Warnings on Aussie tax proposals dominate APPEA conference

The Australian Petroleum Production & Exploration Association (APPEA) conference in Brisbane this month was dominated by reaction to the Australian government’s recent proposal to impose a 40% resource super profits tax (RSPT) on the mining and onshore petroleum industries.

Rick Wilkinson
OGJ Correspondent

BRISBANE, May 26 -- The Australian Petroleum Production & Exploration Association (APPEA) conference in Brisbane this month was dominated by reaction to the Australian government’s recent proposal to impose a 40% resource super profits tax (RSPT) on the mining and onshore petroleum industries.

Conference planners had planned to praise Queensland’s emerging coal-seam gas (CSG)-LNG industry. Instead, the mood was somber and even antagonistic as speaker after speaker condemned the proposed tax as an act that will make many planned Queensland projects nonviable.

APPEA Chief Executive Belinda Robinson said oil and gas projects worth more than $220 billion (Aus.) were planned in Australia. They have the potential to create 55,000 jobs and deliver an estimated $10 billion/year in government revenue.

“Certainty over the long term, design of Australia’s taxation regime that incorporates an accurate and fair reflection of the magnitude of the risk and capital investment involved is absolutely critical to these projects moving forward in the anticipated timeframe,” she said.

She added that in Queensland the proposed CSG-LNG projects represent a new export industry for the state and for Australia. But that industry is probably the most vulnerable to the new tax proposal because it is in its infancy. “If there has been a sovereign-risk issue in Australia over the past 10 years, this is it,” she said.

APPEA Chairman Eric Streitberg of Buru Energy, Perth, blasted the tax proposal, saying it demonstrated a “fundamental and disturbing” lack of understanding about industry investment decisions and used a definition of a “super profit” that was “appalling.”

Ann Pickard, executive vice-president of Australia Shell Upstream International, said Shell is urging the federal government to remodel the tax along the lines of the existing petroleum resource rent tax (PRRT), which has been the regime in Australia’s offshore industry for 20 years.

She believes the PRRT is a genuine windfall profits tax, which the oil and gas industry has been able to work with. The proposed RSPT is not a good tax, she said.

“The PRRT is working pretty well, and if you have a tax that’s working pretty well, why mess around with it?” Pickard asked.

The Queensland government is pushing its federal counterpart to double the threshold that defines a “super profit.” Queensland Mines Minister Stephen Robertson said his government believes the profit threshold that triggers the new tax should be raised from 6% to 11% or 12%. Robertson expressed concern about the impact of the new tax on the state’s fledgling CSG-LNG industry, especially as four major companies are to make final investment decisions about projects within the next 12 months.

Federal Resources and Energy Minister Martin Ferguson told the conference he did not favor “particular carve-outs” for some sections of the resources sector, including the CSG-LNG industry.

Ferguson urged the industry to participate in consultations to ensure it had its say in the tax’s final structure. Away from the podium he hinted that his government was open to compromise on the proposed terms. He also pledged to accelerate consultation to ensure uncertainties about the tax make-up did not drag on.

He added that legislation for the new tax should be finalized by the middle of 2011.

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