Washington, D.C. – Today, the Subcommittee on Energy and Environment held a hearing to examine research needs and priorities relating to Energy Critical Elements (ECE), most notably “rare earths,” and to examine H.R. 2090, the Energy Critical Elements Advancement Act of 2011, a bill introduced by Rep. Randy Hultgren (R-IL).  China currently holds a position of market dominance of these elements, which are essential for advanced energy technologies.

As a result of a deliberate and decades-long strategy to develop its geologic reserves, in 2010 China produced over 90% of the global supply of rare earths.  China recently reduced export quotas and increased levies on exported rare earth oxides in an attempt to exploit its position and manipulate the market.

Discussing the market reaction to China’s actions, Subcommittee Chairman Andy Harris (R-MD) said “In light of higher prices, producers in the U.S. and ally nations have announced plans to develop rare earth reserves around the world and companies such as Toyota and General Electric are pursuing demand reductions through R&D on recycling, substitute materials and increased use efficiencies.”  Harris continued, “While a responsive market will continue to drive toward solutions, there are reasonable and proper steps the federal government can and should pursue in this area.”

Witnesses today praised H.R. 2090 as a measured approach to securing a stable supply of ECEs, without overtly interfering with private market forces. H.R. 2090 establishes a national resource assessment of potential geologic reserves that would deliver key information to the market and benefit both producers and consumers of energy critical elements.  With respect to R&D, the legislation focuses Federal efforts in basic materials science and chemistry related to energy critical elements in order to complement private sector efforts and enable accelerated innovations. 

“My legislation discussed today addresses energy critical elements in a commonsense, market-oriented way,” said Rep. Hultgren. “These elements are intrinsically rare in distribution and the economics of their production as well as geopolitics leads to uncertain supply, yet they are vital to the modern world. I thank Chairman Harris for holding a hearing on this important topic, and thank Dr. Jaffe and the other witnesses for their time and testimony.”

Endorsing a Federal approach that includes free market signals, Dr. Derek Scissors, a research fellow at Heritage Foundation, said “Chinese dominance can last only as long as Beijing is willing to see [rare earth elements] at below-market prices. Because alternative suppliers can feely enter when prices are high, the market can adjust to any Chinese predation.”

A physics professor at Massachusetts Institute of Technology, Dr. Robert Jaffe, stressed the potential benefits of increased federal research into ECE recycling and substitutes.  Dr. Jaffe said “the government should promote fundamental research aimed at the twin goals of increasing supplies and decreasing our dependence on ECEs”

Representing the Department of Energy (DOE) at today’s hearing, Mr. David Sandalow Assistant Secretary for Policy and International Affairs, said that DOE will issue its updated 2011 Critical Materials Strategy later this month.  Mr. Sandalow said that the report “will update its analysis in light of rapidly-changing market conditions and…include updated criticality assessments and market analyses to assist in addressing critical materials challenges.”

The following witnesses testified today before the Subcommittee:

The Honorable David Sandalow, Assistant Secretary for Policy and International Affairs, Department of Energy

Dr. Derek Scissors, Research Fellow, Heritage Foundation

Dr. Robert Jaffe, Jane and Otto Morningstar Professor of Physics, Massachusetts Institute of Technology

Dr. Karl Gschneidner, Senior Materials Scientist, Ames National Laboratory

Mr. Luka Erceg, President and CEO, Simbol Materials