Safety Before LNG
Exposing the truth about the Hess 'Shannon LNG' project
Negative Effects on the Shannon Estuary
Nevada LNG Explosion

Press Releases

Press Release March 13th 2012: Irish Regulator ruling on proposed gas interconnector tariff outlawing monopoly pricing and anti-competitive behaviour to cost Shannon LNG €1 billion over 13 years and seriously compromises the project according to Hess LNG CEO Gordon Shearer.

In moves to protect consumers and outlaw anti-competitive behaviour by new gas suppliers, the Irish Regulator (CER) proposed  on February 17th 2012 that all gas consumers, including those of Shell and Shannon LNG, will contribute to the cost of running the gas interconnector between Ireland and Scotland thereby removing the windfall gains that would accrue to any new entrants to the gas market in Ireland and increasing competition.
The news has been warmly welcomed by ‘Safety Before LNG’ along with other major players in the Irish energy market.
In the proposed decision published on Friday 17th February 2012, the Irish Commission for Energy Regulation (CER) has proposed that the costs of running the gas interconnector from Scotland to Ireland should now be borne by all gas consumers in Ireland by including it as part of the Transmission System’s Regulatory Asset Base. This would be done by defining the entry point to the Irish Gas system for tariff setting purposes as Moffat in Scotland rather than at Gormanstown or Loughshinny where the offshore and onshore sections of the Irish Gas system meet.
The consequences of this proposed decision is that any new entrants to the market such as Shell and Shannon LNG would have to contribute, relative to their market share, to the cost of the interconnectors they would not use directly, thus avoiding a rise in prices for the end consumer.
More controversially, it prevents Shannon LNG from obtaining a market share monopoly by using the annual €50 million fixed costs of running the interconnector as the benchmark for the price it would obtain in the Irish Market and now seriously threatens their entire project.
Gordon Shearer, CEO of Hess LNG was already quoted as saying on December 11th 2011:
However, following the announcement by the CER on February 17th 2012, the actual cost to Shannon LNG has been modified upwards by the company.
Shannon LNG Managing Director, Paddy Power, on February 20th 2012 revealed that the pricing monopoly business model on which the proposed LNG terminal on the Shannon Estuary was based would have been worth almost €1 billion over 13 years to its Cayman-Island-registered Hess LNG owners.
Mr. Power, in a presentation to local planning authority Kerry County Council was quoted by media sources as saying:
"the tariff could cost the company up to €75 million annually".
The interconnector from the UK to Ireland costs approximately €50 million annually (€44.4 million in 2011). Under the new rules, Shannon LNG, which hoped to gain 50% market share in Ireland would be liable to pay approximately €25 million towards the interconnector fixed costs every year.
Paddy Power’s admission that Shannon LNG would lose €75 million annually if it has to contribute to the cost of running the interconnector has lead some observers to claim that the remaining €50 million loss by Shannon LNG could only possibly come from increased market competition, which would be in the interest of consumers. The revenue lost by Shannon LNG proves, they say, that the new rules being put in place by the Regulator will lead to real competition with UK suppliers and force a downward pressure on prices in order for Shannon LNG to gain market share.
These comments  by the Managing Director of a major energy company subsidiary would seem to undermine Hess LNG's entire legal argument that not paying for the interconnector could somehow increase competition in Ireland. The energy executive has quantified for the first time the "windfall gain", as Minister Rabbitte called it in the Dail on November 2011, that would accrue to the offshore company clearly showing that most of this gain would have come from an anti-competitive pricing monopoly position.
However, energy analyst Paul Hunt believes that the €75million loss for Shannon LNG may be taken from the entire transmission network cost. He stated:
In their individual submissions to the CER on the proposed interconnector tariff (see pages 18-24 of ) the following was stated in support of the proposed CER decision:
1 Bord Gais Networks in its submission to the CER on this issue “estimate savings of circa €25m - €40m p.a. to the Irish gas market if the current IC tariff structure is amended and the LRMC approach is adopted”.
2. Economic and Social Research Institute (ESRI) strongly recommends treating the gas interconnectors as part of the essential gas infrastructure on the island and recovering their capital costs through the use of system charges paid by all users. This would secure the guaranteed revenue to cover the historic costs of providing security of supply and it would ensure that price facing domestic customers would be invariant as to the quantity of gas sourced domestically.
3. Endesa Ireland considers that the promotion of competition is best served by ensuring recovery of BGÉ‘s costs without inflating costs for consumers via a “diversity premium‘.
4. ESB Energy International (ESB EI) strongly supports the view that no diversity premium is necessary ….. ESB EI wants to see reduced costs for all customers through the efficient transportation of gas on the island and through more gas entry on the island. ESB EI note the need to develop Irish price signals on the island should not weaken competition by pricing out access to the very liquid UK NBP because of regulatory methods for revenue recovery of assets.
ESB EI which has already accused Shannon LNG of free-riding on the services that the gas interconnector provides also states in full support of the CER position document :

“ESB EI believes in the principles of the polluter pays and there being no freeriders that is set out in the documen

“We desire a competitive market where no single player either a producer or a shipper can potentially skew any market signals through their own behaviour.” (see
5. National Electricity Association Ireland (NEAI) considers that Option 4 (Remove Premium) best aligns with the development and competitiveness of the gas market on the island and is the option that most closely allays concerns relating to minimising the cost of regulatory intervention in the market. NEAI note that Option 4 would appear to be relatively more conducive to the objectives being pursued under CAG and could better facilitate future gas market developments emanating from Europe.
NEAI members would be unwilling to accept a situation whereby additional costs would be placed on them arising from the developments of indigenous gas resources.
However, Shannon LNG stated in its submission
 ( :
“Shannon LNG has retained Matheson Ormsby Prentice (MOP) to review the consultation paper from a legal perspective and retained the Brattle Group to review the consultation paper from an economic and regulatory perspective.”
“MOP have advised that the CER’s proposals are contrary to Irish and EU legislation as they: (i) amount to focused discrimination, (ii) propose tariff structures that are not cost reflective; (iii) provide a cross-subsidy in favour of GB suppliers and the Moffat Entry Point; (iv) distort intra-state trade; (v) constitute a fundamental barrier to entry for new market entrants such as Shannon LNG; and (vi) are in breach of CER’s duties to ensure effective competition and to protect consumers.”
Shannon LNG has reserved the right to legally challenge any CER decision in the courts by stating:
“Without prejudice to Shannon LNG’s rights to challenge the legality of any decision of the CER, Shannon LNG is still interested in working with the CER to find a stable, predictable and long term Interconnector tariff design that recognises the costs of transporting gas from Scotland to Ireland while protecting consumer and investor interests.”
The CER, however, stated that it:
“is satisfied that this proposed solution will enable an effective and efficient framework for gas infrastructure, and is in keeping with the letter and spirit of relevant EU law, and in particular the developing rules for gas market convergence across the EU. The CER is also satisfied that it is not precluded by domestic law, or legitimate expectation considerations, from directing the system operator to adapt the current regime to incorporate the above provisions. The new tariff regime is expected to be in place by October 2014.” (page 4 of ).
Diarmuid Lynch, formerly of Energy Trading & Regulation, ESB Power Generation, who played a major role in the design of the commercial Irish gas market in both supply and transportation told  the CER Public Meeting  on March 1st 2012 in Dublin  that there was “too much  noise” coming from the Shannon LNG side. He said that "Shannon LNG are seeking an added tarrif level to bringing gas into the UK directly" and while cautioning that auctions can spook the market broadly supported the CER proposals. 


Notes to the Editor:

Note 1.
The Entire Commission for Energy Regulation (CER) consultation process on the Regulatory Treatment of the BGÉ Gas Interconnectors may be viewed on  

Note 2.

Hess LNG has repeatedly threatened to pull out of the Shannon LNG project if it is forced to pay any sizeable tariff according to various media reports e.g.:


 “If Shannon LNG are forced to pay a large tarriff towards the upkeep of the gas pipes, the company will simply walk away from its plans for the landbank, The Kerryman understands. However, if faced with a relatively modest tarriff or none at all, the company will then decide whether or not to commit to a final investment that would see the gas plant taking shape” ( Kerryman Feb 15th 2012)


2. Martin Ferris (Kerry North-West Limerick, Sinn Fein) speaking in the Dail on November 29th, 2011( ):

“The importance of LNG for north Kerry and west Limerick cannot be emphasised enough. We are concerned with as many as 450 jobs to start it up. Reports, true or otherwise, have been consistently circulating in the area that Hess LNG is on the brink of pulling out because of the possible €10 million tariff per year to use the national gas pipe network. The regulator has told Shannon LNG that it must pay to use the gas pipeline that connects Ireland to the UK and that will cut costs by €10 million. The parent company, Hess LNG, sees this charge as unsustainable and as a consequence, has been considering its future. The company has invested up to €50 million in the project to date.”


3. The Kerryman newspaper:

North Kerry set to lose promised jobs By DONAL NOLAN
Wednesday May 18 2011
( )
“SHANNON LNG will pull out of its planned multi million euro Ballylongford landbank project, with the loss of hundreds of jobs for North Kerry, if it is hit with massive charges that are being threatened by the Commissioner for Energy Regulation (CER).Local supporters are frustrated that the project, which promises 450 jobs in the short term, has already been massively delayed by red tape.”


“Arts Minister Jimmy Deenihan has told the Limerick Leader that Shannon LNG’s top brass have indicated to him that if the Commission for Energy Regulation (CER) impose any major delay on making a decision in its €600m plans to open a liquid natural gas terminal on the Shannon Estuary, near Ballylongford, they “may consider concentrating their money and efforts elsewhere.” “

5. Rabbitte statement a game changer, say LNG objectors ( )

By Donal Hickey - Thursday, December 08, 2011

OBJECTORS to a proposed €500 million gas terminal on the Shannon Estuary have described a recent statement by Energy Minister Pat Rabbitte as a "game changer".
The minister warned of an increase in gas prices due to the cost of a gas interconnector with Britain if the Shannon LNG (liquefied natural gas) project goes ahead at Tarbert, Co Kerry.
The Commissioner for Energy Regulation (CER) has told Shannon LNG it will have to pay a €10m tariff per year towards the operation and maintenance of gas interconnectors with Britain but the company is refusing, saying it will not use the interconnectors.
A decision from the commissioner is expected inside the next two months.
Speaking in the Dáil, Mr Rabbitte said in an environment in which gas from the Corrib field and LNG met some, or all, of Irish demand, the interconnectors built and owned by Bord Gáis Éireann would become under-utilised. With fewer customers to pay the €50m annual cost of the interconnectors, prices for consumers would rise, he said.
"We have no wish for prices to be pushed up as a result of a stranded asset, that is the interconnector, and a windfall profit to the multinationals, much as we welcome them here, whether they are associated with Corrib or LNG," Mr Rabbitte told Sinn Féin TD Martin Ferris.
Yesterday, the Safety Before LNG group described Mr Rabbitte’s statement as a "dramatic game-changer".
"Shannon LNG is hoping to make millions of euro profits every year with state support at the consumers’ expense at time of increasing fuel poverty," said the action group. "From every angle looked at, be it environmental, safety, strategic planning or economic, the Shannon LNG project defies logic and is the wrong project in the wrong place and is against the strategic national interest.
Meanwhile, Hess LNG chief executive Gordon Shearer said the tariff not only contravened EU law but represented a massive policy shift from the previous government’s stance on interconnector policy.


Note 3

Media Reporting on the issue:
Radio Kerry reported the story as follows: 
20 Feb 2012
Shannon LNG says Ireland closed for business to commercial energy sector
Ireland is closed for business to the energy sector at present.
That's according to the managing director of Shannon LNG, Paddy Power, who gave a presentation on the status of the project to the monthly meeting of Kerry County Council.
The 600 million euro liquefied natural gas plant on the Tarbert Ballylongford landbank has been beset by delays.
The project would bring 650 construction jobs and 100 permanent posts when complete.
Last Friday, the Commission for Energy Regulation published a draft recommending tariffs for gas interconnectors are applied to companies such as Shannon LNG which won't use them.
A public consultation process is ongoing.
Today, Paddy Power from Shannon LNG told Kerry County Council the move is a fundamental change in Government policy saying it was like turning up for a football game only to be told you were playing hurling.
He said the tariff could cost the company up to 75 million annually.
Mr Power told Radio Kerry News they would not be making a statement on the how the proposed tariffs would impact on the future of the project until they have studied the draft in detail.
MEP Sean Kelly said in other countries the project would be up and running within six months and he will be checking if the tariffs break EU competition law.
Deputy Brendan Griffin said he is hoping to raise the issue in the Dail this week and Deputy Arthur Spring said the Energy Commissioner must account for himself.
A deputation is due to meet the Taoiseach soon to discuss the matter.  (Investor set to walk away from € 1bn Kerry project – Kerryman Feb. 22nd 2012)
Investor set to walk away from € 1bn Kerry project
Wednesday February 22 2012
SHANNON LNG will walk away from its planned €1bn investment in the Ballylongford landbank unless the Commission for Energy Regulation (CER) agrees to cut tarriffs that could cost the gas company €75 million a year.
The long-running saga of the LNG plant entered its darkest hour this week after the CER announced on Friday its proposal for swingeing tarriffs on gas suppliers.
The liquified natural gas terminal would create up to 400 jobs for the four-year duration of its build and turn the landbank into the thriving hub of industry locals have been hoping to see for decades.
Anger is becoming even more acute in Ballylongford and Tarbert this week, however, following the CER announcement. The tarriffs are principally being introduced to pay for the upkeep of the existing gas pipeline between Ireland. and Scotland. However, Shannon LNG has no plans to use this pipeline.
Based on its own calculations on foot of the CER document on Friday, Shannon LNG believes it would face €75 million per year in tarriffs on gas imports through the landbank. This led Shannon LNG CEO Paddy Power to make the ominous pronouncement on Monday that 'Ireland is closed for business to the energy sector'.
His statement is being taken as the darkest note yet for the future of the plan.
While Shannon LNG would not make a more detailed statement to the media on the matter, The Kerryman understands the company now believes it cannot invest in north Kerry unless the CER drastically changes its planned tarriffs.
The matter is also being compounded by the consultative nature of the CER process. Friday's announcement is a draft decision and open to debate into the future, further delaying the already long-drawn out process that has stymied progress on the LNG project for years.
The CER told The Kerryman that it would not comment on Mr Power's figure of €75 million per year saying it was a ' calculation for Shannon LNG to make'. But it said a final decision on the gas tarriff process would be made by the end of April. THE head of Shannon LNG, Paddy Power, has accused the Commission for Energy Regulation (CER) of putting obstacle after obstacle in the way of the conpany's plans to construct a billion-dollar gas plant in north Kerry that could essentially save the area from being devastated by recession.
Mr Power said the company is frustrated and utterly bewildered at the CER'S decision to suddenly change government and regulatory policy on gas pipelines tariffs, which he claims will now cost Shannon LNG up to €75m per year in tariffs.
At a meeting of Kerry County Council on Monday — three days after the CER published its draft paper on gas tariffs — Mr Power said he was at a loss to understand why the CER is putting 'block after block' in the way of a ddevelopment that will offer a capital investment of €1bn and secure 600 jobs over the next four or five years.
He explained that initial tariff arrangements were put in place back in 2011 to encourage other suppliers to come and invest in the country, whereby each supplier paid their own costs. Now he says, the CER is asking companies such as Shannon LNG to pay tariffs to subsidise their competition, which he said, have 'absolutely flummoxed' the company.
"We were all set to start in 2014, after years and years of delays, and now we are being told that we have to pay €75 million per year to subsidise competitors," he said. "We have ticked all the boxes and have already invested €62 million in the project, and we find it frustrating, to say the least, that the rules are now being changed at the 11th hour.
We trusted the ministers and that is why we made the investment. This is no way to do business. As far we are concerned Ireland is closed to business for the energy sector."
Mr Power said that the company is extremely bewildered that so many ' bureaucratic challenges' are being put in the way of the project by the CER, which he said is supposed to encourage fairness and competition.
He said the company took gave exception to the new regulations that were introduced only last year, when Shannon LNG was ready to go ahead, saying it did not bode well for future investment in Ireland.
- DÓNAL NOLAN AND MARISA REIDY (Delays Faced by LNG Project Beggar Belief – Kerryman )
Delays faced by LNG project beggar belief
Wednesday February 22 2012
COULD we be forgiven in Kerry for thinking we have a government that simply doesn't care about the economic prosperity of this little part of the island?
People in north Kerry are fast coming around to this view at least, as the billion-dollar potential investment that is the Shannon LNG gas plant enters even more uncertain times.
Just in case anyone is still in any doubt as to the potential of this plan, let us spell it out again. A massive gas plant could be built on the Shannon Development-owned landbank between Ballylongford and Tarbert, creating up to 400 jobs locally for the duration of the four-year build.
Once situated in north Kerry it could well have the added bonus of attracting more industry to the area and lead to a transformation of the economy of the entire region. The first year of the build alone would lift the area out of recession, locals believe. After more than 40 years of empty promises for industry on the landbank, the area finally stands to secure a major employer.
That the company has invested over €60 million on its Irish plans already, says much for its patience and more for the potential promise of the Irish market and the profits to be made here.
The project was originally brought in under the Strategic Infrastructure Act, a supposed 'fast-tracking' process. Once through the planning stage — against significant objection from some quarters locally — it was held up by an inordinate delay as two government departments tried to figure out where responsibility for the foreshore licence lay.
It now appears the regulator could charge the company €75 million a year for the upkeep of an already existing gas pipeline it will never use. That's enough to persuade LNG that Ireland is closed for business as far as it is concerned.
The regulator has said the government has the power to direct it on policy, which could see this charge set aside this charge. But the government takes a different line and insists it cannot influence the regulator because it is an independent body.
This latest depressing twist in the long-running saga beggars belief. How can a State that acts like this ever hope to get itself out of recession?
Here we have a foreign investor willing to stake up to $1 billion, creating hundreds of jobs and securing a major fuel source for the State in the process – the same State, that is so broke it is cutting even the tiniest of services for the most vulnerable in society. It is little wonder all in north Kerry are scratching their heads this week in disbelief (Government told of gas tariff threat to project – Irish Times February 22nd 2012)
 Government told of gas tariff threat to project
Energy: THE GOVERNMENT is being asked to intervene to save key energy projects near Tarbert on the Shannon estuary worth €1 billion after a proposed change in the way gas suppliers pay tariffs.
A meeting of Kerry County Council this week heard how new tariffs outlined by the Commission for Energy Regulation, to be imposed on gas suppliers to make up for an expected reduction in the usage of the Bord Gáis interconnectors with the UK, were likely to jeopardise the Shannon Liquified Natural Gas (LNG) project, and had “shell-shocked” its backers.
The project by Hess Corporation has finally cleared the planning process after six years.
However, the new tariffs would cost the Shannon LNG project $75 million a year, and was now threatening its existence. (Government called on to save €500m gas project  - Examiner Febuary 22nd, 2012)
Government called on to save €500m gas project
By Donal Hickey
Wednesday, February 22, 2012
The Taoiseach and the Government were yesterday called on to intervene to save a €500m gas project earmarked for Tarbert, on the Shannon Estuary.
New tariffs, announced by the Commissioner for Energy Regulation on Friday, met with shock in north Kerry where the Shannon LNG (liquid natural gas) project has widespread support.

The tariffs would cost Shannon LNG €56m a year that it had not anticipated, and were now jeopardising the project, a Kerry County Council meeting heard.

Separately, Tom Fox, spokesman for Tarbert Development Association, which is strongly supporting the project, said the proposal was now in serious difficulty. "The Government needs to take control of the situation and needs to intervene. We desperately need someone [to act] on our behalf. Otherwise, the project will be lost."

Mr Fox also appealed to Jimmy Deenihan, the arts minister and also TD for Kerry North/West Limerick, to use his influence at cabinet level.

Around 650 jobs would be created during construction, in Tarbert, and 100 jobs when the terminal was in operation, according to the company.

Making a presentation to the council on the current situation facing Shannon LNG, the company’s managing director, Paddy Power, said there will be an additional cost on gas suppliers to make up for an expected reduction in the usage of Bord Gáis’s interconnectors with Britain.

Mr Power said no grant aid was being sought by the US-owned Hess Corporation, of which Shannon LNG is a subsidiary, for the regassification terminal and all planning hurdles, including the pipeline link to the national gas network near Foynes, had been cleared in the six-year-old project.

But there was now a fundamental change in Government policy, "like turning up for a football match only to be told you were playing hurling".

"In 2001, the Government put the rules in place. Now they are changing the rules. This is no way to do business," Mr Power said.

Hess had spent some €49m on the project to date, he told the meeting.

Shannon Development regional manager Denis Moran said it would be an "absolute tragedy for north Kerry" if the project did not does not go ahead. "It has the potential to revolutionise the whole area."

However, Safety Before LNG, which is objecting to the project, welcomed the new tariffs which, it maintained, would protect consumers and outlaw anti-competitive behaviour by new gas suppliers.

"The CER decided that all gas consumers, including those of Shell and Shannon LNG, will contribute to the cost of running the interconnector, thereby removing the windfall gains that would accrue to any new entrants to the gas market in Ireland and increasing competition," the objector said.

Safety Before LNG also said the Shannon LNG admission that the new tariffs would cost it €75m annually showed that the pricing monopoly business model, on which the proposed terminal was based, would have been worth almost €1bn over 13 years to the Hess corporation.

Most of the gains would come from the company’s anti-competitive monopoly position, Safety Before LNG claimed. (Anger and disbelief in County Council - Kerryman February 22nd 2012)
Anger and disbelief in County Council
Wednesday February 22 2012
THE announcement on Monday that the future of Shannon LNG now hangs in the balance was met with anger and disbelief at a meeting of Kerry County Council.
The Commission for Energy Regulation (CER) was accused of imposing tariffs which effectively protect competitors, while threatening the biggest investment ever proposed for the north Kerry area.
In a stinging attack on the CER, Cllr John Brassil said the regulator was imposing tariffs to protect the Bord Gais infrastructure, and doing so as to deter projects like LNG.
Questioning what she termed a lack of political will, Cllr Toireasa Ferris said it was mind-boggling that this project wasn't being embraced by the government, which has the power to direct the CER on policy.
In an impassioned plea to our elected representatives, Cllr Michael O'shea warned them not to 'mess this up' and urged them to talk to the Taoiseach about the importance of the project once again.
Terry O'brien agreed that the elected members had a duty to the people of Kerry who voted for them to ensure that they go back to the Dáil and deliver on the jobs they promised when seeking votes.
- MARISA REIDY  (Deenihan to raise delays at Cabinet)
Deenihan to raise delays at Cabinet
By Dónal Nolan
Wednesday February 22 2012
REACTION to the Commission for Energy Regulation decision from politicians in Kerry became increasingly frantic this week as they struggled to formulate a response to the announcement.
Shannon LNG CEO Paddy Power told Kerry County Council on Monday that the decision could result in the company having to pay €75 million per annum in tarriffs to the State; a figure believed to be unviable for the company.
Minister Jimmy Deenihan, who has supported the project from the beginning but now finds himself in a government that is coming under increasing criticism in Kerry for its handling of the latest episode in the LNG saga, said he will be raising the matter immediately at Cabinet. He suggested the government shares the concerns of Shannon LNG.
"I will be raising the matter with Energy Minsiter Pat Rabbitte and Taoiseach Enda Kenny. This is so important, we cannot lose this project. It would be a major blow to the region. I will be in direct contact with Shannon LNG who are very concerned about it and we share those concerns."
Fianna Fáil Senator Ned O'sullivan said the government must come up with a package to recompense LNG if the CER paper results in heavy tarriffs for the company. "This is quite a sizeable setback for the principal players. The government has to ensure that the project goes ahead for the good of the region. I will be calling on the government and Minister Deenihan to look at alternative ways Shannon LNG could be recompensed for paying for the interconnector," he said.
Tarbert native and Fine Gael county councillor Jim Finucane is organising a meeting between Kerry County Council and the Taoiseach in the near future. "A settlement conference has to be established now, under an independent facilitator to work out a formula acceptable to all sides. The CER is talking about workshops on the issue, but the time for that and for meetings about meetings is over, we have to enter a decision-making process now."
- Dónal Nolan ( Locals struggle to understand delays – Kerryman February 22nd 2012)
Locals struggle to understand delays
Wednesday February 22 2012
BALLYLONGFORD and Tarbert locals are deeply angry and struggling to make sense of the latest, bleak turn in the longrunning LNG saga.
"It just makes no sense at all to us and people here are very, very angry, particularly with our politicians," Chairman of the Ballylongford Enterprise Company Noel Lynch said.
"The Regulator said he is giving himself two years to make a final decision on the tarrifs and Paddy Power of LNG made it very clear that the company is not going to hang around for that length of time. It is crazy that the politicians of our country could let it come to this and Ballylongford is deeply angry with them."
What locals see as pointless bureaucracy put in the way of Shannon LNG is a particularly sore point, Mr Lynch said. "Changes in the gas industry in 2001 made it clear that the market here was going to become much more competitive and it was on that basis the LNG came into the market here..
"At no stage was this tarrif flagged to the company over the six long years of the planning process. They have already invested $72 million in the process so far. Now, the CER made it quite clear it would take direction from the government on policy in relation to this issue, we don't know why the politicians said they couldn't and that no direction was given. This is the worst possible thing they could have given to us.
"People are very, very angry locally. It is clear to us that this could be the endgame for LNG and if it goes there is only one group people here will hold responsible, our politicians."
Ballylongford publican and Enterprise Company member Micheal Finucane said people cannot believe what is happening.
"It just looks like anything outside of Dublin doesn't come into the equation. They don't give a fig about us down here. Shannon LNG got all the planning, the licences, they have asked for no grants, they are going to buy the land, create hundreds of jobs in the near future and bring down the price of gas nationally. How could it be any better?"
The Irish Times - Friday, March 2, 2012
Dispute over charges for gas pipelines use casts doubt on €600m project
A DISPUTE over charges for the use of the Republic’s natural gas pipelines has left a question mark over the future of a €600 million project.
Shannon LNG, which has plans to build a liquid natural gas facility in Kerry at a cost of €600 million, has warned proposals to charge all operators in the Irish market for access to gas pipelines connecting Ireland and Britain threaten its commercial viability. Over 90 per cent of the natural gas used in the Republic comes from Britain via two pipelines, known as interconnector one and two.
The Commission for Energy Regulation, which oversees the industry in the Republic, is proposing all suppliers pay for the interconnectors, irrespective of whether they use them. However, Shannon LNG opposes this. It will not require the interconnectors as the gas it supplies will arrive by ship. The commission is due to make a final decision on this at the end of the month. The matter was discussed at a meeting involving the regulator and a number of companies involved in the Irish gas market in Dublin yesterday.
Shannon LNG, which is backed by US energy giant, Hess Corporation, has said it will not make a final decision on whether to proceed with the project until the regulator clarifies the charges issue.
Bord Gáis Networks, which built the interconnectors at the Government’s request, favours charging all suppliers for pipelines, as it says they are vital to ensuring the supply of the natural gas to this country. The company says forcing it to pay for interconnectors that it will not be using will add to the cost of the fuel and effectively put it in a position where it will be subsidising its competitors.
Bord Gáis also argues that, as British prices ultimately set the cost of gas here, companies such as Shannon LNG will charge that in any case and could make super-normal profits at the expense of businesses and consumers. Shannon LNG denies this is the case, and points out if it were to start selling gas in the Irish market, to attract customers it would have to offer discounts to established players .
Bord Gáis Networks built the interconnectors and operates and maintains them. (Call goes out for show of support for LNG project – Kerryman March 7th 2012)
Call goes out for show of support for LNG project
Wednesday March 07 2012
THE ordinary people of north Kerry and west Limerick must let their politicians know exactly how strongly they feel about the future of the Shannon LNG project that is now in danger of being abandoned because of years of bureaucratic delays and the threat of a €65 million a year charge for operating in Ireland.
That's the message from the Tarbert Development Association this week, who took part in a consultation forum in Dublin with the Commission for Energy Regulation (CER) on Thursday last.
Following the meeting, Tarbert Development Association Secretary John Fox called on locals who want to see the massive LNG project going ahead to keep pressure on the politicians of the area, particularly government TDS, in the hopes of influencing a positive outcome on the CER process that is now casting the project in doubt.
Minister Jimmy Deenihan told The Kerryman this week that he is doing everything in his power to impress on Taoiseach Enda Kenny and Energy Minister Pat Rabbitte how important the project is for north Kerry and west Limerick.
He has also formally written to Minister Rabbitte seeking clarification on whether or not the Government can direct the CER on policy.
The CER told this paper there is a legislative basis for the Government to do so. Minister Deenihan said he is aware of the legislation providing for this and is seeking clarity on it from Minister Rabbitte, who holds that there is no way the Government can influence the CER, which is an independent body.
- DONAL NOLAN (Bord Gáis warns of higher prices – Examiner March 7th 2012)
 Bord Gáis warns of higher prices
By Gordon Deegan
Wednesday, March 07, 2012
Bord Gáis Networks yesterday warned of higher gas prices, totalling €40m per annum to consumers.
The company warned of the price hikes if changes proposed to charges for the use of natural gas pipelines are not implemented.

Last month, the Commission for Energy Regulation proposed that suppliers pay for Ireland’s interconnectors, which supply 95% of the country’s gas, irrespective of whether they use them.

This provoked an angry reaction from Shannon LNG, which is currently planning to build a €600m liquid natural gas facility at Ballylongford, Co Kerry.

The construction of the facility is expected to bring 800 jobs — Shannon LNG has already spent €40m to get the project to this stage and has secured planning permission and obtained a foreshore licence.

However, a question now lies over the project with Shannon LNG chief executive Paddy Power telling the February meeting of Kerry County Council that the Commission decision could force the firm to pay €75m per annum to the State.

In a document responding to the proposal, Bord Gais Networks (BGN) states that using the current tariff structure "means higher prices for Ireland’s gas users".

Over 95% of Ireland’s gas comes from Britain via two pipelines, known as interconnector one and two, under the Irish sea.

BGN state that the Commission proposal "puts the interests of consumers ahead of all other stakeholders and identifies the requirements to address network charges in order to avoid customers paying more for their gas".

BGN believes that the majority of the industry should be heard in the Commission process on tariffs, "not just the interests of a developer who has yet to commit to their investment".

The BGN document states that "the structure of network charges must change to reduce risk of higher prices for all consumers and that windfall profits for producers cannot be allowed while consumer prices rise".

BGN states that the determination of network charges must be addressed in order to avoid customers paying more for their gas when Corrib and Shannon LNG flow.

Shannon LNG, which is backed by US energy giant, Hess Corporation, has said it will not make a decision on proceeding with the project until the regulator clarifies the charges issue.

The Commission is due to make its decision before the end of this month.
This appeared in the printed version of the Irish Examiner Wednesday, March 07, 2012

Note 4. Dail Debates on the Issue:

Dáil debates

Wednesday, 22 February 2012

Topical Issue Debate

Shannon LNG Project

3:00 pm

Arthur Spring (Kerry North-West Limerick, Labour) Link to this

I thank the Ceann Comhairle for selecting this matter, the importance of which is evident from the fact that four Deputies from County Kerry have tabled it for topical issue debate.

I was angered by the decision of the Commission for Energy Regulation, CER, to produce a report following a meeting in the Taoiseach’s office in the week leading up to Christmas between the Taoiseach, the Minister for Communications, Energy and Natural Resource, Deputy Rabbitte, the Minister for Arts, Heritage and Gaeltacht Affairs, Deputy Deenihan and myself and Shannon LNG at which there was a lengthy discussion on what further steps could be taken to resolve this matter. Two solutions were identified, including that the parties could sit down at a table and try to come up with a solution and investigation of whether the complaint made to the EU Commission could be suspended until such time as a consultation process had been concluded. Unfortunately, neither happened.

The report issued last week by the CER ultimately determines the framework upon which all further decisions on whether this project will go ahead will be made. I come from a county and constituency which has enormous unemployment. There has been much talk about export growth. This project could result in more than $1 billion being brought into the country and the creation of approximately 700 jobs. The McCarthy report, often condemned in this House, states that this would provide fuel security. It further states that if we increase the supply of energy to the country it should be possible to lower the price. I acknowledge the interconnector between Ireland and the UK, which supplies 95% of our gas at a cost of €50 million per annum.

None of the solutions put forward suggest to me that this matter will be resolved soon. This issue needs to be addressed in an open and transparent manner. The date of 17 March was set as the deadline for finalisation of talks on this matter. It is imperative that the regulator is brought before a committee of the Oireachtas to explain why he produced a report which prefixes a framework that could ultimately prevent this project going ahead. It is essential that this matter is given urgent consideration as it could benefit north Kerry, the county and the country.

Brendan Griffin (Kerry South, Fine Gael) Link to this

I agree entirely with the points made by my colleague, Deputy Spring. The raising of this important matter by four Deputies who represent County Kerry demonstrates how critical it is. The bottom line is that jobs are at stake. A fantastic announcement was made yesterday on the creation of 1,000 jobs in County Louth through the establishment of PayPal. This project is its north Kerry equivalent. A total of 650 construction jobs are associated with the project and there would be a further 100 permanent jobs were it to proceed. Millions of euro have already been invested in it and if it gets the go-ahead, up to €1 billion will be invested in the north Kerry economy. It is a no-brainer and everything possible must be done to ensure it goes ahead. I call on the Minister to take action and do everything in his power to ensure these jobs are created. I emphasise that he must do everything in his power because one of the major barriers to the project has been the lack of regulatory certainty, which he can provide.

As a Deputy representing County Kerry, I would be ashamed if the project were not to proceed. Moreover, Members are not prepared to stand by and let it slip through their fingers because it is too important for those awaiting jobs who perceive it as a ray of hope. Some 17,500 people are on the live register in the county and the project would help to reduce that number considerably. It would alo provide a stimulus for the entire economy of north Kerry and west Limerick. The Minister must, therefore, step up to the mark and do what he can to ensure the project gets the go-ahead and deliver a good news story for County Kerry.

Martin Ferris (Kerry North-West Limerick, Sinn Fein) Link to this

In conjunction with my colleagues from County Kerry, I have brought this brought to the Minister’s attention in the hope he can resolve the outstanding matters. As Deputies Spring and Griffin have stated, the project involves approximately 750 jobs, of which 650 would be created in the construction phase. A further 100 permanent jobs would be created thereafter.

Last Friday the Commission for Energy Regulation, CER, published a draft recommendation on tariffs for gas interconnectors which would apply to companies such as Shannon LNG which states it will not use them. A public consultation process is ongoing and at last Monday’s meeting of Kerry County Council Mr. Paddy Power of Shannon LNG told the council that the move constituted a fundamental change in Government policy. He stated it was akin to turning up at a football match only to be told one would be playing a game of hurling. This issue must be resolved. I suggest both the Minister and the Taoiseach meet all Deputies from the county as soon as possible. County Kerry is one of the country’s black spots; the North Kerry constituency has an unemployment rate of more than 26%. Consequently, it is in urgent need of an input to try to create jobs as young people are being lost on a daily basis. Current developments at Tarbert and Ballylongford are matters that can be resolved politically by a change of policy, if that is what it takes, to ensure jobs are attracted to that part of the county.

I reiterate that I will work with my fellow Deputies, all of whom are wearing the Kerry jersey in this instance and the Irish jersey in respect of job creation. It is essential that this matter be sorted out and if that requires the banging together of heads around the table, so be it. However, matters must not be allowed to continue as they are. The issue is limping on from week to week and there is no light at the end of the tunnel, only speculation. Consequently, the matter must be resolved. Were Members to work together politically, this could be done. I again express my hope the Minister can arrange an urgent meeting with the Deputies from the constituency, as well as the Senators from County Kerry.

Tom Fleming (Kerry South, Independent) Link to this

This matter pertains to the huge investment proposed in the project mentioned - €600 million in the terminal and €400 million in the power plant. At a time when we are trying to entice investment from throughout the world, it is mind-boggling that we are looking at a gift horse in the mouth and shying away from it in the form of this €1 billion investment. As the other Deputies noted, the south-west corner of Ireland has been devastated by unemployment. It certainly is a black spot that has been overlooked in many respects during the years by IDA Ireland in the main, as well as by the other job creation agencies.

The saga of the Shannon and Tarbert land bank is ongoing and there have been many false dawns. Several projects were proposed, but they fell apart and nothing of significance has taken place. The project mentioned is the most feasible that has been put forward to date. What is ironic is that the Government set out the rules in 2001, following a debate at the Cabinet, to comply with European Union gas directives and encourage new and secure sources of gas supplies in a free and open market with no obstacles attached. Subsequently, however, the Commission for Energy Regulation made proposals that would result in a substantial proportion of the interconnection charges imposed on the direction of the energy regulator being levied on gas suppliers. Consequently, suppliers such as Shannon LNG, Corrib and Kinsale Gas were greatly affected. The Tarbert project certainly would take the main hit in this regard because the other probably have been exhausted. Moreover, when reviewing the proposals made by the Commission for Energy Regulation, the economist Colm McCarthy concluded that they were not consistent with its cost-reducing remit on energy policy. In other words, this meant they were bad for the householder, the consumer and business in general. The Minister should intervene in this regard. He has the power to so do and could issue a Government policy directive to turn things around and rescue the project because otherwise it will be lost.

4:00 pm

Pat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour) Link to this

I thank the four Deputies for again giving me the opportunity to address Members of the House on this important issue. I have consistently welcomed the proposal by Shannon LNG to construct a liquefied natural gas, LNG, terminal near Ballylongford, County Kerry. Such a facility, together with the bringing onshore of Corrib gas, would provide important additional security in providing a gas supply for Ireland. I met the promoters of the project soon after taking office last year and both my Department and the Commission for Energy Regulation are in regular contact with Shannon LNG. Most recently, the Taoiseach, the Minister for Arts, Heritage and Gaeltacht Affairs, Deputy Deenihan, Deputy Spring and I met its representatives on 21 December. The meeting offered a timely opportunity to review the state of play on the project and underline the Government’s positive interest in the potential investment.

The meeting also discussed the central concern of Shannon LNG, to obtain regulatory certainty at the earliest opportunity on future pricing and the treatment of Ireland’s two gas interconnectors. Together with all players and potential players in Ireland’s gas market, Shannon LNG has a key commercial interest in the outcome of the regulator’s ultimate decision on this highly complex regulatory question and given the complexities involved, there are many perspectives on what the decision should be. The regulator has been engaged in an extensive consultation process on the matter for the last few months and has had considerable interaction with Shannon LNG, as well as with all key stakeholders.

In line with the stated need for all interested parties, including Shannon LNG, to have clarity and certainty on the future regulatory regime as soon as possible, the regulator originally had signalled it would come to a decision last autumn. Unfortunately, the process was delayed by Shannon LNG’s own decision to lodge a number of complaints with the European Commission.

This further delay in the process was discussed with Shannon LNG at the meeting on 21 December, as was Shannon LNG’s own particular perspective on the regulatory issues for decision by CER.

Decisions on the regulatory treatment of the gas interconnectors and tariffing are statutorily a matter for the CER under the Gas (Interim) (Regulation) Act 2002. I have no function in the matter. As the independent energy regulator, the CER has a remit to protect energy consumers, to ensure security of supply and to support competitiveness. It also has a duty to ensure that new sources of gas for the Irish market do not result in unwarranted increases in the price of gas to business and domestic consumers.

I understand that on 17 February, the CER published a proposed decision paper - its normal way of going about something like this - on the regulatory treatment of the gas interconnectors. The regulator has announced that it intends to hold one further public forum for stakeholders on 1 March. Given the multiplicity of perspectives on the matter, I am sure all stakeholders, including Shannon LNG, will welcome such a forum. In tandem, stakeholders have the opportunity to respond to the regulator by 16 March on the matters raised in the proposed decision paper. At the end of this period, the regulator will assess all comments received and publish a final decision. I understand the regulator expects a final decision to be available by end April. I would hope the regulator will improve on that date. The regulator’s final decision will bring the regulatory certainty which Shannon LNG has repeatedly sought.

Brendan Griffin (Kerry South, Fine Gael) Link to this

I thank the Minister for his reply. I acknowledge that the forum on 1 March will be welcomed by Shannon LNG. However, the mantra of this Government for the past 12 months is that we want to create jobs for our people and that we want to do everything in our power to make sure we reduce the unacceptable number of more than 400,000 people on the live register. Quite frankly, there needs to be greater intervention by the Minister in this matter. I do not feel it is good enough for him to come in here and tell us this is a matter for the energy regulator. He needs to directly intervene in this and guarantee these jobs for north Kerry.

This is a crucial matter for us. We need certainty as does the company. Our international reputation is at stake. When a company has expressed so much interest in our country and has already invested so much money, the Government needs to welcome that interest and show of solidarity with the Irish people. That is what I am asking the Minister to do.

An increased supply on the market surely should be good for competition rather than bad for competition. That is something that should be borne in mind.

Martin Ferris (Kerry North-West Limerick, Sinn Fein) Link to this

I thank the Minister for his detailed response, but we have gone no further. There is an impasse here and we have to find a way to break it. The Minister mentioned Shannon LNG’s own decision to lodge a number of complaints with the European Commission. As I read the rest of his speech, that is not the reason for holding things up. The proposal to have an opportunity to respond to the CER by 16 March is in the proposed decision paper.

If the political will exists - there is collective political will from all parties in respect of job creation and from a parochial point of view in trying to get jobs into Kerry - this must be overcome. Both the Minister and the Taoiseach have a role to play in this. Much was said at that meeting last Monday. I referred to a €75 million tariff. Is that true or is it just wild speculation? If that is the case, it will ensure it effectively will not happen.

Tom Fleming (Kerry South, Independent) Link to this

I am in agreement with the Deputies. There is an essential need for the Government to intervene. I cannot see anything positive coming out of the process here, whereby stakeholders will make further submissions by 1 March. We are going around the house and back to square one again. The importance of this cannot be over-emphasised. We are being told on a weekly basis about our high energy costs for attracting industry and maintaining businesses. Our electricity costs are enormously high even to the householder when compared to the European average.

Perhaps we need to look at EU legislation and regulations. We need to circumvent this in some way, and that is what government is for. We are here as elected representatives for our county, and this is one of the most essential matters that has come before the House in the past 12 months. We should examine every avenue possible to find ways and means to overcome the impasse. There is a huge responsibility on all of us to reach a resolution as soon as possible. Time is of the essence and I ask the Minister and the Government to examine this.

Pat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour) Link to this

I thank the Deputies and I share their concern to grow employment in Kerry. However, Deputy Griffin is essentially asking me to ignore the statute, and the other Deputies seem to concur. Perhaps the House should take greater care when passing a law like this, but the House passed the law and Deputy Griffin is asking me to break the law. I cannot do that, but within the constraints imposed on me by the law, I have done everything that is humanly possible to mediate the earliest possible outcome to this issue. We would have had an outcome, as promised by the regulator, last autumn. However, for reasons that it explained at our meeting on 21 December, the company decided to appeal to Europe against a decision that was not yet made and as a result, disabled the issuing of a decision last autumn.

At our meeting on 21 December, the Taoiseach, the Minister for Arts, Heritage and the Gaeltacht and Deputy Spring met with the promoters and the American representative. They asked for a forum and they are getting a forum. It is normal practice for the regulator to publish this kind of paper in advance. Let the stakeholders go along to that forum for however long it lasts and let them effect the changes that are deemed sensible.

Under the regulatory regime, once utilisation of the interconnector decreases due to new sources of supply, the price per unit of gas transported through the interconnector will increase. Therefore, in addition to its consumer protection remit, the regulator also has a competitiveness and a security of supply remit. Whatever regime is put in place for the interconnectors, it is important for all stakeholders that it should be fit for purpose. In other words, there was a huge investment by the State in the interconnectors between here and the neighbouring island. We cannot strand those assets. They have to be remunerated. The final sentence of the executive summary to the paper published by the regulator reads:

The CER has concluded that the current regulatory treatment of the BGE gas interconnectors with GB will no longer be fit for purpose when new sources of gas come on stream. [It is referring to the Corrib and to the LNG project in this regard] If the system is unchanged, it will result in significantly higher gas tariffs to all gas customers, and will distort efficient economic signals for the future use of the transmission system.

It is the job of the CER to address such issues. It is the task of LNG and other interested parties to attend the forum and influence the ultimate decision. The CER has produced a draft decision, that is all.

I understand the concern that exists in Kerry with regard to jobs. Interest in this issue is whipped up every so often. I assure the Deputies that there is no lack of engagement in respect of this matter. I have pushed the law to the boundaries. The Minister for Arts, Heritage and Gaeltacht Affairs, Deputy Deenihan, and Deputies Spring, Griffin, Martin Ferris and Tom Fleming are all interested in this matter. I understand that but I am constrained with regard to how far I can go. I hope that on this occasion the regulator will be permitted to do its job and bring the issue to finality.

Written answers Wednesday, 7 March 2012

Department of Communications, Energy and Natural Resources

Natural Gas Grid

6:00 pm

Brendan Griffin (Kerry South, Fine Gael)

Question 135: To ask the Minister for Communications, Energy and Natural Resources if he will apply ministerial direction to a matter (details supplied); and if he will make a statement on the matter. [13016/12]

Pat Rabbitte (Minister, Department of Communications, Energy and Natural Resources; Dublin South West, Labour)

I refer the Deputy to previous replies to Parliamentary Questions on this matter. The decision on the regulatory treatment of the gas interconnectors is statutorily a matter for the Commission for Energy Regulation (CER) under the Gas (Interim) (Regulation) Act 2002. I have no function in the matter. The CER, as the independent energy regulator has a remit to protect energy consumers, ensure security of supply and support competitiveness. In particular it must ensure that new sources of gas for the Irish market do not result in unwarranted increases in the price of gas to business and domestic consumers.

There have been requests, from Shannon LNG and others, to me as Minister for Communications, Energy and Natural Resources to issue a policy direction to the CER in accordance with powers of direction as provided under Section 10A of the Electricity Regulation Act 1999. The content of such a policy direction has not been specified by the advocates but it appears the intention is that a Ministerial direction could be used to intervene to influence CER’s decision making about the regulatory treatment of the gas interconnectors, in particular with reference to the imposition of a tariff on this project, on the basis that Shannon LNG alleges that the decision is, in their view, set to damage its future business.

The 2002 Act confers specific legislative powers on the CER to regulate and determine the tariffs applicable to the gas transmission system. By law, the CER makes decisions pursuant to these powers independently of the Minister. These laws reflect the policy that determining tariffs is not a matter for the Minister.

Furthermore, Section 10A of the 1999 Act does not provide an adequate legal basis for a direction sought by and for the benefit of a private entity. The section provides that the Minister may only give directions on ’general policy’ as opposed to a specific direction in respect of the making of a particular decision by the regulator. Section 10A (6) (c) of the 1999 Act explicitly prohibits the Minister from giving a direction in respect of the performance of the functions of the CER ’in relation to individual energy undertakings or persons’.

I am satisfied that any general policy direction I might make would have to operate in what I consider to be in the overall public interest and could not be framed so as to either assist or hinder a particular stakeholder or otherwise so as to undermine the regulatory system. In the absence of any change in policy in respect of the regulation of gas tariffs, which I do not contemplate, and because of the limitations set out in the governing legislation surrounding the exercise of this power, I do not envisage making a Ministerial policy direction as sought by and on behalf of the company.