Green groups query 'drill now, pay later' scheme

TAX breaks to fossil fuel companies should be scrapped and the money put towards ocean protection, environmentalists have said, warning that a boom in offshore gas and oil investment will put pressure on Australia's marine environment.

The Australian Conservation Foundation, in its submission to this year's federal budget, has calculated that tax writeoffs on oil and gas assets will cost taxpayers $1.4 billion by 2016-17 amid a boom in investment in assets such as drilling rigs, pipelines and storage infrastructure.

At the same time, the resources rush was putting pressure on Australia's oceans via offshore infrastructure and sea transport, the foundation chief executive, Don Henry, said yesterday.

"You'll see that the tax break that is effectively achieved is about to blow out from the equivalent of $120 million a year through to nearly $1.5 billion … because of all the intended construction," he said.

"It's going to increasingly cost the taxpayer a motza."

After the 1999 review of business taxation, accelerated depreciation, which effectively allows companies to defer part of their tax by writing off capital expenses, was scrapped in return for a cut in company tax. But in 2002, caps of between 15 to 20 years on the life of assets were introduced for the oil and gas sector, allowing companies to write them off faster.

"In effect this is a 'drill now, pay later' scheme - one that allows oil and gas companies to defer significant tax liabilities for many years after a project begins operating," the foundation's submission to Treasury states.

A spokesman for the Australian Petroleum Production & Exploration Association said the depreciation for oil and gas projects were one of the least competitive in the world for investors.

"Australia is regarded globally as a high-cost investment destination. But it enjoys a reputation for stable governance and sensible regulation, which such an approach would do nothing to enhance."

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