Rabbitte favours tougher tax regime for onshore exploration companies

COMPANIES WHICH find oil or gas onshore may be subject to a different tax regime from those which explore offshore, Minister for Energy Pat Rabbitte has said.

Mr Rabbitte defended the current taxation regime which critics say is too lenient towards oil and gas companies, but said he might take a different view to those who operate onshore because the costs of exploration are lower.

He said that when the current regime was included in the Finance Act of 2008 by his predecessor Eamon Ryan, the prospect of onshore drilling was not contemplated.

In response to a query from The Irish Times, the Minister added: "It seems to me that the risks, and thus the costs as between onshore and offshore exploration and drilling, are so vast that there may be a case for the tax regime to reflect that difference." Any change in the taxation regime would pertain to those companies looking to use hydraulic fracturing [fracking] in the Lough Allen carboniferous basin and in Co Clare.

The Lough Allen Natural Gas Company (Langco) and Australian-based Tamboran Resources have been given onshore petroleum licences to explore the area which takes in parts of Leitrim, Sligo, Roscommon, Cavan and Fermanagh.

Oil exploration company Enegi Oil has an onshore petroleum licensing option for the Clare Basin, an area which covers all of Clare and part of Kerry and Limerick. Its current licensing options allow only for shallow exploratory surveying.

To date only Tamboran has indicated that it intends to move to apply for an exploration licence. The company believes there is $55 billion (€42 billion) worth of gas at present prices in an area of north Leitrim and a similar amount across the Border in south Fermanagh.

Last week, Tamboran said it planned to spend a total of $70 million over this year and next carrying out further work in both counties. If the field was brought to full production, it had the potential to create 600 jobs directly and a further 2,400 indirectly, the company said.

At present oil and gas exploration companies are subject to a 25 per cent corporation tax rate on all profits rising to 40 per cent for the more profitable finds. That regime only pertains to companies who have exploration licences.

Mr Rabbitte said that since no licence had been granted yet for onshore drilling “there is adequate time to examine this issue”.

Mr Rabbitte has defended the present taxation terms, which critics say are the most lenient in the world, on the basis that offshore exploration in Ireland is very expensive and there has been little success to date.

He said he was minded to change the licensing terms for onshore exploration because the costs are lower.

Mr Rabbitte also reacted sceptically to Tamboran’s claims about the amount of gas that might be in north Leitrim.

He said he had seen the press release but no scientific evidence to date which backed up the company’s claim.

“If there is a scientific basis for what is there of course I’ll examine it,” he said.

Mr Rabbitte said the Government was seeking to alleviate people’s concerns about the effects of fracking by carrying out a “very rigorous” environmental impact assessment by the Environmental Protection Agency.