GST war looms over states’ bans on gas drilling

Community opposition prompted bans on further exploration for gas reserves.

Community opposition prompted bans on further exploration for gas reserves.

The Turnbull government has flagged it could use the GST carve-up to try to force states to end bans on gas exploration and development.

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

Finance Minister Mathias Cormann says the federal government just wants all jurisdictions to develop their economies to their full potential.

“We want states like NSW 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 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 ACT which doesn’t have any gas reserves) have some form of restrictions.

“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.

Prime Minister Malcolm Turnbull is again meeting big gas companies on Tuesday with the hopes of finalising an agreement to ensure there is no shortage of gas available to Australian households, power generators and businesses in 2018, without needing to resort to export controls.

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.

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