Title Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021 [and] Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021
Database Bills Digests
Date 02-08-2021
Source Bills Digest Service
Parl No. 46
Author KENNY, Liz
FERRIS, Leah
Citation Id 8099553
Key item No
Major subject Environmental management
Government regulation
Land titles
Occupational health and safety
Offshore oil and gas
Minor subject Bills
Legislative amendments
Levies
National Offshore Petroleum Safety and Environmental Management Authority
Dept of Industry, Science, Energy and Resources
Pages 24p.
Volume no. 006 (2021-22)
System Id legislation/billsdgs/8099553


Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021 [and] Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021

ISSN 1328-8091

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BILLS DIGEST NO. 6, 2021–22 2 AUGUST 2021

Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021 [and] Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021 Liz Kenny Economic Policy Section Leah Ferris Law and Bills Digest Section

Contents

Glossary .......................................................................... 3

Purpose of the Bill ........................................................... 4

Structure of the Bill ......................................................... 4

Commencement ............................................................. 5

Background ..................................................................... 5

Regulating offshore petroleum and greenhouse gas activities ................................................................ 5

Decommissioning framework ..................................... 6

OPGGS Act provisions ............................................... 6

Previous reviews and consultation on the Decommissioning Framework ..................................... 7

Committee consideration ................................................ 8

Senate Standing Committee for Selection of Bills ...... 8 Senate Standing Committee for the Scrutiny of Bills .............................................................................. 8

Minister’s response ................................................... 9

Policy position of non-government parties/independents...................................................... 9

Position of major interest groups..................................... 9

Financial implications .................................................... 10

Statement of Compatibility with Human Rights.............. 11

Date introduced: 26 May 2021

House: House of Representatives

Portfolio: Industry, Science, Energy and Resources

Commencement: Various dates as set out in this Bills Digest. Links: The links to the Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021, the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021, and their Explanatory Memoranda can be found on the Bills’ home pages, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at August 2021.

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Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021 [and] Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021 2

Parliamentary Joint Committee on Human Rights ... 11 Key issues and provisions—Schedule 1 .......................... 11

Change in control of a titleholder ............................. 12

‘Control’ and ‘Change in control’ ............................ 12

Application and approval of change in control ....... 14 Applicant must notify NOPTA of a change in circumstance ........................................................... 16

Change in control takes effect without the approval of NOPTA .................................................. 16

New information-gathering powers for NOPTA ..... 17 Tracing and anti-avoidance ..................................... 18

Key issues and provisions—Schedule 2 .......................... 19

Key provisions ........................................................... 20

Stakeholder views ..................................................... 22

Key issues and provisions—Schedule 3 .......................... 23

Key provisions ........................................................... 23

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Glossary Abbreviation Definition

APPEA Australian Petroleum Production & Exploration Association

CCWA Conservation Council of Western Australia

DISER Department of Industry, Science, Energy and Resources

GHG Greenhouse gas

NOGA Northern Oil and Gas Australia Pty Ltd

NOPSEMA

National Offshore Petroleum Safety and Environmental Management Authority

NOPTA National Offshore Petroleum Titles Administrator

OHS Occupation Health and Safety

OPGGS Act Offshore Petroleum and Greenhouse Gas Storage Act 2006

PRRT Petroleum Resource Rent Tax

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Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021 [and] Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021 4

Purpose of the Bill The purpose of the Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021 (the Main Bill) is to amend the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (OPGGS Act) to improve Australia's decommissioning framework for offshore oil and gas projects.

The Bill proposes to do this through:

• providing for greater oversight of changes in control of titleholders (such as through a corporate merger, acquisition or liquidation), including penalties for failing to seek approval for changes in control or attempting to avoid liability

• expanding existing powers to ‘call back’ previous titleholders to decommission infrastructure and remediate the marine environment in the title area where the current or immediate former titleholder is unable to do so (known as ‘trailing liability’)

• providing for specific decision-making criteria and expanded information-gathering powers to assess the suitability of entities wishing to enter into or progress through the regime and

• minor and technical amendments to improve the operation of the OPGGS Act, including enabling electronic lodgement of applications.

The purpose of the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021 (the Regulatory Levies Bill) is to amend the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Act 2003 (Levies Act) to make consequential amendments with respect to the payment of levies following the passage of the Main Bill.

Structure of the Bill The Main Bill contains seven Schedules, which are discussed further at the ‘Key provisions and issues section’ of the Bills Digest:1

• Schedule 1 contains amendments to alter the process for the change in control of registered titleholders, including the application process, what is regarded as a ‘change in control’ and the information-gathering powers of the National Offshore Petroleum Titles Administrator (NOPTA). It also introduces anti-avoidance and tracing provisions which are designed to capture changes of control within existing corporate structures

• Schedule 2 establishes trailing liability and expands the circumstances where a previous titleholder may be ‘called back’, including the role of National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA) and the responsible Commonwealth Minister to issue remedial directions to former titleholders

• Schedule 3 expands the decision-making criteria that applies in assessing the suitability of applicants applying to operate in Australia’s offshore oil and gas regime and the types of information that can be requested by the decision-maker

• Schedule 4 allows for additional information gathering powers in connection with applications for grants, renewals and variations of conditions to titles

• Schedule 5 makes minor policy changes to allow for electronic submission of forms when titleholders need to update their information

• Schedule 6 removes references to specific Regulations and allows for future Regulations which have yet to be made to be prescribed and

1. This Bills Digest focuses on Schedules 1–3 as these contain the more significant amendments.

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Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021 [and] Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021 5

• Schedule 7 repeals obsolete Acts following the passage of the Main Bill.

The Regulatory Levies Bill contains one Schedule which makes consequential amendments to the Levies Act with respect to the payment of environment plan levies, well-activity levies and safety case levies by people subject to a remedial direction. Due to the mechanical nature of the amendments, they are not discussed in further detail in this Bills Digest.2

Commencement The provisions of the Main Bill will commence as follows:

• Sections 1 to 3 on Royal Assent

• Schedule 1 immediately after the commencement of Schedule 3

• Schedules 2, 3 and 5 on the earlier of Proclamation or six months after Royal Assent

• Schedule 6 on the earlier of Proclamation or 18 months after Royal Assent and

• Schedules 4 and 7 the day after Royal Assent.

The provisions of the Regulatory Levies Bill will commence as follows:

• Sections 1 to 3 on Royal Assent and

• Schedule 1 on the later of the day after Royal Assent or immediately after the commencement of Schedule 2 of the Main Bill. The provisions will not commence if Schedule 2 of the Main Bill does not enter into force.

Background

Regulating offshore petroleum and greenhouse gas activities The regulation of offshore petroleum and greenhouse gas (GHG) storage in Australian waters is divided between the Commonwealth Government and state and territory governments. According to the Offshore Constitutional Settlement, the states have responsibility for activities in the zone of ‘coastal waters’ (onshore and as far as three nautical miles seaward of the territorial baseline).3 The Commonwealth has responsibility for ‘offshore areas’ (those beyond three nautical miles).4

The OPGGS Act outlines the legal framework for exploration and recovery of petroleum and GHG activities in Commonwealth waters. There are a number of Regulations dealing with a range of issues such as levies, safety and the environment.5 Under this framework, the Australian Government, together with the relevant state and territory governments, administers the offshore regulatory regime through the ‘Joint Authority’ arrangements.6 The Joint Authorities are decision makers under the OPGGS Act and their powers include release of offshore petroleum exploration areas, variation of title conditions and resource management.7

2. Further information on the Regulatory Levies Bill can be found at pages 264–272 of the Explanatory Memorandum, Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021. 3. Geoscience Australia, ‘Offshore legislation’, Geoscience Australia website, n.d.; Attorney-General’s Department, ‘Offshore constitutional settlement’, Attorney-General’s Department website, n.d; Geoscience Australia, ‘Maritime boundary

definitions’, Geoscience Australia website; OPGGS Act, sections 3–6. 4. Ibid.

5. Relevant Regulations include, for example, the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Regulations 2004, the Offshore Petroleum and Greenhouse Gas Storage (Safety) Regulations 2009, and the Offshore Petroleum and Greenhouse Gas Storage (Environment) Regulations 2009.

6. Department of Industry, Science, Energy and Resources (DISER), ‘Regulating offshore oil and gas in Australian Commonwealth waters’, DISER website, last updated 12 July 2021. 7. National Offshore Petroleum Titles Administrator (NOPTA), ‘Joint authorities’, NOPTA website, n.d.

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The OPGGS Act also establishes the NOPTA and the NOPSEMA which perform regulatory functions under the legislation and Regulations.8 Under the OPGGS Act, NOPTA is responsible for titles administration and data management functions in relation to offshore petroleum and GHG activities in Commonwealth waters.9 NOPSEMA has functions relating to occupational health and safety (OHS) of offshore petroleum facilities and GHG storage activities, as well as structural integrity of facilities, wells and well-related equipment and environmental management.10 More information on the arrangements and GHG storage can be found in relevant Bills Digests.11

Decommissioning framework The requirements for decommissioning projects are predominately contained in the OPGGS Act and the related Regulations, although some requirements are located in other Commonwealth and state legislation.12 In order to clarify the application, operation and interaction between those components of the Commonwealth requirements for decommissioning, the Department of Industry, Science, Energy and Resources (the Department) released the Offshore Petroleum Decommissioning Guideline (the Guideline) in January 2018.13

As set out by the Guideline, the OPGGS Act outlines the obligation to remove disused property from the title area and what requirements must be met before the Joint Authority will consent to the surrender of a petroleum title. The Regulations detail the approvals that must be sought to decommission infrastructure.

OPGGS Act provisions Some of the key provisions in the OPGGS Act include:

• Removal, maintenance and repair of property: a titleholder must remove all equipment and other property in their title area that is neither used, nor to be used, for operations authorised by their title. This is an ongoing obligation, requiring both the removal of property at the end of production and the removal of disused infrastructure at appropriate points throughout the life of a project14

• Surrender of titles: a titleholder may apply to NOPTA for consent to surrender their title either in part or entirely, depending on the type of permit or lease. The OPGGS Act also outlines the criteria that must be met before the consent to surrender a title is granted, including removing all property brought into the surrender area, closing off any wells in the area and providing for the conservation and protection of the natural resources in the area15

• Power to issue remedial directions to current and former titleholders: NOPSEMA may issue remedial directions to current and former titleholders to do specified activities, including the closure of wells, conservation and protection of natural resources or removing property brought into the title area.16

8. NOPTA, ‘Legislation & compliance’, NOPTA website, n.d. 9. OPGGS Act, Part 6.10; NOPTA, ‘About NOPTA’, NOPTA website, n.d. 10. OPGGS Act, Part 6.9; National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA), ‘About us’, NOPSEMA website, 1 June 2021.

11. See for example: S Power, Offshore Petroleum and Greenhouse Gas Storage Amendment (Cross-boundary Greenhouse Gas Titles and Other Measures) Bill 2019 [and] Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment (Miscellaneous Measures) Bill 2019, Bills digest, 82, 2019–20, Parliamentary Library, Canberra, 2020.

12. DISER, Offshore petroleum decommissioning guideline, DISER, Canberra, 17 January 2018, pp. 14-15. 13. Ibid. 14. Ibid., pp. 6–7. 15. Ibid., p. 7. 16. Ibid., p. 8.

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Despite the release of the Guideline, some commentators noted that it was necessary for Australia to develop an advanced and comprehensive framework to decommission projects.17

Previous reviews and consultation on the Decommissioning Framework In Australia, the oil and gas industry has operated for over 50 years and is continuing to evolve, which may see larger companies moving to divest their mature assets while new, smaller companies enter the market.18 Decommissioning is a normal part of the project lifecycle and as such, there is a need to ensure the governing framework remains current, relevant and able to respond to future decommissioning challenges.19 For Australia’s offshore petroleum industry, the decommissioning liability is estimated to be around US$21 billion over the next 50 years.20

In late 2018, the then Department of Industry, Innovation and Science released a discussion paper on Decommissioning Offshore Petroleum Infrastructure in Commonwealth Waters in order to identify issues with the decommissioning framework and seek stakeholder feedback on how to improve it.21

In 2019, the Northern Oil and Gas Australia Pty Ltd (NOGA) group of companies went into voluntary administration, and then liquidation on 7 February 2020.22 One of the companies in the group, Timor Sea Oil & Gas Australia Pty Ltd, was the petroleum titleholder for the Laminaria and Corallina oil fields (situated approximately 550 km offshore of Darwin), and owned the associated Northern Endeavour floating oil production storage and offtake facility.23 Due to the potential safety and security risks for the Northern Endeavour and the Laminaria-Corallina fields, Australian Government agencies needed to intervene to ensure these risks were minimised and consider how to deliver a longer term solution.24 This also prompted an independent review into the administration and subsequent liquidation of NOGA to identify why this situation occurred and how to minimise the risk of a similar event in the future (the Walker Review).25

The Walker Review provides a comprehensive history of the events leading up to and following the liquidation of NOGA and recommendations on how to improve decommissioning practices, policies and legislation.26 In December 2020, the Department released a consultation paper on the decommissioning framework, which took into account the findings of the Walker Review and the 2018–19 consultations.27 The consultation paper presented a range of proposed legislative,

17. Holman Fenwick Willan (HFW), Developments in Australian offshore decommissioning, HFW website, March 2018. 18. DISER, Enhancing Australia’s decommissioning framework: for offshore oil and gas activities, Consultation paper, DISER, Canberra, December 2020, p. 2. 19. Department of Industry, Innovation and Science (DIIS), Decommissioning offshore petroleum infrastructure in Commonwealth

waters, Discussion paper, DIIS, Canberra, October 2018, p. 6. 20. Wood Mackenzie, Decommissioning Asia Pacific on a budget, 25 January 2018 as cited by DIIS, Decommissioning Offshore Petroleum Infrastructure in Commonwealth Waters, op. cit., p. 5. 21. DIIS, Decommissioning Offshore Petroleum Infrastructure in Commonwealth Waters, op. cit., pp. 6-7. 22. S Walker, Review of the circumstances that led to the administration of the Northern Oil and Gas Australia (NOGA) group of

companies, (Walker Review), report prepared for the Department of Industry, Science, Energy and Resources, Canberra, August 2020, p. 4. 23. Ibid. 24. K Pitt (Minister for Resources, Water and Northern Australia), The future of the Northern Endeavour, media release, 7 February 2020. 25. K Pitt (Minister for Resources, Water and Northern Australia), Update on the safety of the Northern Endeavour, media release, 6 August 2020; and Walker Review, op. cit. 26 Walker Review, op. cit. 27. DISER, Enhancing Australia’s decommissioning framework, op. cit.

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regulatory and policy changes for public comment, with the proposed amendments to the OPGGS Act released for public consultation in April 2021.28

In addition to the work to address the gaps in the decommissioning framework, in the 2021–22 Budget, the Government also announced a temporary levy on industry to pay for the decommissioning costs of the Laminaria-Corallina oil fields and associated infrastructure, with exact details to be determined following consultations with industry.29 The Department has since released a consultation paper on the design of the levy.30

Committee consideration

Senate Standing Committee for Selection of Bills The Senate Selection of Bills Committee determined that the Bills should not be referred to Committee for inquiry and report.31

Senate Standing Committee for the Scrutiny of Bills The Senate Standing Committee for the Scrutiny of Bills (Scrutiny of Bills Committee) reported on the Main Bill on 16 June 2021.32

The Scrutiny of Bills Committee raised concerns with proposed section 566ZD and proposed subsections 566ZE(1) and (3) of the OPGGS Act, at item 1 of Schedule 1 to the Main Bill, which allow NOPTA to do certain things upon the payment of a fee, with the fee to be prescribed by the Regulations. Unlike other provisions of the OPGGS Act which also prescribe the payment of a fee, these provisions do not stipulate that such a fee must not amount to taxation.33

The Scrutiny of Bills Committee noted that while there is no legal need to include a provision providing that a fee does not amount to taxation, such a provision is useful as it may warn administrators that there is some limit on the level and type of fee which may be imposed and in clarifying that the amount calculated under the Regulations will be a fee and not a tax.34

The Scrutiny of Bills Committee requested advice from the Minister for Resources, Water and Northern Australia (the Minister):

… as to whether the bill can be amended to provide at least high-level guidance regarding how the fees under proposed section 566ZD and proposed subsections 566ZE(1) and (3) will be calculated, including, at a minimum, a provision stating that the fees must not be such as to amount to taxation.35

The Scrutiny of Bills Committee had no comment on the Regulatory Levies Bill.36

28. DISER, ‘Consultation on the Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021’, DISER website, n.d. 29. Australian Government, Budget measures: budget paper no. 2: 2021–22, p. 14. 30. DISER, ‘Laminaria-Corallina oilfields decommissioning levy: consultation open’, DISER website, 24 June 2021. 31. Senate Standing Committee for the Selection of Bills, Report, 6, 2021, The Senate, Canberra, 17 June 2021. 32. Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 8, 2021, 16 June 2021, pp. 38-39. 33. Ibid. 34. Ibid., p. 39. 35. Ibid. 36. Ibid., p. 61.

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Minister’s response In his response to the Scrutiny of Bills Committee, the Minister advised that he does not consider it necessary to amend the Main Bill to provide guidance regarding how fees under proposed section 566ZD and proposed subsections 566ZE(1) and (3) will be calculated.37

In forming this conclusion, he stated:

… fees payable under proposed sections 566ZD and 566ZE will only serve to enable NOPTA – as a fully cost recovered agency – to recover the costs it will incur in relation to enabling public access to an instrument, supplying and certifying a copy or extract, or preparing and issuing an evidentiary certificate.38

He also noted that NOPTA’s cost recovery arrangements, outlined in its Cost Recovery Implementation Statement (CRIS), operate in accordance with the Australian Government Cost Recovery Guidelines and any fees prescribed in relation to proposed sections 566ZD and 566ZE would be reflected in updates to NOPTA's CRIS.39 He further noted that the application of relevant case law would limit the fees that could be charged under proposed sections 566ZD and 566ZE, and ensure that the relevant fees would not amount to a tax.40

While noting the Minister’s advice, the Scrutiny of Bills Committee stated that it ‘has generally not accepted consistency with existing legislation or the existence of non-legislative policy guidance to be a sufficient justification for not including guidance in relation to the calculation of fees within primary legislation’.41 The Scrutiny of Bills Committee also remained concerned about the inconsistent approach with respect to fee-making powers in both the Main Bill and the OPGGS Act.42

The Scrutiny of Bills Committee requested that an addendum to the Explanatory Memorandum containing the key information provided by the Minister be tabled in the Parliament as soon as practicable and drew the Senate’s attention to these provisions, to determine whether they have been drafted appropriately.43

Policy position of non-government parties/independents At the time of writing, non-government parties and independents do not appear to have commented on these Bills.

Position of major interest groups The Department consulted stakeholders about a draft form of the legislation in April 2021. The Bill as introduced largely reflects the draft Bill, other than Schedule 3, which contains more substantial changes. Five organisations provided publicly available submissions in response to the draft, in which they raised several concerns with the proposed legislation. Those general concerns are

37. The Minister responded to the Scrutiny of Bills Committee’s comments in a letter dated 24 June 2021 which is available on the committee's website: see correspondence relating to Scrutiny Digest 10 of 2021. Part of the letter has also been included in Scrutiny Digest 10 of 2021: Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 10, 2021, The Senate, 13 July 2021, pp. 47-51.

38. Senate Standing Committee for the Scrutiny of Bills, Scrutiny digest, 10, 2021, op. cit., p. 50. 39. Ibid. 40. Ibid., p. 51. 41. Ibid. 42. Ibid., pp. 51–52. 43. Ibid., p. 52.

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Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021 [and] Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021 10

summarised here, with the specific comments on the Main Bill addressed below under the appropriate Schedule headings.

The Australian Petroleum Production & Exploration Association (APPEA) raised concerns around the reliance on ‘subsidiary legislation’ or other relevant documents or guidelines that are yet to be drafted and determined.44 Shell Australia echoed similar concerns in its submission and sought assurance that these materials would not be subject to ‘open discretion’ by the Regulator.45 The Conservation Council of Western Australia (CCWA) flagged broader concerns with the proposed amendments arguing:

… the amendments do not materially improve the capacity of the offshore petroleum regulatory framework to ensure that operators decommission oil and gas facilities or provide any net benefit to the environmental outcomes under this framework.46

A number of stakeholders commented that the proposed legislation does not cover the tax treatment of decommissioning liability and how this applies when a former titleholder needs to fulfill the decommissioning obligations of the current titleholder.47 Under the current Petroleum Resource Rent Tax (PRRT) arrangements, ‘closing down expenditure’ is a recognised category of deductions and provides a 40 per cent tax credit if the project has previously paid PRRT.48

However, as noted by Shell Australia, in the instance where a parent or related entity is needed to meet the decommissioning liability for a project:

… the related party may not have Australian income or PRRT project to deduct expenditure against, making the financial burden significantly higher. If these tax consequences are not adequately considered and clarified, there is a real risk of inconsistency of financial outcomes depending on the tax status of the called back entity. Tax outcomes should be consistent with those that would have arisen had the ‘call back’ not been required.49

APPEA agreed in its submission that the tax implications of financial assurances, remedial directions, and trailing liability need to be considered further and require greater consultation with industry.50

Financial implications The Explanatory Memorandum states there is no financial impact on the Commonwealth associated with either of the Bills.51 The amendments to the Regulatory Levies Bill are designed to ensure that NOPSEMA is fully-cost recovered for its regulatory operations.52 Regarding the cost, the Regulatory Impact Statement notes:

44. Australian Petroleum Production & Exploration Association (APPEA), Submission to the Consultation on the Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021, 23 April 2021, p. 3. 45. Shell Australia, Submission to the Consultation on the Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021, April 2021, p. 1. 46. Conservation Council of Western Australia (CCWA), Submission to the Consultation on the Offshore Petroleum and

Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021, 23 April 2021, p. 1. 47. APPEA, Submission, op. cit., p. 3; Shell Australia, Submission, p. 3. 48. Australian Government, Petroleum Resource Rent Tax Review: final report, Canberra, April 2017, p. 86; Australian Taxation

Office (ATO), ‘PRRT deductible expenditure’, ATO website. 49. Shell Australia, Submission, op. cit., p. 4. 50. APPEA, Submission, op. cit., p. 12. 51. Explanatory Memorandum, op. cit., pp. 2, 265. 52. Ibid., p. 265.

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The cost of the proposed regulatory changes… are minimal in comparison to the risk of potential decommissioning liabilities of offshore oil and gas assets and infrastructure, where titleholders are unable to mee their obligations.53

The proposed levy for decommissioning the Laminaria-Corallina oilfields (announced in the 2021– 22 Budget) is currently expected to be a $0.48 charge per barrel of oil equivalent.54 While there is no current indication for how much will be raised, Credit Suisse has estimated that the total cost to industry could be up to A$1 billion and could take two to three years to recoup.55

Statement of Compatibility with Human Rights As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the compatibility of the Bills with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act.

The Government considers that the Main Bill is compatible because to the extent to which it may limit human rights, those limitations are reasonable, necessary and proportionate.56 The Government considers that the Regulatory Levies Bill is compatible as it does not raise any human rights issues.57

Parliamentary Joint Committee on Human Rights The Parliamentary Joint Committee on Human Rights had no comment on the Bills.58

Key issues and provisions—Schedule 1 Currently Chapters 4 and 5 of the OPGGS Act require NOPTA59 to maintain:

• for each offshore area, a Register of petroleum titles and petroleum special prospecting authorities that relate to that offshore area (section 469 of the OPGGS Act) and

• a Register of GHG titles and GHG search authorities (section 521 of the OPGGS Act).

A transfer of, or dealing in,60 a GHG title or a petroleum title must be approved by NOPTA and entered in the Register.61 Where a GHG title or petroleum title ceases to be in force, is revoked, or expires, or the company who is the registered holder of the title (the titleholder) changes its name, this must also be recorded in the Register.62

53. Regulatory Impact Statement, Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021, p. 20. 54. DISER, Laminaria-Corallina Oilfields decommissioning levy, Discussion paper, DISER, Canberra, December 2020, p. 1. 55. A Macdonald-Smith, ‘Oil industry fires up over $367m annual remediation levy’, Australian Financial Review, 30 June 2021,

p. 17.

56. The Statement of Compatibility with Human Rights for the two Bills can be found at pages 4 and 266 of the Explanatory Memorandum. 57. Ibid. 58. Parliamentary Joint Committee on Human Rights, Human rights scrutiny report, 7, 2021, 16 June 2021, p. 75. 59. References in the Bills and OPGGS Act to ‘Titles Administrator’ are a reference to NOPTA—see section 7 of the OPGGS Act. 60. Offshore Petroleum and Greenhouse Gas Storage Act 2006 (OPGGS Act), sections 486 and 537 (dealings relating to existing

titles).

61. OPGGS Act, sections 472 and 524 (approval and registration of transfers of titles) and sections 487 and 538 (approval and registration of dealings). 62. OPGGS Act, sections 471 and 523 (cessation, revocation, or expiry of title) and sections 485 and 536 (change of name).

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In seeking approval for a transfer or a dealing, the applicant must provide financial and technical information to NOPTA, which is able to exercise information gathering powers to obtain further documentation from the applicant.63

The Explanatory Memorandum notes:

Government oversight of transfers of titles is crucial to ensuring that those who wish to acquire rights to explore for or exploit resources in offshore areas are suitable to do so. This includes being technically and financially capable to both carry out petroleum or GHG activities in the title area or areas and comply with legislative requirements, including decommissioning.64

However, the OPGGS Act does not currently require any Government assessment when the ownership or control of the titleholder changes. This is because a change in control of a titleholder involves a transfer of the interests in the titleholder (that is, the shares in the company that is the titleholder), not the title held by the titleholder.65

As with the NOGA acquisition, ‘this generally occurs via parent company acquisitions of the shares in titleholders (who tend to be subsidiaries within corporate groups)’.66 While the NOGA agreement to acquire the Laminaria-Corallina oilfields was submitted to NOPTA as a dealing for approval and registration, the Walker Review found that because the agreement did not introduce a new titleholder NOPTA was significantly restricted as to the actions it could take in relation to the dealing under the terms of the OPGGS Act.67

The Regulatory Impact Statement explains that while the acquisition of shares in a titleholder effectively changes the company structure, it is not captured under the OPGGS Act as a ‘transfer’ of a title or a ‘dealing’ because no interests in the title itself are transferred, created or assigned.68

Change in control of a titleholder Item 1 of Schedule 1 to the Main Bill inserts proposed Chapter 5A – Change in control of a registered holder of a title into the OPGGS Act. Proposed Chapter 5A is modelled on Chapters 4 and 5 of the OPGGS Act and requires NOPTA to approve a change in control of a titleholder, including where a person (which includes a body corporate) comes to control, or ceases to control, a registered titleholder.69

‘Control’ and ‘Change in control’ The key provision in Chapter 5A is proposed section 566B which sets out the meaning of ‘control’ and ‘change in control’ of a titleholder.

A person controls the titleholder if they, either solely or jointly:

• hold the power to exercise, or control the exercise of, 20 per cent or more of the titleholder's voting rights or

63. OPGGS Act, sections 474, 489, 526 and 540 (documents to accompany application). See Parts 4.9 and 5.9 for the information-gathering powers of NOPTA with respect to Chapters 4 and 5 of the OPGGS Act. 64. Explanatory Memorandum, op. cit., p. 13. 65. Ibid. 66. Regulatory Impact Statement, op. cit., p. 5. 67. Walker Review, op. cit., pp. 33-36. 68. Regulatory Impact Statement, op. cit., p. 5. 69. Proposed section 566A of the OPGGS Act defines ‘title’ to mean: a petroleum exploration permit; a petroleum retention

lease; a petroleum production licence; an infrastructure licence; a pipeline licence; a GHG assessment permit; a GHG holding lease; and a GHG injection licence.

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• hold, or hold an interest in, 20 per cent or more of the issued securities in the titleholder.70

The Main Bill does not define the terms ‘voting rights’ or ‘issues securities’. According to the Explanatory Memorandum ‘the ordinary meaning of these terms apply’, citing the use of the term ‘voting power’ in section 610 of the Corporations Act 2001 and section 22 of the Foreign Acquisitions and Takeovers Act 1975 (FATA) and the definition of ‘control’ of voting power in section 23 of FATA.71 ‘Control’ in the context of the Main Bill is intended to capture situations where a person may have actual control of a titleholder (by being able to cast votes at a general meeting) or where a person has financial control of a titleholder through the owning of shares in that company.72

A ‘change in control’ of a titleholder occurs where a person/s currently controls the titleholder (through having met the 20 per cent threshold with respect to voting rights or issued shares in the titleholder) and either:

• that person/s reduces their control in the titleholder to less than 20 per cent or

• another person/s acquires an interest of 20 per cent or more in the titleholder.73

The ‘change in control’ can occur over a period, or in one transaction, with the trigger being the acquisition or loss of the 20 per cent threshold interest in the titleholder.

The Explanatory Memorandum notes that the rationale for referring to 20 per cent when defining the level of ‘control’ over a titleholder is that ‘this percentage is regarded in Australia to be a suitably arbitrary level falling short of the likelihood of actual control’ or ‘captures a level of control of a company just before de facto or effective control occurs’.74

Proposed subsection 566B(3) provides that the Regulations may prescribe a different percentage than 20 per cent. The Scrutiny of Bills Committee has generally drawn attention to provisions which allow for subordinate legislation to amend an Act of Parliament (known as ‘Henry VIII’ clauses), noting that ‘such clauses impact on the level of parliamentary scrutiny and may subvert the appropriate relationship between the Parliament and the Executive’.75 APPEA also raised concerns with the ability to change the threshold via Regulations, arguing it is ‘inappropriate and leads to uncertainty’.76

The Government has argued that it is necessary to allow for the OPGGS Act to be amended via the Regulations to provide sufficient flexibility and facilitate such amendments being made in a timely fashion, while noting that ‘the power will be exercised rarely and sparingly’.77 The Government has also stated that industry will be notified of any change to the threshold before it commences in order to ‘reduce any potential increase in legislative complexity in having to understand and comply with a modified control threshold that has been prescribed in the regulations’.78

70. Proposed subsection 566B(1). 71. Explanatory Memorandum, op. cit., p. 16. 72. Ibid.

73. Proposed subsection 566B(4). 74. Explanatory Memorandum, op. cit., p. 17. 75. Senate Standing Committee for the Scrutiny of Bills, Submission to the Senate Standing Committee for the Scrutiny of Delegated Legislation, Inquiry into the Exemption of Delegated Legislation from Parliamentary Oversight, [Submission no. 4],

18 June 2020, p. 4. 76. APPEA, Submission, op. cit., p. 13. 77. Explanatory Memorandum, op. cit., p. 17. 78. Ibid.

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A number of stakeholders raised concerns with this 20 per cent threshold, arguing that the threshold for control includes those in the corporate chain and may mean that changes in control in levels of corporate structure above the registered titleholder may be subject to NOPTA oversight.79 As summarised by the Energy and Resources Law Association Limited (AMPLA):

… by imposing such a low threshold for the definition of ‘control’, and not referring at all to the percentage interest held in the petroleum title by the relevant titleholder affected by the change in control, the Bill will create an additional Government approval requirement that will potentially complicate many corporate re-organisations and investments.80

Submitters argued that this may lead to unnecessary use of the regulator’s resources on matters unrelated to the titleholder’s financial and technical capability.81 Alternative approaches have been offered, with APPEA suggesting the ‘change in control’ tests in the Corporations Act as a possible alternative.82

Application and approval of change in control Within new Chapter 5A of the OPGGS Act, proposed Part 5A.2 sets out the process for NOPTA to approve a change in control of a titleholder.

Proposed section 566C requires a person who proposes to begin to control, or cease to control, a titleholder (the applicant) to submit an application to NOPTA for approval. The application must be made in the approved manner and approved form and be accompanied by any information or documents specified in that form. The Main Bill does not contain any detail as to what information or documents a person will need to provide in order to ‘enable [NOPTA] to appropriately tailor the information requirements for each type of application’.83

The Explanatory Memorandum notes:

Practically, the approved form will only require information, and any accompanying information or documents, relevant for a decision under subsection 566D(2) (that is, a decision whether or not to approve a change in control of a titleholder). The accompanying information or documents required by the form might include, for example, an original instrument or proposed instrument effecting the change in control, a copy of that instrument or proposed instrument, or information or documents with respect to the matters described in subsection 566D(4), including the technical advice and financial resources that will be available to the titleholder after the change in control takes effect (see paragraph 566D(5)(a)).84

An applicant will also be required to pay an application fee. Proposed section 566M provides that the amount of the application fee will be prescribed by the Regulations but cannot amount to taxation (it must be set at a level which reflects the actual costs incurred by the Title Administrator in processing the application).

Proposed section 566D requires NOPTA to decide whether to approve, or refuse to approve, the application for the change in control of a titleholder. In considering whether to approve a change

79. AMPLA, Submission to the Consultation on the Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021, 23 April 2021, p. 2. 80. Ibid. 81. BHP, Submission, op. cit., p. 2. 82. APPEA, Submission, op. cit., p. 7. 83. Explanatory Memorandum, op. cit., p. 19. 84. Ibid., p. 20.

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of control application, NOPTA may consult with the Cross-boundary Authority,85 the Joint Authority, NOPSEMA and the responsible Commonwealth Minister (currently the Minister for Resources, Water and Northern Australia).86 If NOPTA chooses to consult with any of the above, it may have regard to any issues raised when making its decision to refuse or approve a change in control.87

NOPTA must have regard to:

• whether, after the proposed change of control took effect, the titleholder would have sufficient technical advice and financial resources to carry out the relevant operations and works and discharge its obligations under the OPGGS Act or a legislative instrument made under the OPGGS Act

• matters specified in proposed section 695YB (see below section on amendments in Schedule 3 of the Main Bill) and

• any other matters prescribed by the Regulations.

NOPTA must notify the applicant in writing as to the outcome of its decision,88 and if the application was approved NOPTA must enter the relevant information relating to the change in control in the relevant Register.89

Stakeholders are concerned with the lack of timeframes for making this decision and argued that there should be a statutory time limit imposed on NOPTA.90 Both APPEA and Shell recommended that the Government consider similar timeframes to those imposed on decision makers under the Joint Authority Operating Protocols,91 or the statutory time limit imposed on the Foreign Investment Review Board (under the FATA).92 Furthermore, stakeholders consider that the proposed process lacks specific criteria and may allow ‘unlimited discretion’ for decision-making, which creates uncertainty for transactions.93 According to APPEA:

The lack of specific criteria for decision-making by the regulator in approving and revoking ‘change in control’ as well as wide discretion through non-specific criteria for decision-making in relation to direct interests in titles will result in significant uncertainty for commercial transactions. In addition there is no clarity or control around the information or documents that will be required for applications, with current drafting only referencing an application to be in an approved form and to be accompanied by information or documents “required by the form”. This will create significant delays in assessment and

85. Subsection 76A(1) of the OPGGS Act provides for a Cross-boundary Authority for each offshore area of a State and for the Principal Northern Territory offshore area. The Cross‑boundary Authority for each offshore area of a State is constituted by the responsible State and Commonwealth Minister: subsection 76A(2) of the OPGGS Act. The Cross-boundary Authority for the Principal Northern Territory offshore area is constituted by the responsible Northern Territory Minister and Commonwealth Minister: subsection 76A(4) of the OPGGS Act. The main functions of a Cross-boundary Authority include the grant of cross-boundary greenhouse gas titles: for further information, see S Power, Offshore Petroleum and Greenhouse Gas Storage Amendment (Cross-boundary Greenhouse Gas Titles and Other Measures) Bill 2019 [and] Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment (Miscellaneous Measures) Bill 2019, op. cit., pp. 9-11.

86. Proposed subsection 566D(3). 87. Proposed paragraph 566D(4)(b)(i). 88. Proposed section 566E. 89. Proposed section 566L. A reference to ‘Register’ in proposed Chapter 5A refers to both the Register kept under section 469 of

the OPGGS Act for petroleum licences, permits and leases and the Register kept under section 521 for GHG licences, permits and leases. 90. APPEA, Submission, op. cit., p. 8; Shell Australia, Submission, op. cit., p. 2. 91. NOPTA, Operating protocols for offshore petroleum Joint Authorities and supporting institutions, NOPTA website, July 2015, pp. 4–6. 92. APPEA, Submission, op. cit., p. 8; Shell Australia, Submission, op. cit., p. 2. 93. BHP, Submission, op. cit., p. 2.

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make review by the regulator subject to wide interpretation leading to uncertainty and the adverse pricing of risk and investment.94

Applicant must notify NOPTA of a change in circumstance Proposed section 566H of the OPGGS Act requires the applicant to notify NOPTA of any change in circumstance that would affect the matters to which NOPTA must have regard under the legislation as soon as practicable after the change occurs. This requirement applies in the period before NOPTA has made its decision, and the period from when NOPTA notifies the applicant in writing that their application has been approved to the later of: the point at which the change in control takes effect, or is revoked, or nine months from the day of notification (the approval period).95 Failure to notify may result in a title being cancelled. NOPTA can also revoke an approval of a change in control during the approval period following a change in circumstances where it considers it appropriate to do so.96

In their submissions on the exposure draft of the Main Bill, stakeholders raised concerns that the approval period had been limited to six months.97 They argued that the proposed timeframe was too short, particularly for more complex transactions, and thus created uncertainty for the parties involved.98

While proposed section 566A extends the approval period to nine months, this may not be sufficient to address these concerns. For example, Shell Australia suggested either a 12 month period or providing NOPTA the ability to extend the life of the approval.99 As cited by the Walker Review, according to NOPTA, financial assessments for two recent transfers for mid to late life assets took around 8–10 months to complete.100

Proposed section 566K requires an applicant to notify NOPTA where a change in control takes effect during the approval period. For example, where a titleholder has approved the purchase of shares by an applicant and the transfer of shares has been completed. Proposed sections 566H and 566K are both civil penalty provisions, with maximum civil penalties of 480 penalty units ($106,560) for an individual and 2,400 penalty units ($532,800) for a body corporate.101

Change in control takes effect without the approval of NOPTA Proposed subsection 566N(2) provides that a person commits a criminal offence if they begin to control the registered title, or cease to control the registered title, without the approval of NOPTA, or where the change in control takes effect following the conclusion of the approval period. In

94. APPEA, Submission, op. cit., p. 8. 95. ‘Approval period’ is defined at proposed section 566A. 96. Proposed section 566J. 97. BHP, Submission to the Consultation on the Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles

Administration and Other Measures) Bill 2021, 23 April 2021, p. 2; APPEA, Submission, op. cit., p. 7; Shell Australia, Submission, op. cit., p. 2. 98. Ibid.

99. Shell Australia, Submission, op. cit., p. 2. 100. Walker Review, op. cit., p. 35. 101. Crimes Act 1914, section 4AA and the Notice of Indexation of the Penalty Unit Amount made under that section set the current value of a penalty unit at $222. Section 611B of the OPGGS Act provides that civil penalty provisions under that Act

may be enforced under Part 4 of the Regulatory Powers (Standard Provisions) Act 2014 (Regulatory Powers Act). Subsection 82(5) of the Regulatory Powers Act provides that the pecuniary penalty imposed on a body corporate for a breach of a civil penalty provision must not be more than five times the penalty specified in the provision. Proposed subsection 566K(2) is also a continuing civil penalty provision under section 93 of the Regulatory Powers Act, which allows a penalty to be imposed for each day that the contravention continues (in this case, each day from when the person was required to notify NOPTA that the change in control had taken effect, to the day that they do so). The maximum penalty that may be imposed for each of these days is 10 per cent of the maximum penalty (that is 48 penalty units ($10,656)).

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determining whether a person has committed the offence, a court would consider whether the person intended to control, or cease to control the titleholder, and whether they were reckless as to the change in control not having been approved by NOPTA.102

If an individual commits an offence under proposed subsection 566N(2) they are liable for a maximum criminal penalty of imprisonment for five years or 1,200 penalty units (a fine of $266,400), or both. A body corporate will be subject to a maximum criminal penalty of a fine of $1,332,000.103 The person may also be liable for a maximum civil penalty of 2,400 penalty units (a fine of $532,800 for an individual or $2,664,000 for a body corporate). Failure to have the change in control approved also allows NOPTA to cancel the title. Proposed subsection 566N(4) provides that the civil penalty provision does not apply where a person did not know, or could not have reasonably be expected to have known, that they had begun to control, or cease to control, the registered title. A person who seeks to rely on this exception will bear an evidential burden.104

Proposed section 566Q also requires a titleholder to notify NOPTA within 30 days of a change in control where they know, or ought to have reasonably known, that the change in control has taken effect.105

New information-gathering powers for NOPTA Proposed Part 5A.4 of the OPGGS Act introduces new information gathering powers for NOPTA to allow for greater scrutiny when determining whether to approve a change in control.

Within Part 5A.4, proposed section 566R allows NOPTA to require a person to give information, produce documents, or to appear before NOPTA to either give evidence or produce documents.

In issuing a notice to a person under proposed section 566R, NOPTA must believe on reasonable grounds that a person has information or documents, or is capable of giving evidence, with respect to one of the following circumstances:

• NOPTA believes on reasonable grounds that there has been, or there will be, a change in control of a titleholder

• an application has been made to NOPTA for approval of a change in control of a titleholder

• the approval period for the change in control of the titleholder has not ended and NOPTA believes on reasonable grounds that there has been, or will be, a change in circumstances with respect to a change in control that has been approved by NOPTA.

If required to give information or evidence, a person cannot be excused on the grounds of self-incrimination, however the information, evidence or document provided, and any information obtained as a direct or indirect result of that information, evidence or document is not admissible in any other criminal proceedings, except for where the person is being prosecuted for having provided false or misleading information, documents, or evidence under new Part 5A.4 of the

102. Section 5.6 of the Criminal Code Act 1995 specifies that if the law creating an offence does not specify a fault element for a physical element consisting only of conduct, the fault element is ‘intention’ (subsection 5.6(1)). Where the physical element consists of a circumstance or result, the fault element is ‘recklessness’ (subsection 5.6(2)). See also sections 5.2 and 5.4 of the Criminal Code for the meaning of intention and recklessness.

103. Subsection 4B(3) of the Crimes Act 1914 provides that a body corporate may be subject to a pecuniary penalty of up to five times the maximum penalty that could be imposed by the court on a natural person convicted of the same offence. 104. Sections 4 and 96 of the Regulatory Powers Act. 105. Proposed section 566Q is a civil penalty provision, with a maximum civil penalty of 480 penalty units ($106,560) for an

individual or 2,400 penalty units ($532,800) for a body corporate.

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OPGGS Act or equivalent provisions of the Criminal Code Act 1995.106 In summary, a use and derivative use immunity is provided.107

Tracing and anti-avoidance Proposed Part 5A.5 introduces anti-avoidance and tracing provisions which are ‘designed to catch changes of control ‘up the chain’ of ownership’.108

Proposed section 566Z establishes a tracing regime, which allows for a change in control of a titleholder to be traced to a change in control of the companies, trusts or partnerships which control the titleholder.109

Law firm Allens has explained how this provision is intended to operate:

If a person (individually or jointly) holds the power to exercise, or controls the exercise, of 20 per cent of the voting rights in a corporation or partnership (called the higher party), and that corporation or partnership in turn holds the power to exercise, or controls the exercise, of 20 per cent of the voting rights in a different corporation or partnership (called the lower party), then the first person is taken to hold the power to exercise, or control the exercise, of the higher party's voting rights in the lower party.

The same regime applies for a person who, individually or jointly, holds 20 per cent or more of the issued securities in a corporation or holds 20 per cent or more of the interests in a trust or partnership (including beneficial interests and interests in a unit trust).110

The effect of proposed section 566Z is that it widens the scope of who is required to make an application to NOPTA with respect to change of control, as well as subjecting them to the relevant penalty provisions in Part 5A.3. As with proposed subsection 566B(3), the Regulations may prescribe a different percentage than 20 per cent.

Proposed section 566ZA provides that a person commits a criminal offence if they enter into, or carry out, a scheme for the sole or dominant purpose of avoiding the application of proposed Part 5A.3 relating to change of control.

The definition of scheme is broad and means:

• any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings and

• any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise.111

The maximum criminal penalty for a contravention of the anti-avoidance provision is 1,200 penalty units ($266,400) for an individual and 6,000 penalty units ($1,332,000) for a body corporate. The maximum civil penalty is 2,400 penalty units ($532,800) for an individual and 12,000 penalty units ($2,664,000) for a body corporate.112

106. See proposed sections 566W, 566X and 566Y. 107. For more information see Attorney-General’s Department, A guide to framing Commonwealth offences, infringement notices and enforcement powers, Canberra, September 2011, pp. 97–99. 108. A Beresford and I Bogdanich, ‘What does the new Decommissioning Bill mean for you?’, Allens website, 12 April 2021. 109. Explanatory Memorandum, op. cit., p. 38. 110. Beresford and Bogdanich, ‘What does the new Decommissioning Bill mean for you?’, op. cit. 111. Proposed subsection 566ZA(4). 112. Proposed subsections 566ZA(2) and (3).

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The Explanatory Memorandum notes:

The purpose of these sanctions is to deter perverse behaviours in relation to avoiding the application of the penalty provisions in Part 5A.3 of Chapter 5A and thereby ensure (to the extent possible) that transactions proposing to effect a change in control of a titleholder are subject to government oversight.113

Similar to the ‘change in control’ threshold, stakeholder concerns were raised with the establishment of a tracing regime that may require NOPTA oversight for corporate changes that would have little or no impact on the titleholder.114 APPEA also flagged that these provisions may be viewed as a disincentive by infrastructure or private equity funds and lead to a reduction in investment.115

Key issues and provisions—Schedule 2 As discussed above, the OPGGS Act currently sets out a framework for the decommissioning of offshore oil and gas projects. For example, section 572 of the OPGGS Act requires titleholders to maintain property in good condition and repair, and to remove all property that is neither being used, nor to be used, in connection with operations under the title. The Explanatory Memorandum explains the rationale for this framework:

A central policy tenet of the decommissioning obligations under the OPGGS Act is the expectation that restoration of the environment and decommissioning is the responsibility of the current titleholder, and that all decommissioning activities, such as removal of infrastructure, plugging or closing off of wells, and remediating the seabed and subsoil in the title area, should be undertaken by the current titleholder. This also ensures that all decommissioning activities are carried out in accordance with the OPGGS Act and the regulations, including ensuring risks to the environment, safety and well integrity are effectively managed.116

Under existing Part 6.4 of the OPGGS Act, both NOPSEMA and the responsible Commonwealth Minister (the Minister)117 have the power to issue remedial directions to current and former titleholders with respect to the removal of property; the plugging or closing off of wells; the conservation and the protection of natural resources; and the making good of damage to the seabed or subsoil.

While sections 587, 587A, 594A and 595 of the OPGGS Act allow NOPSEMA and the Minister to issue remedial directions to former titleholders, these sections only apply to situations where the title was revoked, surrendered, cancelled, terminated or has expired. They do not cover situations where the titleholder has transferred control of the title to another entity (for example, the transfer of the Laminaria-Corallina oilfields to NOGA). As noted by the Walker Review, the regulatory controls did not anticipate a titleholder liquidation.118 To address this situation, the Walker Review recommended that the Decommissioning Framework Review consider amending the OPGGS Act to allow for ‘trailing liability’, where a previous titleholder can be called upon to undertake remediation and decommissioning activities.119

113. Explanatory Memorandum, op. cit., p. 41. 114. AMPLA, Submission, op. cit., p. 2. 115. APPEA, Submission, op. cit., p. 14. 116. Explanatory Memorandum, op. cit., p. 67. 117. The responsible Commonwealth Minister is currently the Minister for Resources, Water and Northern Australia. 118. Walker Review, op. cit., p. 7. 119. Ibid., p. 41.

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Key provisions Schedule 2 of the Main Bill amends the OPGGS Act to allow NOPSEMA or the Minister to ‘call back’ former titleholders for the decommissioning of offshore assets and field remediation, regardless of how many times the title has changed hands.

Specifically, Schedule 2 amends the current provisions of the OPGGS Act relating to the issuing of remedial notices to expand the category of persons a notice can be issued to.120

Under the proposed amendments, a remediation notice can be issued to:

• the current registered holder of the permit, lease or licence

• any former registered holder of the permit, lease or licence

• a related body corporate of the current or former registered holder of the permit, lease or licence and

• any entity in respect of which the responsible Minister or their delegate has issued a determination,121 having regard to whether:

– the entity was either capable of significantly benefiting (or has significantly benefitted) financially from the operations – the entity was in a position to influence compliance with the OPGGS Act and – the entity acted jointly with the titleholder or former titleholder.122 These amendments allow for a broad range of entities to be called upon to undertake remediation and decommissioning activities, including where a previous titleholder has sought and received NOPTA’s approval to sell its interest in a title and the title has been transferred to another titleholder. Schedule 2 of the Main Bill also extends the issuing of notices to a related body corporate or a former joint venture party of a current or former titleholder, as well as majority shareholders in the company.

While the term ‘significant financial benefit’ is not defined in the legislation, the Explanatory Memorandum states:

What is considered to be a ‘significant’ financial benefit is considered in the context of offshore petroleum operations, such as the large profits that may be made, as well as the costs expended to undertake operations. For example, [the Bill] does not capture, and is not intended to capture, persons such as employees, contractors or suppliers who are paid market value for work undertaken, or goods or services provided. As another example, it does not capture banks entering into a lending agreement with a company on arm’s length commercial terms. It may, however, capture entities such as major shareholders if those entities have received a sizeable financial benefit from their shareholding, having regard to the net profit from operations.123

The proposed amendments also do not specify the order in which a remedial direction will be issued to former titleholders or related persons, though the Government has stated that ‘trailing liability is intended to be a measure of last resort where all other regulatory options have been

120. The relevant provisions are sections 586, 586A, 587, 587A, 591B, 592, 594A and 595 of the OPGGS Act. 121. This power may be delegated to the CEO of NOPSEMA under section 778 of the OPGGS Act. In performing functions or exercising powers under a delegation, the CEO must comply with any directions given by the Minister. 122. Proposed subsection 586(2A) inserted by item 13; proposed subsection 586A(2A) inserted by item 16; proposed subsection

587(2A) inserted by item 18; proposed subsection 587A(2A) inserted by item 22; proposed subsection 591B(2A) inserted by item 29; proposed subsection 592(2A) inserted by item 32; proposed subsection 594A(2A) inserted by item 34; and proposed subsection 595(2A) inserted by item 38 in Schedule 2 to the Main Bill. 123. Ibid., p. 69.

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exhausted’.124 Given the broad range of persons who a direction can be issued to, this creates a somewhat confusing situation.

The Explanatory Memorandum attempts to clarify this situation:

It is intended that this is generally likely to be in reverse chronological order (that is, back from the current or immediate former titleholder). The Titles Register maintained by the Titles Administrator will be used to determine the chronological order. However, this is not specified in the Act as the appropriate person to whom a direction is to be issued will need to be assessed on a case-by-case basis and reflect the nature of the activities required. For example, if a former titleholder that is further back in the order drilled a well that subsequently begins to leak remnants of petroleum or drilling muds into the marine environment, it may be preferable to call back that former titleholder, rather than a titleholder that has held the title more recently, as that former titleholder would have particular knowledge and documentation relating to the well.

It is the Government’s expectation that if a direction is given to the titleholder which is a joint venture (and the parties are individually named), it is the responsibility of the parties to determine how they will individually and collectively comply with the direction, and how reimbursement will be sought as part of their own commercial arrangements. The direction will set the expectation of compliance, not the manner in which the parties discharge their respective responsibilities. Similar to other duties and obligations imposed throughout the OPGGS Act, the titleholder group is responsible for working together to meet legislative requirements.125

Item 46 in Schedule 2 to the Main Bill inserts application and transitional provisions so that a remedial direction may only be given to a former titleholder if the former titleholder ceased to hold the title, in whole or in part, on or after 1 January 2021. This means that the amendments in Schedule 2 with respect to the expanded category of persons apply retrospectively, though a direction can only be issued following commencement of the provisions.

If an entity is ordered to remediate or decommission a site and does not comply, the Government may undertake the activity and recover costs.126 This amount is a debt due to the Government and is recoverable in the Federal Court, Federal Circuit Court and any state court with jurisdiction.127 Section 587B also makes it an offence to contravene a remedial direction in relation to a petroleum title, with criminal and civil penalties applying.128

Item 43 in Schedule 2 of the Main Bill inserts proposed sections 598A and 598B into the OPGGS Act, which applies certain provisions in the OPGGS Act to persons subject to a remedial direction (including former titleholders).129 This includes the obligation in existing section 571 of the OPGGS Act for titleholders to retain financial assurance sufficient to pay for the costs involved in remedial action.

124. Ibid., p. 2. 125. Ibid., p. 68. 126. Both NOPSEMA and the responsible Minister may take action to remediate the site under sections 588, 590A, 595A and 596 of the OPGGS Act.

127. Subsections 589(5) and 597(5) of the OPGGS Act. Amendment to subsection 589(5) by item 24; proposed subsection 590A(3), inserted by item 25 in Schedule 2 to the Bill and proposed subsection 596A(7), inserted by item 41 in Schedule 2 to the Bill. 128. See also sections 591B, 592, 593, 594A and 595 of the OPGGS Act for offences relating to failure to comply with remedial directions relating to GHG sites. 129. Further information about these proposed provisions is set out at pages 84-85 of the Explanatory Memorandum.

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Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021 [and] Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021 22

Stakeholder views As noted by Walker, ‘trailing liability is only a backstop’ and it is essential that current titleholders continue to have primary responsibility for decommissioning.130 While the Explanatory Memorandum acknowledges this is intended to be an option of last resort,131 this is not reflected in the legislation and was consequently flagged by a number of stakeholders.132 Additionally, there is a lack of clarity and guidance around the process and gateways that need to be met before triggering trailing liability, leading to further uncertainty for industry. As discussed above, the Explanatory Memorandum attempts to clarify how trailing liability will be applied, though it is unlikely this will be considered sufficient by industry, with APPEA arguing:

The power to apply decommissioning liability to ‘any person capable of benefiting financially’ from title operations or in a position ‘to influence compliance’ or acts ‘jointly with’ titleholder in relation to title operations’ is too broad, vague, forward looking and speculative. Current provisions in the Bill may unintentionally capture employees and contractors (individuals or companies), royalty holders, financiers, property equity direct interest holders, parent companies of investment funds/trustees or even suppliers or purchasers of commodities or capacity. In the event trailing liability is preferred by government, a better definition is needed so the extent of reach of the liability is absolutely clear and includes elements limited only to direct influence of conduct and compliance.133

Shell Australia warned that the lack of clarity around the order in which a remedial direction will be issued to former titleholders may create a disincentive for industry to undertake due diligence:

Holding any titleholder in the chain of ownership liable for decommissioning could lead to irresponsible behaviour and gaming down the chain of ownership - operating in conflict with the stated objective of increasing due diligence in title transfer.134

Stakeholders also raised concerns with the definition of a ‘related body corporate’ arguing:

This provision hands NOPSEMA and the Commonwealth Minister an incredibly broad power and unfettered power to determine a party responsible. We see there to be significant potential for legal challenges with such a broad definition. It is not a concept adopted in other jurisdictions overseas. We submit a tighter and legally robust definition is required.135

In its submission, AMPLA summarised the impact it believes trailing liability will have on industry:

The combination of discretionary, indefinite trailing liability and the related person concept has the potential to stifle investment, have a negative impact on both the availability and cost of credit to industry, and have a negative effect on board and executive recruitment, retention and company decision making.136

130. Walker Review, op. cit., p. 7. 131. Explanatory Memorandum, op. cit., p. 67. 132. See for example, Shell Australia, Submission, op. cit., pp. 3–4; BHP, Submission, op. cit., p. 2; APPEA, Submission, op. cit., pp. 8–10; and AMPLA, Submission, op. cit., pp. 3–4.

133. APPEA, Submission, op. cit., p. 9. 134. Shell Australia, Submission, op. cit., p. 2. 135. Shell Australia, Submission, op. cit., p. 4. Similar concerns are also raised by APPEA, Submission, op. cit., pp. 14–15. 136. AMPLA, Submission, op. cit., p. 1.

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Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021 [and] Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021 23

Key issues and provisions—Schedule 3 Schedule 3 of the Bill is aimed at increasing regulatory scrutiny and expanding the types of information which can be requested from applicants seeking to operate in Australia’s offshore oil and gas regime.

Key provisions Schedule 3 of the Main Bill amends the relevant provisions in the OPGGS Act to clarify that when making a decision (for example, with respect to granting a petroleum or GHG exploration permit) the decision-maker must have regard to:

• whether the technical advice and financial resources available to the applicant are sufficient to:

– carry out the operations and works that will be authorised by the permit and – discharge the obligations that are imposed under the OPGGS Act, or a legislative instrument under the OPGGS Act, in relation to the permit • the matters specified in proposed section 695YB as they apply to the applicant, including any officers of the applicant if the applicant is a body corporate and

• and any other matters prescribed by the Regulations.137

Proposed subsection 695YB(2) (inserted by item 231 in Schedule 3 to the Main Bill) provides for an expanded list of matters that the decision-maker (also referred to as the Joint Authority) must have regard to when making a decision under the OPGGS Act.

The matters set out at proposed section 695YB go to the applicant’s fitness and proper standing to carry out offshore petroleum or GHG operations and apply to both an applicant and any relevant titleholder. These include ‘relevant experience in the industry, prior offences and involvement in criminal or civil proceedings, previous applications that have been refused or titles that were cancelled, debts payable, insolvency, disqualification from management of corporations, and whether under the OPGGS Act the person has made or given false or misleading statements, information, documents or evidence’.138 Proposed paragraph 695YB(2)(o) also allows for the Regulations to prescribe additional matters that the decision-maker must take into account.

The Explanatory Memorandum states:

The matters provided for in section 695YB capture a range of historical behaviour relevant to a decision for the grant, etc., of a petroleum or GHG title, which has been recommended by the Productivity Commission in its study into resources sector regulation as leading regulatory practice to address the risk of repeated noncompliance.139

Proposed section 695YC requires an applicant and any relevant titleholder to notify both NOPTA and NOPSEMA if certain events occur. This includes if they are found guilty of certain offences such as those involving fraud or dishonesty, are ordered to pay a pecuniary penalty for a contravention of such laws or become insolvent under administration. An individual may be subject to a civil penalty of up to 240 penalty units ($53,280) for breaching this requirement. A body corporate is subject to a maximum civil penalty of 1,200 penalty units ($266,400).

137. Proposed subsection 105(4) inserted by item 4; proposed subsection 111(1B) inserted by item 7; proposed subsection 116(4) inserted by item 12; and proposed subsection 117(3B) inserted by item 13 in Schedule 3 to the Main Bill. 138. Beresford and Bogdanich, ‘What does the new Decommissioning Bill mean for you?’, op. cit. 139. Explanatory Memorandum, op. cit., p. 249.

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Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021 [and] Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021 24

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