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Wednesday, 30 November 1983
Page: 3076

Dr THEOPHANOUS —On behalf of the Joint Committee of Public Accounts I present the 215th report of the Committee relating to Finance Minute on report 190; that is, petroleum royalties and excise. I seek leave of the House to make a short statement in connection with the report.

Leave granted.

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

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

The Committee recognised that the issues identified in its 190th report were complex, and involved policies and administrative procedures at both State and Federal government level. As a result, the significant delay in the finalisation of the Finance minute on this report was anticipated. The Committee has been kept informed of progress in the interim. The Committee is pleased to note the considerable effort which has been directed towards carrying out most of its recommendations. Overall, therefore, the Committee is satisfied with the timing and content of this response to its 190th report.

I will summarise the Committee's recommendations and the responses. Recommendation 1: The terms of the 1980 legislation be discussed with the States with a view to having the legislation amended prior to being proclaimed, to empower the Joint Authority established under the Petroleum (Submerged Lands) Amendment Act 1980 to function in relation to the territorial sea as well as the adjacent areas. In response the Committee was advised that the Government is reviewing the operation of the Commonwealth and State legislation covering off- shore petroleum and mining activities. The issue raised by the Committe will be a matter for consideration in the context of that review.

Recommendations 2 and 3: Discussions take place between the respective Commonwealth and State authorities and between Auditors-General to ensure that royalty collection procedures compatible with the requirements of both governments are implemented under the existing legislation and under the 1980 Commonwealth legislation when proclaimed. The Department of National Development and Energy and the Auditor-General's Office should be involved, in co-operation with the Victorian Auditor-General, in ensuring the correctness of the procedures to arrive at the royalty payments. In response, an independent firm of consultants was commissioned to undertake a review of the sampling techniques employed for obtaining compositional data for the material balance program used in the calculation of royalties and the excise payable to the Commonwealth and Victorian governments. The recommendations resulting from that review have been implemented. Also, four sets of detailed procedures for the collection and verification of royalties and excise for the Bass Strait producing fields either have been developed, or are being developed. They are producers procedures, State procedures, Australian Customs Service procedures, and Department of Resources and Energy procedures.

Recommendation 4: Arrangements be made for the Commonwealth's share of royalties to be paid immediately it is received by the State, with any adjustments being made in the following month's payment. In response, legislation has been amended to ensure the immediate payment to the Commonwealth of its share of the royalties.

Recommendation 5: Officers of the Department of National Development and Energy and the Auditor-General's Office actively participate in the final verification of royalty calculations, which should be completed as soon as possible. In response audit by the Victorian Department of Minerals and Energy of royalty payments on the basis of wellhead values is progessing in consultation with the Department of Resources and Energy.

Recommendation 6: The Department of National Development and Energy and the Department of Business and Consumer Affairs treat finalisation of the documentation of excise procedures as a matter of urgency and the Committee will expect to see substantial progress in this area in the near future. In response, the Department of Resources and Energy advised that the procedures adopted to allocate and verify production from the various Bass Strait fields for excise purposes are the same as those used in the royalty calculation.

The final recommendation in report 190 concerns the simplification of royalty procedures and refers to the United Kingdom experience where procedures have been revised so that wellhead value is no longer used as the basis for royalty payments. The Department of Resources and Energy responded to this by indicating the Government's intention to consider this issue in the context of its current review of taxation arrangements for resource projects. Consequently the Committee intends to review progress in this area in approximately 12 months time. I commend this report to honourable members.