Seanad debates

Wednesday, 26 October 2011

Access to Central Treasury Funds (Commission for Energy Regulation) Bill 2011: Second Stage (Resumed)

 

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

11:00 am

Photo of Mark DalyMark Daly (Fianna Fail)
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I welcome the Minister for Communications, Energy and Natural Resources, Deputy Pat Rabbitte, and wish him luck in finding oil and gas.

While Fianna Fáil does not oppose the Bill in principle, I have several questions about the legislative measures proposed. The anticipated implementation costs of the programme are approximately €5 million. The levy on the industry will not be imposed until the regulatory structures are in place. After that one expects it to be paid back within a year or two through the imposition of the levy.

I see the dreaded word "consultant" written in the Minister's speech in terms of staffing. I understand one cannot have all of the expertise on a staff but I am fearful about the cost of said consultants. Obviously, this has been budgeted into the loan being sought and I presume it will go through the normal e-tender process. Are we certain the figure of €5 million is accurate? It seems a very nice round figure. I presume we will try to not borrow as much as this from the NTMA if we can get away with it.

We initiated this when we were on the other side of the House and it is down to the Corrib gas pipeline. I assume this is why we are putting regulations in place with regard to overall safety. The Minister's speech mentioned the need to have less regulation, but this is regulation. The fear is that ultimately the cost will be passed on to the consumer and the levy will end up being paid by people buying petrol at the pumps, perhaps specifically in Ireland. We spoke about whether similar structures are being put in place in the North of Ireland. I ask the Minister to answer these questions.

Photo of Tony MulcahyTony Mulcahy (Fine Gael)
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I welcome the Minister back to the House. By passing this Bill we will enable the Commission for Energy Regulation to access funding through the National Treasury Management Agency at low rates of interest thus enabling the establishment of a safety framework for the petroleum sector.

As Members of the Oireachtas we have a duty to taxpayers to spend their hard-earned money in the most prudent way possible. In addition, we must legislate to use all necessary means to achieve this. As we are acutely aware, a euro saved is a euro less we must borrow from Europe. For too long, financial responsibility was not the priority of successive Governments and we are left to clean up this legacy.

Section 1 amends section 18 of the National Treasury Management Agency (Amendment) Act 2000 to allow the Commission for Energy Regulation to become a designated body under the provisions of the Act. At present, bodies such as the Railway Procurement Agency and the HSE can access funding through the NTMA. Section 2 provides for the title of the Bill.

The Bill is a necessary step for the most cost-effective financing of a safety framework for the petroleum sector. This sector includes any mineral, oil or hydrocarbon or natural gas extraction carried out in the land mass of the State and its territorial waters. The Bill is in addition to the Petroleum and Other Minerals Development Act 1960, the Continental Shelf Act 1968 and the Gas Act 1976.

The petroleum safety framework is a product of the Petroleum (Exploration and Extraction) Safety Act 2010. This Act conferred on the CER the ability to borrow moneys necessary to carry out certain functions, with the creation of a safety framework being the primary function. Because of this additional role for the CER it must prepare administratively and financially. The Bill gives the CER the ability to source this funding from the NTMA. These funds will be paid back on a phased basis by the CER to the NTMA following the implementation of the safety framework in 2013. The oil and gas industry will be required to pay an annual fee to cover the safety framework costs.

Members of the House are all too aware of the controversy regarding the Corrib gas field and issues regarding pipelines and facilities being built on the Erris peninsula. If the Petroleum (Exploration and Extraction) Safety Act 2010 had been in place when the oil and gas companies were designing their infrastructure years of controversy may have been avoided. We could have avoided a cost to the taxpayer of millions of euro in policing the demonstrations and this money could have been saved or used elsewhere. This is because the CER would have been to the forefront in the protection of safety concerns of those living in the locality and those working in the petroleum industry. This would have happened through the use of enforcement orders and the withdrawal of safety permits.

The Commission for Energy Regulation has the ability to force operators to comply with its direction. Ultimately the courts can impose penalties ranging from €5,000 to €3 million. Because of the new safety role the CER has been granted, Ireland should not see incidents such as that which happened in the Gulf of Mexico in 2010 with the loss of many lives and subsequent pollution of the region. This will not be a self-regulating industry but one which will be held responsible and accountable. The CER will take on this safety role with regard to the petroleum sector and will liaise with the National Standards Authority of Ireland, the Health and Safety Authority, the EPA, the Minister of the Transport, Tourism and Sport, the Irish Aviation Authority and other such persons that may be prescribed by order of the Minister for Communications, Energy and Natural Resources. This will ensure the highest standards are set for safety.

The primary function of the Petroleum (Exploration and Extraction) Safety Act 2010 was to give responsibility for certain safety aspects to the Commission for Energy Regulation, to oversee safety from the primary extraction transport and related ancillary activities through to refining. Prior to this, these activities had been variously regulated by Bord Gais, the HSA and ministerial order, while An Bord Pleanála and local authorities had related and ancillary functions. Allocating responsibility for safety to the CER for the sector will create a pool of knowledge under one umbrella and economies of scale will be achieved. I hope inspectors employed at present by the agencies which previously had responsibility for safety in the oil and gas industry will be reallocated to the CER where their expert knowledge and experience gained in recent years will be of use or be given new functions so they work to the optimal level for the taxpayer and the Minister.

Under its new powers, the CER will have the authority to investigate and report incidents to the Minister and to monitor and enforce compliance. It will also have the authority to issue safety permits and provide safety information to the public where appropriate. It will report annually to the Minister on the functioning of the safety framework. All of this costs money and it will be financed by the imposition of the levy to be paid each year by those involved in the extraction and exploration of oil and gas resources. Any excess of revenue should be applied to the CER to meet its expenses in the following year and the levy for that year should take into account such excess. Any expenses incurred which are not covered by the levy payable for that year should be recovered on foot of a levy order in the subsequent year. This is a fair method of collecting the levy.

Petroleum companies must be encouraged to consider Ireland as a location to explore and extract, but the work must be carried out in a method that is safe for those doing it and for those citizens living in proximity to the operations. If the companies decide to come here they must contribute to any health and safety costs their operations will generate. We can see the enforcement of safety measures will be self-financing and that the initial set-up costs of the implementation of the safety framework will be recovered, thus no cost associated with the Bill will be incurred by the Exchequer.

I welcome and support the Bill and I wish the Minister well in his exploration proceedings.

Photo of Sean BarrettSean Barrett (Independent)
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I welcome the Minister and I praise the brevity of the Bill and the explanatory memorandum. It is to be encouraged. Regulation can be funded from the industry, and I am glad to see this is the Minister's intention, with reference to the funding being repaid following phased implementation of the petroleum safety framework commencing in 2013 through the imposition of the prescribed annual levy on petroleum undertakings. This is quite a short time span and the small amount of €5 million is envisaged. For every 1% we can save through borrowing through the NTMA rather than directly we will save €50,000. Does the Minister have an estimate of the savings? This would be of interest. Should the sum of €5 million be included in the Bill? Supplementary Estimates can be a discipline on spending Departments and fiscal discipline is something we will work on for many years ahead because it is the IMF-EU-ECB agreement. I am glad it is operating between now and 2013 because safety is a current expenditure, and apart from borrowing for the short interval to which the Minister referred, borrowing for safety does not make much sense. The distinction between capital and current expenditure is sometimes fudged in our budgets but I am not sure it leads to any great improvement in the way we do our business.

I welcome the Bill and the payback period for which it provides. If we could set a prototype for dealing with banking institutions in order to start getting the money back in 2013, the country might be in a better place. Perhaps the Minister should communicate our views on that. The payback period looks good. It is not really capital expenditure except within a short period.

Do we have an estimate for the savings and does he think it a good idea to put the €5 million into the Bill so that it does not escalate and become part of our financial problems? Would it be a protection for taxpayers if the Bill provided for permission to be sought to borrow the €5 million for two years? I wish the Minister success with this measure.

Photo of John GilroyJohn Gilroy (Labour)
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This is a short and technical Bill but is important nonetheless. It represents the outworking of the Petroleum (Exploration and Extraction) Safety Act 2010, which requires the Commission for Energy Regulation to assume responsibility for the safe regulation of petroleum exploration and extraction in Ireland. The Minister's thorough and comprehensive explanation has shown us that all bases are covered. To ensure the commission's functions are in line with the 2010 Act, it is necessary to amend the National Treasury Management Agency (Amendment) Act 2000 by making two small changes.

Unless the Leader wants a debate on the Corrib gas pipeline and the exploration off the west coast -----

Photo of Maurice CumminsMaurice Cummins (Fine Gael)
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Certainly not.

Photo of John GilroyJohn Gilroy (Labour)
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----- I do not have much to add to the debate. I conclude by asking the Minister whether the terms and conditions attached to the levy will apply retrospectively to existing licences. I support the Bill and urge the House to do likewise.

Photo of Tom ShehanTom Shehan (Fine Gael)
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The Bill proposes to allow the Commission for Energy Regulation to source low interest funding through the NTMA to meet the start-up costs incurred in putting in place the statutory safety framework required by the Petroleum (Exploration and Extraction) Safety Act 2010 prior to the imposition of the prescribed levy on the industry. What are the implications of the levy for Shannon LNG? Local newspapers have reported that the company is about to pull out of the Kerry area and may sue the State.

Photo of Pat RabbittePat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)
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I thank Senators for their contributions. As Senator Daly noted, this is not a controversial Bill although it owes its origins to the Corrib controversy. My ministerial predecessors, Noel Dempsey and Eamon Ryan, were concerned about the issues that arose regarding safety and the framework that was put in place as a result is in keeping with best international practice. Irrespective of the other issues people may wish to raise with regard to Corrib, nobody can argue that the State has not gone out of its way to cover every possible base in terms of ensuring safety.

The Bill will, of course, apply to other projects, including Kinsale, where drilling is carried out whether onshore or offshore. In regard to value for money and Senator Barrett's question about the €5 million, this figure is not from the top of our heads. It is the regulator's estimate of what it will require to meet its obligations under the statutory regulations. I acknowledge Senator Barrett's remark about fudging the distinction between current and capital expenditure but the proposed measure will not impose a charge on the Exchequer. It is not unusual for a regulator to impose a levy on the industry. The measure is cost neutral for the Exchequer but the levy can only be worked out after the process of consultation has been completed. The document was published and the submissions and responses are being considered by the regulator. I can only answer questions about the duration of the pay back in the context of whatever regime is ultimately put in place.

I do not know the difference in cost between sourcing the funds through the NTMA and conventional financial institutions. It will definitely be cheaper, although the precise cost will depend on when the application is made and processed. It will also be quicker. It is the easiest way to facilitate a body like this given that it will recoup its costs.

Senator Sheahan asked about the impact of the levy on Shannon LNG. He referred to local media reports about the possibility that the company may pull out. Such a decision would have nothing to do with this Bill. I do not know whether the company is withdrawing and, in any event, it is not here. Along with my colleague, the Minister for Arts, Heritage and the Gaeltacht, Deputy Deenihan, I have devoted considerable efforts to encouraging the LNG project at Tarbert and we are anxious to see it proceed because it will provide an additional limb to our energy security policies. The company will be coming into a regulatory environment which may be different to that which its parent company is accustomed to in the United States but it is broadly in keeping with the regulatory systems applied in Europe. The regulator is seized of the issue. I had hoped we would have a decision by the end of this month, but I do not know whether that will now happen. However, I am assured that it will not take much longer than this. I cannot see this as a reason for alarm about the future of the project. When I met representatives of the parent company, they were looking for certainty and the earliest decision possible. They did not object to being subject to the regulatory environment like any other company which comes here. While accepting that the regulator operates at arm's length from us, we have encouraged giving the LNG plant the earliest possible attention because of the importance the Government attaches to it. We want it to be located at Tarbert, not just for the employment it would bring but also for the contribution it would make to the country's energy security. I assure Senator Sheahan in that respect. We are actively looking at the matter and I hope the regulator will make a decision soon. It is important for me to emphasise that when this House passed the legislation to establish the regulator's office, it ensured the office would be independent. If colleagues have views on how the regulatory system should function, I will be happy to discuss the matter at any time. As the law stands, however, the regulator is independent.

I would like to refer to a note given to me since I came to the House. It relates to remarks made this morning by a Member of the House, Senator Rónán Mullen. I am appalled by the remarks attributed to him. He took the opportunity-----

Photo of Denis O'DonovanDenis O'Donovan (Fianna Fail)
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Is this appropriate? Does it have anything to do with the Bill before the House?

Photo of Pat RabbittePat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)
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Other than that there is a lot of gas in it, I do not think it has anything to do with it.

Photo of Denis O'DonovanDenis O'Donovan (Fianna Fail)
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Right.

Photo of Pat RabbittePat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)
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The Senator had alleged yesterday that the Minister for Justice and Equality had counselled or threatened the Bar Council not to come out against either of the referendums. When he was apologising this morning, he ascribed the allegation to me by suggesting I had intervened by warning the Bar Council that it would be punished in the context of the proposed legal services legislation if it were to oppose the referendums. The Senator made an outrageous allegation. I had no discussions with any member of the Bar Council, the chairman of which has been known to me for more than 30 years. I talk to him from time to time and he will testify that I did not discuss the issue with him. I had no contact with the Bar Council.

Photo of Denis O'DonovanDenis O'Donovan (Fianna Fail)
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As Senator Rónán Mullen is not present, perhaps it might be inappropriate for the Minister to continue in this vein. The matter should be raised in another venue.

Photo of Maurice CumminsMaurice Cummins (Fine Gael)
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The allegations were made when the Minister was not present.

Photo of Pat RabbittePat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)
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I do not want to drag it out. I just want to say-----

Photo of Denis O'DonovanDenis O'Donovan (Fianna Fail)
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I am not siding with Senator Rónán Mullen; I am just saying he should be present to hear these remarks. I am trying to be fair as Leas-Chathaoirleach. As the Senator raised the issue, rightly or wrongly, he should be present when the Minister is making such an emphatic reply which he, in turn, may be right to make. Perhaps the matter can be dealt with in another way.

Photo of Pat RabbittePat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)
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I accept the ruling of the Leas-Chathaoirleach. I thought it was particularly ungraceful to apologise to the Minister for Justice and Equality and then go on to implicate me in something in which I had no involvement - good, bad or indifferent. It was an abuse of the privilege of the House and I regret that it happened.

Photo of Denis O'DonovanDenis O'Donovan (Fianna Fail)
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The Minister has made his point.

Photo of Tom ShehanTom Shehan (Fine Gael)
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I have a query.

Photo of Denis O'DonovanDenis O'Donovan (Fianna Fail)
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We cannot deal with queries now.

Photo of Tom ShehanTom Shehan (Fine Gael)
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I am seeking clarification on the Bill.

Photo of Denis O'DonovanDenis O'Donovan (Fianna Fail)
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We are moving on.

Photo of Tom ShehanTom Shehan (Fine Gael)
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I will leave it until Committee Stage.

Photo of Denis O'DonovanDenis O'Donovan (Fianna Fail)
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That is no problem.

Question put and agreed to.