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Thursday, 25 September 2008
Page: 5641


Senator CONROY (Minister for Broadband, Communications and the Digital Economy) (1:01 PM) —In relation to Woodside’s claim that they would have paid less under the resource rent tax, the key point is that the revenue estimates need to be done over the whole life of the project rather than just to this point in time in order to make a meaningful comparison of alternative secondary taxation arrangements applied to the North West Shelf. This is because the revenue profile under the two regimes is very different.

This is a hypothetical proposition, because the North West Shelf project is not subject to the PRRT. That said, under the crude oil excise and offshore petroleum royalty arrangements, the stream of payments commences from when the project begins production or shortly thereafter and ends once the project ceases production. In contrast, the stream of petroleum resource rent tax payments is nil on the commencement of the project to the point in time when all costs, including capital costs, have been deducted against project revenues. Further, undeducted costs in a particular year are carried forward and uplifted at various rates, which has the effect of delaying payments of the PRRT. In other words, it is expected that at this point in time the North West Shelf project may have paid a greater amount under the crude oil excise and offshore petroleum royalty arrangements relative to what it would have paid under the PRRT. This is what Woodside’s figures show.

However, over the remaining life of the North West Shelf project, the project may pay more under the PRRT regime than under the crude oil excise and offshore petroleum royalty arrangements, even if it is assumed that crude oil excise is imposed on production of condensate—that is, the Woodside figures need to take into account the future stream of revenues as well as past revenues. Woodside’s analysis also ignores the value of non-tax concessions received by the project since it started up. It ignored, notably, substantial development and investment allowances, the fact that the state of Western Australia fully funded the construction of the Dampier to Bunbury gas pipeline, and that the state of Western Australia entered into a take away or pay domestic gas contract with the project that meant the state underwrote the project’s cash flow for many years.