Falling wholesale prices for fossil-fuels (coal, oil and gas) last night forced Hargreaves Services, the largest coal company in the UK, to announce that around 85 jobs are at risk at sites across Scotland as the company starts the process of scaling back new projects due to challenges presented by low global coal prices.
Current low coal prices are making many new coal schemes unviable, whether centred around greenfield sites or existing brownfield sites.
Durham-based Hargreaves has been operating at a number of brownfield sites in Scotland – mostly in Fife and Ayrshire – that it took over following the collapse of mining companies Scottish Resources Group and ATH Aardvark in 2013.
Although Hargreaves confirms that all existing project commitments will be fully delivered, regardless of coal price and pressure to reduce costs, it is highlighting that the commencement of several new projects will need to be delayed until coal prices improve.
The scale of the restoration task in Scotland is unprecedented. Hargreaves estimate that the remediation of some 35 square kilometres of land could take five years to complete and would create or safeguard 1,000 direct mining jobs and 1,500 indirect jobs.
Last year, East Ayrshire Council was strongly criticised in an independent expert invetigation of its chronic mis-handling of open-cast coal mining restoration bonds. East Ayrshire sacks planning chief over a £132m mine shortfall – http://goo.gl/TjUvfv – Scottish Energy News, 18 July 2014
A Hargreaves spokesman said last night: “We believe that, without an impactful solution that channels a major portion of current mining capacity to address these issues, the outstanding restoration works may never be completed.
“Although Hargreaves will today (Thurs) commence consultation with the workforce on potential job losses, we are committed to maintaining mining operations in Scotland and remain both hopeful and optimistic that Government will support the Carbon Price Support (CPS) proposal – in the very short term.
“We will be vigorously exploring all options to minimise or even avoid compulsory redundancies while the outcome of the proposal is awaited. “
Independent economists who have reviewed the CPS proposal have confirmed that it would deliver a net cost benefit to the UK economy of tens of millions of pounds whilst also relieving the taxpayer of the burden of restoration liabilities across Scotland. For example, by leveraging the value of coal on and around the brownfield sites, the jobs and fuel duty associated with undertaking the earthworks outweigh the CPS revenue lost through the exemption.
In addition to being endorsed by Coalpro, the proposal has considerable cross-party political support at local, Holyrood and Westminster levels. The CPS proposal is also supported by mining sector suppliers, including mining equipment manufacturers Caterpillar and Terex, which both operate major plants in the UK and are concerned about the impact of seeing surplus plant and equipment displacing factory orders and exports.
Iain Cockburn, Group Finance Director, Hargreaves Services, commented: “We have worked hard to establish a mining operation in Scotland and it is very regrettable that we are faced with the prospect of having to reduce the size of the skilled workforce that has been built up in the last 18 months.
“We knew it would be difficult when we first got involved but that difficulty has been exacerbated by the recent collapse in coal and other energy commodity prices.
“To date the need for urgency has been driven by the combination of the ever-increasing cost of restoration as sites flood. The key urgency driver now focusses on being able to start projects before capacity is retired and jobs are lost.
“We recognise it is a stressful time for the workforce and their families and we can only assure them that we are working as hard as possible to secure the CPS Exemption to protect their job prospects for the next five years as the industry sets about restoring the abandoned sites.
“We have been very encouraged with the support we have received from fellow operators, key politicians and civil servants.
“In my view The Carbon Price Support is an elegant, efficient and cost-effective solution to the current problems. There are no other solutions on the table and no likelihood or prospect of funds being made available to deal with the restoration.
“The CPS Exemption will deliver full restoration and an extra one million tonnes of coal production per annum at no net cost to the taxpayer by generating fuel duty and protecting UK jobs.
“The alternative is simple – no restoration takes place, UK jobs are lost and the one million tonnes of coal is instead imported from Russia, Colombia or the USA.”