Labor’s PRRT deductions cap clears Parliament – but not for free
Federal Labor and Greens will give up on key environmental and gas industry commitments under an eleventh-hour petroleum resources rent tax deal.
The government has struck a deal with the Greens that will allow its proposed 90 per cent cap on PRRT deductions to clear parliament.
Gas companies are expected to pay an additional $2.4 billion over the next five years under the revised tax which has long been criticised as largely toothless.
The Greens had pushed for an 80 per cent deductions cap, meaning companies would be required to pay taxes equal to at least 20 per cent of gas project revenues.
Labor’s 90 per cent cap was broadly supported by gas industry representatives, including a warm endorsement from Woodside, Australia’s biggest gas company.
In exchange for the Greens' support, Labor has agreed to hold off on its fast-tracked approvals process for new offshore gas projects.
The approvals policy would have granted Resources Minister Madeleine King the authority to speed up consultations on new gas projects.
Australian Energy Producers CEO Samantha McCulloch criticised Labor’s capitulation, claiming that costly delays were the result of a “broken offshore approvals process.”
“Regulatory certainty and timely environmental approvals are needed to address delays facing critical new gas supply projects and to restore investment confidence,” said McCulloch.
“It is disappointing that the Government has deferred the important offshore regulatory reforms, which the Future Gas Strategy released last week identified as an ‘immediate action’.”
Major gas projects, including Woodside’s $16.5 billion Scarborough Energy Project and Santos’ $5.8 billion Barossa gas project have recently been fettered by prolonged and costly community consultations, raising the temperature on calls for a streamlined process.
Greens leader Adam Bandt celebrated the deal, calling the loss of the fast-track approvals were a “big blow” to the coal and gas industry.
“We will continue to fight Labor’s push for more coal and gas all the way to the election and beyond. The Greens have stopped Labor’s dodgy attempt to fast-track new gas mines, but their bid to bypass environmental protections shows Labor will stop at nothing to have more coal and gas past 2050,” Bandt said in a statement.
A Senate committee recently voted to endorse the 90 per cent deductions cap, noting that it struck an appropriate balance between bringing forward tax revenues and promoting a competitive resources sector.
“The committee welcomes that this reform means the offshore LNG industry will pay more tax sooner and provide industry certainty to ensure Australia remains a reliable energy supplier and investment partner,” the report said.
“The committee shares the view of inquiry participants that the bringing forward of revenue that would otherwise be years away as a result of this bill is very welcomed.”
However, several committee members claimed the deductions cap would not go far enough in securing appropriate tax revenues.
In a dissenting opinion attached to the final report of the Senate committee, Senator David Pocock expressed concern that a number of the country’s largest gas producers – Exxon, Shell, INPEX, and Chevron – did not pay a “single cent” in PRRT on a combined income of $297 billion over the 9 years leading to 2021-22.
“And for those companies paying PRRT, the actual revenue take remains staggeringly small. In 2022-23, PRRT revenue of $2.4 billion was less than the beer excise ($2.6 billion) and less than half the HELP/SFSS revenue ($4.9 billion),” he said.
McCulloch has previously defended the gas industry’s tax contribution, noting that PRRT is only one among several avenues, including company tax, royalties, and excise.
On Thursday, she wrote, “The extra revenue from the PRRT changes underscores the growing contribution by the oil and gas industry to governments, with over $17 billion expected to flow directly to state and federal Budgets from taxes and royalties this financial year.”
