While many people were shocked to see Peabody Energy, the world’s largest privately owned coal producer file for Chapter 11 bankruptcy a few days ago, industry experts had for some time seen it coming – a few more discerning industry watchers almost expected it.
There’s a higher demand for natural gas in the world’s most industrialized countries; a dramatic slump in the price of coal; and a stronger awareness on the effect of fossil fuel on climate change. These factors, coupled with some ill-timed business decisions have signaled the (imminent) death of the world’s biggest coal producers including Arch Coal and Alpha Natural Resources.
Self-bonding: The failed solution
With the world drifting away from coal to cleaner energy, especially for electricity generation,
the question is: who will clean up after them? This is a question U.S energy policy makers tried to answer with ‘Self-bonding’.
Under U.S federal law, companies must pay for the reclamation of the land contaminated through mining. Usually, mining companies are required to put away money or collateral to cover those costs but some states allow companies to Self-bond – basically, to agree that they will have enough money to clean up when the time comes.
According to available figures, Peabody alone has clean up obligations of about $1.4 billion while Arch Coal and Alpha Natural Resources, the U.S second and fourth largest coal companies, have self-guaranteed liabilities exceeding $485 million and $640 million respectively, in reclamation costs.
Since these companies are officially bankrupt, taxpayers have to pay for their slip. What a huge cost to pay.
Figures like these bring home the dark realities of the real cost of cost mining. And with associated costs related to health, welfare, noise and air pollution, and pollution of surface and groundwater supplies, it is easy to see why the option of coal power can hardly be considered viable.
A research article in the Coal Atlas, a publication released by the Heinrich Boll Foundation, reveals that “mining and burning coal involve enormous external costs. The most significant costs are government subsidies, environmental damage, and harm to human health. Taking these into account, coal becomes an expensive commodity. The International Monetary Fund has revealed that post-tax subsidies for coal amounted to 3.0 per cent of global GDP in 2011, rising to 3.9 per cent in 2015. This is largely due to the environmental costs associated with coal consumption.
“These costs include greenhouse gas emissions and air pollution. It is impossible to put hard numbers on these; instead, we have to rely on estimates and judgement.
“Some type of damage cannot be reversed. According to Trucost, the external costs of using coal to generate power in 2009 amounted to $452 billion in East Asia alone while in the same year, the costs in North America reached $316 billion. A more realistic price would not automatically compensate people harmed by climate change or those suffering from air pollution. The coal companies should have to take on the legal, as well as financial responsibility. A public admission of guilt and an apology to the victims would be appropriated. Both are taboo for the industry,” the report concluded.
Bringing the dirt home
For a country suffering from an acute undersupply of power, it is only natural for the country’s energy policy makers to explore the use of coal energy to augment Nigeria’s lopsided energy mix. Little wonder that in August 2014, the federal government declared that 30 per cent of the country’s power should come from coal by 2030.
Nigeria has significant coal reserves currently estimated at 2.8 billion tonnes of high quality lignite coal. Although it is nothing compared to North America which has almost 1,500 billion tonnes of lignite, it is a substantial volume of natural resources literally lying under our feet.
To put it into context, Nigeria has struggled for years to meet its energy needs. It currently generates 4,500MW of electricity but needs 12,000MW to ensure steady power supply – and ultimately about 200,000MW to meet all its electricity needs and ensure its reach to more than 50 per cent of the nation’s almost 200million population who live without electricity by 2030.
The need to shore up this massive shortfall has made coal energy an attractive alternative – a situation which saw companies like ETA Zuma Coal Company setting up shop in Kogi, Central Nigeriaj HTG/Pacific Energy Company, prospecting in Enugu, South Eastern Nigeria and many more firms showing more than a passing interest in coal mining.
ETA Zuma started its coal mining operation in Kogi’s Okobo Community in 2011 promising residents job opportunities and improved standard of living, but what they have received so far is a far cry from what was promised. Five years on and 30,000 metric tonnes of excavated coal later, only a handful of people living in the community have been employed by the company - this falls considerably short of the community leaders' expectations as expressed in the Community Development Agreement (CDA).
The paramount chief of the remote, peaceful, agrarian community, Chief Aminu Abubakar, counted off the tip of his fingers when asked the number of local residents employed by the mine.
“We have fourteen people working in the company,” he said. “Three drivers, two helpers, three cleaners, and the rest are security guards.”
The environmental degradation suffered by the community is another source of contention. Many people complained of too much dust.
“The roads too are very dusty. When their big tractors run at top speed, we are covered in dust.”
Community leaders claim there has been an increase in the incidence of respiratory diseases since ETA Zuma rode into town like a horseman in the Wild West.
There is no official survey of the health impact of coal mining on the community so far, and without a baseline survey, the community has no evidence to defend their claim that the mine is affecting their health.
But the biggest problem for Okobo citizens is water – lack of it. According to Coal Atlas, ETA Zuma Group’s surface mining activities consume large volumes of water, and excavation activities have possibly disrupted the water bed in the community.
The contaminated residue water from their activities find its way back to the community’s main source of water - a stream.
A scientific analysis commissioned by Global Rights, a civil society organisation, revealed that water turbidity and chemical content in the area was higher than the World Health Organisation’s recommended levels for human consumption.
“We don’t have good water because the chemical from the coal mine is polluting our only source of water, no hospital, and we are also not properly recognised by the company,” Abubakar lamented.
While expressing disappointment over their experience with ETA Zuma’s mining operation, the community leaders did not, however, forget to credit the mining company for fulfilling part of their obligations.
According to Idris Ibrahim, the company has never defaulted in meeting its annual obligation of paying surface rights to land owners. They also put up new school building for children, provided monthly stipend for the school administration and, for easier access, 'levelled' the road leading to the community.
“It’s not like we are ungrateful with what the company has done,” Ibrahim said. “Things are just not the way we expected.”
Right of reply
ETA Zuma Coal Company, the firm in the eye of the storm acknowledges some of the complaints from Okobo residents and promised to act within the limit of their resources.
According to Ambassador Joseph Ayalogu, Executive Director Corporate Relations of the ETA Group, it is foolhardy for anyone to ascribe reported illnesses in the host community to the activities of the coal plant.
“Even without coal plants we have respiratory problems. I don’t want to sound like one is too sanguine. You cannot have an omelette without breaking some eggs and this is the way life is. Even without any (coal) plant at all, people still have problems. The only thing that helps everybody is knowledge about what you’re doing and what can be the mitigating strategies to put in place,” Ayalogu said.
On the possibility of slowing down on coal mining and exploring cleaner forms of energy in Nigeria, Ayalogu suggested a representative mix without the exclusion of fossil fuels.
“I agree that there are renewable options, which of course the country has to adapt to. So like you said, the important thing is to be aware that it is not just coal, or gas, but you can’t exclude them. You will have to continue to develop the other forms of energy sources,” he concluded.
Green is the new black
If it has one, Nigeria’s ministry of power, headed by former Lagos governor, Babatunde Fashola is yet to make public its roadmap for alternative sources of energy, and in particular, renewable energy.
Many countries including China, the world’s largest producer of greenhouse gases, have indicated a commitment to reducing their carbon emissions and integrate the use of renewable energy into its energy mix.
These sources of energy may be considered expensive compared to fossil fuels in nominal terms, but in real terms investment in renewable energy is not only cheaper, but worth exploring.
Developing countries like Nigeria are well endowed with the human, economic and natural resources necessary for the production of renewable energy. If well utilized, this energy sources pose little or no threat to the environment as they are easily renewed from the abundance of nature and are a clean source of energy.
Renewable energy sources such as geothermal, wind power, solar energy, and biomass can be easily tapped. A strategic exploitation of renewable energy sources provides a beneficial intersection between the economy, environment, and human health, thus protecting the earth and conserving its resources for future generations.
It not only provides a clean energy source that is easy and cheap to access, but it also creates employment opportunities, protect the environment, boost local and domestic industries and businesses, decrease reliance on fossil fuels and insulate states from the unpredictable price of petrol in the international market. Forward looking countries who invest in renewable energy stand to earn foreign exchange from exporting the energy.
To compete globally, Nigeria has to rethink its energy policy to reflect its human and economic aspiration. Effective regulatory frameworks should be set up and enforced to check the activities of coal miners with priority placed on the health and welfare of host communities – we can’t afford to give priority to the present financial health of opportunistic companies at the detriment of the people’s future.
Managing Editor of Y!/YNaija.com