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Thursday, 9 October 2003
Page: 21095


Mr HAASE (10:46 AM) —The major function of both the Petroleum (Submerged Lands) Amendment Bill 2003 and the Offshore Petroleum (Safety Levies) Bill 2003 is to establish the National Offshore Petroleum Safety Authority, NOPSA. The drive to develop a single National Offshore Petroleum Safety Authority is a response to the Commonwealth government report on safety on offshore petroleum facilities in Commonwealth and state and Northern Territory waters.

With a dozen major project areas in my Kalgoorlie electorate affected by offshore safety issues, my support for this legislation is understandably keen. The government made the establishment of an offshore safety authority an election commitment in 2001 and agreed to funding of $6.1 million over three years to set it up. The Commonwealth, the states, the Northern Territory, industry and the work force have all recognised the need to address the currently complicated and insufficient regulation of health, safety and environment in the offshore petroleum industry.

Under the government's arrangements for the authority, the advisory board will provide advice and recommendations directly to the Commonwealth, state and Northern Territory ministers on offshore safety policy and strategic matters and will report on the authority's performance. Collectively we need to ensure appropriate, efficient and cost-effective regulation if we are to deliver world-class safety practice that will be admired by international project investors such as China. This requires a major effort on the part of all of the stakeholders—governments, industry and the work force.

The Australian offshore industry is strategically important and supplies a large component of Australia's oil needs. A large proportion of the population also depend on it for their gas supply. Oil and gas provide 54 per cent of Australia's primary energy consumption and 72 per cent of our final energy consumption. Yet to our detriment, the current safety regulation arrangements for the industry are complicated and inadequate.

The Commonwealth has legislative responsibility and it recognises the need to address this problem. Safety is of paramount importance to safeguard the lives of those working on these projects, to safeguard the enormous investment in infrastructure and equipment for offshore developments and also to protect sensitive environments, such as Barrow Island off Western Australia's Pilbara coast. The bill does not seek to change the occupational health and safety provisions in any fundamental way but it does seek to further strengthen these arrangements by modifying them to reflect the practical realities of the offshore petroleum industry.

While the likelihood of accidents on these offshore facilities is low, if and when they do occur they can be catastrophic. For example, the 1998 UK Piper Alpha North Sea oil platform was totally destroyed by fire, taking 167 lives and costing the UK economy a reported $6 billion. The Victorian Longford gas plant explosion resulted in two deaths and deprived the Melbourne region of gas for two weeks, leaving the Victorian economy out of pocket to the tune of $2 billion. The Brazilian P36 oil rig sank in March 2001, with the loss of 10 lives and the destruction of a petroleum facility worth $1 billion, effectively losing five per cent of Brazil's oil production at that time.

The proposed new authority will regulate offshore petroleum safety in Commonwealth, state and Northern Territory coastal waters through the amendments being made to the Commonwealth Petroleum (Submerged Lands) Act 1967 and through mirror legislation in the states and the Northern Territory. The authority will ultimately deliver a uniform national safety regulation regime for Australia's offshore petroleum industry, thereby reducing and simplifying the regulatory burden on the industry.

The amendments to schedule 7 of the Commonwealth Petroleum (Submerged Lands) Act and the enactment of mirror provisions in state and Northern Territory legislation will provide for one body of occupational health and safety law to regulate all Australian waters and improve and clarify the duty of care provisions of all concerned in offshore petroleum activity. The amended bill will disapply the state and Northern Territory occupational health and safety legislation and allow the revisions to the act to apply uniformly in Commonwealth waters and state and Northern Territory coastal waters.

The ministerial council approved the establishment of the authority and agreed that the authority's operations be fully funded on a cost recovery basis by an industry safety fee. A more effective safety regulator will further reduce the probability of incidents, and this itself is a benefit to the companies operating in the industry. It is a reasonable expectation that they contribute the full amount for this service. It is an inescapable fact that there is no need for a safety regulator if we do not have an offshore industry. The cost of safety regulation should be treated no differently from other costs the industry is required to meet. There is a strong case, therefore, for full cost recovery.

The Offshore Petroleum (Safety Levies) 2003 Bill gives effect to the decision of the Commonwealth, states and Northern Territory to fully recover from industry the costs of operating the authority. Both the Petroleum (Submerged Lands) Amendment Bill 2003 and the Offshore Petroleum (Safety Levies) Bill 2003 will provide the authority with the ability to fully recover through industry fees and levies the costs of its operations and activities. The final level and structure of fees and levies will be set by regulations in accordance with the government's cost recovery policy before the authority commences its operations in 2005.

A key feature of the authority will be robust governance arrangements to ensure the independence, efficiency and effectiveness of the authority's activities. Under this bill the authority will be a Commonwealth statutory authority. The arrangements that will be put in place will make the chief executive officer directly responsible to the Commonwealth minister and to state and Northern Territory ministers individually and collectively through the Ministerial Council on Mineral and Petroleum Resources.

There will be an expertise based advisory board that will provide advice to the CEO, the Commonwealth minister and the board. The board will also report to the minister on safety matters and the performance of the authority in carrying out its regulatory functions. In addition, the cost recovery arrangements will be formulated to comply with the government's cost recovery guidelines, and a cost recovery impact statement will be prepared before the fees are set.

The cost recovery impact statement is not required in order to introduce this bill and will be completed prior to the commencement of the authority on 1 January 2005. The cost recovery impact statement, which will detail the exact fees and levies, will be prepared in accordance with the government's cost recovery policy. There will be consultation with industry through the preparation of the cost recovery impact statement.

There are constitutional restrictions on the kinds of fees for services that can be levied under the Petroleum (Submerged Lands) Amendment Bill itself—essentially only services which the industry requests can be cost recovered under the bill. The majority of the authority's activities will need to be undertaken at its own instigation rather than at the request of industry, and therefore charges for this activity cannot be categorised as fees for service nor recovered under the Petroleum (Submerged Lands) Amendment Bill. That is why there is an Offshore Petroleum (Safety Levies) Bill—a bill which will enable services provided by the authority to be cost recovered.

The safety case levy is an annual levy which will be payable by all operators of exploration, production and support facilities whilst there is a safety case in force for that facility. The safety case levy will be calculated based on the type of facility and in such a way as to ensure that any one operator's contribution is proportionate to their level of activity within the offshore petroleum industry. This safety case levy will recover all of the authority's ordinary regulatory costs in monitoring and enforcing compliance with the safety case and other safety requirements.

As with the safety case levy, an annual pipeline safety management plan levy will recover the costs of monitoring the safety of offshore pipelines. A safety investigation levy will be charged by the authority only in the event of a serious accident or dangerous occurrence at an operator's facility which requires the authority to conduct an investigation. Through this bill, it is intended that there will be no levy for routine investigations, and levies will apply only once an investigation becomes major, which will be defined in the regulations. This charge is levied separately from the annual safety case fee, in order to avoid a situation where all operators are effectively subsidising the cost of lengthy investigations into incidents involving only one or two of the industry's operators.

Every three years, starting from 1 January 2005, a review of the effectiveness of the authority will be carried out. Reviews will be conducted in conjunction with any state-Northern Territory review. The bill will make amendments to address the anomaly whereby the Commonwealth is currently required to remit to the states and Northern Territory an equivalent of the GST component of annual fees collected in respect of titles issued under the act. The bill also removes the mechanics of petroleum data submission from the act and places them in new objective based regulations.

The upstream oil and gas industry is extremely important for jobs and regional development in Western Australia, and I strongly support this initiative to improve safety outcomes offshore and to standardise regulation across the offshore petroleum industry. A consistent national approach to offshore safety regulation in Commonwealth, state and Northern Territory waters is essential for the most cost-effective delivery of safety outcomes in the offshore petroleum industry. This legislation will bring an end to the multiple regulatory requirements that have caused difficulties, particularly when companies operate across jurisdictions where regulatory approaches and applicable legislation have differed. This is a particular problem off Western Australia, as rigs often move between state coastal waters and Commonwealth waters, where extensive petroleum operations lie either side of the boundary between these areas. This is further compounded when a rig moves to another jurisdiction.

It is also important that the regulatory regime for the Australian offshore petroleum industry allows the industry in Australia to keep pace with the rapid technological change in the international petroleum industry. There could be no better example of this than the proposed Gorgon development off the Pilbara coast, where innovative solutions will be needed to overcome the enormous technological challenges of this important development. The Gorgon development at Barrow Island represents the potential for future resource development in Australia. There are several major projects already well established in my electorate. Apart from Barrow Island, there are something like 10 oil fields in the Carnarvon Basin, including Harriet Fields, Buffalo and, of course, the ongoing Woodside North West Shelf project.

The 2002 deal to supply 3.3 million tonnes per annum of LNG to China's Guangdong province is an important milestone in the trade and diplomatic relationships between Australia and China. This is one of Australia's largest ever trade deals and is expected to increase exports by $1 billion per year over 25 years, reaping huge benefits in terms of jobs in the industry, jobs in industry related services, investment and revenue. The potential to cement trade alliances and diplomatic exchange with China will no doubt be a feature of the upcoming visit to Australia of Chinese President Hu Jintao. President Hu and other international diplomatic figures like him will be most impressed, I am sure, at Australia's efforts to provide a greater guarantee of protection for workers and the environment at offshore development sites. We are a world-class trading nation with top-quality resources on offer. To be consistent, we must not be complacent about our safety legislation for these facilities. The future of our oil and gas contracts depends on us offering clear and workable offshore policies—policies which will bode well for the ongoing security and progress of our resources industry.

Speaking of policies, the Minister for Industry, Tourism and Resources, Ian Macfarlane, today announced the funding for much-needed infrastructure, including a seawater supply pipeline, a desalination plant, electricity connection and a contribution towards port services on the Burrup Peninsula. This commitment by the Australian government has already attracted UK based company GTL Resources, which plans to develop a major methanol production project on the Burrup Peninsula. The $A700 million GTL project is expected to produce one million tonnes of methanol a year, with exports of up to $350 million annually. Some 600 jobs are expected to be created during the construction phase, with 85 jobs available when the plant is operational. It will be the good policies of this government that determine the future of the Gorgon gas field. The development of this resource relies on policy and the strength of that policy to reflect our commitment to the resources industry, its employees and the environment.

With a sustainable responsible policy in place, we can protect the industry by alleviating its safety concerns. If we can protect the industry and its workers with a stable framework of legislation, then we can protect further investment in the industry. If we can protect investment in the industry, then we can secure jobs and, at the same time, secure the industry's commitment to the environment. Only one per cent of the sensitive ecology on Barrow Island will be affected by resource development, and this bill seeks to ensure that all ecologies, all environments and all project locations are treated with responsibility and consideration.

The stakes are high in this industry in terms of investment in people and infrastructure, and this necessarily affects the economy. Since Western Australia contributes roughly a third of the nation's economic input, safety and environmental concerns in the resources industry are necessarily a national issue. An improved regulatory regime can further encourage exploration and development opportunities in the Kalgoorlie electorate, leading to economic expansion and increased job opportunities for the industry. It is to the credit of all parties that they have come together to achieve this positive result for the offshore petroleum industry and its employees in Australia. I commend these bills to the House.