Coalition threatens to block Labor’s petroleum resource rent tax reforms

In a letter to the Treasurer, the Opposition has called on Labor to back four new measures making it easier for oil and gas projects to go ahead.

Opposition Treasury spokesman Angus Taylor says Labor needs to do more to make it easier for new oil and gas projects to get off the ground. Picture: NCA NewsWire / Martin Ollman

The Coalition is threatening to sink the Albanese government’s proposed more muscular petroleum resource rent tax unless Labor backs four new measures making it easier for oil and gas projects to go ahead.

In a letter to Jim Chalmers, opposition Treasury spokesman Angus Taylor and resources spokeswoman Susan McDonald slammed Labor’s failure to properly consult with the Coalition before the release of draft PRRT legislation last Thursday.

The new legislation would limit what most experts describe as overly generous tax deductions given to oil and gas companies’ capital expenditures, and raise $2.4bn in extra commonwealth revenue over the budget forward estimates period.

The letter says the Coalition would be prepared to support the PRRT reforms in exchange for measures such as overhauling the Offshore Environment Regulations to “restart offshore gas investment”, and steps to stop environmental regulators using “stop the clock” provisions to “effectively circumvent” statutory timeframes when assessing oil and gas project applications.

While the oil and gas industry has supported the PRRT changes, passage of the legislation through parliament is far from secured.

Labor will need the support of the opposition as the Greens oppose the updated PRRT on the grounds it does not go far enough.

The letter, seen by The Australian and addressed to the Treasurer and copied to Resources Minister Madeleine King, flags that the Coalition is prepared to block passage of the bill. “Securing the future of our gas and resources industries is essential to ensure the next generation can enjoy the same prosperity as the generation before them,” the letter says.

“To that effect, the Coalition is putting to you the following proposals to support the future of the gas industry, and the sustainability of the revenue base this tax is designed to draw from, by supporting progression of new approvals and new infrastructure for gas projects.”

The four proposals detailed in the letter include “reforming the Offshore Environment Regulations under the Offshore Petroleum and Greenhouse Gas Storage Act to provide clarity on consultation requirements and restart offshore gas investment”, and “preventing the abuse of ‘stop the clock’ provisions, which are being used by regulators to effectively circumvent statutory time­frames for approvals under the EPBC (Environment Protection and Biodiversity Conservation) Act and OPGGS Act”.

The Coalition is also asking that all existing projects appli­cations, whether approved or not, be carved out “from any future EPA process so as not to move the goalposts on industry yet again”.

The last proposal is to remove the ban on instruments supporting the extraction of natural gas in section 33 of the Industry Research and Development Act.

“The proposals are long established and have the wide support of business, industry, and policy experts,” the letter says. “With Labor’s support, these measures could support the future of our resources and LNG industry, and Australia’s future economic and fiscal prosperity. The Coalition remains ready to engage with the government in more detail on these proposals.”

The Australian Taxation Office’s recent Corporate Tax Transparency for 2021-22 showed some large oil and gas firms had “moved into a tax payable position … following completion of LNG projects and the recoupment of start-up costs over a number of years … Tax payments from this sector have grown markedly in the 2022-23 income tax year to in excess of $11bn. Some of these companies are now amongst the largest taxpayers in Australia.”

Independent economist Chris Richardson recently described Labor’s proposed changes to slow the speed of deductions as a “Band-Aid”, and said the government should go further.

The Coalition letter says the Treasurer’s office had organised a briefing with Treasury officials on August 3, but “a number of questions remain outstanding”.

These included how much of projected budget gains were new; the ­modelled impact of the changes on new investment; and the ­medium-term cost.