Madeleine King (Brand, Australian Labor Party, Shadow Minister for Trade) Share this | Hansard source

[by video link] I thank the member for Perth and the member for Paterson for moving and seconding my second reading amendment in my absence. Briefly on indulgence, I would really like to thank the Speaker and all the presiding officers as well as the Department of Parliamentary Services, especially those in the broadcast team, for being able to organise my first remote access into this parliament from my electorate office in Rockingham, in the seat of Brand. Thank you very much.

Today, on behalf of the Labor Party, I am speaking in support of the Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021 as well as the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021. Again, I note the second reading amendment, particularly point 4: the government's lackadaisical approach to decommissioning reform which has resulted in Australian taxpayers footing the bill for the Northern Endeavour fiasco, which has to date—as the member for Perth noted—wasted over $210 million of public money.

I for one am very glad that the government has finally accepted the need for reform in this crucial policy area, the decommissioning of offshore oil and gas assets. The minister argues that the time is now ripe for Australia's regulatory framework to catch up with demand. But I would ask: Why now? Why not two years ago? As with many things with this government, they are far more concerned with the announcements and political stunts rather than meaningful reform in the interests of all Australians. This government, which has been in power for nearly a decade, had to wait for the Northern Endeavour fiasco and bail out disaster to address the glaringly obvious reform that is required. The government weren't the ones to foot the bill for this problem; it is the Australian taxpayer that foots the bill for this problem. If it wasn't for the Northern Endeavour fiasco falling at the foot of the government, would they have acted at all? I question that entirely.

I will take us through the background of what's happened here in the lead-up to bringing this bill to this parliament. To explain, decommissioning is a process through which all equipment, infrastructure and wells associated with petroleum and gas activity are safely removed when no longer used or required. Currently, the complete removal of infrastructure and the plugging and abandonment of wells is the default decommissioning requirement under the Offshore Petroleum and Greenhouse Gas Storage Act. This is entirely consistent with Australia's international obligations, primarily under the United Nations Convention on the Law of the Sea and the London Convention associated protocol, to remove disused installations and structures to preserve and protect the marine environment.

Options other than complete removal may be considered; however, the titleholder must demonstrate the alternative decommissioning approach delivers equal or better environmental safety and well integrity outcomes compared to complete removal and that the approach complies with all other legislative and regulatory requirements. However, this is set out only in guidelines, and the legislation at hand does not adequately define the criteria by which alternative decommissioning approaches will be permitted.

The risk here is that unscrupulous facility owners will seek to avoid costs and may seek to leave pipelines and other structures in place. This opens the door for producers to undertake a less than full and complete removal, where they opt to repurpose petroleum exploration infrastructure to become an artificial reef. On the face of it, that seems kind of okay. But we cannot let producers have free rein to use a pretend environmental fig leaf to cover up what they have put on the seabed to avoid their responsibilities and of course the great expense that goes with that.

There is no doubt that leaving infrastructure in the sea is a less expensive option for producers; however, it does carry environmental risks that need to be rigorously assessed. I accept that, in the right circumstances, artificial reefs that build up over gas infrastructure can provide a habitat for a range of different species. Once corals and invertebrates make themselves at home they produce additional biomass in the food chain, creating a food source for fish and other marine species. I note, for example, that WA has six purpose-built artificial reefs, with a location spread from Esperance to Exmouth. Nevertheless, it is critical that the complete removal of assets remains the undisputed objective of proper decommissioning of these gas and petroleum assets.

Currently, it is the titleholder that identifies and then collates the information necessary to assess or evaluate the different options for decommissioning petroleum infrastructure via an environmental plan. As you can imagine, maintenance of and the subsequent decommissioning of offshore petroleum assets is a costly enterprise. That is why government oversight is critical—to ensure that titleholders have the financial capacity to actually do it. Until now, business deals brokered by cowboy operators have been able to go on unabated with little attention by the government on what the end result may end up being.

It's really important to put on the record, and I will do so, what has happened to the one such example that is far too big to ignore and that has brought on this legislation—that is, the Northern Endeavour-Northern Oil and Gas Australia incident. For members and for the Hansard record, the background is that the Laminaria-Corallina oilfields are situated approximately 550 kilometres offshore from Darwin, as is the associated Northern Endeavour floating production storage and offtake facility, the chief infrastructure for extraction and development. Production of Northern Endeavour and associated wells commenced many years ago, in 1999. By 2015 the titleholder for the fields was a joint venture of Woodside and Talisman Oil and Gas, with Woodside operating the Northern Endeavour.

In 2015 Woodside announced its intention to cease production from the Northern Endeavour in the second half of 2016, and moved to decommission the field soon afterwards. However, before the decommissioning could occur, Woodside sold its share to its joint venture partner Talisman, which later became known as Timor Sea Oil and Gas Australia; they have been acquired by Northern Oil and Gas Australia. The sale was facilitated through the regulator, NOPTA, and was perfectly allowable in the current legislative environment. At the time, NOPSEMA identified concerns about Timor Sea Oil and Gas Australia's capability and capacity to respond to an oil spill—an obvious and fundamental titleholder responsibility. This led to a formal intervention and enforcement matter just three days after TSOGA became the titleholder. TSOGA and its contractors were unable to convince NOPSEMA, as the regulator, that it had identified the baseline of the corrosion hazards on the facility or undertaken the subsequent assessment prioritisation and planning to address those risks.

By 2019 NOPSEMA had lost confidence in the ability of the titleholder and the operator to fulfil their statutory obligations and resolve the identified concerns of the adequate safety and environmental management of the Northern Endeavour facility. An environmental inspection identified that TSOGA could not demonstrate sufficient financial assurance to cover its liabilities in the case of an oil spill, and this required prompt regulatory enforcement to resolve. As a result NOPSEMA issued a prohibition notice on the contractor on 10 July 2019 and a general direction on TSOGA on 18 July 2020, enforcing the cessation of production on the Northern Endeavour until a range of longstanding serious issues were resolved, particularly relating to the corrosion on the facility.

The Northern Oil and Gas Australia association group was loss making and had not generated a net profit after tax for the past four consecutive years. Essentially, the companies could not afford to maintain let alone decommission the Northern Endeavour asset. On 20 September 2019 the Northern Oil and Gas Australia Pty Ltd group of companies went into voluntary administration, and subsequently, on 7 February 2020, went into liquidation. This was when the government knew it had to step in. The Commonwealth set up the Northern Endeavour Temporary Operations Program, taking control of the facility until a longer-term solution could be found. To date, from that time, it has cost at least $210 million to maintain the vessel, all at the expense of the Australian taxpayer, and costs are still mounting.

This is at a time when the industry is battling on multiple fronts against some activist extremists that like to push their own agendas, and when a social licence to operate in oil and gas, particularly offshore oil and gas, is absolutely pivotal. The industry is faced with cleaning up a mess, and it will do this via a proposed levy across the whole industry. The bills we're speaking of today do not impose the levy, and I understand that consultation on that rate is ongoing and will come forward in another piece of legislation. That levy will apply to the whole industry to fund the decommissioning of the Northern Endeavour, and we look forward to seeing legislation on that in due course.

I want to add that Labor recognises the key role gas plays in creating economic growth and export income for Australia. Labor recognises the many thousands of good jobs the industry creates and sustains. We understand the importance of gas as a critical feedstock for Australia's manufacturing industry, as well as in electricity generation and in providing the energy that millions of Australian households need for heating, cooking and their everyday activities. We recognise and acknowledge the role of natural gas as a transitional fuel and in capitalising on renewable energy opportunities. And we support opening up new gas reserves, subject to independent scientific assessments, effective environmental regulation and effective and authentic consultation. Gas will play a major part in reducing carbon emissions in Australia and will assist our regional neighbours on their own journeys to decarbonisation as they seek cleaner-burning fuels as part of their energy mix. I might also add that the decommissioning bill will provide many jobs as well in the oil and gas sector for the work that will be required to bring these facilities to an end safely and to remove them from the seabed. That's an important part to think about when we talk about this bill.

I will go to more of the detail of the bill. It strengthens Australia's offshore oil and gas regulatory regime to ensure that emerging decommissioning challenges facing the industry will be managed effectively, and it addresses a loophole that fails to ensure that the costs of decommissioning an offshore project remain with the entity or the entities who were responsible for, or had the capacity to, influence how that decommissioning might happen. The bill aims to strengthen the framework of decommissioning from cradle to grave and to better protect the marine environment and the taxpayer from bearing very high costs. These are important objectives, but I would also point out again how important it is to remember the significant jobs that will emerge out of the highly specialised work that has to go on and which will be drawn from an already highly technical oil and gas workforce.

In pursuing successful decommissioning and the jobs it creates we must also be mindful of the workplace safety requirements that will need to be enforced to keep this dangerous workplace safe. The bill increases regulatory oversight and scrutiny by providing for specific decision-making criteria at decision points across the OPGGS Act to ensure that entities are suitable on entering into the regime and remain suitable throughout the life of the project. It expands the type of information that may be requested by the relevant decision-maker from the applicant or the applicants seeking to enter into or to progress through the oil and gas regime.

There are four key pillars to the bill which provide oversight for changes in the control of titleholders through corporate merger acquisition. The sale of an offshore project is meant to be captured as the transfer of the title related to the project, which is already provided for under the act. It is also common for the industry, both in Australia and overseas, for an offshore project to be transferred by the sale of shares in the company which is the titleholder. Such transactions are not captured by the current act because there is no transfer of the interests to the title or titles. The bill provides a specific decision-making criteria and expanded information-gathering powers to assess the suitability of entities that want to go through our oil and gas regime, and the bill includes minor and technical amendments to improve the operation of the acts, including—at last—enabling electronic lodgement of applications.

Very importantly, this bill mandates trailing liabilities—expanding existing powers to call back, literally, previous titleholders to decommission infrastructure and to remediate the marine environment in a title area where the current or immediate former titleholder is unable to do so. It aims to ensure that the risks and liabilities of the petroleum and gas activities remain the responsibility of those who held, or had the ability to influence, operations under the title. It also aims to change industry behaviour by increasing the due diligence undertaken by companies regarding who they sell these assets to. This is best practice on the global stage and it is very good that at long last Australia has now introduced into its regulatory regime world's best practice.

In coming decades, there will be a number of offshore projects which will have exhausted their reserves and will require decommissioning. This is a normal part of the resource development lifecycle. With an estimated $60 billion in anticipated decommissioning liabilities falling due over the next 30 years, the government needs to ensure that it can call upon former titleholders to decommission and remediate the area in the event that the current titleholder is unable to do so. Labor understands that the industry, led by APIA, is comfortable with these proposed reforms. We are a little concerned that, while NOPSEMA acts as an regulator under the act and will continue to oversee decommissioning activities in the Commonwealth waters, there's been no additional funding allocated to the agency to carry out these extra tasks. We need to ensure our regulatory agencies are appropriately resourced to continue their vital work and this extra work. It's pivotal that we get this right. As the world continues to power towards decarbonisation, the management and eventual retirement of these assets will be absolutely critical. It's critical to the marine environment and critical, of course, to the whole gas industry being able to retain its social licence to operate offshore in Australian waters.

While I believe this legislation has taken too long to get to parliament, I'm glad that it is here. I believe it can be improved to ensure full removal of facilities at the end of their life. Although we have some reservations about the effectiveness of the current legislation, we do support it to ensure Australians receive the assurances they require to ensure offshore oil and gas facilities are safely and appropriately decommissioned and removed.

To conclude, I want to endorse the second reading amendments moved by the member for Perth and seconded by the member for Paterson, and I thank them for supporting me in relation to this bill. I thank the House.

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