Audit: National Oil Shale Development Plan Failing

According to the National Audit Office, the main goal of state development plans for oil shale has become outdated and therefore needs to be reconsidered. (Photo: Postimees/Scanpix)
3/20/2014 1:00 PM
Category: Economy

Targets set in the country's plan for reducing the environmental impact of oil shale mining and use, and increasing the efficiency of mining have not been achieved, and the country is not getting the economic benefits of the natural resource, according to a critique of the government's development plan by the National Audit Office.

Charges for a negative impact on the environment have also failed to motivate entrepreneurs to pollute less or use natural resources more sustainably, the Office charged today in the new audit. The state is also preparing a new development period (2016-2040) without having carried out studies that would allow it to assess the most significant impacts of the use of new and existing oil shale resources on the environment, people's health, and society.

The contribution of oil shale to the Estonian GDP is 4 percent. However, the Audit Office report notes that it contributes more than 70 percent of all emissions into the air and produces 70 percent of ordinary and 82 percent of hazardous waste.

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

The National Audit Office wrote in the report:

* The main goal of state development plans, including the country's 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plan - to guarantee Estonia’s energy independence with oil shale energy - is no longer relevant, as it has become outdated and therefore needs to be reconsidered.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. Shale oil does nothing to increase Estonia’s energy independence, because the oil cannot be used as fuel without refinement, the report said.

* 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 percent from 2007-2012. Oil shale mining losses total around 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 audit said.

* 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 audit said the generation of energy and heat from oil shale created 12 percent more oil shale bottom ash, 8 percent more fly ash and 2 percent 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 percent.

* 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.

The audit said the government does not 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 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.

* At present, the government does not earn enough from oil shale mining and use. The state has allowed entrepreneurs to 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 around 12 million euros from shale oil production in 2012 as national taxes (environmental charges, labor taxes and excise duties) while the operating profit of oil producers amounted to around 91 million euros, the report said.

* The National Audit Office believes the ministry has not carried out the necessary fundamental studies or analysis required for the preparation of the new oil shale development plans to learn about its environmental impact.

Environmental impact is only assessed after the company has applied for a mining license. The National Audit Office found 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.

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 newnational development plan of oil shale use (2016-2030).


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