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Where Coal Is King in China

Inner Mongolia has become the center of the coal industry in China--the nation that burns the most coal and, as a result, emits the most greenhouse gases in the world



HerryLawford

HOHHOT, China -- It was late spring, and armed police were barring Inner Mongolia University students from leaving campus to protest the death of a herder run over by a coal truck. Students amassed in towns across the province to condemn coal companies they accused of riding roughshod over livestock grazing land.

"They wanted to go to the streets, too!" recounted Tegusbayar, a professor of Mongolian culture. The presence of Chinese security forces kept his students at bay, and dampened the potential for protests to turn violent at the end of May.

The professor sipped a steaming cup of Mongolian-style milk tea and slowed his speech. "It's a good solution in the end," Tegusbayar said of the peaceful outcome. "But the main issues are still there."

Tegusbayar, who uses a single Mongolian name, lives in a hoarder's paradise. Floor-to-ceiling library shelves carry books and academic journals that date back to the 1970s, when as a 24-year-old student he left the grasslands for the city to study the history and legends of indigenous Mongols living in northern China. Their long history is crammed into his small flat in Hohhot, where living space is getting tighter.

From this provincial capital on the southern edge of the Gobi Desert, Tegusbayar described an ethnic Mongolian minority deeply at odds with China's industrial policy. Inner Mongolia became China's top coal producer two years ago and is on track to provide about one-quarter of domestic supply by 2015. Its sprawling open-cast mines surpass the coal seams underlying Shanxi province, where the most accessible coal deposits have been depleted and where the government has closed unsafe mines.

Coal exploitation, gas drilling and metals mining across the province supply energy to a national economy that expanded another 9.1 percent in the third quarter. Industrial production increased 13.8 percent in September. Yet the mining powerhouse is also the antithesis of another Beijing policy goal, which is to curb smog-forming and cancer-causing pollutants, cap coal consumption and limit power plant emissions tied to global warming.

There's also a cost to the economy. Thousands of miles of proposed rail construction is on the table to ship more coal from remote corners of Inner Mongolia and the West to China's fast-developing interior. Transport bottlenecks and cost pressures to keep supply in line with demand have pushed up the price of China's dominant source of energy for power plants and steel mills.

More rail lines will have to be built if China hopes to exploit the estimated 2.2 trillion tons of coal reserves in its far western Xinjiang province and 7.5 billion metric tons of coal in Mongolia's Tavan Tolgoi coal field.

In a place sparsely populated and off the beaten path for China's urban dwellers, coal trucks clog Inner Mongolia's east-west highway leading to a seaport on the Bohai Sea northeast of Beijing. Pollution darkens the air. China's newest King Coal is a step behind national aspirations to transition from an export-driven, coal-dependent factory economy to a stable middle-income country.

Where nomads rode, coal trucks roll
Tegusbayar and other Mongols lament the loss of their pastoral traditions to industrialization. They say China's central government has spent the better part of 50 years repopulating this vast semi-autonomous region covering 450,000 square miles along China's border with Mongolia and Russia. Mongols make up less than one-fifth of Inner Mongolia's 24 million people, most of whom are Han Chinese.

Tension tied to coal, lead and copper mines hasn't become the bloody ethnic conflict roiling in China's Muslim Northwest. It doesn't have the international appeal of Tibet's struggle. But Inner Mongolia's mostly poor and Buddhist minority is more restive than it's been since the early 1980s, during the first years of China's economic reforms. Young ethnic Mongols are cloaking anger about injustices against their parents and grandparents in the rising tide of economic and environmental grievances spreading across China.

Activists point to China's wild exploitation of fossil fuels and metals under Inner Mongolia's grasslands, and to the forced migration of people off the windswept steppe into cities and housing units to make way for mines. Grasslands where nomadic Mongols lived out their lives for centuries are dust bowls now. Cracked ground dulls a landscape where natural lakes used to rest. Landowners are dipping deeper into their wells for water.

"It's like a bomb," Tegusbayar explained, referring to ponds built by metals mines to store wastewater laced with toxic residue. "The government knows about this issue, but they have a different objective."

In September, as tensions cooled after the spring protests, Tegusbayar's easy laugh and patient optimism softened the outrage that rolled off his tongue in a staccato drumbeat. A graduate student kept his teacup filled and listened intently. "We have to wait for political reform," Tegusbayar said, pushing aside his thin white hair.

Much of that waiting game is over.

Tensions and 2 homicides
Demonstrations in May were sparked after a 35-year-old ethnic Mongolian herder, who went by the name Mergen, tried to block a convoy of coal trucks from crossing grazing lands. He was killed doing so, and according to activists, was run over while truck drivers spouted ethnic slurs.

Word spread. Students organized. Police sealed off schools and shut down protests in Hohhot, the city of Xilinhot and rural outposts where miners and farmers had collided in the past. Police arrested dozens in May and June. Coal and lead mine pollution led to protests throughout the summer. In August, China executed the truck driver who killed Mergen.

Tensions sparked again late last month, according to the New York-based Southern Mongolian Human Rights Information Center, as the result of another death in Uushin Banner, the county around the coal-rich city of Ordos. A herder and activist, Zorigt, died Oct. 20 after his motorcycle collided with an oil transport truck he had been trying to stop from crossing grazing land.

The rights group blasted out emails and messages on social media sites after Zorigt's death. It urged "Mongolian students from all colleges, high schools, middle schools and elementary schools" to ignore a ban on marching and call on provincial government officials to "fulfill their promises to protect herders' rights and regulate the mining industries."

Slogans and banners should make their case, it suggested: "Justice for Zorigt"; "Punish the Criminals"; "Defend Herders' Rights"; "Protect Grasslands."

Chinese authorities are urging students not to overreact to a traffic accident in comments to state-run media outlets and postings on Mongolian-script instant messaging boards. Online chatter about the killing of Zorigt has gotten louder, the rights group reported, prompting authorities on Oct. 27 to close a handful of Internet sites and chat rooms, including Boljoo, a popular instant messaging service and discussion forum.

"If the Mongolian people mention human rights or independence, then the Chinese government will crack down," said Enghebatu Togochog, director of the New York rights group, in an interview with ClimateWire before October's unrest. The peaceful protests have been targeting energy production. "This is a wise choice of fighting," he said. "You can't fight them with a military, so you have to be smart."

Inner Mongolia's provincial government has said it would study the mining industry's effect on the grasslands and the livelihoods of local residents. All the while, the consolidation of China's mining sector, and its partnerships with power producers and chemical makers, is pumping money into the region.

Historical inequalities are colliding with China's unrelenting energy needs for the production of steel, concrete, chemicals and power. "They say for every three light bulbs, one is a result of energy from the Mongolian grasslands," Togochog said. "So the policy will not change."

Dirty and chaotic legacy keeps economy rising
In Hohhot, a longtime Mongolian dissident and prominent writer said prospects are dim for China's Mongolians who eke out lives herding sheep and cattle. "They have no grasslands, no farmland," Naranbilig said through an interpreter. He goes by the single name. "If we cultivate the land, we can't earn much money."

Naranbilig and a couple of guests sat in the corner booth of an empty restaurant next to a young man he called a taxi driver, who sat silently. Activists say he has been under tight surveillance since being jailed briefly in 2008 as part of a broad roundup ahead of the Olympic Games.

Beijing and local officials with strong incentives to quell unrest are reacting to merging social issues: an unsettling gap between rich and poor, fear among young people that future employment is not guaranteed, and an increasing number of environmental protests.

In August, the government closed a chemical factory in the northeastern city of Dalian after thousands of protesters clashed with police over concerns about its safety. A month later, villagers in Zhejiang province, south of Shanghai, forced the closure of a solar panel plant they accused of dumping hazardous chemicals in a nearby river.

Inner Mongolia's industrial hub of Baotou is among the largest producers of rare-earth elements used by clean energy technology companies, but the industry's dirty and chaotic legacy is a lightning rod for environmental protest.

In Inner Mongolia, villagers are using microblogs to complain about their depleted water wells. Sinking water levels around Ordos have forced villagers to carry potable water from sources more than 10 miles away, wrote one villager this summer.

Sounding like every bit the civil society that might protest a gas well in Pennsylvania or road construction in Colorado, Inner Mongolia's online dwellers complain about electricity cables being cut, noisy coal trucks and mining explosions too close to home.

Rich and poor occupy the same space. Coal trucks whiz by near coal mines and plants operated by China's richest coal company, Shenhua. Standing in the middle of an intersection in September, a man swept coal dust with a broom made of straw.

Big action; a U.S. company wants in
China's coal production of 3.2 billion metric tons in 2010 accounted for almost half of the world's coal, according to the U.S. Energy Information Administration. An EIA analysis showed that China's coal production increased 188 percent in the past decade. U.S. coal production has been almost flat.

Production in Inner Mongolia has been bounding upward by double-digit percentages, and it produced 782 million tons of coal in 2010, according to China's state-run media. The region has more than 700 billion tons of coal locked away in reserve, a source that's attracting attention from Western coal companies elbowing into Asia's coal market.

St. Louis-based Peabody Energy, the largest U.S. producer, has made profit potential in the Asian market a big piece of its message to investors concerned about the flagging U.S. coal and power market. Its executives have spent much of the past year forging relationships with China and filling out its Asian offices. They call it "Project Dragon."

China's net coal imports hit an all-time high in September, according to Peabody's data, and power generation increased 20 percent compared to 2010.

In China's desert frontier, Peabody is working with the Xinjiang regional government to develop a 50-million-ton-a-year surface mine. "The West is growing from 100 million tons in 2010 to as much as 1 billion tons by 2025," said Peabody spokesman Vic Svec. "That kind of growth essentially means an entire U.S. coal industry in one province in western China."

In a third-quarter earnings call last month, Peabody President Richard Navarre said the government has "5,000 people and several hundred drill rigs" at work exploring the field and tallying reserve data.

In January, Peabody and China Huaneng Group, the largest power generator in China, agreed to develop a 1,200-megawatt high-efficiency power plant adjacent to a coal mine in eastern Inner Mongolia. That project is awaiting permits. To the north, in the independent country of Mongolia, Peabody is waiting for approval from the Mongolian government to develop the giant Tavan Tolgoi deposit of steel-making coal.

In September, the Mongolian Security Council rejected a mining plan that would split development rights in three ways among Shenhua, Peabody and a Russian-Mongolian consortium. It's caught up in political wrangling about the terms of the deal and other potential Asian investors.

"We've been selected as one of the finalists and continue to be a moving target because of geopolitical issues," Navarre said.

Moving toward coal-by-wire
From a modern office building in Ordos, Sun Zheyu, Party Committee office director for regional coal giant Yitai Group Co., said the capacity required to build out China's network of rails and roads for transporting coal is significant. The goal, however, is to produce as much as 50 percent of the nation's coal-fired electricity at plants located near the mouths of the coal mines.

Instead of hauling black rocks by trucks, trains and tankers over great distances, China energy planners want to send more of it to cities in the form of ready-made electricity. Meanwhile, coal haulers from Australia and Indonesia, and possibly the United States, are investing in infrastructure designed to supply Chinese ports and take pressure off the domestic market.

Coal-by-wire is a likely scenario in Xinjiang, said Richard Morse, a Stanford University coal researcher. The coal frontier is more than 1,000 miles from China's eastern industrial hubs, and mine-mouth power and chemical plants will keep skyrocketing coal costs in check.

"There's a general push to develop a lot of these facilities," Morse said. "The rule of thumb is that rail has had a hard time keeping pace with coal production."

But China's attitude about coal has been a moving target. Its 12th five-year plan plainly envisions cutting coal's piece of the energy pie down by capping energy consumption of 4 billion tons of coal equivalent in 2015. It envisions an increase in non-fossil fuel energy such as hydropower, nuclear and wind power to 11.4 percent of total energy.

Coal accounted for 72 percent of China's energy mix in 2010, and by controlling energy use and boosting clean energy investment, the government says it can shrink coal's slice of the pie to 63 percent by 2015.

The high price of steel-making coal, which is selling at close to $300 a metric ton, is also driving public policy decisions. The National Energy Administration in Beijing is reportedly looking at ways to keep a lid on coal wildcatters in the high-flying market.

Additional reporting for this story was done by Lei Yang.

Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500

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