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Monday, 20 May 1985
Page: 2153


Senator GRIMES (Minister for Community Services)(4.08) —I move:

That the Bills be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows-

These Bills propose a number of amendments to the Petroleum (Submerged Lands) Act and incorporated Acts. They provide for:

the granting of retention leases over currently non-commercial discoveries and the setting of fees for such leases;

the revision of the registration provisions of the Act which deal with registration of legal documents concerning interests in titles and consequential amendments to the fees payable on registration;

the improvement of the administrative processes for the making of regulations and the service of directions which control offshore petroleum exploration and development operations;

the extension of the scope of access and special prospecting authorities to facilitate seismic survey work;

the early release of basic data and interpretive information supplied by titleholders to Government; and

the review by the administrative appeals tribunal of discretionary decisions made by the Commonwealth Minister (or the Minister's delegate) as designated authority in areas adjacent to Commonwealth Territories, or in exercise of other specified powers.

The above provisions have been the subject of extensive consultation with the State and Northern Territory governments and the petroleum exploration industry, and have general support.

In addition, the amendments provide that petroleum production in the territory of Ashmore and Cartier Islands adjacent area will not incur liability for royalties. The amendments also give effect to the agreement between the Commonwealth and Western Australian Governments which waives a proportion of the Commonwealth's share of royalties from the north west shelf natural gas project in favour of Western Australia.

The amendments proposed in these four Bills are essential to the efficient administration of offshore petroleum activity. Many of them will also provide further encouragement of offshore exploration and development.

With the introduction of a new division into the Act, the Petroleum (Submerged Lands) Amendment Bill 1985 enables permittees discovering petroleum which is currently non-commercial, but which is expected to become commercial within fifteen years, to apply to the joint authority for the award of a retention lease. Applicants are required to provide details of proposed work and expenditure in a lease area, as well as details of the commercial viability, or possible future commercial viability, of the recovery of petroleum from the area. A fee of $600 is payable on lodging an application for a retention lease.

If the Joint Authority is satisfied that recovery of petroleum is not presently commercially viable, but is likely to become viable within fifteen years, it shall grant a lease for a period of five years over all of the blocks applied for by the permittee. Given the uncertainties concerning petroleum prices, marketing opportunities and technological change, a fifteen year assessment period should ensure that discoveries with genuine development potential are awarded a lease. The Government does not intend that small, insignificant discoveries will be eligible for a lease as this would 'sterilise' exploration areas with no reasonable prospect for development of the resource.

The Joint Authority may refuse to grant a lease and, if it does so because it is satisfied that recovery is already commercially viable, the permittee may then apply for a production licence. If refusal to grant the lease is on the grounds that petroleum production is unlikely to become commercially viable within fifteen years, the blocks applied for will remain part of the exploration permit.

During the term of a lease the Joint Authority may require the lessee to re-evaluate the commercial viability of petroleum production from the lease area. Having examined such a re-evaluation and formed the opinion that production is viable, the Joint Authority may inform the lessee that the lease is to be cancelled. However, before the Joint Authority issues a cancellation notice, it must give the lessee not less than one month to object to the cancellation. If the Joint Authority proceeds with a cancellation notice after consideration of the lessee's objections, termination of the lease will take place twelve months after the notice has been served. During this period the lessee may apply for a production licence, in which case termination of the lease will not take place until the application for the licence has been dealt with. It is expected that lessees will keep development options under detailed attention throughout the term of the lease particularly where the commercial viability is marginal in the short term. Accordingly, where cancellation action is proposed by the Joint Authority, twelve months will provide adequate opportunity for lodgment of an application for a production licence.

A lessee may apply for renewal of the lease six to twelve months before its expiration. Details similar to the original lease application and a fee of $600 are required to accompany the renewal application. If the Joint Authority is satisfied that the lease is still not commercial, but is likely to become commercial during the next fifteen years, and the lessee has fulfilled the conditions of the original lease, a renewal will be granted.

The Joint Authority may, however, refuse to grant the renewal of a lease, in which case the lessee must be provided with the reasons and will have the opportunity to provide further information in support of the renewal application. Where refusal to renew a lease is because the joint authority is satisfied that petroleum production has become commercially viable, the lessee will have twelve months within which to apply for a production licence.

Where additional petroleum is discovered in a lease area, after the grant of a lease, the lessee is required to notify the designated authority immediately. The designated authority has the power to direct the lessee to furnish particulars in connection with the discovery. The designated authority may then direct the lessee to evaluate the discovery. Non-compliance with either of these directions could attract a penalty of $10,000. These provisions are similar to those applying to the discovery of petroleum by a permittee.

The Petroleum (Submerged Lands) Act (Retention Lease Fees) Bill sets annual fees of $4,500 for each block in a lease. This compares with $9,000 per block for a production licence and $15 per block for an exploration permit. Fees collected from retention leases will be paid to the relevant State or the Northern Territory as appropriate.

The introduction of the retention lease as a form of title is supported by the State and Northern Territory Governments and by industry. The provisions in the Bill include numerous constructive suggestions from those sources which will enhance the effectiveness of the legislation.

The Petroleum (Submerged Lands) Amendment Bill also revises the registration provisions of the Act. The new provisions take into account recommendations of the Royal Commission into the activities of the Ship Painters and Dockers Union, and suggestions by industry and the States and the Northern Territory, to clarify the process of registration of transfers and dealings affecting petroleum titles. The status of transfers and dealings which have not been lodged for registration is also clarified. Provision is also made to ensure that the register is kept as up-to-date as possible, to protect the interests of investors and potential investors.

The amendments ensure that a transfer of title is of no force in law until it has been approved by the joint authority and registered. Each registered holder and each transferee of a title will be required to execute the instrument of transfer before it can be lodged for approval. Applications for approval of a transfer of title must be lodged with the designated authority within three months of the execution of the instrument. Applications received after this period are not to be approved by the joint authority unless special circumstances exist. The prescribed instrument of transfer will make it clear that a transfer must involve the transfer of the whole title from all of the transferors to all of the transferees. The transferees will comprise all of the parties who will be the registered holder of the title on registration of the transfer. Partial transfers will not be acceptable.

Where a transfer is approved by the joint authority the new provisions set out the manner in which the designated authority shall amend the register. The transfer comes into force at the time the register is amended.

All applications for transfer of titles lodged after the commencement of this section will be dealt with under the new provisions. Applications lodged before the commencement of this section, but for any reason not dealt with before the commencement, will be dealt with under the old provisions.

The Bill also introduces an amended scheme of arrangements for registration of specified dealings affecting titles. The new arrangements will remove deficiencies in the existing legislative scheme, particularly the uncertainty as to which dealings are able to be registered, and the effect in law of instruments evidencing dealings which have not been approved and registered.

Dealings which are covered by the amendments are those establishing the initial interests of registered titleholders in a title and any subsequent assignment of those interests, including arrangements which create a charge over an interest; dealings giving rise to assigning a right, whether conditional or not, to the assignment of an interest in a title; dealings between registered titleholders and other parties with an interest in a title regarding the manner in which operations will be carried out under the title and the rights and obligations of each of the parties; dealings creating or assigning an entitlement of a person to a share of the production of petroleum, or the revenue derived from a current or future discovery; and dealings creating or assigning a right or an option to enter into any of the dealings previously described. Any dealings altering or terminating any of the dealings described above are also registrable. Examples of these dealings are given in the explanatory memorandum to this Bill.

Such dealings are of no force until they have been approved by the joint authority. Applications for approval of a dealing must be lodged within 3 months of the date of execution of the instrument evidencing the dealing or they will not be approved, unless special circumstances exist. A separate application must be made for each title affected by a dealing. Any dealings entered into prior to a title coming into existence are, if a provisional application had not already been made, to be lodged within 3 months of the title coming into existence. Any dealing forming a part of a set of dealings comprising the issue of a series of debentures in relation to a particular title is to be treated as one dealing.

The amendments set out the manner in which the designated authority is to amend the register where an application has been made seeking approval for the registration of a dealing affecting an interest in a title.

Amendments are also made to the act covering dealings relating to titles which might come into existence in the future and which would then be subject to the provisions relating to registration of such dealings, as described above. This will enable a party to such a dealing to lodge a provisional application for approval of the dealing immediately before a title comes into existence. On the day the title comes into existence, the dealing will be treated as described above.

Any party to an unregistered dealing which has been entered into before these amendments come into force, and to which this Bill applies, may make application within twelve months for approval of the dealing. As the legislation is not retrospective this is not compulsory, but it will allow parties to clarify the legal status of their dealings.

It is an offence to lodge an instrument relating to transfers or dealings described in this Bill which is false or misleading in relation to the information necessary to calculate the fee payable under the registration fees Act. The penalty is $10,000. In addition, a party to an approved transfer or dealing may be required to supply information as to any alterations in the interests or rights in the title as a result of the operation of the transfer or dealing since it was approved, or to supply further information in respect of applications. Failure to comply with such requests could involve a penalty of $5,000.

The Bill also provides for corrections to be made to the register by the designated authority where there are obvious errors, for example, misspellings of company names. Entries in the register may also be made by the designated authority, either on application by interested persons or on the designated authority's initiative, to ensure the register is accurate. Before an entry is made, however, a notice must be published in the Gazette and the designated authority must take account of any submissions received on the matter before the register is amended.

Appropriate amendments have been made to the incorporated registration fees Act. These amendments clarify the calculation of fees payable for applications to register transfers or dealings affecting titles. They ensure that excessive fees cannot be charged in relation to the series of agreements which give effect to what amounts to a single transaction.

The amendments to the registration provisions of the Act are complex and could not have been completed without the considerable industry support which has been received.

At the suggestion of the Victorian Government, amendments to improve the administrative processes for the making of regulations and the service of directions are included in this Bill. The new provisions will facilitate the service of documents, enable codes of practice and standards to be adopted as they exist from time to time, and enable the directions and regulations to control certain activities by making them subject to the consent or approval of specified persons.

A direction may apply to a titleholder and also to other persons specified in the direction. These persons include those having a contractual relationship with the titleholder. The responsibility for ensuring that all relevant persons are aware of the directions falls on the titleholder. Where the titleholder fails to take appropriate action to make relevant persons aware of a direction, a penalty of $5,000 may be imposed.

To safeguard the rights of persons to whom a direction applies, it is provided that they may not be convicted of an offence for failing to comply with a direction unless the prosecution can prove that they knew, or could reasonably be expected to have known, of the existence of the direction. These parties are also protected from liability for costs incurred by the designated authority.

In view of the international nature of the petroleum industry this Bill will enable regulations to apply Australian or international codes of practice or technical standards, as in operation from time to time, to offshore petroleum activities. Of course, overseas standards will only be adopted where appropriate Australian standards do not exist.

The amendments will allow regulations to be made to enable specified operational and technical actions to be taken subject to the consent or approval of titleholders. The amendments will also enable the advice of internationally recognised certifying and classifying bodies to be accepted as the basis for consideration of certain specified proposals such as the assessment of the sea worthiness of vessels.

These provisions are fully supported by industry and the States and the Northern Territory.

The Bill also extends the scope of access and special prospecting authorities and facilitates their grant to exploration companies.

At the present time an access authority only applies to titleholders and exploration areas under the jurisdiction of the Commonwealth offshore legislation. The scope has been broadened to allow a person who holds a State or Northern Territory petroleum title to apply for an access authority to enter the Commonwealth area adjacent to that title.

The scope of special prospecting authorities has been extended to allow them to be granted over any vacant area, and more than one person may be granted a special prospecting authority over an area. However, the designated authority must inform each holder of a special prospecting authority of the proposed activities by other holders in the same area.

The Petroleum (Submerged Lands) Amendment Bill also provides for the early release of basic data and interpretive information supplied by titleholders to government, subject to consultations with titleholders on the release of interpretive information. The new provisions will increase public availability of data and information and will encourage exploration activity.

Information contained in or accompanying an application for the grant or renewal of a title may be released after the grant of the title, unless it is confidential or of a financial nature or covers details of the technical capability of the applicants. Further, factual data and information, that is data and information which are not conclusions or opinions, obtained about a permit or lease area may be released after two years. The current provisions applying to data and information about permits provide for five years confidentiality.

When a permit, lease or licence is surrendered, cancelled, determined or expires, factual information will be available for release immediately. Factual data collected on vacant acreage, for example under a special prospecting authority, will be available for release after two years, or earlier if it is deemed appropriate by the designated authority.

Interpretive information, that is a conclusion or an opinion of a confidential nature, may be released after five years subject to a number of conditions. Such information was previously not available for release at any time.

Before interpretive information is released, a Gazette notice will be published giving interested persons forty-five days in which to lodge an objection to the release of the information. The grounds for objection are that the information is a trade secret, or that disclosure of the information would adversely affect the business, commercial or financial affairs of the objector.

The designated authority or the Commonwealth Minister may allow, partly allow or disallow, the objection. A person who is dissatisfied with the decision of the designated authority may request a review by the Commonwealth Minister. The latter provision reflects the fact that the Commonwealth Minister is responsible for the administration of the legislation.

The Bill provides a more efficient arrangement in relation to the service of documents on titleholders. Where there is more than one titleholder it will allow one titleholder to be nominated as the person on who documents may be served. This nomination may be revoked by the other titleholders at any time. In the event of such revocation, documents would be served on all titleholders. This will improve the efficiency of administering titles and should be of considerable assistance to titleholders.

The Bill includes amendments which will enable review by the Administrative Appeals Tribunal (AAT) of designated authority decisions made by the Commonwealth Minister, or his delegate, in relation to areas adjacent to the Commonwealth Territories or in relation to the release of data and information supplied by titleholders. The amendments set out the manner in which the Minister may review decisions taken by a delegate before the matter may be referred to the AAT.

The Government has decided that decisions of a policy nature, that is joint authority decisions, and decisions of designated authorities in the State or Northern Territory adjacent areas should not be subject to AAT review. Policy decisions are clearly not a matter for AAT and it would be inappropriate to subject State or Northern Territory Ministers to the AAT legislation in relation to those areas in which they exercise powers in their own right as designated authorities.

In order to ensure that prospective petroleum development projects in the territory of Ashmore and Cartier Islands adjacent area are encouraged to proceed at the earliest possible time, the Government has decided to bring forward amendments to the petroleum (submerged lands) Act and the Incorporated Loyalty Act which will exempt production in this area from royalties. Currently known discoveries affected by this decision include Jabiru, Challis and Puffin.

I make it clear that this exemption from royalties cannot be viewed in isolation. It represents the first legislative step in introducing the RRT arrangements previously announced by the Government. It is being done now, ahead of the overall RRT legislation, to assist the developers of the Jabiru Project and to demonstrate the Government's commitment to major and positive changes in the financial regime applying to 'Greenfield' offshore projects. A prime example is the Jabiru Development in the Timor Sea which will clearly proceed under under the resource rent tax regime and may not have been developed under the previously applicable royalty and levy arrangements. Amendments to extend the royalty exemptions to the remaining 'Greenfield' areas will be introduced when the resource rent tax legislation is introduced into parliament.

Finally, the Petroleum (Submerged Lands) Amendment Bill makes provision for the Commonwealth to waive part of its royalties from the north west shelf project in favour of the Western Australian Government. Details of this arrangement were announced on 11 March this year. This will help Western Australia to meet its contractual obligations to the north west shelf operators, and so ensure the continued viability of the project.

The north west shelf project is of national significance and will bring substantial economic benefits to the State of Western Australia as well as the nation as a whole. It will play a key role in the future development of Australia's energy resources and in the development of energy trade between Australia and Japan. The Commonwealth's future financial contribution to the project, will be the waiver of the proportion of the royalties on the domestic phase of the project amounting to $117.1m (in 1984-85 dollars) over the next 20 years. This contribution is additional to substantial taxation other concessions provided by the Commonwealth for this project.

The amendments proposed in these four Bills are essential to the efficient administration of offshore petroleum activity. Many of them will also provide further encouragement of offshore exploration and development. I commend the Bills to the House.

Debate (on motion by Senator Kilgariff) adjourned.