OFFSHORE PETROLEUM (ROYALTY) BILL 2005

i Offshore Petroleum (Royalty) Bill 2005 No. , 2005

Contents

Short title.......................................................................................1

Commencement .............................................................................1

Application of Chapter 1 of the Offshore Petroleum Act 2005..........2

Definitions.....................................................................................2

Imposition of royalty......................................................................3

Rate of royalty--production licences ..............................................4

Rate of royalty--exploration permit................................................6

Rate of royalty--retention lease......................................................6

Reduction of royalty--potentially uneconomic wells.......................6

Exemptions from royalty................................................................7

Meaning of wellhead......................................................................8

Meaning of value ...........................................................................8

Quantity of petroleum recovered.....................................................8

Directions by Joint Authority..........................................................9

Provisional payment of royalty .......................................................9

Adjustment of payments of royalty ...............................................10

Transitional provisions.................................................................11

Schedule 1--Transitional provisions

Definition ....................................................................................12

Pre-commencement royalty periods ..............................................12

Transitional--eligible instruments ................................................12

Transitional--royalty at the prescribed rate...................................13

Transitional--rate of royalty.........................................................13

Re-enactment of the Petroleum (Submerged Lands)

(Royalty) Act 1967 .......................................................................14

Offshore Petroleum (Royalty) Bill 2005 No. , 2005 1

A Bill for an Act to impose a royalty on petroleum

recovered from the North West Shelf, and for

related purposes

The Parliament of Australia enacts:

1 Short title

This Act may be cited as the Offshore Petroleum (Royalty) Act

2005.

2 Commencement

(1) Each provision of this Act specified in column 1 of the table

commences, or is taken to have commenced, in accordance with

Section 3

2 Offshore Petroleum (Royalty) Bill 2005 No. , 2005

column 2 of the table. Any other statement in column 2 has effect

according to its terms.

Commencement information

Column 1

Column 2

Column 3

Provision(s)

Commencement

Date/Details

1. Sections 1 and

2 and anything in

this Act not

elsewhere covered

by this table

The day on which this Act receives the

Royal Assent.

2. Sections 3 to

At the same time as Chapter 2 of the

Offshore Petroleum Act 2005 commences.

3. Schedule 1

At the same time as the provision(s) covered

by table item 2.

Note:

This table relates only to the provisions of this Act as originally

passed by the Parliament and assented to. It will not be expanded to

deal with provisions inserted in this Act after assent.

(2) Column 3 of the table contains additional information that is not

part of this Act. Information in this column may be added to or

edited in any published version of this Act.

3 Application of Chapter 1 of the Offshore Petroleum Act 2005

Chapter 1 of the Offshore Petroleum Act 2005 applies to this Act in

a corresponding way to the way in which it applies to the Offshore

Petroleum Act 2005.

Note:

This means, for example, that the definitions in section 6 of the

Offshore Petroleum Act 2005 apply to this Act.

4 Definitions

In this Act:

month means one of the 12 months of a year.

North West Shelf exploration permit means one of the North West

Shelf exploration permits as defined by section 2 of the Petroleum

Resource Rent Tax Assessment Act 1987.

Section 5

Offshore Petroleum (Royalty) Bill 2005 No. , 2005 3

North West Shelf production licence means a production licence

that, under the Petroleum Resource Rent Tax Assessment Act 1987,

is related to a North West Shelf exploration permit.

North West Shelf retention lease means a retention lease that,

under the Petroleum Resource Rent Tax Assessment Act 1987, is

related to a North West Shelf exploration permit.

primary production licence has the same meaning as in Schedule 4

to the Offshore Petroleum Act 2005.

royalty means royalty payable under section 5.

royalty period, in relation to a North West Shelf exploration

permit, a North West Shelf retention lease or a North West Shelf

production licence, means:

(a) the period beginning on:

(i) the day on which the permit, lease or licence comes or

came into force; and

(ii) ending at the end of the month in which that day occurs;

and

(b) each later month.

secondary production licence has the same meaning as in

Schedule 4 to the Offshore Petroleum Act 2005.

value has the meaning given by section 12.

Note:

See also section 15, which deals with provisional value.

wellhead has the meaning given by section 11.

5 Imposition of royalty

The registered holder of:

(a) a North West Shelf exploration permit; or

(b) a North West Shelf retention lease; or

is liable to pay a royalty on all petroleum recovered by the holder

in the permit area, lease area or licence area in a royalty period

beginning at or after the commencement of this section.

Section 6

4 Offshore Petroleum (Royalty) Bill 2005 No. , 2005

Note 1:

For exemptions, see section 10.

Note 2:

For collection of royalty, see Part 4.6 of the Offshore Petroleum Act

2005.

6 Rate of royalty--production licences

(1) The rate of royalty on petroleum recovered under a production

licence is worked out using the table:

Rate of royalty

Item

In this case...

the rate of royalty is this

percentage of the value at the

wellhead of the petroleum...

(a) petroleum recovered under a

production licence granted

otherwise than by way of

renewal; and

(b) none of items 2, 3, 4 and 5 apply

10%

petroleum recovered under a

secondary production licence

granted otherwise than by way of

renewal

the percentage determined under

subsection (2) in relation to the

petroleum recovered under the

licence

petroleum recovered under a

primary production licence granted

otherwise than by way of renewal,

where a secondary production

licence is granted to the holder of

the primary production licence

(with effect from the beginning of

the next royalty period after the day

on which the secondary production

licence takes effect) the same

percentage as is applicable to the

petroleum recovered under the

secondary production licence

petroleum recovered under a

production licence granted on an

application under section 154 of the

Offshore Petroleum Act 2005

the same percentage as was

applicable to petroleum recovered

under the initial production licence

(within the meaning of that section)

petroleum recovered under a

production licence granted by way

of renewal

the percentage that would be the rate

of royalty if the renewed licence

were the continuation in force of the

previous licence

Section 6

Offshore Petroleum (Royalty) Bill 2005 No. , 2005 5

Application for secondary production licence--determination of

rate of royalty

(2) If:

(a) a person has applied for a primary production licence; and

(b) before or after the grant of the primary production licence,

the person applies for a secondary production licence;

the Joint Authority must, by written instrument, determine the rate

of royalty payable in relation to petroleum recovered, whether

under the primary production licence or under the secondary

production licence.

(3) The rate must not be less than 11%, nor more than 12.5%, of the

value at the wellhead of that petroleum.

(4) Before determining the rate of royalty payable, the Joint Authority

must:

(a) give the person an opportunity to confer with the Designated

Authority about the rate; and

(b) give the Designated Authority an opportunity to report to the

Joint Authority about any such conferring; and

(5) A determination under subsection (2) is not a legislative instrument

for the purposes of the Legislative Instruments Act 2003.

Royalty at the prescribed rate

(6) A reference in a production licence (whether granted before or

after the commencement of this subsection) to:

(a) royalty at the prescribed rate; or

(b) royalty at the rate that is for the time being the prescribed

rate;

is to be read as a reference to royalty at the rate that is or was the

rate of royalty applicable in accordance with the provisions of this

Act, as in force from time to time.

Section 7

6 Offshore Petroleum (Royalty) Bill 2005 No. , 2005

7 Rate of royalty--exploration permit

(1) The rate of royalty on petroleum recovered under an exploration

permit is 10% of the value at the wellhead of the petroleum.

Royalty at the prescribed rate

(2) A reference in an exploration permit (whether granted before or

after the commencement of this subsection) to:

(a) royalty at the prescribed rate; or

(b) royalty at the rate that is for the time being the prescribed

rate;

is to be read as a reference to royalty at the rate that is or was the

rate of royalty applicable in accordance with the provisions of this

Act, as in force from time to time.

8 Rate of royalty--retention lease

(1) The rate of royalty on petroleum recovered under a retention lease

is 10% of the value at the wellhead of the petroleum.

Royalty at the prescribed rate

(2) A reference in a retention lease (whether granted before or after the

commencement of this subsection) to:

(a) royalty at the prescribed rate; or

(b) royalty at the rate that is for the time being the prescribed

rate;

is to be read as a reference to royalty at the rate that is or was the

rate of royalty applicable in accordance with the provisions of this

Act, as in force from time to time.

9 Reduction of royalty--potentially uneconomic wells

Scope

(1) This section applies if the Designated Authority is satisfied that the

rate of recovery of petroleum from a well has become so reduced

that, having regard to the rate or rates of royalty applicable under

Section 10

Offshore Petroleum (Royalty) Bill 2005 No. , 2005 7

section 6, 7 or 8, further recovery of petroleum from that well

would be uneconomic.

Reduction of royalty

(2) The Joint Authority may, by written instrument, determine that the

royalty in relation to any or all of the petroleum recovered from

that well on or after a date specified in the determination is to be

such lower rate as is specified in the determination.

(3) The Joint Authority may, by written instrument, revoke or vary a

determination under subsection (2), and the revocation or variation

applies to petroleum recovered on or after such date as is specified

in the instrument.

(4) A determination under subsection (2) has effect despite section 6, 7

or 8.

10 Exemptions from royalty

(1) Royalty under this Act:

(a) is not payable in relation to petroleum that the Designated

Authority is satisfied was unavoidably lost before the

quantity of that petroleum was ascertained; and

(b) is not payable in relation to petroleum that is used by the

registered holder of the exploration permit, retention lease or

production licence, as approved by the Designated Authority,

for the purposes of petroleum exploration operations or

operations for the recovery of petroleum; and

of the Designated Authority, is flared or vented in connection

with operations for the recovery of petroleum.

(2) If petroleum that has been recovered by the registered holder of an

exploration permit, retention lease or production licence is, with

the approval of the Designated Authority, returned to a natural

reservoir, royalty under this Act is not payable in relation to that

petroleum because of that recovery.

Section 11

8 Offshore Petroleum (Royalty) Bill 2005 No. , 2005

(3) Subsection (2) does not affect the liability of that or any other

registered holder to pay royalty in relation to petroleum that is

recovered from that natural reservoir.

11 Meaning of wellhead

For the purposes of this Act, the wellhead, in relation to any

petroleum, is:

(a) such valve station as is agreed between:

(i) the registered holder of the exploration permit, retention

lease or production licence; and

(ii) the Designated Authority; or

(b) if there is no agreement within such period as the Designated

Authority allows--such valve station as the Designated

Authority determines to be that wellhead.

12 Meaning of value

For the purposes of this Act, the value at the wellhead of any

petroleum is:

(a) such amount as is agreed between:

(i) the registered holder of the exploration permit, retention

lease or production licence; and

(ii) the Designated Authority; or

(b) if there is no agreement within such period as the Designated

Authority allows--such amount as the Designated Authority

determines to be that value.

13 Quantity of petroleum recovered

For the purposes of this Act, the quantity of petroleum recovered

by the registered holder of an exploration permit, retention lease or

production licence from a well during a period is taken to be:

(a) the quantity measured during that period by a measuring

device:

(i) approved by the Designated Authority; and

(ii) installed at the wellhead or at such other place as the

Designated Authority approves; or

Section 14

Offshore Petroleum (Royalty) Bill 2005 No. , 2005 9

(b) if:

(i) no such measuring device is so installed; or

(ii) the Designated Authority or the Joint Authority is not

satisfied that the quantity of petroleum recovered by the

registered holder from that well has been properly or

accurately measured by such a measuring device;

the quantity determined by the Designated Authority as being

the quantity recovered by the registered holder from that well

during that period.

14 Directions by Joint Authority

(1) The Joint Authority must give directions to the Designated

Authority about the manner in which the Designated Authority is

to exercise the powers conferred by sections 11, 12 and 13.

(2) A direction under subsection (1) must relate to a particular

exploration permit, retention lease or production licence.

(3) The Designated Authority must comply with a direction under

subsection (1).

(4) A direction under subsection (1) is not a legislative instrument for

the purposes of the Legislative Instruments Act 2003.

15 Provisional payment of royalty

(1) If, in relation to petroleum recovered during a royalty period, the

value of the petroleum has not been agreed or determined under

section 12, the Designated Authority may determine a provisional

value.

(2) If:

(a) a provisional value of any petroleum has been determined

under subsection (1); and

(b) the value of that petroleum has not yet been agreed or

determined under section 12;

this Act has effect, in relation to that petroleum, as if:

Section 16

10 Offshore Petroleum (Royalty) Bill 2005 No. , 2005

(d) the determination of the provisional value were an agreement

or determination under section 12.

16 Adjustment of payments of royalty

Scope

(1) This section applies if:

(a) subsection 15(2) has operated in relation to petroleum

recovered during a royalty period, and a value of the

petroleum different from the provisional value is

subsequently agreed or determined under section 12; or

(b) an error has been made in:

(i) the calculation of royalty due; or

(ii) the application of a procedure for ascertaining the value

of the petroleum.

Adjustment

(2) If the determined royalty is greater than the provisional royalty, the

difference is payable by the registered holder concerned.

(3) If the determined royalty is less than the provisional royalty, the

difference is to be:

(a) deducted from any amount subsequently payable under this

Act by the registered holder concerned; or

(b) if no amount is likely to be subsequently payable under this

Act by the registered holder concerned--refunded to the

registered holder.

Definitions

(4) In this section:

determined royalty means:

(a) if paragraph (1)(a) applies--the amount of royalty payable in

relation to the petroleum on the basis of the value ascertained

under section 12; or

(b) if paragraph (1)(b) applies--the amount of royalty payable in

relation to the petroleum.

Section 17

Offshore Petroleum (Royalty) Bill 2005 No. , 2005 11

provisional royalty means:

(a) if paragraph (1)(a) applies--the amount of royalty payable in

relation to the petroleum on the basis of the provisional

value; or

(b) if paragraph (1)(b) applies--the amount of royalty demanded

in relation to the petroleum as a result of the erroneous:

(i) calculation of royalty due; or

(ii) application of a procedure for ascertaining the value of

the petroleum.

17 Transitional provisions

Schedule 1 has effect.

Schedule 1 Transitional provisions

Clause 1

12 Offshore Petroleum (Royalty) Bill 2005 No. , 2005

Schedule 1--Transitional provisions

Note:

See section 17.

1 Definition

In this Schedule:

eligible instrument means a determination, a direction, an

approval, an agreement or any other instrument.

2 Pre-commencement royalty periods

(1) Despite the repeal of the Petroleum (Submerged Lands) (Royalty)

Act 1967, that Act continues to apply, in relation to royalty for a

royalty period that began before the commencement of this clause,

as if that repeal had not happened.

(2) Despite the repeal of section 42 of the Petroleum (Submerged

Lands) Act 1967, that section continues to apply, in relation to

royalty for a royalty period that began before the commencement

of this clause, as if that repeal had not happened.

(3) The definitions of royalty and royalty period in section 4 of this

Act do not apply to this clause.

3 Transitional--eligible instruments

(1) This clause applies to an eligible instrument if:

(a) the eligible instrument was in force immediately before the

commencement of this clause; and

(b) either:

(i) the eligible instrument was made or given under, or for

the purposes of, a particular provision of the Petroleum

(Submerged Lands) (Royalty) Act 1967; or

(ii) the eligible instrument was made or given under, or for

the purposes of, section 42 of the Petroleum

(Submerged Lands) Act 1967.

Transitional provisions Schedule 1

Clause 4

Offshore Petroleum (Royalty) Bill 2005 No. , 2005 13

(2) The eligible instrument has effect, after the commencement of this

clause, as if:

(a) it had been made or given under, or for the purposes of, the

corresponding provision of this Act; and

(b) any requirement imposed by this Act in relation to the

making or giving of the eligible instrument (including a

requirement about the form of words) had been satisfied.

(3) Subclause (2) does not prevent the eligible instrument continuing

to have effect for the purposes of:

(a) a particular provision of the Petroleum (Submerged Lands)

(Royalty) Act 1967 as that Act continues to apply after its

repeal because of clause 2 of this Schedule; or

(b) section 42 of the Petroleum (Submerged Lands) Act 1967 as

that section continues to apply after its repeal because of

clause 2 of this Schedule.

(4) For the purposes of this clause, in determining whether a provision

is a corresponding provision:

(a) regard must be had to the substance of the provision; and

(b) if the provision appears to have expressed the same idea in a

different form of words for the purpose of using a clearer

style--disregard the difference.

4 Transitional--royalty at the prescribed rate

Subsections 6(6), 7(2) and 8(2) of this Act have effect as if:

(a) each reference in those subsections to royalty included a

reference to royalty payable under the repealed Petroleum

(Submerged Lands) (Royalty) Act 1967; and

(b) each reference in those subsections to this Act included a

reference to the repealed Petroleum (Submerged Lands)

(Royalty) Act 1967.

5 Transitional--rate of royalty

(1) Subsection 6(1) of this Act has effect as if the reference in item 2

of the table in that subsection to subsection (2) of that section

Schedule 1 Transitional provisions

Clause 6

14 Offshore Petroleum (Royalty) Bill 2005 No. , 2005

included a reference to section 42 of the repealed Petroleum

(Submerged Lands) Act 1967.

(2) Subsection 6(1) of this Act has effect as if:

(a) the reference in item 4 of the table in that subsection to

section 154 of the Offshore Petroleum Act 2005 included a

reference to subsection 51(1) of the repealed Petroleum

(Submerged Lands) Act 1967; and

(b) the reference in item 4 of the table in that subsection to the

initial production licence (within the meaning of section 154

of the Offshore Petroleum Act 2005) included a reference to

the original licence as defined by subsection 51(1) of the

repealed Petroleum (Submerged Lands) Act 1967.

6 Re-enactment of the Petroleum (Submerged Lands) (Royalty) Act

1967

This Act re-enacts the Petroleum (Submerged Lands) (Royalty) Act

1967 with certain modifications.

Note:

Section 15AC of the Acts Interpretation Act 1901 provides that if an

Act has expressed an idea in a particular form of words, and a later

Act appears to have expressed the same idea in a different form of

words for the purpose of using a clearer style, the ideas shall not be

taken to be different merely because different forms of words were

used.

Commonwealth of Australia Bills

OFFSHORE PETROLEUM (ROYALTY) BILL 2005