Coal troubles pile up for Energy Commissioner

Date: 02/07/1998

By Chris Johnstone

INTENSE pressure is being exerted on Energy Commissioner Christos Papoutsis to alter or delay a key decision on state aid to the coal industry.

Politically, Papoutsis is caught between a rock and a hard place, with both the German and British governments looking to him to deliver a decision which will help salvage their struggling coal sectors.

A recommendation that German export aid for high quality anthracite coal be outlawed and past government payments to mining companies be repaid was circulated by Papoutsis' officials to the top aides of other European Commissioners in mid-June.

It was sent back for further drafting, and a new version of the proposal which was due to be discussed last week was withdrawn at the last minute.

Critics of the latest delay suggest Papoutsis may be bowing to German pressure to postpone a decision until after the country's general election in September. German Chancellor Helmut Kohl and Industry Minister Günter Rexrodt have both called on Papoutsis to rethink his recommendation that the aid should be banned and cash repaid, warning that such a decision would be disastrous ahead of the German election.

In theory, the possibilities for foot-dragging by Papoutsis are almost unlimited. He can keep the issue within his directorate-general and away from the full Commission on the pretext that a final text of his recommendation is not ready.

But the British government and Welsh parliamentarians are demanding fast Commission action to safeguard remaining mining jobs in the UK.

London froze the building of new gas-fired reactors to provide electricity for the national grid last week and tinkered with the 'pool' system of competitive bids to supply power. The move was designed to favour coal-fired power stations and offer the coalmining sector a lifeline.

The amounts of money involved in the anthracite case are fairly small. The two German companies accused of dumping cheap coal on the UK market, Preussag Anthrazit and Sophia Jacoba, would only have to repay around 50 million ecu if the decision went against them.

However, the case would set an important precedent that competition rules should, in practice, apply to the EU's widely subsidised coal sector.

This was ignored while all European mines were receiving government aid, but the emergence of a privatised UK sector meant that it, and the British government, were no longer willing to turn a blind eye to damaging subsidies.

A string of Welsh coalmines, including the cooperative Tower Colliery, have lodged complaints with the UK government about subsidised exports of German coal. They stepped into the gap left by the main British anthracite producer Celtic Energy when it dropped its complaint after coming to an agreement with the private coal companies.

Industry observers say German producers have halted exports of subsidised coal, which were priced 10&percent; below much lower quality Chinese fuel, pending a Commission decision.

The institution is also expected to rule within the next two weeks on German moves to restructure the coal industry by creating a giant coal company, led by RuhrKohle, which would include the two anthracite producers at the centre of the subsidies case.

The British government has questioned aspects of this deal, saying that state aid appears to be involved in the sale of one mining company for a symbolic one deutschemark, although one of its assets includes a power station.