House Passes Rare Earths Bill

September 18, 2013. The House passed HR 761 [LOC | WW], the "National Strategic and Critical Minerals Production Act of 2013", a bill that would have the effect of facilitating domestic mining and extraction of rare earth materials (REMs), which are used in information and communications technology (ICT) products. Republicans voted unanimously for the bill. Most Democrats voted against.

Outline of this Article.
   1. Introduction.
   2. Rare Earths.
   3. Bill Summary.
   4. Floor Debate.
   5. Amendments.
   6. Analysis of Votes.
   7. Conclusion.

1. Introduction. Currently, many applications for mineral extraction permits are blocked, not by final orders of administrative agencies, but by continuous delays by agencies. Many oppose mining operations in the U.S. for environmental reasons, and are content with this regime.

A key provision of this bill would set a time limit of 30 months for government review of permit applications for strategic and critical minerals projects. Other provisions of the bill are directed at facilitating final determinations on the merits in a timely manner.

During floor debate, Republicans emphasized the importance of REMs to ICT products. However, while this bill would accelerate the permitting process for REMs, it would also affect a wide range of other materials that could be deemed critical, including sand and gravel. Democrats focused on this aspect of the bill during floor debate. Republicans defeated proposed amendments that would have narrowed the scope of the bill.

Proponents of the bill also stressed the impact that this bill would have on mining jobs and income in the US. However, this is not just a matter of mining jobs in the US. Currently, almost all REMs are being produced in the People's Republic of China (PRC). Several years ago the PRC began to use its national dominance to favor domestic producers, discriminate against foreign competitors, and leverage technology transfers, to the detriment not only of US ICT and other industry sectors that use REMS, and the consumers of their products, but also producers and consumers in other countries. Not only the US, but also Japan and the European Union, have filed complaints with the World Trade Orgnanization (WTO) regarding the PRC's REM related practices.

The Senate has not yet passed this bill. There is no companion bill in the Senate. Democratic control of the Senate may preclude Senate consideration of this bill. However, Sen. Harry Reid (D-NV) is the Senate Majority Leader. All four Nevada Representatives -- two Republicans and two Democrats -- voted for the House bill. Nevada is a mining state, and Las Vegas is just across state lines from a major mining site with deposits of rare earth elements.

There have been related bills in the Senate. See for example, from the 112th Congress, S 1113 [LOC | WW], the "Critical Minerals Policy Act of 2011", sponsored by Sen. Lisa Murkowski (R-AK).

President Obama's Office of Management and Budget (OMB) has not released a public statement of support or opposition.

See also, story titled "House to Take Up Rare Earths Bill" in TLJ Daily E-Mail Alert No. 2,601, September 16, 2013.

2.Rare Earths. The rare earth elements from which REMs are made are sometimes listed as Scandium, Yttrium, Lanthanum, Cerium, Praseodymium, Neodymium, Promethium, Samarium, Europium, Gadolinium, Terbium, Dysprosium, Holmium, Erbium, Thulium, Ytterbium, and Lutetium. See also, periodic table.

Rare earth elements are found around the US and the world. For the location of rare earths element deposits, see table titled "Classification of Rare Earth Elements-Bearing Mineral Deposits" in Geology.com's web page titled "The Geology of Rare Earth Elements". This web page republishes U.S. Geological Survey (USGS) data.

REMs have a wide range of uses. For example, they are used in fiber optic cable and smart phone screens. However, one of their keys uses is in making permanent magnets, which have the properties of compactness, high strength, and very strong magnetic fields. These magnets are used in computer hard drives, cell phones, loudspeakers, headphones, magnetic resonance imaging, cordless electric tools, and other products.

Neodymium is used in permanent magnets. Holmium, Erbium, Ytterbium and other rare earth elements are used in doping fiber optic cables.

TLJ stories do not address REMs many uses in defense, aviation, and green technologies.

3. Bill Summary. The bill is directed at promoting agencies involved in permitting mining projects to reach a determination on the merits in an expeditious manner.

It provides that "In no case should the total review process ... exceed 30 months unless agreed to by the signatories of the agreement". This refers to an agreement entered into by the project proponent and the government agencies involved.

It further provides that "The lead agency with responsibility for issuing a mineral exploration or mine permit shall appoint a project lead who shall coordinate and consult with cooperating agencies and any other agency involved in the permitting process, project proponents and contractors to ensure that agencies minimize delays, set and adhere to timelines and schedules for completion of the permitting process, set clear permitting goals and track progress against those goals."

Similarly, it provides that this lead agency "shall enhance government coordination for the permitting process by avoiding duplicative reviews, minimizing paperwork and engaging other agencies and stakeholders early in the process."

The bill addresses the National Environmental Policy Act of 1969. This Act, which is also known as the NEPA, was enacted in 1969, and is now codified at 42 U.S.C. § 4321, et seq.. It requires federal agencies to identify and take into account environmental effects when deciding whether to authorize or undertake a major federal action. It is also the statute that the Federal Communications Commission (FCC) invokes when it considers the impact of licensing communications towers on birds.

The bill would impose limits upon, but not terminate its application of, the NEPA to the critical materials permitting process.

The bill provides that "To the extent that the" NEPA "applies to any mineral exploration or mine permit, the lead agency with responsibility for issuing a mineral exploration or mine permit shall determine that the action to approve the exploration or mine permit does not constitute a major Federal action significantly affecting the quality of the human environment within the meaning of the National Environmental Policy Act of 1969 if the procedural and substantive safeguards of the permitting process alone, any applicable State permitting process alone, or a combination of the two processes together provide an adequate mechanism to ensure that environmental factors are taken into account."

4. Floor Debate. Rep. Rob Bishop (R-UT) spoke in support of the bill during floor debate. He emphasized the importance of "critical minerals" to "our weapons development system, including such things as night vision equipment, advanced lasers, avionics, fighter jet components, missile guidance systems".

But, he also said that "if you have an iPhone or an iPad or any of that other kind of new stuff that my kids like to have, you're going to have these critical minerals. And if we are not proposing and developing them here in the United States, we are paying more to develop them out of country, and we're putting ourselves, manufacturing-wise, in a significant deficit situation."

He added that development of resources in the U.S. "has actually been stymied by a combination of special interest politics, as well as bureaucratic red tape, particularly under this administration."

Rep. Doc Hastings (R-WA) said that "Not a day goes by when Americans don't use a product that is made from critical minerals. In fact, life as we know it in the 21st century would not be possible without these minerals. There would be no computers, no Blackberrys or iPhones."

"Rare-earth elements, a special subset of strategic and critical minerals, are core components of these products in the 21st century. Yet despite the tremendous need for rare-earth elements, the United States has allowed itself to become almost entirely dependent on China and other foreign nations for these resources."

Rep. Hastings (at right) continued that "America has a plentiful supply of rare-earth elements, but roadblocks to the development of these crucial materials have resulted in China producing 97 percent of the world's supply. Our current policies are handing China a monopoly on these elements, creating a dependence that has serious implications on American jobs, on our economy, and on our national security."

He said that the problems are that "Burdensome red tape, duplicative reviews, frivolous lawsuits, and onerous regulations can hold up new mining projects here in the U.S. for more than 10 years."

The other Hastings, Rep. Alcee Hastings (D-FL), said that this bill "guts important environmental protections".

Rep. Rush Holt (D-NJ) argued that "despite the bill's title, it has almost nothing to do with national strategic and critical minerals production. In fact, under the guise of promoting the development of minerals critical to the United States' national security, this legislation would reshape mining decisions on public lands for almost all minerals."

Rep. Holt (at right) said, "Make no mistake, this bill is a giveaway. It is free mining, no royalties, no protection of public interest, exemption from royalty payments, near exemption from environmental regulations, near exemption from legal enforcement of the protections." He suggested instead "legislation that makes those available for manufacturing needs, for national security needs, rather than having a catch-all mining definition".

Rep. Pete DeFazio (D-OR) stated that "these critical minerals are not critical. Sand and gravel are now critical."

Rep. Mark Amodei (R-NV), the sponsor of the bill, addressed sand and gravel. "Even sand and gravel and other construction mineral materials can be in short supply or not available, as the USGS discovered in 2009 during the great California shakeout. What they discovered during that was that, in its assessment of scope and damage and materials needed for construction in the event of a large-scale earthquake, USGS discovered there were not enough sand, gravel, and other construction materials available in the region to meet the affected area's reconstruction needs."

5. Amendments. The House Republican leadership allowed a relatively open process. The House Rules Committee (HRC) made in order four amendments offered by Democrats. All were rejected on roll call votes. The House passed one Republican amendment by voice vote.

First, the House rejected an amendment [2 pages in PDF] regarding the meaning of critical minerals offered by Rep. Alan Lowenthal (D-CA). The vote was 187-241. See, Roll Call No. 466.

It would have defined "strategic and critical minerals" to mean "minerals and mineral groups identified as critical by the National Research Council in the report entitled ``Minerals, Critical Minerals, and the U.S. Economy´´, dated 2008", and "additional minerals identified by the Secretary of the Interior based on the National Research Council criteria in such report", but not "shall not include sand, gravel, or clay".

This 264 page report is on sale for $39 in paper. It is also available online for free in an awkward format.

Rep. Holt quipped that "China is not trying to lock up the world's sand and gravel", and these are not necessary for "for jet engines and magnets and hard drives in laptops".

Second, the House rejected a similar amendment [1 page in PDF] offered by Rep. Marc Veasey (D-TX) that would have given the Secretary of Interior the authority to decide what are the strategic and critical minerals covered by the bill. The vote was 189-237. See, Roll Call No. 467.

Third, the House rejected an amendment [1 page in PDF] offered by Rep. Gerald Connolly (D-VA) by a vote of 186-240. See, Roll Call No. 468.

This amendment would have removed from the bill the above quoted language that would limit the application of the NEPA in the case of applications involving critical materials. It would also have added a mandate that the agency make a finding that any such project significantly affects "the quality of the human environment" within the meaning of the NEPA.

Fourth, the House rejected an amendment [1 page in PDF] offered by Rep. Alcee Hastings (D-FL) by a vote of 191-235. See, Roll Call No. 469.

This bill includes a provision that states that the permitting agency "will" require "financial assurance for reclamation of a mineral exploration or mining site". The amendment would have provided that this assurance must include "a surety bond, letter of credit, or other instrument", and that the agency must conduct "annual inspections and reviews of financial insurance".

Finally, the House approved by voice vote an amendment [1 page in PDF] offered by Rep. Stevan Pearce (R-NM). There are many rare earth elements deposits in his southern New Mexico district. His amendment is little significance, except in the Permian Basin area of west Texas, where both potash and oil and gas is developed. Potash, which contains potassium, is used in fertilizers. It is not a rare earth element, and its has no significance for ICT.

The amendment provides that "Nothing in this Act shall be construed as to affect any aspect of Secretarial Order 3324, issued by the Secretary of the Interior on December 3, 2012, with respect to potash and oil and gas operators."

6. Analysis of the Votes. The final vote was 246-178. See, Roll Call No. 471. The vote broke down along partisan lines. Republicans voted 231-0. Democrats voted 15-178. Four roll votes on amendments offered by Democrats were all nearly identical to the final vote.

Most of the debate was conducted by only a few Democratic opponents, and a few Republican proponents. There was no broad participation in the debate.

Urban and suburban Democrats voted against the bill. The Democrats who voted for the bill mostly represent large districts in which mineral extraction, forestry, and agricultural activities are major components of the local economy.

Seven of the fifteen Democrats who voted yes are black, hispanic or asian. Some of the fifteen are blue dogs.

Notably, while this bill would ultimately benefit tech companies, none of the Silicon Valley area delegation, which is all Democrats, voted for this bill.

Republicans who represent districts that are home to REM users voted for the bill. For example, REMs are used in making fiber optic cable, and Corning makes fiber optic cable. Rep. Tom Reed (R-NY), who represents Corning, New York, voted for the bill, as did upstate Democrat Rep. Bill Owens (D-NY). Rep. Dan Maffei (D-NY), another upstate Democrat, did not vote for the bill, but voted against some of the Democrats' amendments to water down the bill.

Rep. Dina Titus (D-NV), who represents Las Vegas, Nevada, and Rep. Steven Horsford (D-NV), who represents a large Nevada district, both voted for the bill. Molycorp, Inc. has a rare earth elements mining facility in Mountain Pass, California, which is just across the border from nearby Las Vegas. See, story titled "Molycorp and Hitachi Plan Joint Ventures for Production of Rare Earth Magnets" in TLJ Daily E-Mail Alert No. 2,189, December 29, 2010.

Colorado is also a mining state, with many rare earth elements deposits. Molycorp is based in Colorado. Three of the seven Representatives are Democrats. Rep. Jared Polis (D-CO) did not vote. Rep. Ed Perlmutter (D-CO) did not vote for the bill, but voted against some of the Democrats' amendments. Rep. Diane DeGette (D-CO) voted for the bill and the Democrats' amendments.

Two Democrats who represent large districts in the mining state of Minnesota, Rep. Nick Nolan (D-MN) and Rep. Colin Peterson (D-MN), both voted for the bill.

Hispanic Democrats of south and west Texas voted for the bill. Rep. Rep. Henry Cuellar (D-TX) represents a south Texas district stretching from the outskirts of San Antonio to Laredo and the Rio Grand Valley. Rep. Filemon Vela (D-TX) represents another south Texas district. Rep. Pete Gallego (D-TX) represents a huge west Texas district stretching from suburbs of San Antonio to just outside of El Paso.

The Texas Rare Earth Resources Corp., aka TRER, has hopes of developing its Round Top facility, which is located in Rep. Gallego's district. See, TRER's release on passage of this bill. This TRER facility would produce Beryllium and Uranium. Beryllium is important to making metal alloys used in high speed aircraft and communications satellites. It is also commonly used in X-ray equipment because it is transparent to X-rays.

Rep. Jim Costa (D-CA), who represents the San Joaquin Valley, was the only California Democrat to vote for the bill. Rep. Jim Matheson (D-UT) also voted for the bill.

Rep. Mike McIntyre (D-NC) voted for the bill. There are rare earth elements deposits in North Carolina, but at the opposite end of the state from his district.

Rep. Grace Meng (D-NY) of Queens, New York, was the only big city Democrat (other than Las Vegas's Rep. Titus) to vote for the bill. She is of Chinese ancestry.

Rep. John Barrow (D-GA), Rep. Sanford Bishop (D-GA), and Rep. Terri Sewell (D-AL) also voted for the bill.

Three Democrats did not vote for the bill, but did oppose one or more of the amendments offered by Democrats: Rep. Perlmutter (D-CO), Rep. Maffei (D-NY), and Rep. Joe Garcia (D-FL).

7. Conclusion. This bill, if enacted into law, would promote the production of REMs critical to making ICT products. It would benefit ICT companies in the US, Japan, EU and elsewhere by providing competition to the PRC, and by taking away from the PRC the ability to abuse its dominant position in REM production.

However, voting does not appear to have been driven by this concern. Rather, proponents were driven by a goal of reducing permitting delays across a wide range of mining projects. Opponents were driven by a goal of maintaining the status quo for all mining projects. Republicans talked about ICT, but voted for mining generally.

To illustrate this, members could have voted for Rep. Lowenthal's amendment (which would have clarified that sand and gravel extraction are not covered by the bill) without undermining the goal of the bill to restart production of critical REMs in the US.

But, almost no one did. Not a single Republican voted for the Lowenthal amendment, and only a few of the Democrats who voted for the bill also voted for this amendment.

Based upon these two roll call votes, only five members can claim to have backed legislative language that would both eased permitting delays on critical REMs, without also granting broad relief to other mining projects -- Rep. Horsford, Rep. Meng, Rep. Gallego, Rep. Costa, and Rep. Sewell.

Also, arguably, voting for the Connolly amendment would have undermined efforts to mine some sites that contain critical REMs. All of these five voted for the Connolly amendment.

Finally, while Republicans insisted on a bill broader than necessary to restart product of critical REMs for ICT, and minerals critical for defense, Democrats did not introduce an alternative bill that would have had this narrow impact. Also, notably absent from the lengthy debate was statements from Democrats that they would vote for a narrowly drafted bill.

(Published in TLJ Daily E-Mail Alert No. 2,604, September 24 2013.)