Wednesday, 31 March 1993
Seanad Éireann Debate
Mr. Howard: I would like to make a  point in relation to section 3. I recall former Senator Murphy complaining that the explanatory memorandum often had the effect of confusing him as to what was in a Bill. I will read the explanatory memorandum in regard to section 3.
Section 3 amends section 8 (8) of the Gas Act, 1976 so that in addition to the conditions which the Minister could previously attach to his consent for a pipeline, he can now impose a condition in regard to transfer of an interest in a pipeline by Bord Gáis to another party and to any subsequent transfers.
The explanation stops at that point. The greater part of this Bill deals with section 3 which ensures the protection of the people in relation to this pipeline. However, these assurances given are revoked in section 3 (8H) (c) which reads:
Paragraphs (a) and (b) of this subsection shall not apply where the contravention or failure to comply in question occurs outside the State or a designated area (within the meaning of the Continental Shelf Act, 1968) unless the person responsible for the contravention or failure to comply is an Irish citizen or a body established in the State by or under any enactment.
An earlier part of section 3 refers to the construction of the pipeline as an area where consent would apply. Once the construction is completed there is no great need for conditions because the construction is either satisfactory or unsatisfactory at that stage. The presumption is that it is satisfactory once it is in operation. Does the second point refer to the operation of the pipeline? I do not think the third point which relates to the maintenance of the pipeline is all that important, but I accept it is desirable to include it. However, I can visualise a situation in the years ahead where the ownership of the interconnector and pipeline between this island and the UK may be transferred to a person or body outside the State. According to section  3 (8H)(c), we are powerless. Will the Minister confirm if my interpretation of the situation is correct?
Minister of State at the Department of Transport, Energy and Communications: (Mr. N. Treacy): I know what Senator Howard means. The purpose of this section is to ensure that the Government can impose penalties if somebody tampers with the pipeline. Our laws can take effect only in our territory and we can impose conditions or penalties only on an Irish national who breaches the law in our territory or on a person or company who breaches the law in that territory. We cannot impose them elsewhere. We have an agreement with the UK authorities that similar laws will operate in their territory. They can impose their laws on anybody tampering with the pipeline or breaking the laws in relation to the conditions laid down in regard to the pipeline. On the other hand, under the European Enforcement of Judgments Act, a decision taken in one member state would be binding in another member state. We have a specific agreement with the UK authorities which covers the points the Senator has been making.
Mr. Howard: I thank the Minister for his response although he confined it to people who might interfere with the operation of the pipeline. The penalty prescribed in section 3 relates to people who are in control of the pipeline. It is the operators of the pipeline I am concerned about.
I would like to refer to the three aspects in the section. I am not too concerned about the construction of the pipeline and I consider the maintenance of the pipeline to be the lesser of the two problems. However, I am concerned about the actual operation of the pipeline. If a series of transfers of ownership takes place it may well transfer the pipeline into the ownership of some person or company outside the jurisdiction of the State. It is the responsibility of the Minister to ensure that the pipeline is operated  in a satisfactory manner. Should it not be operated in a satisfactory manner I think, from my reading of the legislation, that the Minister would not be in a position to impose sanctions on those who fail to operate the pipeline in a satisfactory manner.
I would like the Minister to develop the point he was making that there is complementary legislation being provided in the UK. Will he confirm that the European Convention in relation to the enactment of legislation in member states will have full application in the circumstances to which I refer? Furthermore, will the Minister of State indicate whether the corresponding legislation is in place in the UK and, if not, when will it be in place?
Mr. N. Treacy: It would not be necessary to have corresponding legislation in the UK. This section is a dual section. It gives the right to the Minister or the Government to apply the laws of the country on all of our territory and on any citizen or any Irish company operating in that territory, who might break the law in any regard, no matter what aspect of the law we are talking about. It also gives the same powers to impose the same sanctions and penalties on any Irish citizen or any Irish company or semi-State organisation no matter where they are operating in any part of the world. We have control over them.
The legislation we are putting through is for specific purposes, but the agreement we have reached with the United Kingdom deals with co-operation on the management of the scheme and the legal system under which it will operate. We have reached agreement that the United Kingdom will be in a position to implement its own laws and have its own sanctions and penalties against anybody interfering with this international pipeline on their territory. We are covered on both sides. The normal laws of the State in this country apply as well as this specific legislation.
This is enabling legislation to give certain facilities and rights to Bord Gáis Éireann. The normal laws of the United  Kingdom are enforceable for anybody interfering with the facility which has been agreed between two sovereign Governments and which is being provided by an Irish semi-State organisation.
Mr. N. Treacy: The precise legal status is that an agreement has been reached between two sovereign Governments and between two semi-State companies in the territory of those sovereign Governments. This agreement gives the right to a semi-State company in Ireland — Bord Gáis Éireann — to construct an international pipeline interconnector between the territories of the two sovereign Governments. In the United Kingdom a company called National Power is to supply gas through the interconnector pipeline to another sovereign government — Ireland — and which will be taken by Bord Gáis Éireann. All the legalities of company law and criminal law, in fact all types of laws enacted by both States, are effective in both territories. Once the agreement is signed and agreed it is binding because it is an agreement between two sovereign Governments and two companies in the territories of the two Governments.
Mr. Burke: With regard to the borrowing powers, I would like to ask the Minister of State if he is satisfied that he has sufficient funds under the £350 million to extend the gas pipeline to the western seaboard which includes a number of major cities and large county towns? If the Minister of State does not have sufficient funds, would he consider including this in the Structural Funds for 1993 to 1997? We are receiving £3 million  a day and that money would be well spent in bringing the most disadvantaged area in the European Community into the 21st century with a natural gas pipeline.
One of the major industries in the west of Ireland is a good tourist industry. That industry will be disadvantaged and will not be on a an equal footing with the tourist industries in southern and eastern regions since we will not have a natural gas supply.
Mr. Howard: Senator Burke has raised an interesting point. My understanding from the Minister of State is that the increase in the borrowing capacity of Bord Gáis Éireann is to provide for the construction costs of the pipeline. While the Minister of State told us that the construction costs are on target and within budget, the content of Senator Burke's query is that should there be further development and extension of the gas pipeline around the country will Bord Gáis have sufficient capacity in its new borrowing limits to facilitate that? That matter would be of interest to Senator Cassidy as he expressed a strong interest in seeing the gas pipeline extended to certain towns in the midlands. Senator Burke wants the pipeline to go further into the west. It is a reasonable query. Will there be adequate financial capacity to undertake expansion once the pipeline is constructed?
Mr. N. Treacy: Bord Gáis Éireann is anxious to identify areas where it can supply gas to domestic consumers on a commercial basis. It needs no encouragement from me in that regard. However, I must point out that it has a statutory duty to do this on a strictly commercial basis. That means it can service only those areas where a reasonable return can be earned on the costly infrastructure that must be installed. That usually means identifying sufficient customers who are suitably located so as to minimise the cost.
The converse is that if they were to bring gas into a certain area with a small number of consumers, the cost per connection, the cost per house and the levy  on them would be extremely high and it would not be viable from the point of view of the company or the consumer. Bord Gáis Éireann targeted many estates not using gas and will continue to do so. Where practical and feasible they will bring gas to those estates.
With regard to the borrowing situation, I am satisfied from all available information and from studies carried out by the Department that the borrowing requirement being sanctioned for the company which will be permanent once this legislation is passed, should be pitched at £350 million. That is a big increase for the company and it will take into account the cost of this job which is about £290 million. It will also take into account the availability of a European grant and the fact that any delay in the drawing down of the grant would oblige the company to borrow beyond its normal requirement bringing borrowing to a figure in excess of £300 million. In the light of the existing project and Bord Gáis Éireann's commitments, I am satisfied that once the job is complete and the European grant has been drawn down BGÉ will be in a position to avail of practical and viable opportunities to extend the gas supply to provincial towns and other areas of consumer demand.
Mr. Magner: I quibble a little with the Minister in that natural gas belongs to the people of Ireland and I include the western sea board in the national territory. People are entitled to share the benefits of the gas. The strict financial criteria outlined for Bord Gáis Éireann are not the same as those outlined for Aer Lingus. For instance, the Shannon stop-over was designed as a regional facility. However, if a Government decides to take action on a regional basis then perhaps the region should bear the costs. CIE is another example in that some of its consumer services especially road transport are not economically viable but are socially desirable. In the long term, it may be considered socially desirable and profitable to extend natural  gas to parts of the country that would benefit from it.
Mr. N. Treacy: While I agree with the social philosophy espoused today by Senator Magner, that does not necessarily mean I always agree with the social philosophy he espouses. I agree that the deprived and disadvantaged people in the west should benefit from a natural asset and resource. Taking into account the topography and demographics of the area and the fact that natural gas could be winding its way southwards along the western seaboard, I hope it may be available at a lower cost than if it were brought across from the capital city. It might happen someday but we must not forget we have another indigenous resource peat.
The Government is putting much emphasis on combined heat and power. I hope that research and analysis will enable the use of peat in a new form, a new option could be provided in a new service, particularly for the midlands and the western areas where there are vast amounts of peat. I would see this in totality and the Department will take a broad look at the option. Bord Gáis Éireann has strict commercial criteria and BGÉ has already contributed £300 million by way of direct payments to the Exchequer. Their discovery and utilisation of natural gas has saved the State £2 billion in fuel imports. On this basis there is hope and if the options are maximised the west will benefit from the most feasible and practical option that becomes available over the next ten years.
Mr. Howard: I have a simple query  about the State guarantee. Prior to this legislation, Bord Gáis Éireann's borrowing limit was £170 million, £90 million of which was guaranteed by the State. The new borrowing limit will be £350 million of which £190 million will be guaranteed by the State. The difference between the borrowing limit and the State guarantee is a total of £160 million. I am sure Bord Gáis Éireann is satisfied that the guarantee is adequate but will the Minister explain why it is confident of its ability to borrow a total of £160 million which is not secured by the State guarantee?
Mr. N. Treacy: Bord Gáis Éireann is a commercial semi-State organisation operating under commercial criteria. The modern demands of the State and the necessity to operate semi-State companies as commercial entities must be examined. The State cannot always prop up semi-State companies when they are in serious difficulties and plough millions of taxpayers' money into bailing them out. Bord Gáis Éireann's track record to date illustrates its commercial ability. It has the use of a fine, popular energy resource and based on its commercial record it would seem prudent to ensure that while it operates with commercial criteria, its interests are protected and it achieves the status enjoyed by other semi-State companies. If Bord Gáis Éireann achieves this status, rather than borrowing money domestically and raising the price of credit it will be in a position to seek international finance where resources are available and borrow with a State guarantee. These borrowings can be utilised for the benefit and enjoyment of the people of Ireland and Bord Gáis Éireann can still operate on commercial criteria. We are satisfied looking at Bord Gáis Éireann's track record and the demarcation between the commercial borrowing requirement facility of £350 million and the State guarantee of £190 million that it is able to carry it and will prosper in the future.
Minister of State at the Department of Transport, Energy and Communications (Mr. N. Treacy): Cost benefit studies are not normally made available publicly. Such studies only become available through public inquiries and other matters. This cost benefit study was carried out by a commercial company who employed professional people to conduct the study and make the findings available to them. The study was then sent to the European Commission who employed international consultants to appraise the study. The consultants were of the unanimous view that this was a commercially viable project which would confer vast benefits on the people of the European Community, and more particularly on one member state. In light of the study's findings the EC was prepared to give grant aid to the tune of £90 million for the project. The confidentiality of the report must be respected but we also have to ensure that our Department is satisfied that it is a positive and practical report. It is financially attainable and suitable and has been endorsed by the European Commission and their consultants. This endorsement is evidenced not just by the written document given but also by the financial commitment they have made. The fact that the project appraised by the report has received financial support proves that the report, is a solid and sound one.
Mr. Wright: I thank the parties and the Minister for expediting this Bill  through the House. I have welcomed this Bill at local level and I welcome the Minister's commitment to the environment and security of the north county areas as outlined in his speech.
Mr. N. Treacy: I sincerely thank the House and all the Members for their sincere, positive contributions and for the individualist way in which they dealt with this Bill. I enjoyed the debate very much. It is always a pleasure to come to this House where there are many fine people who ensure that legislation is properly checked before it becomes law. I thank the Senators for their co-operation and I look forward to coming back into this House in the future.
Mr. Howard: It is nearly always a pleasure to deal with a Bill taken by the Minister of State, Deputy Treacy. He responds openly and positively to queries raised on this side of the House and encourages a constructive attitude to legislation.
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