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Address to the South Australian Chamber of Mines & Energy [SACOM]



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Hon Ian Macfarlane MP

Shadow Minister for Energy and Resources

SACOME

26 July 2013

**Check against delivery**

Thank you for the welcome and for the opportunity to speak to you today

about a subject of vital importance to the national economy and therefore

national policy.

The energy and resources sector is the lynchpin our economy and therefore

the policy framework for the sector deserves to be at the heart of the

Government.

Despite the latest instability within the Government, we know that we are in

the final weeks before Australians head to the ballot box.

Therefore, I’d like to take this opportunity to speak with you today about the

Coalition’s plan for energy and resources.

I can assure you that the Coalition recognises how essential this sector is to our

national economy and that we have a plan to ensure the energy and resources

sector can grow and continue to contribute as one of the central pillars of the

national economy.

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Energy and resources overview

Australia has long been an energy exporting powerhouse - in fact we are a

global energy superpower.

It’s now the LNG industry that’s carrying the heavy load, with the Bureau of

Resources and Energy Economics predicting earlier this year that export

earnings from LNG will increase from $12 billion in 2011-12 to $61 billion in

2017-18.

But paper statistics aren’t a guarantee about long-term prosperity and

Australia can’t afford to rest on our record.

The potentially disastrous error comes from assuming those figures will remain

strong regardless of what federal policy framework is in place.

And BREE has well and truly rung the warning bell that future investment can’t

be taken for granted.

Its latest statement said that in the last twelve months around $150 billion in

projects have been delayed or cancelled.

Of most concern is the fact that BREE’s forecasts show that the number of high

value projects considered likely to go ahead is set to decline in the next few

years.

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The Coalition has been warning the Government couldn’t take future

investments for granted.

While Australia’s energy and resource sector is robust, it’s not immune to the

impacts of bad policy making and it can’t continue to bear the brunt of a

Government that sees it as a quick source of cash.

There’s a long lead time for projects in the energy and resources sector, given

their size and expense.

And as the BREE report has laid bare, it’s the next round of investment

decisions that Australia should worry about - the ones for projects that will

come online in the next decade.

This is not to talk down the value and diversity of Australia’s natural resources,

but it’s an urgent reminder that Government policy should not hinder the

process of extracting those resources, or burden the industry with new costs.

The best return to the Australian people comes via a healthy investment

environment, where mining and energy companies want to spend the time,

and most importantly the money, on extracting resources.

There can be no return to Australians on mineral and energy assets that stay

locked up in the ground.

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Government has a responsibility to encourage investments which create job

opportunities and economic growth in towns and communities and export

wealth for the nation.

Public attitudes to the sector

Even against the backdrop of incessant class warfare rhetoric from their

Federal Government, Australians are in no doubt as to the importance of the

energy and resources sector.

A Newspoll published in The Australian newspaper earlier this year showed

that 96 per cent of Australians recognise the importance of the mining sector

to the national economy.

While it would be incorrect to assume the goodwill of Australians can be taken

for granted, this result is clear evidence that Australians are fair-minded when

it comes to considering the value of the resources industry.

They don’t want to see one of the country’s most important sectors attacked

and pilloried, but equally they don’t want to see the industry ride roughshod

over their views or the needs of individual communities.

Therefore, the mining and energy sector has a great opportunity to continue to

build relationships with the broader community.

The energy and resources sector can’t afford to rest on its laurels in engaging

local communities about various projects.

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A case in point relates to the circumstances that apply to the ongoing

development of the coal seam gas industry.

While that industry is well established in Queensland, it has faced some

pockets of push-back and is finding far more resistance in NSW.

It’s now at the point where the development of coal seam gas in NSW is at a

standstill, leading to the increasingly well-publicised reality that NSW faces the

prospect of running out of gas in 2016.

In the absence of full engagement with community members in the past, other

groups - with various motives - have been given the opportunity to fill the

space with their own arguments.

And these groups don’t always have the best interests of the broader

community at heart.

Of course there are legitimate questions raised by landholders and farmers,

particularly in relation to ensuring water supplies are protected and that the

long-term productivity of the land is safeguarded.

However alongside these interested parties, Greens and anti-development

activists have become increasingly vocal against the coal seam gas industry, to

the point where much of the information that Australian landowners and

people in nearby towns and communities have heard has come from these

activists.

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The challenges confronting the coal seam gas industry provide a case study for

the broader energy and resources sector about the risks of falling foul of

misinformation campaigns.

The challenge for the entire energy, resources and minerals industry will be to

present individuals and communities with the full range facts and to face up

the hard questions when asked.

Coalition’s plan for Energy and Resources

While the energy and resource sector is strong and robust, it is essential that

the proper policy framework is in place to ensure planned investments come

to fruition.

There are three cornerstone principles of our energy and resources policy:

 Scrapping the carbon tax

 Scrapping the Minerals Resource Rent Tax (MRRT)

 Establishing a one-stop-shop for project approvals to cut back on red

tape and green tape which can delay major projects for months or even

years.

Both the carbon tax and the Minerals Resource Rent Tax are a drag on the

Australian energy sector and make investments less attractive than in other

countries where these taxes don’t apply.

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That’s why the Coalition believes the carbon tax and the mining tax should be

repealed as a priority.

The imposition of these taxes has also risked Australia’s sovereign risk profile,

because the Government keeps changing the rules for investment.

If the investment climate is uncertain or bureaucratic hurdles are too high and

costs too prohibitive, investors are free to look elsewhere.

Australia must also face up to the reality that it may price itself out of the

market for energy projects, if higher wages aren’t matched with results.

The Coalition supports strong and fair wages for all resources projects, but if

Australia is to be competitive our higher wage costs must be accompanied by

better productivity.

If elected whenever the election is held, a Coalition Government would

prioritise strategies to make Australian energy and resources projects more

internationally competitive, including the return of a strong cop to the beat in

the form of the Australian Building and Construction Commission.

The Coalition wants to restore proper consultation and policy making

processes to all of Government, including the energy and resources portfolio,

where bad policy making can have particularly far-reaching consequences.

The Coalition will also consult with industry about the current conditions and

future planning for investment, jobs and growth.

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The bottom line is that the Government should not be a barrier to investment

and growth in the energy and resource sector.

The Coalition understands and respects the contribution the energy and

resources sector makes to the national economy, as well as in regional towns

and communities.

The Coalition also wants to work with the State Governments to remove much

of the red and green tape that bogs down project applications and

development.

A Coalition Government will establish a one-stop-shop for environmental

approvals and dramatically simplify the approvals process across federal, state

and local jurisdictions, while maintaining environmental standards.

The one-stop-shop will set high standards, make swift decisions and deliver

certain outcomes.

State and territory governments will be given the opportunity to act as a one-stop-shop. This would include:

 Creation of a single approvals process for environmental assessment and

approvals under the Environmental Protection and Biodiversity

Conservation Act via the state system, as part of long-term agreements

with each state and territory.

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 Development of the ability and incentive for Local Government to be

part of the one-stop-shop single assessment process.

 Creation of a single lodgement and documentation process. The single

documentation and assessment process could also be expanded to make

a single entry point and one-stop-shop for all Government approvals

across portfolios.

What’s more, the one-stop-shop process will benchmark states against each

other.

So for example, here in South Australia, the approvals process may only take 8

months.

Contrast that with New South Wales, where there is feedback that the

approvals process for projects can take three or four years.

The beauty of the one-stop-shop system is that is shows up these variations,

and each state will have to be answerable about the timeframe for their

approvals process.

A Coalition Government wouldn’t be passing the buck on federal

responsibilities. Rather, the one-stop-shop is a way to inject some much-needed common sense into the approvals process.

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There’s too much duplication in this area and that has the effect of driving up

costs and causing extensive delays, in some cases adding months and years to

project development.

The Coalition’s objective is to eliminate the excessive paperwork and

bureaucracy and allow projects to proceed in a more timely manner, without

compromising environmental objectives.

Flow through-shares and PRRT

The most important way a Federal Coalition Government can support the

energy and resources sector and encourage future growth is to put in place

policies that encourage investment and investor certainty.

The Coalition will give consideration to a flow-through share scheme to

encourage investment in the smaller mining companies that are so important

to the overall vitality of the mining sector.

However, the viability of this scheme will depend on budget

constraints. Therefore, no firm commitment can be made to this proposal, but

a Coalition Government will commit to further consultation with the industry

on a flow-through shares scheme.

I know many of you are also interested in how the PRRT will fit into the

Coalition’s policy.

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The PRRT is an existing and long-standing tax which was introduced after

lengthy consultation with industry, unlike the MRRT which is a new tax that

was forced on industry with no consultation.

The PRRT dates back to the Hawke Government years. It began in 1987, was

applied to the Bass Strait Project in 1990 and from 1 July 2012, it applies to

onshore petroleum projects and the North West Shelf project but not the Joint

Petroleum Development Area in the Timor Sea.

The Coalition does not resile from our commitment to repeal the MRRT - a

destructive tax which damages Australian’s sovereign risk profile.

The abolition of MRRT does not automatically extend to the PRRT.

Unlike the Rudd/Gillard Governments, we are open, upfront and transparent

and if elected to Government will consult extensively with industry about the

ongoing operation of the PRRT.

Conclusion

The Coalition believes that the energy and resources sector is a fundamental

building block for the Australian economy.

We want to see policies in place that will allow this sector to grow and further

consolidate its position.

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An important part of this growth will be to further build on the international

trade relationships that have provided reliable markets for Australian

resources, and to encourage future investment in the sector.

Australia is an exporting nation and our most important exports continue to

come from the energy and resources sector.

It’s essential that we nurture the right environment to build on our resources

export potential, not take it for granted.

(ends)