Coal operators see tax break as chance to bring answers on restoration question

Hargreaves took over from these companies at Muir Dean, near Crossgates, and St Ninian’s, in Kelty, in 2013 and are working hard to restore both sites.

There will be a debate on 7th January 2015 in which Sandra Osborne MP will ask the UK Government to consider Hargreaves’ proposal for extending an existing exemption from Carbon Price Support (CPS) to cover coal associated with the restoration of opencast sites abandoned after the collapse of previous operators.

CPS is a tax on carbon-based electricity: at present, the exemption applies only to coal slurry, usually found in abandoned colliery spoil tips. The exemption is in place to encourage the restoration of these abandoned tips. This would not be possible if the recovered slurry were taxed.

In the view of Hargreaves, the extension of the coal slurry exemption to coal associated with approved projects would provide a mechanism that would enable restoration of all abandoned coal sites in Scotland.

Due to the high costs of recovering coal from these sites, delivering full restoration for these projects would not be viable without the exemption.

Hargreaves’ view, and contention, is that the benefit of delivering a full solution to all the outstanding restoration issues in Scotland presents a far greater environmental and safety win than the continuing reclamation of coal slurry ponds.

Iain Cockburn, Group Finance Director of Hargreaves Services, commented, “This measure will incentivise the industry to focus a significant proportion of its efforts on restoration projects.

“Fully resolving the dereliction left by ATH and SRG will help rebuild confidence in responsible operators and in doing so will build a stronger bridge to the longer term future of the industry.

“Although the legacy problems are not the fault or responsibility of current operators, properly clearing the restoration backlog can only make it easier for the industry to gain more widespread support for future new Greenfield sites. Whilst members of the anti-coal lobby will continue to lobby against new developments, no one can reasonably argue against finding a solution for restoration in the short term. Everyone should now be looking for a quick and practical solution to the current problems.

“The biggest upside would be in bringing about huge environmental improvements at a time when funds to do this are not available elsewhere.” There were fears that St Ninian’s and Muir Dean could go the same way of the Westfield, site between Ballingry and Kinglassie, which was abandoned by British Coal in the early 1990s.

Westfield has been left in nature’s hands and while a lot of the scarring has been covered by heavy vegetation, the large excavations filled with water remain.

Peter Gillatt, Managing Director of Hargreaves Surface Mining Limited said, “There would be no increases in overall coal burn if the exemption was granted, as coal from legacy sites would simply replace imports. “Based on our calculations, with the exemption, a volume of less than 1 million tonnes per annum of exempt coal (less than 2% of the annual UK coal burn), would allow all the old legacy sites to be fully restored with full provision for aftercare.” If implemented, in Hargreaves’ opinion, the scheme would create or protect up to 1000 direct jobs and approximately 500 indirect jobs, too, over a five year period. Contractors, suppliers and other local businesses would all benefit from the restoration projects. In a climate of record falls in coal prices, this measure would help preserve and focus capacity on restoration.

The exemption would therefore be largely self-funding, even before the restoration benefits were considered. The loss of income to the Exchequer from the carbon tax would be offset by income and corporation taxes, national insurance contributions, fuel duty and reductions in welfare benefits.

The proposal has already gained broad cross-party political support at Holyrood and Westminster as well as strong support from Local Authorities. Scotland’s Energy Minister Fergus Ewing MSP has extended the remit of the Scottish Coal Task Force to help further develop the proposal.

Iain Cockburn continued, “It’s now been over 18 months since ATH and Scottish Coal became insolvent. Since then, all the stakeholders involved have worked hard to find a solution for the sites left abandoned by those companies.

“Out of all the discussions and analysis, this idea is emerging as being both practical and cost effective to deal with the legacy of dereliction facing the affected communities.

“This solution would apply only to sites where responsibility has fallen back on the taxpayer through the financial failure of operators and where insufficient bond funding was available to pay for restoration. It was this combination of events that caused the current problems. Any exemption would be worded to clearly prevent any operator from deriving benefit from the exemption to deal with own restoration. There should be and will no breach of the “polluter pays” principle and thus clearly not encourage similar failures in the future.

“We will continue to work with supportive politicians, industry and stakeholders to try and help deliver this game-changing solution.

“The proposal being tabled has widespread and growing political support. We are now working with other industry parties to gather further support to deliver an industry-led solution.

“We believe that it comes at a time when low coal prices will make it very compelling, as a direct result of the exemption, for all the industry operators to commit a significant proportion of their workforces and machinery towards restoration of these derelict sites.

“In our view it is a simple decision between either increasing coal imports by 1 million tonnes per annum or supporting 1500 direct and indirect jobs and deploying over £300 million of heavy plant to work flat out on delivering full restoration. The outstanding restoration problem is huge and unprecedented and needs a huge and centred effort to deal with it.”