Second Reading Speech
Mr PROSSER (Minister for Small Business and Consumer Affairs)I move:
That this bill be now read a second time.
The purpose of this bill is to amend the Petroleum Excise (Prices) Act 1987 to simplify the crude oil excise calculation and collection regime. Industry supports these changes. The Petroleum Excise (Prices) Act 1987 allows for the determination, by the Minister for Resources and Energy, of the volume weighted average of realised-volware-prices for each excisable crude oil producing region each month; this is the price for excise purposes.
Since the deregulation of the oil industry in 1988 the petroleum secondary taxation regime has altered considerably. At that time, the Bass Strait oil producing region was the only excisable crude oil producing region in Australia. In 1990 the PRRT replaced the excise regime in Bass Strait and PRRT applied to all offshore regions except the North West Shelf project area. However, Commonwealth excise continued to apply in state and territory waters onshore and to the North West Shelf. The fields which are currently subject to excise are: the Jackson field in south-west Queensland and the Saladin and the Harriet-Lenita fields in Western Australian coastal waters. These three fields are significantly smaller crude oil producers than the Bass Strait region, with sales directly to ship compared to Bass Strait where pipeline sales were continuous. During 1997-98 the Wanaea field in the North West Shelf region is expected to become excisable.
Currently, excise is collected thrice monthly with payment of excise occurring before the producers receive payment for the oil sold. To compensate for this early payment of excise, the volware price calculation allows a compensation factor called 'credit terms compensation' for part of the time difference between excise payment and receipt of payment.
The act also imposes the obligation to determine volware prices for oil producing regions even though their production rate is below the level at which excise liability occurs. These prices exist in three forms: a reference price for the month ahead; an interim volware price for the month immediately past; and a final volware price when all transaction data is complete. Depending on the date of discovery, the rate at which excise is levied is based on progressive production tranches with some annual production being excisable at a zero rate. This bill removes the necessity to determine volware prices for oil producing regions whose annual production is below the first excisable tranche, leading to administrative savings for industry and government. If the annualised production increases to 80 per cent of the first excise tranche the determination of volware prices could be reintroduced.
This bill, together with the Excise Tariff Amendment Bill (No. 2) 1997, which are presented together as a legislative package, will change the excise collection regime from three times each calendar month to monthly, therefore negating the requirement for the determination of a reference price. In order to maintain revenue neutrality, the 15-day credit terms compensation period will need to be changed to 30 days. The method of calculation is laid down in the petroleum excise (prices) regulations and its amendment is dependent on passage of these amendment bills. I commend the bill to honourable members and present the explanatory memorandum to this bill.
Debate (on motion by Mr Martin Ferguson) adjourned.