Coal divestment – where does the environmental buck stop when the bucks stop rolling in?

On 14 February 2022, at the Khwezela Colliery in Mpumalanga, acid water flowed through a broken concrete seal in an old mine shaft and into the nearby Kromdraai spring. The acid plume killed thousands of fish as well as other aquatic life before finally being diluted in the Loskop Dam 60km downstream.

The burning of coal for energy releases carbon dioxide into the atmosphere. This has understandably led people who are serious about climate change to call for divesting coal energy and mining.

In the case of divesting coal mining, however, there are two problems: the first is that a mining company’s divestment of coal mines does not mean that coal stops being mined and burnt; the second is that even if coal mining stops tomorrow, the environmental impacts of coal mining will continue, unless these are actively and thoughtfully remediated and the land rehabilitated.

Let us start with the first point: divestment does not stop coal from being mined or burnt. It involves simply substituting one shareholder for another. Working mines don’t stop existing because their shareholders change; in fact, they often get spun off or sold to smaller companies which are willing to operate on thinner margins or with more reputational risk.

The upshot of divesting coal mines is therefore that coal stops being mined by companies that want to be regarded as good corporate citizens, and are instead mined by smaller companies which may not share that goal or have the capacity to fully pursue it.

This brings us to the second point: coal mining itself is not environmentally neutral. Aside from the scars left by both open-cast and underground mining, mining exposes minerals that were previously encapsulated in rock, both within the mining cavity and within the mineral waste. The minerals are then free to react with the water- and oxygen-rich environment, potentially generating acid, leaching toxic metals, and/or spontaneously combusting in the case of poorly managed coal discards.

Hazardous chemicals then find their way into waterways, the air, and the soil in the form of seepage, dust, erosion and off-gases. Unaddressed environmental impacts associated with coal mining reduce the viability and safety of land. They can also affect large areas and continue for centuries. That’s right: centuries.

Mine remediation and rehabilitation are difficult and resource-intensive undertakings and success is not guaranteed, even for large, well-resourced companies.

Read more in Daily Maverick: “‘Repurposing’ coal infrastructure can boost South Africa’s energy transition, International Energy Agency says”

In June 2021, Anglo American completed the demerger of its South African thermal coal-mining division and Thungela was listed on the Johannesburg Stock Exchange. The coal mines therefore live on not as Anglo American Thermal Coal, but as Thungela.

Anglo American did, in accordance with legal requirements, leave Thungela with a 47% contribution to a dedicated environmental rehabilitation trust to fund rehabilitation post-mining. The monetary value of the trust is calculated based on the estimated total liability associated with planned environmental remediation and rehabilitation activities (according to Thungela’s Prospectus and Pre-listing Statement, the rest is still to be contributed by Thungela and covered by guarantees until the full amount is raised).

Whether the estimated total liability is likely to be sufficient for site remediation and rehabilitation as well as water treatment post-mining, is difficult to assess since the methods and assumptions for calculating the liability of older mines are not publicly available.

From what information can be found online, however, it appears that Thungela currently only provides for 50 years of water treatment post-mining, while acid generation is likely to continue well into the next century and beyond.

Anglo American appears to be aware of this, since Thungela’s listing documents stated that the estimated total liability for environmental remediation post-mining is likely to increase “significantly” when the improved financial provisioning regulations become enforced for older mines. The new regulations require much greater provisions for addressing environmental issues, such as water treatment, into the future.

• Ask mining management tough questions about how they manage acid generation, spontaneous combustion, dust emissions, and concurrent rehabilitation;


• Require companies to disclose what environmental problems are associated with their operations, what remediation and rehabilitation activities are planned, and how much this is likely to cost;


• Require companies to disclose their environmental management plans for enabling post-mining land use as well as their costing assumptions and calculations;


• Lobby for implementation of improved regulatory requirements to ensure mines are adequately capitalised to honour environmental liabilities. For instance, in South Africa the enforcement date of the Nema Financial Provisioning Regulations of 2015 has been postponed several times; and


• Lobby for alternative energy solutions to be implemented to replace coal altogether.
  

  DM