Kim Carr (Victoria, Australian Labor Party, Shadow Minister for Innovation, Industry, Science and Research) Share this | Hansard source

I won't be quite so polite on this matter, Senator Georgiou. I think you can perhaps be ready for that proposition. Labor will be opposing the proposed amendments to the Offshore Petroleum and Greenhouse Gas Storage Act contained in the Offshore Petroleum and Greenhouse Gas Storage Amendment (Reporting of Gas Reserves) Bill 2018. You have proposed these amendments without talking to the opposition about them. You may well say that you don't have to, but, if you're expecting us to support them, I think we're entitled to have these matters discussed with us. I've made further inquiries and I've discovered that you haven't actually talked to many people at all about them. It would appear that you've not consulted the industry. It seems to me that, whatever your intention, these measures are essentially a very blunt instrument and show a profound lack of understanding about how the industry actually operates. It has profound ignorance with regard to the way in which our offshore resources industry works, the way our taxation collection system works, the role of the National Offshore Petroleum Titles Administrator and what functions they actually serve. For instance, the bill would require offshore resources companies to provide information that either does not exist or cannot be provided such as information about tax paid on a licence-by-licence basis. This requirement is, frankly, impractical. Any information provided would be, in fact, useless and totally unreliable because income tax is paid on a company level and the petroleum resources rent tax is paid at a project level. The tax is not levied at a licence level. It strikes me that these measures have been drafted for One Nation by people who are financially illiterate. It is a measure that suggests that this is designed to try to gather a headline rather than do anything in a practical way to advance the prospects of this extraordinarily important industry.

I note that the licence fees that this bill says should be made public are already published by the Commonwealth Offshore Petroleum Titles Administrator. The bill also seeks information about royalties and taxes paid on revenue earned by retention leases. A retention lease is not a resource that is producing revenue. In many instances, it might never become economic to develop. It is a lease that seeks to retain an asset while doing work to make development stack up, to allow for the assessment of the viability. Companies do not pay royalties or tax on retention leases, because there is nothing to pay royalties or taxes on.

I notice that the minister has raised some issues recently with regard to a review in Victoria on the question of licences that aren't being developed and has sought to change operations of the industry. That's a perfectly legitimate question to pursue, but it won't be pursued by these types of issues. We saw last week that Senator Canavan has commissioned the National Offshore Petroleum Titles Administrator to review the value of south-eastern petroleum titles to see if some fields not being developed could be brought into production. There are a range of questions that require further discussion by this parliament; however, the purpose of a policy development with regard to understanding is how significant these questions are to the supply of energy for the nation—important for skills formation, important to the prosperity of the whole country and important, of course, for the transparency of company taxation arrangements and to check the revenue basis for the Commonwealth of Australia which allows us to be able to provide the goods and services for the people of this country. However, what you've got here is a proposition that clearly does not relate to the actual operations of the current administrations of the titles as they exist.

This bill would force information to be provided and published by the National Offshore Petroleum Titles Administrator that, as I say, can't be provided. It demonstrates a real failure to understand how the National Offshore Petroleum Titles Administrator does function. It doesn't seem to appreciate what information is currently held by the Taxation Office which, I would have thought, would be a fundamental point if you are putting legislation before this parliament for consideration.

For the record, Labor supports greater transparency of our resources industry and of the payments that ought to be made to governments. I note recent media commentary in November 2015 that PRRT receipts have been declining since that time, and that despite the LNG industry's transformation from a $5 billion concern a decade ago to a $60 billion export powerhouse, according to reports in the media, we now face a situation where we are likely to exceed Qatar as the world's biggest gas exporter by 2020. However, the federal government will only receive from that industry some $800 million in revenues at that time, when of course in Qatar there's some $26.6 billion being received. I'm not saying that we should compare ourselves to Qatar in many other areas, but the point that's being made on the arrangements around the world is that there are legitimate issues to be discussed. That's why Labor's saying that we will legislate to establish a mandatory extractive industries transparency scheme and we will require large Australian extractive companies to disclose payments arising from any activity, including exploration and production. That regime will be on a project-by-project basis. The payments to be disclosed will include taxation on income and production, and profits of companies on royalties and dividends.

Labor does support improvements in the taxation transparency of extractive industries, but this bill is not the right way to go about it. We have to appreciate in relation to company tax and the petroleum resources rent tax that the ATO already publishes comprehensive taxpayer data on an annual basis. The proposals contained in the bill will add a further layer of regulatory reporting to this industry. We don't support a two-tiered system where offshore gas and oil companies are under a different obligation to disclose their payments to government than their onshore counterparts and other onshore resources companies generally. If you're going to have these sorts of changes it is only reasonable that you discuss the questions with the industry itself. After all, it is incredibly important that we are able to sustain supply and investment to this industry and to sustain the jobs, the skills formation, that we need to sustain the prosperity of the nation.

The Australian Petroleum Production and Exploration Association has noted that a significant proportion of the estimated $35 billion in liquefied natural gas exports referenced in this bill are sourced from onshore projects that are not covered by the scope of the bill. These resources are developed under state legislation. Hence, the bill will adopt a distorted, two-tiered system. The association also points out that industry is nearing the end of a significant phase of the investment cycle, with all large gas projects needing many years before investors achieve a positive return. The whole issue of the profitability of the industry needs to be considered in that context.

What we have here is a very poorly considered and poorly developed proposal based on a profound ignorance of how the industry actually operates. We can't possibly support that. We won't be able to support that. There hasn't been the consultation, it would seem, that would actually render a scheme in place that would make sense economically. What we have here is a misunderstanding of the role of the Taxation Office, and of the significant powers the Taxation Office has to ensure that companies are paying the correct amount of tax.

There is not a weak taxation system operating in this country. We have to actually make sure that the powers of the Taxation Office are in fact used or enforced. There are many reasons to think that some corporations should pay more tax than they do at present, but that's an entirely separate question from these heavy-handed blunt instruments that are being deployed in the bill that is before the chamber. At the recent Senate hearings, the ATO indicated the overall level of tax compliance by the corporate sector in Australia was actually relatively high. In addition, the ATO directly engaged with all large entities in the oil and gas industry on a one-on-one basis to ensure the ATO understands the individual circumstances of each company and the likely taxpaying profiles of each of the companies.

The data presented in the second reading speech in relation to these certain companies includes non-oil and non-gas data. It either misunderstands what is represented as oil and gas revenue or deliberately overstates the amounts to make a political point. The vast majority of Origin and ExxonMobil's revenue relates to downstream or utility operations. It has nothing to do with their offshore oil and gas operations—another example of how this bill has been ill conceived. The offshore exploration in Australia is, in fact, at a two-decade low. Aspects of the bill in terms of the reporting of commercially sensitive information—of course, with the inference here being threats to tenures—will further exacerbate challenges with exploration in offshore areas. I say that in the context where the minister has just launched a review on the 'use it or lose it' principle in Bass Strait—a measure, as I say, undertaken with the Victorian government. There are other ways of actually achieving changes to the industry to secure more gas development through conventional means. This measure doesn't do that.

The retention lease provisions in the act are an integral part of the overall offshore acreage management framework, and we have to actually understand how that scheme currently operates. Making changes to the provisions will compromise an acreage management model that has, in fact, served Australia well over many decades. The public release of the reserve or resources data will place explorers and producers at a competitive disadvantage in terms of the commercial negotiations with customers. That, to me, is a matter that ought to be taken very seriously. It will also mean that entities that are unwilling to commit the funds to explore will have a further incentive to sit back and wait for the results of activities undertaken by genuine parties who are actually seeking to develop resources.

Significant amendments to the secrecy provisions pertaining to the tax information will need to be made to other parts of the legislative framework, including the income tax act, the petroleum resources rent tax legislation and various state legislation, to ensure that companies are not operating in a manner inconsistent with other tax provisions. Forecasting future revenue payments from petroleum projects or businesses is impractical, as there are numerous metrics which will need to have an impact on future revenues and cost.

The global Extractive Industries Transparency Initiative, for which Australia is pursuing candidacy, is seeking to address a number of the issues raised in this bill on a voluntary basis, with input from various third-party or civil-society representatives. That process seeks to ensure that information released publicly is meaningful and comprehensive and, at the same time, respects the confidentiality of genuinely commercially sensitive data. The approach adopted by this bill is a crash-through, or rather a crash and burn, approach.

The bill also requires offshore resources companies to provide the National Offshore Petroleum Titles Administrator with estimates about the size and value of resources within varying licensing areas. Offshore resources companies already provide this information to the National Offshore Petroleum Titles Administrator. This information is available to government. In order to develop the information, offshore resources companies have to invest a lot of money in exploration and research. This is genuinely commercially sensitive information. It is critical to raising the funds necessary to actually develop the resource. Releasing it creates an unfair advantage for competitors.

It's a very bad idea to undermine the commercial viability of our extractive industries. This bill is another example where One Nation simply fails to grasp the basic economic realities of the way in which industry and resources policy actually works. It might be the case that the petroleum industry is an easy target, but these are problems that do require a proper and comprehensive assessment by grown-ups. This government used to talk about how they were going to be the grown-ups government. You would have expected that these sorts of measures would be rejected comprehensively by this parliament.

The government has done nothing to address the problems created by the high price of gas in the domestic market. What the government tries to do is jawbone the resources sector rather than deal with the fundamental problems of market failure. I'm particularly concerned about the impact that the high cost of energy is having on manufacturers, particularly the larger manufacturers who are creating such significant numbers of manufacturing jobs. Manufacturers of heavy consumer goods are extraordinarily susceptible to gas and electricity price volatility. That's especially the case in metals, food, plastics, chemicals and cement.

Historically, Australia has had relatively high costs in manufacturing but has enjoyed the benefits of the resources sector and the supply of lower-cost energy. We're not enjoying that at the moment. Those advantages have gone. We simply can't afford to ignore these questions. On the one hand, we cannot ignore the questions of energy security, particularly on the question of dispatchable supply and affordability. That will become the single biggest policy failure in the future of manufacturing in the country. On the other hand, we simply can't have a resources industry that treats workers as badly as it does, too.

The dispute with Esso in Bass Strait has seen a lockout there going on for so long. Esso has sought to take away the entitlements and force a 30 per cent pay cut on its workers, which demonstrates that this is an industry that does need to recognise its social and economic responsibilities as well. That will not happen by adopting these ill-considered measures such as those being advanced by One Nation. This is financial illiteracy; these are measures that are politically irresponsible. These are measures that would cause great harm to the future economic welfare of this nation.

The Labor Party will not be able to support the bill. We recognise the question of the future of resources sector is a matter of political importance, is a matter this parliament should take very seriously. That's why the Labor Party will be announcing future measures in this area. That's why the Labor Party does take these matters so seriously, but we will do it on the basis of proper consultation with the industry and on the basis of ensuring that we can make sure that the prosperity of the industry is able to be sustained.