Report from the Commissionon the application of the Community rules for state aid to the coal industry in 1998 and 1999
Date: 2000-06-23
Institutions: European Commission
Subjects: EU Member State, EU production, State aid, coal industry, financial aid

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 20.11.2000
COM(2000) 380 final/2

CORRIGENDUM:
La présente version annule et remplace
la version du 23.06.2000

REPORT FROM THE COMMISSION

on the Application of the Community Rules for State Aid
to the Coal Industry in 1998 and 1999

1.

INTRODUCTION

Article 10 of Commission Decision No 3632/93/ECSC of 28 December 1993 establishing
Community rules for State aid to the coal industry requires the Commission to report each year
to the Council,
the European Parliament and the ECSC Consultative Committee on the
application of these rules.

This report examines the financial aid granted by France, Germany, Spain and the United
Kingdom to their coal industries in 1998 and 1999.

Such measures may be considered compatible with the proper functioning of the common
market only if they help to achieve at least one of the following objectives:

–

–

–

to make, in the light of coal prices on international markets, further progress towards
economic viability with the aim of achieving degression of aid;

to solve the social and regional problems created by total or partial reductions in the
activity of production units;

to help the coal industry adjust to environmental protection standards.

As required by Article 8 of the Decision, the Member States submitted to the Commission their
plans to modernise, rationalise and restructure the coal industry. After examining the plans the
Commission delivered opinions on their conformity with the general and specific objectives set
by Articles 2, 3 and 4 of Decision No 3632/93/ECSC, and in particular the Decisions adopted on
13 December 19941 for Germany and Spain, 19 July 19952 for France, and 1 June 19943 for the
United Kingdom. In accordance with Article 9(1) of Decision No 3632/93/ECSC, the Member
States notified all the financial aid they intended to grant for 1998 and 1999, as they had for the
previous years, on the basis of these modernisation, rationalisation and restructuring plans. The
Commission's rulings on these measures were given in the Decisions set out below:

1 Decision No 94/1070/ECSC and Decision No 94/1072/ECSC - OJ L 385, 31.12.1994. p. 18 and p. 31

(respectively).

2 Decision No 95/465/ECSC - OJ L 267, 9.11.1995, p. 46.
3 Decision No 94/574/ECSC - OJ L 220, 25.8.1994, p. 12.

2

Member State

Commission
Decision

Date of the Decision

Official Journal

Year of aid

United Kingdom

97/577/ECSC

30 April 1997

L 237, 28.8.1997, p. 13

1998/99

Spain

Germany

Germany

Spain

98/637/ECSC

3 June 1998

L 303, 13.11.1998, p. 57

99/270/ECSC

2 December 1998

L 109, 27.4.1999, p. 14

99/299/ECSC

22 December 1998

L 117, 5.5.1999, p. 44

99/451/ECSC

4 May 1999

L 177, 13.7.1999, p. 27

1998

1998

1999

1999

The amounts of financial aid referred to in this document are the final figures authorised by the
Commission for 1998 and 1999 under Decision No 3632/93/ECSC. Aid for various purposes
such as, for example, the specific social benefits paid by the Member States as part of the special
contribution provided for under Article 56 of the ECSC Treaty is therefore not included. This is
the fourth report under Article 10 of this Decision following its entry into force on 1 January
1994.

2.

COAL INDUSTRY AND MARKET

2.1.

Production

In 1998, coal production in the European Union totalled 106.4 million tonnes, down by
15.5 million tonnes compared with 1997. This reflects the general downward trend over the past
few years, and should be further confirmed since the production forecast
for 1999 is
approximately 100 million tonnes.

Table 1

Coal production (1000 t)

1992
218

1993
0

1994
0

1995
0

1996
0

1997
0

1998 1999 Var. 99/93

0

0

72 153 64 175 57 623 58 858 53 157 51 212 45 340 43 849
18 551 18 402 18 194 17 627 17 688 17 868 16 380 15 601
9 478
4 736 4 033
221

7 538
147

8 576
197

7 014
0

7 310
0

5 779
0

0

0

- 32 %
- 15 %
- 53 %

83 987 67 463 48 971 52 630 48 538 46 981 40 045 36 242

- 47 %

149

15

1

0

0

0

0

0

B
D
E
F
P
UK
Other

EUR 15 184 757 158 828 132 474 136 129 126 693 121 841 106 504 99 725

- 37 %

Source: Eurostat: yearly (1992-1997) and monthly (1998-1999) statistics

2.2.

Employment

Continuation of the measures to rationalise and reduce activity in the coal industry in most
coal-producing countries led to a further drop in employment figures. In 1998 and 1999, the
workforce was reduced by 20 000, to total at a level of 106 000 workers. The biggest drop in
absolute terms was in Germany (11 700 job losses), followed by Spain (approximately 6 000)

3

and France (more than 2 000). Significant
job losses - approximately 2 000 - were also
recorded in the United Kingdom, although widespread recourse to subcontracting in the
exploitation of deposits is hampering the compilation of precise statistics. Further cutbacks
are anticipated in 2000, particularly in Germany and the United Kingdom.

2.3.

Coal demand and trade

Internal deliveries of coal within the Community (including net
totalled
265.4 million tonnes in 1998, compared with 273.9 million tonnes in 1997. This development
is largely due to the electricity generating sector, which has always been the main coal user in
the European economy, accounting for almost 70% of total consumption. This downward
trend continued in 1999 with total internal deliveries estimated at less than 250 million
tonnes.

imports)

Table 2

Total internal deliveries of coal (1000 t)

B
DK
D
EL
E
F
IRL
I
L
NL
A
P
FIN
S
UK

1993
11 118
10 219
75 179
2 279
30 802
26 818
3 092
14 950
277
13 524
3 029
4 761
4 222
2 422
85 733

EUR 15

288 425

1994
11 569
11 569
75 003
1 944
29 518
21 698
2 988
14 426
303
13 944
2 826
5 144
5 549
2 582
69 024
268 087

1995
13 122
12 937
78 904
1 447
31 152
19 803
3 104
11 310
217
14 937
2 728
5 940
6 192
1 978
76 469
280 240

1996
12 106
13 011
72 558
2 490
28 778
15 907
3 147
15 993
245
14 690
3 393
5 688
4 034
3 054
74 658
269 692

1997
10 767
11 161
69 367
1 927
32 778
21 503
3 043
16 071
195
15 123
3 317
5 660
4 096
6 095
72 846
273 949

1998
11 086
9 173
75 503
1 626
30 755
25 076
2 476
17 068
153
14 861
3 458
5 046
3 694
3 128
62 282
265 385

1999

9 897
7 804
65 311
1 382
36 123
21 946
1 839
16 859
146
11 401
3 832
4 530
3 785
1 548
52 549
238 952

Source: Eurostat: yearly (1992-1997) and monthly (1998-1999) statistics

In 1998 and 1999, coal imports from third countries remained stable at 150.9 million tonnes,
as in 1997. The price of coal - unlike that of hydrocarbons - remained largely stable on the
international markets in 1999. A further important point is that imported coal from third
countries is gradually replacing Community coal in some sectors of the market, for ecological
as well as economic reasons, since the imported coal may be of higher quality or contain
fewer pollutants. Finally, the transport of coal by sea does not give rise to any major
environmental problems. Unlike oil tankers, ships transporting coal do not cause large scale
pollution in the event of shipwreck or collision and there are fewer risks of fire.

4

Table 3

Imports of coal from third countries (1000t)

1992
14014
B
11942
DK
15452
D
2132
EL
14512
E
21988
F
3046
IRL
17712
I
278
L
13968
NL
3812
A
4482
P
4263
FIN
3007
S
UK
20339
EUR 15 150947

1993
11894
10467
13090
1337
12726
14231
2907
14299
277
15121
3189
4766
5933
3205
18400

1999 Var. 99/93
1996
10848
12814
7115
13134
23584
16348
821
1780
20564
12130
15434
15544
2800
2802
17254
16545
146
242
19893
16846
3831
3737
4104
5349
2288
6894
2545
3246
19710
17799
131842 135498 143455 145210 150966 150943 150937

1994
12659
11772
15483
1500
11769
12190
2401
15901
314
17330
3015
5012
8060
3051
15041

1995
14099
13009
15052
1409
13889
13190
2858
18485
217
17170
2859
6003
5821
3499
15895

1997
12796
13474
20031
1214
11340
13604
3070
15297
194
20317
3804
5758
7033
3278
19756

1998
12632
8071
23619
883
14546
13156
2345
16566
153
21507
3458
5052
4688
3035
21232

-9 %
-32 %
80 %
-39 %
68 %
8 %
-4 %
21 %
-47 %
32 %
20 %
-14 %
-61 %
-21 %
7 %
14 %

Source: Eurostat: yearly (1992-1997) and monthly (1998-1999) statistics

3.

SITUATION IN EUROPEAN UNION COAL FIELDS

3.1.

Germany

In what is now the main coal producing country in the European Union, the coal industry is in
effect concentrated in two fields, the Ruhr and the Saar. Production is centred on 16 pits,
employing about 67 000 workers, including 37 000 underground.

On 13 March 1997, an agreement was signed between the German Government, the Länder
of North Rhine-Westphalia and Saarland, the trade unions and the coal producers on the
future of the German coal industry. It provides for annual aid, currently standing at 9.4 billion
German marks, to be reduced progressively to 5.5 billion by 2005. The Federal Government's
share of the bill was to drop from DM 7.7 billion in 1998 to DM 3.8 billion in 2005, while
that of North Rhine-Westphalia would increase, rising from 860 million to DM 1 billion.
Saarland's contribution would, as in the past, be paid by the Federal Government. The plan
announced by the companies involved reducing production by around 20% by 2002 and
cutting back the workforce to around 56 000. Subsequently, production would be brought
down to 25 million tonnes in 2005 and by that date only ten mines would still be in service.
Production should fall
to 35 million tonnes from the year 2000. Mining would cease
completely in three pits between now and the year 2000 and, what is more, four mines would
be grouped together into two units. Following these restructurings, the costs of production,
expressed in 1992 prices, should fall to DM 229 per tce (tonne coal equivalent) in the
year 2000, compared with DM 288/tce in 1992 and around DM 270/tce in 1997. This is still,
however, way out of line with prices on the international markets, currently around
DM 60/tce.

5

the

the merging of

three German coal producers

In addition,
(Ruhrkohle AG,
Saarbergwerke AG and Preussag Anthrazit GmbH) into a single entity, Deutsche Steinkohle
AG (DSK), provided for by the same agreement, was approved by the Commission on 29 July
1998. The Decision, adopted under Article 66 of the ECSC Treaty, concerns only the effects
of the merger and hence does not deal with any State aid questions which might be raised by
the operation. The new company centralises the nation's entire coal production. The merger
concerned not only the mining activities of these companies but also affected significant areas
of their non-mining activities.

3.2.

Spain

In Spain, coal mining is spread over a number of fields: Asturias (Central and Western field),
Léon (Bierzo-Villablino, Sabero and Nord), Palencia (Guardo and Barruelo), Cataluña
(Pirenaica), Teruel (Teruel-Mequinenza), Sud (Puertollano and Peñaroya). The Spanish coal
fields are small, geographically isolated areas which are highly dependent on coal mining.
This has a direct effect on the possibility of redeployment and reindustrialisation and,
consequently, on the employment
level. Around eighty undertakings, mostly private
(following the recent privatisation of Endesa, the only exception is Hunosa, which recently
took over Minas de Figaredo), share production and employ some 17 000 underground
workers. Only four undertakings produce more than one million tonnes annually and 12 more
than 200 000 tonnes. On 31 March 1998, Spain presented the second part of the plan to
modernise, rationalise and restructure the coal industry, concerning the years 1998-2002. The
plan involves reducing production annually, which should not exceed 14.5 million tonnes in
2002, and mentions some of the mines in which this reduction will have to be achieved.
Finally, in accordance with the guidelines of Decision No 3632/93/ECSC, it provides for an
additional, gradual reduction in aid to current production of 4% per year for underground
workings and 6% for open-cast mining. The UMINSA company, bringing together 17
previously independent mines in the regions of Léon and Palencia, came into existence in the
years 1998 to 1999. With its production of 1.6 million tonnes, UMINSA is among the
foremost producers in the country.

3.3.

France

fewer

In France, coal mining is now concentrated on the Lorraine coal field, with two underground
mines in operation and the Centre-Midi coal field, with five mines, one of which is
than half of whom work
underground. The industry employs 9 164 people,
underground. The country's only producer, Charbonnages de France,
is a public sector
undertaking. As part of the process of reducing production capacity which has been under
way for many years and which is mainly due to unfavourable geological conditions, over
22 000 jobs were lost between 1986 and 1999. Under the National Coal Pact agreed between
the two sides of industry in 1995, this process will have to continue over the next few years,
leading to the complete cessation of coal mining in France by the year 2005. The seriousness
of the social and regional problems has prevented the French Government from keeping to the
2002 deadline provided for in Decision No 3632/93/ECSC. The main thing, however, is that
the French authorities have recognised the total lack of any prospect of the French coal
industry becoming competitive in the medium or long term and are firmly committed to a
reduction of activity and programmed closures.

3.4.

United Kingdom

For many years, the United Kingdom was the European Union's largest coal producer. The
sector has gone through a drastic restructuring process, particularly with the privatisation of

6

the British Coal Corporation in 1994, as a result of which the number of large collieries in
operation has fallen from 241 in 1976 to the current 17. There are also around 50 small mines
(employing fewer than 100 persons) and a variable number of open-cast workings. Over the
same period, the number of workers has dropped from over 300 000 to less than 12 000 and
production from 125 million tonnes to around 36 million tonnes.

Since the privatisation of British Coal was completed on 31 December 1994, the coal industry
in the United Kingdom has consisted solely of private undertakings. The largest is RJB
Mining (13 pits in total), while Hatfield Coal Company, Goire Tower Anthracite Company,
Scottish Coal and Blenkinsopp Collieries have one pit each. Celtic Energy operates a number
of open-cast workings. The Ellington pit, one of the largest in the country, could close shortly.
Thanks to the concentration of activity on the most productive mines and strenuous and
protracted efforts to increase viability, these companies, none of which receive State aid, have
production costs which are only slightly higher than prices on the world market. In 1998, the
multiannual supply contracts concluded in 1993 with the electricity generating companies
came up for renewal. These contracts, in which prices were pre-set and calculated to decrease
over time while remaining higher than international market prices, guaranteed a remunerative
market for British coal production. Following lengthy discussions,
the major electricity
producers have concluded new contracts whereby either the quantities are reduced or the
duration is shorter. Despite considerable improvements in productivity, however, the national
companies are now facing competition from imported coal and, to an even greater extent,
from gas. Imported coal, apart from its more competitive price, often has the advantage of a
lower sulphur content, which enables the electricity generating companies to comply with the
stringent restrictions on emissions without having to install costly gas scrubbing equipment,
while gas not only produces fewer pollutants, but also, with the new combined cycle gas
turbine technology (CCGT), enables over 50% efficiency to be achieved in converting
the Secretary of State for Trade and Industry
thermal energy into electricity. In 1998,
presented to Parliament a report on the United Kingdom's energy policy expressing the
intention to limit building permits for new gas-fired power stations and encouraging the
maintenance of a large number of power stations fuelled by coal to guarantee the country
the Minister for
sufficient diversification of energy sources. In April 1999 John Battle,
Energy, announced that a grant of £12 million spread over three years would be awarded for
research into clean combustion methods for coal.

3.5.

Others

Coal production ceased in Belgium in 1992 and in Portugal in 1994. There is no significant
production in any other European Union country.

4.

FINANCIAL AID SCHEDULED FOR THE COAL INDUSTRY

This report covers the measures set out in Article 1 of Decision No 3632/93/ECSC, viz:

–

–

any direct or indirect measure or support by public authorities linked to production,
marketing and external trade which, even if it is not a burden on public budgets,
gives an economic advantage to coal undertakings by reducing the costs which they
would normally have to bear;

the allocation, for the direct or indirect benefit of the coal industry, of the charges
rendered compulsory as a result of State intervention, without any distinction being

7

drawn between aid granted by the State and aid granted by public or private bodies
appointed by the State to administer such aid;

–

aid elements contained in financing measures taken by Member States in respect of
coal undertakings which are not regarded as risk capital provided to a company under
standard market-economy practice.

This report classifies aid according to the categories used in Articles 3, 4, 5, 6 and 7 of
Decision No 3632/93/ECSC, i.e. distinguishing between operating aid, aid for the reduction of
activity, aid to cover exceptional costs, aid for research and development and aid for
environmental protection.

For all requests for authorisation it approved in accordance with Article 9 of Decision No
3632/93/ECSC, the Commission checked that the Member States concerned had provided all
the required information and, on the basis of that information, that the measures were in line
with the general criteria and objectives laid down in Article 2 of the Decision and with the
specified criteria, viz.:

–

–

–

Aid granted under Article 3: this must not exceed the difference between production
cost and the price on the international market; coal may not be placed on the market
at a price lower than that charged for coal of a similar quality produced in third
countries; the aid must not distort competition between users; principle of annual
correction.

Aid granted under Article 4: requirement to present and respect a closure plan.

Aid granted under Article 5: this must not exceed the costs it is intended to cover;
strictly limited to the costs expressly mentioned in the Annex to Decision No
3632/93/ECSC.

When assessing aid, the Commission took full account of the need to mitigate as far as
possible the social and regional consequences of the restructuring of mining activity, in
accordance with the second indent of Article 2(1) of Decision 3632/93/ECSC. It also checked
that the aid was compatible with the proper functioning of the common market.

A breakdown of the overall amount of aid granted by the Member States spread over these
different categories also gives a fairly clear idea of the coal policy being pursued at national
level and of the progress being made in the modernisation, rationalisation and restructuring
process. Finally, we would reiterate that aid for various purposes, such as, for example, the
specific social benefits paid by the Member States as part of the special contribution provided
for under Article 56 of the ECSC Treaty is not included.

8

Table 4

Aid authorised 1994-1999

Germany
- operating aid*
- aid for the reduction of activity**
- other***
Spain
- operating aid*
- aid for the reduction of activity**
- other***
France
- operating aid*
- aid for the reduction of activity**
- other***
Portugal
- operating aid*
- aid for the reduction of activity**
- other***
United Kingdom
- operating aid*
- aid for the reduction of activity**
- other***
TOTAL EU
- operating aid*
- aid for the reduction of activity**
- other***
Aid in
- operating aid*
- aid for the reduction of activity**

€
/ecu/tonne

1994

1995

1996

1997

1998

1999

44845.8
0.0
181.4

4784.2
0.0
106.7

55361.8
0.0
104.7

3280.5
1637.7
412.0

2667.2
1606.8
513.4

2612.4
1613.4
380.4

249.1
499.9
205.6

0.0
298.0
614.8

0.0
1.8
3.6

20.1
0.0
870.0

5115.0
799.7
1875.4

298.8
501.3
255.3

0.0
56.9
612.3

0.0
0.0
0.9

0.0
0.0
1622.8

5081.0
558.1
2598.0

310.3
462.8
255.1

0.0
87.6
592.3

0.0
0.0
0.9

0.0
0.0
512.8

5673.4
550.4
1465.8

285.4
419.1
363.8

****
****
****

0.0
0.0
0.0

0.0
0.0
512.3

3565.9
2056.8
1288.1

355.6
403.2
400.5

****
****
****

0.0
0.0
0.0

0.0
0.0
1317.2

3022.7
2010.0
2231.2

327.8
399.6
343.9

****
****
****

0.0
0.0
0.0

0.0
0.0
0.0

2940.3
2013.0
724.3

42.04
71.73

40.43
53.35

48.92
51.29

34.30
169.91

33.26
184.80

37.60
115.03

Figures expressed in million ecus/euros: State aid authorised in national currency has been converted into ecus/euros at the
average exchange rate for the reference year. The totals for 1997, 1998 and 1999 do not include the figures for France.

*

**

Aid granted under Article 3 of Decision No 3632/93/ECSC.

Aid granted under Article 4 of Decision No 3632/93/ECSC.

***
Decision No 3632/93/ECSC

Inherited liabilities under Decision No 2064/86/ECSC and aid granted under Articles 5, 6 and 7 of

****
considered by the Commission.

France notified the aid granted for 1997, 1998 and 1999 but it was not authorised and is still being

4 No account taken of the activation of DM 5 350 million (ECU 2 779 million) from a credit line to cover
compensation fund debts under the German law of 19 July 1994 guaranteeing coal supplies for power
stations.

5 Aid originally authorised for ECU 5 370.2 million, but DM 3.75 million used by Sophia Jacoba GmbH and

DM 9.8 million by Preussag Anthrazit GmbH in breach of the Decision.

9

Compared with 1994, there was a certain reduction in production-related aid per tonne of coal
extracted (the calculations for 1997, 1998 and 1999 do not include France), which is in line
with the degression principle established in Decision No 3632/93/ECSC. The increasing
deployment of aid for the reduction of activity, on the other hand, has caused the overall total
to rise, reducing the true significance of this result. The possibility of a Community coal
industry which can compete commercially on the international markets appears more and
more to be receding, despite the considerable efforts made by producers on both the
technological and organisational fronts to improve productivity.

There are two main reasons for this result. The first is that, as the most easily accessible
seams are exhausted, the coal has to be mined in increasingly difficult geological conditions
and at greater and greater depths, in some cases exceeding 1 500 metres. This is exacerbated
by more stringent regulations on mining health and safety and environmental protection,
application of which has inevitably increased costs, with the result that, over the reference
period, production costs have not fallen as anticipated.

Secondly, the price of coal on the international markets has dropped considerably over the
past few years, for various reasons. Several non-European producers already operating on the
international markets, for example, have adopted more efficient extraction methods, assisted
by more favourable geological conditions; others, such as China, which in the past produced
only for the domestic market, have begun to export coal, adopting aggressive marketing
policies; the specific economic situation in other traditionally exporting countries, such as
Indonesia and South Africa, where the national currencies are undergoing substantial
devaluation and there is an urgent need to obtain hard currency, and the low price of natural
oil and gas, have put strong pressure on prices to drop.

In short, the gap between production costs in the Community coal industry and the price of
coal on the international markets, which is the main basis for calculating State aid, has
become entrenched over the years rather than narrowing as hoped.

In practice, the only significant reductions have been in Portugal, where mining activities
ceased completely at the end of 1994, and in the United Kingdom which, while maintaining a
considerable degree of mining activity, has cut production drastically, keeping open only the
most profitable mines. Of particular note is the position of France, which aims to cease all
mining activity by 2005. The more cautious approach adopted by Germany and Spain, which
have not taken any final decision, seems to be dictated by social and regional concerns rather
than any kind of realistic prospect of their coal industry achieving economic equilibrium.

The aid granted by the various Member States is described in detail below.

4.1.

Germany

Germany's aid to the coal industry under Article 3 and 4 of Decision No 3632/93/ECSC was
restricted, as from 1996, to aid for coking coal intended for the steel industry, aid for steam
coal
force
for electricity generation, and aid to maintain an underground labour
(Bergmannsprämie). Such aid is meant to cover the difference between production costs and
selling prices freely negotiated on the basis of conditions prevailing on the world markets for
coal of a similar quality originating in non-member countries. Consequently, production for
domestic and industrial consumption must be sold at prices which cover production costs.
This aid was approved by the Commission, which took due account of the social and regional
impact of the restructuring of the coal industry. The unemployment rate in the affected areas
is indeed considerably higher than in the rest of the country. What is more, these areas are

10

also generally eligible for aid from the Structural Funds, under the Objective No 2 priorities.
This aid has been entered in the federal budget and thus meets the requirements of
Article 2(2) of Decision No 3632/93/ECSC.

4.1.1.

1998

For 1998, the Commission authorised DM 9 427 million (ECU 5311.2 million) in aid to the
coal industry (under Articles 3, 4 and 5 of Decision No 3632/93/ECSC), the most important
destinations of which were:

–

–

–

–

–

(a) DM 5 171 million in operating aid under Article 3;

(b) DM 3 164 million in aid for the reduction of activity under Article 4;

(c) DM 81 million under a system to maintain an underground labour
(Bergmannsprämie) under Article 3;

force

(d) DM 161 million for Article 5 to cover exceptional costs incurred in pumping out
pits and purifying water which had infiltrated from inactive pits, for RAG AG,
Saarbergwerke AG, Preussag Anthrazit GmbH and Sophia Jacoba GmbH;

(e) DM 850 million in aid under Article 5 (exceptional costs)
for RAG AG,
Saarbergwerke AG and Sophia Jacoba GmbH, to enable these companies to cover
costs resulting from the restructuring of the coal industry and which are not linked to
current production.

The subsidies mentioned under (a), totalling DM 5 171 million, went to the following mines
of RAG AG: Friedrich Heinrich/Rheinland, Niederberg, Walsum, Lohberg/Osterfeld,
Prosper/Haniel, Westerholt, Auguste Victoria, Blumenthal/Haard and Heinrich Robert. In the
case of Saarbergwerke AG, the aid was destined for the Ensdorf and Warndt/Luisenthal mines
and in the case of Preussag Anthrazit GmbH, to the Ibbenbüren pit.

The DM 3 164 million in aid for the reduction of activity, mentioned under point b), was paid
to the Ewald/Hugo, Westfalen, Fürst Leopold/Wulfen and Haus Aden/Monopol pits of
RAG AG. This aid was also paid to the Göttelborn/Reden pit belonging to the
Saarbergwerke AG company. This aid was part of the programme for the total or partial
closure of the mines, mentioned above, under the agreement of 13 March 1997.

The DM 81 million referred to in c), intended to finance the Bergmannsprämie supplement of
DM 10 per shift worked underground, is an incentive measure to encourage skilled mining
personnel to work underground and help rationalise production. It indirectly covers part of the
difference between the cost of production and foreseeable income. What is more, this aid
reduces by that amount the cost of production of the coal industry and must therefore be
examined in the light of Article 3 of Decision No 3632/93/ECSC.

The DM 161 million granted to RAG AG, Saarbergwerke AG and Preussag Anthrazit GmbH,
referred to in d), is to cover the exceptional costs incurred for pumping out pits closed down
under restructuring measures which are situated next to pits still in production. Given that the
closed pits no longer have the equipment
the
installations concerned are not working at full pace, there are additional influxes of water
which are in no way linked with current production but which are occurring in neighbouring
pits still in production and thus causing additional costs. This aid, awarded pursuant to

to evacuate such water or,

if they do,

11

Article 5 of Decision No 3632/93/ECSC, is explicitly mentioned in Title II (b) of the Annex
to this Decision.

The DM 850 million in aid, referred to in e), paid to Ruhrkohle AG, Saarbergwerke AG and
Sophia Jacoba GmbH, was to cover restructuring costs not linked to current production
(inherited liabilities). It was granted as a result of decisions taken at
the Kohlerunde
negotiations of 11 November 1991 between the coal industry, the Federal Government, the
Land governments of North Rhine-Westphalia and Saarland, the trade unions in the coal
sector and the electricity generators, and is intended to cover social security benefits payable
to workers forced to take early retirement, other exceptional costs, supply of free coal to
workers made redundant as a result of restructuring and rationalisation and payment of
allowances outside the statutory system to workers made redundant as a result of restructuring
and rationalisation and those entitled to such benefits prior to restructuring. On the technical
and financial side,
the aid is intended for the supplementary safety measures needed
underground and the exceptional intrinsic depreciation resulting from the restructuring of the
industry. This aid is also granted pursuant to Article 5 of Decision No 3632/93/ECSC and is
explicitly mentioned in Title II, paragraphs a), b), c), d), f) and k) of the Annex to this
Decision.

The restructuring plan for 1998-2002 was examined by the Commission in accordance with
Article 8 of Decision No 3632/93/ECSC in connection with the authorisation of aid for 1998.

4.1.2.

1999

For 1999, the Commission authorised a total of DM 9 193.3 million (EUR 4 700.5 million) in
aid to the coal industry (under Articles 3, 4 and 5 of Decision No 3632/93/ECSC). The main
destinations were:

–

–

–

–

–

(a) DM 5 141 million as operating aid under Article 3;

(b) DM 3 220 million in aid for the reduction of activity under Article 4;

(c) DM 73 million in aid for the Bergmannsprämie scheme to maintain an
underground labour force under Article 3;

(d) DM 11.3 million under Article 5 to the company RAG Aktiengesellschaft to
cover exceptional costs;

(e) DM 748 million in aid to cover exceptional costs under Article 5 and paid to the
companies RAG Aktiengesellschaft and Sophia Jacoba GmbH, to enable them to
cover costs resulting from a restructuring of the coal industry and which are not
linked to current production.

The subsidies referred to in a), totalling DM 5 141 million, were paid to the pits of the
following companies: RAG Aktiengesellschaft, Preussag Anthrazit GmbH6, Dr Arnold
Schäfer GmbH and Merchweiler GmbH. As regards RAG Aktiengesellschaft, the aid went in
to the following pits: Friedrich Heinrich/Rheinland, Niederberg, Walsum,
particular
Lohberg/Osterfeld, Prosper/Haniel, Westerholt, Auguste Victoria, Blumenthal/Haard and
Heinrich Robert and to the Ensdorf and Warndt/Luisenthal mines which have belonged to

6 Although Preussag Anthrazit GmbH was taken over by RAG AG on 1 January 1999, it is still run as a

separate entity.

12

RAG Aktiengesellschaft since 1 January 1998. In the case of Preussag Anthrazit GmbH, the
aid was paid to the Ibbenbüren colliery.

The aid for reduction in activity, totalling DM 3 220 million, referred to under b), was paid to
RAG Aktiengesellschaft's following mines: Fürst Leopold/Wulfen, Ewald/Hugo, Haus
Aden/Monopol and Westfalen and also to the Göttelborn/Reden pit which has belonged to
RAG Aktiengesellschaft since 1 January 1998. In accordance with Article 4 of Decision No
3632/93/ECSC, the Göttelborn/Reden, Westfalen and Ewald/Hugo coal mines will cease all
activity before the date on which the decision expires, namely 23 July 2002. More precisely,
the Ewald/Hugo site will close down on 30 April 2000 and not in July 2002 as initially
planned, on account of the ceiling imposed on aid and the fall of coal prices in the world
market.

The aid totalling DM 73 million referred to in c) and intended to finance the
Bergmannsprämie supplement of DM 10 per shift worked underground,
is an incentive
measure to encourage skilled mining personnel to work underground and to help rationalise
production. It indirectly covers part of the difference between the cost of production and
foreseeable income. In addition, this aid reduces by that amount the cost of production of
coalmining companies and must thus be examined in the light of Article 3 of Decision
No 3632/93/ECSC.

The aid amounting to DM 11.3 million and aimed at covering exceptional costs and paid to
RAG Aktiengesellschaft, referred to in d), must cover the additional cost of pumping out
waste water from pits closed down under restructuring measures and which are situated next
to pits still in production, as described in detail in the relevant section for 1998, paragraph d).

The DM 748 million in aid referred to e) and paid to RAG Aktiengesellschaft and Sophia
Jacoba GmbH, was to cover restructuring costs not linked to current production (inherited
liabilities). Part of this aid, namely DM 609 million, was granted as a result of decisions taken
at the Kohlerunde negotiations of 11 November 1991 between the coal industry, the Federal
Government, the Land Governments of North Rhine-Westphalia and Saarland, the trade
unions in the coal sector and the electricity generators. The remainder, i.e. DM 139 million,
results from new closures decided on 13 March 1997. This aid is aimed at covering the costs
described in detail in the relevant section for the year 1998, paragraph e).

4.2.

Spain

4.2.1.

1998

For 1998, the Commission authorised a total of PTA 193 817 million (ECU 1 159.3 million)
in aid to the coal industry under Articles 3, 4 and 5 of Decision No 3632/93/ECSC. The main
destinations were:

–

–

–

(a) PTA 59 443 million as operating aid, under Article 3;

(b) PTA 67 412 million in aid for the reduction of activity under Article 4;

(c) PTA 54 967 million under Article 5, aimed at financing exceptional welfare
benefits payable to workers made redundant as a result of modernisation,
rationalisation, restructuring and reduction of activity in the Spanish coal industry;

13

–

(d) PTA 11 995 million under Article 5,
technical costs
occasioned by pit closures under the measures to modernise, rationalise, restructure
and reduce the activity of the Spanish coal industry.

to cover exceptional

The PTA 59 443 million in operating aid referred to in a) was paid to cover the operating
losses of 73 coalmining companies accounting for an overall production of 14.5 million
tonnes in 1998. Spain notified the Commission of the production costs of these companies for
1997 in order to show how such costs had evolved between 1994 and 1997. The aid granted to
cover the production costs of companies or production units or aid granted pursuant to Article
3, Article 4, or both these Articles, is meant to cover entirely or partially the difference
between the costs of production and the selling price freely agreed upon by the parties
concerned, account being taken of the conditions prevailing in the world market.

Of the PTA 67 412 million in aid for the reduction of activity, referred to in b), PTA 61 054
million went to cover the operating losses of the Hunosa and Minas de Figaredo mines, PTA
5 361 million to the Mina de la Camocha SA and PTA 997 million to Endesa, only for its
underground mines. The companies concerned produce a total of 3 million tonnes of coal.

The PTA 54 967 million referred to in c) was to fund the allowances payable to workers in the
Spanish coal industry forced to take early retirement or made redundant as a result of the
implementation of the plan to modernise, rationalise, restructure and reduce the activity of the
Spanish coal industry. Part of this aid, totalling PTA 44 872 million, was granted to the
Hunosa and Minas de Figaredo SA mines and will be used to cover the costs of the early
retirement of workers who were laid off before 31 December 1998. The balance, amounting
to PTA 10 095 million, is to cover the allowances payable to workers laid off in other
companies through measures to modernise, rationalise, restructure or reduce activity.

The PTA 11 995 million referred to in d) was intended to cover the fall in value of the fixed
assets of coal producers having to effect total or partial closures and the other exceptional
costs occasioned by the progressive closures connected with the restructuring of the coal
industry. Part of this aid, totalling PTA 1 670 million, will be awarded to Hunosa and Minas
de Figaredo SA. The remainder, i.e. PTA 10 325 million, is destined for other producers
undertaking restructuring or reductions of activity.

4.2.2.

1999

For 1999, the Commission authorised a total of PTA 178 250 million (EUR 1 071.3 million)
in aid to the coal industry (under Articles 3, 4 and 5 of Decision No 3632/93/ECSC). The
main destinations were:

–

–

–

–

(a) PTA 54 544 million (EUR 327.8 million) in operating aid, under Article 3;

(b) PTA 66 486 million (EUR 399.6 million) in aid for the reduction of activity,
under Article 4;

(c) PTA 44 141 million (EUR 265.3 million) in aid under Article 5,
to cover
exceptional social welfare benefits payable to workers made redundant as a result of
the measures to modernise, rationalise, restructure and reduce the activity of the
Spanish coal industry;

(d) PTA 13 079 million (EUR 78.6 million) under Article 5 to cover exceptional
technical costs occasioned by pit closures under
the measures to modernise,
rationalise, restructure and reduce the activity of the Spanish coal industry.

14

The PTA 54 544 million in operating aid referred to in a) is meant to cover the operating
losses of 57 coal producers accounting for an overall production of 13.3 million tonnes in
1999. Spain notified the Commission of the production costs of these companies for 1998 in
order to show how such costs had evolved between 1994 and 1998. The aid granted to cover
the production costs of companies or production units, or aid granted pursuant to Article 3,
Article 4 or both these Articles, is meant to cover entirely or partially the difference between
the costs of production and the selling price freely agreed upon by the parties concerned,
account being taken of the conditions prevailing on the world market.

Aid for the reduction of activity, referred to in b), amounting to PTA 66 486 million (EUR
399.6 million) is meant to cover the operating losses of the following producers: Hunosa,
which received PTA 58 442 million (EUR 351.2 million), Mina de la Camocha, which
received PTA 5 147 million (EUR 30.9 million), the underground mines of Endesa, which
received PTA 624 million (EUR 3.7 million), the underground mines of Encasur, which
received PTA 533 million (EUR 3.2 million), Antracitas de Guillon, which received PTA
1 115 million (EUR 6.7 million), Antracitas de Rengos, which received PTA 271 million
(EUR 1.6 million), and Minas de Escucha, which received PTA 354 million (EUR
2.1 million). The planned total production for these producers in 1999 was 3 million tonnes.

The PTA 44 141 million (EUR 265.3 million) in aid referred to in c) was to fund the
allowances payable to workers in the Spanish coal industry forced to take early retirement or
made redundant as a result of the implementation of the plan to modernise, rationalise,
restructure and reduce the activity of the Spanish coal industry. Part of this aid, totalling PTA
34 046 million (EUR 204.6 million) is to be paid to the Hunosa company and will be used to
cover the costs of the early retirement of workers who were laid off before 1 January 1999
and of 536 workers who will be laid off in 1999. The remainder, i.e. PTA 10 095 million
(EUR 60.7 million), is meant to cover the allowances payable to some 1 000 workers who
will be laid off in 1999 in other coalfields as a result of measures to modernise, rationalise,
restructure and reduce activity. The financial measures in question correspond to obligations
imposed by the modernising, rationalising and restructuring of the Spanish coal industry and
thus cannot be linked to current production (inherited liabilities).

The PTA 13 079 million (EUR 78.6 million) in aid referred to in d), is intended to cover the
fall in value of the fixed assets of coal producers having to effect total or partial closures, and
the other extraordinary expenses caused by gradual closures linked to the restructuring of the
coal industry. Part of the aid totalling PTA 2 754 million (EUR 16.6 million) will be awarded
to Hunosa. The remainder, i.e. PTA 10 325 million (EUR 62 million), is to be paid to other
companies carrying out restructuring or reducing activity.

4.3.

France

the undertaking in question has regular

The State aids notified by France for the financial years 1997, 1998 and 1999 and paid to
Charbonnages de France, were not approved by the Commission and are still being examined.
On 9 July 1999, the Commission addressed a letter of formal notice7 to France in which it
reports that
recourse to credit available on
international markets to cover operating losses arising both from current production losses
and interest on loans contracted previously. The Commission also notes that Charbonnages de
France, while being in a critical financial situation, nevertheless enjoys the highest credit
rating for its loans on the international financial markets (Standard & Poor’s AAA, confirmed
by Moody’s). The Commission considers that the confidence shown by the international

7 OJ C 280, 2.10.1999, p. 3.

15

financial markets can - in the absence of a formal guarantee - be explained only by a tacit
guarantee from the French State for loans issued by Charbonnages de France, which could
thus constitute non-declared State aids.

4.4.

United Kingdom

4.4.1.

1998/1999

Since the privatisation of British Coal was completed at the end of 1994 and the new legal
and administrative framework for the British coal industry was brought in by the 1994 Coal
Industry Act,
the United Kingdom has no longer granted State aid related to current
production. All aid in respect of the period concerned was therefore authorised under Article 5
of Decision No 3632/93/ECSC as exceptional costs arising from the modernisation,
rationalisation or restructuring of the coal industry (inherited liabilities), according to the
provisions of the Annex.

For 1998/1999, the Commission authorised £891 million (ECU 1 317.3 million) in aid to the
coal industry. The main destinations were as follows:

–

–

–

–

–

–

(a) £92 million for contributions to the pension schemes of the British Coal
corporation employees and their dependants;

(b) £24 million to the British Coal Corporation or the public body replacing it, to
cover the cost of exceptional social welfare benefits payable to workers who lose
their jobs as a result of restructuring, rationalisation and modernisation of the coal
industry;

(c) £365 million for supply of free coal or smokeless fuel or, in some cases, cash
payment to former employees of the British Coal Corporation or their dependants;

(d) £177 million in compensation for accidents or physical injuries sustained by
former employees of the British Coal corporation and their dependants;

(e) £15 million to cover the costs arising from the British Coal Corporation's residual
activities;

(f) £218 million towards the cost of environmental damage resulting from mining
activity prior to privatisation.

The £92 million referred to in (a) is intended to cover contributions to pension schemes and
other pension arrangements for around 600 000 persons insured through their activity as
employees of the British Coal Corporation. The pension rights of British Coal Corporation
employees who stay on after privatisation, relating to their employed activity after the date of
privatisation, are the responsibility of the new industry-wide pension schemes financed
entirely by the new companies.

The £24 million referred to in (b), intended to cover the exceptional social welfare costs
arising from the closure of British Coal Corporation mines, is to help the company and the
British Government to meet their compensation obligations towards the workers who have
lost their jobs or been transferred to other mines as a result of the measures to restructure,
rationalise and modernise the British coal industry.

16

The £365 million referred to in (c), covering the entitlement of former employees of the
British Coal Corporation or their dependants to free coal or smokeless fuel or, in some cases,
cash-in-lieu, arises from the British Coal Corporation's obligations under agreements signed
with the miners' trade unions. For workers transferring to the new privatised companies, this
obligation has been taken over by the new companies.

The £177 million referred to in (d) is to cover the cost of compensation payable by the British
Coal Corporation to workers sustaining accidents or other physical injury in the course of
their paid activity within the undertaking prior to the date of privatisation. The beneficiaries
of the financial measures are workers made redundant, retired or transferred to the privatised
companies.

The £15 million referred to in (e) to cover the costs arising from the British Coal
Corporation's residual activities between privatisation and the dissolution of the Corporation
is to meet the Corporation's obligation to cover certain residual activities not related to current
production, such as the management and disposal of the corporation's residual property assets
and liabilities, commitments under rent contracts relating to British Coal properties, and the
Corporation's responsibilities with regard to certain legal action taken against it (other than for
compensation for individual injury or damage to health).

The £218 million referred to in (f) allocated to the Coal Authority is intended to cover
liabilities for the environmental damage caused by underground production activities prior to
privatisation of the British Coal Corporation. Part of these liabilities are for damage caused on
the surface by subsidence. The other liabilities include the rehabilitation of abandoned mine
sites and tips, methane venting and water pumping from old workings. The companies
succeeding the British Coal Corporation are responsible for the obligations connected with the
working of the resources or mines transferred to them, as this is one of their areas of
responsibility defined in their operating licences.

4.4.2.

1999/2000

No State aid was granted to the coal industry of the United Kingdom.

5.

LEGAL DISPUTES

The coexistence on the Community market of undertakings which receive State aid for
current production and others which do not inevitably leads to tension between operators,
which can provoke legal disputes of various kinds.

5.1.

Complaints

On 26 August 1997 the Commission registered a complaint (ref. 97/4717) from five French
undertakings,8
the public undertaking
Charbonnages de France.

including the Thion et Cie company, against

The complaint concerns the alleged misuse of State aid which France grants on an annual
basis to the public undertaking Charbonnages de France after authorisation by the
Commission in the framework of Decision No 3632/93/ECSC.
the
Charbonnages de France group is selling coal at a price lower than that on the world market,

is alleged that

It

8 Thion & Cie, Maison Balland Brugneaux, Société Nouvelle Vinot Postry, Établissements Lekieffre,

Charbogard.

17

thus precluding all competition. This price is allegedly made possible only by making use -
for unauthorised purposes - of State aid granted by France to the public undertaking
Charbonnages de France to support its coal production. According to the complainants this
practice leads to distortion of competition on the French market of imported coal intended for
the industrial sector. The complex mechanism used provided for a series of transactions
between the companies of the Charbonnages de France group, a more detailed description of
which is provided in the letter of injunction, thanks to which SIDEC, one of the group's
subsidiaries, is able to supply industrial consumers with heat produced from coal sold by the
parent company at an artificially low price. What is more, the parent company Charbonnages
de France is said to attribute to itself some of the costs borne by the subsidiary companies,
thus improving the financial result of the latter to its own detriment.

the
In the following months,
complainants, the undertaking Charbonnages de France, the supervisory authority (DIGEC),
and finally the French Government, in order to gather more substantial information to assess
whether the complaint was justified.

the Commission contacted all the parties concerned,

i.e.

On 20 January 1999, having not concluded that the complaint was manifestly not justified, the
Commission forwarded to the French Government a letter of formal notice9 pursuant to
Article 88 of the ECSC Treaty concerning State aids paid since 1994, namely both the aid
awarded for the 1994, 1995 and 1996 financial years, duly authorised by the Commission10,
and aid for the 1997 and 1998 financial years, regarding which the Commission has not yet
delivered an opinion.

On 16 March 1998, the Commission registered a complaint from the British company RJB
Mining plc against a State aid specifically linked to and conditioned by the merger of the
German companies RAG AG, Saarbergwerke AG and Preussag Anthrazit GmbH.

5.2.

Appeals

The British company RJB Mining Plc lodged an appeal with the Court of First Instance of the
European Communities against certain Commission Decisions, viz.:

–

–

–

–

(1) Case T-156/98 concerning the Decision of 29 June 199811 concerning the
amalgamation of the undertakings RAG AG, Saarbergwerke AG and Preussag
Anthrazit GmbH.

(2) Case T-12/99 against Decision No 99/270/ECSC of 2 December 1998 on the
authorisation of State aids to the German coal industry for 1998.

(3) Case T-63/99 against Decision No 99/299/ECSC of 22 December 1998 on the
authorisation of State aids to the German coal industry for 1999.

(4) Case T-64/99 against the implied decision of refusal deemed imputable - pursuant
to Article 35 of the ECSC Treaty - to the lack of initiative on the part of the

9 OJ C 99, 10.4.1999, p. 9.
10 Decision No 95/465/ECSC (1994 financial year); Decision No 95/579/ECSC (1995 financial year); Decision

No 96/458/ECSC (1996 financial year).

11 The appellant claims that the merger authorised by the abovementioned Decision entails the granting of
non-authorised State aids, but the Commission departments affirm that such aid does not exist. The case is
mentioned only for the record.

18

Commission with regard to the merger of the RAG AG, Saarbergwerke AG and
Preussag Anthrazit GmbH companies.

–

(5) Case T-170/99 against Decision No 99/451/ECSC of 4 May 1999 on the
authorisation of State aids to the Spanish coal industry for 1999.

The German company Vasa Energy GmbH & Co. KG has also introduced an appeal similar to
that described under 4):

–

(6) Case T-29/99 against the implied decision of refusal deemed imputable - pursuant
to Article 35 of the ECSC Treaty - to the lack of initiative on the part of the
Commission with regard to the merger of the RAG AG, Saarbergwerke AG and
Preussag Anthrazit GmbH companies12.

These appeals are currently being assessed by the Court of First Instance of the European
Communities, together with Cases T-11013 and T-111 already mentioned in the previous
report.

A letter of formal notice dated 4 February 2000 has been addressed to the German
Government concerning aid which could have been included in the sale of the coalmining and
non-coalmining activities of Saarbergwerke AG and Preussag Anthrazit GmbH for DM 1.

6.

CONCLUSIONS

The main objective of aid granted by certain Member States in the last few years is to
minimise the social and regional consequences of restructuring and the reduction in activity in
the coal industry and thus to avoid the industry's complete disappearance in the very short
term. On its side, the Commission, through its Decision No 3632/93/ECSC, has endeavoured
to ensure that the allocation of aid is performed with the greatest transparency and that the
derogations to Article 4(c) of the ECSC Treaty are limited to the strict minimum to enable the
coal industry to implement the structural changes in the coalmining areas in decline.

As already pointed out in the last report, these aid mechanisms, which were designed to cope
with economic crises, have not managed to provide an answer in economic terms to the
structural crisis facing the European coal industry. The improvements made to production
costs have not been sufficient in the light of the coal prices operated on the world market.
Indeed, the production costs in non-member countries have also been reduced through the
introduction of more advanced technology in geological conditions which are clearly more
favourable than those encountered by European producers, which are increasingly difficult.
The competitive imbalance has not been compensated; on the contrary, it has even increased.
In the absence of any practical prospect of a return to a stable and profitable European coal
industry, the idea has gained ground that State aids ought to be considered a support to areas
and social groups which are lagging behind, rather than a strategy for economic development.

This growing awareness, in a context in which public expenditure is being cut, has provoked a
critical examination of the future of policies implemented by the Member States, particularly
regarding their high cost. In other words, while the social and regional function of these aid

12 OJ C 86, 27.3.1989, p. 32.
13 On 9 September 1999, the Court of First Instance delivered a judgment against RJB Mining plc on two points
of law concerning the annulment of the Commission Decision regarding financial aid by Germany in favour
of the coal industry in 1997 (OJ C 314/99 of 30 October 1999, p. 8). RJB Mining plc has lodged an appeal.

19

programmes has been recognised,
their cost-effectiveness ratio has been progressively
questioned. Modern theories about State intervention in the economy favour other instruments
now which are less burdensome and which, above all, offer better prospects, at least in the
medium term, for the development of the social groups concerned. Indefinitely supporting an
industry in irreversible decline is a choice which is being increasingly questioned, both within
governments and by the public. What is more, the effect on the environment of aid to the coal
industry is also being increasingly questioned, particularly on account of the obligation to
reduce the emissions of greenhouse gases in order to comply with the Kyoto Protocol.

The governments concerned have decided to limit - both in quantity and in time - their public
aid, according to different
timetables and procedures. The process may be regarded as
finished in the case of Belgium and Portugal, coming to a close in France, which has settled
on 2005 as the date for the definitive end of coalmining, and is rapidly changing in the United
Kingdom, where efforts to achieve competitiveness with imported coal are being pursued.
Even Spain and Germany, which have adopted a more gradual approach, have put forward
more rigorous plans for restructuring.

20