Gas, oil and the Irish state: Understanding the dynamics and conflicts of hydrocarbon management 9781526100962

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Gas, oil and the Irish state

Gas, oil and the Irish state Understanding the dynamics and conflicts of hydrocarbon management

Amanda Slevin

Manchester University Press

Copyright © Amanda Slevin 2016 The right of Amanda Slevin to be identified as the author of this work has been asserted by her in accordance with the Copyright, Designs and Patents Act 1988. Published by Manchester University Press Altrincham Street, Manchester M1 7JA www.manchesteruniversitypress.co.uk British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data applied for ISBN 978 1 784 99274 3 hardback First published 2016 The publisher has no responsibility for the persistence or accuracy of URLs for any external or third-party internet websites referred to in this book, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate.

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Contents

Lists of illustrations Acknowledgements List of abbreviations Glossary

page  vii viii x xii

Introduction

1

Part I:  The Corrib gas project

7

1 Politics and pipelines: emergence of the Corrib gas conflict

9

2 Resistance grows

27

Part II:  History of Ireland’s oil and gas experience

45

3 What gas and oil? The early days of the Irish regime (1957–75)

47

4 Unravelling of Keating’s plans (1976–99)

62

5 A new millennium, a new approach (2000–14)

78

Part III:  Ireland in a global context

97

6 Global trends in state resource management

99

7 Ireland’s licensing regime in an international context

117

8 Norway and Ireland: too different to compare?

130

Part IV:  Ireland’s approach – analysis, consequences and alternatives

159

9 Understanding the Irish state’s approach

161

vi

Contents

10 Consent, coercion and consequences of the Corrib gas conflict

187

11 Back to the future? Towards a new model for Ireland

195

Bibliography Index

212 230

Illustrations

Figures 1 Map of the area, from Centre for Public Inquiry (2005). ‘The great Corrib gas controversy’. Dublin: Centre for Public Inquiry. Reproduced by permission. 2 Government take for oil, from Johnston, D. (2008). ‘Changing fiscal landscape.’ Journal of World Energy Law and Business, 1(1): 31–54. Reproduced by permission.

page 10 122

Tables 1 2 3 4 5 6 7

Main authorisations Summary of changes to Ireland’s licensing system (1959–2014) Wells drilled offshore and onshore Ireland (1959–2012) Control over oil production Estimated government take Estimated range of government take Trends in trade union density, Ireland (1975–2007)

84 90 92 109 124 126 171

Acknowledgements

Gas, oil and the Irish state is a book about different journeys  – how the Irish state developed its approach to hydrocarbon management; the diverse experiences of a rural community in North West Ireland; Norway’s journey and how it diverges from Ireland’s; and, to a lesser extent, the path I’ve taken in researching these topics. The story of how my research came to fruition is a long one, involving countless people who contributed in many ways, including Ted Fleming who saw potential and encouraged me to undertake this research as the basis of my PhD; members of the Irish Research Council who awarded me a postgraduate scholarship to conduct this research; and Kieran Allen, an excellent PhD supervisor who guided, motivated and supported me through a challenging yet rewarding academic adventure. Thanks are also due to friends, colleagues and staff in the School of Sociology, University College Dublin who provided invaluable assistance, particularly my doctoral studies panel (Kieran Allen, Tom Inglis and Michael Punch) and Alice Feldman. A significant number of people participated in this research and I am indebted to you all. By sharing your insights, knowledge and experiences you made this project unique, meaningful and worthwhile. As agreed during data collection, I have not named you all in an effort to maintain confidentiality but you know who you are and my gratitude for your contribution is beyond words. I  am beholden to everyone who assisted me during data collection, including Mary Horan, Micheál and Caitlin O’Seighin, Des Brannigan, and Synnøve Hageberg and colleagues in the Norwegian Petroleum Museum (Stavanger) who facilitated access to their library. My sincere thanks go to: the staff of Manchester University Press for bringing this book into production; Helge Ryggvite and Laurence Cox for insightful, helpful and thorough feedback; Frank Connolly (Centre for Public Inquiry) and Daniel Johnston (Daniel Johnston and Co.) for providing valuable diagrams for this publication.

Acknowledgements

ix

I’m very fortunate to have some great friends and thanks to all of you who helped edit an earlier version of this book (particularly Kevin, Sinead, Andy, Aline, Sinead, Sam and Niamh). Thanks are due to friends who inspired and supported me throughout the research and writing processes (Siobhan, Paula, Marty, Roisin, Necip, Cat and activist friends), those who helped put a roof over my head (Charlene, Andy and Maire) and work mates for their encouragement. I am especially grateful to Niamh, Veljko and Arnie for their wonderful friendship, warm welcomes in their home, and persuasion to nail things to walls which aided the writing process. I’d like to thank, or perhaps blame, my dear cousin Kevin for my interest in this research topic. Kevin’s life-long activism and his deep commitment to social justice has been a huge source of inspiration throughout my life. My deepest gratitude goes to my family for always being there – my parents Tommy and Marie, siblings Chrissy and Pauric, Noel, and members of my extended family including Michael, Karen and Eileen – thank you for supporting me through the hardest periods while helping me appreciate and celebrate milestones, achievements and everyday happy moments – my research would not have been completed without your love, support and encouragement.

Abbreviations

ABP An Bord Pleanála, the national planning authority AIB Allied Irish Banks AIOC Anglo Iranian Oil Company bpd Barrels per day CAO Compulsory Acquisition Order CER Commission for Energy Regulation CEO Chief Executive Officer Co. County CPI Centre for Public Inquiry CSO Central Statistics Office DCENR Department of Communications, Energy and Natural Resources, previously DCMNR DCMNR Department of Communications, Marine and Natural Resources, previously DMNR DICE Department of Industry, Commerce and Energy, previously Department of Industry and Commerce DMNR Department of the Marine and Natural Resources, previously DICE and the Department of the Marine EIS Environmental Impact Statement EMD Exploration and Mining Division EPA Environmental Protection Agency EU European Union GAO Government Accountability Office (US) GSOC Garda Síochána Ombudsman Commission IDA Irish Development Authority INPC Irish National Petroleum Corporation IOC International oil company IOOA Irish Offshore Operators Association ITGWU Irish Transport and General Workers Union

Abbreviations

JCCNRA

Joint Committee on Communications, Natural Resources and Agriculture, also referred to as the Oireachtas Committee MCC Mayo County Council MPE Ministry of Petroleum and Energy (Norway) NBIM Norges Bank Investment Management NCS Norwegian Continental Shelf NOC National oil company NOK Norwegian kroner NPD Norwegian Petroleum Directorate NPM Norwegian Petroleum Museum OECD Organisation for Economic Co-operation and Development OPEC Organisation of the Petroleum Exporting Countries PAD Petroleum Affairs Division POD Plan of development PPT Petroleum production tax PRRT Profit resource rent tax PSA Petroleum Safety Authority (Norway) PSC Production sharing contract RPC Resources Protection Campaign SAC Special Area of Conservation SC Service contract SDFI State Direct Financial Interest (Norway) SFWP Sinn Féin the Workers Party SI Statutory Instrument SIPTU Services, Industrial, Professional Trade Union SPA Special Protection Area TD Teachtaí Dála (deputy), member of Dáil Éireann

xi

Glossary

1960 Act

The Petroleum and Other Minerals Development Act (1960), Government of Ireland 1975 terms Ireland: Exclusive Offshore Licensing Terms (1975), Department of Industry and Commerce 1992 terms Licensing Terms for Offshore Oil and Gas Exploration and Development (1992), Department of the Marine and Natural Resources 2007 terms Licensing Terms for Offshore Oil and Gas Exploration, Development and Production (2007), Department of Communications, Energy and Natural Resources Acreage Sections of a state’s territory in which hydrocarbon exploration or production is permitted; ‘opening up acreage’ means a state has invited companies to apply for authorisations in pre-defined areas either offshore or onshore. Ireland’s acreage (onshore and offshore territory) is divided into numbered blocks An Garda Síochána ‘Guardians of the Peace’, the Irish police force Bord Gáis State body responsible for gas distribution Bunreacht na hÉireann   The Irish Constitution Córas Tráchtála Irish Export Board (IEB) Concession An approach to state resource management in which a state concedes ownership of its hydrocarbons to oil companies in defined areas, in exchange for financial returns such as tax and/or royalties; similar to a licensing regime Dáil Éireann The Irish House of Representatives, one of two Houses comprising the Oireachtas (Irish Parliament). The other House is Seanad Éireann (the Senate). Dáil Éireann is the House from which

Glossary

Downstream Fiscal terms Gardaí Government take

Licensing system

Midstream Non-fiscal

Oireachtas Production sharing

Seanad Éireann Service agreement

xiii

the government is formed and members of the Dáil are known as Teachtaí Dála (TDs), or Deputies Oil industry activities which include refining and marketing of hydrocarbons Economic components of the system adopted by a state to manage the exploration, development and production of its hydrocarbons Members of the Irish police force are Gardaí (plural); an individual member is a Garda Share of revenue a state receives in remuneration for the production of its resources. May take the form of royalties, taxes, or other mechanisms for securing a share of revenues The resource-owning state grants licences and authorises oil companies to conduct exploration and production activities. If hydrocarbons are discovered and produced, ownership of the resources is transferred from the state to the companies in exchange for a pre-agreed financial return. A modern version of a concessionary system Activities such as transportation in the oil industry Non-financial elements of agreements between states and oil companies such as phases of a work programme, duration of authorisation, and commitments to drill wells Irish Parliament An approach to state resource management in which the state shares in hydrocarbon production. Generally entails a sharing of production (hydrocarbons or profits) between the state and oil company; some ownership and control of the resources may be transferred from the state to the oil companies upon production Irish Senate Also known as a service contract; a model of state hydrocarbon management in which oil companies agree to produce hydrocarbons as a ‘service’ to the state. Ownership and control of the resources remain with the state and oil companies receive a set fee or pre-agreed share of resources in payment for production of resources

newgenprepdf

xiv State participation

Tánaiste Taoiseach Upstream

Glossary

State participates in hydrocarbon exploitation in partnership with oil companies. Can take several forms including direct state participation through a national oil company; production by the private oil company with the state contributing financially and then sharing in the proceeds; or carried interest, whereby the state’s costs are borne by the oil company while the state receives a predetermined share of profits Deputy Prime Minister Irish Prime Minister Exploration and production activities in the oil industry

Introduction

‘Hail Mary full of grace the Lord is with thee … aaoohhh you’re hurting me, take your hands off me …’ ‘Clear the road …’ ‘Whose cops? Shell’s cops …’ ‘You have no right to stop people going to work …’ As the sun rose over a narrow country road in Erris, Co. Mayo (North West Ireland) in October 2006, these utterances were a small selection of those accompanying the actions of Gardaí (members of An Garda Síochana, the Irish police force) as they dragged protestors from a sit-down demonstration in the middle of the road. Comprising elderly farmers, middle-aged housewives, fishermen, teenagers and political activists among others, the protestors were corralled at the side of the road, encompassed within a wall of fluorescent yellow police jackets. From sounds of chanting and loud praying the aural backdrop shifted to crying and angry yelling as Gardaí physically held back protestors and waved through a convoy of vehicles that had been parked further along the road. Carrying staff and construction materials, these trucks, buses and cars were bound for Ballinaboy and the site of the Corrib gas processing terminal – a hub for protests against the Corrib gas project since the jailing of the ‘Rossport Five’ in June 2005. As one of many protests against the Corrib gas project, the involvement of An Garda Síochána in that day’s demonstration served to problematise the state’s role in the advancement of the development, provoking serious questions: if residents were so opposed to the Corrib gas project, why was the project going ahead? Why were Gardaí using force against Irish citizens to clear the way for Shell’s fleet? And, after five years of opposition to the project, how had it come to a stand-off between local people, the police and multinational oil companies? Despite each stage of the Corrib gas development being vehemently contested by local people and their supporters, on 29 December 2015 Minister for Communications, Energy and Natural Resources Alex White (Labour Party) granted Shell permission to operate the Corrib gas pipeline. Rather than

2

Introduction

fireworks marking the advent of a new year, residents were subjected to intense gas flaring on 31 December as Shell began to process gas in the Ballinaboy terminal. Completion of different phases of the project correlates with worsening conditions for some of those opposed to the development, a number of whom were incarcerated in recent years. Others have sustained lasting physical and psychological injuries as a result of their resistance. Meanwhile some of those who support the project have experienced social isolation and other difficulties due to their position. How did a rural region in the West of Ireland come to experience such wide-ranging, negative outcomes? This book offers some explanations and examines the evolution of the Corrib gas conflict, revealing the environmental, health and safety concerns initially underpinning resistance. It also highlights how the dispute exposed wider issues surrounding the Irish state’s management of its gas and oil. Problematic elements of the state’s approach include the transfer of control and ownership of state owned hydrocarbons to private companies; lenient fiscal terms which result in minimal economic returns to the Irish state; and the use of state and private actor coercive force against citizens. As a microcosm of the Irish state’s approach to the management of its gas and oil, the Corrib gas project and associated conflict illuminate topics which go to the core of Ireland’s socio-economic composition and the functioning of its state. This book offers insights into how and why the Irish state developed such a flawed model. Covering a time frame from 1957 to 2014, this book presents the first comprehensive study of the Irish state’s approach to hydrocarbon management, spanning three interconnected levels of analysis (micro, meso and macro). Examining subjects that are simultaneously empirical and ideological, historical and current, the focus of this book extends beyond decision-making processes within the state system to their impacts on people’s lives in communities. Attention is paid to occurrences internal and external to the Irish state, leading to the identification of specific factors that have shaped how the state manages its gas and oil. This book is based on primary and secondary data gathered through four research methods:  documentary research, interviews, observations and case studies. Documentary research focused on policy, fiscal and licensing systems in Ireland and other countries, with attention paid to literature on state hydrocarbon management and government take. Interviews were a key method of data collection and I  conducted interviews with thirty stakeholders from the spectrum of interests surrounding Irish hydrocarbons (including politicians, civil servants, oil industry representatives, journalists and civil society groups, such as those supporting and resisting the Corrib gas project). Within the book all research participants are referred to by pseudonyms to maintain anonymity, as agreed during data collection. Observations were an integral element of data collection and I conducted observations at twenty key events, including: state and industry sponsored conferences on Irish hydrocarbons; the 2010 oral hearing

Introduction

3

on the onshore Corrib pipeline; protests; and public meetings discussing issues related to Irish gas and oil. Integrating data from the aforementioned methods, my fourth method of data collection comprised two case studies. I compiled a case study of the Corrib conflict to uncover the practice and consequences of the Irish state’s management of its gas and oil and illuminate the impact of macro level structures and ideology at a local level. A case study of the Norwegian oil experience served to identify socio-economic, ideological and political influences shaping state resource management, thereby establishing parameters for a critique of the Irish model. Primary data from this research are incorporated within every chapter of this book, providing the richness and complexity necessary to understand how and why the Irish state manages its resources in the manner adopted. Overview of book This book contains four integrated parts and each comprises a vital component of Ireland’s story. Part I focuses on the Corrib gas project and discusses the emergence and escalation of the conflict in tandem with the diversity of opinions towards the development. Consideration is given to efforts at consent formation juxtaposed with legislative changes that enabled the advancement of the project in spite of significant opposition. While acknowledging how the oil companies’ actions exacerbated the conflict surrounding Corrib gas, this part emphasises the state’s role via legal and policy frameworks and problematises the state’s involvement through policing, the judicial system and belated fora for community engagement. I  argue defects in the state’s model of hydrocarbon management ultimately laid the foundations for this ongoing dispute and suggest the state’s flawed approach has led to emergent controversies surrounding potential onshore gas production by hydraulic fracturing (‘fracking’) and possible near-shore oil production in Dublin Bay. The second part offers a contemporary account of Ireland’s oil and gas experience. Comprising three chapters, this part traces the development of the state’s model of hydrocarbon management from 1957 to 2014. Empirical detail is provided on the design and implementation of Ireland’s licensing regime, contextualised with reference to exploratory and exploitation activities, related economic and political events, and trends in state resource management globally. Summarising key issues inherent to the Irish state’s management of its gas and oil, I  establish landmarks in Ireland’s petroleum history and reveal a consistency in the state’s approach despite changes in political leadership. I also examine more imperceptible occurrences and demonstrate how changes to Ireland’s model of hydrocarbon management reflect prevailing economic ideologies such as Keynesianism and neoliberalism, thus connecting the state’s approach with shifts in political economy, nationally and internationally.

4

Introduction

Contextualising Ireland globally is the aim of the third part which opens with an overview of global trends in state resource management. Offering a succinct history of the growth of the petroleum industry, chapter six outlines the emergence of four main approaches to state resource management globally (concessions, production sharing, service contracts (SCs) and licensing systems). An examination of those models reveals the interrelatedness of approaches taken by states and shifts in political economy globally. One can see how different models are influenced by internal and external forces, for example, ideological and actual struggles over control and ownership of resources which are appraised in relation to the Organisation of the Petroleum Exporting Countries (OPEC) and the ‘neoliberal counter-wave’ (Ryggvik, 2010) that occurred in the 1980s. Dominant approaches to state resource management are considered in an applied way in chapter seven through attention to their outcomes in the form of ‘rent’ or ‘government take’. Utilising secondary data from international studies of ‘government take’, I emphasise how Ireland’s model of resource management is unique both in terms of it being a licensing system (used in fewer than half the countries with hydrocarbon production worldwide) and its low rates of government take (one of the lowest in the world). This chapter underscores the distinctiveness of the Irish model, raising further questions around why Ireland’s approach is quite exceptional. Tracing the evolution of the Irish model within a global context offers new knowledge on the Irish approach. Nevertheless, more comprehensive understandings can be gained through contrasting Ireland’s model with that of another country. Opening with a presentation of arguments against a comparison of the Norwegian and Irish frameworks for hydrocarbon management, chapter eight uncovers some of the discourses underpinning industry, political and state bureaucracy perspectives on the two models. It also reveals weaknesses in these standpoints and stresses the value of comparing both countries’ approaches as a mechanism for developing a critique of the Irish model. The resultant appraisal begins with an overview of socio-economic and historical similarities between the two countries, progressing to a summation of the political, social, economic and ideological influences that moulded the Norwegian model. This analytical structure is then applied to the Irish context and I articulate specific factors contributing to the Irish model of hydrocarbon management. In the book’s final part, I discuss how the phenomenon of Irish state hydrocarbon management has macro, meso and micro level impacts, is shaped instantaneously by global, national and local forces, and bears all the hallmarks and contradictions of a state functioning within neoliberal capitalism. I  also outline the real-life consequences of the state’s model of hydrocarbon management as manifested in the Corrib gas conflict. Chapter eleven brings the book to a close by arguing that Ireland’s approach to the management of its gas and oil is fundamentally flawed and, unless modified, will continue to

Introduction

5

cause difficulties in relation to the Corrib conflict and other areas which face potential hydrocarbon exploitation. Although Irish state hydrocarbon management can be interpreted as an outcome of a state functioning within neoliberal capitalism, the state’s approach has been moulded in particular ways by specific factors. Therefore, tangible elements of the state’s approach can be altered in order to eradicate weaknesses and maximise advantages for citizens of Ireland as owners of the gas and oil. Given the real-life implications of the state’s approach and the critical theories underpinning this analysis of the phenomenon, this book concludes with a series of empirically grounded recommendations around how the state’s model can be transformed to ensure lasting benefits for Irish society.

Part I

The Corrib gas project

1

Politics and pipelines: emergence of the Corrib gas conflict

It’s been a horribly difficult, desperate … damaging sort of project for the whole community up there. For people from both sides and there’s all sorts of perspectives up there, all sorts of different views. (Thomas,1 former Minister for Communications, Energy and Natural Resources) Ah sure Corrib is a disaster … for everybody … the people involved on all sides. It’s no good for anybody the way it’s been dealt with badly. (Andrew, supports the Corrib gas project)

The one thing on which supporters and opponents of the Corrib gas project can agree is that the project has become a debacle that has embroiled a rural community in North West Mayo for over a decade. Corrib gas was discovered in 1996 and its developers and some politicians originally presented it as a panacea for the socio-economic woes of the region. Niamh, a retired school principal, recalled how the project was ‘presented first as the great good news story of the decade and it was going to change everything in the area. It was going to reverse emigration, it was going to provide all sorts of jobs and quality of life, you know there’d be loads of stuff happening’. However, the reality of the project has had an opposite effect and Corrib gas has become synonymous with social upheaval, remaining unproduced nearly twenty years after discovery. Early days of the project On 15 November 2001 a petroleum lease permitting the production of Corrib gas was granted to a consortium of companies comprising Enterprise Energy Ireland (EEI) (45 per cent share), Statoil (36. 5 per cent) and Marathon (18.5 per cent). As the first production lease granted in thirty years, Minister Frank Fahey described the petroleum lease for Corrib as ‘a milestone in Irish offshore exploration and production’ (Department of the Marine and Natural Resources (DMNR), 2001). Corrib was the most significant hydrocarbon discovery off the coast of Ireland

10

The Corrib gas project

since the 1970s, and Enterprise2 and its partners were eager to bring the gas field into production. The field was estimated to contain 870 billion cubic feet of recoverable (sales) gas (Dancer et al. in Wood Mackenzie, 2014, p.21). The Corrib gas field is located approximately 90 km off the Mayo Coast and the consortium planned to develop Corrib as a subsea tie-back which meant ‘about seven wells will be completed and tied back to a central gathering manifold which will connect to the main offshore pipeline’ (EEI, 2001). With subsea technology development of the field would be ‘entirely underwater with no above water structures’ (McGrath, 2001). The developers planned to use an offshore pipeline to transport the unprocessed gas from the seabed to Broadhaven Bay, where it would make landfall at Glengad Beach (the foot of Dooncarton Mountain). Once the raw, odourless gas was brought ashore, the consortium intended piping it from Glengad, through Sruwaddacon Estuary to the inhabited area of Rossport, where the pipeline would again make landfall. From Rossport, the pipeline would run parallel to Sruwaddacon Estuary until it reached an onshore terminal in Ballinaboy3 where the gas would be processed, odourised and transported to customers through the Bord Gáis (state body responsibility for gas distribution) network of pipelines. The onshore pipeline route and processing

Broad Haven

Ballycastle Rossport Sruwaddacon Bay Glenamoy Ballinaboy Site

Belmullet

14

R3

Barnatra

Carrowmore Lake Bangor Erris

N59

Figure 1  Map of the area

Politics and pipelines

11

terminal were central components of the companies’ plan of development (POD) submitted to the Petroleum Affairs Division (PAD, state department responsible for hydrocarbon management) as the basis for the development, production and processing of Corrib gas. While the companies worked directly with the PAD to progress their plans for Corrib gas, people in the area began to hear about the project in an ad-hoc way. Ted, a retired teacher later jailed as one of the ‘Rossport Five’, said the first notice of Corrib gas he encountered was an article announcing the gas find by Mike Cunningham (former Statoil director) in the Western People around 1998. However, it was not until April 2000 that Ted gave more consideration to the project, prompted by an informal plea from a ‘man in the Department of Fisheries’ who contacted and warned him ‘there was a study about to be done, an environmental study about to be done and unless someone from the area mentioned the in-shore fisheries that there would be no study done on the in-shore fisheries’ (Ted, former school teacher). Ted sent a note to some local fishermen advising them about the forthcoming environmental impact study and for the time being took no further action. A fisherman for over thirty-five years, Joe became concerned about the project after reading the Environmental Impact Statement (EIS)  – an outcome of the offshore environmental study. ‘I went through a bit of it and it was very complicated so I sent it over to a marine biologist in the University of Southampton. This biologist produced an independent report on the EIS which stated there was a cocktail of chemical from the outfall pipe going into Broadhaven Bay’ (Joe). This was of huge concern for Joe: ‘I’ve two sons involved in the fishing and I wanted that tradition to be carried on and they wanted to do it anyway, when I saw they were interested in fishing I wanted to protect it for them.’ Spurred on by these concerns and his desire to protect this ‘way of life’ for his family and others, Joe began asking questions about the project and in early 2000 co-founded the Erris Inshore Fisherman’s Association (EIFA) which later opposed the development in the planning process. A school principal in a primary school, Niamh had some prior awareness of issues surrounding gas and oil due to conversations in the late 1990s with a former oil industry worker who had alerted her to ‘how awful the giveaway terms were’. While Niamh knew there were limited benefits to the Irish state from its gas and oil, she hadn’t been aware of plans for the development of Corrib gas – ‘I had only heard about it through word of mouth … I certainly would have checked public notices and local news [papers] … and it wasn’t in that.’ The question of public consultation and information provision was one Niamh put to the developers during the first public meeting held in McGrath’s pub in the summer of 2000. Niamh described this event as a ‘public presentation’, saying it couldn’t be described as either an information meeting or a consultation meeting as ‘it was really just showing us pictures’. The absence of mechanisms for

12

The Corrib gas project

systematic consultation with the community, in tandem with growing concerns around the potential environmental impacts of the project, served to create an atmosphere of mistrust which was compounded by the developer’s actions following this meeting. Lack of consultation Several local people articulated a sense of an outside entity being imposed upon this rural area and this sentiment appeared to grow as the project advanced. Ted (retired teacher) viewed the summer of 2000 as the start of the ‘invasion’. The ‘invasion’ included gas company personnel frequenting local pubs, ‘buying booze for people and coming on with their models [of the project infrastructure]’ (Ted). In Ted’s view, these workers ‘were putting on a display and their models and that, they were so completely out of place and they were so completely irrelevant to the area … the invasion has started but I found it so absolutely pathetic.’ When asked if the company’s effort to build consent by approaching people in the aforementioned informal ways could be considered consultation, Ted answered ‘no’. The topic of consultation (or lack of) is a factor identified by most interviewees as contributing to the emergence and escalation of the controversy over Corrib gas. According to Charles, a consultant who works with the PAD, Enterprise ‘definitely weren’t for talking to the locals about what was going on’. Worthy of note is how the state did not place any obligations on the companies to consult with those living in the area. Aidan, a civil servant, explained that before companies submit an application for planning permission there’s ‘an opportunity … to informally, or from a developer’s point of view, to voluntarily be influenced’. This ‘voluntary engagement’ is at the companies’ discretion and they are not expected to undertake thorough consultation with host communities. Jim (an educational psychologist living in the area) suggests Enterprise ‘came in rather naively’ with a view of ‘the local community here that being such a peripheral area it would be easy to sway the community to their way of thinking and that all that they had to do was dispense some largesse around the place’. Jim felt the company was ‘quite cute really’ because they tried to get the Church on their side in the early days of the project, ‘I remember the priests talking positively about it, this new discovery of gas  …  in a very positive way to their congregations … but … there wasn’t any sort of real consultation with the community.’ Given the influence of the Catholic Church within Irish society, the support of clergy for the project could prove important for securing wider acceptance of the development. Citing Nic Ghiolla Phádraig (1995), Share et al. (2007, p. 510) suggest ‘Irish Catholics continue to practice their religion and support their church’s political positions’ because of the Church’s power, namely in the form of ideological control and control of significant material, organisational and human resources. Jim, however, dismissed the idea of priests consciously, or

Politics and pipelines

13

unconsciously, trying to build consent for the project saying ‘there wasn’t anything malicious in what the priests were doing’. In Jim’s opinion, the priests ‘felt this was a real opportunity for Erris, an opportunity for employment, development and so forth … they welcomed it’. Nevertheless, ‘I don’t think the priests really asked the difficult questions at that stage and didn’t realise that there would be difficult questions to answer and that … some real consultation and analysis of the project had to take place before the community could give their assent or otherwise’ (Jim). Explaining why he supported the project, Fr Adam, a priest in the Kilmore-Erris parish in Mayo (west of the Corrib gas terminal and pipeline), said he thought it had ‘the potential to help social and economic development of this region’. However, this view was not shared by all the local clergy. While he and other priests ‘had an interest in the issue and learning about it’, Fr Donal, parish priest for the Kilcommon parish (where the pipeline and terminal would be located), had ‘environment concerns … issues about pollution … where I live at home was beside Broadhaven Bay and we always had a lot of dealings with our surroundings, our beaches, our inlets, our fishing’. Fr Donal later became an active figure in campaigns for the terminal and pipeline to be located elsewhere. Within the wider Erris region, some people became interested in the development because of the potential benefits it could bring, yet others were cautious about the project and the involvement of members of the Catholic Church. Ted (former teacher) suggests Enterprise was ‘meeting the important people, the bishop, the parish priest … and the people in the golf club. They thought that these were the people who had influence.’ Some interviewees regarded corporate engagement with local authority figures (including priests and business owners) as an effort to get the local elite onside, thereby helping to sway public opinion in favour of the project. Such a perspective is not unfounded as in Irish society a ‘middle layer of teachers, priests, or local dignitaries’ can help secure the loyalty of people below them to ensure that ‘society’s rules’ are embraced by a wider population (Allen, 2007, pp. 243–4). However, in this case attempts to get local leaders and clergy onside, as a mechanism for securing widespread support for the project, were not very successful and as people began to learn more about the project, local opposition began to build. Issues with the onshore terminal and pipeline The issues for the people were, I  suppose, safety first of all, the safety of the project, the safety of the pipeline, the safety of the terminal  …  and it is adjacent to Carrowmore Lake which is the source of all our water in Erris and certainly there have been scares already in the early days with mercury and so forth. And I  think the risk to our water supply is probably the biggest risk we have and certainly over the longer period … so safety was one issue, the other issue

14

The Corrib gas project was damage to the environment and I  think the third issue was what benefit would it be to either this community or to Ireland as a whole? (Jim, educational psychologist)

Issues surrounding safety, regulation, supervision, pollution, potential environmental devastation and questionable benefits from production of Corrib gas were some of the topics underpinning rising concerns and opposition to the project. The proximity of the gas pipeline and terminal to homes, schools and local businesses was also a cause of worry for local residents. Upon moving to Kilcommon parish in 2005, Fr Donal became aware of how close the pipeline would be to some homes (70 m in places) and he recalled people articulating ‘difficulties they would have in having to live beside a high pressure, raw gas pipeline’. At that stage the anticipated pressure in the onshore pipeline was up to 345 bar, over four times the pressure of gas in the national grid.4 Opposition to the project had a more visceral basis for some people. When talking about the first thing which concerned her about the project, Niamh replied ‘at the beginning, the very beginning, through the middle and at the end, is place. It’s the tenet of place.’ This concern for, and connection to, her physical environment influenced Niamh’s response to the project. While Niamh doesn’t live beside Sruwaddacon Estuary5 occasionally she’d drive past it and ‘it was sufficient for me to know that place was there, I absolutely loved it, always loved it … [a]‌place that is sustaining in itself ’. For Niamh the location of the terminal and pipeline was problematic on environmental grounds and she was unhappy with the absence of consideration of residents’ needs. The diverse range of issues articulated by people living in the vicinity of the proposed terminal and pipeline also included threats to a natural environment wholly entwined with a community’s sense of self and place. As the chairman of the first oral hearings noted, ‘the imposition of the development would significantly alter the character of the area … it would form a dominant intrusion on the experiences, way of life, and pattern of activities of the local community’ (Moore, 2002, p. 155). The growing opposition on these grounds was exacerbated by various ‘mistakes’. ‘Mistakes’ Fr Adam, a project supporter, suggested Enterprise made some mistakes and ‘sought to rush the project ahead without proper consultation with the community’. Recounting a conversation with Enterprise’s Chief Executive Officer (CEO) in 2001, Fr Adam said he’d emphasised a need to undertake more consultation with members of the community, provoking the response ‘we haven’t all that much time, the gas has to flow by 2003’. When interviewed by this author, that former CEO did not articulate issues around consultation and pressures to bring the project into production as

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mistakes. Rather, in his view, Enterprise made two mistakes. The first was hiring an English company to conduct an Environmental Impact Assessment (EIA), which was a ‘really, really bad idea, that was really stupid’. Enterprise’s second ‘mistake’ concerned the company’s refusal to honour an informal agreement reached in the 1970s whereby oil companies would hire a certain number of Irish rig-workers when operating offshore Ireland. Peter suggested that when Enterprise refused to hire Irish workers (and were under no obligation to do so) the Services, Industrial, Professional Trade Union (SIPTU) consequently ‘took on this whole “Enterprise are anti-Irish view” … that was a mistake and that created a bad atmosphere in the press … about 1998’. Peter’s comments illustrate how some stakeholders viewed decisions like the two previously outlined (choice of company, conclusion of arrangement with SIPTU) as factors leading to the dispute, as opposed to fundamental issues surrounding location and absence of consultation with residents. Nonetheless, appraising seemingly micro level occurrences can provide insights into wider power dynamics and struggles, for example, those between the oil industry and trade unions globally. As Nore and Turner (1980a) point out, confrontations between capital and oil workers are the most direct form of class struggle within the oil industry and, in the case of the Corrib gas project, Enterprise’s failure to preserve the acquiescence of a large trade union created difficulties as the project progressed. Indeed, the description by some commentators of ‘mistakes’ as being the primary cause of the conflict, serves to minimise the dispute to a micro level of individual decisions, detracting attention from meso and macro level forces which, as we’ll discuss later, are ultimately responsible. From Peter’s perspective, there were no questions of mistakes in relation to the location of the terminal and pipeline, which were fixed from the early days: ‘nobody puts terminals offshore … the terminal is in a perfect location … it was used as a peat … research station all through the ’40s and ’50s … it’s not a pristine environment’. Peter conceded the location of the infrastructure might be problematic for those living nearby, adding ‘it’s the same as saying if someone decided to build a factory near your house you wouldn’t be happy with it, of course not. Nobody is ever happy about having industrial development near them but industry has to go somewhere.’ Enterprise maintained its stance on the terminal, supported by the state via the PAD as the promoter and regulator of hydrocarbon activities. When asked if the PAD had given consideration to alternative locations such as an offshore terminal, Charles, a consultant who reviewed the plan of development for Corrib, replied consideration had been given ‘but there wasn’t a good reason to change it  …  because the plan was perfectly ok’. Aidan (a civil servant in the PAD), explained ‘the model of an onshore terminal was clearly the model that was going to be advanced on the basis of it being seen as the safest model’ (for the oil companies as offshore processing is riskier). In addition to revealing a rigid stance on

16

The Corrib gas project

the location, these interviewees demonstrated a belief that as the technological and engineering elements of the POD were satisfactory the project should go ahead, with little consideration given to the deeply felt concerns of those who lived in the vicinity of the terminal and pipeline. With its decision made that Ballinaboy would be the site of the processing terminal, Enterprise, and later Shell, appeared unswerving in its position, creating additional tensions in the community. Planning permission for the gas terminal On 30 April 2001, Enterprise submitted its application to Mayo County Council (MCC) for planning permission to build the gas terminal (six months before being granted a petroleum lease to produce Corrib gas). Even at that early juncture, the issue of project-splitting began to arise. Project-splitting is a process whereby constituent parts of an integrated project are examined separately, rather than the project and its cumulative impacts inspected as a whole. Concerned with assessing the effects of public and private projects on the environment, EU Directive 2014/52/EU (22) states: ‘in order to ensure a high level of protection of the environment and human health, screening procedures and environmental impact assessments should take account of the impact of the whole project in question, including, where relevant, its subsurface and underground, during the construction, operational and, where relevant, demolition phases’. This was not the case with Corrib as the offshore infrastructure, offshore section of the gas pipeline, onshore section of the pipeline and the onshore gas processing terminal were examined separately, and by different bodies in some cases. This meant the cumulative impacts of the entire project were not scrutinised. In 2001 Enterprise sought planning permission for the gas terminal, separate from the onshore section of the gas pipeline even though the pipeline was a key part of the project infrastructure and necessary to transport the gas to the terminal. Permission for the pipeline’s offshore section and other necessary authorisations6 were later sought from different government departments. Local opposition to the project was becoming more vociferous and several objections to planning permission for the terminal were submitted to MCC. Nevertheless, MCC’s Senior Executive Planner granted permission for the terminal, stating the development would not be ‘contrary to the proper planning and development of the area’ if the proper mitigation measures and conditions attached to planning permission were followed (Gannon, 2001, p.  3). Gannon emphasised the ‘strategic importance of the development’ and local and national government policies to justify her decision on the development. The Planner did, however, acknowledge ‘the main impact of the proposed development is the introduction of a large industrial complex into a rural landscape’ and the minimisation of impacts on the four designated conservation areas in the vicinity of

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the site was dependent on the successful implementation of pollution control and run-off control measures (Gannon, 2001). She also referred to potential issues surrounding the proposed plan to remove large quantities of peat (over 600,000 cubic metres) and fill during construction. MCC granted permission for the gas terminal subject to sixty-six conditions but residents immediately appealed this decision to the national planning authority An Bord Pleanála (ABP). A  two-week oral hearing ensued, chaired by ABP Senior Planning Inspector Kevin Moore. The first oral hearing The first oral hearing on the gas terminal was held from 18 February to 1 March 2002, featuring submissions from Enterprise, local residents and other observers. Following the hearing, ABP Senior Planning Inspector Kevin Moore produced a comprehensive report on the event and detailed the main issues inherent to the proposed gas terminal. A key issue was the ‘development concept’ for producing Corrib gas and the socio-economic, ecological, cultural, health and safety, visual, public safety, tourism and traffic impacts of the project. Project-splitting was another fundamental problem for Moore and he referred to ABP’s limitations. ABP was restricted to assessing the proposal for the terminal and not other components such as the method of production (which impacted on the location of processing facilities), or the offshore and onshore sections of the gas pipeline. Moore also discussed the fragmentation of responsibilities between government departments and Acts, particularly the Environmental Protection Agency Act (1992) which precluded ‘the Board from considering appeals relating to the risk of environmental pollution from an activity which requires an Integrated Pollution Control Licence’ (Moore, 2002, pp. 167–8). This meant ABP could not consider particular elements of environmental risks as this was the responsibility of the Environmental Protection Agency (EPA) which allocates Integrated Pollution Control Licences. In a scathing report, Moore challenged the very basis upon which MCC granted planning permission and stated there was no immediate need for the exploitation of Corrib gas as Ireland’s energy needs were met by production from Kinsale and supplies from the UK (2002, pp.  57–9). He questioned anticipated gains from the project, arguing it would bring limited benefits to the ‘disadvantaged region’ whilst Corrib gas would ‘be wholly used outside’ the area, providing security of supply for the Cork-Dublin gas distribution system (ibid.). Meanwhile, the state, through Bord Gáis, would bear the cost of laying the pipeline connecting Corrib gas from the terminal to the main distribution network in Galway. Moore was particularly critical of the ‘development concept’ at the core of the project (Enterprise’s choice of subsea technology to produce the gas offshore7)

18

The Corrib gas project

as it determined how far the unprocessed gas could be transported (the further the distance from wellhead to the processing site, the higher the risks), which in turn influenced the proximity of an onshore terminal to the wellhead. Moore advocated thorough investigation of other options, favouring gas processing on a shallow water platform with the gas piped to an onshore reception terminal. As processed gas can be transported longer distances, locations other than Ballinaboy could be chosen for the reception terminal with a reception terminal posing lower health, safety and environmental risks than an onshore processing terminal. Arguing the proposed development ‘defies any rational understanding of the term “sustainability” ’ (2002, p. 167), Moore recommended that planning permission for the terminal be refused. Moore stressed the development of the terminal at that time and in that form was not of ‘national strategic importance’, adding ‘there is no merit in permitting this large industrial development on the wrong site’. Furthermore, ‘it is critically important to apply the best development concept and to seek out a terminal site that minimised such adverse environmental impacts that would arise with the current development proposal’ (Moore, 2002, pp. 167–8). Grounds for refusal Concluding ‘the current proposed site is unequivocally an incorrect choice’ and ‘the proposed development would be contrary to the proper planning and development of the area’, Moore (ibid.) recommended the refusal of planning permission on six grounds, which included: the utilisation of benefits from the gas would primarily occur outside Co. Mayo; the onshore siting of the terminal did not constitute the optimum solution or orderly development; and the development would be situated in an ‘unspoilt, rural setting of scenic and ecological value’ which lacked public services and essential facilities. Moore was concerned about the ‘unacceptable risk to members of the public’ posed by the proximity of the development close to residential properties and areas of public use. He also articulated issues around the site development works, particularly the excavation and movement of peat, which meant the proposed development would ‘endanger the health and safety of the general public in the vicinity of the site, seriously injure the amenities of the property in the vicinity, and adversely affect the use of the regional road’. The sixth ground on which Moore recommended refusal of planning permission related to siting of the terminal (a ‘highly obtrusive development’) close to Carrowmore Lake (designated as an Area of Special Scenic Importance) which would ‘detract from the rural character and scenic amenities of this area of outstanding natural beauty and would interfere with protected views’ (Moore, 2002, pp. 167–8). In Moore’s view, the development would seriously injure the

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amenities of the area and would conflict with MCC’s policies and the Mayo County Development Plan (ibid.). Following Moore’s report (30 May 2002), ABP deliberated the planning permission appeal and sought further information from Enterprise in relation to alternatives, peat stability, visual impact and health and safety. The Board requested that the developer pay attention to possibilities for a shallow water offshore terminal and an onshore receiving terminal elsewhere in Co. Mayo, suggesting Killala/ Ballina or Westport/Castlebar (urban areas with existing industrialised sites). Re-opening of the oral hearing The Board’s request for further information led to the re-opening of the oral hearing from 25 November to 10 December 2002, resulting in a twenty-two-day hearing – one of the longest in the Board’s history. In response to ABP’s requirement for a comparison of alternatives, a letter from Enterprise’s new Managing Director Andy Pyle8 argued the Corrib field would only be viable if developed as a subsea tie-back. Pyle claimed alternatives were not economically viable and suggested capital costs for other options could cost an additional €360  million and a 40 per cent increase in annual operating costs (Moore, 2003, pp. 197–204). A report by Enterprise discussed the possibility of offshore processing, deducing such a development concept ‘imposes greater risk levels on the workforce, has a significantly greater environmental impact, requires €361  million additional capital, and incurs higher operating, decommissioning and abandonment costs’ (ibid.). Enterprise’s submission provoked a highly critical response from Moore who argued the company did not fully investigate alternatives, as requested. Moore (2003) stated the company only compared two types of remote inland terminals (a processing and reception terminal) both of which would be situated at Ballinaboy and not other locations. In its limited study, the company considered cost differentials between the original plan (unprocessed gas transported 80 km from the wellhead to landfall with an 8 km distance to the onshore processing terminal) versus the unprocessed gas being piped to a shallow water platform for processing (with this treated gas then piped to a reception facility at Ballinaboy for connection to the national gas grid). The company did not investigate other locations for either a processing or reception terminal nor did it properly respond to the Board’s request for further information on alternatives. ‘The applicant’s response completely avoided this comparison … the context of the shallow water option was clearly avoided … the dismissive response on the non-viability of the alternative [without in-depth study] was issued as the reason for a total avoidance of the Board’s actual request’ (Moore, 2003, p. 208). In a similar vein to his 2002 report, Moore’s conclusions and recommendations from the re-opened oral hearing took a strong position on the proposed development and he reiterated his difficulties with the company’s lack of sufficient

20

The Corrib gas project

attention to alternative locations and development concepts. He highlighted how the proposed subsea tie-back would be the second longest in the world (92 km) and focused on the applicant’s own evidence which illustrated that in projects similar to Corrib, the pipelines were all tied back to offshore processing platforms, not land-based terminals like the one proposed by Enterprise (Shell). In doing so, Moore emphasised the uniqueness of the proposal and stressed how ‘the developer has not proved that the alternative option [shallow water processing platform with gas piped to an alternative reception location] is unviable’ (p. 350). Furthermore, ‘the applicant’s own gas field to landfall studies and the earlier option to provide a dedicated pipeline to Dublin at the developer’s expense would indicate the available reserves in the Corrib field allow for serious consideration of alternatives beyond that which is proposed’ (Moore, 2003, p. 350). As Moore pointed out, Enterprise had initially considered building a pipeline from Mayo to Dublin to add Corrib gas to the national gas distribution ring as there were limited options for connection to the network elsewhere. Concluding his report on the re-opened hearing on the terminal Moore (2003, p. 354, emphases added) argued: From a strategic planning perspective, this is the wrong site; from the perspective of government policy which seeks to foster balanced regional development, this is the wrong site; from the perspective of minimising environmental impact, this is the wrong site; and consequently from the perspective of sustainable development, this is the wrong site.

Arguing the development would result in ‘an unacceptable risk environment being imposed on the local community’, Moore stated there would be ‘serious disbenefits accruing to the community of north-west Mayo by the siting of the development at Ballinaboy’ and he recommended refusal of planning permission for a second time (ibid.). Informed by Moore’s reports, ABP refused planning permission for the gas terminal on the grounds of problems posed by peat excavation, movement and storage onsite (2003a). ABP ruled that the proposed peat repositories necessary to store 650,000 sq. cubic metres of peat removed during terminal construction had a high risk of failure and would constitute an unacceptable risk to the health and safety of the local community and the general public; would constitute an unacceptable risk of pollution of salmonid waters in Glenamoy River, Sruwaddacon Bay and Broadhaven Bay; and would seriously injure the amenities of property in the vicinity (ABP, 2003b). However, ABP did not accept Moore’s grounds for refusal on other grounds, namely visual impact, the development concept not being the optimum solution, and health and safety issues. In its concluding note, ABP noted that alternatives were available for the development of the Corrib gas field.

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While local people celebrated the refusal of planning permission for the terminal as a victory (Siggins, 2010a), the company did not let the decision get in the way of its plans for the Corrib gas field. Plans progress, regardless of planning permission refusal On the surface, the Irish state appeared as a distant entity bearing no responsibility for increasing tensions over the project even though the state was implicated by its functions as resource-owner and regulator. It would later become clear, however, that the Irish state was taking an active role in facilitating the development of the project whilst those living in the affected area were challenging planning permission for the gas terminal. In 2000, amendments were made to the Gas Act to allow construction of pipelines by private corporations – previously only the state body Bord Gáis was permitted to construct gas pipelines. The introduction of a number of Statutory Instruments (SIs) also aided the progress of the Corrib gas project:  SI 100 of 2000 saw Taoiseach (Prime Minister) Bertie Ahern transfer regulatory power and duties related to ‘upstream pipeline networks’ from the Minister for Public Enterprise (who had responsibility for Bord Gáis) to the Minister for the Marine and Natural Resources, Frank Fahey. This separation in responsibility for gas pipelines meant the DMNR would manage upstream (exploration and production) pipelines), while Bord Gáis maintained oversight for downstream pipelines. SI 100 enabled Fahey’s Department to approve construction of the Corrib pipeline by the gas consortium and, in 2001, Fahey introduced SI 517 to allow him to grant Compulsory Acquisition Orders (CAOs) to permit private companies to occupy land and construct a pipeline even if the landowners objected. With these actions, the state sought to fix holes in its deficient legislative framework to facilitate the advancement of Corrib, thereby enabling pipeline construction on private land owned by people opposed to the project. 2001 was a busy year for the consortium who bought 400 acres of Coillte (state forestry service) owned land in Ballinaboy as a site for the gas processing terminal, without having planning permission for the construction or operation of the gas terminal on that site. Furthermore, Enterprise, acting as operator of behalf of the consortium, did not yet hold a petroleum lease to produce Corrib gas. Undeterred by significant opposition to the project and gaps in the permissions and planning processes, in April 2002 the Marine Licence Vetting Committee (MLVC) submitted a report to the Minister for Marine and Natural Resources endorsing the method of development (onshore pipeline and processing terminal) and Enterprise’s proposal for the terminal site (Moore, 2003, p. 197). Moore described the MLVC conclusions as appearing ‘to be beyond the realms of a rational approach to the planning of this major infrastructural development and exhibits

22

The Corrib gas project

nothing short of prematurity … when the decision of the Board on the critical issue of where to locate a terminal has not been made’ (2003, p. 212). Although the development concept for Corrib gas and the location of the terminal were being contested in the formal planning process (with ABP later refusing planning permission for the terminal) other arms of the state were sanctioning components of the project. Project-splitting and fragmented permissions processes By 2004 approval for various elements of the Corrib gas project had been granted, despite the absence of planning permission for the gas terminal. Consents included: the petroleum lease to produce Corrib gas (Petroleum and Other Minerals Development Act 1960; granted November 2001); construction of subsea structures (Continental Shelf Act, 1968; 2001); export pipeline consent (Section 8 of the Gas Act, 1976, as amended; 28 February 2002); and consent for the construction of a pipeline (section 40 of the Gas Act, 1976, as amended; 15 April 2002) (Johnston, 2004, p. 60). Although the consortium did not have planning permission for the terminal, Frank Fahey granted approval for the construction of the pipeline to transport gas to the contested site, exempt from planning permission (Siggins, 2010d), which illustrates the project-splitting inherent to the development. Approval for the plan of development for the overall Corrib gas project (Petroleum and Other Minerals Development Act 1960) was granted on 15 April 2002 and, a month later, a Foreshore Licence for the pipeline, umbilical and outfall pipe (for thirty years) was granted under Section 3 of the Foreshore Act, 1933; 17 May 2002 (Johnson, 2004, p. 60). ‘It’s pretty clear that there was a need for an awful lot more joined up thinking about the permits and consents … this was setting a precedent because there was no legislation in place to deal with the distribution of gas  …  there was an exploration regime obviously, but even that … there was an awful lot of woolly thinking’ (Seamus, a Shell employee). Robert, a representative from the Irish Offshore Operators Association (IOOA), also shared concerns about the permissions processes, describing it as ‘extremely complex’, with ‘a lot of different agencies involved, some of which impose conditions which are contrary to those imposed by other agencies … you find yourself going around in a circle from one agency to another then … back, not where you started, but somewhere quite different’. The granting of the petroleum lease (November 2001) prior to approval for the POD (April 2002) is problematic as the award of a petroleum lease transfers control and ownership of produced resources to the lease holders (the Corrib gas consortium) and this agreement was made before the state had granted approval for how these resources would be produced and processed. Against a backdrop of challenges to the proposed location for gas processing, which theoretically could prohibit the Corrib gas development, the state signed over rights to its gas to

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private companies. Furthermore, before the blueprint for all production activities (the plan of development) was approved, consent had already been given for the construction of subsea structures and an export pipeline (consent was later granted for the various pipeline sections and infrastructure). The PAD, as the specific branch responsible for state hydrocarbon management, prematurely committed the state to agreements with oil companies without thorough consideration of how the resources would be developed or the impacts on communities and society. Project-splitting remained a contentious subject for all parties and is a topic which would repeatedly arise. Crucially, as PAD staff considered the POD to be adequate, it is questionable whether other permissions allocated by different departments could have resulted in fundamental changes to Corrib or its constituent parts. In retrospect, it’s difficult not to view the project as a fait accompli, particularly when one considers suggestions of political intervention in the dispute. Political intervention While refusal for planning permission for the gas terminal might have halted some developers, Shell continued with its plans for Corrib, supported by some important politicians and staff within the PAD. A sense of unease therefore surrounded connections between the consortium and the state, with accusations of political intervention in the Corrib gas project rife. In his report for human rights organisation Frontline, barrister Brian Barrington highlighted Shell’s Committee of Managing Directors’ concern about delays with the Corrib gas project in 2002, drawing attention to their recorded queries around whether they had ‘sufficiently well placed contacts with the Irish government and regulators’ (2010, pp. 15–16). ‘It is disconcerting that the recorded reaction of the Committee of Directors was to query whether they had appropriate contacts with the Irish regulatory authorities, rather than appropriate compliance with Irish regulatory requirements’ (ibid.). In 2003, representatives from Shell met with politicians including then Taoiseach Bertie Ahern (Centre for Public Inquiry (CPI), 2005). According to Siggins (2010a), four days after Shell met with the Taoiseach, an IOOA delegation, including senior executives from Shell, Statoil and Marathon, met with members of ABP. Paul (a film-maker) maintained Shell saw the refusal of planning permission as a ‘failure of project management … they didn’t see this as a flaw in their project, it was a flaw in how it was perceived’. Part of the process of rectifying this problem was having better contact with the regulators and the political establishment, the ‘meetings with Bertie Ahern and securing … the U-turn in planning for the refinery’ (Paul). Although ABP chairman John O’Conner stated it was ‘wrong’ to infer that the meeting resulted in special treatment for the Corrib consortium (Siggins, 2010a, p. 175), the subject has attracted much concern and is one that arose unprompted

24

The Corrib gas project

in several interviews. Stephen (a journalist) described the meetings as ‘sinister’, suggesting that when planning permission was refused, Shell demanded a meeting with the Taoiseach and the later meeting with ABP with the purpose of discussing ‘how to get around the obstacle of this inspector’s refusal’ (Stephen). From Stephen’s perspective, the intervention of the Taoiseach was an effort to achieve a particular outcome (planning permission) and is problematic: ‘it’s not proper or appropriate that any interest in a planning application would be meeting with the Board while an appeal is under way. It’s completely improper … if that’s not an attempt to influence a decision, nothing is.’ Ken, a Fianna Fáil Government Minister at the time of these events, described the meetings between ABP and Shell as ‘a very serious issue’, yet surmised that his colleagues ‘Bertie Ahern and Martin Cullen were told that under no circumstances could they go and interfere with ABP.’ Ken thought that when the companies asked if they could meet with ABP, they were told ‘ok … but whatever happens between you and Bord Pleanála is your business’. Ken suggested those politicians took a facilitative approach by organising the meeting, without directly interfering in ABP’s decision. Ken, however, did not rule out improper behaviour and in his view, if there is: any allegation made in all of this … you follow it up, unless it runs into the sand or is substantiated … if it is substantiated, fine then a serious thing will follow further … or if it runs into the sand … [it’s] dropped … [although] there’s reasonable explanations that people don’t see it. I always believe those cases, trying to follow it until you prove to the person that there’s no substance. Or if there is substance you follow it up and then take action.

O’Donnell (2011, p. 73) recognised any suggestion of ‘governmental corruption and state collusion with Shell’ amounts to a serious allegation, yet cannot be easily dismissed. To date, issues of political intervention in the Corrib gas project have not been the subject of a detailed, independent investigation. Second application for planning permission In 2004, Shell reapplied for planning permission for the gas terminal in the same site in Ballinaboy, proposing the storage of 450,000 sq. metres of excavated peat on a separate site at Srahmore, 11 km from the terminal. MCC granted planning permission on 30 April 2004, subject to seventy conditions. In response, local people appealed the decision to ABP. Although an oral hearing was requested, ABP decided to not hold one, explaining its decision was premised on ‘planning history in relation to this proposed gas terminal and to the amount of background information available arising from the two previous extensive oral

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hearings already held and the information provided in the planning application and the EIS’ (Johnson, 2004, p. 4). Senior Planning Inspector Moore would not adjudicate the new appeal; rather a Deputy Planning Officer, Inspector Johnson, was tasked with the duty and he recommended the granting of planning permission. Whilst recognising the ‘significant disamenity, disruption and inconvenience’ to residents, Johnson concluded these impacts would be short-term and outweighed by the ‘importance of the development and the real and potential benefits which it could generate’ (2004, p. 75). Shell’s new application for planning permission for the gas terminal was therefore upheld. Worthy of note is how Johnson’s conclusions bore little resemblance to those reached by Moore in 2003. Moore, it should be repeated, had serious concerns about the location being completely unsuitable on several grounds, including the lack of attention to alternatives; peat; visual impacts; and health and safety. It is difficult to connect Moore and Johnson’s reports to the same project particularly in terms of differing perspectives on the strategic importance, or otherwise, of the project, and the benefits and ‘disamenity’ to the community. In addition, Moore’s fears about project-splitting were being realised. Moore had argued ABP should not be constrained by any decisions which may have been made by other agencies as to do otherwise would be to present the terminal development as a fait accompli (Moore, 2002, p. 167). If the development was already considered a fait accompli, it would mean the interests of proper planning and sustainable development had been completely stymied and would ignore the ‘wholly inappropriate choice of site for this large industrial complex’ (ibid.). Moore also stated ‘the deliberations by other parties on elements of the Corrib gas field development, inclusive of the Corrib plan of development, should not undermine decision-making in the planning process relating to this gas processing terminal’ (Moore, 2003, p. 350). However, it seems deliberations by other parties did influence ABP’s later decision-making. Emphasising the support of different Ministers for the Corrib gas project, Johnson claimed it was clear from Ministers’ statements that government policy was to support the Corrib gas field and ‘the Board is obliged to have regard to government policy, although it is not rigidly constrained by it’ (2004, pp. 28–34). Considering Moore’s articulated concerns on the issues of project-splitting, amidst the lobbying of politicians and ABP by oil companies, the impartiality of the new appeal and consequent decision-making is questionable. Also concerning is ABP’s marked change of position as reflected in the change of inspectors, the new inspector’s report and the decision to grant planning permission. With permission for the terminal now granted, Shell and its partners continued with their plans until 2005 when events began to take a turn for the worse.

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The Corrib gas project

Notes 1 Thomas is a pseudonym for one of thirty research participants. All participants are referred to by a pseudonym in an effort to maintain confidentiality, as agreed during data collection. 2 Enterprise was the operator for the Corrib project and it held responsibility for the day-today running of the project while its partners functioned as investors, rather than active participants. 3 Also known as Bellanaboy. 4 A bar is a unit of pressure and 1 bar equates to approximately 14.7 pound force per square inch (Society of Petroleum Engineers, www.spe.org). As Allen points out, the pressure of an average car tyre is about two bar while the national gas grid that connects Cork to Dublin can run about eighty bar (2007, p. xiv). 5 Sruwaddacon is part of Broadhaven Bay which is designated as a Special Protection Area (SPA) under EU Directive 2009/147/EC. 6 Other necessary authorisations include a Foreshore Licence and an Integrated Pollution Control Licence. 7 This technology involved the unprocessed gas being transported from the subsea infrastructure over 80 km in a pipeline tied back to an onshore gas processing terminal. 8 Enterprise had been taken over by Shell by the time of the re-opened oral hearing.

2

Resistance grows

Opposition to the Corrib gas project intensified in mid 2005 when Shell was granted a High Court injunction against five local men1 in an effort to prevent those residents from obstructing construction work on the onshore gas pipeline. As a result of CAOs, Shell was permitted to lay part of the onshore gas pipeline on the men’s land, without their permission, yet Willie Corduff, Phillip McGrath, Micheál Ó Seighin, Vincent McGrath and Brendan Philbin (the Rossport Five) would not acquiesce. In refusing to entertain the consortium’s plan to lay the pipeline through their land in the inhabited area of Rossport, the residents could jeopardise the project, hence Shell’s application to the High Court for an injunction against the five named residents. While Shell’s injunction was sought with the intention of advancing the project, it produced the unintended outcome of strengthening opposition to the development. Resistance to the gas project initially comprised individuals and groupings such as those making collective submissions in the oral hearings (Ballinaboy/ Leenamore Concerned Citizens Group and Friends of the Irish Environment), becoming more formalised in 2005 with the establishment of ‘Shell to Sea’ and Rossport Solidarity Camp. ‘Shell to Sea’ was adopted as the name for the campaign in the community which explicitly sought the location of the gas processing terminal offshore. Niamh, a member of Shell to Sea, said it was reasonable to lobby for the gas to be processed offshore, after all ‘we knew that Kinsale was processed offshore and came ashore odourised and de-pressurised’. The Kinsale gas field off Co. Cork was the first commercial production of hydrocarbons in Ireland and the gas is processed offshore then piped to a receiving terminal in Inch, Co. Cork for connection to the national gas pipeline. Opposition to the Corrib gas project grew from a ‘loose network’ primarily based within the local community to national and international levels (Garavan, 2007, p. 857) as Shell to Sea groups were formed in different towns, cities and indeed countries (for example, Shell to Sea groups in London and Germany). Growing support for those resisting the project was evident in the formation of Rossport Solidarity Camp on the 2005 June Bank Holiday weekend as activists

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The Corrib gas project

from around the country came to express solidarity with residents taking a stand against the location of the Corrib gas project. Vincent McGrath, one of the Rossport Five, emphasised the value of ‘different people’ joining protests ‘at different stages of the campaign and by slowing it down the project the flaws were exposed’ (McGrath and McGrath, 2006, p. 179). Shell to Sea became the primary vehicle for local people and supporters to oppose the project while members of Rossport Solidarity Camp supported Shell to Sea and offered solidarity in practical ways such as helping farmers gather turf or potatoes. Their support later became invaluable as members of families were incarcerated. On 29 June 2005, Micheál Ó Seighin, Vincent McGrath, Willie Corduff, Brendan Philbin and Phillip McGrath were jailed indefinitely for contempt of court for refusing to obey the High Court injunction Shell had taken against them. Fr Donal, a local parish priest, emphasised how the difficulties people faced around having to live beside a high pressure, raw gas pipeline ‘led to the situation that brought about the jailing of the Rossport Five and … from then on there were public meetings and rallies and that kind of thing being held which I attended. And the work was stopped by the community, by the blockages at Ballinaboy.’ The jailing of the Rossport Five saw the gates of the terminal turn into a protest site with regular protests held there and across the country, including national marches in Dublin attended by thousands of people. Due to the national public outcry over the Rossport Five’s jailing, Shell suspended work at Ballinaboy in August 2005. The five men served ninety-four days in prison before their release in September when Shell dropped its injunction. Peter, a former CEO of Enterprise, felt Shell’s decision to pursue the arrest of the five men for being in contempt of court was a ‘totally stupid thing … a hundred times worse than [mistakes made by Enterprise) … to put those five guys in jail, that was just mad and that was because the Shell guy who ran the project was an engineer with no interest in people’. While the request for a High Court injunction originated from within Shell, its advancement through the Irish judicial system reveals implicit state support for the Corrib gas project and is an early indicator of the forceful mechanisms the state would deploy in response to challenges to the project. Nevertheless, in most societies the achievement of state and corporate interests requires more than coercion and for a state to function with the consent of the majority of its citizens, there must be legitimacy for the state’s actions (Joseph, 2006). Following the jailing of the Rossport Five, attempts at legitimisation were evident in the commencement of mediation and the establishment of a technical group to advise Noel Dempsey,2 Minister for Communications, Marine and Natural Resources. Dempsey appointed Peter Cassells, a former trade unionist, as a mediator between the parties and Cassells began mediation attempts in early 2006. By July 2006, Cassells confirmed mediation had failed (Siggins, 2010a, pp. 194–5). After ‘intensive discussions and detailed consultation with the local

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community’, Cassells concluded ‘no agreement was likely in the foreseeable future’ (ibid.). Cassells recommended modifying the onshore pipeline route to avoid homes in Rossport and, in calling further attention to fears of Carrowmore Lake being contaminated, stated that discharges from the terminal should be ‘closely monitored’. Cassells also proposed the introduction of financial incentives such as an investment fund for the region and a review of compensation for landowners (ibid.). Acting on behalf of Minister Dempsey, the new Technical Advisory Group commissioned Advantica to conduct a study on the onshore section of the pipeline. Although they were not tasked with an examination of the overall project, the authors of Advantica’s report stressed the onshore pipeline could not be separated from the overall project and noted there were alternative development options. However, the report affirmed the choice of Ballinaboy, primarily on economic grounds, and noted onshore processing was safer for workers compared with a hostile offshore environment. The authors made several recommendations in relation to risk, safety and engineering standards and the monitoring of pipeline construction and maintenance. They also advised the ‘very high design pressure (345 bar), much higher than conventional onshore gas transmission pipelines’ (Advantica, 2006, p. 1) be reduced to 144 bar – a modification which subsequently occurred. Nonetheless, ‘nobody came up with any solution really to the actual problems that the community were facing. They found different ways of talking around the thing … were trying to adopt new strategies of saying they would deal with the thing and find ways around problems’ (Fr Donal). These strategies did not reconcile the crux of the problem – the onshore location of the terminal and pipeline. Advent of civil disobedience and non-violent direct action Despite increasing local, national and international criticism of the project, Shell declared its intention to resume building work at the terminal in September 2006. After years of pursuing their opposition through state mechanisms, namely planning processes and the legal system, the community and its supporters began to oppose the project through civil disobedience and non-violent direct action. Several interviewees stressed how the failure of planning and political systems to respond to their concerns left them with no option other than to protest. Joe, a local fisherman, stressed that when ‘democracy failed us and putting in submissions and objections and all that, and yet all the arms of the state then … going hand in glove with the developer, with Shell. We hadn’t a hope in hell of getting anywhere with them so we were left with no option other than to protest.’ Niamh, a retired school principal, emphasised how she had ‘been through the processes, all the processes, planning ones, consent ones … I have from the beginning, in good faith, engaged in all the planning processes and all the consent

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processes’ and had made several attempts at ‘trying get enforcement and regulation to work’. However, after going through all those processes in ‘good faith’ and seeing the project’s progress despite such opposition, Niamh felt she was left with no option but to ‘don a hi-vis [bright yellow high visibility vest] and a woolly hat [and protest]. Well that’s what I did. But I think that what’s most pernicious, and the state doesn’t seem to care a damn, is the danger of people feeling powerless.’ Using tactics such as blocking roads with their bodies, protestors attempted to halt the building of the terminal. The response from the state was quick and firm – over 150 members of An Garda Síochána were deployed to this rural area, which previously was acknowledged for having a low crime rate (Garda Review, 2006). 3 October 2006 marked the first physical stand-off between protestors and Gardaí as members of the police force lifted people from their sit-down positions on the road and corralled them on the roadside in order to clear the way for the convoy of vehicles waiting to enter the site of the terminal. By early November, more coercive tactics were introduced by the police. State coercion I came up here then for the November 10 [2006] protest and it was then I seen and got some of the Garda violence … the baton-charge … we were over at a protest at Lennon’s Quarry and got battered [beaten] off the road … we were basically a group of maybe thirty detained in a field, just pushed off the road and held in that field for … like an hour … the suspension of law … there’s supposed to be law in the country and that was my first real taste of how far the state would be willing to go. You know before that I would have been following it a bit but never really seen it with my own eyes … I got … kneed in the face by X, Sergeant X and I would have been limping for about a week after it because I got kneed [in the groin] by X as well. I remember two girls who were walking behind me and he just threw them in [to the ditch], one of them hit a barbed wire fence and just flipped over. So it was just eye-opening, the level of violence that would be allowed to happen for this and like again, it goes back to when you see that there’s no benefit, no benefit to the state that I can see, you’re just wondering why would they do that? (Mark, member of Rossport Solidarity Camp)

10 November 2006 had been designated as a national, peaceful demonstration during which hundreds of Shell to Sea supporters from across the country arrived in Ballinaboy to express solidarity with local people. It was also the day when policing tactics changed dramatically and police officers began using batons against protestors. Coverage of the protest released by activists on websites such as shelltosea.com and indymedia.ie, and documentaries such as The Pipe and Pipe Down, vividly illustrate the force and brutality used by members of An Garda Síochána to suppress that and some subsequent protests. According to Siggins (2010a, pp. 213–16) eight people (including four Gardaí) were injured that morning and

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two protestors were arrested. Quoting Micheál Ó Seighin, one of the Rossport Five, Siggins illuminates the fear and distress caused by the events of that morning, ‘I believe someone will be killed, given the violence by the state and the low number of trained police’ (ibid.). During interviews and study visits to this area, I discussed policing with members of the community, many of whom expressed horror and upset at that day’s events and the policing of other protests. A sense of disbelief and shock was verbalised by some people who’d previously trusted and had good relations with their local police force. Joe articulated his surprise at the actions of a relation, who was a local Garda, ‘they [local Gardaí] do things that they normally wouldn’t do. When you see local Guards coming out that we grew up with … I seen him [relation] with his fucking baton about in the road … it broke my heart like to see him beating his own people for Shell. They [the Guards] know in their hearts and souls there’s wrong being done.’ Joe acknowledged such behaviour was at odds with traditional experiences of local police officers ‘when you see Guards in Belmullet the last twenty, twenty-five, thirty years and they’re going out and pushing locals and beating locals and … that wouldn’t be the norm like but they have to do it. They have to do it.’ This researcher also noted the absence of choice for individual police officers during protests and I witnessed individual Gardaí crying or looking visibly upset when ordered to move protestors. Notwithstanding the negative impacts on such Gardaí, the use of police force was a specific strategy deployed by the state when earlier coercive efforts such as the jailing of the Rossport Five failed to dissuade opposition to the project. The Garda Superintendent for the region referred to a policy of ‘no arrests’ as the police ‘did not want to facilitate anybody down there with a route to martyrdom’ (Ward, 2006, p.  10). Physical force, as opposed to arresting protestors, was introduced as a new tactic for quelling resistance. The levels of police violence provoked shocked responses on all sides of the dispute, including people who had worked on the project – ‘been out of it [the gas project] for years but I was pretty horrified though at the images of the guards beating people up, that was horrific, but that’s a totally different question, that’s about … Irish policing policy’ (Peter, former CEO of Enterprise). Peter is correct in stating that the police response was part of a wider policing policy, however, it is also interconnected with the state’s wider support of the project. In Jim’s view, Garda reactions were ‘government policy, I mean the police were told “get down there and sort it out” … “clear the streets and clear the roads” ’. Jim recognised that members of An Garda Síochana were ‘acting under orders’ and pointed to an inherent irony in how the ‘Guardians of the Peace’ ‘were supposed to be there to protect the community but they saw themselves as at war with the community’.3 Since 2006, Dublin Shell to Sea has consistently documented Gardaí ‘breaking up … peaceful protests, throwing residents into ditches, beating them, verbally abusing them and threatening them’ (Dublin Shell to Sea, 2009a). Human rights

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organisations such as Frontline, Afri and Global Community Monitor, elements of the mainstream media, social media (particularly activists’ articles on Indymedia.ie), and several documentaries have illustrated the excessive violence used by members of An Garda Síochána during protests. Storey (2009) refers to a 2007 visit of representatives from Global Community Monitor, a US-based NGO, which found ‘evidence from videos of youth, women and the elderly being pushed and beaten by Gardaí without provocation’. He added that human rights monitoring in the summer of 2009 revealed how ‘Gardaí abuses, including intimidation, harassment and assaults of protestors’ human rights’ were ongoing and serious. In addition to heavy-handed, and often violent, policing tactics, state power has been used in other ways against those who opposed the Corrib gas project. A stand-off between the local community, Shell and the police at McGrath’s pier in 2007 attracted much attention when police force was used against protestors to permit Shell’s entry onto private property at Pollatomais, despite the company not having permission from the landowner or the appropriate permissions to conduct work at that site. In 2008 and 2009, both the police and navy were deployed to prevent efforts by local fishermen to obstruct offshore pipe-laying efforts in Broadhaven Bay. Backed by the state, Shell continued with the development of the Corrib gas terminal and in 2008 the company hired the Solitaire, one of the world’s largest pipe-laying ships, to lay the gas pipeline from the offshore wellhead over 80 km through Broadhaven Bay to Glengad Beach. In doing so, the scene was set for confrontations of a new kind. Joe (a local fisherman) recalled how Shell sent him a letter offering him compensation if he removed his shellfish pots from Broadhaven Bay, one of his traditional fishing grounds, in order for the Solitaire to lay the gas pipeline through the bay: I think it was something like 30 or 40,000 [euros] each year for three years and for each licence. So I had three licences which in reality would become over €300,000. So it was handy money, I don’t believe I’ll ever make it in my lifetime but at the same time it was bribery to me because it was giving this money to stay silent and to turn a blind eye to what was going on. And to me that was wrong because like if you sign up to Shell and their contracts and that, well then you cannot, if you see something happening that you don’t like, that you know is wrong, you can’t afford to speak about it because you’ve already signed up to it. So I knew that was up the line so I decided not to sign up to any of their deals or contracts for shifting my gear. Why should I have to shift my gear? So in 2008 when the Solitaire arrived, I went out and I kept fishing my gear and the state moved three navy boats into Broadhaven, three warships and they were pointing guns at us there for … a couple of weeks.

Used in various documentaries and online resources, the image of a small fishing boat against the massive silhouette of the Solitaire has nearly become iconic,

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symbolising what many see as a case of the underdog fighting a corporate giant. Yet as Joe points out, the Irish state played an integral role in this sea-based battle with the navy supporting Shell’s actions in the bay while the police force maintained a solid presence onshore. Despite his constitutional right to fish in the area, there were ‘seven navy boats in Ireland and you had three of them here for Shell. So you had 50 per cent of our naval defence forces and to me, to put the navy against its own citizens on the sea, to protect a multinational company like Shell is the same as putting … the army around your house’ (Joe, fisherman). Even when faced with armed military personnel, Joe refused to move his pots and he and his son maintained a continual presence to protect their property and exercise their legal right to fish in the bay. Meanwhile events onshore reached a potential deadly stage as Maura Harrington, a local Shell to Sea campaigner, went on hunger strike, vowing not to end her protest until the Solitaire left Irish waters. During a visit to the area in September 2008, I observed how the once peaceful, scenic area seemed as if it had been invaded as the navy fleet, Solitaire and local fishing boats maintained their sea-based confrontation while a public and police vigil surrounded the hunger strike situated outside Shell’s Glengad base. An extremely tense and emotional time for local people, several of whom feared the death of one of their community, the situation came to a head when the Solitaire announced its withdrawal due to an engineering fault. Maura's hunger strike lasted 9–19 September 2008 and Shell announced offshore pipe-laying work would be postponed until 2009. Work on the development was not halted until the Solitaire’s return and incidents in 2009 illustrate how actors other than the state used coercive tactics against protestors. According to Earl (2003, p. 46), state authorities are not the only actors who can serve as repressive agents as seen in the Corrib dispute. Barrington (2010), Flood (2009), Siggins (2010a) and others have documented assaults on protestors perpetrated by Shell’s private security company IRMS. Furthermore, in June 2009, a local fisherman’s boat was boarded and sunk by masked men (Siggins (2010a). The Solitaire returned in the summer of 2009 and there was a ‘complete and total lock-down of this place … nobody could put a foot on the beach or they were just descended upon’ (Niamh). According to Siggins, approximately 300 Gardaí, 160 IRMS staff, two navy ships and a police helicopter were deployed – in a parish of around two thousand citizens (2010a, p. 325). Through the use of various arms of state force, local resistance was suppressed. Joe, whose actions had halted work the previous year, had his boats confiscated in advance of pipe-laying efforts, while he was in hospital: ‘they brought in the navy and deemed my boat “un-seaworthy” so that I  wouldn’t be able to go out on the sea  …  the Guards stayed on the boat until the pipe was laid after five or six days and all of a sudden the boat was fine then’. When the twin strategy of ‘no arrests’ and physical coercion did not suppress opposition to the project, protestors encountered a new policing strategy of

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‘criminalisation’ and were arrested during demonstrations or direct actions. The criminalisation of activists soon became the norm with protestors arrested for public order and other offences. Niamh, a former primary school principal, was incarcerated for around fifty days for different sentences and she emphasised the change in tactics from around 2006: They [the Gardaí] changed tactics. At the beginning in 2006 when they broke the blockades, they had a policy that they weren’t going to arrest people and imprison them because it was too close to 2005 [Rossport Five jailing] but then when the heavy-handed tactics didn’t dissuade people, then they brought back in the court business. And they tied you up in court … there can be a six month wait until you’re actually charged with something or brought to court … six months from when it allegedly happened to coming to court. So they employed that and they held people up in court, coming back day after day, after day. It was a nuisance as well, some people went to jail, some people didn’t. But it took up time you could have been doing other stuff with.

Four residents interviewed for this research project were arrested in relation to their opposition to the Corrib gas project. Three of the four served custodial sentences, ranging from around fifty days spread over a number of sentences to ninety-four days, to one person who spent five months and one week in Castlerea prison. Some residents sought compromises around the location of the gas terminal and pipeline  – the root of most people’s opposition to the Corrib gas project. In 2007, three local priests wrote a joint letter to Eamon Ryan,4 Minister for Communications, Energy and Natural Resources, proposing a new location in the uninhabited coastline area of Glinsk. ‘We put forward something that people might give consideration to; we also know that people’s preferred option would be an offshore facility. Some people were prepared to compromise but not everybody would be happy having an oil company anywhere near them and we thought by making the project more remote, that it would address maybe some of the issues’ (Fr Donal). Despite media and public attention on the proposed compromise, the idea was largely ignored by the state and oil companies. Conversely, the Glinsk proposal had divisive implications within the community. Stressing that tensions already existed within the community in relation to campaign tactics, some of which are well highlighted in Siggins (2010a), Fr Donal discussed the 2007 split within the community of resistance and its primary vehicle of mobilisation (the Shell to Sea campaign), leading to the formation of Pobal Chill Chomáin (Community of Kilcommon) and Pobal Le Cheile (Community Together). Both new groups were primarily focused on local level issues of health, safety and the environment, rather than local and national issues such as the lack of economic returns to state. There was also a

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sense among some members of the new groups that local people were best placed to speak about the issues affecting them, as opposed to some members of Shell to Sea who were from outside the area and featured prominently in some media coverage of the conflict. As Kuecker et  al. (2011) discuss, existing fault lines can affect communities and within the community of resistance such cracks eventually led to a split in the campaign (2007) and the formation of newer groups which continued to resist the project, albeit through different strategies. In a community worn down by years of struggle, this local level split in the campaign created additional tensions yet people continued to resist the project. Oral hearing on the onshore pipeline Against a contentious backdrop, ABP opened an oral hearing for a modified onshore pipeline route in May 2009 – the second route suggested. By August 2009, the offshore pipeline had been laid and construction of the terminal was near completion, yet the company did not have permission for the onshore segment of the pipeline. In November, ABP found that up to half of Shell’s modified pipeline route was ‘unacceptable’ on safety grounds. Following the ABP rejection of this route, the consortium submitted an application for a new route, containing a unique proposal for a 4.9  km section of pipeline to be laid within a tunnel, under Sruwaddacon Estuary (which is part of the Blacksod/Broadhaven Bay SPA). A pipeline through Sruwaddacon Bay was initially ruled out on environmental grounds and ‘engineering challenges due to the deep and shifting nature of the sand in the bay’ (Advantica, 2006, p.  9). During the subsequent oral hearing it emerged that there are no other similar pipelines, in such a vulnerable location, in existence (field notes, September 2010). As the third route proposed for the pipeline and its associated developments, Shell’s new application included plans for a Landfall Valve Installation (LVI) and tunnelling compound at Glengad, and a tunnelling compound and peat storage area at Aughoose. The new plans meant the gas pressure would be reduced to 100 bar at the LVI at Glengad and the gas would be piped through Sruwaddacon Estuary to Aughoose. Reaching land in Aughoose, the pipeline would come ashore and traverse Leenamore River, areas of blanket bog and forestry to the terminal at Ballinaboy, close to Carrowmore Lake. Broadhaven Bay (which incorporates Sruwaddacon Estuary) and Glengad Bog Complex are designated as Special Areas of Conservation (SACs) under the 1992 EU Habitats Directive (92/43/EEC) while Blacksod Bay/Broadhaven Bay and Carrowmore Lake have also been recognised for their ‘high ornithological importance’ and have been designated as SPAs under the EU Birds Directive (2009/147/EC).

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2010 oral hearing The new application for planning permission paved the way for the August 2010 reopening of ABP’s oral hearing on the onshore pipeline. From the onset, Inspector Martin Nolan (who chaired the oral hearing) made clear the hearing would only focus on ‘the onshore upstream gas pipeline facility relating to the Corrib gas field development’ and not other aspects of the project (field notes). Refusing to be limited to one aspect of the gas project (the onshore pipeline), members of the community raised crucial questions about the parameters of the hearing. They argued against Shell’s new application for a pipeline when they had already laid a section without planning permission. They also queried Shell’s application for new CAOs and the overall issue of project-splitting as the Corrib gas project has never been investigated in its entirety. Throughout the ensuing six-week hearing, members of the community of resistance made submissions on nearly every element of the new application for planning permission. Some project supporters from the wider Erris region made statements in favour of the project, primarily focusing on matters of job creation, service provision, and the extension of the Bord Gáis transmission pipeline to larger towns in Mayo. Nevertheless, health, safety and environmental concerns were firmly re-established during the hearing with further attention paid to Shell’s 2009 acknowledgement that residents would have just thirty seconds to escape from thermal radiation caused by a rupture in the pipeline if gas was at full pressure, and houses within 230 m could ‘burn spontaneously’ (Siggins, 2010c). The new route for the onshore Corrib gas pipeline was only 4 m outside that zone. During the hearing it emerged there was ‘no guarantee’ that the route structure under Sruwaddacon Estuary would not be used to carry pipelines from other offshore energy finds, or that the life of the Ballinaboy terminal would not be extended (ibid.). This revelation added to residents’ fears that the gas processing terminal may be used to process gas produced along the entire west coast of Ireland, and not just Corrib gas as proposed – fears founded in the existence of exploration licences held by different corporations who declared shows of hydrocarbons in the region. Indeed, the Licensing Terms (1992 and 2007) underpinning petroleum leases encourage companies to make use of existing infrastructure for new finds. Furthermore, the gas consortium’s plan of development states the offshore infrastructure may be used if the ‘Dodder and/or Deel prospects’ proved to contain gas and decommissioning of the terminal would ‘be probably deferred … if other significant discoveries were made in the Slyne Basin’ (EEI, 2001, p. 106). The issue of project-splitting arose again and a representative from MCC admitted the local authority did not consider the pipeline before granting planning permission for the onshore gas processing terminal. When questioned by a spokesperson for Pobal Chill Chomáin, this representative divulged that MCC did not consider the potential health and safety risks of the pipeline: ‘I wasn’t aware of

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safety implications of the pipeline as they weren’t part of the planning application for the refinery’ confessed this MCC staff member (field notes). Fundamental questions surround MCC’s granting of planning permission for a gas processing terminal without considering how that gas would be transported to that terminal. When reflecting on the ability of ABP to make a decision on this new pipeline route, without conducting its own independent research, activist Niall Harnett questioned whether the decision-making ability and integrity of the board had been compromised by ‘the imposing existence of an already constructed refinery’ and ‘80 km of laid offshore pipeline’. ‘Are you under intolerable pressure to allow the “last bit” to be fitted?’ asked Harnett. ‘Is this proper planning?’ (Ryan, 2010a). From pipeline design and tunnel construction to health and safety risks, to environmental impacts and consequences for the community, members of the community of resistance exhibited an extensive range of technical and scientific knowledge largely attained through research and self-education. Threatened by the potential environmental, health and safety risks associated with this project, and pitted against the petroleum consortium’s ‘expert witnesses’ and their ‘scientific judgement’ with its ‘monopoly of truth’, the community was forced to ‘make use of all the methods and means of scientific analysis in order to succeed with their claims’ (Beck, 2005, p. 71). A stark difference in frames of reference became apparent through the radical clashes of culture, knowledge, ways of being and meanings between the different actors. The detached, ‘professional’ approach of the oil company and its legal team, underpinned by the establishment of its witnesses as ‘experts’ based on qualifications and experience, was in stark contrast to the diversity of human emotions, approaches, knowledge and experiences expressed by the community. During conversations with local people, a number commented on the differences between them and the applicant (Shell), highlighting how specific scientific and technical knowledge was perceived as more valuable than the community’s. One woman said ‘they think they are above everyone else’ because of their qualifications as ‘doctors of this or that’ (field notes, August 2010). Near the end of the six-week hearing, another local woman talked about the oil company’s legal team and witnesses being recognised as experts and suggested that even though local people ‘keep asking questions’, Shell ‘won’t give clear answers’. She stressed that the attitude of Shell’s experts ‘makes local people feel like they are stupid because the experts give the impression that people aren’t asking the right questions … that people are a nuisance’. Citing Friedmann (1973), Sandercock discusses how planning processes can illuminate ‘growing polarity’ between experts and actors (people or planners), with ‘experts confident in their science-based, professional knowledge’ while actors ‘possess a great deal of experiential knowledge which … is not acknowledged as having any validity in the planning process’ (1998, p. 63). Nevertheless endeavours to limit the hearing to the scientific and technical ‘facts’ of Shell’s application could not detract from the wider issues surrounding

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the project, which a local parish priest articulated as ‘physics issues, a location issue, a geography issue, a social issue, a human issue  …  a question of values … what values do you attach to the welfare of people, persons, the individual, their contentment and happiness, their progress or stagnation or regression in life?’ (field notes, August 2010). The 2010 hearing unintentionally created a space for people to convey the enduring stress and trauma they had experienced as a result of ten years of continued opposition to the Corrib gas project. One resident claimed their ‘community is being destroyed’ and there is ‘a breakdown of trust in the bodies and agencies that are supposed to defend the community … it’s about the people in this community’. Another local woman argued that if this project went ahead, it ‘will only create further divisions in a community which has been shattered by the methodology employed to date’. Yet another resident urged ABP to reject the application and ‘give us back our lives’. If, after ten years of struggle, there could be any doubt about the community’s lack of acquiescence with the project, this hearing served to reiterate their resistance to the onshore situation of the gas refinery and pipeline. As Mary Corduff highlighted, just days after the fifth anniversary of her husband Willie’s release from jail (as one of the Rossport Five), ‘if the board gives permission our community will continue to be in conflict with the company, face imprisonment or worse’ (Ryan, 2010b). Despite this emotive six-week oral hearing during which desperate pleas were made for planning permission to be refused, on 20 January 2011 ABP announced its decision to grant planning permission for the onshore section of the Corrib gas project. This decision came ten years after the Corrib gas petroleum lease was granted, several years after permission had been granted for the onshore terminal, and amid the ongoing controversy in which the project was mired. Permission was granted subject to fifty-eight conditions and ABP inspector Martin Nolan suggested the application’s ‘clarity and transparency’ provided ‘confidence that the safety of the public is fully protected, and that the public will not be put at risk’ (Siggins, 2011a). In his lengthy report, Nolan recognised relations between Shell and the local community had ‘broken down to … such a serious extent that there exists mistrust on both sides … the impacts to date of the project have been severe on this community’s spirit (2011, p. 263). Nolan also conceded ‘in the conflict situation that exists between the applicant and those who will object to the Corrib scheme, community consultation and communication between the parties will not work as it might do’ (ibid.). Resistance continues In an immediate press release responding to this news, Shell to Sea vowed to continue resisting the project and said ‘opposition to Shell’s inland refinery and high-pressure onshore pipeline will continue and escalate’. Referring to the ABP

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recommendation that Shell create a €8.5 million community fund, Shell to Sea spokesperson Terence Conway stated ‘the board still seems to think our community can be bribed into accepting a project that places us in danger. This bribery fund would also be fully tax deductible for Shell under Ireland’s current oil and gas exploration licensing terms’ (Shell to Sea, 2011a). Following the granting of planning permission, two separate applications were lodged in the High Court for a judicial review with the intent of reviewing consents for the project and the state’s implementation of European Directives. The grounds for challenging the consents for the onshore section of the pipeline related to the pipeline route which would traverse SACs and SPAs, hence breaching several EU Directives. The legitimacy of consents for this section of the pipeline were further called into question as outgoing Fianna Fáil TD Pat Carey granted consent for the onshore section of the pipeline on the day of the most recent General Election (25 February 2011 when support for Fianna Fáil was at its lowest in recent history). Although the applications for judicial review were accepted, by the end of October 2011, both the applicant parties had withdrawn from the review. In a statement outlining its decision to accept a settlement, rather than follow a judicial review through the court system, an Taisce (the National Trust, one of the applicant parties) premised its decision on a recognition of how Corrib was advanced, consented to and constructed as a ‘travesty of European Environmental Law’ (27 October 2011). However, as the state committed to complete the transposition of EU Directives into Irish law and engage directly with an Taisce to ensure compliance with such European law, an Taisce was satisfied that what happened with Corrib would ‘never happen again … an Taisce will continue to do everything it can to make sure the vulnerabilities in the Irish legislation are addressed’. While the state acknowledged it had failed to transpose the EU Environmental Impact Assessment directive into law (McNulty, 2011), permissions and consents for Corrib went without the intended legal challenge. In response Shell to Sea spokesperson Maura Harrington argued conclusion of the review wasn’t ‘rational … how can the state acknowledge that something is wrong and at the same time claim that consents stemming from that are still valid?’ (Shell to Sea, 2011b). At an event outside Dáil Éireann on 22 March 2011, which was attended by twenty-two opposition TDs, Dublin Shell to Sea called for a reversal of the consents emphasising how approval had been granted by an out-going minister of a disgraced government on the day it failed to get re-elected. Although some prominent politicians supported the request, the consents remained in place and within a few weeks, the Corrib gas project returned to the media’s attention due to the emergence of a video in which a number of Gardaí were inadvertently recorded joking about raping female protestors (Cox, 2015; Hederman, 2012). The derogatory comments made by some Gardaí sparked a

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public outcry about policing of protests related to Corrib and the trivialisation of rape generally, with a wide range of groups articulating their support for the campaigners at the centre of the controversy. A coalition of women’s organisations, social justice groups and political bodies held a protest outside the Dáil on 8 April and the widespread condemnation of the Gardaí’s behaviour led to a public interest investigation by the Garda Síochána Ombudsman Commission (GSOC). Following GSOC’s investigation ‘an officer was found to be in breach of discipline in relation to this by the Garda Commissioner and received advice’ (GSOC, 17 August 2015). In April 2011, the Minister for Justice and Equality Alan Shatter revealed that the cost to the state for policing of protests stood at €14.245  million in overtime alone (Dáil Éireann, 7 April 2011); the cost had risen to €16.3 million by the end of December 2014 (Baker, 2015). By the end of 2011, 121 complaints of alleged police misconduct had been made to the GSOC (GSOC, 17 April 2012). A further three complaints were made by 2015 and of 124 complaints reviewed by GSOC, 37 were deemed inadmissible; 87 were admissible and investigated (GSOC, 17 August 2015). GSOC forwarded seven files to the Office of the Director of Public Prosecutions which directed no prosecution in all seven cases (ibid.) While GSOC recommended disciplinary proceedings in fifteen cases, the Garda Commissioner ‘found no breach of discipline in all cases’ (ibid.). The time frame of March to April 2011 was also notable for a new emphasis on state hydrocarbon management within Dáil Éireann as Sinn Féin and some independent TDs pushed for a new approach, albeit unsuccessfully. The Joint Committee on Communications, Natural Resources and Agriculture (JCCNRA) deliberated wider issues of hydrocarbon management from late 2011 to mid 2012 and invited commentators such as this author, SIPTU nominees, civil servants, representatives from groups opposing and supporting the Corrib gas project, and oil industry personnel, to make presentations. This review culminated in a detailed report, without any changes to the licensing regime. However, a separate review initiated in 2014 by Minister Pat Rabbitte5 resulted in new fiscal terms for future exploration and exploration (discussed in chapter five). The summer of 2012 was another contentious period in the history of the Corrib gas project with many incidences of direct action, arrests and controversy. Illustrating the inappropriateness of a rural environment and country roads for a large industrial development, headlines were made in late July when a specially modified lorry carrying a section of Shell’s 160 tonne tunnel boring machine (necessary to create a tunnel through Sruwaddacon Estuary) came off a road in Glenamoy and remained stuck in boggy land for several days. Shell later commenced drilling work on its tunnel in Sruwaddacon although some of its efforts were undone in early 2015 when part of its outflow pipe became detached from the bottom of the estuary during rough weather conditions.

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By August 2015, Corrib gas remained unproduced – twelve years after the original consortium had hoped to commence production. In late August, Shell applied for an application to operate the Corrib gas pipeline while awaiting a final decision from the EPA on a revised emissions licence for the development (Siggins, 2015). Despite requests for an oral hearing from over 1,160 people, the EPA refused the request and recommended a licence in April 2015 on a preliminary basis (Siggins, 2015). The EPA granted Shell an industrial emissions licence on 8 October 2015 and on 29 December 2015 Alex White (Minister for Communications, Energy and Natural Resources) granted Shell permission to operate the Corrib gas pipeline. Corrib's wells were opened on 30 December, leading to the commencement of gas production and processing. New Year's Eve 2015 saw the skies around Ballinaboy lit up with intense gas flaring and gas was first exported from the terminal on 1 January 2016. Excessive noise and prolonged gas flaring prompted local people to lodge complaints with the EPA and sixteen complaints were submitted by 24 March 2016 (Shell, 2016). Coming into production nearly twenty years after it was discovered, Corrib gas is estimated to necessitated expenditure of €1 billion (Baker, 2015). Clearly resistance to the project has prolonged the development and greatly increased costs (some suggest four times the original estimate). The additional €360 million it would have cost the developers to locate the development offshore appears as small change in comparison to the budget overrun. Arguably, if Shell and partners had situated the processing facilities offshore, their possible financial savings seem minuscule in comparison to the trauma and damage inflicted upon the local community, which could have been averted. A defective approach to hydrocarbon management? The Corrib gas conflict has engulfed the lives of many people and can be interpreted as more than a ‘David and Goliath’ type dispute of a rural community pitted against multinational oil companies. The jailing of the Rossport Five and subsequent occurrences reveal the Irish state’s support of, and involvement with, the Corrib gas project and this case study raises important questions about the Irish state and the management of its hydrocarbons. These chapters have emphasised the actions and responses of oil companies and the Irish state, pointing to interactions between those actors and their shared desire to advance the Corrib gas project. Far from being an objective observer, the Irish state contributed to this controversy through its licensing and planning permission systems, the facilitation of project-splitting and the use of coercion to repress dissent. Indeed, it is arguable the Irish state bears ultimate responsibility for the conflict as the state owns the resources, in turn establishing systems for their exploration, development and production, while setting the legislative context through which related activities (such as building a gas terminal

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and pipeline) can occur. The state also determines the parameters for change while meting out punishment to those who challenge the status quo through resistance. Calum, an academic specialising in media studies, stressed the role of the state is ‘of crucial importance and the alliance between the state and corporate power’. Several research participants implicated the Irish state in the conflict alongside the Corrib gas consortium. As evident in Corley et al. (2013), Cox (2015), Klein (2000, 2007), Stiglitz (2006) and numerous other accounts, oil companies can enjoy particular privileges as a result of their interrelationships with states and some companies are not beyond the use of questionable tactics to advance their interests. Several research participants suggested ‘mistakes’ were made and if the oil companies had approached the community differently the project may have been received in a more positive way. While there is merit to this possibility, occurrences perceived as mistakes can also be seen as revealing wider social political and economic processes – a topic examined in chapter nine of this book. From a broader perspective, the question arises why the Irish state should seek to be so helpful to Shell. The returns to the Irish state from Corrib gas are quite problematic as the companies are only required to pay a 25 per cent tax on profits and are not required to pay royalties, guarantee supply to the country or sell the gas at a reduced price (conditions of the 1992 licensing terms). At a public event in December 2010, a CEO of an oil company operating in Ireland suggested that due to delays with the Corrib gas project, and the ability of the companies to offset all related costs before paying tax, the Irish state will not see any revenues through taxation if/when production begins (field notes). Considering the actual and potential negative impacts for many people in the Erris region, it seems astounding that the state would adopt an approach which appears to favour oil companies above its own citizens. Nevertheless, supporters of the Corrib gas project claim the project should be advanced on the grounds of ‘national interests’ such as the country having access to resources from offshore Ireland, rather than another country; some revenues from taxation; and spin-offs for local businesses and services. Some other supporters argue that as several planning processes and studies had been undertaken, those opposed to the project should simply accept the outcomes of the state’s decisions. Arguments surrounding national versus local interests and associated dichotomies of insiders/outsiders and supporters/opponents, muddle key issues underpinning the conflict and the wider subject of state resource management. At the core lies a particular approach taken by the Irish state to manage its resources, manifested through a multiplicity of laws, processes, policies and decisions, which has resulted in a devastating and far-reaching dispute and a model of hydrocarbon management disadvantageous for wider society. Emergent controversies surround potential onshore gas production via ‘fracking’ and possible near-shore oil production in Dublin Bay, which combined with a growth of interest in issues related to state resource management (e.g. the ‘Own Our Oil’ campaign and

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continued efforts by Shell to Sea), serve to further problematise the Irish state’s defective approach to hydrocarbon management. The Corrib gas conflict exposes key flaws in Irish state resource management while revealing the ramifications of such macro level occurrences on meso and micro levels in Irish society. The Corrib debacle also focuses attention on the oil industry’s involvement in matters of state resource management, directly through companies’ actions specific to Corrib, and more implicitly due to industry relations with elements of the state, which helped advance the Corrib gas project in the face of much resistance. Scrutinising differences in approaches taken by the state towards the oil companies and its citizens points to contradictory dynamics within the state which are worthy of further consideration. By positioning the Corrib gas conflict as a microcosm of the Irish state’s approach to the management of its gas and oil, these chapters pose key questions underpinning this book: why does the state manage its resources in the manner chosen? How did the state develop such an approach? How does Ireland’s model of hydrocarbon management compare with other countries? What are the consequences of the Irish state’s approach to the management of its hydrocarbons? Answers to these questions are offered throughout this book, commencing in the following section on Ireland’s oil and gas experience.

Notes 1 Residents other than the Rossport Five also refused to allow construction work on their land and it was a choice to take the injunction against five men and not include a female landowner. 2 Noel Dempsey (Fianna Fáil) was Minister for Communications, Marine and Natural Resource during a Fianna Fáil–Progressive Democrats coalition (June 2002–April 2007). 3 ‘Guardians of the Peace’ is the English translation for An Garda Síochana. 4 Eamon Ryan (Green Party) became Minister for Communications, Energy and Natural Resources after the 2007 General Election which resulted in a Fianna Fáil and Green Party coalition. 5 Pat Rabbitte (Labour) became Minister after the 2011 General Election.

Part II

History of Ireland’s oil and gas experience

3

What gas and oil? The early days of the Irish regime (1957–75)

When Ireland’s constitution (Bunreacht na hÉireann) was conceived in 1937, Article Ten established the state’s ownership of ‘all natural resources, including the air and all forms of potential energy’ within its jurisdiction. As the foundation for the state’s ownership of its resources, Article Ten would allow the state to transfer title and control of these resources to other parties, temporarily or permanently. Nonetheless, when George B. Collins arrived in Ireland in 1957 he found the state lacked structures to enable him to fulfil his ambitions for hydrocarbon exploitation onshore or offshore Ireland. An American of Irish descent and the self-titled ‘originator of the idea to bring about exploration for oil and gas in the Republic of Ireland’, Collins worked as a lawyer for oil companies and, due to his ancestral roots, he thought Ireland might be a potential hydrocarbon province (Collins, 1977). Collins’ fascination with Ireland’s prospects also mirrored emergent interest in Western Europe, particularly the North Sea, as a new frontier for the oil industry. However, ‘the [Irish] state never thought that it had any oil or gas so [when] a bunch of Americans turned up and said “we’d like a licence for oil and gas”, they [the state] didn’t have a clue’ (Peter, CEO of an oil company). Learning about ‘the obtaining of foreign concessions and what the terms might be’ took time as the necessary systems did not exist (Collins, 1977, p. 9). On one hand, the state’s lack of a licensing system was connected to an absence of interest in hydrocarbon exploitation; while on the other, opportunities for foreign companies to invest in Ireland were limited due to the Control of Manufactures Act (1932). Following an era of social, economic and political turmoil within the Irish Free State (established in 1922), Fianna Fáil’s 1932 election to government brought a new focus on ‘economic self-sufficiency’ and attempts to develop the national economy included protection of the domestic market through tariffs on imports (Collins and Cradden, 2001, p. 9). The Control of Manufactures Act (1932) introduced a system of licensing to prevent foreign companies threatening Irish manufacturers; foreign companies were not allowed to hold more than a 50 per cent stake in firms and the majority of the company’s

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directors had to be Irish (Allen, 1997, p. 39). Within a few months Ireland became one of the most heavily protected markets in the world (Collins and Cradden, 2001, p. 9). Against a backdrop of protectionist policies, Collins encountered scepticism about his exploration plans and he recounted meetings with the Director of the Geological Survey who ‘was cautious about holding out any hope’ of possibilities for future hydrocarbon exploitation (1977, p. 11). Attempts to involve larger oil companies in Collins’ plans initially proved fruitless due to ‘the accepted geological opinion that prospects for commercial production of petroleum in Ireland were not good’ (ibid.). Nevertheless, Collins persevered and was encouraged by changes in the Irish state’s macroeconomic approach. Economic Development, the 1958 report by T. K. Whitaker (Secretary of the Department of Finance), signalled a new direction in Irish economic policy and Fianna Fáil’s First Programme for Economic Expansion (for the years 1959–64), alongside amendments to the 1932 Act, denoted concentrated efforts by the Irish state to attract investment by foreign companies (O’Toole, 1999, pp. 225–6). Those occurrences signify a distinct shift in Irish political economy from a strategy of industrial protectionism, which sought to ‘create employment through import substitution’ (Mjøset, 1992, p.  262) towards foreign-dominated, export-led industrialisation (O’Hearn, 2001, p. 130). Discussing the Industrial Development Authority (IDA), a new tool in the state’s outward focus, Collins outlined its strategies to attract foreign companies with incentives such as a non-repayable grant of $3,500,000 (as part of $12,500,000 expenditure), an exemption from profit taxes on exports, and a grant to cover all the costs of training workers for the companies (1977, p. 18). Although plans to foster an oil and gas industry did not exist when Collins arrived in Ireland, efforts were being made to advance mineral mining. Lauded by the Exploration and Mining Division (EMD, the state body responsible for managing Irish minerals) for its ‘significant tax advantages’, the 1956 Finance Act had ‘a catalytic effect on new mining in Ireland by attracting a number of Canadian exploration companies to the country’ (EMD, 2013). Suggesting this Act primarily benefitted International Mogul Mines of Canada and its subsidiary company which leased Avoca mines in Co. Wicklow, McCabe highlights how this and subsequent mining activities1 brought minimal benefits to the Irish Exchequer due to ‘tax breaks and the fact that the minerals were shipped directly out of Ireland and processed overseas’ (2011b, p. 123). While employment opportunities constituted some benefits, McCabe argues any financial benefits from mining activities were eroded by the 1967 Finance Act which meant no tax was due on profits earned over the first twenty years of any mining operation that had commenced before 1986. As most mining ventures were estimated to have an operating life of less than twenty years, these companies ‘had been given Ireland’s natural mineral resources, effectively, for free’ (ibid.).

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The treatment of gas and oil would not differ greatly from that of minerals and Collins (1977) documents the responsive attitude of key figures, including the Director of the Geological Survey, the Attorney General and civil servants, when he approached them about hydrocarbon exploitation. In a letter to Collins in November 1957, the Attorney General indicated that Sean Lemass (Fianna Fáil, Minister for Industry and Commerce following the 1957 General Election) was prepared to sponsor legislation to facilitate hydrocarbon exploitation ‘if a suitable proposal were put forward’ (Collins, 1977, pp.  16–17). Following negotiations led by Collins’ legal team on behalf of the Messman-Rinehart Oil Company (the company backing Collins’ efforts), the company secured a letter of intent from Minister Lemass stating he would not grant any other company prospecting licences or approve facilities for hydrocarbon exploration or development activities in Ireland. In early 1958, the Messman-Rinehart Oil Company registered its Irish company, the Madonna Oil Company, whose three shareholders met with several senior civil servants in the Department of Industry and Commerce (DICE) in March that year. Collins cites a Reuters dispatch related to the meeting which quoted Minister Lemass as saying he had ‘no objection to prospecting by private enterprise, but the government would not help’ (1977, p. 23). Madonna’s plans progressed well, aided by the news the Minister was preparing legislation to acquire ownership of resources not already in state ownership. The 1959 Oil Agreement During a question session in the Dáil on 4 December 1958, Minister Lemass confirmed a formal agreement had been drawn up with Madonna and stated new legislation was required to give effect to certain provisions of the agreement. Collins’ efforts to secure hydrocarbon rights for the Madonna oil company stimulated some wider interest in Ireland’s potential and an agreement with the Texan company Ambassador in July 1958 saw Madonna become ‘the Ambassador Irish Oil Company’. On 14 January 1959, Minister Lemass announced he had signed the first agreement permitting an oil company to conduct hydrocarbon exploration activities in Ireland. Ambassador Irish Oil Company became the sole holder of rights to exploit Irish hydrocarbons, onshore and offshore Ireland, including the seabed and subsoil, excluding the six counties of Northern Ireland (Quish, 1975, p.  8). Ambassador paid just £500 for those rights (ibid; McCabe, 2011a, 2011b). The granting of exclusive rights to one foreign company prompted significant debate in the parliament. Limitations on the participation of Irish owned enterprises was a contentious matter and Deputy Sweetman (Fine Gael) asked Lemass to establish a commission or ‘other expert body to advise him and the country of the implications of such an exclusive licence’ (Dáil Éireann, 14 January 1959). Lemass refused the request and warned against ‘unjustifiable optimism

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History of Ireland’s oil and gas experience

concerning the possibility of discovering oil and natural gas deposits in Ireland’. According to Lemass, Ireland has ‘fairly extensive rock formations of a kind associated elsewhere with oil deposits but the consensus of informed opinion is that the expectation of discovering oil here in quantities that can be exploited economically must be regarded as slight’ (ibid.). Lemass conceded that the possibility of producible resources had not been tested by drilling, adding that new information was constantly being made available in relation to the prospects of an oil discovery. For Lemass, the programme of exploration agreed with Ambassador would help the state reach a conclusion as to whether commercial production was a possibility; hence, the agreement was implemented despite some challenges within the Dáil. The state’s next step was to create a legal basis for hydrocarbon exploitation as the Petroleum (Production) Act, 1918 (introduced while Ireland was still under British control) and the Mineral Development Act, 1940  ‘did not provide adequate means for facilitating large-scale exploration’ (Jack Lynch (Fianna Fáil) new Minister for Industry and Commerce, Dáil Éireann, 5 November 1959). During deliberations on the forthcoming Act, Lynch described its purpose as being ‘to facilitate the carrying out of a comprehensive scheme for oil and natural gas in Ireland’ (ibid.). Reiterating his colleague Lemass’ position on the uncertainty surrounding Ireland’s hydrocarbon potential, Lynch argued the state could not expect a similar share of profits as demanded in other countries which he divulged was often on a fifty-fifty basis between the state and respective companies. Lynch suggested the better the chance of discovering oil, the higher a share of profits a state could demand and, due to the uncertainty surrounding Irish hydrocarbons, the Irish state could not expect to demand such a large share. Therefore, Lynch introduced a 7.5 per cent royalty rate on profits earned on the sale of the gas and oil. A lack of state oversight is intimated in Lynch’s acknowledgement, on at least two occasions, that ‘the whole country is subject to the agreement and I do not know what part they have in mind [for exploration]’ (Dáil Éireann, 5 November 1959 and 3 March 1960). 1959 was also a significant year in terms of industry infrastructure as the Irish Refining Company (a private venture) opened Ireland’s first and only oil refinery in Whitegate, Co. Cork. Petroleum and Other Minerals Development Act, 1960 On 10 March 1960 the Petroleum and Other Minerals Development Act was introduced, enabling Ambassador to begin exploratory work. The Act vested ownership of all petroleum in the state and established the state as the authorising body for hydrocarbon exploration and production. It also permitted the state to compulsorily acquire, either permanently or temporarily, land or other ancillary rights deemed necessary ‘for the efficient or convenient exploitation of petroleum’ (Section 23, Petroleum and Other Minerals Development Act 1960).

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As some private ownership of hydrocarbons had previously been permitted, a key feature of the Act was the transfer of ownership of all hydrocarbons to the state, subject to the payment of compensation to landowners. This assertion of state ownership was not underpinned by a desire to strengthen state control or an ideological view of these resources as commonly owned, public goods. Rather the state’s acquisition of petroleum rights was necessary for it to grant authorisations for hydrocarbon exploitation in its territory. Consequently, in the event of commercial production, the state could transfer ownership of those resources to the petroleum lease holding company, thus facilitating the privatisation of those resources – a central component of the Irish model of hydrocarbon management. The state’s assertion of ownership rights was also connected to efforts to remove challenges for oil companies, as revealed in Jack Lynch’s statement that ‘oil companies could not be expected to enter into commitments to spend money on oil exploration in Ireland if they were faced with the endless difficulties associated with negotiations for the acquisition of oil rights with a large number of private owners’ (Seanad Éireann, 17 February 1960). Lynch’s comments elucidate the state’s endeavours to create a supportive investment environment for companies, in line with the general economic mood at the time which sought foreign direct investment as the basis for Irish economic development. Nonetheless, the 1960 Act and associated agreements were not simply economically or ideologically driven – they were influenced by oil industry representatives lobbying decision-makers within the Irish state. The state’s pro-corporate approach can also be interpreted as an outcome of a state lacking knowledge and experience in hydrocarbon exploitation. Exploration begins Ambassador’s exploration licence commenced on 29 March 1960 and 15 August 1962 marks the first day of exploratory drilling in Ireland with the inaugural test well drilled onshore in Co. Meath (Collins, 1977, p. 54). However, the well was abandoned by 21 August and the second well drilled in Co. Clare also proved fruitless. The third onshore well, on a site five miles east of Dowra in West Cavan, brought better news and had ‘the distinction of finding the first hydrocarbons in Ireland’ (Collins, 1977, p. 55). As the flow of gas was not sustained, that well was also abandoned. Nevertheless, this area continues to inspire hope amongst oil companies and became home to two licensing options granted to Lough Allen Natural Gas Company and Tamboran Resources during a 2011 licensing round (JCCNRA, 2012a, p. 130). By 2015, one of the companies had applied for an exploration licence.2 Collins (1977) documented the drilling of six onshore wells within the first twelve months of their authorisation, aided by the buy-in of the Ohio Oil Company3 (Marathon). Ambassador sold two-thirds of its lease for $450,000

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History of Ireland’s oil and gas experience

(McCabe, 2011a, p.  43) and Marathon assumed all rights and benefits arising from the 1960 exploration licence in 1966. While Marathon concentrated on exploratory activities, the Irish state sought to fill additional gaps in policy and legislation. Building on the Geneva Convention (1958), which saw states ‘exercise sovereign rights over the Continental Shelf for the purpose of exploring it and exploiting its natural resources’, the Irish Continental Shelf Act (1968) increased the areas under national jurisdiction for the purpose of exploiting resources (Department of Industry and Commerce, 1975, p. 1). In July 1969, Marathon’s licensing agreement was amended and the revised exploration area encompassed ‘the whole of Ireland including the seabed and subsoil which lie beneath the territorial waters and three areas of the Continental Shelf comprising approximately 17,515 square miles’ (Quish, 1975, p.  9). The 1969 amendment included some alterations to the fiscal terms – the royalty rate was raised from 7.5 to 12.5 per cent and the rental fee increased from ten pence per acre to a rate ranging from £25 to £50 per square kilometre (Quish, 1975, p. 10). Non-fiscal terms amendments included requirements for the petroleum to be delivered onshore (unless the Minister consented to delivery elsewhere), and sold or offered at a price to be agreed between Marathon and the Minister (ibid.). Oil industry infrastructure was boosted in 1969 by Gulf Oil’s opening of the Whiddy Island oil terminal. Situated off the Cork Coast (South Ireland), Whiddy Island would be used to receive massive quantities of crude oil from Middle Eastern countries, transported by super-tankers to Ireland as a hub for the trans-shipment of oil to other European countries. At that time Bantry Bay was the only port in Europe capable of accommodating such ‘superships’ and the Whiddy Island terminal was a ‘pioneering venture in the oil industry’ (Eipper, 1986, p. 53). Eipper emphasised the generous deal Gulf negotiated for the project, which mirrored the state’s welcoming approach to other industries. Gulf paid a reported £120,000 for a 350 acre site, comprising around one-third of the island (ibid.) and the company did not have to pay harbour fees or face difficulties when negotiating with the local authorities (McCabe, 2011b, pp. 115–16). Gulf Oil had little intention of supplying oil to the Irish market as the facility was built on an island with no pipeline connection to mainland Ireland (Purvin et al., 2008, pp. 149–50). By 1969 the basis for the Irish model of hydrocarbon management was in place, yet the 1959 agreement with Marathon precluded the involvement of other companies. In March 1970 Marathon relinquished a large portion of its onshore territory (a condition of its exploration licence) and in May that year, the Minister for Industry and Commerce invited applications for two-year ‘non-exclusive petroleum prospecting licences’ for designated areas not held by Marathon (Quish, 1975, p.  11). These licences were for exploratory work only and, by 1971, more than sixty non-exclusive petroleum prospecting licences had been granted to other companies (Department of Industry and Commerce, 1975,

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p. 2). Meanwhile, Marathon persisted in its exploratory efforts and the first offshore wells were drilled in 1970 (DCENR, 2010, p. 2). The Kinsale gas field Contracted by Marathon, Global Marine (Glomar) drilled the first offshore well thirty miles off the Old Head of Kinsale (Co. Cork, South Ireland) in late 1970 and encountered ‘non-commercial shows of hydrocarbons’ (Quish, 1975, pp. 11–12). Another well was drilled off the Waterford coast in 1971 (later abandoned) and in September 1971, the Glomar drilling ship returned to a spot near its original position off Kinsale. It was, as Quish points out, a case of third time lucky and Marathon announced it had discovered the Kinsale Head gas field in block 48/25-2, in about 310 feet of water, twenty-seven miles south-east of Kinsale. In April 1975, Marathon confirmed the field contained one trillion cubic feet of gas with a potential flow rate of 125 million cubic feet per day (Quish, 1975, pp. 11–12). The field’s production life was estimated at twenty years with an annual output of 5,000 million cubic feet or 450 million therms – at a cost of five pence/ therm, the value of field was valued at £500 million (ibid.). Wood, Mackenzie and Co. suggest the estimate of one trillion cubic feet was conservative, adding that between 1.3 and 1.5 trillion cubic feet of gas could potentially be recovered from the field (1980, p. 47). With estimated capital costs of around $230 million (ibid.), Marathon stood to make substantial profits on Ireland’s first commercial hydrocarbon discover which came into production in 1978 (JCCNRA, 2012a, p. 118). Wood, Mackenzie & Co. (1980, pp. 49–50) outlined Marathon’s ‘favourable tax arrangement with the Irish government’ incorporating a 12.5 per cent royalty on sales revenues; depreciation allowed at 10 per cent per annum; a depletion allowance of 25 per cent of gross revenues; a tax rate of 30 per cent until 1983, then rising to 40 per cent; and the tax rate which would be reduced by the amount of royalties paid. ‘On this basis and allowing for relief against the field abandonment costs, we estimate that no tax will be payable until the latter years of the field’s life’ (ibid.). The report highlighted how Marathon sold some of its royalty entitlements to a number of individuals and companies following the restructuring of the Ambassador authorisation in 1960 (p. 49). Peter, CEO of an oil company, mentioned his company is a benefactor of one of six royalties derived from these changes and his company received ‘about $250,000 [in 2010], which is not even enough to pay our overheads, it’s a little bit of income’. Marathon was also required to sell the gas back to the state at a discounted rate for a twenty-year term (JCCNRA, 2012a, p. 32). McCabe (2011a) suggests the gas sold back to the state was valued at around £700 million in 1977. In 2011, Minister Pat Rabbitte divulged that 1.75 trillion cubic feet of gas had been produced from the Kinsale and Ballycotton (added to the Kinsale infrastructure in 1991)  gas fields since 1978 and the state had received over €190 million in royalties over

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History of Ireland’s oil and gas experience

thirty years of production (Daíl Éireann, 14 September 2011). Rabbitte did not disclose how much the state had received from taxation. A move towards greater state intervention occurred after the election of a Fine Gael–Labour coalition in March 1973 and the government decided to allocate Kinsale gas to Nitrigin Éireann Teoranta (NET) for the production of ammonia to manufacture fertiliser and the Electricity Supply Board (ESB) to generate electricity (Department of Industry and Commerce, 1975, p.  2). Through this arrangement, Bord Gáis Éireann would purchase 125  million cubic feet of gas per day for sale to the ESB and NET (Collins, 1977, p. 82). Fergal, a former civil servant who had liaised with Marathon in relation to the pricing of gas, argued ‘the Marathon agreement was pretty tough on them … [the state] wouldn’t pay a gas price beyond the levels we [the Department] thought appropriate. Due to the low costs Ireland paid for it [the gas], Ireland was able to make massive profits.’ Nevertheless, Fergal conceded ‘the terms were very attractive [with Marathon] but the terms we have now are even more favourable than Marathon’s’. Consideration of possible socio-economic benefits created by an Irish oil and gas industry began to occur within other state divisions. In December 1973, the Irish Export Board (IEB), the IDA and the Institute for Industrial Research and Standards (IIRS) jointly held a conference entitled the Potential for Irish Industry from Offshore Oil and Gas. Aimed at identifying ways in which Irish companies could diversify in order to expand into the oil and gas industry, the conference anticipated a forthcoming boom and a report on the conference proceedings stated that companies and the Irish state should be prepared for it. Similarly, in May 1975, AnCO (the Industrial Training Authority) published Manpower and Training Implications in Ireland of Prospective Offshore Oil and Gas Finds which examined the educational and training implications of oil and gas production offshore Ireland. This report reached a number of conclusions on the likely impact of oil and gas discoveries on ‘manpower and training activities in Ireland’, adding that it was not possible to consider these matters in isolation from other issues such as the state’s management of its resources. Optimism in Ireland’s hydrocarbon potential correlated with increasing public debate on state resource management and different groups began to problematise issues of ownership, control and wealth distribution. With Pat Rabbitte4 as President, the Union of Students in Ireland published a pamphlet which argued ‘the proper development of Ireland’s resources under public ownership has the potential to change the face of the nation’ (1973, p.  2). Focusing on minerals, rather than hydrocarbons, the document identified a range of issues surrounding resource management. Initially formed in response to onshore mining activities, the Resources Protection Campaign (RPC) also articulated difficulties with state mineral management and went further to examine gas and oil, holding public meetings on those topics across the country. Described as a non-political, public-education

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campaign, the main objective of the RPC was ‘the development of state companies to explore for, produce and develop industries from our immense natural wealth’ (RPC, 1975, p. ii). With local branches in different areas, the RPC’s membership included representatives from several left political groups including Sinn Fein the Workers’ Party (SFWP), the Communist Party and Labour. In a separate report, described as a ‘detailed study of the political economy of Ireland’s oil and gas resources’ (SFWP, 1975, p. 3), SFWP outlined its policy ‘for a state controlled and financed development of our hydrocarbons on behalf of the workers of the country’ (p. 69), which illuminated vested interests and outlined alternatives for the state. The impact of global occurrences on hydrocarbon activities offshore Ireland became evident in this era and Shannon suggests the oil crisis of 1973, with the resultant increase in oil prices, spurred European and American countries into encouraging exploration for indigenous oil and gas (2009, p. 46). Major discoveries were made in the Norwegian and UK sections of the North Sea and there was ‘a belief that large fields awaited discovery in the Irish offshore’ (ibid.). Marathon concluded a ‘farm-out’ agreement with Esso in April 1972 and in August 1974 Marathon announced its first ‘oil show’ in block 48/24-1 with a flow rate of 780 barrels per day (bpd) (Collins, 1977). However, this field was not brought into production and in 2012 Providence Resources drilled and suspended another oil well in this block amid commentary that Ireland’s first commercial oil production was around the corner (JCCNRA, 2012a). By 1975, seventeen offshore wells had been drilled although Marathon remained the only company with an exclusive licence and petroleum lease (Robinson and Riddihough, 1975, p. 3). An amalgam of factors, including pressures to open up Ireland’s territory to other companies, global trends in resource nationalisation, a new coalition government and the influence of groups such as the RPC and SFWP, culminated in Minister Justin Keating introducing the Exclusive Offshore Licensing Terms in April 1975. The 1975 licensing terms An explanatory paper accompanying the 1975 terms articulated the primary factors underpinning the new regime: the world energy situation, developments in the North Sea and ‘the primary policy considerations’  – the state’s declaration of public ownership of the hydrocarbons. The 1973 oil embargo and higher oil prices in tandem with radically changed relationships between producing states and companies5 were some of the global forces identified as driving Ireland’s new approach. Developments closer to home altered opinions on Ireland’s prospects and the North Sea’s proven hydrocarbon resources raised hope for similar potential off the Irish coast. Consideration was given to Ireland’s need for secure energy supplies and to increased oil prices which meant production initially deemed

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uneconomic became financially viable. In addition, technological advances could overcome engineering and other difficulties previously seen as prohibitive. Described as ‘the primary policy considerations’, the third factor influencing the 1975 terms reveals the influence of global trends in state resource management, notably the concept of ‘permanent sovereignty’.6 The 1975 terms declared Irish hydrocarbons to be public property and the government as custodians must ensure the ‘national interest is the primary consideration in formulating and implementing policies for their development and exploitation’ (Department of Industry and Commerce, 1975, p. 4). ‘National interest’ referred to the necessity of analysing benefits and problems associated with the petroleum industry with the objective of maximising benefits to the country and mitigating any undesirable outcomes. Advocating a prudent approach, the terms stated ‘petroleum should be used to create the conditions which will assure continuing economic and social well-being’ (ibid.). Benefits from the 1975 terms Several principles underpinned the new policy: the state acting for the people as owners of the resources should be paid for this resource; companies engaging in offshore development on the Irish Continental Shelf should be subject to Irish taxation; since the resources are public property, the state must have the right to participate in their exploitation (Department of Industry and Commerce, 1975, p. 7). Several mechanisms were introduced to achieve those goals:  fees and rentals; royalties of between 8 and 16 per cent; state participation; and a tax rate of 50 per cent, the standard corporation tax of that time (CPI, 2005, p. 53). Fergal, a co-author of the terms, stressed that ‘a statement … about tax was made separately in order to differentiate between tax and the licensing system  …  tax is separate, it has a life of its own’ and thus can be altered independently of the licensing system. For the first time, the state established its ‘right to participate in the exploitation of its own resources’ (Department of Industry and Commerce, 1975, p. 8) and the state would have a carried interest in exploration and development activities with the state’s costs covered by the lease-holding companies. If a commercial discovery was made, the state would be liable for expenses from its share of petroleum. The level of state participation would not exceed 50 per cent and could be reduced in exceptional circumstances. The terms also considered that ‘state participation might be best conducted through a state body which would acquire increasing experience in managing and operating within the industry’ (p. 11), suggesting a possible state oil company which might also become involved in downstream operations such as refining. Offering an analysis of hydrocarbon exploitation and the consequences for the Irish state, a section in the terms considered the implications for industry and

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employment, identifying new possibilities for Irish industry. Recognising the oil industry offered significant manufacturing, servicing and downstream opportunities for Irish businesses, the terms sought to maximise benefits by insisting that all servicing of operations should be conducted from Irish bases and that supplies of petroleum must be made available to the Irish market. In addition, section 62 stated ‘the licensee shall use goods and services of Irish origin in his activities as far as they are competitive in regard to quality, service, delivery period and prices’. Companies were required to land the resources in Ireland with the dual purpose of bringing the resources to the Irish market while monitoring the oil companies. As Fergal (former civil servant) pointed out, ‘how do you measure the amount of resources if it isn’t landed in Ireland?’ The 1975 terms signify a departure from the ideas underpinning the 1960 Petroleum and Other Minerals Development Act, even though the 1960 Act remained the legal basis for hydrocarbon exploitation7. Keating and his department envisioned Irish hydrocarbons as the basis of a new industrial strategy for the country – one in which the state would participate and actively benefit. In an interview before his death, Keating outlined a key motive for his terms: ‘I wanted a large lump of the profits for the inhabitants of the indigenous country because the oil companies were accustomed to writing rules and you can see in other countries, oil supplying countries, across the world where the local people got almost nothing … and bluntly I wasn’t having that’ (in Ó Domhnaill, 2008). The new terms mirrored global trends in state resource management during this era with many states asserting stronger control over their natural resources.8 In 2008, Keating emphasised how the Norwegian approach was seen as a model for Ireland, although Ireland did not go as far as establishing a state owned oil company to produce its hydrocarbons (Norway formed Statoil), nor did Ireland increase its tax rate to 78 per cent. Chapter eight compares the approaches adopted by Norway and Ireland and examines divergences between the two countries, yet, at this juncture, one must ask why did the Irish state fail to introduce those two tools to maximise state control and benefits? One explanation lies in factors internal to Ireland, namely the particularities of Ireland’s social and political composition which influenced both the Labour Party’s stance and hydrocarbon policies. Political parties follow different ideological paths and decisions on resource management occur within an Irish political system which historically was ‘not structured on an unequivocal left-right social cleavage’ (Mair and Weeks, 2006, p. 136). Since the state’s formation, Irish politics has been dominated by ‘two catch-all parties’ (Fianna Fáil and Fine Gael) within a ‘two and a half party system’ (with Labour being the half-party) (Mjøset, 1992, p. 256). Mjøset highlights Labour’s weaker position within the Irish political system and, in contrast to the Social Democrats’ political dominance in Norway, by 1975 Labour had only been in government four times and each time was a minority partner in coalition governments with mostly centre-right/right orientated

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majorities.9 Consequently Labour worked in coalition with parties which are politically and ideologically different, implying power struggles and political compromises (primarily for the weaker partner). Attention to the dynamics of government coalitions involving parties with conflicting philosophies and political agendas is relevant for developing an understanding of state hydrocarbon policy. Upon their election in 1973, Labour’s position was stronger than in previous governments due to unexpected social changes resulting from the state-led industrialisation programme in the 1960s and 1970s, including growing militancy among workers (Allen, 1997, pp. 124–5). Strike activity increased, over 90,000 new workers joined unions between 1965 and 1973 (ibid.) and 50 per cent of the Irish labour force joined unions (OECD, 1979, p. 34). The escalation in trade union membership led to a swing to the Left within the Irish Labour Party which, in tandem with growing social activism more broadly, impacted on state hydrocarbon management. The key Minister involved, Justin Keating, originally came from the left of the Labour Party and had a Keynesian statist approach to the development of the Irish economy. Indeed, the Labour–Fine Gael coalition’s election in 1973 occurred when greater state intervention in economies was at its zenith due to the widespread embrace of ‘Keynesianism’10 globally. With mechanisms for higher revenues, possibilities for state participation, and the assertion of public ownership of Irish hydrocarbons, the 1975 terms point to a more influential Labour party. However, despite the popularity of Keynesianism and global precedents in resource nationalisation, the 1975 terms did not result in direct state intervention through a national oil company (NOC) and Labour did not completely divert from the established political economic path. When Keating announced the new terms, he stressed ‘the system envisaged is essentially a commercial operation’ and ‘substantial involvement by the state in the development of a commercial oil and gas field can only be contemplated if the state can command the significant managerial and technical resources needed’ (Keating, 1975). In Keating’s view, state participation involved a state body which would gain managerial and operational knowledge and experience through working with the international oil companies (IOCs); this did not necessarily entail a separate NOC to conduct activities on its own. Furthermore, ‘the Minister considers that as a general proposition, it is equitable that the state should pay its due share of all the expenditure’ (ibid.), implying the state would be a commercial partner as opposed to complete nationalisation. As national oil companies symbolise state involvement in industrial activities, their establishment reflects prevailing ideologies (see chapter six) and the formation of a NOC can be problematic for centre-right/right governments which may

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view NOCs as posing threats to a ‘free’ market. Similarly, increases in corporate tax rates can be regarded as negatively affecting companies and frowned upon by those espousing a form of economic development based on multinational investment, as occurred in Ireland after the ‘1958 turn’. Keating’s terms did not go as far as Norway’s, or many other countries which nationalised operations in that era, and with his demand that projects ‘involve the provision of substantial employment; preferably, export-orientated’ (Keating, 1975) Keating’s amendments are largely in line with the state’s existing strategy of export-led economic development premised on foreign direct investment; mediated to a certain extent by internal and international forces. Response to Keating’s terms Nevertheless, Keating’s terms were not popular with the oil industry and Fergal, a senior civil servant who worked with Keating on the terms, disclosed how the oil companies worked ‘hard in Ireland to get friends’ in efforts to influence more favourable terms for the industry. Robert, a former civil servant who later joined the IOOA, mentioned the IOOA ‘was formed first of all in 1975 when Justin Keating announced the new licensing terms; there was a thing called the Irish Offshore Operators Group’. Fergal approached Minister Keating with his concerns over the nascent oil lobby and they decided their best option was for someone to go to the companies individually and secretively, telling them they could have their choice of acreage if the companies agreed to the new terms. In doing so, Fergal and Keating sought to cut out their lobby group, thus reducing the power of the oil companies. Fergal said he didn’t acknowledge the oil companies’ lobby group nor did he view them as stakeholders in the process of policy formation around Irish hydrocarbons; indeed he ‘wanted to break them’ so the state would have the upper hand. Several consortia were granted authorisations under the first licensing round in 1975, comprising various state owned companies including Deminex (German), Dutch State Mines, Elf (French), AGIP (Italian); Irish companies such as Ergas (private gas company) and Nitrigin Éireann Teoranta (state-controlled fertiliser company); and privately owned oil companies (Quish, 1975, p. 67). The participation of semi-state and private Irish companies was a key feature of each consortium, demonstrating Keating’s efforts to develop indigenous expertise and capabilities through the participation of Irish companies in activities. Although the 1975 terms involved an assertion of state ownership and a new emphasis on maximising benefits for Irish citizens, the terms were slammed by SFWP and the RPC which problematised the continued privatisation of state resources and production of Irish gas and oil by IOCs, rather than a state oil

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company. In the RPC’s view, ‘multinational oil companies are only interested in the massive profits to be obtained from rapid development, rapid extraction and sale  …  the interests of the multinationals and the interests of the Irish people could not be more divergent’ (1975, p. 26). The position of some on the Left was in stark contrast to the oil industry which sought to overturn limits on its activities. Nevertheless, their shared dissatisfaction with the 1975 terms is interesting, particularly the Left’s opposition considering Keating’s terms were ideologically to the left of the political spectrum and the nearest the Irish state has come to participating in the exploitation of its resources. The RPC and SFWP ideal of production by a state owned company would go unrealised and the 1975 terms these groups criticised for being too generous would soon come under attack. Notes 1 Mining companies were active in Tynagh, Co. Galway, Navan, Co. Meath and the Avoca mines in Co. Wicklow. 2 Responding to questions posed by Deputy Thomas Pringle (Independent), Minister of State Joe McHugh (Fine Gael) confirmed Tamboran and Enegi Oil (holder of a licensing option for the Clare Basin) had applied for exploration licences, two years after their licensing options ended (Daíl Éireann, 9 June 2015). The Lough Allen Natural Gas Company allowed its licensing option to expire. Those onshore authorisations have been mired in controversy due to the companies’ disclosure that hydraulic fracturing (‘fracking’) could be used to commercially extract gas. Minister McHugh stated ‘no decision will be made on these applications until there has been time for all interested parties to consider the outcome of the Environmental Protection Agency’s Research Programme into the use of hydraulic fracturing’ (ibid.). Results from that research are not expected until 2016. 3 Marathon was a descendent of the infamous Standard Oil Company, established by the American mogul John D. Rockefeller. Although Standard Oil was broken up in 1911 under US Anti-Trust Laws, its progenies such as Mobil, Chevron (Standard Oil California) and Exxon (Standard Oil New Jersey) remain among the world’s largest companies (Parra, 2010). 4 Nearly forty years later, in 2011 Pat Rabbitte became Minister for Communications, Energy and Natural Resources as a Labour party TD. 5 Evident through the wave of nationalisations in this era; see chapter six. 6 The concept of ‘permanent sovereignty’ was at the core of OPEC’s formation and in 1968, member countries affirmed their ‘inalienable’ and sovereign right over hydrocarbons in their territory and avowed that ‘exploitation should be aimed at securing the greatest possible benefit for member countries’ (Resolution XVI.90 in Mommer, 1994, p. 8) – examined further in chapter six. 7 The licensing terms determine matters such as authorisations, work plans and financial returns. 8 Dunning and Wirpsa (2004); Ryggvik (2010); Smil (2008); Stevens (2008); see chapter six for further discussion on that era.

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9 Labour was a minority partner in the following coalition governments: with Fianna Fáil (1932–33; 1954–57); as part of the ‘Inter-party’ government (1945–51, Fine Gael, Clann na Poblachta (a republican party), Clann na Talmhan (a farmer’s party) and the National Labour Party (a splinter group from the Labour party)); and with Fine Gael (1973–77) (Coakley, 2006). 10 Also known as ‘embedded liberalism’ (Harvey, 2005, pp.  10–11), Keynesianism was a political-economic approach which saw markets within nation states shaped by state processes such as direct participation through macroeconomic planning, regulation and state owned industries.

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Unravelling of Keating’s plans (1976–99)

Justin Keating’s 1975 licensing terms were introduced when interest in North West Europe’s hydrocarbon potential was at its peak due to large discoveries in the North Sea. Consequently some politicians, oil industry representatives and trade unions anticipated an economic boom in Ireland courtesy of oil and gas exploitation. Boom time? With aspirations for North Sea type finds, the allure of Irish hydrocarbons correlated with greater demand for licences. By mid 1975 eleven consortia, comprising thirty-nine companies, had been awarded authorisations for over forty blocks offshore Ireland (Allied Irish Banks (AIB), 1979, p. 1). The number of wells drilled offshore Ireland began to climb and 1975 brought a highpoint of six wells (four exploration, two appraisal) (PAD, 2012a). Subsequent years saw a steady escalation in drilling, culminating in an-all-time high of fifteen exploration wells in 1978 (one of which was an appraisal well) – this figure excludes fourteen production wells for Kinsale gas drilled between 1978 and 1979. The regulatory framework underpinning hydrocarbon exploitation continued to evolve and the Gas Act (1976) enabled the Minster to grant consents for the construction of upstream gas pipelines (Commission for Energy Regulation (CER), 2011, p. 26). In 1977, the Department of Industry and Commerce established the PAD and it became the section responsible for Irish gas and oil (CPI, 2005). After the 1977 General Election, a Fianna Fáil government assumed responsibility for hydrocarbon management with Des O’Malley as Minister for Industry, Commerce and Energy. O’Malley announced plans to hire a minimum of six new civil service personnel in the grades of principal geologist, senior geologist and geologist for mining and offshore exploration activities (Dáil Éireann, 6 December 1977). Despite increases in civil service numbers, the Department began to rely on external consultants and O’Malley confirmed the PAD engaged the services of Richard Duffy, a petroleum engineering consultant, to provide

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consultancy assistance to the PAD at a ‘rate of £70 per day plus expenses (Dáil Éireann, 16 November 1978). In subsequent debates, O’Malley refused to divulge details of consultants hired by the DICE, stating ‘in view of the commercial and strategic considerations involved I am satisfied that it would not be in the public interest to give further information in respect of these studies’ (Dáil Éireann, 8 May 1979). The PAD was not formed as a mechanism for developing centralised indigenous expertise for stronger state control and oversight, or potentially state involvement through a NOC. Rather, the PAD became an ‘administrative’ body and specialised knowledge about exploration and production activities was often provided by petroleum consultants, who consecutive Ministers refused to name when questioned in the Dáil (CPI, 2005, p. 56). In October 1978, Phillips plugged and abandoned a well (35/8-1) which had produced oil and gas (oil had flowed at over seven hundred bpd) on the basis the well was ‘non-commercial due to the water depth’ (AIB, 1979, pp. 1–3). Known as the ‘Burren Discovery’, Providence Resources has held an exploration licence for this block since 20041 (JCCNRA, 2012a, p.  122). An Aran–BP consortium encountered oil in 1979 from well 26/28-1 which flowed five thousand, five hundred bpd (AIB, 1980, p. 3). While ‘plans [were] made for further testing’ (ibid.), this oil discovery (‘Connemara’) remains unproduced and Island Oil and Gas is the operator for a consortium that has held a frontier exploration licence for this block since 2004 (JCCNRA, 2012a, p.123; PAD, 2015). Companies continued to engage in a race for acreage and this competition was ‘given added impetus’ in late 1978 thanks to the Fianna Fáil government elected in 1977 (AIB, 1979, p. 3). Minister O’Malley declared ‘the Irish licensing terms might be considered maximums not minimums and that the department could be flexible, where the terms made production uneconomic they would be reduced to make production viable’ (ibid.). In doing so, O’Malley reiterated Fianna Fáil’s earlier responsive attitude to the oil companies and incentivising exploration activity became a priority, as opposed to Keating’s emphasis on ensuring strong returns for the state. The late 1970s was a significant period for other reasons such as the formation of the Irish National Petroleum Corporation (INPC), and an explosion at Gulf Oil’s Whiddy Island terminal which sent shockwaves through Irish society. The Betelgeuse disaster During early morning unloading of oil from the Betelgeuse tanker to a storage unit on Whiddy Island (off the South Coast) on 8 January 1979, the cargo caught fire and caused an explosion which killed fifty workers; the bodies of several victims were never recovered. Toxic fumes hampered the salvage operation and over one million gallons of oil were released into Bantry Bay – as one of thirty-three

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spills recorded in Bantry between 1966 and 1979, this was the most damaging (McCabe, 2011b, p. 119). Eipper’s anthropological study on the advent of Gulf oil and ramifications for people living in Bantry Bay elucidates controversies which bear strong resemblance to those surrounding the Corrib gas project. He articulated issues contributing to the accident, for example, the state of disrepair of the Betelgeuse, in tandem with problems of self-regulation and consequences of the explosion (Eipper, 1986). McCabe also problematises how Gulf had been allowed to self-regulate, despite oil spillages and safety concerns, while using the Bay for free (2011b, p.119). In March 1979, a motion passed in the Dáil initiated a tribunal into the Betelgeuse disaster, presided over by Justice Declan Costello who was tasked with establishing the causes of the accident. This tribunal sat for seventy-two days between 26 April 1979 and 20 December 1979 (Dáil Éireann, 28 October 1981). Although Costello’s report pointed the finger of blame at Gulf, by 1985 Whiddy Island continued to be a political issue, featuring in several Dáil debates as the site remained unusable. Minister Dick Spring2 reported he was in the process of finalising an agreement with Gulf, assuring the Dáil he would protect strategic oil stocks stored on the island (Dáil Éireann, 22 January 1985a). Spring later updated the Dáil on a formal agreement between the Department and Gulf which committed the company to rebuilding the jetty and maintaining 160,000 barrels of crude oil on behalf of the state. However, in December, Spring announced he’d made a new agreement with Chevron (which owned Gulf) that would see Chevron pay the state $44 million to release them from the obligations placed on them under the February agreement. Chevron would transfer all assets at Whiddy Island to the state (including the oil terminal, jetty, tank farm and lands) but could remove the remaining crude oil from the terminal, equivalent to around 1.5  days’ national oil requirements (Dáil Éireann, 5 December 1985). Spring explained the altered arrangements were due to Chevron arguing it would be a waste of economic resources to construct facilities ‘for which no commercial future could be seen’ (ibid.). Ownership of the terminal was transferred to the INPC and Spring stressed ‘there are no plans at present for the state to put it into operational mode … the reconstruction project will not now go ahead’. Spring’s statement elicited vehement retorts from the opposition and Fianna Fáil TD Albert Reynolds denounced the deal on the basis that reconstruction could have cost $60 million while potentially providing up to 250 jobs in construction and 100 permanent jobs. Reynolds challenged Spring on additional losses posed by Chevron removing the remaining oil stocks (160,000 barrels), considered part of the state’s strategic oil stocks. Tomás Mac Giolla (TD for the Workers’ Party) also criticised the new agreement, stating multinationals weren’t pulling out of Ireland as ‘they run the oil business and control it more than they ever did. All they are doing is refusing to pay in anything while they are continuing to take out profits. For a start they are saving at least $16 million in this deal.’

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Despite dissatisfaction at the deal, the agreement was enforced and Chevron left Whiddy Island which is now used to store oil (approximately 570,000 tonnes) for the National Oil Reserves Agency, a subsidiary of the INPC. The original jetty remains in disrepair and oil is discharged to the terminal through other means (Purvin et al., 2008, p. 149). The Irish National Petroleum Corporation The INPC was established in 1979 in response to difficulties surrounding global oil supply after the Iranian Revolution (Wood, Mackenzie and Co., 1980, p. 28). According to Robert (former INPC Chief Executive), the INPC was formed ‘to deal with the supply of oil product into the retail market and that was why the refinery [Whitegate] was taken over’ (in 1982 following disagreements with the Irish Refining Company over the provision of oil products). Ireland had little choice but to form the INPC as some of the main producing countries refused to do business with the oil majors (‘the Seven Sisters’), and would only sell to a state owned company, thereby necessitating a body such as the INPC to secure oil supplies (CPI, 2005, pp. 54–5). The INPC was created to facilitate state to state oil deals and by 1980 the company was not involved in any offshore activities, nor were there any plans to change its remit (Wood, Mackenzie and Co. 1980, p. 28). A former INPC board member, Fergal recounted its formation and maintained that restrictions on the INPC’s involvement in exploration and production emerged as early as discussions on its Memorandum and Articles of Association. According to Fergal, ‘the Department of Finance came back firmly and told the Department that the INPC should not be involved in exploration and production’. Fergal ‘thought it was a bit much and unreasonable for the INPC not to get involved in exploration and production’, suggesting it was due to an ‘aversion in the state, from the Department of Finance especially, to spend money on risky activities’. Lamenting a lack of ‘state entrepreneurship’, Ken (a Fianna Fáil TD) also problematised the INPC’s failure to develop into a fully functioning production company, saying the INPC was established at a time when ‘there was a rollback [in state involvement] and it [the INPC] was quite restricted in its capacities’. When asked why this happened, Ken replied that ‘the state became risk averse’, suggesting there would be a public outcry if state funds were used in a seemingly risky venture, even though the potential rewards could be significant. In Ken’s opinion, this was quite unlike the early days of the Irish state when ‘state entrepreneurs’ took chances to establish and develop state companies such as Bord na Mona (the peat board), the Sugar Company and Aer Lingus (the country’s first airline),with civil servants and politicians taking risks to build indigenous capacity, knowledge, technology and industry.

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Robert, a former INPC CEO, took a more black and white view on the INPC’s lack of involvement in exploration and production, saying such activities were against the ‘basic philosophy’ of the company as it was established to deal with downstream activities such as securing supply and refining. However, in a Dáil debate in June 1985, Minister Spring referred to plans to amend the INPC’s Memorandum and Articles of Association to allow the INPC to participate in exploration efforts. Spring said these changes were as a result of ‘certain companies … [which] sought the INPC’s participation on a carried basis’ and Spring was of the opinion the ‘INPC should be permitted to accept these invitations’, on condition that the interest was small, the state was carried, and the INPC would not be liable for costs if no development occurred (Dáil Éireann, 11 June 1985a). Robert recalled proposals for the INPC to enter into hydrocarbon exploitation through a joint venture with the British National Oil Company (BNOC) in the 1980s, ‘but it didn’t come to anything and Margaret Thatcher privatised the BNOC so that was the end of that. And so we never really pursued that [INPC involvement in production].’ Ireland was not immune to the winds of change which brought to power Thatcher, Ronald Reagan and other firm advocates of a neoliberal model of business and politics. Although Robert suggested limitations on the INPC were due to a government view that the involvement of the INPC in exploration and production ‘would discourage exploration because [of] the view they had of state companies’, a government with a centre-right majority was ideologically opposed to state intervention, unless essential. Some research participants felt arguments against a national exploration company were connected with a desire to ameliorate activities which might affect the perceived attractiveness of the Irish offshore for IOCs. Others suggested the state had become ‘risk averse’ and did not want to invest in undertakings in which the outcome was uncertain. Yet, deeper ideological and political processes were at play and the Irish state was influenced by occurrences internationally, particularly the prevailing dogma which asserted state companies could distort the ‘free market’ and discourage private investment. One can take cognisance of global economic trends, particularly the amplification of neoliberal ideology, during the 1980s which resulted in a rollback in state intervention in different contexts, revealing how shifts in global capitalism impacted on decision-making and policy formation within a specific nation state. Limitations placed on the INPC had lasting consequences and a Joint Oireachtas Committee review found that a legacy of restrictions on the INPC’s activities was its ‘underdevelopment  … [which] meant Irish expertise in the petroleum industry was never sufficiently developed’ (JCCNRA, 2012a, p.  33). Occurrences at micro and meso levels also influenced Irish state hydrocarbon management and the impact of various interest groups are part of the story of Irish gas and oil.

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Irish Transport and General Workers Union By the time Kevin began working in the Irish offshore oil industry in 1977 many of his fellow rig workers had joined branches of the Irish Transport and General Workers Union (ITGWU). The branches were organised on a port basis and they encouraged companies operating from various Irish ports to hire local workers, for example ‘the Cork no. 5 branch insisted that Irish-based rig-workers would get work on the supply boats’ (Kevin). Five Irish ports were used for offshore servicing and as onshore service bases – Cork, Dublin, Fenit (Co. Kerry), Foynes (Co. Limerick) and Galway (AIB, 1979, p. 11). Reflecting on his experience within the union, Kevin said ‘our view was that we should build up a, apart from getting the work, we should build up a native-based services and supply industry’. Due to agreements with companies such as Transocean, significant numbers of Irish workers benefitted from the increase in exploratory activities offshore Ireland. Up to nine hundred workers were employed at different times, accounting for around ‘three-quarters of all the jobs on the rigs’ (Kevin). These workers were primarily employed with companies which hired rigs to oil companies and ‘the oil companies in the main didn’t have any problem with this, they just hired the rig to get the job done’ (Kevin). A retired trade union official, Michael recalled interactions between unions and oil companies which mirrored a wider industrial policy whereby ‘foreign companies coming in, particularly like American multinationals [were advised] that realistically they’d have to be unionised’. This position derived from the industrialisation programme which began with the ‘1958 turn’, culminating in changes such as a restructuring of Irish labour and growing militancy among workers (Allen, 1997, pp. 124–5). Giving the example of the Shannon Industrial Estate, Allen highlighted how meetings were often organised between foreign business interests and union leaders prior to the opening of a plant. Michael (former trade union official), suggested a similar strategy was applied to the offshore oil industry and companies were basically advised that ‘if you try to resist trade unions you’ll end up with a disaster, they’ll fuck you up every way they can. And so it wasn’t that hard to organise them [the companies] and we had a strong presence in some of the ports.’ Michael outlined some of the ways workers benefitted from the strong ITGWU presence, which included ancillary service provision and catering and occasionally ‘companies were paying for more than were actually on the rigs’. This occurred through a certain number of workers being paid even though they may not all have worked the hours remunerated, but as Michael argued ‘it was cheap, it was peace … there was very little trouble and that’s when the lads starting seeing that there was shows but that the thing would be capped … and then it faded away because nothing was discovered properly’. Paying additional wages can be seen as a form of tribute to the unions to maintain harmony among workers with

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this ‘unofficial’ procedure functioning as a mechanism for building support locally. Such attempts to gain the backing of unions and local communities can also be interpreted as a method of appeasing potential conflict over wealth distribution, ownership and control – topical matters thanks to campaigns by the Union of Students of Ireland, RPC and SWFP. Despite the optimism surrounding Ireland’s hydrocarbon potential, exploratory activities began to decline in the late 1970s and this slowdown occurred alongside a reduction in discourse related to Irish gas and oil. Several interviewees suggested hydrocarbon shows were capped in that era, creating suspicions that oil companies had found resources but were choosing not to produce them at that time. Fred (a Sinn Féin TD) worked on oil rigs off Ireland’s south-west coast in the late 1970s and recalled being on the SEDCO 708 rig when a significant discovery occurred in the Porcupine Basin in 1979. He added, ‘my understanding  …  from other people who worked in different blocks was that there were strikes in other blocks as well, maybe not as significant as the one that we were on … they hit gas and oil … it was very significant, or so we were told at that point in time and I’ve yet to be convinced of otherwise’. In addition, ‘we felt … there was no proper state oversight of what was going on’ (Kevin) and in subsequent decades, these interviewees continued to articulate concerns that the department was not being informed of developments. They also argued companies were choosing not to produce resources on the grounds they were waiting for the price of oil to rise so they could make higher profits. These issues came to a head again in the 1990s, although by that time the circumstances surrounding the management of Irish gas and oil were very different. The unravelling of Keating’s plans While the oil crisis of 1979 helped reinvigorate interest in Ireland’s offshore (Shannon et  al., 2001, p.  2), only three wells were drilled in 1980  – the lowest level of wells drilled since 1971 (PAD, 2012a). A second licensing round in 1981 resulted in several new companies commencing operations offshore Ireland and this round was followed by the PAD’s ‘open door’ policy3 which allowed companies to apply for authorisations for acreage or conduct seismic studies in areas not covered by other authorisations (Shannon et al., 2001, p. 2). Companies could now apply for acreage at any time, yet the PAD continued to hold regular licensing rounds for designated areas as part of its promotional remit. Although the amount of wells drilled rose to eight in 1981, drilling rates remained lower than the peak in 1978 and six to eight wells were drilled each year between 1983 and 1986 (PAD, 2012a). Shannon (2009) suggests the high oil prices of the 1970s had begun to take their toll by 1983, resulting in reduced demand for oil and gas globally which occurred alongside a move by oil companies away from regions perceived as high risk and unproven – such

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as in Ireland. ‘Two non-commercial but significant oil finds’ were made in the Porcupine basin (AIB, 1980, p. 3) but overall, drilling results were disappointing with some small, non-commercial discoveries and no indications of giant fields (Shannon, 2009, p. 47). The movement of some companies away from Ireland did not help increase drilling rates or the acquisition of knowledge on Ireland’s petroleum geology. Key officials then came to believe that a more facilitative response was required. Fianna Fáil Finance Minister George Colley (who precluded the INPC from activities related to hydrocarbon exploitation) assumed responsibility for gas and oil in early 1981 and ‘was at pains to point out that he was keen to see an orderly, effective and fast evaluation of Ireland’s hydrocarbon prospects’ (AIB, 1981, pp. 2–3). In line with his colleague Des O’Malley’s 1977 assertions, Colley stressed the ‘licensing terms were at maximum rather than minimum and whilst Irish participation in consortia was always welcome it would not be a pre-requisite to acceptance’ (ibid.). A weakening of Keating’s plans occurred as Colley sought to make Ireland more attractive to oil companies by reducing requirements to use Irish goods and services or pay the full royalty and taxation rates established in 1975. Efforts were made to entice companies to exploit Ireland’s resources with culpability for a decline in drilling rates placed firmly on the state by virtue of supposedly tough fiscal and non-fiscal requirements. Rather than blame the state for a failure to create the best conditions to attract companies, AIB’s report places some responsibility on oil companies, suggesting the industry had been slower than expected in developing technology necessary for deep water activities, due to a slowdown in the development of fields in Europe (AIB, 1981, p. 3). Advances in deep water drilling technology were crucial for Ireland’s offshore and this report implies companies were more concerned with allocating their budgets to hydrocarbon exploitation in more lucrative climates than developing the technology necessary to exploit Irish hydrocarbons located in deep waters. Hence, shifts in the global energy context were manifested in Ireland, particularly in terms of a re-allocation of exploration budgets. Ministers also catered for other elements of the petroleum industry as apparent in the 1982 decision to acquire the Whitegate oil refinery when its shareholders (Esso, Texaco, Shell and BP) decided to permanently cease refining at Whitegate (INPC, 2006). The state was obliged to take over the Whitegate oil refinery as ‘the companies decided to … concentrate production in Milford Haven [in the UK] … the state only took over the refinery …when it became apparent that the previous owner was going to close it’ (Robert, former INPC employee). He added, ‘the government in its wisdom … decided that it wanted to have a refinery in Ireland for strategic reasons, for security of supply reasons and so we [the INPC] bought the refinery and we took it over and we ran North Sea crude oil in it’.

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Spring’s modifications Changes to Ireland’s licensing system were not divorced from a tumultuous political climate. There were five General Elections between 1977 and 1989, alternating between Fianna Fáil governments (1977–81; March 1982–November 1982; March 1987–May 1989) and Fine Gael–Labour coalitions (June 1981–February 1982; December 1982–January 1987). Minister Dick Spring (Labour) introduced changes to the licensing terms in 1985, allowing him to reduce levels of state participation and royalties when he felt it ‘was necessary in order to enable a marginal field to be developed and, at the same time, to provide a reasonable return on the expenditure to be incurred by the licence holders’ (Dáil Éireann, 25 April 1985). Spring described a ‘marginal field’ as ‘one in which the return on investment does not adequately reward the investor for risk, taking account of alternative investment opportunities’ (ibid.). Spring claimed the state was ‘competing’ with other countries to encourage companies to conduct offshore activities and his changes made the Irish regime more attractive. Reductions in royalties and participation for ‘marginal fields’ were decided by a ‘profitability ratio’, calculated by dividing net revenues by capital expenditure (ibid.). For example, in the case of a field with proven recoverable reserves of less than 75 million barrels, the company would not be liable to pay royalties on the first 25 million barrels of oil, although ‘it was not enough that the field would be less than 75 million barrels – it must also be a marginal field’ (ibid.). With Spring’s changes, the state retained the right to participate up to 50 per cent in a field, without having its costs carried. In the subsequent Dáil debate, Fianna Fáil TD Albert Reynolds condemned Spring’s modifications, beginning with the charge that ‘Ireland is not an oil producing province … we are looking for scarce exploration funds in competition with every other country around the world. We want these companies to come into an area that is not proven.’ Reynolds compared drilling rates in Ireland with the UK, saying there were more wells drilled in the UK sector of the North Sea over a six-month period than offshore Ireland throughout ten years of activity. While strongly arguing for an approach that encourages companies to explore for Irish hydrocarbons, Reynolds slammed the government for removing royalties, questioning whether this approach was a result of ‘ideological hang-ups’4 (Dáil Éireann, 25 April 1985). From Reynolds’ perspective, the removal of state participation was preferable to the abolition of royalties as a mechanism for receiving revenues as royalties can be viewed as another cost of ‘doing business’,5 while state participation entailed the state having some control and ownership of the resources, hence, interfering in the ‘free market’. Reynolds questioned why royalties were waived considering the ‘industry did not ask them to do so’ and said the government should have

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concentrated its efforts on addressing uncertainties surrounding state participation in activities – in his view ‘the root cause of the problem in relation to exploration off our coasts and the government have ignored this’. Avoiding issues around companies choosing to explore for resources elsewhere or inadequacies in relation to building knowledge of Ireland’s offshore geology, for Reynolds state participation was the reason Ireland had low drilling rates. Reynolds flippantly added ‘we can talk about fifty per cent now and we have spoken about this for ten years but fifty per cent of nothing is nothing and what we have been clapping ourselves on the back about for the last ten years has turned out to be nothing’. Reynolds’ speech was underpinned by his concept of ‘ideological hang-ups’, which he used to criticise the activities of the Fine Gael–Labour government on ideological grounds, implying Labour was driven by a strong Left agenda. Yet, Spring’s changes illustrate how the licensing regime had shifted from a centre-left orientation in 1975, reflecting the turn towards neoliberalism. That Reynolds could equate the option of limited state participation (on a state-funded basis) with socialism underscores the conservatism of Irish political discourse by international standards, in the 1980s. Tomás Mac Giolla (TD for the Workers’ Party) also denounced Spring’s modifications and critiqued the changes within an analysis of the state’s overall model. In Mac Giolla’s view, the state’s approach was shared by successive governments (Fianna Fáil and Fine Gael–Labour coalitions) and ‘characterised by an absence of any coherent policy and an apparently limitless desire to accommodate the demands of the exploration companies’. The new concessions ‘were just the latest part of the process of capitulation to the multinationals’ and Mac Giolla argued ‘the whole approach of the government to the development of oil resources has been flawed’. Mac Giolla emphasised the value of learning from the Norwegian model, highlighting how ‘they [the Norwegians] bought the technical expertise to do the job’ while also developing their own capacities and knowledge by participating in activities (Dáil Éireann, 25 April 1985). Mac Giolla concluded ‘this is an outrageous deal, a capitulation and sell-out to Chevron and the Seven Sisters. The Minister is again giving away our natural resources free, as previous Ministers did with our mineral resources.’ Despite the censure levelled at the government, Spring defended his position and at different times responded to questions related to hydrocarbon exploitation. On one occasion he announced that BP’s well in the Celtic Sea (block 48/18) had found gas with a flow rate of 13.7 million cubic feet per day (Dáil Éireann, 31 October 1985). This find was deemed ‘non-commercial’ and BP relinquished its exploration licence in 1988. Since then three other companies have held authorisations for this block, including Lansdowne Oil and Gas which has held a standard exploration licence for this area since 2007 (JCCNRA, 2012a, p. 126; PAD, 2015). Of the remaining wells drilled in 1985, four were plugged and abandoned as dry holes while Gulf ’s drilling in the Celtic Sea (50/-6, Dunmore prospect)

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resulted in an oil well being plugged and abandoned (PAD, 2012a). Minister Spring later stated the well had a flow rate of 2,074 barrels of oil and 1,284 thousand standard cubic feet of gas per day (Dáil Éireann, 5 February 1986). Gulf classified this non-commercial and its licence expired in 1988. Spring modified the licensing terms again in September 1986, removing state participation. He also re-defined a marginal field as one containing 75 million barrels of oil which, in line with the 1985 changes, meant companies would not be liable to pay royalties on the first 25  million barrels and were subject to a maximum royalty rate of 8 per cent on the remaining oil. Spring justified these changes on the basis of reduced oil prices (estimated at $10–15 a barrel compared with $28–30 in 1985), stating companies were cutting back on their exploration budgets. Spring claimed he ‘had to ensure that our terms continued to be sufficiently attractive to invite people in to explore and develop, and sufficiently firm to ensure a fair share of that development for us, the people who own the oil. Our terms have to be competitive with other nations’ (Dáil Éireann, 26 November 1986). Spring suggested the oil industry’s general reaction to the changes was positive but he could not comment on whether the changes had resulted in any additional drilling commitments. Nevertheless, he hoped that by 1987 the country would see a ‘heightening of exploration activity as a direct result of the clarification in September’ (ibid.). New Minister – new terms: Burke’s changes Contrary to Spring’s aspirations, 1987 brought a new low in drilling rates with only three exploration wells drilled that year, compared with six in 1986 (PAD, 2012a). The 1987 General Election resulted in a Fianna Fáil government and a new Minister for Energy, Ray Burke (10 March 1987–24 November 1988). Burke shared his colleague Reynolds’ sentiment that Spring’s 1986 changes were ‘too little, too late’ (Dáil Éireann, 26 November 1986) and Burke was not long in office until he announced new changes to the fiscal regime. Burke removed obligations for companies to pay royalties and allowed companies to offset costs for exploration and development accrued over a previous twenty-five-year period before tax would be paid (DCENR, 2011). Burke said the rationale for his alterations lay in his grave concern for exploration prospects, citing low oil prices, disappointing drilling results and a small number of commitments to drilling wells (Dáil Éireann, 15 October 1987). Accordingly he ‘decided to abolish royalties because such a measure was essential in order to make our terms competitive with the best currently in Europe – that is, in the UK and Spain both of which have abolished royalties in recent years. Even the Norwegians who traditionally apply the severest of terms have also abolished royalties’ (ibid.). Burke argued had royalties not been abolished, drilling would end with little potential for future discoveries and in his opinion people in Ireland would rather

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have income from tax on petroleum activities than no income (ibid.). Former Minister Spring was disparaging of Burke’s modifications and argued that in the event of a commercial discovery of fifteen million barrels, the state would ‘get absolutely no return’ due to the ability of companies to offset their exploration and production costs and the removal of royalties. In Spring’s opinion, royalties would have ensured a direct income to the state. Burke sidestepped the issue by replying that write-offs on exploration had been permissible after 1986 while royalties on small fields had been minimal under the preceding regime. Burke was confident the new changes would ‘have the desired effect of bringing forward an intensive exploration regime over the next few years’ (ibid.). Some unease surrounds Burke’s changes as on several occasions he had met with oil industry executives ‘in the absence of his department officials’ (CPI, 2005, pp. 58–60). These meetings are problematic given revelations which later emerged around Burke’s relationship with different commercial interests. During the ‘Tribunal of Inquiry into certain planning matters and payments’ (the Flood Tribunal), Burke was found to have received money unethically in relation to planning and radio licensing matters (Collins and Quinlivan, 2006, p. 398). The Flood Tribunal established Burke had ‘received illicit payments of almost £250,000’ and following a subsequent Garda investigation, Burke was given a six-month prison sentence for tax offences in 2005 (Connolly, 2014, p. 178). While Irish politics is not free of malfeasance,6 he became the only minister ever to serve a prison sentence for corruption (Cox, 2015, p. 231) and his actions in other spheres have prompted concerns of impropriety related to hydrocarbon management. Aside from Marathon’s Ballycotton gas discovery (brought into production in 1991 as part of the Kinsale authorisation) and a peak of five wells in 1989, Burke’s modifications did not impact on drilling rates which remained low: three wells in 1988; four in 1990; down to an all-time low of one in 1991. By the end of the decade no other fields had been deemed commercial and large areas of the Irish offshore were unexplored or under-explored, the cause of which were described as ‘serious cost disadvantages compared to the North Sea in terms of water depths, lack of infrastructure and distance from shore’ (PAD, 2006a, p. 1). In June 1992, the new Minister for Energy Bobby Molloy7 (Progressive Democrats) announced he was preparing new licensing terms for oil exploration. The 1992 Licensing Terms Described as an effort to ‘kick-start the floundering industry’ (O’Connor and Bruining, 2001), the 1992 Licensing Terms for Offshore Oil and Gas Exploration and Development encapsulated the 1985–87 changes, wrapped up in a language and ethos very different to that underpinning Keating’s 1975 terms. A foreword to the new terms made clear that state participation was no longer on the agenda:

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History of Ireland’s oil and gas experience Since the government do not consider that direct state involvement in this area of activity is appropriate, the pursuit of their policy objectives requires that competent private sector companies be encouraged to invest in the search for and production of oil and gas in Irish waters. The private sector is recognised as having the resources, expertise and practical experience for such a task. The government have taken a number of major initiatives in order to enhance the comparative attraction of Ireland as a location for investment. Principal among such initiatives is the introduction of a complete statutory regime of petroleum taxation and the introduction of new licensing terms. (DMNR, 1992)

The ‘introduction to the 1992 terms practically guarantees a free market approach  …  [the  1992] terms are an abomination’ (Fergal, former senior civil servant involved in writing the 1975 terms) and the new terms unravelled Keating’s work, removing royalties, state participation, bonuses and requirements to land gas and oil in Ireland. Ownership and control of produced hydrocarbons would be privatised in exchange for payment of a 25 per cent tax rate (reduced from 50 per cent in the 1992 Finance Act) – against which exploration, development and production costs could be offset. In Fergal’s view, oil companies played a central role in the terms being changed and he claimed the companies discussed the terms with civil servants, telling them what to eliminate. Speaking about the 1992 terms, Peter (CEO of an oil company) described their origins as emerging from a decline in drilling, ‘so, by about 1990, or 1992, drilling had totally stopped, there was no investment being made at all and the government wanted to attract new investment and they consulted with the industry’. While Peter’s comment exaggerates the decline in drilling (four wells were drilled in 1990, one in 1991, two in 1992 (PAD, 2012a)) the industry clearly influenced the new terms, resulting in significantly fewer financial obligations and greater freedoms for companies. Companies were not required to sell hydrocarbons back to the state and if they chose to do so, it would be at full market prices – in stark contrast to the deal negotiated with Marathon which saw Kinsale gas sold at a pre-agreed rate to semi-state companies for industrial purposes. Illustrating the recurrent efforts to create the best conditions for multinational companies, the terms sought to beat the ‘competition’: ‘Most importantly, the treatment of profits in Ireland generated by oil and gas production compares very favourably with other countries … greater freedom to market indigenous oil and gas on the basis of market prices and, in the case of gas, interconnection with the UK should serve to enhance the attractions of Ireland as an investment location’ (DMNR, 1992). Although the new terms focused on attracting ‘internationally mobile exploration/ production’ (DMNR, 1992), there was a only marginal increase in drilling rates: two wells in 1992; three wells in 1993; 1994 saw two wells drilled; five wells in 1995; and 1996 brought two wells (PAD, 2012a). 1996 is notable for being

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the year in which Corrib gas was discovered off the Mayo coast. Aside from an increase in 1997 (five wells), drilling rates continued to remain low and ranged from one to three wells between 1998 and 2000. As the first commercial discovery since Kinsale (1970) and Ballycotton8 (1989), Corrib sparked fresh hopes that hydrocarbon production would bring benefits to the country, prompting industry workers to seek jobs for Irish-based workers. SIPTU Oil and Gas Committee/National Offshore Rig Workers Committee The Corrib discovery led former rig-workers to question if they could get jobs back on the rigs ‘after years of pretty much fuck all activity … and initially we didn’t think it would be that hard … [but] we were all taken a bit aback by the degree of resistance by the oil companies’ (Michael, former trade union official). Michael said he and his union colleagues thought it ‘was just about jobs in the sense that we thought this will be the same as it was in the 70s’. However, following meetings between union representatives and the Corrib consortium (then Enterprise, Statoil and Saga) it transpired the oil companies would hire rigs directly from companies like Transocean which would transport their rigs from places such as Aberdeen in Scotland, complete with workers; neither the drilling companies nor the oil companies were keen to employ unionised Irish labour, as had previously occurred. Michael recalled how a ‘guy in Statoil’ helped organise a meeting with Transocean who said they could ‘create a few jobs here and there’ but not on the same basis as the 1970s when workers were hired directly from Irish ports. Although this new arrangement brought the possibility of some jobs, Irish-based workers would struggle to be employed offshore in Ireland. According to Fred, TD and former rig worker, ‘to get a job even in Irish waters, they [the rig-workers] would have to leave Ireland, join a rig somewhere off the coast of Africa or the North Sea, if that rig was coming to Ireland, get a job on that and come in the back door’. Fred described this as a strategy ‘to break the union and keep wages down obviously’ as oil companies ‘didn’t want to pay the union rate, they didn’t want a unionised oil rig so  …  they went out of the country and they [the workers] joined outside and you joined as a non-union worker and you had to accept their [the company’s] rates’. Nevertheless, SIPTU9 were able to organise a ‘forum’ where they would meet with department officials, occasionally a Minister, and representatives from the oil industry, to lobby for jobs on behalf of Irish-based labour. The ability to develop such links is connected with the government led ‘social partnership process’ whereby trade unions and business interests were included in macro level processes of decision making and policy formation (Allen, 1997; Collins and Cradden, 2001). Consequently, trade union strategies were often in line with the Irish state’s industrial policies.

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SIPTU organised meetings with ‘Enterprise Oil, Frank Fahey who as a Minister at the time, we met with the department officials’ (Fred, former rig worker). Speaking from a union perspective, Michael (former SIPTU official) highlighted how these meetings were about longer-term benefits – ‘it wasn’t only a question of jobs on the rigs for a short time and on the supply boat, and then build on that … we were trying to recreate the 70s but his resistance [head of Enterprise Oil] to that was tough … their attitude was “no” because, and they, and he said this to me, that they had the complete backing of the politicians’. Michael pointed to the influence of the IOOA in these negotiations, which argued ‘we’ll lose any investment here’ if restrictions were placed on the oil companies. Michael described union representatives feeling ‘like a gnat at the back of an elephant’ saying they felt they were ‘going through the motions, they’d [PAD/ companies] no intention of listening to you’. He added IOOA representatives indicated their displeasure at having to negotiate with the union, suggesting the only reason they participating in meetings was ‘to neutralise us … to know the arguments, to neutralise the arguments. And the Minister one time took us out to lunch, X, myself and Y, he didn’t want to get our views at all, he only wanted to go through the motions.’ Despite the long-standing links between the trade union and government, the union lost its battle for a return to their position in the 1970s and the government gave the oil company free rein to conduct its operations, without any requirements to hire Irish workers or use Irish services and ports. The oscillating power of different interest groups, namely the state bureaucracy, oil industry and trade unions, is a fundamental part of the evolution of the Irish licensing regime. As we’ll discuss in the following chapter, these and additional social pressures resulted in a divergent approach, one which was a far cry from the ‘golden era’ of Justin Keating’s terms. Notes 1 A 2015 PAD report identifies additional participants in Providence’s operation: Capricorn Ireland (38 per cent, acting as operator), Chrysaor (26 per cent) and Sosina (4 per cent). 2 Dick Spring (Labour) became Minister in 1983 following the election of a Fine Gael and Labour coalition in 1982 (Labour Minister John Bruton held the post from 1982 to 1983). 3 The preceding system meant companies could only apply for exploration authorisations when a licensing round was announced. With an open door policy, companies could apply for acreage in specified tranches of offshore areas any time. 4 Reynolds was more familiar with oil exploitation than most politicians as he had served as Minister for Industry and Energy from 9 March 1982 to 14 December 1982, and as Minister for Energy from 4 November 1992 to 12 January 1993. In a later speech on the Cork Gas Company, Reynolds expanded on his concept of ‘ideological hang-ups’, which he used to

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criticise state involvement in enterprise. In his view, state policy ‘seems to have nothing to do with private enterprise or private investment, but letting the state control everything so that we can move towards the last stage of a socialist state’. He continued to ask ‘why not let private investment in?’ answering, ‘because of an ideological hang-up’ (Dáil Éireann, 30 October 1985). 5 Royalties are generally calculated on a percentage of hydrocarbons before other costs are offset, allowing the state to take a predefined share upfront. The company can consider the amount paid out in royalties as a cost of doing business and can offset that against the tax rate, resulting in a lower tax bill. 6 There were at least six major political corruption revelations between 1994 and 2001 (Collins and Quinlivan, 2006, p. 298). 7 A General Election in June 1989 resulted in a Fianna Fáil–Progress Democrats coalition which lasted until November 1992. 8 Ballycotton is considered part of the Kinsale project. 9 SIPTU resulted from the amalgamation of ITGWU and the Workers Union of Ireland in 1990.

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A new millennium, a new approach (2000–14)

The new millennium signalled further changes to the state’s approach to hydrocarbon management, beginning with the sale of the business and commercial assets of the state owned INPC. Whitegate, Ireland’s only oil refinery (taken over by the state in 1982), and the Whiddy Island oil storage terminal (acquired by the state in 1985) were sold to the Tosco corporation, an American oil refining company (RTÉ News, 2000). Mary O’Rourke (Fianna Fáil Minister for Transport, Energy and Communi‑ cations, and Public Enterprise) announced the sale of Whitegate and Whiddy Island was completed on 16 July 2001 and the sale terms included a payment of $100 million. However, ‘the net proceeds to the state will be substantially less, after taking account of a number of factors including the retention of INPC’s existing debt’ (O’Rourke, Dáil Éireann, 17 October 2001). This debt may have been a legacy of the INPC funded £26 million investment programme used to upgrade the Whitegate refinery (Dáil Éireann, 19 April 1994), prior to its privatisation. Allen (2007, p. 218) claims the state had previously invested the equivalent of the sale price in upgrading the facilities prior to their sale, suggesting the state received minimal, if any, proceeds for the privatisation of INPC assets. A newspaper article on the sale described the ‘INPC as a tasty morsel for US firm’, saying ‘the decision to sell INPC came after its own board advised Public Enterprise Minister Mary O’Rourke that its future lay inside a small multinational, rather than as an independent player in a relatively small market’ (Irish Independent, 2001). When questioned why the Whitegate refinery was sold, considering it was the only refinery in Ireland, Robert (a former Chief Executive of the INPC) replied: Well, it [the state] always held the view that, well things like that are better in private hands. The state only took over the refinery in 1982, or there abouts, when it became apparent that the previous owner was going to close it. And it was felt for strategic reasons there should be a refinery … it [the state] must have lost money on it and it varied considerably both in terms of capacity and technology and then ah,

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I think there was the general view that the state didn’t have an interest in it. As long as there was a refinery there, it didn’t matter who was running it. And there’s … a general move in the 80s or 90s, towards privatisation of state assets such as Eircom, the Irish Sugar and Aer Lingus and all that sort of stuff.

From Robert’s comments, one can see a connection between wider trends in neoliberalism and Irish state policy – tendencies which were earlier manifested in the licensing regime. The privatisation of those infrastructural assets in 2000 signalled a decisive break from the ideology underpinning the 1975 terms. On the exploration front, 2001 appeared to be a bonus year with seven wells drilled, two of which were gas producing wells connected to the Kinsale Head gas project. One well was an appraisal well drilled by Ramco which ultimately led to the production of gas from Sevenheads in 2003 (a gas find initially discovered by Esso in 1973) (JCCNRA, 2012a, p. 118). Despite a highpoint of eight wells in 2003 (six related to Sevenheads), 2002 and 2004 each had the distinction of only one well being drilled while 2005 resulted in no wells – the first time there was no drilling activity since 1970 (PAD, 2012a). 2005 was also notable for other reasons as the jailing of the Rossport Five in June focused public attention on the conflict over the location of the Corrib gas terminal and pipeline. It is difficult to establish whether the controversy over Corrib impacted on drilling rates offshore Ireland. Another consideration provides a probable explanation for lower drilling rates – companies are granted exploration licences and petroleum leases on the basis of agreed work plans, committing to drilling wells at specific stages of their authorisation. It is likely companies had not intended to drill exploratory or appraisal wells in 2005. Indeed, the 2006 licensing round for the Slyne, Erris and Donegal basins indicated continued interest in Irish hydrocarbons with four exploration licences awarded (Shannon, 2009, p.  48).Three wells were drilled offshore Ireland in 2006 (PAD, 2012a). More recently, oil industry consultants Wood Mackenzie said ‘the entry of new companies has shown that upstream players are still willing to invest even after the experience of Corrib’ (2014, p. 21). Against a backdrop of public debate on Irish hydrocarbons sparked by the Corrib controversy, Minister Noel Dempsey1 announced a review of Ireland’s licensing terms (Dempsey, 2006). Dempsey stated the review’s primary objective was to examine whether Ireland’s ‘terms ensure a fair return to the Irish public in circumstances where energy prices have risen sharply’. The review would also consider Ireland’s non-fiscal terms ‘to ensure that these terms facilitate and encourage effective exploration in a timely manner’ (ibid.). Dempsey was quick to counter claims that Ireland’s terms were overly generous, stating ‘there is no basis for media commentary suggesting the award of an exploration licence equals “giving away our resources”’. Dempsey was at pains to stress the Irish government ‘did not have a track record for introducing retrospective taxation

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measures’, thereby assuring companies that any changes would only be applied to new authorisations. According to the JCCNRA (2012a, p. 48), revision of the terms was underpinned by concerns about the level of control private companies had over Irish gas and oil, and the length of time companies could retain this control. Following the 2007 General Election, Green Party TD Eamon Ryan replaced Dempsey as Minister, and he announced new licensing terms and a licensing round. 2007 Licensing Terms In August 2007 Ryan introduced the Licensing Terms for Offshore Oil and Gas Exploration, Development and Production, 2007, applied to new authorisations granted after 1 January 2007. Described as being in the ‘greatest public good’, the 2007 terms included the introduction of a Profit Resource Rent Tax (PRRT), claimed as similar to models employed in the UK, Denmark, Norway and German Länder which impose two separate taxes on production (PAD, 2007). The Indecon report (2007) noted the uniqueness of a mechanism such as the PRRT for gathering additional revenues. The PRRT would be payable on an incremental basis in the case of ‘more profitable fields. For marginal fields, PRRT will not be payable’ (PAD, 2007). PRRT is applied after costs have been offset and the 25 per cent corporation tax rate has been paid, calculated on a ratio of the remaining profits to levels of capital investment. If the profit ratio is less than 1.5 (‘cumulative post-tax profits to the cumulative value of capital investment’) the company will not pay PRRT; if the profit ratio is between 1.5 and 3.0, companies are liable to pay a 5 per cent PRRT; companies are subject to a PRRT of 10 per cent if the profit ratio is between 3.0 and 4.5, and if the profit ratio exceeds 4.5, the companies are liable to pay 15 per cent (PAD, 2007). The PAD (2007) claims that on the most profitable fields, the return to the state will increase from 25 to 40 per cent, however, the calculation of PRRT means that only very profitable fields would be subject to additional taxation (up to an extra 15 per cent on top of the 25 per cent corporation tax) and it is not likely that a company will pay 40 per cent tax. By only taxing excess profits calculated against levels of capital investment, the PRRT indicates a continued desire to avoid strong state ownership or control while ensuring oil companies reap the largest share of revenues, thereby demonstrating a distinct ‘free market’ orientation with minimal state intervention. The 2007 terms also resulted in some non-fiscal changes such as requiring licensees to surrender acreage earlier and the length of some exploration licences were reduced.2 In doing so, companies would be encouraged to make decisions on activities quicker, potentially leading to an increase in drilling rates and commercial discoveries.

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The rationale behind the 2007 terms is said to lie in the ‘Indecon Report’, a publication commissioned by DCENR and compiled by Indecon International Economic Consultants in association with London Economics. Described as a review of Ireland’s petroleum exploration and production licensing terms, this evaluation was initiated by Noel Dempsey in 2006 to consider ‘whether additional revenues from potential discoveries are feasible and whether this would require a more flexible fiscal regime’ (Indecon, 2007, p.  i). This short sentence reveals how the review would focus on benefits from additional revenues rather than state participation, reflecting the context for an analysis that did not question the transfer of control and ownership of state resources to private companies. The absence of such analysis is important as Indecon’s report is frequently described as a wholly independent, comprehensive review of how the Irish state manages its resources. Indeed, some proponents of the state’s approach justify the 2007 licensing terms on such grounds. Yet, Indecon’s review was not as widespread as advocates suggest, as evident in the narrow focus of the appraisal. The terms of reference for Indecon’s review stated advice was required on particular areas, including ‘consideration of the department’s views on how the licensing regime could best be changed, as set out in two reports [Department of Communications, Marine and Natural Resources (DCMNR), 2006a, 2006b] covering fiscal and non-fiscal terms respectively’ (Indecon, 2007, p.  1). Those reports ‘implicitly recognise that an effective and efficient fiscal system must facilitate the ability of government to receive a fair market price for its petroleum resources without discouraging long term private investment in the petroleum sector’ (ibid.). In addition, ‘such petroleum fiscal systems must also give an expected fair return on investment to investors, limit administrative burden, and promote healthy competition and market efficiency’. With its neoliberal terminology and focus on market conditions of investor returns, competition and efficiency, the DCMNR report emphasised a reduced role of the state (limited administrative burden) and illuminates prevailing thinking within a department concerned with creating good conditions for private industry. Discussing the 2007 terms, Charles (PAD consultant) explained why state participation was not considered an option: ‘participation is very negative for the industry because it considerably reduces the potential for their gain and the government concluded it’s not the best way to go. And the same goes for a national oil company.’ When asked if the negative view of state participation was due to detrimental effects for corporations the government sought to attract, Charles replied ‘yes’. Seeking deeper understanding of this topic, I suggested the decision was ‘made on economic terms, but were there ever discussions about more political considerations?’ Charles responded ‘not that I know’ then laughed, creating the impression issues other than the attractiveness of the fiscal regime for companies were irrelevant.

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The revision of Ireland’s fiscal regime in 2007 appears to be in line with global trends in resource management with several states demanding a greater share of the revenue from hydrocarbon production. However, as the 2007 terms do not strengthen the Irish state’s control over its resources, the changes are minimal in comparison to the nationalisations in Ecuador and Bolivia. Furthermore, the PRRT is only applicable to licences granted after 1 January 2007, will only bring additional revenues (after tax and other costs have been offset) in the case of large fields, and rates of government take in Ireland remained among the lowest in the world (discussed in chapter seven). While a marginal improvement on the 1992 terms through the increase in taxation, the 2007 terms are a world apart from the 1975 terms and its ‘primary policy considerations’ – public ownership and maximum benefits for the country. Wider developments 2007 was a busy year for the Department of Communications, Energy and Natural Resources (as it became known after the 2007 General Election) and a statement celebrated the extension of Ireland’s Continental Shelf (22 April 2007). Following a submission to the United Nations Commission on the Limits of the Continental Shelf, Ireland received a recommendation which allowed the country to extend its Continental Shelf beyond the two hundred nautical miles agreed by the 1958 UN Convention on the Continental Shelf. The additional area added to Ireland’s Continental Shelf was 56,000 sq. km, 80 per cent of the land area of the state (DCMNR, 2007). Under that UN Convention, a state can exercise rights over its Continental Shelf in order to explore for, and exploit, natural resources in the seabed and subsurface – clearly beneficial for hydrocarbon exploitation. In October, Minister Ryan announced a new licensing round in the Porcupine Basin, opening up approximately 63,500 sq. km of unlicensed acreage with four applications received by December. 2007 was a positive year in other respects as each of the five wells drilled that year encountered oil or gas (Shannon, 2009, p.  48). 2008 was a ‘relatively active year’ with four wells drilled (PAD, 2012a). The following years were less positive in terms of drilling rates and only one well was drilled per year in 2009, 2010, 2011 and 2012. Nevertheless, the PAD persevered with its efforts, holding licensing rounds in 2009 (Rockall Basin), 2010 (onshore in the North West Carboniferous Basin and Clare Basin) and 2010–11 (the Atlantic Margin – over 250,000 sq. km, the largest round ever opened), with each round resulting in the granting of exploratory authorisations. The latter two rounds culminated in the awarding of thirteen offshore licensing options, three onshore licensing options and two standard exploration licences (offshore) (PAD, 2012b). In April 2009, the Malaysian state owned company Petronas acquired PSE Kinsale which operates the Kinsale Head, Ballycotton and Sevenheads gas fields

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in the Celtic Sea (Petronas, 2013). With this buyout, the Malaysian state would have more control over hydrocarbon production in those fields and receive a higher proportion of rent than the Irish state. Issues of regulation and safety Fuelled by the ongoing Corrib dispute, 2010 and 2011 were notable for increased public and political attention on Irish state hydrocarbon management, culminating in deliberations within a joint Oireachtas committee3 and new legislation. In April 2010, the introduction of the Petroleum (Exploration and Extraction) Safety Act 2010 (PEES Act) conferred responsibility for safety on the CER. Characterised as an ‘independent body responsible for overseeing the liberalisation of Ireland’s energy sector (CER, 2011, p. 1), the PEES Act meant CER became responsible for petroleum safety. According to CER, these modifications were governed by a principal objective of protecting the public through ‘fostering and encouraging safety in the carrying out of designated petroleum activities’ (2011, p. 2). Considering this body had no prior experience of hydrocarbon exploitation, uncertainties surround its organisational competency and capacity to perform the new responsibilities delegated to it. As Peter, CEO of an oil company, pointed out: They [the Irish state] hadn’t really thought through the difference in role between the department as promoter of the offshore and the department as regulator of the offshore. They hadn’t separated those two roles properly and now they have done it but they’ve done it in a really inappropriate way. They’ve given the regulatory function to the CER, that wasn’t set up to do that at all, that was set up to do something totally different. So now the CER which has no expertise, [is] opining on safety for offshore which is mad. The CER was set up to decide how much Bord Gáis and the Electricity Supply Board could charge for electricity prices and how much Bord Gáis could charge for building a second interconnector to the pipeline in Scotland. That was its function, now all of a sudden it’s supposed to opine on pipeline safety, it’s got totally nothing to do with it.

CER was tasked with designing and implementing a petroleum safety framework to incorporate new tasks4 designated to CER under the PEES Act (2010) and was granted the ability to impose sanctions5 on companies found guilty of breaching safety standards. A petroleum safety framework implementation project was established to assist CER assume responsibility for safety of petroleum operations. This project was required to consider existing interfaces with other statutory and investigative authorities, resulting from the overlap in safety responsibilities, safety regulation, environmental regulation and economic/land use regulation (ibid.). The complexity and fragmentation of the consents processes surrounding Irish hydrocarbon exploitation is evident in Table  1 (below) which summarises the

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History of Ireland's oil and gas experience Table 1  Main authorisations

Authority DCENR

Irish Coast Guard Marine Survey Office The Commissioners of Irish Lights Department of Environment, Community & Local Government ABP EPA (incl. Office of Radiological Protection) EPA Irish Aviation Authority Health and Safety Authority CER

Permit/consent/approval Petroleum lease Environmental Impact Assessment Permit to use or discharge added chemicals Approval to drill Plan of development approval –  Approved management plan –  Consent to construct upstream pipeline –  Consent to operate upstream pipeline –  Approval for first gas and oil Emergency response procedures manual Oil spill contingency plan Certificate of survey

Onshore

Offshore

  

  

   

        

Aids to navigation



Foreshore licence (If work is conducted in the foreshore – seabed and shore below the line of high water of ordinary or medium tides and extends to 12 mile limit) Planning permission/approval Licence to handle radioactive sources





 



IPPC/Industrial emissions Air operator certificate



 

Emergency response procedures manual Pre-construction safety report Operational safety report Well work safety permit Production safety permit

   If located onshore  



Main authorisations (adapted from CER, 2014).

If located offshore  

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main authorisations necessary for companies with a petroleum lease. Although CER’s document on permissioning processes (2014) clarifies the main authorisations and regulatory bodies, the issue of project-splitting within planning processes remains problematic, as starkly illustrated in the case of Corrib. Concerns also surround approvals for different activities in terms of the state committing to arrangements with oil companies for hydrocarbon production when the country’s choice of fiscal regime is contested – indicated in continuing debate on the matter. Joint Committee on Communications, Natural Resources and Agriculture From the onset, 2011 was set to be an eventful year due to social, economic and political turmoil created by a long-running recession, the Fianna Fáil–Green Party government’s decision to bail out privately owned banks in 2009, and the resultant government-imposed austerity measures. A General Election brought a Fine Gael–Labour coalition government, a new Minister (Pat Rabbitte, Labour) and increased debate in the Dáil around the management of Irish hydrocarbons. Sinn Féin’s motion to implement a new approach to hydrocarbon management (defeated after much debate in the Dáil), and the decision of the JCCNRA to review Ireland’s licensing system, reflected intense public discussion on Irish gas and oil. Between September 2011 and March 2012, the JCCNRA invited a range of stakeholders to make presentations, including: DCENR; IOOA; SIPTU; Pobal le Chéile; Pobal Chill Chomáin; Council for the West; Pro-Gas Mayo; Commission for Energy Regulation; the Norwegian Ambassador to Ireland and an Assistant Director of the Norwegian Ministry for Petroleum and Energy (JCCNRA, 2012a, p. 21). During discussions with a number of TDs involved in the process, each deputy mentioned the impact of the Norwegian contribution, evident in a case study on Norway within the JCCNRA’s final report. The JCCNRA report encapsulated five themes:  (1)  developing petroleum resources to the benefit of the Irish people as a whole should form the basis of petroleum exploration policy in Ireland; (2) to achieve this, a balance should be struck between the need for maximising state revenue with incentivising offshore oil and gas exploration; (3)  recognising two major changes in the field of offshore exploration as huge advances in technology which facilitate exploration and greatly improve the drilling success rate, and better geological data; (4) ensuring transparency, simplicity and forward planning are kept to the forefront in legislation, licensing and planning; (5) ensuring local communities are involved in a comprehensive consultative process from the earliest practicable stage and that they benefit in a defined way from the resources being exploited (2012a, p.9). The first key theme is reminiscent of the 1975 terms in relation to public ownership, however, the eleven recommendations outlined in the JCCNRA report

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did not go as far as Keating’s changes. Some attention was paid to state ownership and control during the JCCNRA hearings but no recommendations were made in relation to the state asserting stronger control over its resources through a NOC or production sharing. Nevertheless, some recommendations could improve the quality of the existing regime, for example, the suggestion that the Petroleum and Other Minerals Development Act, 1960 be reviewed. Other useful recommendations included: an increase in the PRRT6 (not applied retrospectively for fear of damaging Ireland’s reputation as a place to ‘do business’); reviews of the fiscal and licensing terms before each new licensing round; a clear and comprehensive process of public consultation; and the establishment of a forum of key stakeholders to influence policy formation (JCCNRA, 2012a, pp. 10–12). Some TDs expressed satisfaction about the report being based on consensus, incorporating important recommendations (field notes, 17 May 2012), however, the relevant Minister (Pat Rabbitte) did not participate in the JCCNRA deliberations and did not implement the JCCNRA’s recommendations. He did, however, announce plans to conduct his own review. Whilst the JCCNRA review was ongoing, in March 2012 Providence Resources announced the discovery of what it believed to be the first commercially viable oil flow rate in Ireland with this news featuring in the final JCCNRA report. In an appraisal well (48/24-10z) drilled in 335 ft of water in the North Celtic Sea Basin, Providence found oil (DCENR, 2012). The Barryroe well off the coast of Cork is reported to have flowed oil at a rate of 3,500 barrels of oil per day (bopd), exceeding the 1,800 barrel rate it said was needed for the oil field to be commercial (JCCNRA, 2012a, p. 34). A report in the Irish Examiner suggested this oil find was in excess of 1 billion barrels (Keane, 2012). Rabbitte’s review In May 2013, Minister Rabbitte announced plans to ‘seek further independent expert advice on the fitness for purpose of Ireland’s fiscal terms with a focus on the level of fiscal gain achievable for the state and its citizens, and equally importantly, on the mechanisms best suit to produce such a gain’ (Dáil Éireann, 3 July 2014). One might argue two reviews in little over a year, involving many of the same people, is duplicitous and a questionable use of resources; nevertheless, Rabbitte persisted and following a public procurement process engaged industry-body Wood Mackenzie to undertake the evaluation. Rabbitte sought advice on two areas – ‘fitness for purpose’ of Ireland’s fiscal system; and whether revisions should be made. With regards the first strand, Wood Mackenzie was tasked with considering:  the prospectivity of Ireland’s offshore; ‘Ireland’s relative attractiveness as a location for mobile international exploration investment’; the JCCNRA report and related Dáil debates; ‘issues raised through wider public debate on the fitness for purpose of Ireland’s fiscal

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system’; ‘comparative international experience’; and other relevant reports (Wood Mackenzie, 2014, p. 17). Attention to potential revisions was directed at specific topics: ‘the level at which the terms are set; the nature of the instruments used; and the tax reliefs available, including both the nature and timing of tax reliefs’ (ibid.). Representatives from Wood Mackenzie met with commentators on Ireland’s regime, including this author, to gauge their views on the state’s approach and possible modifications to Ireland’s regime. The subsequent report acknowledged stakeholders’ concerns that ‘the review of the fiscal terms should not be treated in isolation, but in conjunction with all aspects of the development of the petroleum sector in Ireland, including local consultation and regulatory processes, domestic supply obligations and employment and local content requirements’ (2014, p.  15). Emphasising those issues were outside the scope of the report, Wood Mackenzie proposed new fiscal terms premised primarily on quantitative analysis with some attention to commentary in the Dáil and Seanad, and different publications.7 Wood Mackenzie contextualised Ireland’s regime with comparison to nine countries it regarded as ‘most closely competing with Ireland for exploration investment’ (2014, p.  27), for example, the Falkland Islands, Mauritania, Newfoundland and Labrador (Canada), Portugal and Spain. Norway and the UK were also considered due to their prominence in public debate on Ireland’s fiscal system. Analysing matters such as the peer group’s exploration history, ‘success case’ economics, government share, expected monetary value and ‘chance of success’, Wood Mackenzie found that under its existing terms, ‘Ireland ranks as one of the more attractive areas behind only Portugal and Spain’ (2014, p. 36). Influenced by eight observations and principles, including ‘Ireland’s terms need to be competitive with a peer group of countries … [which] might be considered as competitors for investment’, the authors recommended Ireland keep its concession system and replace the PRRT (introduced in 2007), with a new petroleum production tax (PPT), charged on a field-by-field basis. Companies would be required to make a minimum payment (5 per cent of PPT) every year ‘which would function like a royalty’ and the overall PPT rates would be higher than the PRRT system, but lower than the rates recommended in the JCCNRA review. Corporation tax would remain the same at 25 per cent, although PPT payments would be deducted before the calculation of tax. Combining PPT and corporate tax, profitable fields could result in a government share of a maximum rate of 55 per cent, compared with a maximum rate of 80 per cent suggested in the JCCNRA review. In addition, Wood Mackenzie advised ‘there should be no introduction of mandatory state equity participation or a production sharing contract system at this time. Instead, both of those options should be properly investigated as part of a thorough review of options for the optimal development of the petroleum sector’ (2014, p. 38).

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Announcing new terms, Rabbitte proclaimed ‘by acting now and setting out government policy on this issue, it is my intention to communicate a clear message in relation to the stability of Ireland’s fiscal regime for the oil and gas exploration sector. For existing licences no changes are proposed’ (Rabbitte, 2014). During a Dáil debate on 3 July 2014, various TDs made statements on the new terms, beginning with Minister Rabbitte who said the new terms would apply to future exploration licences, including those awarded in the 2015 Atlantic Margin Licensing round. Rabbitte received commendation on the review from various quarters, notably other members of government and some Fianna Fáil deputies. Criticism was expressed by other TDs on grounds of ‘all the control’ being held by the oil companies (Richard Boyd Barrett, People Before Profit Alliance), the state remaining ‘utterly reliant on private companies to deliver’ (Clare Daly, Independent TD), and the ‘exclusive reliance on a tax on profits as a means of getting any money from our natural resources’ (Ruth Coppinger, Socialist Party). Coppinger added ‘there is a neoliberal mantra which the Minister seems to have adopted which dismisses out of hand any state interest in such endeavours. The report mentioned Newfoundland and Labrador, as well as other areas where this has been done. The state could develop expertise in this area if it put the work in.’ Certainly, a free market ideology appears to have prevailed in the new terms with Ireland’s perceived attractiveness to the oil industry paramount. Wood Mackenzie, however, did not rule out the possibility of state participation and production sharing arrangements in the future, recommending ‘the government should fully investigate the options and issues associated with the establishment of a national oil company to participate in upstream operations’ (2014, p. 50). Evaluating the Irish model of hydrocarbon management Ireland’s approach to the management of its gas and oil remains problematic, despite recent reviews. John, a financial journalist who has written about Irish gas and oil since the 1970s, described the state’s policy as seeking ‘to get the maximum tax revenue and we can decide how to use the tax revenue for the good of the society’. In John’s view, the state’s approach has been ‘centred on tax revenue and there’s nothing else. There’s no other objective at the moment it seems and the quicker we get the tax revenue the better. Even if it means wasting resources or letting people get away with murder and … not looking to the long term benefits that we could get.’ Similarly, Peter (CEO of an oil company) was critical of the state’s approach, asserting ‘the state doesn’t have an approach, there is no policy. The state  …  hasn’t really thought about the issues  …  it just continues the old policy.’ In tracing the evolution of Ireland’s model of hydrocarbon management, this and preceding chapters have called attention to factors influencing the state’s model whilst illustrating the complexity of the topic. One of the most striking

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features of the Irish model has been the long-standing desire to create a favourable environment for oil companies, an approach influenced by the Whitaker strategy (1958) which is generally regarded as having set the tone for subsequent Irish economic policy. One can also take cognisance of shifts in state resource management internationally, and more broadly, global capitalism. By examining the historical development of the state’s approach, connections begin to appear between the state’s management of its resources and shifts in political economy. The ‘1958 turn’ and efforts to foster Ireland’s economic development through multinational capital offer some explanation for the extremely generous 1959 Oil Agreement. Global trends appear to have impacted on the Irish approach with the 1975 terms reflecting the world-wide popularity of nationalisation, while the rollback in the 1992 terms mirrors the impact of neoliberal ideology on Ireland’s and other countries’ approaches to resource management. More recent examples of stronger state control and ownership in other countries find currency with the 2007 terms, however, Ireland’s changes were remarkably weak in comparison to countries such as Ecuador and Bolivia. One can also see the impact of other global occurrences and Wood Mackenzie argues the fiscal changes in 1987 and 1992 were shaped by fluctuations in oil prices (2014, p. 24). Excepting Keating’s terms (1975), which introduced several mechanisms for the state to increase its revenues, control and ownership, the Irish state’s approach has consistently focused on providing attractive fiscal terms for oil companies. The changes encapsulated in the 1992 terms demonstrate a radical rollback in the concepts of public ownership and maximum benefits for the Irish state inherent to the 1975 terms. Hand in hand with attempts to encourage exploration through licensing rounds and research initiatives,8 Ireland’s fiscal terms were extensively relaxed from the early 1980s to the 1990s. The provision of geological data to oil companies is another component of the state’s strategy to entice oil companies. Commissioned by the DCENR, independent studies using ‘source rock modelling, prospect evaluation and analogue basin review show a risked yet to find potential of at least ten billion barrels of oil equivalent’ (oil or gas) located in different basins (Wood Mackenzie, 2014, p.  19). According to Wood Mackenzie (2014) the calculation of yet-to-find volumes ‘is typically very challenging and relies on a number of assumptions’ such as ‘the identification of selected analogue basins, the estimation of in-place volumes, the assumed recovery factors and the risk factor applied’. Nevertheless, estimates of a potential ten billion barrels of oil equivalent are often used to imply substantial treasures offshore Ireland. When coupled with generous fiscal terms, Ireland appears as a hydrocarbon haven waiting to be cracked. While the 2007 licensing terms and the 2014 review indicate a slighter tougher regime for companies, Ireland’s terms remain among the most generous to oil companies anywhere in the world. Changes to Ireland’s licensing system are summarised in Table 2.

newgenrtpdf

Table 2  Summary of changes to Ireland’s licensing system (1959–2014) Summary of changes to Ireland’s licensing system (1959–2014) 1959 Oil Agreement

Kinsale lease (1971)

1975 Licensing Terms

1992 Licensing Terms

2007 Licensing Terms

2014 review

Patrick Lalor (Fianna Fáil)

Justin Keating (Labour)

Pat Rabbitte (Labour)

Fianna Fáil

Fianna Fáil & GP

Royalties Tax

7.5% 12.5%

Removed 25%

Fine Gael & Labour None 25% CT + PPT (max 55%)

State participation

None

12.5% 30% to 1983, rising to 40% None

Fine Gael & Labour 8–16% 50%

Bobby Molloy (Progressive Democrats) Fianna Fáil & PDs

Eamon Ryan (Green Party)

Government

Sean Lemass (Fianna Fáil) Fianna Fáil

Bonuses

None

None

Duration of Exploration Licence

Up to 20 years

N/A

Minister

Up to 50% carried interest in exploration and development; state pays own way when production begins.

Removed

None 25% CT + 5–15% PRRT (max 40%) None

Payable when production exceeded 200,000 bpd. 6 years (option of an additional 3 years)

Removed

None

None

Standard: 6 years Deepwater: 12 years Frontier: min. 15 years

Standard: 6 years Deepwater: 9 years Frontier: 12 years

Details not available

None

Petroleum Lease   Duration

Territory

Other comments

21 years and so long as petroleum was produced in commercial quantities Island of Ireland & its seas

21 years and so long as petroleum was produced in commercial quantities Kinsale gas field

Marathon was required to sell gas to state at a rate agreed with the Minister (reduced rate for 20 years).

28 years (with possibility of extension)

Decided by Minister

Decided by Minister

Details not available

Designated blocks (specified in each authorisation) Companies were required to: use Ireland as base for servicing; land gas/oil in Ireland; sell hydrocarbons back to the country; use Irish goods and services. In ‘emergency situations’ State could take control of petroleum for its own use.

Designated blocks specified in each authorisation

Designated blocks specified in each authorisation

Details not available

Companies not required to sell resources back to state, etc. The changes encapsulated in the 1992 terms were a result of various policy changes between 1978 and 1987 by a variety of Labour and Fianna Fáil Ministers.

Changes leading to these were terms were initiated prior to 2007 General Election by Noel Dempsey (Fianna Fáil).

At the time of publication, the 2014 review had not yet resulted in new licensing terms.

Sources: Dáil Éireann (5 November 1959); DCENR (2007); Department of Industry and Commerce (1975); DMNR (1992); Organisation for Economic Co-operation and Development (OECD) (1973); Quish (1975); Rabbitte (2014); Robinson and Riddihough (1975); Wood Mackenzie (2014).

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Table 3  Wells drilled offshore and onshore Ireland (1959–2012) Wells drilled offshore and onshore Ireland (1959–2012) 1959 Oil agreement to 1975 terms 28 wells 6 onshore 22 offshore

Year Onshore~

’62 2

’63 4

’64 -

’65 -

’66 -

’67 -

’68 -

’69 -

’70 -

’71 -

’72 -

’73 -

’74 -

’75 -

Offshore

-

-

-

-

-

-

-

-

1E

2E

Total

2

4

0

0

0

0

0

0

1

2

3 E 1A 4

3E 2A 5

3E 1A 4

4E 2A 6

’78 # -

’79

’80

’81

’82

’83

’84

’85

’86

’87

’88

’89

’90

-

-

-

-

-

2

-

-

-

-

-

-

14E 1A 15

7E 14P 21

2E 1A 3

8E

3E

6E

3E

3E

3

5E 1A 8

6E

8

6E 1A 7

6

6

3

3

4E* 1A 5

3E 1A 4

1976 to 1992 terms 107 wells

Year

’76

’77

2 onshore 105 offshore

Onshore

-

-

Offshore

5E 1A 6

6E

Total

6

’91 # -

’92

1E

2E

1

2

-

1993 to 2007 terms 50 wells

Year

’93

’94

’95

’96

’97

’98

’99

’00

’01

’02

2 onshore 48 offshore

Onshore

-

-

-

-

-

-

-

-

2

-

Offshore

3E

2E

4E 1 A*

2E

3E 2A

1A

1E 1A

3E

1E

Total

3

2

5

2

5

1

2

3

3E 2A 2P 9

8 wells

Year

’08

’09

’10

’11

’12

0 onshore 8 offshore

Onshore

-

-

-

-

-

Offshore

2E 2A 4

1E

1E

1A

1A

1

1

1

1

Key: E: Exploration well (129 offshore) A: Appraisal Well (30 offshore) P: Development/ production well (24 offshore) # Year a new commercial development began production ~Data on onshore wells does not differentiate between types of wells * Well listings describe one well in each of these years as an exploration or appraisal well, yet they have also been listed as gas producing wells which suggests they are production wells. Therefore, a word of caution is advised around the accuracy of the data on well listings.

1

’03 # -

’04

’05

’06

’07

-

-

-

-

1E 1A 6P 8

1E

-

2E 1A

1

0

3

2E 1A 2P 5

2008 to 2012

Total

Source: Data in this table are from onshore and offshore well listings (PAD, 2013), JCCNRA (2012a), Minister for Communications, Energy and Natural Resources (2012).

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History of Ireland's oil and gas experience

Fergal (former civil servant) referred to connections between the oil industry and the Irish political elite and it is noteworthy how the most favourable licensing terms were introduced when Fianna Fáil was in government, either as a majority party or in coalition. Keating’s terms aside, the handling of the subject by successive Ministers has been remarkably similar, regardless of the Minister’s political party affiliation. While the Minister in charge changed with each General Election, the department they represented remained the same which suggests the permanent state bureaucracy bears responsibility for maintaining the state’s largely consistent approach – one that emphasises attractive fiscal terms to encourage drilling activities. Yet, despite a generous regime ‘which yields among the lowest government take in the world’, petroleum activities offshore Ireland have been rather limited (Indecon, 2007, p. 15). Petroleum activities are often measured by drilling and as John (a financial journalist) highlighted, ‘the strategy seems to be that we’ll measure our success in terms of the number of oil wells drilled. And if we find something sure we’ll get some taxes for it. But there’s no strategy to go beyond that.’ As Table 3 illustrates, this strategy has been rather unsuccessful in terms of fostering activity. Between 1959 and 2012, 193 wells were drilled offshore (183) and onshore (10) Ireland – in stark difference to the Norwegian Continental Shelf which saw 160 wells drilled in 2010 alone (Sivertsen, 2011). The largest proportion of these wells (107) were drilled after the 1975 terms had been introduced, occurring between 1976 and 1992. 1978 saw the largest amount of exploration wells (14) while the following year is notable as the pinnacle of drilling with 21 wells drilled (7 exploration wells and 14 development/production wells). While some of the latter wells were drilled in 1978 as part of the Kinsale gas field development, the available data do not specify how many production wells were drilled in 1978 and 1979. These tentative findings have illuminated some of the key issues surrounding the Irish model of hydrocarbon management, yet don’t adequately explain why Ireland adopted such a generous regime or why the state has consistently had a reactive approach underpinned by a primary concern of creating the best conditions for oil companies. The question of why there hasn’t been the enduring sense of public ownership prevalent in many other fiscal regimes (apparent through production sharing or nationalised production) merits further attention as do ideological considerations around resource ownership, the role of the state in the economy and issues of wealth distribution. Thus, further insights can be gained by comparing Ireland’s experiences with those of other countries – a task which commences in the following section.

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Notes 1 Noel Dempsey (Fianna Fáil) became Minister of Communications, Energy and Natural Resources after the 2002 General Election and another Fianna Fáil–Progressive Democrats coalition. 2 For example, a deepwater exploration licence valid for twelve years under the 1992 terms was reduced to nine years with the 2007 changes. Similarly, the frontier exploration licence duration was reduced from fifteen years to twelve years. 3 The Joint Committee on Communications, Natural Resources and Agriculture (JCCNRA) comprised elected representatives from both houses of government (Seanad and Dáil). 4 Tasks assigned to CER included: safety regulation; investigate petroleum incidents and report on these to the Minister for Communications, Energy and Natural Resources; monitor and enforce companies’ compliance with safety regulations; issue safety permits; and ‘provide safety information to the public when appropriate’ (CER, 2011, pp. 2–5). 5 Sanctions included fines of up to €3 million, possible imprisonment terms of up to three years, and companies ran the risk of losing their safety permit if found guilty of breaches of new standards, which would halt production (Siggins, 2011b). 6 The PRRT could go up to 80 per cent on very large discoveries. 7 Including Hobbs et al. (2014), Indecon (2007), IOOA (2008), Shell to Sea (2012), SIPTU (2011). 8 For example, the Petroleum Infrastructure Project, a joint industry-government programme to develop and share geological knowledge.

Part III

Ireland in a global context

6

Global trends in state resource management

To understand how and why the Irish state adopted its particular approach to the management of its gas and oil, it is helpful to situate its emergence in a global context, particularly considering the impact of some international occurrences on Ireland’s regime. This chapter documents the evolution of the petroleum industry, illuminating economic, political, social and ideological factors internal and external to states which have resulted in distinctive approaches to hydrocarbon management. The early days of the global petroleum industry When Edwin Drake drilled his first oil well in Titusville, Pennsylvania in 1859, few could have predicted that oil would drive societies and economies within a hundred years. Drake’s find sparked a rush of interest in oil exploration and the American petroleum industry was born as prospectors sought to make their fortune through oil. Industrialists such as John D. Rockefeller anticipated the potential wealth creation from owning and controlling elements of the new industry’s production and supply chain, culminating in the formation of companies like Standard Oil, one of the largest American monopolies. Although Standard Oil was broken up in 1911 under US Anti-Trust Laws, its progenies remain among the world’s largest oil companies (Parra, 2010) and one descendent, the Ohio Oil Company (later Marathon), was the first company to produce Irish hydrocarbons. The shift from coal to oil as a primary energy source for industrial development also contributed greatly to oil’s meteoric elevation to a highly prized and much fought over resource. Commercial production was not limited to the US and nearly simultaneously there was a remarkable spread of the industry globally. Oil production began in Baku, Russia in 1873 and in 1901 the first Middle Eastern concession for hydrocarbon exploitation was granted to William Knox D’Arcy for Persia (Iran) (Yergin, 2003, p. 789). Although its production was dominated by US companies, by 1928 Venezuela had become the world’s leading oil exporter (Chomsky, 2003, p. 24). Between 1945 and 1969, the Gulf States, Iran and Iraq

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revealed extraordinary amounts of oil (Odell, 2000, p. 1). While a full estimation of reserves was delayed by World War II, by 1945 reserves in the Middle East were declared to be a ‘mere’ 3,000 million tonnes while oil production, mostly from Iran and Iraq, amounted to 50 million tonnes which constituted less than 10 per cent of global production (ibid.). By 1960, oil production in the Middle East had jumped ten times, accounting for 25 per cent of global production, and the declared oil reserves for the region increased to almost 25,000 million tonnes, mostly from the Gulf States (ibid.). With an estimated 100  years of future production (based on existing reserves), the Middle East’s reserves were declared to be six times more than both the US and USSR (ibid.). Middle Eastern reserves now account for about two-thirds of the world’s proved reserves (Parra, 2010, p. 39). Given the potential rewards and reserves, the world’s major oil companies sought a substantial share by seeking concessions from various states. At that time, the eight major companies were the French company Compagnie Française des Pétroles (CFP) and the ‘Seven Sisters’:  five American majors (Chevron, Exxon, Gulf, Mobil and Texaco); British Petroleum (BP) and the Anglo-Dutch Royal Dutch Shell (Parra, 2010, p. 7). Rather than work in competition, the companies carved up the Middle East between them and aside from Iran, where the Anglo Iranian Oil Company (AIOC) (later BP) was the sole producer, concessions in the Middle Eastern countries were held in partnership by different combinations of the ‘Seven Sisters’ (ibid.). As Odell points out, the division of the oil-rich territory reflected both the strength of the individual companies and the contrasting diplomatic and political weight of their home governments – Britain, France and the US (2000, p. 1). Chomsky emphasises the importance of the Middle East for both the US and Britain, citing Eisenhower who described the region as ‘the most strategically important area of the world’ (2003, p. 150). According to Chomsky, in 1945 US State Department officials termed Saudi Arabian oil ‘a stupendous source of strategic power and of the greatest material prizes in world history’ and the Gulf region was viewed as ‘probably the richest economic prize in the field of foreign investment’ (ibid.). Their British counterparts claimed the region’s resources were ‘a vital prize for any power interest in world influence or domination’ (ibid.). Consequently, after World War II access to these resources became a policy matter of much importance for these countries. Concessions Concessions were the first type of regime used in petroleum arrangements and this approach can be traced back to silver mining operations in Greece in 480 bc (Anderson, 1998). As the most common arrangement in the early twentieth century, the term ‘concession’ describes the relationship between a state and IOC

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in which the state cedes sovereign control of its hydrocarbon resources to the oil company (Easo, 2009, p. 33), evident in the 1901 D’Arcy concession in Iran. Although each concession regime differed, these arrangements generally included a nominal rent for the area under production and a fixed royalty rent on produced hydrocarbons (Conant, 1979, p. 31). Companies were usually exempt from taxes and other duties and the concessions were often of a very long duration (60–75 years), covering large tranches of territory (ibid.). An example is Iraq in the 1920s where King Faisal signed a concession arrangement with a consortium of British and French companies (95 per cent share) and the Iraq Petroleum Corporation, which ceded rights for all of the country’s hydrocarbons to the companies for a period of approximately seventy-five years (Parra, 2010, p. 33). Concessions usually function in favour of the oil companies with the state granting ‘absolute authority over the territory’ and surrendering ‘the title to all the hydrocarbons in situ’ to the oil companies (Easo, 2009, p. 33). Mommer (1994) suggests this weak position of several states was partly due to their stage of development as the discovery of oil in ‘Third World’ countries generally occurred in countries with little, if any, national enterprise and ‘insignificant’ levels of petroleum consumption. In Mommer’s view, the states tended to concentrate on their role as resource owners rather than become involved in production, initially focusing on maximising rent from the exploitation activities conducted by IOCs (1994, p. 5). The oil companies bore the financial cost of exploration and production and in exchange for ownership and control of the produced resources, the companies made certain payments to the state, such as signature bonuses, royalties and production taxes (Parra, 2010, pp. 8–9). These arrangements were not simply an outcome of negotiations between states and companies  – they were shaped by distinct historical, political and economic factors. As Mommer (1994, p. 7) points out, concessionary systems are often associated with colonialism and Conant illustrates how imperial powers, particularly Britain, assisted indigenous oil companies in obtaining and retaining concession agreements in other countries (1979, pp. 1–2). This foreign state intervention and backing for their indigenous companies was a result of oil having become a ‘strategic commodity of national importance’ (ibid.). In an era when Britain did not have domestic oil production but had ‘global trade commitments’, issues of ‘national security’ became tightly associated with the state’s oil policy (Clark, 1991, p. 33). Indeed, Ryggvik suggests BP was formed to assist Britain, ‘an old colonial power’, secure oil supplies (2010, p. 41). Formed as the Anglo Iranian Oil Company (AIOC), BP was 51 per cent owned by the British government (Parra, 2010, p. 21). Given their multifarious interests, the British government proactively supported the overseas activities of British owned oil companies like BP and Royal Dutch Shell (part Dutch) and these companies were often viewed as commercial extensions of their home governments (Conant, 1979, pp.  1–2). From the early days of the global petroleum

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industry one can see a mutual interdependency between some states and oil companies. The period after World War II brought a shift in power relations in tandem with independence movements and a rise in ‘political and economic nationalism among the former colonies’ (Conant, 1979, p. 1). This meant some independent states began to assert sovereignty over their resources and demanded they be used to provide a much needed economic boost for their countries. There was a realisation among oil producing states that they did not have to accept concession arrangements which gave all profit, control and production to oil majors (Nore and Turner, 1980a, p.  4). Struggles for national independence and sovereignty combined with efforts by states to maximise their share of rent, ultimately brought the possibility of nationalisation (Mommer, 1994). One of the earliest efforts to change concession arrangements occurred with Mohammed Mossadegh’s nationalisation of oil operations in Iran. As the first Middle Eastern country to permit hydrocarbon extraction, Iran experienced fifty years of oil exploitation through a sole concession held by the AIOC (BP) before its new Prime Minister Mossadegh decided to nationalise oil operations in 1951 (Parra, 2010, p. 21). Mossadegh expelled AIOC staff and established the new National Iranian Oil Company (NIOC). However, a CIA sponsored coup in 1953 resulted in the overthrow of Mossadegh and the re-instatement of the dictatorial Shah (Harvey, 2005; Klein, 2007; Parra, 2010). While popular pressures meant the Shah could not completely roll back on Mossadegh’s decisions, he allowed the ‘Iranian Consortium’, a group of US oil majors, to engage in the production of Iran’s resources while the AIOC could return as a partner in the consortium (Yergin, 2003, p. 790). Through this arrangement, the ‘Seven Sisters’ and CFP took control of Iran’s production activities and the AIOC received a 40 per cent share (NIOC, 2011). Due to direct US and British intervention, the imperial powers and their oil companies could continue their operations. A new dawn for producing countries: nationalisation and stronger state control Iran’s changes did not occur in a vacuum; prior to Mossadegh’s nationalisation in 1951, other countries began to seize control of their resources, notably Mexico in 1938 which nationalised all foreign oil companies (Yergin, 2003, p.  788). President Cárdenas expropriated oil companies and related infrastructure ‘making them the nation’s own, after which oil became a national symbol and private participation in the industry was practically wiped out’ (Ernst and Young, 2014, pp. 337–9). Venezuela was also quicker off the mark than Iran with the 1948 introduction of 50/50 deals which brought a strengthening in the state’s position and an increase in the share of revenues (Parra, 2010, p.  14). Similarly, Saudi Arabia introduced a 50/50 deal with Aramco in 1950 (Yergin, 2003, p. 788).

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General Ibnu in Indonesia also asserted stronger control over the country’s resources, insisting that foreign oil companies operating in the country change to production sharing contracts with the Indonesian government (Conant, 1979, pp. 34–5). The resulting arrangements were among the first SCs and production sharing arrangements. Indonesia’s regime is underpinned by a definite philosophical position, articulated in article thirty-three of the 1945 Indonesian Constitution which states ‘all the natural wealth on land and in the water is under the jurisdiction of the state and should be used for the greatest benefit and welfare of the people’ (Ernst and Young, 2014, p. 240). While ownership of the resources lies with the state, IOCs can operate through production sharing contracts (PSCs) negotiated with SKKMIGAS1 (ibid.). Production sharing contracts Sometimes known as contractual systems, PSCs and SCs are based upon the French legal concept that mineral resources should be owned by the state for the benefit of all citizens (Allen and Seba, 1993; Johnston, 1994). Mommer (1994) reframes the issue of ownership by suggesting the concept means ‘public ownership’, rather than state ownership, premised upon a negation of private property as the resources are not considered ‘free goods’ of nature which can be privately owned. Citing Montel (1983), Mommer stresses the philosophy underpinning this stance, which due to the natural origin of the resources, sees natural resources as belonging to a community as a whole, rather than individuals (1994, p. 3). PSCs are also referred to as production sharing agreements (PSAs) and the term ‘PSA’ was first used in Russia to describe its contractual system, mainly as the term ‘production sharing contract’ ‘did not translate well in the Russian language/culture’ (Johnston, 2008b). With a PSC/PSA, the government retains the title to the mineral resources and maintains closer control of the management of the operation (Kaiser and Pulsipher, 2006, p. 58). A basic PSC generally has four components: royalties, cost recovery, profit oil and tax (Kaiser and Pulsipher, 2004). The IOC may be required to pay a royalty to the government on gross revenues of the sale of the gas and oil, albeit at a lower rate than with a concessionary agreement (ibid.). Companies can offset the costs of hydrocarbon exploitation before the calculation of ‘profit oil’ (the division of the net value of oil between the state and companies) which can vary depending on production volume (Baunsgaard, 2001, p. 26). Baunsgaard claims a typical PSC means 50–60 per cent of profit oil going to the state, although this can be much higher in other some countries. In addition, companies are liable to pay tax on their profits (ibid.). Bonuses (such as signature, discovery or production bonuses) are a common feature of PSCs and government participation can sometimes be seen through NOCs, although ‘the government is assured of a minimum level of revenue through the production split’ (Indecon, 2007, p. 9).

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Service contracts An SC means the state retains full ownership of all the hydrocarbons produced within its territory and the IOC conducts the exploration and production work as a service to the state (Easo, 2009, pp. 37–8). As Johnston et al. (2008, p. 4) outline, the oil company does not acquire any rights to the hydrocarbons except when it is paid its fee in kind (given a proportion of hydrocarbons as payment) or when it is allowed to purchase some of the produced resources. There are two basic kinds of service agreements or contracts  – ‘risk’ and ‘normal’/’pure’. With both kinds, a company is paid for its services without directly owning the resources. In a ‘normal’ SC, the oil company will carry out exploration or production for an agreed fee, with costs reimbursed, and may be paid a bonus for the discovery of reserves. With a risk SC, the contractor takes on all of the risk and expense of exploration and production and is later paid a negotiated fee per barrel produced (Kaiser and Pulsipher, 2006, pp. 62–3). As the title ‘risk contract’ implies there are substantial risks for oil companies in a risk contract, as unless hydrocarbons are found in sufficient quantities, the oil companies will not be compensated for their exploration and production expenses. Battles between states and oil companies As apparent in the brief discussion on PSCs and SCs, both regimes entail high levels of, if not full, state control and ownership over resources and are in marked contrast to concession regimes which saw states transfer ownership and control of their resources to IOCs. Mexico’s nationalisation and Venezuela and Saudi Arabia’s 50/50 deals inspired other countries to question how they could secure higher revenues and greater control through production sharing, SCs or even complete nationalisation. Given the introduction of new, or modified, regimes could entail a significant reduction in power and revenues for oil companies, the adoption of new models was not a smooth process suddenly initiated and implemented. Vividly illustrated in the case of Iran, challenges for IOCs can be met with fierce resistance and the process of change was one mired in battles. Between the imperial association with concessions and the weak economic and developmental position some states found themselves in, some individual countries were hesitant to push too far. A fear of a retaliation like that which occurred in Iran was also to the forefront. In addition, US interests had secured a greater hold on the region and US companies had increased their control of Middle Eastern oil from 10 per cent to nearly 60 per cent between 1940 and 1967 (Klare (2001) in Harvey, 2005, p. 20). The British share of reserves had decreased from 72 per cent to 30 per cent in the same time frame (ibid.). Nevertheless, the period following World War II gradually saw two key shifts in the nature of the petroleum industry which challenged the status quo (Parra,

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2010). The first fundamental change arose from the increasing dependency of the global economy on imported oil from the Middle East and the second lay in altered views within the oil producing states. No longer was a minority share of revenue from oil production sufficient for these countries who wanted to use the industry as the basis for economic development and reform, while ensuring control over the industry (Parra, 2010, p. 138). The bargaining power of exporting countries (including Venezuela) increased over time, yet some producing states appeared limited in their options as apparent in the adoption of 50/50 deals as opposed to nationalisation (Mommer, 2001, p. 7). 50/50 deals were considered an improvement to the original concessions and these new terms saw companies pay an equivalent rate of royalties as those paid to private resource owners in the US and a similar rate of income tax (ibid.). Stevens (2008, p. 10) claims that by 1952, all the major countries in the Middle East had switched to this system. However, the geological conditions were not comparable between the US and the Middle East and oil companies producing oil in the Middle East paid the same rate of royalties and tax on the world’s most prolific oil fields as they did on marginal fields in the US (Mommer, 2001, p. 7). Furthermore, the new regimes which equated a 50/50 split in profits became ‘politically unacceptable’ as the colonial-era concessions remained intact and the transfer of ownership and control of a state’s resources to private interests continued to impact on those countries’ sense of sovereignty (ibid.). Once again Venezuela took the lead and the 1948 50/50 deal was altered in December 1958 when the country increased the tax rate by 19 per cent, resulting in a profit split of 65:35 in favour of the country (ibid.). Organisation of the Petroleum Exporting Countries There was a growing recognition among oil exporting countries that collective action was necessary to bring about change. The Arab Petroleum Congress was organised as a vehicle for this purpose and at its first meeting in Cairo in 1959, Iran and Venezuela attended as observers (Mommer, 1994, p. 15). Several decisions were made during the course of the Congress, including the agreement to establish NOCs to function alongside the IOCs (ibid.). Following directly from the Arab Petroleum Congress, in September 1960, representatives from Iran, Iraq, Kuwait, Saudi Arabia and Venezuela met in Iraq and formed OPEC (Parra, 2010, p.  96). Qatar joined OPEC in 1961, followed by Indonesia (1962), Libya (1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador (1973), Gabon (1975) and Angola (2007) (OPEC, 2015). The concept of ‘permanent sovereignty’ was at the core of OPEC’s formation and in OPEC’s Policy Declaration of 1968, member countries affirmed their ‘inalienable’ and sovereign right over hydrocarbons in their territory and avowed that ‘exploitation should be aimed at securing the greatest possible benefit for

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member countries’ (Resolution XVI.90 in Mommer, 1994, p. 8). The assertion of permanent sovereignty comprised three key aims: to declare the sovereignty and integrity of each nation state; to change the rules of game in relation to the ‘unfair terms of trade’ between the states and companies, defended by their Western home governments; and to accelerate economic growth by using the revenue from hydrocarbon exploitation for developmental purposes within the different countries (Clark, 1991, p. 160). Penrose (1973, p. 191) summarised the value and benefits of OPEC membership as a common sense of purpose; the development of expertise and knowledge among the organisation’s members; and the ability to present a common front to the oil companies on a range of issues. The creation of OPEC coincided with the beginning of a third phase in a process geared towards nationalisation; the first stage involved the granting of the original concessions and stage two included the earlier occurrences in Iran, Venezuela, Indonesia and Saudi Arabia (Mommer, 1994, p.  8). Many OPEC members regarded nationalisation as the best mechanism for the changes outlined in the 1968 resolution, particularly as the aim of ‘greatest possible benefit’ was achievable by member counties themselves exploiting the hydrocarbons ‘so that they may exercise their freedom of choice in the utilisation of hydrocarbon resources under the most favourable conditions’ (Resolution XVI.90 in Mommer, 1994, p. 8). OPEC’s resolution marked a turning point in relations between states and companies and subsequent years brought a radically different producing environment (ibid.). While OPEC member countries were unified by virtue of their shared membership, the subject of nationalisation was contentious for some and Nore suggests divisions occurred within the organisation over the form increased state involvement would take (1980, p. 74). Nore identifies two distinct camps within OPEC: the ‘radicals’ (Algeria, Iraq and Libya who sought full nationalisation) and Saudi Arabia. Zaki Yamani, the Saudi Oil Minister, advocated participation in production rather than full nationalisation, partly due to the impact nationalisation would have on access to crude oil for Western companies (ibid.). Highlighting connections between Saudi Arabia and the US, Parra (2010) also documents Yamani’s concern for Western interests and Yamani hailed participation as ‘the alternative to nationalisation’, attempting to sell its merits to his counterparts (Penrose, 1973, pp.  189–90). From Yamani’s perspective, there were three main advantages to participation:  the state would have increased control but the oil companies would bear the financial burden of production; the country could make use of the companies’ technical, managerial and commercial expertise at no additional cost (under nationalisation these services may have to be contracted in); and the government could control how much oil their state companies would sell and the oil companies would be required to take the balance (ibid.).

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Nationalisation, NOCs and ‘rent’ Participation entails production sharing arrangements, with or without the direct involvement of a state oil company. In contrast, nationalisation could mean the complete exclusion of foreign oil companies and production solely by a NOC, or the involvement of IOCs on the basis of SCs. Kaiser and Pulsipher suggest the formation of many NOCs was related to a desire for self-sufficiency and specific issues internal to the countries (2006, p. 32). Additional important reasons to establish a NOC are control and technology transfer (Johnston et  al., 2008, pp. 12–13). The formation of a NOC generally signifies efforts to assert control over resources and industry operations. If the NOC is new or its staff lack experience, production sharing arrangements or SCs with IOCs can assist the NOC develop knowledge and experience of the industry while having a command over the industry (ibid.). A NOC can be particularly powerful for governments with little experience of hydrocarbon exploration and production (ibid.). In McPherson’s view, a principal motivation behind the creation of NOCs is a desire to capture a larger share of the ‘rent’ associated with oil exploitation (2003, p. 1). ‘Rent’ can be understood as a ‘super-normal level of profit’2  – the economic returns from natural resource extraction which exceed labour and other production costs including transport and some ‘normal’ return to capital (Mommer, 2001). Influenced by David Ricardo’s concept of rent, Mommer argues natural resource rents can also be defined as payments to landlords or landowners in exchange for access to subsoil resources. Ryggvik (2010) further interrogates Ricardo’s work and his differentiation of surplus value (profit, which was acceptable) and economic rent. Ricardo condemned rent as it could be secured by owning or controlling resources such as land, without the owners having to work, contribute their entrepreneurship or engage in risk taking (Ryggvik, 2010, pp. 14–26). Oil and gas embody Ricardo’s concept of resources capable of generating large sums of rent, particularly given their strategic importance as energy sources (ibid.). Economic rent can be viewed as a ‘glittering prize’ which rightfully belongs to the country that owns the resources (Parra, 2010, p. 270) and in Parra’s view, private companies should not be permitted to walk away with all the rent resulting from hydrocarbon production and trade. A desire to capture a greater share of rent can be regarded as a motivation to establish a NOC and Mommer (1994) also emphasises the ‘political role’ of NOCs during nationalisation. NOCs can replace IOCs, giving more control over revenues to the state as export volumes and rent per barrel can be determined by the country, rather than the IOCs (1994, p. 17). Nonetheless, there is no clear definition of nationalisation, or participation for that matter, and unless a state controls a NOC of ‘average international efficiency’, nationalisation may not entail

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the state capturing the full share of rent as the state could be dependent on the services of IOCs (Nore, 1980, p. 76). A trend towards NOCs and stronger state benefits from exploitation was not limited to the large producing countries and McPherson claims ‘major increases’ in NOCs during this era were triggered by a ‘worldwide tide of nationalism and enthusiasm for state intervention and ownership’ (2003, pp. 1–2). Alongside the formation of NOCs in Africa, Asia and Latin America, several Western countries also established NOCs including Norway, the UK, Canada and Ireland. The intervention of Western states in economic activities via NOCs mirrored wider socio-economic trends post-World War II, namely ‘Keynesianism’. Also known as ‘embedded liberalism’ (Harvey, 2005, pp.  10–11), this political-economic approach saw markets within nation states shaped by state processes such as direct participation through macroeconomic planning, regulation and state owned industries. Stevens maintains the twenty-five years after World War II were notable for the ‘very large scale state involvement in the economic system’, reflected in the growth of NOCs, underpinned by a view that ‘governments could and should address both social and economic problems’ (2002, p. 1). While the trend for NOCs in Western countries tended to reflect the particular political economy of those states, the growth in popularity of NOCs in oil exporting countries was often connected with the resource owning states gaining control and ownership over their resources. Hence the growth of NOCs was ideological in two distinct ways  – states asserting sovereignty over their resources; and different ideologies underpinning approaches to capitalism and state intervention in economies. Between 1971 and 1974 control over the Middle Eastern oil industry passed from the oil companies to the governments of the OPEC member countries (Parra, 2010, p.  146). Algeria, Iraq and Libya nationalised oil operations in their territories while the other member countries introduced participation. With these changes, oil companies lost control over pricing, production levels and investment decisions and unlike 1953 Iran, the IOCs did not receive political backing or intervention from their home governments (ibid.). By 1976, the exporting states had full control over their oil operations and oil prices (Stevens, 2008, p. 17). The series of conflicts between producing countries and oil companies meant the balance of strength was gradually altered in favour of the states (Ryggvik, 2010, pp. 6–7). Writing in 1980, Nore emphasises how the oil industry had either been nationalised or was in the process of being nationalised in the most important producing countries. Of the thirteen OPEC member countries he examined, only Gabon had less than a 50 per cent share in the ownership of its resources. In the other countries, ownership varied from 55 per cent in Nigeria, 60 per cent in Abu Dhabi to 100 per cent in Indonesia, Iraq, Qatar and Venezuela (Nore, 1980, p. 75). The assertion of ownership and control over state resources is clearly demonstrated in Table 4.

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Global trends in state resource management Table 4  Control over oil production Control over production of oil* Percentage of output Majors State oil companies Others (mainly independents)

1963

1968

1972

1974

1975 (first half)

82.1 8.6 9.3

77.9 9.0 13.1

73.0 12.0 15.0

32.3 60.8 6.9

30.2 62.3 7.3

* Excluding communist countries and North America. Source: Nore (1980, p. 75).

State control over oil production jumped from 8.6 per cent in 1963 to 62.3 per cent in 1975 (Nore, 1980), demonstrating a significant change in the balance of power between the companies and the oil exporting states. It is useful to distinguish between ownership and control in this context. Although states had asserted ownership over their resources, through production sharing arrangements, control and ownership of a share of these resources would be transferred to the IOCs upon production. However, unlike concessions, the oil companies would not have complete ownership of all the resources and any portion of the resources granted by the state to the companies was regarded as payment for producing the resources. The formation of OPEC played a key role in the process of stronger state control and ownership and the organisation also benefitted member countries by enabling them to determine prices and production levels, leading to an increase in oil prices which was beneficial for the countries in terms of higher shares of revenues. Changing times: the impact of neoliberalism OPEC members found themselves entering new territory in the early 1980s due to a series of changes globally. Between an influx of oil from non-OPEC members (including Norway and the UK) and a global decline in consumption (due to the economic recession and energy conservation measures) oil demand and prices dropped sharply and dependency on Middle Eastern reserves lessened (Parra, 2010, pp.  276–7). The significant transformation of the dominant economic model espoused by the US, Britain and influential global institutions such as the International Monetary Fund (IMF) and the World Bank also had ramifications. ‘Embedded liberalism’ (Keynesianism) began to crack, apparent through a series of fiscal crisis internationally and within individual countries (such as Britain having to be bailed out by the IMF in 1975–76) (Harvey, 2005, p. 12). Therefore,

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states began to consider alternative macroeconomic approaches and Milton Friedman’s neo-liberal doctrine was given credence by key decision-makers including Ronald Reagan and Margaret Thatcher (Klein, 2007). The ‘Washington Consensus’ Stiglitz (2002) discusses the radical shift from Keynesianism and its focus on market failures and state intervention, to a free market stance during this era. These changes were encapsulated in the ‘Washington Consensus’ – agreements between the US Treasury, the IMF and World Bank on what they felt were the ‘right policies’ for economic development and stabilisation in developing countries (Stiglitz, 2002, p. 16). Under the guise of ‘structural adjustment’, fiscal austerity, privatisation and market liberalisation (the three pillars of the Washington Consensus) were pushed on Latin American countries following the 1980s debt crisis and those countries’ subsequent dependency on the IMF and World Bank for assistance (ibid.). Stiglitz highlights how privatisation, liberalisation and macro-stability were advocated as the foundation for attracting investment, including from abroad. Policies derived from the Washington Consensus were often premised upon a rather simplistic interpretation of Adam Smith’s ‘invisible hand’ whereby the market is seen to work best without any government intervention. This neoliberalism or ‘market fundamentalism’ prioritised free market conditions above states’ claims to resources (Stiglitz, 2002, p. 74). A dominant strand within neoliberal doctrine held that state intervention should be kept to a bare minimum as the state couldn’t possibly possess enough information to ‘second-guess market signals’ (prices); while interest groups were seen as a threat to the ‘free market’ as they could bias and distort state responses for their own benefit, particularly in democracies (Harvey, 2005, p. 2). Consequently natural resources and NOCs were among the main targets of privatisation and liberalisation as state ownership and control were regarded as contorting free market mechanisms. From a neoliberal perspective, state owned resources should be made available for ‘investment’ by private companies as these were seen as more efficient. The steps taken in the 1970s by producer countries to assert control and establish local capacity through nationalisations were replaced by a ‘neoliberal counter-wave’ during the 1980s (Ryggvik, 2010, p. 49). A neoliberal approach to resource management, and NOCs in particular, became pervasive during the 1980s and 1990s (Stevens 2002, 2008) and the ‘prime missionaries’ of the Washington Consensus (IMF and World Bank) were able to impose their neoliberal ideology on various countries because of the debt crisis, resulting in ‘privatisation, deregulation and general liberalisation’ (Stevens, 2008, p. 8). NOCs were a focus of consternation by neoliberal ideologues and the legacy

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of the Washington Consensus remains manifest in some World Bank reports, for example McPherson (2003). While viewing states’ assertion of control and ownership over their hydrocarbons as ‘resource nationalism’, Stevens (2008, p.  22) identifies additional factors which influenced a changed stance in some countries, including: a deepening of globalisation and a new focus on attracting oil companies as a form of foreign direct investment (as the basis of a country’s development strategy); low oil prices following the 1986 price collapse; and limitations (expertise, technology and funds) within NOCs which sometimes made it difficult to produce oil from more difficult locations (ibid.). These factors, strengthened by neoliberal ideology, led to some countries offering more lenient fiscal terms and opening new acreage to IOCs. Imbued with neoliberal connotations, the opening of additional acreage and reductions in fiscal terms were connected with an increasingly popular view of resources as ‘free’ goods amid a perception that countries had to compete with each other to ‘attract’ foreign oil companies (low oil prices had meant a reduction in exploration activities and countries wanted to reinvigorate these industries). Furthermore, state owned companies were seen as ‘dinosaurs requiring a helping hand into extinction’ and an undisputed requirement was state intervention should be removed from all but a minimal role (Stevens, 2002, p. 4). Kaiser and Pulsipher suggest that by the mid 1990s, many countries which previously been closed to IOCs, had at least partially opened ‘their oil sector to foreign investment’ (2006, p. 30). These trends were apparent in numerous fiscal regimes, including the UK’s, which by 1983 had become ‘purely liberal’ as apparent through the removal of royalties and the Supplementary Petroleum Duty, a tax on profits (Mommer, 2001, pp. 5–6) and the privatisation of BP. Indeed, a free market doctrine appears manifest in an entire fiscal regime – licensing systems. Licensing systems In existence prior to the advent of neoliberal ideology, licensing systems are a descendant of the concession system and are primarily adopted in industrialised countries such as the US, UK, Canada, Norway,3 Australia and Ireland (Johnston, 2008a; Parra, 2010). Also referred to as royalty/tax systems4 or sometimes concessions (even though there are differences in the regimes), licensing systems are distinguishable from the earlier concession systems for several reasons: states retain sovereignty over their resources until production which is when the legal title of ownership is transferred to the oil companies; the areas covered under authorisations are much smaller than the traditional concessions; licences are granted for shorter time frames, often with the requirement for companies to relinquish acreage in line with their pre-agreed work programme and budget (Easo, 2009). In practice licensing systems are similar to modern concession regimes

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although concessions are more often used in ‘developing countries that have an underdeveloped or unstable legal system’ (Easo, 2009, p. 34). While there are some differences between modern concessions and licensing systems, a primary reason for differentiating between the two relates to the colonial legacy of concessions (Mommer, 1994). Parra (2010, p.  8) describes the term ‘concession’ as incorrect as it is redolent of rights over resources, corruptly or reluctantly, granted by governments to foreign oil companies, often under duress – not willingly conceded. A distinction lies in the historical emergence of both regimes and licensing systems are enveloped in a legal framework which ensures some state control and monitoring over exploitation activities while the state retains ownership of its resources until they are produced (whereas under concessions, the state had no control once the agreement was made). Once a licence is granted, the state permits the ‘investor’ to use its subsoil on conditions laid down by the state, however, the state may also ‘withdraw its decision, limit the rights of the investor, or completely withdraw the investor’s rights and revoke the licence’ (Paliashvili, 1998). Kaiser and Pulsipher (2004) outline the three basic components of a licensing system: royalties, deductions and tax. Not every country with a licensing system imposes royalties but when royalties are part of the fiscal regime, they are paid at an agreed rate stipulated in the licence (normally a percentage of the sale value of the resources) before tax and other costs have been offset. Following the payment of royalties to the state, the companies can then consider other deductions such as operating costs and depreciation of capital (ibid.). Once these costs have been calculated, companies are liable to pay tax on their profits and the tax rate imposed by countries with a licensing system varies greatly. Some countries with licensing systems, such as the US, also demand bonuses and Johnston et al. (2008) suggest that nearly half of all countries with hydrocarbon production use signature bonuses as part of their fiscal system. Indeed, they describe signature bonuses as the basis upon which the US Federal Government allocates licences (2008, p.  12). As Johnston highlights elsewhere, the US has some of the highest signatures bonuses in the world in terms of dollars-per-acre and ‘the US government has received over $65 billion in bonuses for the OCS (Outer Continental Shelf) since 1953’ (2008a, pp. 49–50). Described as a ‘relatively free market regime’, Easo points out that under a licensing system the oil companies bear most of the financial risk while enjoying ‘a substantial share of the benefits’ (2009, p. 28). While a licence may involve environmental, timing and other constraints (ibid.), the oil company owns the hydrocarbons once they are produced and is usually free to dispose of the oil and gas as it pleases. Hence, a licensing system entails the effective privatisation of state resources, in exchange for the payment of tax and often royalties.

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A turning of the neoliberal tide? Licensing systems reflect a neoliberal ideology in terms of the privatisation of resources and a liberal attitude towards state management and regulation, and Stevens outlines a faltering in the neoliberal approach in recent times (2002, 2008). Stevens articulates several factors which contributed to a growing recognition that state intervention in energy is often necessary: the Asian financial collapse (1997–99); Russia’s economic collapse (1998); a rising awareness that while many economies grew, poverty alleviation was struggling; the growing questioning of whether such a strategic sector could simply be ‘left to the market’ (a view reinforced by problems with electric power in California (2002–3)); concerns over climate change and the need to control greenhouse gas emissions’; and rising oil and gas prices (2008, p. 8). Also, as Klein documents in her book (2007), cases such as Bolivia and Chile illustrate the potentially devastating impacts of neoliberal ideas cloaked in structural adjustment policies, demonstrating that such policies are often not in the best interests of countries. For a host of reasons, the idea of state intervention in energy once again became ‘respectable’ for governments, although perhaps not to the same extent as in the 1950s and 1960s (Stevens, 2008, p. 8). It should be stressed that many countries with hydrocarbon production did not adopt a neoliberal approach during the 1980s and 1990s. Although there was an opening of acreage by some countries which had previously restricted the operations of IOCs, three major producer countries remained closed – Kuwait, Mexico and Saudi Arabia (Kaiser and Pulsipher, 2006, p. 30). Furthermore, the participation of foreign oil companies in Russia, China, Iran and Iraq was ‘constrained by regulatory, political and administrative barriers and delays’ (ibid.). Put simply, these countries were not prepared to permit IOCs to dominate hydrocarbon production in their countries, for a variety of economic, political and ideological reasons. Ecuador and Bolivia are recent examples of states which asserted control over their resources by nationalising petroleum activities (Bolivia, 2006; Ecuador 2010). Shifts in the balance of power A state’s approach to the management of its resources is not fixed in stone and can be altered, depending on prevailing ideologies, the government in power, and geopolitical demands and tensions. Countries such as Iran, Bolivia and Ecuador are not exceptional in considering changes to their fiscal systems and fiscal regimes are characterised by their ‘changeable nature’ (Johnston, 2008a, p.  38). Trends of states asserting stronger control over their resources have been lamented by industry commentators, for example Mackenzie’s (2010) complaint that ‘resource nationalism’ and more difficult fiscal terms in the Middle East, Central

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Asia and parts of South East Asia have driven the majors and ‘super-majors’ into more remote and deepwater prospects as these regions are some of the few areas where companies ‘can hope to grow or replace reserves’. Others, such as Stevens (2008, p.  12), also use the term ‘resource nationalism’ to describe the process of states asserting control and ownership over their resources. Ryggvik (2010), however, contests this term as the concept of ‘nationalism’ suggests such changes were based on ‘symbols and feelings’ as opposed to smart economic policies. As Ryggvik stresses, there is nothing irrational about an oil-rich country doing what it can to secure the greatest share of revenues for its state as economic rent should fall to society via the state in question (2010, pp. 36–7). Such a view is of little consolation to private companies seeking to maximise their profits and industry concerns about evolving fiscal and legal regimes are reflected in Ernst and Young’s regular publications on NOCs and the ‘top ten risks’ for the oil and gas industry. In the company’s 2010 report (Ernst and Young, 2010b), the risk of ‘worsening fiscal terms’ was elevated from fifth to fourth place in its list of the top ten risks, illustrating concerns that states are increasingly seeking a larger share of the pie. A  2013 report situated this concern in sixth place, lower than health, safety and environmental concerns, price volatility and access to reserves or markets (ranked third). However, ‘worsening fiscal terms’ and ‘uncertain energy policy’ were anticipated as significant risks for 2015, holding fourth and fifth place respectively (Ernst and Young, 2013, p. 4). Ernst and Young suggested the prolonged economic recession resulted in many developing countries receiving a reduction in revenues from their tax regimes and sovereign investments (such as sovereign wealth funds). Hence, IOCs were faced with renegotiations of production sharing arrangements and increased tax rates, and were essentially coerced into ‘agreeing to new models that favour the local country’ (2010b). Ernst and Young also referred to an increased risk of change in ‘developed countries’ which, due to economic and political factors, were considering or had implemented higher taxes, new royalty fees and lower incentives for exploration (2010b, p. 6). Indeed, ‘worsening fiscal terms seem almost inevitable for the upstream sector in 2010 and beyond’ (p. 14). Johnston affirms an altered environment, proposing many governments would prefer to have a field go undeveloped if the country cannot receive what it deems to be an appropriate share of revenues and/or profits (2003, p.  4). Furthermore, IOCs are facing further threats from NOCs which might be given preferential access to reserves (Ernst and Young, 2010b, p. 13). Although the major oil companies have continued to reap massive profits from oil exploitation, Smil advises their ‘upbeat prospects’ cannot change ‘the fundamental fact’ that these oil companies are ‘in a chronic retreat that began with a wave of nationalisations during the 1970s’ (2008, p. 23). Kaiser and Pulsipher argue that NOCs are now the most important factor in the future of the oil industry as

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NOCs control the majority of oil and gas reserves (2006, p. 6). Estimates of the quantity of reserves held by NOCs vary depending on the source:  McPherson (2003, p. 2) suggested NOCs control 90 per cent of the world’s reserves and are responsible for 73 per cent of production while Johnston claimed 77 per cent or more of the world’s reserves are under the control of NOCs (2008a, p. 32). It is difficult to dispute Smil’s contention that NOCs now control most of the world’s oil reserves and, consequently, most of the world’s current and future production (2008, p.  23). This thesis is given further weight by considering the share of oil reserves held by OPEC member countries, which tend to produce their resources through NOCs (sometimes working in partnership with private companies). In 2013, OPEC members controlled 81 per cent of the world’s oil reserves (over 1,200 billion barrels) meaning non-OPEC members, including significant producers like Norway and Russia, held 19 per cent of reserves (OPEC, 2014). OPEC had a weaker position in relation to gas reserves with 47 per cent of gas reserves controlled by OPEC member countries (ibid.). By 2015, OPEC remained a powerful entity; evident in its ability to maintain high production levels which created a glut of oil on international markets thus driving down the price of oil, consequently impacting on the majors. As lower oil prices make some forms of production less viable (for example resource intensive projects like shale gas and tar sands development), IOCs have been further undermined by OPEC members. Alongside restrictions on access to reserves and acreage for IOCs, there has been a growth in joint ventures between NOCs and in some instances the position traditionally held by private oil companies in production sharing arrangements has been taken by NOCs working on an international scale. According to Johnston, these NOCs have ‘a competitive advantage because many governments prefer anything other than a Western major these days’ (2008a, p. 33). Such shifts in the balance of power between IOCs and NOCs are interconnected with the strategies and policies adopted by nation states to manage their resources and the petroleum industries operating within their territory. There are multiple reasons why states choose to form NOCs, including the development of indigenous knowledge and expertise and as a mechanism to secure a greater share of the wealth generated by hydrocarbon exploitation. Disparate ideologies also influence decisions to form NOCs and more broadly how states manage their resources – as reflected in the different types of regime in existence (examined further in chapter seven). Ideological and empirical metamorphoses The petroleum industry has undergone a complete metamorphosis since its emergence in the mid nineteenth century. From an industry initially dominated by major oil companies, backed by imperialist nations, to one in which states control the majority of reserves and production, the petroleum business could

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not have become more different. By focusing on the historical context underpinning the evolution of different approaches to state resource management, this chapter has identified some of the political, economic, social and ideological factors which underpin different models. This chapter draws attention to relevant interconnections:  commonalities among models of resource management adopted by different states; changes in approaches in line with shifts in global capitalism; and relationships between a state’s approach to hydrocarbon management and political economy more generally. The latter topic is most pertinent in relation to NOCs and, as Stevens points out, decisions regarding NOCs generally take place in the wider context of government intervention, or lack of, in a country’s economic system (2002, p. 1). Models of resource management are shaped by a complex amalgam of factors:  internal, such as states attempting to assert ownership and control and seek a greater share of rent; external, for example colonialism and the intervention of imperial powers; and ideological, which can be internal and external, for example the impact of dominant economic strategies and ideologies such as those inherent to the ‘Washington Consensus’; or, on the other end of the ideological spectrum, Iran’s nationalisation and OPEC’s ‘permanent sovereignty’. These occurrences reflect particular ideas around the ownership and control of resources – views which are manifest in the different fiscal regimes in operation globally. Ireland’s use of a licensing system appears to mirror that of other countries with a similar political economy. Yet, as the following chapter illustrates, when considering ‘government take’ as an outcome of fiscal regimes, Ireland’s licensing system is most unique in comparison to other countries. Notes 1 Translated as the Interim Working Unit for Upstream Oil and Gas Business Activities. Previously, all PSCs occurred with Pertamina, the Indonesian national oil company (established in 1971) and following restructuring in 2001, with BP Migas (the national executive responsible for oil and gas) until late 2012 (Ernst and Young, 2014, p. 240). 2 Attention to the Global Fortune 500 give some insights into the scale of profits and, in 2014, more than half of the top twenty Fortune 500 companies were energy companies:  Royal Dutch Shell (2); Sinopec Group (3); China National Petroleum (4); Exxon Mobil (5); BP (6); State Grid (7); Total (11); Chevron (12); Gazprom (17); E.ON (18); Phillips 66 (19). After two years as the top company, Shell fell to second place in 2014 with $16,371  million in profits and revenues of $459,599 million. Sinopec (50 per cent owned by the Chinese government) made $8,932 million while China National Petroleum made $18,504 million in profits. Retrieved from www.fortune.com/global500 (14 April 2015). 3 Norway’s licensing system is quite exceptional as it involves state participation and a NOC (discussed further in chapter eight). 4 Alexander and Johnston (2000); Johnston (2003, 2008a); and Johnston et al. (2008).

7

Ireland’s licensing regime in an international context

Licensing regimes, such as the Irish system, encapsulate a myriad of internal, external and ideological forces within a distinct model of resource management. Chapter six revealed historical economic, political and social phenomena which influence how states manage their resources and, by situating Ireland’s approach in a contemporary, international context, this chapter further illuminates the complexity of state hydrocarbon management and outcomes in the form of ‘government take’. Ownership matters A commonality amongst all models of hydrocarbon management is the fundamental matter of resource ownership. Generally, all hydrocarbon resources in the soil and subsoil, in interior waters and in territorial seas, on the continental shelf and in a country’s exclusive economic zone belong to the state (Easo, 2009, p. 27). The United States is an exception to this trend. Although offshore resources and those contained in federal lands belong to individual states, the US is one of the few nations in the world in which petroleum and other subsurface resources may be privately owned (McBeath et al., 2008, p. 146). Even if a country has not yet experienced hydrocarbon production, most states will have established rights over the natural resources within its territory and any exploitation will be governed by the country’s legislation (OECD, 1973, p. 12). From the outset, governments have to choose how operations will be conducted and whether the state itself will carry out the operations or allocate the rights and obligations to commercial entities (Al-Kasim, 2006). Documenting the primary policy choices facing countries wishing to foster hydrocarbon exploitation, Parra identifies key components of state resource management: (1) leasing of acreage (onshore or offshore territory where exploration and production can occur); (2) taxation; (3) levels of control in terms of state participation and depletion of resources; and (4)  other matters such as safety, the environment, labour, supply industries and taxation (2010, p. 270). The financial reward from

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exploitation activities is of primary concern and there is widespread agreement that rent belongs to the country which owns the resources (ibid.). At the base of hydrocarbon policies, and ultimately exploitation, is a legal arrangement between the resource owner (either the state or private landowners as in the US) and the oil companies (international/national; state owned/private) (Mommer, 1994, p. 1). These arrangements (often termed ‘fiscal regimes’) provide the legal basis and policy framework for hydrocarbon exploitation and govern negotiations between oil companies and states (Kaiser and Pulsipher, 2006, p.  61). The regime, or model of resource management, permits the granting of authorisations for activity throughout the various stages of petroleum exploitation (leasing of acreage, exploration, appraisal, development, production and decommissioning (Gerwich, 2000)). For Al-Kasim (2006), the objective of state resource management is the conversion of a country’s resources into lasting benefits for its society while also ensuring the efficiency of operations. Different regions = different regimes? In considering why countries adopt specific fiscal regimes, Kaiser and Pulsipher (2006) suggest one of the simplest factors is the development status of a country with industrialised countries likely to utilise royalty/tax (concessionary/ licensing) systems. In a 2008 study by Johnston, royalty/tax (licensing) systems appear more frequently among countries such as Ireland, New Zealand, France, the Netherlands, US, UK, Australia, Canada, Denmark, Russia and Norway (Johnston, 2008a). Wood Mackenzie (2014, p. 51) also point to regional trends, suggesting concessions (licensing systems) predominate in Europe and North America. In email correspondence with this author, Johnston (2010) emphasised a tendency for Western countries to utilise royalty/tax systems while non-OECD countries tend to use PSCs and service agreements, indicating a connection between the political economy of a state and the type of fiscal system utilised. Johnston et al. suggest licensing systems are used by nearly half of the countries worldwide with hydrocarbon production (2008, p. 3). Contractual systems, namely PSCs, are ‘the primary choice for many developing countries, especially those opening up new areas for exploration or revising their petroleum legislation’ (Kaiser and Pulsipher, 2006, pp. 73–5). While licensing systems are popular in many countries, Kaiser and Pulsipher (2006) and Easo (2009) argue fiscal regimes premised upon production sharing are likely to be the preferred contract type in new acreage rounds. Indeed, Johnston et al. claim that PSCs have become the fiscal system of choice in many countries with over half of the governments with hydrocarbon production worldwide using PSCs (2008, p. 4). They identify the following as some countries utilising production sharing regimes: India, Mozambique, Ecuador, Angola, Nigeria, Indonesia,

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Malaysia, Gabon, Egypt, Bolivia, China, Trinidad and Tobago, Tunisia, Algeria, Oman, Yemen, Libya and Venezuela. Similarly, Wood Mackenzie suggest PSCs are widespread in Africa and Asia (2014, p. 51). According to Johnston (2008a), contractual systems appear more frequently in non-OECD countries with service agreements utilised in five countries of the countries studied (Peru, Philippines, Bolivia, Venezuela and Iran). Similarly, Baunsgaard emphasised the widespread utilisation of PSCs and claims approximately two-thirds of countries adopt this system (2001, p. 27). Baunsgaard also identified regional patterns:  about one-half of African countries used PSCs; in Asia, PSCs were widespread; outside of the Caribbean, few countries in the Western Hemisphere utilised PSCs with the exception of several South American countries; and the majority of Middle Eastern countries used some form of production sharing (ibid.). In Easo’s view, SCs have typically been adopted in countries with ‘strong elements of nationalism’, including those in which the constitution actually prohibits foreign control or ownership of natural resources such as in Saudi Arabia, Kuwait and Iran. Easo’s articulation of nationalism1 as a deciding factor in the adoption of particular regimes helps unveil the influence of ideology. As examined in chapter six, while countries’ historical experiences impacted on their models of resource management, opposing ideologies are inherent to different approaches. Ideology and models of resource management At a basic level the four main types of fiscal regimes in operation globally (licence, concession, production sharing agreement and SC) determine the relationship between a state and oil company (Easo, 2009, p.  27). As Johnston et  al. (2008, p. 3) point out, the basis of these classifications is legal and deals with the transfer of ownership of the title of hydrocarbons to the oil company. Each regime entails varying levels of state ownership and control, ranging from the complete transfer of ownership of produced resources through a licensing system (resulting in the privatisation of those resources) at one end of the spectrum, to full state ownership with a SC (companies are remunerated for their services) at the other (ibid.). While legal classification of different types of fiscal regimes is most common, Johnston et al. argue legal aspects are secondary to a nation’s ‘philosophical attitude towards their mineral resources’ (ibid.). Inherent to a state’s model of hydrocarbon management is an ideological position on the ownership and control of resources which typically belong to the state. Tied in with matters of who can own the resources in situ and upon production, is the key question of whether private interests can own or control these hydrocarbons at any stage of upstream activities, from exploration through to the point of sale. As demonstrated with SCs, in some cases private companies are rarely allowed to control or own even a share of a state’s resources unless sold to them.

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While a frequently neglected subject, ideology is central to understanding state resource management because ideology ultimately determines the selection and implementation of particular fiscal regimes. Furthermore, conflict and ‘confusions over ideology’ are often beneath the surface of most issues surrounding energy policy (Olien and Davids Olien, 2000). Referring to a study of US energy policy by Richard Vietor, Olien and Davids Olien identify two opposed ideological positions related to resource allocation, one rooted in a ‘collectivist concern for the public interest’ and the other informed by a reliance on market mechanisms for resource allocation and use. Vietor’s study observed how ideology was manifest in US governmental policy-making relating to the American petroleum industry from the beginning of the industry to the end of World War II (ibid.). Influenced by Vietor’s research, Olien and Davids Olien argue participants in ‘energy politics’ frequently do not understand the ideologies influencing their position on resource management and are often inconsistent in how differing ideologies are applied. Consequently, this clash of ideologies confuses and muddles energy policy, often resulting in dysfunctional policies (ibid.). Ideology in the context of hydrocarbons can be explicated to reveal three entwined components: the nature of the resources, ownership and control. A fundamental issue is how resources are regarded and perspectives alternate from one which sees resources as commonly owned by all, to a view of resources as free objects or ‘gifts of nature to man’ (Bellamy Foster and Clark, 2009, p. 8). These standpoints correlate with specific attitudes towards the ownership and control of resources and are reflected in prevailing fiscal regimes which are premised upon radical differences in how states view their resources and whether or not states choose to participate in the exploitation of gas and oil within their territory. With concessions and licensing systems, hydrocarbons are often implicitly seen as ‘free gifts’ of nature, of which private ownership is permitted, and states transfer control and ownership of their gas and oil to companies upon the production of these resources. The resulting returns to states from concession and licensing regimes can vary dramatically. Some regimes also entail state participation, for example Norway’s State Direct Financial Interest (SDFI) and Statoil. As we’ll see in chapter eight, Norway’s approach is an outcome of numerous factors, including the dominance of specific ideologies at different stages in the country’s political economy which influenced its particular model of resource management. PSCs and SCs entail stronger state control: under PSCs only a share of gas and oil (hence ownership of these resources) is transferred to oil companies upon production; with an SC, the state does not transfer ownership of its resources to oil companies (companies may receive a share of oil/gas as payment for their services). In addition, perspectives on ownership correlate with different forms of political economy and in line with the earlier discussion on regional patterns, it is no coincidence that countries espousing a neoliberal model of capitalism tend to utilise licensing and concessionary systems. Clearly this topic raises questions

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about political economy and the nature of states – a subject to which we return in chapter nine. Each model of resource management entails varying power relations between states and companies, prompting questions of ideology and political economy which can be interpreted through the concept of ‘economic rent’. As discussed in chapter six, rent can be understood as the ‘super-normal level of profit’ (Mommer, 2001), derived from owning and controlling natural resources such as land, water, minerals and hydrocarbons. Referring to Ricardo, Mommer (2001) describes rent as a portion of the extraordinary profits associated with some kinds of resource extraction that accrue to ‘landlords’, which in the vast majority of oil producing countries is the state. Offering a more critical interpretation of rent, Nore (1980) situates its origins in the emergence of the capitalist system, with all property considered to be under the proprietorship of an owner who must be paid for access to these resources. As Le Billon points out, the transformation of nature, whether oil, gas or minerals, into tradable commodities is a deeply political process which involves the definition of property rights, the organisation of labour and the allocation of profits (2001, p. 568). In line with the earlier differentiation of resources as either commonly owned or ‘free gifts of nature’, Nore (1980) argues the state (‘the land-owning’ or resource-owning class) can force capitalists using its land, or resources, to pay rent to the state. Thus rent can be seen as an outcome of ideology intertwined with power struggles between resource owners, who may or may not retain control of the resource, and those who seek to extract and own the resources. A state’s ideological stance on resources, ownership and control, implicit in the fiscal regime it adopts, can result in very different economic and social outcomes. Although the term ‘rent’ is frequently employed by political scientists and economists to describe the share of revenues accruing to a state or company after hydrocarbon production and sale, ‘government take’ is more commonly used to account for the percentage of wealth a state receives. Government take ‘Government take’ can be defined as the total percentage of revenue from production accrued through one or more fiscal tools such as tax, royalties or bonuses (US Government Accountability Office (GAO), 2007, p. 11). Several international studies have compared rates of government take, including Kaiser and Pulsipher (2004, 2006), Khelil’s report for the World Bank (1995), Johnston (2004, 2008a, 2008b, among other publications); and the US GAO (2007). Ernst and Young also publish annual reports on regimes for hydrocarbon exploitation although they present details of fiscal terms on a country by country basis without analysis or comparisons between countries. More often than not, such reports concentrate

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on financial considerations rather than deal with key issues of who owns the resources and the extent to which publicly owned resources can be privatised. Johnston’s 2008a study of different fiscal regimes (Figure  2) indicates a direct link between fiscal systems and rates of government take with government take higher in countries that insisted upon PSCs or SCs. Of the fiscal systems

Government Take – for Oil 90%

80%

70%

60%

Ireland Peru Morocco New Zealand Papua New Guinea France Netherlands South Africa US OCS Deepwater UK Argentina Australia Canada Arctic Philippines India US OCS Shelf Mauritania Thailand Colombia Alaska (US) Mozambique Ecuador Denmark Angola Shelf STP/Nigeria JDZ Indonesia Malaysia R/C Russia R/T Gabon Egypt Norway Bolivia China Offshore Nigeria Deepwater Trinidad & Tobago Tunisia Algeria Nigeria Shelf Oman Yemen Libya EPSA IV-1 Venezuela Heavy Oil+ Libya EPSA IV-2 Venezuela 1996 Iran Buybacks

50%

40%

30%

Changes in the Fiscal Landscape 1998–2007 Royalty/Tax System PSC Service Agreement Magnitude and direction of changes

90%

80%

70%

60%

50%

Government Take – for Oil

Figure 2  Government take for oil

40%

30%

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examined, twenty-one were royalty/tax (concessions/licensing), eighteen were PSCs and six were service contracts. While the lowest PSC resulted in government take of around 40 per cent (Peru), twenty-one contractual regimes (PSCs and service contracts) resulted in government take of around 70 per cent or more. Twelve contractual systems saw the government receive over 80 per cent of revenues from its gas and oil while Venezuela, Libya and Iran received in excess of 90 per cent of revenues from hydrocarbon production in their countries. Countries with the highest rates of government take utilised PSCs or service agreements, ensuring that in addition to higher returns, the government retained control and ownership of its hydrocarbons with additional benefits in the form of local employment, service provision and supply of goods. With the exception of Peru, Philippines and India, most countries with contractual systems (PSCs/SCs) received government take of more than 65 per cent, whereas the majority of countries with royalty/tax systems resulted in government take of less than 65 per cent. In Johnston’s study, Algeria, Norway, Russia and Denmark were exceptional for royalty/tax systems (concession/licensing systems) as they resulted in government take of over 70 per cent. Government take in sixteen of the royalty/tax systems ranged from over 40 per cent to around 65 per cent. Ireland’s government take was estimated at around 27–28 per cent (following the 2007 licensing terms and its new PRRT), making it the lowest of the fiscal regimes studied. Although Johnston does not differentiate between Ireland’s 1992 and 2007 Licensing Terms, the 1992 terms (applied to two petroleum leases and nine exploration licences (PAD, 2015)) result in a maximum 25 per cent government take. However, as corporate tax is the primary mechanism to generate government take under the 1992 terms, the maximum the Irish state could receive is a 25 per cent tax on profits, paid after costs accrued over a previous twenty-five years have been offset – which does not amount to a quarter of the value of the find. The 2007 Licensing Terms and the 2014 regime allow for additional taxes – up to 40 per cent (PRRT, 2007) and 55 per cent (PPT) for licences granted after June 2014). The additional taxes for the 2007 and 2014 terms are calculated on ratios: PRRT is calculated on a profit ratio2 after costs have been offset and corporate tax has been paid. Recognising that the payment of corporate tax before field-based taxes (PRRT) is ‘unusual’, Wood Mackenzie (2014) recommended PPT is applied before corporate tax, calculated through an ‘R Factor’3 on a field-by-field basis. The PPT also allows the government to receive a minimum payment (functioning like a royalty) each year calculated on a specified percentage of a field’s gross revenues (Wood Mackenzie recommended 5 per cent) which allows the state to receive ‘some revenue during the period that the producers are recovering the capital costs’ (2014). The 2007 terms and recommended 2014 rates4 could see government take rise to 40 per cent and 55 per cent for large

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fields but as these mechanisms are primarily taxes on profits after costs have been offset,5 the state will not receive the equivalent rates in government take. In May 2015.6 Twenty-one exploration licences existed under the 2007 terms, hinting at a potential 40 per cent government take in the case of commercial discoveries. Yet, as Johnston’s diagram suggests, the likely rate of government take will be much lower. Uniqueness of Ireland’s fiscal regime Based on Johnston’s study (2008a), Ireland’s regime appears unique as it had the lowest rate of government take. In correspondence with this author (2010), Johnston estimated average government take globally to be around 70 per cent – nearly three times the rate of government take under the Irish 1992 Licensing Terms and significantly higher than the 2007 and 2014 modifications. Citing Rutledge and Wright, Kaiser and Pulsipher claimed a 50/50 split in profits between governments and contractor take was ‘considered a fair value before the mid 1970s’, however, a 1995 study by Petroconsultants showed that in more than 90 per cent of the countries studied, government take ranged from 55 to 75 per cent (2006, p.  82). During the 1980s and 1990s approximately 90 per cent of systems resulted in government take of between 45 and 85 per cent (Johnston, 2005). Similarly, Khelil’s report for the World Bank (1995) declared that most government take ranged from between 40 to 85 per cent and Ireland’s ‘very low government take at twenty five per cent’ is ‘very favourable’, particularly in comparison to Yemen which received government take of 95 per cent (Khelil, 1995, p. 1). Indeed, research by the DCMNR (2006a) firmly established Ireland as having one of the lowest returns to a state in the world (Table 5). Not only was the rate of government take in Ireland much lower than regional averages in the Middle East and North Africa, government take in Ireland was Table 5  Estimated government take Country/region North America South America Ireland Europe excluding Ireland Sub Saharan Africa FSU, Middle East, North Africa Asia (excluding Central)

Government take (%) 42–60+ 25–90 25 35–65 44–85 60–90+ 40–84

Source: DCMNR (2006a) in Indecon (2007).

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much lower than our nearest neighbours in North America and Europe with which the country shares similar economic models. Ireland appears to have internalised the idea of natural resources as ‘free gifts’ of nature to such an extent that it demands one of the lowest rates of government take in existence in exchange for the privatisation of its resources. The differences in rates of government take between Ireland and its neighbours are noteworthy and this is an issue apparent in numerous other studies. In 2006, the Alaskan State Legislature reviewed its fiscal system and invited several companies (BP, ConocoPhillips, CRA, Daniel Johnston and Co. and Van Meurs) to make presentations on government take and fiscal systems (US GAO, 2007). Although some of these companies provided different estimates of government take for the same fiscal systems, Ireland’s rate of government take was lower than each of the states surveyed. To develop a clearer picture of how Ireland compared with those countries, this author compared findings from the studies cited in the US GAO report (which reviewed eight studies, including data from the Alaskan State Legislature) with other studies, namely Alexander and Johnston (2000) and Kaiser and Pulsipher (2006). While the length of time between studies (1994 to 2006) means the findings may be outdated and radical changes could have occurred to the fiscal regimes, a comparison is useful for an approximate estimate of how Ireland’s regime compared with a larger number of other countries in a specific era. A total of one hundred and fifty-three fiscal systems spanning seventy-four countries were surveyed across the nine studies and based upon the 1992 Licensing Terms (still applied to a third of authorisations in 2015) Ireland had the second lowest government take of all the states examined. To provide further insights into differences between the Irish rate of government take and other countries, I grouped the fiscal systems by government take in bands of 10 per cent, for example the country with the lowest take (Cameroon) was the only country with a rate of government take between 10 and 20 per cent (see Table 6 below). None of the countries studied had a rate of government take less than 10 per cent while Ireland was the only country in the second band (20–30 per cent). These data also suggest that government take of less than 50 per cent is quite uncommon as 79 per cent of the fiscal systems resulted in government take of 50 per cent or over. Thus, the 2007 terms result in a lower than average rate of government take while the 2014 regime may bring newer authorisations more in line with international rates. As part of the JCCNRA review (2011–12), the Oireachtas Library and Research Service was tasked with developing a paper on Ireland’s fiscal regime, comparing rates of government take in Ireland with those of other countries. Based on a 2007 report by the House of Commons Scottish Affairs committee, the authors found that ‘Ireland has the most generous tax and royalty regime’ (Oireachtas Library and Research Service, 2011). Furthermore,

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Ireland in a global context Table 6  Estimated range of government take Estimated range of government take (153 fiscal systems in 74 countries) 10–20% 20–30% 30–40% 40–50% 50–60% 60–70% 70–80% 80–90% 90–100%

1 fiscal system – Cameroon 1 fiscal system – Ireland 7 fiscal systems 23 fiscal systems 35 fiscal systems 34 fiscal systems 26 fiscal systems 22 fiscal systems 4 fiscal systems

Sources: Alexander and Johnston (2000); Kaiser and Pulsipher (2006); US GAO (2007).

‘even with the tax changes in 2007 Ireland would still probably have the lowest government shares of revenues’. Sixty-five fiscal regimes were mentioned in the report and for the purpose of comparison with the previous study, I  grouped rates of government take in bands of 10 per cent and found the following:  only one country had government take of less than 30 per cent (Ireland); five fiscal regimes resulted in take of between 30 and 40 per cent; another five regimes were in the bracket of 40–50 per cent government take. Thus eleven out of sixty-five fiscal regimes resulted in government take of less than 50 per cent. Ten fiscal systems meant a government share of 50–60 per cent and eight culminated in government take of 60–70  per cent. Eleven regimes sought 70–80 per cent government take and an additional nine systems demanded 80–90 per cent. As the largest category, sixteen fiscal systems resulted in government take of over 90 per cent. Interestingly, this study suggested Cameroon demanded government take of around 81 per cent – much higher than Ireland’s rates. Studies of government take utilise different methodologies and the inclusion of data from several studies is intended to illustrate the uniqueness of Ireland’s regime, rather than serve as a definitive calculation of rates of government take internationally. Nonetheless, Ireland’s fiscal terms seem peculiar as does the state’s adoption of a licensing system. Ernst and Young’s global oil and tax guide (2010a) detailed the fiscal regimes of fifty-seven countries and when I  studied this information, I found thirty of these regimes were contractual (PSCs or SCs) or nationalised industries (e.g. Mexico until 2013 when it began to allow private companies to participate in upstream activities (Gonzalez-Canales, 2015)). A preponderance of PSCs in the countries surveyed reiterated the thesis by Johnston (2008a) and others, that production sharing arrangements are the most popular type of regime in existence. Of the fifty-seven countries reviewed, thirty-eight

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demanded the payment of royalties which ensured the state received a share of revenues before costs had been offset. Once again I found Ireland had one of the lowest rates of government take of all the countries surveyed. Only Romania and Singapore had low rates of government take comparable to Ireland. Data from Ernst and Young (2010a, 2014) further demonstrated the uniquely low rates of Irish government take in comparison with the UK and US with which the Irish state shares a similar macroeconomic approach. In the UK, companies were liable to pay a corporation tax of 30 per cent, a supplementary charge of 20 per cent, and a petroleum revenue tax (on fields authorised before 1993) (Ernst and Young, 2010, pp. 393–7). After costs have been deducted, the UK received between 50 and 75 per cent of profits (ibid.) (an estimation of revenues before the supplementary charge was increased to 32 per cent in 2011)  (Ernst and Young, 2014). The regime in the US also brings significant benefits to the resource owners, be they private landowners7 or federal and state governments. Companies are liable to pay royalties, bonuses, income tax, severance tax; they may also be subject to additional state taxes. Royalty rates range from 12.5 to 30 per cent for onshore production (negotiated with the mineral owner) and from over 12 to nearly 19 per cent for offshore production (paid to the federal government) (Ernst and Young, 2014, pp. 606–7). Signature bonuses are paid upon agreement of an authorisation to produce the resources and all companies are subject to a 35 per cent federal tax rate (companies may be liable to pay state taxes which include income, franchise, production and property taxes). States also require the payment of a severance tax which varies but may be calculated on the volume produced or as a per cent of gross income (ibid.). All these studies emphasise the uniqueness of the Irish approach and stress the need for research on why the Irish state has implemented a model which results in very low returns for Irish citizens, as owners of the resources. At this juncture it must be stressed that if a state has a high rate of government take, it does not mean that the wealth is actually distributed within the state. Most of the science of fiscal system analysis has focused on how governments benefit from hydrocarbon production, not how the wealth is distributed within those countries (Johnston, 2008a, p. 44). Why is Ireland’s approach different? Ireland’s regime is clearly at odds with its neighbours and others’ models of resource management. Production sharing arrangements, and SCs to a lesser degree, are the regime of choice for many governments across the world, resulting in stronger state control and ownership, hand in hand with higher rates of government take. Whereas licensing systems entail the privatisation of state resources and often result in much lower rates of government take than contractual systems, bearing in mind notable exceptions like Norway.

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Ireland in a global context

Although this chapter establishes Ireland as having one of the lowest rates of government take in the world, it does not explain how this happened. Nor is it clear why the Irish state adopted a licensing system instead of a contractual regime (PSCs/SCs)? Furthermore, why is Ireland’s rate of government take much lower than the US, UK and other countries following a similar economic model? Only by situating Ireland’s approach in a global context have these questions come to the fore, and answers to these are crucial to understand why Ireland manages its resources in the manner it has adopted. Wood Mackenzie’s 2014 report on Ireland’s fiscal regime suggests the country’s approach is entwined with its OECD membership and efforts to ‘position itself as a stable investor friendly destination with a relatively low corporation tax that is aimed at encouraging inward investment and enabling job creation’ (2014, p. 21). Yet, despite Ireland’s efforts to provide a welcoming environment for oil companies, exploration rates have been low8 with no obvious correlation to policy which suggests a desire to attract investment is not a credible explanation of Irish policy over a longer period. Like preceding state-initiated reports by Indecon (2007) and the Oireachtas Library and Research Service (2011), Wood Mackenzie (2014) did not pay attention to the ideological, political or social components of state resource management and, as we have seen in this and preceding chapters, those elements influence how states manage their resources. To provide answers to persisting questions on the Irish model, comparisons with another country can act as an investigative tool to identify further socio-economic and political factors shaping resource management  – factors which can then be used as parameters upon which to judge Ireland’s regime. Analogies between Ireland and Norway have been a frequent feature of commentary on Irish hydrocarbons, ranging from Ireland’s approach being modelled on Norwegian arrangements (1975 licensing terms) to derision of Ireland’s limited reserves (incomparable to Norway’s). Given the prominence of discourse comparing the Norwegian and Irish models, there appears to be only one country with which Ireland can be compared – Norway. Notes 1 The concept of nationalism in resource management is contested (see chapter six), for example Ryggvik argues the term suggests changes are based on ‘symbols and feelings’, as opposed to smart economic policies, and there is nothing irrational about an oil-rich country doing what it can to secure the greatest share of revenues for its state (2010, pp.  36–7). Nonetheless, attention to ‘nationalism’ is helpful for revealing the impact of different ideologies on resource management. 2 Profit ratio (2007 terms) is calculated on a ratio of profits (after corporate tax and costs offset) to levels of capital investment: a ratio of