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Rare Earth Elements in National Defense

A March 2011 letter written by Senators Casey, Schumer, Stabenow, and Whitehouse urged the Obama Administration to instruct the U.S. executive director at each multilateral bank, including the World Bank, to oppose the approval of any new financing to the Chinese government for rare earth projects in China, including rare earth mining, smelting or separation, or production of rare earth products.44 The letter also urged the Administration to impose the same types of restrictions on Chinese investment in mineral exploration and purchases in the United States as China imposes on foreign investment in rare earth in China. 45

Some rare earth observers are concerned that Molycorp’s purchase of Neo Materials Technologies could potentially make it more difficult for Molycorp to supply U.S. defense needs for rare earths, given China’s domination and the increased broadening of restrictions on exporting rare earth minerals. 46

Are Rare Earths Critical Materials for U.S. Defense?

DOD has not publicly stated whether rare earths fall within the context of materials considered strategic or critical for U.S. defense needs. There are several definitions of what constitutes a strategic or critical material; however, there is disagreement over which rare earth elements fall within these categories. Generally, strategic and critical materials have been associated with national security purposes. Some experts trace the first mention of strategic and critical materials to legislative language contained in both the Naval Appropriations Act of 1938 and the Strategic and Critical Materials Stockpiling Act of 1939 (P.L. 76-117, 50 U.S.C. 98 et seq.), which authorized the development of an inventory of strategic and critical materials for military use and provided funds for their purchase. 47

DOD’s current position on strategic materials was largely determined by the findings of the Strategic Materials Protection Board (SMPB).48 The purpose of the SMPB was to determine the need to provide a long-term domestic supply of strategic materials designated as critical to national security, and to analyze the risk associated with each material and the effect on national defense that not having a domestic supply source might pose. The SMPB was to meet as determined to be necessary by the Secretary of Defense, but not less frequently than once every two years. SMPB’s last report was issued in December 2008. Given the two-year meeting requirement, the board would have met in December 2010, but no meeting was held.

44 The letter states that “the United States should not sit passively while China’s investment policies hamstring U.S. companies and undermine our national and economic security needs.”

45 The letter can be found at http://casey.senate.gov/newsroom/press/release/print.cfm?id=81a1fa95-49d2-47a7-98b4- 65973ae14ddc.

46 See Baron, Kevin. Pentagon Report Disputes Concerns Over China Rare Earth Reliance. New York Times, March 13, 2012, at http://www.nytimes.com/2012/03/09/business/global/merger-combines-a-rare-earth-mining-firm-with-a- processor.html?_r=1&pagewanted=print; Gordon, Julie. RPT-DEALTALK-Molycorp, Neo Material Deal a Rare Earth Game Changer. Reuters, March 12, 2012, at http://www.reuters.com/article/2012/03/12/neomaterial-molycorp- idUSL2E8E9HTE20120312; also see Bose, Kunal. China Plays Truant With Rare Earth Metals. Business Standard, April 3, 2012, at http://www.business-standard.com/india/news/china-plays-truantrare-earth-metals/469896/.

47 National Research Council. Managing Materials for a Twenty-first Century Military, and Minerals, Critical Materials, and the U.S. Economy, http://books.nap.edu/catalog.php?record_id=12028#toc.

48 The Board was established through Section 843 of the John Warner National Defense Authorization Act for FY2007 (P.L. 109-364).

Congressional Research Service

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