Introductory Info

Date introduced: 2 September 2021
House: House of Representatives
Portfolio: Industry, Science, Energy and Resources
Commencement: The Offshore Electricity Infrastructure Bill 2021 commences on the earlier of Proclamation or six months after Royal Assent. The Offshore Electricity Infrastructure (Regulatory Levies) Bill 2021 commences on the same date as the Offshore Electricity Infrastructure Bill 2021.

Purpose of the Bills

The purpose of the Offshore Electricity Infrastructure Bill 2021 and the Offshore Electricity Infrastructure (Regulatory Levies Bill) is to support the development of an offshore electricity sector in Commonwealth waters.

The Offshore Electricity Infrastructure Bill 2021 (the Main Bill) establishes a regulatory framework to enable the construction, installation, commissioning, operation, maintenance, and decommissioning of offshore electricity infrastructure (collectively, offshore infrastructure activities) in the Commonwealth offshore area.

The Main Bill proposes to do this through:

• prohibiting unauthorised offshore infrastructure activities in the Commonwealth offshore area
• permitting the Minister to declare specified areas suitable for offshore infrastructure activities
• requiring the establishment of a licensing scheme and allowing the Minister to grant various kinds of licences authorising offshore infrastructure activities in specified areas
• providing for the protection of offshore electricity infrastructure (OEI) in the Commonwealth offshore area
• establishing the statutory authorities to administer and regulate the framework
• providing for compliance and enforcement of the regulatory framework and
• providing for the protection of worker safety through modified application of the Work Health and Safety Act 2011 (WHS Act).

The Offshore Electricity Infrastructure (Regulatory Levies) Bill 2021 (the Regulatory Levies Bill) establishes an offshore electricity infrastructure levy to be imposed on industry, with details to be set out in future regulations.

Structure of the Bills

The Main Bill is divided into eight chapters:[1]

• Chapter 1: sets out the scope and object of the Act, including relevant definitions
• Chapter 2: outlines which offshore electricity infrastructure activities are prohibited and outlines the process for the Minister to declare areas as suitable for offshore renewable energy infrastructure
• Chapter 3: allows for the establishing of a licensing scheme and the granting of four different licences by the Minister, as well as changes to licence holders
• Chapter 4: requires licence holders to have a management plan approved, sets out the obligations of licence holders with respect to decommissioning and remediation, and protects offshore energy infrastructure in the Commonwealth offshore area
• Chapter 5: establishes both the Offshore Infrastructure Registrar and the Offshore Infrastructure Regulator and sets out the regulatory framework that will apply to activities conducted under the Act
• Chapter 6: outlines how the WHS Act and other state and territory laws will be applied in the Commonwealth offshore area
• Chapter 7: outlines the data management and information gathering powers of the Registrar, the release of this information, and how information will be used and shared
• Chapter 8: contains miscellaneous provisions, including which Ministerial decisions are subject to review and what matters can be dealt with in the Regulations (which are yet to be made).

The Regulatory Levies Bill:

• provides for the imposition of an offshore electricity infrastructure levy (the levy)
• outlines who the levy will be imposed on and
• provides that the levy or the means for calculating the levy will be prescribed by the Regulations.

The Bills Digest does not examine all provisions of the Main Bill or the Regulatory Levies Bill in detail. Instead, a Quick Guide to each Chapter has been prepared to assist the reader in understanding what the Bills are intended to do and where the relevant provisions are located. For further information, the reader is referred to the Explanatory Memorandum to the relevant Bill.[2]

Background

The regulation of offshore activities in Australian waters is divided between the Commonwealth Government and state and territory governments.

According to the Offshore Constitutional Settlement, the states have responsibility for activities in the zone of ‘coastal waters’ (onshore and as far as three nautical miles seaward of the territorial baseline).[3] The Commonwealth has responsibility for ‘offshore areas’ (those beyond three nautical miles).[4] While there is currently no framework for offshore electricity development, there is a long‑standing framework for the exploration of petroleum and greenhouse gas activities in Commonwealth waters through the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (OPGGS Act).[5]

The Main Bill will establish a regulatory framework for offshore renewable energy infrastructure (OREI) and offshore electricity transmission infrastructure (OETI) (collectively offshore energy infrastructure). While offshore wind farms are often referenced as an example of an OREI project, the definition of OREI in the Main Bill refers to offshore infrastructure which has the primary purpose of supporting activities relating to renewable energy resources. Other examples of technologies which fall within the definition of a renewable energy resource include tidal, wave, rain, solar, and geothermal power.[6] Furthermore, the definition of OETI is not limited to infrastructure which supports renewable energy resources but rather encompasses any offshore infrastructure which stores, transmits or conveys electricity.[7]

Offshore wind potential

The International Renewable Energy Agency (IRENA) predicts that wind and solar energy will lead to the transformation of the global energy sector, with wind supplying more than one-third of total electricity demand by 2050.[8]

Offshore wind power generation is established in a number of other regions, with the UK, China and Germany accounting for over 70 per cent of the cumulative offshore wind installations by the end of 2020.[9] Offshore wind has been described by the International Energy Agency (IEA) as being ‘in a category of its own’, compared to other forms of renewable energy.[10] With the availability of larger turbines and other technology improvements, the EIA has found that new offshore wind projects can operate at the same level of capacity as gas and coal fired power plants in some regions and can operate at double the capacity of solar panels.[11] Geosciences Australia (GA) describes Australia as having ‘some of the best wind resources in the world’.[12]

Figure 1: Gross capacity factors for offshore wind around Australia

Source: C Briggs, M Hemer, P Howard, R Langdon, P Marsh, S Teske and D Carrascosa, Offshore Wind Energy in Australia: Blue Economy Cooperative Research Centre, 2021, p. 4.

This is echoed by recent research which found Australia had strong capacity factors, particularly southern Australia. This research found that the technical offshore wind resource was estimated to be 2,233 GW—an amount far in excess of current and projected electricity demand in Australia.[13] According to the Global Wind Energy Council, ‘exploiting just 2% of Australia’s technical resource would provide nearly double the entire generation capacity of the National Electricity Market’.[14]

Furthermore, diversifying electricity generation sources with offshore wind can reduce the potential risks and constraints of onshore renewable energy.[15] For example, compared to onshore wind infrastructure, offshore wind infrastructure has more consistent breezes, can utilise larger turbines (while having a lower visual impact),[16] and are located near large energy loads and existing transmission infrastructure.[17]

This is particularly important as one of the challenges of the transition to renewable energy in Australia is that many of the new renewable locations are in remote areas where the electricity network capacity is limited.[18] Furthermore, as the National Electricity Market’s (NEM’s) generators become more geographically dispersed, energy losses from the system are rising.[19]

Offshore energy infrastructure projects in Australia

In his second reading speech the Minister for Energy and Emissions Reduction, Angus Taylor, stated that the three most advanced offshore energy projects (Marinus Link, Start of the South and Sun Cable) are estimated to be worth over $10 billion and create over 10,000 direct and indirect jobs during construction.[20]

Since the introduction of the Bills, Sun Cable announced it has received approval from the Indonesian Government to run a cable through its territorial waters to Singapore and the solar farm will now be scaled up by as much as 40 per cent.[21] Star of the South, Australia’s first offshore wind farm, is planned to be located off the south coast of Gippsland.[22] A licence was provided by the Government in 2019 to allow activities to be undertaken to assess the wind resources, conditions and understand whether an offshore farm is technically feasible.[23] However, the licence does not provide the right to build or operate an offshore wind farm, and the project will require a licence under the proposed framework before building the infrastructure.[24]

Committee consideration

Senate Standing Committees on Environment and Communications

Following referral proposals from the Government, the Opposition and the Australian Greens, the provisions of the Main Bill and the Regulatory Levies Bill have been referred to the Senate Environment and Communications Legislation Committee (the Committee) for inquiry and report by 14 October 2021.[25] Details of the inquiry are available on the inquiry homepage and submissions received by the Committee are discussed in further detail in the ‘Key issues and provisions’ section of this Bills Digest.

The Committee tabled its report on 14 October 2021 and recommended that the Bills be passed.[26]

The Committee noted that the Regulations, which will set out significant parts of the offshore electricity infrastructure framework, will not be in place until 2022.[27] This would give the Government the opportunity to consider amending the Act to:

• explicitly recognise the Government's commitment to growing offshore infrastructure that supports electricity exports through amending the objects of the Act[28]
• expanding the consultation requirements for declared areas and incorporating greater transparency and timeframes into the declaration process[29] and
• making technical amendments to the change in control provisions to reflect comments made by stakeholders in their submissions to the Committee.[30]

Senate Standing Committee for the Scrutiny of Bills

At the time of writing the Senate Committee for the Scrutiny of Bills has not yet considered the Bills.

Policy position of non-government parties/independents

The Opposition has indicated support for the Bills with the Shadow Minister for Climate Change and Energy, Chris Bowen, noting:

One example is offshore wind, which I'm very glad the Government has come, very late to the party, and accepted our demands to legalise offshore wind in Australia, it is going to be a jobs bonanza, through much of regional Australia.[31]

In their additional comments to the Committee’s report, Labor Senators recommended that the Government ‘should consider amendments to ensure the Bill's WHS framework is fit-for-purpose and properly implements WHS harmonisation principles’.[32]

The Australian Greens have similarly welcomed the announcement and noted the opportunities for the regions, though reservations with the legislation remain, with their Spokesperson on Climate Emergency and Energy, Adam Bandt, stating:

This legislation could help bring good union jobs to places like the Latrobe Valley and broader Gippsland, like the upcoming Star of the South project will do.

However, Angus Taylor has repeatedly tried to sabotage clean energy development, so we’re referring it to a committee to scrutinise the legislation and hear from the industry.[33]

In their additional comments to the Committee’s report, the Greens recommended four key changes to the Main Bill:

• the merit criteria for feasibility licences, commercial licences and transmission licences include local procurement of labour and goods right through logistics and supply chains
• the power of the Minister to award a feasibility licence on the basis of the applicants’ financial offers should be removed
• the objects of the Main Bill should specifically include a reference to encouraging clean energy exports and
• the workplace health and safety provisions should be fully harmonised with the national workplace health and safety system to ensure the simplicity, safety and security of the offshore clean energy workforce.[34]

At the time of writing, other non-government parties and independents do not appear to have commented on these Bills.

Position of major interest groups

A number of industry and employer groups are largely supportive of the Main Bill, with the Climate Council noting:

Renewable energy is Australia’s key to prosperity, with its ability to create jobs, lower electricity prices and support new industries such as renewable hydrogen and zero carbon manufacturing…

Today’s legislation is a great first step towards helping Australia make the most of our abundant wind and solar resources, and must be accompanied by the right investment and policy support for renewable projects as well as an immediate end to fossil fuel expansion.[35]

Various industry union groups, such as the Maritime Union of Australia (MUA) and Electrical Trades Union of Australia (ETU) have also voiced support for the legislation and flagged the potential opportunities to the economy.[36] The Australian Manufacturing Workers’ Union has called on the Government to introduce a local content mandate, arguing that ‘investment in offshore wind farms should come with a guarantee on local manufacturing jobs coupled with procurement policies that support Australian made’.[37] Weld Australia Chief Executive, Geoff Crittenden, also supports the inclusion of local content requirements, stating:

A procurement policy that mandates local content would see that A$10 billion reinvested back into our economy. It would create thousands of jobs in regional areas like Gippsland, Gladstone and Newcastle — jobs that are absolutely essential to Australia’s post-Covid-19 recovery.[38]

A similar theme was raised in the submissions to the Committee conducting the inquiry into the Bills, with a number of submitters raising the employment and community benefits of offshore renewable energy.[39] The Hunter Jobs Alliance argued:

Effective local content and supply chain development criteria are required as part of the permitting processes to incentivise the development of local downstream manufacturing capacity. Offshore wind construction and maintenance provide substantial job opportunities, but this can be multiplied with the right policy interventions. Significantly, the prospect of large-scale wind offers a consistent pipeline and demand scale to support investment and development of manufacturing supply chains. This has been effectively done at state level, and overseas.[40]

Others have called for an industry package which includes a focus on workforce skills and training,[41] similar to the offshore wind training centres other countries have introduced to support the development of their offshore wind industries.[42] Some submitters argue this is particularly important for:

… workers that are impacted by structural changes in resource and energy production, for example coal fired power and depleted offshore gas. While the timing of individual career transition needs is somewhat unpredictable in terms of structural change and wind development timelines, it is important both for individual workers and regional skill retention that these opportunities are made available.[43]

Other submitters have gone further and called for an industry policy to ensure this emerging industry achieves its potential, including prioritising these technologies through other Australian Government initiatives, like the Low Emissions Technology Roadmap[44] or the National Hydrogen Strategy.[45]

Star of the South Chief Executive, Casper Frost Thorhauge, has also welcomed this announcement, noting:

This legislation is a key step to realising Australia's offshore wind potential and unlocking the associated economic benefits, including providing opportunities for the nation's strong resources and maritime sectors.[46]

Financial implications

The Explanatory Memorandum states there is no financial impact on the Commonwealth associated with either of the Bills. The amendments to the Regulatory Levies Bill are designed to ensure the functions of the Registrar and the Regulator are fully cost recovered.[47]

The Explanatory Memorandum notes:

As part of the 2020/21 Budget process, the Government invested $4.8 million over two years to develop the offshore electricity infrastructure regulatory regime, including preparing the legislative framework and setting up administrative systems and processes. These funds have been distributed between the Department of Industry, Science, Energy and Resources, NOPTA, NOPSEMA and Geoscience Australia for these preparatory purposes.[48]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act.

The Government considers that the Main Bill is compatible because to the extent to which it may limit human rights, those limitations are reasonable, necessary and proportionate.[49] The Government considers that the Regulatory Levies Bill is compatible as it does not raise any human rights issues. [50]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights had no comment on either of the Bills.[51]

Key issues and provisions

Chapter 1 – Preliminary

Key provisions

The application of the provisions in the Main Bill is generally limited to the Commonwealth offshore area which is defined to mean:

• the territorial sea of Australia
• the exclusive economic zone

but does not include the coastal waters (including the airspace over, and the seabed and subsoil beneath, that part of the sea that is included in the coastal waters of a state/territory).[52]

Clause 5 of the Main Bill clarifies that the Commonwealth offshore area would also include Australia’s external territories but would not apply to the Australian Antarctic Territory.[53]

The Commonwealth offshore area under the Main Bill includes the territorial sea, and the exclusive economic zone (EEZ), surrounding each of these external territories.[54] The territorial sea is limited to 12 nautical miles from the low water line along the coast of Australia.[55] The effect of this is that the Commonwealth offshore area under the Main Bill will extend from three nautical miles from the territorial sea baseline to the outer limit of Australia’s EEZ (up to 200 nautical miles from the territorial sea baseline[56]).

Clause 10 provides that offshore renewable energy infrastructure (OREI) is fixed or tethered offshore infrastructure (such as an offshore windfarm) which has one of the following purposes:

1. exploring for one or more renewable energy resources
2. assessing the feasibility of exploiting a renewable energy resource
3. exploiting a renewable energy resource
4. storing, transmitting or conveying a renewable energy product.[57]

Clause 11 provides that offshore electricity transmission infrastructure (ORTE) is fixed or tethered offshore infrastructure (such as an undersea cable and other infrastructure associated with the cable) for storing, transmitting, or conveying electricity (including electricity not generated from renewable resources).[58] To avoid doubt, clause 12 clarifies that a piece of infrastructure may be both OREI and ORTI.

However, the Main Bill provides that the following do not constitute OREI and ORTI:

• an infrastructure facility that is subject to an infrastructure licence under the OPGGS Act
• a facility that is subject to the workplace health and safety obligations under Schedule 3 of the OPGGS Act
• fixed or tethered infrastructure for the purposes of exploring for minerals or recovery of minerals (within the meaning of the Offshore Minerals Act 1994)
• a cable lying on or underneath the seabed of the Commonwealth offshore area that isn’t connected to any place in Australia, or anything else in that offshore area.[59]

Subclause 13(1) defines a renewable energy resource as one of the following from which energy can be obtained:

1. wind and air flow
2. wind‑generated waves
3. tides
4. ocean currents
5. light or heat from the sun
6. rain
7. geothermal heat
8. a resource, event or circumstance prescribed by the regulations for the purposes of this paragraph.[60]

Whilst Regulations may expand the meaning of a renewable energy resource, subclauses 10(3) and 11(3) operate so that offshore gas or oil infrastructure cannot constitute OREI and ORTI.

Stakeholder views

Penelope Crossley, an Associate Professor of Energy and Resources Law at the University of Sydney Law School, advised the Committee in her submission that the definition of ‘renewable energy resource’ differs to not only the existing definition in Australian law but is ‘unusual’ compared to other countries renewable energy laws.[61]

In particular, she states that the inclusion of ‘rain’ in the definition of renewable energy resource is unnecessary as:

To the best of my knowledge there are not any offshore renewable energy projects in the world, either at a commercial scale or in the research and development phase, that use offshore ‘rain’ to generate energy. Conversely, the potential for marine biomass (macro and micro algaes), which can be grown at sea and used to generate energy, is not captured by that definition even though they are arguably ‘renewable energy products’.[62]

The Government has stated in the Explanatory Memorandum that the definition of renewable energy resource is not intended to be fixed and can be varied by amendments to the Regulations:

The regulation making powers in subclauses (2) and (3) are essential, and will allow the framework established by this Bill to adapt to changing renewable energy technologies. Building in adaptability will ensure the framework remains fit for purpose as the offshore industry develops. The regulation making powers will also allow for clarification of types of renewable resources that are suitable under this regime. For example, future regulations may clarify that certain activities such as aquaculture are not considered renewable energy resources.[63]

Chapter 2 – Regulation of offshore infrastructure activities

Key provisions

Prohibition of unauthorised offshore infrastructure activities

Subclause 15(1) provides that a person is prohibited from constructing, installing, commissioning, operating, maintaining or decommissioning either an OREI and ORTI (collectively offshore infrastructure activities) in the Commonwealth offshore area without a licence or other authorisation under the Act. Contravention of subclause 15(1) may be a criminal offence, subject to a maximum penalty of five years imprisonment or give rise to a civil penalty of 3,000 penalty units (currently $666,000).[64]

Minister’s power to declare areas for OREI

Clause 17 allows the Minister to declare, by legislative instrument, that a specified area in the Commonwealth offshore area is a declared area where the Minister is satisfied that:

• a notice proposing to declare the area has been published on the Department’s website in accordance with clause 18
• the notice invites submissions from members of the public on the proposal to declare the specified area and the closing date for submissions has passed
• the Minister has consulted with the Defence Minister and the Minister for Infrastructure, Transport and Regional Development (the relevant Ministers)[65] and
• the Minister is satisfied that the area is suitable for OREI.[66]

In deciding whether an area is suitable for OREI the Minister must consider:

• the potential impacts of the construction, installation, commissioning, operation, maintenance or decommissioning of OREI in the area on other marine users and interests
• any submissions received in accordance with the notice under clause 18
• any advice received as a result of consulting with the relevant Ministers
• Australia’s international obligations in relation to the area and
• any other matters that the Minister considers relevant.[67]

If the Minister is not satisfied that the whole of the proposed area is suitable for OREI, the Minister can either choose not to make a declaration or either:

• limit the declaration to the area which is suitable for OREI or
• impose conditions in accordance with clause 20 which would have the effect of the area being suitable for OREI.[68]

A declaration may provide that it will cease to have effect on a specified day.[69] Otherwise it will remain in force until it is revoked under clause 26. The Minister may vary the terms of the declaration by legislative instrument in accordance with clauses 22 and 23.

Stakeholder Views

A number of stakeholders have sought clarification around how the ministerial declaration process will operate.

In their joint submission to the Committee, the ETU and MUA argued that the process set out in the Main Bill provided no clarity to stakeholders as to when the declaration process would commence or be completed:

Such a system is also inadequate to deal with the incredibly complex planning needed for Australia’s ongoing energy transition. The planning for Australia’s future electricity system is now well underway by the Australian Energy Market Operator, and they have so far identified four Offshore Wind Zones. This planning involves a complex range of matters which any one developer is unlikely to have visibility of, ranging from how the timing and strength of renewable resources correlates with current and projected future demand, the impact of the electrification of industries, and the potential for renewable energy exports, and government planning in all of these areas.[70]

The ACTU supported the recommendations of the ETU and MUA that the Main Bill should be amended to allow ‘a developer, a government electricity planning agency, or a state government to request that the Minister commence the process for declaring an Offshore Electricity Area, and a timeline for when that process will be complete’.[71] The lack of consultation required in the legislation was raised as an issue by the Victorian Government and Friends of the Earth.[72]

The CEC also sought greater clarity around how the Minister will commence a declaration assessment and proposed additional criteria that the Minister must consider before making a declaration:

• robust measurement of wind, wave, sea state, bathometric and geotechnical data
• grid strength, as recent onshore experience for renewable energy projects has highlighted the importance of marginal loss factors, system strength augmentation costs and curtailments to project business cases
• the potential to create adequate infrastructure hubs close to the selected offshore development areas.[73]

The CEC recommended that the Department consider either amending the Main Bill or including the additional criteria in the relevant regulations. The CEC also raised concerns about the broad level of discretion given to the Minister in both making a decision as to whether an area is suitable for OREI and in making a declaration subject to conditions.[74]

Similarly, the Victorian Government flagged that the Main Bill ‘… is not clear what level of environmental or other technical assessments will be undertaken by the Minister prior to declaring an area under the legislation’.[75]

Other stakeholders have recommended that the Federal Minister for the Environment should either be consulted before a declaration is made.[76] Such an inclusion ‘should trigger strategic assessments of environmental conditions’ and contribute to adequate marine planning.[77] This early consideration is expected to avoid the risk of declaring areas that are not environmentally suited for offshore renewable infrastructure and will allow proponents to modify the location or design of their project accordingly.[78]

Chapter 3 – Licensing

Key provisions

As the provisions in Parts 2 and 3 of Chapter 3 are similar to recent amendments to the OPGGS Act, we have not canvassed them in detail and instead refer to the previous Bills Digest which discusses these amendments.[79]

Licences for offshore infrastructure projects

Part 1 of Chapter 3 provides for four types of licences with respect to offshore infrastructure projects:

• a feasibility licence authorises the licence holder to assess the feasibility of an offshore infrastructure project and apply for a commercial licence for the project.[80] The original term of a feasibility licence must be no more than seven years[81] (though this can be extended under clause 37) and the Main Bill allows the Minister to award a feasibility licence on the basis of the applicants’ financial offers (so not first come, first served).[82] However, the Explanatory Memorandum provides that the Minister will only do so when all applications are of similar merit[83]
• a commercial licence authorises the licence holder to carry out an offshore infrastructure project for the purpose of exploiting renewable energy resources.[84] A commercial licence can only be granted to the holder of a feasibility licence.[85] Commercial licences can be granted for up to 40 years, with an ability to extend the term by up to 40 years at a time subject to Ministerial approval[86]
• a research and demonstration licence authorises research into, or demonstration of, OREI or OETI.[87] The Explanatory Memorandum notes that these licences ‘are intended for smaller-scale pilot projects to undertake research, or to test and demonstrate emerging technologies that are not yet commercial (such as wave, tidal or thermal electricity generation)’.[88] Research and demonstration licences will be granted for a maximum of ten years with the possibility of extension but cannot become commercial licences without a feasibility licence first being obtained[89]
• a transmission and infrastructure licence authorises the licence holder to store, transmit or convey electricity (which may or may not be from renewable sources) or a renewable energy product.[90] Importantly however, they also authorise the licence holder to ‘assess the feasibility of storing, transmitting or conveying electricity [which may or may not be from renewable sources] or a renewable energy product in or through the licence area’.[91] The relationship between a feasibility licence and a transmission and infrastructure licence granted for the purpose of assessing the feasibility of transmission infrastructure is not entirely clear, given that it appears that both licences can potentially deal with assessing the feasibility of an offshore infrastructure project related to electricity transmission. Unlike the other kinds of licence, a transmission and infrastructure licence can cover one or more areas outside a declared area.[92] These licences do not have a set term and can instead be issued for the duration of the asset life.[93] An applicant for a transmission licence does not need to be an applicant for, or holder of, a feasibility or commercial licence.[94] This ‘means transmission infrastructure could potentially be developed by third parties who could provide a transmission service to one or more project proponents’.[95]

Applications for each of the licences will be assessed against the following merit criteria (this varies slightly for each different licence):

• whether the eligible person has (or in some cases is likely to have, or be able to arrange to have) the technical and financial capability to carry out the proposed project for the licence
• whether the proposed project is likely to be viable
• whether the applicant is suitable to hold the licence and
• any criteria prescribed by the licensing scheme are satisfied.[96]

The Main Bill provides that the Regulations must prescribe a licensing scheme which may provide further details on:

• matters that may or must be considered in any decision made by the Minister about whether the licence meets the merit criteria
• the suitability of an eligible person to hold a licence to be assessed with regard to the suitability of other persons (including another person that controls the eligible person) and
• procedures for making decisions with respect to whether a licence meets the merit criteria.[97]

It is not clear from the Main Bill or the Explanatory Memorandum how the ‘suitability’ of a person will be assessed and whether this will be based on technical and financial measures or will adopt broader criteria such as a ‘fit and proper person’ test.

Interference with other activities by licence holders

Clause 77 of the Main Bill creates an offence where the activities undertaken by the licence holder interfere with any of the following activities:

• navigation
• exercise of native title rights and interests (under the Native Title Act 1993)
• fishing
• conservation of resources of the sea or the seabed
• activities that are being carried out in accordance with the OPGGS Act or
• activities that someone else is lawfully carrying out

and that interference is greater than is necessary for the reasonable exercise of the licence holder’s rights or obligations under the licence or the Act.

Clause 78 also makes it an offence for a person acting on behalf of the licence holder to interfere with any of the above activities where that interference is greater than necessary for the reasonable exercise of the licence holder’s rights or obligations under the licence or the Act.

Stakeholder comments

As noted by stakeholders, the Government has chosen to leave significant details about how the licensing scheme will operate to the Regulations.

Macquarie Capital, in its submission to the Committee, noted that the following elements of the scheme are yet to be fully explained:

• the role of the Department, NOPTA and/or NOPSEMA in assessing applications
• the licensing scheme including details of the merit-based assessment
• the cost details of the cost components referred to in the Bills
• the need for coordination with state authorities to ensure there is clear legislative route in state waters to ensure clarity on the full regulatory regime for the delivery of the projects.[98]

Other stakeholders raised concerns with the lack of certainty for existing users of the areas subject to licences and whether these users will be given prioritisation rights. The Commonwealth Fisheries Association (CFA) argued ‘that as an industry that operates wholly within offshore waters, Commonwealth commercial fishing operators are potentially the most impacted existing users’ and is of the view that ‘the interests of commercial fishing operators have not been adequately considered’ in the drafting of the Main Bill.[99] The CFA submitted that the Main Bill should allow for consultation and compensation frameworks which involve all impacted parties and that ‘the costs of co-existence should not be borne by existing users’.[100]

Macquarie Capital specifically flagged the need to ensure that different licences for different offshore wind projects do not overlap and referenced the fact that the Main Bill does not currently outline the interactions between offshore renewable infrastructure and offshore oil and gas.[101]

The CEC similarly noted the lack of detail regarding the cost recovery settings and argued that any costs to industry should be reasonable, equitable and not prohibitive.[102] The CEC also warned that overly burdensome fees that are not clearly linked to cost recovery may disincentivise project development.[103]

Other stakeholders submitted that that the merit criteria for the various licences should be expanded to focus on regional job creation and promoting local industry.

The ACTU argued:

The Purpose and the Merit Criteria for the Feasibility Licence (s. 30 and 34), the Commercial Licence (s. 39 and 44) and the Transmission Licence (s. 58 and 62) should include creating employment and promoting local industry, manufacturing and jobs; increasing employment and income opportunities for First Nations communities; and contributing to a just transition for impacted energy workers and communities. The Licensing scheme created by regulation (s.29) should support these objectives in greater detail.[104]

Friends of the Earth Australia suggested that the Government consider the Victorian Renewable Energy Auction scheme as an ‘instructive alternative’:

In order to be awarded contracts under this scheme, developers submitting bids must demonstrate assessment criteria that includes community benefits, use of local procurement and contribution to local economic development. This has led to strengthening of local supply chains, for example the conversion of the former Ford factory in Geelong to a wind turbine assembly hub, and greater use of domestic suppliers of wind turbine towers Keppel Prince in Portland. These measures help maximise the benefits of renewable energy for local job creation. Criteria for community benefits has also helped establish best practice community engagement in the sector. This can and should be replicated for the development of offshore renewable energy projects in Commonwealth Waters.[105]

Other stakeholders supported the inclusion of traditional owner’s consent and participation in the merit criteria.[106]

Stakeholders were also concerned about how clauses 77 and 78 of the Main Bill would limit the rights of native title holders:

The OEI Bill (s.77 and s.78) prohibits Licence holders and people acting on their behalf from interfering with the exercise of Native Title rights and interests. However, 77 d) and 78 d) allow interference if it is necessary for ‘the reasonable exercise of the person’s rights under this Act or the licence’ or ‘the performance of the person’s obligations under this Act or the licence.’ Interference with the exercise of Native Title rights and interests should not be permitted by the legislation and 77 d) and 78 d) should not apply to Native Title rights and interests.[107]

Other stakeholders warned that the vague wording regarding what is considered ‘reasonable’ and ‘necessary’ could see projects approved that conflict with Native Title Rights.[108]

Chapter 4 – Management and protection of infrastructure

Key provisions

Management plans

As with the granting of licences, the process for having management plans approved by the Regulator will be set out in the Regulations.[109]

However, subclause 115(1) lists the matters that must be addressed in a management plan:

• how the licence holder is to carry out offshore infrastructure activities and other activities under the licence
• any matters that the conditions of the licence require to be addressed in the plan
• environmental management, including how the licence holder is to comply with Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act) obligations in relation to the licence activities
• how the licence holder is complying with, or is to comply with, their obligations to maintain and remove property (set out in clause 116 of the Main Bill)
• how the licence holder is complying with, or is to comply with, their obligations to provide financial security to the Regulator (clauses 117 and 118)
• requirements to keep certain records
• other matters that the Act requires to be addressed in a management plan
• other matters prescribed by the licensing scheme and
• other matters required by the Regulator.

Subclauses 115(2) and (3) set out matters that the licensing scheme or the Regulator may require the management plan to address:

• the design, integrity and maintenance of licence infrastructure
• work health and safety
• emergency management
• the making and keeping of records
• requirements to consult with any person that may be affected by activities carried out under the licence, and the outcomes of any such consultation
• monitoring, auditing, managing and reviewing the management plan and
• any other matters the Regulator considers appropriate.

Decommissioning of offshore infrastructure activities

Subclause 117(1) requires licence holders to provide the Commonwealth with financial security sufficient to pay any costs, expenses and liabilities that may arise due to the:

• decommissioning of licence infrastructure
• the removal of equipment and other property from the licence area or vacated area[110]
• the remediation of the licence area, vacated area or any other area affected by activities carried out under the licence.

Not only does the Main Bill envision that the Regulator may refuse to approve a management plan where the financial security has not been paid,[111] a person who fails to comply with this requirement will also have committed an offence and be liable for a maximum criminal penalty of 300 penalty units (a fine of $66,600).[112] Alternatively, person may be liable to pay a civil penalty of 480 penalty units ($106,560).[113]

Clause 119 allows the Commonwealth to use the financial security paid by the licence holder to cover its ‘costs, expenses, liability and debts’. This is not just limited to expenses incurred in decommissioning and remediating the site but also includes any levies that remain unpaid.[114]

Protection of infrastructure

Clause 135 makes it an offence for a person to engage in conduct that results in damage or interference to:

• OREI or OETI in the Commonwealth offshore area
• any structure or vessel in the Commonwealth offshore area that is, or is to be, used in offshore infrastructure activities
• any equipment on, or attached to, such a structure or vessel or
• any operations or activities being carried out, or any works in connection with, such a structure or vessel.

A person who engages in such conduct is liable to a maximum criminal penalty of 10 years imprisonment.[115]

Safety zones

Part 3, Division 3 of the Main Bill allows the Regulator to establish safety zones in the Commonwealth offshore area to protect eligible safety zone infrastructure by prohibiting certain vessels from entering or being present in the safety zone.[116] The provisions are similar to those in Part 6.6 of Chapter 6 of the OPGGS Act which establishes petroleum safety zones and greenhouse gas safety zones.

However, subclause 136(2) of the Main Bill requires the Regulator to determine, by legislative instrument, a safety zone, whereas under the OPGGS Act NOPSEMA is only required to publish a notice in the Government Gazette in order to establish a petroleum or greenhouse gas safety zone.

If a vessel does enter, or remains present, in a safety zone in breach of a determination made under subclause 136(2) the owner or master of the vessel will have committed an offence. The criminal penalty that applies will depend on the fault element in committing the breach, with a maximum penalty of 15 years imprisonment applying to an intentional breach of the safety zone.[117]

Protection zones

Part 3, Division 4 of the Main Bill allows the Regulator to determine protection zones in the Commonwealth offshore area where the Regulator is satisfied that either:

• there is a risk to human safety, or to OREI or OETI, in the protection zone or
• such a risk would arise if OREI or OETI activities were to be carried out in the protection zone in accordance with the management plan

and the determination would avoid or reduce the risk.[118]

The Regulator will be able to prohibit and restrict activities carried out in the protection zone by listing such activities in the determination. Clauses 144 and 145 provide that prohibited and restricted activities can include any activity:

• that involves a serious risk to human safety
• that involves a serious risk of damaging OREI or OETI or
• is specified in the Regulations.[119]

If a person engages in prohibited conduct in a protection zone, or contravenes a restriction imposed on activities in a protection zone, and that conduct is not authorised in accordance with a licence or management plan then the person will have committed an offence.[120] The maximum criminal penalty is five years imprisonment and/or a fine of 300 penalty units ($66,600).[121]

Stakeholder comments

Penelope Crossley noted that decommissioning offshore energy infrastructure is expensive and that ‘the costs involved in effectively decommissioning a project change (and normally increase) over the life of the project’.[122] Given the duration of a commercial lease may be up to 40 years, she suggested that the Main Bill be amended to require management plans to be reviewed:

While the draft Bill makes provision for revisions of the Management Plan, the need for periodic revisions should be formalised in the Bill and a strategic asset management approach adopted. Periodic revisions will ensure there is not a shortfall in the Financial Security Reserve at the end of life of the project, and that the Management Plan is adopting industry best practice to meet the relevant environmental standards upon decommissioning.[123]

The CEC welcomed the decommissioning scheme overall, though it highlighted the need to ensure the scheme is carefully designed so that it does not act as a barrier to new projects and thus disincentivise their construction.[124]

A number of stakeholders flagged that the proposed legislation places a greater burden on the decommissioning of offshore infrastructure than what is currently required with respect to fossil fuel infrastructure under the OPGGS Act.[125] The ETU and MUA stated that while offshore energy infrastructure developers are required, as is the case under the OPGGS Act, to remove unused infrastructure:

… the additional requirement in the OEI Bill is that renewable energy developers must ‘provide the Commonwealth with financial security sufficient to pay any costs, expenses and liabilities’ associated with decommissioning, removal and remediation of licence areas sufficient to cover all structures in place at that time (s.117-119). This financial security must be in place before the infrastructure is installed and could include ‘bonds, letters of credit, bank guarantees and other mechanisms’ (Explanatory Memorandum, s.562).

Oil and gas developers are not currently required to put up any financial security up front except to cover the potential costs of oil spills.[126]

Other stakeholders have suggested that there may be other opportunities for offshore infrastructure beyond the end of its useful life and suggested alternatives to decommissioning be considered. For example, some cite the Gulf of Mexico where a number of artificial reefs have been created and the recreational opportunities associated with this.[127] While others argue the need to decommission projects must be absolute, or compensation should be provided to other users of the area.[128]

More broadly, the adequacy of the EPBC Act has been questioned by some stakeholders, with Friends of the Earth flagging:

… an independent review of Australia’s environment protection legislation found that the EPBC Act is outdated and flawed, and native animals and habitats in decline. Strengthening national environment laws is the best way to improve protection of marine species and habitat that could potentially be impacted by offshore renewable energy proposals or any other large energy infrastructure project.[129]

The amendments to the EPBC Act following this aforementioned review are currently under consideration by the Senate.[130]

Other stakeholders consider that the Bills currently fail to meet best practice in terms of environmental protection and recommend the following amendments to the Main Bill:

1. The inclusion of a higher degree of specificity in a Management Plan developed under section 115(1)(c);
2. The inclusion of legislative requirements for discrete marine ecosystems issues relevant to offshore wind under Chapter 4, Part 1, Division 2, including underwater noise and impacts on fish spawning.
3. Adapting Chapter 4, Part 1, Division 2 to include comprehensive environmental monitoring programmes for marine ecosystems prior to project approval.
4. The inclusion of a reference to relevant federal and state legislation that interrelates with the coastal zone and ecosystem in section 115(1).[131]

Chapter 5 – Administration

Chapter 6 – Application of work health and safety laws and other laws

Stakeholder comments

The Maritime Industry of Australia argued that the application of the WHS framework to Australia’s offshore electricity sector ‘creates unnecessary conflict, duplication, inefficiencies and potentially, sub-optimal outcomes from a work health and safety perspective.’[132] Some stakeholders argued that as this is an emerging sector, these inconsistencies may impact the development of WHS practices for the future.[133]

ETU and MUA submitted:

The OEI Bill switches off a number of important sections of the WHS Act, and undermines the opportunity to harmonise WHS systems. No justification is offered for these changes. It appears that the proposed changes to the WHS Act as applied by the OEI Bill seek to bring the WHS Act closer to NOPSEMA’s normal operations in administering the OPGGS Act in the oil and gas industry. While this may be simpler for NOPSEMA to administer and reduce any potential political issues with the oil and gas industry, it increases the complication for offshore renewables operators and workforce as they will have to straddle both the harmonised WHS system in ports and the unharmonized OEI WHS provisions offshore, as well as the [Occupational Health and Safety (Maritime Industry) Act 1993] OHS(MI) Act in between.[134]

Instead, some stakeholders have suggested that those experienced in safety regulators under the WHS Act system should be included in the development of safety Regulations under the Main Bill.[135]

Chapter 7 – Informationb relating to offshore infrastructure

Stakeholder comments

Some stakeholders have raised issues with the collection and use of the data collected, with some arguing that ‘data collection should not be left to the private sector only.’[136] Friends of the Earth, for example, argued that studies undertaken on the marine environment are:

…valuable knowledge that can aid the protection of marine animals and species, and information that should be held in the public interest with the goal of improving conservation outcomes and marine spatial planning.[137]

The Victorian Government submission also supports the expansion of information sharing provisions ‘to better allow for a coordinated approach to assessing submissions on declared areas, applications for licences and regulating the ongoing activities of offshore electricity infrastructure licence holders’.[138]

Chapter 8 – Miscellaneous

Decisions reviewable by the AAT

Clause 297 provides that the following decisions of the Minister are reviewable by the AAT:

• not to grant a commercial licence, research and demonstration licence or a transmission and infrastructure licence
• not to extend a feasibility licence, commercial licence, research and demonstration licence or a transmission and infrastructure licence, after an application by the licence holder
• a decision to extend the end day of a licence in respect of only part of the licence area and
• any decision regarding the transfer, cancellation or refusing to consent to the surrender of a licence.

Under the Administrative Appeals Tribunal Act 1975, ordinarily a person whose interests are affected by a decision may apply for a review of the decision.[139] It appears that the effect of the above is that persons whose interests are affected by a decision to grant or extend a licence for the entire licence area will be unable to apply to have the decision reviewed.

Delegation of legislated power

Part 2 of Chapter 8 of the Main Bill gives the Governor-General the power to make Regulations which may:

• provide for offences[140]
• provide for approved forms[141]
• apply and modify the Regulatory Powers Act[142]
• deal with OREI or OETI that is already in the Commonwealth offshore area prior to the Main Bill receiving Royal Assent.[143]

The Scrutiny of Bills Committee has generally raised concerns about including offence provisions in Regulations instead of primary legislation, particularly where they impose high penalties.[144] Clause 306 of the Main Bill provides that the penalties for offences made under the Regulations cannot exceed a fine of 100 penalty units ($22,200) or a fine of 100 penalty units for each day on which the offence occurs. Given the significant nature of these penalties, it is unclear why these offences cannot be included in the Main Bill, or in later amendments to the Act.

The Scrutiny of Bills Committee has also raised concerns around the use of “Henry VIII” clauses which allow for primary legislation to be amended by delegated legislation.[145] Clause 308 of the Main Bill allows for the Regulations to modify the Regulatory Powers Act as it applies in relation to a provision of the Regulations.[146]

The Explanatory Memorandum states that this provision:

… is necessary in order to ensure that the [Regulatory Powers Act] regime can be adapted to operate effectively in concert with the regulations and to manage complexity arising from the concurrent operation of three regulatory schemes (the Bill, WHS Act and [Regulatory Powers Act]).[147]

Subclause 309(1) of the Main Bill defines pre-existing infrastructure to mean fixed or tethered infrastructure that:

• is in the Commonwealth offshore area at the time the Bill receives Royal Assent (the application time) and
• is being operated at the application time or was operated at any time before the application time and
• would be OREI or OETI if clause 309 was disregarded.[148]

Subclauses 309(2) and (3) provide that while pre-existing infrastructure is not considered to be OREI or OETI, the Regulations may:

• provide that specified provisions of the Main Bill apply, or do not apply, in relation to pre‑existing infrastructure
• provide that OREI or OETI constructed, installed or commissioned in connection with the operation or maintenance (including the replacement) of pre-existing infrastructure is also to be treated as pre-existing infrastructure
• provide that clause 309 ceases to apply in relation to specified pre-existing infrastructure (and that such pre-existing infrastructure is to be treated as OREI or OETI):
• at the end of a specified period after the Bill commences (which may be the entire life of a project that involves pre-existing infrastructure) or
• in specified circumstances
• provide for an eligible person to apply for a licence in relation to pre-existing infrastructure or
• prescribe any matters of a transitional nature relating to pre-existing infrastructure.

The Explanatory Memorandum argues that this delegation of powers is necessary in order for owners of pre-existing infrastructure to be treated fairly:

It is considered that there could be a disadvantage to owners or operators of pre-existing arrangements if they were made subject to new terms and conditions which had not previously been in place. It is appropriate for matters of a detailed transitional nature to be dealt with in delegated instruments to ensure the result is fair and appropriate in particular circumstances.[149]

This suggests that it is not the Government’s intent to apply the provisions of the Main Bill retrospectively to pre-existing infrastructure owners.

Regulatory Levies Bill

Stakeholder comments

The CEC noted the lack of detail regarding the cost recovery settings and argued that any costs to industry should be reasonable, equitable and not prohibitive.[150] The CEC also warned that overly burdensome fees that are not clearly linked to cost recovery may disincentivise project development.[151]

Concluding comments

While stakeholders are broadly supportive of the introduction of a scheme to regulate offshore electricity infrastructure, the Government has chosen to leave significant details about how the scheme will operate to the Regulations. Additionally, there is a concern among a number of stakeholders that more could be done to fully capture the benefits of establishing this industry.