“The Irish terms are the best in the world.”
This quote came from Mike Cunningham and he should know, as he was once the Director of Statoil E&P Ireland, one of the companies in the Corrib Gas consortium. The terms to which he was referring are those under which energy companies operate in Ireland.
Corruption and Economic Treason
A Timeline of Economic Treason
1971 – Gas Discovered
1975 – Progressive Legislation
1979 – Irish National Petroleum Corporation Established
Whatever O’Malley’s motivation in forming the INPC it had, once established, the potential to replicate the role that Statoil had played in developing Norway’s oil and gas on behalf of the people of that country. This, however, was not to be.
1985 – The Rot Begins – Dick Spring Changes the Terms
These changes to legislation were primarily focused on oil or gas fields of less than 75million barrels. State participation in such fields was abolished and royalties from such fields were reduced.
1987 – Fianna Fail Corruption – Ray Burke as Minister for Energy
The terms introduced by Dick Spring in relation to oil or gas reserves of less than 75 million barrels were extended to reserves of all sizes. With the stroke of a pen all state royalties were abolished and all state involvement in the development of Irish oil and gas ended. Burke, however, wasn’t quite finished. He, and the then Fianna Fail government, also introduced a 100% tax write off against all capital expenditure incurred by the energy companies, backdated by up to twenty-five years. The only progressive element untouched by Burke was the 50% rate of corporation tax which he deemed it would be ‘over-generous’ to the energy companies to reduce.
1992 – The Coup De Grace Delivered by Bertie Ahern
The same year also saw significant changes to the terms of the exploration licences granted to the energy companies. Exploration licenses are issued, at a nominal fee, to energy companies. Each license covers a defined ‘block’ of Irish seabed in which the holder of the license has exclusive rights to explore for oil and gas. The explorations licences issued under the 1992 terms are divided into three categories with each operating over different time-frames, ranging from six years for a ‘standard’ license, twelve years for a ‘deepwater’ license and not less then fifteen years for ‘frontier’ licences.
In addition to the ending of all state involvement in the development of Ireland’s oil and gas the new licences also allowed that any gas or oil discovered would be sold by the energy companies at market prices.
Since 1992 only one ‘standard’ or ‘deepwater’ license has been issued and that was for the block containing the Corrib reserve. All other licenses issued over this period have been of the ‘frontier’ type, many on a sixteen to twenty year basis. Where oil or gas is discovered the relevant energy company can then apply for a petroleum lease which can increase the period from license issue to production to twenty-one years. The Petroleum license itself is valid for thirty years. In effect the energy companies now hold the exclusive rights to explore for oil and gas across huge swathes of Ireland’s territorial waters for decades to come.
2007 – Too Little, Too Late
To fully appreciate just how bad the Ryan changes to the oil and gas taxation regime were one need only compare the global price of energy in 1992 - when the 25% rate was set - to the global price of energy in 2007. When Bertie Ahern lowered the tax rate to 25% in 1992 the price of a barrel of oil averaged $20. When Eamon Ryan increased the tax rate for more profitable projects to 40% in 2007 the price of a barrel of oil averaged close to $70 with many predicting that that figure would increase dramatically over the coming years. So while the value of any given reserve increased by more then 250% the rate of tax for smaller reserves remained unchanged and the rate for larger reserves increased by a maximum of only 15%.
2007 Until Present
Any hopes that the Fine Gael / Labour Party government which came to power in February 2011 would correct the mistakes of previous administrations were quickly dashed. Within weeks of coming to power, the new Minister for Energy and Natural Resources, Pat Rabbitte, happily oversaw the latest round of applications for exploration licenses. The terms of these licenses were largely based on those developed by the disgraced former ministers Burke and Ahern.
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“If you strike at, imprison, or kill us, out of our prisons or graves we will still evoke a spirit that will thwart you, and perhaps, raise a force that will destroy you! We defy you! Do your worst!”
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