Australia mining tax enters parliament, fate in doubt

CANBERRA Nov 2 (Reuters) - Australia's government brought its new mining tax to parliament on Wednesday amid growing risks that the legislation will be blocked or get bogged down in a renewed debate over the hugely profitable mining industry.

The minority government needs independent lawmakers to support the 30 percent tax through parliament, as part of a package of fiscal reforms. But the crossbenchers all want amendments that could see the bill delayed or even defeated.

"I've made it plain that unless something is done in terms of the issues that are out there at the moment ... that I won't be supporting the legislation," said Tony Windsor, a rural independent who has concerns over inroads being made into prime farming areas by the mining industry.

The government wants to slap the proposed tax on big iron ore and coal miners as part of reforms designed to balance its budget and reallocate wealth from the mining industry, now enjoying the biggest boom in a century, to other sectors.

The tax, to apply from the next fiscal year starting in July, is being closely watched by other resource nations and the government says it will ensure Australians get a fairer return from the mining boom, being fed by near insatiable Asian demand.

"Our coal often fires overseas furnaces, our iron ore forged towers under different stars -- and a large part of the profits flow to foreign shareholders," Assistant Treasurer Bill Shorten told the lower house of parliament.

"For the first time in this nation's history, we can be sure that every Australian will benefit from our valuable mineral heritage. Our non-renewable natural resources will finally benefit ordinary Australians," Shorten said.

But Prime Minister Julia Gillard, in the top job for barely a year, has been under siege from the opposition over her plans for new carbon and mining taxes and for dealing with asylum seekers, and the opposition needs only one lawmaker from the government side to switch support for bills to be defeated.

COAL-SEAM GAS CLOUDS TAX DEBATE

The tax is forecast to raise A$7.7 billion ($7.9 billion) in its first two years from July 1 next year, helping to return the budget to surplus by fiscal 2012-13.

It would also help fund a 1 percentage point cut in the company tax rate to 29 percent, which is portrayed as a boost for non-mining sectors, especially those hit hard by a strong local currency.

But independent lawmaker Windsor, an in-principle supporter of the new mining tax, has recently changed his stance and now wants a moratorium on exploration by the burgeoning coal-seam gas industry as a condition of his backing.

Losing his vote would spell the end of the tax.

Windsor wants up to A$400 million set aside from the mining tax to fund studies on the environmental impact on farming land and water catchments from coal-seam gas extraction. He also wants stronger powers for the national government to override state government approvals for coal seam projects.

Australia has large reserves of coal-seam gas and energy companies have around A$70 billion worth of projects underway and on the drawing board in Queensland state alone.

But the industry is becoming a new political battleground that Gillard's unpopular government cannot afford.

Protesters have blockaded properties to prevent access to exploration, concerned about possible water pollution and water supplies from the extraction of gas from coal deposits.

Other independents also want changes to the tax, with one calling for amendments to protect smaller miners which complain the tax was framed to favour major miners BHP Billiton , Rio Tinto and Xstrata .

The three miners agreed last year to drop a pre-election political campaign against the tax after negotiating a watered down version of the original tax proposal with the government.

"I've got no intentions of breaking our word with the mining industry," Resources Minister Martin Ferguson said on Wednesday, when asked if he would bow to demands from the independents to amend the tax legislation.

But Ferguson left open the door to a separate deal on coal-seam gas to appease Windsor and another independent. "These issues are capable of being worked through," Ferguson said.

The government wants to push the tax through the lower house by end-year, so the Senate can vote on it in February.

The conservative opposition, ahead of the government in opinion polls, has vowed to repeal the tax if it wins elections due in 2013.