Patrick Gorman (Perth, Australian Labor Party, Shadow Assistant Minister for Western Australia) Share this | Link to this | Hansard source

On behalf of the member for Brand, who will be speaking shortly by teleconference, I move:

That all words after "That" be omitted with a view to substituting the following words:

"whilst not declining to give the bill a second reading, the House notes that:

(1) the Government has known about the impending decommissioning of a range of offshore assets in Australian waters since it was first elected eight years ago;

(2) while this legislation compels the National Offshore Petroleum Safety and Environmental Management Authority to regulate the financial assurance capabilities of offshore oil and gas producers, the Government has not provided any additional funding to the agency to undertake this critical task;

(3) the current legislation fails to include a comprehensive definition of what the permitted alternatives to complete removal requirements will be, making it possible for pipelines and concrete structures to be left in place without certainty over environmental, safety and well integrity outcomes; and

(4) the Government's lackadaisical approach to decommissioning reform has resulted in Australian taxpayers footing the bill for the Northern Endeavour fiasco, which has to date wasted $210 million of public money".

Kevin Andrews (Menzies, Liberal Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Meryl Swanson (Paterson, Australian Labor Party, Shadow Assistant Minister for Defence) Share this | Link to this | Hansard source

It is seconded. I reserve my right to speak.

Madeleine King (Brand, Australian Labor Party, Shadow Minister for Trade) Share this | Link to this | Hansard source

[by video link] I thank the member for Perth and the member for Paterson for moving and seconding my second reading amendment in my absence. Briefly on indulgence, I would really like to thank the Speaker and all the presiding officers as well as the Department of Parliamentary Services, especially those in the broadcast team, for being able to organise my first remote access into this parliament from my electorate office in Rockingham, in the seat of Brand. Thank you very much.

Today, on behalf of the Labor Party, I am speaking in support of the Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021 as well as the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021. Again, I note the second reading amendment, particularly point 4: the government's lackadaisical approach to decommissioning reform which has resulted in Australian taxpayers footing the bill for the Northern Endeavour fiasco, which has to date—as the member for Perth noted—wasted over $210 million of public money.

I for one am very glad that the government has finally accepted the need for reform in this crucial policy area, the decommissioning of offshore oil and gas assets. The minister argues that the time is now ripe for Australia's regulatory framework to catch up with demand. But I would ask: Why now? Why not two years ago? As with many things with this government, they are far more concerned with the announcements and political stunts rather than meaningful reform in the interests of all Australians. This government, which has been in power for nearly a decade, had to wait for the Northern Endeavour fiasco and bail out disaster to address the glaringly obvious reform that is required. The government weren't the ones to foot the bill for this problem; it is the Australian taxpayer that foots the bill for this problem. If it wasn't for the Northern Endeavour fiasco falling at the foot of the government, would they have acted at all? I question that entirely.

I will take us through the background of what's happened here in the lead-up to bringing this bill to this parliament. To explain, decommissioning is a process through which all equipment, infrastructure and wells associated with petroleum and gas activity are safely removed when no longer used or required. Currently, the complete removal of infrastructure and the plugging and abandonment of wells is the default decommissioning requirement under the Offshore Petroleum and Greenhouse Gas Storage Act. This is entirely consistent with Australia's international obligations, primarily under the United Nations Convention on the Law of the Sea and the London Convention associated protocol, to remove disused installations and structures to preserve and protect the marine environment.

Options other than complete removal may be considered; however, the titleholder must demonstrate the alternative decommissioning approach delivers equal or better environmental safety and well integrity outcomes compared to complete removal and that the approach complies with all other legislative and regulatory requirements. However, this is set out only in guidelines, and the legislation at hand does not adequately define the criteria by which alternative decommissioning approaches will be permitted.

The risk here is that unscrupulous facility owners will seek to avoid costs and may seek to leave pipelines and other structures in place. This opens the door for producers to undertake a less than full and complete removal, where they opt to repurpose petroleum exploration infrastructure to become an artificial reef. On the face of it, that seems kind of okay. But we cannot let producers have free rein to use a pretend environmental fig leaf to cover up what they have put on the seabed to avoid their responsibilities and of course the great expense that goes with that.

There is no doubt that leaving infrastructure in the sea is a less expensive option for producers; however, it does carry environmental risks that need to be rigorously assessed. I accept that, in the right circumstances, artificial reefs that build up over gas infrastructure can provide a habitat for a range of different species. Once corals and invertebrates make themselves at home they produce additional biomass in the food chain, creating a food source for fish and other marine species. I note, for example, that WA has six purpose-built artificial reefs, with a location spread from Esperance to Exmouth. Nevertheless, it is critical that the complete removal of assets remains the undisputed objective of proper decommissioning of these gas and petroleum assets.

Currently, it is the titleholder that identifies and then collates the information necessary to assess or evaluate the different options for decommissioning petroleum infrastructure via an environmental plan. As you can imagine, maintenance of and the subsequent decommissioning of offshore petroleum assets is a costly enterprise. That is why government oversight is critical—to ensure that titleholders have the financial capacity to actually do it. Until now, business deals brokered by cowboy operators have been able to go on unabated with little attention by the government on what the end result may end up being.

It's really important to put on the record, and I will do so, what has happened to the one such example that is far too big to ignore and that has brought on this legislation—that is, the Northern Endeavour-Northern Oil and Gas Australia incident. For members and for the Hansard record, the background is that the Laminaria-Corallina oilfields are situated approximately 550 kilometres offshore from Darwin, as is the associated Northern Endeavour floating production storage and offtake facility, the chief infrastructure for extraction and development. Production of Northern Endeavour and associated wells commenced many years ago, in 1999. By 2015 the titleholder for the fields was a joint venture of Woodside and Talisman Oil and Gas, with Woodside operating the Northern Endeavour.

In 2015 Woodside announced its intention to cease production from the Northern Endeavour in the second half of 2016, and moved to decommission the field soon afterwards. However, before the decommissioning could occur, Woodside sold its share to its joint venture partner Talisman, which later became known as Timor Sea Oil and Gas Australia; they have been acquired by Northern Oil and Gas Australia. The sale was facilitated through the regulator, NOPTA, and was perfectly allowable in the current legislative environment. At the time, NOPSEMA identified concerns about Timor Sea Oil and Gas Australia's capability and capacity to respond to an oil spill—an obvious and fundamental titleholder responsibility. This led to a formal intervention and enforcement matter just three days after TSOGA became the titleholder. TSOGA and its contractors were unable to convince NOPSEMA, as the regulator, that it had identified the baseline of the corrosion hazards on the facility or undertaken the subsequent assessment prioritisation and planning to address those risks.

By 2019 NOPSEMA had lost confidence in the ability of the titleholder and the operator to fulfil their statutory obligations and resolve the identified concerns of the adequate safety and environmental management of the Northern Endeavour facility. An environmental inspection identified that TSOGA could not demonstrate sufficient financial assurance to cover its liabilities in the case of an oil spill, and this required prompt regulatory enforcement to resolve. As a result NOPSEMA issued a prohibition notice on the contractor on 10 July 2019 and a general direction on TSOGA on 18 July 2020, enforcing the cessation of production on the Northern Endeavour until a range of longstanding serious issues were resolved, particularly relating to the corrosion on the facility.

The Northern Oil and Gas Australia association group was loss making and had not generated a net profit after tax for the past four consecutive years. Essentially, the companies could not afford to maintain let alone decommission the Northern Endeavour asset. On 20 September 2019 the Northern Oil and Gas Australia Pty Ltd group of companies went into voluntary administration, and subsequently, on 7 February 2020, went into liquidation. This was when the government knew it had to step in. The Commonwealth set up the Northern Endeavour Temporary Operations Program, taking control of the facility until a longer-term solution could be found. To date, from that time, it has cost at least $210 million to maintain the vessel, all at the expense of the Australian taxpayer, and costs are still mounting.

This is at a time when the industry is battling on multiple fronts against some activist extremists that like to push their own agendas, and when a social licence to operate in oil and gas, particularly offshore oil and gas, is absolutely pivotal. The industry is faced with cleaning up a mess, and it will do this via a proposed levy across the whole industry. The bills we're speaking of today do not impose the levy, and I understand that consultation on that rate is ongoing and will come forward in another piece of legislation. That levy will apply to the whole industry to fund the decommissioning of the Northern Endeavour, and we look forward to seeing legislation on that in due course.

I want to add that Labor recognises the key role gas plays in creating economic growth and export income for Australia. Labor recognises the many thousands of good jobs the industry creates and sustains. We understand the importance of gas as a critical feedstock for Australia's manufacturing industry, as well as in electricity generation and in providing the energy that millions of Australian households need for heating, cooking and their everyday activities. We recognise and acknowledge the role of natural gas as a transitional fuel and in capitalising on renewable energy opportunities. And we support opening up new gas reserves, subject to independent scientific assessments, effective environmental regulation and effective and authentic consultation. Gas will play a major part in reducing carbon emissions in Australia and will assist our regional neighbours on their own journeys to decarbonisation as they seek cleaner-burning fuels as part of their energy mix. I might also add that the decommissioning bill will provide many jobs as well in the oil and gas sector for the work that will be required to bring these facilities to an end safely and to remove them from the seabed. That's an important part to think about when we talk about this bill.

I will go to more of the detail of the bill. It strengthens Australia's offshore oil and gas regulatory regime to ensure that emerging decommissioning challenges facing the industry will be managed effectively, and it addresses a loophole that fails to ensure that the costs of decommissioning an offshore project remain with the entity or the entities who were responsible for, or had the capacity to, influence how that decommissioning might happen. The bill aims to strengthen the framework of decommissioning from cradle to grave and to better protect the marine environment and the taxpayer from bearing very high costs. These are important objectives, but I would also point out again how important it is to remember the significant jobs that will emerge out of the highly specialised work that has to go on and which will be drawn from an already highly technical oil and gas workforce.

In pursuing successful decommissioning and the jobs it creates we must also be mindful of the workplace safety requirements that will need to be enforced to keep this dangerous workplace safe. The bill increases regulatory oversight and scrutiny by providing for specific decision-making criteria at decision points across the OPGGS Act to ensure that entities are suitable on entering into the regime and remain suitable throughout the life of the project. It expands the type of information that may be requested by the relevant decision-maker from the applicant or the applicants seeking to enter into or to progress through the oil and gas regime.

There are four key pillars to the bill which provide oversight for changes in the control of titleholders through corporate merger acquisition. The sale of an offshore project is meant to be captured as the transfer of the title related to the project, which is already provided for under the act. It is also common for the industry, both in Australia and overseas, for an offshore project to be transferred by the sale of shares in the company which is the titleholder. Such transactions are not captured by the current act because there is no transfer of the interests to the title or titles. The bill provides a specific decision-making criteria and expanded information-gathering powers to assess the suitability of entities that want to go through our oil and gas regime, and the bill includes minor and technical amendments to improve the operation of the acts, including—at last—enabling electronic lodgement of applications.

Very importantly, this bill mandates trailing liabilities—expanding existing powers to call back, literally, previous titleholders to decommission infrastructure and to remediate the marine environment in a title area where the current or immediate former titleholder is unable to do so. It aims to ensure that the risks and liabilities of the petroleum and gas activities remain the responsibility of those who held, or had the ability to influence, operations under the title. It also aims to change industry behaviour by increasing the due diligence undertaken by companies regarding who they sell these assets to. This is best practice on the global stage and it is very good that at long last Australia has now introduced into its regulatory regime world's best practice.

In coming decades, there will be a number of offshore projects which will have exhausted their reserves and will require decommissioning. This is a normal part of the resource development lifecycle. With an estimated $60 billion in anticipated decommissioning liabilities falling due over the next 30 years, the government needs to ensure that it can call upon former titleholders to decommission and remediate the area in the event that the current titleholder is unable to do so. Labor understands that the industry, led by APIA, is comfortable with these proposed reforms. We are a little concerned that, while NOPSEMA acts as an regulator under the act and will continue to oversee decommissioning activities in the Commonwealth waters, there's been no additional funding allocated to the agency to carry out these extra tasks. We need to ensure our regulatory agencies are appropriately resourced to continue their vital work and this extra work. It's pivotal that we get this right. As the world continues to power towards decarbonisation, the management and eventual retirement of these assets will be absolutely critical. It's critical to the marine environment and critical, of course, to the whole gas industry being able to retain its social licence to operate offshore in Australian waters.

While I believe this legislation has taken too long to get to parliament, I'm glad that it is here. I believe it can be improved to ensure full removal of facilities at the end of their life. Although we have some reservations about the effectiveness of the current legislation, we do support it to ensure Australians receive the assurances they require to ensure offshore oil and gas facilities are safely and appropriately decommissioned and removed.

To conclude, I want to endorse the second reading amendments moved by the member for Perth and seconded by the member for Paterson, and I thank them for supporting me in relation to this bill. I thank the House.

Kevin Andrews (Menzies, Liberal Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Perth has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The question before the House now is that the amendment be disagreed to.

Vince Connelly (Stirling, Liberal Party) Share this | Link to this | Hansard source

It's a real pleasure to rise today and speak on the really important Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021. I would like to start by acknowledging the comments from the member for Brand, who thankfully just made such a sensible contribution. She talked about the important role of natural gas as a transition fuel. I'm deeply pleased to hear that sort of commonsense approach. I certainly hope that the member for Brand is able to convince many more of her colleagues in the Labor Party and of course their business partner the Greens, many of whom absolutely demonise hydrocarbons in any form. This is a deeply irresponsible position to take. I certainly note the efforts of our wonderful Minister for Energy and Emissions Reduction with our Technology Investment Roadmap. With our Technology Investment Roadmap, we are looking at that transition towards a lower carbon future, but we are doing it absolutely responsibly. We're doing it through technology and not through taxes.

I have a little bit of experience in the oil and gas sector. After my first career as an Army officer over about a decade, I spent almost a decade and a half in the mining and oil and gas sector. The roles that I had were to lead risk management programs, business continuity planning, which is obviously extremely important, and risk and crisis management. I have worked with companies like BHP, Chevron and Woodside Energy as well. I've been out to the sources, the actual gas fields, I've walked the processing facilities, and I've even driven the pipeline from the north of Western Australia, where those important hydrocarbons are transported, down to Perth and beyond—that natural gas which we all use in and around our homes and we know is so important. For over half a century, our oil and gas sector has really supported economic growth and jobs right here in Australia. We are the second-largest exporter of LNG in the entire world, and we see those benefits flowing through to our families, our communities and, of course, our economy. For the same thermal output—for the same amount of energy—natural gas burns at half the carbon dioxide output of coal. That just helps put into perspective how important natural gas is as a transition fuel as we move towards that lower-carbon future.

We have continued, on the back of a strong oil and gas industry, to develop and grow our economy. This is important, obviously, because this is the future that we'll be passing to our children. This is the future in which we will see manufacturing and other energy-intensive industries be viable. And also, of course, it's this investment in a strong economy that will help underpin our continued provision of adequate defence capability, helping to keep Australia sovereign and secure in the complex and challenging world ahead. As a country, it's crucial that we also remain prepared to respond to future challenges in the oil and gas sector. This includes decommissioning of offshore facilities, wells and pipelines which have exhausted their reserves. It's equally important that this is done with effective regulatory oversight and with the utmost safety to ensure protections for Aussie taxpayers, workers and the environment.

Whilst we are seeing the end of a life cycle for some facilities in coming decades, it's also a time when we are seeing exciting new ventures and new players enter the field—smaller companies that provide a fresh perspective and a different risk profile. This includes the development of the $10 billion Scarborough gas project off the coast of WA, which is set to deliver 3,200 jobs during construction, and the Dorado oil project, also off the coast of WA, which is another significant investment expected to create hundreds of jobs over the next decade whilst also being one of the lowest emission intensity oil projects in the region.

This bill will strengthen Australia's already successful offshore oil and gas industry by providing stronger regimes to address regulatory shortcomings and to reduce the risk of another incident like the Northern Oil & Gas Australia incident occurring. Implementing aspects of the Morrison government's enhanced offshore oil and gas decommissioning framework, this bill ensures that decommissioning is managed effectively by businesses involved in oil and gas development. It's these companies operating in Australia's offshore oil and gas regulatory regime that will be entirely responsible for making sure that their projects are capable and competent, in turn protecting taxpayers and the environment.

This bill provides for better government oversight of transactions involving a change in control of a petroleum or greenhouse gas titleholder through a merger or takeover. Such transactions are not currently captured by the act because there is no transfer of the interests of the petroleum title or titles. But, under this legislation, failure to obtain regulatory approval for this type of corporate transaction could now result in a significant civil penalty. In addition, the title can now be cancelled. This approach is consistent with similar regimes across the Commonwealth in acting as a deterrent to corporate misconduct. It's important that we also have the capability to call upon former titleholders to amend problems that a current owner or operator is unable to amend or that they have left behind, also known as a 'trailing liability'. As the act stands now, only an immediate former titleholder can be directed to decommission or remediate an area. But, with an estimated $60 billion in anticipated decommissioning liabilities due over the next 30 years, it's vital that this government has the power to make these directions. It must be made clear, though, that trailing liability is a measure of last resort where all other options have been exhausted. It ensures risks and liabilities remain in the hands of those responsible for developing the project. It sets an expectation that sellers will undertake due diligence before selling titles and assets to avoid being called back to decommission and remediate title areas in years to come. Not only this, it also reduces the environmental, health and safety risks associated with the abandonment of assets and ensures the financial obligations of decommissioning won't fall on the Australian taxpayer.

This bill increases regulatory oversight and scrutiny by providing specific decision-making criteria to ensure entities remain suitable to undertake petroleum project activities. This will better equip the government to screen applicants to determine whether they meet financial and technical capability requirements. It also provides for amendments to improve the administration of greenhouse gas titles, including enabling electronic lodgement of applications and documents. This legislation is all about enhancing regulations and reducing risks.

Even as Australia's offshore industry matures, significant new investments continue to be made. This includes the $4.6 billion Barossa LNG project, delivering another 600 jobs during the construction phase. Australian LNG is playing a significant role in reducing emissions, with our country being, as I said, the second-largest exporter globally. The International Energy Agency has found that, since 2010, coal-to-gas switching has saved about 500 million tonnes of carbon dioxide. To put it into perspective, that is the equivalent of taking 200 million cars off the road in that same period. There are some pretty staggering benefits, and it's a fantastic outcome. We know that natural gas is a flexible, reliable energy source that helps lower emissions. It supports renewables, keeping lights on when the sun isn't shining and the wind isn't blowing.

The Morrison government is also investing in carbon capture and storage projects, which are also referred to as CCS. CCS is a proven and versatile technology. It cuts emissions from energy-intensive industries and helps create a hydrogen export industry for Australia. It's our government that's investing more than $300 million over the next decade in carbon capture, utilisation and storage projects and hubs, including the $50 million CCUS Development Fund and the $263 million CCUS hub and technologies investment stream. The additional investment will establish a new $250 million CCUS hubs and technologies program. This is set to fund large-scale CCUS projects in proximity to high-emitting industrial areas and to accelerate the development of carbon utilisation technologies with export potential.

This is an exciting new initiative, which has been welcomed by industry and energy leaders as providing greater certainty for projects to deploy and help transition Australia to that lower carbon future. In fact, in September last year, the Morrison government released its first new low emissions technology statement, highlighting CCS technologies in CO2 compression, transport and storage as one of five priority technologies for Australia, with an economic stretch goal of under $20 per tonne of CO2. Only the Morrison government recognises that CCUS is a critical technology for sustaining the resources and hard-to-abate sectors whilst promoting new market opportunities in LNG, hydrogen and carbon recycled products.

This bill is yet another way that the coalition is securing Australia's future in the oil and gas industry, making it more reliable and secure for generations to come. It embodies the government's unwavering commitment to having a globally recognised oil and gas sector which continues to deliver significant employment and economic activity right across Australia.

I'll conclude shortly with some comments around where I began, because it's worth highlighting again that we as a government are committed to transforming and moving towards a lower carbon future. We have a road map of how we're going to get there and we're going to do so responsibly. This is despite calls from those opposite and their business partners in the Greens, who would not act responsibly in the same way that this government does. I will tell you why this is important. We value our economy. We don't value our economy just because it gives us pretty graphs or figures that are positive to talk about in government; we value our economy because of what it provides. It provides a future, it provides jobs for our children and their children into the future and it also gives us the ability to invest, as we are significantly, in our defence force—an area that I have a great passion for.

So this government has committed $270 billion to defence capability over the next 10 years, and we're doing that because, again, it's responsible, given the contested nature and the uncertainty within our region and across the globe. But we can only make these investments if we continue to have a strong economy—these investments which provide that future for our children and the security, the stability and the sovereignty which we must continue to have, into Australia's future. We've heard before, and it bears repeating here, that we are moving towards a lower carbon future via technology and not taxes. We are promoting, here in this bill, a regulatory environment that lowers risks to help us achieve those objectives. I commend this bill to the House.

Darren Chester (Gippsland, National Party, Deputy Leader of the House) Share this | Link to this | Hansard source

I welcome the opportunity to make a contribution in relation to the Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021 and the associated bill. As I join the debate, I note its particular relevance to the people of Gippsland. That is not news to you, Mr Deputy Speaker Andrews; as a Rosedale boy who went to school at St Patrick's College, I'm sure you're very familiar with the role that the joint venture partners in the Bass Strait have played in creating the wealth of our nation and supporting the great community of Gippsland. I wouldn't be surprised if some of your classmates from St Patrick's College from the seventies ended up working on the Bass Strait fields.

Gippsland is home to Australia's first offshore oil and gas producing wells in the Bass Strait. More than 50 years later the Gippsland Basin joint venture partners, Esso and BHP, have helped to transform the Australian economy. I can't think of any way to overestimate the role that those offshore oil and gas producing wells have played in the development of the Sale community but in Gippsland more broadly in terms of jobs, social benefits and the skills development that we've seen with young people in the community.

The facts are quite staggering. I don't know who takes the time to come up with facts quite like this, but, according to ACIL Allen Consulting, between 1967 and 2015 the Gippsland Basin joint venture produced more than half of Australia's crude oil and hydrocarbon liquids, and, in that same time period: provided enough fuel to fill every car currently on the road in Australia 500 times; provided enough gas energy to power the MCG's lights for 3.3 million years; improved the real income of Australians by more than $640 billion—which is $780 per year for every person in this country; and contributed an average of 2.5 per cent of all Commonwealth government tax receipts—that's over $220 billion in 2016 terms—making it one of the largest Commonwealth sources of revenue in history.

I say to the men and women who have been part of that incredible story in the Bass Strait: thank you for the work you've done, sometimes in perilous conditions. The joint venture partners take safety as absolutely paramount but there have been occasions where we've lost lives onshore, such as during the Longford gas explosion. Week after week we've had men and women flying out to those platforms on helicopters, doing their job in sometimes very difficult circumstances and continuing to provide energy for our country. I thank them for the work they've done.

Australia's offshore oil and gas regime is regarded globally as international leading practice. The Commonwealth recognises that, as our offshore industry matures, the regime must adapt to meet the needs of the industry and regulate the development of our resources safely and responsibly. I commend the minister on these bills, which strengthen Australia's offshore oil and gas regulatory regime to ensure that the emerging decommissioning challenges facing the industry are able to be managed effectively.

As the previous speakers have indicated, and as others will as well, decommissioning is a normal stage in the lifetime of an offshore petroleum project that should be planned from the outset and matured throughout the life of the operations. Decommissioning involves the timely, safe and environmentally responsible removal of, or otherwise satisfactorily dealing with, infrastructure from the offshore area that was previously used to support oil and gas operations. For petroleum wells this is permanently plugging the well to ensure it can be safely left, and for other offshore subsea infrastructure, like wellheads and pipelines, it may mean removal or being able to leave in an environmentally safe way. There have been conversations in Gippsland already about what assets can remain on the sea floor in terms of artificial reefs.

The main bill mitigates the risk of oil and gas companies walking away from their responsibilities to decommission these facilities safely and effectively. It ensures entities demonstrate their suitability and financial and technical capacity to undertake petroleum activities. As the previous speaker indicated—and I agree wholeheartedly—the costs of decommissioning cannot fall to Australian taxpayers.

The bill amends the OPGGS Act to provide for oversight of changes of control of titleholders; expand existing powers to call back previous titleholders to decommission infrastructure and remediate the marine environment in the title area where the current or immediate former titleholder is unable to do so, which is known as a trailing liability; and provide for specific decision-making criteria and expanded information-gathering powers to assess the suitability of entities wishing to enter into or progress through the regime. This came about, in some ways, in response to the failure of the company Northern Oil and Gas Australia, and NOGA were reliant on the offshore regime. As a result, there is heightened interest in the implementation of the decommissioning framework. These amendments aim to ensure that, as projects reach their maturity, titleholders will manage their assets and infrastructure responsibly as they reach the end of life, and it includes how assets may be onsold by the companies and how decommissioning is included in the planning.

I go back to the experience in Bass Strait. The previous speaker referred to the need for responsible corporate citizens. From my experience in dealing with the joint venture partners and, in more recent times, with Esso itself, I have found the company to be acting in a responsible way, and I am pleased to report that the Bass Strait operations are aware of their decommissioning responsibilities. In fact, they have already spent in the order of almost $500 million on this work. Over the last few years there's been significant progress on the well plug and abandonment work, which puts non-producing platforms in a safer state until the final decommissioning actually occurs. There's been a detailed and extensive program of works, which has seen the successful plugging and abandonment of the Blackback, Whiting, Seahorse, Tarwhine and Mackerel wells, in a campaign that cost in the order of $300 million. Even this work is not without its perils.

Plugging and abandoning wells involves extensive planning and careful execution by specialist vessels, by people involved in the technology and having the right equipment to get the job done safely. It includes engaging crews who are trained and competent in the operation of semisubmersible, jack-up and platform based rigs and remote operated vehicles. Again, we are talking about a workplace in Bass Strait where it's a challenging remote environment, subject to weather and rough sea conditions, and all that work is taken in close consultation with regulators and the other relevant stakeholders. There's also work underway. Esso has mobilised a second platform based rig in Bass Strait, and the two platform based rigs will allow the company to plug and abandon wells at Kingfish B and Fortescue fields as well as remove platform based conductors from the Mackerel platform, in a campaign that will again cost a very sizable amount—$160 million. We will see in the following years Esso continuing to progressively plug and abandon wells as they reach the end of their production life, while they continue to progress the extensive planning and preparation for the final decommissioning program.

From a Gippsland perspective, the legislation before the House is very significant. Energy production is synonymous with the Gippsland and Latrobe Valley region. I would like to take the opportunity today to briefly update the House on another energy initiative in the Gippsland Latrobe Valley region, which is of great significance. The minister at the table would be well aware of the role the Latrobe Valley has played and its rich heritage in energy production. As much as the Latrobe Valley has a rich heritage and proud history of being an energy powerhouse, we are also ambitious as a community for a significant future role in energy production. Still, today, we have the brown coal production of Loy Yang A and Loy Yang B at Yallourn, very significant contributors to the National Energy Market.

We are now seeing a great deal of interest in new energy projects. The Hydrogen Energy Supply Chain pilot project, the HESC project, is underway at Loy Yang power station, turning brown coal into hydrogen. This project has been co-funded by the Australian government, and I thank the minister and acknowledge the minister's work in that regard, along with the Victorian state government, the Japanese government and the joint venture partners of some Japanese companies involved. The HESC project produces hydrogen from the valley's abundant resource of brown coal, and it's the world's first demonstration of hydrogen supply chain from the fuel source. The pilot will turn the brown coal into hydrogen to continue to diversify our energy sources for use in cars, electricity generation and industry. I was there last week to meet with some of the operators, and they are very optimistic about the work they're doing and the role it will play in meeting our future needs. We expect to see great opportunities for the Latrobe Valley region and the nation more broadly, creating 400 jobs both in the Latrobe Valley and the port of Hastings, and we believe there's potential to create more.

In concert with the work that's occurring with HESC, the federal government has also invested over $95 million in the CarbonNet project, which is involved in carbon capture and storage. Again, these are bold new initiatives, technology-led solutions to the challenges we face as a nation in meeting our future energy needs. When I talk to people in my community, they are very focused on the need for reliable and affordable energy, but also maintaining our role and continuing to contribute to the global challenge of reducing emissions. The CarbonNet project, our commitment to carbon capture and storage, is an initiative that has the potential to allow the future use of some resources that would otherwise not be able to be used if we have a emissions constrained environment going forward. The HESC project and the work with carbon capture and storage are very exciting for the Gippsland and Latrobe Valley region and we see a huge upside for our community.

The final point I'll make as I wrap up my contribution on this bill is that we are incredibly thankful for the work of the people involved in the oil and gas industry and also those involved in the brown coal industry in the generation of power in Latrobe Valley. As a community we are incredibly grateful for the contribution they have made to the wealth of our nation. Victoria would not be the state it is today and would not have the manufacturing base it has today without the energy production that has occurred within my electorate over more than 50 years. In terms of Latrobe Valley power stations, I am incredibly proud to represent the blue-collar workers in that industry and appreciate their ongoing commitment to keep the lights on at an affordable price for Australian industry and for the mum and dad householders of our nation. Again, I take the opportunity to thank the workers in the energy industry in Latrobe Valley, Bass Strait and onshore at the Longford gas plant. You have helped to power our state for generations. I look forward to continuing to work with you as the industry transforms—and, in the case of the Bass Strait oil field, that the decommissioning occurs in a safe manner—and we look for future opportunities to ensure the Gippsland and Latrobe Valley region maintains its strong economic contribution to the wealth of our nation. I thank the House.

Zali Steggall (Warringah, Independent) Share this | Link to this | Hansard source

I rise to speak on the Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021, and cognate bill, the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021. These bills aim to change Australia's offshore oil and gas regulatory regime so that the inevitable decommissioning of oil rigs is managed and that the costs of the decommissioning do not land on the taxpayer. The decommissioning of wells will be a growing issue over the coming years. The industry has no problem putting rigs in the ocean; it has serious difficulties in decommissioning safely at minimum cost and taking responsibility for doing it. This is exacerbated by the industry struggling to find buyers for ageing assets as more investors are now conscious of the risk, climate or otherwise of taking on such assets.

As the Rystad Energy report projects, the number of oil and gas wells waiting to be decommissioned will rise from 160 today to 440 by 2026. So this is clearly a growing problem. This will be the largest amount of decommissioning to take place that we have seen for decades. It's important that the costs of decommissioning are not heaped on the taxpayer, because the invoice and the cost will be substantial. The worst example is that of the Northern Endeavour. The facility is 274 metres long and is located 550 kilometres north-west of Darwin, in the Timor Sea. The owners of the facility, Northern Oil and Gas Australia, were placed into liquidation in February last year. That has left the unprecedented clean-up costs on the taxpayer that could run up to $1 billion. Decommissioning will take several years and the taxpayer is footing the bill of $5 million a month just to maintain the facility. Wood Mackenzie modelled that the Australian petroleum industry's decommissioning liability, both onshore and offshore, will be more than $60 billion over the next 30 years. With Australia's net debt approaching $1 trillion, Australia needs to be absolutely cognisant, more than ever, of this cost and we cannot put this on taxpayer. Unsurprisingly, there has been opposition to this measure, but it is absolutely one that has to occur.

From a technical point of view, the bills will amend the Offshore Petroleum and Greenhouse Gas Storage Act 2006 to increase oversight of entities throughout the life of an offshore project. The proposed regime is sensible and will ensure proponents manage the decommissioning and restore the environment. One of the more controversial parts of this legislation is the introduction of the 'trailing liability', whereby a former title holder can be liable for decommissioning. This measure is already used overseas, including in the UK, where massive decommissioning works are happening in the North Sea.

Probably the most controversial part of this bill is a plan to introduce a levy on the industry, which is ironic, coming from a government that continually talks about not wanting to introduce taxes. But this is the exact point where a levy is incredibly important. In the 2021-22 budget the government announced that there will be a temporary levy to offset the cost of decommissioning the Northern Endeavour. This levy will be set at 38c per barrel, and it will cease when the Northern Endeavour has been decommissioned. The levy is projected to raise $367 million per annum. Of course, the industry has issues with the levy, but it's well past time that oil companies started paying their way for the consequences of their business. But what I disagree with is the temporary nature of this levy.

We know that there is much more decommissioning that will be necessary in the future. In fact, hundreds of wells will need to be remediated in the mid-2020s. We know that many of these companies are probably going to fold as the world transitions to net zero emissions. Who's going to pick up the bill then? What assurances is the government providing to the Australian people? We need to pre-empt the inevitable decommissioning crisis by establishing a permanent decommissioning fund. We can't have this land on the taxpayer at a time when our national debt is already so high. Many of the previous speakers from the government spoke about the great achievements of the Morrison government on emissions reduction and its focus on carbon capture and storage. Of course there's always a focus on technology rather than taxes, but this is a clear point where this levy needs to be made permanent. We need to ensure we have a fund to deal with the issues of decommissioning in the future. This is something that needs to be maintained. This should not be a temporary measure.

I would say we need to go a step further. We actually need to place on the industry a national climate disaster levy to collect money from oil and gas companies that are contributing to climate change, for which the taxpayer is picking up the bill. It is the taxpayer who is ultimately taxed for the cost of these disasters. Oil and gas companies should be on the hook for a lot of the consequences that they are causing. Too many of these corporations don't even pay significant taxes in Australia. We know that the greenhouse gases being released into the atmosphere are directly linked to the worsening extreme weather events that severely impact our economy, our communities, our health and our environment. Fossil fuels are the major contributing cause of increased gas emissions. Currently it is the Australian taxpayer who pays in taxes or directly when disasters hit. It is not the oil and gas majors. If we were to set a $1 per tonne for embodied carbon and oil and gas extracted from gas wells, this would raise money to meet the considerably escalating costs of natural disasters. One estimate has natural disaster costs growing to almost $39 billion per annum to the economy over the next 30 years. Who is going to pay for that? The Black Summer bushfires alone were projected to have cost the Australian economy over $50 billion. The Australian public has been asked about this type of measure—a natural disaster levy—and supports it. In the Australia Institute's 2020 climate of the nation report, the majority of Australians, some 65 per cent, support a levy on fossil fuels to pay for climate disasters. It's time for oil and gas majors to pay their fair share for the clean-up of the climate mess and obviously the clean-up of decommissioning wells.

I support the bill, but I would say that, ironically, the government is working against its own interests with respect to other decisions. Just recently, on 15 June, the federal government released a further 80,000 square kilometres of offshore petroleum exploration acreage. Some of that acreage is in prime tourism areas. For example, there is now acreage just six kilometres away from the Twelve Apostles, near Port Campbell, off the Victorian coast. It will be terrible for the local economy and tourism, the climate and the local environment if that acreage is developed.

The International Energy Agency has said there can be no new fossil fuel developments from this year. If we are to stay true to our commitment to the Paris Agreement, to actually limiting global warming to 1.5 degrees, we need to reach net zero prior to 2050, and that means no new acreage can be developed. Of course, the Minister for Energy and Emissions Reduction and the Prime Minister will talk about 'preferably' reaching net zero by 2050, and the spin is always that it's about technology, not taxes. It's absolutely empty and meaningless, because the reality is that technology needs targets. You need targets and legislation to drive investment and the uptake of technologies.

We must double our targets to reduce emissions, at the minimum, by 2030, and we must stop all new gas exploration and drilling. The push for gas is just a cynical short-term move, I would argue, from regional MPs who are trying to win votes on promises that these fossil fuel industries will be around forever. They will not. It is selling an empty promise to communities that do face a serious transition risk and are not being properly protected. We must abandon this folly, this short-sighted policy, and actually put in place plans to assist these communities.

The gas folly that the government is continuing is clear. Gas will not lower prices. We have tripled supply, and gas prices have increased 130 per cent. Gas is not a transitional fuel, and it's disappointing to hear both sides of the political spectrum continually harp on like that when it's clearly not. Grid batteries outperform gas peakers on cost by as much as 30 per cent now. The market has spoken: it has invested over $4 billion in batteries just this year. We don't need more gas supply for domestic markets, as over 70 per cent of our supply goes offshore anyway. There will not be a market for gas in 30 years, as most of our major trading partners have committed to and are putting in place plans for net zero targets by 2050 or 2060. It's an entirely counterproductive measure. It is short-sighted. Continuing down this road just shows political opportunism versus actual good planning.

The issue of offshore gas platforms is very sensitive and hot in Warringah and on the east coast from Newcastle to Manly. We have significant uncertainty about another future fossil fuel project off the coast. Petroleum exploration permit 11, PEP-11, is a permit for oil and gas exploration extending from Newcastle to Manly Beach. It is the most ludicrous project. Some areas of this permit are just five kilometres offshore. Bounty Oil & Gas NL and Asset Energy Pty Ltd are the titleholders, and they are intent on pressing ahead against the wishes of the community, who overwhelmingly reject the proposal. It must not go ahead. It would be a calamity for the environment, the local economy and the coastal region. It just defies common sense. The IEA has found that no new fossil fuel projects should go ahead, so it is clear that these projects should be cancelled. PEP-11 expired in February this year, but the minister continues to maintain that the fate of the program is undecided. The Minister for Resources and Water, the member for Hinkler, continues to threaten to extend this licence. He should be forthright with the community and end the uncertainty. It has already been rejected at the state government level and it should also be rejected at the federal level.

This bill before the House to force oil and gas producers to start paying their way, paying for their responsibility for decommissioning, is important. Many of the measures in this bill are prudent, but what we need to see are permanent measures—a permanent levy in this respect. Decommissioning liabilities are likely to be north of $60 billion, and that cannot fall on the taxpayer. It should not be a question of taxpayer bailouts to these companies. It is clear that we need to make sure we have a permanent, long-term fund to address these issues. We need to have a levy to address the growing cost of natural disasters. Many in the community agree with this. We absolutely need to move on this. We as a government and we as a parliament all have a responsibility for the legacy this parliament will leave, and at the moment it is a short-sighted, short-term policy. We absolutely need to stop increasing oil and gas exploration acreage and to address all the transition aspects and decommissioning aspects that are coming. Finally, I call again on the minister to cancel the PEP 11 licence that currently exists off the coast from Manly to Newcastle.

Kevin Hogan (Page, National Party, Assistant Minister to the Deputy Prime Minister) Share this | Link to this | Hansard source

I thank all members who have contributed to this debate. This bill, the Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021, and the related bill amend the Offshore Petroleum and Greenhouse Gas Storage Act 2006 to strengthen Australia's offshore oil and gas regulatory regime. The measures contained in these bills will ensure that the offshore industry manages emerging decommissioning challenges effectively. They ensure that decommissioning remains the responsibility of those involved in the development and production of the resource. They guard against Australian taxpayers being left to bear decommissioning and remediation costs. The bills afford government oversight of corporate transactions causing a change of control of a title holder, increase scrutiny of entities at key decision points, and expand the types of information that can be requested by the decision-maker and the regulator. These measures ensure that entities operating in the offshore regime are capable, competent and responsible in managing offshore projects, including undertaking decommissioning.

The bills also provide for a more comprehensive trading liability regime, a feature of comparable international jurisdictions. This measure expands current remedial directions and powers to enable any former title holder or a related person to be called back to decommission infrastructure and remediate the title area, in the unlikely event that the current or immediate former title holders are unable to do so. It sets the expectation that a company that sells an asset and titles will undertake appropriate due diligence to minimise the risk of being called back to undertake decommissioning. The bills also make minor and technical amendments to improve the administration of titles, including the electronic lodgement of applications to modernise the regime.

The Offshore Petroleum And Greenhouse Gas (Regulatory Levies) Amendment Bill 2021 makes consequential amendments to the Offshore Petroleum And Greenhouse Gas (Regulatory Levies) Amendment Bill 2003. This enables the National Offshore Petroleum Safety and Environmental Management Authority to recover its costs from former title holders and related persons if a remedial direction is issued.

These bills strike an appropriate balance between implementing regulatory safeguards for Australian taxpayers, managing the impost on industry, and encouraging continued investment in oil and gas development. I commend these bills to the chamber.

Mark Coulton (Parkes, Deputy-Speaker, Minister for Regional Health, Regional Communications and Local Government) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Perth has moved as an amendment that all words after 'that' be omitted with a view to substituting other words. The immediate question is that the amendment be disagreed to.

Question agreed to.

Original question agreed to.

Bill read a second time.