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South African coal resources: The Petrick Report
Communications on energy
South African coal resources: The Petrick Report South Africa's coal resource is known to be of significant size by world standards and is of indispensable local importance, providing over eighty per cent of energy requirements. Recent circumstances have stimulated both the actual and potential demand for South African coal, while fears have evolved about the proportion of the resource that can profitably be mined under current price restraints and the longterm sufficiency of the resource as a whole. An official and comprehensive study of these problems, published as the Petrick Report, affords an instructive example of contemporary energy resource investigation, and its recommendations for future energy policy have some useful generalisable features. The South African energy economy has certain distinctive features, which form the background to the Petrick study. Although the coal mines are largely privately owned (often by the gold mining financial concerns like Anglo American Corporation), the state exercises strong control over coal mining notwithstanding. Not only are there stringent controls over prices and exports, but the large state-owned industries exercise considerable market power as the main bulk buyers of coal. O f these, E S C O M (the electric power authority) is the most important, followed by I S C O R (South Africa's main steel producer) and the railways. S A S O L (the state-owned synthetic oil concern) has hitherto followed a policy of developing its own collieries, but could also, eventually, become a buyer of privately produced coal if some of the Petrick recommendations are implemented. The Petrick Report itself will inevitably become the main primary reference to South African coal and problems of energy policy fomulation for many years to come. The procedure adopted by Petrick was to set up a data bank into which was fed all known facts about South African coal deposits: the full cooperation and assistance of the coal mining industry and all relevant state bodies
was readily available. It is intended that this data bank be perpetually updated and accessible to all concerned. So far as the statistical validity of the input is concerned, it was claimed that the data grid from current mining operations and boreholes was statistically adequate to permit extrapolation to the resource base as a whole. Where information for a particular area was seriously deficient, the computer was programmed with a 'default', or average value to permit evaluation of the quantity of coal available with some degree of adequacy. Resource categories Petrick was careful to define and distinguish the various categories of the resource, according to current technological and economic availability. Thus, 'coal in situ' was defined as the total amount of coal in a given area, however deep, or poor in quality it might be. This category, though calculated, was not published. "Minable coal in situ' was defined as that portion of the coal in situ which could be mined by existing techniques (less unavoidable geological losses). The following parameters were taken into consideration in arriving at an estimate for minable coal in situ: reserves in the inferred category were reduced by 20%; maximum mining height was taken as 6 metres for underground mining of all types of coal, while a minimum height of 1.2 metres was taken for the mining of bituminous coal and 0.7 metres for metallurgical coal and anthracite. The 'Salomon formula' was employed in computing pillar dimensions for bord and pillar workings for 'raw' (ie unwashed) bituminous coal down to 300 metres, washed bituminous coal to 200 metres, and for metallurgical coal to 100 metres. For bituminous coal intended for washing and mined below 200 metres, and for metallurgical coal below 100 metres and anthracite throughout, it was assumed that higheryield underground methods such as stooping (pillar extraction) or even longwalling, would be used, despite their
E N E R G Y P O L I C Y December 1 976
higher cost. In these cases, an extraction rate of 85% was employed. In all cases, including bord and pillar mining, a further mining loss of 10% was deducted to allow for haulage pillars, barrier pillars and boundary pillars between separately owned mines. In the case of open-cast working, wherever stripping ratio and seam depth made this method feasible at all, an extraction rate of 90% was considered justifiable. Petrick drew attention to the fact that South African coals, in distinction from Northern Hemisphere coals, generally have a high ash content, and one which is difficult and expensive to remove by washing, because of the intimate association of ash and coal. In deter mining the upper limit for ash content in evaluating the economically usable proportion of the resource, Petrick commenced by defining coal as 'a carbonaceous mineral containing not more than 50% ash." Although data were collected for coals of ash content between 35 and 50%, Petrick declined to publish estimates of the quantity of this category of coal. It appears that 35% ash content is regarded as the ceiling for usable coal within the foreseeable future, even for such ashtolerant uses as feedstocks for power station boilers or Lurgi gasifiers for the S A S O L synthetic oil process. Not unex pectedly, the quantities of coal ruinable in situ increase sharply with ash content. Thus, of the grand total of 91 767 million tonnes minable in situ at depths from 15 to 400 metres below surface (and reducing to 81 274 million tonnes because raw bituminous coal not of anthracitic or metallurgical properties was deemed to be not minable profitably below 300 metres) only some 2 billion tonnes had ash content of 1015°/O: 10 billion tonnes (nearly) of ash content of 15-20%: 17 billion tonnes of ash content of 20-25¢%; and 43 billion tonnes of ash content of 30-35%J
Deflated complacency Any sense of complacency generated by the large size of the resource ruinable in situ was, however, heavily deflated by Petrick in computing the quantity of coal profitably extractable under current or even rather more favourable economic conditions: the latter quantity is only 24 915 million tonnes of
359
C o m m u n i c a t i o n s on e n e r g y
bituminous coal (including coal of higher qualities). Essentially, current mining practice is the cause of the low proportion of coal currently economically extractable, and mining practice is determined by the low price of coal in relation to current costs of production and by the demand of the general coal market for higher grades of coal than those which would be produced by unselective mining. Petrick complained that the bord and pillar methods mostly used hitherto have restricted coal recovery to between 30 and 80% of the coal present in an individual seam. However, where multiple seams occur, and the correct sequence of seam exploitation becomes crucial in ensuring high over-all extraction from all the seams, the proportion of coal currently extracted falls to between 10 and 50% of the aggregate of coal present in all the seams. 2 Petrick's concern about the life of the resource is equally determined by demand projections over the next half century. These projections are based on ESCOM's projections for expansion of generating capacity, ISCOR's for steel output (currently some 7 million tonnes per annum), SASOL's for synthetic oil, the demands of the general inland coal market, and the lucrative export demand for South African coal now evolving, and made possible by the newlyestablished bulk-loading facilities for mineral exports at Richards Bay in Natal. During 1973 the industry produced nearly 62 million tonnes: but forecasts for the year 2000 without any allowance for exports go as high as 179 million tonnes. On present trends, South African coal output was projected to peak between the years 2025 to 2030 at between 270 and 320 million tonnes of annual output, the variation being caused by the variation of anticipated exports from 10 to 50 million tonnes per annum. The Gaussian curves describing the trend of output were founded on a reserve figure of 21 425 million tonnes. Within these over-all constraints, further problems of resource sufficiency emerge. Coking coal is now in critically short supply, to the extent that ISCOR is now importing American coking coal until experiments with conversion of local coal to 'form coke' attain success. Petrick therefore categorically recommended that the export of the
360
higher grades of bituminous coal be discouraged, as shortages for local consumption could also develop later, with especially prejudicial effects on industries engaged in beneficiating local ores for export. Moreoever, the current dichotomy between collieries tied to ESCOM and owned by SASOL on the one hand, and collieries producing for the private market, on the other, will give rise to grave difficulties in the future. In the case of the blocks of coal to be reserved for large future power stations and synthetic oil plants, two problems arise. Firstly, the need to provide sufficient coal for an operating life commensurate with capital cost requires the allocation of contiguous blocks of coal of the order of magnitude of 800 million tonnes or even more, for each ESCOM power station, to provide for a quantity of 300 million tonnes extractable by underground methods: SASOL's second synthetic oil plant will tie up a quantity of 4000 million tonnes of extractable reserves, and even then will only produce a quarter of the country's oil needs at the time of attaining full output. Petrick very seriously questions whether a sufficient number of blocks of coal of this size can be allocated in the Eastern Transvaal (the main source of coal) to meet these large anticipated demands, which would grow out of all bounds if South Africa attempted to become entirely independent of imported oil. Secondly, this type of block mining leads to the economically irrational results that substantial quantities of high grade coal will be effectively wasted as boiler or gasification feedstock. The problem of resource management for the collieries supplying the general market is quite the opposite, Here, the tendency has been to mine the more profitable higher grades of coal selectively, leaving the lower grades unmined. Thus in both cases, the resource is being exploited less than optimally. Remedial measures, as subsequently mentioned, would have to include not only a higher price, but also the development of markets for large quantities of low quality coal.
The price for selF-sufficiency The Petrick recommendations for maximising exploitation of the resource
under all these circumstances were wide ranging. The most pressing concern pricing policy. The latest South African winter brought the serious threat of a coal shortage on the general market, as demand for coal has grown considerably, year by year, and it has been unthinkable to establish any new colliery to serve this market under past pricing arrangements. Even capital expenditure to enlarge output at existing mines has been substantially inhibited. The problem has been much aggravated by the high rate of inflation prevalent in recent years. The price controller attempted to meet the immediate needs of the situation by granting an increase of about a third in the general coal price, to R4.50 ($5.20) per tonne. A comparison of this price with coal prices in Europe or the United Kingdom will show how unrelated even the current South African price is to the world market. In order to implement the Petrick recommendation for a really substantial increase in the coal price, the South African government has now appointed a further commission, with instructions to evolve a rational and detailed pricing formula for coal to meet all the needs of the situation. The new commission has a challenging task: not only must the pricing formula ensure optimal exploitation of the resource, but it must do so with minimum inflationary damage to the economy generally and particularly to the mining and ore refining industries, which are heavy consumers of coal and electric power. Moreover, the inflation rate is currently running at more than 10%, so that a substantial increase in the price of so important an input will render the task of reducing this rate even more difficult. This is the typical dilemma of a government attempting to rationalise an administered price which has been permitted (for whatever reason) to drift badly out of alignment with the general price and cost level. The findings of the new commission are therefore awaited with great interest.
Open-cast expansion Very important proposals were made regarding the expansion of open-cast mining, which has been little employed in the past. The Petrick statistics show how close to the surface the bulk of the
ENERGY POLICY December 1976
Communications on energy resource is located. Of the total of 24 915 million tonnes of raw bituminous coal economically extractable by underground mining, 5639 million tonnes is located between 15 and 50 metres below surface; 18 279 million tonnes between 50 and 200 metres: 997 million tonnes between 200 and 300 metres) Thus, a great proportion of the resource is located within 200 metres of the surface. Although the category of raw bituminous coal located between 50 and 200 metres is not further analysed into categories above and below 100 metres, a concurrent set of statistics is furnished for coal minable by open-cast methods. Presumably, these totals are to be regarded as 'coal ruinable in situ by open-cast methods' as they are clearly not economically extractable at present. Within the ultimate limits of maximum seam depth of 100 metres and maximum stripping ratio of 15:1, 27 794 million tonnes of raw bituminous coal becomes available for open-casting. Although this total amount overlaps with the figure of
18 279 million tonnes minable by underground methods between 50 and 200 metres, it also includes coal within 15 metres of the surface (which can only be extracted by open-casting). Clearly, then, whatever proportion of the amount of 18 279 million tonnes lies below 100 metres on any reasonable assumption, that the general adoption of open-casting would achieve a very great transfer of coal into the economically accessible category. The first requirement, and indeed one strongly recommended by Petrick, is a very substantial price increase, necessitated by the capital-intensive nature of open-cast mining. (Equally, a higher price is needed to make economically possible more efficient methods of underground mining like long walling.) However, to make open-casting possible generally, Petrick regards it as necessary to create a legal mechanism to enable mineowners to acquire title to the land surface for the duration of open-cast operations. What is proposed, therefore, is the establishment of a state authority with powers of expropriation against
payment of adequate compensation. The authority would then make tracts available to the mining concern, subject to the obligation to restore the land to its original agricultural potential after extraction of the coal was completed. The original landowner would then have a preemptive right to reacquire his land before it could be offered for open sale. There should also be vested in the state what would amount to the power to determine the method of mining to be employed for all new coal mining ventures. No concern should be permitted to mine coal without official determination of which method might be most suitable to achieve optimal resource exploitation. Thus, there would be directives as to whether mining should be open-cast or underground, and in the latter case, as to the suitability of longwalling or the dimensions of pillars. The state should also assist, through the data bank and in other ways, to enable mine-owners to merge their holdings wherever necessary for the rational exploitation of a coal-field. The final requirement for optimal
Announcing...
Journal of Energy and Development Published twiceyearlyby the International Research Centerfor Energyand EconomicDevelopment(ICEED) and the Universityof Colorado. Vol. !1, No. I
Autumn 1976
* Foreign Ownership and Economic Policy, Harry G. Johnson (University of Chicago)
O
• Divestiture and International Oil, William E. Lindenmuth (Mobil Oil) • Current Environmental Policy, U.S. Senator Gary Hart • Book review section included and eight additional articles. Current and former Journal contributors include: Sheikh Ahmed Zaki Yamani, H.E. Mana AI-Otaiba, John Sawhill, Professors Nell Jacoby and Gottfried Haberler, H.C. Kauffmann (Pres., Exxon), U.S. Senator Mike Gravel, among others. Annual subscription rates (surface post included): Institutional - $18; Individual - $12. Payment should accompany orders. (Name)
(Address) (City, State, Zip Code, Country) All orders, manuscripts, and communications to:
ENERGY POLICY December 1976
The Journal of Energy and Development 216 Economics Building, University of Colorado Boulder, Colorado 80309 U. S. A.
361
Communications on energy~Conference report resource exploitation is to establish a market for the large quantities of lowgrade bituminous coal that would be produced by open-casting or total seam extraction by underground methods. Through proper planning, these quantities could be absorbed as power station feedstocks (subject to the problem of transport facilities and costs) or as petrochemical feedstocks, including, it may be assumed, feedstocks for the Lurgi gasification process. The suggestion was also made that large-scale gasification of these coals could provide a gas of quality and price suitable for sale for domestic purposes, especially tO the large urban African population. All these proposals have as a pre-condition the establishment of a high degree of
permanent joint planning by the state enterprises and private concerns. R.J. Friedland Johannesburg, South Africa l i t may be speculated that enormous quantities are available above the cut-off value of 35% ash: one of the lines of research advocated by Petrick is on development of the fluidised bed boiler, which is generally regarded as remarkably free of restraints in the acceptable proportions of non-combustible material in its fuel input. R.K. Dudkiewicz and K.F. Bennet, of the Energy Institute of Cape Town University, in commenting on the Petrick Report, say that imminent success with the fluidised bed boiler will extend the usefulness of South African coals above the 35% ash limit. They also argue that improved technology will in the future permit mining of narrower seams
than those allowed to be ruinable by Petrick: Consequently, they argue, the Petrick conclusions on the great need to conserve the resource are to an extent invalid. But Petrick can hardly be faulted for erring, if at all, on the side of conservatism through avoiding speculative reliance on untried or undeveloped technology. 2It is significant that 'tied' collieries currently being installed to supply large new ESCOM power stations operate under a specifically calculated, more generous pricing formula and are required to use open-casting to ensure greater resource utilisation. 3As previously mentioned, relatively small quantities of coal classified as 'washed bituminous coal', 'metallurgical coal' and 'anthracitic coal' are located between 300 and 500 metres below surface, but these quantities are too small to influence greatly the total tonnage of coal.
Conference report There's no business like no business ' N u c l e a r p o w e r and the public interest: The i m p l i c a t i o n s for business,' o r g a n i s e d by the Financial Times and held in London, 8 - 9 J u l y 1 9 7 6 .
Although doubts persist about the growth prospects of nuclear power, one spin-off from the industry is thriving: nuclear power conferences. As in other matters nuclear, the U K has had a thin time lately. But it got back into the running with this conference. The theme was 'Nuclear power and the public interest'; a sub-head qualified this broad brief, narrowing it to 'The implications for business'. As seems - perhaps unfortunately - to be typical of such conferences, the programme of speakers was drawn exclusively from those with a nuclear affiliation, either historic or current, and those on record as members of the faith. In consequence the presentations tended to start from a number of assumptions which might, in a forum differently constituted, have attracted challenge: in particular assumptions about future patterns of energy use and supply, and about the role of electricity in the energy mix. The 'public interest' was in general broadly identified with that of the nuclear industry; scant reference was made to social and political implications of nuclear development - with one emphatic exception.
362
When the organisers were putting the conference together they included speakers to deal with 'The nuclear issue as seen by a watchdog of the public interest' and '... as seen by a competitor'. To fill these roles they invited Sir Brian Flowers, FRS, Chairman of the Royal Commission on Environmental Pollution, and Leslie Grainger, Member for Science of the National Coal Board. As it happens, Sir Brian is also a part-time Member of the U K Atomic Energy Authority; and Mr Grainger is an alumnus of the Authority's Atomic Energy Research Establishment at Harwell. However, any inference that these two speakers might be in any way mere 'token' critics was dispelled by their presentations, which cannot have set delegates' minds at rest. Sir Brian, in a thoughtful and carefully-worded paper, expanded on the advance summary of the Commission's sixth Report, which he had first revealed at the National Energy Conference on 22 June. Students of nuclear affairs must by now be able to recite verbatim several of the most telling passages from Sir Brian's two speeches, especially those relating to
plutonium and the fast breeder reactor. '[The Commission] believes that one should not rely for something as basic as energy on a process that produces in quantity a by-product as dangerous as plutonium unless one is absolutely convinced that there is no reasonable alternative course of action ... we have not been convinced by the evidence that this is the case.' 'Because of its toxic and fissile properties, plutonium offers a unique and powerful weapon to those who are sufficiently determined to impose their will. In these circumstances I do not believe it is a question of whether someone will deliberately acquire it for purposes of terrorism or blackmail, but only of when and how often.' 'There is no doubt that [a demonstration fast breeder power stationJ can be built and operated, given adequate safeguards and resources, so as to be environmentally acceptable as an object in itself; we therefore do not oppose it. Nevertheless, lit] is a billion-pound step down a technological path which may later prove unacceptable or even catastrophic.' Since the Report itself had not yet been published, Sir Brian declined to answer questions. His colleagues in the nuclear industry at once deplored what they described as the 'misinterpretations' and 'misrepresentations' to
ENERGY
POLICY
December
1976
South African coal resources: The Petrick Report South Africa's coal resource is known to be of significant size by world standards and is of indispensable local importance, providing over eighty per cent of energy requirements. Recent circumstances have stimulated both the actual and potential demand for South African coal, while fears have evolved about the proportion of the resource that can profitably be mined under current price restraints and the longterm sufficiency of the resource as a whole. An official and comprehensive study of these problems, published as the Petrick Report, affords an instructive example of contemporary energy resource investigation, and its recommendations for future energy policy have some useful generalisable features. The South African energy economy has certain distinctive features, which form the background to the Petrick study. Although the coal mines are largely privately owned (often by the gold mining financial concerns like Anglo American Corporation), the state exercises strong control over coal mining notwithstanding. Not only are there stringent controls over prices and exports, but the large state-owned industries exercise considerable market power as the main bulk buyers of coal. O f these, E S C O M (the electric power authority) is the most important, followed by I S C O R (South Africa's main steel producer) and the railways. S A S O L (the state-owned synthetic oil concern) has hitherto followed a policy of developing its own collieries, but could also, eventually, become a buyer of privately produced coal if some of the Petrick recommendations are implemented. The Petrick Report itself will inevitably become the main primary reference to South African coal and problems of energy policy fomulation for many years to come. The procedure adopted by Petrick was to set up a data bank into which was fed all known facts about South African coal deposits: the full cooperation and assistance of the coal mining industry and all relevant state bodies
was readily available. It is intended that this data bank be perpetually updated and accessible to all concerned. So far as the statistical validity of the input is concerned, it was claimed that the data grid from current mining operations and boreholes was statistically adequate to permit extrapolation to the resource base as a whole. Where information for a particular area was seriously deficient, the computer was programmed with a 'default', or average value to permit evaluation of the quantity of coal available with some degree of adequacy. Resource categories Petrick was careful to define and distinguish the various categories of the resource, according to current technological and economic availability. Thus, 'coal in situ' was defined as the total amount of coal in a given area, however deep, or poor in quality it might be. This category, though calculated, was not published. "Minable coal in situ' was defined as that portion of the coal in situ which could be mined by existing techniques (less unavoidable geological losses). The following parameters were taken into consideration in arriving at an estimate for minable coal in situ: reserves in the inferred category were reduced by 20%; maximum mining height was taken as 6 metres for underground mining of all types of coal, while a minimum height of 1.2 metres was taken for the mining of bituminous coal and 0.7 metres for metallurgical coal and anthracite. The 'Salomon formula' was employed in computing pillar dimensions for bord and pillar workings for 'raw' (ie unwashed) bituminous coal down to 300 metres, washed bituminous coal to 200 metres, and for metallurgical coal to 100 metres. For bituminous coal intended for washing and mined below 200 metres, and for metallurgical coal below 100 metres and anthracite throughout, it was assumed that higheryield underground methods such as stooping (pillar extraction) or even longwalling, would be used, despite their
E N E R G Y P O L I C Y December 1 976
higher cost. In these cases, an extraction rate of 85% was employed. In all cases, including bord and pillar mining, a further mining loss of 10% was deducted to allow for haulage pillars, barrier pillars and boundary pillars between separately owned mines. In the case of open-cast working, wherever stripping ratio and seam depth made this method feasible at all, an extraction rate of 90% was considered justifiable. Petrick drew attention to the fact that South African coals, in distinction from Northern Hemisphere coals, generally have a high ash content, and one which is difficult and expensive to remove by washing, because of the intimate association of ash and coal. In deter mining the upper limit for ash content in evaluating the economically usable proportion of the resource, Petrick commenced by defining coal as 'a carbonaceous mineral containing not more than 50% ash." Although data were collected for coals of ash content between 35 and 50%, Petrick declined to publish estimates of the quantity of this category of coal. It appears that 35% ash content is regarded as the ceiling for usable coal within the foreseeable future, even for such ashtolerant uses as feedstocks for power station boilers or Lurgi gasifiers for the S A S O L synthetic oil process. Not unex pectedly, the quantities of coal ruinable in situ increase sharply with ash content. Thus, of the grand total of 91 767 million tonnes minable in situ at depths from 15 to 400 metres below surface (and reducing to 81 274 million tonnes because raw bituminous coal not of anthracitic or metallurgical properties was deemed to be not minable profitably below 300 metres) only some 2 billion tonnes had ash content of 1015°/O: 10 billion tonnes (nearly) of ash content of 15-20%: 17 billion tonnes of ash content of 20-25¢%; and 43 billion tonnes of ash content of 30-35%J
Deflated complacency Any sense of complacency generated by the large size of the resource ruinable in situ was, however, heavily deflated by Petrick in computing the quantity of coal profitably extractable under current or even rather more favourable economic conditions: the latter quantity is only 24 915 million tonnes of
359
C o m m u n i c a t i o n s on e n e r g y
bituminous coal (including coal of higher qualities). Essentially, current mining practice is the cause of the low proportion of coal currently economically extractable, and mining practice is determined by the low price of coal in relation to current costs of production and by the demand of the general coal market for higher grades of coal than those which would be produced by unselective mining. Petrick complained that the bord and pillar methods mostly used hitherto have restricted coal recovery to between 30 and 80% of the coal present in an individual seam. However, where multiple seams occur, and the correct sequence of seam exploitation becomes crucial in ensuring high over-all extraction from all the seams, the proportion of coal currently extracted falls to between 10 and 50% of the aggregate of coal present in all the seams. 2 Petrick's concern about the life of the resource is equally determined by demand projections over the next half century. These projections are based on ESCOM's projections for expansion of generating capacity, ISCOR's for steel output (currently some 7 million tonnes per annum), SASOL's for synthetic oil, the demands of the general inland coal market, and the lucrative export demand for South African coal now evolving, and made possible by the newlyestablished bulk-loading facilities for mineral exports at Richards Bay in Natal. During 1973 the industry produced nearly 62 million tonnes: but forecasts for the year 2000 without any allowance for exports go as high as 179 million tonnes. On present trends, South African coal output was projected to peak between the years 2025 to 2030 at between 270 and 320 million tonnes of annual output, the variation being caused by the variation of anticipated exports from 10 to 50 million tonnes per annum. The Gaussian curves describing the trend of output were founded on a reserve figure of 21 425 million tonnes. Within these over-all constraints, further problems of resource sufficiency emerge. Coking coal is now in critically short supply, to the extent that ISCOR is now importing American coking coal until experiments with conversion of local coal to 'form coke' attain success. Petrick therefore categorically recommended that the export of the
360
higher grades of bituminous coal be discouraged, as shortages for local consumption could also develop later, with especially prejudicial effects on industries engaged in beneficiating local ores for export. Moreoever, the current dichotomy between collieries tied to ESCOM and owned by SASOL on the one hand, and collieries producing for the private market, on the other, will give rise to grave difficulties in the future. In the case of the blocks of coal to be reserved for large future power stations and synthetic oil plants, two problems arise. Firstly, the need to provide sufficient coal for an operating life commensurate with capital cost requires the allocation of contiguous blocks of coal of the order of magnitude of 800 million tonnes or even more, for each ESCOM power station, to provide for a quantity of 300 million tonnes extractable by underground methods: SASOL's second synthetic oil plant will tie up a quantity of 4000 million tonnes of extractable reserves, and even then will only produce a quarter of the country's oil needs at the time of attaining full output. Petrick very seriously questions whether a sufficient number of blocks of coal of this size can be allocated in the Eastern Transvaal (the main source of coal) to meet these large anticipated demands, which would grow out of all bounds if South Africa attempted to become entirely independent of imported oil. Secondly, this type of block mining leads to the economically irrational results that substantial quantities of high grade coal will be effectively wasted as boiler or gasification feedstock. The problem of resource management for the collieries supplying the general market is quite the opposite, Here, the tendency has been to mine the more profitable higher grades of coal selectively, leaving the lower grades unmined. Thus in both cases, the resource is being exploited less than optimally. Remedial measures, as subsequently mentioned, would have to include not only a higher price, but also the development of markets for large quantities of low quality coal.
The price for selF-sufficiency The Petrick recommendations for maximising exploitation of the resource
under all these circumstances were wide ranging. The most pressing concern pricing policy. The latest South African winter brought the serious threat of a coal shortage on the general market, as demand for coal has grown considerably, year by year, and it has been unthinkable to establish any new colliery to serve this market under past pricing arrangements. Even capital expenditure to enlarge output at existing mines has been substantially inhibited. The problem has been much aggravated by the high rate of inflation prevalent in recent years. The price controller attempted to meet the immediate needs of the situation by granting an increase of about a third in the general coal price, to R4.50 ($5.20) per tonne. A comparison of this price with coal prices in Europe or the United Kingdom will show how unrelated even the current South African price is to the world market. In order to implement the Petrick recommendation for a really substantial increase in the coal price, the South African government has now appointed a further commission, with instructions to evolve a rational and detailed pricing formula for coal to meet all the needs of the situation. The new commission has a challenging task: not only must the pricing formula ensure optimal exploitation of the resource, but it must do so with minimum inflationary damage to the economy generally and particularly to the mining and ore refining industries, which are heavy consumers of coal and electric power. Moreover, the inflation rate is currently running at more than 10%, so that a substantial increase in the price of so important an input will render the task of reducing this rate even more difficult. This is the typical dilemma of a government attempting to rationalise an administered price which has been permitted (for whatever reason) to drift badly out of alignment with the general price and cost level. The findings of the new commission are therefore awaited with great interest.
Open-cast expansion Very important proposals were made regarding the expansion of open-cast mining, which has been little employed in the past. The Petrick statistics show how close to the surface the bulk of the
ENERGY POLICY December 1976
Communications on energy resource is located. Of the total of 24 915 million tonnes of raw bituminous coal economically extractable by underground mining, 5639 million tonnes is located between 15 and 50 metres below surface; 18 279 million tonnes between 50 and 200 metres: 997 million tonnes between 200 and 300 metres) Thus, a great proportion of the resource is located within 200 metres of the surface. Although the category of raw bituminous coal located between 50 and 200 metres is not further analysed into categories above and below 100 metres, a concurrent set of statistics is furnished for coal minable by open-cast methods. Presumably, these totals are to be regarded as 'coal ruinable in situ by open-cast methods' as they are clearly not economically extractable at present. Within the ultimate limits of maximum seam depth of 100 metres and maximum stripping ratio of 15:1, 27 794 million tonnes of raw bituminous coal becomes available for open-casting. Although this total amount overlaps with the figure of
18 279 million tonnes minable by underground methods between 50 and 200 metres, it also includes coal within 15 metres of the surface (which can only be extracted by open-casting). Clearly, then, whatever proportion of the amount of 18 279 million tonnes lies below 100 metres on any reasonable assumption, that the general adoption of open-casting would achieve a very great transfer of coal into the economically accessible category. The first requirement, and indeed one strongly recommended by Petrick, is a very substantial price increase, necessitated by the capital-intensive nature of open-cast mining. (Equally, a higher price is needed to make economically possible more efficient methods of underground mining like long walling.) However, to make open-casting possible generally, Petrick regards it as necessary to create a legal mechanism to enable mineowners to acquire title to the land surface for the duration of open-cast operations. What is proposed, therefore, is the establishment of a state authority with powers of expropriation against
payment of adequate compensation. The authority would then make tracts available to the mining concern, subject to the obligation to restore the land to its original agricultural potential after extraction of the coal was completed. The original landowner would then have a preemptive right to reacquire his land before it could be offered for open sale. There should also be vested in the state what would amount to the power to determine the method of mining to be employed for all new coal mining ventures. No concern should be permitted to mine coal without official determination of which method might be most suitable to achieve optimal resource exploitation. Thus, there would be directives as to whether mining should be open-cast or underground, and in the latter case, as to the suitability of longwalling or the dimensions of pillars. The state should also assist, through the data bank and in other ways, to enable mine-owners to merge their holdings wherever necessary for the rational exploitation of a coal-field. The final requirement for optimal
Announcing...
Journal of Energy and Development Published twiceyearlyby the International Research Centerfor Energyand EconomicDevelopment(ICEED) and the Universityof Colorado. Vol. !1, No. I
Autumn 1976
* Foreign Ownership and Economic Policy, Harry G. Johnson (University of Chicago)
O
• Divestiture and International Oil, William E. Lindenmuth (Mobil Oil) • Current Environmental Policy, U.S. Senator Gary Hart • Book review section included and eight additional articles. Current and former Journal contributors include: Sheikh Ahmed Zaki Yamani, H.E. Mana AI-Otaiba, John Sawhill, Professors Nell Jacoby and Gottfried Haberler, H.C. Kauffmann (Pres., Exxon), U.S. Senator Mike Gravel, among others. Annual subscription rates (surface post included): Institutional - $18; Individual - $12. Payment should accompany orders. (Name)
(Address) (City, State, Zip Code, Country) All orders, manuscripts, and communications to:
ENERGY POLICY December 1976
The Journal of Energy and Development 216 Economics Building, University of Colorado Boulder, Colorado 80309 U. S. A.
361
Communications on energy~Conference report resource exploitation is to establish a market for the large quantities of lowgrade bituminous coal that would be produced by open-casting or total seam extraction by underground methods. Through proper planning, these quantities could be absorbed as power station feedstocks (subject to the problem of transport facilities and costs) or as petrochemical feedstocks, including, it may be assumed, feedstocks for the Lurgi gasification process. The suggestion was also made that large-scale gasification of these coals could provide a gas of quality and price suitable for sale for domestic purposes, especially tO the large urban African population. All these proposals have as a pre-condition the establishment of a high degree of
permanent joint planning by the state enterprises and private concerns. R.J. Friedland Johannesburg, South Africa l i t may be speculated that enormous quantities are available above the cut-off value of 35% ash: one of the lines of research advocated by Petrick is on development of the fluidised bed boiler, which is generally regarded as remarkably free of restraints in the acceptable proportions of non-combustible material in its fuel input. R.K. Dudkiewicz and K.F. Bennet, of the Energy Institute of Cape Town University, in commenting on the Petrick Report, say that imminent success with the fluidised bed boiler will extend the usefulness of South African coals above the 35% ash limit. They also argue that improved technology will in the future permit mining of narrower seams
than those allowed to be ruinable by Petrick: Consequently, they argue, the Petrick conclusions on the great need to conserve the resource are to an extent invalid. But Petrick can hardly be faulted for erring, if at all, on the side of conservatism through avoiding speculative reliance on untried or undeveloped technology. 2It is significant that 'tied' collieries currently being installed to supply large new ESCOM power stations operate under a specifically calculated, more generous pricing formula and are required to use open-casting to ensure greater resource utilisation. 3As previously mentioned, relatively small quantities of coal classified as 'washed bituminous coal', 'metallurgical coal' and 'anthracitic coal' are located between 300 and 500 metres below surface, but these quantities are too small to influence greatly the total tonnage of coal.
Conference report There's no business like no business ' N u c l e a r p o w e r and the public interest: The i m p l i c a t i o n s for business,' o r g a n i s e d by the Financial Times and held in London, 8 - 9 J u l y 1 9 7 6 .
Although doubts persist about the growth prospects of nuclear power, one spin-off from the industry is thriving: nuclear power conferences. As in other matters nuclear, the U K has had a thin time lately. But it got back into the running with this conference. The theme was 'Nuclear power and the public interest'; a sub-head qualified this broad brief, narrowing it to 'The implications for business'. As seems - perhaps unfortunately - to be typical of such conferences, the programme of speakers was drawn exclusively from those with a nuclear affiliation, either historic or current, and those on record as members of the faith. In consequence the presentations tended to start from a number of assumptions which might, in a forum differently constituted, have attracted challenge: in particular assumptions about future patterns of energy use and supply, and about the role of electricity in the energy mix. The 'public interest' was in general broadly identified with that of the nuclear industry; scant reference was made to social and political implications of nuclear development - with one emphatic exception.
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When the organisers were putting the conference together they included speakers to deal with 'The nuclear issue as seen by a watchdog of the public interest' and '... as seen by a competitor'. To fill these roles they invited Sir Brian Flowers, FRS, Chairman of the Royal Commission on Environmental Pollution, and Leslie Grainger, Member for Science of the National Coal Board. As it happens, Sir Brian is also a part-time Member of the U K Atomic Energy Authority; and Mr Grainger is an alumnus of the Authority's Atomic Energy Research Establishment at Harwell. However, any inference that these two speakers might be in any way mere 'token' critics was dispelled by their presentations, which cannot have set delegates' minds at rest. Sir Brian, in a thoughtful and carefully-worded paper, expanded on the advance summary of the Commission's sixth Report, which he had first revealed at the National Energy Conference on 22 June. Students of nuclear affairs must by now be able to recite verbatim several of the most telling passages from Sir Brian's two speeches, especially those relating to
plutonium and the fast breeder reactor. '[The Commission] believes that one should not rely for something as basic as energy on a process that produces in quantity a by-product as dangerous as plutonium unless one is absolutely convinced that there is no reasonable alternative course of action ... we have not been convinced by the evidence that this is the case.' 'Because of its toxic and fissile properties, plutonium offers a unique and powerful weapon to those who are sufficiently determined to impose their will. In these circumstances I do not believe it is a question of whether someone will deliberately acquire it for purposes of terrorism or blackmail, but only of when and how often.' 'There is no doubt that [a demonstration fast breeder power stationJ can be built and operated, given adequate safeguards and resources, so as to be environmentally acceptable as an object in itself; we therefore do not oppose it. Nevertheless, lit] is a billion-pound step down a technological path which may later prove unacceptable or even catastrophic.' Since the Report itself had not yet been published, Sir Brian declined to answer questions. His colleagues in the nuclear industry at once deplored what they described as the 'misinterpretations' and 'misrepresentations' to
ENERGY
POLICY
December
1976