Kaljulaid: No claims should be made that we build the oil plant regardless

ETV's "Impulss." Source: Priit Mürk

The Supreme Court's decision to revoke the building permit for the new Auvere shale oil processing plant (Enefit 280-2) contradicts Minister of Finance Mart Võrklaev's claims that the plant will be definitely built, former President Kersti Kaljulaid said on ETV's "Impulss" debate.

The Supreme Court has annulled the building permit granted to Enefit Power AS for the construction of a new €350 million shale oil processing plant in Auvere, Enefit 280-2, because of errors in the environmental impact assessment (EIA). Every month that the construction is halted costs the state-owned company about €20 millions.

Andrus Durejko, the head of Eesti Energia, said during the televised debate that the company did not wait to get the complex environmental permit, just as it has done before with large investments. "Typically, one could state, using a straightforward metaphor, that no one waits for an operating permit before obtaining a building permit, when building a house," he said.

Durejko said it is now impossible to determine whether Eesti Energia's decision was justified.

Andrus Durejko. Source: Priit Mürk

"I don't think the risk has realized. Rather, the investment was initiated because, in accordance with prevailing legislation and customary procedures, the waiting period was deemed unreasonable at that time. Determining the specific circumstances is difficult because I was not involved with Eesti Energia at the time; but, based on my knowledge of reasonable investing procedures, it seems like such behavior was common at the time," he said.

President Kersti Kaljulaid said she did not know whether the new shale oil plant was a mistake, as climate activists believe. Kaljulaid said that Eesti Energia acted in accordance with the owner's expectations.

"First of all, Eesti Energia has not made this mistake - Eesti Energia had a very clear ownership interest," Kaljulaid said.

"The expectation of the owners was that €125 million euros would be injected into the share capital of the company to build a second shale oil processing capacity. And today, some of the risks have materialized, but in fact, the bigger risk, as we also heard the head of the company say, is this issue of the complex permit. And indeed, whether you're going to get a permit to operate, it's pretty difficult to try to predict until you've built something."

"I looked up the comments made at the time by the chair of the board of Viru Keemia Group (VKG), Ahti Asmann, and I understood that even then, such a decision could only be made in accordance with the ownership interests of Eesti Energia. Eesti Energia could not have made this decision on its own, and it certainly would not have been a market-driven decision at that time, because the visibility horizon of so-called brown or polluting production was quite short. This is actually also the reason why Eesti Energia completed the construction of the new plant so quickly. Because, as I said, the visibility horizon is that the plant will pay for itself in 10 years, but whether it will be able to produce for much longer is something that the secretary general for the Climate Ministry, Keit Kasemets, has actually questioned now," Kaljulaid said, noting that Eesti Energia itself still considers the venture worthwhile."

Kersti Kaljulaid. Source: Priit Mürk

"But the further into the future we go, the greater the risks associated with these climate targets. One thing is for sure: no private company would have made such an investment at this time," she said.

The Ministry of Climate said the new oil plant would account for a very large share of Estonia's total CO2 emissions – 10 percent in 2035 and 35 percent in 2040. The anchors asked Kaljulaid if this was too high a price to pay. Kaljulaid said the government would have to answer that.

According to Kaljulaid, in the light of the Supreme Court ruling, ministers should not claim that the plant will "definitely go ahead."

"I heard today that both Finance Minister Mart Võrklaev (Reform) and Eesti 200 leader Lauri Hussar said that this plant must definitely be opened. This was said even without any agenda... It is precisely the court that has shown its true independence – one of the indicators of the independence of the judiciary is that a tiny entity with few resources can go against the state or against a large corporation and win – and these disputes over the construction of this plant have not really ended. And now we simply claim that we will definitely put this plant into operation? I have a question though: if a private investor would do the same thing, just build thier own thing and say, 'Well, I've invested €100 million, €200 million, so why can't I run it?' That is just extremely bad practice. So we have not really gotten any reassurance from the government today about what their goals are, and how they are going to get there. For example, so that people would retain the perception that the Estonian judiciary is independent," Kaljulaid said.

Alar Konist, professor of energy technology at Tallinn University of Technology (Taltech), who is involved in several projects funded by Enefit and provided consultancy services for the assessment of technical solutions for the new oil plant, said that he does not see a problem with the new oil plant.

"Fridays For Future" representative Kertu Birgit Anton. Source: Priit Mürk

"I see no problems here. Yes, they made that mistake with the last oil plant and thought they could buy in all the expertise, but unfortunately that is not the case. You also have to have expertise in the specifics of oil shale to get this plant up and running. But today, we already have a new generation of people who know how to operate this new oil plant. And even with this new oil plant, all those original teething problems have been fixed, so there's certainly no chance of that kind of glitch," she said.

Durejko also said that Estonia now has unique expertise in the world for such an shale oil processing plant.

"Many countries are now trying to adopt pyrolysis technology as part of this circular economy. Increasing the capacity of our plant was the main problem in the start-up of this previous plant; so increasing the productivity, and not being able to do everything in balance. That's done today; it's there, and this new oil plant is exactly the same format and has the same capacity as the previous one (Enefit 280, which was put in operation in 2012 - ed.). They are technologically improved. The existence of this knowledge, especially from a circular economy perspective, is important because a lot of countries today are asking us for the experience that we have in operating pyrolysis plants of this capacity. This is unique in the world, and it is an asset that should be capitalized in the Estonian economy," Durejko said.

According to Kertu Birgit Anton of the NGO "Fridays for Future," the environmental movement that has taken the oil processing plant to court, said that their organization does not regret that millions of euros of people's money are wasted every day the plant is delayed.

"We didn't decide to build it and put all our collective money into it; on the contrary, when 'Fridays for the Future' heard about the plan to build an oil plant around 2019, we spoke out against it from the beginning, we spoke out in rallies, and we wrote in the press. And when the government made the decision to allocate €125 million to it before we reached the court, youth associations, environmental groups, academics, and public figures appealed to the government to reverse this decision. The government didn't do that, and now we are standing here," Anton said.

She said that there is also an environmental cost of shutting down the plant, but added that running an oil plant would be much more damaging to the environment.

Kertu Birgit Anton. Source: Priit Mürk

"There is an environmental cost, but if we were to start an oil processing plant, the production of oil in Estonia alone would generate over 800,000 tons of CO2 every year. On top of that there is about another second that is generated by burning this oil outside of Estonia. We don't count that in our statistics, but it ends up in the atmosphere. So, yes, at the moment there is a cost to stop this plant, there is an even greater cost to start this plant, and I, as a taxpayer, want us, as a country, not to spend any more money, not to dig the hole we have already dug any deeper," Anton said.

"Eesti Energia talks a lot about its plans to become a climate-neutral chemical company. And if these technologies are already ready and could actually be implemented, then I have a question: why not start this oil plant as a carbon-neutral chemical plant right away? Why does it have to be a polluting oil plant in the meantime?" she added.

What will happen to the oil plant?

Durejko said that Eesti Energia is complying with the law and is now working towards the completion of the investment. This is an economically sound course of action, he said.

"I'm not talking about principles or anything like that. It is a reasonable thing to do in this situation; it was considered reasonable when making this investment decision, and we will certainly continue to do it in accordance with the regulations of the Republic of Estonia and the possibilities of the law. Our plan is definitely to put the oil plant into operation," he said.

Andrus Durejko. Source: Priit Mürk

"Our plan is to invest in product development with our universities and to be as close to carbon neutral as possible. And on the chemical side, the oil plant itself is a chemical plant and there we will also see a very big development in our investments and also an economic return for Ida-Viru County," Durejko continued.

To compensate for the extra costs incurred by the halt in construction, the company is trying to find the cheapest solution, he said. "To keep this investment within reason and to make sure that we can recoup the investment. But that also means that we have to invest in the next steps – we need this plant to do the next steps and to meet climate standards."

Durejko explained that the Ministry of Climate currently has an environmental impact assessment report, which is the basis for applying for the complex environmental permit. "We cannot start the complex environmental permit procedure until this climate impact assessment is completed."

Konist hoped the company would get a complicated permit. "The technologies are available today to meet these future challenges, but if they stay just our dreams, then unfortunately we are not applying these technologies in reality. But all Estonian universities are ready to contribute to minimizing the environmental impact," he said.

Kersti Kaljulaid. Source: Priit Mürk

Anton said that if Eesti Energia's complex permit is approved, its possible challenge in court depends on the conditions under which the permit has been granted.

"Together with environmental groups, including 'Fridays for the Future,' we believe that this oil processing in its current form, as it is planned to produce oil for export, should not go ahead because the damage it will cause as a result of climate change is simply so costly to society that the cost is not acceptable," she said. According to her, the building of the oil plant should not be scrapped but could be converted into a chemical plant that does not harm the climate.

Kaljulaid said the oil plant's construction situation is unpredictable and that the project's value, which has cost hundreds of millions of euros, is not even known.

"As a taxpayer, I have exactly the same feeling that I don't want these millions to be wasted. I don't want this dispute and this delay to have any further impact on Eesti Energia's loan prices. I understand that the last refinancing was not cheap either. And I don't want us to start talking about what else we might have gotten for it. But the way I look at it now is that this whole saga has been dogged by lawsuits, and if we put this thing up for sale today, I don't even know if any private company would offer us a euro for it. So we don't really know what the value of this project is; we've already invested hundreds of millions, and we're going to invest tens of millions more. We don't know that at all today. And we don't know if we're going to be able to get this thing off the ground because we've had lawsuits, and there may be more to come. It is a very uncertain environment," Kaljulaid said.

Kertu Birgit Anton. Source: Priit Mürk

"And what that means for us, on the other hand, is that I don't want to hear the finance minister say today that we're going to do this anyway. Because if I look at it the other way around, is the independence of the Estonian judiciary worth €300 million, or maybe even more? In fact, this is also an important issue today, and any politician who speaks on this issue should not forget it for a moment. We are dependent on the decisions of the institutions we have created in Estonia. This is not a decision for one, two, three, or ten politicians. It is an institutional decision, certainly involving the Ministry of Climate and certainly involving the Court. And then we will see. And it's very important to keep in mind: here's the other side of this: these millions," she said.

Raik on implementing Just Transition Fund projects

Former mayor of Narva and the representative of the University of Tartu in Narva, Katri Raik, gave an account of the oil plant controversy from the vantage point of Ida-Viru County.

Raik said that the people in Narva have a clear predisposition towards renewable energy, and the Supreme Court's ruling to halt the development of the oil plant was a revelation. Jobs in the region will be affected by the decision, Raik said.

"It has been reported today that there are 500 building workers on the site, although clearly not all of them are from the Ida-Viru district. Some 200 miners might be laid off. In contrast to the anticipated 400 jobs that the lauded Fair Transition Fund will create in the coming years, the number of people affected by this situation is approximately 400 to 700," Raik said.

Municipalities dependent on the oil shale industry are also losing money.

"Narva-Jõesuu, for example, with its €11 million budget, will lose nearly 7 or 8 percent, less than a million next year. That's actually quite a lot of money for one local authority. Of course, education and social services, where local government is the main contributor, will suffer most. People will have to look for a new job and potentially move away," she explained.

"The state should not be talking about Ida-Viru County only when there is a big problem, as was the case last spring when the election results did not meet the expectations of the current parliamentary parties and there was a big uproar. But where is the attention now? We need a long, real plan so that we have jobs. So that we have a solution for the county that people actually believe in," Raik said.

According to her, there is a need to mobilize the money from the fair transition fund.

"There are no investors, companies are not very interested in Ida-Viru County; look at the map. Our angry neighbor is very close. We have to try contribute so that this [Just Transition Fund] money is actually used here, so that new jobs are created, that post-secondary education is created and so that people are retrained through higher education possibilities and micro-degrees. And finally, it may sound surprising, but at the moment, it seems that the most stable sector of the economy in Ida-Viru County is tourism. So maybe we should invest in that," Raik said.


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Editor: Merili Nael, Kristina Kersa

Source: "Impulss"

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