Michael Mullins (Fine Gael)
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I welcome the Minister of State at the Department of Public Expenditure and Reform, Deputy Brian Hayes, to the House and ask him to make his address.

Brian Hayes (Dublin South West, Fine Gael)
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I thank the Cathaoirleach for the opportunity to come to the Seanad to contribute to this debate on fuel laundering.

The Office of the Revenue Commissioners, which has responsibility for the collection of mineral oil tax and for tackling the illicit trade in mineral oil products, informs me that it is acutely aware of the threat posed by illegal activity and tax evasion in this area. The most serious risk comes from the large-scale laundering of markers from diesel that is subject to a reduced rate of mineral oil tax on condition that it is not used in road vehicles. Revenue collects some €1.1 billion annually in excise duty from road diesel. Therefore the potential for loss of tax revenue from this fraud is very significant and very real. This type of criminality also undermines the competitiveness of legitimate businesses, damages our environment, can damage consumers’ vehicles and sustains organised criminal gangs who are the prime movers in this illegality.

Recognising the threat that this illegal activity poses to the Exchequer and to legitimate business, Revenue has made action against illegal fuel related activities one of its top corporate priorities and has adopted a comprehensive strategy to tackle the problem. This strategy encompasses the following elements.

The licensing regime for auto fuel traders was strengthened with effect from September 2011 to limit the ability of the fuel criminals to get laundered fuel onto the market. A new licensing regime was introduced for marked fuel traders in October 2012 which is designed to limit the ability of criminals to source marked fuel for laundering. New requirements on fuel traders’ records of stock movements and fuel deliveries were introduced by regulation to ensure data are available to assist in supply chain analysis. New supply chain controls that require all licensed fuel traders to make monthly electronic returns to Revenue of their fuel transactions were introduced from January 2013. The first returns were received by Revenue in February. I understand that Revenue has initiated a process of rigorous analysis of these returns. This will support the development of a comprehensive overview of supply patterns and the identification of suspicious or anomalous transactions and facilitate robust follow-up enforcement action where necessary. This is very important and we have not had it up to now. We have had no picture of what has been coming into the country on a legal basis. Having this analysis and knowing the legal people, we will be able to see exactly the gaps that exist and which are clearly being filled by illegal activity. Colleagues will recall that this was part of a budget announcement which has come about only from 1 January this year. We are beginning to see the data on the distribution, which is crucial to tracking where the illegal stuff is.

There is an intensified targeting, in co-operation with other law enforcement agencies on both sides of the Border, of fuel laundering. That has been ongoing. There has been an intensified targeting, in co-operation with colleagues on the other side of the Border, of the illicit sale of laundered products. This involves a concentration on building intelligence, gaining an understanding of the supply chain, applying analytics to available data, embarking on a strategy of closing down stations that were in breach of legislation and-or regulations, and working collaboratively with other law enforcement agencies on both sides of the Border. One of the objectives is to cause maximum disruption to laundering plants and networks and to prevent trading by stations that are operating outside the law.

Following discussions with HM Revenue and Customs, HMRC, in the UK on regulatory measures to tackle the problem, the two Administrations signed a memorandum of understanding in May 2012 on a joint approach to finding a more effective marker for use in both jurisdictions, and an invitation to make submissions was published in June 2012. By the deadline in November 2012, 12 submissions had been received and these are currently being evaluated. The problem up to now is that the marker employed has allowed laundering to exist. If we can get ahead of that with new technology and ahead of the criminals, we can reduce criminality levels. Both HMRC and the Irish Revenue are working on a collaborative basis and we are examining submissions to see how we can overcome the marker issue. If we can solve that problem and get ahead of the criminals, we will be nine tenths of the way to addressing this problem.

Revenue’s enforcement strategy in the fuel sector has already yielded results. Between 2010 and yesterday, Revenue officers detected and closed 28 oil laundries, not including the oil laundry detection made yesterday morning, which I will refer to separately, and seized 620,000 litres of oil, together with 12 oil tankers and 60 vehicles. Additionally, almost 2 million litres of fuel, held for commercial purposes, were seized during that period. Revenue shut down 32 filling stations in 2011, either because they did not have a licence or were in breach of licensing conditions. Revenue closed a further 57 outlets in 2012 and seven to date this year. Almost 90 stations have been closed down between 2011, 2012 and the first part of this year. A sizeable number have been detected and closed down, and it illustrates the scale of the problem we are facing.

Regarding the detection made yesterday, officers from Revenue's customs service supported by the regional support unit and local gardaí uncovered an oil laundering plant in Drumacon, County Monaghan, with the capacity to launder over 15 million litres of fuel per annum with a potential annual loss to the Exchequer of over €8 million. The laundry was uncovered following an intelligence-led surveillance operation. A forklift, six vehicles and ancillary equipment were seized from the plant. In addition, seven tonnes of toxic waste - the by-product of the laundering process - were also seized. In a connected search of a commercial yard in Longfield, a tanker with 20,000 litres of fuel, a trailer with a concealed tank and 68 bags of bleaching earth were also seized. Investigations are ongoing. Not only is this the result of intelligence, the officers from Revenue, the Garda Síochána and the officers in HMRC on the other side of the Border with the PSNI are working in very difficult conditions. They face threats and intimidation. Closing down these facilities is difficult, hard work. I express our deepest appreciation of the work of the Irish Revenue and HMRC who do this on a daily basis. In many cases these are local people who have to take on this criminality and they deserve our support and thanks in their work.

Stringent penalties are prescribed for offences relating to mineral oil smuggling and laundering. For example, a person convicted on indictment of an offence of evading or attempting to evade excise duty can be sentenced to imprisonment for up to five years, or a fine, or both. Following a substantial increase introduced by the Finance Act 2010, the fine is an amount not exceeding €126,970, or, where the value of the goods is more than €250,000, an amount not exceeding three times the value of those goods. I believe that these penalty provisions permit the courts to impose sentences reflecting the seriousness of this criminal activity and deterring involvement in this form of crime.

The problem of illegal activity in the fuel market is unquestionably a serious one, and the extensive enforcement action that is being carried out on an ongoing basis highlights the Government’s commitment to combating it.

The legislative steps that have been taken, together with the work on development of a more effective fuel marker, will provide important new support for this action and will serve to enhance its effectiveness.

The Minister for Finance and I, as well as colleagues in Revenue, greatly appreciate the interest taken in this House, led by Senator Jim D'Arcy and others, in highlighting this issue on a frequent basis and rightly calling the Government to account, which has led to this important debate today. We appreciate the opportunity to put this information on the record of the Seanad in order that the public, through Members and colleagues nationwide, are aware of the seriousness of the problem, the measures that have been taken and of the work that is under way. It is important that the public be fully supportive of this work as the Government does its best to close down what is a dreadful crime that affects the life of this country.

Thomas Byrne (Fianna Fail)
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Ireland currently faces an epidemic of illegal diesel. There is a huge problem with the sale of illegal diesel, and figures suggest at least 12% of all diesel in Ireland is sold illegally. When one goes to a garage, unless one knows it is wholly owned by one of the major oil companies, one is never 100% certain whether there is some illegal diesel in the tanks. This is not a victimless crime but has many victims. Fuel costs are at record levels, which is a separate but related issue. However, the victims of this crime include the Exchequer, which funds public services, as well as individuals whose cars are seriously damaged because of this activity. This matter has become so serious that in certain towns in the north east, rumours abound that all the garages are to be questioned. These rumours will persist until this problem is tackled and people realise there is no more illegal diesel in the system. I certainly will not make allegations on the floor of the Chamber because I do not have the evidence, but this suspicion certainly exists and public confidence in the market for petrol and diesel, particularly the latter, is at an all-time low. On the one hand, people do not know what is in the product, and on the other, they believe the product they are getting is too dear in any event.

I do not believe there will be a truly competitive market in motor fuels in Ireland until this problem is solved because when one sees a cheap price, one does not immediately or necessarily decide to buy it because it is cheap. While I acknowledge many people do because of the economic situation, others question that price and believe they should be paying a higher price because the fuel in question may be problematic. I believe some major fuel companies are profiteering on the basis of this fear, and that will not be rectified until the problem is solved. They can keep the price up because one feels confidence in going to them, as one is certain the fuel they offer is okay. However, this does not apply everywhere either, because there are even rumours in respect of major brands, of a little tip going in in the middle of the night. Members certainly hear such allegations regularly, and were I to receive any genuine allegations in that regard, I certainly would go to the Revenue Commissioners with them. However, the gangs involved in this activity must be pursued ruthlessly, and Fianna Fáil will give the Government every encouragement to do that.

The system described by the Minister of State regarding the electronic recording of what is coming in and out of the market will be critical. Nothing really will happen until the exact supply chain throughout the country is ascertained. The Exchequer is losing at least €120 million per year, the Minister of State may have had a different figure, but that equates to approximately 5 cent per litre of fuel. This is what this loss is costing motorists in additional taxation. Moreover, Louth County Council, unfortunately, is obliged to pay too much money, and I am familiar, as are Senators Jim D'Arcy, Brennan and Moran, with the costs it must bear in this regard. As I understand it, that money ultimately comes from central government, but it acts as a significant brake on resources and is to put down a criminal racket. The problem is that until the ins and outs of the supply chain and what actually is being sold are known, there will be no confidence anywhere. There is suspicion about almost all garages. For instance, there is a town in the north east in which I am told there are two garages that are wholly owned by a fuel company and people can have confidence in going there. However, I am told there are other garages that are wholly owned by other reputable fuel companies about which one simply cannot be sure. Until these measures are put in place, such rumours and suspicions will continue and there will not be a functioning market in diesel or indeed in petrol. There also is the general criminality associated with the ongoing intimidation, whereby people are being forced into accepting late-night deliveries. This also is taking place and such deliveries are not merely being accepted on a voluntary basis.

Fianna Fáil supports the Government and encourages it to do everything it can to implement these measures. There is a much wider debate to be had about the price of fuel, as people undoubtedly are being ripped off at all levels of the supply chain. I am glad the European Commission is investigating this matter at that level but I believe it must also be investigated on the forecourts. In the Meath East are there are approximately four of what I call motor fuel markets in which the prices are similar. It is highly competitive in one market, is cheaper than most other places nationwide and they are all reputable stations. However, it is not as competitive in other parts of the county. There are reasons for this and they are anti-competitive in nature. However, until the diesel laundering issue is solved and until people can be confident in what they are actually buying, they will be unable to make a judgment about the price. At present, they feel confident about paying a higher price in the hope that the product is good. This is wrong and the public is being ripped off in this regard, even if people are getting a good product.

Fianna Fáil sought a rebate system and proposed that duty rates between agricultural fuels should be equalised, with a rebate for agricultural fuel users. This could save the Exchequer more than €100 million per year, but of course it must be done on an all-Ireland basis. Members are due to meet representatives of the agricultural community later today - I hope I do not miss that meeting as some people consider it to be more important than debates in this House - and they perceive that proposal as entailing more paperwork for the farming community. Nevertheless, something must be done to turn the existing market into a proper, functioning motor fuel market in which people can have confidence in the product and in the price of it.

Jim D'Arcy (Fine Gael)
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I welcome the Minister of State back to the House and acknowledge the great work he is doing to deal with this criminal activity, which is a national issue located on the Border. Anyone who thinks that laundered diesel is only sold in the Border counties misunderstands the position. While the plants may be located in or around Border counties in the main, there is a national distribution network of what I believe are small, independent suppliers that are delivering loads of laundered diesel to places as far apart as Tralee, Tipperary and Galway. This criminal activity is extremely difficult to stop because the perpetrators appear to be always one step ahead of the authorities. Activity appears to have lessened thus far this year, however, if one is to go by the amount of diesel sludge dumped in County Louth, which is less than in the comparable period last year and substantially less than the peak levels experienced in 2011.

It might be useful to read out some statistics from 2005 to 2012 on diesel sludge recovered in County Louth. The tonnages recovered in 2005, 2006, 2007, 2008, 2009, 2010, 2011 and 2012 were 157 tonnes, 149 tonnes, 69 tonnes, 125 tonnes, 71 tonnes, 186 tonnes, 868 tonnes and 615 tonnes, respectively. These figures provide Members with a picture of how this criminal activity has been developing.

Finds of diesel sludge are down a little this year. This time last year there were 272 tonnes of diesel sludge and there are 241 tonnes this year. The increase is due to the 90 tonnes discovered in Carrickarnon at the Border two weeks ago. That is a well-known dumping place for diesel sludge. We might treat the statistics and the recent reduction with a little caution as the launderers might have found a new way to dispose of sludge. The activity increased again in May this year. That is not to say there is not great work going on, as the Minister of State indicated, in very difficult conditions by the Revenue Commissioners, the Garda and the Customs and Excise who are very brave people who confront this criminal activity fearlessly and rigorously.

I concur with the Minister of State’s welcome of the discovery this week in Drumcahon, Castleblaney. The diesel laundering plant there resulted in an estimated €8 million in lost revenue to the State each year. Enforcement is an important part of the fight against laundered diesel. I again pay tribute to those who work in enforcement.

The Minister of State referred to the new licensing regulations. In the coming months he will be able to track all diesel movements and identify who is legal and by a process of elimination who is acting illegally. That is excellent news. I urge the Minister of State to keep us informed of progress in that regard through press releases or other means. It is important that people know what is going on because they are opposed to what is happening.

I would like the new licensing regulations to apply also in Northern Ireland. The Minister of State is aware that I have spoken on the issue with Mr. Danny Kennedy, MLA, Minister for Regional Development. The Minister of State has also spoken with him. Mr. Kennedy is keen to increase the level of co-operation between the two jurisdictions. I hope we can meet soon to further co-operation. Could the Minister of State indicate whether it would be possible to introduce equivalent legislation on laundered diesel in both jurisdictions?

The general opinion on the matter is that the most effective solution is a new marker which would be more difficult to remove. I am aware that scientific research is ongoing and I urge that the priority of the work would be upgraded so that we could finally eliminate this environmental and economic scourge which is costing the State dearly. We do not know the ultimate cost of fuel laundering but it costs the State in excess of €100 million in lost revenue each year. I congratulate the Minister of State on his response to the problem we face and encourage him to keep up the good work.

Feargal Quinn (Independent)
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The Minister of State, Deputy Hayes, is very welcome. I thank him for explaining to us what is going on and the response to it. He provided us with interesting figures. As Senator Jim D’Arcy said, we are keen to encourage him to continue with the work.

The issue was first brought to my attention approximately three years ago by a garage owner who was so frustrated at a competitor who was undercutting him. Having been clearly identified as selling at a price that was way below what he could possibly have afforded, he was closed down but opened up again within 24 hours. The frustration of legitimate garage owners is evident. As Senator D’Arcy said, fuel laundering is not just limited to the Border areas. We thought it was confined to such areas but that is no longer the case. I am aware of a problem in Tipperary and Dublin and Senator D’Arcy referred to Tralee and elsewhere.

I have raised the issue on several occasions in the past year. The amount of criminal activity, especially around the Border area, but not confined to it, is something we must address as a matter of urgency. It is good to hear the Minister of State’s heart is in the right place but we need action. It is a fact that the State is losing millions of euro. Senator Byrne referred to a possible sum of €100 million. It is rumoured that the loss is between €100 million and €200 million per year, which is a significant amount.

An example is worth mentioning to outline a motivation for the crime. There are 35,000 l in a tanker of diesel. The profit from a full tanker, bought legitimately, is approximately €1,500. However, the profit from a tanker of imported diesel without paying the VAT is approximately €16,000. Punishment appears to be severely lacking. I referred briefly to a garage owner being concerned about a competitor. We appear to be severely lacking in appropriate action. My attention was drawn to the fact that one garage owner who was found with illegal diesel on his premises was fined just €3,500 and was instructed to close for 24 hours. Some garage owners who have been instructed to close for 24 hours are often open again within the 24-hour period. One could ask whether the punishment is adequate. It might be the case that the legislation is in place but it is not being enforced. We must examine how to redress the situation. The cost to the State is significant, as is the cost to individual garage owners who are trying to compete with such activity. It is such that it is making a mockery of legitimate trading in this country. How can legitimate traders survive in such an atmosphere?

Let us examine possible solutions. Other countries in the EU subsidise farmers for diesel use but in a considerably different way. Our current system only encourages criminality in diesel laundering and forces legitimate companies out of business through unfair competition. We are one of the few countries that use a system of colouring diesel to distinguish between diesel on which duty is paid and agricultural diesel. I firmly believe that we need another solution. It must be possible to come up with one. In the case of technology for counterfeit tobacco there is a new app which everyone could handle. I do not refer to diesel in this case but the app allows one to test a packet of cigarettes to find out whether it is counterfeit or if duty has been paid on it. I accept that it is legitimate in the case of cigarettes to bring them in for one’s own personal use but the amount of illegal sales of such cigarettes is significant. Likewise, there must be a technological solution in the case of diesel also.

I agree with the Minister of State that we need a cross-Border approach. However, there is an obvious difficulty precisely because of the Border. We must bear in mind that the dye can be removed from agricultural diesel by washing it. The simple answer, which is often the best one, would be to allow farmers to buy normal diesel and to make a subsequent claim for the amount they use for agricultural purposes. Farmers might be concerned about such a system but as Retail Ireland highlighted, the rebate scheme’s design should guarantee no cashflow loss to farmers, and to minimise paperwork the scheme should be linked to another regular agricultural payment scheme. It said the operation of the rebate scheme should be outsourced by way of a tender competition, thereby ensuring that it is administered not only at the lowest possible cost but at a small fraction of the current loss. Retail Ireland also called for the duty rates on agricultural fuel and motor fuel to be equalised in an effort to remove the profit margin attractive to diesel launderers. It said that a rebate system should be introduced through which agricultural fuel users could claim back duty paid. I concede that difficulties attach to such a solution but it is a better one than the current system. We do not have an answer at the moment but it must be possible to employ technology to that end. I understand the Revenue Commissioners are consulting with the UK on the introduction of a more effective diesel marker. I would be interested to hear whether progress has been made on the issue. Could the Minister of State indicate how far we have got in that regard? This is not the time to talk about the problem; we need action at this stage.

It is a serious problem that is causing and attracting criminality in an area where we can do something. I am not sure what the technology is but there are a few solutions and the Minister clearly has his heart in the right place. Enough people are saying we must do something about this so the Minister has the support not just of the House but of every legitimate trader in Ireland.

Jimmy Harte (Labour)
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Smuggling in the Border areas has been going on since the Border was established. Some people have made a lot of money out of it and criminals have used it to enrich themselves. That is still ongoing and will continue until we devise a solution. The thinking behind this is that diesel costs 50 cent per litre less for farmers who do not use the public roads. It is a logical way to look at this. If they are not using the roads, they should not be charged. If there was no dye in the diesel on both sides of the Border, however, this would not happen.

The rebate system should be looked at. I understand from the farmers and the IFA that they would not be keen on this because it might lead to a cashflow problem. The Minister should consider a farmer's previous year's usage of fuel and base it on that. If he spent €5,000 one year, that would be taken as the amount he would use the following year and he would pay a monthly amount based on that. If, however, we brought in a rebate scheme, he would get a monthly grant. At the end of the year he could reconcile the figure and most farmers could be accurate on how diesel they would use. That would take a lot of criminals out of the game. Some farmers would be down a few euro and some would be up a few euro but the genuine farmer would see this as a way forward. It is not just a fly-by-night doing a turn for someone by getting cheap diesel. It is an ecological and criminal problem. If the opportunity exists, these gangs are always ahead of the pack. The Revenue Commissioners only have so many resources and these guys are always thinking ahead. We know who they are and the community is aware who is doing this. With the economy at the moment, people are under stress and in the case of a small haulage company, it might be the difference between surviving and going under if it can get diesel 50 cent cheaper. That is contributing to the problem, however, because it keeps the criminals going.

I ask the Minister to engage with the IFA and the fuel retailers on this. There is a cross-Border element to this so it must be a 32 county solution or we will be back to square one. There is fuel laundering along the Border from Derry to Dundalk and now as far south as Dublin. As Senator Quinn said, there is a massive opportunity for people to make huge profits on a single tanker of diesel.

We should not allow anyone to get away with this. I know of a case in Donegal where the garage owner was convicted but the garage continued to operate and everyone knew where the money was going and where the diesel was being laundered. People thought he had got away with it. Some garages reopen the day after being raided. These people are willing to lose the cost of one day's trading for the massive profits. We do not know how much they have made and the money is probably being laundered by dissident republicans and being put back into drug dealing.

The solution must be tight. We must look at a rebate system that would suit everyone, would give farmers the comfort that they are not out of pocket and make the criminals aware the Government and the Executive in the Six Counties are serious about sorting out the problem.

Mary Moran (Labour)
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Diesel laundering has traditionally been associated with the Border, but we know that it reaches into and damages many sectors of society. The practice is moving southwards so it has become a national problem and can no longer be categorised as simply being a Border problem.

Being from County Louth, I would like to speak about how this issue affects the county. Louth has been dealing with diesel laundering for many years and had to bear the large cost. In May 2010, almost 10,000 litres of toxic diesel sludge, the by-product of washing the diesel, was found in four different locations in the county. This cost the county council €10,000 to clean up. Three more diesel laundries were uncovered in October of 2012, one of which could have cost the State €9 million in lost revenue. This raid uncovered 40 tonnes of toxic waste, which is extremely worrying for the people of Louth. I do not want even to imagine the environmental or health ramifications of this toxic waste entering the water system. In 2011, Louth County Council estimated the cost for cleaning up toxic diesel waste was €1 million. There is huge demand elsewhere for this money.

Incidents like those have occurred regularly and have for many years cost the taxpayer and legitimate local businesses. I do not need to go into the facts and figures for the House to know local businesses are struggling, but I find it appalling that it is estimated that one in ten garages is selling laundered diesel. This places a massive burden on the legitimate proprietors and unsuspecting consumers. My husband is in the motor trade and he will frequently get a call at weekends or late at night. The first question he asks is where the person bought their diesel. Depending on the answer, he can tell them what the damage will be to the car. Laundered diesel wreaks havoc on cars, with repairs costing anything between €1,500 to €16,000. In 2012, the Society of the Irish Motor Industry recorded a sharp rise in vehicles experiencing damage due to diesel fuel laundering. We must urge people to remember it is too good to be true if they believe they are getting a great deal on their fuel. The economy is stabilising but we must provide support for legitimate diesel traders and business people. We must allow them to practise unhindered by criminals and not to get a bad reputation on the strength of one unscrupulous garage owner.

I commend the Garda Síochána and the Revenue Commissioners on the recent raids. I spent much of my teaching career in County Monaghan and officials from Customs and Excise were always very efficient when stopping cars. I did not always enjoy being stopped on the way home, but very often they were very efficient. There are, however, many windy roads that cross the Border and it is easy to slip across and back. Each raid and arrest helps to restore another element to the legitimate business undertaken by honest people every day. We must stay vigilant, however, and not allow others to pick up where these criminals left off.

The Government has realised the scale of the problem and produced new orders in the Finance Act 2012. Under the Act, Revenue has further powers to vary the mineral oil licence and introduce a registration scheme for marked oil products, which will assist the Revenue Commissioners in identifying where the laundered fuel is entering the market. Those within the industry have made efforts to complement this legislation by introducing a quality insurance logo to show consumers that the diesel and the retailer can be trusted.

The Revenue, Garda Síochána and customs have detected more diesel laundries in the lifetime of this Government than in the period from 2006 to 2009. The Government has made significant strides in dealing with the problem, as evidenced by previous legislation and the increased number of raids on diesel laundering plants. I thank the Cathaoirleach for his patience.

Brian Ó Domhnaill (Fianna Fail)
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Tá lúchair orm an deis seo a bheith agam labhairt ar an ábhar seo.

The Minister of State will note there is cross-party support for Government efforts to deal with diesel laundering. The trade in illicit products, from fuel and tobacco products to alcohol, is a scourge on society. Fuel laundering has become rampant, in no small part as a result of increases in fuel prices. I welcome the advances made by the Revenue Commissioners. While we are sometimes critical of the Revenue in certain areas, it enjoys the full support of the Oireachtas and citizens in gathering intelligence and taking on the criminals involved in fuel laundering. Recent successes include raids on a fuel laundering plant in County Monaghan and a number of arrests in Dublin. Diesel laundering is also taking place north of the Border, including south Armagh.

I understand the annual cost of diesel laundering to the taxpayer is between €120 million and €150 million, although the figure could be much higher. This activity also has consequences for consumers who purchase laundered fuel in the belief that they are getting value for money. While they may be able to buy fuel at a lower price than that available at legitimate fuel suppliers, I know an individual in County Donegal who had the engine of his car wrecked as a result of buying laundered diesel.

Fuel laundering is a scourge. Former paramilitaries who were involved in so-called republicanism and loyalism in the past are involved in it. These people are what I would describe as "financial republicans" and, as I am sure Sinn Féin Senators will agree, they deserve to face time in jail for stealing from citizens revenue that would be otherwise used to fund critical health services, services for people with disabilities and so forth. Diesel laundering is an unacceptable activity.

Against a background of rising fuel prices on the legitimate market, Revenue must be fully supported in its efforts to thwart the sale of cheaper laundered diesel. Additional steps must be taken and I am aware that proposals have been made following consultations between Revenue and Her Majesty's Customs in the North. These are being considered in the Department of Finance and include the option of refusing to provide rebates unless paperwork is provided. It is likely that some changes will be introduced as a result of the consultations. Perhaps consideration will be given to Senator Harte's proposal that farmers be allocated a supply of cheaper diesel calculated on the basis of their activities or consumption the previous year, with additional amounts above a certain threshold to be provided only where further paperwork is produced. All options should be on the table given the amount of money and criminality involved in the business and the manner in which the crime of diesel laundering has escalated in recent years. A joined-up approach should also be taken to the trade in illicit tobacco and alcohol. Large containers of alcohol from France are making their way via Belfast to stores in the Republic and causing all sorts of social problems.

The Government deserves the support of the Oireachtas in dealing with this issue. I look forward to the public consultation. Perhaps the Minister of State will provide a timeframe for the completion of the consultations. Perhaps he did so in my absence for part of this important debate, for which I apologise. Unfortunately, I had to attend another meeting.

Senator Jim D'Arcy has raised the issue of fuel laundering on many occasions. The trade in illegal fuel must be stopped. The Judiciary has a responsibility to ensure that those who are brought before the courts for engaging in diesel laundering face the full rigours of the law. They deserve to spend time behind bars because the gravity of the crime merits a serious custodial sentence. There would be no fuel laundering in an ideal society but we do not live in an ideal world. As such, we must try to keep the escalating problem of diesel laundering to a minimum.

Tom Shehan (Fine Gael)
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I welcome the Minister of State to the House. Mar a déarfaí, ní mar a shíltear a bhítear. The difference in the price of diesel charged at fuel outlets in County Kerry can be up to 10 cent. People can draw their own conclusions from that. Last week, I purchased fuel at a garage in Limerick on my journey home. On Monday, my car started to shudder and when I visited my mechanic he asked whether I had bought diesel at the outlet where I normally buy it. When I informed him that I had bought it in Limerick he told me that was the problem and asked me to fill the tank at the supplier where I always buy diesel. I did so and this appears to have rectified the matter. I hope there has not been any serious damage to the engine. This happened to me as recently as last week.

The Minister of State noted the fines that have been imposed for fuel laundering. The best way to address this issue is in the courts. The fine in cases where the value of the goods seized is more than €250,000 may be up to three times the value of the goods. The way the buckos involved in diesel laundering appear to operate is that they will use one tanker at a time to ensure the value of the goods remains under the €250,000 threshold. If they are caught, the sentences or fines they receive will not be as significant as they would be in the case of a larger operation. The Legislature should increase fines and sentences for diesel laundering.

Senator Moran outlined the way in which her husband, who is in the motor trade, is dealing with the issue. Greed is the reason for diesel laundering. If a garage is found to be selling laundered diesel, it should be shut down and the owner never again be permitted to hold a licence to sell fuel. This is a worthwhile debate but we, as legislators, must take steps to crush those involved in the trade in illicit fuels. While Revenue is doing an excellent job, the Oireachtas must support the efforts it and the Garda Síochána are making to stamp out this activity.

Sean Barrett (Independent)
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I welcome the Minister of State. As previous speakers stated, he has the unanimous support of the House in dealing with this form of criminality. Senator Jim D'Arcy has been the Minister of State's ally on this issue at all times and has represented his interests in this matter very well in the Seanad.

He will not let this issue be long-fingered. It has been going on for a long time. A total of 157 tonnes were found in County Louth in 2005, rising to 868 tonnes in 2011. I worry about the marker as a solution because if criminals can remove the existing marker, they will be able to remove the new marker. I do not know what time advantage will be gained. The criminals will have their own scientists and technologists and so on.

Looking at this from a different perspective, and Senator Quinn had some interesting thoughts on the issue, there has never been a tax that people will not try to avoid. There has never been a subset of people who will not try to qualify for exemptions. This could be rule No.1 in the Department of Finance and should be pinned up on the wall there. This is an agricultural subsidy, as I understand it, which people are seeking to drain off into other areas. Is there a possibility, as hinted at by Senator Quinn, that we could subsidise agriculture directly? This might be the time for a discussion of this issue, given the levels of criminality referred to by my colleagues here. There is an extremely good relationship between the Minister for Agriculture, Food and the Marine, Deputy Coveney, who was in this House last week to discuss the fodder crisis and how his Department has gotten to grips with it, and the farming sector. In that context, could we change to a different way of assisting farmers which would not involve the loss of income on anyone's part, as Senator Moran stressed? At the moment, this form of assisting agriculture is leading to horrible criminality. Even if it was not criminal, it is promoting the use of a product, by lowering the price, which product is in scarce supply anyway. This should be an era of energy efficiency but the criminality dwarfs that.

When the legislation to provide the exemption was originally brought through the Houses, the intention was not to promote criminality or to reward farmers with a subsidy which encouraged them to use more fuel rather than less. How do we help farmers, especially those on low incomes, without reducing their incomes? Direct payments or income supplements, weighted towards low-income farmers could be the way to go. If there are diesel tax rebates for millionaire farmers, that does not particularly concern me at the moment. This is a serious problem and I join the Minister of State in commending the PSNI, the Garda Síochána and both sets of customs officers who have to deal with this problem. Did we create this criminality by a badly designed scheme to subsidise agriculture? While we do not want to deprive farmers of anything, we need to use the combined intelligence of the Revenue Commissioners, the Department of Agriculture, Food and the Marine and the Department of Finance to change the system so that farmers are not worse off but the criminals are substantially so.

Terry Brennan (Fine Gael)
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Cuirim fáilte roimh an Aire Stáit. Diesel laundering is an issue which I and other colleagues have raised in this House on numerous occasions. Indeed, it is one of the first issues I ever spoke about in the Seanad over two years ago. Diesel laundering is an illegal operation to remove the marker dye from cheaper agricultural diesel and to sell it on as road diesel. As others have said, substantial profits are to be made from this illegal activity, which results in an extensive loss of revenue to the Exchequer and high clean-up costs for local authorities, particularly in Border counties. In my own county of Louth, for example, the local authority has spent in excess of €8 million over the past ten years on collecting, dispatching and forwarding the sludge to Germany for disposal. Those costs were recouped from the Department of the Environment, Heritage and Local Government, but imagine what we could do with that money. We spoke this morning in the House about home help and the need to increase the number of home help hours available. A sum of €8 million would make a significant contribution in that regard.

The problem in Border areas is historic but there is also evidence that the activity is now spreading to other counties, including Meath, Westmeath, Offaly, Galway, Roscommon and Kerry. Indeed, earlier this week a diesel laundering plant was discovered for the first time in Dublin. This plant had the capacity to process more than 2.5 million litres of fuel a year. It is, to my knowledge, the first discovery of a diesel laundering facility in our capital city, which had the capacity to lead to the potential loss of €1.75 million in revenue to the Exchequer. The plant used an unsophisticated method of fuel laundering which involves filtering the fuel through cat litter. I had to read the article in the newspaper twice, to be honest. One wonders what quantity of cat litter is required and where it comes from. As Senator Barrett has said, the launderers have their own scientists among them.

On the enforcement front, action is taken at all stages of the fuel supply chain, tackling both those involved in laundering and the sellers of laundered fuel. In this work, Revenue is supported by well-established structures to ensure very close co-operation between all relevant agencies, north and south of the Border. Indeed, the Minister of State referred to that close co-operation in his opening remarks. The cross-Border fuel fraud group brings together representatives from a number of agencies, including An Garda Síochána, the PSNI as well as the UK and Irish revenue authorities. There has been excellent co-operation between all agencies in identifying and investigating those involved in this fraud.

While there has been considerable success in detecting and closing fuel laundering plants, it is recognised that this approach will not solve the problem on its own. Fuel launderers need to be denied access to marked fuel for the purposes of laundering. They also need to be denied access to a market for their laundered fuel. In addition to the ongoing enforcement action, legislative changes that will enable more effective controls in this sector have been put forward in this year's Finance Bill and are to be applauded. These will lead to the introduction of new licensing requirements for marked fuel traders. The new arrangements will, for the first time, require any person dealing in marked fuel to hold a licence for that purpose. The granting of a licence will be subject to tax clearance requirements and the applicant will have to show Revenue that any conditions subject to which the licence may be granted will be complied with. Revenue will be empowered to revoke a licence if any of the licence conditions is breached.

Steps are also being taken, in close co-operation with the UK authorities, to acquire a more effective fuel marker. Revenue is planning to go to the market shortly with the UK authorities to seek a new marker. A good deal of preparatory research has been undertaken here and in the UK, and the Government expects to proceed with this project shortly. I ask the Minister of State to comment on the status of that project.

The problem of fuel laundering and smuggling is a serious one and the extensive enforcement action that is being carried out on an ongoing basis highlights Revenue's commitment to combating it. Added to the loss of revenue to the Exchequer is the damage done to our environment by the reckless disposal of diesel sludge and by-products from laundering. Scenic areas in my own county of Louth seem to be some of the most strategic places for the launderers to dump these substances.

Motorists normally buy laundered diesel without knowing it. It is entirely possible that I have bought some myself and perhaps the Minister of State has also done so. The chemicals used in the laundering process mean that the protracted use of laundered fuel will damage one's engine. One suggestion made by the legitimate fuel industry is worth pursuing. Agricultural diesel, which has been coloured with a green marker, is for use by farmers and others for off-road machinery.

Why do we not cut off the criminal industry at source by getting rid of green diesel completely and instead introduce a rebate system, as mentioned by Senator Barrett and others? Farmers and genuine users of green diesel could then just buy the normal diesel and be compensated for the difference by claiming it back in their tax returns.

Michael Mullins (Fine Gael)
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I must stop the Senator there.

Terry Brennan (Fine Gael)
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Táim beagnach críochnaithe. Tá an chuid is fearr le rá agam anois. What are the difficulties in having one type of diesel? Has this been considered? It might mean some more administrative work and some initial inconvenience in terms of cashflow, but with €150 million being lost to a thriving criminal industry, a considerable amount of money is available to get such a scheme operational.

Michael Mullins (Fine Gael)
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I gave the Senator a fair bit of leeway.

Terry Brennan (Fine Gael)
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Níl móran le rá agam.

Kathryn Reilly (Sinn Fein)
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I will be brief as most of the issues have been mentioned and there is no point going over old ground. Diesel laundering is a serious crime. As Senator Byrne said, it is not a victimless crime and it significantly impacts our communities, businesses and the economy. I commend the Criminal Assets Bureau and the Revenue Commissioners on their significant successes. CAB is a vital element in combating criminal gangs and going after what these people hold most dearly, which is their money.

Many contributors spoke about North-South co-operation. Has the Minister of State met his counterparts to explore, even tentatively, the beneficial impact of harmonising excise duty and diesel prices on both sides of the Border and what impact that could have on diesel smuggling? As the issue of the rebate has been already discussed, I will not raise it.

The Minister of State mentioned that 96 stations had been shut since 2011. He referred to building intelligence and a strategy of closing down stations. Many people would be aware of stations that could be selling laundered diesel through their experience of damage having been done to their cars. How can such people blow the whistle on stations they believe are selling laundered diesel. Many car mechanics are pointing to problems caused to cars by using laundered diesel. How can an ordinary person report a suspicion in order that the authorities can clamp down on it? That is important for ordinary people who are victims.

It is affecting ordinary car owners. It is becoming the rule rather than the exception that people, especially those in rural areas, are suffering damage to their cars. As Senator Byrne said one can never be sure from where the diesel being bought came. Is there any avenue for eventual compensation open to people whose cars have been damaged? While there may be issues relating to proof, could they go after the petrol station owners? Does the Minister of State envisage any such scheme in the future?

Obviously the submissions for a more effective marker are being evaluated. What is the timeframe for the analysis of this and the publication of results? Senator Moran spoke about Customs officers. I have been driving since I was 17 and have never been stopped by Customs officers. Now that I have said that I have probably jinxed myself-----

Jim D'Arcy (Fine Gael)
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The Senator has an honest face.

Kathryn Reilly (Sinn Fein)
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----- and when I am in a rush I will probably get stopped. Twitter, Facebook and other social media give warnings about the location of speed cameras meaning that people will use the back roads. If Customs officers are planning an operation on a particular road, could some of the minor roads around it also be checked in order to pick up all the people? If not, people will find out that there is a check on, for example, the N3 and then bypass that road.

John Crown (Independent)
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I will probably be ruled out of order and asked to sit down because I will stray from the issue. The issue before us today relates to laundering and smuggling. A much more important issue relating to smuggling was apparently discussed at a meeting of three of our senior Ministers, including the Taoiseach, on 7 May with three representatives of the tobacco industry. The story came out in today's newspapers. The Taoiseach, the Minister for Finance, Deputy Noonan, and the Minister for Justice and Equality, Deputy Shatter, met representatives of Japan Tobacco International, John Player and PJ Carroll. Clear guidelines prevent lobbying by the tobacco industry of Government representatives - the 2004 United Nations directive. I raised this in the Joint Committee on Health and Children this morning and raise it again here. Was the Minister of State aware of it? Was there a collective Government decision that this was acceptable? Has this been reported back? Do we know the agenda of the meeting and who organised it?

A certain amount of circumstantial evidence would suggest there is a potential interweave between current and former members of Government and of the Minister of State's party with people who have been involved in advocacy and lobbying on behalf of the tobacco industry. Were any of these channels explored in setting up this meeting?

We should have no business meeting representatives of the tobacco industry under any circumstances. There is no agenda item we should ever discuss with these people. The only thing we should tell them is that we intend ending their industry and making it extinct by making it illegal to do commerce in tobacco at some stage in the future. We should advise them to considering divesting, learning new skills, retooling their factories, and telling the farmers to grow something else in a world that is desperately short of food and does not need tobacco. Furthermore, sitting down and doing the arithmetic would show that our State would be richer. If tomorrow morning tobacco disappeared, the Exchequer would be richer and our country would be a richer place.

We need an explanation from the Department of Finance because apparently the primary purpose of the meeting was to discuss smuggling, although it is being reported that it strayed into inappropriate lobbying by the industry against very worthwhile initiatives being taken by the Minister for Health, Deputy Reilly, in another branch of Government to try to row back the access to and sales of tobacco, particularly to younger people, by introducing plain packaging, and banning menthol and roll-your-own tobacco. It has been reported today that there was lobbying against these initiatives and that the meeting strayed far beyond the discussion on smuggling. I am beside myself with rage about this.

Brian Hayes (Dublin South West, Fine Gael)
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I can see that.

John Crown (Independent)
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It is clearly inappropriate and we will need explanations in coming days as to how this was allowed to happen.

Brian Hayes (Dublin South West, Fine Gael)
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I can see the good Senator is beside himself and has worked himself up into a frenzy on the issue.

John Crown (Independent)
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The Minister of State should see the frenzy when it happens.

Brian Hayes (Dublin South West, Fine Gael)
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As Hamlet said, "Seems, madam! Nay it is; I know not 'seems.'" The issue under debate today relates to diesel laundering and I am not sure about the matter to which the Senator refers. I have not heard about the matter he mentioned if it was referred to previously today. It is not particularly unusual that people with a view on illegal goods on sale in this country would make that known to the Government.

Thomas Byrne (Fianna Fail)
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It has not happened in decades.

Brian Hayes (Dublin South West, Fine Gael)
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The Senator should hang on. I have not been given notice on this. I would advise the Senator to table a motion on the Adjournment or raise it in the normal way. I have not heard of that meeting. If there was a meeting, I do not believe it is exceptional. The issue of cigarette smuggling is well known and the Government has a view on it. I do not believe it is an exceptional issue. However, there is a way to raise the issue and I encourage the Senator to do so and get a full statement from Government accordingly.

I thank colleagues who have contributed to this useful debate. In particular I thank Senator Jim D'Arcy and others who have repeatedly raised the issue over the past two years and have sought to bring public profile to it. Senator Byrne is absolutely right in saying this is not a victimless crime. We need to work with the HMRC authorities in Northern Ireland to see this as an all-Ireland issue. Even though many of these laundering operations are located close to the Border, as colleagues have said, this is a nationwide problem resulting in the loss of tens if not hundreds of millions of euro. It is impossible to estimate the lost revenue to the State. However, it would not be wildly wrong to suggest it might be €100 million. No one knows exactly because it is an illegal activity that is impossible to quantify.

In terms of trying to bring the debate to some conclusion and what are the net issues, Senator Quinn put his finger on it when he asked about how the courts are operating the very strict new penalties we have put in place as a consequence of changes made in the Finance Acts in recent years. For the information of the House, in 2011 there were four convictions for these offences, with fines of between €7,500 and €10,000 and 16 people were arrested in the course of fuel laundering operations, in respect of which files have been sent to the Director of Public Prosecutions. I understand cases are being pursued in regard to five of those convictions. In 2012, there were two court convictions for laundered oil offences, with a fine of €2,500 imposed in one of those cases and a two-year suspended sentence imposed in the other. The question that arises based on that information is, are the penalties provided for in legislation being imposed? That is an issue for the courts. I do not wish to criticise the Judiciary in that regard, except to say that there is a public issue of concern. The Oireachtas has responded by way of additional penalties and there is now a responsibility on the courts to impose those penalties in the set of circumstances faced by them on a daily basis.

Senators Barrett, Quinn and Harte posed the question of whether the imposition of a ban on green diesel and the introduction of a rebate system would rid us of this type of crime overnight. The new system of licensing people in the first instance, and in the second requiring them to make monthly returns by e-mail in terms of what they are or are not using, will indicate pretty rapidly whether or not this is having an impact. If it is not having an impact, we will then have to look at the rebate issue and a ban on green diesel. I suppose there would be financial issues arising, including how much would it cost, how open ended would it be, to whom it would relate and if it would be based, as stated by Senator Harte, on a previous year's return. We will soon find out whether our licensing and monitoring provisions, which have effectively been in place since the middle of last year, are having an impact on the ground. We now know for the first time what is coming into the country. There are two ports in the country through which this diesel is being brought in. We now know how much is being brought in and how it is being distributed, which information we did not know up to now. We will now get a legitimate picture of how much is being distributed. That is important.

Senator Barrett is correct that the criminals have been one step ahead of us thus far. We have received 12 submissions from interested parties who believe they have the technical solution, by way of a new marker, to this problem. However, as Senator Barrett rightly stated, the criminals will be only seconds away from making redundant any new marker established. If we are not successful by way of the new operational memorandum imposed between North and South, we will have to look at this again. It is an open question as to whether or not it will work in the fullness of time.

I regard all of the contributions made today as very useful. I will forward a copy of the transcript of this debate to the Revenue Commissioners and Customs to highlight to them the issues raised. This is a matter under ongoing operational review and closely monitored by the Irish Government, HRMC and the Northern Ireland Executive. I have met already with officials from Northern Ireland and hope to meet shortly with the relevant Minister. The Minister, Deputy Noonan, is in ongoing contact with the Northern Ireland Minister, Mr. Wilson, on this issue. Senator Reilly is correct that there is a need for greater profile around this. It is akin to the argument made when the Criminal Assets Bureau tried to seize a building, namely, communities worse affected by drugs need to know that the proceeds of the crime have been used for useful projects in those communities. There was some public profile around the Criminal Assets Bureau. Senator Reilly is correct that we also need a profile around this. We need to modernise how we get that message out, particularly when convictions are secured. As stated by Senator Byrne, this is not a victimless crime and people need to know that those involved will be brought before the courts. The criminals also need to know that if they get involved in this activity they risk prosecution.

As far as I am concerned, the Government is on top of this problem. We continue to work closely with all agencies on how to resolve it. This debate has greatly helped the public profile of this issue in terms of trying to tackle it on a multifaceted basis.