Morrison’s gas cartel to plunder Australia indefinitely

The Australia Institute has a new report out that should be the headline around the country but barely gets a mention:

Australia’s giant offshore gasfields are paying almost no royalties, create few jobs and are a large and rising source of greenhouse gases, according to a new report from the Australia Institute.

The “Gas-fired robbery” report, released Monday, finds Western Australia receives only a tiny fraction of its revenue from an industry that generated $27bn in WA exports last year.

The report comes just days after a WA heatwave matched Australia’s hottest ever reliably recorded temperature of 50.7C and reportedly caused an outage at a nearby gas plant.

The $430m that ended up in the state’s coffers was a mere 1% of budget revenue, or half as much as it collected from motor vehicle registrations. By contrast, the iron-ore industry tipped $7.8bn into the 2019/20 budget, more than 18 times as much as gas.

This should surprise nobody. Last year, Shell declared it wouldn’t pay a brass razoo in tax forever:

Dutch giant Shell forecasts it will never pay Australia for oil and gas extracted for the Gorgon and Prelude LNG projects that it can sell for up to almost $4 billion a year.

Shell owns 25 per cent of the Chevron-operated $US54 billion Gorgon LNG project and 67.5 per cent of its Prelude floating LNG project that are both liable to pay Petroleum Resources Rent Tax.

Shell’s outlook of no PRRT payments is recorded in notes to the 2020 financial accounts for the global group released last week.

The note may not be apparent to a layperson, but the meaning is plain to an accountant: free gas forever from Australia.

What is the industry response? Playing the Joker card:

…Claire Wilkinson, director of the WA division of the Australian Petroleum Production and Exploration Association, said: “Western Australians know that natural gas creates local jobs and is essential to our community, no matter what this east coast outfit [the Australia Institute] suggests.

There are bugger all jobs in these operations. They were all temporary in the construction phase lasting a few years and are long gone.

Most have break-even costs under $10 and are now shipping roughly half the gas at $30 plus to Asia. We are talking about a robbery in the realms of tens of billions of unpaid tax while much of gas goes to China to build weapons to threaten Australian freedom, keeps the AUD high hollowing out other tradeables, and trashes carbon output targets with failed CCS.

The east coast gas cartel is even worse where the failure to install WA’s domestic reservation regime has added skyrocketing utility bills rendering the net economic contribution of the gas projects negative for living standards.

In all of my days studying the history of costs and benefits of extractive industries, Morrison’s gas cartel is the worst behaved I have ever seen.

It is the stuff of failed states.

Houses and Holes
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Comments

  1. Where is Albo? This is cover for corporate minimum taxes.

    Since he doesn’t want a MTR for billionaires and multi millionaires

    • Albo is exactly #MeToo with Morrison, that’s where he is. It’s not easy tracking precisely in Morrison’s footsteps for nigh on three years, terrifically difficult and dangerous work, let’s hope Morrison gives him a gong in the Queen’s Birthday honours.

      • Strange EconomicsMEMBER

        Albo is still scarred from the “mining tax” attempt.
        A few million in anti-Labour advertisements would scare him off.
        Once if in power he could quietly raise the PRRT and fund things.

    • Where is Albo? This is cover for corporate minimum taxes.

      The energy companies have quotas for men in dresses, and compulsory indigenous sensitivity programs for newly inducted employees.

      The ALP has covered its mandate.

  2. Through the lens of ScoMo government, they are heroes for allowing these companies to pay bugger-all tax here, whilst the PAYG person gets hit with the bulk of taxes. I really wish our WA state Govt, could do something, like stop their LNG operating licence, the number of people affected would be minimal, and if they had to pay more they surely would, as they know they are on a good money making wicket.

    • True Aussies don’t make most of their money through PAYG.
      True LNP believers and Hillsongers are all small business dudes, trading cash payments for jobs, then making massive untaxed profits on their houses and investment flats. The wealthy stick it in a trust.
      PAYG is for the suckers.

      • The wealthy stick it in a trust.

        Oh, right.

        Tell me more about what you know about trusts……

  3. In all of my days studying the history of costs and benefits of extractive industries, Morrison’s gas cartel is the worst behaved I have ever seen.

    It is the stuff of failed states

    Imagine if you will, a capable opposition, that was able to express a message to the Australian people…

    A message that your finite resources, a resource which is a circumstantial endowment, a gift and not by any means of exertion or ingenuity….

    A resource which at proper pricing, is costing the citizens of this country $x per day…

    And this message is day, after day, after day, after day, after day………

    It’d be an opposition in tune with what the people want, as presenting themselves as a viable alternative government..

    Imagine…

    Our alternative are the type which argues milk is racist because its White.

    It starts with a new alternative.

    • Display NameMEMBER

      Imagine party that actually represented their constituents. Its a quaint 20th century idea…

      • Imagine party that actually represented their constituents. Its a quaint 20th century idea…

        In a perverse way, the LNP are probably closer to that than many would like to admit.

        • Strange EconomicsMEMBER

          They represent house owners, retirees and high wealth dudes heavily invested in BHP and gas companies and real estate. They are true to their base. Not many PAYGers there.

          • They represent house owners, retirees and high wealth dudes heavily invested in BHP and gas companies and real estate. They are true to their base. Not many PAYGers there.

            Yeah about that….

            Stage 2 (2020–21 onwards): …. changing the 32.5% tax bracket from $37,001–$90,000 to $45,001–$120,000 and raising the lower threshold for the 37% tax bracket from $90,001 to $120,001
            Stage 3 (2024–25 onwards): Changing the 32.5% tax rate to 30%, raising the upper threshold for the 30% tax bracket from $120,000 to $200,000, removing the 37% tax bracket and raising the 45% lower threshold from $180,000 to $200,000

            I reckon there’s plenty for the PAYG worker…..

          • Stage 2 (2020–21 onwards): …. changing the 32.5% tax bracket from $37,001–$90,000 to $45,001–$120,000 and raising the lower threshold for the 37% tax bracket from $90,001 to $120,001
            Stage 3 (2024–25 onwards): Changing the 32.5% tax rate to 30%, raising the upper threshold for the 30% tax bracket from $120,000 to $200,000, removing the 37% tax bracket and raising the 45% lower threshold from $180,000 to $200,000

            The obvious next step in the ongoing progression to a flat income tax will be to try and remove the 45% rate completely.

            These tax reductions are all aimed at high income earners. The benefits to low income earners are tiny. They _could_ cut taxes in ways that primarily (even solely) benefit lower earners, but that’s not really the point, is it ?

          • The obvious next step in the ongoing progression to a flat income tax will be to try and remove the 45% rate completely.

            OK. High is good for the sake of being high? High(er)?

            These tax reductions are all aimed at high income earners.

            They start at $45,000p.a., and go to $200k. Virtually everyone with a fulltime PAYG income, and most small business owners, falls within this bracket.

            So pretty much everyone who works for a living.

            The benefits to low income earners are tiny. They _could_ cut taxes in ways that primarily (even solely) benefit lower earners,

            They pay little enough as it is, there’s no need to pay less.

            but that’s not really the point, is it ?

            No, it’s a PAYG cut to people who generally work fulltime, and provide for themselves and their families.
            That’s how this works, you keep your own money.
            At 30%, (or more) you’re giving enough.

            Find another way, such as tax on oil and gas companies, tobin taxes and (unavoidable) land taxes.

            But the era of looking at PAYG earners as a limitless source of funds.. of which the likes the Greens and the ALP can make limitless, ill-thought out demands from, yeah I think that’s over

          • TBH, we seemed so much happier and better off as a nation when we paid more income tax. Tipping the scales so far towards individual discretion about how our money is used is ruining our nation.

          • OK. High is good for the sake of being high? High(er)?

            No.

            They start at $45,000p.a., and go to $200k. Virtually everyone with a fulltime PAYG income, and most small business owners, falls within this bracket.
            So pretty much everyone who works for a living.

            Median income is about $60k. Top 10% kicks in at about $100k. Top 5% at about 150k.

            They pay little enough as it is, there’s no need to pay less.

            The point here is that the tax cuts are aimed at and deliver the biggest benefits to the minority of high income earners.

            Find another way, such as tax on oil and gas companies, tobin taxes and (unavoidable) land taxes.

            Sounds like something the Greens might do.

            But the era of looking at PAYG earners as a limitless source of funds.. of which the likes the Greens and the ALP can make limitless, ill-thought out demands from, yeah I think that’s over


            LOL. Yes, the party that’s hardly been in Government for a quarter century and never been in Government. Obviously they’re the problem with “limitless, ill-thought out demands” and “looking at PAYG earners as a limitless source of funds”. As opposed to the party that’s actually been in Government and would probably slit their wrists before considering any serious taxation of wealth.

          • TBH, we seemed so much happier and better off as a nation when we paid more income tax.

            Well, one of the primary purposes of taxation is to reduce inequality – requiring high taxes on high income earners (and wealth) – and lower inequality typically correlates to higher happiness.

            This sort of taxation also encourages those with the means to invest in productive spending and investments, rather than hoarding, which drives higher incomes and living standards.

          • “OK. High is good for the sake of being high? High(er)?”

            No.

            Let’s return to this…

            “They start at $45,000p.a., and go to $200k. Virtually everyone with a fulltime PAYG income, and most small business owners, falls within this bracket.
            So pretty much everyone who works for a living.”

            Median income is about $60k.

            Which includes all P/T workers. AWOTE is $1,737.10 per week, or about $45.10 per hour

            That puts the average fulltime work on $90,330. So what was the start of the 2nd highest (39%) tier up until two financial years ago.

            Top 10% kicks in at about $100k. Top 5% at about 150k.

            And? Their tiers are applied at $45k, up to $120k… so it includes everyone, it’s not restricted to high income earners… as if that’s a reason to be punitive anyway….

            “They pay little enough as it is, there’s no need to pay less.”

            The point here is that the tax cuts are aimed at and deliver the biggest benefits to the minority of high income earners.

            As is, they maintain their own money? OK… that is a reason for, not against.

            “Find another way, such as tax on oil and gas companies, tobin taxes and (unavoidable) land taxes.”

            Sounds like something the Greens might do.

            Yeah, but the Greens are children.

            “But the era of looking at PAYG earners as a limitless source of funds.. of which the likes the Greens and the ALP can make limitless, ill-thought out demands from, yeah I think that’s over”

            LOL. Yes, the party that’s hardly been in Government for a quarter century and never been in Government.

            Umm, yes. They go to every election showing they’re ready and raring to go to take more out of a PAYG earners pay… and wonder why they don’t get elected.

            Obviously they’re the problem with “limitless, ill-thought out demands” and “looking at PAYG earners as a limitless source of funds”. As opposed to the party that’s actually been in Government and would probably slit their wrists before considering any serious taxation of wealth.

            They do tax wealth. The 0% tax tier is at the low end, not the high end. WHat they don’t do is think to themselves “well we can buy more votes, let’s us tax even more”…. there’s a thing called a sense of proportion.

          • TBH, we seemed so much happier and better off as a nation when we paid more income tax.

            yeah, I’d really like to see the before and after data which qualifies this.

            If anything, the most high quality data which points to a decrease in happiness is the loss of markers of a high trust society, and the data is clear here. It’s the diminishment of a homogenous culture.

            Tipping the scales so far towards individual discretion about how our money is used is ruining our nation.

            Oh?

            And not the flood of labour, tipping the supply/demand equation and supressing wages for 35 years?
            Not the perpetual lack of supply of affordable housing?
            Not the increased corruption at all levels of politics? (see what Lee Kwan Yew said was rule number 1)
            Not the degradation of institutes such as tertiary education, as they decrease standards to cater to being a PR factory?

            It’s the government says “here, we’re taking less of your money. you can spend it how you see fit”…. that’s the cause of unhappiness…. yeah… seems legit.

          • Well, one of the primary purposes of taxation is to reduce inequality –

            It’s not a purpose of taxation at all.

            It’s purposes are to fund government expenditure, and to maintain price stability.

            There is no feature of taxation that compels it to uphold ‘equality’

            requiring high taxes on high income earners (and wealth) – and lower inequality typically correlates to higher happiness.

            This sort of taxation also encourages those with the means to invest in productive spending and investments,

            Haha, how ? This is fictitious nonsense, plucked from thin air by an unaccountable academic.

            Liquidity, and customers with a spare discretionary income spur investment. Every market that has zero surplus income is a market which fails to invest in productive assets.

            rather than hoarding, which drives higher incomes and living standards.

            This too is fictitious nonsense. Every jurisdiction which has little surplus income sees a fall in living standards.

          • Which includes all P/T workers. AWOTE is $1,737.10 per week, or about $45.10 per hour
            That puts the average fulltime work on $90,330. So what was the start of the 2nd highest (39%) tier up until two financial years ago.

            Median is a better indication of typical income than average.

            Approximately 3/4 of taxpayers earn less than $90k

            (Looked up the most recent ATO stats and I have to correct my numbers above. Top 10% kicks in at $133k, top 5% at $176k. Median is still $60k.)

            Stage 2 is irrelevant to approx 85% of taxpayers earning <120k.

            And? Their tiers are applied at $45k, up to $120k… so it includes everyone, it’s not restricted to high income earners… as if that’s a reason to be punitive anyway….

            The point is where the majority of the benefit goes (and the larger strategy of attacking progressive taxation).

            Including all stages, the tax cuts disproportionately benefit high-income individuals and households:
            * Most individuals on $30,000 or less, and the lowest 30% of households, do not benefit from the tax cuts because their taxable incomes are too low to pay income tax.
            * A middle income-earner on $50,000 gains $1,205.
            * A high income-earner on $200,000 gains $11,640

            The economy is driven from the bottom up. More money in the hands of lower income earners is better overall than more money in the hands of high income earners.

            WHat they don’t do is think to themselves “well we can buy more votes, let’s us tax even more”

            Well they do, they just lie about it.

            It’s not a purpose of taxation at all.

            It is.

            It’s purposes are to fund government expenditure, and to maintain price stability.
            It’s not.

            There is no feature of taxation that compels it to uphold ‘equality’

            Progressiveness.

            Haha, how ?

            ‘Would you like to do something beneficial with your money, or would you like the Government to destroy it ?’

            Or if you subscribe to the “taxes pay for stuff” view:

            ‘Would you like to choose who gets your money, or would you prefer the Government did ?’

            Taxes incentivise behaviour.

            Every jurisdiction which has little surplus income sees a fall in living standards.

            Which is why you use policy to encourage distributing the surplus to the people most likely to do something useful with it, like spend it buying stuff from their fellow citizens, rather than parking it in unproductive assets.

            The most prosperous times in recent history – not only in Australia but across the western world – have been accompanied by high and sharply progressive taxation, and the slow decline has gone hand-in-hand with reducing and flattening the tax system.

            The shrinking surplus for the common punter isn’t due to taxation. Income taxes have been on a flattening and downward trend for decades. Reducing taxation can’t fix it. Moreover, giving more money – and power – to those who are causing it, will just make it even worse.

    • Imagine where the money to fund our political parties comes from.
      A land of milk and honey, or the corporate wallet…
      Never bite the hand that feeds you.

    • Sorry to say it mate, but Aussies just don’t dream of using their resources to build a better Australia, it’s just not how they think.
      Plan A: we ship all these resources to another country and buy back everything we need
      Plan B we process our own resources and build a resilient society which values differentiated knowledge / skill
      Most Aussie would think it was a trick question (and just wtf does Resilient let alone Differentiated mean) F’it I’ will vote Plan A ….at least I understand this plan.
      With all due respect it will remain this way until Aussie themselves start to make the necessary changes. I’d suggest you explore Economic Connectivity concepts like “Distance”, basically you can only reasonably aspire to do things that are within a limited “distance” of that which you currently do.

  4. And yet Labor won’t nail ScoMo to the wall with this sort of stuff. Evidence that destroying the 2 party system is them only chance we have.

  5. This looks like a very opportunistic evaluation on the part of AI.
    During FY 2020 oil and gas prices were low. The LNG netback price began at A$6.11/GJ and fell to A$2.29/GJ by the year’s end, which would not have been at all profitable for the industry as a whole.
    The Brent oil price ranged between US$57 and US$69/bbl until January 2020 when it fell to US$20/bbl before recovering to US$44/bbl.
    https://www.accc.gov.au/regulated-infrastructure/energy/gas-inquiry-2017-2025/lng-netback-price-series

    The Gladstone “Cluster” is burdened by massive capital cost over-runs that are a result of cost inflation as all 3 projects were built simultaneously and a failure of regulation that saw each project replicate plant that could and should have seen shared facilities.
    Currently, Woodside is budgeting to sell about 27% of its product into the spot market, where it can get +US$30/GJ currently but the contracted 73% will be delivered at a price of around US$10.4/GJ (A$14.4/GJ).

  6. I agree that Shell ought to pay their fair share of taxes on their Australian-based operations. Like any other business operating in Oz, they’ll certainly pay tax on their profits… that’s the thing isn’t it, they’re yet to actually make a profit with their Gorgon JV stake.

    If you start a hobby farm and plant 100 olive trees that cost you $50/tree, then when you start selling olive oil would you feel compelled to pay tax on those first $5,000 of revenue generated? of course not. You’re argument suggests the hobby farmer should. Luck with that.

    Side note: natural gas has decades of rising demand to come to a) maintain current supply, and b) displace thermal coal electricity generation in Asia. Approx 2/3rds of half the world’s population gets their electricity from burning coal today. the population is growing exponentially, as it has for over 100 years… not even an incredible man-made virus-induced pandemic can even make much of a dent in the growth rate of the plague.

  7. The real crime of the last decade in this space has been the permission from state & Fed governments to permit the three plants on Curtis Island to export without implementing domestic reservation…as you say.

    Even with the success of the WA domgas reservation policy staring them all in the face, they have committed a real treason by not implementing this. All Australian’s have been short-changed by this unbelievable failure of government

  8. They came in like thieves in the night – no media coverage – lined it all up with our ‘representatives’ on the quiet and now its gone. They don’t come any bigger or badder than big oil/gas. Counterintuitively a steal like this would require a whole bunch of nasty business in an oil rich developing nation, in Australia all you got to do is go out to a strip club with Murdoch and talk it over. Done.