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Dáil Éireann debate -
Tuesday, 13 Feb 2007

Vol. 631 No. 3

National Oil Reserves Agency Bill 2006: Report Stage (Resumed) and Final Stage.

I move amendment No. 72:

In page 20, lines 19 and 20, to delete all words from and including "including" in line 19 down to and including "State" in line 20 and substitute the following:

"taking particular account of the necessity of holding sufficient stocks within the jurisdiction of the state".

This amendment relates to holding contracts between the agency which will be put on a statutory basis, and another person, by which that person undertakes to hold an agreed volume of oil stocks. In previous debates on Report Stage, it was argued it was necessary that Ireland should hold above the minimum amount of stocks — 90 days. The Minister recently reported stock levels stood at 107 days. I advocate that Ireland should hold at least 120 days of stocks.

Another concern is that in a time of an international political emergency, such as at the time of the Iraq invasion, there could be a massive increase in oil prices. The Minister explained that Ireland has tickets for stocks in Wales and elsewhere. The question arises then as to how this stock would become available to keep the economy running in times of emergency. The provision proposed in this amendment would be a useful addition to the Bill. My previous amendment stated "a sufficient internal-external holding ratio so as to ensure there are enough stocks physically held within the jurisdiction of the state if a crisis situation arises." Amendment No. 72 is to ensure Ireland will have sufficient stocks to keep the economy performing if a political emergency arose. This is a useful amendment to section 33 and I urge the Minister of State to accept it.

I support the amendment, in respect of which Deputy Broughan makes a valid point. It is one matter to make available to the National Oil Reserves Agency, NORA, a variety of locations and sources necessary to meet our supply needs for 90, 100 or 120 days, but it is important that those sources be accessible to the State. Events over which we have no control, which might be political, environmental, or the result of a disaster at sea, for example, could prevent access to oil stocks by the authorities. The Bill would be strengthened by a provision that those stocks must be held within the State where they are accessible and can be protected and where there is direct responsibility for them in so far as the institutions of state are concerned.

In the parlance associated with issues of energy supply, we have all come to know that security of supply is a major factor. A wide range of issues can affect security of supply. An outbreak of hostilities in the Middle East or elsewhere or a security threat, for example, might set in motion procedures that make it impossible to access storage facilities. In such circumstances, it might not be possible for NORA to carry out its functions in ensuring access to the stockpiled fuel supplies necessary to run the utilities of the nation.

At the end of December 2006, Ireland held 113 days of stocks, 75 of which were held within the State. Subsection (4) of section 33, as agreed on Committee Stage, makes specific provision for circumstances which, in the Minister's view, may warrant a need for specific volumes of particular categories of oil stocks to be held in the State. Examples of particular categories of stocks include petrol and diesel.

Taking account of our island status, I am strongly of the view that the powers provided for in section 33(4) are justified and warranted in the event of a possible oil supply disruption. The text of the Bill as it stands is more specific than the Deputy's amendment. I am not disposed to accept the amendment.

I note that the Bill makes provision for particular categories. However, the internal-external balance could be even higher. The Minister of State will claim that 75 days is sufficient to meet most short-term emergencies given that if one such emergency developed seriously enough, there would have to be some type of rationing. However, it might be more helpful to NORA, as it sets out as a statutory body on its particular mission, to have a specific requirement that there be sufficient stocks within the State to meet any emergencies. Perhaps there might be a rule that 90 days of stocks should be held within the State.

Question, "That the words proposed to be deleted stand", put and declared carried.
Amendment declared lost.

I move amendment No. 73:

In page 20, line 40, after "Agency" to insert the following:

"and in accordance with the terms of the national emergency contingency plan".

This amendment relates to the role of NORA in releasing oil stocks in cases of particular urgency. Section 35 refers to the Minister's ability, after consulting the agency, to issue directions for the release of stocks to particular sectors and in accordance with basic procedures. The amendment proposes that this should be done in accordance with the national emergency contingency plan. If the nation were faced with an external shock, whether from geopolitical difficulties, war or any other emergency, one assumes the national emergency contingency plan would take precedence and the Minister would act in accordance with it in releasing oil stocks. I am interested in the Minister of State's view on this amendment.

The provision, as drafted, provides for the release of strategic reserves by NORA in emergency situations. To meet its obligations to the International Energy Agency, IEA, and the EU, for instance, Ireland may be required to release oil reserves to avoid a supply disruption. A second example would be a local shortage of a specific product. In the case of NORA, the release of stocks would follow a direction from the Minister. I am satisfied that the text as it stands adequately provides for the release of stocks in emergency situations. I do not accept the Deputy's amendment.

This amendment relates to the functions of NORA in the event of a national or international emergency. There have been no emergencies in the fuel area since the 1970s, when everybody became an expert on the issue. The immediate questions at that time were how quickly we could gain access to stocks, how quickly they could be released onto the markets and to what extent they might affect supply at the petrol pumps. It was only when people were pushing their cars to petrol station forecourts and forming long queues that there was a recognition of the degree to which it is necessary for State institutions to be able to procure and provide the necessary supplies to run the country.

Some people claim that such provision will happen in the natural order of things. We discovered in the 1970s that this was not the case. We learned something of the complexity of oil stocks and markets, and recent experience has reminded us of this. Prices can be puffed up to suit the market and supplies can rise and fall in accordance with necessity, as perceived by those in the area of investment. I am concerned about hardship for any group in society but I have a sneaking suspicion that oil magnates are not the most fraught. They seem to be able, at a blip on the screen, to add another billion or two to their resources.

The amendment proposed by Deputy Broughan is useful. Something we did not discuss but which is relevant to the issue of supply within the State is the quality of the product. This is not provided for as it could be, and the Minister should consider that in the context of this amendment. I have heard complaints from people who claim that the quality of some of the supplies imported into the State is below par.

In some areas, large scale refitting had to take place to diesel engines. The supply is coming from Russia. I raised this question but it was disallowed because the Minister has no responsibility for it. I am surprised he does not have responsibility because the question of supply is governed by this legislation and NORA will have responsibility for supply in emergency situations and in similar ones. The quality of that supply will have a serious bearing on the degree to which these provisions will be available for the public's benefit.

There is merit in that formulation in terms of the national emergency contingency plan. It is not really clear from the legislation why there is no link between the release of oil stocks in an emergency and, for example, the wider emergency plan which the Department of the Environment, Heritage and Local Government and other Departments would have in place if there was a national emergency. Why is there no reference to the possibility of a national emergency given the vital role of fuel? If oil stocks were released for whatever reason, would that necessitate a wider review of our oil strategy at that particular time?

It is not clear from section 35 whether the Minister must consult our EU partners before any emergency stocks are released. For example, could a situation emerge as in the United States where the President and the Government decided to release some strategic reserves to combat escalating prices and to try to bring stability to the market? Should those issues have been teased out? Could the Minister go ahead unilaterally if there was an emergency? Would he adhere to the overall national emergency plan?

I am well aware of the problems of oil rationing. Indeed, I worked in the oil business before I became a Member of the House.

The Minister of State has a lot in common with President Bush.

I am a socialist; I do not know about him.

The Fuels (Control of Supplies) Acts 1971 and 1982 were put in place to safeguard the supply and distribution of oil in an emergency. They provide for significant State intervention in the market in the event of a major oil supply crisis. Under this legislation, the Government may make an order authorising the Minister for Communications, Marine and Natural Resources to intervene where the Government is of the opinion that the exigencies of the common good necessitate the regulation or control by the Minister on behalf of the State of the acquisition, supply, distribution or marketing of fuels held by private sector oil companies.

Once the Government order is made, the Minister is empowered to make an order or orders in respect of certain fuel or fuels. This means that, in effect, the stocks held by the oil companies in the Whitegate refinery in Cork become part of the totality of the emergency stocks under the Minister's control and direction. Detailed provisions in the order give the Minister, for example, powers to regulate the sale of individual products so as to prevent hoarding or unnecessary topping up of fuel tanks by setting out minimum and probably maximum sales of particular products, especially petrol. Other provisions in the legislation include the imposition of demand restraints such as restricted opening hours for filling stations and restrictions on non-essential motoring — for example, a ban on Sunday driving.

In regard to Deputy Broughan's question on the EU, as a member of the IEA, Ireland would participate in and benefit from the IEA mechanisms designed to deal solely with physical shortages. In the first instance, if there was to be disruption in supplies, the IEA has an initial response plan originally developed in the wake of 11 September 2001 to provide for a limited and co-ordinated release of emergency stocks. If launched, this plan could be rapidly implemented in Ireland by means of joint action involving NORA and the industry. If the situation were to deteriorate, more intensive activity, stock and-or demand restraint would come into play while a 7% reduction in global oil supplies would trigger, for the first time ever, the implementation of the full panoply of the IEA measures, including the sharing of any available stocks according to an agreed formula. The theory underlining the IEA approach is that the emergency reserves would be eked out over an extended period to supplement supplies which would be available in the normal course even in emergency situations.

Amendment, by leave, withdrawn.

I move amendment No. 73a:

In page 22, to delete line 28 and substitute the following:

"(a) the contract provides for an agreed volume of petroleum products owned by the oil consumer to be so held by the other person for the purpose of a claim by the oil consumer for exemption from levy under this section, and”.

This amendment arises as a consequence of proposed amendments to section 62. It will provide for consideration by the Minister of applications by oil consumers for exemptions from levy payment on the basis of a contract being in place between an oil consumer and a third party for the storage by the third party of specific volumes of oil owned by the oil consumer. While it is accepted that oil consumers will generally have adequate storage facilities for volumes of oil to allow them to claim exemption from levy payment on an ongoing basis, nevertheless I acknowledge that storage problems may arise from time to time where, for example, a company must temporarily decommission storage tanks to allow for refurbishment. The provision will facilitate oil consumers who find themselves in such a situation and will strengthen the Minister's powers in regard to the assessment of applications by oil consumers for exemption from the levy payment.

Amendment agreed to.

Amendments Nos. 73b, 73c and 75a are consequential on 77a and all may be discussed together.

I move amendment No. 73b:

In page 22, line 30, before "were" to insert the following:

"(within the meaning assigned by section 62)”.

The House will be aware that, on Committee Stage, I moved an amendment to provide for the Minister's prior approval for certain stockholding contracts. Subsequent consultations with the Office of the Attorney General established that the provisions of the sanction, as agreed on Committee Stage, if enacted, would result in unintended commercial restrictions on commercial activities of oil companies and oil consumers beyond the stockholding contracts. Accordingly, amendment No. 77a proposes that section 62 be amended.

The amendment will provide that the Minister's approval will be required in the case of contracts between an oil company, an oil consumer and a third party, other than NORA, to hold bilateral oil stocks in Ireland on behalf of another EU member state. Prior to an oil company entering into such a contract, the company will be statutorily obliged to submit details of the contract proposals to the Minister for approval. Information to be provided to the Minister on the contract proposals is set out in subsection (5).

The opportunity has also been taken to include a new provision in subsection (4). This subsection provides that in regard to stockholding contracts between NORA and an oil company, where the oil company contracts to store oil in the State on NORA's behalf, such stocks may be drawn upon or replenished only by NORA or with the prior consent of NORA. Amendment No. 75a proposes that an offence provision be created under section 50 in the event of the failure of a party to a NORA stockholding contract to comply with the provisions of section 62.

As a consequence of the proposed amendments to section 62, amendments to section 38 are proposed as follows. Amendment No. 73b defines contract proposals required under section 38 as having the meaning assigned by section 62. Amendment No. 73 proposes to remove the obligation imposed on the Minister in section 38(2)(b), as agreed on Committee Stage, to approve oil storage contract proposals between companies. It is not appropriate that the Minister should be involved in the approval of commercial contracts between private companies. I am satisfied these amendments will strengthen and improve the Bill and will provide Ireland with a better structure in the future in terms of ensuring robust security of national strategic stocks.

The Minister of State did not respond to my last question on this matter so perhaps he might do so in the context of these amendments. I wish to raise the issue of quality control. During consideration of the amendments on Committee Stage, I was not aware of certain matters which have been subsequently brought to my attention, such as the alleged poor quality of some of the oil supplies. A great deal of emphasis has been placed on the need to ensure an accessible supply is retained and this amendment attempts to enhance the security of that supply. Will the Minister of State comment on the quality of the supply? If the quality is not adequate it does not make sense to have it. The necessary supply will not be maintained because it will be of inferior quality. To preserve the objective of the Bill and ensure that NORA can do its job the Minister should consider to what extent he or his Department can control the quality, as it is imperative that we can. It is an important issue and I do not know whether, in today's avaricious world, people are aware of the need to ensure quality is of the highest standard. However, quality and quantity are of equal importance in this case and I suggest the Minister clarifies the issue with regard to stocks held in this country, which is the subject of a forthcoming amendment in Deputy Broughan's name.

This amendment fundamentally amends section 62 to clarify the position relating to the possibility of a person incurring a levy. It puts in place a wide-ranging mechanism for ministerial approval of contracts where one of the parties arranges to hold certain supplies. The new section refers to identified oil but is that simply oil for which there have been returns? Should "identified oil" have been included in the definitions at the top of the Bill? The Minister of State also referred to a specific amount of non-identified oil. Does that mean there might be oil in the market for which the Department did not have returns? Is the reference to 75 days of indigenous oil stocks held in the country all-embracing? Could there be stocks of which we are not aware? How does the Minister define identified and non-identified oil?

As I said at the start of the debate, one of the weaknesses of the Bill is the fact that we are establishing NORA on a statutory basis but have very little power over the oil market. We are price takers and victims of the big companies, as in the famous case of the petrol station on the Dublin quays where it costs €1.36 or €1.38 per litre. A mile away on the north side it costs €1 per litre. CER has no control over such matters, although the Competition Authority has recently sought to bring people to justice for arranging cartels, among other things. Given that we do not appear to have much control over this area, does this amendment begin to give us the resources to get a full picture of the oil market?

Deputy Durkan and I were present at a meeting of the Joint Committee on Communications, Marine and Natural Resources when the head of the Competition Authority complained about the lack of competition in broadcasting. This was the head of an organisation which had failed to invigilate the Topaz takeover of Statoil in Ireland by missing a deadline, an incredible error for a State agency.

This is an area in which we need much more State invigilation but in which the Minister has been fearful of treading, or at any rate treads gingerly. Oil is just another energy source. We all believe it is a depleting source and that it will run out at some stage, whether it be in five or 25 years' time. Accordingly, it must be managed very carefully.

The Minister of State introduced this amendment at the 11th hour. I feel, and I am sure the other Opposition parties — the Labour Party, Fine Gael, the Green Party and Sinn Féin — will agree that it is very difficult to respond to an amendment we only received a day or two ago. Most of us thought we had completed Report Stage and we had forgotten that a few amendments remained, including one very important amendment which has not yet been dealt with. Can the Minister of State say whether the distinction between identified and non-identified will stand the test of time?

This Bill is concerned with strategic stockholding and NORA has no function with regard to the quality of oil stocks, imports or price.

It could have had. That is the point.

The Minister's function is to approve stockholding contracts. The object of the amendment agreed on Committee Stage was to strengthen the Department's position with regard to the approval of stockholding contracts. Subsequent consultations with the Office of the Attorney General established that the provisions of the section, as agreed on Committee Stage, would result in unintended restrictions on the commercial activities of oil companies and oil consumers, resulting in oil companies and consumers being obliged to submit to the Minister for approval details of commercial contract proposals that fell outside the stockholding contracts. Accordingly, on the advice of the Attorney General, the section has been amended to restrict the Minister's powers to approve stockholding contracts relating to the holding of bilateral oil stocks in Ireland on behalf of another EU member state.

I am somewhat alarmed by the Minister of State's statement to the effect that it was not NORA's role to control quality. We might wake up one morning in the future and find ourselves in a serious situation, with 2 million litres of poor quality material which cannot be disposed of and will be of no benefit to anybody. The Minister should consider introducing regulations or statutory instruments to deal with such a situation. If he does not, the purpose of the Bill will be undermined. Without it, the lowest common denominator will apply and, if one supplier gets away with supplying poor quality fuel from the reserve, they all will. We could have followed the Minister of State and waited to submit more amendments on Report Stage but it does not work that way. We receive a continual stream of amendments at the last minute.

There has been no legislation for four years but we are expected to deal with a Bill in four months.

That is right. We could not find a Minister for two or three years but now they turn up every five minutes. If the Minister does not recognise the need for some quality control he will find himself in a very embarrassing situation with 10 million gallons of substandard diesel or petrol which will be useless and will have to be sent to a refinery to be reprocessed. This should be borne in mind when considering this series of amendments.

As it is now 6 p.m., I am required to put the following question in accordance with an Order of the Dáil of this day: "That the amendments set down by the Minister for Communications, Marine and Natural Resources and not disposed of are hereby made to the Bill, Fourth Stage is hereby completed and the Bill is hereby passed."

I thank those Deputies who participated in the debate on Committee and Report Stages, particularly Opposition spokespersons, and I appreciate the constructive contributions made on the contents of the Bill. I am satisfied the amendments the House has agreed have improved and strengthened the Bill and I look forward to discussing them in the Seanad at the earliest opportunity.

I thank the Minister of State and his officials. This is an important aspect of our democracy, the opportunity to go through legislation on Committee and Report Stages on a line by line basis. Scant regard is often paid to democracy in its truest form so I compliment all concerned for their contributions.

I thank the Minister of State and his officials, particularly for their briefings on this before Christmas.

Question put and agreed to.
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