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Sent: Monday, 26 November 2001 2:46
To:
Subject: Fuel tax inquiry

We are writing to contribute this company's views in respect of the Fuel Tax Inquiry. De Beers Australia Exploration Ltd (formerly Stockdale Prospecting Limited) has been actively involved in mineral exploration, primary for diamonds, throughout Australia for more than 30 years. During that time its exploration expenditure has exceeded $300 million.

Mineral exploration is a high-risk activity, which has reduced outstanding benefits to Australia, and is particularly important in the more remote regions of the country. It is in many ways similar to industrial research and development, both being high-risk/high return activities. The value of the latter has been recognised in terms of government policy by a variety of rebate and assistance schemes over the last few decades. The importance of successful exploration can be gathered from the fact that roughly 50% of Australia's export income is derived from either mining products or oil and gas.

Both exploration and mining are heavily dependent on diesel fuel, as there are relatively few mines serviced by electricity grids or gas pipelines. Both the Association of Mining and Exploration Companies (AMEC) and the State based chambers of mines have provided substantial submissions for consideration by the Inquiry.

This company is concerned to ensure that there should be no reduction or erosion of existing benefits, as that was always intended to the government policy. Our industry supports the push to adopt cleaner fuels in the interests of an environmental protection, but this should be done by way of positive incentives rather than penalties. The cost of diesel fuel for off-road vehicles and camp generators makes up a significant proportion of the company's operating costs, and at a time when mineral exploration is struggling to retain its critical mass, any increase in the burden of taxation must be avoided.

Changes which affect the use of heavy plant and machinery need to be brought in in a manner which allows a phased introduction of new equipment, and the new standards must be assessed as to their practicability and economic impact. At this stage, it is far from clear when ultra-low sulphur diesel fuel will be available from the Australian refineries. The industry is expecting heavy haulage vehicles powered by alternative fuels to become increasingly common but these are not yet widely available, or economically competitive.

We also have concerns about the effectiveness of the Australian Taxation Office compliance strategy, and recommend that you consider the comments of the industry bodies in this regard.

To reiterate, we have a number of concerns that the Energy Grants (Credits) Scheme may be introduced in manner that potentially reduces explorers' entitlements through linkage to environmental penalties. We believe that the issue of environmental standards should be dealt with by a system of incentives rather than asserting qualifying standards to existing entitlements.

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Stuart Vercoe
Exploration Manager Australia

De Beers Australia Exploration Limited
ACN 004 912 172

15 Hanwell Way
Bassendean
Western Australia
6054
Australia
ph +61 8 9378 0017 fax +61 8 9378 0020 email
svercoe@debeersaustralia.com



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