Safety Before LNG condemns as daylight robbery plans to waive up to €22.5 million of an annual levy on Shannon LNG and will appeal any such decision to the Competition Authority and, if necessary, to the EU.

Safety Before LNG is also deeply concerned about what it perceives as biased political interference by Minister Jimmy Deenihan T.D. in the workings of the Commission for Energy Regulation (CER) in its setting of the contributions to be paid by Shannon LNG for the fixed costs of the gas interconnector from the UK. Mr. Deenihan says that Hess LNG should not have to pay any money to the CER for the interconnectors[1].

We are of the opinion that €22.5 million every year from the irish people should create more than 50 long-term jobs.

We ask the minister to explain why the country should give a massive subsidy of up to €450,000 per annum to each of the 50 long-term jobs at the proposed LNG terminal at Tarbert? We ask him to explain  if he is  lobbying the CER to give  a yearly subsidy of  up to €22.5 million euros to a  multinational company based in the offshore tax haven of the Cayman Islands or if he is acting in the national  interest?

Minister Deenihan told the Limerick  Leader newspaper on May 21st 2011:.

Minister Deenihan is reported in  the Kerryman newspaper on May 18th 2011 as follows:

The CER is supposed to be an independent body and should be allowed to complete its work in a transparent manner without unfair political lobbying from politicians claiming to be acting in the common good. Jimmy Deenihan has indicated to the local media in recent weeks that he is responsible for arranging high-level meetings between the independent energy regulator, Shannon LNG and Ministers Rabbitte and Noonan as well as the Taoiseach Enda Kenny. We consider that he is happy for the Irish taxpayers to give away millions of euros to the benefit of a company based in the offshore tax haven of the Cayman Islands which will result in a huge increase in gas prices for the consumer and ask who does he really represent? It is not the taxpayer in any case. We feel that he is trying to pull the wool over the eyes of the Irish taxpayers and box other powerful politicians and statutory bodies into a corner they will not easily get out from if they publicly support the Shannon LNG giveaway without access to all the facts. All this intense lobbying is for 50 long-term jobs and at the cost of sterilising the rest of the Shannon Estuary from further sustainable development.

As long ago as October 17th 2008 [2] we highlighted to the CER the revelation in an internal CER memo which stated that the gas prices for the consumer would increase by about 15% if Corrib and Shannon LNG start production [3]. It has been reported in the media that the CER could charge Shannon LNG as much as €10 million a year [4]. It is also stated that Shannon LNG claims it can supply up to 45% of Irish gas needs and that the €50 million fixed annual cost of operation of the interconnector is currently footed by Bord G�is, ESB and Airtricity [5].

Please note the following:

1. We believe that each energy supplier should incur a levy to cover the current €50 million fixed operating charges of the interconnector proportional to its share of the gas market in Ireland. In the case of Shannon LNG providing up to 45% of the country’s gas this would amount to a levy up to €22.5 million per year. This is equivalent to a state subsidy of €450,000 per year for each of the 50 long-term jobs to be created at the proposed plant if this levy is waived.

2. We believe that only a €10 million levy on Shannon LNG, representing less than half of its share of the actual operating costs would still be anti-competitive and force increased costs on the final consumer. We believe that this would amount to price fixing and an abuse of a dominant position – both of which are anti-competitive practices contrary to EU law. Shannon LNG will not charge less for gas than Bord G�is would be forced to pay via the interconnector even though Bord G�is would then have the added burden of the same fixed costs for the pipeline. This is equivalent to holding the country to ransom. If this proves to be the case then we will make a formal complaint to the Competition Authority of Ireland once a final CER decision on this matter is made public.

3. We have already highlighted the fact that any conversion of the Endesa power plant at Tarbert to gas with only a pipeline from the proposed LNG terminal would also hold power generation in the region hostage to Shannon LNG. This situation would be compounded if, as we already raised with the CER, Shannon LNG becomes pivotal supplier to two power stations controlling at least 700 megawattts in Tarbert by building its own gas-fired power plant adjacent to the proposed terminal and managing to jump the GATE grid access queue [6].

4. The Report of the Review Group on State Assets and Liabilities (the second McCarthy Report) of April 20th 2011 stated:

"if security of supply is the goal, policymakers and the regulator should facilitate the development of liquefied natural gas importation capacity in Ireland on a commercial basis” [7].

  
However, if Shannon LNG, along with Corrib, supplies more gas than the country requires then the direction of the interconnector changes; decoupling from the UK market would have happened and the country would then become even more of a hostage to Shannon LNG.

5. The Economic and Social Research Institute’s 2011 Energy Review stated that importing LNG


We believe therefore that any levy other than a levy based on market share amounts to state support and would therefore run contrary to the findings of the ESRI report.
 
6. The CER is quoted in the media as stating that “CER will seek to balance the interests of gas customers while, at the same time, keeping Ireland as an attractive location for gas producers. It has to be considered whether these companies [LNG and Shell] will use the interconnectors in the future, or if the other suppliers will incur extra costs by paying for the interconnectors.”  [9]
  
To this we state:
a. Regarding using the interconnectors in the future we believe that Shannon LNG would never be able to compete with the LNG suppliers to the two LNG terminals now operating at Milford Haven in Wales. This is because the extra charges the future probable UK importers of Irish LNG-sourced gas would have to pay to import via the interconnector could be avoided completely by directly purchasing from the LNG terminals at Milford Haven. The same would not be the case for indigenous Irish-sourced gas such as Corrib which would have no choice but to use the interconnectors.

b. The direction of the interconnector from the UK will therefore only ever be changed if more sustainable gas fields are discovered and developed in Ireland such as at Corrib. Otherwise the nation would become a hostage to Shannon LNG due to decoupling from the UK market.

c. In any case it is not unreasonable to charge Shannon LNG the levy now because any costs for the future use of the interconnector can be dealt with at that appropriate time, if it ever happens; the costs incurred by the consumer in the short to medium term must have a bearing on the CER decision on the levy to charge in the short to medium term.. Put in other words, if Corrib and LNG provide 99% of the country’s gas requirements, then who would be expected to pay the €50m fixed charges on the interconnector in order to import the final 1% of gas via the pipeline from the UK? Would Bord G�is be expected to pay the annual €50m and pass the cost onto the consumer and allow Corrib and Shannon LNG walk away with a savings of €50m every year, without even considering the higher prices they will subsequently be able to charge Bord G�is as a result?

d. Shannon LNG would not be an indigenous gas producer as the CER spokesperson seems to imply. Unlike Shell at Corrib, Shannon LNG would be an importer of foreign gas and is therefore not a gas producer. They are only merchants seeking a niche in the Irish market with government support, thank you very much.

7. We do not trust the bona fides of Hess LNG which has never managed to develop an LNG regasification terminal anywhere in the world. It is getting bogged down in two highly contentious and increasingly acrimonious planning applications in the USA at Crown Landing in New Jersey on the Delaware River [10] and at Weavers Cove at Fall River in Massachusetts on the Taunton River  [11] . It is now willing to play strong arm tactics when necessary by threatening to pull out of Ireland if it does not get its way with the CER levy. We remind the CER that it was a legal pre-condition for the CER in giving a licence to Shannon LNG to construct an LNG pipeline on December 8th 2009 that Shannon LNG was capable of paying any levy to the CER (criterion G) [12]. We ask that if this is how Shannon LNG acts before it gets a licence from the CER how will it act if it finally starts production and obtains an abusive dominant position in the Irish gas market? We say that Shannon LNG is yet one more company who, with the help of biased political lobbying, is intent on stitching up the Irish taxpayer in what is another all-too-familiar round of horse trading at the Irish taxpayer‘s expense.

8. Could these “current delays” as they are reported as in the media have been avoided? We have continuously argued that the lack of a Strategic Environmental Assessment (SEA) for the Shannon Estuary is at the root of the problem due to the fact that issues which would have been highlighted at the early SEA stage are now only being assessed. These come under the heading of effects on Material Assets which would have been considered in any SEA. The EU Commission has already agreed with our assessment and we believe that this message is now finally hitting home in the wider estuary region. We believe that the new inter-jurisdictional “Strategic Integrated Framework Plan” for the entire Estuary being spearheaded by Clare County Council should be prioritised as it seeks to investigate and analyse competing alternatives for the sustainable development of the estuary. We now ask the CER to go back to basics in order to strategically assess the Shannon LNG project in the light of the Clare County Development Plan 2011-17 Strategic Integrated Framework Plan objective which states:

“CDP 14.2 Development Plan Objective: Strategic Integrated Framework Plan
It is an objective of Clare County Council:
a) To facilitate the carrying out of an inter-jurisdictional Strategic Integrated Framework Plan (SIFP) for the Shannon Estuary in conjunction with the other relevant local authorities and agencies, in accordance with the SEA Directive and Habitats Directive. The SIFP will identify both the nature of the development, economic growth and employment that can be sustainably accommodated within the Shannon Estuary and the location of the sites that could accommodate specific types of development. The SIFP will ensure that the habitat status of the areas within the Estuary designated as Natura 2000 or other environmentally sensitive sites would not be reduced as a result of the short-term or long-term impact of such developments, considering alternatives, cumulative impact, or impact in-combination with other proposed or planned developments outside the area of the Estuary. [13] ”