Wednesday, 28 March 2018
Offshore Petroleum and Greenhouse Gas Storage Amendment (Miscellaneous Amendments) Bill 2018; Second Reading
That this bill be now read a second time.
This bill contains important measures making amendments to the Offshore Petroleum and Greenhouse Gas Storage Act 2006.
The bill will transfer regulatory oversight for offshore greenhouse gas storage environmental management and well operations from the responsible Commonwealth minister to the National Offshore Petroleum Safety and Environmental Management Authority, or NOPSEMA. Currently, NOPSEMA is the regulator for offshore petroleum environmental management and well operations.
The reason for the division of petroleum and greenhouse gas responsibilities is largely historical. NOPSEMA did not have any environmental management functions in 2008, when the greenhouse gas regulatory provisions were introduced into the act. With the potential for an increase in greenhouse gas storage activities in future, there is a renewed focus on the adequacy of regulatory arrangements.
NOPSEMA has developed expertise in the regulation of offshore environmental management and well operations through its responsibility for regulation of offshore petroleum activities. The Australian government therefore proposes to transfer regulatory oversight for offshore greenhouse gas storage environmental management and well operations from the minister to NOPSEMA. This will ensure we have an experienced and independent regulator for offshore greenhouse gas operations. The proposal will be effected through a suite of amendments.
The minister will retain responsibility for major resource related decisions concerning the granting of greenhouse gas titles, the imposition of title conditions and the cancellation of titles, as well as core decisions about resource management and resource security.
The amendments in this bill will also strengthen and clarify the powers of NOPSEMA inspectors to determine whether regulated entities are compliant with their obligations under the act and associated regulations.
The amendments will expand and clarify the categories of premises that inspectors may enter without a warrant to monitor compliance with environmental and occupational health and safety obligations. This will include premises of a body corporate that is related to a titleholder, such as a parent company which may make decisions about operations carried out under that title. It will also include the premises of titleholders' contractors, including entities who have agreed to provide response equipment in the event of an oil spill.
The amendments in this bill will also enable inspectors to undertake inspections without a warrant to monitor compliance by titleholders with well integrity related obligations under the act and regulations, equivalent to existing powers that inspectors may exercise to conduct environmental or OHS inspections.
In the context of a high-hazard industry, it is particularly important that the regulator has sufficient powers to ensure regulatory obligations are being complied with. Noncompliance may increase risks to health or safety or to the environment, with potentially serious consequences. Given the difficulty in accessing offshore facilities and changes to titleholders' operational decisions on the timing of well activities, the requirement to obtain a warrant may impede NOPSEMA's ability to conduct inspections. It would also impede NOPSEMA's ability to respond quickly in an emergency.
Inspectors will still be required to obtain a warrant before exercising any powers to search for or gather evidence of contraventions of provisions.
The bill further amends the act to introduce enforceable undertakings. This will enable the minister, the National Offshore Petroleum Titles Administrator and the CEO of NOPSEMA to accept and enforce undertakings in relation to compliance with provisions of the act and regulations, as part of a graduated enforcement framework.
Although regulators currently have access to a range of enforcement tools, enforceable undertakings offer a unique benefit. While existing tools can require a duty holder to cease an activity or reach a minimum standard of compliance, enforceable undertakings can go beyond this to effect meaningful changes to overall compliance culture.
Enforceable undertakings allow the regulator to secure more timely and cost-effective outcomes than a prosecution. For example, a prosecution may take months or years to achieve a result, whereas an enforceable undertaking can require the duty holder to take steps to comply as soon as the undertaking has been accepted by the regulator. Enforceable undertakings remove the need for the regulator to pay the potentially sizeable costs associated with prosecutions. Undertakings also enable the regulator to tailor the enforcement response, taking specific titleholder and broader industry considerations into account.
The bill also amends the act to retrospectively designate particular areas as 'frontier areas' for the purposes of the designated frontier area tax incentive, to correct a recently discovered historical administrative oversight.
The DFA tax incentive was designed to encourage petroleum exploration in Australia's remote offshore areas. It was active between 2004 and 2009. Under the scheme, the resources minister could designate up to 20 per cent of each year's offshore petroleum acreage release areas as 'frontier areas'. Where a permit was awarded over an area designated as a frontier area, the registered holder or holders of the permit could claim up to 150 per cent of exploration expenditure as a deduction for the petroleum resource rent tax.
Under the Petroleum Resource Rent Tax Assessment Act 1987, the resources minister was required to formally designate frontier areas in writing. Due to an administrative oversight, this requirement was not met for the 2005 acreage release. As a result, four petroleum exploration permits were awarded over areas promoted in 2005 as frontier areas which were not validly designated.
This bill will amend the act to retrospectively designate these areas as frontier areas. This will remove any doubt that the relevant titleholders are entitled to the uplifted PRRT deductions. No persons will be disadvantaged by retrospective application.
Overall, this bill underscores this government's ongoing commitment to the maintenance and continued improvement of a strong and effective regulatory framework for offshore petroleum and greenhouse gas storage, and to ensuring the regime's currency and alignment with international best practice.
I commend this bill to the chamber.