Rare-earth reality check

Not far from Devils Tower in the Black Hills of eastern Wyoming, work crews are preparing to drill dozens of new holes amid ponderosa pines and rolling meadows. But they're not looking for gold. Instead, they hope to strike neodymium, europium and other exotic-sounding rare earth metals -- a group of 15 elements, plus two others with similar properties, used in clean-energy technology, military hardware and cell phones. Initial drilling on the Canadian company's 2,400 acres of mining claims has revealed concentrations that are "bigger and better than we expected," says Don Ranta, CEO of Rare Element Resources, owner of the proposed Bear Lodge Mine. "It's very likely we'll find a commercial deposit."

Similar optimism has triggered a run on claims in Idaho, Alaska, California, Arizona, New Mexico, Colorado and Utah. A U.S. Geological Survey report released last November outlined 23 "principal" domestic deposits, 19 of them in Western states. Ninety-seven percent of the world's processed rare earth oxides comes from China and the country has been limiting exports and driving up prices since last year -- spurring the rush.

Beyond all the hype and frenzied activity, though, the rare-earths industry must overcome the environmental challenges that shuttered American production a decade ago, as well as a lack of domestic experience in and infrastructure for refining the metals. Lawmakers are scurrying to introduce bills that would help bring the country back up to speed and complete its rare-earths supply chain, from mining to manufacturing. Whatever happens, the West will feel the impacts.

The United States once dominated the rare-earths market, thanks to the Mountain Pass Mine in Southern California's Mojave Desert. The strip mine opened in 1952 and, at its peak, produced 70 percent of the world's supply of rare earth metals. But processing rare earths creates distinctive problems. The tailings that are left behind often contain radioactive thorium and uranium. And highly corrosive hydrochloric acid must be used to help extract the individual elements to make powdered concentrates and then refined oxides, which are used in the manufacturing of alloys and magnets.

The oil company Unocal, which used to operate Mountain Pass, handled the tailings and dealt with about 850 gallons per minute of acid-laden wastewater by piping it to evaporation ponds in the desert. During the 1980s and '90s, pipeline breaks and leaks spilled enough waste to fill an Olympic swimming pool, costing the company $1.4 million-plus in fines. That and a price decline triggered by increased Chinese production led the mine to close in 2002.

Meanwhile, Congress closed the U.S. Bureau of Mines in 1995, halting government mining research, some of which was directed at improving rare-earth recovery. "We lost all our mining expertise and mineral-processing expertise," says Keith Long, a 20-year veteran of the USGS and a co-author of the recent agency report.

By the time mining ceased at Mountain Pass, rare earth metals had become necessary for many products, including compact fluorescent light bulbs, wind turbines, hybrid-electric batteries and missile defense systems. The disparity between U.S. consumption and production finally got the attention of policy-makers, mining officials and would-be investors in the last few years after industry analysts and government reports began highlighting China's market muscle and its implications for national security.

• Energy & Industry