Dáil debates

Wednesday, 18 October 2006

1:00 pm

Paudge Connolly (Cavan-Monaghan, Independent)
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Question 85: To ask the Minister for Finance his views on the provision of exemptions to licensed hauliers to enable them to use green diesel fuel for deliveries within this jurisdiction; and if he will make a statement on the matter. [33320/06]

Photo of Brian CowenBrian Cowen (Minister, Department of Finance; Laois-Offaly, Fianna Fail)
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I have no proposals to extend the use of green diesel to hauliers. Green diesel, also known as marked gas oil, MGO, is a reduced-rate diesel containing a dye and a chemical marker. It is primarily used in the agricultural sector, for example, in farm tractors and certain vehicles used for the most part by the agricultural sector, and also by construction machinery and vehicles designed for off-road use. Under EU law, the use of marked gas oil in road haulage, or by passenger carrying vehicles, is strictly prohibited. The current rate of mineral oil tax for auto diesel that is used by hauliers and private motorists is €368 per 1,000 litres. The minimum rate required by EU law is €302 per 1,000 litres. Given the existing problems with smuggling and misuse of green diesel it would not seem wise to contemplate its extension to new categories, even if EU law allowed it.

Paudge Connolly (Cavan-Monaghan, Independent)
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I refer to the use of green diesel in this jurisdiction and to the harm caused by the use of washed diesel in lorries. I spoke recently to a lorry driver who drives occasionally who told me that 12 months ago it cost €300 to fill his lorry and now it costs €400. Somebody has to pay for this. A number of such hauliers are locked into contracts and they do not have the opportunity available to operators in the airline business of adding a surcharge and making the passenger pay.

I am sure the Minister would agree that the industry is already laundering and washing diesel. People are offering their products to hauliers and because the margins are so tight in the industry, at times people are tempted. In effect, they cannot compete with what is out there.

I am sure the Minister would also accept the problems this creates for local authorities, such as my local county council in the Border area of Monaghan, which has been left with a bill for hundreds of thousands of euro to mop up the sulphuric acid that is used in the diesel laundering process, in addition to large quantities of cat litter that is also involved. I believe it was necessary to dispose of 250 tonnes of cat litter. A black cat may have kittens but I do not know where the litter is coming from. The clean up after this illegal activity is a major issue of concern. This is an accident waiting to happen. The environmental consequences are serious because if a water supply is affected it could result in a major catastrophe.

Almost 90% of freight is moved by road rather than rail as we do not have that facility. I urge the Minister to consider this issue. The haulage industry held talks with the Minister for Finance some years ago. At that time the industry sought a rebate of 12 cent per litre. The indicators looked good at the time but the Department failed to deliver. If the Minister is averse to the extension of the use of green diesel I invite him to consider three other options to take the gangsters out of the system, namely, that everybody would be allowed to use white diesel and a full rebate would be given to all those entitled to it, including licensed hauliers; the use of a separate colour for diesel used by the licensed sector; or the setting up of a fund for the purchase and storage of diesel which could then be passed on to industry members. Much damage is done by speculators in terms of price.

Photo of Brian CowenBrian Cowen (Minister, Department of Finance; Laois-Offaly, Fianna Fail)
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Excise is charged on petrol and diesel at 44 cent and 36 cent per litre, respectively. Excise rates in the EU are subject to minimum rates under the EU energy tax directive. Irish rates are around the EU average and are considerably lower than many of our trading partners, particularly the UK. While rates could be potentially reduced to the basic EU minima, I remind the Deputy that EU Finance Ministers agreed in September of last year, in the context of rising oil prices, that distortionary fiscal and other policy interventions that prevent the necessary price adjustments should be avoided. Reductions are costly — even a 2 cent reduction in petrol and diesel would cost in excess of €80 million per year. There may be a concern that reducing fuel taxes conveys a message that increasing consumption can be tolerated, especially in terms of CO2 emissions.

It must also be recognised that diesel and petrol prices have begun to fall significantly over recent weeks. Last year I made a decision to direct Exchequer funding into alternative motor fuels, for example, bio-fuels, through excise reliefs, rather than reducing excise on conventional fossil fuels. That scheme is estimated to cost in excess of €200 million over the next five years.

It is also important to point out that where the chemical marker and dye is illegally removed from marked gas oil to facilitate illegal use as auto diesel, it can still be identified as MGO on the basis of its sulphur content which is higher than auto diesel, as the Deputy indicated. In 2005 a total of 127 detections of laundered oil were made, including 21 at retail and distribution outlets and 71 involving hauliers. Over 300,000 litres of fuel and five tankers were seized.

In addition to its primary use in the agriculture sector and by construction industry machinery and vehicles designed for off-road use, green diesel is also used in commercial and domestic heating systems as well as in ships, fishing boats, pleasure craft and trains. In each of these areas it is allowable under EU law for green diesel to be used in these sectors and in this regard Ireland is similar to other EU member states. I will consider certain issues raised by the Deputy and revert to him in due course.

Paudge Connolly (Cavan-Monaghan, Independent)
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Would the Minister agree that the number of seizures suggests the amount of washed diesel is a major problem? Millions of gallons of diesel are being washed and the black economy is thriving from it. I urge the Minister to consider some of the options I suggested. This industry was the first to be deregulated and since then its members have been hung out to dry. Inflation is another factor to be taken into account. We are a peripheral nation and we depend on the import and export of goods to and from rural areas. There is no transport option other than the roads, which are frequently congested. I urge the Minister to reconsider.

3:00 pm

Photo of Brian CowenBrian Cowen (Minister, Department of Finance; Laois-Offaly, Fianna Fail)
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It is a moot point as to whether we should put in place some incentive just so that certain rogue operators will see that it makes sense to abide by the law. I am inclined to favour an approach which ensures there is greater compliance in the sector generally. I pay tribute to those licensed hauliers who are abiding by the law and dealing with very competitive issues. The best way forward is where all hauliers pay the appropriate excise on diesel and those who engage in diesel washing are met with the proper punishments.

Revenue inform me that under the current system the misuse of MGO in vehicles can be detected by means of a visible check for colour and a laboratory check for the chemical marker. A total of 173 convictions were obtained for marked oil offences in 2005 and fines of over €175,000 were imposed. A further 1,326 offences were settled on payment of compromise penalties totalling nearly €1 million.