Halliburton Co. knew the cement mixture it used in BP PLC's ill-fated well in the Gulf of Mexico was unstable two months before the April 20 blowout that triggered the worst oil spill in U.S. history, according to the staff of the presidential commission investigating the spill.

Documents from Halliburton show that before it started pumping cement into the wellbore on April 19 and 20, the company knew the results of three separate laboratory tests on the cement showed that the mixture did not meet industry standards, the commission's staff wrote today in a letter to the seven-member panel.

Halliburton provided BP with the data from at least one of the tests in March, but "there is no indication that Halliburton highlighted to BP the significance of the foam stability data or that BP personnel raised any questions about it," Fred Bartlit Jr., chief counsel for the commission, wrote.

One of four cement tests conducted in the months leading up to the disaster indicated the mixture would be stable, Bartlit said. And details remain uncertain about a final test conducted in the days before the blowout.

"We are not yet certain whether Halliburton reported this data internally or whether the test was even complete prior to the time the cement job was poured at the Macondo well," the letter says.

Bartlit does not fault the cement job as the primary or sole cause of the blowout that killed 11 rig workers and sparked the oil spill. But he is clear that if the cement had worked properly and kept the pressurized oil and gas out of the wellbore, the blowout could have been prevented.

"We have known for some time that the cement used to secure the production casing and isolate the hydrocarbon zone at the bottom of the Macondo well must have failed in some manner," Bartlit wrote. "The cement should have prevented hydrocarbons from entering the well."

BP has also faulted Halliburton's role in the disaster (Greenwire, Sept. 8). But Halliburton officials have said that the company properly tested and used the cement mixture in the BP well and that BP's flawed well design and operations are to blame.

A Halliburton spokeswoman today said the company is still reviewing the commission's letter.

Rep. Ed Markey (D-Mass.) blasted both the companies on the news and used the opportunity to continue his push for BP CEO Bob Dudley to testify before his House Energy and Commerce Subcommittee on Energy and Environment and to plug a bill he introduced that would grant the commission subpoena power.

"The fact that BP and Halliburton knew this cement job could fail only solidifies their liability and responsibility for this disaster," Markey said in a statement. "This is like building a car when you know the brakes could fail, but you sell the cars anyway."

The commission meets next month to discuss the panel's preliminary findings.

Click here to read the letter.

A coalition of groups including the American Petroleum Institute and the U.S. Chamber of Commerce is stepping up the fight to strip funding for U.S. EPA greenhouse gas regulations from a bill to keep the government afloat for the rest of fiscal 2011.

A letter sent by 21 organizations urged lawmakers to include the spending restriction in any continuing resolution or omnibus appropriations measure Congress may consider in a lame-duck session after next week's election. The group included the American Chemistry Council and National Mining Association.

"While keeping the government running is critical, lawmakers also need to make sure government funds are used in ways that advance economic recovery and environmental improvement. In that context, there is an urgent need to delay EPA's implementation of the stationary source rules," the groups wrote.

"The bipartisan Senate and House support for an EPA postponement of the stationary source rules signals that this issue should be a priority for inclusion in spending measures this year," they added.

Neither the House nor the Senate has passed any of the dozen 2011 spending bills yet, in part because of the threat to EPA funding. Congress had to pass a continuing resolution just before the October recess to keep the government running until December and is expected to pass another funding bill when it returns next month.

EPA is set to begin implementing regulation of greenhouse gas emissions from large stationary sources on Jan. 2. The regulations will cost industry jobs, hurt the economy and should be delayed, the groups say.

Republicans have already threatened to challenge EPA authority on its "endangerment finding" that greenhouse gas emissions harm public health and other impending regulations, if the GOP gains the majority in the House. Appropriations bills are likely a primary target for their actions.

Sen. Jay Rockefeller (D-W.Va.) also has proposed a resolution that would delay EPA's regulation of greenhouse gas emissions for two years. He says Senate Majority Leader Harry Reid (D-Nev.) promised a vote on the resolution during the lame-duck session. Rockefeller has the support of at least six Senate Democrats who co-signed his bill, although some Democrats, including Sen. Byron Dorgan (D-N.D.), have expressed concern about passing it through the appropriations process.

Including restrictions on funding of EPA authority could threaten passage of any continuing resolution or omnibus appropriations bill -- all 12 spending bills packaged together -- as President Obama said he would veto a bill that included such language.

The letter was also signed by the Aluminum Association, American Farm Bureau, American Forest and Paper Association, American Iron and Steel Institute, National Association of Chemical Distributors, National Association of Manufacturers, and National Petrochemical and Refiners Association.

Click here to read the letter.

Rep. Joe Barton (R-Texas) today vowed he will be the next chairman of the Energy and Commerce Committee if Republicans win control of the House.

"If that happens, the Republican Steering Committee, which I'm a member of, would nominate to the full conference, and I am confident that I will be nominated. And I am confident, hopefully, that the conference would confirm me to be chairman of the Energy and Commerce Committee," Barton told CNBC.

Barton's bold words are part of an unusually public campaign he is waging to retain the top GOP spot on the powerful committee. Barton has reached the end of his six-year term limit as top Republican on the committee, but he is petitioning for an exception to the GOP rule.

The committee will be the front line in a battle to challenge U.S. EPA's authority on impending air pollution and waste regulations and to change or repeal the Democrats' health care reform bill next year.

Repealing the health care measure would be his first priority, Barton said, but he will also work quickly to hold EPA accountable. Barton said EPA was "the empty-promises agency."

"They've promised all this green revolution, but what they're -- what they're actually delivering is loss of jobs. The cap-and-trade bill, had it become law, would have cost millions of jobs. So you could expect us to aggressively review the endangerment finding if we're in the majority," he said.

EPA found in 2009 that greenhouse gas emissions endanger public health and that the agency has jurisdiction to regulate them under the Clean Air Act.

Barton made similar promises earlier this week in an editorial where he laid out his plan for oversight of EPA and the White House Council on Environmental Quality, along with the Health and Human Services Department, if he obtains the committee gavel (Greenwire, Oct. 27).

Barton made no excuses for his many controversial remarks, including an apology he made to BP PLC last summer when the White House demanded the company set up a $20 billion fund to pay for damages from the oil spill in the Gulf of Mexico.

"I'm a Texan, I'm an engineer, I'm an Aggie engineer, I'm an honest person, I speak the truth as I know it. Sometimes that's good. Sometimes it does ruffle feathers," he said.

Lobbyists question whether Barton has ruffled too many feather at this point to remain at the top of the committee, especially in the eyes of GOP leadership.

But despite the hostility from Republican leadership after the BP apology, Barton said his relationship with House Minority Leader John Boehner (R-Ohio) is "in good repair."

"I'm also a team player. I have worked very hard with Leader Boehner and Whip [Eric] Cantor [of Virginia] and Conference Chairman [Mike] Pence [of Indiana] and the entire Republican Conference to, as you put it, mend the fences. I think the fences are in good repair," Barton said.

Rep. Fred Upton (R-Mich.), chairman of the Energy and Environment Subcommittee, is the leading contender to become chairman of the full committee if Barton's request for an exception is not granted and the Republicans win control of the House. Upton has indicated that he would only step up if Barton is not granted an extension (Greenwire, Oct. 19).

Reporter Elana Schor contributed.

Three industry-funded studies that found U.S. EPA's air pollution regulations would cause hefty job losses and economic damage have gotten low marks from economics professors in a new report commissioned by environmental advocates.

The report from the Natural Resources Defense Council is the latest salvo in a public relations battle between business groups, which say the Obama administration's environmental policies will bludgeon the struggling economy, and environmentalists, who say the rules would yield far more health benefits than costs. Environmental and health advocates teamed up yesterday, launching an ad campaign that accuses "big polluters" of "dumping millions of dollars into a lobbying war against America's clean air laws" (E&ENews PM, Oct. 27).

In recent weeks, industry groups have focused their criticism on EPA's cost projections, arguing that new limits on smog and toxic air pollution would cost millions of jobs and billions of dollars over the coming decades. According to one analysis released last month by the Manufacturers Alliance, tightening the nationwide smog standards to the strictest level being considered by EPA would cause more than 7 million job losses and cost $1 trillion per year from 2020 to 2030 -- about 5 percent of the nation's gross domestic product.

But according to Richard Howarth, an environmental economics professor at Dartmouth College, that analysis is "fundamentally flawed, resting on an analytical framework that is scientifically unsound and inappropriate for use in policy evaluation." Though the analysis includes states that are already in nonattainment for federal ozone standards, it treats its sample as representative of the nation at large, wrote Howarth, who was paid to review the study.

Howarth graded Norman's smog analysis as "incomplete," but if two industry groups submitted their analyses of EPA's proposed standards for industrial boilers, economics professors would give them a 'D' or an 'F', according to the NRDC report.

"These industry groups are attempting to shape vital public health policies with work that wouldn't pass muster in a college economics class," said John Walke, the advocacy group's clean air director, in a statement.

Don Norman, the economist who authored the Manufacturers Alliance study, said the environmental groups should be focusing as much attention on EPA's analysis, which concluded that the ozone rule would yield between $13 billion and $100 billion in annual health benefits at a cost of $19 billion to $90 billion per year.

Norman's report was based on a study by NERA Economic Consulting, which found that a stricter smog standard would eliminate 1.45 million jobs in 11 states. Even if there were any errors in how Norman extrapolated those results to the entire country, the analysis would still be "in the ballpark," he said.

"Whether it's three times NERA's estimate or five times," Norman said, "the number's still large."

Criticism of boiler studies

The NRDC report also includes attacks on two industry analyses of EPA's proposed standards on toxic air pollution from industrial boilers.

Jason Shogren, an economist at the University of Wyoming, criticizes a study from the Council of Industrial Boiler Owners that said every $1 billion spent complying with stricter emissions rules for boilers would threaten 16,000 more jobs. Though actual implementation costs are hard to project because it is unclear what technology will be developed to lower costs, it is unreasonable to assume that no new technology will fall in place, he wrote.

And in another recent analysis of the impact of new air regulations on the pulp and paper industry, the "economics is all wrong," wrote Charles Kolstad, chairman of the economics department at the University of California, Santa Barbara.

That report, which was commissioned by the American Forest and Paper Association, projected widespread shutdowns of paper mills based on the assumption that industry would bear all the costs of the rule.

"The extent to which industry can pass on these costs depends on foreign competition and the price sensitivity of consumers, among other things," wrote Kolstad, who said he would give the paper a failing grade if it were submitted in his classroom. "Simply looking at the engineering costs of a rule, even if accurately estimated, overstates, perhaps substantially, the costs that are actually borne by the industry, its employees or its shareholders."

Chuck Fuqua, a spokesman for the forestry and paper group, said the organization is focused on working with EPA on its final rule. His group's study "uses more comprehensive, timely and accurate data than was used in EPA's analysis," he added.

Click here to read the NRDC report.

The X Prize Foundation has sent the last portion of its $10 million automotive prize to Li-Ion Motors Corp., the winner of its "alternative side-by-side" category.

Li-Ion Motors has indicated it needs the money to pay a $75,000 settlement with a customer who said his electric car would not start when it was delivered and never worked properly.

Also awaiting the disbursement of the $2.5 million award are the company's three "side-by-side" finalists. Just before the final, tie-breaking competition in July, the four companies signed an agreement to share the award, no matter who won (Greenwire, Oct. 18)

"The money has now been disbursed," said X Prize Foundation spokeswoman Carrie Fox. "The foundation processes one team at at time, and this one happened to be last."

The goal of the Automotive X Prize is to spark the development of super-efficient cars that can be manufactured in large volume.

In a detailed look at Li-Ion (prounced "lion") this week, Greenwire found the company's ability to mass produce a car might be in doubt (Greenwire, Oct. 27). Attempts to reach Li-Ion Motors, its fellow finalists and Lyon were unsuccessful this afternoon.

Court documents, interviews and the company's regulatory filings with the Securities and Exchange Commission show the company has vacuumed up $50 million from stock holders in 10 years with little to show for it until the Sept. 16 X Prize ceremony.

Li-Ion Motors owes more than $250,000 to the IRS for unpaid payroll taxes. Company management has twice been investigated by the SEC. A 2008 lawsuit accused the company of operating a "pump-and-dump" penny stock scheme before the suit was dismissed for lack of jurisdiction. And the company is currently appealing a cease-trade order issued by Canadian securities regulators who allege it broke a rule targeted at flagging companies that engage in "abusive practices" in the penny-stock market.

In the tie-breaker, Li-Ion's margin of victory was less than two-tenths of a second in a 100-mile energy and performance run on a Michigan track in July. Five entries achieved an average of at least 100 mpg or the equivalent (all were battery-electric vehicles).

Leaders of the five teams hand-drafted an agreement on the page of a spiral-bound notebook stating that whoever won would keep $1.7 million but share the rest according to an agreed-to formula.

"If my team wins the competition, I agree to share the prize in the following fashion," states the simple contract.

One of the finalists, RaceAbout Association of Finland, did not sign the agreement. RaceAbout came in second in the competition but is not sharing in the prize money.

The German team TW4XP is to get $400,000. ZAP of Santa Rosa, Calif., and Aptera of San Diego tied and are each to receive $200,000.

Also awaiting the award is San Mateo, Calif., technology CEO Barrett Lyon who settled with Li-Ion on Sept. 16, the day the company was awarded the X Prize.

Lyon bought his LiV Surge, a converted PT Cruiser, in 2008. First it was delivered late. Then it would not start, according to the lawsuit he filed in California. Lyon had to pay for it to be towed to his home.

The car sat unused for two months. After two visits by a technician from North Carolina (the first technician did not have the parts to fix a defective battery cell), Lyon says it runs, but takes 40 hours to charge when it is supposed to take eight. It was supposed to go 120 miles on a charge but goes less than 80.

The League of Conservation Voters announced today that it has placed campaign workers in 20 competitive congressional races across the country.

The workers, dubbed "Eagles," are assisting pro-environmental House and Senate candidates in races in Arizona, California, Connecticut, Delaware, Florida, Hawaii, Illinois, Massachusetts, Michigan, New Jersey, New York and Virginia.

"There are more than a few empty offices at LCV headquarters right now, but we couldn't be prouder of our dedicated staff who have hit the campaign trail to support pro-environment candidates this cycle," said Tony Massaro, LCV Action Fund's senior vice president for political affairs.

All of the candidates LCV is assisting are Democrats.

LCV has deployed staff to help in the House campaigns of:

• Rep. Gabrielle Giffords, who is being challenged by Jesse Kelly, a contractor and former Marine, in Arizona's 8th District.

• Democratic physician and educator Ami Bera, who is challenging eight-term incumbent Rep. Dan Lungren, in California's 3rd District.

• Rep. Loretta Sanchez, who is fighting a tough re-election battle against Republican state Assemblyman Van Tran for California's 47th District seat.

• Rep. Ed Perlmutter, who is facing Aurora City Councilman Ryan Frazier in a fight to represent Colorado's 7th District.

• Rep. Allen Boyd, who is fighting off a challenge from mortician Steve Southerland to represent Florida's 2nd District.

• Two-term incumbent Rep. Ron Klein, who is facing retired Army Lt. Col. Allen West in Florida's 22nd District.

• Rep. Suzanne Kosmas, a one-term incumbent battling former state representative and conservative tea party favorite Sandy Adams to retain her seat representing Florida's 24th District.

• Joe Garcia, who is in a tight four-way race to replace departing Republican Rep. Mario Diaz-Balart in Florida's 25th District.

• Colleen Hanabusa, who is trying to win Hawaii's 1st District seat that Rep. Charles Djou won in a special election after Democratic Rep. Neil Abercrombie departed to run for governor.

• Rep. Mellissa Bean, who is fighting Joe Walsh, an independent consultant and tea party member, to keep her seat in Illinois's 8th District.

• Dan Seals, who is trying for the third time to win Illinois' 10th District seat that was vacated by Rep. Mark Kirk and is competing against businessman Robert Dold.

• Norfolk District Attorney Bill Keating, who is trying to win Massachusetts' 10th District seat -- which is being vacated by Rep. William Delahunt -- against state Rep. Jeffrey Perry.

• Rep. Gary Peters, who is fighting off challenger Andrew "Rocky" Raczkowski in Michigan's 9th District.

• Rep. John Adler, who is fighting to retain his seat as New Jersey's 3rd District representative against former NFL player Jon Runyan.

• Rep. Tim Bishop, who is fighting to retain his seat in New York's 1st District against Randy Altschuler.

• Rep. Mike McMahon, who is fighting to retain New York's 13th District seat against businessman Michael Grimm.

• Rep. John Hall, who is locked in a battle with retired ophthalmologist Nan Hayworth to represent New York's 19th District.

• Rep. Gerry Connolly, who is fighting off a challenge from Republican businessman Keith Fimian to represent Virginia's 11th District.

LCV also deployed staff to help in two tight Senate races. Workers are helping in the campaigns of Democrat Richard Blumenthal, Connecticut's attorney general, who is up against Linda McMahon, a former executive with World Wrestling Entertainment, to replace retiring Sen. Chris Dodd (D); and New Castle County Executive Chris Coons, who is locked in his own tight battle against tea party favorite Christine O'Donnell to win the Senate seat in Delaware once held by Vice President Joe Biden.

Democrat Jerry Brown has opened a 10-point lead over Republican Meg Whitman in the race for California's gubernatorial seat, according to the last Field Poll of this year's campaign season.

Attorney General Brown has crested to the comfortable edge -- 49 percent to 39 percent -- with a few days left until Election Day behind a surge in support from Latinos, women and nonpartisan voters, particularly in Los Angeles County, the poll found.

Six months ago, the same polling firm had Whitman ahead by 3 points over Brown, with no discernible advantage found in subsequent Field Poll surveys in July and September. The current poll means Brown has increased his once-small lead by 8 points since the last Field Poll in September.

The survey also found that 21 percent of those expected to vote have already cast their ballots by mail. By Election Day on Tuesday, more than half of all voters in California, or 55 percent, will have voted by mail.

Brown, governor of California from 1975 to 1983, has the edge over former eBay Inc. CEO Whitman at the mailbox, with 48 percent of mailers saying they have voted or will vote for Brown to 40 percent for Whitman.

Brown holds a distinct advantage along the coast, where 71 percent of the state's voters reside, primarily in the Los Angeles region and the San Francisco Bay Area. Less populated, more conservative inland areas tend to favor Whitman.

The Field Poll surveyed 1,501 registered voters Oct. 14-26 in six languages: English, Spanish, Cantonese, Mandarin, Korean and Vietnamese. The error margin of the survey was plus or minus 3.2 percent.

Click here to see the poll.

Sullivan reported from San Francisco.

SAN FRANCISCO -- Three West Coast fishing groups have sued the federal government over proposed revisions to the harvest system for West Coast trawlers.

The Crab Boat Owners Association of San Francisco, the Port Orford Ocean Resource Team of Port Orford, Ore., and the Pacific Coast Federation of Fishermen's Associations filed suit in U.S. District Court here last week in an attempt to block the Commerce Department from replacing an old quota harvest structure with a "catch-share" system meant to address overfishing and competition among fishermen.

Commerce's National Oceanic and Atmospheric Administration wants to change from the quota system to catch shares, which are already employed in Alaska and divide the total amount of an overall allowable catch in a fishery into shares controlled by individual fishermen. The system was designed by the Pacific Fishery Management Council and is supported by the trawl fishing industry.

The old method, according to NOAA, employed fleetwide numerical quotas that led to fishermen from Washington down to California competing with each other in a frenzy until the quota was met, often endangering lives.

But some local fishermen like things the way they are. And they say the new rules would favor big corporations over small operators and cost jobs.

"Ownership of the resource will consolidate into the hands of a few operators in a few ports along the coast, leaving many coastal fishing communities, including our own Fisherman's Wharf, with no access to our own local fish," said Larry Collins, a San Francisco fisherman and president of the Crab Boat Owners Association.

The regulations apply to groundfish such as sole, rockfish and sablefish. These fish are caught with bottom trawls, or drag nets, with smaller boats still using hook-and-line methods and traps.

According to the suit, NOAA's new rule would mean that 90 percent of groundfish in the Western fishery would be controlled by trawl vessel owners. The groups behind the suit say hook-and-line fishing and traps are more selective and do not harm seafloor habitat.

Named defendants in the suit are Commerce Secretary Gary Locke, the National Marine Fisheries Service and NOAA. The rule in question is set to go into effect early next year.

Click here to read the lawsuit.

The top Republican on a House Science and Technology subcommittee needled the Obama administration today for failing to fully implement a White House memo on the use of scientific information at federal agencies.

Rep. Paul Broun of Georgia, the ranking member of the Subcommittee on Investigations and Oversight, asked White House Office of Science and Technology Policy Director John Holdren to finalize recommendations to the president on how federal agencies can further improve the use of science in policymaking.

Recommendations on how the White House can shore up the scientific integrity of its decisions have been overdue, Broun noted, since a March 2009 presidential directive gave Holdren's office four months to finalize them.

"This lack of response reveals the unwillingness of this Administration to cooperate with Congressional inquiries," Broun said in a statement. "For a president who promised an open and transparent federal government, it is frustrating that such optimistic rhetoric has too often not matched actions."

Broun has repeated that request in several letters to the administration over the past year.

He also issued two other letters today. One reiterated a June request to Interior Secretary Ken Salazar for records related to a report on safety measures for drilling on the outer continental shelf. That report was cited by the administration in its decision to impose a moratorium on deepwater drilling.

The third letter asks the White House for records related to delays in awarding funds through the Gulf of Mexico Research Initiative.

Click here to read the scientific integrity letter.

Click here to read the drilling safety letter.

Click here to read the Gulf of Mexico Research Initiative letter.

Last week, Chinese news outlets reported that China plans to cut export quotas for rare earth metals by 30 percent next year. How critical are these materials to U.S. renewable energy production? Is China using its monopoly over rare earths production for political gains? During today's OnPoint, Yaron Vorona, director of the Technology & Rare Earth Metals Center at the Institute for the Analysis of Global Security, explains how Congress and the Obama administration can address the issue and discusses the state of U.S. rare earths production.

Click here to watch today's OnPoint.

Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is Yaron Vorona, director of the Technology and Rare Earth Metals Center at the Institute for the Analysis of Global Security. Yaron, thanks for joining me.

Yaron Vorona: Thanks for having me.

Monica Trauzzi: Last week Chairman Markey wrote a letter to the administration asking for more information about China's alleged restrictions of rare earth materials. The issue has really hit a boiling point recently. What are the allegations against China at this point?

Yaron Vorona: Really it's coming from partially a World Trade Organization investigation that was petitioned by the United Steelworkers. The allegations are that they are illegally supporting their domestic industry, taking actions that are not considered legal under their accession into the WTO.

Monica Trauzzi: So, that means basically that they are not exporting the percentage of materials that they should be?

Yaron Vorona: Well, they have the choice whether or not to export. It's the resource from what we see, there are three distinct actions that China has taken and they have separate motivations. First, there's been a large-scale consolidation within the Chinese bare earth industry, as well as reduced production. In 2008 and 2009 they produced 120,000 tons of rare earths. In 2010 it's looking more like 89,000. So there's been a pullback in production. Second action is a decrease in their export quotas, a certain amount is allowed to be exported. They do it as a mass, rather than specifying individual rare earths. And so they've reduced the export quotas to try to maintain more material domestically for their own use. And, finally, there is reported and frequently denied by Chinese de facto export bans through hold-ups in customs to both Japan and to the U.S. And so there are different motivations behind why they might be doing each one of these actions.

Monica Trauzzi: OK and so for the viewers who aren't familiar with rare earths, why are they so important? How are these materials being used?

Yaron Vorona: Sure. Focusing on renewable energy, which is clearly of importance to the audience, any time you put up a wind turbine, any time you have an electric car, in any application where you have magnets you're using, generally speaking, rare earth magnets because they're more powerful per unit weight. As well, compact fluorescent light bulbs use rare earth phosphorus to emit light at different frequencies and so in batteries, also in solar photovoltaics, solar PV, rare earths are used in the optics as well. So rare earths are widely used across the energy spectrum. Of course, there are also defense applications for rare earths wherever you have a motor. So it really is, it becomes a national security issue.

Monica Trauzzi: And China produces, what, 90 ...

Yaron Vorona: Ninety-seven percent of the world's rare earths right now. The U.S. used to be a great producer. The mine was shut down. It's down in Mountain Pass. It's in the process of being reopened. It will take another couple of years, at least a year, until it's reopened and producing. Currently estimated that it will be producing at 20,000 tons a year.

Monica Trauzzi: And in the broader picture, that means what? Are we still going to need to export or import a certain percentage from China, even if that's reopened?

Yaron Vorona: Not only from China. There are activities all over the globe, certainly domestically in the U.S. there are other projects. There are a number of projects in Canada, Australia as well have a few companies developing their resources. It's going to take some time and there are significant policy issues that need to be overcome before all of those mines come online.

Monica Trauzzi: OK, so what impact is this having on the renewable energy industries? Are they seeing price fluctuations? How are they being impacted?

Yaron Vorona: These metals generally take up a very small percentage of the cost of the end product. In terms of let's say weight and consumption, the Department of Defense consumes only half a percent of the world's rare earths, but it is a strategic metal. Without even that small amount you can't make the end product. So while it might not be an overall component of the cost, it is strategic. The prices of the rare earths themselves, as a result of China's various announcements and actions, have been rising rapidly. In some cases, for some specific rare earth oxides it's gone up as much as 7 to 900 percent.

Monica Trauzzi: Do you believe that China is using their monopoly over these materials for political gains? Is it basically a bargaining chip for them?

Yaron Vorona: There are a number of reasons. As I said, it's not just one action are taking. There are three distinct actions. The official party line and is often quoted in the press is that it's to help them remediate their own environment, as well as to maintain their resource for a longer time. That might make sense for capping production, I can see that, though by my calculation, at their production and their reserves of 27 million tons of rare earths, they've got a lot in the ground. They do have a need to control the industry a little bit more to have less of an environmental impact. That said, restricting exports and having two prices, internally and for the international community, is a separate issue entirely. That's largely to raise revenues, as well is to try to convince foreign firms to do business and start factories locally in China. A condition of that is often transfer of intellectual property into Chinese companies hands, which is also a significant problem if we're talking about American intellectual property. And, finally, there is the de facto ban and that really is geopolitical muscle flexing. With Japan it's over the East China Sea. There is also the U.S.-backed claims of the Association of Southeast Asian Nations over the South China Sea. And what you've got there is the entire trade corridor into Asia. China is also - it was in the news recently that they're investing into Greek shipbuilding. They're building their own shipbuilding facilities and grabbing resources internationally in order to build a navy. And so I see a proto-geopolitical play here.

Monica Trauzzi: So, the House is expected to have a hearing on this in November after the midterms. How should Congress and the administration be addressing this issue and can Washington sort of break China's monopoly on these materials?

Yaron Vorona: There are a number of policy priorities that need to be addressed. There is a problem that there is not the investment into research and development and the raw science domestically here in the U.S. China has invested heavily over the years. They have thousands of rare earth scientists. Of course, they have a very large population. But we don't have anywhere near that number of people. So there is going to be production problems, having the expertise come online at the same time as the mines and production facilities. So an investment into research and development is really important. Also making sure that it's not viewed just as a one-dimensional problem of making sure that there is enough resources. It's the entire supply chain that is at risk here. You need to obviously take the ores out of the ground, but then you need to process them, develop them into components and finally integrate them into the end technologies. And a lot of that knowledge is missing from the U.S. supply chain, so there needs to be investment into that. And the other issue is, of course, that it's not just rare earths that are at risk. There are other strategic materials that haven't yet come onto the radar that aren't such a priority because they're not being restricted now. But, for example, for lithium-ion batteries cobalt is used. Cobalt comes primarily from the Democratic Republic of Congo. Cuba has a large supply, so there are geopolitical issues there. So it's both looking laterally and vertically in the supply chain of technology metals to develop a domestic industry.

Monica Trauzzi: So lots of moving parts in this area.

Yaron Vorona: Exactly.

Monica Trauzzi: Lots to watch. Thank you for coming on the show.

Yaron Vorona: Thank you for having me.

Monica Trauzzi: Thanks for watching. We'll see you back here tomorrow.

[End of Audio]

Click here to watch today's OnPoint.