THE nation’s peak oil and gas lobby has demanded significant modifications to the Petroleum Resource Rent Tax before it is extended across the entire Australian oil and gas industry to ensure small producers enjoy the same tax breaks as junior miners.
THE nation’s peak oil and gas lobby has demanded significant modifications to the Petroleum Resource Rent Tax before it is extended across the entire Australian oil and gas industry to ensure small producers enjoy the same tax breaks as junior miners.
In its State of the Industry 2010 report, the Australian Petroleum Production and Exploration Association said it believed extending the PRRT, a 40 per cent rent levy on offshore oil and gas profits, to onshore production could yield significant benefits to industry.
The two decades-old PRRT allows offshore producers to recoup capital costs before paying the levy, and has been credited with encouraging increased investment in the sector.
As part of the government’s controversial resources tax plans, the PRRT is to be extended to all onshore projects, which currently pay only state royalties.
However, APPEA said the government should offer the same tax breaks to junior oil and gas companies as junior iron ore and coal miners, which will be exempt from paying the new mining tax until their profits exceed $50 million per annum.
“In the event that PRRT is extended, the overall fiscal burden on projects should not be increased and an exemption or tax-free threshold should apply to small projects,” APPEA said in the report.
APPEA also took aim at the lower 30 per cent tax rate on coal under the new mining tax, arguing for the elimination of any tax breaks that favoured coal over cleaner burning gas.
“Care should also be taken to ensure that not only are offshore and onshore projects treated equitably, but also that the tax burden on gas is not greater than that applying to competing fuels, particularly coal when used for electricity generation,” APPEA said.
“At a time when the nation is seeking to reduce its greenhouse gas emissions, it would be counterproductive to apply a higher tax rate to gas than coal when gas-fired electricity results in around half the greenhouse gas emissions of electricity generated from coal.”
With increased use of gas considered the best available option for drastically reducing Australia’s carbon footprint in the medium term, APPEA said it was also time to adopt a more “thoughtfully designed national climate change policy”.
In that light, it suggested removing subsidies and mandated renewable energy targets that unfairly disadvantaged gas against higher cost renewable alternatives.
APPEA also took a further swipe at calls by big Western Australian gas buyers for government intervention to retard rising domestic gas prices as likely to have the “perverse effect of reducing competition and investment”.
Instead, the WA government should focus on policies that would increase gas market competition and remove impediments to gas industry investment.
