Archive for the ‘Politics and policy’ Category


The “Dirty Little Secret Behind the Chevy Volt”…. The Rest of the Story

May 20, 2011

The “Dirty Little Secret Behind the Chevy Volt”…. The Rest of the Story

Patrick Michaels is a senior fellow in Environmental Studies at the Cato Institute and the editor of the forthcoming Climate Coup: Global Warming’s Invasion of our Government and our Lives, as well as the author of several other books on global warming.

His Forbes column on the Chevy Volt is a case study in the nexus between big government corruption and big business rent-seeking.

Michaels briefly recaps the well-known consumer fraud in which GM has touted the Volt as an all-electric mass production vehicle on the supposed basis of which its sales receive a $7, 500 taxpayer subsidy, which still renders it overpriced and unmarketable.

Michaels notes that “sales are anemic: 326 in December, 321 in January, and 281 in February.”

There seems to be a trend here.

Michaels adds that GM has announced a production run of 100,000 in the first two years and asks what appears to be a rhetorical question: “Who is going to buy all these cars?”

But wait! Keep hope alive! There is a positive answer to the question.

Jeffrey Immelt’s GE will buy a boatload of those uneconomic GM cars. Here the case study opens onto the inevitable political angle: Recently, President Obama selected General Electric CEO Jeffrey Immelt to chair his Economic Advisory Board.

GE is also awash in windmills waiting to be subsidized so they can provide unreliable, expensive power. Consequently, and soon after his appointment, Immelt announced that GE will buy 50,000 Volts in the next two years, or half the total produced.

Assuming the corporation qualifies for the same tax credit, we (you and me) just shelled out $375, 000, 000 to a company to buy cars that no one else wants, so that GM will not tank and produce even more cars that no one wants. And this guy is the chair of Obama’s Economic Advisory Board?

But of course. Michaels includes this hilarious detail in his case study:

In a telling attempt to preserve battery power, the heater is exceedingly weak. Consumer Reports their tests averaged a paltry 25 miles of electric-only running, in part because it was testing in cold Connecticut. (The [GM] engineer at the Auto Show said cold weather would have little effect.) It will be interesting to see what the range is on a hot, traffic-jammed summer day, when the air conditioner will really tax the batteries. When the gas engine came on, Consumer Reports got about 30 miles to the gallon of premium fuel; which, in terms of additional cost of high-test gas, drives the effective mileage closer to 27 mpg. A conventional Honda Accord, which seats 5 (instead of the Volt’s 4), gets 34 mpg on the highway, and costs less than half of what CR paid, even with the tax break.

The story of the GM Volt deserves a place in the Harvard Business School curriculum….but of course, it won’t. It’s a classic tale of the GOVERNMENT deciding what the public needs, not the marketplace.

Freedom is lost gradually by an uninterested, uninformed, and uninvolved people.


More Oil Supply

April 29, 2011

By Michael J. Economides
Posted on Apr. 28, 2011

It is unfortunate that on the day when President Barack Obama said perhaps one of the most noteworthy things during his entire Administration, the ridiculous birther issue hijacked the news. On that day he was quoted: “”We are in a lot of conversations with the major oil producers like Saudi Arabia to let them know that it’s not going to be good for them if our economy is hobbled because of high oil prices.” He certainly would like more oil to get into the market.

After oil topped $110 per barrel, after gasoline prices have been flirting with $4 per gallon and after a relentless climb which lasted for weeks, the President felt compelled to do or, at least say, something. Obama can be the subject of criticism for a lot of things but as a campaigner he is almost impeccable. He is campaigning officially and he knows too well that virtually nothing removes votes from an American candidate better than higher gasoline prices.

Of course, it is hard to be the President of wind mills and solar panels and now try to implore foreign countries, raking it in from higher oil prices, to commit financial sacrifice. They are asked to increase the supply of the commodity, which has been labeled by Obama as the “energy source of the past”, and against which his Administration has gleefully declared war in both words and action from the time of the previous presidential campaign to today. One would think that higher oil prices would force people to use solar and wind to drive their cars. Yes, I know this is not possible and it is sarcastic but many of the President’s supporters, behind the public consumption headlines of feeling the consumers’ pain, think that what is happening is good for the energy future they would like to see.

The President, like many of his predecessors of both parties, is missing the opportunity to level with the American people: There are no alternatives to hydrocarbon (oil, gas and coal) energy sources in the foreseeable future. The entire twenty first century will still be dominated by them. Solar and wind are unrealistic today, they are thermodynamically deficient, and they will most likely never amount for much more than one percent of the world energy mix without massive government subsidies.

Ideological environmentalism has trumped economic development and has thwarted economic freedom, which was, ostensibly, the motive of the Cold War which America won but certainly does not act like it did. Al Gore, a precursor to Obama even before the Nobel Prize for the “Inconvenient Truth” wrote that the “internal combustion engine is the biggest threat to humankind.”

Tell that to the Chinese who are buying at least 40,000 new cars per day.

Breaking even the lowest standards of credulity on the same day of the President’s Saudi plea, Lisa Jackson, the EPA administrator said rising gasoline prices were not her agency’s fault. Upward pressure on gas prices was “not coming from any environmental or health regulation.” Really? This from an agency that even its more ardent supporters think as the most intrusive and recalcitrant, ever, an agency that has attempted to regulate by government edict rather than legislative fiat.

Make no mistake: global climate change rhetoric — fully espoused by the Obama Administration — is a frontal attack on the US and the lifestyle that emanates from its economy and system. The Europeans who adopted it in the first place are not averse to admit that they are jealous of America. The Chinese, who are all too aware of the ramifications of mandatory carbon restrictions on both the world and, in particular, their economy, simply will not play along. They are, at best, bemused. Does anybody really believe there would be economically extractable hydrocarbons in this world that would not be produced because we pass legislation in the US? Isn’t the atmosphere the same for all?

To crown a day that surely even Don Quixote would question the credibility of Obama’s adversaries, a third jewel was added to the news menu. Senator Harry Reid said the “Senate will turn as early as next week to Obama’s proposal to repeal tax breaks for the oil and gas industry.” This is the answer. Let’s turn on Big Oil. That will solve the problem.

What are we really talking about? The “subsidies” amount to just $4 billion per year. It may sound a lot of money but here is a quick calculation. The United States is using about 400 million gallons of gasoline per day. At $4 per gallon this translates to $1.6 billion per day, which means that the yearly subsidies to the dreaded oil companies account for less than three days of just the US gasoline bill. The US total oil bill at today’s prices is about $2.3 billion per day. Using a modest multiplier in economic activity, that would make the US oil industry, not counting natural gas, a $10 billion per day economic activity. The “subsidies” trumpeted by the government headlines amount to a few hours of the industry’s size.

Last year the Chinese spanned the globe and spent $200 billion in buying oil properties. I am often in China and my colleagues there are actually bewildered. After a few drinks and when words become looser and in some ways, more lucid, they have two questions: “What is the energy policy of the United States? and “If you are not going to produce your own oil and gas why are you letting us have a free ride in accessing oil supplies everywhere in the world with no resistance and no competition?” I have no answer to either but I do know that the Chinese understand that energy means power and better economics. We no longer seem to get it.


Obama’s Green-Jobs Fantasies

March 10, 2011

(For some reason WordPress kills the text formatting on some of my posts and the software refuses to register my edits; the result the following “smashed together” post.  My apologies)

By John Stossel


Anyone who understands basic economics already knows that President Obama’s $2.3 billion green-jobs initiative was snake oil. Now, thanks to Kenneth P. Green, we have statistics as well as theory to prove it.
In a new article, “The Myth of Green Energy Jobs: The European Experience,” the environmental scientist and a resident scholar at the American Enterprise Institute writes, “Green programs in Spain destroyed 2.2 jobs for every green job created, while the capital needed for one green job in Italy could create almost five jobs in the general economy.”
Ironically, Obama boasts his initiative “will help close the clean-energy gap between America and other nations.” But Green says, “(C)ountries are cutting these programs because they realize they aren’t sustainable and they are obscenely expensive.”
Obama claims that if we “invest” more, “the transition to clean energy has the potential to grow our economy and create millions of jobs — but only if we accelerate that transition.”
What could make more sense? A little push from the smart politicians and — voila! — we can have an abundance of new good-paying jobs and a cleaner, sustainable environment. It’s the ultimate twofer.
Except it’s an illusion, as economic logic demonstrates.
“It is well understood, among economists, that governments do not ‘create’ jobs,” Green writes. “The willingness of entrepreneurs to invest their capital, paired with consumer demand for goods and services, does that. All the government can do is subsidize some industries while jacking up costs for others. In the green case, it is destroying jobs in the conventional energy sector — and most likely in other industrial sectors — through taxes and subsidies to new green companies that will use taxpayer dollars to undercut the competition. The subsidized jobs ‘created’ are, by definition, less efficient uses of capital than market-created jobs.”
Green is using good, solid economic thinking. Many years ago, Henry Hazlitt wrote in his bestseller, “Economics in One Lesson,” “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”
In judging any government initiative, such as Obama’s green-jobs plan, you can’t look just at the credit side of ledger because the government is unable to give without first taking away.
Worse than that: Inevitably, more is taken away — destroyed — than is given because the government substitutes force and taxation for consent and free exchange. Instead of a process driven by consumer preferences, we get one imposed by politicians’ grand social designs. It’s what F.A. Hayek called “the fatal conceit.”
So we shouldn’t be surprised that green-jobs programs make energy more expensive. “(F)orcing green energy on the market (is) much, much more expensive,” Green said. “Using Spain as a model, when you do the math, you realize that creating 3 million new green jobs could cost $2.25 trillion.”
Of course, many people who push “green jobs” want the price of energy to rise so we’ll use less. If the environmental lobby wants Americans to be poorer, it ought to come clean about that.
The advocates of such programs don’t just misunderstand economics. They have lapsed into a pre-economic mentality. Rulers once believed they could do whatever they wanted, subject only to the physical laws of nature. If things didn’t work out as planned, it was because the people had failed to cooperate. But as economist Ludwig von Mises wrote, once economics emerged as an intellectual discipline, “it was learned that in the social realm too there is something operative which power and force are unable to alter and to which they must adjust themselves if they hope to achieve success … .”
That “something” is inescapable economic forces like the law of supply and demand.
Green is right when he says, “Central planners in the United States trying to promote green industry will fare no better (than Europe) at creating jobs or stimulating the economy.”
John Stossel
John Stossel is host of “Stossel” on the Fox Business Network. He’s the author of “Give Me a Break” and of “Myth, Lies, and Downright Stupidity.” To find out more about John Stossel, visit his site at


The corruption of climate science

March 1, 2011

Roy W. Spencer, Ph. D.  (

Politicians formed the IPCC over 20 years ago with an endgame in mind: to regulate CO2 emissions. I know, because I witnessed some of the behind-the-scenes planning. It is not a scientific organization. It was organized to use the government-funded scientific research establishment to achieve policy goals.

Now, that’s not necessarily a bad thing. But when they are portrayed as representing unbiased science, that IS a bad thing. If anthropogenic global warming – and ocean `acidification’ (now there’s a biased and totally incorrect term) – ends up being largely a false alarm, those who have run the IPCC are out of a job. More on that later.

I don’t want to be misunderstood on this. IF we are destroying the planet with our fossil fuel burning, then something SHOULD be done about it.

But the climate science community has allowed itself to be used on this issue, and as a result, politicians, activists, and the media have successfully portrayed the biased science as settled. They apparently do not realize that `settled science’ is an oxymoron.

The most vocal climate scientists defending the IPCC have lost their objectivity. Yes, they have what I consider to be a plausible theory. But they actively suppress evidence to the contrary, for instance attempts to study natural explanations for recent warming.

That’s one reason why the public was so outraged about the ClimateGate e-mails. ClimateGate doesn’t prove their science is wrong.but it does reveal their bias. Science progresses by investigating alternative explanations for things. Long ago, the IPCC all but abandoned that search.

Oh, they have noted (correctly I believe) that a change in the total output of the sun is not to blame. But there are SO many other possibilities, and all they do is dismiss those possibilities out of hand. They have a theory – more CO2 is to blame – and they religiously stick to it. It guides all of the research they do.

The climate models are indeed great accomplishments. It’s what they are being used for that is suspect. A total of 23 models cover a wide range of warming estimates for our future, and yet there is no way to test them for what they are being used for! climate change predictions.

Virtually all of the models produce decadal time scale warming that exceeds what we have observed in the last 15 years. That fact has been known for years, but its publication in the peer reviewed literature continues to be blocked.

My theory is that a natural change in cloud cover has caused most of the recent warming. Temperature proxy data from around the world suggests that just about every century in the last 2,000 years has experienced warming or cooling. Why should today’s warmth be manmade, when the Medieval Warm Period was not? Just because we finally have one potential explanation – CO2?

This only shows how LITTLE we understand about climate change.not how MUCH we know.

Why would scientists allow themselves to be used in this way? When I have pressed them on the science over the years, they all retreat to the position that getting away from fossil fuels is the `right thing to do anyway’.

In other words, they have let their worldviews, their politics, their economic understanding (or lack thereof) affect their scientific judgment. I am ashamed for our scientific discipline and embarrassed by their behavior.

Is it any wonder that scientists have such a bad reputation among the taxpayers who pay them to play in their ivory tower sandboxes? They can make gloom and doom predictions all day long of events far in the future without ever having to suffer any consequences of being wrong.

The perpetual supply of climate change research money also biases them. Everyone in my business knows that as long as manmade climate change remains a serious threat, the money will continue to flow, and climate programs will continue to grow.

Now, I do agree the supply of fossil fuels is not endless. But we will never actually “run out”.we will just slowly stop trying to extract them as they become increasingly scarce (translation – more expensive). That’s the way the world works.

People who claim we are going to wake up one morning and our fossil fuels will be gone are either pandering, or stupid, or both.

But how you transition from fossil fuels to other sources of energy makes all the difference in the world. Making our most abundant and affordable sources of energy artificially more expensive with laws and regulations will end up killing millions of people.

And that’s why I speak out. Poverty kills. Those who argue otherwise from their positions of fossil-fueled health and wealth are like spoiled children.

The truly objective scientist should be asking whether MORE, not less, atmospheric carbon dioxide is what we should be trying to achieve. There is more published real-world evidence for the benefits of more carbon dioxide, than for any damage caused by it. The benefits have been measured, and are real-world. The risks still remain theoretical.

Carbon dioxide is necessary for life on Earth. That it has been so successfully demonized with so little hard evidence is truly a testament to the scientific illiteracy of modern society. If humans were destroying CO2 – rather than creating more – imagine the outrage there would be at THAT!

I would love the opportunity to cross examine these (natural) climate change deniers in a court of law. They have gotten away with too much, for too long. Might they be right? Sure. But the public has no idea how flimsy – and circumstantial – their evidence is.

In the end, I doubt the IPCC will ever be defunded. Last night’s vote in the House is just a warning shot across the bow. But unless the IPCC starts to change its ways, it runs the risk of being totally marginalized. It has almost reached that point, anyway.

And maybe the IPCC leadership doesn’t really care if its pronouncements are ignored, as long as they can jet around the world to meet in exotic destinations and plan where their next meeting should be held. I hear it’s a pretty good gig.



The Ethanol Idiocy that Will Not Die

February 9, 2011

Thank you oh  “Great Hot-Air One” (read Al Gore).  What an idiot! Thank God he is fading (a little too slowly, in my opinion) .

Rich Lowry: National Review Online, 14 December 2010

When Al Gore drops an environmental fad, it has truly reached its expiration date.
In his wisdom, the Goracle recently acknowledged what almost all disinterested observers concluded long ago: Ethanol is a fraud. It has no environmental benefits, and harmful side effects. The subsidies that support its use are an object lesson in the incorrigibility of Washington’s gross special-interest politics. It is the monster that ate America’s corn crop.
“It is not good policy to have these massive subsidies for first-generation ethanol,” the former vice president and Nobel Peace Prize recipient said, referring to corn-based ethanol. He called the fuel “a mistake,” and confessed one reason he fell so hard for it is that he “had a certain fondness for the farmers in the state of Iowa.” These farmers vote in the First in the Nation caucuses and practically insist that their favored presidential candidates drink ethanol at breakfast and hail it as the nectar of the gods.
Al Gore’s ethanol apostasy is a symptom of a left-right coalition that has arisen to expose the former wonder fuel. (The Gore of old insisted that “the more we can make this home-grown fuel a successful, widely used product, the better off our farmers and our environment will be.”) But common sense, even cross-ideological, bipartisan common sense with all the evidence on its side, is no match for Congress’s boundless appetite for expensive favors for powerful lobbies and constituent groups.
Tom Harkin and Chuck Grassley, the Democratic and Republican senators from Iowa respectively, stand at the doors of Congress declaring: Ethanol now, ethanol forever. They have graced the Obama-McConnell tax bargain with an extension of a tax credit for ethanol that costs about $6 billion a year, and with an extension of a tariff on ethanol imports. Ethanol is so uneconomical that Congress supports it three different ways — with a mandate for its use, a tax credit to subsidize it, and a tariff to keep out competitors. Rarely are so many levers of government used to prop up one woeful product.
During the past decade, ethanol enjoyed a good run as a notional part of the solution to global warming. Then, environmentalists began to realize it may actually increase greenhouse emissions. Ethanol releases less carbon dioxide per gallon than gasoline. Once the emissions necessary to convert land to corn production and then grow and process it are taken into account, though, ethanol doesn’t look so green anymore.
So much corn — about 40 percent of the U.S. crop — is feeding into the maw of government-created demand for the fuel, that it could be increasing worldwide food prices. In short, in exchange for not reducing greenhouse emissions, ethanol reduces the availability of food to the poor.
The multiple layers of subsidization have their own perversity. Since there’s already a mandate to blend ethanol into gasoline, the tax credit is giving away money for something that would happen anyway. Environmental groups say this pads the bottom line of Big Oil. Harry de Gorter of the free-market Cato Institute has a more complicated take — the subsidy decreases the cost and therefore the price of gasoline, effectively subsidizing its consumption. Your Congress at work.
But who cares about the facts? Once we have fired up a vast machine that from cornfield to distilleries produces 38 million gallons of ethanol a day, it will be nearly impossible to turn it off. Too many people will have a vested interest in continuing the scam, and its supporters — like Harkin and Grassley now — will always argue that any change is too disruptive. We’ll still be mandating ethanol long after the internal-combustion engine is obsolete.
The ethanol experience should counsel against blithely creating new government-supported industries on the basis of dubious promises of cost-free environmental benefits. Judging by the tax bargain, festooned with all manner of other green subsidies and credits, it’s a lesson ignored.

In Washington, the boondoggles may lose their luster, but they never die.


Sputnik State of the Union

February 3, 2011

From Geoffrey Styles’ blog

Wednesday, January 26, 2011

Energy didn’t feature as prominently in last night’s State of the Union Address as it has in some years, including last year’s speech. Rather than making it a primary focus area, the President seemed to mention it more as an example of his broader innovation and competitiveness agenda. That’s probably a good thing, because the administration’s persistence in pitting conventional energy against renewables reflects the muddle in which US energy policy remains. We’re desperately worried that China is getting ahead of us in renewable energy, yet we don’t seem to notice that China is hardly treating oil and gas as yesterday’s energy. I suspect that from China’s perspective, their focus is not especially on renewable energy or clean energy but on cheap energy, which is what their economy needs to grow. I wouldn’t think we’re so different in that regard.

I won’t waste time dissecting the President’s suggestion to strip the oil & gas industry of its tax benefits in order to fund a new or expanded clean energy innovation effort. If the administration couldn’t make that happen when its party dominated both houses of Congress by large majorities, then this idea is simply dead on arrival in an era of divided government. The best way to address those subsidies, along with the much larger per-barrel subsidy for ethanol, is through the kind of tax reform that would make all US industries more competitive globally. So I was pleased to hear the President suggest simplifying the tax code and reducing the corporate income tax.

Innovation and tax reform will indeed be crucial if the US wants to be a leader in clean energy technology, not just as the favored beneficiary of today’s version of our periodic debate over industrial policy–picking winners–but as one part of a more robust and competitive US manufacturing sector. However, it’s myopic to compare ourselves to China on infrastructure and clean energy innovation while ignoring China’s full-court press to meet its rapidly growing demand for oil and gas. China doesn’t have an offshore drilling moratorium or “permitorium”; instead it has focused on offshore drilling as a primary means for expanding its domestic production and limiting its oil imports, which a few years ago eclipsed those of Japan as the world’s second largest, behind our own. Chinese companies are investing in oil & gas projects, joint ventures and acquisitions all over the world, because China recognizes that oil wasn’t just the dominant fuel of the 20th century; it remains a key energy source in the 21st. And for those worried about China’s lead in renewable energy, exemplified by the news that its wind power capacity surpassed that of the US last year, I recommend Michael Levi’s article in Foreign Policy.

On a more positive note, President Obama seemed to signal his support for moving the debate on a national renewable energy standard toward encompassing all clean energy. His remarks suggested that this would include not just nuclear power–by far our largest source of low-emission energy today–but also natural gas and clean coal. With those inclusions, the goal he suggested of generating 80% of our electricity from “clean energy sources” by 2035 could be the most achievable energy goal his administration has put forward since taking office. With coal’s share of electricity generation currently at 45%, it would require increasing the contribution from nuclear, renewables and natural gas by just under half–or less with some help from efficiency and conservation. Not easy, but not impossible, either, as long as we build enough new nuclear power plants to more than replace the ones that will likely have been retired by then.

Whether or not this is truly “our generation’s Sputnik moment”, the speech’s recurring theme exhorting us to “win the future” was perhaps a bit too reminiscent of another presidential speech centered on a different kind of “WIN”. Ensuring that this initiative doesn’t share the fate of that earlier one in the Ford Administration might just depend on making sure that in an environment of tightening purse strings, the government’s investments in new energy are focused on making clean energy cheap enough to compete without unsustainable subsidies. In the meantime, while we’re waiting for that effort to bear fruit, it’s worth recalling that America’s conventional energy industry is still one sector in which we don’t have to catch up with anyone else, unless we deliberately set out to hamstring it.


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 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.