Representative Zoe Lofgren, the ranking Democrat on the House Committee on Science, Space, and Technology, has written a 10-page letter sharply criticizing the Commerce Department's proposed financing package for USA Rare Earth. In the letter, Lofgren alleges that Commerce Secretary Howard Lutnick structured the planned $1.58 billion federal support in a way that could give the government significant leverage over the privately held company while simultaneously advantaging a family-run financial firm linked to Lutnick.
The planned package, according to filing details cited in the letter, originates from the Commerce Department's CHIPS Program Office and was set out in a non-binding letter of intent in January. It would provide up to $1.58 billion in support to USA Rare Earth, consisting of a $277 million grant and a $1.3 billion loan. In return, the government would acquire an equity stake in the company estimated between 8% and 16%.
Lofgren describes a set of provisions she finds troubling. One such provision allows the Commerce Department to retain its equity stake even in the event the overall deal does not close or if funding is clawed back. She called that possibility "deeply strange" for a federal investment, noting that the filing makes clear the government could still hold a stake under those circumstances.
The company would only receive the funds if it meets a sequence of milestones laid out in the filing. Those milestones include raising additional private capital, completing technical studies that underpin the mining and manufacturing plans, and demonstrating market demand for the proposed magnet manufacturing operation. The Commerce Department's support is therefore conditional on a series of steps that USA Rare Earth must satisfy to secure the funding.
A focal point of Lofgren's concern is the private capital requirement. The filing indicates USA Rare Earth must complete a roughly $1.5 billion private capital raise led by Cantor Fitzgerald, the investment firm formerly led by Lutnick and now run by his sons. Lofgren contends that making the private fundraising a condition of the government investment leaves USA Rare Earth reliant on private actors and vulnerable to discretionary decisions by Commerce officials. She wrote that this interplay between the company's vulnerability and the secretary's family ties presents "a glaring red flag" and creates the potential for undue influence.
Beyond the potential conflict, Lofgren questions the Commerce Department's legal authority to accept equity stakes under the CHIPS and Science Act. She argues that the statute's so-called "other transaction" authority does not permit the government to take ownership positions in private companies, and she has asked the department to provide documents related to the negotiation of the deal by April 3.
The federal funds, should they be provided, are intended to support two major projects: development of a mine in Sierra Blanca, Texas, projected to begin operations by 2028, and construction of a magnet manufacturing facility in Stillwater, Oklahoma, which is expected to start production this year. The agreement's filings link the disbursement of government resources to completion of the milestones tied to those projects.
USA Rare Earth's CEO Barbara Humpton and a company spokesperson were not immediately available to offer comment. The Commerce Department did not immediately respond to requests for comment about the letter or the filing.
Lofgren's letter provides a view into the types of oversight issues that could be pursued by congressional Democrats if they regain committee control after the November midterm elections, as lawmakers examine the administration's use of federal financing and equity positions to reshape supply chains for critical minerals and strategic industries. Separately, a U.S. Senate committee is reported to be reviewing at least one other proposed equity deal in the critical minerals sector.
Contextual note - The arrangement combines federal grant and loan support with an equity exchange, and includes conditions intended to ensure the projects advance technical feasibility and market demand. The interplay between conditional public financing and private capital requirements is central to the concerns raised by the ranking committee member.