This article is an English translation of a revealing article by Dutch journalist Sam Gerrits published on the website FOLLOW THE MONEY. It is about the sleazy repercussions of the earthquakes blighting NAM’s operation of the Groningen Gas Field. NAM (The Dutch Petroleum Company) is a Shell/Exxon joint venture company.
This story starts in 1959, almost sixty years ago. Jan de Quay of the Catholic People’s Party (KVP) ruled the country. The first DAF cars came from the factory in Eindhoven, the first Barbie dolls from the molds of Mattel in California. Alaska and Hawaii joined as 49th and 50th with America. And in Slochteren gas was found in the beetroot field of farmer Boon. That soon turned out to be the largest gas field in Europe.
Thanks to it’s large population density, the Netherlands was the perfect place to build a natural gas network. The Texan Exxon engineer Douglass Murray Stewart calculated for the then Minister of Economic Affairs Jan de Pous that the state, by selling gas directly to households, and not power plants, could earn three times as much. The state would receive the lion’s share of the profits; Stewart’s plan was heard.
Exxon had already signed an agreement with Shell in 1947 and formed the Dutch Petroleum Company (NAM) to exploit the oil field at Schoonebeek. On March 4, 1963, the State Mines, now Energie Beheer Nederland, concluded an agreement with the current Shell and ExxonMobil; Minister de Pous signed. The Ministry of Economic Affairs has kept this agreement secret for at least half a century. It was not until January of 2018 that the paper was passed on to the Dagblad van het Noorden by the Groningen farmer Sijbrand Nijhoff. It appears from the documents that the Dutch State, through the Ministry of Economic Affairs, has since actually operated the gas field together with Shell and Exxon. This is reflected, for example, in the fact that NAM currently uses the equivalent of half a million households of electricity every year to make natural gas available to households, but does not have to pay a single cent for that.
Willem Meiborg argues for a damage fund
Back to 1963. With the state behind it and the NAM as a vehicle, the oil companies themselves installed pipelines to all houses in the Netherlands. Before the year was out, there was already a gas pipe from Groningen to Maastricht. Not long after that door-to-door sales of Slochteren gas started, also with our eastern and southern neighbors. On November 8, 1963, the Groningen engineer Willem Meiborg sent a letter to the newspaper Nieuwsblad van het Noorden, in which he pointed out the dangers of gas production. He predicted calamities and a substantial subsidence, and urged urgently to set up a damage fund.
“There is still no gas in any house, but the newspapers state how big the profits will be for the state and for the oil companies. But what benefits will be made available for (…) the northern provinces? Important amounts will have to be reserved for all kinds of calamities, such as the expected future subsidence, for example ‘, wrote Meiborg. The state and the oil companies thought differently. They put Meiborg away as a village fool, he had to resign his work as director of the Groningen road construction center.
The area around Loppersum slowly changed into a deep plate
In the decades that followed, the whole of the Netherlands lived warm without coughing out coal dust. We cooked on beautiful blue gas flames, showered nice and hot, built our welfare state on the gas money, and the NAM pumped the huge natural gas field empty. The soil above the gas reservoir began to subside. The area around Loppersum slowly changed into a deep plate that covered a third of the province. Soil subsidence pumping stations were built to keep the polder soil dry, since it had fallen far below Normal Amsterdam Level. According to Shell and Exxon, the soil subsidence and drainage pumping happened in a uniform way. The farmers and citizens, who saw their walls and floors subsiding and cracking, thought differently.
In the seventies the first damage reports came in. NAM denied any involvement or liability. Complainers were given the bureaucratic runaround. Claims were turned away by telephone or handled fragmentarily, any serious damage was bought off under an oath of confidentiality. For almost half a century, the oil companies were able to keep quiet in this way, that the monuments, houses and farms above the gas field, gradually got dislocated, due to soil subsidence and drainage.
The first earthquakes and the reaction of the NAM
Between 1963 and 1988 the pressure in the Slochterenveld dropped evenly. In the late 1980s, when the gas pressure in the field had decreased by more than 50 percent, the pressure drop became jerky. On 5 December 1991 the first earthquake was registered above the Groninger gas field in the village of Middelstum: 2.4 on the Richter scale. This sounds like a small earthquake, but due to the unique soil conditions in Groningen and the shallow epicenter of the earthquake, the horizontal acceleration of this earthquake was so intense locally, that a woman who lived at the Boterdiep heard a huge bang, probably her breaking foundation. She fell out of her bed from the shock, and saw daylight through the holes in her bedroom wall. Geologist Peter van der Gaag researched her house and concluded earthquake damage. The NAM claimed that a jet fighter had flown over, and Van der Gaag was declared insane. Van der Gaag, just like Meiborg, was banned from working professionally in his field. Experts who knew about what was going on kept quiet from then on.
Since then, the soil has continued to shake. Every quake, however minimal, put the buildings above the gas field under tension. All houses, farms and monuments were confronted with accelerated settling damage and aging. The dripping complaints became a stream. The NAM denied where-ever possible. In order to keep complainants quiet, the company found a man: former building contractor and independent claims expert Pieter de Vries was sent to them. He got a small budget and a strict task: make sure the complainers are satisfied. People were barely compensated, but De Vries earned well.
The earthquake of Huizinge 2012 and the origin of the old protocol
The earth became more restless. In August 2012 the earthquake of Huizinge took place, Richter 3.6, Mercalli VI, locally perhaps even VII. The damage in the earthquake area was considerable: the NAM received more than two thousand damage reports within days. Large, serious damage: walls torn along the walls, dislocated foundations. The company could no longer deny the damage.
Shell and Exxon consulted in secret. The mining law, drawn up during the operation of the State Mines in Limburg, was clear; operators must make every effort to prevent damage and must compensate all damage caused by them. This meant in Groningen: not only earthquake damages, but also the damage caused by decades of soil subsidence and drainage, the construction of transport pipelines, and the interactions of all these disruptions of the soil with each other.
That would be way, way too expensive. Moreover, the state and the NAM – and thus both its shareholders, Shell and Exxon – would have to pay for it; since there was no damage fund. The solution that the oil companies came up with, probably after long deliberation with in-house lawyers and with the consent of the Ministry of Economic Affairs, was smart: they would, under the flag of the NAM, open a counter, where only earthquake damage could be submitted for assessment. That would keep the claims within bounds. After all, if you view the various causes of damage separately, it is easier to maintain, that each cause can never explain the total damage – even if it is clear that the damage as a whole is due to the gas extraction in the last half century.
In addition, by opening their own counter, the oil companies were able to keep full control of claim handling. In this way they rolled out the tactic that is now known as ‘the old earthquake damage claims protocol’, that was built on maximum use of denial and dispute of liability. The link between earthquakes and damage to buildings had to be disproved as much as possible.
The NAM “damage claims service” opened in the autumn of 2012, and from it’s outset received a steady stream of damage reports. The misery that had been ignored for decades was finally released.
Pieter de Vries and his circus of friends
Various Groningen architects and damage experts contacted the NAM in the course of 2012, and offered their services. They were brushed off, with the message that the NAM had been handling the damage reports for years and did not need external experts. The experts thought that was strange. How did NAM want to assess so many claims, without having any deep knowledge of the shallow soil in the Netherlands and the Groningen buildings?
The answer from the NAM was: Pieter de Vries. The damage claims handling of the NAM never did amount too much, but now the process derailed completely. Damage denier De Vries suddenly had two thousand cases to handle. That was too much for his one-man business, especially because he had never even studied architecture or geology.
De Vries didn’t mind that at all. He gathered a small circus of employees around him, which he controlled perfectly in the way the NAM had in mind. Exxon and Shell work according to their own very specific logic. It was not their intention, that experts would tell people with earthquake damage how to best handle their claims – the oil companies themselves would determine what was earthquake damage, and what wasn’t, and how much they wished to compensate, if at all. As they say in the Netherlands: The butcher inspected his own meat. This is how the big lying and cheating began, which the inhabitants of the province of Groningen have been so angry about for decades.
De Vries had renamed his company Northern Damage Taxation Bureau B.V. (NSTB). That sounded great, but he just sat in Akkrum in an old shed and did not even have a website or a telephone in the first few months. He did work overtime however. Within a few weeks, 65 people worked for him, usually for a few bucks per hour. He himself raised around 100 euros per hour. Almost two tons per year. Based on his published annual accounts, De Vries earned almost one million euros in pure profit, by running NAM’s damage circus.
The birth of A, B and C damage
At the beginning of 2013, the damage insurance and other expert companies that were brushed off by the NAM earlier, got plenty of work anyway. Dozens of people that realized they were being duped by the NSTB and Pieter de Vries, approached them for counter-expertise. In other words: they wanted a second opinion. The reports from De Vries and his friends were so bad, that almost everyone who had been ‘helped’ by them was angry. From 2013 to 2017 – the year in which the Ministry of Economic Affairs put the “old claims protocol” on hold – most of the damage insurance and other expert companies in Groningen were engaged in little else, than helping people who had been treated unfairly by the experts hired by NAM. These companies, let’s call them counter-experts, also took on additional people. In this way, the “damage circus” started by NAM grew to unprecedented proportions: hundreds of millions of euros were spent on it.
The misery that the counter-experts encountered was immense. Every day they tended to crying people, with enormous damage to their home, which was largely not reimbursed. General practitioners, hospitals and mental health authorities also noticed, that the number of requests for assistance was increasing steadily. Groningen Health Services carried out extensive research in 2017 and concluded that physical complaints among Groningen residents, with earthquake damage to their houses, had increased considerably since 2013. The number of anxiety and depression complaints had nearly doubled in that year alone.
The damage reports from the De Vries circus – people without any relevant training – were shockingly bad. Any structural or earth scientific basis was missing. They simply used a matrix devised by the NAM, containing three letters. ‘A’ was earthquake damage, ‘B’ was already present damage, aggravated by earthquakes, and ‘C’ was damage that was not caused by earthquake. The columns seem randomly filled in, usually with a C. It is striking that in the reports the term “deficiency” was as prominently represented, as the term damage, and there is no mention of earthquakes, but of ‘the present event’. The denial of any connection between earthquakes and damage was already ingrained from the beginning in the formulation of the ‘experts’ reports.
At first De Vries and his people were kind enough to jot down an A here and there, but gradually these A’s became rare. Among Groningen counter-experts, the joke arose, that De Vries’ keyboard was probably broken: the NTSB reports increasingly consisted of long series C’s.
Arcadis and Witteveen + Bos are cooperating
Meanwhile, in Groningen rumors spread like wild fire, that you could finally report earthquake damage to the NAM. The NAM damage counter became so busy, that in addition to the circus of Pieter de Vries, a second circus of 65 people was added: civil engineering expert Arcadis, which also saw bread in the job, and had as few scruples as De Vries. What contra-experts encountered, when Arcadis had assessed the damage, was of the same caliber as the work of De Vries, if not worse.
More and more damage was placed in the category ‘C’. This process started out pretty awkwardly, but the NAM experts became creative. They came up with statements like: ‘long overdue maintenance’; ‘thermal damage’ on the north side of buildings (there is no sunshine on the north of buildings); damage caused by passing trucks, on roads where rarely a truck came; and even ‘You close the doors too violently’. The famous Groninger Jan Mulder was told that the damage to his house was probably due to moles. A damage experts told me that he had to ask questions such as: “Are you saying honestly, was that crack there before or not? Do you have any photos, from before, when the façade was still intact? Did you have a garden party last year, for example? “
That charade became a bit too transparent. Exxon and Shell therefore hired a third agency, this time the renowned engineering bureau Witteveen + Bos, which were well paid, to designed a thick multiple-choice directive. The ‘experts’ employed by the NAM could now choose from a smörgåsbord of reasons, why damage to building had to be classified under ‘C’. ‘There is a lot of traffic passing by,’ ‘you have built on soft soil,’ ‘there is a tree growing next to your wall,’ et cetera. The damage reports became thicker, more beautiful and more convincing. But they were all filled with the letter ‘C’.
The Centre For Safe Living
The criticism in the Dutch Lower House, about the way in which NAM dealt with damage reports increased. For political appeasement reasons, NAM set up a straw man: the Center for Safe Living (CVW): from the beginning of 2015 it took over the earthquake damage refunding business, from Exxon and Shell. The oil companies promised that the new organization would be placed at an appropriate distance from their influence. A brand new office was built in Appingedam, where 150 people came to work.
But soon doubts arose, about the independence of the CVW. New employees were invited to pick up their laptop at the NAM head office in Assen, and had to log in via Shell, so that a Shell case manager could view their work, through the team viewer. Whoever stood up for earthquake victims, according to my sources, was promptly discharged. CVW employees and lawyers I spoke to, told me, that behind the scenes Shell legal jurists completely controlled the state of affairs within the CVW: their goal was explicitly to minimize damage compensation and maximize earnings. In 2016, the CVW earned 2.4 million euros, form the “handling” of earthquake damage. A culture emerged within the company, in which CVW lawyers to denying damage claims to the extreme. Then the CWW waited and watched, if the victim would conduct a lawsuit.
Arcadis, as co-founder and shareholder of the private company CVW, had a big finger on the porridge. The company already earned well, writing thick reports on behalf of the NAM. These reports were then assessed by the CVW. If you assess damage reports, made by your own shareholder, the outcome of such an evaluation is seldom surprising.
Behind the scenes, the oil companies are doing everything they could to delay the handling of claims files. A years delay was normal, two or even three years occurred. My sources report, that Shell and Exxon deliberately created a huge backlog of untreated files, by systematically losing counter-reports and by placing incompetent employees on claims handling.
FROM ONE OF MY CONVERSATIONS WITH A COUNTER-EXPERT
‘People were entitled to a counter-expert report that NAM had to pay for by law. For every “expert report” made, we immediately made a counter-report, proving that the original report was full of nonsense, and then you got into a lengthy discussion. At one point the NAM was so fed up with this, that they got a bright idea. You know what? Let’s change the clause a bit: “Only when a definitive report from the NAM is on the table, a victim has the right to counter-expertise.” And of course, that definitive report simply never happened. Only a slew of preliminary reports, filled with “C”, in all colors of the rainbow.
If we did not agree with that report, a NAM “expert” would visit you again, and a comma in the report would be changed, or a damage claim slightly adjusted: this they called their next preliminary report. So still no counter-expertise was possible.
We were so fed up with that, that we said: you know what NAM, can endlessly produce preliminary reports, to frustrate the process, but we refuse to wait any longer, we will just put forward our definitive counter-report. At some point, when you are ready, our report is already there. Good luck. But of course NAM did not accept our final reports, they were always sent back. “Because there is no definitive NAM report.”’
Counter-experts are not compensated any more
The Dutch mining law stipulates that the NAM must compensate both it’s own damage expertise and counter-expertise. Contra-expertise was reimbursed by NAM up to a maximum of 130 euros per hour. After the establishment of the CVW, however, the reimbursement was reduced to a maximum of € 95 per hour.
In their first reports, the counter-experts worked exactly as they had done for insurers for years. They went to a damaged building, assessed the earthquake damage, consulted with the owner, wrote a damage report and afterwards they counted their hours. Usually they were busy for 14 to 20 hours. But in 2014, all counter experts were summoned to report to NAM. They were told that, since the NAM paid the expertise, the company wanted to determine what the average number of hours the counter-experts were allowed to spend on a damage file would be.
The damage expert companies in Groningen received a list. A terraced house had to be ready in 5 hours. A corner house had an extra facade: 6 hours of work. A complete farm was the most time-consuming object, but had to be ready in 12 hours. That included intake, going to the building, taking 200 photos, discussing the damage with the owner, and drawing up the report.
That hours list of NAM was a farce. How many hours a damage report requires, depends entirely on the damage. Sometimes a report costs less, but usually more time is needed. That time for the counter-experts was not paid out, since 2014. So what do you do then, as a counter-expert? You curb your work and try to merge things. You take 20 photos of just the east facade, of a terraced house. And you describe those pictures in less detail. You try to stuff everything in those few hours, that the NAM pays you for. So you end up with a flimsy counter-expert report.
A big surprise at the arbitrage
However, the damage experts and the lawyers of the NAM (later the CVW) were allowed to write unlimited hours for compensation. Shell and Exxon thus laid the foundation for institutional legal inequality, and they broke the mining law. NAM damage experts were instructed to disagree as much as possible with counter-experts, when discussing an earthquake damage claim. I know of a case of glass damage of 400 euros, that was not simply paid, but, after 1000 euros of expertise and 1000 euros of counter-expertise, cost thousands of euros more, at arbitrage.
This is not an incident. In the insurance sector, experts and counter-experts usually come to an agreement in 80 to 90 percent of cases. The rest ends up at arbitrage: an independent, specialized judge. In Groningen, however, 80 percent of the cases went to arbitrage.
And when they stood in front of the arbitrage judge, counter experts were in for a surprise. They had prepared a flimsy report, in 5 or 10 hours. At the first meeting, the NAM experts had already had a slightly thicker report. But at arbitrage, they suddenly put a 200-page book on the table. A source told me how this went. ‘The NAM damage experts said: “Yes, sir, we have thoroughly examined this case.” As a counter-expert you disagree: “This piece does not belong here, that was not present at the start!” But the arbitrage judge does not know that. He only sees your flimsy report, and compares it to a complete book by the NAM expert. He looks at your counter-expertise work and says “it is not much, is it?”
All desk studies, all archive material
Many of these fat, book size reports were written by Witteveen + Bos. They looked impressive, and a lot of money way made writing them. One counter-expert, however, confided to me: “I do not know if you have ever read such a report? That is 200 pages long copy-pasted technical fog, and then the conclusion comes to the last two pages: “C”. It’s really quite disgusting.”
Attorney Martin Blokzijl, who has filed lawsuits for many victims, has told me that all the Witteveen + Bos reports that he saw during these proceedings, were all desk studies. The engineers who wrote the reports, have never been in Groningen. There were no field investigation at a victims house, no pictures of any foundations, nor an investigation of the soil under the house. The thick reports are written at the office. The choice selection of graphs, soil and soil species maps, geohydrological analysis, and cross-sections of soil, that decorates the reports, is all archival material. The formulations seem to be complicated on purpose, to impress the arbitrage judges. The outcome of all these reports is the same: the damage to this property is not a mining damage, because ‘that is not possible’. In other words: “C”.
HOW MUCH HAS THIS CIRCUS COST THE DUTCH TAX PAYER SO FAR?
According to the first quarterly report of 2018 by Hans Alders – until recently he was National Coordinator Groningen and previously Queen’s Commissioner in Groningen – the NAM spent approximately € 1.73 billion on claims handling, security and preventive reinforcement. Since the old protocol was shut down in March 2017, and the new one was only started in March of this year, and the reinforcement of buildings so far has been minimal, this amount has been spent almost entirely on the claims settlement under the old protocol. This is confirmed by a public complaint from former politician Maxime Verhagen, now a representative of the construction industry. In January 2018 he said that so far too way little money has been spent on actual compensation: around 480 million. The rest went to what Verhagen called ‘bureaucratic red tape’.
Almost 1.7 billion was spent on claims handling. The Dutch state treasury paid 64 percent of this, as agreed in 1963. The taxpayer therefore has paid 1.1 billion of the claims handling. The remaining 36 percent was paid by NAM: 310 million for Shell, 310 million for Exxon.
For an estimation of the expert costs, I used the total number of damage reports, based on the highest known file number: 122,000. In 2016, the NOS already spoke of 100,000 people with damage in Groningen. My sources speak of approximately 90,000 damage claimants, some of which reported damage again, after later quakes. These 122,000 files represent an army of NAM experts. Outside of Pieter de Vries and Arcadis, the bureau Archipunt in particular has benefited. After 2013, this company grew from 7 employees to 85, part of which is exclusively engaged in the damage circus: writing damage reports, writing additional reports for arbitration cases, and representing the NAM at arbitrage sessions, to deny damage as much as possible
Add to this the working hours for the counter experts, including their consultation with NAM experts; with their average hourly compensation, this amounts to around 1100 euros per case for the counter experts. Based on information from my sources, I estimate that the NAM experts earned on average three times as much per case. A conservative estimate therefore amounts to 4000 euros per file of expertise and legal tug-of-war.
According to the counter-experts, an average of € 4,000 per claim is paid to – mainly cosmetic – damage claims handling. According to reports, approximately 4000 euros have been spent on (malicious) NAM experts and administration per incident case. There are about 8000 cases that have been disputed. This leads to the following calculation: 8,000 files per 4,000 euros administration plus 4,000 euros tug-of-war is a total of 64 million euros. For the other 144,000 files you come to 456 million in administration alone. Together 520 million. 122,000 times 4,000 euros in damages is 488 million. In other words, NAM has spent a small half billion on claims, and on handling / denying of claims about half a billion bro’s. The government has paid two thirds of that huge sum: this is how Exxon and Shell used hundreds of millions from the Dutch state treasury, to deny Groningen gas field earthquake damage claims.
Between the approximate billion of my calculation, and the 1.7 billion that Alders mentions, there is a gap of about half a billion. What that is spent on is unclear. However, my sources do have a suggestion. The stories of consulted counter-experts and former CVW employees all support the suspicion of lawyer Martin Blokzijl. In his procedures on claims files, he saw every time, that thick stacks of reports were submitted. Reports that thousands of euros must have been spent on. Legal books, that lawyers have been working on for a long time. Blokzijl: ‘When I look at my own hours, for example in the case of Hiltje Zwarberg, and at the hours and reports of the NAM, I can only conclude that more money has been spent to sue away the last 20,000 euros, than the value of Zwarberg’s entire house.” With a few hundred such cases, plus the costs of setting up and running the Centre for Safe Living, you are already well on your way to half a billion.
Why such a blockade of damage claims?
The motive for this blockade of claims handling is clear: as soon as you compensate one claimant for all damage, you create a precedent. Shell and Exxon – and consequently: NAM and CVW – wanted to prevent this at all costs. Because if you compensate one inhabitant of Groningen justly, before you know it, the rest of Groningen is on your doorstep. And, as previously mentioned, there is no damage fund. That is why all legal cases that victims threaten to win, have been settled outside of court, with an order of discretion.
It is difficult to say for how many billions the NAM has saved, by denying the claims of Groningen inhabitants under the old protocol. As soon as arbitrage is involved, the advice of the counter experts is followed in 85 percent of cases. Independent research shows that the NAM has only refunded 7 percent of the reported damage so far.
It is possible that the exact amount of damage that is still outstanding can be retrieved, for example via a parliamentary inquiry, that has already been repeatedly asked for. Emeritus professor of administrative law Jan van Dunné has already concluded, that the claims settlement under the old protocol has dramatically gone wrong. Mr. Reurt Gisolf, former president of the Court of Amsterdam, already asked for a parliamentary inquiry in 2017.
A new damage protocol has been officially launched since March 2018. But in fact, a large part of the damage reports under the old protocol should be reconsidered. There are also serious questions about the structure of the new protocol: how is it possible, for example, that the state determines under this protocol whether or not someone has earthquake damage, whereby the citizen is not entitled to counter-expertise, unless he pays for it himself?
Who are responsible?
This misery has been around for decades. A team of lawyers from Shell Legal is present at every damage consultation at the offices of the NAM, undoubtedly supported by lawyers from ExxonMobil behind the scenes. 150 people work at the CVW. And then the ‘experts’. At least 150 people participated in the systematic conspiracy of Groningers without any serious prior education, with the help of NTSB, Witteveen + Bos, Archipunt and Arcadis. These ‘experts’ have “chatted away” millions of euro’s in damage claims.
Prof. dr. ir. Theo Salet of Eindhoven University of Technology as project director of engineering firm Witteveen + Bos has linked his name to piles of reports full of demand-driven research. The same applies to the general manager of Arcadis, ir. Gert Kroon. I have not seen science being so misused, on such a scale, to harm people personally. Not only were the Groningen inhabitants severely affected by this, the credibility of the scientific method is being thrown to the dogs.
Gerald Schotman of NAM deliberately discredited the efforts of the contra-expertise during hearings in the House of Representatives. Shell director Marjan van Loon must be aware of this. Jan Michielsen, the CEO of ExxonMobil Benelux, is for the time being largely out of the picture. That is no coincidence: operating invisibly is the main tactic of ExxonMobil worldwide.
Given the close ties between the oil companies and the Ministry of Economic Affairs and the continuing secrecy, it is unlikely that the Ministry of Economic Affairs knows nothing about this. Economic Affairs has published a number of very biassed research reports in Groningen, in recent decades; research that did not serve the truth, but to supported policy and the oil companies.
Reurt Gisolf is right. This whole affair raises major ‘questions about the policy of the State’. Questions that a parliamentary inquiry may provide answers to.royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellnazihistory.com, shellnews.net and cybergriping.com are all owned by John Donovan