Sins of the Father (16 page)

No Irish industrialist need be in the least bit worried that his interests will be in any way impaired by foreign industrialists setting up here … [The industrialists’] sole reason for coming here is that the kind of industry will be established for the manufacture and processing of articles which are not yet made here, and which we need, not only for ourselves, but for export as well.
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Mr V.B. Bjorkman, assistant manager of the St Patrick’s Mines, Avoca, told the assembled guests that ‘they – the Canadian experts – were satisfied that about eight million tons of ore were readily available [and that] full production was about 18 months away’.
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The 1956 Act, ‘designed to compensate for high costs and the uncertainty of exploring for unproven resources’,
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was almost certainly written with the Canadians and Avoca in mind. In a speech given to the Dáil during the debates on the Mining Act, Seán Lemass, then in opposition, said that ‘every deputy knows that this Bill has resulted from a bargain with one group in relation to a particular undertaking … in so far as anyone outside the government service was consulted about this Bill, it was the Canadian groups interested in Avoca’.
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Northgate Exploration and Development Ltd of Toronto quickly followed Mogul to Ireland. In 1961, Northgate discovered large deposits of lead, silver and zinc at Tynagh, County Galway. The resulting increase in exploration in the wake of Tynagh resulted in significant finds, including the 80 million ton zinc-lead deposit outside Navan, County Meath, and the opening of five new metal mines.
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By 1970, Tynagh was the largest producing lead mine in Europe. During the first five years of operation in Ireland (1965-70), Northgate recorded a net profit of $36,628,000 Canadian dollars. It also had control of the copper/silver/mercury mine at Gortdrum near Tipperary town; a 70 per cent direct interest in the Smelter Corporation of Ireland; a 10 per cent interest in the Anglo United Development Corporation, and a 10 per cent interest in Avoca Mines Ltd.
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According to Kevin C. Kearns, ‘Irish mining developments during this period are properly acclaimed largely as an achievement of Canadian expertise and enterprise.’
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And it was Canada that was the net recipient of the value of these mineral deposits.

The benefit of this mining activity to the Irish exchequer was minimal, due to the tax breaks and the fact that the minerals were shipped directly out of Ireland and processed overseas. In terms of employment, from 1961 to 1971 the number of mining and quarry jobs in the State actually decreased by 149, although the 1971 figure was an increase of 564 on 1966 employment levels. The financial benefits of mining in Ireland were further eroded by the 1967 Finance Act, which brought changes in the law so that no tax was due on profits earned for the first twenty years of any mining operations begun prior to 1986. As most mines were reckoned to have an operating life of less than twenty years, this meant that the Canadian companies had been given Ireland’s natural mineral resources, effectively, for free.

The tax changes were announced by the Minister for Finance, Charles Haughey, in the Dáil in April 1967:

The achievements of [the mining] sector have been impressive and have contributed very satisfactorily to employment and export earnings … I am told that a great future expansion in exploration and development is possible and that additional tax incentives can generate a large volume of outside investment. I have accepted this argument.
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By way of explanation as to the tax holiday, he said:

Many different types of allowances and incentives have been suggested but, instead of bringing in rather complicated new provisions, I have come down in favour of the simple decision to substitute for the existing reliefs a twenty-year period of complete exemption. I believe that Ireland now offers a very favourable sphere of activity to mining organisations and I hope they will not be slow to take advantage of this.

In his analysis of the Irish mining industry, Kevin C. Kearns said that ‘in light of the successes resulting from the 1956 incentives many questioned the need and justification for augmenting the State’s generosity to such a degree. There was, as one observer averred, “some mystery” surrounding the new concession.’
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The tax holiday was eventually rolled back in the wake of the Navan find.

On 31 January 1968, the soils division of An Foras Taluntais completed a survey of east central Ireland which unearthed evidence of potentially significant quantities of lead/zinc/copper mineralisation in County Meath and north County Dublin. News of the discovery was presented in a paper to the Royal Irish Academy in June of that year, but the findings were not released until 30 June 1969.
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On 25 July 1970, the Canadian-owned Tara Exploration and Development Company applied for a prospecting licence for an area of 18 square miles in County Meath; five months later the company’s shares almost doubled in price when it confirmed that it had ‘encountered zinc and lead mineralisation from 296 feet to 354 feet in the first drill hole in a new prospect’ on the farm of Mr Patrick Wright at Nevinstown, about a mile from Navan.
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It was soon obvious that this was a special find, and on 30 August 1971, the President of Tara Exploration, Michael McCarthy, announced that:

… the Navan ore body has clearly demonstrated its potential as a major world source of zinc and even at this stage of the development programme is can be said that the arrival of the Navan mine on stream will rank it as the largest zinc producer in Europe and among the four largest in the world.
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Contemporary analysis put the value of the Navan deposits at around £2 billion.

The news of the size and wealth of the find led to protests and public criticism of the terms of the 1967 Act. At a meeting of the Law Society in Trinity College in 1974, Mr David Giles of the Resources Protection Campaign pointed out that under existing law, all minerals in the State were owned by the State:

There is no reason why the State should not retain its ownership of this fantastic potential for economic and social development and, while compensating the mining company for what it has already spent, use the profits from Navan to develop a smelter, metallurgical industries and humane system of social services.
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The opening of the mine was further complicated by counter-claims on the mining rights for the area. Eventually, in 1974, the Irish State took a 49 per cent interest in the mine, and agreed to accept royalties on the profits, not on the ore itself. The result was that Tara was able to extract million of pounds worth of ore from Navan and not have to pay a penny in royalties to the Irish government, who were fobbed off with profit warnings. In 1987, the Department of Energy requested royalties of £4.1 million on profits of £107 million.
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This was rejected by the company and in 1989 the State sold its remaining share to the Finnish state-owned mining company Outkumpu for €50 million. One third of this amount was to cover back payments in royalties. Tara Mines was now fully nationalised, but it was Finland, not Ireland, that owned it.

Over 70 million tonnes of ore was extracted from Navan during the period 1977 to 2008. The current owners are New Boliden, a Swedish mining and smelting company. Annual ore production at Navan stands at 2.7 million tonnes, with yields of 200,000 tonnes of zinc metal and 40,000 tonnes of lead metal contained in concentrates. These are shipped out to either Boliden’s smelters in Norway and Sweden or to other smelters in Europe.
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There is no smelting facility in Navan, nor has there ever been one. The raw material was extracted and exported for processing, same as the cattle of Meath in 1968, the year the minerals were first discovered.

In 1989, the then leader of the Irish Workers’ Party, Tomás MacGiolla, said:

… because of loopholes in the mining lease granted by the [1973-77] coalition government, Tara Mines has not paid a penny in royalties in almost 13 years of operation, despite the huge level of ore produced. The failure to ensure that a smelter was built has meant that huge quantities of raw ore have been exported and used to create jobs abroad, rather than here in Ireland.
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The servicing of exporters, rather than the production of exports: this was Ireland’s way of utilising its natural resources.

Three Americans arrived in Dublin in March 1958 in order to set up an oil exploration business. They called it the Madonna Oil Company and, having hired the prominent Dublin legal advisors Arthur Cox & Co. of St Stephen’s Green, they made contact with the Department of Industry and Commerce and its Minister, Seán Lemass, with a view to obtaining a licence to explore for oil and gas. ‘When progress proved to be satisfactory, the company approached the Ambassador Oil corporation of Texas, with a view to selling the lease already negotiated.’
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Lemass wanted a change of name before he would issue a licence, and in December the company became Ambassador Irish Oil Ltd. One month later, on 31 January 1959, it was granted exclusive oil and gas rights over ‘The whole of Ireland, including the seabed and subsoil which lie beneath the territorial waters and the high seas under the control and jurisdiction of the Government of Ireland at this time or in the future, but not including the Six Counties’.
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It was later revealed that Ambassador paid just £500 for these rights. Two years later, a two-thirds share in the lease was sold for £230,000.
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In 1969 the Irish government renegotiated the 1959 lease with its then owners, Marathon Oil, who in 1965 had taken over Ambassador’s activities in Ireland. The company was allowed to keep one third of Ireland’s oil and gas rights, and got to choose which areas it kept and which it gave back. It kept the southern box, and in 1973 Marathon Oil confirmed that it had found commercially viable quantities of natural gas off the Old Head of Kinsale, County Cork. Having secured the rights for less than a quarter of a million pounds, Marathon Oil set about selling the gas back to Ireland at a cost which was estimated in 1977 to be £700 million.
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The renegotiation of oil and gas rights lead to a fresh round of speculation. Between April 1971 and January 1974, the Irish government issued fifty-nine non-exclusive petroleum prospecting licences, which allowed the holder to search for petroleum and natural gas on the continental shelf surrounding the Republic.
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Each licence cost £610, which consisted of a £10 application fee, a £100 consideration fee, and a £500 yearly rental fee. Of the sixty-one companies which held the licences in 1974, only eight were Irish. The vast majority of the survey and exploration work, however, was undertaken by four companies who were themselves licence holders. These were: Western Geophysical; Delta Exploration; Continental Oil, and CCG. They worked on a subcontracting basis and sold the results of their surveys to the licence holders, who did not need to have any experience in oil and gas exploration in order to attain a licence. They merely needed to be ‘competent persons’ and have the necessary funds to ‘purchase the technical competence’ needed for exploration.
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Nor did the government require of the licence holders that they actually explored for oil and gas. ‘It was possible’ wrote Paul Tansey in 1974, ‘to spend £610 on acquiring a licence, undertake no expensive exploration work and hope that the non-exclusive licence will provide a passport to securing an exclusive licence’.
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The price of the licence was highlighted by Dr Seán O’Connell, a lecturer in Edinburgh University, at a public lecture in Monaghan in April 1974:

It is maddening to see Britain selling off oil-blocks for exploration at figures of £1¼ million plus while one oil company held more than 100 such blocks belonging to Ireland. And it was almost ridiculous for a company which had got oil concessions from the Irish government to sell them to other companies.

He told the audience that ‘The concessions given to the Marathon Oil Company were being constantly referred to in trade and scientific magazines as amazing, exceptional, and so on’.
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In 2008, when Marathon Oil was sold to the Star Energy Group for $180 million, it had 100 per cent control of the Kinsale Head, South West Kinsale and the Ballycotton gas fields; 86.5 per cent interest in the Seven Heads field; and a 100 per cent interest in the company’s gas-storage business. Net production from these fields was approximately 36 million cubic feet of natural gas per day. The total net proven reserves of gas was 62 billion cubic feet.
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It had sixty-one employees and paid no royalties. Those employees paid more tax in Ireland than Marathon.

In 1977, Una Claffey of the Resources Protection Group pointed out in an opinion piece for
The Irish Times
that the terms and conditions of the non-exclusive licences saw some Irish businessmen ‘set up front companies to give the impression of Irish involvement. [Then] without risking capital or having to prove technological expertise they carved a niche for themselves so that when it came time to allocate [exclusive] licences they were there to the fore.’
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This approach was a variation on the property speculation of the 1960s and ’70s: the purchase of large tracts of farmland surrounding Dublin and other cities which were then parked until government developmental policies regarding housing took effect and land ownership transformed into significant payouts. Speculation on land, oil, gas and mineral rights, rather than investment in actual economic activity, was one strand of the
modus operandi
of the modern Irish businessman – at least, those businessmen who had the ear of government policy makers. The position of the Irish businessman as an interface between foreign capital and the Irish State was the other. In 1967 it was announced that Gulf Oil Terminal (Ireland) Ltd were to build an oil terminal at Whiddy Island in Bantry Bay, County Cork. The story of that terminal, the relationship between its owners, the government and the local population, in many ways came to typify the dynamics of the Whitaker revolution and the relentless pursuit of exporters over exports.