Thursday, 12 August 2021
Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021, Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021; Second Reading
I rise today to support the Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021 and the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021 on behalf of the Labor opposition. In doing so, I move the second reading amendment on sheet 1363 standing in the name of Senator Watt, which has been circulated in the chamber:
At the end of the motion, add ", but the Senate notes that:
(a) 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;
(b) 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;
(c) 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
(d) 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".
I, for one, am 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 has argued that the time is now for Australia's regulatory framework to catch up with demand, but I would ask the minister: Why now? Why not two years ago?
As with all things with this government, they are far more concerned with sexy announcements and political stunts than meaningful reform in the interests of all Australians. The government, who have been in power for nearly a decade, had to wait for the Northern Endeavour bail-out disaster to address the glaringly obvious reform needed here. If the government weren't the ones to foot the bill, would they have acted at all? The Australian taxpayer is $210 million in the red—and counting, might I add—but I will get to that palaver in due course. Let's start from the top.
By way of background, decommissioning is the process through which all equipment, infrastructure and wells associated with petroleum activity are safely removed when they are no longer used or required. Currently, the complete removal of infrastructure and the plugging and abandonment of wells are the default decommissioning requirements under the Offshore Petroleum and Greenhouse Gas Storage Act. This is consistent with Australia's international obligations, primarily under the United Nations Convention on the Law of the Sea and the London convention and associated protocol, to remove disused installations and structures and to preserve and protect the marine environment.
Options other than complete removal may be considered; however, the titleholder must demonstrate that 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 in the guidelines only, 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 sounds 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 at great expense.
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 algae, 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. For example, Western Australia currently has six purpose-built artificial reefs, with locations spread from Esperance to Exmouth. Nevertheless, it is critical that the complete removal of assets remains the undisputed objective of proper decommissioning.
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's 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, to the point of negligence, on behalf of the government.
One such example of this was evidently too big to ignore: the Northern Endeavour-Northern Oil and Gas Australia incident. The LamCor oilfields, or 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 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 this decommissioning could occur, Woodside sold its share to its joint venture partner Talisman, later known as Timor Sea Oil and Gas Australia, who had been acquired by Northern Oil and Gas Australia. The sale was facilitated through NOPTA and was perfectly allowable in the current legislative environment. NOPSEMA identified concerns about its capability and capacity to respond to an oil spill—an obvious and fundamental titleholder responsibility. This led to formal intervention and enforcement just three days after TSOGA became the titleholder. TSOGA and its contractors were unable to convince NOPSEMA 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 over the adequate safety and environmental management of the ageing Northern Endeavour facility.
An environmental inspection identified that TSOGA could not demonstrate sufficient financial assurance to cover its liabilities in case of an oil spill, and this required prompt enforcement to resolve. As a result, NOPSEMA issued a prohibition notice on TSOGA's contractor, UPS, on 10 July 2019 and a general direction on TSOGA on 18 June 2020, enforcing the cessation of production on the Northern Endeavour until a range of longstanding serious issues were resolved particularly related to corrosion.
The loss of production until the prohibition notice and the general direction were resolved had serious implications for TSOGA's cash flows. The NOGA group was loss making and had not generated a net profit after tax for the past four consecutive financial years. Essentially the companies could not afford to maintain, let alone decommission, the 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, into liquidation.
The government had to step in. The Commonwealth set up the Northern Endeavour Temporary Operations Program, taking control of the Northern Endeavour until a longer term solution could be agreed. To date it has cost at least $200 million to maintain the vessel—all taxpayers' money. This is at a time when the industry is battling on multiple fronts against extremists with their own agendas and where a social licence to operate is pivotal. They are faced with cleaning up the mess by a negligent government themselves via a proposed levy on industry. This bill, however, does not impose any such levy. As I understand it, consultation is ongoing and a levy is proposed to apply to the industry to fund the decommissioning of the Northern Endeavour. Relevant legislation will come to the fore in due course.
Labor recognises the key role gas plays in creating economic growth and export income earnings for Australia. Labor recognises the many thousands of 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 and cooking. Labor recognises the role of natural gas as a transition fuel in capitalising on renewable energy opportunities. We support opening up new gas reserves, subject to independent scientific assessments and effective environmental regulation. Gas will play a major part in reducing Australia's carbon emissions and it will assist our regional neighbours on their own journey to decarbonisation as they seek cleaner burning fuels as part of their energy mix, which is why the government's negligence on this issue is so callous and why it's high time they introduced meaningful reform in this place.
The bill strengthens Australia's offshore oil and gas regulatory regime to ensure that emerging decommissioning challenges facing the industry are able to be managed effectively and it addresses a loophole that failed to ensure that the cost of decommissioning an offshore project remained with the entity or entities who are or were responsible for or had the capacity to influence. This bill aims to strengthen the decommissioning framework from cradle to grave and better protect the marine environment and the taxpayer from bearing the cost.
These are important objectives, but I also point out that tightening decommissioning standards will result in significant jobs in the highly specialised 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 in force to keep this workforce safe. This bill increases regulatory oversight and scrutiny by providing for specific decision-making criteria decision points across the OPGGS Act to ensure entities are suitable on entry into the regime and remain suitable throughout the life of the project. It also expands the type of information that may be requested by the relevant decision maker from the applicant or applicants seeking to either enter into or progress through the regime.
There are four key pillars of the bill. The bill provides for oversight of changes in control of titleholders. The sale of an offshore project is meant to be captured as a transfer of the title or titles related to the project, which is also provided under the act. It is also common in the industry, both in Australia and overseas, for an offshore project to be transferred by the sale of the shares in the company that is the titleholder. Such transactions are not currently captured by the OPGGS Act because there is no transfer of the interest of the title or titles.
It provides 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. It includes minor and technical amendments to improve the operation of the act. It mandates trailing liabilities, expanding existing powers to call back previous titleholders to decommission infrastructure and 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 risks and liabilities in petroleum activities remain the responsibility of those who held—or had the ability to influence operations under—the title and it aims to change industry behaviour by increasing the due diligence undertaken by companies regarding who they sell their assets to.
I'm running out of time, so I will wind up. While it has taken a long time for the government to act to ensure full removal of facilities at the ends of their lives, Labor supports the legislation to ensure Australians receive the assurance they require that offshore oil and gas facilities are safely and appropriately decommissioned and removed.
Later I'll get to Labor's shameful admission in this chamber just then of their support for the fossil fuel industry and a gas-led recovery. I look forward to looking in Hansard at the exact words that Senator Brown used and promoting and publicising those words. I think it's very important that the Australian people see the lack of difference between the Labor Party and the Liberal Party on the use of fossil fuels, especially in a week when the IPCC report warned of a code red facing humanity. We are on the edge of an irreversible disaster if we don't immediately and rapidly reduce our emissions. The idea that Labor would come into this chamber and say that gas is an important way of reducing emissions is literally abominable. I'll get to that in a little bit more detail shortly.
Let's talk about a perfect scam. Suppose I'm a big petroleum company—a multibillion dollar company—and I have these ageing assets that have been written off to nothing in my balance sheet. I've never had to pay petroleum resource rent tax, because of a very generous scheme—interestingly, one of the architects who set that up was Dr Emerson from the Labor Party. Nevertheless, I've been claiming uplift of 15 per cent per annum on all my exploration and five per cent per annum on all my operating expenditure. And now I'm part of a $350 billion tax offset, so I never have to pay 'petroleum rort rent tax' for the life of my project. I'm getting to the end of the life of this project, and guess what I discover? I've got multimillions of dollars—if not potentially hundreds of millions of dollars—worth of liability to clean up these giant rusting rigs in the ocean. What would I do? What would be the perfect scam? Senators, what could we do?
If there was a little bit of oil and gas left in my field, I might be able to sell this petroleum licence. And who would want a petroleum licence at the end of its life with a liability for potentially hundreds of millions of dollars? Probably a nice penny dreadful listed on the stock market. I could go out and raise some capital. I could say I'm buying an exploration and production licence from Woodside Petroleum, for example. My share price goes up. I can sell my shares, make millions of dollars and squeeze every last bit of oil out of that field. Then, when the liability comes along, I can declare bankruptcy. Bob's your uncle—everybody wins! Everyone's a winner! No, sorry, there's a loser—the taxpayer.
Do you think that's a theoretical example? I don't think so. I think there is a very real scenario here where a large company—Woodside Petroleum—sold off an ageing asset to a very small company. Surely they must have known this company wasn't capitalised to deal with that liability. That company purchased the asset and, lo and behold, wasn't able to meet its commitments for maintenance. Sure enough, the whole thing went pear-shaped, and the taxpayer had to step in and foot the bill. That is exactly what happened. I've put multiple questions about this scenario to NOPSEMA and to the government at estimates, and I know other senators have as well. I know that there are environment groups out there like the Wilderness Society that have been doing a lot of work on this. I'd like to acknowledge in the Senate today the Australian Wilderness Society and, in particular, Jess and Tim Beshara, for the work that they've done on making many senators in this place—not just the Greens; they have been talking to all political parties—aware of this impending problem. What we've seen is just the tip of the iceberg.
Senator Brown talked about the Northern Endeavour, but there are a raft of ageing assets out there in the ocean, rust buckets, that are potential pollutants and that need to be remediated and fixed. We've got to get on top of this now. I heard the proposal that maybe one of these rusting, ageing production platforms might make a good artificial reef. Why don't we literally take a giant welder to it and cut it into pieces and dump it in the ocean and make a habitat for fish? Well, I'm not sure what the cost of doing that would be—I haven't actually looked at the numbers—but, even if it were acceptable from an environmental point of view, which I very much doubt, I'm sure it would be a cost-saving measure on behalf of companies that make a lot of money. They make significant returns on equity and significant returns on capital. They have some of the most profitable companies on the planet, and getting tax out of them is like getting blood out of a stone. I have sat on numerous inquiries over many years on this exact issue, and I can tell you that the Australian tax department themselves calls them 'systemic non-payers of tax'.
Interestingly enough, I will acknowledge, Woodside Petroleum does pay tax. Woodside Petroleum does pay tax. They're one of the few that haven't been dragged through the courts by the Australian tax office. But that doesn't go for the petroleum resource rent tax. The whole of the fossil fuel sector have managed to experience that largesse over many years, without paying the Australian people for the extraction of super profits from our publicly owned resources. But there are a number of companies out there that aren't paying their tax. We're all familiar with the tax department's High Court case against Chevron, for example, and believe me there are many others. So, of course, we will support any pathway towards levying some money out of the fossil fuel industry to pay for the clean-up of their own assets, which they have exploited over many years and made billions of dollars of profit from. That makes perfect sense.
Just this last month, in the middle of the G7 meeting which was predominantly focused on looking at taking action on climate, the Prime Minister sneaked off and presented directly to the APPEA, the Australian Petroleum Production and Exploration Association, conference in Perth. What did the Prime Minister do when he spoke directly to that conference via video link from London, while the rest of the world was talking about acting on climate change? He announced 80,000 square kilometres of new ocean permits for the fossil fuel industry—80,000 square kilometres of areas to be opened up to the fossil fuel industry, to be burnt to produce carbon dioxide and add to global warming. In a climate emergency, in the middle of a conference discussing action on climate, that's our Prime Minister. That's this government. That is a national disgrace and a shame.
How many more of these assets are there going to be for future generations to decommission? There are hundreds of production platforms around this country, including in Bass Strait, off the coast of my home state of Tasmania. So, this is very important to get right. But, while we're at it, let's not kid ourselves. There are enough reserves of fossil fuel, petroleum and gas already discovered around the world such that, if we were to burn them, it would push us above two degrees of warming. Remember, the IPCC said we have to limit warming to 1½ degrees, and we've got only 5½ years of our carbon budget left before we hit 1½ degrees. In other words, if we keep going, business as usual, we will exceed the target we all signed on to as an international community under the Paris Agreement.
Why are we still risking our oceans with dangerous seismic testing, with dangerous offshore oil and gas drilling, for a product that, when we burn it, is killing our oceans? It is warming our oceans. It is acidifying our oceans. It is the definition of insanity, and I think it is criminal, that we are still pushing ahead. In the government's spin this week we have heard them talking about the fact that they have exceeded their Kyoto commitments, that they have somehow reduced emissions by 16 per cent since 2005. Well, if you take out the Kyoto clause and land clearing—which Australia very sneakily snuck in to those negotiations—our emissions are actually up by 19 per cent in real terms. Australia is the third-highest emitter of greenhouse gases per capita in the world—the third-highest. We're also the third-biggest exporter of fossil fuels, behind Saudi Arabia and Russia.
We have failed to develop any long-term mitigation strategy to tackle climate change in the past nine years under this government. Australia is the only country in the world to have legislated and repealed a carbon pricing mechanism—the only country in the world. That's a shame, and an international disgrace. We have no meaningful policies in place to electrify transport. We have no commitments to net zero emissions by 2050. We have a 26 to 28 per cent 2005 reduction target for our 2030 milestone, when the IPCC report said this week that we now need to make that a 75 per cent reduction if we're going to meet our targets. The Deputy Prime Minister—the second most powerful man in the country—said just yesterday that 'it's not up to the government to have a plan'—it's not up to the government to protect Australians from fires and flood and famine from this climate emergency!
It's the government's No. 1 role to protect its people. Yet we hear that from the second most powerful man in the country. We have been constantly criticised by experts right around the world for having no nationally determined contribution under the Paris Agreement since 2015. We have consistently ignored recommendations on climate targets such as the Climate Targets Panel report out of the University of Melbourne to continue to cut emissions. We have tried to gut, and we ultimately reduced, the renewable energy target. Only last week we—shamefully—allowed a clean energy investing government body set up by the Greens and Labor to invest in fossil fuels. We repealed a carbon price that did drive down emissions for the first time ever by seven per cent. We're pursuing a gas led recovery even though there are better options with renewable energy and even though we know—including from the IPCC report—that burning gas is not the solution. Indeed, the IPCC specifically singled out gas in their report as not something you want to do. Yet here we have the Labor Party in here peddling the line of the fossil fuel industry, joining with the Liberal Party to support a gas led recover in a time of climate emergency.
If we do not have the Greens in this place and in the other place, we have no chance of holding either of these two parties to account. I am at least pleased that Labor have made very clear today their support for the fossil fuel industry, which cuts all the best available science. I hope that some in the environment movement out there are listening to what was said in here today. The Labor Party have made it very clear that they support more gas, more exploration and more development in the middle of a climate crisis.
I will just finish by saying one word and that's 'leadership'. If I could ask for anything from this parliament, from this institution that I think has dismally failed in its duty of care for future generations, it's leadership. We used to be a leader a decade ago. It's so sad to see the Labor Party walking back that leadership and supporting the government in a gas led recovery. We need leadership to stand up and say, 'We have to transition.' The costs of inaction by far outweigh the costs of action. We have to do this not just for our economy and for our community; we have to do this for future generations. It can only be done in this place. Climate change is an environmental problem, but it is first and foremost a political problem. It is politics and governments that have failed on climate change. This is the only place we can fix it, and this is a small step towards that. (Time expired)
I wish to rise and speak in favour of these bills, the Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021 and the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021. I want to really pay a compliment to Minister Pitt in relation to how he's managed a very difficult issue in relation to Northern Endeavour.
Senator Whish-Wilson is correct insofar as this was an old piece of infrastructure that was sold by Woodside to a purchaser. Woodside had made the decision—and I am saying this as a Woodside shareholder, and that's on my register of interests—that it didn't want to extend the production life of that asset. It made that decision and then it went out to the market to sell that asset. I have a firm view, as someone who was worked in the mining industry and been involved in transactions in the mining industry, that if you own and operate mining assets or oil and gas assets you have a very strong obligation arising out of legal requirements but also your social licence to operate, when you transfer that to someone else, to ensure the person you transfer it to has both the financial and the technical capability to discharge their legal obligations. That did not occur in this case. Northern Endeavour went under.
Instead of all the Australian taxpayers having to meet that huge liability—there are hundreds of millions of dollars associated with decommissioning that platform—it is fit and proper that the oil and gas industry bear the lion's share of meeting that cost. It's right that the oil and gas industry should look towards Woodside and ask Woodside's senior executive team: 'How did it come to this? How did it come to this, that you've sold this ageing piece of infrastructure to a company that didn't have the technical or financial capacity to meet its obligations and, in that context, you have now caused a levy to be imposed upon the whole industry?' Woodside needs to reflect on that very, very carefully.
The second point I want to make is this. There was a gaping hole before this legislation that would allow someone to be the subject of an upstream takeover where someone acquired the shares in a holding company and didn't have to necessarily meet the technical and financial capability obligations of the actual tenement holder. When oil and gas companies set up special purpose vehicles to hold oil and gas tenements, you can't just look at the special purpose vehicle; you have to look up the corporate tree. So it is fit and proper that an obligation be added in a takeover context for the ultimate holding company to prove that it has the financial and technical wherewithal to discharge its obligations. We have $52 billion of these contingent liabilities on the horizon and we must make sure that the commercial operators who are legally and morally responsible, as part of their legal requirements but also their social licence to operate, do exactly all that they need to do so that these facilities are safely decommissioned for the benefit of all the Australian people and for the environment.