COAL - contributing towards a diverse, secure and sustainable energy portfolio at competitive prices for the U.K.

Last year saw some 3,000mt of coal produced worldwide, the bulk of which was for power generation. Some 38% of global electricity is generated from coal and this will be the case for the foreseeable future.

Coal is produced in many countries, principally for domestic consumption with less than 15% of world production being exported. It is the most abundant fossil fuel with over 200 years of proven reserves at current production levels which should be compared to oil and gas reserves of around 50 years at current consumption.

In 2001 the UK consumed around 50mt of coal in power stations representing over 36% of total electricity generation. However, we mined only 32mt so the balance of 18mt plus some 8mt for steel manufacturing and other industrial process was imported.

Coal burn has increased substantially in both 2000 and 2001 and is set to continue at these levels in the medium term. This is because coal is the cheapest fossil fuel and the benefits of the new electricity trading arrangements - NETA - which no longer discriminates against coal have been in force since March 2001.

The current costs for electricity generation are:-

Coal-fired generation is the most economic and can provide both base load as well as flexibility to meet demand peaks. It is clear that reducing volume of coal consumed can only increase electricity costs. These costs will inevitably rise in line with the increase in gas prices which are set to steadily increase as we, along with the rest of the E.U., become more dependant on supplies from far outside the E.U.

We must maintain economic coal production in the U.K. where we can have the confidence that coal is produced under acceptable environmental conditions and not encourage uncontrolled mining in developing countries to the detriment of both people and the environment.

Some 40% of our annual production is from surface (opencast) mining working under a planning regime with a stated "presumption against the granting of planning permission for coal extraction". Contrast this with the quarrying and aggregate industry where a landbank equivalent to 10 years production is to be provided by the planning system - why such discrimination?

Similarly oil and gas are treated as strategic reserves yet our most abundant fossil fuel - COAL - has no strategic reserve status. We must provide a system that enables us to access the coal reserves for the benefit of the country.

By maintaining economic, indigenous coal production we will make a significant contribution towards providing diverse, secure and sustainable energy at competitive prices for the U.K. thereby ensuring we can compete within the E.U. and global economy.