After Fossil Fuel Front Group Attacks on Clean Energy Fail, New Model Bill Emerges to Weaken RPS Laws

ALECFossilFuelFundersMembers of the American Legislative Exchange Council (ALEC), including fossil fuel corporations and front groups, will meet in Chicago this week to discuss their next round of attacks on clean energy policies. The Center for Media and Democracy (CMD), The Checks & Balances Project (C&BP) and Greenpeace released ALEC’s confidential model bills and agenda ahead of their Annual Meeting taking place in Chicago, that include a new anti-clean energy model bill, “The Market-Power Renewables Act.”

 “A little sunlight is a powerful force for good. ALEC is trying every trick in the book to keep the agenda of their upcoming meetings secret,” said Nick Surgey of The Center for Media and Democracy. “They are even claiming every state’s public record laws don’t apply to them. This is preposterous. The ALEC documents that CMD obtained show that ALEC is continuing to scheme on behalf of fossil fuel corporations, working together to undermine state’s efforts to promote renewable energy production.”

 “The Market-Power Renewables Act” will likely serve as the model for another round of attacks on state Renewable Portfolio Standards (RPS) in 2014 following ALEC’s failure to weaken or eliminate clean energy policies this year. The new bill would significantly weaken state clean energy laws by broadening the eligible electricity sources to include existing, large hydroelectric power plants, biomass, biogas and other sources of electricity.

 “Fossil fuel-backed efforts to rollback clean energy laws in states across the country have failed, including in at least three critical battleground states,” said Gabe Elsner, Director of C&BP. “It’s no surprise that ALEC is pushing a new model bill that would eliminate incentives for in-state investments in clean energy. These policies are boosting investment in the clean energy industry and creating jobs, which poses a major threat to fossil fuel interests.”

Despite a robust lobbying effort from fossil fuel corporations and fossil fuel-funded front groups, ALEC and its allies lost in the critical battleground states of Kansas, North Carolina and Missouri. Bipartisan majorities defeated ALEC’s model legislation this year, after ALEC legislators in at least 13 states sponsored or co-sponsored legislation to weaken or eliminate RPS laws.

But despite complete failure in 2013, ALEC’s Energy, Environment and Agriculture Task Force Director Todd Wynn indicated that attacks on clean energy laws would resume in 2014.

 “Fossil fuel-funded front groups connected to the Koch-funded State Policy Network and ALEC advocated to repeal or weaken RPS laws in at least 14 states,” said Connor Gibson of Greenpeace. “Many of these front groups published flawed economicreports written by the fossil fuel-funded Beacon Hill Institute to inflate the cost of RPS and ignore the economic benefits of the pro-clean energy laws.”

House Natural Resources Committee takes yet another action promoting same oil and gas giveaways, mandates leasing quotas for oil companies

The U.S. House Natural Resources Committee meets on Wednesday to mark up a slew of bills, and sandwiched in among them are a familiar series of giveaways to the multibillion-dollar oil and gas industry. In fact, the legislation would mandate leasing quotas for oil companies and increase speculation on public lands.

“The oil and gas giveaway bills being considered in the House today mandate leasing quotas, a policy that is dramatically out of step with public opinion in the West,” said Center for Western Priorities Policy Director Greg Zimmerman. “Westerners acknowledge there is room for energy development, but polling shows that recreation and conservation are their highest priorities for public lands. Moreover, 90 percent of western voters say protected lands were vital to their local economies.”

Wednesday’s hearing continues the determination by House Republicans, over the last five years, to put the interests of oil and gas companies ahead of conservation and the future of America’s public lands. This, despite the fact that a majority of Westerners in oil and gas producing states want to see a balance struck between energy development and protection of public lands.

ADDITIONAL BACKGROUND

About H.R. 1965 – Sponsor Rep. Doug Lamborn (R-Colo.) 

  • The Lamborn bill blocks the public from participating in leasing decisions by creating “entrance fees” of up to $5,000 to join the conversation. It also mandates leasing quotas for oil and gas companies, encourages speculation, and bars the public, local officials and others from protesting potentially dangerous leasing decisions.
  • The Lamborn bill prevents the Bureau of Land Management (BLM) from protecting water, air and land from the impacts of drilling. It also rolls back the Obama Administration’s common sense approach to the failed “rock that burns,” oil shale, and in doing so endangers western water supplies and local economies.
  • The Lamborn bill continues to promote oil shale speculation despite the fact a Congressional Budget Office analysis of his proposal during the previous Congress found that opening up public lands to oil shale speculation would have zero effect on revenue.

About H.R. 1394 – Sponsored by Rep. Scott Tipton (R-Colo.)

Attitudes of Westerns about energy development and conservation (Hart Research)

  • About two in three (65%) voters say that permanently protecting and conserving public lands for future generations is very important to them personally, and another 63% say that ensuring access to public lands for recreation activities is personally important to them (as indicated by a rating of “9” or “10” on a zero-to-10 scale). By comparison, only half as many voters (30%) say the same about making sure oil and gas resources on public lands are available for development.
  • Voters reject the idea that there must be a single-minded, “either/or” approach to public lands. When explicitly given the opportunity to choose a third option, a majority (55%) instead say the government should put conservation on equal ground with drilling for oil and gas. This is the case among independents (59%), Republicans (64%), hunters and anglers (57%), and even among people who rate oil and gas as very important to them personally (57%). Democrats, in contrast, are divided between putting drilling and conservation on equal ground (44%) and focusing more on conservation and protection (47%).

# # #

Same story, different day: Lamborn, Tipton offer-up tired package of oil and gas company giveaways

House Republicans paraded out their latest series of giveaways to the billion-dollar oil and gas industry today in a subcommittee chaired by Rep. Doug Lamborn (R-CO). The bills would increase corporate welfare and a total disregard for western families and the economic health of local communities.

These reckless proposals put forth by Reps. Lamborn, Scott Tipton (R-CO), and Doc Hastings (R-WA) have failed over and over again in Congress because Americans want more out of their representatives than messaging bills for the oil and gas industry. At a time when oil and gas companies are already getting fat on the taxpayers’ dime, it’s appalling that politicians are dishing up yet another industry smorgasbord with zero regard for Western families’ safety and security.

Westerners want a real balance between protecting public lands and energy development. That balance is critical for attracting high-wage businesses and maintaining the billion-dollar outdoor recreation economy in the West.

The three tired bills paraded out yet again today include extreme measures that create quotas and mandates on behalf of oil and gas companies, and encourage risky speculation on publicly owned lands. These reckless proposals would sacrifice our drinking water, air quality, and public lands just to create more handouts that would do nothing to address our energy concerns.

These reckless measures run counter to western values and what’s best for local economies. Recent polling found that 9 out of 10 Westerners agree that national parks, forests, monuments and wildlife areas are an essential part of the economy, while 74% believe that national parks, forests, and monuments, help to attract high quality employers and good jobs to their state.

The outdoor recreation industry alone accounts for $646 billion in annual spending, 6 million jobs and nearly $80 billion in local, state and federal taxes.

Yet, House Republicans continue to push these same reckless proposals, regardless of the potentially devastating impacts to western families and economies – in order to provide more handouts to the billion dollar oil and gas industry which is already hoarding millions of acres of public lands, billions in taxpayer-funded subsidies and is focused on drilling on non-federal lands, where the best and most profitable oil resources are located.

Reps Lamborn, Tipton and Hastings, need to be held accountable for blatant disregard of taxpayer money and their continued attempts to increase corporate welfare for oil and gas companies.

Key provisions from the legislation considered today:

Rep. Lamborn’s bill (HR 1965) would:

  • Block the public from participating in oil and gas leasing decisions by creating “entrance fees” of up to $5,000 to join the conversation.
  • Mandate leasing and encourage costly oil shale speculation that has a century-long track record of failure despite billions in taxpayer-funded subsidies.
  • Roll back the Obama Administration’s common sense approach to the failed “rock that burns,” oil shale, which would put already scarce western water at risk.

Rep. Tipton’s bill (HR 1394) would:

  • Establish energy development – especially fossil fuels – as the primary use of public lands, jeopardizing the billion-dollar outdoor recreation and tourism industries and the thousands of western jobs that they create.
  • Require the Department of Interior to prioritize oil, gas and coal over renewable energy development.

Rep. Hastings bill (HR 1964) would:

  • Fast track approval of drilling permits, roads and pipelines in the National Petroleum Reserve (NPR-A) in Alaska, regardless of potential environmental impacts.
  • Eliminate the “integrated activity plan” for NPR-A that balances energy development with protection of wildlife habitat and other critical areas.

Group’s new oil shale report contains wildly inaccurate claims

The Institute for Energy Research (IER), recently posted a blog about oil shale that doesn’t have its facts straight.

The IER blog falsely claims that the federal government put oil shale resources ‘under lock and key’. Oil shale companies have been awarded billions in taxpayer-funded subsidies and received research, development, and demonstration (RD&D) leases on publicly owned lands that don’t require the payment of bonuses, rents, or royalties.

Despite more than a century of failed oil shale projects and billions of dollars risked, taxpayers are still subsidizing oil shale research and development. Currently, there are seven such RD&D leases being pursued in Colorado and Utah.  The companies include: Shell, American Shale Oil (AMSO), Enefit, ExxonMobil, and Natural Soda Holdings.

Chevron also had an RD&D holding, but abandoned it last February in order to focus on viable energy sources – hardly the first oil shale experiment to go bust. On Black Sunday, Exxon closed its Colony oil shale project, which put more than 2,000 out of work and devastated the economy of Colorado’s western slope for years.

kivioli_tuhamaed

Arial photo of a pile of oil shale ‘ash’ in Estonia. Source: EcoCrete Project.

In their blog, IER also highlights Estonia, considered the world leader in oil shale, as the prime example of successful oil shale development – but that’s not factual either. Oil shale isn’t economically viable in Estonia, has caused significant water, air and land pollution, and is highly controversial.

The head of Estonia’s biggest oil shale company, Eestia Energia – known as Enefit in the U.S. – has admitted that oil shale is not profitable without large taxpayer subsidies. Underscoring this point was Moody’s recent move downgrading Enefit’s credit rating to negative, over concerns that they can’t make oil shale profitable.

In addition, oil shale is a dirty, polluting fossil fuel that’s responsible for 80 percent of all of Estonia’s pollution.  Enefit’s track record includes contaminated groundwater, creating 600-foot high mountains of oil shale waste that spontaneously ignite, and causing the emission of “lots of carbon dioxide.”

IER’s blog also boasts that there are huge oil shale deposits in the U.S. But these projections are irrelevant because oil shale isn’t a viable energy source and fails the basic economic test. In other words, the return on oil shale doesn’t outweigh the investment. The amount of energy and water that it takes to superheat, mine and process oil shale – which is actually fossilized algae – is more than the energy that oil shale provides. If you need more evidence just look to the billion dollar oil and gas industry, which has almost limitless resources, and has 100 plus years of failed oil shale experiments to show for their efforts.

The IER can spin oil shale all day, but it won’t change the cold hard fact that oil shale isn’t ready for prime time.

Oil shale causes 80 percent of Estonia’s pollution

The hits just keep coming against Estonian oil shale. A new story from Estonian Public Broadcasting sheds more light on the devastating environmental impact oil shale has on the small, European nation.

“The oil shale industry, which produces the bulk of Estonia’s energy, is responsible for about 80 percent of the pollution and carbon emissions produced by Estonia, as well as nearly all of the sulfur emissions. Quarries and landfills have also spoiled around 15 percent of Ida-Viru County’s territory, as 150 square kilometers of land has sunk or become unstable.”

Just the week before, Estonia’s Environmental Minister said that the country has maxed out on oil shale due to high water use and pollution.

Oil shale waste piles are also prone to catching fire. Last week the Estonian government had to allocate 38 million Euros [$4.9 million according to today’s conversion rate] to extinguish a fourteen-acre fire at an oil shale site.

If these problems weren’t enough, the Estonian Economy Minister is under fire for a sour investment it made with Eestia Energia, known as Enefit in the U.S., to build a new controversial oil shale plant – which has since been abandoned. A majority of Estonians surveyed want to see the Minister resign over this deal and other questionable decisions.

Thankfully, on this side of the Atlantic, Interior Secretary Ken Salazar recently finalized a smart approach to costly oil shale speculation that should help the United States avoid Estonia’s problems. The Salazar plan requires companies to prove they’ve developed oil shale technology that works, is commercially viable and won’t deplete our scarce water resources or harm our air, land and wildlife, before any commercial leases are considered.

The environmental devastation and questionable investments from Estonian oil shale are good examples of why we need Sec. Salazar’s common sense oil shale plan.

Big Oil’s API insatiable lust for taxpayer handouts continues; Industry group demands that U.S. double down on failed oil shale experiments

**UPDATE** API’s Erik Milito may want to check with Estonian Environment Minister Keit Pentus-Rosimannus before continuing to pressure President Obama to double down on costly oil shale speculation. In an article in today’s Postimees, Minister Pentus-Rosimannus said,

“Eighty percent of our waste, water use and greenhouse gas emissions are connected with the oil shale industry. We must think together how to reduce the negative impact. With that as bottom line, I do not consider it possible for the annual extraction volume of oil shale to grow in the future.”

Estonian oil shale giant Eesti Energia’s U.S. arm, Enefit, is one of the companies trying to develop oil shale in Utah. For more on that, see our recent series Eyes on Enefit.**UPDATE**

The American Petroleum Institute (API) – see: Big Oil – called on President Obama, today, to double down on a century of failed oil shale experiments and risk western water supplies.

API’s response to outgoing Interior Sec. Ken Salazar’s smart oil shale plan was shameless, but predictable (for more on the Salazar Plan, see articles in the SL Tribune, Denver Business Journal and an editorial in the Grand Junction Daily Sentinel). Sec. Salazar adopted a reasonable approach that requires oil companies to prove any oil shale technology they might develop is commercially viable and won’t devastate water resources and air quality in the West.

The Government Accounting Office and industry experts have said oil shale could use up to 140 percent of what Denver Water provides its customers, today.

It turns out that common sense and good business practice aren’t slowing down API’s insatiable lust for taxpayer handouts. API wants to double down on 100 plus years of abject oil shale failure, despite the huge risks to the West’s scarce water supplies.

Erik Milito, API’s director of upstream and industry operations, claims that ensuring the safety of western water might delay investment in the development of oil shale technology. He ignores the fact that oil shale speculators have failed for over a century to develop any such technology, despite the billions in taxpayer subsidies – and private investments – already risked.

Western families, farmers, ranchers and business owners, already in year two of the worst drought in a decade, can’t afford to have any more of their water risked on costly oil shale speculation. We need President Obama to put the security and safety of the West’s water and communities before Big Oil’s hunger for more taxpayer handouts.

Eyes on Enefit: Financially unstable and unprofitable, and not ready for prime time

Eyes On Enefit LogoOver the past few weeks, we’ve examined Estonian oil shale company, Eesti Energia, known as Enefit in the U.S., to find out the real story on Estonian oil shale and how it could affect the American West. The outlook is grim.

Even though Eesti Energia is widely considered the world’s leading oil shale firm and is the largest company in the world working with oil shale, it is in a financially vulnerable position. The company has made a number of poor investments, including a new bloc for an Estonian oil shale plant – an investment the Estonian State Audit Office found to be legally questionable and “not economically feasible.” Less than a year after breaking ground on the plant, Eesti Energia abandoned the project.

Things have gotten so bad for Eesti Energia that credit benchmark Moody’s has downgraded the company’s credit rating (now rated negative) twice in the past 15 months.

Even Eesti Energia’s CEO admits that oil shale is not profitable without government subsidies. The reason is simple: oil shale fails the basic economic test. In other words, the return on oil shale doesn’t outweigh the investment.

Over here in the United States, we found Enefit has run into trouble trying to commercially develop oil shale. Despite the company’s claims that extracting Utah oil shale is a “simple mining project,” Enefit has experienced significant problems. Tests show that Enefit hasn’t been able extract oil from the oil shale ore mined in Utah as easily as executives had hoped and promised, and that it requires more energy to process Utah oil shale than expected, which results in higher carbon dioxide emissions. An internal company document called the Utah test results “not promising.” And, despite all the “around the corner” rhetoric we hear from oil shale supporters, at least one Estonian expert thinks that a method for viably extracting Utah oil shale is decades away.

Company dismissals of these concerns are, as one Colorado columnist put it: “reminiscent of previous failures to extract commercial quantities of petroleum from [oil] shale.”

Even when Eesti Energia has been able to produce subsidized energy from oil shale in Estonia, the environmental impact has been disastrous. The company’s Estonian operations have contaminated groundwater, created 600-foot high mountains of oil shale waste that spontaneously ignite, and caused the emission of “lots of carbon dioxide.” A former executive at Red Leaf Resources testified before Congress that Eesti Energia’s Estonian operations were a “nasty business.”

Given this web of problems, it shouldn’t be surprising that company officials can’t seem to keep their stories straight. What is said in the U.S. often doesn’t match up to what is said in Estonia.

Oil shale – a rock that actually contains no oil – has a 100-year track record of failure in the U.S. despite the billions in taxpayer dollars that have been risked on failed oil shale experiments.

The facts from our Eyes on Enefit series argue for taking a cautious, balanced approach to oil shale. Companies like Enefit should not be given more federal land or money for oil shale experiments until they can prove that they are able to develop oil from oil shale in a commercially and environmentally sound way.

This blog is a summation of our series about Enefit, known at home in Estonia as Eesti Energia, covering the company’s financial outlook, background and status of its Utah project.

Eyes on Enefit: Conflicting Claims

Eyes On Enefit LogoFor over a century, conflicting claims have surrounded the rock called oil shale. Estonian oil shale company Eesti Energia, and its U.S. arm, Enefit, are no exception to this rule. Whether it’s company executives, other oil executives or financial experts, we’ve seen numerous inconsistencies about Enefit’s financial health, technological capability, impact on the environment, and its Utah project.

 

 

Technology

What Enefit says in the U.S. What Enefit says in Estonia
“And most importantly for our project in Utah, and for our activities here in the U.S., we also have demonstrated proven commercial shale oil production. We have our own proprietary technology. We have our own operating plants. And we’ve been operating those plants for more than 30 years. And we produce about 1 million barrels a year.”
- Rikki Hrenko, CEO of Enefit America Oil. Transcript of API/Colorado School of Mines Briefing. June 19, 2012.
“But it is not a big surprise that a new technology [Enefit 280] does not work right away.”
- Sandor Liive CEO, Eesti Energia. BBC Monitoring Europe, Text of report by private Estonian newspaper Postimees. November 30, 2012.
The company’s technology “does not need to be proven,” says [Enefit] Chairman Harri Mikk, who points out that Enefit has successfully operated an oil shale plant in Estonia for decades.
- Utah Business. August 1, 2011.
+Note Mikk has since resigned from Enefit’s Board Chair
According to [Sandor] Liive, [oil] shale has so far been produced in Estonia by employing the trial and error method. The old Eesti Energia production plant is a proof of that – over the years, the solutions used there have been almost completely changed.
- BBC Monitoring Europe, via Postimees. May 4, 2010.
“The tests are not promising,”
- Eesti Energia internal document obtained by Eesti Ekspress. Estonian Public Broadcasting. January 24, 2013.

Utah Project

What Enefit says in the U.S. What Enefit says in Estonia
“And most importantly for our project in Utah, and for our activities here in the U.S., we also have demonstrated proven commercial shale oil production. We have our own proprietary technology. We have our own operating plants. And we’ve been operating those plants for more than 30 years. And we produce about 1 million barrels a year.”
- Rikki Hrenko, CEO of Enefit America Oil. Transcript of API/Colorado School of Mines Briefing. June 19, 2012.
“The [Utah] tests are not promising,”
- Eesti Energia internal document obtained by Eesti Ekspress. Estonian Public Broadcasting. January 24, 2013.
“This is a simple mining project. The mining component is nothing unique to oil shale. This is a simple mineral processing project.”
- Rikki Hrenko, CEO of Enefit America Oil. Transcript of API/Colorado School of Mines Briefing. June 19, 2012.
The Salt Lake Tribune recently reported that Enefit is experiencing difficulties applying its technology to Utah oil shale deposits, and specifically that the company hasn’t been able extract oil from the oil shale ore mined in Utah as easily as executives had hoped and promised.
- Utah oil shale becomes political punching bag in Estonia. Salt Lake Tribune. January 25, 2013.
Ingo Valgma, director of the Department of Mining at the Tallinn University of Technology in Estonia, said that he believes oil production from Utah shale is not a matter of five to six years, as Enefit predicts, but more a question of decades.
- Utah oil shale becomes political punching bag in Estonia. Salt Lake Tribune. January 25, 2013.
Eesti Energia’s spokesperson says that the applied development technology needs enhancing. Eesti Energia has invested EUR 33.3mn [$43.1 million] in the Utah project since 2011, including EUR 29.6mn [$38.6 million] in the acquisition of the Utah-based oil shale exploration and development company. Eesti Energia is projecting an additional EUR 37mn [$48.2 million] investment in the Utah shale oil project by 2016.
- Esmerk. January 18, 2013.

Environment

What Enefit says in the U.S. What Enefit says in Estonia and what oil executives say
A proven, efficient and environmentally sound means to help Utah become energy independent while providing long-term jobs for local families.”
Enefit Utah website.
“I worked in Estonia for several years. You’re exactly right. The old antiquated surface retorts that they use there are pretty nasty business. They produce a lot of semicoke. You know, they call them the Estonian Alps…. you would never want the retorts that are operating — operating in Estonia to come to the United States.”
– Anton Dammer, NOSA Board Member and former Senior Vice President of Red Leaf. CQ Transcript—House Committee on Science, Space and Technology, Subcommittee on Energy and Environment. May 10, 2012
[Oil shale is] commercially viable… And it can be done in an environmentally responsible manner.”
- Rikki Hrenko, CEO of Enefit America Oil. Transcript of API/Colorado School of Mines Briefing. June 19, 2012.
“…our production involves the emission of lots of carbon dioxide.”
– Sandor Liive, CEO, Eesti Energia. Interview Eesti Paevaleht website via BBC Monitoring Europe. July 4, 2011.

Commercial Viability

What Enefit says in the U.S. What Enefit says in Estonia and what Moody’s says
[Oil shale is] commercially viable. It is proven. We’re doing it on a large scale commercial production basis in Estonia and have been for decades. And it can be done in an environmentally responsible manner. “
- Rikki Hrenko, CEO of Enefit America Oil. Transcript of API/Colorado School of Mines Briefing. June 19, 2012.
“True, most of the investments are made under various subsidy schemes because even current free market prices are not high enough to make investments financially profitable.”
- Sandor Liive, CEO, Eesti Energia. Interview, Eesti Paevaleht website via BBC Monitoring Europe. July 4, 2011.
“And most importantly for our project in Utah, and for our activities here in the U.S., we also have demonstrated proven commercial shale oil production.”
- Rikki Hrenko, CEO of Enefit America Oil. Transcript of API/Colorado School of Mines Briefing. June 19, 2012.
In January 2013, Moody’s credit agency downgraded Eesti Energia’s bonds to negative, citing the evolving “business risk profile” of the company, and its inability to maintain profitability “given CO2-intensive oil-shale based generation assets.”
- Moody’s changes outlook on Eesti Energia’s Baa1/P-2 ratings to negative. January 8, 2013.

Not even Enefit’s executives can agree whether or not oil shale is ready for prime time in the U.S. Oil shale companies like Enefit must prove they viable commercial technology that won’t harm our water or communities before they get any more public land.

This blog is part of a series about Enefit, known at home in Estonia as Eesti Energia, covering the company’s financial outlook, background and status of its Utah project.

Eyes on Enefit: Under fire for risky investments

Eesti Energia, known as Enefit in the U.S., has been under fire from both the Estonian press and high-level Estonian officials for its poor investment record. As Raimo Poom, a columnist for Estonian publication Eesti Paevaleht wrote:

Eyes On Enefit Logo

“Eesti Energia’s plan to build up a huge shale oil industry raises a lot of questions; financing the plan is the most questionable decision taken by the government lately.”
– Raimo Poom, Columnist, Eesti Paevaleht, May 22, 2010 via BBC Monitoring Europe

According to the former deputy CEO of a subsidiary of Eesti Energia’s biggest oil shale processor:

“Eesti Energia’s activities largely look like an unplanned adventure, and this type of export of oil shale-related know-how is simply adventurism.”

– Mati Pallasma, former deputy of VKG OIL AS, subsidiary of VKG, Postimees, April 8, 2011 via BBC Worldwide Monitoring

Even Eesti Energia itself acknowledged that the present time is “financially, the most complicated period of time for us… [and] will be the most difficult time.”

Photo of Narva Power Plant. Source: The Baltic Course

Photo of Narva Power Plant. Source: The Baltic Course

Here are a few examples of Eesti Energia’s questionable investment strategies and what opinion leaders and financial experts inside and outside of Estonia had to say about them.

Eesti Energia and Estonian government are accused of pushing through a large investment based on “legally questionable basis”

Eyewitness, an Estonian investigative journalism show, accused Eesti Energia and the Estonian government of “pushing through” large investments in the new blocs of the Narva power plants, despite the fact it was, “legally incorrect and based on incorrect data.”

State Audit Office chief auditor Tarmo Olgo said building the Narva blocs at a total cost of 1 billion Euros ($1.3 billion U.S. dollars*), “is not necessary as it won’t contribute anything to the market,” and that, “it is not economically feasible…”

So, it’s not surprising then, that Eesti Energia sought in January to abandon operations at the plant, after the company found, “the new station would be unable to produce electricity for a competitive price.”

Eesti Energia abandoned the second phase of the plant – a 400 million euro investment [$522 million U.S. dollars*] less than one year after the cornerstone laying ceremony.

Standard & Poor’s downgrades Eesti Energia’s bonds to negative, while Moody’s raises concerns over risky Lithuanian investment prospects

Eesti Energia’s failed investments aren’t limited to oil shale. The company also considered investment in Lithuanian nuclear power plant, despite credit rating agencies’ reservations.

Standard & Poor’s Rating Services said that [sic] has revised the outlook on…Eesti Energia AS to negative from stable to reflect the risk that the company’s credit quality will weaken due to possible participation in a prospective nuclear power plant in Lithuania.

– Eesti Energia outlook cut to negative on possible nuclear plant investment – S&P, Thomson Financial Super Focus, August 28, 2007

The Moody’s rating agency says in a comment concerning the new nuclear power plant concession bill supported by the government in Lithuania, that proceeding with the plan would jeopardize the power utilities Eesti Energia’s and Latvenergo’s credit ratings.

– NPP Project threat to power utilities’ rating- Moody’s, Esmerk, DELFI.ee, May 14, 2012

Lithuanians back out of deal with Eesti Energia due to company’s debt burden

Eesti Energia’s home government isn’t alone in expressing doubt over the company’s investments. Other governments have shown wariness toward Eesti Energia as well. Lithuania backed out of a privatization deal with Eesti Energia because of the company’s debt burden of one billion litas ($379 million U.S. dollars**).

One more argument against selling RST, a profitable and stable company, to Eesti Energia is the Estonian company’s debt burden of almost a billion litas, which limits its investment possibilities.

– Estonians to seek compensation over aborted sale of Lithuanian power grid, Baltic News Service, March 3, 2004

If a history of failed investment sounds familiar to Eastern Utah and Western Colorado residents, it should. Oil shale development in the region has had a similar track record of failure. Given this shared history, it makes sense for oil shale companies like Enefit to prove they have developed a technically and commercially feasible way to produce oil shale before they are given more access to public lands and resources.

*Calculated using the Euros to U.S. Dollars conversion rate on February 27, 2013

**Calculated using the Litas to U.S. Dollars conversion rate on February 27, 2013

This blog is part of a series about Enefit, known at home in Estonia as Eesti Energia, covering the company’s financial outlook, background and status of its Utah project.

Eyes on Enefit: Oil shale extraction an environmental threat

Eyes On Enefit Logo

Contaminated groundwater, 600-foot high piles of oil shale waste that spontaneously ignite, and the emission of “lots of carbon dioxide”; all of this comes from a company that claims to be “highly dedicated to lessening the environmental impact of our production processes.” A look at the facts reveals that, despite its claims, Estonian oil shale company Eesti Energia’s operations have been anything but environmentally friendly.

For several decades Eesti Energia, an Estonian government-owned corporation, has been extracting oil shale, and using it to generate Estonian electricity at a stunning environmental cost. In the United States, Eesti Energia is known as Enefit. In 2011, Enefit bought the largest privately held oil shale reserve in Utah, and since then it has been experimenting with oil shale found on that land.

Since Eesti Energia has brought its oil shale technology to our shores through Enefit’s Utah project, we think a quick review of the company’s environmental record is in order. That way, Utahns can see what could be in store for them.

A polluted lake near an “ash” mountain in NE Estonia. Source: EcoCrete Project

First off, let’s see what the Estonians think of oil shale. A member of the Estonian Parliament described oil shale waste as a problem “for which there is no solution at present.” Researchers at Estonia’s Tallinn University of Technology and the Estonian Fund for Nature describe the oil shale industry’s environmental impacts as “huge.”

Scientists at Tartu University and the Institute of Ecology even wrote a paper in which they explain how Estonian oil shale’s waste is hazardous.

“[The] Processes of oil shale mining, combustion in power plants, and thermal processing in chemical plants generate a huge amount of solid waste…Semi-coke dumps surrounding the plants of oil shale thermal processing. Semi-coke is a residue classified as environmentally harmful due to its components like sulphides, volatile phenols, benzo(a)pyrene, etc.”

– “Artificial Mountains in North-East Estonia: Monumental Dumps of Ash and Semi-Coke.” Tartu University and the Department of North-East Estonia. 2005.

In fact, these waste products are so unstable, they have been known to spontaneously combust and contaminate groundwater and soil. As of 2005, 27 percent of oil shale landfills in Estonia had self-ignited.

“Observation of groundwater and soil illustrate that the environment close to burning landfills is contaminated with molybdenum, copper, sulphate, arsenic, oil products, and PAHs…”

– “Life Cycle Analysis of the Estonian Oil Shale Industry.” Estonian Fund for Nature and Tallinn University of Technology. 2005.

In spring 2012, The Baltic Course magazine reported that one of these massive oil shale waste piles caught fire during the winter, and still continued to burn. The magazine also noted there is, “no universal solution to extinguish such a fire.”

In addition to water and ground pollution, Eesti Energia’s CEO, Sandor Liive admitted producing energy from oil shale creates significant global warming pollution, or “lots of carbon dioxide,” as he puts it.

“The risk concerning the price of carbon dioxide is relatively high for Eesti Energia because our production involves the emission of lots of carbon dioxide.”

–  Sandor Liive, CEO Eesti Energia. Interview with Eesti Paevaleht. BBC Monitoring Europe. 04 July 2011.

Arial photo of a pile of oil shale ‘ash’ in Estonia. Source: EcoCrete Project.

Eesti Energia isn’t the only company experimenting with the rock that admits oil shale has negative environmental impacts. In 2012, Anton Dammer, a former Senior VP at oil shale company Red Leaf Resources, testified to Congress:

“I worked in Estonia for several years…The old antiquated surface retorts that [Eesti Energia] use are pretty nasty business…They produce a lot of semicoke. You know, they call them the Estonian Alps…I can’t tell you exactly all the technical details of it, but it’s – it’s much improved, but you would never want the retorts that are operating – operating in Estonia to come to the United States.”

– Anton Dammer, Senior Vice President of Red Leaf [Resources]. CQ Transcript, House Committee on Science, Space and Technology, Subcommittee on Energy and Environment. 10 May 2012.

Eesti Energia’s environmental track record shows its claims of environmental friendliness ring hollow. Oil shale production’s health and environmental risks present a clear case against allowing oil shale companies increased access to public lands. Until they can prove they have a commercially viable technology that won’t pollute our communities’ air and water supplies with harmful waste, they shouldn’t receive more handouts.

This blog is part of a series about Enefit, known at home in Estonia as Eesti Energia, covering the company’s financial outlook, background and status of its Utah project.

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