Priority Questions

Offshore Exploration

Éamon Ó Cuív

Question:

1 Deputy Éamon Ó Cuív asked the Minister for Communications, Energy and Natural Resources if he intends issuing offshore oil and gas exploration licences in the near future on foot of submissions received by him in 2011; and if he will make a statement on the matter. [23962/11]

The 2011 Atlantic margin licensing round was formally launched in October 2010 and the closing date for applications was the end of May this year. The 2011 licensing round was different from previous licensing rounds in that the authorisations on offer are for two-year licensing options and not for the traditional 15 or 16 year frontier exploration licences. Fifteen applications were received under the round and my Department has now concluded its evaluation of the applications received. I will make a decision on the granting of licensing options over the next week or so.

There has been a good deal of debate of late on the possible potential of Ireland's indigenous oil and gas resources. While there has been a modest increase in the number of exploration authorisations in recent years, the overall level of exploration activity has remained stubbornly low. This is particularly true of exploration drilling with an average of only two exploration wells a year being drilled over the past decade.

Companies that are offered licensing options under the 2011 licensing round will have to undertake work programmes agreed with my Department. These work programmes, which will principally involve desktop studies, will then inform decisions to be made two years from now, as to whether these companies will actually apply for exploration licences with a view to then potentially moving towards exploration drilling.

The Minister is no doubt aware that the Oireachtas committee intends to investigate the whole regime under which licences are granted. Is it his intention to await the conclusion of the report of the committee before issuing these licences in order that we get public agreement in regard to the terms of these licences? There is great concern in regard to this matter, some of it stirred by the Minister's party when in opposition. The Government when in opposition and when it came into office spoke about new politics and putting the Oireachtas first. Is the Minister willing to wait until the Oireachtas, through its committee, reports on this issue before issuing these licences?

As I told the Oireachtas committee concerned last evening, I am more than willing to engage with it for as long as is necessary to review this issue but I am not prepared to delay the current licensing round that has its origins in the changes made in the Finance Act 2008 which Deputy Ó Cuív had the opportunity, when in Cabinet, to approve. I do not wish to delay that as it would introduce a note of uncertainty in a situation which has been disappointing in recent years. On average, fewer than two holes per annum have been drilled over the past decade. At that level of exploration and drilling, it is like trying to find a needle in a haystack. The purpose and motivation of the Government is to increase exploration activity offshore and to explore whether some of the resources we hope are there exist. The strike rate over the past 40 years has been disappointing. In terms of energy security and so on, it is very important we have success and I hope we will.

I am delighted the Minister is now convinced the terms we set in 2008 are the correct ones but he did not believe that when in opposition. As he knows, the disquiet which his party tried to build up when in opposition is fairly pervasive among the public. It seems the Minister is putting short-term expediency ahead of long-term certainty. Will he confirm that if these licences are issued and if an Oireachtas committee subsequently recommends changes, if oil or gas was found, the licences would be under the 2008 terms and that it would not be possible to change those terms in the future?

I did not make any comment good, bad or indifferent approving or disapproving of the Finance Act 2008. Deputy Ó Cuív was bruiting this about throughout the summer and it is about time he produced some quote from me to that effect.

The Minister's party did.

I did not do it. That is the first point.

The Minister's party did.

The second point is that there is nothing preventing — the former Minister, Deputy Ó Cuív, understands this well — the Minister for Finance of the day addressing the fiscal regime in any area of the economy which he or she believes appropriate at any time. That applies to this regime as well. That is the competence of the Minister for Finance and it is untrammelled.

It is important, now that the evaluation is concluding in my Department, that I get on with the authorisation of this licensing round. It is for a relatively small area, 6%, of the Atlantic margin. Let the Oireachtas committee take what evidence it wishes from whomsoever it wishes and for as long as it likes, and then let it come to conclusions. However, that will take a considerable length of time in my opinion.

Will the Minister recommend that the Minister for Finance change the tax terms for the Corrib regime, since he said that they could be changed at any time?

I am sorry Deputy but we are out of time. I am calling the Minister to reply to Deputy Martin Ferris on Question No. 2.

Sale of State Assets

Martin Ferris

Question:

2 Deputy Martin Ferris asked the Minister for Communications, Energy and Natural Resources his views on proposals to sell parts of the ESB; if he has made any decisions on this matter; and if he will make a statement on the matter. [23961/11]

The EU-IMF programme of December 2010 involves a commitment that the Government will outline methods to raise funds through asset disposals. The 2011 budget included a similar commitment.

The programme for Government includes an intention to finance investment in the State from the proceeds of the sale of certain State assets. The Government has also considered the report of the McCarthy review group on the sale of State assets and the recommendations of that group.

I accept that the fiscal path, to which the Government is committed under the EU-IMF agreement, demands that the option of realising value from State assets be fully explored. I also accept that there is significant value in energy commercial State companies, which could be realised at an appropriate time after necessary further analysis of all the complex factors relating to the disposal of commercial assets in the energy sector.

The sale of a minority stake in the ESB as an integrated utility has, this morning, been agreed by Government. This decision is an early demonstration of the commitment by the Government to the programme for Government's objectives and to its obligations under the EU-IMF memorandum of understanding.

This sale will be advanced by means of a defined process involving a full evaluation of the best approach to be taken, including consideration of the size of the minority stake to be sold. That process will be progressed by a group co-chaired by the Department of Communications, Energy and Natural Resources and the Department of Public Expenditure and Reform, also including officials from the Department of Finance and availing of expertise from the National Treasury Management Agency and NewERA.

Full consideration will be taken of the energy policy and regulatory framework in this evaluation, and appropriate consultation will be engaged in. The group will report back to Government with a recommendation by the end of November.

Additional information not given on the floor of the House.

The decision by Government today recognises the strategic importance of the energy sector to the economic and social functioning of the State, and that the State must continue to have a strong and direct presence in electricity, particularly in the regulated transmission and distribution networks. This presence must be maintained in a way that protects overall economic competitiveness and does not deter private investment. The process to analyse options for the minority stake sale in ESB will fully reflect these principles.

While I thank the Minister for his reply, I wish to reiterate that my party is totally opposed to the sale or disposal of any State share in the ESB, be it a minority one or otherwise. The acquiescence of the programme for Government to the demands being made by the IMF and others is unacceptable and absolutely wrong. For generations, the ESB and other semi-State companies have served this State well, both socially and infrastructurally.

Could we have a question for the Minister, please?

I will get there. What has been agreed today is a retrograde step and will be a disaster in the long term. What percentage minority share has the Government agreed to sell off? What is the projected value of that share to the economy or, should I say, to the IMF?

I hear the Deputy's reiteration of his opposition to the disposal of any State assets. I also hear his conviction that there is no necessity for the Government to respond to the demands of the IMF-EU memorandum of understanding.

However, he has not explained how he would run the social services of the State in circumstances where we walk away from the agreement imposed on us by the previous Government. Due to the injunction by the troika that we must dispose of some State assets, I find myself in a position I do not want to be in but I acknowledge that the survival and viability of this economy is at risk. We have to ensure economic recovery and get people back to work.

No decision has been made regarding the percentage that will constitute the minority stake. That will be a matter for the process I have described in my initial reply. A group comprising my Department and the Department of Public Expenditure and Reform will, between now and 30 November, work out the many complex and intricate decisions that must be taken in the context of the disposal of any share in a State company. I agree entirely with Deputy Ferris on the role the ESB has traditionally played in this society and economy. I am happy to report that will continue to be the case because the Government's decision is to dispose of a minority stake.

I cannot understand why the Minister, after taking a decision in principle to dispose of a minority stake, does not know the percentage figure to which that minority will equate.

It is less than 50%.

Has Deputy Ferris a question?

The Minister does not know the value of the stake to the Exchequer. He has taken a decision and he speaks about the financial situation in this country. Will the financial situation be improved by privateers taking over part of our national assets?

That is the reality. The give-away of national assets by the previous Government was acquiesced to by the present Government.

Eircom was an example.

Eircom is a classic example of what has happened.

I call the Minister.

It is an example of what the parties opposite have done and are prepared to do.

What about the workers in ESB when those private profiteers come into the equation?

Where do they stand?

I call the Minister now.

People will be cast out of their jobs and there will be more unemployment.

Order, please. Deputy Ferris, I am calling the Minister.

I am not yet finished.

What is happening here is a disgrace.

The Deputy must be fair to other Deputies.

The Government will sell off the State's assets one by one, starting with the decision taken in principle this morning on one of the most lucrative of our State assets. It is an asset that has supplied an outstanding infrastructure——

The Deputy should resume his seat. That is enough.

The Government has no right to sell off State assets.

The Minister to make a final reply, briefly.

I am pleased, as should be all my colleagues in this House, with the growing recognition in Europe of the responsible manner in which this Government is dealing with the crisis we inherited.

The Minister is contradicting himself.

That is not what the economists are saying.

That is becoming clearer with every day that passes. I cannot understand how Deputy Ferris can assert that the Government is handing over control of State companies to outsiders. A minority stake is not control and there is no question of this Government handing over control. The ESB has strategic significance for the Irish economy and we recognise its importance in the context of energy security and supply.

The Government has already handed over control to its European masters.

Alternative Energy Projects

Thomas Pringle

Question:

3 Deputy Thomas Pringle asked the Minister for Communications, Energy and Natural Resources if he has considered the development of a wood biomass industry to offset home heating oil imports, to create indigenous jobs and to reduce carbon emissions here; and if he will make a statement on the matter. [24144/11]

The 2007 Energy White Paper set overarching targets for penetration of renewable energy in the electricity, heat and transport sector. These targets are 40% renewable electricity, 12% renewable heat and 10% renewable energy in transport. These three sectoral targets are in line with meeting our renewable energy directive target which sets a binding 16% penetration of all energy from renewable sources.

Currently, Ireland imports some 90% of its fuel to meet demand at a cost of approximately €6 billion per annum. Developing renewable sources of energy, including energy from biomass, will help Ireland to reduce its dependence on these imports. In addition, because sustainable biomass is considered carbon neutral, it will also assist Ireland in meeting its climate change commitments under the Kyoto Protocol and the 2020 European Union targets.

In order to support renewable energy from biomass and waste, my Department is in the process of introducing new tariffs for biomass technologies under the renewable energy feed in tariff, REFIT, scheme. REFIT is designed to provide certainty to renewable electricity generators as to the price they receive. It has been in operation for wind, landfill gas and hydro power since 2006, acting to ensure a guaranteed price for each unit of electricity exported to the grid by paying the difference between the wholesale price for electricity and the REFIT price. The tariffs for biomass technologies will range from 8.5 cent per kilowatt hour to 15 cent an hour depending on the technology deployed and will include higher tariffs where the heat generated by a plant is being used more effectively. These biomass REFIT rates are in the final stages of being cleared through the State aid process by DG Competition in Brussels.

Other measures that will assist the development of biomass include the Department of Agriculture, Fisheries and Food's bio-energy scheme, which offers supports to farmers to grow miscanthus and willow for use as energy crops, and afforestation grants to encourage new forests. Full details of all these scheme supports are available from the Department of Agriculture, Fisheries and Food.

I thank the Minister for his reply, although only the last two sentences address my question. There is great potential to create an indigenous wood for home heating industry which would offset the importation of home heating oil. Given that, as the Minister stated, we are currently importing all the heating oil we use, such a development would greatly assist with our balance of payments. The industry would be based in rural areas, where we already produce more wood than is needed to heat the entire country. It would create jobs, something of which we have heard so much from the Government under the so-called NewERA.

Unfortunately, the Minister did not address these aspects in the opening part of his answer. Will the Government support the development of a wood for home heating industry and thus facilitate the creation of indigenous jobs and a reduction in imports of home heating oil? That would be of significant benefit to the economy and would help to address fuel poverty.

I meant no disrespect to the Deputy. It is conventional to provide this type of background information; not everybody is as knowledgeable about REFIT and the subsidy to the industry as is Deputy Pringle. I did no more than elucidate that point.

I do not disagree with what the Deputy said, but his expectation for an indigenous industry is somewhat exaggerated. I agree with the general thrust of his contribution in terms of the capacity of this area to make a contribution to our electricity and heating needs and to contribute to rural development and the creation of jobs in rural areas. However, in all fairness, one of the reasons I wanted to explain how REFIT works is that there may be an assumption by some people that all it requires is the press of a switch and we will have a biomass industry. As stated in my reply all of this involves a subsidy and people should understand that. I also stated that the tariff will range from 8.5 cent to 15 cent. That is a consideration. The net point as far as the Deputy is concerned is that this matter is being progressed. It has been with the relevant DG of the EU for some time and I expect a decision on the matter in the next couple of months.

I suggest that the Minister's officials contact the Donegal Woodland Owners Association and Western Development Commission, which is currently running the RASLRES programme that is examining the potential of this industry. I believe that a policy rather than a subsidy is what is required to encourage and develop this industry and I do not believe the EU-IMF-ECB or anyone else would have a problem with that.

We are agreed on the desirability of building a renewable sector that can make a contribution to the targets that we must meet in a European context. I accept that biomass is an aspect of that. I reiterate, however, that I would not be as optimistic as Deputy Pringle in terms of the quantum that will be contributed. That does not mean that it is not important. I accept that it is important in the context of rural development and indigenous employment.

Éamon Ó Cuív

Question:

4 Deputy Éamon Ó Cuív asked the Minister for Communications, Energy and Natural Resources if he intends giving approval to the REFIT programme; and if he will make a statement on the matter. [23963/11]

The renewable energy feed in tariff scheme known as REFIT was introduced in 2006 for certain categories of renewable energy, including onshore wind. Since then, the tariffs have been increased, where applicable, by the annual consumer price index. Adjustments to the rate are by way of indexation annually and by the annual increase, if any, in the consumer price index in Ireland.

REFIT is based around 15-year power purchase agreements between generators and suppliers which provide wind energy developers with the necessary certainty required to finance their projects. The scheme is funded through a public service obligation, PSO, levy, paid for by all electricity consumers. With the support of REFIT, the sector has continued to grow strongly and there is now approximately 1,800 MW of renewable generation capacity connected to the electricity grid. In addition, there is a further 1,100 MW of renewable generation capacity with signed connection offers. This capacity will build out over the next few years.

The next batch of generation capacity is referred to as the Gate 3 process and consists of approximately 4,000 MW of renewable generation capacity. The projects in this category are scheduled to be connected to the grid between 2012 and 2020. EirGrid currently forecast that approximately 4,500 MW of renewable generation capacity is required to be connected by 2020 to achieve our national renewable electricity target of 40% of all generation from renewable technologies.

The original REFIT scheme was designed with a view to delivering our 2010 renewable electricity target of 13.2% of electricity consumption from renewable technologies. It was successful in achieving that target and Ireland was one of only six member states to achieve its 2010 target level. Officials from my Department are currently finalising State aid clearance with DG Competition in Brussels to continue to offer REFIT for the next batch of renewable energy projects that are in the Gate 3 process. It is proposed to offer the same rates of tariff as in the original scheme.

Additional Information not given on the floor of the House.

There are two State aid clearance processes under way, one in respect of onshore wind, landfill gas and hydro technologies and a second in respect of various biomass categories. The Commission is currently finalising its assessments on both applications and I am confident that we will have a positive outcome shortly in both cases. As this is a Commission decision process, it is not possible to give an exact conclusion date. Once these clearances have been received from Brussels the final proposed schemes will be brought, as soon as is practicable, to Government for sign-off before being opened for applications.

Any additional REFIT rates beyond these technologies will have to be considered carefully by the Government given the cost implications to the electricity consumer. The public service obligation levy is imposed against all consumers' electricity bills, domestic and commercial. The objective is to balance the imperative of increasing the penetration of renewable energy with the retention of competitive affordable energy supply.

Is the Minister willing to hold back on the decision in regard to the new REFIT, which is fundamentally different from the old one, until an Oireachtas committee has had a chance to examine the issue? There are people who believe that this is a great giveaway, which will give so-called suppliers, namely, big companies such as the ESB, Airtricity and Bord Gáis, a licence to print money to the tune of €1 billion on the backs of Irish taxpayers.

The reason is that the new REFIT works on the basis that the producer, that is, the person with the wind farm receives a fixed tariff, that the supplier receives a fixed margin, with virtually no risk, and if the price increases due to the cost of oil the supplier, rather than the producer, gets the benefit. In view of all these serious public concerns about this scheme, which was devised by his Department, is the Minister willing to hold back on any decision on the new REFIT programme until the Oireachtas committee has had an opportunity to examine whether the concerns raised by people of good bona fides and knowledge are founded? It would appear to me that they are well founded.

The application has been with DG Competition of the European Commission for 18 months or longer and is in the final stages so I do not see how I can pull back. Certainly, I am more than willing to go into committee with Deputy Ó Cuív and other members to tease through this issue because there are questions that need to be examined with regard to this system. I am assured there is no basis for the claim that REFIT is a licence to print money. As I said to Deputy Thomas Pringle what is involved here is essentially a subsidy, whether it comes from the consumer or the Exchequer, and for that reason it must be measured very carefully. The whole idea is to bring more competition into the market to make us less reliant on fossil fuels and to use a natural resource, of which we have a bountiful supply, but I accept there has to be a balance.

Will the Minister leave the issue with the Commission while we examine it? Will the Minister agree that no REFIT contracts will be entered into under the new scheme pending discussion by the committee? The allegation made is that a margin is given to the supplier — not the person with the wind farm who must operate through a supplier — for virtually no risk and if the price increases the supplier gets all the benefit. If the price is low the State foots the bill and if the price is high the supplier, rather than the producer, gets all the benefit. Therefore, there are two major gains for the supplier for virtually no risk. These are not the people who build the wind farms but the major companies who would put the electricity on the market. Will the Minister clarify the amount to be paid to the supplier multiplied by the total number of megawatts he intends to produce, multiplied by the 15 years these contracts would be place? Will he hold back on issuing any REFIT contracts until the Oireachtas committee has had an opportunity to examine what,prima facie, appears to be a serious giveaway from the State?

I am assured that the contribution is no more than is necessary to encourage new entrants into the marketplace, which is what we are seeking to do. If there are these big holes in it — the scheme was devised by Deputy Ó Cuív and his colleagues — I do not know when it dawned on him that there are such holes in it. I am happy to go into committee and examine it. I appreciate the Deputy holds strong on it, about which we have spoken briefly privately. I am anxious to submit it to that type of scrutiny but the professional advice I have is that, contrary to Deputy Ó Cuív's conviction in the matter, the scheme is well balanced. It simply would not function unless there was some element of REFIT.

Absolutely. Like the old REFIT.

Therefore, all we are debating is the quantum.

No. The Minister has been——

We are running out of time. We are dealing with a priority question.

The reality is——

The Deputy is behaving like a new Member of the House. He is mad for action. I believed he would be tired——

No. The Minister looks exhausted.

——after all the years he spent making the wrong decisions. I believed he would be worn out.

I have great stamina and do not look exhausted.