Safety Concerns As Investors Move To Revive The Coal Mines

The recent sale of many of the nation’s coalfields is opening up fresh opportunities for the economy as some of the buyers have started mobilising to move into the mines. But there are some environmental issues that needs to be addressed to avoid confrontation, writes IKECHUKWU EZE. | 30 September, 2007

The recent sale of the nation’s coalfields to both indigenous and foreign firms have raised the hopes of boosting the nation’s insecure economy, improving its lean export base and enhancing Nigeria’s earning capacity. The development which is in line with the federal government’s bid to revive the mining sub-sector, which went into oblivion soon after the advent of petro-dollars, is seen by economy watchers as a bold move in the right direction. In the first place, reviving the coalfields would serve as one of the veritable means of concretising the often mouthed diversification of the nation’s sources of revenue by exploring other possibilities outside crude oil exports. But beyond the expected foreign exchange gains that would accrue to reviving the moribund coal fields is the prospect of improving the nation’s power generation capabilities and harvesting the abundant potential economic benefits that usually results from improved power supply. This is because coal enjoys a pride of place in powering the economies of many nations because of its critical role in the functionality of power plants. Business Day gathered that the buyers of the ten fields that were privatised including indigenous and foreign firms are planning to move into the fields to begin production. One of them Taurian Resources of India is said to be investing about N6.3 billion ($50 million) in the coal fields located in Enugu State.

Business Day gathered that Taurian which won the bid for about two of the mines in the state plans to begin production soon. So far the company is conducting an assessment of the deposits and state of the facilities at the fields with a view to determining the kind of equipment to bring into the country. I it was further learnt that Taurian, India’s mining giant and manufacturer of mining equipment, has promised to turn the fields around and make them profitable. India’s deputy high commissioner in Nigeria, Anil Trigunayat who disclosed this in an interview with Business Day said that the Indian firm was attracted to Nigeria because of the quality of Nigerian coal. Nigeria coal, he added “is of a rare quality with less ash content.”

The 16 companies that made the short list for the purchase of the coal properties as announced by then minister of Solid Minerals Development included Australia’s BHP Billiton South Africa’s Mvelaphanda Resources and Shanduka Resources, Enel S.p.A (Italy), Ivanhoe Mining (Canada), and Nordic Industries (Nigeria, Dangote Industries (Nigeria) Others are Global Energy/Shanduka Resources (Nigeria/South Africa), Global Steel Holdings (Nigeria/India), Owukpa Consolidated Mines (Nigeria) the LSC Consortium (Nigeria/South Africa), New Nigerian Development Company (Nigeria), Proper Technologies (Nigeria) and Octagoncorp (Nigeria). Ezekwesili predicted then that the sale of the coal assets located in Enugu, Benue, Kogi and and Delta States as well as associated expenditure on infrastructure could attract $10 billion in investment into the country. “These short-listed companies will form the vanguard that will lead the revival of Nigeria’s mining sector. It is our hope that their strong leadership will serve as a catalyst for the rejuvenation of the sector,” Ezekwesili said.

The Enugu coal fields which at one time formed the main plank of the nation’s economy, especially immediately after independence, became abandoned after crude oil was discovered in the country. Consequently, the massive equipment and installations of the Nigerian Coal Corporation in Enugu gradually fell into disrepair. Progressively the resource like many other natural deposits in the country were abandoned since oil money began to flow in from the sale of crude oil. Many analysts believe that if the nation had continued to mine its main natural resources, especially the already well established coal, the country would have become more prosperous, especially in the light of huge employment opportunities that would have been generated. The Nigerian Coal Corporation which had the exclusive rights to mine coal in Nigeria finally stopped production about 2002. That was three years after it lost this exclusive right following federal government’s deregulation of mineral exploration and exploitation.

The 1999 liberalisation of the sector opened up the sector to private participation, enabling NCC to enter into joint ventures on an equity-participation basis. Established in 1950 the NCC which was domiciled in Enugu recently started a process of divesting from all of its operating interests following the privatisation of the sector and the subsequent resting of the corporation. For instance, the NCC used to have over 1000 workers in its main offices in Enugu. But the corporation’s rather expansive office complex is now a shadow of itself. The overgrown and partially abandoned complex is now manned by a tiny fraction of its former staff strength. With about 1000 workers sacked, the premises are now looked after by 18 members of staff who were asked to stay behind receiving only a fraction of their salary albeit an uncertain future. Before the workers were eventually sacked, they were being owed at least 39 months salary as at 2005. One of the 18 left behind in the NCC offices who pleaded anonymity told Business Day in Enugu that the disengaged members of staff were eventually paid the arrears although he insisted that many of the retired workers are owed several months of their pension.

A mining expert Dili Adukwu, believes that the nation has lost huge revenue and immense development opportunities that are linked to coal production on a commercial basis. He said that it was wrong for the country to have abandoned coal production “simply because oil was discovered and easy money was coming into the economy.” While Nigeria abandoned its coal fields, many other countries have continued to reap huge economic dividends from investing wisely in their coal mines. In other countries coal is primarily used as a solid fuel to produce electricity and heat through combustion. Wikipedia online data base put world coal consumption at about 5.3 billion tons annually, out of which about 75% is used for the production of electricity with China, and India consuming about 1.7 billion tonnes annually. The United States consumes about 1.0 billion tons of coal each year, using 90% of it for generation of electricity.

A recent EIA publication on Annual Coal Report, 2005 identified four major uses of coal around the world, to wit: Coal is used to generate roughly half of all electricity produced in the United States. Besides electric utility companies, industries and businesses with their own power plants use coal to generate electricity. Power plants burn coal to make steam. The steam turns turbines which generate electricity. A variety of industries use coal’s heat and by-products. Separated ingredients of coal (such as methanol and ethylene) are used in making plastics, tar, synthetic fibres, fertilizers, and medicines. The concrete and paper industries also burn large amounts of coal. nCoal is baked in hot furnaces to make coke, which is used to smelt iron ore into iron needed for making steel. It is the very high temperatures created from the use of coke that gives steel the strength and flexibility for products such as bridges, buildings, and automobiles.

Many producers export coal to many different countries, but in the case of the US most trade is with Canada, Brazil, the Netherlands, and Italy. More than half of coal exports are used for making steel. Perhaps of greater loss to the nation resulting from the neglect of the coal fields is the corresponding deplorable state of the power sector in the country. It is in deed a paradox that a country blessed with huge gas and coal deposits suffer such a horrendous shortfall in electricity supply. Many analysts are amazed that coal seen as a ‘wonderful and component mineral’ because of its key role in the global energy mix could just be abandoned by a nation with huge power deficit. Coal is known to be the mainstay of the economy of many successful nations like United States, Japan, China, India, Australia and South Africa because of its place in power generation, with coal- compatible power plants contributing over 50 per cent to the energy needs of some of these countries. In the US where coal is mined in 27 states over 90 per cent of the coal used is for generating electricity with coal plants contributing up to 60 per cent of the country’s energy needs. In deciding to privatise the coal fields, the country’s leaders might be aiming to reap the economic benefits derivable from allowing private sector participation in the mining sub-sector.

Even then, many pundits are already worried that the Nigerian experience might not have followed the tested path that have changed the economic fortunes of other nations. For instance, in India coal blocks were not just sold to businessmen and entrepreneurs with eye on returns on investment but to companies on the condition that they channelled their production towards activities that would contribute to the growth of the economy. As a result of this, most of the coal mining companies in India sell their products to the power generating plants in the country. Said Adukwu: “I have read all the government papers on the privatisation of the mining sector including the bureau of public enterprises’ bidding process but there is no such conditions for investors.” His views are not different from that of a source close to BPE who told Business Day that no such commitment was obtained from the buyers of the mines on the imperative of channelling their activities to aid economic growth. President Umar Yar’ Adua in line with the preceding administration’s economic reforms programme has promised to declare power emergency as a means of addressing the nation’s grave power problems. In line with this dream it is expected that he will correct the perceived imbalance in the location of the power plants built under the Obasanjo administration.

Although the previous administration began the process of privatizing the coal mines, it failed to recognise the fact that the states with coal deposits should have been considered in the location of the plants. Building coal powered plants in such states in stead of concentrating on locations with proximity to gas supply, world have diversified the generation base especially at a time when disruptions from the Niger delta regularly threatens the ready availability of gas for such plants. If the plan was to revitalise coal production for exports, it therefore means that a lot still needs to be done to create the enabling environment for such intentions. The fact that there is no functional rail system linking the production points to the sea ports and lack of strong jetties in many locations that could take thousands of tonnes means that the prospects of producing for exports even becomes less attractive. It is however the expectation of industry watchers that the new owners the fields would discover the gains of building power plants that would in turn sell generated power which would guarantee enough returns on investments. But beyond the foregoing economic considerations is the potential for crisis which the take over of the coal fields by the new owners may generate. This is because the citizens of the concerned states are already raising serious environmental concerns. Many analysts feel that except the government moves to nip the looming crisis in the bud by addressing the concerns of the communities, there is the likelihood that trouble of Niger delta dimensions would soon be visiting the coal fields.

Leaders of some of these communities who spoke with Business Day in Enugu claimed that the government did not carry out due diligence especially in the area of environmental impact analysis before selling the mines. They declared that they are mobilising the communities to prepare the people to resist any attempt to take over the mines and begin excavation activities without the approval of the representatives of the communities. Recently the Enugu State House of Assembly passed a motion rejecting the sale of the coal mines in the state and vowing to resist any attempt by the new owners to move into the fields. Speaker Eugene Odo told Business Day at the Enugu Assembly complex that the House was opposed to the sale because the process did not clearly determine the limit of excavation at the mine fields nor conduct proper study on its environmental impact. According to Odo, a lawyer “the Enugu State House of Assembly wants to know the way and manner of the process,” adding that the law makers were worried that there was no clear specification of the extent and quantity of the coal deposits. “Selling the coal fields means that the whole area has been sold without any clear indication on the limits of the excavations and the impact of such excavations. Why will the deposits be sold? We do not support the idea of selling off mineral deposits to individuals whose only concern is how to maximise profits.

Although the BPE source told Business Day that due process was followed in the privatisation process, Odo insisted that there was no proper consultations before the mines were put up for sale. His words: “There was no agreement between the federal government and the state. The point the House is making is that the federal government should have given out the sites to concessionaires to manage, rather than outright sale…We believe that unchecked excavation by those out to make profit might endanger the lives of our people just like we already have in the Niger Delta. Except safety and other conditions are met we will not risk the lives of our people.” Similarly some prominent indigenes of the state under the platform of Enugu Leaders of thought had also taken a position against the sale of the coal fields in the state, stressing that the people deserved to be consulted on issues that had to do with the resources in their land. According to analysts, such fears stem from the fact that coal mining causes harmful environmental impacts including release of methane, a dangerous greenhouse gas, water pollution, rendering land unfit for common usage just as burning coal for power generation and other uses poisons the atmosphere with large doses of carbon dioxide which is the main greenhouse gas that is linked with global warming. But experts believe that the damage could be controlled with careful planning through the enactment of strict environmental laws and the deployment of modern technologies.

Elsewhere, the coal industry has discovered the means of reducing sulfur, nitrogen oxides, and other impurities from coal. The industry has also discovered more effective ways of cleaning coal before it leaves the mine. According to a publication by Energy Information Administration ” Power plants use ‘scrubbers’ to clean sulfur from the smoke before it leaves their smokestacks. In addition, industry and government have cooperated to develop clean coal technologies that either remove sulfur and nitrogen oxides from coal, or convert coal to a gas or liquid fuel.” Business Day however gathered that the federal government, in a bid to avoid a repeat of the mistakes of oil exploration activities in the Niger Delta is making moves to engage the leaders of the affected states with a view to reaching a common ground and creating enabling atmosphere for the investors to begin production. Until that is done, those positioning themselves to move into the mines might just prepare for likely confrontation from the people.