Gas industry rejects ‘leech’ tag over royalty freebies

Poppy Johnston and Jacob Shteyman |

Australia is being urged to charge companies royalties for all of its gas exports.
Australia is being urged to charge companies royalties for all of its gas exports.

Gas producers have hit back at claims they are denying taxpayers billions of dollars by not paying fossil fuel royalties.

Six of the 10 facilities that export liquefied natural gas were not paying royalties to state or federal governments, an Australia Institute report shows.

Charging royalties on the remaining gas could have raised an extra $13.3 billion in revenue over four years, which the report’s author said could have been funnelled into public services such as healthcare and education.

“Many Australians will be shocked to realise that a large portion of the nation’s gas is given away, essentially for free,” co-author and principal advisor at the progressive think tank Mark Ogge said.

A LNG carrier ship in Darwin.
Australia is forgoing billions of dollars by not charging for all gas royalties, analysis shows. (Darren England/AAP PHOTOS)

Australian Energy Producers chief executive Samantha McCulloch said the industry was making a substantial and growing contribution to government revenues and would pay $17.1 billion in taxes, royalties and other charges this financial year.

“To claim that Australia’s gas resources are given away ‘for free’ is a deliberate misrepresentation of a critical sector to Australia’s economy,” Ms McCulloch said.

She accused the Australia Institute of using outdated figures and misrepresenting how the tax and royalty system works to encourage investment in projects, which then result in tax windfalls for the government when they become profitable.

But Mr Ogge said the oil and gas companies should be paying royalties as well as taxes on profits and a failure to do so consistently meant Australians were missing out on a fair return on their resources.

Other countries, such as Norway and Qatar, were extracting far greater returns from their natural resources, with the latter producing only 50 per cent more coal and gas than Australia but taking in six times more government revenue.

ACT Senator David Pocock said the gas industry was taking part in “state-sanctioned daylight robbery”.

“We are seeing a betrayal of Australians and our future by the major parties. We are seeing state capture by the gas industry,” he said.

“They are absolute leeches on this country and this has to end.”

Royalties are effectively the purchase price of a natural resource paid by miners to compensate communities for their depletion.

They are paid to the Queensland government for three gas projects in that state as well as to the Commonwealth government and the Western Australian government via Woodside’s Karratha Gas Plant under a framework set up in the 1970s.

That leaves another six, all of which extract gas from offshore fields in Commonwealth waters and are the responsibility of the federal government.

The industry is subject to taxes – which are distinct from royalties – including income tax and the petroleum resource rent tax levied on profits.

The federal government has moved to cement a place for gas as “an important source of energy through to 2050 and beyond” in its future gas strategy, unveiled in May.

The total value of LNG exports over the past four years is about $265 billion.

Exports of royalty-free gas were thought to be valued at about $149 billion, much of which was produced in Western Australia.