Rare-Earth Materials Measure Unlikely to Pass Before Session’s End


Lauren Gardner, CQ Today

Congress is likely to adjourn without enacting legislation to re-establish a domestic supply chain for rare-earth materials, industry experts and lobbyists agree — despite concern that Chinese market dominance poses economic and national security threats.

The House passed a bill (HR 6160) in September to create an Energy Department research and development program aimed at ensuring a long-term domestic supply of the critical materials. But a Senate bill (S 3521) to address the rare-earth minerals issue, sponsored by Alaska Republican Lisa Murkowski, has not advanced beyond an Energy and Natural Resources subcommittee hearing.

Energy and Natural Resources Chairman Jeff Bingaman, D-N.M., has not put rare-earth legislation on his priority list for the post-election session. “There’s a lot of legislation in the pipeline and in the queue ahead of it,” said Bill Wicker, a spokesman for Bingaman.

Rare-earth materials are used in the manufacture of a variety of technologies, including personal electronic devices, computer disk drives, hybrid cars and weapons systems.

China now controls as much as 97 percent of the world’s supply of the elements, and its export quotas have become increasingly stricter — exports for the second half of 2010 were reduced by 72 percent. The potential for economic blackmail has sparked new interest among lawmakers about reviving the moribund domestic rare-earth industry.

But hopes for action this year are running into a crowded Senate agenda and a dwindling number of legislative days on the calendar.

Gareth Hatch, a co-founder of Technology Metals Research LLC, noted that House Science and Technology Chairman Bart Gordon, D-Tenn., said at a conference in October that he would push senators to clear the House-passed legislation, which was sponsored by outgoing Rep. Kathy Dahlkemper, a Democrat from Pennsylvania. Gordon is retiring, and Dahlkemper lost her re-election race.

Other legislation is in the works. Colorado Republican Rep. Mike Coffman said he plans to introduce a measure that would draw from his earlier bill (HR 4866). And retiring Sens. Evan Bayh, D-Ind., and Christopher S. Bond, R-Mo., are working on a bill that would support funding to build a U.S. cooperative to refine rare-earth minerals.

Bills introduced during the lame-duck session are unlikely to become law, but could lay down markers for the 112th Congress.

‘ONE-SHOT DEAL’

One reason the Senate may not be scrambling to clear the Dahlkemper bill is the perception among many in the industry that it offers an incomplete solution to a complex problem. Hatch said the House bill looks like a “one-shot deal” rather than part of a broader effort to build up research and development in the industry. “By trying to rush something through in the lame-duck session, it can have a hint of being a knee-jerk reaction and miss the bigger piece,” Hatch said, cautioning against an impulsive response to recent reports that China briefly halted rare-earth exports to the United States and other countries.

Jeff Green, counsel for the U.S. Magnet Materials Association, said the group wants to ensure that loan guarantees the House bill would establish would target niche applications of rare-earth materials that the current market is not supporting.

Green called the bill a significant first step in addressing the domestic supply chain issue, but added, “We’re afraid that it will become the solution for Congress when there are many more things that need to be done.”

The Magnet Materials Association is supporting the Coffman bill, which Green says employs a “whole of government” approach addressing every aspect of the rare-earth supply chain. He said the group believes the markets are correcting the commercial side of the industry, but that Coffman’s measure has a greater focus on the military applications of rare-earth materials.

But Hatch said emphasis on defense applications has the same problem as the Dahlkemper bill — that it would tackle one part of a multifaceted problem, rather than the big picture.
Some industry experts are concerned that the House-passed measure will benefit only the few U.S. entities with a history in the industry — primarily Molycorp, a Colorado-based company expected to relaunch operations at a mine in California in 2012 — rather than encourage new companies to enter the market.

Hatch said the bill appears to have been written specifically to revive the Ames Laboratory at Iowa State University, which was the U.S. research center for rare-earth materials until 2002.

There is a widespread view in the industry that the bill’s loan guarantee program was geared specifically to help Molycorp, according to an industry insider familiar with discussions on the legislation. The company raised almost $400 million in an initial public offering in July, raising questions about why it needs federal assistance.

Molycorp spokesman Jim Sims acknowledged that the company will raise the capital it needs, regardless of whether the Dahlkemper bill is enacted. Sims said that Molycorp has applied for a loan guarantee through an existing Energy Department program that would expedite production and help the company exceed the 20,000 tons per year it is geared to generate by 2012, assuming market conditions are favorable.