VZCZCXRO3277
PP RUEHAST RUEHCN RUEHGH RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD RUEHTM
RUEHVC
DE RUEHBJ #4495/01 3460139
ZNR UUUUU ZZH
P 110139Z DEC 08
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 1313
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUEAEPA/HQ EPA WASHDC
RHMFIUU/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 03 BEIJING 004495 
 
STATE FOR EAP/CM-HABJAN 
STATE FOR OES, OES/EGC, OES/ENV and EEB 
STATE PASS TO CEQ CONNAUGHTON 
USDOE FOR EERE/MIZROCH 
EPA FOR INTERNATIONAL/MKASMAN 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: SENV ENRG KGHG CH
 
SUBJECT: Coal Bed and Coal Mine Methane (CBM/CMM) in China: 
Opportunities and Challenges for Project Development, Methane 
Reduction, and Utilization 
 
¶1. (SBU) SUMMARY:   A two-day international symposium and follow-on 
workshop on coal bed/coal mine methane (CBM/CMM) and carbon trade in 
China was held December 4-5, 2008, in Beijing.  Both the symposium 
and workshop stressed progress made in existing CBM/CMM projects, 
the opportunity for future projects with the advent of more advanced 
CBM/CMM oxidizing technology, and the growth of China's CBM/CMM 
incentive policies.  Significant challenges to the CBM/CMM project 
process remain, especially in the areas of developing safe 
technology for draining highly volatile methane gas, navigating the 
complex legal and regulatory barriers associated with CBD/CMM 
project development, and streamlining bottlenecks associated with 
the Clean Development Mechanism application process, a process that 
hinders CBM/CMM project development and utilization in China.  END 
SUMMARY. 
 
¶2.  (U) The symposium was held under the auspices of China's State 
Administration of Coal Mine Safety and the United States 
Environmental Protection Agency (EPA), and was organized by China's 
Coal Information Institute (CCII). The follow-on workshop that dealt 
largely with new technology advances and applications for reducing 
and utilizing coal mine methane, was co-sponsored by the Australian 
government's Department of Climate Change and China's National 
Development and Reform Commission (NDRC), and was organized by CCII 
and Australia's Commonwealth Scientific Industrial Research 
Organization (CSIRO).  In opening remarks, Dr. HUANG Sheng-chu, 
President of CCII, stressed that CBM/CMM projects represent a very 
important sector for international cooperation, that CCII cooperates 
with Australia and the U.S. EPA, and that CCII will continue to 
promote cooperation in the areas of technology, finance, and legal 
"best practices" to encourage more CBM/CMM projects in China.  It 
was the general consensus of the symposium participants that 
improved strategies to enhance technology exchange, cooperation 
efforts, and the development of additional financing options and 
channels will be necessary to enable successful development of new 
CBM/CMM projects. 
 
¶3.  (U) Dr. Pamela Franklin, Team Leader for the U.S. EPA's Coal Bed 
Methane Outreach Program, said that over 200 CBM/CMM projects were 
currently underway in China, with more projects expected in the 
future.  Dr. Franklin noted that progress has been made in CBM/CMM 
project development and partnership creation since the 2007 Beijing 
Methane-to-Markets Partnership Expo and that future projects must 
build on the results of the 2007 event.  However, while more 
projects are in the development stage, technological, legal, 
economic challenges to CBM/CMM drainage and utilization still 
remain, particularly regarding technology to drain methane gas 
safely (methane gas is very explosive at 5%-15% concentrations) and 
in eliminating bottlenecks in the Clean Development Mechanism (CDM) 
approval process that discourage CBM/CMM project development. 
 
------------------------------------ 
DRAINAGE AND UTILIZATION TECHNOLOGY 
------------------------------------ 
 
¶4.  (U) Methane released by coal mining operations (CMM) is a potent 
greenhouse gas (GHG).  According to Karl Schultz of Green Gas 
International, China is the world's largest emitter of coal mine 
methane -- about 13 million cubic meters per year.  Only a fraction 
of the worldwide CMM emissions is currently being recovered, the 
rest being released into the atmosphere.  Up to 70 percent of CMM 
emissions originate from coal mine ventilation air methane (VAM), 
which is virtually all released into the atmosphere.  According to 
the World Bank, VAM emissions amount to about 276 million tons of 
carbon dioxide equivalent -- the standard measure for GHG emissions 
-- each year.  This represents about 5 percent of all 
human-generated methane emissions.  China alone contributes about 40 
percent of these emissions, making it by far the world's largest 
emitter of VAM.  Methane is extremely explosive at low 
concentrations, and technology used in CBM/CMM projects in China is 
currently not adequate to find deeper seated sources of CMM in order 
to avoid highly-volatile (5% - 15%) concentrations (deeper seated 
CMM contain larger, less volatile percentages of methane). 
Conference participants generally agreed that a key challenge to 
current and next generation CBM/CMM projects will be developing and 
implementing more sophisticated technology able to optimize CMM 
operations and enhance efficiency in order to drain higher purity, 
less volatile concentrations of CMM. 
 
¶5.  (U) According to Professor YANG Ke-jian of the Beijing Guoneng 
 
BEIJING 00004495  002 OF 003 
 
 
Energy Technology Co., Ltd., China has an estimated 31.4 trillion 
cubic meters of CBM located at depths between 200-3000 meters, 
equivalent to Chinas conventional land-borne natural gas reserves. 
In China more than 10 billion cubic meters of CMM is exhausted into 
the atmosphere per year, largely for coal mining safety.  Advocating 
the introduction of new oxidizing technology to current and new 
CBM/CMM projects, Professor Yang said that his company's 
experimental cryogenic methane purification and liquefaction process 
has resulted in a high rate of CMM recovery, can be done safely 
because of a low temperature process, and can be done cheaply 
because of the simultaneous liquefaction and purification 
techniques.  The resultant markets include fuel for alternative 
vehicle for industrial power generation, making LNG derived from CMM 
economically beneficial. 
 
¶6.  (U) Companies attending the symposium and workshop presented 
data from ongoing feasibility studies showing that new CBM/CMM 
managers, expecting to sell gas developed from CMM projects, will 
more often than before have to take market and economic 
considerations into account.  Ray Pilcher, President of Raven Ridge 
Resources, Inc., suggested that local residential and commercial 
markets for gas derived from CMM projects are often limited and the 
best LNG markets are a good distance away from the projects; mining 
areas also are sometimes located near population and prime 
agriculture areas, a potential for land use conflict.  Mr. LIU 
Bai-qi of Biothermica Technologies, Inc. (Montreal) said that 
highly-explosive, low concentrations of CMM continue to be a barrier 
to CMM recovery and use, and that new oxidation technologies are now 
able to safely and reliably destroy VAM while generating a revenue 
stream from the sale of carbon credits. 
 
--------------------------------------- 
CBM/CMM AND THE CLEAN DEVELOPMENT MECHANISM 
--------------------------------------- 
 
¶7.  (U) CMM projects are also seen as potentially valuable for 
investors in their ability to generate CDM credits. But some 
existing projects have met with limited success.  As a large emitter 
of methane from coal mines, China has a large number of coal mines 
and project developers submitting proposals for approval as Clean 
Development Mechanism (CDM) projects.  Karl Schultz of Green Gas 
International noted that CMM projects seeking to qualify for 
certified emissions reductions (one CER is equal to one ton of 
carbon dioxide reduced) in China have on average a poor record for 
approvals and delivery, and that many projects have not lived up to 
expectations.  Michael Cote of Ruby Canyon Engineering said that, as 
of November 2008, only 8 of 59 CMM projects in China have been 
registered by the UNFCCC CDM executive board, and that the remaining 
projects face the prospect of never being registered because of 
changing Chinese regulations surrounding utilization of CMM and 
because of lengthy and complex CDM validation periods.  However, 
Shultz said that risks of CDM approval delay or rejection can be 
mitigated if appropriate care is taken in project preparation, 
technical execution, and appropriate alignment of interests between 
the mine and CMM project experts. 
 
------------------------------------------- 
CHINA'S EVOLVING CBM/CMM INCENTIVE POLICIES 
------------------------------------------- 
 
¶8.  Mr. LIU Wen-ge, Director of the International Division of CCII 
provided examples of 2006 Chinese central government policies that 
are aimed at encouraging CBM/CMM project development.  These include 
encouraging CMM utilization (i.e., expanding household and 
industrial use), increasing Chinese government financial support for 
projects (proposed 3 billion RMB investment over the next 3 years), 
preferential tax treatment (exempting prospecting and mining right 
fees), and improved project management practices (encouraging big 
domestic coal, oil or gas companies to partner with international 
corporations). Mr. Liu noted that China's incentive policies are 
expected to contribute to coal mine safety, increase the utilization 
of clean energy, and help protect the environment. 
 
¶9.  (SBU) COMMENT:  Chinese government officials are keen to support 
continued CBM/CMM efforts and next generation projects, while 
acknowledging that current legal and regulatory hurdles present 
difficult challenges to new CBM/CMM projects.  Growing opportunities 
for more CBM/CMM drainage and utilization projects are stimulating 
new feasibility studies, encouraging development of advanced 
 
BEIJING 00004495  003 OF 003 
 
 
technologies, and stimulating new experimental processes. 
Increasing technology exchanges, capacity building efforts, new 
feasibility studies, and exploring new sources of and channels for 
CMM project financing will be necessary if momentum for new CBM/CMM 
projects is to continue.  What remains to be seen will be how 
Chinese government officials address the lack of clear lines of 
decision making among mine operators, managers, and investors, which 
is often seen by private sector technology developers as the most 
significant challenge to the success of new and next generation 
CBM/CMM projects.  END COMMENT 
 
PICCUTA