The President House of Representatives of the States General Binnenhof AA The Hague. Date 17 January 2014 Re: Gas extraction in Groningen

Transcription

1 > Retouradres Postbus EK Den Haag The President House of Representatives of the States General Binnenhof AA The Hague Directoraat-generaal Bezoekadres Bezuidenhoutseweg AC Den Haag Postadres Postbus EK Den Haag Factuuradres Postbus BD Den Haag Date 17 January 2014 Re: Gas extraction in Groningen Overheidsidentificatienr T (algemeen) Dear Madam President, 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 plan 1 before 1 December 2013 taking account of the insights, including those of the studies carried out. Ons kenmerk 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. Pagina 1 van 24

2 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. Pagina 2 van 24

3 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 Pagina 3 van 24

4 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 m 3 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 m 3 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 m 3 a year natural gas revenues would be cut by some 3 billion a year based on the most recent estimates over If production would be cut to 40 billion m 3 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. Pagina 4 van 24

5 would go down by some 1.3 billion over 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: Pagina 5 van 24

6 Gas extraction from the Loppersum clusters will be scaled down for 2014, 2015 and 2016 to a production level of 3 billion m 3 a year. Compared to the average production levels of 15 billion m 3 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 m 3 respectively over the years 2014, 2015 and 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 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 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 m 3 over the years 2011, 2012 and 2013 respectively. Pagina 6 van 24

7 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. Pagina 7 van 24

8 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. Pagina 8 van 24

9 annual cum Track 1 Safety and prevention Reinforcement of buildings prevention and infrastructure PM 100 subtotal PM 600 Track 2 Claim settlement and increasing property value Damage repair Loss of property value PM PM Increasing property value Fund for exceptional situations 3 15 extra costs for new housing to be built in risk area 2 10 subtotal 80 + PM PM Track 3 Liveability Existing programme provincesmunicipalities 5 25 NAM programme 5 25 Liveability fund 7 35 subtotal Line 4 Economic perspective Sustainable economic perspective programme contribution NAM Contribution province 6,5 32,5 subtotal 19,5 97,5 Total Pm PM The package of measures for Groningen will amount to 1.18 billion for the entire 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. Pagina 9 van 24

10 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 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 Pagina 10 van 24

11 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 Pagina 11 van 24

12 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 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. Pagina 12 van 24

13 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 Tcbb 4 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 Pagina 13 van 24

14 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 On 28 November 2013 NAM submitted a modified extraction plan, with an added an explanatory note in writing on 23 December 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? Pagina 14 van 24

15 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. Pagina 15 van 24

16 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). Pagina 16 van 24

17 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 Pagina 17 van 24

18 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 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 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 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 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 Pagina 18 van 24

19 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 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 Pagina 19 van 24

20 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 eye 5. 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 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 , , no. 21. Pagina 20 van 24

21 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 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. Pagina 21 van 24