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S. 2006 (113th): National Rare Earth Cooperative Act of 2014

The text of the bill below is as of Feb 6, 2014 (Introduced).

II

113th CONGRESS

2d Session

S. 2006

IN THE SENATE OF THE UNITED STATES

February 6, 2014

(for himself and Mr. Manchin) introduced the following bill; which was read twice and referred to the Committee on Energy and Natural Resources

A BILL

To provide for the establishment of a National Rare Earth Refinery Cooperative, and for other purposes.

1.

Short title

This Act may be cited as the National Rare Earth Cooperative Act of 2014 .

2.

Findings; statement of policy

(a)

Findings

Congress makes the following findings:

(1)

Heavy rare earth elements are critical for the national defense of the United States, advanced energy technologies, and other desirable commercial and industrial applications.

(2)

The Government Accountability Office has confirmed that the monopoly control of the People's Republic of China over the rare earth value chain has resulted in vulnerabilities in the procurement of multiple United States weapons systems.

(3)

China has leveraged its monopoly control over the rare earth value chain to force United States, European, Japanese, and Korean corporations to transfer manufacturing facilities, technology, and jobs to China in exchange for secure supply contracts.

(4)

China’s increasingly aggressive mercantile behavior has resulted in involuntary transfers of technology, manufacturing, and jobs resulting in onerous trade imbalances with the United States and trading partners of the United States.

(5)

Direct links exist between heavy rare earth mineralogy and thorium.

(6)

Thorium is a mildly radioactive element commonly associated with the lanthanide elements in the most heavy rare earth deposits that are located in the United States and elsewhere.

(7)

Regulations regarding thorium represent a barrier to the development of a heavy rare earth industry that is based in the United States.

(8)

Balancing the strategic national interest objectives of the United States against economic and environmental risks are best met through the creation of a rare earth cooperative.

(9)

A rare earth cooperative could—

(A)

greatly increase rare earth production;

(B)

ensure environmental safety; and

(C)

lower the cost of the production and financial risks faced by rare earth producers in the United States.

(10)

Historically, agricultural and electric cooperatives have stood as one of the greatest success stories of the United States.

(b)

Statement of policy

It is the policy of the United States to advance domestic refining of heavy rare earth materials and the safe storage of thorium in anticipation of the potential future industrial uses of thorium, including energy, as—

(1)

thorium has a mineralogical association with valuable heavy rare earth elements;

(2)

there is a great need to develop domestic refining capacity to process domestic heavy rare earth deposits; and

(3)

the economy of the United States would benefit from the rapid development and control of intellectual property relating to the commercial development of technology utilizing thorium.

3.

Definitions

In this Act:

(1)

Actinide

The term actinide means a natural element associated with any of the 15 rare earth minerals with atomic number 43 and atomic numbers 81 through 93 on the periodic table.

(2)

Consumer member

(A)

In general

The term consumer member means a member of the Cooperative that is—

(i)

an entity that is part of, or has a role in, the value chain for rare earth materials or rare earth products, including from the refined oxide stage to the stage in which the rare earth elements are finished in any physical or chemical form (including oxides, metals, alloys, catalysts, or components); or

(ii)

a consumer of rare earth products.

(B)

Inclusions

The term consumer member includes—

(i)

a producer of or other entity that is part of the value chain for rare earth materials, including original equipment manufacturer producers, whose place of business is located in or outside the United States;

(ii)

a defense contractor or contractors in the United States; and

(iii)

any government agency in the United States or outside the United States that invests in the Cooperative.

(3)

Cooperative

The term Cooperative means the Thorium-Bearing Rare Earth Refinery Cooperative established by section 4(a)(1).

(4)

Cooperative Board

The term Cooperative Board means the Board of Directors of the Cooperative established under section 4(b)(2).

(5)

Corporation

The term Corporation means the Thorium Storage, Energy, and Industrial Products Corporation established under section 5(a)(1).

(6)

Corporation Board

The term Corporation Board means the Board of Directors of the Corporation established under section 5(b)(1).

(7)

Executive Committee

The term Executive Committee means the executive committee established under section 5(b)(2).

(8)

Initial board of directors

The term Initial Board of Directors means the initial Board of Directors for the Cooperative established under section 4(b)(1)(A).

(9)

Institution of higher education

The term institution of higher education has the meaning given that term in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a)).

(10)

National laboratory

The term national laboratory has the meaning given that term in section 2 of the Energy Policy Act of 2005 ( 42 U.S.C. 15801 ).

(11)

Secretary

The term Secretary means the Secretary of Defense.

(12)

Supplier member

The term supplier member means a rare earth producer that enters into a contract to supply the Cooperative with rare earth ores.

(13)

Tolling

The term tolling means a fee-for-services contract between the Cooperative and a primary rare earth producer under which—

(A)

the producer retains ownership and control of the finished product; and

(B)

pays to the Cooperative a fee for services rendered by the Cooperative.

(14)

Unprocessed and unrefined ore

The term unprocessed and refined ore includes any ores or residual ores resulting from the mining, extraction, beneficiation, and processing of other natural resources.

4.

Thorium-Bearing Rare Earth Refinery Cooperative

(a)

Establishment

(1)

In general

There is established a Cooperative, to be known as the Thorium-Bearing Rare Earth Refinery Cooperative, to provide for the domestic processing of thorium-bearing rare earth concentrates as residual unprocessed and unrefined ores.

(2)

Federal charter; ownership

The Cooperative shall operate under a Federal charter.

(3)

Membership

(A)

Composition

The Cooperative shall be comprised of—

(i)

supplier members; and

(ii)

consumer members.

(B)

Supplier members

(i)

In general

As a condition of entering into a contract to supply the Cooperative with rare earth ores, supplier members shall provide rare earth concentrates to the Cooperative at market price.

(ii)

Capital contributions

Any supplier member that makes significant capital contributions to the Cooperative, as determined by the Cooperative Board, may become a consumer member for purposes of the distribution of profits of the Cooperative under subparagraph (D).

(C)

Consumer member

A consumer member—

(i)

shall make capital contributions to the Cooperative in exchange for entering into negotiated supply agreements; and

(ii)

in accordance with the agreements entered into under clause (i), may acquire finished rare earth products from the Cooperative at market price.

(D)

Distribution of profits

Any profits of the Cooperative shall be distributed between supplier members and consumer members in accordance with a formula established by the Cooperative Board.

(b)

Management

(1)

Initial board of directors

(A)

In general

As soon as practicable after the date of the enactment of this Act, the Secretary shall appoint the Initial Board of Directors for the Cooperative, comprised of 5 members, of whom—

(i)

1 member shall represent the Defense Logistics Agency Strategic Materials program of the Department of Defense;

(ii)

1 member shall represent the Assistant Secretary of Defense for Research and Engineering;

(iii)

1 member shall represent United States advocacy groups for rare earth producers and original equipment manufacturing interests;

(iv)

1 member shall represent the United States Geological Survey; and

(v)

1 member who shall—

(I)

not be affiliated with a Federal agency; and

(II)

be recommended for appointment by a majority vote of the other members of the Initial Board of Directors appointed under clauses (i) through (iv).

(B)

Duties

The Initial Board of Directors shall—

(i)

establish a charter, bylaws, and rules of governance for the Cooperative;

(ii)

make formative business decisions on behalf of the Cooperative; and

(iii)

assist in the formation of, and the provision of tasks and assignments to, the Corporation.

(C)

Standing member

The member appointed under subparagraph (A)(v) shall remain on the Cooperative Board and Corporation Board, until such time as—

(i)

the member voluntarily resigns; or

(ii)

a majority of the members of the Cooperative Board and a majority of the members of the Corporation Board vote to remove the member from the Cooperative Board and the Corporation Board.

(D)

Termination

The Initial Board of Directors shall terminate on the date on which the initial members of the Cooperative Board are appointed under paragraph (2).

(2)

Board of directors

(A)

In general

The Board of Directors of the Cooperative shall be comprised of 9 members, to be selected in accordance with the bylaws of the Cooperative established under paragraph (1)(B)(i), of whom—

(i)

5 members shall be consumer members;

(ii)

2 members shall be supplier members;

(iii)

1 member shall represent an advocacy group for defense contractors, other rare earth consumers, and suppliers who are not represented by the Board or through direct ownership in the Cooperative; and

(iv)

1 member shall be the member of the Initial Board of Directors appointed under paragraph (1)(A)(v).

(B)

Powers

The Cooperative Board may—

(i)

prescribe the manner in which business shall be conducted by the Cooperative;

(ii)

determine pay-out ratio formulas for consumer members and supplier members, based on—

(I)

the capital stock ratios of consumer members; and

(II)

the value of supply member contracts, as determined based on the volume, term, and distributions of rare earth concentrates relative to processing costs; and

(iii)

evaluate technologies and processes for the efficient extraction and refining of rare earth materials from various thorium-bearing ores.

(C)

Refinery and office locations

The Cooperative Board shall establish the refinery and offices for the Cooperative at any locations determined to be appropriate by the Cooperative Board.

(c)

Powers; duties

(1)

Investment partnerships

The Cooperative shall seek to enter into domestic and international investment partnerships for the development of the refinery.

(2)

Agreements; direct sales

The Cooperative may—

(A)

enter into equity, financial, and supply-based agreements or arrangements with value-added intermediaries, equipment manufacturers, consumers of rare earth products, and Federal, State, or local agencies to provide economic incentives, leases, or public financing; and

(B)

engage in direct market sales of rare earth products.

(3)

Supply contracts and tolling services

(A)

In general

The Cooperative may—

(i)

directly purchase rare earth materials obtained from any byproduct producers of rare earths;

(ii)

transport those materials in accordance with part 40 of title 10, Code of Federal Regulations (or any corresponding similar regulation or ruling);

(iii)

offer supplier members short-term or direct purchase contracts; and

(iv)

allow primary rare earth producers to be tolling customers of the Cooperative.

(B)

Requirements

A tolling customer under subparagraph (A)(iii) shall—

(i)

retain control of the rare earth products during the processing, refining, or value adding of the rare earth products by the Cooperative; and

(ii)

take possession of the rare earth products after—

(I)

tolling services are rendered by the Cooperative; and

(II)

the Cooperative has received payment in full for the tolling services rendered.

(C)

Fee

The Cooperative may charge tolling customers under subparagraph (A)(iii) a tolling fee not to exceed the sum of—

(i)

the amount equal to 110 percent of the total cost for tolling services rendered by the Cooperative on behalf of the tolling customer; and

(ii)

the amount equal to 5 percent of the market value of the finished product provided to the tolling customer by the Cooperative.

(D)

Applicable law

Any contract among consumer members, supplier members, tolling customers, and direct purchase suppliers entered into under subparagraph (A)(iii) shall be protected as provided in sub section 552(b)(4) of title 5, United States Code.

(E)

Limitations

A direct purchase consumer under subparagraph (A)(ii) or a tolling customer under subparagraph (A)(iii)

(i)

shall not be considered to be a supplier member or otherwise be considered a member of the Cooperative for purposes of this Act; and

(ii)

shall not participate in Cooperative profits or have voting rights with respect to the Cooperative.

(d)

Audits

(1)

In general

The Cooperative shall retain an independent auditor to evaluate the extent to which Federal funds, if any, made available to the Cooperative for research and development activities have been expended in a manner that is consistent with the purposes of this Act and the charter, bylaws, and rules of the Cooperative.

(2)

Reports

The auditor retained under paragraph (1) shall submit to the Secretary of Defense, the Cooperative, and the Comptroller General of the United States an annual report containing the findings and determinations of the auditor.

(3)

Review by Comptroller General

The Comptroller General of the United States shall—

(A)

review each annual report submitted to the Comptroller General by the auditor under paragraph (2); and

(B)

submit to the Committee on Armed Services of the Senate and the Committee on Armed Services of the House of Representatives a report containing the comments of the Comptroller General on the accuracy and completeness of the report and any other matters relating to the report that the Comptroller General considers appropriate.

(e)

Reimbursement of Federal Government

Not later than 7 years of the date of the enactment of this Act, the Cooperative shall reimburse the Federal Government for administrative costs associated with the establishment of its charter.

5.

Thorium Storage, Energy, and Industrial Products Corporation

(a)

Establishment

(1)

In general

As soon as practicable after the date of the enactment of this Act, the Cooperative Board, in consultation with the Secretary of Defense, shall establish the Thorium Storage, Energy, and Industrial Products Corporation to develop uses and markets for thorium, including energy.

(2)

Federal charter

The Corporation shall operate under a Federal charter.

(b)

Management

(1)

Board of directors

(A)

In general

The Board of Directors of the Corporation shall be composed of 5 members.

(B)

Initial members

The initial members of the Corporation Board shall consist of the following members, to be appointed by the Secretary of Defense:

(i)

1 member, who shall represent the Assistant Secretary of Defense for Research and Engineering.

(ii)

1 member, who shall represent the Advanced Energy Program of the Defense Advanced Research Project Agency.

(iii)

1 member, who shall represent United States advocacy groups for commercial development of thorium in nuclear energy systems.

(iv)

1 member, who shall represent a national laboratory.

(v)

1 member, who is the member of the Initial Board of Directors appointed under section 4(b)(1)(A)(v).

(C)

Subsequent members

Subject to subparagraphs (A) and (D), subsequent members of the Corporation Board and Executive Committee shall be appointed in accordance with the bylaws of the Corporation established under paragraph (2)(B)(i).

(D)

Standing members

The initial members appointed under clauses (iv) and (v) of subparagraph (B) shall remain on the Corporation Board and the Executive Committee, until such time as—

(i)

the members voluntarily resign;

(ii)

in the case of a member appointed under subparagraph (B)(iv), a majority of the members of the Corporation Board vote to remove the member from the Corporation Board; or

(iii)

in the case of a member appointed under subparagraph (B)(v), a majority of the members of the Corporation Board and a majority of the members of the Cooperative Board vote to remove the member from the Corporation Board and the Cooperative Board.

(2)

Executive committee

(A)

In general

The Executive Committee for the Corporation shall be composed of the initial members of the Corporation Board appointed under clauses (iv) and (v) of paragraph (1)(B).

(B)

Duties

The Executive Committee shall—

(i)

establish the charter, rules of governance, bylaws, and corporate structure for the Corporation; and

(ii)

make formative business decisions with respect to the Corporation.

(c)

Powers

(1)

Establishment of subsequent entities

(A)

In general

The Corporation may establish 1 or more entities, to be known as an Industrial Products Corporation, for the certification, licensing, insuring, and commercial development of all non-energy uses for thorium (including thorium isotopes and thorium daughter elements), including—

(i)

alloys;

(ii)

catalysts;

(iii)

medical isotopes; and

(iv)

other products.

(B)

Authority of entities

The entities described in subparagraph (A) may—

(i)

develop standards, procedures, and protocols for the approval of commercial and industrial applications for thorium;

(ii)

carry out directly the production and sale of thorium-related non-energy products; and

(iii)

sell or license any production or sales rights to third parties.

(C)

Sale or distribution of industrial products corporation; creation of businesses and partnerships

To develop and commercialize non-energy uses for thorium, the Corporation Board may—

(i)

create, sell, or distribute the equity of an entity described in subparagraph (A); and

(ii)

establish partnerships with Federal agencies, foreign governments, and private entities relating to businesses and activities of the entity.

(2)

Sale or distribution of corporation equity; creation of partnerships

To develop and commercialize thorium energy, the Corporation may sell or distribute equity and establish partnerships with the United States and foreign governments and private entities—

(A)

to create capital;

(B)

to develop intellectual property;

(C)

to acquire technology;

(D)

to establish business partnerships and raw material supply chains;

(E)

to commercially develop thorium energy systems;

(F)

to commercially develop systems for the reduction of spent fuel;

(G)

to develop hardened energy systems for the United States military; and

(H)

to develop process heat technologies systems for coal-to-liquid fuel separation, desalinization, chemical synthesis, and other applications.

(d)

Duties

(1)

Ownership of thorium and related actinides

The Corporation shall—

(A)

on a preprocessing basis, assume liability for and ownership of all thorium and mineralogically associated or related actinides and decay products contained within the monazite and other rare earth mineralizations in the possession of the Cooperative;

(B)

after the Cooperative has separated the thorium from the rare earth concentrates, take physical possession and safely store all thorium-containing actinide byproducts, with the costs of the storage to be paid by the Corporation from fees charged or revenue from sales of other valuable actinides;

(C)

develop new markets and uses for thorium;

(D)

develop energy systems from thorium; and

(E)

develop, manage, and control national and international energy leasing and distribution platforms related to thorium energy systems.

(2)

Safe, long-term storage; development of uses and markets

The Corporation shall—

(A)

in consultation with the Administrator of the Environmental Protection Agency and the Secretary of Energy, be responsible for the safe, long-term storage for all thorium and thorium decay products generated through the Cooperative, consistent with part 192 of title 40, Code of Federal Regulations (as in effect on the date of the enactment of this Act), while taking into account the low relative risks relating to thorium; and

(B)

develop uses and markets for thorium, including energy, including by coordinating and structuring domestic and international investment partnerships for the development of commercial and industrial uses for thorium.

(e)

Audits

(1)

In general

The Corporation shall retain an independent auditor to evaluate the extent to which Federal funds, if any, made available to the Corporation for research and development activities have been expended in a manner that is consistent with the purposes of this Act and the charter, bylaws, and rules of the Corporation.

(2)

Reports

The auditor retained under paragraph (1) shall submit to the Secretary of Defense, the Corporation, and the Comptroller General of the United States an annual report containing the findings and determinations of the auditor.

(3)

Review by Comptroller General

The Comptroller General of the United States shall—

(A)

review each annual report submitted to the Comptroller General by the auditor under paragraph (2); and

(B)

submit to the Committee on Armed Services of the Senate and the Committee on Armed Services of the House of Representatives a report containing the comments of the Comptroller General on the accuracy and completeness of the report and any other matters relating to the report that the Comptroller General considers appropriate.

(f)

Reimbursement of Federal Government

Not later than 7 years of the date of the enactment of this Act, the Corporation shall reimburse the Federal Government for administrative costs associated with the establishment of its charter.

6.

Duties of Secretary of Defense

(a)

Advancement of rare earth initiatives

The Secretary shall coordinate with other Federal agencies to advance and protect—

(1)

domestic rare earth mining;

(2)

the refining of rare earth elements;

(3)

basic rare earth metals production; and

(4)

the development and commercialization of thorium, including—

(A)

energy technologies and products; and

(B)

products containing thorium.

(b)

Annual reports

Not later than one year after the date of the enactment of this Act, and annually thereafter, the Secretary shall submit to Congress a report that, for the period covered by the report—

(1)

contains a description of the progress in the development of—

(A)

a domestic rare earth refining capacity; and

(B)

commercial uses and energy-related uses for thorium; and

(2)

takes into account each report submitted to the Secretary by the Cooperative and the Corporation.

(c)

Federal agencies; national laboratories

Each Federal agency (including the Nuclear Regulatory Commission and the Defense Advanced Research Projects Agency), each national laboratory, and each facility funded by the Federal Government shall provide assistance to the Cooperative and the Corporation under this Act.

(d)

Institutions of higher education

Each institution of higher education is encouraged—

(1)

to develop training and national expertise in the field of thorium development; and

(2)

to promote—

(A)

the marketing of thorium;

(B)

the advancement of the strategic uses of thorium; and

(C)

salt chemistry science and radio chemists.

7.

Authorization of Department of Defense to establish equity stake in Cooperative

The Secretary may acquire and maintain a 10 percent equity stake in the Cooperative in accordance with the provisions of the Strategic and Critical Materials Stock Piling Act ( 50 U.S.C. 98 et seq.) for the purpose of accessing strategic rare earth materials and eliminating the need to acquire such materials under that Act.