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]
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.
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]
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.
[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
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