Fortescue chairman targets major miners in bid to phase out diesel fuel rebate

Fortescue Metals Group Ltd. Chairman Andrew Forrest's proposal to phase out a multibillion-dollar federal diesel fuel rebate is only targeted at major mining companies to end their diesel use, allaying industry fears that explorers would be hard-hit should the whole scheme be scrapped.

Forrest's proposal urges the government to start phasing out the scheme between 2025 and 2030 and "only to the largest mining and energy companies," Forrest said in a Nov. 23 statement to S&P Global Market Intelligence from Fortescue Future Industries Pty Ltd., or FFI, the subsidiary through which Fortescue invests in green energy.

Fortescue Metals Group Chairman Andrew Forrest. Source: Fortescue Metals Group

"Approximately 70% of the A$7.8 billion diesel fuel rebate goes to a handful of major mining and energy companies, costing the taxpayer approximately A$5 billion annually and rising," Forrest said in the statement.

Under the scheme, companies can claim tax credits for petrol, diesel, kerosene and liquid petroleum gas used in machinery, plant, equipment and heavy vehicles, according to the Australian government. Activities eligible for the rebate include road transport, construction, manufacturing, agriculture, electricity generation and industrial furnaces.

"Phasing out the diesel rebate will give the government the choice of using the money saved to retool Australia to utilize green agriculture, green hydrogen, green ammonia and green electricity" instead of imported fossil fuels, which are "rapidly becoming redundant [and] polluting."

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Small business fears

"I am acutely aware that farmers and other small businesses rely upon this rebate, and I have never suggested that they should have it taken away," Forrest clarified.

This addressed fears expressed by the Association of Mining and Exploration Companies, whose CEO Warren Pearce said small explorers who often take the risk to find the metals of the future would be among the hardest hit should the scheme be scrapped entirely.

Diesel use is "one of the biggest things that will be hard to fix in the decarbonization picture," as technologies like renewable energy, which make a big difference in emissions reduction, require "quite substantial infrastructure or be part of a grid," Pearce said in an interview.

Small companies operating "in the middle of nowhere" do not have an opportunity to be part of the grid, Pearce said in an interview, responding to the initial report suggesting that the proposal called for phasing out the whole fuel tax credit scheme.

"It is not an exaggeration to say that the proposed phasing out of the diesel fuel tax credit would lead to regional job losses," Pearce said in a Nov. 22 statement. "Hundreds of exploration and mining companies have no choice to use anything other than diesel for mobile and remote operations."

Off the grid

Generators of off-grid electricity proliferate across Australia, and energy access is restricted in regions beyond metropolitan areas, according to the Fuel Tax Credit Alliance's website. The alliance comprises nine industry groups, including mining, agriculture, maritime and tourism.

A recent data pull by Market Intelligence revealed that most of the owned power generation of Western Australia's mining sector is gas-powered.

Scrapping the scheme would "create a new tax for many of Australia's industries, undermine their competitiveness and adversely impact thousands of jobs in regional Australia," according to a Nov. 22 statement from the Minerals Council of Australia, or MCA. Fortescue is not an MCA member, but is part of AMEC.

Such a move would "introduce a tax distortion by imposing a levy on industries that are reliant on diesel fuel to generate power and operate heavy machinery off-road or in heavy on-road transportation vehicles," the MCA said.

However, Forrest warned against "complete dependence" on foreign and often unreliable supplies. "Right now, our only choice is to run our business on expensive, imported oil and diesel."

"Australia has an opportunity to create all its own energy and export its sun and its wind to global markets but only if our government acts quickly to create an environment where renewables can prosper and where the odds are not stacked against them by outdated fossil fuel subsidies," Forrest said.

"Pollution-free energy and fuel can be made entirely at home, not imported, and by 2025, this hypothesis will be proven," Forrest said.