Chapter 3

Proposal for the national regulators

3.1        The Offshore Petroleum and Greenhouse Gas Storage Amendment (National Regulator) Bill 2011 will replace the Designated Authority arrangements outlined in chapter 2 with two new national regulatory authorities. The two new bodies will be the:

• National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA); and
• National Offshore Petroleum Titles Administrator (NOPTA, or Titles Administrator).

3.2        The Explanatory Memorandum describes NOPSEMA as being:

...an expanded version of the National Offshore Petroleum Safety Authority ('NOPSA'). NOPSA, which is a body corporate, will be continued in existence under the new name and will have an extended range of functions in relation to petroleum and greenhouse gas operations. Its principal functions will be: occupational health and safety; structural integrity of facilities, wells and well-related equipment; environmental management; and regulation of day-to-day petroleum operations. NOPSEMA will appoint and deploy OHS inspectors and petroleum (and greenhouse gas) project inspectors. NOPSEMA, like NOPSA, will be fully funded by cost-recovery levies and fees, managed by means of a Special Account under the Financial Management and Accountability Act 1997.[1]

3.3        The Titles Administrator will be a public servant at the Senior Executive Service (SES) level within the Department of Resources, Energy and Tourism (DRET), appointed by the Secretary of the Department. The holder of the position will be assisted by other APS employees, and their principal responsibilities will be:

...to provide information, assessments, analysis, reports, advice and recommendations to members of the Joint Authorities and the ‘responsible Commonwealth Minister’ in relation to the performance of those Ministers’ functions and the exercise of their powers, the collection, management and release of data, titles administration, approval and registration of transfers and dealings, and the keeping of the registers of petroleum and greenhouse gas titles.[2]

3.4        NOPSEMA and the Titles Administrator will have jurisdiction in Commonwealth waters, although the States and the Northern Territory will be able to confer functions and powers onto NOPSEMA and/or the Titles Administrator related to their designated coastal waters. Additionally, subject to constitutional limitations regarding constitutional corporations, a State or the Northern Territory will be able to contract NOPSEMA for the provision of regulatory services in any of the waters in their jurisdiction (including onshore).

NOPSEMA specific matters

Environmental responsibilities

3.5        The key difference between the current regulator, NOPSA, and the proposed regulator, NOPSEMA, is that NOPSEMA's functions will extend beyond occupational health and safety and structural integrity to include environmental management.

3.6        To give NOPSEMA these functions and powers related to environmental management, the government will amend the Offshore Petroleum and Greenhouse Gas Storage (Environment) Regulations 2009. These Regulations relate to the acceptance of environment plans and the monitoring and enforcement of compliance with the requirements of environment plans:

It is intended that these Regulations will be brought into effect in conjunction with the proclamation of relevant Schedules in the National Regulator Bill which propose to extend NOPSA’s functions and rename it NOPSEMA.[3]

3.7        The specific responsibilities that will be transferred to NOPSEMA will include the acceptance of environment plans as well as the power to issue directions related to the decommissioning of facilities at the end of the period of a petroleum title. This power may include:

...requiring the removal of plant and equipment that was brought in by the titleholder and also the making good of any damage to the seabed, the plugging of any wells and, essentially, restoring the environment to its initial condition.[4]

3.8        The bill also envisages NOPSEMA having a future role regarding greenhouse gas injection and storage. While the responsible Commonwealth Minister will retain these functions initially and will perform these functions with advice from Geoscience Australia, the Explanatory Memorandum expects, over time, that the Minister 'will devolve at least some regulatory responsibilities onto NOPSEMA, either by delegation of functions and powers or by the naming of NOPSEMA as the regulator under regulations'.[5]

3.9        DRET also explained that NOPSEMA could perform some certification and regulatory functions under the International Convention for the Prevention of Pollution from Ships (the MARPOL Convention).[6]

3.10      Responsibilities related to environmental management functions will also be able to be conferred by the States and the Northern Territory onto NOPSEMA, as discussed below.

Conferral of responsibilities onto NOPSEMA by States and the NT

3.11      While NOPSEMA will regulate safety, environment plans and day-to-day operations of petroleum, mining and greenhouse gas storage activities in Commonwealth waters, the States and the Northern Territory will be able to confer their equivalent regulatory powers and functions regarding offshore petroleum activities on NOPSEMA for the coastal waters under their jurisdiction. This is provided for in the proposed list of NOPSEMA's functions (amendments to section 646) and proposed subsection 650(2), subject to the limitations on conferral outlined in proposed section 646A.

3.12      DRET provided an additional explanation regarding the intent and implications of these arrangements:

The conferral will have no bearing whatever on the State or Territory’s right to grant petroleum rights over its three nautical mile seabed. The same will be true if Western Australia confers functions and powers on NOPSEMA in the State’s "internal waters" (called "eligible coastal waters" in the Bill). There is therefore no question of a State or Territory "giving up" its petroleum rights.[7]

Other new functions

3.13      Another new function given to NOPSEMA is in proposed paragraph 646(gq), which gives NOPSEMA responsibility for compliance monitoring and enforcement of 'all obligations of persons under the [OPGGS] Act and regulations, except for the obligations in respect of which NOPSEMA already has those functions'.[8] The Explanatory Memorandum outlines the operation and intention of this amendment:

This function extends beyond NOPSEMA’s own range of regulatory functions under the Act and regulations. It extends for example to monitoring of compliance with conditions of titles or with field development plans. While the Titles Administrator will have the principal role in these areas, the Titles Administrator’s monitoring will mostly be by audits of documents lodged by a titleholder under requirements imposed by the Act or regulations. The conferral of this function on NOPSEMA will improve the comprehensiveness of the monitoring and enforcement strategies available to both regulators under the Act. In particular, NOPSEMA will employ, appoint and deploy petroleum and greenhouse gas project inspectors, who have a range of powers available to them under the information-gathering powers in Division 3 of Part 7.1.[9]

Titles Administrator specific matters

Timeframes for Joint Authority decisions

3.14      The National Regulator Bill seeks to impose a time limit for the making by the Joint Authority of decisions whether to grant, renew or vary certain applications relating to petroleum retention leases, production licences, infrastructure licences and pipeline licences.

3.15      The time period will be prescribed by regulations, although there is an allowance for applicant and the Joint Authority to enter into an agreement specifying a different number of days, with the agreement able to be varied or terminated by the parties.

3.16      For decisions where the OPGGS Act allows further information to be required from the applicant, a "stop-the-clock" mechanism will come into effect when such further information is sought.

3.17      A failure by the decision-maker to comply with the time limit does not affect the validity of the decision. However, if a Joint Authority contravenes a time limit requirement during a financial year, at the end of the financial year the Titles Administrator must prepare a report for the Commonwealth Minister, which he or she must table within 15 sitting days.

Information gathering powers

3.18      Through amendments to sections 507 and 699, the existing information gathering powers of the Designated Authorities are transferred to the Titles Administrator. The powers include the production of information and documents, as well as the ability to compel individuals to give evidence. Petroleum project inspectors[10] will continue to also have these powers.

Directions

3.19      Part 6.1 of the OPGGS Act currently gives the Designated Authorities the general power to give directions to a petroleum titleholder. Other direction issuing powers are also contained in Chapter 2 and Part 7.1 of the OPGGS Act.

3.20      The general power to issue directions covers any matter for which regulations may be made. Unlike most other amendments made by the National Regulator Bill, the power previously vested in the Designated Authorities is not transferred to the Titles Administrator, but instead to NOPSEMA and (by the new section 574A) to the Commonwealth Minister.  The Explanatory Memorandum notes that 'it would fit the general scheme of the Act if the Joint Authority were to have the direction-giving powers with respect to resource management', however due to decision making requiring the involvement of both the Commonwealth Minister and their State/Territory counterpart, this would be a 'fairly slow process, when a direction may need to be given within a day'.[11]

3.21      The Explanatory Memorandum also provides the reasoning behind the seemingly incongruous decision to allocate to NOPSEMA the power to give directions related to resources management, given NOPSEMA's responsibilities for occupational health and safety, environmental management and other matters:

While NOPSEMA does not have responsibility for resource management matters, many aspects of NOPSEMA’s regulation of operations will have the potential to impact on resource management, and it would hamper NOPSEMA’s performance of its functions if it were prevented from taking any action that had such potential impacts.[12]

3.22      As a result of the proposed arrangements, it is possible that both the Commonwealth Minister and NOPSEMA could issue a direction at the same time, and that these directions could be inconsistent. New subsection 574A(12) provides that the part of NOPSEMA's direction that is inconsistent with the Minister's will have no effect. NOPSEMA is also required to give the Minister copies of any directions given.

New offences

3.23      The National Regulator Bill inserts a new section 286A, which requires registered holders of petroleum titles, or a person who become a registered holder, to notify both NOPSEMA and the Titles Administrator of their contact details, and to provide updated details when these change. The penalty for not fulfilling this strict liability obligation will be 100 penalty units (the current definition of one penalty unit in the Crimes Act 1914 as $110 would make this fine $11 000):

Setting the penalty at 100 penalty units is considered appropriate. It is noted this is higher than the preference stated in A Guide To Framing Commonwealth Offences, Civil Penalties and Enforcement Powers, December 2007 for a maximum 60 penalty units for offences of strict liability. However, offshore resources activities, as a matter of course, require a very high level of expenditure and therefore by comparison a smaller penalty would be an ineffective deterrent. This is also consistent with other provisions in the OPGGS Act, which set the penalty for a strict liability offence at 100 penalty units.[13]

3.24      The bill also makes it an offence to breach the new directions or remedial directions issued by the Commonwealth Minister, although a defence is provided by subsection 578(2) if the defendant can prove it took all reasonable steps to comply with the direction.

3.25      The provisions related to offences that currently apply for breaches of directions issued by Designated Authorities are amended to replace references to the Designated Authorities with references to NOPSEMA. The penalties associated with these offences, which are currently in the OPGGS Act, correspond with those proposed by this bill.

Co-operation between NOPSEMA and the Titles Administrator, and with other agencies

3.26      The bill provides a full list of functions for both NOPSEMA (by amending section 646) and the Titles Administrator (new section 695B). New paragraph 646(gr) will also expressly require NOPSEMA to cooperate with the Titles Administrator; an obligation that is also applied by paragraph 695B(e) on the Titles Administrator in respect of NOPSEMA. Other provisions will also require NOPSEMA to notify the Titles Administrator if they believe there are grounds to cancel certain licences or permits.

3.27      Revised paragraph 646(h) will require NOPSEMA to cooperate with other Commonwealth, State and Northern Territory agencies or authorities having functions relating to regulated operations.[14] The Titles Administrator has a similar requirement imposed on it by paragraph 695B(f).

Accountability and reviews

Annual reports

3.28      NOPSA is already required to produce an annual report. The National Regulator Bill will simply update the OPGGS Act to reflect the name change of that organisation to NOPSEMA.

3.29      Proposed section 695N will require the Titles Administrator to prepare an annual report for presentation to Parliament. Copies of this report are required to be given to the responsible State and Territory ministers, and the Standing Council on Energy and Resources. This reflects the obligations currently imposed on NOPSA. There are no specific additional issues (other than those required by the relevant government guidelines) which must be included in an annual report.[15]

Requirement for reviews of the Title Administrator to be undertaken

3.30      New section 695P would require the Minister to cause reviews of the activities of the Titles Administrator to be conducted. The first review will cover the first three years of the Title Administrator's operation, with subsequent reviews to cover five year periods. The report of a review will be tabled in Parliament.

Delegation by the Titles Administrator

3.31      Proposed section 695D would allow the Titles Administrator to delegate any or all of the Title Administrator's functions or powers to:

• an SES employee, acting SES employee, EL2 employee in DRET; or
• an employee of a State or the Northern Territory.

3.32      The Senate Scrutiny of Bills Committee has previously considered the question of delegations 'to a relatively large class of persons, with little or no specificity as to their qualifications or attributes', such as employees of a State or Territory. Such a delegation was proposed by the Offshore Petroleum Amendment (Greater Sunrise) Bill 2007, which due to the Explanatory Memorandum's reasoning that this may be difficult because the rank profiles differ between Commonwealth, State and Territory public services, the committee decided that it would not make further comment on this provision.[16]

3.33      DRET also explained the reasoning behind how these provisions were drafted. Regarding the broad ability to delegate powers to State and Territory officials, and why a minimum level of qualifications or experience such a delegate would require was not stipulated in the proposed section, DRET advised that this was normal practice and corresponded with similar provisions already contained in the OPGGS Act. DRET highlighted that the Titles Administrator, before deciding to delegate powers to a State and Territory official, would still need to satisfy themselves of certain factors:

It is a judgment call always by the repository of a particular statutory power that, whenever that power or function is delegated to somebody else, the person who has the power under the act is required to satisfy themselves that the delegate is a proper person to receive the delegation, that they have whatever skills and experience are necessary to enable them to act as delegate.[17]

3.34      The Scrutiny of Bills Committee has also expressed a preference regarding delegations to Commonwealth officials, recommending 'that delegates be confined to the holders of nominated offices or to members of the Senior Executive Service'.[18]

3.35      The committee asked DRET why the bill was drafted to allow the delegation of the Title Administrator's broad powers to officers at the EL2 level. DRET explained:

We have done that because the titles administrator will be an SES position but the other members of his team in Perth will not be SES staff. To ensure that there is somebody who can exercise a delegation whilst the SES person is away, we would envisage that, just for practical administrative purposes, you would need to be able to delegate those powers also to an EL2 officer in the NOPTA office.[19]

Committee view

3.36      The committee notes the issues associated with the broad ability for the Titles Administrator to delegate their powers but, given its terms of reference and experience in considering these types of issues, the committee considers that the Senate Scrutiny of Bills Committee is better placed to examine these provisions.

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