Greens’ new war with Labor over taxing gas industry

The Greens are gearing up to oppose Labor’s $2.4bn tax increase on the gas industry after releasing documents showing Treasury advocated for proposals that would generate more revenue from the sector.

Greens Senator Nick McKim is opposed to the government’s reforms of the PRRT.

The Greens are gearing up to oppose Labor’s $2.4bn tax increase on the gas industry after releasing documents showing Treasury advocated for proposals that would generate more revenue from the sector.

Opening up a fresh attack on the Albanese government, Greens senator Nick McKim said it was “abundantly clear how much power the gas cartel wields over a compliant Labor Party” and accused Jim Chalmers of adopting the weakest possible reform to the petroleum resource rent tax.

The government’s proposal – a new 90 per cent cap on the deductions that can be offset under the PRRT – has been inked in the budget forecasts but legislation is needed to pass parliament for it to be implemented.

With parliament resuming on Monday, the Greens will release documents obtained through the Senate showing Treasury preferred a different reform to the PRRT which would tax gas at a later point in the production process when the value of the resource is higher.

The Longford gas plant in Gippsland. The Greens are objecting to the model Labor is using to tax the industry. Picture: Stuart McEvoy/The Australian

The “netback” method was opposed by industry, with the government adopting Treasury’s less preferred model of preventing the LNG industry from offsetting its tax liabilities.

Even then, the government took the higher end of Treasury’s proposal to cap deductions by between 80 and 90 per cent.

“Treasury considers that the netback only approach represents the most appropriate option for minimising impacts to investment while also ensuring the community receives a fairer return from the exploitation of its gas resources,” Treasury said in a March 2023 industry roundtable document.

Labor’s proposal has been endorsed by the Australian Petroleum Production and Exploration Association, the peak body for the oil and gas sector.

Senator McKim said Labor’s policy was “simply not good enough”, signalling Labor would require the support of Peter Dutton to pass the reform.

“These documents clearly show that the proposal now before parliament was an afterthought, designed by the gas industry and delivered by a Labor government too weak to resist,” Senator McKim said.

“Under the model the government has been directed to choose, the higher the gas price the less revenue Australians will receive for a resource they own.”

It is uncertain whether the Coalition will support Labor’s changes to the PRRT.

The Opposition Leader told The Australian in May he would only consider supporting the reform if the government reduces red tape and approval timelines for gas ­projects.

“I think there is a reasonable ask of the government to give something back to the industry by way of reduced regulation, by way of condensed timelines for approvals, and that will be part of our discussion with the government in relation to this bill,” Mr Dutton said.

The PRRT debate highlights a growing rift between Labor and the Greens, after the two parties worked constructively in the first year of the Albanese government to pass landmark climate change reforms, including the 45 per cent emissions reduction target.

The government will this week reintroduce legislation to set up the $10bn Housing Australia Future Fund, which has been blocked in the Senate by the Coalition and the Greens.

On Friday, Anthony Albanese warned the government would consider an early election if the Greens continued to block the housing legislation.

“To be blocking this is quite absurd,” Mr Albanese said.