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The President
House of Representatives of the States General
Binnenhof 4
2513 AA The Hague
Directoraat-generaal
Energie, Telecom &
Mededinging
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2594 AC Den Haag
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Overheidsidentificatienr
00000001003214369000
Date
Re:
17 January 2014
Gas extraction in Groningen
T 070 379 8911 (algemeen)
www.rijksoverheid.nl/ez
Dear Madam President,
Ons kenmerk
DGETM / 14008697
In my letter to the House of 25 January 2013, I informed you of new insights into
the effects of gas extraction from the Groningen gas field and their relationship to
the earthquakes in the province of Groningen. State Supervision of Mines
(hereinafter: SSM) said, after an investigation following the earthquake on 16
August 2012 near Huizinge, that tremors stronger than 3.9 on the Richter scale
could no longer be ruled out beforehand. For a balanced decision on measures to
be taken, if any, I commissioned fourteen studies to be carried out. I also asked
the Nederlandse Aardolie Maatschappij (NAM), the operator of the Groningen gas
field, to submit a new extraction plan1 before 1 December 2013 taking account of
the insights, including those of the studies carried out.
Bijlage(n)
2
By now I have received the new extraction plan, the outcome of the studies and
the recommendations put forward by SSM, the Technical Committee Soil
Movement (Tcbb) and the independent steering Group I set up to supervise and
assess the studies. All this gives me a sufficiently complete picture that enables
me to take concrete measures of improvement for the area and to come to an
intended decision on the modified extraction plan.
This letter will first go into the consequences of gas extraction in Groningen and
the interests involved and people’s concern about earthquakes. Then I will outline
the main outcomes of the research and recommendations. Finally I will go into the
measures the government intends to take for gas extraction in Groningen to take
place in a responsible way. The attachment contains a detailed explanation of the
results of the research.
1. Gas extraction in Groningen: consequences, interests involved and the
studies carried out
The consequences of years and years of gas extraction in Groningen have become
increasingly clear over the past year. The inhabitants of the region and
1
The extraction plan is an instrument in which the permit holder must lay down how he intends to (1) plan the
management of the gas supply; and (2) keep the risks of damage following the soil movement to a minimum.
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particularly those in the most risky area around Loppersum, have experienced a
growing number of earthquakes of steadily increasing magnitude. Their impact on
houses and other buildings are becoming visible. As a result, inhabitants in the
direct vicinity are seriously concerned about their personal safety and well-being.
The worry and anger of the people in that part of Groningen living over the
natural gas reserve are shared by many. Quiet and reasonable people are
concerned about their safety and worry about what will happen to their property
and their living environment. They think it is unfair that while everybody in the
Netherlands is profiting from the natural gas, they are the ones left to deal with
the consequences. They run the risks, suffer the losses and see their houses,
churches and monuments damaged. An added worry is that the region’s economic
perspective is vulnerable. The people of Groningen are feeling more than concern
and anger, they are up in arms feeling they have been done an injustice. These
feelings are understandable and, like the problem itself, require an adequate
administrative response.
Gas extraction is of vital importance for the energy supply in the Netherlands.
Most Dutch households rely on gas from Groningen to cook and heat their houses
with. Moreover, gas extraction has been an important source of income for the
State for decades. At present, gas revenues amount to some € 13 billion a year,
over € 10 billion of which comes from sales of gas from the Groningen field.
The experiences with gas extraction and the concerns have over the past year
been reason to re-think the quantity and method of gas extraction in Groningen.
Research has enhanced our insights into the effects of gas extraction on the
chance, magnitude and potential risks of earthquakes, into the value development
of people’s properties and the possibilities of reinforcing the houses and other
buildings. Consideration was also given to the liveability and the economic
perspective of the region
I have safeguarded the independence of the research right from the start of the
process. The research reports have been validated by the independent steering
group referred to earlier, which also advised me on the follow-up steps and
further research. Over the course of the research I had talks with the local
inhabitants for further orientation. At regular intervals I conducted intensive
consultations with the administrative authorities in the region. I also talked to
NAM and its shareholders.
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2. Main outcomes of the research and recommendations
The various studies and recommendations produced the following picture.
New insight in maximum magnitude earthquakes
All the researchers involved agree that the earthquakes in Groningen are caused
by the gas extraction in the area. There is however uncertainty about the severity
of the problem. The main factor of uncertainty concerns the part of the tension
built up in the soil (compaction) that will eventually erupt through an earthquake
and of what magnitude these earthquakes will be. This uncertainty concerns
particularly the period after the next five years.
For the short term, the next three to five years, there is sufficient certainty about
the threat of earthquakes and the attendant risks. In accordance with present
calculations a maximum magnitude of 4.1 on the Richter scale will have to be
taken into account for the next three years with an attendant ground acceleration
of 0.12g (g being the acceleration caused by gravity). Both of which are likely to
increase by 10%.
According to Deltares research the potential maximum ground acceleration over
the next three years will not seriously affect vital infrastructure like dams or dikes,
pipelines, and power pylons. A number of dikes however did not satisfy current
standards. This vital infrastructure will have to be brought up to the mark. For
buildings however with an earthquake of the foreseen maximum magnitude there
is reason for concern. A 0.12g ground acceleration poses a real danger to certain
categories of housing. Reinforcement of buildings in the area is necessary to limit
the impact of major earthquakes.
Possibilities to reduce the threat of earthquakes via different production scenarios
and extraction techniques.
NAM has studied various scenarios to reduce the threat of earthquakes by bringing
gas production down. In the short term, most of the production scenarios studied
show small differences as regards the threat of earthquakes. With the same levels
of production over the next three years we are pretty certain that the risk of
earthquakes will show a small increase at the most. For the period after that the
research outcomes show great uncertainty. This is particularly true for the period
after the next five years.
In the short term, lower production levels will have little effect on the safety risk
on account of the delayed reaction of the subsoil. In its recommendations to the
extraction plan SSM says that a drastic reduction in production from the clusters
in the most risky area (around Loppersum) is the only way to bring down the risks
in the short term (one or two years). SSM therefore recommends closing down
five clusters for a period of at least three years. This period allows for detailed
measurements and geomechanic research. All this with the aim to reduce the
uncertainty around the safety risk forecasts. The period should also be used to
look into the widely diverging opinions of experts on the calculations and weighing
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of risks related to earthquakes and provide more coherence to put a consistent
risk policy in place.
Alongside scaling down production, alternative methods of extraction have also
been studied to reduce the tension built up below ground (compaction). In
comparison the most feasible option proved to be a nitrogen injection. However,
both NAM and the Technical Committee that supported the steering group do not
consider this a realistic and acceptable alternative for the time being, given the
scale of the industrial activities required, the impact on the landscape and the high
costs associated with this method. Not to rule it out altogether additional studies
into this alternative will be carried out.
Consequences of scaling down production for assured supply and government
finances
The Groningen gas field plays an important role on the North West European gas
market. Groningen gas is low-calorific gas for which there are hardly any other
natural sources. The only other way to meet the demand for low-caloric gas in a
substantial way is converting the high caloric gas into low caloric gas by adding
nitrogen. To this end, Gasunie Transport Services, the national gas network
operator, has conversion installations in place. These installations are however of
limited capacity and expansion in the short term is not an option. An added
complication is that a large share of the low caloric gas (the Groningen gas) is
used for heating. Therefore the demand for Groningen gas is to a large extent
driven by the weather, which requires a great need for flexibility of supply.
Maximum utilisation of the conversion installations would make it possible to
reduce gas extraction from the Groningen field to 30 billion m3 a year. This can
only be done if the flexibility of the Groningen field can be put to maximum use
and production levels may go up if circumstances (the weather) give reason to it.
If however, it is desirable that extraction levels in the Groningen field should
remain stable, or flexibility should be limited for other reasons, a minimum of 40
billion m3 gas extraction a year would be necessary as otherwise the gas supply in
winter months would be compromised.
The budgetary impact of reducing gas production on State finances has also been
documented. Gas production is a vital source of income for the Dutch
Government. In recent years natural gas revenues amounted to € 12 to 14 billion
a year, € 10 to 12 billion of which came from the Groningen gas.2 Any cut in
production would have major consequences for the national budget. For example:
if production from the Groningen field would be cut to 30 billion m3 a year natural
gas revenues would be cut by some € 3 billion a year based on the most recent
estimates over 2014. If production would be cut to 40 billion m3 a year revenues
2
Some 85% to 90% of the total revenue from Groningen gas sales goes to the treasury. Some 65% comes from
the smaller gas fields. These percentages include the 40% share of EBN.
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would go down by some € 1.3 billion over 2014. For 2015 the amounts would be
similar.
Settlement of claims and loss of property value
The number of damage reports following the tremors in 2012 and 2013 now lies
around 12,000. New earthquakes in the area are likely in the future including
more damage and loss. Tcbb believes that prevention and damage repair must be
addressed in an integrated manner by an independent body close to the
inhabitants, at a certain distance from NAM but under its management with an
independent Review Board of Audit Committee focussing on processes,
organisation, protocols and contents.
As for the loss of property value, over the first six months of 2013 Ortech Finance
research did not find any significant loss of property value that could be attributed
to the earthquakes. Research into the third quarter of 2013 however shows for the
first time a statistically significant loss in property value compared to the
reference areas.
3. Government decision gas extraction and measures for improvement in
Groningen
On the basis of research results, recommendations and consultations the
government has decided to put measures in place targeted at improving safety
levels, liveability and the economic perspective for the inhabitants of Groningen.
The intended measures will follow three tracks:
1. a targeted reduction of gas extraction for reasons of safety;
2. large-scale preventive reinforcement of houses, other buildings and
infrastructure and adequate settlement of damage claims;
3. improving the economic perspective of the region by encouraging economic
activity.
I shared the intended decision of reducing gas extraction with the administrators
in the province and municipalities. With them I have elaborated a package of
measures as referred to under 2 and 3 to reinforce buildings, houses and
infrastructure and ensure the adequate settlement of damage claims, as well
enhanced liveability and economic perspective for the region. NAM has committed
itself to this programme. To further detail the measures the involvement of the
people in the region is vital. To this end, a permanent dialogue table will be
created. The overall approach will be as follows.
1. reducing the risks of gas extraction
As regards the gas extraction in the region the government will work along the
lines of the SSM recommendations. It is important that a proper estimate is made
of the risk of earthquakes in the next three to five years. After this period there is
a great deal of uncertainty about the risks. On the basis of the recommendations I
received from SSM and others over the past period I intend to approve the
extraction plan submitted by NAM under the following conditions:
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•
•
•
Gas extraction from the Loppersum clusters will be scaled down for 2014,
2015 and 2016 to a production level of 3 billion m3 a year. Compared to the
average production levels of 15 billion m3 over recent years this means that
production in the risk area will be lowered by 80%. Total production from the
Groningen gas field will thus be reduced to 42.5, 42.5 and 40 billion m3
respectively over the years 2014, 2015 and 2016.3
I intend to give my approval for a period of three years, during which
measurements and studies will be carried out to be incorporated in a new,
modified extraction plan which will be decided on by the end of these three
years. NAM has to submit a modified extraction plan for the Groningen gas
field before 1 July 2016.
As for SSM’s recommendation to have NAM submit a modified extraction plan
on 1 September 2015, the government has decided to give NAM an extra 10
months with his final date of 1 July 2016. This is in line with what was
recommended by the Steering Group (three years) and Tcbb (two to three
years).
For the interim period the government shall give its consent to the present
extraction plan, which incorporates the reduced extraction of the Loppersum
clusters and limitation of the total extraction as conditions. The advantage of
this approach over the SSM recommendation not to approve the extraction
plan is that everyone is given the opportunity to respond to the decision of
approval by submitting a view or in the second instance, making an appeal.
With the scaling down of gas production, levels are going to be below those
foreseen in NAM’s extraction plan. Production however will not fall below levels
that could compromise security of supply. A cut in gas production will mean a cut
in government revenues from natural gas. On the basis of the most recent
estimates 2014 and 2015 will see cuts of € 0.7 billion and € 0.6 billion
respectively. For 2016 revenues are expected to be cut by some € 1.0 billion.
These amounts do not include the government’s contribution to settlement costs
and prevention measures and the measures to improve the liveability and
economic perspective in the region.
2. Reinforcement of houses, other buildings and infrastructure and adequate claim
settlement
The region’s inhabitants must be able to feel safe in their living environment and
claims for damages must be settled adequately and quickly. The decision to
approve the extraction plan for a period of three years implies that this period can
be used to reinforce and/or bring up to standard the most vulnerable buildings
and infrastructure with great urgency. This period will also serve to make the
best possible use of the Tcbb recommendations in the claim settlement process.
Tcbb will be asked to continue monitoring the process over the next three years.
3
In comparison: gas extraction from the Groningen field amounted to 45.2, 47.6 en 53.8 billion m3 over the years
2011, 2012 and 2013 respectively.
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It is also important that the recommendations for an integrated approach to
prevention and damage repair are realised quickly and are carried out by an
independent body close to the inhabitants, at a certain distance from NAM but
under its management with an independent Review Board of Audit Committee
focussing on processes, organisation, protocols and contents.
The independent legal advisor I have appointed for this purpose, Leendert
Klaassen, will follow progress with a critical eye. I have therefore extended his
term for another year.
NAM has estimated that the amount required for the repair and prevention of
damage is € 750 million over the next five years. An additional € 100 million is
believed necessary for preventive measures which in view of the heightened risk
of earthquakes are specifically required for the infrastructure. NAM will also create
a fund for exceptional situations to be managed by an independent body whose
members will be decided by the dialogue table referred to earlier. NAM will make €
15 million available for this purpose. In addition, it will set aside € 10 million for
the reinforcement of houses and other buildings still to be built in the area. In this
way NAM will contribute a total of € 125 million over the next five years to a
package of measures targeted at raising the value of properties within and outside
the risk area.
Furthermore, now that Ortec Finance research has shown a significant loss in
property value the compensation scheme announced earlier will come into effect
under conditions yet to be decided. The outlines of the scheme have been agreed
with NAM. The financial details depend on the number of houses sold in the risk
area and the final establishment of the actual loss of property value. Obviously,
proven loss of property value will be compensated. The budget required for this
cannot yet be quantified.
3. Liveability and economic perspective of the region
With the administrators of the region I believe that the adverse effects of gas
extraction for the region’s inhabitants should be offset by a positive impulse. To
enhance the liveability of the region the dialogue table will be asked to put
forward proposals for measures relating to:
1. A programme promoting new destinations for cultural heritage;
2. Restructuring the housing stock and shopping facilities;
3. An impulse for local energy generation;
4. Fast internet and smart grids in rural areas.
For this purpose NAM will set aside € 60 million over the next five years. This
amount comes on top of the € 25 million investment fund to be set up by
provincial and municipal authorities.
Also, to improve the region’s economic perspective an Economic Board will be set
up. The Board will draw up an incentive programme to reinforce the economic
structure in the region. NAM will set aside € 65 million for this programme. The
provincial authorities will top up this amount by € 32.5 million.
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With the package outlined in figures below, a total amount of € 1.18 billion will be
made available for the region over the next five years. This will provide a firm
impetus to employment and industrial activity in the region creating an estimated
3,000 extra jobs.
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Track 1 Safety and prevention
Reinforcement of buildings
prevention and infrastructure
subtotal
Track 2 Claim settlement and
increasing property value
Damage repair
Loss of property value
Increasing property value
Fund for exceptional situations
extra costs for new housing to be built in
risk area
subtotal
Track 3 Liveability
Existing programme provincesmunicipalities
NAM programme
Liveability fund
subtotal
Line 4 Economic perspective
Sustainable economic perspective
programme
contribution NAM
Contribution province
subtotal
Total
annual
cum. 2014 2018
100
PM
100 + PM
500
100
600
50
PM
25
3
250
PM
125
15
2
10
80 + PM
400 + PM
5
25
5
7
17
25
35
85
13
6,5
19,5
65
32,5
97,5
216.5 + Pm
1182.5 + PM
The package of measures for Groningen will amount to € 1.18 billion for the entire
2014 - 2018 period and is largely funded by NAM. NAM operates the Groningen
gas field with the Maatschap Groningen bearing the costs and risks. The State
participates in the Maatschap which means that the State will pay for 64% of the
claim settlement and prevention measures and the liveability programme through
reduced natural gas revenues, estimated at € 144 million a year.
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4. Follow-up steps
A considerable amount of research has been carried out over the past year, which
has led to new knowledge and insights into the relationship between gas and
earthquakes, as well as the implications for safety and the measures to be taken.
The measures for the next three years, which will focus on reducing safety risks
around Loppersum and will take an urgent and thorough approach to damage and
prevention must ensure the inhabitants of the area at risk will feel safer in their
immediate environment, and any problems are limited as quickly and as far as is
reasonably possible. At the same time I must indicate that there is still much we
do not know in the long term. This requires further research, which is unique in
the world and which must be carried out diligently. I also ask the Research Council
for Safety to determine whether and to what extent safety has been taken into
account in the decision making process.
I consider transparency regarding the research available to date and the rationale
for the measures I announced to be highly desirable. All findings are therefore
now available on www.rijksoverheid.nl/aardbevingen-in-groningen. The follow-up
study to be performed and the preparation of the decision on gas extraction after
2016 will be discussed with the region.
I submit the draft decision on the extraction plan for inspection, after which there
will be a period of six weeks for views to be submitted. After these have been
processed in a final decision it will be possible to make an appeal to the Council of
State. If required, the government decision, but also the research results can be
further detailed to your House in technical briefings.
I do realise that the government decision will not put an end to the earthquakes.
Gas extraction in the past and the continuation in some form of this extraction
means that earthquakes will continue to occur, along with the resulting damage
and problems. The government has therefore decided to scale down production
around Loppersum and to take the necessary measures to prevent damage as far
as possible and to continue with the compensation process in an optimal manner.
The government has also decided to implement measures to increase the value of
homes and improve the quality of life and regional economic outlook. The details,
the further elaboration and implementation of the measures will be developed in
dialogue. To this end, agreements were made with provincial and municipal
administrators in Groningen.
Understanding, recognition, meaningful actions, concrete improvements,
willingness to listen and to engage in proper discussions is all that is needed to
regain the confidence of the people of Groningen. With the package of measures
outlined above, I believe the government is responding to both the earthquake
problem itself and the concerns of the area’s inhabitants. Today I have described
the government's decision and the contents of the package of measures for the
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region. By doing so I have indicated what will happen in the coming years, but
results are what ultimately matter. The government is acutely aware of this and
is committed to an ongoing dialogue with people in the area, and to take whatever
action is necessary together with the provincial and municipal administrators.
(sgd)
Henk Kamp
Minister of Economic Affairs
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ATTACHMENT 1
RESEARCH RESULTS EXPLAINED, RECOMMENDATIONS AND GOVERNMENT
DECISION
Below I will explain in more detail the research carried out, the recommendations
I received and the government decision based on them.
1. Background to the research
In their recommendations of 22 January 2013 State Supervision of Mines stated
that the annual tremors in the Groningen field and the attendant release of energy
had increased over the past years and stated on the basis of their own studies
that tremors stronger than 3.9 on the Richter scale could no longer be ruled out
beforehand. SSM found these results alarming and indicated that given a
maximum magnitude of 5 on the Richter scale there is a 7% risk of tremors of a
magnitude of 3.9 or higher over the 2013/2014 period. In view of the potential
damage these tremors could cause this risk was qualified as high. SSM therefore
recommended that seismic and geomechanical studies be carried out and NAM be
told to scale down its activities in the Groningen field as soon as possible to levels
that are still realistic. This would not remove the risk of heavy tremors but it could
reduce it.
In response in my Letter to the House of 25 January 2013 I pointed out the vital
importance of the supply of Groningen gas for consumers at home and abroad. A
major reduction of the Groningen gas supply in the short term cannot be offset by
the import of gas or other measures and may have serious consequences for
people in the Netherlands and the countries surrounding us. A major cut in gas
sales would also have adverse effects on the national budget.
Given that we do not yet have full insight into the maximum magnitude of future
tremors I believed a decision in January 2013 to reduce gas production would not
be responsible. Therefore, to arrive at a balanced decision, I immediately
commissioned eleven independent studies to form the basis for drawing up and
assessing the modified gas extraction plan NAM was to submit on 1 December
2013. We could then look at what measures to take, measures to limit the
damage and the number and magnitude of earthquakes. Three more studies were
added to these later, making for a total of 14 studies.
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2. Design of the studies
Over the past period I commissioned fourteen studies to be carried out which
have now been completed:
Design of the studies
Commissione
d to
Carried out by
1
Inventory preventive measures buildings
NAM
Arup
2
Quick scan possible effects on vital infrastructure
EZ
Deltares
3
Damage pattern with tremors of higher maximum
impact
EZ
KNMI and TNO
4
Area affected with tremors of higher maximum impact EZ
KNMI and TNO
5
Determining tremors of maximum impact
NAM
NAM
6
Alternative extraction techniques
NAM
NAM
7
Possibilities conversion of quality
EZ
GTS
8
Possible financial consequences for State revenues
EZ
EZ
9
Supply contracts
EZ
GasTerra
10
Devaluation
EZ
Ortec Finance
11
Safeguarding independence of damage procedures
EZ
Tcbb4
12
Liveability and economic perspective
EZ
Ecofys
13
Building standards
EZ
NNI
14
Assessment of risks
EZ
Prof. Helsloot
The studies 1- 4 deal with the limitation of damage such as personal injury and
serious material damage in the event of tremors of greater magnitude. The impact
on buildings and vital infrastructure (dikes, pipelines and power lines) was
calculated for tremors with a magnitude of 5 on the Richter scale and the
preventive measures to be considered. The area that could be affected was also
taken into account.
Studies 5 and 6 are the core of the technical investigation and cover studies of
potential future tremors of maximum magnitude in the Groningen field and
possible alternative extraction techniques to reduce the number and magnitude of
4
Tcbb: Technical Committee Soil Movement
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the earthquakes. The effect of scaled down production was also taken into
account.
Studies 7, 8 and 9 document the consequences of reduced production. The
consequences for State finances for instance, and the contract obligations of the
suppliers of Groningen gas. Reduced production of Groningen gas may also affect
the energy supply at home and in the countries surrounding us. The study
therefore looked at the levels to which production could be scaled down without
compromising gas supplies in a cold winter.
Studies 10 and 11 deal with the relationship between the earthquakes and the
devaluation of properties in the area and safeguarding the independence of
damage assessment and claim settlement. Study 12 deals with the possibilities to
improve the liveability and the economic perspective of the area. Study 13
concerns the preparation of new building standards for new-build and the
reinforcement of existing buildings. Current building standards do not provide for
areas with the type of earthquakes experienced in Groningen.
Finally, study 14, deals with the question of how the risks, estimated by some of
the studies, should be assessed. Which risks are still acceptable and which are
not? A policy framework is required for the risks associated with gas extraction.
In my letter of 28 March 2013, I pointed out the importance of safeguarding the
independence of the studies as requested by the House and I reported the
appointment of a steering group chaired by Ms T. Klip-Martin, dike warden of the
Vallei en Veluwe water board, with Prof. R.D. van der Hilst of the Massachusetts
Institute of Technology and dr. J.N. Breunese of TNO as its members. The steering
group has approved the design of the studies, supervised them and looked at the
results. The steering group worked on the principle that the results of the
combined research should provide me with a basis for an informed decision on the
future gas production from the Groningen field in relation to the safety risks
following earthquakes. The steering group was supported by two technical
supervisory committees (belowground and aboveground) consisting of members
with a broad expertise. SSM was also represented in these committees which had
to promote and report the progress made to the steering group.
On receiving the results of the studies the steering group provided me with its
recommendations on 20 December 2013. On 28 November 2013 NAM submitted a
modified extraction plan, with an added an explanatory note in writing on 23
December 2013. I received the interim advice from Tcbb and the
recommendations put forward by SSM for the extraction plan on 16 December
2013 and 13 January 2014 respectively.
3. Results studies and recommendations
Below, the results of the studies and the recommendations are given by reference
to the following questions:
1. How serious is the problem in terms of number and magnitude of the tremors,
what are the risks involved and how are they to be weighed?
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2. What can be done in terms of production or pressure stabilisation to prevent
or limit the increase in number and magnitude of the tremors?
3. In case of earthquakes of great magnitude, what can be done to limit their
impact? What is the most adequate way in which the resulting damage and
nuisance or the potential damage and nuisance still to follow can be restored
or compensated for?
4. What is the impact on the security of supply and the gas revenues?
3.1 Seriousness of the problem
The translation of the results of studies 1, 2, 5 and 6 into safety risks (risk of
material damage and personal injury) determines the seriousness of the problem.
The risks should then be considered to see whether they can be limited and
whether the eventual remaining risk is acceptable to society.
The safety risk is determined by a number of factors:
•
the porous rock from which the gas is extracted which is compressed in the
process of extraction and the weight of the layers above it (subsidence);
•
the tension built up below ground (compaction) which will eventually erupt in
the form of earthquakes;
•
the magnitude of the earthquake and the subsequent pattern of soil
movements;
•
the ground acceleration which has an impact on buildings and infrastructure
above ground.
The degree to which buildings and infrastructure are resistant to the impact of
earthquakes ultimately determines the safety risk.
The results of the studies 1, 2, 5 and 6 are characterised by a substantial degree
of uncertainty notably for the period after the next five years. This uncertainty is
related to the fact that there is insufficient data about the constitution and
behaviour of the underground layers and the more serious earthquakes in
Groningen. Also, there are few international reference data dealing with the
consequences of induced tremors. The research therefore had to be based on a
limited amount of data and knowledge of the seismic mechanisms underground.
The main factor of uncertainty concerns compaction and what part of the built up
tension would erupt into earthquakes. This results in a wide bandwidth for seismic
threat over the period after the next five years with an emphasis on the higher
values. There is also uncertainty about the extent to which the porous rock is
compressed and the relationship between the magnitude of tremors and the
resulting pattern of ground movement.
The last important factor of uncertainty concerns the impact above ground. What
is the relationship between the robustness of the various types of buildings
(expressed in fragility curves) and the specific ground acceleration? There is a lack
of specific data on houses, other buildings and constitution of the soil in
Groningen.
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In light of these and other uncertainties researchers have in some cases been
conservative (i.e. cautious) in their assumptions and looked at all the options that
were theoretically possible. In its recommendations therefore the steering group
indicates that the seismic threat and risks involved could well be overestimated.
The uncertainty which is set to increase over the years makes it rather difficult to
make long-term predictions. It may be clear that with ongoing production
seismicity will increase but it is not clear how long this trend is going to last or the
maximum seismic threat that should be taken into account.
For the short term, the next three to five years, the seismic threats and risks are
sufficiently clear to pronounce on the steps to be taken, because the perspective
to reduce the uncertainties within that timeframe is clear. It is fair to assume that
more and better data in combination with further research can lead to an
adjustment downward of the seismic threat and safety risks.
The short-term risks
The studies provide a good insight into the problem (based on the data, computer
models and knowledge currently available). The major uncertainties and the steps
necessary to reduce them have been identified. We can make a distinction
between the short-term (the next three to five years) and the long-term risks (the
period after the next five years).
In accordance with present calculations a maximum magnitude of 4.1 on the
Richter scale with an attendant ground acceleration of 0.12g (g being the
acceleration caused by gravity) will have to be taken into account for the next
three years. Both of them are likely to increase by 10%. Such potential maximum
ground acceleration will not seriously affect vital infrastructure although this does
not mean that reinforcement of dikes and banks is not necessary. Study 2 has
revealed that many dikes and dams do not satisfy current standards. For buildings
however there is reason for concern. A 0.12g ground acceleration poses a real
threat to certain categories of housing.
The opinions among experts on the calculations and weighing of risks related to
earthquakes and the methods used vary.
SSM rates risk levels high comparing them with risks accompanying flooding:
‘Calculations reveal that the safety risks for persons (Local Personal Risk) in the
event of earthquakes resulting from gas extraction with its epicentre in the
Huizinge, Zandeweer and Hoeksmeer area are similar to the highest risks caused
by flooding.’
In the explanatory note to the modified extraction plan NAM goes into the
calculations and weighing of risks in their own and in the national context. NAM
concludes that the safety risks in the next three years still falls within the
analogous standards but also that preventive reinforcement is necessary to keep
the long-term risks acceptable (risks after five years will increase for nonreinforced housing stock).
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In anticipation of these varied opinions regarding the approach I asked Prof. I.
Helsloot of the Radboud University in Nijmegen to put his into perspective. In his
report Prof. Helsloot concludes that a new risk policy is required as the
earthquakes pose a greater risk than was initially thought. According to him, the
smaller risk increase in the next few years is comparable to what is considered
acceptable in other domains. He urges adequate compensation of risks and
damages to be determined primarily between the liable party (NAM) and the
environment.
Tcbb points to the importance of involving, in the next two to three years, a much
wider group of experts from various disciplines to try and reach a consensus about
the risks following earthquakes.
3.2 Measures to reduce the risks
Measures targeted at production
Study 6 considered the possible measures related to the gas extraction itself. Most
of the production scenarios studied show small differences in the short- term
seismic threat. A first exception is the scenario in which all gas extraction in the
Groningen field is halted. This would reduce the seismic threat by 38% over the
next ten years.
But this scenario is no option as it would mean that the demand for gas at home
and in the countries surrounding us cannot be met and there are no alternatives.
A second exception is the scenario with an alternative production philosophy
where the gas is primarily extracted from the southern part of the gas field. This
would reduce the pressure in the area around Loppersum more slowly and slow
down the increase in seismicity. The steering group recommends to seriously
consider this philosophy as it provides opportunities for the short term: not only
will the risks be lowered it will also provide more time for data collection, further
study and the reinforcement of buildings and infrastructure.
The recommendation to reduce the pressure around Loppersum finds broad
support among the advisors:
•
The Technical Supervisory Committee that supported the steering group
believes that the alternative production philosophy is an option which
deserves serious consideration. It could be part of an approach where shortterm measures are accompanied by further study to make an informed
decision possible for the long term. The option to stop production in the north
altogether during this period would then also have to be considered.
•
Tcbb believes that waiting is no longer an option and measures should be put
in place with immediate effect to enhance the safety of the inhabitants in the
area at risk as soon as possible and in the best possible manner.
•
SSM recommends closing down five of the twenty-five operational clusters in
the risk area around Loppersum for a period of three to five years.
Measures targeted at alternative extraction techniques
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Alongside the measures targeted at scaling down production, alternative
techniques to reduce pressure and compaction in the field were also studied.
Reducing pressure and thereby compaction can only be achieved by injecting
substances into the field to replace the gas. Various substances were considered:
water, CO2 and nitrogen, with the injection of nitrogen as the most promising of
the three. Nitrogen injection can help to keep pressure levels stable which would
prevent further compaction in the field. It would also limit the seismic threat
according to the models used by NAM.
NAM also notes that this option would involve major investment and high
operational costs and would have a significant impact on the environment because
of the amounts of nitrogen to be produced. If in spite of all the drawbacks, this
method is chosen, further study will be required beforehand and implementation
cannot begin before 2018.
The Technical Supervisory Committee comes to a similar conclusion saying that
the enormous costs, the loss of a significant volume of natural gas and the scale
of the industrial activities required with the associated impact on the landscape,
make it difficult to believe that nitrogen injection is an acceptable alternative at
present.
3.3. Reducing the impact of heavier tremors
Given the scope of the measures required and the uncertainties involved, NAM
opts for a step-by-step approach. First, the most vulnerable houses and important
buildings like hospitals and schools will be reinforced. Next, further measures will
be considered on the basis of further study and the experiences gained over the
years ahead: further houses and buildings could be reinforced and/or the houses
and buildings tackled in the first round could need further reinforcement. NAM has
laid this down in a Plan of Action for the coming years. The Plan also provides for
an inspection of 15,000 houses before the end of 2015 with a view to reinforce the
most vulnerable ones. Once the package of measures for large-scale
reinforcement is approved and market consultations have taken place the
activities will be taken up diligently and scaled up in 2014 and 2015.
The advisors propose the following:
•
The Technical Supervisory Committee is well aware of the fact that it is not
reasonably possible to accelerate the implementation of the measures
proposed for the years ahead, given the scope of the programme, which is
expected to involve thousands of houses and buildings and thousands of new
jobs. The Technical Committee also acknowledges that the Plan is very
ambitious.
•
Tcbb points out that NAM intends to start the large-scale implementation of
the preventive measures half-way through 2014. Tcbb welcomes the clarity of
the Plan but thinks that the timescale shows a lack of urgency. The Plan is too
much based on what is reasonably possible. Implementation can be speeded
up by a tight planning, timely research into possible obstacles in the issue of
permits, timely consultations with stakeholders (municipalities!) and making
large-scale use of building knowledge and execution capacity available in the
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•
Netherlands. A modified planning is highly desirable and should be
incorporated in the extraction plan.
The steering group says that houses and buildings should at least comply with
the current standards and that extra activities for a coordinated reinforcement
programme must be started as soon as possible.
Tcbb and I have discussed the above recommendations to speed up the
reinforcement process with NAM several times. NAM said to have seriously
considered the recommendations but that the logistics involved (building permits,
invoice procedures with contractors, agreements with inhabitants, temporary
housing) were a hampering factor. How the process can be accelerated in light of
the logistics is being studied as well. Another problem signalled by NAM is the lack
of guidelines for building and repairs in areas susceptible to earthquakes. I
therefore approached the committee in charge of building standards to draw up a
temporary directive for this purpose (study 13) The directive will be completed by
mid- 2014.
The recommendation to scale down production from the Loppersum clusters for a
three-year period will create the time and space to implement the reinforcement
activities in the area and this should be made full use of. Reinforcement directly
lowers risk levels and can contribute to the decision to be taken after this period.
The government will supervise the speedy implementation of NAM’s Plan of Action
to ensure that the inhabitants in the risk area will feel safe.
Strengthening of vital infrastructure
In study 2 Deltares looked at the extent to which various infrastructure elements
could withstand stress (flood defences, pipelines and the high-voltage electricity
network). The study identified the most critical elements and charted the actual
risks. This information was used to draw up a plan of approach and set priorities.
The most important measures proposed concern the inland waterway dikes
(embankments), where as a rule, unlike sea dikes, the height of the water is
relatively closer to the top of the dike. An important finding is that some of the
primary and secondary flood defences do not currently meet prevailing standards,
which implies that they would not be able to withstand a situation in which serious
tremors occurred. The vital infrastructure must be brought up to the level of
prevailing standards at the very least. Detailed study of the sections of the flood
defences that Deltares has identified as high risk must be given the greatest
priority and highest urgency. Deltares and the water authorities expect that a
detailed inspection of the most vulnerable sections will produce a less negative
picture. In addition improvements to flood defences already planned in the short
term will be calculated to include resistance to earthquakes, and the extra
improvements may be included in activities already planned. Further, a
coordinated programme of strengthening based on the proposed detailed analysis
must be activated to deal with existing risks in the immediate future. Agreements
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will be made with the water authorities and managers of the pipeline and highvoltage electricity networks to achieve this.
Reduced production over the next three years in the Loppersum area will provide
some scope for detailed study and actual strengthening. Together with the water
authorities we will consider how to prioritise work to bring flood defences up to
standard in combination with any extra measures required to mitigate against
tremors. It is here again the case that adequate strengthening will have a direct
impact on the risk (reduction) and may contribute to the decisions that will have
to be made after the proposed three-year period.
3.4 Repairs and compensation for damage
Damage
Since 16 Augustus 2012 there have been some 12,000 damage reports. Of these,
almost 10,000 house were inspected by damage experts and 7,700 damage
reports have been drawn up and sent to the claims notification office. The damage
evaluation process has been completed for 6,000 houses and agreement reached
with the residents.
I have asked the Tcbb, and Leendert Klaassen, the independent legal advisor
appointed by me, to follow progress with a critical eye5. The Tcbb has tested the
quality and quantity of the claims settlement procedure, its uniformity and its
client satisfaction. The Tcbb produced its first findings and recommendations in
August 2013. In December 2013 the Tcbb examined what action NAM had taken
on its recommendations. The Tcbb found that the NAM is making good progress in
implementing its advice, but that this is not yet fully implemented. It makes the
following recommendations in this respect:
•
The area will continue to experience new earthquakes and accompanying
damage in the future. It is therefore essential to have a robust organisation in
place to deal with information, claims settlement and preventative measures.
The Tcbb believes that prevention and damage repair must be dealt with in an
integrated manner, by an implementing organisation close to the residents, at
some distance from, but managed by NAM, with an independent Review Board
or Audit Committee that concerns itself with the processes, organisation,
protocols and content. This should be a condition of approval for the
extraction plan. Management of the project should be in keeping with the size
of the activities. For organisation of the implementation NAM could issue a
tender that includes conditions ensuring good relations with the residents and
the avoidance of unnecessary bureaucracy.
•
This year NAM will hold a customer satisfaction survey. The Tcbb feels it
should be carried out by an independent body to ensure the credibility of the
results.
5
Lower House, parliamentary year 2012-2013, 33 529, no. 21.
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•
•
The reports of more serious damage, overdue maintenance and the work this
involves are all still a problem for NAM. Tcbb recommends that clear rules and
guidelines should be included in the handbook, as there comes a point when it
is difficult, or even impossible, to distinguish old cracks resulting from
earthquakes from overdue maintenance.
NAM could intensify the number of zero measurements. These are recordings
of the technical condition and damage existing at the moment the photo is
taken and the written record made. The recording can later be used to
establish responsibility and the extent of the damage, or to exclude it. This
precludes further discussion and shows whether the situation has changed as
a result of tremors. The zero measurement could also contribute to the timely
implementation of preventative strengthening measures.
Loss of property value
As part of study 10, Ortec Finance is periodically conducting statistic research into
the effects of gas production and earthquakes on the value of the houses in the
area where the risk of tremor is greatest, and in a number of reference areas. The
reference areas, some neighbouring, are comparable in terms of economy and
demographics. Information from the land registry and the Netherlands Estate
Agents Association going back to 1993 have been used for this purpose. The study
is repeated every quarter.
On the basis of discussions with residents, estate agents and local government
Ortec Finance refined its research methodology to include factors like demographic
shrinkage, distance to the epicentre of the Huizinge tremors, placing and removal
of houses on the mark, length of time that houses are for sale and removing
houses bought by NAM from the study. Research is currently taking place into how
damage reporting can be included in the study. Physical damage to a house could
cause a loss in value. This is expected to be included in the study for the fourth
quarter of 2013. However this costs time because the information falls under the
Data Protection Act.
The first two quarters of 2013 indicated that there is no demonstrably significant
difference in value development. The third quarter reporting in 2013 shows a
significant statistical difference in value development. I do realise that the
difference in value development currently found is considerably less than that
experienced by the residents. It is therefore important to continue to monitor
developments and to publish to results.
As already announced, now that research by Ortec Finance has demonstrated loss
in property value as a result of gas production and earthquakes, the scheme will
now be put in place to provide compensation under conditions still to be
determined. Agreement has been made with NAM on the form this scheme will
take:
•
The target group is formed by the people who have sold their houses.
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•
•
•
•
The scheme will start at the moment Ortec Finance establishes that since
SMM’s report was published in January 2013, property values in the risk area
have developed significantly less favourably than in both reference areas 1
and 2. That is the case over the third quarter of 2013 and application can be
made to the compensation scheme from that time. If at a certain moment it is
established that there is no longer a significant difference, recourse to the
scheme will cease.
Compensation granted will represent the difference in value development
between a property in the risk area and a comparable property in the
reference areas. Various elements will be included in the assessment:
reports by Ortec Finance;
findings of property valuers on the effects of the earthquake risk on the
property involved;
the condition of the property involved and the specific conditions of the
house.
There will also be an opportunity for the residents to have an independent
assessment of the compensation offered. The independent assessment is a
separate process involving several experts.
The scheme will be evaluated periodically and adjusted if necessary in the
light of experience.
The details of the scheme, including protocols to be used by the experts in
establishing compensation, will be worked out further by NAM. NAM will also set
up the organisation to implement this work. Bearing in mind the work this
involves, including requests to experts and setting up an organisation to deal with
the claims, this will take until 1 April 2014. In the meantime the NAM will make it
known where people can register prior to making a claim under the scheme.
3.5 Security of supply and budgetary consequences
Security of supply
Studies 7, 8 and 9 show that Groningen gas plays an important role on the gas
market in north-western Europe. It is low calorific gas for which there are hardly
any other natural sources. The only other way of meeting demand for low calorific
gas substantially is to convert high calorific gas to low calorific gas by the addition
of nitrogen. The national gas transmission operator, Gasunie Transport Services
(GTS), has conversion installations at its disposal. These installations do however
have limited capacity which cannot be expanded in the short term. In addition the
functioning of these installations is dependent on the high calorific gas actually
being available for conversion.
A specific point for attention is that the demand for low-calorific gas and the
accompanying demand for Groningen gas is characterised by the need for
considerable flexibility. As a large portion of this gas is used for heating, much of
the demand is temperature-driven. This not only makes demand unpredictable,
but can also mean that demand in a winter month is three times higher than in a
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summer month. Until now the Groningen field has played an important role in
meeting the fluctuations in demand.
The market for Dutch gas and more specifically Groningen gas is not restricted to
the Netherlands. Low calorific gas from the Netherlands is supplied to Germany,
Belgium and France on the basis of long-term contracts which originally date from
the 1960s and extend to 2020 and beyond. There are hardly any long-term
contracts for the supply of low calorific gas and Groningen gas within the
Netherlands.
Study 9 indicates that these long-term contracts contain no conditions for
dissolution in the event of restricted production. Even if production is restricted
the amounts contracted will have to be supplied, unless new agreement can be
reached with the recipients. This is unlikely as they have little or no other
possibility of obtaining low calorific gas and their customers’ appliances are not
suitable for gas of a different quality. This is also the case for Dutch users of low
calorific gas.
Although GTS has installations which can convert high calorific gas to low calorific
gas these installations are used only sparingly because there is a preference for
supplying low calorific Groningen gas rather than converted high calorific gas, also
from the point of view of income to the State. Study 7 indicates that maximum
employment of the conversion installations would make it possible to reduce
production from the Groningen field to 30 billion m3 a year. This would only be
possible on the condition that the flexibility of the Groningen field could be fully
exploited and that more could be produced if circumstances, for example seasonal
temperature, required it. If it is necessary for the Groningen field to be less
flexible in its supply, in other words, to produce at a level which is as constant as
possible, or if flexibility is limited for other reasons, then the Groningen field would
be required to produce at least around 40 billion m3. Greater restrictions would
threaten gas supply during the winter months.
It is necessary to point out here that study 7 is based on a situation where
potential production restrictions will be spread equally across the Groningen field
and its production clusters. If production is restricted by halting production from
the Loppersum clusters, as SSM recommends from the point of view of safety, a
different situation will be created and the question then is whether sufficient gas
could be produced from the Groningen field when demand is extremely high.
Halting production at the Loppersum clusters reduces the Groningen field’s
capacity to produce gas and feed it into the national network by 25%.This
capacity reduction is large enough to cause problems for security of supply in
wintertime. In times of peak demand the remaining clusters and gas reserves will
be unable to produce insufficient low calorific gas to meet the total demand. This
problem will only get worse in the near future because continuing production from
the Groningen field means that its present supply capacity is declining anyway,
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regardless of the decision on the Loppersum clusters. To mitigate the problem it
is desirable to continue some limited production from the Loppersum clusters in
order to respond quickly to peak demand. The level needed is about 3 billion m3 a
year for the next three years. In comparison: in recent years the average
production level from these clusters was approximately 15 billion m3 a year.
Natural gas profits
Gas production is a key source of income for the Dutch State. In recent years
profits from natural gas have amounted to EUR 12 to 14 billion a year of which
EUR 10 to 12 billion were generated by Groningen gas.6 Any potential restriction
on production has considerable consequences for the national budget. If
production is limited to 30 billion m3 a year, the natural gas profits over 2014 will
decline by approximately EUR 3 billion. Limiting production by up to
40 billion m3 means that profits over 2014 will decrease by approximately EUR 1.3
billion in relation to estimates, limitations up to 42.5 billion m3 would result in a
EUR 0.7 billion decrease. Similar amounts apply for 2015.
6
The Dutch State receives approximately 85% to 90% of the total profit. It receives approximately 65% from
sales of gas from smaller fields. These percentages include the 40% EBN share.
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