Bad politics behind great oil and gas giveaway
Irish Times, Tue, Aug 23, 2011
OUR CHILDREN and grandchildren will see us as a weak and inept generation.
They will wonder how we blew the boom, why we put €30 billion into Anglo Irish Bank and Irish Nationwide, how we gave up our economic sovereignty without much of a fight. They will feel bitterness at the way we pushed them, as children, to the top of the queue for so-called austerity.
And unless we act now, that bitterness will turn to contempt. They will hate us for the way, as well as leaving them with a legacy of unpayable debt, we also gave away something that might have been of real use to them, the chance to use our natural gas and oil resources for their benefit.
I’m returning to this issue because it seems to me to be a touchstone for our entire political culture. We can use it to address three big questions: have we learned anything? Is there really a shift in the way we do politics? And have we any capacity for the kind of radical thinking we need?
The question of what we’ve learned is stark. In September 2008, our system of governance – Civil Service, regulators, government – faced a historic test. It failed catastrophically. Why? Because, under the pressure of the banking crisis, it fell back on its ingrained habits and attitudes. It had acquired the habit of doing what the banks asked it to do. In a closed system of decision-making, that habit made a grotesquely irrational decision seem like common sense.
Just as the Department of Finance was habituated to doing what the banks wanted, the mindset of the Department of Natural Resources is shaped by the perceived needs of the oil and gas companies. That mindset has proved to be resilient. Two successive ministers – Eamon Ryan and Pat Rabbitte – have entered it from the outside, with some history of scepticism, and quickly gone native. Each has ended up speaking a language that is indistinguishable from that of his Fianna Fáil predecessors.
Which brings us to the second question: has anything changed in our governing political culture? Leave aside for the moment the substantive issue of why we’re ceding control of our natural resources on the worst terms in the developed world. Just consider the way this is being done. It is closed, top-down, peremptory. Even our parliament doesn’t get to have any say.
Rabbitte’s position is that an Oireachtas committee can consider the licensing terms but that, in the meantime, he’ll go ahead and award the licences anyway. As a process, this is the same parody of democracy that has us where we are.
Third, is there the slightest possibility of imaginative thinking? Last week, I made a concrete suggestion: that the State seeks a partnership with Norway in the development of our oil and gas. It is not a mad idea. Norway has the money and expertise. In the 1970s, it offered us a deal on sharing oil and fisheries. Norway (unlike Ireland) has a large stake in the Corrib gas field. It is actively expanding its operations around the world.
Rabbitte replied to my piece in these pages last week. He didn’t dismiss this suggestion or show why it is absurd. Rather, he completely ignored it. He’s comfortable with a phoney argument between “fantasists” who think there’s a free pot of gold out in the Atlantic and pragmatists like himself. But the idea that there might be an imaginative pragmatism, a hard-headed defence of the public interest, simply cannot be countenanced.
And this, I’m afraid, is where official thinking is still at. It poses false alternatives: we either submit to the abject position of powerlessness we occupy or we’re deluding ourselves. Any notion that we might actually use the collective power we still have is literally unimaginable. So we have to accept “reality”, however miserable it may be.
Just how miserable it is is illustrated by figures cited by William Hederman in the Sunday Time s. He quotes the former managing director of the Corrib Gas project, Brian O’Cathain, as predicting that the State may end up with as little as €340 million in tax over its lifetime. O’Cathain actually suggested at a public debate in December that Corrib may in the end pay no tax at all.
Nor is there anything in the current regime to force companies even to land oil and gas in Ireland; they can ship it or pipe it to the United Kingdom or Holland if they wish. There is no guarantee of a single Irish job being created. But none of this is even up for discussion.
If you knew nothing at all about the issues at stake here and merely looked at the process by which decisions are being made, you’d put your shirt on those decisions being bad ones. It’s always a good bet that closed, top-down policymaking, with minimal information and no serious willingness to consider alternatives will have awful results. We know that from very bitter experience. Or we would do if we hadn’t forgotten it already.
© 2011 The Irish Times
Councillor Cian O Callaghan,Labour Party, Fingal Co Council, has Described Minister Rabittes position on development and control of our Oil and Gas resources as “rubbish”
firstname.lastname@example.org or 086 286 6631. http://cianocallaghan.com/2011/08/response-to-article-by-minister-rabbitte-on-oil-and-gas-deposit-taxation/
Letter to Irish Times Friday Aug 19
Sir, – Minister for Energy Pat Rabbitte’s assertion that Ireland’s tax take on our oil and gas: “compares favourably with all similar countries but not with Norway” (Opinion, August 19th) is misguided.
A report by the US government accountability office in 2007 found that Ireland has the second lowest government take on oil and gas deposits of 142 countries studied. Furthermore the headline figure of 25 per cent tax cited by Mr Rabbitte will never be applied under our current taxation regime due to the generous availability of tax loopholes to offset exploration and drilling costs.
It is time that we ditch the failed economic policies of the last government; and instead we should adopt the European norm in tax take for oil and gas. – Yours, etc,
CIAN O’CALLAGHAN, Howth,
Response To Article By Minister Rabbitte On Oil And Gas Deposit Taxation
This is a statement that I, Cian O’Callaghan, issued to media outlets today:
“In today’s Irish Times Minister Pat Rabbitte T.D. argues that Ireland’s tax take on our oil and gas: “compare favourably with all similar countries but not with Norway.” This is complete nonsense.
“A report by the US Government Accountability Office in 2007 found that Ireland has the second lowest government take on oil and gas deposits of 142 countries studied. The Department of Communications, Marine and Natural Resources reported in 2006 that average government takes range from 25% -90% across the world. They further found that the European average government take excluding Ireland is between 35% – 65%. The assertion that the Irish government take at 25% compares favourably only rings true for the corporations that wish to exploit our resources. For the rest of us it represents an insane act of economic treason, offering to give away some €750 billion worth of oil and gas over the coming decades at the worst possible terms and conditions for the Irish people and Irish economy.
“The headline figure of 25% tax cited by Minister Rabbitte will never be applied under our current taxation regime due to the generous availability of tax loopholes to offset exploration and drilling costs. Recent Research by William Hederman (see http://www.irishoilandgas.com) reveals that corporations may pay as little as 7% of the revenue from Irish oil and gas fields. The application of tax on declared profits only and not on the actual wealth and value of the oil and gas reserves further benefits oil corporations to our detriment.
“Minister Rabbitte further argues that a lack of interest from multi-national companies in Ireland over the last two decades vindicates the tax regime that was put in place by Fianna Fáil. He fails to acknowledge that our oil and gas reserves are now a much more attractive proposition for exploration and drilling than two decades ago. There are three key reasons for this:
• First as larger oil and gas deposits elsewhere are depleted, attention is turning to smaller deposits such as those located on our offshore.
• Secondly rising oil and gas prices determine that smaller deposits are now a viable proposition.
• Thirdly technological advances in exploration and resource exploitation over the last two decades have increased profitability rates from smaller fields.
“These three key changes have dramatically altered the oil and gas exploration market requiring that we urgently re-examine our tax take before the latest round of licences are granted. It is time that we ditch the failed economic policies of Fianna Fáil and instead we should adopt at least the European norm in tax take for oil and gas. It is absolutely certain that our off shore fields will be exploited over time. The only question is will we benefit from the exploration of the natural resources that we own.”
Fintan O’Toole’s original article is here:
Pat Rabbitte’s article is here: