Doug Cameron (NSW, Australian Labor Party) Share this | Hansard source

I rise to speak in favour of these bills, the Excise Legislation Amendment (Condensate) Bill 2008 and a cognate bill. I just find the hyperbole from Senator Cash quite amazing. For her to talk about arrogance and lack of consultation on behalf of the Labor Party after the record of the Liberal government for 11½ years is quite breathtaking. To talk about trust and to talk about an election is also quite breathtaking. The Australian public have put their trust in the Australian Labor Party to run this country for the next three years. These bills are an important component, a key component, of the government’s 2008-09 fiscal position.

The North West Shelf Venture is Australia’s largest resource infrastructure development. It has involved $25 billion in capital expenditure over the last 30 years, and more than $10 billion is being committed or is under consideration. The North West Shelf Venture comprises wholly owned subsidiaries of some of the biggest resource and energy companies in the world: BP, Chevron Corporation, Shell, BHP Petroleum, Mitsui and Mitsubishi, and Woodside Energy operate the project. The North West Shelf gas and oil fields are a natural resource asset of unparalleled riches in Australia’s resource-rich history. The oil and gas resources of the North West Shelf are not private property; it is an asset owned by all Australians, and the wealth it generates should be shared between the venture partners, those who invest in the recovery of the resource and the Australian people. While the energy resource in the North West Shelf project is quite vast, it is not infinite. It is a non-renewable resource and it is in the national interest that the Australian community receive a fair share of the wealth that this project generates.

These bills see a return to the Australian people of $2.5 billion over the forward estimates to the period 2011-12. The bills end the exemption from the crude oil excise regime granted to condensate produced in the North West Shelf production area. Those exemptions were granted by the Fraser government in 1977, so they have had a favourable position since 1977. The exemption was intended to encourage the development of the liquefied natural gas industry in the North West Shelf and thus can be seen as a form of infant industry assistance. Times have changed since 1977 and it is time that a tax anomaly that has grown with the continuation of the exemption from the excise of condensate produced on the North West Shelf is brought to an end. The excise exemption under current circumstances distorts the excise regime on liquid transport fuels. At a time when the government is expected to maintain the integrity of the budget, it is essential that we remove tax anomalies and distortions. Condensate is a form of light crude oil and it is put mainly to the same purpose as other forms of crude oil: the production of petrol. It is a product in every major respect, apart from its origins, identical to other forms of crude oil, yet it is excise exempt. When condensate from the North West Shelf is co-mingled with other forms of crude oil, it is subject to excise. These commodities should be taxed consistently.

The LNG industry in the North West Shelf project area is now mature. It is highly profitable and oil prices are at or near record highs and will remain there. Over the last five years, production in the North West Shelf project area has returned record profits to the venture partners. The excise exemption has served its purpose. It is time to move on and develop modern incentives to assist the development of new projects rather than persist with a crude subsidy in the form of excise exemptions for mature and highly profitable projects. Just how profitable the North West Shelf project area is can be gauged by the profits made by the operator, Woodside Petroleum. Woodside recorded a record year in 2006. Net profits after tax were $1.472 billion, up 29 per cent from 2005. Revenue was $3.81 billion, up 39 per cent. Net operating cash flow was $2.349 billion, up 37 per cent. However, 2007 was not quite as good: net profits were $1.03 billion and revenue was $4.004 billion, up five per cent.

On 27 August this year, after the economics committee concluded its inquiry into these bills, Woodside announced its results for the half year to 30 June 2008. They are astonishing. Revenue was $2.574 billion, up 45 per cent on the first half of 2007. Reported net profit after tax and significant items was $1.016 billion, up 67 per cent on the first half of 2007. Interim dividend was 80c per share, up 63 per cent on the first half of 2007. Earnings per share were up 62 per cent on the first half of 2007.

Oil and gas companies around the world—ExxonMobil, Shell, BP, Chevron—are all making previously unimaginable profits in a climate of constrained oil supply and record or near-record high prices. The industry spent a lot of time in the Senate economics committee inquiry arguing that their profits are substantially offset by increased costs. Their contentions are just not supported by the results. In Woodside’s recent half-yearly director’s report to shareholders, there is no mention of the threats to profitability posed by increased costs. Rather, the report focuses on the likelihood of increasing exploration, increasing capital expenditure, increasing production and a very, very rosy outlook for profits. It is all good news for Woodside Petroleum.

Given that Woodside’s half-yearly report was released nearly 3½ months after these bills were introduced into parliament, one might expect that the removal of the excise exemption would be mentioned in the director’s report, especially if it was going to produce the nonsense that we have heard about what is going to happen to Woodside from the other side of this house. We have a feisty managing director in Don Voelte, but did Don Voelte say that this was going to destroy the company? No, he did not. Did Don Voelte say it would reduce investment? No, he did not. Did Woodside tell the Senate committee one thing and shareholders another? We have to ask ourselves that question, because what was told to the Senate committee is not what was being told to the shareholders. Perhaps the position of Woodside is that which is forecast by independent analysts. Dr Richard Griffiths put in his submission to the committee:

In a situation of steeply rising petroleum prices worldwide, it is unlikely that increased excise will do much to dampen the profitability of oil and gas production.

If senators care to check the profitability of all the North West Shelf Venture partners, they will find that they are in a similar position to Woodside. It is the role of government to pass new laws and change regulation in response to changed circumstances. The circumstances that prevailed in 1977 at the time of the excise exemption for condensate from this project have long since passed.

The argument that there is now some sovereign risk to these major international companies and their operation in Australia is a nonsense. A great deal was made during the course of the committee inquiry into these bills raising this very perception—that there was a sovereign risk to investment in Australia. Sovereign risk is an important element in investment decisions. Political instability, capricious and selective government decision making, oppressive use of state power and other elements of sovereign risk all add up to an environment that discourages investment. But to suggest that these bills create a climate of sovereign risk is absolutely ludicrous.

Australia is a free and democratic country. It observes a constitutional separation of powers. It has predominantly transparent decision- and policy-making processes and it has a very, very responsible federal government. Australia ranks about 21st amongst the natural-gas-producing nations of the world. It would rank at or near the bottom of those countries representing sovereign risk. Look at some of the countries who are producing gas and tell me whether Australia is a bigger sovereign risk than these countries for investment: Russia, the No. 1 producer; Iran, No. 4; Algeria, No. 5; Turkmenistan, No. 9; and Indonesia, No. 10. Is Australia a bigger sovereign risk than these countries? Nobody in their right mind would come here and argue that proposition. Ahead of Australia in gas production are Saudi Arabia, Uzbekistan, Malaysia, China, United Arab Emirates, Qatar, Argentina, Mexico, Egypt, and Trinidad and Tobago. Anyone who would argue that any of these countries represent less sovereign risk than Australia, or anything even comparable to Australia, is not on this planet.

The other fear factor—the Liberal fear factor again—is that domestic gas prices will rise. Again, we have pensioners rolled out for some cheap political points by the opposition. Arguments have been raised that the removal of the condensate excise exemption will lead to higher domestic gas prices in Western Australia. This is plain wrong. According to the proponents of these arguments, domestic gas prices will rise because the removal of the excise exemption will lead to increased administration costs and that these will be passed on to domestic gas consumers. These costs were never quantified by any submitter or any witness to the inquiry. They remain intangible; they remain unknown; they remain this great enigma. The real position, as put to the committee by Treasury, is the following:

Liquid petroleum gas, which is one form of gas that is used—

in Western Australia

… is priced in WA by reference to a world price for liquid petroleum gas—as it is in the rest of Australia. In the case of natural gas supplied to small use customers in Western Australia that is subject to regulation by the Western Australian government under the energy coordination gas tariff regulations

If there is something the other side knows about the new Western Australian government and what they are going to do to gas prices in Western Australia, let them be upfront and put it out here today. There is no argument for any increase to any part of the community because of this government proposal.

Rather than assisting mature and profitable projects, it is time to reassess the incentives government can provide to encourage new projects. Taxation regimes need to change over time to account for changes in economic conditions. The overall taxation regime facing the gas industry will be considered by the Henry review, and these bills create a level playing field ahead of the Henry review. These bills do not create a climate of sovereign risk. I would put my money on Australia ahead of Turkmenistan any day. The industry is liable to pay excise on extraction of a non-renewable resource that should benefit all Australians, and the industry has the capacity to pay. That is the reality.

There is bound to be opposition from anyone who is about to be taxed on something they have previously enjoyed tax free or at concessional rates. That is what this debate is about. The debate is as old as civilisation, with big business saying, ‘We don’t want to pay any more tax.’ It is about the Liberal Party supporting big business over the needs of the community and the real needs and long-term needs of pensioners in this country. The only really strong argument against these bills is that no-one likes to pay tax. I noticed that Senator Abetz in the economics committee said that no-one should pay any tax. I do not know what economic school that comes from, but it is not the economic school of reasonable approaches and economic fairness and equity. No-one in this place would retain any shred of respectability if they argued anything other than that this is a fair and reasonable position to adopt in the interests of this country, in the interests of the nation and in the interests of the community.

If you accept an argument that you can never change the taxation system on a company that has received special consideration from the state from 1977 until now then we are in real trouble. Woodside Petroleum and these giant oil companies that are making massive profits out of our resources can afford to pay fair and reasonable tax to this country to allow this government to meet its budget requirements and to shield this country from the crisis that is happening elsewhere in relation to the international economy.

It is an absolute nonsense to come here and argue on behalf of these major international oil companies at the same time that you are arguing against tax relief for ordinary Australians on the Medicare levy. That is just a nonsense. It typifies what the other side have been about since I have been here. It is about looking after the big end of town. Nothing shows this more than their opposition to a bill that says, ‘Make those massive companies who are making superprofits pay reasonable tax, the same as other oil companies, in the interests of the community.’ How can you come here with a straight face and argue against that on the basis that you are looking after the community? What you want to do on the other side is look after the Lamborghini drivers, look after the Maserati drivers, look after the big end of town. You do not really care about the need to ensure our hospitals are well financed, our education system is looked after and ordinary Australians get a fair go.

These are national resources. They should be taxed in the national interest. We are simply saying bring the taxation on this company into line with the taxation on other oil companies and make sure that they pay their fair share so that we are in a position to make sure that we have a budget that is providing the surplus that shields us from the worst aspects of the international crisis. There is no reasonable argument against this bill. The arguments we have heard are arguments for the big end of town against ordinary Australians, and it is not good enough. (Time expired)