· 81 the proposed corrib onshore system ... the corrib pipeline is not a “normal ... the...
TRANSCRIPT
DublinNovember 2005
The second report of the Centre for Public Inquiryconcerns the Corrib gas project and the associatedpipeline and processing plant proposed for theErris peninsula in north west County Mayo. Thejailing of five men from Ros Dumhach in thecounty Mayo Gaeltacht during the summer of2005 has focused national attention on theproposal to run a gas pipeline from the sea bed 80kilometres offshore to a gas processing plant atBallinaboy Bridge.
Residents of the area have expressed deepconcerns over the safety of the proposed pipelinewhich runs within 70 metres of people’s homesand over the suitability of the location of theproposed processing plant to be constructed onbog land acquired by the Corrib consortium whichis comprised of Shell E&P Ireland Ltd, Statoil andMarathon, three global players in the internationaloil and gas industry. The campaign and theresponse by both the Government and thecorporations involved has also highlighted themanner in which successive governments havegranted major fiscal and licensing concessions tothe oil and gas majors over a thirty year period.
For this report, the Centre for Public Inquiry hascommissioned a detailed independent analysisfrom the highly respected US based consultants,Accufacts Inc, which addresses the health andsafety implications of the proposed pipeline andprocessing plant including the question ofwhether the latter should be located offshore.Pipeline expert, Richard Kuprewicz, whose termsof reference went beyond the confines of a reviewof previous Quantitative (or Quantified) RiskAssessments carried out on behalf of theGovernment on the pipeline proposal in recentyears, has arrived at conclusions which can only bedescribed as highly critical of the project ascurrently proposed.
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editorial CENTRE FOR PUBLIC INQUIRY
Fiosrú An Phobail
A separate document researched and written bystaff at the Centre for Public Inquiry examines thebackground to the Corrib Gas controversy, thehistory, since the early 1970s, of Ireland’srelationship with the oil and gas industry and thelegislative and other changes made over theperiod. The conclusions of this study raise seriousquestions about the manner in which the Corribgas project has proceeded in relation to itsplanning and legislative aspects.
The report will be forwarded to Mr Noel Dempsey,the Minister for Communications, Marine andNatural Resources who currently holdsresponsibility for protecting the country’sstrategically important national resources and foradvancing this significant infrastructural project.It will also be distributed to members of theOireachtas, the relevant local authorities, theconcerned communities in north west Mayo andother interested parties. We hope that thepublication of this report will contribute to thegrowing national debate surrounding the Corribgas project and the wider development ofIreland’s oil and gas resources.
Frank ConnollyExecutive Director.
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Written by Frank Connolly & Dr Ronan Lynch
Research: Dr Ronan Lynch
Photography: Derek Speirs (except where indicated)
Design: Public Communications Centre
Printed by: Hudson Killeen
Published by:
Centre for Public Inquiry-Fiosrú an Phobail
The Courtyard, 25 Great Strand Street, Dublin 1
Tel: 01 8748851 Fax: 01 8748976
E mail: [email protected]
Website: www.publicinquiry.ie
CPI Logo: Robert Ballagh
contents
4 Executive Summary
6 Key Findings Independent Analysis by Accufacts Inc
8 Introduction
21 A Storm Comes AshoreThe Rossport Story
51 The Great Oil and Gas Story The Colonisation of Ireland’s offshore
71 The Final Frontier Offshore Ireland
73 Taxing Oil productionA Global Picture
75 What Shell says about Corrib
77 Corrib Timeline
81 The Proposed Corrib Onshore SystemIndependent Analysis by Accufacts Inc
1 The Corrib gas field, which is
controlled by a consortium
including Shell (45%), the
Norwegian state company Statoil (36.5%)
and Marathon (18.5%), is worth up to €8
billion according to sources in the oil and
gas industry. Its discovery was announced
in 1996. The Corrib and associated fields in
the Slyne/Erris basin off the north west
coast of Ireland are estimated to be worth
up to €50 billion. Through Statoil, the
Norwegian tax payer benefits more directly
from the gas find than the Irish public.
Following the introduction of a new fiscal
and licensing regime for the industry in
1987 and 1992, the Irish tax payer receives
no royalties from the find while
development costs can be written off
against tax.
2 Changes to the 1975 fiscal and
licensing terms are weighed heavily
in favour of the oil and gas
companies. While designed to encourage
exploration and drilling the record shows
that the new terms introduced by former
minister, Ray Burke, in 1987 and then
finance minister, Bertie Ahern, in 1992 had
little effect in this regard and effectively
ceded control of vast offshore reserves to
the oil and gas industry.
3 In 1987, Mr Burke exempted the oil
and gas industry from royalty
payments and abolished all State
participation in the commercial
development of important natural
resources. He introduced a 100% tax write
off against profits on capital expenditure
for exploration, development and
production for up to 25 years.
4 In 1992, then Minister for Finance,
Bertie Ahern, reduced Corporation
Tax on oil and gas companies from
50% to 25%. The 1992 licensing terms
allowed the oil and gas companies to
secure licences covering extensive offshore
areas for long periods of time with
minimal drilling requirements.
5 A proposal in the 1970s to establish
an Irish State company to develop
the country’s oil and gas resources
and offers by the Norwegian government
to assist in its creation were rejected by the
Irish government at the time. When, in
1979, a state company, the Irish National
Petroleum Corporation, was set up to
guarantee oil supplies during an
emergency it was explicitly prohibited
from any involvement in exploration and
drilling.
6 In 2002, the Irish government
introduced statutory instruments
into legislation which allow the
Minister for Communications, Marine and
Natural Resources to make Compulsory
Acquisition Orders for the benefit of private
companies which permit them to acquire
land without the permission of property
owners. Five men from County Mayo spent
94 days in jail during 2005 when they
refused to permit Shell E&P to exercise
these orders.
7 The Government also introduced
legislation to allow the department
to grant permission for an upstream
pipeline, carrying untreated gas, without
it being subject to normal planning
procedures.
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EXECUTIVE SUMMARY
8 Following public hearings in 2002 a
senior inspector of An Bord Pleanála
rejected the proposed location for a
gas processing plant at Ballinaboy Bridge
in County Mayo. Mr Kevin Moore stated
that the proposed plant was in the wrong
location and upheld the appeal by local
residents against planning permission. In
his decision he cited the threat to a
sensitive and scenic location, the instability
associated with the removal of hundreds of
thousands of tonnes of peat bog and the
risk of a major accident.
9 In 2003, senior executives of Shell
E&P were granted a meeting with
the Taoiseach, Bertie Ahern, the
former Minister for Communications,
Marine and Natural Resources, Dermot
Ahern and former Minister for the
Environment, Martin Cullen and senior
government officials to express their
concerns over planning delays.
10 Within a week representatives
of the consortium seeking to
develop the Corrib gas field
were granted a meeting with the chairman
of An Bord Pleanála, John O’Connor, and
members of the planning appeals board to
discuss their concerns.
11 In 2004, the Shell-led
consortium was granted
planning permission after
altering their original proposal to dump
hundreds of thousands of tonnes of peat
near the intended gas processing plant and
instead remove it to a site some 11
kilometres away at Bangor Erris.
12 The Department of
Communications, Marine and
Natural Resources failed to
properly supervise work by Shell E&P
which erected a section of the controversial
pipeline without the necessary ministerial
consents. They were subsequently forced to
dismantle it.
13 The Department also
commissioned a safety review
of the proposed pipeline, which
was originally routed through an area
affected by landslides, from a company
which was part owned by Shell and was
forced to commission an alternative review
after public protest.
14 A safety review commissioned
by the Centre for Public Inquiry
from US company, Accufacts
Inc. has found that the current proposed
route of the pipeline is unacceptable and
that claims that it meets “the highest
international standards” are meaningless.
The report raises serious questions
concerning the credibility of the current
proposal and also concludes that the
benefits of locating the gas processing
plant offshore have not been properly
addressed.
15 In the latest round of licences
issued in August 2005, frontier
licences were allocated to a
Shell-led consortium and to Island Oil and
Gas, an Irish based company. Providence
Resources, controlled by Tony O’Reilly, the
owner of Independent News and Media, is
the largest Irish company involved in
offshore oil and gas activity and controls
significant acreages off the west coast and
in the Celtic Sea.
16The Government has stated on
several occasions that the benefit
to Ireland from the Corrib gas
field will be to increase the attractiveness
of the northwest as an investment location;
the creation of jobs in construction and
operation of the connector pipeline and
processing plant and to ensure ‘security of
supply’ and reduce reliance on gas from
‘unstable’ regions of the world.
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� The Corrib pipeline is not a “normal”
pipeline given its potential to operate
under exotically high pressures and
because of the unknown gas
compositions associated with gas field
production. This can seriously increase
the likelihood of pipe failure.
� The Quantified Risk Assessment (QRA)
is inappropriate for this highly unique,
first of its kind, pipeline as there is no
historical data that can be used to
evaluate this proposed system.
� The route of the pipeline, as currently
proposed, is unacceptable because of its
close proximity to people and dwellings.
� The thick-walled pipe is not invincible
to leak or rupture from the expected
high pressures and the destructive
potential of reactive gases.
� There are too many unknowns
regarding the future operation of this
pipeline - especially in the areas of
gas pressure and gas composition that
can lead to failure.
� Maximum pipeline pressure, a
condition that should be easily defined,
has not been clearly demonstrated or
documented - a grave deficiency.
� This pipeline’s uniquely large rupture
impact zone with high fatalities
raises many questions about the
appropriateness of the current
proposal and QRA approaches.
� Claims of meeting “highest
international standards” are
meaningless as no standard adequately
addresses the numerous issues
associated with this unique proposal.
� Routing analyses for the onshore
systems are seriously deficient while
the difficulties with locating the gas
processing plant offshore are
overstated.
� This report raises critical questions
concerning the credibility of the current
proposal, and should call into question
the validity of evaluations concerning
this project.
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The Proposed Corrib Onshore System
An Independent Analysisby Richard Kuprewicz
President, Accufacts Inc.
KEY FINDINGS
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LOCAL PROTEST, NATIONAL DEBATE
More immediately it has also focused national andinternational attention on a remote, ruralcommunity in northwest Mayo that has expresseddeep concern over the threat to its health andsafety arising from the route of the proposedpipeline to carry untreated gas from deep Atlanticwaters 80 kilometres off the Erris peninsula.
The imprisonment of five residents of RosDumhach (Rossport) and surrounding areas in theMayo Gaeltacht for 94 days for refusing to obey aHigh Court order forbidding them fromobstructing the planned pipeline has turned alocal environmental controversy into a nationaldispute that has polarised attitudes and renewedpublic debate over the relationship betweensuccessive governments and powerfulinternational oil companies.
A detailed examination of that relationship hasraised serious questions about decisions madeover several decades by administrations tornbetween the need to explore and develop lucrativeand vital national resources and the desire tomaintain sovereign control over strategicallyimportant oil and gas fields. As the world supplyof hydrocarbons rapidly depletes, and oil and gas
prices escalate, the political decisions made overthe past 30 years are now under public scrutinylike never before.
With the benefit of hindsight it is arguable thatthe terms and conditions under which the oil andgas companies operate in Ireland are over-generous and that the repeated concessions to the demands of the some of the world’s mostpowerful financial interests were ill advised andpremature.
FROM PROTECTION TO GIVE-AWAY
The agreement with Marathon Oil in 1960, the1975 Offshore Licensing Terms, the 1992 OffshoreLicensing Terms and the 1992 Finance Act are theprincipal regimes governing the oil and gasindustry in Ireland.
From a position in 1975 when senior civil servantsdevised licensing and fiscal terms which ensuredsubstantial state participation in any oil and gasproduction, significant royalties on production anda vigorous taxation regime, the Irish State haseffectively removed most, if not all, of theconstraints imposed on the oil and gasmultinationals.
introductionThe recent discovery of rich deposits of natural gas off the west
coast of Ireland, and the manner in which a consortium led by
the global conglomerate, Royal Dutch Shell, intends to bring the
gas onshore, has generated a renewed debate over the control
of the country’s oil and gas resources.
companies to a programme that required them todrill at least one exploratory well within threeyears and to surrender 50% of the originallicensed area they were granted within four years.
Under the terms the State would gain a “carriedinterest” by taking a share of the project after adiscovery and thus would not have to bear thecosts of exploration.
It was clear from the 1975 terms that the Ministerenvisaged the formation of a State oil companysimilar to the Norwegian state company, Statoil, ifsignificant finds of oil or gas weremade.
Underlying the decisions which permitted thiserosion of State involvement in the exploitation ofthe nation’s natural resources was an undoubteddesire to ensure that the economic climate wascreated to facilitate the expensive explorationprocess in technologically challenging conditionsoff the western seaboard.
Changes in 1985 and 1987 were to provide a kickstart for oil exploration but the 1992 terms placedalmost all control over the resources into thehands of the oil companies.
MINISTER JUSTIN KEATING’S VISION
In 1975, officials in the Department of Industryand Commerce prepared draft terms for offshoreexploration on behalf of the then minister, JustinKeating. He was heavily influenced by the mannerin which the Norwegian government had soughtto develop its indigenous oil and gas resources inthe face of stiff opposition from the oil majors.
He and his colleagues in government were alsohighly critical of the terms agreed by a previousFianna Fáil government with Marathon Oil forthe development of the Kinsale gas fields.
The 1975 terms included a provision for theState to acquire a 50% maximum stake in anycommercial find, production royalties ofbetween 8% and 16% and productionbonuses on significant finds. The standardcorporation tax of 50% was also applied,while the terms sought to commit
Rossport
Bangor Erris
Glenamoy
Barnatra
CarrowmoreLake
BroadHaven
Sruwaddacon Bay
BelmulletR314
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Ballinaboy Site
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Indeed, as Dáil records examined by the Centre forPublic Inquiry (CPI) reveal, the Norwegiangovernment offered direct assistance to their Irishcounterparts (partly in exchange for fishing rightsin Irish waters) to set up a State oil company andoffered them a direct involvement in thecommercial development of North Sea fields as ameans of gaining the necessary experience andfinancial ability to properly develop the potentiallyrich Irish offshore resources.
MINISTER DES O’MALLEY’S ROLE
In 1979, Mr Keating’s successor as Minister forIndustry and Commerce, Des O’Malley, made adecision to establish the Irish National PetroleumCorporation (INPC), a State company with a remitto control Ireland’s strategic petroleum reserves.This initiative, however, was a result of a crisissparked by the revolution in Iran which disruptedoil supplies and saw a dramatic increase in price. A number of the major oil producing countrieswould only supply oil to Ireland on condition thatit was purchased by a State owned company.
The former Fianna Fáil minister claimed to the Dáilin 2001 that he had been reluctant to establishthe INPC and only did so because the governmentof Iraq would only supply to an Irish statecompany and Norway’s offer to the government ofparticipation in one of its new oil fields was,according to Mr O’Malley, also conditional on thedeal being done with an Irish State-controlledcompany. Despite this radical development theINPC was never given adequate finance or powersto realise its potential and was actually prohibitedin its memos and articles of association fromdrilling for oil and gas.
By the mid 1980s, and despite the drilling of 96wells offshore, there were no commercial finds ofoil or gas and pressure mounted for a dilution ofthe 1975 fiscal terms.
In April 1985, the then Minister for Energy, DickSpring, introduced new exploration terms for so-called marginal fields of less than 75 millionbarrels and announced that he would reduce Stateroyalties and introduce a sliding scale of Stateparticipation. In September 1986, he announcedthe abolition of participation rights for marginalfields.
MINISTER RAY BURKE’S GENEROSITY
In September 1987, Ray Burke, who was given theenergy portfolio by Taoiseach, Charles Haugheywhen the new Fianna Fáil government replacedthe Fine Gael–Labour coalition earlier that year,
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In September1987, Ray Burkeannounced newterms thatincluded theexemption of all oil and gasproduction fromroyalty paymentsand the abolitionof all State participation.
announced new terms that included theexemption of all oil and gas production fromroyalty payments and the abolition of all Stateparticipation.
Mr Burke also introduced a 100% tax write-offagainst profits on capital expenditure forexploration, development and production for upto 25 years. Mr Burke told the Dáil that he thoughtthe removal of the 50% corporation tax rate onprofits would be “over generous” and the rateremained. Mr Burke explained that the radicaldeparture from the 1975 terms was necessary inthe light of the poor drilling results of previousyears and the low price of crude oil.
He said he was gravely concerned that explorationin Irish offshore waters might end if the newregime was not applied. Mr Burke introduced thenew terms after several meetings with theexecutives of a number of oil and gas companies.He also met executives of Marathon Oil to re-negotiate the State’s contract for Kinsale gas, onsome occasions without the presence ofdepartment officials.
MINISTER FOR FINANCE, BERTIEAHERN MAKES HIS MARK
In April 1992, the then Minister for Finance, BertieAhern, incorporated Mr Burke’s 1987 changes tothe taxation regime into the Finance Act and alsofurther reduced corporation tax on oil and gascompanies from 50% to 25%.
Mr Ahern told the Dáil that he intended to set outa definitive tax regime that was “designed toimprove Ireland’s competitive position inattracting oil and gas exploration”.
“A particular feature is the provision for a specialincentive rate of Corporation tax of 25%, whichwill apply to income arising under petroleumproduction leases granted by the Minister forEnergy before certain specified dates.”
The announcement met with no opposition, withthe Labour Party’s finance spokesman, RuairiQuinn, declaring that he would “suspendjudgement on the operation of the petroleumtaxation regime and the changes being proposedin this Bill because, in fairness, the previousregime did not produce any kind of activity”. TheFinance Act was passed in late May 1992 whilethe new licensing terms were introduced witheffect from June.
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CEDING POWER TO THE OIL COMPANIES
In June 1992, the government introduced newlicensing terms with no royalties or stateparticipation. The new licensing terms alsopermitted producers to sell any oil or gas atmarket prices – a departure from the arrangementwith Marathon Oil, which for many years sold gasfrom the Kinsale field under a bulk discountsupply agreement with Bord Gáis and a radicaldeparture from the 1975 terms.
Critics of the new regime argued that the termseffectively abandoned principles of good offshoremanagement and ceded too much power andrights over the country’s natural resources to theoil companies who were now granted 16 yearlicences for exploration of vast offshore fields.
On 1 January 1993, the British company EnterpriseOil was granted a deepwater licence for six blocksin the Slyne basin. The Enterprise-led consortiumalso included two Norwegian companies – theState-controlled Statoil and Saga Oil (which, in1999, sold its 18.5% share to Marathon).
Much of the information about the potential ofthe Slyne Basin had in fact been collated byofficials of the Department of Energy. The Centrefor Public Inquiry has learned that significantamounts of the seismic and drilling data collated
by the State, particularly from the Slyne andPorcupine Basins, over a period of two decadeswas made available to the oil companies at a costof £8000 in respect of at least one report on thePorcupine Basin.
CORRIB IS DISCOVEREDA PIPELINE IS PLANNED
In October 1996, Enterprise Oil announced that ithad discovered gas in the Corrib Field in the SlyneBasin, 80 kilometres off the Mayo coast, andestablished a new subsidiary, Enterprise EnergyIreland (EEI), to develop the massive find.
By 1999, the company had identified a site ownedby the State forestry service, Coillte, ninekilometres inland at Ballinaboy, County Mayo, fora gas processing plant and started to prepareplans for a pipeline to transport the untreated gasfrom a wellhead on the seabed.
In the summer of 2000 EEI formally approachedCoillte about the purchase of a 400-acre site atBallinaboy. In July 2000, the Minister for PublicEnterprise introduced changes to the Gas(Amendment) Act 2000 that allowed constructionof the pipeline by EEI to proceed. Under existinglegislative provisions, only Bord Gáis waspermitted to construct a gas pipeline.
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In September 2000, the Taoiseach, Bertie Ahern,introduced Statutory Instrument (SI) 110,transferring regulatory power over “any upstreampipeline network” from the Minister for PublicEnterprise (who had responsibility for Bord Gáis)to the Minister for the Marine and NaturalResources, Frank Fahey.
In February 2001, Mr Fahey confirmed that he hadbeen informed of the commerciality of the field amonth earlier by EEI, which had now applied for apetroleum lease to develop the field.
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(above) Satellite photograph ofSruwaddacon Bay showing proposedpipeline route and the homes of theRossport 5 and Bríd McGarry (credit: John Monaghan)
(below) Panoramic view showing proposedpipeline route from Broadhaven Bay toBallinaboy Bridge.
Philip McGrath
Vincent McGrath
Willie Corduff
Bríd McGarry
Michéal Ó Seighin
Brendan Philbin
In April 2002, Mr Fahey approved the EEI plan ofdevelopment and issued a letter of consent toconstruct the pipeline; the following month thefirst CAOs were made by the Minister andprovided to EEI.
On the day of the general election on 17 May2002, Mr Fahey issued a foreshore lease to EEI.
AN BORD PLEANÁLA HEARS THEARGUMENTS
After objections to the planning permission werefiled by Rossport residents and others opposed tothe construction of the processing plant, An BordPleanála held oral hearings in February andNovember 2002. Senior planning inspector KevinMoore heard a range of arguments both in favourof and against the development before coming tohis own conclusions.
In his report to An Bord Pleanála Mr Moore statedthat the development was on the wrong site.“From a strategic planning perspective this is thewrong site. From the perspective of governmentpolicy which seeks to foster regional development,this is the wrong site; from the perspective ofminimising environmental impact, this is thewrong site; and consequently, from theperspective of sustainable development, this is thewrong site.”
Mr Moore also said that the Marine LicenceVetting Committee, set up in July 2001 to examinethe environmental aspects of the Corrib gas fieldplan of development, the foreshore licenceapplication and the petroleum lease application,had failed to adequately explain why a shallowoffshore processing plant, as demanded by manyobjectors, would not succeed.
The managing director of EEI in Ireland, Andy Pyle,insisted that processing the gas on a shallow-water platform was not economically viable andestimated its cost at €360 million.
Mr Moore recommended refusal of the project onthree grounds: the threat to the sensitive andscenic location; the likely instability of the peatbog at Ballinaboy where EEI wished to constructthe processing plant; and the risk of a majoraccident.
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Planning permission for the construction of the€800 million processing plant was granted byMayo County Council in August 2001. The plant,occupying 23 acres, was to be located on the 400-acre site at Ballinaboy Bridge.
The petroleum lease was granted to EEI inNovember 2001, a day after the ministerintroduced a further statutory instrument, SI 517,giving him power to make Compulsory AcquisitionOrders (CAOs) for upstream pipelines.
This meant that the CAOs made by the ministerpermitted a private company to occupy land andconstruct a pipeline even if the owners of the landobjected. Within weeks, landowners along theroute of the proposed pipeline were informed thatthey would be served with CAOs unless theyaccepted compensation and allowed EEI to lay thepipeline.
In March 2002, the Statutory Instruments wereincorporated into legislation through anamendment to the Gas Act allowing privatecompanies in the gas market to enter land on thebasis of the compulsory acquisition orders madeby the Minister. Within weeks of these newmeasures, giving private companies compulsoryacquisition rights that had been previouslypermitted to local authorities and State or semi-State companies only, Enterprise Oil was takenover by Shell in a €6.5 billion deal.
Significant amounts ofthe seismic and drillingdata collated by theState, particularly fromthe Slyne andPorcupine Basins, overa period of twodecades was madeavailable to the oilcompanies at a cost of£8000 in respect of atleast one report.
BIG OIL MEETS MEETS BIG GOVERNMENT
They sought and were granted a meeting with theTaoiseach, Bertie Ahern, who met with a group ofsenior Shell executives, including Tom Botts, chiefexecutive officer of Shell E&P Europe, and AndyPyle of Shell E&P Ireland, in his department on 19September 2003. Mr Ahern was accompanied bythen Minister for Communications, Marine andNatural Resources, Dermot Ahern, and thenMinister for Environment, Heritage and LocalGovernment, Martin Cullen.
Assurances were given by Mr Ahern that thegovernment would seek to facilitate the project,which he argued was in the national interest butthat it would have to go through the planningprocess. Assurances were given that any newappeal against planning permission would beaddressed swiftly by An Bord Pleanála.
A briefing document prepared for the meeting bythe Department of the Environment states that“all possible steps will be taken by the Board toensure that any such appeal is processed with allpossible speed with a view to giving a finaldecision on it within the statutory objective periodof 18 weeks”.
Documents obtained under Freedom ofInformation (FOI) by the Centre for Public Inquiryconfirm that the Shell delegation told theTaoiseach that they would like “a greater dialoguewith the planning authorities, especially ABP (AnBord Pleanála)”.
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AN BORD PLEANÁLA REFUSES PLANNING PERMISSION
At a meeting of An Bord Pleanála in April 2003 theboard upheld its inspector’s decision butoverturned two of the three reasons given by MrMoore for refusal. It rejected granting planningpermission on the grounds that the transfer of600,000 cubic metres of peat bog to land near theproposed processing plant would represent anunacceptable risk and could pollute local rivers.
While Mr Fahey viewed the An Bord Pleanáladecision as a technicality, EEI executives and theirsenior colleagues at Shell headquarters in Londonwere claiming that the delay in obtaining fullplanning permission had cost them a further€100 million.
(from left) Former EEI Managing Director Brian Ó Catháin, Principal Officer of the PetroleumAffairs Division Michael Daly and former Ministerfor the Marine and Natural Resources, FrankFahey on board drill ship off Donegal, April 2001(Photo: Shay Fennelly)
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OIL INDUSTRY GETS A MEETING WITHAN BORD PLEANÁLA
Within a week a meeting took place between anoil industry delegation, including senior Shellexecutives, and the chairman of An Bord Pleanála,John O’Connor. According to minutes of themeeting, obtained by the Centre for Public Inquiry,the chairman said that he could not discuss anyindividual case. The delegation made apresentation titled “The Case for Indigenous Gas”and a discussion took place on the manner inwhich a large, complex planning application mightbe approached by a developer.
Shell executive Andy Pyle, Lief Arne Hoyland ofStatoil and Fergal Murphy of Marathon Ireland,representing the three elements of the consortiumdeveloping the Corrib field, were present alongwith the chairman of the Irish Offshore OperatorsAssociation, Fergus Cahill.
PERMISSION GRANTED DESPITE DANGER SIGNALS
Just hours after the meeting in the Taoiseach’soffice on 19 September, a massive landslide drovetonnes of peat and mud off Barnacuille andDooncarton mountains overlooking the route ofthe pipeline, sweeping away homes and theremains of the deceased in a nearby graveyard.The landslide covered one of the original proposedpipeline routes which, if implemented, would havebeen carrying unprocessed gas were it not for theplanning delays.
In December 2003, EEI submitted a fresh planningapplication to Mayo County Council, whichincluded a proposal to transfer the 600,000 cubicmetres of peat from the Ballinaboy site to a Bordna Móna site 11 kilometres away near BangorErris.
In April 2004, the council granted planningpermission, which was again appealed to An BordPleanála. In October 2004, An Bord Pleanálaunanimously approved the planning permission.
(from left) Bridie Moran, Barney Keogh, Michael Kane and Ed Collins in theShell To Sea campaign h.q. in Ballinaboy
Landslide on Barnacuillemountain, 19 September 2003(Photo: Shay Fennelly)
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LOCAL WORRIES
Landowners concerned at the proximity to theirhomes of the pipeline carrying what theyconsidered untreated and volatile gas, in theshadow of a mountain recently affected by majorlandslides, continued to protest.
In April 2005, the president of the High Court, MrJustice Joseph Finnegan, granted an interlocutoryinjunction to Shell E&P restraining a number ofresidents from obstructing the laying of thepipeline across their lands.
The residents claimed there was a danger that thepipeline could explode, killing people anddamaging houses – some of which were within 70metres of the pipeline.
THE ASSESSMENT DEBACLE
A Quantitative (Quantified) Risk Assessment(QRA), by UK based pipeline engineering company,J P Kenny, of the risk to human safety caused bythe proposed pipeline had argued, in 2001, thatthe occupants of a building 70 metres away wouldbe safe in the event of a pipeline rupture andexplosion. The Erris residents were not convincedand, through local Independent TD Dr Jerry Cowley,sought an independent assessment of the QRA.
In March 2005 the Minister for Communications,Marine and Natural Resources, Noel Dempsey,agreed to commission an independent review ofthe QRA and this was carried out by the BritishPipeline Agency, which largely agreed with theconclusions of the earlier QRA carried out by JPKenny, whose 2001 report had beencommissioned by EEI. Within hours of the reviewbeing published in May 2005 it emerged that theBritish Pipeline Agency was jointly owned by Shelland British Petroleum. This embarrassingdisclosure led the Minister, Noel Dempsey, toimmediately agree to a fresh review of the QRA.
THE ROSSPORT FIVE BECOME THENEWS STORY OF THE SUMMER
On 29 June 2005 Micheál Ó Seighin, Willie Corduff,Vincent McGrath, Philip McGrath and BrendanPhilbin were sent to Clover Hill jail in Dublin forfailing to comply with an order of the High Courtrestraining them from interfering with Shell E&P’sattempts to lay the pipeline.
A major campaign seeking their release made theRossport Five, as they were soon dubbed, themajor news story of the summer. Meetings andrallies took place across the country and the Shellto Sea campaign and the demands of the Errisresidents became a national issue.
The demand that Shell process the gas on ashallow platform at sea became the focal point ofthe growing campaign. The future of the gasprocessing plant itself was now at stake asresidents vowed to stop the pipeline feeding it atany cost.
In July 2005, Minister Dempsey commissioned athird safety review by UK based consultants,Advantica, but the campaigners rejected its termsof reference as too narrow.
The demand that Shell process the gas on ashallow platform at sea became the focalpoint of the growing campaign. The futureof the gas processing plant itself was nowat stake as residents vowed to stop thepipeline feeding it at any cost.
Four Courts, Dublin Photo: John Monaghan
It also emerged that Shell had breached theconsents earlier granted by the minister byconstructing sections of the pipeline withoutpermission. Following this further embarrassmentwhich reflected a failure of supervision by thePetroleum Affairs Division (PAD) of his departmentthe Minister established a new Technical AdvisoryGroup to oversee the safety review.
ROSSPORT TO STATOIL AND BACK
On a visit to Statoil headquarters in Norway inSeptember, campaigners for the imprisoned menmet senior company executives; they also raisedthe issue of the five imprisoned men with seniorpoliticians and media representatives during theirvisit.
Later in September Statoil executives travelled toIreland for talks with their project partners ShellE&P and Marathon. The Minister, Mr Dempsey,also proposed the appointment of a mediator totry and resolve the impasse between the Rossport5 and the Shell-led consortium.
On 30 September, Shell moved to have thetemporary injunction discharged by the HighCourt. The Rossport Five were released from jail.
On 12 October, the Department ofCommunications, Marine and Natural Resourcesheld a two-day public consultation in Geesala, Co.Mayo, chaired by John Gallagher SC, which wassparsely attended. The Rossport Five had rejected
the terms of reference of the safety review, ofwhich the consultation was part, and did notattend.
A report by former Bord Gáis design engineer, LeoCorcoran, was opened at the hearings and raisedserious questions about the safety of theproposed pipeline.
On 19 October, the president of the High Court MrJustice Finnegan said he was satisfied nounauthorised works had been carried out on landsowned by some of the Rossport Five and thatthere was no breach of an undertaking made tothe court by Shell in April. Mr Justice Finnegansaid that the issue of unauthorised works by Shellon other lands was a matter between thecompany and the Minister for the Marine.
On 25 October, the Rossport Five appeared beforeHigh Court president Mr Justice Joseph Finneganin contempt of court proceedings. A decision onfurther punishment was postponed.
On 28 October, Minister Dempsey rejected theproposal from the Pro Erris Gas Group that Shellpay €250,000 to the local community rather thandismantle a section of the pipeline which hadbeen built without ministerial consent.
On 31 October, the Minister announced that hehad appointed Mr Peter Cassells, a former generalsecretary of the Irish Congress of Trade Unions, tomediate between Shell E&P and the Rossportresidents.
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Rally in Dublin, the day after the release of the Rossport Five
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the rossport storyFor five years, a few people in the seaside community of Ros Dumhach innorthwest Co. Mayo have been fighting to stop an oil consortium led byShell from building a high-pressure production pipeline carryinguntreated gas from the Corrib gas field through their village. When fivemen refused to allow Shell access to their lands in January 2005, Shellobtained a High Court injunction against the men and the five werelocked up for more than three months, drawing national andinternational attention to their battle against the oil industry.
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A STORM COMES
ASHORE
Micheál Ó Seighin, Willie Corduff, Brendan Philbin,Vincent McGrath and Philip McGrath refusedaccess to their lands because of their concernsabout the safety of the pipeline. The five men areresidents of Ros Dumhach (known in English asRossport) in the Gaeltacht area of Kilcommon andhave reared families in the area. Philip McGrath isa construction worker and his brother VincentMcGrath, who lives next door, is a musician.Brendan Philbin and Willie Corduff are farmers. All four live along the route of the pipeline, whileMicheál Ó Seighin, who lives nearby, is a pensioner who taught the men and many of their neighbours at the local national school.
THE KINSALE MODEL
The Kinsale gas field, discovered and operated by Marathon Oil, has supplied Ireland with naturalgas since 1978, creating hundreds of jobs downstream and generating significant revenuesfor the Exchequer. The Corrib gas field is in ahydrocarbon-rich geological structure on theAtlantic Margin that stretches from the southerncoast of Ireland up to the Norwegian continentalshelf. The potential value of the Corrib gas lies notonly in the availability of supply for Ireland butalso in the “downstream” services, which arerequired to service and process oil and gas.However, under existing exploration and development terms there is no guarantee of supply of gas to the State and no certainty overfuture price.
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When five menrefused to allowShell access to theirlands in January2005, Shellobtained a HighCourt injunctionagainst the menand the five werelocked up for morethan three months,drawing nationaland internationalattention to theirbattle against theoil industry.
Willie Corduff on his farm in Gob a’ tSáilín
WHAT’S CORRIB WORTH?
An industry presentation to the Irish governmentin January 1998 estimated the Corrib field andassociated nearby fields in the Slyne/Erris basincould contain between 6 and 11 trillion cubic feet(TCF) of natural gas. Natural gas, composed mainlyof methane, requires relatively little processingcompared to crude oil, which is refined into several products ranging from light oils and petroleum for cars to heavy oils and lubricants.The oil industry measures the value of natural gasby energy equivalence to crude oil, with one trillion cubic feet of natural gas equivalent to
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The market value per one trillion cubicfeet of Corrib gas is€8.4 billion, puttingthe potential value of the Corrib andsurrounding fields for Shell and its partnersin excess of €50.4 billion.
between 167 and 182 million barrels of oil.Industry analysts expect oil prices to remain above$50 per barrel in the long term.
It is expected that the price for gas from the Corribfield will be similar to UK “National BalancingPoint” prices. Currently, natural gas for immediate(December 2005) delivery is trading at €8.40 permillion BTUs (British Thermal Units). At this price,the market value per one trillion cubic feet ofCorrib gas is €8.4 billion, putting the potentialvalue of the Corrib and surrounding fields for Shelland its partners in excess of €50.4 billion.
The Rossport Five, who were initially concernedabout the safety of the pipeline and the apparentabdication by the State of its constitutionalobligation to protect and defend the rights of itscitizens, are now demanding a re-negotiation ofthe 1992 licensing terms and fiscal regime underwhich the Corrib gas field and Ireland’s otheroffshore oil and gas resources are beingdeveloped.
A LAND-BASED TERMINAL
The developers also needed a gas processingfacility and a site was identified at BallinaboyBridge as a suitable location. In the summer of1999, state forestry agency Coillte moved to bringthe 400-acre forestry site into its legal title. InMarch 2000, Enterprise Energy Ireland (EEI), theIrish subsidiary of Enterprise Oil, engaged RSKEnvironment Limited to prepare an EnvironmentalImpact Statement (EIS) on the Ballinaboy site. EEIformally approached Coillte to purchase the site inMay 2000.
The availability of the Coillte site, which EEIpurchased in 2001 for a sum in excess of €2.7million, accommodated EEI’s development conceptof a land-based terminal. In his 2003 report on theplanning appeal over the processing plant site, AnBord Pleanála’s Senior Planning Inspector KevinMoore wrote: “A conclusion can reasonably bemade from the information before the Board thatthe chosen development concept for the CorribGas Field by its nature led to the selection of alarge land-based terminal site. The availability of a
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GAS IS DISCOVERED OFF ERRIS
In 1996, Enterprise Oil announced the discovery ofa gas field 80 kilometres off the Mayo coast.Enterprise, with a 45% share in the project, wasthe operator in a consortium with Saga Petroleum(which sold its 18.5% share to Marathon in 1999)and Statoil (36.5%). Enterprise drilled appraisalwells in 1998 and 1999 and declared the fieldcommercial in early 2001.
WHERE TO BRING IT ASHORE?
In 1998, the Corrib Enterprise Oil consortiumemployed consultants to survey the Connachtcoastline for suitable landfall locations to bringthe gas ashore. The consultants identifiedlocations at Killala Bay, Broadhaven Bay andBlacksod Bay, Emlagh Point (west of Westport) andLiscannor Bay and Doughmore Bay in Co. Clare.Unprocessed gas from undersea fields can only bepiped a certain distance, which limited the siteselection to Killala Bay and Broadhaven Bay. Thedeveloper identified four sites within these areas –Sruwaddacon Bay, Bunatrahir Bay, Ross Point closeto Killala, and Rathlee Head – but dismissed theKillala Bay option because of the 145-kilometredistance. Bunatrahir and Rathlee Head weredismissed because of the visual intrusion that acoast-based terminal would present. That leftBroadhaven Bay, 80 kilometres from the field, asthe preferred location.
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People first heard ofthe development inspring 2000, whenlocal fishermen saidthey had been paid£2,000 apiece by EEI to stay away from the area of the rig and the inshore development. During the summer of 2000,EEI began to seek support for their plansamong the Erris community and donated£8,000 to Carne Golf Club.
large land-based site in one ownership with theland area to accommodate a processing terminalat Ballinaboy greatly accommodated thedevelopment concept for the Corrib Field.”
FROM EXCITEMENT TO FOREBODING
This decision to base the terminal at Ballinaboywas made before the local community knewabout the project. People first heard of thedevelopment in Spring 2000, when localfishermen said they had been paid £2,000 apieceby EEI to stay away from the area of the rig andthe inshore development. During the summer of2000, EEI began to seek support for their plansamong the Erris community and donated £8,000to Carne Golf Club. The Bishop of Killala, TomFinnegan, and Kilcommon parish priest Fr DeclanCaulfield were flown out to bless the rig.
Initially, locals were excited about the prospect.“We thought we would have gas coming into Co.Mayo,” said Annie Gannon, who owns land andcommonage along the planned pipeline route.“Our son was working up in Dublin at the time,
Rossport is in the parish of Kilcommon, which liesbetween Belmullet and Ballycastle along the northcoast road in Co. Mayo. Along the coast, the seahas carved spectacular cliffs that rise to more than300 metres. The Blue Stack Mountains rise to thenorth, and Benbulben and Knocknarea rise to theeast. This region, with its megalithic tombs andstone circles, is one of the oldest inhabited areasof the world. The world heritage site at the CéideFields along the coast road celebrates a prehistoriclandscape that contains the world’s oldest knownfield systems, the early agricultural endeavours offive thousand years ago.
It is an unpolluted, sensitive and scenic landscape.The air is clean, and much of the local populationdraws its drinking water from Carrowmore Lake.Several locations around Sruwaddacon Bay andthe planned processing plant site are designatedor proposed protection areas. The proposedlandfall site for the pipeline at Glengad beach atBroadhaven Bay is a proposed candidate SpecialArea of Conservation (SAC) and a designated Areaof Special Scenic Importance. The Glenamoy BogComplex including Sruwaddacon Bay is an SAC, asis Carrowmore Lake. Pollatomish Bog is an SACand a proposed Natural Heritage Area.
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and he and other people thought that they wouldhave jobs to come back to.” Construction of thepipeline and the gas processing plant promisedthe creation of up to 500 local jobs in an area withan unemployment rate of more than 30%. At thatpoint residents assumed the pipeline was to carryclean gas but soon learned the distinctionbetween an upstream and a downstream pipeline.The upstream pipeline will carry unprocessed gas,which contains a volatile mix of chemicalcompounds, from the subsea field to the gasprocessing plant while the downstream pipelinecarries clean, processed and consumer ready gas.
HERITAGE, BEAUTY, HISTORY AND NEGLECT
The barony of Erris has suffered centuries ofneglect and mismanagement. In the second halfof the 19th century, there was massive emigrationfrom the area to Britain and the United States. Theprincipal source of income in late 19th-centuryErris was money from relatives abroad, a flow ofremittances which continued, like massemigration, into the 1960s.
Two thousand people live in Kilcommon, whichcontains one of the few Gaeltacht areas remainingin Ireland. The economy depends on small-scalefarming and seasonal fishing, and the area hasconsistently suffered from emigration because ofa lack of local jobs. The nearest towns are Bangor-Erris and Belmullet.
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Along the coast, the sea hascarved spectacular cliffs thatrise to more than 300 metres.The Blue Stack Mountains riseto the north, and Benbulbenand Knocknarea rise to the east.This region, with its megalithictombs and stone circles, is oneof the oldest inhabited areas ofthe world. The world heritage
site at the CéideFields along thecoast road celebrates a prehistoric landscape thatcontains theworld’s oldestknown field systems
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AN IMPORTANT MARINE HABITAT
In 2001, Enterprise Energy Ireland Ltdcommissioned a report from the Coastal andMarine Resources Centre at University CollegeCork titled “Marine mammal monitoring in thewaters of Broadhaven Bay & northwest Mayo:2001–2002”. The authors of the report cited over220 sightings of two whale and five dolphin andotter species during 2002. The report stated:“Broadhaven Bay SAC and its neighbouring coastalwaters undoubtedly represent an important areafor marine mammals and other species. There arefew, if any, comparable examples of a relativelysmall, discrete bay in Ireland containing all fiveAnnex II marine mammal species [Bottlenosedolphin, harbour porpoise, grey seal, common sealand European otter] with such frequency. It wasalso clear in 2001–2002 that the area containedimportant foraging habitats for numerous marinemammal species, plankton-feeding basking sharksand seabirds. Recurrent encounters with photo-identifiable bottlenose dolphins during 2002 andsightings of newborn common and white-sideddolphin calves also underlined the area’s potentialas a breeding/rearing habitat for several cetaceanspecies.”
According to the Environmental Impact Statementsubmitted to Mayo County Council in support ofthe EEI planning application, there was “noevidence that the bay is of particular importance”to whales and dolphins.
GOVERNMENT OILS THE WHEELS OF LEGISLATION
The approach by Enterprise Energy Ireland in 2000to purchase the 400-acre Coillte site at BallinaboyBridge, nine kilometres inland from BroadhavenBay, created significant legislative problems forthe Government and the Department of theMarine and Natural Resources, as existinglegislation did not cover an on-land, upstreampipeline network.
The pipeline would have to run through privateproperty, but there was no legislation to allow theMinister to make compulsory acquisition orders(CAOs) and provide them to private corporations.The Government placed the project under thesupervision of the Department of the Marine andNatural Resources, which controlled fisheries,forestry and Bord na Móna, in addition to oil andgas exploration and production, and thedepartment took responsibility for both planningand health and safety aspects of the Corribproject.
The two men most closely associated with theproject during the critical legislative changesbetween 2000 and 2002 were Taoiseach, BertieAhern and the Galway West TD and Minister for
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The two men most closely associated withthe project during the critical legislativechanges between 2000 and 2002 wereTaoiseach, Bertie Ahern and the GalwayWest TD and Minister for the Marine andNatural Resources, Frank Fahey
Bertie Ahern,announced thatBord Gáis and the EEIconsortium wouldfund and build a connector pipelinefrom the Ballinaboysite to the nationalloop at Galway. The announcementwas made before any application for planning permissionfor the project wassubmitted
An Taoiseach Bertie Ahern Frank Fahey (Former Minister for the Marine andNatural Resources)
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the Marine and Natural Resources, Frank Fahey. On10 July 2000, the Government introduced the firststages of a complex series of legislative actsdesigned to place the gas pipeline outside thedomain of planning through the Gas(Amendment) Act of 2000, which made provisionfor “a person other than the Board (i.e. Bord Gáis)”to construct or operate a pipeline and cleared theway for EEI to apply for planning permission forthe processing plant.
In September 2000, Mr Ahern introducedStatutory Instrument (SI) 110 of 2000, transferringregulatory power over “any upstream pipelinenetwork” from the Minister for Public Enterprise(who had responsibility for Bord Gáis) to theMinister for the Marine and Natural Resources.
In early October 2000, at a 21st anniversarycelebration of Bord Gáis, An Taoiseach, BertieAhern, announced that Bord Gáis and the EEIconsortium would fund and build a connectorpipeline from the Ballinaboy site to the nationalloop at Galway. The announcement was madebefore any application for planning permission forthe project was submitted by the developers.
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The EIS indicatedthat gas wouldcome ashore athigh pressure in a raw state, containing metals andradioactive gas.
EIS SETS OFF ALARM BELLS
In November 2000, EEI applied for planningpermission to Mayo County Council and submittedan Environmental Impact Statement (EIS).Rossport resident, Gerard Muller, and localgeography teacher, Micheál Ó Seighin, went to theGarda station in Belmullet to inspect the EIS. Theywere shocked by what they saw. The EIS indicatedthat gas would come ashore at high pressure in araw state, containing metals and radioactive gas.
Brendan Philbin with his daughter Siobhán and wife Aggie
lease for the Corrib field. On 15 February 2001,Minister Fahey told the Dáil that the consortiumhad notified him of the commerciality of the fieldon 11 January 2001.
THE INDEPENDENT CONSULTANTS
In December of 2000, the Department of theMarine and Natural Resources had askedEnterprise Energy Ireland for a study ofalternatives to the onshore processing plant,which the company submitted in January 2001.The department forwarded the report to theirconsultant petroleum engineer, David Fox, whooperates a UK-based petroleum consultancy, DavidFox and Associates, specialising in developing low-cost tie-backs (where a subsea well-head is tiedback to a processing plant on an offshore platformor on land) for oil and gas production. Speaking inthe Dáil on 8 February 2005, Minister forCommunications, Marine and Natural Resources,Noel Dempsey, said: “In December 2000, myDepartment requested from the developers theresults of its alternative concept studies. These
were examined and reviewedin January 2001 by theconsultant petroleumengineer advising myDepartment. He advised theDepartment that thedevelopers of the Corrib gasfield should not be requiredto change or considerchanging the Corribdevelopment scheme.”
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“The proposal to redistribute 60 acres ofpeat (10 to 15 ft. deep) within the localforestry area seems to have come out of the teddy bears’ picnic”
Mr Ó Seighin drafted a submission to MayoCounty Council outlining the objections of localresidents. “The entire community here nowrealises the scale and toxicity of the effluents andemissions about to be imposed on this area –land, air and sea – by the construction andrefining activities of Corrib Gas,” he wrote. Mr ÓSéighin zeroed in on the proposals to excavatelarge amounts of peat to make way for theprocessing plant: “The proposal to redistribute 60acres of peat (10 to 15 ft. deep) within the localforestry area seems to have come out of the teddybears’ picnic. Apart from the sheer bulk andviscosity of the mass, the logistics rival those ofNATO in Kosovo. Enterprise Oil have not in any wayshown (a) that they understand the problem and(b) that they have any idea how to cope with it.”The council requested further details and thedeveloper re-submitted the planning applicationalong with a more detailed EIS.
Early in 2001, EEI applied to the Department ofthe Marine and Natural Resources for a petroleum
Former school teachers Micheál Ó Seighin and his wife Caitlín
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Rossport residents told Mike Daly of thePetroleum Affairs Division (PAD) that theMinister could not grant CAOs for theupstream pipeline to privatecorporations. Later that month,Taoiseach Bertie Ahern introduced SI 389
of 2001, transferringpowers from theMinister for PublicEnterprise to theMinister for theMarine and NaturalResources coveringall legislation relatingto upstream pipelinenetworks.
THE MARINE LICENCE VETTINGCOMMITTEE
In July 2001, the department convened the MarineLicence Vetting Committee (MLVC) to examine theenvironmental aspects of the Corrib gas field planof development, foreshore licence application andpetroleum lease application, with terms ofreference covering the entire pipeline and theprocessing plant.
The committee comprised Dr Terry McMahon andDr Francis O’Beirn of the Marine Institute, TrevorChamp from the Central Fisheries Board and threeofficials from the Department of the Marine andNatural Resources: Mick O’Driscoll, RichardMcKeever and Captain Tom O’Callaghan. Thecommittee and the department hired in outsideconsultants, with the MLVC retaining consultantsPosford Haskoning, a subsidiary of engineeringand architectural consultants Royal Haskoning.The department retained internationalconsultants Environmental ResourcesManagement (ERM).
On 25 July 2001, chief geologist Dr Keith Robinsonand Mike Daly of the Petroleum Affairs Division(PAD) of the Department of the Marine andNatural Resources, and Minister Frank Fahey,travelled to Geesala, Co. Mayo, to host a publicconsultation on the project. Rossport residentstold Daly that the Minister could not grant CAOsfor the upstream pipeline to private corporations.Later that month, Taoiseach Bertie Ahernintroduced SI 389 of 2001, transferring powersfrom the Minister for Public Enterprise to theMinister for the Marine and Natural Resourcescovering all legislation relating to upstreampipeline networks.
Mayo County Council granted planning permissionon 3 August 2001, and Rossport residentsappealed the decision to An Bord Pleanála.
The government moved to provide the land for thepipeline by giving powers to the Minister to makeCompulsory Acquisition Orders for the benefit of a
private consortium. Rather than altering existinglegislation on CAOs, which were granted throughthe Minister for Public Enterprise, the governmentmoved part of the CAO legislation into the powerof the Department of the Marine and NaturalResources, without the caveats relating to thepublic interest.
POWER MOVES QUICKLY
On 15 November 2001, Mr Fahey introduced SI517 of 2001, giving the Minister for the Marineand Natural Resources powers to grant CAOs forupstream pipelines.
On 16 November 2001, Mr Fahey granted thepetroleum lease to EEI at a cost of €3 million.
On 21 November, Enterprise Energy Irelandapplied to the Department for approval of its planof development, foreshore licence and consent tobuild the pipeline, and submitted a newEnvironmental Impact Statement.
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THE VETTING COMMITTEE APPROVESDEVELOPMENT
The Vetting Committee (MLVC) report, publishedin April 2002, approved the development with 28conditions. Opponents of the project had becomeconvinced that the safest option was to processthe gas offshore on a shallow-water platform, andseveral of the submissions to the MLVC raised theissue of offshore processing. However, the Vetting Committee report dismissed thealternative option:
“Treatment of gas at source requires mannedplatforms or vessels. The MLVC has consideredthese methodologies and has noted that thecoastline of the west of Ireland is exposed to avigorous wave climate characterized by one ofthe highest wave power levels in the world(Ireland’s Marine and Coastal Areas and AdjacentSeas: An Environmental Assessment 1999). Giventhe water depths and the extremely hostilenature of the environment in this part of theAtlantic, the MLVC is of the opinion that therewould be greater environmental risk and risk tohuman life through treating it at source. TheMLVC accordingly recommends onshoretreatment of gas”.
The Vetting Committee, however, only consideredtreatment at source – 80 kilometres out to sea –and failed to consider a shallow-water platformnear shore for processing, but with the VettingCommittee report in place, the department beganto issue the approvals for the plan ofdevelopment, the pipeline consents and theforeshore licence.
BIG OIL GOES DOOR TO DOOR
On 17 December 2001, Enterprise Energy Irelandrepresentatives began knocking on doors andsending letters to landowners asking them togrant permission for the pipeline in exchange forcompensation. Twenty-seven people held shares inthe commonage, and seven people owned landalong the route of the pipeline. EEI toldlandowners that they would be served with CAOsunless they signed up to the compensation offer.Those who owned parts of the commonage butdid not live adjacent to the route of the pipelinesigned, but seven of the landowners refused.Concerned about the safety of the pipeline andthe potential danger to their families, they refusedto sign until they received guarantees about thepipeline’s safety.
In February 2002, An Bord Pleanála SeniorPlanning Inspector, Kevin Moore, opened the oralhearing in Ballina, County Mayo, to hear appealsagainst planning permission. The first hearingconvened for two weeks and was then adjourned.
“No-one has permission to enter this land except inaccordance with the law” - sign erected by local resident inLéana Mhianaigh, along the proposed gas pipeline route
FRANK FAHEY APPROVES PLAN
On 15 April 2002, following the recommendationsof the MLVC, Mr Fahey approved the EEI plan ofdevelopment and issued a letter of consent toconstruct the pipeline. In his letter of consent theMinister specified that the pipeline should be aminimum distance of 70 metres from dwellings.The letter did not specify under which code ofpractice the pipeline should be constructed. On 3May, the Minister made the first of the CAOs andprovided them to EEI.
When Taoiseach, Bertie Ahern, visited Geesala inMayo shortly before the May 2002 generalelection, a delegation representing the residentsapproached him. Micheál Ó Seighin spoke for theresidents. “I argued that there were other ways todo the project, and asked him to give me hiseconomic people for a couple of hours,” said ÓSeighin. “Ahern told me he knew we weren’t just aNIMBY (Not In My Back Yard) group, but that theproject was in the national interest, and that itwas going to go through.”
MR FAHEY ISSUES LEASE ON DAY OFGENERAL ELECTION
On 17 May, Frank Fahey issued the foreshore leaseto EEI. It was the day of the general election. TheFianna Fáil-led coalition was re-elected and MrFahey was appointed as Minister of State at theDepartment of Enterprise, Trade and Employmentwith responsibility for Labour Affairs in the newFianna Fáil–Progressive Democrat cabinet.
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PUSHING THROUGH LEGISLATIONBEFORE THE 2002 GENERAL ELECTION
In the Spring of 2002, the government begananother series of legislative changes to assist theproject. The Department of the Marine andNatural Resources hired UK-based petroleumconsultant Andrew Johnston to carry out a reviewof the design code for the pipeline. Mr Johnstonsubmitted his review on 13 February 2002 andrecommended minor changes to the Quantitative(Quantified) Risk Assessment (QRA).
A QRA is a mathematical modelling tool used byengineers to quantify risk to human safety, andthe Government reviews of the QRA have provedto be one of the most contentious aspects of theproject. The first QRA, which was produced inNovember 2001 by JP Kenny, has not beenreleased, and five further versions have beenprepared since the initial assessment. On the basisof Mr Johnston’s report, the department moved toissue consents for the pipeline.
On 27 March 2002, Minister for State at theDepartment of Public Enterprise Joe Jacob movedto amend the 1976 Gas Act and told the Seanadthat the amendment “would ensure that BordGáis Éireann and all other operators in the gasmarket have exactly the same rights under theGas Act, 1976, in regard to entry into land and themaking of compulsory acquisition orders”. The Dáilpassed the Gas (Interim) (Regulation) Act 2002 on10 April 2002, allowing Enterprise Energy Ireland(EEI) to apply for privileges that had onlypreviously been granted to local authorities andState or semi-State bodies. Within weeks,Enterprise Oil was taken over by Shell.
Enterprise Oil had been a takeover target forseveral years. In early 2002, the Italian companyENI had expressed interest in a bid, but BritishEnergy Minister Brian Wilson announced that hewanted Enterprise to stay under British control.Within one week of the Gas Act amendment, Shellmade a €6.5 billion bid for Enterprise Oil, and on 2April 2002 the board of Enterprise Oil decided toaccept the offer.
“Ahern told me heknew we weren’tjust a NIMBY (Not InMy Back Yard) group,but that the projectwas in the nationalinterest, and that itwas going to gothrough.”
THE BORD PLEANÁLA HEARINGS
In July 2002, Bord Pleanála requested furtherinformation from the Corrib developer. Hearingsre-commenced in November 2002 and finished on10 December. In April 2003, An Bord Pleanálapublished its decision to refuse planningpermission.
SENIOR PLANNING INSPECTORVIGOROUSLY OPPOSES PLAN
In his report, Senior Planning Inspector KevinMoore was adamant that the development wastaking place on the wrong site:
“From a strategic planning perspective, this is thewrong site; from the perspective of Governmentpolicy which seeks to foster balanced regionaldevelopment, this is the wrong site; from theperspective of minimising environmental impact,this is the wrong site; and consequently, from theperspective of sustainable development, this isthe wrong site.
At a time when the Board in now required, inaccordance with the Local Government (Planningand Development) Act, 2000, to have regard tothe proper planning and sustainabledevelopment of an area in which a developmentis proposed to be constructed, it is my submissionthat the proposed development of a large gasprocessing terminal at this rural, scenic, andunserviced area on a bogland hill some 8kilometres inland from the Mayo coastlandlandfall location, with all its site developmentworks difficulties, public safety concerns, adversevisual, ecological, and traffic impacts, and arange of other significant environmental impacts,defies any rational understanding of the term“sustainability”. It is an irony that this largeindustrial proposal is linked with a natural gasresource, the exploitation of which adheres tothe concept of sustainability.”
Mr Moore noted that several separate agencieshad responsibility for the development for seabed,landfall, overland pipes and terminal:
“If there is to be any merit in permitting thesplitting of this overall project into its variouscomponent parts and permitting separateindependent assessments by various agencies,then the Board should not be constrained by anydecisions that may or may not have been madeby other agencies to date, in my opinion.”
MR MOORE SCATHING ABOUT MLVCREPORT
Mr Moore was scathing about the MLVC report:
“How the MLVC came to its conclusions wouldappear to be beyond the realms of a rationalapproach to the planning of this majorinfrastructural development and exhibits nothingshort of prematurity, in my view, when thedecision of the Board on the critical issue ofwhere best to locate a terminal had not beenmade in April, 2002. Their determinations shouldnot be utilised as a stick for driving the Board inthe direction of a grant of planning permission inthis way. Their deliberations are not thedeterminants on whether this developmentshould be granted planning permission or not. In effect, if this was to be the case, the Board’sfunction has been undermined in determiningthe proper planning and sustainabledevelopment of this area.”
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Shell To Sea campaigner and teacherMaura Harrington at a community meeting
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An Bórd Pleanála hearings, February 2002 in Ballina(Photo: Shay Fennelly)
gas development solutions company owned by UScompany, Halliburton, submitted on behalf of thedeveloper that the Broadhaven Bay option was thelimit of current technology and, therefore, theonly acceptable option. Mr Moore noted that theresponse provided by Granherne did not addressthe questions he had raised. “It was expresslyrequested that a more complete comparison bemade between the proposed development and ashallow water fixed steel jacket option,” Mr Moorewrote. “The applicant’s response completelyavoided this option.”
Mr Moore’s analysis of the Granherne submissionshowed that the developments submitted asevidence of comparable existing subsea tie-backswere all tied back to offshore platforms. Several ofthese fields, including the Gemini field, Mica field
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DEVELOPER DID NOT ADDRESS QUESTIONS
Mr Moore noted the MLVC’s approval of the planof development emphasised “a perception tosome degree that the granting of planningpermission for the processing terminal at theBallinaboy site is a fait accompli”.
Mr Moore also noted that the MLVC reportcompared the treatment of gas at source versusonshore:
“It did not compare the treatment of gas onshorewith a shallow water option, i.e. offshore but notat source. The utilisation of the findings of theMLVC are not appropriate in this instance whenconsidering what was asked of the applicant byway of further information. Furthermore, theapplicant appears to be seeking to use thefindings of the MLVC to undermine thedeliberations of the Board on the suitability ofthe Ballinaboy site from a planning perspective.”
Mr Moore had investigated the shallow-wateroption that the MLVC had failed to consider andhe had requested the developer to provide furtherinformation on the tie-backs in the re-openedhearings. David Bennett of Granherne, an oil and
“From a strategicplanning perspectivethis is the wrong site;from the perspectiveof government policywhich seeks to fosterregional development,this is the wrong site; from the perspective of minimising environmental impact, this is the wrong site; and from the perspective ofsustainable development, this is the wrong site.”
Independent TD, Jerry Cowley at a communitymeeting in Glenamoy, October 2005
Aerial view of the site of the proposed Gas Processing Plantin Ballinaboy looking south west, with Carrowmore Lake inthe background (Photo: Jan Pesch)
and Pluto fields in the Gulf of Mexico, weresmaller than the Corrib field. “Canyon Express [inthe Gulf of Mexico] is a gas field that has acomparable reserve,” Mr Moore wrote.
“Again, it is tied back to a shallow waterplatform, a distance of 88km, and the processingplatform stands in a water depth of 91m. This isa new processing platform. Its umbilical is in twosections. For comparative purposes, it is areasonable example in my opinion. The applicanthas sought to minimise the comparison bysubmitting that a platform was viable as aconsequence of the presence of an existingpipeline, because of the relatively benign physicalenvironment, and due to other hydrocarbonprospectivity in the area.”
(The destructive potential of hurricanes in the Gulfof Mexico illustrated starkly by Hurricane Katrinawhich destroyed much of New Orleans inSeptember 2005 was clearly understated in thesubmissions to the inspector.)
MOORE DISMISSES COMPARISONS
Mr Moore noted that the norm appeared to be tie-backs to offshore platforms. He dismissed thecomparison with the planned developments atOrmen Lange and Snohvit on the Norwegiancoastline, which were to process vast fields severaltimes the size of the Corrib gas field.
However, the issue of Ormen Lange and Snohvitraised further questions. The oil industry had toldthe Government in January 1998 that the offshore
around the Corrib field potentially contained up to11 TCF (or eleven times the size of the Corrib field).In his report, Mr Moore wrote about the prospectof further gas being discovered in the area: “I putit to the Board that there is hydrocarbonprospectivity ongoing off the coast of Donegal,that the proposed gas terminal has a design life of30 years, and that it was accepted at the hearingthat the terminal could be developed to meet newdemands from other prospectivity if a tie-backwas feasible.”
Andy Pyle, Managing Director of Enterprise EnergyIreland, had submitted that the Corrib field wasonly viable as a subsea tie-back and said that theshallow-water platform was not economicallyviable. Mr Pyle estimated the cost of an offshoreplatform at €360 million and a 40% increase inannual operating costs.
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Philip McGrath on his land in Rossport
NATIONAL STRATEGIC IMPORTANCEOF TERMINAL QUESTIONED
Mr Moore stressed that the development of thegas processing terminal was not of nationalstrategic importance. “This is a critical point,” hewrote.
“The planned developments for the improvementof gas infrastructure in Ireland are in place or arecurrently being put in place by Bord Gáis. Theproposed development under appeal allows areserve to be exploited that would feed anestimated 60% of the resource into the nationalnetwork and out of the West and North-WestRegions. The lack of any benefits to these regions(outside of Galway) is compounded by the whollyinappropriate site proposed to be developed.There is no merit in permitting this largeindustrial development on the wrong site. It iscritically important to apply the bestdevelopment concept and to seek out a terminalsite that minimises such adverse environmentalimpacts that would arise with the currentdevelopment proposal. In my opinion, the currentproposed site is unequivocally an incorrectchoice.”
MR MOORE RECOMMENDS REFUSAL
In his concluding remarks, Mr Moorerecommended refusal of the project on threegrounds, specifically the threat to the sensitiveand scenic location; the likely instability of the
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“The lack of any benefits to theseregions (outside of Galway) iscompounded by thewholly inappropriatesite proposed to be developed. There is nomerit in permittingthis large industrial development on thewrong site.”
Maureen and Vincent McGrath standing 20metres from proposed pipeline route, opposite the entrance to their home.
peat; and the risk of a major accident. Mr Moorewrote: “The Board is not satisfied, having regardto the significant adverse environmental effects ofthe proposed development, that the developmentat Ballinaboy constitutes the optimum solution toproviding a gas processing terminal to serve theCorrib Gas Field.” Mr Moore noted the possibleinstability of the peat that was to be moved to theperimeter of the Ballinaboy site:
“The Board is not satisfied that the sitedevelopment works can be undertaken withoutundermining the safety of road users and causingstructural damage to the adjoining RegionalRoad R314 and to adjoining properties. Theproposed development would, therefore,endanger the health and safety of the generalpublic in the vicinity of the site, seriously injurethe amenities of property in the vicinity, andadversely affect the use of the regional road.”
Mr Moore noted that the developer had notsatisfied the provisions for safety under the EU“Seveso II” directive on the transport of dangerousmaterials. He wrote that the Board was notsatisfied that “the proposed development wouldnot give rise to an unacceptable risk to membersof the public due to the proximity of the terminalsite to residential properties and areas of public
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use to which the Directive applies”.
(Mr Moore’s inquiry extended only to the gasprocessing plant and excluded consideration ofsafety issues associated with the proposedpipeline as it is exempt from normal planningprocedures. The Inspector did not take intoaccount the dangers posed by landslides in thearea as these occurred after the completion of hisreport.)
AN BORD PLEANÁLA REFUSES PERMISSION
Following a meeting of An Bord Pleanála on 28and 29 April 2003, the Board directed thatplanning permission be refused, but overturnedtwo of the three reasons Mr Moore gave forrefusal – the visual impact on a sensitivelandscape and failure to comply with the Sevesodirective on dangerous substances – and rejectedplanning solely on the grounds that the transfer of600,000 cubic metres of peat bog would presentan unacceptable risk and could pollute the localrivers. Minister of State for Labour Affairs, FrankFahey, announced that the project had beendelayed on a “technicality”.
Shell To Sea campaigner Bríd McGarry on her farm inGort a’ Chreachaire which is on the route of theproposed pipeline.
BIG OIL COURTS BIG GOVERNMENT
On August 6 2003, the chief executive officer ofShell E&P, Mr Walter van de Vijver, wrote to theTaoiseach requesting a meeting about the project.Mr Ahern agreed to the meeting.
Under Freedom of Information legislation, the CPIobtained briefing documents prepared for themeeting by the Department of the Environment,Heritage and Local Government and theDepartment of Communications, Marine andNatural Resources.
Briefing documents for the meeting held on 19September, 2003, from the Department of theEnvironment, Heritage and Local Governmentstate: “An Bord Pleanála has recently given theGovernment an assurance that should an appealbe made to the Board against a planning authoritydecision relating to development of the Corrib gasfield it will be afforded top priority by the Board asan item of national infrastructure.”
The document dated 12 September 2003 andprepared for the 19 September meeting by theDepartment of Environment officials continued:“Consequently all possible steps will be taken bythe Board to ensure that any such appeal isprocessed with all possible speed with a view togiving a final decision on it within the statutoryperiod of 18 weeks.”
According to briefing documents prepared for thesame meeting by the Department ofCommunications, Marine and Natural Resources:
“EEIL are very concerned with the following:
The length of time (20 months) for ABP’s [AnBord Pleanála] to arrive at its decision; ABPs lackof understanding of many aspects of both theproject and the petroleum sector as exhibited inthe Inspector’s report;
The disimprovement in the economics of theproject (this also impacts on the potentialcorporation tax yield to the State) resulting fromthe delay in the ABP planning process;
The need for ABP to engage directly with thedevelopers of what can be termed national andstrategic infrastructure projects.
EEIL continues to have serious reservations as totheir understanding of the ABP decision andespecially the final sentence which states ‘theBoard noted that alternatives are available forthe development of the Corrib Gas Field’.
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“An Bord Pleanálahas recently giventhe Governmentan assurance thatshould an appealbe made to theBoard against aplanning authoritydecision relatingto development ofthe Corrib gas fieldit will be affordedtop priority by theBoard as an itemof nationalinfrastructure.”
Andy Pyle, Managing Director, Shell E&P Ireland Ltd.(Photo: Shay Fennelly)
The document concluded that EEIL were engagedin a full review of the project and wereconsidering, among other options, relocating theterminal to ‘Ballinacorrick’ (sic – presumablyBellacorick) or the former Asahi site in CountyMayo. The document also states that an offshoreprocessing platform was under consideration butadds, “this is not viewed as a viable option”.
MR AHERN MEETS THE OIL INDUSTRY
On the morning of 19 September 2003, Mr Ahernmet with Tom Botts, CEO of Shell E&P Europe,Andy Pyle of Shell E&P Ireland and RosemarySteen of EEI along with Minister forCommunications, Marine and Natural ResourcesDermot Ahern, department official MichaelGuilfoyle, Minister for Environment, Heritage andLocal Government Martin Cullen and departmentofficial Mary Moylan, and the Taoiseach’s official,Martin Fraser. The meeting took place in theTaoiseach’s department. Before the meeting Shellindicated that Mr Botts, a senior decision maker,was meeting the Taoiseach to assess whether thecompany should commit further resources to theproject.
According to the briefing documents, theDepartment of the Environment, Heritage andLocal Government assured Shell that both MayoCounty Council and An Bord Pleanála would treatany new application as a priority and that MayoCounty Council would be happy to continuediscussions at the pre-planning stage. Accordingto the steering note prepared for the Taoiseach,“D/CM&NR (Department of Communications,Marine and Natural Resources) are of the viewthat enactment of the proposed criticalinfrastructural legislation would address thecompany’s concerns and uncertainties.”
The Taoiseach advised the company that withoutcertainty on the proposed critical infrastructurelegislation, the company would be better offproceeding under the existing system. Tom Bottstold the assembled ministers and officials that forthe project to be “economic”, Shell needed to startconstruction in summer 2004 and produce firstgas in 2006 at the latest.
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Does this refer to issues of the peat removal or toalternative terminal sites or what else?”
The document generated by the Department ofMarine officials continues:
“ABP’s decision has had serious implications forthe progress of this development in that: Unlessthe proposed design concept is changed e.g. tooffshore, the project will be subject to theplanning process for the terminal under thePlanning and Development Act 2000.
A new planning application and its progressthrough the existing planning process could takebetween 1 and 2 years and would involvesubstantial additional costs.”
According to the documents, Shell, operating asEnterprise Energy Ireland Limited (EEIL), advisedthe government that: “As a consequence of thedelay in the ABP planning process EEIL haveincurred additional costs of €100 million andthese will continue to increase.”
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As the rain grew in intensity, soaking intothe bog, great chunks of land began to peeloff Barnacuille and Dooncarton Mountain,
rumbling down thehillside and sweepingaway houses in thevillage of Pollathomasbelow. Locals drivinghome from work hadtheir cars swept off inthe mud
BEFORE THE DELUGE
As the Shell delegation filed out of the Taoiseach’soffice, the rain began to pelt down in Rossport,two hundred miles to the northwest. As the raingrew in intensity, soaking into the bog, greatchunks of land began to peel off Barnacuille andDooncarton Mountain, rumbling down the hillsideand sweeping away houses in the village ofPollathomas below. Locals driving home fromwork had their cars swept off in the mud, and thelandslides devastated the local graveyard. Thelocal superintendent described the scene as“Apocalypse Now, utter devastation”. Fortunately,no one was seriously injured.
Looking at the blighted hillside the following day,locals began to take in the full scale of what hadhappened. One of the original planned pipelineroutes went across the site of the landslide. Theproject developers originally planned to beginproduction of gas in 2003.
TOP OIL EXECUTIVES MEET TOP PLANNERS
At the 19 September meeting, Shell had requested“greater dialogue with the planning authorities,especially An Bord Pleanála”, and on 23 September2003, Bord Pleanála’s top officials, includingchairperson John O’Connor, deputy chairperson
Brian Hunt, chief officer Paul Mullaly, planningofficer Tom O’Connor and secretary DiarmuidCollins, welcomed a delegation of the Corribdevelopers under the aegis of the Irish OffshoreOperators Association (IOOA). Andy Pyle,managing director of Shell E&P Ireland; FergalMurphy, president of Marathon Ireland; LiefArne Hoyland of Statoil; and Fergus Cahill,chairman of the IOOA, made up the delegation.
According to documents released by An BordPleanála, John O’Connor opened the meeting bysaying the board was unable to discuss any
Landslide warning near Pollathomas,overlooking route of proposed pipeline
individual case. The Corrib delegation then made a30-minute presentation on “The Case forIndigenous Gas”. The presentation projected thatthe Corrib field, coming on stream in 2006/7,would supply 60% of Ireland’s energy needs. Thedelegation asked the board for general guidanceon how a large, complex planning applicationmight be approached by a developer and put anumber of questions to the board regarding re-submissions of planning applications andadherence to time scales. Mr O’Connor repliedthat hold-ups could occur when the developer’sapplication and Environmental Impact Statement(EIS) were short on information and he added thatneither the government nor the board couldguarantee the success of any planning applicationuntil it had been through the application andappeal process.
On 3 October, Andy Pyle informed the Taoiseachthat Shell had decided to “adhere fully to theexisting due process”. Shell began to prepare anew planning application, involving the transfer of600,000 cubic metres of peat from the Ballinaboysite to a Bord na Móna site a further 11 kilometresinland.
SHELL RE-SUBMITS ITS APPLICATIONAND SUCCEEDS
On 17 December 2003, Shell re-submitted itsplanning application to Mayo County Council.Rossport residents made new submissions to thecouncil, citing the concerns raised by the SeniorPlanning Inspector. On Friday 30 April 2004, thecouncil granted planning permission. Residentsappealed to the Planning Appeals Board, but on23 October 2004, the board delivered aunanimous decision to approve planningpermission.
SHELL ISSUES ULTIMATUM TOLANDOWNERS
Shell set about serving CAOs on the landowners.On Tuesday 11 January 2005, with 100 m.p.h.winds blowing onto the coast, Shell engineersattempted to enter land to “peg out” the pipelineroute. Backed by gardaí, the engineers tried toenter the land of local residents Monica Muller,Philip McGrath and Bríd McGarry. In each case, thelandowners demanded to see the CAOs andcertificates of health and safety. The Shellengineers withdrew but, on 19 January 2005,issued an ultimatum to the landowners. Shell’ssolicitor asked the landowners to give anunconditional undertaking to “cease and desistfrom all efforts and actions” to prevent Shell’s
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Maureen McGrath, wife of Philip McGrath, marching inDublin with daughters of the Rossport 5 - Jaqueline Philbin,Siobhán Philbin, Mairead Corduff, Dierdre McGrath, MáireMcGrath and Máire Ní Sheighin.
“efforts to exercise its lawful rights under saidorders”. Shell pressed ahead with the project,beginning preparatory work on the Srathmorecutaway bog outside Bangor-Erris, which wouldreceive the peat from the Ballinaboy site.
SHELL GETS RESTRAINING ORDERAGAINST LANDOWNERS
On 18 March 2005, Shell applied to the High Courtfor an order restraining six landowners frominterfering with the laying of the pipeline, and on4 April, the President of the High Court Mr JusticeJoseph Finnegan issued an interlocutoryinjunction until the full hearing of the caseagainst the six. Restraining orders were grantedagainst Philip McGrath, Brendan Philbin, WillieCorduff, Monica Muller and Bríd McGarry.
CHAOS IN ROSSPORT
In April, Shell began work on moving the peatfrom the Ballinaboy site. The challenge wastechnically formidable. The peat proved difficult toexcavate. Diggers sank into the bog, and threefive-axle heavy goods vehicles toppled off the roadin quick succession.
There was chaos in Rossport, where Shell haderected a compound on the shore. With only onenarrow road in and out of the village, and notraffic management plan in place, locals wereforced to make way for trucks belonging to Shell’scontractors. The project called for 70 truckmovements per day into Rossport for threemonths. Locals were unable to navigate past theShell trucks and confrontation brewed. Rossportresidents turned to their TDs for assistance.
THE QRA AND THE INDEPENDENTREVIEW
In February 2005, independent Mayo TD Dr JerryCowley submitted a written question to MinisterNoel Dempsey to make publicly available theQuantitative (Quantified) Risk Assessment (QRA)and an independent review of the QRA. In awritten reply on 1 March 2005, Minister Dempseystated: “Since the QRA report forms part of thedeliberative process under which Shell has soughtconsent to install and commission the pipeline, itwould not be appropriate to release the report atthis stage.”
MINISTER PLAYS DOWN RISK
On 2 March 2005, Dr Cowley told the Dáil: “Thepeople of Erris, who have been compelled to havethe Corrib gas upstream pipeline adjacent to theirhomes, are scared out of their minds.” In reply,Minister of State at the Department ofCommunications, Marine and Natural Resources,Pat “The Cope” Gallagher, speaking on behalf ofMinister Noel Dempsey, told the Dáil: “Theassessment [QRA] makes recommendations forrisk reduction where appropriate anddemonstrates that the residual risks associatedwith the operation of the onshore pipeline havebeen reduced to tolerable levels. It showed thateven in the worst case of the pipeline beingruptured and the gas being ignited, the occupantsof a building 70 metres away would be safe.”
The Rossport residents disputed the Minister’scontention and claimed there was ample evidencethat smaller, lower-pressure pipelines had
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Shell began work on moving the peatfrom the Ballinaboy site. The challengewas technically formidable. The peatproved difficult to excavate. Diggers sankinto the bog, and three five-axle heavygoods vehicles toppled off the road inquick succession. There was chaos inRossport, where Shell had erected acompound on the shore.
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exploded, killing people a lot farther than 70metres away. The residents had become aware ofat least two recent fatal accidents. In June 2004, agas pipeline explosion in Belgium had killed 21people within a 400-metre radius of the explosion.In New Mexico, USA, in 2000, a family of 12 waskilled when a gas pipeline exploded almost 200metres from where they were camped.
BRITISH PIPELINE AGENCY REVIEWSSAFETY ASSESSMENT
On 10 March 2005, Minister Noel Dempseyundertook to publish the latest version of the QRAalong with an independent review. The job ofreviewing the QRA was given to British PipelineAgency (BPA), a British-based pipeline consultancy.The BPA review of the QRA concluded: “BPAconsiders that the design of the pipelineincorporates measures to contain the highoperating and design pressures and has beenconservative in the use of materials and integritymanagement procedures.”
The report noted that the failure frequency datawas limited to UK data and recommended thatdata should be used from international sources;that pipeline leak models should be included for5mm and 100mm leak scenarios; and thatpipeline protection should be increased at roadcrossings and to extend to the road boundary, andnot just one metre beyond the road width.
THE INDEPENDENT REVIEWER’S RELATIONSHIP WITH SHELL
On 25 May, the Minister published the QRA andthe independent review but within hours ofpublication it emerged that British PipelineAgency was jointly owned by Shell and British
Petroleum. The commercial relationship whichwas revealed within minutes of the reports’release caused uproar in Erris and, almostimmediately, Minister Dempsey who defended theBPA document nevertheless announced anotherindependent review.
In a statement the Department said; “Thedepartment accepts that BPA has completed thereview in a fully professional and objectivemanner. However, the Minister remains consciousthat the association of Shell UK Oil Ltd. with BPAby means of its 50% ownership of the companywill raise questions as to the completeindependence of the QRA review process.”
The second review was then carried out in June2005 by AEA Technology, which lists Shell amongits clients.
SHELL ASSERTS CONTROL OVER ITS PIPELINE ROUTE
On 10 June, the Shell Corrib onshore pipelineproject steering committee met with their legalteam at the Shell offices in Corrib House.According to documents attached to a book of“Inter Partes Correspondence” supplied by Shell toPhilip McGrath, Brendan Philbin, Willie Corduff,Monica Muller, Bríd McGarry and environmentalactivist, Peter Sweetman, Shell’s solicitor told thecommittee that he believed it preferable toattempt entry on the land and then decide aboutseeking to have landowners who refused accessheld in contempt. Shell Managing Director, AndyPyle, asked about the procedures involved inenforcing the injunction. The solicitor said thatShell would have to attempt entry and that, uponrefusal of admission, a notice of motion andaffidavit would be served on the parties, whowould then have time to review the documentsbefore the matter came to court.
The Rossport residents disputed theMinister’s contention and claimed therewas ample evidence that smaller, lower-pressure pipelines had exploded, killingpeople a lot farther than 70 metres away.In June 2004, a gas pipeline explosion inBelgium had killed 21 people within a400-metre radius of the explosion.
the people.” Mr Ó Seighin argued that the issueshould be decided on technical and scientificknowledge and reminded the court that thecommunity had to fight at every step to get accessto information. Patrick Hanratty SC for Shell askedthat the men be “attached and committed”. Mr Justice McMenamin ordered the men to bejailed for contempt of court.
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On 15 June, Shell returned to Rossport andengineers backed by local gardaí attempted toenter the lands of Philip McGrath in Rossport,Brendan Philbin in Léana Mhianigh and Willie
Corduff in Goba’tSáilín. Micheál ÓSeighin joined themen, as did BrídMcGarry. When themen refused to letthe engineers passthe Shell personnelcalled for the policeto take the namesof those present.
On 15 June, Shell returned to Rossport andengineers backed by local gardaí attempted toenter the lands of Philip McGrath in Rossport,Brendan Philbin in Léana Mhianigh and WillieCorduff in Gob a’tSáilín. Micheál Ó Seighin joinedthe men, as did Bríd McGarry. When the menrefused to let the engineers pass the Shellpersonnel called for the police to take the namesof those present.
FROM THE BOG TO THE HIGH COURT
On 29 June, Willie Corduff, Micheál Ó Seighin,Philip and Vincent McGrath and Brendan Philbinwere summoned to the High Court charged withbreaching the court’s interim order. President ofthe High Court, Mr Justice Joseph Finnegan,presided over the initial hearing. The men told himthey could not abide by the court order. Mr JusticeJoseph Finnegan told the men that Mr Justice JohnMcMenamin would hear their case.
Shortly before noon, the men came back into thecourt. Willie Corduff told the court, “I’m beggingyou for justice.” Brendan Philbin drew attention tothe lack of independence in preparing andreviewing the safety documents. “To make fairjudgement, one needs to see the whole story,” hesaid. Micheál Ó Seighin was the last to speak. “Thefarms form the basis of the identity of thepeople,” he said. “Monetary compensation cannotcompensate for undermining the social identity of
THE ROSSPORT 5 BECOME BIG NEWS
Willie Corduff’s fear was that, on being locked up,Shell would use the opportunity of his absence toput the pipe through his land, but as Mr Corduffwas on his way to prison, sixty local peopleshowed up and surrounded his farm in solidarity.The next morning, the Rossport Five, as they werequickly dubbed, became a national andinternational story.
THE CAMPAIGN IN ROSSPORT: “SHELL TO SEA”
With their neighbours locked up, there was achange of mood in Erris. People who oncesupported the Corrib project hung anti-Shellbanners over their front gates. Locals organised arota to man the Shell to Sea campaignheadquarters, operating out of a horsebox that isparked by day outside the gates of the proposedprocessing plant site.
The Shell to Sea campaign, which represented thefive men during their incarceration, is a looselyorganised collective that also includes Dr MarkGaravan, sociology lecturer at GMIT Galway;Maura Harrington, school principal in Bangor-Erris; Padhraig Campbell, SIPTU spokesperson onoil and gas; and Mayo TD Jerry Cowley. Thecampaigners decided to build the campaignorganically, raising support in their owncommunity, then across Mayo and then across thecountry. By midsummer, several environmentalactivists had set up a temporary camp on PhilipMcGrath’s land in Rossport, sleeping in a marqueeand using a laptop to update the Shell to Seawebsite, which detailed upcoming rallies andgathered media articles.
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As Mr Corduff was onhis way to prison, sixtylocal people showedup and surrounded hisfarm in solidarity. Thenext morning, theRossport Five, as theywere quickly dubbed,became a national andinternational story.
PJ Moran, Tony King, Mary Horan, James Healy,Kevin Moran and Vincent McGrath in the Shell ToSea campaign h.q. at Ballinaboy
Natural Resources, which would oversee the newsafety review. The TAG consisted of Bob Hanna,the chief technical advisor in the department,Richard McKeever, assistant chief engineer in thedepartment, and Koen Verbruggen, the seniorgeologist of the Geological Survey of Ireland.
The Petroleum Affairs Division (PAD), it appeared,was being sidelined. In July, it emerged that Shellhad breached its consents by welding togetherthree kilometres of pipeline at the Ballinaboy site.It also emerged, after residents raised the issue,that the PAD, which had been charged withmonitoring the project, had relied on regularreports from Shell rather than direct site visits.Local residents complained to the Departmentafter they noticed the 3 km stretch of pipelinesnaking through the forest.
On 25 August 2005, Minister Noel Dempseyannounced that the review would be conductedby Advantica, a UK-based consultancy owned byNational Grid Transco, the UK company that ownsand operates gas and electricity networks in theUK. It soon emerged that Transco had on that veryday been fined Stg£15 million in connection witha 1999 gas pipeline explosion in Scotland in whicha family of four were killed.
THE CAMPAIGN BUILDS
Following the jailing of the five men in June, thecampaigners organised rallies in Dublin, Castlebar,Belmullet, Ballina, Galway and Sligo and smallerpublic meetings around the country. The Mayorallies drew crowds of between two and threethousand people. Dr Jerry Cowley served as masterof ceremonies for most of the rallies. Shell to Seaspokespeople Dr Mark Garavan and MauraHarrington, former Statoil director, MikeCunningham, and SIPTU oil and gas spokesmanPadhraig Campbell addressed the rallies, alongwith the wives and older children of the RossportFive.
In Rossport and Ballinaboy, locals manned picketsand prevented Shell contractors from gainingaccess to the site. Two weeks after the jailing ofthe Rossport Five Minister Noel Dempseyannounced a further safety review and requestedShell to suspend work. The company, alreadyunable to work because of the pickets, agreed.
The imprisoned men rejected the review, sayingthe terms of reference were too narrow and wouldonly replicate earlier desk reviews of existingdocumentation. On 10 August, Dempseyannounced that he would establish a separateTechnical Advisory Group (TAG) within theDepartment of Communications, Marine and
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Michéal Ó Seighin, Brendan Philbin, Philip McGrath and Willie Corduff at October 1st Rally in Dublin on theday after their release
ROSSPORT VISITS STATOILSTATOIL VISITS IRELAND
On 19 September, Dr Jerry Cowley and a numberof the Rossport Five’s relatives visited Norway,where they spoke with parliamentarians andStatoil executives, explaining the situation. TheStatoil executives subsequently travelled toIreland to meet their partners in the Corribdevelopment to discuss the project.
SHELL BACKS DOWN
On 30 September, the five men were summonedto the High Court, where Patrick Hanratty SC forShell told High Court President Mr Justice JosephFinnegan that Shell wished to have the temporaryinjunction lifted. Mr Hanratty told the court that achange in circumstance had occurred since theinjunction had been put in place and that Shellcould not undertake any further work until thesafety review had been completed. Mr Hanratty
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added that the company could not undertake anyfurther work this year because of weatherconditions between November and February.
Mr Justice Finnegan said that he would dischargethe injunction. Mr John Rogers SC, for four of thefive men, asked if the court would discharge thecommittal order. Mr Rogers said that an order ofcommittal was intended to be coercive, andpersuasive of purging civil contempt, and that incivil court, the court moved at the instance of theparty whose rights had been infringed. When theparty seeking to enforce the order had no reasonto continue with the injunction, the committal toprison was discharged.
THE MEN ARE FREED
Mr Justice Finnegan said it seemed that the menintended pursuing their adopted course and askedif they would purge their contempt and undertakenot to breach the court’s order. Mr Rogers said hisclients perceived an immediate danger tothemselves and their families. “I have had preciseinstructions as to what to say to the court andregrettably that does not include a furtherundertaking. They have instructed me to say toyou that they have sincere regret that theydisobeyed your lordship’s orders.”
Mr Justice Finnegan lifted the committal order anddischarged the men, adjourning the matter of thecourt’s power to punish them until 25 October. MrJustice Finnegan said he would deal with Shell’sbreach of its consent and told Mr Hanratty SC thathe wanted Shell to address the matter by a fullsworn affidavit.
Michéal Ó Seighin at Ballinaboy after his release
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On their release, the men issued a briefstatement:
“We the Rossport 5 would like to thank ourneighbours, friends and fellow Irish citizens forthe loving support we and our families havereceived during these 94 traumatic days. Inaddition we would like to thank the incomingNorwegian government for their respect, supportand assistance. We remind Shell and their Irishgovernment partner that imprisonments havehistorically and will always fail as a method tosecure the agreement of Irish people. We now callon our supporters to intensify the campaign forthe safety of our community and families. Thecampaign has now begun in earnest.”
“We remind Shell and their Irish governmentpartner that imprisonments have historicallyand will always fail as a method to secure theagreement of Irish people. We now call on oursupporters to intensify the campaign for thesafety of our community and families. Thecampaign has now begun in earnest”
Mairead, Marie, Willie and Mary Corduff
Rossport 5 at Dublin Rally on October 1st 2005
Marathon Oil commenced oil and gas explorationin Ireland in 1960. In 1970, Marathon contractedthe drillship North Sea to explore off the Corkcoast. The first well drilled in May 1970 was just200 metres from the Kinsale field and indicatedthe presence of hydrocarbons. The second well hitthe one trillion cubic feet of natural gas in theKinsale field. Marathon confirmed the field’scommercial potential in 1973. The Kinsale gasrequired a small amount of processing on theoffshore platform before being piped ashore atInch Strand in Co. Cork and into the national grid.
MARATHON’S ONE-OFF DEAL ON KINSALE
In 1975, Marathon signed an agreement with BordGáis to supply 125 million cubic feet of gas perday for a 20-year term, beginning with “first gas”in 1979. Marathon commissioned a productionplatform, which was anchored to the seabed 50kilometres off the Kinsale coast. Gas from theundersea field was processed on the platform andpiped ashore at Inch Strand.
Following the general election of 1973, Fine Gaeland Labour formed a government with LiamCosgrave (Fine Gael) as Taoiseach and JustinKeating (Labour) as Minister for Industry andCommerce. Marathon had discovered the Kinsalegas field under a one-off deal with thegovernment that senior government officialsbelieved was heavily in Marathon’s favour. There had been a public outcry over what wasseen as the extremely generous deal withMarathon which became an issue during theelection campaign.
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THE GREAT OIL AND GAS STORYthe colonisation of ireland’s offshore
MINISTER JUSTIN KEATING SETS NEW TERMS
With Ireland about to become a producer country,Mr Keating set about developing legislation thatreflected the new-found authority of the oil-producing countries. The oil companies formed theIrish Offshore Operators Group (later re-namedAssociation) as a lobbying force.
“I remember being terrified because I thoughtthey [the oil companies] had all the cards,” MrKeating told RTÉ’s Primetime programme in 2001.
In 1974, Mr Keating directed that new terms beprepared governing offshore exploration in therecently extended offshore area excludingterritory covered by the Marathon agreement. By1975, Norway was a model for State participation.The Norwegians had first issued explorationlicenses in 1965, and in 1969, Phillips struck theEkofisk field on the Norwegian continental shelf.
THE NORWEGIAN MODEL
In 1972, the Norwegian parliament voted toestablish a State-owned oil and gas company anda Norwegian Petroleum Directorate. Thedirectorate was charged with management andcontrol of Norway’s oil and gas resources, buildinga Norwegian oil community and ensuring state
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participation. The parliament also established aGoods and Procurement Office to ensure thatNorwegian industry was involved in thedevelopment of the resources. The consensus atthe Norwegian Goods and Procurement Office wasthat “operatorship”, through Statoil (although notimmediately and not in all cases), was necessaryto learn the tools of the oil trade.
In 1973, Mobil discovered the Statfjord field in theNorwegian sector. The terms of the 1973 licensinground in Norway included training requirementsand requirements for private companies totransfer knowledge and competence in thedevelopment of new technologies. Mobil wasrequired to bring Statoil in as a 50% partner in thedevelopment of the giant Statfjord field, whichsecured Statoil’s future for 20 years. The dealstarted the process of training the Statoilworkforce, who took on-the-job training andcompany training courses with the oil majors. Thedeal secured the transfer of knowledge from theoil majors and the development of indigenousNorwegian industry. The industry was forced toshare its knowledge and technical expertise,which the Norwegians turned to their advantageto become a world leader in deepwaterexploration technology.
The Fine Gael–Labour coalitionwatched Norwegian developmentswith interest and knew theScandinavians had been tough withthe oil companies. The Norwegian government was taking up to 90% of the oil profits in 1975.
Ireland’s 1975 terms included a 50% maximumparticipation stake in any commercial find,production royalties of between 8% and 16% andproduction bonuses on significant finds. Thestandard corporation tax rate was 50%. The termssought to commit companies to a programme ofdrilling of wells at as early a date as possible andobliged the licensee to drill at least oneexploratory well within three years and surrender50% of the original licensed area after four years.Licensees failing to carry out the requiredexploration programme were liable for the costs.
THE IRISH NATIONAL PETROLEUM CORPORATION
The 1975 terms envisaged the development of anexploration and production company to serve asthe agent of state participation. Under Section 29of the terms, the State or its agencies could take a50% maximum stake in the development andexploitation of any commercial discovery.
The terms stated: “There is no question of publicfunds being put at risk since, at the time the Statedecides to participate, a commercial discovery ofpetroleum will have been confirmed. Furthermore,the additional financial commitment is, in thetotal context, modest since exploration expensesrepresent a relatively small proportion of the totalcost involved in bringing a commercial petroleumfield to the production stage.”
The participation terms were drafted to ensurethat the government would have full access to theexploration data, allowing the government tomake independent decisions about the likelysuccess of any particular development.
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Justin Keating
KEATING’S 3 PRINCIPLES
The Fine Gael–Labour coalition watchedNorwegian developments with interest and knewthe Scandinavians had been tough with the oilcompanies. The Norwegian government wastaking up to 90% of the oil profits in 1975.
In 1975, Mr Keating introduced the IrelandExclusive Offshore Licensing Terms for oil and gasexploration. Drawing on the recent changes in theworld energy situation, the development of newresources in the North Sea and the highlyprofitable nature of oil production, the 1975 termsintroduced three principles regarding Staterevenue and participation:
1. The State, acting for the people as owners ofthe resources, should be paid for this resource;
2. Companies engaging in offshore developmenton the Irish Continental Shelf should besubject to Irish taxation;
3. Since the resources are public property, theState must have the right to participate intheir exploitation.
States use separate licensing and fiscal regimes todeal with oil and gas exploration and production.Licensing terms govern prospecting licences,exploration licences and petroleum leases. Aspetroleum is such a valuable resource, it is notdealt with simply by taxation. A fiscal regime setsterms for royalties, state participation, taxationand production payments. The regime includeslicensing terms (royalties, state participation) andfiscal terms (taxation).
A large number of wells were drilled as a result ofthe strategy employed by the Minister and hisdepartment officials who managed to do businesswith a number of the oil companies under thenew terms without meeting blanket non-cooperation from the multi-nationals.
NEW GOVERNMENT, NEW ERA, NEW POLICY
The Fine Gael–Labour coalition and Justin Keatingwere voted out of office in 1977 before a Stateowned Irish petroleum corporation wasestablished. It had not been established becauseno new commercial find had been made. FiannaFáil returned to power and Des O’Malley wasappointed as Minister for Industry and Commerce.Mr O’Malley was against the idea of establishing aState company, and when the Fianna Fáilgovernment reluctantly established the IrishNational Petroleum Corporation (INPC) in 1979, it
prevented the corporation from engaging inexploration or production.
The 1970s was a decade of crisis for the oilindustry as OPEC battled the Seven Sisters, as theoil majors were known. A number of oil-producingstates wanted to do business with an Irish Statecorporation rather than the oil majors but werestymied by the Fianna Fáil government. Dáilrecords show that Norway offered explorationconcessions to Ireland in 1978 on a licensing areathey considered potentially lucrative, known asthe “Gold Block”, while the offer of oil from Iraqduring the 1978–9 oil crisis finally forced O’Malleyto establish a State-controlled oil company. Asupply crisis and huge price hikes were sparked bythe overthrow of the Shah of Iran in 1979. In orderto procure much needed supplies the Irishgovernment intensively lobbied the producercountries who responded positively on conditionthat they would sell to a State owned company.
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Mr O’Malley was against the idea ofestablishing a State company, and when theFianna Fáil government reluctantly establishedthe Irish National Petroleum Corporation(INPC) in 1979, it prevented the corporationfrom engaging in exploration or production.
seven sisters to dispose of a substantial amount ofoil I had bought in Baghdad at what would havebeen a very considerable profit to the Irishexchequer.”
Mr O’Malley said that he had travelled to Norwayin December 1978. “I went to Oslo to try toacquire what was described as a golden block inthe North Sea. Again it was the same story. TheNorwegians were more than willing to sell it or alot of it to the Irish but not to any privatecompany. In the summer of 1978, I gave directionsthat a State company be established. When I cameback from Oslo on Christmas Eve I found that hadnot been done. Because of the delay, I then had toform this company, not as a State board, but as alimited company under the Companies Acts.”
The INPC was established in July 1979 with aremit to pursue strategic oil supplies. It wasspecifically excluded from carrying out drilling orexploration.
Opponents of a State-controlled Irish oil companyhad pointed to the difficult conditions offshoreIreland and the danger of sinking public moneyinto the oil business. However, the offer fromNorway, had it been taken up, may well havesecured the future of an Irish State-controlled oilcompany, as the “Gold Block” turned out tocontain the Gullfaks field, which is one of thelargest oil fields on the lucrative Norwegiancontinental shelf.
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In June 2001, during a Dáil debate about theprivatisation of the INPC, Mr O’Malley said: “Ihave a particular interest in this because I startedthe INPC. It is the only State company I formedand I only formed it because I had to. I did notaltogether agree with it, but I was faced with thesituation in Baghdad in the summer of 1978whereby, if I was to acquire oil for Ireland that wasextremely badly needed at that time, I could onlydo so by forming a State oil company.”
IRAQ PERSUADES O’MALLEY TO FORMSTATE OIL COMPANY
Mr O’Malley told the Dáil that Iraqi ministersexpressed great goodwill towards Ireland: “Theyaccepted my undertaking that I would establish aState oil company in Ireland and that I would notsell any of the oil provided by Iraq to any of, whatwere then known as, the seven sisters. I honouredthat undertaking later, even though a verylucrative offer was made to me by one of the
Des O’Malley
Entrance to the proposed processing plantat Ballinaboy
WHY WE ENDED UP WITH NONATIONAL OIL COMPANY AND NO NATIONAL EXPERTISE
Ireland did not develop expertise in oil explorationand production due to the underdevelopment ofthe INPC by successive Fianna Fáil and coalitiongovernments. Instead, the Petroleum AffairsDivision (PAD) of the Department of Industry andCommerce, which was established in 1977,became the ad hoc administrative centre for theindustry in Ireland. From the late 1970s, successiveFianna Fáil and coalition governments employedpetroleum consultants rather than developing aspecialist sector in Ireland, and governmentdepartments dealing with exploration begandisplaying the secretive characteristics of the oilindustry.
IDENTITY OF CONSULTANTS KEPT SECRET
In May 1979, Des O’Malley refused to name theconsultants to the Dáil: “In view of thecommercial and strategic considerations involved I am satisfied that it would not be in thepublic interest to give further informationin respect of these studies.” During the1980s and 1990s, the PAD continued to relyon consultants, and successive ministersrefused to identify the consultants on the groundsof commercial sensitivity and national security. InMarch 1986, Tánaiste and Minister for Energy Dick
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Successive Fianna Fáil and coalitiongovernments employed petroleumconsultants rather than developing a specialist sector in Ireland, andgovernment departments dealingwith exploration began displayingthe secretive characteristics of the oil industry.
Spring told the Dáil: “Bearing in mind the verysensitive security, strategic, and commercialconsiderations involved in relation to theresources in the care of my Department, I amsatisfied that it would not be in the nationalinterest to publish the names of consultantsemployed unless there were special reasons fordoing so.” In October 1987, Minister for Energy,Ray Burke, told the Dáil: “Bearing in mind the verysensitive, security, strategic and commercialconsiderations involved in relation to theresources in the care of my Department, I amsatisfied that it is necessary to follow the practiceof successive Ministers for Energy in asserting thatit would not be in the national interest to publishthe identity of the consultants employed in eachparticular assignment.”
From 1975, the oil companies’ sights were set forstrategic and economic reasons on the abolition ofState participation in Ireland. Although the oilcompanies regarded the oil and gas findsdiscovered offshore Ireland in the 1970s and1980s as commercially unviable, people in theindustry knew that “uneconomic” or “sub-economic” fields can become “economic” underthe right circumstances, through a reduction inworldwide supply or, primarily, throughimprovements in technology.
HOW RAY BURKE MADE COMMONCAUSE WITH THE OIL INDUSTRY
Between 1975 and 1992, the world’s largest oiland gas companies – including Amoco, BP,Burmah, Chevron, Conoco, Elf, Esso (Exxon),Enterprise, Gulf, Phillips, Marathon, Shell, Texacoand Total – drilled 100 wells offshore Ireland, butduring this period the oil majors, by their ownaccount, failed to find one single well that wascommercially viable.
By the mid-1980s, industry insiders were tellingBusiness & Finance magazine that Ireland’soffshore resources did not contain any big fields,but only small fields, which were laced around thecoast like a “string of pearls”. These “pearls” werethe marginal small fields in complex geologicalstructures that the industry claimed it could notdevelop commercially under existing terms.
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Ray Burke (left) with Bertie Ahern in 1984(Photocall Ireland)
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From 1975, the oilcompanies’ sightswere set for strategic and economicreasons on the abolition of Stateparticipation in Ireland.
DICK SPRING CHANGES THE TERMS
The first changes to the 1975 terms came aboutunder the Fine Gael–Labour coalition in April1985, when Tánaiste and Minister for Energy DickSpring introduced new exploration terms formarginally profitable fields of less than 75 millionbarrels. Mr Spring announced that he wouldreduce State royalties and introduce a sliding scaleof State participation on marginal fields. InSeptember 1986, Mr Spring announced furtherchanges, including the abolition of participationrights for marginal fields, clearing the way for theindustry to develop small offshore fields withoutany State participation and minimum royalties.
THE INFLUENCE OF RAY BURKE
In 1987, Fianna Fáil returned to government, andTaoiseach, Charles Haughey, appointed Ray Burkeas Minister for Energy. Mr Burke, who hadpreviously served as Minister of State in thedepartment, entered negotiations with the oilcompanies, which were lobbying for changes inthe licensing terms, and with Marathon, whichwas looking for a better deal for the Kinsale gas.
MARATHON GOES TO COURT FORCHANGE IN TERMS
During late 1986 and early 1987, Marathon wasseeking to change its contract with Bord Gáis andthe Department of Energy over a new price for itsKinsale gas, which had originally been fixed in a20-year agreement negotiated in 1975. Marathonwas selling the gas to Bord Gáis under a bulkdiscount arrangement, and Bord Gáis was sellingthe gas on to other semi-State organisations, suchas Nitrogen Teoranta Éireann (NET) and theElectricity Supply Board (ESB), and to industrialcustomers and paying significant dividends to theExchequer.
In 1985, Marathon took Bord Gáis to the HighCourt in a dispute over the supply agreementclauses. The High Court ruled in favour of BordGáis, and Marathon appealed the decision to theSupreme Court, which ruled in July 1986 to upholdthe High Court decision relating to price butoverruled the judgement relating to quantity. Thejudgment allowed Marathon to restrict its annualquantity supplied from the Kinsale field to 60billion cubic feet, allowing Marathon to negotiatea new price for any gas beyond that quantity.
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MINISTER RAY BURKE OILS THE LEGISLATIVE WHEELS
Following his appointment in March 1987, MrBurke began negotiating with the oil companiesmeeting directly with executives on occasion andin the absence of his department officials.
On 8 April 1987, Mr Burke told the Dáil that hewas considering changes in the licensing terms:“Taxation issues are obviously a matter for theMinister for Finance but I can assure the Housethat, in so far as it is open to me to do so andtaking account of the national interest, I willensure that no obstacle is left in the way ofexploration in our offshore. At times such as this,when oil prices are low and exploration money isscarce, Governments must look at the main factoraffecting exploration over which they havecontrol, namely the national licensing terms underwhich exploration takes place. In that regard, ourlicensing terms are in general competitive withthose prevailing in western Europe. I am, however,
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having a review of the situation carried out in myDepartment and when that is completed I willtake whatever additional steps I deem necessaryto accelerate exploration activity.”
On 30 September 1987, Mr Burke announced newfiscal terms that included the exemption of all oiland gas production from royalty payments, a100% tax write-off against profits on capitalexpenditure for exploration, development andproduction extending back 25 years and theabolition of all other State participation in oil andgas development. Electing to leave corporation taxat 50%, he told the press that, after considering areduction, he had decided that such a move wouldbe “over-generous”. Five years later, the thenMinister for Finance, Bertie Ahern, cut the oilindustry corporation tax to 25%.
Mr Burke begannegotiating with theoil companies,meeting directly withexecutives onoccasion and in theabsence of hisdepartment officials.
In a Dáil speechduring the samemonth the leader of the Labour Party, Dick Spring, described Mr Burke’srevisions as “an act of economic treason”.
AN “ACT OF ECONOMIC TREASON”
When the Dáil resumed in October, several TDsraised questions about the new terms. Mr Burketold the Dáil: “The reason for revising our offshorelicensing terms was that I was gravely concernedabout exploration prospects. Given the continuinglow price of crude oil, recent disappointing drillingresults and the small number of commitmentwells in the next few years, radical action wascalled for.” Mr Burke said that existing licensingterms were unattractive to the explorationcompanies and said he was “gravely concerned”that exploration might disappear from Irishwaters altogether.
In a Dáil speech during the same month the leaderof the Labour Party, Dick Spring, described MrBurke’s revisions as “an act of economic treason”.
In January 1988, Mr Burke reported to the Dáil;“I have met representatives of more than 20companies from around the world – some were
DEPARTMENT DENIES BURKECHANGED TERMS
The Department of Communications, Marine andNatural Resources has recently denied that MrBurke had a role in changing the oil and gaslicensing terms. Documentation supplied to MayoCounty Council on 12 August 2005 from the officeof Noel Dempsey, the Minister ofCommunications, Marine and Natural Resources,in advance of a council meeting, stated that therewas no ministerial involvement in changing the1975 licensing terms. According to the document,the 1992 licensing terms “developed from acomparative study of international terms, andwent to Government via an Aide Memoire inSeptember 1987.”
The document also states: “It has been suggestedthat the changes in the licensing terms are
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iryThe entrance to the Srathmore cut-away bogclose to Bangor Erris, where Shell plans to storepeat from the Ballinaboy site
This apparent denial of involvement by Mr Burke in the introduction of newlicensing terms in 1987 is in direct conflict
with the content ofpublic statementsmade in the Dáil bythe former ministeroperating here before, some were here and left
and others were never in Irish waters,”. He added:“As well as my own contacts with these oilcompanies, there have been a considerablenumber of contacts between officials of myDepartment and representatives of othercompanies.”
Mr Burke was later found to have received anumber of corrupt payments during the late1980s, and in 2004 he pleaded guilty to charges ofmaking false tax returns. The interim report of theFlood Tribunal in September 2002 found that MrBurke had received a number of corrupt paymentsduring his twenty five year political career. Theyincluded a number of significant payments in theperiod leading to the general election of June1989. The tribunal is still investigating a payment,during the same period, of £30,000 to Mr Burke byMr Robin Rennicks a director of a company ownedby the Fitzwilton Group which is controlled by MrTony O’Reilly.
somehow linked to, or are a result of, Mr Burke’speriod as Minister. PAD had found nothing tosupport this, in terms of directions (or evidence ofor references to directions) from the Minister orhis office. It would seem that there wereindependent reasons for the changes, and PAD isof the view that these changes would have had tobe brought in whoever was in office.”
This apparent denial of involvement by Mr Burkein the introduction of new licensing terms in 1987is in direct conflict with the content of publicstatements made in the Dáil by the formerminister in April and October 1987 and which werecord above. It is also the case that it is theresponsible minister who brings proposals onlicensing terms or other matters to Cabinet fordecision.
After Mr Burke’s changes the new licensing termscame into immediate effect.
On 30 May 1991, Minister for Energy BobbyMolloy told the Dáil that he had asked hisdepartment to review the offshore licensing termsin light of the government decision to incorporatepetroleum taxation legislation into the 1992Finance Bill.
MINISTER FOR FINANCE BERTIEAHERN GOES FURTHER
In April 1992, the Minister for Finance BertieAhern introduced the 1992 Finance Actincorporating and extending Mr Burke’s 1987fiscal terms. Mr Ahern told the Dáil he would setout “the definitive tax regime which is to apply tooil and gas activities in Ireland’s offshore areas,other than the Marathon acreage, and which isdesigned to improve Ireland’s competitive positionin attracting oil and gas exploration”.
He added: “A particular feature is the provision fora special incentive rate of corporation tax of 25per cent, which will apply to income arising underpetroleum production leases granted by theMinister for Energy before certain specified dates.These dates reflect the respective degrees ofsuccess of difficulty of gaining access to, anddeveloping, commercial discoveries in the offshoreareas, as indicated by the duration of explorationlicences granted in respect of such waters – longerlicences being granted for exploration of moredifficult waters.”
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Pipeline constructed without Ministerial consent at Ballinaboy
NO OPPOSITION FROM OPPOSITION
Fine Gael’s Michael Noonan told the Dáil: “Thepetroleum taxation provisions of Chapter VI, to alarge extent, appear to be a rerun of the 1985amendment we produced when in Governmentbut did not enact for one reason or another andwill warrant scrutiny in the Committee Stage. I donot intend to deal with them now.”
Labour’s deputy leader, Ruairi Quinn, said: “Westill do not have a taxation regime that works tothe point that we achieve significant levels ofexploration that would reduce our dependency onimported oil and produce on-shore oil here. Sincethere is at present no tax revenue or yield fromthis activity, I am prepared to suspend judgmenton the operation of the petroleum taxationregime and the changes being proposed in this Billbecause, in fairness, the previous regime did notproduce any kind of activity. Therefore, any changewhich would result in any such activity should becarefully examined. We will have to come back tothe point either on Committee Stage or at a laterstage when we have seen how it functions andoperates.”
Bobby Molloy prepared to introduce the newlicensing terms, telling the Dáil on 5 May 1992:“Taken together, the enactment of petroleumtaxation legislation and publication of the newlicensing terms will, for the first time, equipIreland with a complete regime of fiscal and non-fiscal measures applicable to hydrocarbonsexploration, development and production. I believe these necessary steps will place Ireland in a strong position once again in relation tooffshore exploration”.
The Finance Act was passed on 28 May 1992, andthe Licensing Terms were introduced in early June.
OFFSHORE MISMANAGEMENT
It now appears that, having made enormousconcessions in the area of royalties, taxation andstate participation in 1987, the State thenproceeded, under the 1992 terms, to abandon allprinciples of good offshore management. Throughbinding the fiscal regime and permitting thealienation of vast amounts of territory for longperiods in return for insignificant explorationcommitment and by transferring power and rightsin so many matters from the Minister to the oilcompanies, the State is no longer the owner andlandlord of its own territory. Under the new terms,the oil companies became the new proprietors.
Mr Burke’s 1987 terms were introduced in order toencourage more exploration in the Irish offshoreat a time when crude oil prices were low and fewwells were being drilled.
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The State then proceeded, under the 1992 terms, to abandon allprinciples of good offshore management.
Pipeline welding equipment at Ballinaboy
The changes to the 1975 Offshore Licensing Termsmade by Mr Burke in 1987 were supposed to ‘kick-start’ exploration and production but thegovernment then proceeded in 1992 to enshrinethe ‘kick-start’ provisions in a manner thatabandoned all the principles of good offshoremanagement.
Although the 1992 terms were suppposed toimprove conditions for exploration, oil companiesonly drilled 26 exploration wells between 1993and 2004, compared to 100 exploration wellsbetween 1975 and 1992.
The overall effect of the 1992 terms appears to bethat, even in the event of a commercial discovery,very large tracts of the Irish offshore will havebeen ceded to the oil companies into the distantfuture, tying the hands of future governments.
In the 1992 terms, it is stated: “There is a directlink between the Licensing Terms and Ireland’sstatutory petroleum taxation regime. Companiescommitting to activities offshore Ireland, can,
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Although there isto be no Stateparticipation andno royalties, andpotentially very little tax accruing to theState, the Irish people will now be obliged to pay for any oil or gas from the Irishoffshore at full market prices.
therefore, be assured that they will be operating inan integrated environment with appropriatelinkages between fiscal and non-fiscal elements.”
GOVERNMENT BINDING ITS OWN HANDS
This appears to suggest that the Governmentcannot change the tax regime during the lifetimeof an authorisation. It is highly unusual to bindthe hands of Government in matters of taxation inthis way, as was done under the old Marathonagreement. Under the 1975 terms, care was takento ensure that this did not happen.
The introduction to the 1992 terms further statesthat oil or gas can be delivered at ‘market prices’,unlike the previous agreement with Marathonwhere the company supplies gas to Bord Gáisunder a bulk discount supply agreement. Hence,although there is to be no State participation andno royalties, and potentially very little tax accruingto the State, the Irish people will now be obligedto pay for any oil or gas from the Irish offshore atfull market prices.
The fundamental requirements of a prudentlicensing regime are to avoid the alienation orsurrender of large tracts of prospective territory
for unrealistic periods of time and to ensure thatdrilling of wells occurs at an early stage, and thatcompanies are not allowed to sit on territory forlong periods without carrying out work.
3 KINDS OF EXPLORATION LICENCES
There are three types of exploration licence: astandard exploration licence, which is issued forsix years; a deepwater licence, which is issued fortwelve years; and a frontier licence, which isissued for periods of not less than fifteen years.No standard licences have been issued under the1992 terms, and only one deepwater licence hasbeen issued, for the block that contains the Corribfield. All other licences issued since 1992 arefrontier licences.
Under a frontier licence, an oil company can holdon to a very large amount of its licensed territoryfor more than fifteen years in return for drillingone single well. If a company then makes adiscovery and seeks a petroleum lease, the terms
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do not require production to begin until eightyears following notification or six years afterexpiration of the exploration licence, meaningthat a company can control an area through a 15-year exploration licence (or longer) and not beginproduction until 21 years after the start of theexploration licence. A petroleum lease may lastthirty years. However, the licensee is entitled torely on his own data and his own plans inassessing commerciality, and the Minister mustgrant the lease if requested. In considering thecase, the Minister is confined to the licensee’sdata. This is different from the 1975 terms, whichdid not confine the Minister in this way.
When a commercial field has been discovered, it iswell known in the oil industry that an adjoiningterritory may be extremely valuable. In somecountries, these adjoining blocks are sold byauction. This is completely precluded in the 1992terms, as the only entity given any rights to theterritory is the lessor of the commercial field.
Along with the 1992 provision for market prices this means that the Statewill have to pay full price for gas from theIrish offshore and will have no controlover prices, even in emergencies.
THE DIFFERENCE BETWEEN THE 1975TERMS AND THE 1992 TERMS
A significant section of the 1975 terms dealt withthe Minister’s control over the landing ofpetroleum or gas in Ireland, the prior approval bythe Minister of all contracts for the sale of gas,and the power of the Minister to require deliveryof petroleum to specified purchasers to satisfyIrish national requirements. The 1975 terms alsogave the Minister control, during emergencies, ofsupplies of petroleum; the regulation ofproduction during emergencies and the curtailingof excessive production that is not in the nationalinterest. There is no equivalent of these powers inthe 1992 terms.
Along with the 1992 provision for market pricesthis means that the State will have to pay fullprice for gas from the Irish offshore and will haveno control over prices, even in emergencies.
In the 1992 terms, the government stated that“the treatment of profits generated by oil and gasproduction compares very favourably with othercountries”. Industry observers agreed. The 1995World Bank rankings of 37 oil-producing areasplace Ireland among the top seven countries orregions with “very favourable” terms forexploration. By comparison, the US states of Texas
and Louisiana, adjacent to the Gulf of Mexico, arerated “tough” or “very tough”. Mike Cunningham,former director of Statoil E&P Ireland, told theCentre for Public Inquiry that “the Irish terms arethe best in the world”.
THE NEXT FRONTIER
By the summer of 1992, the oil companies weregearing up for the next exploration licensinground, and an Enterprise Oil-led consortiumapplied for a deepwater exploration licence for sixblocks in the Slyne Basin. The licence, which wasthe only deepwater licence sought under the 1992terms, was granted on 1 January 1993.
Every license issued so far under the 1992 terms isa frontier licence, apart from the deepwaterlicence granted to Enterprise. Enterprise-ledconsortia also applied for frontier licences for theareas surrounding the Slyne basin, and in 1994,the consortia were awarded frontier licences foreight further blocks. At the same time, Statoil-ledconsortia were awarded frontier licences forseveral blocks between the Slyne basin and theErris basin. Under the frontier licences, theEnterprise and Statoil-led consortia secured 16 to20-year licences, which could be extended by
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Aerial view of the site of the proposed Gas Processing Plant inBallinaboy (lower left) looking west towards Sruwaddacon Bayand Broadhaven Bay (photo Jan Pesch)
decades, on a stretch of offshore reaching fromwest to north one-quarter of the way around theIrish coast. The Dooish field off Donegal and theCong field off Sligo were discovered under the firsttwo frontier licences issued after 1992.
ENTERPRISE OIL AND THE SHELLTAKEOVER
Enterprise Oil was established in 1982 as anindependent oil and gas exploration company,following the privatisation of the Britishgovernment’s ownership share in the North Sea oiland gas licences. The company set up an office inIreland in 1984. Enterprise drilled only three wellsoffshore Ireland between 1984 and 1996. The firstwell, drilled in the Celtic Sea in 1986, produced oilshows. The second well, drilled in 1996, showed oiland the third well struck the Corrib gas field.
In 1987, the PAD published a report on thePorcupine Basin compiling seismic and drillingdata from several blocks. The reports were sold tothe oil companies for £8000 (€10,157). In 1991, asimilar report was prepared and made availablecovering the northwest offshore basins includingSlyne and Erris.
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On 1 January 1993, an Enterprise-led consortium,which included Statoil and Saga Oil, was granted adeepwater licence for six blocks in the Slyne basin.Enterprise’s determination not to use Irish workerscaused problems, and with drilling rigs in highdemand, Enterprise did not get a rig out into theSlyne basin until 1996.
IRISH WORKERS GET SQUEEZED
The Irish oil workers were well organised andunionised. Work on rigs in Irish water was wellpaid. Irish workers with experience on theMarathon platforms subsequently hired on to rigsin the Porcupine Basin and the Celtic Sea. By themid-1980s, hundreds of Irish rig workers werecompeting for offshore jobs. “There were nounions in the North Sea, and the companies calledthe shots,” said one rig worker still working in theindustry, who asked to remain anonymous. “Theguys in Scotland couldn’t believe how well wewere being paid.”
In 1996, Enterprise Oil hired the semi-submersiblerig Petrolia to drill in the Slyne Basin. TheEnterprise boss in Ireland was John McGoldrick,who wanted to hire the Petrolia with a crew fromhis native Scotland. McGoldrick approachedEmmet Stagg, then Minister for State at theDepartment of Transport, Communications andEnergy, and said he wanted to move the base ofoperations to Ayr in Scotland, but Stagg insisted
Fianna Fáil had returned to government,and Minister for the Marine and NaturalResources Michael Woods endorsed MrMcGoldrick’s argument that EUregulations allowed the free movementof labour. For the Irish rig workers, it wasa disastrous development and the lasttime that many of them worked in theindustry.
that Enterprise hire Irish workers for the rig or elselose the tax breaks.
Following negotiations, Enterprise hired 26 Irishworkers. In October 1996, the Petrolia hit theCorrib gas field. “I don’t think they really expectedto hit such a big field,” said one rig worker whoworked on the Petrolia. “They hit a volume theydidn’t expect, and there was so much pressurethat they had to shut down the stack.” EnterpriseOil reported that the rig had encounteredtechnical difficulties and would have to return tothe well at a later date. The company, however,appeared to be secretly confident of a find, and on15 October 1996, Enterprise Oil incorporated anIrish subsidiary, Enterprise Energy Ireland, with aregistered address in the Bahamas.
In 1998, Enterprise hired the larger Sedco 711 rigto appraise the Corrib field. Mr McGoldrick wantedto hire the rig without Irish workers and claimedthat Irish workers were demanding wages “way in
excess of industry norms”. When Enterpriseorganised to bring pipes in through the Foynesbase, Irish dockers decided to picket the base insympathy with the oil workers and, in response,Mr McGoldrick approached the minister to movethe supply base to Scotland. Fianna Fáil hadreturned to government, and Minister for theMarine and Natural Resources Michael Woodsendorsed Mr McGoldrick’s argument that EUregulations allowed the free movement of labour.For the Irish rig workers, it was a disastrousdevelopment and the last time that many of themworked in the industry.
OIL MOVES CLOSER TO POWER
Having cut loose the Irish workers, Mr McGoldrickand the Enterprise team opened a new chapter intheir relations with the government. Enterprise Oilwas confident it had a significant discovery on itshands. It needed promoters inside thegovernment who would smooth the way for theproject and lobbyists to promote the industry line.
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Days after dispatching the Irish oil workers fromthe industry, the Enterprise team took a table atthe Fianna Fáil tent at the Galway Races, whichhad become a gathering place where developersand business people could gain access to ministersand politicians by buying a table in the tent.Enterprise Oil, joined by their public relationscontingent, mingled with Fianna Fáil politiciansand party activists. The Fianna Fáil tent at theGalway Races had been organised by DesRichardson in 1994 as a fund-raising venture. MrRichardson, a close associate of Bertie Ahern and akey fundraiser for the party, socialised on occasionwith Mr McGoldrick.
Pierce Construction, which is involved in the Corribproject, and Marathon Oil both madecontributions to Fianna Fáil. In 1997, MarathonInternational Petroleum contributed £10,000 toFianna Fáil, while Pierce Construction contributed£6,100 to Fianna Fáil in 1999.
PUBLIC RELATIONS
Among the PR executives was Declan Kelly, aformer journalist who rose quickly through theranks at Murray Consultants and then FleishmanHillard. Murray Consultants had long ties to the oilindustry, and its founder, Joe Murray, had editedthe journal of the Irish Offshore OperatorsAssociation as far back as 1976; Fleishman Hillardwas the international PR agency favoured by Shell.
In late 1998, Mr Kelly left Fleishman HillardSaunders (renamed Fleishman Hillard since April2005) and formed his own company with Jackie
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As Enterprise EnergyIreland awaited theconsents that would give legal cover to the project, a suitor was watchingEnterprise Oil. In March 2002, Royal Dutch Shell madea €6 billion bid for Enterprise Oil. On 2 April 2002, theEnterprise Oil board voted to accept the takeover offer.
Gallagher, a former advisor to the Taoiseach,Bertie Ahern. Mr Gallagher resigned from hisgovernment position in November 1998 to join MrKelly, forming Gallagher & Kelly PR. They werejoined by Paul McSharry, another formerFleishman employee. The three PR executives arerecognised as among the top-rankingprofessionals in their field.
In 2001, Gallagher & Kelly sold their company, lessthan two years old, for €14 million. The companywas bought out by international PR companyFinancial Dynamics. Mr Kelly stayed with thecompany, while in 2003, Jackie Gallagher went onto form another PR and lobbying company, Q4, withformer Fianna Fáil general secretary Martin Mackin.
Mr Kelly was then involved in a managementbuyout of Financial Dynamics and currently servesas a director working in Dublin and New York.Financial Dynamics is Shell’s external PR companyin Ireland.
With well-connected lobbyists and willing politicalsupporters, Enterprise Oil began to push for thevarious consents it needed to begin production ofgas from the Corrib field.
Between 1998 and 2002, the Enterprise-ledconsortium identified and purchased the 400-acreformer Coillte site at Ballinaboy and applied forapproval of their plan of development, apetroleum lease, consent for the pipeline andCAOs for the pipeline route. As Enterprise EnergyIreland awaited the consents that would give legalcover to the project, a suitor was watchingEnterprise Oil. In March 2002, Royal Dutch Shellmade a €6 billion bid for Enterprise Oil. On 2 April2002, the Enterprise Oil board voted to accept thetakeover offer.
SHELL HAS A BIGGER ECONOMYTHAN IRELAND
The Royal Dutch Shell group comprises over 2,000companies operating in 140 countries andterritories and employing 112,000 people. A 2005study by the US-based Institute for Policy Studiesranking the top 100 global economies, includingcountries and corporations, placed Shell at 28thplace. (Ireland ranked in 41st place.) Shell rankedas the largest non-American corporation in theworld and fourth-largest overall, behind Wal-Mart,General Motors and ExxonMobil.
Shell operates an “upstream” business consistingof exploration and production business, a massivefleet of huge ships, refineries around the world, oiland gas power stations, distribution systems anddepots, and a “downstream” business retailing oil,gas and petrochemicals.
INSIDE THE SHELL
The company is big enough to have its own full-time critics and detractors, including Friends ofthe Earth, which publishes an annual report onShell. “The Other Shell Report 2004”, published in2005, is dedicated to the late Nigerian author KenSaro-Wiwa, who led the Movement for theSurvival of the Ogoni People (MOSOP) in its fightagainst Shell’s destruction of the wetlands of theNiger delta where the Ogoni live.
Shell began operating in Nigeria in 1937 and firststruck oil in the Nigerian delta in 1958. Beginningin early 1993, MOSOP organised marches andassemblies of hundreds of thousands of Ogonis,and Shell stopped operating in the region. Saro-Wiwa was arrested and detained by Nigerianauthorities in June 1993 but was released after amonth. In May 1994, following the deaths of fourOgoni elders, Saro-Wiwa was arrested and accusedof incitement to murder. He denied the chargesbut was found guilty after a year of imprisonment.He was hanged by the military government inNovember 1995. The trial was widely condemnedby human rights organisations, and Shell becamea target of international outrage.
According to “The Other Shell Report 2004”, Shell’scommitment to human rights and development is“paper thin”:
“Shell continues to hold on to an industrialinfrastructure that is hazardous to people andthe environment, to operate aging oil refineriesthat emit carcinogenic chemicals and otherharmful toxins into neighbourhoods, to neglectcontamination that poisons the environment anddamages human health, to endanger the survivalof species, and to negotiate with localgovernments for substandard environmentcontrols.”
Several other communities around the world arefighting against Shell, including Shell’s so-called“Elephant” project on Sakhalin Island, Russia,where Shell’s $10 billion development hasdoubled to more than $20 billion over the lastyear.
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Ken Saro-Wiwa was hanged by the militarygovernment in November1995. The trial was widelycondemned by human rights organisations, andShell became a target ofinternational outrage.
Dr Owens Wiwa, brother of Ken Saro-Wiwa, atthe Dublin rally on the day after the release ofthe Rossport 5, October 1st 2005
“The Other Shell Report 2004” details the fight oflocal communities against Shell in Sao Paolo inBrazil, Durban in South Africa, Louisiana, and PortArthur in Texas. For the first time, Ireland joins thelist of countries in the report where residents feelthemselves under threat from Shell.
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“Shell continues to hold on to an industrialinfrastructure thatis hazardous topeople and theenvironment, tooperate aging oil refineries that emitcarcinogenic chemicals and other harmfultoxins into neighbourhoods, to neglectcontamination that poisons the environmentand damages human health, to endanger thesurvival of species, and to negotiate withlocal governments for substandardenvironment controls”.
SHELL IN FINANCIALSCANDAL
A scandal also loomed for Shellin 2004. Oil company shareprices are partly based oncompany reserves, and inJanuary 2004 the company wasforced to admit to shareholdersthat it had over-estimated itsreserves by 23%, or some 4billion barrels of oil. Theadmission caused Shell shares
to plummet, and the company was forced to payfines of $84 million to regulators in the US andUK. The débâcle led to the resignation of Shell’schairman, Philip Watts.
Following the downgrading of its reserves in 2004,Shell, more than any other oil major, needs toincrease its stated reserves. Gas prices are rising,and as resources become rarer, it seems that theprice will only go up to the benefit of the oilgiants.
If the Corrib field is developed through theonshore site at Ballinaboy, Shell will have achievedtwo goals. First, Shell will have opened up a newfrontier for bringing natural gas onshore in asensitive area. Second, Shell may be in a positionto charge other exploration and productioncompanies for the use of the Corrib sub-seainfrastructure and the production pipeline to bringother gas fields ashore.
OIL MAJORS WATCHING IRELAND
The potential for Ireland to control large areas ofthe Atlantic continental shelf is of interest to theoil majors, which are currently restricted in theirability to explore the US Atlantic shelf. The USAhas thus far refused to join the United NationsConvention on the Sea (UNCLOS), on the basis thatsuch charters undermine US sovereignty. TheAtlantic Ocean may be the final frontier for oil andgas exploration as new deepwater technologyallows drilling in more than 10,000 feet of water.
More than 80% of the United States’ offshoreterritory is under moratorium until 2012,encouraging energy majors to look elsewhere,particularly the Atlantic coasts of Africa andEurope. Ireland could prove to be attractiveterritory for the oil majors if the governmentsucceeds in extending its Exclusive Economic Zone(EEZ). In June 2005, the Irish governmentannounced its intention to seek an extension of itsinternational boundaries, with Minister forForeign Affairs Dermot Ahern saying he planned toextend Irish frontiers 350 nautical miles offshoreto take advantage of developments in deepwaterdrilling technology. In 2001 the West Navian
drillship drilled in depths of 1,435 metres orapproximately 4,000 feet, 125km off the Donegalcoast.
DEEP WATER - THE FINAL FRONTIERFOR OIL AND GAS
The deadline for countries to join the UNConvention on the Sea (UNCLOS) is 2009, andseveral countries, including Ireland and the UnitedStates, are due to file claims to territory farbeyond the 200-mile nautical limit currentlyallowed under international law. The rationalebehind the extended claims is the development ofdeepwater drilling technology that will allow oilcompanies to drill in the high seas, potentiallyopening up the deep Atlantic Ocean as a finalfrontier for oil and gas.
WHO CONTROLS OFFSHORE IRELAND?
The current offshore licences are divided betweeninternational and Irish-controlled companies. Shellcurrently holds a large share of the frontierlicences, including four blocks in the Rockall Basin,
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THE FINALFRONTIERoffshore ireland
As the world’s supply of oil and gas begins to diminish, the demand for oil
and gas keeps climbing, pushing the price of a barrel of oil from $20 in 2000
to more than $65 by the Autumn of 2005. Increasing demand is driving up
the price, but another factor is that the world’s remaining undiscovered oil
and gas resources – outside of countries where the industry is nationalised –
are in the most inaccessible areas of the world, in the deep Atlantic and
Pacific waters, where drilling is risky and expensive.
and five blocks in the Slyne/Erris basins whichhold the Corrib field. Statoil, which shares theCorrib lease with Shell and Marathon, is also amajor licence holder, holding frontier licences inten blocks along the Atlantic margin.
The Italian company ENI holds frontier licences ineight of the Atlantic margin blocks between theDonegal basin and the southern Slyne basin, alongwith six blocks in the south of the PorcupineBasin, due west of the Kinsale gas field. OMVIreland, the Irish subsidiary of the Austrian oil andgas company OMV, holds a 10% share in the Shell-operated licence in the Rockall Trough.
Two Irish-controlled companies, ProvidenceResources and Island Oil and Gas, hold licences inthe Porcupine Basin. Island Oil and Gas, which wasfounded by former Gulf Oil geologist PaulGriffiths, holds frontier licenses in four blocks inthe north Porcupine Basin, which contains theConnemara field that flowed oil for BP. Island alsohas licences in five blocks surrounding the Kinsalefield in the Celtic Sea.
TONY O’REILLY’S OIL INTERESTS
Providence Resources, which is controlled by TonyO’Reilly senior, the proprietor of Ireland’s largestmedia group, Independent News and Media, whoowns a 45% stake, has several prospects in thePorcupine Basin. Providence holds an 80% share inthe 16-year frontier licences for several blocks inthe Porcupine Basin in the Atlantic Ocean. Mr
O’Reilly’s son, Tony O’Reilly junior, is the currentChief Executive of Providence Resources.
Providence claims to have identified a possible 25trillion cubic feet of gas and 4 billion barrels of oilin the Dunquin prospect in the Porcupine Basin,which has not been previously drilled. Providencealso holds licences for the Ardmore, Hook Headand Helvick prospects in the Celtic Sea.
In a recent interview the chief executive ofProvidence, Tony O’Reilly junior, said that heviewed the strategy mapped out for Providence assimilar to property development.
“I view it as a type of offshore property company.Our focus is to create more value tomorrow thanwe have today. There is no doubt this is the besttime to be in the oil and gas industry,” he told theIrish Independent in October 2005.
Dublin-based independent Petroceltic holdsproduction and exploration interests in sevenblocks and part-blocks in the Kinsale field area.
Aberdeen-based Ramco Energy has interests in anumber of blocks but has recently sold a numberof its exploration blocks to Swedish companyLundin Petroleum, a division of the Lundin group.
In July 2005, the Department of the Marine andNatural Resources issued further frontier licencesto Shell and Island Oil and Gas in a 1,650 squarekilometre block in the North East Rockall Basin. Thelicences are valid for a minimum of sixteen years.
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“I view it as a type of offshore propertycompany. Our focus is to create morevalue tomorrow than we have today.There is no doubt this is the best timeto be in the oil and gas industry”-
Tony O’Reilly junior, current Chief Executive
of Providence Resources.
The International Energy Agency believes that oilproduction will peak between 2013 and 2037, butanalysts such as the Swedish-based Associationfor the Study of Peak Oil (ASPO) estimate thatpeak oil may have already happened or willhappen by 2008.
GOVERNMENTS THINK AGAIN ABOUT THEIR RESOURCES
As prices now seem set to stay at the current highrate into the foreseeable future, governments ofpetroleum-producing countries are re-examiningtheir fiscal regimes for taxing oil and gasproduction. The British Treasury has beenexamining plans to reform North Sea taxes,including the possibility of putting taxes on asliding scale related to the price of oil. The UKgovernment is aware that BP and Shell have madeunprecedented profits in the past three years. Theincrease in oil industry corporation tax three yearsago from 30% to 40% resulted in a dramatic fall-off in licence applications. However, there was arecord high number of bids in the 23rd UKlicensing round in June 2005.
Britain, Norway and Ireland discovered oil or gasor both in their territorial waters in 1965, 1969and 1971 respectively, but the three countrieshave taken different approaches to husbandingtheir resources.
BRITAIN
Britain initially introduced petroleum royalties andState participation rights but abolished royaltiesand participation in the early to mid-1980s underthe privatisation agenda driven by theConservative government. Britain, however, is thehome of Shell and BP, two of the world’s major oilcompanies, which pay tax on their worldwideoperation in Britain. The corporation tax for oilcompanies is 40% in the UK. There is a specialfield-based Petroleum Revenue Tax levied at 50%that taxes a proportion of super-profits from UKoil and gas production but is only levied on fieldsgiven development consent before March 1993.The marginal government take is 40%.
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TAXING OILPRODUCTIONa global picture
In the near future, the world’s supply of oil and gas will peak, meaning that
more than half of all known reserves will have been used. The second half of
the world’s reserves will be used much faster than the first half, as demand
driven by international industrial development keeps rising, especially in
Asia, where demand in India and China is growing at 10% a year.
NORWAY
Norway also introduced royalties and Stateparticipation. The Norwegians are now phasingout royalties but have a 28% corporation tax and asupplementary 50% corporation tax for oil and gasprofits for a marginal government take of 78%.The Petroleum Fund of Norway is a government-controlled fund owned by the people of Norwaythat currently stands at €154 billion, according toa spokeswoman for the Norwegian PetroleumDirectorate. The fund is invested overseas in abroad range of activities. The Norwegian State isdirectly involved in oil and gas exploration andproduction through its shareholding in Statoil(70%), which was originally a State-ownedcompany that was partially privatised in 2001, andNorsk Hydro (44%). The State also has directinvestments in transport systems (includingpipelines) and land-based plants.
IRELAND
In Ireland, the government introduced royaltiesand State participation in 1975 to govern futureexploration and production. Beginning in 1985,successive governments began liberalising theterms, and under the 1992 Finance Act and 1992Offshore Licensing Terms, the government take inIreland is now limited to 25% corporation tax with100% write-offs against exploration, developmentand production costs. The Ambassador licencethat taxes Marathon’s fields in Kinsale andsouthwest Kinsale pays royalties at 12.5% andcorporation tax at 35%, but due to remittance, themarginal government take is 25%.
Under the 1992 Finance Act and the 1992 offshorelicensing terms, it appears that the Irishgovernment will be unable to alter any terms forlicences that have already been given, most ofwhich are minimum 16-year frontier licences.
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The British Treasury has been examiningplans to reform North Sea taxes,including the possibility of putting taxeson a sliding scale related to the price ofoil. The UK government is aware that BPand Shell have made unprecedentedprofits in the past three years.
Asked to make a submission to this report aspokesperson for Shell E&P Ltd directed the Centrefor Public Inquiry to the company’s website whichincludes information on the Corrib gas project.From the website we drew the followinginformation which we submitted to Shell forcomment before publication of this report.
“The pipeline route is generally flat along itsentire length and was deliberately routed on thenorth side of Sruwaddacon Bay – away fromDooncarton Hill where there is a history oflandslides.
In the process of selecting a design concept forthe development of Corrib, priority has beengiven to minimising hazards and preventingincidents that could endanger personnel, eitherpublic or company. The risk factors associatedwith an offshore platform, even one close toshore, are significantly higher when taking intoaccount the exposure of personnel working andtravelling offshore.
Subsea offshore facilities enable the field to beoperated remotely from the onshore terminal.This minimises the need for personnel to workoffshore, thereby reducing the exposure of
personnel at work to risk. In addition, costconsiderations make offshore processing non-viable for a field of this type, location and size. Alloptions were scrutinised by the relevantauthorities who also supported the onshoreconcept.
The Corrib project has been through a rigorousand transparent planning and authorisationprocess, with significant public consultation andinput, during which the project benefits andimpacts were evaluated.
The first planning application for the onshore gasterminal was turned down by An Bord Pleanálain April 2003 because of their concern on oneissue, the management of peat on the site. Theconsultant employed by An Bord Pleanála hadreservations regarding the long-term integrity ofthe retaining structures for the peat excavatedfrom the terminal footprint. SEPIL worked toaddress this issue and a new planning applicationsubmitted to the local authority, Mayo CountyCouncil, in December 2003 contained a proposalto remove the peat from the site and deposit it ata Bord na Móna cut-over site 11km from theterminal site. The proposal met with the approvalof both the local authority and the national
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WHAT SHELL SAYSABOUT CORRIB
planning board and final approval was grantedin October 2004, with 42 conditions attached.
The pipeline has been designed to aninternationally recognised code BS8010 (nowrenamed PD8010) which is at least as stringentas the Irish code IS328. BS8010 is the mostapplicable code, as IS328 does not cater forpipelines that run predominantly offshore, as isthe case with the Corrib pipeline. The BS8010code was fully accepted as the most suitable bythe consultant employed by the Department ofCommunications, Marine and Natural Resources.
The consultant concluded, on the basis of hisevaluation, that the pipeline had been designedin accordance with best public safetyconsideration and is appropriate for the pipelineoperating conditions. The pipeline is a minimumof 70m from the nearest house compared to BGÉtransmission pipelines that can pass within 3m.”
Shell Exploration and Production Ireland Limitedsaid that it values local opinion, support and inputas critical to the success of the project.
“We have always tried to communicate with thelocal community, and with the local stakeholders,”said Shell spokesperson Susan Shannon.
Asked about the estimated value of the Corrib gasfield Ms Shannon said that she could notcomment on commercially sensitive matters.
Shell has recently been working closely with thePro Erris Gas Group (PEGG) which is campaigningfor the pipeline and processing plant.
On 28 October, Minister Dempsey rejected theproposal from the Pro Erris Gas Group that Shellpay €250,000 to the local community rather thandismantle a section of the pipeline which hadbeen built without ministerial consent.
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Shell office in Bangor-Erris
1969
Marathon awarded licence for offshore exploration
1970
Marathon Oil begins exploring for oil and gas off
the Cork coast and drills first gas well
1973
Marathon declares a commercial find 50 kilometres
offshore Kinsale Head
1975
Minister for Commerce and Industry Justin Keating
introduces licensing terms for offshore exploration
and production, including provision for 50% State
participation
1978
Marathon begins production of gas from Kinsale
field
1979
Minister for Energy Des O’Malley sets up Irish
National Petroleum Corporation
1985
Minister for Energy Dick Spring introduces revised
terms for marginal fields of less than 75 million
barrels
1987
Minister for Energy Ray Burke introduces new
licensing terms, abolishing State royalties and State
participation, and introduces 100% tax write-offs
for exploration and development costs on 30
September, before return of Dáil
1991
Government publishes Northwest Offshore data
compilation.
1992
Minister for Finance Bertie Ahern introduces 1992
Finance Act, reducing corporation tax on oil profits
to 25%. Minister for Marine and Natural Resources
Bobby Molloy introduces new licensing terms
reflecting Burke’s changes
January 1993
Enterprise Oil awarded deepwater exploration
licence for block 18/20, which contains Corrib gas
field
October 1996
Enterprise Oil discovers the Corrib gas field 80
kilometres off the northwest coast of Mayo.
Enterprise Energy Ireland incorporated in Bahamas
April 2000
First notices of Corrib gas project in Mayo newspapers
July 2000
Government passes Gas (Amendment) Act of 2000
September 2000
Bertie Ahern introduces Statutory Instrument 110,
transferring powers over production pipelines from
Department of Public Enterprise to Department of
the Marine and Natural Resources
October 2000
Bord Gáis announces plans to construct pipeline
from processing plant site in north Mayo to
national grid loop at Craughwell, Co. Galway, on
behalf of the Corrib developers Enterprise Energy
Ireland, Statoil and Marathon
November 2000
Enterprise Energy Ireland (EEI) applies to Mayo
County Council for planning permission for a gas
processing plant at Ballinaboy Bridge
December 2000
Micheál Ó Seighin makes submission to Mayo
County Council opposing the development
January 2001
EEI applies to Department of Marine and Natural
Resources for petroleum lease. Mayo County
Council requests further information from EEI
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CORRIB TIMELINE
April 2001
EEI re-applies to Mayo County Council for planning
permission
June 2001
Mayo County Council requests further information
on the EEI planning application
July 2001
EEI submits further information to County Council;
Minister for Marine and Natural Resources Frank
Fahey hosts public meeting in Geesala, Co. Mayo. Mr
Fahey convenes Marine Licence Vetting Committee
(MLVC) to examine plan of development, foreshore
lease and petroleum lease applications
August 2001
Mayo County Council grants planning permission
for terminal; Rossport residents immediately appeal
decision to An Bord Pleanála
15 November 2001
Frank Fahey introduces Statutory Instrument 517,
giving the Minister for the Marine and Natural
Resources powers to grant compulsory acquisition
orders for land along the route of the pipeline
16 November 2001
Fahey grants petroleum lease to EEI; Bord Pleanála
announces oral hearings into appeal against Mayo
County Council planning decision
21 November 2001
EEI submits new environmental impact statement
(EIS) to Department of Marine and Natural
Resources in support of application to build a gas
pipeline from sub-sea facilities to the processing
plant at Ballinaboy. EEI applies for approval of its
plan of development, foreshore licence and consent
to construct the pipeline
December 2001
MLVC holds public meeting in Geesala
February 2002
Bord Pleanála oral hearing opens
March 2002
End of first Bord Pleanála hearing. Government
passes Gas (Interim) (Regulation) Act of 2002. MLVC
approves project with conditions. Report by
consultant Andrew Johnston approves design of
pipeline with minimal changes
April 2002
Shell buys Enterprise Oil. Mr Fahey issues consent
for plan of development and consent for pipeline
May 2002
Mr Fahey issues CAOs to EEI. Fahey issues approval
for foreshore licence
June 2002
An Bord Pleanála requests further information on
the terminal application
July 2002
Managing Director of EEI Brian Ó Catháin resigns
and is replaced by Andy Pyle of Shell
September 2002
EEI/Shell submits further information to An Bord
Pleanála
November 2002
Bord Pleanála opens second phase of oral hearing
January 2003
In January 2003, the Comptroller and Auditor
General told the Public Accounts Committee that
under the original Marathon agreement in 1960,
“Marathon will never pay tax in this jurisdiction”.
April 2003
Bord Pleanála overturns Mayo County Council’s
decision to grant planning permission and cites
grounds of instability of peat on site
September 2003
Landslide at Barnacuille and Dooncarton mountains.
Taoiseach meets delegation from Shell. Bord Pleanála
meets delegation from Shell, Statoil and Marathon
and the Irish Offshore Operators Association
December 2003
Shell re-submits planning application to Mayo
County Council
April 2004
Mayo County Council approves project. Rossport
residents appeal decision
October 2004
Bord Pleanála approves project
January 2005
Shell workers attempt to gain access to privately
owned land along route of pipeline in Rossport
April 2005
Shell seeks court injunction against landowners
opposing entrance of Shell workers onto their land
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May 2005
Minister Noel Dempsey admits that the
independent review of the quantitative risk
assessment (QRA) has been done by British Pipeline
Agency, a company jointly owned by Shell and BP
June 2005
Shell workers attempt to enter land and are refused
permission by landowners; Shell applies for
committal of men who have broken the injunction;
Mr Justice John McMenamin jails five Rossport men
– Micheál Ó Seighin, Vincent McGrath, Philip
McGrath, Willie Corduff and Brendan Philbin – for
contempt of court
July 2005
Shell admits to constructing three-kilometre section
of pipeline without consent; Minister for
Communications, Marine and Natural Resources Noel
Dempsey requests Shell cease work on the project
August 2005
Minister for Communications, Marine and Natural
Resources Noel Dempsey announces a further
safety review
September 2005
Family and supporters visit Norway and meet
Statoil and public representatives
30 September 2005
Shell drops temporary injunction. High Court
President Mr Justice Joseph Finnegan releases the men
1 October 2005
Thousands rally in support of Rossport Five in
Dublin
12 October 2005
A two-day public consultation organised by the
Department of the Marine is held in Geesala, Co.
Mayo
25 October 2005
Rossport Five appear before Mr Justice Finnegan in
the High Court
31 October
The Minister announced that he had appointed Mr
Peter Cassells, a former general secretary of the
Irish Congress of Trade Unions, to mediate between
Shell E&P and the Rossport residents
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