Michael Hatton (Blaxland, Australian Labor Party) Share this | Hansard source

Point No. 1 is that the debate on the Petroleum Resource Rent Tax Assessment Amendment Bill 2006 and cognate bill is being foreshortened and my time is being foreshortened because at 5.30 we have to finish. In consideration of the fact that the member for Rankin is coming after me, I will speak for just over half the time that I normally would. It is interesting to follow the member for O’Connor in this debate, because he has a considered approach to matters of energy generation and the associated problems of climate change. He is one of a set of at least two bookends from Western Australia—that is, he and the member for Kalgoorlie—who tell us time and time again about tidal power in Western Australia and about how that could be used to generate power. The member for O’Connor has argued for a better way of producing hydrogen to power a hydrogen economy by setting up facilities to use that tidal power. The benefit would be that you would not be using a greenhouse gas emitter in natural gas, of which we have absolutely abundant sources.

Indeed, new fields—the Janz field and the associated field off Barrow Island—are going to be brought to market in Australia. This is the biggest investment in natural gas infrastructure in Australia’s history, with a minimum of 60 years worth of supply and, indeed, the possibility of a 100-year supply of gas. The company involved, Texaco, has determined to do further exploration in the area of natural gas. Texaco knows that there is not only petroleum in that region—because that is what was searched for in the 1960s and 1970s—but immense natural gas resources. They were identified in the 1960s when people were searching for petroleum—the subject of this bill—and those resources are available to us.

The member for O’Connor also pointed out that what underlies and is underlined by many elements of this debate is that there is not one solution to how we go forward. The story of the petroleum resource rent tax from its first imposition and through the changes that have been made—particularly those significant ones in 1990—is that the world’s use of energy resources has changed from the 1950s to now. We have much more multilayered sources of energy; we also have a multilayered atmosphere that is in significant difficulty. The member for O’Connor argued against the sceptics’ view—the leading sceptic in Australia being the geologist Professor Ian Plimer. Most people would now have come to the fairly solid view, particularly after the experience of the last couple of years, that, yes, climate change is real and needs to be dealt with significantly.

But the answer is not just one set of renewable resources but an entire suite of them, not only to provide for Australia’s energy needs but also to provide for world needs. As with most other technological change, while we are moving to new forms of technology—or, indeed, to very old ones such as wind and tidal power—and bringing together new ways to utilise solar energy as well as biomass energies and so on, we are not going to get rid of the ones we currently have. It is a question of how we actually control and attempt to ameliorate the deleterious effects of some of those key energy sources—in Australia, particularly from coal, natural gas and the use of natural gas to burn coal more intensely to produce energy. In Australia we need to find ways to find more petroleum. That is what the changes to this act are supposed to be centred on. We also need to continue to tax petroleum and the companies that are looking for it.

From the early 1960s it was completely understood that, in order to go into the high-cost business of finding petroleum resources for Australia, companies needed to (1) be brave and (2) be encouraged to do it. But when they were successful—not only in Western Australia but particularly in Bass Strait and the other fields that have been found—with Labor coming to power the imposition of a resource rent tax was a recognition of the fact that, if you are going to make a lot of money out of this over a long period, it is right and proper that the government taxes what is one our most significant natural assets.

We are debating these changes without the government providing much time to look at the specifics. Labor has already indicated through its amendment and in the Senate—even a Senate controlled by the government—that the schedules in this act need to be dealt with in as much depth as possible. I will examine the key schedules, and I particularly want to look at the significance of the changes. They include a move from an annual assessment to a quarterly assessment and effectively treating this tax similarly to most other business taxes. That is the effect of schedule 1, and Labor supports that. Schedules 2 and 3 provide that, if you have a company or a series of corporate groups involved in an internal corporate restructure, you need to allow them to transfer exploration expenditure between the petroleum projects of group members.

That is unexceptional. There is no particular problem with clause 1 of the schedule of the current act, which contains a very strong test. The reason it has a strong test is that, when this was put in place, the government did not want it to be abused. A key question, and one that the minister has to answer, arises in relation to schedule 2. It removes the strong test and puts an extremely weak one in its place, allowing common ownership at the start of the year of expenditure and then only assessing that common ownership after it has been transferred and used—that is, you take the whole loss and it is only realised once the corporate restructure has taken place. The minister needs to address the question of whether there will be deleterious effects from that and whether it will be used responsibly. Is the government willing to look at that in the future if it does prove to be deleterious?

If that is an interesting area, there is a more interesting area in schedule 3. The government’s proposed amendment allows the present value of expected future expenditures associated with the closing down of a petroleum project to be deductible against the petroleum resource rent tax receipts of this project. That is made as far as the costs are not already covered. The future expenditures that relate to so much of this project as continue to be used under an infrastructure licence will be deductible. If you look at how this is expected to operate, this really is an utterly extraordinary provision. Why? For those closing down costs when the project is terminated, you would expect that the program would have a definite termination. This provision says that the costs from the project are allowed to be offset against revenue until the project ends. The deduction can be claimed now; the ending of the project may just go on forever. We may come to no final point where we can clarify this—there may be no end point to it. It cannot just be off in the never-never, like the ill-considered measures the government brought in with regard to the wine industry, where we had a 25-year term of investment turned into five years and massive structural problems and significant overproduction within the industry as a result.

This particular schedule change needs to be looked at very carefully because, to protect Commonwealth revenue, we need a workable act, not an act so loose and ill considered that it allows almost anything to be done with it—not an act that allows companies to simply extend the life of a thing forever so that they are not forced into the position of having to come up with the goods at the end. It reminds me of a practice in Lebanon during World War II which transferred to Australia and particularly to South Africa. The practice was that, when you built a house, you would build one or maybe two levels of the house but leave bits of iron sticking up into the air—because if you actually finished the house you would have to pay tax on it. In Lebanon, if you leave a bit of iron sticking up into the air, there is no end to the house. This provision is a bit like that. Under this provision, there is no end to the project. This could stink to high heaven. I think it needs to be very closely examined in the Senate.

Schedule 4 runs to a whole series of deductibilities. The key thing is that this is about companies that are involved in renting the petroleum resource. These are major investments, but these companies are being treated as if they were individual taxpayers doing their own self-assessment. That is why the bill says, ‘If you don’t get the self-assessment right, we’ll penalise you and whack you.’ But I would be very surprised if major penalties arise out of this. It is the government’s duty not just to do what they have done since 1996—benchmark and audit—but also to actively govern and make provision for what we have done in the past. The government needs to tax companies properly. It needs to take responsibility for assessing them and taxing them in an effective way.

I am really annoyed by the fact that I am not able to speak for a significantly longer period. It is more than a week to the winter break, but the government has shortened the debate on a series of bills. I was on the speakers list for two bills this morning, but I was not allowed to speak. Here we have a set of bills that does some credible things, but there is not enough time to introduce them and look at them specifically. They need to be looked at very closely in the future. I support the shadow minister’s amendment, because this government lacks a long-term view of Australia’s energy needs and does not really understand that the story is about getting there and back again. It is about making changes to Australia’s infrastructure capacity and trying to ensure that people go out to look for the resources that we need in a responsible way and under the close watch of the government. The government should not abrogate its duties in that regard.

We currently have an absolute minerals boom. Given the provisions in this bill, I ask, as the member for Rankin may well do: what would the government do to give companies a clear run in a minerals and resources bust? I will end my remarks there.

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