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Select Committee on Welsh Affairs First Report

1 Coal production in Wales

The world price for coal

3. After many years in which coal mining in Wales has been in steady decline, the rise in the world price for coal has meant that coal mining operators are taking commercial decisions which clearly indicate their belief that coal has a viable future. As the Parliamentary Under-Secretary of State for Energy told us in evidence:

… as the price of coal goes up, increasingly businesses will look to areas of former pits to see whether they are viable in terms of reopening them ... We are at that point where the price has risen to such a point which makes some of these developments economic, whereas they previously were not.[3]

4. The Minister continued: "overall the prospect for coal in Wales does look good".[4] The mine operators who gave evidence to us also saw a positive future for coal in Wales. The Chairman of Unity Power Plc, Mr Gerwyn Llewellyn Williams, told us that "When we talk about coal in Wales I think we totally underestimate the resource there is ... There is a good future for deep mining in the reserves we have already quantified".[5] Mr Poyner, Director of Miller Mining, told us "We have always believed that there is a future for coal in Wales. Whether it is a good future depends on continuity of access to the coal reserves and the market conditions".[6]

5. We share this positive assessment, and agree with the conclusion of the Government's Energy Review that:

... it is right to make the best use of UK energy reserves, including coal reserves, where it is economically viable and environmentally acceptable to do so.[7]

The market for coal in Wales

6. The domestic market for coal in Wales is shrinking, with "limited scope for further development".[8] The remarks in this Report are therefore confined to the production of coal in Wales intended for industrial use, primarily at Wales's two coal-fired power stations, Aberthaw and Uskmouth. The potential for introducing coal into coke-making and blast furnace injection at the steelworks at Port Talbot, which was under discussion at that time, was also referred to by representatives of the mining companies.[9] The Chairman of Unity Power, Mr Gerwyn Llewellyn Williams, told the Committee that he also believed there to be a role for smaller, modern coal-fired generating stations to be built, "strategically placed throughout South Wales".[10]

7. RWEnpower has recently opted into the Large Combustion Plants Directive and is retrofitting flue gas desulphurisation to meet the deadline of implementation of the Directive in January 2008.[11] Although Aberthaw Power Station was specifically built to burn the type of coal with the characteristics that can only be found in the South Wales coalfield - Welsh dry steam coal - because Welsh-mined coal has a higher sulphur content than that of imported coal, the advent of the Directive requires Aberthaw to use a blend of Welsh and imported coal.[12] The lower sulphur content of the imported coal helps generators to meet their emissions targets.[13] However, the fitting of flue gas desulphurisation equipment can overcome the comparative disadvantage of the higher sulphur content of Welsh coal, although using Welsh coal increased the cost of applying this technology.[14]

8. Seventy per cent of Wales's annual coal consumption is through the two coal-fired power stations at Aberthaw and Uskmouth.[15] RWEnpower, which owns Aberthaw, told us that 40 per cent of Aberthaw's coal burn is made up of supplies from Tower, Celtic Energy and Energybuild, with the remaining 60 per cent imported from Russia, Australia and South Africa.[16] Clare Harding of the DTI's Energy Technologies Unit told us:

... clearly with demand for the generating sector exceeding the total domestic production in Wales, there is a shortfall [from domestic production] and it has to be met by a mix [with imports].[17]

Security of supply and the importation of coal

9. There are clear economic and employment-related advantages for Wales in Aberthaw and Uskmouth using indigenous supplies of coal. It is also vital for the power stations to have a guaranteed security of supply, something Gareth Jones of the TGWU believed was best achieved by the use of Welsh-mined coal.[18]

10. However, the view of the DTI was that security of supply did not necessarily require sourcing a larger percentage of coal from indigenous stock. According to Lord Truscott:

... unfortunately in some circumstances UK coal has not been as reliable and as flexible and as dependable as imported coal.[19]

11. On the environmental cost of importing coal, Clare Harding of the DTI told us:

... the actual environmental cost of shipping is not as high as you might envisage and ... the carbon cost is not significant.[20]

However, the environmental cost of using imported coal is not simply a calculation of its transport; as Clare Harding also mentioned, the environmental impact of its extraction - possibly by a less well-regulated process - should also be considered:

If you rely increasingly on imports ... coal may be being produced overseas and not subject to the same controls that are applied in the UK, so you may be in effect exporting the impacts that local communities are objecting to.[21]

12. There may also be health and safety considerations. As Nigel Hughes, Chairman of the Opencast Coal Committee of Wales, told us:

The difference between our extraction of coal and foreign extraction of coal is that ours is priced very, very heavily and the simple reason is the health and safety aspect. We have an excellent health and safety record and that comes with a price.[22]

13. For reasons of reliability and flexibility it is sensible to ensure a diversity in the sources of supply of coal to the generating sector. Welsh-mined coal will continue to be an important component of this mix.

The "generation gap"

14. James Poyner, Director of Miller Mining, described the projected "generation gap" whereby "between now and 2015 approximately 22 GW of power generation is going to come off-stream, and ... that has got to be replaced with something".[23] In a supplementary note on this point, Mr Poyner stated:

I now wish to add that that generation gap will increase to 29 GW if the existing AGR stations do not get a life extension.[24]

15. The directors of the mining companies who gave evidence to us were cautious in their estimates of the extent to which this "generation gap" could be filled by the use of alternative technologies such as wind power.[25] Mr Poyner's supplementary evidence stated that "the gap is far too large for renewables" and that "wind is portrayed by some commentators to contribute much more than it realistically does and in fact can".[26]

16. When asked about the future role for coal as part of the energy portfolio, Mr Poyner told us "I do not think it should change very much from what it is at the present day ... between 20 and 30 per cent of the total contribution".[27] Mr Poyner's written memorandum stated:

Whether we like it or not, the UK relies on coal for a third of its electricity, in fact over the winter months it relies on coal for half its electricity. This reliance will not change in the short to medium term.[28]

Unless and until alternatives are in place coal will continue to be used in the UK otherwise the lights will go out and our economy will crash.[29]

17. We are not convinced that alternative technologies will be able to produce sufficient electricity to fill an anticipated power generation gap of around 22 GW by 2015. Coal-fired power generation will continue to play a valuable and significant leading role. Consequently, UK and Welsh Assembly governments should have a more positive policy approach, which recognises the continued critical importance of Welsh coal in filling the power generation gap at present and into the future. This is not, however, a reason to discourage investment in alternative and renewable technologies.

The economic importance and environmental impact of open cast mining

18. Coal has an environmental impact, although measures to reduce carbon emissions are more a matter for the electricity generators than for coal producers.[30] As Mr Richard Nugent, Director of Energybuild, said, "... we cannot mine clean coal. The clean coal is the way in which it is burnt".[31] We welcome the Government's response to our earlier Report, recognising that:

We agree that clean coal technology, and in particular carbon capture and storage, can contribute to the UK's security of energy supply enabling it to use its coal resources whilst avoiding coal's impact on the environment.[32]

19. The major part of the coal produced in Wales at present is produced by open cast methods and, for that reason alone, it is economically very significant. Furthermore, given required consents, it is estimated that open cast output in Wales could be raised to 2 million tonnes a year by 2014 (from 1,235,485 tonnes in 2005), equivalent to 50 per cent of current coal demand in Wales.[33] However, the future of open cast mining is controversial.[34]Open cast mining has a particular environmental impact in terms of the despoilation of the landscape and in terms of noise, dust and its impact on the lives of those living close to extraction sites.

20. As planning regulations and the granting of mining licences are matters devolved to the National Assembly for Wales, we make no comment on this other than to note the division of views which were expressed to us. The directors of the mining companies were clearly dissatisfied at the complexity of the planning application system, which resulted in considerable and costly delay for them.[35] In its memorandum to the Committee, Celtic Energy stated that:

Planning restrictions often form the greatest hurdle to the coal industry. ... Delays within the current planning system can mean that the time can run into years.[36]

For the TGWU, the difficulty in obtaining planning permission for opencast coal production was "the greatest impediment", and "illogical, discriminatory and absurd".[37]

21. Those opposed to the extension of open cast production, however, took a very different view. We heard evidence from the campaigning group, Protecting and Conserving Together (PACT) and from the Woodland Trust - both groups opposed to an extension of open cast mining at Margam, Port Talbot.

22. One of the witnesses from PACT referred to open cast development as the "exploitation of countryside features, amenities, physical access and ... our wellbeing", which also affected leisure and tourism in their area.[38] PACT's witnesses maintained that no restoration of the open cast site in their area had been undertaken in 12 years, that the threshold for dust levels was "far too high", and that the protection offered by currently designated buffer zones was inadequate.[39]

23. In its memorandum to the Committee the Department of Trade and Industry told us:

... it should be recognised that surface mine projects are transient in nature - even major sites expect to have areas in restoration within three years of opening - and ... recent regulations on dust and noise suppression, and traffic management requirements which can be a condition of consent, mean that the potential impact of such developments on local communities can be much better managed than was the case in previous decades.[40]

Celtic Energy, in its written evidence, agreed:

Day to day site operations are undertaken to ensure that dust and noise emissions are kept to a minimum in compliance with statutory controls[41]

On the restoration of open cast sites, we heard from Celtic Energy that:

Once coal extraction operations have been completed, sites are restored in accordance with agreed schemes with a strong commitment to protection and enhancement of scientific and ecological value of the land[42]

... not all environmental impacts are negative. There are many examples of improvements in landscape and amenity as a result of open cast coal workings, and new habitats can be created so that they are every bit as good, if not better than, those lost temporarily.[43]

24. Representatives of the Department of Trade and Industry referred to the concern of open cast mine operators in South Wales that:

... the introduction of mandatory "buffer zones" could sterilise a high proportion of the remaining resource, which probably represents around 50 years of supply at output levels of 1.2 - 1.4 million tonnes per year.[44]

25. Gareth Jones of the TGWU expressed his Union's case against set buffer zones, preferring each application to be considered on its merits.[45] In its memorandum, the TGWU noted:

... extending buffer zones from the 200 metres that apply to some other minerals will sterilise large areas of reserves and could make operations unviable.

The Open Cast Coal Committee agreed:

There is no doubt that substantial recoverable coal resources are available in the UK. ... Whilst those resources will not disappear, some may well become sterilised forever.[46]

And Miller Argent stated in its memorandum to the Committee:

In effect if a 500 metre buffer zone was introduced in Wales it would close the Welsh open cast industry down overnight.[47]

26. We believe that there is a good future for the coal mining industry in Wales, given the remaining large reserves of coal and the supply of highly skilled labour. We do not believe in the application of one, set distance for all "buffer zones" between mining sites and housing which would apply to all developments, as each case should be considered on its merits. However, mine owners and operators should take care to engage with local communities and local authorities and be sensitive to their reasonable health and environmental concerns.

THE PRESERVATION OF AREAS OF ANCIENT WOODLAND

27. The Woodland Trust supports PACT in its opposition to an extension of the Margam site, as it would result in the loss of 4.5 hectares of ancient woodland, Coed Hafod Heulog, on the banks of the River Kenfig.[48] The Trust defines ancient woodland as "land that has been wooded since 1600", but also told us that "most ancient woodland in Wales has been there since shortly after the Ice Age".[49] The Trust did not agree that ancient woodland could be transplanted or re-created. Mr Rory Francis, Public Affairs and Press Officer for the Trust, told us:

I do not think that anyone would claim that they could restore or ... trans-locate an ancient woodland.

In its memorandum to the Committee the Woodland Trust wrote:

Ancient woods are our richest, most important sites for a vast range of insects, birds, animals, flowers and trees. They are one of the glories of our natural heritage; they are places of inordinate beauty, reservoirs of evidence for environmental change, archaeology and economic history. ... we simply cannot afford to lose them, and ... new planting can in no way compensate for their loss.[50]

28. In its memorandum the Woodland Trust noted that it had identified 35 ancient woodlands across Wales known to have come under threat recently from development. Ten of these were under threat from road schemes, seven from public utility services, five from minerals, four from housing development and nine others from such things as caravan parks, golf courses and an airport.[51]

29. The Director of Miller Mining told us that open cast mining "may temporarily change the surface features".[52] The Department of Trade and Industry told us:

... restoration generally starts within three years of the void moving forward in a site. Actual restoration of the site will take longer, depending on the size of the site and the nature of the restoration work to be done.[53]

30. We are not convinced by the Department of Trade and Industry's description of open cast projects as "transient".[54] We believe that in cases where areas of ancient woodland may be affected, there is a very real possibility that areas of significant environmental importance - which cannot be re-created or transplanted - will be lost forever.

The extraction of coal bed methane

31. We were interested to hear from Mr Williams, Chairman of Unity Power, that his company is working on a programme together with an Australian company to extract methane from coal reserves and by blending it with hydrogen to produce hythane, a cheaper and less polluting form of road vehicle fuel. Mr Williams told us:

… hythane is a very, very competitive, much cheaper road vehicle fuel, and a 5 - 6 per cent blend of hydrogen with methane will actually reduce emissions by something like 30 per cent.[55]

32. Mr Williams' assessment is that South Wales is "top of the league for potential coal bed methane production. There is huge scope.".[56] Given the potential benefits of this resource, we recommend that there is a role for Government in working jointly with industry in developing the potential for commercial extraction of coal bed methane, including joint funding for exploration, to establish the likely extent of this resource.

The Mines Rescue Service

33. We were reminded in evidence of the valuable work undertaken by the Mines Rescue Service, established over 100 years ago to effect the rescue and escape of mineworkers from underground. The Service has since diversified and now uses its expertise to support a range of health and safety related products, training and services.[57] Although it earns a large part of its income from such diversification, the Service is funded by mine owners on the basis of a fee per tonne extracted and, as the mining industry has contracted, so has the Service's income.[58] In a House of Commons debate in March 2007, it was pointed out that:

In the most recent financial year, the income from non-deep coal mine reserve cover and training was about £4.5 million - three times as much as its deep coal mine rescue income. However, that still left a shortfall of about £150,000 and next year ... the shortfall will increase to £250,000.[59]

We agree with the Director of Miller Mining, Mr Poyner, when he told us that:

... the Mines Rescue Service should be treated in exactly the same way as any other emergency service ... If there was a terrorist attack anywhere and there were people trapped it is highly likely that the Mines Rescue Service would be called out.[60]

This view was strongly endorsed by Mr Rhydian Davies, Director of Energybuild, who said that "if that is not looked after we have a serious problem".[61]

34. We recommend that the Department for Business, Enterprise and Regulatory Reform work together with the Department for Communities and Local Government and the Health and Safety Executive [Department for Work and Pensions] to explore the future funding arrangements for the Mines Rescue Service so as to protect the extremely valuable work it undertakes and to avoid the disincentive to the coal mining industry of the imposition of a levy on the extraction of coal.

The collection of below-national level data

35. In its memorandum to the Committee the DTI told us that below-national-level data for the production and use of coal were not readily available, and that "some of the Welsh data are estimates based on UK totals".[62] In evidence, Lord Truscott told us:

... we are committed to collecting and making available data on energy production, emissions and so on at below-national level to enable local authorities, devolved administrations and regional bodies to monitor and implement energy strategies to reduce CO₂ emissions. ... We are looking at trying to do more both at a sub-national level and at local authority level and ... we are developing the production of statistics on these matters.[63]

36. We believe that the collection of below-national-level data is essential in order to underpin the development of policy in this area, and encourage the Department for Business, Enterprise and Regulatory Reform to continue to pursue this aim.

3 Q 21 Back

4 Q 2 Back

5 Q 122 Back

6 ibid Back

7 The Energy Challenge, Energy Review, DTI, July 2006, CM 6887, para 4.23 Back

8 Q 12 Back

9 Q 128 Back

10 Q 123 Back

11 Ev 51 Back

12 Qs 125, 127; Ev 49 Back

13 Q 5 Back

14 Q 5 Back