Why a 25 per cent tax on gas exports would hurt everyday Australians

Slapping a tax on gas exports could ultimately hurt Australians already copping soaring power bills, with the industry warning it will discourage the investment necessary to boost the supply of electricity.

The Greens and independent senator David Pocock argue a 25 per cent tax on liquefied natural gas exports would raise $17 billion a year — that could be used to fund cost of living relief.

They used a Senate hearing on Wednesday to grill representatives from Shell, ConocoPhillips, Origin Energy and the Queensland Resources Council.

The gas industry argued a new tax on LNG exports would discourage capital investment, that would be essential for addressing the cost-of-living crisis when it came to electricity prices.

Left-wing senators pushing for a gas export tax argue the existing petroleum resource rent tax, levied on 40 per cent of taxable profits at the exploration and extraction stage, doesn’t raise enough revenue.

If they had their way, a gas tax would be introduced as the Federal Government proceeded with plans to force gas exporters to reserve 15 to 20 per cent of the LNG they extracted for domestic use, from 2027.

Gas is regarded as a transition fuel as Australia switches from coal-fired power to renewable energy under Labor’s plan to slash carbon emissions by 62-70 per cent by 2035.

The trouble is introducing a tax on Australia’s third biggest export — after iron ore and coal — based on revenue would discourage the necessary investment in exploration, extraction and production needed for natural gas supply.

This supply will be increasingly needed for the domestic market, with consumers reeling from a 37 per cent annual increase in electricity bills during a time of coal power plants being decommissioned, Commonwealth power rebates ending and renewable energy projects requiring massive investment in new transmission lines.

Queensland Resources Council chief executive Janette Hewson made this point on Wednesday before a Greens-chaired Senate committee examining the idea.

“I’m really here to talk about what a potential 25 per cent tax impact would have on investment and why I think the economic contributions that the industry currently provides for the benefit of all Australians, and particularly in a Queensland setting, would be at risk,” she said.

“I’m not sure of anywhere in the world where an increase in taxation has actually brought on increased investment.

“If you have a suggestion, I would love to consider . . .”

Greens senator Steph Hodgins-May interjected despite chairing the committee.

“I don’t know of any other country that gives away their gas,” she said.

Shell Australia’s executive vice-president of integrated gas Cecile Wake argued the UK’s windfall tax — known as the energy profits levy — had discouraged investment.

“The facts are the cumulative effects of windfall taxes in the UK has been immeasurable contraction in UK Continental Shelf investment activity,” she said.

“I put it to you that it was not in structural decline, that there was significant capital investment happening in the UK Continental Shelf at the time and indeed Shell was one of the companies that was investing at scale at the time that the windfall tax was introduced.

“It is now materially less attractive for discretionary investment.”

Tim O’Grady, Origin Energy’s general manager of government engagement, said while his company would absorb the costs of a gas export tax, it would be bad for investment.

“We really need the tax system to be stable and to encourage investment in new gas resources to supply the domestic market and our international trading partners as well,” he said.

Origin, an electricity and gas retailer, jointly owns Australia Pacific LNG with ConocoPhillips, which operates the Curtis Island LNG plant near Gladstone in central Queensland.

Prime Minister Anthony Albanese and West Australian Labor Premier Roger Cook are apparently opposed to the idea of a gas tax.

So is the Coalition, with the exception of Perth-based industry frontbencher Andrew Hastie.

At least there’s commonsense in the major parties who will most likely be campaigning on electricity prices at the next election.