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Tuesday, 14 October 2003
Page: 16353


Senator ELLISON (Minister for Justice and Customs) (6:37 PM) —I move:

That these bills be now read a second time.

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

Leave granted.

The speeches read as follows

PETROLEUM (SUBMERGED LANDS) AMENDMENT BILL 2003

The Petroleum (Submerged Lands) Amendment Bill 2003 is a bill to amend the Petroleum (Submerged Lands) Act 1967, which is the legislation through which the Commonwealth regulates development of its offshore petroleum reserves.

This bill gives effect to the Government's election commitment to establish a single safety regulator for the offshore petroleum industry in Commonwealth, State and Northern Territory coastal waters. The bill will also bring about improved and nationally consistent occupational health and safety arrangements for the offshore petroleum industry.

The bill also makes minor amendments to the Petroleum (Submerged Lands) Act unconnected to offshore safety.

One is to address an 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 second is to make amendments that will remove the mechanics of petroleum data submission from the Act and place them in new objective based regulations.

The offshore petroleum industry is an important contributor to the Australian economy. The industry supports thousands of jobs; supplies a large proportion of our domestic liquid fuel and natural gas requirements; and is a major export industry. It also attracts billions of dollars in foreign investment for exploration, development of new oil and gas fields, and construction of gas pipelines and downstream gas processing plants.

In August 2001, the Commonwealth Department of Industry, Science and Resources prepared a report on offshore safety titled “Future Arrangements for the Regulation of Offshore Petroleum Safety”. It found that the current system was inadequate.

In particular, it was noted that there are too many acts and regulations regulating offshore petroleum activities, with unclear boundaries and inconsistent application. Different sets of legal documents apply to the areas adjacent to each State and the Northern Territory. And there are overlaps in the applicable legislation.

In response to this report, and the wishes of industry and the workforce, the Government committed $6.1 million dollars in the 2002-2003 budget to establish the Authority as a single national safety regulator. It will cover offshore petroleum activities in Commonwealth, State and Northern Territory coastal waters from 1 January 2005.

The Authority will be established as a Commonwealth statutory authority which will regulate safety on offshore petroleum facilities on behalf of the Commonwealth, the States and the Northern Territory.

When it is undertaking its regulatory activities in Commonwealth waters the authority will use the powers conferred by the Commonwealth Petroleum (Submerged Lands) Act.

When regulating in the coastal waters of the States or Northern Territory it will use “mirror” powers conferred under State or Northern Territory Petroleum (Submerged Lands) Acts.

There is also provision in this legislation for the Authority to undertake regulatory activities requested by a State or the Northern Territory in inland waters or onshore. If such a request was made, the Authority would draw its powers from the relevant State or Northern Territory legislation.

If the States or Northern Territory seek the safety regulation of offshore petroleum operations in their internal waters, it will be undertaken by the Authority. This is the situation for Western Australia.

The Authority may also be invited to regulate associated onshore petroleum operations. Decisions about this will be taken on a case by case basis.

The Authority's key functions will be to promote the health and safety of persons engaged in offshore petroleum operations. It will effectively monitor and enforce the health and safety obligations in Commonwealth, State and Northern Territory legislation.

The Authority will have the power to investigate accidents or circumstances that could have increased the risk of accidents. It will report on these investigations to the Commonwealth, State and Northern Territory Ministers.

The Authority will continue to apply the safety case approach to regulation which is currently used in the offshore petroleum industry in Australia and other jurisdictions such as the United Kingdom and Norway.

Under the safety case approach, operators of offshore facilities assess all the risks to the facility, undertake formal hazard and risk studies, and describe the management systems for safe running of the facility. Once accepted, the safety case is “in force” and provides the basis for safe facility operations.

I turn now to the structure and governance of the Authority.

An important aspect of the governance arrangements for the Authority is that it will have an advisory Board. The independence and expertise of the Board members will be an invaluable resource for the Chief Executive Officer of the Authority.

The Board will provide advice and give recommendations directly to Commonwealth, State and Northern Territory Ministers on offshore safety policy and strategic matters, and the performance of the Authority.

The legislation requires the CEO to seek the Board's advice on strategic matters relating to the Authority's functions, and to have regard to the advice provided. The CEO must keep the Board informed of the Authority's operations, and provide any information requested. It is intended that this Board will be influential and effective in the activities of the Authority.

As the Authority is a national regulator, the CEO and members of the Board will be nominated for appointment by the Ministerial Council on Mineral and Petroleum Resources, and will be appointed by the Commonwealth Minister.

The Commonwealth Minister will be responsible for issuing policy principles or directions but, before doing so, will consult with State and Northern Territory Ministers. Should the principles or directions relate wholly or mostly to operations in State or Northern Territory coastal waters, the Commonwealth Minister will first need to obtain the agreement of each responsible Minister.

Directions will not relate to operations at a particular facility, although the Minister will be able to direct the Authority to investigate a particular act or dangerous occurrence at a facility.

There are emergency powers that allow the Minister to issue directions without first obtaining the agreement of the relevant State or Northern Territory Minister, but they only apply for a short period. There is also provision for the State and Northern Territory Ministers to request the Commonwealth Minister to issue a direction to apply in their coastal waters.

I turn now to staffing arrangements for the Authority.

The safety case approach gives the operator greater freedom to choose how it runs its facility but places increased demands on the regulator. The regulator has to be in a position to assess and, if necessary, challenge the operator's safety case.

Difficult decisions will fall upon the regulatory staff of the Authority. For example, they may have to decide whether a safety issue is of such concern that oil or gas production should cease until it is rectified. It is an immense responsibility which must be exercised judiciously. The people with this responsibility need to possess a unique blend of technical competence, interpersonal skills and judgement. Above all they need the respect of industry, the workforce and Governments.

The staff of the Authority will be employed under the Public Service Act but the Authority will need to be able to specify essential qualifications and experience for offshore safety regulators.

It will need to be able to advertise for Offshore Safety Regulators, or Offshore Safety Team Leaders, without reference to more widely used Australian Public Service classifications. It will need to be able to offer salary ranges which are competitive in the international market and which are well outside the normal levels of public service pay and conditions.

For the regulatory staff of the Authority, all of these requirements can be provided through the flexibilities provided by Australian Workplace Agreements available under the Australian Public Service Act.

I now turn to how the Authority will be funded.

Regulation of industry activities is essential for three reasons. To provide a safe working environment for the offshore petroleum workforce. To provide the greatest possible confidence that there will be no environmental damage arising from any catastrophic explosions. And to ensure continuity of important energy supplies such as gas.

Governments will not allow the industry to operate without regulation. The regulation is like any other essential input into the industry's offshore petroleum operations. This is a case with clear beneficiaries of a service being provided by the Government and the industry must pay for it.

The offshore petroleum industry will receive an obvious benefit in the form of a greater level of confidence that their safety systems are robust. They will be less exposed to failures which could result in injury, death and interruptions to business operations.

This bill, and the related Offshore Petroleum (Safety Levies) Bill, will provide the Authority with the ability to fully recover the costs of its operations and activities through industry fees and levies.

Where an operator requests the Authority to perform a service, the Authority will have the ability, under this bill, to charge fees for the supply of its services. These services may include the assessment of safety cases, assessment of pipeline safety management plans, and provision of advisory and other services as may be requested by industry from time-to-time.

The majority of the Authority's resources will be employed in activities associated with monitoring compliance with approved safety cases. These include conducting audits of facilities, reviewing and assessing updates to existing safety cases. Under the Offshore Petroleum (Safety Levies) Bill 2003, the cost of these ongoing activities will be recovered through a safety case levy which will be payable by all exploration, production and support facility operators on an annual basis whilst there is a safety case in force for that facility.

The Authority will also have the ability to recover the costs of monitoring the safety of offshore pipelines through an annual pipeline safety management plan levy. However, it is expected that this levy will recover only a small proportion of the Authority's operating costs.

The Offshore Petroleum (Safety Levies) Bill 2003, will also authorise the Authority to charge a safety investigation levy. This will be payable by an individual operator in the event of a serious accident or dangerous occurrence which requires the Authority to conduct an investigation. The levy will only be charged if the resources required to conduct the investigation exceed a level which will be set by the regulations.

The final level and structure of the fees and levies will be set by regulations before the Authority commences operation in 2005. The fees and levies will be designed in accordance with the Government's cost recovery policy. And there will be consultation with industry, through the preparation of a cost recovery impact statement.

The fundamental purpose of this bill is to improve offshore safety outcomes by simplifying regulatory arrangements under a single national regulator.

The decision to create the Authority, and the development of the legislation, has involved the Ministerial Council on Mineral and Petroleum Resources, a steering committee of Commonwealth and State and Northern Territory officials, industry participants and workforce representatives. The role of the working groups comprising members of governments, industry and the workforce has been invaluable.

The offshore petroleum industry and workforce have been strong advocates for the creation of a national safety authority. An important reason for this support is an acknowledgement that a strong and effective regulator will enjoy the confidence of industry participants. It will also be influential in ensuring that safety is considered the highest concern from the drilling rig to the boardroom.

The amendments contained in this bill should give the public greater confidence that the regulation of safety in the offshore petroleum industry will be performed efficiently and effectively. It will lead to greater protection of the livelihood of the offshore petroleum workforce and the Commonwealth's interests.

I commend this bill to the Senate.

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OFFSHORE PETROLEUM (SAFETY LEVIES) BILL 2003

The Offshore Petroleum (Safety Levies) Bill 2003 is a bill for an Act to give effect to the decision of the Commonwealth and the States and Northern Territory to fully recover the costs of operating the National Offshore Petroleum Safety Authority from industry.

This bill, once enacted, will provide the National Offshore Petroleum Safety Authority with the ability to recover the costs of its regulatory activities through industry levies. A separate bill, the Petroleum (Submerged Lands) Amendment bill, establishes the Authority as the single regulator of safety in Commonwealth, State and Northern Territory waters.

The majority of the Authority's resources are to be employed in activities associated with monitoring compliance with approved safety cases, conducting audits of facilities, reviewing and assessing updates to existing safety cases. The cost of these ongoing activities will be recovered through a Safety Case levy.

This will be payable by all operators of exploration, production and support facilities on an annual basis whilst there is a safety case in force for that facility. It is intended that the Safety Case levy, which will recover the majority of the Authority's annual operating costs, will be calculated according to the type of facility. It will be done in such a way as to ensure that any one operator's contribution is in proportion to their level of activity within the offshore petroleum industry.

The costs of monitoring the safety of offshore pipelines will be recovered through an annual pipeline safety management plan levy. It is intended that the pipeline safety management plan levy will be calculated according to the type of pipeline. This levy is expected to recover only a small proportion of the Authority's operating costs.

This bill will also authorise the Authority to charge a safety investigation levy. This will be payable by an operator in the event of a serious accident or dangerous occurrence which requires the Authority to conduct an investigation.

The levy will only be charged if the resources required to conduct the investigation exceed a level which will be set by the regulations. Having a separate safety investigation levy will avoid a situation where all operators must subsidise the cost of investigations involving just one or two of the industry's operators.

The bill also makes provision for a penalty to be imposed if a levy payment is significantly late.

Finally if the company requests the Authority to undertake a service for it, for example to assess a safety case, the Authority will charge the company for doing that work. This fee will be recovered under the Petroleum (Submerged Lands) Act.

The final level and structure of the fees and levies will be set by regulations before the Authority commences operation in 2005. The fees and levies will be designed in accordance with the Government's cost recovery policy. There will be consultation with industry, through the preparation of a cost recovery impact statement.

I commend the bill to the Senate.

Debate (on motion by Senator Mackay) adjourned.