HC Deb 28 January 2004 vol 417 cc75-94WH

Motion made, and Question proposed, That the sitting be now adjourned.—[Vernon Coaker.]


Mr. Kevin Hughes (Doncaster, North) (Lab)

I am grateful for the opportunity to raise the important issue of the future of Hatfield colliery and, indeed, the future of the UK coal industry.

It is ironic and historic that we are discussing the future of the coal industry on the eve of the 20th anniversary of the miners' strike. Twenty years ago, the Tory Government were determined to close down the bulk of the mining industry. The miners at Corton Wood resisted and went on strike, and the rest, as they say, is history.

Twenty years on we have a Labour Government, who face a clear choice: do they stand on the sidelines wringing their hands while the final nail is hammered into the coffin of the UK coal mining industry and thereby finish the job that the Tories started 20 years ago, or do they face their responsibilities and ensure that we maintain an indigenous coal industry and protect the UK's future energy requirements? We will know the answer to that when the Minister responds later this morning.

Hatfield colliery in my constituency is the key to the future of the UK coal industry. It sits on 80 million to 100 million tonnes of accessible, good quality coal, which amounts to about 50 per cent. of accessible UK reserves. Its history is chequered—it was closed just before the privatisation of the industry in the 1990s and reopened with a management buy-out. Two and a half years ago, in August 2001, it was closed again and the receivers were brought in. The then Minister agreed to keep the colliery on a care and maintenance basis until a new buyer was found because of Hatfield's future prospects. The new buyer was Richard Budge and Coalpower Ltd., which set about re-employing the men and trying to give the colliery a future.

The colliery was maintained on the understanding that it would continue to work the High Hazel seam. Everybody knew that there was no prospect of making a profit without the operating aid scheme, but it was understood that the colliery would continue to work the High Hazel seam while it developed into the Barnsley seam. At that point, the Government were discussing ending the operating aid scheme and moving to a coal investment aid scheme.

All was going well until the operating aid scheme ended in July 2002. Agreement was reached to extend that scheme until December 2002, but unfortunately the coal investment aid scheme was not introduced seamlessly—it was not introduced until November 2003, which was a little bit too long for the plans for Hatfield colliery. Everybody knew that working the High Hazel seam would not make a profit, and a short-term cash-flow problem quickly developed.

I am grateful for the Minister's help in keeping the pit open and the men at work from late summer through to the autumn, but there were difficulties. When the coal investment aid scheme was introduced, the offer was not what we thought. I attended a meeting in the Department of Trade and Industry with the previous Minister, where it was stated that coal investment aid would amount to about £110 million and that Hatfield would get about £45 million over three years£15 million a year.

Mr. Michael Clapham (Barnsley, West and Penistone) (Lab)

My hon. Friend mentions the meeting where we were given the impression that more money would be available for investment aid. If Hatfield had received £45 million, would it have been sufficient to drive down to the Barnsley seam and access that enormous block of coal—it is the largest UK reserve—from Thorne eastwards?

Mr. Hughes

I am grateful to my hon. Friend for his intervention. The answer to his question is that the matter would have depended on timing, and I shall deal with that in a moment.

When the coal investment aid scheme was announced, only £15 million was made available over three years, which was one third of the expected sum, and more than 12 months had elapsed. It is because Hatfield had got itself into short-term financial difficulties and because Government funding depended on match funding from the private sector that the owner put in a bid for match funding that related to the original scheme. Bankers base their decisions on the information submitted to them, and the bid was different from the Government offer. The time lapse made the situation difficult, and it is no wonder that the bank said no. The coal investment aid scheme offers £15 million over three years. To obtain that money, the owners must start the bidding process to obtain £30 million of match funding, which takes time. They cannot just go to a bank and ask for £30 million because various assurances must be made and details must be checked.

The Minister agreed to keep the mine on a care and maintenance basis over November, December and January, but unfortunately there has not been enough time. Unless something dramatic happens here today, the men will be sent their redundancy notices today, tomorrow or on Friday and the pit will close. Will the Minister keep the pit open on a care and maintenance basis to give the owner, Coalpower—or whoever the future owner might be—an opportunity to put together a financial package to exploit the reserves in the Barnsley seam?

The Government have to make a decision about whether we should be involved in deep-coal mining or whether we should import all our coal. I think that it would be dangerous to go down the latter track. The Government underpinned the nuclear industry with £650 million and even agreed to let it have some more money. When we consider the coal aid given in other countries, such as Germany or France, the £60 million that has been made available in this country looks like peanuts. I downloaded some information from the European Commission website and found that in 2002 it had authorised payment of almost €1 billion to France for its coal industry. France has only two pits, yet it is spending €2 billion. Germany is giving €3.3 billion in coal aid and it has 10 pits. We made an application for £10 million, which was agreed, to close Selby.

Mr. Dennis Skinner (Bolsover) (Lab)

We didn't.

Mr. Hughes

Well, the Labour Government did. If we are willing to spend £10 million to close down a colliery, why on earth are we not willing o spend a few million to keep the Hatfield pit open, to access the Barnsley seam and ensure a prosperous future?

I am not just talking about Hatfield and the mining jobs there, although that is important; I am talking about the future and about maintaining our indigenous coal industry. Hatfield is not only a good prospect for coal; the Minister knows that there is planning permission and a section 36 permission to build an integrated gasification combined cycle power plant on the site. That sounds complicated, but basically it is a clean coal power station, which does not burn coal but uses it with other technology to generate electricity. That is not all. Such power stations do not merely generate electricity, they capture carbon dioxide and hydrogen nitrates which can, of course, be used in other industries. The waste is inert and can be used in civil engineering.

The use of captured carbon dioxide is the latest in clean coal technology. Experiments are under way in the North sea to use captured carbon dioxide in enhanced oil recovery—pumping CO2 down into the oil well enhances the amount of oil that can be brought out. There is no reason why the Hatfield plant could not assist us in recovering more oil from our North sea oilfields.

The prospects are even better than that, however. Scientists are developing the hydrogen economy, saying that hydrogen is the new power of the future. An IGCC plant at Hatfield could develop fuel cells from captured hydrogen and produce enough energy to power the whole of the public transport system in the south Yorkshire area. So not only do we have a coal mine with a future of between 30 and 40 years, which would maintain our indigenous coal industry, we have the possibility to build technology on the site that would take us forward by helping us to deal with our Kyoto targets and generate the fuel of the future.

It is ironic that our oldest and most reliable fuel, which we have used for centuries, could help to create and develop the fuel of the future. That is a prospect worth pursuing. I am not the only person to think that; the Americans think so, too. They are pouring about $6 billion into developing IGCC technology. If they are pouring in that amount, surely it is incumbent on our Government to get ahead of the game. We can develop that technology, our engineering industry can get involved and we can start exporting it, or shall we just sit back, watch the Americans develop the technology and buy it from them, no doubt at a premium price, in years to come?

The clean coal budget for the UK is £25 million—I am not sure how much of it has been used to date. I realise that America is a much bigger country and that it has a larger budget, but the Americans are spending between $6 billion and $10 billion—I think they are putting $6 billion into IGCC technology alone, quite apart from what they are doing to develop other clean coal technologies.

We need to start thinking about developing such technologies. Everybody is aware that we shall be burning fossil fuels in this country for years to come, but we cannot keep spewing out toxic emissions, so the future must lie with those new technologies. Windmills are popular at present and, yes, we must develop renewable sources of energy. There is no doubt about that; I agree. The Government should be helping to develop renewable energy sources. However, in reality, renewable sources will produce only about 10 per cent. of our energy requirements. We shall continue to be reliant on fossil fuels for a long time to come. The sensible thing for any Government to do would be to get in there and help to develop that technology.

I was disappointed by the White Paper that the Government published last February. It really was a missed opportunity. Everything I read about coal related to the fact that the industry in this country would end within the next 10 to 15 years. When we look around, we can see that that is probably true. Most collieries that are operating now will naturally be approaching exhaustion by that time, but Hatfield is the exception.

Hatfield has between 80 million and 100 million tonnes of accessible coal, and there is more—those are only the accessible reserves. The plan is to link Hatfield and Thorne collieries, which will give access to even more reserves. The only real prospect for the future is the Hatfield colliery.

We have to make a decision about whether to continue with the colliery, or to walk away from it. The Minister should do everything that he can to ensure that Hatfield stays open in the short term. I am asking him to help and to get involved in developing the Barnsley seam—to get into the new territory, as it were—and the IGCC technology. The Government are responsible for the energy requirements of this country, and those requirements will not be satisfied by renewables alone.

Mr. Denis Murphy (Wansbeck) (Lab)

My hon. Friend has mentioned the massive reserves at Hatfield. Is he also aware of the reserves at Ellington colliery? They have already been accessed by the National Coal Board and, subsequently, by British Coal at huge public cost. There are between 20 million and 200 million tonnes of accessible reserves there. Does my hon. Friend think that they should be mined as well?

Mr. Hughes

I do, indeed. I am grateful to my hon. Friend for raising that point because it brings us to the crux of the question. When we consider the White Paper, it is clear that the Government intend to take us down the track towards being a net importer of energy. How ludicrous is that? We must think about security of supply. It is fine to think about short-term economic gain, but we must also think about the fact that, when people press a light switch, they want the lights to go on, and when they turn their heating on, they want heat. Yet we are planning to close down the indigenous coal industry. We are already burning our natural gas to generate electricity, which is ludicrous. We ought to be burning our gas—a premium fuel—in homes for heating and cooking. However, we are planning to continue to burn it to create electricity, and to build a pipeline across Europe. The Minister has already had a meeting with the Norwegians and possibly even signed an agreement on that pipeline.

So we are going to be importing our gas, and if Hatfield, Ellington and other collieries close down in the near future, we shall also be importing all our coal. Where does that leave us in terms of security of supply? It leaves us vulnerable.

Mr. Skinner

This is a private industry, and the same is true of the railways. When, in the railway industry recently, Connex could not deliver, the Government stepped in to ensure that the service continued. The same was true in relation to Railtrack. It was a failure, so what did the Government do? They picked it up. Here we have a private coal industry that seems to do as it likes and get away with it. Why cannot the Government take the same line on coal as they do on rail, and say that in Hatfield, for example, the private element cannot do the business? All the reserves are there. Why cannot the Government step in, as they did with Connex and Railtrack? That is a very good analogy, and this ought to be done.

Mr. Hughes

I am grateful for that intervention. I can only agree with my hon. Friend. I shall bring my comments to a close now because I know that other colleagues have things to say about the future of the deep-mine coal industry in this country.

It is sensible to have a diverse energy mix. It is also sensible to maintain an indigenous supply, because if we do not do so, we shall be vulnerable in terms of cost and of international terrorism. Let us imagine a situation in which this country had no coal industry and had to import all its supplies. Let us also imagine that we had no natural gas and had to import all our supplies down a pipeline. What would it take for a terrorist to take out a ship coming in across the sea? What would it take to blow up that pipeline?

Not only that; what about cost? We live in a capitalist world, and if someone does not have something and I do, I am going to make sure that they pay what I want for it. To maintain that cost element and to secure ourselves against any international terrorist element, we need to maintain a diverse energy source and an indigenous supply. The Government have some stark choices, and there is no doubt that they are political ones. Do we choose to do what is right for this country and for the long-term future or do we choose short-term economic expediency and hammer home the last nail in the coffin of the indigenous mining industry? I hope not, but at the end of the day, Minister, the choice is yours.

Several hon. Members:rose

Mr Frank Cook (in the Chair)

Order. Perhaps I should remind the House that it is common practice during these 90-minute Adjournment debates to commence the first of the three winding-up speeches 30 minutes before termination. That would be at 10.30, which leaves us 34 minutes in which to accommodate the five hon. Members who are seeking to catch my eye. I would therefore ask all contributors to the debate to bear that time limitation in mind when making their comments, and when seeking to make or respond to interventions from others.

9.56 am
Mr. Bill O'Brien (Normanton) (Lab)

I congratulate my hon. Friend the Member for Doncaster, North (Mr. Hughes) on taking the initiative in requesting this debate, because it gives us an opportunity to consider once again the future of the mining industry, and to reflect on this country's energy needs for generations to come. Last year, the Government published their White Paper on energy. From it emerged four goals: reducing CO2 emissions, maintaining reliable energy supplies, promoting competitive markets, and ensuring that there is affordable heating in every home.

The current mix, as my hon. Friend said, consists of 32 per cent. of our electricity being generated by coal, 23 per cent. by nuclear power, 38 per cent. by gas, 4 per cent. by oil and 3 per cent. by renewables. The maintenance of reliable energy supplies cannot be achieved under the Government's proposals that have emerged since the publication of the White Paper.

The Institution of Civil Engineers, which carried out research on the White Paper and published a report on it, stated that the target of 10 per cent. renewables by 2010, and 20 per cent. by 2020, was out of the question. It said that that could not be done. Perhaps the Minister will tell us whether be considers those targets to be achievable. The report also suggested that the Government's objective appeared to be to phase out coal production in this country by 2016. If that happened, it would he a disaster for the mining industry and for the nation. The report also stated that only one nuclear power station would be operating after 2020. That, too, spells out a crazy energy provision policy. In terms of keeping the lights on, future generations will suffer if the proposals outlined in the White Paper are allowed to proceed.

Hatfield colliery has a great deal to offer the future provision of energy. It and the other collieries that are working require the long-term security of a market for the coal produced in this country.

When a delegation of hon. Members, some of whom are here, met the Prime Minister on 17 September last year—the Minister was also present—we pressed him to consider agreeing to the emission limit values arising out of the large combustion plant directive being pursued by the European Commission. We told the Prime Minister that we considered the ELV programme to be in the best interests of the mining industry, and we still do. Although the Government have gone for the national plan instead of that proposal, we ask the Minister to reconsider it and give the mining industry an opportunity to secure long-term markets in the electricity generating industry. I remind him that a majority of electricity generators opted for ELVs.

How could the Government overlook and overturn a proposal that benefited the coal industry and was requested by the electricity generating industry? I have twice written to the Minister asking for a meeting to consider that question, and I hope that this morning he will agree to it. If we cannot get that co-operation with the Department of Trade and Industry, we are left with no option but to go back to the Prime Minister, who said at the time that the Minister should consider the issue and then give us, the miners' representatives, an opportunity to make further representations in due course. I make that plea because it is important that we be given the opportunity to discuss issues of importance and relevance to our communities.

On 28 November 2002, the Secretary of State for Trade and Industry addressed the House on the subject of assistance to British Energy, which runs the nuclear industry. She reported that on 26 September 2002 a loan of £650 million was granted to British Energy, and that the Government would underwrite the arrangements secured by British Energy to raise money from bonds. She said: The cost to the Government"— of supporting British Energy— will average £150 million to £200 million per year for the next I0 years".—[Official Report, 28 November 2002; Vol. 395, c. 489.] If we are to have fairness, openness and justice within the various parts of the industry, how can the DTI and the Minister say that the support for the mining industry that we are looking for will not be forthcoming? We are not asking for anything like £150 million or £200 million a year over 10 years. A one-off payment of £100 million would help the industry to develop new resources such as clean coal technology, and would aid its survival. That is not unreasonable when one considers what the Government are handing out to the nuclear industry. Will the Minister take this matter seriously and offer us, the representatives of mining communities, the chance to put our case on the future of the mining industry and the development of clean coal technology?

At the beginning of 2003, "Energy Review" said: It is surprising that the closure of nuclear capacity is addressed in some detail yet there is no comment about the age of the coal and oil fired capacity. In other words, according to that report and to the research done by the Institution of Civil Engineers, the Government are writing off the mining industry. We give notice that we will campaign here in this House to retain the mining industry and to develop the reserves at Ellington and Hatfield collieries. We want fairness and justice on assistance for the development of the coal mining industry and the introduction of clean coal technology, which will help to reduce CO2emissions. I ask the Minister to address those points first, then we can move on further.

10.6 am

Paddy Tipping (Sherwood) (Lab)

I am grateful for the opportunity to take part in this extremely important debate. My hon. Friend the Member for Doncaster, North (Mr. Hughes) spoke about the importance of Hatfield colliery. Twenty years ago the men, their families and their community fought to keep that pit open, and the fight will go on. The debate gives us an opportunity to talk about the future of the British coal industry. Hatfield is important because it gives access to immense reserves—50 per cent. of the reserves in the UK coal industry. These days, it is unfashionable in energy circles to support UK Coal, but I am an enthusiast. There is a place for British coal in the short term, the middle term and the long term. The Minister and his colleagues at the Department of Trade and Industry, working with the Department for Environment, Food and Rural Affairs, must take action to secure the cornerstone of our energy policy.

The most important lesson of the energy White Paper, which is a year old today, is security and diversity of supply. I applaud its direction in moving towards a low-carbon economy—that must be right—but we must take the necessary careful steps to get there, and I have doubts about some of the courses of action being advocated. I have always thought that the target of 10 per cent. renewables by 2010 was ambitious; I think that we will get there, but arrive late. The target of 20 per cent. renewables by 2020 is described as "aspirational", although some people call it impossible.

If we cannot achieve those targets, we need to consider other sources of supply. My hon. Friend the Member for Normanton (Mr. O'Brien) talked about the problems in the nuclear industry. It is clear to me that the private sector will not renew the nuclear industry in the foreseeable future. That takes us to gas. By 2006, Britain will be a net importer of gas. The Department's own figures suggest that by 2020, 80 per cent. of our energy needs in the UK will be met by gas, 70 per cent. of which will be imported. In the context of the diplomacy mentioned in the White Paper—the need to make international connections—we need only look at what has happened in Iraq recently. We need to remember the lessons of 11 September. It would be a fundamental mistake to be so dependent on gas in 10 years' time.

There is, however, a wider argument: the coal industry must be compatible with renewables. Renewables, by their very nature, are peripheral and variable. Our renewables targets could be achieved through wind power if it were sustainable, but the wind does not blow all the time. As only coal is flexible enough to meet demand, it is important for the industry to survive in the short, medium and long term.

The industry is doing its bit. It is no longer uneconomic. The UK Coal work force are the most efficient miners in Europe, and they have brought down the price per gigajoule. The company can now compete on the world market.

I applaud the Government for introducing operating aid and, recently, the investment aid scheme. It may be insufficient, short term and too late in coming, but at least it is there, giving us an opportunity to develop new reserves and giving the coal industry a long-term future. It is, of course, a bargaining counter; public sector money brings in private sector money.

The environment is a difficult issue for the industry, as my hon. Friend the Member for Doncaster, North suggested, and it will be environmental concerns that kill it. I have discussed this with the Minister before, but I ask him now to discuss it thoroughly with his DEFRA colleagues. If he wants a long-term UK coal industry, he must think carefully about the way in which the large combustion plant directive is implemented. It appears that no final decision has been made, but the Government seem inclined towards the national plan. I understand why, but all the advice given to the Minister and all the research show that if that route is taken, as night follows day the coal industry will close. It will survive only if the emissions limit value route is adopted. If we want to lose 15,000 jobs, or deprive the economy of £700 million, let us go for the national plan, but I counsel my hon. Friend the Minister to be very careful. I know that research has been commissioned and I know that decisions can be reversed, but he must take heed of what I say. He must also consider the long-term issues involving carbon dioxide. We must progress from research on clean coal technology to implementation of that technology.

Across the world—in India, China and Indonesia—we will see the coal industry grow. Coal will remain the powerhouse for industrial growth. Here in the first world. we should be cautious about closing down the industry. We have the technology, we have the expertise, and we have the most efficient miners in Europe. We have a strategy for our energy policy. We must ensure that coal is and remains the cornerstone of that strategy.

10.13 am
Mr. Michael Clapham (Barnsley, West and Penistone) (Lab)

I congratulate my hon. Friend the hon. Member for Doncaster, North (Mr. Hughes) on securing this debate. It is important, and Hatfield is an important colliery. My hon. Friend described it as at the centre of the current coal industry. He also pointed out that this was the 20th anniversary of the miners' strike. At the time of the strike in 1984, there were 170 collieries in the United Kingdom; today there are about a dozen.

Hatfield is indeed at the centre of the coal industry. We expected it to be able to take men from Selby after Selby's closure this spring. We expected that Hatfield would be developed, for it has vast reserves of good low-sulphur coal. Moreover, it is linked with Thorne, whose take of coal on the east side of Doncaster probably makes up the largest reserve in the UK. It is therefore extremely important to the indigenous coal industry. It is also part of a wider industry. It is not always appreciated that the coal industry is still a large industry in the UK, with a turnover of more than £1 billion, that it employs 9,000 men, and that there are probably between 15,000 and 17,000 jobs connected with it. My hon. Friend the Member for Sherwood (Paddy Tipping) pointed out that the industry produces the cheapest deep-mined coal in Europe—yet we hear that the French and German industries draw down much more money for their support.

We are facing another crisis. Since I came to the House 12 years ago in 1992, we have faced crisis after crisis in the coal industry. Luckily we have a Government who have listened, and on each occasion some assistance has been given. This time, however, I fear that the investment has not been enough to enable the industry to continue. We need more help. I hope that even at this 11th hour the Minister will think about that. Perhaps it would be possible to obtain operating aid. It is, after all, important for us to be able to support our indigenous coal industry.

It has been said that by 2006 we shall be importing gas. By 2020, 80 per cent of our energy economy will depend on imports of both gas and coal. It is not always realised that it currently depends on coal, which constitutes about a third of the energy mix. Last year we burned some 50 million tonnes in our coal-fired stations. We need a new generation of such stations. My hon. Friend the Member for Doncaster, North spoke of the integrated gasification combined cycle system. I know that the owner of Hatfield colliery was seeking investment to support a new unit based on the new clean coal technology. Such a unit, if successful, might well provide a stimulus for the development of clean coal technology generators that would help sustain the industry.

My hon. Friend the Member for Sherwood put his finger on the real problem for the future, though. He referred to the large combustion plant directive and the Government's approach to it. There are two possible approaches, the national plan and the emissions limit value plan. The national plan would involve one national sulphur bubble. I suspect that DEFRA has considered how it might trade off the bubble with other European countries, which would be a mistake. DEFRA's calculations fail to take account of the cost of the demise of the UK coal industry. The cost for coalfield communities would be terrific. It is therefore important that the Minister and his colleagues in the Department for Environment, Food and Rural Affairs examine the alternative approach of emission limit value, which would support the UK coal industry. UK Coal estimates that if the national plan is to be the Government's way forward, the industry is likely to he decimated, and could be reduced to 3 million or 5 million tonnes in two or three years.

I therefore urge the Minister to adopt the emission limit value approach arid consider the way in which we could make more investment available to Hatfield, which is the centre of the industry. I get the feeling that if Hatfield colliery closes, others may speedily follow.

It is therefore important that the Minister take on board the combustion plant directive, and approach it in a way that gives the UK coal industry sustainability and makes more investment available, so that Hatfield colliery continues into the future.

10.20 am
Mr. Denis Murphy (Wansbeck) (Lab)

I congratulate my hon. Friend the Member for Doncaster, North (Mr. Hughes) on securing an important debate. He made a powerful speech for Hatfield colliery, which I support. I am sure that many other people, inside and outside the House, would like Hatfield to have a good future.

I want to make one or two brief remarks about the last remaining colliery in the great northern coalfield—Ellington. Just before Christmas, UK Coal announced 70 redundancies at the colliery and placed it in the review process. That news came after information that £2 million of Government investment aid was available and that £1.1 million was available immediately for development in the next two years. The plan was to develop an area called K3 south district, thereby providing four more years of production and employment. Protecting more than 400 jobs in an area of long-term high unemployment is vital.

Ellington supplies a pithead power station, which is owned by Alcan, and provides power to its adjacent aluminium smelter. More than 1,100 jobs are shared between the two industries. Although Ellington relies almost entirely on Alcan for its survival and future, the closure of the pit would have a negative effect on Alcan's prosperity. Alcan burns 1.2 million tonnes of coal per annum—80 per cent. now comes from Ellington. Finding 1 million tonnes of coal at the price that it now pays would be impossible for Alcan. World coal markets are changing rapidly. Ellington colliery could supply Alcan's requirements for the next 20 years.

At great public expense under British Coal and the National Coal Board, tens of millions of pounds were spent on developing roadways to access new reserves to the north of Ellington—some 14 km under the North sea. It is estimated that between 20 million and 200 million tonnes of accessible coal lie in that Klondike under the North sea—enough to fuel a new generation of clean coal power stations.

To realise that, Ellington needs to overcome its short-term problems. I know that my hon. Friend the Minister is supportive and has been helpful in recent meetings. Indeed, were it not for the Government's commitment, Ellington would have closed several years ago. I ask my hon. Friend to re-examine another application from UK Coal for further investment aid to Ellington.

It is commendable that everyone at the pit—management and work force—is working together for the colliery's survival. However, I am surprised and disappointed that the company's board passes on its responsibilities to the work force when problems occur. I find that strange. Nevertheless, a critical fault has been identified in any survival plan for the colliery: problems with the coal preparation plant because of a poor design that constantly breaks down and spends many days down, on maintenance. That has led to a build-up of some 400,000 tonnes of unwashed and ungraded coal. It is estimated that an improved plant, costing £2.5 million, will be required to solve the long-term problems of Ellington colliery. I respectfully suggest that my hon. Friend the Minister look favourably on any application that includes such a proposal.

Alcan is the largest industrial employer in my constituency. It has invested heavily so that it can continue on site for at least 20 years. Ellington has the reserves, manpower and skills to produce the coal that Alcan requires. Further investment now would make that possible.

10.25 am
Brian Cotter (Weston-super-Mare) (LD)

I speak on behalf of the Liberal Democrats, but I appreciate that many speakers, especially the hon. Member for Doncaster, North (Mr. Hughes), have made a case for the coal industry with far more knowledge than I could pretend to possess. I do not believe that I am alone in being moved last night by the television programme about Hatfield. When I first became involved in policies for the Liberal Democrats 20 years ago, I joined one of the miners' marches that went through London. Although I know that that was a token gesture, it represented how I felt about the terrible position that confronted us under the premiership of Margaret Thatcher.

I congratulate the hon. Member for Doncaster, North on presenting his case so well and on expressing great concern for Hatfield colliery. I appreciate that he is anxious today to ensure that the Minister provides clarity, especially about the proposed £15 million in funding. I shall therefore not take issue with the request for that money, although the Liberal Democrats are worried about the amount of funding that the Department of Trade and Industry has put into various projects over the years. We remain concerned about that, but I shall deal with the details of the specific request that we are considering shortly.

A massive amount of money, which has already been mentioned, has been put into nuclear power. At the end of last year, the Secretary of State for Trade and Industry announced that she would increase the credit facility to British Energy by £75 million. Even worse, many people say that the cost of nuclear energy could rise to £ billion in the next few years because of the need for decommissioning, waste management and the costs of production. Vast sums of money are being put into energy production that is costly and of major environmental concern to many of us. No one here, except perhaps the Minister, would agree that such a use of Department of Trade and Industry funding represents the way that we should go.

At the beginning of the month, the European Commission drew attention to the fact that Britain had crept to the top of the European scoreboard for subsidies, thanks to two big handouts—one to British Energy and the other to Railtrack. That position is not sustainable. All state subsidies to industry should be considered according to the taxpayer's long-term interests and the value that the industries add to society, rather than on the basis of individual commercial or labour interests, so the Minister needs to be asked some questions about that situation.

First, will the coal mine be viable in the long term? Concern has been expressed about the fact that the administrators are finding it hard to attract private investors because of the cost involved in developing a new seam. If such projects are viable in the long run but just need a helping hand to attract investment, should we not consider at least the possibility of loans based on the project's viability, both in this case and in other cases?

Secondly, if the Government agree to fund the maintenance of the mine until a suitable buyer can be found, how much will that cost? If we are to put money into a project, we should have a view about its viability, effectiveness and long-term cost. There is no point putting money in if we will see no result at the end of the day. Of course there is great concern about the future of the £350 million clean coal power station that the pit's former owners were planning to construct next to the mine. Has the Minister any answer to those questions?

The hon. Members who have already spoken, particularly the hon. Member for Doncaster, North, have made some important points about Hatfield colliery holding the key to 50 per cent. of the coal industry's reserves in this country, and about security of supply. The hon. Gentleman has said that we need a clear strategic approach to energy—something that I called for more than a year ago in a previous debate on coal. Above all, we must decide to allow the development of a number of environmentally acceptable forms of energy production, and I very much hope that clean coal can be part of that.

10.32 am
Mr. Laurence Robertson (Tewkesbury) (Con)

I congratulate the hon. Member for Doncaster, North (Mr. Hughes) on securing this debate and on speaking so eloquently on behalf of not only Hatfield colliery, but the UK coal industry. I welcome the chance to contribute to the debate. I intend to say a few words, but to leave the Minister plenty of opportunity to reply to a number of the points that have been made by all the hon. Members who have spoken. In some ways, I feel a little sorry for the Minister because he is perhaps a bit isolated on the issue, inasmuch as there seems to be some concern—as expressed not only in this Chamber today, but throughout the industry—not about the White Paper's objectives, which we all share, but about the lack of direction that, I am afraid, it seems to show. I shall return to that in a minute.

I have researched Hatfield colliery, and very interesting reading my brief on it is. I do not intend to go through that brief because the hon. Member for Doncaster, North has indeed spoken about the colliery and I would not pretend to have anything like his knowledge, but I know that the colliery has an interesting history and, potentially, an interesting future, which depends on which way this country decides to go in its energy policy.

When I took on the shadow Department of Trade and Industry brief some six months ago, I started to look at the issues and it became very clear to me that there was no immediate threat to, or problem with, the security of supply. Of course we had some technical problems in London and the west midlands, when the power was out for nothing more than a few minutes. However, those technical problems were in no way related to capacity and were nothing to do with supply, and it is unfortunate that the two issues got confused.

I am satisfied that in the very short term—this year, next year—there is enough capacity to see us through. That is a dangerous thing to say when we are not yet quite through the winter, but I am assured by those at Ofgem and many other people that there is sufficient capacity now and, indeed, there probably will be for next winter. However, when we look slightly beyond that the situation possibly changes. I share the concern that has been expressed not only by a number of hon. Members, but by people throughout the energy world who seem to be somewhat concerned about the prospect of a possible shortage of supply in the medium term.

What do we mean by the medium term? Well, according to one or two discussions that I had only yesterday with people in the industry who really should know, they are concerned not about next winter particularly, but the winter after that, when demand might possibly begin to exceed supply. Things can be done to secure that supply in the short to medium term, but when we move into the middle-medium term things look a little bit worrying.

As the hon. Member for Normanton (Mr. O'Brien) has already suggested, our current mix is about 22 or 23 per cent. nuclear, about 32 per cent. coal and about 38 or 39 per cent. gas, with one or two other bits coming in. That kind of mix—a third, a third, a third, with a desire to increase renewables—is probably not a bad one, but that is, of course, about to change as there are questions about the future of the nuclear industry. I want the Government to give some signs about what will happen to the nuclear industry, which ought to have a future.

I accept that the costs in the past cannot be repeated in the future, but there is no need for that to happen. There is new technology and there are different ways to do things and to handle the waste. I have travelled to Finland—a country that is expanding its nuclear industry and, indeed, finding good, safe and not all that expensive ways to handle and deal with the waste. I think that the nuclear industry has a future, but I am not sure that the Government agree and I should like the Minister to tell us—although I have heard him speak about this before—about his view of the nuclear industry's future. As things stand, I do not believe that the Government particularly intend the nuclear industry to have a future.

If the 22 or 23 per cent. of electricity produced by the nuclear industry starts to fall, how will we make up the difference? Well, let us look at the coal industry, which, as hon. Members have suggested, is under some environmental pressure in respect of sulphur emissions and carbon emissions—a double whammy. That is a threat to the coal industry, and we have to recognise it as such. Of course we have to play our part in reducing emissions, but we ought to remember that the emissions produced in this country amount to about 2 per cent. of world emissions. Although we probably have to play more than our part—that would only be fair—I do not want British industry to be penalised to the extent that we have a power supply crisis.

If the nuclear industry is allowed to diminish and coal is under environmental pressure, so that 32 per cent. might drop, what will happen? Where will our power come from? Well, we have gas. As the hon. Member for Doncaster, North and other hon. Members have said, we are due to become a net importer of gas in 2006. The Minister confirmed that in the House only a few days ago. Therefore the 38 or 39 per cent. of supply that is now provided by gas might creep up to 49, 59, 69 or even 79 per cent. A lot of that gas will be imported, as we have heard.

I am not convinced that the Government have sufficiently advanced the negotiations with countries such as Russia, Algeria and others to enable us to feel secure in the supply of gas, which is so important. Yes, a treaty has already been signed with Norway, but that will cover only a fraction of the gas that we will need to import as we move forward. So where will the security of supply come from?

I am concerned about the fact that we could become over-dependent on gas. We have been over-dependent on middle east oil in the past—we have seen where that gets us—and, to an extent, we have been over-dependent on coal at certain times, which was not a good situation either. What I should Like is a balanced energy policy so that we are not over-dependent on any one source, but the Government have not yet come up with such a policy. They have given no guarantee that they know how to achieve that, nor even that it is their desire.

Of course, we have the prospect of increasing our use of renewables. Everyone who cares about the planet and our ability to continue to generate electricity wants renewables to succeed and increase in importance. However, our targets of 10.4 per cent. of supply by 2010, 15.4 per cent. by 2015 and 20 per cent. by 2020 seem ambitious when we consider that the present target, which is underpinned by an obligation, is only 3 per cent. Even that target has not been met—I think that last year's figure was 1.8 per cent. We are not near achieving even a low 3 per cent. target, so how will we reach 10.4 per cent. in only six or seven years?

I am worried that the Government not only expect renewables to come up to the 10, 15 and 20 per cent. targets, but expect windmills to provide all that energy. I am in favour of renewables, and although I am not against windmills, as such, we should consider how unreliable and inefficient they are. They are expensive to build, they do not last long after they are built, the electricity that they produce is expensive and no one wants windmills to be built near them, so there is a bit of a problem. I encourage the Government to try to increase the amount of electricity generated by renewable energy and to look a little wider than simply getting that from windmills.

I want to leave the Minister plenty of time to reply to the many points made by hon. Members. I once again congratulate the hon. Member for Doncaster, North on not only raising the issue of Hatfield colliery, but giving us the opportunity to discuss energy policy in general.

10.42 am
The Minister for Energy, E-Commerce and Postal Services (Mr. Stephen Timms)

I, too, congratulate my hon. Friend the Member for Doncaster, North (Mr. Hughes) on securing the debate. I pay tribute to him for the absolute and unyielding determination that he has shown while trying to secure a viable future for Hatfield colliery and the proposed clean coal power station that would be linked to it. Without his determination and work over a long period, the prospect of an attractive future for Hatfield may not have existed.

I thank all hon. Members who represent coal mining constituencies who spoke in the debate. Their contribution is important to maintain a wide recognition that coal continues to play an important role in the UK's energy supply—my hon. Friend the Member for Barnsley, West and Penistone (Mr. Clapham) was right to make that point. Coal will continue to be important for a long time to come. I want to refer to the work involved in producing "Manifesto for Coal", which was launched on 3 November last year, because that has been helpful in focusing attention on the issues that face such an important industry.

The UK coal industry provides about half the coal used by our coal-fired power stations, which, in turn, supply about one third of the country's electricity requirements. There is also a big demand for UK-produced coal for industrial use. Coal's contribution to meeting our national energy needs is in addition to its local economic importance in many parts of the UK where it continues to provide good quality employment.

Several hon. Members, including my hon. Friend the Member for Sherwood (Paddy Tipping), said that we now have the most efficient coal industry in Europe. That is right, and it is important that we celebrate that and draw attention to it. Our coal producers have made big strides to reduce costs to make themselves more competitive with world producers. With world coal prices buoyant, as they are at present, many are well placed to compete on much better terms than previously with producers of coal imported from elsewhere.

We have heard a good deal about Hatfield colliery, so I want to respond to points that hon. Members have made. I understand that the mine at Hatfield was sunk between 1911 and 1917. As we heard, an important and interesting history is attached to the colliery. It has strong support and loyalty from its work force, which is an important part of the reason why we can still talk about its prospects today.

Hatfield colliery received a total of £11.3 million of coal operating aid from the Government between April 2000 and December 2002, of which nearly £4.5 million was paid to Coalpower Ltd. after it took over in October 2001. During that period, and despite such substantial Government support, the mine was not able to generate the income that had been hoped for. It received £867,000 as the last instalment of coal operating aid in March 2003, but the company nevertheless continued to experience financial difficulties. In August and October last year, the Coal Authority released to Coalpower funds that it held on behalf of Hatfield in the hope that that would help the company to finalise the necessary refinancing to secure its future. I was kept regularly briefed on those developments and was keen to do everything that I could to help, so it was with great regret that I learned that those efforts had not come to fruition.

On 3 December, Coalpower Ltd. went into administration. That was judged to be the best option for finding a new owner with the financial resources to pursue the Barnsley seam project, which, with the High Hazels seam all but exhausted, is essential to the mine's future. Once again, with the Coal Authority's help, Hatfield was kept open—albeit not in full production— while a buyer was sought. A possible bid is in development that might lead to an offer that could secure a viable future for the mine. I do not want to prejudge the outcome of the bid or raise any undue hopes, but acquisition by a properly financed and funded company with the resources to carry out the planned investment would clearly be an excellent outcome for the colliery, its work force and the Government.

There were plans to develop a power park on part of the colliery site. It was planned to have been completed by 2005–06 and centred on the construction of a 430 MW coal integrated gasification combined cycle power plant adjacent to the colliery. Coalpower had obtained section 36 planning consent for the plant. but it was unable to finance its construction before the administrators were appointed. The project would present major challenges. The combination of technologies that it would entail is untried at present. The zoning of the site in local plans would be a challenge, and there would be a need for an access road to connect the site with the motorway network. Those are all significant challenges, but if they can he resolved an attractive project could undoubtedly take place at that plant.

The Government need to remain within state aid rules when considering means of support. I hope that the House accepts that we have done everything that we could within those rules to help to secure the colliery's future. We considered Coalpower's application for coal investment before the other applications that were received. Having done so, we made a formal offer of £15 million of support, in the hope that that would help the company to secure the refinancing that it needed to demonstrate that it could meet the 70 per cent. of costs that have to be provided privately under state aid rules. The company was hopeful that it could do so. When Coalpower went into administration, we authorised the administrators to tell potential buyers that that aid would be available to a new owner who offered a comparable investment project.

The aim of coal investment aid schemes is to create or safeguard jobs in the UK coal industry in areas that are often socially and economically disadvantaged by encouraging coal producers to enter into investment projects that maintain access to coal reserves and help to ensure the medium-term economic viability of those mines. We have a budget of up to £60 million over three years, and bids for the first of three application periods total £131 million—more than twice the total budget available over three years. It clearly was not possible to meet all the bids in full, so it was important when assessing applications to take full account of the benefits that were likely to result from each application. On 27 November, I announced investment offers totalling £52 million, which could secure more than 4,000 coal mining jobs and create an additional 300. Most applicants have until the end of February to accept the offers, and I can confirm that because of its particular circumstances, the period for acceptance of the £15 million offer to Coalpower has been extended to 31 March. It therefore remains available to a new owner of Hatfield if an acceptable bid is received before that date.

Mr. Kevin Hughes

I think that I made it clear that we are grateful for the help that the Government have given to Hatfield colliery over the past few years in coal operating aid and for Coal Authority grants from the summer to December. However, does my hon. Friend agree that if it had not been for the huge gap between the end of coal operating aid and the start of coal investment aid, Coalpower might not have experienced short-term problems with financing, and perhaps we would not be having this debate today?

Mr. Timms

I do not know about that. We were all optimistic once the offer was made. As I said, we made it as early as we could, and we hoped that with the availability of that substantial Government support it would be possible to put together a financing package to make the project viable. We still hope that that is the case, but we are all disappointed that it was not possible to do so as soon as it initially appeared. However, we will keep the offer open until the end of March. I understand that the administrators will maintain a skeleton staff at the colliery until the bid expected in mid-March has been assessed, to make sure that operations can restart promptly if it is accepted.

Mr. Hughes

I am grateful for my hon. Friend's announcement about keeping the £15 million offer open. However, can he confirm that the administrators have been instructed to maintain the pit so that it is ventilated, water-pumped and open for business should the company come up with a successful financial package?

Mr. Timms

That is certainly important. Steps have been taken to ensure that that is the case and operations can restart promptly if the bid is accepted. If my hon. Friend has detailed questions about that, I am happy to consider them.

The offers announced in November included awards to three mines operated by UK Coal, including Ellington, which was mentioned by my hon. Friend the Member for Wansbeck (Mr. Murphy), who has spoken to me on a number of occasions about this matter. I can tell him and other Members that I recently met Alcan to discuss the concerns that he has expressed. The other mines to receive awards were Rossington and Welbeck. There are concerns about the implications of those awards for the collieries, given what UK Coal has since said. I am aware that the review process for Ellington is under way, as my hon. Friend the Member for Wansbeck said, and is expected to take about three months.

If offers of aid made to these collieries are refused, the funds would be returned to the coal investment aid budget and would be available for reallocation in a future application period. The next period is due to close at the end of May this year. Important points have been made about other issues affecting the coal industry. Eighty per cent. of UK-produced coal goes into coal-fired electricity generation, so the future of the industry is inextricably bound to the future of that sector, which is facing considerable challenges in the years ahead, not least because of increasing pressure from the environmental regulation that a number of hon. Members spoke about.

Of immediate concern, as my hon. Friends the Members for Normanton (Mr. O'Brien), for Sherwood and for Barnsley, West and Penistone said, is the implementation of the large combustion plants directive, which will constrain the capability of generators to burn coal mined in the UK because of its relatively high sulphur content. There has been a lot of debate in the coal and generating industries about which of two alternative ways—the emission limit value and the national plan—of implementing the directive is more appropriate, and which option, if not the most beneficial, is the least damaging to their prospects. Coal producers, as we have heard, have clearly stated their preference for the emission limit value option, believing that it offers the best choice for the continued use of UK-mined coal.

The Government considered carefully all the responses to the consultation exercise and announced on 27 November last year that we would submit a national plan to the European Commission. As there may have been some misunderstanding, I emphasise to my hon. Friend the Member for Normanton that at the same time we made it clear that we would conduct further analysis of the likely impact of the implementation of the directive so that full account could be taken of the different and conflicting views expressed by the various interested sectors. In other words, at this stage we are not irrevocably committed to the national plan, as further analysis is needed if we are to be confident about which of the two alternatives is the right one to adopt.

We recently commissioned further independent research into expected levels of coal production to 2016, which will help further to refine our considerations. I do not anticipate that we will look at low production levels such as the amount of 3 million to 4 million tonnes that was suggested in our debate—I think that production will stay at a higher level. In the remit for the study, we asked the analysts to report on the potential effect on demand for coal, especially indigenous coal, of other environmental controls that are already in place, in the pipeline or in development and are likely to be introduced during this period. They include, for example, the emissions trading scheme and integrated pollution prevention and control regulations. We will work closely with the Department for Environment, Food and Rural Affairs when considering which steps to take, as my hon. Friend the Member for Sherwood requested. In response to the point made by my hon. Friend the Member for Normanton, I am happy to meet again Members who have expressed concern before a final decision is made.

Mr. Frank Cook (in the Chair)

Order. We must turn our attention to the next topic for consideration today.

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