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Wednesday, 1 June 1994
Page: 1027


Senator BOSWELL (Leader of the National Party of Australia) (10.10 a.m.) —We are now dealing with the petroleum and offshore minerals legislation cognately. The coalition is opposed to the package of bills that seek to impose an annual user charge on all holders of offshore petroleum and mineral exploration permits, retention leases, production licences and pipeline licences. We are opposing outright three bills dealing with the imposition of these user charges—the Petroleum (Submerged Lands) (User Charge) Bill 1994, the Offshore Minerals (Exploration Licence User Charge) Bill 1993 and the Offshore Minerals (Retention Licence User Charge) Bill 1993. We are not opposing the Petroleum (Submerged Lands) Legislation Amendment Bill 1994, but we have put forward an amendment to remove clauses 6, 9 and 11, which relate to the imposition of the user charges. I believe we have support for that amendment. We are not opposing the Petroleum (Submerged Lands) Fees Bill 1994. Its provision to consolidate four previous acts dealing with fees into a single act is uncontroversial.

  The government's reason for imposing a user charge on offshore exploration permit and leaseholders is to recover from industry approximately half the cost of geophysical work undertaken by the Australian Geological Survey Organisation through its continental margins program. As the continental margins program costs an annual $20 million to run, the government is looking to raise around $10 million from the offshore exploration industry through imposing a user charge on each offshore exploration or retention permit of around $100,000. The charges are set with a ceiling of $200,000 per permit or lease in the case of offshore petroleum exploration, and zero for the offshore minerals industry due to its presently undeveloped state. The petroleum industry would be hit with the full $10 million tax until the offshore minerals industry develops sufficiently to make a contribution, which will be a few years down the track.

  The coalition is utterly opposed to this new tax grab by the government on the productive resources sector, levied at the extremely costly and uncertain stage of petroleum production exploration. If this government is remembered for anything, it will be for the endless capacity to devise legislation with seemingly the sole purpose of driving our industries offshore. Not content with putting mining investments on hold as a result of the uncertainty extended by the Mabo decision, the government now wants to place a major impost on offshore petroleum exploration.

  It has been increasingly difficult over the past few years to attract new investment to Australian industry. These new user charges, if passed, will only serve to provide a greater incentive for Australian exploration companies to divert their exploration funds overseas. These user charges will impact particularly heavily on smaller exploration companies, which often pave the way in frontier offshore exploration. Larger companies would be forced to re-evaluate their permits and leaseholdings in the light of their finite exploration funds being hit with this new tax. Surely it is a universal truth that companies will bear the weight of only so much taxation and other government charges before they look for more favourable business conditions elsewhere.

  As the Australian Petroleum Exploration Association's Executive Director, Dick Wells, stated in the March edition of the Australian Journal of Mining:

Competition for companies' exploration dollars remains intensive in the Australian-Pacific region and worldwide. Fifteen Australian based companies have reported plans to spend up to $177 million overseas, $350 million on exploration and $714 million on development.

Both the petroleum and mineral sectors already pay hefty taxes—in the region of $2.5 billion for the mineral sector and $1.5 billion for the petroleum exploration and production sector. Now the government wants to weigh in with another tax to be borne by the petroleum industry and levied at the most expensive and uncertain stage of production, the exploration stage. Exploration is the most expensive and risky stage in the industry cycle, but also of huge importance to the continual search for new wells. For a typical exploration prospect in Australia an exploration well drilled onshore may cost up to $2 million, while a well drilled offshore could cost five times that amount. The bill for a wildcat exploration well drilled in a previously untested rock structure could run to $10 million or more.

  An up-front user charge on an exploration permit can be absorbed in the same way as a tax, such rent resource, levied at the more certain and profitable production stage is absorbed. This being the case, exploration companies are absolutely the last industry that should be hit with increased taxation.

  The National and Liberal parties are not opposed to work undertaken by the continental margins program and I will discuss that work in a moment. We recognise its public benefit as found in the Richards review but we totally repudiate the notion that the offshore petroleum and minerals industry be hit with these new charges in order to relieve the government of financing half the program.

  I have received representations from the Australian Petroleum Exploration Association as well as other companies seeking support in opposing these bills that deal with the imposition of user charges. I have already stated opposition to these bills which can only act to impede growth in the vital resource area and that opposition is total.

  I turn now briefly to discuss the continental margins program. The government's attempt to abrogate its funding responsibilities to this program is, after all, the reason for most of these bills that we are debating here today. The continental margins program which began operation in 1983 is a marine geological and geophysical research program to undertake strategic offshore surveys and research. The Australian Geological Survey Organisation—AGSO—formerly known as the Bureau of Mineral Resources, is responsible for administering the program and is based in the Department of Primary Industries and Energy. Essentially the continental margins program is a baseline study to define the basins and the margins of the continental mass. Land margins are not well delineated where the continental shelf drops off, as shown by the discovery three months ago of previously undetected land masses in south west Tasmania. This discovery extends the area that Australia can claim as our sovereign territory and has foreign affairs and treaty implications and should therefore be the responsibility of the federal government.

  In the case of south-west Tasmania, which I have just described, I do not suppose there will be any need for treaties and the like. However, this discovery adds to our sum total knowledge of our continent and therefore clearly has public benefit. A clear recognition of the public benefit provided by the continental margins program was contained in the government initiated Richards review of the administration arrangements of AGSO. One of the key recommendations of the Richards review handed down in May last year was that AGSO's work be recognised as pre-competitive, long term and of wide benefit and, as such, a public good.

  The report also revealed that the federal government is a major client of AGSO research, in particular the Department of the Environment, Sport and Territories, the Department of Defence, the Department of Foreign Affairs and Trade and the Department of Primary Industries and Energy. The research work of AGSO through its continental margins program has a clear public benefit and, as such, should be maintained.

  However, the bill for the program should not be laid at the door of the offshore exploration petroleum and minerals industry. We strongly refute the resources minister's argument in his second reading speech on this package of bills when he proclaimed that despite the fact that the Richard's review decreed that geoscientific work undertaken by the continental margins program should be fully funded by the government, the government believed that where there are community benefits, the community should pay; where the industry benefits, the industry should pay; and where benefits are shared, costs should be shared.

  We reject utterly the notion that exploration companies benefit from the research undertaken by the continental margins program and, as such, should bear half the cost. In representations I have received, the exploration companies have all stated that the data collected by the continental margins program is not of a sufficiently high standard for their needs. It is not industry specific and it is of negligible value to them. This is highlighted by the fact that the continental margins program has generated only about $5 million worth of sales in six years when the program costs an annual $20 million to run.

  All exploration companies undertake their own costly exploration research and surveys which are designed specifically for their exploration needs. Quite rightly, these companies are baulking at being forced to pay for research that they do not need, want or use. The continental margins program annual running cost of $20 million does not represent a great drain on the federal coffers, particularly to support a program which has an established national benefit. However, $10 million is a great burden to place on an industry in a very uncertain exploration stage, which is so necessary for continued development but so costly and fraught with uncertain outcomes for the industry. As my colleague Peter McGauran stated in the other place, the wealth created by the petroleum and mineral industry underpins the quality of the Australian way of life in so many diverse areas.

  This government should be doing all it can to encourage industry, investment and exploration. Absolutely the last thing it should be doing is imposing ill-conceived new taxes that send completely the wrong signals to these wealth creating companies and will act to drive even more of them offshore. The coalition opposes these bills that seek to impose user charges on all offshore exploration permit holders and leaseholders.