Written Answers. - Prospecting Licences.
Martin Ferris
Ceist:
853
Mr. Ferris
asked the
Minister for Communications, Marine and Natural Resources
his views on whether it is time to conduct a thorough review of the terms offered to mineral exploration companies which exclude the State from any real benefit in terms of revenue.
[17455/02]
I do not accept that the terms for mineral exploration exclude the State from any real benefits in terms of revenue. Mineral exploration is conducted by private enterprise under prospecting licences under the Minerals Development Acts, 1940 to 1999. It is a high-risk activity which does not generate revenue in itself. The aim of mineral exploration is to discover mineral deposits which will be worth mining. It is not appropriate, therefore, to seek significant payments at the exploration stage which would only deter investors and divert funds from their proper use for investigation on the ground. However, fees levied under the Minerals Development Acts contribute significantly towards the cost of administering these licences.
It is only on the rare occasions that such exploration is successful that any question arises regarding the generation of revenue to the State. Under the Minerals Development Acts, 1940 to 1999, a separate permit is required before mining can take place. The financial terms of these state mining facilities – leases or licences, as the case may be – are set by individual negotiation as required by section 26(2)(a) of the 1940 Act, which states:
Unless the Minister, with the concurrence of the Minister for Finance, is of the opinion that such lease should be made free of payment, such lease shall be made subject to the payment to the Minister of such moneys, whether by way of fine or preliminary payment or by way of rent (including a royalty rent) or by any or all of such ways, as the Minister, with the concurrence of the Minister for Finance, shall think proper and shall agree upon with the lessee.
It is long standing policy that the financial terms of state mining facilities must provide a fair return to the State, whilst recognising that the developers are entitled to hope for a return on their high-risk investment in both exploration for and development of mineral deposits.
I am satisfied that the royalty regimes for Galmoy, Lisheen, and the single payments made by Tara for some permits for modest tonnages have provided a very fair return to the State for the exploitation of these minerals. Indeed, they are at the high end internationally of such payments. Details of the financial terms of all state mining facilities can be found in the statutory report to the Oireachtas which is laid before the House twice yearly in accordance with section 77 of the Minerals Development Act, 1940, and section 8 of the Minerals Development Act, 1979.
The Deputy should note that, where there are continuing payments, these are based on either the tonnage produced or the revenue generated, and not on the profits of the operation. This ensures that the State will be due payment whenever mining is taking place.
In addition to direct payments through royalties and corporation tax, which is, incidentally, deductible at 25%, as opposed to the general rate of 12.5%, mines provide significant other benefits, especially at the local level. For instance, the Lisheen mine employs 400 people at a total annual wage bill of €16 million. The mine's annual electricity bill is €5 million. Approximately €25 million of its consumables are purchased in Ireland each year and over €11 million is paid locally each year for road transport and shipping. Furthermore, capital project is under way at the mine to raise the tailings management facility at a cost of €10 million. This contract is being carried out by an Irish firm.
Martin Ferris
Ceist:
854
Mr. Ferris
asked the
Minister for Communications, Marine and Natural Resources
if he will review the conditions governing the granting of exploration licences in the Celtic sea, in view of the drastic changes made in 1987 by a former Minister (details supplied).
[17456/02]
Martin Ferris
Ceist:
855
Mr. Ferris
asked the
Minister for Communications, Marine and Natural Resources
if he will suspend all current Celtic sea licences in view of the pending investigation into the circumstances surrounding the radical changes granted to multi-national exploration companies by a former Minister (details supplied) in 1987.
[17457/02]
I propose to take Questions Nos. 854 and 855 together.
The main features of the changes introduced in 1997 were: the exemption of all oil and gas production from royalty payments as provided for in the 1975 terms; the allowance of 100% free depreciation on exploration and development capital expenditure to be written off against corporation tax in the first year of production; and the abolition of other State participation in profits from oil and gas developments.
The changes made in 1987 to the licensing terms were designed to keep exploration in Ireland at a sustainable level. The changes addressed the falling levels of both exploration and commercial finds and sought to make exploration in Ireland attractive when the industry in several other countries in north-west Europe were enjoying commercial finds. In fact the adjustments made in 1987 were consolidated in the 1992 licensing terms and have been left unchanged by every Government since then. Despite the relative attractiveness of these terms, no company has benefited from them to date.
