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Colombia and coal

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This article is part of the CoalSwarm coverage of Colombia and coal.
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Colombia is the world's tenth largest producer of hard coals and the fourth largest exporter of coal, based on 2009 data.[1] The U.S. Geological Survey states that Colombia is the largest coal producer in South America and has the largest reserves in the region. It also states that coal mining for export is booming in Colombia, with production having increased by 80% since 1999.[2][2]

Coal output in 2010 stood at 74.35 million tons, a 2% increase from 2009 but below the government's target of 80 million tons, reportedly due to unusually heavy rains in the last months of the year. Colombia's total coal exports for 2010 came in at 68.14 million tons. Carlos Rodado, Colombia's mining minister, has said coal output will reach 144 million tons in 2020.[3]

The majority of Colombia's coal exports are shipped to European markets due to shorter distances and lower freight costs compared to the rapidly growing Asian markets. Colombia is considered to be a low-cost producer with its coal highly sought after due to its low sulfur content.[4]

Coal Mining Operations

Coal mining in Colombia is undertaken entirely by private sector mining companies. The largest coal mining operation is that of Carbones del Cerrejón LLC in the Department of la Guajira. The company -- which is a joint venture of Anglo American (33%), Glencore International (33%) and BHP Billiton (33%) -- produced 31.3 million tonnes in 2008.[5] It operates the Cerrejon Centro mines, Cerrejon Sur mines, Cerrejon Zonoa Norte and Oreganal mines in the La Guajira Department. The U.S. Geological Survey reports that in 2005 59% of the company's exports went to Europe with a further 22% to North America.[2]

The other major mining company is Drummond Ltd., which produced 22 million tonnes from its La Loma mine in Cesar Department.[2]. The company also operates the El Descanso mine, which it is aiming to expand from its current 3 million tonnes per annum production to 25 million tonnes.[6]

Other coal mining projects includes the Calenturitas mine in Cesar Department by C.I. Prodeco S.A, which is entirely owned by Glencore International. In 2005 this 5 million tonnes. The next largest coal mine is a privately owned Paz del Rio mine in Boyaca Department which produced 600,000 tonnes.[2]

In 2012, Vale Colombia agreed to sell its thermal coal assets in Colombia for $407 million to a unit of Goldman Sachs. The divestiture includes Vale’s El Hatillo mine, the Cerro Largo deposit, a port facility on the Atlantic coast of Colombia, and an 8.4 percent stake in the railway that links the mines with the port.[7]

In May 2012 it was announced that Vale sold its Colombian coal assets to Goldman Sachs' Colombian Natural Resources SAS for $407 million cash. Vale reported that they were going to refocus their efforts on their metal extraction production.[8]

Coal production

Coal output in 2010 stood at 74.35 million tons, a 2% increase from 2009 but below the government's target of 80 million tons, reportedly due to unusually heavy rains in the last months of the year. Colombia's total coal exports for 2010 came in at 68.14 million tons.[3]

In Colombia, the state owns all hydrocarbon reserves and private companies operate coal mines under concession contracts with the state.

Growth projections

In its review of mining in Colombia, the U.S. Geological Survey states that "based on information provided by the coal producers in Colombia, the Government expects the production of coal to increase to 124.9 mt in 2011 and to 134.2 mt in 2019; the largest increase would be in the Department of Cesar. The production from the Departments of Cesar and la Guajira is expected to continue to be exported in its entirety. The Government outlook for coal is somewhat higher than that of other analysts."[2]

In 2011, Colombia's mining minister Carlos Rodado said coal output will reach 100 million tons by 2015 and 144 million tons in 2020.[3]

Expansion of Cerrejon thermal coal mine

In August 2011, three of the U.K.'s largest listed miners - Xstrata Coal, BHP Billiton, and Anglo American - in the Colombian Cerrejon coal mine approved a $1.3 billion project to expand the coal mine's output by 25%. Each own a 33.3% stake in the mine and will invest $437 million each. The approved Cerrejon project will increase coal output by 8 million tons to 40 million tons a year, as well as expand the coal handling facilities and the fully-owned Puerto Bolivar port, adding an extra loading berth. Construction will be completed by 2013.

Cerrejon, located in La Guajira, has a resource base of about 5 billion tons, of which 2.1 billion tons are currently measured and indicated to be of export quality, according to the companies. Xstrata said it is one of the largest coal deposits in the world.[9]

U.S. investment

California-based Colombia Clean Power & Fuels, Inc. a publicly-traded coal mining company, is planning the construction of Colombian metallurgical coal mines in 2011, with intentions to commence exports in early 2012. The company owns six mining concessions and a 70% interest in another mining concession, all in Colombia. Three mining concessions are located in the "North Block" area, situated within the Santander region in the northern section of Colombia. According to Standard & Poor's, the Santander region was selected because of its large metallurgical coal resources, its location on the Magdalena River with river access for shipping, and its proximity to Colombia's main pipeline and several other refined product pipelines. The remaining mining concessions are located in Boyaca district of Colombia, in the municipality of Otanche.

The company's six mining concessions cover 10,000 hectares (25,000 acres) with an estimated 150 million tons of coal, while its 70% interest in coal mining concessions cover about 3,459 acres, agreed to in August 2011 for about $4 million, including the small Ruku mine.[10]

Coal infrastructure

Coal rail project proposed

In late March 2011 the Colombian government opened an international bidding process for a proposed rail project that reportedly would facilitate 6 million tones of coal shipments per year by 2013. The project included construction of the Carare railway and rehabilitation of the existing Central railway into a single line.

It was reported that the government aimed to grant the large international concession in 2012 that will require as much as USD $1.5 billion in investment.

The Central Railway begins in central Colombia and ends in Chiriguana. The government has granted USD $540 million for the line's rehabilitation and construction of new stretches of the line. While that line is worked on, the winning bidder can start building the 470km Carare railway, which will originate in the coal rich area of Lenguazaque and another stretch in Duitama until reaching a river terminal near the city of Barrancabermeja. The project is a key initiative for coking coal miners that use trucks to transport coal across 1,000 kilometers of mountainous roads to Caribbean ports.[11]

Coal Exports

In 2008, Europe imported 40.9 percent of coal from the Cerrejon mine (about 12.8 tons).[5] Twenty percent of Cerrejon's coal went to Central and South America (about 6.3 tons), while another 26.7 percent went to North America (about 8.4 tons).[5] The remaining 12.2% went to other destinations (about 3.8 tons).[5]

In 2009, Colombia exported 72 million tons of coal, accounting for approximately 10% of all global exports of thermal coal.[12]

As of 2011, Colombia ranks fifth in terms of coal exports, behind Australia, Indonesia, South Africa and Russia.[13]

Expanding exports to the U.S.

A new coal terminal at the Port of Jacksonville, Florida is slated to open in 2011, and could open markets in the southeastern and midwestern U.S. to Colombian coal. Use of Keystone Coal Co.’s $20 million terminal is expected to create access to imported coal that is 10 to 20 percent cheaper than domestic coal. Because rates for rail transport of U.S. coal continue to increase, the cost of getting the Colombian product to buyers would be significantly less, possibly as little as $4.50 per metric ton, versus $40 per metric ton for domestic coal. Keystone owner Tom Scholl suggested that despite calls for more environmentally forms of energy, the lower cost of Colombian coal would ensure its continued use for electrical generation.[14] See Keystone Coal Terminal for more details.

Colombian Exports to Salem Harbor Station

In 2008, the Salem Harbor Station in Massachusetts burned 287,610 tons of coal from Colombia.[15]

The Colombian coal comes from el Cerrejon and la Loma mines. El Cerrejon is the largest open-pit coal mine in the world.[16] The mine began a joint venture between Exxon and the Colombian government in 1982 but now is a joint venture of Anglo American (33%), Glencore International (33%) and BHP Billiton (33%).[16] The U.S. Geological Survey reports that in 2005, 59% of the company's exports went to Europe with a further 22% to North America. [2] Coal imported from Cerrejon to the U.S. is sent to five ports, which are located in Mobile, AL, Jacksonville, FL, Baltimore, MD, Salem, MA, and Somerset, MA. Each of these ports serves a major power station.[16] In Salem, MA the destination is the Salem Harbor Station, and in Somerset, Dominion's Brayton Point Station.

La Loma mine opened in 1985 and is privately-owned by Drummond Coal.[16] Aside from Salem Harbor, coal imported to the U.S. from la Loma mine mainly goes to the Brayton Point station (Somerset, MA) and a plant in Mobile, AL.[16] Plants in Newburgh, NY, Savannah, GA, and Tampa, FL also receive coal from la Loma.[16] Nova Scotia and New Brunswick also imports large amounts of la Loma's coal.[16]

Colombia's Cerrejon projects 2011 coal exports will reach 32 million mt

It was announced in September 2011 that Cerrejon coal mine, which owns Colombia's largest coal mine, projected it will export about 32 million mt in 2011, up from 30.2 million mt from 2010.

At the projected level, exports from Cerrejon would account for 42.6% of Colombia's total coal exports. Colombia is among the worlds top-five coal exporters with Australia, South Africa, Indonesia and Russia.[17]

Drummond, Colombian Coal, and Human Rights Violations

Colombia's coal mines, like many industries in the country, are filled with stories of displacement and terror. A number of entire communities in the coalfields have been displaced, including Tabaco, a 700-person Afro-Colombian village that was razed in 2001.[18] People living near the coalfields have faced malnutrition, diseases such as ringworm, and restricted access to land since the large mines opened up.[18]

In the late 1980s, Drummond expanded offshore and secured extensive mining rights in Colombia because of the significant low-cost, low-sulfur coal market opportunities.

Production began in 1995 at La Loma; in 1997 Drummond acquired El Descanso; and in 2003 acquired Rincon Hondo and Similoa reserves. These reserves have made Drummond one of the two largest miners of Colombian Coal. Drummond is now a major long term competitor in the international coal market, with over 2 billion tons of reserves that are strategically positioned relative to key power generation markets in the U.S. and Europe.

Drummond produced 22 million tonnes from its La Loma mine in Cesar Department in northern Colombia.[2]

On its website the company states that it bought the La Loma mine in the late 1980's and that "development commenced in the early 1990’s." The thermal coal produced from the mine is marketed in 13 countries under the trade name Aire Amigo which the company states is "very low in NOx emissions, which is highly desirable to utility plants required to lower these emissions."[19]

(Left to right) Colombia President Alvaro Uribe, Drummond President Garry Neil Drummond, and Drummond Ltd. President Augusto Jimenez.

Dummond states that its mining "includes Mina Pribbenow, an open-pit coal mine located in the Cesar Coal Basin near La Loma, Puerto Drummond, a deep-water ocean port on the Caribbean Sea near Santa Marta, and coal transportation and handling facilities. Drummond Ltd. transports the coal from the mine 120 miles by railcar on the renovated portion of the Colombian National Railroad System and National Highway directly to Puerto Drummond, the deep-water ocean port."[19]

The company states that company exports from Colombia have grown from "1 million tons in 1995 to 22.9 million tons in 2007."[19] In 2000, coal extraction rose by 4 million tons at la Loma mine after Drummond built a huge dragline at the mine site.[20]

In June 2009, a Drummond contractor, Héctor Rafael Pedroza, was killed in a drive-by shooting at a billiards hall in Valledupar (a city in the Cesar province of Colombia).[21] Two other men were killed, including a demobilized paramilitary, Wilman Rafael Torres.[21] The third man killed was Milciades Torres Pacheco.[21] A taxi-driver, Héctor Enrique Zuleta, was injured.[21] The shooters were on motorbikes.[21]

The Drummond Company (operator of la Loma mine) has been the subject of numerous lawsuits regarding the murders of 70 union miners and railroad workers, collectively.[22][23][24] The murdered Colombians were killed by the notorious paramilitary group, United Self Defense Forces of Colombia (AUC), which had been hired by Drummond to act as security.[23] In addition to those killed, a lawsuit against Drummond describes "how hundreds of men, women, and children were terrorized in their homes, on their way to and from work… innocent people killed in or near their homes or kidnapped to never to return home, their spouses and children being beaten and tied up, and people being pulled off buses and summarily executed on the spot."[23]

WikiLeaks cables regarding paramilitary forces

According to U.S. diplomatic cables sent between 2006-2010 and released by WikiLeaks, Drummond paid paramilitaries for protection of its Colombian operations. An October 2006 cable said there were significant security improvements in the northeastern region of Colombia where Drummond operates due to private security operations in the area, including roving patrols along the company's railroad from their La Loma mine to the port in Santa Marta. The cable went on to say that these private security guards were former paramilitaries. Over the course of four years U.S. Embassy officials sent 15 diplomatic cables to Washington which expressed concern over the company's labor disputes, lax environmental practices and apparent links with paramilitary death squads.[25]

A federal Court in Alabama began a civil case against Drummond in 2010 for the alleged paramilitary links, in a case that is still underway. Victims of paramilitary violence in Colombia accuse Drummond of paying the paramilitary organization United Self Defense Forces of Colombia (AUC) between 1999 and 2005, during which time 116 civilians were murdered in the region where the coal company operates, allegedly by the right-wing militia. The civil case also seeks compensation for the relatives of several people who were murdered, which they claim was for refusing to sell their land to to make way for the company's railroad.[25]

Mine Accidents

In October 1997, sixteen miners were buried after an explosion at El Diviso mine in Cucuta.[20] On April 27, 2001, fifteen miners were killed by an explosion at the Cana Brava mine in the Santander province.[20]

On June 16, 2010, a coal mine in the northwestern town of Amaga exploded, trapping dozens of miners. The blast at the San Fernando mine, believed to be caused by a methane gas buildup, tore through an access tunnel that is about 1.2 miles (2 kilometers) long and drops to a depth of 500 feet (150 meters). Officials said there were 70 to 80 workers in the mine at the time. Two injured workers managed to escape. Antioquia state mining secretary Nicolas Lopez said the mine complied with the minimum state requirements set by the state Institute of Geology and Mining. However, the institute said in a news release that experts inspected the mine last month and found it "didn't have gas detection devices, one of the fundamental requirements to guarantee safety in case of an explosion."[26] It was later reported that 73 miners had died.[27]

On January 26, 2011, twenty workers died and six others were injured in a gas explosion at the La Preciosa coal mine in the northeastern town of Sardinata. Preliminary investigations indicate the blast was caused by a build-up of methane gas, also blamed for an explosion four years ago at the same mine that left nearly 30 dead.[27]

On May 17, 2011 it was reported that at least eight miners were trapped in a caved-in coal mine in southeastern Colombia. An official with the city of Cali said noises were heard from inside the mine, though they were not human voices. Shortly thereafter eight trapped miners were rescued from the coal mine. The miners were trapped about 60 meters (197 feet) from the mine’s entrance.[28][29]

Power Stations

Coal-fired power stations financed by international public investment institutions

Coal-fired power stations financed by international public investment institutions include:[30]

Proposed

Major financiers

The 2011 report, "Bankrolling Climate Change: A Look into the Portfolios of the World’s Largest Banks" by Earthlife Africa Johannesburg and BankTrack, researched the coal financing of 93 large banks and found that 73 were involved in financing Anglo American, BHP Billiton and Xstrata, three of the main mining companies active in Colombia. All together, banks provided over 15 billion Euro to these companies from 2005-2011. The top financiers were Deutsche Bank, JPMorgan Chase, Royal Bank of Scotland, Barclays, and BNP Paribas.[31]

Citizen Groups

  • Atlantic Regional Solidarity Network: The Atlantic Regional Solidarity Network (ARSN) was formed in 1981 with the objective of improving coordination of Atlantic Canadian work in solidarity with the people of Latin America and the Caribbean. ARSN has a "Mining the Connections" Campaign which focuses on the activities of the Canadian-based Glamis Gold's Guatemalan gold mines and the purchase of Colombian coal by Canadian companies.
  • North Shore Colombia Solidarity Committee: The North Shore Colombia Solidarity Committee was formed by people from various North Shore communities in Massachusetts in response to the news that a portion of the coal for the Salem Harbor Station was coming from a mine in Colombia where human rights violations were being committed against the people in the villages surrounding the mine.
  • Witness for Peace: Witness for Peace's mission is to support peace, justice and sustainable economies in the Americas by changing U.S. policies and corporate practices which contribute to poverty and oppression in Latin America and the Caribbean. Witness for Peace trips to Colombia have brought members of Kentuckians for the Commonwealth, people from Massachusetts (where Colombian coal is burned), and elsewhere to the Colombian coalfields.

Articles and Resources

Sources

  1. World Coal Institute, "Coal Statistics", World Coal Institute website, accessed February 2010.
  2. 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.7 Ivette E. Torres, "The Mineral Industry of Colombia", U.S. Geological Survey, U.S. Department of the Interior, December 2007.
  3. 3.0 3.1 3.2 "Colombia Produced 74.35 Million Tons Of Coal In 2010", Wall Street Journal, Feb. 10, 2011.
  4. ABARE, "Energy:Thermal coal", Australian Commodities, June quarter 2006.
  5. 5.0 5.1 5.2 5.3 "Export results", Cerrejon Coal website, accessed July 23, 2009.
  6. Drummond, "Drummond Limited Plans new development", Media Release, August 21, 2010.
  7. Juan Pablo Spinetto, "Vale Sells Colombian Coal Assets to Goldman for $407 Million," Bloomberg, May 28, 2012.
  8. "Vale Sells Colombian Coal Assets to Goldman for $407 Million" Juan Pablo Spinetto, Bloomberg Business, May 28, 2012.
  9. Alex MacDonald, "U.K.-listed miners OK $1.3B Colombia coal plan" MarketWatch, Aug. 18, 2011.
  10. Chang Noh, "US company developing met operations in Colombia" Platts Energy, August 30, 2011.
  11. "Colombia advances coal rail project" Steel Guru, March 25, 2011.
  12. "Dark Materials: the consequences of clinging to coal" Mines and Communities, Aug. 30, 2010.
  13. "Colombia mining minister sees coal exports hitting 100 mil mt by 2015" Platts, Nov. 1, 2011.
  14. Mark Szakonyi, "Keystone preparing to import South American coal to Jacksonville," Jacksonville Business Journal, January 23, 2009.
  15. "New England power plants that use coal and where the coal comes from", "Appalachian Voices", accessed March 30, 2009.
  16. 16.0 16.1 16.2 16.3 16.4 16.5 16.6 Aviva Chomsky, "Linked Labor Histories: New England, Colombia, and the making of a global working class", Duke University Press, 2008.
  17. "Colombia's Cerrejon projects 2011 coal exports will reach 32 million mt" Platts, September 26, 2011.
  18. 18.0 18.1 Aviva Chomsky, "The dirty story behind local energy", The Boston Phoenix, October 1, 2007.
  19. 19.0 19.1 19.2 Drummond Company, "Colombia", Drummond company website, accessed June 2008.
  20. 20.0 20.1 20.2 David Bacon, "The Colombian Connection", In These Times, July 23, 2001.
  21. 21.0 21.1 21.2 21.3 21.4 Kirsten Begg, "Three die in Valledupar shooting", "Colombia Reports", June 8, 2009.
  22. International Rights Advocates, "Juan Aquas Romero, et al. v. Drummond Company Inc., et al.", Plaintiff's Opening Brief, December 11, 2007.
  23. 23.0 23.1 23.2 "Federal lawsuit alleges U.S. mining company Drummond paid millions to Colombian paramilitary terrorists who killed 67; including "execution" of union leaders", "Reuters", May 28, 2009.
  24. "Children of slain Colombian coal miners sue Drummond Co. in Birmingham federal court", "Birmingham News", March 20, 2009.
  25. 25.0 25.1 Hannah Aronowitz, "Drummond paid Colombian paramilitaries: WikiLeaks" Colombia Reports, March 16, 2011.
  26. Libardo Cardona, "Colombian coal mine blast kills 16, traps dozens", USA Today, June 17, 2010. (This is an Associated Press article.)
  27. 27.0 27.1 "20 Die in blast at Colombian coal mine", Fox News Latino, Jan. 26, 2011.
  28. "At least 8 miners trapped in Colombian coal mine are believed still alive" Associated Press, May 17, 2011.
  29. "8 Rescued after collapse at coal mine in Colombia" Fox News Latino, May 18, 2011.
  30. "Coal Fired Plants Financed by International Public Investment Institutions since 1994", Appendix A in Foreclosing the Future: Coal, Climate and International Public Finance: Investment in coal-fired power plants hinders the fight against global warming, Environmental Defense, April 2009.
  31. "Bankrolling Climate Change: A Look into the Portfolios of the World’s Largest Banks" Earthlife Africa Johannesburg and BankTrack, 2011.

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