Estonia considers tougher punishments after competition critical of Olerex

Olerex filling station.
Olerex filling station. Source: Siim Lõvi/ERR

A part of fuel retailers worry that paying a fine of €10 million could be cheaper than complying with the motor fuels bioadditive requirement. All eyes are on Olerex that promises to meet the requirement by year's end.

Major fuel retailers are set to meet in Tallinn on Wednesday. All eyes are on Olerex at the extraordinary meeting of the Estonian Oil Association as the company has been the subject of conversation recently in the Riigikogu, watchdogs and the Ministry of Economic Affairs.

Competitor Tartu Terminal suggested in October that Olerex is failing to meet the fuel sellers' bioadditive requirement. "There is confusion on the market today – if a potential fine of €10 million is the only sanction, it makes no sense for any fuel seller to comply with the biocomponent requirement," CEO Raido Raudsepp wrote.

The letter does not mention Olerex specifically, more so as the company still has a month and a half to comply.

Rein Vaks, head of energy markets at the Ministry of Economic Affairs and Communications, said that companies have several ways to comply with the environmental obligation, including adding 7.5 percent of bioadditive to motor fuels and selling biomethane. It is also possible to purchase quota from those who have already complied and have sales statistics left over.

For example, Neste is manufacturing HVO renewable diesel the properties of which are virtually indistinguishable from ordinary diesel to a point where no Estonian laboratory can manage it.

"One problem is that market participants tend to bend the rules with these products," Vaks said, adding that companies claim they are selling HVO renewable diesel, while analyses suggest otherwise.

Olerex has told the Environmental Board that it bet on HVO diesel too, while deliveries have taken longer than expected. The board has launched misdemeanor proceedings against Olerex as the company allegedly failed to hit the biocomponent target last year.

Market participants believe that Olerex cannot meet its target by buying statistics from other sellers this year, while head of the Estonian Oil Association Mart Raamat said that there is plenty of HVO available.

In order for purchased goods to count towards the target, fuel must leave the excise warehouse by year's end.

"In other words, the excise duty needs to be paid on that quantity," Raamat said. "It does not have to reach filling stations."

Ministry: Violators potentially looking at revocation of license

Everyone involved hopes that Olerex will meet tis target. The matter came up in the Riigikogu Finance Committee in mid-October, with committee chair Aivar Kokk suggesting a situation where paying a fine is cheaper than compliance with obligations should not be allowed.

"Sums major sellers spend on buying quota can approach €40 million. Paying a fine of €10 million instead of spending €40 million on sales statistics constitutes a net profit of €30 million," Kokk remarked. "But this would not be fair toward other fuel retailers," he added.

Even with the fine sum, Estonia would still be out €8 million in VAT. Rein Vaks said that the ministry is considering an amendment. "Fuel prices have grown and there are changes in market share, meaning that we may have reason to hike the sanction," he said.

The ministry has asked the Environmental Board to remind market participants of the obligation and the fact fines are not the only possible punishment.

"If a person with an activity license fails to uphold legal obligations, that license can be frozen or revoked. Another instrument is confiscating illegal income," Vaks said.

Mart Raamat said that the Wednesday meeting of the oil association will concentrate on whether current legislation ensures sufficient transparency rather than how sellers should opt for fines instead of meeting obligations.

"The government has failed to communicate how much biofuel was circulated last year, whether anyone failed to comply and how potential violations are processed," Raamat admitted.


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Editor: Marcus Turovski

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