The NSW Government is currently in the process of reviewing the five year royalty free period that applies to coal seam gas production.
A spokesman for Energy and Resources Minister Chris Hartcher says change may be on the way.
“The New South Wales Government is currently reviewing the royalty holiday for coal seam gas developments,” he said.
But the spokesman gave no timeframe for when a decision will be made.
Greens NSW mining spokesperson Jeremy Buckingham responded to the announcement by calling for the state government to match Queensland’s royalty rate of 10% which applies from the first year of production.
Currently in NSW there is a royalty holiday for the first 5 years of production. In the 6th year a royalty rate of 6% applies, rising 1% per year to 10% from the 10th year onwards.
“The Greens are very pleased to hear the government is reviewing coal seam gas royalties. The government should provide details about who is conducting the review and when it is likely to be completed,” said Greens MP Jeremy Buckingham. [...]
“Certainly the gas royalty rate in NSW should at least match Queensland’s 10%.”
The statement from Buckingham also explains how the royalty scheme in NSW was introduced, 20 years ago:
The legislation relating to the royalty holiday was originally introduced into Parliament by the Greiner Government on 30 April 1991. Minerals Minister Neil Pickard’s speech at the time thanked APPEA:
“This bill has the support of the Australian Petroleum Exploration Association. I thank the association for its significant contribution in preparing this legislation”
Jeremy Buckingham said: “It looks like this exemption was written by industry, for industry. There is no reason why NSW taxpayers should subsidise the coal seam gas industry while it seeks to roll out across farms and sensitive environments in large tracts of the state.”
Santos spokesperson Matthew Doman said it is not unusual for a government to implement measures to encourage investment. He said:
Coal seam gas is an industry that requires millions of dollars of investment before any returns are made and one way the NSW government has done that is with the royalty holiday. Queensland didn’t do that but they did introduce a requirement for 13% of the state’s electricity to come from natural gas, that was a major driver for CSG in Queensland … Supportive government policy does enable the establishment of new industries.
To give some background- the Queensland government introduced its 13 percent gas scheme on 1 January 2005. One of the eligible fuels under the scheme is coal seam gas, including waste mine gas.
The Scheme requires electricity retailers and other liable parties to source at least 13% of their electricity from gas-fired generation between 1 January 2005 and 31 December 2020.
In 2008, three years after the Queensland government’s scheme had commenced, ecogeneration reported that the CSG industry was a beneficiary of the scheme:
Undoubtedly, coal seam gas (CSG) developers have been one of the scheme’s biggest winners, with CSG now supplying around 80 per cent of Queensland’s gas market.
“Coal seam gas is an integral part of Queensland’s future gas development,” Queensland Minister for Mines and Energy Geoff Wilson said, noting that the scheme had delivered well over $1 billion of investment into the state’s CSG industry.
The NSW Government has not elaborated on what the state’s review of royalty structure for CSG production encompasses or whether requirements similar to Queensland’s 13 percent scheme were being considered.
Featured photograph by Jeremy Buckingham.
CSG development in Queensland (and NSW) is all about export at Gladestone and natural gas on the East Coast reaching export price parity.
If coal seam gas can not be extracted economically without some kind of subsidy or financial incentive from taxpayers, then why are we seeing to extract it at all?
Why not provide such financial incentives to truly clean energy forms such as solar and wind technologies?
Why must taxpayers subsidise big oil?
Good and informative post. In response to Jeremy Buckingham (“There is no reason why NSW taxpayers should subsidise the coal seam gas industry) and Max, Neil Pickard’s speech contains the answer:
“The level of petroleum exploration in the State has fallen over the last three years because of the economic situation and in particular the very high level of interest rates.”
In 1991 there was no resources boom. Australia was in recession. That is why there were incentives written into the Act to encourage investment.
With that historical perspective the royalty holiday makes sense. Though it’s true policy makers were (perhaps) unaware of how the CSG industry would take off, and did not have a complete picture of the enviro/health risks posed by CSG. Hindsight makes fools of us all.
It’s good news the law is under review, on the surface it does seem like the holiday is no longer needed.