Note 2. Dail Debates on the Issue:

http://www.kildarestreet.com/debates/?id=2012-02-22.522.0

Dail debates

Wednesday, 22 February 2012

Topical Issue Debate

Shannon LNG Project

3:00 pm

Arthur Spring (Kerry North-West Limerick, Labour) Link to this

I thank the Ceann Comhairle for selecting this matter, the importance of which is evident from the fact that four Deputies from County Kerry have tabled it for topical issue debate.

I was angered by the decision of the Commission for Energy Regulation, CER, to produce a report following a meeting in the Taoiseach’s office in the week leading up to Christmas between the Taoiseach, the Minister for Communications, Energy and Natural Resource, Deputy Rabbitte, the Minister for Arts, Heritage and Gaeltacht Affairs, Deputy Deenihan and myself and Shannon LNG at which there was a lengthy discussion on what further steps could be taken to resolve this matter. Two solutions were identified, including that the parties could sit down at a table and try to come up with a solution and investigation of whether the complaint made to the EU Commission could be suspended until such time as a consultation process had been concluded. Unfortunately, neither happened.

The report issued last week by the CER ultimately determines the framework upon which all further decisions on whether this project will go ahead will be made. I come from a county and constituency which has enormous unemployment. There has been much talk about export growth. This project could result in more than $1 billion being brought into the country and the creation of approximately 700 jobs. The McCarthy report, often condemned in this House, states that this would provide fuel security. It further states that if we increase the supply of energy to the country it should be possible to lower the price. I acknowledge the interconnector between Ireland and the UK, which supplies 95% of our gas at a cost of €50 million per annum.

None of the solutions put forward suggest to me that this matter will be resolved soon. This issue needs to be addressed in an open and transparent manner. The date of 17 March was set as the deadline for finalisation of talks on this matter. It is imperative that the regulator is brought before a committee of the Oireachtas to explain why he produced a report which prefixes a framework that could ultimately prevent this project going ahead. It is essential that this matter is given urgent consideration as it could benefit north Kerry, the county and the country.

Brendan Griffin (Kerry South, Fine Gael) Link to this

I agree entirely with the points made by my colleague, Deputy Spring. The raising of this important matter by four Deputies who represent County Kerry demonstrates how critical it is. The bottom line is that jobs are at stake. A fantastic announcement was made yesterday on the creation of 1,000 jobs in County Louth through the establishment of PayPal. This project is its north Kerry equivalent. A total of 650 construction jobs are associated with the project and there would be a further 100 permanent jobs were it to proceed. Millions of euro have already been invested in it and if it gets the go-ahead, up to €1 billion will be invested in the north Kerry economy. It is a no-brainer and everything possible must be done to ensure it goes ahead. I call on the Minister to take action and do everything in his power to ensure these jobs are created. I emphasise that he must do everything in his power because one of the major barriers to the project has been the lack of regulatory certainty, which he can provide.

As a Deputy representing County Kerry, I would be ashamed if the project were not to proceed. Moreover, Members are not prepared to stand by and let it slip through their fingers because it is too important for those awaiting jobs who perceive it as a ray of hope. Some 17,500 people are on the live register in the county and the project would help to reduce that number considerably. It would alo provide a stimulus for the entire economy of north Kerry and west Limerick. The Minister must, therefore, step up to the mark and do what he can to ensure the project gets the go-ahead and deliver a good news story for County Kerry.

Martin Ferris (Kerry North-West Limerick, Sinn Fein) Link to this

In conjunction with my colleagues from County Kerry, I have brought this brought to the Minister’s attention in the hope he can resolve the outstanding matters. As Deputies Spring and Griffin have stated, the project involves approximately 750 jobs, of which 650 would be created in the construction phase. A further 100 permanent jobs would be created thereafter.

Last Friday the Commission for Energy Regulation, CER, published a draft recommendation on tariffs for gas interconnectors which would apply to companies such as Shannon LNG which states it will not use them. A public consultation process is ongoing and at last Monday’s meeting of Kerry County Council Mr. Paddy Power of Shannon LNG told the council that the move constituted a fundamental change in Government policy. He stated it was akin to turning up at a football match only to be told one would be playing a game of hurling. This issue must be resolved. I suggest both the Minister and the Taoiseach meet all Deputies from the county as soon as possible. County Kerry is one of the country’s black spots; the North Kerry constituency has an unemployment rate of more than 26%. Consequently, it is in urgent need of an input to try to create jobs as young people are being lost on a daily basis. Current developments at Tarbert and Ballylongford are matters that can be resolved politically by a change of policy, if that is what it takes, to ensure jobs are attracted to that part of the county.

I reiterate that I will work with my fellow Deputies, all of whom are wearing the Kerry jersey in this instance and the Irish jersey in respect of job creation. It is essential that this matter be sorted out and if that requires the banging together of heads around the table, so be it. However, matters must not be allowed to continue as they are. The issue is limping on from week to week and there is no light at the end of the tunnel, only speculation. Consequently, the matter must be resolved. Were Members to work together politically, this could be done. I again express my hope the Minister can arrange an urgent meeting with the Deputies from the constituency, as well as the Senators from County Kerry.

Tom Fleming (Kerry South, Independent) Link to this

This matter pertains to the huge investment proposed in the project mentioned - €600 million in the terminal and €400 million in the power plant. At a time when we are trying to entice investment from throughout the world, it is mind-boggling that we are looking at a gift horse in the mouth and shying away from it in the form of this €1 billion investment. As the other Deputies noted, the south-west corner of Ireland has been devastated by unemployment. It certainly is a black spot that has been overlooked in many respects during the years by IDA Ireland in the main, as well as by the other job creation agencies.

The saga of the Shannon and Tarbert land bank is ongoing and there have been many false dawns. Several projects were proposed, but they fell apart and nothing of significance has taken place. The project mentioned is the most feasible that has been put forward to date. What is ironic is that the Government set out the rules in 2001, following a debate at the Cabinet, to comply with European Union gas directives and encourage new and secure sources of gas supplies in a free and open market with no obstacles attached. Subsequently, however, the Commission for Energy Regulation made proposals that would result in a substantial proportion of the interconnection charges imposed on the direction of the energy regulator being levied on gas suppliers. Consequently, suppliers such as Shannon LNG, Corrib and Kinsale Gas were greatly affected. The Tarbert project certainly would take the main hit in this regard because the other probably have been exhausted. Moreover, when reviewing the proposals made by the Commission for Energy Regulation, the economist Colm McCarthy concluded that they were not consistent with its cost-reducing remit on energy policy. In other words, this meant they were bad for the householder, the consumer and business in general. The Minister should intervene in this regard. He has the power to so do and could issue a Government policy directive to turn things around and rescue the project because otherwise it will be lost.

4:00 pm

Pat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour) Link to this

I thank the four Deputies for again giving me the opportunity to address Members of the House on this important issue. I have consistently welcomed the proposal by Shannon LNG to construct a liquefied natural gas, LNG, terminal near Ballylongford, County Kerry. Such a facility, together with the bringing onshore of Corrib gas, would provide important additional security in providing a gas supply for Ireland. I met the promoters of the project soon after taking office last year and both my Department and the Commission for Energy Regulation are in regular contact with Shannon LNG. Most recently, the Taoiseach, the Minister for Arts, Heritage and Gaeltacht Affairs, Deputy Deenihan, Deputy Spring and I met its representatives on 21 December. The meeting offered a timely opportunity to review the state of play on the project and underline the Government’s positive interest in the potential investment.

The meeting also discussed the central concern of Shannon LNG, to obtain regulatory certainty at the earliest opportunity on future pricing and the treatment of Ireland’s two gas interconnectors. Together with all players and potential players in Ireland’s gas market, Shannon LNG has a key commercial interest in the outcome of the regulator’s ultimate decision on this highly complex regulatory question and given the complexities involved, there are many perspectives on what the decision should be. The regulator has been engaged in an extensive consultation process on the matter for the last few months and has had considerable interaction with Shannon LNG, as well as with all key stakeholders.

In line with the stated need for all interested parties, including Shannon LNG, to have clarity and certainty on the future regulatory regime as soon as possible, the regulator originally had signalled it would come to a decision last autumn. Unfortunately, the process was delayed by Shannon LNG’s own decision to lodge a number of complaints with the European Commission.

This further delay in the process was discussed with Shannon LNG at the meeting on 21 December, as was Shannon LNG’s own particular perspective on the regulatory issues for decision by CER.

Decisions on the regulatory treatment of the gas interconnectors and tariffing are statutorily a matter for the CER under the Gas (Interim) (Regulation) Act 2002. I have no function in the matter. As the independent energy regulator, the CER has a remit to protect energy consumers, to ensure security of supply and to support competitiveness. It also has a duty to ensure that new sources of gas for the Irish market do not result in unwarranted increases in the price of gas to business and domestic consumers.

I understand that on 17 February, the CER published a proposed decision paper - its normal way of going about something like this - on the regulatory treatment of the gas interconnectors. The regulator has announced that it intends to hold one further public forum for stakeholders on 1 March. Given the multiplicity of perspectives on the matter, I am sure all stakeholders, including Shannon LNG, will welcome such a forum. In tandem, stakeholders have the opportunity to respond to the regulator by 16 March on the matters raised in the proposed decision paper. At the end of this period, the regulator will assess all comments received and publish a final decision. I understand the regulator expects a final decision to be available by end April. I would hope the regulator will improve on that date. The regulator’s final decision will bring the regulatory certainty which Shannon LNG has repeatedly sought.

Brendan Griffin (Kerry South, Fine Gael) Link to this

I thank the Minister for his reply. I acknowledge that the forum on 1 March will be welcomed by Shannon LNG. However, the mantra of this Government for the past 12 months is that we want to create jobs for our people and that we want to do everything in our power to make sure we reduce the unacceptable number of more than 400,000 people on the live register. Quite frankly, there needs to be greater intervention by the Minister in this matter. I do not feel it is good enough for him to come in here and tell us this is a matter for the energy regulator. He needs to directly intervene in this and guarantee these jobs for north Kerry.

This is a crucial matter for us. We need certainty as does the company. Our international reputation is at stake. When a company has expressed so much interest in our country and has already invested so much money, the Government needs to welcome that interest and show of solidarity with the Irish people. That is what I am asking the Minister to do.

An increased supply on the market surely should be good for competition rather than bad for competition. That is something that should be borne in mind.

Martin Ferris (Kerry North-West Limerick, Sinn Fein) Link to this

I thank the Minister for his detailed response, but we have gone no further. There is an impasse here and we have to find a way to break it. The Minister mentioned Shannon LNG’s own decision to lodge a number of complaints with the European Commission. As I read the rest of his speech, that is not the reason for holding things up. The proposal to have an opportunity to respond to the CER by 16 March is in the proposed decision paper.

If the political will exists - there is collective political will from all parties in respect of job creation and from a parochial point of view in trying to get jobs into Kerry - this must be overcome. Both the Minister and the Taoiseach have a role to play in this. Much was said at that meeting last Monday. I referred to a €75 million tariff. Is that true or is it just wild speculation? If that is the case, it will ensure it effectively will not happen.

Tom Fleming (Kerry South, Independent) Link to this

I am in agreement with the Deputies. There is an essential need for the Government to intervene. I cannot see anything positive coming out of the process here, whereby stakeholders will make further submissions by 1 March. We are going around the house and back to square one again. The importance of this cannot be over-emphasised. We are being told on a weekly basis about our high energy costs for attracting industry and maintaining businesses. Our electricity costs are enormously high even to the householder when compared to the European average.

Perhaps we need to look at EU legislation and regulations. We need to circumvent this in some way, and that is what government is for. We are here as elected representatives for our county, and this is one of the most essential matters that has come before the House in the past 12 months. We should examine every avenue possible to find ways and means to overcome the impasse. There is a huge responsibility on all of us to reach a resolution as soon as possible. Time is of the essence and I ask the Minister and the Government to examine this.

Pat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour) Link to this

I thank the Deputies and I share their concern to grow employment in Kerry. However, Deputy Griffin is essentially asking me to ignore the statute, and the other Deputies seem to concur. Perhaps the House should take greater care when passing a law like this, but the House passed the law and Deputy Griffin is asking me to break the law. I cannot do that, but within the constraints imposed on me by the law, I have done everything that is humanly possible to mediate the earliest possible outcome to this issue. We would have had an outcome, as promised by the regulator, last autumn. However, for reasons that it explained at our meeting on 21 December, the company decided to appeal to Europe against a decision that was not yet made and as a result, disabled the issuing of a decision last autumn.

At our meeting on 21 December, the Taoiseach, the Minister for Arts, Heritage and the Gaeltacht and Deputy Spring met with the promoters and the American representative. They asked for a forum and they are getting a forum. It is normal practice for the regulator to publish this kind of paper in advance. Let the stakeholders go along to that forum for however long it lasts and let them effect the changes that are deemed sensible.

Under the regulatory regime, once utilisation of the interconnector decreases due to new sources of supply, the price per unit of gas transported through the interconnector will increase. Therefore, in addition to its consumer protection remit, the regulator also has a competitiveness and a security of supply remit. Whatever regime is put in place for the interconnectors, it is important for all stakeholders that it should be fit for purpose. In other words, there was a huge investment by the State in the interconnectors between here and the neighbouring island. We cannot strand those assets. They have to be remunerated. The final sentence of the executive summary to the paper published by the regulator reads:

The CER has concluded that the current regulatory treatment of the BGE gas interconnectors with GB will no longer be fit for purpose when new sources of gas come on stream. [It is referring to the Corrib and to the LNG project in this regard] If the system is unchanged, it will result in significantly higher gas tariffs to all gas customers, and will distort efficient economic signals for the future use of the transmission system.

It is the job of the CER to address such issues. It is the task of LNG and other interested parties to attend the forum and influence the ultimate decision. The CER has produced a draft decision, that is all.

I understand the concern that exists in Kerry with regard to jobs. Interest in this issue is whipped up every so often. I assure the Deputies that there is no lack of engagement in respect of this matter. I have pushed the law to the boundaries. The Minister for Arts, Heritage and Gaeltacht Affairs, Deputy Deenihan, and Deputies Spring, Griffin, Martin Ferris and Tom Fleming are all interested in this matter. I understand that but I am constrained with regard to how far I can go. I hope that on this occasion the regulator will be permitted to do its job and bring the issue to finality.

 

http://www.kildarestreet.com/wrans/?id=2012-03-07.985.0

Written answers Wednesday, 7 March 2012

Department of Communications, Energy and Natural Resources

Natural Gas Grid

6:00 pm

Brendan Griffin (Kerry South, Fine Gael)

Question 135: To ask the Minister for Communications, Energy and Natural Resources if he will apply ministerial direction to a matter (details supplied); and if he will make a statement on the matter. [13016/12]

Pat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)

I refer the Deputy to previous replies to Parliamentary Questions on this matter. The decision on the regulatory treatment of the gas interconnectors is statutorily a matter for the Commission for Energy Regulation (CER) under the Gas (Interim) (Regulation) Act 2002. I have no function in the matter. The CER, as the independent energy regulator has a remit to protect energy consumers, ensure security of supply and support competitiveness. In particular it must ensure that new sources of gas for the Irish market do not result in unwarranted increases in the price of gas to business and domestic consumers.

There have been requests, from Shannon LNG and others, to me as Minister for Communications, Energy and Natural Resources to issue a policy direction to the CER in accordance with powers of direction as provided under Section 10A of the Electricity Regulation Act 1999. The content of such a policy direction has not been specified by the advocates but it appears the intention is that a Ministerial direction could be used to intervene to influence CER’s decision making about the regulatory treatment of the gas interconnectors, in particular with reference to the imposition of a tariff on this project, on the basis that Shannon LNG alleges that the decision is, in their view, set to damage its future business.

The 2002 Act confers specific legislative powers on the CER to regulate and determine the tariffs applicable to the gas transmission system. By law, the CER makes decisions pursuant to these powers independently of the Minister. These laws reflect the policy that determining tariffs is not a matter for the Minister.

Furthermore, Section 10A of the 1999 Act does not provide an adequate legal basis for a direction sought by and for the benefit of a private entity. The section provides that the Minister may only give directions on ’general policy’ as opposed to a specific direction in respect of the making of a particular decision by the regulator. Section 10A (6) (c) of the 1999 Act explicitly prohibits the Minister from giving a direction in respect of the performance of the functions of the CER ’in relation to individual energy undertakings or persons’.

I am satisfied that any general policy direction I might make would have to operate in what I consider to be in the overall public interest and could not be framed so as to either assist or hinder a particular stakeholder or otherwise so as to undermine the regulatory system. In the absence of any change in policy in respect of the regulation of gas tariffs, which I do not contemplate, and because of the limitations set out in the governing legislation surrounding the exercise of this power, I do not envisage making a Ministerial policy direction as sought by and on behalf of the company.