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Petroleum - Royal Commission - Royal Commissions - Exploratory and production drilling for petroleum in the area of the Great Barrier Reef - Report - Volume 2 - References 3, 4 and 5 and Appendixes


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THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA 1975-Parliamentary Paper No. 39

ROYAL COMMISSIONS INTO EXPLORATORY AND PRODUCTION DRILLING FOR PETROLEUM IN THE AREA OF THE

GREAT BARRIER REEF

REPORT-VOLUME 2

Term of Reference No. 3 Term of Reference No. 4 Term of Reference No. 5 Appendixes

Presented by Command 11 February 1975

Ordered to be printed 6 March 1975

THE GOVERNMENT PRINTER OF AUSTRALIA

CANBERRA 1975

© Coouoomlealth of Australia 19ft ISBN 0 642 IHI86l 9

Printed by Watson Ferguson & Company, 221 Stanley Street, Brisbane

AUSTRALIAN GOVERNMENT

AND

GOVERNMENT OF THE STATE OF QUEENSLAND

PERSONNEL OF ROYAL COMMISSIONS

INTO

EXPLORATORY AND PRODUCTION DRILLING FOR PETROLEUM IN THE AREA OF THE GREAT BARRIER REEF

SIR GORDON WALLACE CHAIRMAN

DR J.E. SMITH C.B.E., SeD., FRS

MR V.J. MORONEY

MEMBERS

MR P.C. WHITMAN

Secretary

MR E.R.G. WHITE

Assistant Secretary

iii

Preface

There were two Royal Commissions one appointed by the Australian Government and the other by the Government of the State of Queensland,

Each Commission had the same three Commissioners, and the same Terms of Reference appeared in the two Letters Patent which were issued to each of the

Commissioners by their Excellencies The Governor-General of Australia and the Governor of Queensland respectively. There was only one hearing and the two Commissions

sat in parallel. The two Governments considered it would be more convenient if one report only were compiled, instead of two separate, but

identical reports. This ha£ accordingly been done and such report will be presented concurrently to their Excellencies. The Terms of Reference as contained

in the Letters Patent appear in the Principal Introduction paragraph PI.l.6 at pages 2 - 3 of the Report.

v

TERM OF REFERENCE NO. 3

"Are there localit.ies within the Area of the Great Barrier Reef and, if so, what are their geographical limits, wherein the effects of an oil or gas leak would cause

so little detriment that drilling there for petroleum might be permitted?"

PART l - INTRODUCTION

The construction of TR3 3 .l.l As pointed out in paragraph PI.3.5 of the "Principal

Introduction" the word "wherein" should be given a wide meaning in this context because spilt oil spreads and drifts long distances from the actual source of the spill due to the forces of wind and surface currents. "Effects" may occur in

areas remote from the drilling locality. Accordingly, we construe TR3 as meaning:-"Are there within the Area of the

Great Barrier Reef, and, if so, what are their geographical limits, in respect of which it can be said that the effects of an oil or

gas leak occurring therein and wherever such effects can be expected to extend, would cause so little detriment that drilling within such localities for petroleum might

be permitted."

The answers to other Terms of Reference are relevant when

answering TR3 3.1.2 The question assumes the occurrence of an oil or

gas leak and then the enquiry relates to the effects thereof.

The answer will be partly dependant on the answers given to TR2 and will also involve the consideration of' other f'actors such as the migration and weathering of' spilt oil, the effectiveness of contingency planning and remedial measures and the safety precautiont> discus.sed and recommended in the answer to TR4. Some of the potential disadvantages discussed in the answer to TR5 are also relevant.

In the opinion of Dr Smith and Mr Moroney the degree of risk of an oil spill discussed in the answer to TRl is also a consideration to be borne in mind when answering TR3 and when fixing the "buff'er zones" referred to in paragraphs

3.3.10 and 3.4.6 (infra). They consider that risk or chance constitutes a large element in determining not only probability of the occurrence of a leak but also its place, time and

magnitude and therefore the probable effects of an oil or gas leak in the GBRP as asked in TR2. The probable eff'ects and

kinds and extent of detriment are involved in TR3 and these would be strongly influenced by elements of chance such as winds, currents, sea state, duration, response, and the nature, vulnerability and proximity of features. Any departure from the concept of total security involves the consideration of risk. The majority further consider that although the Commiss­

ion is not directly concerned with the consideration of the degree of risk it is concerned with the degree of risk of sig­ nificant detriment that might result from the leak. The Chairman's divergent views are in paragraphs 3.4.10 and 3.4.11, sub-paragraph (o).

3 .1. 3 Clearly enough, if the answer to TR2 indicated

that the probable ef'fects of an oil spill on the corals and eco-systems of the GBRP would be nil or slight, there might well be a number of localities in which petroleum drilling could be tolerated whereas if such effects were considered devastating, there would be very few, if any, such localities.

Meaning of "oil or gas leak" 3.1.4 In accordance with the construction given in

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other answers the phrase "an oil or gas leak" will be construed to include both massive spills from blowouts and chronic spills of low level pollution. On the evidence before the Commission gas leaks attract no special attention in this answer as gas

is almost insoluble in seawater and emerges rapidly during a blowout and does not migrate like oil and no suggestion of damage or potential damage from a gas spill was made, unless it contains significant amounts of the hydrogen sulphide gas

(H 2 S).

"Effects" and "so little detriment" 3 .l. 5 The question as framed links "detriment" with the

word "wherein" but giving the question the extended construct­ ion set forth in paragraph 3.1.1 supra, "detriment" relates not only to the specified locality but to effects wherever occurring.

The width of "detrimeut" is manifest. It is linked with the word "effects". Detriment may conceivably occur to corals, their food web, their juveniles and planula larvae and to their reproductive systems as the result of the effects

of oil. There is also the possibility, at present unproven, that oil-caused detriment may be caused through interference with access to oxygen and light, and from damage to the symbiotic algae of coral (zooxanthellae).

Detriment could also Dcur to the many other eco­ systems in the GBRP including fish and birds and fauna and flora of many varieties whilst intertidal, benthic and plank­ tonic animals and plants must also be considered. The import­

ance of mangroves and wetlands is now fully recognised. But of course some hazards to corals such as fresh water, undue salinity, cyclonic winds and low temperatures have no relation­ ship with oil spills.

Other important ways in which both effects and detriment could be manifested include fouling of beaches, rocky headlands and coastlines, damage to cays and islands, birdlife and mangroves and interference with resorts and

tourism, with boating and fishing, and the environment 551

generally and man's enjoyment of its beauty and amenities. One only has to imagine a fouling of such a beach as White­ haven Beach on the eastern side of Whitsunday Island - four miles long, with its glistening white fine sand and crystal

clear water - to appreciate the value to mankind of t .he featur-· es of the GBRP and the responsibilities of those who have the duty of safeguarding them.

3.1.6 Accordingly "detriment" may occur both to the amenit-ies and the marine life of the Province.

3. 1. 7 One way in which enjoyment of the ameni t .ies could be

preserved is to ensure that man when on vacation enjoys and sees nature as it is - free from the visible manifestations of "Co-existence." If a producing or drilling platform is out of sight from a holiday resort it is more likely to be out of mind.

But greater distances can be involved in the protection of marine life should an oil spill occur. In paragraph 3.3.10 "buffer zones" are discussed and in Part 4 (infra) their recommended sizes are tabulated.

3.1. 8 We heard much of "co-existence." This word cannot

of course be construed literally but in its colloquial meaning it conveys a practical concept which attract-s implementation. In a sense, this merely states the problem - but TR3 in a

special way involves its consideration and application so far as it is practicable.

3 .1. 9 But the total phrase is "so little detriment" - and

these words raise the question: according to what standard? Is the e xtent of detriment to be judged by comparing the area in which detriment may occur with the total area of the GBRP? Or is it the nature and degree of the detriment even if local­ ised, or the likely effect on the public mind, and so on. The

answer is not readily at hand. It is clear that any substantial

fouling of and damage to the comparatively small areas which comprise the reefs and sands of Heron Island or of Green Island

55 2

or Hayman Island or places of national interest or aesthetic would be widely regarded as a serious detriment.

3.1.10 The Commission .considers that the degree of detri-ment should take account of but should not be determined solely by a comparison with the totality of the vast area of multitudinous eco-systems of the GBRP.

The vast size of the GBRP does not diminish in our view the need to protect specific localities of special and often unique interest to the community. On the other hand there are features not within this

special category which are very numerous and of like kind in respect of which the size of the GBRP and the multiplicity of such features could be relevant considerations.

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PART 2 - FACTORS FOR CONSIDERATION

Introduction 3.2.1 We will now enumerate the various factors which must

be weighed when answering this question and indicate how they affect the answer. Some of these factors will be given further consideration in Part 3 infra. In respect of some of them the evidence was conflict­ ing, in other cases it was incomplete because of lack of long­

term scientific research whilst an important one namely the migration of oil spills rests on variables such as winds, tides and currents which have different patterns in different zones of the 1,200 miles long GBRP. The winds also vary with the

seasons- for example, in the Northern Zone the N.W. monsoons replace the S.E. trade winds from about November to March and other changes occur in the south. These matters have been dis­ cussed in detail in the answer to TR2 and in the Principal Introduction. Dr Maxwell was one of the witnesses who dealt with this subject in considerable detail but in relation to the accuracy of his predictions regarding the probable route of oil

spills which might occur in localities ranging from the far north to the south it seemed to be accepted as put by a member

of the Commission to Mr Woodward QC (Tl662-3) and Dr Maxwell:-"The plain fact of the matter is that the

prediction is just as good as the weather prediction."

Migration of oil spills 3.2.2 A fundamental issue requiring consideration is the distance and direction a spill could be expected to travel from selected localities under normal conditions. What would happen if a spill occurred in cyclonic weather or during strong winds from an unusual direction (both of which occur from time to time) cannot be legislated for. This factor of migration is

5.54

of primary importance because so much can turn on it. Thus oil is said to weather, to evaporate partially, to emulsify, and to lose much of its toxicity by auto-oxidation, biodegrad­ ation, dissolution and loss of toxic aromatics with the

passage of time and exposure to sun, wind and waves. The extent to which these things happen is controversial accord­ ing to some of the expert views given us - for example the

writings and views of the American chemist, Dr Blumer of Woods Hole and his colleagues differ in some degree from some of the views which we heard in evidence. This has been discussed in the answer to TR2 and will be mentioned again later. However

the general view seems to be that freshly spilt oil is more toxic than weathered oil. This of course does not mean that weathered oil is incapable of causing certain types of damage and detriment for example to beaches, mangroves, birds and

amenities. Accordingly, time and distance are both important when the possible or probable detrimental effects

of an oil spill.

The speed at which the spill moves under the in­ fluence of wind generated surface currents and tidal currents is a related matter so that the direction and speed of prevail­ ing winds are important. It was generally accepted that oil travels at a little more than 3% of the speed of the prevail­

ing wind and of course in its direction, although Dr Spillane (Tl2362) gave somewhat lower rates varying with the speed of the wind. Its course is also influenced by surface currents such as the ebb and flow of tides which however are to some

extent compensatory, and on the evidence usually cause a some­ what zig-zag effect to be given to the direction of a spill.

Generally the prediction of an oil spill movement seems to be on two levels - the long range forecast of poss­

ible future spills and the daily or even two-hourly prediction which would be made of an actual spill with the aid of known

current weather conditions and the use of modern detecting and tracking methods and devices such as those described by Mr Biglane at T6624 and Mr Winders at Tl2573 et seq and which are

555

described in the answer to TR4 and ref'erred to in the answer to TR2. The availability of such means of detection and tracking would undoubtedly enhance. the capacity to employ remedial measures and so tend to reduce detrimental effects.

Contingency planning and remedial measures 3.2.3 Remedial measures and the implementation of efficient contingency planning are important factors for consideration when the quantum of detriment likely to result from an oil

spill is being estimated. The extent of time which they require is dependent on the nature of the remedial measure selected. If the spill is massive and weather conditions permit the use of such containment measures as booms of various types and removal by skimmers, the necessary equipment has to be taken to the spill area according to its location after some measure of migration. Detergents if permitted would require transporta­ tion, spreading and mixing with the oil. The use of detergents is dealt with in the answers to TR4 and TR2. The suggested occasions when their use may be permitted may be summarised as

(i) in open waters when adverse wind and wave action make con­ tainment and removal difficult or impossible, (ii) ·w:qen the possibility of fire appears to be an immediate hazard (iii) when large numbers of birds are exposed to contact with the oil spill and (iv) protection of life and property.

The existence of a well co-ordinated contingency plan on the three levels recommended in the answer to TR4 (Australian, State and Industry) with well positioned stockpiles of equip­ ment and materials and with both aerial and sea transportation

in readily available positions would play a cogent part in diminishing potential detriment. The availability of modern monitoring equipment and devices would also assist, as to which see answer to TR4.

The size and nature of the spill 3.2.4 We have expressed the view in the answer to TRl that

the risk of a massive blowout would be small to very small but that some measure of pollution from random and chronic spills

556

would be almost certain - the quantum ranging from small to substantial. But all possible types and sizes of spills must be considered having regard to the wording of TR3.

Temperature and winds affect the rate of evaporation 3.2.5 Evidence was given to the effect that chemical

changes and evaporation take place much more quickly in warm than in cold temperatures (Mr Deasy Exhibit 547). This evidence has been examined in the answer to TR2. Mr Deasy states that:-

"it is universally accepted ... that the

rates of such processes as evaporation dissolution and chemical reactions generally, double or even treble for each increase of ten degrees Celsius in the temperature of

the system under study." The question whether winds are even more important than temperatures in increasing rates of evaporation is also discussed in the answer to TR2 in which the views of Mr are taken into account.

The probable effects of oil on the corals and ecosystem of the GBRP 3.2.6 This all important question (as mentioned earlier) has been discussed at length in the answer to TR2 under two headings (a) fresh oil and (b) weathered oil. Some divergence

of opinion exists which is referred to later in Part 4.

Emergent and non-emergent reefs 3.2.7 An important aspect is the location not only of cays

and islands but also of emergent and non-emergent reefs. On the evidence it would appear that emergent reefs that is to say reefs which are exposed or partly exposed at low tide - no

corals are permanently exposed - are more vulnerable than deep­ er living and permanently submerged reefs for the reason that surface oil would not be expected to come into physical contact with submerged coral unless it sank. Consequently a persuas-

5-57

ive view is that drilling could be permitt.ed closer to perman­ ently submerged reefs (of which there are many) than to emerg­ ent reefs. It would appear that the majority of coral colon­ ies are permanently submerged at varying depths though the pro­ portions between submerged and emergent corals was not made clear.

Vulnerability of non-emergent reefs 3.2.8 Whether non-emergent corals are at any hazard is an

issue on which not all witnesses agreed. In any event there are contingencies and scientific views which must be weighed and the general insufficiency of scientific knowledge on the long-term effects of oil pollution and the need for scientific long-term research as advocated by many overseas and Australian

scientists in evidence before us make the formation of firm views difficult.

Sinking of oil 3.2.9 The ability and tendency of oil to sink in shallow

and near-shore waters under certain conditions is a factor for consideration in assessing possible detriment to submerged reefs and benthic and planktonic organisms. These conditions include wind, waves, water-in-oil emulsifications and the adherence of particles of organic and inorganic origin.

The spread of oil on the sea bed

3.2.10 Dr Blumer and his colleagues averred that spilt oil which has sunk to the sea bed spreads. It was said that the

kill from the 'Florida' in Buzzard's Bay in 1969 extended to outlying areas. This matter has been discussed in the answer to TR2 where it is suggested that the evidence produced by this scientist did not support his statement to the degree claimed by him and that in any event there was a slow but general

recovery after the acute effects had disappeared. The oil in question was No. 2 fuel.

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Persistence of spilt oil 3.2.11 The same scientist stressed that oil had evinced an unexpected persistence both in the sediments of the sea floor and in marine life which had absorbed it. This view must be

accepted in relation to the type of sediments which he had under consideration. The matter is discussed in answer to TR2.

Plankton and planula larvae 3.2.12 The ultimate importance of plankton to all forms of marine life was universally acknowledged (see Professor Clark at T3723-4) whilst the planula larvae which also drift are

one of the two ways in which corals propagate. To what extent plankton, whether animals or plants, are vulnerable to oil and if so, at what depths are important issues. The relevant evidence which was small and not always consistent is discuss­

ed in the Principal Introduction and in the answer to TR2. The subject is relevant in answering TR3. It was suggested that larval settlement could be prevented or retarded on oiled surfaces. The nature and extent of any detriment to plankton resulting from an oil spill is difficult to assess.

Different types of crude oils 3.2.13 This subject also has been fully debated in the

answer to TR2. The Moonie type of "light" oil is the likely

type of oil which may be discovered on the GBRP but no certain­ ty can exist.

Weathered oil 3.2.14 The composition and residual toxicity of weathered oil is of much importance in answering TR3 as the assessment of buffer zones depends thereon. The subject is part of the

answer to TR2 and will be referred to again. Some divergence of view exists thereon.

Interference with oxygen and light 3.2.15 Mr Kinsey's experiments and the views of Mr Mansfield and of Professor Clark have been mentioned in the Principal

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Introduction. The subject in relation to moving spills would seem to have a bearing on oil effects in coral pools.

To what extent do unoccupied and remotely situated cays, reefs and islands need protection 3.2.16 The vast area of the GBRP is not only largely without

much human habitation - especially in the north - but by reason of winds, currents and difficulties of navigation even tempor­ ary access to the vicinity of many reefs is difficult. It is

notorious, for example, that visits to the outer Barrier Reef by tourists from such centres as Townsville and Mackay not in­ frequently have to be postponed or foregone by reason of weather and sea conditions.

It may be thought that in these circumstances, any detriment to such localities even of a severe nature, providing it was ephemeral, would be of little consequence as it would pass almost unnoticed and in due course nature would regenerate

the damaged areas. One only has to think of the Swain Reefs in

the south and the waters of the Papuan geological basin in the far north to appreciate the arguments supporting this view. The detriment if it occurred would be of a temporary nature and of little consequence compared with the possible loss of valuable resources which if existing should be exploited in the public interest - such seems to be a corollary to . this view. On the

other hand appreciable detriment to any part of the GBRP should in our opinion be wherever possible avoided. Serious and wide­ spread biological effects of oil pollution have not been report­ ed although stressed as scientific possibilities by several scientists.

These and associated views must receive consideration when TR3 is being answered.

Re generation

3.2.17 Attention has been given to this subject in the

Principal Introduction. The main examples as regards coral, have occurred in relation to damage from cyclones, crown-of­ thorns starfish and flooding by fresh water. Research is

5.60

necessary to determine recovery rates following death or to corals resulting from oil pollution. Regeneration

after devastation by the crown-of-thorns is now being examined and on this subject we heard views from Dr Endean. There is

little doubt that coral does regenerate in the course of time perhaps after a period of occupation by opportunist species of algae and soft corals. But very considerable difference of opinion existed amongst the scientific witnesses on the length

of time and conditions required for regeneration. The period varied from 2 to 20 years or more. Perhaps the subject of

regeneration for immediate purposes is not of outstanding importance, the issue being "so little detriment." Other standards seem more important. Thus, if the minimum period for regeneration after appreciable damage is two years, such

damage could scarcely be considered as "of little detriment".

Fishing and tourist industries 3.2.18 It has been said that "since the beaches are more

likely to be damaged than fisheries, and in view of the importance of the Province's 'image' to the tourist industry, it would seem that damage to beaches is one of the major factors to be considered by the Commission" (Mr Woodward). Even weathered oil can cause serious and semi-permanent damage

to beaches as the photograph of a vertical cavity dug in a beach after the Santa Barbara spill (photograph No. 29 of Exhibit 69) demonstrates. The subject is mentioned elsewhere including the

answer to TR5.

Mangroves and the shoreline 3.2.19 Mangroves are important as nursery grounds for commercial fisheries and in preserving the marshlands built up behind them and their protection must receive consideration.

Birds 3.2.20 A summary of the evidence given on this subject (mainly by Dr Kikkawa) reveals:

561

(i) An oil spill in many areas of the GBRP

could result in large bird mortalities; (ii) The species most to be affected

are terns, gulls, cormorants, gannets, shearwaters and, on or near the coast, herons, egrets, ibises, ducks and plovers; and (iii) But some species which have suffered

worst in overseas spills are not represented in the GBRP (e.g. auks and penguins Tl6460-3).

East of the outer barrier reef 3.2.21 Under the Terms of Reference the "Area" of the GBR

is defined as including "the area outside and adjacent to the outer line of reefs." Accordingly, the phrase "are there localities within the Area ... "appearing in TR3 must be construed in the light of this definition of "Area."

Thus the answer to TR3 should theoretically take into consideration the possibility of drilling outside the outer Barrier in the Coral Sea, (that is to say in the eastern parts

of the "Queensland Adjacent Area" as defined in the Mirror Legislation of 1967) and this subject is referred to in Part 4 infra. As seen from a low flying aircraft, the outer Barrier Reef in the north (for example, 30 miles east of Cape Melville near Princess Charlotte Bay and also east of Cooktown) appears as a narrow line of white breakers or surf stretching as far as

the eye can see from the northern to the southern horizons in which there are occasional narrow breaks or "passages" which become visible as one flies over them. From this line of break­ ers the water descends very steeply seawards to the 100 fathom line, which, as indicated earlier in paragraph PI.4.9, the Commission has selected as the approximate outer boundary of the "Area" as defined in the Terms of Reference. (In the

Central and Southern Zones of the GBRP as a glance at a map of

the GBRP in latitudes 19° and 23° will show the outer Barrier

Reef is not so clearly defined.) Coral grows inside and outside this long line of breakers. Inside, there are large expanses of non-emergent and emergent reefs of platform and lagoonal types (with

channels). Outside the coral is said to grow profusely on the first 100 feet or so of the steep slopes leading down

to the 100 fathom shelf.

The joint Australian and Queensland Governmental submission to IMCO in 1971 regarding ships discharging oil at sea 3.2.22 The well known tendency of spilt oil to drift large

distances was the reason why early in 1971 the Australian and Queensland Governments jointly prepared and, at Prime Minister level, dispatched a request for amendment of the boundary of the zone off the Queensland coast within 50 miles

of which shipping including tankers of the convention countries were forbidden to discharge oil and oily wastes, to the International Convention for the Prevention of Pollution of the Sea by Oil 1954 (as amended in 1969)

conducted by IMCO (Inter-Governmental Maritime Consultative Organisation - an Agency of the United Nations Organisation. This was referred to and explained by Mr Morehead (T787l et seq), an Assistant Secretary, Land Transport Policy Division, Federal Department of Shipping and Transport (as it then was).

The amendment was duly made by IMCO late in 1971.

3.2.23 The wording of the Australian submission to IMCO is of some interest when answering TR3 as it was prepared by knowledgeable officials of the two governments. It is Appendix "A" to Exhibit 318 and reads:-

"There is no natural feature of the Australian Continent that deserves such special care and protection as the Great Barrier Reef, generally recognised as one of the Wonders of the World. The value of this unique area is greatly increasing and, apart from its scientific importance and

fisheries aspects, many of its off-shore isles are now holiday resorts of extraordinary appeal.

564

If a discharge of oil, such as would be permitted under Article III as amended, is in fact carried out by any ship or a tanker en route within the

region of the Great Barrier Reef, this could cause pollutiOn of cays, live coral reefs and beaches, which in turn could have serious consequences on the ecology of the Reef and on the tourist industry. "The Australian Government is greatly concerned that the 1969 amendments to the International Convention for the Prevention of Pollution of the Sea by Oil, 1954, would permit ships and tankers to discharge oil into waters immediately surrounding the Great Barrier Reef.

"Noting that the new Article III would prevent tankers from discharging oil within 50 miles from any coastline, because of the risk of pollution of the coastline if this is done within this distance, and that the reason a distance of 50 miles has been selected is because outside this distance the structure of ocean currents and surface drift is likely to be of such a pattern that any oil which is

discharged would be most unlikely to cause pollution of a coastline, either because it would no longer be in a form capable of causing pollution by the time it has reached shore or because it would be unlikely in any case to drift towards the coastline, the Australian Government holds the strong view that there is a very special and urgent need to ensure that these same guide lines are applied equally as stringently to the waters of the Great Barrier Reef."

" ... To give effect to this submission the

Australian Government proposes that, in addition to the provisions of the amended Convention, the

discharge of oil or oily mixtures from a ship or from a tanker en route should be prohibited within all waters between the mainland of Australia and the outer edge of the Great Barrier Reef and, in order to protect the Great

Barrier Reef from the discharges of oil from tankers which may take place outside this area, proposes that tankers should not be permitted to discharge oil or oily mixtures within 50 miles. of a line drawn from Bramble Cay to a

point Latitude 13° South Longitude 144° East thence to a point Latitude 15° South Longitude 146° East thence to a point Latitude 18° South Longitude 147° East thence to a point Latitude

21° South Longitude 153° East." (Underlining supplied)

The new IMCO boundary for discharging oil

3.2.24 The actual amendments made by IMCO in pursuance of the Australian submission complied therewith and are set forth in Exhibit 489 being a copy of the IMCO Amendment dated 2 November 1971. The line within 50 miles of which

oil may now not be discharged is shown in red on Exhibit 223 (three sheets of the Queensland strip map). It encircles almost the whole of the Torres Strait islands and in irregular form goes southwards to Fraser

Island. In some places it is nearly 50 miles east of the

outer Reef. At latitude 23°S it is about 120 miles due east

of the coast and by the shortest route 80 miles distant from Heron Island. At one stage it is nearly 30 miles east of the

eastern islands of Swain Reefs. It is to be observed that oil

may not be discharged within 50 miles of this boundary.

The views of the Senate Select Committee in 1971 contrasted with the views of the Queensland Minister for Mines

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3.2.25 The Report of the Senate Select Committee (Exhibit 450) at paragraph 13.310 recommends that until sufficient information has been gathered and it can be proved beyond reasonable doubt that off-shore exploration for or exploitation of, petroleum fields on the Reef or in waters surrounding the Reef is unlikely to cause damage to the Reef and its marine life, appropriate legislative action be taken to prohibit exploration for and exploitation of, petroleum in the province area of the Reef.

With this view may be contrasted the views of the Queensland Minister for Mines as presented by his senior Counsel Mr Bennett QC during the latter's final address (Tl5003):-

"To sum up what we are putting on this aspect: we do submit that the relative size of area, that is prospective area, compared with the great vast area of the Great Barrier Reef is important; that basins are but a minor part of the total area

particularly prospective basins; that reservoirs within basins are still less; that areas of drilling activity are even less than reservoirs; that a distribution acceptable can be obtained; coupled with the remoteness of risk which should be turned into an impossibility our final sub­ mission on the matter is that there is no reason why with proper precautions this normal and necessary activity of mankind should not proceed." Seven of the witnesses who gave evidence to the Commission also gave evidence before the Senate Select Committee namely Mr R.K. Bryson, Mr R.E. Chapman, Mr S. Cochrane, Dr D.W. Connell, Dr J.F. Grassle, Dr A. Hunter (by Mr A.W. Brown), Mr J.B.R. Livermore and Dr G.R. Orme but the Senate Select Committee did not have the benefit of many overseas witnesses who appeared before the Commission or of the results of the short-term experiments conducted by Queensland officials and others which are referred to in the Principal Introduction and in the answer to TR2. On the other hand the

566

Commission did not hear evidence from many of the expert witnesses who appeared before the Senate Select Committee as - for example - Professor Burdon-Jones of Townsville. These contrasting views are representative of

the marked difference of opinion that exists in informed circles relating to petroleum drilling within the GBRP.

Resorts, national parks, military areas, navigational channels and marine national parks when declared 3.2.26 All these are obviously to be included amongst the

features of the GBRP which require special consideration. Their positions have been referred to elsewhere. It might be added that under the Fauna Conservation Act, all islands (of which there are over 744 in Queensland waters) are fauna

sanctuaries (Exhibit 392 which is a copy of a Report to the

Honourable A.R. Fletcher, M.L.A. Minister for Lands by the Inter-Departmental Committee on Leasing and Development of Queensland Islands). The same Exhibit states:-"Coral reefs should also be available for the

enjoyment of all members of the public. However, the constant visiting of any area of a coral reef usually has the effect, in time, of denuding the reef of shells and sea life and impairing the

coral to some extent. This is more noticeable in the case of coral cays which have resorts on them. To restrict visitation of the islands by the

public would defeat the purpose of bringing people from all over the world to see the Great Barrier Reef. Clean beaches of coral or silica sand are

essential features for every island resort and its satellites; and, like the coral reefs, these should be freely available to all and preserved for public benefit. Island beaches are easier

to control than are remote coral reefs ... "

The Capricorn Channel

3.2.27 This large area is at the southern end of the GBRP

and by reason of its size and absence of reef's and islands, probably offers the smallest degree of detriment from the effects of oil spills. "The dominant wind is the South-East Trade and it would tend to move surface oil north-westward. In this direction, the distance to reefs (fringing reefs of the Cumberland Group) is of the order of 120 miles." (Dr Maxwell at Tl658)

He added that the Capricorn Channel "located on the

deeper part of the Southern Shelf, west of the Swain Reefs complex, would appear to be one of the safest areas for drilling in terms of the effect of possible oil-leaks." ,(ibid)

The Papuan Basin 3.2.28 The eastern part of the Papuan Basin in the far

north (i.e. the portion east of the outer Barrier) is free of reefs and islands with the exception of the Boot and Portlock Reefs and is officially rated as a "good" prospective area. This eastern part is substantially (but not entirely), outside the "Area" defined in the Terms t:Jf Reference.

No drilling on any island, cay or reef (whether

emergent or non-emergent) 3.2.29 The Commissioners consider that no drilling should be permitted on any island, cay or reef (whether emergent or non-emergent), or on any national park, marine national park

(when declared) or reserved area of any kind.

Probabilities 3.2.30 In this TR, as in the others, the difficult question

of probabilities arises when considering many of the relevant factors enumerated above .

568

PART 3 - AN ELABORATION OF SOME OF THE FACTORS

Tributes to the GBRP 3.3.1 It seems appropriate at this stage to refer, without

elaboration, to some of the witnesses who paid tribute to the aesthetic, recreational and scientific importance of the GBRP. These include:-Mrs. Judith Arundell Wright McKinney at T783l:

("I do not t .hink I have ever heard of anyone

who went to the Great Barrier Reef without being very deeply moved by the variety, the beauty and the pristine character of the area I would say taking that aesthetic factor plus

the recreational factor into consideration any economic survey done on those lines would be very different from one done purely on financial economic lines"), Miss Olive Ashwortrr in Exhibit 325, quoted at length in the answer to TR5 at paragraph 5.3.3,

Dr Coombs in Exhibit 406 ("Australia is in a real sense a trustee the Barrier Reef is a wilderness of a unique

kind"), Mr Piesse in Exhibit 432 (quoted in paragraph 5.3.31 of the

answer to TR5) , Dr Kikkawa at Tl917: (" ... it would be a great loss to

natural science if any part of the Great Barrier Reef were spoiled as a result of oil drilling ... the wisest use of thE

Reef is to be found in educational, scientific and recreational forms which recognise the aesthetic value of the area as a whole"),

Dr Maxwell "Atlas" - Exhibit 2 at p.3 ("many factors have been combined to make the Great Barrier Reef Province unique"), Dr. Grassle of U.S.A. at T6097 and at T6427 (" ... the most

varied, the most complex and perhaps the most productive

569

biological system in the world"), Dr Talbot at T938 ("Coral reef's are perhaps the most interesting of all marine living systems"), Sir Maurice Yonge (T9225) and Dr Endean (Tl3056) on the

complexity and diversity of the GBRP ecosystems, Dr Stoddart at T5783 ("the most extensive single reef system in the world"), Professor Woodhead (T5403), Dr Jones (Tl865) on uniqueness and diversity, and Professor Johannes of U.S.A. (T4205) ( ... "to say that this area provides some of the loveliest scenery on earth and some of the most exciting recreation is just a beginning ... ").

Migration of oil and the Graf'ton Passage spill 3.3.2 No useful purpose would be served by repeating the

discussion on the all-important subject of migration which is given in the Principal Introduction and in greater detail in the answer to TR2. The long range forecast referred to in paragraph 3.2.2 supra must of necessity be used when answering TR3 however uncertain it may be - but this measure of uncertainty makes it desirable to use a margin of safety when considering localities which might be thought to qualify for the TR3 description.

The wording of the question seems to suggest that detriment is acceptable - it is the degree of

detriment which will govern the answer. Accordingly, the "migration" factor is not to be taken as signifying that the source of the spill must be so distant that under no

circumstances could a spill however thin or weathered reach any cay, reef, island or resort area. If this were the test

one could say at once that no part of the GBRP could be immune. What is required is the determination of distances which will result in an acceptable level of risk and detriment in relation to emergent and non-emergent reefs, cays and so on, having regard always to the remaining factors such as the effects of weathering and the opportunities for containment and remedial measures. The distances will vary according to the

570

estimated vulnerability of the physical feature under consideration. It is in this way that the migration factor will be considered and applied. The migration of a recent (October 1973) oil spill

in Grafton Passage (north-east of Cairns) as detailed to the Commission by Queensland Governmental officials, is illustrat­ ive. The spill was from a tanker and was estimated to be

about 20 tons (approximately 140 barrels). At the time the spill was first sighted the weather was calm and there was no wind. The following day there was a wind from the south-east of 5 - 10 knots. Two days after the spill the wind was 10 -

15 knots and still from the south-east which is the prevailing wind during the months of April to November. (Thereafter there would be mainly the North-West Monsoons). Movement of the spill was also affected by cyclical tidal stream flow.

During the first 12 hours of calm weather the spill travelled 2 miles towards the west-north-west. During the first 24 hours the spill travelled 6 miles west-north-west.

During the first 2 days, when the spill was breaking up and thinning out, it travelled 15 miles to the north-west. In the first 3 days it travelled 45 miles to the

north-west between Cape Kimberley and Bailey Point - which in a straight line is nearly 70 miles from Grafton Passage.

However the course of the drift was in all probability not a straight line if only because of the tidal ebb and flow. No containment and removal measures were, or could

have been taken because several miles of boom would have been required and this equipment was not available. In any case by the time such an exercise could be mounted the oil would have spread over a very large area.

No detergent was used and the oil did not appear

to emulsify. At one stage there were clearly visible slicks not

exceeding 100 yards in width and about a mile long extending from the western tips of the reefs off Green Island, Upolo Cay and Michaelmas Cay.

571

The oil reached Green Island and Michaelmas Cay but the amount involved was very small. From this summary it would appear that:-(i) An oil spill will travel either as the result

of spreading or tidal influence, or both, even in a calm sea and in the absence of any wind.

(ii) As the wind freshens the rate of travel

increases. (The oil moves at the rate of a

li·ttle more than 3% of the speed of the

wind - but cf the evidence of Dr Spillane

at T12362 where somewhat slower rates varying with the speed of the wind are given). (iii) In a fresh breeze (Beaufort Scale 5) or a

strong breeze (Beaufort Scale 6) an oil spill might travel a substantial distance during the first day (up to 15 or 20 miles)

and quite a long distance during the week following (100 miles or more). Of course during such a period and with the size of the waves that would accompany such winds the oil would be subjected to thinning, dispersal, evaporation, oxidation, biodegradation, emulsification and dissolution and in the Chairman's opinion to some measure of sinking.

It is also to be observed as an important feature of

this spill that the oil travelled consistently in a north­ westerly or west-north-westerly direction. It should be added that the facts relating to the Grafton Passage spill as summarised above did not differ to any appreciable extent from evidence and theories which the Commission had earlier heard relating to oil migration.

This appears from what has been said in the Principal Introduction paragraphs PI.4.57-61 and in the treatment of "oil movements" in Part 3 of the answer to TR2. Although the importance of the prevailing wind throughout eight months of the year is manifest the monsoonal in the north and in the south the westerly winds of the winter

572

months and other departures from the prevailing winds must as far as is practicable be considered. Tidal currents which in a tidal cycle are partly if not largely compensating in their residual displacement

of oil, travel in open waters at about knots at maximum

flow. They move much faster in channels and passages.

The probable effects of oil on the corals and ecosystems of the GBRP 3.3.3 This subject has been dealt with in the answer to

TR2 under two headings - freshly spilt oil and weathered

oil.

The importance of "weathered oil" when answering TR3 is referred to in paragraph 3.2.14 supra.

The kind of oil which might be expected to occur in the GBRP 3.3.4 Reference was made in evidence to the fact that

light and heavy types of oil as those terms are used in the

industry occur within closely adjacent areas or even at different horizons within a drilled well from time to time overseas. Mr Cowell £tressed this aspect after stating that "it is very misleading to talk about a Russian crude or a

Canadian crude." Nevertheless as Mr Ericson indicated it may well be that if oil is found in the GBRP it will be of a

similar type to the presently produced Australian light crudes. On this basis spilt oil in the GBRP would have a

comparatively low specific gravity (from .797 to .834) which means that it would be less likely to sink than oil of a

higher gravity. Australian crudes are also less viscous than many overseas crudes. This means that there is a likelihood that they would spread and form thinner and more extensive films than heavier and more viscous crudes.

Australian crudes were said by Mr Allen to be rich in volatile components. This means that they would tend initially both to evaporate quicker and dissolve more readily than heavier oils although no one seems to have made practical

573

measurements of the rate and extent which the light fractions would respectively evaporate or disso.lve. This is one of the many fields in which field experiments are desirable. There was some evidence although it was not all one way that the

toxic components evaporate and dissolve more readily than the less toxic components. The pour points of Australian crudes seem to be lower than some overseas crudes. This would tend to lessen a tendency to congeal in the comparatively warm waters of the GBRP where during the winter months sea temperatures range

from 23°C in the north to 20°C in the south. Higher figures were given by Dr Isabel Bennett (Exhibit 451 at p.27).

Location of continental islands, reefs and cays. The shelf edge reefs. Water depths. Mangrove areas 3.3.5 A detailed description of these features with references to the expert witnesses who spoke thereon appears earlier and will not be repeated here. It is usual when

referring to the GBRP and to the coastline thereof to refer to three zones or regions - north, central and southern, as each zone has some distinctive features. Various witnesses including Dr Maxwell, Dr O.A. Jones and Professor Thomson of Queensland University supplemented by the evidence relating to the coastline and maps produced by Mr I.H. Davis, Lecturer in Geography at the Queensland University combined to give the Commission a full account of the features of the GBRP so necessary to be kept in mind when answering TR3.

Mr A. B. Yeates, Surveyor-General, Department of

Lands, Queensland who caused to be produced the three strip maps of the Northern, Central and Southern Zones respectively -Exhibit 8 - said that these maps included reef features visible in aerial reconnaissance photographs down to a depth of at

least 30 feet so that the reefs marked on the strip maps are

not limited to reefs that partly emerge above the surface in low tides. These are called "emergent reefs." There are many reefs within the GBRP that are always submerged. Sometimes they are called shoals (Exhibit 12 - the Australian Pilot) or

574

reefal shoals (Dr Maxwell's "Atlas", Exhibit 2 page 254). It seems to the Commission that there still exists uncertainty on the proportion of permanently submerged to emergent reefs (Mr Yeates at T263 and T266). The various references in

Dr Isabel Bennett's "The Great Barrier Reef" (Exhibit 451

at pages 32, 37, 38, 44, 49, 50 and elsewhere) to submerged and

emergent reefs and to the inaccessibility of reefs in the outer margin (page 38) would seem to confirm this view. The outer Barrier or shelf edge reefs in the Northern and part of the Southern Zones form an almost continuous wall

through which there are hundreds of passages but most are tortuous unnavigable by big ships (Professor Thomson at T6ll). Dr Maxwell's evidence at T218 may be repeated:-"· .. most of the reefs along the shelf edge,

the so-called outer Barrier tend to be lower than the reefs back of the shelf. I do not

believe that I have ever seen a reef on the

outer edge exposed." Dr Isabel Bennett's description of the back region of

the outer Barrier and of the difficulties of access thereto is in Exhibit 451 pages 37 - 8.

Variety of reef fishes 3.3.6 This subject is referred to in the answer to TR2.

The full diversity of the species of fishes - as well as

corals - has not yet been fully explored, but Dr Choat of

Auckland University who carried out research work on the ecology of reef fishes in Heron Island from 1963 to 1967 was of opinion that because of the great size of the GBRP it

might contain something in the order of 5,000 species and

will probably turn out to have the richest fish fauna of any region on earth (T13146). Of corals and reefal fauna generally Professor

Stephenson at T2057 said that:-"although our knowledge of diversity on the reef is woefully incomplete, some patterns are obvious. Firstly, the richest faunas are in the north and

575

they decline as we come southwards ... "

For present purposes it will be kept in mind that enormous numbers of various fishes inhabit the areas of sub­ merged reefs and the localities of emergent reefs. The history of the effect of oil spills on fishes in overseas spills is

somewhat varied.

The size of reefs surrounding cays - fringing reefs at

continental islands Another factor is that cays and reefal shoals frequently have flat reefs extending outwards at shallow depths - generally to windward - for some miles. The case of Heron

Island may be instanced as having such a reef five miles long. A glance at Maxwell's "Atlas" (Exhibit 2) and Dr Isobel Bennett's "The Great Barrier Reef" (Exhibit 451) will provide other examples.

The fringing reefs which surround portions of most

continental islands are much narrower. They would approximate up to half a mile in width.

The experiments of Messrs Grant, Haysom, Professor Chuang

and others 3. 3. 8 These have been described in detail and dicussed in

the answer to TR2, where the weight which should be given to them and the conclusions which may be drawn from them are also discussed. In respect of Mr Grant's experiments, the following series of questions and answers (at Tl4252A-3) seem to indicate that his conception of long-term research differs from the views of some overseas scientists (See paragraph PI. 2. 7):-

576

"THE CHAIRMAN: Mr Grant, would you say that

your experiments and the results you obtained related only to short-term effects? Do you regard them as short-term experiments or not? No, sir, I do not think I do.

You do not regard them as short-term experiments?

Do you think it would be likely or unlikely that

they could be a reliable basis for general conclusions? --- Within the limits of the

experiment, yes. THE CHAIRMAN: What are those limits?

That the oil was applied for only two consecutive days. In a running out tide? --- On both a

running out and ascending tide, yes. In an area where the current was travelling at about just under 3 miles an hour? --- At the

time of initial application I think that is correct. At all events you do not agree that your

experiments relate only to short-term effects in a limited area - or do you?

The effects, I think, Sir, are long-term. The area is certainly limited by the extent

of being 17ft. 8 ins. by 7ft."

Experiments of the type made by Mr Grant and Mr Haysom are however not without value as showing the capacity

of corals to survive acute and visible effects of contact and near contact with Moonie oil over limited periods. But they did not inspect for stresses and sub-lethal damage as did Dr Lewis and Professor Johannes who found evidence of

such stresses and damage (see answer to TR2). General conclusions such as are required in answering TR2 cannot be drawn from them and in any event the effects of low level chronic pollution (regarded by the majority of the scientific witnesses as the most hazardous) cannot be determined

therefrom.

Detection of spilt oil 3.3.9 The detection and monitoring of spilt oil have

relevancy in answering TR3. Usually visible observation by personnel at the source of the spill provides the evidence but monitoring from boats or small ships is not easy if the slick is thin,

and of course is impractical at night. Surveillance from

577

aircraft is superior and modern methods include using the sun's spectrum through visible light waves and ultra­ violet and infra-red frequencies. (Winders Tl2617) Another technique is radar imagery which was said (Winders -Tl2618) to have the advantage of "rapidly searching wide areas with good resolution under adverse weather conditions." A modern

system which would probably be useful in the GBRP was described by Mr Biglane at T6624 (black and white imagery also infra-red and ultra-violet coupled with a multispectral remote temperature instrument) but for present purposes it is sufficient to note that the availability of the means of detecting and tracking an oil spill enhances the capacity to employ remedial measures and reduces the likelihood of detrimental effects.

Buffer zones or "safe distances" 3.3.10 Reference has been made to buffer zones,(paragraph 3.1.7. supra) It is clear that if drilling is permitted in any

selected and defined areas their "geographical limits" (TR3) can scarcely be described by metes and bounds or approx­

imations thereto. The method selected has been to define buffer zones

of varying sizes to give protection to neighbouring features and eco-systems. In this way features such as cays, islands and reefs also eco-systems of importance will receive protection according to their respective degrees of vulnerab­

ility, as the result of the weathering of spilt oil from its

migration. (paragraph 3.2.2 ) Then, in paragraph 3.4.6 infra the majority (Dr Smith and Mr Moroney) have described geographic areas where drilling could be permitted in general terms by referencffi to parallels of latitude and meridians of longitude thus giving the localities with recommended distances off-shore. The buffer zones will of course apply to all such areas. Dr Smith and Mr. Moroney consider that the permitted areas should include the north-eastern section of the

Papuan Basin in the far north.

578

The divergent views of the Chairman appear in paragraph 3.4.10. Allowances cannot however be made for exceptional climatic conditions and for vagaries of wind in different

seasons. A main consideration is to give protection from migration due to the prevailing winds and normal currents which, as has been earlier shown in general would give an oil spill a predominantly on-shore migratory direction.

Accordingly the buffer zones are intended to allow for sufficient down-wind distance to provide that any oil reaching or stranding near or on a feature which is the object of special protection will be appropriately weathered so as

to be non-toxic according to our present limited state of knowledge. The buffer zones also assist in providing time for remedial measures to be undertaken.

Massive and chronic spills 3.3.11 Throughout the report we have construed "oil leak" as including both single massive spills (such as blowouts) and chronic and random low-level spills.

Low-level chronic spills can, in some circumstances have a greater potential for inflicting serious and lasting damage than a single massive spill but they might not require, in some cases at least, the same width in a protecting buffer

zone.

Nevertheless such width cannot be variable and the size of the recommended zones should be assessed according to the maximum safe requirement.

Transportation of oil from production source to shore 3.3.12 There are two methods of such transportation (see answer to TR4) mainly by tanker (or barge) and by pipeline laid on the sea bed (preferably buried, especially in shallow waters, near shipping routes and approaching the coast line).

However, oil leaks of a "chronic"type can and do occur in each case, although under modern conditions, only occasionally. In the case of pipelines, special care relating to

579

routing, maintenance and the provision of safety and monitoring devices is necessary. The loading of moored barges or tankers at or near the production platform requires care on the part of trained and experienced personnel.

The routing of tankers and barges from the production source to a shore receiving depot would require fixation and control by the appropriate authority (not the D.A.).

The route would no doubt be determined by an evaluation of such factors as channels, currents, water depths, passages and the position of the buffer zones. It is not suggested that tankers and barges should avoid buffer zones, but subject always to the overriding consideration of safety, the avoidance of proximity to protected features might generally be considered desirable.

Similarly whilst pipe lines should be routed and installed in the manner which, in the opinion of the D.A. will best provide stability, safety, and inspection and maintenance facilities, the desirability of avoiding proximity to special features protected by buffer zones should be kept in mind.

A conservationist view

3.3.13 The comparative lack of knowledge of the effects of oil on coral and other organisms was put forward by Mr Connolly QC in his final address in support of the conservationist view

that petroleum drilling within the GBRP which, if properly controlled and regulated his did not oppose in principle

should be deferred until the results of further essential scientific research including long-term scientific experiments should have been fully considered. This was also the view of several scientists who gave evidence. In this way only, it was said, could informed decisions be made on where, how and under what conditions exploration for petroleum in waters of the Great Barrier Reef should be permitted.

Dr Coombs' view 3.3.14 A somewhat comparable view was presented by Dr Coombs

580

who in Exhibit 406 said:-"Australia is in a real sense a trustee for

the world in the protection and preservation of the Reef ... The Reef area should be reserved

from oil development at least for the present and placed under the control of a National Park Authority charged ... to sponsor research into the nature of that ecology and the problems of

reconciling development and effective ecological protection."

581

PART 4 - ANSWER TO TR3

Some divergence of view amongst members of the Commission

3.4.1 Some differences of opinion have occurred amongst members of the Commission in determining the answer to be

given to TR3. They derive from the divergence of view expressed in the answer to TR2 and upon which the answer to TR3 is substantially based.

It is proposed firstly to tabulate matters on which there is agreement amongst all members. Thereafter the answers to the question as given by the majority (paragraphs 3.4.5 to 3.4.9) and the minority (paragraph 3.4.10) will be given. Finally in paragraph 3.4.11 will be given the reasons for the Chairman's minority view.

3.4.2

582

Matters affectiog the answer on which all members are in agreement:-(A) As to fresh oil

(i) It is toxic

(ii) Its effects are deleterious in some measure to corals and other marine organisms but the measure thereof is largely unknown because of lack of knowledge of effects - direct, acute and delayed on individual organisms, and indirect on the eco-systems. (iii) There is need for research and experiments

along the lines set forth in the Appendix to the Principal Introduction - such research to be conducted by or under the supervision of an independent Commit­ tee. (B) As to weathered oil

(i) As spilt oil migrates under the forces of

wind and surface currents there is some measure of depletion of toxic

components by evaporation and dissolution. (ii) Weathered oil has different compositions and residual toxicities at different

stages of migration (iii) All weathered oil is a hazard to the

environment such as beaches and prior to its eventual solidification can cause physical detriment to birds and some organisms.

The "localities" and "geographical limits" 3.4.3 As earlier indicated the Commission finds it

impracticable to describe localities by geographical limits as required by Term of Reference.

Guidelines will be given by assessing "buffer zones" and areas indicated by broad references to latitude and longitude.

No drilling on islands, cays etc.

3.4.4 All members agree that drilling should not be

permitted cay, island or reef or national park or

marine park when declared.

Majority view on the answer to TR3 3.4.5 Dr Smith and Mr Moroney consider that drilling

for petroleum could be permitted within certain areas of the GBRP provided that the buffer zones which they recommend in paragraph 3.4.8 are adhered to, and the Commission's recommend­ ations for safety precautions,including contingency planning,

as set out in the answer to TR4 and which are summarised in

Part 10 thereof are strictly applied and supervised. The boundaries of the several areas both permitted and excluded listed in paragraphs 3.4.6 and 3.4.7 (infra)

are intended to be indicative rather than precise limits. Notes are added in explanation of some criteria used in defining the boundaries. The Chairman's divergent views are in paragraphs 3.4.10 and 3.4.11.

Majority view recommendations on permitted drilling areas. 3.4.6 Dr Smith and Mr Moroney make the following recommend-ations for permitted areas in answer to TR3:-

584

As to the area eastwards of the outer Barrier

(1) (a) Dr Smith's recommendation All parts of the GBRP lying 15 miles or more eastwards of the most seaward reefs of the outer Continental Shelf. (b) Mr Moroney's recommendation

All parts of the GBRP lying eastward of the buffer zones as described in paragraph 3.4.8 (infra) respectively relevant to the most seaward of the reefs, cays and islands of the outer Barrier reefs.

As to the area from north to south of the GBRP

within the area enclosed by the outer line of reefs ( 2) from the northern boundary of the GBRP

to 10°S and eastwards of 142°E. (3) from 10°S to 11°S and eastwards of 143°E.

(4) from 11°S to 12°3 and eastwards of 143°

30'E.

(5) from 18°s to 19°S and eastwards of 147°E.

( 6) from 19°S to 19°45'S and eastwards of 148°E.

( 7) from 22°S to 23°S and eastwards of 151°E.

( 8) from 23°3 to 24°S and eastwards of 152°50'E.

Notes on the above recommendations

As to:-

(1) (a)

( 2)

(3) (4)

(5)

(6)

(7) (8)

(Dr Smith's note) The wall of the outer Barrier though often inaccessible to visitors is a feature which, for its

grandeur and unique character appears to call for a buffer zone of the

magnitude recommended for features of special tourist and scientific value. The high concentration of reefs east of 143°E appear to leave little room,

because of buffer zone requirements, for permitted drilling. The area is however included because of the remote­ ness of the features from areas of normal visitation. Relatively few emergent reefs.

The westward boundary is drawn at l43°30'E in recognition of the line of islands a little to the eastward of 143°E.

The western boundary is set well to

the east of Hinchinbrook Island and Palm Islands. The southern boundary is set to the north of 20°S with the safeguarding

of th2 Whitsunday group of islands from infrequently occurring persistent NE winds in mind.

Containing no charted reefal features. The western boundary is set well to the

east of the Capricorn and Bunker groups of reefs and cays. Eastwards of 152°50'E there are no charted reefal features.

Majority view recommendations on areas where drilling should not be permitted ("excluded" areas)

585

3.4.7

As to:-

Dr Smith and Mr Moroney recommend as follows:-(l) l2°S to 18°S within the outer line

of reefs. Approximately C.Grenville to Dunk Island. ( 2) 18°S to 19°S west of l47°E.

( 3) 19°S to 20°S west of 148°E.

( 4) 20°S to 21 °S west of 150°E.

(5) 21°S to 22°S west of 150°30'E.

(6) 23°S to 24°s west of 152°50'E.

Notes on the above recommendations

(1) Extending over more than 500 miles of

coastline where the outer line of reefs is at its closest to the land and the

Channel studded with reefal features. The area includes, especially at its southern end, many easily accessible islands of outstanding beauty. ( 2) Includes Hinchinbrook Island and Palm

Islands.

(3) Understood to be within the general sea

area of the proposed Institute of Marine Science, Townsville. (4) Includes the Whitsunday, Cumberland and

Northumberland Groups and the Swain Reefs. (5) Includes the Capricorn and Bunker Groups

including tourist centres (e.g. Heron Island) and cays which are readily accessible and presently used for scientific research.

Buffer zones for permitted drilling localities as recommended by the majority

3.4.8 The sizes of the buffer zones recommended by the

majority (Dr Smith and Mr Moroney) are based on the majority

586

view (see paragraph 2.10.24 supra) that oil which has been at sea in the GBRP and subject to weathering for some days

will p robably be depleted of the toxic compone nts originally present in the freshly spilt crude oil to the point where it

is virtually non-toxic to marine organisms. The Chairman's minority views are in paragraphs 3.4.10 and 3.4.11 (infra). The size of the zones have also been assessed on the basis that they will provide appropriate prot ection for t he

a menities which the various cays, islands, re s ort are as and

c oastline provide.

The recommende d . size s of the buffe r z o n es a re as

follows:-

Submerged reefs Emerg ent reefs

Cays and islands not being or containing a resort Cays and islands containing a resort

Any feature of special

e nvironmental or

scientific importance The mainland shore

Dr Smith

2 miles

5 miles

10 miles

20 miles

20 miles

20 miles

Mr Moroney

>, mile

5 miles

5 miles

20 miles

20 miles

20 miles

Dr Smith differs from Mr Moroney in respect of submerged reefs because of the risk of rapid emulsification o f freshly spilt oil especially in rough weather with the

consequent availability of oil to submerged features. He differs also in the case of cays and islands not

being or containing a resort because the intertidal shingles a nd sands of cays and islands will tend to retain spilt and

emulsified oil which reache s them whereas in the case of emergent reefal areas the spilt oil will be largely removed by the rise and fall of the tide and tidal currents .

Experiments on the evaporation rates and residual toxicities of Australian oils - majority view 3.4.9 Dr Smith and Mr Moroney are in full agreement with

the Chairman's view (paragraphs 3.4.10 and 3.4.11 (m)) that experiments of this nature on known and newly discovered Australian oils are urgently needed. They are, however, of the opinion that information derived from such experiments would become available before some exploratory drilling within the permitted areas of the majority view had been

completed. The information would therefore serve as useful guidelines for the subsequent revision of the buffer zones and excluded areas if found necessary at the production stage and in the planning of transportation routes by tankers, or pipelines.

The minority views of the Chairman

3.4.10 On a review of the evidence as a whole, the Chairman

has found difficulty in defining any locality within the GBRP which answers the requirement sought by TR3. With deference to his colleagues, he considers it preferable that petroleum drilling in the GBRP should be postponed, and be planned and permitted only in the light, and with the aid, of full

scientific knowledge of all the effects of oil pollution direct and indirect, short and long-term, on the coral and other marine life of what was described by Sir Maurice Yonge as the complex and delicately balanced system of the Barrier Reef -that is to say in the light of the results of the experiments

and research recommended in the Appendix to the Principal Introduction. Because of the general on-shore direction of prevailing winds and ocean currents, drilling east of and adjacent to the outer Barrier should in the Chairman's opinion be similarly postponed.

As Dr Coombs indicated, the present generation is in

a real sense a trustee of this unique wilderness, and it is

undoubtedly the fact that at present there is a complete lack of scientific knowledge of possible damage of an indirect and

588

long-term nature, and which according to the evidence is scientifically possible. On the view which the Chairman takes of the

evidence, there is also imprecision on the toxic qualities of spilt oil at the various stages of its weathering through migration and insufficient evidence to establish how long it takes for the oil to become non-toxic in the waters and

climatic conditions of the GBRP and indeed whether it is completely harmless even when weathered. Owing to the long distances which spilt oil

travels during its migration due to the effects of wind and currents, an oil leak (which the question put in TR3 propounds) within the GBRP especially in the Northern and Central Zones could expose corals and marine life therein to the possibility of detriment, which according to the evidence

as the Chairman construes it, and in the present state of scientific knowledge, would be of unknown proportions. This in the absence of compelling reasons, seems undesirable. The Chairman finds consequential difficulty on the evidence in defining with confidence any locality within the

Area of the Great Barrier Reef "wherein the effects of an oil or gas leak would cause so little detriment that drill­ ing there for petroleum might be permitted" (TR3), or in estimating appropriate buffer zones without recourse to a measure of assumption or speculation.

Buffer zones and the Capricorn Channel (only) But although the above are his firm views, the Chairman respects the views of his colleagues and recognises their force.

Accordingly he wishes to add that of the various permitted drilling areas as recommended by the majority in paragraph 3.4.6 supra, the Capricorn Channel by reason of/a) its size (paragraph 3.2.27 supra)and (b) the absence of

any reefs and islands therein would, in his opinion, and on the evidence as it presently stands, offer the least risk of appreciable detriment to ecosystems and foreshores if 589

drilling were therein permitted and an oil leak occurred. This comment is made on the assumption that wide buffer zones were imposed to give protection to well kn own island s , reefs and cays and their iurrounding eco-systems which lie on the western and north western (or leeward in the prevailing winds)

s i des of this spacious Channel although organisms actually within it for example plankton , would not o f course receive protection from such buffer zones which the Chairman envisages would be not less than 30 miles in width measured from the coast line , cays, islands and emergent reefs and 15 miles from submerged reefs .

On the eastern or Swain Reefs side (i.e. the

windward side in the prevailing wind) the buffer zone might be somewhat smaller. Of the Swa in Reefs area itself Messrs. Gi llett and McNeill (Exhibit 3 at p.l87) make reference to its "unspoilt virgin condition" and suggest it should be de c lared a Marine National Pa rk.

Re asons for the Chairman's minority views

3. 4.11 (a)

\

590

Introduction Certain f eatures of the evidence have caused the Chairman to differ from his colleagues on the Answer to TR3, a nd also on some views expressed

(b)

in the answer to TR2 upon which the answer to TR3 largely depends. In order to illustrate where the the divergences arising from a review of the evidence occur, it will be desirable to recapitul­ ate at some stages.

As pointed out in the answer to TR2, spilt oil can

be considered under two headings namely, fresh and weathered. Fresh oil - short-term effects (c)

(d)

As regards fresh oil, which has toxic qualities,

the effects on coral and other marine organisms may be either acute (visible and short-term) or indirect and long-term - or both. Certain short-term experiments relating to acute

effects were conducted by Australian and overseas scientists and these are discussed in detail in the answer to TR2. In the Chairman's opinion whilst they indicate a somewhat suprising measure of tolerance by corals to acute effects, the results were not entirely consistent and some deaths or ill

effects were noted where contact or near contact with oil took place. This was especially the case in the experiments by Professor Chuang of 3ingapore and to a lesser extent in some of the experiments

by Professor Johannes. These experiments were the main source of our knowledge on this subject and although helpful were generally unsatisfying as a basis for

planning petroleum drilling in the unique and remarkable area of the GBRP. Fresh oil - long-term and indirect effects (e) The importance of possible long-term effects of oil

on corals was stressed by a number of scientists, and a list of those who either recommended or approved of long-term research and experiments appears in paragraph PI.2.8.

591

Dr Grassle's list of potential short and long-term

detrimental effects to marine ecology from oil pollution was quoted by Mr Woodward QC during his final address at Tl6296. (f) But there is lite rally no scientific knowledge

(according to the evidence before the Commission) of these possible long-term and indirect effects. They relate (inter alia) to the effects on juveniles, the food web and reproductive systems, so that their importance is manifest. Weathered oil - composition and toxic qualities

(g) There is, of course, no doubt that weathered oil,

even if wholly free of toxic constituents can be detrimental to the environment, to amenities, and to some forms of marine and bird life.

(h) But if it retains an appreciable proportion of

toxic fractions it may also have detrimental effects on corals and the food web. (i) This view is strengthened by the Chairman's

understanding of the evidence that spilt oil has the capacity to sink or precipitate (Exhibit 302 p.ll; Dr Grassle at T6139; and paragraph

2.2.15 supra) under certain conditions (for example when weighted by organic or inorganic part­

icles particularly in shallow and near-shore waters) and to persist for a comparatively long period in the sea-floor sediments after it has sunk. Its more toxic elements have the capacity to dis­ solve in sea water (see paragraphs 2.2.4 et seq supra). Mr Cowell (Tl0912) said:-" ... the more soluble the material, the higher

its toxicity. So that benzene ... which is

the most soluble is also the most toxic." (j) The importance o f reliable knowledge of the

composition and residual toxic qualities of spilt oil which has "weathered" at various stages of its

migration (consequent upon the effects of wind and

(k)

(l)

(m)

surface currents) lies in the fact that it is

on such knowledge that the ''buffer zones" have largely been assessed. As shown in the answer to TR2 the weathering is

due to a number of factors including rates and results of evaporation. But the evidence on these matters and therefore the evidence relating to toxicity and composit­

ion of weathered oils at various stages of migration was, in the Chairman's opinion, imprecise and incomplete and conclusions therefrom must in some degree be based on a measure of assumption and speculation.

The Chairman on a review of the relevant evidence as a whole is therefore unable to agree with the majority view in paragraph 2.10.24

of the answer to TR2 namely:-"oil which has been at sea in the area of the GBRP

and subject to weathering for some will

probably be depleted of the toxic components originallY present in the freshly spilt crude oil to the point where it is virtually non-toxic to marine organisms."

He agrees that there will be a depletion but is

unable to fix its quantum in such finite terms on the evidence as it stands. Thus the general words of a group of American scientists are also lmprecise when drilling

in the restricted and reefal waters of the GBRP is under consideration:-"However, the toxicity of fresh oils declines rapidly in the first few days after a spill

since the aromatics are volatile and the phenolics, being water soluble, may become diluted well below toxicity " -(Exhibit 397

593

page 13- First Report of The President's Panel on Oil Spills).

Tests and experiment& on this all-important subject are needed before buffer zones can be fixed with confidence particularly in relation to the compar­ atively narrow and restricted but important waters of the No rthern and Central Zones of the GBRP in which there are many coral reefs, and a number of

islands and cays. This view is fortified by the factors referred to above namely that the acute effects of spilt oil on curals are insufficiently known whilst the long-term effects are completely unknown.

A review of the evidence which related to weathered oil

(n) (i) There is a statement by Dr Nelson-Smith

in Exhibit 365 p.236 which itse lf refers to a statement by "Brunnock et al" regarding loss of the 'Torrey Canyon's' cargo by evaporation., But no reference to the time involved is made in such

statement.

594

(ii) Then at T6717 Mr Biglane gave an estimate

about the spill on the Chevron platform. In speaking of this blowout however Mr Biglane said " The manner in which oil and gas sprayed into the air and dispersed over large areas of the water facilitated evaporation of the liquid fractions. Samples collected 500 feet from the platform and analysed by FWQA showed a loss in volume of 16 per cent, all in

the lighter ends. It seems likely that

at least 35 per cent or 10,000 barrels of the total oil discharged would have

evaporated within 48 hours." (iii) Mr Norrie of the Queensland Department of Mines also gave evidence of the 'Torrey Canyon' spill at T6019 being

quotations from a publication by a journalist named R. Petrow, but the quotations appear to the Chairman to be imprecise on relevant matters (cf.

paragraph 2.9.12 supra). (iv) There was other evidence about the 'Torrey Canyon' spill which suggested that the heavy application of detergents

made it difficult to judge the toxicity

of the weathered oil when it reached the Cornwall coast ("so that the effect of the oil cannot be separated from the effect of the dispersant in this case" - Professor Clark at T3696) whilst in the First Report of the President's Panel on Oil Spills (Exhibit 397 at p.l3)

it is stated:

"The 'Torrey Canyon' observations, because of the large use of dispersants, furnished valuable data on the effect on the biota of combined oil and dispersants but these

observations do not provide data on the effect of oil alone." On the other hand (Exhibit 365 p.250 by

Dr Nelson-Smith) there was evidence that "Shore molluscs suffered very heavily from emulsifier spraying but survived where the oil was left untreated." Professor Clark at T3696 also quotes "O'Sullivan and

Richardson 1967" for the statement that "A few rocky beaches in south-west England

were not treated with dispersants and

595

596

examination of these and a number of untreated beaches in Brittany suggests that while crude oil caused some physical damage to plants and animals, there were relatively few deaths from toxins in the oil." (v) All this evidence was in more or less

degree informative but it was insuffic­ ient to base finite calculations of buffer zones applicable to the entire GBRP generally without resort to a measure of assumption or speculation. (vi) Reference was also made (paragraph 2.2.2.)

to Mr Mansfield's evidence at T7195-9 (where he was reading from his written statement being Exhibit 315). Here again, reading his statement in its full context, the Chairman has found difficulty in using it as a base on which

to finite planning figures for the

entire GBRP. In Exhibit 315 Mr Mansifled deals firstly with spreading, emulsification and oxygen transfer resistance by a layer of oil.

In an additional statement he writes: "At any one moment, the most volatile fractions present at any particular part of the oil/air interface of this slick evaporate preferentially at a rate determined mostly by the wind velocity, the surface temperature and the vapour pressures of the components being evaporated ...

Altogether, there is a very complicated relationship between the evaporation and the spreading of an oil slick.

This makes prediction of some changes difficult." and then he stresses the need for a series

of experiments, designed and controlled for the express purpose of predicting the behaviour of large slicks. Perhaps more importantly he then stresses a point which he made earlier name ly that

his studies of oil slicks has been meagre and that his work had been restricted to the laboratory. He did not claim to have

a great knowledge of the GBRP. said he

could predict the final form of a slick

of Moonie oil only by r e ference to the

recorded behaviour of slicks of other oils.

It was in this context that he went on to

express views of what he "would expect" and referred to his expectation that the "final state" - which he describes -would be approached in about one day.

A little later, in his oral evidence,

(T7201) in answer to questions put by the Chairman he indicated that his expectations would vary according to the amount of the spill and the particular environment

although he apparently had made his stated expectations on a substantial spill ("some hundreds of barrels") of light crude oil in water temperatures of the

order of 70 to 80 degrees Fahrenheit and with winds of about 13 to 18 miles per hour.

A little later he added " so that what I

am trying to say is, that the larger the

dumping, the more wild would become my

597

598

(vii)

guesses as to what would happen." This evidence, again, is informative and helpful but in the Chairman's opinion insufficient to use as a foundation for computing buffer zones for general use throughout the reefal waters of the GBRP. Finally, passing references were made by Mr. Cowell at Tl0988 and Miss Ottway in Exhibit 404 (p.l) to the low toxicity

of "Kuwait residue" as reported by "Crapp and Baker 1969." No details were given and no further examination of the statement took place. Such

statements do not assist for present purposes. Some divergent views (viii) Reference will now be made to some views

expressed by Dr Blumer as appearing in Exhibits 303 and 533, and by Professor Clark. Dr Blumer is a hydrocarbon chemist and was senior scientist at the Woods Hole (Mass) Laboratory. His views were subjected to criticism mainly on grounds which alleged that his generalisations resulted from extrapolations of flimsy data and that he gave general results without quantitative details. However he was described by one of his critics

as a first class chemist with outstanding technology and his views and those of his associates and colleagues even if not accepted, cannot be disregarded by a Commission. Unfortunately Dr Blumer

was not a witness. He declined two

invitations to attend and stated that

Dr Grassle knew his views and that his

evidence would be representative of his own. Much of Dr Grassle's evidence was

impressive. The quotations are:-At page 9 of Exhibit 303 (being a letter

from Dr Blumer to a Dr Hunt relating to

the report edited by Dr Straughan on the 'Santa Barbara' spill (which is Exhibit 281) the following appears:-"It is stated that' as the oil floats

at the surface of the water the volatile components are rapidly lost' and 'the loss of volatile components reduces the potential toxicity of the oil.' On p.326

it is said that 'slicks remained at sea for

several days beforu moving onto the beaches. This delay at sea allowed the oil to lose

many of its toxic volatile components

prior to its arrival on shore'. -We have had an opportunity to analyse oil

that arrived at the beaches of Santa Barbara after the spill in January 1969. In spite of the exposure at sea, gas

chromatography shows the presence of hydrocarbons boiling as low as n-dodecane. Mass spectrometry revealed the presence

of benzenes .... Thus, the hydrocarbons

of the fuel oil range are still present

in the 'weathered' oil that arrived at the beach .... The aromatics mentioned

above are toxic as are the higher ring

number compounds, some of them carcinogens .... The oil has lost little of its acute,

and probably none of its long-term toxicity through the exposure at sea." In Exhibit 533 Blumer states:-

599

600

"Even weathered crude oils may still contain these long-term poisons, and in many cases some or the moderately low­

boiling, immediately toxic compounds." (p.48) At T3839A Clark said

"The general conclusion is that rractions in the 200-400°C range are not appreciably lost by evaporation, because at that boiling point the rate of

evaporation is going to be quite slow. These present a hazard in the marine environment because they contain water soluble toxins which enter the marine environment rather than the atmosphere." Rates of evaporation and of migration (ix) Both are variables as each depends on

variables. In the case of evaporation the variables include (a) type of oil (b) rorce or the wind (c) sea air

temperatures. In the ease or migration the speed and the distance travelled in a given time- or perhaps more important­

ly, the time to travel a given distance

- will depend on the directions and

speeds of the wind and tidal currents. The type of oil and its viscosity are

also relevant. Whilst the evidence showed that the rate of evaporation increases rapidly with increases or temperature, there was evidence to the effect that the strength of the wind is equally important and that the rate increases with stronger winds. But no evidence was given relating to comparative evaporation rates in

different strengths of winds. Clearly, this important factor in the determination of safe buffer zones can only be determined by field experiments

conducted in different lvcalities in the 1200 miles long GBRP.

Is the degree of risk of an oil spill relevant when answering TR3?

(o) This is a factor, which, especially in the light of

our answer to TRl, is difficult to eliminate from all consideration when answering TR3. But it must be borne in mind, in the Chairman's view, that the wording of TR3 assumes the actual occurrence of a

spill (which means both massive and chronic) and then the question seeks information relating to safe drilling localities. The question does not begin, for example, "taking

into account the risk of a spill" - whereas TRl

significantly begins "Taking into account existing world technology." It is stressed in the answers to TRl and TR4 that

whilst human frailty continues, oil spills particul­ arly chronic spills in some measure will continue. Factory and employment accidents continue notwith­ standing very strict statutory and regulatory control

and governmental supervision of factory life and employment conditions.

Plankton and chronic spills (p) The universally acknowledged wide importance of the

former to practically all forms of life in the GBRP and the special dangers of the latter - as evidenced, by way of example, by the statements of Dr Nelson­ Smith in Exhibit 365 p.259, by Professor Clark in

Exhibit 235 p.5 (reduction in diversity) and by the

601

report of the President's Panel on Oil Spills compiled by a large team of American scientists after the Santa Barbara spill, Exhibit 397 p.l2 ("a widespread low intensity persistent leakage of pollutants is likely to make profound changes in

the biota and the food web") - attract special

attention when drilling is being considered in the comparatively narrow and restricted reefal waters particularly of the Northern and Central Zones of the GBRP and together with the Mironov and Kasymov experiments on plankton in the Black and Caspian seas ( Exhibits 289 and 299) are contributing factors to the formation of the Chairman's preferred view that drilling even in the spacious Capricorn Channel should await the results of long-term experiments and field tests.

Submerged and emergent reefs (q) The Chairman is not satisfied that submerged reefs and

benthic organisms are invulnerable or only

to a small extent, to the effects of spilt oil. The

evidence relating to the sinking and dissolution properties of crude oil, (see answer to TR2 Part 2) and to its persistence in sediments when sunk -

602

("It has been recognised that spilled oil has a tendency to precipitate and accumulate in bottom sediments" - Exhibit 302 p.ll, Report to U.S. Department of the Interior - and see sub-paragraph

(i) above) and the fact that the type of oil which

may be discovered cannot be stated with complete

confidence lead to the conclusion that on the present incomplete state of knowledge, permanently submerged reefs especially those submerged in shallow depths need protection though to a less degree than reefs which partially eme1•ge at low tides. It is also to

be borne in mind that the Commission has recommended

against the use of sinking agents as a remedial measure - see answer to TR4, the reason being the hazards to marine and benthic organisms from sunken oil whilst some permanently submerged reefs

are submerged only to shallow depths - as shallow as one foot (see paragraph 2.9.16 supra) - or knee

deep (Dr Isabel Bennett in Exhibit 451 at p.37). The views of Dr Blumer in Exhibit 290 at p.6 (a

paper delivered in Ro me in December 1970 to an F.A.O. Conference on Marine Pollution) relat ing to the toxic effects of sunken oil and how the

poisonous fraction can be carried in water solution away from the accident tend to strengthen the

Chairman's doubts regarding submerged and emergent reefs although such evidence has not been subjected to examination and testing before the Commission.

Unoccupied islands and cays (r) It can be reasonably predicted that within the next

decade or so, a number of additional tourist and holiday resorts will appear on various islands and cays at present unoccupied. The Chairman doubts whether for planning purposes, any distinction

should be made between occupied and unoccupied islands and cays.

603

4.1.1

TERM OF REFERENCE NO. 4

"If exploration or drilling for petroleum in any locality within the Area of the Great Barrier Reef is are existing safety

precautions already prescribed or otherwise laid down for that locality regarded as adequate and, if not, what conditions should be imposed before

such exploration or drilling could take place?"

PART l - OUTLINE OF THE ANSWER

This question assumes the possibility of an affirm-ative ans.wer to TR3.

No existing "safety precautions"

4.1.2 There are no "existing safety precautions prescribed or otherwise laid down" for any locality within the GBR whilst certain draft regulations prepared by Australian and State authorities in 1969 (Exhibit 68) inadequately and

insufficiently cover the subject of safety precautions.

Existing draft regulations (Exhibit 68) should be amended 4.1.3 The final address of senior counsel assisting the

Commission, Mr A.E. Woodward QC (now The Hon. Mr Justice Woodward) and his assisting counsel, Mr C.E.K. Hampson QC and Mr M.P. Moynihan contains the following introductory observations on this Term of Reference:-

"The basic problem which the Commission faces in answering this question is that there are virtually no "existing safety precautions already

605

prescribed or otherwise laid down.' Every thing is at a planning s t age . The most th e Commi s sion can

do is ask itse lf whether the safety pre cautions

likely to be laid down if drilling were permitted would be ade qua te. The evidence hardly inspires confidence. Exhibit 68, the Drafting Instructions for a common c o de of regulations which have been under cons ideration for several years, may well be thought totally inadequate and to require not merely up-dat ing but complete r e writing as a matter

of urgency. The actual ·dire ctions issued by the Queensland Mines

Department to the Japex Company up to the time it was about to commence drilling in Repulse Bay (these instructions were in the form of correspond­ ence being Exhibit 255) provide an illustration of how the syste m would work in practice. They leave

much to be desired in clarity, comprehensiveness

and enforcea bility. Penalties for breaches of the Act or any re gulations or directions which may be promulgated appear totally inadequate at $2,000. The responsibility of permit holders, contractors

and sub-contractors in cleaning up an oil spill are nowhere laid down. There is no clarity as to legal

liability for g overnmental costs or private damages. There is no certainty of ability to pay. Government planning for control of clean up oper­ ations is in its infancy. Althoug h the lines seem

right, there is a long way to go before it can be

said that such precautions are ade quate." The Commission a g rees with much of this comment and although a proportion o f Exhibit 68 is sound, it should be reviewed as a whole befo re exploration or production is per­ mitted anywhere within the GBRP and amendments and additions mad e .

We have found its provisions insufficient not only

in regard to technical requirements but also in re gard (inter 606

alia) to such important matters as pollution prevention, contingency planning and clean up provisions.

"Safety precautions" and "locality" 4.1.4 The phrase·"safety precautions" has been taken to refer to the environment and eco-systems and not (for example) to the prevention of injuries to employees arising out of or

in the course of employment. With this qualification the phrase will be construed widely so as to include such activ­ ities as blasting, dredging, pipe laying, transportation from wells and production platforms to shore depot and

seismic surveys. Contingency planning and arrangements for the clean up of oil spills are also regarded as essential components of "safety precautions."

4.1.5 The references to "locality" in Term of Reference No. 4 may be a recognition that in such a large and unusual

area with varying geographical features in different local­ ities, safety precautions might conceivably vary from place to place, or be the subject of a specific direction or con­ dition imposed under SlOl of the 1967 Act or under some local

contingency plan. The scheme of our answer to TR4 The scheme of our answer to TR4 is as follows:-

Part 9 deals with Exhibit 68 and drilling technique 4.1.6 In Part 9 (infra) we have concentrated on Ex.68 and

American Outer Continental Shelf Orders relating to explor­ ation, drilling and production activities and have based our recommendations for safety precautions on the substantial volume of overseas and local expert evidence which was so helpfully given to the Commission. We would like to acknow­

ledge the great pains taken by very senior American govern­ mental officials and other well known overseas specialists and experts in preparing and presenting their evidence and in thanking them warmly for so doing we express the confident

607

opinion that Australian authorities who ultimately revise Exhibit 68 will thereby receive great assistance. We also wish to thank with equal warmth the Australian witnesses for their help and for the time and effort spent.

4.1. 7 We would mention also Exhibits 433 and 434 being

directions given. under the mirror legislation by the Victorian DA to Hematite Petroleum Pty. Ltd and Esso Exploration and

Production Australia Inc. on 16th October 1968 and 11th May 1971 respectively in relation to Bass Strait drilling. The latter directive revokes the former in so far as it is incon­ sistent with its own provisions but there remain parts of Exhibit 433 still in force. These two Exhibits do not direct­

ly affect the issues raised by TR4 as they do not relate or

extend to any part of the adjacent area of Queensland, but they contain useful provisions many of which are substantially the same as corresponding provisions of Exhibit 68. We have not found it necessary to analyse these directives in detail but amongst other topics therein to which attention might be given are "Navigation Warnings and Identification", "Mobile Drilling Units" and "Person in Charge".

Part 2 deals with the "mirror" legislation of 1967 4.1. 8 In Part 2 which follows we have summarised relevant

sections of the mirror legislation being the Queensland Petro­ leum (Submerged Lands) Act of 1967 as this is a desirable background to the later Parts and in any event some suggestions for amendments to the Act relevant to the issues raised by TR4 are contained therein.

Parts 3 to 8 deal with activities relating to drilling and production 4.1.9 In Parts 3 to 8 we deal successively with the various

subjects and activities relating to petroleum exploration and production in addition to the technical procedures covered by Exhibit 68, which require precautionary and safety

608

measures not presently existing. These subjects include con­ tingency planning, remedial measures, seismic surveys, avoid­ ance of pollution and governmental supervision.

The Commission has concentrated throughout on the special conditions and characteristics of the GBRP 4.1.10 We have throughout confined ourselves to the consider­ ation of the specific problems associated with the GBRP because the biological, geographical and hydrological con­

ditions thereof differ appreciably from those of other parts of the Australian OCS. Therefore, our recommendations are intended to relate to the reef area as indeed the TR requires. Thus in connection with the prevention of poll4tion and disposal of wastes we have in Part 9 recommended a total prohibition (with three exceptions each subject to the DA's

approval) upon the disposal of all substances whether solids or liquids into the waters of the GBR.

Part 10 contains a summary of all recommendations suggestions and conclusions contained in this answer to TR4 4.1.11 In Part 10 we have supplied a summary of all recom­

mendations, suggestions and conclusions contained in Parts 2 to 9 of this answer to TR4.

609

PART 2 - THE "MIRRORrr LEGISLATION OF 1967

AND ACT NO. 36 OF 1967 (QLD)

The 1967 Agreement and the Queensland Act No.36 of 1967 -Petroleum (Submerged Lands) Act 4.2.1 The so-called "mirrorrr legislation enacted by the Australian Government and by each of the States in 1967 in all cases under the title of "Petroleum (Submerged Lands) Act" was enacted in pursuance of the Agreement which was made between them on 16th October 1967 (Exhibit 56) and it is pro­ posed to refer to certain provisions of the Queensland Legis­ lation Act No. 36 of 1967 which are deemed relevant as a background to the enquiry set by TR4. No regulations or safety precautions have yet been prescribed or otherwise laid down either in pursuance of the power contained in Sl59 of the 1967 Petroleum (Submerged Lands) Act or otherwise but as earlier stated (Exhibit 68) to which reference in detail is made later in Parts 9 and 10, is a draft of instructions to

the Parliamentary Counsel for ,the making of proposed 'regul­ ations. This was compiled by Australian and State authorities and is dated 22nd October 1969.

The Geneva Convention of 1958 4.2.2 It should first be noted however that by clause 12

of the Agreement (Exhibit 56) each State undertook, in the administration of the Common Mining Code in relation to the "adjacent area" of the State (defined in S5 of the Australian Act), to take all reasonable steps to secure compliance with

the obligations of Australia under the Geneva Convention of 1958 on the Continental Shelf. Article 5(1) of that Convention which appears as the First Schedule to the Queensland Act requires that the exploration of the Continental Shelf and the exploitation of its "natural resources" must not result

610

in any unjustifiable interference with navigation, fishing "or the conservation of the living resources of the sea".

Natural resources 4.2.3 The term "natural resources" is defined by clause 4

of Article 2 and the Interpretation section 4 of the Queens­ land Act gives the term the same meaning as in the Convention namely "the mineral and other non-living resources of the sea bed and subsoil together with living organisms belonging to

sedentary species, that is to say, organisms which at the harvestable stage either are immobile on or under the sea bed or are unable to move except in constant physical contact with the sea bed or the subsoil". But the term "living

resources" is not defined either in the Convention or the Act. Clause 7 of Article 5 makes further references to ''living resources" and both clauses 2 and 7 of Article 5 refer to safety zones for their protection.

Sections 124 and 159 4.2.4 The implementation of the covenant contained in clause 12 of the Agreement seems to reside with sub-section (3) of section 159 of the Act and Sl24. The former reads:-

4.2.5

"The regulations may prescribe in relation to the exploration for and the exploitation of the natural resources (being petroleum) of the adjacent area, matters for carrying out or giving effect to the

Convention".

This seems clearly enough to authorise (inter alia) contingency planning and all forms of safety, preventive and protective statutory provisions relating to the living resources of the sea and the environment.

Section 124 reads as follows:-"Interference with other rights. A person carrying on operations in the adjacent area under a permit,

611

licence, pipeline licence, special prospecting auth­ ority, access authority or instrument of consent under the last preceding section shall carry on those operations in a manner that does not with -

(a) navigation; (b) fishing ;

(c) the conservation of the res ources of the sea

and sea b ed ; or

(d) any operations of another person b e ing law­ fully carried on by way of exploration for, recovery of or conveyance of a mineral, whether petroleum or not, or by way of con­ struction or operation of a pipeline, to a greater extent than is necessary for the

reasonable exercise of the rights and performance of the duties of that first-mentioned person. Penalty: Two thousand dollars".

It will be observed that it departs from the wording of Article 5 (clause 1) in chat whilst retaining "navigation" and "fishing" it refers to "resources of the sea and sea-bed" and not to "living resources" so that both natural and living resources may be considered to be included within the ambit of the section. The matter however is not free from doubt as

Mr Jeffrey QC (for APEA) showed (Tl6994).

4.2.6 Section 159(2)(c) was criticised both by a witness

and a le gal representative but it is aimed, justifiably enough at the protection or conserving of "natural res ources" thus including sedentary organisms whereas Article 5 of the Convention includes the protection of "living resources" that is all living resources which would include the eco-systems excluded from the definition of "natural resources" (i.e. non­ sedentary organisms). Sub-section (3) of Sl59 must b e read accordingly.

612

4.2.7 However every part of the GBRP requires protection, whether it be a natural resource capable of exploitation, a living resource, or the environment itself whether in the form of a coast line, an island shore, a sand cay or a reef.

It would therefore appear that neither the Convention nor the l egislation covers the necessary field and to put the matter

beyond doubt section 159 should be amended by extending the grant of powers so as to· enable reg ulations to be made

dealing with the protection of the environment itself. The "living resources" can be protected under the powers contained in 8159(3).

Clause 15 of the Agreement 4.2.8 Clause 15 of the Agreement (Exhibit 56) provides

that an area can be withheld from permit at the request of the Commonwealth for reasons relating to Commonwealth respon­ sibilities under the Constitution - defence and external affairs for example. (Also - of interest to the Constitional

lawyer- "fisheries beyond territorial limits").

Clause 18 and SlOl 4.2.9 Clause 18 provides that except (inter alia) in case

of emergency, neither directions overriding re gulations nor exemptions from compliance with permit or licence conditions shall be g iven without consultation with the Commonwealth. It may be observed that SlOl which is the provision relating

to directions makes no reference to such consultation. (The same comment applies to the Australian provision).

Outline of the Queensland Act 4.2.10 The Commonwealth Petroleum (Submerged Lands) Act came into force on 29th March 1968 and the Queensland Act on

lst April 1968. The latter applies to the waters of the

continental shelf adjacent to the State of Queensland,includ­ ing the Great Barrier Reef and territorial waters, as des­ cribed in the Second Schedule of the Act.

613

Security sums in Sll4 too small 4.2.11 It provides for the granting of permits to explore for petroleum (Division 2) and licences to produce petroleum (Division 3). The holder of a permit may "explore for petro­ leum and ... carry on such operations and execute such works as are necessary for that purpose" (S28). As the combined effect of sections 22, 43 and 114 the grantee of an explor­ atory permit and of a production licence shall provide security for compliance with the conditions of the grant in the sum of $5,000 and $50,000 respectively. The Commission considers that each of these amounts is too small. A similar comment applies to pipeline licensees.

Permits and licences 4.2.12 A permit is granted initially for a period of 6 years

and can then be renewed over a reduced area for 5 yearly periods (S29). If the permittee has complied with the require­ ments of the Act, the Designated Authority (who is the Minister charged with the administration of the Act) must grant a re­ newal (S32). A permittee is to notify the Designated Auth­

ority of the discovery of petroleum (S34), and may have

the discovery declared a location (S37). He may then apply for a production licence (S40), and, if he has complied with the Act, the Designated Authority must grant it (S44).

4.2.13 A licence gives the right to explore for and produce

petroleum (S52) and is for an initial period of 21 years (S53). If the licensee complies with the requirements of the Act, he may apply for (S54) and be granted a renewal of the licence

(S55) for a further period of 21 years (S53). (Such extension must be granted if the licensee has observed all requirements of the Act, regulations and licence).

4.2.14 The conditions are to be specified in the licence

(S56). The Designated Authority may instruct a licensee to reduce the rate at which petroleum is being recovered (S58).

614

A permittee or licensee is to operate in accordance with good

oil field practice and is to take all reasonable steps to prevent the escape of petroleum (397). For non-compliance with this provision, the Designated Authority may cancel the permit or licence (3105). In addition, the Designated Auth­

ority may give directions consistent with the Act (SlOl), and a permitee or licensee is to take all reasonable steps to

comply (Sl02).

Sections 97 and 124 4.2.15 Sl24 of the Act (referred to earlier) penalises inter­ ference with natural resources of the sea and sea-bed "to a greater extent than is necessary for the reasonable exercise

of the rights and performance of the duties" of a person carrying on operations under a permit or licence.

4.2.16 397(1) requires inter alia a permittee or licensee to carry out all petroleum operations "in accordance with good oil-field

4.2.17 These two provisions attract consideration in respect of the underlined phrases. When dealing with an area like the GBRP undue flexibility in the definitions of duties and safety

precautions however reasonable from the driller's viewpoint should not obtain. Mr Basire suggested that the word "necessary" might

be substituted for "reasonable" in Sl24. A preferable alter­ native however would be simply to omit the word "reasonable" and this is recommended. The section seems to recognise that all drilling however properly conducted will "interfere" to

some extent with the natural resources of the sea and of the

sea-bed and especially in the case of the GBRP this is un­ doubtedly correct.

"Good oil-field practice" and 399 4.2.18 The phrase "good oil-field practice" is defined in

615

section 5 as meaning, "all those things that are generally accepted as good and safe in the carrying on of exploration for petroleum or in operations for the recovery of petroleum."

4.2.19 But this definition is nearly as vague and uncertain as the phrase itself. The matter is of some importance (and has proved itself so in the U.S.A. and Canada) if only because the rights of third parties who suffer loss from a breach of a statutory duty may arise. Furthermore the regulations (be they an OCS Order in U.S.A. or regulations to be made in Australia founded on an amended Exhibit 68 as to which see later) do not and cannot cover the whole field of drilling procedure and activity. Again the phrase is "good" not "best" oil field practice and technology and drilling procedure are said to be steadily improving. Professor Thompson, Professor of Law at the University of British Columbia in Vancouver gave some history of the phrase as used in Canada and in the

U.S.A_. where there has been "frequent litigation" (T8986) and some cases in which this phrase has been construed (ibid). He said that "from an enforcement point of view it is

extremely difficult to \)!Se" (T8985). He added:-

4.2.20 616

"it would be a useful provision if you have flagrant abuses but you will tend to find that those abuses are already covered specifically somewhere else." Mr Basire said (T2382):-

"It would be very easy to settle this matter if we had for example, a petroleum advisory board, provision for which does exist under the land legislation. In Alberta, Canada there is an Oil and Gas Conservation Board."

(now known as Alberta Energy Resources Conserva­ tion Board) . S99 which provides that sections 97 and 98 are to

have effect subject to (inter alia) the regulation is an important and useful provision. Nevertheless the Commission suggests that consideration be given to reviewing the wording and/or use of the phrase "good oil-field practice" in the

light of any amendments thereto or judicial dicta thereon which may in the future be made ip the U.S.A., the U.K.,

Canada or Australia. It was regarded as a "catch-net" pro­ vision by Professor Thompson (T9056) akin to such a phrase as "keeping premises in tenantable repair" in a different field of law and so intended to cover cases not expressly mentioned (ibid) but with the passage of time it could lend

itself to improvement or substitution. The Report of the Senate Select Committee deals with "good oil-field practice" at paragraphs 17.86 et seq.

SlOl should be amended 4.2.21 Section 101 is an important section which empowers the DA to give directions by an instrument in writing to permittees and licensees etc., but (like S97) does not include

any reference to the drilling contractor or sub-contractor or the personnel who do the actual work of drilling and producing.

4.2.22 In our opinion the Designated Authority should not only have power to give directions in writing but should be empowered to give such directions orally when he considers it necessary for the proper control of a well, conservation of natural resources, protection of aquatic life, protection of

human health and safety, property or the environment. This

power to give oral directions should include a power to suspend any operation including production, which in his judgment threatens immediate, serious or irreparable harm or damage to life including aquatic life, to property or to the environment.

Such emergency suspension should continue until in his judgment the threat or danger has terminated. This would seem to accord with American procedures - Mr Coulter T6909 and cf CFR 250.12. (b) and (c) Exhibit 309.

617

4.2.23 It is also necessary that the power to give directions should be extended to contractors and sub-contractors and in urgent situations to the person on site who is in charge of the actual operation of or producing.

4.2.24 The Commission has read and considered the remarks of the Senate Select Committee in its Report (Exhibit 450) at paragraphs 17.112 and 17.239 to 17.259 on the subjects of SlOl and clause 18 of the Agreement and is aware of the

amending legislation passed by the South Australian and West Australian Governments following the decision of the Standing Committee of Attorneys-General in March 1969.

4.2.25 Whilst the principles enunciated by the Select Committee on page 651 of its Report are appreciated the Commission considers that the hazards of off-shore petroleum drilling and production if permitted within the GBRP will be such that in the interests of human and property safety and of the environment an exception from normally accepted principles is justified and that proper safety precautions require that an overriding discretion must be vested in the DA. The American precedent should be followed. A possible

exception to which reference is made later would relate to the second limb of sub-section (l) of S97 which deals with the safety, health and welfare of persons engaged in operations. The Commission recognises that under clauses 6 and 7 of the Agreement, amendments to the mirror legislation require relevant consents.

Sections 97 and 98 and "operator" - Chairman's views 4.2.26 As regards sections 97 and 98 (with which on the

following aspects the definition of "operator" in Exhibit 68 and the provisions of clause 1 of Division l of Part II there­

of are associated) the Chairman's views which are not shared by Dr Smith and Mr Moroney are as follows:-

618

(a) It is insufficient and unacceptable to confine the duties imposed by S97 to the titleholder

(as the permittee or licensee is appropriately described in Exhibit 68). Such important duties should also be imposed on the drilling contractor whether or not he be an independent

contractor in a strict legal sense so that his liability to comply with Governmental require­ ments of this nature should be joint and several with the titleholder and compliance

should not be left to the enforcement of con­ tractual rights and/or indemnities between the titleholder and the contracting driller. The varying types of contractual relationship between the titleholder (generally described

in these contracts as the "operator") and "contractor" appear from the pro forma drilling contracts which are Exhibits 534, 535 and 538. In Exhibit 535 the drilling company is a true independent contractor but in the others its position is legally somewhat anomalous and

difficult to define. The principle of joint and several responsibility should extend to all types of contractors and sub-contractors who participate in the various activities

associated with exploration and production to the extent that such activities are subject to governmental regulation. (b) The definition of the word "operator" both in

S98 of the Act and in Part l of Exhibit 68

requires clarification. In the Chairman's view the operator should not be identified with the titleholder (or his representative on the site however extensive the latter's

contractual powers may be), except in those cases where the titleholder itself performs its own exploration and production activities. In other cases (i.e. where a drilling etc.

619

contractor of sub-contractor is engaged) the titleholder should not .be called the "operator" even if he has (by contract) a supervising agent in situ. In clause l of Division 1 of

Part II of Exhibit 68 the joint and several

responsibility of the titleholder and "operator" for complianc·e with statutory and regulatory duties is soundly enunciated but some obscurity remains as to the intended identity of the

"operator" in all cases. The Chairman realises that he differs from the American view of the incidence and construction of the word "operator" in this type of context. (c) Consideration should be given to eliminating

the defence of "reasonable steps" inserted by sub-section (6) of S97 in so far as it applies

to the first limb of sub-section (1) of S97

and to its application to sub-section (l) of SlOl as provided by sub-.section ( 3) of Sl02. The liability to use good oil-field practice and to obey a direction of the DA be

absolute. but in matters of safety and health of personnel questions of contributory negli­ gence frequently arise in all fields of indust­ rial life.

Views of Mr Moroney and Dr Smith 4.2.27 As regards sections 97 and 98 and the Petroleum

(submerged Lands) Act of 1967 and the definition of "operator" as it now appears in the Draft Regulations (Exhibit 68) the views of Mr Moroney which are shared by Dr J. E. Smith are as

follows:-The Chairman's suggested change would place the con­ tractor in the position of sharing equally with the title­ holder the risks of an operation over which he does not have equal control and in which he does not share the rewards of success.

620

Under present statutes and proposed regulations the ( 11 titleholder and operator 11 ) is clearly responsible for com­ pliance with all laws and regulations applicable to all the

operations which are permitted and to which the titleholder and operator may be committed under his permit or licence. At the same time it must be noted that the contractor is not

relieved of any of his common law responsibilities or liabil­ ities. It is the responsibility of the titleholder and operator to obtain approval for and meet the costs of executing all programmes, plans and procedures with respect to operations

on properties held under permit or licence. The changed relationship between titleholder and contractor which would result from the proposed amendments could lead to disputes with respect to programmes, plans and procedures, and also

could well discourage the acceptance of contracts. Regarding the defence of 11 reasonable steps 11 , if absolute responsibility for obeying an order of the DA means successful accomplishment of the objective of the order it would seem an unreasonable condition. If it means something

less than that there appears no need to change the applic­ ability of sub-section 6 of S97.

Section 18 4.2.28 Returning to our joint views on various provisions of the Act the Commission wishes to mention Sl8 by which the Designated Authority may publish a Gazette notice that a

specified block shall not be the subject of a permit or licence etc. With this however may be contrasted the provision criticised by Mr Connolly QC and others (see under 11 Hazards to the Tourist Industry 11 - TR5) relating to the overriding or paramount nature of the provisions of the Petroleum (Submerged

Lands) Act created and effected by a recent amendment of the Forestry Act, namely Sl02(C) of the Forestry Act 1959-1971 (Tl3395).

621

4.2.29 Under that amendment the result though not entirely clear - see Tl2551 - seems to be that statutory provision has now been made permitting oil drilling in certain public

reserves without reference to the Conservator of Forests. This provision may attract a review of policy.

Comments on S99

4.2.30 Finally the provisions of sub-paragraphs (b) and (c) of 399 are worthy of note because they evince a full recogni­ tion of Australian and State Legislatures of the importance of 3101. But whether the second limb of 397 ( 1) (namely "shall secure the safety, health and welfare of persons engaged") should be made subject to a 3101 direction as section 99 expressly provides may b e thought questionable. It is to be observed that the safety, health and welfare of persons engaged in operations ' (3.97(1)) is not a subject specifically mentioned in the regulation making powers conferred by Sl59

(cf SlOl(l)). This means that whilst the regulations and a SlOl direction may arguably not lawfully extend to the subject of the safety and welfare of personnel engaged in drilling and production operations yet the provision in the Ac·t itself part of which is expressly aimed at protecting and ensuring such safety and welfare namely 397 is subordinated and made subject to a direction given by the DA under SlOl. Although such a contingency may be thought remote, and the matter there­ fore only one of academic interest, the wording of 399 seems to attract amendment.

622

PART 3 - CONTINGENCY PLANNING

Necessity for co-ordinated contingency planning on different levels - Australian,State and Industry 4.3.1 Careful contingency planning is a pre-requisite of any petroleum off-shore exploratory drilling or production and

falls fairly within the phrase "safety precautions" as used in TR4.

A contingency plan deals with:-"the establishment of a chain of command for operations in the event of a spill; the dis­ position of chemicals and company owned equip­

ment; the disposition of additional equipment which may be required from outside sources; the establishment of a communications network; public relations, catering etc. The essence

of such planning is a predetermined method of attack on a spill, rated according to size, source and continuity of flow and considering all states of the weather and currents."

(Mr. T.R. Haskell, T5977).

It is universally recognised that in Australia there must be contingency planning at a number of levels including Australian, State (including where appropriate local govern­ ment) and industry.

4.3.3 The necessity for co-ordination of Australian, State and industry planning was stressed and exemplified in the evidence of Mr Biglane (Director of the Division of Oil and

Hazardous Materials Environmental Protection Agency (EPA), Washington, D.C.), whose evidence began at T6564 and whose two statements are Exhibits 295 and 300 and it is considered

623

that those concerned with the details of contingency planning and remedial measures will be interested in such evidence.

4.3.4 Speaking of the 'Ocean Eagle' tanker at Puerto Rico

on 3 March 1968, and after referring to the desirability of having biological assistance in planning remedial measures he said (and his remarks apply with equal force to spills which may occur as the result of off-shore drilling) (T6705):-

"The need for a firm arrangement between the Federal and State and other local units involved in the spill. Let me expound on

that. It was difficult to determine what State agency might be the best State agency to set up and handle this spill ... We

finally decided on the Department of Public Works as opposed to the State Health Department. The Department of Public Works had the trucks, had manpower, had aeroplanes; they had the operational equipment. While we probably would have preferred to work with the State Health Agency or the State Water Pollution Control Agency we found these agencies had absolutely no equipment to use ... We did not know it

at that time but we were laying the groundwork for just the type of planning you read in the

National Contingency Plan. Hopefully now we all know better where to go ... Then the

concept ... Of the On-Scene-Commander arose some one individual should have been delivering

the orders and receiving the information, placing the clean up crews ... sometimes the

Departments were at cross purposes and we really saw the need then for that single execu­ tive agent now called the On-Scene-Commander (OSC)."

The American National Contingency Plan

4.3.5 And so in the U.S.A. "National Oil and Hazardous

624

Materials Pollution Contingency Plan" was prepared and publish­ ed ·in June 1970 by the Council on Environmental Quality which is directly responsible to the President of the U.S.A. The Plan was developed pursuant to the amended Federal Water

Pollution Act. It is Exhibit 301.

4.3.6 This national contingency plan provides for national and regional response centres and teams and an on-scene cornm-ander and by a system of planning and response elements provides for co-ordination at various stages. Subjects dealt with include "Discovery and Notification", "Containment and

Countermeasures","Clean Up and Disposal" and "Recovery of Damages and Enforcements". Restrictions contained therein on the use of dispersants and sinking agents are referred to later.

4.3.7 Mr Biglane beginning at T6633 elaborated the various paragraphs and annexes of this national contingency plan in a manner which could be of assistance to those engaged in the important task of finalising contingency planning for the GBRP. Various definitions were given including those of minor, moderate and major spills and the functions of regional res­

ponse centres and regional response teams were explained. The U.S. Coast Guard has important responsibilities allotted to it including the provision of on-scene commanders (OSC's) for "the high seas, coastal and contiguous zone waters" whilst the Environment Protection Agency (EPA) provides for OSCs in other

areas. The actions taken to respond tc a spill or pollution incident are separated into five phases which are Phase I -Discove ry and Notification, Phase II - Containment and Counter­ measures, Phase III - Clean Up and Disposal, Phas e IV - Restor­

ation, and Phase V- Recovery of Damages and Enforcement. These are elaborated and the following extracts (Phase II, Phase III and Phase IV) are illustrative:-"402.Phase II - Containment and Countermeasures

402.1. These are d e fensive actions to be initiated

625

as soon as possible after discovery and notification of a spill or pollution incident. After the OSC determines that further Federal response actions are needed and depending on the circumstances of each particular case, various actions may be taken. These may include source control procedures, public health protection activities, salvage operations, placement of physical barriers to halt or slow the spread of a pollutant, emplacement or activation of booms or barriers to protect specific installations

or areas, control of the water discharge from up­ stream impoundments and the employment of chemicals and other materials to restrain the pollutant and its effects on water related resources. Surveil­

lance activities will be conducted as needed to support Phase II and Phase III actions. 403. Phase III - Clean up and Disposal

403.1. This includes those actions taken to remove the pollutant from the water and related on-shore areas such as the collection of oil through the use of sorbers, skimmers, or other collection devices, the removal of beach sand, and safe, non­ polluting disposai of the pollutants which are recovered in the cleanup process.

404. Phase IV - Restoration 404.1. This includes those actions taken to restore the environment to its pre-spill condition, such as replacement of contaminated beach sand." This 1970 Plan is undergoing revision (Mr Biglane Exhibit 300, p.6).

Planning for the GBRP - three plans necessary 4.3.8 As regards the GBRP there would require to be three

co-ordinated contingency plans, namely by the Australian Government, the State of Queensland (which will include coastal local government authorities) and the producer or explorer

626

("industry''). is because of the geographical features

of the Province, the jurisdictional interests of the Australian and State Governments and the high responsibility of the producer or explorer in case of a spill to take immediate but pre-planned remedial measures. Co-ordination will be neces­

sary otherwise prompt and efficient action may be prejudiced. These co-ordinated plans will doubtless also be co-ordinated with or form part of anti-pollution plans relating to shipping including tankers and other coastal industries. The site of

a spill, its distance from the coast and from sea and air

ports and weather conditions will amongst other factors govern the type of remedial action which is appropriate and the agency or agencies which will take such action. The storage at care­ fully selected tactical positions along the coast of approp­ riate equipment and stores and the ready availability of both

sea and aerial reconnaissance and distribution facilities will be other necessary features of contingency planning. Selected key personnel and specialists of various types must be nomin­ ated and trained so that the line of responsibility for the

various duties is clearly known. A central headquarters with rapid communication facilities to all subordinate headquarters, civil authorities and companies, firms and persons who will be called on by pre-arrangement to render required assistance,

will be essential as will also be very early notification to such central headquarters of a spill by the explorer or prod-ucer.

Special factors affecting the GBRP 4.3.9 Contingency planning which should be in complete and final form with all containment equipment and remedial materials stockpiled or made readily available in selected

tactical positions before the commencement of any drilling, has in the Commission's view special problems in relation to the GBRP by reason of such factors as: (a) its distance from Brisbane and industrial

facilities;

627

(b) the sparse nature of industry, population and necessary aerial and marine transportation facilities in many parts of the long neigh­ bouring coastline; (c) the presence of the many reefs, islands and

cays and places of scientific interest which attract special protective and remedial measures. (d) navigational difficulties - Dr Connell T7065

Dr Connell at T7065 (and Exhibit 229, p.l3 prepared by him in conjunction with Mr D. McManus) stated:-"The Great Barrier Reef poses some special difficultie s. Much of the area is hazardous

to navigation. Any oil spill remedial measure requires surface vessels for application of the technique. Thus navigational difficulties in reaching a spill may occur. In addition sections of the reef are remote from large population centres and ports where oil spill treatment equipment could be stored. Surfactants are commonly used either alone

or in conjunction with other remedial measures. Very little is known of the effects of these substances on Great Barrier Reef animals. Also the Reef contains extensive inter-tidal and shallow areas in which surfactants would not be rapidly diluted. Thus a maximum toxic effect could be expected by the application of these substances."

4.3.11 It is apprehended that it is not part of the

Commission's functions to draft a contingency plan, never­ theless the importance of correct planning cannot be over­ stressed by us. The special difficulties which relate to GBRP

628

remedial measures only add to such importance.

4.3.12 In this regard it is noteworthy that the United

States OCS Order No. 7 of 1 June 1971 (part of Exhibit 401)

makes provision for compulsory planning by an applicant to drill as a condition precedent to any permission being granted and any such submitted plan may by direction of authority require to be amended and it is recommended that this practice

be adopted in respect of applications relating to the waters of the GBRP.

Requirements before drilling commences 4.3.13 Mr Jeffrey QC who appeared for APEA was in effect invited to comment on suggested recommendations that before any drilling commences, (a) a national (by which was meant both national and state ) plan should be completed, and (b)

an operator must prepared (by which was meant prepare, submit for and obtain approval of) his own emergency plan. Mr Jeffrey answered, "I make no submission to the contrary." (Tl7086).

4.3.14

At T6773 Mr Biglane's views were thus expressed:-"Would you regard it as satisfactory for an industry to operate off-shore unless there is something in the nature of a contingency

plan?---No sir. I feel very strongly that

they should not operate at all unless there has been a contingency plan and have so testified before the International Joint Commission on Oil Pollution of the Great

Lakes, that oil drilling should not be allowed to intrude unless there is a contin­ gency plan for those off-shore installations."

Speed is of the essence in all off-shore remedial action and booms, barges, pumps, skimmers, tugs, helicopters and small craft should in the case of a major spill be quickly available.

629

4.3.15 Reference will now be made to existing Australian planning which, however, is incomplete.

The Australian National Plan

4.3.16 Mr T. Morehead, formerly a ship's officer on Shell Tankers of London and on Irish Shipping Ltd. ships, later an Assistant Secretary in the Australian Government Department formerly known as Shipping and Transport spoke of the consider­ ation being given (T793l on 27 July 1971) by the Australian and State Governments to a national plan to deal with oil spillages from ships and added that with the co-operation of the then Department of National Development it was intended to extend the plan to cover spillages from "off-shore petroleum production facilities and oil rigs". He referred also to a ministerial statement of intention to hold a meeting of State Ministers in September 1971. He agreed that the national plan was then still in an embryo stage (T7933). This seems to be

confirmed by an examination of Exhibit 491 and Exhibit 492. (Proposals by Australian/State officials for the drafting of a national plan and a paper prepared 14 August 1970 by the

Department of Shipping and Transport on Marine Pollution respectively.) They were dealt with in detail by Mr Woodward at pages Tl5427 et seq. Mr Woodward tendered as Exhibit 490 a letter to the Deputy Crown Solicitor from Department of

Shipping and Transport dated 16 March 1972 part of which reads as follows:-"

630

following the 'Oceanic Grandeur' incident it was agreed by the Commonwealth and the States that it would be desirable to develop a national plan to deal with marine oil

pollution incidents. Several meetings of Commonwealth and State officials have taken place and officials have proposed a series of alternatives outlining different ways in which the Commonwealth and the States might operate in the event of an

oil spillage incident. These proposals, as set out in the attached paper constitute what has been referred to as the draft national plan.

The key to a national plan (in whatever form it

finally takes) will be the availability of dispersant materials and application equipment stockpiled at strategic locations around the coast. The matter of providing and funding such stockpiles was discussed

at a meeting of Commonwealth and State Ministers on 24 September 1971. Arising out of this meeting the

Commonwealth Minister for Shipping and Transport,

Mr Nixon, undertook that the Prime Minister would

write to each Premier on the matter ... It will be

apparent that the Commonwealth's draft operational plan will need to be amended and revised to give greater precision on many points which are at present in the nature only of suggestions and which will need

to be discussed further with State officials before finality is reached. As in the case of the drafting of a national plan

further progress on the detailed operational plan depends to a large extent on the outcome of the

Prime Minister's proposals in relation to the pro­ vision of stockpiles of dispersant materials and application equipment."

4.3.17 The Commission, as appears later, favours the American view on dispersants as regards the GBRP and recommends that they be not used within the GBRP except in special circumstances.

4.3.18 Accordingly the phrase "dispersant materials and appli-cation equipment" appearing in this letter attracts comment. It is to be observed that Exhibit 465 which is a copy of a

Statement by the Minister for Shipping and Transport dated 9 February 1972 also refers to the serious need for stockpiles

631

of dispersant materials and application equipment. The key to a national plan so far as it extends to and includes the

GBRP is considered to be more complex than the availability

of dispersant materials and application equipment although it is true that they should be stockpiled in tactical positions to meet special circumstances dependent on the location of drilling sites. If spillages from tankers are also in mind, then in view of the length of the shipping lane from Thursday Island to Gladstone and its unusually close proximity to the coastline the stockpiles should be reasonably close since time will be of the essence should a spill occur. Moreover if, in a special case approval is given by the relevant authority constituted under the "Contingency Plan" to use dispersants, they should be worked into the oil slick (for

example by small boats) and not merely sprayed on to the surface.

State contingency planning (and regional planning) 4.3.19 As Mr Morehead said (T7930) in respect of the GBRP:­ "Action to be taken for emergencies in certain - areas and circumstances would be the respon-

sibility of the Commonwealth. For other major emergencies which could not be met from the resources of a State the Commonwealth would offer to assist."

4.3.20 State contingency planning must be co-ordinated with the Australian plan and the industry or company plan must be co-ordinated with both. It is envisaged that State planning would include the establishment of a number of regional plans, each region embracing a coastline containing a coastal port with air facilities.

4.3.21 Captain R.G. Hildebrand (Assistant Director, Marine Affairs, and Portmaster attached to the Queensland State Department of Harbours and Marine) produced in his statement

632

(Appendix "C" to Exhibit 463) a copy of the Queensland Oper­ ational Plan. He said (Tl3875):-"The Queensland plan envisages also that in the event of any major incident the Queensland

Department of Harbours and Marine and the Commonwealth Department of Shipping and Transport would work closely together from the outset, and for major spills as part of a joint team, so that

there was no doubt on the part of either Authority as to the action which is taken, or is to be taken.

Commonwealth and State officers are well known to each other, and immediate contact is made in the event of any incident. State harbourmasters iq all ports are also appointed Commonwealth officers." This State plan envisages (paragraphs 2.4 and 2.5) the State acting as the "Authority" (i.e. "the Responsible Operational Authority") in "coastal waters" - not defined -

and the Department of Shipping and Transport on the "High Seas" -but in conjunction with the "joint Commonwealth State Team".

4.3.22 In ports, harbours and similar waters and on the

coastline within say three miles of the shore a coastal local government authority could conceivably be the Authority. Cap­ tain Hildebrand took the Commission through the main features

of this plan which is still in draft form and which came into

being following the Santa Barbara spill and investigations made abroad by Mr Norrie and Mr Stewart. The third draft is

dated January 31, 1972. Conferences are still taking place between Australian Government and State officials for joint contingency plans.

4.3.23 The correspondence which passed between Japex Australia Pty Ltd and Mr Stewart, the Senior Petroleum Engineer between 14 May 1969 and 3 December 1969 regarding the Repulse Bay drilling project is set forth at T4474 et seq and in Exhibit

255. Mr Stewart's correspondence is open to comment at various

633

places (see the remarks of Mr Wo.odward QC quoted in paragraph 4.1.3 supra) -but no regulations governing the conduct and management of off-shore drilling had then been drawn up pur­ suant to section 159 of the 1967 mirror legislation or other­ wise nor had the importance of contingency planning at that time taken practical form. The site of the proposed drilling was apparently just within a "base line" so that strictly

speaking the drilling may have come under the Land Act and not the Petroleun (Submerged Lands) Acts. A reference to the suggestions and recommendations which the Commission has made in respect of Exhibit 68 - i.e. the Draft Regulations - will

however indicate the nature of such comments. At all events the correspondence was not finalised at the time of the suspension of the Repulse Bay operations (T4482) and this Commission was set up shortly afterwards.

Industry contingency planning- Esso-Hematite and P.I.E.C.E. 4.3.24 An example of an industry contingency plan is Exhibit 174 being the Esse-Hematite Bass Strait "Conservation Manual"

(Water/air/land) which was published as long ago as January 1970. It has very recently been replaced by the ''Oil Industry Marine Oil Spills Action Plan" produced by PIECE. (Petroleum Industry Environmental Conservation Executive). The preface to this latter production reads:-

634

"The Marine Oil Spills Committee of the Petroleum Industry Environmental Conservation Executive (PIECE) has been instructed to draw up an organis­ ation essentially to combine all the Oil Industry oil spill facilities in the form of a co-operative and to create an organisation to handle oil spills and to assist the Government, both State and Common­ wealth, in this area. This Manual represents this final plan and as such

is an Oil Industry Plan. It has nominated individ­ uals from each of the companies involved to play a responsible role on behalf of, and for, the Industry in the event of an oil spill incident. This does

not intend to assume responsibilities which are logically those of the State and Commonwealth Government, but to ensure that the Industry has a responsible organisation which will initiate action

and pursue cleanup together with the authorities. This organisation will also be offered to the authorities in the event of a major crisis and it

is anticipated that it will fit into the National Disaster Plan, both on a State and Commonwealth basis. It is recognised that each of the individual com­

panies has had for some time its own plans in relation to oil spills, but by this plan we are able to have

an overall joint industry pooling of facilities and manpower towards the common objective." Its basic concept appears to be that for minor spill­ ages the responsible companies will attend to these with the normal equipment they have available in each of the ports on

the Australian seaboard, but "the Plan essentially comes into action if any occurrences are beyond the scope of the individ­ ual responsible company."

4.3.25 The plan provides for seven "regions" - Queensland b e ing No. 7 - and the appointment of an overall co-ordinator,

r egional industry controllers, and local industry controllers

with a central marine oil spill committee and responsibilities are allotted. As regards Region No. 7 the names, addresses and telephone numbers of various governmental and industry officials are given in respect of eight coastal towns and references are also given to local tugs, launches, police and

fire brigades. Stated information includes dispersants and equipment for distributing dispersants but in some cases no quantities of dispersant s or distribution equipment yet exist. This plan although it has not yet reached the stage of being

a full contingency plan is certainly more than a Public Rela­

tions plan .

635

4.3.26 This production is symptomatic of the undoubted interest which the oil industry nowadays is taking in remedial as well as in prevention measures and it is true to say that

the industry has in recent times developed a "responsible and responsive attitude" (APEA submission in synopsis on Term of Reference No. 1, page 45).

4.3.27 With the PIECE production may be compared Volume II of the Dillingham Corporations Systems Study of Oil Spill Cleanup Procedures - i.e. the Dillingham Industry Response Plan which is Exhibit 453.

The Industry's responsibilities - American views 4.3.28 On the subject of company responsibility Mr Stanphill (of Enjay Chemical Co. of Houston) said (T4634):-

4.3.29

" •.. if a spill occurs a company could have a

suggestive organisation programme such that one member of their Company was responsible for locating booms, another member might be responsible for calling together all the

spray boats that are available, another might be responsible for contacting aircraft and having aircraft ready if they are needed. This plan is laid out usually prior to any

accidental spill and is immediately available for operation in the event of a spill."

Mr Biglane said (T6602):-"··· the Government does not now stockpile items to be used in response to an oil spill

incident; it is depending upon private industry and private enterprise to accumulate these materials."

During the early years of off-shore drilling in the GBRP, it would be advisable for the Governments to insist upon

successful applicants stockpiling at tactical sites to a

stipulated minimum extent.

4.3.j0 In this regard attention is drawn to clause 6 on p.ll

of Exhibit 121 being OCS Order No. 10 (since replaced by a 1971 OCS Order) under "Pollution Control Equipment" whereby it was made compulsory to maintain or make immediately available

at each platform designated control and removal equipment. The correspondence between Mr Stewart and Japex in December 1969 (Exhibit 255) is also relevant.

4.3.31 The enormous cost of dealing with a blowout must be

stressed. Dr St Amant spoke of "about half a million dollars a day" in the case of the Shell blowout and fire (T3934) whilst

Mr Thomas gave two examples of cost - one at Lake Maracaibo in

Venezuela where the cost was $600,000 and the other at Petrel No. 1 off the N.W. Coast of Australia where the total over the

very long period involved in controlling the blowout plus cost of repairs was reported to be $15 million.

4.3.32 The cost of proper and full remedial measures, per­ haps especially in the GBRP where there are so many reefs and islands, would be of a major nature and the appropriate govern­ mental authority should insist on being given a satisfactory

assurance that any successful applicant to explore or produce petroleum in GBRP is able to meet the financial commi tment.s which may be involved in control and clean-up operations.

4.3.33 The question of compensation for damage caused by a spill and the availability of appropriate legal relief and means of enforcing claims (cf TOVALOP at T5051 and CRISTAL at T5052 in relation to liability of tanker owners) are important subjects but are outside the TR.

637

PART 4 - REMEDIAL MEASURES

Introduction 4.4.1 Associated with contingency planning (Part 3) and therefore with the "safety precautions" referred to in TR4 are the remedial measures required to deal quickly and efficiently with oil spills.

On this subject the Commission heard evidence from a

considerable number of overseas expert witnesses, not all of whom expressed the same views.

It is proposed to deal first with dispersants and sinking agents - perhaps the most controversial of the various available measures - and then we will deal briefly with other remedial measures. In Part 5 we will summarise our recommend­ ations relating to contingency planning and remedial measures.

(a) Dispersants 4.4.2 Professor Clark (Professor of Zoology, University of Newcastle-upon-Tyne) in Exhibit 235 page 29 said that "The natural process of emulsification of oil in the water and dispersion of the oil slick can be hastened by the addition of chemical emulsifiers and dispersants. The oil is broken into minute droplets which are separated sufficiently from one another that re-aggregation and reformation of the oil slick is impossible."(T.36lO).

4. 4. 3 Mr Stanphill, a District Manager of Oil Field Chern-

i cals for Enjay Chemical Company at Houston, Texas, who is

not a biologist but whose company manufactures "C orexit" exp l a ined (T45 90 ) that dispersants contain surfactant agents which are attracted to the oil/water interface and, by reduc­ ing the surface tension at the boundary, promot e "fine oil droplet formation upon the application of mixing energy."

638

He added that ·"lack of mixing has been one of the principal

reasons for reported instances of ineffective dispersant application. 11

Mr Haskell's vtew

4.4.4 Mr Haskell (Petroleum Geologist, Planet Management and Research Pty Ltd) gave evidence about the nature and function of dispersants. He said: " ... Dispersants stabilise oil as fine droplets

throughout part of the water column. In the dispersed state the oil surface exposed to natural oxidation and biological degradation is increased, allowing a corresponding increase

in the rate of these processes. In addition the fine droplets do not sti.ck to solid surfaces and the tendency to contaminate foreshores, and marine life is correspondingly reduced.

Application of dispersants is a two stage process. The dispersant is sprayed on to the slick in the first stage ... "The oil and dispersant" must then be thoroughly agitated ... " (T5902) ". . . the oil and dispersant form fine droplets;

the dispersant being arranged around the surface of the oil globules. In this state the droplets

are mutually repellant, hence ... reforming of the slick is prevented. There are two types of dispersants, organic solvent based and water based. The former variety

tends to be more effective over a wider range of temperatures and oil types. However, some types of organic solvent based dispersants can be toxic to marine life ... "

(T5905) "In the case of the water-based dispersant. the water fragment of the dispersant is readily soluble in the sea water or readily combines

639

with the sea water and the chemical is then released to form the barrier between the water and the oil. In the case of the oil based

dispersant" (Mr Haskell later corrected this to "kerosene based" T5907) "it combines firstly with the oil which is on the surface and again

the chemical is leached out of the solution to take its place between the oil layer and the sea water underneath." (T5906)

Method of' application 4.4.5 " ... Dispersants are usually applied to oil slicks

from spray booms, or hoses, mounted on ships. The necessary agitation is obtained from the wash of the vessel on the same pass or on successive passes. Dispersants may also be sprayed from a helicopter in which case the rotor down draught provides adequate agitation. Fixed wing aircraft can be used to spray slicks in conjunction with agitation by small boats or choppy seas." (Mr Haskell) .CT5910) Later he said:-

4.4.6

640

"If conditions are rough, windy or if a current in excess of 1 knot is running and booms are

inadequate, dispersants become the primary method of attack on spills. Dillingham Corporation has designed a boom layout to confine oil to a

channel where it can be intensively attacked with dispersants (Exhibit 286)." (T5974)

"One of the most effective methods of application", Mr Stanphill noted at T4604, "is by means of high

pressure spray booms mounted on boats ... Dispers­ ants can and have been applied effectively by spraying from aircraft provided there is sufficient agitation from boats or from wave action. Aircraft

4.4.7

and boats can work in concert. Small spills in

harbour areas can be conveniently handled by application from high pressure

Other mixing devices mentioned in evidence included "something like a wooden gate ... towed behind the boom. The speed of the ship

and the passage of the water through the bars of the gate does the agitating ... During the

latter process the oil and"dispersant"form fine droplets; the dispersant being arranged around the surface of the oil globules. In this state

the droplets are mutually repellant, hence coagulation and reforming of the slick is prevented."(Mr Haskell, T5905)

Toxic dispersants more efficient than the less toxic dispers­ ants 4.4.8 The evidence on the toxicity and efficiency of

different dispersants was conflicting but it seemed to be common ground that the toxic dispersants are more efficient

than those which are less toxic. "The higher the aromatic content the more effective the product in operational conditions, but the more toxic it is" - Professor Clark said:- (T3612)

"the argument against the use of dispersants has changed during the last two years ,and the case against them is now approximately as follows. Oil pollution is not only

damaging while the oil exists as a slick or when it comes ashore, it is a most undesirable

addition in the marine environment. The use of dispersants ensures the more widespread and total distribution of oil into the sea than if the slick were untreated. Furthermore it is

undesirable to add dispersants to the marine

641

4.4.9

environment .for, even if they are non-toxic, they may have undesirable damaging effects on the animals and plants with consequences that cannot be predicted."

Mr C!Jwell said, "Thin fresh oil can readily be

emulsified by the sparing use of one of the less toxic aliphatic solvents, thick hardened deposits may

require several applications of a highly aromatic solvent" (Tll024-5); and Mr Stanphill said, by way of example, "it is well known from the 'Torrey Canyon' incident that the toxicity of many detergents and other emulsifiers increases with effectiveness since effective dispersion depends upon

solvents which are highly toxic."(T4569) Mr Cowell, however, said that as a result of recent research "three or four major oil companies discovered that by taking a very careful cut off the distillation of a kerosene, they could obtain a solvent that was of low toxicity." (Tl0906)

4.4.10 It is appropriate to state here that research into

the effects of .various dispersants on marine life in the GBRP is necessary even though the modern dispersants are claimed by their manufacturers to be non-toxic.

4 .4.11 At T3671 Professor Clark said that "new dispersants such as Corexit, BP 1100 and Dispersol are water-based and avoid the use of toxic solvents. They are effective dispers­ ants of light oil and fresh crude oil, they approach but do not yet quite match the organic solvent based dispersants in shore cleaning." However Mr Cowell at Tllll3 said that Professor Clark was wrong on this point. He said that BP llOOX was "about 85% by volume of the solvent."

642

4.4.12 Professor Clark's opinions appear to be based on the ·researches and views of others and the Table 9 of toxic­ ities of old and new dispersants on T3672 is from Portmam. At T3679 he said that a mixture of Corexit and oil is "in

some cases" more toxic than the oil itself. Further views of Professor Clark appear later.

Dr St Amant's view 4.4.13 Dr St Amant, Assistant Director, Louisiana Wild Life and Fisheries Commission, a marine biologist and ecolo­ gist said

"Usually when oil spills occur, public outcry and concern on the part of the industry to re-establish good public relations result in rapid and costly attempts to clean up the area

or to make the visible oil disappear from sight. From our experience with oil emulsion muds this may be the worst approach possible to the clean­

up problem for these reasons: l) Detergents or disperant chemicals may cause the oil to adsorb on mud and silt particles which sink to the substrate or float in the

water column where they are more available to filter feeders. 2) Adsorbed oil on ,bottom particles appears to take longer to degrade. 3) The use of chemicals to disperse the oil

involves placing an additional load of foreign and undesirable material in the ecosystem. Many of the dispersants tested proved to be far more toxic than oil.

4) Dispersal of oil does not allow proper mapping or study of polluted areas. 5) Floating oil is probably the least damaging position for oil to occur in the ecosystem.

Here it degrades more rapidly - its only

643

effect is at the interface and, except in inter­ tidal areas and marshes, will usually dissipate degrade and be mechanically dispersed by wave action with little apparent effect on the eco­ system. (But this view must be read in its

context and would not in its entirety be universally held) THE WITNESS (Continuing his statement): Generally

we do not permit the use of such chemicals for

the cleanup of oil spills unless the area is so

badly polluted that nothing is living anyway, or unless the aesthetic value and effect on private property outweighs consideration for the local ecology. MR WOODWARD: Does the phrase 'such chemicals',

include non-toxic dispersants? --- I have yet to see a dispersant that is totally non-toxic."

Other views on Corexit 4.4.14 Mr Stewart (Senior Petroleum Engineer, Department of Mines at T442l) said that "Corexit 7664" is limited in the treatment of very viscous crudes.

4.4.15 Mr Stanphill, tabulated at T4560 et seq the con-

ditions when oil slick disperants could be used. These included:-1. In the open sea when adverse wind and wave

action often made containment and physical removal difficult or impossible, 2. In harbour areas,

3. To clean up oil remaining after the use of

such physical methods as skimmers, weirs, adsorbents and absorbents, and he added that dispersion is the most practical method of attacking medium and large spills in open water because of the wide range of application techniques. He did not

644

advocate burning at sea (T4562A).

4.4.16 He gave several reasons why Corexit 7664 is effective and should be used (for example at T4628) and said that 90% of

the slicks that must be dealt with (he was including spills from tankers) can be dispersed with Corexit.

4.4.17 It should perhaps be pointed out at this stage that

according to Dr Blumer of Woods Hole Laboratory (U.S.A.) (Exhibit 290) the dispersal or disappearance from sight of crude oil does not prevent the poisonous fraction being carried in water solution away from the accident and see Dr Grassle in paragraph 4.4.19 infra.

4.4.18 Of Mr Grant's evidence (Research Fisheries Biologist, Queensland - Exhibit 194 p.l2) which was to the effect that the effect of Corexit in the 'Oceanic Grandeur' spill was "unacceptably poor", Mr Stanphill said that the particular

crude in th.at spill was Minas crude and was one of the 10% of

oils carried in tankers for which Corexit 7664 is not effective (T4677). He did not agree with various features of Dr St Amant's evidence relating to dispersants - for example that no detergents of any kind should be used under any circumstances.

This evidence had been given by Dr St Amant at T4067-8.

Dr Grassle's view on dispersants 4.4.19 Dr Grassle, Assistant Scientist at Woods Hole Oceanographic Institution, Massachusetts, had firm views on dispersants. At T6198 he said:-

"None of the presently used containment and

recovery techniques prevents the ecological damage and the damage to fisheries products from oil spills. Toxicity is evident immediately and the poisonous fraction will be carried in

water solution away from the accident, even if the surface spill is contained and recovered

645

rapidly. Detergents and dispersants while cosmet.ically ef'f'ective., are especially harmful since they introduce all the oil into the environment. There are no dispersants that are not toxic in. the presence of' oil. The use

of' dispersants should be most discouraged."

Professor Clark's view 4.4.20 Professor Clark elaborated the U.K. view on dispers-ants. He said that their use was favoured in U.K. and other

countries (T3891):-

maps "

" ... particularly because of public pressure to have to clean beaches for recreation and because of the public pressure against losses of sea birds, which are very obvious, the removal of the oil slick at the earliest time, certainly in Britain, demands first attention. Exceptions to this policy are made when there are known and limited hazards to, for example, shell fisheries at particular sites or beaches and coastlines which are of particular scientific interest. All of these have been designated on a series of

Some miscellaneous views 4.4.21 Amongst those who gave qualified approval to the use of dispersants were Mr Norrie, State Mining Engineer and Chief Inspector of Mines, Queensland who spoke at some length on events in South Africa and reports emanating therefrom

(T60l4 et seq) and in particular of the successful use of detergents after the 'Esso Essen' tanker spill in 1968 (T6014). Dr D.W. Connell (a senior Research Scientist, Australian Wine Research Institute, Adelaide) said that very little is known of the effects of dispersants on reef animals (T7065) but considered that dispersants may have an application in open seas where rapid dilution takes place and little damage can

646

be done to marine life (T706l). Mr D.J. Tranter, who is Principal Research Scientist CSIRO Division of Fisheries and Oceanography, Cro.nulla, and who visited and inspected the 'Oceanic Grandeur' spill said of the use of dispersants on that .occasion (T7530)·:-

"In our opinion the validity of (spraying detergents) is open to question. It would seem to us an ecolog­

ically better alternative would be to try to contain the oil spilt into the sea. With the calm weather

prevailing it ought to have been possible to run an inflated or otherwise buoyant boom right round the tanker and so contain the oil until it .could be pumped into another vessel and removed from the

site."

Case histories 4.4.22 Under this heading we give examples which with one exception relate to overseas incidents where dispersants have been used in the protection and restoration of amenities with­

out reference to their toxic effects on eco-systems. The evidence cited relates to oil on the open sea, in harbours and inshore waters, and when stranded on rocky, sandy and muddy shores. With the exception of the 'Oceanic Grandeur'

coral and reefal areas . were not involved.

4.4.23 When oil is spilled at sea in massive quantities and driven shorewards by winds it may not, because of the magnitude of the quantities involved or because of adverse conditions of strong winds and rough seas, be susceptible

to containment and collection in the open sea. In these circumstances oil poses a severe threat to shore line amenities and, under conditions of crisis, the use of dispersants to diminish the scale of the slicks and the damage they may cause

on stranding is seen as the most immediate practical remedy. Examples of such crisis conditions that were cited in evidence, were the 'Torrey Canyon' and 'Santa Barbara' spills in which,

647

in both instances, some 10,000 - 20,000 tons of crude oil were destined for transp-ort respectively to the nearby coastlines of Cornwall and Santa Barbara, the large spills in the neigh­ bourhood of the South African coastline from the tankers 'Esso Essen' (15,000 tons of oil, 3,000 - 4,000 tons near to the

coastline) and 'World Glory' (more than 20,000 tons), and the oil spilled from the wreck of the tanker 'Oceanic Grandeur' off Cape York, Queensland (amount not quantified). The prin­ cipal evidence on these spills was given at the following and subsequent transcript pages:- 'Torrey Canyon': Professor Clark, T3790; Mr Biglane, T6699; Dr Straughan, T5624-5 and Mr Norrie, T6019; Santa Barbara: Professor Connell, T436; Mr Stewart, T4388 Mr Keith, T5555 and Dr Straughan, T5616; 'Esso Essen': Mr Stanphill, T4668; Mr Norrie, T6020 and Exhibit 275; 'Oceanic

Grandeur': Mr Grant, T2472 and Tl2847; Mr Keith T5575; Mr Norrie T6056; Capt. Hildebrand, Tl4028; Mr Tranter, T7514 and Exhibits 193, l9lJ, 195. The examples, all of which are of

spills of crude oil, are illustrative of different types of oil, varied climatic conditions and sea state, and of varying degrees of reported effectiveness of some of the man;v. differ­ ent types of dispersants that have been used on spills threat­ ening to a coastline.

(1) 'Torrey Canyon'

4.4.24 Professor Clark said of the 'Torrey Canyon' incident that the "Dispersants used were generally supplied in a kero­ sene base" (T3612). The amounts used at sea were not accur­ ately recorded. They were probably of the order of about

5,000 tons. The figure derives from the U.K. Cabinet Office Report of the Committee of Scientists on the Scientific and Technological Aspects of the 'Torrey Canyon' disaster which was not entered as an exhibit. This figure derives from Mr Norrie's statement that during operations "about 15,000

tons ... were used" (T6019), and Professor Clark's estimate that "About 10,000 tons of toxic detergents were used on the beaches of Britain" (T3790). The main points to be noted

648

are that very considerable quantiti.es were used at sea during operations extending over several days (T6019), and that these amounts were certainly inadequate to prevent some 20,000 tons crude oil, much of it in the form of water-in-oil emulsions

("chocolate mousse 11 ) being spread over large areas of the Cornish coastline. Mr Norrie speaks of "About 100 miles of coast eventually polluted. "(T60l9)

(2) Santa Barbara 4.4.25 The Santa Barbara Wellhead A-21 blow out on 28 January 1969 n released into the waters of the Santa

Barbara Channel a large amount of very viscous crude oil every day for a period of eleven days. Lesser volumes were reportedly encountered for some period thereafter ... The slick created by the leaking oil was estimated to have covered

in patches and long fingers with clear water between, some 200 to 800 square milesn (Mr Stanphill T4669). Professor Connell said that "dispersants .... were only sparingly used at Santa Barbara" (T44l) and Dr Straughan, quoting Gaines

(1970), confirmed this in saying "Limited use of these was made at sea in Santa Barbara and only two small quantities applied during a fire danger in in-shore areas. However, the detergents were ineffective in dispersing the oil." (T5630)

"Less toxic detergents ... developed following the 'Torrey Canyon' spill" were used(T5630) and included a water-based mixture Corexit 7664, manufactured by the Enjay Chemical Company of Houston, Texas. Mr Stanphill, a district manager

of this Company (T4557) said of its use at Santa Barbara "A difficult combination of conditions was encountered by

those groups trying to control and remove the slick - relative­ ly cold water, calm seas and the large volume of continuously replenished oil - a great deal of it in the form of a heavy,

semisolid emulsion formed by the concurrent escape of natural gas. During the early days, as oil escaped from the well and

spread over the relatively calm ocean, applications of Corexit 7664 were made under these adverse conditions, generally with

649

inadequate equipment: Without the vigorous agitation necessary to begin dispersion of the heavy intractable emulsion, results of the aerial spraying and the hose efforts were inconclusive. Consequently, those responsible for cleanup, who had little or no experience with the new dispersant, decided against using Corexit more extensively." (T4669, 4670-71)

( 3) 'Esso Essen'

4.4.26 Mr Stanphill reported greater success with the use of Corexit 7664 in relating the events following the wreck of the tanker 'Esso Essen' on April 29, 1968. "The ship hit a

reef off Oliphantspunt spilling some 24,000 barrels (more than 3,000 tons) of its cargo of Arabian crude. Before it could be treated with dispersant some of the oil reached beaches along the southeast coast. When treatment was begun on May 3 using Piper Pawnee and Cub spray aircraft, a quantity of oil estim­ ated at more than 5,000 barrels (about 70 tons) formed a slick covering an area of about three by 15 miles. Seas varied from calm to very rough during the three day spraying period. One hundred drums of Corexit 7664 were used. Cleanup of the slick at sea was complete" (T4668). _Mr Norrie, basing his account on "press reports at the time" (T6020) noted the results as

"excellent" and "tremendously successful". Some doubts were cast, however, on the efficiency of Corexit and other water based dispersants in a report from the South African Council for Scientific and Industrial Besearch to the South African Government (Ex. 287, Annexure A, Addendum IV). Six dispersants were tested for emulsifying ability in the CSIR regional labor­ atory and evaluated in operation at sea. "Three of the avail­ able types proved effective both at sea and in the laboratory" and received ratings of 1 = Best or 2 Next Best. Three,

including Corexit 7664, were less effective and received "O" ratings both in the laboratory tests (Addendum IV, Table 2) and in "The field score •.• based on observations made by eye from ships at sea" (Table 1). It is difficult fully to recon­

cile the results of these tests with Mr Stanphill's evidence

650

of its successful use in the 'Esso Es.sen' operations, and the possibility must be entertained that the manufacturers of the dispersant might have given it credit for a dispersion which took place naturally in a rough sea and with little assistance

from the dispersant.

( 4) 'World Glory'

4.4.27 According to G.H. Stander and J.A.V. Venter (Ex.275) "The most serious situation South Africa has had to cope with so far arose from the breaking up of the tanker 'World Glory' (48,823 dwt) 65 miles north-east of Durban. The ship carried a cargo of 45,572 tons of crude oil. The stern section of the

vessel sank shortly after the hull had parted, but the bow section drifted south and it is presumed that it went down about 40 miles further south, where oil was being emitted strongly for several days. It is estimated that at least

20,000 tons of oil was released .•• and although it was originally 40 miles off-shore, it moved to within 5 miles off the coast in 5 days. Big slicks were eventually sighted up to 2 miles from the shore, while thin oil films were noticed

immediately behind the breakers. At least 150 miles of coast­ line was being threatened with the winter holiday season approaching in an area relying heavily on tourism." The successive stages of the treatment of oil from the 'World Glory' are described by Mr Stander in Exhibit 276.

On 16 June, three days after the break up of the ship, and with

the main oil slicks still some miles out to sea, three crop­ spraying aircraft were used to spray small quantities of a non-toxic detergent on the slicks. The report states that "Utilising crop-spraying aircraft has the advantage of speed

and flexibility, but also has severe restrictions. These include the limited payload of light aircraft, the inadequate agitation of the oil/dispersant mixture, the loss of solvent before the detergent reaches the sea/surface and the tremendous dispersion of the material being applied, especially in high winds. Aircraft could be used however to disperse thin layers

651

of oil immediately behind the breaker zone where ships could not operate ... and in general proved to be moderately success­ ful. It is doubtful whether the method will meet with any

significant degree of success on thick oil and especially "chocolate mousse" (i.e. a sea water and oil emulsion contain­ ing 60- 70 per cent water)." "The growing threat of beach pollution soon made it apparent that with aerial spraying alone it would not be possible to cope with the situation. Accordingly, the possibility of employing ships was investigated ... and four

vessels were fully operational on 19 June ... and at the peak

of operations, a fleet of 12 ships was expending 20,000 gallons of non-ionic detergents per day ... A variety of detergents were available in Durban and whereas it was hoped to base the selection on specific brands, on considerations such as price, efficiency and availability, the latter factor emerged as the most important."

"With the aid of favourable weather conditions and currents, such good progress was made in dispersing the oil slicks close inshore that it was possible to place all ships on standby by 27 June ... Reports of oil being

were received from time to time ... but none of them could be

confirmed." A report to the South African Government, three months after the close of operations by the South African Council for Scientific and Industrial Research includes the following comments and recommendations: (Exhibit 287)

"Roughly, with present knowledge, in order to ensure effectiveness an equal volume of dispersant is necessary for each volume of oil on the sea. The minimum dose rate for

oil thick enough to warrant spraying is 2 gallons per minute. Heavy oil and "chocolate mousse" may require 20 times as much. In practice at sea a spraying rate of 32 gal/min proved effective on patches of chocolate mousse and thick oil."

"Oil patches should not be sprayed unless they actu­ ally threaten the coast. Determination of the threat must be

652

based on actual movements of the patches and their predicted future movements." "The use of spraying aircraft is not recommended In calm weather (they) are completely ineffective while in

rough weather when sufficient agitation is present the wind is so strong that most of the dispersant is blown away."

(5) 'Oceanic Grandeur' 4.4.28 In describing the circumstances which led to the 'Oceanic Grandeur' oil spill on 3 March, 1970 Mr Grant, Research FisherieB Queensland State Department of

Primary said "At about 0300 hours on 3 March 1970,

the tanker 'Oceanic Grandeur', loaded with 55,015 tons of heavy crude, struck bottom at a point east of Wednesday Island (Torres Strait) and came to anchor about six miles to the east of that island. The ship was holed in seven spaces of which

six held oil, one of them bunker fuel" (T2472). The oil,

according to Mr Keith (T5575) was Minas crude of Sumatran origin. "There seems to be no doubt that two massive losses occurred, the first at the initial impact, the second at about 0300 on 10 March- lasting for about three hours." (T2474)

The second phase of major loss occurred during the transfer

of cargo, by that time a mixture of oil and water, to the

Ampol tanker 'Leslie J. Thompson' and the total amount of oil

spilled into the sea was never satisfactorily quantified (Tl4029/30). According to Mr Grant, "Material coming away from the tanker was subject to three obvious influences: a current

(five to six knots) running due east; a current of similar strength running west, then curving north-west and passing to the north-east of Wednesday Island; and a north-westerly breeze that did not exceed ten knots. Over the period of my

observation (4th/10th March) seas remained smooth to slight ... the pattern of tides in this area appears to be extraordinarily complex."(T2478) Aerial surveys of the slicks were made by Captain

653

Curtis, the Thursday Island Harbour Master, and Mr Grant on 3 and 4 March. Thereafter, boat surveys were made from 5 -10 March in which Mr Grant and Mr Tranter, Principal Research Scientist, CSIRO Division of Fisheries, both of whom later gave evidence to the Commission, took part.

4.4.29 From the descriptions given of the sighted slicks by Mr Grant (T2479-2483; Tl284.8-12858) and Mr Tranter (T7514 et

the oil that was spilled came under the influence of

"Strong tidal currents through the east-west shipping channel where the wreck occurred constrained the oil that was spilt into narrow &licks which moved back and forth through the channel for several days before spreading laterally to island shores and reefs only a few miles away. By this time the

slicks had broken up into widely dispersed aggregates which were washed up as oil spots not more than a few em in size."

(T7524-5). Mr Grant, during an extensive aerial survey of the area around the tanker which began some 28 hours after the rupture of hl!ll of the 'Oceanic Grandeur', reported at T2479-83 and Tl.2848-58 the scale and shape of the large slicks seen in ten separate sightings. The approximate of

slicks were reported as 6 x 1, 6 x 2, 8 x 2, 30 x 1, 20 x l

and 30 x 1 miles. Four had an east-west extension, one bore

WNW and one curved northwards and then to the east of the

tanker. In addition, "sparse patches of heavy crude with a surface coverage of about 5% were seen." (T12855) The oil seen consisted mainly of colourless dieselene-like material, often containing or bordered by brown-black or black streaks.

4.4.30 Drums of dispersants were flown to Thursday Island on 4 and 5 March, and by 5 March spraying of oil in the

vicinity of the tanker began. The "vessels called into immed­ iate service included three luggers, the small cargo vessel 'Poseidon' and two twin-motored speed boats." (Tl2865) "After the material has been sprayed on to the oil ... the spraying

craft were circled through their own wake in an attempt to

654

agitate the material ... applied to the oil (T12867). Two

types of dispersants were used, Corexit and Gamlen of which the initial stocks were "42 44-gal drums of Gamlen and 40 drums of Corexit." (Tl286l) Mr Tranter described the Esso product Corexit 7664 as "a mixture of two non-ionic detergents with 25- 30 per cent water and 2- 12 per cent isopropanol."

The Gamlen products "are also non-ionic detergents but dis­ solved in an aromatic oil." (T754l)

4.4.31 "By 6 March", Mr Grant said, "it had been demonstrat­

ed beyond argument that the effect of Corexit on the dieselene­ like material, and on the heavy crude, were unacceptably poor. On the other hand, Gamlen appeared reasonably effective

against both materials, excepting on crude which had weathered and hydrolysed (emulsified) for more than about six hours." (Tl2866)

4.4.32 Mr Stanphill, when asked to comment on the apparent ineffectiveness of Corexit in the 'Oceanic Grandeur' oil­ dispersing operations, said of the Minas oil which the tanker carried, "This particular crude was heavily laden with paraffin molecules and has a pour point which is I believe near 100

degrees - at least 90 - llOF - and spilled on the surface of

the water, I believe it would tend to harden, especially if light ends were lost. It would be impossible to treat with

a water-based product I would regard it as one of the

crudes that Corexit 7664 would not treat." (T4677)

Protection of amenities 4.4.33 A more cautious approach to the use of dispersants in the safeguarding of amenities was counselled by a number of witnesses, and for a variety of reasons, chief among which were the doubtful efficiency of dispersant treatment of oil

at sea, the practical difficulties of making the most effect­ ive use of them, the high cost of the operations, and the poss­ ibility (proven in a number of instances) that, with watchful

655

monitoring of the direction oi' movement of· slicks, oil will be. dissipated by natural processes without the aid of dispers­ ants. As examples of the natural dispersion of oil, Dr St Amant related the events following spills at two off-shore platforms off the coast of Louisiana. A spill associated with a fire at a West Delta Block 45 platform in October 1958 pro­ duced the "largest amount of oil I have ever seen in the embay­ ment system."(T4021) Large quantities were blown on shore.

"Some several days later north winds and off-shore winds re­ moved most of the oil from the lower bay and blew it to sea

where it was dissipated and broken up." (T4022) A later spill, in March 1969, followed" ... extremely rough seas and apparent­ ly the oil disappeared or broke up rapidly in the wave action and moved off-shore. the shore." (T4024)

There never was any trace of it along Mr Haskell, at T5965-6, reported in

similar terms the disappearance by natural dispersion, through wave agitation, of oil which spilled from Chevron platform C in the Gulf of Louisiana in February 1970 and estimated by Mr Biglane at some 4,000 tonnes (T662l) in recommending that

oil be not treated oy dispersants if moving out to sea. And among several instances where oil spilled from tankers has been suspected to have dispersed in part or in whole by natural means an article by Mr G.H. Stander and Mr J.A.V. Venter (Exhibit 275) records the grounding off Cape Town in February 1968 of the tanker 1 Si vella 1 from which ''An unknown volume of oil escaped and the slick that developed moved slowly northwards and finally disappeared."

4.4.34 When, however, oil is seen to be moving shorewards and as in the case of the 'World Glory' disaster towards "most beautiful seaside resorts" (Exhibit 275) there is, for good reason, little disposition on the part of authorities and the public in general to rely solely on natural agencies and the contrariness of winds and currents to dispel the threatening oil. As Dr St Amant remarked "Usually when oil spills occur, public outcry and the concern on the part of the industry to

re-establish good public relations result in rapid and costly att.empts to clean up the area or to make the visible oil dis­ appear from sight." (T3968) Under these circumstances earliest consideration is invariably given to the use of dispersants

and in greater or lesser measure they are almost always used. The minutes of a meeting of the Natal Anti-Oil Pollution Com­ mittee in Durban at the time that oil from the 'World Glory' had approached to within five miles of the coastline record

the dilemma which the committee was called upon to resolve. The minute reads (Exhibit 287, Addendum V, p.l): "A decision which faced the meeting was:

(a) whether to use toxic chemicals and face certain biological mortality or (b) not to use toxic chemicals and experience possible beach pollution." Because the avoidance of beach pollution was deemed to be the prior consideration, dispersants were used, agreement being reached to "Use detergent up to 3 miles from shore and

thereafter non-toxic detergents." In the event the reports which summarised the learned from this well planned

series of operations were reassuring on the reported damage caused to marine life by the remedial measures. In an article "Oil Pollution off the SA Coast - the 'World Glory' Disaster" (Exhibit 276), Mr Stander wrote that "Apart from

isolated instances of dead marine birds and a case of a small number of dead fish washed up (which was probably in no way related to oil or spraying operations), there was no evidence of damage to marine life. Spraying with detergents was done

in relatively deep water where the dilution effect would have precluded any harmful effects. According to Oliff (personal communication), plankton collected two metres below the sur­ face in areas which had received a heavy dosage of detergent,

was generally alive. The treatment of oil close inshore (be­ hind the breakers) was performed with the aid of a non-toxic dispersant and there is no reason to believe that it would have any undesirable effects. As oil did not reach the beach

there was no question of damage to members of the littoral

657

community."

High cost of dispersants 4.4.35 Some significant commentaries were made on the cost of the operations and the uneconomic use, under operational conditions, of dispersants. Although a strict account was not kept of the cost of the dispersants used in combatting the

'World Glory' spill, Stander and Venter stated, in Exhibit 275, that "it is certain that it will run into approximately R.280,000" - or about A$224,000 at the then rate of exchange, This may however be a conservative estimate for Mr Norrie, as a result of his enquiries in South Africa which in this

instance were based mainly on newspaper reports, gave the cost after seven days of spraying, as about R.300,000, and at the close of the operations a week later the cost was estimated at "about R.Boo,ooo to R.l,ooo,ooo." (T6021)

4.4.36 The expenditure incurred in the purchase of dispers-ants in other major oil spills was not made known in evidence and it is doubtful whether an accurate costing has been attempt­ ed in any major spill. That the costs can be very high, espec­

ially if 'non-toxic' water-based dispersants are used in quant­ ity was however made clear in questions put to Mr Stanphill. He was of the opinion that, in respect of Corexit 7664, 1,000

drums of this dispersant should satisfactorily handle 50,000

barrels of an oil of the type of Bass Strait crude of 45

gravity (T4598). In Australi·a Mr Stanphill said, at T4597, "the price of Corexit in for instance 100 drum quantities is $4.79 per Imperial gallon" adding that a drum contains 46 Imperial gallons (T4598). Figures for aromatic based dispers­ ants are apparently comparable (T6704). On these figures the cost of the materials used for dispersing 50,000 barrels of oil, some 6,600 long tons - would be about $220,000, i.e.

about $33 per ton of oil. Mr Stanphill admitted, in further questioning, that this computation assumed that "the 1,000 drums could be applied in a very efficient manner" under

conditions where a contingency plan had been developed which ensured a full and rapid deployment of dispersant carriers, (including aircraft and helicopters), and the availability of efficient spraying equipment and of personnel trained to use the sprayed chemicals to the best advantage (T4599).

4.4.37 Considerable doubt was cast, however, on the attain-ment, in practice, of the most economic use of dispersants as a result of a series of laboratory and field experiments com­

missioned by the South African Council for Scientific and Industrial Research and reported in Addendum IV to the "Special report on events following the sinking of the 'World Glory' off Natal in June 1968" attached as Annexure 'A' to Mr Norrie's statement (Exhibit 287).

4.4.38 Six different types of dispersant, listed in Table I of the addendum were tested. Of these it was said that "Three ... proved effective both at sea and in the laboratory"

(T6034) and that "The effective dispersants are all toxic to marine life." (T6036) In respect of the effective dispersants, the report goes on to say, "Experiments have shown that the oil requires 1/10 to as much dispersant by volume to emulsify

and disperse (oil) completely. It is estimated that with pres­ ently used methods up to 4/5 of the dispersant can be lost into the sea in mixing processes without reaching the oil and treat­ ment may only be 20% effective ... Roughly, to ensure effect­

iveness at the present state of knowledge, an equal volume of dispersant is needed for each volume of oil on the sea." (T6035) As Mr Woodward, Q.C. said, at T6035-6, "This is 1968 experience. It may well be that more effective means of spray­

ing have been developed and certainly Mr Stanphill" - who was referring to the demonstrably less effective dispersant, Corexit 7664 - "claimed appreciably lesser ratios would be fully effect­

ive ... There are many factors which, as we have heard, can

affect the efficiency of the dispersant but this is going to leave a question mark which on the evidence, the Commission

659

may not be in a position to resolve in a firm fashion."

Rocky shores 4.4.39 Of rocky shores and other impermeable structures Dr Straughan said that" ... with the gradual improvement in efficiency of the less toxic dispersants ... I feel that used

correctly they are a valuable tool in cleaning up after an oil spill ... or to clean a rocky shore to obtain a rapid recovery

of the area." (T5654) Mr Cowell, speaking from direct exper­ ience of cleansing operations near the oil terminal at Milford Haven, in the United Kingdom said "We are convinced ..• that rocky shores can be cleaned with minimal damage provided that the new low toxicity materials such as BP 1100 are used with moderation." (Tl0980) He expanded this later in saying "Thin

fresh oil can readily be emulsified by the sparing use of one of the less toxic alphatic solvents" but he added 11 ••• thick hardened deposits may require several applications of a highly aromatic solvent" the use of which requires a decision "to accept the adverse biological consequences." (Tll024-5) Mr Stanphill, in a table (T4622) which set out the manufacturer's assessment of the efficiency of the water-based Coreiit 7664 and the hydrocarbon-based Corexit 8666 in the cleaning of docks, sea walls and rocks similarly made the point that, although the water-based solution would disperse light oils, it was not recommended for the clearance of heavy oils. It was claimed, however, that Corexit 8666 is effective in dispersing both light and heavy oils. But neither in respect of BP 1100 nor the two types of Corexit were figures given of the quantities of dispersant that would be required to clear a given amount of oil in the various states of a highly mobile fluid, a heavy

viscous oil, a sticky emulsion or a semi-solid tar in which it can be deposited on shores. It should be noted however, that, in whatever state the oil is present the process of its disper­ sion introduces ecological hazards according to the character of the oil and the quantity and inherent toxicity of the dispersant used to clear it. Fluid oils containing a high proportion of relatively soluble hydrocarbons of low carbon

660

nwnber could be potentially hazardous in oil/dispersant mix­ tures even when the dispersant is rated as only slightly toxic and used in small quantity. Heavy, aged oils and water-in-oil emulsions from which the more soluble fractions have been lost require, on the other hand, greater quantities of often more

toxic dispersants to clear them.

4.4.40 While we agree with Mr Haskell (T5974) that" ...

detailed planning should accompany the use of dispersants to ensure that they do not exceed toxicity thresholds in critical areas" we are not convinced, on the evidence received, that the quantities required for the cleansing of rocky shores can,

on present knowledge, be sufficiently well predetermined to give this assurance. We therefore conclude, with Dr St Amant, that the use of such chemicals should not be permitted " ..• unless the aesthetic value and effect on private property out­ weighs Gonsideration for the local ecology." (T3970) This

view has special force in·the reefal areas of the GBRP.

Sandy beaches 4.4.41 Mr Cowell, said of oil cast upon a sandy beach that

."it does not sink so readily into wet sand, but breakers may

throw fresh sand over it, burying it in layers like geological strata" (Tll014), but he considered that "for oil to sink through sand it may well require the operation of some emul­ sifying agent to produce that result." (Tll015) Mr Biglane,

reporting on the 'Torrey Canyon' experiences, confirmed this effect in saying "the dispersant and oil percolated through the sand column and apparently disturbed the beach dynamics by lubricating each sand grain ... I saw this on numerous

occasions." (T6702) Professor Clark was of a similar opinion on the undesirability of treating oil sands with dispersants saying "It is not suitable for cleaning permeable beaches, because the emulsified oil drains into the beach only to re­

appear and cause renewed pollution at a later stage."(T3610) This was also the view expressed in the American "First Report

661

of the President's Panel on Oil Spills" entitled "The Oil Spill Problem" (1969) from which Mr Stanphill quoted, at T4569-70, the following passage: "The use of detergents on beaches, littoral zones and harbours is more dangerous because, in making oil miscible with water, the oil will spread into the

sand ... " Mr Stanphill contested this as a "technically un­ sound thesis" in saying "We take issue with the statement that all dispersants and all surfactants would do this" and he claimed that "some surface active agents such as Corexit 7664 oil dispersant actually prevent rather than enhance the con­ tamination of beaches and sediments." (T4570) Mr Stanphill performed some small scale experiments for the benefit of the Commission that were designed to demonstrate, with an untreat­ ed oiled sand column as a control, the emergence of Corex·it emulsified oil from a sand column into the overlying water

(T4570-81). After some hours during which the treated and untreated columns were not disturbed by shaking, Mr Stanphill contrasted the disposition of the oil in the following words, "In the untreated preparation the oil has sunk into the sand, and it has not been lifted out in the presence of water" where­ as "the one that is treated has removed a fairly large portion of the oil to the surface of the water." (T4615) Mr Stanphill

however allowed that in the Corexit treated preparation "all of the oil had not been removed from the sand, but quite a

large portion had been removed, more so than in the untreated bottle." (T4617)

4.4.42 The Commission, while deferring to Mr Stanphill's interpretation, was not wholly convinced that the demonstration had revealed a significantly greater clearance of oil from the sand after treatment with the dispersant as compared with an untreated column; and, with the evidence of other witnesses in mind, are of the view that dispersants should not be used in an attempt to cleanse sands.

4.4.43 Of other types of permeable beach deposits, Mr Cowell

662

said at Tll014 "The most troublesome beach to clean is one of large pebbles between which oil may sink to a depth of 0.5 -l. 0 metre (see Wardley Smith, 19 6 Sa) 11 , and in the only refer­ ence made to mangroves and salt marshes, Mr Cowell strongly advised against the use of dispersants.

4.4.44 Professor J.H. Connell (Professor of Zoology, Univer-sity of California) produced a number of interesting coloured slides of the oil spill at Santa Barbara particularly in relation to its approach to the shore and its effects on beaches. His evidence at T463 et seq should be read by any­

one with a practical interest in the pollution of shores and beaches by oil. The slide No. 29 was discussed at T464 and

shows horizontal layers of oil some six inches apart vertically in a pit dug into a beach which had apparently been cleaned free of oil.

The English approach to dispersants 4.4.45 A practical expression of the English approach is seen in the activities of the local authorities at Milford Haven. Mr Cowell spoke of the constant surveillance by a

launch fitted with spray booms and a tank full of detergent and the availability of five launches and a tug, fitted with booms and sprays and towing a 5-barred gate arrangement to

provide agitation, in the event of a large oil spill occurring. It is c lear that automatic use of this newly devel­ oped BP llOOX is the policy at Milford Haven and it appears to have been successful there. But, of course, conditions

in the GBRP are very different.

4.4.46 In the U.K., all new dispersants must be tested for

toxicity by the Ministry for Agriculture and Fisheries before they can be put on the market whereas in the United States some 400 chemicals used for dispersing oil are being manu­

factured (Mr Biglane at T6687).

663

4.4.47 Mr Cowell who is Co-Ordinator Ecology Environment Control Centre, B.P. Coy, Ltd, London, spoke of tests which had been carried out on some of the older and more toxic dis­ persants (Exhibit 361, p.ll). He said 11Until recently most

emulsifiers available were highly toxic" and he stated that work on the comparatively new BPllOO had shown that it was much less toxic than the BP1002 which was used in the 'Torrey Canyon' spill.

Mr Cowell also spoke of the use to which dispersants

are put in the enclosed and busy waters of the U.K.'s largest oil port, Milford Haven where an average of 2,500 gallons of BPllOOX are used each month (Tl0905) and he claimed that the maxim "less toxic less efficient" to which reference was made by Professor Clark (supra) is no longer true since the develop­ ment of BPllOOX. He added, however, that he considered it wrong to use dispersants in mangrove areas or salt marshes.

The views of Mr Grant and Professor Chuang 4.4.48 Mr E.M. Grant at Tl5982 who made the report on the

'Oceanic Grandeur' spill (Exhibit 194) expressed the.opinion that dispersants should not be used.

4.4.49 Professor S.H. Chuang of Singapore University spoke of the use in the inner harbour of Singapore of detergents (Tl5560) but had no opportunity of observing the effects (Tl5570). He later spoke of the results of experiments which he had made in aquaria using oil and a dispersant called Chemk­ leen on corals which are referred to elsewhere (see paragraph 2.8.9). Of three experiments made, all corals died (Tl5572 et seq and Exhibit 486) in the first and some damage occurred or mucus was expressed in the second and third.

English and American official views on dispersants contrasted 4.4.50 The U.K. authorities appear generally to favour the use of approved dispersants in the absence of a particular

reason in special cases. As Mr Woodward said in his final

664

review of the evidence "the U.K. authorities take the view that all possible steps should be taken to break the oil up at sea before it can reach the shoreline." In U.S.A. however dispersants are to be used only as a last resort and where there is a particular reason such as danger of fire in inlying waters (T4653, T4660). The Commission considers that the American view is correct and is especially applicable in our Reef waters.

4.4.51 The American views on dispersants appear from para­ graphs 2005 et seq in Annexure X to the 11 National Contingency Plan" (Exhibit 301). Thus paragraph 2006 reads:

4.4.52

"2006 Interim Restrictions on Use of Dispersants for Pollution Control Purposes. Except as noted in 2005.1, 2006.1

2006.2

dispersants shall not be used. on any distillate fuel oil; on any spil,l of oil less than 200 barrels

in quantity;

2006.3 on any shoreline; 2006.4 in any waters less than 100 feet deep; 2006.5 in any waters containing major populations, or breeding or passage areas for species

of fish or marine life which may be damaged or rendered commercially less marketable by exposure to dispersant or dispersed oil; 2006.6 in any waters where winds and/or currents

are of such velocity and direction that dispersed oil mixtures would likely, in the judgment of EPA, be carried to shore areas within 24 hours; or 2006.7 in any waters where such use may affect

surface water supplies."

The earlier paragraph 2005.1 provides for dispersants being used as follows:-2005.1 Regional response team activated; dispersants

665

may be used in any place, at any time, and

in quantities designated by the On-Scene Commander, when their use will

2005.1 - 1 in the judgment of the On-Scene

Commander, prevent or substantially reduce hazard to human life or limb or substantial hazard of fire to property; 2005.1 - 2 in the judgment of EPA, in con­

sultation with appropriate State agencies, prevent or reduce substantial hazard to a major segment of the population(s) of

vulnerable species of waterfowl; and 2005.1 - 3 in the judgment of EPA, in

consultatjon with appropriate State agencies, result in the least overall environmental damage, or interference with designated uses."

4.4.53 Other restrictions are also imposed on dispersant use by paragraph 2007.1 whilst paragraph 2007.3 requires dispersant containers to be labelled with various information including name and address of manufacturer, flash point and viscosity.

The Queensland official view 4.4.54 It is relevant to add that Mr Bennett QC who appeared

for the Queensland Minister for Mines submitted that we should recommend that dispersants be not used (Tl5387 and Tl5426).

Recommendation (dispersants) 4.4.55 The Commission recommends that dispersants should not be used in the GBRP except in special circumstances and that contingency planning should as regards the GBRP adopt and apply the principles of the United States Plan. Special circumstances would include the prevention of risk of fire and danger to property and to bird life when other measures

666

are impracticable. Should an issue arise involving an elect­ ion between risk of detriment to marine life on the one hand and serious interference with amenities and environment on the other, the decision should be made by the Designated Authority as soon as possible after the spill occurs.

(b) Sinking agents

The American view and Dr Connell's view

4.4.56 The American view on sinking agents appears from paragraph 2004 of Annexure X to the National Contingency Plan (Exhibit 301) which reads:-"Sinking agents may be used only in marine waters

exceeding 100 metres in depth where currents are not predominantly on-shore and only if other con­ trol methods are judged by EPA (Environment Protec­ tion Agency) to be inadequate or not feasible." Dr Connell at T706l (Exhibit 229) said of "sinking":­

"Sinking oil by use of high density agents such as talc, chalk, cement dust, has been carried out with some success, particularly during the 'Torrey Canyon' disaster. Unfortunately this method does

not remove all the oil from the surface and it

may subsequently rise again. The presence of oil

on the bottom of the sea has been known to have an

adverse effect on the benthic animals and the degradation of the oil in the bottom sediments is slow. Release of the oil after a period of time can be

expected and fouling of trawling nets etc. may occur. There has been some discussion about the use of a chemical to sink the oil so that it remains

at mid water levels, however this does not appear to have been perfected. Again this would only remove the oil from sight and allow currents and upwellings to distribute it. This method would appear to have limited application

since it doesn't result in either the degradation or 667

removal of the oil from the aquatic environment but simply a relocation. 11

Special conditions of the GBRP 4.4.57 In view of the comparatively shallow depths obtaining in the GBRP, the direction of the prevailing winds and currents (in general towards the shore) and the presence of coral life and benthonic fauna and flora in many areas of the Province it is clear that sinking agents should be used only as a last

resort or when other methods are not feasible in the face of an emergency.

Dr Blumer's view 4.4.58 The views of Professor Clark. and of Dr Blumer of

Woods Hole Laboratory on the persistence of oil which sinks

to the sea-bed and the retention of its toxic qualities are dealt with in the answer to TR 2. Dr Blumer was strongly

opposed to the use of dispersants and sinking agents (Exhibit 290).

Dr Nelson-Smith's view 4.4.59 Finally the views of Dr Nelson-Smith of the Depart-ment of Zoology, University College of Swansea, Wales in Exhibit 365 at p.271 are helpful if only to indicate that different conditions may require different remedial measures although some of the views do not seem applicable to GBR conditions:-

668

11It is always preferable to deal with spilt oil

on the water, before it reaches the shore. In

reasonable weather conditions it is usually easy to transport and apply dispersing or sinking agents by ship. When these are toxic their rapid dilution and the relative scarcity of plants and animals in the open sea makes for far less bio­ logical damage than their application directly onto the densely populated intertidal zone. In treating oil spillages in European waters the method most

used so far has been to spray with solvent­ emulsifiers The mixture must be agitated vigorously to disperse it as an oil-in-water emulsion. This can be done by making a faster

return journey or using a following vessel to break it up by propeller action or with high pressure water hoses ... Oil can be sunk by

the addition of any fine dense material ...

unfortunately it then coagulates on the bottom into large globules which rise at the slightest disturbance. Because of this and due to fears that sunken oil might smother shellfish beds,

interfere with fish feeding or breeding grounds, and foul nets or pots, British official policy seemed until very recently to be opposed to sinking oil.

4.4.60 Exhibit 365 is an article "The Problem of Oil Pollu-ti.on of the Sea" appearing in "Advances - Marine Biology", Vol. 8, 1970. It is obvious that the conditions in many

parts of the GBRP would make the use of sinking agents and of toxic solvent emulsifiers very undesirable.

Recommendation (sinking agents) 4.4.61 We recommend against the use of sinking agents in similar terms to those given in the case of dispersants (paragraph 4. 4 . 55 . supra) .

(c) Other remedial measures

No action

4.4.62 One option said by several witnesse,s to be open

to the responsible authorities is to take no action, other than to watch the movement and behaviour of the oil. This course was discussed by Mr Stewart (T4410 et seq), Professor Clark (T3609), Mr Haskell (T5965) and Mr Norrie (T6026). The

669

view seems to be that in the open sea and in circumstances where the spill is like.ly to remain at sea, it should be

monitored and then the forces of nature (evaporation, bio­ gradation, dissolution) allowed to act. Amongst the advocates for no action was the South African Council for Scientific and Industrial Research who in a report produced by Mr Norrie and which became Exhibit 287 said (T6026):-

"0il patches should not be sprayed unless they actually threaten the coast." Conditions in the GBRP are much different and as earlier stated the Commission does not favour dispersants except in special circumstances. But part of the oil dispersed and emulsified will result in a tarry residue being formed which dependent on conditions, may be washed ashore. Professor Clark (T3609) said that in some circumstances a water-in-oil emulsion ("chocolate mousse") is formed which is extremely viscid, has many of the properties of a gel rather than a

liquid and is extremely persistent. But whether "no action" would be good policy as a remedial measure for a moderate or major spill in the GBRP is dubious.

Monitoring a spill - modern devices 4.4.63 The monitoring of a spill dependent on its thickness and weather conditions could, and on occasions, does present difficulties. Visual observation from aircraft supplemented by observation from ships and small craft is the best method but may be ·difficult or impractical in bad weather. The evidence about the 'Oceanic Grandeur' spill showed the diffi­ culty of tracing the movements of slicks from day to day.

There have been recent developments in devices designed to assist in this problem and with night monitoring "Remote tracking methods using infra-red and microwave frequ­ encies as well as radar have been found to have application"

(Mr Haskell T5964). Mr Biglane (T6623-4) also spoke of

cameras mounted on a gyroscope on an aeroplane and these cameras were able to take infra-red, ultra-violet and black

670

and white video imagery of the oil on an instant relay video tape. Mr Winders, a mechanical engineer graduate of University of Queensland and a Director of Oceanics Australia Pty Ltd spoke at some length of micro-wave and infra-red remote sensing

techniques. "Micro wayes have a long wave length which can penetrate cloud cover, hence they can be used at night or during periods of bad weather. 11 (Tl2570) It is apparent that much research into the use of such techniques is taking place

in U.S.A.

Booms

4.4.64 According to Mr Biglane the techniques relating to the use of booms is improving and he instanced the technique used in the Shell spill as being superior to that used in the

earlier Chevron spill. It was universally agreed that the best method of dealing with oil spills - if weather conditions permit - is to contain the oil by the use of booms, collect and pump it

into barges or tankers and remove it from the environment -Mr Stewart T4410, Mr Haskell T5973, Mr Stanphill T4559.

4.4.65 But booms are impracticable in fresh or strong winds with waves more than about 5 feet high (Mr Biglane at T6692). Mr Haskell said (T5950-l):-110il displaces its own weight in water, hence

oil will float partly above but mostly below the water surface. To act as a barrier a

boom must extend above and below the water

level. Boom design includes provision to enable the boom to float in a stable manner so as not to be overturned by wave or wind

action ... booms are used in conjunction with

skimmers and dispersants."

4.4.66 Speaking of the towing of booms in order to concen-

trate and collect an oil spill, Mr Haskell said of a mQbile

671

boom that it could be towed at 2 or knots at an angle,

provided that the right-angled. velocity of the oil against the boom did not exceed l knot (T5956). Thus two barges could tow the ends of a boom arranged in a V shape at these higher speeds in the absence of strong winds or surface currents. The float­ ing oil would then be found back towards the point of the V where it could be skimmed, absorbed or otherwise collected.

He added:- (T5957)

"There are booms built up to six feet high and this would retain a comparatively larger amount of oil. If these were placed in the vicinity

of quite a large spill provided the weather . conditions were in its favour it could retain a spill .... But I do not think any boom can

combat all conditions. They do have their limitations." The subject of booms is dealt with in the Dillingham Report Volume 2 being Exhibit 453.

4.4.67 Mr Biglane spoke at length on the difficulties of

getting delivery of a.boom to the site of an oil spill and it is obvious that even with careful pre-planning, days rather than hours would elapse after a spillage incident before cer­ tain types of booms even if previously manufactured could be transported to the site and there assembled for use.

4.4.68 As appears from the Dillingham "Industry Response Plan" (Exhibit 453) the American view is that booms should be used to direct incoming oil away from inlets and around promon­ tories and for the purpose of diverting oil on to sand beaches where it can be collected by absorbents and diagrams are given

showing the use of a boom "dynamically positioned" for such purposes (p.87). It is considered that generalisations of this nature however sound from some points of view can scarcely be made in GBR areas. The decision on how and for what partic­ ular purpose a boom should be used, whilst having to be made

672

quickly if the boom materials were at hand, would turn on the geography of the particular environment which was threatened.

Tents 4.4.69 An arrangement for the collection and channelling of sub-surface oil spills referred to by Mr Haskell (T597l) and in the Dillingham Report Exhibit 273 p. 60.

''I think the principle is that the tent is placed beneath the surface of the sea and catches the oil as it is rising and channels it to the highest

point of the tent and, from there, along the pipe­ line to a storage tank. 11 (T597l)

Oil Herder 4.4.70 Spoken of by Mr Biglane at T6792, Mr Mansfield at

T7264 and Mr Haskell (T5946). It is a chemical compound developed by the Shell Company and was tested during the Chevron spill. It is based on the fact that oil will not

spread over certain types of compounds containing surface acting agents. Mr Haskell quoted (at T5946) from an industry publication which stated that 11it is non-toxic and non-persist­ ent."

Mr Biglane (at T6792) said:-"It presents itself as a surface chemical barrier of oil and I have noticed in hundreds of spills

that a rip tide or a debris line can be an effect­

ive barrier ... Shell ... did enjoy some moderate

success using this chemical."

4.4.71 Mr Mansfield (of C.S.I.R.O.) spoke to a paper by

E.A. Milz and J.P. (Exhibit 321) delivered at an off­

shore technology conference at Texas in 1971. The title is "A Surface Ac+-ive Chemical System for Control and Recovery

of Oil from Ocean Environments." The opening abstract may appropriately be quoted:-"Research on the control and recovery of oil by

673

4.4.72

use of surface active chemicals and in situ gener­ ation of polyurethane foam is discussed. Both laboratory experiments and full-scale field tests demonstrating the efficiency of the system are reviewed in depth. Total system capability utilis­ ing highly portable chemicals and highly mobile sorbent spreading machinery and oil sorbent pick-up nets are evaluated as a function of oil spill size and weather conditions. Data on toxicity of the chemical agent to marine organisms are presented. It is concluded that a surface active chemical oil spill control system is a feasible technique for controlling and recovering oil spilled on the ocean over a broad spectrum of weather condit:ons. It is further concluded that the chemicals utilised are harmless to the ecology."

One of the features of the paper is the attention

given to surface active chemicals for beach protection. It states:-"The class of chemicals that spreads rapidly on water also will preferentially wet silicates

and carbonates, i.e., the surface chemical will wet sand grains. Thus, if a beach is chemically

treated prior to the arrival of the oil slick, the oil will not soak into the sand but rather

will collect in discrete pools on the beach, thus making the clean-up job much simpler." It seems that the use of a herder is a subject which

attracts research and consideration.

Pumps and skimmers

4.4.73 Where containment of an oil spill has proved success-ful the next step is to take it up and remove it to a pre­

planned site for separation and recovery or destruction. For transportation a tanker or a barge with storage tanks would be necessary.

If the contained oil is thick pumps can be used for

taking up the oil. Otherwise skimmers and absorbents are used. Mr Haskell (T5933) spoke of floating surface pumps as being

a normal part of harbour clean-up equipment.

4.4.74 Skimmers were said to be of three basic designs (l)

the weir type, (2) the floating surface pump with an intake designed to remove only the surface layers including floating oil and (3) using a layer of absorbent material on a drum or

as a belt to pick up oil from the water surface and transfer

it to a tank. A fourth skimmer device is the skimmer boom,

a floating boom with a channel on one face (T5931).

Development was said to be taking place in the design and manufacture of skimmers which at present seem to operate only in calm conditions (Dr Nelson-Smith Exhibit 365 at p.227; the Dillingham Report Exhibit 273 p.61).

Dr Connell at T7063 gave a description of a "typical skimmer" taken from a 1970 issue of the Oil and Gas Journal.

Absorbents 4.4.75 Some absorbents could more correctly be described as adsorbents. At all events materials commonly used are straw, polyurethane foam, hay and treated cellular materials

such as perlite.

4.4.76 Contrasting views on the use of straw are:­

Dr Straughan (T563l) "Incomplete removal of oil-straw mixture can actually cause an overall delay in recovery of an area because recolonising species are

removed with the oil and straw. If this

method is to be widely used after oil spills, it should be considered carefully before use in sheltered rocky areas." "··. Adsorbents such as straw and polyurethane

should only be used if an adequate method of

675

collection is available ... it would be impossible to remove oily straw i'rom a coral reef. Oil and

straw still remain in sheltered crevices over 2 years after the Santa Barbara spill." (T5653) Dillingham Corporation Exhibit 273 p.65 "Straw is considered to have the best combination

of characteristics of the absorbents currently available." At p.78 this report says:-

4.4. 77

"Generally speaking, the technology for oil spill control is likely to advance significantly in the next several years."

Mr Stanphill spoke of the advantages of polyurethane

of which he said it was relatively inexpensive and the foam absorbs over 90 per cent of its own volume of oil or 100 times

its own weight.

4.4.78 The Commission is of the opinion that absorbents if used at all in the GBRP should be used guardedly and only when complete collection and removal and proper disposal are assured (cf Dr Connell at T7064). They should in no circumstances be used near a reef or rocky shore line. In the open sea absorb­

ents should always be in some contained form or upwind of some collecting device such as the nets described in Figure 2 of Exhibit 286.

Gelling agents 4.4.79 Various witnesses spoke of this measure but none with particular enthusiasm. Mr Haskell at T5949 said:-

676

"Oil can be essentially solidified by the addition of gelling agents and some of these are available commercially .... The gelling agent is a chemical

which is mixed with the oil, causing it to form a semi-solid mass immediately. The gelled oil is more easily handled than liquid oil. The method

has been used on small spills in enclosed waters." Mr Biglane (T6696 spoke briefly on this subject and

references are made to it in the Dillingham Report Exhibit 273, P-77 and in Dr Nelson-Smith's statement Exhibit 365 at pp.273-4.

On the evidence before it the Commission can make

no comment for or against gelling.

"Adapts" 4.4.80 These are the initials of "air-delivered anti-pollu-tion transfer system" - being the result of research by the U.S. Coast Guard. It consists of a large plastic container with requisite transfer pumps and transfer hoses. It is

essentially intended for receiving oil from a damaged tanker and was referred to by Mr Haskell (T5933) and Mr Biglane (T660l and T6697). Although it has not yet been used operation­ ally so far as Mr Biglane knows, a suggestion was made that it

might be capable of development, (with pump and skimmer) for ocean spills, and cf Dr Connell at T7064.

Burning 4.4.81 method. "There are many restrictions on the use of this

Technical difficulties include the cooling effect of the water on the flames and the rapid loss of volatiles from floating oil which substantially lowers the ability of the oil to burn" (Mr Haskell at T5938). He referred however to

chemically induced burning using a non-toxic material composed of extremely fine particles of fumed silica (T5940). A very fresh oil spill will burn more rapidly on warmer water because the temperature of the cumbusting surface is higher. The Dillingham Report (Exhibit 273, p.76) states that burning

promoters may not be effective in cold temperatures where the oil is very viscous. Several examples were given of success­ ful burning in the case of tanker spills, whilst in the case

of the Shell blowout the fire was deliberately allowed to burn for many weeks to avoid pollution during diversionary

677

drilling (Mr Gusey, Environmental Conservation Department, Shell Oil Company, New York T5180). A gas blowout containing hydrogen sulphide might have to be flared for safety reasons (Mr Stanphill at T4562A) but his general view was that burning

is not advocated at sea (ibid). Mr Stewart expressed the view that it is an inefficient and very expensive method of disposal of oil on water, "In the case of the 'Torrey Canyon' many thousands of gallons of aviation spirit and napalm and several rockets had to be used to ignite the oil after the vessel had

been bombed." (T4416)

Beaches and coastlines 4.4.82 Beach pollution is treated by absorbents and by bull-dozing the sand and carting both the absorbents and the bull­ dozed sand away.

"This process is expensive of time and labour and is only partially effective." (Professor Clark at T3614) Some confirmation of the view that this process is only partially effective comes from photo no. 29 of Exhibit 69 and T464 (Professor Connell) referred to in paragraph 4.4.43 (supra) and in the answer to TR5. Briefly this photo taken many months after the Santa Barbara spill shows several layers of thick oil on a treated beach near Santa Barbara going down some feet, the layers being about six inches apart. A pit had been dug in the sandy beach for testing purposes. However it should be added that although not shown this photo­ graph Mr Biglane at T6698 said of Carpinteria beach near Santa Barbara that he would not be surprised to find oil down in the sand column as that area has natural oil seeps. He also said

that techniques were improving in the use of road machinery and that there is a new frothing method of washing contaminated sand in a cell or container (T6697).

4.4.83 Mr Norrie produced a code of practice for the clear­

ance of oil from beaches drawn up by the South African Depart-

678

ment of Industries Oil Pollution Control Croup (T6041). It is recognised therein that after as much oil as possible has been picked up some oil will remain on the beach or rocks and that if the beach is a bathing beach clearance by means of

approved detergents may be considered also that whe n thin oil has penetrated deeply into the beach repeated treatment with mechanical equipment may be necessary. Polluted rocks require hand treatment with sprays

and hoses.

4.4.84 There can be little doubt that onc e a heavy spillage

of oil reaches a beach the remedial measures may be long and expensive and that a heavy loss of sand with some semi-perman­ ent loss of quality in the remaining sand will be inevitable.

4.4.85 Professor Johannes read a short paper on the 'Argea

Prima' spill near Puerto Rico written by Diaz-Piferrer, Insti­ tute of Marine Biology, University of Puerto Rico which inclu­ ded the following:-"··· Off-shore coral reefs to the west ... received

a blanket of thick oil ... The most important

physical damag e was the heavy erosion of beaches by the combined action of waves and oil ... For

example an estimated 3000 cubic metres of sand disappeared from Tamarindo Beach in less than a week ... The oil striking mangrove shore s settled among the roots, and where the amount of oil was

great, the habitat was virtually destroyed." The Commission however received no evide nce from any other source in regard to the 'Argea Prima' spill (and see parag raph 2.5.28 supra).

679

PART 5 - SUMMARY OF RECOMMENDATIONS ON CONTINGENCY

PLANNING AND REMEDIAL MEASURES

Twelve recommendations tabulated

4.5.1 Although the Commission considers that Australian contingency planning e. g . Exhibits 491, 492 and Appendix "C" to Exhibit 463, seems to be proceeding along correct lines and shows a proper concern matters of detail as well as

questions of broad policy, it would like to offer the follow­ ing recommendations in relation to the GBRP:-

680

1. That no drilling in the GBRP be allowed until all contingency plans, Australian, State and Industry relating to the GBRP shall have been prepared and their terms and requirements including stockpiling implemented. All plans to be fully co-ordinated and regional commanders designated. 2. That it be mandatory for explorers to submit

and obtain approval for their own contingency plans before commencing to drill. (Mr Jeffrey Q.C. on behalf of APEA accepted the imposition of such a condition) (Tl7085A). It would be advisable to insist on designated containment and removal equipment to be maintained or made immediately available at each platform. 3. In the absence of an Australian equivalent of

the u.s. Coast Guard at least a nucleus of

trained specialists with biological advisers should be available to be moved to the locality of a spill with minimal delay to assist the local personnel be they shire engineers or in­ dustry personnel or otherwise. 4. The final planning should ensure that the

explorer's individual plan should fit in with and become part of the higher planning, for example with regard to quantities, nature and siting of stockpiles and availability of remedial equipment and personnel. 5. That overall responsibility be made clear and

not fragmented with the object of ensuring prompt action and the avoidance of counter­ orders. Responsibility should not be dispersed. 6. The governmental authority in charge of regional

operations must have power to override or alter the operating company's individual plan at any stage. 7. As the tanker route is so close to the coastline

throughout the GBRP it may be that the one plan will deal with both shipping and drilling spills as seems to be the case in the PIECE plan referr­ ed to earlier but this feature confirms the nec­

essity for siting stockpiles of remedial materials and equipment, at reasonably close intervals. The evaluation of stockpiling will no doubt take into consideration (inter alia) distances,flying

times and quantities. 8. There should be training of key personnel and periodical field exercises with outside assist­ ance. 9. A government test range should be established

where different experiments and researcn could be carried out ( Mr Biglane T6687). 10. Wherever wind and wave conditions permit, spilled oil should be contained and removed. ll. That pending research and further consideration

the use of dispersants and sinking agents in the GBRP be restricted to special circumstances and then only with the approval of the relevant authority.

681

682

12. Absorbents such as straw and polyurethane should only be used if an adequate method of collection is available (Dr Straughan at T5653). Straw should not be laid on a reef or rocky

headland or on a floating oil slick if it

would seem that the straw would end up on a

reef or rocky headland. "Oil and straw still remain in sheltered crevices over 2 years after the Santa Barbara spill." (Dr Straughan) The sandy beaches (where the use of straw would be appropriate) are shown in Exhibit 223 prep­

ared by Mr Davis.

PART 6 - RECENT BLOWOUTS AND THEIR CAUSES

Introduction 4.6.1 In this Part we give short descriptions some

recent blowouts both overseas (off-shore and on land) and also in Australian OCS waters. We summarise their causes and give recommendations resulting therefrom relating to safety precautions which should be taken. Such recommendations will

be in short form as their subject matters have been dealt with at more length elsewhere in this Report, e.g. Part 9 of the answer to TR4 and in the answer to TRl.

The human factor 4.6.2 Mr Thomas, General Manager of Beach Petroleum NL said (T2832):-"(The human factor) can never be excluded ...

One must accept the chance of a blowout occurr­

ing wherever one is drilling."

The mechanical factor 4.6.3 Not only can the human factor not be excluded but

mechanical failure will almost inevitably occasionally occur.

External causes 4.6.4 Then there can be external causes such as cyclones,

collisions and an abnormal formation pressure (though the last named was said to be an unlikely occurrence in the GBRP except in the northern or Papuan Basin).

Reduction of human error and equipment failure 4. 6. 5 But in practically all cases a major part of the

causation chain has in fact been human error. This however can be reduced by:-(a) better training of key personnel,

683

(b) better supervision, (c) fewer working hours (i.e. more key personnel), (d) better platform equipment such as both auditory and visual indicators of the movements of mud

levels,

whilst equipment failure should be reduced by proper mainten­ ance and testing.

4.6.6 Indeed Mr Bennett QC said that by these measures

human error and faulty equipment should be completely elimin­ ated and the risk of a blowout reduced to "Nil". Unfortunate­ ly experience has shown that human error occurs from time to time in most fields of human endeavour.

Four Australian blowouts were all gas blowouts 4.6.7 The Australian blowouts described below were all gas blowouts. The witnesses from whose evidence these descriptions have been summarised were Mr White, Mr Thomas, Mr Lipscomb and Mr Stewart.

Marlin A7 (2 December 1968, Bass Strait) 4.6.8 This was a gas blowout while drilling a production

well. Duration 29 days. At the time of the blowout the act­ ivity was drilling ahead at 4857 feet. The drill struck gas bearing Latrobe sand at a higher level than anticipated (Mr Stewart at T4367). There was an unexpected "kick" or surge of drilling mud through the rotary table on the drilling rig floor. Appropriate steps were taken to put the well on choke to maintain control. The weight of the mud was increased by adding barytes. However about an hour after the original kick "a sudden increase in pressure was observed on the choke manifold gauge and simult­ aneously it was observed that mud was breaking out from the sea bottom in the vicinity of the platform." (T4369) It was apparent that the formation at some point below the surface casing was incompetent. The platform was subsequently evacu-

684

ated. Mr Lipscomb (Area Production Manager, Esso, Gippsland, Tl2652) indicated that after the first break about five feet left to drill on a joint of pipe was drilled rapidly. Then

a second joint of about 30 ft was attached and drilled. It

seems now likely that this 5 ft should not have been drilled. There was no audible warning device and no mud level indicator visible to the driller (Tl2672). Mr Lipscomb indicated a number of changes in procedure-which have been made since this blowout occurred (Tl2662-3), especially for

the purpose of providing high sensitivity of measurement when the drill pipe is being removed. Also as the gases probably escaped at the casing shoe at 1015 feet (Tl2665) casing in other wells in this region has been set at 1800-2200 feet. The casing is thus set well below the point of deviation in

formation that will not have been weakened by too many holes in close proximity. It is clear enough that some measures of inexperience, lack of care, insufficient casing and lack of full warning equipment were present in the chain of causation here.

Marlin A4 Well (19 May 1971, Bass Strait) 4.6.9 This was a short-lived escape and ignition of gas

from q production well while wirelining to replace a sub­ surface safety valve. Mr Lipscomb described how some difficulty was

experienced in screwing the lubricator to the top of the Christmas tree so as to effect a pressure-tight seal. Recovery of the sub-surface valve was achieved without incident.

Later the tools were lowered but when it was sought to replace them they stuck. Next morning, further attempts were made using the wireline hoist (Tl2699). On the third pull there was a loud noise accompanied by flame. The

lubricator had become broken off and detached from the Christmas tree. Escaping gas was burning. The platform was evacuated. The well has not been used since (Tl2714).

685

The main causes of this incident were:

(a) owing to an oversight at the time of

installation of' the lubricator the thread on the lubricator was not exactly the same size as the thread on the Christmas tree, (b) The use of Teflon tape and a lubricant

to effect a pressure tight seal concealed this error, (c) the lubricator was wrongly rigged in that the hoist put a grossly undue lateral strain

on the lubricator at the point of its attach­ ment to the Christmas tree. This itself was contrary to the company's own safety manual (Tl2722). It is clear that the causes of this blowout were ignorance and carelessness on the part of key personnel.

The main valves on the,Christmas tree were not

closed before evacuation and Mr Lipscomb and Mr Beall boarded the platform at personal risk a few hours after the blowout and closed them thus shutting off the gas flow and extinguish­ ing the flame from the well. Mr Lipscomb expressed the view that shock together with inability to stand off and examine the situation carefully, were the causes of the crew's failure to close the main valves.

Among the lessons to be learnt from this blowout is

that there should be provision f'or shutting off the main valves from a distance or automatically in emergencies.

Petrel No. l (6 August 1969)

4.6.10 This was a gas blowout from an exploratory well

being drilled in Buonaparte Gulf, 150 miles west of Darwin. Programmed depth 16,000 ft (T3025). Depth of water 320ft (T3186). At the time of the blowout they were drilling ahead at 13,052 ft.

The drill pipe dropped 5 ft and a pressure build-up

686

cccurred. The hydril was then closed and circulation was continued but the hydril blew out and the drill pipe dropped again. From the evidence it would appear that the failure of the hydril was due to the driller having pulled a tool joint

through it with something over 2,000 lbs pressure on the annulus below it. When the hydril failed a high pressure jet of mud came up to the drilling floor and knocked the driller away from his controls. At this stage the drill pipe dropped

and the drilling line broke with consequential impairment to further remedial action. The pipe rams were closed but the lower rams leaked. Later the upper pipe rams also leaked. Attempts to cement failed and the blind rams were closed but gas continued flowing and caught fire around the rotary table

and the fire spread to the crew's quarters. It was in the result decided to drill a relief well

which was spudded in on 6 February 1970. The well can be

considered as plugged and abandoned as from ll January 1971. It was said that the basic reason for the blowout was the encountering of an over-pressured highly permeable gas reservoir.

The causes of the blowout were (Mr White T3046) given as:-(a) the failure of the hydril (which in turn was

due to the driller's action referred to above). (b) the failure of both sets of pipe rams, possibly

because at least one set was closing on a tool

joint,

(c) the failure of the blind rams to diminisn

flow with drillpipe in the hole. An undue strain appears to have been put on the

hydril by the personnel and it seems likely that the prime cause of the blowout was inexperience or lack of care. At T3242 the following questions and answers took place during Mr White's evidence:-

"Have you considered the possible effect, ramming effect on the hydril, of a mass of mud hitting it?

687

---It would have been quite considerable. And also have you considered the possible effect

on the hydril if, coincident with the mass of mud hitting it, in a ramming effect, you were at

the same time pulling the drill pipe?--- It would

have been a very severe mechanical blow to the hydril. Do you think that perhaps would have wrecked the

hydril? ---This could well have been the prime cause of

the hydril failure, yes." Then although a blind ram can be effective if it in fact shears, it will appear that the shear type should be present. At T3ll7 the following question and answer occurred:

"Mr Bennett: It would appear the shear type is

essential is it not? Mr White: Yes I would say so."

Again, Mr White conceded both to Mr Bennett and Mr Jeffrey that this blowout need never have happened if on

the occurrence of the drilling break and the increase in mud level the hydril had been closed and the drill pipe hung off on the rams. But in making this concession Mr White added (T3122):-

"At the time of the blowout the importance of hanging off the drill pipe had not been fully realised by the industry at large ... industry

and government are both wiser after the event." This comment, made as it was of a blowout which occurred in 1969 is not perhaps as curious as it may appear because Mr White added "this type of drilling (a ship or semi­ submersible) had only been going on for a relatively few years."

In the result it would appear that the prime cause of this blowout was inexperience or carelessness on the part of the drilling personnel.

4.6.11 Barracouta (18 February 1965) Minor gas blowout in Bass St. Never completely out

688

of control (T3056). Depth of water 148 ft. Coring at time of

blowout. This well was the first off-shore drilling operation by any rig in Australian waters.

Thirty inch casing to 284 ft had been run and cement­ ed; 20" casing to 687 ft and 13 3/8" casing to 2,974 ft. A

core was being cut to a depth of 4,321 ft when mud started to

flow over the top of the bell nipple on the marine riser.

Although the kelly was picked up to a point where .the kelly drive bushings were 10 ft above the rotary table and the mud pump was shut off and the hydril closed it s eems very

doubtful whether the string was hung off either at all or promptly. This would impart abnormal strain on the rams. Later with the hydril and both pipe rams closed and the choke line open gas started blowing up the marine riser having dam­

aged the rams thus allowing leakage. The blind rams were closed and in so doing they crushed "by almost good fortune'' Mr Bennett at Tl4866 - the drill pipe which broke and fell to

the bottom. Cement was pumped in through the kill line and secondary control re-established. The cause of this incident is not fully explained but it would seem that delay or failure in hanging off arising

from inexperience or lack of knowledge was a contributing if not a prime cause.

American oil blowouts 4.6.12 Santa Barbara (28 January 1969)

Gas blowout changing to a large oil blowout from a

well being drilled miles off-shore. Depth of water 276

feet. Local areas of young unconsolidated pleistocene. Oil seeps common (Mr Stewart T4391). Tectonic instability. Pressures normal. At time of blowout pipe being withdrawn from hole and a swabbing effect created.

At the time the 8th stand (each stand 90 ft) was

being disconnected mud started flowing out. While attempting to screw the inside blowout pre venter heavy gaseous hydrocarbon mist flowed from the drill pipe at high pressure and engulfed

689

the rig floor enclosure. The course of dropping the drill pipe and closing the blind rams was adopted. Shortly after bubbles appeared in the ocean floor around the platform. Oil blowout developed on the 29 January and continued for about ll days. Evidence differed as to the quantity of oil which es.caped and the period of time over which the escape lasted but it seems that after the first major spill of 11 days the

leak continued at a low rate for about a year.

Although mud appears to have been pumped into the annulus through a fill line it does not appear that the amount thereof was measured, as it should be at all times so that a

check can be made with the theoretical calculation (Mr Stewart T4404). But a more immediate cause of the blowout was the small depth of surface casing which had been set and cemented below the mud line. A line of weakness in the sea bed had

appeared. Mr Stewart said: "Well A-21 had casing set at 514 feet measured from the rotary table in a depth of 276 ft of

water and was drilled to 3479 ft preparatory to the installing the production casing. This meant that at the time of the blowout only .238 ft of surface casing had been set and cemented below the mud line." This was in order in that it could act as an anchor

for setting the blowout preventer. Later Mr Stewart added (T4407):-

690

"If a second string of casing had been set at

between 1000 ft and 1200 ft it is quite probable that the avenue of escape for the oil and gas

would have been cemented behind this casing and the subsequent disaster not have eventuated. The well would have been contained under those conditions and the killing of the well carried out." This method of casing was the major cause of the

blowout and was subsequently forbidden under the provisions of OCS Order No. 10 made 21 March 1969. This order has it­ self since been amended. The lesson from this catastrophe is that correct

casing depths are of the utmost importance.

4.6.13 Chevron (10 February 1970) Fire on an unmanned production platform about 15 miles off the coast, south-east of New Orleans. Water depth 40ft. A number of wells on this production platform were

producing 1,900 barrels of oil and 2 million cubic feet of gas per day.

On the fire being observed personnel and boats were

sent to the vicinity of the platform (Mr Coulter T6982). No attempts appear to have been made to use the remote

shut-in valves. It was decided to construct a number of relief wells. Later it was discovered that a large number of sub­ surface safety valves had been removed at various times with­ out approval and prosecutions and massive fines totalling $1 million ensued.

A discouraging example of company action

and also of lack of official supervision.

4.6.14 Shell (l December 1970) Fire following blowout in a well being worked over 10 miles off the coast south of New Orleans. Depth of water 55 ft. Twenty-two wells were producing from depth 12,000-14,000 ft (T6989) oil, gas and condensate.

"We are told" said Mr Biglane T6593 "that this

great casualty started during a so-called wire­ lining operation. This is a simple work-over operation in which you pick up paraffin and perhaps other debris from the producing tubing

of the particular well." What happened is not altogether clear but it does

691

appear from Mr Coulter (T6990) that the crew "removed the ljlbricator and found the plastic in the lubricator and above the swab valve. They did not get the plastic completely cleaned

out and left the swab valve open and the lubricator off while they broke off for coffee." While the men were gone on the coffee break the explosion occurred.

Mr Biglane said that it is thought that some of the

plastic material found its way between the valve and the valve seat and when the surface valve was shut, you did not get a

perfect seat (T6593). In the result therefore, whether the actual explosion and subsequent catastrophe werecaused by static electricity or otherwise it is clear that leaving the valve open in such dangerous circumstances was gross carelessness, and this appears to be the prime cause of the blowout.

Other blowouts

4.6.15 Several other blowouts were referred to by Mr Stewart and Mr Thomas to which brief mention should be made.

4.6.16 B.P.Well 44/23-1 (According to Mr Stewart at T4429 this took place in January 1967 but Mr Keith gave the date as 21 February 1968) (Exhibit 216) This took place in the North Sea.

A storm threatened so the well was made secure by

closing all wellhead valves and removing the riser. Later a blowout (gas) occurred and on inspection the wellhead was found to be damaged. This was considered to be due to trawlers fishing in the vicinity (T4429). An "external" cause.

4.6.17 Phillips Well 53/5-A5 (of 15 November 1968) In the North Sea. Gas blowout during a round trip.

"this blowout was undoubtedly due to failure to keep the well filled with mud."

692

Carelessness of drilling personnel (T442.9) ..

4.6.18 Shell Wells 49/26 - All and Al6 (2 February 1969)

In the North Sea. Gas blowout caused by one well

intersecting another. 11 Since this accident, potentially producing wells have been sealed off by solid plugs

above the storm chokes before any other drilling is carried out in their vicinity. 11 (T4429-30) Inexperience of personnel.

4.6.19

ll.6.20

land.

Unnamed Well 11 A11 1961-3 (T2827) (from Mr Thomas' case history) 11 I believe it was a result obviously of a lack

of knowledge or understanding of the equipment by the supervisor in question; his negligence in making a premature entry in the log which r-esulted in untested B.O.P. equipment breaking

down and his error in attempting to change rams without first lowering the internal pressure of the B.O.P. stack. 11 (T2764)

Unnamed Well 11 B11 1961-3 (Mr Thomas's second case

history) Gas blowout during workover of production well on

11 The reasons for the blowout were that ... the

lubricator assembly had not been pressure tested to its full pressure expectancy prior to firing this gun. The lack of the wire line blowout

preventer ... meant that our secondary means of control was missing from this well . .. . this particular lubricator had been in use only the day before on another job and the

operator concerned was therefore fully convinced

693

4.6.21

that it was operable ... in this particular case

again the shortage of equipment and material in the country concerned led us ... " (T2768-70)

Unnamed Well "C" 1961-3 (Mr Thomas' third case history) Gas blowout during drilling of production well. Maintenance of swivel being carried out (i.e. the device from which the kelly hangs and enables the kelly to rotate while maintaining a pressure type seal).

" ... the crew failed to observe that the fluid

level was falling slowly but steadily and was in fact escaping into a minor thief zone some­ where, we believe, at 1000 ft ... the crew

failed to observe that mud was flowing into the mud pit ... In this parti.cular country we again

did not have a hydril B.O.P. not because we did not wish to use one but because conditions made it difficult to obtain equipment ... we lost

the well and lost the complete string of pipe." Mr Thomas gave three reasons for this blowout:­

(a) negligence on the part of the crew,

(b) lack of training on the part of the

supervisor, (c) lack of proper equipment (T2775).

Summary of causes of blowouts 4.6.22 The causes of these blowouts in the aggregate were:-(a) Carelessness of drilling crew. (b) Inexperience of drilling crew.

(c) Inexperience of company supervisor. (d) Lack of official supervision. (e) Failure to test equipment. (f) Lack of equipment and material. (g) Inadequate casing programme.

(h) Equipment failure due to careless or

inexperienced assemblage. (i) Equipment failure. (j) Inexperience in drilling closely adjacent wells.

(k) Insufficient key personnel on the platform. (1) Insufficient warning devices on platform.

Recommendations 4.6.23 l. Regulations relating to casings especially

surface and conductor (see Part 9 infra). 2. Compulsory provision of auditory and visual warning devices and remote and automatic control of valves, including surface con­

trolled sub-surface safety valves (see Part 9 infra). 3. Presence of government inspectors on plat­ forms with power to give written or oral

directions to drillers at any time. S.lOl of the Petroleum (Submerged Lands) Act of 1967 to be amended accordingly (see Part 2 supra and Part 9 infra). Frequent inspec-

tions by inspectors to ensure compliance with drilling and safety regulations at all times. A prohibition on the use of ship-shape plat­

forms using conventional anchorages within the GBRP, but this is not intended to be an

inflexible view because technical advances are being made (PI.3.11). 5. A prohibition on use in waters less than 250

feet deep of semi-submersibles which depend solely on conventional anchoring systems for station keeping. 6. Official approval to be required for

(a) the number of key personnel, and

695

696

(b) standards of drilling experience and qualifications required for all personnel before commencement of drilling. 7. Generally, provision requiring approval before

spudding.

PART 7 - MISCELLANEOUS HAZARDS OF PETROLEUM EXPLORATION

DRILLING AND PRODUCTION IN THE GBRP

Some subjects discussed in other answers but for different

purposes 4.7.1 In this Part we turn to a number of activities and

subjects associated with petroleum exploration-drilling and production which could be deemed potential hazards when oil pollution of the GBRP is under consideration and they indicate the need for various safety precautions which will be specified.

Some of the subjects have been discussed in other sections of

our Report when we have been dealing with different facets of pollution. For example the subject of pipelines in the GBRP and the potential hazards which may derive therefrom are dealt

with in Part 11 of the answer to TRl when measure of risk was

considered and also later in Part 9 of this answer where Exhibit 68 is analysed in detail and when we deal with Part VIII of Exhibit 68("Pipelines") recommendations are made which include the adoption of the American OCS Order 9 of l June 1971

with certain amendments. Again the potential hazards of seismic surveys and of explosives are also referred to in Part 9 when dealing with Exhibit 68, Parts III and IV thereof.

Chronic and random oil spills, including the disposal of garbage and industrial wastes, flexible hoses and the poten­ tial hazards involved in the transportation of oil from the production site to the shore receiving depot are dealt with under the title chronic and random pollution in Part 11 of

the answer to TRl paragraphs 1.11.1 et seq and also in para­ graphs 1.2.1 et seq in Part 2 thereof where we were considering the degree of risk of an oil or gas leak.

697

Tanker spills 4.7.2 It is universally acknowledged that the greatest single source of oil spills is from shipping, mainly tankers. Mr Keith (Co-ordinator of Research, Oil and Gas Division BHP)

gave a summary of recorded incidents in which tankers were involved in spillages of over 1,000 barrels between 1957 and 1971. There were 60 such incidents with a total spillage of 3.5 million barrels. This represented about 85% of all marine oil spillages (T5509). The Dillingham figures were somewhat

less. (Exhibit 273 page 66) Probably if minor spills were included the number of incidents would be multiplied by 10. But except in relation to incidents occurring during the collection and storage of crude oil from the off-shore rig by barges or tankers and its transportation (whilst within the GBRP) to and into a shore depot - all of which activity is

regarded as part of the total process of "production drilling for petroleum" within the meaning of Term of Reference No. 1 -the hazards from shipping and tankers are outside the scope of the Commission.

But when safety precautions relating not only to liv­ ing resources but to environment and natural resources in a locality within the GBRP are under consideration (Term of Reference No.4) a miscellany of potential hazards in addition to blowouts and which derive from different activities and situations attract consideration.

Individually these hazards will probably not involve spillages as large as those from a blowout or from a tanker

incident but they may result in minor spills single or repeti­ tive or a measure of chronic pollution and in the aggregate these hazards could be considerable or even substantial. In general terms they are:

Pipeline failure

Whether pipelines should be permitted in GBRP is debatable 4.7.3 The question whether in the more shallow waters of

the GBRP containing as they do so many reefs and islands, pipe­ lines should be permitted to transport crude oil from wellhead

698

to the shore depot is one on which minds may the

line ·is buried - as it should be especially in shallower waters (Tl6893) - some damage to the sea bed and deposit sediments might be thought likely and so coral or benthic in some degree Leaks can and do occur and

ships' anchors in coastal waters are the most common cause pipeline failure (Mr Rochelle T2948). Shifting due to gale and cyclonic is perhaps the next greatest hazard

(ibid). He added that the experience of his own company (Brown and Root Incorp.) was that in the case of unburied lines there had been an incident of damage from ships' anchors once every 4 years per 100 miles of line.

Systematic inspection, testing and maintenance are imperative and all information from frequent inspections must be logged and analysed. Spillage from a line ruptured by storm forces may be

limited to a given volume of oil or gas by the placement of

control valves in the line and the implementation of planned emergency procedures - but how frequently such valves should be placed along the line and how sensitive they should be to a lowering of pressure may be difficult matters (cf Mr

Rochelle at T2952).

4.7.4 Mr Lowd (Vice President National Tank Co. of U.S.)

said that in the Outer Continental Shelf of the U.S.A. a valve at the platform is required by law and only two valves are "traditionally installed" (T3327) and he spoke of sub-sea devices and meters at the platform.

He added:-"Obviously a line that is ruptured is going to leak oil even if we shut it off at both ends -

one end with the automatic valve and the other end with the check valve. The leakage usually can be characterised almost as a seep of oil to the surface and not a cataclysmic discharge

of all the oil in the line, and the reason for

699

this is that there are some counter forces at play." (T3434) Mr Lowd discussed at length the circumstances in

which a "bad, quick leak" can occur and the difficulties of locating and welding the leak. The selected method of repair will depend on water depths. Modern methods require equipment including a support barge; a habitat; surface decompression equipment; a submersible chamber or bell which is essentially an environmental elevator; a means of pipe alignment if re­ quired and special cutting, welding and x-ray tools (Mr Rochelle at T2956).

4.7.5 Before lines are accepted they must pass a hydro-

static pressure test (Mr Rochelle T2933).

In recent years large quantities of oil have occasionally escaped from pipelines 4.7.6 In recent years large quantities of oil have escaped

to the.sea from pipelines on a number of occasions and Mr Keith tabulated some of the more significant ones totqlling 13 (T5582). One of these, West Delta, Gulf of Mexico 15 October 1967 involved the spillage of 160,000 barrels of crude oil

the result of a pipeline being broken by a dragging anchor. Another spillage was of 100,000 barrels. Other such spillages ranged from several hundreds to 7,000 barrels. Some were caused apparently by corrosion or inadequate welding - doubt­ less old, corroded lines off the Louisiana coast. Such incid­ ents could undoubtedly be avoided by proper inspections, proper maintenance and governmental control.

4.7.7. On the subject of chronic pollution (which in the

GBRP could be more serious than a single incident of a larger

size) Mr Biglane (of the U.S.A. Environmental Protection Agency) said (T6597):-

700

"We have over 200,000 miles of pipeline systems

in our country and I have noticed that a

significant portion of the oil spills reported to us are from breaks and leaks. Breaks of

course are mostly occasioned by human error -a barge bumping into the facility, or dragging

an anchor in a navigable waterway. But leaks predominate in old oil fields."

4.7.8 Generally it can be said that the incidence of pipe­

line failure will depend on care ful design in the light of full information on storms, cyclones, currents, bottom conditions, corrosion protection system, the weight coating system, con­ figuration of the line terminals, future tap valve locations and stresses to be encountered while placing the line on the bottom (Mr Rochelle T2912). In two of the more serious cases,

automatic shut off devices were not activated by the pressure drop involved (T5582). If this serious difficulty can be solved the quantities of oil spilled from pipelines should be lessened. According to Mr Rochelle every weld should be and

in practice is x-rayed as the line is assembled. Usually the film from this x-ray is reviewed by both the contractor's and the customer's inspectors.

The burial of pipelines in the GBRP 4.7.9 The burying of pipe lines is costly and difficult

but if pipelines are permitted at all in the GBRP burying will be imperative in most areas of the Province. On the it would seem that a pipeline should

be buried from 3 to 6 feet and out to a depth of water from

100 to 200 feet. It would appear impracticable to lay them on

rocky or coral floors whilst their laying would on sea beds cause at least temporary turbidity. As a line approaches a shore or through shipping lanes the depth of cover is increased to 10 or more feet (Mr Rochelle T2936).

4.7.10 Exhibit 68 to which reference is made later makes

provision for pipeline licencees obtaining approval for a

701

proposed design and the marine conditions over the route prop­ osed (p.l29) whilst in U.S . .A. Pacific OCS Order 9 provides inter alia that all oil and gas and other pipelines shall be designed and maintained for protection against water currents, storm scouring, soft bottoms and other environmental factors. In Part 9 (infra) we recommend that with certain amendments OCS Order 9 be adopted and incorporated into Exhibit 68.

Dr St Amant on corridors 4. 7.11 Dr St Amant at T399l stressed the dangers of having

many pipelines laid down on the ocean floor in haphazard fash­ ion. He said:-

4.7.12

"I would recommend to any group that was going to set up regulations in any virgin area that has never been explored for oil that they declare certain corridors in which to lay the pipelines, that these corridors be selected by an agency familiar with the ecology and biology of the area and that they be placed in areas of least

possible disturbance to your eco-system."

The respective provisions of OCS Order No. 9 and Exhibit 68 on the subject of pipelines, their proper design and burial were of course well known to Mr Taylor-Rogers, Chief Petroleum Technologist, Bureau of Mineral Resources

(Tl4591 to Tl4598) but however careful the supervision of design and construction including control valves and periodical inspections may be, all possibility of leakage could not be eradicated.

Spoil from trenches 4.7.13 Another feature of pipelines which would require special attention in the GBRP was referred to by Dr St Amant namely that spoil from trenches dug for the purpose of laying and burying pipelines is often left on the sea bottom and patrol boats are used to prevent this.

702

4.7.14 In some outlying or eastern parts of the GBRP the

pipelines could be somewhat tortuous in their path to the coastline requiring special care in designing , construction and laying.

High-low pressure sensors 4.7.15 In U.S.A. OCS Order 9 makes specific provision for pipeline control valves namely "high-low pre ssure sensors", "automatic shut-in valves" and "check valves" at certain

prescribed positions at each end of a submarine pipeline . The object of these provisions is to ensure that in the event of leakage the pipeline will be closed in at each end. There

is no provision for shut-off points or detection devices along the length of the pipeline.

Aircraft monitoring 4.7.16 Exhibit 68 deals in a general way with standards and

approved designs but there are no specific detailed provisions dealing with safety devices. The subject was discussed by Mr Taylor-Rogers at Tl4586-90. The American provision to

which Mr Taylor-Rogers drew attention at Tl4592 requiring an inspection of the ocean surface above the pipeline at least once a week using aircraft, floating equipment or other means seems especially desirable in GBRP waters.

There is no such provision in Exhibit 68 and this should be rectified.

4.7.17 Recommendations relating to OCS Order 9 and safety d evices are made in Part 9 (infra).

Sea transportation from production site to shore depot or refinery Sea transportation also not free from hazards 4.7.18 The alternative to the use of pipelines nam e ly the

use of barges and/or tankers for sea transportation from the wellhead to shore depot is also however not free fr"om hazards

703

which derive to an appreciable extent from the neces.sary repet­ ition of operations requiring manual care and skill. According­ ly the selection of the method of transportation in the GBRP will require judgment and careful planning. This subject is discussed further in Part 9 infra and in Part ll of the answer

to TRl.

Mr Crane's view

4.7.19 As Mr Crane (Marine Manager, Shell Coy of Australia) pointed out (T4978) :-"The movement of crude oil from the off-shore production site to the refinery can be carried

out either by a direct pipeline or by sea

transportation." The subject is dealt with in detail by Mr Crane and

Mr Allen in Exhibit 217 whilst Exhibit 218 is a series of

relevant photographs. Very broadly it can be said that the tanker is moored by a type of buoy mooring in the general vicinity of the prod­ uction site (in some situations quite a long distance away for example where the water is shallow or the production is close to a lee shore) and then there are flexible hoses

connected to a submarine pipeline running between production site and the mooring site.

Buoy moorings for tankers

4.7.20 Buoy moorings can be divided into two basic types:-

704

1. A C.B.M. the Conventional Buoy Moorings, which generally consist of a number of mooring buoys, in between which the vessel is kept more or less in a fixed direction.

2. An S.B.M. the Single Buoy Mooring which consists of one mooring buoy only, to which a vessel is moored with specialised bow

moorings and which permits the vessel, together with the attending floating hoses

attached to the buoy, to swing freely around the buoy and thus take up the most advantageous position under the combined influences of wind, current and sea/swell.

Flexible hoses 4.7.21 Single buoy moorings permit petroleum products to be loaded or discharged by means of floating hoses connected to a swivel arrangement on the buoy and have other advantages.

The "Conventional" type (up to six buoys) accommo­ dates large tankers and resists the influence of changing directions of wind or current but would not be so suitable for use in heavy cross winds.

"The connection from the buoy to the ship is by floating flexible hose. These hoses generally are of normal construction but have floats cemented on. When not in use the hose string floats freely,

streaming from the buoy. In this way they are

ready to be lifted on board when the tanker moors bow to the buoy. In some locations authorities

do not permit hoses to remain afloat when not in use. There are various methods used for this sink/ float system, a recent development of which is a hose with an internal annular chamber which can

be inflated by compressed air from the buoy or mooring launch." (T4994-5) The subject of flexible hoses is dealt with in Part 9 (infra) and in Part 11 of the answer to TRl (supra).

Hazards of loading 4.7.22 The actual loading of the tanker requires skill and

care. At page 5 of Exhibit 217 it is stated:-

"When loading a tanker a great deal of care and

attention is required of the ship's personnel. Considering again the tanker in our diagram it

705

would not be possible to load say any one centre tank or pairs of wing tanks individually and in isolation. The rate of rise of

level in the tank would be high and also concent­ rated loads could overstress the ship's structure. In practice, probably all the wing tanks would be loaded simultaneously the rate of flow to the individual tanks being controlled by the valves on deck,to ensure that they filled progressively. The level of the contents is kept under observation

at all times on a modern ship by means of direct

reading contents gauges ... During all cargo operations great care is taken to prevent spillage as there is,with most products, a very real hazard from fire and explosion if over­

flow or leakage of cargo occurs. Any oil spilled is not only a threat to ecology but also a very

real threat to the lives of the operator and the

remainder of the crew all of whom therefore have a very real incentive to carry out their duties

in a competent and responsible manner, and prevent incidents that may give rise to spillages."

Load on top

4.7.23 Other aspects of the process of loading oil into a

moored tanker include the operation knwon as "the load on top" method of loading and associated procedures having the object of ensuring that tankers arrive at the moorings with clean ballast only on board so this can be discharged directly into the sea.

4.7.24 Equipment on the platform would include storage tanks and a loading pump. The connection to the ship is by floating flexible

hose and when not in use the hose (Exhibit 217 page 2) lies

on the sea bed being marked by a buoy to which a messenger

706

wire is attached. A barge anchored near the production platform may

be used either for being towed to the shore depot when filled or as an intermediate storage place for towing to a distantly moored tanker.

Spillage risk 4.7.25 From the foregoing it will be seen that however

carefully planned and executed this transportation by sea may be, there will always be some risk of spillage either due to carelessness or equipment failure or perhaps due to some external force such as gales or cyclones or a navigational

incident. Simple acts of forgetfulness have from time to time resulted in spills whilst tankers have been loading or unloading and the "holler and yell" procedure must give way to automation in relation to the opening and closing of valves

and the stoppage of the flow of oil. Frequent and careful

testing of the ship end of the hose string is necessary. The

following evidence was given by Mr Crane (T4981) :-"A line in regular use would be examined at

three monthly intervals and the hose strings brought ashore for thorough examination every 12 months . ... Particular note would be taken of chafing

or damage and the position of individual hoses in the string would be changed to spread the wear over the entire string. Complete logs of hose inspections are maintained." " ... Do you know of cases where they are not

examined as frequently as that?"---'Yes, I do." "In Australia?"---'Yes, in Australia, at Barrow Island." "What is the period of inspection there?"---"About

six-monthly intervals." "Do you know of other instances where the examin­

ation is more frequent than every three months?" ---"Yes, I knovJ of a case at Port Stanvac in

707

South Australia where the line is inspected every time it is used and also at 30-day inter­ vals." (T498l) " ... There is no governmental regulation of

these matters in either of those two cases?" ---"That is correct." (T4982)

Hoses left full of oil

4.7.26 Another aspect referred to by Mr Crane was the

choice between leaving the pipelines and hoses full of oil or replacing that oil with water. Apparently the practice varies among companies (T4997). In the GBRP consideration would have to be given to a practice being settled and con­ trolled by government authority in order to avoid accidental or deliberate discharge into the sea.

Navigation hazards 4.7.27 Captain Hildebrand was examined on the subject of the navigation of tankers near production platforms and the following evidence was given at T323-4 whilst he was being questioned by Mr Jeffrey QC:-

708

"Suppose for example that an oil drilling platform were constructed in some part of the reef waters away from the established shipping lanes, and suppose it were desired to take vessels, say in the order of 39

feet draught, to that platform or as near to it as could safely be done. What would

be the conditions that would need to be fulfilled to render the navigation of the vessel to such a point safe?---This would involve an intense hydrographic survey of the area between the known shipping route and the suggested platform and, after this survey has been carried out, the erection of the necessary navigation beacons."

and .at T325 the following important evidence was given. He had been referring to radar and navigational aids:-"But with all those benefits might it still not be possible, indeed probable, that as you approach

a reef the currents are getting stronger and that

a ship might swing, and even with all the naviga­

tional aids, could get out of control?---Yes. One would have to ensure that there was plenty of room between reefs in this area. It would be most unwise to try to handle and swing big ships in narrow

passages between the reefs."

Size of tankers must be controlled 4.7.28 But it is very questionable whether "big ships" should be allowed to take part within the reef areas of the GBR in the

transportation of oil from well to shore. If sea transporta­ tion is permitted the size of the craft used therein and the

manner of mooring should be carefully considered and strictly controlled.

Summary of necessary precautions if tankers used

4.7.29 If transportation by sea should be permitted from production platforms in the GBRP to a shore depot or refinery a measure of pollution can be expected. The quantum can be

minimised depending on the degree of care used and maintained in planning and during operations. Proper procedures are well known throughout the industry. The care and attention which have been given to the equipment safety and otherwise, on the modern tanker (as clearly shown on the photographs forming

Exhibit 218) and the efficient way in which the large high­ pressure flexible hose has been constructed and can be fitted will all tend to make the risk of a spill from this source as

Mr Crane indicated small. But the GBRP is an ususual and in

some places difficult area and there are three stages in the

transfer-of-oil process namely on the production platform, in the hoses and submarine line and on the tanker.

709

Government supervision and control should be main­ tained and no amount of oil or waste products should be permit­ ted to be consciously discharged into any of the waters of the GBRP. The dangers of using the buoy mooring method in sea

transportation during the cyclone season and of navigation in enclosed or reefal waters will doubtless be recognised. A system of navigation lights and more detailed charting in some areas within the GBRP would be desirable before such sea transportation commenced.

The coupling and uncoupling of hoses is one of the

most frequent sources of random spillage (Mr Cowell Tl0903) whilst pressure tests and protection of the hose from abrasion are necessary precautionary activities. The leaving open of valves (resulting in loss to the sea or overfilling of tanks) is also a not infrequent cause of such spillage. Suggestions for precautionary measures are made in Part 9 when considering Part VIII of Exhibit 68.

Seismic surveys, explosives and blasting 4.7.30 These activities have been associated with off-shore petroleum drilling and in more or less degree are deleterious to coral reefs and to ecosystems in the vicinity.

Seismic surveys - their purpose 4.7.31 Seismic surveys and explosives are referred to in Part 9 (infra) where Exhibit 68 (Parts III and IV) are con­ sidered.

These surveys are essential for identifying the situation and quality of sedimentary basins, in other words for discovering potential petroleum reservoirs. The grids made during such surveys are to varying scales but testing

at mile or half-mile or even quarter-mile intervals is carried out. Until very recently explosives were used.

4.7.32 The purpose of these surveys is described in some

detail in Exhibit 417 being Mr Robertson's statement under the

710

heading "Geophys;ical Methods of Exploration for Petroleum". Mr Robertson is supervising Geophysicist, Petroleum Exploration

Branch, Bureau of Mineral Resources. Applied geophysics is defined as geologic exploration or prospecting using the instru­ ments and applying the methods of physics and engineering -exploration by observation of seismic or electrical phenomena

or of the earth's gravitational or magnetic fields or thermal distribution. Geophysical exploration for petroleum is virt­ ually confined to the use of the seismic, gravity and magnetic methods (ibid). Mr Robertson adds that since the 1930's the

seismic prospecting method has been recognised as the most· effective method of investigating sub-surface geological structure short of drilling holes in the ground - "There are two different seismic methods, the reflection seismic method

and the refraction method - the latter's use would comprise no more than 5% of all seismic operations." (p.3)

4.7.33

"About a dozen marine seismic surveys totalling some 6,500 line miles have been done to date

in the area of the Great Barrier Reef. Currently the overall cost of a marine seismic survey varies from about $300 to $600 per mile." (ibid) He added:-

"Seismic prospecting involves the generation of considerable amounts of accoustical energy which, in the marine environment, is injected into the sea or perhaps into holes drilled

into the sea bottom where water is very shallow. This energy may be generated by a number of different types of energy sources ranging from high explosive charges to much more innocuous

sources."

Dr St Amant (Assistant Director, Louisiana Wild Life

and Fisheries Commission) gave some detailed evidence about the use of explosives in seismic surveys and said that:-" ... we have found that seismic companies we thought

711

were shooting every quarter of a mile are dropping in the charge every 600 feet." He said that fish could be driven from the area by

concussion and vibrations associated with the detonations and at T3954-5 he said that seismic surveys had been going on since the 1940's and that Jp to as much as one ton per linear

mile of explosives have been detonated. He added:-"Once a seismic survey has been carried out, it stands for all who read it to see it more or

less permanently, does it not?---We would hope it is that way, but it is not quite the way it

works. First, seismic engineers have gradually improved their system over the years, and they like to go back and reshoot with new and improved equipment and systems because in this way they have discovered fields in places where, in the beginning, they thought there was nothing. The second thing they tend to do is that they may shoot a generalised type of seismic survey in advance of some lease or sale that may be put up, and after they get the lease, they may want to go back and do an intensive survey to deter­ mine exact structures. In the first they are

looking for information, then they want to go back and shoot for more information."

Special factors relating to GBRP and Dr St Amant's view re Gulf of Mexico Now the situation in the GBRP is much different from

that off the coast of Louisiana as Dr St Amant recognised and to anyone familiar with the coral reefs here and their growth in waters up to 100 feet in depth it will not be difficult to

imagine with some accuracy the likely effects of detonating appreciable quantities of dynamite near or upon such reefs. Our reefs are inhabited by enormous quantities of fish and other marine life and however insignificant fish kills from

712

explosives may be in open and deep waters, the situation within GBRP. waters is much different. Dr St Amant's evidence where

he said:-"Fish kills of significant size rarely occur unless the charge happens to be placed in or near a large school of fish, or on or near

a reef frequented by fish, or in shallow,

semi-enclosed water bottoms densely populated by fish" (T3952) seems directly relevant and apposite to reef and near-reef conditions in the GBRP.

He said that in shallow waters (10 feet or less)

floating shots are not permitted; instead all shooting is done at a depth of 100-200 feet in sub-surface drilled holes and that the smallest charge consistent with acceptable recording should be used.

include: Other relevant extracts from Dr St Amant's evidence "Another and different problem in off-shore areas involves undetonated floating charges which may

drift onto beaches or be accidently picked up in trawls if they sink to the bottom . . .. We have more or less gotten control of

this problem by requiring that the seismic boats tether the charges. So in the case it

does not explode they can pull it in and defuse it. They did not like this, but we think it is

their problem . . .. The off-shore conflicts in navigation got

to be rather bad at one time ... (T3957)

... we rather insisted they not do any seismic

work when the fishing was at its maximum intensity, and by some manipulation of the two industries we were able to keep them separate and in ... the

last two or three years, we have reduced this friction considerably (T3958).

713

... seismic engineers have developed several new systems for creating vibrations or sound waves suitable for seismic investigations. Most of these have far less effect on fish life than do

high explosives ... " (T3959)

" ... The seismic companies inform me they do not

have to use explosives in most sections of the world. I only pointed out that they continue to use them in Lousisiana." (T4056)

Explosives 4.7.35 Mr Biglane (U.S.A. Environmental Protection Agency) said (T6581) :-"The use of dynamite charges ... has been abandoned

by much of the off-shore mining industry. I would

recommend against the use of such techniques in favour of underwater, contained, imploding gas echo chambers or other devices which take advantage of the more sophisticated seismic equipment in use today. The old technique of using dynamite 'shots' could damage coral formations, kill marine life and leave pipes protruding above the ocean floor."

Mr Robertson tabulated (at p.4 of Exhibit 417) the

disadvantages of using dynamite charges of 10 lbs. to 100 lbs or more the first of which was:-"Obvious destruction of fish and possibly other marine life, which produced opposition from

fishing interests and conservation bodies" and then named and discussed some of the principal alternative energy sources developed and widely used. These include Sparker, Airgun, Gas Exploder ("Aquapulse") and then added:-

714

"Small Explosive Charges. In recent years methods have been developed of using explosives much more efficiently than was the case when large, concentr­ ated charges were fixed near the surface. The

increased efficiency largely results from firing the charges at greater depth than previously. This allows the use of charge sizes only a fraction of

those originally used. Three of these modern explosive techniques which have been employed in Australian waters in recent years are known by the trade names Aquaseis, Flexotir and Maxipulse."

Modern energy sources 4.7.37 Then he said that the seismic energy sources most

used around Australia in recent years have been Aquapulse, air­ gun, Maxipulse and sparker. He added:-"The technique of using large explosive charges as energy source has been little used in recent

years. It was probably used in Australian waters for the last time in 1969, as it is not likely to

be used again."

4.7.38 Yet Exhibit 446 is a direction given fairly recently

(according to Mr White on 2 July 1969 (T3163) by the Delegate of the Designated Authority of the Northern Territory under S.lOl(l) of the Petroleum (Submerged Lands) Act 1967-1968 and at page 2 of Direction No. NT/p3D2 which deals with geological

and geophysical programmes, the use of explosives and their maximum weights - without prior approval of the Director of

Mines - are dealt with thus:-"(i) reflection shots, fifty pounds of ammonium nitrate base explosive (or equivalent) except in the case of experimental shot points, when

up to two per centum of the total shots made

during the survey may exceed fifty pounds of ammonium nitrate base explosive (or equivalent)

in weight but shall not exceed one hundred pounds (or equivalent). (ii) refraction shots, one thousand pounds of ammonium nitrate base explosive (or equivalent)."

715

(Then follows a strange direction that a reflection or refraction shot shall not be fired within one and a half nautical miles of any fishing boat or within five nautical miles of any pearling lugger or any vessel engaged in fishing for tuna - pleasure craft and steamships are not mentioned -

"unless otherwise approved by the Director of Mines and Water Resources"). At all events the question whether operators have already and voluntarily given up the use of explosives may not be thought clearly settled. In this regard reference

should also be made to Exhibit 68 (which is dealt with in detail later) which is dated as late as 22 October 1969. In

Part III - "Geophysical and Geological Regulations" - the use of explosives is dealt with in detail. (There is a similar

direction against the use of an "explosive charge in excess of the equivalent of 40 pounds of TNT" being detonated within a radius of one mile of any fishing boat ... "except with the

prior consent in writing of the relevant authority" (see comment at .Tl7044-5).)

Mr Ericson's evidence

4.7.39 Mr Ericson, Exploration Manager, Petroleum Division, Australian Gulf Oil, gave evidence on seismic surveys and showed the differences between reflection, refraction and velocity surveys (Tll62 et seq) and explained the operation

of the "basic tool" known as the reflection seismograph (Tll63). He stated that during 1965 and 1966 his company undertook two marine seismic programmes covering parts of the Capricorn Channel - Swain Reefs area and that a total of

2,700 line miles were covering an area of about

8,000 square miles resulting in the location of two drilling locations namely Capricorn lA and Aquarius No. l. These were subsequently unsuccessfully drilled to depths of 5,609 fe et and 8,695 feet in 1967 and 1968 respectively. They are situate over 100 miles NE of Gladstone at Latitude 22°42'

0 0 0

south longitude 152 16' east and 22 37' south 152 39' east

respectively. Neither well encountered gas or liquid hydro-

716

carbons and both encountered economic basement (Tll67). In all cases the company brought its "trash" ashore (of which there are considerable quantities both in seismic surveying operations and in drilling Tl4706) and did not allow any to be cast over­ board or left lying around on the sand cays in the Swain Reefs. He stated (Exhibit 478 p.4):-

et seq.

"Gulf has been following this procedure in the Gulf of Mexico since the early 1960's. These statements were elaborated in evidence Tl4706

The views of A.P.E.A.

4.7.40 The views of A.P.E.A. on the use of explosives were

given by Mr Jeffrey QC at Tl7046 et seq - •·a general prohibition against the use of TNT ... possibly coupled with a power in the

DA to give exemption in special circumstances" (Tl7046).

Mr Courtenay-Peto and the Persian Gulf

4.7.41 Mr Courtenay-Petn who was a professional diver for 14 years and had 5 years experience at Bahrain and neighbouring areas in the Persian Gulf before coming to Australia in 1959 (Tl60l8) gave accounts of his seismic work in the Gulf. He and other divers drilled the sea bed amongst growing coral (stag­

horn) and put the explosives in drilled holes about 2 feet in

depth, pushing the coral aside to drill. This was done in

depths up to 120 feet. The explosives were in cylinders about 8 to 9 inches in length and inches in diameter. He said

(Tl6019) :-"The seismic work did a small amount of damage. The result of explosions killed some fish and

damaged a little coral but after 2 or 3 years

this seemed to come back to its normal state." He also described the construction of grillages on the

sea bed being metal frameworks drilled and fixed into the sea bed which became the foundation on which the production well was built. He also said (Tl6023) that the

"waste or pollution from the drilling from

717

cleaning the casings as they were used in conjunction with the mud seemed to settle over a wide area, I would say approximately half a mile from the centre. Also the exhaust

fumes from the machinery could help to some extent as these are all pushed into the sea, as water is continually running through the exhaust systems of all machinery. Over a period of nine months to one year I noticed the coral seemed to lose its colour and it

just became a dark murky grey. When oil was

struck there was a fair amount of not only oil

but other waste which settled on the seabed, and in my opinion also contributes to the

destroying of the coral and any other sea life." He added (Tl6024):-"In the five years I was there we had to do

inspections of the wellheads periodically under water and there was never any regrowth of coral or any marine life. Unfortunately I am not

qualified to discuss the technical side of ocean life; but, as a man who has dived and

seen the beauty under water with my eyes, I honestly think that any sort of drilling which is an unnatural phenomenon destroys marine life and will upset the balance of nature." Mr Courtenay-Peto was of course a layman on marine

biological matters and in respect of grillages and other sea­ bed activities he was speaking of procedures which are probably now out-moded but his account of his own observations is entitl­

ed t·o respect.

Report on seismic surveys in Gippsland Lakes area 4.7.42 Reference should also be made to Exhibits 522 to 526

inclusive which were tendered by Mr Woodward QC following questions by the Commission regarding seismic surveys. Exhibit

718

522 is a report on the effects of a seismic survey on the

fisheries of the Gippsland Lakes by Mr T.B. Gorman of the Victorian Department of Fisheries and Wild Life issued in July 1965. The opening abstract states that the Gippsland Lakes area is an important region for both commercial and

recreational fishing and as a tourist resort. As a result of a seismic survey of the lakes in May 1962 the obsErved kill

of fish was estimated at 6844 of which 98% were small bream. The principal commercial species was said to be the yellow-eye mullet.

4.7.43 Although the "conclusions" paragraph of the report states simply that "it believed that the damage caused by

the seismic survey to the marine fauna of the lakes was slight, and there is no reason to believe that there will be any last­ ing ill effects on the fishery as a whole" there are earlier features of the report which must be mentioned. The explosive

used was said to be related to blasting gelatine "but has only 63% the latter's power". The collecting procedure was describ­

ed as follows: .. -"As soon as the shot was fired, the Department's launch patrolled across the area of upwelling caused by the explosion. Dip nets were to

collect as many floating fish as possible. Where it was possible to retrieve all the fish, a rough

estimate was made by inspection of t!1e percentage collected in proportion to the total observed kill. No equipment was available for sampling the bottom.

For a number of reasons the time available for collecting at each station was, as a rule, very limited. To avoid interference with the recording gear, all boat engines had to be stopped just before

and during each explosion. Without steerage way, the launch tended to drift across the floating cable, so that it was frequently necessary to anchor. Getting under way again occupied valuable

719

time. As the survey crew grew more familiar with their own routine, they were able to change stations in fairly rapid succession, and this often meant that collecting at one station had to be abandoned in order to allow sufficient time to steam to the next. Again, many fish were lost when they drifted

over and beyond the cable. To cross this expensive piece of equipment would have invited the risk of fouling it, possible to the extent of holding up the survey." The report states that of 175 charges exploded 137 or 78% were observed.

Details of fish mortalities recorded by the depart­ ment were based solely on fish which floated. Anchovies, the report adds, which are commercially fished "proved particularly sensitive and probably suffered more than any other species. However owing to their small size and very great numbers it was impossible to estimate the extent of their mortality ... at the moment of detonation the individ­ uals (in small schools) would disperse many gyrating crazily

n

"Garfish" (the report adds) "were hard to detect when stunned so it is possible particularly s.ince they appeared quite sensitive, that many more were killed than have been recorded."

Then fish living on the bottom and which have no swim bladders such as flounders, soles and flatheads probably

did not surface when killed or injured the report says -consequently losses amongst them were not counted or taken into consideration.

4.7.44 It is in the light of these extracts that the "con-

elusion" quoted above must be read and the opinions expressed therein judged.

720

Exhibits 523 to 525 4.7.45 Exhibit 523 is a reprint from the July 1952 issue of

"California Fish and Game" and is a lengthy report on experi­ ments carried out in 1951 designed to determine effects of underwater explosions on fish life. The summary and conclus­ ions (at p.363) states that "large charges of such violent

explosives as dynamite - say from 50 to 200 lbs - were known

to be very destructive of fish life. Charges even as small as ten, five, two and one-half or one and one-quarter pounds often killed fish, even when the explosive had been buried many feet in the bottom sediments ... Black powder explosions

proved to be relatively innocuous in a series of experiments ... The experiments strongly indicated that it would be safe to utilise even large charges of black powder (to at least 45 pounds) as a source of energy for submarine seismographic

surveys." Whether such a conclusion could be applied to con­ ditions in the GBRP is, however, doubtful.

4.7.46 Exhibit 524 is a short report on the effect of under-

water explosions on fish apparently made by an officer of the Victorian Department of Fisheries and Wild Life in 1966 as the result of some experiments in the Bass Strait. One statement is to the effect that "provided there were no big schools of

pelagic fish present in the area when explosives were dropped, there was no justification for concern over fish losses." The import of this statement is not very clear.

4.7.47

Another statement in the report reads:­ "Barracouta appeared to be extremely susceptible to the effects of explosions, and fish with air bladders also vJere most vulnerable."

Exhibit 525 is called "Non-explosive sound source for off-shore seismic surveys'' and states that a non-explosive sound source is being used in Australian seismic

exploration by Esso-BHP. It says that the higher the pitch

7?1

and the higher the intensity the more the damage and that black powder which produces a dull, low pitched "whoom" type of sound has almost no effect on marine life and then follows a description of "Aquapulse" which utilises a confined detona­

tion or discharge producing a very low-pitch sound impulse followed by little or no pressure lowering .

4.7.48 Exhibit 526 is a translation of a French report on

experiments carried out in Sete using (in 1966) a "new process of geophysical protecting " on plankton. The report is brief but is interesting because of the importance of plankton in the eco-systems in the GBRP. The comparative absence of mort­ ality amongst £ish and benthonic vertebrates is contrasted with the destructive effect on plankton using "a 50 g plastic c h a rge." No other details of the explosive charge are given.

Recommendations 4.7.49 The Commission is of opinion and recommends that the use of high explosives for seismic surveys within the Great Barrier Reef Province should be totally prohibited ami whilst

some modern methods for creating vibrations or sound waves

suitable for seismic investigations were said to be much less harmful to marine life , the Commission recommends that all seismic surveys in the GBRP should be the subject of govern­ mental regula tion and control. It is recommended that no

seismic surveying of any kind should be permitted in waters of the GBRP which have shallow depths or are proximate to coral lagoons, reefs, cays or islands.

Dredging, sands and sediments Damaging effects 4.7.50 It was generally accepted that the deposit of sands

and sedime nts and of earth deposited by dredg ing and other forms of excavation are among the most lethal of all pollutions to coral.

72 2

Construction of airfield on island caused destruction of coral in bay

4.7.51 The following evidence is illustrative of the scient-ific views expressed. It was given by Dr Johannes who is

Associate Professor of Zoology, University of Athens, Georgia, U.S .A.:-"The development of an oil industry along the Great Barrier Reef poses a variety of potential

ecological problems beyond that of oil pollution. The establishment of large man-made structures on or near the reef, such as drilling rigs, pipe­ lines, loading facilities, boat channels, etc.

brings a variety of ecological stresses with it. The most serious of these is associated with dredging and other forms of excavation. Not only does dredging destroy the reef outright in

the immediate area, but the deleterious effects can extend for miles as the result of sedimentation. Although corals can cleanse themselves of moderate amounts of sediments falling from above, most cannot live for long if heavily coated or

buried (e.g. Marshall and Orr, 1931). Coral planulae cannot settle and survive on an uncon­ solidated substrate. Fine sediments capable of resuspension are in fact inimical to suspension­

feeding bottom dwellers in general and bring about the destruction of a wide variety of reef fauna in addition to corals." (T4217) He added:-

"Van Eepoel and Grigg (1970) report that in large areas of Lindburg Bay, St Thomas, Virgin Islands, most corals and other sessile animals have been destroyed and conditions remain unsuitable for

their establishment due to sedimentation caused by bulldozing, construction, and the surfacing of land which drains into the Bay.

723

... Blasting and dredging of channels for passage of ships through the reel' is a widespread source of sediments which pollute the reef community. Brock et al (1966) give a detailed account of the

destruction of corals and reduction of fish and echinoderm populations at Johnston Island due to siltation brought about by dredging."(T4218) He also referred to a personal communication made to

him by Burnette-Herkes that the construction of an airfield in Castle Harbour, Bermuda between 1941 and 1943 destroyed the Bay's population of brain corals (T4218).

4.7.52 Some references were made to the navigation channel which was cut into the western approach of Heron Island a few years ago. The early evidence was summarised by Mr Hampson QC at T2140. Professor Woodhead at T53ll said that there had

been virtually no recolonisation in the channel itself and he attributed this to sediment and the movement of boats. Mr Cropp at Tll841 said that there had been no regeneration of coral life in the channel.

4.7.53 Other scientists who spoke of the deleterious effects of sedimentation generally said to be of an enduring or long lasting nature were Professor Woodhead (T5356) Dr Halstead (T7414) and Professor Chuang (Tl5555 cf Tl5616).

Deposit of sediments on sea-bed damaging 4.7.54 There can be no doubt that there are activities

associated with petroleum drilling which cause the deposit 'Jf sediments and sands on the sea bed and that these are deleter­ ious to the eco-systems. It must be borne in mind also that if oil drilling

is permitted in the GBRP and is commercially successful there will be a multiplicity of wells and associated activities. Accordingly it is recommended that such activities be strictly supervised and kept to a minimum.

724

General precautions against chronic or random spills Kerb·s, gutters and drains on platforms 4.7.55 These are required in U.S.A. off-shore drilling- OCS Order 8, Exhibit 401 p.8-7. The collection treatment and dis­ posal of rainwater and spray which becomes contaminated by

running over the platform is necessary. Mr Taylor-Rogers pointed out (Tl4562) that there is no express provision similar to OCS Order 8 in our draft regulations (Exhibit 68). A similar subject was spoken to by Mr Lowd (T3404). Such a precaution is

clearly desirable in the GBRP.

Chemicals, drilling mud, sand, cuttings, garbage, oilfield brines and oily waters 4.7.56 U.S.A. Pacific OCS Order 7 provides:-"Liquid waste materials containing substances

which may be harmful to aquatic life or wild­ life, or injurious in any manner to life or

property, shall be treated to avoid disposal of harmful substances into the ocean waters." Mr Taylor-Rogers (Tl4526) pointed out that there was

no provision directly corresponding with this in the draft Regulations Exhibit 68 (Tl4526).

Recommendation 4.7.57 But in Part 9 paragraph 4.9.31 (infra) the Commission has firmly recommended that it should be provided that subject. to three specified exceptions no substances of any kind whether

solids or liquids should at any time be disposed of into the waters of the GBR. If this recommendation is accepted and adopted there will be no need for any provision similar to OCS Order 7 or

clause 7 of Division l of Part II of Exhibit 68.

4.7.58 It is the Commission's intention that this prohibition as its terms would indicate should extend and apply to chemicals, drilling mud, sand and cuttings, garbage, sewage, oilfield brines

725

and oily waters. A number of witnesses including Dr StAmant (T3990), Mr Lowd (1'3410) and Mr Taylor-Rogers (Tl4646) spoke in varying ways on one or more of these subject matters of our recommended prohibition and it would be correct to say that no witness advocated a prohibition as far reaching as our recommendation. Mr Taylor-Rogers referred to the U.S.A. requirement in OCS Order 7 relating to drilling mud containing oil or toxic substances. The same order deals with drill cuttings, sand and other solids containing oil whilst OCS Order 8 requires the installation of sewage disposal systems. Dr St Amant referred also to an earlier practice of throwing

large paper bags overboard which had contained barytes.

4.7.59 The Commission's view is that the various features of the GBRP differ so markedly from those of the Gulf and west coast waters that nothing less than a total ban on the

disposal of all substances liquid and solid into the waters of the GBRP is acceptable. The three exceptions specified in Part 9 (infra) are subject to DA's approval.

726

PART 8 - GOVERNMENTAL SUPERVISION

The need for such supervision 4.8.1 It was universally accepted by American, Canadian and Australian expert witnesses that governmental supervision of all activities relating to petroleum drilling, production and transportation within the GBRP would be necessary.

"But properly derived and implemented legislation (which would include regula­ tions) can be a major positive influence and stand as real and supportive assist­ ance to prudent operations. This requires

however, that provisions for implementation of the Statutes be adequately detailed, technologically specific, operationally achievable, readily enforceable and quickly

flexible for adjustment to changed con­ ditions." (Mr Lowd at T3380)

Mr Gusey' s view

4.8.2 Mr Gusey of the Shell Oil Coy N.Y. thought that

industry was "decidedly showing interest in responding on a positive note to some of the environmental issues of today" and this is undoubtedly correct. He went on to say:-" ... if the tasks that are confronting

us today from the environmental point of view are going to be resolved they

will in fact have to be resolved within the companies with direction and guidance and assistance from the State and Federal organisations which we would expect to draw upon." (T5214)

Dr StAmant's view 4. 8. 3 Dr St Amant said:-

727

and added:

and

" ... One of the problems which becomes immediately

apparent when govei•nments attempt multiple-use programmes in a coastal area is that various agencies of the government are designated to regulate and develop the various uses and that these agencies have varying degrees of regulatory power. It is not too unusual to

discover one agency of the government granting permits and even sponsoring one type of use which is extremely detrimental to the ...

estuarine environment while another agency of the same government may be working 'tooth and nail' to prohibit this use ... or at

least to prevent as much estuarine damage as possible ... effective policy and action concerning estuaries must include an evaluation of the involvement of the various agencies which might be concerned ... and the establish­ ment of the authority of each." (T3994)

"no programme will get off the ground unless it is operating under effective legislation which ... should be specific, clear and contain

adequate powers for enforcement and the assess­ ment of penalties." (T3996) "governments ... must set some priorities, they must make up their minds in advance ... how

much protection they want to give each thing."

(T3997)

Finally he said:-

728

"I would not leave the impression that you can set up inflexible regulations which will operate permanently. If you go into a serious petrol­ eum operation, you must have flexibility and

this means regulations for certain areas may have to be adjusted from time to time." (T4104)

Mr Coulter's view

4.8.4 Mr Coulter (Deputy Solicitor, Department of the Interior, DC) said:-

"We also in many instances have public hearings

on the regulations and the oil companies avail themselves of this opportunity and they do present their comments in writing and orally to us." (T6965)

Mr Biglane (of the U.S.A. Environmental Protection

Agency) supported Mr Coulter's remarks:-"There is almost a built-in conflict between the agency responsible for ensuring that the nation has adequate energy reserves with the one respon­

sible for environmental protection." (T6684)

Government inspectors and S.l25 4.8.6 S.l25 of the Petroleum (Submerged Lands) Act of 1967 provides that the Designated Authority (who is the Minister -Section 16) may by instrument in writing appoint a person to be an inspector and S.l26 sets forth the inspector's powers which are to enter, inspect and test within the "adjacent

area" which is described in the Second Schedule to the Act and consists of coastal waters of the State of Queensland as shown in Exhibit 8. (It is considerably larger than the Continental Shelf or the GBRP and is irregular in outline).

4.8.7 It is not altogether clear from the wording of S.l25

whether the Designated Authority can appoint more than one inspector concurrently.

Delegations 4.8.8. By sub-section (5) of S.l6 (and S.l5 of the Australian

Act) the Designated Authority may delegate all or any of his powers and functions under the Act (except this power of delegation).

729

As appears from Exhibit 202 and at T2377-8 (Mr

Basire) extensive delegations have been made including to an inspector. As regards the important power to give directions under S.lOl(l) to which reference has been made earlier (Part 2- "Petroleum (Submerged Lands) Act") and in Part 9 infra), the instrument of delegation provides:-

"A person to whom power under Section 101 of the

Act has been delegated shall (a) exercise the power only in case of urgency in which it is

not reasonably practicable for the Designated Authority by whom the power has been delegated to exercise the power and (b) forthwith report to the Designated Authority by whom the power has been delegated each exercise of the power."

Section 101 4.8.9 Exhibit 68 at pp.l3-l5 also contains material about

powers of an inspector. Paragraph 6 of Part II Division I appearing on pages 14 and 15 of Exhibit 68 empowers an inspector to give directions in writing in terms which are perhaps not fully consistent with the delegation instrument as forth in Exhibit 202 but other amendments to S.lOl and to the power to give directions have been suggested earlier in Part 2 supra and in Part 9 infra. For example, there is no power to give

directions to drilling companies or their key personnel but only to permittees, licensees, etc., although a person nomin­ ated by a titleholder as an "operator" shares with the title­ holder the obligation to observe the requirements of Exhibit

68 (pp.8 and 13 thereof). Nor is there statutory power to

give oral directions.

il.8.10 Probably the inspector's powers to give a direction should only be exercisable in an emergency as Exhibit 68 as presently drafted seems to indicate. It will be remembered that in U.S.A. changes were made after the Santa Barbara blow­ out where it was found that a local officer had, in good faith,

730

waived performance of certain casing requirements and this was possibly a major contribution to the blowout.

Reporting oil spills 4.8.11 A requirement of the legislative scheme as Mr Biglane pointed out (T6571) is the mandatory and prompt reporting of all spills. Indeed this is fundamental to contingency planning

(q. v.).

The American attitude 4.8.12 In U.S.A. Pacific OCS Order 7 p.7-3 Exhibit 401 is

stringent on this matter whilst Exhibit 68 also sets forth notification requirements regarding escape or ignition of petroleum (p.l6) and also from a pipeline (p.l31). These latter provisions however attract review and amendment as there

appears to be some unhelpful overlapping and in proper conting­ ency planning it would be insufficient to require notification to an inspector at least in cases apparently exceeding some specified number of barrels of oil. Words such as "substantial"

should be avoided as Mr Taylor-Rogers indicated (Tl4640).

Reporting generally 4.8.13 If drilling is permitted in the GBRP the remoteness of any site should not be permitted to delay adequate inspection services (cf Mr Taylor-Rogers at Tl44l2-4) particularly during exploratory operations.

Exhibit 434 (Directions of the Victorian Designated Authority to Bass Strait licence holders) shows that only weekly reports of drilling depths, casing, cementing and testing are required. The importance of reporting depends to an extent on

the amount of direct supervision which the inspectors can give. References are made in Exhibit 68 to a daily drilling report (e.g. paragraph 1(6) on p.83 where the phrase "daily drilling report" is used and again at p.84 paragraph l(8))but nowhere

in Exhibit 68 is there an express requirement of a daily report.

731

Mr Stewart ( Senior Petrolewu Engineer, Queensland

Department of Mines) said that a full-time on-site inspector was under consideration for the Japex operat ions in Repulse Bay

(T449 6-7) and that daily reports would have been required al­ though not prescribed, It is considered that on-site inspectors and daily reporting of drilling progress are desirable "sa fety precaut­ ions" within t he meaning of Term o f Reference No. 4.

Whether regulations imposing safety precautions should be of a general or specific nature

4.8.14 This is an important issue and somewhat conflicting views thereon were express ed by witnesses.

The Commission's view

4.8.15 It is the view of the Commission that regulations

should be specific wherever possible but should nevertheless provide for flexibility to meet (a) the advance of technolog­ ical knowledge and (b) the requirements of unusual situations. This would undoubtedly represent the experj_enced American view as the latest OCS (Outer Continental Shelf) Orders (Exhibit 401) exemplify.

There is a primary need for carefully compiled part­ icularity with a controlled measure of fleocibility.

Vie ,v s of American and Australian witnesses 4.8.16 The general tendency of those who drafted Exhibit 68 seems to be to leave matters to the discretion of the rele­

vant authority but this approach should be altered.

4.8.17 Mr Coulter of the U.S.A. Department of the Interior

said of the Santa Barbara blowout that it emphasised

!32

"that in the drafting of regulations particularly in relation to the outer continental shelf the use of specific language is almost a comp lete necessity." (T6975)

4.8.18 On the other hand the Australian expert Mr Taylor-Rogers referred to the use of field rules to supplement general regulations (Tl4369) and speaking of Exhibit 68 said:-

"All the way through this code the intention has been rather to lay down principles that should be applied than to be specific ... " (Tl4466)

4.8.19 An industry view was presented by Mr Thomas (General Manager of Beach Petroleum NL). He described the aim of Ex­ hibit 68 as being

"to set down principles rather than details which will allow servants of the Crown to properly use their authority to approve or disapprove of any given programme" (T2587A) and he considered that regulations should not lay down methods or equipment in too great detail (T2789).

Professor Thompson's view 4.8.20 To an extent a Canadian lawyer who has an expert know­ ledge of Canadian and U.S.A. petroleum regulations expressed a somewhat similar view but for different reasons. He was

Professor Thompson, Professor of Law, University of British Columbia. At T8961 he said:-wr think the question for Australia. and Canada

at the moment is not one of choice between

detailed operating regulations and a discret­ ionary system, but rather that a discretionary system is dictated by necessity. Until wells are drilled and knowledge is gained about sub­

surface conditions and until experience dictates the kind of hazards that will be encountered in drilling, completing and producing in new untried regions, it will not be possible for Canada and

Australia to write the kind of detailed require­ ments that the OCS Orders provide ... This does

733

not mean that Australia and Canada cannot learn from the U.S. or that a set of operating

regula.tions cannot now be written dealing in detail with many aspects of off-shore procedures and requirements, such as for example platform require­ ments, but it does mean that at the present stage

Australia and Canada need to rely a great deal on discretionary authority applied on a programme­ by-programme basis as new regions are being drilled for the first time."

Mr Coulter's view on "field orders"

4.8.21 Mr Coulter explained the nature and purpose of "field orders" as follows (T6964):-"A field order is to supplement or amend an OCS Order because of certain conditions existing

in a given area. The effect of the field order

is to add a degree of flexibility to the OCS

Order so that we can meet a given situation because it is recognised that you cannot blanket the whole coast of the U.S. or the Pacific coast

with an OCS Order and make it applicable every­ where, because of differing conditions." Later he said (T6975):-"If there were one lesson Santa Barbara taught to

us it was that we are not in a position to enunc­

iate regulations in 1953 and fail to look at them until 1969 because of advances in technology, greater knowledge of the geophysical and geo­ logical structures that are involved, and many other problems indicate a constant need for looking at our regulations."

Regulations should be constructed especially for GBRP condit­ ions 4.8.22 The Commission's view is .that conditions in the GBRP

734

differ so markedly from most of the remainder of the Australian Continental Shelf, for example the Bass Strait, that regulations compiled especially for such conditions are desirable.

Summary 4.8.23 Such important issues as whether ship-shape drilling vessels should be permitted, the circumstances in which semi­ submersibles should be allowed, some aspects of the use of

pipelines and their burial, transportation by sea from product­ ion site to shore depot, seismic surveys, the use of explosives, dredging, the disposal of wastes, oiled water and drilling mud, setting depths of casings, proximity of wells, diversion wells,

some aspects of drilling procedures, of navigation lights, navigational aids, the effects of currents and tides, the emergency action in cyclonic weather, design of platforms to withstand 100 year storms and the permitted proximity of wells

to coastlines, beaches, islands, sand cays, marine national parks and many coral reefs are amongst the subjects which attract careful and special treatment when regulations relating to drilling in the GBRP - should it be allowed - are being

drafted. Most of these matters are considered in Part 9. It

would be insufficient to apply regulations which have been compiled for general Australian use to the GBRP - whilst to give inspectors a discretion to make particular judgment on all such matters would be erroneous also.

Mr Coulter's view should be applied here

4.8.24 In general the views of Mr Coulter (T6975) quoted in

4.8.21 supra both on the use of specific language and field rules appear sound and mutatis mutandis should be applied to the GBRP.

735

PART 9 - EXHIBIT 68 AND REGULATIONS TO BE MADE

UNDER THE MIRROR LEGISLATION

SECTION 1 - PRELIMINARY

Exhibit 68 requires amendments 4.9.1 As stated in Part 1 supra, if exploration or drilling

for petroleum in any locality of the Great Barrier Reef Prov­ ince is permitted the safety precautions and procedures set forth in Exhibit 68 (being instructions to parliamentary counsel for drafting regulations under the mirror legislation) are considered to be inadequate for that area. Certain desir­ able changes in Exhibit 68 were indicated during the examina­ tion and cross-examination of Mr Taylor-Rogers, Chief Petroleum Technologist, Bureau of Mineral Resources, Department of Nation­ al Development, who gave evidence at some length with respect to that exhibit whilst in the examination of other overseas and Australian witnesses, for example Messrs Lewd, Thomas, White, Stewart, Coulter, Biglane and Professor Thompson, other

inadequacies were brought to light and the Commission considers that substantial revision of Exhibit 68 is necessary, although portions of it are quite sound.

Section 157 of the Australian Act and section 159 of the Queensland Act 4.9.2 The origin and history of Exhibit 68 were given by

Mr Taylor-Rogers at Tl4316-21 and by Mr Livermore at T419.

Various overseas acts, regulations and orders including the replaced U.S.A. OCS Order 10 were taken into consideration when Exhibit 68 was being drafted by Australian and State authorit­ ies. The final draft of Exhibit 68 was sent to the Parliament­ ary Counsel on 22 October 1969, for the drafting of regulations intended to be made under the provisions of S.l57 of the Australian Act which correspond with those of S.l59 of the

736

Queensland Act.

4.9.3 The Commissioners have not put their recommended amend-ments to Exhibit 68 in the precise language of instructions to parliamentary counsel in all cases but in many cases this has been done.

The Commission's suggested amendments designed for GBRP 4.9.4 The suggested amendments have been made with the special conditions and characteristics of the Great Barrier Reef area in mind and although some of them may be considered

applicable to off-shore drilling in other parts of the Austral­ ian Continental Shelf (and to on-shore operations a1so) the Commission is of the view that regulations should be made which apply specifically to the GBRP, and which are not necessarily applicable to the remainder of the Australian Continental Shelf.

This of course will require agreement between the Australian Government and the States (Exhibit 56 cl 7).

4.9.5 We have considered all the provisions of Exhibft 68 and where no comment appears this means that the provis-ion is considered adequate or is outside the issues raised by the TR.

4.9.6 We have also on occasion referred to allied matters not mentioned in 68.

Latest American OCS orders relating to the Pacific Region are very useful 4.9.7 In as much as our recommendations and suggestions have in mind the special requirements of the Great Barrier

Reef, it is our opinion that a useful aid for re-drafting some of the instructions to the parliamentary counsel are the latest available (1971) OCS (outer Continental Shelf) orders of the United States Department of the Interior, particularly those pertaining to the Pacific Region (Exhibit 401), and the Code

of Federal Regulations (CFR) of which Exhibit 313 is illustra­ ive.

737

4.9.8 The nature and the legal setting of OCS orders were

explained by Mr Coulter, Deputy Solicitor, Department of the Interior, Washington DC at T6883 et seq where some important decisions of the Supreme Court of the U.S.A. were also referred to by him. In parti.cular the Government's power to order a "clean-up" when pollution occurs and implied covenants oil leases to correct pollution are two of the subjects judicially dealt with in the cases to which Mr Coulter referred us.

The Agreement of 16 October 1967 and the Victorian conditions imposed on Esso. - BHP 4.9.9. The Agreement made the 16 October 1967 between the Australian Government and the States (Exhibit 56) which pre­ ceded the Mirror Legislation of 1967 and which has been dis­ cussed in Part 2 (supra) conta.ins provisions relating to the regulations to be made under that .legislation such as clause 7 which was discussed at some length at Tl4615 et seq. In

this regard it is of interest to note that Mr Taylor-Rogers at Tl4612 told the Commission that so far as he knew no Australian Government authority was given knowledge of the condi­

tions imposed by the Victorian Department of Mines when grant­ ing approval to Esso-BHP to drill in Bass Strait areas and that this applied to approvals granted both before and after the passing of the Mirror Legislation of 1967 (ibid). This seems to be a departure from the provisions of clause 7. Clause 18 of the Agreement relating to consultation between Australian Government and State Ministers may also be mentioned. This also is referred to in Part 2 where S.lOl, which may be said to derive from clause 18, is discussed.

Importance of (a) proper casing programme (b) BOP equipment and (c) mud programme 4.9.10 In his final address Mr Bennett QC (for the Queensland Minister of Mines) aptly said (Tl5396) that there were three

things which seemed to contribute mostly to safety in actual drilling namely (l) proper casing programmes, (2) blowout

738

preventive equipment and (3) the mud programme. He added:-"In actual production the matters which call for attention seem to be those relating to the use of equipment down the hole where they run a line

to scoop it out and that sort of thing, and that

involves the proper procedures in regard to the Christmas tree or set of valves in the top of the

well, the lubricator as a unit through which the various lines are run. Closely associated with these matters of equipment arise matters such as supervision, discipline generally and training

and qualification of key personnel." (Tl5396) But as we have stressed in our answer to TRl and in

Section 6 supra - "Recent Blowouts and Their Causes" - experi­ ence has shown that the greatest contributing factor to blow­ outs and some forms of chronic pollution has been human frailty whether it be inexperience or negligence.

Precautions not dealt with in Exhibit 68 4.9 .ll Recommendations and suggestions have been made in this and other Parts which relate to safety precautions not specifi­ cally dealt with in Exhibit 68. Thus corrective action (OCS order 7 cl. 3A p.7-4) is not in its terms present in Exhibit 68

although clause 3 (vi) (e) at p.l6 of Exhibit 68 implies that corrective action will be taken, whilst OCS Order 8.2 which is entitled "Safety and Pollution Control Equipment and Procedures" may be compared with portions of Part VI of Exhibit 68. The

OCS Order requires a company contingency plan and as earlier

indicated under "Contingency Planning" (Part 3) this is essent­ ial.

4.9.12 A good deal of discussion relating to the provisions of OCS Order 8 particularly at pages 8-3 to 8-6 took place during Mr Taylor-Rogers' evidence at Tl4550 et seq and the comment was correctly made by Mr Woodward at Tl4555 that they

are much more specific than the provisions of Exhibit 68. The

739

question whether the regulations should be specific where practicable rather than of a .general nature is discussed in Part 8 (supra). The Commission favours the former.

Disposal of wastes 4.9.13 On the important subject of the disposal of wastes and the avoidance of pollution in the GBRP, the Commission is firmly of the view that with only three exceptions, (and they are subject to the approval of the. DA), no substances of any kind whether solids or liquids should be permitted to be dis­ posed of into the waters of the GBRP (infra when dealing with

clause 7 of Division 1 of Part II of Exhibit 68).

4.9.14 At Tl4656 Mr Taylor-Rogers expressed the view that he would need to give further consideration to an OCS Order 8 requirement, namely the daily inspection or monitoring of unattended production platforms whilst a little later he ed out that certain references to American pamphlets and pub­

lications would require alteration when the provisions of the Order were being into an amended Exhibit 68.

ever, the Commission considers that although as earlier stated the discharge of all substances into GBRP waters should, with three exceptions, be prohibited, all unattended platforms should, weather permitting, be inspected daily.

On other occasions, Mr Taylor-Rogers suggested

"minor" additions and alterations to the Order, for example at T14657 where he suggested that in (e) on p.B-9 a diagram of the firefighting system showing the location of all equip­ ment should also be posted at the nearest shore base as well

as in a prominent place on the structure as required by the Order. A similar suggestion was made in respect of the gas detection system (8-10 at Tl4658).

Pipelines 4.9.15 The subject of pipelines is dealt with at length in

Part 11 of the answer to TRl and also later in this Part

740

where specific amendments and additions to Part VIII of Exhibit 68 are suggested.

Shear rams 4.9.16 Recommendations regarding shear rams and surface controlled sub-surface safety valves also appear later in this Part.

Casing programme 4.9.17 Casing programmes are the subject of important recommendations which, whilst based on OCS Order 2 contain appreciable differences therefrom.

Visual and audio warning devices 4.9.18 Clause 2 of Division 2 of Part V of Exhibit 68

provides that the drilling fluid tanks shall be equipped with fluid level indicators. The Commission is firmly of the opinion (based on the history of major blowouts and on the views of experts such as Mr Thomas - of Tl4491) that the

indicator should include both a visual and audio warning device. In Exhibit 69 no reference is made to either whilst in the 1971 OCS Order No. 2 (the modern successor to the 1969

Order No. 10) the requirement is for a visual "or" an audio warning device.

4.9.19 As earlier indicated, the Commission's recommendat-ions contained in this Part relating to Exhibit 68 are specific wherever deemed apposite.

741

4.9.20

SECTION 2 - EXHIBIT 68 (paragraphs 4.9.20 to 4.9.136 inclusive)

We now turn to a detailed examination of the

important provisions of Exhibit 68. We will deal successively with such of its provisions

as in our opinion attract comment or recommendations and will use its nomenclature namely, Parts, Divisions and clauses - for example "Part II - Division 2 - Safety (p.l9) - clause 1 (1)

- Responsibili'ty of Supervisors" (paragraph 4. 9. 34). The references to pages are to the pages as appear­ ing in Exhibit 68.

4.9.21 A summary of the recommendations and suggestions relating to Exhibit 68 as contained in paragraphs 4.9.22 to 4.9.136 appears in part 10 paragraphs 4.10.68 to 4.10.140 infra.

742

EXHIBIT 68 - PART I - PRELIMINARY (p.l)

Clause 2 - Interpretation - "Relevant Authority" 4.9.22 Consistent with our earlier expressed recommendation that these regulations should be designed exclusively for the GBRP this should be defined so as to mean the designated

authority for the State of Queensland or his delegate under section 16 (T14324). The definition attracts amendment accordingly and should be quite short.

Clause 3 - Arrangement (p.2) 4.9.23 This paragraph has some obvious omissions, e.g. pagination is lacking and Division 4 of Part IV is not mentioned.

4.9 . 24

Clause 5 - Definitions (pp3 - 12)

"Drill Stern Test"

It is not considered that a drill stern is a "temporary comple­ tion." "Good Oilfield Practice" Comments on this phrase are contained in Part 2 supra.

"Operator" (p.8) With this definition may be compared the definition of "operator" in and for S.98 of the Petroleum (Submerged Lands) Act and also the U. S.A. CFR 250.2 definition namely

(Tl4535 and Exhibit 309):-"The individual, partnership, firm or corporation having control or management of operations on the leased land or a portion thereof, The operator may be a lessee, designated agent of the lessee or

holder of rights unde r an approved operating agreement." The U.S.A. OCS Orders are all headed:- "Notice to lessees and operators" (T14535 per Mr Woodward)

743

In paragraphs 4.2.26 et seq (supra) the dissenting views of the Chairman and the views of the majority relating to aspects of the definition of "operator" and to associated matters related to joint and several responsibility for

compliance with statutory and regulatory provisions and also to aspects of S.97 are set forth. The Commission's unanimous views on the desirability of amending S.lOl by widening its ambit are also given above in paragraphs 4.2.21 et seq.

We wish to add that we consider that drilling con­

tractors under whatever name should be licensed. Mr Biglane at T6772 described this suggestion as an "interesting concept". "Pipeline" (p.8) "Plant" (p.9) ( which includes "pipelines")

The definition of "pipeline" requires clarification. Mr Taylor-Rogers analysed the difficulties at pages Tl4329 et

seq where Mr Woodward was attempting to clarify the position in regard to Part II clauses 9 to 14 of Division I. At Tl4331

he said that "there are other pipelines which run across the sea which are not connected with petroleum operations". His understanding was that the intention in clause 9 was.to deal only with non-petroleum pipelines and the object was to remind petroleum operators that they must comply with any state law affecting the plant which was being set up off-shore.(Tl4332 and Tl4333) Perhaps some confusion has arisen from the con­ cept of common carrier as it is used in American regulations. So far as the GBRP is concerned the definition of "pipeline" should include pipelines used within the GBRP for the transport­ ation of petroleum or other substances in connection with drill­ ing or production operations. Clause 9 will require minor amendments.

4.9.25

PART II - DIVISION I - GENERAL (p.l3)

Clause 1 -Responsibility of title holder and operator (p.l3) The importance of this regulation has been stressed in Part 2 and in the notes on the definition of "operator"

(supra). 744

Subject to the Chairman's dissenting views on the necessity f'or clarif'ying the definition of "operator" (see paragraph 4.2.26 supra) the Commission considers that the principle of joint and several responsibility as imposed by this clause is sound.

But it is urged that a consistent plan for assigning responsibility for compliance with the regulations should be used throughout the regulations. The provisions of this clause 1 do not appear to have been kept in mind when the later clauses

in Parts 1 to X were being drafted. It would probably assist if the words "except where otherwise provided" were inserted immediately after the word "shall" in the phrase "shall be jointly and severally responsible."

Sections 97, 98, 99 and 102 of the 1967 Act

4.9.26 It is for consideration whether this clause 1 should not include a general responsibility in accordance with sub­ section (1) of S.97 "proper and workmanlike manner and in accordance with good oil field practice." The better alternative might be to insert the words "the provisions of the Petroleum

(Submerged Lands) Act of 1967 and of these" before the word "Regulations" wherever appearing. Although the phrase "good oilfield practi.ce" - discussed in Part 2 above - is defined in definition clause 5 (the phrase "all those things" appearing in the S.4 (State) and S.5 (Commonwealth) definition being replaced by the word "practices") it only appears once through­

out Exhibit 68 namely at p.82 in clause 2 of Division 3 of Part

v.

It is to be borne in mind that S.97 (also S.98 in

which "operator" for the purpose of that section means permit­ tee, licensee, etc.) is by S.99 only to have effect subject to:­ (a) any other provision of the Act

(b) the regulations (c) a direction under S.lOl (d) any other law.

745

4.9.27 Another aspect is that by sub-section (6) of S.97

(and of S.l02 (3)) it is a defence if a person charged with

failing to comply with S.97 or a defendant in an action arising out of a failure by the defendant to comply with a provision of the section, proves that he took all reasonable steps to comply with the provision whereas by Part X of Exhibit 68

(p .153 - Penalties) the penalty is the same, ( $2, 000 - a quite

inadequate maximum) and the offence is a continuing one, but there is no such defence expressly provided. Whether such a d.efence should be permitted at all is one of the matters upon which a difference of view exists and this has been set forth in Part 2 supra.

Liability to third parties 4.9.28 An incidental matter which however is outside the jurisdiction of the Commission is the liability of the licen­ see or permittee to third parties for damages caused by the negligent or wrongful acts of the operator whether an independ­ ent drilling contractor or not in a case where licensee and operator are made jointly and severally liable to comply with the regulations or with the provisions of S.97. Thes-e and allied questions have been helpfully analysed by Mr C.E.K. Hampson QC one of the counsel assisting the Commission in a paper he compiled at the request of the Commission and which became Exhibit 247.

4.9.29

746

Clause 6 - Hazard not otherwise specified (p.l4) This reads:-"Where an inspector finds any plant in a dangerous condition, or any practice or method of working in connection with operations carried out under a title (sic) which is dangerous, as determined in accordance with these Regulations and/or contrary to the accepted safety and health practices, he may give notice in writing of the problem and the need to repair or replace such plant or to remedy such

practice or method of working, the permittee or licensee shall forthwith comply with such notice." Mr Coulter, Deputy Solicitor, Department of the Interior, Washington D.C. spoke at length on the American Outer Continental Shelf (OCS) Orders and of the Code of Federal Reg­ ulations (CFR). At T6909-ll he stated certain principles and

gave examples of a post-Santa Barbara origin which illustrate the modern American approach and are relevant to a commentary on Exhibit 68. He said:-

"A number of the duties of the supervisor are

more clearly set forth in the revised regulations. In certain limited situations pertaining to con­ servation of resources and protection of human health, safety, or the environment, he may permit

departures from the OCS Orders after approval by the Chief, Conservation Division (30 CFR $250.12 (b)). In addition, he may authorise the emergency suspension of 'any operation including production,

which m his judgement threatens immediate, serious, or irreparable harm or damage to life, including aquatic life, to property, to the leased deposits, to other valuable mineral deposits or to the

environment. Such emergency suspension shall con­ tinue until in his judgment the threat or danger has terminated.' (30 CFR $250.12(c) Exhibit 309). (Certain amendments emphasised). He may also sus­

pend operations and production in the interest of conservation and for other conditions, including failure to comply with any law, regulations, order or lease term (30 CFR $250.12(d))." (T6909 -11) The wording of clause 6 quoted above is an insuffici­ ent remedy to meet dangerous conditions and dangerous practices and should be appropriately amended so as to show to whom the notice may be given and so as to widen the class of persons

who must comply with the notice. The Designated Authority or his delegate (an inspector)

747

should be empowered to give a verbal direction, (possibly to be confirmed in writing later) to the permittee or licensee, and/or to the drilling contractor or operator and/or to the operating personnel ordering the immediate suspension of any operation and the regulation should make it compulsory for the person or persons to whom such a direction is given to comply with it immediately. It should be made competent for an

inspector to give such a direction in cases where he finds any operation, including production, whi c h in his judgment threat­ ens serious or irreparable harm or damage to life, including aquatic life, to property, the leased deposits, to other valuable mineral deposits, or to the environment.

He should also be empowered to order suspension in

less urgent circumstances by direction in writing (given to the licensee or permittee and/or to the operator or drilling contractor) such as where he finds a failure to comply with any law or regulation or lease term or where suspension is in the interests of conservation. Suspension should continue in force until in the opinion of the Designated Authority or his delegate the threat or danger has terminated or the breach of regulations etc. remedied.

Our recommendations contained in Part 2 supra relat­ ing to sections 101, 97 and 98 if adopted will assist in the

redrafting of this clause.

Clause 7 - Waste or contamination (p.l5) 4.9.30 As we have elsewhere stressed, the Commission is of opinion that regulations should be made which apply ly to the GBRP and which are not intended to extend to other parts of the Australian Continental Shelf albeit they may con­ tain much in common with regulations intended to have a wider application. This is because the GBRP has special geograph­ ical, hydrological and environmental conditions not elsewhere contained. For example, we consider that one of the most impor­ tant provisions which should apply to the GBRP (but which is not

748

necessarily appropriate elsewhere) is that there should be a total and absolute ban (with certain named exceptions) on disposing into the waters of the GBRP all substances whatsoever

whether solids or liquids. If this recommendation be adopted there will consequently be no necessity for regulating the manner of discharge or the maximum permissible degree of oil contained in discharged wastes, because included in the total

ban will be all bleed waters, brine, waste oil, oily sludge, oil water emulsion, crude oil, sewage or oil bearing mixtures. Included in the ban as it applies to solids would be, for example, containers or boxes whether wooden, cardboard or plastic.

Accordingly, clause 7 should begin with an appropriate­ ly worded prohibition, but as a measure of pollution or contam­ ination will in all probability from time to time occur and for other reasons clause 7 in somewhat modified form should be

retained. In suggesting such modified form we have adopted part of OCS 7, namely l.C (2) which is set forth in Exhibit 401,

p.7-3. A portion of clause 7 as appearing in Exhibit 68 p.l5 has also been retained.

Suggested new clause 7 4.9.31 l. No pollution of the GBRP of any type or degree

shall at any time be caused or permitted. Subject to the three following exceptions (to be made only with the permission of the DA) no substances of any kind whether solids or liquids shall at any time be disposed of into

the waters of the GBRP. The exceptions are:-(a) detritus deriving from the erection of a fixed platform

(b) detritus deriving from the drilling of the hole for the first or structural casing although the structural casing should be installed by driving wherever practicable (c) the hydraulic fluid used in actuating the

749

elements of an ocean bottom blowout prevention assembly, in which case however the hydraulic fluid must invariably be water soluble and non­ toxic. 2. The operator's personnel shall be thoroughly instructed in the techniques of equipment maintenance and oper­ ation for the prevention of pollution. Non-operator personnel shall be informed in writing prior to executing contracts, of the operator's obligations to prevent pollution.

3. Drilling and production facilities, whether manned or unattended, including those with remote controls and monitoring systems, shall be inspected daily to determine if pollution is occurring. Such maintenance and repairs as are necessary to prevent pollution of ocean waters shall be immed­ iately undertaken and performed. The DA may at any time require such tests to be made and give such directions as he considers necessary to prevent pollution.

750

4. (i) Every precaution shall be taken to

minimise the escape of gas into the atmosphere. (ii) Waste gas from vents shall be disposed of safely. (iii) Without excluding any other method of

detection the presence of a sheen shall be deemed evidence of pollution. (iv) Where oil or oily mixture escapes into the sea it shall be contained immediately

and the spilled oil shall be removed physically. Chemical dispersants of a kind approved by the DA may be used only after specific approval of such use by that authority. (v) Equipm!:!nt

Standby pollution control equipment shall be maintained at each operation or shall be immediately available to each operator

at an on-shore location. This equipment shall include, but need not be limited to, containment booms, skimming apparatus, and chemical dispersants and shall be available prior to the commencement of operations. This equipment shall be the most effective

available resulting from the current state of pollution control and removal research and development efforts. The equipment shall be regularly inspected and maintained in good

condition for use. The equipment and the location of land bases shall be approved by the DA. The operator shall notify the DA of the location at which such equipment is

located for operations conducted on each lease. All changes in location and equipment maintained at each location shall be approved by the DA.

NOTE: This is taken from OCS Order 7-3B Exhibit 401 p.7-4 and is included only as a guide. It seems to be directed to chronic spills. It would require redrafting when

contingency planning has been settled (Part 3 supra). The inclusion of a provision similar to 3A on p.7-4 ("Corrective Action") would then also have to be considered. (vi) Where there is an escape or ignition of

petroleum in the area an inspector shall be notified forthwith and effect given to his direction (if any) regarding control of the escape and prevention of pollution.

NOTE: This is in substitution for (v) at the

top of p.l6 of Exhibit 68.

(vii) (Here insert (vi) on p.l6 of Exhibit 68).

751

Clause 13 - (Compensation) (p.l8) 4. 9. 32 This being a matter of Workers' Compensation it is

not considered to fall within our Terms of Reference, but we would point out that if, as elsewhere suggested, these regula­ tions are to be framed t0 meet the special conditions of the GBRP and are not intended to apply to the whole of the Austral­

ian Continental Shelf, the reference to a Territory Ordinance should be deleted and the phrase "any relevant State Act" will require re-framing.

4.9.33 Clause 14 - Pollution of the sea (p.l8)

(i) The construction to be placed on the word "operators" has been referred to earlier (ii) The suggestion made to paragraph 13 relating to the Territory Ordinance also applies here (iii) For 1960-1965 substitute "1960-1972".

PART II - DIVISION 2 - SAFETY (p.l9)

Clause 1(1) - Responsibility of supervisors (p.l9) 4.9.34 The word "licensee" should be replaced by the phrase "title holder and operator". See notes to clause 1 of Division 1 of Part II also to the definition of "operator" supra. Simil­ arly the responsibilities relating to the approved manual of instructions referred to in sub-clauses (2) and (3) should extend to both title holder and operator.

The safety of crew members and of the totality of drilling operations depends very largely on the skill and train­ ing of the drilling personnel and on their ability to maintain a constant state of vigilance. It follows that no person should be allowed to be a crew member of any rank unless he has been

thoroughly trained and is in all respects competent for his work. This subject was discussed during the hearing and both counsel for the Queensland Minister for Mines, Mr Bennett QC and Counsel for A.P.E.A., Mr Jeffrey QC made submissions there­

on during their final addresses. The subject is not free from some difficulty - for example, the Chairman who is in a minority

752

on this point considers that certification of all key personnel should be given consideration although certificates are not elsewhere recognised or issued. At Tl5410-ll Mr Bennett after referring to the import­

ance of training and equipment said:-

"In our submission, perhaps the problem can be met by a good system of inquiry and licensing for each particular job; that is to say, if a

company proposes to drill, with precautions, in an area off-shore, particular toolpusher or toolpushers and senior drillers should be nomin­ ated; that the company should provide evidence

of their qualifications, and, if necessary; they should submit themselves to further test and interview to determine their knowledge and ability. This could include practical tests so that they would have to be approved toolpushers for that particular job •.. so that it would not be left

to chance and the standard would be ensured. We do suggest it is an important matter to ensure the standard and that this can only be done by a

system of approval in this way; otherwise one is left at the mercy of the companies. They may be

quite adequate but the fact remains that in all instances in what has occurred this adequacy has not been demonstrated; moreover on one notable occasion in Bass Strait the whereabouts of the toolpusher was not determined, as to whether he was present or not during the very difficult

situation when obviously the hydro-carbon bearing formation had been reached and the situation called for the presence, experience, ability and direct control of an experienced person. For anything else to happen should be impossible." At Tl6609 Mr Jeffrey made a number of submissions on the subject and the Commission agrees with and adopts as its

753

recommendation the following points made by him:-"However, it is desirable that the designated authoi'ity should have .adequate information concerning the qualifications, training and

experience, which each member of the crew has in fact received. It is reasonable that the right to commence work in drilling activities should be condi­ tional upon the production of evidence of those qualifications, training and experience, to the satisfaction of the designated authority." Accordingly, we recommend that a provision incorpor­ ating Mr Jeffrey's suggestion be inserted into clause 1.

4.9.35

Clause 7- Ventilation of confined areas (p.21) The hazards inherent in explosive and toxic gases should receive somewhat fuller consideration and should include detection and alarm provisions.

4.9.36 Accordingly, we recommend the substitution of the following for existing c. 7:-

754

"7. (1) All areas where operation could lead to

the emissio'n or accumulation of explosive or toxic gases shall be provided with suitable means of ventilation. (2) All drilling and workover installations

shall have approved degassing equipment installed in the mud system. (3) All drilling, workover and production platforms and vessels shall have hydro­

carbon and hydrogen sulphide gas detection devices installed in all enclosed areas containing gas handling or oil handling equipment, mud tanks, mud pumps, shale or other open parts of the mud system. (4) All gas detection systems shall be capable

of continuously monitoring for the presence of combustible gas in the area in which the detection devices are located. (5) The central control shall be capable of giving

an alarm at a point not higher than 60 per

cent of the lower explosive limit. (6) The central control shall automatically activate shut-in sequences and emergency equipment at a point not higher than 90% of

the lower explosive limit. (7) All internal combustion engines used in the operation of drilling or production equipment on off-shore platforms or vessels shall be

equipped with air intake shut off devices. These engines shut down devices shall be equipped with remote control, readily access­ ible to the driller on drilling and workover

rigs, and at some readily accessible point on production platforms."

Clause 8(2) and (3) - Contaminated atmosphere (p.22) 4.9.37 This provision seems inadequate to meet various contingencies. We recommend the substitution of the following for sub-clauses (2) and (3) of clause 8:-

"(2) (a) On all off-shore drilling, workover and production platforms and vessels operating in known hydrogen sulphide areas, and on all drilling vessels and platforms engaged

in exploration drilling there shall be a minimum of one unit of approved breathing

apparatus for each member of the active crew and for each supervisor. Said units shall be readily available and shall be maintained in good working and sanitary

condition. (b) Every person who may be required to use

755

breathing apparatus shall receive instruct­ ions and practice in its use.n

Clauses 10 and 11 (Untitled) - (p.23) These are sound provisions. They do not appear in OCS Order 8.

4.9.39

Clause 14(1) sub-paragraphs (b) and (c) - Special reports - (p.25) These provisions will require reconsideration and incorporation into contingency planning provisions.

4.9.40

Clause 22 -Debris to be removed - (p.28) Sub-para (a) The word "on-shore" should be added at the end after "disposed of". Sub-para (b) This should be deleted and the following substituted:­ "No rubbish, debris or oil refuse shall be disposed

of into the waters of the GBRP." . NOTE: This is necessary to conform with our earlier recommendation (see clause 7 Part l supra) that no substances whether liquids or solids (with certain named exceptions) shall be disposed of into the waters of the GBRP. In our suggested clause 7(2) Part l supra we have provided for pollution prevent­ ion by personnel.

Clause 23 - Welding (p.29) 4.9.41 This provision seems inadequate. The welding practices and procedures prescribed by OCS Order 8 pages 8-11 to 8-13 are in our opinion sound and

should be adopted mutatis mutandis. The use of any kind of open flame on a platform particularly a production platform is hazardous and detailed treatment of the subject is necessary. The OCS directions should assist the operator in taking necess­ ary precautions.

756

Clause 26 - Inte!'nal Combustion engine exhaust treatment o.f- (p..29) 4.9.42 It should be provided that no internal combustion engine except of a dieRel type shall be allowed on any platform and that any diesel engine shall have an adequate air intake shut-off valve, equipped with remote control, readily access­

ible from the drillers station. The provision about exhaust pipes should be retained.

Clause 27(2) -Fuel tanks - (p.29) 4.9.43 This should be eliminated. See notes to clause 22

and to clause 7 of Part I. Clause 27(2) should conform to what has been said on clause 22(b).

Miscellaneous t;tp.ograp.hical errors - <22· 32-40) 4.9.44

4.9.45

p.32 - In 33(2) - for 12 read 37

p.33 - In 35 - for 7 read 33

for 8 read 34

p.35 - In 39(c) - for 30 read 43

p.40 - In 50(1) - for 35 read 49

PART III - GEOPHYSICAL AND GEOLOGICAL REGULATIONS

(p.48) AND PART IV- EXPLOSIVES (!2.54) As appears from Part 7 supra the Commission has made

three recommendations relating to seismic surveys and the use of explosives within the GBRP. If these recommendations are accepted the provisions of Part III and Part IV of Exhibit 68 will require complete revision. Apart from our recommended total ban on the use of

explosives for seismic work within the GBRP, the Commission considers that the use of explosives in wells should be more specifically controlled than is provided for in Division 4 of Part IV where such general phrases as "by or under the direct

personal supervision of a competent person" appear. The use of explosives should be confined to wells or in some areas of the GBRP to work below the sea bottom, but in all cases should only

757

be allowed if the special approval of the DA .be first obtained .. In making this recommendation we have in mind our earlier comment that if oil be discovered in commercial quantities within the GBRP there will possibly be, sooner or later, a multiplicity of wells as in the Gulf and off California. More­

over, no provision is therein contained requiring persons associated with explosives to be licensed. This is a main requirement of the Queensland Explosives Act 1952-1963 and the regulations made thereunder.

PART V - EXPLORATION APPRAISAL AND DEVELOPMENT

DRILLING AND RELATED OPERATIONS - DIVISION I GENERAL- (NOTIFICATION CONDITIONS, REPORTS)- (p.70) 4.9.46 The phrase "Permittee and Licensee" should be recon-sidered in each paragraph. See notes to clause 1 of Part II

and to the definition of "operator" in Part I of Exhibit 68. The form of an application for approval to drill, etc (sub-clause 1(3)) had not been prescribed at the time Exhibit 68 was drafted.

General 4.9.47

PART V - DIVISION 2 - EXPLORATION APPRAISAL, AND

DEVELOPMENT DRILLING, PRACTICES AND REQUIREMENTS -(p.74)

As earlier indicated the Commission considers that

in this field greater particularity is desirable both in the interests of the operator and the Designated Authority. For example, in Exhibit 68 the setting depth of the surface casing is related to geological factors and conditions above that depth as well as to expected conditions below that point. In an exploration well the conditions below the selected setting depth are very largely unknown at the time the casing is run.

In most cases of blowouts which have resulted in cratering, or appearance of hydrocarbons at the surface near the well, less than 1400 feet of casing has been properly cemented above the point at which drilling was proceeding. This is an import-

758

ant consideration since leakages of hydrocarbon under and around the drilling rig create enormous hazards, which can result in fires. We believe that the protection afforded by properly

cemented casing at about 1500 feet should be required by specific order. The draft instructions as set out in Exhibit 68 p.74 Part V are to a large extent the same as in OCS Order 2

under "DRILLING PROCEDURES" Exhibit ltOl page 2-l. However, whereas the regulations as in Exhibit 68 are general in char­ acter and direct that certain objectives with respect to safety, prevention of waste, prevention of pollution etc. be attained,

they do not .in some instances set down what are considered to be acceptable conditions or standards.

Clause l- Tubulars (p.74) lt.9.48 For the phrase "in good condition" substitute "new".

Clause 2 -Drilling fluid and tank gauges (p.7lt) lt.9.49 This important provision is out of place, We have

dealt with it at some length in our comments on clause 6(1) infra.

4.9.50

4.9.51

Clause 3(1) - Casing programmes. Casing cementations and tests theteof (p.74) This provision is sound and needs no amendment.

Clause 3(2) -Drive or structural casing (p.75) In the GBRP the structural casing should be made compulsory in all cases and should be run to a depth of approx­ imately 100 feet below the ocean floor to provide hole stabil­ ity and to minimise loss of drilling fluid and detrital mater­

ial into the sea. We also consider that in the GBR area the

drilling fluid in drilling hole for this casing should be ordinary sea water. The existing draft provision should be amended· accord-ingly.

759

Clause 3 (3) Conductor casing (first string) - (p.75) 4.9.52 In the opinion of the Commiss.ion it is imperative

that this casing be set in all cases and to a depth of not less

than 500 feet below the ocean floor TVD provided that if formations known to .contain hydrocarbons exist or are encounter­ ed at a shallower depth such casing shall thereupon be set before further drilling. It is also important that cementing sufficient to fill the annulus to the ocean bottom be done.

4.9.53 Accordingly it is recommended that the following provision be substituted for the existing draft clause 3(3):­ "3(3) Conductor casing (first string) This casing shall be set in all cases

and to a depth of not less than 500

feet TVD below the ocean bed or to such greater depth as may be necessary to extend it into a competent or

consolidated formation. Provided that if formations containing hydrocarbons are known to exist or are encountered at a shallower depth than 500 ft such casing shall thereupon be set before further dri.lling. The casing shall in all cases be cemented with a volume of cement sufficient to fill the annulus from the shoe to the ocean floor."

Clause 3(4) - Surface casing - general principles (p.76) 4.9.54 The comparable OCS Order is OCS 2.1 p.2-2 and is more

specific than Exhibit 68 which relates the setting depth of the surface casing to geological factors and conditions above that depth as well as to expected conditions below. In an explora­ tion well conditions below the selected setting depth are very largely unknown at the time the casing is run. In most cases

760

of blowouts which have resulted. in cratering, or appearance of hydrocarbons at the .surface near the well, less than 1400 feet of casing has been properly cemented above the point at which drilling was proceeding. This is an important consider­

ation since leakages of hydrocarbon under and around the drill­ ing rig creates enormous hazards - often resulting in fire -and almost always render the rig inoperable. We believe that the protection afforded by properly

cemented casing at about 1500 feet .justifies a specific require­ ment with regard to it.

4.9.55 Accordingly, we recommend that existing draft 3(4) be replaced by the following:-

4.9.56

"3(4) Surface casing Surface casing shall be .set in a manner which will protect fresh water sands and provide well control until the next string of casing is set.

Determination of proper setting depth shall be based on all geologic factors including the presence or absence of hydrocarbons in the interval between the surface casing sett.ing depth and the

ocean bottom. However, to obtain a des.irable degree of protection against possible cratering the approved depth for surface casing shall be approximately 1500 feet TVD below ocean bottom.

Variations of more than 75 feet from this depth will be permitted only upon specific order of the Designated Authority."

Clause 3(5) - Casing cementing - (p.76) The first sentence should be substituted by the

following:-"The surface casing shall be cemented with a volume sufficient to fill the annulus from the shoe to the ocean floor or to a minimum

of 100 ft into the next larger string of pipe."

761

The remainder of the draft provision does not require

amendment.

All casing below surface casing 4.9.57 A new sub-clause should at this stage be inserted under the above heading incorporating the following recommenda­ ation. This sub-clause will become 3(6) because existing 3(6) can be eliminated and in its place a new 3(7) inserted under the heading "Intermediate and Protective Casing" (infra). The recommendation is that subject to a general rule that all cas­ ing programmes within GBRP require DA approval the following general rules shall apply to exploration wells and all other wells where known geological and other conditions do not per­ mit the design of specific casing programmes:-

1. For drilling at depths less than 10,000 feet

TVD below the rotary table:

The drilling depth in feet TVD below the ocean floor at any time shall not exceed 2 l/3 times the setting depth in feet TVD below the ocean floor of the last higher properly cemented Bnd tested casing. 2. For drilling depths greater than 10,000

feet TVD below the rotary table: The drilling depth in feet TVD below

the ocean floor at any time shall not

exceed twice the setting depth in feet TVD below the ocean floor of the last

higher properly cemented and tested casing.

Clause 3(6) - Intermediate and protective casing (p.77) 4.9.58 The provision in OCS Order 2-lE relating to protect-ive casing should be inserted into Exhibit 68 but under the above enlarged heading where it would be 3(7). Accordingly existing 3(7) will become 3(8).

762

Clause 3(7) -Production casing (p.77) As presently drafted clause 3(7) does not adequately

protect possible hydrocarbon zones. Furthermore it should be stipulated as in OCS 2 that surface casing should never be used as production casing. Accordingly the following substitu­ tion is recommended for 3(7).

4.9.60

"3(8) - Production casing Production casing shall be set prior to completion for production. The production casing shall be cemented in a manner which will cover or isolate all zones which contain oil, gas or fresh water, but in any case, not less than the volume of cement required for 500 feet of annular fill above the

uppermost produceable hydrocarbon zone shall be used. When a liner is utilised as production casing, a seal between the liner top and the next higher string is required as in the case of inter­ mediate liners. When intermediate casing is util­

ised as production casing, it shall conform in all respects to the requirements for production casing. The surface casing shall never be used as production casing."

Clause 3(8) - (p.78) This will now become 3(9). The correct reference in the third line is to regulation l.

4.9.61

Clause 3(9) - (p.78)

This will become 3(10). It should be deleted in its present form and the following substituted:-"3(10)

In special circumstances the DA may permit variations from the foregoing provisions of clause 3 upon application made by the title holder or operator."

It is for consideration, however, whether any general provision of this type is desirable in view of the wording of S.lOl of the Act.

Clause 5(2) -Disposal of oil or gas - (p.8l) 4.9.62 In view of the recommended total prohibition on the disposal into GBR waters of all substances, whether solids or liquids, this provision should be deleted.

Clauses 6(1) and (2) -Mud and mud testing (p.8l) 4. 9. 63 It would seem more appropriate to. insert this provis-ion (6(1)) into Division III. However, wherever it is placed we make the following comments and suggestions thereon.

The comparable OCS Order is Order 2, 3A at p.2-7. The procedures therein provided are necessary to ensure safe conditions for making a tr.ip and are routinely performed in drilling (Mr Thomas Exhibit 205). They are of such importance that they should be reproduced in our regulations.

Clause 6 (2) covers only the testing of mud propert­ ies such as weight, viscosity, water loss, gel stren_gth, etc. We feel that other features of the mud system could properly

be dealt with here since they are, in fact, related to control.

4.9.64 Accordingly, we suggest the following be substituted for existing 6(1) and (2). "(1) Mud programme - general. The characteristics, use and testing of drilling mud and the conduct of related drilling procedures shall be such as are necessary to prevent the blowout of any well. Quantities of mud materials includ­

ing mud weighting materials sufficient to insure well control shall be maintained readily accessible for use at all times.

764

A. Mud control. Before starting out of the hole

with drill pipe, the mud shall be circulated with the drill pipe just off bottom until the mud is properly conditioned. Proper condition­

ing requires, at a minimum, circulation to the

e.xtent that the annulus volume is displaced. When coming out of the hole with drill pipe,

the annulus shall be .filled with mud before the mud level drops below 100 feet and a mech­ anical device for measuring the amount of mud to fill the hole shall be utilised. The volume

of mud required to fill the hole shall be watched and any time there is an indication of swabbing or of influx of formation fluids the necessary safety devices required (see

comments on Exhibit 68, page 84, 2. Other Equipment infra) shall be installed on the drill pipe, the drill pipe shall be run to

bottom and the mud properly conditioned. The mud shall not be circulated and conditioned,

ex.cept on or near bottom, unless well condi­ tions prevent running the pipe to bottom. The mud in the hole shall be circulated or reverse

circulated before pulling drill stem test tools from the hole. (2) Mud testing equipment shall be maintained on the drilling platform at all times and mud tests shall be

performed frequently and the results entered in the daily drilling report. (3) The following mud system monitoring equipment must be installed (with derrick floor indicators) and used

throughout the period of drilling after setting and cementing the conductor casing. (i) Recording mud pit level indicator to determine mud pit volume pit gains or

losses. This indicator shall include visual and audio warning devices. (ii) Mud volume measuring device for accurately measuring mud volumes

required to fill the hole on trips. (iii) Mud return or full hole indicator to

765

show when returns have be.en obta.ined, or when there is any flow of fluid from the hole, and additionally to determine that returns essentially equal the pump discharge rate. (iv) Mud logging equipment for continuously monit­

oring mud returns to detect the presence of hydrocarbons or H2S."

PART V - DIVISION 3 - SAFETY IN DRILLING

AND ASSOCIATED OPERATIONS- {p.82)

Clause l(l) {a) - Blowout prevention - (p. 82) 4.9.65 Exhibit 68 states, in general terms that the blowout prevention equipment shall be adequate. It does not .specify the items of equipment that would be accepted as a minimum re­ quirement and indeed it might be thought that such requirements could be met with one bag type (which will close or. anything), one set of blind rams (which will close on open hole) and an inside preventer (a safety valve or kelly cock in the drill string).

While it is unlikely that any operator would under­ take to drill below surface casing with such a stack the order, as written, would certainly not assure an adequate installation. The OCS Order 2 in Clauses A. B. and C. {p.2-5) on

the other hand states clearly what major components will be required in assemblies, as minimums, for drilling below con­ ductor, surface and intermediate casing and subject to two amendments, we regard the OCS Order as sound. The two amend­ ments are:-

(a) substitute "two" for "one" when dealing with hydrils {which we call "bag types"). (b) substitute "two" drilling spools for "one" drilling spool wherever appearing. These amendments would provide additional security and permit circulation through the drill pipe when hung off.

766

4.9.66 Accordingly, we recommend that 1(1) (a) should be substituted by the following :­ "1(1) (a) Blowout prevention equipment. Blowout preventers

and related well control equipment shall be installed, and tested in a manner necessary to prevent

blowouts. Prior to drilling below the conductor casing, blowout prevention equipment shall be installed and maintained ready for use until drilling operat ions a re completed as follows:

A. Conductor c asing . Before drilling below this

string, at leas t one remotely controlle d bag type blowout preventer and equipment for circulating the drilling fluid to the drilling structure or vessel shall be installed. To avoid formation fracturing from complete shut­

in of the well, a pipe of adequate diameter with control valves shall be installed below the blowout preventer so as to permit the diversion of hydrocarbons and other fluids; except that when the blowout preventer assembly is on the

ocean floor, the choke and kill lines shall be equipped to permit the diversion of hydro­ carbons and other fluids. B. Surface casing. Before drilling below this

string the blowout prevention equipment shall include a minimum of: (l) four remotely controlled, hydraulically operated blowout preventers with a rated

working pressure which exceeds the maximum anticipated surface pressure, including one equipped with pipe rams, one with blind rams, and two bag type;

(2) two drilling spools with side outlets, if side outlets are not provided in the blowout preventer body;

(3) a choke manifold;

(4) a kill line; and

(5) a fill-up

C. Intermediate casing. Before drilling below this

string the blowout prevention equipment shall include a minimum of: (1) five remotely controlled, hydraulically operated blowout preventers with a rated

working pressure which exceeds the maximum anticipated surface pressure, including at least two equipped with pipe rams, one with blind rams, and two bag type; (2) two drilling spools with side outlets, if

side outlets are not provided in the blowout preventer body; (3) a choke manifold;

(4) a kill line; and

(5) a fill-up line."

Clause l(l)(b) - (p.82)

4.9.67 There is no specific reference to hanging off

capability in the OCS Orders. While drilling from a floating platform or vessel it is necessary to provide a means of securing drill pipe in such a manner that it may remain stationary and independent of vessel motion. The ability to do this in all cases and part­

icularly in emergency situations when it is necessary to quickly disconnect the marine riser and move the drilling vessel away from the well requires a means of severing the drill pipe. This can be done by actuating shear rams which can be included

in the blowout preventer assembly. The shearing function may be added by modifications to the blind rams without loss of their primary function.

4.9.68 It is accordingly recommended that clause l(l)(b)

be elaborated and made more specific by substituting the

768

following;-"l(l) (b)

Provision shall be made .so that equipment being run in the well may be secured in

such a manner that it may remain stationary and independent of the motion of the drilling vessel. To assure this every blowout preventer assembly in use while drilling from a floating

platform or vessel shall have included in it at least one set of shear rams."

Clause 1(2) - (p.82)

Tnere is no directly comparable OCS Order. The Commission considers that while it is undesir­

able to attempt to design equipment or equipment assemblies, nevertheless recognised or potential weaknesses in design or arrangement should be avoided. Thus restriction on flow owing to reduced internal

diameter of any part of the assembly should be avoided. Again smooth bends should be avoided as they tend to be quickly damaged by flow of abrasive material through them.

Some designers use positive chokes or one positive

and one adjustable choke. Controlling a kick by the constant drill pipe pressure method, or by any method which would nec­ essitate limiting the maximum annulus pressure, could make it necessary to adjust the chokes to accommodate large fluctua-­ tions in flow rates. Positive chokes not only limit the

ability to adjust pressures but are affected by abrasive fluids. A system having several adjustable chokes has all the capabilities of a system with positive chokes and has much greater flexibility.

4.9.70 Accordingly, we recommend that clause 1(2) be sub-stituted by the following:-111(2) The blowout preventer assembly shall contain two

769

4. 9. 7l

lines for the purpose of bleeding off well fluids or a well. These lines shall

be of adequate size (being a minimum diameter of 3 inches) and shall be connected to outlets in spools or blowout preventers. The

outlets providing access to the well bore shall have internal diameters not less than those of the connecting lines. The choke manifold and connecting lines have no smooth bends and

shall have not less than two adjustable chokes and shall in all respects be constructed and equipped in accordance with good oilfield practice. The lines and all other components of this system

shall have a pressure rating of not less than that of the blowout assembly to which they are connected."

Clause 1(3) - (p.82)

There is no comparable clause in the OCS Orders. It is for consideration whether manual controls for blowout preventers serve any useful purposes in relation to off-shore drilling as they are slow and difficult in opera-tion.

4.9.72 On the other hand the Commission is of opinion that

provision should be made in these regulations for the compuls­ ory installation of a choke control panel clearly visible to the operator of the choke control which includes the following:­ (a) An accurate sensitive pressure gauge showing

the drill pipe pressure:

770

(b) An accurate sensitive pressure gauge showing the casing annulus pressure; (c) A pump stroke counter showing strokes per minute; (d) A pump stroke totaliser.

Clause 1(5) - (p.83)

There is no directly comparable OCS Order. A frequently occurring fault found in BOP assembl.ies

is that the volume of actuating fluid stored under sufficient pressure together with the capacity of the recharge system is not sufficient to permit fast operation of all valves.

4.9.74 Accordingly we recommend that the following sub-paragraph be substituted for 1(5) :-

4.9.75

"Blowout preventers shall be hydraulically operated and remotely controlled. The hydraulic actuation system shall maintain a pressure capacity reserve at all times

sufficient to close and open all the blow­ out preventers in the assembly one time and rebuild pressure within a period of three minutes thereafter."

There should also be added a provision requiring actuating fluid used in an underwater blowout preventer system to be non-toxic and water soluble.

Clause 1(6) - (p.83)

4.9.76 The concept is sound but the clause requires re-

drafting in order to legislate for the functional differences between blind and other types of rams. It should be provided that pipe rams and bag type BOP's be actuated each time a trip is made or once each day whichever is the lesser. Blind

rams should be actuated each time a trip is made and only when

the drill pipe is out of the hole.

4.9.77 When re-drafting the clause will therefore not con-tain the word "greater" whilst the word "recommended" will become "recommenced".

Clause l(7)(a) - (p.83)

771

4.9.78 The comparable OCS Order is OCS 2 at 2 - 6.

Both Exhibit 68 and OCS 2 2.D accomplish much the same thing but it would seem to us better to specify testing

to some specific working pressure rather than to manufacturer's recommendation as in Exhibit 68, since the equipment is required to have a stipulated minimum working pressure. The testing of ram type preventers can be done with a plug type tester and drill pipe without subjecting the bag type preventer or the casing or the open hole below it to the same pressure.

OCS 2 at this point also stipulates the minimum

frequency of practice drills for crews in the operation of the preventers and in performing the other functions necessary to control an incipient or actual blowout. In order to assure that prolonged drilling through has not weakened it, it should be tested after not more than

30 days, or sooner if damag e is suspected. The test pressure

should be equivalent to 1.5 times the hydrostatic pressure at the lower extremity of the casing being tested. This test can be made using drill pipe and a cup type packer.

Other comments ar·e added by way of notes below.

4.9.79 It is accordingly recommended that l(7)(a) be sub-stituted by the following:-

772

"1(7)(a) -Blowout preventer tests and practice drills (1) Ram-type blowout preventers, choke assemblies and related control equipment shall be

pressure tested to the rated working pressure of the stack assembly when first installed, or when re-installed, and not less than once each week while drilling, and if defective

shall be made serviceable before any down hole operations are commenced or continued. Bag-type blowout preventers shall be tested with the same frequency to 70% of the ir rated working pre ssure.

NOTE: The Commission however

that in the case of bag-type blowout preventers consideration might be given to reducing the 70% to 50% of rated pressures as the latter

figure may be thought sufficient and would tend to prolong the life of the element. The 70% comes from

OCS 2 of l June 1971.

(2) While drill pipe is in use ram type preventers

shall be actuated to test proper functioning once each trip,but in no event less than once each day. (3) A blowout prevention drill shall be

conducted daily with any newly assembled crew until all its members have demonstrated satisfactory proficiency and weekly with all crews to ensure that crews are fully

to carry out emergency duties and

that equipment is operational. (4) The upper 300 to 400 feet of any casing,

being the inside string, having had drilling operations carried out through it for a maximum of 30 days and before any further

down hole work, shall be tested using drill

pipe and packer. The test pressure shall be a pressure equivalent to one and one half times the hydrostatic pressure at the shoe of the casing being tested.

NOTE: This does not derive from evidence

before the Commission but is considered to be a desirable precaution which should be imposed by regulation. (5) All blowout preventer tests and crew drills

shall be recorded on the daily drilling report."

773

4.9.80

NOTE: Notwithstanding the wide powers

of the DA (for example under S.lOl of

the Act ) it would be appropriate to add a

provision that the DA (or his r epresentative) may at any time order testing and

inspection in his presence. It would also be a ppropriate to require suffi c i ent n o tice to b e given to the DA of casing

c ement i n g ope rations and of plugging

and a bandonme nt operations to e nable his r e presentative to be pres ent if he so wishes . Clause l(7)(b) - (p.83) There is no compa r ab le OCS Order. Clause l(7)( b ) is good as far as it goe s but we

feel that it s hould be tig ht e ned up somewhat wi th respect to

r ep l aceme nt of unserviceable or suspect elements. Initial

cost of blowout preve nters is very high and the cost of

inspecting , testing and h a ndling them in terms of rig time alone i s so great that acceptance of anything less than the

best obt ainable reliability would seem imprudent . At trans­ cript page 3137 Mr Whit e was aske d his opinio n r egarding the numb er of complete clos ure s on nothing that a Hydril element

would stand . He replied " This is a very difficult question

to answer. If you aske d the company they would tell you that

it is desi g ned to do t his . But stresses, very seve re stresses

are set u p in the element a nd I would not like t o see myself,

more than say six compl e t e cycles to this extent made before

chang ing the element." Today some opera t ors r equire that the packing ele me nt of a unit of this type be discarded after one complete

c l osure .

4.9. 81 According ly, it i s s u ggested that the following be

s ubstitut e d for 1(7) (b):-

774

4.9.82

"l(7)(b) Where a blowout preventer of the bag-type is used,

the packing element shall be inspected for service­ ability, condition of the rubber or other signs of wear that might result in malfunction or failure. Such inspections shall be undertaken (i) when the packing element is first installed at any well,

(ii) whenever the blowout prevention equipment is raised to the surface, and (iii) where drilling into an expected high pressure zone is expected to be imminent, immediately prior to undertaking

such drilling. Any packing element found on inspection to be defective in any way or which is in a condition where there is reasonable doubt as to its condition shall be replaced with a new unit. Any bag-type packing element that has had five

complete closures on nothing shall be replaced with a new element. No reconditioned packing element shall be used on

any type of BOP valve." Clause 1(8) - (p.84)

At present this reads in Exhibit 68:-"The Permittee or Licensee shall include, or cause to be included, in the daily drilling report, every closing of the blowout preventer system for

other than normal operations and test purposes and the reasons for the closure." The concept is sound but it would be advisable to

record all BOP tests and drills on the daily drilling report in order to be sure that drills and tests are being conducted as required by these regulations as well as to serve as a means

of accounting for rig time. Also the phrase "permittee or licensee" is unsatis­ factory - see notes on clause 1 of Part II and on the

definition of "operator" (supra).

775

4.9.83 Accordingly it is suggested that the following be substituted for 1(8):-

4.9.84

"Every closing of the blowout preventer system and the reason for the closure shall be reported daily on the daily drilling report." Clause 2- Kelly cock- (p.84) The last sentence of 2(2) reads:

"The bore hole shall be kept full of mud at all

times."

4.9.85 Mr. Jeffrey Q.C. during his final address referred to the evidence which explained the meaning of the phrase "keeping the hole full" (Tl7063). The evidence before us clearly showed that this is

one of the most important and fundamental precautionary meas­ ures of the whole field of oil drilling.

4.9.86 Accordingly this sentence should be more prominently positioned in the regulations and we recommend that it be taken out of 2(2) and be given a separate clause number to

itself. This should be clause 1 at the beginning of Division 3 of Part V and all other paragraphs in the division appropr­

iately renumbered.

Clauses 2(1) and 2(2) (Other equipment)- (p.84) 4.9.87 The comparable OCS Order is OCS Order 2E at 2-6, which

provides for quicker action in case a kick should occur while the kelly is in the rat hole and for more flexibility.

A spare safety valve in the open position, or a spare

kelly cock, being at hand on the floor, could be more quickly installed on the drill pipe than could the kelly. For continuous operation below the kelly a lower kelly cock is preferable to a drill pipe safety valve.

If it should be necessary to install a safety valve with the kelly on the drill pipe and the drill pipe is under

pressure, the lower kelly cock could be closed allowing the

776

kelly to be unscrewed above it. The OCS Order also requires that the spare items

to fit any tool joint or drill collar joint in the string

be available on the floor. However, it is considered that additions to the OCS Order can appropriately be made. In particular we consider that provision should be made for the availability of a drop-in type back pressure valve to be used

if the socket type sealing coupling shall have been installed.

4.9.88 Accordingly, it is recommended that the following be substituted for 2(1) and 2(2) under the heading of "Other equipment": "2. Other equipment

(1) A kelly cock shall be installed on the top of

every kelly and must be checked and operated each time the blowout preventers are pressure tested. (2) In addition to the top kelly cock, a lower

kelly cock shall be installed at the bottom of every kelly and be of such design that it

can be run through the blowout preventers. (3) Valves of the following type and of proper sizes and designs to fit any pipe in the

drill string shall be maintained readily available and in good working order at the rig floor at all times while drilling oper­ ations are being conducted.

(a) A lower kelly cock in the open position

(b) A full opening drill string safety valve. (c) A socket type sealing coupling capable of being dropped over the exposed drill pipe and having a lower kelly cock or

equivalent valve mounted above or as an integral part of it.

(4) Every drill string, while in operation, shall have installed within it, and located above

777

the bit, a receptacle for receiving and retaining a drop-in type back pressure valve and a drop-in type back pressure valve of the proper size and type to be

received and held by such receptacle shall be maintained readily accessible at the rig floor.

4.9.89

Clause 3(1) - Drillstem tests, for - (p.84)

Here, as elsewhere, substitute "Designa ed Authority" for "relevant authority".

Penetration rate recorder- (p.86) 4.9.90 There should be inserted as "7" on p.86 the following

(under the above heading):-"Every drilling rig shall be equipped with a penetration rate recorder. Such recorder shall be maintained in good working order and be in

continuous operation while drilling.'' Probably because it is standard equipment on drilling rigs the penetration rate recorder has not been mentioned in either Exhibit 68 or Exhibit 401. However, an item such as a

weight indicator is a standard and necessary instrument and the authors of Exhibit 68 saw fit to include it.

Both these functions should not only be indicated but should also be continuously recorded. This is usually accomp­ lished by pen traces on a moving chart which may have pens tracing records of a number of functions such as penetration rate, drill string weight, rotary table r.p.m., mud pump pressure, rotary torque and sometimes others as well. Drill

string weight and penetration rate records are most important and useful as they show drilling breaks, trips, down time, total footage drilled, and total depth.

778

PART VI - PRODUCTION AND CONSERVATION (p.99) - DIVISION

l - EQUIPMENT AND FACILITIES

General note on pages 99 and 100

4.9.91 In Part 3 (supra) we have dealt with "Contingency

Planning " and our notes on clause 7 of Division 1 of Part II

(supra) also refer to the necessity for co-ordinating all phases of contingency planning including corrective action by operators to deal with emergencies. The provisions of OCS Order 7-38 at 7-4 were referred to. We suggested that the

immediate corrective action to be taken by the operator and/or title holder (cf clause 4(l)(c)(v) on p.lOO and also OCS Order 7-38) will be governed within the G8 RP to some extent by the particular site of the well and other factors and will in any

case be pre-planned and be subj ect to the approval of the a uthority which co-ordinates all contingency planning.

Some miscellaneous recommendations

4.9.92 We also firmly recommended (paragraph 4.9.31) that within the G8RP (with three specified exceptions) no substances of any kind whether solids or liquids shall at any time be

disposed of into the sea.

4.9.93 If these recommendations are accepted, some of the provisions appearing in Division 1 of Part VI - for example the important c lause 4(l)(c)(v) p.lOO- will require revision and r edrafting .

4.9.94 The provisions of OCS Order 7-3A and 38 at 7-4 will

provide a useful guide for any such redrafting. It will be

ob served that modernity and flexibility are features thereof,

e.g. "Corrective action taken under the plan shall be subject to modification when directed by the (supervisor)" (3A) and "This equipment shall be the most effective available resulting from the current state of pollution control and removal research

and development efforts" (3B).

4.9.95 Another matter to which attention was drawn in evidence was that although Division l tabulates the various subjects upon

779

which the DA must be satisfied by an applicant licensee before approval will be given for the grant of a production licence no guidance is given for the determination of the standards by which any particular proposal should be evaluated (T3464). In his final address Mr Jeffrey QC for A.P.E.A. contrasted this situation with OCS Order No. 8 and suggested that there should be incorporated into our regulations provisions such as appear in Exhibit 213 Section 7·-10. This Exhibit is a "Testimony Summary" prepared for this Commission by C-E Natco Division, Combustion Engineering Corporation and tendered and spoken to by Mr Lowd.

Section 7-10 thereof is entitled "A typically current and use­ ful control."

4.9.96 The suggestion attracts consideration as giving assistance not only to the draftsman of the regulations in final form but also to the DA and title holders. It was also

suggested that the regulations should cover such matters as fired equipment, flame arrestors, etc. At T3452 Mr Lowd suggested that the following provision should be incorporated into the regulations and the Commission agrees with suggestion and so recommends:-

4.9.97

780

"Fired equipment on or used in connection with production processing platforms shall be equipped with flame arrestors and internal fire box heat detectors capable of simultaneously shutting off fuel, actuating vent closures at the air intake and stack, and releasing carbon dioxide, or some equally effective fire extinguisher, into the fuel combustion space of the fire box and of a

design approved by - "

The approving authority would of course be the DA.

Clause 5 - (p.lOl)

The comparable OCS Order is Order 6.

The OCS Order more clearly defines the requirements

pressure ratings etc. and also states that to

annu_lar areas between any two strings of casing be maintained. This is intended to facilitate detection of leaks, testing and repair if the need should arise. The stipulation of two master valves on high pressure wells is a good precaution and

is accepted as good practice. Pre-installation assembly and testing is also good practice and often reveals weaknesses in equipment which might otherwise become problems.

4.9.98 It is necessary that the current edition of the

American API specification be used as the present edition is the 9th not the 6th.

4.9.99 Accordingly we recommend that the following be sub-stituted for 5 on p. 101:-

4.9.100

"5. Wellhead equipment used for the recovery of petroleum in the adjacent area shall be in accordance with the requirements of American Petroleum Institute API Specification for wellhead equipment API STD 6A Ninth Edition, March 1971, or such later edition as may be

current at the date of the approval of the

application" (or such later date as the DA may direct).

Later clauses also necessitate flexibility in the references to specifications because American standards will doubtless alter from time to time and it may be that Austral­ ian specifications will be established and adopted here.

Clause 8 - (p.lOl)

4.9.101 Mr Lowd suggested (T3466) that the words "manually operated" might be inserted before the opening word "Valves".

Clause 10(2)(a) - (p.l02) 4.9.102 The new OCS requirements for the testing of produc-tion facilities and controls appear in OCS Order No. 8 and are

781

set out at pp. 8 - 5 to 8 - 7 of Exhibit 401. Mr Lowd at T3403

said that the frequent testing (monthly) lengthe ning out grad­ u a lly as prescribed by OCS 8 should however never exceed inter­

vals of six months. OCS 8 prescribes quite frequent tests for automatic wellhead valves by requiring weekly tests for opera­ tion and monthly testing for holding pressure ((2) (g) at 8-6) ). The subject was discussed in some detail at T3402- 3

by Mr Lowd who also stressed the need for a sacrificial valve

downstream of the valve to be tested if it is to be tested to

atmosphere (T3468 - 9). Th e Commission agrees with this view and so r ecommends.

4.9.103 Accordingly 10 (2) (a) should be redrafted so as to

provide for more frequent testing and inspection; Furthermore the phrase "or immediate ly after an event ... "should be replaced by "and immediately a fter any event "

4.9.104 The phrase "by a person trained in such inspections" is somewhat vague and gives rise to the consideration whether some at least of the tests should be made in the presence of

the DA's representative . At Tl4412 Mr Taylor-Rogers·when questioned on this subject spoke of the difficulties deriving from the small number of inspectors presently appointed in other States but such a consideration ought not to be permitted to apply in the case of drilling or production within the GBRP. The matter was also referred to during Mr Lowd's evidence at

T3403 - T3404 where OCS 8 (i) at 8 - 6 was quoted. This reads:-

4.9.105

782

"(i) A complete testing and inspection of the safety system shall be witnessed by Geological Survey representatives at the time production is commenced. Thereafter,

the operator shall arrange for a test every six months. The test shall be conducted when it can be witnessed by Geological Survey representatives."

Substituting "DA" for "Geological Survey" it is

recommended that a similar provision be incorporated into .1 0 ( 2) (a).

Clause 11 (1) - (p.l03)

4.9.106 The concepts set forth in 11 (1) are broadly stated

and are commendable as ultimate general objectives but offer insufficient assistance to title holders and operators plan­ ning to instal and operate drilling or production platforms. Nor does 11 (1) convey to the DA reasonably specific require­

ments the performance of which are capable of being properly checked and supervised.

Some recommendations relating to OCS Order No. 8

4.9.107 It is recommended that 11 (1) be eliminated and that

in its place the provisions of OCS 8 under tht title "2.

Safety and Pollution Control Equipment and Procedures" pages 8 - 3 to 8 - 11 be substituted. These provisions cover the

field of 11 (1) but do so in a more precise, detailed and

objective manner.

4.9.108 However, a few omissions and amendments are necess-ary namely:-OCS 8 Provision

2A ( 8-3)

2A(l) (8-3)

2A (2) (f)

(g) (8-6)

(h)

2A (3) (8-7)

2A (4) (8-7)

2A (5) (8-7 to 8-8)

Amendment

Omit second sentence The records should also be maintained at an on­ shore base

Add the words "and at an

on--shore base" at the end

of the last sentence in

each case Substitute DA for supervisor This provision seems preferable to clause 27 (1)

on p.l40 of Exhibit 68

If our firm recommendation previously given that no

OCS 8 Provision

2A ( 6) ( 8 - 8)

2A ( 7) ( 8 - 9)

784

Amendment

substances whether solid or liquid of any kind

shall at any time be dis­ posed of into GBRP waters (with three specified exceptions) is adopted, this provision should be eliminated.

(a) Alter "supervisor" and "District Office" (8 - 9)

(b) Add "and at an on­

shore base" after "structure" (8 - 9)

and in (c) (8 - 8)

(c) For "National Fire Protection Associat­ ion's Pamphlet No. l 15" (8 - 8) substitute

reference to an appro­ priate Australian authority (Tl4656) (a) In sub-paragraph (a)

the American references to hazardous areas will require consideration by the DA

(b) Sub-paragraphs (c) and (d) appear to be con­

sistent with clause 11 of Division 2 of Part

II of Exhibit 68 (p.23)

(c) In sub-paragraph (e) substitute DA for District Office and delete "appropriate"

4.9.109 5 - 1).

OCS8 Provision

2A (8) (a) (8 - 10)

2A (8) (b) (8- 10)

2A ( 9) ( 8 - 10)

2B ( 8 - 11)

Amendment

(d) In sub-paragraph (f) add "and at an on­

shore base" after "structure" (8 - 10)

This provision should be omitted. We have earlier recommended when dealing with cl. 26 of Exhibit 68

that no internal combustion engine except of a diesel type shall be allowed on any platform. The references to Americ'an electrical code require review. This also will be eliminated

if our recommendation regard­ ing the non-disposal of all substances solid or liquid (with three exceptions) into the waters of the GBRP

is adopted In our comments on clause 23 p.29 of Exhibit 68 (supra) we have recommended that the

welding provisions of OCS Order 8 at 8 - 11 to 8 - 13

be adopted in toto

Clause 11 (2) (a) - (p.l03)

The comparable OCS Order is 5 of 1 June 1971 (at

OCS Order 5.1 is modified by the first sentence in

5.3 making it obligatory in installations made in wells capable of natural flow after June l, 1971 to utilise a surface con­ trolled sub-surface safety device. 785

4.9.110 The subject of surface controlled sub-surface safety devices was dealt with at some length by Mr Thomas at T274l and later at T2846. In his final address Mr Jeffrey QC (for

APEA) agreed that a remotely controlled sub-surface safety

valve has a number of advantages over the directly controlled sub-surface safety valve (Tl7071).

4. 9.111 The surface control feature makes it possible to integrate the device with the other fail safe and remote control mechanisms of the platform dealt with in 2 (2) (d) and 2 (2) (e)

of OCS Order 8 and clause 11 (1) supra.

4.9.112 The importance of this was high lighted by

the fire on Shell "B" Platform in Block 26 South Timbalier area (referred to in Part 6 supra). The wells drilled from this platform had sub-surface

devices which were of the type which is actuated by a drop in

pressure on the outlet side of the device or by increase in fluid velocity through it. The fire which started at a well

being repaired ignited the platform installations nothing occurred which caused a change in conditions at the sub-surface devices in a number of wells which were producing into the platform facilities. Consequently these wells continued to produce oil and gas into the fire. If however surface control­ led sub-surface devices had been installed the flow of oil and gas could have been stopped deliberately or would have been stopped because of the effect of the fire on the integrated shut-in control lines.

4.9.113 The OCS Order also requires that all wells having a sub-surface safety devide or tubing plug shall have the tubing casing annulus sealed below the setting depth of the valve or plug. Without such a provision, of course, the device would not operate to seal the well off in case of casing or wellhead

failure. It seems to us appropriate to deal with the matter

at this point.

786

4.9.114 It is considered that in lieu of ll (2) (a), (b)

and (c) the relevant provisions of OCS 5 clauses 1 to 5

inclusive should be inserted into Exhibit 68. Accordingly, we suggest the following be substituted for 11 (2) (a):-

4.9.115 (b) :-

"11 (2) (a) All wells capable of flowing

oil or gas shall be equipped with an approved surface controlled sub-surface safety device installed at a depth of 100 feet or more

below the ocean floor. The installation depth of this device shall be below the recognised paraffin deposition level in the well. Such device shall be installed in

all oil and gas wells, including artificial lift wells, unless proof is provided to the satisfaction of the DA that such wells are incapable of any natural flow. For shut-in wells capable of flowing oil or gas, a

tubing plug may be installed, in lieu of a sub-surface safety device, and such plug shall be installed when required by the DA."

Clause ll (2) (b) - (p.l04)

We suggest the following be substituted for ll (2)

"ll (2) (b) Sub-surface safety devices shall be adjusted, installed and maintained to ensure reliable operation. Each sub-surface safety device and tubing plug installed in a well shall be tested at intervals not exceed­

ing 6 months or at such other intervals as

the DA may fix. Where a safety valve is set

in a landing nipple and is of the type that is

controlled from the surface by a hydraulic line or other means, the valve may be tested from the surface to ensure proper functioning.

If the valve does not operate properly it shall be removed, repaired, re-installed or replaced and again checked for proper operation. When a sub-surface safety device is removed

from a well for repair or replacement, a standby sub-surface safety device or tubing plug shall be available at the well location. In the event of an emergency such device shall be immediately installed within the limits of practicability, consideration being given to time, equipment, and personnel safety. Sub-surface safety devices that are an integral part of the tubing string shall be tested at intervals not exceeding six months and, if the test is unsatisfactory, shall be replaced or a removable sub-surface device shall be installed. All wells in which a sub-surface safety device or tubing plug is installed shall have the tubing-casing annulus sealed below the valve or plug setting

depth."

Clause 11 (2) (c) - (p.l04)

4.9.116 It is suggested that in lieu of 11 (2) (c) the follow­

ing be substituted. It is the relevant part of OCS 5 - 3 on

p.5- 2:-

788

"11 (2) (c) In high-flow-rate wells or wells

producing sand, areas of turbulence above and below such devices shall be protected by flow couplings or other protective equipment. The control system for the surface controlled sub­ surface safety devices shall be an integral part of the platform shut-in system."

DIVISION 2 - MEASUREMENT (P.l.05)

4.9.117 The recent introduction of the metric system will require that the various figures be adjusted. Also the references to various American standards may require to be brought up to date if such standards are

acceptable. Again (p.l08) other means of measuring flow in addition to positive displacement meters attract consider­ ation. Mr Lowd at T3473 mentioned this matter.

DIVISION 3 - PROCEDURES (P.lll)

Clauses 15- (p.ll7) and 19- (p.ll8) 4.9.118 Attention is again invited to our earlier recommend­ ation that no substances whether solids or liquids (with three stated exceptions) should be permitted to be disposed of into the waters of the GBRP (paragraph 4.9.31). In this

connection we would repeat that in our opinion regulations as in Exhibit 68 should be drafted with the intention that they apply only to the GBRP and not to the Australian OCS generally and we have adhered to this view throughout when making suggestions and recommendations. Accordingly these

paragraphs (and 16) will need review if our recommendation is accepted.

4.9.119 Although the subject is, strictly speaking, not referable to TR4, it may be helpful to record that Mr Taylor­ Rogers at Tl4628-9 expressed the view that clause 19 on p.ll8 of Exhibit 68 could preferably be dealt with as in OCS 6 -

3A - p. 6 - 2.

PART VII - ELECTRICAL - (P.ll9)

4.9.120 In our suggestions (supra) relating to clause 11 (1) - p.l03 supra, we have recommended that certain provisions of

OCS Order 8 be substituted therefore and 2A (8) (b) - p.8 -

10 of OCS Order 8 relates to electrical equipment and systems.

Probably if this suggestion is adopted the provisions of 1 (b) on p.ll9 would be redundant. However it is suggested that

provision should be made in Part VII as follows:-

4.9.121

"A qualified electrician shall ensure that electrical installations are at all times kept in conformity with regulations."

PART VIII - PIPELINES - (PP. 128 - 131A)

The subject of pipelines in the GBRP and the potent-ial hazards wpich may derive therefrom have been dealt with at some length in Part 11 of the answer to TRl and in Part 7

supra and it is important that the principles and the citations appearing therein be considered with the following when a final decision is being made on regulations covering the survey, design, construction, operation and maintenance of pipelines within the GBRP.

Mr Lowd at T3473 in commenting on the provisions of

Part VIII said that they were good as far as they went but that

they should be more specific in the requirements for the instal­ lation of particular pieces of equipment to sense leaks and to operate as a safeguard in the case of broken lines.

4.9.122 Mr Jeffrey QC (for APEA) at Tl7054 said that the treat-ment of this subject in Exhibit 68 was "somewhat economical."

4.9.123 At T2943 Mr Rochelle said:-"The most effective deterrent against leaks in a pipeline is the elimination of potential problems during the planning and construction stages and the creation and execution of a well planned mainten­

ance programme."

4.9.124 Amongst the various principles stressed by witnesses such as Mr Lowd, Mr Rochelle, Mr Stewart and Mr Taylor-Rogers

790

were the following:-(a) There should be a genera l provision

r equiring a ll pipe lines to b e corr ect l y

and appropriately buried throughout the GB RP unless t he DA in special

cas es approves of some modification. Such f actor s as proximity to coast­ lines and shipping routes, the depth of t h e water, t he strength of various

currents and the nature of the ocean bed will affect the require d depths of burial and the nature of the back­ fill. (This is not in OCS9). Thes e

factor s were e l aborated by Mr Rochelle when d e aling with marine sur veys at

T29 44.

(b) Provi sion should be made requiring appropriate marking s to b e installed with warnings to shipping of t he presence of a ll p ipe lines and f o r

the p rohibition of anchoring or dredg ing in the vicinity. (This is

not i n OCS9).

(c) Provi s i on should be made for ocean

surface inspecti ons once a week using aircraft floating equipment or other means . Part VIII).

(This i s not in

(d) Sen s ing d ev i ces should be compuls or y to protect a gainst broken line s and also valves such as automatic shut­ in valves and che ck valves and volu­ metric me tering system. (This is not

in Part VIII). (e) The design of a submarine pipeline entails much more than determining t h e rout e a nd s i z e of the pipe . Ot her

791

Recommendation

matters which must be given close con­ sideration include the design of the corrosion protection system, the weight coating system, configuration of the line terminals, future tap valve locations and stresses to be encounter­ ed while placing the line on the bottom

(Mr Rochelle at T2912). He also dealt

at length with the various features of the necessary survey work including the detection of such hazards as out­ cropping, deep trenches and other obstacles which would cause undue localised loading on the line and the collection of adequate hydrographic and meteorological data for the

specific area. He added that theore­ tically the pipeline is laid down the middle of a selected right of way. Other important matters dealt with at length by Mr Rochelle and also by Mr Lowd are referred to in Part 7

supra.

4.9.125 In the result we recommend that OCS Order 9 of 1

June 1971 be adopted but with amendments and additions necess­ ary to incorporate the principles lettered (a) and (b) above. The principles lettered (c) and (d) are already in OCS 9 whilst

those in (e) can perhaps best be implemented by the DA using the important machinery of Cl3 on p.9 - 4 of OCS 9 ("any other

pertinent information as the DA may prescribe"). There will of course be necessary alterations where "supervisor" or "District Engineer" are used.

4.9.126 Our recommendations do not involve the abandonment of the useful provisions of Part VIII upon which we make the

792

rollowing comments:­ l(l) on p.l28

1(2) on p.l29

1(3) on p.l29

2(2) on

2 ( 3) on

p.l30)

2(4) 3(1) 4

)

p.l30) on p.l30) on p.131j on p.l3l)

This should be reviewed and its currency checked This must avoid duplication with OCS9 and of course 1(2)(d) must

be altered so as to embody

principle "(a)" supra. ( 2A ( 7) on 9 - 3 of OCS 9 is also

defective in this respect). This to be reviewed and its

currency checked

But substituting DA for "relevant authority" or "inspector" wherever appearing

5 on p.13l-131A This is another provision which

4.9.127

may require revision and co­

ordination with contingency planning when such shall have been rinally settled.

We would add that the machinery provided by C(l3)

on 9 - 4 of OCS 9 should ensure that the DA will receive much

important information not specifically required either by OCS 9 or Part VIII of Exhibit 68 but which will be necessary

to ensure that the various precautionary principles relating to the construction and maintenance of pipelines as stressed by Mr Rochelle and others (referred to above) will be carried out.

Hose connections 4.9.128 In Part 11 of the answer to TRl we have dealt at

some length with the subject of flexibile hoses when consider­

ing the risks of chronic pollution, and in Part 7 (supra) we have referred to pollution hazards deriving from hose connect­ ions in the operation of receiving and transporting petroleum

793

from the production well to a shore depot. No provision has been made in Exhibit 68 for the specific regulation and control of hose connections and none seems to have been made in any OCS Order, nor have we found any reference to this subject in the American Code of Federal Regulations but Mr Crane at T5026 referred to an industry document called "International Oil Tanker and Terminal Safety Guide" which was said to contain a number of steps which should be taken in loading and dis­

charging operations. If no statutory provision relating there­ to elsewhere exists, special provision should be made applic­ able to the GBRP for regulating the use of hose connections. Amongst the matters which should be covered by such provisions

would be (a) d:dp pans, (b) seals, (c) quick acting valves,

(d) pressure tests, (e) prevention of abrasion, (f) periodical inspection and maintenance, (g) proper methods of clearing the hose and (h) the size and lengths of hoses. It is also

suggested that consideration be given to the applicability of devices for automatically shutting off the supply of petroleum when the receiving tank is full and/or for a warning system of

Tl4035 (Captain Hildebrand) and T6598 (Mr Biglane).

PART IX - (P.132)

4.9.129 The definition of "unmanned platform" in Part I and the provisions of clause 1 of Division 1 of Part II relating to responsibilities for the compliance with these regulations have the effect of giving precision to Part IX comparable with that given in OCS 8 (cf T14545).

Clause 10 (c) (viii)- (p.l34) 4.9.130 The wording might be improved if phrased "a wind velocity of not less than 100 knots" (cf Tl4549) but the

Commission considers that this precautionary measure relating to design criteria is insufficient. The evidence showed that over a period of 100 years the cyclonic storms from time to time exceeded speeds of 100 knots in the GBRP and this factor affects in our opinion the design standard for "structures".

794

4.9.131 Accordingly we recormnend that for structures in the GBRP design standards be such that the structures will be designed to withstand wind and wave conditions generated by "the 100 years storm." In a unique area such as the GBRP

even this standard could well be increased.

Clause 11 - (p.l35)

4.9.132 The transoript at Tl4548 - 9 refers to this para­

graph. It is recommended that the design criteria for fixed platforms be carefully reconsidered.

Clause 27 (l) - (p.l40)

4.9.133 The inclusion of OCS 8 - (4) at 8 - 7 as recommended

above in the notes to clause 11 (1) on p.l03 does not require

the elimination of 27 (1).

Clause 28 - (p.141)

4.9.134 With this provision may be compared l.B (1) (f) of

OCS 8 at 8 - 2. It is suggested that in clause 28 it should

be provided that the marking and identification shall be in accordance with the requirements of the DA.

Clause 33 - (p.142 - 3)

4.9.135 The inclusion of OCS 8 - (6) at 8 - 8 as recormnend-

ed above in the notes to clause 11 (1) on page 103 does not

seem to require the elimination of clause 33 although the provisions of 33 (3) relating to inspection and testing may require some co-ordination with (6) (c) at 8 - 8.

Clauses 34 - 37 - (pp. 143 to 147)

4.9.136 Having regard to the length of the GBR coastline and its sparse population in some areas, it is suggested that the provisions relating to shore stations and emergency evacuations attract revision. The subject is however strictly speaking

outside the issues raised by TR4.

795

PART 10 - SUMMARY OF ANSWER TO TR4

In the following summary of the recommendations, suggestions and conclusions appearing in the foregoing answer to TR4, recommendations are prefaced by "(R)" and the relevant Part and paragraph are noted in all cases.

Part l (Outline of the Answer) 4.10.1 There are no "existing safety precautions" as the question suggests (4.1.2).

4.10.2 The drafting instructions for a common code of regu-lations compiled by Australian Government and State Authorit­ ies being Exhibit 68 which is dated 1969 are inadequate and require extensive review (4.1.3).

4.10.3 American regulations are of much assistance (4.1.6).

4.10.4 Our recommendations are designed to relate to the GBRP and are not necessarily or in all cases intended to apply

to the whole of the Australian Outer Continental Shelf (4.1.10).

Part 2 - The Petroleum (Submerged Lands) Act of 1967 - Act No. 36 of 1967 (Q)

4.10.5 (R) Sections 101 (4.2.22) and 114 (4.2.11) should be

amended as indicated.

4.10.6 (R) Sections 124 (4.2.17) and 159 (4.2.6) should be

amended as indicated.

4.10.7 The phrase "good oil field practice" as defined in

S5 attracts review (4.2.20).

796

4.10.8 In the oplnlon of the Chairman (contra Mr V. J.

Moroney with whom Dr Smith agrees) (4.2.27) sections 97 and 98, (and the definition of "operator" in Part 1 of Exhibit 68) should be amended (4.2. 2 6) and consideration should be given to eliminating the defence of "reasonable steps" in so far as it applies to the first limb of S97 and to sub-section (l)

of SlOl (4.2.26).

4.10.9 Drilling should not in any event be permitted in a

marine or national par k (4.2.28). A recent ame ndment to the Forestry Act namely Sl02 (c) should according ly be re-consider­ ed (4.2.29).

4.10.10 S99 attracts re-consideration (4.2.30).

Part 3 - Contingency Planning 4.10.11 (R) There must be fully co-ordinated Australian and State and Industry contingency plans before any drilling is permitted .(4.3.3, 4.3.8 and 4.3.9) with appropriate stockpiling

(ibid). An approved industry plan should be a condition precedent to the grant of permission to drill (4.3.12). The American procedure should be followed (4.3.12).

4.10.12 Existing Australian and State planning is only at an early stage (4.3.16, 4.3.18 and 4.3.22).

4.10.13 Good industry planning has recently taken place by Esso-Hematite and PIECE (4.3.24).

4.10.14 (R) In view of the high cost of remedial measures

successful applicatns must give appropriate assurance that they can meet any financial commitments involved (4.3.32).

Part 4 - Remedial Measures 4.10.15 (R) Neither dispersants nor sinking agents should be used in the GBRP except in special circumstances and then only with the approval of the relevant authority appointed under the

797

contingency plan (4.4.55 and 4.4.61). This view on dispers­ ants was advocated by the Queensland Minister for Mines (4.4.54).

4.10.16 Toxic dispersants are more efficient than those which are less toxic (4.4.8).

4.10.17 (R) Research necessary on qualities of modern dis-persants (4.4.10).

4.10.18 The American view is against dispersants except in special circufustances 14.4.13 and 4.4.52). The English view is somewhat different (4.4.20 and 4.4.45).

4.10.19 (R) Dispersants should not be used when attempting to clean sandy beaches (4.4.42).

4.10.20 Leading American chemists e.g. Dr Blumer hold the view that the dispersal or the disappearance from sight of crude oil does not eliminate its toxicity (4.4.17) and Dr Grassle spoke to the same effect (4.4.19).

4.10.21 The American view on sinking agents is expressed in Exhibit 301 which is the (American) National Contingency Plan (4.4.56).

4.10.22 Sinking agents should be used in the GBRP only as a

last resort (4.4.57).

4.10.23 The view of Dr Blumer on the persistence and spread of oil which sinks to the sea-bed is given in the answer to

TR2 (4.4.58).

4.10.24 The view of Dr Nelson-Smith of Wales is referred to

(4.4.59).

4.10.25 Other remedial measures were canvassed before the

798

Commission (4.4.62- 85).

4.10.26 It is difficult to monitor or trace the movements of oil spills. Visual observation from aircraft and small ships are best if weather conditions permit (4.4.63).

4.10.27 Modern methods include night monitoring using infra­ red and micro wave frequencies and radar (4.4.63).

4.10.28 Techniques relating to the use of booms are improving (4.4.64).

4.10.29 The use of a herder is a subject which attracts

research (4.4.72).

4.10.30 Development is taking place in the design of skimmers (4.4.74).

4.10.31 (R) There are restrictions on the use of absorbents

(or adsorbents) (4.4.75). Our recomn1endations appear in 4.4.78.

4.10.32 There are restrictions on the use of burning (4.4.81).

4.10.33 Other remedial measures referred to were "Adapts" (4.4.80) gelling agents (4.4.79) tents (4.4.69) and no action (4.4.62).

4.10.34 The treatment of beaches and the coastline after a heavy spillage of oil will be long and costly. A heavy loss

of sand with semi-permanent loss of qualtiy will be inevitable (4.4.84).

Part 5 - Summary of Recommendations on Contingency Planning and Remedial Measures 4.10.35 This is more than a summary because it includes

several important recommendations not made in Part 4. It appears at paragraph 4.5.1.

799

Part 6 - Recent Blowouts and Their Causes 4.10.36 Mr Thomas General Manager of Beach Petroleum NL said that the human factor can never be eliminated and that one must accept the chance of a blowout wherever one is drilling (4.6.2).

4.10.37 Both human error and equipment failure can be reduced (4.6.5).

4.10.38 There have been four off-shore Australian blowouts all of which were gas blowouts (4.6.7).

4.10.39 The Marlin A7 on 2 December 1968 in Bass Strait was caused by negligence, insufficient casing and lack of proper equipment (4.6.8).

4.10.40 The Marlin A4 on 19 May 1971 in Bass Strait was

caused by ignorance and negligence on the part of key personnel (4.6.9).

4.10.41 The Petrol No. l on 6 August 1969 in Buonaparte Gulf

150 miles west of Darwin was substantially due to the inexper­ ience or carelessness of the drilling personnel (4.6.10).

4.10.42 Barracouta on 18 February 1965 in Bass Strait was partially if not entirely due to inexperience or ignorance of personnel (4.6.11). The overseas blowouts examined were as follows:-4.10.43 Santa Barbara on 28 January 1969 (California coast) was partly due to bad drilling procedure but mainly to a bad

casing programme (insufficient casing) (4.6.12).

4.10.44 Chevron on 10 February 1970 (Gulf of Mexico) was due to irresponsible action by the drilling company (in removing a large number of sub-surface safety valves for which they were subsequently fined $1,000,000) and lack of govern­ mental supervision (4.6.13).

Boo

4.10.45 Shell of 1 December 1970 (Gulf of Mexico) appears to have been due to gross carelessness of personnel (4.6.14).

4.10.46 Six other blowouts, three in the North Sea and three in unidentified areas were dealt with in paragraphs 4.6.15 -21. They were due to carelessness and lack of experience.

4.10.47 A tabulated summary of the causes of these blowouts appears in paragraph 4.6.22 .

4.10.48 (R) Seven important recommendations arising from a consideration of the causes of these blowouts a re tabulat­

ed in paragraph 4.6.23.

Part 7 - Miscellaneous Hazards of Petroleum Exploration Drilling and Production in the GBRP

4.10.49 Spills can occur during the collection and transport­ ation ashore of oil from the production well (4.7.2).

4.10.50 The question whether pipelines should be permitted within the GBRP to transport oil from well head to the shore depot (instead of using or tankers) is debatable

(4.7.3). The Commissioners are not entirely ad idem on this subject but the respective hazards of both methods of trans­ porting oil to the shore have been canvassed.

4.10.51 If pipelines are permitted regulations must be made (4.7.3 and 4.7.8). We are not conversant with the regulations which relate to tankers.

4.10.52 In recent years some very large quantities of oil have esca ped from pipelines (4.7 . 6).

4.10.53 (R) If pipelines are permitted their burial should be made compulsory in QOSt areas (4.7.9).

801

4.10.54 (R) Other necessary restrictions on the use of pipe­ lines are given (4.7.13, 4.7.14, 4.7.16 and 4.7.17).

4.10.55 Suggestions are made regarding sea transportation to shore and the use of flexibile hoses (4.7.21 and 4.7.29).

4.10.56 Seismic surveys and the use of explosives within the GBRP are dealt with at 4.7.31 et seq.

4.10.57 (R) It is recommended (a) that the use of high

explosives for seismic surveys be totally prohibited within the GBRP, (b) all seismic surveys should be subject to Govern­ mental control and (c) no seismic surveys be permitted in GBR waters of shallow depths or close to reefs, cays, lagoons and

islands (4.7.49).

4.10.58 (R) Dredging and the deposit of sands and sediments are deleterious to corals and benthic organisms and should be controlled (4.7.50 and 4.7.54).

4.10.59 (R) Kerbs, gutters and drains should be constructed on all drilling and production platforms (4.7.55).

4.10.60 (R) Subject to three exceptions no substances whether solid or liquid of any kind should be disposed of into the waters of the GBRP (4.7.57). This recommendation also appears in Part 9.

Part 8 - Governmental Supervision 4.10.61 (R) There must be governmental control and super­ vision of all activities relating to petroleum drilling prod­ uction and transportation from well to shore within the GBRP (4.8.1).

4.10.62 It is not altogether clear whether 8125 of the mirror legislation permits the appointment of several inspectors concurrently (4.8.7).

802

4.10.63 (R) The powers of the inspectors should be enlarg­ ed (4.8.9 and 4.8.10).

4.10.64 (R) The reporting of spills should be dealt with

more fully and co-ordinated with contingency planning. On­ site inspectors are desirable (4.8.12 and 4.8.13).

4.10.65 (R) When regulations imposing safety precautions are being finally drafted they should give specific instruct­ ions wherever possible and not be general guides. They should nevertheless retain a measure of flexibility (4.8.15).

4.10.66 The subjects which should be covered by such regula­ tions are given (4.8.23).

4.10.67 (R) Mr Coulter's view on "field orders" should be

adopted (4.8.24).

Part 9 - Exhibit 68 and Regulations to be made under the Mirror Legislation (Sl59)

Section 1 - Preliminary 4.10.68 Exhibit 68 is inadequate and requires substantial amendments (4.9.1).

4.10.69 (R) Regulations should be made which apply specific­ ally to the special and unique features of the GBRP (4.9.4 and 4. 9. 7).

4.10.70 The American OCS orders pertaining to the Pacific Region and which were amended after the Santa Barbara blowout in 1969 are of particular value when framing regulations for the GBRP (4.9.7 and 4.9.12).

4.10.71 (R) The recommendations regarding Exhibit 68 and safety precautions relate inter alia to shear rams, surface controlled sub-surface safety valves, casing programme and

803

fluid level indicators with visual and audio warning devices (4.9.16- 19).

Section 2 - Exhibit 68 Exhibit 68 - Part I.

4.10.72 (R) The definition of

attracts amendment (4.9.22).

4.10.73 (4.9.24).

4.10.74 (4.9.24).

"Good oilfield practice"- see 4.10.7 supra

(R) Drilling contractors should be licensed

4.10.75 Definition of·"operator" is discussed (4.9.24) with dissenting views of the Chairman.

4.10.76 (R) Definition of "pipeline" is confusing (4.9.24) It should be amended.

Exhibit 68 - Part II

4.10.77 (R) A consistent plan for assigning responsibility for compliance with the Regulations as between title holder and operator (or both) is imperative. The position on this apsect is unsatisfactory (4.9.25).

4.10.78 A suggestion is made regarding S97 (4.9.25- 27).

4.10.79 The subject (not directly germane to the

Commission's enquiry) of liability to third parties for damage caused by negligent or wrongful acts during drilling is mentioned and an analysis of the subject made by Mr Hampson QC at the request of the Commission became Exhibit 247 (4.9.28).

4.10.80 (R) The wording of clause 6 is defective. The

DA (that is the Designated Authority who under the Mirror

Legislation is the Minister) or his delegate (an inspector)

804

must have wider powers to deal with emergencies (4.9.29). The suggestions previously made regarding amendments to sections 97, 98 and 101 referred to (4.9.29).

4.10.81 (R) Subject to three exceptions there should be a

total prohibition against disposing of substances (solid or liquid) into the waters of the GBRP - a new clause 7 is set

forth (4.9.31). This is directed to the prevention of pollution. A reference to standby pollution control equip­ ment is included.

4.10.82 (R) In clause l(l) Division 2 of Part II the word

"licensee" should be replaced by the phrase "title holder and operator." (4.9.34)

4.10.83 (R) The qualifications and experience of drilling personnel should be approved by the designated authority (4.9.34). The question of their certification is discussed (ibid).

4.10.84 (R) A substitute for clause 7 which deals with

explosive and toxic gases is suggested and its details given (4.9.36).

4.10.85 (R) A substitution for clause 8 (2) is recommended

and its wording given (4.9.37).

4.10.86 (R) Various recommendations and suggestions are made regarding clauses 14 (1), 22, 23 and 26 (4.9.39 et seq).

4.10.87 (R) Clause 27 (2) should be eliminated (4.9.43).

Part III and Part IV

4.10.88 (R) If the Commission's previously given recommend-ations regarding seismic surveying and explosives are accept­ ed the provisions of Parts III and IV will require complete revision (4.9.45).

805

4 .10. 89 The phrase "Fermi ttee or Licensee" attracts .consider­ ation (4.9.46).

Part V - Division 2

4.10.90 4.10.91 Greater particularity is desirable (4.9.47). (R) In clause I "new" casing to be specified

4.10.92 (R) Structural casing to be compulsory and run to

100 feet. The drilling fluid should be ordinary sea water (4.9.51).

4.10.93 (R) Conductor casing should be set to 500 feet with

a proviso (4.9.52). A substitute for clause 3 (3) is accord­

ingly provided (4.9.53).

4.10.94 (R) Surface casing should be about 1500 feet TVD below ocean bed (4.9.54). A substitution for clause 3 (4) is given (4.9.55)

4.10.95 (R) Casing cementing- a substitution for the first sentence of clause 3 (5) is given (4.9.56).

4.10.96 (R) A new sub clause is given which gives general

rules for all casing below surface casing (4.9.57) and see 4.9.58 re Intermediate and Protective casing.

4.10.97 (R) Production casing requires special treatment. It should be stipulated as in American OCS Order 2 that surface casing should never be used as production casing. A substitution for clause 3 (7) is accordingly given (4.9.59).

4.10.98 (R) A recommendation is made for a substituted wording for clause 3 (10) with a qualification (4.9.61).

4.10.99 (R) Clause 5 (2) should be deleted if our recommend-

ation for a total prohibition on the disposal of substances is accepted (4.9.62).

806

4.10.100 (R) To ensure safe conditions for making a trip the provisions of OCS Order 2 - 3A should be incorporated (4.9.63).

4.10.101 (R) A substitution for clause 6 (1) and (2)

relating to the Mud programme and Mud control is given (4.9.64).

Part V - Division 3

4.10.102 (R) Clause 1 (1) (a) is inadequate. OCS Order 2

clauses A, B and C with two important variations should be substituted for it (4.9.65). A substituted form is given (4.9.66). This sets forth in detail the proper number of BOPs (pipe rams, blind rams and bag type), spools, choke manifolds, kill and fill-up lines.

4.10.103 (R) (Clause 1 (1) (b) should be elaborated (4.9.67). The new form is provided. There must be at least one set of

shear rams (4.9.68).

4.10.104 (R) Clause 1 (2) should be substituted by the

given form. The reasons for the substitution are given (4.9.70).

4.10.105 (R) Clause 1 (3) ' requires amendment. Provision should be made for the compulsory installation of a choke control panel clearly visible to the operator of the choke control and including accurate sens itive pressure gauges and

other devices as set forth (4.9.72).

4.10.106 (R) Clause 1 (5) should be substituted by the form

given (4.9.74). This relates to the sufficiency of pressure c apacity reserve.

4.10.107 The fluid should be non-toxic and water soluble (4.9.75).

4.10.108 (R) Clause 1 ( 6 ) requires re-drafting t o provide for the functional difference s between blind and othe r types Jf rams as suggested (4.9.7 6 ). 807

4.10.109 (R) A substitution for clause 1 (7) (a) is given

relating to blowout preventer tests and practice drills (4.9.79).

4.10.110 A note is added suggesting a discretion to the DA to require testing and inspection.

4.10.111 (R) Clause 1 (7) (b) should be substituted by the

form given (4.9.81). The general objective relates to the replacement of unserviceable or suspect elements of bag type blowout preventers.

4.10.112 (R) Clause 1 (8) should be substituted by the given form (4.9.83) - (reporting closures).

4.10.113 (R) The all important last sentence of clause 2 (2)

should become clause 1 at the beginning of Division 3 of Part Vandall other paragraphs renumbered (4.9.86) - (hole full of mud at all times).

4.10.114 (R) A substitution for clause 2 (1) and 2'(2) is

given (4.9.88). This follows OCS 2E but with additions. Top and lower kelly cocks, drop-in type back pressure valves, etc.

4.10.115 (R) Provision for a penetration rate recorder (4.9.90).

Part VI - Division I - Equipment and Facilities 4.10.116 Some of the provisions of Division I such as clause 4 (l)(c)(v) will require re-drafting if earlier recommenda­ tions are accepted (4.9.93).

4.10.117 The suggestion made by Mr Jeffrey QC on behalf of A.P.E.A. regarding the incorporation into the regulations of provisions such as the "Testimony Summary" (Exhibit 213) prepared by Combustion Engineering Corporation should be

considered as in the Commission's opinion such provisions

808

would assist both the draftsman of the regulations and the DA also title holders (4.9.95).

4.10.118 (R) Mr .Lewd's suggestion regarding flame

arrestors and internal fire box heat detectors should be adopted (4.9.96).

4.10.119 (R) OCS Order 6 should be adopted as indicated.

Also a requirement for two master valves on high pressure wells is a good precaution (4.9.97).

4.10.120 (R) Clause 5 on p.10l of Exhibit 68 should be

substituted by the form given in 4.9.99 for the reason given.

4.10.121 (R) All references to American or other standards

should be brought up to date (4.9.100).

4.10.122 (R) As suggested by Mr Lowd the words "manually

operated" should be inserted before the opening word "Valves" in clause 8 (4.9.101).

4.10.123 (R) Clause 10 (2) (a) should be redrafted so as

to provide for more frequent testing and inspection and other requirements as set forth in 4.9.103.

4.10.124 (R) Clause 10 (2) (a) should be amended so as to

provide for the witnessing by an inspector of testing and inspection of the safety system (4.9.105).

4.10.125 (R) Clause 11 (1) should be eliminated and be

substituted by OCS Order 8 pages 8 - 11 but with the tabulated omissions and amendments (4.9.108).

4.10.126 (R) Clause 11 (2) (a) should be replaced by the

form set forth in 4.9.114. This amendment relates inter alia to surface controlled sub-surface safety valves and the provision of OCS Order 5 clauses l to 5 inclusive are referable.

809

4.10.127 (R) Clause 11 (2) (b) should be replaced by the

form given in paragraph 4.9.115.

4.10.128 (R) Clause 11 (2) (c) should be replaced by the

form given in paragraph 4.9.116.

4.10.129 (R) The metric system must be introduced into "Division 2- Measurement" (4.9.117).

4.10.130 (R) Clauses 15 on p.ll7 of Exhibit 68 and 19 on

p.ll8 will require review if an earlier recommendation is accepted (4.9.118 - 119).

Part VII - Electrical 4.10.131 A suggestion is made regarding electrical equipment (4.9.120).

Part VIII - Pipelines 4.10.132 (R) OCS Order 9 of 1 June 1971 should be adopted

but with tabulated amendments and additions (4.9.125 and 4.9.127).

4.10.133 (R) But the provisions of Part VIII should be retained subject to tabulated considerations (4.9.126).

4.10.134 Suggestions are made as to the regulation and control of flexible hoses and enumerated safety measures and devices (4.9.128).

Part IX - Marine

4.10.135 (R) Clause 10 (c) (viii) should be amended. The

standard should be the 100 years storm. But in the GBRP an

even higher standard is desirable (4.9.131).

4.10.136 (R) The design criteria for fixed platforms should be reconsidered (4.9.132).

810

4.10.137 Clause 27 (1) should be retained.

4.10.138 It is suggested that in clause 28 (p.l41 of Exhibit 68) it be provided that the marking and identification should be in accordance with the requirements of the DA (4.9.134). The provisions of OCS order 8 at 8 - 2 are mentioned.

4.10.139 The provisions of clause 33 (3) may require co­ ordination and earlier provisions (4.9.135).

4.10.140 The provisions relating to shore stations and emergency evacuations seem to attract revision but these subjects are beyond the scope of the enquiry (4.9.136).

Some other recommendations relating to

safety precautions For the sake of convenience we add a note of other recommendations made in the answers to Terms of Reference other than TR4:-

4.10.141 (R) Because of its present limitations as regards stability and station keeping the ship-shape floating plat­ form using conventional anchorages is unsuitable for use within the GBRP and its use therein should be prohibited

1.4.8 and 4.6.23 supra.) This view is intended to be flexible with the advent of technical advances - see paragraphs 4.6.23 (4) and PI.3.ll.

4.10.142 (R) The semi-submersible floating platform should not be used within the GBRP in water depths less than 250 feet. This also is not intended to be an inflexible prohibit­ ion- see paragraphs 4.6.23 and PI.3.ll.

4.10.143 (R) Petroleum drilling should in any event never be allowed within specified distances of actual or potential resort areas, marine parks, sand cays, coastlines,beaches, headlands and coral reefs. (See answers to TR2, TR3 and TR5.)

811

Addendum 5 .l.l

TERM OF REFERENCE NO. 5

"What are the probable benefits accruing to the State of Queensland and other parts of the Commonwealth from exploration or drilling for petroleum in the Area of the

Great Barrier Reef and the extent of those benefits?"

PART l - INTRODUCTION

Events both overseas and in Australia which have occurred since the hearing of evidence concluded in mid 1972 have altered the value of some of the facts given in evidence as bases for present day values although they do not appear to

affect the principles and conclusions which we have stated in the answer. Thus in Australia alterations have been made to the Income Tax Assessment Act (+936-1973) whilst overseas sub­

stantial changes have been made by OPEC countries in posted prices and in some measure in the production and distribution of Middle East oil. Expert evidence given on the basis of the 1970-1972

situations is in some instances - and not unnaturally - based on wrong premises but we have retained quotations from such evi­ dence because it has been deemed likely to help readers to be able to contrast such views with the situation as it presently exists but which is still in a changing state.

Where deemed appropriate, we have inserted addenda so as to draw attention to the relevant changes and how they may be expected to operate. These addenda appear at paragraphs 5.2.19, 5.2.29,

5.2.62 and 5.2.144.

813

Assumptions 5.1.2 Oil exploration drilling is not a labour intensive

industry and apart from obtaining greater geological and general knowledge of the area and improved drilling technology and some possible business benefits from the supply of services and equipment to the searching companies (Mr McAlister (T969l)) substantial benefits could not be expected from unsuccessful exploration for oil within the GBRP. Furthermore, it cannot be known whether oil search would be successful, and if so the degree of success. As regards gas it was formerly considered that it was a primary objective as a welcome but accidental consequence searching for oil (T989l) - but this is scarcely

the case to-day. Accordingly, an answer to this question requires the assumption to be made that drilling will be commercially successful and our answer will wherever necessary be based on selected hypotheses relating to the nature, time, location and degree of such assumed success. The "capital expenditure" method used by the economist, Mr Cochrane; Lecturer in Economics, University of Queensland will however also be dis­

cussed (paragraphs 5.2.2 et seq). Of this method Dr·Coombs said "This approach is ingenious and to a degree rational ...

I doubt whether it will sustain the kind of conclusions which Mr Cochrane seeks to draw from it" (Tl3249). The present day

position confirms Dr Coombs' judgment.

Net benefits The word "benefits" will be construed as meaning "net benefits" because whatever degree of commercial success may be assumed there will be some debit factors to the industry such as the direct cost of obtaining gross benefits and indirect debits like benefits foregone if the invested capital had been deployed elsewhere, and also actual or potential disadvantages to the community, such as hazards to the reefs, the eco-systems, the general environment and to the tourist industry and also the consumption of irreplaceable natural resources.

814

The extent of the disadvantages and of some of the gross benefits, e.g. self-sufficiency in petroleum products, cannot be assessed in monetary or precise terms whatever assumptions are made. In other words not all benefits can be manifested in terms of an increase in the Australian "net national product" - which is a concept of the system of

national accounts. Dr Coombs adverted to this subject at Tll298.

5.1. 4 The nature of the net benefits will vary as between

the Australian and Queensland Governments, the community gen­ erally and the petroleum industry. The question whether the industry or part of it is carried on by foreign or Australian capital will affect the answer although the subject is not

free from complexities (paragraph 5.2.110(12)). Furthermore benefits from successful drilling in the GBRP would be affected if Australia were otherwise self-sufficient which however is not the case at present.

Effect of foreign capital 5.1.5 Under existing conditions some debit factors to industry e.g. foregone benefits will operate only to a small extent because the on the evidence which we heard and

as obtaining at the time of writing this report was that 92% of the blocks in respect of which permits to drill in the GBRP have been granted are in permit areas granted to foreign owned companies (Mr McAlister at Tl0087A, Mr Norrie Exhibit 509 and

see Appendix D to the Report). Consequently "direct costs" to these permittees would not touch or concern our net national product whilst "foregone benefits" (which strictly speaking might themselves have to be similarly measured) are

inapplicable except in regard to Australian capital and labour. One economist (Mr Cochrane) stated (Exhibit 341 p.4):­

"Gains from a foreign owned industry are equal to Governmental revenue from it. The costs are borne by the foreiF>;n owner." This quotation however does not state the gains in

815

exhaustive fashion as there would obviously be other gains which would benefit the community generally. Again the heavy finding and development costs (in­ cluding transportation from well to shore depot) are major

factors when assessing "benefits" both to the industry and government revenues, so that if the exploration and production industry is foreign owned the answer in relation to the Australian community (and perhaps to some extent the Govern­ ments) is affected.

5.1. 6 In this regard it may be mentioned that existing

geological knowledge of the GBRP is small whilst the petroleum prospects of the known "basins" have been officially graded (Tl305 et seq) as ranging from "fair" to "poor" or "C" to "D" with one exception, namely the "Papuan Basin" in the far north which is graded "good" or "B".

Probabilities 5.1. 7 The presence of the word "probable" in this Term of

Reference ("probable benefits") fortifies the view that the answer must be based on assumptions and hypotheses. -Mr McAlister of the Department of National Develop-ment said:-

"I do not wish to enter into the realm of probabil­ ities, I have no useful information on that at all." (Tl0013)

5.1.8 The evidence of the expert witnesses given on this

Term of Reference differed remarkably.

5.1.9 All witnesses necessarily assumed that any permitted drilling within the GBRP would be commercially successful but whilst some compiled tables giving figures showing taxable in­ come, government "take" etc. for different sizes of discovered fields and based on varying assumptions, others adopted a "capital expenditure" and extrapolation method and thus arrived at probable or possible sizes of fields and present

816

value of petroleum to be won therefrom. The results differed to a remarkable degree. Both these methods will be referred to later.

Policy matters involved 5.1.10 Some of the gross benefits depend on governmental fiscal policy whilst some potential disadvantages such perils to corals, the eco-systems and the general environment will remain uncertain until further researches including long­

term experiments have been undertaken and completed. This subject is discussed in detail in the "Principal Introduction" and in the answer to TR2.

Displacement effect 5.1.11 Mr Cochrane claimed that a possible disadvantage to be set off against gross benefits would be "displacement effect" which would be caused if GBR oil entered the

Australian market in that:-(i) Profits would to an extent be trans­

ferred from existing Australian pro­ ducers of oil (e.g. BHP) to the for­

eign permittees who become producers of Reef oil and who have over 92% of

the blocks in existing authorised permit areas in the GBRP (TlOOB7A, Tl5990). (ii) GBR oil will reduce average prices

and so deter exploration in the rest of Australia (T9097). This effect was said to be a consequence of the

Australian Government's pro-rationing policy whereby Australian refineries must purchase allocated shares of in­ digenous crude otherwise they are sub­

ject to a penal duty on imported crude.

817

But two conditions must subsist before these dis­ placement effects can operate, namely (i) Australia's in­ digenous crude production must equal or exceed home consump­ tion, and (ii) the home price must exceed the overseas (or

export) price - the situation which existed prior to the Australian Government's policy (as announced by Mr Gorton in 1968) came into operation at the beginning of 1970. As regards the former, Mr Cochrane using his capital

expenditure and extrapolation method of assessing future pro­ duction of oil in Australia expressed the startling opinion that by 1976 there was a possibility that Australia will be exporting crude at the rate of one million barrels per day and as regards the latter he considered the probabilities to be that the trend of overseas prices will be downwards.

5 .1.12 The subject is discussed later under the heading "Possible decrease in the local price of petroleum products" but in view of the existing overseas trends it is difficult indeed to make any forecast regarding future overseas prices. The present overseas prices as appearing from press feports

seem to have jumped to figures in excess of $10 per barrel. For the rest, much will turn on Federal Government policy in 1975 in regard to the home price of $2.06. Even when Mr Foster a BHP official gave evidence in 1971 overseas prices had gone higher than was contemplated when the $2.06 was fixed.

(T8426)

5. 1. 13 Mr McAlister (Senior Economist, Minerals and Forest Policy Branch of the Resources Policy Division in the Depart­ ment of National Development) at T9895 said of Mr Cochrane's "displacement" theory:-

818

"If you make those assumptions (i) that Australia exported crude oil, (ii) that home prices were higher than export prices then to the extent that

oil produced from another area was

forced out as it were from

the domestic market, then to that extent that reduces the profit otherwise applicable then I would say yes. One

would need to balance this out and take such a situation into account."

5.1.14 Mr Cochrane added that if all three prices were the

same -home support, import and export - could be no

displacement effect. But he thought it to be almost a certain­ ty that Australia would become an oil exporter. Mr Cochrane's views are also discussed later under "Increase in national wealth".

5.1.15 In the result whilst this displacement effect will be required to be kept in mind when the home price is being

reviewed or if overseas prices should unexpectedly fall it cannot be regarded under existing conditions as a factor presently operating against oil exploration in the GBRP or as a set off to potential benefits which may be thought cap­

able of arising therefrom.

5.1.16 If production commences within 10 years of com-pletion of field operations subsidies formerly payable were repayable in full (clause 27 of the General Conditions under the Petroleum Search Subsidy Act 1959-1969 -Exhibits 359, 360

and 245). The aggregate amount paid to unsuccessful explorers who leave the industry was claimed to be a proper deduction

when considering gross benefits to the Commonwealth from

royalties.

Other miscellaneous background matters 5.1.17 (a) Double counting

When assessing benefits, not all items are

cumulative.

819

.......

Dr Coombs said: "There is a tendency, especially among non­ economists, and even among economists, to refer to increases in export income, or re­ ductions in import expenditure on particular items, particularly if accompanied by increases in international reserves or gold or foreign exchange as 'gains' which in some way are additional to and different from the net social gains which Mr Cochrane and others set out to estimate. This is erroneous. In this case the increase in domestic oil pro­ duction, which is presumed, accompanied by a reduction of oil imports, brings about a rela­ tive redistribution of income - for instance markedly in favour of oil producing companies. Particularly during a period of more than nor­ mal profits, this would be accompanied by an

increase in the level of domestic savings, part of which would be used to build up the financial reserves of, particularly, those corporations with higher incomes and greater surpluses over

current expenditure. Some of these increases in financial reserves would be in the form of gold and foreign currency assets held on public be­ half by the Reserve Bank or the banking system It should be emphasised that this strengthening of international reserves is not an addition to the general social gains but one 'use' of such gains. Indeed, it is possible that the growth of reserves could occur independently of there being net social gains." (Tll307-8)

(b) Discounting Discounting is a technique designed to deal with the time elements of investment projects. It was used exten­ sively by the various expert witnesses in the compilation of

820

various Tables to illustrate the present value of future benefits based on assumptions or hypotheses relating to size of discovered reservoirs, number of wells, rate of flow and

value of output over various periods of time. But it is not a technique of unlimited application and on one or two occasions it served no useful purpose for us.

As Dr Coombs said (Tll323):-" ... a discounted cash flow ... enables you

to make a comparison at this point of the

different ways of using the resources you have, yielding returns at different times, but this does not mean that from a social

point of view, looking at it from the point

of view of different generations of the pop­ ulation at a different time that when that happens ... the value of the output is dis­

counted. At that time it is a real value,

but it is when you want to convert it into

a judgment about now, that you have to dis­

count it." One or two other views may be quoted. Thus Dr

Hunter recently deceased but formerly Professorial Fellow in Economics, Institute of Advanced Studies, The Australian National University and Mr Brown, Planning and Development Manager of Delhi International Oil Corporation - who read

Dr Hunter's paper, said:-"The rate of discount to be applied to a

cost benefit analysis is usually the prime interest rate for loan funds as used, for

example, by the Australian Government in advancing money to statutory corporations and the like." (T7990) Mr Fitzgibbons Lecturer in Economics, University

of Queensland dealt with the selection of the discount rate as follows:-

821

"Although the correct choice of a discount rate is important, there have been three possible rates for this. Cochrane - Fitz­ gibbons have suggested 15% and Hunter has employed 7% and 10 %. Hunter's figures were not adjusted for a growth rate, whereas Cochrane and Fitzgibbons used a 6% growth rate and applied a discount rate equal to 15% - 6% = 9% ... it is possible that Hunter

merely omitted consideration of the growth rat e ." (Tll232)

(c) Natural and creative wealth Dr Coombs when referring to the difference between inherited and creat ed wealth said:-

822

"The Commi s sion is making a judgment not for a particular person or corporation but for

and on behalf of the community as a whole which it seems proper to regard as having "perpetual succession". It will therefore desirably give greater wei ght to the needs and opportunities of that community in the future than perhaps would

an individual whose life is limited or a corpor­ ation concerned to satisfy the immediate demands of individual shareholders. In a sense the Commission, if it were practical, should call representatives of the grandchildren of those presently involved and indeed the grandchildren of those grandchildren. It is true that into

this weighting the uncertainty of the future will enter. Opportunities may pass because of events of the kind described by Dr Hunter in his appendix (p.68):

"changes in demand, increased costs, government intervention, Acts of

God etc."

But these changes are as likely to be favourable

as unfavourable. Furthermore, increasing knowledge, improved technology, are likely to reveal more fully the potential of given resources." (Tll327)

(d) Efficiency of the oil industry It was said by the economists that it is a con­

dition that the industry be efficient for any benefits to accrue. Dr Hunter said (T7962):-" ... that the industry is efficient in eco­

nomic terms is a necessary condition when discussing the economic benefits accruing from the industry ... "

Mr Brown explained:-" in other words it must be producing more

than the resources it is using." (T7965) Mr Cohen Research Director, Committee for Economic

Development of Australia, Melbourne, said:-"There is little doubt that to the present point in time net inflows of labour, capital, technology and organisational skills on

account of (i.e. exclusive to) the oil in­ dustry have added substantially to the Australian factor resource production frontier I think most simply it (factor resource pro­

duction frontier) can be explained by what we can produce with a given level of factor re­ sources which are, land, labour, capital, organisation and in fact expanding the factor resources which are available to us which en­

able us to produce potentially a greater level of goods and services ...

In both these additive and allocative character­ istics the Australian oil industry would to have performed efficiently with consequent

823

economic benefit to the Australian public." (T8707-8) Dr Hunter worked out a rough cost benefit estimate and made comparisons of productivity of Australian drilling with that of Canada and United States and formed the view that his exercise had established the efficiency of the Australian petroleum industry.

The plan of the answer is as follows:-5.1.18 In Part 2 the potential gross benefits will be ana-

lysed under the following headings:-(a) Increase in national wealth (b) Possible decrease in price of petroleum products (c) Income tax

(d) Royalties (e) Possible benefits to our balance of payments situation (f) Self-sufficiency (g) Industrial and labour development and natural

gas benefits (h) Increased technological and scientific knowledge In Part 3 the potential disadvantages will be analysed under the following headings:-

824

(a) Introduction (b) Consumption of irreplaceable natural resources (oil and gas) (c) Interference with a unique environment and

with its enjoyment by the present and succeed­ ing generations. (d) Potential peril to the corals and eco-systems of the GBRP (e) Hazards to the tourist industry In Part 4 the Answer to TR5 will be given

PART 2 - POTENTIAL GROSS BENEFITS

(a) Increase in national wealth

Uncertainty of success in petroleum drilling 5.2.1 As earlier stated one of the major difficulties in

any attempt to estimate the nature and extent of benefits which may flow is the uncertainty of success in exploratory drilling in the GBRP. Different methods were used by witnesses to help overcome this fundamental difficulty.

Mr Cochrane's capital expenditure method

5.2.2 Mr Cochrane's indirect method (T9166) to which ref-erence has been made earlier by which an output expectation may be made was described by him as the "capital expenditure

method" - and his own example of how to learn from the "com­ bined geological wisdom of the industry" and hence become "privy to the output expected" in an area is as follows:-"Ignoring the problem of discounting, where explora­

tory and development capital is $100m and the normal profit rate is 20% after tax, the industry will expect annual revenue from oil to yield an after tax profit of $20m. Where the after tax pro­

fit per barrel is 50¢ the industry will expect to

find oil sufficient to give an annual output of 40 million barrels." Then Mr Cochrane extrapolated past capital expendi­ ture on exploration development (there has been no pre­ production development in the GBRP) and found it thereby possible to construct models which give the most probable

gains from the anticipated development of the Australian oil industry:-(i)

(ii)

assuming exploration and development including the Reef area excluding the Reef area

825

and, by subtraction, the added gain from exploration and de­ velopment of the GBRP. The results he achieved were surpris­ ingly low and indicated that if his methods are reliable oil drilling in the GBRP would probably serve comparatively little useful monetary purpose to the Australian economy.

Dr Coombs' comment thereon But although in some respects attractive the theory, depending as it does in part on extrapolation of very meagre figures in relation to the GBRP, is unacceptable.

5.2.4

Of it Dr Coombs said:-"This approach is ingenious, and, to a degree rational. It is consistent with the basic economic doctrine that investment will be so directed as to tend to bring about a uniform return to marginal units of capital expendi­ ture on alternative forms of production and avoids resort to arbitrary or intuitive judg­ ment about oil output. It takes into account the displacement effect between Reef and non­ Reef developments, recognising that capital and labour employed, costs incurred, prices and incomes earned in the non-Reef area will be affected by whether or not the Reef Area development takes place."

But Dr Coombs then indicated that, applied to a con-crete problem of this kind, the analysis is open to serious doubt. He indicated:-

826

(1) The trend towards uniform return on capital at the margin is a long term

trend and at any one time is subject

to interference by changing conditions of supply and demand. (2) Mr Cochrane's judgments about output probability from GBRP are based upon

expenditure figures extrapolated after January 1969 (a very few drills - all unsuccessful - were made in the

GBRP up to 1968) and on the basis of

the projected release of a further 14 "Permit" areas within the GBRP which he considered would double the Reef area under exploration. He (and his co-authors of Exhibit 344) thereupon

doubled the figure of 3.3% which had been previously obtained as the percent-age of expenditure on Reef exploration in 1969 as compared with the exploration ex­

penditure throughout Australia and used 6.6 as the percentage of Reef exploratory capital in Australia during the years 1971-1980. "Extrapolation" added Dr Coombs "is at all times hazardous and there

appears to be a non sequitur in the reasons by which the post 1969 figures were chosen.·" (Tll303) (3) Dr Coombs challenged Mr Cochrane's re­

liance on the geological wisdom of the industry being exemplified by expenditure. Mr McAlister had additional reasons for disagreeing

which are set forth a little later.

Mr Cochrane's comment on tables and hypotheses

5.2.5 For their part Messrs Cochrane and Fitzgibbons criticised other methods of calculation put before the Commission such as the Tables based on alternative outputs of Dr Hunter, Mr Brown and Mr Foster, Mr McCay and Mr McAlister and others. "How can a decision maker" they ask "decide which of the many alternatives is the most likely output and which is the least likely output?" and this may seem fair comment.

"The only alternative to the expenditure

827

method is to present figures on net gains which are based on vague qualitative judgments or personal hunches." (ibid) The view of Messrs Cochrane and Fitzgibbons was that

the capital expenditure method "however imperfect" (Exhibit 341 p.8) is ·superior to the random approach because "it is

based on objective criteria, it will accommodate the dis­ placement effects and it does allow an explicit statement of net gains." (Exhibit 341 p.8)

Mr Cochrane's Exhibits 344 and 341

5.2.6 As the Commission agrees substantially with Dr Coombs' comments on Mr Cochrane's submissions it is un­

necessary to examine in detail the ingenious and interesting computations and figures which are set out in Exhibits 344 and 341. In particular the Tables II.4, II.5 on pages 2.7 and

2.8 of Exhibit 344 and the computation at page 2.9 which shows how the estimated number of wells (21) to be drilled in the

GBRP during 1971-80 is arrived at are of interest but fail to

attract adoption by the Commission because of the basic re­ liance made on extrapolation especially as the Bass Strait dis­ coveries were made so quickly whilst the GBRP is geologically little known.

For those interested in further research on Mr Cochrane's evidence, it should be explained that the computa­ tion at page 2.9 of Exhibit 344 is to be associated with Table

11.3 appearing at page 2.5 in order to understand that the fig­ ure 695, appearing in the equation 695 x 1.18 x 0.066 = 21

2.57

where 21 is estimated number of wells drilled in the GBRP dur­ ing the period 1971-1980, is the undiscounted total of Australian exploration for the years 1967-1969 plus extrapo­ lated figures for 1970-1974 inclusive. After ascertaining in this way the number of expected wells the figure of 21 was reduced to 10. Mr Cochrane states (p.9 of Exhibit 341):-

"But because expected Reef production will

828

reduce the average price of oil (this is

a reference to his 'displacement' theory)

the average net addition to the expected number of wells in Australia was about 10. That is if drilling was prohibited in the Reef the expected average reduction in the number of exploratory wells would be about

10." The computations ultimately obtain figures for (a) expected mean production, (b) the statistical distribution of oil fields in the area and (c) the present discounted value

of the expected mean net gain from Reef production. The latter appears to be comparatively small - $24m or $2 per head of population.

Mr Cochrane's estimate of $24m or $2 per head

5.2.7 Mr Cochrane explained how he reached his figures as

follows:-"For example it is known that all over the world field sizes are normally distributed if reserves are calculated in logarithmic units.

If the mean is known, hardly any additional geo­ logical information is required to derive the whole of the distribution. Thus it becomes poss­ ible to estimate the probability of any particular

output of oil and gas.

It was found that the probability distributions of net gains from oil and gas production were as follows:-(i) The expected mean net gain from Australian

production, excluding the Reef was calcu­ lated to be $265m per annum after 1976. Discounted to the present (1971) represen­ ted a capitalised sum of $1,463m. (ii) With the inclusion of the Barrier Reef the

capitalised value today of the expected

829

--

mean net gains was $1,487m. (iii) The expected mean net gain from Reef pro­ duction is the difference between (ii) and (i) above, that is a capitalised value

today of $24m."

and he elsewhere points out that this is the equivalent of about $2 per head of Australia's population.

Mr Cochrane's other views

'5. 2. 8 (a) "Australia, excluding the Reef

The expected mean new annual initial (1976) output from Australian production excluding the Reef, was 430m barrels of oil and 2.7 trillion c.f. of gas (2.7 x 1012 ), corres­ ponding to new reserves of 3,800m barrels of oil and 24 trillion c.f. of gas. (These

additions are about double known reserves today. It is expected that over lm barrels

of oil per day and over 7,000m.c.f. LNG per day will be exported)."

(b) "Barrier Reef production (i) The expected mean annual initial (1976) output in the Reef was 30m barrels of oil and 0.2 trillion c.f. of gas,

corresponding to reserves of 270m barrels of oil and 1.7 trillion c.f. of

gas.

(ii) The most likely outcome was reserves of 15m barrels of oil and 93,000c.f. of gas. These reserves will be non-commercial and hence constitute a loss. (iii) There was a one in twenty chance that

r eserves will exceed l,l50m barre ls of Gil and 7 trillion c.f. of gas.

(iv) There was a one in twenty chance that

reserves will be less than lOrn barrels of oil and 62,000m.c.f. of gas. These reserves will be

and hence consti­

tute a loss of Australian capital to the Australian nation."

(c) Critique of Mr McCay's submission "The submission by Mr F.L. McCay" First Assistant Secretary in charge of Resources Policy Division of the Department of National Development, whose paper was read by Mr McAlister Senior Economist, Minerals

and Forest Policy Branch of the Resources Policy Division, Department of National Development "on the net gains from Reef oil contain two major errors, which cause net

gains to be over-estimated. First Mr McCay has ignored the displacement effects which were analysed in section 4(iii). Secondly he has implicitly assumed that Australia will not be self-sufficient in crude oil

in the foreseeable future." "The net gains estimated by Mr McCay are an overstatement because (i) All Reef production should have

been valued at the average export price, and not at import price. (ii) There will be no savings in foreign

exchange since Reef oil will not replace imported oil, although foreign exchange reserves will be increased through export earnings. (iii) There will be no increase in

security of domestic oil supplies because a necessary condition for

--

831

the security argument to be upheld is that Australia must be less than self-sufficient in crude oil. We will already

be self-sufficient without Reef drilling."

Mr McAlister's view on Mr Cochrane's evidence

5.2.9 Mr McAlister's reply to some of the features of Mr

Cochrane's evidence appears in Exhibit 387. Inter alia he says:-

832

(1) "But it is important to realise that the

industry must, if acting normally, re­ late its future expectations to each separate investment decision. That is the industry will always be looking for­ ward at the time of each decision to take

a further exploratory step, and the ex­

pected outcome will be related to expendi­ ture associated with that step and with that step alone." ( 2) "We have suggested that the circumstances

could arise where say 200 wells are drilled. To proceed beyond that stage the industry would not need to expect a return on its total outlay on past as well as

future exploration. Clearly not, because to adopt that criterion rigidly could well mean that projects expected to be quite profitable on the marginal investment are passed up. It would be illogical not to

drill the next well because it did not promise a return on the previous 200 wells. So our advice is that a minimum of about

25 wells should be drilled, while perhaps

up to 250 could be put down depending on

the encouragement or otherwise offered by the progressive exploratory activity. No one can foretell just how many will be

put down - certainly not until consider­ able work has been carried out to delineate possible targets and more precisely indicate their prospectivity." (3) "For these reasons then it is impossible

firstly to estimate the amount of explora­ tory work which will be carried out in the Reef area as such work will be subject to constant revision; and secondly to relate the expected outcome to the total expendi­ ture, as explorers could be led on at each

step by an expected outcome just sufficient to induce the marginal investment." (4) "I turn now to examine the proposition that an expected rate of return can be utilised

to determine the field size distribution in a particular and unknown geological environ­

ment. Is it valid to take this step? I

would suggest not." ( 5) "Our view is that, even if it is accepted

that the distribution of field sizes within a region is adequately described by a log

normal distribution, the step from known basins to unknown basins cannot be taken Certainly, within a single region for which considerable data on field sizes is avail­

able, valid predictions might well be made, but this is irrelevant to our present pur­ pose. We do not yet have that data on the

Great Barrier Reef." ( 6) "As an Economist I am unable to provide

any measure of probabilities of oil production

833

or that the Barrier Reef region will be equivalent to a Middle East, a Moonie, or somewhere in between. Nor do I consider that Mr Cochrane's thesis would enable any such helpful measure to be made. Indeed it is my own view that, rather than being

helpful, to adopt such an approach in the absence of full relevant geological data and relating the Reef area to a partly known region which might well be quite

dissimilar, could prove in fact to be most misleading."

Dr Hunter' s cost benefit analySis 5.2.10 Several witnesses attempted to show that investments in the oil industry represen'ted a relatively efficient a llo­ cation of the country's resources which in economists' terms comprise "land, labour, capital and organisational skills"

(Mr Cohen T8703). In his statement Dr Hunter (Exhibit 327 p. 7)

performed a cost-benefit analysis of "the investment·in ex­ ploration for oil in Australia and the expected return over the 1970s decade" and using a 7% discount rate and a price of

$1.90 instead of $2.06 as he ignored quality differential, found that the present value of the investment was $391m.

Mr Foster's re-calculation of $979.3 millions

5.2.11 As appears later under "Income tax", Mr Foster re-calculated Dr Hunter's figures and inter alia produced an un­ discounted figure for a 500 million barrel field and at a price of $2.86 per barrel a total of $979·3 millions for Gov­ e rnment "take" and company earnings over the life of the field.

He also came to the view that the cost of discovery and pro­

duction of indigenous c rude was less than the mid-1970 cost of importing crude from overseas.

An efficient industry

5.2.12 Dr Hunter stressed that when discussing the economic

benefits accruing from an industry it is a necessary pre­ requisite to establish that the industry is efficient in economic terms. "It must be shown" said Mr Brown (T7965) "to be pro-

ducing more than the resources it is using." Mr Cohen said:-"There is little doubt that to the present point of time net inflows of labour, capital,

technology and organisational skills on account of the oil industry have added sub­ stantially to the Australian factor resource production frontier." (T8707-8) Dr Hunter, in addition to comparing the hitherto costs of obtaining indigenous crude oil with the costs of importing it, compared the productivity of the drilling effort in Australia and in the Bass Strait with that of

Canada and the United States; but it is already over three years since Dr Hunter made his comparisons and so much has happened since then both overseas (e.g. the North Sea and Alaska) and in Australia that little useful purpose would be

served by adverting to the details of the analysis. In particular it must be kept in mind firstly that we are primar­ ily concerned with a hypothetical case of an off-shore oil industry in the GBRP where over 90% of existing permittees

are foreign-owned companies whose "efficiency" or otherwise will not be of national importance to us and secondly that the Bass Strait off-shore industry had unusual success in its earliest stages. (But see Addendum to paragraph 5.2.18 infra)

Special position of the GBRP 5.2.13 Accordingly whilst the general proposition is acceptable that the "oil industry" is efficient, it cannot be said of the small proportion of Australian capital at present potentially interested in the GBRP that this generality can

therefore be applied to a prospective off-shore industry in the comparatively little known GBRP. It is a large area of

835

100,000 square miles and with the exception of the Papuan Basin in the far north its have been by Mr R.J.

Allen from "fair" to "poori'. Even giving these words the some­ what special and perhaps curious meaning given to them by Mr Allen during oral evidence the prospect at this stage can­

not be regarded as good, and it seems reasonable to envisage that if petroleum exploration in the GBRP were permitted much exploration south of the Papuan Basin would be necessary be­ fore success was won. Mr Vines (Exhibit graded Papuan

Basin " B" and the remaining basins within GBRP "C" or "D". The very few exploratory drills made to date have been un­

successful. In these circumstances "efficiency" which in this industry must rest so largely on future costs of finding and cost of development, cannot reasonably be pre-estimated. Past finding costs in other areas are:-

"often unknowable, usually unknown and always uninteresting" (Professor Adelman quoted at Tl0007) and to extrapolate from data relating to other and remotely located areas would be to adopt a process kindred to that for which Mr Cochrane was criticised by those who disagreed from his arresting conclusions.

Governmental rewards of successful exploration 5.2.14 But if assumptions be made that Australian in-

vestment in petroleum exploration in the GBRP will prove to be both an "efficient" industry and commercially successful then it seems reasonable to think that the Australian Government revenue and to some extent the Queensland Government will derive more in monetary terms if only by reason of the factor of royalties from such investment than from investment in a different industry with a comparable output and production costs. The monetary impact of royalties on Queensland revenue however is referred to later under "Royalties".

Royalties only a contra 5.2.15 Royalties were not free from analysis and comment

836

when the subject of benefits under the heading of national wealth was under discussion. Of the additional "perk" (as it was put) of royalties it was said that a government should not regard their receipt as "a benefit without a contra"

(Mr Greenwood Tl77e4). Dr Coombs made the point that

royalties should be regarded as a contra to pay for the receipt of non-renewable capital resources. "Oil" said Dr Coombs (Tll329) "cannot be recycled. Its use is therefore a re­

duction in the total of national wealth." A little later he added:-" as a first approximation one may regard

royalty payments and any taxes on output falling exclusively on oil production as the government's price for foregoing the com-munity's ownership of the resources concerned." This seems sound. Crown Grants and Certificates of Title in New South Wales commonly reserve to the Crown, rights

of ownership of designated minerals.

5.2.16 Another comment made on royalties by Mr Greenwood appearing for the Conservation interests was, that if the question to the benefit of the economy as a whole, an

industry's total output (if it is Australian owned) is the real test, and it does not matter whether in one case the Govern­ ment has a bigger "take" than in another. But this comment is of minor significance when considering the GBRP by reason

of the large foreign ownership of the permittee companies. (paragraph 5.2.110 (12) infra). Of course in the oil industry, unrecouped capital expenditure (Sl24DF of the Income Tax Assessment Act) to which reference is made under "Income tax" has an impact on Australian Government "take".

Subsidies a set-off to royalties 5.2.17 Mr Greenwood also said that if royalties are to be

837

regarded as one of the "benefits" a set-off should reasonably enough be made against them in respect of subsidies paid to other operators for unsuccessful exploration. He stressed that in an area (such as the GBRPJ where the prospects range from "fair" to "poor" the aggregate of subsidies granted to unsuccessful explorers might be large. But under paragraph

(d) of Sl24DF subsidies must be repaid by an explorer who ultimately achieves success and becomes a producer, by re­ ducing deductions for unrecouped capital expenditure. The position regarding subsidies has however altered since the end of the hearing. The Commission understands from Press reports that they will cease as from 30 June 1974.

Success in the GBRP would mean some addition to national wealth However, whilst glvlng some recognition to Mr

Greenwood's overall description of royalties and taxes as being "something of a red herring" in any analysis of benefit to national wealth and whilst it is true to say that oil is

non-renewable capital resource, the fact remains the dis­ covery and production of petroleum in the GBRP in commercial quantities would add to national monetary wealth to an extent which would depend on (a) the reservoir size of the dis­

covered fields, (b) the costs of finding and development, and (c) the proportion of Australian ownership of the producer (see paragraphs 5.2.110 (12) infra and paragraph 5.1.5 supra).

Addendum

Since the hearing of expert evidence finished and indeed since the draft of this Part of the Report was written newspaper reports have suggested that some governmental changes of policy both Australian and State in relation to ownership and development of off-shore leases is contemplated. One press statement attributed to a State authority intimated that appli­ cations had been or would be cancelled. There are combinations and variations of the possible courses which could be taken in

relation to the costs of exploration, development, production refining and distribution, and in relation to government "takes" and how and where petroleum products would be disposed of under any suggested new arrangements and to what extent

Australian national or private capital respectively would be invested so that no use(ul purpose would be served by theoris­ ing. Recent relevant amendments to the Income Tax Assessment Act are tabulated in the "Addendum" which precedes paragraph 5.2.62 infra whilst a reference to overseas (OPEC) prices and production of Middle-East oil appears in the "Addendum" which precedes paragraph 5.2.29 infra.

Exploration without production - storage 5.2.19 The possible alternative courses to exploration drilling in the GBRP which were mentioned during the hearing may be briefly noted. If no exploration takes place the ex­

istence of any petroleum resources will remain in the field of speculation. If, as an alternative, exploration is carried out but without development after success, the finding costs whilst doubtless less than Mr Fitzgibbons' figure for storage

(90¢) would still have to be found. But for what particular

long-term objective such costly activity should be undertaken was not made altogether clear. In any future full scale war,

for example, the GBRP and any activities therein might plainly enough be vulnerable from afar. Energy sources are used for the production of many classes of goods and for which future generation are we to conserve our energy sources?

5.2.20 On the other hand curtailment of production from major discoveries made in the GBRP might be understandable if such discoveries were made after Australia had become self­ sufficient because of discoveries made elsewhere in Australian

areas.

839

Alternative course of exploring and development as policy requires 5.2.21 Another suggested course was to explore and if

successful, develop - the development to be regulated as policy requires, but it is doubtful whether exploration on such controlled terms would take place with forei g n money (as was suggested) so as to allow the diversion of Australian

moneys into other productive channels.

Fiduciary duties of the prese nt generation 5.2.22 But these sugge s tions require further consideration in the light of the unique character of the GBRP. Several witnesses expressed or implied the view that the powers of ownership of the prese nt generation are of a fiduciary nature and suggestions were made that the GBRP and its unrivalled beauties should be h e ld without any drilling for an approp­ riate period pending scientific research into the effects of oil on the eco"-systems of the GBR. - "placed in escrow"

(Senate Select Committee Report Exhibit 450 at 13.295 quoting the U.S. President's Panel on Oil Spills).

Dr Coombs' view on the meaning of national wealth

5.2.23 Dr Coombs said (Tll298)

BlJO

"the national product, despite its value as a tool of economic analysis and of policy,

takes account only of output and costs whose price can be assessed by the market; these are by no means all the costs and benefits

relevant to rational decision in this issue ... the obvious ones are pollutions and on

benefits which do not have to be sold in

the market ... income alone cannot be re­

garded as the sole CTiterion of benefit -effects on wealth in the form of produced capital, discovered or imputed resources, and the nature of the physical and social

environment are factors which affect the individual and collective welfare of citizens of Queensland or the Commonwealth ... national wealth is quite a comprehensive thing."

Dr Coombs' view on the economic functions of natural and creative wealth 5.2.24 Later (Tll319), Dr Coombs drew a comparison between persons and entities with the same income but different

sources of wealth and said that just as accumulated or in­ herited wealth is a major factor in the economic circum­ stances of individuals so too, is it in that of communities. A somewhat full quotation from his evidence at this point in­

cluding his tabulation of the economic functions of natural and creative wealth is relevant (Tll327):-"Just as accumulated or inherited wealth is a major factor in the economic circumstances of

individuals, so too is it in that of communities. There will in any society be an aggregation of assets upon which the current and future economic welfare or its members will in part depend. This

aggregation of assets will include natural re­ sources, man-made productive capital embodied in farms, factories, shops, offices, roads, railways, etc.; social capital such as in dwel­

lings, schools and universities, hospitals; the accumulated cultural wealth of the society in books and pictures, song, music, dance and theatre; it will include also scientific and technological knowledge - the fruits of centuries

of research, and of course the whole natural en­ vironment in which human life is lived. Finally it will include financial assets which represent claims on the resources of other societies."

(Tll319)

841

842

"What do you mean by that last sentence?"

"Included in the wealth of Australia would be its of gold and international

reserves which give it command over the re­ sources of other countries. it plays the

same role in the national sense as a private

person's bank account performs for the indi­ vidual: what mon ey you have in your pocket or in your bank is a claim on other people's

resources." "The assets which constitute this accumulated wealth are in our society owned in a variety of ways. Some may remain the property of the

community as a whole through 'the Crown'. Some may be owned privately by large or small

corporations with more or less widely dis­ persed shareholdings. Others may be owned by individuals. Many are the property of public corporations or agencies of governments. Some are used directly by their owners for •

enjoyment or productive purposes; others may be hired or rented out for current use; others

again may be in the nature of 'public goods' available either free or at subsidised prices to members of the community generally. The economic functions of natural and creative wealth are -

(a) To provide the basis for current and

future production of goods and services; (b) To provide a reserve against temporary fluctuations in current production or to allow time to solve problems created by

an apparently permanent fall in production; (c) To provide flexibility and diverse potential for future use or development; (d) To provide a source of direct enjoyment. An intelligent assessment of the effect of any proposed

development such as exploration for or development of oil in the Reef Area can­ not be made without consideration of its impact on the wealth of our society and

the present and future capacity of this wealth to perform these functions. Such a consideration is nonetheless necessary

even if it is difficult or impossible to quantify the impact with which the assess­ ment is concerned." (Tll32l) "The Commission is making a judgment not for

a particular person or corporation but for

and on behalf of the community as a whole which it seems proper to regard as having 'perpetual succession'. It will therefore desirably give greater weight to the needs

and opportunities of that community in the future than perhaps would an individual whose life is limited or a corporation con­ cerned to satisfy the immediate demands of

individual shareholders. In a sense the Commission, if it were practicable, should call representatives of the grandchildren of those presently involved and indeed the grand­

children of those grandchildren. It is true that into this weighting the uncertainty of the future will enter. Opportunities may pass because of events of the kind described by Dr Hunter in his appendix (p.68):

'changes in demand, increased costs, government intervention, Acts of God etc.'

But these changes are as likely to be favourable as unfavourable. Furthermore, increasing knowledge, improved technology, are likely to reveal more fully the potential of given resources." (Tll327)

843

The special position of the GBRP

5.2.25 One message which Dr Coombs was conveying appears to be that in our planning for and dealings with the GBRP the issues are much different from those which might confront a company board which is conducting a cost benefit analysis for a profit making or wealth accumulating project.

5.2.26 At all events it is plain that an enquiry into the

impact of successful oil exploration in the GBRP on natural wealth cannot be conducted with the comparative simplicity with which a similar enquiry relating to off-shore drilling in other parts of the Australian Continental Shelf could be made.

The APEA view

5.2.27 The following contrasting view presented on behalf of APEA is also helpful when overall judgment is being made:­ "Perhaps the most obvious benefits from success­ ful exploration in the Great Barrier Reef.··.

are the increases in the national wealth and the national income which would result ... The great significance of the taxes and royalties paid by producing company is that these taxes and royal­ ties represent a benefit is completely lost

each time a barrel of overseas crude oil is

purchased."

CONCLUSION ON INCREASE IN NATIONAL WEALTH

5.2.28 The conclusion (paragraph 5.2.18 supra) that success-ful exploration on the GBRP would result in some addition to our national wealth is confirmed and elaborated by the dis­ cussions on various subjects which follow and to which this section (a) on national wealth is intended to be an intro­ duction.

(b) Possible decrease in local price of petroleum

products

844

As in the case of Income Tax recent events have

altered some aspects of the factual position since the hearing of evidence finished. As regards Income Tax the changes have been caused

by amendments to the local legislation (Income Tax Assessment Act 1936-1973). The alterations are tabulated and their gen­ eral effect noted in the "Addendum" which precedes paragraph 5.2.62 infra.

As regards such potential "benefits" as "decrease

in local price of petroleum products" and "balance of payments situation" the altered factual position derives from recent overseas events which occurred not only after evidence had finished but indeed after the draft to this Term of Reference

(5) had been completed. The Commission's knowledge of these overseas events comes from newspaper reports. It only has to be mentioned that in 1973 it appears that production of crude oil from OPEC countries has been curtailed and deliveries

thereof to a number of countries either denied or restricted whilst the OPEC price has risen to figures variously given as ranging from $5 to $12 per barrel for it to be realised that

the alterations are arresting to a degree and that both pre­ dictions and estimations on this aspect of "Probable benefits" (TR5) are difficult and uncertain. However these curtailments and price increases in most cases tend to confirm the general views and conclusions

reached by the Commission (and one or two of the witnesses e.g. Mr Foster- see paragraph 5.2.45 infra) throughout its answer to TR5 on the evidence given and no useful purpose would be served by altering our prepared draft or by eliminat­

ing any of the expert views given on the situation as it exis­ ted during the hearing in 1970-1972.

Definition 5.2.29 By "decrease in price" is meant a price less than

that which would have obtained if hydrocarbons in substantial

845

quantities were not discovered in the GBRP.

Factors involved in such a decrease 5.2.30

846

The factors include:-(a) The present and future price and struc­ tures of Australian crude and overseas crude. Reference is made later to the

pricing as from 1970 inclusive of Aus­ tralian crude made in 1968 in a state­ ment by the then Prime Minister, Mr Gorton ($2.06 per barrel). Reference is also made to the OPEC organisation and the Teheran Agreement. If, for example, there were no indigenous crude, we would have to pay overseas prices

however high they went. Consequently up to the limits of the requirements of home consumption, the production of indigenous crude whether from the GBRP or elsewhere in Australian areas , makes price fixing - and hence a "decrease'' as defined above - possible . (Recent - late 1973 - overseas events, confirm these views). (b) Australian production and probable short­

fall through to 1980. The only witnesses who suggested there was any present indi­ cation that Australia would produce sufficient crude to satisfy her needs were the economists Messrs. Cochrane and Fitzgibbons to whom reference has been made. (c) Th e magnitude of any discovery in the GBRP.

At present indigenous crude provides nearly 70% of our total requirements and nearly

all of our motor spirit or "petrol" re­ quirements.

Although its quality is high never­ theless owing to its light nature as hitherto discovered, it can possibly and so far as can be reasonably fore-

seen not supply more than about 80% of all our commerical requirements. We say "possibly" and not "probably" be-cause "heavy" and "light" crudes as

these terms are used in the industry are not infrequently found in close proximity in overseas oil fields and even at differ­ ent zones in the same well. But a minor

discovery in the GBRP would not appreciably affect the position. (d) If other substantial discoveries were made elsewhere in Australian areas whether on

or off-shore the impact on local prices of discoveries in the GBRP might be less be­ cause only the export or storage of crude might as a consequence be involved. (e) The price of imported overseas crude lan­

ded in Australia must continue to exceed substantially the price fixed by the Australian Government for indigenous crude for the possibility of such a "decrease"

to exist.

(f) The question whether the benefit to re­ fineries of a low fixed price for in­

digenous crude is being passed on to the local consumer of petroleum products was raised during the hearing. Some of these matters are discussed more fully a

little later.

Dr Coombs' view

5.2.31 On the general subject of decrease in oil prices

847

as the result of drilling in the GBRP Dr Coombs said:­ "Increased oil production (including any from the reef area) would be likely to

lead to lower oil prices to the Australian consumer provided effective competition in production and distribution existed." (Tll346)

Mr McCrossin's view

5.2.32 A view presented by Mr McCrossin (General Manager of Australian Resources Development Bank) was that whilst a reduction in the cost of petroleum products could be a short term benefit to Australians, it would not be a long-term benefit if it led to a cessation of exploration (T8408-9).

The APEA view 5.2.33 OPEC members increased posted prices both during and since the hearing of evidence and the price of Australia's domestic crude has fallen further behind the latest import parity price. The view presented on behalf of APEA was that if the Australian price is held below world prices will

be under pro-rationing a curtailment of costly exploration followed by declining production "and soon a scarcity will develop" (Precis, Vol. 11 p.ll). APEA claimed that an efficient industry required only that the domestic price be equal to the landed cost of imported crudes (ibid).

Mr Woodward's submission

5.2.34 The submission of senior counsel assisting the Commission, Mr Woodward QC (p.972 of the final address) when dealing with the possible benefit of a decrease in the price of petroleum products was:-

848

"If future Government policy continues to cause or permit Australian crude oil prices to lag behind the presently rising cost of overseas oil, and if the consequences of this is passed on (underlining supplied)

the Australian consumer will enjoy a cost advantage."

Excise duties 5.2.35 It should however be mentioned at this stage that

excise duty on motor spirit rose from 9.8¢ per gallon in 1961 to 17.3¢ per gallon in 1971- Exhibit 456 p.20. This matter is dealt with later under "Income Tax" (paragraph 5.2.110) where the apparent anomaly of lower prices of motor spirit to New York consumers compared with those ruling

in Sydney notwithstanding the lower cost of crude to Aus­ tralian refineries is discussed. The convention by which prices fixed by the South Australian Prices CommissioMer are accepted elsewhere in Australia is also there mentioned.

The principles on which the Commissioner makes his assess­ ment were not given to us although questions relating thereto were put by the Commission. Recent newspaper reports have referred to a further substantial increase in excise duty

(to over 22¢). However the relevancy of excise duties to the present subject of our enquiry may be thought doubtful because it will be payable whether the crude be indigenous or imported.

World crude oil demand and supply - the world-wide situation 5.2.36 A reference to this subject is desirable because the world-wide situation will influence overseas prices and indirectly the future fixed price of indigenous crude and the value of any indigenous oil which may be exported.

Mr Foster's view on world supply and the reserve ratio

5.2.37 Mr Foster said (T8521):-"Shell assumed, for the purpose of this cal­ culation, that reserves of the Middle East are about 400 billion barrels ... If you are

going to meet future requirements of the world for oil and keep the same level of re­

serves - Shell suggested 20 years of consumption

849

as at the day you consider - as the day you

consider advances the ratio is of a new and higher consumption. Therefore you need to find reserves at a faster rate than you are

exhausting them in order to keep the ratio the same." Earlier he said:-"The fact that in 1980 you have a reserve

ratio of 2 0 years' times the 1980 consump­ tion does not tell you that these reserves will last for 20 years."

"There are two reasons for this. One is that

consumption will continue to grow - and world consumption is growing by something like 12% a year - speaking from memory. The other rea­

son is that you cannot produce all these re­ serves in 20 years because of the nature of the

decline of the oilfields." (R.J. Foster T8520) Whether new productions in Alaska, North Sea and elsewhere including deep sea mining will cover in

world demand or whether reliance will continue to rest on the Middle East and North Africa only time will tell. At T8464 Mr Foster said:-"The British Department .of Trade and Industry

has made an estimate of the potential pro­ duction from the North Sea by 1980 of 3 million barrels a day .... The current demand of north­

western Europe is for some 12 million barrels a day and by 1980 ... will need some 22 million

barrels a day."

APEA submission on future world prices

5.2.38 The APEA submission made to the Commission and which seems acceptable was:-

850

"for the next decade the enormous growth in world demand for crude will mean consuming

countries will remain dependent on Middle East sources for a large part of their

crude oil requirements. As a result the various price negotiations and threats of

or actual curtailments emanating from the Middle East countries are likely to con­ tinue to dominate the world crude oil pric­ ing structure, and to keep prices at or

above their new, high levels."

Other views on future world prices 5.2.39 One expression of view was that the Middle East car-

tel may tend to weaken with the increasing trend towards nationalisation of production wells and consequent inter­ country rivalry. It was said that there are some current in­ dications that this could happen. A collapse or partial weak­

ening of the OPEC organisation could lead to a stabilisation or even reduction of overseas prices. Associated factors are (a) inflationary trends and (b) tanker freight rates. Again there were some conflicting views on the trend of freight

rates but it is not easy under present conditions to foresee a decrease in freight costs notwithstanding the modern trend

to construct super-tankers if only because the cost of con­ struction appears to be sky rocketing. Likewise it is scarcely possible to speak with confidence on the future of present in­ flationary trends. The subject of changes in international monetary standards has recently become an additional factor.

Professor Adelman's view 5.2.40 Professor Adelman, who is Professor of Economics of the Massachusetts Institute of Technology, and whose views were shared by Mr Cochrane, stated in Exhibit 349:-

"The long term tanker shortage . . . has been

much aggravated by the Suez Canal closure

whose effect had only partly been worn off." Later during a long analysis of the respective situ-

851

ations of the overseas producing and consuming countries he expressed what appears to be a minority opinion that a "new buyer's market is on the way". He said:-"The market in the 1970's will be pushed two

ways - governments raising taxes and prices, chiselling undermining the structure ... De­ livered prices will in any case keep declin­ ing as the tanker shortage eases." In a letter to Mr Cochrane dated 23 August 1971 (E x-hibit 353), Professor Adelman wrote:-

"But in the longer run there seems no change in the prospect that crude oil prices will decline ... my last guess at the 1976 price (net of in­

flation) to be around $1.55/$1.60. But now as earlier the bare conclusion is of less import­ ance than to monitor and assess the impac t of national policies in producing and consuming countries."

(But as to OPEC prices prevailing late in 'l973 see "Addendum" which precedes paragraph 5.2.29 supra).

Dr Coombs' view on future overseas prices 5.2.41 Dr Coombs in Exhibit 406 p.7 also dealt with projec-ted future overseas prices. He wrote:-"Consequently despite increasing demand for

oil produc ts, it seems highly unlikely in the years immediately ahead that exporters will be able to force prices for crude oil up and

increasing competition between them could well lead to low e r prices." In answer to questions by Mr Bennett QC who referred to an article in the Economist of 31 July 1971, Dr Coombs said:­ "What I have said in my paper makes the point

852

that in the long run oil is going to become

increasingly scarce and increasingly expen-sive; but I was talking here about the rela-

tively short period." (Tl3275)

Mr Cochrane's view

5.2.42 Mr Cochrane considered that the OPEC countries would not be able to maintain an effective price controlling cartel especially since they had not agreed on production limitations. He also said:-

"The discovery of crude in the North Sea, Spain, Alaska and Australia in the late 1960's, together with increasing competition from liquified natural gas will tend to re­

inforce the pressure on price levels in the 1970's." (ANZAAS paper Exhibit 344 p.3.3) (T9397)

The Teheran Agreement and its implications

5.2.43 By the Teheran Agreement made between the OPEC countries on 14 February 1971 (Tl7432) automatic escalation of price was provided for to take place on 1 January 1973, 1 January 1974 and 1 January 1975 (T8281-2). There has been a

further· increase by agreement made in January 1972 due to the effect of inflation (The Geneva Pact). The Table of Increases (Exhibit 521) shows (by way of example) new posted price projections in Persian Gulf for Iranian crude:-

Pre-January 1972 - $2.274 January 1972 - $2.467 (an 8.4% increase) January 1973 - $2.579 January 1974 - $2.693

January 1975 - $2.810 These, of course, are appreciably higher than the selling price f.o.b. Persian Gulf as the posted prices are for taxation purposes and are discounted for selling purposes

(T8531). Actually the Geneva Pact seems to have added about 9¢ to the Teheran fixations.

The Commission's view

5.2.44 It therefore seems that unless the OPEC agreements weaken or are rescinded and unless inflationary trends cease,

853

it is more likely than not that the rising trend will continue over a long term view. (Indonesia, although not a party to the

Teheran agreement will doubtless follow Teheran and Geneva prices).

Mr Foster's view

5.2.45 Amongst the witnesses who favoured the view which the Commission takes was Mr Foster. He said (T8283):-" and I think, by far the most important

point that must be recognised is that the countries of OPEC have at last, after many years of trying, estab lished solidarity. This solidarity was expressed in an OPEC re­ solution l ast December. I have the key words in

my records but in general, the resolution bound

all member countries to take appropriate action to make sure that their just demands are met." He added:-"If they do not seek a price increase before then,

they will certainly do so in 1975 and it will be

another big price increase. My own belief is that they are probably more likely than not to seek some price increases before 1975."

Curtailing production 5.2.46 Also, the possibility of a planned curtailment in Middle East production was mentioned. For example, production in Libya is said to have been curtailed by 17% in 1971 (Petro­

leum Intelligence Weekly of 17 January 1972 as copied by APEA). Press reports refer to Arabian planned curtailment against the West.

Freight rates 5.2.47 Mr McAlister spoke (inter alia) on freight rates and

said:-"Your view is that freight rates will tend to increase, is it?---

"No. I think we have injected the thought

into our evidence that there is a possibil­ ity that freight rates might decline in the short term somewhat, purely in recognition of the fact that they have, for a number of

factors, recently been higher than one would have anticipated under normal circumstances." (Tl0495)

Other factors 5.2.48 Associated questions are (l) projected Australian demand growth, (2) the accepted facts that good reservoir fields reach a "hump" in the production graph at a compara­

tively early date and thereafter decline and, (3) owing to the quality (small sulphur content) of the crude hitherto found both off and on shore in Australian areas, it may be that, how­ ever large in quantity, future discoveries will not supply more than about 70% to 80% of the various fractions required

by Australian industry (for example bitumen). But as earlier stated light and heavy oils have been discovered overseas in close proximity to one another.

Mr Foster's estimates of future shortfalls

5.2.49 The projected Australian demand was given by several witnesses, together with the probable shortfalls up to 1980 if no appreciable further reservoirs are found. Mr Foster's estimates of shortfalls in thousands of

barrels per day were:-Year Shortfall

1972-3 170

1973-4 230

1974-5 220

1975-6 290

1979-80 660

He estimated total Australian production those

years (in thousands of barrels per day) were:-

855

1972-3 370

1973-4 370

1974-5 420

1975-6 400

1979-80 260 (T8291-2)

Mr Greenwood's submission on Mr Foster's estimates

5.2.50 Mr Greenwood who appeared with Mr Connolly QC for the Australian Conservation Foundation et al (Tl7608 et seq) com­ mented on these figures by suggesting that they understate pro­ duction figures - and he referred inter alia to recent discov­ eries in Bass Strait and South Australia namely Mackerel and Tirrawarra - secondly that the pipelines and also the on-shore plant for the Bass Strait field are insufficient and have

created a bottleneck (Tl7612) and that the potential capacity of Bass Strait is greater than the production figures, and thirdly, t-hat it is "unrealistic" to assume that there will be no further discoveries in the period ending 1980. He conten­ ded that in any event the Australian economy would not be seriously affected by Mr Foster's figures. Mr Greenwood had some evidence on which to found his submission that the es­ tablishment of plant and pumping facilities on shore and the pipelines from the Bass Strait wells imposed a measure of con­ straint on production output (Tl2796, Tl7617) also that "throt­ tling" back requests to the production manager in Gippsland emanate periodically from the reservoir engineering group at Esso headquarters in Sydney (Tl7619A). But these requests were said to be normal and essential procedure (Tl7619).

Mr Greenwood also referred to the "move afoot" which

contemplates the establishment of a stabilisation plant at Gippsland of a daily capacity of 420,000 barrels (Tl763l) which could increase the total Australian 1972-3 figure of 370,000 bbls/day by a third. He also expressed a "surmise" that it would be only commonsense for Esso-BHP to defer heavy capital expenditure for the purpose of increasing production

capacity until 1975 when a substantial increase in the $2.06

may well be expected and he cited Tuna (declared commercial in

May 1971 but in respect of which it had been said that no firm

decision had yet been made to produce from it) as an indi­ cation of the unwillingness of producers to produce from a commercial field at this point of time (Tl7638). (Since the hearing of evidence finished Mackerel has been graded as a

commercial field according to newspaper reports).

APEA reply to Mr Greenwood

5.2.51 The reply to these suggestions made on behalf of

APEA reads:-"It is true that in theory, and ignoring the

possibility of reducing ultimate recovery through an excessive production rate, the expenditure of more money on wells, pipe­ lines, pumps and plant can increase pro­ duction rate in the short term. Taken to

the ultimate, an infinite expenditure of money could lead to an infinitely high pro­

duction rate for an infinitely short period. In fact, based on operating experience with the Gippsland fields, Esso-BHP have decided to expand their facilities and production will be increased to 365,000 b/d in third quarter 1973

(refer attached letter to refiners dated 20 June 1972). However, this increase in pro­ duction has been anticipated in the table. As can be seen, the natural and inevitable

decline in production from known fields begins in 1975-76 and is substantial by 1979-80. Any further expenditure on production facili­

ties will not increase ultimate recoverable reserves - though it may or may not delay the

onset of production decline in 1975-76. One thing is certain, it will not prevent the sub­ stantial decline apparent by 1979-80, and may

857

in fact accelerate it. We point out that the increase in Gippsland

production rates discussed by Mr Greenwood will provide no more oil for Australia. We submit that the decline in production from known fields, as forecast in the table, is

inevitable."

How and why the $2.06 price was fixed

5.2.52 When Mr Gorton as Prime Minister was making a state-ment to the House on October 10 1968, he said (Exhibit 407):-

858

"Secondly, the Government announces as policy that for a period of 5 years after 17 September 1970, when the present policy arrangements terminate, the price that refineries will be required to pay Australian producers will be import parity. Import parity is defined as the posted prices of overseas oil as of today, less the discounts allowed off those posted prices as of today, plus overseas freights at the most efficient econom­ ic rates prevailing today plus wharfage where app­ licable. To this price will be added a sum for

quality.differential worked out by the modified Nelson method, this quality differential being added because of the richness of Australian crude in the lighter distillates. From the import parity price so arrived at there will be deducted a sum representing the average freight cost of de­

livering Australian oil to the refineries from the port of delivery by the most economical means possible. This will mean that as from September 1970 for a period of 5 years the price payable for Australian crude oil should generally be neither higher nor lower than the price now pay­ able today for overseas oil, except for the effect of Australian coastal freights, if any. This in

turn should mean that as from that date the price

5.2.53

of petrol products produced from Australian crude oil should not be higher than the price payable today for products produced today."

The result achieved by the application of these

principles was the figure of $2.06 per barrel and this is the price payable by the refiner to the producer at the nearest refinery (e.g. Westernport in the case of Bass Strait crude). At the time this figure was assessed the Middle East posted

price was $1.62 and the computations consequent upon Mr Gorton's statement were:-Posted price $1.62

Less discounts $0.26

Plus freight $0.46

Plus wharfage $0.07

Nominal Import Parity Price $1. 89

Quality differential (26¢) less the average coastal freight rates (9¢) made the result equal to $2.06.

Earlier incentive provision modified 5.2.54 Mr McCay showed that prior to 1970 an "incentive" of

67¢ per barrel had been added but as posted rather than dis­

counted f.o.b. values were used the true value of the incent­ ive was nearer A$0.90 per barrel. It was following the dis­ covery of the large 1967 Gippsland off-shore fields that the incentive provision was modified (Exhibit 323 p.6) and the new purchase price of $2.06 ultimately arrived at.

Present margin favouring Australian refineries 5.2.55 Today owing to unexpected turns of events (Teheran 1971 and Geneva 1972 - see Tl7432) and with consequent increas­ es in Middle East posted prices the overall purchasing margin

favouring Australian refineries is approximately 40¢ to 46¢. The margin will in all probability increase if the $2.06 figure

remains to 1975 unless the overseas position substantially alters by reason of discoveries in the North Sea, Alaska and

859

elsewhere, or a weakening of OPEC takes place. It seems poss­ ible that the margin has increased since the hearing of evid­ ence concluded. (But as to the 1973-1974 position see Addendum preceding paragraph 5.2.29 supra).

Projected future margin 5.2.56 In a ministerial statement to the Senate on 25

February 1971 Senator Sir Kenneth Anderson said:-"Assuming that present freight rates remain the same the (overseas) price will be $2.65 by 1975." (and this statement was made before the Geneva Pact).

Dr Coombs' view on Australian refineries

and the Australian consuming public 5.2.57 Under the Australian pro-rationing policy the refiners (with a tariff penalty as an alternative) take a pro­ portionate allocation of indigenous fuel, although a small percentage is aJlowed to be exported. Consequently the refiner< purchase Australian light crude at a lower price than imported crude. But whether a decrease of an overall nature in the price of petroleum products to the Australian consumer will occur if major finds occur in the GBRP are questions involving not only the foregoing considerations but comparative refining and distribution costs in Australia (on which some general views have been given by Mr Foster under "Income Tax"), and Australian Government policy on such matters as excise duty and the relationship of our purchase price to posted prices in the

Middle East and import parity. The methodology of the South Australian Prices Commissioner who by convention fixes whole­ sale prices throughout Australia, is also of consequence but is unknown to the Commission.

5.2.58

860

At Tll315 Dr Coombs said:-"Prices of oil products to the consumer in Australia, while not among the very highest, tend to be higher than in many countries in

Europe. This is attributed by representat­ ives of the industry to differences in area, distance, volume and population. It would be surprising if these were the complete explana­ tion. The oil distribution industry is an almost classic example of imperfect competi­

tion with the characteristic techniques of product differentiation, high advertising costs, leadership practises and so

on ... " "This monopolistic tendency is

strengthened by the requirements of Govern­ ment regulation including that which requires each marketing company to absorb its share of Australian crude oil output. This require­ ment forces new entrants into the distribution

field either to incur losses by selling their share of Australian crude oil on the export market or accepting the prices for it an Aust­ ralian refiner or distributor would offer.

It cannot therefore, be assumed that any reduction in crude oil costs would be passed on to the consumer." "In other words you are

saying that merely because there was more being produced in the Australian region and the producer was getting the benefits of an increased scale it cannot be necessarily

assumed that it would be passed on to the consumer?"---"! am not saying it would not be, but you cannot take it for granted

because the position is not wholly competit­ ive and other outcomes are possible."

5.2.59 A later passage (at Tll383) should be quoted as APEA

described it as a correction. This however is doubtful. It

reads:-"I said that a change had taken place which

resulted in Australian crude being sold to

861

refiners somewhat more cheaply than they could buy imported crude, and I said that while that relationship continues, increas­ ed Australian pr.oduction is likely to bring about a lower average of the prices of crude oil to refiners, and subject to any risks that may be involved in the

imperfect competition in the distribution part o f the industry, that reduction could be expected to be passed on to Australian consumers."

Mr McAlister's a·nd Mr McCay's views

5.2.60 Finally the views of Mr McAlister and Mr McCay on

possible policy decisions to be made in 1975 may also be quoted:-

5.2.61

"It seems likely that the policy decision the Commonwealth will have to make in 1975 will be made against the background that Australia will have then already enjoyed for several years petroleum product price advantage over other petroleum consuming countries deriving from the nature of the present formula we have adopted for pric­ ing Australian crude oils. Against this background it seems to me likely that the decision then will be such as to ensure that the Australian consumer will continue to enjoy an advantage in some measure. On the other hand, if no additional reserves have been discovered it may be that some increase in crude oil price will be given to encourage additional exploration effort."

CONCLUSIONS ON POSSIBLE DECREASE

IN LOCAL PRICE OF PETROLEUM PRODUCTS The conclusions reached by the Commission on this subject of a possible decrease in price are:-862

(i) Substantial of oil in the

GBRP would be likely to lead to

"decreased prices" (as defined above) of petroleum products to the Austral­ ian consumer if:-(a) Future Australian Governmental

policy continues to fix the price of indigenous crude to Australian refineries at an appreciably lower figure than the cost of

overseas crude oils as landed in Australia. (b) The benefit of the consequences of this cost difference is,

subject to any special local factors affecting refining and distribution costs, passed on to the consumer of petroleum products. (c) Excise duties and the principles

on which wholesale and retail prices of petroleum products are assessed, permit such decrease. (ii) But to the extent (if any) that oil dis­

coveries in the GBRP (or elsewhere in Australian areas) might exceed local consumption requirements, such excess would appear unlikely to have effect

on local consumption prices as it would be exported or stored. If for

example Australia were completely self sufficient in oil production and there­ after further oil were discovered in the GBRP such later discovery would have

little or no effect on consumer prices in the absence of some governmental intervention.

863

(iii) In the absence of further substantial shortfalls of oil will

increase during the latter half of the 1970-1980 decade by reason of increas­ ing demands and the gradual depletion of existing Australian fields. (iv) World demand for petroleum products

will continue to increase. (v) The price of overseas crudes will

continue to rise unless (a) new discoveries of outstanding import­ ance are made in areas outside the OPEC countries, for example in

Alaska or the North Sea, or (b) the

strength of the OPEC organisation for some reason weakens. (vi) No attempt can be made to estimate

the quantum of such a possible increase in the absence of knowledge of refinery and distribution costs and of the methods used by the South Australian Prices Commissioner in fixing wholesale and retail prices for motor spirit. Furthermore excise duties vary markedly in different countries.

(c) Income Tax

Addendum

Important Australian Governmental fiscal changes affecting previously existing taxation benefits to exploring Companies and their shareholders were announced subsequent to the conclusion of the hearing and indeed subsequent to the pre­ paration of this answer to Term of Reference No. 5.

The Commission has not attempteo to incorporate the consequences thereof into its report as to do so

seems unnecessary and could involve tl'e recalling of one or more witnesses. It is sufficient tc point that this

864

section of the Report was drafted on the evidence and the state of affairs existing at the conclusion of the hearing (mid 1972). Moreover no amendment to recoupment of capital (exploration) expenditure provision - S124DF - has been made so that the Tables and conclusions of expert witnesses have not been appreciably affected in a direct way. The broad position remains that no tax becomes payable on income from

the sale of petroleum produced in Australia (or of the products of such petroleum) until exploration and other capital expenditures associated with finding and producing

the petroleum have been recouped out of the income. Because of the termination of S77D (see infra) - as from 8 May 1973 -

the unrecouped capital expenditure of these companies will not in future be reduced by amounts that might otherwise have been conferred as deductions on shareholders by means of declarations under section 77D. This, however, is probably

not a matter of any significance to successful petroleum producers. These companies would be disinclined to forego their deductions in favour of their shareholders and would not need to offer the incentive of this kind to raise capital.

The general trend of the changes is readily apparent

but the ultimate consequential effects on the answer to TR5 -"probable benefits'' - are not easy to forecast. Thus on the

one hand national revenue will be increased by the removal of the tax exemption to shareholders under S44 (2) (d) relat­ ing to dividends paid out of profits from sales of petroleum (e.g. the Bass Strait production of B.H.P.) and by the amend­ ment to S77D by which the deduction for subscription of share

capital to mining and exploration companies was withdrawn but on the other hand the investment in Australian equities will lose some of its attraction and with it the desire to indulge in the heavy expenditure necessary for petroleum exploration may weaken.

Through the courtesy of the Commissioner of Taxation Sir Edward Cain CBE the Commission has received a Summary of the relevant legislative changes already effected by Section 6 of the Income Tax Assessment Act (No. 2) 1973 and of other

865

relevant changes implemented by the Income Tax Assessment Act (No. 5) 1973 which received Royal Assent on 11 December 1973.

Also tabulated are the pages of the transcript where the First Assistant Commissioner Mr K.F. Brigden gave evidence relating to legislative provisions which have been affected by these changes. The summary is as follows:-

l.

2.

866

AMENDMENT

Section 77D of the Income Tax Assessment Act 1936-1973 was amended by section 6 of

the Income Tax Assessment Act (No. 2) 1973. The

principal effect of the amendments was to withdraw as from 8 May 1973 (but subject

to certain transitional arrange­ ments in relation to calls made by that date) the deduction formerly available for sub­ scriptions of share capital by Australian resident tax­ payers to mining and explora­ tion companies. The legisla­ tion also amended section 77D to curtail misuses of the con­ cession with effect from 16 July 1972 until its cessation.

The Income Tax (International

Agreements) Act 1936-1972 was amended by the Income Tax (International Agreements) Act 1973 to give the force of law

in Australia to a new comprehens­ ive double taxation agreement between Australia and New Zealand that was signed on 8 November

TRANSCRIPT PAGES

12439-12440, 12441-12445, 12476 12485-12489, 12494 12507-12508, 12511.

12472-12476

3.

AMENDMENT

1972 and to a limited

double taxation agreement with Italy in relation to international airline profits. Under the new

comprehensive agreement, New Zealand now formally

recognises Australia's taxing rights over opera-tions on the continental shelf, particularly as regards petroleum explora-

tion and mining activities. Provisions are contained in the Income Tax Assessment Bill (No. 5) 1973 currently before Parliament to give

effect to proposals announced

TRANSCRIPT PAGES

12453-12458, 12463, 12465.

by the Treasurer (Mr Crean) in his Budget Speech for the amendment of section 44 of the Income Tax Assessment Act 1936-

1973. The Bill proposes that the tax exemption under section 44 (2) (d) will not be available

in relation to dividends paid out of profits from sales of

Australian petroleum or petrol­ eum products where the divid­

ends are declared after Budget day, 21 August 1973. It will

also discontinue the exemptions of dividends declared after that day and payable out of the

other classes of exempt mining profits falling within section

867

4.

5.

868

AMENDMENT

44 and referred to in evid-ence. Section 62AA of the Income Tax Assessment Act was amended by section 6 of the Income Tax Assessment Act 1972 to restore the special investment allowance for manufacturers' plant with effect as from 14 February 1972. As announced in the

1973-74 Budget however, the investment allow­ ance is now to be withdrawn in

relation to expenditure made after 21 August 1973 (unless the expenditure is made under a contract made by that date). Provisions to giv8 effect to the withdrawal are proposed

in the Income Tax Assessment Bill (No. 5) 1973.

Limitations on the allowabil­ ity of company losses under former sections BOA to SOE of the Income Tax Assessment Act 1936-1973 were strengthened by amendments in the Income Tax Assessment Act 1973 to over­ come tax avoidance practices. Principally, the amendments changed the "continuing owner­ ship test" to require a con­ tinuity of shareholding of more than 50% in lieu of the

previous test of 40% discussed

TRANSCRIPT PAGES

12480

12494-12496, 12509.

AMENDMENT TRANSCRIPT PAGES

6.

in evidence. The new

loss provisions are con-tained in sections BOA, BOB, BODA and 80E.

Current citations of principal Acts are:-Income Tax Assessment Act 1936-1973 Income Tax

(International Agre ements) Act 1953-1973

The producing company

12436

12449, 1 2 473

5.2.62 With the discovery and production of oil in suffic-ient quantities in the GBRP income tax will be attract ed on the profits of the producing company to the benefit of the national revenue.

The refining company pays income tax on its profits whether it buys indigenous or overseas crude or both.

The various Tables put in evidence 5.2.63 The computation of such tax is not free from com-

plexities even if the magnitude of discoveries were known . Various carefully prepared Tables based on listed assumptions were put in evidence which had been originally prepared or recalculated by Dr Hunter, Mr McCay, Mr McAlister, Mr Foster

and Mr Cohen and some of these will be discussed later. Most

of the Tables give discounted figures the rate of interest generally used being 10%. The Tables will evince that owing to the high cost

of exploration and development and taxation deductions allow­ ed under Divisions lOAA and lOAAA of the Income Tax Assessment Act relating to capital expenditure, and depending to some extent on the number of fields discovered, some smaller dis­

coveries will not create a relevant "benefit" (cf paragraph 5.2.68) .

869

How profits of Australian investors should be calculated

5.2.64 The following sta tement by Mr McAlister, who spoke to Mr McCay's paper owing to the latter's indisposition, represents

a commonly held approach to this problem.

This approach however is not universally accepted even if the "net benefit'' is accepted as the correct test be cause there is force in the APEA contention ("Reply to Mr Gr e enwood's Submissions" p.3) that if' it has been shown that the oil industry is efficient (as it has) then the need to

prove it is more ef'f'icient than any other industry is unnec ess­ ary. The Tables which are set forth later include alternative figures by Mr McCay and Mr Foster, giving the full return on an Australian investment and not merely the return in excess of 20 % before tax.

Mr McAlister said:-"Insof'ar as the prof'its from oil f'ields fall to Australian investors they are only to the national advantage if they are higher profits than would have been realised if the investors

(including the unsuccessful ones) had put • their funds as risk capital in something else -e.g. in manufacturing or in metal mining. Taking into account the available statistics, and in particular the most recent Tariff Board survey of profitability in the manufactur­ ing sector (see Appendix 18, pages 18 and 19), it appears we should be looking for an after tax return of at least 10% on shareholders' funds. Accordingly, and again for the purposes of illustration, I have taken as a benefit flowing from the mounting of an oil search in the Barrier Reef area any return to Australian investment in excess of 20% before tax."

Mr McAlister's view on costs and benefits figures

5.2.65 He later added:-

870

"For reasons I have given one cannot argue from any ground of expected costs of exploration and development to any quanti­ tative assessment of probable benefits

It is not really possible to state in

quantitative terms, the profits and benefits likely to flow from a search for oil in the Barrier Reef area. Nevertheless, in order to think realistically about what

the nature of the benefits might be, it

would seem useful to propose some figures of costs and benefits, not as a forecast, not even as an expression of probabilities, but as an illustration of what might happen."

(Tl0008-9)

5.2.66 Mr McCay was First Assistant Secretary in charge of the Resources Policy Division of the then Department of National Development. Mr McAlister who, owing to Mr McCay's indisposition, spoke to his carefully prepared Exhibit 323,

is Senior Economist, Minerals and Forest Policy Branch of the Resources Policy Division, of that Department.

Mr McCay's Table IV Exhibit 323 - net social benefit Table

5.2.67 One of the Tables put in evidence was Table IV in

Appendix 20 to Mr McCay's Exhibit 323. This was dealt with by Mr McAlister at Tl0099 et seq. It purports to show the "net

social benefit" of expenditure and discovery as related to profits and taxes and excluding any secondary benefits such as balance of payments and regional development. As compared with an earlier Table (Table IIIA in Appendix 17 to Exhibit

323 set forth at Tl0083) the "Expenditure on exploration" figures are only 1/10 because Table IV is confined to Australian expenditure which would represent something less than 10% of the total expenditure (see paragraph 5.2.110 (12) infra). The

Table reads as follows:-

871

TABLE IV

THE AMOUNT IN A$ MILLION BY WHICH THE TAXABLE INCOME WOULD EXCEED, IN TOTAL, A RETURN ON EQUITY INVESTMENT OF 20% P.A. BEFORE TAX, THE AMOUNT OF SUBSIDY, AND A NOTIONAL RETURN OF 7% P.A. ON UNREPAID SUBSIDY, RESULTING FROM THE DISCOVERY OF VARIOUS TOTAL RECOVERABLE RESERVES IN 1, 2 OR 3 FIELDS FOR TOTAL EXPLORATION EXPENDITURES OF $7.5 MILLION, $15 MILLION AND $30 MILLION.

TOTAL RE­ COVERABLE RESERVES DISCOVERED

MILLION BARRELS

EXPENDITURE ON EXPLORATION - A$ MILLION

7-5

NUMBER OF FIELDS DISCOVERED

1 2

-60 - 1 -95

3

15

NUMBER OF FIELDS DISCOVERED

1 2

-84 -25 -119

3

30

NUMBER OF FIELDS DISCOVERED

1 2

-132 -n -167

3

50

100 200 400 600 Boo

115 349 582 816

21 255 488 721 955

-73 161 394 627 861

91 325 558 792

3

231 464 698 931

-97 137 370 603 837

43

277 510 744 977

- 51 -145

1000

Greater than 1000

NOTE:

1049 1025

183 416 650 883

89

322 555 789

As the reserve figure is increased further the 'profitability' as defined above approaches a limit of $1.17/bbl.

(i)

(ii) (iii)

Expenditure on exploration taken as including subsidy. Minimum commercial field size taken as 50 million bbl. Entries in this table are calculated for a refinery port price of $2/bbl. They may be adjusted for other prices by adding to the above entries a sum equal to the total recoverable reserves multiplied by seven­ eighths of the amount by which the price exceeds $2/bbl.

It should be added that negative values were used to indicate unused tax deductions.

872

Mr McAlister's comments on Table IV

5.2.68 Of this Table Mr McAlister said (Tl0102):­ "It will be seen from the illustrations I have given that if there is found, as a

result of an Australian exploration effort, a single field of 100 million barrels with

an expenditure on exploration of $7.5 million we will just about break even with a 20% per annum before tax return, but

will not gain any premium from direction of our resources to oil search. Similarly, the discovery of a total of 600 million barrels in three fields at an explorati-on

cost of $15 million would yield a benefit of $370 million over and above what might be regarded as the 'normal' return of 20% before tax on shareholders' funds. And

that benefit would be shared between the Australian investors and the nation at large as a result of taxation on profits in the proportion of

An earlier Table by Mr McCay - Table 1

5.2.69 By way of contrast an earlier Table compiled by Mr

McCay (Table 1 of Appendix 17 of Exhibit 323 set forth at

T10058) uses "Expenditure on Exploration" figures being not 1/10 but the full expenditure amounts as though it were all Australian of 75, 150 and 300 A$ million respectively and gives estimates of total taxable income (not the amounts by which the taxable income would exceed in total a return on

equity investment of 20% before tax as in Table IV). Illustrative figures are:-Recoverable reserves with 3 fields 600 million bbls

Expenditure on Exploration Total Taxable Income 150 A$ million 498 A$ million

873

Comparison of Table IV with Table I 5.2.70 Such a comparison shows that by selecting a reservoir of recoverable reserves of 600 million barrels with 3 discover­ ed fields in each case and assuming $15 millions spent on exploration in one case because only l/10 of the total expenditure is Australian capital (Table IV) - see paragraph 5.2.67- and $150 million in the other case on the assumption that all the expenditure is Australian money (Table I) - see paragraph 5.2.69- and having as the object of the enquiry the amount by which taxable income would exceed a return of 20% in the one case (Table IV) and the amount of the total taxable

income in the other (Table I) we get a taxable benefit of:-Table IV $370 millions

Table I $498 millions

The corresponding figures for a 400 million barrel reservoir

are:-

Table IV Table I

$137 millions $229 millions

and for a 1,000 m.b reservoir:­ Table IV $83J millions

$1,036 millions Table I

For a 600 m. b reservoir but assuming $30m. and $300m. expenditure respectively:-Table IV Table I

$322 millions $348 millions

Some assumptions

5.2.71 All these figures are of course based on many assump-

tions including those set forth in paragraph 5.2.97 infra. These assumptions are "largely arbitrary" (p.2 of Appendix 18 of Exhibit 323) but the reasons for their adoption are given at length . Two of them may be quoted here:-

874

"that the development investment (v) to the extent of 50% constitutes an immediate tax deduction (vi) to the extent of 50% is

amortised and ' depreciated for tax purposes in accordance with a field production pattern"

(e.g. over a period of 15 years).

Mr McAlister's new Tables III and IIIA

5.2.72 These Tables (Appendix 17 of Exhibit 323) were

designed to show the level of reserves one would have to find (under the various stated headings) in order tc establish when a tax liability would first be incurred. The approach was designed to assist because he found it

impossible to adopt a discounting procedure where discovery dates are unknown, and because of the incidence of such matters as the ability to write off unrecouped capital expenditure.

The difference between the two Tables was

explained by Mr McAlister at Tl0082-3:-"Table 3A is more realistic perhaps than Table 3 because contrary to J on p.l6 of

appendix 18 the whole of the development investment is recorded as capital expend­ iture and therefore none of it is deprec­ iable and is dealt with otherwise under section 124 DG.

(To Witness): Is that correct?--- That

is correct, Your Honour. It is more realistic because it adds up to

commercial and taxation experience, would you say? --- Well, really Your Honour, it

is more realistic because we understand it would be the case; in other words the

treatment plant would be included as an allowable capital expenditure, the pipe­ line would be included as an allowable capital expenditure on our understanding

so therefore this is virtually all of the capital expenditure. Perhaps Mr Woodward, I could just add a few words on Table IIIA,

if I may?

MR WOODWARD: By all means --- I have two

875

points to make: firstly over a time it does

not really make much difference. If we look at the bottom lines in Tables IIIA

and III, they are not much different. In other words, your deductions are virtually the same in either case except the time spread is different. So in the ultimate it does not

make much difference and in the tenth year

there is little difference between the size of fields required to incur a tax liability. The big difference arises in the early years

and changing our assumption has going on to doubled the size of field required before a tax liability is incurred in the first year. I think they are the two points to be brought

out when looking at the two tables together. Subject to that, I have nothing further wish to add." Earlier Mr McAlister had said (Tl0079):-

11 ••• but that is the purpose of this table.., so

that we may see when a tax liability is first

incurred and in quite a number of cases income tax would not be payable before the fifth year. Rather than the majority of it being paid before the fifth year, it could be in the circumstances of the case tax is not payable before the fifth

year be cause of the size of unrecouped capital expenditure. So that the proportion of recover­ able reserves that you produce in specified years is by no means the test of the quantum of income

tax payable? --- Indeed not. You may have

produced every barrel in the field and still not be paying income tax. This is the

circumstance in the case where the blank appears in the table. Will ;you go to the other extreme and say that

you may towards the closing years of the

given life of a reservoir be producing only a quarter of what you produced in the first year of production and be paying more income tax than in the first year of

production? --- I am quite prepared to

concede that. Certainly over time the rate of tax per barrel may well increase as depreciable items are written off in the first place, as unrecouped capital

expenditure has gone. In other words, I think all we are doing is recognising

the industry will deduct as much as it

can, as quickly as it can, and leave the

later years to bear the burden of the

income tax."

and at Tl0081 he said:-"··· I assume year 6 refers to the year

after discovery, but my great difficulty is I cannot tell you what the year of

discovery is. Once I have that year of

discovery I could do great things on a

discounting basis."

The two tables will now be set forth. It will be noted

therefrom:-(i) Unlike some other witnesses no

attempt is made to discount or

(ii)

(iii)

to estimate or base any calculations on, the dates of discovery. The figures show the sizes of recov-erable reserves when first discovered. The production pattern is at p.6 of Appendix 18 to Exhibit 323 and is Table Al8-2. It shows a pattern of

1/10 of total recoverable reserves as produced in each of the first 7

877

878

years, 1/20 in each of the next 3 years

1/30 in each of the next 2 years and

1/50 in each of the next 3 years.

(iv) In Table III the figure 1982 in the

top line (or year 1) means (referring to the reef as a whole not to a

single company) that the search for oil yielded net inGome sufficient to more than match the total unrecouped capital expenditure plus the deprec­ iable items plus operating expenses which are deductible to arrive at a net income (Tl0072). (v) Another illustration in respect of

Table III is in relation to the

figure 244 opposite the year 6. This means that in the case of a

$75 million expenditure on explor­ ation and three fields totalling less than 244 million barrels there would never be a tax liability

(Tl0074).

(vi) A third illustration is that with

an expenditure of $150 millions and with 3 fields a reserve of

(vii)

(viii)

859m. barrels will become assessable

to tax in the 2nd year after production commences. The fewer the number of fields the smaller the reserves necessary to get the tax liability in the first

year. Table IIIA was said to be probably more realistic than Table III because the whole (not 50%) of development investment is here

regarded as capital expenditure and none is depreciable.

TABLE IIIA

(APPENDIX 17 OF EXHIBIT 323)

TOTAL RECOVERABLE BARRELS, IN 1, 2 OR 3

FIELDS AT TOTAL EXPLORATION EXPENDITURES OF $75 MILLION, $150 MILLION OR $300 MILLION FOR WHICH A TAX LIABILITY IS FIRST INCURRED IN THE INDICATED YEAR FOLLOWING THE COMMENCEMENT OF PRODUCTION.

YEAR FOLL- EXPENDITURE ON EXPLORATION - A$ MILLION OWING THE COMMENCE- 75 150 300

MENT OF PRODUCT- NUMBER OF NU!I!BER OF NUMBER OF

ION IN FIELDS FIELDS FIELDS

WHICH A DISCOVERED DISCOVERED DISCOVERED

TAX LIAB-ILITY IS FIRST INCURRED 1 2 3 1 2 3 1 2

1

2

3

4

5

6

7

8

9

1825 2269 2714 3206 3650 4094 5967 6412

10

NOTE:

509 645 780 883 1019 1154 1632 1767

307 396 486 525 614 704 961 1050

221 290 360 372 442 511 674 744

181 243 304 301 362 424 540 601

155 211 267 254 310 366 452 508

139 192 225 278 332 396 450

132 185 211 264 317 369 422

126 199 251 304 3115 398

123 193 246 333 386

(i) Subsidies assumed to be not applicable. (ii) All exploration expenditure is assumed to be available as a tax deduction prior to the end of the year in which a tax

liability is first incurred. (iii)No figure is shown where the total taxable income does not exceed $5 million, in which circumstance the

first year of tax liability is

particularly sensitive to variation in field size and to matters of

detail in assumptions and no confidence could be placed in the results. (iv) All fields are assumed to be brought into production on the same date.

3

6856 1902 1140 813

663 564 503 475 450 440

879

TABLE III

(APPENDIX 17 OF EXHIBIT 323)

TOTAL RECOVERABLE RESERVES,MILLION BARRELS, IN 1,2 OR 3 FIELDS AT TOTAL EXPLORATION EXPENDITURES OF $75 MILLION, $150 MILLION OR $300 MILLION FOR WHICH A TAX LIABILITY IS FIRST INCURRED IN THE INDICATED YEAR FOLLOWING THE COMMENCE­ MENT OF PRODUCTION.

YEAR FOLL- EXPENDITURE ON EXPLORATION - A$ MILLION OWING THE COMMENCE-MENT OF PRODUCT-ION IN WHICH A TAX LIAB-ILITY IS FIRST INCURRED

1

2

3

4

5

6

7

8

9

10

NOTE:

75 150 300

NUMBER OF NUMBER OF NUMBER OF

FIELDS FIELDS FIELDS

DISCOVERED DISCOVERED DISCOVERED

1 2 3 1 2 3 1 2

918 1064 1211 1689 1835 1982 3231 3378

391 468 544 706 782 859 1334 1411

260 321 382 459 520 581 856 917

200 255 309 346 401 455 638 -692

166 217 268 281 332 383 512 563

145 195 244 242 291 340 435 484

133 181 217 266 314 386 435

127 177 206 255 304 362 411

122 195 245 295 340 390

119 187 237 324 374

(i) Subsidies assumed to be not applicable. (ii) All exploration expenditure is assumed to be available as a tax deduction prior to

3

3524 1488 978 747

614 533 483 460 439 424

'the end of the year in which a tax liability

is first incurred. (iii)No figure is shown where the total taxable income does not exceed $5 million, in which circumstance the first year of tax liability

is particularly sensitive to variation in field size and to matters of detail in assumptions and no confidence could be placed in the results. (iv) All fields are assumed to be brought into

production on the same date.

Mr Foster's calculation

880

5.2.73 Another approach came from Mr R.Foster (Exhibit 339 Appendix 1) being a recalculation of Dr Hunter's Table 6 (Exhibit 327 p.48). Illustrative figures therefrom are:-Size of field - 500 million bbls

Total undiscounted "take" (royalties and taxes) "take" from income tax Dr Hunter's original figures

- 347 $A million

- 252 $A million

5.2.74 Dr Hunter was a Professional Fellow in Economics, Institute of Advanced Studies, The Australian National University, and after his death his specially prepared paper, Exhibit 327, was read by Mr Brown. His paper which has been

of great assistance, contains many Tables some of which were recalculated by Mr Foster. Like others, he made many assumptions. For our purposes perhaps the most important of his Tables is his Table 6.

5.2.75 Dr Hunter's original figures for a 500 million

barrel feild which were based on a purchase price of $2.06 and an income tax rate of 45% instead of the more modern were $334 million and $239 million respectively. (The

proportion of "take" by the Australian and State Governments respectively from royalties is referred to later under "Royalties.")

5.2.76 For a 1000 million barrel field his figures were

respectively $691 million and $501 million. Mr Brown's figures for a field of 500 m. barrels

5.2.77 Mr A.W. Brown, who is Planning and Development Manager of Delhi International Oil Corporation in Adelaide (it is an American Company), in his statement being Exhibit 332 at page 3 pointed out that it is a characteristic of

petroleum exploration that relatively long periods are required to discover and to develop a commercial oil field and accord­ ingly any method used to assess economic benefits obtained from the industry should recognise the time value of money. He explained the system of discounted cash flows in Exhibit

881

336 p.49. He restated part of Dr Hunter's Table 6 in its

discounted values form using a discount rate of 10% and portion of this reads as follows (T8014B):-

(i)

of field

Finding Costs

(ii) Production Costs (i.e. development & operating costs)

(iii) Government "take"

(iv) Company net earnings

Total

And for lOOOm:

- 500 million barrels

- 75¢ per barrel

(total $130m.)

- 48¢ per barrel

(total $82m.) - 65¢ per barrel

(total $110m.) 18¢ per barrel (total $32m.)

$2.06 =====

5.2.78 For a field of 1000 million barrels the respective

discounted values were (i) 75, (ii) 41, (iii) 67 and (iv) 23

cents per barrel and totals were (i) $261m., (ii) $142m., (iii) $230m., and (iv) $79 m. respectively.

And for 100 m.

5.2.79 For a field of only 100 million barrels he said the

company sustained a loss of 17 cents per barrel. In all cases

the price used was $2.06 per barrel.

Proportion of total expenditures retained in Queensland 5.2.80 Mr Brown also stressed that Dr Hunter's stated view (which he considered to be on the conservative side)was that 50% of t otal expenditures on exploration, development and

production within the GBRP would be retained within the State of Queensland. In the case of 250 million barrel field the estimate was that between $79 million and $93 million would be

882

retained in Queensland - and this without applying the multiplier.

Mr Foster re-calculated Dr Hunter's Table 6

5.2.81 Using the same discount rate (10%) but assuming as

a 1975 purchase price the figure of $2.82 instead of $2.06,

Mr Foster re-calculated Dr Hunter's tables.

The re-calculated Table is at T8285-6 and an

illustration from it reads as follows. It is to be

observed that like the others these figures take no account of any LPG if produced - or if gas were found with the oil,

from the export of LNG:-

Field size in million barrels (Oil Production -Discounted

Finding Cost Production Cost (Development -0.28 Operating -0.20) Government Take

500 173.2 million barrels)

Cents/Barrel 75

48

(Royalties and Income Tax) 106 Company Earnings 53

Initial Outlay Government Take

$2.82

In Million Dollars 178

(Royalties and Income Tax)

Company Earnings

183

92

(If undiscounted these figures would aggregate $979. 3m.) 275

883

Comment on the $2.82 figure 5.2.82 The figure of $2.82 was selected in the light of

ministerial (infra and T8312) and conjecture but

it is obviously impossible for anyone to foresee with confidence either local policy or overseas prices patterns in 1975 and for 20 years thereafter. Yet, in the light of recent and current events, it is not a realistic figure. The current fixed price of

$2.06 was based on an import parity figure of $1.89 which pertained in October 1968 (paragraph 5.2.52 supra); Mr. Foster said:-"That figure if it were calculated today (August 1971)

would be $2.44 ... "

(Before the hearing ended it had gone to $2.60. Today it would be much more). Furthermore,Mr Foster at T8520 told us that a 1971 oil industry publication had stated that at the present rate of demand growth proven crude oil reserves would be exhausted in less than 20 years if no more were found. To maintain

the 20 year ratio of reserves to the resultant level Df 1980 demand, 400 billion barrels of new reserves would have to be discovered by 1980. These factors seem to support the realism of the $2.82 figure. After all we are discounting the future

take over the next 20 years.

Mr Foster's figures

5.2.83 Thus, using $2.82 and assuming amongst other assumptions a field of 500 millions of barrels (which would approximate the Halibut Bass Strait field), there would be a yield on discounted or "present day" value over the 20 years life of the field some $183 millions of government take and $92 as company earnings. If undiscounted

these figures would total $979.3 millions (T8265-6).

Assumptions set forth in paragraph 5.2.97 5.2.84 All these ( and other ) Tables particularly in

884

respect of their expenditure on exploration figures were based on a number of assumptions to which reference will be made later in paragraph 5.2.97. The insuperable difficulties

in attempting to quantify the "extent" of revenue benefits which will flow from the prOduction of oil in the GBRP emerge clearly enough.

Mr Fitzgibbons' approach on royalties

5.2.85 At p. 20 of Exhibit 405 Mr Fitzgibbons under the

heading "State Finances" said:-"Given that Reef petroleum does not displace petroleum elsewhere in Queensland the expected annual royalty payment to the Queensland

Government will be $3.7 million, that is 8.587 cents per barrel multiplied by 44 PBE (per barrel equivalent- to accommodate gas). Thus of the expected annual gross gains of

$17.6 million (Cochrane's submission p.28) the State royalty payments equal $3.7 million. The expected royalty payments to other State

Governments will be reduced by about $2.2 million owing to the expected reduction in the average price and the expected reduction in output elsewhere. The capitalised sum today

of royalty payments from Reef petroleum to the Queensland Government will be about $21 million. The capitalised sum today of royalty payments to other State Governments will be reduced by about $12 million. Annual royalty payments would be 1% of annual State expenditure."

Reference is made elsewhere to the interesting "displacement" and other theories of Messrs Cochrane and Fitzgibbons (paragraph 5.1.11 et seq).

Factors affecting quantum of taxation

885

Before rEading paragraphs 5.2.86 to 5.2.95 inclusive reference should be made to the "Addendum" appearing immediately before paragraph 5.2.62 supra.

5.2.86 The amount of tax would clearly depend on factors such as finding costs and development and also other

normal outgoings falling within sections 51 and 54 of the Income Tax Assessment Act 1936-1971 on the one hand and the ma gnitude of the discovered reservoir including the number

of fields on the other. For example, if such costs and

outgoings (including royalties) equalled or exceeded $2.6 x 30 millions (choosing the case of a comparatively modest 30 million barrel reservoir) no tax would become payable in view of the provisions of Divisions lOAA and lOAAA of the Assessment Act, relating to "unrecouped capital expenditure." The practical effect of the allowance for unrecouped capital expenditure is that a petroleum mining company does not pay tax on income from Australian petroleum produced by it until such time as it has fully absorbed its allowable capital expenditure either by way of deductions for that expenditure against assessable income or (until a very recent amendment of S.77D) by transferring deductions to its resident share­ holders (Exhibit 409 p.4). (see Table III paragraph 5.2.72 supra).

It is also to be observed that there is an

associated exemption for dividends paid by a company out of income that is freed from Australian tax through the application against it of unrecouped capital expenditure. This is so whether the dividends are paid to resident or non-resident shareholders.(section 44 (2)(d) and (6) ).

Percentage of foreign ownership of permit areas 5.2.87 Another important factor is the degree of foreign ownership of permit areas already granted in the GBRP. The percentage of Australian owned areas is presently only 8

886

(Tl0089). (see paragraph 5.2.110 (12) ).

Resident and non-resident companies and shareholders 5.2.88 A company incorporated in Australia is a resident for taxation purposes. So too is a company incorporated abroad that carries on business in and has either its central management and control here or

its voting power controlled by shareholders who reside here (Section 6 of the Assessment Act). In general there is no Australian tax collected on dividends paid out of Australian profits to non-resident shareholders where the profits are made by a branch of an overseas company (K.F. Brigden,

First Assistant Commissioner, Policy and Legislation Division, Commonwealth Taxation Office, Canberra Exhibit 409 page 7). This is largely because of jurisdictional difficulties over the paying company and its shareholders (ibid). As the result of amendments to the Assessment Act made in 1968 by the inclusion of section 6AA "Australia" includes for

income tax purposes the offshore "adjacent areas" as specified and defined in the Petroleum (Submerged Lands) Act 1967.

Double taxation agreements 5.2.89 The position with regard to the earlier (with

United States, Canada and New Zealand) and the more recent (with United Kingdom, Singapore and Japan) double taxation agreements was explained by Mr Brigden. As the earlier agreements do not specifically treat Australia as including

the continental shelf and have not yet been re-negotiated as was the 1946 United Kingdom Agreement in 1967 it is arguable that a company incorporated in United States, Canada or New Zealand could carry on petroleum production in the

GBRP in such a way that it could claim that for the purpose

of the double taxation agreement, it has no permanent establishment in Australia from which its profits are derived thus exempting the profits from Australian tax

887

notwithstanding the insertion of section 6AA in 1968 (cf Mr Brigden Exhibit 409 at p.8). However fresh agreements (at least with the United States) are apparently being negotiated.

Validity of section 6AA and withholding tax 5.2.90 The validity of section 6AA and the power of the

Commonwealth to extend its taxing powers to activities on the

continental shelf have not been tested. One immediate effect of section 6AA was to entitle the off-shore searchers to accumulate deductions as if they had searched on shore (K.F. Brigden Tl2511). Other aspects of the complex provisions relating to dividends include withholding tax in the case of non-resident shareholders in an Australian resident company (Sl 2 8B ). This is generally 30% of the gross dividend but under the double taxation agreement this rate is reduced to 15% for shareholders resident in the agreement countries (Exhibit 409 p.5).

Unrecouped capital expenditure -Sl24DF 5.2.91 On the assumption that Term of Reference refers

not only to governments but citizens, it was pointed out that although the governmental "take" from a given profit would be greater in the case of the petroleum producer (but only after unrecouped capital expenditure had been fully deducted under section 124DF of the Assessment Act) than in the case of another industry by reason of royalties the benefit to the shareholders would be less. It was submitted that therefore non-petroleum industries might yield greater flexibility and movement in the national wealth.

5.2.92 The requirement that subsidies must be repaid by an

exploring company which becomes a producer by reducing deductions for unrecouped capital expenditure will also affect the incidence of income tax over a period by increasing it (yet repayment of subsidies by a producing company is largely compensatory).

888

Secbion 77D 5.2.93 As regards section 77D Mr Brigden pointed out

that it is available only to Australian residents and that it may represent a policy of encouraging through the tax law at least some Australian participation in this form of activity (Tl2507). Of course its value to the general

economy depends on whether oil is found (ibid). Its operation has involved very considerable revenue cost and this must be regarded as an offset when considering the "net benefit" accruing to the Commonwealth Government from income tax on

. profits derived from petroleum production. Mr Brigden (Tl2508) when asked about the cost of section 77D (and its predecessors sections 77A and 77AA) pointed out one of the difficulties:-"The difficulty would be in saying those moneys subscribed under section 77D, to what extent the companies would in the future allocate that expenditure between searching for oil and searching for other minerals." Details of the estimated cost to Commonwealth revenue in recent years of the income tax concession provided under sections 77A and 77D for capital subscribed to petroleum exploration companies were provided by Mr Brigden subsequent to his giving evidence and became Exhibit 512. They are:-"Year ended 30 Year ended 30 Year ended 30 Year ended 30 Year ended 30 June June June June June 1967 1968 1969 1970 1971 $m. 4.3 6.6 16.1 28.0 9.2 Figures in respect of the cost in the 1971-2 financial year are not yet available but we expect it to be down on 1970-71. Possibly the 1971-2 cost will be of the order of $6.0m." 889

Since writing the above paragraph Act No. 52 of 1973 (assented to 14 June 1973) has been passed (see addendum which precedes paragraph 5.2.62 supra).

Section 124DE 5.2.94 Another legislative provision to which brief mention should be made is section 124DE. During questioning by Mr Connolly QC of Mr Brigden the following took place:-

890

Q - "I was going to ask you whether it might

not be right to say that if you have a group

of companies then it may well be worth

while for the acquiring company to take over the whole of the unrecouped capital expenditure of its associate and to pay by way of consider­ ation the full value in the perhaps well founded anticipation that in one way or another it will be able to get the money back again. What do

you think about that? --- Yes, I agree completely.

The issue I took with Mr McCay was this: the

absence of any controls in the legislation,does not evince any policy that this whole fund of unrecouped expenditure is a potential charge on the revenue. 124DE permits transfers between associate companies and we could conceive perhaps that BHP, which is a producer, would buy the whole of the shares in an unsuccessful company at the moment, and I think this is what you were

aiming at. Q - Yes, that is what I am suggesting ? --­

Immediately these companies are very closely associated. The newly acquired company is a 100% subsidiary of BHP and there would be no

reason why an exorbitant payment by BHP for the unrecouped capital expenditure would not be economically attractive because it would still own the money that it paid over. All I can say

is that 124DE was not introduced to encourage that sort of thing. It has never been used

for that sort of thing; that the policy is

fairly clear in S80A and if ever it looked

as though there were to be this trafficking either by acquiring complete ownership in the unsuccessful company and using 124DE or by acquiring complete ownership and then

giving the newly acquired company an interest in the exploration, I would know that the Commissioner would see the Treasurer and I would expect fairly prompt government action."

(Tl2509)

5.2.95 However if the "fairly clear" policy evidenced by S80A requires structural support to ensure its implementation it may be a matter for consideration whether legislative amendments should be made early rather

than late as changes in taxation law in modern times are not made so as to be retroactive. ( But see addendum which

precedes paragraph 5.2.62 supra).

McCay's assumptions when the Tables were compiled 5.2.96 The Tables of Dr Hunter as recalculated by Mr

Foster which have been referred to earlier (paragraphs. 5.2.73 et seq) appear at pages 8263 and 8266 of the transcript whilst those compiled by Mr McCay (delivered by Mr McAlister) appear as Appendices 17 to 20 to Exhibit 323.

5. 2.97 They were compiled on certain assumptions a reference t0 which will serve to show the accuracy of Mr McAlister's statement quoted above that "it is not really

possible to state in quantitative terms the profits and benefits likely to flow from a search for oil in the Barrier

Reef area." The major assumptions which appear in Appendix 18 to Exhibit 323 were:-

891

892

"(a) That

(i)

(ii)

(iii)

the oil fields discovered will be:-30 miles off-shore in depth of water approaching 50 fathoms about midway up the Queensland coast, where shipping charges to a refinery port will be

$0.20 per barrel.

(b) that the crude will bring about $2 per

barrel at the refinery port. This assumption is related to my argument about the policy decision to be made in 1975 as to the price for Australian crude oil ...

(c) that the rate of production of crude

from the field is not constant but declines with time on a certain pattern.

(d) that the development investment (i) is related to the field size

(ii) may be regarded as being

incurred in toto l year prior to the commencement of prod-uction from the field (iii) to the extent of 50%, is down-

stream of the well head (iv) to the extent of 50%, is

financed by borrowing at 10% per annum

(v) to the extent of 50%, constitutes

an immediate tax deduction (vi) to the extent of 50%, is amort­

ised and depreciated for tax

purposes in accordance with a field production pattern.

(e) that the exploration expenditure may be regarded as being incurred in toto at the time of commencement of production from a field

(f) no limitation exists at any time as to

the quantity of crude oil for which $2 per bbl may be obtained at the refinery port."

Comments on these assumptions

5.2.98 Of these assumptions it may be said:-

(1) They are largely of an arbitrary nature and have been adopted for the sake of illustration but with an eye on apparent possibilities if not probabilities. (2) An assumption relating to off-shore

distance (30 miles) is a necessary assumption as development and prod­ uction costs will appreciably turn on the distance from shore. However if

drilling were permitted in the Capricorn Basin the selected distance of 30 miles could well be doubled or even trebled. (3) Generally speaking the water depth

deepens in the south (e.g. in the

Capricorn Channel) and is much less in the north. (4) The selection of $2 as the delivered

price at the refinery port may be subject to a major change by 1975 in the light

of the Teheran agreement and other current OPEC activities. In any event the argument

893

on which the figure of $2 was selected

is not persuasive. For future calcul­ ations it is too low. ( Since this para­

graph was drafted events overseas in late 1973 have more than confirmed the view that the figure of $2 will be subject to

a major and arresting change by 1975).

(5) Tanker charges are liable to be subjected to considerable changes but the evidence is conflicting as to whether changes will result in increases or decreases. Under current and foreseeable conditions they appear likely to increase. (6) Pattern of production from fields cannot

Finding Costs

be foreseen. Much will turn on further geological knowledge and on various factors such as reservoir sizes, product­ ion procedures and policy. A pattern which is admittedly a compromise pattern was selected. Close to 90% of

reserves are expected to be withdrawn in the first 15 years.

5.2.99 To the end of 1970 an estimated total of $751

million appears to have been expended in Australia in the search for oil and estimated recoverable initial reserves stood at 1861 million barrels. This represents 40¢ per barrel ( a somewhat lower figure was given by Dr Hunter and Mr McCay namely 35¢) but this cannot be regarded as a current

figure. Mr Brown's figures appear at T7975. Little inform­ ation is available on the comparative costs in other countries (p.l5 of Appendix 12 of McCay's Exhibit 323 where a figure of 12¢ - Canadian - is mentioned) and certainly none for the

GBRP as all drillings therein to 1968 - since when no drilling

has taken place - were unsuccessful. Moreover the position is

subject to the further difficulty that expenditure directed to exploration, for example on geophysical work, may long precede drilling and actual discovery to which that expenditure was directed. That is, it may_be fallacious to consider exploration expenditure in a period as being related to

discoveries made in that period (ibid p.l9). In short, likely costs in the GBRP will ( by reason of its size and geograph­ ical features) not only vary between its Northern,Central and Southern Zones, but cannot be reasonably inferred in the absence of some knowledge of:-

(a) the particular geological environment in that area and

(b) the typical size distribution of oil fields in such an environment. In fact we do not have useful or at least suffic­

ient information in regard to either of these matters. Mr McAlister's views when commenting on Mr Cochrane's

"expenditure" method of estimating the size of discoveries is also in point. At Tl0454 Mr Woodward summarised portion of his evidence as follows:-"As I understand it, sir, what Mr McAlister is

putting is this; you cannot look at the total exploration at any given time and say that that helps you to determine how much oil is going to be found because you could well have

a situation in which having put down 24 wells it is only the last of them that shows some

promise. You then make a decision to spend some more money but one could not say that the amount of oil that you then expect or hope to

find is in any way related to the cost of

the previous 23 wells."

At Tl0464 Mr McAlister quoted from Professor Adelman as follows:-"We cannot estimate finding costs in the same

895

way as with operating and development costs. Future costs out of existing deposits can be estimated with some claim to accuracy because there is great continuity of past, present, and future development and extraction. The costs tomorrow grow out of costs today, making only allowance for changes as the depletion process continues. But this continuity assumption is precisely the one we cannot make about finding costs. The discovery of a new field, and to some extent even of a new reser­ voir in a known field is a unique event, and

we cannot go in any smooth fashion from the

reporting of past costs to the estimate of future ones. I have had occasion to write

tnat 'past finding costs are often unknowable, usually unknown, and always uninteresting. ' Discovery in one place is really a joint product with non-discovery in others; the cost of some failures is part of the cost of the

success. In order to make a rational

estimate of the cost of new reserves, we must have some knowledge of the total and size distribution of new fields. But we have no knowledge of what will be found; neither a theory nor facts into which it may be fitted. Finding-cost estimation is a reckoning of gambling odds, and we cannot start it until we have some notion of the chance of finding

a pool of a given size."

It would therefore seem that the presence of figures for "exploration expenditure" in some of the above Tables is one of the many assumptions made by economists when compiling Tables to assist us in answering this Term of Reference. If for example $50 m. were spent in exploration and then a

reservoir of 100 million barrels were discovered it might not be a national answer to say that the finding cost of the 100 m.

barrel field was 50¢ per barrel because a much bigger reservoir might be discovered (whether nearby or distant is immaterial) as quickly as the early Bass Strait discoveries. Mr Brown at T8012 when speaking to Dr Hunter's

Table 6 referred to the assumption therein made of 30¢ per barrel finding cost and said:-

5.2.100

"The assumption of a 30 cent exploration cost per barrel of recoverable reserves is the value which could vary most signif­ icantly in practice, depending on the

incidence of structures actually found to contain petroleum accumulations,the time spent in discovering these structures, the number of dry holes put down before discovery, water depths, distance from shore and there­

fore the logistics of off-shore operations." -and he mentions Reference No. 25 at p.78 of Exhibit 327.

Probably costs of developing an oil field when discovered - the cost involved in producing the oil and bringing it to land - might be easier to guess at than

finding costs, if only because development expenditure will not be incurred unless a profitable project is foreseen. But development and production costs would still vary widely according to size of field, its physical situation and

characteristics (depth, porosity and permeability) and distance from the shore.

5.2.101 These factors demonstrate the difficulties in attempting to estimate the "extent" of taxation which will flow from the production of oil in the GBRP.

897

Subsidies 5.2.102 Subsidies to which earlier reference has been made, have an indirect bearing on the quantum of income tax and on benefits generally receivable by the Australian Government. Subsidies granted to the end of January 1971 as an incentive to petroleum search totalled $108.9 millions (p.5 of Exhibit 245). The subsidies are under certain conditions repayable if production commences on a commercial basis. The method and conditions of repayment are set forth in Exhibit 390 and an explanatory note of the Subsidy Acts is in Exhibit 245. In 1969 the legislation which commenced with the 1957 Petroleum Search Subsidy Act was amended in relation to off-shore drilling. The maximum rate is 30% but as stressed on behalf of APEA the subsidy does not apply to foreign owned companies and it varies according to proportion of Australian equity. Recent press reports indicate that subsidies will cease as from 30 June 1974.

Some benefits from foreign capital 5.2.103 . As elsewhere stated (paragraph 5.2.110 (121 infra) about 92% of the Permit Areas hitherto granted in the GBRP have been granted to foreign companies.

It must be borne in mind that foreign capital which is permitted to be invested in petroleum drilling in the GBRP might well be invested in other countries if not so invested so that some of the remarks about "foreign benefits" and certain aspects of "net benefit" must be tempered in the light of this consideration whilst foreign capital spent on unsuccess­ ful exploration was regarded by some witnesses as Australian money saved. On the other hand both from a nationalwealth view

(paragraph 5.2.110(12) ) and an income tax view (paragraph 5.2,88) it is to Australia's advantage that there should be Australian equities in producing companies.

Future pricing and pro-rationing policy 5.2.104 It should also be kept in mind that, unless reviewed

898

earlier, the future Government pricing policy including its pro-rationing policy will be reviewed so as to operate afresh in 1975.

Mr Foster, who is- Chairman of the APEA Barrier

Reef Sub-Committee, at T8312 said:-"If the government policy is to use import parity as its guide the price will go up by 76 cents

or some figure like that - obviously it will

not be exactly that ... if the government

policy were to allow the price to float with world prices ... the price would move in some

relation to world prices plus freights." Of course an increase in price would mean a greater revenue "take" not only from royalties but in all probability from income

tax. Whether there would be a resulting disadvantage to the consumer cannot be foreseen.

Retail prices of petroleum products in Australia 5.2.105 The retail price movements of petroleum products may not appear to be readily explicable. For example, although our price for indigenous

crude oil is $2.06 (which Mr Cochrane called "the home support price" (T9769) at the nearest refinery, the retail price of petrol per gallon at Sydney in 1971 exceeded by 7.4 cents the price in New York, U.S.A. (44.9 cents as

compared with 37.5 cents) at a time when the cost of imported Middle East crude into U.S.A. was considerably more than $2.06 per barrel (page 40 of Exhibit 456). The maximum wholesale prices are fixed by the South Australian Prices Commissioner for South Australia and by common agreement the

refiners accept and apply the price so fixed in other States. Mr Masterman ( appearing for the APEA said (T9775A):-"It has become the convention for the South Australian Prices Commissioner to act as the

899

prices Commissioner for the whole of Australia."

Mr Cochrane's view

5.2.106 In speaking on this matter Mr Cochrane, whose views did not coincide with those of Dr Hunter, Mr McCay and Mr Foster on various aspects, expressed the view that petroleum prices in Australia exceed the competitive level and added

"in the absence of new entry into the industry, there is no reason to believe that a reduction in the price of local crude oil will be passed on to the Australian consumer." Mr Cochrane was cross-examined at some length by Mr Masterman

on this subject at pages 9755 to 9775A. Dr Coombs' views are referred to in paragraph 5.2.31 supra.

Mr Foster's view on prices overseas

5.2.107 Mr Foster said that gasolene in the United States is cheaper to the public than in most parts of the world, as is

gasolene in Australia (T8334). (This also clearly appears from Exhibit 456 page 40. Some very high overseas prices of petrol are due to excise duties).

Factors affecting the low U.S.A. retail prices 5.2.108 He added, in regard to the difference in retail price between U.S.A. and Australia:-

900

"The points are several. First of all, the United States refineries are larger than ours. Their refining costs are lower than ours. The profit of the United States refiners is generally a little above the profit of the Australian refiners. Another point is that our population density is very low and our transport costs are very high. Their transport costs are lower. Therefore, their distribution costs are

lower. These are considerable, and are more important, perhaps, than the difference in well head price. The third point is that,

in general, in the United States the excise duties are lower than ours. There may be

other points, but I think those factors will be enough to illustrate to you that it is

not directly due to the refiner's profit, and probably the refiner's profit tells you the opposite td the true picture."

It was also said that there are manufacturing differences due to the nature and quality of indigenous crude.

Australia's excise duties 5.2.109 Our own excise duties have increased materially since indigenous crude oil became available. Thus:-

5.2.110

1961 - 9.8 cents per gallon

1965 " -12.3 cents per gallon

1970 " -15.3 cents per gallon

1971 " -17.3 cents per gallon

(Exhibit 456 page 20) 1973 rate - 22.3 cents per gallon (Since drafting this answer to TR5, we have been informed by governmental authorities that the excise duty

is now 22.3 cents per gallon)

CONCLUSIONS ON INCOME TAX

(1) Depending on the magnitude of the discovery and on important factors relating to finding costs and development and product­ ion expenditures, and if certain assumptions are made (see paragraph 5.2.97) substantial national benefits from income tax can be

expected if oil discoveries are made within

901

902

the GBRP of commercial significance. The Tables set forth in paragraphs 5.2.67 et seq (supra) illustrate the quantum of such benefits. (2) The oil industry was universally accepted

as an efficient one and it therefore seems understandable to refer to estimates of taxable income therefrom in absolute or total terms but the majority view of the economists who gave evidence was that the relevant "net" benefit should be measured as the excess over a 20% return berore tax on Australian investment

(because efficient industry in Australia looks to a 10% after tax return on share­ holders' funds and company tax is now of net income). (3) Many assumptions must be made before

attempts can be made to eGtimate the quantum of taxable income. Most of these are listed in paragraph 5.2.97. (4) Other assumptions which must be made relate

to finding, development and production costs. These are shown in and form part of some of

the various Tables. (5) In cases where estimates of taxable profits over a 15 years or 20 years production life are discounted to present day figure

(immediate discovery being assumed) the discount rate has varied between 7% and 10%­ mostly the latter. (6) But some economists will not approach the

problem by discounting because of the date of discovery being unknown and incapable of estimation. Accordingly both discounted and undiscounted

figures were given. (7) Also one set of Tables gave the year

after discovery when according to costs, size of reservoir and number of fields the first payment of income tax would become due. In this Table the size of

the reservoir (given in detailed figures not in round numbers) governs the year of first tax liability. (8) In offshore exploration in such a large

area, the GBRP,with such a long and (in places)sparsely populated coastline, finding and production costs will partly depend on the position of the discovery with consequential impact on both the quantum

of tax and the date it first becomes payable. Consequently one of the assumptions made when the Tables were being compiled related to locality of discovery (this appears in

the list of assumptions, supra). It is

doubtful if a remotely situated original field of less than 75 millions of recover­ able barrels would be commercially attractive or would yield any significant

income tax benefit to the revenue unless the finding costs were small. (9) The provisions of Division lOAA and Division lOAAA of the Income Tax Assessment Act

including the special deduction for unrecouped capital expenditure provided for by sections l24DF and 124 DG are among the important factors affecting and tending to reduce and delay liability for income tax in successful offshore drilling. (10) In any event offshore drilling and production

are much more costly than onshore drilling.

903

904

(Pipelines for example cost about five times as much as onshore yipes if the latter are constructed on average and not mountainous terrain). (11) The present fixed price for indigenous

crude of $2.06 is due for review in 1975

and consequently the Tables compiled by the economists have used both $2.06 and a figure claimed to be more realistic for making long-term future calculations, namely $2.82. This factor together with

such necessary assumptions as a production pattern and others listed in paragraph 5.2.97 illustrate the difficulties of giving estimates of quantum. These diffic­ ulties have been highlighted by recent overseas events. (12) The fact that 92% of the permit areas of the

GBRP which have hitherto been granted have

been to companies with foreign equities . (see Appendix D to the Report) will affect indirectly revenue subsequently receivable from the shareholders as compared with share­ holders who are Australian residents. A main benefit from having Australian equities in production companies would be an increase of national wealth in the sense that the dividends would remain in Australia (paragraph 5.2.18), whilst the difficulties in collecting tax from non-resident shareholders are mentioned in paragraph 5.2.88 supra. As regards income tax benefits it is to be kept in mind that any

Australian capital expended in exploration might be used for other industrial purposes and so produce income tax (but not royalties) from other sources. But foreign capital

intended for investment in offshore exploration is unlikely to be invested in other forms of Australian industrial life. Press announcements since the hearing ended have indicated a change

of governmental policy in regard to foreign ownership of offshore mining leases. (13) As Mr Woodward QC indicated each of the

various methods used by the different economists in compiling the Tables appears to be valid and no occasion arises for us to select a preferred

one. All demonstrate that substantial net gains to the national revenue under this head of benefit will eventuate if discoveries of oil within the GBRP of

sufficient magnitude are made but both the minimum size of reservoir and the circumstances necessary to attract tax can vary according to certain factors which have been mentioned above. (14) The following are five examples taken from

the Tables in evidence. They have not been selected for any particular reason but have been taken almost at random as illustrations "of what might happen" (Mr McAlister).

Example I (From Mr McCay's Table IV in Appendix 20 to Exhibit 323 (not discounted) Reservoir Expenditure (1/10) Excess Taxable

Income

800 m.barrels $792 m. (only one

field)

(where (a) "Excess" means excess over a return of

$15 m.

905

906

20% before tax on equity investment

(b) Refinery price is $2 per barrel.

Over a 20 years production period the net taxable income would be shared between the national revenue and the shareholders in the proportions of to

Example II (From Mr Foster's recalculation (Exhibit 339 Appendix I) of Dr Hunter's Table 6 (Exhibit 327 p.48) )

Reservoir Income Tax

500 m.barrels 252 $A millions

Example III (From Dr Hunter's Table 6 (T8014B) - discounted at 10% - T8014C)

Reservoir Income Tax

500 m.barrels $75.5 millions (undiscounted the figure is $239.1 m.)

Example IV (Also from Table 6 - T8014A) Reservoir Company makes a loss

100 m.barrels of 17¢ per barrel

Example V Showing in what year a Tax liability would first be incurred (Prepared by Mr McAlister - his Table IIIA - ALL development expenditure (not 50%) regarded as deductible capital expenditure under Sl24DG and NONE depreciable) - Tl0083 -

Year following commencement of discovery in which a Tax liability is

first incurred

lOth year lst year lst year 3rd year

3rd year

Expenditure (Full amount­ not l/10)

$150 millions

$ 75 millions $300 millions

$ 75 millions $150 millions

Millions of barrels in the discovered reservoir (2 fields)

246 m.

2269 m. 6412 m.

396 m. 614 m.

Note:- The "years" and the "expenditure" have been selected to illustrate the degrees of variation. It will be seen that a comparatively small reservoir with a large expenditure on exploration will postpone the date

of first income tax liability. It is also interesting to note that this table in fact associates large reservoirs with large exploration expenditures although it is not suggested that the table is intending to adopt Mr Cochrane's theory that the

greater the expenditure the greater the recoverable reserves. Mr McAlister's explanation is at Tl0071 et seq.

(d) Royalties

Rates payable 5.2.111 The production of petroleum in the GBRP will involve the payment of royalties. A standard rate of 10% of the value at the well head was fixed under clause 19 of the 1967

Agreement between the Australian Government and the States of which 40% was allocated to the Australian Government and 60% to the State. This standard rate applies if only 5 blocks

are taken up and then an over·ride royalty of between 1 and is payable if more blocks up to nine are taken. This override

royalty is retained by the State. Thus if a total royalty

907

of were payable the Australian Government would receive 4% and the State The period for payment is 21 years (the

term of the licence).

Value at well head 5.2.112 The value at the well head will be ascertained in

the manner prescribed by clause 21 of the Agreement and the Petroleum (Submerged Lands) (Royalty) Act. It is sufficient to say that allowances are made for certain transport and treatment costs and that it will vary with the size of the field, its location and the cost of bringing the field into production. As production increases in magnitude, costs decrease and so deductions decrease whilst well head values and consequently royalties may increase.

Illustrative calculations 5.2.113 As no hard data are available both Dr Hunter and

Mr McCay adopted the method of providing a range of illustrat­

ive calculations. Mr McCay calculated that with one field the royalty per barrel in dollars Australian ranged from_.l4 for a recoverable reservoir of 100 million barrels to .19 for reservoirs of 500 and 1000 million barrels and .20 for a field of 5000 million barrels. He used $1.50 as the well head price. Mr McAlister's evidence on this subject appears at T9953 to

T9960. Dr Hunter in respect of a 500 million barrel field attained a figure of $.21 per barrel and using a 10% discount rate and a $2.06 per barrel price found the present value of the total royalty over the license period to be $35.6 million. However such figures are no more than a guide as no one can

do more than offer a range on particular assumptions which may or may not become applicable.In particular, reliance upon the key figure of $2.06 cannot be made beyond 1975.

Nominal State "take" from royalties may not be significant if Queensland a "claimant" State 5.2.114 In the result it can be said that substantial sums

of money will be involved in the payment of royalties if

908

production on a commercial basis eventuates; but although the nominal "take" of the State will be greater than that of the Commonwealth the net monetary advantage to the State from royalties may not be very significant for the reason given

in Exhibit 450 - "The Report from the Senate Select Committee on Off-Shore Petroleum Resources" at paragraph 9.206:-

" moneys accruing to a State as a consequence

of a State's capacity to raise revenue are taken into account when Commonwealth financial assistance grants arrangements are being reviewed. An immediate cash flow to a State as the result

of the division of royalties is of course an advantage to a producing State, but when considered against the overall budget of the State it is not of great significance." (It is

understood that for purposes of financial grants Queensland has recently become a "claimant" State.) This result seems strange as the proportion of Queensland's share of royalties was settled by agreement

(clause 19 of the 1967 Agreement -Exhibit 56). This aspect was not canvassed during the hearing.

Fees 5.2.115 Fees and pay roll tax are payable both during

exploration (even if unsuccessful) and production periods. The former are a necessary contribution to the special administration expenses incurred by the State Government in connection with off-shore drilling, e.g. the employment of

expert mining, geological and scientific personnel, inspections, training, supervision and contingency planning with all its complexities. Such fees can therefore scarcely be regarded as a monetary benefit.

909

Royalty a tax deduction 5.2.116 Royalties are amongst the income tax deductions available to a petroleum producer. Aspects of royalties of a general nature were discussed in paragraphs 2.15 to 2.17 supra under the title

"Increase in National Wealth "

CONCLUSION ON ROYALTIES

5.2.117 Royalties, particularly to the State of Queensland, will be substantial if commercial success is achieved. Thus for a 500 million barrel field (a comparatively modest reservoir) the total discounted value over the license period of 21 years would be $35.6 millions. If the price to the

producer increases in 1975 from the existing $2.06 per barrel the royalty benefit will also increase. From the Australian Government "take" must be offset the incidence of royalties as a tax deduction but this is of minor importance having regard to the rate of tax.

But irrespective whether royalties are received by a State or the Australian Government the national interest viewed as a whole is certainly a substantial beneficiary from royalties.

The Commission notes with interest the observation quoted in paragraph 5 . 2.114 above contained in paragraph 9.206 of the Senate Select Committee Report (Exhibit 450). No evidence was called relating to this aspect, which indeed only came to the Commission's notice after the hearing was concluded.

Also the Commission finds a little difficulty in reconciling paragraph 9.206 with the next paragraph 9.207 which begins "A petroleum producing State is likely to derive considerably more revenue from royalties than the Commonwealth .. "

910

(e) Possible benefits to our balance of payments situation

of imports

5.2.118 Whilst indigenous production remains insufficient to meet all Australian demands, it follows that any additional petroleum discoveries will reduce our import bill the extent of the reduction depending on the quality of the discovered

oil. For although it has a high quality it is a light oil

in industry terms and until a heavier crude is discovered, our crude, however great in quantity, would not satisfy all industrial requirements.

Export effect 5.2.119 The export of Australian crude could have a benef­ icial effect although this was not accepted without qualific­ ation by all witnesses and in any event, such export is unlikely to be of significance in the near future notwith­

standing the views of Mr Cochrane referred to elsewhere. But whether these aspects mean that oil drilling in the GBRP will result in significant benefits to the balance of payments situation is problematical.

The future of our balance of payments position 5.2.120 Experts such as Mr Cohen and Dr Hunter expressed the view that during the 1970's it is unlikely that there will be any balance of payments problems (Tl7652).

At T8069 Dr Hunter said:-"The balance of payments criterion asserts that since oil imports are the largest single item on which foreign exchange is expended we should

seek to economise by producing indigenous crude even where it is known to be high-cost crude. This view states a fundamental error. All such arrangements which seek to conserve foreign exchange by means of high-cost import replacement policies are justified economically only if there

is some considerable cyclical instability in the

911

balance of payments situation, affec·ting the central bank's capacity to maintain its fixed exchange rate, or if there is a long term trend

affecting adversely the terms of trade (import prices increasing relatively to export prices) for all goods. For the 1960's, no evidence of

such general adverse conditions exists. And for the 1970's there appears to be little prospect of balance of payments problems. Indeed, before 1980 it is not unlikely that secure foreign exchange earnings from minerals will be five or six times the value of a 100%

import of crude oil for Australian refineries." On behalf of APEA it was submitted that these views

must be questioned and reference was made to the statement of Mr McCrossin at T8394 that since Dr Hunter wrote his paper

overseas trends have altered, but on the evidence viewed as a whole the Commission feels that Mr Cohen and Dr Hunter were probably correct, although admittedly the position can change with some rapidity.

The high cost of off-shore exploration 5.2.121 But it was common ground that a relevant benefit cannot derive from an inefficient or high cost industry and although it was accepted that the oil industry in general is an efficient industry such items as exploratory and develop­ ment capital, profits remitted overseas and other contra items must be weighed, and exploratory and development costs in the GBRP, although incapable of estimation, will be much higher than on-shore drilling (at least 5 times as much according to one witness). Indeed the view was advocated that because of the high cost of off-shore exploration and the poor to mediocre official ratings of the petroleum prospects of the GBRP "basins" (referred to elsewhere) Australian capital

would be better spent in on-shore exploration than off-shore in the GBRP.

912

Foreign exchange savings not so important under present conditions 5.2.122 The views of Mr McCay and Mr McAlister were:­ "In itself a saving of this sort to our balance

of payments is, however, of not such great importance to us as long as our balance of

payments si tuat.ion remains heal thy. The additional benefit arising from such a saving in foreign exchange certainly cannot be regarded as a benefit to Australia of an assignable number of dollars. It cannot be reckoned in ·terms

of so many cents a barrel. Due largely to the

general development of our mineral industry (of which the petroleum industry is part) our balance of payments prospects are healthy notwithstanding difficulties for some primary products - though

it must be remembered that the balance of payments outlook can change quickly. About all one can say is that any oil discovery helps to

contribute to the general prospective strength of the country's balance of payments position, in proportion of course to the size of the

discovery." (T9930)

Dr Coombs' view on greater flexibility of economic policy 5.2.123 Dr Coombs expressed the following views:-"Up to a point, higher export income and greater

international reserves are valuable to those responsible for the management of the economy. They give greater flexibility to the range of economic policy and can, in periods of temporary

difficulty, give longer time for necessary adjustments to occur or for policy changes to become effective. But beyond these consider­ ations there is no intrinsic reason to value

them (i.e. higher international reserves) more

913

Summary 5.2.124

highly than production of goods sold on the domestic market or savings embodied in any other form - such as productive capital equipment or stocks of goods in process or awaiting consumption. And if they are achieved at the cost of lowered efficiency, and therefore a smaller net contribution to the national product by users of the oil produced, then they may be bought at an excessively high price." (Tll309)

Accepting as we do the view of Dr Coombs and of Mr McAlister and Mr McCay we consider that any contribution

to the balance of payments situation including one made by the petroleum industry is to give greater flexibility to economic policy but having regard to the existing and probably future sound balance of payments position as expressed by Mr Cohen and Dr Hunter above and in the light of the part

which the large capital inflow plays in achieving our satisfactory trading and current account (referred to later), it is our opinion that the arguments in favour of oil drilling in the GBRP in so far as they are based on balance of payments

have reduced significance. This aspect is referred to later.

Net import savings -Mr Cohen's figures 5.2.125 A table of estimated savings of imports as the result of local production of petroleum for the years 1971 to 1975 inclusive was given by Mr Cohen (Table XV Exhibit 337) set forth at T8757.

Before discussing Mr Cohen's later Tables it is interesting to observe his Table I (T8715) in which, for the period 1966-1970 he tabulates Australian (a) consumption (b) exports (c) production and (d) imports of petroleum "products." Elsewhere (Exhibit 456 at p.17) it appears that Australian exports of crude oil and petroleum products for

914

1970-1971 totalled 395 millions of gallons of which 53 millions were crude oil exported mainly to Japan and the United States. The exported petroleum products went mainly to Malaysia and Singapore and to New Zealand.

TABLE I

Consumption,Exports,Production and Imports of Petroleum Products, 1966-1970 ( '000 barrels)

Consump- Change Exports Product- Imports Change tion % ion %

1966 136,145 7.0 8,289 3,390 142,117 4.4

1967 149,952 10.0 8,130 7,600 151,995 7.0

1968 164,676 9.8 8,186 13,877 155,809 2.5

1969 178,979 8.7 5,815 15,765 167,944 7.8

1970 187,424 4.7 11' 466 65,149 136 '911 (18.5)

Mr Cohen prefaced his various Tables by stating

that the increase in the proportion of domestic supply of Australian oil to consumption needs was estimated to reach a peak of 69.1% in 1972 and would decline thereafter assuming no significant new discoveries. He added:-

"The effect of this transformation in terms of the balance of payments will be that Australia will achieve substantial import savings." (T8712) and he proceeds to examine the magnitude of those savings and estimates the net debit (credit) position of the oil industry

in the balance of payments as a whole. He added that in broad

terms the Australian oil demand and supply functions were:-Consumption + Exports = Production + Imports

Illustrative examples from his Tables follow:-For 1971 the estimated gross import savings as the result of local production were given as being the difference between $563 millionsand $206 millions - namely $357 millions.

915

For 1974 the gross savings were given as the difference between $752 millions and $301 millions namely $451 millions. Table then goes on to make adjustments to prevent double counting and he makes subtractions for royalties, profits, interest and principal repayments (T8746A) and addition for

"capital inflow for productlon" and"LPG exports" (T8757) and achieves net import savings as follows:-

1971 1974

$A338 millions $ 394 millions

Figures for the years 1972,1973 and 1975 were also given (T8757). Included in his adjustments were figures relating to capital inflow for the production of domestic crude oil. During the years 1963-1969 the inflow was $190 million but his estimates for the years 1972-1975 ranged between $20 million and $30 million per annum.

Further on Mr Cohen's Tables 5.2.126 Mr Cohen's earlier Tables (XIII and XIV in Exhibit 337) had dealt with actual capital inflow for production purposes which had taken place with estimates for the future

and with estimated exports of LPG -1971 to 1975. His Table XV consolidates earlier tables and by making necessary adjustments both up and down for such matters as payments abroad (e.g. interest), capital inflow and LPG exports, arrives ultimately at estimated net import savings for the years 1971 to 1975.

Thus taking the two years referred to in our previous paragraph namely 1971 and 1974, the net import savings given for 1971 are shown as $338 millions and for 1974 $394.5 millions.

His Table also shows that higher overseas prices for crude result in greater net import savings for his 1975 figures are the largest, both gross and net. Such a result assumes,

916

of course, that OPEC prices will continue to rise and will be higher than the Australian fixed price. Mr Cohen's final Table XVII illustrates the net

effect on the balance of payments of discernible activity in the oil industry. Two additional components are taken into account namely inflow on account of exploration expenditure which he estimates will average $50 millions per annum

during the period 1971 to 1975 and f.o.b. value of exports. He thus obtains total outflows (imports and

payments abroad) and total inflows (exploration inflows capital for production and exports) and, because the former are greater than the latter, obtains as his final result in Table XVII "net debits" for each of the years 1971 to 1975.

Illustrations for 1971 and 1974 are:-1971 1974 net debit $155.6 millions

net debit $278.1 millions These tables are naturally helpful but like other Tables we have quoted can only be regarded as "what may happen" even though the years 1971 and 1972 were included.

Unsuccessful exploration - possible effects of 5.2.127 As well as the impact uf successful exploration in the GBRP in terms of import savings there will be some attraction to Australia of foreign capital.

Dr Hunter spoke of the possible impact on the Australian balance of payments by unsuccessful exploration by referring to the operations of Esse in the Bass Strait area. He said (T8094):-

"The policy of Esse, the operating company, is to buy locally wherever possible. Unfortunately, it is not clear how much in value of the total

contractual work went abroad in purchase of design and special equipment. The labour component in the establishment of the facilities (directly on site and in the works and offices

917

of contractors) must of course be great and this, including the incomes and expenditures of expatriate employees stays in Australia. On the other hand drill bits, certain types of valves, pipe-laying barges, hire of Glomar III, some compressors, etc., are straightforward imports. There is however a large 'grey' area."

The large capital inflow 5.2.128 The large national capital inflow presently existing and which is responsible for our credit net

monetary movement was not regarded with favour as a long-term policy by several expert witnesses and vulnerability to the vagaries of international trade and a factor tending to cause inflation were two reasons given for this unfavourable attitude.

It would appear from the Commonwealth Bureau of Census and Statistics (Exhibits 348 and 520) that our largest invisible debit is (and owing to our location probably always will be) the cost of freight between Australia and overseas countries.

The actual amount of capital inflow 5.2.129 The overall position deriving from capital inflow was summarised as follows: For the quarter ending December 1971 the balance on current account (which of course does not include capital items) was a debit of $854 million. But the net

apparent capital inflow totalled $1456 million so that the net monetary movement was a credit of $602 million. These figures show in arresting fashion the incidence of capital inflow on our current figures and Mr. Greenwood on behalf of Conservation interests during his final address

(Tl7652), when supporting Mr Cohen's views- (Mr Cohen was apparently called at the instigation of A.P.E.A. - Tl7652) -that a balance of payment surplus is not so important as the most efficient allocation of resources within the Australian economy, pointed out that capital inflow could have decreased

918

by 40% and we would still have had a balance in our favour (cf

Tl7652). Mr McCrossin said that a country cannot continue to

go indefinitely into debt by relying on capital inflows to balance deficits on current account and that the dependence over the long term on such capital inflow represents an increase in the ownership of a nation's resources by foreign

countries. It must not however be overlooked that a substant­ ial proportion of our capital inflow is not a repayable debt.

Dr Coombs'view 5.2.130

A.P.E.A. 5.2.131

Dr Coombs said at Tl3290 "It is important to realise that capital inflow is balanced by a transfer of ownership. The capital inflow is on account of an asset in Australia which passes into the ownership of somebody overseas ... frequently it is a physical

asset, a business, a factory, a farm, an

oil well "

view On behalf of APEA it was submitted that dependence

on capital inflows and export earnings leaves an economy vulnerable to the vagaries of international trade and relations and reference was made to Mr Cohen's evidence that although in theory an adverse balance of payments can be dealt with by either devaluing the currency or by taking internal measures in practice these remedies are difficult of govern­ mental achievement (T8778).

Estimated LPG exports 5.2.132 A Table (XV) of estimated exports of LPG for the

years 1971-1975 taken from Mr Cohen's Exhibit 337 at p.l8. appears at T8754. For 1975 the figure given is 1.4 million tons and working on a price of $18 per ton the gross value

919

thereof is given at $25.2 millions and the net value at $19.6 millions.

Double counting 5.2.133 When attempting to assess net benefits it must be borne in mind (as we have earlier pointed out) that a potential error is double counting. Some methods of calculating net benefits merely express the same facts from different aspects -the benefits are not cumulative. When speaking on the subject of "Balance of Payment Benefits" Dr Coombs spoke on this matter and an extract from his evidence appears in paragraph 5.1.17 supra. We requote portion thereof and add a further extract relating to flexibility of economic policy (Tll308 -9):-

5.2.134

920

"It should be emphasised that this strengthening of international reserves is not an addition to the general social gains but one 'use' of such gains. Indeed, it is possible that the growth of reserves could occur independently of there being net social gains ... "

"Indeed had the price policy decided upon·by the Australian Government worked out as apparently anticipated, the increases in oil company profits would have been in part at the expense of other sections of the economy - but it is likely that

greater savings and increased international reserves would still have emerged." ( This was apparently a reference to the fact that overseas prices for crude have risen sharply since the

$2.06 price was announced in October 1968 to commence from 1970).

CONCLUSIONS ON BALANCE OF PAYMENTS (a) The currently strong balance of payments position (in 1972) was due to a large

capital inflow which far more than compensated for what was then a chronic

deficit in trading or current account and which deficit was largely due to invisibles such as freights payable to overseas shipping lines. Petroleum drilling in the GBRP was advocated in

part because it would attract overseas investment but in reply to this it was persuasively pointed out that the levelof overseas investments was far in excess

of what was needed to achieve a balance of payments (Mr Greenwood at Tl764l). But long-term reliance on foreign capital is not in any event regarded

favourably by economists. Dependence on capital inflows may leave an economy vulnerable to the vagaries of internat­ ional trade whilst both excessive capital

inflow and excessive exports in periods of high prices can cause inflation. (b) However the discovery of crude oil in the

GBRP would, so long as our total indigenous

crude is insufficient to meet our consumption requirements, and providing our fixed price for indigenous crude remains well below the landed cost of overseas crude, assist in

saving import expenditure with consequential effect on our trading deficit and our current account. (The arresting price increases by OPEC countries in late 1973 are relevant).

(c) If large reserves of natural gas were discovered in the GBRP the export of LNG could contribute to foreign exchange reserves. (d) But according to Dr Coombs (Tll309) internat­

ional reserves do not build up national wealth in any better way than by building up assets

921

and equipment in Australia. Dr Coombs however described as "most valuable" the flexibility to governmental management of the economy given by foreign exchange savings deriving from a reduction of the debit side of our current account. (e) Australia's holdings of foreign currencies

were at their highest (1972) and additional capital inflow could exert inflationary pressures (Tl7643 and T883l). Questions relating to the revaluation upwards of our dollar and the international monetary fund system of fixed exchange rates are also associated with a persistent surplus in balance of payments. (f) In the light of the present position of the

national economy deriving from changes taking place in capital inflow and expected earnings from other minerals and high priced exports the Commission has formed the view that it is unlikely that successful exploration in the GBRP will result in any major impact on our

balance of payments situation in the foresee­ able future.

(f) Self sufficiency

Self sufficiency is desirable 5.2.135 It was generally (but not universally) accepted by witnesses who gave evidence on economic and allied matters that self sufficiency in petroleum supplies is desirable, and in some quarters exploration in the GBRP was supported on this ground.

But there is an important qualification 5.2.136 But it was an accepted qualification that the

922

industry must be itself an efficient one so that there is an efficient allocation of resources with a resultant net contribution to Australia's primary energy reserves. Thus if there is oil in the GBRP it does not have to be exploited for

the benefit of the present generation if its extraction requires an inefficient allocation of resources.

Dr Hunter's and Mr Brown's views 5.2.137 At T8069 Mr A.W. Brown speaking to the paper of

the late Dr Hunter read:-"The self-sufficiency concept in Australia is accepted too readily and uncritically -sometimes it is stated as though the economic penalties which may be necessary to insure self­

sufficiency (such as high domestic prices, import controls, protection) are factors to be disregarded. Yet it can easily be demonstrated that the main arguments for self-sufficiency in crude oil are not in themselves impressive although, collect­

ively, they may appear substantial. The necess-ity for acquiring self-sufficiency turns on, usually, a set of three criteria: (i) the danger to the balance of payments; (see under 'Balance

of Payments') (ii) reliance on supply areas which are politically unstable; and (iii) defence and security dangers." (see under "Defence") To these should perhaps be added:- insulation from

steep world-wide price movements such as are presently taking place. It must however be kept in mind that in October 1968 when the Australian 1970-1975 price for indigenous oil was fixed (and probably when Dr Hunter wrote his paper which appears to have been in 1970 or early 1971 - cf T6998)

the cost of landed overseas oil was much less than it is

today.

923

5.2.138 As pointed out elsewhere Dr Hunter did not approve of the conserving of foreign exchange by means of high-cost import replacements but in any event .he could see no evidence of any trend towards adverse conditions affecting balance of payments or creating problems relating thereto. He added:-

"Indeed before 1980 it is not unlikely that secure foreign exchange earnings from minerals will be five or six times the value of 100% import of crude oil for Australian refineries."

(T8069) However, such a prognostication could fail due to such factors as the current though perhaps passing decline in overseas demands for some minerals or to a very steep rise in the price of imported oil.

5.2.139 As regards Australia's requirements he said (Exhibit 327 p.23):-"To supply all the crude oil required for Australian consumption by the year 2000 prob­

ably means that an additional 15 billion barrels of recoverable reserves must be found. In effect such a programme calls for a find of

Gippsland proportions every three years and, later, every two years up to the year 2000. Recoverable quantities of these magnitudes, indeed quantities much greater, may well be discovered in the time given. But it is im­

possible to say in advance just how success­ ful exploration will be and whether the type of oil found will be suitable for refining to meet the whole range of products required by

the Australian economy."

Dr Coombs' view on storage 5.2.140 Dr Coombs gave qualified support to bulk storage. He said (Tll310-l):-

924

"Well my reasons for this are simply that if you are concerned about interrupted supply it is my impression that the cheapest most effective way of insuring yourself

against interrupted supply is to carry a large stock appropriately distributed and turned over at a suitable rate and you would have then to meet the added cost of storage, but you would not be imposing any distortion or added costs on the community to achieve

that self-sufficiency. On the other hand if in order to be self-sufficient you produce oil at a higher cost than you could buy it abroad,

then you are paying extra for that. This is

a disguised cost but it is a cost which is

borne by all those people who pay a higher price for the oil.

MR WOODWARD: The resulting cost, I put to you,

might or might not be less than the cost of

storage? --- Yes, it could be, that is true.

The assumption that you are making here is that it would probably be greater than the cost of storage?--- Yes, it would probably be greater."

Dr Coombs' view on large monopolistic enterprises 5.2.141 Dr Coombs considered that there were two conceiv-ably valid "but limited" arguments for ensuring the existence of a significant domestic production and refining industry,

if obtainable at reasonable cost, namely:-(i) Australia would be in a stronger position to overcome if necessary a preference on the part of existing large monopolistic

enterprises to resist or defer improvements in production patterns; (ii) We would be in a stronger position to

925

negotiate and compete for price terms and to ensure that the large enterprises would be stimulated into taking Australian requirements into account (Tll312).

Mr Fitzgibbons' view on storage

5.2.142 Mr. Fitzgibbons also spoke on storage and referred to the benefit of certainty of supply. He said (Tll227):-"The alternative to exploring for oil for defence purposes is storing oil for defence

purposes. The major component in storage costs (75%) is the steel tanks required. U.S. data suggests that the annual all inclusive cost of storage is 90 cents per barrel in

steel tanks, although it is only about 35 cents per barrel in salt domes. (Report by

U.S. Department of the Interior to the Cabinet Task Force on Oil Import, Oil and Gas Journal 29 September,l969)."

Insulation from overseas price increases 5.2.143 Insulation from unpredictable overseas price increases was referred to by Mr McCrossin (T8361) who said:-

926

"For example, recent world wide crude oil price increases are going to increase France's currency outflow by $US750 million per year. Over 75% of Japan's imported crude has increased in price from $US1.32 per barrel to $US1.77 per barrel, a jump of almost 35%. Over the next 5 years the

price increases will cost Japan an additional $US5 billion. Australia, however, because of the recent jump in indigenous production, will be far less severely affected by these price increases and thus will escape the strain on its foreign reserves presently being experienced by oil importing countries in many parts of the world."

Addendum

These views have been more than confirmed by recent (late 1973) overseas events relating to arresting price increases by OPEC countries.

Possible curtailments of overseas production 5.2.144 The possibility of overseas production curtailments with consequential effects on costs and supplies were referred to by Mr Foster who also was one of those who thought that a

break up in the cohesion of the Middle East producing countries (OPEC) having a downward effect on prices, though a possibility was very unlikely (T8616). Some signs of overseas curtailments were said to exist and the case of Libya was

cited by APEA representatives. Its planned production was curtailed by 17% during - according to a report in

Petroleum Intelligence Weekly of 17 January 1972 and some other ME countries were also mentioned in this connection. (This information is taken from Volume III of the APEA Synopsis of Submissions on TR5 at p.21) Recent events in

late 1973 show that the forecasts of certain expert witnesses made in 1971 to a contrary effect were not accurate. A major

curtailment as against the U.S.A. and some other countries is operating and increasing in severity based on political grounds.

Defence 5.2.145 Several witnesses including Dr Hunter, Mr Woods, Mr Norrie and Mr Basire had a little to say on this subject

but no witness from the Defence Department was called nor did that Department appear or apply to be represented. Its relevancy, if any, derives from our "benefit" heading "self­ sufficiency".

There can be little doubt that, even allowing for questions relating to the sovereignty of the Commonwealth over the continental shelf, the Commonwealth's flexible "defence" power (S.5l(vi) of the Constitution) would giv'e it

power to control the off-shore petroleum industry in a war-

927

time emergency. Its peace time powers may be thought by some to be more controversial.

5.2.146 Such questions as the Commonwealth power to (1) reserve known and proven oil reservoirs, (2) veto grants of permits and assignments thereof and (3) control or limit rates of recovery are obviously of potential future importance. The provisions of the Queensland Petroleum (Submerged Lands)

Act of 1967 are relevant, for example the power of the Designated Authority to direct a licensee to increase or reduce the rate at which the petroleum is being recovered (S.58(3) ). Other relevant provisions of the Act include sections 43 (conditions attached to a licence), 65 (grant or refund of pipeline licence),78 (transfers of licences), 111

(special prospecting authorities), 112 (access authorities) and clause 11 of the Agreement of 1967. It should be noted

that by paragraph 18.62 of its Report the Senate Select Committee on Off-shore Petroleum Resources recommended that consideration should be given by Commonwealth and States to enlarging the consultation requirements under clause 11 of the 1967 Agreement so as to make consultation necessary before a Designated Authority directs alteration of rate of production of petroleum under S.58(3) of the 1967 "mirror" legislation. The views of the dissenting senators (Senators Cant, Keeffe and O'Byrne) which contain interesting suggestions relating to the national interest do not directly deal with defence.

Very useful and careful consideration was given to the subject of Defence by the Senate Select Committee and paragraphs 18.56 and 18.62 are of especial interest.

5.2.147 Some of the enquiries which would require to be made

to comment on defence in particular relationship with the GBRP are: (a) the likelihood of war within any given period, (b) with whom, (c) the allies of Australia, (d) treaties and international understandings, (e) the type of war which might be envisaged, (f) the maritime strategy in such a war - forward

928

defence or fortress Australia, (g) where would the bulk of Australian naval, military and air forces be operating, (h) intercontinental missiles and their range, (i) the importance of oil in a war effort and the type of oil required

and (j) whether large quantities of oil would be better stored than reliance placed on vulnerable off-shore wells off the central and North Queensland Coasts. Because clearly enough wells off the Queensland coast might well be considered open

to a measure of vulnerability perhaps from afar. Whether they would themselves be more vulnerable than shipping and tanker routes to southern ports of Australia or those across the Indian and Pacific Oceans can scarcely be foreseen.

Dr Coombs said, in regard to the necessity of hydrocarbons in the conduct of modern war, that:-"It does not seem to me to matter whether the supply is currently produced or has been

previously produced and stored." (Tl3269)

Dr Hunter in his statement (Exhibit 327 at p.26) said:­ "Even with self-sufficiency or some substantial degree of self-sufficiency Australian coastal tankers must carry oil

from Barrow Island, Westernport Bay and from other future discoveries. These routes, although partially protected by air cover, are almost as vulnerable as Indian Ocean routes­ more so perhaps since stand-off missiles from submarines know exactly where to look for targets. Further, undersea pipelines from the Gippsland Basin, or any other off-shore discovery, although they can be protected by undersea monitoring devices, could also be vulnerable to submarine attack. Finally, one of the most logical targets for a medium to

short-distance missile despatched from a

929

submarine at sea, is the refinery itself. All Australian refineries, except one, have well-known locations on tide water. In short, self-sufficiency in crude oil can only hope to alter the character of oil supply vulnerability; and decrease the risk only by a minor margin." Dr Hunter added:-

5.2.148

930

"To sum up on self-sufficiency: The arguments in

support are, on examination, nebulous and, in the course of time, have depreciated to almost a mythical value. Possibly defence, security of supply sources and balance of payments could become significant and perhaps there is something to be said for preparing against, so far unknown, misfortunes in these areas. But in my opinion the real justification for oil search is, of course, the demonstrable efficiency of the industry and its contribution to Australia's primary energy reserves."

CONCLUSIONS ON SELF SUFFICIENCY

(a) Self sufficiency is an undoubted benefit provided it is obtained in the course of an efficient development of resources. (b) This benefit manifests itself in -

(i) insulation from overseas price increases and overseas production curtailments (ii) greater national control over energy resources (iii) increased governmental influence over

large enterprises engaged in the refining and distribution of petroleum products (iv) savings of import costs thus affecting

the balance of payments position (discussed under "Balance of Payments")

(v) possible effects on questions relating to defence and storage (c) Although the oil industry in Australia is

itself efficient, it is not possible to say whether oil production in the GBRP would be an efficient development of our resources and if so to what extent as much would turn

on exploration and development costs and the location of the production site if oil were found and whether the expenditure was from foreign or Australian capital. (d) It should be borne in mind that any petroleum

which may exist in the GBRP is a national asset which will in all probability increase in value and importance with the passage of time. One view emerging from the evidence

is that oil does not necessarily have to be

exploited for the benefit of the present generation, except possibly to meet some defence factor or an overseas curtailment policy. The matter is discussed in the

Senate Select Committee Report referred to above (Exhibit 450) at paragraphs 18.51 to 18.53 when reference is being made to S.l8 of the 1967 "mirror" legislation (power to

reserve areas from drilling). Another available view however should be mentioned namely, that there seems to be a possibility that alternative sources of energy

(e.g. nuclear fission or nuclear fusion processes) may in the future become available thereby supporting the view that oil should be used now rather than be reserved for later use.

931

(g) Industrial and labour development and natural gas benefits 5.2.149 Increased industrial development - but local refining unlikely Major petroleum discoveries in the GBRP could result in a measure of increased industrial development in the State of Queensland in areas on the mainland local to the discover­ ies and also further south. A major discovery of natural gas could tend,but only at a later stage,to develop the establish­ ment of other industries in the vicinity of one or two or the

major coastal towns. But it seems unlikely that in the event of production in the GBRP a refinery would be established locally. Mr McAlister when speaking to Mr McCay's paper

expressed acceptable views on this subject (T9950):-

932

"Wherever such a refinery were to be located in the general area, the major part of the production would need to be shipped to markets in other centres. Should the refinery be enlarged to reduce the economic penalty of small size, there would be an offsetting cost of increased coastal shipment of refined products. However, it should be noted that the construction of a refinery in close proximity to a field could yield some advantage to the crude oil producer in terms of a higher well head price under the

present system of price determination. It appears therefore that the construction of a refinery could be advantageous only to an oil producing company, and other marketers and refiners would prefer to expand refineries in the major consuming regions to meet market expansion. Even then, the possible advantages to the producer would not seem to offset the disadvantages of the shipping away of refined products. To sum up, whilst the construction of a refinery

adjacent to any major discovery cannot be ruled out,

it seems unlikely under existing circumstances." 5.2.150 Mr Young (Retired Director of Technical Services, Department of Industrial Development,Queensland) after referring to the optimum size for maximum plant efficiency

in oil refineries (Exhibit 335,page 22), said that it may be that under existing circumstances unless a consortium with sufficient market outlets undertook the major project of establishing one 180,000 b.p.d. refinery on the Queensland

coast if adequate oil reserves were located in the same general area rather than have three plants of the present average Australian size of 60,000 b.p.d. crude oil located in the Barrier Reef region would be transported to Brisbane and the south "but the position appears to be fluid."

5.2.151 The Commission is of opinion that under present and reasonably foreseeable conditions crude oil won from the GBRP would most likely be transported from well head to Brisbane or further south by barge or tanker either direct or through a staging shore depot close to the well

head.

Factors which would affect the nature and extent of consequent industrial development would be the size, location and nature of the petrol€um discovered. The optimum location for a large off-shore field was c6nsidered by Mr Young to be off Central Queensland

where there are solar salt projects operating on dense

underground brines near Port Alma. Other favourable locations he thought would be ''adjacent to Weipa, at the southern end of the region nearest to Brisbane and possibly Townsville."

Natural gas - possible benefits 5.2.152 Possible benefits to Queensland flowing from natural gas if petroleum exploration in the GBRP were successful were canvassed at some length. Of natural gas Mr Young said:-

"It needs only relatively simple t reatment ...

it gives a clear burning flame; odourless combustion,

933

easily controlled rate of heating and if required high intensity. Moreover, being piped direct to the point of application it needs no customer storage or other handling equipment. It thus has many advantages over and above its inherent thermal efficiency ... the potential market is limited only by ... means of transport. Due to

the high cost of gas transport facilities the market must be sufficiently large and constant in 'offtake' if unit transport costs are to be

within reasonable limits."

Decentralisation 5.2.153 In the Senate Select Committee Report (Exhibit 450) at paragraph 8.62 it is stated:-"In Australia today, governments are attempting

to promote decentralisation in an effort to stem the tide of the migration of young population from the country and rural areas to the city areas. Cheap natural gas could well be of great in developing industry in the country areas and thus assisting in decentralisation throughout Australia. In this circumstance alone, trade in natural gas becomes important to Australia."

The Commission fully agrees.

But long distances and high cost of distribution involved 5.2.154 But whilst these views are acceptable as general principles, their applicability to the mainland of the GBRP in the near future is at present doubtful owing to the long

distances involved, the comparatively sparse populations in Central and North Queensland and the high cost of the install­ ation and distribution of gas as an industrial and domestic fuel. As a general rule substantial industries and populat­ ions must exist before the supply of natural gas from a distant source is warranted.

934

Industries under development in Queensland 5.2.155 Mr Young considered that in the far North gas reserves in adequate quantities would have a beneficial effect on the aluminium industry in that region and could possibly result in tne export of liquified gas. In the

Townsville area industrial developments of a significant nature are imminent (at Greenvale) whilst in the central area where salt is produced in substantial tonnages a potentiality is the manufacture of caustic soda and its

co-product chlorine. He considered that in general Central Queensland is expected to have a big demand for energy and raw materials for industry in the future. His Exhibit 418 is a table which gives maximum figures of a forecast of

energy demands with probability of utilising natural gas if available. The industries included are alumina (Gladstone), cement (Townsville and Rockhampton), ammonium nitrate (Mackay), nickel (Greenvale near Townsville), paper pulp (Mackay) and

a power station (Gladstone). The total of the maximum energy

demands was estimated at 96.25 x 106 s.c.f.p.d. a figure which allows for only 75% replacement of all hydrocarbons by natural gas at the Greenvale nickel industry (Tll916-7). But these and other references made by Mr Young whilst useful indeed for future planning purposes are general

expressions of opinion and no information was made available as to the time lapse which would follow between discovery of petroleum and the implementation of the suggested benefits. Mr Connolly QC speaking on behalf of Conservation associations

in his final address referred to them as pipe dreams.

LNG and LPG - characteristics

5.2.156 Both natural gas - (which is mainly methane (CH 4 ) with some ethane (c 2H6 ) and higher hydrocarbons and which liquifies at -160°C) and petroleum gas (which is mainly propane (C

3 H 8 ) and butane (C 4H10 ) and which liquifies under pressure at atmospheric temperatures) have valuable commercial qualities. The former can be transported in gaseous form by pipeline or in

935

liquified form (LNG) in refrigerated tankers. The latter is a by-product of refining of crude oil and is either "flared" or distributed in liquified form (LPG) in cylinders or in pressurised tankers.

Mr McAlister's view on markets for natural gas in North and

Central Queensland 5.2.157 Mr McAlister was in general not so optimistic as

Mr Young of the potential markets for natural gas in North

and Central Queensland. He spoke of developments at Weipa (which however

is remotely situated) and Gladstone. Of Townsville he said the potential market totals 8 million cubic feet per day and at Rockhampton an ultimate potential of 3 million. He could not forsee a significant potential market for natural gas at either Mackay or Cairns.

Cost per inch mile of gas pipelines 5.2.158 Nevertheless the principal detriment in the use of natural gas is cost and the dominating factor is transport cost which is always very considerable. Various figures relating to the cost "per inch mile" were given but as these vary widely according to the terrain and the size and strength of the pipe details peed not be given (Tl0388 et seq). It is

generally much more expensive to construct marine pipelines than pipelines on normal terrain on land.

Mr McAlister's view on pipeline costs

5.2.159 He said that other things being equal the cost of

field development on-shore would be likely to be less than for an off-shore field and supply of natural gas from an on-shore field would be likely to be preferred "at the same equivalent land pipeline distance from the market" - and he illustrated appropriate supply distances from Weipa and Gladstone. He said:-

936

"Because pipeline costs are only one fifth on land as they are at sea the general idea would be to get

the gas to the shore by the shortest method

so that it went overland for the longest distance." (Tl0406)

Export markets may be needed 5.2.160 Mr Foster considered that in the long run export markets would be needed for potential gas discoveries in the GBRP. In the light of current events both in the Bass Strait

and North-west areas of Australia this view seems sound. But export markets seem to be available.

Brisbane not yet a potential market for GBRP gas 5.2.161 The city of Brisbane however, cannot at present be foreseen as a market or outlet for natural gas coming from a GBRP field apart from any consideration of transport costs.

Mr McAlister said (Tl0395-6):-"Hence no market worth supplying can be foreseen at Brisbane for natural gas from off-shore fields for so long a period as the Roma fields are capable

of meeting the demand, or until such a time as the

market has increased beyond the capacity of the Roma fields by about 20 million scf/day. If as is brought out later, a field should be located a short distance north of Brisbane from whence it could be feasible

to supply Gladstone, then gas from this field could conceivably also be brought to Brisbane to make up possible short-falls of supply from the Roma fields of relatively small volumes."

Brisbane natural gas statistics -cost to householders and industry respectively 5.2.162 As at 30 June 1971, the total number of natural gas

consumers in South Brisbane was 34,486 of whom 33,930 were householders (Exhibit 530) and for the year ending 30 June 1971, the total supply of natural gas was 17,477,634 therms (1747 million standard cubic feet) (Exhibit 531).

937

As at 9 May 1972, the maximum daily purchase had

been 79,200 therms (8 million standard cubic feet) on 1 March 1972 (ibid). The price to major industrial users .was about 6 cents per therm whereas the domestic householder was charged

about 36 cents per therm. The small industrialist paid 7.5 cents per therm. Mr Connolly QC said of these figures that the public is subsidising the industrial user (Tl8195-6) but this may to an extent at all events overlook the fact that much more

maintenance and administration is involved in supplying a large number of small users than in supplying a small number of large users. However, these figures should be borne in mind when consideration is being given to Mr Young's opinions of the future of natural gas from the GBRP and its commercial use in

Central and North Queensland.

Dr Hunter's view on natural gas

5.2.163 Dr Hunter summarised the position as follows:­ "In any event it is probably more relevant to state that all foreseeable requirements gf natural gas in Australia will be met for the next 20 years; that by 1975 natural gas will

provide 6% of the primary energy of Australia and at least 10% by 1980." (T8042) Since Dr Hunter wrote these words,substantial new finds of gas have been made off N.W. Australia and in South Australia.

Future natural gas prices 5.2.164 Mr McAlister thought that prices at the liquifaction plant will increase from 1 to 2 cents per therm and that due to

global trends and increasing U.S., Japanese and European demands will further increase during the next few years. Events since the hearing ended indicate that Mr McAlister's views were conservative. He thought that the discovery of a very large natural gas field capable of delivering at least 200 million

938

cubic feet per day for 15 or 20 years could possibly lead to

export of liquified gas if the field was in reasonable proximity to an accessible liquifaction plant site. (Tl0415 -underlining supplied).

Coal gas in Queensland 5.2.165 It should be added that at present some Queensland towns have reticulated coal gas (e.g. Mt Isa, Bundaberg, Rockhampton and Maryborough) whilst others (including Towns­ ville, Bowen and Gladstone) use LPG supplied in metal cylinders.

A feature of the evidence the importance of which

was stressed by Conservation interests, was that Queensland has vast resources of the highest quality coal which is produced at comparatively cheap rates and has established a very substantial coal export industry, and is expanding it.

Employment and decentralisation Oil industry not labour intensive 5.2.166 The number of new jobs which would be created from successful oil drilling in the GBRP would depend largely on

the size of the discovery. Although this industry is not "labour intensive" undoubtedly a major success would result in modest employment facilities both of a direct and indirect value.

Victorian experience 5.2.167 Between 1966 and 1969 the population of Sale (Victoria) increased by 7% compared with the Gippsland average increase of 2.7% (Dr Hunter Exhibit 327, page 33). But the

on-shore installations close to Sale rendered necessary to bring the extensive Bass Strait discoveries into productive and distributable condition are extensive with consequential results. There are about 350 to 380 permanent company employees

in producing operations and a further 100 permanent contractor personnel who work with the company's employees (Mr Foster T8588).

939

As many as 5,000 construction workers were employed at one

stage and five years after· the project first began there are over 1,000 construction workers still employed in installing new capacity in the existing facilities (T8589). These are

temporary workers engaged in bringing the field and shore installations into a full capacity condition. In addition there are consequential activities elsewhere such as the construction of special and expensive barges (Mr Norrie at T2217).

Opportunities for technicians and skilled men 5.2.168 Again the technical demands of the petroleum industry attract trained and skilled men. This was said to be a benefit

not specific only to the area where the development takes place. Generally the development of petroleum resources in the GBRP would give a greater variety of employment opportunities. Mr McCrossin referred to this aspect as follows

(T8355-6):-

940

11A country with a small population and a limited

range of industry is confronted with a great problem in developing a full range of scientific and technical skills in its population. On the one hand it is scarcely economic to develop training facilities for a very wide range of skills if there is only a restricted demand or no demand at all for some of them. On the other

hand if the training facilities are provided in advance of effective demand there tends to be a 'brain drain' whereby the recently qualified graduates are obliged to travel abroad for employment opportunities from which they may never return. In building up a wide range of activities based on its natural resources, Australia is expanding the range of opportunities for its skilled people. An example which readily comes to mind is that of

geology in its various forms. As a consequence of the accelerated rate of mineral search and production in recent years, the demand for geologists has increased greatly. Subsequent processing of the discoveries has widened the

employment opportunities for many engineering and scientifically trained people."

An opposing view

5.2.169 As opposed to these figures and views it was sugges­ ted that the number of new jobs would not be significant and that in any event the people employed would not necessarily come from local unemployed and that merely to transfer

workers from one locality to another or from one industry to another does not, in a State where practically full employment exists, work a benefit. (Dr Coombs at Tl3290 and Tll314; Mr McAlister at T9894 and T9948; Mr Fitzgibbons at Tlll49 and

Mr Greenwood at Tl7683).

A.P.E.A. view 5.2.170 But the reply supplied on behalf of APEA is persuas­ ive - that the Australian labour force has been growing at a rate of about 2% per annum over the last 5 years (Year Book,

Australia 1971 No.57,page 690) and it is because new industries have been starting up or existing ones expanding that there have been sufficient jobs and a comparatively low unemployment. Moreover economic conditions are variable as certain aspects

of primary production have recently shown. In the final Synopsis (Vol.II p.37) the following submission was made on behalf of A.P.E.A.:-"However, it should be noted in this discussion

that full employment in the economy is a state which can change rapidly. This has been clearly illustrated by the events of this past year during which time Australia's unemployment levels

changed from being very low and of no economic

941

consequence to levels which are now causing the government and the nation great concern. Development of any reserves which may be discovered in the region of the Great Barrier Reef would take three to five years and to judge future benefits from increased employment opportunities occurring three to five years hence in the light of the

mid-1971 relatively tight employment situation could be misleading, as is now clearly apparent with the current high levels of unemployment."

Whether local industries will benefit 5.2.171 But the extent to which local industry both directly and consequentially due to petroleum discoveries in the GBRP will benefit is by no means free from doubt. Much would turn

on where the necessary on-shore installations would be sited. It is one thing to site major production plants near Sale with its comparative proximity to the Bass Strait wells, to the refineries at Westernport and to Melbourne but perhaps another to envisage similar installations in proximity to some discovery off-shore in North or Central Queensland, remote from Brisbane and refineries. Moreover:-

"Where processes are of a lesser degree of complexity such as for example where only stabilised crude was being produced without gas or other materials being recovered, the level of employment would be substantially lower and more comparable to the situation at Barrow Island for example where there are about 240 wells but there are only 55 direct

employees plus about 50 on contract work." (Mr McAlister at T9948)

The employment figures for actual production from

the Bass Strait fields were given by Mr McAlister at approxim­ ately 380 (T9948).

942

Labour multiplier effect 5.2.172 Dr Hunter said that in addition to the direct

benefit which the State of Queensland could expect from the expenditures required to develop various sizes of off-shore fields (the figures are given at page 16-17 of Exhibit 327 and show that for a 250 million barrel field there would be

retained in Queensland accounts over a total period of 12 years of exploration, development and production a total sum of between $79 million and $93 million) the establishment of an oil and gas producing industry in Queensland would have a

labour multiplier effect"which could be of significant benefit to Queensland." A labour multiplier is an estimate of how many jobs will be created in the regional economy for every

100 jobs stimulated directly by new investment in a particular industry. "Most sectors" he stated "have multipliers which normally fall within the 2.13 to 3.18 range". Only detailed inter-industry analysis, he added, and a knowledge of mineral and chemical company intentions can predict accurately the

labour multiplier; but he estimated that 100 new jobs in oil exploration and development would develop approximately 125 jobs in associated or dependent industries thus giving a labour multiplier of 2.25 which however he thought a conserv­ ative figure as it did not take into consideration additional

jobs which may be created as a result of "downstream" developments e.g. the development of a petrochemical industry or the normal accretion of industrial enterprise to be expected around any new development.

He added

"It is important to note that the labour

multiplier may only apply to the labour force of a particular region. If, for example, there is full employment in the particular region then the labour force

required for an oil and gas investment would probably come through a redistribution of persons from other industries, both from

943

within and without the State. If all new oil

and gas jobs are redistributed jobs then the net multiplier effect on the total labour situation may be only 1.03 (3% is the per annum growth of the total workforce)."

Linkages to other industries 5.2.173 On the subject of linkages to other industries Dr Hunter's view was that a new discovery of Australian crude would not have much immediate effect here because the estab­ lished refining industry has capacity sufficient to meet present Australian market demands for some time into the

Structural unemployment 5.2.174 Mr Fitzgibbons said that assuming an employment multiplier of 5 or less, long run structural unemployment (people unwilling or unable to take up existing employment opportunities of whom there are said to be 2,500 in Queensland -Tlll48) would not be eliminated by the oil and gas'industry and any postulated benefits from decentralisation would be at the expense of even greater benefits from correcting structural unemployment. He added:- "In the short run however there would be a chance that the industry demand for labour would be

sufficient to correct all structural employment in non -metropolitan Queensland and still employ more people from Brisbane with any associated advantages from decentralisation.

A.P.E.A. view 5.2.175 The general propositions presented on behalf of APEA were:-

944

"It is not only the new highly specialised jobs which would become available as a result of the activities of the oil industry but also jobs of a far less skilled nature which would be created in those industries serving the oil industry.

There would be the very local increases in available work in the mainland towns near the exploration and discovery areas for a number of suppliers of food accommodation,

transportation and other services to the oil industry. In addition there could be wider effects on the ship building industry, communications industry,etc.,"

Dr Coombs' view 5.2.176 Dr Coombs'views were different. In Exhibit 406, page 6, he stated:-"The validity of Dr Hunter's description of

the multiplier employment effect of increased employment in a new basic industry is not in question. It cannot, however, be taken for granted that these effects would flow autom­ atically for the benefit of North Queensland

in the event of a major oil field being opened

up. The major market for oil products in Queensland is the Brisbane metropolitan area which is already served by a refinery. (In fact there are two). It

would appear to be in the interests of those operating the oil industry to feed any new finds into the existing complex, expanding it if necessary. To establish a new centre for refining, storage

and distribution would almost certainly be more costly in capital outlay and in operating costs. So far,therefore, from serving the policy of decentralisation, a major oil find is likely,

if left to natural economic decisions, to intensify the urban concentration of Brisbane. Of course such a discovery would create an opportunity for decentralisation which, if the Queensland Government wished, could perhaps be

945

imposed on the industry. In this event regional expansion of the kind described by Dr Hunter would, if the policy were

made effective, occur. It would, however,

at least for many years, involve higher money costs than the process which would more

probably be chosen by the oil companies concerned and presumably the community would have to bear these higher money costs in some way.

There would possibly be offsetting advantages in preventing (or perhaps only delaying) the excessive growth of Brisbane to the detriment of the conditions of life of its existing inhabitants."

(h) Increased technological and scientific knowledge 5.2.177 There is linked with the oil industry a wide range of

technology with great potential and importance for industry, running far beyond the supply of fuel. Access to this tech­ nology, to the opportunities for research and innovation which it provides and the existence of persons trained to take advantage of them, may well be regarded as critical for a growing industrial country. (Dr Coombs Tll312)

But whilst Dr Coombs did not see any particular merit in self sufficiency (Tll313) he considered that provided it was not gained at unusual costs, technology of a fairly wide range obtained from a local oil industry is an argument in favour of having a significant level of local production. (ibid)

Dr Hunter and Mr McCrossin stressed that the mineral including petroleum industry gave Australia scope to build up a wide range of skills which could not otherwise be supported.

After referring to the advances in economic product­ ivity which derive from technical changes Dr Hunter gave instances of advances which have been made in Australian manuf­ acturing processes from pipeline construction in Queensland,

946

various fabrications in Gippsland, and shipbuilding in Brisbane and Whyalla. His statement (read by Mr Brown at T8105) points out that an important element in the diffusion of technology is the retention of acquired skills and design

experiences by our skilled artisans. Mr Toohey, who represented the Australian Labour

Party made the following persuasive submission:­ "What has to be shown here is that the

exploration on the Great Barrier Reef brings additional technological knowledge to that obtained from exploration for petroleum elsewhere in Australia, and I would submit that any additional amount

of knowledge here would be minor in the context of overall knowledge that we would be gaining from oil exploration." (Tl7833)

Increased scientific knowledge 5.2.178 Dr Hunter's statement continues:-"Oil and natural gas search also has its scientific by-product. Geological and

seismic data collected by the oil companies becomes, under the Petroleum Subsidy Act provisions available to the Bureau of Mineral Resources. Six months after the completion

of a project the data may be published and/or become available to all interested parties. Bureau officers report that Government depart­ ments have found this information valuable." Mr Norrie (State Mining Engineer and Chief Inspector

of Mines,Qld) said that the exploration for oil in the Great Barrier Reef would result in the amassing of geological, geophysical, hydrological and meteorological data which other­ wise would not be collected for some time and he gave some

particular instances of useful data received including aerial photographs of the expansive Swain Reefs at the southern end of the GBRP.

Mr Ericson (Exploration Manager of Petroleum

Division, Australian Gulf Oil Co.) discussed the planning and safe operations of geophysical surveys, approximations of shallow water bathymetry and the determination of long-term and major current patterns (Tl122). The safety of very modern seismic survey methods, the abandonment of the use of explosiv­ es and the substitution of other methods including implosives were referred to by more than one witness. As we have else­ where recommended seismic surveys using explosives should not be permitted in the GBRP.

5.2.179

948

CONCLUSIONS ON INDUSTRIAL DEVELOPMENT,

EMPLOYMENT AND NATURAL GAS BENEFITS AND ON

INCREASED TECHNOLOGICAL AND SCIENTIFIC

KNOWLEDGE

(a) The petroleum industry is capital intensive but is not labour intensive. (b) Nevertheless substantial petroleum discoveries in the GBRP would create an appreciable

measure of employment opportunities for skilled, semi-skilled and unskilled labour in industries directly and indirectly associated with or serving the drilling and producing companies. (c) The maximum period of labour demand assoc­

iated with the industry is comparatively short and is related to the exploration and development stages. (d) A major discovery in the GBRP depending on

its location, could create opportunities for regional development and decentralisation in its vicinity. (e) Natural gas finds in the vicinity of Weipa,

Townsville or Gladstone-Rockhampton would have considerable potential value. (f) Elsewhere the cost of pipelining natural gas

and of exporting liquified gas would mean that the find would probably have to be very large to justify its transport­ ation by land or sea,

Brisbane does not appear to be a potential market for gas discovered off the central or northern coast of Queensland in the near future. (g) It appears to be unlikely that a refinery

would be established on the central or northern Queensland Coast in the near future even if oil were discovered in substantial quantities in the GBRP. (h) The retail cost of natural gas varies very

much according to the type of consumer. In South Brisbane a householder pays 36 cents per therm for Moonie gas whereas a big industry pays 6 cents per therm.

Accordingly in sparsely populated areas and where a long transportation is involved the supply of natural gas would probably be costly. (i) Exploration in the GBRP would much increase

the geological, geophysical, hydrological and meteorological knowledge of the area.

949

5.3.1

PART 3 - PQTENTIAL DISADVANTAGES

(a) Introduction As pointed out in paragraph 5.1.3 supra, the

Commission has defined the word "benefits" appearing in TR3 as meaning "net benefits" for the reasons there given. In Part 2 we have discussed the potential gross benefits - the credit items on the balance sheet.

In Part 3 the disadvantages or debit items will be enumerated. They are not, in general, assessable in monetary terms - even if assumptions are made, as in Part 2, for

example when Income Tax benefits were under analysis. Moreover even the possible - still less the probable - occurrences of some of these disadvantages cannot be forecast with confidence

owing to the general lack of scientific knowledge of the effects of oil pollution on corals and marine organisms in the GBRP - a factor to which reference has been made on several

occasions throughout this Report. (e.g. paragraph PI.2.1) Nevertheless these potential disadvantages must be duly weighed when a total review of "net benefits" is being made.

5.3.2 No witness who gave expert evidence on TR5 -

"benefits" - specifically dealt with the losses, incapable of evaluation, due to the effect upon the GBR environment of exploration and drilling therein, and which could be manifested in various ways such as damaging effects upon the tourist industry.

But witnesses agreed generally that these potential disadvantages are relevant.

950

Thus Mr McCay's paper (read by Mr McAlister) stated (T9895):-"Costs and disadvantages may be categorised as:­ (a) the costs of finding the oil - which may be

expressed at any point of time as the total

expenditure on oil search in the area to that date divided by the sum of estimated recover­ able reserves on that date and any production

before that date; (b) the cost of producing and delivering the

oil;

(c) loss of profits that could have been

realised by other uses of the capital employed; (d) damage done to the environment by

accidents;

My evidence does not deal with the question of

damage to the environment but it will attempt

to discuss the other factors." Mr Cochrane at T9096 said:-"The ecological effects are not evaluated." - and although he dealt in detail with the positive benefits

he did not again refer to the admitted disadvantages of this nature. Dr Coombs at Tll298 when discussing TR5 and the papers prepared for the Commission by Dr Hunter and Mr Cochrane

said that both had concentrated on production effects as being the criteria of benefits and had accepted the gross or net national product according to the matter under consideration, as the measure of those effects. He thought that this sort of

approach called for critical examination and his comments included:-the national product, despite its value as a tool of economic analysis and of policy, takes

account only of o utput and costs whose price can be assessed by the market; these are by no

means all the costs and benefits relevant to rational decision in this issue" He added, as illustrations of costs and benefits

whose price cannot b e assessed by the market:-"The obvious ones on the costs are pollutions and on benefits which do not h ave to be so ld

in the market. For instance in developing the tourist industry resources were invo lved.which

951

were available to people freely. Then those benefits would not be included in the national product because they have no price attached to them but they might nonetheless be very important."

Human Values 5.3.3 In assessing "probable benefits" therefore, it is essential to keep in mind that this unique and remarkable Province of the Great Barrier Reef possesses human values which are quite outstanding. However important to man's monetary and social well-being the discovery and exploitation

of oil in commercial quantities within the GBRP may be, the debit side when reckoning probable net benefits must undoubted­ ly contain an entry to the effect that the beauty of the

physical features of the Province and of man's ability to enjoy them in full will be thereby placed at some hazard. Fortunately, with modern technology and safety precautions this hazard could be reduced to small proportions (with occasional exceptions) and we hope our answer to TR4 will contribute further to this end; but some real measure of hazard could probably never be eliminated.

The aesthetic importance of the GBRP 5.3.4 (i) Mrs Judith Arundell Wright McKinney's comments

952

In paragraph 3.3.1 supra appears an extract from the evidence given by this witness at T7831. She spoke of the "variety, the beauty

and the pristine character of the area." (ii) Miss Olive Ashworth's description and comments The following colourful description is extract­ ed from Exhibit 325:- "The aesthetic impor­

tance of the Great Barrier Reef relates to:­ (1) The beauty of its environment (the area between the outer Barrier Reefs and the Queensland coastline). (2) The beauty of the living animal, fish and

plant life found on and around isolated coral reefs and fringing reefs.

Miss Ashworth continued as follows:­ "Three tourist regions The hundreds of off-shore continental islands scattered along the coast of Queensland within the shelter

of the Great Barrier Reef, between Gladstone and Cairns, may be divided into three main tourist regions - the Capricorn Region, including the Keppel Islands - the Central Region, including the Cumberland Group and the islands adjacent to

the Whitsunday Passage, - and the Northern Region, comprising the islands between, and including, the Palm Group,and Dunk Island. All three regions are remarkably picturesque and

include many un-inhabited islands varying in size, terrain and vegetation. The Central Region attracts the greatest number of tourists, having six major island tourist resorts within its boundaries. The beauty of the Whitsunday Passage and adjacent islands is world renowned. Some islands are

large and mountainous, with dense tropical vegetation, rocky pine-clad headlands and unspoiled sandy beaches fringed with coconut palms or casuarinas. Others are sparsely wooded with undulating grassy slopes but most have indigenous hoop pines

clinging to rocky headlands. Some are small rocky islets with no vegetation except for native golden orchids which usually flower in September. To cruise among these islands is an unforgettable experience and the most relaxing holiday for tired and jaded city dwellers.

"Beaches Beaches are clean and un-littered, the sea is clear and unpolluted, large oysters abound on the rocky shores of most islands, and birdlife is protected. Reef and game fish

provide good sport and excellent eating but both are signifi­ cantly more plentiful around the Outer Barrier Reefs. I have seen these islands at all seasons, in all

weathers and at all times of day and have always found them aesthetically satisfying. 953

"Heron Island and Green Island In direct contrast, but equally beautiful, are the low coral islands of Heron Island, north-east of Gladstone, and Green Island, north-east of Cairns. Their main beauty lies in the varied hues of the sea and reefs surrounding them, their white beaches and evergreen vegetation, particularly when viewed from the air.

"GBRP is unique

As an artist, I believe the Great Barrier Reef proper is a unique and priceless art form that should be protected and preserved as such. Every reef is comprised of an immense diversity of living creatures that could provide unlimited inspiration for creative artists and designers. An intensive study of the colour and form of reef life could

create a new concept of Australian design, applicable to fashion and furnishing textiles, ceramics and interior design. "The colours of the GBRP

I have been struck by the harmonious distribution of colours on reefs whether they be for the protective camouflage of reef creatures or for bright contrast to attract other reef life to them. It is difficult to describe

the colours on the reef because they are generally unlike any found on land. They combine brilliance with warmth and softness in a remarkable way and some colours appear to be integrated with their complementary colours for added richness, instead of the greying effect usually produced by such combinations.

Most colours, with the exception of red, yellow, blue, green, brown and black are identified with fruit, flowers, metals, etc. (all of the earth) - for example,

orange, mulberry, violet, copper and rust. There are colours on the reefs similar to all these but richer or softer, and because they differ in this way could not be accurately identi­ fied with any of them. They are extremely difficult to reproduce in any media and for this reason artificially tinted corals seldom look natural. 954

"I believe that research into the colours of the reefs could unravel some of the mysteries of colour psycho­ logy, particularly in relation to the mental and emotional effects of colours on human beings and animals.

It may be enlightening to investigate the reason why corals and other reef life when photographed in reef caves, thirty to forty feet below the surface of the sea, have such brilliant colours. Normally no light would

penetrate to these remote, sheltered caverns."

(iii) Dr Coombs' view on the wilderness In Exhibit 406 Dr Coombs said:-"Man needs the wilderness - as a source of knowledge, as an area of novelty and diversity in the web of life ••. as a

place of refuge and reflection and also simply as an aspect of nature to be enjoyed. The Barrier Reef is a wilderness of a unique kind ... Australia is in a real sense a

trustee for the world in the protection and presentation of the Reef." (iv) Gabrielle Matves (Tourist Consultant) In Exhibit 254 (T780l et seq) Gabrielle

Matves referred to a number of wilderness areas in various European countries and stressed the importance which is now every­ where placed on their preservation and

added:-The Great Barrier Reef is a unique wonder of marine life and it should be protected by special legislation, so that no one may

ever be tempted to spoil it." (v) Sir Maurice Yonge. (President of the

Royal Society of Edinburgh) At T9225 Sir Maurice said:-"A coral reef ... is not just composed of

955

956

coral; it is composed of an enormous assemblage of organisms, plant as well as animal. This represents an of quite unique complexity."

Sir Maurice led the 1928-9 scientific expedition to the Low Isles north of Mossman. (vi) Dr Isobel Bennett (Exhibit 451 - "The Great

Barrier Reef.") In the Preface to this remarkable book, Dr Bennett who Bas an unrivalled knowledge of the GBRP says:-"The Great Barrier Reef -for most Australians these words inspire wistful visions of vivid memories of sundrenched days on tropical islands, sparkling, blue-green seas lapping on coral sands; skin diving in a new and unreal world - and almost unbelievable realm of coral bastions, exquisite in design, colour and form, through which bizarre and highly coloured fish flash by in their myriad schools. Sunbaking, water skiing,

fishing for hard fighting game fish or exotic reef species - this is the Great Barrier Reef holiday depicted, in glowing prose, but with a great deal of truth, by

the tourist brochures. But few know the fascinating reality of this tremendously complex maze of reefs and islands that lie scattered haphazardly along the continental shelf of Queensland's coastline. How much of the imensity and extent of this submarine mountain chain of limestone can be realised or appreciated during even a prolonged visit? Its extent

can perhaps only be grasped by seeing it from the air."

Scientific value of the GBRP 5.3.5 (i) Dr O.A.Jones (Retired Reader in Geology

and Mineralogy University of Queensland) At Tl865 Dr Jones said:-"The Great Barrier Reefs are unique. They are by far the largest single collection of

coral reefs known throughout geological history. The area of approximately 80,000 square miles embraced by the Great Barrier Reefs contains the most dense and diverse assemblage of

living organisms to be found in any region of comparable size in the world. Accordingly, it is not surprising that this area is of great

interest to scientists in many disciplines and that scientists from many countries are attracted to the area. The Great Barrier Reefs then provide one of Australia's premier

scientific attractions and are a national asset." (ii)Dr J Kikkawa ( Reader in Zoology

University of Queensland) At Tl917 Dr Kikkawa said:-" ... it would be a great loss to natural

science ... if any part of the Great Barrier

Reef were spoiled as the result of oil drilling." (iii)Other scientific witnesses who referred to various aspects of the GBRP as attracting

scientific studies included Dr J.H. Choat, Lecturer, University of Auckland, Dr R Endean, Reader in Zoology, University of Queensland, Dr B.W. Halstead, Director of World Life

Research Institute, Colston, California,

957

Professor J.H. Connell, Professor of Zoology, University of California, Dr F.H. Talbot, Director of the Australian Museum, Sydney, Professor W. Stephenson, Professor of Zoology,University of Queensland, Dr D.R. Stoddart,University Lecturer in Geography and Fellow of the Churchill College, Cambridge, Dr G.R.Orme, Senior Lecturer Geology, University of Queensland, Dr W.G. Maxwell, formerly Asso­

ciate Professor of Geology, University of Sydney, and Dr P. Mather,Research Fellow, University of Queensland.

Marine park areas and national parks 5.3.6 The subject of marine national parks is also dealt

with in the Principal Introduction paragraph PI.6.226. Mr Piesse,Director of the Australian Conservation

Foundation,spoke at length on the value of marine ·park areas and national parks within the GBRP (provided for bTa recent amendment to the Forestry Act of 1959-1968), and reference was made by several witnesses to S.43 (4) which is headed

"Saving of Existing Mining Rights and Official Acts" and to S.l02 of that Act. As amended in 1971, S.102(c) provides:-"To the extent that there is any inconsistency

between the provisions of this Act and the provisions of the Petroleum (Submerged Lands) Acts of 1967, the provisions of that Act shall prevail." This aspect was first raised by Mr Connolly QC at T10883 and received considerable attention at later stages. At T13395 Mr Piesse was asked by Mr Greenwood:-

958

"So that all this legislation relating to marine national parks is subject to the overriding provisions of the Petroleum (Submerged Lands) Act legislation? "

to which he answered:-"That is my understanding of the position." At Tl2549 et seq the matter was discussed at some length and at Tl2552 Mr Connolly referred to S.46 of the Mining Act.

At Tl4083 Dr Mather who had earlier been drawing attention to the lack of "total protection" for an area proclaimed as a marine park since commercial fishing is allowed in areas so proclaimed said:-

"The view of the Department of Mines as well as those of the Department of Harbours and Marine and the Fisheries Branch must be considered before any area can be proclaimed as a marine national park while provisions of the Petroleum

(Submerged Lands)Act 1967 are applicable notwith­ standing the provisions of the legislation." As appears from Exhibit 197 (Department of Mines

Map of Off-Shore Titles) most of the GBRP (75% to 90%) has

been granted to permittees and in view of the provisions of the Petroleum (Submerged Lands)Acts 1967 it is doubtful, apart from the 1971 amendment to the Forestry Act (S.l02(c) ) whether a permittee in the absence of further legislation,

can be restrained from drilling in his area whether it or part of it be a proclaimed national or marine park or not and whether or not it contains coral reefs or islands. The view was expressed that the power of the Designated Authority

to give directions under S.lOl when read with the regulation making power given by S.l59 (e.g. S.l59 (2) (c) and (f)

would not extend to the imposing of such a restraint.

5.3.7 At all events the position under the amended

Forestry Act is clear, so that no part of the GBRP whether or not it be a proclaimed national or marine park is exempt from exploratory drilling or the production of petroleum. Mr Piesse added (Tl3385-6):-

"It is obvious from this account of the laws

959

5.3.8

and administration governing Queensland national parks that if an area is affected by mining or

prospecting it becomes less capable of functioning as a national park. Dr B.F.McMichael, a marine zoologist, currently Director of the National Parks and Wildlife Service in New South Wales, has said that legislation establishing marine parks should provide for the permanent reservation of the sea floor of marine national parks against all forms of mining including oil well drilling." Of course, as Mr Bennett QC elicited (Tl3408-9), the

position of the Commonwealth (now called the Australian Government) in relation to the 1967 mirror legislation must be kept in mind. This probably means that the Australian Government should participate in the delineation and ing of national and marine parks. (ibid) It remains a matter for governmental consideration whether drilling should at any time be permitted within a marine park if and when they are proclaimed.

A joint statutory committee suggested by APEA 5.3.9 In view of the special way in which the GBRP might

indirectly be affected by these matters including (but not confined to) tourism senior counsel for APEA Mr Jeffrey QC suggested consideration be given to the establishment of a joint committee of public servants and specialist citizens having knowledge of oil, conservationism and the relevant science to advise and make suggestions to the Minister and/or the Designated Authority under the 1967 legislation. This of course would be a very differently constituted committee from that constituted by S. 29 of the 1971 Ac t . Its suggested

powers included:-

960

(i) Advise on the regulations to be made under

the 1967 Act;

(ii) Suggest changes thereto; (iii) Advise re conditions to be imposed in

particular cases of exploration and production; (iv) Advise on 3.101 directions given by the Designated Authority;

(v) Advise on environment protection; (vi) Advise on safety measures generally.

The Conservationists' view

5.3.10 Mr Connolly QC went considerably further and took account of the division of sovereignty believed to exist between Australian and State authorities over the outer continental shelf including the GBRP. He referred to the

fact that marine parks would be underwater and would probably exist beyond even three miles from the coast and that there should be an avoidance of governmental procedure by which a number of authorities control the GBRP for different purposes.

The object of having marine national parks will be to maintain the areas in a state of nature (cf 3.102 of the Forestry Act

giving paramountcy to the Petroleum (Submerged Lands)Act -Tl3395). In the result Mr Connolly advocated the establish­ ment of one statutory authority, appropriately constituted,

having control over all facets and activities of and within the GBRP - such authority to be established if necessary by joint Australian and State governmental action. The Great Barrier Reef Committee, he said at Tl8181, has come to the

view than an advisory committee is not enough and one with authority is required. This theme was developed at Tl4105. The views of the Australian Conservation Foundation and also

of Dr Coombs were quoted by Mr Connolly at Tl8182-3.

The views of Dr Coombs and Dr Mather 5.3.11 Both Dr Coombs and Dr Mather were amongst those

who advocated the establishment of a special authority to be

responsible for the ecological protection, the conduct of research and the control of development within the GBRP and

961

in relation to joint responsibility of Commonwealth and State Dr Coombs usefully referred to the Joint Coal Board establish­

ed by the Commonwealth and New South Wales Parliaments during the last war.

The Commission's view- one statutory authority

5.3.12 It seems sound that conflicting albeit legitimate interests and issues should go for review and decision to one statutory authority responsible to the appropriate Parliament or Parliaments. The views of Dr Mather as stated in PI.6.228 attract serious governmental consideration.

Some miscellaneous comments

5.3.13 These came from various counsel and witnesses and are mentioned as matters of interest only. They are not directly relevant to the Terms of Reference.

962

(a) the lack of any onus of proof being placed

on applicants in Mining Wardens' Courts to establish lack of interference with environment, (b) the failure of Queensland to follow the

examples of Victoria and Western Australia in regard to Environmental Protection and Co-ordination Legislation. (c) the lack of real power in the Environmental Control Council which was re-constituted by S.29 of the State and Regional Planning and Development etc. Act 1971, (d) the fact that of such Council's nineteen members eleven constitute a quorum who act by majority (S.36) so that six members out of 19 can form a decision which in any event

is only of an advisory nature.

(b) Consumption of irreplaceable natural resources 5.3.14 This factor occurs in all mining industries and the

gravity or otherwise of its impact depends in each case on the quantum of nature's given reserve. It was put during argument that the manufacture of paint and other goods involve the consumption of natural resources. But unlike the case of

coal, in respect of which it is known that Queens land has vast resources, the quantity (if any) of p etroleum resources of the GBRP is unknown. On this aspect Dr Coombs suggested that

action to endeavour to discover and exploit petroleum resources in the GBRP should remain in abeyance for some appreciable period especially if importation of overseas crude can be continued without serious prejudice to the national economy as appeared then (1971) to be the case.

Again, special considerations plainly enough apply to the GBRP and in any event it occupies only about one tenth of the Australian Continental Shelf whilst its prospects with the exception of the Papuan Basin in the far north and north­

east are officially rated as "fair" to "poor" so that there are abundant areas of off-shore exploration drilling elsewhere around the Australian coast. On the other hand another view advocated was that our

resources should now be developed in the general national and State interests. Future generations can expect to receive benefits from further discoveries, from scientific advances and from new sources of energy.

The events overseas of late 1973 indicate that all governments and all nations are gravely aware of the comparat­ ively short span of life remaining for known reservoirs. On the other hand it seems reasonable to assume that apart from

known Alaskan and North Sea reservoirs further discoveries

will be made including possibly as the result of deep sea mining.

Addendum

By early 1974 the posted prices of Middle East crude

were, according to press reports, approximately four times the 1970-1971 prices. This -of course, inc.reases the importance of indigenous crude to our economy but not pro tanto because it still (early 1974) supplies 70% of our own requirements at the price to the nearest refinery of $2.06 (paragraph 5.2.52 supra) It does, however make any existing but undeveloped oil reser­ voirs proportionately more valuable, especially for export purposes - see paragraph 5.2.149(d) supra.

5.3.15

(c) Potential peril to reefs and ecological systems in the GBRP This is a potential disadvantage (paragraph 5.1.3 supra) which must be regarded as an offset to the objective and monetary benefits which would be the fruits of successful petroleum exploration in the GBRP.

The degree of peril cannot be assessed without careful and long-term scientific research. This view was communicated by the Chairman to the then Prime Ministers and to the Premier of Queensland by letters dated 15 October 1970, 5 July 1971 and 2 February 1972. (paragraphs PI.2.2'et seq)

The nature of the necessary research is set forth in the Appendix to the Principal Introduction. The short-term experiments on the coral polps and other marine organisms carried out by several scientists in 1971 including two officers of a Queensland Government Department are discussed at length in the answer to TR2.

The various factors which can effect ecological systems are referred to in the answers to TR2 and TR3. They include toxicity of fresh oil, the direct and indirect (or long-term) effects of oil on corals and their dependencies, the capacity of oil to sink in certain conditions in shallow and near-shore waters, to dissolve in sea water and its persistence on the sea bed when it sinks.

There are many different eco-systems in the GBRP and little is yet known of the effects of oil pollution on any of them.

964

The varying views of the Commission on the degrees

of possibility of ecological damage and on the differences between freshly spilt and weathered crude oil are contained in the answers to TR2 (Part 10) and TR3. (paragraphs 3.4.5 to 3.4.10)

(d) Interference with a unique environment and with its enjoyment by the present and succeeding generations

The Commission's view 5.3.16 The Commission is of opinion that some interference will occur if exploration is successful. The greater the success the greater will be the number of wells and platforms, with accompanying barges, tankers and/or pipelines and

possibly shore installations. A measure of intermittent or chronic pollution of Reef waters is probably unavoidable (see answer to TRl- paragraph 1.14.24) but the extent thereof will depend on the training, skill and care of the industry's

personnel, the soundness of its equipment, the quality of the regulations made for governing the conduct and management of the industry and the strictness of governmental supervision thereof. The promptitude and efficiency of remedial measures

taken as the result of well planned and co-ordinated contingency planning will also be of major importance in keeping risk of damage to a minimum. These matters are discussed at length in answer to TR4. It is because of human and mechanical frailty

that pollution with its consequential effects can probably never be entirely eliminated. This frailty for example continues to be manifested in factory and industrial accidents notwithstand­ ing many statutory and regulatory provisions. See also the history of overseas oil and Australian gas blow-outs in the

answer to TR4.

Examples of witnesses' views 5.3.17 One scientific view favoured controlled exploitation

of the Reef as being essential for the benefit of mankind, provided any damage occurring were very slight and of a tempor­ ary nature (Dr Talbot at Tl053). Later (Tl068) he said he

thought the Reef should be exploited "subject to no damage being done to it" but that controlled exploitation without damage was "a pious hope." Other scientists were opposed to any drilling in the GBRP pending the result of long-term research (e.g. Professor Connell T448, Dr Grassle T623l and Dr Halstead T7438-9).

Dr Mather said the Great Barrier Reef Committee

advocates "properly controlled exploitation" (Tl4165), but she made it clear that proper safeguards and machinery were very

important. Mr Piesse said that the Australian Conservation Foundation did not advocate a total ban on drilling but sought a moratorium pending appropriate research and the establishment

of a statutory GBR Authority. Mrs Matves expressed the view that drilling should not be permitted. (T7818) Dr Coombs advocated research before making decisions on or allowing development of the Reef.

The quantum of such interference

5.3.18 Because of the lack of scientific knowledge (see PI.2.l supra) this cannot be estimated with any degree of confidence as the answers to TR2 and TR3 indicate. The difficulties of estimation are increased by the knowledge that

cyclones can be an additional hazard (Mr Keith at T5508 Dr St. Amant T4003) and that exceptionally high tides and very strong tidal currents seasonally occur in various GBRP localities. (Dr Isobel Bennett Exhibit 451 p.27) The probable existence of a measure of interference must be recognised and regarded as an offset to the objective and monetary benefits which, as earlier shown, would be the fruits of successful petroleum exploration in the GBRP.

The varying views of members of the Commission on

this subject are given in the answer to TR3, paragraphs 3.4.5 to 3.4.11 and see also paragraph 2.10.24.

966

(e) Hazards to the tourist industry

Outline of the tourist industry in the GBRP 5.3.19 A description of the GBRP has been given in some

detail both in the "Principal Introduction'' and in the answer to TR2. It is proposed to give an outline of the tourist

industry therein as it exists today and its potential for development. In so doing some further re f erence to the various attractions of the GBRP and to the importance generally of the Reef and of its constituent features such as beaches, cays and reefs in the minds of the public will be

made.

The possible hazard which will confront the tourist industry in the GBRP as the result of oil exploration and production is another "disadvantage" (paragraph 5.1.3 supra) and will be analysed as part of the task of estimating the

"net" benefits which an answer to TR5 requires.

Report of Messrs Pannell, Kerr and Forster 5.3.20 The GBRP has been described as "a tourist attraction of almost unlimited appeal." (Exhibit 450 paragraph 13.222) In the report of Messrs Pannell, Kerr, Forster and

Company to the Australian Tourist Commission (Exhibit 358 at

page 3) it is stated:

"The Great Barrier Reef presents Australia with a great opportunity for developing its tourist potential. It is a geographic area that both

awaits discovery and offers the challenge of creative development requiring risk capital. In developing a tourist industry along the Barrier Reef, however, the aim should not be restricted

to economic benefit but it should encompass the preservation of the Reef's ecology. The Barrier Reef is one of Australia's greatest natural wonders and, as such, its potential can be depleted as

967

readily as, for example, mineral resources. Development should therefore be monitored so as to avoid the pitfalls of over-commercial­ isation and exploitation which usually result from unplanned and uncontrolled development."

Tourism"multiplier" 5.3.21 If properly developed, tourism in the GBRP would

introduce considerable foreign money and for local purposes there is in addition, a "tourism multiplier" the value of which varies apparently between 3 and 4. At present the majority of tourists to GBRP resorts come from Queensland and other Australian States.

Incentives necessary 5.3.22 But incentives appear necessary. Generally

speaking the locations of the resort cays and islands are remote and major developments would be difficult and expensive. The accommodation and other facilities with possibly one or two exceptions are not yet up to the requirements of world standards and opinions were expressed that assistance by way of subsidies and income tax allowances were necessary if development is to be achieved.

It is also to be borne in mind that only two coral

cays have hitherto been developed as resorts, - (Heron Island and Green Island) although there are others which lend them­ selves to future development. The other existing well known resorts are on continental or rocky islands lying close to the shore, (e.g. Hayman, Lindeman, Dunk and Brampton). Although most have in more or less degree some fringing reefs, which are important to the tourist trade as they are the only reefs that many visitors see (Exhibit 325, page 3) - the true "reef zone" and

the "outer reef" lie considerable distances to the east and owing to the vagaries of wind and tide are not readily access­ ible. Therefore one of the necessary components in the further

968

development of tourism will be the provision of additional reliable transportation and viewing facilities which are not dependent on wind and tide. Under the Labour and Industry Acts 1946-1963 and the Industrial Development Acts 1963-1964 the Queensland Government provided financial assistance to resorts and cruise operators totalling $623,000 between 1953

and 1970. An additional contribution of $232,000 was made towards the cost of jetties at islands in the Whitsunday group. The evidence indicated that the additional capital required for a 200 room resort on an island as compared with a similar resort facility on the mainland would be about $2.4

million.

Discounted value of future tourism 5.3.23 The Pannell Kerr Forster report (Exhibit 358) contained many suggestions and recommendations for orderly and well-planned development and it contains an estimate that

if its recommendations are implemented the additional money which will be spent in Queensland by tourists in the 15 years ending 1985 would approximate $124 million discounted at 6% to present day values.

(Why discounting to present day values should be

thought necessary in this type of situation - that is to say

when comparisons between the uses of investment moneys is

scarcely the issue - is not understood, but with the exception of Dr Coombs see Tll322-3 all witnesses who dealt with figures seemed to think it is a requirement). The details of the recommendations are not relevant

for present purposes but they appear to be reasonable and practicable.

Many new potential tourist localities

5.3.24 It is clear that in addition to the attractive

Mackay to Bowen region and the various resorts presently

existing elsewhere there are many other localities and islands lying northwards (and some to the south) which have great

969

tourist resort potentiality. In the course of time new resorts will doubtless have satellite islands attached by special leasing arrangements and possibly (as recommended by various witnesses and reports) there will be established an overriding Barrier Reef Authority which will promulgate and monitor

standards of development and supervise and control maintenance of tourist resorts and the preservation of marine national parks and reserves (paragraphs 5.3.6 to 5.3.12). Doubtless also, as a necessary factor in protecting the environment and attracting overseas and Australian tourists there will be areas for strict conservation and there will be liaison between various authorities including the Fisheries Department and the Conservator of Forests.

Much damage can be done by tourists

5.3.25 A corollary to tourist development will be tourist control for, as Mr Cropp (amongst others) pointed out, (he is Managing Director of Ben Cropp Productions Pty. Ltd.), extensive damage can be done to the reefs by tourists (Tll754).

Various features - beaches 5.3.26 The various attractions provided by the GBRP include day trips from such ports as Cairns, Townsville and Mackay, big game fishing trips, charter cruise ships, fishing, reef viewing and swimming. Many of the beaches (e.g, Whitehaven on the eastern shore of Whitsunday Island) are practically a glistening white and the coastal and island scenery is unrivalled. (See coloured photos in Exhibit 451 "The Great Barrier Reef" by Dr Isobel Bennett) Mr Davis (Lecturer in Geography, University of Queensland) estimated that about 30% of the Queensland coast was occupied by sandy beaches - see paragraph PI.4.29 (and cf paragraph PI.4.31 as to the coastline generally).

Monetary worth of tourism- Mr Washington's view 5.3.27 Various witnesses gave facts and figures relating to

970

the flowing from tourism in and to the Province as

it currently exists including Mr Fitzgibbons (Exhibit 405) who stated that the most noticeable impact of tourism is on

the local economy and he spoke of the contribution described as "Consumers' surplus", and Mr Washington who is the Tourist Development Manager of the Australian Tourist Commission and who in Appendix III to his Exhibit 107 gave an

interesting analysis of the total estimated value of the tourist industry in the Mackay region in 1965 of $6,587,000. Mr Washington also elaborated on present tourist activities

and spoke amongst other matters of underwater laboratories, walking and reef-fossicking, glass-bottomed boats and snorkelling, skin-diving, scuba diving and underwater photography. He spoke also of the "home-beach" areas, and

the occasional golf course. He said that as at 30 June 1969

a total of 128 islands had been set aside as national parks

and stressed the "intrinsic qualities" of experiencing the recreational use of these wilderness type surroundings. (Exhibit 107, page 5) He added:-

"The Australian Tourist Commission in its marketing activities places stress on attractions away from the major capital cities in that our major market areas tend to be highly urbanised and it is there­

fore felt that the non-urban experience will have the most appeal and furthermore, visitors will be encouraged to travel within Australia. Considerable stress is placed on the Barrier as a destination,

remote from the capital cities. The Commission considers that the Barrier Reef can in all honesty be described as an attraction ranking with the other great natural wonders of the world, such as

the Grand Canyon or Yosemite Valley." Including day visitors (175,000) an estimated total of 237,000 persons visited the GBRP in 1968 of whom 3,674 were American visitors, and the Australian Tourist Commission

971

estimated that the tourist spent a total of million in

that year.The fi gures today are considerably larger although visits by R. and R. personnel have ceased to be a factor in

Australian tourism.

Cost of travel 5.3.28 Mr Washington was questioned on the subject of the

cost of travelling io the Reef from other parts of Australia (T7656) and the ''tourism multiplier" (paragraph 5.3.21) and he conceded that the multiplier was not a factor peculiar to tourism (Tl0870 et and Exhibit 391). He had compiled

recommendations relating to the improvement of overseas travelling facilities into Australia and recognised that travelling costs are an important factor. His Tourist Commission is particularly concerned with overseas visitors but his projections for the period 1970-1975 of total holiday visitors to Australia show an increase from 179,000 to 393,000

(Exhibit 107, page 13) and an increase of visitors receipts from $135 million to about $300 million.

The future of tourism in the GBRP

5.3.29 Enough has been said to indicate the importance to

Queensland in particular and Australia generally, of the tourist industry and to the present and (perhaps more important­ ly) its enormous potential for future generations providing it remains substantially unspoiled.

The hazards of tankers and shipping 5.3.30 Accordingly grave concern was expressed regarding the relationship between the tourist industry and oil drilling . To this could be added - and was added by some - shipping and

tanker traffic, for it is universally accepted that such traffic is a major hazard. The recent (1971) representation of the Australian and Queensland Governments to IMCO (Inter­ Governmental Maritime Consultative Organisation) in relation to the GBR (referred to in paragraph3.2.22 supra) seems to confirm this view. 972

Mr Piesse's view on oil hazards to tourism

5.3.31 Representative views were those of Mr Piesse (Exhibit 432 page 10 et seq) who speaking on behalf of the Australian Conservation Foundation, said:-"Depending on the location, and volume of

spillage including its total duration, the prevailing winds and the actual tide regimes, the effects of an oil and gas spillage on the

tourist attractions and activities would no doubt vary in magnitude, but there will cer­ tainly be deleterious effects of one kind or another. Because the majority of each

island resort's activities such as swimming, sailing and water skiing are concentrated at or close to their own 'home-beaches', they and their immediate environment are thus extremely vulnerable to any physical inter­

ference such as that constituted by the effects of some external source of pollution on their waters, fringing reef and sands."

The existence of drilling rigs 5.3.32 Then after referring to the reported effects of the

'Torrey Canyon' spill (Petrow) in Brittany and Cornwall he added:-"From the indications of this sort of evi­ dence it may be assumed that an oil or gas

spill of any considerable degree in the Rockhampton, or Mackay, or Townsville­ Innisfail-Cairns-Cooktown areas, would have a very unfortunate effect on the Barrier Reef tourist industry.

It might be rightly argued that the very existence of drilling rigs of whatever type, visible from resort islands or in travelling to and from such islands and

the mainland, or to and from the Outer

973

Barrier Reefs, would constitute a definite assault to the aesthetic experience of peace, beauty and escape from the works of man which in the ultimate analysis is the enduring quality of a visit to the

Barrier Reef."

An English view - Dr Nelson-Smith

5.3.33 Informed English opinion on this aspect came from Dr Nelson-Smith of the Department of Zoology, University

College of Swansea, Wales. Extracts from Exhibit 365 at pages 264 and 265 read:-

974

"Sea shores and coastal waters are used by commercial or amateur fishermen and sailors as well as other sportsmen, naturalists, and holidaymakers in general. In harbours and enclosed waters, fresh oil is a direct danger when it constitutes a fire risk. It is also

a hazard to coastal power stations, which

usually draw sea water for cooling from d?cks or estuaries. Oil in the water may cause an

explosion in the condensers and after a serious spill they have to be shut down (as at Hayle,

Cornwall, in 19 67) . " " The paintwork of a speedboat or sails

of a yacht are easily spoiled by oil; the

oil is equally easily transferred to boat­ trailers, towing vehicles, caravans and cloth­ ing. In Milford Haven and elsewhere, yachts­ men in need of a repaint have been observed

to sail deliberately into a slick of known origin, when they could be certain of com­ pensation, but these are few compared with the numbers who are forced to spend time and money on cleaning and touching-up operations.

Underwater swimming, surfing and water-skiing are further sports of increasing popularity

5.3.34

which require expensive equipment - for example, neoprene-foam 11 wet suits" which can be ruined by contact with oil. Western Europe

On almost any shore in western Europe, stran­

ded oil is to be found in rock crevices, in

lumps along high-water mark or in patches beneath the sand. Even if the swimmer, sun­ bather or walker avoids all obvious traces of its presence, the warmth of his body as he sits on an apparently clean area is likely

to melt a hardened deposit, causing it to smear his skin or stain his clothes. Many resorts in

the south of England now operate 11 detergent stations" in addition to first-aid huts and lifeguards, where the worst of the oil may be

removed. Nevertheless, oil is carried or trod­ den into hotels, boarding-houses, caravans, cafes and places of entertainment, ruining their carpets and upholstery. The total cost

of cleaning, repainting or repair to the indi­ viduals affected, together with the cost to the public of beach cleaning and other services can­ not be determined but must be large."

Of course, this pollution comes from shipping -mainly tankers (Exhibit 273 page 66).

Generally (i) Tourism reacts to adverse publicity An important view was presented by the Australian

Tourist Commission Exhibit 107 page 14:-11The tourism market is prone to over-react

to any adverse publicity associated with a destination area. Unfortunately any oil spill in any part of the Barrier Reef can be expected to produce serious reactions in overseas and

interstate tourism markets remote from the dis-?75

5.3.35

976

aster area. The impact. can be expected to be associated with the. entire region rather than the localised disaster area and can also be expected, to continue for a considerable period following any success­

ful remedial action." Then after reference to tourism losses following the Santa Barbara spill the state­ ment proceeds:-

"The adverse effect of an oil spill would be more pronounced in the Barrier Reef than it was at Santa Barbara because:-(a) Santa Barbara is a mere 70 miles from

Los Angeles which is a major tourist attraction in its own right not greatly dependent on the sea; (b) Santa Barbara is located on a popular and

heavily used tourist and commercial corri­ dor between Los Angeles and San Francisco. In contrast, the Barrier Reef is substantially dependent on visitors who decide to travel up to thousands of miles to a tourist destination. In the event of loss to tourism interests, the awarding of adequate damages presents special difficulties. This is well illustrated by the problems associated with damage following the

'Torrey Canyon' oil spill."

(ii) Oil drilling causes improved fishing Several references were made in evidence and during argument to improved fishing which has taken place in the Gulf of Mexico at and around the rigs. This was said to be due to the

adherence to the legs of bottom founded plat­ forms of barnacles on which some fish feed.

5.3.37

(iii) Multiplicity of production platforms When considering any aspect of the possible effects of drilling in the GBRP it is to be

borne in mind that if exploration be permit­ ted and becomes truly successful the number of production platforms will probably not be few.

(iv) USA experience The following extracts are taken from Exhibit 449 being a Final Environmental Statement issued under the Outer Continental Shelf Act by the Department of

the Interior on August 27, 1971, in connection with proposed installations of two platforms in the Santa Barbara Channel. (a) »If a serious accident of malfunction

occurred during drilling or producing operations, oil pollution of the marine environment could result. Under unfav­ ourable weather or sea conditions an oil

spill could also cause extensive short­ term damage to beaches and wildlife. The long-term or permanent effects of a major oil spill are still unknown, though some

danger obviously exists. More stringent safety requirements have decreased the possibility of the occurrence of accidents. Improved methods of containment are also

available should a spill occur." (b) »The effect of an oil spill on the plant

and animal life in the area would vary according to the location of the spill, the time of the year, the weather, and the currents." (c) »About 10,000 barrels of oil escaped into

the waters of the Santa Barbara Channel during the initial 10-day period while

977

978

well A-21 was being brought under control, according to Geological Survey estimates. Other estimates of the flow range from approximately 23,800 barrels to 71,500 barrels according to the First Report of the President's Panel on Oil Spills. The Resources Agency of California has quoted estimates as ranging from 5,000 barrels

to 160,000 barrels. As a result of the oil spill, the deaths

of 3,686 birds were recorded, some marine organisms were killed at the water line, there was temporary damage to property and beaches, and temporary restrictions on fishing and recreational activities." (d) "Drilling and production platforms are

utilitarian and not beautiful, and there is little or nothing that can be done to

camouflage them." (However mention should be made of Exhibit 79 which is a series of

photographs of camouflaged drilling sites off Long Beach and Santa Barbara). (e)· "Many people believe that the platforms will decrease the value of the Santa Barbara

Channel Region as a tourist and retirement area. Others, however, find the lights across the waters attractive at night, and welcome the platforms as sport fishing reefs, or as an aid to navigation for pleasure boat­ ing." (f) "The proposed location of Platform C is

approximately ten miles from the nearest point of the northbound San Francisco -Long Beach shipping lane. Platform Henry would be located approximately eleven miles

from this shipping lane. At these distances, the structures offer little hazard to ocean-

going traffic. Because of the lighting and signalling requirements imposed by the Coast Guard, a platform can serve as a navigational aid and a haven during

inclement weather for smaller commercial and pleasure craft." (g) "The effect of an oil spill on the plant

and animal life in the area cannot be

predicted, though the experience of the 1969 spill has provided much information on the subject. The mortality rate of

flora and fauna would vary depending on the location of the spill, the time of

the year, the weather, and the currents. Short-term and long-term effects also differ." (h) "Max Blumer (Woods Hole Oceanographic

Institution) has pointed out that oil pollution damages the marine ecology not only through direct kill and des­ truction of food sources but also through

incorporation of sublethal amounts of oil and oil products into organisms resulting in reduced resistance to infection, the incorporation of carcinogenic and poten­

tially mutagenic chemicals into marine organisms, and low level effects that may interrupt any of the numerous events

necessary for the propagation of marine species and for the survival of those species which stand higher in the marine food web. An oil spill left within the

marine environment may blanket bottom sediments and have long-lasting and wide­ spread effect." But Dr Blumer's views on carcinogenic chemicals were not acceptable to some witnesses (see answer to TR2).

979

980

However, as Blumer and other scientists have pointed out, spectacular accidents such as the wreck of the 'Torrey Canyon' in 1967 or the Santa Barbara blowout in 1969 contribute only a small fraction of the total oil that enters the ocean. Chronic pollution resulting from smaller day-to-day spills, vessel discharges, waste disposal, and similar causes is much greater and probably more severe in biological consequences." ( i) "Beaches.

After the initial cleanup of oil from the beaches, which was complicated by the presence of flood debris, a residue of oil remained on the sands. According to Ronald Kolpack, this oil on the beaches south of the Ventura River was removed by normal beach processes within a matter of months. North of the Ventura River,

of the oil was burned and remained buried until November 1969, but only isolated remnants were still present at the end of February 1970."

(v) Effect of oil on beaches - Photo No. 29 of

Exhibit 69 However, mention should be made of Photo No. 29 of Exhibit 69 and T464 (Professor Connell). This photo shows in colour a pit dug some feet deep on a

Santa Barbara beach and was taken some considerable time after the spill in January 1969. Professor Connell gave the following evidence:-"Slide 29. A pit in beach sand; the scale

is inches. As much as a foot down is a layer

of oil, then a layer of sand, then another

layer of crude oil. It happened this way

because when we first had the oil spill, the sand had been washed off the beach and there was a shallow layer of sand, then the tide brought in oil. More sand was

deposited on top of that, then another layer of oil and so on. This two

layers with possibly more here; but two main layers of thick oil are buried in the pit. Depositing beach sand coming in on top of the oil tends to bury it for a

while. MR WOODWARD: Why are the layers discon­

tinuous?---I show a tide in between. I

show a layer, then a tide in which sand

is deposited, and as the water comes down, oil is left on top of the sand.

That is, six inches of sand?---When we get

a big storm in the winter, the sand is washed

off the beach; when the storm abates, the

sand is put back by the tide; it has built

up to six feet higher in the matter of a

week or two. Why does the oil appear on one side of that

hole and rather on a different side of the

hole in the case of the layer?---I will re­

screen an earlier slide which shows that the oil comes patchily, in patches. I show

an edge of the patch. This is the simple

explanation, it is simply not continuous." Also another relevant photo is that of Yarra Beach (in Botany Bay) after an oil spill from a tanker lying in Botany Bay. This photo

accompanied Exhibit 545 which is a letter from the Maritime Services Board of New South Wales addressed to the Commission. It shows large quantities of thick black oil appar­

almost in solid form from the water's

981

5.3.39

982

edge to high up on the sand extending along the length of a curved beach. During the hearing (early in 1972) an oil spill occurred from a tanker at a refinery wharf at the mouth of the Brisbane River. Two Members of the

Commission inspected the beach on the mainland near Bribie Island a few days after the spill and also the eastern beach of Bribie Island. The sand which was then being removed by mechanical means, was heavily polluted by oil in

semi-solid emulsified form.

CONCLUSIONS ON POTENTIAL DISADVANTAGES

1. The GBRP has outstanding human values (paragraph 5.3.3.) and has aesthetic (para­ graph 5.3.4) and scientific (paragraph 5.3.5) importance. The position of marine national parks should be clarified. (paragraph 5.3.8)

.

A special statutory authority should be estab-lished responsible to the appropriate Parlia­ ment for ecological protection and the control of research and development within the GBRP.

(paragraph 5.3.12) Adoption of this recommendation should reduce potential disadvantages if petroleum drilling be permitted within the GBRP. 2. Should petroleum production be permitted in the GBRP there will be a consequential con­ sumption of irreplaceable resources and it is a matter for governmental decision whether such

resources should be developed now or later (paragraph 5.3.14) 3. Should petroleum production be permitted in the GBRP there will be a measure of inter­ ference with this unique environment and with

its enjoyment by mankind (paragraph 5.3.15). The measure of interference cannot be estim­

ated but if certain recommended restrictions and controls are adopted the interference should in general be reduced but there would be exceptional cases.

4. There will also be a risk of damage to

corals and ecosystems of the GBRP but owing to lack of scientific knowledge of the effects of oil pollution the degree of this risk cannot be estimated until careful long-term scientific

research has been completed (paragraph PI.2.l). The general nature of this research is given in the Appendix to the Principal Introduction. But as to weathered oil, see the varying views expressed in paragraph 2.10.24.

5. (a) The possible hazard to the tourist industry

in the GBRP as the result of oil explora­ tion and production is another "dis­ advantage" within the meaning of paragraph 5.1.3 supra which must be considered when estimating "net" benefits which

the wording of TR5 as construed by the Commission, requires (paragraph 5.3.19). (b) Tourism has a "multiplier" factor of 3

or 4 because it brings industry not only to resorts and recreational activities in the GBRP but also to coastal business centres and coastal tourist resorts

(paragraph 5.3.21). (c) The importance of tourism will probably increase during the next decade, as the attractiveness of the GBRP is of outstand­

ing and rare quality and appeals to over­ seas as well as Australian visitors. If

certain recommendations referred to in paragraph 5.3.23 above are implemented

984

it is said that tourists could spend $124 millions (discounted) in Queens­ land in the coming period ending 1985. The undiscounted figure was not given

but it would be several times greater. (d) But owing to its comparative remoteness and the cost of travel thereto and also the distance of most resorts from the

Re e f Zone and Outer Barrier, the devel­

opment of the tourist industry will depend largely on the nature and quan­ tum of governmental assistance. At the present time the quality of the accommodation and amenities with a few exceptions is not of world stan­ dard. (paragraph 5.3.22) (e) The nature of the environment of the

GBRP is such that the tourist industry

therein will be susceptible to re­ action to any reported or publiciseD oil pollution and oil spills. Such reaction will not necessarily be con­ fined to the locality of the reported

spill. (paragraph 5.3.34) 6. As appears elsewhere (see answer to TRl)

although the Commission considers the risk of a major or massive oil spill or

blowout would, with modern technology and the application of safety precautions set forth in the answer to TR4, be small

to very small, it cannot be eliminated. Small spills of an intermittent or rep­ etitive nature, that is to say chronic spills are more likely consequences of oil drilling and production and in the view of several scientists are a greater poten­ tial for damage to eco-systems. These too,

but for human and me chanical frailty, would also be controllable .

925

PART 4 - ANSWER TO TR5

Introduction 5.4.1 The phrase "probable benefits" appearing in TR5 has been construed by the Commission as meaning "probable net benefits." (paragraph 5.1.3)

5.4.2 Gross benefits are discussed in Part 2 and the paten-

tial disadvantages in Part 3 supra.

Summaries of the conclusions and views of tDe Com-mission on the various gross benefits which will probably accrue from successful petroleum drilling in the GBRP are given in paragraphs 5.2.28 (national wealth) 5.2.61 (decrease in cost of petroleum products to consumers) 5.2.110 (income tax benefits) 5.2.117 (royalties) 5.2.134 (balance of pay­ ments) 5.2.148 (self sufficiency) and 5.2.179 (industrial, employment and natural gas). A summary of the possible poten­ tial disadvantages is given in paragraph 5.3.39. These summaries in condensed form are reproduced .in Section A below

(paragraphs 5.4.6 to 5.4.13) benefits and Section B

(paragraph 5.4.14) - potential disadvantages.

5.4.4 When analysing gross benefits many assumptions must of necessity be made (paragraph 5.1.2) an illustration being the case of benefits which will accrue from income tax. (para­ graphs 5.2.97 and 5.2.71)

5. 4. 5. The potential disadvantages are not assessable in monetary terms and cannot be forecast with confidence due to the insufficiency of scientific knowledge on the effects of oil pollution on corals and other marine organisms of the GBRP. (paragraph 5.3.1)

986

Section A - Gross benefits (a) National monetary wealth

5.4.6 The discovery and production of petroleum in commercial quantities in the GBRP would add to the national monetary wealth to an extent which would depend on:

(b) 5.4.7

(a) the reservoir sizes of discovered fields, (b) the costs of finding and development, and (c) the proportion of Australian ownership of the explorer and producer (paragraphs 5.2.18 and

5.2.110 sub paragraph (12)). Thus if the shareholders of a producing company are Australians, the dividends will probably remain Australia. At the present time

92% of the blocks in authorised permit areas

in the GBRP stand in the names of foreign owned permittee companies (paragraph 5.1.11).

Lower prices for Australian consumers (i) Substantial discoveries of oil in the GBRP would be likely to lead to a lower price for

petroleum products to the Australian consumer than would otherwise be the case if -(a) The price of indigenous crude to

Australian refineries continues to be at an appreciably lower figure than the cost of overseas crude oils as landed in Australia. (b) The benefit of the consequences of this

cost difference is, subject to any special local factors affecting refining and distribution costs, passed on to the consumer of petroleum products. (c) Excise duties and the principles on which

wholesale and retail prices of petroleum are assessed, permit such decrease (paragraph 5.2.61). Our excise duties

987

have risen from 9.6 cents per gallon to 22.3 cents per gallon between 1961 and 1973 (paragraph 5.2.109). (ii) But to the extent (if any) that the aggregate

of oil discoveries in the GBRP and elsewhere in Australian areas exceeded local consumption requir e ­ ments, such excess would be unlikely to affect local consumption pric e s as it would be e xported or stored

(paragraph 5.2.61). (iii) The price of overseas crudes will continue t o rise unl e ss (a) new discoveries of outstanding importance are made in areas outside OPEC countries

(b) the stre ngth of the OPEC organisation for some good reason weakens (c) the international or economic position alters in some material way (paragraph 5.2.61). (iv) In the absence of further substantial discover­ ies, shortfalls in Australia will increase during the next decade whilst world demand for petroleum prod­ ucts will continue to increase (paragraph 5.2.61).

(c) Income Tax

5.4.8

988

(i) Depe nding on the magnitude of the discovery and factors such as finding, developmental and production costs, substantial national benefits from income tax could be expected if oil discoveries are made within the GBRP (paragraph 5.2.110).

The Tables set forth in paragraphs 5.2.67 et seq illustrate the quantum of such income tax bene­ fits. Certain necessary assumptions must be made as illustrated in paragraph 5.2.97. Five examples taken from the Tables are given at the end of

paragraph 5.2.110. But the amount of foreign capital invested is of some significance because if the finding and production c os t s were Australian capital, it could be invest e d in other industries and thus become the

(d) 5.4.9

source of income tax (paragraphs 5.1.4 and 5.1.5) whereas foreign exploration companies would be unlikely to invest capital in other forms of Australian industrial life.

But a benefit from successful Australian owned production companies would be an increase in national wealth in the sense that the dividends substantially would remain in Australia (paragraphs

5.2.18 and 5.2.110 (12)). At the present time 92% of the blocks in

authorised permit areas in the GBRP stand in the names of foreign owned permittee companies (paragraph 5.1.11). (ii) The majority of the economists who gave evidence consider that the net benefit should be measured as the excess over a 20% return on

Australian capital invested in such oil production -because industry looks to a 10% return after tax on shareholders' funds and company tax is now of

taxable income (paragraph 5.2.110). (iii) There was a difference of opinion amongst the economists both as to the discount rate which should be used when estimating taxable profits over

a 15 or 20 years production life and also as to

whether discounting should be used at all (para­ graph 5.2.110).

Royalties (i) Royalties, particularly to the State of Queensland, would be substantial if commercial success in petroleum drilling were achieved in the

GBRP (paragraph 5.2.117).

(ii) For a modest field (500 millions of barrels)

the discounted value over the licence period of 21 years would be $35.6 millions. (iii) The standard rates and illustrative

989

(e) 5.4.10

990

calculations are given in paragraphs 5.2.111 and 5.2.113. (iv) The suggestion contained in paragraph 9.206 of the "Report from the Senate Select Committee on Off-Shore Petroleum Resources" (Exhibit 450) to the effect that the cash flow to a "claimant" State from royalties when .considered against the overall budget of that State is not of great significance is quoted in paragraph 5.2.114. A very recent press announce­ ment (March 1974) indicates that the substitution of a share of profits for mining royalties is under

consideration by Queensland Authorities but it seems doubtful whether this was intended to apply to off­ shore mining.

Balance of payments position (i) The strong balance of payments position as at the close of the hearing (1972) was due to a large

capital inflow which far more than compensated for what was then a chronic deficit in trading or current account. This deficit was largely due to invisibles mainly freights payable to overseas shipping lines.

(ii) Long-term reliance on foreign capital was not regarded favourably by the economists. An extract from Dr Coombs' view is given in paragraph 5.2.130). (iii) Dependence on capital inflows may 1eave an economy vulnerable to the vagaries of international trade whilst both excessive capital inflow and excessive exports in periods of high prices can cause inflation (paragraph 5.2.134) (iv) However the discovery of crude oil in the GBRP would, so long as our total indigenous crude is insufficient to meet our consumption requirements, and providing our fixed price for indigenous crude remains well below the landed cost of overseas crude,

(f)

5. 4.11

assist in saving import expenditure with consequen­ tial effect on our trading deficit and our current account. (The arresting price increases by OPEC countries in late 1973 are relevant).

(v) If large reserves of natural gas were disco­ vered in the GBRP the export of LNG could contribute to foreign exchange reserves. (vi) But according to Dr Coombs (Tll309) interna­

tional reserves do not build up national wealth in any better way than by building up assets and equipment in Australia. Dr Coombs however described as "most valuable" the flexibility to

governmental management of the economy given by foreign exchange savings deriving from a reduction of the debit side of our current account. (vii) Australia's holdings of foreign currencies were at their highest (1972) and additional capital

inflow could exert inflationary pressures (Tl7643 and T8831). Questions relating to the revaluation upwards of our dollar and the international monetary fund system of fixed exchange rates are also asso­

ciated with a persistent surplus on balance of payments. (viii) In the light of the present position of the national economy deriving from changes taking place

in capital inflow and expected earnings from other minerals and high priced exports the Commission has formed the view that it is unlikely that exploration

in the GBRP whether successful or unsuccessful will have any major impact on our balance of payments situation in the foreseeable future.

Self sufficiency (i) Self sufficiency would tend to be promoted if substantial oil reservoirs were discovered in the GBRP.

991

(ii) The benefits which flow from self sufficiency are tabulated in paragraph 5.2.148. These include insulation from overseas price increases and produc­ tion curtailments and also savings of import costs. Dr Coombs' views did not necessarily favour self sufficiency if it had to be obtained at undue cost and are referred to in paragraph 5.2.177.

(iii) An associated question is whether oil produc­ tion in the GBRP would be an efficient development of our resources. This depends on factors which cannot be presently known (paragraph 5.2.148). Dr Coombs spoke on this subject at Tll313 (paragraph 5.2.177).

(g) Industrial development, decentralisation and benefits from natural gas 5.4.12

992

(i) Major petroleum discoveries in the GBRP would tend to increase industrial development and promote decentralisation although the establishment of a local refinery seems unlikely (paragraphs 5.2.149-151; paragraph 5.2.166).

(ii) A major discovery of natural gas would tend but only at a later stage to promote the establishment of industries in the vicinity of one or two of the

major coastal towns. (ibid) Natural gas finds in the vicinity of Weipa, Townsville or Gladstone­ Rockhampton would have considerable potential value paragraphs 5.2.155 and 5.2.179).

(iii) But long distances and high costs of distribu­ tion would be involved (paragraph 5.2.179). As a general rule substantial industries and populations must exist to justify the supply of natural gas from

a distant source (paragraph 5.2.154). (iv) The retail price of natural gas varies accord­ ing to the type of consumer. In South Brisbane a

householder pays 36 cents per therm for Moonie gas

(h) 5.4.13

whereas a big industry pays 6 cents per therm (paragraph 5.2.162). (v) Dr Hunter's paper (Exhibit 327 pp.l6-17) stated that the establishment of an oil and gas producing industry in Queensland would have a

labour multiplier effect which could have signifi­ cant benefit to Queenland (paragraph 5.2.172). Dr' Coombs' views on the multiplier employment effect and the creation of an opportunity for decentralisa­ tion are quoted at some length in paragraph 5.2.176.

Increased technological and scientific knowledge (i) Dr Hunter's paper and Mr McCrossin referred to technical advances accruing from the mineral includ­ ing petroleum industry and other activities in Australia (paragraph 5.2.177). Dr Coombs considered that provided it was not gained at unusual costs, technology of a fairly wide range

obtained from a local oil industry is an argument favouring a significant level of local production. Mr Toohey who appeared for the Australian Labor

Party persuasively submitted that what has to be shown on this matter is that exploration and drilling in the GBRP would bring technological knowledge additional to that obtained from exploration else­ where in Australian areas (paragraph 5.2.177).

(ii) Exploration for petroleum in the GBRP would increase the geological, geophysical, hydrological and meteorological knowledge of that area (paragraph 5.2.178).

Section B - Potential disadvantages 5.4.14 include -The potential disadvantages (paragraph 5.3.39)

(a) consumption of irreplaceable resources (paragraph 5.3.14). This raises an issue for governmental

993

decision. One view is that the GBRP resources should, in the public interest now be exploited sub­ ject to proper control. Another is that such

exploitation should remain in abeyance for a consider­ able period pending research into the long-term effects of oil on corals and other reef organisms. (b) interference with the environment and with its enjoy­

ment by mankind (paragraph 5.3.15). The extent of such interference should be reduced if the suggestions contained in the answers to TR3 (which however vary and are not unanimous) and TR4 are adopted and applied (paragraph 5.3.17). (c) risk of damage to corals and other marine organisms

and to birds (paragraph 5.3.18). The extent of this risk cannot be defined until the experiments and research outlined in the Appendix to the Principal Introduction have been carried out. (d) hazards to the tourist industry (paragraphs 5.3.19

et seq).

FINAL CONCLUSION ON TR5

5.4.15 Commercially successful petroleum exploration in the GBRP would probably result in financial and industrial bene­

fits accruing to the State of Queensland and other parts of the Commonwealth of the nature and to the extent indicated in Part 2 above which, however, would ·be offset by the possible disadvantages indicated in Part 3. Whether the ownership of the production companies was foreign or Australian would to some degree affect the quantum of the benefits (Part 2).

The weight to be given to the possible disadvantages cannot be judged until the research and experiments outlined in the Appendix to the Principal Introduction shall have been made.

Consequently the Commission cannot assess the net benefits which an answer to TR5 seems to require (see para­ graph 5.1.3 supra) and the answer must take the form of a

994

summary of all the gross benefits and all the possible disadvantages as respectively detailed in Parts 2 and 3 above (paragraphs 5.2.1 to 5.3.39). This summary appears in paragraphs 5.4.6 to 5.4.14.

However, Dr Smith and Mr Moroney consider that with the application of the safety measures set out in the answer to TR4, and having regard to -(a) the degree of risk as given in the answer to TRl,

(b) the changing properties and composition of spilt oil as it weathers with consequential expected diminution of hazard to eco-systems (answer to TR2), and (c) the great size of the GBRP with consequential

remoteness of some areas for either the development of tourism or the public appreciation of its human values, the hazards to the eco-systems and human values (amenity) by drilling would, with the adoption of the criteria for the

determination of sea room protection of coral reefs, islands and mainland coast and provision for excluded areas as

stated in the answer to TR3, be reduced to acceptable degrees of risk. The Chairman's divergent views on this subject appear in paragraph 3.4.10.

995

EXHIBIT NUMBER

1

2

3

4

5

6

7

8

9

10

11

12

13

APPENDIX "A"

LIST OF EXHIBITS

DESCRIPTION

Programme for first weeks

"Atlas of the Great Barrier Reef": Maxwell

"The Great Barrier Reef and Adjacent Isles" : Gillett & McNeill "The Australian Great Barrier Reef in Colour" : Gillett

"Corals of the Great Barrier Reef" Domm

"The Future of the Great Barrier Reef" Symposium of Australian Conservation Foundation

Report of Dr Harry S. Ladd

Strip Map of Great Barrier Reef and Adjacent Islands : Sheets 1, 2 and 3

Folder of key maps

Statement of Mr A. B. Yeates

Statement of Captain R.G. Hildebrand

Extracts from Australian Pilot (Australian Pilot Volume IV)

Eleven 2764 2763 345

346 347 348 2349

Admiralty Charts

Sandy Cape to Keppel Isles Keppel Isles to Percy Isles Percy Isles to Whitsunday Passage Whitsunday Passage to Palm Isles

Palm Isles to Frankland Islands

997

EXHIBIT NUMBER

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

998

DESCRIPTION

Eleven Admiralty Charts (Continued) 2344: Frankland Islands to Lizard Island 2355: Lizard Island to Cape Sidmouth 2354: Cape Sidmouth to Cape York 2321: Torres Strait and Approaches

Beaufort Scale

Statement of Dr W.G.H. Maxwell

Statement of Mr A.J. Shields

Supplementary figure No. l to Mr Shield's &tatement being cyclone tracks for years 1960 - 1970

Statement of Mr E.K. Ericson

Statement of Mr J.B.R. Livermore

Statement of Professor J.H. Connell

Map showing air photography and seismic surveys (Exhibit l to Mr Ericson's statement)

Map of Swain Reefs Area (Exhibit 2 to Mr Ericson's statement)

Water depth map of the Capricorn Channel area (Exhibit 3 to Mr Ericson's statement)

Patterns of surface drift in the Capricorn-Bunker area (Exhibit 4 to Mr Ericson's statement)

Map of tidal currents in the Capricorn­ Bunker area (Exhibit 5 to Mr Ericson's statement)

Map of non-tidal currents December to March in the Capricorn-Bunker area (Exhibit 6 to Mr Ericson's statement)

Map of non-tidal currents April to November in the Capricorn-Bunker area (Exhibit 7 to Mr Ericson's statement)

EXHIBIT NUMBER

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

DESCRIPTION

Typical record sheet of weather observations from an oil rig (Exhibit 8 to Mr Ericson's statement)

Paper entitled "Electronic Navigation Systems for Off-Shore Surveys" (Attachment 1 to Mr Ericson's statement)

Paper by Mr Woodhead on sea surface drift (Attachment 2 to Mr Ericson's statement)

Report by Glenn & Associates on meteorological - oceanographic factors affecting off-shore petroleum operations in the Capricorn Channel area

(Attachment 3 to Mr Ericson's statement)

Paper by North Neushul and Glendenning re Tampico Maru

Statement of Professor J.M. Thomson

Statement of Dr Jiro Kikkawa

Statement of Dr F. Talbot

Statement of Dr Talbot and Mr Goldman on the diversity and feeding relationships of reef fish on One Tree Island

Letter from Mr D.W. Kinsey Statement of Mr A. B. Yeates relating to Continental Shelf

US Geographic Bulletin No. 3 - April 1965 "Double Continental Shelf"

Strip map corrections by Mr A.B. Yeates

Letter from R.A.N. Hydrographer 10.7.70 re Goldie Reef

Statement of Mr J.T. Woods

Withdrawn vide Transcript Page 14248

Withdrawn vide Transcript Page 14248

999

EXHIBIT NUMBER

45

46

47

48

49

50

51

52

53

54

55

56

57

58

59

60

61

1000

DESCRIPTION

Statement of Mr R.J. Allen

Map Seismic Surveys in Great Barrier Reef Province (Appendix B to Mr Allen's statement)

Map Aeromagnetic Surveys in Great Barrier Reef Province (Appendix C to Mr Allen's statement)

Map Basin Structure and Exploratory Wells in Great Barrier Reef Province (Appendix D to Mr Allen's statement)

"Evaluating the new overseas crude oils" (Appendix E to Mr Allen's statement)

"Petroleum Resources of Queensland" by Allen & Hogetoorn

Statement of Mr A.B. Basire

Statement of Mr D.J. Rochford

Statement of Dr G.R. Orme

Admiralty : Notes on Currents

Background to Re.cent Legislation

Agreement between Commonwealth and States relating to exploitation of Petroleum resources on Continental Shelf

List of Papers by Dr Maxwell

Tropical Cyclones in the Queensland Region (Bureau of Meteorology)

Surface Circulation Maps for the Tasman and Coral Seas - Wyrtki

Natural Destruction of a Coral Reef -Charles Hedley

An investigation of Coral Deaths at Peel Island Moreton Bay in early 1956 - Mr R.J. Slack-Smith

EXHIBIT NUMBER

62

64

65

66

67

68

69

70

72

73

74

DESCRIPTION

Admiralty Chart 5011 (Conventional Signs and Abbreviations on Admiralty Charts)

Map - Port Moresby SC 55 (1:1,000,000) showing Goldie Reer

Map - Australian Geographical Series 1:1,000,000 (being genesis of Exhibit No. 63)

Admiralty Chart No. 2027 Daru Road to Kerema Bay

Dates of major flooding since 1900 Barrier Reef area Maximum wind gusts Great Barrier Reer area

Rainfall : Great Barrier Reef Miscellaneous Data

Instructions to Parliamentary Draftsman 22.10.69 Regulations under the Petroleum (Submerged Land) Act 1967

32 Slides produced by Proressor Connell

Article by Mr G.R. Hampson & Mr H.L Sanders re "Florida" : Volume 15 No. 2 "Oceanus" October 1969

Article "The Estuary in Modern Society" by Mr G. Harrison 6/8/69 in Queensland Littoral Society Newsletter Sept/Oct 1969

Article "Hydro-carbon pollution or edible shell-fish by an oil-spill" Technical report 70/l Woods Hole Oceanographic Institution Mass. USA

7th Biennial Report of Fisheries & Wildlife Commission of State of Louisiana : Dr Lyle St. Amant

"Geology Petroleum Development and Seis­ micity of the Santa Barbara Channel Region California" : paper of the Department of the Interior, Geological Survey Proressional

Paper No. 679 November 1969

1001

EXHIBIT NUMBER

75

76

77

78

79

80

81

82

83

84

85

86

87.

88

89

90

91

92

1002

DESCRIPTION

Article "Just How Serious was the Santa Barbara Oil Spill"? Jones Mitchell Anderson & North in "Ocean Industry" June 1969

Ar.ticle "Oil Drilling on the Great Barrier Reef"? : Joseph H. Connell "Wildlife" Magazine March 1970

Article "Tampico, a study of Destruction and Restoration" by Wheeler J. North

Letter 20th May 1970 to Dr D.W. Connell, President, Queensland Littoral Society from Mr W. Abbott

Photographs No's 1 to 6 showing aesthetical development of off-shore rigs

Statement of Mr A.W. Norrie

Statement of Mr E.M. Grant

Requirements for a Field Experiment to Assess the effects of an Oil Spill on a

coral reef within the Great Barrier Reef (proposed by APEA)

Revised Programme

Statement of Mr C.J. Dreger

List of Exploration Permits issued under the Petroleum (Submerged Land) Act of 1967

Exploration Permit for Petroleum Q/2P

Direction No. Q/2P/Dl

Direction No. Q/2P/D2

Amendment to Direction No. Q/2P/D2

Exemption from compliance with conditions

Alternative form of Exploration Permit for Petroleum

Authority to Prospect

EXHIBIT NUMBER

93

94

95

96

97

98

99

100

101

102

103

104

105

106

DESCRIPTION

Map showing Permits issued under Common­ wealth - State petroleum legislation

Map showing Permits issued under Common­ wealth - State petroleum legislation and relevant Authorities to Prospect under Petroleum Acts 1923-1967

Treatise by Dr W.G.H. Maxwell on Reef Development and Petroleum Exploration in the Central Gulf of Papua WAC Charts 3096, 3097 showing -

a. Q/lPA, Q/2PA Petroleum Permits b. Flight Plan flown during aerial reconnaissance

ONC Chart N-14 showing -a. Q/lPA, Q/2PA Petroleum Permits b. Bathymetry from Scripps Sparker Survey, 1967

c. Location of Scripps Sparker Line R

Water Bottom Profile from Scripps Sparker Line R

List of Dr Kikkawa•s,publications Extract from publication "Birds of the South West Corai Sea" showing the presence o,f various species on particular coral

cays

Geological Map of Australia and Oceania

of Figure 2 to Mr Shield's state­

ment (Exhibit 16) showing order of climatological stations

Statement of Dr J.P. Webb

Tables of production of reef fish and mackerel in Great Barrier Reef waters Mr E.M. Grant

Statement of Mr R. L. Anthony

Report of Mr De Golyer and Mr MacNaughton on the Petroleum Possibilities of Permits Q/PAl and Q/PA2

1003

EXHIBIT NUMBER

107

108

109

110

111

112

113

114

115

116

117

118

119

120

121

122

123

124

1004

DESCRIPTION

Evidence to be pre.sented on behalf of the Australian Tourist Commission

Statement (2.7.70) by Department of Harbours & Marine on tanker traffic in reef waters Letter from Mr D.W. Kinsey commenting on Exhibit 82

List of Mr Wood's publications

Seismology and New Global Tectonics -Isacks, Oliver, and Sykes

Statement of Mr R.H.R. Vine

Statement by Mr E.K. Ericson

Details of Film Showing 5th August, 1970

Details of proposed visit to drilling operations in Bass Strait

Report on Surface Circulation in the Southern Area of the Great Barrier Reef by Profes sor P.M.J. Woodhead

Further Revised Programme

List of Permits, Licences and Pipe-Line Licences in Australia current at 23rd July, 1970

Statement of Dr O.A. Jones

Statement of Mr H.S. Taylor-Rogers

OCS 10 of 19.3.69- Outer Continental Shelf Regulation of USA Department of Interior Four overlays for Strip Map showing currents

(Maxwell, Glenn & Woodhead)

Map showing sedimentary thickness based on magnetics and seismic (Enclosure 1 to Mr Ericson's statement Exhibit 113)

Further exemptions from compliance with expenditure provisions and variations

EXHIBIT NUMBER

125

126

127

128

129

130

131

132

133

134

135

136

137

138

139

140

141

142

DESCRIPTION

Variation of conditions of Q/2P -27th July, 1970

Table of Exploration Wells

Ampol Proserpine No. l Log

Australian Gulf Oil Aquarius No. 1 Log

Australian Gulf Oil Capricorn No. lA Log

Cabot Blueberry Marina No. l Log

Humber Oil Wreck Island Log

Pasca No. l Log

Shell Development Australia Gregory River No. l Log

Tenneco Signal Anchor Cay No. l Log

Summary of Petroleum Prospects in Great Barrier Reef Province Modern Drilling Methods (2 Volumes)

Overlay : Magnetic Basement produced by Mr Vine cf. Exhibit 101

Overlay : Seismic Horizons produced by Mr Vine cf. Exhibit 101

Report on Energy Resources of Queensland and Their Use - Chas. R. Hetherington & Co.

Graph of Queensland production of Pearl Shell, Trochus Shell and Beebe-de-mer Table of estimated annual production of edible fish, number of commercial fishing and professional licences and fishermen

for Queensland

Numbers of handline and troll line fisher­ men 1965-8 Gladstone to Cairns and Far North

1005

EXHIBIT NUMBER

143

144

145

146

147

148

149

150

151

152

153

154

155

156

157

158

1006

DESCRIPTION

Graph showing commercial production of reef fish and mackerel for 10 years 1960 to 1970

Further statement of Dr Maxwell

Table Commercial production of Turtles, Tortoise Shell and Turtle Soup in Queens­ land 1923/4 to 1930/1

Set of 12 photographs of Singapore Reefs produced by Dr Maxwell

Map "Bathymetry of Singapore Region"

Wind Drift. Current Prediction Chart

Location of standing and secondary ports compiled by Mr D. J. Rochford Review of Dr Maxwell's Atlas by Sir Maurice Yonge

Review of Dr Maxwell's Atlas by Professor Steer in Geological Magazine 27.1.69

Review of Dr Maxwell's Atlas by Dr Stoddart in Nature Volume 221 8.3.69

Map of Q/lPA based on the US Naval Hydrographic Survey Chart HO 3466

Water Depth Map of area near Anchor Cay prepared by Tenneco Australia Inc.

Review of Dr Maxwell's Atlas by Professor · R. Fairbridge "Marine Geology"

Review of Dr Maxwell's Atlas by Dr C.V.G. Phipps, Australian Journal of Science Volume 32 No. 1

Review of Dr Maxwell's Atlas by Weber & Woodhead "The Journal of Geology" May 1970

Review of Dr Maxwell's Atlas by Mr M. Dane Picard "The American Association· of Petroleum Geologists Bulletin" October 1969

EXHIBIT NUMBER

159

160

161

162

164

165

166

167

168

169

170

171

172

173

174

DESCRIPTION

List of Further Publications (see Exhibit 57) of Dr Maxwell

Tidal Information from Chart Datum (Ad. Chart 2922)

Extracts from "A Year on the Great Barrier Reef" by Sir Maurice Yonge

Graph plotting Oil Movement in Princess Charlotte Bay area produced by Dr Maxwell

Graph plotting Oil Movement in Middle Percy Island area produced by Dr Maxwell

"Biologic Economy of Coral Reefs" by Sargent & Austin

Details of Uramu and Pasca drills (Supplementary to Exhibit 126)

Studies on the Physiology of Coral, Part VI, by Sir Maurice Yonge

Report to Crown of Thorns Committee by Professor Woodhead

Longford and Long Island documents produced by BHP and Esso Standard Oil (Australia) Ltd.

Bass Strait Energy brochure produced by Hematite Petroleum Pty. Ltd.

Brochure "Oil in Today's World" produced by Petroleum Information Bureau (Australia)

Brochure "Man Makes His Islands in the Sea" produced by Esso Standard Oil (Aust) Ltd. Hematite Petroleum Pty. Ltd.

Photograph - Drilling Rig "Ocean Digger"

Details of Gippsland Operations Tour, 18th August 1970

Handbook - "Conservation Water/Air/Land produced by Esso Standard Oil (Aust) Ltd. Hematite Petroleum Pty. Ltd.

1007

EXHIBIT NUMBER

175

176

177

178

179

180

181

182

183

184

185

186

187

188

189

190

1008

DESCRIPTION

Statistics of Gulf Fisheries 1957 - 1966, Shrimp Landings produced by US Fisheries Wildlife Service

Memorandum and Articles of Association of The Great Barrier Reef Committee

Statement of Aims and History of The Great Barrier Reef Committee Statement "The Heron Island Research Station"

List of publications based wholly or partially on work carried out at the Heron Island Research Station

List of Reports of The Great Barrier Reef Committee

List of work carried out under the auspices of The Great Barrier Reef Committee and elsewhere than in "Reports of The

Great Barrier Reef Committee"

List of Scientific Reports of The Great Barrier Reef Expedition 1928 - 9 Copy article "Exploration in The Great Barrier Reef Area" by Dr T. Wilson (dec'd) Map of Australian Basins produced by Mr R.H.R. Vine

Further Statement of Mr R.H.R. Vine

Volume of Sedimentary Rock in Queensland Basins produced by Mr R. Allen

Further Statement by Dr Jiro Kikkawa

Article by Mrs M.K. Rowan "Oiling of Marine Birds in South Africa"

Programme for Sittings commencing 30th November 1970

Tables of Bird Mortality from article Mr W.R.P. Bourne "Oil Pollution and Bird Populations": Field Studies

EXHIBIT NUMBER

191

192

193

194

195

196

197

198

199

200

201

202

203

204

205

206

207

208

209

DESCRIPTION

Further Statement of Mr D.J. Rochford

Statement of Professor W. Stephenson

Further Stateme.nt of Mr E .M. Grant

Report - Grounding of the Oil Tanker "Oceanic Grandeur 11 in the Torres Strait

Report on Pollution from the Tanker "Oceanic Grandeur 11 - CSIRO Division of Fisheries & Oceanography

Notes on an Experiment upon the Effect of Crude Oil on Live Corals - Mr E.M. Grant

Map showing Basins and Authorities to Prospect. Produced by Mr A.W. Norrie

Queensland Department of Mines 1969 Report

Graph showing Annual Production and Consumption of Petroleum in Australia

Paper "An Energy Policy for Queensland 11 by Mr A.W. Norrie given to Fuel and Energy Resources and Requirements Conference, Brisbane, November 1970

Statement by Mr G.G.T. Harrison

Delegation under State and Commonwealth Legislation by Mr Camm

Programme for Sittings commencing 9th February 1971

List of references by Dr Orme Statement by Mr R. Thomas

Illustrations forming part of Statement of Mr R. Thomas

Statement of Mr J.A.W. White

Statement on Blowout on Petrel No. l - Mr J.A.W. White

to Exhibit 208

1009

EXHIBIT NUMBER

210

211

212

213

214

215

216

217

218

219

220

221

222

223

224

225

226

227

228

229

1010

DESCRIPTION

List of Australian off-shore Drilling Operations in which Blowout Preventive Equipment has been used

List of Subsidised off-shore Drilling Operations

List of Subsidised Drilling Operations in Queensland

C-E Natco Division, Combustion Engineering Incorp. Testimony Summary - Mr J.D. Lowd

Statement of Mr J. Roe

Statement of Brown & Root Incorp. - Mr W.R. Rochelle

Statement of Mr G.N. Keith

Statement of Mr J.F. Crane and Captain R.S. Allen

List of photographs, Appendix 2 to Exhibit 217 (Crane and Allen)

Photographs produced by Mr Grant

Further statement by Mr R. Thomas

Further statement by Mr R. Thomas

Statement of Mr I.H. Davis

Map of Queensland Coastline produced by Mr Davis

Statement of Mr H.W.J. Stewart

1970 "Oil and Australia" Petroleum Information Bureau Publication

Description of Films produced by Mr W.R. Rochelle

Further statement on Controlling Blow-Out at Petrel No. 1 by Mr W.R. Rochelle

Statement by Dr R.E. Chapman

Statement by Dr D.W. Connell

EXHIBIT NUMBER

230

231

232

233

234

235

236

237

238

239

240

241

242

243

244

245

DESCRIPTION

Statement by Dr Lyle Stanhope St. Amant

Statement by Mr R.D. Stanphill of Humble Oil & Refining Co.

Set of prints illustrating Exhibit 215 (Brown & Root Incorporated - Rochelle)

Future Programme

Further Statement of Mr J. D. Lowd (National Tank Company)

Statement of Professor Robert Bernard Clark (together with personal history a separate document at p.3592.3)

Article "Recent and Pleistocene Coral Reefs of Australia" by Rhodes Fairbridge, Journal of Geology Volume 58 Part IV pp. 330 - 401

Addendum to Professor R.B. Clark's statement (Exhibit 235) dealing with Dr Lewis' experiments

"The West Falmouth Oil Spill" Second Woods Hole Paper on "Florida" spill: (Blumer, Souza, Sass, Hampson, Grassle) September 1970

Statement of Professor R.E. Johannes

Statement of Mr William F. Gusey, Shell Oil: "Petroleum Production and Fish and Wildlife Resources, The Gulf of Mexico, Louisiana".

Statement of Mr D. W. Kinsey

Article by Mr P. W. Marshall on risk

evaluation for off-shore structures

Script of Film "Cloud over the Coral Reef" by Professor R.E. Johannes

"Coral Reefs and Pollution" by Professor R.E. Johannes

Explanatory note regarding the Petroleum Search Subsidy Acts

lOll

1012

EXHIBIT NUMBER

246

247

248

249

250

251

252

253

254

255

256

257

258

259

260

261

262

263

DESCRIPTION

Explanatory letter 11/3/71 by Mr J.A.W. White on transcript of his evidence

"Legal Liability for Oil Industry Negligence"

Statement of Dr J. Frederick Grassle

Statement of Dr Alan Brideson Cribb

Statement of Dr Robert Endean

Statement of Miss Olive Ashworth

Statement of Mr Victor McCrystal

Statement of Mrs Judith Wright McKinney

Statement of Mrs Gabrielle Matves

Extracts from Mines Department File re Mackay No. 1 (Repulse Bay)

Future Programme 27th April, 1971 - 1st July, 1971 Report of Crown of Thorns Starfish Inquiry

Report on Experiments to Test the Diffusion of Oxygen through a surplus layer of oil. Brown & Reid (Texas A & M Research Foundation Project Nine)

Paper by Rutzler & Sterrer (Bio Science Volume 20 No. 4 of February 15, 1970) re "Witwater" Panama

Reports on Experiments to test the diffusion of oxygen through a surface layer of oil: J.L. Boswell (Texas A & M Research Foundation Project Nine)

Admiralty Chart 3781 (Prince of Wales Channel)

Statement of Professor P.M.J. Woodhead

Australian Institute of Navigation Newsletter No. 71 (August 1970)

EXHIBIT NUMBER

264

265

266

267

268

269

270

271

272

273

274

275

276

277

DESCRIPTION

Five photographs produced by Mr Gusey 1. Towards Louisiana Coast 2. Fire on Platform 13; Platform A in

right foreground 3. Pumper Barges in action on Platform B 4

· )) Closer views of the Pumper Barges 5.

Graph produced by Mr Gusey showing Fish Production in Coastal USA 19

Map of Shrimp Harvest Waters of Gulf of Mexico

Photographs produced by Professor Woodhead showing cyclone damage at Heron Island A, B, C, D, E, F, G, H, I, J, K, L & M

Further photographs produced by Professor Woodhead showing re-colonisation at Heron Island after cyclone damage A, B, C, D, E, F, G, H, I, J, K, L, M, N, O,

P, Q & R

Statement of Dr I. M. Straughan

Summary and Conclusions Growth and Asexual Reproduction in Coral:Mr T.A. & Anne Stephenson

Supplement to Statement of Mr G.N. Keith

Some statistics from the statement of Mr G.N. Keith·

Final Report of Dillingham Commission

"The Ocean Eagle Oil Spill" by Mr M.J. Cerame­ Vivas

Paper presented at a world conference in 1968 dealing with oil pollution in South Africa by Mr G.H. Stander

"Oil Pollution off the South African Coast" - the "World Glory" disaster - Mr G.H. Stander

IMCO (Inter-Governmental Marine Consultative Organization) document "Descriptions of Major Incidents of Marine Pollution by Oil"

Document dealing with Shell incident off Louisiana: March 1971 "Offshore"

1013

EXHIBIT NUMBER

279

280

281

282

283

284

285

286

287

288

289

290

291

292

293

294

295

296

297

298

299

300

1014

DESCRIPTION

AOR Report - Botany Bay

Table of Blowout and Storage losses from collisions and hurricanes

Hancock Foundation - Santa Barbara Report

Coral Reefs by Mr J. W. Wells

Tide tables

Statement by Mr D.R. Stoddart

Statement by Mr T.R. Haskell

P.68, 72, & 87 of Volume II­ Dillingham Report

Further Statement by Mr A.W. Norrie

Summary toxicity tests Corexit 7664

Effect of oil pollution on flora and fauna of Black Sea- Mr O.G. Mironov

Oil contamination and the living resources of the sea - Dr Blumer

General recommendations FAO Conference

Photostat copy - original plotting forecast

Chart showing actual oil movement - Captain Hildebrand

Statistics of the Falmouth Spill Statement of Mr K.E. Biglane

Statement of Professor A.R. Thompson

Hydrocarbons in digestive tract and liver of a basking shark - Blumer -Science Volume 156 p.390

The Natural fate of oil in the sea - Pilpel

Industry and Productivity of Caspian Sea -Mr A.G. Kasymov (Marine Pollution Bulletin 7. 7.70)

Further Statement by Mr K.E. Biglane

EXHIBIT NUMBER

301

302

303

304

305

306

307

308

309

310

311

312

313

314

315

316

317

318

319

320

321

DESCRIPTION

National Contingency Plan

Department of the Interior Report -Chevron Oil

LetterD.r Blumer to Dr Hunt 29.3.71

Microbial Degradation of paraffin hydro­ carbons in Crude Oil - Mjget, Oppenheimer, Kator & LaRock

Decomposition of Crude Oil Residues in Sand Columns - Mr R. Johnston

Pristane in Marine Environment - Blumer, Mullin and Thomas

Pristane in Zooplankton - Blumer, Mullin and Thomas (Science Volume 140 p.974)

Fish kill caused by Intermediate Oil from coke ovens Zitko and Tibbo

Statement by Mr R. C. Coulter

Map of Standard Regions for Federal Administration

Map of US Coastguard Districts

Gulf Coast OCS Orders

Part of Federal Regulation Title 30

Water Quality Improvement Act

Statement of Mr W. W. Mansfield

Additional Statement by Dr D. W. Connell

Statement of Dr J.G. Hawke

Statement of Mr T. Morehead

Statement of Dr Bruce W. Halstead

Toxicity of Marine Organisms caused by Pollutants - Halstead - Rome paper

Surface Active Chern System for Control and Recovery of oil from ocean environments Milz and Fraser

1015

EXHIBIT NUMBER

322

323

324

325

326

327

328

329

330

331

332

333

334

335

336

337

338

339

340

341

342

1016

DESQRIFTION

Statement of Mr D.J. Tranter

Statement of Mr McCay

Letter Ansett Hotels to Aastralian Tourist Commission

New Statement by Miss 0. Ashworth (in lieu of Exhibit 251)

Planned Programme, July October Sittings

Statement of Dr A. Hunter (now deceased)

Major features of Queensland. Report of Mr M. J·. Gibbings

Letter dated 23.10.70 Mr S.C. Lowry (Santa Barbara Chamber of Commerce)

Black & White Photographs (Miss 0. Ashworth)

Slides 1 - 16 Miss 0. Ashworth

Statement of Mr A.w. Brown

1969 Amendments to.I.M.C.O. Convention

Statement of Mr R. a.· McCrossin

Statement of Mr W. Young

Article - Mr A.W. Brown (APEA Journal pp. 49-52-1971)

Statement of Mr P.E. Cohen

Report of Mr J.B. Lewis (Marine Pollution Bulletin)

Statement of Mr R. Foster

Extract - Samuelson - Balance of Inter­ national Payments

Statement of Mr S.M. Cochrane

Correspondence- Sir Maurice Yonge (23.6.71 and 1.7.71)

EXHIBIT . NUMBER

343

344

346

347

348

349

350

351

352

353

354

355

356

357

358

359

360

361

362

DESCRIPTION

Correspondence- Dr Blumer (11.6.71 & 8.7.11) .

A.N.Z.A.A.S. Paper by Cochrane & Ors. (May 1971)

Basic Tanker Data

Further Statement - Professor R.E. Johannes ·

3 Coloured Photos Professor R.E. Johannes

Balance of Payments - Quarterly Summary -June 197l

Buyers market in World Oil - Professor M.A. Adelman

Map of Santa Barbara (Draft Environmental Impact Statement)

Statement of Mr N. Haysom

Problems of Growth and Calcium Deposition. in Coral Reefs - Goreau Letter lOth August 1971 - Mr S. MeL. Cochrane to Professor M.A. Adelamn (MIT) and replY dated 23rd August 197l

Statement - Mr M.F. Winders

Statement - Mr B. Cropp

Population Ecology of Reef Corals -Professor J.H . . connell

Letter from Esso Standard Oil Aust. Ltd Marlin A7 Blowout

Great Barrier Reef Visitor Kerr Forster & Company

General Conditions - Payment of subsidies under Petroleum Search Subsidy Act 1959-60

Guide to Appli cants & Operators

Sta tement - Mr E.B. Cowell

Oil Spilt at Sea - identification determination & ultimate fate - Freegarde, Hatchard & Parker

1017

EXHIBIT NUMBER

364

366

368

369

370

371

372

373

374

375

376

377

378

1018

DESCRIPTION

Further information - world tanker fleet and Australian terminals with. submarine lines Mr J.F. Crane

Report Maritime Services Board - Botany Bay Spill- 21.12.70

Problem of Oil Pollution of Sea - Mr A. Nelson-Smith

The Petroleum Newsletter No. 44 1.10.70-31.12.71

Article - Australian Crude Oil Policy -Mr S. MeL. Cochrane - Australian Accountant May 1970

Article by Frank J. Gardiner- Oil & Gas Journal 21st June 1971

Article - Australian Financial Review p.24 23.8.71- Higher charges for world oil forecast - Petroleum Press Service

Future programme

Personal History and Qualification Mr E.A. Shinn

Short term pollution experiment on semi­ in-situ reef corals - Shinn Observations relative to coral regeneration -Shinn

Statement - Mr D. McAlister

Hydrocarbon Analysis by Gas Chromatography

Information Bulletin of the Co-ordination of Meteorological Activities in the Arabian Gulf

Petroleum Today - Winter Issue 1969 - pages 16-23

Louisiana Conservationist July-August 1971 (p. 14-17)

EXHIBIT NUMBER

379

380

381

382

383

384

385

386

387

388

390

391

392

393

394

395

DESCRIPTION

Further statement - Mr E.M. Grant

Artificial Habitat in Marine Environment Carlisle, Turner & Ebert Photograph of banded Acropora cervicornis showing overgrowth

Analysis of oil samples from experiments by Mr E.A. Grant

Letter of 21st September 1971 with two chromatograms

Coral Experiments Wistari Reef, times and heights of low water - Heron Island

Graph and Associated figures showing percentage of absorption of Australian indigenous crude

List of Petroleum Reserves according to basins and in the case of oil fields - 30th

June, 1971

Comments by Mr D.M. McAlister on Cochrane's paper

Extracts from "Courier Mail" on 3.9.71 concerning statement by Deputy Prime Minister (Anthony)

Petroleum Search in Australia Petroleum Titles Map 31.3.70

Petroleum Search in Australia Petroleum Titles Map 31.3.71

Further Statement Mr G.W. Washington -Economic Impact of Tourism

Extract from Interdepartmental Committee on Leasing and Development of Queensland Islands Report

Census Information 30th June 1966

Map of Statistical Divisions of Queensland

The Santa Barbara Oil Spill (Article by Mr M. F. Baldwin)

1019

EXHIBIT NUMBER

396

397

398

399

400

401

402

403

404

405

406

407

408

409

410

411

412

1020

DESCRIPTION

(Draft) Environmental Impact Statement regarding Santa Barbara area

The Oil Spill Problem - First Report of the President's Panel on Oil Spills

Off-shore Mineral Resources - A Challenge and an -opportunity - Second Report of the President's Panel on Oil Spills

Petroleum and Natural Gas Act 1965 C33 -British Columbia Oil and Gas Laws of Title

102 Revised Civil Statutes of Texas -Rule 8 - Water Protection

Being OCS Orders 1 to 10 published June 1971 in respect of Outer Continental Shelf -Region

Comparative Table of Statutory Provisions Regulating Oil Pollution of the Sea (Prepared by Professor A.R. Thompson -April 1971) ·

Article "Oil Pollution of the Sea" from Environmental Law Review

Comparative Toxicities of Crude Oils -Miss S. Ottway

Statement - Mr A.J. Fitzgibbons

Statement - Dr H.C. Coombs

Copy of Hansard re oil pricing lOth October 1968 (Gorton)

Unsigned letter from Tokyo address -14th June 1971

Statement of Mr K.F. Brigden

Statistics .as to employment in the sugar industry - Queensland Canegrowers Council

Figures of private enterprise expenditure on petroleum exploration 1961 - 1969

Petroleum Intelligence Weekly - 18th October 1971

EXHIBIT NUMBER

413

414

415

416

417

418

419

420

421

422

423

424

425

426

427

428

429

430

431

DESCRIPTION

Extract from Sydney Morning Herald - 28th October 1971

Future Programme

Further Statement of Mr G.N. Keith

Statement of Mr R. Cantley

Statement of Mr C.S. Robertson

Forecast of Energy Demands with probabil­ ity of utilising natural gas if available Queensland Mines Department Table B -October 1971 - Reserves of black coal - Bowen Basin

Queensland Government Mining Journal Year Book · ·

Utah Company Map of Goonyella and adjoin­ ing mines

Queensland Pocket Year Book No. 22 - 1971

Classification of Petroleum Hydrocarbons Conversion of specific gravity and viscos­ ity figures (Exhibit 415) to API & SSU Units

Equivalent figures for Australian Crudes (Table I of Exhibit 404)

Gippsland Crude Oil Reply dated 7th July 1971 (Exhibit 408)

Statement of D.r K. T. Spillane

Letter dated 4th November 1971 - Mr R.J. Foster to Mr B.F.L. Crommelin (Exhibit 408, 426)

Letter dated 27th October 1971 - Bureau of Mineral Resources - Drilling vessel Navigator

Report of fire Marlin A4 - 19th May 1971

Statement of Dr J.H. Choat

1021

EXHIBIT NUMBER

432

433

434

435

437

439

440

441

442

443

444

445

446

447

448

1022

DESCRIPTION

Statement of Mr R. D. Piesse

General Directive as to Safe Practice 16th October 1968 (Victoria)

Directions of various dates - May 1968 -May 1971 (Victoria)

Map of Torres Strait - Pearl Culture Areas (Grant)

Two (2) interim reports on Oil and Coral Experiments at Wistari Reef -Grant

Apparent extent of Recovery of Reefs (GBR) Devastated by Crown of Thorns Starfish - R.Endean & W.Stablum Study of some aspects of Crown of Thorns infestation of GBR - Endean & Stablum from Nature Vol. 228 October

1970 Peter J.Vine

Statement of Mr R.K. Bryson

Summary of Estimates of recoverable primary reserves of petroleum in Australia - 30.6.1971

Estimate of proved crude oil reserves -30.6.1971

Map of Milford Haven

Letter dated 6th May 1971 from RAN Captain Osborn - Goldie Reef

Naval Survey - Goldie Reef Area

Copy of directions - designated authority for Northern Territory to Arco Ltd.

Statement of Dr Patricia Mather

Press release - Department of the Interior - 20th September 1971

EXHIBIT NUMBER

449

450

451

452

453

454

455

456

457

458

459

460

461

462

463

464

465

466

467

DESCRIPTION

Final Environmental Statement Department of the Interior 27th August 1971

Report of Senate Select Committee on Off­ shore Petroleum Resources

Great Barrier Reef - Dr Isobel Bennett

Guide to Fishes - Mr Grant

Dillingham Report - Volume 2

Programme

Policies of Australian Conservation Foundation as at 30th June 1971

Booklet Oil and Australia 1971 (Exhibit 225)

Extract from National Parks Association News of April 1969

Booklet entitled Conservation Geological Rationale by Mr P.L. Ellis

Conservation Directory (1970)

Submission to Australian Senate Select Committee on Australian Off-shore Petroleum Resources from Queensland Littoral Society prepared by Dr J. F. Grassle, Ph.D., Vice

President

Conservation and Mining in Modern Australia (Viewpoint No. 6 of Au gust 1971) Conservation of Cockburn Sound, Western Australia, Special publication No. 5

Further Statement of Captain R.G. Hildebrand

Additional Evidence Mr H.S. Taylor-Roger s

Statement by Mr Nixon, Minister for Shipping and Transport 9th February 1972

Map Australia 293 - Prince of Wales Channel (marked by Mr R. Cantley)

Map Australia 292 - Adolphus Channel to Harvey Rock (marked by Mr R. Cantley)

1023

EXHIBIT NUMBER

468

469

470

471

472

473

474

475

476

477

478

479

480

481

482

483

484

485

1024

DESCRIPTION

Australian Map 256 - Cleveland Bay

Statement by Dr T. Wilson (Gulf Exploration) printed in Rockhampton Bulletin

Extract from Sunday Truth 16th March 1969

Slides 22 & 23 - Oceanic Grandeur

Photostats of Rockhampton Bulletin relating to stoppages News Release - Premiers Department 22nd February 1972

Uniqueness of the Great Barrier Reef - Dr Mather

Further statement by Mr E. M. Grant re visit to Wistari Reef January 1972 "Blowout Prevention" by Mr W.C. Goins

Article - Why USGS off-shore Rules must be changed - World Oil - November 1971

Further statement of Mr E.K. Ericson

Statement and supporting maps by Mr B. Goldman

Hydrocarbon incorporated into Salt Marsh Eco-system from West Falmouth Oil Spill -Burns & Teal

Statement of Mr K.F. Courtenay-Pete

Statement of Mr R. G. Pearson

Statement of Mr G.M.J. French

Letter f'rom Mr Crommelin to Dr Serene 28th June 1971 and reply thereto 27th July 1971

Letter from Mr A.H. Weatherley to Prof'essor Chuang and reply

EXHIBIT NUMBER

486

487

488

489

490

491

492

493

495

496

497

499

500

501

502

DESCRIPTION

Statement of Professor Shou Hwa Chuang

Dr Maxwell's comments on Dr Serene's and Professor Chuang's letters

Dr Maxwell's comments on Dr Stoddart's evidence

I.M.C.O. - Amendments to International Convention for prevention of pollution of sea by oil 1954 (amended 1969) concerning protection of Great Barrier Reef

Letter to Deputy Crown Solicitor from Department of Shipping and Transport -16th March 1972

National Plan

Commonwealth Operational Plan

List of 72 slides extracted by Mr Grant for comparison with slides, H, J and L

Series A - 14 slides - A - N - September

1971

Series B - 14 slides A - N - January

1972

72 slides as listed in Exhibit 493

Photographs of coral (5) vide Exhibit 1 Professor Chuang's statement

Photographs (4) of corals on reef flat vide Exhibit 2 Professor Chuang's statement

Photograph (1) - reef flat with dead coral as appears on Salu (Exhibit 3 Professor Chuang's statement)

Map showing tidal movements - 1971 Professor Chuang's statement Exhibit 6(1)

Map selection of experimental drogues incorporation experiments in 1932 and 1971 - Professor Chuang's statement Exhibit 6(ii)

Geological subsidence - Professor Sullivan Marsden

1025

EXHIBIT NUMBER

503

504

505

506

507

508

509

510

511

512

513

514

515

516

517

518

519

1026

DESCRIPTION

Photograph of south east part of reef flat on Salu

Descriptive list and 23 slides by Mr B. Goldman

Descriptive list and 33 slides by Mr G.M.J. French

Statement of Mr I.D. Croll

Role of Symbiotic Algae (Zooxanthellae) in Coral Calcification by Pearse and Muscatine

Further statement of Mr E.M. Grant

Additional information from Department of Mines

Great Barrier Reef Committee membership

Australian Conservation Foundation - Members of Council, Life Members, Benefactor Members, National Sponsors and Queensland Member Bodies

Letter from Mr K.F. Brigden, First Assistant Commissioner, Department of Taxation - 14th April 1972

Letter from Director, Bureau of Mineral Resources, Department of National Development - 1st March 1972 - Seismic surveys

Report to I.M.C.O. of maritime pollution incidents in Australia

Adjustments to addition in A.N.Z.A.A.S. paper (Exhibit 344)

Table of national parks

Map showing areas under forestry control - national parks marked in orange

Study on the state of pollution of the Mediterranean Sea

Petroleum reserves (updating Exhibit 441)

EXHIBIT NUMBER

520

521

522

523

524

525

526

527

528

529

530

531

532

533

DESCRIPTION

Balance of payments - quarterly summary, December quarter 1971 (updating Exhibit 348)

Petroleum Intelligence Weekly extract, 31st January 1972

Report on the effects of a seismic survey on the fisheries of the Gippsland Lakes by Mr T.B. Gorman, July 1965

Article on experiments designed to determine effects of underwater explosions on fish life - California Fish and Game, July 1952

Re: Effects of underwater explosions on fish. Extract from the Australian Fisheries Newsletter, March 1966 -publication of the Commonwealth Department

of Primary Industry

Non-explosive sound source for off-shore seismic surveys - extract from Australian Fisheries Newsletter, July 1968

Report of geophysical marine trials 17th June 1966 on the effects of flexotir

Relevant Queensland Regulations affecting tankers

Rules for the Handling of Dangerous Goods in Port·s

Statement on Geological subsidence by Mr J.A.W. White

Letter - 13th October 1971 - from Allgas Energy Ltd.

Letter - 9th May 1972 - from Government Gas Examiner and Chief Gas Examiner

West Falmouth Oil Spill - Paper No. 1

Biology - Sanders, Grassle & Hampson April 1972

West Falmouth Oil Spill Data - November 1971 - Chemistry - Blumer & Sass

1027

NUMBER

534

535

536

537

538

539

540

541

542

544

545

546

547

1028

DESCRIPTION

Copy Contract - Hematite Petroleum Ltd. and Intairdrill Australia Pty. Ltd.

Rotary Drilling Contract and Bid Sheet

Environmental Fate of Stranded Crude Oil­ Blumer, Ehrhardt & Jones

Indigenous & Petroleum derived hydro­ carbons in a Polluted sediment - Blumer & Sass

Copy of Off-shore Drilling Contract

Collected Extracts dealing with Petroleum Production Limitations by Persian Gulf Countries and updated Tanker Building Costs

Petroleum Hydrocarbon in Oysters -Galveston Bay -Ehrhardt

Iraq nationalises IPC

Shell Development (Aust) Pty Ltd - Oil Spill Procedure Off-shore - South Australia Letter from Mr Crook to Mr Foster - 14th June 1972 - referring to Australia-wide industry contingency plan

Letters dated 30th March 1972 and 4th May 1972 from Minister for Mines, Victoria

Letter dated 27th April 1972 from Maritime Services Board, NSW and Photographs

Two sets of Mr Grant's slides (Exhibit 379)

Statement of Mr K.H. Deasy

Mr

Captain

Mr

Miss

Mr

Mr

Mr

APPENDIX "B"

LIST OF WITNESSES

R.J.ALLEN

R.S.ALLEN

R.L.ANTHONY

O.ASHWORTH

A.H.BASIRE

J.E.BEALL

K.E.BIGLANE

B.Sc. (Hons. Geology & Mineralogy) Queensland. Principal Geologist, Petroleum Section, Geological Survey of Queensland Tl285-l453, Tl897-l90l Exhibits 45-50, 126-135, 186

Master's Foreign going Certifi­ cate & Member of the Honourable Company of Master Mariners, London, Marine Superintendent for Australian & S.W. Pacific Island ports, Shell Company of Australia T5106-5172 Exhibits 217-218, 261,

263

Professional photographer and pilot Tll05-lll4 Exhibit 105 Artist and publicity consultant, Proprietress Olive Ashworth

Publicity Services and Indigenous Design of Australia T7765-7800 Exhibits 251, 325, 330, 331

Authorised Surveyor, Member of Australasian Institute of Mining and Metallurgy, Part time consul­ tant in petroleum matters T2297-

2468 Exhibits 51, 202

Professional Engineer, Supervis­ ing Drilling Engineer Esso Stan­ dard Oil Australia T4438-4442

M.S. College of Zoology, Physiol­ ogy and Entomology - Louisiana State University B.S. College of Arts and Sciences - Louisiana

State University, Director of the Division of Oil and Hazardous Materials, Water Quality Office, Environmental Protection Agency

T6564-6793 Exhibits 295, 300-302, 310, 311

1029

Mr K.F.BRIGDEN

Mr A.W.BROWN

Mr R.K.BRYSON

Mr R.CANTLEY

Dr R.E.CHAPMAN

Dr J.H.CHOAT

Professor S.H.CHUANG

Professor R.B.CLARK

Mr S.M.COCHRANE

1030

First Assistant Commissioner, Policy and Legislation Division, Commonwealth Taxation Office, Canberra Tl2436-12512 Exhibits 409, 512

Master of Business Administration, Melbourne, Diploma of Applied Chemistry, Melbourne Institute of Technology, Planning and Develop­ ment Manager of Delhi Internation­

al Dil Corporation T7955-8252 Exhibits 327, 332, 336, 340

Secretary Professional Fishermen's Association (Townsville) Oyster Farmer Tl3538-13615 Exhibit 440'

Freelance journalist Tl3683-13850 Tl3915-13968 Exhibits 416, 466-472, 502

M.A. Oxford, Ph.D. (Geology) Leeds, B.A. (Hons. Geology) Oxford Petroleum Geologist and Senior Lecturer in Geology,

University of Queensland T3484-3589 Exhibits 228, 236

Ph.D. Queensland, M.Sc.Wellington B.Sc. Wellington, Lecturer, Uni­ versity of Auckland Tl3116-13231 Exhibit 431

Ph.D. Singapore, M.Sc. Bristol, B.Sc. Amoy China, Professor at University of Singapore Tl5532-15649, Tl5731-15738 Exhibits 486,

497-9, 500, 501, 503

D.Sc. London, Ph.D. Glasgow, B.Sc. (Zoology) Exeter, B.Sc. (Physics and Maths) London, Professor of Zoology, Director of Dove Marine Laboratory, University of New­ castle-upon-Tyne T3591-3926 Exhibits 235, 237

B.A. (Social Sciences) Leicester Lecturer in Economics, University of Queensland T9089-9218, T9282-9874 Exhibits 341, 344, 353, 366-369, 515

Mr P.E.COHEN

Professor J.H.CONNELL

Dr

Dr

Mr

Mr

Mr

Mr

D.W.CONNELL

H.C.COOMBS

R.C.COULTER

PETO

E.B.COWELL

J.F.CRANE

B.Com.(lst Class Hans) Melbourna Research Director Committee for Economic Development of Australia T8618-8629, T8686-8849 Ex.337,348

Ph.D.(Zoology) Glasgow, Professor of Zoology, University of California T435-604, Tl2136-12302 Exhibits 20, 32, 69-79, 175, 356

Ph.D (Organic Chemistry) Queensland, M.Sc. (Organic Chemistry)Queensland, B.Sc.Queensland, Senior Research Chemist at the Australian Wine Research Institute, Adelaide

7181, Exhibits 229, 316, 362

M.A. West Australia,Ph.D.London School of Economics, Chairman Australian Council of Aboriginal Affairs, Formerly Economist to the

Commonwealth Treasury; Governor and Chairman of the Board of the wealth Bank and of the Reserve Bank of Australia Tll295-1144o, Tl3244-

13304, Exhibits 406-408

LLB. University of Oregon Law School, B.S. (History) University of Oregon, Deputy Solicitor in The Office of the Solicitor, Department of Interior Washington T6794-6981 Exhibits 309,

312-314, 448, 449

Professional Diver Tl6016-16040 Exhibit 481

B.Sc. (Hons.) Wales, Diploma of Agricultural Sciences (Cantab) Co­ ordinator of Ecology and Environment Control Centre for British Petroleum

Co. Ltd. Tl0895-11113 Exhibits 361, 365, 404, 443

Marine Engineer lst Class Certificate (Board of Trade) Member of the Institute of Mechanical Engineers and Member of the Institute of Marine

Engineers, Marine Manager, Shell Co. of Australia T4976-5106 Exhibits 217, 218' 363

1031

Dr A.B. CRIBB Ph.D. Queensland, M.Sc. Queensland

B.Sc. Queensland, Senior Lecturer in Botany - University of Queens­ land T4746-4885 Exhibits 249, 258-260

Mr I.D. CROLL Manager Magnetic Island Marine

Gardens Tl5930-15940 Exhibit 506

Mr B. CROPP Film producer and Managing Direc­

tor of Ben Cropp Productions Pty. Ltd. Tll739-ll871 Exhibit 355

Mr I.H. DAVIS B.Sc. (Hons.) London, Lecturer in

Geography at University of Queens­ land T2490-2538 Exhibits 222, 223

Mr C.J. DREGER Clerk - Exploration Titles and

Petroleum Registrar, Department of Mines, Queensland Tl207-1247 Exhibits 84-92, 124, 125

Dr R. ENDEAN Ph.D. Queensland, M.Sc. Sydney,

B.Sc. (1st Class Hons. Zoology) Sydney, Reader in Zoology, Univer­ sity of Queensland Tl2931-13089 Exhibits 250, 437-439

Mr E.K. ERICSON B.A. (Geology) Colorado, Explora­

tion Manager of Division

of Australian Gulf Oil Co. Tlll4-1205, Tl247-1285, Tl4689-14772 Exhibits 18, 21-31, 113, 122, 123, 478

Mr A.J. FITZGIBBONS M.Com. (New South Wales) B. Com.

(1st Class Hons.) Newcastle, Lecturer in Economics, University of Queensland Tllll5-11295, Tll443-11628 Exhibits 344, 405,

410-412, 515

Mr R. FOSTER B.Eng. Adelaide, Chairman of APEA

Barrier Reef Subcommittee and Manager of Special Studies Hematite Petroleum Pty. Ltd. T8255-8338, T8418-8618 Exhibits

327' 339' 349

Mr G.M.J. FRENCH Technical Assistant Department of

Primary Industries Queensland Tl5893-15930 Exhibits 483, 505

Mr B. GOLDMAN B.Sc. (Zoology) Sydney Post

Graduate Student at Macquarie

1032

Mr

Dr

Mr

Dr

Mr

Mr

Dr

Mr

University T15738-15821 Exhibits 479, 504

E.M.GRANT M.Sc. Queensland, B.Sc. (Geology and Physiology) Queensland, Research Fisheries Biologist, Department of Primary Industries Queensland Tl543-1599, T2471-

2484, T10265-10371, T12847-12930, T14175-14253, T15462-. 15530, T15949-15984 Exhibits 81, 104, 140-143, 145, 193, 194, 196,

219, 379, 382-384, 435, 436, 475, 493-496, 508, 546

J.F.GRASSLE Ph.D. Duke, B.S. Yale, Assistaht Scientist Woods Hole Oceano­ graphic Institute, Woods Hole, Massachusetts T6097-656.4 Exhibits

238,248, 294, 297-299, 303-308

W.F. GUSEY M.S. (Zoology and Wildlife) Kansas

B.S. (Biology) Oregon, Senior Staff Wildlife Specialist, Environ­ mental Conservation Department, Shell Oil Company, New York T5173-

5244 Exhibits 240, 264-266

B.W. HALSTEAD M.D. Lorna Linda University of California, B.A. (Zoology) Berkeley, California, Doctor of Medicine and Marine Biotoxicologist Director of World Life Research Institute,

Colston, California T7303-7452 Exhibits 319, 320

G.G.T.HARRISON B.Sc. (Chemistry) Leeds, Chief Inspector of Fisheries and Senior Biologist, Department of Primary Industries, Queensland T5710-5778 Exhibits 71, 201, 283

T.R. HASKELL M.Sc. Wellington, B.Sc. (Hons.) Wellington, B.Sc. New Zealand, Petroleum Geologist, Planet Management and Research Pty. Ltd. T5898-60ll Exhibit 285

J.G.HAWKE Ph.D. Sydney, Senior Lecturer in

Chemistry, Macquarie University T7599-7626 Exhibit 317

N.M.D. HAYSOM B.Sc. (2nd Class Hons. Marine Zoology) Queensland, B.Sc.

1033

(Zoology & Physiology) Queensland Fisheries Biologist, Department of Primary Industries Queensland Tl0619-10727 Exhibit 351

Captain R.G.HILDEBRAND Certificate of Competency Master of Foreign Going Steamships, Port Master, Department of Harbours and Marine, Queensland T292-326, Tl3851-13908, Tl3970-13986,Tl4007-

14061 Exhibits 11,62,108,194,293, 463,465

Professor R.E.JOHANNES Ph.D. Hawaii, M.S. British Colum­ bia, B.S. British Columbia, Associate Professor of Zoology, University of Athens, Georgia, USA T4200-4302, T8631-8686 Exhibits 239, 243, 244, 346, 347

Doctor O.A.JONES M.Sc. Cambridge, D.Sc. Queensland

Retired Reader in Geology and Mineralogy, University of Queens­ land Tl852-1892 Exhibits 119, 176-182

Mr G.N.KEITH Graduate of the Institute of

Engineers (Australia), Associate of the Royal Australian Chemical Institute, Fellow of the Royal Melbourne Institute of-Technology in Chemical Engineering, Associate of Melbourne Technical College in Applied Chemistry, Co-ordinator of Research and Technical Infor­ mation, Oil and Gas Division of BHP T5499-5611, Tl2044-12135 Exhibits 216, 271, 272, 280, 415,

423-425

Doctor J.KIKKAWA B.Sc. Kyoto, D.Sc. Kyoto, Reader

in Zoology, University of Queens­ land Tl903-1982

Exhibits 34, 99, 187, 188, 190

Mr

Mr

1034

D.W.KINSEY

L.I.LIPSCOMB

B.Sc. (Biochemistry and Micro­ biology) Sydney, Senior Research Chemist M.B.T. Research Labora­ tory T4885-4974 Exhibits 37, 109, 241

M.S. (Civil Eng.) Texas A and M. University B.S. Texas, Area Pro­ duction Manager, Esso (Australia) Ltd. Gippsland T12649-12843 Exhibits 357, 430, 433, 434

Mr

Mr

Mr

Mr

Mr

Mrs

Mr

Dr

Mrs

Dr

J.B.R.LIVERMORE Graduate Australian Administrative Staff College, Imperial Defence College London and Australian Army Staff College, Senior Assistant Secretary, Minerals and Forest Policy Branch, Department of National Development, Canberra T394-

434 Exhibits 19, 118

J.D.LOWD B.S. (Mech.Eng.) Worcester Poly­

technical Institute, Massachusetts, Executive Vice President of National Tank Company of United States T3257-348l Exhibits 213, 234

D.McALISTER B.Econ. A.N.U. Senior Economist, Minerals and Forest Policy Branch of the Resources Policy Division, Department of National Development T9877-l0105, Tl0379-10619 Exhibits

323, 374, 385-390, 441, 442

V.McCRYSTAL Author and photographer T14253-14304 Exhibit 252

R.G.McCROSSIN Fellow of the Institute of Actuaries London, General Manager of Austral­ ian Resources Development Bank T8338-8417 Exhibit 334

J.A.W.McKINNEY B.A. Sydney, President of the Wild­ life Preservation Society T7820-7839 Exhibit 253

W.W.MANSFIELD B.Sc. (Hons. lst Class) Adelaide Senior Principal Research Scientist, Division of Applied Chemistry CSIRO Melbourne T7182-7302, T7458-

7495 Exhibits 315, 321, 362

P.MATHER Ph.D. Queensland, D.Sc. Western

Australia, Research Fellow, Univers­ ity of Queensland T14070-l4174, Exhibits 447, 474

G.MATVES M.A.Sorbonne, Proprietress, Labonne Exclusive Catering School for the Development of Tourism T780l-7820 Exhibit 254

W.G.MAXWELL D.Sc. Queensland, D.I.C.London, Ph. D. Queensland, B.Sc. (Hons.) Queensland, Formerly Associate Professor of Geology, University of

1035

Mr

Mr

Doctor

Mr

Mr

Mr

Mr

Mr

1036

Sydney T99-244, T375-383, Tl599-1826,Tl5650-15730, Exhibits 15, 57, 60, 61, 95, 98, 144, 146-148, 150-

164, 487, 488

T.MOREHEAD Certificate of Competency - Extra Master Mariner. Assistant Secret­ ary, Road Transport Branch, Land Transport Division, Department of Shipping and Transport, Canberra T7845-7953 Exhibits 318, 333, 489, 514

A.W.NORRIE Associate of the Otago School of Mines in Mining, B.Sc. (Physics) Otago, State Mining Engineer and Chief Inspector of Mines, Depart­ ment of Mines, Queensland, Chair­ man of the Queensland Energy Resources Advisory Council T2145-

2296, T6013-6097, Exhibits 80, 93 94, 197-200, 287, 292-293, 509

G.R.ORME Ph.D. Sheffield, B.Sc. (Hons.)

Sheffield, Senior Lecturer -Geology - University of Queensland Tl500-1543 Exhibits 53, 204

R.G.PEARSON M.Sc. Queensland, B.Sc. (Zoology and Genetics) Melbourne, Fisheries Biologist, Department of Primary Industries, Queensland Tl5824-15893, Tl5941-15943 Exhibits 482, 505, 507

R.D.PIESSE LL.B., B.A., Dip.Ed. (Hons.)

Melbourne, Director of Australian Conservation Foundation Tl3310-13531 Exhibits 432, 455, 457-462

C.S.ROBERTSON M.Sc. (Geomagnetism), B.Sc. (Hons.) Sydney, Supervising Geophysicist, Petroleum Exploration Branch, Bureau of Mineral Resources, Canberra Tl3627-13681 Exhibits 417, 513

W.R.ROCHELLE B.S., (Mech.Eng.) Tennessee Project Engineer and Assistant Project Manager for Brown and Root Incorporated T2880-2981 Exhibits 215, 226, 232

D.J.ROCHFORD B.Sc.(Hons.) Sydney, Senior Principal Research Scientist,

Mr J .ROE

Doctor L.S.ST.AMANT

Mr A.J.SHEILDS

Mr E.A.SHINN

Doctor K.T.SPILLANE

Mr R.D.STANPHILL

Professor W.STEPHENSON

Mr H.W.J.STEWART

Division of Fisheries and Ocean­ ography, CSIRO, Sydney Tl984-2052 Exhibits 52, 149, 191

B.Eng. (Civil) Queensland,Senior Partner,Cullen and Roe,Consult­ ing Engineers T4114-4200 Exhibits 214, 242

Ph.D. Illinois, M.S. (Inverter­ brate Zoology,Entomology,Ecology) Louisiana State University, B.S. (Zoology and Chemistry)Louisiana State Assistant Director Louisi­ ana Wildlife and Fisheries Comm­ ission T3927-4113 Exhibits 73,230

B.Sc. Melbourne, Regional Director of the Bureau of Meteor­ ology, Brisbane T327-375, Exhibits 16, 17, 58, 66, 67, 102

B.S. (Zoology) Miami, Senior Geologist- Shell Oil Co., New Orleans Tl0107-10265 Exhibits 371-373, 375-378, 380, 381

Ph.D.Melbourne, B.Sc.Queensland Principal Research Scientist, Division of Atmospheric Physics, CSIRO, Melbourne Tl2307-12433 Exhibit 427

M.S. (Biochemistry) South West Texas State B.S. (Organic Chemis­ try) South West Texas State District Manager Oil Field

Chemicals for Enjay Chemical Company, Houston T4557-4743 Exhibits 231, 288

D.Sc. Newcastle-upon-Tyne, Ph.D. Durham, (England), B.Sc. (1st Class Hons. Zoology) Durham Professor of Zoology, University

of Queensland T2052-2144 Exhibit 192

Fellow of South Australian School of Mines B.Eng.(Mining) Adelaide Senior Petroleum Engineer, Depart­ ment of Mines, Queensland T4308-

4436, T4451-4557 Exhibits 224, 25 5' 429

1037

Doctor D.R.STODDART M.A., Ph.D. Cambridge, University

Lecturer in Geography and Fellow of the Churchill College, Cambridge T5778-5898 Exhibit 284

Doctor I.M.STRAUGHAN Ph.D. Queensland, B.Sc. (Hons.) Queensland, Assistant Professor Biology Department, University of Southern California and Research Associate with Allen Hancock Foundation T5612-5709 Exhibits

269, 281

Doctor F.H.TALBOT Ph. D. Capetown, M.Sc. Capetown,

B.Sc. Johannesburg, Director of Australian Museum, Sydney T933-1104 35, 36

Mr H.S.TAYLOR- B.Sc. (Science) London, Chief

ROGERS Petroleum Technologist, Bureau

of Mineral Resources, Canberra Tl4307-l4681 Exhibits 68, 120, 121, 312, 401, 433, 434, 446, 464,

477

Mr R.THOMAS B.Eng. (Hons. Mech. Eng.) Liver­

pool, General Manager of Beach Petroleum No Liability T2539-2879 Exhibits 205, 206, 220, 221

Professor A.R.THOMPSON D.Jr.Sc. LL.M . Toronto, LL.B. Manitoba, Professor of Law, University of British Columbia T8853-9089 Exhibits 296, 350, 395-403

Professor J.M.THOMSON D.Sc. West Australia, M.Sc., B.Sc. (lst Class Hons.) Western Austra­ lia. Professor of Zoology, Univer­ sity of Queensland T609-673 Exhibit 33

Mr D.J.TRANTER M.Sc. (Marine Biology) Queensland

B.Sc. (Zoology and Entomology) Queensland, Principal Research Scientist, Division of Fisheries and Oceanography, CSIRO, Cronulla T7496-7591 Exhibits 195, 322

Mr A.ST.J.UNDERWOOD Journalist - General Reporter,

1038

Feature writer in aviation and travel Tl3988-14005

Mr R.H.R.VINE

Mr G.W.WASHINGTON

Doctor J.P.WEBB

Mr J.A.W.WHITE

Mr M.F.WINDERS

Professor P.M.J.WOODHEAD

Mr J.T.WOODS

Mr A.B.YEATES

Sir MAURICE YONGE

C.B.E.

B.Sc. (Hons. Geology) London Geologist Class 4, Geological Branch of the Bureau of Mineral Resources, Geology and Geophysics

Canberra Tl455-l497, Tl892-l897 Exhibits 101, 112, 137, 138, 184 185

M.A. Sydney, Tourist Development Manager, Australian Tourist Commission T7627-7763, Tl0733-l0889 Exhibits 107, 324, 328,

329, 358, 391

Ph.D. St. Louis, B.Sc. Queensland Senior Lecturer in Geophysics University of Queensland T853-866 Exhibit 103

B.Sc. (Oil Tech.) Imperial College London, Associate pf Royal School of Mines, Supervis­ ing Petroleum Technologist, Petroleum Exploration Branch, Bureau of Mineral Resources,

Geology and Geophysics, Canberra T298l-3256 Exhibits 207-212, 227, 246, 446, 529

B.Eng. (Hons. Mechanical) Queens­ land, Director of Oceanics Aust. Pty. Ltd. Tl2565-l2647 Exhibit 354

B.Sc. (lst Class Hons. Zoology) Durham, Associate Professor of Marine Biology, University of Newfoundland T5245-5498 Exhibits

30, 116, 167, 262, 267, 268, 270

M.Sc., B.Sc. Queensland, Chief Government Geologist, Department of Mines, Queensland T760-853, T866-930 Exhibits 42, 110, lll

Authorised Surveyor, Surveyor General, Department of Lands, Queensland T246-29l Exhibits 8, 9, 10, 38-41

D.Sc., F.R.S. President of the. Royal Society of Edinburgh, Honorary Fellow in Zoology at the University of Edinburgh T9224-

1039

Mr W.YOUNG

1040

9280 Exhibits 342, 352

M.Sc. App., B.Sc. Queensland, Retired Director of Technical Services, Department of Industrial Development, Retired Deputy Chair­ man of Industrial Assistance Board

Queensland Tll630-ll734, Tll872-l2043 Exhibits 335, 418-422

APPENDIX 11 C 11

LIST OF FILMS, PHOTOGRAPHS AND SLIDES SHOWN TO THE COMMISSIONS DURING THE HEARING

Date shown 5.8.70

(1)

Film showing at 3:45 p.m. (T104l Exhibit 114)

"Great Barrier Reef" - Australian Commonwealth Film Unit, 1968. Marine life on the Great Barrier Reef,and some of the scientific observations of the Heron Island

Research Station. Illustrates all the characteristic fishes, molluscs and other invertebrates, and vegetation of a coral reef, and the turtles and birds that breed on the islands.

Producer, Richard Mas on; scientific advisers, Frank H. Talbot, H.R. Bustard, P.M.J. Woodhead.

(2) The "Reef at Heron Island" - Douglas Steen, 1966.

(Diver 1 s Logbook Series) Underwater photography of the varied marine life of a coral reef, showing living corals and plants, anemones, sea cucumbers and a number of species of

fish.

(3) "Marvels in Miniature" - ANFB., 1950

(Great Barrier Reef Series) Living organisms taken from the waters of the coral reefs are examined under high power microscopes revealing the perfection of design and tremendous energies of minute creatures invisible to the unaided eye. Producer and photographer, Noel Monkman.

( 4) "Life and Death on the Reef"

(By courtesy of Television Station Channel 7)

30 minutes

1041

Date shown 16.2.71 ROCHELLE, W.R. (T2880 Exhibit 226)

( 1) "Oil Sea and Steel" - produced by Brown & Inc.

Design, fabrication and erection of permanent ing and production platforms - offshore Louisiana.

(2) "Arpet" - produced by Atlantic Richfield Coy. Design, fabrication and installation of platforms -Hewett Field in North Sea and 30 11 submarine pipe­ line to shore at Bacton Coast. (3) "Earth's Last Frontier" - produced by Taylor Diving

and Salvage Coy. Repair of pipeline in Gulf of Mexico utilizing und&rwater welding habitat.

(4) The "Whittier" - produced by Taylor Diving and Salvage Coy. Method of attaching risers to pipelines by under­ water welding habitat and use of handling equipment and helium-oxygen diving gear.

23.3.71 JOHANNES, R.E. (T4200 Exhibit 243)

"Cloud over the Coral Reef" Coral pollution by sewage and deposits of sediments in a harbour in the Hawaiian Islands.

26.3.71 BEALL, J.E. (T4438) Two films showing different aspects of for

training of drilling crews.

28.4.71 CRANE, J .F. (T4984)

1042

(1) Film showing single buoy mooring with both con­ ventional buoy mooring and single buoy type. Tests of model to determine stress on mooring connections. (2) Film showing Load on Top - cleaning procedure to

ensure oil is not clinging to ship structure after discharging, but is retained on the ship and dis­ charged in port. (3) "Murex to Darina" -discharging oil from large tank­

ers to permit entry into ports. Practical to berth ship alongside another ship as if a hulk was moored to a single buoy.

Date shown

21. 9. 71

(1) ( 2)

SHINN, E.A. (Tl0158)

( 3)

1.11. 71

1.12.71

23.2.72

"New Homes for Fish" - by Burr Tettleton.

Film by Shinn taken under the world's deepest rig, namely a Shell rig in the Gulf of Mexico - 11

producing wells at the time of filming. Film by Shinn showing the setting up of his short term experiment.

CROPP, B. ( Tll 73 9)

"Great Barrier Reef" - filmed and directed by Ben Cropp and produced by NBC Reefs generally and varieties of life and habits thereon including fish, and examples of the

commensal and symbiotic relationships.

ENDEAN, R. (Tl3000/l

Film photographed by Theo Brown and showing Slashers Reef, John Brewer Reef, Lodestone Reef and Keeper Reef. Illustrative of devastation caused by starfish to reefs and corals.

CANTLEY, R. (Tl3764)

Film of 'Oceanic Grandeur'.

1043

EXHIBIT

69

79

95 (part)

146

172

WITNESS PARI'ICULARS

Professor J.H. Connell 32 slides taken after Santa Barbara and West Falmouth oil spills, petroleum industry developments Louisiana

and Gulf of Mexico

Dr W.G.H. Maxwell

Dr W.G.H. Maxwell

6 photographs showing the construction of artificial islands around oil wells Long Beach California

24 serial and under­ water photographs, Fly River - Gulf of Papua

water junction, Lagoon, K and Bramble Reefs and Anchor Cay

12 photographs of Singapore reefs

Photograph of semi­ submersible drilling rig "Ocean Digger"

195 (part) Mr D.J. Tranter 34 photographs taken

after the "Oceanic Grandeur" oil spill

218 Mr J.F. Crane

219 Mr E.M. Grant

224 (Annexure H) Mr H.W.J. Stewart

(Annexure L-R) Mr H.W.J. Stewart

11 photographs showing tanker manifolds, couplings, valves and hoses

12 photographs taken after "Oceanic Grandeur" oil spill

Photograph of two sub­ sea blowout preventer stacks

7 photographs of various controls and recorders drilling vessel "Nav­ igator"

1045

EXHIBIT

230 (part)

232

248 (part)

249 (part)

250 (part)

262 (part)

264

267

1046

WITNESS

Dr L.S. St. Amant

Mr W.R. Rochelle

Dr J.F. Grassle

Dr A.B. Cribb

Dr R.J. Endean

Professor P.M.J. Woodhead

Mr W.F. Gusey

Professor P.M.J. Woodhead

PARTICULARS

66 slides showing industry on

and off-shore activities, incidents of on-shore oil pollution and the Shell platform B fire

27 slides relating to platform construction and pipeline construc­ tion, laying and repair

45 slides relating to the West Falmouth oil spill studies, Heron Island reef and reef development at Elat on the Red Sea and Ras el

Burga on the Sinai Coast

14 slides of various islands showing vege­ tation, beach rock for­ mation, algae and coral growths

21 slides relating to crown-of-thorns star­ fish studies 32 slides in relation to fauna and flora on

various cays in the Swain Reefs complex, ocean currents and coral biology studies and destruction and regenera­

tion of Heron reefs following cyclone Dinah.

5 photographs of the Shell platform B fire, Gulf of Mexico

13 photographs of Heron Island and reef showing devastation following cyclone Dinah

EXHIBIT

268

316 (Part)

322 (part)

330

331

347

351 (part)

372/3 (part)

381

416 (part)

WITNESS

Professor P.H.J. Woodhead

Dr D.W. Connell

Mr D.J. Tranter

Miss 0. Ashworth

Miss 0. Ashworth

Professor R.E. Johannes

Mr N.M.D. Haysoru

Mr E.A. Shinn

Mr E.A. Shinn

Mr R. Cantley

PARTICULARS

18 photographs of Heron Reef showing recolonisa­ tion following damage by cyclone Dinah

14 slides relating to studies into kerosene­ like taint in mullet Photograph of oil

pollution, Elat, Gulf of Aqaba

16 photographs of islands in the Whitsunday Passage, Hardy and Keeper Reefs

24 slides of corals, Cape Bilsborough Nation­ al Park and nearby beaches and headlands

3 photographs of corals used in the experimen­ tal application of oil 28 photographs of corals

Fitzroy Reef and Peel Island, relating to the experimental application of oil

22 slides relating to the experimental appli­ cation of oil to corals, coral growth studies and corals in the

Persian Gulf

Photograph of branch of banded Acropora showing overgrowth

34 slides of islands and coastline northern part of reef province, Mag­ netic Island, Slasher

and Brewer Reefs, spiny lobsters and the crown­ of-thorns starfish

l047

EXHIBIT

432

471

47 8 (part)

494

495

496

497

498

499

503

504

1048

WITNESS PARTICVLARS

Mr R.D. Piesse 10 slides of northern

coastline, rainforest scenery and Hinchin­ brook Island

Mr R. Cantley 2 slides of 'Oceanic

Grandeur' after ering

Mr E.K. Ericson Photograph of drilling

vessel 'E.W. Thornton

Mr E.M. Grant 14 slides relating to

the experimental application of oil to corals at Wistari Reef

Mr E.M. Grant 14 slides for compari­

son with Exhibit 494 (shown about 4 months later)

Mr E.M. Grant 72 slides relating to

the experimental application of oil to corals at Wistari Reef

Professor S.H. Chuang 5 of reef­

slope corals, Singa­ pore and neighbouring islands

Professor S.H. Chuang 4 photographs of reef­ flat corals, Singa­ pore

Professor S.H. Chuang Photograph of reef­ flat corals, Salu Island

Professor S.H. Chuang Photograph of corals S.E. section of reef­ flat, Salu Island

Mr B. Goldman 23 slides relating to

surveys of coral reefs Fly Point to Evans Point, Pioneer Bay (Albany Island) Black­ wood Bay (Mt Adolphus Island) Tuesday Islet, Wednesday and East Strait Islands

EXHIBIT WITNESS

505 Mr G. French

546 Mr E.M. Grant

PARTICULARS

33 slides relating to surveys of coral reefs Pioneer Bay (Albany Is) and East Strait Island

175 slides relating to experimental application of oil to corals at

Wistari Reef

1049

APPENDIX "D"

NAMES OF PERMITTEES IN THE GBRP AND EXTENT OF AUSTRALIAN

AND OVERSEAS OWNERSHIP AS APPEARS IN EXHIBIT 509

Permit Actual Permit Holder No. of No. at 31 December 1969 Blocks

Q/lP Tenneco Aust. Inc.

and Signal (Aust.) Pet. Co. 115

Q/2P do 186

Q/3P do 97

Q/4P

Q/5P

Q/6P

Q/7P

Australian Gulf Oil Co.

do

do

do

(AOG retains (override interest) Q/8P Exoil NL and Trans­

oil NL

Q/9P Corbett Reef Ltd.

Q/lOP California Asiatic Oil Co. and Texaco Overseas Pet. Co.

Q/llP Gulf Interstate Overseas Ltd.

Q/l2P Ampol Exploration Pty. Ltd.

Q/l3P Shell Development (Aust.) Pty. Ltd. and Pacific American Oil Co.

397

400

397

356

35

252

278

126

150

79

P.T.O.

Ownership

Foreign

Foreign

Foreign

Transfer

Foreign approved 2nd September 1969

Foreign do

Foreign do

Foreign do

Australian

Foreign

Foreign

Foreign

Australian

Foreign

1051

APPENDIX "D" (continued)

Australian Ownership (Blocks)

Foreign Ownership (Blocks)

Percentage Foreign Ownership (Blocks)

1052

No. of' Blocks

224

2644

92.2%

Ownership

Australian Ownership (Permits) 2

Foreign Ownership (Permits) 11

Percentage Foreign Ownership (Permits) 84.6%

SOUTH

CORAL SEA ISLANDS

ADJACENT AREA

0

MAP OF QUEENSLAND Showing the outer Barrier. the 100 fathom line, the outer Continental Shelf line and relevant features of the Great Barrier Reef Province

0

PACIFIC

OCEAN

-TITLES-JOINT OFFSHORE STATE - COMMONWEALTH PtTROLEUM LEGISLAnON AND RELEVANT AUTHORITIES TO PROSPECT UNDER PETROLEUM ACT (1923-67)

To Date

(:FlO,. .. -,-- - - - - ThO! &ovnd.,nes sJ,own on t h1S map a!"8

!

Reproduced with the permission of the Honourable Minister for Mines and Main Roads. Crown Copyright Reserved .

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to be final m· relr>Uon lo po.sd/ons of

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