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Dáil Éireann debate -
Wednesday, 20 Jun 2001

Vol. 538 No. 4

Irish National Petroleum Corporation Limited Bill, 2001: Second Stage.

I move: "That the Bill be now read a Second Time."

I apologise for the delay. The primary purpose of this Bill is to allow me, as the shareholder in the Irish National Petroleum Corporation, to discharge certain functions which are essential if the proposed sale of the INPC's business and principal commercial assets, chiefly the Whitegate refinery and the Whiddy oil terminal, to the Tosco Corporation is to proceed to completion. The Bill also includes a number of provisions which could be activated at some stage in the future in the unlikely event that the current sale process cannot be completed.

The House may be aware that on 26 May last, legal documents were signed which commit the INPC and the Tosco Corporation to a completion date of 16 July, subject to the fulfilment of certain pre-completion conditions, including the enactment of enabling legislation by the Oireachtas. That is why the Government agreed to give priority attention to this Bill, despite the many pressing items in its overall legislative programme, and I am very appreciative that the Houses have agreed to facilitate the matter.

The INPC was established in 1979 during the so-called second oil shock in the context that a number of oil producing countries had made it known that they would provide incremental oil supplies only on a state to state basis.

Given the urgency of the situation, it was decided to establish the INPC as a private limited company under the Companies Acts, with the Government as shareholder, rather than have recourse to the more usual method of establishment as a statutory State body with its own dedicated legislation.

In 1982, as part of the oil industry's response to a downturn in world demand for oil products, the original private sector owners of the Whitegate refinery withdrew from the facility. The refinery was then acquired by the State and responsibility for its operation was entrusted to the INPC. In 1986, the INPC also became responsible for the management of the Whiddy oil terminal after the facility was gifted to the State by Chevron, the then owner. Chevron also paid the State a sum of US$44 million to be released from its contractual obligations to reactivate the facility or to restore the site to greenfield status, following the Betelgeuse accident of 1979 which had effectively closed the facility. In the event, Whiddy continued to lie dormant until the installation of a single point mooring facility made the tanks accessible once again in 1998.

From the outset there were problems with Whitegate, as the companies operating in the Irish market refused to do business with the refinery.

I regret very much that copies of my script have not arrived.

(Mayo): We prefer to listen to the Minister.

I am sure the Deputies do. I thank Deputy Higgins.

In response, an arrangement known as the mandatory regime, or MR, was introduced, which compelled those companies to source a fixed proportion, originally set at 35%, of their overall requirements from Whitegate at a premium price which was passed on to the consumer as a levy at the pumps. The price support system was necessary to enable the refinery to stay in business notwithstanding its technical limitations and the other factors which militated against it operating on a fully commercial basis.

While the capabilities of the refinery have been improved in the interim, its basic drawbacks have remained and have been a continued source of uncertainty over the years. Whitegate, for example, lacks scale, technical sophistication and the benefits of integration with the more profitable sectors of the oil business. It operates in a market which is dominated by the local affiliates of the multinational oil companies and is entirely dependent in commercial terms on international refining margins, which are completely outside its control and which are more often negative than positive. Not surprisingly, and despite dedicated and highly professional service from INPC's management and staff over two decades, the threat of closure has never been far away.

In these circumstances, State ownership and in particular the availability of financial support under the mandatory regime has provided a lifeline for the INPC and has ensured that Ireland has been able to retain the benefit of the strategically significant facilities operated by the company. At the same time, it has been a poor substitute for a proper commercial environment for the company within the mainstream oil industry. Successive Governments have been concerned about the potential threat to competitiveness posed by the MR and as the arrangement is subject to annual review, Ministers in charge of the energy portfolio and the INPC itself have always had to live with the prospect that MR support and, consequently, the refinery might not survive from one year to the next.

As I have said often and not with any tone of censure, the previous Government took a Cabinet decision to abolish the mandatory regime levy but within three or four months rescinded that decision. Dependence on the MR has tended to become especially worrying whenever the necessity for investment at the refinery has arisen. This occurred most recently in the context of the need to adapt the refinery to ensure that its products would be able to meet new emission standards for motor fuels under the EU auto oil 1 programme, which were to be effective from the year 2000.

The proposal that went to Government at that time seeking approval for the auto oil investment, the cost of which was then estimated at US$100 million, made it abundantly clear that there was no prospect of the INPC raising the necessary finance without the assurance of MR support at a level commensurate with the need to make loan repayments in addition to compensating for ongoing operational losses. I am glad the Government was prepared to accept my recommendations and allow the INPC to proceed with its proposed upgrading project, which eventually entailed expenditure of US$75 million. Otherwise, there was no doubt but that the refinery would have had to close once the new environmental standards came into force and that Ireland would have lost an important contributor to security and diversity of oil supply.

The assessment of the auto oil project had the effect of highlighting the certainty that Whitegate could not maintain operations and service its debts on the basis of income from refining alone and, consequently, would continue to require MR support for the foreseeable future. Concerned at this prospect, the Government therefore requested the INPC to seek out possibilities for additional commercial activities to underpin the core refining business. Nothing was prescribed and nothing was ruled out. It was a question of INPC using its best efforts to come up with options that could be identified and developed into workable proposals.

The INPC responded to that challenge with exemplary enthusiasm and energy and after an extensive and professionally-conducted search process, the INPC board recommended to me a proposal submitted by the US-based Tosco Corporation as representing by far the best and most forward-looking prospect for the INPC and the State. This assessment was confirmed by my expert advisers and last July the Government was therefore prepared to permit the INPC to confer preferred bidder status on that company.

There followed almost a year of very intensive activity as the proposal was refined and developed. This phase included a direct role for my officials and those of the Minister for Finance who, with the help of independent financial and legal experts, have worked to ensure that share holder interests were fully addressed at all stages of the process.

I am aware there was impatience at times because of the amount of attention given on the shareholder's side of the table to the small print of the proposed sale and purchase agreement. While I can understand the frustrations in some quarters, I make no apologies for the diligence of the officials and advisers concerned – it is no more than we have a right to expect when the disposal of State assets is in question and it makes for a more stable settlement in the long run.

The outcome of the process is a proposal which I have been prepared to recommend to my Cabinet colleagues because I consider it to be in the best interests of the INPC and its workforce, the State and the economy generally. Under the terms of the proposed transaction, the INPC will receive US$100 million from Tosco and will retain the proceeds from existing debtors. The INPC will be paid for its trading stocks at market prices on completion of the sale and will retain certain stocks originally acquired, at the direction of the Government, in 1990 for strategic rather than trading purposes.

At the end of the day, however – I must be clear about this – the net proceeds to the Exchequer will be considerably less than the headline figure of US$100 million I have mentioned. This is chiefly because the INPC will continue to be liable for the existing debt of about £70 million, most of it due to the auto oil 1 loan, and for existing liabilities to trade creditors. An ESOP for INPC employees will also have to be funded out of the sale proceeds. Nonetheless, while the final arithmetic at the time of completion will be influenced by, inter alia, oil price and currency fluctuations in the interim, the overall result will be a positive transfer to the State and this is considered to be a very satisfactory outcome.

However, the principal benefit of the transaction from the State's perspective is the fact that for the first time in almost 27 years, there can be a solid basis for the future of both the refinery and the terminal, and for the strategic contribution they make to our economy. A central plank in the Tosco proposal is a written undertaking to operate and invest in the facilities on a fully commercial basis for at least 15 years while maintaining existing jobs and conditions of employment. I have been given to understand by Tosco's chief executive officer that in the corporation's plans for the Irish acquisitions, 15 years is only the beginning.

We should not underestimate the national significance of this aspect of the proposal. Since 1982, the State has been prepared to support INPC through the operation of the mandatory regime because of the strategic significance of having refining capacity on the island but, as we have seen, that stewardship was a poor substitute for a proper commercial environment. The proposed deal with the Tosco Corporation offers the prospect of a secure and prosperous future for the refinery and the terminal in the context of a major player in the oil industry which has the resources and the incentive to operate and develop these assets in its own commercial interests. This means that the contribution that these facilities make to our oil supply security are thereby secured at least cost to taxpayers and consumers and on a basis that represents a significant improvement on the State's own ability to make commitments under the MR or any possible alternative support mechanism. Although not a household name on this side of the Atlantic, Tosco Corporation is a multi-billion dollar undertaking whose resource base will increase later in the year when it is expected to merge with the US oil giant, the Phillips Petroleum Corporation. Already the third largest refiner and marketer of oil products in the US, Tosco enjoys substantial benefits in terms of operational scale, technological capabilities, business integration and operating synergies that could never be replicated for Whitegate as a stand-alone facility. The INPC facilities will find a niche within the overall Tosco business plan, adding value to the extended Tosco family while continuing to serve the Irish market.

Acquiring the Irish facilities is a very significant first step outside the US for Tosco and not one that the corporation is taking lightly. From a purely business perspective, Tosco has not only the resources but also the clear incentive in terms of its own self-interest to honour its commitments under the proposed transaction by making a success of its acquisitions in this country, now and in the longer term.

The Bill before the House contains provisions which are a prerequisite for completing the proposed transaction and are consequently necessary to ensure that Ireland secures the benefits I have already mentioned. It has been clear for some time that because INPC is not a statutory State body, legislation of this kind would be necessary to underpin the proposed transaction. However, it was only in recent weeks, with the signing of the legal documents, that we had an assurance that there was a definite deal on the table and a clear indication of the provisions that would have to be enshrined in the proposed Bill.

The Bill contains two principal provisions that go to the heart of the Minister's functions in relation to the completion of the proposed sale. In the first place, section 6 empowers me, with the consent of the Minister for Finance, to authorise INPC to dispose of its assets, including its shares in the subsidiaries that operate the refinery and the terminal, to the purchaser, and this is obviously fundamental to the whole transaction.

The section also allows me to authorise the INPC to make payments in relation to the establishment and funding of a trust in order to provide for an employee share ownership plan, or ESOP, to facilitate the proposed sale. The establishment of such a scheme in order to secure the co-operation and assistance of INPC's workforce in the implementation of the new arrangements is a pre-condition for the completion of the deal. Following a number of meetings between union representatives, the company and officials of my Department and the Department of Finance, agreement has been reached on a specific offer in relation to a proposed ESOP which the unions have recommended to their members. I further understand that the offer is currently the subject of a ballot, the result of which should be known in the near future.

Section 7 gives me the authority, once again with the consent of the Minister for Finance, to provide a guarantee in respect of certain potential liabilities of the INPC. Such a guarantee is not unusual in a transaction of this kind. The potential liabilities in question, which include potential environmental risks, are based on the general principle that INPC is liable for issues which pre-date the sale while Tosco will be liable for matters relating to post-completion circumstances. However, within that general framework, and as a result of the very hard bargaining that took place on this particular aspect of the proposed transaction, there are now very significant limits in place in terms of both time and money on the extent of INPC's – and hence the State's – potential exposure. In money terms, that liability is capped at US$75 million and the terms of the guarantee will expire over varying periods, the longest of which is 12 years, depending on the nature of the risk.

The one exception to the above relates to the jetty at Whiddy Island which was destroyed by fire in the 1979 disaster. The derelict structure is completely non-productive and neither Tosco nor any other commercial company could be expected to take responsibility for it. Consequently, the State will continue to bear the potential liability it acquired in relation to the jetty when it took over the terminal in 1986 and for which it was compensated at the time.

I have been advised by the INPC that it should be possible to insure against the environmental risks covered by the guarantee for a relatively modest once-off payment and the company is actively pursuing this aspect at my request.

The Bill requires the Minister for Public Enterprise on an annual basis to lay before each House a statement setting out the amount of any payment which was made during the year under the guarantee together with an indication of the amount covered by the guarantee that was outstanding at the end of the year.

The State's interest in INPC's facilities over the years has been rooted in the contribution which they make to security of oil supply. A further major element in our oil security apparatus is the maintenance of a 90 day oil reserve in line with our obligations in the context of EU legislation and the emergency oil sharing arrangements maintained by the International Energy Agency. Since 1995, responsibility for maintaining these reserves has been a matter for the National Oil Reserves Agency, or NORA as it is more com monly called. Although NORA is a subsidiary of the INPC, I have expressly excluded it from the terms of the proposed sale. NORA does not perform a commercial function but acts as my agent and is the custodian of oil stocks which have been acquired on the basis of a dedicated levy on consumers and taken out of the market to be set aside for strategic purposes. Arrangements are being made to ensure that NORA will continue to function within the public sector. The agency, which had separate representation throughout the talks with Tosco, will enter into arm's length commercially based contracts in respect of storage of a volume of its stocks at Whiddy and Whitegate. This is only to be expected as NORA needs to have stocks in Ireland for strategic reasons and the main available tankage is situated at Whitegate and Whiddy. NORA has other commercial storage contracts at home and abroad and will continue to welcome further competitively priced bids from storage providers.

To provide a clear legal basis for the safeguarding of strategic stocks in the context of the Tosco transaction, I propose to table an amendment on Committee Stage which will allow me, notwithstanding the provisions of any other legislation, to order, with the consent of the Minister for Finance, the transfer of the agency and its stocks out of the INPC. The proposed amendment will also provide for the transfer from INPC of the stocks which were acquired by the corporation in 1990 during the Gulf crisis specifically for strategic purposes, before NORA came into being. The intention is to ensure that these stocks can continue to be reserved for Ireland's strategic purposes as part of NORA's overall stockholding in the wake of the disposal of INPC's other assets to Tosco Corporation.

These are the provisions of the legislation that impinge directly or indirectly on the proposed sale. At the same time, some account has to be taken of the possibility, however unlikely it may be, that the proposed transaction for one reason or another might not proceed to completion. I am, therefore, taking the opportunity to include provisions in the legislation to permit a share sale to another purchaser or purchasers in the future and to allow INPC to implement an ESOP, in the event that the sale to Tosco is not completed.

Hopefully, these particular provisions will not have to be acted on and the transaction will go ahead to completion. For too long, the INPC facilities have had to operate a stop-gap arrangement characterised by uncertainty, limited planning horizons and less than optimum levels of investment. We now have the opportunity for the refinery and the terminal to thrive in their natural environment, as part of a major oil company, which has the resources, the incentive and the cultural disposition to invest in and develop the business. These strategically significant resources will be retained for the country, but on the basis of robust business models rather than artificial and ultimately inadequate support mechanisms. I am particularly gratified that the Government, in sanctioning the essential auto oil investment back in 1999 and in directing INPC's attention towards the potential for new commercial arrangements, was instrumental in bringing us to a position where we can look forward with confidence to a bright future for INPC's business and facilities and the contribution it makes to our economic life.

In some important respects, however, there will be no change. The facilities at Whitegate and Whiddy will continue to operate under existing regulations governing safety, the protection of the environment and the use of stocks in the event of an emergency, irrespective of the new ownership, and with the existing INPC personnel still at their posts.

I pay tribute to all those in INPC who have kept the oil flowing over the years. It is remarkable that despite what must often have seemed a bleak and dispiriting outlook, INPC and its staff can look back on an exemplary record on productivity, industrial harmony and safe and environmentally friendly operations. I know others join me in that tribute which is very deeply felt. I was twice there and I found the whole working environment extraordinarily friendly and co-operative. There is a great atmosphere in the place and all of the employees were extremely forthcoming and open. They are a great bunch at all levels including workers and management. They work very closely together and there are very few blocks between them. They seem to ebb and flow between each other in an extremely open way.

Now, for the first time in 20 years, there is the prospect of job security and career development as part of a major oil company that has the ability and the motivation to invest in its people and its plant. I congratulate INPC management and staff past and present on their achievements over the years. A word of appreciation must go to the board and its chairman together with the chief executive officer and all those whose enthusiasm, dedication and sound instinct for a good business opportunity have brought us to the threshold of a new lease of life for INPC and its people.

Last week, senior officials of my Department and the chairman and chief executive officer of INPC met the Joint Committee on Public Enterprise and Transport to explain and discuss what is involved in the current proposals. They were very courteously received and I know my officials considered the forum to have been a very positive and useful means of addressing and clarifying concerns, which are no doubt shared by other members of the House. I hope the committee members found the occasion equally worthwhile and that it will have compensated in some measure for the limitations, which have of necessity been placed on the time available to debate the matter here in the House.

I commend the Bill to the House and I look forward to participating in this evening's debate.

(Mayo): I am extremely annoyed that we are telescoping into two days the legislation to give effect to the sale of a major national asset because that is what Whitegate is. It is our one and only State oil refinery. Having initially been told that legislation was not necessary to clinch the sale, I am annoyed that it is now being bulldozed through the House in the space of a few hours today and tomorrow in order to meet the 16 July deadline.

At a minimum I had expected that Second Stage would happen this week and then there would be adequate time for Committee, Report and Final Stages next week.

Is Deputy Higgins stuck for something to say?

(Mayo): I am not stuck for anything to say and if Deputy Daly holds on he will see that I have plenty to say about it. Would it not have been much better and wiser to wait until we have a definitive decision from the workers next week as to whether they will accept the proposals on offer?

There are three vital considerations as regards the sale of the INPC assets: the economy, the consumer and the employees. From the point of view of the economy, oil is both metaphorically and literally vital in order to grease the wheels of the economy. It is as essential to the economy and the national interest as food is for human survival. It was that strategic consideration that dictated the take-over of the Whitegate refinery by the Government in 1982. In the intervening 19 years Whitegate has served this country well.

Various Governments have emphasised the strategic importance of having our own oil refinery. It provided a crucial guarantee and insurance during times of oil crises. Its benefits were evident most recently during the Gulf crisis. Its relevance has become even more important in the context of the contraction of refining capacity over the past 20 years. The Whitegate refinery produces propane, butane, premium, super and Euro unleaded, gasoline, diesel, heating oil and heavy fuel oils. It also has the capacity to produce aviation jet fuel.

It has 157 permanent employees. As the Minister said it operates in a very positive culture and environment for 365 days a year, 24 hours a day and produces products, which can compare favourably and compete with the best imported products on the international market.

Whitegate has a long history of safety and trouble free working conditions. This includes an impeccable industrial relations record. The refinery provides training for apprentices and third level students. The staff is extremely well skilled. Whitegate provides fire and safety training for most of the marketing oil companies as well as the chemical plants in the greater Cork region.

One of the key features of the refinery is the manner in which management has displayed an acute awareness of its environmental responsibility. Oil refining by its nature is not an environmentally friendly industry. It poses obvious and considerable challenges to the environment. Considerable emphasis has been placed by Whitegate management on keeping the environment clean. Local beaches such as Whitebeg and Corkbeg have not been affected by the proximity of the refinery. The very successful Trabolgan holiday complex is located nearby. Whitegate has its social clubs, playing pitches and pitch and putt course, most of which are made available to the local community. Its safety record is second to none and has won numerous national and international safety awards.

The importance of Whitegate is obvious from the point of view of the economy of the region in which it is located. However, it is the national strategic interest that is really important. As an island nation should we sell off our one and only State owned oil refinery? Is the sale of the refinery as inevitable as the Minister is telling the House today? Would it not have been much better from the point of view of guarantee of oil supplies and stocks to have entered a strategic alliance rather than a complete sell off?

First of all, there is the sale price of $100 million. However, when one sets against the sale price the fact that the State is to pick up the tab for the outstanding liability of £70 million, one sees clearly that there is little if any financial return. Furthermore, the State has agreed to underwrite the costs of possible environmental claims against the company.

I am somewhat intrigued by the elaborate deal that has been worked out whereby risks that pre-date the sale will be covered by the State and risks that post-date the sale are to be covered by Tosco. When a company is making such an acquisition, why did it not carry out a very comprehensive investigation of all aspects of what it is buying? If I were buying a house, I would get an engineer to go in and ensure that all aspects of the construction and delivery of the house were complete. For example, why was a full inventory not carried out covering the building, plant, machinery and the site? Is there something latent there that might at some stage erupt?

The Minister said she is optimistic and will bring before the House the details of whatever insurance arrangements are put in place. However, one has to ask why should the taxpayer, even in a pre-dated agreement, have to bear the cost in respect of a take-over by a multi-million pound conglomerate as large as Tosco?

With regard to the value-for-money argument which has been put forward, section 7 of the Bill gives a guarantee that the State will cover possible further liabilities up to a maximum of $75 million. Then, as the Minister has said, there is the NORA consideration. The 90-day oil reserve guarantee has been crucial to the national interest. Since 1995, the National Oil Reserve Agency has had responsibility for overseeing this guarantee. In spite of such a vital strategic con sideration, this was not included in the agreement with Tosco in its present state. Poor NORA seems to have been divorced from the deal, cut adrift completely and is now the victim of some kind of convoluted marriage with a whole series of different agencies. The price at which oil can be bought on the spot market is also a factor.

Of course, the deal which is before the House today has our good wishes, but the legislation does not spell out the specifics. What we are seeking – this will be teased out on Committee and Report Stages – is publication of the maximum possible amount of information, including, if possible, the actual agreement between INPC and Tosco. This is a vital national asset and there should be an obligation on the Government to make available the agreement which the Government and the INPC are entering into with a private corporation, including the small print.

On behalf of the people of Ireland, we want clarification as to how well copper-fastened are the guarantees and assurances which are supposed to be part and parcel of the deal. Does the agreement between Tosco and the INPC guarantee continuity of supply and a supply of the full range of existing products? Does it retain and offer the output of the refinery to the domestic market prior to exporting the product? Does it ensure that refining products sold in Ireland are allocated fairly and offered at market price? Does it respect existing customer relationships? Does it take account of the strategic role of the national refinery in meeting the energy needs of the State not alone in normal times, but also in times of crisis? Does it recognise the important role the national refinery plays in meeting commercial needs of Irish owned fuel companies? Does it recognise the impact of the national refinery operations and competition in the retail price of fuel? Does it establish and respect an independent dispute resolution mechanism for disputes between consumers and the national refinery? Does it allow Irish fuel companies to contribute to and use the facilities of Whitegate to distribute fuel by road and sea?

The Minister will be aware that the sale of Whitegate will have enormous implications for the indigenous Irish fuel companies. These seven companies are extremely worried about this deal. They operate and compete in a market that is dominated by four large foreign owned companies, Esso, Shell, Texaco and Statoil which, between them, hold the lion's share of the market, a combined share of 74%. Being able to source fuel supplies from the national refinery in Whitegate is essential to the capacity of these seven indigenous companies to compete with major oil companies. The national oil refinery has given Irish companies an opportunity to offer vigorous competition and choice to their customers throughout the country.

The new owners of the INPC facilities in Whitegate will have a monopoly over oil refining from now on. If they place restrictions on the supplies available to the indigenous Irish companies, the consequences are obvious. These Irish companies will be squeezed out of the market and the customer will lose the benefit of competitive pricing which exists at present. I fully empathise with the fears of these Irish companies. Have guarantees been sought or given that this will not happen? Surely, protection for the indigenous companies must be built in? That is something which Fine Gael will seek to enshrine in the legislation and we will bring forward constructive amendments on Committee Stage to give effect to this. The sale of the INPC assets raises many issues of national and regional importance concerning the sale and supply of fuel in Ireland. There are serious national strategic issues involved in the disposal of such a State asset to a non-national, indeed a non-EU, commercial undertaking that will operate such an asset on purely commercial grounds.

The Government should consider a new role for the INPC, which is to remain in existence after the disposal of its refining assets. We are entering a very exciting phase for oil and gas exploration off the Irish coast. The Corrib gas find is a major incentive and encouragement for exploration companies to drill more wells here. Coming in the wake of the expiry of the Old Head of Kinsale gas find, it has invested the industry with huge new and welcome credibility that Ireland is carbon rich terrain. However, when one examines the tax regime enshrined in the Finance Act, 1992, one could be forgiven for thinking that we have given away the family silver. We have no royalties in this country. Our corporation tax is a mere 25% compared to a world average of 50% and a Norwegian rate of 70%. Furthermore, the exploration companies can offset all their exploration and well development costs against their tax.

Now that a whole new era of oil and gas exploration is about to unfold along the west coast and elsewhere around the Irish coastline, surely the time is opportune for the Government to create an entirely new role for the INPC. The Government should seriously consider encouraging the INPC to enter the exploration stakes with the oil companies on a shared risk basis, thereby ensuring hands-on control for the first time since exploration began in the 1970s, but will the Government embark on such a course or will it simply abjectly succumb to the dictates and dominance of the oil and gas companies which are about to harvest excellent returns for their investment on the offshore waters of Ireland?

I wish to be positive and supportive in this development and I am delighted that the workers and their jobs are to be safeguarded. I wonder how well copper-fastened is the 15 year guarantee in relation to the jobs? Is there an absolute assurance that that guarantee is nailed down? Are we absolutely assured that the full complement of existing workers will be retained come what may? These are vital considerations. We need confirmation of the Minister's assurance to the House that this is the best possible deal in the circumstances. We wish it well and hope it has a bright future. There was great optimism prior to the ISPAT saga and tragedy last week. Perhaps there are parallels, but I hope they will not be borne out on this occasion and that this enterprise will have a much longer, brighter, more productive and profitable existence than ISPAT, literally down the road.

I thank the staff of the Department for the briefing which they gave me. I particularly thank the Secretary General of the Department, Mr. Brendan Tuohy, who made a presentation to our committee. Having listened to the Minister's speech, I realise that the Minister also prepared the statement for the Secretary General, which was very similar to the Minister's speech.

The Labour Party is supporting this Bill, which is an enabling measure to allow for the sale of Whitegate and Whiddy to Tosco. The two issues which need to be addressed and are indeed being addressed by the proposal are security of supply for an island nation and stock reserves. The history of the refinery in Whitegate and the company is rather strange. I do not think it has a parallel with any other company or State enterprise in Ireland. It happened more by accident than by Government design. The then Minister for Industry and Commerce, Deputy Des O'Malley, found that some of the Arab supplying states would not supply oil except on a state to state basis. Even though he would not be a strong advocate of State enterprise, he was obliged to set up a company called the Irish National Petroleum Corporation, in State ownership, which was able to do that trading. That was in 1979. Subsequent to that, the companies which owned the old oil refinery at Whitegate decided to close it down and upgrade their facilities in Britain. The State wisely took ownership of the refinery for quite a high price at the time.

The refinery has, effectively, limped forward on a non-commercial basis since then with the mandatory regime which requires the distributor companies in Ireland to buy part of their supply from the refinery. That is a requirement in law. There is also a levy on every consumer for every litre of petrol they buy. At present 0.4p of the price goes towards the refinery and its maintenance. It is a relatively small amount but it had to be adjusted on a regular basis, certainly when I was in the Department, because of the volatility of the margins on refining. I remember hoping the margins would be up and we would not have to put up the price by another 0.1p or 0.2p. It was artificially maintained and there was a continuing need for its artificial maintenance.

The worst part was that the refinery was effectively under constant threat of closure from the commercial point of view and the possibility of a new court action. There was always the possibility that another court action would be taken and that the next one against the management regime that was required for its operation would be success ful. This unusual State enterprise came out by virtue of the failure of the private sector, as did nearly all our State enterprises, including CIE, the gas company and so on. In this case, the oil companies decided to close the refinery and the State stepped in for a security of supply reason.

I pay tribute, as others have done, to the workers and management in the company for their very special devotion to this enterprise in Cork over a long period of time. I am not using the word "devotion" unadvisedly – I witnessed devotion to the project which I have not seen anywhere else. Arising from that, the safety and environmental record, as Deputy Jim Higgins and the Minister have said, were unequalled anywhere. The leader of that group for a long time was the chairman of the board, Ed O'Connell. He had a very positive relationship with the people who worked there and he did an excellent job. I do not know what will happen to him now.

He is going to Bord Gáis.

Good for Bord Gáis. The workers there were very proud of what had been achieved.

The Tosco Corporation deal gives a 15 year guarantee to this refinery. This time last year it had a one year guarantee and at any other time it would have a one year guarantee. The refinery and the oil terminal will continue to be available to and used for a security of supply point of view for the Irish market. There will be an end to the mandatory regime and the levy, which I welcome.

The setting up of the European headquarters of Tosco in Dublin is welcome. That will create additional employment and a power base in Dublin which is welcome. The Minister referred to the emergency powers that are still available to the Minister and the taking of other powers that are required. I welcome the advanced stage of negotiations for the workers' ESOP and the security of tenure they will now have which they did not have before. They worked on a year by year basis and could not plan a career in any real sense of the word because at any time a Minister could have ended the mandatory regime. When I was Minister, it was proposed to me. I think civil servants proposed it to every Minister since the time the mandatory regime was brought in. The Department of Finance would regularly say so and—

They would regularly pounce on one to do away with it.

—-the other Department in charge of competition regularly said the mandatory regime and the levy created real problems for competition and should be ended.

The current phase of this started in 1999 post the £70 million investment. There were prior attempts to find a partner or a buyer, but they were not successful. If the deal before the House and the legislation to allow it to be implemented were available when I was in the Department, I would have jumped at them. It is a good deal and is better than the best for which we could have hoped. I say that in all sincerity and I compliment all the people involved in that and in getting that result for Ireland incorporated, the workers in the company and the strategic interest of Ireland from an oil supply point of view.

I would like to refer briefly to the 90 day oil reserve. I welcome the retention of our old relation Auntie NORA. It is wise it is retained separately and that it continues to have enhanced powers in the job it does. I urge that we should try to have real reserves rather than ticketing in international markets which is a lot less certain than having the real thing. There is a need to keep a firm eye on the oil companies which have a requirement in Ireland to hold certain reverses for that 90 day period on behalf of NORA. When we had a mini-crisis in the mid-1990s, we found that the oil companies which were supposed to have reserves did not have them and were running out of oil in a matter of three weeks rather than three months. That was caused by a refinery being destroyed in an explosion fire in England, there was a shortage arising from that. We did not have the reserves we thought we had and which the oil companies assured us of. That needs to be dealt with.

The State unusually gets involved to protect strategic interests or sometimes to pick up the pieces when a private enterprise has failed. However, the wheel has turned full circle in this case and private enterprise is moving back into an area that it is rightly in its interest to be in. In the context of the oil industry, a small stand-alone refinery is practically impossible to operate commercially. Without subsidy, it cannot operate. If we can ensure it operates over a 15 year guaranteed period and with the very good prospects that it can operate well beyond that, we should go for it. That demonstrates the pragmatic position of the Labour Party in regard to State ownership. We support this move and we also supported the Trustee Savings Bank Bill. Due to the timescale of the commercial imperative, I am prepared to support the Bill's early passage through the House. I say that with another hat on, my Whip's hat. Given the safety net amendments the Minister has suggested she will bring in on Committee Stage, I am happy to support the measure.

Debate adjourned.
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