Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Government in the Senate) Share this | Hansard source

I would like to thank all senators who have taken part in the debate on the Excise Tariff Amendment (Condensate) Bill 2008 and the Excise Legislation Amendment (Condensate) Bill 2008. The bills amend the Excise Tariff Act 1921 and related legislation to apply the crude oil excise regime to condensate produced in the North West Shelf project area and onshore Australia. Condensate is a light crude oil extracted from natural gas. The measure has the effect of removing the current exemption of condensate from the crude oil excise regime and applies to condensates produced after midnight Canberra time on 13 May 2008. This measure allows the Australian community to share more fairly in the benefits from allowing the extraction of non-renewable energy resources located in the North West Shelf project area and onshore.

The exemption of condensate from the crude oil excise was introduced in 1977 to encourage the development of petroleum resources located in the North West Shelf project. Since the commencement of the North West Shelf project, stakeholders in this project have benefited very substantially from the exemption of condensate from crude oil excise. Treasury estimated this tax concession was worth almost $2.7 billion from 2001-02 to 2010-11, even before the price of crude oil rose significantly. As the development of petroleum fields in these regions are now reaching maturity, together with high world prices for non-renewable energy resources, there is no longer a need to retain this generous concession. Since 2001, the North West Shelf project has also benefited from a reduction in the rate of excise applying to crude oil. The concession exempting condensate from the crude oil excise should not remain at a time when the financial integrity of the budget needs to be maintained and at a time of high commodity prices. This measure generates a substantial annual revenue stream to the budget, estimated at $2.5 billion over the period to 2011-12. It makes a significant contribution to the government’s commitment to fiscal discipline.

I now turn to some of the key issues that have been raised in relation to this bill. One of the issues that have been raised is the impact of the measure on gas prices in Western Australia. This measure removes the tax exemption from condensate. It is not a tax on gas and will not put up gas prices. Residential and small business gas consumers in WA account for less than one per cent of Woodside’s revenue. It is not clear on what basis claims are being made to suggest that this group will bear the effects of the excise exemption removal. And to put it beyond doubt there are consumer safeguards that would prevent the costs being passed on to these consumers. In WA a cap on gas prices applies to residential and small business customers. The cap is indexed to the CPI annually. Any increase beyond that is through a review of the WA Office of Energy with the WA energy minister being the final decision maker. So we all know what will happen.