Bills Digest No.
32, 2021–22
PDF version [569KB]
Dr Emily Gibson
Science, Technology, Environment and Resources Section
19
November 2021
Contents
Glossary
Purpose and Structure of the Bills
Background
Committee consideration
Policy position of non-government
parties/independents
Position of major interest groups
Financial implications
Statement of Compatibility with Human
Rights
Key issues and provisions
Date introduced: 20
October 2021
House: House of
Representatives
Portfolio: Treasury
Commencement: The Offshore Petroleum (Laminaria and Corallina
Decommissioning Cost Recovery Levy) Bill 2021 commences on the day after Royal
Assent. The Treasury Amendment (Laminaria and Corallina Decommissioning Cost
Recovery Levy) Bill 2021 commences on the same day as the Offshore Petroleum
(Laminaria and Corallina Decommissioning Cost Recovery Levy) Bill 2021.
Links: The links to the Offshore
Petroleum (Laminaria and Corallina Decommissioning Cost Recovery Levy) Bill
2021, the Treasury
Laws Amendment (Laminaria and Corallina Decommissioning Cost Recovery Levy)
Bill 2021, their second reading speeches and Explanatory Memoranda can be
found on the Bills’ home pages, or through the Australian
Parliament website.
When Bills have been passed and have received Royal Assent,
they become Acts, which can be found at the Federal Register of Legislation
website.
All hyperlinks in this Bills Digest are correct as
at November 2021.
Glossary
Purpose and
Structure of the Bills
The Offshore
Petroleum (Laminaria and Corallina Decommissioning Cost Recovery Levy) Bill
2021 (the Main Bill) introduces a temporary levy on offshore petroleum
production to recover the Commonwealth’s costs of decommissioning the Northern
Endeavour, the Laminaria and Corallina oil fields and associated
infrastructure.
The Treasury
Laws Amendment (Laminaria and Corallina Decommissioning Cost Recovery Levy Bill
2021 (the Treasury Laws Amendment Bill) amends
three tax Acts to specify certain administrative features relating to the
Laminaria and Corallina cost recovery levy, including the requirement that the
levy is payable to the Commissioner of Taxation annually.
The details of the levy and the proposed amendments to the
tax Acts are explained in more detail in the ‘Key issues and provisions’
section of this Digest.
Background
Regulation of offshore petroleum
production
The regulation of offshore petroleum and greenhouse gas
storage in Australian waters is divided between the Commonwealth Government and
state and territory governments. According to the Offshore Constitutional
Settlement (OCS), 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).[1]
The Commonwealth has responsibility for ‘offshore areas’ (those beyond three
nautical miles).[2]
The Offshore Petroleum
and Greenhouse Gas Storage Act 2006 (OPGGS Act) outlines the
legal framework for exploration and recovery of petroleum and GHG activities in
Commonwealth waters. There are a number of Regulations made under the OPGGS
Act dealing with a range of issues such as levies, safety and the
environment.[3]
Under this framework, the Australian Government, together with the relevant
state and territory governments, administers the offshore regulatory regime
through ‘Joint
Authority’ arrangements.[4]
The Joint Authorities are decision makers under the OPGGS Act and their
powers include the release of offshore petroleum exploration areas, variation
of title conditions and resource management.[5]
Th OPGGS Act also establishes the National Offshore
Petroleum Titles Administrator (NOPTA) and the National Offshore Petroleum
Safety and Environmental Management Authority (NOPSEMA).[6] Under the OPGGS Act,
NOPTA is responsible for titles administration and data management functions in
relation to offshore petroleum and GHG activities in Commonwealth waters.[7] NOPSEMA has
functions relating to occupational health and safety (OHS) of offshore
petroleum facilities and GHG storage activities, as well as the structural
integrity of facilities, wells and well‑related equipment and
environmental management.[8]
More information on the arrangements and GHG storage can be found in relevant
Bills Digests.[9]
Decommissioning framework
The oil and gas industry has operated in Australia for
over 50 years and is continuing to evolve. Decommissioning is a normal part of
the project lifecycle. The current decommissioning liability for Australia’s
onshore and offshore petroleum industry is estimated at US$49 billion
(AU$60 billion) over the next 30-50 years.[10] There is thus a need to
ensure that the governing framework remains current, relevant and able to
respond to future decommissioning challenges.
The requirements for decommissioning offshore oil and gas
projects are predominantly contained in the OPGGS Act and the related Regulations,
although some requirements are located in other Commonwealth and state
legislation.[11]
In order to clarify the application, operation and interaction between those
components of the Commonwealth requirements for decommissioning, the Department
of Industry, Science, Energy and Resources (DISER) released the Offshore
Petroleum Decommissioning Guideline (the Guideline) in January 2018.[12]
As set out by the Guideline, the OPGGS Act outlines
the obligation to remove disused property from the title area and what
requirements must be met before the Joint Authority will consent to the
surrender of a petroleum title. The Regulations detail the approvals that must
be sought to decommission infrastructure.[13]
Some of the key provisions in the OPGGS Act
include:
- removal, maintenance and repair of property
- surrender of titles
- power to issue remedial directions to current and former
titleholders.[14]
In early September 2021 the OPGGS Act was amended
by the Offshore
Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and other
Measures) Act 2021 to strengthen the decommissioning framework.[15] The amendments
(among other things):
- provide for greater oversight of changes in control of
titleholders (such as through a corporate merger, acquisition or liquidation),
including penalties for failing to seek approval of changes in control or
attempting to avoid liability
- expand existing powers to ‘call back’ previous titleholders to
decommission infrastructure and remediate the marine environment in the title
area where the current or immediate former title holder is unable to do so
(known as ‘trailing liability’).[16]
The amendments have not yet commenced. See the Bills
Digest for more information on the changes.
Collapse of the NOGA Group of
Companies and the Northern Endeavour
The changes to the decommissioning framework were prompted
by the collapse of the Northern Oil & Gas Australia Group of Companies
(NOGA Group), a review of the circumstances leading to that collapse (the Walker Review),[17] and a review
of the decommissioning framework.[18]
Northern Endeavour and the
Laminaria-Corallina oil fields
The Northern Endeavour is a Floating Production Storage
and Offloading (FPSO) facility. It is permanently moored between the Laminaria
and Corallina (LamCor) oil fields. The oil fields are within two Petroleum
Production licence areas (AC/L5 and WA-18-L) and are located approximately 550
km northwest of Darwin in the Timor Sea (see Figure 1).[19]
Figure 1. Location of the Northern Endeavour
and Laminaria-Corallina oil fields.
Source: ‘Activity –
Northern Endeavour FPSO’, NOPSEMA.
Brief history of petroleum
production in the LamCor oil fields
Woodside Energy Ltd (Woodside) discovered the LamCor oil
fields in 1994 and 1995.[20]
The original production titleholders were Woodside/Shell/BHP for AC/L5 and BHP
for WA-18-L. Production from both fields commenced in November 1999, with
Woodside operating the Northern Endeavour FPSO, coupled to wells via subsea
infrastructure situated in the AC/L5 area. The LamCor oil fields were
originally estimated to contain 317 million standard barrels of oil (MMbbl),
and peak production was 180,000 bbl/day. The Northern Endeavour had a storage
capacity of 1.4 MMbbl.[21]
By 2015, the titleholder for AC/L5 was a joint venture of
Woodside and Talisman Oil & Gas Pty Ltd (Talisman), with Woodside owning
and operating the FPSO, and Talisman the sole titleholder of WA-18-L.[22] Production had
reduced to around 2 per cent of peak production rates. Woodside determined that
there were no further viable exploration opportunities within the AC/L5 licence
area and began to plan for the end of field life accordingly.
In July 2015 Woodside commenced the formal decommissioning
phase for LamCor, announcing that it was seeking environmental approval from
NOPSEMA for its decommissioning proposals.[23]
Northern Oil & Gas Australia
Group of Companies
The Northern Oil & Gas Australia Group of Companies
(NOGA Group) comprises four entities, a holding company and three subsidiaries.
The Group had a sole director, who had previous interests in onshore gas
production.[24]
The NOGA Group believed that it could continue commercial
production in the Lam-Cor oil fields and on 29 September 2015 entered into the
Laminaria-Corallina Sale Agreement (the LamCor Agreement) in which the NOGA
Group acquired Woodside and Talisman’s interests in the Northern Endeavour and
the LamCor oil fields.[25]
While the financial terms of the agreement remain confidential, it has been
reported that Woodside paid the NOGA Group US$16.5 million in cash and $5.4
million in services to take over the assets.[26]
Intervention by NOPSEMA and the Government’s
response
From shortly after the NOGA Group took control of the
Northern Endeavour and LamCor oil fields, NOPSEMA developed concerns about the
ability of NOGA, together with Upstream Production Solutions Pty Ltd (UPS)
(whom the NOGA Group had contacted to manage the FPSO), to satisfy safety and
environmental obligations. These concerns included serious corrosion issues
affecting the FPSO. Over the following three years, NOPSEMA issued two
Prohibitions Notices, three Improvement Notices, four General Directions and
four requests to revise permissioning documents.[27]
On 18 September 2019, NOPSEMA determined not to lift the
Prohibition Notice and General Direction that were in place at that time and
required that production cease until the identified issues were remedied. Two
days later, the NOGA Group went into voluntary administration.[28]
A General
Direction issued by NOPSEMA to the Administrators on 27 September 2019
required the Administrators to immediately develop and implement a plan to
ensure that the Northern Endeavour could enter an extended state of
non-production, such that the health and safety of persons at or near the
facility are protected, environmental impacts are minimised, and the facility
is secured.[29]
On 7 February 2020 the NOGA Group was placed into
liquidation[30]
and the liquidator disclaimed the Petroleum Production Licences, the FPSO, and
all associated infrastructure.[31]
NOPSEMA indicates that, from this point in time, the
Northern Endeavour, associated infrastructure and petroleum activity are no
longer being regulated under the OPGGS framework because there is no
registered title holder or operator.[32]
Importantly:
- the titleholder is the regulated entity under the OPGGS
Act; that is, the titleholder must comply with the requirements of the Act
and can be issued notices and directions by NOPSEMA or NOPTA
- the titleholder is the regulated entity under the OPGGS (Environment)
Regulations 2009; that is, the titleholder must have and comply with an
accepted environment plan prior to undertaking any offshore activities[33]
- the titleholder and operator are the regulated
entities under the OPGGS
(Safety) Regulations 2009; that is, the titleholder and operator have
general and specific occupational health and safety duties, and responsibility
for well integrity, and the operator prepares and implements the safety case
for the offshore facility.[34]
On 14 February 2020 the Minister for Resources, Keith
Pitt, reported
the Government had established the Northern Endeavour Temporary Operations
Program under the Industry
Research and Development Act 1986 to maintain the FPSO in lighthouse
mode, secure the facility and associated wells, and undertake required
operational activities (hereafter ‘lighthouse mode’).[35] The Government allocated
$75.433 million over two years to the program.[36]
On 17 February 2020 the Minister for Resources announced
that the Government had engaged UPS to operate and maintain the FPSO in
lighthouse mode.[37]
On 23 April 2020, the Minister for Resources announced
an extension of UPS’s engagement and that the Government had commissioned Steve
Walker to undertake an Independent Review into the Circumstances Leading to
the Administration and Liquidation of Northern Oil and Gas Australia (NOGA)
(Walker Review).[38] The Walker Review
was delivered to the Government on 9 June 2020 and provides a comprehensive
overview of the circumstances leading to the NOGA Group going into liquidation
and makes a number of recommendations.
On 31 July 2020, the Minister for the Environment, Sussan
Ley, issued an Exemption
under section 158 of the Environment Protection and Biodiversity Conservation
Act 1999, allowing the Commonwealth, as represented by DISER and those
acting on behalf of DISER, to undertake ‘lighthouse operations’ without an
approval under the EPBC Act until 31 December 2021.[39] This exemption was required
because activities undertaken in the Commonwealth marine area require approval
under the EPBC Act. Petroleum activities assessed by NOPSEMA’s
environmental management authorisation process under the OPGGS Act do
not require approval under the EPBC Act.[40] However, as noted above the
FPSO and associated infrastructure are no longer regulated under that Act.
On 6 August 2020, the Minister for Resources announced
that Woodside was ‘providing expert advice on what will be required to
decommission and remediate the facility and fields, if the Government proceeds
with that option’.[41]
It was later revealed that Woodside’s limited tender contract was valued at
$8.8 million.[42]
On 14 December 2020, the Minister for Resources announced
that the Government was ‘moving to decommission the Northern Endeavour ... and
associated oil fields to remove potential risks to the environment’.[43] At the same time,
the Minister announced that the Government had opened consultations on a
revised decommissioning policy framework.
To 22 April 2021, seven contracts relating to the Northern
Endeavour decommissioning totalling $231.4 million had been awarded, including
financial and insurance services, operations and maintenance services,
membership or licensing fees, professional advice and business facilitation
services.[44]
The largest portion of the funds ($209.3 million) relates to contracts with UPS
to maintain the facility in lighthouse mode, remedial works and preparation for
decommissioning.[45]
On 1 July 2021, the Minister for Resources announced
the Government had ‘released a Request for Expressions of Interest (REOI) for
Phase 1 works to decommission the Northern Endeavour’ FPSO.[46]
On 28 September 2021, the Minister for the Environment
issued a revised Exemption
under section 158 of the EPBC Act, exempting the Commonwealth from the
requirement to obtain an approval under the EPBC Act for ‘the taking of
“lighthouse operations” and “short-term well injection”’ activities until 31
December 2022.[47]
DISER’s submission to the Decommissioning Cost Recovery
Levy Inquiry (see below) states that the Commonwealth does not hold legal
ownership of the FPSO and associated infrastructure.[48] DISER has further indicated
that it is seeking to ‘emulate’ the requirements of the OPGGS framework
through its contract with UPS.[49]
The Commonwealth is currently a party to legal proceedings
relating to the Northern Endeavour.[50]
Government announcements about
the Laminaria-Corallina recovery costs levy
On 11 May 2021, the Minister for Resources, Keith Pitt, announced
‘a temporary levy on offshore petroleum production to fund decommissioning and
remediation works in the Laminaria-Corallina oilfields and associated
infrastructure’ as part of the 2021-22 Budget.[51]
The levy was intended to ‘ensure taxpayers aren’t footing the bill’.[52] The budget
measure indicates that ‘the levy will terminate on 30 June of the year in which
all costs associated with the decommissioning have been recovered’,[53] however, no
further information is provided as to when that may be.
Treasury and DISER undertook targeted consultation in June
and July of 2021 and DISER subsequently released a consultation
paper on the Laminaria-Corallina oilfields decommissioning levy on 24 June
2021.[54]
Treasury also released an Exposure Draft of both Bills and Explanatory
Materials.[55]
Submissions do not appear to be publicly available.
The decommissioning process is described as occurring in
three distinct phases:
- Phase 1: decommissioning and disconnection of the facility from
the subsea equipment
- Phase 2: permanent plugging and abandonment of wells
- Phase 3: removal of subsea infrastructure and remediation.[56]
The Government has previously declined to provide an
estimate of the full cost of decommissioning the Northern Endeavour and Lam-Cor
oil fields.[57]
Committee
consideration
Senate
Economics Legislation Committee
The Bills have been referred to the Senate Standing
Committee on Economics’ Economics Legislation Committee for inquiry and report
by 18 November 2021. The Committee held one
public hearing on 8 November and received 14
written submissions.[58]
Submissions highlight a number of similar issues and are discussed in the
‘Positions of major interest groups’ and in the ‘Key provisions’ sections of
this Digest.
The Senate Committee’s report
was released on 18 November 2021.[59]
The Committee noted the ‘broad support’ for the levy and recommended the Bills
be passed without further amendment.[60]
The committee is satisfied that the bills will deliver on
their intent with regard to decommissioning the Laminaria-Corallina fields and
associated infrastructure at no cost to the taxpayer, and with the lowest
reasonable practicable burden on industry.[61]
The Australian Labor Party (ALP) and Australian Greens
(the Greens) both contributed additional comment. The ALP Senators supported
the Bills but recommended that the Main Bill be amended ‘to give NOPSEMA a
legislated duty to provide safety and environmental regulatory oversight’ and
to require the Resources Minister to table in Parliament an annual report
providing transparency with respect to plans for and progress on
decommissioning work, and receipts for the levy and anticipated receipts in the
coming year.[62]
The Greens similarly supported the Bills and recommended greater transparency
measures. They also recommended the levy be made permanent and that the
‘government implement a long-term solution to ensure industry covers the full
cost of offshore decommissioning.’[63]
Senate
Standing Committee for the Scrutiny of Bills
At the time of writing this Bills Digest, the Senate
Standing Committee for the Scrutiny of Bills has not yet considered the Bills.
Policy
position of non-government parties/independents
At the time of preparing this Digest, non-government
parties and independents do not appear to have commented directly on the Bills.
Labor Shadow Ministers Madeleine King and Josh Wilson have
previously indicated that ‘Labor will be constructive in its consideration and
engagement with the Government’s proposed reform process, but will hold the
Government to account in this critical area of regulation’.[64]
Independent Senator Rex Patrick has argued that NOPSEMA
acted too soon to shut down the Northern Endeavour and expressed concern that
the Government had not adequately considered other options.[65]
Position of
major interest groups
Major oil producers
It has been reported that major oil producers, including
Chevron Corp, ExxonMobil Corp and Royal Dutch Shell, oppose the levy on the
grounds that they have had nothing to do with the site.[66] Chevron, which anticipates
being the largest payer of the levy, has indicated that it is ‘strongly opposed
to the NOGA levy’.[67]
Woodside—the former owner of the FPSO and associated infrastructure—is reported
to have denied responsibility for the clean-up bill,[68] and to have been working to
present ‘to the government an alternative proposal for the decommissioning’.[69]
The Australian Petroleum Production & Exploration Association
(APPEA), the peak body for Australia’s upstream oil and gas industry, described
the then proposed levy as ‘a terrible precedent’ and suggested there were a
range of other options that wouldn’t risk ‘undermining investment confidence in
the offshore oil and gas industry’.[70]
In June 2021, APPEA described the levy as ‘over the top and extreme’.[71] In evidence to
the Inquiry, APPEA acknowledged that the levy will be imposed and seeks to
ensure its application and scope are confined to the Northern Endeavour
incident.[72]
APPEA also argues that the Government’s policy intent and
associated provisions specifying that the levy is not tax deductible are
inconsistent with the existing tax treatment of decommissioning costs.[73]
Several oil and gas industry related unions have expressed
support for the levy but raise concerns around regulation of safety and
environmental issues, and transparency and reporting.[74] They also argue that the
scope of the levy should be broadened to support the development of domestic
decommissioning capacity and onshore facilities.
Environmental groups
The Wilderness Society is reported to support the
government’s intervention (in taking over the Northern Endeavour), ‘on the
proviso that industry would have to fully reimburse the taxpayer’.[75] The Wilderness
Society and Friends of the Earth have called for the levy to be made permanent
to ‘help address the ongoing risks’ of the substantial outstanding
decommissioning task facing the industry.[76]
Financial
implications
The Explanatory
Memorandum states ‘the impact on receipts of this measure is not for
publication reflecting commercial sensitivities’.[77]
Estimates of the total cost of decommissioning the
Northern Endeavour and associated infrastructure range from $250 million
to over $1 billion.[78]
It was reported in June 2021 that the cost to industry ‘would be $367m a year,
based on Australia’s production of 765 million barrels of oil equivalent’, with
total cost recovery estimated to take up to three years.[79]
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 Bills’ 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 Bills are compatible.[80]
Parliamentary
Joint Committee on Human Rights
The Parliamentary Joint Committee on Human Rights made no
comment on the Bills.[81]
Key issues
and provisions
The Main Bill establishes the Laminaria and Corallina
Decommissioning Cost Recovery Levy (the levy) and the Treasury Laws Amendment
Bill provides the framework in which the levy may be imposed.
Main Bill
What are the Commonwealth’s
total decommissioning costs?
The Main Bill seeks to allow the Commonwealth to recover
the Commonwealth’s total decommissioning cost, defined as ‘the total
amount in dollars of net costs reasonably incurred by the Commonwealth in
relation to the decommissioning-related activities’.[82] Decommissioning-related
activities and decommissioning are defined in clause 6 and
include all activities carried out by, or on behalf of, the Commonwealth that
relate (whether directly or indirectly) to decommissioning the Northern
Endeavour and the wells and subsea infrastructure in the Laminaria and
Corallina oil fields. This includes the operation (in any mode) of the Northern
Endeavour, decommissioning activities, and the maintenance of required
insurances.
The Department of Treasury confirmed in evidence to the
Inquiry that indirect costs include ‘things like legal expenses and
insurances’, as well as departmental costs such as the Northern Endeavour
Taskforce.[83]
Definition of decommissioning
Numerous stakeholders expressed concern that the
definition of decommissioning in the Bill is different from the definition
included in the Exposure
Draft of the Bill and also differs from terminology used in the OPGGS
Act.[84]
While decommissioning is not defined in the OPGGS Act, section 572(3)
requires a title holder to remove ‘all structures..., all equipment and other
property’ from the title area after it stops being used. The Offshore
Petroleum Decommissioning Guideline outlines the Government’s policy
position that complete removal is the base case, unless a titleholder can
demonstrate that an ‘alternative decommissioning approach delivers equal or
better environmental, safety and well integrity outcomes compared to the
complete removal’, and complies with other legislative requirements.[85] Stakeholders
argued that the phrase ‘removal or any other treatment’ (emphasis
reflects change from Exposure Draft) represented a deviation from the base case
and accepted best practice.[86]
Other stakeholders argued that the definition should also refer to recycling of
infrastructure.[87]
When does the levy apply?
Subclause 7(1) provides for the levy to apply in levy
years (financial years), from the beginning of the 2021-22 financial year
through to the end of the 2029-30 financial year (inclusive).
The Department of Treasury indicated ‘that end date [was]
chosen to ensure that the levy is in place and would reasonably be expected to
be a long enough period of time for the Commonwealth to recover its costs’.[88] Stakeholders
argued that the levy should end in a shorter timeframe to provide certainty to
industry and investors, or alternatively should be made permanent.[89]
To whom does the levy apply?
Clause 10 provides that levy applies to leviable
entities, defined as ‘registered holders of a petroleum production
licence at any time during the levy year’.[90]
Petroleum production licences are granted by Joint Authorities under Part 2.4
of the OPGGS Act. At the time of preparing this Bills Digest, there were
94 active petroleum production licences.[91]
Many of the licences are held in a range of partnership arrangements and each
of those entities would be responsible for payment of the levy.
Subclause 11(1) provides that the levy will be
payable on all petroleum recovered at the wellhead during the levy
year under any petroleum production licences held by the entity.
How much is the levy and how is
it determined?
Subclause 11(1) provides that the levy rate
is the lesser of $0.48 per barrel of oil equivalent or a distributed levy
rate, as described below.
Leviable entities will be required to submit an annual
return stating the total barrel of oil equivalent recovered under their petroleum
production licences during the levy year, by 31 December in the
following levy year to the Commissioner of Taxation, and the Commissioner of
Taxation will issue notices of assessment to the entities.[92] The Explanatory Memorandum
states that the Commissioner of Taxation has general administration of these
provisions and general provisions (for example, review of decisions,
enforcement and penalty powers) of the Taxation
Administration Act 1953 apply.[93]
The Department of Treasury indicated that the levy rate
‘represents a judgement about collecting those potential estimated
[decommissioning] costs within a reasonable time frame’.[94]
Reduction of the levy rate and
early termination of the levy
The Main Bill provides for circumstances in which the levy
rate may be reduced, and the levy terminated prior to the 2029-30 financial
year.
Subclause 8(2) allows the responsible Minister to
make a determination, by legislative instrument, specifying the Commonwealth’s
unrecovered costs, being the amount by which the total amount of levy
assessed for previous levy years falls short of the total decommissioning
costs. Proposed paragraph 8(3)(a) provides that the responsible Minister
may only make such a determination if they consider that the application of the
usual levy rate would result in recovery of an amount that exceeds the Commonwealth’s
unrecovered costs. Subclause 11(2) specifies how the distributed
levy rate is calculated.
The Explanatory Memorandum states:
This provides a mechanism to lower the levy rate for a levy
year to avoid the Commonwealth collecting more levy than it costs to undertake
decommissioning activities.[95]
The Explanatory Memorandum states that it is anticipated
that this would only occur ‘during the tail end of the levy’.[96]
Subclause 7(2) allows the responsible Minister to
make a determination, by legislative instrument, that the following financial
year is not a levy year for the purposes of the Act, thus bringing the
levy to an end at the end of the relevant financial year.
The Explanatory Memorandum states:
This limited power for the Resources Minister to terminate
the levy early by way of a legislative instrument is both limited in its
application and necessary and appropriate in these circumstances to ensure the
design of the levy gives effect to the Government’s intention that the levy is
only in place until the Commonwealth has recovered its costs.[97]
Some stakeholders raised concerns about these
responsibilities being held by the Minister.[98]
APPEA suggested that these responsibilities should be executed by the
Australian Tax Office, who should be able to vary the levy as required without
the need for a disallowable legislative instrument and that the levy should
terminate automatically on receipt of the total decommissioning cost.[99]
Transparency and reporting
Numerous stakeholders expressed concern that the Bill did
not contain any measures to ensure transparency and reporting of the
Government’s decommissioning costs, the amount of levy recovered, progress in
decommissioning activities, or identify who would determine when
decommissioning activities are complete.[100]
The ACCR and Offshore Alliance both suggested that the Australian Taxation
Office should be required to release an annual report detailing the financials
of the levy, including the amount collected for each leviable entity each year.[101] They
further suggested that a quarterly report on the decommissioning work,
detailing costs, progress of works and safety or environmental issues, be made
available.[102]
Several stakeholders pointed to the Extractive Industries Transparency
Initiative (EITI) and the existing EITI Multi Stakeholder Group as an
appropriate group to be involved in this work.[103]
Identification of a regulator
Numerous stakeholders outlined concerns about the
inability of NOPSEMA to effectively regulate the FPSO and decommissioning
process.[104]
They argued that the Main Bill should clearly identify the responsible
regulator for environmental and safety issues to ensure that the entities
responsible for lighthouse operations and decommissioning works are held to the
same standards as other industry operators.
Treasury Laws Amendment Bill
The Treasury Laws Amendment Bill amends three tax Acts to
specify certain administrative features relating to the Laminaria and Corallina
decommissioning cost recovery levy. Specifically,
- Items 1-5 amend the Income Tax
Assessment Act 1997 to specify that the levy is non-deductible
- Item 6 amends the Petroleum Resource
Rent Tax Assessment Act 1987 to add payments of the levy to the
list of excluded expenditure, ensuring, amongst other things, that the levy is
an excluded cost for the purposes of calculating upstream and downstream costs
under the residual pricing method and
- Items 7-21 amend the Taxation
Administration Act 1953 to limit the objection period and the
period of review for the levy, specify that the levy is payable to the
Commissioner of Taxation, and ensure that ordinary taxation collection and
recovery provisions apply in relation to the levy.[105]
Item 10 of Schedule 1 of the Bill inserts proposed
paragraph 14ZW(1)(bga) into the Taxation Administration Act 1953
which provides that a leviable entity may lodge an objection to the assessment
of the levy up to 60 days after the assessment has been received.
Item 11 of Schedule 1 of the Bill inserts proposed
Part 3-17 into the Taxation Administration Act 1953, with proposed
Division 125 outlining general provisions relating to the Laminaria and
Corallina decommissioning levy. Proposed subsection 125-10(1) provides
that the levy is due and payable 21 days after the day on which the
Commissioner gives the leviable entity a notice of assessment. Proposed
subsection 125-15(2) provides that the period of review for an assessment
of levy is six months starting on the day on which the Commissioner gives the
leviable entity a notice of assessment.
[1]. ‘Offshore
legislation’, Geoscience Australia, n.d.; ‘Offshore
constitutional settlement’, Attorney-General’s Department, n.d.; ‘Maritime
boundary definitions’, Geoscience Australia, n.d.; Offshore Petroleum
and Greenhouse Gas Storage Act 2006 (OPGGS Act), sections 3‑6.
[2]. Ibid.
[3]. Relevant
Regulations include, for example, the Offshore Petroleum and
Greenhouse Gas Storage (Regulatory Levies) Regulations 2004, the Offshore Petroleum and
Greenhouse Gas Storage (Safety) Regulations 2009, and the Offshore Petroleum and
Greenhouse Gas Storage (Environment) Regulations 2009.
[4]. ‘Regulating
offshore oil and gas in Australian Commonwealth waters’, Department of
Industry, Science, Energy and Resources (DISER), 25 October 2021.
[5]. ‘Joint authorities’,
NOPTA, n.d.
[6]. ‘Legislation
and compliance’, NOPTA, n.d.
[7]. OPGGS
Act, Part 6.10; NOPTA, ‘About
NOPTA’, NOPTA, n.d.
[8]. OPGGS
Act, Part 6.9; ‘About us’,
NOPSEMA, 30 July 2021.
[9]. See,
for example: Sophie Power, ‘Offshore
Petroleum and Greenhouse Gas Storage Amendment (Cross-boundary Greenhouse Gas
Titles and Other Measures) Bill 2019 [and] Offshore Petroleum and Greenhouse
Gas Storage (Regulatory Levies) Amendment (Miscellaneous Measures) Bill 2019’,
Bills Digest, 82, 2019–20, (Canberra: Parliamentary Library, 2020).
[10]. Advisian, A Baseline
Assessment of Australia’s Offshore Oil and Gas Decommissioning Liability,
report prepared for National Energy Resources Australia, (n.p.: NERA, 2021); Australia Oil and
Gas Outlook Report, (Wood Mackenzie, 9 March 2020), p. 14; Senate
Economics Legislation Committee, Answers to Questions on Notice, Department of
Industry, Science, Energy and Resources, Additional Estimates 2020-21, 25 March
2021, Question
AI-29.
[11]. DISER,
Offshore
Petroleum Decommissioning Guideline, version 2, (Canberra: DISER,
February 2020), pp. 14-15.
[12]. Ibid.
[13]. Ibid., pp.
6–12.
[14]. Ibid., pp.
6–8.
[15]. For
more information see: Liz Kenny and Leah Ferris, ‘Offshore
Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other
Measures) Bill 2021 [and] Offshore Petroleum and Greenhouse Gas Storage
(Regulatory Levies) Amendment Bill 2021’, Bills Digest, 6, 2021-22,
(Canberra: Parliamentary Library, 2021).
[16]. Kenny
and Ferris, p. 4.
[17]. Steve
Walker, Review
of the Circumstances that Led to the Administration of the Northern Oil and Gas
Australia (NOGA) Group of Companies, (Canberra: Commonwealth of
Australia, June 2020) (Walker Review); note: the Walker Review was released
under the Freedom
of Information Act 1982, with some redactions.
[18]. ‘Offshore
oil and gas decommissioning framework review’, DISER, last updated 25
October 2021; Offshore Resources Branch, Discussion
Paper – Decommissioning Offshore Petroleum Infrastructure in Commonwealth Waters,
(Canberra: DISER, October 2018).
[19]. Walker
Review, p. 12.
[20]. Walker
Review, p. 12.
[21]. Walker
Review, p. 13.
[22]. Walker
Review, p. 4.
[23]. Walker
Review, pp. 12‑13.
[24]. Walker
Review, pp. 12‑13.
[25]. Walker
Review, p. 14.
[26]. Peter
Milne, ‘Federal
Govt Regulates Poorly and Gets $360M Northern Endeavour Clean-up Bill’, Boiling
Cold (blog), 2 October 2020, p. 2; Georgia Wilkins and Bernard
Keane, ‘Woodside
Pockets Millions From Government to Clean up its Own Mess’, Crikey,
3 September 2020.
[27]. Walker
Review, pp. 4–5.
[28]. Walker
Review, pp. 4-6.
[29]. General
Direction No. 772 Under Section 574 of the OPGGS Act, issued to the
administrators of Timor Sea Oil & Gas Australia Pty Ltd on 27 September
2019.
[30]. Walker
Review, p. 11.
[31]. Notice
of Disclaimer of Onerous Property, Timor Sea Oil & Gas Australia Pty
Ltd, notice under subsection 568A(2) of the Corporations Act
2001, (ASIC: n.p., 7 February 2020).
[32]. Karl
Heiden (Head of Division, Corporate and Financial Assurance, NOPSEMA), Evidence
to the Senate Economics Legislation Committee, Decommissioning Cost Recovery
Levy Inquiry, 8 November 2021, p. 27.
[33]. OPGGS
(Environment) Regulations 2009, sections 6 and 7.
[34]. OPGGS
Act 2006, Schedules 2B and 3 and OPGGS (Safety) Regulations 2009, sections
2.24 and 2.43—2.44. A safety case is essentially a safety management system for
operation of the facility.
[35]. Keith
Pitt (Minister for Resources), ‘Government
moving quickly to secure Northern Endeavour’, media release,
14 February 2020. The Northern Endeavour Temporary Operations Program
is established by the Industry Research and Development (Northern Endeavour
Temporary Operations Program) Instrument 2020 [F2020L00125]
(commenced 15 February 2020), with the Instrument amended [F2020L01611] in
December 2020 (commenced 16 December 2020).
[36]. Explanatory
Statement, Industry Research and Development (Northern Endeavour Temporary
Operations Program) Amendment Instrument 2020, p. 1.
[37]. Keith
Pitt (Minister for Resources), ‘New
Agreement Secures Safety of the Northern Endeavour’, media release,
17 February 2020.
[38]. Keith
Pitt (Minister for Resources), ‘Government
Ensures Security and Safety of Northern Endeavour’, media release,
23 April 2020.
[39]. Exemption
under section 158 of the EPBC Act, granted to the Commonwealth as
represented by DISER, 31 July 2020.
[40]. Notification
of decision to endorse the program to streamline offshore petroleum and
greenhouse gas activity environmental approvals under the EPBC Act,
7 February 2014; Final
approval decision for taking of actions in accordance with an endorsed program
under the Environment Protection and Biodiversity Conservation Act 1999 (Cth)
(EPBC Act): Offshore petroleum and greenhouse gas activities taken in
accordance with the Program Report – Strategic Assessment of the environmental
management authorisation process for petroleum and greenhouse gas storage
activities administered by the National Offshore Petroleum Safety and
Environmental Management Authority under the Offshore Petroleum and Greenhouse
Gas Storage Act 2006 February 2014 (the Program), 27 February 2014.
[41]. Keith
Pitt (Minister for Resources), ‘Update
on the safety of the Northern Endeavour’, media release, 6 August 2020.
[42]. Senate
Economics Legislation Committee, Official
Committee Hansard, 29 October 2020, p. 71.
[43]. Keith
Pitt (Minister for Resources), ‘Northern
Endeavour to be decommissioned’, media release, 14 December 2020.
[44]. Senate
Economics Legislation Committee, Answers to Questions on Notice, Department of
Industry, Science, Energy and Resources, Budget Estimates 2020-21, 25 March
2021, Question
A1-25.
[45]. Senate
Economics Legislation Committee, Official
Committee Hansard, Estimates, 25 March 2021, p. 161.
[46]. Keith
Pitt (Minister for Resources), ‘EOI
released for Phase 1 of Northern Endeavour decommissioning’, media release,
1 July 2021.
[47]. Exemption
under section 158 of the EPBC Act, 28 September 2021.
[48]. DISER,
Submission
to Senate Economics Legislation Committee Inquiry into the Offshore
Petroleum (Laminaria and Corallina Decommissioning Cost Recovery Levy) Bill
2021 [Provisions] and Treasury Laws Amendment (Laminaria and Corallina
Decommissioning Cost Recovery Levy) Bill 2021 [Provisions], 8 November
2021, p. 3.
[49]. Shane
Gaddes (Head of Liquid Fuels and Northern Endeavour Division, DISER), Evidence
to Senate Economics Legislation Committee, Decommissioning Cost Recovery Levy
Inquiry, 8 November 2021, p. 28.
[50]. In
the matter of Timor Sea Oil & Gas Australia Pty Ltd [in liq] [2020]
NSWSC 1832.
[51]. Keith
Pitt (Minister for Resources), ‘Boosting
jobs and maximising growth to secure Australia’s recovery’, media release,
11 May 2021.
[52]. Pitt,
‘Boosting
jobs’.
[53]. Australian
Government, ‘Part
1: receipt measures’, Budget Measures: Budget Paper No. 2: 2021-22,
p. 14.
[54]. Paul
Trotman (Head of Division, Resources Division, DISER), Evidence
to Senate Economics Legislation Committee, Decommissioning Cost Recovery Levy
Inquiry, 8 November 2021, p. 25.
[55]. Treasury
consultation, ‘Laminaria-Corallina
Decommissioning Levy’. The consultation period was 16 to 23 September 2021.
[56]. ‘Northern
Endeavour decommissioning: Expression of Interest’, DISER website, 1 July
2021.
[57]. Senate
Economics Legislation Committee, Answers to Questions on Notice, DISER, Budget
Estimates 2020-21, 29 October 2020, Question
BI-121.
[58]. ‘Public
Hearings’ and ‘Submissions’,
Senate Standing Committee on Economics, Inquiry into the Offshore Petroleum
(Laminaria and Corallina Decommissioning Cost Recovery Levy) Bill 2021
[Provisions] and Treasury Laws Amendment (Laminaria and Corallina
Decommissioning Cost Recovery Levy) Bill 2021 [Provisions].
[59]. Senate
Economics Legislation Committee, Inquiry
into the Offshore Petroleum (Laminaria and Corallina Decommissioning Cost
Recovery Levy) Bill 2021 [Provisions] and Treasury Laws Amendment (Laminaria
and Corallina Decommissioning Cost Recovery Levy) Bill 2021 [Provisions] (Inquiry
Report), November 2021.
[60]. Senate
Economics Legislation Committee, Inquiry Report, pp. 44-45.
[61]. Senate
Economics Legislation Committee, Inquiry Report, p. 45.
[62]. Senate
Economics Legislation Committee, Inquiry Report, pp. 51-53.
[63]. Senate
Economics Legislation Committee, Inquiry Report, pp. 55-58.
[64]. Madeleine
King and Josh Wilson, ‘Govt
acknowledges oil & gas regulatory failure after $200M liability falls on
Australian taxpayer’, joint media release, 9 April 2021.
[65]. Ben
Butler, ‘Oil
and Gas Industry Fights Morrison Government Levy of up to $1bn to Decommission Rig’,
The Guardian, 12 May 2021; Senate Economics Legislation
Committee, Official
Committee Hansard, Estimates, 4 June 2021, pp. 68-71.
[66]. Perry
Williams, ‘Anger
over Proposed Change: Energy Giants Hit With $1bn Clean-up Tax’, The
Australian, 30 June 2021, p. 13; Sonali Paul, ‘Woodside,
Oil Majors, Work to Overturn $723M Timor Sea Field Decommissioning Levy’, Offshore
Engineer, 27 August 2021.
[67]. Chevron
Australia, Submission
to the Decommissioning Cost Recovery Levy Inquiry, 8 November 2021, pp.
1–2.
[68]. Butler,
‘Oil
and gas industry fights Morrison Government’.
[69]. Sonali Paul, ‘Woodside,
Oil Majors, Work to Overturn $723M Timor Sea Field Decommissioning Levy’.
[70]. APPEA,
‘Federal
Budget – Some Ticks But New Levy a Blow to Australian Jobs’, media release,
11 May 2021.
[71]. APPEA, ‘New
NOGA Levy is extreme’, media release, 29 June 2021.
[72]. Andrew
McConville (Chief Executive, APPEA), Evidence
to Senate Economics Legislation Committee, Decommissioning Cost Recovery Levy
Inquiry, 8 November 2021, pp. 12‑14.
[73]. APPEA,
Submission
to the Decommissioning Cost Recovery Levy Inquiry, 8 November 2021,
p. 6.
[74]. Offshore
Alliance, Submission
to the Decommissioning Cost Recovery Levy Inquiry, 5 November 2021; see
generally: Economics Legislation Committee, Proof
Committee Hansard, 8 November 2021, pp. 1‑7.
[75]. Butler,
‘Oil
and Gas Industry Fights Morrison Government’.
[76]. Peter
Milne, ‘Oil
and gas producers to start paying up to $1B to decommission the Northern
Endeavour’, Boiling Cold (blog), 29 June 2021; Wilderness Society, Submission
to the Decommissioning Cost Recovery Levy Inquiry, November 2021, p. 4;
Friends of the Earth, Submission
to the Decommissioning Cost Recovery Levy Inquiry, n.d., p. 2.
[77]. Explanatory
Memorandum, Offshore Petroleum (Laminaria and Corallina Decommissioning
Cost Recovery Levy) Bill 2021 [and] Treasury Laws Amendment (Laminaria and
Corallina Decommissioning Cost Recovery Levy) Bill 2021, p. 1.
[78]. Sean
Smith, ‘Abandoned
ex-Woodside ship to cost taxpayers $200m’, The West Australian, 24
December 2020; Perry Williams, ‘Anger
over proposed change: Energy giants hit with $1bn clean-up tax’, Australian,
30 June 2021, p. 13.
[79]. Williams,
‘Anger’.
[80]. The
Statement of Compatibility with Human Rights can be found at page 11 of the Explanatory
Memorandum to the Bills.
[81]. Parliamentary
Joint Committee on Human Rights (PJCHR), Human
rights scrutiny report, 13, 2021, (10 November 2021): 33.
[82]. Clause
6.
[83]. Simon
Winckler (Director, Special Tax Regimes, Treasury), Evidence
to the Senate Economics Legislation Committee, Decommissioning Cost Recovery
Levy Inquiry, 8 November 2021, p. 36; see also: Treasury, Answer to
Question on Notice, Levy
cost coverage, 8 November 2021.
[84]. Wilderness
Society, Submission to the Inquiry, p. 3; Offshore Alliance, Submission to the
Inquiry, pp. 15‑16; Australian Centre for Corporate Responsibility
(ACCR), Submission
to the Inquiry, 8 November 2021, p. 2.
[85]. DISER,
Offshore
Petroleum Decommissioning Guideline, p. 4.
[86]. Wilderness
Society, Submission to the Inquiry, p. 3; Offshore Alliance, Submission to the
Inquiry, pp. 15-16.
[87]. Offshore
Alliance, Submission to the Inquiry, p. 16; ACCR, Submission to the Inquiry, p.
3.
[88]. Winckler,
Evidence to the Inquiry, p. 33.
[89]. Submissions
to the Inquiry: APPEA, p. 2; Wilderness Society, p. 4; Friends of the Earth, p.
2; The Australia Institute, 8 November 2021, p. 7.
[90]. Clauses
6 and 10.
[91]. ‘NEATS Public Portal’, NOPTA,
Title search for ‘Production Licence’, filtered for active licences; as at 19
November 2021.
[92]. Treasury
Laws Amendment Bill, item 11 of Schedule 1; Explanatory
Memorandum, pp. 7‑8.
[93]. Explanatory
Memorandum, p. 8.
[94]. Winckler,
Evidence to the Inquiry, p. 33.
[95]. Explanatory
Memorandum, 6.
[96]. Explanatory
Memorandum, p. 6.
[97]. Explanatory
Memorandum, p. 7.
[98]. Offshore
Alliance, Submission to the Inquiry, p. 18; APPEA, Submission to the Inquiry,
p. 4.
[99]. APPEA,
Submission to the Inquiry, p. 4.
[100]. Submissions
to the Inquiry: Wilderness Society, p. 3; Offshore Alliance, pp. 20‑21;
APPEA, p. 5; Australasian Centre for Corporate Responsibility (ACCR), p. 3;
Jubilee Australia Research Centre, p. 3; Publish What You Pay, pp. 2‑3;
The Australia Institute, pp. 7‑8.
[101]. ACCR,
Submission to the Inquiry, p. 3; Offshore Alliance, Submission to the Inquiry,
pp. 20‑21.
[102]. ACCR,
Submission to the Inquiry, p. 3; Offshore Alliance, Submission to the Inquiry,
pp. 20‑21.
[103]. The
Australia Institute, Submission to the Inquiry, p. 8; Publish What You Pay,
Submission to the Inquiry, pp. 2‑3.
[104]. Taylor
Rundell (National Economist, Australian Workers Union), Evidence
to the Senate Economics Legislation Committee, Decommissioning Cost Recovery
Levy Inquiry, 8 November 2021, 5; Offshore Alliance, Submission to the
Inquiry, pp. 13‑14; ACCR, Submission to the Inquiry, p. 3; Jubilee
Australian Research Centre, Submission to the Inquiry, p. 4.
[105]. Explanatory
Memorandum, Offshore Petroleum (Laminaria and
Corallina Decommissioning Cost Recovery Levy) Bill 2021 [and] Treasury Laws
Amendment (Laminaria and Corallina Decommissioning Cost Recovery Levy) Bill
2021, p. 4.
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