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Thursday, 9 October 2003
Page: 21084


Mr SIDEBOTTOM (9:59 AM) —The Petroleum (Submerged Lands) Amendment Bill 2003 will establish a National Offshore Petroleum Safety Authority, the NOPSA, to regulate safety in Commonwealth waters and state and Northern Territory coastal waters as agreed by the Commonwealth and its states and territories. The offshore petroleum industry is strategically and economically important to Australia and any serious disruption to supply due to an accident would have major economic consequences.

The authority, to be established by Commonwealth legislation, will deliver a uniform, national safety regulatory regime for Australia's offshore petroleum industry and will reduce the regulatory burden faced by industry participants. It is to be an independent agency, accountable to the Commonwealth, state and Northern Territory ministers and will be established via an amendment to the Petroleum (Submerged Lands) Act 1967.

The bill also contains amendments to the occupational health and safety provisions of the act. These amendments will improve safety, administration and outcomes for offshore petroleum facilities and pipelines and will also, importantly, reduce risks to the environment. Amendments in the bill, when mirrored by state and Northern Territory legislation, will also provide a consistent safety regulatory regime across all Commonwealth waters and state and Northern Territory coastal waters.

There are two further sets of amendments in the bill. Schedule 2 seeks to amend section 129 of the act to rectify an anomaly whereby the full amount of fees paid by the offshore petroleum industry needs to be redirected back to the states and the Northern Territory; yet the goods and services tax legislation requires GST deductions from some of these fees. Schedule 3 seeks to amend the data and management provisions in the act. These provisions cover the submission of data by petroleum owners to the regulator and the later releases of some of that data to the public. The amendments will enable the machinery provisions covering both submission and release of this data to be placed in new objective based data management regulations under the act.

Since 1967 the act has provided for the regulation of all aspects of offshore petroleum and mining, including titles, exploration, production, pipelines and safety regulation. Following a High Court decision in 1975 that confirmed Commonwealth jurisdiction offshore—that is, below the low watermark—in June 1979 the Commonwealth and the states agreed to a division of offshore powers and responsibilities, known collectively as the offshore constitutional settlement. The purpose of the settlement was to generally maintain the role of the states in the management of offshore areas.

In relation to offshore petroleum arrangements post OCS, the states and the Northern Territory have been granted by the Commonwealth title to all waters, including seabed, and landward of the three-nautical-mile limit and have the same power to legislate over those coastal waters as they do over their land territory. Another significant outcome of the OCS was an amendment to confine the application of the Commonwealth act to waters outside the three-nautical-mile limit, with the states and Northern Territory enacting mirror legislation applying in waters landward of that boundary.

Beyond the coastal waters, cooperative governance of the Commonwealth's legislation vests executive powers jointly in a joint authority—which is the Commonwealth minister and the relevant state or Northern Territory minister in respect of each adjacent area—on all major decisions affecting petroleum exploration and development, with the Commonwealth minister's view to prevail in the event of disagreement. Day-to-day administrative duties and regulatory functions have been exercised by the designated authority, who is the relevant state or Northern Territory minister.

Until the safety authority commences operations on 1 January 2005, safety regulation will continue to be administered under the existing legislation and arrangement. A particular feature of the act in its present form—prior to 1 January 2005—is that the occupational health and safety requirements in schedule 7 of the act do not apply to Commonwealth waters adjacent to a state or the Northern Territory if the law of that state or territory provides, to any extent, for matters relating to the occupational health and safety of persons employed in the area. In that case, the OHS laws of the state or territory apply.

As a result, each jurisdiction except Western Australia has applied its own state or Northern Territory OHS law in its own coastal waters, and that law was applied by the Commonwealth act in Commonwealth waters. Western Australia has relied on the application of schedule 7 of the act. Each of these laws is different. Consequently, companies with offshore facilities in more than one state or in the Northern Territory adjacent area have had to meet the requirements of these different laws. Furthermore, those companies operating mobile facilities, such as drilling rigs, have had to comply with different requirements as their rigs move from job to job around Australia.

In response to the 1988 Piper Alpha disaster in the North Sea, the act was amended in 1992 to include schedule 7 and in 1995 to provide for implementation by regulations of a safety case regime. The term `safety case' is used to describe a sophisticated, comprehensive and integrated risk management system. This is characterised by an acceptance that the ongoing management of safety on individual facilities is the direct responsibility of the operators and not the regulator, whose key function is to provide guidance as to the safety objectives to be achieved and an assessment of performance against those objectives.

The operators can achieve those objectives by developing systems and procedures that best suit their needs and agreeing these with the regulator. This safety case then forms the rules by which the operation of the facility is governed. The safety case also forms the basis for ongoing audits by the regulator of the facility and its operation throughout its life. The safety case regime has been fully operational since 1996, when detailed safety case regulations under the act, underpinned by guidelines for their preparation and submission, came into effect. The safety case regime remains as it is and is not altered by this bill. It is proposed, however, to revise the regulations to clarify the operation of the regulations.

In August 2001 the Commonwealth government report on offshore safety, entitled Future arrangements for the regulation of offshore petroleum safety, was delivered to the former Minister for Industry, Science and Resources. The primary conclusion of the review was:

The Australian legal and administrative framework, and the day to day application of this framework, for regulation of health, safety and environment in the offshore petroleum industry is complicated and insufficient to ensure appropriate, effective and cost efficient regulation of the industry. Much would require improvement for the regime to deliver world-class safety practice.

In particular, an independent review that formed part of the above report recommended that a national petroleum regulatory authority be developed to oversee the regulation of safety in Commonwealth offshore waters.

The Commonwealth view, strongly supported by industry and employees, was that it would be more efficient and effective—as well as reducing the regulatory burden—to have a single national agency covering both Commonwealth waters and state and Northern Territory coastal waters, a view subsequently shared by states and the Northern Territory. The Ministerial Council on Mineral and Petroleum Resources subsequently endorsed a set of principles for regulation of safety of petroleum activities in Commonwealth waters and state and Northern Territory coastal waters in Australia and agreed that the council's standing committee of officials would examine how best to improve offshore safety outcomes, primarily through a single joint national safety agency. This work led to the agreement upon which this bill is based.

The safety authority will function as a regulator of occupational health and safety in relation to offshore petroleum facilities and offshore petroleum diving operations in Commonwealth and designated coastal waters. Individual states or the Northern Territory may also confer powers on the safety authority under the onshore legislation of the state or Territory in respect of particular petroleum operations. Where this occurs, this bill authorises the authority to exercise those powers. In acting under state or Northern Territory `onshore' legislation, the authority will be entirely subject to the governance arrangements established by that legislation.

Labor supports this bill, which enjoys the support of all industry players, including the trade union movement. However, it is my view that amendments to the submerged lands act should not stop at these important safety issues. Certainly the industry believes that more needs to be done to encourage oil exploration. For example, it wants changes to the PRRT arrangements to promote exploration in deep water and frontier areas and to encourage gas production. The industry faces many impediments, including global competition for project capital, concentration of ownership, LNG market power, conflicts of interest and constraints within the domestic gas market itself.

Much of the focus of the industry has been on fiscal arrangements, but this is merely one component, albeit an important one. Labor's economic reforms of the 1980s and 1990s opened up the financial and product markets and established Labor as the party of the market. This sets us apart from the government, which have been and are the party of business or, shall we say, business arrangements, where political mateship overrides broader competition issues. But while Labor backs the market, it also recognises the potential for market distortions and the need at times for government intervention. This is a source of competition policy and its enforcement through bodies like the ACCC.

The natural gas market is a relatively immature one, in which global corporate interests and community interests must be fairly reconciled. It is entirely proper that companies act in the best interests of their shareholders. But what happens when the shareholders' interests and the country's interests collide? There will always be a role here for government—that is, keeping some equilibrium in focus. The industry's drive towards sustainability should have the right balance between community interests and the corporate interests of its members. Sustainability in a social sense is about more than simple employment generation and community benevolence. It is about ensuring the Australian community is getting a fair shake for the exploitation of its gas resources and a fair chance of adding to them. Given Australia's rapidly declining oil self-sufficiency, the manner and timing of the exploitation of our natural gas resources are crucial to the nation's future. It is estimated that our current oil reserves will last only about 40 more years, and it is generally believed that major new oil finds are unlikely. Even if we accept that new reserves are possible, we need to look further than oil exploration for the total solution.

For the seven years to 2002, Australia consumed oil three times faster than it added to its reserves. By 2010, Australia is likely to be importing 50 to 60 per cent of its crude oil. The adverse impact on our balance of trade will be in the order of $7 billion to $8 billion each year. This will make any balance in the trade in goods and services that much harder to achieve. Conversely, for the last 20 years Australia has discovered more natural gas than it has produced. It seems we have plenty of gas, but most of it is distant from the market and the LNG market is ultracompetitive. That said, I find it hard to accept that the industry and the government are doing enough to unlock the 100plus TCFof reserves—that is more than 100 years of supply—that are remote from markets. Nor would I find it comfortable to be exporting gas at bargain basement prices—not in the absence of a medium- to longterm strategy which is tied in with our own domestic requirements.

According to Woodside, 60 per cent of Australia's remaining undeveloped gas reserves are under the control of foreign companies. If Woodside were taken over by a foreign major, the figure would rise to over 90 per cent. Foreign ownership is not in itself a problem. Indeed, continuing foreign investment in Australia is essential to build the nation's industrial base. But it is the degree of cross-ownership in competing joint ventures, not only in Australia but globally, that creates potential conflict between corporate and community interests. That is why the government must look at the way in which the Petroleum (Submerged Lands) Act deals with the property rights issue. Under the current arrangement it is too easy for companies to warehouse Australian reserves for global sequencing. Work programs for developing gas reserves need to be open to further public scrutiny and accountability. Labor was very pleased that the government-dominated House of Representatives Standing Committee on Industry and Resources agreed on that point in its inquiry into impediments to mineral and petroleum exploration in Australia. It also agreed with Labor that there is a need to review retention lease arrangements. The government does need to impose tougher resource title principles, but it must also do more to promote domestic gas markets to bring forward the commercial viability of offshore gas reserves for title holders.

Finally, I am pleased to say that natural gas is a very important Tasmanian resource, and fortunately without the difficult market constraints faced by those trying to develop north-west Australian reserves. According to Origin Energy, it is estimated that demand for natural gas in Victoria will double over the next 20 years, and to meet this growing market new infrastructure is required. The BassGas Project will bring the first alternate gas supply into south-eastern Australia since the Gippsland gas fields were developed over 30 years ago. The BassGas Project will commercialise gas from the Yolla field and will meet approximately 10 per cent of Victorian gas demand for 15 years. I look forward to that occurring. We on this side support these bills.