Bills Digest No. 162 2001-02
Petroleum (Submerged Lands) Amendment Bill 2002
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
Petroleum
(Submerged Lands) Amendment Bill 2002
Date Introduced:
15 May 2002
House:
House of Representatives
Portfolio:
Industry, Tourism and Resources
Commencement:
On Royal Assent
Purpose
To make relatively minor amendments to the Petroleum
(Submerged Lands) Act 1967 relating to offshore petroleum exploration
permits and leases.
In 1967 interest in offshore petroleum resources led
to negotiations between the Commonwealth, the States and Northern Territory,
which produced an agreement regarding joint responsibility over offshore
petroleum exploration and exploitation. This agreement resulted in the
Commonwealth Petroleum (Submerged Lands) Act 1967 ('the Act') and
eventually complementary 'mirror' legislation in the States and Territories.
Amongst other things, the Act establishes entities known
as the Joint Authority (JA) and Designated Authority (DA) respectively.
There is a JA and DA for each of the State or Territory 'adjacent areas'.(1)
The JA - which is comprised of the Commonwealth Resources Minister
and his or her counterpart from the relevant State or Territory - is the
decision-maker regarding the granting of exploration permits, production
and pipeline licences etc. The DA - which is simply the Minister from
the relevant State or Territory - has responsibility for the more day
to day administrative aspects of managing the offshore petroleum regime
in each adjacent area.
Exploration permits can be granted in several ways under
the Act, but the Exploratory Memorandum(2) to the Bill indicates
that current policy is to grant them through a public tendering progress
under section 22. Such permits are granted on the basis of the proposed
exploration work program submitted by companies wishing to access the
relevant exploration area. Once granted, these permits may be renewed
by the holder several times, allowing a theoretical total 'holding' time
of up to 46 years.
In 2000, the Act was reviewed for compliance with national
competition policy (NCP) principles. According to the Exploratory Memorandum(3),
the review concluded that the maximum holding time should be reduced to
allow for greater competition between companies for access to exploration
areas. The changes to the Act proposed by items 1 and 3 of Schedule
1 of the Bill would mean that an exploration permit could only be
renewed twice, thus giving a maximum holding time of 16 years. This new
limit will only apply to permits granted for the first time after 1 January
2003. While there appears to be nothing on the public record on the issue
from APPEA(4), the relevant industry body, it is understood
that there has not been unanimous agreement by the industry to the idea
of reducing the holding time, but the proposed change is unlikely to opposed
given it is not retrospective.
The other substantive change proposed by the Bill deals
with retention leases. Where a petroleum discovery has been made and duly
notified under the Act, the holder of the exploration permit may apply
for a retention lease. This type of lease is designed for a situation
where the discovery is not currently economically viable but is likely
to become so within fifteen years. As the Act currently stands, the holder
of a retention lease may be required by the DA to re-evaluate whether
discovery has become viable twice during the duration of the (five year)
lease. The NCP review mentioned above concluded this was excessive in
terms of compliance costs. The proposed changes in item 4 of Schedule
1 accordingly reduces this to a maximum of one re-evaluation every
five years.
Schedule 1 - Amendment of the Petroleum
(Submerged Lands) Act 1967
Item 3 inserts a new section 31A that applies
exploration permits granted under section 22 or 27 for the first time
on or after 1 January 2003.(5) This proposed change limits
the maximum number of renewals on these permits to two.
Item 4 reduces the number of times the holder
of a retention lease may be required by the DA to re-evaluate the viability
of a petroleum discovery, from twice every five years to once every five
years.
Item 5 is a transitional item relating to item
4. It provides that if, before the Bill comes into force, a DA issues
a second notice to re-evaluate the viability of a petroleum discovery
within the five year period of the retention lease, the lease holder does
not have to comply with the notice.
- The 'adjacent area' is the area that extends from 3 nautical miles
seawards of each of the State or Territories low water mark out to a
defined boundary on the continental shelf.
- At p. 5.
- At p. 2.
- Australian Petroleum Production and Exploration Association.
- In the case of section 22 permits, the invitation to apply for a permit
must also have been Gazetted on or after 1 January 2003.
Angus Martyn
5 June 2002
Bills Digest Service
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ISSN 1328-8091
© Commonwealth of Australia 2002
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