Cook weighs in on LNG royalties

Premier Roger Cook has highlighted the need to incentivise investment in the state while playing down the findings an Australia Institute report targeting the lack of royalties paid on LNG in WA.

The lobby group’s report found $111 billion worth of LNG was exported from WA – 73 per cent of all gas exported from the state over the last four years – had attracted zero royalty payments.

The claim has sparked backlash from climate groups and been rebuked by those in industry, with critics highlighting the fact most LNG projects off the coast sit in Commonwealth waters and are subject to the federal Petroleum Resource Rent Tax – not state-based royalties.

Royalties are paid from the North West Shelf and onshore fields, while all of Chevron’s Wheatstone and Gorgon, Woodside’s Pluto and Shell’s Prelude LNG projects do not pay royalties in WA.

Quizzed on the state of play for LNG royalties in WA this morning, Mr Cook highlighted the limitations of Commonwealth waters on the ability for WA to generate royalties from LNG producers.

“In relation to offshore gas, we have to work in partnership with the Commonwealth government. They have their own arrangements under the PRRT,” he said.

“Domestic is obviously an opportunity for us to get more royalties, because that is wholly onshore.”

The operators of those projects are subject to the federal PRRT but had historically been able to use deductions to offset all of their PRRT obligations, until the system was changed recently to cap deductions, in a move backdated to July 1, 2023. 

Chevron expects to pay PRRT from this year, while Woodside paid some PRRT in 2021-22 through a subsidiary which holds a non-operating stake in Bass Strait projects supplying the east coast gas market.

Mr Cook highlighted the challenges governments faced in changing the status quo against the wishes of economic powerhouse sectors.

“When we see from time to time, the Commonwealth government proposing that either miners or oil and gas proponents pay more, there’s a sizeable campaign, and there is always a certain amount of backlash associated with that,” he said.

“The PRRT and other forms of royalties and payments from the resources sector are set in an appropriate way with the consent of the parliament, but also working in partnership with industry themselves.”

Mr Cook said while he was always supportive of generating more revenue for government, there needed to be a balance struck to ensure investment was still incentivised in the state.

“I always want to see more money in the coffers because that means we can do more for the community.

“But we need to balance that industry to make sure that they have incentive to continue to invest in Western Australia and these offshore fields, but also the opportunity to make sure that they can commercialise their activity.”

LNG, including that produced using natural gas from Commonwealth waters, accounts for around 90 per cent of gas produced in WA.

The Australia Institute claims a royalty could have generated at least $9.6 billion if charged over the last four years.

Oil and gas lobby group Australian Energy Producers predicts the industry will pay more than $17 billion in tax revenue to federal, state and territory governments this financial year.

Mr Cook’s comments come amid a fierce and ongoing debate over the ability for onshore gas producers to export some of their production, of which he is a central figure.