South Australian body calls for policy changes

southTHE South Australian Chamber of Mines and Energy (SACOME) has cited Federal policies on a flow through shares scheme and the Petroleum Resources Rent Tax (PRRT) as major hindrances to the state’s energy sector growth.
SACOME stated that an exploration tax credit policy was critical to encourage investment in junior resource companies and deliver the capital required to get mining and energy projects up and running.
The Rudd Government first promised a flow through shares scheme in 2007, but canned the policy upon delivering the Minerals Resource Rent Tax (MRRT). SACOME chief executive Jason Kuchel said junior resource companies were facing increasingly testing times, and needed incentive to move forward with projects.
“With recent downtrends in mineral exploration expenditure, softening commodity prices and extremely constrained capital markets, junior resources companies are facing tremendous challenges right now to
develop their deposits into economical projects,” he said.
SACOME reported that a flow through scheme “would allow companies which are unable to access tax deductions as they accrue – given their lack of income – to issue shares with these deductions ‘flowing through’ to investors”.
The South Australian resources sector could also benefit from some key infrastructure developments, according to the organisation.
Mr Kuchel said the two major infrastructure issues holding back growth were the need for a multi-user deep water port and an upgrade of electricity transmission networks in the Eyre Peninsula.
“The Federal Government should use bodies like Infrastructure Australia and the Export Finance and Insurance Corporation to provide funding agreements to stimulate infrastructure in the state where the market has failed to deliver a solution,” he said.
With a the potential for a thriving unconventional oil and gas sector in areas such as the Cooper Basin, SACOME stated that changes to the PRRT were also necessary to facilitate growth in South Australia.
It proposed the inclusion of contiguous licenses to allow exploration expenses to be deductible against production revenue, and a low profit offset where profits below $50 million were not subject to the PRRT.
“A low profit offset mechanism, which is currently utilised in the MRRT to shelter junior miners with low profits from the effects of the tax, should also translate into the PRRT for junior oil and gas companies,” Mr Kuchel said.