VZCZCXYZ0001
RR RUEHWEB

DE RUEHTL #1042/01 3241553
ZNR UUUUU ZZH
R 201553Z NOV 06
FM AMEMBASSY TALLINN
TO RUEHC/SECSTATE WASHDC 9268
INFO RUEHCP/AMEMBASSY COPENHAGEN 1585
RUEHRA/AMEMBASSY RIGA 2815
RUEHVL/AMEMBASSY VILNIUS 6584
RUEHHE/AMEMBASSY HELSINKI 5119
RHEBAAA/DEPT OF ENERGY WASHDC

UNCLAS TALLINN 001042 
 
SIPDIS 
 
COPENHAGEN FOR EST COUNSELOR 
STATE FOR OES 
DOE FOR TONY DAMMER 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PREL PGOV SENV ENRG EN
SUBJECT:  OIL SHALE ENERGY:  FACING ENVIRONMENTAL 
CHALLENGES AND LOOKING TOWARDS THE FUTURE 
 
 
¶1.  (U) Summary.  Oil shale is a key Estonian national 
resource, whose existence has allowed the country to remain 
relatively independent of Russian natural gas supplies. 
Despite the high cost of compliance, the GOE and power 
utility Eesti Energia are confident they will bring 
Estonia's oil shale fired power plants into compliance with 
EU environmental directives affecting ash landfills and air 
emissions by mandated deadlines.  Environmental activists 
are concerned, however, that Eesti Energia may delay the 
forward-looking upgrades until the last minute in order to 
maximize output in the short term.  A Ministry of 
Environment Committee is currently reviewing a draft 
Development Plan that will serve as the basis for a new 
National Strategy for Oil Shale.  End Summary. 
 
OIL SHALE USAGE IN ESTONIA 
 
¶2.  (U) For decades, Estonia's energy sector has been the 
country's single biggest consumer of water and mineral 
resources and the biggest producer of waste.  Combustion of 
fossil fuels (oil shale, heavy fuel oil, and natural gas) 
to generate electricity and heat accounts for a large 
percentage of the solid particles and greenhouse gases 
emitted into Estonia's air.  The majority of these 
emissions are due specifically to the burning of oil shale. 
GOE-owned Eesti Energia, the supplier of approximately 95% 
of Estonia's electricity demand, owns the largest oil shale 
based power plants in the world.  Three of its four power 
plants produce electricity by burning oil shale:  Eesti 
Power Plant, Balti Power Plant, and Kohtla-Jarve/Ahtme 
Power Plant.  These plants are located in the northeastern 
oil shale producing region of Estonia.  (Note.  Eesti 
Energia's fourth plant, Iru Power Plant, is a small 
combined heat and power plant located in Tallinn and fueled 
by natural gas and liquid fuels.  End Note.) 
 
¶3.  (U) There is considerable debate as to the quantity of 
useable oil shale in Estonia.  The most optimistic 
estimates put Estonia's oil shale reserves at seven 
Gigatons, an amount that would last for approximately 100 
years at current usage rates.  However, more conservative 
industry estimates predict that reserves of high quality, 
easily accessible oil shale will only last for another 15 
years.  The deeper the oil shale is located, the more 
difficult it is to mine and the lower the quality. 
 
EU ENVIRONMENTAL DIRECTIVES:  MEETING THE CHALLENGE 
 
¶4.  (U) When Estonia joined the EU in 2004, the country 
agreed to comply with certain environmental restrictions to 
be phased in over the course of several years.  For 
example, EU Directive 1999/3/EC restricts hydro 
transportation (mixing oil shale ash - a bi-product of 
combustion - with water and pumping it into a landfill). 
The low-grade composition of Estonian oil shale results in 
large amounts of waste ash after it is burned. 
Traditionally, this ash was disposed of in the manner now 
specifically prohibited by the EU regulation.  The EU and 
Estonia have agreed on a transitional period for 
implementation of EU 1999/3/EC until July 16, 2009.  In 
addition, EU Directive 2001/80/EC requires that large 
combustion plants reduce sulfur dioxide and solid particle 
emissions.  The EU and Estonia agreed to phase in emissions 
reductions by December 31, 2015. 
 
¶5.  (U) Eesti Energia estimates that EU compliance 
(including EU landfill and air pollution directives and the 
cost to clean up past pollution) will ultimately cost the 
company approximately USD $2 billion.  According to Mati 
Uus, Development Manager for Eesti Energia, Estonia's 
compliance with EU environmental regulations is on track 
and the deadlines will be met.  In addition, Heido Vitsur, 
Economic Advisor to the Minister of Economy and 
Communication, confirms that the GOE is ready to upgrade 
its oil shale plants to meet the EU's environmental 
standards.  Specifically, Eesti Energia plans to reduce air 
emissions by rQlacing old high pressure pulverized firing 
boilers with more efficient circulating fluidized bed 
boilers.  Eesti Energia also plans to install sulfur 
dioxide and nitrogen dioxide "scrubbers" on smoke stacks to 
further reduce emissions.  Additionally, the company 
intends to replace existing oil shale ash hydro transport 
systems with more environmentally friendly methods 
including trucking dry ash to better insulated landfills. 
 
By 2007, two old ash landfills will be closed and bQ2013 
existing ash storage sites will be renovated to prevent 
leaching.  (Note.  For the past 45 years a private company, 
AS Silbet, has used waste oil shale ash to produce 
construction materials, including concrete.  In August, the 
company opened a second production line to increase output. 
While it is encouraging to see some waste ash being turned 
into useful products, due to the sheer volume of ash being 
generated it is not an overarching solution to the landfill 
problem.  End Note.) 
 
TIMING ENVIRONMENTAL UPGRADES 
 
¶6.  (U) There is concern among domestic environmental 
organizations and others that Estonia's interest in 
increasing electricity exports could delay planned 
environmental upgrades.  The GOE currently exports 
electricity to Latvia and Lithuania.  This month Estlink, 
an undersea electricity cable to Finland, will come online. 
Valdur Lahtvee, former Environmental Manager of Eesti 
Energia and current Director of the Sustainable Development 
Institute, expressed concern that the GOE's interest in 
producing a maximum amount of energy for export could 
result in a delay in replacing old, polluting boilers.  In 
order to maximize production, Eesti Energia might opt to 
completely exhaust the old boilers and wait to make 
upgrades until just before the EU compliance deadline. 
Additionally, Eesti Energia may delay replacing old boilers 
if studies indicate future oil shale reserves are indeed 
inaccessible or of poor quality.  Importing energy via 
Estlink may ultimately prove more economically sound than 
continuing to mine an inefficient resource.  Thus, while 
some environmental upgrades have already taken place in 
accordance with EU environmental directives, Eesti Energia 
has significant incentive to take a "wait and see" approach 
before making further investments. 
 
DETERMINING THE FUTURE OF ESTONIAN OIL SHALE 
 
¶7.  (U) Last summer, the Ministry of Environment (MOE) 
formed a 5-member Working Group (WG) to determine the best 
and most sustainable strategies for oil shale mining and 
power production.  The WG was comprised of members from the 
National Science Academy, the Ministry of Education and 
Research, Tallinn University, a former director of Eesti 
Energia power plants, and Lahtvee as a representative of 
Estonia's Green NGOs.  The MOE tasked the WG with drafting 
an oil shale Development Plan, including a Strategic 
Environmental Impact Assessment and an Implementation Plan. 
The WG submitted a draft Development Plan to the MOE in 
late October.  The draft concludes that current rates of 
oil shale mining are sufficient to cover Estonia's needs 
for electricity, heat, and moderate oil production through 
the year 2015.  After 2015, the draft recommends that 
mining capacity decrease and the use of renewable energy 
increase.  Further, the draft Development Plan calls for 
new mining licenses to be issued only to those companies 
that implement environmentally friendly technologies and 
have projects to improve the environment in mining areas. 
 
¶8.  (U) The draft Development Plan is currently being 
evaluated by a MOE-appointed 17-member Committee that will 
simultaneously deal with the economic, security, social, 
and environmental aspects of oil shale utilization.  This 
is a first for the GOE, as previous oil shale studies were 
primarily focused only on economics.  A round-table 
comprised of MOE-appointed stakeholders from local 
governments, civic groups, and the general public will also 
review the draft Development Plan and offer opinions.  By 
May 1, 2007, the MOE Committee must complete its review of 
the draft Development Plan and submit a draft National 
Strategy for Oil Shale to the Cabinet.  The various 
political parties and interests in the Cabinet will 
ultimately determine whether a final National Strategy for 
Oil Shale bill is submitted to Parliament for approval. 
 
WOS