Wednesday, 4 March 2015
Offshore Petroleum and Greenhouse Gas Storage Amendment (Miscellaneous Measures) Bill 2014, Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment (Designated Coastal Waters) Bill 2014; Second Reading
I present the explanatory memoranda and I move:
That these bills be now read a second time.
I seek leave to have the second reading speeches incorporated in Hansard.
The speech es read as follows—
Australia's success in the offshore petroleum investment market is underpinned by its comprehensive and well-established regulatory framework. Central to this framework is the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA), a national regulator with the experience and technical capacity to effectively regulate in relation to matters of occupational health and safety, structural integrity, and environmental management.
In February 2014, the Commonwealth Government announced a new streamlined approach for environmental approvals for offshore petroleum activities. The approach makes NOPSEMA the sole environmental regulator for these activities in Commonwealth waters.
Streamlining has significantly increased regulatory efficiency in respect of petroleum activities in Commonwealth waters, as well as delivering clarity and certainty for industry participants.
Recognising these significant gains, the Commonwealth Government is seeking to streamline regulatory arrangements in respect of all offshore petroleum activities. As part of this process, the States and the Northern Territory are being encouraged to confer occupational health and safety, structural integrity and environmental management functions and powers upon NOPSEMA under their respective legislation in respect of those waters of the sea within their jurisdictional reach.
This would permit the States and the Northern Territory to benefit from the expertise and experience of an established national regulator, and increase the efficiency of the administrative process by minimising the number of regulatory agencies with whom industry participants must deal.
However, the Offshore Petroleum and Greenhouse Gas Storage Act in its present iteration includes a number of legislative impediments to conferral. For example, there is a requirement to conclude an intergovernmental agreement before conferral is permitted in respect of certain areas of the sea. In relation to others, conferral is not permitted at all.
The amendments in this Bill seek to remove these impediments, thereby permitting conferral across as wide a geographic area as possible.
This represents an important step towards the establishment of a single national regulator for all safety, structural integrity and environmental management matters in the offshore petroleum sector. Moreover, it underscores this Government's ongoing commitment to the maintenance and improvement of a strong and effective regulatory framework, and to a cooperative approach to the regulation of offshore petroleum activities.
The Bill further makes a number of technical amendments to the administrative framework relating to the taking of particular voluntary actions under the Act and regulations by multiple registered holders of a single petroleum title.
Due to the high cost of offshore petroleum operations, petroleum titles are often held by a consortium of companies. The Act at present provides a mandatory process by which titleholders may take an action, such as submission of an application or nomination, that is permitted, but not required, to be taken under the Act or regulations, where there is more than one registered holder of the relevant title. Such an action is defined under the Act as an 'eligible voluntary action'. The process requires the holders of the title to nominate one of them to take eligible voluntary actions on behalf of the group, and only the nominated person can take an eligible voluntary action.
However, application of the process in practice has created some confusion among titleholders, particularly in relation to the mandatory nature of the process, and also identified several unintended consequences.
The amendments in this Bill seek to clarify the operation of the process relating to the taking of eligible voluntary actions and, importantly, provide an alternative process for the taking of eligible voluntary actions that titleholders may elect to use instead of the current nomination process. The alternative process would require all of the registered holders of the title to take the action jointly, such as by all signing the relevant application or nomination. The current nomination process will also still be available for use where a group of titleholders prefer this option.
I commend this Bill to the Senate.
I would now like to take the opportunity to foreshadow another significant amendment to the Act.
As all present are no doubt aware, Australia's exploration and mining success is underpinned by its highly prospective geology, up-to-date geoscience data, and comprehensive information systems. The custodian of Australia's geographic and geological data is the national geoscience agency, Geoscience Australia.
As part of its core functions, Geoscience Australia has an ongoing responsibility to define the limits of Australia's maritime jurisdiction. Most recently, this work has resulted in a change to the boundary separating Commonwealth waters from the coastal waters of Western Australia. These changes, centred on the North Scott and Seringapatam Reefs, took effect from May this year.
The revised boundaries around these reefs intersect three existing Commonwealth titles: one retention lease operated by Woodside Petroleum on behalf of the Browse joint venture, and two exploration permits operated by ConocoPhillips on behalf of the Poseidon joint venture. The maritime boundary changes mean that certain blocks previously falling within the jurisdiction of the Commonwealth now fall within that of Western Australia.
My Department is working closely with the Western Australian Government to ensure the stable progression of the Browse and Poseidon joint ventures, and to ensure the seamless and efficient transition of affected blocks from Commonwealth to Western Australian waters.
This work has uncovered a gap within the Commonwealth offshore petroleum regime administered under the OPGGS Act. This gap will be of particular concern should a change to maritime boundaries in future cause an area presently within the jurisdiction of a State or the Northern Territory to fall within Commonwealth waters.
At present, there is no legislative mechanism enabling titles over affected blocks to transfer, with continuity of tenure, from the jurisdiction of the States or the Northern Territory to that of the Commonwealth following a boundary change. Instead, affected blocks become vacant acreage in Commonwealth waters, and existing titleholders will lose title over those blocks. These titleholders may have already spent considerable sums of money and effort undertaking exploration activities under their title, and therefore titleholders should have continuity of tenure in the event of a boundary change.
While this will not impact current efforts in Western Australia, it is necessary to amend the Act to anticipate those circumstances in which a future boundary change results in a gain of Commonwealth jurisdiction over blocks. Given the ongoing nature of Geoscience Australia's effort to define Australia's maritime border, changes of this type are a realistic prospect.
The proposed amendment will provide for the automatic grant of a Commonwealth title over affected blocks to the existing holder(s) of a State or Northern Territory title at the time at which the State or Northern Territory title ceases to be in force.
The amendment is generic in nature, and it is intended that it will provide a workable model for other jurisdictions to adopt. This will allow for consistency across Australia's offshore petroleum legislative framework, eliminate the sovereign risk created by future boundary changes, and ensure continuity of tenure for existing titleholders.
OFFSHORE PETROLEUM AND GREENHOUSE GAS STORAGE (REGULATORY LEVIES) AMENDMENT (DESIGNATED COASTAL WATERS) BILL 2014
This Bill will make amendments to the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Act 2003 (Levies Act) that are made necessary by amendments contained in the Offshore Petroleum and Greenhouse Gas Storage Amendment (Miscellaneous Measures) Bill 2014 (Miscellaneous Measures Bill). That Bill expands the geographical scope of the definition of 'designated coastal waters' in the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (OPGGS Act).
The effect of those amendments in the Miscellaneous Measures Bill is to permit the States and the Northern Territory to confer particular functions and powers upon the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) in respect of all of the waters of the sea that are on the landward side of the Commonwealth offshore area.
NOPSEMA operates on a fully cost-recovered basis through fees and levies payable by the offshore petroleum industry. The Levies Act at present facilitates cost-recovery, by imposing levies in respect of regulatory activities conducted by NOPSEMA in Commonwealth waters, as well as in the designated coastal waters of the States and the Northern Territory where functions and powers have been conferred by State and NT law.
Under the Levies Act, 'designated coastal waters' is defined to have the same meaning as within the OPGGS Act. Expanding the geographic coverage of 'designated coastal waters' under the OPGGS Act would therefore consequentially extend the area in respect of which levies are potentially imposed.
Legal advice obtained by my Department indicated that this consequential expansion of the application of the Levies Act will create a medium to high level of risk of constitutional invalidity, as it would potentially result in the imposition of taxation that discriminates between States or parts of States on the basis of geographic location. This Bill therefore amends the Levies Act to limit the operation of the levy regime to the area constituted by the existing definition of designated coastal waters. In other words, the Levies Act will continue to apply in the same area that it currently does, and not to the expanded area of 'designated coastal waters'.
The effect of these amendments will be that NOPSEMA will not recover costs associated with regulatory functions performed in waters that do not fall within the existing definition of designated coastal waters by way of levies imposed under the Levies Act.
I note that, given the lack of current activity in these waters, this is unlikely to have a significant impact in the near future. The Commonwealth will bring forward alternative options to ensure that NOPSEMA will be able to fully recover costs associated with the performance of regulatory functions conferred by a State or the Northern Territory.