HomeBussinessCorrib gas field operator challenges State’s windfall tax

Corrib gas field operator challenges State’s windfall tax

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Vermilion Energy has made an application to the Commercial Court based on the fact that although its revenues in 2022 were higher than in previous years, it has not yet realised any profit from the Corrib field.

The company will tell the court it continues to hold significant losses on its investment which have yet to be recovered.

In a statement today explaining why it has taken a legal challenge, Vermilion said: “These significant and ongoing financial losses have not been taken into account by the State when applying the recent Temporary Solidarity Contributory Tax, as would normally be the case under prudent tax law.”

It added: “Further compounding this unfair application of the Temporary Solidarity Contribution tax legislation as it applies to Vermilion, it is our view that Ireland did not need to be an outlier with respect to other European countries by applying a punitive tax rate of 75pc, which is more than double the European Council recommended minimum rate of 33pc, and then implementing the option of applying the tax over both years 2022 and 2023.”

Today’s News in 90 Seconds – April 24th

According to figures released by Vermilion, only Slovenia has imposed a higher rate – at 80pc. Several countries, including France and Germany, have set the rate at 33pc.

The idea of making the energy sector pay a temporary solidarity contribution on its windfall gains arose immediately after the war in Ukraine in 2022 when the prices of oil and gas soared.

Announcing the measure at the time, the Government estimated proceeds would be in the range of €200m to €450m, and they could be used to give financial supports to households and businesses affected by high energy prices. They could also be used to support investment in renewable energy.

An EU regulation was introduced as an emergency intervention in 2022 to address the high energy prices in Europe at the time, and the surplus profits being generated in the industry. The Irish Government’s implementation of the EU regulation came in the form of the Energy (Windfall Gains in the Energy Sector0 (Temporary Solidarity Contribution) Act 2023, which went through the Oireachtas last autumn and was signed into law by President Michael D Higgins in November.

It meant energy companies had to make returns to the Commission for Regulation of Utilities, which has now drawn up regulations, with a deadline of August for complying.

Vermilion are the operators and majority shareholder of the Corrib field in Mayo. As Ireland’s largest producer of natural gas, it would be expected to bear the brunt of the new windfall tax.

According to results published in March, revenue at its “high margin” Irish business dropped 6.7pc last year to C$302.4m (€205.1m). Operating expenses at the Irish unit more than doubled in 2023 to C$39.46m.

The idea of levying a tax on the sector Europe-wide has already been challenged in the courts by ExxonMobil. It lodged a case late last year with the EU General Court opposing the regulation that allowed national parliaments to impose the tax.

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