They were shut down because they could not compete against subsidized foreign competition. Then, like how fallujah-nuker pointed out with regard to American mercury mines, once they were out of the way foreign suppliers were free to raise their prices as much as they wanted. They knew no one would go back to try re-investing in American rare-earth mines with such a high probability they would just be undercut again and lose their investment.
So our tariffs on Chinese rare-earths didn't work, then. And the EPA didn't hamstring the Mountain Pass operation. And the Chinese purchase of Magnequench (and nearly the purchase of Unocal) was inconsequential, according to CFIUS.
Yup, not our government's fault in the slightest. Just "subsidized foreign competition" to blame (in a market that has been reasonably stable over the past couple of decades).