Witnesses
The Honorable John P. Holdren
Director, Office of Science and Technology Policy
The Honorable David Sandalow
Assistant Secretary for Policy and International Affairs, U.S. Department of Energy
Jeff Doebrich
Program Coordinator (Acting), Mineral Resources Program, U.S. Geological Survey

 

Subcommittee Members Present
Randy Hultgren (R-IL), Acting as Chairman
Donna Edwards (D-MD), Ranking Member
Jerry McNerney (D-CA)
Brad Miller (D-NC)
Sandy Adams (R-FL)
Dan Benishek (R-MI)
Larry Bucshon (R-IN)

 

The Subcommittee on Investigations and Oversight held a hearing on June 14, 2011 to assess the perspectives of federal organizations on critical mineral supplies. Critical minerals have come to the attention of Congress and the administration because of concerns about economic and national security implications of a China-dominated market.  Critical minerals are defined by the National Academy of Sciences (NAS) based on their importance to production of goods and the availability of their supply.  Many rare earth elements are critical minerals.

 

Representative Randy Hultgren (R-IL), acting as Chairman, began the hearing with an opening statementemphasizing the importance of critical minerals and the ways that his bill, the Energy Critical Elements Advancement Act of 2011 (H.R. 2090), would effectively address research, development, extraction and processing of rare earth elements and other critical elements in the U.S. and abroad. He stated that the government should do basic research on the sources and locations of critical minerals while leaving more applied research regarding exploration, extraction and processing to the private sector. Subcommittee Ranking Member Donna Edwards (D-MD) explained in her opening statement that the government needs to create ongoing policies that address shortages and account for the fact that the importance of specific minerals is erratic. She focused on the role of China, which has adjusted export quotas in order to encourage critical mineral companies to move there. She explained that China has the ability to “flood the market” at any time in order to decrease prices and keep mining operations in other countries from establishing competitive markets. For these reasons, she concluded the market alone cannot solve the critical minerals issue and government intervention is necessary.

 

John Holdren explained the critical minerals supply-demand dilemma and offered some solutions in his testimony. He noted that the current concentrated production of critical minerals in China is not a reflection of geographic distribution of resources. China has one third to one half of known reserves yet produces 95% of the world’s rare earth elements. The small market size of critical minerals does not reflect their larger potential to disrupt economies. Although critical minerals comprise only .001% of the United States gross domestic product (GDP), disruption in their supply could be devastating due to their central role in the manufacture of products that our nation’s economy and security depends on. Holdren suggested that in the short term critical minerals supply should be addressed through trade relations and diplomacy while investments in industry can solve the problem of domestic production in the long term. David Sandalow of the Department of Energy (DOE) focused his testimony on the importance of critical minerals for clean energy technology. He emphasized that the American Recovery and Reinvestment Act of 2009 (H.R. 1) marked the largest investment in clean energy in history and noted that other countries are following suit. He outlined what DOE sees as the three most important aspects of critical mineral legislation—the creation of substitutes, more efficient use and reuse practices, and diversified global supply chains.  Jeff Doebrich outlined the duties of the United States Geological Survey (USGS) in critical minerals resources. The USGS, he emphasized, is ready and willing to fill its role in the process and has already compiled an assessment of critical minerals in the U.S.

 

Hultgren began the question and answer period by asking Holdren if the interagency working group created by the Obama administration to address critical minerals development will produce any deliverable results. Holdren responded that the group has already produced studies, engaged with industry, and met with foreign ministers. He added that the bills that have been introduced in Congress have a lot that the Obama administration supports such as recycling, more research, and more extensive assessments. Holdren said that he would like to see clauses added to the bill addressing trade negotiations and efforts to “make clear that it’s actually not in China’s interest to restrict trade.”

 

Representatives Dan Benishek (R-MI) and Sandy Adams (R-FL) heatedly interrogated Holdren on how he expected to convince China of this. Holdren responded that China cannot continue to control the industry simply by driving out competition through increasing exports. With proper resources and legislation the United States has the ability to “out-innovate” China.  Benishek asked how the U.S. would be able to do this when the permitting process for mineral development takes 7 to 10 years. Holdren responded that he was unsure of the permitting process, but cited Senator Jeff Bingaman’s (D-NM) statement at an earlier hearing that the problem with mineral development is profitability and not permitting. Adams asked Holdren, “If you’re not sure on all the issues how can you say that China won’t keep doing this?” Holdren responded that he was not claiming to have a “clear crystal ball” but believed that the United States has the resources to compete with China.

 

Hultgren asked Holdren why the Department of Defense (DOD) has stated that there is no rare earth minerals crisis. Holdren responded that the quantities of rare earth minerals required by the DOD are small compared to commercial production needs. Holdren reiterated that the value added of critical minerals is much larger than their percentage of GDP. He emphasized their particular importance in developing clean energy technology. He gave examples of critical minerals with no substitutes such as europium in liquid crystal display (LCD) screens and erbium in fiber optic equipment. Hultgren then inquired if Holdren felt that stockpiling would be effective in addressing the issue. Holdren responded that he would be wary of doing this as stockpiles have a “checkered history” and can lead to taxpayer money being used to increase prices which drive out industry.

 

Edwards directed her questions at how a long term solution for addressing critical minerals in the federal government can be created. Holdren responded that he did not feel that the current situation of China dominating the market was due to U.S. policies but rather due to an economic shift. Sandalow added that investment in research and development, use and reuse efficiency, and establishing a domestic supply are the most important issues for policymakers to focus on.

 

Representative Brad Miller (D-NC) asked what the advantages of a DOE hub for critical minerals research would be. Sandalow explained that it would bring minds from various disciplines together and create “synergies and complementarities.” Sandalow added, however, that currently the U.S. is very deficient in people with specialized knowledge on critical minerals. Holdren noted that financial support is essential for training scientists and engineers in critical mineral specialities. He added that the current USGS budget makes it a major stretch to promote geoscience education. Hultgren asked how, if such a hub were created, it could be ensured that students with industrial mineral knowledge would be retained in the U.S. Sandalow responded that the best way to do this is through research and development support. Holdren said that the government should make it easier for foreign students with mineral expertise to stay here.

 
Representative Jerry McNerney (D-CA) inquired about the environmental damage of mining and if economic incentives are enough to ensure that companies clean up after themselves. Holdren responded that market forces cannot do it alone and that the government would need to incentivize recycling for certain minerals. Edwards asked what types of environmental contamination should be of the most concern. Doebrich responded that radiation is possible with critical minerals extraction. Edwards and Holdren agreed that radiation is not a danger to be taken lightly and that proper environmental policies are critical.

 

Full text of witness testimonies and an archived webcast can be accessed from the subcommittee hearing summary page.