Phulbari Coal project: Development Bank pulls backPublished by MAC on 2008-04-18
Phulbari Coal project: Development Bank pulls back
One of the most vilified mining proposals of recent years has hit a major stumbling block, as its key financial backer suspends support. Early this month, in a statement to opponents of the Phulbari coal mine in Bangladesh, the director general of Asia Development Bank (ADB)'s Private Sector Operations Department declared that his agency would "decline the opportunity" of investing in the project.
Bangladeshi newspaper, The Daily Star - which has backed the mine - put an optimistic slant on the announcement, maintaining that the final decision lay with the Bangladesh government. But this hardly diminishes the importance of the ADB decision ,or its negative implications for GCM Resources (through its subsidiary Asia Energy). The UK-based company was heavily dependent on the Bank's endorsement to help raise the massive funding required to implement its scheme. Not surprisingly, the company's share price took a fall immediately after the news broke.
The ADB's move came just before a group of NGOs were to make a submission to the Bank's board in Manila, providing critiques of both the Summary Environmental Impact Assessment [see below] and the "project affected peoples" Resettlement Plan for Phulbari.
Although the struggle is far from over, these events have naturally given heart to the majority of citizens (including a substantial number of indigenous land-users), doggedly opposed to open-pit exploitation of the coal seams above which they farm.
In August 2006, the Bangladesh government's Rapid Action force opened fire on a local demonstration against the mine, killing three teenage men and severely injuring scores of others.
ADB pulls out of Phulbari open pit mine project
Tanim Ahmed, NewAge
8th April 2008
The Asian Development Bank has decided to pull out of Asia Energy's proposed open pit coal mine project at Phulbari in Dinajpur.
According to an email from Robert Bestani, director general of the ADB Private Sector Operations Department, the agency has decided to 'decline the opportunity' of investing in the Phulbari project.
The multilateral lending agency's private sector division was expected to provide $100 million in loans and another $200 million as political risk guarantee for an open pit coal mine at Phulbari that would displace some 50,000 people according to Asia Energy's own assessment.
Bestani wrote on April 4, in reply to an email from Yuki Tanabe of the Tokyo-based non governmental organisation named Japan Centre for a Sustainable Environment and Society, inquiring about the status of the project, 'We have reviewed the proposal and have officially determined that we will decline the opportunity.'
The Japanese organisation is part of an international campaign group opposing the coal mine, which according to local and foreign campaigners would affect a large number of people that has been severely understated by Asia Energy, which is a subsidiary of the UK-based Global Coal Management.
The Dhaka office of Asia Energy did not make any comments regarding the ADB decision that is being considered as a big blow for the coal mine project.
An expert committee commissioned by the Bangladesh Government in 2005 found that 130,000 people would be displaced for the mine and a further 220,000 would be impacted through the massive draw-down of the water table, necessary to keep water from running into the 300 metre deep mine pit.
According to a high official of the lending agency, Robert Bestani had briefed executive directors of the Asian Development Bank about the latest decision last week. Apparently the UK-based mining company had failed to conduct activities according to ADB guidelines and furthermore its project proposal was in conflict with the lending agency's policies.
The open pit coalmine would produce some 520 million tonnes of coal from a reserve of 573 million tonnes over 35 years according to Asia Energy's projection. Its backers include the UK-based Barclays and Credit Suisse of Switzerland.
Asian Development Bank Pulls Out of Controversial Coal Project in Bangladesh - NGOs call upon Barclays, UBS and Other Investors to Follow Suit
BanglaPraxis - Bank Information Center - International Accountability Project - Urgewald - World Development Movement Press Release
4th April 2008
The Director of the Asian Development Bank's Private Sector Operations Department, Robert Bestani, notified the Bank's Board last week that it will no longer ask for approval of the Phulbari Coal Project in Bangladesh. The ADB's Board was slated to approve a US$ 100 m loan and US$ 200 m political risk guarantee for the project on June 3, 2008.
This comes as another major blow to the UK based company GCM Resources (formerly known as Asia Energy), which aims to establish one of the world's largest open pit coal mines near the town of Phulbari in northwestern Bangladesh. GCM/Asia Energy was forced to shut down its operations and flee the project area after a major protest of over 50,000 people in 2006 that resulted in three deaths and hundreds people injured as government-backed paramilitary forces fired upon the protesters.
Since then and in spite of the Bangladesh Government's Emergency Power Rules that ban major civil liberties, widespread opposition in the project area has continued. National opposition has been led by the National Committee to Protect Oil, Gas, Mineral Resources and Ports (NC). Although its General Secretary Prof. Anu Muhammad has received death threats and its local leader Mr. Nuruzuman was publicly tortured by the military in February 2007, the, NC and other civil society organizations have remained undaunted in their opposition to the Phulbari project.
Prof. Muhammad says: "The area around Phulbari is extremely fertile and densely populated. It is also one of the few regions in Bangladesh that are safe from flooding and other natural catastrophes and therefore plays a key role for the food security of the entire country. The proposed "development" project is merely a scheme to loot natural resources from a poor country for the rich. We will not allow GCM Resources to turn a land of food for the people into a black hole for corporate profit."
According to the company's own estimates, the mine would displace some 50,000 people. However, an expert committee commissioned by the Bangladesh Government in 2005 found these numbers to be grossly underestimated. The expert committee reports that 130,000 people would be displaced for the mine and a further 220,000 would be impacted through the massive draw-down of the water table, which is necessary to keep water from running into the 300 meter deep mine pit. This would have major impacts on drinking water and irrigation for many miles beyond the actual mine. Furthermore, the company has no viable plan to prevent acid mine contamination of the soil and water as a result of mining 15 million tons of coal for over 35 years.
Mining expert Roger Moody notes: "It is extremely costly to adequately prevent and mitigate acid mine drainage in a mine of this size. The acid is likely to stay in the environment for decades after the mine closes contaminating the land, rivers and streams. And GCM has not provided any financial details as to who would cover the bill for such an environmental disaster."
Various community leaders and representatives of the Phulbari area wrote a letter to the ADB's Executive Directors in December 2007, followed by a letter by over 60 international civil society organizations protesting ADB's involvement in the project. International NGOs point out that the project would also cause extensive damage to the Sundarbans mangrove forest, an UNESCO declared World Heritage Site where the port facilities for exporting the coal are to be constructed. As several of the ADB's Executive Directors began raising questions about the environmental and social feasibility of the project, the Bank's management finally decided to take Phulbari out of ADB's funding pipeline.
Tim Jones of the World Development Movement says: " The Phulbari project is truly a British and international scandal. GCM Resources is a British company and is backed by banks such as Barclays (UK), UBS and Credit Suisse (Switzerland). Among its other investors are the British hedge fund RAB Capital and the mutual funds manager Fidelity from the US. The ADB's decision sends an important signal to these institutions about the unacceptability of their investment into this project."
Bangladesh, British and international civil society organizations are now calling on these financial institutions to follow suit and pull the plug on the Phulbari coal project.
For further information contact:
Heffa Schücking: (49)-160-96761436
The Bangladesh Government originally awarded an exploration license to the Australian company BHP Minerals in 1994, which however, decided against developing a coal mining operation in the area. In 1999 its licenses were transferred to Asia Energy Corporation (Bangladesh) Pty Ltd. Asia Energy PLC was incorporated in London Stock Exchange Alternative Investment Market (Ticker code: GCM) in September 2003 and acquired 100% of Asia Energy Corp. It subsequently changed its name to Global Coal Management after the August 2006 killings in Phulbari and to GCM Resources Plc in December 2007. According to the company's 2007 annual report, its major shareholders are RAB Capital, UBS, Fidelity Group, Barclays, Credit Suisse, LR Global, Ospraie Management, Capital Group and Argos Greater Europe Fund. GCM Resource's financial advisor is Barclays and its principal banker is the Bank of Scotland.
Tel. +49-2583-1031 / +49-2583-9189933 (direkt)
ADB awaits govt move on Phulbari coal mine
The Daily Star, Dhaka
8th April 2008
Dispelling a rumour that it has pulled out from financing the Phulbari coal mine project, the Asian Development Bank (ADB) has said it would wait for a government decision in this regard.
"ADB will continue to monitor the situation on the ground with full sensitivity to local conditions and we'll also wait for Bangladesh government's decision on how to proceed in harnessing the rich energy resources, including those of Phulbari," the Manila-based international funding agency has said clarifying its position about the project.
The statement said, "In the interim, we think, it is premature for ADB to continue dialogue with the private sector under the current circumstances. So, at this stage we're completely open to the suggestions of GoB, civil society and other stakeholders and prepared to review our engagement in this project to ensure that all sensitivities, including concerns relating to safeguard issues are fully considered."
Sources said a number of NGOs, who are opposing the open pit Phulbari coal mine project and demanding its developer UK-based Asia Energy to go, have spread the rumour that the ADB has decided to withdrew from the project.
The NGOs have also been carrying out a campaign internationally and pursuing the ADB to abandon its project financing plan.
According to sources, the ADB was keen to finance US$ 300 million, about 10 percent of the total fund requirement, to implement the project.
The Asia Energy conducted a feasibility study on its plan to develop the Phulbari project through an open cast mining method.
Phulbari Coal: a parlous project in numerous respects
Comments on Global Coal/GCM Resources/Asia Energy’s SEIA for the Phulbari coal mine and transportation project in Bangladesh
Submitted to the Asia Development Bank (ADB) board
by Roger Moody, Nostromo Research, Kolkata, 26 March 2008
The integrated Phulbari coal mine, coal rail-river transport and coastal coal offloading project, is of such proportions that it would prove highly ambitious even for a developed country, posing both environmental challenges and demanding a sophisticated degree of regulatory adhesion and implementation.
That the project is seriously being proposed, in its present form and dimensions, for a lesser-developed state, with a poor record of environmental compliance, and considerable weakness in regulatory enforcement (both points noted in the project Summary Environmental Impact Assessment/SEIA), should be of serious concern to the ADB board.
Of equal concern must be the degree to which the SEIA depends on vague assurancesand speculation. There are many examples of this. For example:
SEIA paragraph 107 (ii) “Beels will be retained and maintained wherever possible’
para 107 (vi): “Local indigenous species will be given priority where feasible… [other species of trees and plants] will be planted where possible”
para 144: “The proposed barging and shipping operations are considered unlikely to have any significant adverse impacts [on river hydrology et al]”
para 84: “Small areas [of land ] especially the area north of the mine site could be inundated [because of land settlement resulting from extraction of groundwater] during a 100 year flood”
para 85 “…mine dewatering flows are unlikely to cause any hydrologic or hydraulic problems…”
para 123: “The rail corridor operations are unlikely to cause gross groundwater contamination…”
Appendix 1- 2: “Where possible, place stripped soils into rehabilitation areas and revegetate immediately”
These are, by no means, the only examples of defects in authority evidenced in the Assessment. It is obvious that, the greater the speculative elements to the report, then the more pressure will be placed on GCM Resources plc /Asia Energy and its sub-contracted parties to properly implement its proposed EMPs (environmental management plans). An inordinate amount of weight (in comparison to many other projects of this type) is being vested in the quality of monitoring of “trigger” events, and the capacity of various personnel to recognise such events, then swiftly mitigate against them.
Such “bucks” inevitably stop with the company itself, especially – as already noted – the capacity of the Bangladesh government to detect and pre-empt such events is highly circumscribed. ( para 265, SEIA: “Bangladesh is inconsistent [in implementing] rules and regulations in many fields.”)
In this context, the Assessment’s bald assurance that Asia Energy/GCM Resources plc is “a leader in environmental practices” is quite extraordinary – dangerous, if not mendacious. The company was listed on the London Stock Exchange AIM less than five years ago and has no pedigree in operating mining projects of any kind, let alone one on the scale of Phulbari. While it is true that some of its board and management do have individual experience in mine management, none (to this author’s knowledge) has mirrored the challenges of this particular multi-faceted endeavour.
Disturbingly, there appears nowhere to be demand that, in view of the lack of provenance for the company, it has to post a realistic Bond (insurance), to cover all costs of unpredicted failures and accidents, and all aspects of post-mine reclamation.
Many aspects of the project do appear fairly well-researched. But, taken as a whole, and given the excessive number of qualifications to many of its conclusions, the Assessment is by no means encouraging; nor should endorsement of one or other aspect of the entire project lending credibility to, or reducing risks of, other aspects. The Project, as currently mapped, places overwhelming emphasis on conveying coal mined in the Phulbari lease area, through rail to India, and rail and river links to the south of Bangladesh for sea-bourne export from a coastal terminal. A number of alternatives to the actual routes, and some of the methods of transport, are discussed in the SEIA – seemingly providing some scope for choosing among them. However, these choices are fairly incidental.
Among the key unanswered questions are these:
1) Will the majority of the mined coal remain in Bangladesh; if so, how much will be absorbed by a mine-mouth power plant (the figures of 500MW and 1,000 MW capacity for such a plant are variously used)?
2) How much (if any) of the metallurgical grade coal will be utilised within the country, thus making value addition?
3) Is the ore deposit amenable to underground exploitation? Many local residents in the project area seem prepare to consider this, while rejecting what they consider would be a dire threat to their livelihoods and environment from open-pit extraction.
Of course these questions carry political connotations. But this does not justify failing to deal with them adequately in the EIA, or to evaluate thoroughly their implications. (It is clear, for example, that abandoning the sea borne export segment of the project would obviate most of the pollution or accident risks, posed to the Bhairab-Rupsa-Pussur river system, and more especially to the Sunderbans protected forest and Ramsar Convention/World Heritage Site.)
Equally – perhaps even more important – the contribution of the project to global greenhouse gas emissions (both in its construction phase and in terms of its “embedded” carbon content) does not seem even to have been considered. Nor (or so it appears) has the possibility of adopting coal methane capture technology to the deposit as a form of clean development mechanism (CDM). These omissions seem extraordinary in the light of Bangladesh’s specific, perennial, jeopardy from climate change, a major proportion of which is caused by the burning of coal.
From the outset [SEIA 1,1], the SEIA boasts that the project will “provide the country with a vital new source of sustainable energy.” This is palpably false: coal is a fossil fuel which cannot be replaced, except over a period of millennia. However, if the objective of producing sustainable energy were to be taken seriously, it should require an examination of scenarios for:
1) limiting output from the Phulbari deposit, and significantly extending the mine life, so as to reduce its current “footprint”;
2) employing coal bed methane or similar technology;
3) adopting alternative renewable sources of energy (wind, solar, wavepower).
Lost – and not found?
The SEIA (paragraph 279) states that the "maximum net loss in agricultural production over the project's lifetime is estimated to be 17%". This will be highly significant in an area which has been relatively free of the disasters that have wreaked havoc on agriculture elsewhere in Bangladesh, and in view of designed length of the project. The degree of such loss is compounded by the fact that [para 276] close to 20% of the mined-out agricultural land will apparently be permanently forfeited. (Or, as the company prefers to represent it: "More than 80% of the agricultural land will be restored after it has been mined…net loss in value of the land is only USD57 million")
In paragraph 112 of the SEIA, the company states that: "A significant reduction in land acquisition and population displacement is not possible without compromising the economic and technical viability of the project." This encapsulates the project's key premises: that it is economically and technically viable as it stands, therefore any sacrifice of land, the creation of new hazards to the environment, and a disruption of existing livelihoods, should be accepted – with the promise of equal, if not better, prospects for the future. But, insofar as major doubts can be raised about the validity of these assumptions, it may well seem that such sacrifices are unacceptable.
Some specific deficiencies in aspects of the Phulbari SEIA:
Paragraph 6 of the SEIA states that. "[t]he [Project] area is among the poorest in Bangladesh". However, the statement appears to be qualified (if not belied) a few paragraphs later  : "Most plots [within the Project area] are harvested two to three times per year..[while] flooding is rare…" In addition [para 20] it is noted that the area has "moderate faunal and floral diversity, including 89 fish species". It seems clear, therefore, that the area is not agriculturally or biologically impoverished; nor is it subject to the ravages of flooding characteristic of much of the rest of Bangladesh.
Defects in mine site management: waters and rivers
A critical part of the whole Phulbari project is the groundwater management system: the dewatering strategies and the compensatory measures to assure recycled water to local people. To date, trials to test the feasibility of re-injecting and infiltrating water have still to be carried out. It is likely that, even with the planned forty seven re-injection wells, the water table will be lowered to a degree that cannot be fully compensated for. The key point is that a fully-functioning model of how this intricate system of checks and balances will operate has not, apparently, been performed.
River waters adjacent to the mine site might also become affected . The SEIA [para 95] states that: "Should monitoring indicate that [these] rivers are adversely affected by dewatering activities…water will be released to the surface body from the mine water dewatering system to maintain the current seasonal water levels and quality". However, this assertion just cannot be made, in light of the uncertainties surrounding the (lack of) a functional water management plan.
Failures in identifying and mitigating Acid Rock Drainage
ARD (or Acid Mine Drainage-AMD) is the malignant process whereby sulphide bearing minerals/iron pyrites becoming oxidised in water, producing sulphuric acid which has the propensity to leach heavy metals into the environment. It is generally accepted as the most intransigent single problem in mining; some instances of mining-derived AMD/ARD persisting for decades, if not longer. (For example, it is predicted that the currently operational Ok Tedi (OTML) copper-gold mine in Papua New Guinea will continue to deliver AMD to the vital Fly River system for a least 100 years, despite “best practice” on the part of the management [See statement by Keith Faulker of OTML, cited in “Acidic Exposures” PostCourier, Papua New Guinea, 8 February 2006].)
The SEIA does not treat the likelihood of AMD with anything approaching the seriousness demanded. It simply says that "a number of acid mine drainage mitigation strategies" will be "instigated" (a curious phrase) and that “monitoring of water will be part of the EMP and will determine if additional treatment is needed" [para 93.]
GHD Pty Ltd, an Australian services firm employed by GCM/Asia Energy, estimated Acid Mine Drainage Impacts of the Phulbari project in August 2005. GHD then pointed out that a "significant percentage of the overburden material [at the mine site]" is "considered to have a high risk of producing AMD". However, no further studies appear to have been made to determine the nature of this material, nor the likelihood of its causing ARD.
The current project strategy for dealing with pyritic – and other hazardous materials - is to "encapsulate" them within "at least 2 metres of compacted clay or another impermeable material." This will include the overburden dumps. [SEIA Appendix 1], but apparently not address potential AMD from the open pit itself. The lack of certainty in the plan is worrying; the nature of "encapsulation" required can only be determined when a thorough analysis is performed on the materials to be "encapsulated." For example, synthetic (HDPE/high density polyethylene) or bentonite liners and covers, may be necessary to avert leaching. Even so, these are by no means foolproof in actual operation, especially under extreme weather conditions (such as heavy monsoons) or as a result of ground shifts.
Even if the exact nature of AMD-producing materials is determined, there is no guarantee of success for any of the methods currently used to cope with, or inhibit its production. Both the Ok Tedi experience (above), and recent collapses of waste piles and overburden dumps at other mine sites (eg at the Lihir mine in October 2005 [see Ben Sharples, “After the Lihir landslide” Mining News.net, 14 October 2005]) give little cause for comfort.
Unanswered questions about the Coal Terminal and barge loading
Paragraph 27 of the SEIA states that the Coal Terminal is estimated to receive 5 trains a day, taking 3 hours each to unload, while barge loading will take around another 12 hours The trains will arrive at the terminal via the main Khulna-Jessore line, passing through more than 500 km [paras 21,22]. Paragraph 120 of the SEIA declares that the Bangladesh railway network can accommodate this, with "minimal interruptions to traffic." This is highly over-optimistic, especially as the line will require upgrading "in certain areas" [para 9], the extent of which "will only be determined during the detailed design phase" [SEIA ibid]
Hazards of dredging and dumping
The SEIA (paragraph 9) envisages that: "The [sea transportation] project will include dredging a 43 km channel through the outer bar between Hiron Point and a relocated Fairway Buoy at the edge of the Swatch of No Ground."
Dredging of the sea bed will have adverse consequences for pelagic and benthic fish. It is impossible to assess both the nature of, and how long-lasting will be, the consequences of such dredging Over a five-year period, around 72 million tonnes of sediment from the dredged spoils will be dumped into the Swatch of No Ground, with "approximately 33% suspended in the water column." The SEIA asserts that this is "negligible" in comparison with "the 200-500 metric tonnes per year of sediment discharged to the Swatch…from the Ganges-Brahmaputra - Meghna rivers." The comparison is tendentious, if not spurious. It takes no account of the carrying capacity of the Swatch to accept these materials, nor any critical “over-tipping point" that might be reached in doing so.
The SEIA admits that: "[T]here is limited information [regarding] the biodiversity of the proposed disposal area". However, it recognises that the Swatch is one of three major fishing grounds in the Bay of Bengal that "support numerous pelagic and demersal fish and shrimp species" [para 41]
The SEIA promises a programme "…implemented during dredging operations to specifically monitor fishing biodiversity at the spoil dump location [para 46]. Yet, it is not at all clear how any results from this monitoring will be Interpreted; by what criteria they will be measured; and whether any cessation of dumping will result if a critical overloading point is reached. In fact, since disposal of the spoils depends on their gravity descent to the ocean floor [paras 152/153] – and this is below monitoring depth – the programme will prove useless in determining what the impacts of fisheries may be. (Such is well-attested by failures to determine the behaviour of waste rock and tailings disposal through STD – submarine tailings disposal/deposition; viz: R Moody, "Into the Unknown Regions: The Hazards of STD”, SSC and International Books, London and Utrecht, April 2000, passim).
The anchorage at Akram Point and consequences for the Sunderbans
Akram Point, site of the deep water anchorage point for vessels receiving coal from Phulbari (after being barged 107 km downstream) is within the Sunderbans Reserved Forest (SRF), over which the Bangladesh Forest Department has jurisdiction. (SEIA paras 37-38). The SEIA seeks to quell understandable fears of the consequences of a major coal spill, petroleum discharge, or accident/collision in this area, by asserting that "the…anchorage will be at least 1.3km from the nearest shoreline which itself is 16kms north of the Sunderbans World Heritage Site." However, it admits that "the likelihood an oil spill caused by a marine accident" is real, even if "remote." Similarly, the chances of a collision in this area are rated as "very low", and and their force as being "low" - although the frequency will inevitably increase when the area is developed (an important point noted only in parenthesis) [paras 261-263]. There is a woeful under-estimate of the potential dangers, posed by the amount and bulk of the coal which will regularly travel through this area.
It should be noted that the Ministry of Environment and Forests in neighbouring India legislates that no industrial plant of any kind should be situated within 25 kms of an "ecologically sensitive" area – citing the Gulf of Mannar in particular, which lies to the south and west of the Bay of Bengal. As the world's largest wetlands, arguably the Sunderbans demand even more protection than that provided elsewhere. Situating a major off-loading/transfer point – and one premised on operations over many years - so close to this unique and vital area is arguably unacceptable.
The Phulbari coal project encapsulates numerous dangers and potential damages from the sacrifice of a major agricultural region in Bangladesh, to pollution of the world's largest wetlands, to making a big contribution to adverse global climate change. The project's Environmental Impact Assessment is replete with vague assurances, making many promises of future mitigation methods which simply aren't quantified.
Despite many studies carried out in support of the Assessment, the soundness of this complex venture hinges on two highly dubious assumptions: that the Bangladesh government has the capacity to implement its own legislation (which it doesn't); and that Global Coal/Asia Energy - a fragile company that has shot from nowhere, without any corporate practical experience of the type required - will hold up the safety nets when the project cracks at the seams, with drastic consequences for thousands of Bangladesh citizens and the country as a whole.
These realities should be acknowledged not only by the Asia Development Bank, but also putative investors, before they are tempted to contribute any further funds towards this looming disaster.
Nostromo Research, 26 March 2008