Laughing Gas: Fossil Fuels And The Queensland Budget

This is a great and horrifying article. But my question is still why.  If even the producers and the government don't make money off lng, and the community doesn't want it, why is it still being pushed?

My car registration is $670 a year (and trust me, that is for for a very ordinary old car). 

So if you are saying that every year, the coal industry pays the Government in royalties the equivalent of $670 for every Queenslander, then that seems like a lot of money to me.

I'd rather have a coal industry and pay a rego of $670 each year, than not have the industry and pay $1,340 in rego each year.

On coal seam gas, Rod seems got himself a bit confused (too much tea?).  The Treasurer's speech yesterday was very clear.  The industry has invested $60 billion to create a new export industry for Queensland.  That new industry has already sold $658 million in gas this year and paid $51 million in royalties. 

This article seems to confuse an investment total with annual sales. That's a bit of a worry for an economist.

Oh and royalties.  By my maths that's 7.8% royalty return not 4%.  $51m divided by $658m is not 4%.  Perhaps you should show your workings?

The royalty rate is 10% of wellhead value, but there are discounts, so 8% sounds about right for the early days of a new industry. 

An entertaining read, but relying a few more facts would have made it an informative read as well.

Sooz:

Unless our governments are going to hand them large amounts of public funding in return for donations to political parties.

That will be no problem, as the mining industry is on a sweet cop of at least $4.5 billion per year: $0.492 billion in direct subsidies and the rest in tax concessions - ie tax foregone. As Abboott (aboot time he was booted) says, "Australia is open for business".

Well, Australia's till is certainly open for business, and a lot of them just can't keep their paws out of it.

http://www.abc.net.au/news/2013-06-25/nrn-dist-mining-subsidies/4778042

@O. Puhleez

What used to be the Minerals Council of New South Wales and is now called NSW Mining has rebutted most of the points made by the Australia Council here.

I've taken to these boards in the past to point out the many ways Australian governments raise revenue by compulsorily charging productive enterprises in ways they disguise as "user-pays" and which they can therefore claim are not taxes. This feeds into the myth that Australia is a low-tax country.

I've also taken to these boards – reluctantly, because I think any sort of tax on fossil fuels is desirable in the absence of a comprehensive carbon price – to attack the intellectual dishonesty of calling a rebate for off-road diesel use a subsidy to miners (or to farmers or to railways).

I've also noted before that almost all of the tax concessions afforded to mining companies are also available to taxpayers generally – that is, they are, like Research and Development as an example, activities governments of all political persuasions think they should encourage by allowing faster write-offs of what would be legitimate deductions from income in the long run anyway.

@beetwo77

I may be wrong – that has happened to me a couple of times in living memory – but I'm pretty sure neither the mine subsidence fund nor the safety fund have anything to do with insurance.

Miners still have to pay separately for public liability and workers compensation insurance, against the risk of being sued by people affected by subsiding mines or by workers injured on the job.

As I understand it, compulsory levies paid by miners to both the mine subsidence fund and the safety fund (and the rest of an enormous raft of such fronts for the State Revenue Office) are entirely used to pay for "administration", that is, for the jobs of public servants who overseas would be employed out of general taxation revenue.

I agree that the money State governments everywhere pour into infrastructure, like ports, that is largely or wholly used by private companies should be partly or wholly recovered from those companies, but given that it isn't, you can't make a special case for charging the miners. And I'm assuming you accept that there was a great deal of public benefit from the port upgrades both in Newcastle and the Illawarra, even if most of the benefit went to the coalminers and steelmakers.

As for the diesel fuel rebate, this was introduced at the time that the excise on diesel fuel was multiplied many times as a way (or so it was said at the time) of raising the money said to be needed to be spent on roads. It was sold as a user-pays exercise, and especially as a way of getting the road transport industry, whose heavy vehicles did almost all of the damage to the nation's highways, to pay for repairing that damage.

Logically, those who used their diesel off-road, like farmers, railway operators, and, yes, miners, would and should get part of the fuel tax rebated.

Naturally enough, vastly more money was raised by this increase in excise than was ever spent on roads (at least directly by the Federal government on national highways, although they argue that the increase in grants to the states led to the states spending the rest of the revenue raised on the roads under their control), and I have long argued that since it is a de facto general revenue raising measure, the de facto exemptions should go too. 

And by the way, the additional tax deduction for the no-longer-rebatable-tax-increased cost of fuel would mean a bottom-line benefit of 30% of the extra diesel bill (at the current company tax rate), a fraction of the current rebate.

Anyway, I also hold the view that all of this should be rolled up in some sensible carbon-pricing/polluter-pays policy.

In a carbon-constrained world nobody should be drilling for CSG, and certainly State governments shouldn't be relying on royalties from gas companies, whatever the net benefit to their budgets. In a world of plentiful renewable energy, combustible hydrocarbons (probably hydrogen) can be produced by a range of processes using surplus electricity – like using off-peak power today for domestic hot water, for commercial intermittent high-load activities, and for pumped hydro – and fed into the gas supply grid currently dependent on fossil-fuel gases, including CSG.