It is well known that the UK has a long history of coal mining. Output peaked as long ago as 1913 at nearly 300m tonnes. At that time all coal produced in the UK was from deep mines. Surface coal mining began in the 1940's, initially as an emergency measure during the Second World War to increase national output, and peaked at 21m tonnes in 1991.
What is less well known is that the UK still has significant economic coal reserves. The assessment of the volume of economic coal reserves is fraught with difficulty at any time but it will vary with the prevailing price of coal. What is clear is that the dramatic rise in international prices over the last four years (figure 1) has increased the interest of UK operators in exploiting more reserves and of investors in UK coal mining prospects
The market for coal in the UK has been strong in recent years averaging 60m tonnes, with consumption at power stations accounting for some 50m tonnes. Whilst there may be some decline in the market due to environmental pressures, UK coal consumption will significantly exceed UK production under any likely scenario. This means that UK coal producers can sell every tonne that they can produce, and more, and provides them with a huge opportunity to profitably increase production.
UK coal production has fallen to some 16m tonnes a year, about half deep mined and half surface. However, against such a strong market background, firm investment plans are now in place for all of the UK's ongoing deep mines and some closed deep mines are in varying stages of being reopened. There is also renewed activity in the surface mine sector with operators actively seeking to increase output.
In the UK there are six large deep mines in production. Four of these have investment programmes in place, or planned, to extend their lives. In total, some tens of millions of pounds are involved to develop into new seams or into new areas in seams that have already been worked. A fifth, Welbeck Colliery, will close around the end of next year due to exhaustion of reserves.
The sixth large deep mine is a special case. The Hatfield mine in Yorkshire has been reopened and recommenced production in January of this year. The total investment involved is over £100m and output is now being built up to an expected level of some 2m tonnes a year. Associated with the mine is a proposal to construct an adjacent power station which will use gasified coal as its fuel source with carbon capture and storage. It will thus eventually operate with near zero carbon emissions and will be "clean" in all other respects.
The Hatfield mine is the first, but not the only example of a major resurgence in the UK deep mine coal industry. In South Wales, the Aberpergwm mine also reopened some time ago but output there is now being increased in response to strong demand and high international coal prices. Also in South Wales, work has now started to reopen the Unity mine on the back of similar commercial considerations.
The most dramatic recent news is that UK Coal now expect to reopen Harworth colliery in Nottinghamshire with an investment which will run to over £100m. The mine was mothballed in 2006. An exploration programme is currently being undertaken to provide added assurance on the reserves that the reopened mine will exploit but there is a reasonable level of confidence that the project will proceed.
All of the above are steam coal mines with the bulk of their output destined for power stations. However, the increase in international coking coal prices has been even more dramatic. The UK still has some coking coal reserves and a licence has been awarded to the Corus Group with a view to the development of a brand new deep coking mine at Margam in South Wales, adjacent to Port Talbot steelworks. This shows that, in the right combination of circumstances, there is potential for the development of new deep mine capacity.
This resurgence of interest and investment has brought a new confidence to the deep mined coal industry in the UK. Whilst it is in the nature of things that there will be ups and downs in output due to variations in geology, there is now a reasonable expectation that deep mined output will increase to over 10m tonnes a year, and capable of being sustained at that level into the 2020's.
But it is not just the deep-mined industry that is undergoing a resurgence. Output from surface mines has fallen from a peak of 21m tonnes in 1991 to less than 9m tonnes last year for two main reasons. First, low international coal prices until recently have reduced the volume of available reserves at a ratio that could be economically exploited. Second, the industry has had great difficulty in gaining access to these reserves because of the planning system. It is not just the proportion of applications that have been refused that is the problem. Delays in getting decisions, and as a result of going through the appeal process, mean that operators have had difficulty in the timely replacement of sites as they complete coaling. Whilst some sites have a life of a decade or so, most have much shorter lives, typically about three years. The industry therefore has to run very fast just to stand still.
Now things are changing on both fronts. The increase in international coal prices means that higher ratio sites can now be worked economically. This has increased the volume of reserves that can be economically extracted from the surface with some estimates putting this as high as 700m tonnes. Whilst environmental restrictions may place some limit on accessible reserves, certainly the reserve base exists to support an output of at least 15m tonnes a year for several decades. The challenge will be to gain access to these reserves.
However, there is evidence that the planning situation is also changing. Last year, five applications were resolved on appeal or following subsequent legal challenge, and the total tonnage that became available, including approvals by Mineral Planning Authorities, amounted to no less than 24m tonnes.
Recent Government planning guidance on minerals generally (MPS1, November 2006) and a number of Government statements supportive of indigenous coal production have changed the picture significantly. In addition, higher coal prices have made it worthwhile for operators to take the risk of incurring the expense of pursuing applications through the appeals process. It is also becoming more widely recognised that importing coal rather than producing it in the UK does not avoid the environmental impact, it merely displaces it.
In the case of carbon emissions, the transport of coal produced indigenously generates only 0.1% of the carbon emissions involved in burning it. By contrast, the equivalent figures for coal imported from Russia and South Africa, the UK's two largest overseas suppliers, are nearly 9% and about 4.5% respectively. Furthermore, international shipping involves sulphur dioxide emissions from high sulphur marine diesel. Given that the market for coal in the UK substantially exceeds the level of indigenous production, every extra tonne produced in the UK represents the lowest carbon option, and the most environmentally sustainable option in the widest sense.
Recent success on the planning front, allied with increasing coal prices, means that UK surface mine output should also increase to more than 10m tonnes a year, sustainable for many years.
The industry provides well-paid, skilled jobs, often in depressed areas, injects significant money into the local economy, and can assist in the reclamation of derelict land. Operatives are trained to NVQ standards. Nevertheless, the industry recognises that surface coal mining can have local environmental impacts and that both coaling and restoration operations need to be carried out to the highest standards. Engagement with the community is essential. Operators know that they have to do what they say they are going to do all the time, everytime if they are going to continue to gain the permissions they need to maintain and increase the level of their operations.
To conclude, the increase in international coal prices and increasing recognition of the value of indigenous coal production has brought a new sense of optimism to the UK coal industry. There is now a reasonable expectation that output from both the deep mine and surface sectors will increase to a total of over 20m tonnes a year, sustainable for some time to come.