EU Approves Groningen Funding Package
The European Commission (EC) said July 13 it has approved a support package put in place by the Netherlands to compensate for damage caused to property by earthquakes induced by Groningen gas production.
The Dutch authorities notified to the EC a plan to set up a non-profit foundation to manage activities related to the repair and sale of buildings in the area concerned.
Three-quarters of the activities of the foundation will be financed by Shell/ExxonMobil-owned NAM, the 60% owner and operator of the giant Groningen field, while the remaining quarter will be part-financed by the state through a €10mn ($11.6mn) grant. The Dutch state, through petroleum holding EBN, owns the other 40% interest in the Groningen field.
The EC said it was satisfied both that the support package conforms with EU state aid rules, and that repair work ultimately funded by NAM will be in line with the 'polluter pays' principle and thus confer no advantage on the company. Prior to establishment of the fund, NAM was responsible for compensation payments, but engaged in several litigation processes to reduce its liability for payments.
Economy minister Eric Wiebes announced the new funding arrangements for Groningen compensation at the start of 2018, whereby the new state-backed fund takes over responsibility for payments. This led critics to accuse NAM's owners of wriggling out of their financial responsibilities. That in turn was vigorously denied by Shell CEO Ben van Beurden who said February 1 that Shell would not shirk its responsibility to meet NAM's obligation to pay compensation for earthquake damage.
The Shell CEO added that the new protocol with the government, to which NAM agreed, would mean claims in future would be handled at arms-length from NAM – but that NAM would continue to have a legal responsibility to contribute to that funding arrangement to ensure it was sufficient, with the government also contributing.
Earthquakes have continued to plague the Groningen region with a magnitude of 3.4 on January 8 this year, which was the second most powerful since the worst on August 16 2012 at Huizinge (3.6 magnitude). Frequent smaller tremors have occurred in the intervening period, for which Dutch state seismic authority KMNI years ago pinned the blame squarely on NAM's gas extraction.
Natural Dutch earthquakes occur typically 12-15 km sub-surface, but those 'induced' (in Dutch: geinduceerd) by gas production all occur in the Groningen area of the northern Netherlands and all at a depth of only 3 km, making them feel more powerful than a typical 2 or 3 magnitude quake might.
Last week the Dutch government said that all 6,199 residents of Groningen with outstanding old claims have now received an offer from NAM for the settlement of their damage, and that 74% had accepted.