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This Digest was prepared for debate. It reflects the legislation as introduced
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CONTENTS
Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer & Copyright Details
Date Introduced: 24 June 1999
House: House of Representatives
Portfolio: Industry, Science and Resources
Commencement: The amendments described in this Digest commence on the Bill receiving Royal Assent.
The major change proposed by the Bill is the introduction of a new class of licences, known as infrastructure licences. The Bill also re-writes and updates a number of provisions in the Petroleum (Submerged Lands) Act 1967 (the Principal Act).
In 1967 negotiations between the Commonwealth and the States and Northern Territory over offshore jurisdiction resulted in an agreement that provided for joint Commonwealth-State/Northern Territory responsibility over exploration for and exploitation of offshore petroleum resources. Under the agreement the Commonwealth passed the Principal Act and complementary legislation was enacted by the States. Under the agreement, the Commonwealth had jurisdiction over the offshore areas beyond the three nautical mile Territorial sea, while the States and Northern Territory had jurisdiction over the Territorial sea and onshore areas.
In 1973 the Commonwealth enacted the Seas and Submerged Lands Act 1973 which gave the Commonwealth jurisdiction from the low water mark. The validity of the Act was challenged in the High Court which upheld the Commonwealth's power to enact the legislation.(1) In 1979 a further agreement was reached between the Commonwealth and States giving the States jurisdiction over coastal waters to 3 nautical miles.
The Principal Act deals with the exploration for, and extraction of, petroleum resources beyond the 3 mile limit in co-operation with the States and Northern Territory through State/Northern Territory Joint Authorities.
The Principal Act provides a regime within which exploration permits and exploitation licences are issued and provides for:
Revenue from offshore petroleum products is gained through a resource rent tax (RRT) which applies to offshore areas other than the North West Shelf, which are subject to excise and royalty payments. RRT is payable at the rate of 40% of taxable profits and generated an estimated $420 million in 1998-99, estimated to increase to $720 million in 1999-2000, due to a recovery in Bass Strait production following the disruption in gas supplies to Victoria due to the explosion in the processing plant.(2) Crude oil excise receipts, which include receipts from the North West Shelf, onshore fields and on-shore production are estimated to total $115 million in 1999-2000, increasing from $29 million in 1998-99.(3)
Offshore exploration and development activity for the three months ended March 1999 remained strong, with 16 exploration wells drilled (compared with 19 for the same period in 1998) and 9 development wells active (compared with 8 in the same period in 1998). This activity was higher than expected as Australian Geographical Survey Organisation (AGSO) anticipates that 'the overall level of exploration drilling and seismic survey acquisition is expected to decline in the first half of 1999'.(4) The major areas of offshore activity are in the Gippsland and Carnarvon Basins, which is reflected in the number of exploration rigs active in, or adjacent to, these areas, with 5 rigs operating in the Gippsland Basin, and 3 in the Carnarvon Basin and 1 in the Bonaparte Basin, both on the North-West Shelf.(5)
The Australian Petroleum Production and Exploration Association (APPEA), the main industry body, estimates that:
The Government's broad policy towards the administration of offshore petroleum exploration and development regulation was outlined in a Media Release by the Minister for Resources and Energy dated 16 June 1998. That statement, and the present Bill, followed an extensive review of the regulation of the industry and the Principal Act by the Department of Industry, Science and Resources in consultation with the industry and State and Northern Territory governments. Main directions indicated by the Minister included:
A further announced change is the proposed introduction of infrastructure licences for offshore areas. The proposed licences are intended to apply to facilities that fall outside the current production and pipeline categories, such as offshore processing of natural gas and methanol.(7)
It should be noted that where the Principal Act refers to petroleum it means more than what is commonly associated with the term. Petroleum is defined in the Principal Act to include any naturally occurring hydrocarbon, whether gaseous, liquid or solid and any mixture of hydrocarbons.
Due to the nature of the licences to be granted, the calculation of the area covered by a licence, and the technical nature of exploration for and extraction of petroleum, a large number of the amendments contained in the Bill are of a technical nature. Inquiries concerning technical matter should be referred to the Science, Technology and Environment Group.
A definition of infrastructure facility will be inserted into the Principal Act by item 3 of Schedule 1 and includes:
Infrastructure licences are dealt with in proposed Division 3 of Part III of the Principal Act which will be inserted by Item 59 of Schedule 1.
It will be an offence, with a maximum penalty of 5 years imprisonment, to begin to construct, alter, reconstruct or operate an infrastructure facility without an infrastructure licence (proposed section 59A).
Proposed sections 59A to 59E deal with largely administrative matters such as applications for, granting and notification of infrastructure licences.
While an infrastructure licence is in force the holder will have permission, subject to any conditions in the licence (proposed section 59J allows conditions to be imposed), to construct and operate infrastructure facilities in the area covered by the licence. The licence will not authorise exploration for or recovery of petroleum or the construction of a pipeline (proposed section 59F).
An infrastructure licence will continue indefinitely (proposed section 59G) although if facilities are not constructed or used for 5 years the Authority may give notice that the licence is to be terminated and terminate the licence at any time more than one month after notice has been given (proposed section 59H).
An infrastructure licence may be varied upon application but if the block covered by the licence is subject to another type of licence, permit etc (such as a pipeline licence) held by another person, the other person must also be notified of the proposed variation (proposed section 59K).
Section 67 of the Principal Act provides that a pipeline licence is to remain in force for a maximum of 21 years. Item 67 will amend the section to provide that the licences are to remain in force indefinitely, while proposed section 67A provides for their termination if not used for 5 years.
Infrastructure licensees are to carryout operations in a safe manner and are to prevent the waste or escape of water, petroleum or any other product derived from processing petroleum (item 97 which will amend section 97 of the Principal Act).
Section 107 of the Principal Act provides that where a licence, permit etc has been cancelled, terminated or has expired, the Designated Authority may direct the holder or the former holder of the licence, permit etc to undertake certain action, including the removal of property brought onto the area, to cap wells, make provision for the conservation and protection of natural resources in the area or to make good any damage to the seabed or subsoil. Items 124 and 125 will amend section 127 to remove the power to direct except in regard to the removal of property brought into the area.
It will be an offence, with a maximum penalty of 10 years imprisonment, to damage or interfere with a structure or vessel in an adjacent area (i.e. between the Territorial sea and Continental Shelf) that is, or is to be, used in exploring for, recovering, processing, storing, preparing for transport or transporting petroleum, or to interfere with any operations or activity connected with such a vessel or structure (item 150 which will insert a new section 124A into the Principal Act).
Item 161 will insert a new Part IIIA, dealing with the release of information, into the Principal Act to replace the rules currently contained in section 118 of the Principal Act. The measures in the Bill are substantially similar to those contained in current section 118 with the major differences being that there is a prohibition on the release of conclusions derived from information; a new 8 year exclusion period will be introduced for 3-dimensional seismic survey information; and the initial decision as to whether information should be disclosed is to be made by the Designated Authority with a right to appeal to the Commonwealth Minister.
Chris Field
25 August 1999
Bills Digest Service
Information and Research Services
This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.
ISSN 1328-8091
© Commonwealth of Australia 1999
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Published by the Department of the Parliamentary Library, 1999.