MAC: Mines and Communities

While this is not a first for Bangladesh it's a huge project which has been anticipated for some yea

Published by MAC on 2005-07-05

While this is not a first for Bangladesh it's a huge project which has been anticipated for some years and its impacts are likely to be huge.

Phulbari Coal Mine AEC plan requires shifting of 50,000

Sharier Khan, The Daily Star

5th July 2005

London-based Asia Energy Corporation (AEC) is preparing a 30-year open pit coal mining plan for Phulbari Project that would require relocating around 50,000 people of about 100 villages and a part of Phulbari town but raise government earning by $200 million a year.

The AEC estimates that Phulbari reservoir has 500 million tonnes of high quality coal, enough to generate 8,000 megawatt power for 30 years. The coal is located at varying depths between 120 metres and 300 metres.

Under the coal development policy, 1993, the government will get only six percent royalty from AEC and different types of taxes. In terms of money, this will stand at $200 million if AEC produces 15 million tonnes of coal per year.

Working in Bangladesh from 1998 under an agreement with Petrobangla, the AEC last year started a $20-million feasibility study, including a $4-million social and environmental impact assessment.

With 75 percent of the feasibility study completed, AEC Bangladesh's Chief Executive Officer (CEO) Gary Lye sees bright prospect in open pit mining in Phulbari area where the company would invest $1.4 billion over 30 years.

Lye says the study will end by September this year and his company will submit to the government its plan that will include details of mine development, and how it could finance and help the government rehabilitate and relocate the affected people of the area.

If the government approves the plan within this year, AEC can start production of 1.5 million tonnes of coal in 2007, six million tonnes in 2008, nine million tonnes in 2009 and finally 15 million tonnes from 2011. It will employ 1,200 to 1,500 people and deploy trucks that can carry up to 350 tonnes of coal each. Digging machines to be deployed there will pick up 50 tonnes of coal in one go.

"Price of the coal at the mine gate is likely to be around $13 per tonne," the CEO said talking to The Daily Star at his Dhaka office.

As per the AEC plan, bulk of this coal could be exported through Chalna port, using the railway link to Khulna from the northern region. While India can be one of the prime and easy export markets, AEC sees a broad market for Bangladeshi coal that is high in calorific value, and cause low environmental pollution.

The company also thinks that 20 percent of the production can be utilised by any steel industry, and another part may go for domestic power generation, brick kilns and other consumers.

But to make it all happen, AEC needs a mining area of 6,500 hectares of land because of its open pit mining, which most Bangladeshi energy experts term socially and environmentally hazardous.

Lye and AEC Head of Corporate Affairs Brian Mooney explained the advantages of open pit mining over shaft mining (used at Barapukuria mine), and why relocation of the affected people is worth the venture.

"In shaft mining, optimal extraction of coal is not possible. If you cannot extract even 10 percent of the coal, what is the point in such mining? Whereas in open pit mining, you can extract 90 percent of the reserve," Lye says.

"Again, shaft mining creates land subsidence (as the mining progressively creates vacuum inside), posing a great risk. But in open pit mining, developers fill up the open pit when extraction in one part is over and then move to a new part. This is much safer than shaft mining," says Brian Mooney.

Lye points out that such mining exists in different areas of Australia and Germany. "There is a mine in Australia where 30,000 people had to be relocated. In Germany, there is a bigger mine in operation for a hundred years. The mine developers move ahead from one point to another, filling up the previously excavated land and giving it five to seven years to stabilise and then return that to people for farming," he said.

He stressed that to undertake a major project that can change socio-economic condition of people, relocation of a community becomes necessary. "Bangladesh had to relocate 50,000 people to build Jamuna Bridge," he mentioned.

Mooney noted that of the 6,500 hectares of Phulbari mining area, AEC will use a maximum of 2,000 hectares as open pit at any given time and move on to developing the next phase once that part is exhausted.

"To do this, eastern part of Phulbari town will have to be relocated, may be to the eastern side of the Jamuna river nearby. This will not be so difficult but it will be more difficult to relocate people from agricultural area, where most part of the mine is located," Mooney said.

On the relocation, the AEC executives say they will follow the high standard set by International Finance Corporation (IFC). The IFC standard dictates that every affected person should be better off when relocated, none will be forcibly relocated, they would be fully compensated, they would be provided with alternative livelihood and housing, and the miners have to inject huge benefits for the community.

"Nearly 300 people are now working on socio-environmental impact assessment of the project. They are talking to people of every village concerned," Lye said.

While producing coal, AEC will also extract white clay used for ceramics, clay for brick fields, gravel, sand and hard rocks as by-products.

Late last month, energy ministry adviser Mahmudur Rahman at a meeting with Petrobangla criticised the AEC agreement for two years for feasibility study. A one-year agreement was good enough for this, he thought.

The adviser also criticised that Petrobangla gave AEC access to a vast area saying if people of the town need to be relocated for exploration, the social cost will be too much for the government to handle. However, he also suggested awarding AEC two new areas for mining exploration.

Mahmud also supports open pit mining over shaft mining, and has advocated a proposal from Tata to allow it open pit method at Barapukuria mine which is already being developed by a Chinese company. The energy adviser suggested Petrobangla to hire an international consultant to see if open pit mining is more profitable than shaft mining.

Most local energy experts oppose open mining on socio-environmental grounds. They also suggest that the six percent royalty under the coal development policy should be immediately revised as it undermines the high value of coal in the present context of high price of petroleum.

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