China Makes Strange Coal-Bedfellows

The news from China's Shaanxi Province is seldom bright. Every few weeks, and sometimes more frequently, I read about coal mine blasts that kill dozens there. But that may change soon with new technology in an aging industry.

This north-central region holds 1/3 of China's coal reserves, and many of the tens of thousands of small coal mines (collieries) that operate with little or no regulation because they are privately owned.

Recent government pledges to crack down on unsafe operations highlighted that China has over 17,000 small coal mines in operation, even following slews of Communist party demotions and some prison sentences for renegade mine operators. The government's National Reform and Development Commission reports that deaths due to colliery accidents are down by 25.5% in the first eight months of 2006.

But that still amounts to 2,900 dead miners so far this year!

Often, the fatalities stem from explosions. Either walls come crashing down when a fuse lights unseen fumes, or nearby ground water surges in after supports are blown through. The headlines read "Killer Gas Strikes Again!"

Killer Gas Saves?

This gas is methane, and it is pinned underground along with the coal that is carted to the surface. When the coal is freed, so is the gas, and improper ventilation in these mom-and-pop mineshafts means any worker is an errant flint strike away from blowing up his crew.

For China to maintain its status as the world's #1 producer of coal, that industry needs to be a safe one. Coal bed methane (CBM) is part of the answer.

1 cubic meter of liquefied, CBM - the compressed version of the stuff that can kill when trapped in operating mines - amounts to 1.13 liters of gasoline. In Shaanxi's cities, this means that the abundant local coal is half the price of gasoline, and 90% of taxi drivers now drive retrofitted vehicles that can use either gasoline or liquefied methane.

Some 600 wells have been dug for the purpose of CBM extraction nationwide, and the world's largest processing plant is in early planning stages for construction in Shaanxi. Officials say the transition from coal-fired to CBM will be relatively easy, but the government also plans to build more than 70 new coal-fired plants by the decade's close.

So where are the government's priorities?

Coal bed methane seems like a clean option, and one that could save lives if the technology is used to siphon harmful gases from coal mines. But if CBM processing is done at dedicated facilities, there will be little effort to attach extraction mechanisms to the country's still-astounding number of small mines (10,000 is the goal following the planned round of closures).

80% of colliery deaths are due to gas explosions, causing a direct loss of 93 mil. USD per year. That is unacceptable for any industry, especially given the loss of life involved. Remember the Sago mine disaster in West Virginia and the outcry it caused? Now reconsider China's 2,900 deaths this year in the same industry.

China is #3 in the world in potential coal bed methane reserves, at 37 trillion cubic meters. Nationally, the industry hopes to produce 17 billion cubic meters of the stuff by 2020, to be transferred overland through pipes that will run alongside existing natural gas infrastructure.

But the coal bed methane industry is still in its infancy, if not in the womb.

The Chinese government and its National Development and Reform Commission have had a very hard time harnessing industries and transaction systems that are rather new to Mao's evolved model.

So there is a need for an industrial blueprint in order to dig to the proper depth and with the proper caution. One gets the sense that the entire mining industry in China is something like a runaway cart in a mineshaft.

The goal is clear, being sustained energy and profit, but the method by which those should be achieved in all aspects of the nation's economic growth threatens a critical mass that could run good intentions straight off the tracks.

For example, weekly reports discuss attempts to curb lending through reserve requirements and limits on housing construction contracts. 10% GDP growth is now the norm, even as the central bank tries to balance external pressure on the national currency with internal need for price stability.

And where methane is concerned, the process of turning the gas into a usable form of fuel is heavily water-intensive, and water is not abundant in China by any means. Wild variations in climate across the country and increased need for water as hydroelectric generation fodder means that the tens of millions of cubic meters of H2O needed for CBM might result in an SOS for billions of parched citizens.

This year, the government issued a circular that aims to curb overheating in the industry, and preferential policies are also being outlined for foreign investment. And there is of course a five-year plan, a mainstay of Communist systems worldwide, addressed to the coal industry. We must wait and see if this is a lot of hot air - the dangerous kind - or if coal bed methane could really spell a valid fuel for China's future.

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