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CONTENTS
Passage History
Purpose
Background
Main Provisions
Endnotes
Contact Officer & Copyright Details
Petroleum (Submerged Lands) Legislation
Amendment Bill 1999
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:
-
- application for and the issue of exploration permits
-
- the issuing of a retention lease for an area covered by an
exploration permit
-
- application for an issue of production licences
-
- application for and issue of pipeline licences, and
-
- the registration of various legal instruments, such as
transfers of title, variation of conditions and cancellation for
non-compliance with conditions attached to a permit or
licence.
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:
-
- 70% of Australia's liquid fuel needs are produced
domestically
-
- oil and natural gas account for 54% of Australia's energy
fuels
-
- the value of production is $8 billion per annum, and
-
- exports are $1 billion per annum.(6)
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:
-
- the protection of the environment and fair community returns
would be fully maintained
-
- there would be a clarification of the roles and
responsibilities of the various governments involved to reduce
duplication and delay
-
- more of the administration of offshore areas will be given over
to the States/Northern Territory with the Commonwealth moving to a
more strategic and policy-orientated role
-
- the development of guidelines to streamline approval processes,
and
-
- the move to a more objective based regulation of the industry
to allow industry greater flexibility to attain objectives in areas
such as environmental protection and pipeline management.
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:
-
- remote control facilities used to recover petroleum
-
- facilities for processing or storing petroleum
-
- facilities for preparing petroleum for transport, and
-
- facilities related to the above activities resting on, fixed to
or connected with the seabed or attached to such facilities.
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.
-
- N.S.W. v The Commonwealth, 1975 [135] CLR, 337.
- Budget Paper No. 1 1999-2000, p. 6-8.
- Ibid., pp. 6-8&9.
- AGSO, Australian Petroleum Exploration and Drilling
Activity, May 1999.
- Ibid.
- see http://www.appea.com.au
- Minister for Industry, Science and Resources, Media
Release, 24 June 1999.
Chris Field
25 August 1999
Bills Digest Service
Information and Research Services
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ISSN 1328-8091
© Commonwealth of Australia 1999
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