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Federal dollars spur cautious optimism about U.S. rare earths production

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Mine Tailings Discoveries

Rare-earth oxides, clockwise from top center: praseodymium, cerium, lanthanum, neodymium, samarium, and gadolinium. Rare earth elements are required for key components of cellphones, televisions, weapons systems, wind turbines, MRI machines and the regenerative brakes in hybrid cars.

A nascent arm of the Wyoming mining industry stands to benefit from incentives baked into recent federal law.

It will take years of research and permitting before either of the companies eyeing deposits of rare earth elements in the state — Rare Element Resources in the northeast and Western Rare Earths to the southeast — can open a commercial mine.

But rare earths are needed for a variety of technologies, including renewables. Growing bipartisan concern about the import-reliant supply chain could prompt officials to accelerate new U.S. production. They’re wary, however, of the significant environmental impacts that have historically accompanied rare earths mining.

The Inflation Reduction Act, enacted in August, introduced and expanded incentives for a broad range of low-carbon technologies.

Among them is “a new tax credit for domestic manufacturers of ‘eligible components,’ which in this case includes critical minerals including key rare earth elements: neodymium, dysprosium, and praseodymium,” Oscar Serpell, associate director of academic programming at the University of Pennsylvania’s Kleinman Center for Energy Policy, wrote last week in a blog post.

“This tax credit covers up to 10% of the manufacturer’s cost of production and represents a considerable incentive to begin or continue producing critical minerals domestically,” Serpell added.

He noted, though, that much of the funding targeting the production of critical materials, whether through mining or recycling, targets batteries. Despite their important role in motors, rare earths are less likely to be used in the batteries themselves.

Serpell pointed to the law’s modified electric vehicle tax credits, which require manufacturers to begin sourcing a significant fraction of their battery components from North America.

“While these new limits to the EV tax credit will likely have a profound effect on global production patterns for elements such as lithium, nickel, cobalt, and manganese that are essential components of EV batteries, the new rule is unlikely to impact REE production,” he wrote.

Motor components (including rare earths), he added, have not been granted the same consideration.

While the Inflation Reduction Act “sets the stage for the U.S. and its trade partners to make a much more significant contribution to the global production of essential minerals for the energy transition,” Serpell wrote, it “does not resolve all of the barriers to increased domestic mining and manufacturing.”

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