Tuesday, 23 February 2016
Offshore Petroleum and Greenhouse Gas Storage Amendment Bill 2016; Second Reading
I rise to talk about the Offshore Petroleum and Greenhouse Gas Storage Amendment Bill 2016. As we all know, the oil and gas industry in Australia is of crucial importance in terms of not only our economy and jobs but also as part of Australia being an energy superpower and providing not only energy but also energy security to many of our trading partners. The amendments in this bill are required to resolve an issue in relation to an administrative oversight that has led to petroleum titles which are prior usage rights being renewed and extended under the Offshore Petroleum and Greenhouse Gas Storage Act 2006, the OPGGS Act, without the consent of the Minister for the Environment—as required under the Environment Protection and Biodiversity Conservation Act 1999, also known as the EPBC Act.
The oil and gas industry has acted responsibly at all times and this is merely an administrative oversight which we need to rectify. The department has contacted all affected titleholders and outlined the issues to them, and the joint authority members, delegates and APPEA have also been engaged and the issues have been discussed. It is important that at all times we have a structured and correct legislative framework. The industry is responsible and does behave in a very responsible manner, but we need to ensure that they are seen to be doing so and that the community has confidence in them doing so. It is important that the community has that confidence and also that there is transparency into the way these acts operate, both the offshore petroleum act and the EPBC Act. The confidence that Australians have in their resource industry is part of the success story that we have around the oil and gas industry.
The Department of Industry, Innovation and Science is developing a process and amending relevant protocols to ensure consent is obtained from the Minister for the Environment for any future decisions relating to the prior usage rights titles, and it has also commenced a broader review of processes relating to titles approvals. Later this year, it will also seek to progress further amendments to the OPGGS Act that will clarify the policy intent of the interrelationship between that act and the EPBC Act. So we have a situation where two government departments are already working closely together and have been for some time and, in terms of that process, we have seen a significant reduction in red tape and green tape. We have seen the establishment of NOPSEMA, the National Offshore Petroleum Safety and Environmental Management Authority, and the oversight that it provides the industry. There is not only the oversight; it also provides advice to industry to make sure it is compliant in terms of safety but, just as importantly, if not more importantly, also in relation to the environment.
There is confidence in investing in Australia in the oil and gas industry, which we all know is currently going through a very, very tough time. Globally, oil and gas prices are down, but the investment we have seen here will see Australia become the largest exporter of LNG in the world. Next week, I am hoping to travel with the shadow minister for energy and resources to Gladstone for the third commissioning of LNG plants. In that case, the LNG has come from onshore gas but the issues are much the same—that is, we need to ensure that we have reliability of production and supply but that it is done in a safe and environmentally friendly way. We need to continue to maintain that confidence from overseas investors. We need to ensure that these acts are executed in a way that delivers the outcomes that the government and the community expects but also that the industry has the confidence in. And we will continue to do that.
The Minister for the Environment has already presented this bill. I note that he has made comments that certain petroleum titles that intersect with the Commonwealth marine reserves have had their operating terms renewed without the consent of the Minister for the Environment. This oversight goes back to 2008. The industry understands this issue and is keen to have it rectified. So the minister has already introduced the legislation which I am speaking to today and the amendments will correct the administrative oversight.
The industry will continue to work with government to ensure that the legislation that they work under is world's best practice, an incredibly important factor in the confidence that not only the community expects but also the overseas investment community expects.
For a company to undertake activities within the title area, the applicant must attain approval from the independent regulator, NOPSEMA. But to continue operations when these titles expire after six years, the title must be renewed and extended, which is where the oversight came in. When they were renewed, the Minister for the Environment was not consulted correctly. To rectify the incorrect processing of these renewal or extension decisions as a matter of priority, the government will implement, with retrospective effect, amendments to the Offshore Petroleum and Greenhouse Gas Storage Act 2006 to deem these decisions to have been properly administered and, therefore, to have full effect. As a result, legitimate activities within these title areas will not be affected.
No-one likes to see a mistake, or an oversight in this case, but we do need to fix it in a way that gives both the community and the investors in the oil and gas industry the confidence that we run a rigorous framework around the world and gas industry. Yes, we have had our incidents. But in terms of how the industry has operated as a whole over a very long period of time, I think our safety and environmental record is enviable. So the coalition is supporting this legislation. I understand the opposition will also be supporting this legislation. It is a case of ensuring that things are done absolutely correctly and I commend the legislation to the House.
I acknowledge the former minister, the longest serving minister for resources our country has ever had, for the work that he has done to build this sector, for the work that he has done to make sure that Australia will be the world's leading LNG producer and for the work that he has done to make sure that our offshore and onshore hydrocarbons' production sector is not only a great place to work and environmentally safe but also a safe workplace.
This Offshore Petroleum and Greenhouse Gas Storage Amendment Bill 2016 comes about because of an administrative shortfall, not the kind of shortfall that can be described as being of no consequence. It is a shortfall that arises because of an administrative oversight by the government of which I was a minister, and I apologise for that. I apologise because this oversight, this shortfall, this lack of consistent dealing consistent with the act's fine requirements, was first exposed to the government in 2011 and we, and I, did nothing to attend to it then, placing an onerous obligation on the current government to act in a legislative way to retrospectively repair that flaw.
None of us like retrospective legislation. It was required in this context simply because of the timing of our knowledge and understanding, and the lack of previous action. That is also why the government, in consultation with the opposition, issued a press release on 10 February—issued after the close of markets—advising of the presence of this flaw and the remedy for dealing with it. That media release indicated that it was understood that the legislation would pass with the support of both sides of the House.
I have been assiduous in making sure that all my public comments are to understand that at no point were any environmental standards at risk and at no point was this lapse of public administration a title risk, a safety risk or an environmental risk; it was indeed an administrative shortcoming and an oversight that should not have happened.
As I say, the departmental records indicated that the Department of the Environment and the Department of Resources were aware of the issue as long ago as 2011 and they had intended to progress amendments to the EPBC Act through the parliament. The issue was not resolved as agreed prior to the proclamation of the marine reserve network in November 2012, and subsequent departmental staffing changes resulted in this issue not being adequately monitored and not being adequately remedied at the time.
Offshore petroleum operations in Australian waters are governed by the OPGGS Act and related acts and regulations. The joint authority is responsible for key petroleum title decisions in Commonwealth waters, including the grant and renewal of offshore petroleum titles, the suspension of title conditions and the extension of a title's term. All title-related decisions impacted by the EPBC Act issue are actually decisions made under the OPGGS Act. The joint authority for an offshore area of a state or the Northern Territory is constituted by the responsible state or Northern Territory minister and other responsible Commonwealth ministers.
Offshore petroleum exploration is only permitted under a petroleum exploration title. A petroleum exploration title is granted for an initial six-year period and may be renewed for two additional five-year periods. In addition, titleholders can also apply to the joint authority for a suspension of the title conditions and an associated extension to the term of the title in order to facilitate variations to the work program under the title. When we became aware of this flaw and the need to take urgent action, legal advice from the Australian Government Solicitor indicated that they were petroleum titles and that renewal and extension decisions had been made without the environment minister's written consent. This, of course, as I said, extended from a Labor government's failure—and I apologise for that. It is an issue that did not have an impact on the environmental regulation or the environmental requirements associated with titles or work programs consistent with those titles.
The Offshore Petroleum and Greenhouse Gas Storage Amendment Bill 2016, this bill, will amend the Offshore Petroleum and Greenhouse Gas Storage Act 2006 to validate past joint authority decisions to grant renewals or extensions of petroleum titles which also have prior usage rights. Joint authorities generally comprise the responsible state and Commonwealth authorities. Subsection 359(3) of the EPBC Act requires that a title, permit, lease or licence that is a prior usage right must have the written consent of the Commonwealth environment minister or their delegate before the usage right can be renewed or have its term extended. That written consent was not provided.
A petroleum title is a prior usage right under the EPBC Act if the title was in force on the date of the proclamation of a Commonwealth marine reserve that overlaps that title area. Titles that are prior usage rights are exempt from having to comply with the provisions of the EPBC Act and regulations that relate to a Commonwealth reserve or of a management plan for that reserve. There have been three relevant Commonwealth marine reserve proclamations that have led to petroleum titles becoming prior usage rights. They are the proclamation of the south-east Commonwealth marine reserve in 2007; the proclamation of the Commonwealth marine reserves in the south-west, north-west, north, temperate, Coral Sea regions in November 2012; and the reproclamation of Commonwealth marine reserves in the south-west, north-west, north, temperate east and Coral Sea regions in December 2013.
The administrative oversight that led to the exposure of the prior usage rights issues is something that had been revealed to the government through its own internal audit processes, and it was later revealed to operators themselves through their own audit processes. What I would say to companies operating in this field—and I know that a number of companies had identified this shortcoming themselves—is that if you are carrying out exploration in our offshore you should have checked your titles, you should have checked the administrative details yourselves. You should have checked to make sure that the audit processes that you run yourselves are as good as those audit processes which the Commonwealth of Australia runs.
The fact that they were identified by a couple companies is in and of itself alarming to me, since all companies operating in the area should be constantly monitoring their leases, their titles and the legal basis for them to ensure that they are above challenge, because the challenge here can be a mischievous challenge. The challenge here can be a challenge to simply stop an exploration activity for political purposes. So all of our interests are served by good companies ensuring that their exposure is as slight as possible and that their compliance is complete.
I am really proud that the government's own processes identified these shortcomings. I am embarrassed that I as a minister participated in these shortcomings, and I apologise for that. But I am really pleased that, having identified the shortcoming, we are able to be absolutely transparent, absolutely upfront and very clear with the Australian people, with our companies, with interested public stakeholders and our communities and to say: 'We found a problem. We have identified it; we have done it upfront and, in the most transparent way, we are fixing it to preserve, firstly, the integrity of our regulation system and, secondly, the property rights of those people operating in these areas.' I commend this bill to the House. It enjoys bipartisan support, as it should. I thank the government for bringing this to the attention of the parliament so that it can be dealt with in an orderly fashion that ensures the continuation of good public administration and good practices in the management of our offshore title system.
I thank members for their very gracious contributions. The Offshore Petroleum and Greenhouse Gas Storage Amendment Bill 2016, the bill, will validate certain title extension and renewal decisions made by the Offshore Petroleum and Greenhouse Gas Storage Act 2006, the OPGGS Act.
In Australia, offshore petroleum exploration and development is regulated by a title system, authorising titleholders to carry out petroleum operations in Commonwealth waters. A petroleum title granted under the OPGGS Act is defined as a 'prior usage right' for the purposes of the Environment Protection and Biodiversity Conservation Act 1999, the EPBC Act. If the title was in force immediately before the proclamation of a Commonwealth reserve that overlaps the title area, under the EPBC Act it is stipulated that such a usage right may only be extended or have its term renewed with the consent of the Minister for the Environment. A recently identified administrative oversight, extending back to 2008, led to certain petroleum titles being renewed or extended under the OPGGS Act without the Minister for the Environment's consent being sought, as is required under the EPBC Act. Without legislative amendment, there is a question as to the validity of the relevant extension and renewal decisions made under the OPGGS Act. The amendments proposed in the bill are, therefore, curative measures designed to validate the affected title decisions. Amendments to validate affected decisions are the only way to satisfactorily eliminate the risk of affected divisions posed for title holders.
Despite the aforementioned administrative oversight on affected title decisions, the government is confident that all petroleum titleholders have undertaken their activities in good faith. They have continued to be subject to and compliant with the stringent environmental management requirements set out under the OPGGS Act and environmental regulations. The government is committed to applying international leading practice in the regulation and management of environmental safety and integrity risks associated with offshore petroleum operations.
Question agreed to.
Bill read a second time.