Dáil Éireann díospóireacht -
Friday, 8 Jul 1938

Vol. 72 No. 6

Committee on Finance. - Vote 71—Peat Fuel Development.

Mr. Lemass

I move:—

Go ndeontar suim ná raghaidh thar £22,000 chun slánuithe na suime is gá chun íoctha an Mhuirir a thiocfaidh chun bheith iníoctha i rith na bliana dar críoch an 31adh lá de Mhárta, 1939, chun Deontas-i-gCabhair chun na Móna d'Fhorbairt.

That a sum not exceeding £22,000 be granted to complete the sum necessary to defray the Charge which will come in course of payment during the year ending on the 31st day of March, 1939, for a Grant-in-Aid for Peat Fuel Development.

Deputies will recollect that a Grant-in-Aid was given to the Peat Fuel Development Company last year to enable them to complete the experimental work on which they were engaged. The funds provided by that Grant-in-Aid have now been expended, but, notwithstanding that, the position of the undertaking has not altered materially except, of course, that considerable further experience of the operations of the company has been acquired, but the undertaking cannot yet be regarded as a commercial proposition.

The amount of raw peat brought to the factory at the end of 1937 was estimated as sufficient to produce about 11,000 tons of briquettes, whereas the original estimate for the season was 30,000 tons. The company's present position is that further Government assistance is necessary to enable them to carry on their operations. The amount of the financial assistance required has been estimated at £30,000, of which about £5,300 is required for new plant and machinery. I am advised that if that assistance were forthcoming it would enable the company to carry on the milling and harvesting of about 120,000 tons of raw peat this year, from which about 40,000 tons of briquettes, it is estimated, would be manufactured.

This year, as last year, it is reasonably clear that the commercial prospects alone would not justify the giving of further assistance by the State. I feel, however, that the process worked by this company has not been fully tried out, and if the operations were now to cease no final conclusion could be reached as to the economic possibility of harvesting and briquetting peat in Ireland by the methods adopted by this company, and as a considerable amount of money has been provided, not altogether by the State but by private interests for the conduct of this experiment, it is advisable to bring the experiment to a conclusion, particularly, as I am advised by my technical experts and the board of the company and others who have examined the matter, there is good reason to anticipate that the technical difficulties of the company have been overcome and that the process can be shown to be practicable and worth proceeding with.

The amount advanced to the company is, of course, secured by a debenture on the assets of the company and we have an option to require the company to issue to us ordinary A shares against the money advanced, each of these ordinary shares carrying two votes as against the other ordinary shares, which have been designated as B shares. The position is that at any time the Government desires to exercise that option, it can acquire the voting control of the company. That, I think, is a reasonable safeguard in the circumstances. It is undoubtedly true that some of the private capital and other money invested in this company must be regarded as having been lost, in so far as it was expended upon experimental works which were not quite successful, and upon machinery which had to be subsequently adapted at additional cost before it became really suitable. At the same time, the enterprise offers such substantial prospects for development, if it is a success, that we think we should proceed with it to the end.

I will be in a position to report to the Dáil before the end of the year whether or not the additional expenditure has been justified by the success of the experiment. So far, I am informed, there is every appearance that it will be successful, and already a substantial harvest has been secured which will result in the production of a substantial quantity of fuel, the sale of which will bring in revenue for the company and assist its future operations.

General Mulcahy

I should like to ask the Minister, with regard to the statement that he will report to the Dáil at the end of the year, in what form will he report Is it the intention to put a formal statement, a written document, before the House?

Mr. Lemass

The Deputy understands that this is the harvesting season and everything depends on the harvest that will be won. That harvest will not be translated into briquettes and the briquettes will not be translated into cash until the end of the financial year. But before the end of this year it will be possible to see whether it is apparent that the difficulties which hampered the company in the past will be overcome. That statement will be made, perhaps, in reply to a Parliamentary question. The financial results will not be available until the end of the financial year, until the briquettes have been manufactured and disposed of. I think there will be no difficulty in disposing of the output of the factory if the technical difficulties in production are overcome.

General Mulcahy

So when the Minister says he will report before the end of the year, it will be only a question of casual reporting — there is no intention to make a systematic report before the end of the year?

Mr. Lemass

It would not be practicable.

General Mulcahy

So the Minister's suggestion that he is going to report is not so very important at the moment. I should like to ask him one or two questions. What is the total amount of money inclusive of this £30,000 which will have been issued by the State to this company, what is the value of any other assistance given, and what is the total amount of private capital invested up to date in the company?

Mr. Lemass

The total amount of private capital authorised and fully paid up is £47,004. Then there was money advanced on a mortgage debenture by a bank amounting to £20,000. The State guaranteed a loan of £90,000 and made advances last year of £35,000 and this year of £30,000, making a total of £65,000.

Mr. Belton

Can the Minister say what is the cost of producing a ton of briquettes and what is the commercial selling price? Can he give the House any information as to the cost of production and the selling price?

Mr. Lemass

Not precisely in the form in which the Deputy requires it. That is one of the matters on which information has to be procured — what is the lowest cost of production that can be secured. The briquettes were sold last year at 30/- a ton.

Mr. Belton

The Minister holds out hopes that this experiment will be a success. Surely if the experiment is carried out intelligently we should know at this stage what is the cost of production per ton. If the cost was 35/- a ton, there might be other factors in the experiment which would warrant its continuance in the hope that the cost of production might be reduced, and I would not blame the Minister for continuing the experiment. There might be other factors which would give him hope that the cost of production would be reduced; but surely he knows now the cost per ton of producing those briquettes that were sold at 30/-. He certainly ought to know now their cost of production.

Mr. Lemass

No, because the cost of production depends upon the output. The difficulty is that an output which would enable the company to be conducted on commercial lines has not been secured because of technical difficulties in the operation of the plant and because of other obstacles of that kind. If they could get an output of 40,000 tons a year they could make a profit at 30/- a ton, but with a less output than 40,000 tons a year they cannot do so. The profit to be made depends upon the output. It is in relation to that point that the difficulties have arisen.

Mr. Belton

That is precisely what I wanted to find out. We can all appreciate that if there is only production of one ton of briquettes the cost per ton would be enormous. The cost per ton of production would diminish as the quantity produced is increased. I wonder can the Minister say, at the present cost of production, including overhead charges, what output would he need to reach so that he would be running level, selling the briquettes at 30/- a ton—would 40,000 tons be the figure?

Mr. Lemass

Yes.

Mr. Belton

Then the profits of the company would increase with every ton over 40,000 tons?

Mr. Lemass

Yes.

Mr. Belton

Is the Minister satisfied that it would be a good, sound business if the 100,000 ton mark were reached?

Mr. Lemass

There are technical difficulties that I think have now been overcome. This industry is dependent very much upon climatic conditions. In a really good year, a bright sunny year, they could get a much higher output than in a wet, bad, rainy year. In the ordinary course of events once they get working on the basis of a commercial success they would make a good profit in a good year as against a bad year when the climatic conditions were not so suitable.

Mr. Belton

Then you would have to calculate over a period of years?

Mr. Lemass

Yes.

Mr. Belton

I am sure the Minister will not mind my want of knowledge in connection with this experiment. I understood at first that this experiment was independent of climatic conditions?

Mr. Lemass

I cannot speak as an expert but the Deputy is aware that this is a process of milling turf, milling it into a powder. The powder dries very much more quickly than the sod of turf and it is collected more quickly from the bog. This is a process that has been working most successfully in Denmark. Before we encouraged the process here its working was inspected by our experts in Denmark. The difficulties that might arise were attributable to the character of the bog and to climatic conditions. The bogs here are of a different character from the bogs in Denmark. The bogs here are much deeper than the bogs in Denmark. There is a higher percentage of moisture here and the bogs are larger in size. It was found that the particular method that was successful in Denmark could not be made a success here and the whole of this experiment has been directed towards the adaptation of these machines to Irish bogs. Now the experiment is working towards success.

Mr. Belton

Has the Minister any idea of the time that will be required to give this experiment a full trial? Has he made an estimate of the time it may take to give the experiment a full and fair trial?

Mr. Lemass

I think this year will decide that. The progress made this year will be the determining factor in the experiment. The year has been good from the climatic point of view. The opinion of the technical experts associated with the company is that they can make the thing a success this year unless they may come up against some insuperable difficulty. The moisture content of the peat was reduced by the process of milling in the bog. The powder is dried subsequently and then it is transported to the place where the briquettes are being manufactured. The moisture content is reduced by 10 per cent. before the actual briquette is made.

Mr. Belton

I am sure the Minister is hoping he will not meet with any insuperable difficulties this year.

Mr. Hughes

Am I to take it that if the company does not show a substantial improvement this year there will be no further subsidy available?

Mr. Lemass

If the company succeeded in carrying out its production programme and getting to the point of producing 40,000 tons of briquettes which could be sold at a profit, it would be a commercial success. But some consideration must be given to the fact that there is so much dead capital. The question might arise whether the Government may exercise its right of taking control of the company or some other question may arise the solution of which may entail favourable consideration. When Deputy Hughes speaks of subsidies I want to say it is not so much a matter of subsidy but making capital available. The State has power to take over control of the company, and it may exercise that power. If it did it would have to provide further working capital so as to make it possible for the work to be continued. It may be necessary in the future to provide, not a subsidy but additional money, but I do not think that is likely.

Mr. Hughes

How many people are engaged in employment by the company at present?

Mr. Lemass

The number is 150.

Mr. Hughes

Is that all the year round?

Mr. Lemass

It would vary from time to time. The process of harvesting the turf in the bog takes place from March until later in the year. The figure of 150 is the average for the year. The briquetting is done in the winter.

Mr. Hughes

The figure of £30,000 sounds rather big when one considers that there are only 150 people employed.

Mr. Lemass

Undoubtedly that is so. There would be no justification for the State making this money available were it not for the fact that the success of this experiment makes it possible for large development schemes in the peat fuel business being carried on in the future. Money may be lost in this plant but if, as a result of the money spent in it, the new process is shown to be a commercial success the money is well spent. In that event then the value of the experiment would be out of all proportion to the number of people employed there at present.

Mr. Hughes

Well, I was surprised to hear that the grant of £30,000 to this company only meant securing employment for 150 people.

Mr. Lemass

It is not a grant.

Mr. Belton

Would the Minister say if that is the usual proportion of capital content to labour content in the manufacture of peat fuel by this process?

Mr. Lemass

Oh, not at all.

Mr. Belton

I should have thought that while the thing is in its experimental stage the labour content would be unusually high. In the course of experiments that I have seen carried through in other industries I noticed that while the thing was in the experimental stage the labour content was unusually high and this labour content went down when the people employed became more adaptable and the thing became a commercial proposition. I would like to hear what are the prospects in this industry from the labour point of view?

Mr. Lemass

Whatever the employment potentialities of the company are one must not confuse the number of employed at a particular time with the capital sum expended. This experiment may make employment available for 40 or 50 years to come to 150 men. The expenditure of £30,000 would seem out of proportion to the employment of 150 men, but if you look at the possibility of the future where this work may be carried out in several areas as a result of this experiment the matter will look quite different. This is a fuel-producing process which will permit of substantial reproduction of that process in other factories throughout the country. The utilisation of these factories for the purpose of turning a native resource into a high-grade fuel is one that has caught public favour. The demand for the briquettes of this factory was far in excess of the actual supply. There seems to be no doubt that the briquettes can be sold if they are available, and the one point that we hope to make clear is that they can be made available by this process. I could not say what the normal employment in a factory of this size would be once it had been placed upon the basis of ordinary commercial working.

Mr. Belton

Of course, the Minister will go into that aspect of it?

Mr. Lemass

Oh, undoubtedly.

Mr. Hughes

Would the Minister tell us what is the real purpose of this £30,000? Is it for the purchase of further plant or the development of bogs and so on? Evidently it is not for employment.

Mr. Lemass

It is not for the purchase of plant. About £5,000 of it is for additional plant, and the balance is working capital to maintain the company during the year until the harvest has been sold.

Mr. Hughes

To maintain the plant?

Mr. Lemass

No, to maintain the company until it gets sale for its product.

Mr. Cogan

I think Deputies would be inclined to be sympathetic with the Minister so far as this year is concerned, in so much as he has given an undertaking that he will be able to decide at the end of the year whether the experiment is going to be successful or not. There is one point, however, on which I think Deputies would require information, and that is the result of the experiments and of the experience of other countries. We would like to know in how many countries on the Continent have experiments been tried, and the length of time over which those experiments have been tried; the rate of wages paid in the industry and, generally, information as to the success of peat development in those Continental countries; also, of course, the relative conditions under which the peat is found in those countries, and how it compares with this country. Having regard to the fact that this matter of peat development has been tried out, over a number of years, in certain countries, I think information of that kind would be extremely useful — more useful, perhaps, than any information the Minister can give with regard to the experiments made here over a short period.

Mr. Lemass

Well, of course, the general question of peat development is a much wider one. As Deputies are aware, the Turf Development Board are proceeding with the production of peat fuel by mechanical means at Turraun and other places in the country. They are following there what might be called the German method. That enterprise has every prospect of success, but, of course, it will be at least another 12 months before the development stage is completed and the production stage begun. The Germans, of course, are producing turf by that particular method quite successfully, and have been doing so for some time past. In Russia, they are using peat for the generation of electric power to a very considerable extent and very successfully, but the conditions there are very different from the conditions here. They get the peat very largely by hydraulic methods: that is, by washing the peat out of the bogs by means of jets of water pumped at great force into them. That, however, is not suitable here, nor is it necessary here.

The particular process this company is operating has a different history altogether. The process was the subject of experiments many years ago in Great Britain, and a company was formed there which, I think, was financed by the British Government to the amount of several million pounds, during the period of the war. I am not quite clear as to what the outcome of that expenditure was, but there did emerge a patent. A process was evolved which was patented, and the ownership of that patent ultimately passed from one company to another. No commercial working, however, followed from the granting of the patent until quite recently, when, following certain further experimental ventures, a company was formed in Denmark which established a briquetting plant and operated this process of harvesting on Danish bogs. Just at that stage a company was formed here to do the same work in this country, and the company are proceeding on commercial lines. The Government became interested only when an application for a trade loan guarantee was made. At that stage the Government employed as its advisers certain people who are regarded as experts in matters relating to peat, and, in fact, have been regarded as the world's foremost experts on these matters. These experts went to Denmark and inspected the process that was being operated there. They went into the whole matter thoroughly and produced a report, the effect of which was to recommend the Government to assist this company to carry out the development here on an experimental basis, having regard to the benefit it would be if the first experimental factory proved to be a success. Consequently, a company was formed which has the right to operate this patented process in Ireland, and which was financed to a large extent by private capital and a portion by trade loan guarantee, and they set out to work.

They ran into difficulties. Their initial difficulties were not dissimilar to those which other commercial companies met. They planned to get going in 1935, but through delays of various kinds they did not get going until 1936, with the result that their working capital had been absorbed and they found themselves unable to continue in 1936. They met that difficulty by issuing debentures, but 1936 proved to be a particularly unsuitable year from any point of view, and also, as I have mentioned, the company began to discover that the machinery which was, apparently, quite successful in Denmark, was not suitable for operation in Irish bogs. Consequently, they had to carry over until 1937, and in that year we helped them by means of a loan charged against the assets of the company. That gave them the means of providing for that year. It meant the readaptation of the machinery and the reorganisation of the process on the basis of the experience gained in 1936. They got to the point, at the end of 1937, where they could see, according to their own conclusions, the possibility of successful working in this year, but, of course, they were up against the fact that they would not be selling the material they produced until the winter, and that some temporary financial arrangement would have to be made which would carry over their operations until the winter. If their plans work out as they expect, they will get back from their sales this winter an amount sufficient to repay the loan they are getting. Of course, we will not press them to repay it because they will still require some working capital, but if their plans work out they should recover this amount advanced to them for capital from the sales this winter. If that is done, then their future working is only a matter of some arrangement to enable them to continue.

Mr. Hughes

Does the company anticipate making any experiments in artificial drying? As Deputy Belton says, if you are going to depend on sun-drying, and if you have an abnormally wet year such as we have this year, it is going to be very difficult.

Mr. Lemass

This was not an abnormally wet year. Certain months were abnormally wet, but in fact we have had a very dry year on the whole up to this.

Mr. Hughes

But you will have abnormally wet years.

Mr. Lemass

Undoubtedly, and it was to deal with them that this process was designed. This milling process on the bog permits of the turf being reduced to 55 per cent. moisture content in a very short spell. A day or two will get it down to 55 per cent. moisture content, and it is at that moisture content it must be delivered to the plant. Further drying is done in the plant. The plant was constructed by Messrs. Babcock and Wilcox, and there was an undertaking — I forget the particular form of it — that if turf of 55 per cent. moisture content was delivered to this plant it would be produced in briquettes of certain efficiency. That undertaking was given by Messrs. Babcock and Wilcox, who were responsible for the construction of the plant, and who are, as Deputies are aware, a very eminent engineering firm.

Mr. Belton

In supporting the suggestion of Deputy Hughes, I should like to say that I think the Minister would be well advised to adopt any experiment which would tend to eliminate the necessity for natural drying by sun and air. Under the old methods, the production of turf had to depend on the weather. I am quite satisfied that its production cannot be a commercial success until we can defy the climate and dry the turf artificially. I agree with the continuance of this experiment until all hope of its being a success has gone. I think the Minister has the support and good wishes of every Deputy in the House for the success of the experiment. When I say that I think he should be on the look-out for artificial means of drying, I say that because I believe that only on those lines will peat production be a success in this country. The climate is too moist, the bogs are too wet, and the dry season too short to produce a fuel that could possibly pay for the overhead charges. The plant costs, I think, £65,000, the balance of £25,000 being for working capital. With £5,000 lying idle for the greater part of the year, the industry could never hope to be a success. I am not very well up in the mechanical processes of turf production, but I think that while peat production depends upon drying by sun and air it will not be a success. I think that that success will be ensured only by having artificial means of drying the peat.

Vote put and agreed to.

Progress reported; the Committee to sit again on Wednesday next.