Coal

Coal is defined as a sedimentary rock composed predominantly of solid organic

materials with a greater or lesser proportion of mineral matter. It is derived from
the accumulation of plant remains in sedimentary basins, and is altered to solid
rock by heat and pressure applied during the basin’s development. Its quality
varies according to the content of ash, impurities, and volatile matter which
decreases as coal rank gets higher. It has a natural dark brown to black, graphite-
like appearance and is primarily used as a fuel. Types of coal according to
increasing rank (in terms of hardness, purity and heating value) are peat, lignite,
subbituminous, bituminous and anthracite.

Worldwide, coal is a sought-after energy source. It has the largest reserve and is
often the cheapest of the fuel options. Now that clean coal technologies are
available, the demand for coal has remained steady despite the current stringent
standard on environmental concerns. The Philippines is largely a coal consuming
country with coal having the highest contribution to the power generation mix at
44.5% in 2015. But, local demand for coal is not limited to power generation. In
2015, the cement industry utilized 15.22% of the country’s coal supply, 5% went
to other industries such as alcohol, sinter, rubber boots, paper and chemical
manufacturing, fertilizer production and smelting processes.

The coal industry has never been so robust than these past years. From a historical
yearly average of 1.5 million MT, local coal production began increasing at a
steady rate since 2002. Within a span of 13 years, coal production has more than
quintupled to an astounding 8.17 million MT in 2015, with a production high of 8.4
million MT in 2014. This increase in production is attributed to the conversion of
exploration contracts into production agreements, as well as the development of
production contracts into full blown operations. Consumption likewise, increase
steadily as new coal-fired power plants are installed and industries switch to coal
because of the highly volatile price of oil.

Potentials

The Philippines has a vast potential for coal resources just awaiting full
exploration and development to contribute to the attainment of the country's
energy self- sufficiency program. As of 31 December 2015, our in-situ coal
reserves amount to 470 million metric tons or 19.7% of the country's total coal
resource potential of 2.39 billion metric tons.

Continuing Exploration and Development Program

Recent upswing development in the coal industry encouraged increased interest
in coal exploration. There are 30 Coal Operating Contracts in the Development
and Production phase, 48 Coal Operating Contracts in the Exploration phase,
and 83 small-scale coal mining operators as of July 2016.

To supplement these exploration activities, the Coal and Nuclear Minerals Division
(CNMD) continuously conduct reconnaissance to semi-detailed mapping of under
explored coal areas.

The Philippine Energy Contracting Round (PECR) 5

PECR 5 was launched on 09 May 2014, and offered 15 prospective coal areas in
Mindanao. 5 companies submitted a total of 9 applications for 7 coal areas. The 7
coal areas applied for were located in the provinces of Agusan del Norte, Agusan
del Sur, Surigao del Sur, Zamboanga del Norte, and Zamboanga Sibugay. On 18
December 2014, all 7 Coal Operating Contracts were awarded to companies who
satisfactorily complied with the technical, legal, and financial requirements of the
Department of Energy.

Investment Opportunities

It is but very timely to invest in coal facilities as the price of oil continues to rise
with coal being still the cheapest option with abundant supply worldwide. For
private companies, the key investment opportunities in the coal sector are (1) the
setting-up of coal preparation plants to upgrade the quality of Philippine coals and
make them acceptable to current coal users; (2) the expansion of production
volumes of higher-rank Philippine coals which can be used without upgrading
and/or blending with high-quality imported coal; (3) the introduction of clean coal
technologies (i.e., circulating fluidized bed combustion) to ensure utilization of
Philippine coals with minimal adverse effects on the environment; and (4) the
putting-up of mine-mouth power plants designed to utilize the abundant low-rank
coals that have no alternative markets.

Expansion and Development of Higher Rank Coals

There are Philippine coals which are of such quality that they can be used by
current users without the need for any coal preparation or blending with imported
coals. Among these are the coal deposits being mined in Malangas by the
Philippine National Oil Company (PNOC) with its Taiwanese partner, in Southern
Cebu by Ibalong Resources and Development Corporation, and in Batan Island by
Rock Energy International. The coal deposits in Catanduanes Island which have
been contracted out to Monte Oro Resources and Energy, Inc. for coal exploration
while the coal areas in Gen. Nakar, Quezon are not contracted out at present.
Adjacent to Malangas mine are two (2) other coal fields of good quality, namely:
Integrated Little Baguio (ILB) and Lalat. ILB is covered by PNOC's coal operating
contract. On the other hand, the Lalat area will be developed through a joint
venture between PNOC and Filsystems, Inc.

Introduction of Clean Coal Technologies

In the downstream coal sector, particularly the utilization of coal for power
generation and cement manufacturing companies, which can introduce clean coal
technologies in existing and future power/cement plants to minimize adverse
effects of coal on the environment and still be competitive, are definitely welcome.

Some Clean Coal Technologies presently being utilized are:

(1) Coal washing/preparation – This is a wet method of cleaning low-rank coal by

separating coal from the wastes using their specific gravity differences. This
method reduces ash and sulfur contents of coal and increases its heating value.

(2) Circulating Fluidized Bed (CFB) Combustion Technology – Crushed coal is fed
with crushed limestone or dolomite to a fluidized bed furnace with a bed material
(silica sand). At a controlled furnace temperature of 800-950 C, the limestone or
dolomite due to its reactive CaO or MgO absorbs and reacts with SOx gas, thereby
reducing the formation of this gas. At the said temperature, NOx emission is also
controlled.

(3) Flue Gas Desulfurizer (FGD) - This equipment is installed to control the SOx
emissions by spraying or scrubbing the flue gas with limestone slurry whose MgO
content absorbs and reacts with SOx to form a stable substance (gypsum).

Setting-Up Mine-Mouth Power Plants.

Finally, companies wanting to get involved in the Philippine coal sector in a major
way are invited to consider putting up coal-fired mine-mouth power plants in the
country's major undeveloped coal areas through joint ventures with existing
holders of coal operating contracts. As in the case of natural gas and geothermal,
private companies are allowed to put up their own plants at the mine site to assure
a market for the coal by selling electricity to the grid. The same transmission lines
to be built by the government to bring geothermal power from the Visayas to Luzon
and Mindanao islands will be used to transmit power from mine-mouth power
plants.

Specific programs, forecast and coal project schedules are found in the Philippine
Energy Plan.
Incentives

 The current coal operating contract (COC) system gives the following
incentives to contractors:
 Exemption from all taxes except income tax
 Exemption from payment of tariff duties and compensating tax on
importation of machinery/equipment/spare parts/materials required for the
coal operations
 Allow entry of alien technical personnel
 The right of ingress to and egress from the COC areas
 Recovery of operating expenses

PHILIPPINES.

Accustomed as we are in this day to the extensive application of

coal in the arts and industries, it is difficult for us to realize that while
its discovery is ancient its use is comparati^'ely modern; in fact, its
application may be said to belong exclusively to the present daj'.

Coal was first discovered in the Philippines in the year 1827; this
discovery was made in the island of Cebu, and, as stated bj^ Abella, "did
not succeed in inspiring anj' interest in the State nor in private indi-
viduals until the journey of the first steamships to the islands being
announced, the superior civil government issued in the year 1842 a
timely circular to the provincial authorities requesting them to furnish
information regarding the coal deposits that might be in their respec-
tive localities."

The first inspector of mines of this archipelago was Isidro Sainz de

Baranda. That gentleman disembarked at ^Manila on December 26, 1838,
and on the 25th of Januar}"- of the next year he commenced an active
and vigorous campaign for the enactment of a law and for the estab-
lishment of the mining industry in these islands which, with the pro-
verbial slowness of the ministry of colonies and Her Majesty's
Government, seems to have been wholly without effect until the 3'ear
1846, when the first mining code was adopted and put into operation.
The real history of the department of mines and of the mining
industry in the Philippines, therefore, dates from 1846. The work
done prior to that time may be considered as preliminary.

The circular referred to b}'^ Abella was dated October 17, 1842, and
was issued to the alcaldes may ores and others by Don Marcelino Oraa,
the then governor and captain-general of these islands. Its special
purpose was to obtain information of the existence of coal deposits
and mines, the cost and means of transportation, and other facts relat-
ing thereto. The replies are many of them curious, and all are inter-
esting; they possess, however, no value outside of their historical
interest.

The alcalde of Zambales reports that "In the time of great freshets
some pieces of black rocks that burn are accustomed to be seen in the

THE COAL MEASURES OF THE PHILIPPINES. 9

Banganbacao River of Botolan," but that he has not been able to

secure any of them because "none has been seen during the present
year; " he promises the governor a trip to the mountains later in the
year and a further report. He then branches off into a rosy account
of his military operations against the infidels of the mountains, and
reports two more towns in the mountains whose population have
" submitted." In November he again reports that he has fulfilled his
promise, but failed to find any of the " black rocks that burn," or
where they came from; but he left word with the "lately submitted,"
"That in their trips they shall not neglect to collect every black and
heavy rock they find in the rivers, and after applying to the fire if
they find that it burns that they bring it to me instantty, and I do not
doubt they will do so if they hit upon them."

In November the inspector of mines from Albay reports a deposit

of coal on the island of Siargao, in the province of Cax'aga (now Suri-
gao), and another on the island of Batan, then being worked by Mr.
Jose Velarde, the governor of the province of Albay. The alcalde
mayor of Pampanga reports a mineral found near San Miguel, that
from the fact of its being heated red hot in a forge it remains so for a
long time and communicates fire to combustible articles that are
brought in contact with it, and also because of its soliditj' and hard-
ness, ." demonstrates that said samples might belong to the class of
carbon minerals, although to be assured of its goodness," as the alcalde
states, " the processes of chemical analysis would be indispensable,
and for these I am lacking the agents and apparatus that belong to a
laboratory. "

The alcalde mayor of Batangas reports that at Maynit, in the town

of Bauan, " there are found stones of different qualities, and among
them are seen some that are half burned, which, in my judgment,
might be coal; yet I doubt whether they might not be the effect of a
volcano which is in their neighborhood." He promises to send some
of the stones to Manila in order that they may be examined by men
learned in science. The political military governor of Saniar, with a
commendable conservatism, reports a deposit at the Visitation of
Loquilocon, in the town of Paranas, on that island, "where there is
accustomed to be found between the earth of the channel that the river
forms, a combustible which was like coal."

The other officials reported that they knew of no deposits of coal,

and no coal mines in their jurisdictions.

The coal discoveries in the island of Cebu, known since 1827, had
resulted in no efforts for their being regularly worked or developed,
and, in fact, it was not until 1853 that the first coal concession was
granted in that island.

The above notes on the original discovery were further increased by

a report of the inspector of mines covering all the mineral resources

10 THE COAL MEASUBES OP THE PHILIPPINES.

of the islands, made to the governor in 1844, in which he locates the

known coal deposits as follows:

Province of Caraga: Island of Siargao.

Province of Albay: Island of Batan.

Province of Tayabas: Mauban and Antimonan (and a report that Senor Penaranda
had found a piece of coal in the Pagsanjan River, between the headlands of Bondoc
and Punta Arenas) .

Province of Bulacan: In the mountains of Angat.

Province of Pampanga: In the mountains of Camachin.

Province of Pangasinan: (Said to have been seen in the mountains of Bacnotan.)

This may be safely said to be the whole of the history of the discovery
of coal in the Philippines, and the extent of the knowledge of the Gov-
ernment with reference thereto up to 1844. The next step in the his-
tory may be properly called a step of development. In closing this
chapter on discovery, there are two pertinent statements in the i*eport
of Senor Baranda, from which we have just quoted, that are pertinent
because of their general bearing upon the status and condition of the
mining industry in these islands to-day, and because of their present
suggestive value under conditions not to a great degree different from
the conditions of 1844.

The first of these is:

It seems incredible that, notwithstanding it is now more than three centuries since
the Philippines were discovered, their mineral wealth is yet unknown. However,
nothing is more certain.

And the other is:

The greatest obstacle' that exists in this day in order that there may be a resolu-
tion to develop the mining industry is the lack of a law. * * * It falls, then, to
the lot of the Government alone to remove the obstacle which the nonexistence of
some law presents.

While there are other interesting suggestions, and of much value,

in this interesting paper of Senor Baranda, I shall not quote further
from it at this point.

I again respectfully call attention to the above two quotations as

showing how like the conditions of 1844 and 1901 in these islands, so
far as the mining industry is concerned. It seems to be an illustration
of that saying, "History repeats itself constantly, but nature never."

CHAPTEK III. —FIRST STEPS IN DEVELOPMENT, 1846-1853.

This chapter will contain a brief and comprehensive review of the

period between 1846 and 1853, at which latter date the second steps
in development of coal mining were taken.
On January 29, 1846, the "Decree of the superior civil government"
of that date was promulgated, putting into operation a complete
mining code in the islands. This continued, subject to some slight

THE COAL MEASURES OF THE PHILIPPINES. 11

amendments, to be the law under which all mining was conducted

until the 14th day of May, 1867, when it was superseded by the code
that was found in force at the date of American occupation in 1898.
This first code, hereafter referred to as the "Code of 1846," had much
to commend it. Its language was clear, concise, and plain, and its
definitions were comprehensive and sufficiently elastic to allow all the
necessary latitude in the executive control. In my judgment, under
honest administration, the "Code of 1846" is far superior, as a whole,
to the more elaborate and extended "Code of 1867."

The "Code of 1846" was composed of 56 sections, and the quotation

of article 2, defining minerals, is a fair illustration of its composition
throughout:

Abt. 2. The following are objects of mining: Precioiis stones and all substances
properly metallic, combustible, and saline, whether encountered upon the surface of
the earth or its interior.

By article 12 the sizes of mining claims are fixed at 200 Spanish

yards in length, and half that width, for mines in general; while for
veins of bituminous coal they shall be 600 yards long by 100 wide.
On December 22, 1851, these sizes were changed by a royal order,
and the coa!l claim was made 600 by 300 yards, and to include coal,
lignite, and peat, and with permission to take as many as four claims
to each mine.
These are all the essential features of the law requii'ed at this stage
of the examination. Other provisions from the Code of 1846 will be
incidentally referred to later in their proper connection.

This period may be considered the formative period in the way of

development. Coal mines were being worked in the names of various
claimants, but the works were all superficial and none of them advanced
to the degree of a formal registration in the inspectorate of mines.

Under date of July 4, 1847, a brief petition, signed by Leandro

Cardano, was addressed to the inspector of mines, asking a denounce-
ment of a coal mine on the island of Raporapo, but no indorsement
appears upon it and no action seems to have been taken. From a draft
of a letter it is learned that Senor Cardano was the collector of taxes
on tobacco for the province of Albay. This can scarce be considered
a registry of a mine.

The work commenced in Batan was afterwards carried on by another

proprietor, one Don Martin Varanda, and in the early part of this
period the official tests were commenced on the part of the navy in
the ships of war, and also in the stationary engines and the forges of
the arsenals, blacksmith shops, tobacco factories, and other institu-
tions under the control of the Government. It is curious to note that
at the beginning of this epoch there were not lacking those who, from
matters of personal interest, or from a pure habit of objecting to any-

Coal mining in the Philippines

Panian mine in Semirara Island.

Coal mining in the Philippines has a long history dating back to the 1800s during the Spanish
colonization of the islands. The Philippines consumes more coal than it can produce and coal
accounts for most of the country's power generation at 27 percent in 2005. 20 percent of the
country's coal supply is used by the cement industry, also in 2005.[1]
As of 31 September 2005, the in-situ coal reserves of the Philippines amounts to 458 million
metric tons which is about 18 percent of the country's total coal resource potential amounting
2.53 billion metric tons.[1]
Seventy-five percent of the country's coal supply composes of imported coal. In the 1990s, the
country saw increase in the importation of coal due to large coal-fired power plants being built in
the country designed to burn imported coal.[2]
Semirara Mining Corporation is the largest coal producer in the country whose primary mine is
in Semirara Island. The company accounts for 92 percent of the country's coal production
according to the Department of Energy.[3][4]

History
Early history
Coal was first discovered in the Philippine islands in 1827 in the island of Cebu although there
was little interest from the Spanish colonial government or private individuals to exploit the
resource until the arrival of steamships in the archipelago. In October 17, 1842, Governor
General Marcelino de Oraá Lecumberri issued a circular to alcaldes mayores and other
provincial authorities regarding information about possible coal deposits in their area. While
some areas report of coal deposits, there is minimal commercial exploitation of the resource. In
the island of Cebu, where coal was first discovered in the islands, it was only in 1853 when the
first coal concessions were granted in the island.[5]
Starting from 1853 until 1860, saw the development of the coal-mining industry in the islands
especially in the island of Cebu. The colonial government effectively had a monopoly of the
industry especially after the coal mine in Guila-Guila in Cebu was put under control of the
state.[6]