By John Kemp
LONDON Jan 31 Critical minerals like rare
earths, lithium and tellurium are becoming ever more essential
to the modern economy, yet production in the United States
remains limited, leaving the country relying on imports from
just a handful of countries led by China.
For many of these materials, there are few substitutes,
raising obvious concerns about supply security.
It wasn't always this way. The United States was once the
world's leading producer of rare earth elements (REEs). However,
mining at its Mountain Pass facility was largely suspended
between 1998 and 2010 owing to environmental concerns.
China came to dominate production in the 2000s. Beijing's
decision to impose export restrictions on REEs, tungsten and
molybdenum in 2011 and 2012 to reserve more of them for domestic
manufacturers underscored the supply chain's vulnerability and
drew protests from the United States, the EU, Canada and Japan,
as well as a complaint to the WTO.
Since then, Mountain Pass has reopened, following the
construction of a new $1.55 billion processing facility by its
owners Molycorp. New sources of supply are also becoming
available from Mount Weld in Australia. The market is rapidly
moving from tight supply into surplus.
But many policymakers, as well as rare earth producers and
high-technology firms, remain concerned about import dependence,
and want to do more to encourage the production of rare earths
and other scarce but important materials within the United
PERMITS OR FUNDING
Congress is currently considering two pieces of legislation
that take contrasting approaches to the problem.
"The National Strategic and Critical Minerals Production
Act" (HR 761), approved by the House of Representatives largely
along party lines, aims to boost supply by streamlining the
process for obtaining mining permits.
It contains no new funding for minerals-related research and
production, but is opposed by the Obama administration and
environmental groups because it might weaken environmental
By contrast, the "The Critical Minerals Policy Act" (S 1600)
being considered by the Senate Committee on Energy and Natural
Resources, has bipartisan support from 19 senators (10 Democrats
and 9 Republicans) including the chairman and highest-ranking
Republican on the committee.
S 1600 would authorise spending up to $60 million for new
studies of domestic mineral resources and research into
recycling and substitutes. It funds a review of the permitting
process but does not mandate any changes.
The administration has not yet expressed a formal view on S
1600. But at a hearing on Tuesday, the bill won strong support
from producers like Molycorp, as well as trade organisations
representing users like the Semiconductor Association and
automakers, and the leading academic researchers working in the
Whether either of these bills would be a good piece of
legislation depends on what the fundamental problem is that has
been holding back production of rare earths and other critical
Writing in December 2013, I described the Critical Minerals
Policy Act as the sort of special-interest legislation which
deserved to die in Congress. This is because it fails to
identify a good reason for the critical minerals industry to
receive special help from taxpayers rather than leaving
provision up to the market..
That drew a sharp rebuke from Colin Hayes, a former staffer
on the Senate Energy and Natural Resources Committee who helped
write the legislation, and who described it as a "cynically
"Just imagine the benefits of replicating America's natural
gas boom for even a fraction of the other commodities needed to
keep our economy growing," Hayes argued. "We can and should
pursue that outcome."
"I couldn't agree more with Kemp's enthusiasm for the free
market, but we don't live in an Ayn Rand novel" he concluded
("Don't belittle Congress's attempts to enhance mineral
production," Jan 3).
The problem is that Congress has been trying to pass
legislation on critical minerals, and sometimes succeeding, for
at least 40 years.
A quick search of Congress's legislative database shows the
U.S. House of Representatives in 1974 considering a "joint
resolution requiring the President to submit to Congress a
report concerning importations of minerals which are critical to
the needs of U.S. industry."
None of these issues is new. Several laws have been passed
since then in a bid to stimulate domestic production of rare
earths and other critical minerals.
The fact all this legislative activity has still not
provided secure and reliable domestic supplies suggests the
problems are more fundamental.
It is generally agreed government should only intervene
where there is some reason to believe the market will not supply
enough of a product, or any at all, because of some "market
For all the talk about some minerals being "critical" to the
modern economy, only one of the experts who testified to the
Senate tried to identify market failures that prevented secure
Roderick Eggert of the Colorado School of Mines suggested
the government's appropriate role included encouraging
undistorted international trade; improving the regulatory
approval process; facilitating the provision of information and
analysis; and facilitating research and education.
Eggert, who is also deputy director of the Critical Minerals
Institute, argued that private firms might fail to invest
heavily enough in analysis, research and education because it is
hard to capture all the benefits rather than share them with
The argument is a sound one. And the $60 million of spending
that the S 1600 would authorise is less than 20 cents per
inhabitant of the United States.
But Congress is inundated with hundreds of such demands for
special assistance each year; the combined impact is
significant. Moreover, special spending directions by Congress
make it harder for federal agencies to manage their budgets
"Many of the activities called for in S 1600 are already
authorised by existing authorities," the U.S. Geological Survey
and Department of the Interior noted carefully in their
response. "Any activities conducted to fulfil the objectives of
this bill would require substantial resources and would need to
compete for funding with other priorities."
Justified or not, spending an extra $60 million will not
make much difference to the supply of critical minerals in the
United States. Molycorp has just spent more than $1.5 billion on
a new rare earth processing facility, so $60 million is a tiny
In any event, plenty of mineral resources have already been
identified in the United States. The problem is not finding them
but developing them.
Molycorp told to the Senate re-starting Mountain Pass took
"15 years and more than 500 permits". The company emphasised the
need for "more certainty in permitting and the overall
Testifying to the House Committee on Natural Resources back
in March 2013, the National Mining Association was much blunter.
"The United States has one of the world's greatest mineral
repositories, but our ability to get these minerals into the
supply chain ... is threatened," the mining association
The main obstacle is "the length of time consumed in
obtaining permits," it went on. Permitting delays have been
identified "as among the most significant risks and impediments
to mining projects in the United States."
The United States has the world's lengthiest permitting
process, averaging 7-10 years, compared with 2 years in Canada.
The House bill was designed to streamline the process.
Similar steps have been taken in Alaska and a number of other
But every one of those permits is important to some
environmental or community group who lobbied hard to put it in
place. So eliminating them is immensely controversial.
For that reason, the Senate bill shies away from the issue,
allocating $8 million for a review of the permitting process and
requiring the relevant departments to report back to Congress,
but not mandating any changes.
Without permitting reform, however, the extra spending is
unlikely to make any more difference to the supply of critical
minerals than any of the other pieces of legislation Congress
has passed on the issue over the last four decades.