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Minister submits proposal to change regulation of oil shale pricing

Oil shale mining.
Oil shale mining. Source: (Ants Liigus/Pärnu Postimees/Scanpix)

Estonia's Minister of Finance Sven Sester submitted to the government a proposal to change the regulation of oil shale pricing, according to which the pricing of oil shale used for manufacturing heavy fuel or electricity production via direct burning would differ.

According to the current oil shale pricing system, all oil shale is connected to the price of heavy fuel oil. If such a system remains in place, there is a risk that the price of oil shale might be suitable for heavy fuel oil producers but not for electricity producers in cases of high power exchange or high CO2 prices.

At the same time, the situation was the opposite prior to the price of oil shale being tied to the price of heavy fuel oil. Thus the current system needs to be changed.

In addition, changing the taxation system is necessary in order to create a suitable investment environment for the sector's businesses as the Estonian state-owned Eesti Energia is to close several direct burning blocks, which will result in the freeing up of additional resources.

Ministries to propose new oil shale distribution system this summer

The Ministry of the Environment, Ministry of Economic Affairs and Communications and Ministry of Finance are to anlyze the current oil shale distribution system together with the sector's businesses and submit new principles to the government in June.

The current system has a number of problems, Sester said in a proposal submitted to the government.

For instance, the annual maximum extraction rate is not connected to the applicant's processing capacity and enables them to "reserve" the resource for the future while another processor may already have the processing capacity. As a result, the system has been under constant criticism by Viru Keemia Grupp (VKG).

Sester likewise noted that the state would also get bigger receipts from oil shale, environmental fees and other state taxes.

According to the Earth's Crust Act, the annual maximum extraction rate for oil shale is 20 million ton.

Four Estonian companies currently extract oil shale and use it in their production processes: Eesti Energia AS, Viru Keemia Grupp AS, Kiviõli Keemiatööstuse OÜ and Kunda Nordic Tsement AS.

Editor: Aili Vahtla

Source: BNS

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