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Wednesday, 6 July 2011
Page: 7726

Mr SHORTEN (Maribyrnong—Assistant Treasurer and Minister for Financial Services and Superannuation) (10:51): I move:

That this bill be now read a second time.

This bill amends the Excise Tariff Act 1921 to address uncertainties that have arisen regarding the application of crude oil excise to condensate production. Condensate is a light crude oil extracted from natural gas.

In the 2008-09 budget, the government announced its decision to remove the longstanding crude oil excise exemption that had applied to condensate production, with effect from midnight (by legal time in the Australian Capital Territory), 13 May 2008. The intention of that measure was to increase the return to the Australian community for allowing private interests to extract non-renewable energy resources located in the North West Shelf project and onshore Australia and was estimated to raise $2.5 billion in revenue over the three years to 2011-12. The measures included in this bill, together with those in the Excise Legislation Amendment (Condensate) Bill 2011, clarify uncertainties that have arisen following the removal of the exemption. These uncert­ainties relate to two elements integral to the operation of the crude oil excise regime, namely, the prescription of condensate production areas—which define the areas over which the excise is applied—and the determination of the volume weighted average of realised prices, or the VOLWARE price, which are the prices used to calculate excise liability.

In November 2008, the Commissioner of Taxation prescribed the Rankin Trend as a condensate production area through by-law, with effect from 13 May 2008. The Rankin Trend is located within the North West Shelf project area and encompasses a number of spatially related reservoirs. It was prescribed as a single condensate production area on the basis that the Rankin Trend reservoirs form a single field.

Doubts have subsequently been raised regarding the validity of the Rankin Trend by-law. These doubts relate to the area that the Rankin Trend encompasses, with claims it is of an uncertain size and could be interpreted as being significantly larger than the area intended when it was prescribed.

The Excise Tariff Amendment (Conden­sate) Bill amends the Excise Tariff Act 1921 to address any uncertainty regarding the area encompassed by the Rankin Trend. It does this by introducing a statutory definition of the Rankin Trend within the act as being the area including those reservoirs previously identified as forming a single field. The amendments will also allow for additional reservoirs which commence production to be added to the Rankin Trend condensate production area by regulation in circums­tances where the resource minister is satisfied they form part of the Rankin Trend field, and after considering what effect, if any, this may have on the efficient exploitation of the resource.

These amendments serve only to clarify and confirm the current application of the crude oil excise to condensate production, consistent with the original policy intent, and have no revenue impact.

The measure will take effect from midnight (by legal time in the Australian Capital Territory), 13 May 2008, consistent with the original 2008-09 budget measure.

Full details of the measures in this bill are contained in the combined explanatory memorandum.

Debate adjourned.