Jim Chalmers brings a Budget potpourri: something for everyone, the fossil fuel lobby too

by Callum Foote | Oct 26, 2022 | Economy & Markets, Latest Posts

The “Potpourri Budget” has something in it for everyone, including the fossil fuel lobby which has attracted another $3 billion in spending commitments. Callum Foote reports.

This was the potpourri budget. Lacking in adventure, low on risk, higher on fiscal rectitude; Labor’s first Budget in nine years is designed to leave a pleasant scent in the air. There is something for everyone:

  • Just enough social spending and ideas to satiate the Labor faithful, and a plan to get super funds into public housing.
  • The lavish range of superannuation subsidies for wealthy boomers left entirely intact.
  • Conservative forecasts and enough restraint on the spending front to appease the business lobby, mute the Liberal press and deliver the message Labor is a solid economic manager in a crisis.
  • Delivers on political commitments – education, childcare, housing, water, tax avoidance, First Nations, aged care – so gets the job done”.
  • Delivers for the business lobby on immigration, a higher intake will ease pressure on labour market.

And this budget delivers for the gas sector too, leaving the piquant aroma of fossil fuel subsidies which is likely to see the spending challenged by the Greens in the Senate.

Fossil fuel infrastructure funding

Of the government’s $3 billion in fossil fuel funding, the vast majority $1.9 billion, comes in subsidies earmarked for the Middle Arm Sustainable Development Precinct in the Northern Territory. This was a little higher than anticipated as a number of $1.5bn had been previously foreshadowed for the new Darwin port and gas hub.

The Middle Arm development will be a petrochemical precinct that will make use of fracked gas from the NT’s Beetaloo Basin as well as offshore oil and gas products. The products from this manufacturing hub will be exported.

This expenditure estimate has been revised up from the Morrison government’s $1.5 billion earlier this year which then included $300 million for “low emissions LNG $300 million in the National Water Grid to help meet Middle Arm industrial users demand for water.”

Other fossil-fuel subsidies came in the form of Carbon Capture and Storage and hydrogen technology investments. There are serious questions of commercial viability over both technologies.

The government likes to use the term ‘green hydrogen’, specifically around $71.9 million over seven years that has been allocated to build a hydrogen hub in Townsville and $5.5 million for a George Town project, but this is likely to be questioned by environmentalists, that is, whether the hydrogen is “green” or “brown”, whether it has been made using renewables or fossil fuels. Same deal for the CCS pretentions of the Middle Arm petro port. 

Oil and gas peak-body APPEA has recognised previously that subsidies for hydrogen will largely go to oil and gas industry projects.

Then there is $89.5 million earmarked over six years for the Hydrogen Highways initiative to fund the creation of hydrogen refuelling stations on Australia’s busiest freight routes. 

Townsville will also receive $22 million to develop the Lansdown Eco-Industrial Precinct which also has a Middle Arm “sustainable development precinct” feel about it.

Carbon Capture and Storage has been awarded $141 million over the next decade despite the technology being condemned for lacking commercial viability and actually extending the use of carbon. 

Carbon Capture’s Epic Fail: giant Gorgon gas plant goes ‘phut’

An additional $673 million is going to “deliver port infrastructure improvements in the Pilbara, Bundaberg and Hunter regions to support emerging industries and economic transition”. Those regions are better known for their iron ore and coal credentials than for their “emerging industries”.

The Pilbara Port Authority exports roughly 40% of Australia’s LNG, alongside other resource sector exports. Gladstone Ports Corporation, which operates through Bundaberg, Gladstone, and Port Alma ports, mainly trades in fossil fuels with coal and LNG exports making 92% of total exports, and LPG and petroleum products making 6% of total imports. The Hunter Region is NSW’s thermal coal-mining mecca.

Broader fossil fuel subsidies

The Fuel Tax Credit Scheme is the largest fossil fuel subsidy offered by the federal government and is expected to come in at $7 billion in 2021-22, increasing by 32.7% to $11.2 billion in 2025-26.

The Fuel Tax Credit Scheme allows businesses to claim a tax credit on the fuel they use off public roads. This makes fuel use cheaper for energy-intensive industries and increases the overall amount of fuel used. The scheme also heavily subsidies the production of fossil fuels, with 2020 Australian Taxation Office data showing that roughly half of the fuel tax credits since 2004 have gone to fossil fuel companies themselves.

Another subsidy to the fossil fuel industry that is not adequately detailed to the public is the federal and West Australian governments providing indemnity to the Gorgon Joint Venture Partners against independent third-party claims regarding Gorgon’s failed carbon capture and storage facility.

Potential fossil fuel subsidies

Alongside the above subsidies which are expected to go directly to the fossil fuel industry, there are also tens of billions of dollars earmarked for infrastructure projects across Australia, some of which could assist the industry.

The first is the Powering the Regions Fund which has $1.9 billion allocated to assisting industries, regional Australia, and communities “with the transition to net zero emissions”. Labor considers fossil-powered hydrogen and carbon capture and storage as transition or low-emission technology despite their supporting of the fossil fuel industry. It remains to be seen whether any of this $1.9 billion will be allocated to these technologies.

The National Reconstruction Fund, a $15 billion fund that will be used as co-investments over seven industry priority areas including “renewables and low emissions technologies” which may again be fossil fuel powered hydrogen and CCS.

There is also $8.1 billion earmarked for rail and road infrastructure projects “to support economic growth and development”, which while excluding pipeline infrastructure may be used by gas and coal companies for shipping freight or moving equipment.

The final allocation of funding which may be, but is less likely to be, used by fossil fuel companies is the $160 million committed for critical minerals in the form of a development program and research development centre. While no fossil fuels are considered a critical mineral, helium is. Helium is found alongside offshore petrochemical deposits and can make up half the value of an offshore oil field.

Renewable energy funding/taking away of fossil fuel subsidies

However, the budget’s headline climate change initiative, the $20 billion Rewiring the Nation fund which seeks to “expand and modernise Australia’s electricity grids at lowest cost, unlocking new renewables and storage capacity and driving down power prices” could tip Australia over into a net-zero future if handled correctly.

The fund will provide concessional loans and equity for transmission infrastructure projects, but as a previous MWM  investigation has shown the energy market is rife for gold plating which ultimately locks in higher energy prices and profits for energy companies.

Bad news over. The Budget also allocated $1.3 billion which will flow directly to renewable energy and legitimate emissions reduction technologies.

$102 million over four years will go to establishing a Community Solar Banks program, alongside $224.3 million over the same period allocated to provide 400 community batteries across Australia.

The Electric Car Discount will result in $345 million in forgone tax on electric cars from the fringe benefits tax and the 5 per cent import tariff is intended to increase the uptake of electric cars.

The new Department of Climate Change, Energy, the Environment and Water, which will cost $275.7 million over four years from 2022-23 (and $60.5 million per year ongoing) is set to pick up from the previous department of climate change, axed by Tony Abbott in 2014.

There is also $158 million over six years to support the implementation of the National Energy Transformation Partnership, between the federal and state governments, which is designed to specifically increase the uptake renewable energy into the mix.

The government will also increase the Heavy Vehicle Road User Charge rate from 26.4 cents to 27.2 cents per litre of diesel fuel. This will decrease spending on the fuel tax credit by $215.7 million over four years from 2022–23. While not being a direct subsidy for renewable energy it does increase the cost of doing business for energy-intensive businesses.

Additional quirks

The Budget also promises $66 million over nine years to monitor the gas market with the hope of ensuring adequate supply and presumably avoid the energy crisis experienced along the east coast this year.

However, the returns for the taxpayer on this $66 million are underwhelming. $41 million is going to increase the frequency of domestic gas supply assessments by the Australian Competition and Consumer Commission (ACCC) and reform the Australian Domestic Gas Security Mechanism. $25 million over eight years is earmarked to extend the ACCC’s never-ending inquiry into gas supply.

Speaking of gas company profits, the Petroleum Resource Rent Tax, which covers offshore oil and gas production, is expected to fall from $2.7 billion in 2022-23 to $2 billion in 2025-26.

This is despite massively high global gas prices leading to windfall profits for multinational gas companies. The Labor government, like its predecessor has decided to let the offshore oil and gas industry keep its windfall profits, unlike other LNG exporting nations such as Qatar.

PRRT revenue will also be used to pay “the cost of decommissioning parts of the Bass Strait fields”, according to the Budget. 

When considering both domestic gas supply and the PRRT it’s clear that the government is not willing to tackle the gas industries windfall profit gouging just yet. 

The government missed the opportunity to bolster Australia’s renewable power component manufacturing capability which could develop new manufacturing capabilities while providing jobs and energy independence.


Callum Foote was a reporter for Michael West Media for four years.

Don't pay so you can read it.

Pay so everyone can.

Pin It on Pinterest

Share This