and 
consumption for about 100 mineral commodities both domestically 
and internationally.
    We also conduct research on the interactions of mineral 
resources with the environment, both natural and as a result of 
resource extraction to better predict the degree of impact the 
resource development may have on human and ecosystem health. 
This full spectrum of mineral resource science allows for 
comprehensive understanding of the complete lifecycle of 
mineral resources and materials: resource formation, discovery, 
production, consumption, use, recycling, and reuse, and allows 
for an understanding of environmental issues of concern 
throughout the lifecycle.
    Global demand for critical mineral commodities is on the 
rise with increasing applications in consumer products, 
computers, automobiles, aircraft, and other advanced technology 
products. The USGS has recently completed an inventory of known 
domestic rare earth reserves and resources. This study reviews 
current U.S. consumption and imports of rare earths, current 
knowledge of domestic resources, and possibilities for future 
domestic production. The report also includes an overview of 
known global rare earth resources and discusses the reliability 
of alternative foreign sources.
    Though rare earth elements are currently of most concern to 
many--including the Department of Defense which funded this 
inventory--it should be noted that in 2010 the United States 
was 100 percent dependent on foreign suppliers for 18 mineral 
commodities and more than 50 percent dependent on foreign 
sources for 43 mineral commodities. The import partners include 
Brazil, Canada, China, France, Germany, Japan, Mexico, Russia, 
Venezuela, and many others.
    The USGS is a member of the OSTP convened interagency 
process on critical and strategic mineral supply chains. USGS 
information on domestic and global mineral production and 
consumption and expertise in understanding this information are 
being provided to the interagency group to help inform 
decision-making and to support the ongoing activities that 
relate to a national critical mineral strategy.
    In particular, the USGS is taking a lead role with other 
interagency members in the recently-established sub-working 
group to identify high-priority critical minerals and to 
establish a methodology and criteria necessary to make those 
determinations. This work will enable the Federal Government to 
anticipate material shortfalls before they happen in the market 
and will be a core competent in establishing a national 
critical minerals strategy.
    The USGS stands ready to fulfill its role as the federal 
provider of unbiased research on known mineral resources, 
assessment of undiscovered mineral resources, and information 
on domestic and global production and consumption of mineral 
resources for use in global critical mineral supply chain 
analysis.
    Thank you for the opportunity to explain the role of the 
USGS on this very important topic, and I will be happy to 
answer any questions.
    [The prepared statement of Mr. Doebrich follows:]

    Prepared Statement of Mr. Jeff L. Doebrich, Program Coordinator 
                               (Acting),
 Mineral Resources Program, U.S. Geological Survey, U.S. Department of 
                              the Interior
    Good afternoon, Mr. Chairman and Members of the Subcommittee. Thank 
you for the opportunity to appear before you today to discuss the role 
of the USGS in informing decisions regarding a national critical 
minerals strategy.
    The USGS is responsible for conducting research and collecting data 
on a wide variety of nonfuel mineral resources. Research is conducted 
to understand the geologic processes that concentrated known mineral 
resources at specific localities in the Earth's crust and to estimate 
(or assess) quantities, qualities, and areas of undiscovered mineral 
resources, or potential future supply. USGS scientists also conduct 
research on the interactions of mineral resources with the environment, 
both natural and as a result of resource extraction, to better predict 
the degree of impact that resource development may have on human and 
ecosystem health. USGS mineral commodity specialists collect, analyze, 
and disseminate data and information that document current production 
and consumption for about 100 mineral commodities, both domestically 
and internationally for 180 countries. This full spectrum of mineral 
resource science allows for a comprehensive understanding of the 
complete life cycle of mineral resources and materials--resource 
formation, discovery, production, consumption, use, recycling, and 
reuse--and allows for an understanding of environmental issues of 
concern throughout the life cycle.
    Global demand for critical mineral commodities is on the rise with 
increasing applications in consumer products, computers, automobiles, 
aircraft, and other advanced technology products. Much of this demand 
growth is driven by new technologies that increase energy efficiency 
and decrease reliance on fossil fuels. To begin the process of 
understanding potential sources of critical mineral commodities, the 
USGS has recently completed an inventory of known domestic rare-earth 
reserves and resources (Long and others, 2010). This study restates 
basic geologic facts about rare earths relevant to assessing domestic 
security of supply and reviews current U.S. consumption and imports of 
rare earths, current knowledge of domestic resources, and possibilities 
for future domestic production. The report also includes an overview of 
known global rare-earth resources and discusses the reliability of 
alternative foreign sources of rare earths.
    Though rare earth elements are currently of most concern to many, 
including the Department of Defense, which funded the inventory, it 
should be noted that in 2010 the United States was 100 percent 
dependent on foreign suppliers for 18 mineral commodities and more than 
50 percent dependent on foreign sources for 43 mineral commodities. 
Import partners include Brazil, Canada, China, France, Germany, Japan, 
Mexico, Russia, and Venezuela. In 2008, a National Research Council 
committee, funded largely by the USGS, developed a ?criticality matrix? 
that combines supply risk with importance of use as a first step toward 
determining which mineral commodities are essential to the Nation's 
economic and national security (National Research Council, 2008).
    The USGS is currently preparing for a national assessment of 
undiscovered resources which will include an assessment of rare-earth 
and other critical mineral resources. The recent inventory of known 
rare-earth resources will be followed by other critical mineral 
inventories and used as a foundation for the assessment of domestic 
undiscovered critical mineral resources. The preparation for the 
assessment involves research and data collection on mineral deposit 
types that represent the primary sources of minerals to be assessed, 
research on techniques to assess for resources that are concealed below 
the earth's surface, and research on techniques to characterize 
environmental aspects of mineral resources, prior to, during, and 
subsequent to resource development.
    The USGS continuously collects, analyzes, and disseminates data and 
information on domestic and global rare-earth and other critical 
mineral reserves and resources, production, consumption, and use. This 
information is published annually in the USGS Mineral Commodity 
Summaries (USGS, 2011) and includes a description of current events, 
trends, and issues related to supply and demand.
    The USGS is a member of the OSTP-convened interagency process on 
critical and strategic mineral supply chains. USGS domestic and global 
mineral production and consumption information and expertise in 
understanding this information are being provided to the interagency 
group to help inform decision-making and support the on-going 
activities that relate to a national critical minerals strategy. In 
particular, the USGS is taking a lead role, with other interagency 
members, in the recently established sub-working group to identify 
high-priority critical materials and establish the methodology and 
criteria necessary to make those determinations. This work will enable 
the Federal government to anticipate material shortfalls before they 
happen in the market and will be a core component in establishing a 
national critical minerals strategy.
    The USGS stands ready to fulfill its role as the federal provider 
of unbiased research on known mineral resources, assessment of 
undiscovered mineral resources, and information on domestic and global 
production and consumption of mineral resources for use in global 
critical-mineral supply chain analysis.
    Thank you, Mr. Chairman, for the opportunity to explain the role of 
the USGS on this very important topic. I will be happy to answer any 
questions you or the other Members may have.

    Mr. Hultgren. I thank the panel for their testimony.
    Reminding members of the Committee that Committee rules 
limit questioning to five minutes. The Chair will at this point 
open the round of questions. The Chair recognizes himself for 
five minutes.
    First question, Dr. Holdren, I wonder if you could help me 
with this, just some understanding on the interagency working 
group. The interagency working group has met over the--for the 
last year now. I wonder will it produce any deliverables? And 
then I also wonder if you can comment on any proposed 
legislation that may complement or duplicate the efforts of the 
working group?
    Dr. Holdren. Sure. I would actually argue that the working 
group has already produced some deliverables. It will certainly 
produce more. But its meetings have been working sessions where 
the agencies is under the direction of the Executive Office of 
the President are actually doing things and committing to do 
additional things. Examples include the studies that have 
already been mentioned by my fellow witnesses, the reports that 
have come out of the DOE and the USGS, World Trade 
Organization, litigation from the USTR, the new R&D programs 
out of DOE, proactive engagement with industry by the 
Department of Commerce and the Office of the Trade 
Representative, over a dozen high-level, bilateral meetings 
between the Department of State and foreign counterparts on 
these issues. And so we have already been actually generating 
products, doing things, taking action.
    Your question about the legislation, as you know, there are 
a number of bills, Mr. Chairman, including one of yours. We 
have not taken a formal position as an Administration on the 
specific characteristics of these different bills, but there is 
a lot in them. And again, I would point to yours in particular 
that we are clearly very much in agreement with. Your bill 
calls particularly for three focuses. One is on better 
information, one is on recycling, and one is on research. We 
agree with all of that. And we are already pursuing all of 
those avenues.
    I would say the additional approaches which we regard as 
important and clearly warranted are diversification through 
discussion and encouragement not only with companies in this 
country but companies located among our friends and allies. And 
also, really I would add, negotiation, which includes 
discussions with China in both bilateral and multilateral 
forums to try to make clear to China that it is actually not in 
China's interest to restrict trade in these materials.
    Mr. Hultgren. Changing course a little bit, Dr. Holdren, 
but again asking you a couple questions here if I may. Just 
specifically, according to press reports, the DOD sees that no 
rare--there really is no rare earth crisis right now. I 
wondered if you concur with the DOD's observation? And then 
following up on that, what is your assessment of the rare earth 
and critical materials situation in the United States relative 
to nondefense applications? And should the United States be 
engaged in stockpiling critical materials for nondefense 
applications?
    Dr. Holdren. Just jotting notes so I can remember all three 
parts of your question. First of all, the DOD assessment, we 
are actually still awaiting a formal and comprehensive 
assessment from the Department of Defense, which is due out 
next month. Earlier statements I think were perhaps incomplete, 
but I think the basis for them was probably that the quantities 
required by the Department of Defense are relatively small 
compared to the quantities required in the commercial sector. 
And I think the Department's assumption is probably that given 
those small quantities and given the very small fraction they 
represent of the cost of the systems to which they are 
important, the Department is assuming it would continue to be 
able to get what it needs, even if at higher cost, without 
significant impact on the overall cost of the weapons systems 
and the programs. But again, I don't want to preempt the 
appearance of their actual comprehensive study on this, which 
is due next month.
    Your second question was on the overall situation with 
respect to these materials in the commercial sector. And 
certainly they are very important. The value added by the use 
of these materials, even though, as I said, the price of the 
materials themselves is a relatively modest share of our GDP, 
the value added is much larger. And their importance to 
emerging sectors, particularly the clean energy sector that 
Assistant Secretary Sandalow was talking about is very great. 
So we really have to be focused on our capacity to maintain 
access to these materials over time.
    When the National Academy conducted its study that came out 
just three years ago on minerals, critical materials, and the 
U.S. economy, they developed actually a methodology for 
defining and quantifying how critical is critical, and they 
looked actually at 11 minerals and mineral families. And among 
those, the rare earths were the most critical, exceeded only by 
platinum and rhodium if you look at the methodology and you 
look at the results, criticality in terms of importance and in 
terms of the risk associated with our supply of those 
materials. That is pretty strong stuff that among all the 
minerals we import--and again, my colleague from the USGS 
talked about the fact that we are 100 percent dependent for our 
supply of 18 minerals and over 50 percent dependent for our 
supply of 43--out of all of those dependents as rare earths are 
right there at the top in terms of criticality.
    One can talk about some very specific ones. Europium, which 
has no substitute in red phosphors that are used in our LCD 
screens and color cathode ray tubes. That stuff is now going 
for around $2,000 a kilogram. And again, there is no 
substitute. Erbium, there is no substitute for erbium and its 
special properties for use in fiber optic cables. It is going 
for about $1,000 a kilogram.
    Other materials, cerium has unique attributes that are used 
in lens and glass polishing, for example, mirror polishing for 
telescopes. It is much cheaper than the others but it has such 
unique attributes that one has to consider it critical. A whole 
set of them--of the rare earths, neodymium and several others, 
samarium, gadolinium, and more are essential in permanent 
magnets, in memory sticks, in DVDs. So when you ask what is the 
situation in the United States, very important stuff, a lot of 
it is critical. We have got to be paying attention.
    Your last question was about stockpiles. I think stockpiles 
have a very checkered history. The government investing in 
stockpiles can be a pipeline by which taxpayer money bids up 
the price and gets the private industry out of the business of 
having their own stockpiles. I certainly would have serious 
reservations about the government investing in stockpiles. The 
private sector does have some incentive for stockpiling. It 
does do some, and that is one of the reasons that our short-
term situation is perhaps not as serious as the percentage 
dependences would indicate.
    Mr. Hultgren. Thank you. I now recognize Ms. Edwards.
    Ms. Edwards. Thank you, Mr. Chairman, and thank you to the 
witnesses.
    Dr. Holdren, over the last 30 years we have seen the 
government's commitment to addressing critical materials, both 
in the Executive Branch and the Congress wax and wane as 
different specific crises have emerged and receded, and I think 
one of the key things that we need in place is a structure that 
is going to remain in place even after you and I have left our 
current positions to ensure our government is better able to 
anticipate and supply--anticipate supply problems with critical 
materials in the future. And so I wonder if you have any 
specific recommendations on how to accomplish that, and I 
wonder if you could tell me whether you think Administration 
policy--either this Administration or past Administration--
actually contribute to the lack of industry development? And I 
would note the closing of the AIMS Information Center in the 
early part of the last decade and the--you know, the shift at 
the same time of the industry almost to--well, pretty much to 
zero. And so I wonder if you could comment on that, Dr. 
Holdren, and then I will turn to you, Mr. Sandalow.
    Dr. Holdren. I have to admit, Ranking Member Edwards, that 
I am not an authority on the history of this industry. It is my 
impression that the decline of the industry in the United 
States and basically the transfer of the production--so much of 
the production of these materials to China was, as you 
mentioned in your opening statement, largely a matter of 
economics. The Chinese simply underbid everybody else. They did 
it in part, I think, by neglecting environmental impacts of the 
mining of these materials, which are often severe. They are now 
coming around to recognizing that and starting to try to 
rectify it. I am very much encouraged myself looking forward by 
Molycorp's announcements about new technology that they have 
developed that will enable production in the United States to 
be both more efficient and much cleaner than production was in 
the last round. I think this has substantial potential for 
restoring our own productive capacity. But I don't think it was 
particularly U.S. policies that caused the decline in this 
country. Again, I think it was the Chinese underbidding 
everybody else.
    Ms. Edwards. Well, let me just turn to Mr. Sandalow because 
in your statement you mention, one, your visit to Mountain Pass 
and the importance of what you were seeing there, but at the 
same time, Molycorp has had a bit of a difficulty in securing a 
loan guarantee, for example, from the Department. And so that 
is about Administration policy because how do you begin to 
stand up an industry that then can thrive on its own and have 
the capacity to produce in a competitive market when we are 
not--I mean we can't provide, obviously, the level of support 
that China can provide because you can do that when you have 
just got a government that says we are just going to spend here 
and we are not going to spend anywhere else, and where we also 
have a regulatory structure in place that I think is actually 
really important to protecting the public health and the public 
interest.
    So, you know, Mr. Sandalow, can you just tell me, have you 
given any thoughts to what steps need to be taken to protect 
our domestic capacity to mine and sell critical materials in 
the face of the price pressure from the likes of a China?
    Mr. Sandalow. Thank you for the question, Ranking Member 
Edwards. And there is no question we need a wide range of 
policy tools in order to be able to develop this industry going 
forward. The Department of Energy's loan guarantee authority 
today does not extend to mining operations, and so there are 
limits in the ability of the Department in this respect.
    But what we identified in our strategy was a three-pronged 
approach, and that includes areas that are particularly in the 
competence of the U.S. Department of Energy. For us, research 
and development is particularly central. The Department of 
Energy is the Nation's leading funder of the physical sciences, 
and so research and development in substitutes is particularly 
important, research and development into more efficient use and 
reuse is particularly important, and then developing a 
globalized supply chain, including domestic supply is important 
as well.
    Ms. Edwards. Let me ask Dr. Holdren because you also 
mentioned, obviously, our need to develop a more robust 
manufacturing capacity. We could talk about that across all 
kinds of lines. But it does seem to me that our manufacturing 
capacity--21st Century manufacturing capacity is actually tied 
to our ability to produce the domestic supplies that we need 
without being held to whatever quotas might be imposed from 
those who, in fact, are investing in mining of critical 
materials.
    Dr. Holdren. I can only agree with that, Ranking Member 
Edwards, and I think the whole domain of advanced manufacturing 
is immensely important. The President's Council of Advisors on 
Science and Technology recently completed a study in that vein. 
The President has been out there talking about what we need to 
do to lift our game in advanced manufacturing and restore some 
real strength to the manufacturing sector in this country. And 
I agree with you that attending to these matters of critical 
minerals is going to be an important part of that strategy.
    Mr. Hultgren. Thank you. I now recognize Dr. Bucshon for 
five minutes.
    Mr. Bucshon. Thank you, Mr. Chairman.
    This, again, seems to be another area where our country is 
dependent on foreign nations for sources of minerals, oil, 
whatever you want to call it, and it is quite distressing 
actually. And I think that this is a great hearing to have 
because we do need a strategy to reverse that, just as we do 
with our dependence on foreign oil.
    The basic question I have is pretty simple. What are the 
one or two things that we need to do in our country to decrease 
our dependence on China for these type of minerals going 
forward? It is pretty simple. I can start with Dr. Holdren and 
then everyone can comment.
    Dr. Holdren. Well, Congressman Bucshon, I would just say 
again that recycling and diversification are two of the most 
important things we can do early, and diversification includes 
both the development of sources domestically and the 
development of sources in friends and allies--Australia, 
Canada--countries on which we can really rely not to cut us 
off. Recycling also has very substantial potential and we need 
to emphasize it. But over the longer run, research to develop 
substitutes is going to be crucial.
    Mr. Sandalow. I would--Congressman, thank you for your 
question and I would echo the thoughtful comments of Director 
Holdren and just say as well this is an area that government 
and business can work together and work together well and that 
a partnership between government and business institutions can 
only make a difference for our country. I think it is a place 
where government can do the initial research, some of the R&D, 
can help to create the knowledge base, and then working 
together. We are all headed in the same direction I think. This 
is one where we can really come together to help solve the 
problem.
    Mr. Doebrich. Yes, Congressman, particularly with regards 
to supply risk that we are facing with regards to rare earths, 
diversifying supply, understanding where our potential future 
supply may be able to come from, and that is a role USGS can 
help with in terms of assessments for undiscovered rare earth 
resources both domestically and internationally.
    Mr. Bucshon. I guess the last time we lost our domestic 
production was based on economic factors primarily. That is 
what I am hearing. What prevents economic factors, competitive 
factors to just keep our companies out of business again in the 
future, for example, as some people are saying in their 
testimony, China just floods the market?
    Dr. Holdren. Well, I would say first of all that the 
strength of America, American companies, American manufacturing 
has always been innovation. And we have to, as the President 
has said, out-innovate our competition. And I think it is going 
to be innovation that enables us to compete. We have already 
heard about some of the innovations that Molycorp itself has 
pursued and achieved. And I think that what one finds is over 
the long run the strategy of flooding the market with cheap 
stuff could drive out your competitors doesn't work very well. 
I think China would pay a very high price for doing that, but 
we can't, as some other comments have suggested, rely on good 
sense from that quarter, and therefore, we have to make--take 
the steps and make the investments we need to make sure that on 
our own we can do what is necessary and together with our 
friends and allies to diversify those sources.
    Mr. Bucshon. Mr. Sandalow, any comments on that?
    Mr. Sandalow. I think that is very well said.
    Mr. Bucshon. I yield back. Thank you.
    Mr. Hultgren. Thank you, Doctor.
    I now recognize Mr. Miller for five minutes.
    Mr. Miller. Thank you, Mr. Chairman.
    Dr. Holdren or Mr. Sandalow, in the past the rare earths 
research was carried on at the Rare Earth Information Center at 
the Ames laboratory and DOE is now proposing an energy 
innovation hub on critical materials. What are the advantages 
of using a hub or a center to carry out the research?
    Mr. Sandalow. Thank you for the question, Congressman. This 
is a model that DOE is using now and brings together some of 
the best minds in a single place to focus on a challenge of 
especial national importance. And that is a goal with something 
like a hub. And with concentrated funding, with funding that 
will sustain itself over a number of years, bringing together 
the best minds and creating synergies between different 
disciplines, we think we can make progress. And this is just a 
perfect area for doing something exactly like that.
    I would say the Ames National Lab, which you point to, has 
been a historic leader in this area. It has been a leader for, 
you know, since World War II with extraordinary expertise, and 
so we want to build on that at the Department of Energy with 
substantially augmenting what they have already done with 
substantial new capabilities.
    Mr. Miller. Okay. Is it more or less cost effective to do 
the research in a hub or a center?
    Mr. Sandalow. Yes, it is more cost effective and more 
productive, more productive to bring different disciplines 
together in one place creating synergies and complementarities.
    Mr. Miller. Okay. Again, to any of the panelists, do you 
think we have the researchers now in the United States who have 
the skills and the knowledge to carry out the critical 
materials research that we need done, either in the private 
sector or in government?
    Mr. Sandalow. In my view, Congressman, we do not. We need 
concentrated effort in this country to build up the 
intellectual capital, not just the industrial base in this 
country--you know, in this area. That means, you know, training 
chemists with, you know, experts in lanthanide chemistry and a 
broad range of other disciplines who can make sure that we are 
innovating in a way that will transform this industry and make 
a difference for the future.
    Dr. Holdren. If I may just add to this, I think candor does 
require that we confess that there is some real financial 
challenges in this whole domain. You have raised the question--
really the question of our science and technology education and 
training in this country. And we know we have to lift our game 
in that domain. We have to train more scientists and more 
engineers. And we train those at every level from our community 
colleges to our great research universities, and we have some 
real funding challenges in that domain.
    As you know, the President proposed shortly after he came 
into office that we should be aiming to double the investments 
in our basic science, our most important basic science 
agencies, the NSF, the DOE, Office of Science and the NIST 
laboratories. And that money radiates out into the research 
universities. And it is going to be a real challenge to do that 
in the current budget environment. The President has been clear 
he wants to do it, but obviously we are going to need the help 
of the Congress to pull that off.
    Even--and I will say this because my colleague from the 
USGS might not want to--the budget of the USGS is an important 
issue here. The capacity of the USGS to deliver the analysis 
and the information that we need to identify the most critical 
areas, to identify the shortfalls potentially before they 
materialize, it requires that you maintain those capabilities 
with the USGS and the current USGS budget makes it a great 
stretch to do that.
    Mr. Miller. Okay. Dr. Holdren, you said that R&D reduces 
the risk associated with critical material shortages. I think I 
know what you mean by that and how that works, but could you 
elaborate on that some?
    Dr. Holdren. Sure. One of the things that R&D, particularly 
in material science, leads to is substitutes. You know, we used 
to think we were going to rely on copper for all our 
communication circuits. Now, we rely very heavily on fiber 
optic cables. That is as a result of research that enabled us 
to do that. Research will unquestionably lead to better ways--
in many cases less expensive ways--to achieve some of the tasks 
for which we now depend on materials that we have to import.
    Mr. Miller. Okay. I yield back my time.
    Mr. Hultgren. Thank you. I now recognize Dr. Benishek for 
five minutes.
    Mr. Benishek. Well, thank you, Mr. Chairman. I thank the 
gentlemen for coming. It is a pleasure listening to your 
testimony.
    Dr. Holdren, I have a question for you concerning your 
previous answer. How are you going to convince China it is not 
in their interest to control the market on these materials? 
Because I don't see how we can do that nicely.
    Dr. Holdren. I am not sure we can do it nicely, but there 
are a couple dimensions. First of all, they might believe it is 
in their interest to control the market, but if we out-innovate 
them, they won't be able to. If their only strategy is to try 
to drive out the competition by flooding the market with very 
inexpensive material, they are going to lose their shirts.
    Mr. Benishek. Well, they have done that and they are making 
money.
    Dr. Holdren. They have done it from time to time in the 
past, but I think going forward, if we apply our comparative 
advantage in innovation, it is going to be harder for them to 
do it going forward.
    Mr. Benishek. How is that? They control the market now so 
how are you going to do that?
    Dr. Holdren. Well, 20 years ago they didn't control the 
market; we did. And again, they captured it by underbidding 
everybody for the time. But their capacity to do that 
indefinitely is limited because------
    Mr. Benishek. How is that?
    Dr. Holdren. --we will out-innovate them.
    Mr. Benishek. How is that? How do we out-innovate them? We 
don't have the material.
    Dr. Holdren. We do have the material. The United States has 
very substantial reserves of this material.
    Mr. Benishek. Okay. How do we get that material to market 
here in this country faster?
    Dr. Holdren. I think we have been talking about how we do 
that here. We encourage U.S. corporations to make the 
investments. We help them------
    Mr. Benishek. My information here is that it takes------
    Dr. Holdren. --in research and development and partner----
--
    Mr. Benishek. --7 to ten years to get a permit for some of 
these mines.
    Dr. Holdren. The question of permitting is one that I would 
defer to colleagues------
    Mr. Benishek. But that is the central issue here, though.
    Dr. Holdren. --about permits, but let me simply say about 
that I am not sure where the 7 to ten years comes from. I 
suspect that part of that is hesitation and delay over whether 
one can compete economically and not actually the inability----
--
    Mr. Benishek. No, this is an inability to get a permit. 
People are willing to do it; they just can't get a permit.
    Dr. Holdren. Well, no, I hear you, Congressman. I have not 
looked at these analyses of how it takes ten years. I think if 
it is taking ten years, that is problematic and we should fix 
it.
    Mr. Benishek. All right. Thank you. Mr. Doebrich, what 
could the Administration do as far as you are concerned about, 
you know, making it easier for us to develop these resources 
here at home other than talking the Chinese out of controlling 
the market?
    Mr. Doebrich. Well, from a scientific standpoint, just 
providing better information, understanding what our resources 
are, where they are, how much there is. I think also beyond the 
United States, there are known and potentially future supplies 
as well outside of China. And I think that is an important 
point to make as well with those who are perhaps a little bit 
friendlier trading partners.
    Mr. Benishek. Well, I think part of the problem myself--and 
I didn't hear any of you address this--was the fact that, you 
know, the uncertainty in the permitting process, the 
uncertainty in the regulations that they are going to change 
from one year to the next as far as, you know, the requirements 
for the EPA and all that sort of thing, do you think that has 
had any effect on the ability to raise money and market these 
big projects?
    Mr. Doebrich. Again, from a scientific standpoint, I can't 
comment on that.
    Mr. Benishek. Dr. Holdren, do have any--Dr. Holdren, do you 
have any comment on that?
    Dr. Holdren. Well, I did see a statement the other day that 
Senator Bingaman offered in which he made the argument that 
profitability and not permitting had been the real obstacle and 
it is profitability that we have to work on. But I am prepared 
to agree with you that we need to simplify the permitting as 
well. And I would note that this Administration, this President 
has issued an Executive Order on simplifying regulatory 
regimes. And a lot of progress has been made on that and more 
will be made because we understand that unpredictability and 
regulation is an obstacle to investment in business and we want 
to improve that situation. We are taking steps to do it.
    Mr. Benishek. If you could provide this Committee with some 
examples of that streamlining process?
    Dr. Holdren. Oh, absolutely. I will submit that for the 
record.
    Mr. Benishek. Thank you.
    Dr. Holdren. Happy to do that.
    Mr. Benishek. With that, I yield back.
    Mr. Hultgren. Thank you, Dr. Benishek. I now recognize Mr. 
McNerney for five minutes.
    Mr. McNerney. Thank you, Mr. Chairman.
    Mr. Doebrich, I would like to get an idea of how much of 
environmental damage was done at Mountain Pass Mine before it 
was closed. Is that a significant amount of damage or is it not 
that significant?
    Mr. Doebrich. Sir, I don't have specifics on that but I can 
perhaps look into that and provide some information for the 
record.
    Mr. McNerney. Mr. Sandalow, do you have an idea on that?
    Mr. Sandalow. Congressman, I don't know the detailed 
history. I did tour the site and I did see the environmental 
management techniques that they are applying right now, which 
certainly, from a tour, looked very impressive.
    Mr. McNerney. So you have confidence in Molycorp's claims? 
You think they are reliable? You think they will be as good as 
their word on that?
    Mr. Sandalow. Well, I hope so, Congressman.
    Mr. McNerney. So do--we all do. What I am wondering is can 
economic drivers alone, you know, the high cost of water, the 
high cost of power, can those considerations alone force--not 
force but encourage American mining and reprocessing operations 
to clean up and do a good job or are we going to need some 
other guidelines to help make sure that that happens?
    Mr. Doebrich. Again, from the Department of the Interior's 
standpoint, I mean that would be a question perhaps to the BLM 
and I would have to defer to them on that.
    Dr. Holdren. I guess I would add a comment on that. I 
wouldn't say that market forces alone will lead to all the 
kinds of environmental controls that one would want, but we do 
have in place a very substantial number of laws passed by the 
Congress that affect air and water quality and the protection 
of land. And my assumption is we will continue to enforce those 
laws. And that those together with economic incentives to 
become more efficient and cleaner will push us in the right 
direction.
    Mr. McNerney. And that Molycorp should be able to compete 
economically with the China producers within a few years, is 
that their estimate? Is that your estimate?
    Dr. Holdren. They are saying they can. And I would bet on 
it.
    Mr. Sandalow. And yeah, I heard that personally as well. 
And to just broaden the point, there is no market that American 
innovators cannot compete in and win, and this is one of them.
    Mr. McNerney. Good. Thank you.
    Now, what I want to know is do you feel, Mr. Sandalow, that 
the real risk with the current imbalance--trade imbalance--on 
this issue is that China will force industries and jobs to 
China that won't return? Is that the real underlying risk that 
we are looking at here?
    Mr. Sandalow. That is a concern to be sure, Congressman. I 
think there are other concerns as well. All of these concerns 
could be addressed if we are smart and serious about the way 
that we do this, with R&D on substitutes and efficiency and on 
globalizing supply chains.
    Mr. McNerney. Well, I mean I hear that--I hear you saying 
if we do recycling, which means people using their cell phone 
batteries when they die and that kind of stuff will produce a 
significant quantity of these materials, and also innovation--I 
mean, what are the potentials there for the recycling part of 
this?
    Dr. Holdren. I will take recycling on. The potential for 
recycling depends on a number of factors. It depends on the 
value of the material, it depends on how expensive the 
processing is for getting that material out of the products it 
is in, it depends on the logistics of how concentrated the 
sources of product are that you are going to process to get the 
stuff out, and I would say the answer is that recycling looks 
good for some of these materials and less good for others. 
Recycling is also not going to be adequate in situations where 
a market is very rapidly expanding, because the stuff that you 
are recycling from is not as large in quantity as what you need 
for the expanding sector.
    And so, for example, if you look at permanent magnets for 
the wind turbine market where wind turbines are growing very 
rapidly, recycling is not going to do that for us. I think we 
have to be realistic and we have to discriminate between 
different circumstances, some where recycling will help a lot, 
others where it won't, and we have to rely on other kinds of 
measures, including diversification.
    Mr. McNerney. Is there a sort of a unified or coordinated 
program to put research money in areas where substitution would 
be a good alternative, Mr. Sandalow?
    Mr. Sandalow. Yeah, this is something that we are investing 
money in at the Department of Energy in our Energy Efficiency 
Renewable Energy Program in particular, and it is something we 
are looking at. We are talking to colleagues around the 
government about it as well.
    Mr. McNerney. So you are trying to avoid duplication or----
--
    Mr. Sandalow. Absolutely, Congressman.
    Mr. McNerney. Thank you. I yield back.
    Mr. Hultgren. I recognize Ms. Adams for five minutes.
    Mrs. Adams. Thank you, Mr. Chair.
    Dr. Holdren, I listened to the back and forth with you and 
Mr. Benishek, and I have a question. If you haven't researched 
all the factors, how can you make that assertion that China 
would not flood the market?
    Dr. Holdren. I don't have a clear crystal ball 
congresswoman and so I can't assert that China would not. I can 
only assert that there would be some disadvantages to China in 
doing that. I would also point out that we are engaged with 
China in the World Trade Organization, that China has a 
considerable economic interest in maintaining good trade 
relations with the United States and other countries, and so 
there is some leverage there. Nonetheless------
    Mrs. Adams. You know they do have a lot of our debt.
    Dr. Holdren. They do and that also means it is not 
particularly in their interest to try to devastate our economy 
because they would drop the value of the U.S. securities that 
they hold. But I am not claiming I have a clear crystal ball. I 
am simply claiming here------
    Mrs. Adams. So it is possible.
    Dr. Holdren. It is possible but there are a number of 
things we can do, certainly, to reduce the risk from that very 
substantially.
    Mrs. Adams. In your written testimony you say that USTR is 
closely examining China's policies restricting exports of raw 
materials, include RE and continues to press China and remove 
its export restraints on RE and other raw materials. Can you 
elaborate on the state of the conversations between USTR and 
PRC? Are we making any headway?
    Dr. Holdren. It is my impression that we are making some 
headway there but I can't really elaborate. I think it would be 
appropriate to defer to the USTR on that point for an up-to-
date assessment of the state of their interactions.
    Mrs. Adams. Okay. There is a greater issue, a bigger issue 
than rare earths. We have been talking about critical materials 
and rare earth today but the Committee has identified similar 
failures in other fields. Recent unforeseen shortages in 
Helium-3--you know, the ones that used for radiation 
detectors--suggest this is an issue greater than just rare 
earths. What is the Administration doing to characterize and 
forecast supplies and demands of other materials such as rare 
isotopes and strategic minerals that may be impacted by 
policies decisions outside of the market?
    Dr. Holdren. Well, certainly our focus in the 
Administration and the focus of outside entities such as the 
National Academy that have looked at these issues is not 
restricted to rare earths. I commented a while ago that rare 
earths are judged to be among the most critical but they are 
not the only critical elements and we are looking at the 
others. The DOD is looking at the others; the DOE is looking at 
the others; the USTR is looking at the others; the Department 
of Commerce. We are certainly not confining our attention to 
rare earths.
    Mrs. Adams. Like plutonium-238?
    Dr. Holdren. Well, plutonium-238 is, of course, 
indispensible for radioisotopic thermal power generators as we 
use on our Mars missions and other such technologies. Helium-3 
is essential. And yes, we are looking at that. The DOE looks at 
that closely.
    Mr. Sandalow. Just to add, Congressman, in our critical 
materials strategy last year we looked not just at rare earths 
but also at indium, gallium, tellurium, lithium, and cobalt. 
And then in the request for information that we just submitted 
to the public, we asked about other materials that might be 
important, of interest. So it is very much an area beyond just 
rare earths that we are looking at.
    Mrs. Adams. Thank you. I yield back.
    Mr. Hultgren. Thank you very much. I know a couple of the 
witnesses--panel members need to leave at 4 o'clock, so we want 
to be conscious of your time. I see that we still--it is a few 
minutes before 4 o'clock, about 20 minutes until, so my hope is 
to go through another round of questions. Our Committee rules 
say that we are limited to five minutes each, but if we can be 
shorter than that, that would be nice to be able to try and get 
through all of us. So if that is all right with you all, we 
will start going through another round of questions and wrap up 
at 4 o'clock so one of you can catch a plane and others have 
other things that you need to get to.
    Dr. Holdren, one of the provisions of the bill I introduced 
instructs the Secretary of the Interior and the Secretary of 
Energy to specify a principal statistical agency. I wonder what 
your thoughts are on the efficacy and effectiveness of 
specifying a principal statistical agency?
    Dr. Holdren. Well, I guess my response would be I believe 
we have had a principal statistical agency in the USGS and 
the--where the rubber meets the road would be what additional 
responsibilities the USGS would have under such a provision and 
whether they would have the budget to carry out those 
responsibilities.
    Mr. Hultgren. I think the challenge is can they identify 
what the demand is without that. Any thoughts on that or not?
    Dr. Holdren. I agree with you.
    Mr. Hultgren. Okay. Do any of the other two witnesses have 
thoughts on that?
    Mr. Doebrich. As Dr. Holdren said, this would apply to one 
part of the Mineral Resources Program that provides minerals 
information, and we would like to better understand what such a 
designation would truly mean, the ramifications of it. And we 
would be happy to answer that more fully for the record.
    Mr. Hultgren. Okay. We can get you that and that would be 
great if you could submit a response to that. That would be 
very helpful.
    Quickly, just with another minute or two here, I know one 
of the challenges is, again, making sure that we have got 
people who are capable to be doing this work and certainly we 
are talking about the resources but also the intellectual 
resources are so challenging here. Specifically, we need 
students who have a better grasp of the industrial sciences 
versus a specific education in rare earths. I wondered if any 
of you have heard concerns about this and what the government, 
if it were to spend funds targeting and strengthening 
industrial science programs, how would it ensure retention of 
this talent in the United States after subsidizing their 
education?
    Mr. Sandalow. Well, I will just start and then turn to Dr. 
Holdren, I just want to thank you for emphasizing this point, 
Chairman. It is vitally important. It is vitally important that 
we have the intellectual capital in this country to invest in 
this area. I often hear that the expertise follows the research 
money, and so when the research money is available, then the 
expertise will be developed. And so it just underscores the 
importance of maintaining federal support for basic R&D in this 
area, and in particular, in the areas you point to in 
industrial sciences. Industrial manufacturing processes and 
efficiency are absolutely critical for U.S. competitiveness in 
the decades ahead. So it is vital that we maintain federal 
funding support in that area.
    Dr. Holdren. I would add I think it is also important as 
the formulation your question suggests that we look at ways to 
make it easier for foreign talent that gets educated in this 
country, particularly getting advanced degrees in science and 
engineering, that makes it easier for them to stay here. Right 
now, I think we make it too hard for them to stay here. Some, 
obviously, are going to want to go back to their countries. 
That is not an entirely bad thing because science and 
engineering in some respects is not a zero sum game, but we 
certainly shouldn't be making it hard for foreign nationals who 
are educated here and want to stay to do so.
    Mr. Hultgren. To give everyone else a chance, questions as 
well, I now recognize Ms. Edwards.
    Ms. Edwards. Thank you, Mr. Chairman. I just have a couple 
of quick questions.
    Dr. Holdren, I just want to point to you. I was looking at 
the fourth quarter 2010 reports from Molycorp as another 
suggestion about why China might be rethinking things. In 
this--in the report, the CEO of Molycorp noted that senior 
government leaders in China consistently stress China's intent 
to continue to restrict rare earth exports and the possibility 
of China becoming a net rare earth importing nation by 2015. 
CEO Smith also said, ``These dynamics are why we believe rare 
earth pricing will remain robust for the foreseeable future.'' 
It is also why Molycorp recently committed to expanding its 
production capacity from 19,050 metric tons per year in 2012 to 
40,000 metric tons per year, which is expected to be achieved 
by 2013. And he says that that will position Molycorp to 
capture new markets and customers and benefit from continued 
strong pricing, hence, a competitor for China, but I think it 
is important and highlights the reason that the United States 
needs to step up its game, our government needs to step up its 
game in order to be able to stand up industries that can 
compete.
    And I would also note that Molycorp secured all of its 
critical government permits that enabled it to proceed with 
construction of a new rare earth oxide manufacturing facility 
in Mountain Pass. They broke ground ahead of schedule. They are 
constructing their new manufacturing facility and they 
recommenced mining operations for the first time since 2002. 
And that is with environmental regulations in place that are 
actually going to protect the American consumer and those who 
live in and around Mountain Pass from the dangers that have 
befallen the Chinese and the reason that the Chinese, in fact, 
are having to make these changes and different decisions about 
what they do with respect to their mining.
    And I wonder for USGS, Mr. Doebrich, if you could comment 
whether from an environmental perspective what sort of concerns 
we need to be aware of regarding potential environmental 
contamination as a result of these mining operations and how 
that impacts what we need to consider in the United States in 
terms of our own industry with respect to competition with 
China?
    Mr. Doebrich. Thank you, Congresswoman.
    With regard to rare earths in particular, many of these 
rare earth minerals contain radioactive components, and so 
radiation is an environmental issue of concern when developing 
rare earth resources. So this is an area of research that we 
are actually getting more involved with to understand what the 
impact--the natural impact of the known resource in the ground 
even before resource development, developing baseline 
information to understand what the natural baseline geochemical 
signature is of these resources to help us better understand 
what the impact of resource development would be for different 
types of these rare earth deposits. So that is an area of 
research that we are involved with right now.
    Ms. Edwards. In any case, the goal would not be to throw 
out environmental regulations. That is not what is going to 
stand up our industry. Thank you, and I will yield back.
    Dr. Holdren. I strongly agree.
    Mr. Hultgren. I now recognize Mr. Miller.
    Mr. Miller. Thank you, Mr. Chairman.
    The subject of Helium-3 came up, which is also a subject 
that was--that this Subcommittee dealt with in the last couple 
of years. The problem with Helium-3 was we didn't know how much 
of it we had. That was the biggest problem. We didn't have an 
assessment of what the demand was and what the supply was, and 
the reason was that Helium-3 was produced by the decay of 
tritium, which was used in nuclear weapons and how much tritium 
there was and, therefore, how much Helium-3 there was was all 
classified, so nobody knew how much there was. And we spent 
billions of dollars developing a technology that depended on a 
lot of Helium-3 and then found out there wasn't that much 
Helium-3.
    The Administration actually appears to have done a pretty 
good job of dealing with that problem once you realize you had 
a problem, kind of assessing what the supply was and figuring 
out what the demand was and making decisions about priorities. 
But that appears not to have been unique to Helium-3. There are 
other problems of identifying supply and demand. Dr. Holdren, I 
think you addressed that at least somewhat in your testimony of 
identifying the supply and demand.
    And there is still a problem--both in the government and 
the private sector--of that information not being available, 
whether it is treated as a trade secret or confidential for 
business reasons or whatever else. How much of a problem is 
that, and how are we going to get at that problem to identify 
what the demand is and what the supply is?
    Dr. Holdren. Well, first of all, Congressman Miller, the 
first item on my list consistent with your question of what we 
need to do is information. We need to do better with 
information, and there I think again the USGS has been a 
mainstay of our ability to get that information and my judgment 
should continue to be.
    My understanding is that companies are becoming more 
forthcoming with the kinds of information we need to make these 
assessments. I think we are doing better at public-private 
partnerships in this domain and in some other domains as well. 
Of course, the problem with classified information that you 
referred to in the case of tritium is, as always in the case of 
those kinds of materials, going to be something of an obstacle. 
But it is not true that nobody knew how much tritium we had. It 
is just that nobody knew in the public domain how much we had, 
and there was probably a lack for a time of connecting the dots 
as they say among the different people who had the requisite 
information.
    But I do believe we are doing better going forward. We have 
an approach to open government and transparency in this 
Administration that is yielding, I think, real benefits in 
terms not only of the kinds of data and databases that the 
government is making available but also in terms of an 
increasing tendency toward transparency in business.
    Mr. Miller. Okay. Anyone else?
    Mr. Sandalow. Thank you. If I might add, this is a topic 
that I hear about from businesses when I talk about this issue 
with them. And they say that government really has an important 
role to play in collecting the information. And we were 
encouraged at the U.S. Department of Energy to inquire about 
this in the last request for information that we put out. And 
we did so and, among other things, we said that we would keep 
information proprietary and collected it on that basis if 
businesses wanted us to do that. So we have collected 
proprietary information, looking at ways in which we might be 
able to share it while protecting the confidential nature of it 
by aggregation or other types of tools. But I hear about this 
all the time from the industry as an important area.
    I would note, too, that on our Energy Information 
Administration (EIA), which is our statistical agency, have 
plans to scale up its work in this area but as the result of 
the latest round of budget pressures and cuts is unable to 
pursue its additional work in this area, which I think is 
unfortunate. But this is an area that, no question, that we 
hear about all the time in the Energy Department.
    Mr. Miller. Okay. Just for purposes of clarifying 
something, which was reasonably clear already, but when you say 
``flooding the market,'' you really mean that the Chinese are 
selling rare earths below cost to drive out competitors is 
what--it is called the anti-trust law's predatory pricing so 
that other suppliers will not compete because they have a 
dominant position in the market and they have got a government 
behind them funding it all. Is that generally what you mean 
when you say ``flooding the market?''
    Dr. Holdren. Well, Congressman, I didn't use the term 
``flooding the market.'' Your colleagues used it. But I think 
what they have in mind is not what the Chinese are doing now. 
The Chinese are, I believe, not losing money under current 
pricing. But the concern is that as we start to develop more 
effective competition with the Chinese at current prices, the 
concern is they could undercut those------
    Mr. Miller. Right.
    Dr. Holdren. --as happened some decades ago in the 
international oil market where we developed some expensive 
alternatives to conventional oil and the--and OPEC cut its 
prices to undercut those technologies. That history causes 
people to worry about that possibility. And as I have said 
before, it is a possibility. I don't have a crystal ball clear 
enough to rule it out, but I think our strategy needs to be 
prepared for a wide variety of possible scenarios. And the way 
you get prepared for that, again, is better information, it is 
diversification, it is recycling, it is research.
    Mr. Miller. Thank you.
    Mr. Hultgren. I want to thank the witnesses for their 
valuable testimony and for the members for their questions. The 
members of the Subcommittee may have additional questions for 
the witnesses and we will ask you to respond to those in 
writing if that is all right. The record will remain open for 
two weeks for additional comments from members. The witnesses 
are excused and the hearing is now adjourned.
    [Whereupon, at 3:54 p.m., the subcommittee was adjourned.]
                              Appendix I:

                              ----------                              


                   Answers to Post-Hearing Questions




                   Answers to Post-Hearing Questions
Responses by Dr. John P. Holdren, Director, Office of Science & 
        Technology Policy (OSTP):

Questions submitted by Chairman Paul C. Broun

Q1.  What are the Administration's short, medium and long-term plans to 
ensure adequate supplies of rare earths and critical materials for U.S. 
industries?

A1. In the short term, the Administration is using trade relations and 
diplomacy to foster the diversification of critical material supply, as 
well as taking steps to facilitate domestic production. In the long 
term, the greatest opportunities to reduce the risks associated with 
supply shortfalls of critical materials are through investments in R&D 
and innovation. The OSTP-convened interagency process is addressing 
these core themes in both the short and long term. Presently this 
interagency effort is organized around the following sets of 
activities:

      identifying critical materials based on common and agreed 
criteria;

      promoting more detailed and transparent collection of 
information on global resource supply and demand to facilitate the 
proper functioning of markets;

      establishing federal R&D priorities and roadmaps; and

      reviewing-in coordination with our colleagues in the 
National Economic Council, the Office of the U.S. Trade Representative, 
the National Security Council, and Federal departments and agencies-
domestic and global policies that affect the supply of critical 
materials (permitting, export restrictions, recycling, stockpiling, 
etc.) and pursuing remedies for roadblocks.

Q2.  What role is OSTP playing to promote public/private collaboration 
in the development of recycling technologies--including technical 
standards, guides and best practices--to strengthen recycling for key 
materials and to facilitate innovative materials use throughout 
economic value chains?

A2. The potential for recycling depends on a number of factors. It 
depends on the value of the material, the ease of disassembly or 
separation, and how concentrated the material is within a product. 
Recycling may be a viable option for some materials but not for others. 
Recycling will not be adequate in situations where a market is rapidly 
expanding, because the supply of recovered material will not be 
sufficient to meet expanding demand.

The President's FY 2012 Budget includes a proposal for a Department of 
Energy (DOE) Energy Innovation Hub on critical materials to help reduce 
U.S. reliance on critical materials including rare earth elements 
(REE). Hub activities on recycling would include R&D on efficient 
separation technologies that could be economically applied to both 
mined ores and recycled product streams, as well as other strategies 
that could significantly lower world demand for newly extracted 
critical materials.

Q3.  Has the development of technical standards and standard reference 
materials been integrated into the Administration's Critical Materials 
Strategy? Will the National Institute of Standards and Technology 
(NIST) be tasked to lend its technical expertise--particularly in the 
development of standard reference materials that help in the 
identification and classification of rare and other materials, and that 
could facilitate their re-use from electronic scrap, cell phones, 
magnets and magnet applications, and batteries?

A3. While NIST has not specifically been tasked with integrating its 
activities and expertise into the Administration's Critical Materials 
Strategy, NIST's longstanding technical expertise in reference 
materials and technical standards could play an important role in any 
Federal efforts to develop standards and reference materials related to 
critical materials. Of NIST's 1300 Standard Reference Materials (SRMs), 
several metal alloys and geological materials have measurement 
information on rare earths. A series of calibration standards is 
available for calibrating the determination of rare-earth elements 
using a wide variety of chemical analysis methods.

Q4.  Our current situation with raw materials is not unique to the 
United States. To what extent is the U.S. government coordinating 
strategies with other nations in an effort to address this issue by 
learning for each other's actions? What nations are more active in 
these discussions? What are some of the ideas and strategies that have 
been discussed in these collaborative efforts?

A4. I believe the United States government must be prepared for a wide 
range of scenarios in this area in the years ahead. The United States 
is interested in working with like-minded trading partners to determine 
the best way forward to ensure reliable supplies of critical materials 
from all sources. We have been working bilaterally and multilaterally 
(at the G20, the Asia-Pacific Economic Cooperation (APEC) Forum, the 
World Trade Organization (WTO), and other fora) to seek progress on the 
issue. We have also hosted direct conversations with: Japan, South 
Korea, Germany, Australia, Canada, China, the European Union, European 
Commission, and the European Parliament among others. These 
conversations have covered collaboration in: research and development, 
promoting an open and transparent global market including sharing of 
supply and demand information, and the responsible development of 
future supply chains.

Q5.  Recent articles have described a potential relationship between 
China and Taiwan, where Taiwan would benefit from a special rare earths 
arrangement. Can you comment on the significance of such an agreement 
and its potential impact on the U.S. and other countries? \1\
---------------------------------------------------------------------------
    \1\ Mozur, Paul and Liu, Fanny, ``Taiwan, China Discuss possible 
Rare-Earths Deal,'' The Wall Street Journal, May 18, 2011

A5. At this point, without specific knowledge of the details of a 
potential arrangement, any comments on how Taiwan could benefit or how 
---------------------------------------------------------------------------
other countries would be impacted would be speculative at best.

Q6.  In an ideal world, what provisions would you want to see in a rare 
earths/critical materials bill?

A6. I would welcome provisions that strengthen our capabilities to: (1) 
educate and train scientists and engineers in this country; (2) 
identify critical materials and establish an appropriate early warning 
mechanism; (3) perform a more detailed and transparent collection of 
information on global resource supply and demand; (4) support federal 
research and development priorities in the areas of substitute 
materials and technologies, more atom-efficient use of materials, 
environmentally superior mineral extraction and processing, and 
recycling; (5) pursue an adequate and diversified supply of critical 
materials; (6) identify downstream supply chain vulnerabilities (e.g. 
metals, alloys, components, or finished goods) and propose effective 
mitigation measures; and (7) review domestic and global policies that 
affect the supply of critical materials and pursue remedies for 
roadblocks. Such provisions could strengthen efforts the Administration 
is already pursuing in these areas.

Q7.  Congress visited the issue of strategic minerals in 1980 with the 
National Materials and Minerals Policy, Research and Development Act, 
and again in 1984, with the National Critical Materials Act. The 1980 
Act included certain reporting requirements by the National Science and 
Technology Council, which is housed in the Office of Science and 
Technology Policy. Are you familiar with those reporting requirements? 
Understanding that this occurred before your time, do you have any 
insight as to why those requirements are not being met? How can we 
ensure that we are vigilant in our monitoring of critical materials? Do 
you believe annual updates are necessary?

A7. I am familiar with those reporting requirements but do not know the 
history of why those had lapsed in previous Administrations. This 
Administration, in contrast, has taken the National Materials and 
Minerals Policy, Research and Development Act, and the National 
Critical Materials Act seriously. It began coordination on this topic 
early in the first year of the Administration.

While there are no current plans for the Executive Office of the 
President to release documents on the topic, there will be a continuous 
stream of reports from our colleagues in the Federal agencies (e.g. 
DOD, DOE, USGS) that reflect the collective thinking and analysis of 
our interagency process. The set of issues on critical materials is 
fluid and dynamic. The market and geopolitical landscape change rapidly 
and so too must the U.S. government response.

Q8.  Do you have any suggestions to modify or amend the National 
Materials and Minerals Policy, Research and Development Act of 1980, to 
ensure the Act is effective? Are there any additional authorities or 
restrictions that Congress should consider to ensure compliance with 
the Act?

A8. These Acts are comprehensive but could benefit from an update to 
reflect nuances in the present market landscape. One such area that may 
deserve additional emphasis is in full supply-chain considerations. The 
risks of supply disruptions depend on what form of the material is 
deemed critical-raw minerals, metals, alloys, components, or finished 
goods. Another area that deserves additional emphasis is training of 
the next-generation workforce in materials through STEM-based education 
programs.
Responses by David Sandalow, Assistant Secretary of Energy for Policy 
        and International Affairs, U.S. Department of Energy

Questions submitted by Chairman Paul C. Broun



[GRAPHIC] [TIFF OMITTED] 66924.002

[GRAPHIC] [TIFF OMITTED] 66924.003

[GRAPHIC] [TIFF OMITTED] 66924.004

[GRAPHIC] [TIFF OMITTED] 66924.005

[GRAPHIC] [TIFF OMITTED] 66924.006

[GRAPHIC] [TIFF OMITTED] 66924.007

[GRAPHIC] [TIFF OMITTED] 66924.008

[GRAPHIC] [TIFF OMITTED] 66924.009

[GRAPHIC] [TIFF OMITTED] 66924.010

[GRAPHIC] [TIFF OMITTED] 66924.011

[GRAPHIC] [TIFF OMITTED] 66924.012

[GRAPHIC] [TIFF OMITTED] 66924.013

[GRAPHIC] [TIFF OMITTED] 66924.014

[GRAPHIC] [TIFF OMITTED] 66924.015

[GRAPHIC] [TIFF OMITTED] 66924.016

[GRAPHIC] [TIFF OMITTED] 66924.017

[GRAPHIC] [TIFF OMITTED] 66924.018

[GRAPHIC] [TIFF OMITTED] 66924.019

Responses by Mr. Jeff L. Doebrich, Program Coordinator (Acting), 
        Mineral Resources Program, U.S. Geological Survey (USGS):

Questions submitted by Chairman Paul C. Broun

Q1.  In this year's (2011) USGS Mineral Commodities Summary: Rare 
Earths, China is listed as having around 48% of the world's rare earth 
elements, which is a significant up tick from last year's (2010) report 
which listed China's number at around 37%.

   a.  What is the reason for China's elevated numbers this year?

A1 a. The USGS estimate of China's Rare Earth reserves in Mineral 
Commodity Summaries 2011 (MCS 2011) was changed from the previous 
year's estimate based upon improved understanding of Chinese reserve 
and resource definitions and the comparison of those definitions to 
USGS reserve and resource definitions. The concepts are explained for 
all countries in Appendix C (Part B) on page 196 of MCS 2011 (http://
minerals.usgs.gov/minerals/pubs/mcs/2011/mcs2011.pdf); the 
correspondence of the Chinese and USGS terms are discussed in USGS Open 
File Report 2011-1042 (http://pubs.usgs.gov/of/2011/1042/).

   b.  How does USGS determine the presence of rare earths, i.e., what 
methods and technologies does it employ?

A1 b. The USGS employs a variety of geologic investigations and 
analytical techniques to characterize a region or site for the 
existence of rare-earth-bearing mineral resources. Reconnaissance 
geologic mapping and use of satellite remote sensing are used to 
identify specific rock types known to contain rare-earth minerals. 
These rocks are then investigated further through more detailed 
mapping, higher-resolution satellite or airborne remote sensing, 
sampling for geochemical analysis, and geophysical surveys to determine 
the presence of rare-earth mineral concentrations in the rock. Once 
surface evidence of concentrations is documented through these 
techniques, a drilling program is initiated to begin to explore the 
subsurface and to outline identified resources. In the United States, 
it is at this point that private industry enters the process to define 
identified resources and reserves through drilling and feasibility 
studies of developing an ore reserve. In some countries governments 
will conduct the initial phases of drilling to define an attractive 
resource to interest private investment. The USGS does not explore for 
nor drill mineral resources but conducts research on a deposit to 
understand the parameters of its formation that can then be used to 
predict where other deposits may be found. This research may rely on 
samples from drilling that was done by private industry or be confined 
to surface or remote examinations as described above.

The USGS National Minerals Information Center (NMIC) collects, 
analyzes, and publishes identified resource and reserve information 
that is released by private industry and national governments. National 
reserves information for rare earths found in the Mineral Commodity 
Summaries report, including those for the United States, is derived 
from a variety of sources. Lacking national assessment information by 
governments, sources such as academic articles, company reports, 
presentations by company representatives, and trade journal articles, 
or a combination of these, serve as the basis for national reserves 
information reported in the mineral commodity sections of this 
publication. The USGS collects information about the quantity and 
quality of mineral resources but does not directly measure reserves. 
Reassessment of reserves is a continuing process, and the intensity of 
this process differs for mineral commodities, countries, and time 
period. Some countries have specific definitions for reserves data, and 
reserves for each country are assessed separately, based on reported 
data and definitions. In the Mineral Commodity Summaries report, an 
attempt is made to make reserves consistent among countries for a 
mineral commodity and its byproducts.

   c.  Does USGS have the best tools and employees to accomplish its 
mission competently?

A1 c. The USGS Mineral Resources Program, including its National 
Minerals Information Center, has the tools and employees needed to 
accomplish its core mission competently but lacks capacity to expand 
its functions to accommodate increased activity called for in some of 
the pending critical minerals legislation. The Mineral Resources 
Program has been proposed for budget cuts every year but one [2010] 
since FY 2001; for FY 2012, the Administration's budget request 
proposed a reduction of $9.6 million (18%) from the FY 2010 funding 
level of $53.8 million, which will require the elimination of 49 
scientific and technical positions and the elimination of important 
research, assessment, and mineral information program activities both 
within the United States and internationally. Furthermore, the past and 
current proposed reductions to MRP funding make it more difficult to 
recruit and retain high-caliber scientists.

   d.  Given the jump in China's numbers, should we have expected to 
see a jump in resources for other areas such as in Africa and 
Australia?

A1 d. No. Given the answer to the first question, there is no reason to 
think that new information about and improved understanding of the 
classification system used by the Chinese to report their mineral 
reserves would cause a change in reserve estimates for Africa or 
Australia.

Q2.  The recommendation to develop a ``Principal Statistical Agency'' 
(PSA) has sparked a debate over whether that should be housed in DOE 
and modeled after the Energy Information Agency (EIA), or housed at 
USGS and modeled after the Mineral Resources Program (MRP). One 
difference between DOE and USGS is the designation of the EIA as a PSA. 
USGS has stated in the past that it has concerns about such a 
designation as it may threaten the ,goodwill? it currently enjoys with 
industry contacts because a PSA designation would require companies to 
report to USGS, potentially hurting the existing relationship.

   a.  Can you comment on the roles and potential overlaps of EIA and 
MRP and how a PSA designation for both offices would impact your 
efforts?

A1 a. The EIA and the National Minerals Information Center (NMIC) of 
the MRP are both organizational units that collect, analyze, and 
disseminate statistical data and information, provide industry 
analysis, and conduct supply and demand forecasting. The EIA is 
responsible for reporting on four nonrenewable energy commodities (oil, 
gas, coal, uranium) and five renewable sources of energy (biofuel, 
solar, wind, hydroelectric, geothermal). The NMIC is responsible for 
reporting on more than 80 nonrenewable nonfuel mineral commodities. 
There is no overlap in the responsibilities of the EIA and the NMIC.

In a 1997 Order Providing for the Confidentiality of Statistical 
Information, OMB established ``a uniform policy for the principal 
statistical agencies'' but appears to have used the term principal 
statistical agency informally. The Order lists twelve agencies under 
the heading ``Designated Statistical Agencies or Units''. These 
agencies were determined by OMB to be subject to the 1997 Order and 
thus obliged to implement certain policies on confidentiality of 
information (Federal Register, v. 62, No. 124, p. 35044-35050) \1\. The 
Energy End Use and Integrated Statistics Division of the EIA is 
included as one of the twelve agencies or units listed in the 1997 
Order. The USGS is not one of the twelve agencies listed in the 1997 
Order, nor is any unit within the USGS.
---------------------------------------------------------------------------
    \1\ Order Providing for the Confidentiality of Statistical 
Information http://www.gpo.gov/fdsys/pkg/FR-1997-06-27/pdf/97-16934.pdf

The Confidentiality Information Protection and Statistical Efficiency 
Act of 2002 (CIPSEA) defines a statistical agency or unit as ``an 
agency or organizational unit of the executive branch whose activities 
are predominantly the collection, compilation, processing, or analysis 
of information for statistical purposes.'' \2\ OMB, which coordinates 
the implementation of CIPSEA, recognized 14 statistical organizational 
units as statistical agencies or units for the purposes of CIPSEA in 
its 2007 guidance on implementing the Act \3\. The EIA is designated as 
a statistical agency or unit under CIPSEA. Neither the USGS as a whole, 
nor any part of the USGS, is designated as a statistical agency or unit 
under CIPSEA.
---------------------------------------------------------------------------
    \2\ Confidential Information Protection and Statistical Efficiency 
Act of 2002 P.L. 107-347, title V http://www.gpo.gov/fdsys/pkg/PLAW-
107publ347/pdf/PLAW-107publ347.pdf
    \3\ Confidential Information Protection and Statistical Efficiency 
Act of 2002 P.L. 107-347, title V http://www.gpo.gov/fdsys/pkg/PLAW-
107publ347/pdf/PLAW-107publ347.pdf; ys/pkg/FR-2007-06-15/pdf/E7-
11542.pdf

The designation of an agency or unit as a statistical agency or unit 
for the purposes of CIPSEA subjects the agency to different 
confidentiality standards. CIPSEA statistical agencies or units must 
implement higher standards to protect data confidentiality than other 
statistical units. This involves increased physical and IT security 
measures, confidentiality training for all personnel, additional record 
keeping, informing respondents about the confidentiality protection and 
use of information, ensuring that information is used only for 
statistical purposes, ensuring that identifiable information is not 
disseminated, and supervising and controlling agents who have access to 
---------------------------------------------------------------------------
confidential information.

CIPSEA does not convey specific authority to an agency--including the 
authority to require companies to report to the USGS, contrary to our 
previous understanding. Rather, each agency's authority is defined in 
the statutes governing that agency. For example, some CIPSEA 
statistical agencies have mandatory data collection authority. In 
addition, there are differences in how the agencies are funded.

If a unit within USGS, such as the NMIC, were to be designated as a 
statistical unit under the provisions of CIPSEA, that unit would have 
to implement additional IT and administrative security measures, 
increase personnel training, and meet additional reporting requirements 
to comply with the higher confidentiality standards. The 
confidentiality of data collected by the NMIC is currently governed by 
subsection (f) of the National Materials and Minerals Policy, Research, 
and Development Act of 1980 (30 U.S.C. 1604(f)).

   b.  What are the cost and implications of such a designation for 
USGS?

A1 b. The USGS has not conducted an analysis of cost required to 
implement the higher confidentiality standards of statistical agency 
designation under CIPSEA. The USGS believes that such a designation 
would have little impact on the quantity and quality of data currently 
collected through a long-standing trust-based voluntary system and does 
not anticipate that such a designation would improve our ability to 
serve clients.

Q3.  Has your agency commented on any House or Senate rare earths/
critical materials bills? If yes, please provide those comments.

A3. The USGS provided testimony to the House Natural Resources 
Committee, Subcommittee on Energy and Minerals on H.R. 1314 on June 3, 
2011 and to the Senate Energy and Natural Resources Committee on S. 383 
and S. 1113 on June 9, 2011.

These testimonies can be found at the following links:

      H.R. 1314: http://naturalresources.house.gov/
UploadedFiles/DoebrichTestimony06.03.11.pdf

      S. 383: http://energy.senate.gov/public/--files/
BurkeTestimonyS383.pdf

      S. 1113: http://energy.senate.gov/public/--files/
BurkeTestimonyS1113.pdf

A4. In an ideal world, what provisions would you want to see in a rare 
earths/critical materials bill?

Legislative authorizations that apply to mineral resource work of the 
USGS are quite old, dating back to the 1980s and earlier. Much has 
transpired since then and it would be helpful to update authorizations 
to reflect the current scope of work performed by the USGS Mineral 
Resources Program (MRP). There are two very important areas of MRP work 
that lack specific up-to-date authority. These are the work of the 
National Mineral Information Center (NMIC) and the environmental 
science conducted by the MRP.

The NMIC is a function that was transferred to the MRP in 1996 from the 
U.S. Bureau of Mines (USBM) at the time of its closure. This transfer 
authority was provided in appropriations language only. The transfer 
authority should specify data analysis of the domestic and 
international supply of and demand for minerals and materials essential 
to the U.S. economy and national security.

Specific authorization language that recognizes the importance of the 
mineral environmental science conducted by the MRP would be helpful. 
This work is key to understanding the parameters for environmentally 
responsible development of mineral resources. The MRP conducts research 
on the interactions of mineral resources with the environment, both 
natural and as a result of resource extraction, to better predict the 
degree of impact that resource development may have on human and 
ecosystem health. Environmental issues related to mineral resources 
have required research to help mitigate impact.

Any bill related to critical minerals should clarify the roles of 
specific federal agencies involved in nonfuel mineral resource data 
collection, information dissemination, and research on identified and 
undiscovered resources. These roles and responsibilities should be 
consistent with the expertise that resides in such agencies. The bill 
should also ensure that there is no overlap or redundancy in effort 
expended on accomplishing the objectives of the bill.

The USGS would welcome adequate and sustainable support for unbiased 
and objective nonfuel mineral research, assessment, and information 
gathering and analysis that it conducts. These activities are federal 
responsibilities that are essential for informing decisions and policy 
related to mineral supply sustainability and land management of 
resources.
                              Appendix II

                              ----------                              


                   Additional Material for the Record




                   Additional Material for the Record
Letter submitted Dr. John P. Holdren, Director,
Office of Science & Technology Policy (OSTP),
in response to Representative Dan Benishek question found on page 41























                                   
