Rare metal producer in trouble over pollution tax

TALLINN - Silmet, one of the largest producers of rare metals in Europe, is threatening to halt its business in the northeastern part of Estonia if the Ministry of Environment imposes a tenfold increase on pollution tax. This is being considered because national pollution limits set this year are eight times lower.

Tiit Vahi, Silmet's general director, told Estonia's business daily Aripaev that business would be pointless if the company was forced to pay 40 million kroons ($2.4 million) in pollution charges.

Silmet's profits last year amounted to 40 million kroons and its sales were about 500 million kroons. The company has emerged swiftly from the red since Vahi, the former prime minister of Estonia, took over the business a couple of years ago.

On Feb. 14, the ministry decided to lengthen Silmet's water permit for last year until July 1, 2001, when the company is expected to submit its water protection plans to the ministry. The ministry will then give Silmet a schedule with roughening nitrogen pollution rates for the following two and a half years.

Eva Kraav, councilor of environmental economics at the ministry, is of the opinion that Silmet would like to receive fresh benefits from the ministry. The ministry is working on a new bill that foresees increasing environmental charges by 20 percent annually in five years.

"The company has to pay a tax rate that is 10 times higher because its pollution rate is 300 times higher than acceptable," said Kraav.

From Jan. 1, 2003, companies in Estonia's cities will be allowed to produce 10 milligrams of nitrogen per liter of water, while in towns the pollution level may reach 15 milligrams. These are European Union norms. She said that the average pollution rate in Estonia is currently about 20 to 25 milligrams per liter of water.

Until Dec. 31, 2000, the state allowed Silmet to launch 2,913 milligrams of nitrogen per liter of water. Since Jan. 1, 2001, the limit has been reduced to 450 milligrams per liter, the ministry reported.

Kraav said that the ministry wants to see a report from Silmet on precisely how the company is going to decrease its pollution within two years. She said that Silmet has highly educated personnel and the opportunity to ask for foreign help.

The Ministry of Environment also claims that the Silmet Group has not reduced its pollution to the required levels agreed with the government in 1998. The state gave Silmet an environmental tax benefit to the tune of 7.6 million kroons on condition that Silmet would invest around 20 million kroons in a water protection program.

According to Tonis Kaasik, CEO for Okosil, one of Silmet Group's subsidiaries whose task it is to manage environmental projects for the group. Silmet fulfilled the requirement to decrease nitrogen pollution by more than 25 percent by the end of 1998.

"The environmental authorities accepted a report from the company in spring 1999. Silmet actually invested more in the environmental upgrading of current technologies than was agreed with the state," said Kaasik. Silmet has invested more than 24 million kroons in environment protection since 1998.

Silmet will stop using the Sillamae waste depository by 2003. Together with a U.S. engineering company, Behre Dolbear, Silmet is working on the development of new waste management systems. The company's waste may be used in the production of fertilizers, while radioactive and hazardous waste can be vitrified - converted into glass - for thousands of years.

"I hope that the Ministry of Environment will support our environmental protection program. Our company could be the second positive example after Kunda Nordic Cement of a complex enterprise that meets environmental requirements and allows its employees to maintain their jobs and for local authorities and the state to maintain their revenues in the budget," said Kaasik.