What is the significance of the approval for the environmental impact assessments of the two coal chemical projects in Shanxi?

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What is the significance of the approval for the environmental impact assessments of the two coal chemical projects in Shanxi? Author/Source: Date: 2016-03-23 Clicks: 9. Nine days ago, the environmental impact assessments for Shanxi Lu’an Mining (Group) Co., Ltd.’s integrated demonstration project for the clean utilization of high-sulfur coal for oil, chemical, and thermal applications, as well as China National Offshore Oil Corporation’s demonstration project for the clean utilization of low-metamorphic bituminous coal in Datong, Shanxi, were approved by the Ministry of Environmental Protection on the same day, drawing significant attention in the industry. Some believe this is a sign indicating encouragement for the development of modern coal chemical industry, while others think that modern coal chemical industry will once again benefit from favorable policies. So, what significance does the approval of the environmental impact assessments for these two projects hold for the future development of modern coal chemical industry? A reporter from China Chemical Industry News conducted an interview. Environmental assessment requirements have not been relaxed. “Regarding the environmental impact assessment reports for the recently approved coal-to-oil and coal-to-gas projects in Shanxi’s Lu’an region, I believe that on one hand, this is an indication of the Ministry of Environmental Protection’s commitment to implementing the ‘Environmental Access Conditions for Modern Coal Chemical Projects (Trial)’” ； On the other hand, this confirms that the Ministry of Environmental Protection has no prejudice against such projects; as long as the project location is appropriate, the layout is optimized, various environmental risk prevention measures are properly designed, the regional emission limits are met, and the principles of green development are followed, there is a high likelihood that the project will be approved. ” Dr. Feng Xiangzhao, an associate researcher at the Center for Environment and Economic Policy Studies under the Ministry of Ecology and Environment, said this in an exclusive interview with a reporter from China Chemical Industry News. “After 22 months, a new coal chemical project has finally received approval for its environmental impact assessment, signaling the arrival of another spring for China’s coal chemical industry. ”The head of a coal chemical company appeared somewhat excited in an interview with a reporter from China Chemical Industry News. He believes that this move means that large-scale coal chemical projects, which have been repeatedly set aside since 2015, have once again received approval from the Ministry of Environmental Protection. Reporters from China Chemical Industry News noted that these two coal chemical projects represent the first new coal chemical projects to receive approval from the Ministry of Environmental Protection for their environmental impact assessments, since the 100-billion-yuan project for comprehensive utilization of coal in Yulin carried out by China Shenhua was approved by that ministry at the end of May 2014. They are also among the first modern coal chemical projects to get such approvals since Chen Jining took office as the new Minister of Environmental Protection. During this year’s National ** event, Chen Jining stated publicly that the clean use of coal can actually be as environmentally friendly as that of natural gas, and that significant progress has been made in technologies for the clean utilization of coal. “These are indeed the first modern coal chemical projects to receive approval from the Ministry of Environmental Protection in 22 months. ”Dr. Feng Xiangzhao told reporters that since the second half of 2014, environmental impact assessments for new coal chemical projects have not been approved by the Ministry of Environmental Protection anymore. In 2015, the Ministry of Environmental Protection tightened the environmental impact assessments for new coal chemical projects, and the environmental impact assessments for several large-scale coal chemical projects were rejected. For example, Jiangsu Su New Energy’s coal-to-natural gas project with a capacity of 4 billion cubic meters per year, Yili Xintian’s coal-to-gas project with a capacity of 2 billion cubic meters per year, and Lu’an’s coal-to-oil project – all of these projects submitted new environmental impact assessment reports in the same year. Several industry insiders told reporters that coal chemical projects, which were set aside by the Ministry of Environmental Protection last year, are expected to receive approval this year. For example, the Su New Energy coal-to-natural gas project, as well as the 2 billion cubic meters per year coal-to-natural gas project of Yili Xintian Coal Chemical Co., Ltd., are currently under review and public disclosure by the Ministry of Environmental Protection. According to the latest announcements on the **Ministry of Environmental Protection’s website, based on the main environmental impacts and corresponding measures, public participation, as well as the opinions of relevant departments, it is likely that the environmental impact assessments for these projects will also be approved, if nothing goes wrong. Industry experts say that although there is still debate regarding the path for the new coal chemical industry, in terms of the overall development direction, the fact that these two coal chemical projects in Shanxi have received environmental approval simultaneously is just one sign of things getting better. It is expected that in the coming time, those new coal chemical projects that have already invested significant capital, received strong local support, play a crucial role in ensuring energy security, and are essential for helping companies achieve positive transformation, will likely receive approval one after another. When asked by reporters whether the simultaneous approval of the Lu’an coal-to-oil project and the Datong coal-to-gas project carried some symbolic significance, Dr. Feng Xiangzhao said, “Judging from the details of the approvals, these two projects have indeed met the environmental protection requirements set by the Ministry of Environmental Protection through supplementary improvements.” **The Ministry of Environmental Protection has also not relaxed the environmental impact assessment requirements for coal chemical projects. If we must identify some symbolic significance, it could be said that the Environmental Protection Department has normalized the environmental impact assessment process for coal chemical projects. Going forward, more coal chemical projects may see their environmental impact assessments approved, but the pace of approval could also slow down, with some projects that do not meet the environmental assessment requirements still being rejected. ” An industry expert told a reporter from China Chemical Industry News that as China’s coal industry accelerates its capacity reduction and transformation process, it has reached a critical point where it is necessary to make the coal chemical industry the main direction for development. Strict scrutiny will be the norm. \"I compared the documents regarding the rejection and subsequent approval of the Lu’an project; it seems that the environmental impact assessment report required specific supplementary revisions, and the local authorities also made a lot of efforts.\" ”Dr. Feng Xiangzhao told reporters that if the People’s Government of Changzhi City issues a \"Notice on the Allocation of Responsibilities for Reducing Regional Pollution Sources,\" it will ensure that measures to reduce regional pollution such as shutting down and transferring polluting facilities, upgrading environmental protection equipment, replacing them with clean energy sources, and building new sewage treatment plants are carried out on time. This will help to prove that the capacity of the air and water environments can be maintained ； The People’s Governments of Xiangyuan County and Lucheng City, where the enterprise is located, have committed, in accordance with Documents Xiang Zheng Fa (2016) No. 8 and Lu Zheng Ban Fa (2016) No. 16, to carry out the relocation of residents within the designated health and epidemic prevention zones on schedule. The reporter reviewed the website of the Ministry of Environmental Protection as well as the websites of relevant companies, in order to gather information on the basic details of these two coal chemical projects and the approvals granted for them. The Ministry of Environmental Protection approved the CNOOC project, stating that its construction complies with relevant plans such as the \"Overall Development Plan for the Zuo Yun Coal Chemical Industry Base in Datong City\", as well as the requirements outlined in environmental impact assessments for planning purposes. It also meets the requirements set out in the \"Environmental Access Conditions for Modern Coal Chemical Projects (Trial Version)\“. After implementing the regional reduction measures and the various environmental protection measures outlined in the environmental impact assessment report, the emissions of various pollutants can meet the specified standards, and the levels of key pollutants comply with the requirements for total emission control. “In principle, we agree with the nature, scale, process, location of the construction project, as well as the environmental protection measures outlined in your company’s environmental impact report. ” The Ministry of Environmental Protection approved the coal-to-oil project in Lu’an, Shanxi, stating that the project as a whole meets the requirements of the \"Environmental Access Criteria for Modern Coal Chemical Industry Projects (Trial)\”. However, the groundwater in certain areas of the industrial site has poor pollution prevention capabilities, posing a risk of contaminating sensitive groundwater areas such as the Xin’an Spring Protection Zone and the centralized water supply sources in Wangqiao Town. Moreover, the area in question has limited environmental capacity and a high population density; therefore, it is necessary to strictly implement various pollution control measures and regional reduction strategies, strictly control the population size within the industrial park, and adopt the strictest environmental risk prevention measures and monitoring programs. After strictly implementing the regional reduction measures and various environmental protection measures outlined in the environmental impact assessment report, the emissions of various pollutants can meet the specified standards, and the emissions of key pollutants comply with the requirements for total emission control. “After comprehensive consideration, our department agrees in principle to the nature, scale, process, location of the construction project, as well as the environmental protection measures outlined in your company’s environmental impact report. ” “The approval of the environmental impact assessments for these two projects does not mean that the Ministry of Environmental Protection has relaxed its regulations regarding the environmental impact assessment of coal chemical industries. ”An industry insider told a reporter from China Chemical Industry News that this year, the environmental impact assessments for some coal chemical projects were also rejected, such as the 600,000 tons per year polyolefin project of Sinopec Great Wall Energy Chemical (Guizhou) Co., Ltd. “The approval of the Lu’an project was ultimately granted due to its status as a **coal-to-oil demonstration project; it is believed that the National Development and Reform Commission and the Energy Bureau also carried out corresponding coordination and communication efforts. ”Dr. Feng Xiangzhao believes that although environmental impact assessments for coal chemical projects will be approved one after another, these are mainly projects left over from the past. In the future, the Ministry of Environmental Protection will remain cautious, strict, and standardized in approving environmental impact assessments for modern coal chemical projects; it is not possible to grant unrestricted approval for such assessments. It is hoped that some coal chemical companies will not misinterpret or misunderstand this approach. The main theme of demonstration remains unchanged. Reporters noted that the outline for the 13th Five-Year Plan, which was just approved nationwide this year, identifies 100 large-scale projects for China over the next five years; the “Project for Clean and Efficient Utilization of Coal” is among them. Modern coal chemical processes such as coal-to-oil, coal-to-natural gas, conversion of coal to olefins via methanol, coal-to-dimethyl ether, and coal-to-aromatics represent effective ways to achieve clean and efficient utilization of coal, indicating that there is approval for the development direction of modern coal chemistry. He Yongde, an expert from the Coal Chemical Industry Committee of the China Petroleum and Chemical Industry Federation and honorary president of the Shaanxi Chemical Industry Society, pointed out that modern coal chemical industry in China will still have considerable room for development during the 13th Five-Year Plan period, but demonstration projects will remain the dominant approach. Modern coal chemical projects must not only comply with **industry policies** and meet the technical standards such as energy consumption requirements set out in existing draft guidelines like those on standardizing coal-based fuel development and the regulatory requirements for the coal-based olefins industry, but they also need to analyze market trends, keep track of market dynamics, and identify potential markets – with these potential markets mainly referring to fuels and petrochemical products that can serve as substitutes for imported ones in large quantities. **Li Ye, the chief economist of the Energy Bureau, revealed that **the bureau has preliminarily proposed five types of demonstration models for upgrading, namely coal-based ultra-clean petroleum products, hierarchical and differentiated utilization of low-grade coal, coal-to-natural gas, comprehensive utilization of coal and oil, and production of key chemicals from coal. According to Li Ye, the **Energy Bureau will work with relevant departments to study support policies for the deep processing of coal, such as incentives for the first set of equipment. At the same time, taking full account of the differences between coal-to-oil production and refining processes, research is conducted on a VAT rate suitable for coal-to-oil production. In addition, the differences between coal-derived oil products and petroleum-based products in terms of scarcity and cleanliness will be taken into consideration to establish a consumption tax applicable to coal-derived oil. Gu Zongqin, director of the Petroleum and Chemical Industry Planning Institute, said that with falling oil and natural gas prices, **many projects approved by the National Development and Reform Commission may need to have their preliminary work extended. “It is not possible to bring all eight coal-to-oil projects online, with a total capacity of 24.4 million tons per year; nor can the entire 87.3 billion cubic meters per year of coal-to-natural gas production be established by 2020, as the construction period for such projects is relatively long. ”He said that according to the plan, during the 13th Five-Year Plan period, there will be no simple expansion of scale at the existing level; instead, efforts will focus on carrying out upgrades and demonstration projects as well as fostering innovative development while controlling the overall volume. The emphasis will be on improving energy efficiency, reducing resource consumption and pollution emissions, enhancing the optimization and integration of systems, and lowering construction costs. Industry experts warn that in the past, many coal chemical projects were constructed without prior approval, which poses two main risks: policy risks and market risks. Coal chemical enterprises need to take precautions in this regard; they must adhere to laws and regulations and must not start construction without approval, otherwise the consequences could be disastrous. Journalists’ investigations have revealed that the total investment in coal chemical projects currently under construction or built without prior approval across the country amounts to a staggering trillion yuan. Taking Shaanxi province alone as an example, the total investment in the nine new coal chemical projects currently under construction there amounts to 300 billion yuan. ““I believe the approval of the environmental impact assessments for these two projects holds demonstrative significance in five aspects,” said Tang Hongqing, consultant at Beijing Zhongke Synthetic Oil Engineering Co., Ltd., in an exclusive interview with a reporter from China Chemical Industry News. First, the products produced by these two projects are in demand in the domestic market, given that China’s resource profile is characterized by abundant coal, limited oil, and scarce gas. Secondly, they are beneficial to the development of the local economy; both projects are located in Shanxi. It’s unclear whether this is a coincidence, but in any case, they contribute to the economic growth of Shanxi. Thirdly, it helps to promote the development of various industrial chains related to coal chemical equipment manufacturing, transportation, and materials in the domestic market. Although international oil prices are currently hovering around $40 per barrel, it takes at least three to four years to complete coal chemical projects; by that time, oil prices may be unpredictable. Nevertheless, the construction phase of these projects can contribute to infrastructure development and job creation. Fourth is the demonstration of environmental protection for large-scale coal chemical projects. Fifth, the small number of projects that have passed environmental approval indicates that large-scale coal chemical projects should be developed in an orderly manner. Some industry experts argue that international crude oil prices are likely to remain low for a long time. With low oil prices, the comparative advantages of modern coal chemical industries no longer exist; most of the existing coal chemical projects are operating at a loss. While a few projects manage to generate some profits, these are still negligible in comparison to the huge investments made. Therefore, the time is not right for large-scale development of coal chemical industry, and it is even less appropriate to rush into it. I hope everyone will be more cautious and rational when considering launching modern coal chemical projects.