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Dáil Éireann debate -
Thursday, 1 Jul 1976

Vol. 291 No. 15

Gas Bill, 1976: Report and Final Stages.

There are two amendments, the first in the name of the Minister and an alternative amendment in the names of Deputy Barrett and Deputy O'Malley. The amendments may be discussed together.

I move amendment No. 1:

In page 24, to substitute "the Arbitration Act, 1954, and in determining such a dispute exploration expenses other than the geological, geophysical, drilling or other exploration expenses which may properly be attributed to the discovery, delineation or development of the deposit from which the relevant natural gas is to be got shall not be taken into account by the Arbitrator" for "the Arbitration Act, 1954" in line 17.

This amendment arises from subsection (3) of section 37. On the Committee Stage Deputy Barrett and Deputy O'Malley sought to ensure that the price negotiated by Bord Gáis Éireann for any finds of gas should relate only to the expenses incurred by the developing company in actually exploiting the particular find. They put in an amendment to add after the last line "of the Arbitration Act, 1976", "only expenses incurred in the block in question". I said at the time that I was sympathetic to their thinking but the use of the word "block" could be over-restrictive in a find of gas. Because of the geological structure the investigation of the find could run beyond the block and I promised I would look at it before the Report Stage. I have consulted with the Department of Industry and Commerce and I have also discussed my amendment with the Attorney General to ensure that it was something that could be legally enforced.

Deputy Barrett and Deputy O'Malley have also put in an amendment which reads:

In page 24, line 17, after "1954" to add "The Arbitrator in any such arbitration shall not take into account expenditure on any field other than that in which the natural gas concerned was discovered.".

I had this amendment also examined by the Attorney General and by the Department of Industry and Commerce and the Department advise me that, besides the actual drilling in the gas field, there could be expenses outside the particular field which could rightly be considered as part of the expenses incurred in developing the find and they should therefore in fairness be taken into account. The Attorney General advised me that the term "field" is legally difficult to define and the form of words used in my amendment would ensure that any expenses rightly incurred could be charged but it prohibits other expenses being charged by the company in arriving at the price to be paid. I hope the Opposition will accept the amendment. It meets their point of view and it ensures that the arbitrator will take into account only expenses rightly chargeable. At the same time this ensures that this will not be seen by a licensee as endangering legitimate expenses he may incur or in any way inhibit such licensee from exploring and exploiting the natural gas in our Continental Shelf. I hope the Opposition will accept this amendment.

The Minister has accepted the substance of our amendment. Our purpose was to prevent multi-nationals, or whatever you like to call them, from charging expenses in some place like Nigeria against an oil or gas find off our coast. The Minister's amendment sets out to do this. The first licences issued by the British did not contain such provision and the British were badly caught out. The next lot of licences issued by them were corrected. Would the Minister consider a small deletion? Would he delete the word "exploration" and leave it just "drilling or other expenses"? This will give greater flexibility to the arbitrator in arriving at a decision with regard to what shall or shall not be allowed. If the qualification is left in there could still be a danger that one of these companies could charge a large proportion of management or overhead costs against the field and might also accelerate the write-off against equipment and so on. If the Minister accepts what I suggest there would be no danger of this happening.

Is the Deputy suggesting that the Minister should change his amendment by the deletion of the word "exploration"?

That is right.

The Chair would like to advise Deputies that they may speak only once——

On a point of order, if the Minister replies to Deputy Barrett now I take it that I may speak after him if necessary?

The position would be that the Minister would be replying to his own amendment and that would exclude anyone else speaking.

Of course it would be easier for me to speak if I knew what the Minister was going to say. I could wait and move amendment No. 2 and withdraw it afterwards.

Perhaps it may help the Deputy if I tell him that he will not be displeased at what I have to say.

It is a pleasure to do business with the Minister for Transport and Power.

I can accept the Opposition's suggestion, namely, to delete the word "exploration" in line 2 of amendment No. 1. I presume amendment No. 2 then falls?

The Chair understands that in amendment No. 1, in line 2, the word "exploration" is being deleted. Accordingly, amendment No. 2 is not being moved.

Amendment amended, by leave, by the deletion of the word "exploration" in line 2, agreed to.
Amendment No. 2 not moved.
Question proposed: "That the Bill do now pass."

We would like to point out that in opposing the Gas Bill Fianna Fáil were concerned to illustrate in detail, as we did, how since October, 1973, the Government have not recognised the fundamentals of our energy problem. As a result, they are incapable of devising the means to direct an energy policy that will permit our economy to adapt itself to the changes that are necessary as a result of the energy crisis.

For the last three years the blame for the economic mismanagement of the country has been put on the Arab oil producers, on labour costs and on other factors outside our control. Weekly during the last three years the Government have put the blame on someone but not once have they admitted that their own incompetence was the cause of our problems. Government expediency, based on the sole criterion of holding on to office, has created more inflation.

On Committee Stage of this Bill the Minister made some observations. He told us that a decision was made by the Government six months after the discovery of the gas find and that meant it was less than 12 months after the Government came to office. We were told this was the quickest way to get the gas ashore and that it would be in the interests of the economy. The Minister also informed us that no feasibility study existed with regard to a gas grid. He said that the longer the gas was in the ground the dearer it would get.

Since the time of the oil crisis the price of oil has increased fourfold and this has affected the price of fertilisers and of energy for industrial purposes. The Minister told us it was essential in the context of our international payments that the ESB should be able to use home-produced raw materials for energy purposes. He gave us his opinion that the cost of a gas grid would range from £10 million to £200 million, depending on which expert was consulted. During the debate he told us he was arranging for studies to be carried out. He said it would be expensive and difficult and that it would take some time but he agreed that we must take every step to ensure the most beneficial and economic use of any further resources. Here we have an admission that, without any study being carried out, decisions were made which affect what the Government say has been one of the major influences in the economic upheaval of the last few years.

We have been debating a Gas Bill that brings into being a gas board that initially will concern itself with the Kinsale find. At the end of Committee Stage, after hours of examination, we discovered that the Government decision was made, apparently taken without any reliable assessment, whereby more than 50 per cent of this discovery was being disposed of to the ESB. The justification was that in the context of our international payments the ESB should be able to use home-produced materials.

As the utilisation by the ESB involves a massive investment of about £60 million in new generating capacity, we are entitled to ask how the output from this new capacity, producing electricity at ever increasing cost to the consumer, has any benefit with regard to easing inflation or helping our balance of payments? Is the Minister suggesting that the existing oil-fired generators at Pigeon House and Tarbert will not be used? The answer is, of course not. It would not be logical to do that. Neither is the decision to increase the investment in the ESB. The ESB report that increased costs arise from reduced consumption. Therefore, we are asking existing ESB consumers to subsidise the present and past investment in generating capacity and we add further reasons for cost increases by encouraging this new investment in Cork of £60 million.

The greatest detrimental factor in our balance of payments is the effect of inflation on our manufacturers and on their costs. In the last three years increasing fuel costs have influenced rises in all manufacturing costs. First, there are increased processing costs; secondly, there are increased delivery and distribution costs; thirdly, increasing wage rises have brought about increases in the cost of living of which lighting, heating and power are very significant influences.

It follows therefore that when the Minister for Transport and Power spells out Government energy policy as being directed towards pushing up the cost of all energy supplies to the level of electricity no one can expect the Government to be capable of dealing with our inflationary problem. This has been stated in this House.

Fianna Fáil will use the first prudent gas find to reduce the cost to the consumer and they will expand the utilisation of low cost energy so that the cost of living can be reduced. Furthermore, we will use the availability of low cost energy to maximise the creation of downstream conversion of other resources, such as lead and zinc, to provide the necessary job opportunities to absorb our thousands of unemployed.

The Government policy, on the other hand, wants to make all energy more expensive, whilst it is the concern of the Minister for Transport and Power, who then passes it to the Minister for Finance to further plunder it. We believe, at the appropriate time, that the electors will support our policies on energy utilisation, as set out in this debate. We, therefore, give notice that we will not be bound by decisions of the Government which are, as yet, not contracted for, as we learned last week, and which have been opposed, because of their fundamental incorrectness in our judgement. Having regard to this statement the ESB are on notice from us that any arrangements entered into by them for the supply of natural gas will be reviewed by Fianna Fáil when we re-enter Government.

We have put forward our reasons, as I have said, for opposing this Gas Bill. We opposed this right through the debate in the House on the different Stages and we still oppose it. That is the position of Fianna Fáil and we have not failed to put forward alternative proposals for the utilisation of this gas in order to make it of greater benefit to our economy and to create more employment, which is so badly needed at this time. We have disagreed with the Government proposals and will continue to do so.

On a point of order, is it correct that everybody can speak once on the Fifth Stage and then I reply to the debate?

I ask the Minister, at this late stage, if it is the intention of the Government to issue a White Paper or a Green Paper on our resources, those we know we have and those we might find as a result of further explorations? Are the Government trying to effect some international deal with foreign imported oil or gas until we are self-sufficient, which we hope will be some day? If this is not the case the economy will crash very shortly because of the Government's policy in mishandling our imports and also the fatal decision of the Minister for Finance imposing a tax on imported oils.

This is Fifth Stage and the Deputy can only speak on what is in the Bill.

This is all part of the Bill. We do not believe that the Government are using our resources in the best way possible. We have a duty to draw the Government's attention to those lapses on their part and also in relation to good planning. The Minister might try to influence the Government and the Minister for Finance to take the tariff off imported oils which he imposed because otherwise he will drive more people out of employment as those firms cannot carry on. Perhaps the Government will now spell out what they intend to do with our natural resources, the imported oils, and when they will remove this punitive tax off imported oils.

This debate has been a useful one not just today, which is very brief, but on the Second Stage and the Committee Stage because a number of matters have clearly come to light as a result of it in relation to the Government's policy on energy in general and on gas in particular. The most important point, in my view, is the decision of the Government in principle that when gas becomes available in the country it should not be sold at its economic or true market price but that it should be sold at a price which bears reference to the price of other forms of energy.

Deputy Barrett dealt with this matter already and I dealt with it at some length the last day. I can only say once again, at this late stage, to the Minister that I sincerely believe that to be a totally wrong policy. I believe that if the Government implement that approach to the pricing of gas they will, unfortunately, render far less beneficial to the country the find which we already have off Kinsale Head and the other further finds which, hopefully, we might have in the future. There is no point in our going to a lot of trouble and expense to bring in a comparatively small amount of gas, equal to 12 per cent of our energy needs, if we are not going to take advantage of it.

The advantage is that it is coming in and being bought by Marathon at 5p a therm and it apparently will now be used subsequently at some figure or other, which will allow the Minister for Finance, under section 11 of this Bill, to direct the Gas Board to make substantial profits and will enable those profits to be paid into the Exchequer. This is quite at variance with what has happened in Britain. It is, in fact, what the Coal Board and the Central Electricity Generating Board in Britain have been looking for but which successive Secretaries of State for Energy in Britain have refused to concede. It has, apparently, been conceded in advance here. It does not matter so much in relation to the Kinsale Head find because it is committed to two main users. From what we gather an agreement has been made in principle with them, even though the contracts have not yet been signed. We also assume that the price has been agreed in principle with them.

It is unreal to be expected to debate this Bill, particularly the implications of section 11, without knowing what those prices are. It was indicated to us by the Minister in the course of the Committee Stage debate that he does not think that one form of energy should be significantly cheaper than another. He sought to retreat somewhat from that position later on. That was my understanding of it and I believe that is the understanding of anyone who read the debate and is the only understanding one could arrive at. He went on to say that it would be very unfair to let industries in Cork that were using gas have cheaper power than industries somewhere else that did not have gas. That is quite a foolish argument. Obviously, everyone cannot have it all at the same time. Some industries are particularly suitable for gas and some are not.

The one I have spoken about several times, not alone in this Bill, but other Bills and Estimates in the House, is a zinc smelter and/or a lead smelter. The most crying industrial need we have at the moment is such a smelter. No arrangements have yet been made. It should have been a condition of the issue of a mining lease in Navan that those to whom the lease was issued would arrange for the erection of a smelter and that the export of concentrate from that mine would not be allowed except under special permit from the Minister for Industry and Commerce. We have here a source of energy which would be ideal and very economic for such a smelter, but it is not being used.

In fact the Government decision is that 60 per cent of this gas will be used in the most wasteful way in which it can be used. It is converted into electricity which is already very highly priced in this country. The wasteful use of gas in this way is not going to do anything to reduce the price. The amount is not big enough to have any great impact on the ESB's cost structures anyway. It seems pointless that when we have at the moment a limited quantity of a very valuable source of energy, it should be used in such a wasteful fashion. Gas is not something that simply goes up in the air once a start is made to open a well. The flow from that well can be regulated and if, as the Minister says, we have not got in the Cork Harbour region at the moment industries which would take up that gas and use it benefically, that is not to say that we would not have them in two, three or four years' time if we deliberately, as a matter of policy, decide to put them there. Apart from the fertiliser industry there is a whole variety of petrol-chemical industries which can use natural gas benefically and use it in a way in which the waste of thermal and calorific value is kept to a minimum, unlike electricity which is the very opposite, where thermal loss is huge, amounting to approximately two-thirds the value.

For these reasons I regret some of the consequences of this Bill. Already, although the idea of a gas board is one that I and my party support, some of the decisions which have been forced on that board in my view are the wrong ones. There has been no attempt to take an overall view of the energy needs of this country and of the utilisation of sources of energy that would be to the maximum benefit of the country. In particular it is very disappointing to find that the usage of this natural gas will give something like only 600 or 700 permanent jobs. This at a time such as the present is extremely disappointing. The value that could be got from this gas is immensely greater than what will be got. For these reasons, and also because the gas board are going to be purely a buying and selling operation and have no powers that I can see in this Bill to undertake any kind of exploration themselves——

They have under section 9.

Section 9 deals with the conferring of additional functions by the Minister in the future but apparently they are not there now.

We cannot go back on sections now at this stage.

One might as well say that the function of going to the moon can be conferred on the gas board under section 9, because I presume almost anything can be. As the matter stands it does not seem to envisage that any exploration would be carried out here by the board. It is wrong, when we are now in a position to finance exploration of that kind from the profits that will be made by this board, that we still leave it to foreign companies for the most part to do this work and that the Irish interest in these various consortia is very minute, normally not exceeding 5 or 7 per cent.

The Bill we are now debating is of considerable importance because the board is going to be as important a body in ten or twenty years' time as the ESB is now. I would like to see such a board get off to a better start with more useful policies than those which it appears to have at present.

I can agree with the last point made by Deputy O'Malley that the Bill we are debating and just concluding concerns a very important body. I hope he is right that in 20 years' time it will be as important as the ESB. Of course we do not know that. This gas board has been set up to deal at the moment with one find of natural gas. That is all we know about it. It may be—I hope I am wrong—that there will be no others and that we will have no further functions in the future except to deal with this one find of gas. However, the Bill is designed to allow any further finds to be handled by the gas board, and the policy decisions for any other finds of gas are left open deliberately so that in the future a Minister for Transport and Power can decide how they should be used to the best advantage of the country.

The reason I resisted on Committee Stage amendments from the Opposition which sought to control at the moment the price at which the gas is being sold is that this would remove that flexibility in approach by any Minister in the future. I think that is the right way to do it. It may be there would be two policies in relation to future gas finds from different areas. The acceptance of the attitude or outlook of the Opposition in this regard would have prohibited a Minister or Government in the future from adopting two policies.

Deputy O'Malley spoke about feeding gas to industry. There is a section in the Bill which allows, outside the gas board at all, gas to be fed directly to an industry in a particular spot at a particular price. This could not be done if the Opposition had their way. On the Second Stage, the Committee Stage and again today Deputy O'Malley referred to the argument going on in England as to the price at which natural gas should be sold and the resistance to it. Of course, if the amendment proposed by the Opposition was accepted by me there could be no argument here in the future as to what it would be, and the only reason that argument can go on in England is that, contrary to what Deputy Barrett and Deputy O'Malley know, there is provision in the British Act for the Exchequer to take the money. Section 16 of the Gas Act, 1972, in England says: "If in any financial year of the Corporation there is an excess of revenue of the Corporation over the total sums properly charged by them to revenue account, the Secretary of State may with approval of the Treasury direct the Corporation to pay over to him so much of that excess as appears to him after consultation with the Corporation to be——"

They do not do it.

They do not have to do it, and the argument can go on as long as they are not compelled either to do it or not to do it, but it is only when one tries to limit that that the argument cannot and does not take place. If one writes into an Act that the price must be such and such, it can be sold only at whatever the wording of the amendment he had down was. Then this argument is prevented from going on not just in two years' time or for one future gas find in two or three years, but for all time you prevent any change of policy by a Government, a Minister for Finance or a Minister for Transport and Power in utilisation of gas. This is not what we want. We want the freedom to use it and to have every option open to Government in the use of that gas and the prices charged for that gas. We must not confine in this Bill the price either at a low level or a high level. There must be flexibility in this regard.

Deputy Barrett said that he gave notice to the ESB that they would not be bound to supply gas or to uphold the contract presently entered into between Bord Gáis Éireann and the ESB. He does not have to give that notice, as I explained. The gas contract negotiated between the ESB and Bord Gáis Éireann is an interruptable contract. Therefore I can stop supplying gas to the ESB next year if I want to or leave it with them for 20 years as I want to. Again there is that freedom. We need have no qualms in the unlikely possibility over here that we would be breaking any contract by the Government, because the Minister can interrupt the flow of gas to the ESB and make them use oil or whatever other form of energy—solar, fusion—that may be available.

They will have spent £60 million in two years.

It seems to have become the occupation of the Opposition to spend most of their time indulging in academic debate as to the best use of gas. Some of them would have it going to Crosshaven. They never seem to deal with the realities. We as a Government have to face the realities and make decisions. We know that by commercial standards this gas find will provide 11 per cent of our needs. Even if the consumption of gas in Dublin were to be doubled—even if we told everybody in Dublin that he or she must use twice as much gas and even turn over from electricity to gas—it would take years to reach that position and the price would be controlled by the rate at which the gas would be taken from the field. The more gas we can take from the field the cheaper the price will become. If we take twice the amount at the end of ten years the price will be halved. Our concern has been to strike the best balance.

The Government had to go against the EEC directive.

If Deputy Haughey had been here he would have heard my explanation.

I know in my capacity as Chairman of the EEC Joint Committee.

If that is the Deputy's knowledge he should either resign from the chairmanship or inform himself properly. The directive does not prohibit the use of natural gas for conversion to electricity.

It discourages it.

The decision to use natural gas was taken prior to the EEC directive.

The contract has not been signed yet.

The contract was merely a formal document setting out the obligations as between BGE and the Government. The decision was taken two years ago.

You were profligate.

Deputy Barrett's point about £60 million ignores the most recent statement by the ESB. He chose the one they issued last year. The growth rate in the consumption of electricity has been resumed. The ESB would have had to build generating stations anyhow. The project to build a nuclear station has been shelved and put back. It is a matter of demand in the country, and if the money were not spent on conversion of natural gas, stations would have to be built anyway. This is a very important piece of legislation, a first step to provide for the use of a new form of energy in this country. The Bill gives me freedom, as Minister for Transport and Power, and to my successors, to use the gas that comes in, and BGE will do that under the direction of the Minister. The Bill is an important measure and will be looked on in the future as a carefully thought-out piece of legislation.

And a waste of gas.

Nothing in the Bill will waste gas. It provides for any future Minister for Transport and Power an opportunity to avail of natural gas for the benefit of the whole economy.

Question put.
The Dáil divided: Tá 65; Níl, 59.

  • Barry, Peter.
  • Barry, Richard.
  • Begley, Michael.
  • Belton, Luke.
  • Belton, Paddy.
  • Bermingham, Joseph.
  • Bruton, John.
  • Burke, Dick.
  • Burke, Joan T.
  • Burke, Liam.
  • Byrne, Hugh.
  • Clinton, Mark A.
  • Cluskey, Frank.
  • Conlan, John F.
  • Coogan, Fintan.
  • Cooney, Patrick M
  • Corish, Brendan.
  • Cosgrave, Liam.
  • Costello, Declan.
  • Coughlan, Stephen.
  • Crotty, Kieran.
  • Cruise-O'Brien, .
  • Desmond, Barry.
  • Desmond, Eileen.
  • Dockell, Henry P.
  • Dockrell, Maurice.
  • Donnellan, John.
  • Dunne, Thomas.
  • Esmonde, John G.
  • Finn, Martin.
  • FitzGerald, Garret.
  • Fitzpatrick, Tom (Cavan).
  • Flanagan, Oliver J.
  • Gilhawley, Eugene.
  • Governey, Desmond.
  • Griffin, Brendan.
  • Halligan, Brendan.
  • Harte, Patrick D.
  • Hegarty, Patrick.
  • Hogan O'Higgins, Brigid.
  • Jones, Denis F.
  • Keating, Justin.
  • Kelly, John.
  • Kenny, Enda.
  • Kyne, Thomas A.
  • L'Estrange, Gerald.
  • Lynch, Gerard.
  • McLaughlin, Joseph.
  • McMahon, Larry.
  • Malone, Patrick.
  • Murphy, Michael P.
  • O'Brien, Fergus.
  • O'Donnell, Tom.
  • O'Leary, Michael.
  • O'Sullivan, John L.
  • Pattison, Seamus.
  • Reynolds, Patrick J.
  • Ryan, John J.
  • Ryan, Richie.
  • Spring, Dan.
  • Staunton, Myles.
  • Taylor, Frank.
  • Timmins, Godfrey.
  • Toal, Brendan.
  • White, James.


  • Allen, Lorcan.
  • Andrews, David.
  • Barrett, Sylvester.
  • Brady, Philip A.
  • Brennan, Joseph.
  • Breslin, Cormac.
  • Briscoe, Ben.
  • Brosnan, Seán.
  • Browne, Seán.
  • Brugha, Ruairí.
  • Burke, Raphael P.
  • Callanan, John.
  • Calleary, Seán.
  • Carter, Frank.
  • Colley, George.
  • Collins, Gerard.
  • Connolly, Gerard.
  • Daly, Brendan.
  • Davern, Noel.
  • de Valera, Vivion.
  • Dowling, Joe.
  • Fahey, Jackie.
  • Farrell, Joseph.
  • Faulkner, Pádraig.
  • Fitzgerald, Gene.
  • Fitzpatrick, Tom (Dublin Central).
  • Flanagan, Seán.
  • French, Seán.
  • Gallagher, Denis.
  • Geoghegan-Quinn, Máire.
  • Gibbons, Hugh.
  • Gogan, Richard P.
  • Haughey, Charles.
  • Healy, Augustine A.
  • Hussey, Thomas.
  • Kenneally, William.
  • Kitt, Michael P.
  • Lalor, Patrick J.
  • Leonard, James.
  • Loughnane, William.
  • Lynch, Celia.
  • Lynch, Jack.
  • McEllistrim, Thomas.
  • MacSharry, Ray.
  • Meaney, Tom.
  • Molloy, Robert.
  • Moore, Seán.
  • Murphy, Ciarán.
  • Noonan, Michael.
  • O'Connor, Timothy.
  • O'Kennedy, Michael.
  • O'Leary, John.
  • O'Malley, Desmond.
  • Power, Patrick.
  • Smith, Patrick.
  • Timmons, Eugene.
  • Tunney, Jim.
  • Wilson, John P.
  • Wyse, Pearse.
Tellers: Tá, Deputies Kelly and B. Desmond; Níl, Deputies Lalor and Browne.
Question declared carried.