Finance minister indicates NSW, Victoria and Northern Territory could be penalised for their gas moratoriums

This article is more than 2 years old

This article is more than 2 years old

The federal government has indicated it could use the GST to try to force states to end bans on gas exploration and development.

As it seeks to avoid long-term gas shortages, the Coalition is escalating pressure on state governments to ease restrictions.

The finance minister, Mathias Cormann, said the federal government just wanted all jurisdictions to develop their economies to their full potential.

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“We want states like New South Wales and Victoria and the Northern Territory to step back from their moratoriums on gas exploration and development of their resources,” he told Sky News on Sunday.

“GST-sharing arrangements are a potential lever to encourage and incentivise the states and territories to develop their economies to their full potential.”

The Commonwealth Grants Commission – the independent body that carves up the GST pie – has indicated it will consider coal seam gas development as part of its 2018 update and 2020 review of the formula to split the tax take between jurisdictions.

In a discussion paper released late last week, the commission notes Queensland and South Australia have no bans on gas exploration or development, but all other jurisdictions (bar the Australian Capital Territory, which doesn’t have any gas reserves) have some form of restriction.

“The commission could take the view that all states that have CSG have the opportunity to exploit it and whether they do or not solely reflects policy choice,” it states.

If the commission assumed that states had the capacity to raise money from their gas resources, it could potentially withhold GST or give them a lower share in a similar way it now treats gambling revenues. It said the “same considerations” appled to mining uranium.

Cormann said that use of levers to encourage states and territories to develop their economies was “in the national interest”.

“It is important that every individual state and territory jurisdiction puts its best foot forward,” he said.

“Clearly we need to increase the domestic supply of gas and to have three key jurisdictions locking up their supply of gas is manifestly not in our national interest,” he added, in reference to NSW, Victoria and the Northern Territory

On Wednesday three major gas companies agreed to fill the shortfall in the domestic gas market next year, saving the government from having to enact its export control trigger.

Santos, Origin Energy and Shell agreed to quarantine additional supply after meeting the prime minister, Malcolm Turnbull, his deputy, Barnaby Joyce, and the energy minister, Josh Frydenberg.

But the government did not confirm how many additional petajoules were being set aside. Turnbull would only say that another meeting had been scheduled for Tuesday at which the government hoped to finalise the agreement.

Cormann said the prime minister had “shown great leadership … in relation to the decision by exporting gas businesses on the east coast diverting increased supply into the domestic market”.

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The topic of gas exploration bans may also be raised at a Council of Australian Governments meeting on Thursday, although it has been called specifically to discuss terrorism.

Asked about resistance from AGL to the government’s proposal for it to sell the Liddell coal-fired power plant to a responsible buyer to keep open beyond 2022, Cormann noted the company had 90 days to develop alternative proposals and the government would “cross that bridge when we come to it” if AGL refused to sell.

“Our unequivocal focus is taking every possible step to bring down the cost of electricity, and to increase the reliability affordability of energy supplies,” he said.

Australian Associated Press contributed to this report