MAC: Mines and Communities

Point Counterpoint:

Published by MAC on 2007-08-15

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

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