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John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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Thunder Down Under - Western Australia Talks Secession over Canberra’s Energy Policies

It’s marginal, economically backward states that fragment, like Yugoslavia and Sudan, right?
Usually – but an extraordinary situation is developing in energy-rich Western Australia, where Canberra’s policies have begun fuelling talk of secession.

Call it an east-west divide, pitting population-rich eastern Australia’s cities against resource-rich Western Australia, where resentment is rising over the upcoming imposition of the Mineral Resource Rent Tax (MRRT) and the state’s perception of poor treatment by Canberra’s bureaucrats.

Aside from fuelling resentment amongst mining companies, a recent poll on Western Australia Today's website found 63 percent of the 7,585 respondents stating that Western Australia should consider secession.

So, is this merely a case of consuming too many cases of Fosters, or something more serious? Like Texas, where legislators grumble about leaving the Union, secessionist talk has been a frequent staple of Western Australia's politics since the early 19th century.

Like Hawaiian discussions of secession, Western Australia has repeatedly seen the idea surface, appearing in the media and even being broached in a 1933 state referendum.

Far from being an idea grumbled about in taverns, secessionist ideas have political support including from Western Australia’s Minister for Mines and Petroleum, Norman Moore, one of Western Australia’s government's most senior members in the State's Upper House.

 Speaking bluntly, Moore said that the proposed MRRT had caused "rumblings of secession - everywhere you go these days, people are now talking about it. We should try and fix the federation, but in the event it can't be fixed, and I suspect it can't be, then states like Western Australia should give some thought to going it alone. The constitution has changed dramatically to the point where the Federal Government is very much in control of virtually every lever that goes on in the economy in Australia. The bottom line is Western Australia is being put in a position where its industries are being penalized because they are successful.

When you start doing that people take their successful industries somewhere else and to suggest we are the only place in the world with mineral resources is naïve. My view is we should go back to what the original foundation of the constitution provided for and that the states indeed have some responsibility. The concern we have here obviously is that the mining industry and the LNG industry especially are high emitting, and energy intensive and so they'll be hit with this on top of the mining tax. The Gillard government's coming along saying 'well you make all this money, you can pay extra tax,' but they already pay royalties to the states, and that's a charge that we levy on companies to access our minerals.

Contrary to the views of the Prime Minister, the minerals actually belong to the state of Western Australia, and all the other states, with respect to their minerals. So they pay royalties to the states, and I think our revenue last year was about $4 billion. "Why separate the mining industry from the rest just because it's going through a good time?"

According to Moore, of the $38 billion expected to be produced from the MRRT, 65 percent will come from companies operating in Western Australia.

Cazaly Resources managing director Clive Jones strongly supported Moore’s position stating that any constitutional legal challenge against the tax would have strong support from other Western Australia resources companies, "absolutely - 100 per cent. We are considerably less than happy. However, although the concept of secession is attractive it is not a realistic option as all States need to agree - which is very unlikely given we're their breadbasket these days. Under the proposed tax liens of the MRRT and its potential impact on Cazaly Resources' profitability Jones observed, "Our modeling shows our total tax hike will rise from around 37 percent to 44 to 46 percent. Meaning there will be far less incentive to us to go mining."

Australian Premier Colin Barnett has refused to support Moore’s call for Western Australia to consider seceding from the nation over the carbon tax and Minerals Resource Rent Tax. Barnett said, “Norman Moore is a very good mines minister, however, he has over many years argued the case for Western Australia seceding. Can I make it absolutely clear as Premier, Western Australia has no plan and no intention of ever seceding from Australia."

And if the split occurs, how will the new government defend itself?
Easy said Moore, the new nation could form alliances with China and the U.S. to cover for a lack of an army, navy and air force.
Moore’s defense comments impelled Opposition spokesman Mark McGowan to state that Barnett should take a stronger line and pull Moore into line for his ''disrespectful'' and ''preposterous'' comments, remarking, ''The idea that you have China, the People's Liberation Army, as our defense force is frankly ridiculous and secondly dangerous. 'The third most powerful man in Western Australia talking about those sorts of ideas is a bit disturbing. When you have cabinet ministers saying ridiculous stuff that's offensive and you're the premier, you should take some action.''

While the secessionist concept at present remains precisely that, Canberra should take heed of Western Australia’s discontent and modify both the proposed MRRT and carbon tax schemes accordingly. The stakes are hardly minor, as according to the Australian Bureau of Statistics the total pre-tax profits earned by mining firms operating in Australia was more than $51 billion in 2009-10.

Canberra should not kill the kangaroo that lays the golden eggs.

By. John C.K. Daly of OilPrice.com

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