Bills Digest no. 126 2009–10
Offshore Petroleum and Greenhouse Gas Storage
Legislation Amendment (Miscellaneous Measures) Bill
2010
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
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Offshore Petroleum
and Greenhouse Gas Storage Legislation Amendment (Miscellaneous
Measures) Bill 2010
Date introduced: 10 February 2010
House: House
of Representatives
Portfolio: Resources and Energy
Commencement: Sections 1–3: on Royal Assent; Schedule1 Part
1: 1 July 2010; Schedule 1 Parts 2–7: day after Royal Assent;
Schedule 1 Part 8: 1 January 2010
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
The Offshore Petroleum and
Greenhouse Gas Storage Legislation Amendment (Miscellaneous
Measures) Bill 2010 (the Bill) seeks to amend the Offshore
Petroleum and Greenhouse Gas Storage Act 2006 (the Act) for
several reasons, including:
- to enable the Commonwealth to retain registration fees
- adding to the functions of the National Offshore Petroleum
Safety Authority (NOPSA) the regulatory oversight of
non-occupational health and safety (OHS) structural integrity for
facilities, wells and well-related equipment
- making certain offences under the Act (consisting of a failure
to do or the doing of an act) strict liability offences, and
- restricting titleholders’ OHS responsibilities to wells
and not to facilities more generally.[1]
For background information about inquiries and reforms relating
to offshore petroleum and greenhouse gas storage, and in
particular, NOPSA’s role and issues relating to OHS, see the
Bills Digests for:
Please note that, along with this Bill, the
Offshore Petroleum and Greenhouse Gas Storage (Safety Levies)
Amendment Bill 2010 (the Safety Levies Amendment Bill) had also
been introduced into Parliament on 10 February 2010.[3]
NOPSA was established on 1 January 2005 under the Petroleum
(Submerged Lands) Act 1967 (PSLA) and, under the PSLA,
NOPSA’s operational effectiveness had to be reviewed after
three years.[4] A
team of three independent safety experts (the review team)
conducted the review during 2007 and subsequently reported to the
Minister of Resources, Energy and Tourism on 4 March 2008.[5]
The review team supported the view that the NOPSA’s regime
should cover, and be adequately resourced to cover, the integrity
of pipelines, subsea equipment and wells.[6] In particular, the review team pointed
out that:
Stakeholders including State regulators support
the view that the legislated coverage of NOPSA should be extended
to encompass the integrity of pipelines, subsea equipment and
wells. These issues are currently covered under other arrangements
such as Well Operations Management Plans (WOMPs) and Pipeline
Management Plans, where regulatory responsibilities are shared by
the DA's and NOPSA.
If the intent of the Safety Case is to include
all risks impacting upon the integrity of the system, then
inclusion of all hydrocarbons, carbon dioxide storage and other
risks from the reservoir (well) through to the custody transfer
point should be considered. In the example of WOMPs the interaction
with operatorship of the drilling operations needs to be considered
in parallel to ensure clarity.
The regulation of the safety aspects of carbon
capture, transport and storage could feasibly fit into NOPSA's
model and boundaries. There is however a concern that the
additional workload/focus may detract from NOPSA's current
responsibilities. Additionally, regulatory boundaries imposed by a
system that may include onshore and offshore facilities may present
regulatory coverage challenges.[7]
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On 10 April 2008, the Assistant-Treasurer requested the
Productivity Commission to undertake an inquiry of regulatory
burdens on the upstream (oil and gas) sector, with 12 months in
which to submit a report.[8]
In particular, the Productivity Commission was asked to:
- assess the impact of the existing regulatory framework on the
international competitiveness and economic performance of
Australia’s petroleum sector
- report on regulatory impediments to improved performance, such
as jurisdictional inconsistencies and duplication, as well as ways
to address these impediments, and
- consider options for a national regulatory authority as a means
of addressing issues of regulatory inconsistencies and
duplication.[9]
During the course of conducting its inquiry, the
Productivity Commission consulted with stakeholders by holding
informal discussions and roundtables; as well as inviting and
considering submissions to an issues paper released in July 2008
and a draft report subsequently released.[10]
The Productivity Commission made several
recommendations in its final report, including:
- a staged development of a national offshore petroleum regulator
to undertake resource management, pipeline and environmental
regulation in all Commonwealth, State and Territory waters:
- initially—the regulator would only operate in
Commonwealth waters
- subsequently—the States and Territories would be given,
on a bilateral basis, the option of conferring their petroleum
regulatory obligations[11]
- the national regulator would be self-funding through
fees,[12] and
- NOPSA would remain a separate entity, with functions extending
to offshore pipelines, subsea equipment and wells.[13]
On 9 January 2009, Martin Ferguson (Commonwealth Minister for
Resources and Energy) and Norman Moore (Western Australian Minister
for Mines and Petroleum) requested an inquiry into the OHS and
integrity regulation of upstream petroleum operations, with
reference to the oil and gas explosion on 3 June 2008 at Apache
Energy Ltd’s facilities on Varanus Island.[14]
The report was released in July 2009.[15]
In summary, the panel conducting the inquiry found that NOPSA
was ‘seriously under-resourced’ even to discharge its
existing responsibilities.[16] The panel also recommended that NOPSA be given powers
to enable it to regulate the safety and integrity of all facilities
and pipelines in the water and Western Australian islands which
export gas by pipelines.[17]
On 24 February 2010, the Bill was referred to the Legislation
Committee of the Senate Standing Committee on Economics (the
Economics Legislation Committee) for inquiry and report by 23 April
2010.[18]
In addition, the Bill has been examined by the Senate Standing
Committee for the Scrutiny of Bills (the Scrutiny of Bills
Committee), whose comments will be addressed, where relevant, in
the Main Provisions section of this Digest.[19]
The views of stakeholders on the Bill itself are not yet
available. It will be interesting to read the submissions to the
Economics Legislation Committee’s inquiry on the Bill.
However, stakeholders’ comments regarding the
establishment and funding of a national regulator, and the
extension of NOPSA’s functions, have been included in
submissions made to the various inquiries mentioned above.[20] Stakeholders’
comments will be addressed, where relevant, in the Main Provisions
section of this Digest.
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The Explanatory Memorandum states that:
The Bill includes minor policy and
administrative changes which will have a slight financial impact on
the Australian Government Budget. The retention of the registration
fees is estimated to result in a decrease in expenses of $15.3
million in 2010-11 and $7.7 million in 2011-12.[21]
In addition, the Explanatory Memorandum states that the Bill
does not impose any new regulatory burden on the petroleum
industry.[22]
Schedule 1 of the Bill contains provisions
relating to several matters. Due to time restrictions, this Digest
will only focus on the following:
- retention of registration fees, by the Commonwealth, to fund
the establishment of the National Offshore Petroleum Regulator
(NOPR)
- new functions for NOPSA relating to non-OHS structural
integrity for facilities, wells and well-related equipment
- making certain existing offences under the Act strict liability
offences, and
- restricting titleholders’ OHS responsibilities to wells
and not to facilities more generally.
Part 1 sets out proposed amendments relating to
the retention of registration fees by the Commonwealth.
Currently, all money raised by the Commonwealth under the Act,
the Offshore Petroleum and Greenhouse Gas Storage (Registration
Fees) Act 2006 (Registration Fees Act), and the Offshore
Petroleum and Greenhouse Gas Storage (Annual Fees) Act 2006
(Annual Fees Act) is paid to the States and Northern
Territory.[23]
On 5 August 2009, Martin Ferguson, the Federal Minister for
Resources and Energy, announced that NOPR would be established and
commence operating on 1 January 2012.[24]
Under items 1–2 of the Bill, fees under
the Registration Fees Act would be retained by the Commonwealth. In
other words, only money obtained under the Act and the Annual Fees
Act would be paid to the States and Northern Territory.
It is stated in the Explanatory Memorandum that the registration
fees would be used to fund the proposed NOPR.[25]
The proposal to fund the proposed NOPR is consistent with the
Productivity Commission’s recommendation, as mentioned
above.
However, not only is the proposal to establish NOPR subject to
debate (this will be subject to further consultation and is outside
the scope of this particular Digest), but the proposal that NOPR be
self-funding is also subject to disagreement. Some stakeholders,
such as the Western Australian Government, simply do not support
the idea of establishing a national regulator.[26] In addition, some stakeholders
strongly disagree with the proposal that NOPR be funded by full
cost recovery.[27]
Part 2 sets out proposed amendments relating to
NOPSA’s new non-OHS functions.
NOPSA currently regulates OHS matters arising from petroleum and
greenhouse gas operations in Commonwealth waters.[28] Its functions extend to
structural integrity of facilities (including pipelines), and also
to wells that are part of those facilities, to the extent to
which the structural integrity affects the safety of the offshore
workforce at the facilities.[29]
Items 4–8 proposes to insert the
following new definitions into section 7 of the
Act:
- ‘non-OHS structural integrity’
- ‘non-OHS structural integrity law’
- ‘structural integrity’
- ‘structural integrity law’, and
- ‘well-related equipment’.
In particular, it is noted that ‘non-OHS’ applies to
the extent to which something ‘does not relate to a
matter or thing that affects, or is likely to affect, the
occupational health and safety of persons’ engaged in
offshore petroleum and greenhouse gas storage operations
(items 4 and 5).
Item 11 proposes to insert new
paragraphs 646(ga)–(gf) into the Act, specifying
what NOPSA’s new non-OHS functions would be. These are:
- functions conferred onto NOPSA by or under the Act, or a State
or the Northern Territory Petroleum (Submerged Lands) Act, in
relation to the non-OHS structural integrity of:
- facilities
- wells, or
- well-related equipment
located in Commonwealth waters or the designated coastal waters
of the State or Northern Territory, as the case may be[30]
- develop and implement effective monitoring and enforcement
strategies to ensure compliance with obligations under non-OHS
structural integrity laws
- investigate accidents, events and circumstances that involve,
or may involve, deficiencies in the non-OHS structural integrity
of:
- facilities
- wells, or
- well-related equipment
located in Commonwealth waters
- report to the relevant Commonwealth, State and Territory
Ministers on those investigations, and
- provide advice about matters relating to the non-OHS structural
integrity of:
- facilities
- wells, or
- well-related equipment
located in Commonwealth waters.
An example of how this would apply is as follows:
in accepting a safety case for a pipeline under
the Offshore Petroleum (Safety) Regulations 2009 NOPSA
will consider the all aspects of the structural integrity of the
pipeline. The pipeline will be on the seabed, and for much of its
life people will not be in contact with it. Until now,
NOPSA’s functions in relation to the structural integrity of
the pipeline have focused on the safety of the pipeline for persons
who, from time to time, do maintenance or other work on the
pipeline. The intent of the current amendments is that a probably
meaningless distinction will be removed in relation to unmanned
facilities, and NOPSA can focus on structural integrity of
facilities as a whole. NOPSA will also acquire responsibility for
the structural integrity of wells that are not part of a
facility.[31]
The Explanatory Memorandum states that:
The proposed amendments to its functions and
powers have the intent of strengthening the ability of NOPSA to
carry out its existing regulatory responsibilities and augmenting
its responsibilities by expressly including oversight of the whole
of structural integrity of facilities (including pipelines), wells
and wellrelated equipment. For achieving completeness of this
oversight role, the amendments include non-OHS structural integrity
aspects to ensure complete coverage of this particular
function.[32]
It is noted that the Government asserts that:
… regulations relating to structural
integrity will provide a more detailed delineation of NOPSA’s
structural integrity functions between NOPSA and the Designated
Authorities functions relating to resource security and resource
management which may also have a structural integrity
aspect.[33]
This proposal is also subject to disagreement between
stakeholders. For example, the Victorian Government does not
support the extension of NOPSA’s functions to well integrity,
believing that to be an inefficient use of scarce
resources.[34] Yet,
other stakeholders support the proposed extension of NOPSA’s
functions.[35]
It is noted that although the Productivity Commission, in its
report, recommended that NOPSA’s functions be extended to
offshore pipelines, subsea equipment and wells, the Productivity
Commission did point out that NOPSA would have to be adequately
resourced in order to carry out its additional functions.[36]
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Part 4 sets out proposed amendments to various
provisions in the Act, making particular offences in those
provisions strict liability offences.
It is noted that the maximum penalty proposed in the Bill for
such offences is 100 penalty units. Existing penalties less than
100 penalty units would be retained and, where relevant, existing
penalties more than 100 penalty units would be reduced.
In some provisions, penalties of five years imprisonment have
been changed to 100 penalty units.[37] Examples of such provisions are:
- section 227 - failure to comply with directions to vary
pipeline licence (items 14 and
15), and
- section 228 - ceasing to operate pipeline licence without
consent (items 16 and 17).
Other offences under the Act that have been made strict
liability offences include:
- subsections 280(3) and 460(3) – interference with other
rights (items 20, 21,
30 and 31)
- subsections 249(2) and 420(2) – failure to comply with
reporting obligations to titileholders (items 18,
19, 24 and
25)
- subsections 284(5), 451(8) and 452(5) – failure to notify
of discovery of petroleum or of greenhouse gas storage formation in
particular title areas (items 22,
23, 26–29)
- subsections 569(6) and 570(5) – failure to comply with
work practice obligations (items 36 and
37)
- subsections 508(4) and 557(4) – failure to comply with
request for particular information (items 32 and
35)
- subsections 586(5), 587(6), 592(5) and 595(6) – failure
to comply with directions to undertake remedial action
(items 42–45;
47–48)
- subsections 697(3) and 723(3) – failure to comply with
record-keeping directions (items 49 and
50).
The Explanatory Memorandum states that:
Where offence provisions in the Act apply to
titleholders and the offence itself consists of only a physical
element (the doing of or failure to do an act), the amendments will
have the effect that these offences will become offences of strict
liability. The application of strict liability to an offence means
that a fault element such as intention to do the act, or not do the
act, is not required to be proved. This is to ensure that the
legislation can be enforced more effectively, as without these
changes applying strict liability the intention to do an act or not
do an act needs to be proven. Given the remote and complex nature
of offshore operations and the prevalence of multiple titleholder
arrangements it is extremely difficult to prove intent. To date
this has left these particular offence provisions largely
unenforceable. The intention of the application of strict ability
is to improve compliance in the regulatory regime. Due to the
application of strict liability to this group of offences, some
existing penalties have been reduced from 5 years imprisonment to
100 penalty units. These changes are in line with Commonwealth
strict liability guidelines.[38]
Part 6 sets out proposed amendments to
Schedule 3 of the Act, which relates to
restricting titleholders’ OHS obligations to wells.
It is noted that, although in October 2009, the Act was amended
to add a titleholder’s duty of care in relation to
facilities,[39] the
Explanatory Memorandum states that:
The original intention of that amendment was to
introduce titleholders’ duties in relation to wells
only.[40]
However, the Act (as it is currently worded) may actually be
interpreted as imposing a duty of care onto titleholders in
relation to facilities generally. In particular, existing subclause
13A(1) of Schedule 3 provides that:
If a proposed facility is for use in connection
with operations authorised by:
(a) a petroleum exploration permit; or
(b) a petroleum retention lease; or
(c) a petroleum production licence; or
(d) an infrastructure licence; or
(e) a pipeline licence;
the permittee, lessee or licensee must take all
reasonably practicable steps to ensure that the facility is so
designed as to be, when properly used, safe and without risk to
health.
Existing subclause 13A(2) provides similarly in relation to
greenhouse gas titleholders.
Item 63 of the Bill proposes to substitute
existing clause 13A of Schedule 3 in the Act with new
clauses 13A and 13B. These new clauses
would restrict titleholders’ duty of care to wells, while
maintaining the penalty for breach of duty (200 penalty units).
Generally, if:
- a well has been or is being used; has been or is being prepared
for use, in connection with operations authorised by a current
title; or a well has been used in connection with operations
authorised by a title from which the current title is
derived, and the wellhead is located in the title area of
the current title, and
- the well is not suspended, abandoned or closed off,
the registered current titleholder must ensure that the well is
designed, constructed, commissioned, altered, equipped, maintained
and operated so that risks to the OHS of persons at or near the
facility are as low as practicable. Such risks include risks from
the well; any unplanned escape of fluids from the well; anything in
the well or in the geological formation to which the well is either
connected or through which the well passes (proposed
subsection 13A(1) and 13B(1)).[41]
A similar provision is proposed in relation to circumstances
where the well has been, is being or will be suspended, abandoned
or closed off (proposed subsection 13A(2) and
13B(2)).
The Explanatory Memorandum states that:
The ‘persons at or near a facility’
include the persons who are engaged in a well-related activity,
such as drilling the well, as well as any other persons who are at
or near a facility. The term ‘persons at or near a
facility’ is also expressly extended to divers, who may be
exposed to risk from a well while carrying out operations at a well
that are not facility-related.[42]
It is noted that absolute liability would apply to the element
in proposed paragraphs 13A(3)(a) and
13B(3)(a)—in other words, to the existence
of a duty of care itself.
The Explanatory Memorandum states that:
Clauses 13A and 13B establish occupational
health and safety duties of care in respect of a hazardous aspect
of the offshore petroleum industry -- ie the risk of blow-outs and
other escape of fluids from wells. It is considered that the
application of absolute liability to the element in paragraph
(3)(a) in each case, ie the existence of the duty of care, is
therefore appropriate. The titleholder is usually a consortium of
companies. A requirement to prove a particular state of mind in
relation to a non-conduct element of the offence will therefore
make a breach of the duty of care difficult or impossible to prove.
The application of absolute liability to this element is therefore
essential to the integrity of the occupational health and safety
regime.[43]
Some of the proposed amendments in the Bill are largely
technical in nature, and in the main, uncontentious.
However, the proposed amendments in the Bill relating to
retaining registration fees to fund the proposed establishment of
NOPR and extending NOPSA’s functions to the integrity of
facilities, wells and well-related equipment, although generally
consistent with recommendations made by the Productivity
Commission, remain contentious.
In particular, there continues to be disagreement and
uncertainty about the establishment of NOPR, including the details
of how NOPR would be established (all of which is not the subject
of the Bill). It is also noted that there will be further
consultation about the details involved in establishing NOPR. Given
the continuing debate and uncertainty about NOPR’s
establishment itself, the question is raised as to whether the
proposed amendment in the Bill relating to the Commonwealth’s
retention of registration fees is somewhat premature at this point
in time.
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[37]. A penalty unit is currently $110: Crimes
Act 1914 section 4AA. In certain circumstances, additional
pecuniary penalties — up to five times the amount of maximum
pecuniary penalty imposed on a natural person convicted of the same
offence — may be imposed on corporations: see ibid.,
subsection 4B(3).
Sharon Scully
9 March 2010
Bills Digest Service
Parliamentary Library
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277
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