Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Question 7: To ask the Minister for Communications; Energy and Natural Resources the quantity of gas produced from the three fields of Kinsale, Ballycotton and Seven Heads, in County Cork; the current commercial value of the gas being produced from these fields; the amount the companies have paid in taxation and the royalties that the Exchequer has received since the commencement of production at these fields; and if he will make a statement on the matter. [23931/11]

Pat Rabbitte (Dublin South West, Labour)
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The total volume of sales of gas from the Kinsale and Ballycotton gas fields is approximately 1.75 trillion cubic feet since production started in 1978. Royalties from the two fields are payable to the State at a rate of 12.5% of the fair market value of gas at the well head. The amount received in royalties to date is just over €190 million. The total volume of sales gas produced from the Seven Heads gas field, since production started in 2003, is 0.025 trillion cubic feet. Royalties are not payable on production from the Seven Heads gas field as Ireland, following the lead of counties such as Norway and the UK, moved away from a royalty-based payments system to a tax-based system in 1987. The Kinsale area gas fields are nearing depletion and gas production is currently running at approximately 0.01 trillion cubic feet per annum.

The amount paid in tax is a matter between the operators of the gas fields and the Revenue Commissioners. However, for the information of the Deputy, the combination of tax, royalties and rental fees currently provides for a State take of 40% of net income.

On a more general and forward-looking note, the rate of tax that will apply to any future commercial discoveries made under an exploration licence granted since the Finance Act of 2008, will be between 25% and 40%, depending on the profitability of the field. The fiscal terms in the Finance Act 2008 were introduced following a review of the licensing terms by my predecessor and that was informed by a report from expert economic consultants. The fact that the Kinsale area gas fields are nearing depletion at a time when Ireland's only other commercial discovery, the Corrib gas field, is still in development phase, is another clear indicator of why Ireland needs to encourage an increase in the level of exploration investment and exploration activity.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I think the Minister knows the point of my question, which is the extent to which the people of this country will benefit from gas and oil production under the terms that currently operate. It is not very clear to me what €190 million represents as a proportion because the Minister has not really answered that question. If I am correct in understanding what the Minister said, €190 million is the total tax take from the three fields I have asked about. I ask the Minister to clarify this for me. What I want to find out is how much tax revenue has been received from those fields as a proportion of the overall income generated so that we can know the actual percentage rather than the figures of between 25% and 40% being bandied around as to what we might receive. It is like the corporation tax rate which we are told is 12.5% but actually the effective tax rate is 10%. How much are we actually getting back? I doubt very much we will get 40% back, given the other methods for the tax write-offs on capital costs and so on which means, I suspect, that in many cases we will get virtually nothing back from some of these fields, no royalties and no security of supply. We cannot even control prices because we have effectively given away these gas and oil reserves under the conditions of the licences. How can we justify a situation where at best we are talking about 40% while in Iran, for example, there are service-sharing agreements by which the state maintains the ownership of the gas and in Norway the state receives a 78% tax rate and it owns 67% of the gas and oil? Why are we giving away the gas and oil and what will we be getting back in return? Some of us suspect it will be nothing.

Pat Rabbitte (Dublin South West, Labour)
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The figure of €190 million is royalties only. The royalties system was terminated in 1987.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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The Minister knows the point of my question.

Pat Rabbitte (Dublin South West, Labour)
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Yes, I know the point of the Deputy's question and I understand the question and the importance of it. However, the problem is I do not know how he can say what we are giving away. The point is we are not giving anything away because until we find something, we have nothing to give away. That is the issue. If the Deputy is of the view that the fiscal regime is not tough enough, it was toughened by my predecessor, Eamon Ryan in the Finance Act 2008. Before he did so, it had been 25% for the previous 20 years. Therefore, if it is a giveaway, why is there not a thicket of exploration rigs off the coast where the Deputy lives? Why have there been fewer than 20 holes drilled in the past decade? Nobody who has espoused the position - I sympathise with the Deputy's aspiration - has been able to explain to me why there is not a queue to drill for oil and gas off our shores, if it is a giveaway. If the Deputy decides that it is not practicable for this Government at this time to establish a State exploration company - at €70 million to €80 million a pop, we do not have the money to drill empty wells offshore - if he accepts the investment is not there to establish a State company, then we are reliant on the oil companies to do the exploration for us. Therefore, it is a matter of balance and how one attracts them to do so but we have done a very bad job in this regard so far, with an average of two holes drilled per annum. I am trying to balance a fiscal regime with the requirement to bring in the oil companies to do the exploration and the drilling and hopefully to make finds. That is the balance and that is my position. I was very conscious of what happened at Corrib having regard to the international reputation of Ireland in circumstances where we will be lucky to bring Corrib gas on shore after 17 years while Norway brings gas ashore within four years.

Michael Kitt (Galway East, Fianna Fail)
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A brief question from Deputy Boyd Barrett as we are out of time on this question.

Pat Rabbitte (Dublin South West, Labour)
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I apologise but I am bursting with information on this question.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Even at €80 million a pop, would it not be better for us to borrow the money to invest in a State company to do some drilling rather than borrowing €100 billion to bail out banks? Could we not have borrowed a fraction of that sum to drill because there are estimates of the equivalent of tens of billions of barrels of gas and oil offshore? Would this not have been a better investment than borrowing €100 billion to bail out rotten banks, speculators and bondholders?

The Minister did not answer my question. What I am trying to elicit is what are we getting back from the fields that were exploited. I understood the Minister to say that we were getting €190 million in royalties but what was the total take we got as against what the companies made? That would give a real sense of what we get back under those arrangements, even in a field that is in production.

There are other methods to entice in companies to explore. Why do we have this unique arrangement whereby as soon as the companies go into production we give it to them? That is unique. Why are we doing it?

Martin Ferris (Kerry North-West Limerick, Sinn Fein)
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The Minister made the point that we do not have money for exploration and that we cannot afford it but the reality is that all exploration carried out by multinational oil companies is written off. Effectively, we are paying for it anyway. It does not make sense. Deputy Boyd Barrett referred to the amount of money we put into toxic banks to bail out bankers and developers. If a small fraction of the money was used to develop our natural resources I am certain we would be in a far more lucrative state than is the case at present.

Pat Rabbitte (Dublin South West, Labour)
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The Deputies and I are like ships in the night. I do not think we are relating to each other. I would love to be free of the shackles of the moneys that have gone into the banks but Deputies Boyd Barrett and Ferris do not accept that it was necessary in the first place. We could have a long discussion about why it was necessary and how it might have been done differently. That will be an interesting thesis for bright young people, such as Deputy Boyd Barrett, who will attend Trinity College in 20 years time but it is not much help in terms of trying to have a functioning banking system in the country.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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It is not functioning.

Pat Rabbitte (Dublin South West, Labour)
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Nobody denies that the previous Government made a hames of the situation. Everyone acknowledges that, but it does not help given where we are now. Therefore, I am reluctant to agree with the Deputy that it would be a better use of moneys that we do not have to spend €70 million or €80 million drilling holes that have largely been dry. Of 156 holes that were drilled there were three strikes. If one was to go to Paddy Power, I doubt if one would take those odds.

Martin Ferris (Kerry North-West Limerick, Sinn Fein)
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The Minister is aware that does not reflect reality.

Pat Rabbitte (Dublin South West, Labour)
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I am very sceptical. Under the present licensing round the companies will be given a permit for two years to do the necessary exploration activity. After that, they have three years to drill and if they do not drill it is a case of use or lose it. They have to drill. We will see. I hope Deputy Boyd Barrett and I will still be in the House at that time and I hope bountiful resources will be found. Deputy Boyd Barrett must acknowledge that whether the tax rate is between 25% and 40%, as it is now, or 50% as he and Sinn Féin want, 50% of nothing is nothing. I hope and believe we have prospects but we have not found anything. What I am trying to do is strike a balance between bringing in companies to establish what are our reserves on the one hand while not frightening them away on the other. That is the challenge that confronts us.