Goals set in oil shale development plan have not been achieved

Toomas Mattson | 3/20/2014 | 8:45 AM

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TALLINN, 20 March 2014 – The audit carried out by the National Audit Office indicates that the goals of reducing the environmental impact of oil shale mining and use and increasing the efficiency of mining and use set in the National Development Plan for Oil Shale Use have not been achieved. Environmental charges have failed to motivate entrepreneurs to pollute less or use natural resources more sustainably. Also, the state is preparing new development (2016-2030) without having carried out important studies that would allow it to assess the most significant impact of the use of existing and new oil shale resources on the environment, people’s health and society as a whole.

No other industrial activity in Estonia has a bigger environmental impact than oil shale mining and use. The air pollution caused by the oil shale sector comprises more than 70% of all emissions into the air in Estonia and the waste generated by the use and processing of oil shale comprise ca 70% of ordinary and 82% of hazardous waste. The water pumped from mines and quarries and the cooling water used by Eesti Energia Narva Elektrijaamade AS comprises more than 90% of surface water and groundwater use in Estonia. The contribution of the oil shale sector to Estonian GDP, however, is 4%.

The findings of the National Audit Office in the audit were as follows:

* The main goal of state development plans, incl. the oil shale development plan – to guarantee Estonia’s energy independence with oil shale energy – is no longer relevant, as it has become outdated and therefore needs to be reconsidered. As an open electricity market participant and member of the Nordic electricity exchange, Estonia cannot prefer domestic production sources and consumers when guaranteeing power supply for its consumers. The price of electricity is formed on the market and consumers cannot buy oil shale electricity for less than the market price. It is also impossible to save the electricity produced from oil shale in Estonia for Estonian consumers only. Eesti Energia is planning to increase the use of oil shale for the production of shale oil. The majority of shale oil is and will be exported in the future. Oil shale does nothing to increase Estonia’s energy independence, because the oil cannot be used as fuel without refinement.
* The second important goal of the oil shale development plan – to mine and use oil shale more efficiently – has not been achieved. Mining losses in quarries and underground mines have not decreased. Mining losses in oil shale quarries increased by 11% from 2007-2012. Oil shale losses in underground mines remained at the same level as in 2007 (i.e. 28%). Oil shale mining losses total ca four million tons per year. Better technology and equipment must be taken into use to increase efficiency. However, the state has not established any specific activities in the development plan to increase the efficiency of oil shale mining and use (i.e. electricity generation and oil production).
* The third goal of the oil shale development plan – to reduce the environmental impact of oil shale mining and use – has not been achieved. Negative environmental impact has increased across almost all of the indicators prescribed in the development plan. For example, the generation of energy and heat from oil shale created 12% more oil shale bottom ash, 8% more fly ash and 2% more semi-coke than in 2007. The amount of CO2 emissions and oil shale ash created per unit of oil shale energy and heat production has also increased by 11%.
The decrease in the amount of sulphur dioxide (SO2) in 2012 is positive, as the EU directive states that the SO2 emissions generated by large combustion plans may not exceed the permitted quantity, but SO2 emissions are not among the indicators selected in the development plan for monitoring the reduction of environmental impact.
The Ministry has not specified a single activity in the development plan which would help reduce the environmental impact of oil shale mining and use.
* The environmental charges applied to oil shale do not meet their purpose of motivating companies to prevent or reduce potential damage related to the use of natural resources, emission of pollutants into the environment and disposal of waste. Although the state has gradually increased the environmental charges, the environmental impact of oil shale mining and use has not decreased. Environmental charges have been increased arithmetically, i.e. the actual environmental impact and its consequences have not been considered. The state does now know what the actual scale of environmental damage is and whether environmental charges compensate for this. The state has still not carried out a study by agreed methods that would be acceptable to all parties in order to comprehensively ascertain and assess the negative health, environmental, social and economic impact of the oil shale sector and their consequences in terms of money. The Ministry of the Environment has pointed out that the present environmental investments of the state exceed the environmental charges.
* At present, the state does not earn enough from oil shale mining and use. The state has allowed one of its riches – oil shale – to be used in business. Entrepreneurs earn income at the cost of this resource, which means that the state should demand a fair charge for its use. Not a single tax aimed at earning revenue for the state from oil shale production has so far been established on the oil shale sector. For example, the state earned ca 12 million euros from shale oil production in 2012 as national taxes (environmental charges, labour taxes and excise duties) while the operating profit of oil producers amounted to ca 91 million euros. The total amount of national taxes received from the oil shale sector in 2012 is ca 90 million (incl. ca 34 million as excise duty and labour taxes, and 56 million euros as environmental charges). The Government of the Republic discussed the potential establishment of oil shale royalty in 2013, but dealing with the issue was postponed.
* Identification of the overall effect of the mining volumes planned in the new oil shale development plan has been left in the background. The Ministry of the Environment has started preparing the oil shale development plan until 2030. The National Audit Office is of the opinion that the Ministry has not carried out the necessary fundamental studies or analyses required for the preparation of the new oil shale development plans. For example, there are plans to start using new oil shale resources, but the state does not know what the complex environmental impact of this would be. The technical and economic possibility of mining has been the only factor considered upon the use of new resources for decades. Environmental impact is only assessed after the company has applied for a mining licence. The National Audit Office finds this impermissible in a situation where one groundwater body is permanently in a bad condition and several other groundwater bodies are at risk as well. In addition to this, the most significant health, social and economic effects of mining and use have not been fully ascertained either.
Tarmo Olgo, Director of Audit at the National Audit Office (Performance Audit Department) feels that the present oil shale development plan is basically a document that has little impact on steering the use of oil shale. “Several ideas in the development plan are good, and right,” he said. “For example, one of the goals set in the plan is to mine and use oil shale in a manner that causes less environmental pollution, but the activities required for the achievement of this goal have not been specified.” He also hoped that the Ministry of the Environment learns from the mistakes made in the current development plan and carries out the studies and analyses about the most significant impact of the oil shale sector upon preparation of the new development plan.
The National Audit Office advised the Minister of the Environment to ascertain the complex impact of oil shale mining and use with studies before the completion of the new National Development Plan of Oil Shale Use (2016-2030).This will make it possible to assess the complex negative impact of the oil shale sector that society is prepared to tolerate.Then it will be possible to decide on the permissible annual oil shale mining rate and to assess the use of new resources.
The actual environmental damage caused by oil shale mining and use and how much money the state will have to spend to eliminate such damage must also be assessed before the completion of the new development plan. After that it will be possible to calculate environmental charges that will motivate companies to prevent environmental damage and use natural resources more sustainably.

Background

The National Audit Office audited whether the following goals set in the National Development Plan for Oil Shale Use have been achieved:

  • Has the state managed to reduce the environmental impact of mining and use and increase efficiency?
  • Has the state carried out the necessary studies forming input for the preparation of the new oil shale development plan?
  • Does the state receive a fair charge for oil shale mining and use?

Oil shale resources total 4.8 billion tons according to the Environmental Register. Active resources comprise 1.3 and inactive resources 3.5 billion tons of this. According to the Ministry of the Environment it is possible to extract up to 50% of active resources. Considering that 20 million tons are extracted per year, active resources will last for another 25-30 years.

Toomas Mattson
Head of Communication Service, National Audit Office
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+372 513 4900
toomas.mattson@riigikontroll.ee
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  • Posted: 3/20/2014 8:45 AM
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Oil shale development plan audited

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