Politics: Key Hints At Mining Royalties Review
May 18th, 2010
While oil, gas and minerals are likely to take a back seat in next week’s Budget, to be delivered on Thursday, John Key is dropping hints mining royalties could rise at some stage in the future. Speaking at his post-Cabinet press conference, Key said there were no royalties proposals in the Budget, but appeared to acknowledge perceptions the current royalties regime does not reward NZ sufficiently for resource extraction. Key says “to be acceptable on a basis for NZ, there needs to be evidence that it’s delivery economic benefit to NZers.” However, suggestions in reports prepared for Energy and Resources Minister Gerry Brownlee last year such as creating a National Oil Corporation, hiving off Genesis’s stake in Kupe to a new SOE, and tax breaks for gas-only exploration have not advanced.
In a recent interview, Brownlee said the level of exploration currently occurring suggests there is no immediate need to use the tax system to incentivise oil and gas discoveries, and it’s unlikely such ideas even got a look in, given the juggling act Finance Minister Bill English already has on hands to make the Budget tax package balance fairness and debt repayment priorities. Brownlee says “you only have to look at the drilling programme to know we don’t perhaps need to leap in that direction quite as quickly.” On creating an NOC, Brownlee described the oil and gas sector as “a risky business.” NZ is “much better to ensure our royalty and tax regimes are appropriate.” However John Key is promising this will be a Budget favouring science and research, and the inclusion of energy resources as a key focus of science policy could yet yield a pleasant surprise.
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