Mining groups have hit back at a push to abolish the federal diesel fuel tax credit scheme, saying it would harm industry competitiveness.

The Australian Greens have stepped up calls for the change after reports the Labor Environment Action Network was campaigning for Treasurer Jim Chalmers to strip miners of the tax credits.

Association of Mining and Exploration Companies (AMEC) chief executive officer Warren Pearce said this targeted campaign to cut the scheme should not be viewed as a way to fix holes in the federal budget.

“Diesel excise is collected from public road users, including industry, to support the repair and maintenance of the public road network,” he said.  

“Industries that use diesel, but not on public roads, pay the excise but receive it back through the diesel fuel tax credit scheme.

“The mining industry uses diesel on private roads on private minesites that it builds and maintains. Meanwhile, the drilling and exploration industry use diesel to explore and drill for minerals. Not to mention the agricultural sector that uses diesel to seed and harvest crops.”

Removing or capping the fuel tax credit on diesel for the mining industry would raise costs, increase inflation, weaken competitiveness and productivity, and hurt jobs, he said.

Australian Drilling Industry Association (ADIA) chief executive officer Jeff Miller said the scheme should not be mischaracterised as a subsidy, but understood for what it was: a targeted correction that ensured fairness in the tax system.

He warned that any blanket changes to the diesel fuel tax credit scheme would disproportionately affect drilling contractors and explorers, particularly small and mid-tier businesses operating on tight margins.

“The impact would be immediate,” Mr Miller said.

“Higher operating costs would flow directly through to fewer drilling programs, reduced exploration activity, weaker investment signals and lost regional jobs. Australia’s competitiveness as a destination for exploration capital would suffer.”

Minerals Council of Australia chief executive officer Tania Constable also stressed that the fuel tax credit was critical to the competitiveness of a diverse range of regional businesses reliant on diesel.

“Along with other regional industries, the MCA has campaigned for some years to retain the fuel tax credit in its current form,” she said.

“Ill-informed and misconceived attacks on the fuel tax credit, which according to reports today are being reheated in advance of the Federal Budget, are a direct attack on regional businesses and jobs.

“If fuel tax credits are scrapped, some of Australia’s most remote communities would face financial hardship and all Australians would face higher prices, job losses and weaker local businesses.”

National media outlets today reported that the Labor Environment Action Network had launched a grassroots campaign last week to overhaul mining fuel tax credits.

The campaign is tipped to ramp up before the party’s three-yearly national conference in Adelaide in June.

The Australian Greens have cited independent analysis of the fuel tax credit scheme  showing BHP recieves about $627 million a year and Rio Tinto about $416 million a year.

“If these handouts to coal and gas corporations survive the budget chopping block this year, that’s a clear red flag that Labor is prioritising corporate profits over people,” party leader Larissa Waters said.

“Australians are being told to tighten their purse strings while the government gives wealthy coal and gas companies hundreds of millions of dollars to buy diesel. It’s not good enough and it shows exactly where Labor’s priorities lie.

“At the last election the Greens were clear: taxpayers should not be propping up the pollution and profiteering of the coal, oil and gas industries.”

Darryl Daisley, a fuel tax expert and AMEC’s member representative on the ATO’s Fuel Schemes Stakeholder Group, said the mining industry had never shied away from innovation or adopting new technologies to reduce emissions.

“Take for example companies transitioning from diesel to gas and gas to solar generation for their energy, where possible,” he said.

“But the reality is, we operate in some of the most remote and extreme environments on the planet, with established diesel infrastructure.

“While the mining industry would love to roll out EV trucks, dumpers and diggers on minesites, the reality is that while suburban EVs might cut the mustard in the suburbs, they aren’t at the standard required in the extreme conditions we operate.

“That means the industry is still beholden to the internal combustion engine (and the diesel credit) for a little while longer.”

You may also like: