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The SMH has a look at Australias entrant into the rare earths industry and the problems facing its Malaysian processing plant - The global race is on for rare earths and Lynas.

WHEN a Chinese trawler fishing in disputed waters collided with Japanese coastguard patrol boats early on September 7, the global supply of rare earths - crucial for producing smartphones, flatscreen televisions, hybrid cars and iPads - was plunged into turmoil, even if it was not immediately apparent.

And Australias crucial role in the lucrative trade was also to be thrust firmly into the international spotlight.

The errant vessels skipper was arrested and detained, calls for his release went unheeded, and a diplomatic row, seeded by a long-standing territorial feud, erupted between the two Asian nations. For two weeks, tensions worsened with no resolution in sight - until China decided to hit Japan where it hurt.

On September 22, Chinese Premier Wen Jiabao banned rare-earth exports to Japan, and threatened further action if the fisherman was not released. Two days later, the man was set free.

In order to further grow our mutually beneficial relationship based on strategic interests, I believe it is necessary for Japan and China to handle matters calmly, Japanese Prime Minister Naoto Kan said at the time.

The export ban was swiftly revoked, but the world had received a nasty wake-up call. China has a stranglehold on the rare-earths market, accounting for 97 per cent of worldwide production. And it was clear it was prepared to use that dominance for political, as well as economic, gain.

Japan, in particular, had to find alternative sources of rare earths, or risk whole industries being affected.

New applications for rare earths are being discovered all the time. The 17 closely related elements have remarkable magnetivity and help make phones smaller, TVs bigger and display panels brighter. They also represent our best-known chance to make energy-efficient technologies, such as electric vehicles, wind turbines and solar cells financially viable.

We are as addicted to rare earths as we are to oil, we just dont know it, says Nicholas Curtis, chief executive of Australian rare-earths miner Lynas Corporation.

Even before the diplomatic incident, China had begun to restrict exports of rare earths, to ensure it could meet the demand from its local industry. Shipments have been cut from 67,500 tonnes in 2005 to 30,250 tonnes last year. With prices of some rare earths having soared up to five times since the start of the year, the worldwide race to break Chinas stranglehold is officially on. I think the situation has become more acute more rapidly than anybody would have ever predicted, Curtis says. The crisis in the supply of rare earths in the last year or so has resulted from a combination of events that came together and created this perfect storm - and that focused policymakers very heavily on the strategic implications on rare earths.

With California-based Molycorp also in the mix, Australias Lynas is widely considered to be leading the pack. Much like Andrew Forrests Fortescue Metals in its infancy, Lynas has rocketed from a penny-dreadful stock to a company worth $3 billion almost on expectation alone - it has yet to start production.

While its been hot this summer you wouldnt be able to tell from slumping electricity grid demand (courtesy of a pleasingly large takeup of solar PV in recent years) and probably helped along by the governments efforts to push solar hot water and roof insulation a couple of years ago- Summer on the NEM: What the extreme heat didn’t do to demand.

With a run of recent summers of below par temperatures, energy pundits have been eagerly awaiting a good summer heat wave to see just how our electricity system would stand up. The big question was what would happen when all those newly installed air conditioners finally got ramped up, once the the la Nina cycle broke and we got a good roasting? Would a return to hotter conditions finally break the trend of declining energy demand over the last four or five years?

Well it looks like we got the summer that would answer these questions, and the answers are no doubt causing a fair bit of head scratching amongst the pundits.

Since the last hot summer in 2010, our electricity system has seen a lot of changes. For one thing, almost 2 gigawatts of distributed generation has been added in the form of domestic solar PV. To put that in context, 2GW represents a touch under 10 per cent of average summer demand, though of course solar PV only produces at near maximum levels for a few hours in the middle of a sunny summer day. However, when solar PV is producing it takes away from the demand for electricity that otherwise would be dispatched across the poles and wires via our National Electricity Market – or NEM.

So with this summer just past setting new records for extreme heat, it’s a good time to point the summer sun on the NEM and see how it is standing up.

With blistering summer heat, particularly across New South Wales and Queensland, there was an expectation we might see new records in peak demand. But despite the weather and the supposed new air-conditioning load, the NEM doesn’t seem to have been pushed very hard at all during this last summer.

The Australian has an article on The Greens canny exploiting of a new wedge issue for the Coalition, trying to get Tony Abbott to side with either farmers or mining companies over the impact of coal seam gas extraction on farmland - Greens dig a hole for Tony Abbott on farmers rights. There was more today - Greens urge rethink of investment on coal seam gas; want scientific analysis of emissions and Greens question the science of gas for power generation .

THE Greens will move to give farmers veto powers over coal-seam gas operations on their land after seizing on comments from Tony Abbott, who last week backed the right of farmers to deny miners access to their properties.



After the Opposition Leader declined on Saturday to elaborate on remarks he made on Friday that farmers had "a right to say no", Greens leader Bob Brown said he would seek Mr Abbotts support for a private members bill on the issue.



The bill, to be brought into the Senate in the next fortnight by Greens Queensland senator Larissa Waters, would require the written permission of landholders be obtained before companies could explore for, or extract, coal-seam gas.



As senior Coalition figures accused Senator Brown of trying to wedge the Coalition on the issue, which pits its rural constituency against the mining industry, Mr Abbotts spokesman said he "stands by his recent comments that the Coalition supports a vibrant coal-seam gas industry". ...



Resources Minister Martin Ferguson accused Mr Abbott of risking the $45 billion of investment in the Queensland industry through his comments on Friday and of dodging questions on the issue in Perth on Saturday.



He said Mr Abbott was a "rank opportunist" and an "economic vandal".



"Mr Abbotts comments jeopardise future investment, raise the spectre of sovereign risk and are contrary to Australias policy of welcoming foreign investment -- a policy that has in no small way helped ensure the fundamental strength of our economy," Mr Ferguson said.



"Two of the major companies operating in the coal-seam gas industry -- Santos and Origin -- are Australian companies. Is Mr Abbott saying to other major companies in the energy sector, like British Gas or Chevron with their $43bn Gorgon project, that their investment is not welcome?"



The Greens move comes amid rising anger over coal-seam gas extraction in Queensland and NSW, where the rapid expansion of the industry has sparked protests amid concerns about the industrys impact on prime agricultural land and its effect on ground water reserves.

The Climate Spectator has a look at the issue of potential contamination of the Great Artesian Basin - A double-sided CSG dilemma.

Four years ago, fund manager John Abernethy wrote a prescient article for Business Spectator explaining how we were degrading our economic environment just as much as the physical and biological environment.



Abernethy, executive director and chief investment officer of Clime Investment Management, knows plenty about money and his article, published in the throes of the initial 2007 sub-prime crisis, is worth re-reading as a reminder that we have been through the financial and economic equivalents of a Chernobyl, an Exxon Valdez and the American dustbowl of the early 1930s (Economic warming, November 2007).



Today we limp forward wondering whether the ecological system of global finance and economics will collapse altogether.



Increasingly economics, the study of scarcity, and ecology, the study of the biological systems that fill our world, are different sides of the same coin.



Thus the Greens believe they are speaking great economic truths, but based on a much longer timeframe than conventional economists. If youll bear with me for a moment, its fair to say that in theory they are right – the fairly radical suite of policies they promote would, in theory, hand a better world to our great grandchildren than the one we inhabit. In theory. ...



The CSG majors have refined their extraction techniques in recent years to avoid the most hazardous chemicals – one, on condition of anonymity, explained to me yesterday that what is pumped down into the ground to release CSG is around 97 per cent water and sand, with the remaining 3 per cent being "essentially the kind of household chemicals youd find in a normal home".



Sounds pretty benign, doesnt it. But the other view of that harmless mixture is this: imagine filling hundreds of water tankers with a 3 per cent chemical solution, then pouring the lot into an old quarry to create a wetland environment. It might do alright, but then again it might not.



Jim Cox, professor of hydrology at the University of Adelaide, explained to me yesterday the unique characteristics of the Great Artesian Basin that extends over much of the areas of Queensland and some of NSW where CSG extraction is occurring. (This report has a neat little map of where the water is.)



In many parts of the world, underground aquifers are quite discrete, so any pollution of one is likely to be contained. This is not necessarily true of the GAB – Cox explains that areas of heavy rainfall in the north create a long, percolating flow of water that makes its way south, taking perhaps 100 years to reach the southern regions.



And that is where the two sides of the ecology/economics coin come together. The flow of pollutants created by the fracking process of extraction is either an unacceptable burden for future generations who may rely on this water to irrigate crops in an increasingly hungry world; or it is a cost that, with the right discount rate applied, is almost negligible alongside the immense benefit of the energy we extract from CSG.



Bob Brown yesterday questioned the science used by fans of CSG, who claim that as an energy source it releases 50 to 70 per cent less CO2 than coal.

The SMH has an article looking at the issue from a farmers viewpoint - Our food bowls should not be sacrificed to mining.

Australia is the driest continent on earth and as we push towards an ever increasing population we must be mindful of the fact the less than 9 per cent of our continents surface is arable land: a far smaller portion of that is prime agricultural land, and an even smaller portion of that has underground water resources.



This limited area for producing food for the nation is under threat from coal seam gas mining and so far the pendulum has been firmly tilted towards the miners interests. There is a way the two industries can co-exist, but it will require a moratorium on further mining exploration while a regional plan is formed.



I cannot overstate the importance to the country of our food producing areas. The Liverpool Plains in the north-west of NSW, where I am from, is an area of just 1.2 million hectares that produces about 37 per cent of the nations cereal crops. After 185 years of working the land, locals now use some of the most advanced broad-acre farming practices in the world, while local irrigators led the state in water reform.



Many Australians have their wealth tied up in mining stocks and it is in their own interests to imagine that these companies will never affect the agricultural viability of our nation. A few well-run media campaigns have ensured that Australians hold this view. I too felt the same way until mining came into my life six years ago.



The truth is far different – pollution, damage and destruction are the norm, and water resources are being compromised and destroyed on an hourly basis. For far too long, this industry has been able to fix any problem by waving the cheque book.



The legislation in this area is totally inadequate to deal with the coal and gas rush in this nation. Farmers in the Liverpool Plains engaged in the process as set out by the Acts, but the process failed to protect our property and water rights and interrupted our ability to work our own land. We then went to NSW Supreme Court and won, only to have the NSW Labor government of the time retrospectively change the laws, with the full support of the opposition.



Yet while agricultural areas are under siege, Queensland will protect urban areas from mining. NSW and Victoria say they will not follow suit, but the issue of urban mining and the controversial extraction method of fracking is gaining prominence.



The issue of mining in agricultural areas, leading to questions of how the country will feed itself, sits alongside broader questions about how the nation will generate heat and light into the next millennium. ...



We still need a mining industry but, like other industries, it must be held accountable for the damage it inflicts. Until now, the nation has turned a blind eye – we love our wealth and we love our prosperity, and Australians have been unaware what theyve been sacrificing to meet these ends.



Good fences make good neighbors, but at present the mining industry is not prepared to be fenced out of anywhere. They say they do no harm, but all around we see evidence to the contrary. Throughout the Hunter Valley wells are dry and rivers no longer run clean, while aquifers in central Queensland are predicted to drop more than 50 metres following coal seam gas extraction.



The only way agriculture and mining will be able to co-exist is if extractive industries are kept away from productive agricultural land and the precious water resources on which it relies. A regional plan is needed that sets out areas for certain land use, including agriculture, wine production, thoroughbred breeding and mining. Boundaries drawn in black are the only way to achieve a diverse regional Australia where the various industries can co-exist in peace.



Forcing the mining industry to be accountable could also serve to promote renewable energy policies and investment. We cannot eat money or coal, yet we still need light, warmth and industrial activity. Technologies to harvest energy from the sun, the wind and the ocean are advancing fast – if we cast our minds to it, who knows what wonders are ahead? The time to take action to preserve our future is now or there will be no turning back.

There is plenty more commentary on the subject with Robert Gottliebsen at The Business Spectator weighing in with Beware the CSG enfants terribles and Wholl take the CSG blame? and the ABCs "World Today" with Coal seam gas good for environment: Santos.

I was amused watching PM Abbott spending much of the week in the bushfire zone while the News Ltd press complained the greens were politicising the event by linking it (obviously) to global warming. The Age has an editorial on the topic - Action on climate is a duty above politics.

As at least 56 bushfires rage across New South Wales in the worst fire disaster to hit the state in nearly 50 years, The Age endorses the sentiments of Prime Minister Tony Abbott, who has expressed the nations sorrow and sympathy for all who are suffering. Likewise, we support Opposition Leader Bill Shortens tribute to the brave and tireless work of firefighters and police. With one life already lost, and probably more to come as the infernos indiscriminately continue to take their toll, this is indeed a human tragedy.

Given the scale and terrible consequences of the fires, and the fact that NSW Premier Barry OFarrell has declared a state of emergency, it might have appeared unnecessarily churlish of the Greens deputy leader Adam Bandt to criticise the Abbott governments policy on climate change. Mr Bandt says that the Coalition is dismantling Australias global-warming action in the face of scientific opinion that global warming and its associated dangers are increasing. Federal Environment Minister Greg Hunt has accused Mr Bandt of scoring political points from the fires.

The Age believes Mr Bandt has a valid point. Rather than politicising on his own behalf, his criticisms draw necessary attention to the Abbott governments own politicising: the swift fulfilment of its election promises to downgrade the prominence of science in general and the effects of climate change in particular. As we wrote a month ago, It is reasonable to fear that science and the science portfolio are being sacrificed to politics.

It is not just Mr Bandt who is concerned. The Climate Institutes chief executive, John Connor, says there are high risks in disregarding the nexus between the advancement of climate change and the growing severity and frequency of bushfires. An analogy may be drawn with the responsibility of government to respond to road safety issues as they arise. When causes of tragedies on our roads are identified, it is not politicising the issue to demand they be tackled.