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Committed to PEOPLE'S RIGHT TO KNOW
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A critical review of the coal policy
Md. Khalequzzaman, Ph.D.
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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