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

Gas, oil and the Irish state

Gas, oil and the Irish state

Understanding the dynamics and conflicts of hydrocarbon management

Amanda Slevin

Manchester University Press

Copyright © Amanda Slevin 2016

The right of Amanda Slevin to be identified as the author of this work has been asserted by her in accordance with the Copyright, Designs and Patents Act 1988.

Published by Manchester University Press

Altrincham Street, Manchester M1 7JA

www.manchesteruniversitypress.co.uk

British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library

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ISBN 978 1 784 99274 3 hardback

First published 2016

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Contents

Lists of illustrations

Acknowledgements

List of abbreviations

Glossary

Introduction

Part I:The Corrib gas project

1Politics and pipelines: emergence of the Corrib gas conflict

2Resistance grows

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

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

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

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

Part III:Ireland in a global context

6Global trends in state resource management

7Ireland’s licensing regime in an international context

8Norway and Ireland: too different to compare?

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

9Understanding the Irish state’s approach

10Consent, coercion and consequences of the Corrib gas conflict

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

Bibliography

Index

Illustrations

Figures

1Map of the area, from Centre for Public Inquiry (2005). ‘The great Corrib gas controversy’. Dublin: Centre for Public Inquiry. Reproduced by permission.

2Government take for oil, from Johnston, D. (2008). ‘Changing fiscal landscape.’ Journal of World Energy Law and Business, 1(1): 31–54. Reproduced by permission.

Tables

1Main authorisations

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

3Wells drilled offshore and onshore Ireland (1959–2012)

4Control over oil production

5Estimated government take

6Estimated range of government take

7Trends in trade union density, Ireland (1975–2007)

Acknowledgements

Gas, oil and the Irish state is a book about different journeys – how the Irish state developed its approach to hydrocarbon management; the diverse experiences of a rural community in North West Ireland; Norway’s journey and how it diverges from Ireland’s; and, to a lesser extent, the path I’ve taken in researching these topics. The story of how my research came to fruition is a long one, involving countless people who contributed in many ways, including Ted Fleming who saw potential and encouraged me to undertake this research as the basis of my PhD; members of the Irish Research Council who awarded me a postgraduate scholarship to conduct this research; and Kieran Allen, an excellent PhD supervisor who guided, motivated and supported me through a challenging yet rewarding academic adventure. Thanks are also due to friends, colleagues and staff in the School of Sociology, University College Dublin who provided invaluable assistance, particularly my doctoral studies panel (Kieran Allen, Tom Inglis and Michael Punch) and Alice Feldman.

A significant number of people participated in this research and I am indebted to you all. By sharing your insights, knowledge and experiences you made this project unique, meaningful and worthwhile. As agreed during data collection, I have not named you all in an effort to maintain confidentiality but you know who you are and my gratitude for your contribution is beyond words. I am beholden to everyone who assisted me during data collection, including Mary Horan, Micheál and Caitlin O’Seighin, Des Brannigan, and Synnøve Hageberg and colleagues in the Norwegian Petroleum Museum (Stavanger) who facilitated access to their library. My sincere thanks go to: the staff of Manchester University Press for bringing this book into production; Helge Ryggvite and Laurence Cox for insightful, helpful and thorough feedback; Frank Connolly (Centre for Public Inquiry) and Daniel Johnston (Daniel Johnston and Co.) for providing valuable diagrams for this publication.

I’m very fortunate to have some great friends and thanks to all of you who helped edit an earlier version of this book (particularly Kevin, Sinead, Andy, Aline, Sinead, Sam and Niamh). Thanks are due to friends who inspired and supported me throughout the research and writing processes (Siobhan, Paula, Marty, Roisin, Necip, Cat and activist friends), those who helped put a roof over my head (Charlene, Andy and Maire) and work mates for their encouragement. I am especially grateful to Niamh, Veljko and Arnie for their wonderful friendship, warm welcomes in their home, and persuasion to nail things to walls which aided the writing process.

I’d like to thank, or perhaps blame, my dear cousin Kevin for my interest in this research topic. Kevin’s life-long activism and his deep commitment to social justice has been a huge source of inspiration throughout my life. My deepest gratitude goes to my family for always being there – my parents Tommy and Marie, siblings Chrissy and Pauric, Noel, and members of my extended family including Michael, Karen and Eileen – thank you for supporting me through the hardest periods while helping me appreciate and celebrate milestones, achievements and everyday happy moments – my research would not have been completed without your love, support and encouragement.

Abbreviations

Glossary

Introduction

‘Hail Mary full of grace the Lord is with thee … aaoohhh you’re hurting me, take your hands off me …’

‘Clear the road …’

‘Whose cops? Shell’s cops …’

‘You have no right to stop people going to work …’

As the sun rose over a narrow country road in Erris, Co. Mayo (North West Ireland) in October 2006, these utterances were a small selection of those accompanying the actions of Gardaí (members of An Garda Síochana, the Irish police force) as they dragged protestors from a sit-down demonstration in the middle of the road. Comprising elderly farmers, middle-aged housewives, fishermen, teenagers and political activists among others, the protestors were corralled at the side of the road, encompassed within a wall of fluorescent yellow police jackets. From sounds of chanting and loud praying the aural backdrop shifted to crying and angry yelling as Gardaí physically held back protestors and waved through a convoy of vehicles that had been parked further along the road. Carrying staff and construction materials, these trucks, buses and cars were bound for Ballinaboy and the site of the Corrib gas processing terminal – a hub for protests against the Corrib gas project since the jailing of the ‘Rossport Five’ in June 2005.

As one of many protests against the Corrib gas project, the involvement of An Garda Síochána in that day’s demonstration served to problematise the state’s role in the advancement of the development, provoking serious questions: if residents were so opposed to the Corrib gas project, why was the project going ahead? Why were Gardaí using force against Irish citizens to clear the way for Shell’s fleet? And, after five years of opposition to the project, how had it come to a stand-off between local people, the police and multinational oil companies?

Despite each stage of the Corrib gas development being vehemently contested by local people and their supporters, on 29 December 2015 Minister for Communications, Energy and Natural Resources Alex White (Labour Party) granted Shell permission to operate the Corrib gas pipeline. Rather than fireworks marking the advent of a new year, residents were subjected to intense gas flaring on 31 December as Shell began to process gas in the Ballinaboy terminal. Completion of different phases of the project correlates with worsening conditions for some of those opposed to the development, a number of whom were incarcerated in recent years. Others have sustained lasting physical and psychological injuries as a result of their resistance. Meanwhile some of those who support the project have experienced social isolation and other difficulties due to their position.

How did a rural region in the West of Ireland come to experience such wide-ranging, negative outcomes? This book offers some explanations and examines the evolution of the Corrib gas conflict, revealing the environmental, health and safety concerns initially underpinning resistance. It also highlights how the dispute exposed wider issues surrounding the Irish state’s management of its gas and oil. Problematic elements of the state’s approach include the transfer of control and ownership of state owned hydrocarbons to private companies; lenient fiscal terms which result in minimal economic returns to the Irish state; and the use of state and private actor coercive force against citizens. As a microcosm of the Irish state’s approach to the management of its gas and oil, the Corrib gas project and associated conflict illuminate topics which go to the core of Ireland’s socio-economic composition and the functioning of its state. This book offers insights into how and why the Irish state developed such a flawed model.

Covering a time frame from 1957 to 2014, this book presents the first comprehensive study of the Irish state’s approach to hydrocarbon management, spanning three interconnected levels of analysis (micro, meso and macro). Examining subjects that are simultaneously empirical and ideological, historical and current, the focus of this book extends beyond decision-making processes within the state system to their impacts on people’s lives in communities. Attention is paid to occurrences internal and external to the Irish state, leading to the identification of specific factors that have shaped how the state manages its gas and oil.

This book is based on primary and secondary data gathered through four research methods: documentary research, interviews, observations and case studies. Documentary research focused on policy, fiscal and licensing systems in Ireland and other countries, with attention paid to literature on state hydrocarbon management and government take. Interviews were a key method of data collection and I conducted interviews with thirty stakeholders from the spectrum of interests surrounding Irish hydrocarbons (including politicians, civil servants, oil industry representatives, journalists and civil society groups, such as those supporting and resisting the Corrib gas project). Within the book all research participants are referred to by pseudonyms to maintain anonymity, as agreed during data collection. Observations were an integral element of data collection and I conducted observations at twenty key events, including: state and industry sponsored conferences on Irish hydrocarbons; the 2010 oral hearing on the onshore Corrib pipeline; protests; and public meetings discussing issues related to Irish gas and oil. Integrating data from the aforementioned methods, my fourth method of data collection comprised two case studies. I compiled a case study of the Corrib conflict to uncover the practice and consequences of the Irish state’s management of its gas and oil and illuminate the impact of macro level structures and ideology at a local level. A case study of the Norwegian oil experience served to identify socio-economic, ideological and political influences shaping state resource management, thereby establishing parameters for a critique of the Irish model.

Primary data from this research are incorporated within every chapter of this book, providing the richness and complexity necessary to understand how and why the Irish state manages its resources in the manner adopted.

Overview of book

This book contains four integrated parts and each comprises a vital component of Ireland’s story. Part I focuses on the Corrib gas project and discusses the emergence and escalation of the conflict in tandem with the diversity of opinions towards the development. Consideration is given to efforts at consent formation juxtaposed with legislative changes that enabled the advancement of the project in spite of significant opposition. While acknowledging how the oil companies’ actions exacerbated the conflict surrounding Corrib gas, this part emphasises the state’s role via legal and policy frameworks and problematises the state’s involvement through policing, the judicial system and belated fora for community engagement. I argue defects in the state’s model of hydrocarbon management ultimately laid the foundations for this ongoing dispute and suggest the state’s flawed approach has led to emergent controversies surrounding potential onshore gas production by hydraulic fracturing (‘fracking’) and possible near-shore oil production in Dublin Bay.

The second part offers a contemporary account of Ireland’s oil and gas experience. Comprising three chapters, this part traces the development of the state’s model of hydrocarbon management from 1957 to 2014. Empirical detail is provided on the design and implementation of Ireland’s licensing regime, contextualised with reference to exploratory and exploitation activities, related economic and political events, and trends in state resource management globally. Summarising key issues inherent to the Irish state’s management of its gas and oil, I establish landmarks in Ireland’s petroleum history and reveal a consistency in the state’s approach despite changes in political leadership. I also examine more imperceptible occurrences and demonstrate how changes to Ireland’s model of hydrocarbon management reflect prevailing economic ideologies such as Keynesianism and neoliberalism, thus connecting the state’s approach with shifts in political economy, nationally and internationally.

Contextualising Ireland globally is the aim of the third part which opens with an overview of global trends in state resource management. Offering a succinct history of the growth of the petroleum industry, chapter six outlines the emergence of four main approaches to state resource management globally (concessions, production sharing, service contracts (SCs) and licensing systems). An examination of those models reveals the interrelatedness of approaches taken by states and shifts in political economy globally. One can see how different models are influenced by internal and external forces, for example, ideological and actual struggles over control and ownership of resources which are appraised in relation to the Organisation of the Petroleum Exporting Countries (OPEC) and the ‘neoliberal counter-wave’ (Ryggvik, 2010) that occurred in the 1980s.

Dominant approaches to state resource management are considered in an applied way in chapter seven through attention to their outcomes in the form of ‘rent’ or ‘government take’. Utilising secondary data from international studies of ‘government take’, I emphasise how Ireland’s model of resource management is unique both in terms of it being a licensing system (used in fewer than half the countries with hydrocarbon production worldwide) and its low rates of government take (one of the lowest in the world). This chapter underscores the distinctiveness of the Irish model, raising further questions around why Ireland’s approach is quite exceptional.

Tracing the evolution of the Irish model within a global context offers new knowledge on the Irish approach. Nevertheless, more comprehensive understandings can be gained through contrasting Ireland’s model with that of another country. Opening with a presentation of arguments against a comparison of the Norwegian and Irish frameworks for hydrocarbon management, chapter eight uncovers some of the discourses underpinning industry, political and state bureaucracy perspectives on the two models. It also reveals weaknesses in these standpoints and stresses the value of comparing both countries’ approaches as a mechanism for developing a critique of the Irish model. The resultant appraisal begins with an overview of socio-economic and historical similarities between the two countries, progressing to a summation of the political, social, economic and ideological influences that moulded the Norwegian model. This analytical structure is then applied to the Irish context and I articulate specific factors contributing to the Irish model of hydrocarbon management.

In the book’s final part, I discuss how the phenomenon of Irish state hydrocarbon management has macro, meso and micro level impacts, is shaped instantaneously by global, national and local forces, and bears all the hallmarks and contradictions of a state functioning within neoliberal capitalism. I also outline the real-life consequences of the state’s model of hydrocarbon management as manifested in the Corrib gas conflict. Chapter eleven brings the book to a close by arguing that Ireland’s approach to the management of its gas and oil is fundamentally flawed and, unless modified, will continue to cause difficulties in relation to the Corrib conflict and other areas which face potential hydrocarbon exploitation. Although Irish state hydrocarbon management can be interpreted as an outcome of a state functioning within neoliberal capitalism, the state’s approach has been moulded in particular ways by specific factors. Therefore, tangible elements of the state’s approach can be altered in order to eradicate weaknesses and maximise advantages for citizens of Ireland as owners of the gas and oil.

Given the real-life implications of the state’s approach and the critical theories underpinning this analysis of the phenomenon, this book concludes with a series of empirically grounded recommendations around how the state’s model can be transformed to ensure lasting benefits for Irish society.

Part I

The Corrib gas project

1

Politics and pipelines: emergence of the Corrib gas conflict

It’s been a horribly difficult, desperate … damaging sort of project for the whole community up there. For people from both sides and there’s all sorts of perspectives up there, all sorts of different views.

(Thomas,¹ former Minister for Communications, Energy and Natural Resources)

Ah sure Corrib is a disaster … for everybody … the people involved on all sides. It’s no good for anybody the way it’s been dealt with badly.

(Andrew, supports the Corrib gas project)

The one thing on which supporters and opponents of the Corrib gas project can agree is that the project has become a debacle that has embroiled a rural community in North West Mayo for over a decade. Corrib gas was discovered in 1996 and its developers and some politicians originally presented it as a panacea for the socio-economic woes of the region. Niamh, a retired school principal, recalled how the project was ‘presented first as the great good news story of the decade and it was going to change everything in the area. It was going to reverse emigration, it was going to provide all sorts of jobs and quality of life, you know there’d be loads of stuff happening’. However, the reality of the project has had an opposite effect and Corrib gas has become synonymous with social upheaval, remaining unproduced nearly twenty years after discovery.

Early days of the project

On 15 November 2001 a petroleum lease permitting the production of Corrib gas was granted to a consortium of companies comprising Enterprise Energy Ireland (EEI) (45 per cent share), Statoil (36. 5 per cent) and Marathon (18.5 per cent). As the first production lease granted in thirty years, Minister Frank Fahey described the petroleum lease for Corrib as ‘a milestone in Irish offshore exploration and production’ (Department of the Marine and Natural Resources (DMNR), 2001). Corrib was the most significant hydrocarbon discovery off the coast of Ireland since the 1970s, and Enterprise² and its partners were eager to bring the gas field into production. The field was estimated to contain 870 billion cubic feet of recoverable (sales) gas (Dancer et al. in Wood Mackenzie, 2014, p.21).

The Corrib gas field is located approximately 90 km off the Mayo Coast and the consortium planned to develop Corrib as a subsea tie-back which meant ‘about seven wells will be completed and tied back to a central gathering manifold which will connect to the main offshore pipeline’ (EEI, 2001). With subsea technology development of the field would be ‘entirely underwater with no above water structures’ (McGrath, 2001). The developers planned to use an offshore pipeline to transport the unprocessed gas from the seabed to Broadhaven Bay, where it would make landfall at Glengad Beach (the foot of Dooncarton Mountain).

Figure 1Map of the area

Once the raw, odourless gas was brought ashore, the consortium intended piping it from Glengad, through Sruwaddacon Estuary to the inhabited area of Rossport, where the pipeline would again make landfall. From Rossport, the pipeline would run parallel to Sruwaddacon Estuary until it reached an onshore terminal in Ballinaboy³ where the gas would be processed, odourised and transported to customers through the Bord Gáis (state body responsibility for gas distribution) network of pipelines. The onshore pipeline route and processing terminal were central components of the companies’ plan of development (POD) submitted to the Petroleum Affairs Division (PAD, state department responsible for hydrocarbon management) as the basis for the development, production and processing of Corrib gas. While the companies worked directly with the PAD to progress their plans for Corrib gas, people in the area began to hear about the project in an ad-hoc way.

Ted, a retired teacher later jailed as one of the ‘Rossport Five’, said the first notice of Corrib gas he encountered was an article announcing the gas find by Mike Cunningham (former Statoil director) in the Western People around 1998. However, it was not until April 2000 that Ted gave more consideration to the project, prompted by an informal plea from a ‘man in the Department of Fisheries’ who contacted and warned him ‘there was a study about to be done, an environmental study about to be done and unless someone from the area mentioned the in-shore fisheries that there would be no study done on the in-shore fisheries’ (Ted, former school teacher).

Ted sent a note to some local fishermen advising them about the forthcoming environmental impact study and for the time being took no further action. A fisherman for over thirty-five years, Joe became concerned about the project after reading the Environmental Impact Statement (EIS) – an outcome of the offshore environmental study. ‘I went through a bit of it and it was very complicated so I sent it over to a marine biologist in the University of Southampton. This biologist produced an independent report on the EIS which stated there was a cocktail of chemical from the outfall pipe going into Broadhaven Bay’ (Joe). This was of huge concern for Joe: ‘I’ve two sons involved in the fishing and I wanted that tradition to be carried on and they wanted to do it anyway, when I saw they were interested in fishing I wanted to protect it for them.’ Spurred on by these concerns and his desire to protect this ‘way of life’ for his family and others, Joe began asking questions about the project and in early 2000 co-founded the Erris Inshore Fisherman’s Association (EIFA) which later opposed the development in the planning process.

A school principal in a primary school, Niamh had some prior awareness of issues surrounding gas and oil due to conversations in the late 1990s with a former oil industry worker who had alerted her to ‘how awful the giveaway terms were’. While Niamh knew there were limited benefits to the Irish state from its gas and oil, she hadn’t been aware of plans for the development of Corrib gas – ‘I had only heard about it through word of mouth … I certainly would have checked public notices and local news [papers] … and it wasn’t in that.’

The question of public consultation and information provision was one Niamh put to the developers during the first public meeting held in McGrath’s pub in the summer of 2000. Niamh described this event as a ‘public presentation’, saying it couldn’t be described as either an information meeting or a consultation meeting as ‘it was really just showing us pictures’. The absence of mechanisms for systematic consultation with the community, in tandem with growing concerns around the potential environmental impacts of the project, served to create an atmosphere of mistrust which was compounded by the developer’s actions following this meeting.

Lack of consultation

Several local people articulated a sense of an outside entity being imposed upon this rural area and this sentiment appeared to grow as the project advanced. Ted (retired teacher) viewed the summer of 2000 as the start of the ‘invasion’. The ‘invasion’ included gas company personnel frequenting local pubs, ‘buying booze for people and coming on with their models [of the project infrastructure]’ (Ted). In Ted’s view, these workers ‘were putting on a display and their models and that, they were so completely out of place and they were so completely irrelevant to the area … the invasion has started but I found it so absolutely pathetic.’ When asked if the company’s effort to build consent by approaching people in the aforementioned informal ways could be considered consultation, Ted answered ‘no’. The topic of consultation (or lack of) is a factor identified by most interviewees as contributing to the emergence and escalation of the controversy over Corrib gas.

According to Charles, a consultant who works with the PAD, Enterprise ‘definitely weren’t for talking to the locals about what was going on’. Worthy of note is how the state did not place any obligations on the companies to consult with those living in the area. Aidan, a civil servant,