Léim ar aghaidh chuig an bpríomhábhar

Seanad Éireann díospóireacht -
Friday, 24 Apr 1998

Vol. 155 No. 5

Gas (Amendment) Bill, 1998: Second Stage.

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

This is a very short Bill, the purpose of which is to repeal section 37 of the Gas Act, 1976.

First, I will outline the background. In 1971 Marathon International Petroleum, Ireland Ltd. announced the discovery of deposits of naturas gas off Kinsale Head which, in 1973 were declared to be commercially exploitable. Following this first discovery of indigenous gas reserves, the Gas Act, 1976 was enaced to establish Bord Gáis Éireann — BGE — as the statutory body with responsibility to purchase, transmit, distribute, sell and supply natural gas.

When the Kinsale Head gas field was discovered by Marathon, it was a time of great volatility in the energy market. The advent of natural gas to our energy mix was very timely and it helped to reduce our exposure to the uncertainties of that market, particularly for oil supplies. At the time, however, there did not exist an established natural gas industry with the potential to absorb the flow of gas from the Kinsale Head field in sufficient quantity to remunerate the huge capital investment involved.

In 1974, the Government decided to allocate a significant amount of the gas for a new plant to be built by Nitrigin Éireann Teoranta — NET — at Marina Point in Cork for the production of ammonia and urea for the fertiliser industry and for additional ESB generating capacity in a new power station at Aghada and a conversion of an existing plant at Marina, both plants located in Cork. In addition, an allocation of gas was made available to Cork Gas Company to meet the requirements of their consumers. It was decided also that NET and the ESB should jointly negotiate with Marathon as to the price of the gas. When BGE was subsequently set up it took over responsibility for gas purchasing arrangements with Marathon, resulting in an agreement made in 1975 governing the arrangements and prices for the sale and supply of natural gas from KInsale Head.

In 1987, Marathon discovered further natural gas in the nearby Ballycotton field and that gas was the subject of a separate agreement with BGE. In 1995, a new Marathon-BGÉ agreement was signed to replace the earlier agreements, which would have expired in 1999, and to deal with the sale and purchase of gas produced at Kinsale Head-Ballycotton post-1996.

The ESB and NET are still the main natural gas consumers and they consume about 50 per cent and 20 per cent, respectively, of total gas sales. The Kinsale Head-Ballycotton reserves are now depleting and are expected to be exhausted for commercial purposes by the year 2003. The effect of this is that BGE now also purchases gas from other suppliers and is importing 50 per cent of its gas requirements through the interconnector pipeline with Scotland so that our indigenous reserves are playing a decreasing role.

As a result of the continuing high growth in gas demand, I recently launched a major study into future gas needs to the year 2025 to ensure that any necessary infrastructural development is identified and put in place in good time. The study is a joint project between my Department and Bord Gáis Éireann. A joint North-South study of the feasibility of providing a natural gas interconnector between Dublin and Belfast was completed last year. The study report concluded that such an interconnector is technically possible and represents the most cost effective of the potential solutions considered in relation to gas supply issues for both sides of the Border.

The report is a valuable contribution towards policy making in relation to gas infrastructure requirements. It represents an excellent example of cross-Border co-operation in the energy sector in that officials from my Department, the Northern Ireland Department of Economic Development, Bord Gáis Éireann and Phoenix Natural Gas Limited. participated in the study. The findings of the report are now being considered as part of the gas demand study.

Section 37 of the Gas Act, 1976, provides that all natural gas landed in the State, or got within the jurisdiction of the State, for consumption therein, shall be offered for sale to BGE on reasonable terms. The section also provides that any gas which is so offered to and purchased by BGE shall be disposed of by the board for consumption in the State unless the Minister for Public Enterprise gives consent for the export of the gas. There are three subsections to section 37 and I will deal with them later. The protection afforded by section 37 in favour of a newly discovered energy resource was a prudent measure taken at the time in the national interest by ensuring that all the gas for consumption in Ireland should be offered for sale to BGÉ on reasonable terms.

This Bill is brought before the House following advice from the Attorney General that section 37 of the Gas Act, 1976, is anti-competitive and in conflict with the competition provisions of the Energy Charter Treaty, which Ireland signed in December 1994. In order to ratify this treaty, all contracting parties must ensure that their domestic laws and regulations are compatible with its provisions. Section 37 would have to be repealed in any case to bring the Act into line with national and EU competition rules.

The provisions of the Energy Charter Treaty require that all contracting parties work to alleviate market distortions and barriers to competition in the energy sector. The main objective of the treaty is to stimulate investment by the west in the energy sector in eastern Europe and in the states of the former Soviet Union in an effort to aid their transition to market economies. It is expected also to provide for long-term co-operation between western and eastern Europe in the energy field and, by so doing, to improve security of supply, maximise the efficiency of production, conversion, transport, distribution and use of energy, enhance safety and minimise environmental problems for their mutual benefit.

Over 50 countries have now signed the treaty and 33 have ratified it to date. The treaty entered into force on 16 April this year and from that date became a binding instrument of international law. All member states of the European Union have signed the treaty and all but three, including Ireland, have ratified the treaty so far. While the idea for the energy charter which eventually led to the negotiation of the treaty was first mooted in the European Union, other countries of western and eastern Europe, the states of the former Soviet Union and many of the non-European members of the Organisation for Economic Co-operation and Development supported the idea and entered into the negotiations. Ireland has participated in the negotiations on the treaty at EU level and in the wider negotiations. We enthusiastically support the aims of the treaty and I am anxious that we should ratify it as soon as possible.

The repeal of section 37 of the 1976 Act will not cause a problem for the purchase of natural gas supplies by BGE. The board will still be able to bid for purchase of natural gas, whether discovered within the jurisdiction or otherwise, and to continue to transmit, distribute and sell the gas for industrial, commercial and residential purposes. In the event of an energy crisis affecting the State and where there would be a need to control the use of energy sources, there is provision in the Fuels (Control of Supplies) Acts to enable the making of orders governing the acquisition, supply, distribution and marketing of natural gas.

At this point, I wish to give the House a brief account of the current state of the natural gas industry and the general direction of its future development. BGE has a de facto but not a statutory monopoly in the purchase, transmission, distribution and sale of natural gas. In the relatively short period since its establishment in 1976, BGE has achieved significant progress in the development of the industry. It now supplies natural gas to 280,000 residential consumers and 10,000 commercial and industrial consumers. By the end of 1998, BGE hopes to be serving 297,000 residential and 10,500 industrial and commercial customers. Natural gas now meets 20 per cent of our total primary energy requirements. Gas demand grew at a rate of 5 per cent in 1997 and this year is expected to grow by 4.5 per cent. BGE operates in a highly competitive market and has to fight for market share against other fuels, such as oil and electricity.

One of the key priorities for the energy sector in the Programme for Government "An Action Plan for the Millennium" is to extend natural gas as far as practicable to major towns and cities. BGE is currently arranging gas supplies to the towns of Fermoy, Carrick-on-Suir, Cobh, Annacotty, Ashbourne, Bettystown, Clane, Kildare, Dunshaughlin and Ratoath and extending supplies in Mitchelstown and Mallow where natural gas has been available for some time.

In addition, a proposal for a major extension of the gas network to the midlands and west to provide gas to Trim, Mullingar, Athlone, Ballinasloe, Galway, Ennis and Shannon with the support of Exchequer funding is under consideration. The necessary notification to the EU Commission's competition directorate in relation to the State aids aspect is still being examined by the Commission and my Department has provided additional information, as requested by the Commission.

The following towns, which currently do not have a natural gas service, are included in BGE's present study for the extension of natural gas supply — Kinsale, Bandon, Navan, Portlaoise, Athy, Ballina-Killaloe and, in north County Wicklow, Kilcoole-Newtownmountkennedy. Surveys of the load potential for the residential and commercial markets in these towns are ongoing and, should sufficient loads be identified for each extension to be economically viable, the project will be included in the BGE programme. Some other towns may be included in the programme should the extensions to them be identified as economically viable.

The natural gas market is one of the energy sectors being opened up to further competition. In December last, the EU Council of Energy Ministers reached political agreement on the terms of a directive which will introduce competition into the natural gas industry in the form of third party access to gas networks throughout the European Union. The draft directive is now being considered by the European Parliament under the codecision procedure of the EU Treaties. This process will take some months to complete.

Ireland has already provided for this form of competition and the necessary detailed operating rules are being developed. Our domestic legislation — the Energy (Miscellaneous Provisions) Act, 1995 — which provides for a legal framework for third party access by large consumers to the BGE gas network, is broadly in line with the draft EU directive. This facility enables eligible gas consumers, such as the ESB and NET, to purchase their supplies direct from gas producers and to have the gas transmitted through the BGE network on commercial terms. The threshold in the 1995 Act is 25 million standard cubic metres of gas per annum. On the basis of that figure, 75 per cent of BGE's market is potentially opened up to this new form of competition, but the number of eligible customers is less than ten.

The Act also provides for the giving of ministerial general directives to BGE relating to transmission and pricing aspects of third party access. I have prepared draft directives and published them for comments. The comments received are now being examined. In addition, BGE is busily engaged in the preparation of the technical and operational rules in a code of operations document.

Hydrocarbons play a significant role in Ireland's energy mix and, therefore, it is of considerable importance that we continue the efforts being made to establish further Irish production. The economic benefits — royalties, tax, jobs, support services and so on — resulting directly from the natural gas produced from the Kinsale Head and Ballycotton fields illustrate the importance of indigenous energy supplies. However, as I have already stated, that supply of natural gas is depleting, resulting in an increasing dependency on imports. That is sufficient reason for us to continue to make every effort to promote the search for additional indigenous supplies and, whenever possible, to get discoveries developed.

I understand from my colleague, the Minister for the Marine and Natural Resources, Deputy Woods, that we now have a high number of exploration licences in place. This is the result of the new licensing terms introduced in 1992, the consequent licensing rounds in 1994 and 1995 and, the most successful of all, the Rockall Trough Licensing Round last year, which gave rise to 11 new licences. At present, 28 exploration licences are held and each carries a specific work programme involving a high level of exploration activity.

The licensees include many of the major exploration companies, several of which returned to Ireland in 1997 after periods away, while others reaffirmed their commitment to Ireland by taking on further licences and building on their existing positions. The number and quality of exploration companies now involved in offshore Ireland inspires confidence that the present level of exploration activity will be maintained in the coming years.

In 1996, Enterprise Oil discovered gas in their second well in the Slyne Trough but despite their best efforts they were unable to test this discovery because of mechanical problems. I understand that during 1997 Enterprise Oil acquired new seismic data in the area of the discovery and that they propose to drill an appraisal well in the prospect shortly. During 1997 two exploration wells were drilled in the Porcupine Basin by Total and Marathon and another exploration well was drilled by Enterprise Oil in the Kish Bank Basin off Dublin. In addition, 1997 was, I believe, the busiest year for acquisition of new seismic data since records began with the acquisition of in excess of 28,000 kilometres of seismic data.

Ireland has a vast Continental Shelf and much of it remains underexplored. My colleague, Deputy Woods, considers it important that we see an exploration presence in areas in our offshore not currently subject to authorisations. One such area is the 156 blocks in the South Porcupine Basin which is now the subject of a licensing round, the closing date for which is 15 December 1998. Speculative data acquired there in 1997 — 17,000 kilometres of seismic data, a high resolution aeromagnetic survey and a seep detection survey — shows it to have considerable interest for explorationists.

I will now return to the purpose of this Bill, that is, to repeal section 37 of the Gas Act, 1976. Section 37(1) provides that all natural gas landed in the State, or got within the jurisdiction of the State, for consumption therein, by the holder of an exploration licence or the holder of a petroleum lease shall be offered for sale to Bord Gáis Éireann on reasonable terms. It also provides that any gas which is so offered to and purchased by the board shall, unless a consent is given by the Minister for Public Enterprise under section 8(7) of the Act to export the gas, be disposed of by the board for consumption in the State. In fact, all natural gas produced to date from our indigenous reserves has been consumed in the State and no consents under section 8(7) have been sought or given.

Section 37(2) provides for an exception to the foregoing. That subsection provides that the requirement to offer gas for sale to BGE shall not apply in cases where the Minister, in approving a plan for the development or exploitation of a deposit of natural gas, requires that the gas be offered for sale to a person other than BGE for a specific industrial purpose. In fact, that provision has never been used. In any event, I would have reservations about its compatibility with competition rules.

Subsection (3) provides for a dispute resolution mechanism for dealing with disputes regarding the reasonableness of terms on which natural gas is offered for sale to BGE. It is clear that section 37 is anti-competitive and incompatible with the competition requirements of the Energy Charter Treaty and also in conflict with EU competition rules.

I commend the Bill to the House.

I hope this will be a fruitful debate. Everyone agrees it is very important that this Bill be passed because we are moving into a modern world where we must have clear lines of competition in our community and in the EU. This is the first Bill dealing with Public Enterprise and Transport and it is the first real work spokespersons in this area have to do.

The original Bill was produced by the former Deputy Peter Barry when he was a Minister. The setting up of Bord Gais Éireann and its relationship with Marathon Oil was very important in those days. Peter Barry predicted at that time that natural gas would meet 12 per cent of our energy needs, that 700 permanent jobs would be created and that the balance of payments would be improved by £75 million per annum by our use of natural gas. The reference in the original Bill to this section was very brief. When I read the debate on the original Bill I was struck by the references to the need for a smelter and other issues of the 1970s which are now long gone.

I welcome the Bill but it is important to examine how much competition it will create. I acknowledge the tremendous work of Bord Gais Éireann, which has a large number of employees and services many homes and businesses. However, competition will begin in only the heavy industrial and commercial sector and there are no proposals at the moment to facilitate the emergence of a competitor in the domestic consumer market. I understand it will be five to ten years before there will be competition in the domestic supply sector and that developments in the UK are much more advanced, where there are approximately 20 competing suppliers of gas to domestic consumers. We must encourage more competition in this sector and I hope the Minister will address this in the near future.

Last November, Bord Gáis Éireann predicted it would make £82 million in pre-tax profits, which indicates it is a very efficient company in this area of operation. At virtually every home I visit or community meeting I attend, people raise the cost of installing heating in their homes. It is a necessity, yet many cannot afford it. Given that gas is an environmentally friendly source of energy, a number of people in the health boards have suggested to me that the provision of central heating to homes, in the first instance to senior citizens, should be national policy. Some years ago grants were provided for the extension and improvement of homes. We now need a policy to supply energy cheaply, especially to the elderly, of which natural gas is an important element. The Government should introduce a grant system and Bord Gáis Éireann should consider providing incentives to the elderly in that regard. It would not be too expensive. This is a very important issue.

Gas is environmentally friendly and an increase in domestic gas consumers will mean a reduction in coal consumption. I welcome the Minster's decision to extend the ban on the sale of bituminous coal to Drogheda and Dundalk. We are very concerned with health issues in County Louth because we have the highest incidence of death in the country from all respiratory causes. This ban will make a significance difference to the health of the population.

I understand that domestic households spend approximately £2,000 per annum on energy products. In view of this, it is a good idea to encourage more people to use natural gas or oil rather than bituminous coal.

This important Bill is concerned with competition and opening up the market to other suppliers. Energy comprises a major proportion of production costs and is, therefore, a very important factor in job creation. The advent of the combined peat and power stations, which are part of the proposals, will make a significant impact on releasing energy. I note we will be going from a 75 to 80 per cent conversion in electricity power stations, rather than the 30 to 40 per cent which prevails at present.

I welcome the extension of the natural gas pipeline to the areas outlined in the Minister of State's speech. All of those communities will be very happy with these proposals. However, Bord Gáis Éireann must take more care when moving into new areas. When the company came to Drogheda it dug up the roadways and pathways in an unacceptable manner and we received numerous complaints from householders that the company did not care about the way it left its working areas. While it must return after a period of time after the ground has settled to seal the connections to individual locations, the Minister must let the company know it needs to be more environmentally aware and take more account of the needs of the local community. I and many of my fellow citizens had to put up with muck and dirt for weeks on end waiting for the company to finish its work.

I welcome the Bill and we will facilitate its passage. I hope the Minister of State will address the points I have raised.

Cuirim fáilte roimh an Aire Stáit. Is é seo an chéad uair dó teacht chun an tSeanaid le Bille ón Roinn Fiontair Phoiblí. Molaim é gur bheartaigh sé tús a chur leis an mBille anseo agus gabhaim buíochas leis as ucht an beart sin a dhéanamh. Tá sé seo an-tábhachtach dúinne mar, le fada, an dearcadh a bhí ann maidir leis an Seanad mar bhí sé ina backwater of Irish politics. Tá athrú mór ag teacht, buíochas le Dia.

This is the first visit to the House by the Minister of State with a Bill. It is his first decision to initiate a Bill in this House, which we warmly welcome. We commend him for his decision and for according us the honour of initiating the Bill.

The Bill is short but very important. Its purpose is to repeal section 37 of the Gas Act, 1976, which is understood to be anti-competitive and incompatible with the competition requirements of the Energy Charter Treaty. This section is also deemed to conflict with the competition rules of the EU.

The Energy Charter Treaty imposes obligations in terms of competition and conditions of trade between east and west, mainly affecting the west. It also opens up huge opportunities for Irish enterprises for investment in a number of areas, such as export services, consultancies, joint ventures, construction and equipment supply.

Apart from Belgium and France, Ireland is the only other EU signatory to the Treaty that has not ratified it. It is imperative that ratification should proceed and be finalised to enable Irish entrepreneurs and businesses tap into and exploit the vast potential available to them in places such as the former states of the USSR at the earliest opportunity.

The Treaty is also aimed at contributing to the economic recovery of countries in transition in the east. At the same time it provides for improved security of energy supply to the west by giving access to these vast energy resources in the former USSR. As far as the EU is concerned, we are all too well aware of the raft of directives being introduced to open up competition in economic activity throughout the community. The natural gas market is only one of the energy sectors that has been opened up in this way. I understand the directive will introduce competition to the natural gas industry in the form of third party access to gas networks throughout the EU.

The Energy (Miscellaneous Provisions) Act, 1995, provides a legal framework in Ireland for this competition by way of third party access so that although the draft directive and its procedures will not be finalised for some months, we will be prepared. It is an example of good homework by the Minister of State and his officials.

The opening up of competition in the natural gas industry must inevitably bring about a reduction in prices, a development that will be welcomed by domestic, commercial and industrial consumers. Competition is very healthy, especially for the consumer. We know this from many other fields of semi-State and private sector activities. I am not an economic or, indeed, a market forces analyst, but to my amateur mind Bord Gáis or the natural gas industry is ideally placed and seems to be a splendid example of a company well poised to take on the opening up of market competition and market forces.

As one of Europe's youngest natural gas companies, its short history of just over 20 years has been marked by ever-growing success. Perhaps it could be said its youthfulness is proving to be one of its greatest strengths. The birth of this industry came about mainly as a result of two contemporaneous developments — the energy crisis of the early 1970s, particularly 1973, and the discovery of deposits of natural gas, which were declared to be commercially exploitable in 1973. At a time of great volatility in the energy market, the advent of natural gas was undoubtedly a welcome relief in reducing our exposure at the time to the uncertainties of that market, particularly in relation to oil supplies.

The absence of a natural gas industry, which would absorb sufficient quantities to justify the huge capital investment involved, was a major obstacle. I pay tribute to the Opposition because, as was rightly stated by Senator O'Dowd, the 1974 decision by the then Government to allocate a significant amount of gas to the new plant, Nitrigin Éireann Teoranta, and for additional ESB generating capacity must be applauded. It justified the launch of an industry which has been a growing success ever since. With Bord Gáis Éireann's establishment as a company two years later in 1976, it took over responsibility for gas purchasing arrangements with Marathon. The two decisions taken by that Government have stood the test of time and have proved to be wise and forward thinking, even though they came about as a result of a crisis. Nevertheless, we must applaud and recognise publicly decisions made by successive Governments where they have had long-term beneficial effects for our community.

The Irish natural gas grid has doubled rapidly over the past 15 years. At first gas was piped from the Kinsale Head gas field, located about 50 kilometres offshore, to Cork city. The 240 kilometre pipeline to Dublin was built in 1982 and represented a mammoth advance. It took in a number of towns on route, including my own native city, Limerick, and the mid-west. The expansion of the grid has continued to other parts in the north east, north central areas and the midlands. There are many other areas which must be reached because the momentum must be maintained until all towns and cities have equal access to this environmentally friendly, clean and efficient energy source. I welcome the Minister's decision to establish a task force to identify our energy gas needs for the next 25 years and beyond. Such forward planning is commendable and has become the hallmark of his Department and the company we are discussing.

The most spectacular development of all in the expansion of the grid was undoubtedly the construction of the natural gas interconnector from north county Dublin to Scotland. It was a landmark project for late 20th century Ireland, the benefits of which will be felt for many decades to come. It is a wonderful inheritance for future generations. There were a number of compelling reasons the company and the Government of the day saw the construction of a subsea pipeline as a necessity. With Ireland's energy needs doubling over the past 20 years and with a consistent increase in demand in all market sectors, additional pressure was being put on existing resources. The realisation that the Kinsale Head-Ballycotton reserves would be exhausted for commercial purposes by the year 2003 helped concentrate minds. The task force of Government officials and board members, established to examine the feasibility of an interconnector, realised how vulnerable our gas market was as it depended on a single source of supply. If further indigenous supplies were found off the Irish coast, surplus quantities could be exported via the interconnector — good forward thinking and planning. The interconnector will eventually be linked to the European and world grids.

With the depletion of our indigenous reserves, Bord Gáis Éireann is purchasing gas from other suppliers and is importing in excess of 50 per cent of its gas requirement through the interconnector pipeline, which is up and running. Perhaps it is not being used to its full potential yet but it is being used in a positive and progressive way. Our indigenous reserves, therefore, are playing a decreasing role.

The construction of the pipeline means Ireland is assured of natural gas supplies for the next 50 to 60 years and the project is no doubt an economically and environmentally sound investment for the future. One of the most spectacular features of the construction of the interconnector and, to a great extent, the national grid — perhaps this is slightly at odds with Senator O'Dowd's experience in his area — was the absence of a negative environmental impact and the preservation of heritage, flora and fauna and reinstatement, where necessary. I read a number of plaudits from local authorities in Scotland on the professional consultative approach of the contracting company and the client Departments.

One of the undoubted consequences of the discovery of natural gas is the way in which it has transformed the way we live and work. The low carbon natural gas has clear environmental benefits with its very low emissions. Bord Gáis's state of the art transmission distribution network transports gas at high pressures reaching customers instantly and safely. Both of these characteristics are vitally important in that there is instant delivery and it is safe. I understand the backup service in terms of expertise, assessment, analysis and reappraisal is of the highest professional standard.

Nearly all new housing developments in Ireland, like the rest of Europe, opt for natural gas. In 1994, residential customers rose to over 223,000. I believe the Minister said approximately 287,000 houses have been connected to the grid. By the end of 1999, through large scale network expansion programmes, it is projected that 40 per cent of Irish households will have natural gas available. The company regards this market as its premium market, which accounts for 11 per cent of gas deliveries.

Natural gas is used by a variety of customers. For example, in 1994, 42 per cent went to the ESB for power generation. Ireland has five gas fired generating stations using advanced thermal technology. In that year also, natural gas contributed 26 per cent of the fuel required for production of electricity generation. Some 23 per cent was sold to NET and 24 per cent to other industrial and commercial customers. Some 90 per cent of industry with access to the national gas transmission grid switched to natural gas. Many other sectors have tapped into the grid, such as the hotel and catering industries, hospitals and leisure centres.

From 1989 to 1994, Bord Gáis Éireann's turnover grew steadily to £217 million. It made profits of £45.4 million in that year and its cumulative dividend to the Government in the same year reached £394 million. We have in this company, in its operations, expansion programmes and a professional approach to planning, an example of a company which will be well able, robust and trim enough to take on whatever competitive forces are thrown in its way with the opening up of full competitiveness forces in the EU and in accordance with the treaty. I commend Senator O'Dowd on his positive approach to the Bill and allowing it to pass through all Stages at the earliest possible opportunity.

I welcome the Minister to the House. I do not share the same strong enthusiasm expressed by the two previous speakers. I am not so much concerned by the fact that competition will be introduced, which is in many circumstances a good thing, but by the negative approach of the Bill. It repeals section 37 of the 1976 Gas Act but puts nothing in its place. I am concerned the Bill has two sections only, repeals section 37 of the Gas Act and leaves a vacuum. The only thing which fills that vacuum is the Energy Charter Treaty and the Energy Charter Protocol on energy efficiency. We should be thinking about this in a different fashion. If we are going to change the status of Bord Gáis Éireann we should lay down the criteria, framework and parameters in which we want to see the new developments taking place rather than ending the current system and allowing market forces to establish what happens without giving any direction to those forces or taking the consumer into consideration. There is not a single word about the consumer in the Energy Charter Treaty. The explanatory memorandum states that this treaty is an international framework which provides for improved conditions for investment and trade in the energy sector. That is fine for businesses which wish to acquire a useful portfolio of investments and for international trade but what provisions are there for consumer protection, such as ensuring supply and a reasonable price?

I sought copies of the Energy Charter Treaty and the energy efficiency protocol from the Library but I was unable to obtain them. I was told copies were circulating somewhere but no one knew how to get one's hands on them. I am still waiting and had hoped they would be available before this debate. It is not satisfactory that Members cannot obtain the text of the documents which brought about this legislation because it means they cannot know its implications. We must rely exclusively on a one page explanatory memorandum and a two section Bill and accept the good word of the Minister that everything is fine and there is nothing dangerous in this provision.

This Bill significantly changes the operation of a semi-State body, introducing it to a new environment which is based on an international treaty which has as its core value trade and investment. We need to flesh that out considerably if we as legislators can be satisfied with this Bill which deals with an essential service relied on as an energy source by hundreds of thousands of domestic consumers and many large corporations. That is why I am unhappy with this legislation — we have been presented with a two section Bill and left in a vacuum.

There is nothing pro-active about the Bill. The semi-State sector has a long and honourable history and the Minister's party was to the fore in supporting and enhancing it. The Irish semi-State sector was different to its equivalent in other countries because in the past it lacked capital and many bodies within it came into existence because of the failure of the private sector, as was largely the case with BGE. Dublin Gas went into liquidation in the mid-1980s not so long ago. That private company failed the market and its customers so the State had to bail it out. If responsibility for providing service to those customers had not been given to BGE, there would have been a crisis of confidence in the State and in the supply of essential services to many households. Competition existed at that time but it failed to deliver the goods, which is why BGE was given full responsibility for providing this essential energy service. As the Minister indicated, it has progressed in leaps and bounds and has approximately 20 per cent of the energy market.

We must look at the matter in that context and should be careful to tease out the implications of what we are doing. I am disappointed no back up study has been done on the change of one energy sector from a monopoly to a competitive environment. This is a major step which is not taken every day. If we were doing it with Aer Lingus one can imagine the lobbying which would have taken place — we would all have been approached by the trade unions, Aer Rianta, Aer Lingus management, community groups and a variety of other parties. Yet here, with one stroke of a pen and in one day, we are putting through a Bill which will have considerable implications for the heating of hundreds of thousands of homes and the provision of energy to a large number of corporate bodies.

What is included in the Protocol on Energy Efficiency and Related Environmental Aspects? The Minister's speech did not address that point. What new environmental protections are being provided? We are opening the country to vast fossil fuel resources — we are going behind the Iron Curtain to obtain them and they will flow through the interconnector from Scotland and, one hopes, through the interconnector which is to be built between Northern Ireland and the Republic. This issue ties in well with our debate a couple of days ago about the Northern Ireland Agreement, which provides for co-operation on certain utilities and for the establishment of cross-Border bodies. I hope that a cross-Border body is established to link gas supplies North and South. Gas is an environmentally friendly source of energy; while it has its problems, it has a lower carbon content and fewer damaging emissions than other fossil fuels.

We will also be linked to the vast gas reserves in Siberia. What implications does that have for further exploration in Ireland or for experiments with other alternative forms of energy? In recent years much emphasis has been placed on wave and wind energy and other recurring energy sources which we could produce and make competitive. No doubt gas from Siberia would be cheaper than the limited supply from the Ballycotton and Kinsale Head fields. What impact will it have on our efforts in acquiring as many alternative energy sources as possible? Are we going in the right direction by making available this additional supply?

There are some limitations in terms of how we use the gas supply at present. The most significant problem I experience as a local councillor is that it is difficult to obtain an adequate supply for every house in a local authority area. There is a five year plan to connect all senior citizens to the gas network, but there are no plans as of yet to extend the supply to families living in local authority housing. New houses are connected but we are still a long way off extending it to all families in local authority housing. They need it most, as gas energy is probably cheaper than most other forms of energy. Some action should be taken. It is welcome that the network is being extended to other homes and communities in the country. However, where the infrastructure already exists, such as in Dublin, it is only a question of connecting homes. The main grid does not have to be put in place. That level of infrastructural work has already been done so it is a question of supplying homes.

Has there been any consultation with Bord Gáis about this legislation and, if so, what is its response? How has the company prepared for competition? What practices and procedures has it put in place? What reform of its operation has been undertaken? What studies has it carried out to determine the implications of the new dispensation? These are all highly important as it enters the arena of competition. How does the Minister envisage that competitive element operating? He stated that he estimates there will be about ten eligible customers. Who are they? Are we just talking about the ESB, NET and some of the larger energy consuming corporate bodies, or are we also talking about the individual domestic consumer? How does he see those operating in the market? Will they enter the international market? Will they operate themselves? Will they use the Bord Gáis grid? If so, how will that affect homes? Will there be parallel grids and connections? Competition does not always necessarily result in reduced costs, especially if an existing service is being duplicated. There is a move by the Government to force Esat and Eircell, the mobile phone companies, to use the same masts so as not to duplicate services as it is inefficient and results in greater cost. I look forward to hearing what the Minister has to say.

I agree with Senator O'Dowd when he spoke of the work practices involved in providing gas supply to homes in built-up areas. Bord Gáis has, in its work, caused enormous inconvenience to communities and householders in all cities. Its work is unplanned. The workmen arrive suddenly and dig the pavement the length of the street thus creating an enormous amount of dust. This is generally left behind as they do not sweep the street or clean up after them. The pavement is replaced with tarmacadam and it is the local authority which is responsible for replacing the pavement with whatever was the original paving, such as granite or some other stone. What is left is generally an ugly, uneven and undulating cover on the pavement. I would like to know the number of compensation claims which have been lodged because of the activities of Bord Gáis. It needs to improve its work practices. It must consult with the local community when it moves into the area. Almost all its work is done by subcontractors and it does little direct work itself. In those circumstances, it is difficult to achieve a standard level of work practices, but it is needed. I do not understand why Bord Gáis, if it digs up a street to provide a service, does not replace the street or pavement with the same material which was there before it started. Why must it always be tarmacadam, even if the street or pavement is made of a different material? Why must it be left to the local authority, perhaps years later, to install a replacement covering of the original material? It is unacceptable and it should be examined in greater detail.

I am not opposed to the Bill but I am worried about our not having adequate information. We do not know the framework of the new developments which will take place, such as the criteria for competition. It seems the approach being adopted is both minimalist and maximalist. The minimum is being done in terms of the removal of what existed heretofore and the maximum is being left open in the sense that we are being left with a crystal ball to see what will happen in future. It is an irresponsible way to legislate because we have a major repsonsibility to the consumers of this service and there are hundreds of thousands of them. One of the crucial utilities any country requires is a reliable energy source for its welfare in terms of heating for citizens and energy for industry. We must know what kind of competition will take place, what are its parameters and how it will work. Will parallel infrastructures be established which may well increase rather than reduce costs? We want to know there will be security of supply. There was none in the mid-1980s when Dublin Gas closed down and it had to be taken over by Bord Gáis to provide that security and continuity of supply. We want to know that the customer will get gas at a reasonable price. This Bill makes provision that Bord Gais Éireann must buy supplies at a reasonable price and operate under reasonable costs. The Minister of State should attempt to give the House some information on these issues. We do not have the document on which this legislation is based to determine whether we are acting correctly and if the terms of the Energy Charter Treaty are sufficiently extensive to cover not only trade and investment but also consumer protection, stability, continuity and security of supply. Ultimately, that is our responsibility to the citizens of this country.

Cuirim fáilte roimh an Aire Stáit go dtí an Teach chun an Bille gearr seo a phlé. When I saw that this Bill included only three and a half lines I said to myself that the draftsman was not noted for his verbosity but I am not sure the same can be said of Members of this House. If we follow the draftsman's example brevity should be the order of the day.

The purpose of the Bill is to repeal section 37 of the Gas Act, 1976. That Act was introduced due to the installation and development of the Kinsale gas field. The port of New Ross, with which the Minister of State is familiar, played a part in that development as the Ross company constructed the platform for the Marathon gas rig. That company employed up to 1,000 people directly and indirectly in a small, local shipyard. Unfortunately, its fortunes changed subsequently and it is no longer in existence.

I noted with interest that Senator Costello found this Bill negative despite the fact that it is a short Bill repealing a section of an Act. However, I suspect the reason is that the industry is being opened to competition. I am surprised that any Member of the Labour Party would find anything incompatible with its ideology negative.

The Bill is straightforward. Section 37 of the Gas Act, 1976, stipulates that all gas drilled within the jurisdiction of the State for consumption shall be offered for sale to Bord Gais Éireann on reasonable terms. That is patently anti-competitive given national and European legislation on competition and, therefore, needs to be changed. We should not be arguing or complaining about the changes being made.

Bord Gáis Éireann has a de facto monopoly on the transmission, distribution and supply of gas. Despite this it is a young company which has been extremely successful. Nonetheless we must ensure that we have compliance with European legislation and that we are mindful of the many public utilities which, when protected from competition, become monoliths which would not be examples of well run or competitive businesses. Many such companies come to mind.

I agree with Senator Costello that, in general, we can be proud of the semi-State sector. It did much for the economy and created employment at a time when it was most needed. However, many of these companies have gathered moss over the decades. It is often painful to shed that moss but if this is not done these companies will not be there in the future. Aer Lingus, Aer Rianta, CIE and others fit into that category. It is healthier for us to recognise the inefficiencies and take steps to improve these companies. This Bill addresses such a situation and, hopefully, the difficulties which others have found will not attach themselves to Bord Gáis Éireann as it develops its niche in the future.

It is interesting that the Energy Act, 1975, stipulated that large consumers can use Bord Gáis Éireann's network. As this industry develops it is equally important that others will have access to that network without having to duplicate the major capital costs involved. This should not be seen as a threat to Bord Gais Éireann but a challenge which will improve its performance. The company has done well in supplying 20 per cent of the primary market and 300,000 homes in a short time.

I take on board Senator Fitzgerald's comments on the initial customer base which still represents 70 per cent of the consumption of ESB and NET. Without their input and comfort at the time there would not have been the confidence for this industry to make the investment and develop. However, I am sympathetic to the argument that it is not the best use of a scarce resource to use a primary source of energy such as gas to generate another source of energy such as electricity. Given that our indigenous supplies will expire in 2003 we should concentrate on this issue.

Bord Gáis Éireann should be applauded for developing the link to the Scottish network and ensuring that gas will be a primary source of energy on an ongoing basis. Countries such as Holland use natural gas as their primary source of energy. It is clean and effective. In this regard I commend the Minister of State on his recent announcement of a study into gas needs up to 2005. Such forward planning will ensure the success of the industry in the future and ensure that it plays an effective part in the development of our economy.

However, I was disappointed by the Minister of State's list of towns to which he hopes to extend the gas pipeline. I might have been more optimistic if he mentioned south Wicklow — north Wicklow is a little too far from Wexford. The gas network runs close to Wexford and I would like to think that towns such as New Ross, Enniscorthy and Wexford, which are adjacent to the line, might be included in future plans for the development of the network. The fact that this is one of our primary objectives in Wexford is indicative of the importance we attach to the supply of gas in the development of industry and the economy.

Last Wednesday the House spent much time discussing the Multi-Party Agreement and the developing co-operation between North and South in many areas. It is interesting that the joint North-South study concerning the feasibility of providing natural gas between Dublin and Belfast has been completed. This is a prime example of how best to give effect to the aspirations in the new round of co-operation which we expect will emerge between people North and South.

It is also contrary to the International Energy Charter Treaty, which has been ratified by 33 countries. The Treaty was initiated during Ireland's Presidency of the EU and the Government can be credited with making a very positive input. This is an example of the constructive role we have played in Europe, something which has immeasurably enhanced our reputation.

It is timely that the Bill is being introduced and that we will be one of the last countries to ratify the Treaty — I understand it came into force a week ago. In the context of North-South co-operation it is probably worth remembering that a fundamental part of the Treaty is inspired to stimulate and attract investment for the energy sector in Eastern Europe. We should applaud this, given the resources in Eastern Europe and the need for employment and investment. Many years ago, at the end of the cold war, Mikhail Gorbachev encapsulated the idea of long-term co-operation between Europe and the former Eastern Bloc countries when he spoke of his vision of a Europe which stretched from the Atlantic to the Urals. What we are now doing is a small practical expression of support for that concept to which we all subscribe. There are opportunities in the developing democracies and their markets which require nurturing.

If Senator Costello reflects further on the matter he will see the many positive reasons why the Bill should be supported.

I thank Senators O'Dowd, Fitzgerald, Costello and Walsh for their quality contributions to the debate and assure them I will carefully examine the views expressed.

As I stated in my opening speech, the purpose of this Bill is to repeal a section of the Gas Act, 1976, to enable Ireland ratify the Energy Charter Treaty. It is important that Ireland be in a position to ratify the Treaty as soon as possible as it is a valuable mechanism for developing investment in energy projects and facilitating the provision of energy supplies.

Production from our indigenous gas fields at Kinsale Head and Ballycotton has already gone into decline and unless there is success in the discovery of further reserves we will be totally dependent on gas supplies from external sources. The Minister for the Marine and Natural Resources is providing every possible encouragement and a range of incentives to companies wishing to explore for natural gas on our continental shelf and onshore so that further reserves of a commercial nature can be discovered and developed.

Many of the interventions referred to Bord Gáis Éireann. Senator O'Dowd and others were very complimentary of the work done by BGE, a highly successful State body which has performed satisfactorily since its establishment in 1976 and served the country well in developing the natural gas industry. It now supplies a varied market, including residential, commercial and industrial users, the ESB and NET. BGE has developed the gas industry so that it now contributes 20 per cent of our total primary energy requirements, as against 6 per cent in 1980.

This progress has been achieved without the need for State investment. On the contrary, the Exchequer has benefited to the tune of over £400 million in contributions from BGE. Therefore, not only gas consumers, but the whole economy, has reaped the benefits of BGE's success. This success story is due in major part to the expertise and resourcefulness of its Chairman, Dr. Michael Conlon, the board, the Chief Executive, Mr. Phil Cronin, and the management and staff. I join with Senators in congratulating them on their continued success. However, there are formidable challenges to be faced by BGE in the near future, although I am confident the board will rise to them and continue to play its part in the provision of an efficient and cost-effective service.

The natural gas industry has reached an important milestone in its history with the impending liberalisation of the natural gas market through the introduction of further competition. The EU is actively promoting competition in the natural gas market. Ireland is to the forefront in this regard in that legislation is already in place for third party access to the gas network. Preparation of the necessary detailed and technically complex operating rules for third party access is receiving high priority. All this work is designed to contribute to the growth of our economy through competitive energy pricing and quality service. In preparation for this new competitive environment, BGE is engaged in an efficiency and cost reduction programme and is in negotiation with staff and unions on systems and work practices.

Senator O'Dowd spoke of the need for greater competition, the provision of gas to domestic users and a grant scheme for senior citizens. I am fully committed to the introduction of competition and am satisfied that new competition should be introduced on a phased basis, as has been and will continue to be the case. There have been lengthy preparatory discussion on this issue, the result of which has been agreement on the phased introduction of third party access, as provided for in the EU proposals for liberalisation of the gas market. The threshold of 25 million cubic metres is in line with EU proposals.

In the context of Senator O'Dowd's reference to grants and pipelaying, we all know that omelettes cannot be made without breaking eggs and I fully agree with him and other colleagues. Senator Costello referred to the same issue. I agree those eggs should be broken, particularly by sub-contractors and State agencies and companies, in a sensitive, careful and planned fashion with regard to the health, safety and wellbeing of our citizens. I will be pleased to relay Senators' comments to BGE and perhaps we can discuss the issues with a view to future developments around the country. I thank Senator Liam Fitzgerald for his remarks and I compliment him on his excellent grasp of the situation. He covered all parties and Governments in his appreciation of what has been achieved in the area of gas over the years.

I regret that Senator Costello was unable to obtain a copy of the Energy Charter Treaty. Copies are available from my Department and I will ensure, albeit belatedly, they are provided to the Senator. Senator Costello mentioned the protocol on energy efficiency and related environmental aspects, which is designed to ensure that matters are carried out under the framework of the Treaty in a manner which ensures energy efficiency and does not damage the environment.

I assure Senator Costello that the Treaty will not adversely affect consumers. It promotes long-term co-operation between East and West in the energy field. Opening up competitive markets and encouraging investment can only benefit energy consumers in the West while at the same time assisting the economies in Eastern Europe.

I agree with the Senator on the need to exploit alternative sources of energy. I recently announced the results of the third alternative energy requirement competition, which will see more than 100 megawatts of electricity generated from wind, biomass, hydro and wave energy. Ireland is richly endowed with clean and natural energy resources which do not involve the emissions we are trying to avoid and therefore do not pollute the environment. I intend to fully exploit these resources for the benefit of the Irish people. The alternative energy requirement competitions have been very successful in reducing the price of renewable energy. Wind energy is very competitive and quotes for its cost had decreased in the recent competition.

I thank Senator Walsh for his positive comments. He complimented BGE on its highly satisfactory achievements. I have every confidence in BGE and its ability to approach the new competition in a professional and positive manner. The question of extending the area of competition to small volumes of gas can be continued.

Senator Walsh was slightly parochial, as I am from time to time. He expressed his concern, which is allowed and essential for public representatives, that the natural gas facility be extended to towns in his constituency. It would be my pleasure if I could oblige and I will be happy to talk to him and his colleagues about that at any time. Viability is the main criterion for the extension of the facility. I will continue to ask BGE to keep the areas mentioned by Senator Walsh in mind.

The Senator mentioned south Wicklow, which is dear to my own heart. There has been substantial development of and expenditure on infrastructure — tens of millions of pounds — in Arklow town which is on the periphery of Senator Walsh's constituency. There will be a need for the gas facility there and the south Wicklow hinterland if we can get it that far. The towns in County Wexford mentioned by the Senator are within that scope and will hopefully be viable.

The gas industry is now in a major process of change and, therefore, all suggestions for the future of the industry, including proposals put forward today, will be considered in relation to any legislative or structural changes which may be necessary. I hope I have addressed the points raised by Senators. A Chathaoirligh, I thank you and the House for allowing me initiate this short, but nevertheless important and necessary legislation here. I thank Senators for their interest and valuable contributions.

Question put and agreed to.
Agreed to take Committee Stage now.