The Minister of Finance Mart Võrklaev (Reform), who is also the state's representative in Eesti Energia, the company constructing the new shale oil processing plant in Auvere, said that the state will try to get the almost-finished plant up and running for even a short period of time, so as to avoid squandering the nearly €350 million investment.
"This decision was taken in 2019 and entailed substantial risks, given that the possible consequences could have been predicted. Upon examination of the circumstances involving the state-owned enterprise, the €120 million invested by the government, the public purse, it becomes clear that the decision made was both difficult and irresponsible," Võrklaev told a government press conference on Thursday.
"However, in this administration, we have an obligation to find a solution and a compromise: either the funds are essentially going to a scrap heap, or it is still possible to extract the goods and the profit over a span of several years," he added.
ERR publishes here the full text of ERR journalist Toomas Pot's questions and Võrklaev's answers.
Do I understand it correctly that an oil plant will never be launched in Auvere?
It is too early to say whether it will be operational or not. If you look at the whole construction period or history of the new facility, it actually started in 2019, when there was a big push by the then head of Eesti Energia, the then government, to start building a new oil plant. Already at that time, there were messages that this might not be a very sensible thing to do in view of future climate and environmental goals and requirements – is this plant going to work without having too much environmental impact, without having too much environmental impact on other sectors? At that time, the state decided to put another €120 million into it, and today the plant is basically finished. It was supposed to start work either at the beginning of the year or in March, and now the building permit has been canceled.
Today, we find ourselves in a situation where long-term environmental goals may indeed render this plant impossible to operate despite investments amounting to well over €200 million. The total cost of the undertaking is 350 million; both public and private funds have been contributed. So decisions have been made in the past that, had we listened and planned ahead, would have been better to stay away from.
Now, a decision must be made between two unpleasant or challenging options: either allow the hundreds of millions of euros to remain idle as scrap, or operate the plant temporarily to make a profit.
Based on the available information, the building permit has been revoked, Eesti Energia is awaiting the issuance of a complex permit in order to continue with construction; construction will cease until this permit is obtained.
In any case, it is a difficult situation and I would venture to say that these decisions in 2019 – knowing where we are in our environmental journey - have been irresponsible and today we see that they could cost the country hundreds of millions of euros.
From the long answer I conclude that rather not?
To be launched or not? In any case, it is too early to say today. This plant is almost ready; we have spent hundreds of millions of euros of state and public company money on it. Now we have to see if we can actually get some kind of result or benefit from the factory, because writing off a few hundred million as scrap is a bit much.
The question is how long it can work and when it will become too much of a burden on our environment and on other sectors that will have to shrink at its expense. But that's what the integrated environmental permit is for – once it's in place, we'll know what the exact parameters are, and then we can make the next decisions.
So it's too early to say today whether or when the plant will be launched.
But is it then likely that €350 million will have to be simply thrown away?
This decision was taken in 2019 and entailed substantial risks, given that the possible consequences could have been predicted. Upon examination of the circumstances involving the state-owned enterprise, the €120 million invested by the government, the public purse, it becomes clear that the decision made was both difficult and irresponsible.
However, in this administration, we have an obligation to find a solution and a compromise: either the funds are essentially thrown away, or it is still possible to extract the goods and the profit over a span of several years. In any case, it is a difficult situation.
On November 18, 2019, Enefit Power AS (then Enefit Energiatootmine AS) submitted an application to the Narva-Jõesuu City Government for a building permit for the construction of an oil shale plant in the village of Auvere, Ida-Viru County, which was granted by the City Government on March 27, 2020. The plant would convert oil shale rock into [shale] oil, with long-term intentions to chemically process plastic waste and tire residues that will no longer be permitted to be incinerated in the future.
On April 26, 2020, the NGO Loodusvõlu, an environmental organization representing young citizens, filed an appeal with the Administrative Court of Tartu to annul the construction permit, arguing that the construction permit violates international climate agreements.
The Supreme Court reversed the lower courts' decisions and issued a ruling in the case, upholding the environmental organization's appeal and voiding the contested building permit. Withdrawal of a building permit means that the plant construction cannot go ahead. In addition, the Supreme Court emphasized that the legislature must decide on the constitutional obligation to limit greenhouse gas emissions based on the best available scientific information and Estonia's international obligations.
Editor: Mait Ots, Kristina Kersa