Jack Wall (Kildare South, Labour)
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Question 72: To ask the Minister for Communications, Energy and Natural Resources if, in view of the invitations for oil and gas prospectors to apply for licences to drill in the north west and the Clare Basin, these licences will fall under the 2007 legislation; if the State will have first option on the oil or gas extracted; if there is a provision for royalties on any oil and gas extracted as part of that legislation; and if he will make a statement on the matter. [16635/10]

Conor Lenihan (Dublin South West, Fianna Fail)
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Over recent months there has been renewed interest in targeting the natural gas resource potential of the Northwest Carboniferous and Clare basins which had been identified in earlier exploration, but not deemed commercial at that time. In March of this year, I announced a competition for Onshore Licensing Options over the two areas. The acreage on offer covers an area of approximately 8,000 square kilometres over parts of counties Cavan, Donegal, Leitrim, Mayo, Monaghan, Roscommon and Sligo in the North West Carboniferous Basin and parts of counties Clare, Cork, Limerick and Kerry in the Clare Basin. The closing date for receipt of applications is Friday 11th June 2010.

Licensing Options awarded from this competition will be for a maximum period of two years and will be subject to an agreed work programme. Work programmes will include procurement of all available relevant technical data/studies and new geological/geophysical studies/data acquisition as considered necessary. Work programmes will not include drilling, but may include shallow geological sampling where subsurface penetrations would typically not exceed 100-200m. The holder of any Licensing Option awarded will have the first right to a Petroleum Exploration Licence over all or part of the area covered by the Option. At the end of the Option period, the holder must either apply for a Petroleum Exploration Licence or surrender the acreage. Any Petroleum Exploration Licence awarded over the area would be subject to a commitment by the licensee to drill an exploration well in the first three years of the licence.

The 2007 Licensing Terms for Oil and Gas, Exploration, Development and Production apply to all petroleum exploration licences issued after 1st January 2007. The 2007 terms provide for a new profit resource rent tax, payable at rates of up to 15%, in addition to the 25% corporate tax rate previously applying. The 2007 terms ensure that the return to the State will increase to a maximum of 40% in the case of the most profitable fields. The general rate of corporation tax is 12.5%. Ireland in common with other countries such as the UK and Norway moved away from a royalty based payments system to a tax based system in 1987. Under the tax based system the return to the State is linked directly to the profitability of the oil or gas field.