Fossil fuel windfall tax was changed after lobbying by Cork oil refinery owner

Irving Oil, which owns Whitegate refinery, warned the charge could threaten viability of the plant

The Government changed its windfall charge on fossil fuel companies after being lobbied by the owner of Whitegate oil refinery in Cork, which warned the policy could threaten the viability of the plant.

The changes are set to lead to lower levels of income arising from the windfall charge, according to a confidential briefing note given to Ministers on Tuesday.

The Coalition announced plans this week to raise up to €600 million in a series of levies on the energy sector – but the briefing document shows the proposals were changed after a warning from the industry about the impact of the so-called “temporary solidarity contribution”. This is the part of the measures which applies to fossil fuel companies.

The Government moved to introduce the windfall measures following agreement at European level that countries would try to capture some of the high profits being generated at energy firms for use supporting cost-of-living interventions.

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The Cabinet was told that Irving Oil, the owner of the refinery, had written to the department warning it that the planned charge would put the continued viability of the refinery at risk – which it reiterated in subsequent meetings with the department.

The warnings sparked official concerns that if the refinery closed, it could place pressure on the wider market for oil-based fuels – specifically in the south of the country, which the refinery serves.

Products could be transferred from elsewhere in the country, but in the context of the war in Ukraine, Ministers were told that keeping a diversity in how fuel and oil are imported and distributed is important – especially having a facility that can handle crude oil, converting it into usable fuels.

The briefing outlines how a change would be introduced to allow capital expenditure on assets purchased or built over the period 2018 to 2023 to be used to reduce taxable profits. This allows investments in assets which came into operation during the period to reduce the level of profits that will be subject to the temporary solidarity contribution.

Ministers were told that the deduction reduces the potential income from the charge, but that it was considered a “balanced measure” that would maximise the return to the exchequer “while reducing the potential and immediate risk of a closure announcement in relation to the Whitegate refinery and the resulting impact on security of supply in the near term”.

Industry sources believe that the level of investment Irving Oil has put into Whitegate suggests it will have very limited liabilities under the scheme. According to the briefing, the Department of Public Expenditure flagged that the introduction of the measure would allow companies to reduce their liabilities by making capital investments this year.

Ministers were also told that the new measures would be unlikely to have an impact on high retail prices – but that the proceeds collected could help fund Government interventions across next winter.

Irving Oil did not respond to a request for comment.

The expected yield from the temporary solidarity contribution – the part of the windfall package of measures which applies to fossil fuel companies – is between €200 million and €450 million, revised from a range of €60 million to €480 million.

Jack Horgan-Jones

Jack Horgan-Jones

Jack Horgan-Jones is a Political Correspondent with The Irish Times