Keqi ctg pollution en report

A Peek into the Dirty Secrets of China’s Flagship Coal-to-Gas Model Project Table of Contents Datang Hexigten Project Introduction ...........................................................................................................3 The ‘Legend’ of Zero Wastewater Discharge .................................................................................................4 Suspected Illegal Informal Pond..................................................................................................................4 Manmade Waste Water Lakes ....................................................................................................................8 Air Pollution ..............................................................................................................................................11 Policy Recommendations: No Active Promotion until a Working Model is Established ..............................14

References ....................................................................................................................................................16 Appendix 1: Financial Analysis of Datang Coal Chemical ..............................................................................18 Appendix 2: 54 Coal-to-Gas Projects Completed, Under Construction or Planned ......................................21

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In an effort to deal with air pollution and make up for insufficient natural gas supplies in the east, China has been pushing a coal-to-gas program that has been fraught with debate because of the pollution and greenhouse gas emissions that result from the production process. According to statistics compiled by Greenpeace, as of October 2014 there were 54 coal-to-gas projects at different stages of development nationwide (See Appendix 2). The total production volume of these projects currently stands at 240.8 billion cubic meters.

Over 80% of these projects are in China’s arid northwest.

However, since two model projects, namely the Datang Hexigten Coal-to-Gas Project and the Kingho Coal-to-Gas Project in Ili, went into production late last year, they have been consistently troubled by technical and environmental issues, including a reported accident in January 2014 that killed two people as well as air pollution that has caused local residents to lodge official complaints (Hexigten EPB, 2014; Zhang, 2014).

In order to give an initial assessment of the actual environmental performance of coal-to-gas model projects, a team from Greenpeace East Asia (hereafter ‘Greenpeace’) carried out an on-site survey of the Datang Hexigten Coal-to-Gas Project for a total of seven times between April and October 2014. During two of these visits, the team took test samples of drinking water1, water and sediment collected from an informal pond, as well as wastewater collected in the vicinity of the plant. Greenpeace also interviewed nomadic families living around the plant to understand how their lives have changed. Additionally, the team also examined open flue gas emissions data available from government websites2.

Greenpeace’s survey found that wastewater treatment did not meet with the project’s claimed ‘zero wastewater discharge’3 policy and even official data showed that flue gas emissions had exceeded standard levels for extended periods of time4. The survey also showed local residents’ strong opposition to the project. Based on the findings, Greenpeace is concerned that, as one of the only two projects currently in operation in China’s coal-to-gas sector which reflects the general technological levels across the sector, Datang Hexigten project showcases the additional environmental and social challenges facing the sector whose negative carbon implication is already a much debated issue (Gong & Li, 2014; Yang & Jackson, 2013). Greenpeace strongly recommends the Chinese government seriously 1

Testing results of the drinking water samples are not discussed in this report. Based on the analytical results by both Greenpeace Research Laboratories and an accredited independent third-party testing facility in China, concentration of metals and metalloids in most or all of the samples were below limits of detection and few organic compounds were identified overall. For details, please see http://www.greenpeace.org/eastasia/publications/reports/climate-energy/2014/keqi-ctg-pollution-en-report/ 2 See the Platform for the Self-monitoring and Information Disclosure by the Enterprises subject to Intensive Monitoring and Control of the State in Inner Mongolia (http://nmgepb.gov.cn:8088/enterprisemonitor/webpage!indexPage.action); supervisory monitoring data disclosed by Chifeng Municipal Environmental Protection Bureau (http://www.cfhb.gov.cn/sjzx/hjsj/gkyjpsj/jdxjcsj/index.html). In order to tackle pollutions at sources, the Chinese government has created a list of key state monitored and controlled enterprises and put in place an emission data monitoring and information disclosure system where both environmental agencies in different levels and the enterprises are required to monitor and disclose emission data.

3 We cannot find any open sources about the project’s own definition of “zero wastewater discharge”. Anyway, there is a good general overview of zero wastewater discharge in China written by China Water Risk http://chinawaterrisk.org/resources/analysis-reviews/zero-liquid-discharge-a-real-solution/.

4 Please see the section of Air Pollution below for details.

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reconsider the development of coal-to-gas projects.

Datang Hexigten Project Introduction The Datang Hexigten Coal-to-Gas Project is located in Hexigten near the city of Chifeng in the Inner Mongolia Autonomous Region, only 15km from the Dalai Nur (“Dalinuoer” in Mandarin) Nature Preserve, a national-level preserve established to protect a unique ecosystem of lakes, wetlands, grasslands and forests that support many rare species of bird (Inner Mongolia Dalinuoer Nature Reserve Managing Office, n.d.)

The synthetic natural gas produced by this project, which requires 40 million cubic meters of water every year, is mostly transported by pipeline to Beijing and once fully completed the project is expected to fulfill 1/4 of Beijing’s natural gas needs (Chifeng Municipal Water Resources Bureau, n.d.; Wang, 2014 ).

The original scale of project investment was 22.6 billion RMB, but due to continual technical adjustments and environmental considerations in actual implementation, total investment has already surpassed 33 billion RMB and looks like it will continue to increase (Guo, 2014).

Comparatively, many coal chemical businesses, including the Datang coal-to-gas project, continue to operate at a loss (See Appendix 1).

Figure 1: Relative Locations Surrounding the Coal-to-Gas Plant

Note: Based on Google Earth, Image © 2014 Digital Globe © 2014 Mapabc.com ① Coal-to-Gas Plant, ② Xilin Gol Coal Mine (coal source), ③ Dashimen Reservoir on the Xar Moron River (water source), ④ Dalai Nur National Nature Preserve, ⑤ Waste Water Evaporation Pools

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The ‘Legend’ of Zero Wastewater Discharge Datang has repeatedly said in promotional materials that this project has achieved ‘zero wastewater discharge’ and in an interview with China Chemical Industry News on October 16th, the Director of Environmental Security for the Datang Energy and Chemical Company, Mr. Hao Jun, said that ‘there is no drainage outlet at the Hexigten project and we have no other option but to ensure zero discharge.’ (Chen, 2014)

Suspected Illegal Informal Pond However, Greenpeace’s survey team found an informal pond in sandy soil near the Datang Hexigten facility filled with contaminated water containing a number of hazardous substances.

The rectangular informal pond is located 200 meters to the northwest outside the plant area and measures 68m x 56m x 5m5 with no visible anti-seepage measures as seen on the edge of the formal evaporation pond discussed below. The water in the pond was an inky black with black powder-like solid waste floating on the top. There was also a very pungent odor surrounding the pool. From the pit, a 150cm-diamter pipe extends from the direction of the plant. There are no other active industrial projects within a radius of several kilometers in the area of the plant.

Analysis of satellite images show that digging on the informal pond began before November 2010, but images did not show any water accumulation until May 3rd 2013. The water accumulation in the pit was confirmed by site visits and satellite images from later dates.

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The figures of 68m and 56m are based on GIS analysis by Greenpeace. The depth of 5m was estimated by Greenpeace survey team during the field visits.

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Figure 2: Location of the Informal Pond outside Western Wall of Plant

Note: Based on Google Earth, Image Š 2014 Digital Globe Š 2014 Mapabc.com

Figure 3: Satellite Image of the Informal Pond, Taken on November 6th, 2010

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Figure 4: March 3rd, 2013 was the first time water was observed in the informal pond– using LandSat8 satellites

Local herders had previously reported the informal pond to local environmental authorities and on July 5th 2014, the Hexigten Environmental Protection Bureau (EPB) released a public response that described the informal pond as a ‘initial rainwater runoff from a drainage pipe to the west of the plant’, adding that ‘all runoff water has been retrieved by the plant and sediment has been fully cleaned.’ (Hexigten EPB, 2014) However, on three separate visits by the Greenpeace survey team on August 2 nd, August 8th and August 30th 2014, it was found that the informal pond was still filled with accumulated water and there was no sign of any cleanup efforts. Moreover, the water level observed in the visit on August 30th had risen by about one meter compared to the visit on August 8 th.

Greenpeace also carried out sampling and chemical testing of the water and sediment in the informal pond. Results showed that this turned out to be contaminated water that contained heavy metals and hazardous organic pollutants, many of which could be from coal-relevant production.

On August 2nd and 30th, Greenpeace workers collected two separate batches of water and sediment samples from the informal pond using scientific methods, recording the entire process. While the batch obtained on August 2nd was delivered the Greenpeace Research laboratories, based at the University of Exeter in the UK, the batch on August 30th was sent

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to an accredited national-level third party independent testing facility in China6.

Results from the third party testing facility show a range of PAHs including benzo[a]pyrene.

The concentration of benzo[a]pyrene was 41.5ng/L, 0.38 times higher than national standard7. Other PAHs found in tests included phenanthrene, acenaphthene, fluorene, pyrene, chrysene, fluoranthene, benz[a]anthracene, benz[b]fluoranthene, indeno[1,2,3-cd]pyrene, dibenz[a,h] anthracene and benzo[g,h,i]perylene8.

Qualitative screening of the two waste water samples sent to Greenpeace Research Laboratories for testing showed that both contained organic compounds with similarly complex compositions. Compared with waste water samples that were taken far from the discharge pipe (CN140015), samples taken nearer to the discharge pipe (CN140016) contained more complex compounds. A total of 15 volatile organic compounds (VOCs) were isolated, 13 of which could be reliably identified (i.e. compounds identified to better than 90% match to mass spectrum libraries) as well as 44 semi-volatile organic compounds (SVOCs) being isolated, 25 of which could be reliably identified, including multiple phenolic compounds (e.g. cresol, xylenol, etc.) as well as phenanthrene, fluorene, fluoranthene and several other PAH derivatives.

In addition, analysis from both sides9 indicated that sediment from the informal pond contained similar heavy metals and a series of organic compounds including PAHs as found in the wastewater samples.

Ultimately, regardless of the source of wastewater samples, the composition of the contaminated water from the informal pond has caused a certain degree of hazardous substances to accumulate in the sediment of the informal pond.

Based on the above findings, Greenpeace challenges the Datang Hexigten Coal-to Gas Project to confirm whether or not the informal pond has been used as a seepage pit to dispose of contaminated water with hazardous substances. According to China’s Water Pollution Prevention and Control Law (2008)10, Amendment (VIII) to the Criminal Law

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As to the detailed description of sample collection and analysis, please see http://www.greenpeace.org/eastasia/publications/reports/climate-energy/2014/keqi-ctg-pollution-en-report/ 7 Here national standard refers to the Integrated Wastewater Discharge Standard (GB8978-1996). According to the standard, benzo[a]pyrene is classified as Category One Pollutant, which is defined regardless of industry, discharge method or the function of the water. All samples are taken from discharge points outside factory workrooms or treatment facilities with discharge concentrations reaching no more than 0.00003mg/L, i.e. 30 ng/L. 8 The range of PAHs found here are not included in the Integrated Wastewater Discharge Standard (GB8978-1996) with the exception of benzo[a]pyrene. However, due to the hazardous nature of these compounds, both the US EPA and EU have listed a number of PAHs as the priority substance to regulate. For details, please refer to US EPA, Priority Chemicals http://www.epa.gov/osw/hazard/wastemin/priority.htm; EU Directive 2000/60/EC. DECISION No 2455/2001/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 20 November 2001.

9 Please seehttp://www.greenpeace.org/eastasia/publications/reports/climate-energy/2014/keqi-ctg-pollution-en-report/.

And please note that the testing results of Greenpeace Research Laboratories and the third-party testing facility are not directly comparable due to different methods employed in the analyses and that the sediment samples were not collected at the same time.

10 See http://www.gov.cn/flfg/2008-02/28/content_905050.htm.

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(2011)11 and Environmental Protection Law (2014 revision)12, the use of seepage pits to dispose of water with hazardous contaminants is explicitly banned and those who violate can face penalties or even criminal charges in severe cases.

Manmade Waste Water Lakes Greenpeace also found that a formal evaporation pond located 6km to the southeast of the Datang Hexigten goal-to-gas plant had become a long-term holding pool for waste water.

According to the facility’s introduction and its own environmental impact report, evaporation pools should be used for storing waste water only in the case of an emergency, stating that “waste water may be temporarily be released into an evaporation pool for waste water that has not met with reuse standards during testing periods or in the case of faults in the waste water treatment process” (Datang Hexigten Coal-to-Gas Project, n.d.; Datang International Power Generation Co., Ltd & Wuhuan Science and Technology Co., Ltd, 2008).

This clearly states that the evaporation pond is to be used only temporarily in the case of emergencies and not as a place for the longer-term storage of industrial waste water.

During site surveys, the Greenpeace team found that the total area of the evaporation pond covered an area of 1.1 square km. Though construction had not even been completed, in the course of less than one year there were two evaporation pools nearly 5 meters deep13 that had been filled with production waste water. Workers from Datang Chemical said that the evaporation pools were currently at 70% capacity and that after phase two and three of the project began production, even larger evaporation pools would be needed (Duan, 2014).

There was also a clear pungent odor surrounding the evaporation pools.

On August 30th 2014, the Greenpeace team collected waste water samples from this evaporation pond, recording the entire process. All samples were collected using scientific methods, and were also sent to a nationally accredited independent third party testing facility as well as the Greenpeace Research Laboratories, based at the University of Exeter in the UK for analysis.

Test results from the third party testing facility show that the waste water in the evaporation pools contained similar heavy metals and organic compounds as were found in the waste water taken from the informal pond, reaching levels that were several times (in the case of some PAHs, hundreds of times) greater than latter. Meanwhile, current national standard, i.e., the Integrated Wastewater Discharge Standard (GB 8978-1996)14, are not applicable for evaporation ponds. However, as a point of reference, levels for volatile phenols, phenol, benzo[a]pyrene and chemical oxygen demand (COD) in the sample were several times (up to 181 times for benzo[a]pyrene) above the national standards set for waste water discharges 11 12 13 14

See http://www.gov.cn/flfg/2011-02/25/content_1857448.htm.

See http://www.nnhb.gov.cn/web/201404/25/80012.htm.

Estimated by Greenpeace survey team in the field visits.

See http://kjs.mep.gov.cn/hjbhbz/bzwb/shjbh/swrwpfbz/199801/t19980101_66568.htm

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(where they apply).

Results from Greenpeace Research Laboratories also showed that the waste water from the evaporation pond contained a total of 154 different kinds of VOCs, 41 of which could be reliably identified (i.e. compounds identified to better than 90% match to mass spectrum libraries) as well as 209 SVOCs, 47 of which could be reliably identified. Compared with the water samples taken from the informal pond, the waste water samples from this location contained more types of phenol derivatives. Also found were a series of hazardous pollutants including PAH derivatives, benzene derivatives (particularly alkylated benzenes), substituted quinolones and pyridines, many of which are common to the highly hazardous wastes arising from coal gasification operations (Gai, Jiang, Qian, & Kraslawski, 2008; Wang, et al., 2011; Xu, Han, Hou, Jia, & Zhao, 2014).

Table 1: VOCs identified in wastewater sample of the formal evaporation pond No. of chemicals isolated

VOCs (154) Compounds identified to better than 90%

Phenol & derivatives  Phenol  Methylphenol  Ethylphenol  Azido‐phenol Dimethylphenol (3 isomers) Benzene derivatives  Tetramethylbenzene  Difluorobenzene  Dimethylbenzene  1‐Methyl‐2‐(1‐propynyl)benzene  Propenylbenzene  4‐Ethenyl‐1,2‐dimethylbenzene Pyridines derivatives  Methylpyridine  Dimethylpyridine  Trimethylpyridine  2‐Pyridinecarboxylic acid Naphthalene & derivatives   

Naphthalene 1‐Methylnaphthalene 2‐Methylnaphthalene

Other compounds  (E)‐3‐Phenyl‐2‐butenal  1‐(2‐Ethylphenyl)ethan‐1‐one  1‐Methyl‐2,3‐dihydroindene  2‐Cyclopenten‐1‐one, dimethyl‐  Methylbutane  Propanone  Benzaldehyde  Benzenemethanol  Toluene  Decane  Dodecane  Tetramethylhexadecane  Diisopropyl ether  Isopropyl(6‐phenylhex‐5‐ynyl)amine  N‐Benzyl‐3‐pyrroline‐N‐oxide  N‐Benzyl‐N‐(phenylethyl)amine  1,3,5‐Trimethyl‐1H‐Pyrazole  Dimethylthiophene  trans‐3‐Methoxy‐5‐(4‐methoxyphenyl)‐1,2,4‐ trioxolane  Tetrahydro‐2‐methyl‐2‐furancarboxaldehyde  5‐Phenyl‐2‐tetrahydrofurylmethyl 2'‐pyridyl sulfide

Note: Results from the Greenpeace Research Laboratories.

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Table 2: SVOCs identified in wastewater sample of the formal evaporation pond No. of chemicals isolated

SVOCs (209) Compounds identified to better than 90%

Phenol & derivatives  Phenol  Methylphenol (2 isomers)  Dimethylphenol (3 isomers)  Trimethylphenol (2 isomers)  Ethylphenol  Diethylphenol (2 isomers)  Ethylmethylphenol (3 isomers)  Propylphenol  Methoxyphenol  Methylpropylphenol Pyridines derivatives  Phenylpyridine  9H‐Indeno[2,1‐b]pyridine  3,5‐Diacetyl‐1H‐pyrazole  5‐(Phenylmethyl)‐2‐pyridinamine Quinoline derivatives  Isoquinoline  Methylisoquinoline  Methylquinoline  7,8‐Dihydro‐6‐methyl‐6H‐pyrrolo[2,3‐ g]quinoline

PAHs & derivatives  9H‐Fluorene  Hydroxymethylnaphthalene  9H‐Fluorenol (2 isomers) Other compounds  Methyl‐4‐indanol  Ethylanisole  1,1'‐Biphenylol (2 isomers)  Ethynylbiphenyl  2‐Cyclohexene‐1‐carbonitrile  2,3‐Dihydro‐2‐methylbenzo[b]thiophene  3,4,5,6,7,8‐Hexahydro‐(2H)‐ naphthalenone  Allyl toluenesulfonate  10‐Azatricyclo[4.3.1.0(1,6)]deca‐2,4‐diene  Hydroxyphthalide  2,3‐Dihydro‐1H‐inden‐5‐ol  (4‐Fluorophenyl)butynone  Benzo[d]isothiazole  (E)‐2‐(2H(1)‐4‐Methoxyphenylethene  Methoxyphenylacetone  1‐Methylene‐1H‐indene  Dimethyl‐3‐phenylaziridine Note: Results from the Greenpeace Research Laboratories.

Figure 5: Total Ion Chromatograph for the sample collected from the formal evaporation pond (SVOCs) A

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Note: Results from the Greenpeace Research Laboratories.

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Wastewater discharge standards used by the coal chemical industry are currently the Integrated Wastewater Discharge Standard (GB 8978-1996) released in 1996. This covers only a limited number of substances (39 indices are suitable for all industries) and permitted levels are high. The test results from the Datang project show that these standards are not suitable for today’s coal chemical industry and are in urgent need of being updated.

The way in which wastewater is being dealt with at the Datang facility shows that the ‘zero wastewater discharge’ policy is merely a myth used in promotion and that this leading ‘model project’ in China’s coal chemical industry has serious problems that are not easily resolved.

Air Pollution Most of the synthetic natural gas products made by the Datang Hexigten project are used by Beijing, which is already plagued by serious air pollution. However, according to local residents Greenpeace interviewed, the exhaust produced by this ‘model project’ has also created extremely serious air pollution for nearby residents. Herders living in Darihanwula Sumu told Greenpeace that they have been plagued by air pollution since test production began in December 2013.

In on-site interviews conducted by Greenpeace, most residents reacted strongly, saying that as long as they were downwind from the Datang facility, there was a strong smell and they couldn’t sleep at night. Some even said that they felt dizzy. Some pointed out that their livestock have also been adversely affected with cows and horses gasping for air and ultimately dying, with both ‘number and quality’ declining.

The air pollution problem has been recognized by the local government. In a response to a complaint issued by the Hexigten EPB on July 3rd, it was admitted that the Datang coal-to-gas project has produced a ‘strong odor in the test production phase’ (Hexigten EPB, 2014).

The environmental impact report for the Datang coal-to-gas project at Hexigten indicates that there are two main sources of exhaust (Datang International Power Generation Co., Ltd & Wuhuan Science and Technology Co., Ltd, 2008). One is the chemical portion, including procedures like pressurized gasification, low-temperature methanol wash, coal gas wash and separation, cooling, coal storage facilities and wastewater treatment, which emit organic and inorganic pollutants such as carbon monoxide, sulfur dioxide, hydrogen sulfide, ammonia gas, phenols, benzo[a]pyrene and particular matter.15 Another portion of the process is the power generation facility, the typical pollutants of which are sulfur dioxide, nitrogen dioxide and particulate matter.16

15

These emissions should comply with Malodorous Pollution Emissions Standards (GB14554-93) issued in 1994 and General Air Pollution Emissions Standards (GB16297-1996) implemented in 1997.

16 Thermal Power Plant Pollution Emissions Standards (GB13223-2003) implemented in 2004 applied to emission prior to July 2014 and afterward the new standards (GB13223-2011) that went into effect on July 1, 2014 applies.

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In addition, based on the multiple VOCs that were found in waste water samples from the informal pond and the evaporation pond, it is possible that volatile pollutants given off by the pools could possibly contribute to air pollution in the surrounding areas.

However, open emission data available at government websites17 show that only emissions from the thermal power plant are monitored, not inclusive of the other two main pollution sources, the chemical plant and the wastewater treatment unit. However, even the limited data from the thermal power plant indicate that levels of nitrogen oxide have been above permitted levels for extended periods of time.

Greenpeace used open flue gas emission data disclosed at government websites18, including both company self-monitoring and government monitoring data to analyze daily average data for the Datang coal-to-gas project.

Based on the emission data monitored by the Datang Hexigten project itself, it was found that in the 296 days between January 1st and October 23rd of this year, monitoring data for facility was unavailable for the periods between April 5th-June 10th and August 26th-September 5th.

Data show that in the 203 monitored days, daily average nitrogen oxide levels exceeded permitted levels19 for 196 days, constituting an extended period, and the highest percentage above national standards were 303% (i.e. the daily average level of 805mg/mÂł at the Monitoring Site 2 on July 16th 2014 compared to the permitted level of 200mg/mÂł).

Particulate matter exceeded permitted levels for 23 days and at the highest percentage above national standards were 208%. Sulfur dioxide exceeded permitted levels for 21 days and the highest percentage above national standards was 632%.

On the other hand, the emission data monitored by the Chifeng Municipal Environmental Protection Bureau (EPB) also indicated that daily average nitrogen oxide levels exceeded permitted levels in the first three quarters of 2014.

However, despite compliance failures there is no denitration equipment installed in the plant, as pointed out in a supervisory monitoring report on the Datang project’s emission data in the third quarter of 2014 by the Chifeng Municipal EPB20.

17

See the footnote 2.

See the footnote 2.

19 Here Thermal Power Plant Pollution Emissions Standards (GB13223-2003) & (GB13223-2011) are applied. The limits are set for maximum allowed concentrations, not designated for daily average.

20 See http://www.cfhb.gov.cn/sjzx/hjsj/gkyjpsj/jdxjcsj/201408/P020140811631668800323.pdf 18

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Figure 6: Daily Average Concentrations of Nitrogen Oxide (Monitoring Site 1)

Note: Prepared by Greenpeace based on data from Platform for the Self-monitoring and Information Disclosure by the Enterprises subject to Intensive Monitoring and Control of the State in Inner Mongolia21

Figure 7: Daily Average Concentrations of Nitrogen Oxide (Monitoring Site 2)

Note: Prepared by Greenpeace based on data from Platform for the Self-monitoring and Information Disclosure by the Enterprises subject to Intensive Monitoring and Control of the State in Inner Mongolia

Table 3: Above-Standard Nitrogen Oxide Levels at the Datang Coal-to-Gas Project

Nitrogen Oxide

National Standard (mg/m続) Before After July 1st July 1st 2014 2014 450

200

No. of days above Standard (mg/m続)

Highest Recorded Level ( mg/m続)

Highest % above Standard

196

912 February 24th, Monitoring Site 1

303 July 16th, Monitoring Site 2

Note: Prepared by Greenpeace based on data from Chifeng Municipal EPB22.

21 22

See http://nmgepb.gov.cn:8088/enterprisemonitor/webpage!indexPage.action See http://www.cfhb.gov.cn/sjzx/hjsj/gkyjpsj/jdxjcsj/index.html.

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Policy Recommendations: No Active Promotion until a Working Model is Established The problem of concentrated greenhouse gas emissions from coal-to-gas technology has received a great deal of attention and the issues of air pollution and waste water disposal at Datang’s Hexigten project, a flagship model program in China’s coal-to-gas development efforts, must not be overlooked (Gong & Li, 2014; Yang & Jackson, 2013). This issue warrants close attention by the National Energy Administration and Ministry of Environmental Protection. The truth is that Datang’s Hexigten Qi project and Kingho’s Yili project, two of China’s four coal-to-gas model projects begun during the 11th Five Year Plan, still have many problems that are not yet resolved. While construction has yet to begin on the other two projects, production volume at the two operational projects remains far below design specifications. Considering all this together, it would seem that China’s coal-to-gas industry still lacks a successful model to follow.

The haze that shrouds nearly much of China should be a warning that the old path of ‘pollute first, clean up later’ is a mistake. As far as the coal-to-gas industry is concerned, we should remain cautious and careful. Greenpeace calls on industry and government to consider the following: First, China’s National Energy Administration should adopt a more cautious policy by establishing a model before expanding.

China’s energy policy under the 13th Five Year Plan is currently being developed and planned coal-to-gas production has the potential to reach 50 billion cubic meters per year. This is the wrong signal and may cause multiple projects to push ahead blindly. We recommend that the National Energy Administration set production volume of China’s coal-based synthetic natural gas to be below 20 billion cubic meters by 2020. The first four model projects can be completed first and used as a platform to gain experience in production technique and resolve technological bottlenecks like excessive energy and water use as well as pollution. At the same time, this will allow for environmental standards to be established and sufficient time to consider the next step of expansion.

Second, The Ministry of Environment Protection should implement a strict Coal Chemical Pollution Emission Standards as soon as possible. Technology used to treat waste water in the coal-to-gas industry is a global problem as there is a great deal of highly toxic waste water and sediment created in the production process. It is easy to see through the lie of ‘zero wastewater discharge’ when evidence is so clear to the contrary in the form of huge lakes filled with hazardous waste water that cannot be fully treated. This is also due to the lack of discharge standards in the treatment of waste water. The Waste Water Discharge Standards passed in 1996 are seriously outdated and are far from applicable to the treatment of waste water produced by the coal chemical industry.

We call on the Ministry of Environment Protection to strengthen the monitoring of volatile organics and other pollutants. The Ministry of Environmental Protection should also make

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information more available to the public and place all coal chemical projects on the list of national priority monitored institutions. The scope of public information should include gas emissions, waste water and sediment that result from production processes in coal chemical plants as well as pollutants produced by thermal power plants connected to them.

Third, the NDRC should implement practical controls on the increase in carbon emissions by the coal chemical industry. The energy efficiency of coal-to-gas projects is far lower than other technology pathways and produces extremely concentrated carbon emissions, nor does it as of yet have a way of being economically viable(Ding, Han , Chai, Yang , & Shen, 2013; Li , Yang, Zhang, Kraslawski, & Qian, 2014). This is extremely detrimental to national efforts to conserve energy and reduce emissions, very possibly leading to a new high carbon lock-in effect and impact China’s ability to reach peak carbon emissions levels it has set by 2030.

The NDRC should work with China’s long-term environmental policies to strictly control the development scale of coal chemical industries like coal-to-gas and integrate the coal chemical industry into China’s coal market system as soon as possible. It should also begin collecting a carbon tax.

Fourth, relevant government departments should give greater consideration to the carrying capacity of water resources. China is a country with a serious water deficit and water resources are unevenly distributed throughout the country with water necessary to maintain ecosystems often being used for industrial purposes. The coal chemical industry, including coal-to-gas manufacturing, uses massive amounts of water and most facilities are located in inland regions of northwestern China, placing great pressure on local water resources. In 2011, the State Council implemented a system to ensure the ‘strictest management of water resources’, establishing three ‘red lines’ including total water usage for each province, requiring that they to follow them explicitly23.

We recommend that national plans for coal chemical development are brought in line with water resource management policies and that water intensive coal chemical projects be strictly controlled. Local governments should reflect the true scarcity of water resources in the water prices and consider very carefully the use of water transfer projects or water rights exchange trials. They should also strictly forbid industrial use of agricultural or ecological water resources.

23

See Opinions of the State Council on Applying the Strictest Water Resources Control System(2012) (http://www.gov.cn/zwgk/2012-02/16/content_2067664.htm)

15

References Bernton, H. (2014, May 3). China’s coal solution has carbon downside across globe. The Seatle Times.

Retrieved from http://seattletimes.com/html/specialreportspages/2023517279_chinaenergyxml.html Chen, D. (2014, October 17). 一个煤制气示范工程的真实面貌[The true face of a coal-to-gas model project]. China Chemical Industry News. Retrieved from http://mp.weixin.qq.com/s?__biz=MjM5OTI1NDg0OQ==&mid=201015024&idx=1&sn=1c325 2bd628acf972adc0000db838454&scene=2&from=timeline&isappinstalled=0#rd Chifeng Municipal Water Resources Bureau. (n.d.). 赤峰市水利资源开发利用情况汇报 [Report on water resources use and development in Chifeng City]. Chifeng: Chifeng Municipal Water Resources Bureau.

Datang Hexigten Coal-to-Gas Project. (n.d.). 灰渣场蒸发塘简介[A brief introduction of evaporation pond][Billboard]. Chifeng: Datang Hexigten Coal-to-Gas Project.

Datang International Power Generation Co., Ltd & Wuhuan Science and Technology Co., Ltd. (2008). 内蒙古大唐国际克旗日产 1200 万 m3 煤制天然气项目环境影响报告书简本[An abridged environmental impact report of Datang Hexigton Coal-to-Gas Project with a daily capacity of 12 million m3]. Retrieved November 17, 2014, from Doc88: http://www.doc88.com/p-772457570715.html Ding, Y., Han , W., Chai, Q., Yang , S., & Shen, W. (2013). Coal-based synthetic natural gas (SNG): A solution to China’s energy security and CO2 reduction? Energy Policy, 55, 445-453. doi:10.1016/j.enpol.2012.12.030 Duan, X. (2014, August 8). 神华有意接手大唐克旗煤制气 更看重管道资产[Shenhua shows interest in taking over Datang Hexigten Coal-to-Gas project: More valuing pipeline assets].

21st Century Business Herald. Retrieved from http://money.21cbh.com/2014/8-8/xMMDAzMDdfMTI2MTcxMg.html Gai, H., Jiang, Y., Qian, Y., & Kraslawski, A. (2008). Conceptual design and retrofitting of the coal-gasification wastewater treatment process. Chemical Engineering Journal, 138(1-3), 84-94. doi:10.1016/j.cej.2007.05.032 Gong, M., & Li, H. (2014). High carbon emission risks of smog control measures——The case of replacing coal with coal-to-gas. In Y. Qi (Ed.), Annual Review of Low-carbon Development in China (2014) (pp. 62-76). Beijing: Social Sciences Academic Press.

Guo, L. (2014, September 10). 大唐发电煤化工项目巨亏调查 10 年砸 600 亿[Invistigation of huge loss of Datang Power's coal-to-chemical projects: 60 billion in 10 years]. China Securities Journal. Retrieved from http://money.21cbh.com/2014/9-10/4MMDAzMDdfMTMwMjI4Mg.html Hexigten Environmental Protection Bureau (EPB). (2014). 关于达日罕乌拉苏木牧民对大唐公司环 境信访案件办理情况的答复(克环发[2014]131 号[A reply to herders of Darihanwula Sumu about the environmental complaint against Datang Company(Hexigten EPB No. [2014]131].

Chifeng: Hexigten EPB. Inner Mongolia Dalinuoer Nature Reserve Managing Office. (n.d.). 自然保护区概况[Overview of the Nature Reserve]. Retrieved November 17, 2014, from China's Dalinuoer: http://www.kqdlh.com/view_zrbh_article.php?id=1204 Li , H., Yang, S., Zhang, J., Kraslawski, A., & Qian, Y. (2014). Analysis of rationality of coal-based synthetic natural gas (SNG) production in China. Energy Policy, 71, 180-188.

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doi:10.1016/j.enpol.2014.04.018 Wang, D. (2014, September 24). 内蒙古煤制气年底暖京城[Coal-based synthetic natural gas from Innter Mongolia warms Beijing end of this year]. Beijing Daily, p. 5. Retrieved from http://bjrb.bjd.com.cn/html/2013-09/24/content_111198.htm Wang, W., Han, H., Yuan, M., Li, H., Fang, F., & Wang, K. (2011). Treatment of coal gasification wastewater by a two-continuous UASB system with step-feed for COD and phenols removal.

Bioresource Technology, 102(9), 5454-5460.

Xu, P., Han, H., Hou, B., Jia, S., & Zhao, Q. (2014). Treatment of coal gasification wastewater by a two-phase anaerobic digestion. Desalination and Water Treatment, 1-11. doi:10.1080/19443994.2014.884474 Yang, C.-J., & Jackson, R. B. (2013). China's synthetic natural gas revolution. Nature Climate Change(3), 852-854. doi:doi:10.1038/nclimate1988 Zhang, L. (2014, January 19). 内蒙古大唐国际克什克腾旗煤制天然气公司发生中毒事故已致 2 死 4 伤[A poisoning accident in Inner Mongolia Datang International Hexigten Coal-to-Gas Co., Ltd killed 2 injured 4]. Retrieved from http://inews.nmgnews.com.cn/system/2014/01/19/011398154.shtml

17

Appendix 1: Financial Analysis of Datang Coal Chemical In addition to the problems of environmental pollution connected with the Datang Hexigten coal-to-gas project, another point that should be of special interest to investors are the continued losses of Datang Power’s entire coal chemical business unit, which can be mainly attributed to high capital costs, the difficulty of operation and the lack of mature technology.

Financial reports of the Datang International Power Generation Co., Ltd. clearly show that revenue from its coal chemical business unit is severely behind. In the company’s 2013 financial report, its coal chemical business showed the poorest performance out of all business units with a total loss of 2.18 billion RMB, creating a striking comparison with its high-revenue generating power production and coal product units.

2013

Power Production

Coal Products

Coal Chemical

Other Units

Total

Unit Revenue External Transactions

65,629,209

4,210,348

4,937,628

450,273

75,227,458

Inter-unit Transactions Total Revenue

756,266 66,394,475

21,639,602 25,849,950

6,373 4,944,001

106,405 556,678

22,517,646 97,745,104

Unit Performance

9,494,603

462,951

-2,186,275

435,511

8,206,790

Depreciation/Amortization Revenue (Losses) from Selling Off of Land, Facilities and Equipment Revenue from Long-term Investment Losses from Asset Depreciation Interest Revenue

8,824,693 43,630

217,942 33

988,499

93,357 -167

10,124,491 43,496

-16,926

-16,926

-674

-1,263,811

-717,657

-545,480

64,730

7,093

6,293

1,388

79,504

Interest Payments

6,794,882

292,225

1,009,725

87,676

8,184,508

Profit from Jointly Operated Companies Profit from Joint Ventures

24,329

438,513

214,979

677,821

133,030

114

Income Taxes

2,395,068

181,576

133,144 -249,920

63,284

2,390,008

Source: Datang International Power Generation Co., Ltd. 2013 Financial Report

However, despite being the worst performing business unit in the company, coal chemical operations took up one of the largest portions of the company’s assets.

The following balance sheet shows coal chemical operations to hold the second largest proportion of assets at Datang Power, reaching 23.7%, but contributes only 5.2% of its revenue. Meanwhile, the coal chemical business unit ran at a loss in 2013, having a generally negative impact on the company’s overall profitability.

18

Asset Ratios for 2013

Revenue Ratios for 2013

Profit Ratios for 2013

Power: 63.5% Coal: 9.4% Coal Chemical: 23.7% Other: 3.4%

Power: 66.9%

Power: 115.7% Coal: 5.6% Coal Chemical: Loss Other: 5.3%

Coal: 27.2% Coal Chemical: 5.2% Other: 0.6%

Source: Derived by Greenpeace from Datang International Power Generation Co., Ltd. Annual Report 2013

The disappointing performance of the coal chemical business unit caused Datang Power to announce on July 8, 2014 that it had signed a ‘Restructuring Agreement for Coal Chemical and Related Projects’ that would restructure operations at the Hexigten Qi coal-to-gas project, Duolun coal chemical project, the Hulun Buir fertilizer project and Xilinhot mining project in Inner Mongolia as well as the Fuxin coal-to-gas project in Liaoning Province24.

This news resulted in a massive 20% increase in the value of Datang Power stock, which reached a new record high of 3.76 RMB at the end of the trading day.

Note: Based on open data available from Yahoo Finance.

Most investment analysts are optimistic about the deal and believe that the constant problems and continued losses that the Datang Group faced in its coal chemical business, which it viewed as a way to diversify its coal business, simply turned out to be more trouble than it was worth.

24

See http://static.sse.com.cn/disclosure/listedinfo/announcement/c/2014-07-07/601991_20140708_4.pdf

19

Analysis by Nomura Securities titled “Goodbye Coal Chemical” states that delays and forced technical conversions of the Datang coal chemical project ‘severely tested the patience of investors’ and the divestment of this business took the pressure off that kept its stock price so low25.

Analysis by Deutsche Bank also says that this was ‘good news for the company’ as the market generally felt it was the coal chemical business that had caused losses for the company, resulting in the stock price of Datang Power to drop 46%, 30% and 122% over 6-month, 12-month and 36-month periods26.

25

See Lam, J., & Tang, T. (2014). Quick Note - Datang International Power (991 HK, Buy) - Let it go – GOOD bye coal-chemical. Hongkong: Nomura.

26 See Deutsche Bank. 2014. Datang Int'l Power Alert - Significant value unlocking potential from coal chemistry business disposal.

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Appendix 2: 54 Coal-to-Gas Projects Completed, Under Construction or Planned

No.

1

Project Name

Datang Coal-to-Gas Plant, Hexigten Qi

Province

Inner Mongolia

Capacity (billion cubic meters(bcm)/year)

Project Progress

4

Phase 1 of 1.33 bcm/year in production; Phase 2 under construction

2

Kingho Coal-to-Gas Plant, Ili, Xinjiang

Xinjiang

5.5

Phase 1 of 1.375 bcm/year in production; Phase 2 design tendering

3

Datang Coal-to-Gas Plant, Fuxin

Liaoning

4

Phase 1 under construction

4

Huineng Coal-to-Gas Plant, Ordos

Inner Mongolia

1.6

Phase 1 under construction

5

Inner Mongolia Mining Coal-to-Natural-Gas Plant, Ili

Xinjiang

2

Phase 1 under construction

6

Guodian coal-to-gas plant, Xing'an League

Mongolia

4

In preparation

7

Xinmeng coal-to-gas plant, Ordos

Inner Mongolia

4

In preparation

8

Beikong coal-to-gas plant, Ordos

Inner Mongolia

4

In preparation

9

CNOOC coal-to-gas plant, Ordos

Inner Mongolia

4

In preparation

10

Hebei Jiantou coal-to-gas plant, Ordos

Inner Mongolia

4

In preparation

11

Huaxing coal-to-gas plant, Ordos

Inner Mongolia

4

In preparation

12

China Power Investment Corp coal-to-gas plant, Huocheng

Xinjiang

6

In preparation

21

13

Suxin Energy coal-to-gas plant, Hefeng

Xinjiang

4

In preparation

14

Guanghui coal-to-gas plant, Kamusite

Xinjiang

4

In preparation

15

Huaneng coal-to-gas plant, Zhundong

Xinjiang

4

In preparation

16

SINOPEC coal-to-gas plant, Zhundong

Xinjiang

8

In preparation

17

Longyu coal-to-gas plant, Zhundong

Xinjiang

4

In preparation

18

Zhejiang Energy Group coal-to-gas plant, Zhundong

Xinjiang

2

In preparation

19

Xinjiang Tianye Group coal-to-gas plant, Zhundong

Xinjiang

4

In preparation

20

CNOOC coal-to-gas plant, Datong

Shanxi

4

In preparation

21

Wanneng coal-to-gas plant, Fengtai

Anhui

2.2

In preparation

22

Shenhua coal-to-gas plant, Ordos

Inner Mongolia

4

Feasibility study being compiled

23

Guodian Pingmei coal-to-gas plant, Nilka

Xinjiang

4

Being filed

24

China Power Investment Corp coal-to-gas plant, Yinan

Xinjiang

6

Being filed

25

TBEA coal-to-gas plant, Zhundong

Xinjiang

4

Being filed

26

Huadian coal-to-gas plant, Zhundong

Xinjiang

4

Being filed

27

China Coal coal-to-gas plant, Zhundong

Xinjiang

4

Being filed

Xinjiang

4

Being filed

28

Yan Mining coal-to-gas plant,

22

Zhundong 29

Kailuan coal-to-gas plant, Zhundong

Xinjiang

4

Being filed

30

Changji Shengxin coal-to-gas plant

Xinjiang

1.6

Being filed

31

Huahong Mining coal-to-gas plant, Zhundong

Xinjiang

2

Being filed

32

Shendong Tianlong coal-to-gas plant, Zhundong

Xinjiang

1.3

Being filed

33

Sanyi coal-to-gas plant, Zhundong

Xinjiang

4

Being filed

34

Beikong New Energy coal-to-gas plant, Zhundong

Xinjiang

4

Being filed

35

Ziguang coal-to-gas plant, Hami

Xinjiang

0.8

Being filed

36

Hongsheng New Energy coal-to-gas plant, Zhangye

Gansu

4

Being filed

37

Huaneng coal-to-gas plant, Hulun Buir

Inner Mongolia

4

Being filed

38

Jinneng Group coal-to-gas plant, Shuozhou

Shanxi

4

Being filed

39

Xinfeng Cement coal-to-gas plant, Handan

Hebei

1.8

Being filed

40

Xing'an Boyuan Coal-to-gas plant, Xing'an League

Inner Mongolia

4

Submitted to NEA

41

Huaneng coal-to-gas project, Weinan Heyang

Shaanxi

4

Contract signed Oct 2014

42

Anhui Jingwan coal-to-gas project, Anqing

Anhui

4

Contract signed Oct 2014

43

Zhendong New-Energy coal-to-gas project, Baotou

Inner Mongolia

6

Contract signed Aug 2014

23

44

Bohai Chemical coal-to-gas plant, Ordos

Inner Mongolia

8

Contract signed Feb 2014

45

Tianjin Energy Investment coal-to-gas plant, Hulun Buir

Inner Mongolia

16

Contract signed Jan 2014

46

Jinshajiang Chuangtou coal-to-gas plant, Ningdong

Ningxia

N/A

Contract signed Jan 2014

47

Inner Mongolia Fortune Energy coal-to-gas plant, Bayannaoer

Inner Mongolia

4

Contract signed Jan 2014

48

Hebei Jiantou coal-to-gas plant, Hulun Buir

Inner Mongolia

16

Contract signed Nov 2013

49

Xinjiang Energy coal-to-gas plant

Xinjiang

8

Feasibility study tendered Oct 2013

50

Guoneng coal-to-gas plant, Baotou

Inner Mongolia

4

Contract signed Sep 2013

51

Guochu Energy coal-to-gas plant, Alxa League

Inner Mongolia

4

Contract signed Sep 2013

52

Shandong Energy Shenglu Energy & Chemical coal-to-gas plant, Ordos

Inner Mongolia

10

Contract signed Sep 2013

53

Xinjiang Development and Construction Corp Xiexin Coal-to-gas Plant, Yining

Xinjiang

4

Contract signed Sep 2013

54

Inner Mongolia Mining coal-to-gas plant, Hohhot

Inner Mongolia

4

Contract signed Sep 2013

Data Sources and Processing: This list of coal-to-gas project at various stages of development (as of October 2014) is an update to the list published by Greenpeace in June 201427, which is compiled based on a wide range of public information available online, including government documents, EIA reports and news reports, project lists created by other institutions. We eliminated projects that have had no new information since 2012. For more information, please contact Greenpeace.

27

See the Chinese version http://www.greenpeace.org/china/zh/publications/reports/climate-energy/2014/chinese-coal-to-gas-industry-analysis/.

Please contact Greenpeace for the English version.

24