Éamon Ó Cuív (Galway West, Fianna Fail) | Oireachtas source

I am pleased to have an opportunity to speak in this debate. The decision by the Minister brings us to the end of a road that was embarked on at the beginning of this Dáil. It shows that if the Oireachtas functions properly, it can bring about change through analysis and debate, making recommendations and listening to Members. Now that the process has advanced, there is unlikely to much media interest in this debate. As the Minister noted, over the years there has been considerable comment, some ill-informed and some well-informed, about the fiscal terms for oil exploration.

The current journey started when Sinn Féin tabled a Private Members' motion early in this Government's term. I remember arguing in that debate that it would be pointless to have the usual discussion in which Deputies from each side speak from prepared scripts and no one listens to anyone else. I advocated instead referring the matter to an Oireachtas committee to examine the issue calmly, listen to the various points of view and make detailed recommendations. I pay tribute to Deputy Andrew Doyle who chaired the Joint Committee on Communications, Natural Resources and Agriculture which examined this issue as its first task. Deputy Doyle chaired proceedings in an open and non-partisan manner and did not in any way try to stifle debate. He facilitated, in particular, an engagement with the Norwegian Ministry of Petroleum and Energy which gave members a very good insight into the realities of Norway's policy on exploration. Given that reports on that issue were sometimes inaccurate, the advice offered by the Ministry and the facts that emerged proved very interesting. For example, we learned that Norway's high tax rates were introduced after the Ekofisk field was found. It is also interesting to note that the Norwegians strongly recommended against changing terms retrospectively. We also learned that Norway uses some of its tax revenue from offshore exploration to pay companies to explore for oil. Under the Irish regime, companies pay the full cost of exploration, which can be up to €100 million for one drill. Norway, in contrast, offers rebates to companies involved in drilling.

The joint committee's report, which made 11 concrete recommendations, has acted as a spur to review the licensing terms. I recall during the debate on the report in the Chamber that the Minister blew hot and slightly cold on it, first following the official line that the terms in place at that time were good and it would not be possible to attract more companies to engage in exploration, before promising to have the matter re-examined, as he subsequently did through the Wood Mackenzie report. I welcomed the undertaking he gave at the time as a good and sensible approach.

In general, I welcome the changes the Minister has made. During the terms of this Government and its predecessor, we will have moved from a position in which corporation tax on profits from offshore exploration were 25% to one in which a maximum tax rate of 55% will apply to substantial finds. I favour the idea of a graded tax, as did report produced by the joint committee in which we proposed three tax rates of 40%, 60% and 80%. The Minister, in proposing a sliding scale ranging from 30% to 55%, has accepted the principle advocated by all members of the joint committee, from Fianna Fáil, Fine Gael, Sinn Féin, the Labour Party and the Independent member, that the tax rate applied should reflect the profitability of the find. I welcome the Minister's response in this regard.

A number of interesting facts emerged when we were doing our analysis. I submitted a parliamentary question asking how much of the seabed was subject to licence, in other words, to what proportion of the seabed did the old terms apply should a company strike lucky. The answer I received indicated that 4.4% of the continental shelf is currently licensed, which means more than 95% of the seabed is not subject to licence.

Only 9.8% of the geologically significant areas for hydrocarbons, that is, the places where one would be likely to find a hydrocarbon, is licensed and the Minister would still have 90% left if one managed to strike gold by finding an Ecofisk out there where it is only a relatively simple matter to encourage exploration companies to find the rest of it. Therefore, the idea that all is given away has been grossly exaggerated.

Unfortunately, our record of finds in recent years has not been great. On the other hand, there is always the possibility. Our understanding from the Norwegians was that when they found Ecofisk they were nearly on the point of giving up. Their licensing regime stated they had to go slightly deeper than the exploration company had gone at the time. It was that extra depth that found the field and if they had not forced them to comply fully with the licence, although I presume they would have found it eventually, they might not have found it as fast. What we must have, and what we are now building into the system, is a contingency that if one strikes rich veins of hydrocarbons, the State will benefit.

I presume there will be a debate as to whether we should have gone even higher and included the provision that one could get a marginal tax rate of 80% if one found very large deposits. It is a significant achievement that we have moved, from the 25% rate to the 55% marginal rate, depending on the size of the field, by a good process.

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