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Wednesday, 30 November 1983
Page: 3038

Senator WATSON —I present the 215th report of the Joint Parliamentary Committee of Public Accounts.

Ordered that the report be printed.

Senator WATSON —by leave-The 215th report of the Joint Committee of Public Accounts contains the Department of Finance minute on the Committee's 190th report which reviewed the procedures used for the collection of petroleum royalties and excise. The Department of Finance minute is the formal documentation of the Government's response to the Committee's recommendations, as contained in the 190th report which was tabled on 27 October 1981. The Committee's inquiry commenced as part of its examination of the Auditor-General' s 1977-78 report. As a result of this examination, the Committee decided to examine separately matters concerning the off-shore petroleum royalties and excise, which were again referred to in reports of the Auditor-General in 1979- 80 and 1980-81.

The Committee's decision to inquire into this matter was influenced by the significance of the Commonwealth's receipts from petroleum royalties and excise. These receipts were of the order of $3,000m a year. The Committee's concern, as expressed in the 190th report, was that even a small percentage error resulting from inaccuracies in the back allocation procedures which are used to verify the amount of crude oil produced could lead to errors of plus or minus millions of dollars. The report also highlighted some of the many complex legal issues in this area involving both Federal and State governments as well as oil producers. These issues arise because of the many different Commonwealth and State Acts covering off-shore matters and the difficulties in resolving those areas and activities which should come under Commonwealth rather than State jurisdiction.

The Committee recognised that the issues identified in its 190th report were complex and involved policies and administrative procedures at both State and Federal government level. As a result, the significant delay in the finalisation of the Department of Finance minute on this report was anticipated, but the Committee has been kept informed of progress in the interim. The Public Accounts Committee is pleased to note the considerable effort which has been directed towards carrying out most of its recommendations. Overall, therefore, the Committee is satisfied with the timing and content of the response to its 190th report. Mr Deputy President, I wish to incorporate in Hansard the Committee's recommendations Nos 1 to 6 and the Department of Finance minute responses in summary form.

Leave granted.

The document read as follows-

Recommendation 1: . . . the terms of the 1980 legislation be discussed with the States with a view to having the legislation amended prior to being proclaimed, to empower the Joint Authority established under the Petroleum (Submerged Lands) Amendment Act 1980 to function in relation to the territorial sea as well as the adjacent areas.

In response the Committee was advised that the Government is reviewing the operation of the Commonwealth and State legislation covering offshore petroleum and mining activities. The issue raised by the Committee will be a matter for consideration in the context of that review.

Recommendations 2 and 3: Discussions take place between the respective Commonwealth and State authorities and between Auditors-General to ensure that royalty collection procedures compatible with the requirements of both Governments are implemented under the existing legislation and under the 1980 Commonwealth legislation when proclaimed; the Department of National Development and Energy and the Auditor-General's Office should be involved, in co-operation with the Victorian Auditor-General, in ensuring the correctness of the procedures to arrive at the royalty payments.

In response an independent firm of consultants was commissioned to undertake a review of the sampling techniques employed for obtaining compositional data for the material balance program used in the calculation of royalties and excise payable to the Commonwealth and Victorian Governments. The recommendations resulting from that review have been implemented.

Also, the following four sets of detailed procedures for the collection and verification of royalties and excise for the Bass Strait producing fields either have been developed, or are being developed: Producers procedures, State procedures, Customs procedures and Department of Resources and Energy procedures .

Recommendation 4: Arrangements be made for the Commonwealth share of royalties to be paid immediately it is received by the State, with any adjustments being made in the following month's payment.

In response legislation has been amended to ensure the immediate payment to the Commonwealth, of its share of royalties.

Recommendation 5: Officers of the Department of National Development and Energy , and the Auditor-General's Office actively participate in the final verification of royalty calculations which should be completed as soon as possible.

In response audit, by the Victorian Department of Mines and Energy, of royalty payments, on the basis of wellhead values, is progressing in consultation with the Department of Resources and Energy.

Recommendation 6: The Department of National Development and Energy and Business and Consumer Affairs treat finalisation of the documentation of (excise ) procedures as a matter of urgency and the Committee will expect to see substantial progress in this area in the near future.

In response the Department of Resources and Energy advised that the procedures adopted to allocate and verify production from the various Bass Strait fields for excise purposes are the same as those used in the royalty calculation.

Senator WATSON —Thank you, Mr Deputy President. The final recommendation in the 190th report concerned the need to simplify the royalty procedures and the Committee referred to the United Kingdom experience wherein procedures have been revised so that well-head value is no longer used as the basis for royalty payments. The Department of Resources and Energy responded to this by indicating the Government's intention to consider this issue in the context of its current review of taxation arrangements for resource projects. Consequently, the Committee intends to review progress in this area in approximately 12 months time. I commend this report to honourable senators.