Commonwealth Numbered Regulations - Explanatory Statements

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CLEAN ENERGY AMENDMENT REGULATION 2012 (NO. 2) (SLI NO 51 OF 2012)

EXPLANATORY STATEMENT

Select Legislative Instrument 2012 No. 51

Issued by the Authority of the Minister for Climate Change and Energy Efficiency

Clean Energy Act 2011

Clean Energy Amendment Regulation 2012 (No. 2)

The Clean Energy Act 2011 (Clean Energy Act), together with the other Acts of the Clean Energy Legislative Package, sets up the carbon pricing mechanism (the mechanism) as part of the Government's climate change plan, as set out in Securing a clean energy future: the Australian Government's climate change plan.

Section 312 of the Clean Energy Act provides that the Governor-General may make regulations prescribing matters required or permitted by the Clean Energy Act and matters necessary or convenient to be prescribed for carrying out or giving effect to the Clean Energy Act.

The Clean Energy Regulations 2011 (the Regulations) provide necessary details that facilitate compliance with, and administration of, the Clean Energy Act. The Clean Energy Amendment Regulation 2012 (No. 2) (the Regulation) amends the Regulations to specifically address:

*         definitions which relate to the supply of natural gas;

*         additional circumstances under which an Obligation Transfer Number (OTN) holder may reduce its provisional emissions number to ensure liability is not imposed on exported fuel, fuel that is subject to excise or uses of natural gas that give rise to liability under another section of the Clean Energy Act;

*         general requirements that must be complied with when documents are provided to the Clean Energy Regulator (the Regulator);

*         information and documents to be provided with an application for an OTN;

*         the circumstances under which a facility may cease to be a large gas consuming facility and information and documents to be provided with an application to show that these circumstances are satisfied;

*         additional information and documentation to be provided with applications for declared designated joint ventures (DJVs) and liability transfer certificates (LTCs), and

*         the interaction between LTCs and DJVs.

The sections of the Clean Energy Act which enable the Regulation are set out in Attachment A.

Background to the Regulation is set out at Attachment B.

Details of the Regulation are set out in Attachment C.

A statement of the Regulation's compatibility with human rights is set out at Attachment D.

The Clean Energy Act specifies no conditions that need to be satisfied before the power to make the Regulation may be exercised.

The Regulation is a legislative instrument for the purposes of the Legislative Instruments Act 2003.

The Regulation commences on the day after it has been registered.

Consultation

The Clean Energy Legislative Package reflects the outcomes of comprehensive consultation with the public and stakeholders.

• In September 2010 the Government announced the establishment of the Multi-Party Climate Change Committee (MPCCC) to consult, negotiate, and report to the Cabinet, through the Minister for Climate Change and Energy Efficiency, on agreed options for the implementation of a carbon price in Australia, and to provide advice on, and participate in, building community consensus for action on climate change. 
• On 24 February 2011, the Prime Minister announced the climate change framework outlining the broad architecture for a carbon pricing mechanism, which had been considered by the MPCCC.
• The Department of Climate Change and Energy Efficiency conducted a public consultation process on the proposed mechanism in April and May 2011.
• On 10 July 2011, the Government published Securing a clean energy future: The Australian Government's climate change plan.
• On 28 July 2011, the Government released draft bills of the legislation included in the Clean Energy Legislative Package, and received over 300 submissions on those bills.
• Since the passage of the Clean Energy Legislative Package, the Government has consulted extensively with those covered by the mechanism and related reforms in relation to implementation and compliance issues.

Consultation on an exposure draft of the Regulation took place in March-April 2012. A discussion paper dealing both with the content of this Regulation and the National Greenhouse and Energy Reporting Amendment Regulation 2012 (No. 1) was exposed for public comment between 16 March and 2 April 2012.

Thirty submissions from industry stakeholders were received in response and DCCEE also conducted several meetings with industry stakeholders. Comments received by the Department through the exposure draft process were considered in finalising the Regulation.

Authority: Sections 5, 6, 35(9), 38(2), 55A(2), 56(3), 68(4), 74(4), 81(4), 85(4) and 312 of the Clean Energy Act 2011

Glossary

The following abbreviations are used throughout this explanatory statement

Attachment A

Legislative authority for the Regulation

The Regulation is supported by the following provisions of the Clean Energy Act:

•                 section 312, which allows the Governor-General to make regulations prescribing matters required or permitted by the Clean Energy Act and matters necessary or convenient to be prescribed for carrying out or giving effect to the Clean Energy Act.

•                 section 5, which provides that;

-                    'applicable identification procedure' has the meaning ascertained in accordance with the regulations,

-                    a 'natural gas supply pipeline' does not include a pipeline of a kind specified in the regulations,

-                    'withdrawal', in relation to natural gas, has the meaning given by the regulations;

•                 section 6, which provides that the 'supply' of natural gas occurs when the gas passes a point ascertained in accordance with the regulations, if the regulations specify this point;

•                 section 35(9), which specifies that the regulations may provide that a number ascertained in accordance with the regulations is a netted-out number of an OTN holder for an eligible financial year;

•                 section 38(2)(c)(i) and (ii), which specifies that an application for the issue of an OTN must be accompanied by such information and documents (if any) as are specified in the regulations;

•                 section 55A(2), which provides that if the conditions specified in the regulations are satisfied in relation to a large gas consuming facility, the facility is taken to cease to be a large gas consuming facility at a time ascertained in accordance with the regulations;

•                 section 56(3)(c) and (d), which provides that an application to be an 'approved person' must be accompanied by such information and documents (if any) as are specified in the regulations;

•                 section 68(4)(c)(ii) and (iii), which allow the regulations to require that an application for a declared DJV must be accompanied by information and documentation set out in the regulations;

•                 section 74(3)(c)(i) and (ii), which allow the regulations to require that an application for a participating percentage declaration must be accompanied by information and documentation set out in the regulations;

•                 section 81(4)(c)(iv) and (v), which allow the regulations to require that an application for a corporate group LTC must be accompanied by information and documentation set out in the regulations;

•                 section 85(5)(c)(iv) and (v), which allow the regulations to require that an application for a financial control LTC must be accompanied by information and documentation set out in the regulations; and

•                 section 227, which allows the regulations to require that a person make a record of specified information relevant to the Clean Energy Act or the associated provisions and keep that record or a copy of that record for 5 years.

Attachment B

Background information

Natural gas liability and Obligation Transfer Numbers (OTNs)

Liability for emissions embodied in natural gas is provided for in Part 3, Division 3 of the Clean Energy Act.

Section 33 of the Clean Energy Act provides that natural gas suppliers are liable for emissions embodied in natural gas that they supply where:

•                 the natural gas has been withdrawn from a natural gas supply pipeline to supply to a customer; and

•                 it may reasonably be expected that the customer will use all or part of the gas; and

•                 the customer does not quote an OTN to the supplier in relation to the supply of natural gas.

Liability for natural gas emissions generally arises for the last supply before the gas is used. Either the final supplier or the end user is liable for emissions from the combustion of the natural gas, depending on whether the end user quotes an OTN for the supply.

The Regulation defines 'withdrawal', and defines 'pipelines' which are not 'natural gas supply pipelines' for the purposes of the Clean Energy Act. Regulations made under section 6 of the Clean Energy Act specify when 'supply' of natural gas occurs. Together, these regulations define clearly where liability arises for natural gas emissions.

The OTN mechanism is established under sections 37 to 58A of the Clean Energy Act. Liability for a person who quotes an OTN is described in section 35 of the Clean Energy Act.

OTNs allow for the transfer of liability for natural gas emissions from natural gas supplier to end users. This lets certain large users of natural gas manage their own liability, provides for feedstock users to avoid paying a carbon price on natural gas that is consumed without giving rise to emissions, and enables manufacturers of liquefied petroleum gas (LPG), liquefied natural gas (LNG) and compressed natural gas (CNG) to avoid paying a carbon price on fuel that is subject to excise duty.

The Regulation provides that a person must include additional information and documents with an application for an OTN. This information and documentation will assist the Regulator in identifying the applicant and other relevant persons, and in assessing whether an applicant is likely to be required or permitted to quote an OTN. To minimise duplication of effort and compliance costs, the requirements for identifying information are consistent with those for registrations under the NGER Act.

Section 55B of the Clean Energy Act provides that recipients of gas for use at a 'large gas consuming facility' must quote an OTN so that liability for those natural gas emissions may pass to the end user.

Section 55A of the Clean Energy Act provides that a large gas consuming facility is taken to cease to be a large gas consuming facility if the conditions in the regulations are met. The intent of allowing facilities to cease to be large gas consuming facilities is to provide for facilities with consistently reduced natural gas emissions (below 25,000 tonnes CO₂-e) and facilities experiencing one year of above-average emissions to pass liability back to their natural gas supplier. It may be more efficient, for example, for a supplier to manage this liability in these circumstances.

The Regulation sets out the process to apply for a facility to cease to be a large gas consuming facility. It also sets out the criteria that the Regulator will take into account in its decision on these applications.

Declared Designated Joint Ventures and Liability Transfer Certificates

LTCs and DJVs facilitate the efficient management of emissions liabilities. A DJV allows for the distribution of liability for emissions from a facility that is operated for a joint venture to the participants in the joint venture. LTCs allow for the transfer of liability for the emissions from a facility from the operator of that facility to another member of the operator's corporate group (corporate group LTC) or to a person outside of the operator's corporate group that has financial control of the facility (financial control LTC). 

The Regulation provides for additional information to be provided with applications for DJVs and LTCs. This information aligns with identifying information that is provided for registrations under the NGER Act and allows the Regulator to identify the facility as well as persons relevant to the application or facility. The Regulation also requires the provision of information that allows the Regulator to assess whether applications meet the tests for DJVs and LTCs, set out in the Clean Energy Act. The Regulation is not prescriptive, so the Regulator can accept such documentation as is appropriate in the circumstances (including statutory declarations).

Attachment C

Details of the Regulation

Section 1 - Name of Regulations

Section 1 provides that the name of the Regulation is the Clean Energy Amendment Regulation 2012 (No. 2).

Section 2 - Commencement

Section 2 provides that the Regulation commences on the day after it is registered.

Section 3 - Amendment of the Clean Energy Regulations 2011

Section 3 provides that Schedule 1 amends the Clean Energy Regulations 2011.

Schedule 1 - Amendments

Item [1] - Regulation 1.3

Item [1] inserts an additional definition in regulation 1.3 of the Clean Energy Regulations of 'ANREU Act', which allows the abbreviation 'ANREU Act' to be used for the Australian National Registry of Emissions Units Act 2011.

Item [2] - Regulation 1.3

Item [2] inserts an additional definition in regulation 1.3 of the Clean Energy Regulations of 'ANREU Regulations', which allows the abbreviation 'ANREU Regulations' to be used for the Australian National Registry of Emissions Units Regulations 2011.

Item [3] - Regulation 1.3

Item [3] inserts an additional definition in regulation 1.3 of the Clean Energy Regulations of the abbreviation 'CNG', which defines it as 'compressed natural gas'. For these purposes, CNG has the same meaning as in the Clean Energy Act.

Item [4] - Regulation 1.3

Item [4] inserts an additional definition in regulation 1.3 of the Clean Energy Regulations of 'CO₂-e', which defines it as carbon dioxide equivalence. For these purposes, CO₂-e has the same meaning as in the Clean Energy Act.

Item [5] - Regulation 1.3

Item [5] inserts an additional definition in regulation 1.3 of the Clean Energy Regulations of 'contact details' for a person, which defines them as the person's:

*         name;

*         phone number;

*         email address; and

*         postal address.

Item [6] - Regulation 1.3

Item [6] inserts an additional definition in regulation 1.3 of the Clean Energy Regulations of 'identifying details' for a person, which defines them as:

*         the person's Australian Business Number (ABN);

*         if the person has no ABN, the person's Australian Company number (ACN);

*         if the person has neither of an ABN or an ACN, the person's Australian Registered Body Number (ARBN); or

*         if the person has none of an ABN, ACN or ARBN, the person's trading name and street address.

For these purposes, 'identifying details' has the same meaning as in the NGER Regulations.

Item [7] - Regulation 1.3

Item [7] inserts an additional definition in regulation 1.3 of the Clean Energy Regulations of 'identifying information,' for a facility. For these purposes, 'identifying information' has the same meaning the information required under paragraphs 4.04A(2)(a) to (h) of the NGER Regulations (see item [69] of the National Greenhouse and Energy Reporting Amendment Regulation 2012 (No. 1))..

The information listed in this definition must be provided as part of a number of applications under the Clean Energy Regulations.

Item [8] - Regulation 1.3

Item [8] inserts an additional definition in regulation 1.3 of the Clean Energy Regulations of 'identifying information,' for a person, which defines this as:

*         the person's name or trading name (if any);

*         the person's identifying details (see item [6] above);

*         a statement about whether the person is an individual, a body corporate, a trust, a corporation sole, a body politic or a local governing body;

*         the person's contact details, which differ depending on whether the person is an individual or not;

*         for bodies corporate and politic and local governing bodies, relevant officers or agents resident in Australia;

*         for trusts, the details of trustees; and

*         for statutory agencies, details of the constitution of the body, including its legislation.

The information listed in this definition must be provided as part of a number of applications under the Clean Energy Regulations.

Item [9] - Regulation 1.3

Item [9] inserts an additional definition in regulation 1.3 of the Clean Energy Regulations of the abbreviation 'LNG', which defines it as 'liquefied natural gas'. For these purposes, liquefied natural gas has the same meaning as in regulation 1.03 of the NGER Regulations.

Item [10] - Regulation 1.3

Item [10] inserts an additional definition in regulation 1.3 of the Clean Energy Regulations of the abbreviation 'LPG', which defines it as 'liquid petroleum gas'. For these purposes, liquid petroleum gas has the same meaning as in regulation 1.03 of the NGER Regulations.

Item [11] - Regulation 1.3, note

Item [11] inserts a list of terms into the note at the end of regulation 1.3, which are terms defined in section 5 of the Clean Energy Act and are used in the Clean Energy Regulations. In particular, the terms that are added are:

*      declared designated joint venture;

*      financial control;

*      foreign person;

*      liability transfer certificate;

*      mandatory designated joint venture;

*      participating percentage;

*      obligation transfer number or OTN;

*      registered holder;

*      Registry account;

*      relevant operator; and

*      unit shortfall charge.

Item [12] - After regulation 1.3

Item [12] inserts into the Clean Energy Regulations new regulations 1.4, 1.8, 1.9 and 1.10, which defines key terms relating to natural gas liability, and new regulations 1.11 to 1.14, which outlines general requirements for documents submitted to the Regulator under the Clean Energy Regulations.

Regulation 1.4 - Definition--applicable identification procedure

Regulation 1.4 defines the term 'applicable identification procedure' for the purposes of section 5 of the Clean Energy Act. This procedure will be used by the Regulator to identify a person when issuing an OTN under sections 40 or 41 of the Clean Energy Act. It will assist with carbon pricing mechanism compliance by ensuring that OTNs are only issued to persons who have been properly identified.

Regulation 1.8 - Definition--natural gas supply pipelines

Regulation 1.8 defines pipelines that are not a 'natural gas supply pipeline' under section 5 of the Clean Energy Act. This definition makes clear when the provisions in Part 3, Division 3 of the Clean Energy Act apply to natural gas supplies. Gas that is not 'withdrawn' from a natural gas supply pipeline will not count towards liability under these provisions.

This definition excludes pipelines from being 'natural gas supply pipelines' if they are:

*      upstream of a connection point, or if there is no connection point, upstream of an exit flange on a pipeline conveying natural gas from a gas processing plant mentioned in column 1 of the table in the new Schedule 2 of the Clean Energy Regulations inserted by item [17];

*      a gathering system operated as part of an upstream producing operation; or

*      downstream of a point on a pipeline from which a person takes natural gas for use.

'Connection point', for a pipeline conveying natural gas from a gas processing plant, will be a point mentioned in column 2 of the table in Schedule 2 of the Clean Energy Regulations. 'Exit flange', for a pipeline conveying natural gas from a gas processing plant, is a flange mentioned in column 2 of the table in Schedule 2 of the Clean Energy Regulations.

By excluding these pipelines from the definition of 'natural gas supply pipeline' this regulation provides for the definition of natural gas supply pipeline to be broadly consistent with things which are 'pipelines' under the National Gas (South Australia) Act 2008 (SA) (National Gas Law).

Regulation 1.9 - Definition -withdrawal

Regulation 1.9 defines a 'withdrawal' of natural gas for the purposes of the definition in section 5 of the Clean Energy Act. This definition makes clear when the provisions in Part 3, Division 3 of the Clean Energy Act apply to natural gas supplies. Gas that is not 'withdrawn' from a natural gas supply pipeline does not count towards liability under these provisions. A 'withdrawal' of natural gas occurs where natural gas exits a point on a pipeline at which the amount of natural gas supplied to a person wholly or partly for use is ascertained at that point by:

*      the natural gas supplier that supplies that gas; or

*       or an agent of that natural gas supplier; or

*      another person acting in accordance with an agreement entered into with that natural gas supplier.

Regulation 1.9 provides that withdrawal occurs where a natural gas supplier has the capacity to know that the gas they supply to a person will be withdrawn at a point on a pipeline from which a person takes natural gas for use. In most circumstances, ascertaining the amount of gas supplied will involve measuring the gas that passes through a customer meter, however some other industry arrangements exist where the amount of natural gas supplied is ascertained by other methods. 

'Withdrawal' will also occur when natural gas is combusted in machinery or equipment used to heat or compress natural gas within a natural gas supply pipeline.

Three specific situations are excluded from the meaning of 'withdrawal'. The first is where natural gas goes from a pipeline to an underground storage reservoir. The second is where natural gas goes between two natural gas supply pipelines. The third is where natural gas goes directly into the atmosphere (also known as a 'fugitive emission'). These exclusions ensure that liability is not imposed twice on the same portion of gas.

Regulation 1.10 - When supply of natural gas occurs

Regulation 1.10 defines 'when supply of natural gas occurs' for the purposes of section 6(a) of the Clean Energy Act, so as to align the time of supply with the time of withdrawal of the natural gas. This provides clarity about the exact time at which liability arises. It also ensures that where a supply of natural gas occurs but withdrawal does not take place, then the provisions in Part 3, Division 3 of the Clean Energy Act do not apply to natural gas supplies.

Regulation 1.11 - Electronic notice transmitted to the Regulator

New regulation 1.11 sets out the requirements for 'electronic notices transmitted to the Regulator'. An electronic notice which is not transmitted in accordance with the requirements set out in this regulation is not be an 'electronic notice transmitted to the Regulator' for the purposes of the section 7(1)(c) of the Clean Energy Act.

Most actions done in the Registry are done electronically, for example, carbon units are surrendered to discharge liabilities under the carbon pricing mechanism by means of an electronic notice provided to the Regulator by the liable entity or its authorised representative.

Regulation 1.11 provides that electronic notices must be transmitted using the Regulator's website (www.cleanenergyregulator.gov.au), and must be transmitted as an instruction concerning a Registry account. The electronic notice may only be transmitted by an individual who is the registered holder of the relevant Registry account, or by that person's authorised representative.

Regulation 1.11 also covers notices to be provided to the Regulator concerning significant holdings of carbon units under Part 12 of the Clean Energy Act.

Regulation 1.12 - Requirements for documents

New regulation 1.12 provides that, where a person must provide a document under the Clean Energy Regulations, then the document must be current. This ensures that documents provided with applications reflect the current circumstances and also facilitates timely consideration of applications and decision making by the Regulator.

Regulation 1.13 - English translation of documents

New regulation 1.13 sets out the requirements for documents provided to the Regulator which are not in English. Under regulation 1.13, if a document is not in English, then a translation must be provided and the translation must be prepared by a translation service which is accredited by the National Accreditation Authority for Translators and Interpreters Ltd.

Regulation 1.14 - When documents need not be given

Under new regulation 1.14, a person does not have to provide a document again to the Regulator if the person has already provided the document to the Regulator, it is still current and it has been provided under the Clean Energy Act or Regulations, the NGER Act or Regulations or the ANREU Act or Regulations. This avoids the need for persons to provide multiple copies of the same document to the Regulator, thus avoiding duplication of work and cost for those persons who deal with the Regulator on a number of issues.

Item [13] - After regulation 3.2

Item [13] inserts new regulations 3.5 and 3.5A in Division 3 of the Clean Energy Regulations, which creates two extra netted-out numbers for OTN holders, and new regulations 3.6 to 3.19 in Division 4, which deals with requirements for OTN applications and the conditions for ceasing to be a large gas consuming facility and related application processes and decision making processes by the Regulator.

Item [13] also inserts new regulations 3.20 to 3.22 in Division 5, which set out requirements for applications for declared DJVs and participating percentage declarations, and new regulations 3.23 to 3.25 in Division 6, which set out requirements for applications for LTCs.

Regulation 3.5 - Netted-out numbers for OTN holders--transfer of gases between storage areas

New regulation 3.5 ensures that manufacturers of LNG, LPG and CNG can net-out emissions embodied in natural gas that is exported or subject to excise duty (including non-transport LNG, LPG and CNG which is subject to an equivalent carbon price under fuel tax legislation).

While section 35(7) of the Clean Energy Act provides for a netted out number to arise for LNG, LPG and CNG that is entered for home consumption and on which duty is or was payable by the OTN holder or another person, regulation 3.5 ensures that a netted out number can also arise for LNG, LPG and CNG that is moved from one premises licensed under the Excise Act 1901 to another, or from premises licensed under the Excise Act 1901 to a place of export.

Regulation 3.5A - Netted out numbers for OTN holders - use of natural gas without combustion

New regulation 3.5A ensures that entities that use natural gas without combusting (such as in an industrial process) can net-out covered emissions that result from that use of that natural gas where the emissions count towards a provisional emissions number under Part 3 Division 2 of the Clean Energy Act (relating to direct emitters of greenhouse gases). This ensures that liability is not imposed twice on emissions attributable to the use of the same portion of natural gas.

Regulation 3.6 - Application for OTN

New regulations 3.6 to 3.10 and 3.19, in conjunction with the definitions of 'identifying information' for a person and for a facility in regulation 1.3, set out the information and documentation to be provided with an application for an OTN. In considering an application, the Regulator needs adequate information to identify the applicant and to assess whether the applicant is likely to be permitted or required to quote an OTN.

The requirements for identifying information are consistent with those for registrations under the NGER Regulations, to minimise duplication of effort and compliance costs.

Regulation 3.6 sets out that an application for an OTN must contain:

*         identifying information for the applicant. 'Identifying information' is defined in regulation 1.3;

*         a statement indicating which section of the Clean Energy Act is likely to require or permit the applicant to quote an OTN; and

*         information and documents described in regulations 3.7 to 3.10 and 3.19 (as applicable) to demonstrate that the applicant is likely to be required or permitted to quote an OTN.

Subregulation 3.6(4) also makes it clear that, if an applicant is likely to be required or permitted to quote an OTN under more than one of sections 55B, 56, 57 and 58 of the Clean Energy Act, then that applicant only needs to provide documents relating to one of those sections.

Regulation 3.7 - Eligibility information for large gas consuming facility

New regulation 3.7 sets out the information and documentation necessary for an OTN application to be made on the basis that the applicant is likely to have to quote an OTN for natural gas used at a large gas consuming facility.

In addition to the information under regulation 3.6, an application made under regulation 3.7 needs to contain:

*         the identifying information for the facility to which the application relates (paragraph 3.7(2)(a));

*         information about specified persons relating to the facility (paragraph 3.7(2)(b) and (c));

*         information which demonstrates that the facility is, or will be, a large gas consuming facility (paragraphs 3.7(2)(d) to 3.7(2)(f)) including the date from which the applicant expects to be required to quote an OTN (paragraph 3.7(2)(f)); and

*         information relating to the supply and use arrangements for the natural gas used at the facility (paragraphs 3.7(2)(g) to 3.7(2)(j)).

Paragraph 3.7(2)(k) provides that the applicant must provide documentary evidence of the natural gas supply arrangements, or, with the consent of the Regulator, a statutory declaration could be provided instead. The types of documents to be provided are not prescribed. This allows flexibility for the applicant in making its application and for the Regulator to accept appropriate supporting documents for the particular application.

Subregulation 3.7(3) makes it clear that information required under paragraph 3.7(2)(d) and the statements required under paragraph 3.7(2)(e) in relation to demonstrating that the facility is, or will be, a large gas consuming facility needs to be provided in the form of statutory declaration if requested by the Regulator. These provisions allow flexibility for the applicant in making its application and for the Regulator to accept appropriate supporting documents for the particular application.

Regulation 3.8 - Eligibility information for feedstock

New regulation 3.8 sets out the information and documentation necessary for an OTN application to be made on the basis that the applicant is likely to be permitted to quote an OTN for natural gas used as a feedstock.

In addition to the information to be provided under regulation 3.6, an application made under regulation 3.8 needs to contain:

*         a description of the chemical process in which natural gas will be used as a feedstock, and the relative inputs and outputs of that process (paragraph 3.8(2)(a));

*         the date from which the applicant expects to be permitted to quote an OTN (paragraph 3.8(2)(b));

*         information relating to the supply and use arrangements for the natural gas which is to be used as a feedstock (paragraphs 3.8(2)(c) to 3.8(2)(f)); and

*         the information set out in regulation 3.10 relating to the facility, business premises or other location in which natural gas will be used as a feedstock (paragraph 3.8(2)(g)).

Under regulation 3.7(2)(h), the applicant needs to provide documentary evidence of the supply arrangements for the natural gas which is to be used as a feedstock, or, with the consent of the Regulator, a statutory declaration could be provided instead. The types of documents to be provided are not prescribed. This allows flexibility for the applicant in making its application and for the Regulator to accept appropriate supporting documents for the particular application.

Regulation 3.9 - Eligibility information for manufacture of CNG, LNG or LPG

New regulation 3.9 sets out the information and documentation necessary for an OTN application to be made on the basis that the applicant is likely to be permitted to quote an OTN for natural gas used to manufacture CNG, LNG or LPG.

In addition to the information to be provided under regulation 3.6, an application made under regulation 3.9 needs to contain:

*         the date from which the applicant expects to be permitted to quote an OTN (paragraph 3.9(2)(a));

*         information relating to the supply and use arrangements for the natural gas which is to be used to manufacture CNG, LNG or LPG (paragraphs 3.9(2)(b) to 3.9(2)(e) and 3.9(2)(g)) and

*         the information set out in new regulation 3.10 relating to the facility, business premises or other location in which natural gas will be used to manufacture CNG, LNG or LPG (paragraph 3.9(2)(f)).

Under paragraph 3.9(2)(g), the applicant needs to provide documentary evidence of the supply arrangements for the natural gas which is to be used to manufacture CNG, LNG or LPG, or, with the consent of the Regulator, a statutory declaration could be provided instead. The types of documents to be provided are not prescribed. This allows flexibility for the applicant in making its application and for the Regulator to accept appropriate supporting documents for the particular application.

Regulation 3.10 - Eligibility information for location where natural gas to be used

New regulation 3.10 outlines the information to be included in an application for an OTN under regulations 3.8 and 3.9 relating to the facility, business premises or other location in which natural gas will be used. To minimise duplication of effort and compliance costs, these requirements are consistent, where possible, with the requirements for registration under the NGER Act.

Regulation 3.11 - Conditions for ceasing to be large gas consuming facility

New regulation 3.11 sets out the conditions to be satisfied so that a facility may cease to be treated as a 'large gas consuming facility' under section 55A(2) of the Clean Energy Act. A facility will cease to be a 'large gas consuming facility' if an application is made under new regulations 3.12 or 3.14 concerning the facility and the Regulator decides under new regulations 3.13 or 3.16 that the facility should cease to be treated as a 'large gas consuming facility'.

Regulation 3.12 - One-off year--application

New regulation 3.12 sets out the information and documentation necessary for an application to cease to be a large gas consuming facility, where the application is made on the basis that the facility passed the threshold test in a particular financial year (a 'one-off year'), but did not pass the threshold test in the two prior financial years and is unlikely to pass the threshold test in the two following financial years.

Applications need to be made at least 90 days before the facility will become a large gas consuming facility (subregulation 3.12(3)). Applications made under regulation 3.12 are required to contain:

*         identifying information for the applicant (paragraph 3.12(4));

*         identifying information for the facility (paragraph 3.12(5)(a));

*         information relating to the facility's emissions in the one-off year and the two previous financial years (paragraphs 3.12(5)(b) to 3.12(5)(d)); and

*         a statement of the reason why the facility's emissions are likely to less than 25,000 tonnes of CO₂-e in the two financial years following the one-off year (paragraph 3.12(5)(e)).

Paragraph 3.12(5)(3) requires the applicant to provide documentary evidence of the statements made under paragraphs 3.12(5)(d) and (e) or, with the consent of the Regulator, a statutory declaration may be provided instead.

The types of documents to be provided under paragraph 3.12(5)(f) are not prescribed. This allows flexibility for the applicant in making its application and for the Regulator to accept appropriate supporting documents for the particular application.

Regulation 3.13 - One-off year--Regulator's decision

New regulation 3.13 sets out the circumstances under which the Regulator may decide that a facility is to cease to be treated as a 'large gas consuming facility' if an application is made under regulation 3.12. To decide that a facility will cease to be treated as a 'large gas consuming facility', the Regulator needs to be satisfied that:

*         the application is complete and correct; and

*         the facility's 'one-off year' was preceded by two below-threshold years and is likely to be followed by two below-threshold years.

In making its decision, the Regulator is permitted to take into account any previous applications made in relation to the facility under regulation 3.12.

The Regulator needs to take all reasonable steps to make a decision within 90 days after the application was made, or if further documents or information are required, within 90 days after that information or those documents were provided to the Regulator. The Regulator is required to notify the applicant of its decision.

Regulation 3.14 - Diminishing emissions--application

New regulation 3.14 sets out the information and documentation that is required in an application to cease to be a 'large gas consuming facility', where the application is made on the basis that the facility's natural gas emissions were less than 25,000 tonnes of CO₂-e in the previous financial year, and it is likely that the facility's natural gas emissions will be less than 25,000 tonnes of CO₂-e in the current and future financial years.

Applications made under this regulation need to contain:

*         identifying information for the applicant (paragraph 3.14(2));

*         identifying information for the facility (paragraph 3.14(3)(a))

*         the name and contact details of any person who may be a liable entity for that facility under section 25 of the Clean Energy Act, should the facility cease to be a large gas consuming facility (paragraph 3.14(3)(b));

*         information relating to the facility's emissions in the previous three financial years (paragraphs 3.14(3)(c) and 3.14(3)(d); and

*         the reason why the facility's emissions are likely to be below 25,000 tonnes of CO₂-e in the current and next financial years (paragraph 3.14(3)(e)).

Paragraph 3.14(3)(f) requires the applicant to provide documentary evidence of the statements made under paragraphs 3.14(3)(d) and (e) or, with the consent of the Regulator, a statutory declaration may be provided instead.

The types of documents to be provided under paragraph 3.14(3)(f) are not prescribed. This allows flexibility for the applicant in making its application and for the Regulator to accept appropriate supporting documents for the particular application.

Regulation 3.15 - Diminishing emissions--notification of OTN holder

New regulation 3.15 provides that, if the facility operator who applies for a facility to cease to be a 'large gas consuming facility' under regulation 3.14 is a different person to the OTN holder being supplied with gas for use at the facility, then the applicant is required to notify the OTN holder of the application, should the OTN holder become liable or should it be likely to become liable.

Under new regulation 3.16, the Regulator is also required to notify the OTN holder of its decision on the application.

These notification requirements apply because liability arrangements alter when a facility is no longer a 'large gas consuming facility'. Liability for natural gas emissions from the facility will revert to the OTN holder if the facility had total covered emissions of less than 25,000 tonnes of CO₂-e and the OTN quotation remained in place. However, liability will remain with the facility operator if the facility met the threshold for covered emissions from the operation of the facility.

Notifying the OTN holder of the application lets the OTN holder know that it may become a liable entity, and assists the OTN holder to prepare for this.

Regulation 3.16 - Diminishing emissions--Regulator's decision

New regulation 3.16 sets out the circumstances under which the Regulator may decide that a facility is to cease to be treated as a 'large gas consuming facility' for applications made under regulation 3.14.

To decide that a facility is to cease to be treated as a 'large gas consuming facility', the Regulator needs to be satisfied that:

*         the application is complete and correct; and

*         the facility's natural gas emissions were less than 25,000 tonnes of CO₂-e in the previous financial year, and it is likely that the facility's natural gas emissions will be less than 25,000 tonnes of CO₂-e in the current and following financial year. 

The Regulator needs to take all reasonable steps to make a decision within 90 days after the application was made, or if further documents or information are required, within 90 days after that information or those documents are provided to the Regulator. The Regulator is also required to notify the applicant of its decision and, if regulation 3.15 applies, the Regulator must also notify the OTN holder of the decision.

Regulation 3.17 - Request for further information or documents

Under new regulation 3.17, the Regulator is able to request further information or documents in connection with applications made under regulations 3.12 or 3.14. This allows the Regulator to seek more information when the information provided is not sufficient to properly assess an application. This is consistent with the ability for the Regulator to seek further information in connection with an application for an OTN under section 39 of the Clean Energy Act.

Regulation 3.18 - When facility taken to cease to be a large gas consuming facility

New regulation 3.18 specifies the time at which a facility ceases to be a 'large gas consuming facility', if the Regulator decides that a facility should cease to be treated as a 'large gas consuming facility'.

If the application was made under regulation 3.13, the facility will cease to be a 'large gas consuming facility' immediately after it becomes a large gas consuming facility.

If the application was made under regulation 3.16, the facility will cease to be a 'large gas consuming facility' at the end of the financial year in which the application was made. However, if the applicant was required to notify an OTN holder of the application under regulation 3.15, then the facility will cease to be a 'large gas consuming facility' on the later of:

*         30 June in the financial year in which the application was made; or

*         28 days after the Regulator notifies the OTN holder of the decision.

This allows time for OTN holders who may become liable entities to make necessary arrangements.

Regulation 3.19 - Information and documents required with application to be an approved person

Under subsection 56(3) of the Act, an 'approved person' can quote an OTN for the natural gas supplied to them during a specified eligible financial year. This allows entities to quote an OTN if they receive natural gas for a facility which is likely to exceed the large gas consuming facility threshold. Regulation 3.19 sets out the information and documentation to be required in an application to be an 'approved person'.

An application to be an 'approved person' needs to contain:

*         identifying information for the applicant (subregulation 3.19(1));

*         a statement indicating the 'eligible financial year' to which the application relates (paragraph 3.19(2)(a));

*         the identifying information for the facility to which the application relates (paragraph (2)(b));

*         information relating to the supply and use arrangements for the natural gas which is to be used at the facility (paragraphs 3.19(2)(c) and (d));

*         the reason why the facility's emissions attributable to natural gas are likely to be at least 25,000 tonnes of CO2-e in the specified eligible financial year (paragraph 3.19(2)(e)); and

*         a statement that the applicant is supplied natural gas for use at the facility, or is likely to be supplied natural gas for use at the facility, over a 12 month period (paragraph 3.19 (2)(f)).

Paragraph 3.19(2)(g) requires the applicant to provide documentary evidence of the statements made under paragraphs 3.19(2)(e) and (f) or, with the consent of the Regulator, a statutory declaration may be provided instead. The types of documents to be provided are not prescribed. This allows flexibility for the applicant in making its application and for the Regulator to accept appropriate supporting documents for the particular application.

Division 5 - Declared designated joint ventures

Regulation 3.20 - Application for declaration

New regulation 3.20 sets out the additional information and documents to be provided to the Regulator with an application for a declared DJV. The application needs to be accompanied by documents to verify the information provided, or, with the consent of the Regulator, a statutory declaration that verifies the information.

In considering an application, the Regulator needs adequate information to identify the facility, the operator of the facility and each of the joint venture participants. To minimise duplication of effort and compliance costs, the requirements for identifying information for persons and facilities are consistent with those required for registrations under the NGER Act.

The Regulator also needs sufficient information to determine whether the joint venture passes the declaration test set out in section 67, and needs to be satisfied that the applicants meet the criteria in subsection 70(3) of the Clean Energy Act relating to capacity, access to information and financial resources to meet obligations under the Act or associated provisions, and to previous record of compliance.

Documentation needs to be provided to support the information required in the application under paragraphs 3.20(2) (c) to (f), or, with the consent of the Regulator, a statutory declaration may be provided instead. The types of documents to be provided are not prescribed. This allows flexibility for the applicant in making its application and for the Regulator to accept appropriate supporting documents for the particular application.

Regulation 3.21 - Making of declaration

New regulation 3.21 provides that the Regulator must not make a declaration of a declared DJV for a facility, if a LTC exists in relation to the facility. This clarifies that declared DJVs and LTCs cannot co-exist for the same facility at the same time. This serves to prevent an apparent duplication of liabilities and confusion about which entity holds liability for the emissions from a facility.

Regulation 3.21 should be read in conjunction with regulation 3.25, which prevents the issue of an LTC where a DJV is in place.

If a LTC exists for a facility it is necessary for the LTC be surrendered under section 89 or cancelled under section 90 of the Clean Energy Act before the Regulator is able to declare a declared DJV in relation to the facility.

Regulation 3.22 - Application for participating percentage declaration

New regulation 3.22 sets out additional information and documents to be provided to the Regulator with an application for a participating percentage declaration for a declared DJV or a mandatory DJV. The application needs to be accompanied by documents to verify the information provided, or, with the consent of the Regulator, a statutory declaration that verifies the information.

In considering an application, the Regulator needs sufficient information to determine whether the proposed distribution of liability between joint venture participants is appropriate, and in particular whether:

*         the appropriate criterion under section 78 of the Clean Energy Act has been used for the distribution of liability;

*         the proposed distribution of liability accurately reflects the criterion used; and

*         if an alternative percentage is proposed by the applicants, that it reflects the economic benefits received by the JV participants equally well or better than the relevant criterion.

Under regulation 3.22, an applicant that is applying for a participating percentage declaration in respect of a mandatory DJV also needs to provide identifying information for the joint venture participants, operator and facility, and supporting information to allow the Regulator to determine that the joint venture is a mandatory DJV. This information is required in relation to the participating percentage determination as there is not a separate application process for a mandatory DJV, and the Regulator needs sufficient information to determine that a mandatory DJV exists in order to make a participating percentage determination in respect of that joint venture.

Documentation needs to be provided to support the information provided in the application, or, with the consent of the Regulator, a statutory declaration may be provided instead. The types of documents to be provided are not prescribed. This allows for flexibility for the applicant in making its application and for the Regulator to accept appropriate supporting documents for the particular application.

Division 6 - Liability transfer certificates

Regulation 3.23 - Application for liability transfer certificate - transfer of liability to another member of a corporate group

New regulation 3.23 sets out the additional information and documents to be provided to the Regulator with an application for a corporate group LTC. The application needs to be accompanied by documents to verify the information provided, or, with the consent of the Regulator, a statutory declaration that verifies the information.

In considering an application, the Regulator needs adequate information to identify the facility, the operator of the facility and the applicant for the LTC. To minimise duplication of effort and compliance costs, the requirements for identifying information for persons and facilities are consistent with those required for registration under the NGER Act.

The Regulator also needs sufficient information to determine whether the applicant passes the corporate group transfer test set out in section 80 of the Clean Energy Act, and to be satisfied that the applicant meets the criteria set out in subsection 83(3) of the Clean Energy Act relating to capacity, access to information and financial resources to meet obligations under the Act or the associated provisions.

Documentation needs to be provided to support the information required in the application under paragraphs 3.23(2) (c) to (e), or, with the consent of the Regulator, a statutory declaration may be provided instead. The types of documents to be provided are not be prescribed. This allows flexibility for the applicant in making its application and enables the Regulator to accept appropriate supporting documents for the particular application.

Regulation 3.24 - Application for liability transfer certificate - transfer of liability to a person who has financial control of a facility

New regulation 3.24 sets out the additional information and documents to be provided to the Regulator with an application for a financial control LTC. The application needs to be accompanied by documents to verify the information provided, or, with the consent of the Regulator, a statutory declaration that verifies the information.

In considering an application, the Regulator needs adequate information to identify the facility, the operator of the facility the applicant for the LTC and, where relevant, the controlling corporation of the applicant. To minimise duplication of effort and compliance costs, the requirements for identifying information for persons and facilities are consistent with those required for registration under the NGER Act.

The Regulator also needs sufficient information to determine whether the applicant passes the financial control transfer test set out in section 84 and to be satisfied that the applicant meets the criteria set out in subsection 87(3) of the Act relating to capacity, access to information and financial resources to meet obligations under the Act or the associated provisions.

Documentation needs to be provided to support the information required in the application under paragraphs 3.24(2) (c) to (d), or, with the consent of the Regulator, a statutory declaration may be provided instead. The types of documents to be provided are not prescribed. This allows flexibility for the applicant in making its application and for the Regulator to accept appropriate supporting documents for the particular application.

Regulation 3.25 - Issue of liability transfer certificate

New regulation 3.25 provides that the Regulator is not permitted to issue a LTC in respect of a facility if a mandatory or declared DJV exists in relation to the facility. This clarifies that DJVs and LTCs cannot co-exist for the same facility at the same time to prevent an apparent duplication of liabilities and confusion about which entity holds liability for the emissions from a facility.

If a declared DJV exists for a facility, it would be necessary for the declared DJV to be revoked under section 72 of the Clean Energy Act before the Regulator could issue an LTC in relation to the facility.

Regulation 3.25 should be read in conjunction with regulation 3.21, which prevents the declaration of a declared DJV where an LTC is in place.

Item [14] - Part 4, before Division 5

Item [14] deals with the way in which the Regulator is informed of transmissions of carbon units by operation of law and by other means.

Regulation 4.5 - Transmission of carbon units by operation of law etc.

New regulation 4.5 provides for the formal requirements for informing the Regulator is to be informed of transmissions of carbon units by operation of law under section 106 of the Clean Energy Act. This includes situations where the ownership of units is transferred as a consequence of a court order including, for example, letters of probate, the appointment of a trustee in bankruptcy and an order under the Family Law Act 1975.

When informing the Regulator of the transmission of carbon units, a person needs to provide a declaration of transmission of carbon units which is:

*         in writing;

*         signed by the transferee (that is, the person receiving the carbon units),

and which contains the following information:

*         the identification numbers of the carbon units;

*         a brief description of the circumstances that resulted in the transmission;

*         the names and addresses of the transferor and the transferee;

*         the account number of the transferor's Registry account; and

*         if the transferee has a Registry account, the account number of the transferee's Registry account.

If the transferee does not have a Registry account, then the declaration needs to be accompanied by a request to open a Registry account as provided by subsection 106(5) of the Clean Energy Act. Such a request must be in accordance with the requirements of the ANREU Regulations. 

Item [15] - Regulation 4.1, heading

Item [15] renumbers the previous regulation 4.1 of the Clean Energy Regulations as regulation 4.10.

Item [16] - After Part 8

Item [16] inserts new regulations 14.1 to 14.3 into the Clean Energy Regulations, which outline record-keeping requirements which apply when a person:

*         makes particular applications under the regulations;

*         notifies a natural gas supplier of their intention to quote an OTN to the supplier;

*         withdraws an OTN quotation; or

*         accepts an OTN quotation.

Record-keeping requirements will assist the Regulator to assess whether persons have complied with their obligations under the carbon pricing mechanism.

Regulation 14.1 - Record-keeping--applications

Under new regulation 14.1, a person who:

*         makes an application under:

o   subsection 38(1) (application for an OTN);

o   subsection 56(2) (application to be an approved person);

o   subsection 68(2) (application for the declaration of a joint venture);

o   subsection 74(2) (application for a participating percentage determination);

o   subsection 81(2) (application for a corporate group LTC); or

o   subsection 85(2) (application for a financial control LTC); or

*         gives further information to the Regulator under subsection 39 (1), 69 (1), 75 (1), 82 (1), or 86 (1) of the Act, or subregulation 3.17 (1)

is required to make a record of every source document relied upon when the person makes the application or gives further information to the Regulator. These records need to be kept for 5 years after the application is made or the further information is given.

By requiring that a record of each source document is made at the time that the application is made or additional information is provided, regulation 14.1 provides clarity as to the length of time such records must be kept and the commencement of the obligation to retain records.

Regulation 14.1 defines 'source document' as a document verifying the information given to the Regulator, or the original of a document.

Regulation 14.1A - Record-keeping--notice of intention to quote OTN

New regulation 14.1A provides that, when a person gives notice to another person of their intention to quote an OTN under paragraph 55B (1) (a), 57 (2) (a) or 58 (2) (a) of the Act, then each of the persons must make a record of:

*         the notice;

*         the date on which the notice is given;

*         the number of days between the day on which the notice is given and the day on which the OTN is first quoted.

Regulation 14.1A also requires the OTN holder and the natural gas supplier to keep the record for 5 years after the record is made.

By requiring a record of a notification of intention to quote an OTN to be made, regulation 14.1A provides clarity as to the length of time such records must be kept and the commencement of the obligation to retain records.

Regulation 14.2 - Record-keeping--withdrawal of quotation of OTN

New regulation 14.2 provides that, when a person withdraws the quotation of an OTN that was made to another person by giving the required written notice under sections 51(1) or (2) or 52(1) or (2) of the Clean Energy Act, then each of the persons must make a record of the following things:

*         the date on which the notice was given;

*         the reason for withdrawing the quotation;

*         if the notice was given under sections 52(1) or (2) of the Clean Energy Act, the terms of the agreement to withdraw the quotation (for example, a scanned copy of a written agreement); and

*         the amount of natural gas supplied in relation to the quotation of the OTN before the notice was given.

These records need to be kept for 5 years after the application is made or the further information is given.

By requiring that a record of each source document is made at the time that the application is made or additional information is provided, regulation 14.2 provides clarity as to the length of time such records must be kept and the commencement of the obligation to retain records.

Regulation 14.3 - Record-keeping--acceptance of quotation of OTN

New regulation 14.3 provides that, when a person accepts another person's quotation of an OTN, concerning a supply of natural gas, by giving a written notice under sections 59 or 60 of the Clean Energy Act, then each of the persons must make a record of the following things:

*         the notice (for example, a scanned copy of the notice);

*         the date on which the notice was given;

*         the date on which natural gas is supplied in relation to the quotation of the OTN; and

*         the amount of natural gas supplied.

These records need to be kept for 5 years after the application is made or the further information is given.

By requiring that a record of each source document is made at the time that the application is made or additional information is provided, regulation 14.3 provides clarity as to the length of time such records must be kept and the commencement of the obligation to retain records.

Item [17] - After Schedule 1

Item [17] inserts Schedule 2 into the Clean Energy Regulations. Schedule 2 lists 'connection points' and 'exit flanges' for the purposes of the definition of 'natural gas supply pipeline' (see regulation 1.8 in Item [12] for the definition of 'natural gas supply pipeline').

Attachment D

Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Clean Energy Amendment Regulation 2012 (No. 2)

This Regulation is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the Clean Energy Amendment Regulation 2012 (No. 2)

The Regulation makes amendments to the Clean Energy Regulations 2011.

The changes cover administrative and compliance issues associated with the carbon pricing mechanism. Specifically, the Regulation includes definitions and administrative requirements relating to natural gas, as well as requirements for applications for joint ventures and liability transfer certificates.

Human rights implications

The Regulation engages the right to privacy and reputation, at least to the extent that it applies to the collection of personal information by the Clean Energy Regulator.

While collection of personal information limits the right to privacy, the Regulation is not considered to be incompatible with this right. This is because:

*         the information to be collected is necessary for the identification of applicants under the various schemes established by the enabling legislation for the amended instruments; and

*         the Clean Energy Regulator will be subject to the secrecy provisions in the Clean Energy Regulator Act 2011.

Conclusion

This Regulation is compatible with human rights because, to the extent that it limits human rights, it is reasonable, necessary and proportionate.

Greg Combet

Minister for Climate Change and Energy Efficiency

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