Mr ENTSCH (Parliamentary Secretary to the Minister for Industry, Tourism and Resources) (10:24 AM) —I move:

The act proposed to be created by this bill is consequential to the repeal of the Petroleum (Submerged Lands) (Royalty) Act 1967 and is its replacement in conjunction with the Offshore Petroleum Bill 2005 and other bills achieving the rewrite of the Petroleum (Submerged Lands) Act 1967 and incorporated acts. This bill sets out the royalty payable in respect of petroleum produced in the North West Shelf project area under the proposed offshore petroleum act.

For machinery reasons, the provisions by which the joint authority must determine the royalty rate to be applied to all petroleum recovered subsequent to the grant of the secondary production licence are proposed to be transferred from the Petroleum (Submerged Lands) Act to this bill, rather than into the Offshore Petroleum Bill. On the other hand, provisions about when provisional or determined royalty is due for payment, late payment penalty and recovery of royalty debt are proposed to no longer be part of the royalty act. They have been placed instead into part 4.6 of the Offshore Petroleum Bill 2005.

The fact that the Petroleum (Submerged Lands) (Royalty) Act applies, and this bill would apply, only in the North West Shelf project area is based on a decision by parliament in 1987. This was to introduce petroleum resource rent tax to all petroleum projects except those in areas covered by production licences granted on or before 1 July 1984 and the wider exploration permit areas from which those production licences were drawn.

Production from these titles remained subject to royalty under the Petroleum (Submerged Lands) (Royalty) Act. Following another subsequent amendment to the petroleum resource rent tax legislation, the only titles that now remain under the coverage of the Petroleum (Submerged Lands) (Royalty) Act are those in the North West Shelf project area.

The intention of rewriting the Petroleum (Submerged Lands) (Royalty) Act is to maintain current policy, meaning that there would be no financial consequences of the rewrite itself. However, an incidental policy change with a minor financial impact is proposed in this bill. This could benefit a royalty payer at the time when the petroleum production operation comes to an end. This could occur if, in monthly remittances of royalty, the royalty payer has made an overpayment through finalisation of a provisional payment or by an error in calculation or procedure, and production comes to an end with no further royalty payments. The royalty payer would then be able to obtain a refund equal to any overpayment in the final remittance.

This differs from the provisions of the existing royalty act, which allows overpayments to be accounted for by means of credits in future months’ payments but recognises no possibility of a refund when all payments have ended. This policy inconsistency is proposed to be rectified in this bill. The change is not expected to have any significant impact on Australian government revenues as the cessation of production operations in the North West Shelf project area will be a rare event and the total of any refund, assuming one was required, would be unlikely to exceed an amount in the thousands of dollars. I commend the bill to honourable members and present the explanatory memorandum.

Debate (on motion by Mr Gavan O’Connor) adjourned.