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Tuesday, 5 July 2011
Page: 7667

Ms LIVERMORE (Capricornia) (20:44): I rise to support the Offshore Petroleum and Greenhouse Gas Storage Amendment (National Regulator) Bill 2011 and cognate bills and their swift passage through this parliament. Essentially, these bills provide for the establishment of a national regulator for petroleum, gas and greenhouse gas storage activities in Commonwealth waters. This is a significant reform and one that implements recommendations made by both the Productivity Commission and the Commission of Inquiry into the Montara blowout in the Timor Sea in 2009.

The past few years have been a time of massive growth in offshore oil and gas investment and activity. We all know that what we have seen so far is just the start of a new era for the industry. Natural gas is set to take its place as one of Australia's key export commodities, underpinning national growth and economic prosperity. It is also expected to play a much greater role in domestic energy supply as a less carbon intensive alternative to traditional coal-fired power generation.

The past few years have also been a time of review and reform of the regulatory framework that applies to the offshore gas and petroleum industries. That process of review and reform was initiated with the Australian Petroleum Production and Exploration Association's strategic leaders report Platform for prosperity, which in 2007 called for a Productivity Commission review of the regulatory regime applying to the industry. The Productivity Commission car­ried out its review in 2008 and reported in 2009. The focus of that review was to investigate whether overlapping and incon­sistent Commonwealth and state regulation was impeding economic activity within the sector and how the regulatory regime could be made more efficient and effective.

The commission's principal recomm­endation to reduce the regulatory burdens on the sector was the establishment of a national offshore regulator. Since the Productivity Commission began its work in 2008, Australia and the world have seen what can happen if this industry is not regulated with the highest standards of rigour and oversight. First, the Varanus Island explosion off Western Australia in 2008, then, a year later, the Montara blow-out and, most catastr­ophically, BP's Deepwater Horizon spill in the Gulf of Mexico all carried grave lessons for our Australian offshore oil and gas producers and regulators. Even though the Productivity Commission report was handed to the government back in 2009, it was clear that these events raised new questions and that implementation of the Productivity Commission's recommendations should be deferred until the Montara inquiry reported as well. Those lessons have informed the government's response to the recomme­ndations coming out of both the Productivity Commission and the Montara inquiry. They are reflected in these bills, which go to the efficiency of the regulatory regime but also to its strength and effectiveness in the areas of safety and environmental protection.

At the heart of these bills is the creation of a national regulator of the offshore petroleum, gas and greenhouse gas activities in Commonwealth waters through the establishment of two new bodies, one with regulatory responsibilities and one with administrative responsibilities. The first, the National Offshore Petroleum Safety and Environmental Management Authority, NOPSEMA, will be a single independent national regulator with responsibility for regulating safety, well integrity, environm­ental management and day-to-day operat­ions. This will be done by expanding the functions currently performed by NOPSA, the National Offshore Petroleum Safety Authority.

In addition, it is proposed that the new National Offshore Petroleum Titles Admin­istrator, NOPTA, will replace the current system of designated authorities—essentially the state and Northern Territory ministers and their respective departments—with a single national titles administrator. NOPTA will be part of the Department of Resources, Energy and Tourism at the Commonwealth level.

The arguments in favour of these changes could not be stronger. There is no doubt that the current system of regulation is complex and disjointed. While the Commonwealth government has legislative responsibility for petroleum operations in offshore areas beyond three nautical miles from the territorial sea baseline, the Commonwealth and the relevant state or territory jointly administer the activities in Commonwealth waters adjacent to that state or territory. Some of those functions, such as the administration of titles, are carried out by the joint authority, which is the responsible Commonwealth minister making decisions together with the relevant state or territory minister. In practice, however, the actual day-to-day and environmental regulation is undertaken by the designated authority, which is essentially the minister and the minister's department in each state and the Northern Territory. In effect, this means that there are seven separate designated authority regulators for the Commonwealth waters around Australia, all applying their own standards of scrutiny, their own different interpretations on the regulations, and their different levels of resources and expertise. As well, since 2005, the National Offshore Petroleum Safety Authority has had responsibility for safety and, more recently, well integrity.

Not surprisingly, the Productivity Comm­ission review found evidence of duplication, overlap and inconsistent administration in the current regime that imposed significant unnecessary burdens on the oil and gas sector and threatened Australia's compet­itiveness. The Montara Commission of Inquiry was a stark reminder that there is a lot more than just efficiency at stake if there are any weak links in the regulatory regime. That inquiry was instituted by the minister following the uncontrolled release of oil and gas from the Montara platform in the Timor Sea, for 10 weeks from 21 August 2009, and found major deficiencies on the part of both the operator, PTTEP Australasia, and the primary regulator, the Northern Territory Department of Resources.

The Montara experience highlighted the problems arising from the regulatory gaps between regulation of safety and regulation of integrity, environment and day-to-day operations. In that case NOPSA had responsibility for the safety of the Montara operation but no powers or responsibility for well integrity and day-to-day management, which logically have a crucial bearing on the overall safety of the operation.

The unacceptably lax way in which the Northern Territory Department of Resources carried out its role on behalf of the Commonwealth as the designated authority meant that the Commonwealth agency, NOPSA, could not properly discharge its obligations to do with safety. Consequently, the commission of inquiry recommended a single independent regulatory body be created to look after safety as a primary objective, well integrity and environmental approvals. The Minister for Resources and Energy summed it up in his second reading speech when he said that maintaining the current arrangements is not a credible option in light of these two reviews. The House of Representatives Standing Committee on Agriculture, Resources, Fisheries and Forestry, in its report on the bills, identified the objectives of the reforms they contain as being consistent with the findings of those reviews. The objectives are:

to provide an integrated approach to the regulation of safety, structural integrity and environmental management;

to ensure that this regulation is independent and appropriately skilled and resourced;

separate the resource development function from regulation and retain resource development within government; and

reduce the regulatory inconsistency and duplication that is inherent in the existing regulatory regime.

Those objectives will be met by the establishment of the two new bodies I referred to earlier. NOPSA will become NOPSEMA, the National Offshore Petrol­eum Safety and Environmental Management Authority, reflecting its expanded role. NOPSA had already been given expanded responsibilities for well integrity in amendments passed by parliament last year. These changes go even further to include responsibility for environmental manage­ment and day-to-day operational consents. This achieves the aim of fully integrating, within one agency, the safety of Australia's offshore petroleum and gas workers and the environment from exploration to decomm­issioning. It recognises that occupational health and safety, structural integrity of facilities, day-to-day operational matters and environmental management are all related and require an integrated approach to minimise risk and maximise overall safety.

There is an overlap in the skills required by the regulator to properly supervise all these aspects of offshore activities, so it makes sense to have all functions located in the one agency and complementing each other so that a high standard of assessment and scrutiny can be assured. As is the case under the current system, NOPSEMA will only have authority over activities in Commonwealth waters. However, states and territories will have the option of conferring their equivalent regulatory powers and functions to NOPSEMA in respect of oil and gas operations in state and territory waters if they choose to do so.

The establishment of the national titles administrator, NOPTA, deals with the issues of efficiency and duplication identified by the Productivity Commission. As I outlined earlier, the current system relies on the designated authority, which is effectively the relevant state or territory department, to administer the petroleum titles within the Commonwealth waters off the shores of that state or territory. To replace the current system of seven designated authorities, the single administrator, NOPTA, will be situated within the Commonwealth Depart­ment of Resources, Energy and Tourism and will carry out the functions of data collection, analysis, titles approval and transfers, and the provision of information, advice and recommendations about all petroleum titles to members of the joint authorities and the responsible Common­wealth minister. This will centralise the administration of all titles and promote efficiency and consistency across operations in all Commonwealth waters.

The bills retain the joint authority as the decision maker on key title decisions. That means that the relevant state or territory minister, in concert with the federal minister, makes the major decisions on things like the granting of titles, the imposition of conditions and the cancelling of titles. This ensures that the states and the Northern Territory still have an important role in making decisions on gas and oil projects that will affect their state, although, as is curre­ntly the case under the offshore petroleum legislation, in the event that agreement cannot be reached the Commonwealth minister will prevail.

A representative from the Department of Resources, Energy and Tourism gave evid­ence to the House of Representatives Standing Committee on Agriculture, Resour­ces, Fisheries and Forestry illustrating how the creation of NOPTA will be an improvement over the current situation. She said:

The titles administrator will be able to source that advice from wherever they wish to, and obviously all relevant and available sources of advice will be used, including any information and advice that can be provided by the state department. But the advice will go to the joint authority as a single set of advice from the titles administrator. That will increase efficiency over the current situation, where it tends to be the case that the state minister gets his technical advice from his department and the Commonwealth minister gets his technical advice from Geoscience Australia, and sometimes there is toing and froing between the two departments about the quality of each other's advice and that kind of thing. That will all now be dealt with in an efficient manner by the titles administrator and there will be one set of technical advice that goes up.

This is consistent with the Victorian government's submission to the Productivity Commission, which estimated that a single national offshore regulator could reduce the time taken for approving a production licence by about 50 per cent, from 12 months down to six months. When you are talking about projects on the scale of these projects in the oil and gas industry, six months makes a big difference.

One other important element of these bills is the question of cost recovery for both the establishment of the new bodies and their ongoing operation. The government has approached this on the principle that it is the industry that benefits from the activities of NOPSEMA and NOPTA, so the costs of these bodies should fall to industry rather than to general taxpayers. To cover the set-up costs, these bills authorise the Commonwealth to retain registration fees from companies in the sector for a minimum of 24 months, or until the lesser amount of $30.6 million or the actual establishment costs have been collected. In addition, from 1 January 2012, NOPSEMA's and NOPTA's fees and charges will be reset to ensure they operate on a full cost recovery basis.

The government is committed to greater transparency for the industry when it comes to the fees they are required to pay and the expenditure of that money by the regulators. This has not always been the practice for the designated authorities, leading to the situation where revenue from fees often significantly exceeded the designated authority's administration costs. We want these reforms to lead to cost savings for the industry, and transparency in the fee structure will help to achieve that.

The offshore oil and gas industry is a valuable industry for Australia, employing thousands of people and contributing to our national wealth. But it is also a dangerous industry and one that operates in environ­mentally sensitive and unique areas off our coastline. Since the Montara blow-out, we cannot say that we were not warned. We know what can happen if offshore operators are not held to the very highest safety and environmental standards by regulators who have the expertise, the resources and the authority to supervise this industry on our behalf. These bills put the recommendations of the Montara Commission of Inquiry into place and, in doing so, make our regulatory framework more robust and in line with world's best practice for this industry. I commend the bills to the House.