Mr STEPHEN SMITH (9:21 PM) —In speaking in the debate on the Primary Industries and Energy Legislation Amendment Bill (No. 3) 1997 I would like to restrict my remarks to that portion of the bill which amends the Petroleum (Submerged Lands) Act 1967. I note that the member for Richmond (Mr Anthony) described these amendments as effecting a coalition government success. He underlined their importance because they relate to Australia's great petro leum resources industry. He urged their speedy passage in case of adverse consequences in Indonesia, which he hoped, like I am sure all members of the House do, are not for the worse. The second reading speech by the Minister for Customs and Consumer Affairs (Mr Truss) refers to clauses 40 and 41 of the bill in the following terms:

The bill will amend the descriptions of the adjacent areas defined in the Petroleum (Submerged Lands) Act 1997 in respect of Western Australia and Territory of Ashmore and Cartier Islands respectively to make the northern boundaries consistent with the seabed boundaries agreed in the Treaty between the Government of Australia and the Government of the Republic of Indonesia Establishing an Exclusive Economic Zone Boundary and Certain Seabed Boundaries, which was signed on 14 March 1997. The amendments are necessary to enable ratification of the treaty.

The bill effects that at clauses 40 and 41, which amend schedule 2 of the PSLA. The explanatory memorandum is modest. It simply says:

These items replace the existing boundaries with new boundaries in accordance with the Treaty between the Government of Australia and the Government of the Republic of Indonesia Establishing an Exclusive Economic Zone Boundary and Certain Seabed Boundaries.

The exclusive economic zone and seabed boundaries, of course, pick up the terms that we find in the United Nations Convention on the Law of the Sea, UNCLOS. The Parliamentary Library Bills Digest , in dealing with this bill, regrettably misses it, which I think reflects two things. It reflects the sometimes difficult technical nature of these amendments and also the point I made to the Australian Petroleum Producers and Exploration Association Annual Conference in Canberra this morning—that our great petroleum resources industry is massively underappreciated and often overlooked.

This bill goes to the question of the allocation of sovereign rights. I will come to the provisions of the treaty shortly, but the long and the short of the treaty and the bill which effects it are to establish a regime to delineate the maritime boundaries between Australia and Indonesia to the north of Australia. It has the effect that, in certain areas, the Indonesian nation state has control of the column waters and the Australian nation state has control of the seabed.

The first issue I raise occurs as a result of a High Court decision in the Commonwealth of Australia v. WMC Resources, which was decided by the High Court on 2 February 1998. This relates to a treaty between Australia and Indonesia which is not the subject of this piece of legislation but which deserves comment in its own right and, in my view, raises matters which may have implications for this bill and the configuration proposed by the treaty.

The majority High Court decision has the effect of saying, by way of a majority led by Chief Justice Brennan, that rights which are given in offshore waters of the Commonwealth under the Petroleum (Submerged Lands) Act are sovereign rights but not property rights. As a consequence, if those rights are varied in any way which is not just nor fair, then the fair and just terms compensation provision of the constitution which protects property rights does not come into play because these rights are sovereign rights, not property rights.

That has some potential implications for those people investing in our petroleum resources industry in offshore Commonwealth waters, and this is an issue to which the government needs to give consideration. So far, the only government response that I am aware of was when the implications of this decision were put to the Minister for Primary Industries and Energy (Mr Anderson) at the opening of the ABARE conference in Canberra in early February. The minister's response was that this was a matter which he would need to discuss with his colleague Senator Parer. In ministerial terms, that was probably the safe answer. It was unfortunate for the minister that the tone and demeanour of his reply created the impression amongst the ABARE audience that he had absolutely no idea what the case or the implications were about.

Be that as it may, my first inquiry relates to whether the government has put its mind to the implications which arise as a consequence of this decision of a majority of the High Court with regard to rights under the PSLA being described as sovereign rights and not property rights and which, as a consequence, can be summarily taken by the Commonwealth without application of the fair and just terms compensation provision. I am not suggesting that that would occur but, in areas of petroleum exploration and petroleum production investment, there are very large sums of money involved by way of international capital and sovereign risk is an issue, so I lay that on the table.

I also raise the High Court case in the context of this piece of legislation and the maritime delineation treaty. It is in this context that I inquire of the government whether it has put its mind to this matter. It is the case that the treaty was signed and this bill put into play before the High Court decision. What the treaty does and the bill implements is to change the configuration of column water sovereign rights so far as areas of water are concerned. They include areas of water in respect of which petroleum exploration leases may well have already been granted.

The questions I ask are: if those petroleum leases raise sovereign rights, and this bill and this treaty interfere with sovereign rights because it gives to the Indonesian nation state rights over column waters in those same areas, has there been a disturbance of the sovereign rights which have been granted to petroleum companies by way of petroleum exploration leases? Has that sovereign right been disturbed? Might there be something in this High Court case which might suggest some adverse implications for the Commonwealth in moving to disturb the granting of a sovereign right under the Petroleum (Submerged Lands) Act? Mr Deputy Speaker, I am a lapsed lawyer and that may well be a long bow to draw, but I would not mind inquiring of the government whether it has put its mind to the Western Mining Corporation compensation case in that context.

As I outlined, the legislation implements the treaty between Australia and Indonesia, establishing, as the treaty describes, an exclusive economic zone boundary and certain seabed boundaries. The key article of the treaty is article 7—areas of overlapping jurisdiction. Subparagraph (a) of article 7 says:

the First Party

which is Indonesia—

may exercise exclusive economic zone sovereign rights and jurisdiction provided for in the 1982 Convention in relation to the water column;

The 1982 convention is, of course, UNCLOS—the Convention on the Law of the Sea. Subparagraph (b) says:

the Second Party may exercise continental shelf sovereign rights and jurisdiction provided for in the 1982 Convention in relation to the seabed;

Subparagraph (d) says:

the Second Party shall give the First Party three months notice of the proposed grant of exploration or exploitation rights;

On that basis, I move immediately to a joint media statement issued by the Minister for Resources and Energy, Senator Warwick Parer, and Eric Poole, the Northern Territory Minister for Resource Development, dated 5 March 1998, which announces petroleum exploration permit awards in the Timor Sea. The statement says:

The Federal Minister for Resources, Senator Warwick Parer, and the Northern Territory Minister for Resource Development, Eric Poole, today announced the names of the successful bidders for seven new petroleum exploration permits in the Timor Sea.

Permits are being awarded to the following consortia and companies:

. . . . . . . . .

Area AC97-1 to a consortium led by Cultus Timor Sea Ltd

Area AC97-2 to Flare Petroleum NL

Area AC97-3 to a consortium led by Mosaic Oil NL

Area AC97-4 to a consortium led by ARC Energy NL

During the next six years, an estimated $88 million will be spent on exploration in these areas . . . The four areas in the Territory of Ashmore and Cartier Islands are in the general vicinity of the Jabiru and Challis oil producing fields.

It goes on to say:

In area AC97-1, awarded to Cultus Timor Sea Ltd . . . the consortium have proposed a guaranteed work program for the first three years of data review, 1,000 km of seismic reprocessing and 1,300 km 2D seismic acquisition for an estimated ex penditure of $1.7 million. The consortium has also proposed a secondary program of data review and two exploration wells for an estimated expenditure of $16.15 million.

This petroleum lease granted under the joint authority arrangements between the Commonwealth and the Northern Territory is petroleum lease AC97-1. That is in the Ashmore-Cartier area. If one looks at the map which is contained in the treaty documents and distributed with the treaty documents, that petroleum lease area—as I read this map and as I read the 1997 petroleum exploration lease map produced by the Bureau of Resource Sciences—is in one of the green areas on the map, which is an area of seabed jurisdiction for Australia only. This means that the water column rights reside with the nation state of Indonesia. Article 7, subparagraph (d) says:

the Second Party shall give the First Party—

that is, Australia shall give Indonesia—

three months notice of the proposed grant of exploration or exploitation rights;

So I inquire of the Commonwealth as to whether, in accordance with the treaty provisions, area AC97-1 has been the subject of the required notice provision to the nation state of Indonesia. The second query I have is in respect of AC97-1, and subparagraph (i) of article 7 states:

marine scientific research shall be carried out or authorised by a Party in accordance with the 1982 Convention and such research shall be notified to the other Party;

When one turns to the 1982 United Nations Convention on the Law of the Sea, in respect of marine research, relevant provisions are `Part V: Exclusive economic zone', article 56, which makes the point that in the exclusive economic zone, the coastal state has jurisdiction with regard to marine scientific research. So in the water column area, under this treaty Indonesia has jurisdiction in respect of marine scientific research.

In `Part XIII: Marine scientific research' of the treaty, you find the provisions that are most pertinent and relevant. Article 248 and article 249 place a duty on a nation state like Australia, if it is engaged in marine scientific research in the exclusive economic zone of another nation state like Indonesia, to do a number of things. `Article 248: Duty to provide information to the coastal state' says:

States and competent international organisations which intend to undertake marine scientific research in the exclusive economic zone . . . shall, not less than six months in advance of the expected starting date of the marine scientific research project, provide that State with a full description of:

(a) the nature and objectives of the project;

(b) the method and means to be used, including name, tonnage, type and class of vessels and a description of scientific equipment;

(c) the precise geographical areas in which the project is to be conducted;

(d) the expected date of first appearance and final departure of the research vessels, or deployment of the equipment and its removal, as appropriate;

(e) the name of the sponsoring institution; its director, and the person in charge of the project; and

(f) the extent to which it is considered that the coastal State should be able to participate or to be represented in the project.

So my query of the Commonwealth in respect of AC97-1, in accordance with article 7(i) of the treaty and pursuant to article 248 of the UNCLOS treaty, is: has the required six-months notice been given of the proposed operation of Cultus Timor Sea Ltd in respect of area AC97-1? If so, when; if not, why not? The more compelling point comes under `Article 249: Duty to comply with certain conditions'. Some of the duties which 249 provides on a nation state like Australia include the following:

(b) provide the coastal State, at its request, with preliminary reports, as soon as practicable, and with the final results and conclusions after the completion of the research;

(c) undertake to provide access for the coastal State, at its request, to all data and samples derived from the marine scientific research project and likewise to furnish it with data which may be copied and samples which may be divided without detriment to their scientific value;

So the effect of article 249—and that has effect because of article 7 subparagraph (i) of the treaty, which this bill seeks to implement—is that a nation state is required under the UNCLOS article to effectively hand over the results of scientific research. So my question to the Commonwealth is: what obligation, if any, does the Commonwealth believe is imposed on Cultus Timor Sea Ltd to hand over the results of their seismic petroleum exploration to the nation state of Indonesia? That is a very pertinent question because Cultus Timor Sea Ltd acquired that petroleum exploration lease under the provisions of the Petroleum (Submerged Lands) Act at a competitive bid for a price.

I do not know that Cultus Timor Sea Ltd were aware at the time that now they may well have certain requirements, when they are in the process of their exploration activity and when they have completed their $1.7 million exploration activity. Presumably, in the normal course of events they would either want to use it themselves to turn a prospective area into a production area or to on-sell it to another petroleum production partner. In other words, the results of their exploration activity on that reading of the treaty have the effect that they are obliged to hand over that material to the Indonesian nation state. That is a plain English reading of the convention. I do not know whether that view is right or wrong. What I do know is that there is no evidence before us which would suggest, firstly, that that view might be wrong or, secondly and more importantly, that it has been properly or seriously considered.

In accordance with the government's arrangements for the examination of treaties, this bill was sent to the Joint Standing Committee on Treaties. The joint standing committee's report raised the issue of overlapping jurisdiction, on pages 21 and 22. The most pertinent question raised in the report, the fourth dot point on page 22, is:

. with respect to marine research, whether Australia has a duty to provide to Indonesia all of the information detailed at UNCLOS Article 248 and 249(1)(b), and, importantly, to comply with any or all of the other conditions stipulated at Article 249

In the course of the public hearing and evidence to the Joint Standing Committee on Treaties, representatives of the Attorney-General's Department—and to a lesser extent representatives of the Department of Primary Industries and Energy—asserted without any detail that they have the complete answer to that issue and the question that I have raised. I would like the government to produce the basis on which that view was asserted. It was asserted in the hearings held on 2 September and 28 October that there is a complete answer to that question. I would like to see the basis of that. I think it is important that the Commonwealth provides it because this is, in my view, a live issue which goes to the sovereign rights of the Petroleum (Submerged Lands) Act and the rights which Cultus may or may not have as a consequence of this treaty.

The Attorney-General's Department in its formal written submissions to the committee, which are submissions Nos 2 and 2A, says at paragraph 19:

The Treaty does recognise that the activities of one party in the exercise of its jurisdiction in the area of overlap might affect the activities of the other party in the area of overlap. It provides for such issues to be resolved by co-operation.

If you are engaged in seismic research, one of two or three things may well occur. Firstly, someone may suggest that the nature of the seismic research is such that it can disturb the fishery's life. Fisheries are a sovereign right of Indonesia in the column waters. Secondly, someone may suggest that, if you are even overflying and doing exploration activity by laser, the laser may have an adverse consequence on the fishery's life, which is an Indonesian right. Someone might, finally, equally suggest that, if you are out there trawling with a seismic vessel with the streams behind you and you run across an Indonesia fishing vessel, you have impaired their rights. These are serious issues in respect of which the Commonwealth needs to give some answers. (Time expired)