Wednesday, 30 March 2022
Offshore Petroleum (Laminaria and Corallina Decommissioning Cost Recovery Levy) Bill 2021; Second Reading
Today I rise to say that Labor will support the two bills before the House, the Offshore Petroleum (Laminaria and Corallina Decommissioning Cost Recovery Levy) Bill 2021 and the Treasury Laws Amendment (Laminaria and Corallina Decommissioning Cost Recovery Levy) Bill 2021. Labor referred these bills to a Senate inquiry to ensure thorough parliamentary scrutiny. Labor believes industry and workers must be at the table for this vital reform. I note the publication of the final report of this inquiry on 18 November 2021.
These bills introduce a temporary levy on offshore petroleum production to recover the Commonwealth's cost of decommissioning the Laminaria and Corallina oil fields and associated infrastructure. This aims to ensure taxpayers are not left to pay for the decommissioning and remediation of these sites. Labor agrees that companies that operate oil and gas infrastructure must be held to the obligations to decommission and remove that infrastructure in a safe and timely way. I have spoken in this place at length regarding the situation in the Laminaria and Corallina oil fields, otherwise known as NOGA or the Northern Endeavour fiasco, and the need for broad reform and the regulation of decommissioning of offshore oil and gas infrastructure in this country.
The levy will be at a rate of 48 cents per barrel of oil equivalent and be paid on an annual basis in arrears. The first payment made will be for the 2021 financial year and be payable in the first half of 2022-23, which is why it is important it passes through the House and the other place today.
All entities with an ownership interest in petroleum production license issued under the Offshore Petroleum Greenhouse Gas Storage Act of 2006 will be liable to pay the level administered by the Australian Taxation Office. The levy will be in place until the net cost associated with the decommissioning has been recovered, or 30 June 2030 at the latest.
Labor acknowledges the fact the levy is temporary by design; however, we are rightly sceptical about the level of public consultation the government has undergone throughout its development. I have consistently argued that industry is at the table when designing this scheme as well as the workers concerned. That's why Labor referred this rate of levy alongside the bills as a whole to the Senate to scrutinise and ensure the industry and worker representatives have a voice. The Senate committee inquiry also considered the impacts of this decommissioning work on jobs in offshore gas and related sectors, including shipping and port workers.
Rigorous decommissioning requirements will be an important source of jobs for workers in the oil and gas industry as the energy transition to net zero emissions takes place. Those in the oil and gas sector have adjusted to me that the direct spend will be up to $1 billion. This represents potentially a $1 billion opportunity to ensure that Australia's decommissioning task is set up properly to ensure good jobs, safety in those dangerous jobs and good environmental outcomes, and $1 billion worth of jobs for Australian decommissioning workers as well.
A report from National Energy Resources Australia in February on the projected total future Australian decommissioning liability found that decommissioning of these facilities would cost $52 billion based on the total removal of all offshore equipment. There are 1,008 offshore wells; 57 fixed facilities, with 37,000 tonnes topside and 518,000 tonnes underwater; 82 pipelines, with a total length of 4,960 kilometres; plus 205 infield flowlines; 130 umbilicals the length of 1,500 kilometres; and 535 subsea structures, such as manifolds. There is much work to do. Twenty-seven per cent of this activity may need to take place before 2025 due to facilities that are already disused, and 51 per cent of this work could be due before 2030. About half of this work is in Northern Carnarvon Basin, off the north-west of the Western Australian coast, between Exmouth and Dampier. Another quarter of this work is in the Bass Strait.
There is no doubt that Australia needs a regulatory system that delivers the planning, monitoring, oversight and enforcement of high standard decommissioning outcomes for offshore oil and gas infrastructure. In that context, Labor was deeply concerned about gaps in the safety oversight from a regulatory agency. In a Senate economics committee inquiry, the department, DISER and the National Offshore Petroleum Safety and Environmental Management Authority, NOPSEMA, said that due to the fact that there was no titleholder or operator, the Offshore Petroleum and Greenhouse Gas Storage Act does not apply to the LamCor decommissioning. This meant that NOPSEMA would be unable to issue enforcement actions. Labor sought better from the government in the application of an occupational health and safety regime in a dangerous industry on the high seas, which would have been through a confidential commercial contract. This has been achieved, and better regulations will be there.
I want to thank Senator Anthony Chisholm, who worked on this committee; the Maritime Union of Australia, in particular, Adrian Evans and Penny Howard, who worked very proactively on this matter; Shawn Lambert from the ACTU; and representatives of the ECU and AWU. All these people made extremely constructive representations on behalf of current Australian workers in this industry, an industry they know well. They work on gas platforms on the high seas around this country and know the risks of this sector. It is dangerous work, and it will be an emerging industry in the future as we move, and companies themselves move, quite rightly, to decommissioning assets in an environmentally safe and worker-safe way throughout the coming decades. I thank them all for contacting my office and being very constructive.
I also want to thank the government and Minister Pitt and his office, who made an undertaking in relation to ensuring that the operator is subject to the NOPSEMA safety regime. The minister and I agreed that the safety of those workers decommissioning the LamCor well is paramount. I thank him and his office again for the cooperative and collegiate way in which they approached this issue. It's very much in the national interest. I commend these bills to the House and reaffirm Labor's support of them.
I am glad for the opportunity to speak in support of the Offshore Petroleum (Laminaria and Corallina Decommissioning Cost Recovery Levy) Bill 2021. It's another instalment in the government's response to the Northern Endeavour fiasco, which, if unaddressed, would have left the taxpayer picking up a bill of the financial kind of several hundred million dollars that should have been met by the operator Woodside.
This levy is a supportable and sensible means of ensuring the taxpayer does not pay for a very expensive mess that was created by some risky and I would say questionable corporate conduct. The department and the minister deserve some credit for resolving both the trailing liability that was dealt with in an earlier piece of legislation and for bringing along this cost recovery levy. But, based on what we now know, it is a shame that the rigour of our regulatory arrangements wasn't sufficiently good to prevent what occurred.
Unfortunately, when you have a government that is reflexively or, some would say, ideologically dismissive of the regulatory systems that are required to guarantee the public and national interest and that deliver safety and environmental protection and good corporate conduct, this is exactly the kind of thing that will occur: regulatory failure with harmful consequences. We're fortunate that, so far, the mess is only administrative and economic in nature, rather than a mess that could well have involved very real hazards to worker safety and to the marine environment. No-one in the Australian community would be unaware of the kinds of things that have happened in the past that have involved offshore oil spills by Deepwater Horizon and Exxon Valdez and other disasters. In addition to causing costs in the tens of billions of dollars, they left awful environmental legacies across hundreds and hundreds of kilometres that have lasted decades and, in most cases, continue today.
The member for Brand has done some very important work on this bill and in response to this issue more generally and, as the shadow minister just described, worked with the government to particularly address some aspects of the government's response that raise questions about whether we had the right occupational health and safety settings in these measures. The shadow minister already described those, but their importance cannot be underestimated.
I also want to acknowledge that the industry peak body, APPEA, ultimately came on board in supporting the measures required to ensure that companies take appropriate responsibility for their decommissioning obligations and that the taxpayer is therefore protected from picking up the tab. In essence what occurred with the Northern Endeavour was a sale or transfer of an end-of-life offshore oil production asset from Woodside to a small company with insufficient operating experience and capability and with completely insufficient financial standing. Woodside essentially transferred the asset for what was a relatively tiny sum and by providing some financial assistance to the purchaser. The reason Woodside did that is there was significant value in them not having to bear the decommissioning cost. It's not surprising that within a very short time the company that received the asset proved incapable of operating the Northern Endeavour, and we should be grateful that NOPSEMA was relatively quick off the mark and resolute in holding the operator to account and in preventing what may have escalated towards something fatal in human terms or environmentally disastrous.
One of the things that NOPSEMA considers is the adequacy of the spill response arrangements and preparations, which are critical when it comes to offshore oil and gas. In this case I think it's notable to record that when NOPSEMA carried out some inspections on the Northern Endeavour it determined that the new operator had:
… an inadequate capability and capacity to support and sustain a protracted response resulting in short and long term biological, ecological and social harm in the event of an uncontrolled hydrocarbon release.
In other words, they weren't in any position to safely respond if there had been some kind of oil spill. There would have been short- and long-term biological, ecological and social harm if that had occurred. NOPSEMA also found:
…failure to maintain the oil spill response arrangements provided for by the current TSA would result in an immediate and significant threat to the environment.
So what happened next? Operations were stopped. Not that much further down the track, the Timor Sea Oil & Gas Australia company—that's the company that received the asset—went into administration and liquidation. It left the Australian government to step in and arrange for the Northern Endeavour to be operated in lighthouse mode and then to arrange a proper decommissioning. That process continues and will take some time, as the shadow minister has described. Some tenders were actually issued earlier this year, and the government has already provided something like $230 million for the expected work. I don't think that will be the end of it. The $230 million includes $8 million paid to Woodside for their expert advice. I reckon some people in the community would think that payment is pretty rich in all the circumstances.
I said 'questionable' earlier in terms of the whole arrangement. I think this is an important point to make and certainly for people in the community to understand. I said 'questionable' because it is quite hard to look at the circumstances around the disposal of the Northern Endeavour and take the view that Woodside disposed of the infrastructure while giving due and reasonable consideration to the possibility that the receiving entity was not in a solid position to safely and properly operate the rig and was in no position to safely and properly decommission it. It is hard to believe that an operator of the capability and scale and experience of Woodside didn't foresee that possibility. In any case, this bill helps fix a serious and costly problem, but we know there's further work to be done to ensure this kind of thing doesn't occur again.
On the upside, we should ensure that the considerable volume of decommissioning work in prospect is undertaken by an Australian decommissioning industry and by Australian workers. On that front, I welcome the establishment of CODA, the Centre of Decommissioning Australia, and I'm grateful to have met with the general manager, Dr Francis Norman, on a couple of occasions. It's pretty incredible to reflect on the fact that $60 billion of offshore decommissioning will be required in the next 30 years—that is by 2050—and half of that in the next 10 years. It's a very substantial and important piece of work. If it's not done well there will be unacceptable risks in terms of worker safety and in terms of harm to our marine environment. If it is done well there's the potential for a state-of-the-art Australian decommissioning industry to be created, supporting investment, innovation, infrastructure and Australian jobs that are all relevant to our broader maritime capability in shipbuilding, marine science and offshore renewable energy, and—with my recycling hat on—in resource recovery and recycling. That is what we should all hope for. That is what we should aim for. It's entirely possible and it's the right way to go, but it will require some concerted and rapid work from government in partnership with industry. As we have seen, there really is no time at all to waste. I'm glad to support this bill.
I rise to speak on the Offshore Petroleum (Laminaria and Corallina Decommissioning Cost Recovery Levy) Bill 2021. This bill is the culmination of one particular gas corporation's complete and utter stranglehold over both of the establishment parties and, through that, over parliament.
Woodside donates $220,000 a year—every single year—to Labor and the Liberals. They offer not just cash but perks. More than a couple of ministers have left parliament to work for them, countless numbers of advisers too. Woodside has extraordinary access to our lawmakers. How else can they shift a billion-dollar liability off their books and onto everyone else in their industry?
The Greens support this bill because getting any money out of gas corporations for the public benefit is like drawing blood from a stone. It is a miracle to get money out of a sector the ATO has called 'systemic non-payers of tax'. Still, the Greens aren't going to gloss over the fact that something about this bill doesn't sit right. Woodside have acted like bandits—extracted all their profits, paid no taxes, and then punted the old and depleted Northern Endeavour oil rig off to a fly-by-night businessman who went bankrupt shortly afterwards, leaving the government holding the can to cover the clean-up costs.
Rather than force Woodside to take back the asset they made billions in revenue off and force them to clean it up, the power of Woodside's lobbying, donations and future job offers meant that Minister Pitt has decided the entire gas industry has to pay to clean up after Woodside. No company outside such a massive coal or gas donor could ever get away with such negligent or greedy conduct. But here is the kicker: the Australian Liberal government has since paid Woodside $9 million for expert advice on how to decommission their old oil and gas field. In a perfect culmination of corporate state capture, Woodside has been rewarded to the tune of $9 million for sucking a well dry and pushing the clean-up costs onto others.
Just last week, Woodside misled the Guardian and the public that they 'transitioned the vessel over in good condition', when the facts of the Walker report show there were massive corrosion hazards. This is just the latest in a long line of governments doing Woodside's bidding. The Howard government bugged the cabinet room of the East Timor government to help Woodside's commercial negotiations over oilfields between our territorial waters. As a result, they had access to confidential national security information that not even this parliament would have had access to. It is now subject to the Witness K prosecution.
The foreign minister of the time, Alexander Downer, left parliament and went to work for them. Labor's previous resources minister, Gary Gray, was a senior executive for them. The Liberals' previous resources minister, Ian Macfarlane, is currently on their board. Woodside is not just a publicly listed company, it's a hybrid public-private apprenticeship. They're a hybrid government department. They can write laws, hold classified documents, provide and receive cash flows, second staff and set their own environmental and safety standards, and can authorise other entities to take on their liabilities.
Until we cut off the tentacles of these big coal and gas corporations we won't be able to turn the ship of government around on the climate crisis. These companies take what they want and leave the mess for others to clean up. Their pollution is turbocharging natural disasters that we have to pay to clean up. And, according to NOPSEMA's answer to Greens senator Dorinda Cox, there are 400 disused gas wells in Australian waters that haven't been decommissioned. There are 19 mothballed platforms sitting there without being decommissioned. This is their legacy. And it's their legacy, not ours, to pay to clean up.
The Greens want the big polluters and corporations that are profiting off the climate crisis to pay to clean up the damage they are doing. It is time to make the big corporations pay their fair share. It is time to stop giving money to the big coal, oil and gas corporations and, instead, make them pay their fair share. Only the Greens are able to push for that because we're the only ones not taking money from corporations like Woodside. When you look across the entire gas industry, you see that in one year tens of billions of dollars of profit are being brought in and not one cent of tax is being paid. No wonder the Australian tax office calls them systemic nonpayers of tax. It is time to make the big corporations pay to clean up the mess that they are inflicting on all of us.
I rise to speak on the Offshore Petroleum (Laminaria and Corallina Decommissioning Cost Recovery Levy) Bill 2021 and cognate bill, the Treasury Laws Amendment (Laminaria and Corallina Decommissioning Cost Recovery Levy) Bill 2021. These bills will introduce a temporary levy on offshore petroleum production to recover the costs of decommissioning these oilfields and other associated infrastructure. Let's be clear: we should never be in this position. This is a responsibility of those companies. These oilfields, situated 550 kilometres offshore of Darwin, the LamCor oilfields, were first commissioned in 1999. At the time it was a $1.37 billion development that was projected to produce up to 180,000 barrels per day. Now they no longer produce any and remain in lighthouse mode. These bills stem from the disastrous decision in 2016 by Woodside and Talisman Energy to sell both the Northern Endeavour and LamCor oilfields to a small oil and gas speculator called Northern Oil and Gas Australia that could not afford to decommission it and in 2020 went into liquidation.
Announced in the 2021-22 budget, this bill will introduce a levy on the industry to recoup the almost $1 billion in costs that have been heaped on the taxpayer. It's ironic, coming from a government that continually talks about not wanting to introduce taxes, that, in fact, here is one. The levy will be set at 48 cents per barrel. This levy will fluctuate depending on how much cost is being recovered. The levy could go from 1 July 2021 to 1 July 2029 but will terminate when the costs have been recovered.
The real question is: why stop there? Of course, the industry is fighting this levy tooth and nail but will not find any sympathy from the border community for their plight. In fact, what we should have is this levy continuing. It's time the industry paid their way not just on this but on the other related issues like climate change and natural disasters. Earlier this year I talked on the bill that implemented the decommissioning framework for other ageing assets and the levy for the recoup of costs associated with the Northern Endeavour fiasco. The problems are the same. The decommissioning of oil and gas infrastructure will be a growing issue over the coming years. The industry has absolutely no problem in putting rigs in the ocean but it has serious difficulties in decommissioning safely at a minimum cost and taking responsibility for doing it. It's exacerbated by the industry struggling to find buyers for ageing assets as more investors are now conscious of the risks, climate or otherwise, of taking on such assets.
We know Risen Energy reported that the number of oil and gas wells waiting to be decommissioned will rise from 160 today to 440 by 2026. That is only four years away. Clearly this is a growing and looming problem. We need to make sure that the decommissioning of these rigs takes place in a safe and orderly way and that it is done with proper environmental conservation and clean up. And we know this is coming in coming decades. The cost of decommissioning should not be heaped on taxpayers. Invoicing the cost is substantial, and, ultimately, it is not their responsibility. It is the companies' and the government's for allowing these companies to have these rigs. We know that onshore and offshore decommissioning liability of the industry could be some $60 billion over the next 30 years. With Australia's net debt approaching a trillion dollars, we need to be cognisant more than ever of this cost, and it cannot be put on the taxpayer. Already we know that the cost of the consequences of the love affair with fossil fuel is put on the taxpayer. We need a permanent fund that will act as a backstop for the inevitable issues that arise with decommissioning.
Actually, the government needs to do more. We need a climate disaster levy to collect money from oil and gas companies that leave environmental destruction in their wake. It's currently the Australian taxpayer who foots the bill for all these climate related natural disasters. We know just this year it's $6 billion due to the floods on the east coast. We know the cost of natural disasters is projected to reach some $96 billion a year by 2060 under the current business-as-usual actions. That is over $1.2 trillion by 2060. This is one unfolding disaster after the next. Just in the course of this government it has been $10.3 billion on floods and bushfires alone.
It should not be up to the taxpayer to meet this cost. We need to start talking about a natural disaster or climate disaster levy to be put on those responsible. If we set a levy of $1 per ton of embodied carbon, we could raise a significant amount to offset these costs. The Australia Institute polling indicates 65 per cent of the public would back this sensible measure. But of course what we need to do is a stop expanding gas. We need to stop having more and more of these fields. If not, you are just dooming future generations to an ongoing crisis.
Locally, there is a strong community rejection of any offshore oil and gas. We push this government to reject once and for all the exploration licence in relation to the PEP-11 area from Newcastle to Manly for exploration of oil and gas. It's time we did this for all of our offshore areas, but the minister, a Nationals minister, can only see fossil fuels in our future. He wants to expand gas fields. The most ridiculous one is around the prime tourism area of the Twelve Apostles near Port Campbell on the Victorian coast. Of course he sees no trouble in expanding this to fossil fuel extraction. Developing this area will be terrible for the local economy and tourism, the climate and the local environment. It is adding fuel to the fire. So whilst I support this levy and this bill today to ensure that the cost of decommissioning these rigs is not imposed on the taxpayer but on the industry, it is time this industry pays its way and ensures it cleans up the mess it is causing.
The Offshore Petroleum (Laminaria and Corallina Decommissioning Cost Recovery Levy) Bill 2021 and Treasury Laws Amendment (Laminaria and Corallina Decommissioning Cost Recovery Levy) Bill 2021 will impose a temporary levy on offshore petroleum production to recover costs for decommissioning two oilfields and associated infrastructure. The purpose of the levy is to ensure that taxpayers are not left to pay for the decommissioning or the remediation. The levy is temporary, and that's the point to remember. Commencement of the levy will be on 1 July 2021 and pay in arrears a rate of 48c per barrel or oil equivalent production for the year. I commend the bill to the House.
Question agreed to.
Bill read a second time.