VKG: If EU Green Deal damages oil industry, state must pay compensation

Viru Keemia Grupp (VKG).
Viru Keemia Grupp (VKG). Source: VKG

The leaders of the Viru Keemia Grupp (VKG) are asking the government to confirm the European green agreement would not affect investments already made in oil production and if so investments would have to be compensated by the state.

VKG is a private company focusing on oil shale mining, shale oil, combined heat and power production and production and marketing of fine chemical products.  The company is the largest producer of shale oil both in Estonia and in the world and employs 1,760 people.

Supervisory Board member Priit Piilmann and Chairman Ahti Asmann sent a letter to Prime Minister Jüri Ratas and the government stating investments in oil production before the implementation of the European Union's Green Deal must be protected.

They wrote: "Estonia's shale oil has been very successful in competing in the global fuel market and demand for production is increasing over time. there is a dialogue between industry and regulators and the Estonian state has a clear economic policy position represented in the EU institutions."

"Due to the principle of legal certainty, investments made prior to the green agreement should be able to be remunerated or compensated by the state."

Piilmann and Asmann think the fair transition measures must offset the negative impact on the budgets of the Estonian state and local governments and the negative socio-economic effects on the regional and the possible depreciation of investors' assets.

"Investors could not foresee significant impacts and changes in the decision-making process prior to the green agreement. Investment decisions have been made in good faith on the basis of national development plans. VKG as a company has a value of €600+ million," wrote Piilmann and Asmann.

Entrepreneurs point out that the member states of the European Union have different levels of development and opportunities.

VKG attaches importance to the sustainable operation of shale oil production until new economic sectors with similar tax revenues are formed in the country.

"In order to ensure a fair transition, the business sectors being developed as a substitute should be able to offset the tax revenue lost by the shrinking oil shale sector. The tax contribution of the oil shale sector in 2018 was €122 million," entrepreneurs wrote to the Prime Minister.

Estonia will receive €125 million from the European Union 's Fair Transfer Fund, which is the highest figure in terms of population at €95 per person. While Estonian politicians have been happy with this amount, VKG executives have pointed out that it is on a par with the one-year tax revenue of the oil shale sector.


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Editor: Helen Wright

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