Introduction
1.1
Senator Chris Back, Senator Alex Gallacher and Senator Linda Reynolds
CSC acknowledge the substantial amount of work contained in the Committee's report,
and the factual information it contains.
1.2
The following provides the additional evidence provides support for our
views and conclusions.
Additional evidence Chapter 3 – Regulatory issues
Ministerial oversight and decision
making-expertise
1.3
We note additional evidence received in relation the benefits of
decision-making by an independent statutory authority such as NOPSEMA compared
to ministerial decision-making. Dr Malcolm Roberts, Chief Executive Officer of
the Australian Petroleum Production and Exploration Association (APPEA) told
the committee that:
My view is that we have a very good balance. Ministers have
policy responsibility for the framework. They have decision-making powers over
what areas are released for exploration. They appoint the board, the CEO. There
are opportunities for ministers to decide to attach conditions to the release
of acreage.[1]
1.4
In explaining the reasons why the National Offshore Petroleum Safety and
Environmental Management Authority (NOPSEMA) was given responsibility for
environmental management and assessment, Mr Smith, Chief Executive Officer,
NOPSEMA, told the committee that:
...one of the reasons that NOPSEMA was given responsibility for
environmental management and assessments was that it was recognised as having
particular specialist knowledge with regard to offshore oil and gas, which may
well ensure that we are better placed than other options for making decisions
under the EPBC Act. I think that has been affirmed by the independent reviews
of our performance on our handling of those responsibilities.[2]
1.5
Mr Smith, while noting the strengths of the current regulatory regime,
stated that it places the onus on the proponent to actually identify and
approach and address issues from relevant persons. He concluded that:
So we think it goes beyond
other environmental approvals processes in various ways, and there are
strengths.[3]
NOPSEMA's environmental standards
1.6
NOPSEMA explained to the committee that its environmental and approval
processes contain the same essential elements as those of the Environment
Protection and Biodiversity Conservation Act 1999 (EPBC Act). The key point
of difference being that NOPSEMA is required to evaluate all environmental
impacts and risks (including those to matters protected by the EPBC Act), and
identify appropriate control measures to manage and monitor those impacts.[4]
Mr Smith told the committee that:
...the environmental regulations we administer do not just
focus on matters protected under EPBC Act, the national environmental
significance. It is all impacts and risks. If they are not protected and if
there are unacceptable impacts or risks to those parts of the environment, they
will not proceed, and that includes social and economic features in the
environment as well.[5]
1.7
In contrast, the Department of the Environment and Energy's initial
approval process is restricted to the evaluation of impacts and risks only to
those matters protected by the EPBC Act. Further detailed analysis and
identification of control measures are then addressed separately in action
plans post approval.[6]
1.8
Mr Cameron Grebe, Head of Division, Environment, NOPSEMA, told the
committee that it is 'worth noting' that NOPSEMA's environmental approvals
regulations have been assessed against the EPBC Act's approval process in
relation to offshore petroleum activities. Mr Grebe stated that 'that process
led to the endorsement of the process we [NOPSEMA] administer as having an
equivalent outcome'. Mr Grebe also noted that:
...we have specific obligations that existed under the EPBC Act
before streamlining. As Commonwealth officials, the EPBC Act constrains us from
approving actions that are likely to have an impact on a number of different
things under the EPBC Act, including species recovery plans, plans of
management for marine protected areas, and so on. Those are hardwired in
legislation and not just a commitment.[7]
1.9
In response to suggestions that the approvals process should be amended
to again require the approval of the Department of the Environment, the South
Australian Government noted that the former process was 'a duplicative,
overlapping assessment process that demonstrably resulted in longer assessment
timeframes'.[8]
Transparency of decision making
1.10
NOPSEMA told the committee that with the exception of information it is
required to release by law, it does not typically publicly release information
received during its deliberative process. It submitted:
In accordance with the Australian Administrative Law Policy
Guide and NOPSEMA's published policies, NOPSEMA does not provide specific
comment on the merits of regulatory submissions that are under assessment as
any comment may be perceived to bias NOPSEMA’s fair and impartial assessment of
the submission in question.[9]
1.11
Further, Mr Cameron Grebe, NOPSEMA, stated that:
We have to be mindful, as a regulator, to abide by the
administrative law principles that apply to decision making, and, where the
information is provided for the purpose of something other than public release,
we do not have the authority to release that information.[10]
Industry co-operation
1.12
APPEA provided evidence to the committee of work it is undertaking with
industry stakeholders. It submitted that developing and sustaining
relationships between the oil and gas industry and stakeholders is critical to
the industry's long-term sustainability. Positive relationships are one of the
key ways in which the oil and gas industry are able to manage the potential
economic and social impacts on other industries such as fishing.[11]
1.13
In recognition of the importance of stakeholder relationships, APPEA
signed a Memorandum of Understanding (MOU) with five of Australia's peak
commercial fishing, aquaculture and seafood industry associations. This MOU
established principles of co-operation, communication and consultation between
APPEA and fishing industry bodies. Under the MOU, industry groups meet
regularly through a roundtable process and have committed to seek to resolve
issues through better information sharing.[12]
Additional evidence Chapter 4 – Effects of oil and gas exploration and
production in the Great Australian Bight
Economic impacts of oil and gas
production
1.14
The committee received evidence that outlined the potential economic
outcomes of oil and gas production in the Great Australian Bight. This included
evidence noting the volume of oil imported, and its associated costs. Dr
Roberts, APPEA, stated:
About 80 per cent of the oil we use in Australia is imported,
costing us about $34 billion a year. Local production has been falling
steadily. Australia has less than 10 years of proven domestic crude oil
resources left. Finding a major new local source of oil will help address our
widening trade deficit in this vital commodity.[13]
1.15
The Department of Industry, Innovation and Science noted that Australia
imports around 75 per cent of the crude oil it refines into liquid fuels and
around 50 per cent of the refined liquid fuels in Australia. The
department went on to state:
It is important that Australia continues to identify and
maintain the potential for access to areas that are moderate to highly
geologically prospective for oil and gas hydrocarbons. This will ensure
Australia can maximise the exploitation of its offshore oil and gas resources
to provide ongoing benefits to the Australian economy and to maintain diverse
and resilient energy supplies and sustain our energy security in Australia and
the broader Asia-Pacific region.[14]
1.16
APPEA also stated that 'exploration is important as a means of reducing
uncertainty about Australia' available petroleum reserves'.[15]
1.17
APPEA also highlighted the economic benefits delivered by ventures in
the Bass Strait, as the closest adjacent offshore petroleum province to the
Great Australian Bight. It stated that operations in the Bass Strait have
contributed $200 billion to the Australian Gross Domestic Product (GDP) and
50,000 permanent jobs over four decades.[16]
Similarly, between 1989 and 2009, the North West Shelf project is estimated to
have generated export revenues approaching $60 billion, contributed
$70 billion to the GDP, and paid state and Commonwealth taxes of
approximately $5 billion.[17]
1.18
Chevron Australia, in outlining its operations in Australia stated that the
direct benefits from its projects include over 1,000 contracts with Australian
businesses; 19,000 people working on the Gorgon and Wheatstone projects; $53
million investment in research and development; and about $300 million
committed to community investment both in Onslow and in the region. Dr Moffat,
General Manager, Exploration, Chevron Australia stated:
The benefits directly from the project are immense. They are
indicative of the kind of expenditures and benefits that flow from oil and gas.
In terms of direct benefits to the federal government, there is some
independent analysis. I would like to table this for the committee. This work
was done independently and it talks to a revenue benefit from Gorgon and
Wheatstone of $338 billion to the federal government.[18]
1.19
The committee received evidence that exploration in the Great Australian
Bight would have brought opportunities and expenditure in a range of services
including supply vessels, aircraft and drilling rigs, products and
infrastructure, logistics and warehousing, machine shops, environment, medical
and catering services.[19]
1.20
Regional Development Australia Whyalla and Eyre Peninsula (RDAWEP) and
the Eyre Peninsula Local Government Association (EPLGA) stated that to date
activities in the Great Australian Bight have had a 'positive impact on the
demand for food and accommodation, and transport services, including regional
airlines and fuel sales (estimated at $5–10million)'.[20]
It further stated that:
GAB oil and gas activities have had a positive economic
impact in the region to date. The most conspicuous economic impact has been the
airport upgrade at Ceduna associated with the fuel dump and helicopter
facilities. Airlines, hotels, consumable and fuel suppliers have enjoyed
greater and not insubstantial sales revenue created by this activity.[21]
1.21
The RDAWEP and EPLGA concluded:
...if oil and gas production is developed at some time in the
future, the economic impact to this region will be transformational and will
remove many of our current constraints to regional development at a social and
economic level.[22]
1.22
Similarly, the District Council of Ceduna noted the developments at
Ceduna Airport for the operation of BP's aviation logistics base for the
proposed exploratory drilling program. The Council stated that the revenue generated
by the lease will provide revenue to the Council for community services and
works which would otherwise be borne by Ceduna Council residents. The Council
concluded that:
BP's positive social and economic contribution to the
communities of Eyre Peninsula and the Ceduna Region to date has been
significant as a direct result of their presence in the region for the GAB
exploratory drilling program.[23]
1.23
BP noted that the $8 million upgrade to Port Adelaide's bunkering
facility provided more than 20 local jobs including in construction works and
pipeline design, and has provided a 'welcome boost for local suppliers and
business confidence'.[24]
1.24
In noting BP's decision to not proceed with exploration in the Great
Australian Bight, the Department of Industry, Innovation and Science submitted
that:
The BP program in the Great Australian Bight would have
created jobs and opportunities for local suppliers. It was expected that 25
businesses in Ceduna and surrounding towns would be engaged in BP's planned
drilling program; 100 workers including 25 Ceduna-based workers and 20 per cent
indigenous worker component.[25]
Revenue and royalties
1.25
The committee received evidence in relation to the taxation arrangements
that apply to the extraction of petroleum resources in Australia. These
arrangements 'are aimed at encouraging production from Australia's oil and gas
reserves while providing an adequate return to the Australian community on the
exploitation of their resources'.[26]
1.26
Table 1.1 provides an outline of the various petroleum taxation
arrangements that are in effect.
Table 1.1 – Summary of
Australia's petroleum taxation arrangements
| Tax |
Description |
| Petroleum resource rent tax (PRRT) |
The
Petroleum Resource Rent Tax (PRRT) was originally introduced by the
Australian Government in 1987 to replace royalties and crude oil excise in
most areas of Commonwealth waters. From 1 July 2012, PRRT applies to all
Australian onshore and offshore oil and gas projects, including the North
West Shelf and coal seam gas projects.
The PRRT is
a profit based tax levied at 40 percent of net revenues (sales receipts less
eligible expenditures) from a project. |
| Offshore petroleum royalties |
Offshore
petroleum royalties currently apply to the North West Shelf (NWS)
production area and state and territory waters. Royalties do not overlap with
the Resource Rent Royalty regime (see below).
Onshore,
royalties are levied on petroleum production and are collected by
the states and territories. The rate is generally set at approximately 10
per cent of net wellhead value of production. |
| Crude Oil Excise |
The
Australian Government applies Crude Oil Excise to eligible crude
oil and condensate production from coastal waters, onshore areas, and the
North West Shelf project area in Australian waters.
The rate of
excise applied depends on the annual rate of production of crude oil and
condensate, the date of discovery of the petroleum reservoir and the date on
which production commenced.
The first
30 million barrels are excise exempt, and variable excise rates apply to
annual production at different levels. |
| Production Sharing Contracts |
Petroleum
produced within the Joint Petroleum Development Area (JPDA) is subject to
fiscal terms outlined in a Production Sharing Contract (PSC). PSCs are agreements
between the parties to a petroleum extraction facility and the Australian and
East Timorese governments regarding the percentage of production each party
will receive after the participating parties have recovered a specified
amount of costs and expenses. |
| Resources Rent Royalty (RRR) |
The
Australian Government excise is waived where a state introduces
a Resource Rent Royalty (RRR) on a petroleum development within its
jurisdiction and where a revenue sharing agreement is negotiated with the
Australian Government.
The profits
based RRR regime is similar to the PRRT. |
Source:
Department of Industry, Innovation and Science, 'Resources taxation', https://industry.gov.au/resource/Enhancing/ResourcesTaxation/Pages/default.aspx.
1.27
The PRRT attracted some comment during the inquiry. The PRRT is a
profit-based tax applied to the recovery of petroleum products that is:
...designed to capture the 'economic rent' associated with the
development of petroleum projects. A finite supply of high quality, accessible
petroleum deposits means that there are pockets of petroleum resource projects
offering the prospect of very high returns, well in excess of the returns
necessary to attract commercial investment. Those high excess returns represent
pockets of economic rent.[27]
1.28
Mr Mike Lawson, Acting Deputy Secretary, Department of Industry,
Innovation and Science, explained the difference between ordinary company tax
and taxes such as the PRRT succinctly as follows: 'The companies pay company
tax on their profits. Resource rent tax is a tax on the resource rents'.[28]
1.29
The following is a brief summary of how the PRRT operates:
The PRRT is assessed on a petroleum project basis and is
levied at a rate of 40 per cent of a project's taxable profit. Taxable profit
is calculated by deducting a project's eligible project expenses from the
assessable receipts derived from the project. Deductible expenditure broadly
includes those expenditures, whether capital or revenue in nature, which are
directly incurred in relation to the petroleum project.[29]
1.30
Some submitters raised concern
that existing taxation arrangements for offshore oil and gas projects may reduce
the economic benefits.[30] The risk associated
with offshore petroleum exploration and the implications of this for taxation
revenue was also raised.
1.31
It is a fundamental principle of the Australian taxation system that
expenses and losses incurred in gaining tax assessable income can generally be
deducted from assessable income.[31] The design of the PRRT also
takes into account the risks involved in petroleum exploration and development.[32]
The advantages and risks involved in the development of oil and gas projects in
Australia were examined recently as part of a review of the PRRT commissioned
by the Government. Although Australia is considered to have 'a number of
country specific advantages' that help influence whether oil and gas
exploration and development in undertaken in Australia, the review considered
that 'a number of major challenges confront the development of oil and gas
projects in Australia':
In particular, the development of
Australia's gas resources, especially offshore, is challenged by its remoteness,
a lack of available infrastructure, geological uncertainties and the
significant capital costs and long lead times required to facilitate resource
recovery.[33]
1.32
The Department of Industry, Innovation and Science told the
committee that the PRRT is 'designed to be—in a sense—a risk-sharing
engagement' which encourages investment.[34]
In particular, departmental officers agreed that the
design of the tax is not intended to inhibit exploration. Mr Lawson stated:
Absolutely, the whole point of it
is what is a normal return on the assets that have been invested in and spent
doing exploration and assets that are then spent on building the capacity of
the production facilities and so on. Those things are deducted according to tax
law and profits. Resource rent taxes can come out the other end and are subject
to those taxes.[35]
Environmental impacts – seismic
surveying
1.33
The committee received evidence in relation to the regulatory
requirements which govern the undertaking of seismic surveys during the
exploration phase of offshore oil and gas operations.
1.34
APPEA submitted that both industry mitigation practices and the
requirements of the EPBC Act Policy Statement Interactions between offshore
seismic exploration and whales ensure that seismic surveying occurs under strict
conditions designed to protect marine life. APPEA described the mitigation
measures required under the Policy Statement as 'some of the most restrictive
mitigation measures in the world' including a 'timing guide, soft-starts,
observations zones, low power zones and shutdown zones'.[36]
1.35
Mr Derrick O'Keefe, Murphy Australia Oil, also pointed to an added,
unplanned, benefit of seismic surveying: environmental data, such as meteor
data, wave action, observation of different species in the Bight and salinity
measurements, has been obtained. The data has been provided to different
scientific groups to assist them with their research.[37]
Additional evidence Chapter 5 – Environmental and economic impacts in the
event of an oil spill
Natural oil seepage
1.36
APPEA presented evidence that the Great Australian Bight has a history
of natural oil and gas seeping from the seabed, accounting for more than half
of the oil introduced into the marine environment. Oil and gas below the seabed
can either seep from the sea floor or rise through the water column in a
plume—both of which result in oil slicks on the sea surface.[38]
1.37
APPEA noted that small balls of natural tar washing up on beaches along
South Australia's Bowney Coast 'provided the first tangible sign of potential
oil and gas reserves in the canyon systems of the continental slope'. It also
stated that:
The former South Australian Department of Mines & Energy
has previously reported a stranding of an estimated 1000 tonnes of crude oil
near Seal Bay on the south coast of Kangaroo Island on 7 December 1986.
Australian Mineral Development Laboratories analysed samples and concluded the
substance was naturally occurring oil.[39]
1.38
APPEA submitted that Geoscience Australia studies 'indicate that some
natural slicks are up to 1,200 metres long and between 30 and 150 metres wide
and occur in water depths from 5000 to less than 200 metres'.[40]
1.39
APPEA also submitted that the US National Research Council estimates
that oil introduced into the environment from platform based oil spills only
accounts for 0.07 per cent of all spills.[41]
Additional evidence Chapter 6 – Capacity to prevent, and mitigate the
effect of an oil spill
Regulatory requirements
1.40
APPEA told the committee that the regulatory regime implemented by
NOPSEMA 'recognises the importance by both preventing but also preparing to
respond to the very low likelihood but credible, high consequence events'.[42]
Titleholder strategies and response
organisations
1.41
APPEA submitted that in 'the rare event' that an oil spill occurs,
operators are required to have in place the capability to respond and minimise
the impact.[43]
Mutual Assistance Agreement
1.42
BP noted that in 2012, 12 APPEA member companies, including BP signed a
memorandum of understanding on mutual assistance (known as the Mutual
Assistance Agreement). This agreement is intended to facilitate the transfer of
a mobile offshore drilling unit (MODU) between operators in the event that one
is required to drill an emergency relief well. However it stated that it is
unlikely that any other MODU would be present in the Great Australian Bight at
the time of its proposed project.[44]
Concerns with the ability of
proponents to prevent an oil spill
1.43
Oil and gas exploration companies responded to concerns raised by
submitters in relation to the ability of proponents to prevent and oil spill,
and noted that they had been undertaking activities successfully for many
years. Santos Ltd, for example, commented:
Santos has been undertaking offshore petroleum activities for
more than 30 years and, in that time, has developed an expertise in, and
track‐record of,
safe and effective operation. The company's internal processes ensure that
proposed activities in even the most challenging of offshore settings are well
planned and carefully managed and, in the context of the Commonwealth waters of
Australia, accepted by NOPSEMA as demonstrating that impacts and risks are
reduced to ALARP.[45]
1.44
Murphy Australia Oil also commented that 'it should be remembered that
safety systems in relation to spills and accidents are not limited to
world-class methods, post-incident, but also include world-class systems
designed to prevent an incident'.[46]
1.45
In relation to concerns about the weather and depth of drilling in the
Great Australian Bight, Chevron Australia commented that there are a
number of other areas in the world with comparable weather and depth conditions
which have been successfully drilled. Dr David Moffat, General Manager,
Exploration, stated:
The examples we would offer would be west of Shetland, which
is a harsh environment; Newfoundland; West Africa; and Western Australia, as a
key example. The analogy I was giving there was not with Bass Strait but with
other areas that we have operated that are of similar character to the bight.
In terms of the water depth, we have drilled over 175 wells with greater than a
kilometre depth, a thousand metres of water depth. I think our record in those
deepwater wells is admirable. The record, in terms of depth of drilling, is
that we have drilled down to depths of 2,900 metres plus. Those are comparable
to the bight.[47]
1.46
Similarly, Santos Ltd noted that it has drilled along the southern
continental slope in the Bass Strait to total drilled depths in excess of
3600m. It described the weather conditions in the area as 'challenging' and
stated that they are 'consistent with those experienced through the whole of
the Southern Ocean region from the Bass Strait to the Great Australian Bight'.
It submitted that 'robust and comprehensive technical rig selection process,
mooring analysis and engineered well design ensure that these conditions do not
impact the integrity or safety of the drilling operations'.[48]
1.47
Dr Malcolm Roberts, APPEA, added that the industry has longstanding
arrangements in place to ensure that, in the event of a major incident,
equipment and qualified people are ready to be mobilised quickly. In addition
to the equipment available in Australia to response to a spill, arrangements
are in place with international agencies to ensure the delivery of specialist
equipment not available in Australia. Dr Roberts also noted that NOPSEMA is
responsible for assessing environmental risk and ensuring that companies have a
response plan. He stated:
There is no doubt that these are significant issues, but
equally there is no doubt that these are some of the major issues that will be
assessed by the regulator as part of this proposal. If the regulator is not
satisfied that those environmental risks have been identified and reduced as
much as reasonably practicable, and that there is an effective response plan in
place that could be implemented quickly and effectively, then approval will not
be given.[49]
1.48
APPEA stated that the most common drilling rig in Australian waters are
semi-submersible Mobile Offshore Drilling Units (MODU) which are semi-submerged
to increase stability and are stabilised by anchors or azimuth thrusters.
BP commissioned the construction of a specialist MODU, the Ocean
GreatWhite equipped with dynamic thrusters to enable it to remain stable during
extreme weather. APPEA stated that the Ocean GreatWhite is capable of operating
at water depths of more than 3,000 metres and drilling to depths of more than
10,000 metres.[50]
Lessons learned from Deepwater
Horizon
1.49
BP provided the committee with evidence of its response to the Deepwater
Horizon accident. It noted that an internal investigation into the event had
made eight findings and 26 recommendations specific to drilling which BP
as implemented across its worldwide drilling activities. In addition, the
'eight key findings of the Accident Investigation Report have all been directly
addressed in preventative planning for operations in the Great Australian
Bight'.[51]
These were provided in detail in BP's submission.[52]
1.50
BP went on to comment that the industry has continued to advance
capabilities and adopt changes in a number of areas as a result of the lessons
learned from Deepwater Horizon and other incidents. These areas include:
-
prevention and drilling safety—the aim is to prevent well control
incidents from occurring in the first instance;
-
enhancing standards in relation to equipment and procedures is
continuing; and
-
planning and preparing to contain a situation—implementation of a
tiered approach to tactical responses to subsea well incidents.[53]
1.51
It also provided a report on environmental recovery and restoration in
the Gulf of Mexico. This report detailed the response efforts and noted that:
-
under the Natural Resource Damage Assessment (NRDA) process,[54]
scientists have conducted more than 240 studies and BP has provided funding of
$US1.3 billion for these studies;
-
in 2011, BP entered into an agreement to provide $US1 billion for
early restoration projects, allowing environmental restoration work to begin
while scientists continued to assess injury through the NRDA.[55]
1.52
BP also noted that the recovery effort following the Deepwater Horizon
accident was generally well received by the community. Ms Fitzpatrick stated
that the community 'has been pleased with the fact that we stepped up and
actually did do all of the activity and work that we did, and that we looked
after people who had been impacted financially'.[56]
Ms Fitzpatrick went on to comment that BP was in a position to meet its
financial obligations should a spill event occur in the Great Australian Bight.[57]
Senators' views
1.53
Balancing the need for the protection of pristine marine environments
against the development of, and investment in, the offshore oil and gas
industry has been the subject of fierce public debate for many years.
1.54
Though this inquiry followed the proposal by BP to conduct exploratory
drilling in the Great Australian Bight, the concerns and issues raised more
broadly addressed the current regulatory regime governing the approval of
offshore oil and gas activities in Australia. It was also evident that concerns
regarding the potential impact on the pristine marine environment of the Great
Australian Bight would apply to all oil and gas activities in the area,
regardless of the proponent company.
1.55
We acknowledge that the environmental, economic and social impacts
resulting from the 2011 Deepwater Horizon incident in the Gulf of Mexico
influenced the view held by many submitters regarding the appropriateness of
offshore oil and gas activities being conducted in the Great Australian Bight.
The Deepwater Horizon incident also weighed heavily on some submitters'
perception of BP as a titleholder in the Great Australian Bight.
1.56
It should be noted however that the Australian offshore oil and gas
regulatory regime differs significantly from that of the United States. BP has
acknowledged that since the Deepwater Horizon incident, it has changed a number
of its business practices to ensure the safety of its operations. We also note
the extensive rehabilitation work coordinated and funded by BP which has
significantly limited the impact of this incident on affected coastal
communities along the Gulf.
Protection of the Great Australian Bight
1.57
The Great Australian Bight is an extraordinary oceanic and coastal
environment of global conservation significance. It is a place of unparalleled
natural beauty and is home to an array of diverse and unique flora and fauna
species. Coastal communities have a deep and abiding connection to the Great
Australian Bight and rely on it for both industry and recreation. The Great
Australian Bight also provides national and international visitors with an
opportunity to experience one of the world's pristine and unique marine
wilderness areas.
1.58
As one of the last remaining intact ocean wilderness areas in the world,
it provides critical habitat to a range of threatened and endangered wildlife
species. It is extraordinarily rich in biodiversity, and is home to an enormous
number of endemic species—some 85 percent of species found in the region are
endemic. Many of these endemic species are also listed as threatened under the Environment
Protection and Biodiversity Conservation Act 1999 (EPBC Act).
1.59
The waters of the Bight provide the most significant breeding and
calving areas in Australia for the southern right whale, one of two such major
calving areas in the world. It also supports an essential nursery area for the
endangered Australian sea lion. The Bight provides seasonal habitat for a range
of rare and endangered cetaceans such as sperm whales, killer whales and
rorquals (blue, minke and humpback whales).
1.60
Over the past 20 years, both the Commonwealth and the South Australian
governments have worked to recognise the global conservation values of the
region through the declaration of extensive protection areas. One mechanism to
preserve and protect the Great Australian Bight has been the establishment of
Commonwealth marine reserves. The establishment of marine reserves acts to
protect and maintain an area's biodiversity, including endangered and
threatened species such as whales and pinnipeds, and their habitats.
1.61
In 2014, the Australian government commissioned an independent review of
the CMR network established in 2012. The review was undertaken by an expert
scientific panel, which reviewed the science underpinning the current CMRs, and
five bioregional advisory panels, which facilitated enhanced consultation with
stakeholders.
1.62
The panels recommended zoning changes in the Great Australian Bight to
exclude oil and gas activities from existing inshore special purpose zones.
However, these zones do not overlap current petroleum titles, nor are
titleholders or other companies prohibited from traversing the re-zoned areas.
1.63
We believe that the mechanisms currently in place acknowledge the high
environmental values of the Great Australian Bight, and provide appropriate
levels of protection to the area.
Economic benefits and energy security
1.64
The energy sector is fundamental to Australia's social and economic
prosperity. It underpins every aspect of economic activity, and the strategic
management and security of energy resources is critical to the future of the
nation. In addition, oil and gas exploration and production continues to be a
significant contributor to the Australian economy through domestic supply,
export revenue, skills development, employment opportunities and regional
development.
1.65
In 2014–15, it was estimated that the oil and gas industry contributed
$31 billion to industry gross value added, and employed around 24,000
people. In addition there have been some 40,000 fulltime jobs on LNG
construction projects in Western Australia and Queensland in the last decade.
Oil and gas exploration and production results in investment in regional
infrastructure, and expenditure through the development of facilities, industry
contracts, accommodation, and associated service contracts. The oil and gas
industry is also one of the highest value-add industries in Australia generating
highly skilled jobs both directly, and through downstream processing,
engineering, and other services.
1.66
As noted during the course of the inquiry, BP's proposed exploration
activity in the Great Australian Bight would have resulted in significant
economic benefit to both South Australia and the Great Australian Bight region.
It was expected to generate opportunities for the development of business
capabilities and diversification in the Eyre Peninsular and Whyalla region.
This would have occurred through direct and indirect service provisions and the
development of infrastructure to support offshore activities.
1.67
Benefits during the exploration phase have already arisen with the Regional Development Whyalla and Eyre Peninsula/Eyre Peninsula
Local Government Association pointing to the upgrade of facilities at
Ceduna airport. The South Australian Government also provided the committee
with evidence of opportunities for South Australian businesses, for example,
the opening of the Port Adelaide Marine Supply Base which serviced and provided
supplies to BP.
1.68
We note evidence that the Eyre Peninsula has suffered from a lack of
investment in ageing infrastructure, poor employment opportunities, low
retention rates of younger workers and limited business opportunities. It is
therefore unsurprising that the Regional Development Whyalla and Eyre
Peninsula/Eyre Peninsula Local Government saw the economic benefits for the
region arising from oil and gas production as being 'transformational'.
1.69
Evidence received by the committee pointed to the much needed regional
employment and investment which would have arisen from BP's operations. It was
expected that 25 businesses in Ceduna and surrounding towns would have been
engaged during BP's planned drilling program. It was also expected that 100
workers, would have been engaged including 25 Ceduna-based workers, and a
20 per cent Indigenous worker component.
1.70
We consider that the economic benefits from exploration and production
of oil and gas in the Great Australian Bight are clear. While only in the
exploration phase, significant investment has already taken place in South
Australia. The experience with offshore oil and gas developments in Western
Australia point to the potential for significant job creation, investment in
infrastructure, and business opportunities in regions where there are no
alternative opportunities. We therefore strongly support the oil and gas
industry in Australia.
1.71
The oil and gas industry is also critical to ensuring Australia's energy
security. Australia's fuel supply has been protected from disruption by current
market conditions. However it remains vulnerable to high-impact geopolitical
events in areas of production such as the Middle East, or along supply chains
such as the Straits of Hormuz and, more recently, the South China Sea. As such,
it is important that new opportunities for production must be identified to
ensure that Australia can maintain diverse and resilient energy supplies.
Continued growth in domestic oil demand and declining oil production have
already resulted in a significant decline in Australia's self-sufficiency in
crude oil and refined petroleum products. Australia's growing trade deficit in
crude oil and refined products has both security and cost implications.
1.72
We consider the protection of Australia's energy security to be of the
utmost importance. Domestic oil and gas exploration and production are pivotal
to ensuring that Australia's economic and social wellbeing is protected from
the effect of any disruption to Australia's fuel supply. The International
Energy Agency predicted that Australia had only 48 days of fuel reserves
onshore in January 2017!
1.73
Chevron Australia has indicated it proposes to drill for oil in its
exploration lease in the Great Australian Bight. Chevron and its partners have
invested US $100 billion (A$130 billion) on its Liquid Natural Gas (LNG)
projects at Gorgon on Barrow Island and Wheatstone based at Onslow on the North
West Shelf of Western Australia.
1.74
From its two LNG trains at Gorgon, Chevron has already invested
A$60 billion into the local economy during the construction phase of these
projects. Acil Allen consultants have predicted that, over the 30 year
life of these two projects, they will deliver more than $1trillion to
Australia’s GDP, around 150,000 full time job equivalents and $340 billion to
Federal Government revenue.
Strength of regulatory regime
1.75
The Australian offshore oil and gas industry is subject to one of the
most rigorous environmental and safety regulatory regimes in the world. The
National Offshore Petroleum Safety and Environmental Management Authority
(NOPSEMA), was established in 2011 as the independent authority responsible for
the regulation of well integrity, health and safety, and environmental
management for offshore oil and gas operations in Commonwealth waters. It is a
highly competent, robust, and independent regulator, and utilises an
objectives-based regulatory model which has been recognised as best practice in
high risk industries.
1.76
Previously, the Department of the Environment was responsible for the
environmental approvals of offshore oil and gas activities which would have an
impact on Matters of National Environment Significance (MNES) under the EPBC
Act. In 2014, NOPSEMA's environmental approvals process was endorsed by the
Commonwealth Minister for the Environment as being appropriate to ensure that
oil and gas activities do not have unacceptable impacts on matters protected
under the EPBC Act.
1.77
We note some submitters questioned whether NOPSEMA has sufficient expertise
to make environmental assessments. It accepts NOPSEMA's evidence that it
employs appropriately qualified staff. We also note the evidence that staff are
required to demonstrate and maintain relevant competencies prior to undertaking
lead regulatory roles. We also note the high level of cooperation which exists
between NOPSEMA and other government departments.
1.78
NOPSEMA relies on both scientific evidence and a team of highly
qualified staff to undertake all environmental and safety assessments. NOPSEMA utilises
national and international information sources including peer-reviewed
scientific literature, industry publications, and government reports.
1.79
We are of the view that the approvals process administered by NOPSEMA
has substantial strengths over other regulatory regimes. In particular, NOPSEMA
requires proponents to be proactive in identifying, consulting and addressing
issues raised by relevant persons. Proponents are also required to demonstrate
to NOPSEMA that concerns raised by relevant persons have been dealt with
appropriately. If NOPSEMA is not satisfied that all consultation requirements
have been met, then the environment plan will not be accepted, and the activity
cannot proceed.
1.80
We agree with Mr Stuart Smith, Chief Executive of NOPSEMA that this is
superior to other environmental processes, such as those administered by the
Department of the Environment and Energy under the EPBC Act, as it places the
onus on the proponent to actively consult, and provide evidence of this
consultation to NOPSEMA.
1.81
Further, contrary to claims made by environmental advocacy groups, there
is no evidence that NOPSEMA has failed to implement the principles of
ecologically sustainable development as defined under the EPBC Act, such as the
precautionary principle. Nor is there evidence that NOPSEMA, in considering
Environment Plans has failed, or will fail to explicitly take into
consideration any potential impacts on matters protected under Part 3 of the
EPBC Act. In fact, evidence demonstrates that NOPSEMA is actually required to
consider the impacts on the environment from offshore oil and gas beyond the
matters stipulated by the EPBC Act.
1.82
NOPSEMA's environmental approvals process has been endorsed by the
Minister for the Environment as being appropriate to ensure that offshore oil
and gas activities do not have unacceptable impacts on matters protected under
the EPBC Act. It was also reviewed after 12 months of operation and found to be
delivering, and is expected to continue delivering the levels of environmental
protection required under the EPBC Act. We accept the evidence that NOPSEMA's
approvals process reduces costly and unnecessary duplication and allows for the
timely consideration and approval of oil and gas projects. This ensures that
investment in oil and projects is encouraged and facilitated, whilst
simultaneously ensuring that the environment is appropriately protected.
1.83
We note NOPSEMA's efforts to develop mechanisms to increase public
confidence in the offshore regulatory regime through enhanced transparency for
stakeholder input. For example, the requirement for proponents to publicly
disclose environment plans before the NOPSEMA assessment process commences, and
the introduction of a formal public comment period. As stated by Mr Smith,
Chief Executive of NOPSEMA, these enhancements would not alter final
approvals by NOPSEMA, as the current existing regulatory framework already
ensures that the regulator is provided with all required information about
stakeholder consultation. These enhancements are simply directed at improving
community confidence that their issues have been taken into account, rather
than altering approval outcomes.
1.84
We are reassured that the existing approvals process ensures that
NOPSEMA is a well-informed, robust and independent regulator. We commend
NOPSEMA for considering ways to improve community confidence in its approvals
process and notes the work being undertaken by the Department of Industry,
Innovation and Science as part of the review of environmental transparency
under NOPSEMA's regulatory regime.
1.85
We have confidence that NOPSEMA provides, and will continue to provide,
appropriate levels of environmental protection through its rigorous approvals
process.
Long track record of safe exploration and production
1.86
We note the findings of oil spill modelling provided by both
The Wilderness Society and BP, and note concerns that the effects of an
oil spill in the Great Australian Bight could be catastrophic. Submitters
provided evidence that marine flora and fauna, including threatened and
protected species would be killed and injured, and that delicate ecosystems
would be disrupted. Further, submitters expressed concern that industries such
as fisheries and aquaculture, and tourism would be affected by an oil spill.
1.87
Some submitters also raised concern that in the event of an oil spill in
the Great Australian Bight, the harsh weather conditions and the remote and
isolated coastline could create difficulties in undertaking containment and
clean-up activities. However, evidence was received that NOPSEMA requires oil
and gas proponents to demonstrate that appropriate response strategies are in
place in order to obtain approval to undertake activity in the region. We
believe that NOPSEMA is best-placed, as a robust and independent regulator, to
make an assessment of the appropriateness of oil spill mitigation measures.
1.88
Oil and gas industry proponents argued that operations in the Great
Australian Bight would be conducted with the risk reduced to as low as
reasonably practicable as required under the regulatory framework. In
Australia, the oil and gas industry has a long history of ensuring that
operations are conducted safely, and in a manner which does not endanger
pristine environments. Over many decades, operations in the Bass Strait and the
North West Shelf area have proven to co-exist with other industries such as
fishing and aquaculture, and delicate marine and coastal ecosystems have not
been negatively affected.
1.89
We particularly note the efforts of Chevron Australia which has operated
on Barrow Island, Western Australia since 1967. Barrow Island is a
Class A Nature Reserve, and Chevron Australia has implemented best
practice environmental management strategies which have ensured that the
island's ecology remains essentially intact. Chevron Australia's management of
Barrow Island demonstrates that oil and gas exploration and production can
safely co-exist with delicate and protected ecosystems, and that titleholders
have a strongly demonstrated commitment to ensuring that their operations are conducted
in a manner in which environmental protection standards are paramount in all
aspects of their operations.
1.90
In relation to the Deepwater Horizon spill, the committee notes that
this event was used by some submitters as a reason for a complete ban on oil or
gas activities in the Great Australian Bight. However, BP provided evidence to
the committee that the lessons learnt from the accident and the recommendations
of the BP internal investigation have been implemented across BP's worldwide
drilling activities, including in the Great Australian Bight.
1.91
In addition, we note the evidence from NOPSEMA that the regulatory
arrangements for well integrity in Australia are 'amongst the best in the
world', and are based on experience worldwide and the lessons learned from
other incidents. As a consequence, NOPSEMA concluded that it is well-placed to
identify and prevent an incident similar to Deepwater Horizon and to respond if
such an event should occur.[58]
1.92
The oil and gas industry also has a longstanding and cooperative
relationship with the scientific research community. The committee notes that
BP Australia provides funding to the Great Australian Bight Research Program, a
four year $20 million project led by the CSIRO which involves seven major
study themes including benthic biodiversity and socioeconomic issues. This
project is a collaborative effort between BP, CSIRO, the Government of South
Australia, the South Australian Research and Development Institute, the
University of Adelaide, and Flinders University. This project will provide
invaluable baseline data sets which will ensure that the Great Australian Bight
is managed appropriately. Chevron Australia also separately funds a research
program in the Great Australian Bight which will complement the aims of the
Great Australian Bight Research Program.
1.93
We commend the commitment of the oil and gas industry to ensuring that
oil and gas operations are supported by the latest in scientific research. We also
commend the industry on its valuable contribution to the support of the
scientific and academic research community in Australia.
1.94
We have confidence that the oil and gas industry in Australia will
continue to comply with all regulatory requirements, and implement appropriate
safety and environmental protections measures. We particularly recognise the
oil and gas industry demonstrated commitment to best practice safety and
environmental practices over many years.
1.95
As such, we support the continued development of Australia's oil and gas
sector in accordance with the regulatory regime's robust environmental and
safety requirements.
Oil spill mitigation
1.96
Some submitters expressed concerns relating to the capacity of
companies, and the industry more generally, to mitigate the risk of an oil
spill during exploration or production from an offshore facility.
1.97
We note advice from the Australian Petroleum Production and Exploration
Association (APPEA) that Australia has longstanding arrangements for
co-ordinated action by industry and governments in the event of a marine oil spill.
The Chief Executive, Mr Malcolm Roberts informed the committee that the
National Plan for Maritime Environmental Emergencies provides a co-operative
framework for response by governments, the shipping and petroleum industries.
1.98
Mr Roberts advised that the industry contribution is led by the
Australian Marine Oil Spill Centre (AMOSC), established in 1991 as a subsidiary
of the Australian Institute of Petroleum (AIP). AMOSC’s members account for
virtually all oil and gas exploration and production, offshore pipelines and
tanker shipping in Australian waters. Through AMOSC, the local industry
operates in line with international best practice for spill prevention,
preparedness and response.
1.99
APPEA advised that AMOSC operates from two main centres (Geelong and
Fremantle) with additional equipment stockpiles at Exmouth and Broome. AMOSC
has a permanent staff of twelve people with support readily available from
another 120 trained industry personnel (known as the Core Group). Over the last
three years, AMOSC has trained 355 industry professionals to expand the pool of
trained response staff across the industry. AMOSC training is endorsed by the
International Maritime Organisation. AMOSC has invested almost $30 million in
on-call specialised surface and sub-surface equipment and dispersants, located
in the main risk areas off Australia.
1.100
We were informed of the existence of the Subsea First Response Toolkit
which can be deployed at short notice with equipment to respond to a failure in
well integrity, including injecting subsea dispersants, operating blow out
preventers and, if necessary, preparing the wellhead for deployment of a
capping stack.
1.101
We also note the evidence from BP and other companies that there is
continuous improvement in equipment, procedures and training and competency
management in the areas of drilling safety and prevention, containment and oil
spill response. We consider that the industry has shown its willingness to
learn from past accidents and is well placed to respond to any accident in the
Great Australian Bight in the unlikely event that this should occur.
Conclusion
1.102
We support oil and gas exploration in the Great Australian Bight subject
to continued strong oversight by NOPSEMA.
Senator Linda Reynolds CSC Senator
Chris Back
Deputy Chair Senator
for Western Australia
Senator for Western Australia
Senator Alex Gallacher
Senator for South Australia
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