WA Government sets terms of reference for royalty rate review

IN THE LOBBY: The Western Australian Government has begun formal public consultation for a review on the State’s mineral royalty rates.
 
The terms of reference for the review and a stakeholder consultation paper for the Mineral Royalty Rate Analysis were released by WA Premier and State Development Minister Colin Barnett and Mines and Petroleum Minister Bill Marmion.
 

Industry representatives and other interested parties will have until 31 October 2013 to consider the paper and make submissions.

 

The State Government’s public consultation was given the thumbs up by the Chamber of Minerals and Energy of Western Australia (CME), which said it expected to play an integral role in the Industry Reference Group as part of the review of WA’s mineral royalty system.

CME said it would be a strong industry voice to the Industry Reference Group, which will also consist of senior representatives from both the Department of State Development and Department of Mines and Petroleum.

The WA-based lobby group stressed the economic contribution of the Western Australia resources sector has never been more vital to the state’s economy, pointing to the State Government’s 2013-14 Budget, which showed total mining royalty payments are anticipated to reach $5.8 billion.

“Royalty income from the sector now accounts for 21 per cent of government revenue up from only 5 per cent in 2003-04,” CME chief executive Reg Howard-Smith said.

“CME has always believed a state-based royalty regime is best placed to ensure revenue and infrastructure investment is returned to the communities from where our mineral wealth is extracted.

“The Western Australian resources sector has brought long term economic benefits to Australia and in order for that to continue, we must remain internationally competitive.”

Premier Barnett said the aim of the review was to ensure the State’s minerals royalties operated fairly and efficiently.

While not mentioning the Federal Mining Tax scheme he did deliver a well-disguised backhanded slap indicating the Sate’s royalties review would be of benefit, “both for the mining industry and the resource owners, West Australians.”
 
“Royalties are vital to the State’s ability to provide the services and infrastructure West Australians expect,” Barnett said.
 
“It is important that royalty rates deliver a reasonable return to the community without discouraging production or acting as a disincentive to new investment.”
 
The WA Government collected $5.1billion in mineral and petroleum royalties in 2012.
 
Mines and Petroleum Minister Bill Marmion said mineral royalty rates were designed to deliver a return to the State equivalent to about 10 per cent of the mine-head value of a resource.
 
“For most producers, mineral royalty rates operate on a three-tier system reflecting the degree of processing involved in production,” Marmion said.
 
Marmion also pointed out the current system took into account historical considerations such as rates negotiated as part of major project agreements.  For coal, salt and basic materials, a rate per tonne is applied.
 
The state also does well from its Petroleum royalties, which return 10 per cent of value at the well-head.

However, they do not form part of the current review.

According to the CME the review aims to ensure any reforms or adjustments are workable and achieve their aims without unintended consequences.

CME is of the opinion a blanket tax across all commodities is inappropriate and any changes must factor in the different processing and refining costs borne by different commodities.

The group considers the wider context of other taxes, rates and levies imposed other cost pressures currently imposed on the industry also need to be factored into any decision to change royalty rates.
 
“CME looks forward to working with the State Government to ensure that industry’s views are taken into account and that Western Australia’s resources sector remains internationally competitive, ensuring the continuing wealth of our state and the national economy”‘ Howard-Smith said.