Treasury review of the petroleum resource rent tax: gas transfer pricing arrangements

Treasury has been directed to review the petroleum resource rent tax (PRRT) gas transfer pricing arrangements. Central to the process is a 2019 Treasury consultation paper that contains gas transfer pricing questions, and targeted to gain responses from a range of stakeholders. Issues raised in the public submissions to the Treasury consultation are considered, and include responses to Treasury questions about the underlying principles of the gas pricing mechanism. The gas transfer pricing mechanism or method is based on a little understood, revenue-impacting set of provisions in the PRRT regulations. This method is required for an integrated gas extraction projects that have no arms-length gas prices. The research incisively examines the regulated gas transfer pricing method. Public submissions to Treasury are evaluated. The research seeks to address the chasm between business requiring the lowest costs (ie taxes) for a natural resource project; and the community requiring sufficient return from its resources to invest in public goods. Currently, the PRRT regulations are based on 20th century ‘resource rent tax’ theory and economic principles. The public submissions findings are analysed through these principles, with the critique then extended to consider alternative principles from the framework of energy justice. Treasury will tender a report in 2021, and this article suggests the PRRT principles be augmented to take account of 21st century climate change concerns. It is recommended that the current method for gas transfer pricing be removed from the PRRT regulations and replaced with the net back method.