Chapter 1


Chapter 1

Introduction

Referral

1.1        On 25 May 2011, the Government introduced a package of five bills into the House of Representatives related to the administration and regulation of petroleum and greenhouse gas storage operations in Commonwealth waters.

1.2        Pursuant to a resolution of the Senate on 12 May 2011 regarding time critical bills, the provisions of the bills were automatically referred to the Senate Economics Legislation Committee for inquiry and report by 14 June 2011.

Summary of the bills

1.3        Offshore Petroleum and Greenhouse Gas Storage Amendment (National Regulator) Bill 2011—amends the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (OPGGS Act) to establish two new regulatory bodies to administer and regulate petroleum and greenhouse gas storage operations in Commonwealth waters in the Australian offshore area:

  • The National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA), which will be an expanded version of the current National Offshore Petroleum Safety Authority (NOPSA) and will have responsibilities for occupational health and safety; structural integrity of facilities, wells and well-related equipment; environmental management; and regulation of day-to-day petroleum operations.
  • The National Offshore Petroleum Titles Administrator (NOPTA, or Titles Administrator), which will centralise the administration of titles, although 'preserving the role of each state and the Northern Territory in decision making on key petroleum projects in Commonwealth waters that could impact the individual state or territory'.[1]

1.4        Offshore Petroleum and Greenhouse Gas Storage Regulatory Levies Legislation Amendment (2011 Measures No. 2) Bill 2011—the bill amends the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Act 2003 to impose cost recovery levies (an annual titles administration levy and an environment plan levy) on the registered holders of offshore petroleum and greenhouse gas storage titles to fund the operations of the Titles Administrator and NOPSEMA.

1.5        Offshore Petroleum and Greenhouse Gas Storage (Registration Fees) Amendment Bill 2011 and Offshore Petroleum (Royalty) Amendment Bill 2011—these bills replace references to state-based Designated Authorities with references to the new national Titles Administrator.

1.6        Offshore Resources Legislation Amendment (Personal Property Securities) Bill 2011—amends the OPGGS Act and the Offshore Minerals Act 1994 (the OMA) to provide that any security interests acquired in petroleum, greenhouse gas and offshore minerals titles are not personal property securities for the purposes of the Personal Property Securities Act 2009 (PPS Act).

Related inquiries and reports

1.7        In April 2009, the Productivity Commission published a research report, Review of Regulatory Burden on the Upstream Petroleum (Oil and Gas) Sector, which made 30 recommendations. Among the recommendations was that a national offshore petroleum regulator be established to regulate Commonwealth waters, as well as the implementation of regulatory best practice.

1.8        The Explanatory Memorandum outlined other incidents and resulting reports that have led to the introduction of these bills:

The Varanus Island gas pipeline explosion in 2008 and the uncontrolled release of oil and gas from the Montara Wellhead Platform in 2009 also highlighted inadequacies in the offshore petroleum regulatory regime. Of particular concern was a shortage of technical staff in the Designated Authorities’ Departments with the necessary qualifications, skills and experience. There was also a perceived lack of independence of staff with responsibility for regulatory oversight of well integrity and environmental management, located as they were in the State and Northern Territory Departments that were responsible for resource development.

The June 2010 Report of the Montara Commission of Inquiry recommended that the PC’s proposal to establish a national offshore petroleum regulator should be pursued at a minimum. The Montara Commission recommended that a single, independent regulatory body should be created, looking after safety as a primary objective, along with well integrity and environmental approvals. Industry policy and resource development and promotion activities should continue to reside in government departments and not with the independent regulatory agency.[2]

1.9        The Government's responses to the Productivity Commission report and the report of the Montara Commission were released on the same day the bills were introduced (25 May 2011).

1.10      This committee has examined matters relating to offshore petroleum regulation recently, through its inquiry into the provisions of the Offshore Petroleum and Greenhouse Gas Storage Legislation Amendment (Miscellaneous Measures) Bill 2010 in April 2010. That bill, among other matters, funded the establishment of a National Offshore Petroleum Regulator, strengthened the functions of the National Offshore Petroleum Safety Authority and clarified the operation of the titleholder provisions in situations of multiple titleholders.

1.11      The OPGGS Act (together with a number of related bills) was also the subject of a Senate Economics Committee inquiry into the Offshore Petroleum Amendment (Greenhouse Gas Storage) Bill 2008 and three related bills in September 2008.

Conduct of the inquiry

1.12      The committee advertised the inquiry in The Australian and on its website. The committee also wrote to the relevant Commonwealth, State and Territory departments and agencies, industry groups and other stakeholders inviting submissions. The committee received submissions from the Commonwealth Department of Resources, Energy and Tourism, the Western Australian Department of Mines and Petroleum and the Maritime Union of Australia (see Appendix 1).

1.13      The committee held a public hearing on 7 June 2011, which was conducted in both Canberra and Perth with senators and witnesses participating via teleconference facilities. The committee thanks the officials from the Commonwealth Department of Resources, Energy and Tourism and the Western Australian Department of Mines and Petroleum who provided evidence at this hearing.

Outline of this report

This report is divided into six chapters:

  • Chapter 2 provides an introduction to the regulation and administration of matters relating Australia's offshore petroleum sector. The chapter discusses the respective jurisdictions of the Commonwealth, States and the Northern Territory in offshore areas as well as the current regulatory framework and issues with these arrangements.
  • Chapters 3 and 4 examine the proposals contained in the bills regarding the powers and functions of the new national regulators, and the views key stakeholders have on the proposed arrangements.
  • Chapter 5 examines the proposed cost recovery arrangements for the new national regulators (which involve changes to the administration of royalties and fees).
  • Chapter 6 discusses the PPS Bill which is separate to the other bills in the package in that it seeks to address matters related to the treatment of security interests acquired in petroleum, greenhouse gas and offshore minerals titles, and is not directly related to the national regulator proposals.

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