Bills Digest No. 27 2005–06
Offshore Petroleum Bill
2005
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage History
Offshore Petroleum Bill
2005
Date Introduced: 23 June 2005
House: House of
Representatives
Portfolio: Industry, Tourism and Resources
Commencement: The Bill commences on Royal Assent. However, the
great majority of its operative provisions only commence on
Proclamation. The reason for this is to allow relevant States and
Territories to make any necessary changes to their equivalent
offshore petroleum legislation.
The purpose of the Offshore Petroleum Bill 2005 is to replace
the Petroleum (Submerged Lands) Act 1967, which is the
main existing Commonwealth legislation dealing with offshore
petroleum exploration and production. The Bill is not intended to
introduce any major policy or legal changes to current regulatory
arrangements.
Background
The Offshore Petroleum Bill 2005 (the Bill) is a revamp of the
long standing Petroleum (Submerged Lands) Act 1967 (PSLA).
The PSLA has been the primary legislation for the administration of
Australia's offshore petroleum resources for almost 40 years and
through age and many amendments it has become complex and unwieldy.
The PSLA is actually repealed by the Offshore Petroleum (Repeals
and Consequential Amendments) Bill 2005.
The PSLA and associated Acts(1) provide the legal
framework within which petroleum exploration, development and
production activity takes place in Australia beyond State coastal
waters from beyond the three nautical mile limit extending out to
Australia's maritime seabed boundaries. Within this legal
framework, the Commonwealth, the States and the Northern Territory
administer and supervise industry activities through what are
called Joint Authorities. There is a Joint Authority for each of
the areas offshore every State and the Northern Territory seven in
total. Each Joint Authority comprises the Commonwealth Minister and
the relevant State/Territory Minister. In addition, the relevant
State/Territory Minister administers some of the more day-to-day
operations in the relevant offshore area. In this capacity, the
relevant Minister is called the Designated Authority.
The legislation provides for orderly exploration and development
of petroleum resources, and sets out a basic framework of rights,
entitlements and responsibilities of government and industry.
The more important matters covered in the legislation are:
-
issuing of invitations to apply for exploration permits;
-
granting of permits and determination of conditions of the
title;
-
granting of retention leases over current non-commercial
discoveries;
-
granting of production and pipeline licences to successful
explorers;
-
granting of infrastructure licences;
-
renewal of titles (where appropriate);
approval and registration of legal transactions,
including transfer of titles, preparation and issue of special
prospecting authorities, access authorities, authorities for
scientific investigations, variations of title conditions,
exemptions from title commitments, cancellation of titles for
non-compliance with conditions of title; and
issuing of regulations and
directions.(2)
Whilst the new Bill proposes conspicuous changes to the
structure and style of the former Act, it seeks to implement only a
modest number of minor policy adjustments from the framework that
previously existed. Given the length of the Bill (over 600 pages),
only a few of these technical changes and policy adjustments
highlighted by the second reading speech are covered in the Main
Provisions section of the Digest. Note that the second reading
speech actually given in Parliament was substantially shorter than
the version tabled with the Bill and Explanatory Memorandum. In
some cases, this Digest quotes from the tabled version as it
contains useful information.
The Government canvassed the proposed Bill with various
stakeholders whose focus in part revolved around ensuring that
major rewordings in the new Bill intended to simplify and
streamline previous text did not amount to any major changes in
meaning as compared to the PSLA.
New section 7 primarily makes some changes to
terminology in defining offshore areas to which the Bill applies.
In general, the outer limit of such areas is the continental shelf.
However, there a number of areas in which neighbouring countries
may have continental shelf claims that overlap Australia s.
New subsection 7(4) clarifies that an area over
which Australia does not exercise sovereign rights pursuant to an
agreement with another country is not to be taken as part of the
continental shelf for the purposes of the above definition.
The tabled version of the second reading speech notes that the
Bill replaces the PSLA phrase special circumstances with sufficient
grounds in a number of cases. This amendment relates to the power
of the Joint and Designated Authorities to renew various types of
permits. The PSLA generally provides guidance as to whether a
permit should or should not be renewed, but sometimes may provide
for exceptions in special circumstances . The stated rationale for
the change is that the decision-maker s statutory ability to make
an exception should not depend on a situation being unusual,
abnormal, exceptional or uncommon (3) rather that the
decision-maker need only be satisfied there are sufficient grounds
to warrant the exception. It is not possible to readily estimate
the potential effect of this amendment as the re-drafting of the
legislation has changed its overall structure and the sufficient
grounds phrase appears four times(4) whereas the former
special circumstances appears over ten times in the PSLA.
New section 138 deals with conditions imposed
by a Joint Authority in granting a production licence. One of the
matters raised in the second reading speech given to Parliament
appears to relate to it. The relevant part of the speech states:
(5)
The next issue is not about a policy change in an
administrative sense; rather, it is a proposal to make explicit in
the act a policy that has been adhered to by governments for some
time.
It is proposed to make clear that the conditions
imposed by the joint authority on the holder of a production
licence are not to be prescriptive to the point of requiring the
holder to drill a well, to carry out a survey or to spend a
specific amount of money on exploration activities.
There will also be a provision that recognises
that the production of petroleum involves a substantial and
long-term financial commitment by licensees and that, accordingly,
continuity and predictability are important features of the regime
as it relates to production licences and the conditions applicable
to them, particularly when licences come up for renewal.
The prohibition on prescriptive conditions appears to be a
reference to new subsection 138(7) which
provides:
Despite subsection (1), a production licence must
not be granted subject to specific conditions requiring the
licensee to:
(a) make a well in the licence area; or
(b) carry out a seismic survey, or any other kind
of survey, in, or in relation to, the licence area; or
(c) spend particular amounts on the carrying out
of work in, or in relation to, the licence area.
Currently, the equivalent provision in the PSLA, subsection
56(1), states that the Joint Authority may grant a production
licence subject to conditions such as [it] thinks fit and are
specified in the licence .
The continuity and predictability issue referred to above in the
extract of the second reading speech appears to be reflected in
new subsection 138(9).
With respect to safety zone offences, the second reading speech
states that:(6)
The bill also includes some changes to the
provisions seeking to ensure the safety of offshore petroleum
facilities from incidents such as vessel impact. One amendment is
to the definition of owner of a vessel . In most parts of Australia
s marine jurisdiction, if a vessel is involved in a violation of a
safety zone and the vessel is leased, the lessee could avoid
prosecution but the owner, who could be isolated from the action,
could face 10 years imprisonment. This anomaly is considered
unacceptable and the equivalent provision in the bill ensures that
an uninvolved owner of a leased vessel would not be guilty of an
infringement.
The above is given effect through new section
326 the actual owner of the vessel will not be liable for
safety zone offences if the person operating the vessel also has
whole control and possession of the vessel . New section
329 contains a graduated scale of safety zone offences
with varying penalties according to the degree of fault by the
ships master, owner, or person controlling the vessel. For example,
when the owner or ships master intentionally enters a
prohibited safety zone, the maximum penalty is 15 years
imprisonment. There also is a strict liability (no fault) offence
carrying imprisonment for up to five years: new subsection
329(9). In relation to the new subsection
329(9) offence, the tabled second reading speech
comments:
While an imprisonment penalty under strict
liability is not a common provision in Commonwealth Acts, it is
justified in these instances because of the serious consequences of
a breach of the provisions. Members need to bear in mind the
isolation, vulnerability and physical defencelessness of offshore
petroleum facilities, the possible attractiveness as terrorist
targets and the potentially serious consequences of damage to, or
interference with, facilities or operations. When considering
alleged offences that have occurred in an offshore area,
legislators need to be realistic about the viability of conducting
a successful prosecution if that can be achieved only with proof of
intention, recklessness or negligence. It follows that there should
also be a strict liability offence.
The current occupational health and safety provisions of the
PSLA allow for authorised investigators (7) to enter
premises at any reasonable time to carry out investigations to
ascertain any breach of the PSLA or in relation to any accident or
dangerous incident. These investigators can compel assistance in
their searches and seize and remove things related to the
investigation. However, Part 4 of Schedule
3 of the Bill contains wider search and seizure powers
where there are reasonable grounds to suspect that things that are
evidence of an offence are present on relevant premises. Warrants
can be also be obtained from Magistrates to exercise various
powers. According to the second reading speech given in Parliament,
the expansion of these powers has been recommended by the Director
of Public Prosecutions and draw extensively on relevant model
provisions in the Crimes Act 1914. (8)
As mentioned in the background to this digest, the Bill is
exceptionally long at over 600 pages. This digest does not attempt
to examine the Bill in detail. A more comprehensive review of the
legal and policy framework of offshore petroleum regulation may be
done should the Government choose to undertake a more far-reaching
modification of the framework: (9)
The fact that the rewriting process [of the PSLA]
has been an editorially-focused exercise rather than a
policy-focused one has meant that a number of other policy issues
have been reserved for later consideration and to be possibly the
subject of an amendment bill at a future date.
-
For example, the Petroleum (Submerged Lands) Fees Act
1994.
-
Department of Industry, Tourism and Resources, Mineral and
Petroleum Exploration and Development in Australia, a Guide for
Investors:
Information Sheet 11 Petroleum Legislation.
-
Tabled second reading speech.
-
See new sections 233(5), 259(2), 273(2) and
284(2).
-
Hon. Warren Entsch MP, Parliamentary Secretary to the Minister
for Industry, Tourism and Resources, Second Reading Speech:
Offshore Petroleum Bill 2005 House of Representatives
Debates, 23 June 2005, p. 19.
-
ibid.
-
Currently these investigators are persons that are appointed as
inspectors by the relevant Designated Authority. See sections 125
and clause 29 of Schedule 7 of the PSLA. Under the Bill, such
persons are simply termed inspectors and are appointed by the
National Offshore Petroleum Safety Authority see new
section 390.
-
Hon. Warren Entsch MP, op. cit., p. 19.
-
ibid., p. 20.
Angus Martyn and Mike Roarty
16 August 2005
Bills Digest Service
Information and Research Services
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Australian Parliament using information available at the time of
production. The views expressed do not reflect an official position
of the Information and Research Service, nor do they constitute
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ISSN 1328-8091
© Commonwealth of Australia 2005
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Published by the Parliamentary Library, 2005.
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