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Thursday, 18 September 2008
Page: 7871


Mr MARTIN FERGUSON (Minister for Resources and Energy and Minister for Tourism) (10:58 AM) —in reply—Thank you, Mr Deputy Speaker. It is always a pleasure to follow the member for Capricornia because I very much appreciate not only her support for this bill but also her great appreciation of the significance of the coal industry, especially to the area which she represents and also to Australia as a nation.

On 18 June 2008, I had the pleasure to introduce the Offshore Petroleum Amendment (Greenhouse Gas Storage) Bill 2008 and associated bills, going to annual fees, registration fees and safety levies, into this parliament. As I outlined when I introduced the bills, this government is committed to comprehensive action to tackle climate change whilst maintaining Australian jobs and economic prosperity. We are committed to the widest possible portfolio of responses, of which the geological storage of greenhouse gases is an important avenue being explored. Other activities include the development of renewable energy sources and a focus on improving efficiency in energy consumption. The consideration of a Carbon Pollution Reduction Scheme is also part of this armoury. And we are going through a detailed green paper process at the moment, leading to a white paper and legislation in 2009.

We believe carbon dioxide capture and geological storage—or CCS, as it is commonly known—holds great potential as a method of avoiding emissions of carbon dioxide and other greenhouse gases into the atmosphere. Geological surveys have indicated that the storage formations in offshore waters made available by these amendments have the potential to securely store hundreds of millions of tonnes of carbon dioxide. These quantities represent a significant proportion of Australia’s greenhouse gas emissions, and carbon capture and storage has the potential to substantially reduce Australia’s emissions.

The amendments I intend to introduce today enable a key component of the carbon capture and storage process—namely, geological storage—to be actively developed by industry proponents. Companies are keen to identify suitable storage sites to match their parallel development of carbon dioxide capture from coal or gas powered electricity generation and from other industrial and extraction processes. The bill focuses on the provision of access and property rights for greenhouse gas injection and storage activities in Commonwealth offshore waters and provides a management system for ensuring that storage is safe and secure.

On 19 May I was pleased to refer the exposure draft of the bill to the House of Representatives Standing Committee on Primary Industries and Resources for inquiry and report. The committee, chaired by the member for Lyons, Dick Adams, with the deputy chair, the member for Hume, Alby Schultz, received submissions and heard testimony from a broad range of stakeholders, including the petroleum industry, coal producers, governments and non-government organisations. The committee publicly released its final report, which included 19 recommendations, on 15 August 2008. On behalf of the government and the Australian community, I express my sincere appreciation to the committee for their hard work and insight. The committee’s final report, Down under: greenhouse gas storage, did a superb job of distilling the key positions of the various stakeholders into a format that provides greater clarity of the government’s legislative framework. It also speaks volumes for the committee structure of the House of Representatives and the need for all of us to consider referring detailed bills to the House of Representatives committee structure for consideration and report to the parliament. The process undertaken by the Standing Committee on Primary Industries and Resources with respect to these bills clearly indicates the capacity of members to improve legislation, and I commend the process to the House.

Most of the recommendations made in the report either endorse existing principles which are currently within the provisions of the bill—or which are part of the general policy framework—or refer to matters that are to be addressed in regulations and guidelines. These are supported by the government; however, I contend that a number of amendments, which I am tabling today, are required to the draft bill to give effect to the committee’s recommendations, to remove ambiguities and to clarify processes. These amendments will contribute meaningfully to a robust and effective regulatory framework. I also note that the Senate Standing Committee on Economics is considering this bill—specifically, the question of liability. The government will consider the committee’s report when it becomes available.

Yesterday I had the pleasure of tabling the government’s formal response to the report of the Standing Committee on Primary Industries and Resources. I am pleased to note that the government supports 15 of the committee’s 19 recommendations. A further two recommendations were partially supported. A number of recommendations required careful consideration to address underlying issues. These include recommendations 1, 8, 9, 11, 12 and 14. Amendments to the legislation are required to give effect to the matters raised by recommendations 1, 6, 8, 9 and 12. In relation to recommendation 1, which the government supports, a high-level objects clause has been included as part of the amendments. A more detailed objects clause along the lines suggested by the committee is not recommended, as it has the very real potential to impact on the interpretation of the detailed contents of the bill, including the balance of objectives relating to the interactions between petroleum and greenhouse sections of the bill.

The government supports recommendation 6—renewal of greenhouse gas assessment permits. The current proposed term for greenhouse gas assessment permits—six years non-renewable—may not provide sufficient time for assessment works in a situation where demand for equipment such as drilling rigs is booked for an extended period into the future. However, to ensure that renewals are not used to warehouse areas, the renewal will be subject either to proposed work programs having been fully met but further work being required on them or to work programs having been subject to unavoidable delays.

The government partially supports recommendation 8—recognition of integrated petroleum developments. The government recommends amending the bill to allow activities across different petroleum title areas to be permitted, subject to the normal approval processes where these are consistent with good oilfield practice, protection of the environment and occupational health and safety. It is not proposed, however, that the disposal of greenhouse gas substances consisting overwhelmingly of carbon dioxide be permitted across multiple petroleum title areas. If such an operation were to be undertaken, it should be subject to the greenhouse gas requirements of this bill and hence should be done under a greenhouse gas title. If injection of by-product greenhouse gases from multiple sources were to be permitted under a petroleum title, there is the possibility that the amount of the greenhouse gas to be injected will exceed the quantity of fluids produced from the reservoir with no requirement for the operator to monitor the behaviour of the stored substance or to ensure that it does not migrate outside the boundaries of the title area. There is a need, therefore, to ensure that such injection projects be regulated under the requirements of the greenhouse gas provisions of the act.

The main underlying issue is to give petroleum operators reasonable certainty that they will be able to obtain the greenhouse gas titles needed for an integrated operation. Giving these industries increased certainty is critical because they are likely to be early movers in the Australian greenhouse gas storage industry. This can best be managed by adopting the committee’s recommendation 12, which would make the availability of a carbon dioxide stream for imminent injection a criterion when assessing bids for the award of acreage.

The government partially supports recommendation 9, allowing ministerial intervention in negotiations between greenhouse gas and petroleum operators. The underlying concern that led to this recommendation relates to the potential for petroleum titleholders to effectively block greenhouse gas activities in an area by claiming that there is a ‘significant risk of a significant adverse impact’ on their petroleum operations. While the government does not believe the recommendation can be adopted in its current form, there are a number of amendments that can be made to address the concerns of the committee. The government believes that the responsible Commonwealth minister having power to direct the parties to negotiate in good faith would be unlikely to assist the parties to reach a negotiated settlement. This is because each party will, albeit in good faith, inevitably continue to act in pursuance of their own commercial interests.

Giving the responsible Commonwealth minister the power to direct an outcome needs to be given separate consideration in relation to pre-commencement and post-commencement petroleum titles. In pre-commencement petroleum titles, the government considers that a power for the responsible Commonwealth minister to direct an outcome would be a substantial encroachment on pre-existing petroleum rights and would represent a major policy shift in the policy balance of this bill in its current form. Regarding post-commencement petroleum titles, there is already a circuit-breaker mechanism in place where parties fail to agree. In the absence of agreement between parties, or if the responsible Commonwealth minister is not satisfied with the terms of the agreement, the responsible Commonwealth minister has power to decide the outcome in the public interest.

As I have already mentioned, a number of amendments to the bill are recommended to address the concerns of the committee. Regarding the ‘significant risk of a significant adverse impact test’, the government recommends that the test criteria be strengthened and handled by regulations rather than in legislation. On that note, I have also given the committee an undertaking that we will present to them for consideration the regulations once they have been drafted. I appreciate their offer to also assist in that process.

To strengthen the treatment of the ‘significant risk of a significant adverse impact test’, the government is proposing to provide the responsible Commonwealth minister with the power to establish an expert advisory committee to provide technical advice. This proposal goes beyond the recommendations of the House of Representatives committee, but the government believes that it will help address the committee’s underlying concerns about the balance between petroleum and greenhouse gas storage rights. The advisory committee would be convened on a ‘needs’ basis. The amendments also cover such matters as membership, remuneration and conflicts of interest.

The government also recommends that the bill be amended to give the responsible Commonwealth minister the power to request parties to report on any negotiations that have taken place and the outcome of those negotiations. The recommended amendments to the bill require parties to exchange information on their proposed activities. While the existing framework of the legislation has been prepared with the intention of providing incentives for commercial negotiations, explicit provisions such as these will provide further encouragement. Another area where regulations can contribute to addressing the underlying issues relates to data. The government recommends an amendment to the bill to allow the responsible Commonwealth minister to request production of any relevant information as an aid in decision making. The proposed amendment also makes provision, and appropriately so, for confidentiality.

The government does not support recommendation 11, which provides for a one-off opportunity for petroleum operators to apply for and incorporate a greenhouse gas assessment permit over their exploration or production licence. While adoption of this recommendation would, as the committee suggest in their report, likely lead to increased exploration activity and knowledge of Australia’s storage resource, it could alternatively delay implementation of some projects by locking out early movers which do not have existing petroleum rights. Another major drawback is that storage sites are very unlikely to match petroleum title boundaries. The underlying geology will be a crucial factor when selecting acreage for release for a greenhouse gas assessment permit because of the need to take migration paths into account, which is not a factor in determining petroleum title areas. As a result, areas that would be selected to give the best utilisation of potential storage sites would almost certainly be very different from the areas covered by existing petroleum titles.

There is, however, one area where the Commonwealth has proposed that rights be extended. The bill provides for the holder of a petroleum production licence to apply for a greenhouse gas injection licence. Additional certainty will be provided by the mirroring of these rights to allow petroleum retention leaseholders to apply for a greenhouse gas holding licence. Only greenhouse gases derived from petroleum operations in the production licence area could be stored under an injection licence awarded under this provision. This need was highlighted in several submissions to the committee. There is also a need to include an amendment to ensure that if the holder of a petroleum production licence holds a greenhouse gas title through this mechanism then the titleholder should not be able to sell one title separately from another. This provision was aimed at promoting synergies between the petroleum and greenhouse gas industries, and allowing them to pass into several hands could result in these synergies being largely lost. Moreover, allowing separate sale could simply be ‘gifting’ the petroleum licensee with a valuable asset that could be sold without public benefit.

The government supports recommendation 12. The government recommends including the demonstration of a readily available carbon dioxide stream for imminent injection as a criterion in the amended criteria for assessing bids for acreage.

The government does not support recommendation 14, which recommends a process for formal transfer of long-term liability to the government. This is an area which has critical implications for the public acceptability of the framework. The practical effect of the current legislative framework is that, after statutory obligations cease and when a closure certificate is issued, common law will apply. The existing bill sets out requirements that have to be met before a closing certificate can be issued. In particular, it requires the responsible Commonwealth minister to be satisfied that the injected substance is behaving as predicted and does not pose a significant risk to the conservation of natural resources, the environment, human health and safety or other matters that the responsible Commonwealth minister considers relevant.

One possible impact of taking over all liability, as recommended by the committee, could be to lengthen the closure period and increase the complexities of the closure processes. This could occur because such a transfer of liability would likely lead to the responsible Commonwealth minister requiring a higher degree of certainty concerning long-term liability issues. As a result, the reduced uncertainty for industry as a result of transferring long-term liability to the Commonwealth could be offset by increased uncertainty concerning the requirements of the closure processes. Under certain provisions, which remain silent on long-term liability and hence leave the matter to common law, a greenhouse gas operator would likely only be liable if damage arose and there was fault or a failing of some kind, such as negligence on the part of the operator. The government therefore recommends that the existing framework remain unchanged.

I also note that the Senate Standing Committee on Economics is considering the bill. The government will consider the report when it becomes available. I would again like to express my appreciation and the government’s appreciation to the House of Representatives Standing Committee on Primary Industries and Resources for its contribution to this pioneering legislation. This bill is a world first and will play a significant role in developing one of the key available methods for reducing greenhouse gas emissions, thereby assisting Australia to address the challenges of climate change. Large-scale projects for capturing and concentrating greenhouse gases involve potential investments of many hundreds of millions, or billions, of dollars. Several large-scale projects in Australia have already been considering their requirements for geological storage for some years. While they recognise the complexities that need to be addressed by this bill, the proponents are also eager to gain access to areas so that they can commence detailed assessment of storage formations. It is the government’s belief that this bill provides that access and will play a key role in accelerating the development of the carbon dioxide capture and geological storage industry. In so doing, it provides a significant opportunity to tackle climate change in a way that protects Australian jobs and maintains our economic prosperity.

In closing, I wish to thank all members for their positive contributions to the debate on the bills. I appreciate the spirit in which contributions have been made. Members of the opposition have indicated in their speeches that opposition senators may wish to move amendments once the bills have been introduced in the other place. The government has already commenced detailed discussions with Senator Johnston and the member for Groom, Mr Ian Macfarlane, on these matters of concern. I look forward to continuing those constructive discussions so as to reach consensus on this vital piece of legislation. I commend the bills to the House.

Question agreed to.

Bill read a second time.

 

OFFSHORE PETROLEUM AMENDMENT (GREENHOUSE GAS STORAGE) BILL 2008