The People of America's Oil and Natural Gas Indusry

Protecting U.S. Economic Interests

Jane Van Ryan

Jane Van Ryan
Posted November 8, 2010

An international coalition of business groups has asked the Group of 20 leaders to reach consensus encouraging the global trade of rare earth minerals. The minerals are used in cell phones, cars, alternative energy technologies, as well as in military hardware including smart bombs and sonar. (The New York Times)

About 97 percent of the world's rare earth minerals come from China. On Sept. 21, the Chinese government halted rare earth exports to Japan after Japan detained a Chinese fishing trawler. The export interruption was expanded to other countries, including the United States, on Oct. 18. Beijing reinstated mineral shipments on Oct. 28, only hours before Secretary of State Hillary Clinton planned to mention China's export embargo at a news conference in Honolulu. (The New York Times)

The embargo prompted the international business coalition to call on Group of 20 leaders and governments to "renounce interference with commercial sale of rare earth elements, domestically or internationally, to advance industrial policy or political objectives." API, the Business Roundtable, the National Association of Manufacturers and many other U.S. and global business organizations signed the letter.

Rare earth minerals, such as neodymium which is used to make powerful magnets for wind turbines and hybrid vehicles, cost significantly less inside China's boundaries than externally due to the country's export restrictions and taxes. To avoid the exportation fees, many companies have established factories in China. The United States is completely dependent on China for rare earth minerals.

As we've noted on this blog, the U.S. government's desire to move away from oil to alternative energy sources could increase the country's reliance on Chinese rare earth minerals. That fact and China's demonstrated willingness to withhold supplies are ringing alarm bells in Washington. Rep. Edward Markey (D-Mass.) has called on the administration to examine China's actions.

Meanwhile, private industry is moving forward with a solution. The Molycorp Minerals rare-earths mine in Mountain Pass, California, which closed in 2002 over environmental concerns, is slated to resume full-scale operations in 2012. For Molycorp, the mine is a potentially lucrative business opportunity. For the United States, the mine will help protect the nation's economic interests.

The United States could help to reduce its reliance on imported oil in the same way--by allowing private industry to explore for and produce more oil and natural gas here. By producing more of its own energy for American consumers, the United States could reduce its dependence on unstable or unfriendly countries and improve U.S. energy and economic security.