Coalition Senators' Dissenting report
1.1
The Bill seeks to establish national regulators through expansion of the
current safety National Offshore Petroleum Safety Authority (NOPSA) to the
National Offshore Petroleum Safety and Environmental Management Authority
(NOPSEMA). It also seeks to create the National Offshore Petroleum Titles
Administrator (NOPTA).
Western Australia would be most affected
1.2
Western Australia is the most active petroleum jurisdiction in Australia
with an estimated 60 per cent of offshore activity being conducted of its
coast. There are currently five LNG developments with onshore LNG processing
plants are various stages of development, emphasising the fact that WA stands
to be the most affected by the proposed legislation, as illustrated by evidence
given to the inquiry:
Almost 60 per cent of titles are in offshore Western
Australia in Commonwealth waters.
The principal concerns have been raised by Western Australia.[1]
There are a large number of sensitive areas—which I am sure
other states have as well—off the Western Australian coast, and we saw this
most recently with the petroleum acreage that was released off Margaret River.[2]
...it is important to note that that Act [Offshore Petroleum
(Royalty) Act 2006] only relates to the North West Shelf project, which is
unique to WA. Therefore, the changes to this act impact WA and no other state.[3]
1.3
The WA government is also concerned that under these proposals there
will be no requirement for the Commonwealth to advise the WA government about
the location of licenses over the WA coast.
1.4
Activities taking place in Commonwealth waters offshore WA can come
under significant public and media scrutiny due to their proximity to sensitive
environments.
...a well could be drilled and regulated by NOPSEMA just
outside the three nautical miles, which could be off Rottnest Island or off the
Ningaloo Reef Park, and the state would have no input into that environmental
regulation.[4]
There are a large number of sensitive areas – which I am sure
other states have as well – off the Western Australian coast, and we saw this
most recently with the petroleum acreage that was released off Margaret River.[5]
1.5
It is therefore imperative that the WA government maintains the
capability to assess these activities and ensure that appropriate environmental
safeguards are in place.
1.6
This involvement was emphasised by the US National Commission on the BP
Deepwater Horizon Oil Spill and Offshore Drilling. The Commission recommended
the need to actually strengthen state and local involvement in oil spill
contingency planning and training, rather than weaken it.
The legislation ignores the co-operative work to date between the two
governments
1.7
Despite the impact on WA, the legislation does not reflect the progress
made on co-location and Western Australia's understanding of the continuing
role of the Joint Authority. Evidence from the Department of Resources, Energy
and Tourism on the consultative process leading to this legislation is noted:
The reforms in the Bills are the outcome of a long process,
involving several independent evidence based reviews and extensive consultation
with jurisdictions and industry.[6]
1.8
In fact, the legislation is not reflective of the co-operative
negotiations that have been taking place with the WA government in recent
months. Indeed, WA was not provided with the amendment Bills until after they
were introduced into Federal Parliament on 25 May 2011. The WA government gave
evidence outlining its disappointment that the Commonwealth government has introduced
legislation to create a single national offshore regulator without consultation
or advice prior to the completion of its negotiations.
1.9
The Commonwealth and Western Australia have also been negotiating a
memorandum of understanding for co-operative working arrangements to allow for
sharing of expertise and resources on a cost recovery basis. In entering these
negotiations, the Commonwealth minister made it clear that it would not delay
the legislative amendments.[7]
1.10
Senator Eggleston noted:
It seems rather rude of the federal minister to have gone
ahead with this legislation before negotiations with Western Australia are
completed . . . The industry is very much a Western Australian industry.[8]
The negotiations on the MOU have been ongoing for about four
months . . . We are very close to reaching an agreement on the MOU . . . The
problem that we had was the setback with bills being introduced that do not
reflect that co-operative arrangement.[9]
1.11
In evidence to the inquiry, representatives from the WA government noted
their willingness to be involved in these talks:
It is not that we do not want to co-operate. We have been
negotiating for about a year trying to find a way that Western could work
together with the Commonwealth...This legislation was introduced without any
consultation with us.[10]
...we have been trying to find a compromise that would work.
We are close to that but we have not quite got there, and this legislation does
not reflect that co-operation.[11]
1.12
In light of these talks, it would be far more prudent for the
Commonwealth government to delay the legislation's progression until these
negotiations were completed. This would also provide scope for outcomes to be
incorporated into relevant parts of the legislation.
Western Australia's view
1.13
It does not seem that the establishment of NOPTA and NOPSEMA will
improve the areas of the regulatory system that require reform, those being
environment and native title. Similarly, there is no evidence to suggest the
existing arrangements are not working:
Senator Eggleston: Would you say the Western Australian
regulatory system has been deficient, in any way?
Mr Livingston: I do not believe these reforms are addressing
any identified deficiency in WA regulation.[12]
Montara
1.14
The Bill's explanatory memorandum outlines the importance of the Montara
and Varanus incidents in the genesis of this legislation:
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 the 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.
1.15
The committee heard further evidence that the Montara incident was
pivotal in the Commonwealth's decision to take over regulation of all offshore
projects in Commonwealth waters.
1.16
However, in answers to questioning about the Montara incident, evidence
was given that the key factor was that the Commonwealth contracted out wellhead
supervision to the Northern Territory authorities who had been at fault:
Senator Eggleston: To what extent has the Montara oil
spill been a factor in the development of this proposal? Was it not the case
that the regulation by the Northern Territory government perhaps left something
to be desired and that this was a contributing factor to Montara and, in turn,
a contributing factor to the development of this proposal, notwithstanding the
fact that in Western Australia there have never been any problems like that and
the Western Australian regulatory regime has worked very well?
Mr Livingston: The Montara inquiry has had a
significant impact on the development of these reforms...[13]
...
Senator Eggleston: We have been told by previous
witnesses that the Montara incident is actually pivotal to this whole piece of
legislation and the Commonwealth feeling that it needs additional power. From
what you are saying, it would seem that perhaps the Commonwealth itself was a
little deficient in the way it managed the Northern Territory offshore. Would
that be a fair comment?
Mr Tinapple: I believe that is right. It is difficult
to contract out your responsibilities. That is always the case. You end up
still maintaining those responsibilities, even though you have a contractor
doing that. The Northern Territory was the contractor in this case. I think
the prime holder of those responsibilities was the Commonwealth. That is an
awkward situation.[14]
1.17
Similarly, in the case of the Varanus explosion, the submission made by
the Department of Resources, Energy and Tourism (DRET) considers that the
incident 'highlighted inadequacies in the Australian offshore petroleum
regulatory regime. These inadequacies largely stem from risks of regulatory
gaps arising from regulation of safety separate from regulation of integrity,
environment and day-to-day operations'.[15]
1.18
However, WA government witnesses said that WA had made the mistake of
sub-contracting the supervisory role to the Commonwealth agency, NOPSA!
Senator Eggleston: That is an interesting point. What
about the overall record of the Western Australian government in managing
offshore facilities compared to that of the Northern Territory? Do you feel
that this legislation is going to improve the safety of offshore facilities
over and above any standard set by Western Australia?
Mr Tinapple: We did have an incident in Western
Australia, which was the Varanus Island pipeline explosion. That was actually
in Western Australian areas. By the way, interestingly that was a reverse case
of what I just talked about with the Northern Territory, in that NOPSA was
actually our contractor to regulate safety on Varanus Island.[16]
1.19
This would seem to indicate that Commonwealth oversight would not necessarily
improve outcomes.
Impact on WA state finances and autonomy
1.20
Importantly, the position is also reflective of the WA government's
concerns whereby it would be removed from the State's involvement in the
administration of royalty arrangements for the North West Shelf project. It is
important to note that WA is the only jurisdiction that receives any royalties
under this legislation, further highlighting the importance of the need for
co-operative negotiations to continue.
1.21
If these legislative provisions are implemented as planned, the WA
government may not have any estimates of royalty revenues until payments are
actually received from the Commonwealth.
The way they [the reforms] impact on the royalty arrangements
is that currently the royalty act provides certain functions to the designated
authority—the Western Australian department and the Commonwealth reforms will
abolish the designated authority and allocate the functions and powers of the
designated authority to either NOPTA or NOPSEMA.[17]
1.22
Evidence from the WA government emphasised the issue this would create
for the state:
...one of the big issues that we have with these
arrangements, if they are implemented fully, is that WA would not know the
amount of royalty revenues for three to six months after they are actually
collected, and that is a problem for our budgeting and forecasting.[18]
1.23
This creates significant difficulties for the state in managing its
budget and forecasting both income and expenditure.
1.24
Similarly, although no revenue impact to the state is expected, the
amendments remove the Designated Authority and replace it with the Commonwealth's
proposed Titles Administrator.
1.25
The WA government notes that a significant list of responsibilities will
move from the Department of Mines and Petroleum to NOPTA:
-
involvement in setting the royalty rates;
-
negotiation of wellhead royalty schedules;
-
determination of the wellhead point and the value of petroleum at
the wellhead;
-
assessment/determination of the quantity of petroleum recovered;
-
assessment and audit of monthly royalties payable; and
-
exemption from royalties.
Forecasting of Northwest Shelf royalties
1.26
In light of the WA government's successful administration of wellhead
royalty arrangements for over 25 years, references to the 'Designated Authority'
in the current legislation should be changed. The legislation should be
changed to 'the Western Australian Member of the Joint Authority' rather than
the proposed 'Titles Administrator'.
Constitutional settlement
1.27
The importance of the 1975 Constitutional settlement appears to have
been overlooked with the writing of this legislation.
Senator Eggleston: Just for the record, would you like
to quickly outline the constitutional settlement, which I think was drawn up
with the Fraser government.
Mr Norris: Yes. My recollection is that, in about
1975, there was a High Court decision which handed over the rights in the
Commonwealth offshore area up to the low water mark. Then there was a 1977
Premiers Conference at which there was agreement in principle that the
territorial seas should be the responsibility of the states. That was followed
by a Premiers Conference in 1979, where agreement was reached between the
Commonwealth and the states on an offshore constitutional settlement and on the
issues that would be covered by it. That offshore constitutional settlement was
in fact an agreement between the Commonwealth and the states to really put in
place a co-operative approach to administering the offshore area and, in our
view, it is an approach that has worked very well for all of those years
[emphasis added].[19]
1.28
As noted in evidence by the WA government, it would seem that this
Constitutional settlement is being overridden:
...what is happening is that the designated authority's role
is being removed and replaced by the titles administrator. That is a
significant shift away from what has effectively been in place for about 30
years—put in place by the Offshore Constitutional Settlement where there was a
cooperative administrative arrangement which has successfully applied for all
that period of time.[20]
Environment and Biodiversity Act
1.29
In evidence to the inquiry the WA government supported the concept of
maintaining the existing dual authority arrangement, suggesting that the
precedent set in the Environment and Biodiversity Act (EBA) could be used as a
template.
1.30
In the EBA the Commonwealth in effect sub-contracts initial
environmental assessments to the states and the Commonwealth only intervenes if
there is some problem with the assessment made by the state authority.
1.31
Were this approach adopted it would mean that the dual regulatory
process which has been in place for many years would be maintained. This would
satisfy the WA government's concerns about not receiving notification of the
location of offshore drilling and mean that the WA government would have an
appreciation of royalty income and thus mean that required state onshore
infrastructure could be planned for.
Conclusion
1.32
The manner in which the Commonwealth government has introduced this
legislation without having advised the WA government given that the ongoing
negotiations with them were not concluded, is disgraceful. This approach seems
extremely high-handed on the part of the Commonwealth.
1.33
Further, in Western Australia, the Commonwealth government's actions in
doing this imply a totally unacceptable attitude of disrespect over the
interests of the sovereign state of Western Australia and the underlying
precepts of the federation.
Recommendations
That this legislation not be proceeded with until:
-
The current ongoing negotiations between the Commonwealth and WA
government are concluded;
-
the very reasonable concerns of the WA government have been
resolved by agreement between the two governments concerned; and
-
references to the 'Designated Authority' are changed to 'the
Western Australian Member of the Joint Authority' rather than the proposed 'Titles
Administrator'.
Senator Alan
Eggleston
Senator for
Western Australia
Senator David
Bushby
Senator for
Tasmania
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