It all started at Olerex's Muuga terminal on the penultimate day of 2022, when the fuel tanker Xanthia arrived with 9,000 tons of biofuel on board — at least, according to the documentation.

However, for the first time in history, the Environmental Board took a sample to verify whether the cargo was indeed the biofuel labeled as HVO (hydrotreated vegetable oil). Under the law, fuel companies are required to ensure that 7.5 percent of all fossil fuel sold in Estonia includes biofuel. The Xanthia cargo was crucial, as it fulfilled both Olerex's and Estonia's annual biofuel obligation.

"When it was being pumped into ground storage tanks, we took samples and sent them to laboratories. The results showed that it was not biofuel, despite what the documentation stated. This led to an investigation into the submission of false information to the Estonian state, and in cooperation with the Prosecutor's Office, we have now reached the stage of criminal proceedings," explained Rainer Vakra, director general of the Environmental Board.

It is worth noting that the cargo came with sustainability certificates issued by Trafigura, one of the world's largest fuel traders, confirming that the shipment matched the order.

However, the tank actually contained regular diesel. Olerex had paid Trafigura for HVO, meaning a significantly higher price than it would have for the same quantity of regular diesel. Nevertheless, Olerex maintains that Trafigura did not defraud them and that the biofuel obligation was met.

"There is a great deal of confusion here, as it has been claimed that we imported regular fossil diesel. That is absolutely not true. What we are talking about in this diesel shipment is diesel covered by bio-certificates. There is a very big difference between fossil diesel and diesel covered by bio-certificates. The price difference is already significant. This shows that diesel covered by bio-certificates has a carbon footprint of zero in European terms," said Andres Linnas.

In other words, Olerex argues that the existence of a certificate proves that the bio-obligation was already fulfilled by the intermediary company Trafigura, making the actual fuel in the tank irrelevant. According to Linnas, a similar quota-trading logic applies to the electricity and gas markets. However, the Environmental Board interprets the law differently, insisting that if the certificate specifies HVO, then the actual fuel must also be HVO.

"There are different calculations, but from the Estonian state's perspective, two things are important: first, no one should gain a competitive advantage by circumventing biofuel regulations, and second, there is a substantive reason for these rules — to steer Estonia's fuel market away from burning only fossil fuels and toward biofuels," said Vakra.

The situation was further inflamed by the fact that Olerex's vocal competitor, Terminal Oil, had already suspected fraud at the start of 2022. They argued that the market leader was selling fuel to major clients at prices clearly below market rates, a practice that, according to Terminal Oil board member Alan Vaht, generated tens of millions of euros at the expense of others.

"This manifested as price dumping in the wholesale market, where prices were deliberately lowered. This wasn't just by the 10 cents per liter cost of the renewable energy obligation — it was much more. Comparing Olerex's daily market prices in 2022 and 2023, they were consistently below the actual market price," said Vaht.

"It is true that Olerex sells fuel at competitive prices, but that is not because we are breaking the law. It is because Olerex has the largest market share in Estonia. We are the only company with a terminal that operates 24 hours a day, seven days a week, including all public holidays. Olerex also has its own logistics fleet. Over the years, we have refined our system to be extremely cost-efficient. Since we control roughly one-third of the fuel market, people in Estonia trust us and that enables us to offer better prices than our competitors," Linnas explained.

Initially, the Environmental Board imposed a historically large fine of €8 million on Olerex for the incident. However, the case went to the Supreme Court, which reduced the fine to €300,000. Competitors argued that, given the scale of the fuel market, this amount was insignificant. According to Alan Vaht, they had urged the Environmental Board to investigate thoroughly, but the authorities were slow to act.

"The Environmental Board's failures are clear: mismanagement, lack of action and later discoveries that Olerex had submitted false data despite market participants flagging the issue. This is a serious oversight on the part of the Environmental Board. The facts confirm this," Vaht stated.

Vakra dismissed Vaht's criticism, asserting that their most effective action was the criminal investigation launched by the Prosecutor's Office in 2023, which was sent to court in February this year.

"If the court so decides, it is possible in the criminal proceedings that Olerex could face a maximum additional fine of €16 million as criminal proceeds. Therefore, any current discussions, whether on the show "Impulss" or elsewhere, are premature. Furthermore, for 2023, when Olerex also failed to meet its obligation, the Environmental Board imposed another fine of €6 million in misdemeanor proceedings," Vakra said.

As Vakra pointed out, in 2023, Olerex faced another Environmental Board investigation for again failing to properly meet its bio-obligation. This time, the issue was fuel labeled as UCO, which stands for used cooking oil. While UCO can be used to fulfill biofuel obligations, it is subject to volume restrictions. According to Andres Linnas, Olerex had already been in contact with the Environmental Board and the Tax and Customs Board in late 2023.

"They confirmed that everything was in order according to the law, and they did not issue any precepts. Then, a month later, in March, they initiated proceedings and told us that we had actually failed to meet the bio-obligation," said Linnas.

"I believe the shift in their position is due to the fact that biofuel regulations are extremely complex, open to interpretation and not well understood by market participants," he added.

Vakra confirmed that the Environmental Board had indeed issued a precept to Olerex, which was complied with, but a misdemeanor investigation was subsequently launched.

"It turned out that Olerex had reported fulfilling its biofuel obligation, but had used more used cooking oil-based diesel than permitted. Since 2023, there has been a cap on this fuel type. The excess amount had to be excluded from the calculations, meaning that the obligation was not actually met," Vakra explained.

Alan Vaht also argued that the Environmental Board interpreted the law in a way that benefited Olerex. He pointed out that the government allowed Olerex to use UCO for 3.4 percent of its bio-obligation, even though the explanatory memorandum to the law suggested a limit of 1.7 percent.

"My question is: what is the Environmental Board doing? Why is the law being interpreted in Olerex's favor when the explanatory memorandum clearly states a 1.7 percent cap? I will say it outright — this could be a case of corruption," Vaht stated.

As a result, Terminal Oil has decided to take the Environmental Board to court.

"I believe that in a democratic country, everyone has the right to do so. However, I must emphasize that the Environmental Board does not create the rules. These rules were developed in cooperation with businesses and passed by the Riigikogu roughly four to five years ago. I also believe that part of this dispute stems from intense market competition — Estonia's fuel market is small and every opportunity is tested and challenged," Vakra commented.

However, Olerex, the main party in this controversy, argues that many of the legal disputes between market participants and the government arise because the current biofuel obligations are simply too complex.

"You know, I get the impression that even government officials don't fully understand these rules because we often receive conflicting messages — one day it's one way, the next it's another. The regulations are complicated, open to interpretation and vary between countries. That's where these problems come from," Linnas concluded.

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