Molaim an Bille um an Ghníomhaireacht Chúltaca Ola Náisiúnta don Teach. I am pleased to have the opportunity to present the National Oil Reserves Agency Bill to the House. This Bill, which was initiated in the Dáil in June 2006, is an important part of the Government's energy agenda.
The Government's Green Paper on energy policy, Towards a Sustainable Energy Future for Ireland, has set out the framework for national energy policy for the medium to long term. The policy proposals to be set out in the forthcoming White Paper will be informed by projections in respect of growth in energy demand and related economic and demographic trends, as well as the requirements to ensure sustainability and security of energy supplies and fuel diversity.
In addition to work under way on the development of the Green Paper on energy policy as a White Paper, the Energy (Miscellaneous Provisions) Act 2006 was enacted at the end of December. The Act has expanded the functions of the Commission for Energy Regulation, CER, the independent statutory body responsible for regulating and overseeing the liberalisation of Ireland's electricity and natural gas sectors. Earlier this afternoon, this House considered the Electricity Regulation (Amendment) (Single Electricity Market) Bill 2006 and is due to consider Report and Final Stages of this Bill tomorrow. This Bill will be an important step in the delivery of the single electricity market that will contribute to a more secure and cost efficient service for all customers.
A detailed explanatory memorandum has been published that provides a synopsis of the provisions of this Bill as initiated. While the Bill has undergone some changes in the course of its passage through the Dáil, these changes have not been fundamental. Amendments to the Bill by Dáil Éireann have resulted in the insertion of three new sections — sections 49, 57 and 62 — which were introduced with the objective of strengthening the Bill.
The Bill has a number of strands which I will outline. It will establish the National Oil Reserves Agency, NORA, as a stand alone non-commercial State body under the aegis of the Department with responsibility for the maintenance of strategic supplies of oil in line with the State's oil stockholding obligations to the European Union and the International Energy Agency, IEA. It will transfer the Irish National Petroleum Corporation's shareholding in the National Oil Reserves Agency to the Minister for Communications, Marine and Natural Resources and will provide for the continued operation of the agency as a private limited company under the Companies Acts. It will provide for the continued operation of a variable levy on disposals of petroleum products to be imposed on oil companies and oil consumers. Such a levy has operated since 1995 under the European Communities (Minimum Stocks of Petroleum Oils) Regulations 1995. It will make provision for the furnishing to the Minister of regular returns in respect of oil purchases, sales, consumption, imports and exports by oil companies, oil consumers and the National Oil Reserves Agency and will provide for monitoring of compliance with its provisions and the application of penalties in the event of non-compliance.
Before discussing the detailed provisions of the Bill, I wish to outline the background to the National Oil Reserves Agency, which was set up in 1995 as a subsidiary of the Irish National Petroleum Corporation. Arising from its membership of the European Union and the International Energy Agency, Ireland has obligations to maintain levels of national oil stocks. At present, it must maintain 90 days of previous year consumption under the EU system and 90 days of previous year net imports under the IEA system.
Prior to 1995, the oil companies in Ireland were obliged to meet a substantial portion of these oil stockholding obligations. This system proved unsatisfactory and, under the European Communities (Minimum Stocks of Petroleum Oil) Regulations 1995, responsibility for the maintenance of strategic stockholding was vested in the National Oil Reserves Agency. For pragmatic reasons, the agency was established as a subsidiary of the INPC. Since 1995 NORA has acted as the agent of the Minister for Communications, Marine and Natural Resources with the function of arranging for the holding of strategic oil stocks at a level determined, at least annually, by the Minister.
The period since 1995 has coincided with the emergence of the Celtic tiger and the phenomenal increase in the country's oil consumption. This increase has impacted on the volumes of strategic stocks required to meet the 90 days obligation of the IEA and the EU. On 1 December 2006 Ireland's oil stock reserves were estimated at 129 days, well in excess of the 90 days obligation. With the disposal of the Bantry oil terminal and the Whitegate refinery in July 2001, NORA is the sole remaining subsidiary of the INPC. The INPC has no operational capacity and its current activities are limited to its rights and obligations arising from the sale and purchase agreement attaching to the 2001 transaction and meeting requirements under company law arising from its role as parent company to NORA. It is against this background that the Government agreed the agency should be established as an independent body under the aegis of the Minister for Communications, Marine and Natural Resources, continuing to have responsibility for the maintenance of emergency oil reserves. The Bill provides that the INPC shareholding in NORA will be transferred to the Minister and the agency will continue to operate as a private limited company under the Companies Acts. On enactment of the Bill, therefore, NORA will no longer be a subsidiary of the INPC.
I will refer to the main provisions of the legislation in more detail. Part 2 provides for the transfer to the Minister of the share owned by the INPC in NORA. By means of a ministerial order, a share transfer day will be appointed as the day on which the INPC transfers the share owned by it in NORA to the Minister.
Part 3, which includes sections 7 to 31, inclusive, provides for the continuation of the agency as a limited company subject to the provisions of the Companies Acts. Provision is also made for wide-ranging corporate governance provisions. The principal functions and powers of NORA are set out in section 8. These include the maintenance of oil stocks, the provision of advice to the Minister on matters relating to the holding of oil stocks, the collection of a levy on petroleum products and the provision of advisory and technical assistance. The agency will have powers to acquire, hold, store, import, export, transport and exchange oil and it will also have powers to construct, acquire, maintain, operate and develop works, plant, storage tanks and pipelines for holding and transporting oil stocks. These provisions are necessary for the ongoing successful implementation by NORA of its oil stockholding responsibilities. Part 3 also makes provision for a company memorandum and articles of association, for alterations thereto and for the appointment of a board of directors of six persons. Provisions have been included in regard to the submission of strategy statements by the agency to the Minister, the drawing up of a code of conduct by the agency, the appointment of a chief executive by the directors, the setting out of CEO functions and the appointment of staff.
Since its establishment in 1995 the agency has been funded by a combination of a levy on oil companies and oil consumers on disposals of petroleum products and by commercial borrowings from financial institutions. It is proposed that this situation will continue. The legislative proposals regarding borrowing by NORA, set out in sections 26 and 27, propose an aggregate borrowing threshold of €1 billion, a figure which takes account of sustained high oil prices of recent years. NORA avails of commercial borrowings to fund the purchase of oil. Obligations regarding the submission of annual reports and accounts by the agency are provided for in sections 28 and 29. Section 31 provides that the NORA CEO may be examined by committees of the Houses of the Oireachtas on expenditure by the agency.
Part 4 sets out provisions relating to the maintenance of oil stocks by the agency. As a member of the IEA, Ireland is required to maintain emergency oil stocks equivalent to at least 90 days of net imports in the previous year. The EU imposes a similar requirement based on consumption. Section 32 provides that the agency shall maintain a level of oil stocks to comply with Ireland's stockholding obligations, or such higher level as the Minister may specify. Ireland meets its EU and IEA obligations through a combination of wholly owned stocks held in Ireland by NORA and industry-major oil consumers; wholly owned stocks held by NORA in other EU member states under cover of bilateral agreements; and oil stock "tickets" where NORA has entered into short-term commercial contracts — either in Ireland or in EU member states where a bilateral oil stockholding agreement has been concluded — with an option to purchase, in emergency circumstances, during the period of the contract.
Sections 32 and 33 provide that NORA may enter into contracts with third parties to hold stocks on its behalf either within the State or outside the State in accordance with a bilateral agreement. The facility to hold stocks under cover of bilateral agreements stems from EU stockholding legislation. A member state may hold stocks in the territory of another member state, subject to a bilateral oil stockholding agreement being in place between the respective states. Under such agreements, the host country guarantees that it will not oppose the transfer of the oil in question to Ireland in the event of an emergency. Section 34 obliges the Minister to decide what volumes of oil stocks are to be maintained to meet international obligations and requires that the Minister must keep the agency informed as to the volume of oil stocks it must maintain.
Section 35 provides for the issue of ministerial directions authorising the agency to release oil stocks in, for example, a case of major interruption in oil supplies. There would be no question of Ireland or any other oil consuming country attempting to deal on its own with such an interruption. If such a crisis were to occur, the response, including the release of emergency stocks and the identification of alternative sources of supplies, would take place primarily within the framework of the formal emergency regime developed and maintained by the IEA. This framework acknowledges that the management of major oil supply disruptions requires an international response.
Part 5 outlines provisions relating to the NORA levy on disposals of petroleum products. One of the key strands of the legislation is to provide for the continued operation of a variable levy on disposals of petroleum products by oil companies and oil consumers. The levy, which funds the holding and storage of oil and other operating expenses of the agency, is charged at the rate of 0.476 cent per litre on sales of petroleum products. It is applied to oil companies that use petrol, kerosene, gasoil and fuel oil for their own consumption and-or sales of these products within the State. The levy has remained unchanged since 1995.
Section 37 provides that expenses of the National Oil Reserves Agency, which are defined under section 36, will continue to be funded by the monthly levy on oil disposals. The National Oil Reserves Agency will continue to administer and collect the levy. The agency will also continue to be funded by borrowings from financial institutions towards the purchase of National Oil Reserves Agency owned oil stocks.
Section 38 provides for exemptions from the levy. At present oil consumer companies that hold in excess of 55 days reserves based on their previous year's consumption may claim an exemption from payment of levy. It is a commercial decision for each oil consumer as to whether it avails of the exemption or pays the levy. In order to avail of the exemption, an oil consumer will require dedicated tankage for oil storage over and above its normal operational requirements.
Section 38(2), as passed by Dáil Éireann, provides that an oil consumer may claim exemption from levy on the basis of a contract between an oil consumer and a third party to hold oil owned by the oil consumer for the purpose of the consumer claiming an exemption from levy. The Minister may consider a claim for exemption from levy provided that, before the contract was entered into, the contract proposals were submitted to the Minister.
While it is accepted that oil consumers will generally have adequate storage facilities to allow them claim an exemption from levy, nevertheless it is acknowledged that storage problems may arise from time to time where, for example, a company must temporarily decommission storage tanks in order to carry out necessary or unanticipated refurbishment works. Therefore, section 38 facilitates oil consumers who find themselves in this situation and also strengthens the Minister's powers in regard to the assessment of applications by oil consumers for exemption from levy payment.
Section 39 provides for the issue of monthly notifications to the agency by the Minister in regard to the volumes of petroleum products disposed of by each oil company and oil consumer in the preceding month. Volume assessments will be based on information provided by the companies or, in the absence of information being provided by a company, the Department will provide an estimate.
Section 40 provides for calculation by the Minister of the amount of levy payable by each oil company and oil consumer and for notifications of each company's liability to the agency. The levy charged will be based on disposals during each month and the rate of levy as prescribed by ministerial regulations. The Department notifies the agency of the relevant levy amounts payable by each company and the agency invoices the companies accordingly under section 41.
Section 41 provides that monthly notices be provided by the National Oil Reserves Agency to oil companies and oil consumers advising them as to the volumes of petroleum products disposed of, the rate of the levy, the amount of the levy due, the date by which the levy should be paid and any exemptions from levy payment. Section 42 provides for the charging of interest on levy not received by due date, while section 43 provides for the recovery by the agency, through the courts, of unpaid levy.
Section 44 provides for the making of regulations by the Minister relating to the levy. Regulations may be made in regard to a range of matters, including the rate of levy to be charged, the volume of products to be held by an oil consumer in order to claim an exemption from levy, the keeping of records by oil companies and oil consumers, the times at which levy payment becomes due and the rate of interest on unpaid levy. The section provides that if the prescribed rate of levy is varied, the new rate of levy will take effect three months after the making of a ministerial order.
Part 6, which encompasses sections 45 to 51, relates to enforcement provisions. Provisions are proposed to provide for inspection and monitoring of the premises of oil companies and major oil consumers. These provisions include the appointment of authorised officers, the powers of authorised officers and the issue of search warrants.
Section 49, as passed by Dáil Éireann, obliges authorised officers to report certain matters. The section provides that an authorised officer who, while in the course of an audit of an oil company or an oil consumer or while operating under a search warrant, forms the opinion that an activity is being carried out at a premises which is either not in compliance with a regulatory provision or the officer considers that there is a risk to the health and safety of the employees is obliged to report the matter to the appropriate authority. Examples of "appropriate authority" include the Garda Síochána, the Health and Safety Authority, the local authority and the Revenue Commissioners. A regulatory provision includes any provision made under legislation concerning the protection of employees, the protection of the environment or the regulation of planning and development.
The offences provision under section 50 provides, inter alia, that a person is guilty of an offence if he or she obstructs an authorised officer in the exercise of a power conferred under section 47; fails to comply with a direction of an authorised officer under section 47(1)(c) or (e); fails to comply with section 62 (4)(b); alters records that the person has been required to produce; gives false information to an authorised officer; or impersonates an authorised officer.
Part 7 provides for amendments to relevant legislation and for revocation of the 1995 regulations. Sections 52 to 54, inclusive, provide for amendments to sections 7, 8 and 9 of the Irish National Petroleum Corporation Act 2001 to allow the transfer of the assets of the Irish National Petroleum Corporation to the National Oil Reserves Agency; and release of the Irish National Petroleum Corporation from its obligation to repay to the Minister any moneys that might be paid out by the INPC under the provisions of the ministerial guarantee pursuant to the sale and purchase agreement relating to the 2001 sale of Whitegate refinery and the Bantry terminal; and the alteration of the memorandum and articles of the Irish National Petroleum Corporation to reflect the provisions of the National Oil Reserves Agency legislation.
Section 55 provides for an amendment to the Freedom of Information Act to provide that NORA will come within the scope of the Freedom of Information Act. Section 56 revokes the European Communities (Minimum Stocks of Petroleum Oils) Regulations 1995 as the provisions of these regulations will become redundant after the Bill is enacted.
Part 8 provides for miscellaneous provisions relating to the making of ministerial regulations and orders, the prosecution of offences, penalties and the giving of notices. Section 57, which was agreed on Report Stage in Dáil Éireann, will allow regulations to be made under the National Oil Reserves Agency Act to give effect to amending legislation of the European Communities in so far as such legislation relates to oil stockholding. The absence of this type of provision in the National Oil Reserves Agency Bill would require an amendment to the National Oil Reserves Agency Act in order to give effect to any future European Union legislation relating to oil stockholding.
Ireland's obligations to the European Union and the International Energy Agency require the provision of monthly returns relating to oil imports, exports and consumption, together with details of oil stocks held by the National Oil Reserves Agency. These returns allow the EU and the International Energy Agency to monitor both oil usage and member countries' compliance with oil stockholding obligations.
Section 59 provides that the Minister may make regulations requiring oil companies and oil consumers to make written returns within specific timeframes. The proposals in regard to data provision do not include obligations on companies over and above obligations currently imposed.
I draw the attention of Senators to section 62, as agreed on Report Stage in the Dáil. This section relates to bilateral oil stocks held in the State on behalf of another member state and to oil stocks also held in the State on the National Oil Reserves Agency's behalf. The provision sets out criteria to be applied in regard to applications to the Minister to hold oil stocks in the State on behalf of another member state. Oil companies and oil consumers will be obliged to submit contract proposals to the Minister in advance of entering into any contract arrangement. The definition of "contract proposals" provides clarity in regard to the information to be submitted by companies to the Minister.
In order to ensure that the approval of bilateral contracts should not weaken Ireland's stockholding position, subsection (2) provides that the Minister, before deciding on a bilateral stockholding proposal, will have regard to the level of Ireland's national oil reserves and the availability of adequate stockholding facilities in the State for the purposes of meeting the State's stockholding obligations.
With regard to contracts between NORA and oil companies to store oil in the State on the agency's behalf, the section provides that such oil may not be drawn upon or replenished without the prior consent of the agency. The House will note that an offence provision has been created under section 50 of the Bill whereby it will be an offence if a person draws upon or replenishes stocks of the National Oil Reserves Agency without its prior consent.
The objective of strengthening the Minister's position in regard to the approval of bilateral stockholding contracts and of NORA's position in regard to the holding of stocks in the State on its behalf, has been met through the amendment of the Bill to include this provision.
On a general note, I hope the foregoing gives Senators a reasonable summary of the policies underpinning the Bill. The Minister is confident that the provisions of the Bill will have benefits for Ireland in terms of affording maximum protection in the event of a significant oil supply disruption.
The Minister of State at the Department of Communications, Marine and Natural Resources, Deputy John Browne, will be glad to provide any further information required by Senators to facilitate the early enactment of the Bill. I hope the Bill will be progressed into law at the earliest opportunity.
