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Offshore Minerals (Retention Licence User Charge) Bill 1993

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House: House of Representatives

Portfolio: Primary Industries and Energy

Commencement: Immediately after the Offshore Minerals Act 1994 commences. The Offshore Minerals Act 1994 commenced on the day of its assent, 25 February 1994.


To impose a user charge on the holders of retention licences issued under the Offshore Minerals Act 1994. The aim of this charge is to recover approximately half the cost of geophysical work carried out by the Australian Geological Survey Organisation (AGSO) in its Continental Margins program. The AGSO is the principal Commonwealth geoscience agency. Its role is also to develop a comprehensive and integrated geoscientific knowledge base for the Australian continent, offshore territory and Australian Antarctic Territory. Its functions include providing scientific and technical advice to government, industry and the public and participation in multilateral geoscientific programs 1 .

The Continental Margins Program currently being conducted by AGSO involves mapping the continental shelf around Australia, and testing various underwater areas for future mineral exploration possibilities, most importantly natural gas and petroleum.

In the Second Reading Speech, the Minister indicated that the present level of the charge would be zero 2 .


In the late 1960s and early 1970s, a resources boom in Australia led to increased activity in mining and exploration, especially at sea. The discovery of significant oil and gas fields at sea alerted governments to the prospects of large revenue flows and export possibilities of these discoveries. There was at the time, however, a lack of clarity with respect to constitutional power over offshore resources. Offshore resources, in particular petroleum, were governed by a series of State Acts which usually purported to claim offshore minerals for the State Crown 3 . Even though the Commonwealth has no specific power over offshore resources, the State statutes still appeared to be constrained by the principle that colonial legislatures had limited power to legislate extra-territorially 4 . As a result of this uncertainty, negotiations between the States and the Commonwealth produced an agreement which provided for joint responsibility over offshore resources, most importantly petroleum. The agreement was to be implemented by mirror legislation in all the States and broadly provided for a uniform system of valid exploration titles, regardless of actual legal jurisdiction, revenue sharing, consultation, delineation of "adjacent areas" of the States. These adjacent areas were areas appertaining to each State. The Commonwealth legislation would apply to all State adjacent areas while the State statute would apply to its adjacent area only 5 . The Commonwealth passed the Petroleum (Submerged Lands) Act in 1967 and the complementary legislation was passed by all the States in that same year.

In spite of the agreement, the incoming Whitlam Labor government enacted the Seas and Submerged Lands Act 1973, which implemented the Convention on the Territorial Sea and the Contiguous Zone (Geneva 1958) 6 and the Convention on the Territorial Shelf (Geneva 1958) 7 thereby claiming sovereignty for the Commonwealth over the continental shelf and territorial sea, giving the Commonwealth exclusive jurisdiction to exploit its natural resources. The then Minister for Resources and Energy, Rex Connor stated that the increasing importance of the exploitation of natural resources, the advancement of technology and the need to preserve the environment meant that a national approach had to be taken, which could only be provided by the Commonwealth 8 .

The States challenged the legislation, but its validity was upheld by the High Court in NSW v Commonwealth (The Seas and Submerged Lands Case) 9 . The Court held unanimously that the external affairs power 10 allowed the Commonwealth to exercise rights over the territorial sea and continental shelf consistent with the conventions. The Court further held that the boundaries of the States ended at the low water mark and that they had no sovereign or proprietary rights in respect of the territorial sea or seabed.

As a result of the case, and a change of government, further negotiations were entered into with the States, to formulate a joint approach to the whole question of offshore jurisdiction. A further intergovernmental agreement was reached in 1979, which made significant concessions to the States, notably, the States were given legislative authority over the territorial sea and property rights in the seabed 11 . Commonwealth legislation was eventually passed 12 giving back to the States certain responsibilities in relation to offshore mining. Prime Minister Fraser rationalised the position by stating that his government was more cognisant of:

"..notions of the appropriate allocation of rights and responsibilities among governments in Australia, and of the benefits of decentralisation of authority and of decision making." 13

The legislation enacted by the Commonwealth as a result of the 1979 agreement was divided into 2 types of subject matter:

(a) legislation dealing with petroleum, such as the Petroleum (Submerged Lands) Act 1967 and;

(b) legislation dealing with other mineral resources (the Minerals (Submerged Lands) Act 1981).

The States passed similar legislation in relation to petroleum 14 but were unwilling to enact complementary offshore minerals legislation due to dissatisfaction with the Commonwealth Minerals (Submerged Lands) Act 1981. These acts however provided a framework for the exploration, extraction, and production of offshore natural resources in the various offshore areas.

In 1990, consultation with the States took place to revise the regime established under the Minerals (Submerged Lands) Act 1981. A number of amendments to that Act were agreed to after consultation with the States, in return for which the States affirmed their commitment to a common offshore minerals code. In 1993, the Commonwealth enacted the Offshore Minerals Act 1994, (the Principal Act) which replaces the Minerals (Submerged Lands) Act 1981 and its associated Acts 15 . The Act simplifies existing provisions and administrative procedures and introduce new, more effective provisions. The Act also preserves the principles of the intergovernmental agreements while giving the States continuing functions over administration of certain parts of the Commonwealth legislation.

Section 35 of the Principal Act specifically states that that Act does not apply to the exploration or recovery of petroleum, maintaining the distinction in the previous legislation.

Section 428 of the Principal Act preserves State laws operating in an offshore area under Commonwealth jurisdiction.

Part 2.3 of the Principal Act deals with the procedures involving the granting, renewal, duration, surrender and expiry of retention licences. Section 132 of the Principal Act allows retention licences to be granted over "blocks" in an offshore area. Section 17 of the Principal Act defines a block to be an area of approximately 2 km 2 located according to meridians of longitude and latitude. Section 133 of the Principal Act allows a retention licence holder to explore for and recover minerals in the retention licence area as long as such activities are not part of a commercial mining operation. The licence holder must also comply with any restrictions in the licence as to what minerals can be recovered.

Main Provisions

Clause 4 of the Bill imposes a user charge on a retention licence for each year of the term of the licence, to be calculated in accordance with the regulations, but not to exceed $50,000.

Clause 5 makes a single licence holder liable for the charge, and makes multiple holders of a single licence joint and severally liable.

Clause 6 makes the charge payable one month after the day on which the year of the licence begins.

Clause 7 provides a penalty for late payment of the user charge, being 0.33% of the charge per day. Single licence holders are liable for the penalty, and multiple holders of a single licence joint and severally liable.

Clause 8 makes unpaid charges and penalties debts due to the Commonwealth, recoverable in court of competent jurisdiction.


1 Australian Geological Survey Organisation Yearbook 1992, pp v - viii

2 House of Representatives, Parliamentary Debates (Hansard), 16 December 1993, p 4274.

3 For example, the Underseas Minerals Resources Act 1963 (Vic) applied the Mines Act 1958 (Vic) and the Petroleum Act 1958 (Vic) to the seabed and subsoil outside territorial limits within Parliament's legislative competence (section 2(1)) and vested minerals in the seabed and subsoil in the Crown, the Mines Act 1958 (Vic) set up a framework for licensing mining on Crown land, and the Petroleum Act 1958 (Vic) retrospectively vested all petroleum under land in Victoria in the Crown. For another example, see the Mineral Resources Adjacent Submarine Areas 1964 (Qld).

4 Such power being limited by the need for some nexus between the subject of legislation and the State; Broken Hill Sth v NSW Commissioner of Taxation, (1937) 56 CLR 337.

5 A more detailed account can be found in Crommelin M, "Federal State Cooperation on Natural Resources: The Australian Experience" in Saunders C and Owen J, Managing Natural Resources in a Federal State, 1986.

6 Seas and Submerged Lands Act 1973, Schedule 1.

7 Seas and Submerged Lands Act 1973, Schedule 2.

8 House of Representatives, Parliamentary Debates (Hansard), Second Reading speech, 10 May 1973, p 2005-2007.

9 1975 135 CLR 335

10 Commonwealth Constitution, Section 51 (xxix).

11 Section 5 of the Coastal Waters (State Powers) Act 1980 (Commonwealth) provides that:

"The legislative powers exercisable from time to time under the constitution of each State extend to the making of-

(a) all such laws of the State as could be made by virtue of those powers if the coastal waters of the State, as extending from time to time, were within the limits of the State, including laws applying in or in relation to the sea bed and subsoil beneath, and the airspace above, the coastal waters of the State;

(b) laws of the State having effect in or in relation to waters within the adjacent area in respect of the State but beyond the outer limits of the costal waters of the State, including laws applying in or in relation to the sea bed and subsoil beneath, and the airspace above, the first mentioned waters, being laws with respect to-

(i) subterranean mining from land within the limits of the State; or

(ii) ports, harbours and other shipping facilities, including installations, and dredging and other works, relating thereto, and other coastal works; and

(c) laws of the State with respect to fisheries...."

Sub section 5 (c) deals with fisheries which are subject to special constitutional considerations.

12 Such as the Coastal Waters (State Powers) Act 1980 (Commonwealth).

13 House of Representatives, Parliamentary Debates, (Hansard), Second reading speech, 23 April 1980, p 2166.

14 For example, the Petroleum (Submerged Lands) Act 1982 (Vic).

15 Such as the Minerals (Submerged Lands) (Royalty) Act 1981, the Minerals (Submerged Lands) (Exploration Permit Fees) Act 1981, the Minerals (Submerged Lands) (Production Licence Fees) Act 1981, the Minerals (Submerged Lands) (Works Authority Fees) Act 1981, and the Minerals (Submerged Lands) (Registration Fees) Act 1981.

Marco Bini Ph. 06 2772476

Bills Digest Service 9 March 1994

Parliamentary Research Service

This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1994.