An independent senator and crossbench MPs say the money lost from royalties that aren’t collected by state or federal governments on Australian gas exports amounts to “daylight robbery” by “leeches” in the gas industry.

Gas sold overseas from six of Australia’s 10 liquefied natural gas (LNG) export facilities pay no royalties to state or federal governments, amounting to a sum of $13.3 billion in foregone royalty revenue during the past four years, according to the Australia Institute.

Four of those six projects are based in Western Australia, and two are in the Northern Territory.

Some WA projects source gas from Commonwealth waters but the federal government does not charge royalties, while Woodside’s Pluto project is outside of the area captured by the Royalty Act.

Gas projects in Commonwealth waters between three and 200 nautical miles offshore are not covered by state royalty regimes but, rather, the federal government’s Petroleum Resource Rent Tax (PRRT).

Although, the Australia Institute’s executive director Richard Denniss told The Business that the federal government did have the power to impose royalties on offshore gas fields.

“Most of the offshore gas in Australia pays absolutely no royalties at all,” he observed.

“The Commonwealth chooses to collect royalties on gas from the North-West Shelf, but the Commonwealth chooses not to collect any royalties on other offshore projects.”

Under the PRRT, companies are liable to pay a tax on profits generated by gas projects, but only once the up-front costs of developing those facilities have been paid off.

“In the last four years alone, Australians have given away the gas that made $149 billion worth of LNG, for free,” the Australia Institute report said. 

“$111 billion worth of this royalty-free LNG was produced in Western Australia.”

ACT senator David Pocock said the loss of royalty revenue was “daylight robbery” by “the gas industry that is not paying royalties, (and) not paying petroleum resources rent tax for offshore LNG exports”.

“They are absolute leeches,” he said.

Tax changes

While royalties are charged to access a resource, the federal government also collected tax on the profits made from their sale.

For many years, gas companies have had large tax write-off accompanying construction of their projects, which has kept PRRT receipts low.

But massive profits made following an upswing in prices after the Ukraine war mean the federal government is finally collecting some company tax and expecting revenues generated by the PRRT to rise in the coming years, according to Treasury Secretary Steven Kennedy.

“One thing that we have seen more recently is that — and part of the reason we significantly underestimated the company tax receipts for the last budget was that — we saw oil and gas companies paying company tax, not PRRT, for the first time,” he said in response to a question from ABC News.

“They exhausted their losses, and our sense is that, working with the ATO, many of those companies now will begin to be paying company tax on a more regular basis because they don’t have those losses to offset against the company tax system.

“The government finalised last year, and then has now legislated, gas transfer pricing arrangements for petroleum resource rent tax arrangements, has put in place those and they expect to raise future revenue there.”

However, Mr Kennedy added that it was an area where further tax changes should remain under consideration.

Australian Energy Producers chief executive Samantha McCulloch said the claim Australia’s gas resources are given away “for free” is a deliberate misrepresentation of a sector critical to Australia’s economy.

“The fact is that Australia’s oil and gas industry has invested more than $400 billion over the past decade or so to find and develop Australia’s natural gas resources,” Ms McCulloch said in a statement.

“The gas industry will pay $17.1 billion in taxes, royalties and other charges this financial year, up from $16.2 billion last year.”

International comparison

The amount of royalty revenue collected from gas exports is well below international competitors like Qatar and Norway, the report’s authors, Piers Verstegen, Mark Ogge and Rod Campbell said.

“Qatar exports almost the same amount of LNG as Australia along with a slightly larger oil industry. On an energy basis, Qatar produces 50 per cent more oil and gas than Australia. However, the revenue received by Qatar from its oil and gas industry is six times greater.”

Richard Denniss said collecting royalties on all of the gas sold overseas would help deliver better services.

“In Australia we subsidise our fossil fuel industry, giving more than half of our gas away without collecting any royalties, and we charge our kids a fortune to go to university,” he said. 

“In Norway, they tax their fossil fuel industry and give university education away for free,” he said

Independent Member for Kooyong Dr Monique Ryan called on the government to tax fossil fuels “appropriately”.

“We need to get that money and use it for good, instead of allowing multinational companies to take that money overseas,” she said.

The key recommendation in the Australian Institute report called for an inquiry into the management of Australia’s gas resources, but neither Mr Pocock nor Dr Ryan made a formal request for parliament to open an inquiry.