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Thursday, 1 June 2000
Page: 16797

Mr ENTSCH (Parliamentary Secretary to the Minister for Industry, Science and Resources) (9:31 AM) —I move:

That the bill be now read a second time.

The Petroleum (Submerged Lands) Legislation Amendment Bill (No. 2) 2000 proposes the repeal of section 130 of the Petroleum (Submerged Lands) Act 1967. Section 130 was introduced in 1985 to allow the payment of $117.1 million in 1984-85 dollars to Western Australia through an annual schedule of payments. This agreement was entered into after the Western Australian government's gas utility sought to renegotiate domestic gas `take or pay' contracts with the North West Shelf joint venture participants.

The schedule of annual payments was planned to run from 1985-86 to 2004-05. The Commonwealth, with the agreement of Western Australia, intends to discharge the remaining five years of obligations, with a single one-off payment in 1999-2000 of $79,118,990. The payment is fair and equitable to the Commonwealth and Western Australia. It is based on agreed estimates of the future obligations discounted to a current value using discount rates derived from the Commonwealth's yield curve. Repeal of section 130 is necessary for the Commonwealth to make the payment, as the section as originally drafted did not foresee, nor allow, amounts in excess of the Commonwealth's retained gas royalty share to be transferred to Western Australia.

The payment will deliver administrative efficiencies and simplification of petroleum taxation revenue arrangements between the Commonwealth and Western Australia. By replacing the current complicated arrangements, the payment honours the Commonwealth's election commitment to review and simplify the administration of petroleum taxation arrangements. Furthermore, the government is delivering on its tax reform objectives of developing a fairer, more internationally competitive, more efficient and less complex tax system.

The North West Shelf project has evolved from the early stages where royalty from domestic gas was limited by the small market. It is now a mature project with the Commonwealth royalty receipts from LNG, condensate, crude oil, domestic gas and LPG far exceeding the remaining share of royalty to be paid to Western Australia under section 130. I commend the bill and present the explanatory memorandum.

Debate (on motion by Mr Melham) adjourned.