MAC: Mines and Communities

Bangladesh update: is opinion now swinging against Phulbari coal?

Published by MAC on 2007-08-16

Bangladesh update: is opinion now swinging against Phulbari coal?

16th August 2007

After several months of official and media intimidation against opponents of the Global Coal/Asia Energy Phulbari project in northwestern Bangladesh, the tide of official opinion may be turning (albeit slowly) in their favour.

Last week, the interim government's advisory body on the long-delayed national coal policy warned against over-reliance on extraction of coal and its likely negative impacts on the environment. A noted Bangladeshi geologist, while pointing out major inconsistencies and shortcomings in the draft policy proposal, also welcomed the fact that it "seems to have moved away from export-oriented mining plan by international companies, including the Asia Energy Company (AEC)"

Meanwhile, it is reported that Khaleda Zia, former prime minister and leader of the Bangladesh National Party (BNP). is under investigation for illegally allowing the transfer of BHPBilliton's Phulbari lease to Asia Energy in 1998.

No exhaustive coal-mining possible: coal body

Staff Correspondent, NewAge

17th August 2007

The advisory committee, formed to finalise the draft coal policy, on Thursday decided to include a provision in the policy that the country would not go for 'vigorous' coal mining because of the limited amount of coal, numerous difficulties in extracting it and the adverse effects on the environment.

The committee, headed by former vice-chancellor of the BUET, Abdul Matin Patwari, also decided that the committee members would visit Barapukuria, Phulbari and Khalaspur coal-fields next Friday.

A geology professor of Dhaka University, Badrul Imam, told the committee at a meeting that the amount of coal in the country was very limited and exclusively situated in two northern districts, Dinajpur and Rangpur.

'If you consider our entire coal reserve, which is around 2,500 million tonnes, with the Raniganj coal field in West Bengal that has a reserve over 22,000 million tonnes, you can surely see how limited our coal reserve is,' he said at the meeting of the committee.

He said that country would face difficulties in both underground and open-pit mining in Dinajpur and Rangpur because of presence of a layer of water over the layer of coal.

He said, with regard to open-pit mining, that this method would be difficult and have adverse effects because of the tremendous land shortage and the extreme density of population.

'One can imagine what will happen by 10 to 15 years if two or three open-pit mines are operated in Dinajpur and Rangpur districts. The population of the districts will increase but not the land,' said professor Imam.

The committee endorsed his suggestion that a paragraph would be included in the introduction of the policy that would say that country would not be able to go for thorough or exhaustive coal mining because of the limited resources, shortage of land and difficulties in extraction.

Professor Imam, rebutting criticism of underground mining at Barapukuria coal-field, said that the current miserable state of the field was not a fault of the underground mining method -- rather bureaucratic tangles were responsible for the sorry state of the field.

'After the Chinese company developed the field, coal extraction was not started for six months because of bureaucratic tangles. It is common knowledge that oxygen will enter a mine if it remains idle and thus combustion will occur,' he said.

One of the two parts of Barapukuria was closed last year because of emission of carbon monoxide, resulting in the slump in coal production. A British mining engineer died of carbon monoxide poisoning this year.

Professor Imam also blamed the Chinese company for its dilly-dallying approach to extraction of coal from the field.

Professor Nurul Islam of BUET stressed the need for changes in environmental laws relating to coal-mining as he felt the existing laws were not sufficient to protect the ecology.

The committee will scrutinise the opinions of different sections of people and professionals on the coal policy, and include suggestions that it considers appropriate in the policy in its next meeting.

Point Counterpoint:

A critical review of the coal policy

Md. Khalequzzaman, Ph.D.

The Daily Star

15th August 2007

The Department of Energy and Mineral Resources under the Ministry of Electricity, Energy, and Mineral Resources has made the latest version of the proposed coal policy (June 2007) available for review on their website. They also invited opinions and suggestions on the same. This approach, of transparency and accountability, by a government office is laudable.

The latest version of the coal policy is quite different from the earlier versions that were drafted by the Infrastructure Investment Facilities Center. Among many other changes made, the current draft seems to have moved away from its earlier versions in which an export-oriented mining plan by international companies, including the Asia Energy Company (AEC), was emphasized. Unlike the earlier versions, there is no mention of any foreign company as a part of the coal mining action plan in the current draft.

This draft emphasizes the role coal can play in meeting the demands for energy in the country, and in achieving energy security for the next fifty years. The draft under discussion gives preference to the government sector over the private sector in developing and extracting the recoverable coal reserve.

This draft underscores the need for national capability building through improvement of the existing institutions as well as establishment of new institutions, such as the proposed Coalbangla and the Office of Inspector General of Mining.

The current draft coal policy does not embrace open-pit coal mining method as the only viable option for extracting the coal. The amount of royalty for exporting or selling of coal by private companies has also been raised from 6% to 20%. To ensure public ownership and participation in coal resources, all private coal-mining companies will have to enlist 25% of their resources in the share market.

In spite of the positive changes made in the proposed coal policy, a critical review reveals a great deal of discrepancies, inaccuracies, inconsistencies, redundancies, and misleading information throughout the document. For instance, although it is obvious from the calculations that the recoverable coal reserve is not enough to meet the domestic needs, and to achieve energy security, for the next fifty years, the draft outlines detailed leasing procedures of the coalfields, and what rules would be applied during the entire period of mining.

On the one hand, the draft emphasizes the need for national capability building, and on the other, it goes to great lengths to show calculations for royalties from coal exports and sales by lessees.

The policy proposes establishing of new public sector organizations, including Coalbangla, yet the role they will play in extracting coal is not clearly outlined. It is not clear from the document whether the coal fields will be leased out to a private domestic company or to an international company, or whether any of the governmental organizations will do the mining, as is done in India by Coal India Limited. A similar role for the proposed Coalbangla would have been a positive change, and a step in the right direction.

However, the roles of the proposed Coalbangla and of the Office of the Inspector General of Mining are very vaguely defined. If they are envisaged only for a regulatory purpose, then they will only duplicate the role of existing organizations, such as the Bureau of Mineral Resources Development and/or the Department of Environment. Coal mining is an environment degrading process.

In order to minimize degradation of water, soil, air, and human health, it is extremely important to formulate strict rules, regulations, acts, and laws, keeping local socio-economic, geologic, and environmental settings in mind. The draft policy refers to the Equatorial Principles and World Bank Standards as applicable norms for coal mining in Bangladesh. However, these principles and standards are written in generalized terms, and are not enforceable in, or applicable to, a particular country.

The Equatorial Principles are suggested by lenders to borrowing companies as recommended sets of rules, which encourage environmental assessment and corporate social responsibility before a lender can loan out a huge sum of money. These principles also emphasize the need for participation of local stakeholders in projects carried out by private companies that borrow money from a financial institution like ADB.

What Bangladesh needs to do, given the fragility of her environment and dense population, is to formulate a strong legal framework similar to or stronger than those in India or the USA in order to control environmental degradation, monitor compliance, and enforce rules and laws applicable during all phases of coal mining.

The draft policy does not pay much attention to the scope and necessity for developing and harnessing alternative energy sources, including renewable ones. Yet, coal can only be one ingredient in a country's energy mix.

The coal policy has to be an integral part of an overall comprehensive energy strategy covering all existing and potential renewable and non-renewable energy sources. For example, Bangladesh has rich potential for solar, wind, and tidal energy. Bangladesh may also consider the potential of modern bio-fuels.

Given the importance of agriculture in the economy, it may be possible to find a win-win solution by choosing an appropriate crop mix that also enhances the country's energy security. In addition, there is a pressing need for reducing system loss and improving energy efficiency in buildings, and in the transportation sector.

Thus, alongside formulation of the coal policy, the Bangladesh government should also initiate a public consultation process for formulation of a national energy strategy, so that all the issues can be discussed and resolved in an open, participatory, and transparent manner.

The draft policy suffers from many discrepancies and inaccuracies with regard to the information concerning reserves, utilization, and impact. To begin with, the recoverable coal reserves mentioned in the draft differ from those in the national energy policy of 2004, and in GSB publications.

For example, the reserve for Phulbari coalfield is shown to be 400 and 572 million tons (MT) in the national energy policy and the draft coal policy, respectively. The coal reserve for Khalaspir is 450, 143, and 400 MT as per the national energy policy, the draft coal policy, and the GSB, respectively. Because of the great depth, the draft coal policy excludes 1053 MT of reserve in Jamalganj coalfield.

However, instead of excluding Jamalganj and other deep coalfields from the master plan, it is important to investigate the feasibility of developing these fields using underground coal gasification.

The draft policy has outlined four scenarios of power demand and distribution of usage of fuels for the period 2005-2025. These scenarios are based on the annual GDP growth rates of 5.2% and 8%, as well as for "sufficient" and "limited" natural gas scenarios beyond 2011. The basis for calculation for these scenarios is not clear. For example, as per the calculation (for GDP growth rate of 8%), the amount of electricity generated per MT of coal varies between 397 MW and 2560 MW, with an average of 712 MW. The reason for such a great variation (more than six times) is not explained.

Also, the reason for fluctuations in the amount of production of gas-based electricity between 2011 and 2025 is not clear. The projected amount decreases from 10174 MW in 2011 to 8857 MW in 2024, and then increases to 9062 MW in 2025. In addition, 37 MT of coal is considered to be the equivalent of one trillion cubic feet (TCF) of gas.

As per the calculations shown, the amount of electricity generated from one TCF-equivalent coal (i.e. 37 MT) varies between 14712 MW and 94728 MW, as compared to about 22181 MW of electricity generated by one TCF of gas. This discrepancy is important because the draft policy says that private companies will have to produce at least 500 MW at mine-mouth for each 3 MT of coal mined. As per the calculations, only 0.5 MT of coal will be needed to produce 500 MW, allowing them to either sell or export about 2.5 MT out of each 3 MT of coal. As a result, though not explicitly stated, the policy still remains an export oriented one.

It is shown in the calculation that 4.938 MT of coal will be used to produce 2306 MW in 2012, which implies that coal mining will be in operation at that time. It is not clear, however, who will mine the coal and what method (underground, open-pit, or underground coal gasification) will be applied. The total amount of coal mined by the year 2025 is shown to be about 450 MT, which is much higher than the amount of recoverable coal by underground mining methods, implying that the policy favours open-pit mining.

Although the current policy is an improvement over earlier versions, a close review reveals many shortcomings and discrepancies. It is hoped that the draft will be revised again, and the inconsistencies, inaccuracies, discrepancies and other inadequacies will be removed in order to produce a pro-people and pro-environment coal policy for Bangladesh.

Md. Khalequzzaman, PhD, is Associate Professor of Geology and Chair,Department of Geology and Physics, Lock Haven University, USA

Oil gas committee wants govt to implement Phulbari deal

Staff Correspondent, NewAge

18th August 2007

The National Committee to Protect Oil, Gas, Mineral Resources, Power and Port on Friday demanded that the government should cancel all the deals with Asia Energy and fully implement the agreement signed with people.

The committee also decided to observe August 26 as 'Phulbari Day' every year as thousands of people at Phulbari in Dinajpur started a massive agitation against Asia Energy's planned open pit mining at Phulbari coal field on this day in 2006. Three people were killed when law enforcers opened fire on the protesters.

Member-secretary of the committee Professor Anu Muhammad demanded that the government should fulfil all the points of an agreement the then government signed with the people on August 30, 2006 following the protest.

'The previous government fulfilled two points out of six of the agreement by paying compensation to the victims. Besides, Asia Energy was ousted from Phulbari and the present government has taken steps to fulfil another point by ensuring fund for a monument at Phulbari in remembrance of the dead,' Anu told a news briefing at the National Press Club.

But no step has yet been taken to fulfil other points, including cancellation of agreement with Asia Energy and ouster of the company from Bangladesh, he said.

'Although Asia Energy was ousted from Phulbari, it has continued its conspiratorial plan in the country. As part of such plan, the company has now taken programmes to exert influence on media.

The company's aim is to buy reporters and consultants to create confusion among people,' Professor Anu observed.

'The company recently took a number of reporters to Germany to write in favour of Asia Energy and open pit mining. Sadly some of my colleagues have also joined them. A clique of teachers, journalists, bureaucrats and businesspeople has been created by the company for supporting it.'

Regarding recent news reports on benefits of open pit mining in Germany, Professor Anu said that the geological formation of Bangladesh land, water table, rainfall, flooding and density of people don't match with Germany and open pit mining would not be viable in this country.

He said many countries, including Argentina and Costa Rica, have recently banned open pit mining (of metals), considering environmental disaster. [* see note]

Professor Anu said that they had sought permission from the government to hold programmes like placing floral wreath in remembrance of the dead, holding mourning rally, photo exhibition, in-house discussion, and prayers sessions from August 26-30.

Committee convener Sheikh Md Shaheedullah, Dhaka University teachers Akmal Hossain and MM Akash and leader of Communist Party of Bangladesh Ruhin Hossain Prince were, among others, present at the news briefing.

* Editorial note: Four provincial assemblies in Argentina have banned open-pit mining but not the central government, which remains solidly in favour of all types of mineral extraction.

Khaleda's role in Niko, Asia Energy deals under probe

Staff Correspondent, The Daily Star

16th August 2007

Intelligence agencies are investigating into allegations that former prime minister Khaleda Zia played dubious roles in realising compensation for the Magurchhara blowout, awarding gas fields to Niko Resources and leasing out Phulbari coal zone to Asia Energy.

There are allegations that Khaleda's actions in these matters violated law while the country incurred huge financial losses at the expense of benefiting some individuals.

An investigation report on the Magurchhara blowout on June 14, 1997, which was caused by negligence of US oil company Occidental, says the process of awarding of the gas blocks to Occidental itself was irregular.

The blowout caused damage worth Tk 3,900 crore, which was never compensated by Occidental and the bid to recover this compensation was limited within filing of some letters.

The report points out that Occidental expressed its interest in exploring block 12 through a fax in 1992. Later, during a visit to the USA, the then PM Khaleda Zia held a meeting with Occidental president. Afterwards, without any tendering process the government started an unsolicited negotiation for blocks 12, 13 and 14.

The government in July 1993 announced a petroleum policy outlining an incentive package for foreign investors in oil and gas sectors. In September that year, the government held a promotional roundtable in Houston to attract oil and gas investors. Yet, without any bid, the government in the same month started processing the unsolicited negotiation with Occidental through signing a memorandum of understanding (MoU). In November, Khaleda approved the MoU. The production sharing contracts for these blocks were signed on January 11, 1995.

The Magurchhara blowout took place in June 1997. Two government committees investigated the blowout and filed their reports by July 1997 blaming Occidental's operational negligence. Yet no move was taken to claim for the compensation until July 1, 2002 when Petrobangla made a claim of $685 million compensation from Occidental. In response Occidental (then Unocal) said a 1998 supplemental agreement had increased 5 percent production share in favour of Bangladesh and that addressed the compensation issue. The government on August 2005 formed a committee on the matter. That committee mysteriously refrained from filing its report.

According to another allegation, the government in 1994 awarded a three-year licence to Australian company BHP to explore Phulbari coal zone. This licence expired in 1997. But in 1998, this licence was transferred to Asia Energy and the government illegally approved it.

But Asia Energy could not use that licence to work in Bangladesh.

Khaleda, however, created the scope illegally for Asia Energy to work in Bangladesh by changing her own orders repeatedly. Later, Asia Energy was allowed to develop the Phulbari coal mine by depriving the nation of huge financial returns.

Meanwhile, Canadian company Niko Resources was awarded the unexplored gas field of Chhatak in disguise of a marginal gas field through a joint venture with Bapex.

The deal, that illegally gave away national resources worth crores of taka to Niko, was forged in connivance with the then law minister Moudud Ahmed, the then state minister for energy Mosharraf Hossain and Khaleda Zia.

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