Before I introduce our motion I should like to mention that it is proposed to divide the time allotted because many Deputies are anxious to contribute to this debate. I propose to conclude at 7.20 p.m. and Deputy Kitt will conclude at 7.40 p.m.
Private Members' Business. - Bog Development: Motion.
I assume the Whips will give the Chair a timetable.
I assume they will. I move:
That Dáil Éireann calls on the Government to proceed immediately with the building of the briquette factory at Derryfadda, Ballyforan, County Galway and in the national interest to take all measures necessary to secure the maximum development of the potential of our bogs.
I am moving that motion on behalf of Deputies Leyden, Kitt, Noel Treacy, Connolly, Hyland, Power and all members of the Fianna Fáil Parly. There are two reasons for tabling the motion. The first is because of the continuous delay on the Ballyforan project. It was delayed in 1981 when the Coalition were in power and delayed again in 1982-83 and 1984. Another important aspect of the motion is to try to elicit from the Government their policy in relation to the ESB strategic plan which concerns the midlands and many other rural areas. Are those areas to be decimated and turned into economic wastelands or will the Government give us the decision we have been pressing for? The first part of our motion which concerns peat development in the midlands and other areas and the future of the ESB power stations does not need as much comment from me as the second part. We are all aware that a by-election campaign is in progress in Laois-Offaly. On a few occasions in the House I asked for a statement on the Government's position in regard to the future of the 14 ESB power stations and the Bord na Móna operation involved in servicing those stations but I failed to get a response. Indeed, I forecast that we would get a decision during the Laois-Offaly by-election campaign and I will not be surprised if that decision is imminent. The Minister may take the opportunity of clearing the air tonight——
Pure coincidence.
I know a decision is imminent. The Minister will try to produce it out of the hat to try to save the hide of the Coalition in that important by-election.
Would the Deputy accept it from my cap?
The Minister will lose more than his cap in Laois-Offaly if he is not careful and for that reason I believe he will produce the right decision soon. I am aware there was disagreement as to who should make the announcement and I agreed with the Minister that it is his area of responsibility. As Leader of the Labour Party and Tánaiste, why should he permit the Taoiseach or a Fine Gael Minister or a Fine Gael Deputy from the constitueney to announce that decision? Do not have the rug pulled from under you as it was in regard to the announcement of the National Development Corporation by the Minister for Industry. Trade, Cornmerce and Tourism late at night. He left the Minisier for Energy slightly embarrassed.
The Deputy should address the Chair.
Double exposure never hurt anybody.
We do not care where the announcement comes from but if it is not a favourable one not alone will the Government lose their cap and their hide-in Laois-Offaly but they will get their answer from the electorate throughout the country. It is economic lunacy to decimate the midlands. The livelihood of thousands of people depends on bog development. There is no alternative employment in the offing. If one examines the 1982 annual report on the cost per unit of milled and sod peat in the ESB operation one will see clearly that the figures being tossed around publicly are not the same. One can see from that report that the unit cost arising from the mix of milled and sod peat compares more than favourably with the cost in many of the stations that burn imported oil.
I believe the right decision is on its way. We will welcome it when it is announced but we will recognise it as a by-election decision. It is unfortunate for areas like south Roscornmon and east Galway that they do not have a by-election in progress. I accept that the electorate there will be voting in the European election but we are aware of the Governments attitude to that election. In some areas the Government have thrown in their hat as far as that election is concerned. South Roscommon and east Galway have not the opportunity to put the pressure on Government Ministers in regard to their area. I am glad Deputy Naughten is present for the debate. I suggest that if he does not stop being weak-kneed, as he has been up to now, in tolerating the 18-month reviewing of the Ballyforan project he will regret it. I am aware what that Deputy and the Minister of State, Deputy Connaughton, said when in Opposition. Now they are prepared to stay quiet while an 18-month review of the project is carried out. I will give you a brief history of the project.
The Deputy should address the Chair.
In May 1979 the Fianna Fáil Governnment approved of a peat briquette operation to be started at Ballyforan, serviced by the Derryfadda group of bogs and to provide employment for 600 people. That project was to be built in two phases and give production capacity to Bord na Móna for approximately 260,000 tons of peat briquetts. Work went along nicely until the Coalition took office in 1981. In that year work stopped and the project was pushed back for a review or to be considered by a committee or task force. The hallmark of the Government is that they push decisions over to committees of inquiry, reviews or consultants. They are not a substitute for decision-making. The Coalition went out of office very quickly and then Fine Gael members during Question Time and Adjournment Debates were asking the Fiannna Fáil Government what was happening. They claimed that they put £8.4 million into the non-voted capital part of the capital budget for 1982 but they did not tell the people in south Roscommon that Bord na Móna were not in a financial position to remunerate that capital. They did not tell the people that the European Investment Bank would not loan the money to Bord na Móna to continue with the bog development. The memoranda that were before the Coalition Government were rejected out of hand and they were not prepared to take the unpopular but correct decision to put the financial position of Bord na Móna in order. You did not do that.
The Deputy should address the Chair.
I was Minister for Industry and Energy in 1982 for another short spell and the first thing I did was review the project. In May 1982 I announced what I intended doing during an Adjournment Debate called for by Deputies Naughten and Connaughton. I told you then——
If the Deputy does not recognise the Chair he might recognise his new role.
I recognise it every few seconds and I am looking at you. I am not disregarding what you are saying, but you are inclined to break my stream of thought on this and I have to pull facts out of the air or out of my head. The review of the financial position was carried out. I took the politically unpopular but right decision in granting Bord na Móna a four-stage price increase which would remunerate them properly for their products which were totally underpriced at the time. That put Bord na Móna in the position that they could go to the European Investment Bank and raise the money to proceed with their bog development programme, which had been stopped by the previous Government, and proceed with the Ballyforan project. I announced here in May 1982 that the project was going ahead with one slight change. Instead of the large project in two phases it was going ahead in two separate factories, one to give an employment content of 110 people with 300 people employed in bog development to service the factory.
What was the capacity?
It was 140,000 tonnes capacity of peat briquettes. The second stage was to be another similar unit. The cost of that at the time was £20 million.
When was that?
We went out of Government and the Coalition came in again. Again they stopped the work on the project, or rather they stopped it in their own minds or their own offices or whatever. They decided that this project was not proceeding. What is the position today? An amount of £16 million has been spent on this project. There are contractual commitments to the tune of between £3 million and £4 million on this project. A total of £20 million of taxpayers' money has gone into this project and the Government have been reviewing and reviewing this project for the past 18 months despite the fact that the review was carried out by Bord na Móna themselves in 1982 and the decision taken to go ahead on the basis I have just outlined. The Government have spent £20 million. They took the decision at Cabinet or ministerial level perhaps, but they did not pass that decision down the line, with the result that work has gone ahead, more and more money has been spent, more contractual agreements have been entered into which will have to be paid for and milled peat production in advance stockpiling for that project stands around 150,000 tonnes. The ludicrous situation is that stockpiling has taken place for the project, £20 million has been spent and nobody, least of all Bord na Móna, know where this project is to go. Is that good financial management by a Government who have constantly preached financial rectitude? They stand indicted on their management of this and for not taking decisions.
The whole problem of this Government in a nutshell is that they have taken no decision. When asked the other day on the campaign why this Government were not falling out between Labour and Fine Gael I asked how they could fall out when they had taken no decisions. Decision after decision coming up to this Government is being passed back to a committee of inquiry or for a consultant's report or to a task force. I do not know why it takes 18 months to review an economic analysis of any project, the Ballyforan peat briquette factory or any other. but the Government cannot make up their minds as to what they are going to do despite the fact that all this money is being spent in the meantime.
Today in Ballyforan the management called in the unions and said that they wanted to discuss redundancies in the whole bog development area. I understand that tomorrow the worker directors will attend at Derryfadda for a full consultation on the situation. Is this decision being made by stealth? Have the management been told that the project is not going ahead? I ask the Minister to clarify that tonight. Why does it take 18 months for a Government to make up their minds in relation to it? It should not take anything like that. When they come to an analysis of this project neither I nor any other Deputy in this House want to see a very narrow economic analysis brought in. Surely it is the kind of project we are looking for, based on natural resources in the first instance. We want to develop natural resources. I ask the Minister, the Leader of the Labour Party, if his party are committed to the development of natural resources, and if not, why not? If this project is not going ahead why is it not going ahead?
Bord na Móna were set up by an Act of the Oireachtas in 1946 to develop the peat resources of this country and in so doing to provide employment. If any area at the moment needs employment, surely the Derryfadda area in south Roscommon and east Galway needs it badly. To pull the rug out from under them at this stage would be national economic suicide. The Government have spent up to £20 million on the project. They have 150,000 tonnes of milled peat stockpiled for the project and they have been sitting around for 18 months unable to make up their minds about whether to go on with it. What are the drawbacks? What has this delay cost the economy? The delay in this project has opened up the market for German briquettes which are much inferior to our native briquettes but they are sweeping the midlands market. This product is a very bad briquette made of dust and something else and does not compare in any way with the peat briquette from Bord na Móna which everybody here and abroad accepts as the best briquette on the market and can command a decent price. They have allowed the Bord na Móna market to be undermined. Now the Government are putting a bigger job in front of Bord na Móna in trying to regain the market.
It is not long since the market in the North was closed off to Bord na Móna because they could not get briquettes. It is not so long since briquettes were rationed here and could not be obtained. With all the forward planning that went into this project, surely it is a negative Government and negative thinking that delay for 18 months. If the project was not to go ahead it would have been decent to say so at the start and not spend taxpayers' money on Bord na Móna and allow outsiders to come in and take our market from us. I look to the Minister to give us a clear decision, — surely that is not unreasonable after 18 months of dilly-dallying — that produce based on our natural resources that will provide employment in the black spot for unemployment which Deputy Naughten and Deputy Connaughton said, quite rightly——
Deputy Reynolds has about two minutes left.
It is a pity I have not 42 minutes left because I could continue without any bother on a project such as this. The Bord na Móna annual report for 1982-83 states that the turnover for that year as at 31 March 1983 was £91.63 million of which £80.46 million represented added value. That is the type of industry this economy needs, that this country needs and that any Irish Government should be promoting. Exports represented £13.5 million of that figure.
Bord na Móna activities are very commendable in the area of horticulture and research into what to do with cutaway bogs. Maybe the Minister will tell us whether he has a policy on the cutaway bogs. It is high time that such a policy was set out clearly so that we can know what use is to be made of them. I am aware of the research and development that Bord na Móna have put into this. It is an area where employment can be increased and imports can be decreased by vegetable growing and the development of the cutaway bogs for grassland feeding for beef. Bord na Móna are also proceeding with biomass development. They are a progressive semi-State body who should be allowed to go about their business which was held back for a few years because they lacked the financial resources to do the things they wanted to do. Why should this Government hold them back for 18 months after I had set their financial situation right and given them the go-ahead and the opportunity to do it? The Government stand indicted in the eyes of the taxpayers for having squandered money. They stand indicted in the eyes of the people of south Roscommon and east Galway for having deprived them so far of opportunity. We want a clear statement of the position from the Minister tonight. My colleagues in speaking to this motion, whether they come from the area in question or from Laois-Offaly will elaborate on other aspects which they knew even better than I do.
In conclusion, I look forward to the Minister's statement here tonight and to a clear direction from the Government and the decisions that I believe imminent in the case of the ESB strategic plan. If the Government did not intend going ahead with the ESB strategic plan, why did they accept the very expensive redundancy plan which concerned the closure of the same power stations and which was at a rate never before experienced in the State? This involved six weeks' pay in addition to the average for redundancies. However, with the by-election about to take place, the Government may have to change their minds.
I second the motion proposed by Deputy Reynolds and I am very disappointed that the Government are not accepting this motion. Surely after an examination of the economic viability of this project, an examination spread over 18 months, the Government ought to have made up their minds. It is almost five years to the day since Fianna Fáil in Government sanctioned the project but we are still in the dark as to its future. The decision of the then Government resulted from a deputation in 1977 from the local public representatives and the Ballyforan Development Association. We were given a favourable hearing and we continued to press for a decision. Much consideration was given to the project and almost two years elapsed before a final decision was reached. Having been made aware that the project was sanctioned we hoped it would proceed rapidly. Naturally, we were very disappointed when, on the coming into office of a Coalition Government in 1981, a review of the whole matter was ordered. Obviously, there was no enthusiasm for the project so far as that Government were concerned. Two years later there was a second review. Because of all the confusion that has been created it is incumbent on the Minister to let us know what the position is.
Fianna Fáil were in power in 1982 and at that time an interest was taken suddenly in the project by the Coalition Deputies in Counties Galway and Roscommon. Deputy Connaughton, who is now Minister of State, raised the issue on a number of occasions. It was raised also by Deputy Naughten. The matter was raised on the Adjournment of the House in May 1982 when the then Minister, Deputy Reynolds, said that a new factory would be built which would have a production capacity of 140,000 tonnes per annum with employment for 110 people. As Deputy Reynolds has pointed out, the factory was to be built in two phases. In May 1982 he was speaking of the first phase. His commitment was welcomed by the people of Galway and Roscommon but Deputy Connaughton's response was that we were getting only half a factory. He repeated that assertion during the debate. It was a negative approach on his part though we have not heard any such reference from him since.
One other point I should like to make about that Adjournment debate was that the Minister said work would commence on the factory within four months of that time. The sod was turned in the following November which happened to be during a general election campaign.
Pure coincidence, no doubt.
As the record will show, that could not be labelled as an election gimmick because the Minister had said that the sod would be turned within four months of the debate taking place. However, when the Coalition were returned to power they ordered a second review. I regret that Deputy Naughten is not here this evening but he will be aware, from meetings which we as public representatives have attended in Galway and Roscommon, that the feeling among the people of the area is that there is a bias against the project, that there is no enthusiasm among the Government for it and also that it represents discrimination against the people of the west. It has been suggested also at these meetings that the reason for the lack of interest on the part of the Government is that the project was sanctioned by Fianna Fáil.
The Minister should answer these various arguments. Morale is very low among the workers concerned. The 160 people in full-time employment there are very concerned about their jobs after these past 18 months of uncertainty. In addition, the 45 to 50 people who worked there part-time have not been taken on this year. For them that part-time employment was a very important supplement to their incomes since many of them are smallholders.
We cannot afford to wait any longer for a decision. Let us hope, therefore, that the Minister will announce a favourable decision this evening. We had to wait a long time for a decision on another project in the area. I refer to the Tuam sugar factory. After many representations in that regard a decision was reached to maintain the factory. We are talking here about the continuation of a factory that has begun.
I am very proud of Fianna Fáil's record in regard to this peat briquette factory. From the moment it was sanctioned there was a definite commitment to proceed with the building. The necessary financial arrangements were made. The site was cleared in 1982 and the sod turned on 8 November of that year.
I should like to hear from the Minister why the project is not continuing. The civil engineering contract was to go to tender early in 1983 but that was suspended following the change of Government. It was natural for Bord na Móna to assume they would enter into contracts. I understand that happened. In one newspaper report I read it was suggested that contracts of up to £6 million were entered into by the board. This semi-State body will find themselves in a serious position because they entered into contracts on the understanding that the project was going ahead but now they find that a second review is ordered and there is a possibility that the factory will not be built. On 29 November 1983 I received a reply from the Minister for Industry and Energy on this matter. He said that contracts entered into by Bord na Móna in connection with the factory project were as follows: site development, entrance road, turbine and generator, boiler, presses, screens, site lighting, site electrics and an intake system. All those contracts were entered into. The Minister should tell us the position regarding these contracts. Will Bord na Móna have to honour them? It seems obvious that they should have gone ahead when the sod was turned for the factory. The next phase would have been to put the civil engineering contract out to tender.
Last year was a confusing one as regards trying to get that information about the future of Derryfadda briquette factory. In June 1983 on the Estimates I asked the then Minister, Deputy Bruton, what was the outcome for Ballyforan. He said that a review was to be carried out and spoke in terms of whether the investment would justify paying back loans. I was amazed to hear that because I understood that all aspects of the viability of the project has been dealt with and that there was no economic argument against building the factory.
When we discussed the Turf Development Bill in July 1983 the Minister of State, Deputy Collins, commented on the Ballyforan project. He said that a review of the Ballyforan project which was projected in the revised Public Capital Programme for 1983, published by the Government, was at an advanced stage and that the Minister hoped to be in a position to put the outcome of the review to the Government within the next few weeks. That was July 1983. This is May 1984 and we still do not know what the outcome of that was nor did we have a Government decision to continue with the project.
Last summer we met the Minister, Deputy Bruton, with a deputation from the area and after talking to him on 14 August we were no wiser. He spoke about the review and said he hoped there would be a decision before the end of 1983. No decision had been made.
This year we were told that £15.4 million was provided in the Public Capital Programme. In 1982 it was £8.4 million and last year it was £5.2 million. All this money was provided yet the Government tell us the review has to be carried out and considered by the Government. Last January the Minister said we would know the outcome within a few months. I hope the Minister will tell us the position tonight.
Galway and Roscommon County Councils are the local authorities involved. They have done a lot of work providing the infrastructure for the factory. They have co-operated in strengthening and repairing Ballyforan bridge which connects the two counties. Roscommon County Council have provided a water supply and housing there. We know it will benefit this area which has been so poor for so long because it was bog. There was no development there until Bord na Móna came in. Roscommon County Council were so concerned about the delay that they held a special meeting to consider the review. The meeting was held in January and Deputy Naughten told the meeting that there would be a decision on the factory within the next few weeks. This phrase is used by Government Deputies, Ministers and Ministers of State. It is disappointing that we have not had any definite decision. I call on the Minister to give us a decision on this tonight.
Farmers in the area sold the bog to Bord na Móna for as little as £25 an acre. They did this in the hope that there would be jobs there for their families so that their children could work in their own area. They have, so to speak, given away their bog and it is frustrating for them to hear about reviews. What could be more important than developing our natural resources and providing jobs in Counties Galway and Roscommon? There is very serious unemployment in both these counties. In the last four years unemployment in County Galway increased by 100 per cent. The permanent jobs are in jeopardy. The people involved are very concerned about their future. I am sure they have written to the Minister and other Government Deputies. They came into the Dáil on a number of occasions and made a strong case for an early decision. The small farmers got part-time work there which helped them supplement their incomes. They are also disappointed at the long delay.
I appeal to the Minister to give us a definite decision on the future of the project. It is the most important project in the west. There is no economic argument against it. We have waited for five years for a decision. It would be welcome and end the confusion and boost the low morale of the workers in Counties Galway and Roscommon.
I move amendment No. 1:
To delete all words after "Dáil Éireann" and insert:
"endorses the action of the Government in having a thorough examination carried out of the economic viability of the proposed briquette factory before a decision is made to proceed with the project and notes that in this examination full consideration is being given in the national interest to the maximum development of the potential of our bogs."
At the outset, I would like to refer to remarks made by Deputy Reynolds and Deputy Kitt. Deputy Reynolds raised a question of the ESB's strategic plan and the fact that there would be by-election influences brought to bear on decisions about to be made by the Government. It is an open secret that decisions will be made by the Government because they have had the plan for some time, but I want to put it on record that in the course of preparing a Department reaction to the strategic plan, at no time were my officials or myself motivated by by-election or any other election considerations.
Tongue in cheek.
Quite the contrary. Deputy Kitt said there is a perception in the west that there is a Coalition bias against this project. I emphatically refute that. Any project within my ambit as Minister for Energy will be looked at on its merits. The Deputy seems to feel that this Government — and the implication was that all Coalition Governments, or inter-Party Governments — have a bias against the west. That too is something I would like to refute because it is obviously untrue. It may be the Deputy's perception, and it may be many people's perception ——
This is on the record of the House ——
Deputy Reynolds, please.
As a Deputy from rural Ireland, no less than the Deputies opposite ——
Not as rural as we are.
That depends on how one looks at it. There is no in-built bias to making what has to be a straightforward decision on the merits or demerits of any capital intensive projects, like Ballyforan, which come before us. In order to understand the difficulties now facing Bord na Móna in relation to a decision whether to proceed with the Ballyforan factory project, I feel it would be of assistance, and necessary, to try to understand some of the board's difficulties at the present time, and some of the serious problems which Bord na Móna face. In that context I should put on the record of the House that Bord na Móna have had a great record as a semi-State company in the development of our national resources and in carrying out the whole programme for peat production. If we look back at the history of this project we can see that the present situation is not caused by any one event but is a cumulation of a series of misfortunes over the years, some of which were brought about by the Opposition when in Government and some which resulted from external factors which directly and indirectly affected the financial situation of Bord na Móna.
To get a true picture of the position Bord na Móna now find themselves in over the Ballyforan project, we must go back to the oil crisis of 1973 and the formulation of the third development programme which was a response to it. Deputies will remember that this was a time when the high cost of imported energy caused a rise in domestic prices and the balance of payments deficit. It can be said that the ensuing increases in inflation stemming from this period created huge problems for companies like Bord na Móna whose rising costs were not matched by corresponding price increases for their products.
The third development programme which commenced in 1974 was aimed at expanding peat production for electricity generation and for industrial and domestic use. The programme was subsequently extended to the 78,000 acres, which is under development today; the main development area being west of the Shannon where it was planned to produce 700,000 tonnes of milled peat from the Derryfadda group of bogs in County Galway and County Roscommon. It was originally proposed that this milled peat would be used to fuel an 80 mw power station in the Ballyforan area which would be located near the centre of the region being developed. Subsequently, however, this plan fell through when the ESB decided that it would be preferable to provide extra generating capacity by extending the Shannonbridge station.
In 1978 Bord na Móna indicated that they had reviewed their plan for the utilisation of the produce from Derryfadda and proposed that the milled peat should be used to produce briquettes at a factory to be erected on the Derryfadda bogs. The reasons given by the board in suggesting this change were two-fold—first, the market for briquettes had become buoyant and, second, supplies for the existing briquette factories were inadequate to meet demands.
One of the effects of the oil price rises in 1973 had been to boost the sales of solid fuels. Sales of machine turf had increased during 1973 to 1977 from 431,000 tonnes to 580,000 tonnes and briquettes from 330,000 tonnes to 360,000 tonnes in the same period. In the case of briquettes the market demand was constrained by supply and all available production was sold. Indeed, Bord na Móna estimated that an additional 150,000 tonnes could have been sold in 1977 if this amount had been available. It can be seen from this that there were strong arguments at this time in favour of using the milled peat from the Derryfadda bogs to produce an additional 260,000 tonnes of briquettes. From an economic aspect also it seemed more advantageous to use the turf for briquettes than to generate electricity and it was felt that more employment would be created by the briquette plant. An evaluation of the estimated capital cost of the project which took into account the price at which briquettes could be sold and indications of a possible future market convinced the Government of the time that a briquette factory would be an attractive alternative option to a power station. In May 1979, Government approval was given to the erection of a briquette factory at Ballyforan. The plan proposed was to erect a full size factory capable of an ultimate output of 260,000 tonnes but to equip it to produce 130,000 tonnes only as a first phase. The estimated cost of the project was £13.2 million for the factory on top of the £16.3 million of bog development at Derryfadda which was being incurred anyway under the third development programme making a total cost of £29.5 million.
Difficulties in financing the project beset Bord na Móna from the outset. The board considered different methods of financing, the first being Exchequer financing which would be repayable in half-year instalments over 25 years at 12 per cent. This was the most attractive method from the board's point of view, but it was ruled out by the then Minister for Finance. The third development programme was already being financed by repayable Exchequer advances and the interest on these had been waived for a five-year period because there would be no return during this time on capital invested in bog development until the bogs came into production. A request for an extension of this waiver for a further five years to help finance the factory was, however, turned down. The second option involved seeking finance in the form of a loan from the European Investment Bank over a 15 year term repayable in the final 11 years at 12 per cent. This would have required higher charges for briquettes than with Exchequer financing during the nineties which were regarded as crucial years for the project. This method was used initially to finance bog development but was not available for the project when in 1981 the EIB refused to lend money to the board because of the tenuous viability of the project—as in the EIB view the sale price of products was too low. Another option remaining was to finance the project completely from its own resources which would mean increasing sale prices for all turf products. Given that scope existed for increasing the prices of turf products which since 1973 had been underpriced in relation to other fuels, and in the case of briquettes so low as to require rationing to distributors, there seemed to be scope and the board had strongly pressed, indeed, for a price increase.
The price of briquettes was subject to the decision of the Minister for Industry, Commerce and Energy in the light of recommendations by the National Prices Commission. Bord na Móna's prices and, therefore, profits had been constricted by Government policy from 1974 onwards when prices were kept down; increases recommended by the National Prices Commission on allowable cost basis were in fact reduced by the then Minister for Energy. It is of interest to give Deputies some insight as to the treatment which was meted out to Bord na Móna by previous Governments and, in particular by the Fianna Fáil Government of the day, in relation to prices sought by Bord na Móna as they endeavoured at that time to finance their projects.
I hope that the Minister is not including me in that category.
It was before the Deputy's time. In October 1979 the board sought an increase of £9.5 million and the National Prices Commission recommended £7.5 million. Regrettably, at the time from the board's point of view the Government approved £5.4 million, £4.1 million short of what Bord na Móna sought on a cost level basis to finance their project at that time. In September 1980 an increase of 32 per cent was sought for domestic sales yet again by Bord na Móna, but the Government saw fit at that time to limit the increase to 10 per cent. In August 1981 an increase of 26 per cent was sought but the decision on this, in fact, was postponed to June 1982. We should look at the overall implications from 1979 to 1982 in relation to what the board had sought and actually got from the Governments of the day. As a result of the decisions mentioned just now, from 1979 to 1982 the total increase allowed in peat prices was only 28 per cent compared with approximately the 73 per cent it would have been on purely allowable cost basis if full National Prices Commission increases had been allowed. The effect of all of this on Bord na Móna in relation to the running of their affairs and their conduct of everyday business was to cause the build-up of a heavy burden of debt.
In 1979 the Government when giving their approval to the erection of the Ballyforan factory also approved the drafting of a Bill to raise the statutory limit on the amount Bord na Móna could borrow for the performance of their functions. I have to say, looking at it perhaps with the benefit of hindsight at this stage, that surely it must be accepted that it was totally contradictory for the Government to withhold price increases, to allow interest payments on Exchequer advances for turf production to be deferred, at the same time to approve an extension of borrowing and also to allow a situation to come about in which because of Government policy the board were forced to sell their products at prices which, while remaining keenly competitive, would have to be recouped as a minimum, allowable cost. It is true to say that if Bord na Móna had been free to increase their prices on a more reasonable basis during the seventies a stronger capital base could have been built up from the revenue generated and the board put in a stronger position vis-á-vis the subject matter of this motion, the Ballyforan project.
On the board's side there were lower figures projected for cost inflation which ran at figures near the twenties over the critical years. These higher cost inflation levels than expected, coupled with the fact that prices obtainable for the factory's output under the then pricing policy would be insufficient to cover projected total costs, resulted in a decision to proceed with the factory being deferred until the viability of the entire development programme had been reviewed. The board had indicated that State grants and Exchequer finance, and interest waiver or deferment would in fact be required to make the project viable. The Minister for Energy had a comprehensive review carried out, in conjunction with Bord na Móna, of the viability of the project and indeed of the financial needs of the board. This review had particular regard to the financial resources which the board must derive, in the absence of Exchequer funds, from the sale of their products to enable their operations to go ahead. Consequent on this review the Government approved in June 1982, in accordance with the board's proposals, a pricing structure for turf products which it was felt would enable the Ballyforan project to go ahead. The increases, in the board's view, could not be applied all at once but were to be phased over the next year and these increases would be conditional on the Minister for Energy being satisfied that the relativities of the market warranted them.
Since September 1980 the price of milled peat to the ESB has increased by about 145 per cent and sod peat to the ESB has increased by 48 per cent. Increases approved on the domestic market since 1980 were sod peat 66 per cent and briquettes 54 per cent.
At this stage the land had been acquired, a bridge had been built and a road and railway tracks laid to facilitate development and indeed considerable bog development and factory site preparation carried out.
The projected bog development and factory costs which had been in the region of £30 million in 1980 had now escalated to a sum expected to be in the region of £48.2 million. In May of 1982, the then chief executive of Bord na Móna had stated that, even with realistic pricing levels, Bord na Móna would have to reduce the cost of the project and shortly afterwards the board decided to cut costs by scrapping the original plan and replacing this by a plan which would allow the project to be carried out, but with two separate factory units, the first of which would be designed to produce 150,000 tonnes with employment for 110 persons and to proceed at once; a second similar factory unit to be deferred until later. The effect of this would be to reduce factory costs by one-third and to ensure that the second unit would not be proceeded with until the success and viability of the first unit had indeed been established.
It is necessary to look at the statutory obligations of Bord na Móna from which we can see that the board are required to remunerate capital fully, that is, to provide out of revenue for the payment of interest and the amortisation of debt. The board as a statutory corporation have no equity capital. Over the years sales revenue and depreciation provisions have provided some measure of self-financing, but prices sanctioned for their products pegged too low have not allowed the board to build up reserves of cash towards the cost of new development. Exchequer finance is no longer available following the Government decision in 1978, which, by wisdom or otherwise of the then Government, rejected the question of Exchequer advances for Bord na Móna's bog development programme.
Continuing board anxiety over funding caused doubts to persist about the viability of the project and, as Deputies will be aware from the published estimates, over the last two years an appraisal of the project was carried out last year by my predecessor the Minister for Industry and Energy, Deputy John Bruton, as part of a Government review of major public expenditure. For a major capital project of long duration and slow initial payback—it takes seven years development expenditure on a bog before production from it can begin—the most comprehensive review was seen as essential. The major cost elements had to be thoroughly examined, in the light of the board's own deep anxieties.
This is something which Deputies may not appreciate. In the course of the discussions which have taken place over the last few years in relation to the viability of this project there has been at all times deep anxiety by the board in relation to having the cost elements thoroughly examined to make sure that a major capital project like this would not be undertaken without having the viability ascertained. The marketing projections which were, obviously, of major importance, were also seen and have been at all times seen and understood by the board and by my Department in relation to the whole project of producing these briquettes. Mid-1983 saw a halt to world energy price rises—indeed, a fall in the price of oil— also keener competition emerged in the Irish solid fuel market and consumer spending on energy tightened. A new briquette factory at Littleton had come into production.
I am outlining these factors for the benefit of the House in relation to many variable elements, the many fluctuations which have taken place in the last number of years which obviously have a crucial bearing in relation to this project, the building of the factory and the coming on the market of 150,000 tonnes of briquettes and in relation to the marketing and marketability of this increase in production which will be coming forward from the Ballyforan project. The indications from this review are that the project is one of considerable risk. Its viability is based on the fulfilment of the assumption that the further annual output of 150,000 tonnes expected from Ballyforan could be marketed at the projected prices and that a rate of price increase could be assumed in line with inflation.
Fears on this score persist. Market resistance, indeed fall-off, has been encountered. Bord na Móna's experience of higher prices and free marketing over the past year has meant that the third phase of the price increases already approved for briquettes could not be applied as planned because of a drop in sales. Following one year's experience of a phased increase in the price of briquettes the board found that the market was sluggish and the price itself appeared to be too high. In consequence, volumes were not being taken by the market from the new factory at Littleton. This has caused doubts that market capture at higher prices could be easily achieved and underlines and re-emphasises the crucial nature of the marketing projections and the need for thorough reappraisal.
In addition, because pressure by the ESB against the milled peat price increased, Bord na Móna have had to come to an arrangement with the ESB not to apply any increase since July 1982 in the price of milled peat. The net effect of quantity and price shortfalls for all peat products has been to show a drop of £24 million over the past two years in the financial projections of Bord na Móna on which Ballyforan was planned. In 1982-83 Bord na Móna had a surplus of £15 million to apply to debt servicing. In 1983-84 the result is expected to be £13 million approximately. In 1984-85 because of reduced volume expectations and price projections down on previous estimates, coupled with increased costs, the outturn is expected to be almost a break-even position with no surplus for debt servicing.
There is no doubt that the financial exposure of the board arising from the situation which I have outlined to the House and which I have tried to present in a totally unbiased way because I understand the feelings of the Deputies not only on the opposite benches but in the Government parties in relation to a project like this, shows the need for a comprehensive review of further investment in the Ballyforan project. Despite the criticism from the opposite benches in relation to the time lag in making decisions, in relation to the long period which has passed by, in relation to the Government making decisions, Deputy Reynolds is well aware of the fact that he had a considerable time and I am at a loss to understand why, if he was so convinced of the merits and viability of this operation, it was not commenced during his time as Minister.
(Interruptions.)
I received a communication from Bord na Móna. I want to inform the House of the important aspects of this communication. In this communication the board decided in their wisdom, having looked at the various questions raised by my Department with the board over the past 18 months, to look at the current situation and at all the aspects which I have outlined. They looked at the marketing of solid fuels during the recession and they have admitted that the depth and duration of the recession is much greater than had been anticipated and the depression on the fuel market has been far greater than the board anticipated, demand has fallen and that competition is intense. Bord na Móna, looking at all the factors, told me in the communication, as I said for the benefit of the House, received today ——
Now we know.
The Deputy should know the members of the board. I am putting fairly and squarely before the House the information available to me for the benefit of the House rather than have anybody accusing me of misleading the House, not that I expect the Deputies to do anything like that. The board formed the opinion having considered all the factors which were brought to their notice and from their own research on the project that this project should be deferred for a period of 12 months. They feel this would be the best decision, given all the market uncertainty and the depression in solid fuels sales. They have also brought to my notice that unless moneys are provided by the Government for ongoing development work, men will be laid off on this project. In view of the information which has been brought to my attention this very day, there is no option but to suspend the project for one year. A further review will then take place.
A defeatist attitude.
It is not a defeatist attitude. It is a practical and realistic attitude in the light of the information available to the Government. This motion, if passed, would restrict both the Government and Bord na Móna in the necessary freedom of action to take a decision on a solid, sustainable basis. The board's decision would be controverted and the board denied the opportunity to continue their market assessments and the further review of all aspects of the project which would have a bearing on its success. For that reason I am opposing the motion and putting forward the amendment.
Let the Germans take over the market.
I am pleased to have an opportunity of speaking on this motion but I am absolutely shattered by the Minister's speech. When he changed his portfolio I thought that he, being an energetic young man, would bring a new dimension to the Department of Energy, which was being segregated from Industry, and that we would see energy projects moving forward, particularly projects which had been planned and analysed over a number of years. All he needed to do was take a de facto decision and give people the opportunity to become involved in vital projects involving indigenous natural resources. That did not happen.
During recent weeks and months Deputies opposite have changed their stance in relation to this project. When Fianna Fáil initiated this idea six years ago and made a decision on the project a year later, Deputies and Senators cast serious doubt as to whether the factory would be built. Speaking in this House on 26 May 1982, Deputy Naughten stated:
We stated clearly that the project would go ahead. This was reiterated by the Minister of State at the Department of Posts and Telegraphs while speaking in the area.
I regret that the Minister is now leaving the Chamber. Recently we have seen members of Government parties change their stance to blame Bord na Móna. The thirty-third annual report of Bord na Móna for the years 1978-1979 stated:
Derryfadda, south County Roscommon, is the board's 23rd and latest works location. It will provide services for the development programme in the area which will embrace a total of 18,000 acres, providing employment for 590 people.
The thirty-seventh annual report of Bord na Móna for the years 1982-83 stated:
Design work for Ballyforan briquette factory progressed very satisfactorily and had reached an advanced stage by the year's end.
There is no doubt about these two reports emanating from an organisation which has served this country well since it was set up in 1946 by Fianna Fáil. These are the sentiments and the commitments of the board. It seems that recently, probably due to Government pressure in an effort to balance the books, they have been pressurised into a change of heart. That is what is being said in the media and at public meetings by Government spokesmen. It is very sad for the west that the Minister should say:
Bord na Móna, after extensive review, decided at their meeting on 25 May 1984 to suspend the project for one year, when it will be reviewed again.
That is one of the saddest statements ever made in this House vis-á-vis the west. Do the Minister and the Minister of State accept this? Is the Minister for Energy presiding over the demise of that Department, similar to the situation over which he presided in the Department of the Environment? Local authority workers are on short time and redundancy is staring them in the face. The authorities are not in a position to provide the services to which people are entitled.
The Deputy should stay with the motion, please.
This is central. The board are being blamed and they are being forced to review the project again. Fianna Fáil in Government gave commitments on various projects and always honoured them. This Government are charged with the responsibility of running the country. Are they reneging on that responsibility? Are they afraid to invest money in an area which needs investment, in an industry which has proven conclusively over a number of years that it is viable and profitable? Is this the attitude of the Government?
Various reviews have been carried out by Bord na Móna and in 1982 they conducted a major review of this project. It resulted in a decision by the board to go ahead with the Ballyforan factory and they were given full support by the then Fianna Fáil Government, as well as a further commitment that the financial position within the board would be rectified in order to ensure that the project would go ahead. The then Minister, Deputy Reynolds, granted an increase in the price of peat briquettes to ensure that the energy projects would go ahead. Not alone did Fianna Fáil see the need to stimulate the economy and provide employment by utilising our natural resources but they also saw the economic advantages of having a project like Derryfadda to offset our balance of payments and stem the tide of imports.
The Minister seems to be giving the marketing position as one of the reasons the project cannot go ahead. Is he saying that Bord na Móna are not able to market briquettes successfully? Is he saying the board are falling down in their marketing strategy and in their ability to persuade people to purchase home-produced briquettes?
No credit is due to the Minister's predecessor, Deputy Bruton, who also indulged in this political procrastination, analyses and reviews. During all this time we have allowed second grade German briquettes to be brought in here and this, of course, has affected the stability and the potential viability of the briquette production of Bord na Móna. The longer we postpone a project like this the more expensive it will be to finalise it. We have been waiting two-and-a-half years already and now, apparently, we will have to wait longer.
Naturally, the effect on our balance of payments of being self-sufficient in domestic energy is incalculable. The more home produced fuel we can get, and the quicker we can produce it, the better for Bord na Móna and other companies involved in energy supply, including the ESB.
The viability of this project was assessed thoroughly by the IDA in 1982 and a grant was approved for it. Surely that was proof positive of its potential viability. The record of the IDA is known and respected worldwide. We all know of their ability to attract here the best industries, the highest skills and technology. They approved a grant for this project but after the general election in 1982, when Fianna Fáil were not returned, the Coalition once again failed to go ahead with the completion of this factory, one of the few prospects the west had of getting much needed jobs.
It seems that Bord na Móna have accepted the Government's attitude about postponing this for another year. We know there has been a change in personnel at the top in Bord na Móna and we know that earlier they were in favour of this project. Every new head of an undertaking like Bord na Móna is due a honeymoon period and the Government used this to put official pressure on the board, many of whom are not in favour of the postponement. This further postponement coincided with the appointment of the chief executive.
We must consider what will be the cost of completing this factory at the end of another year, what will happen to the £20 million already spent at Derryfadda? Bord na Móna purchased 18,000 acres of bog cheaply from the farmers who had committed themselves to the project as a source of badly needed employment. Indeed the farmers virtually gave away the 18,000 acres. What will happen to the turbines, the generators and the other equipment, some of which is lying under the elements in Ballyforan or in stores in Dublin rented at high cost? Will all this not add immensely to the final cost of the problem and add to our ever-growing national financial problem? Is it to be called financial rectitude?
We notice particularly that Deputy Connaughton, the Minister of State, is not here tonight. As a Senator he slammed this project at the beginning and became known as "Senator Slam". Where is Deputy Naughten tonight? Has he, too, run for cover as a member of a Government party who have no commitment to the west, to this project or to continued expansion by Bord na Móna, one of the finest semi-State bodies we have. They are being denied the opportunity to expand and develop so that they could make a professional economic contribution to the most deprived and disadvantaged area in Ireland.
Apparently the Government are ignoring the importance of bogland for the supply of domestic fuel. This could be vital to the economy in these days of scarce energy because it could help our balance of payments enormously. I suggest that this postponement can be attributed to one man in the Government, the pin-striped politician, "Mr. Bloomer", who has been unable to find the missing £500 million which has thrown the economy and the State's security into jeopardy. Deputy Dukes has had a major influence and has played a major part in this postponement.
The turf industry is vital and this was recognised as far back as the last century under an alien administration. In 1933 Fianna Fáil set up a special section in the Department of Industry and Commerce to appraise and analyse the potential of turf as a contributor to the economy.
Debate adjourned.