Senator REYNOLDS (Western Australia) (10:18): I thank Senator Georgiou for the opportunity to discuss some important policy matters that are relevant to offshore resource reporting. A number of the ideas raised in the Offshore Petroleum and Greenhouse Gas Storage Amendment (Reporting of Gas Reserves) Bill 2018 are, I think, good and worthy of discussion—for example, increasing access to information and enabling opportunity for public scrutiny and engagement, as two examples. Senator Georgiou may be pleased to hear that the Department of Industry, Innovation and Science is working on a number of initiatives that go to the heart of the matters that he raised—however, as the bill currently stands, the government is not in a position to support it.
As a fellow Western Australian senator, Senator Georgiou would appreciate that the offshore oil and gas industry has already contributed and continues to contribute greatly to the Australian and Western Australian economies, particularly in relation to thousands and thousands of jobs for Western Australians, and also billions of dollars of tax annually. As I said, this includes jobs. It’s a significant contributor to national GDP, regional development, upskilling our workforce and also powering Western Australia to become an energy superpower in the global market.
The point I’d make to Senator Georgiou and this chamber is that the industry’s contribution to our nation comes in so much more than taxes. In Western Australia, the first domestic gas deliveries from the North West Shelf began in 1984, which is, today, Australia’s largest oil and gas resource development. Over 92 per cent of the reserves feeding Australia’s multibillion dollar LNG sector are located off the coast of Western Australia. In 2016-17, sales volumes reached 28.7 billion tonnes generating sales of nearly $13 billion. LNG accounts for 66 per cent of all Western Australian petroleum sales. Austrade confirms that production from this region accounts for one per cent of Australia’s GDP and contributes more than $5 billion a year to state and federal taxes and royalties. So, far from the cries that we hear from many in this country, the LNG sector is certainly paying its fair share of taxes, and it will increase. Its tax revenues will keep increasing as production is coming online.
But, of course, resources in Queensland, South Australia, Victoria and the Northern Territory are also poised to fuel a gas boom around the rest of Australia. As the Senate is well aware, the PRRT review and issues that it relates to are currently with the Treasurer for consideration. The timing of any announcement on further comment will be determined by the Treasurer. As a Western Australian, I hope it will be sooner rather than later. The Senate may also be interested to know that the PRRT has generated over $33 billion in revenue payments since payments were first made in 1989-90—that’s $33 billion of direct revenue payments from that.
Low oil and gas prices, declining production, immature projects globally and recent large investments in new projects are all factors that currently influence the PRRT receipts. I think that is quite reasonable, when companies and their shareholders are investing hundreds of billions of dollars building this infrastructure. It is important and absolutely necessary that these sunk capital costs are taken into consideration in the building phase. The industry is at the bottom of a profit cycle, and this naturally reflects in a profit based tax. Australia has an outstanding reputation as an investment destination for resource sector projects, and it is important for us to not only maintain that reputation but to balance the need to ensure that the Australian community receives a fair return on this development.
This bill raises a number of important policy matters relevant to offshore resources reporting, including increasing access to information and the opportunity for public scrutiny of industry. These are, as I said up-front, good things. The Offshore Petroleum and Greenhouse Gas Storage Act 2006 is not the correct piece of law to advocate tax disclosure for public scrutiny; it is there to provide a legal framework to incentivise exploration and development. The National Offshore Petroleum Titles Administrator, NOPTA, administers titles; it doesn’t administer taxes. That’s why we think this is the wrong piece of legislation to deal with the issues raised by Senator Georgiou. The National Offshore Petroleum Titles Administrator—again, as indicated in their name, are a ‘titles’ administrator—does not have the policy mandate, the legislative basis, the funding nor the expertise to consider or provide protection to taxpayer information. Again, that is not to say that that is not an important issue, but this is the wrong piece of legislation and the wrong organisation to seek that from.
NOPTA would derive limited benefit from the changes proposed in this bill. It already has access to the reserve and resource information to undertake its function as the Offshore Petroleum Titles Administrator. Furthermore, the passing of this bill does not necessarily guarantee the public disclosure of information, as is the intention. A number of other pieces of relevant Commonwealth and state legislation could prevent the provision of this information into the public domain. So, regardless of any changes that may or may not get through to this specific piece of legislation, there are other Commonwealth and state pieces of legislation that could well prevent the disclosure of this information into the public domain.
The bill’s passing may also bring the Offshore Petroleum and Greenhouse Gas Storage Act 2006 into direct conflict with other Commonwealth and state legislation, and it could, unintentionally, undermine the consistency of the laws around taxation and reporting for offshore petroleum. The resource information that is subject to this bill is currently provided to NOPTA in a range of confidential submissions. The ATO has access already to this necessary information, required for them to undertake compliance actions. This bill would not enhance the ATO’s ability to obtain any more information. The passing of this bill also does not necessarily guarantee the public disclosure, as I’ve said, of the requisite information, but it would create significant additional regulatory burden, for little or no public good. Other pieces of relevant Commonwealth and state legislation could, however, be used to prevent the provision of this information in the public domain.
Resource estimates are based on technical interpretations, and it is simply not possible to derive a single number for the value of a resource without considering the way in which that resource can be developed and the specific circumstances of the individual field. Information regarding value from retention leases means very little, because it is highly speculative and it is certainly at that stage unclearly defined. By contrast, information on the production licence value would be likely to be based on data such as concrete sales contracts. This contractual information is highly commercially sensitive and is not collected by NOPTA, because it is simply not needed for their mandate.
Entities would not pay tax on a retention lease, as they would not be producing petroleum products. This taxation would only occur under a production licence, not a retention lease. I think it’s important for those in this chamber to understand the difference. This taxation would only occur under a production licence and not a retention lease. Entity-level reporting on the MRRT and PRRT and corporate taxes paid is already being publicly disclosed under the ATO’s annual report of entity tax information. In addition, many firms also voluntarily disclose additional information on their tax affairs as part of the Tax Transparency Code.
The proposed bill in its current form would, in effect or actually, increase compliance costs and could involve the publication of commercially sensitive information. I certainly know that it is not the intent of Senator Georgiou to do either of those things. The public disclosure of this commercially sensitive information could well—and some would argue would—impact the viability of the industry itself. It would certainly place Australia at a strategic disadvantage to our competitors overseas. It would also likely result in difficulty in attracting and retaining any offshore petroleum investment.
In summary, the bill cannot be supported by the government, for all of those reasons I’ve outlined. However, I commend Senator Georgiou, because a number of the ideas raised in the bill are certainly good and worthy of further discussion. But this bill is not the right bill to amend to get those outcomes. But those on this side applaud you and agree in principle with the ideas of increasing access to information and enabling more public scrutiny of these matters. We also agree that there is some inconsistency in the public reporting of resources currently and there may also be some value in ensuring consistency in reporting requirements. A discussion of this in public is certainly a laudable and very good idea. In closing, I thank Senator Georgiou for providing the Senate with the opportunity to discuss and debate this important industry for our nation and some very important policy matters that should be aired more regularly in this chamber.