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Seanad Éireann debate -
Wednesday, 17 Feb 1960

Vol. 52 No. 6

Petroleum and other Minerals Development Bill, 1959—Second Stage.

Question proposed: "That the Bill be now read a Second Time."

Broadly, the purpose of this Bill is to facilitate the carrying out of a comprehensive scheme of exploration for oil and natural gas in Ireland. There can be no certainty that petroleum deposits exist in this country in quantities that could be worked economically. At the same time, the benefits that would accrue to the national economy from the discovery of petroleum in worthwhile quantities would be so valuable that it is desirable that a scheme of exploration should be undertaken which would establish whether oil or natural gas occurs in quantities which would be capable of being developed economically. Exploration for oil is very costly and highly technical, and it is desirable that it be carried out by concerns which have the necessary up-to-date equipment and adequate experience of similar work in other parts of the world.

Oil and natural gas, which are covered by the term petroleum as used in this Bill, are found in association with sedimentary rock formations. Such formations are fairly extensive and of moderate thickness in Ireland and, although there is no direct evidence, it is possible that oil could occur in these formations unless it has been released by disturbances during their long geological history. The main oil producing areas of the world are in the Middle East and the American Continent, but oil has also been found in Western European countries in quantities somewhat greater than might have been expected, having regard to their geological structure and history. Holland, France, Western Germany, Austria and Italy have all undertaken oil exploration and development with varying degrees of success. Great Britain has also carried out extensive oil exploration at considerable cost, but only limited quantities have been discovered up to the present. A report published in December, 1957, by O.E.E.C. in regard to the development of the oil resources of Western Europe is discouraging in its assessment of the prospects of finding oil in Ireland, but the fact that applications have been made to me for the grant of oil prospecting facilities indicates that in some quarters, at least, the prospects are not regarded as too discouraging.

The existing legislation relating to petroleum exploration is contained in the Petroleum (Production) Act, 1918, and the Minerals Development Act, 1940. These Acts were passed at a time when there was little prospect that exploring for petroleum would be undertaken in this country, and they do not provide adequate means for facilitating large-scale exploration programmes. I am satisfied that new legislation must be enacted to facilitate comprehensive exploration under the most up-to-date conditions.

This Bill provides for the vesting in the Minister for Industry and Commerce of all petroleum in the State and empowers him, by the grant of licences and leases, to secure that any petroleum deposits that may be discovered will be developed efficiently. There is provision in the Bill for the grant of compensation to the persons who formerly owned the petroleum rights if petroleum is subsequently found and worked, and also to persons whose land may be damaged by operations carried out in searching for and working petroleum deposits. A number of the provisions of the Bill are already contained in our general legislation relating to minerals, but it is desirable to repeat them in this Bill in order that all the legislation relating to petroleum may be contained in one measure.

Mineral ownership in Ireland presents a mosaic of holdings varying from 100 to 1,000 acres in extent. About one half is already in State ownership. The balance is in private ownership but it is frequently difficult to determine who are the legal owners. It is obvious that oil companies could not be expected to enter into commitments to spend money on oil exploration in Ireland if they were faced with the endless difficulties associated with negotiations for the acquisition of oil rights with a large number of private owners. It is necessary, therefore, that, subject to the payment of compensation, the State should acquire title to such petroleum rights as are not already vested in it. If, at any time in the future, petroleum is found and worked, the owners of the petroleum rights which are now being vested in the Minister under this Bill will be entitled to a royalty related to the royalty rent reserved by the lease.

In oil producing countries, the general practice is that profits earned by oil operators are shared with the Government. The most common arrangement has been one which provides for profit-sharing roughly on a 50-50 basis, though some of the major oil producing countries are now demanding a higher percentage. Generally speaking, the more favourable the prospects of discovering oil, the higher the percentage of the profits demanded by the State. The Bill provides for the sharing with the State by way of royalties or similar payments of the profits earned from the sale of any petroleum that may be found here. Having regard to the relatively poor prospects of discovering oil in economic quantities in Ireland, I am satisfied that it would not be reasonable in present circumstances at any rate, to insist upon a 50-50 profit-sharing arrangement.

As Senators are aware, I have entered into an agreement with American oil interests for the carrying out of a comprehensive scheme of exploration for petroleum in this country and for the working of any deposits that may be found. The Agreement, copies of which were laid on the Table of the House, will not come into operation until this Bill is enacted. I ought, perhaps, to say that I have not had from any Irish interests a satisfactory scheme for the carrying out of a full scale exploration programme for oil.

The company with which the Agreement has been made is Ambassador Irish Oil Ltd., an Irish registered company which will be a wholly owned subsidiary of Ambassador Oil Corporation, Fort Worth, Texas. Ambassador Oil Corporation are an organisation with extensive practical experience of oil exploration and the working of oil fields and they have the resources necessary for the carrying out of a comprehensive exploration for petroleum in Ireland. Under the terms of the Agreement, their subsidiary company, Ambassador Irish Oil Ltd., will be given exclusive exploration rights over the whole country for an initial term of five years, and, if they meet their obligations under the Agreement, over 75 per cent of the country for a further 5 years, 50 per cent for a third term of 5 years and 25 per cent for a fourth term of 5 years. They will be entitled to prospecting licences and mining leases in any area over which they have exploration rights.

During the first three years of the first five year period, Ambassador Irish Oil will be obliged to spend at least 300,000 dollars on exploration and to drill at least one well to a depth of 5,000 feet. If they do not meet both these obligations, the unexpended balance of the 300,000 dollars will be forfeited to the Minister, and they will have no right to any further prospecting rights or to any mining leases which may have been granted to them in the period.

If the company, having met these obligations, does not elect to proceed with further exploration they may retain any leases acquired by them up to that time but will have no further right to leases or to explore further for petroleum. If they elect to continue exploration after the first three years, they must spend a further 200,000 dollars during the remaining two years of the first five year term. If they do not spend all that amount of money in the two years, the unexpended balance will be forfeited to the Minister and they will have no further right to exploration licences or mining leases but they will be entitled to retain any leases acquired in the first three years.

If Ambassador Irish Oil meet all the obligations which I have mentioned, they will retain the right to any leases granted to them during the first five years. If, however, they spend 1,000,000 dollars in the first five years, they will have, in addition, the right to renewal of their exploration licence for a further period of five years but must surrender to the Minister for Industry and Commerce 25 per cent. of the territory.

During the second period of five years, Ambassador Irish Oil will be obliged to spend at least 750,000 dollars but, if they actually spend 2,500,000 dollars, they will be entitled to renewal of the exploration licence for a third period of five years over 50 per cent. of our territory.

During the third five year term, Ambassador Irish Oil will be obliged to spend not less than 750,000 dollars but if they actually spend 4,000,000 dollars, they will be entitled to renewal of the exploration licence for a fourth term of five years over 25 per cent of our territory.

During the fourth term, Ambassador Irish Oil will be obliged to spend not less than 750,000 dollars but, if they actually spend 5,000,000 dollars, they will have a preferential right over other applicants, other things being equal, for renewal of their concessions. If, in any specified period, Ambassador Irish Oil fail to spend the appropriate minimum amount, then the difference between what they spend and the specified minimum sum is forfeited to the Minister for Industry and Commerce.

If, during any five year term, Ambassador Irish Oil have spent more than the minimum amount but not the amount which entitles them to automatic renewal, they may "purchase" such automatic renewal by paying the difference to the Minister for Industry and Commerce. As I have already indicated the Bill provides, in accordance with normal practice, for the sharing with the State of profits earned on the sale of oil and gas. The effect of the provisions relating to this matter which are contained in the Agreement is that the contribution payable to the State will never be less than a 7½ per cent. royalty computed on the selling price of the oil or gas or more than 40 per cent. of the company's net income as defined in the Agreement. Having regard to the very speculative nature of any project for seeking and working petroleum deposits in this country, I consider that this arrangement is a reasonable one.

In addition to the provisions relating to petroleum, the Bill provides for certain amendments to the Minerals Development Act, 1940. These amendments have been found to be necessary as a result of experience gained in the administration of the Act, and it is useful to include them in the present Bill. At present, for example, the Minister for Industry and Commerce is required, before granting a prospecting licence, to serve one month's notice by registered post on each surface occupier of land in the area covered by the licence.

When this provision was made in the law, it was not anticipated that prospecting licences would cover large tracts of land. The present practice, however, is to give prospecting licences for relatively large areas, and this means that formal notice has to be served on hundreds of surface occupiers. In the circumstances, I feel that, in the interests of administrative convenience, the publication in a local newspaper of notice of intention to grant a prospecting licence should replace the existing arrangement. A map giving details of the area affected will be made available for inspection in the Geological Survey Office and in the local post office, and, in this way, the interests of surface occupiers will be adequately safeguarded.

The Act of 1940 provides for compulsory acquisition by the Minister of ancillary rights, e.g., the right to construct roads, the right to a supply of water, the right to cross lands adjoining a leasehold, but I am advised that the Act is defective because, inter alia, it does not empower him to assign such rights to the holder of a State mining lease. It is desirable that this defect should be remedied in relation to oil and other minerals and this is being done in the present Bill.

A prospecting licence issued under the Act of 1940 may not be expressed to apply to named minerals but is deemed to apply to all minerals and, in effect, therefore, it confers on the licensee an exclusive authority to search for all minerals in a given area. I propose to amend the Act of 1940 so that, in future, the authority conferred by a prospecting licence may, if necessary, be confined to one or more specified minerals so that the Minister for Industry and Commerce will be in a position to authorise different persons to prospect for different minerals in one area.

It is my hope that the Bill will commend itself to all Senators, and that there will be general acceptance of the principles of the measure. On its enactment by the Oireachtas, the first major scheme of petroleum exploration in Ireland will commence. Ambassador Irish Oil Ltd. will apply to me for an exploration licence within three months of the enactment of the Bill, and they will be required within a further three months to make substantial deposits in an Irish Bank of moneys to cover expenditure during the first part of the exploration programme.

It will, I am sure, be appreciated that the Bill has been prepared on general lines which will make it possible to facilitate a number of exploration projects for petroleum. As I explained, the first project will be carried out by Ambassador Irish Oil Ltd., but it is possible that, after the completion of this project, or of such part of it as the company may decide to undertake, other groups may formulate proposals for exploration programmes. The wide basis on which the Bill rests will make it possible to grant any reasonable facilities which may be necessary for the purposes of carrying out a number of successive exploration projects.

I hope that, on its enactment, the Bill will provide the facilities which are necessary for the exploration and development of whatever oil deposits we may possess.

I want to welcome this Bill with the minimum of words and, to the Minister's relief, with the minimum of knowledge. The subject matter of the Bill is one for lawyers and engineers, and I am neither. In fact, I feel strangely like the boy who once stood on the burning deck because those people whom we had competent to discuss this Bill are not here. I do not know what the physical results will be on the Irish scene as a result of this legislation, but I hope what will be done will be done neatly and discreetly, and that the Irish scene will not be destroyed thereby. I also hope that eventually we shall see Irish farmers like Middle East sheiks, driving around in goldplated Cadillacs. In essence, it is a Committee Stage Bill. We have had a long television session and I propose that we give the Minister the Second Stage now and deal further with the Bill in Committee.

The principle of this Bill is quite acceptable. I think there is no other method by which this work could be carried out, but owing to a curious set of circumstances, the person who was to deal with this matter in Committee is not available now. I should like to ask the Minister to postpone the Committee Stage, on the understanding that certain matters will be raised then. We shall have no objection to his getting all Stages on the next day the Seanad meets.

For what length of time does the Senator propose that we postpone the Committee Stage?

Until the next meeting.

March 2nd— this day fortnight.

There appears to be no necessity for any comment from me, except, first of all, to thank the Seanad for the manner in which the Bill has been received.

Do I understand that the Minister is closing?

An Leas-Chathaoirleach

I did not think anybody else wanted to speak.

I should like to say something, if I may?

I am sorry; I did not see the Senator rise.

I also am sorry that I did not see him.

I want to welcome the general principle of the Bill, which vests a portion of the mineral wealth of the nation in the Government of the State. When it was suggested by the Professor of Geology in Trinity College that possibly there might be oil in County Clare, it caused a certain amount of excitement to Kilrush Town Commissioners, to the county council of Clare, and in the whole county and indeed the rest of the country. It was a very tentative statement by Professor Gill, but it was taken up with great enthusiasm in Clare. It occurred to me, when I saw all this enthusiasm recorded in demands by Clare County Council for action by the Government along the lines now suggested by this Bill, and for immediate attention to be paid to this professor's statement, that I should look up and see whether County Clare was one of these counties which permits its people to hold scholarships in Trinity College. I found that it was not. Possibly if, finally, oil is struck in Clare, it may have a broadening as well as a deepening effect on the sentiments of the people, reflected not merely in gold Cadillacs, but perhaps in a slightly more liberal outlook also.

I am very doubtful if the Senator is in order.

He is not talking about petrolem now. He is asking for something else.

I am adverting to the possibility of oil being struck in Clare along these lines, and the possible effects like gold Cadillacs, which have been suggested. I am satisfied that equally good spiritual benefits in the way of more liberal thinking might accrue from the striking of oil in such circumstances.

I am a little surprised, though it will come up no doubt on Committee Stage, that nobody has risen to say that the Minister is taking on behalf of the State very considerable powers to interfere with the rights of the individual, rights of property and so on.

I notice that among the ancillary rights as defined in Section 3 there are all kinds of rights to be given to the holder of various types of licences. I take one almost at random. It is paragraph (i) of Section 3. It gives the holder a right to dam or divert any river or watercourse, including an artificial watercourse. The same section also gives a right to construct, operate, and maintain roads and railways for access and egress for the purpose of conveying petroleum, and for that purpose to use and occupy land and to exercise any right in or over land, and so on. You will, if you get one of these leases, be able to go through anybody's lands, road or railway, to divert rivers, and watercourses, and so on. I am not suggesting that such powers will be abused, but I am adverting to the fact that the Minister is asking for very considerable powers to be conceded to him in this Bill, which, could, if abused, lead to considerable interference with individual rights. There might even be a question of this not being fully constitutional.

I notice that in Section 13 there is a subsection which provides that if in the opinion of the Minister it is in the public interest that petroleum under specified land shall be granted by way of lease to any person, the Minister may demise such petroleum to that person by way of lease for such term as the Minister thinks proper. I should like to ask what exactly is in the Minister's mind when he is thinking of the terms of such a lease. Possibly it is, as he suggested, along the general lines of the lease granted to the American company, that is, a not very long period, of five or ten or 25 years. I should hope that such leases would be of short duration, and not of the absurd type granted sometimes in ground leases, and so on, for 500 years and that kind of thing.

The Minister has adverted to an agreement with an American oil company. It is quite natural that an outside company with experience of this kind of thing should be allowed to come in to do this, though I do remember that the European Economic Commission of the United National Organisation produced a report upon oil which surveyed the oil and the petrol situation, and one of the conclusions of which was that American interests in oil were artificially keeping the price of oil and petrol at a figure almost double what it would be in Europe, if we were allowed freely to buy oil from the Middle East, without the interference of these controlling companies.

That is a point that ought to be in the mind of the Minister at any rate in dealing with these companies from Texas, in whose interest is to show that no oil can be produced more cheaply than it can be in Texas, because that is the burden of what this United Nations Committee says, that the price of oil per barrel as produced in the Middle East was very nearly half the price regarded as economic in Texas and so had to be artificially increased. I hope the Minister will have this in mind, and that possibly Irish oil, if it comes to the surface, may be used to some extent to break that kind of international artificial price rigging.

I notice that Section 16 covers compensation for damage to the surface of land or to mineral deposits, or to water supplies caused directly or indirectly either by working or doing anything incidental to the working of petroleum, or by exercising the right of entry on and user of land. Under that section, a person shall be entitled to compensation. May I take it that that paragraph covers any work resulting from ancillary rights for the purpose of gaining access to or egress from the land? I am sure that it is comprehensive.

I notice that the Minister is to bring into being and permit these ancillary rights "by order". The rights are very considerable, and I should like some comment from the Minister as to what shape the order will take, whether it will be laid on the table of the Oireachtas and in any sense be open to question or debate.

The Minister has also said that notification in the newspapers would be regarded as sufficient in order to safeguard adequately the interests of the people involved. Perhaps I have read this too hastily, but I do not quite see what people who are dissatisfied with the intention to grant a lease in the locality or to grant ancillary rights can do about it if they are dissatisfied. The Minister has suggested that their interests are adequately safeguarded if they are publicly told that certain of their rights over their property are to be taken from them. I would ask him if that is really fully safeguarding their interests, unless we say clearly what they can do about it? It is almost like saying: "We are going to take over your farm, and give you one month's or three months' notice, and since we are doing this publicly your interests are adequately safeguarded." There is a non sequitur there, unless I have failed to see some paragraph that shows what they can do about it if dissatisfied with this rather abrupt way of telling them that certain rights that vest in them are no longer to be vested in them by reason of a ministerial order.

I do not want to delay the House further. I think the Minister has been bold in this matter. He has gone very far in it. My hope is that it will result in the good of the State and the community. I am tempted to recall that people like Fintan Lalor suggested that some such idea as this should be applied to the land of Ireland—that the land of Ireland should be vested in the State and the people, and that the people should hold it by lease from the community, in the precise way the Minister is now suggesting for petroleum. Perhaps the Minister and the Government are, judging by this Bill, beginning to tread those paths towards socialism along which Fintan Lalor had the hope we might some day be going in this country.

There are two points I should like to mention to the Minister which might perhaps be more relevant on Committee Stage but which I shall mention now. I refer to Section 16 where damage to the surface of the land is dealt with. "Damage to the surface of the land" is the point with which I want to deal. I do not think that compensation payable to a neighbour is dealt with in the Bill. Let me deal with it in this way. Supposing the Minister gives a prospecting licence for a certain area and the Ambassador Oil Company decide to bore on the borders of that area, is there anything in the Bill to compensate the owner of the neighbouring land who is not in the area for damage not so much to his land as to the amenities: the outlook and the enjoyment of the land? There could be a serious difficulty there in a demand for compensation from a person whose property has been reduced in value by the fact that the company might put, at his front door, a large construction which might be of a permanent nature.

There is one other point I should like to mention to the Minister. There is a section which compels the company or the Minister, in certain circumstances, after boring, to leave the area, or the bore-hole, in a safe condition only. I should like to see it left, so far as possible, in the condition in which it was previously. A "safe condition" might mean that the bore-hole was left in a safe condition but outside it there might be deposits from excavations. Those points can be dealt with on Committee Stage but I should like to hear the Minister on them.

The points raised by both Senators Sheehy Skeffington and Cole are really Committee Stage points, even though Senator Sheehy Skeffington may have, in fact, touched on some matters which are fundamental. The position as regards the granting of leases is that a person who is in possession of an exploration licence will have a statutory right to a lease, and the giving of a lease will be attended with the greatest possible degree of endeavour to secure that adequate compensation will be given. That will also apply to the giving of ancillary rights. All ancillary rights which the Minister may acquire must be adequately and fully compensated to the owner of these rights.

So far as length and conditions of lease are concerned, the conditions will naturally be related to exploration or drilling for oil, and the length will also be related to the life of the oil deposit, which is usually about 20 years, maximum. It is not likely that any of the leases given under the Bill will exceed 20 years, and in most cases they will probably be for less than 20 years.

On Senator Cole's point about the danger of affecting a neighbour's land in respect of which no rights have been sought or given, I think the answer is that this Bill will not preclude a person from seeking his ordinary civil law remedy in respect of damage done to property not included as part of an exploration or drilling operation. The Senator need have no fears that anybody who is an innocent victim of these operations will not be properly provided for.

The bore-hole difficulty which he mentioned was one which I myself raised in the Dáil. The manner in which it was met was ample to ensure against any danger or any damage that might occur as a result of leaving a bore-hole in a defective condition. The owner of the land on which that borehole was opened would be fully compensated for any damage that might be done to his property or to his stock. He would be fully compensated even after the operators had departed from the scene. There is a provision whereby the Minister himself would be responsible, in the event of the operator not being available or amenable to the jurisdiction.

In that case, Senator Cole need entertain no fears about the possibility of bore-holes being left inadequately protected and causing damage. There is a provision that they must be properly protected and in the event of their not being so protected, the compensation provision will be adequate.

So far as the oil deposits in county Clare are concerned, as Senator Sheehy Skeffington knows, these deposits proved to be refined oil. If there were sufficient known deposits of oil throughout the country, it would not be necessary to enter into this agreement with the Ambassador Oil Company.

Question put and agreed to.
Committee Stage ordered for Wednesday, 2nd March, 1960.
Business suspended at 5.40 p.m. and resumed at 7 o'clock.