The Government has sent a strong warning to the Northern Executive that it must do more to clamp down on the activities of Provisional Republican fuel smugglers who are polluting water supplies in the Republic.
In a hard-hitting letter to his Stormont counterpart, Environment Minister Alan Kelly called for far greater cooperation to combat the fuel launderers.
Minister Kelly told Stormont Environment Minister, the SDLP's Mark Durkan, that the authorities have identified up to 600 sites in Louth and Monaghan where toxic sludge from illegal fuel plants have had to be cleaned up at a cost of over €6m to taxpayers in the Republic.
Mr Kelly wrote: "There is strong anecdotal evidence to suggest that a large proportion of this toxic waste has its origins in Northern Ireland."
The minister also hinted the Government would seek compensation from Stormont to pay for the clean-up.
"Given the scale of the problem which now faces us, I think it is appropriate that these discussions be escalated and that a mechanism which factors the significant cost of this environmental crime be finally factored into the overall agreement on waste repatriation," Mr Kelly said.
The Sunday Independent - which in recent months has brought the activities of the Provisional Republican fuel launderers to the forefront - has learned that water poisoned by illegal diesel laundering in the Republic is still being allowed to flow into Northern Ireland's republican area of south Armagh. The toxic waste - which contains chemical compounds that cause cancers and birth defects - is being pumped into watercourses feeding the Lough Ross reservoir on the Border between Monaghan and Armagh.
Water from the Lough Ross reservoir is extracted directly from the lake and, via a local filtration station, to around 10,000 people in and around the town of Crossmaglen.
Responding to Minister Kelly's letter, Mr Durkan said he shared concerns over the environmental and financial impact of the toxic waste from fuel laundering and is "happy to discuss" relevant issues.
A spokesman said: "The over-riding problem is that those involved in illegal fuel operations simply don't care whether their activities damage the environment or harm the public.
"The money spent on cleaning up after criminals could be much better spent in the North to secure a better environment for the whole community."
The dramatic developments come after Fine Gael TD Patrick O'Donovan last week told a meeting of the British Irish Parliamentary Assembly (BIPA) meeting in the Seanad that the proceeds of illegal diesel laundering "are making their way into the political system".
Mr O'Donovan called on the governments of Ireland, Northern Ireland and the UK to "stop pussyfooting" around the issue and address it "head on".
"I know where the money that funds the Fine Gael party comes from, everybody knows where it comes from. Everybody knows where the funds for Fianna Fail and the Labour Party comes from but there are strong question marks over other political parties," he added.
Speaking after the debate, Sinn Fein MLA Barry McElduff said Mr O'Donovan's comments were a "slur" on his party.
Fine Gael Senator Paul Coghlan said much of the problem in clamping down on this problem is because there are "policing difficulties" along 34 border crossings in the Dundalk area.
"North of the Border, in south Armagh, policing is even more difficult. There is a personnel shortage. One will not find any policemen on the beat or near on the beat. They have armoured vehicles for when they leave their barracks. The place is a fortress," he said.
"It is not tolerable that 17 years after the first peace agreement, we have certain crime overlords and drug smugglers openly flouting the law."