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The “Green” Treason

January 28, 2011

More on REEs.  Mr Wilson has it mostly right.  Reopening of Mountain Pass is on a “fast track” (See http://www.google.com/finance?client=ig&q=NYSE:MCP) and could be in production in less time than is presented in his piece.  Nevertheless, well intentioned but misdirected regulatory oversight could hamstring the mine/mill restart.  Any true push towards “clean energy” requires increasing uses of REEs and why should the US be held hostage to non-domestic supplies.

By Bill Wilson –

It’s the same old story: The U.S. has abundant natural resources, but refuses to extract and produce them, as usual, because of environmental restrictions and regulatory costs. In the meantime, we are exporting our energy security, job security, and now, national security to China and other emerging markets.
Since 2002, the U.S. has not mined any rare earth elements (REEs) — today used in U.S. smart bombs, silent helicopter blades, night vision, missiles, and tank guns, as well as computers, cell phones, DVD players, and other civilian technologies.
These metals are not even that rare. The nation as a whole has about 13 million metric tons in reserves according to the U.S. Geological Survey. We could make them ourselves. But we don’t.
Leaving that aside for a moment, a modern military, and many common conveniences we today take for granted, would not be possible without these metals. They are essential.
Which is why China has rapidly developed its rare earth element mining sector, with over 55 million metric tons in reserves and 130,000 metric tons of annual production. It now controls over 97 percent of REE mining and refinement in the entire world. China is largely able to do so because it holds about 36 percent of global reserves, has lower labor costs, and because it largely ignores the environmental impact of the REEs. Finally, it lacks competition since the U.S. dropped out of the market.
With the rise of China’s REE near-monopoly, concerns have emerged that the communist dictatorship has too much control over these metals that have become critical to defense and other high technology needs.
So, how could China, an adversary, gain so much control over such a strategically critical industry? Call it the green treason.
The problem is that nearly all of the nation’s production of REEs was done by a single company, Molycorp, at a single mine in California, Mountain Pass. From 1965 to 1985, Molycorp was the world’s leader in this industry, but because of a series of main wastewater pipeline spills from the mine, state and federal environmental regulators all but shut it down.
As reported by the Washington Independent, “Mining at Mountain Pass stopped soon after the spills came to light. Industry sources say Union Oil of California, which bought Molycorp in 1977, couldn’t afford to comply with environmental rules and felt that it couldn’t compete with China.” In other words, the environmental regulatory costs made it cost-prohibitive to produce the metals at a competitive price versus the Chinese.
But, rather than help the industry out with the regulatory problems, the government acted punitively against Molycorp. The regulators were indifferent if domestic production was completely turned off. It made sure production of REEs in the U.S. was severely hindered, even though shortages would disrupt the defense supply chain.
Just like that, a few faceless bureaucrats shut down an entire domestic industry — essential to national security — just as the Chinese overseas competitor was emerging. And it was all in the name of radical environmentalism.
Fears of Chinese manipulation in the market have subsequently been confirmed in July when China once again reduced its export quotas for these metals. Since 2005, it has reduced these quotas from over 65,000 metric tons to just over 30,000, according to the Department of Energy. This has caused prices of the metals to skyrocket.
Already, the scarcity of the REEs is having an impact on U.S. defense capabilities. According to a Governmental Accountability Office (GAO) summary, “A 2009 National Defense Stockpile configuration report identified lanthanum, cerium, europium, and gadolinium as having already caused some kind of weapon system production delay and recommended further study to determine the severity of the delays.” Which, unless the U.S. ramps up production, will only get worse as China tightens the entire world’s supply of REEs.
The GAO report notes the decline of the nation’s capabilities in this area: “The United States previously performed all stages of the rare earth material supply chain, but now most rare earth materials processing is performed in China, giving it a dominant position that could affect worldwide supply and prices.” The Department of Defense is undergoing several other evaluations to determine its dependency on these metals, but we already know that it is high.
So, what can be done to ramp up new domestic production? Right now, the U.S. imports about 10,000 metric tons of these metals, or 7.6 percent of global production, according to the USGS.  Unfortunately, the Mountain Pass mine has been gutted. According to the GAO, it “currently lacks the manufacturing assets and facilities to process the rare earth ore into finished components, such as permanent magnets.” It also lacks “substantial amounts of heavy rare earth elements” used in industry and defense. Nonetheless, Molycorp intends to begin mining again this year, and in July offered a successful $393.75 million IPO to rebuild its capabilities.
According to Dr. Madan Singh, director of the Department of Mines and Mineral Resources (DMMR) in Arizona, it could take up to two years to get the mine back online.
But to get the heavy rare earths, we’ll also need to mine in Idaho, Montana, Colorado, Missouri, Utah, and Wyoming. Again, the GAO report is not comforting: “Once a company has secured the necessary capital to start a mine, government and industry officials said it can take from 7 to 15 years to bring a property fully online, largely due to the time it takes to comply with multiple state and federal regulations [emphasis added].”
So, barring regulatory waivers being granted to companies to begin extraction immediately, it won’t be until 2020 at least before the nation’s REE capabilities can be fully reconstituted. In the meantime, it is likely that China will continue to reduce its export quotas, ratchet up prices, and hoard the REEs for its own defense stockpiles.
It’s bad enough that environmental radicalism has made the nation more dependent on foreign sources of fuel, and has exported hundreds of thousands of jobs. Now, it is harming our security as a nation.
It is up to Congress to urgently enact legislation that will cut through the red tape and help this domestic industry get its feet back on the ground. We have to make sure we’re not dependent on a hostile nation like China or a single mine in California in order to maintain first-rate defense capabilities. And our security must not be held hostage to onerous environmental regulations. This green treason must be stopped.
Bill Wilson is the President of Americans for Limited Government.

Read more at NetRightDaily.com: http://netrightdaily.com/2011/01/the-green-treason/#ixzz1CLMlLgto

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