Events and Special Reports

Miners welcome resource funding, but petroleum levy questioned

Miners welcome resource funding, but petroleum levy questioned
Mining News Pro - The resources sector has welcomed measures by the federal government to boost resource investment and growth.

During the 2021/22 Budget, the federal government announced a A$100-million investment to extend the Junior Minerals Exploration Incentive for a further four years, from July 2021, to encourage exploration and development of new deposits, as well as a A$20.1-million investment over the next two years to deliver on a Global Resources Strategy to diversify and strengthen Australia’s access to key export markets and reduce the risk of trade disruptions.

The government also announced funding for the Rum Jungle rehabilitation project in the Northern Territory, supporting around 61 full time direct jobs over 11 years and creating significant indirect employment and local supply opportunities, including training, employment and other engagement opportunities for the site’s traditional owners.

The mine produced 3 530 t of uranium oxide and 20 000 t of copper concentrate between 1954 and 1971, but resulted in significant environmental impacts due to acid rock drainage, which resulted in the pollution of the East Branch of the Finniss river.

In addition, the government also announced new funding to implement its Strategic Basin Plans, including A$15.7-million to support gasfield trials in the North Bowen and Galilee basins, and A$2.2-million for the Northern Land Council to help provide better services to Traditional Owners in the Beetaloo basin.

Minister for Resources, Water and Northern Australia Keith Pitt said new measures in the 2021/22 Budget would build a more secure and resilient Australia, delivering jobs, opportunities and long-term benefits, particularly for regional Australia, as the economy recovers from the Covid-19 pandemic.

“The 2021/22 Budget locks in funding to accelerate the development of northern Australia, and to build a global resources strategy and network to strengthen a vital sector that continues to underpin our economic recovery and wellbeing,” Pitt said.

The federal government would be investing A$189.6-million over the next five years into Northern Australia, with a focus on job creation, stronger digital connectivity, and support for businesses to scale-up and diversify.

The Chamber of Minerals and Energy (CME) of Western Australia has welcomed measures announced in the 2021/22 federal Budget to encourage investment in mining and resources, help develop the sector’s workforce of the future and foster the use of technology to deliver lower emissions energy.

CME CEO Paul Everingham said Australia’s stronger than previously expected economic position highlighted not just the nation’s ability to negotiate the Covid-19 pandemic but also the contributions of the mining and resources sector.

He pointed to Budget documents which showed higher-than-expected iron-ore prices resulted in a resurgence of Australia’s terms of trade, and increased company tax receipts of A$3.4-billion this year and A$7-billion over forward estimates.

“I continue to be very proud of the way our sector has been able to keep operating safely and effectively through Covid-19 and the positive impact this has had on both the Western Australian and Australian economies,” Everingham said.

“Federally, corporate taxes paid by CME member companies and the flow-on of some of the royalties paid to the Western Australian government have helped fund vital support mechanisms such as JobKeeper and JobSeeker, and made a significant contribution to the country’s comparatively healthy economic position and outlook.

“I think this federal Budget recognises our sector’s importance as a major provider of jobs and community contributions. The initiatives contained within the budget will give member companies the confidence they need to work towards and beyond the A$140-billion of projects that are currently in the Western Australia pipeline.”

Meanwhile, the 2021/22 Budget also included a temporary levy on offshore petroleum production to fund decommissioning and remediation works in the Laminaria-Corallina oilfields and associated infrastructure.

Pitt said the levy was an important measure to ensure taxpayers are not footing the bill for the decommissioning and remediation of the oilfields, northwest of Darwin in the Timor Sea.

“The government will consult with industry over details of the levy’s administration, with further information to be announced following this consultation period,” he added.

The government has previously announced an enhanced decommissioning framework, to make sure Australia has effective oversight and robust financial and accountability safety nets in relation to future offshore oil and gas decommissioning projects.

The Australian Petroleum Production and Exploration Association (Appea) has warned that the new levy would impact investment confidence and jobs in the oil and gas sector.

CEO Andrew McConville said the Laminaria-Corallina oilfields and associated infrastructure levy will see a number of offshore oil and gas companies footing the bill for a project they have never been involved in, never benefitted from, and which lies up to 3 500 km away from their operations.

McConville said he was glad there would be extra consultation where Appea would put forward alternatives that the federal government should consider ahead of such a blunt instrument to meet the cost of decommissioning the Laminaria-Corallina fields and the Northern Endeavour floating production and storage operation (FPSO) in the Timor Sea.

The project requires decommissioning after its owner, the Northern Oil and Gas Australia group of companies, went into liquidation and in accordance with legislation, the government took ownership of the asset.

McConville said Appea and its members are committed to providing support to government to ensure the safe and timely decommissioning of the Northern Endeavour and related infrastructure but the new impost had the potential to hold back Australia’s economy and the 80 000 jobs the industry supports.

“The announcement of a new levy on the entire (offshore) oil and gas industry is a terrible precedent and could have serious repercussions to Australia’s economy and to jobs,” McConville said.

“Everyone agrees that the Northern Endeavour needs to be decommissioned and the costs managed – but there are a number of ways that the government can do so without risking undermining investment confidence in the offshore oil and gas industry.”

McConville said options were still available, including making the government’s current management of the operations more efficient; reducing the cost of decommissioning through working collaboratively with industry; and looking at alternative funding such as selling the asset or accessing petroleum resources rent tax (PRRT) credits.

“We have consistently maintained to government the importance of considering other cost recovery measures like selling the asset, working constructively with creditors, making available PRRT credits, seeking in-kind contributions from industry, and fully exploring a commercial solution,” he said.

“We stand ready to work with the government to look at how to best manage decommissioning of the Northern Endeavour. A levy is not the right instrument.”

McConville said the oil and gas industry remains committed to an updated decommissioning policy framework to ensure clarity and robust financial assurance in the future.

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