COAL TRAIL IN THE PHILIPPINES

Naga’s Open Dirty Secret

A Case Study on the Korean Electric Power Corporation-Salcon Power Corporation (KSPC) “Clean Coal
Technology”
By: Atty. Aaron Pedrosa

Project Background

Dubbed as the Visayas Baseload Power Development Project 2 , a 200 MW coal-fired power plant was
constructed in the City of Naga, Cebu, to cater to the looming power requirements of the Visayas grid.
The $220M project, co-financed by the Asian Development Bank (ADB) and the Korean Export-Import
Bank (KEXIM), boasted of using clean coal technology (CCT) otherwise known by its proponents as
circulating fluidized bed combustion technology (CFBT).

The coal-fired power plant project, which was supported by the Cebu Provincial Government and the
Department of Energy (DOE), was intended to boost base-load power supply to respond to the
increasing power demand in Cebu, as well as other parts in the Visayas, on the basis of DOE’s demand
and supply forecast.

On December 5, 2005, the Department of Environment and Natural Resources (DENR) granted the
environmental compliance certificate (ECC) to Salcon Power Corporation (SPC). SPC originally submitted
an Environment Impact Statement (EIS) for the expansion of its operations. SPC then managed and ran
the 110 MW Naga coal-fired power plants owned by the National Power Corporation (NPC). The NPC
plants utilize conventional coal plant technology.

In 2008, SPC entered into a joint venture agreement with the Korean Electric Power Corporation
(KEPCO) thus forming KSPC under a 60%-40% shareholding structure in favour of the former.

1
Photo lifted from www.adb.org
2
ADB Summary Environmental Impact Assessment (SEIA), March 2009

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KSPC submitted a $120M loan application to the ADB in 2009. This was approved by the ADB Board in
December of the same year and became effective in March of 2010. The loan was financially closed in
May of 2012. 3

The KSPC coal-fired power plant was inaugurated in June 27, 2011 by no less than Pres. Benigno Aquino
III. KSPC services eight (8) electric cooperatives 4 in the Visayas through separate power sales contracts
(PSCs) it contracted with the latter.

Relevant Certificates & Contracts Date Accomplished 5

Environmental Compliance Certificate 5 December 2005
Land Lease Agreement 23 December 2005
EPC 10 December 2007
Coal Supply Agreement 30 January 2008
DOE Endorsement 17 April 2008
BOI Certificate of Registration 8 May 2008

KSPC’s Inspiration

KSPC brags about using CCT or CFBT broaching the 400MW Donghae “clean coal” plant in Korea, which
according to the former is reputed for its “world-class operation”. The plant since its operation in 1999 is
reported to have reaped various awards and commendations for being environmentally friendly. 6

According to KSPC, through CFBT, limestone is directly injected in the boiler resulting in the reduction of
sulphur oxide (SOx) emission. In its GreEnergy Chronicle, KSPC argues, “Due to low combustion
temperature of 850-950 degrees Celsius, very low concentrations of nitrogen oxide (NOx) are formed.”

The Donghae plant’s air emissions, according to KSPC, are well below the government standards. The
plant’s dust emissions reached 10mg/s cubic meter (Standard: not to exceed 50 mg/m cubic meter); SOx
at 110 parts per million (ppm) (Standard: not to exceed 150 ppm); and NOx at 40 ppm (Standard: not to
exceed 250 ppm) 7 .

The rub

However, despite KSPC’s “clean coal technology” rhetoric, the KSPC coal-fired power plant remains to be
hounded by social acceptability, health and environmental issues.

3
Final Report on Compliance Review Panel Request No. 2011/1 on the Visayas Base-load Power Development
Project in the Republic of the Philippines, 12 March 2012
4
The 8 electric cooperatives are: NOCECO, NORECO 1, NORECO 2, CEBECO 1, CEBECO 2, CENECO, IN2POWER and
LEYECO 2.
5
KSPC Inks Power Sales with Off-Takers, GreEnergy, The Cebu CFBC Plant Chronicle, KEPCO-SPC Corporation,
Edition 2, May 19, 2008
6
ibid
7
ibid

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 COAL TRAIL IN THE PHILIPPINES
As early as 2003, Cebu groups put up resistance to the construction of a new coal-fired power plant in
the province that would come in addition to the operational coal plants located in Naga and Toledo
Cities. The groups which eventually formed the Cebu Alliance for Renewable Energy (CARE) argued
against the establishment of yet another coal-fired power plant citing known health and environmental
hazards and risks posed by its operation.

The burning of coal results in the emission of heavy metals and hazardous gases which include carbon
dioxide, a notorious greenhouse gas (GHG) whose excessive presence in the atmosphere has resulted in
global warming. Coal itself has been refutably shown to be more radioactive than nuclear posing hazards
manifested in carcinogens, among others.

CARE came into existence inspired by the formation of the Responsible Ilonggos for Sustainable Energy
(RISE). Originally, KEPCO trained its sight on Panay Island as the situs of its coal plant project. Met with
heavy resistance from the communities under the leadership of RISE and the provincial government, it
was compelled to locate elsewhere.

It found its way to Cebu, facilitated by the Cebu Provincial Government under Governor Gwen Garcia
and the DOE. 8

During the August 6, 2005 public hearing conducted in Naga, Cebu, CARE registered its opposition to the
project. Town folks mobilized outside the hearing venue to say no to the project for lack of social
acceptability, health and environmental concerns. Despite this and the series of actions and activities
against the project, DENR granted an ECC for the project in December of the same year.

In 2009, Cebu groups headed by the Global Legal Action on Climate Change (GLACC), together with
Freedom from Debt Coalition-Cebu (FDC-Cebu), sent Notices to Sue to SPC, among others, over the
indiscriminate dumping of coal ash.

News of a pending ADB loan application from KSPC also prompted groups which included the Diocese of
Bacolod to flood ADB with letters opposing the approval of the loan. In December of 2009, however, the
ADB Board approved the KSPC loan amounting to $120 M. The loan represented the first collaboration
between ADB and KEXIM. 9

On August 2010, an environmental case 10 for environmental protection order was initiated by the
Philippine Earth Justice Center (PEJC) and other Cebu groups against responsible elective and appointive
officials as well as KSPC over the indiscriminate dumping of coal ash.

The complaint cited the findings of the Philippine Institute for Physics and Applied Chemistry (PIPAC) on
the coal ash samples gathered from historical coal ash dumpsites around Naga. It found “significant
amounts of arsenic, cadmium and mercury” in excess of the “average global background values and the

8
Financing Naga’s Coal-fired Power Plant, Evaluation Study on the EIA Compliance of Naga’s Coal-fired Power
Plant, FDC Cebu, September 2010
9
supra
10
Environmental Case No. Man-6961 for: Environmental Protection Order with Prayer for Temporary
Environmental Protection Order and Writ of Continuing Mandamus, filed on August 12, 2010

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 COAL TRAIL IN THE PHILIPPINES
limit values recommended by the European Union for arsenic, cadmium and mercury” 11 . Also appended
in the complaint were the morbidity and mortality data collected from the Naga Rural Health Units and
published in the FDC Cebu’s Evaluation Study on KSPC’s Environmental Impact Assessment (EIA)
Compliance 12 .

The green court of Mandaue City issued a temporary environmental protection order (TEPO) against the
indiscriminate dumping and movement of coal ash outside of the plant premises. After the issuance of
the TEPO, it was extended until the termination of the proceedings for the main action.

On December of the same year, FDC Cebu, Task Force Detainees of the Philippines-Visayas, Kongreso ng
Pagkakaisa ng Maralita ng Lungsod-Cebu (KPML-Cebu) and SANLAKAS Sugbo filed complaints before the
Office of Ombudsman-Visayas and Commission on Human Rights-7 against the government officials over
the adverse health impacts of the project and possible human rights violations.

CHR-7 later on recommended the filing of charges before the Ombudsman against concerned
government officials after it found violations of the right of the people to a healthful ecology, lack of
meaningful information and participation of the affected community and the irregularities surrounding
the acquisition of the proposed coal ash dumpsite in Brgy. Tinaan, Naga.

ADB in the picture

On February 28, 2011, a group of affected people in Naga together with and through FDC Cebu filed a
complaint before the Office of the Special Project Facilitator (OSPF) of the ADB against KSPC, DENR, the
City of Naga and the Cebu Provincial Government over the lack of adequate information, consultation
and environmental impact of the project. 13 The OSPF process represented the problem-solving and
mediation phase of ADB accountability mechanism to address the complaints of projected affected
peoples and arrive at a compromise or settlement.

The complaint alleges that the so-called “clean coal technology” is far worse compared to conventional
coal plants as the former produces four times more coal combustion wastes or coal ash and does not
arrest the emission of carbon dioxide.

Despite the complaint having been deemed eligible, the complainants exited the process for being non-
responsive to their sentiments. As such, it proceeded to file a request for compliance review before the
Compliance Review Panel (CRP) of the ADB on May 25, 2011 14 . The process before the CRP signified the
interest of complainants to elevate the issues at the policy level, holding the ADB management liable for
its non-compliance with relevant ADB standards.

On April 11, 2012, after a series of site visits, community interviews and expert investigation at the plant
site in Naga, the ADB Board found the project violative of its own standards pertaining to public

11
Interpretation of Dr. Romeo Quijano of the University of the Philippines Toxicology Department in Diliman
Quezon City, Arpil 13, 2010
12
The study was in collaboration with the NGO Forum on the ADB.
13
See http://www.adb.org/site/accountability-mechanism/complaint-registry/visayas-base-load-power-project
14
See http://compliance.adb.org/dir0035p.nsf/alldocs/RDIA-8HF6GG?OpenDocument

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consultation, information disclosure, incorporation of social dimensions into ADB operations and Energy
policy and laid out a list of recommendations to remedy the Bank’s violations and non-compliance 15 .

The Bank’s decision is a trailblazing development involving a private sector project investment on a coal-
plant project.

The positive outcome in the ADB engagement, however, in the long run, appears to be a superficial
response to the sentiments against the KSPC plant. While pointing out and underscoring the project’s
violations of its own policies, the ADB, in effect still supports the operation of the plant. In the 2013 CRP
consultation with the affected people cum requesters, the panel explained that ADB did not have the
power to shut down the plant operations nor can it impose sanctions on KSPC.

ADB’s track record in dirty energy investment in the Philippines would partly explain its double-edged
handling of the Naga complaint. (Ano ang mga projects na supported ng ADB sa pinas?)

ADB in fact continues to promote the establishment of coal-fired power plants in the country. (ano ang
mga ADB-assisted projects sa pinas?)

Energizing the Visayas

The DOE projects that by 2030, the Visayas grid would need an additional 2,000 MW to meet the
demand for the region. With the inauguration of the KSPC plant in Naga, Cebu now exports power to the
other parts of the grid with an installed capacity 16 of 907MW accounting for 37.8% of the total capacity
for Visayas.

Installed Dependable
Visayas % %
Capacity Capacity
Sub-grid Share Share
(MW) (MW)

Cebu 907 37.8 837 41.1

Negros 223 9.3 203 10.0
Panay 508 21.2 415 20.4
Bohol 31 1.3 24 1.2
Leyte-
Samar 733 30.5 558 27.4
Total
Visayas 17 2,402 2,037

15
supra
16
Installed Capacity or nameplate capacity is the full-load continuous gross capacity of a unit. It can be calculated
by multiplying the megavolt-ampere rating by the power factor. (DOE)
17
DOE Visayas Field Office Data, April 2012.

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In the pipeline are another 200MW coal plant projects in the Visayas for 2014 and 2016 each project at
100 MW capacity respectively. DOE categorized the additional capacity as committed projects - those
which have complied with the necessary permits and clearances of various agencies and concerned local
government and in the process of financial closing.

For 2015, the DOE identified another 246 MW coal plant power project under the category of indicative
power projects or those which are at different stages of project developments prior to financial closing.

In 2011, coal accounted for 30.10% of the country’s installed capacity energy mix accounting for 4,887
MW of the country’s total capacity.

PHILIPPINES
PLANT TYPE Capacity (MW) Percent Share (%)
Installed Dependable Installed Dependable
Coal 4,887 4,607 30.10 31.56
Oil Based 2,967 2,505 18.28 17.16
Natural Gas 2,861 2,756 17.62 18.88
Geothermal 1,896 1,415 11.68 9.69
Hydro 3,535 3,257 21.77 22.31
Wind 33 26 0.20 0.18
Solar 1 1 0.01 0.01
Biomass 54 30 0.33 0.21
TOTAL 16,233 14,597 18

Current State of Affairs

Two years into the operation of the KSPC coal plant, it had twice been issued with Cease and Desist
Orders (CDOs) for the coal dust emission caused by its open coal stockyard and the transportation and
loading of coal. 19

In 2011 and 2012, Residents complained of coal dusts and fine black particles entering their homes. This
prompted Cebu Governor Garcia and Naga Mayor Val Chiong to issue separate CDOs to arrest the
contamination. The coal dust issue have been addressed for now. However, bigger problems lie ahead.

To this day, the project lacks a coal ash disposal facility that would manage the estimated 250 tons of
ash/day that would be generated by the coal plant. The original coal ash disposal site, a 25 hectare

18
DOE 2011
19
See news articles http://www.philstar.com/cebu-news/669567/cease-and-desist-order-issued-gwen-kepco-
contain-coal-dust and http://www.philstar.com/cebu-news/2012/11/14/866439/loading-unloading-coal-city-naga-
issues-cdo-vs-kspc

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beach-front property, which the Provincial Government offered to KSPC was discovered to be largely
submerged, thus forming part of the public domain.

The discovery resulted in yet another legal action against provincial officials for the illegal purchase of
the property supposedly for KSPC’s waste management requirements.

Health issues continue to persist. In the the ADB Board decision cited much earlier, the Bank took note
of the morbidity and mortality incidences in Naga as higher than national averages. The data, covering
2005-2009, came before the actual operation of the KSPC coal plant. This suggests greater exposure of
the local population to health risks incidental to the operation of the coal plant, including its allied
services.

Recent Naga City Health data covering the period of 2009-2012 would reveal a rise in upper respiratory
tract infection (URTI). URTI topped the list of morbidity cases within the same period. Cancer has
likewise consistently placed in the top five causes of mortality from 2005-2012.

The 2012-2030 Philippine Energy Plan (PEP) lays down the government’s thrust of tapping into
renewable energy options. However, a closer scrutiny of the PEP would readily expose the continued
reliance on coal as a baseload energy source.

The unveiling of more coal-fired power plants to fuel the country’s growing energy requirements,
however, reveals the government’s dependence on coal as a primary source of power despite the
brazen lack of social acceptability and the negative health and environmental effects experienced by
host communities like Naga City.

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