Cabinet weighs deal for coal-seam gas industry over mining super-profits tax

Release Date: 2010-06-29

JULIA Gillard is set to announce a deal for the burgeoning coal-seam gas industry that involves a major shift from the original mining super-profit tax plan.

Cabinet is considering proposals today that will treat Australia's existing offshore oil and gas industry in the same way as the new onshore coal-seam gas industry, effectively put both under the existing Petroleum Resources Rent Tax.

The Prime Minister is expected to announce the deal, if approved by Cabinet today, before a $5000-a head dinner for mining companies in Brisbane tomorrow.

The deal on coal-seam gas has been worked out over recent weeks with Resources Minister Martin Ferguson and Treasurer Wayne Swan and is the first real progress with mining companies since the announcement of the controversial RSPT on May 2.

Ms Gillard has been moving away from the RSPT as proposed by Kevin Rudd, the Treasurer and the Treasury secretary, Ken Henry, in the Government's response to the Henry Tax Review as the Government has been pounded in the polls.

The public reaction to the handling of the RSPT and a fierce advertising campaign against the tax by the mining industry has been credited with being instrumental in destroying Labor's electoral support and spurring the challenge against Mr Rudd last week.

Even before Mr Rudd was removed as Labor leader the coal-seam gas industry has been negotiating with the Government for special treatment because of the difference between the oil and gas sector and the minerals sector.

The proposed changes would treat all oil and gas projects the same and effectively under the existing PRRT, which has a 40 per cent tax rate on profits but does not apply to existing projects.

The coal-seam gas industry is a huge boost for Queensland's economy and one $9 billion project is already ready to begin.

Queensland's Labor Premier Anna Bligh has been publicly calling for the RSPT to be changed to avoid damaging the infant coal-seam gas industry.

Unlike the existing mining projects of BHP Billiton, Rio Tinto and Xstrata, the coal-seam gas projects are all “greenfields” sites so the issue of the retrospectivity of the tax is not as important as it is for the big three miners, which will pay 80 per cent of the new RSPT.

The Prime Minister has set an unofficial deadline of Friday to make real progress on the mining talks and senior Government members believe they can achieve an understanding with the mining sector based on negotiations which have been under way for five weeks with the miners.

Mining sources have indicated that Mr Ferguson has been playing a central role in the talks and that Mr Swan, who returns from the G20 meeting in Toronto today, is prepared to adopt changes to the original plan.

If the wider mining sector cannot come to an agreement by the end of the week, the “advertising war” that was suspended as a an act of good faith at Ms Gillard's request will reignite with miners worried they may being misled on the extent of changes to the RSPT.

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Url:	http://www.theaustralian.com.au/politics/cabinet-weighs-deal-for-coal-seam-gas-industry-over-mining-super-profits-tax/story-e6frgczf-1225885596411