I would like to thank the Deputies on both sides of the House who contributed to this debate. They have demonstrated the concern felt by all at the difficulties facing Bord na Móna in their efforts to build this factory which had promised to bring such benefits to the local communities in an area where options are limited. Exploitation of an indigenous resource, particularly where the employment given is long term and stable, is a prime enterprise and there is great disappointment on all sides at the shadow overhanging the Ballyforan project. It has been the hallmark of the present Government that State boards should carry out their responsibilities to the full and manage their affairs with competence and effectiveness. It is only to be expected then that the board's approach to new projects must be prudent at all times, especially in an uncertain economic and financial climate. The timing of such projects must be determined by two things — the board's ability to pay their way and the existence of a market for the product. Revenue must be sufficient to meet all costs; money spent on new development can only be recovered through sales of turf, milled peat, briquettes and moss peat. The level of borrowing required to fund new development, especially at a time of high interest rates, makes investment in new projects financially hazardous. Such investment if not soundly based could seriously threaten the board's solvency and because of this all new projects must be very critically appraised.
The debate in the House has focused quite rightly on the consequences for the social and economic life of the area if the Ballyforan project does not go ahead and, as a rural Deputy, I can understand their fears in this regard. The Tánaiste and the Government must, however, have regard to two aspects of this project — to the optimal use of the important indigenous fuel source that is peat and the prudent use of scarce and expensive finance for capital projects to ensure that the best possible use is made of both. The Government, the Minister for Energy and I recognise our responsibilities in regard to these two duties.
I am conscious of the role and value of peat as an indigenous fuel source of very great value to this country, not only in terms of import saving in respect of expensive oil or coal, but in the safety and security of a supply within our own country. I am conscious, too, of the 30 years of employment afforded and of considerable economic underpinning to the regions affected and indeed the degree of prosperity that it brought to these regions and to the nation.
The work of Bord na Móna in the decades since the mid-thirties is one of the success stories of this country. It is more than that, more than a success story, it has been a pioneer, and it has been emulated in other places where peat resources are available. In more recent years, the Government have shown their faith by approving the third programme on which Bord na Móna are now engaged. This was done in the face of rising costs, of scarce capital resources, of increasing interest rates, virtually at times to crippling proportions, and of the very great risk that these ever-increasing costs, fuelled also by a very adverse inflation rate, could push Bord na Móna projects well beyond budgeted costs.
That, too is a problem which this House and the Government cannot be unmindful about. It would be reckless in the extreme not to pay full regard to the need for viability and effectiveness in investment decisions. Economic development, the growth in the national product, the affording of new opportunities for employment, these are one side of the equation with which Government must be concerned. The other side is to achieve this effectively, within economic viability and by not depriving other areas of Government investment or activity by cost overruns, by unviable projects, by non-competitive enterprises. Spokesmen on the Opposition benches devoted much of their comments to the first half of this equation; not as many are equally as realistic or as pressurising in relation to the second. I think the times we are in demand that they should be.
The rationale of the board's existence is to produce peat and thereafter to create arable land. The first responsibility of the organisation must be to implement a national programme of peat development whose main features are the annual production of around five million tonnes of fuel peat for use in electricity generating stations and briquette factories and sod peat and briquettes which are sold on the domestic market. It is this programme which provides the context for Bord na Móna's current activities at 21 locations around the country today, and it is the milled peat from this programme that is being used to increase the output and extend the existing electricity generating stations at Shannonbridge, County Offaly, Lanesboro, County Longford, and the power station at Bellacorick. Additional sod peat under the programme will be used to offset to some extent the reduction in output from existing sod peat bogs as they become cut out.
The programme also provides for a major increase in horticultural production. Export sales of horticultural peat of the order of £12 million made a useful contribution to the revenue of Bord na Móna and our balance of payments last year.
Bord na Móna are a major industry employing 6,234 persons on average throughout the year. Apart from providing employment directly, the programme also generates spin-off employment in engineering construction and allied industries. The consequence of this on the economy in the catchment areas of all the board's enterprises has been substantial.
Deputy Reynolds has asked about cutaway bogs. The position is there will be 10,000 acres available by 1990, and by the year 2000 a further 20,000 acres. The area is mainly in Kildare and Offaly with a further 5,000 acres in the western counties of blanket peatland which could be used only for coniferous forestry. Over the past ten years Bord na Móna have been applying research to pilot scale developments in conjunction with the Forestry and Wildlife Service and An Foras Talúntais.
The work of the committee is necessarily slow in that they have to monitor application of the information received from technical studies to actual experiments. Results to date show that the most attractive options are forestry and agriculture and very significant area will be made available for these. The technical, scientific and economic results are to hand. Cost input models are being put together by Bord na Móna and will be into the Department within two months. It will be necessary to look at the wider issues of funding and the sociological aspects of ownership before a final report can be issued.
Bord na Móna are a very successful company but also a very vulnerable one. Harvesting is subject to weather conditions and year to year fluctuations in output occur primarily because of weather conditions during the drying season, which causes substantial stocks to be carried. Land acquisition is a very slow process. Essential lengthy processes of drainage and development mean that there is a lead-in time of up to seven years before a bog can come into production. The outlay on these can create a very heavy burden on the board's finances. Most important too is the fact that the source of about a half of Bord na Móna's revenue comes from the ESB where peat faces severe competition from imported oil. Since the mid-seventies Bord na Móna have spent £78 million on this programme and have proposals to spend a further £82 million to complete the programme in about three years' time.
In the early years of the third programme the Exchequer financed by way of repayable advances the bulk of Bord na Móna's capital requirements. Since 1978, however, when the Fianna Fáil Government rejected the suggestion of Bord na Móna that the interest on these advances should not be waived for a further five years, Bord na Móna had to meet the expenditure on their development programme and related capital charges mainly by borrowing. This cutting off of Exchequer advances combined with withholding, delaying or reducing increases recommended by the National Prices Commission on an allowable costs basis which was the short-sighted Fianna Fáil policy during the seventies, expressed through the action of the then Minister for Energy, created the seeds of Bord na Móna's problems and caused a very heavy burden of debt to build up which put severe financial strain on Bord na Móna.
It was only when the last Coalition Government took office in 1981 and it was seen that the board were not in a position to remunerate their capital borrowings that a review was undertaken, in conjunction with the board, of their financial needs in the context of their development programme. This was the first attempt to come to terms with the fact that the only revenue available to Bord na Móna must come from the sale of their products and that to continue the policy of restraint on prices which had been practised by the previous Government would mean that further finances would not be available from lending institutions and the entire development programme would be jeopardised. This review was continued in 1982 by the incoming Fianna Fáil Government and I am glad to say resulted in the four phased market price increase. Such a large increase would, of course, not have been needed if realistic increases had been introduced gradually over the years.
A considerable improvement was expected in the board's finances from the implementation of the four phased price increase. Based on certain assumptions at this stage, the board's financial projections showed that they could implement a capital programme which included a 150,000 tonne per annum briquette factory at Ballyforan while meeting the capital charges which the programme would incur. The principal assumptions were that all planned production would be sold at certain prices and that such prices would keep pace with inflation. It was soon evident, however, that the financial projections in relation to Ballyforan were too tight and that even with the implementation of full energy-related pricing further assistance would be needed if the factory project was to go ahead. The only promise of extra assistance was a grant of £3 million approved in principle by the IDA and perhaps some assistance from the EEC, which given the state of EEC finances at present, could not be counted upon. The IDA grant approval was not based on a totally independent assessment of the project, as the Opposition Deputies would like to suggest but, as I have said, a grant in principle based on the number of jobs envisaged from the project; it necessarily relied on some of the projections made by Bord na Móna.
Early in 1983, in the face of continuing board anxiety over funding and revised projections which showed that the costs of the Ballyforan project had now escalated to £48.2 million, the Minister for Industry and Energy, Deputy John Bruton, initiated a review of the Ballyforan project. The initial review had been into the board's financial position, and the price increases which followed had strengthened that position. The purpose of the second review was to assess the viability of the project itself and to examine the major cost elements involved. The increased cost of the project would involve a higher level of borrowing by Bord na Móna and it was necessary for the Government to be satisfied that expenditure on this project would ensure a better return to the community. The Government have the ultimate responsibility where very large capital expenditure is involved and it is only right that before any investment proposal is approved it must demonstrate a reasonable probability of success. At a time of high public sector borrowing, as now, there must be greater reluctance by the State to approve investment projects which do not offer reasonable return. The Opposition Deputies have deplored the time taken over this review. I would remind them if the analysis and review of projects in the past had been more exacting, there might be fewer white elephants today.
