Tuesday, 9 February 2010
Energy (Biofuel Obligation and Miscellaneous Provisions) Bill 2010: Second Stage
Eamon Ryan (Minister, Department of Communications, Energy and Natural Resources; Dublin South, Green Party)
I am very pleased to return to the Seanad to present the Energy (Biofuel Obligation and Miscellaneous Provisions) Bill 2010 for its consideration. The main purpose of the Bill is to introduce a bio-fuel obligation in Ireland to underpin the achievement of a number of important national and EU targets around renewable energy and transport in an affordable and environmentally sustainable manner. With all other member states, Ireland is required under the 2009 renewable energy directive to have a 10% penetration rate of renewable energy in transport by 2020. The Government programme and White Paper on energy policy also commit to the introduction of the bio-fuel obligation for similar reasons.
Bio-fuels offer a real, immediate and cost-effective way of simultaneously meeting a number of energy policy aims. Replacing fossil fuels with sustainable bio-fuels results in immediate and noticeable reductions in carbon emissions and an improvement in security of supply. It also opens up new opportunities for existing industries.
Ensuring the cost-effective and sustainable integration of bio-fuels into the fuel supply chain is not an easy task because of the difficulty in balancing the need to keep costs to the consumer to a minimum with the need to ensure a consistent supply of fuels. Therefore, it is imperative we put the right policy in place now to set a clear and transparent framework to facilitate progressive increases in volumes used and to give industry and investors the certainty they need to commit funds. Experience in this country and elsewhere has shown that short-term fiscal measures cannot provide this type of certainty and that only a system of obligation can ensure Ireland seizes the opportunity, takes advantage of bio-fuel and exploits the opportunities for its indigenous production.
It is important to note that policy for bio-fuel fuel use in the future is ambitious but is tempered by a determination, shared among all European governments, to ensure there are no adverse consequences for consumers, the environment or those living where the products needed are grown or extracted. This is critical, given that it seems likely that bio-fuel penetrations of up to 8.5% by energy will be required by 2020, with the remainder coming from renewable energy used in electric vehicles. This determination is reflected in two central aspects of national policy, as reflected in this Bill, and in the 2009 renewable energy directive. The first of these relates to the sustainability criteria regime set out in the directive and incorporated in this Bill. This set of rules, which will come into force across the EU this year, will compel suppliers to ensure every unit of bio-fuel counted towards national targets meets a stringent series of criteria, including life cycle greenhouse gas emissions savings versus fossil fuels, the type of land from which bio-fuel crops can be taken, and ecosystem preservation. This desire to mitigate any additional adverse effects is also reflected by means of a number of review clauses built into the Bill and the directive. These involve scheduled reviews of the effect increased bio-fuel use may have in terms of the market and any environmental and social consequences. In the case of this Bill, it includes the requirement for a review of the ongoing impact of bio-fuel use before any change in the suggested penetration rate.
This is not the first initiative in the bio-fuels sector in Ireland. The mineral oil tax relief schemes, which were introduced to incentivise the production of bio-fuel in Ireland as an interim measure, have proven very successful in getting initial volumes to the market. The market penetration rate for bio-fuels as a percentage of road transport fuels was 0.0003% prior to the schemes being introduced. The figure rose to 1.6% market penetration in 2008 and although final figures for 2009 are not yet available, we expect the figure to be approximately 2.5%. The schemes were designed as an interim measure to increase the level of bio-fuels in the fuel mix and to encourage the development of an indigenous bio-fuels industry in advance of the introduction of the national bio-fuel obligation. There is considerable potential for growth and we can now build on a base we did not have prior to the introduction of the schemes in 2005.
The National Oil Reserves Agency, NORA, will be the administrator of the scheme. I have chosen NORA because the agency has an existing business relationship with the obligated parties, namely, suppliers of transport fuels to the Irish market. NORA is responsible for ensuring Ireland complies with its EU and international requirements for emergency oil supplies. The agency is funded by a levy on mineral fuel which it collects from oil suppliers. It also enters into contracts with oil suppliers for the purposes of leasing oil storage. On that basis, it was deemed that NORA was by far the most appropriate administrator for the bio-fuel obligation. The cost of administering the obligation will be met by a bio-fuels levy on oil suppliers to cover bio-fuels, which are currently exempt. This will ensure the smooth operation of the obligation.
The principal role of NORA will be to administer the bio-fuel obligation on behalf of my Department. The administrator will be responsible for the opening of accounts for obligated parties and bio-fuel producers and suppliers who wish to be part of the scheme. The administrator will have the power to ask for evidence to support all the conditions of the scheme. If the administrator deems that the evidence does not support the information provided, it will have the power to reject the application for certificates for some or all of the fuel in a submission. The administrator will also have the power to revoke a certificate that has been issued if the information or evidence on which the certificate was issued is subsequently found to be false. The administrator will also have the power to certify trading of certificates among account holders. This means obligated parties who have not been able to meet their obligation fully by supplying bio-fuel themselves can purchase certificates from other obligated parties or from bio-fuels suppliers who have registered with the administrator. An obligated party who has a shortfall in the number of certificates at the end of a defined period — the calendar year — will be required to pay a non-compliance fee, calculated on the basis of the number of certificates short multiplied by the established amount of 45 cent per certificate. All of the transactions on accounts will be in electronic format to reduce the administrative burden on those participating in the scheme.
The Bill also has a number of other provisions that do not relate to bio-fuel. It amends the National Oil Reserves Agency Act 2007 to provide for some changes in respect of strategic oil stocks policy. These include provisions on consultation on the rate of the NORA levy, management of NORA's funds, procedures in respect of levy overpayments and increased penalties for non-compliance with legislation in the event of an emergency.
The Bill also proposes to assign additional functions to the Commission for Energy Regulation, which is the independent body responsible for regulating and overseeing the liberalisation of Ireland's energy sector. These new responsibilities relate to the safety regulation of the activities of liquid petroleum gas installers. Established as the independent regulatory body with responsibility for electricity under the Electricity Regulation Act 1999, the CER's powers and responsibilities were extended under the Gas (Interim)(Regulation) Act 2002 to cover regulation of the natural gas market. As the independent regulator for the electricity market, the CER has a range of statutory functions including the licensing and authorisation of electricity undertakings and infrastructure and the regulation of certain tariffs. Within the gas sector, the CER has a similar regulatory role and also has the power to regulate prices charged to BGE's residential and SME gas customers. The Energy (Miscellaneous Provisions) Act 2006 amended the Electricity Regulation Act 1999 to extend further the functions of the CER to provide for electrical and gas safety, including LPG safety. The gas safety regime is now fully operational. However, following legal advice to the Department, it is necessary to address identified gaps in the 2006 amending legislation so that the LPG provisions adequately address the regulation of LPG safety. Given its statutory responsibility to carry out gas safety functions, the CER is evidently best placed to take on the LPG safety functions and responsibilities as provided for in the 2006 Act.
The amending provisions of this Bill represent phase 1 of a two-phase approach to LPG safety. The focus of the phase 1 proposals as set out in the Bill is on LPG installer safety provisions. The second phase will require the undertaking of a detailed consultation by the CER on the appropriate options available for the safety regulation of LPG distribution networks, LPG appliance related incidents reporting in a domestic setting and LPG promotion by the CER. I understand that the CER published the phase 2 consultation document on 4 February. The outcome of that process will inform thinking on phase 2 legislation requirements which will need to ensure there are no regulatory overlaps with the role of agencies such as the Health and Safety Authority. The overall objective is the achievement of first-rate safety standards for the LPG sector.
To place the phase 1 provisions in context, it is important to note there is also legislation outside the scope of my Department which relates to the transportation and storage of LPG. The regulation of the transportation of LPG by sea is a matter for the maritime safety directorate under maritime safety legislation. Transportation over land and the safety regulation of storage facilities are covered by regulations governing the transportation and storage of dangerous substances and by the Safety, Health and Welfare at Work Act 2005.
The safety provisions of the Bill will deliver benefits to LPG consumers and to the public in general. I look forward to working closely with the CER on ensuring the speedy implementation of the Bill's provisions, following enactment. There are no Exchequer costs associated with this Bill.
I now propose to outline the main provisions of the Bill. For the convenience of the House, a detailed explanatory memorandum has been published and this provides a synopsis of the provisions of the Bill. The Bill consists of 27 sections and four Parts. It establishes that a bio-fuel obligation will be introduced in Ireland which will compel road transport fuel suppliers to have an average of 4% bio-fuel included in their fuel sales each year. The obligation will be administered by the National Oil Reserves Agency, NORA, as an additional function to its current remit. Part 1 contains standard provisions concerning Short Title, commencement, definitions and making of orders connected with the Bill.
Part 2 sets out how the bio-fuel obligation will work. Section 3 outlines how the National Oil Reserves Agency Act 2007 will be amended by the insertion of an additional Part to the Act to allow for the introduction of the bio-fuel obligation. The section sets out the manner in which the scheme will operate, to whom it will apply, and the definitions to be used in respect of the bio-fuel obligation. It also details penalties which will be enforced relating to non-compliance. The section also sets out the accountability of NORA and the account holders relating to the obligation, along with the powers and functions of NORA relating to said obligation.
Part 3 of the Bill sets out the amendments required to the principal Act to ensure that all powers conferred on NORA in the existing Act are extended to include administration of the bio-fuel obligation. Sections 4 and 5 provide for amendment of specific sections of the principal Act to allow NORA to administer and operate the bio-fuels obligation as an additional function to the current remit. Section 6 provides that directors appointed to the board of NORA have knowledge of the bio-fuel area and that the directors, including the chairperson and chief executive, shall be paid by NORA out of the levy and bio-fuel levy such remuneration and allowances for expenses as the Minister, with the consent of the Minister for Finance, may decide. Sections 7 to 10 provide that the bio-fuel levy collected can be used by NORA to pay for consultants' fees or expenses incurred by a subsidiary of NORA if required and that the bio-fuel levy can be used to pay for staff and the chief executive of NORA.
Section 11 provides that the National Treasury Management Agency, with the consent of the Minister for Finance, may act on behalf of NORA in respect of investments, borrowings and related financial transactions. Section 12 provides that reference to expenses shall also include any costs incurred by NORA in administering the obligation or in collecting the bio-fuel levy. Section 13 provides that the Minister for Communications, Energy and Natural Resources shall consult with the Minister for Finance in setting the rate of the NORA levy.
Sections 14 and 15 provide for the amendment of the enforcement and penalties provisions in the principal Act in order that the bio-fuel obligation is also covered. Section 16 provides for the procedures in respect of reclaiming overpayments of the bio-fuel and NORA levies and specifies that claims for overpayment must be made within 18 months of the end of the year in which the overpayment was made. Section 17 provides that should a dispute arise with an account holder over whether the payment of the bio-fuel levy is appropriate, the onus is on the account holder to prove otherwise, as is currently the case for the NORA levy.
Section 18 provides that NORA or the Minister for Communications, Energy and Natural Resources may prosecute offences that relate to the bio-fuel obligation and that a court may order a person convicted of an offence to recompense NORA for its costs in investigating, detecting and prosecuting the offence. Section 19 amends the principal Act to clarify that notices may be served by electronic means.
Part 4 deals with miscellaneous amendments to three Acts, namely the Fuels (Control of Supplies) Act 1971, the Electricity Regulation Act 1999 and the Energy (Miscellaneous Provisions) Act 2006. Section 20 updates the fines on summary conviction and on conviction on indictment for offences under section 4 of the Fuels (Control of Supplies) Act 1971.
Safety is, and must remain, a matter of highest priority. The phase 1 proposals contained in this Bill propose to provide for the extension to LPG installers of the existing natural gas installers safety regime. These provisions are addressed under sections 21 to 27 of the Bill. Section 21 of the Bill provides that references in the Bill to "the Act of 1999" mean "the Electricity Regulation Act 1999", described as the 1999 Act. Section 22 amends section 2(1) of the 1999 Act by inserting definitions in regard to LPG and LPG fittings. It also extends the definition of "gas installer" to include LPG installers. Section 23 amends section 9 of the 1999 Act to extend the functions of the CER to include regulation of the activities of LPG installers with regard to safety. It also provides for the establishment by the CER of an LPG safety framework. Section 24 provides a definition of LPG works.
Section 25 amends section 9H of the 1999 Act to extend the functions of the CER to the making of regulations relating to LPG safety. Such regulations may provide for specifications regarding the installation or maintenance of LPG fittings, the conditions to be fulfilled before LPG may be connected or re-connected to a premises following installation, maintenance or repair of an LPG fitting. The penalty provision set out in the 1999 Act, which applies in regard to non-compliance by a person with the natural gas regulations, is to be extended to LPG. In the case of domestic dwellings, an amendment is provided to extend responsibility to the landlord for ensuring an LPG fitting is safely maintained. In the case of a premises used as a place of business similar responsibilities are set out.
Section 26 of the Bill amends section 9J of the 1999 Act. This provision relates to the appointment of gas safety officers. The amendment proposes to extend the powers of gas safety officers appointed by the CER to the inspection of LPG fittings, to the issue of directions, to the taking of measures for the protection of the public from any danger arising from LPG and to the disconnection of LPG supply. Section 27 of the Bill provides for the repeal of section 14 of the Energy (Miscellaneous Provisions) Act 2006.
This Bill is an important measure in delivering on our targets for renewable energy in transport. Furthermore, the safety provisions of the Bill will deliver benefits to LPG consumers and to the public in general. I look forward to working closely with the CER on ensuring the speedy implementation of the Bill's provisions following enactment. I commend the Energy (Biofuel Obligation and Miscellaneous Provisions) Bill 2010 to the House.