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October 04, 2011

Jobs Go Awaiting… Or to China

"China, which currently mines most of the world's rare earths of both types [light and heavy], has a chokehold on heavy rare earths, producing 99 percent of the global supply.

"In its report last December, the Energy Department said it could take up to 15 years [emphasis decidedly mine] for the United States to break dependence on China, based on how long it might take to obtain federal permission to open new mines and processing plants…" NYTimes story by Keith Bradsher.

China, as you may remember, has choked back exports of rare earths in order to force high-tech factories which need these materials to locate in that country. Turns out that most rare earths can also be found somewhere in our huge country. It would be nice to have those factories – and working mines and processing plants - here rather than in China.

It's likely that the companies building the factories want some geographic and supply diversification and want to avoid absolute dependence on China, which is also forcing companies which locate there to turn over intellectual property to Chinese joint venture partners. Moreover, Chinese wages are going up along with the standard of living and China has an energy problem. The US is a huge market. There are lots of reasons we could be a competitive place – especially if we had an active supply of rare earths.

Of course we can't do away with all regulation of extraction; there ought to be environmental approval of new projects and enforcement of the conditions of any such approval with harsh penalties for violation. But we've tied ourselves in handcuffs; fifteen years is absurd! What are we going to learn about a project in fifteen years that we can't learn in two? Conditions may actually change in fifteen years. Market conditions may change as well so who wants to start a project now for a market that may or may not exist in fifteen years?

Now imagine a two-year review process (up or down) and, should approval be granted, no delay through injunction or appeal unless the appellant posts a bond for the damages that delay will cause. Imagine the flood of private investment which could go first into rare earth extraction, then into processing, and finally into the industries which are dependent on rare earths and all the supporting businesses. Imagine the jobs that would be created, the economic growth, even the taxes collectible.

BTW, this particular story has good news in it: Molycorp has discovered that it has a source of heavy rare earths in an area of the US where it already has permits. They say they can begin extracting in a little more than a year – that's more like it. They are already building a processing plant for both heavy and light rare earths. We need to see this story replicated a hundred times over. And it can be… if we take off the handcuffs.

BTW # 2, in the same edition of the Times there is an article by economist Bruce Bartlett saying "Academic research has also failed to find evidence that regulation is a significant factor in unemployment." Maybe Bartlett and the academicians ought to read the newspapers. How much more evidence of glacially-paced regulatory approval costing jobs do we need beyond the fact that China will have a virtual monopoly on a key industrial ingredient for fifteen years because that's how long it takes to get the feds to say yes to mining in the US?

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