Open-cast Coal Sites (Restoration)

Nia Griffith Excerpts

Thursday 29th January 2015 Commons Chamber

[Nia Griffith (Llanelli) (Lab)]

Does my hon. Friend find it extraordinary that Celtic Energy was given an exemption from any form of restoration bond, whereas all the other private operators in the area had to pay such a bond? It made for a completely uneven playing field.

[Mrs Moon]

It most certainly did. Money went to the Major Government, and our community has been left with the financial responsibility for restoring the sites. It is shocking.

--- Later in debate ---

[Nia Griffith (Llanelli) (Lab)]

I congratulate my hon. Friend the Member for Bridgend (Mrs Moon) on securing the debate and pay tribute to the Welsh Government for commissioning the review, “Research into the failure to restore opencast coal sites in south Wales.”

Restoration of open-cast sites pre-privatisation was relatively assured because British Coal, the then controlling body, managed the contract cash flow by holding a restoration lump sum in reserve, which was tantamount to a restoration bond. Furthermore, in the event of all such precautions failing, British Coal, as a Government body, could, as a means of last resort, restore an abandoned site at public cost.

At privatisation, Celtic Energy acquired the British Coal open-cast operation in south Wales but it was not required to provide any restoration bonds, for reasons that have already been explained. It is staggering to think that for the first 10 years after privatisation, 1995 to 2005, there was no effective mechanism to require the restoration of open-cast sites, but that is precisely what happened.

My hon. Friend the Member for Lanark and Hamilton East (Mr Hood) raised with the then Department of Trade and Industry Minister responsible the issue of the enormous burden that was to fall on local planning authorities as a result of privatisation, and how right he was. It has been an enormous burden. Following privatisation, it is absolutely clear that all large open-cast coal sites should have been the subject of adequate restoration bonds.

The situation in which we find ourselves today is that we have five large sites in Wales, which may have insufficient bond cover at some stages in their operating life. They are Ffos-y-Fran in Merthyr, Tower at Hirwaun, Nant Helen at Coelbren, East pit at Gwaun-Cae-Gurwen and Margam at Kenfig. In my constituency, we have Dynant Fawr in Tumble. That is a smaller site, extending to some 33 hectares. Coal extraction has finished, having removed some 100,000 tonnes of coal in total. However, the operator Carmarthen Mining Ltd has been dissolved and the site ownership is spread between a number of owners. My local planning authority, Carmarthenshire county council, has released some of the bond to achieve some restoration and currently holds a bond of some £176,000, but that falls short of the full restoration costs, which the local authority believes could exceed £250,000. There are some lessons to be learned from that situation.

I should explain that Dynant Fawr is not a former British Coal site. It was run by a separate private operator. Although the local authority required a bond and the operator was to pay into an escrow account, the bank was slow to alert the authority that payments were not being made. The lesson to learn is that although the local authority tried its best to get the right mechanisms in place, the situation is much more complex than it might at first appear. Making bonds work is not easy when companies disappear and play all sorts of dirty tricks.

The local authority now faces the situation that both the operator and the landowner have conveniently disappeared, so the job of managing the restoration is left to the county. The money that has accrued from the bond is less than the council estimates to be ideal, so it has been looking at different ways of making sure that bonds are more effective. It is not that easy. One has to be certain that the money that is paid in is ahead of the restoration costs. That is quite a hard bargain. Likewise, the council does not accept insurance as cover unless the premiums are paid up front to the county, because if the company does not pay the premiums, the insurance company obviously will not pay out. The council might accept assurances from an insurance company that it would pay up whatever, but that is much more difficult to achieve because insurance companies are also extremely wary.

This is a highly technical area and, as the World Bank has said, a lot of expertise is needed to set up, control and run bonds properly, and to ensure that the restoration is done properly at the end. This is extremely costly and in the current economic climate local authority expertise does not just come from nowhere. Carmarthenshire helps out Powys, which does not have the expertise. Many of the people who are there now may not be there for ever, and they have other pressures on their time. The head of minerals planning in my local authority is working with colleagues from Natural Resources Wales and from Neath Port Talbot, and he is also chair of the group of planning officers across Wales who come together on mineral issues to develop some guidance on making the bond mechanism as effective as possible. That could be incorporated into guidance such as a technical advice note for planners.

The way forward is very much to work together and do whatever we can, but we still need the money to restore the communities that have suffered devastation from people just ripping them off for open-cast.

--- Later in debate ---

[Matthew Hancock]

I saw it for the first time this week, and it is under active consideration. I would expect to be able to respond in a matter of weeks, certainly before the Dissolution of Parliament.

As the right hon. Member for Berwick-upon-Tweed (Sir Alan Beith) said, restoration bonds are not only about open-cast coal mining; they are also about deep mining, as well as things like the fire in his constituency that raged for months and that he and I have discussed before. It is vital to get restoration liabilities and restoration cash tied together better.

The hon. Member for Hartlepool quite reasonably asked about questions of the past and questions of the future. In getting the future right, it is vital that we have a regime, including depositing money in escrow accounts and restoration bonds, that is watertight. On privatisation in 1994, the calculation of the costs of restoration was part of the decision as to how much companies paid for the opportunities they bought when they bought rights to a site. That was taken into account at the time. It is therefore not reasonable to say that money was put into a fund, with the taxpayer paying for the restoration at the end of the process. The money paid to the taxpayer for the coal that was bought, which was then in the ground and was going to be extracted, had set against it the future costs of restoration. That was encapsulated in the cost at which the companies purchased.

[Nia Griffith]

What mechanism did the Government put in place to ensure that the money was then used for restoration? That is what seems to be missing.