Dutch NAM queries steep rise in damage bill

The operator of the Dutch Groningen gas field, NAM, has queried a sharp increase in the earthquake damage bill, it said March 31. It has asked the government to provide better substantiation for the costs charged, which have risen from  €3.5-5.5bn ($4.1-6.5bn) in 2018 to €8.5bn. 

The company, owned equally by Anglo-Dutch Shell and US ExxonMobil, has agreed to bear all reconstruction and other costs relating to damage caused by gas production from the Groningen field, including necessary measures to guarantee the safety of the residents. 

But it doubts if all the claims are genuine and may be fairly attributed to the Groningen field rather than being the result of heavy traffic or construction work. However it said it has paid all bills and levies, except the latest for Q3 2020. It is waiting for "sufficient specification of the work," which its external auditor has also requested.

"It was precisely in 2018 that it was decided to reduce the production in the Groningen field to zero as quickly as possible in order to reduce the seismicity and impact, and the inconvenience thereof for the residents, as quickly as possible. NAM endorses this decision and concludes that seismicity has indeed decreased in the past two years. We recognise that this will be gradual and that the occurring earthquakes can still cause damage and concern. A properly functioning claims handling process therefore remains essential," NAM said.

"Everyone understands that no damage is caused by the slamming of a door or a truck passing by. However, that is the vibration level that is used by the [government] to compensate for damage. As a result, we believe thousands of damages are falsely attributed to earthquakes," it said.

It cited a 2019 study that confirmed vibrations, as slight as those used by the government to compensate for damage, occur on average more than daily. It pointed out that building damage can also be caused by many other causes, including changing groundwater levels in Groningen but says the government is likelier to attribute damage to Groningen production. This means that a decreasing cause no longer leads to a decreasing effect, NAM said. So, fewer earthquakes and lower magnitudes produce "a stable number of damage reports and the average amount of damage awarded has even increased over the years," it said.