Michael Danby (Melbourne Ports, Australian Labor Party, Shadow Parliamentary Secretary to the Leader of the Opposition) Share this | Link to this | Hansard source

In regard to the Offshore Petroleum and Greenhouse Gas Storage Amendment (Cash Bidding) Bill 2013, I think we have to understand that most of the oil that was released meant it was one of the biggest spills that could have endangered Australia and that this legislative amendment is an important change to the regulatory regime in relation to offshore petroleum management. A strong and updated regulatory regime in relation to offshore petroleum management was made clear by this spill. It is a necessity. This was from the blow-out of the Montara wellhead platform. The Montara development was owned and operated by PTTEP Australasia (Ashmore Cartier) PL and the area of this spill is located in the Timor Sea 690 kilometres west of Darwin in the Northern Territory and 250 kilometres north-west of Truscott in Western Australia. On the morning of 21 August 2009, there was a blow-out of oil and gas from the wellhead platform. Although 69 personnel on the platform were safely evacuated, a considerable amount of oil was released from the blow-out. Estimates vary but an inquiry observed that, if the worse-case scenario used in the initial response planning by PTTEP Australasia (Ashmore Cartier) PL meant 400 barrels a day were thought to have been spilt, the spill would have constituted 29,600 barrels or about 4,736 tonnes. This would have been Australia’s third largest oil spill after the Kirki spill of 17,280 tonnes in 1991 and the Princess Anne Marie one of 14, 800 tonnes in 1975. PTTEPAA advised the commission of inquiry that the initial release could have been as high as 1,500 barrels per day. If this figure had been the actual amount of oil released into the ocean per day until the well was 'killed', the spill would have been the largest in Australian history at 17,760 tonnes, larger than the Kirki spill which I have mentioned and which broke up off of the coast of Western Australia.

Most of the oil released from the blow-out remained within 35 kilometres of the Montara wellhead but some oil was observed 94 kilometres off the Indonesian island of Palau Roti and in the joint Petroleum Development Area off Timor Leste. The area of ocean where oil sheen or oil patches were observed was about 90,000 square kilometres. From 5 September 2009 through to 3 December 2009, two vessels were used to operate a 300-metre containment boom and skimmer around the oil well, which recovered an estimated 493,000 litres of oil or oil emulsion over 35 days of operation. Part of the response strategy was aimed at protecting Ashmore Reef, the Cartier Islands and the Western Australian coastline, because of their significant environmental features and the fact that trajectory models showed that the oil spill threatened Ashmore Reef and the Cartier Islands. A total of 184,000 litres of dispersants were used on the oil spill to accelerate weathering and breakdown of the oil on the sea over the period 23 August 2009 to 1 November 2009.

On 5 November 2009 Martin Ferguson, the then Minister for Resources and Energy—the former member for Batman now departed this place—announced a commission of inquiry into the uncontrolled release of oil and gas from the wellhead petroleum. The inquiry was undertaken and a number of recommendations proposed. The government has agreed to a large number of these recommendations. New regulatory bodies have been created and relevant legislation passed. I think that we have seen with the events in the Gulf of Mexico that we cannot be too careful with offshore oil spills. They can cause severe damage to the country if the activities are not properly regulated by governments, particularly in their relations with commercial organisations which are seeking to exploit oil and gas.

The purpose of this particular bill is to amend the Offshore Petroleum and Greenhouse Gas Storage Act 2006 to provide a new model for allocating cash-bid exploration permits in the offshore petroleum regulatory regime. In November 2012 the government announced the decision to apply the cash bidding allocation method for select blocks as released in the prospective 2014 offshore petroleum exploration acreage release. An independent and expert review of the act was conducted. It identified weaknesses in the current model that posed risks to implementation of the effective cash-bidding model. It proposed amendments to the existing cash-bid exploration permit allocation model in the act to have the following key features: limiting the discretion to refuse an offer of a permit made by the joint authority; failure of highest bidder to accept offer results in the 10 per cent deposit paid by that bidder as part of cash bid being forfeited to the Commonwealth; full payment of the cash bid must be paid by the successful bidder within 14 days—previously 30 days.

The joint authority will set a reserve price for each of the areas being released. This price will reflect an estimate of the resource available. The reserve price will be determined in advance of inviting applications for the permit and, at the discretion of the joint authority, will be disclosed or undisclosed to bidders via the government Gazette. Where an offer is made below the reserve price, the permit will be offered at a reserve price.

Another of the regulations concerns the separate prequalification and bidding process. The prequalification assessment of potential bidders' technical and financial capacity to hold an exploration permit will take place prior to the applicants placing their cash bids. There will be a tie-breaker where two or more equal highest cash bids are received. In such cases, further cash bids will be invited from the tied applicants and the highest bidder will be offered the permit.

Oil spills threaten countries such as Australia. I commend the former minister for his inquiry. I obviously agree with the former government's inquiry and recommendations and am pleased that this current government is following up this issue, if not others.

Tony Zappia (Makin, Australian Labor Party, Shadow Parliamentary Secretary for Manufacturing) Share this | Link to this | Hansard source

I too take the opportunity to briefly speak on the Offshore Petroleum and Greenhouse Gas Storage Amendment (Cash Bidding) Bill and the related bill, the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2013. As the member Melbourne Ports has quite properly pointed out, the purpose of the bills is to amend the Offshore Petroleum and Greenhouse Gas Storage Act 2006 to provide an optimised model for allocating cash bid exploration permits in the offshore petroleum regulatory regime. The bills arise from a review of the current processes that took place some time ago—a review which was quite appropriate given the importance of offshore petroleum exploration in the waters around our country.

As we have debated in this place on other occasions, the importance of offshore petroleum exploration to the country is unquestioned in terms of what it means for the future of our nation because of the quantities of minerals and gasses that we understand are located in those waters. Simultaneously, the importance of preserving and protecting the natural environment is equally of immense value to our nation—and what is not often well understood or accepted is that the environment within the ocean waters is perhaps far more important than the natural environment that we see on a daily basis on land. In order to try and ensure we get a good balance of what goes on in the ocean waters, some of these changes have been brought in.

What this amendment will effectively do is introduce a two-staged process, whereby someone who wants to get an exploration permit for mining in the ocean waters is, firstly, assessed as to their suitability to even apply for the permit; and, secondly, if they are suitable, they are allowed to engage in a tender process. I will come back to the question of their suitability, because quite frankly I think that is a critical element of this proposal. Assessing whether an applicant is in fact suitable to be able to apply for a permit is critical to the whole process because the suitability of the applicant goes not only to the concern of whether they are suitable and competent to carry out the necessary work, and therefore ensure that the work they are carrying out is in the national interest, but it is also a matter of whether they are suitable and competent in terms of their previous track record in mining exploration, in particular their responsibility with respect to the environment. So the government is able to assess their suitability not only on the basis of their expertise but also on their compliance with the relevant laws and regulations and the level of responsibility shown by their previous activities in complying with all the environmental requirements placed on them.

One of the things that is not clear from the legislation is whether an applicant who is determined to be not suitable has an appeal mechanism available to them to be able to appeal the decision that they were not suitable. I could not find that anywhere in the material that I read, but it would be interesting to get a response from the minister as to whether there is a process available to them. I have no doubt that an applicant may lodge all of the necessary documentation, and perhaps be determined by the minister not to be suitable, and then in turn wish to appeal that decision because they may feel they were harshly or unjustly treated. Having said that, I have to say that I have no problems with the process being a two-stage one, with the suitability question being the first step of that.

The second stage of the process is where the government is now proposing to go from the current system, where I understand an applicant is allocated the permit on the basis of how much work they are expected to be able to carry out, to one where they simply bid for the right to carry out the exploration work on the basis of a value that the government has put on the area that is subject to the licence application. As the member for Melbourne Ports has quite rightly said, in the bidding process it is broken up into four categories: (1) limiting the discretion to refuse an offer of a permit; (2) the reserve price; (3) the separate pre-qualification and bidding process; and (4) a tie-breaker. They are all steps required to try and overcome different issues that may arise out of the whole process.

In my view the bidding process is the fair way to go. It enables an applicant to put in the bid that they believe is commensurate with the opportunities presented by the licence for which they are applying. It also has provision within the whole process to ensure that if the bids are tied then there is a tie-breaking mechanism. If a bidder puts in an application and then refuses to go through with it, they lose their 10 per cent deposit. It also establishes the process that will be required if none of the bidders put in an amount up to the reserve price that the government has set for it. Again, there are processes to see all of that through.

The whole process, I believe, will not only make the process of issuing licences much fairer but also make it more transparent. I think that that is critical given the immense interest that has been shown to date with respect to licences issued for permits to be granted in exploration of both land and sea opportunities here in Australia. We have seen cases in the past where licences have been issued to proponents and the activities resulted in serious damage to the ocean environment. We have also seen cases in the past where other activities associated with the mining, once the licence has been granted, have also resulted in serious environmental damage to the oceans. What we need to try to ensure is that that does not occur again. Whilst there is other legislation which covers some of the matters relating to the obligations of the people who are granted the permits and the penalties involved with them, I believe it is incumbent on the government, on behalf of the community that we represent here, to ensure that the processes that we apply are not only fair but responsible, because the last thing anybody wants to see is some of the environmental damage and catastrophes that have occurred in recent years both in Australia and elsewhere as a result of mineral exploration permits or mineral licences being granted in some of the sea waters around countries. We have had examples here in Australia and also in America where the damage that was done was such that it took months and months, and possibly even longer, to try to rectify or remedy it; in fact, I do not think it was ever properly remedied. The same applies with some of the areas here in Australia.

I think that in this country we have some of the most pristine ocean areas, which we need to protect. We also know that within those areas there are opportunities for mineral development and mining leases to be granted. So this legislation, in my view, draws the right sort of balance and, as I said earlier, picks up on recommendations as a result of a review that was commissioned by the previous government and which is now being implemented by the current government. I commend the legislation to the House.

Jill Hall (Shortland, Australian Labor Party) Share this | Link to this | Hansard source

It gives me great pleasure to speak on this legislation, which I believe is very important because it not only changes the regulatory regime that we currently have in place but also, as the member for Makin points out, gets the right balance between environmental protection and the issuing of permits, ensuring that Australia's exploration and mining industry continues to succeed. In Australia we have a strong commitment to the mining, petroleum and other industries. We are very committed to ensuring that we have a strong industry base, but we are also extremely committed to ensuring that our pristine environment is protected. Any issuing of permits and licences needs to take into account the need to preserve the environment.

The purpose of the Offshore Petroleum and Greenhouse Gas Storage Amendment (Cash Bidding) Bill 2013 is to amend the Offshore Petroleum and Greenhouse Gas Storage Act 2006. It is providing a new model for the allocation of cash bidding exploration permits in the offshore petroleum regulatory regime. It is very important to mention at this stage that it was the previous government that undertook this. In November 2012 there was an announcement that we had moved to this system. The government then announced the decision to apply the cash bidding allocation method for the selection blocks released as from 2014.

The next statement I am making is a very important one: an independent and expert review was conducted of the act. It identified weaknesses in the current model that posed risks to the implementation of an effective cash bidding model. I am very supportive of any reviews that take place that really can improve the industry and ensure that the regime that is in place is the best possible regime, as I mentioned in the beginning, to deliver for the industry and protect the environment.

The proposed amendments will change the current cash bidding exploration permit allocation model in a number of ways. They will limit the discretion to refuse an offer of a permit made by the joint authority, and failure of the highest bidder to accept will result in the 10 per cent deposit paid by the bidder as part of the cash bid being forfeited to the Commonwealth. Full payment of cash bids must be made by the successful bidder within 14 days; previously it was 30 days. So this puts in place a requirement for those who are involved in the industry to actually commit to the permit in a much quicker and more transparent way.

The joint authority will set a reserve price for each of the areas that are released, and the price will reflect an estimate of the resource available. The reserve price will be determined in advance of inviting applications, at the discretion of the joint authority, and will be either undisclosed or disclosed to bidders via the gazette.

There are separate prequalifications and bidding processes. Prequalification assessment of the potential bidders' technical and financial capacity to hold an exploration permit will take place prior to the applicant placing their cash bid. I think this is a very important aspect. It allows for the bidders' credentials to be looked at. This should take place definitely well in advance.

The amendments also introduce a range of tools to achieve more efficient allocation of petroleum permits. It is important that we have an efficient industry that operates in a way that is going to deliver the greatest benefit not only to the industry but also to the Australian economy. These changes will lead to that.

As I mentioned previously, it was the Labor government that, in 2012, announced that it would reintroduce cash bidding for selected offshore petroleum permits. Cash bidding was previously used in Australia between 1985 and 1992. It was used successfully in the US Gulf of Mexico and has recently been introduced for onshore coal tenements in Queensland. Last year the Labor government decided that cash bidding would be used from 2014 on, and we made that decision based purely on the fact that it was the best way to operate the industry, and that the allocation of offshore petroleum acreages in mature areas and in areas containing known petroleum accumulations was best served by operating under this new regime. Under the competitive cash-bidding system applicants offer cash bids for the right to explore, with exploration permits being awarded to the highest cash bidder. The legislation before the House follows the 2010 Australia's Future Tax System Review, which recommended a move in this direction.

I feel that this is very important legislation. It is noncontroversial simply because of the fact that we on this side of the House could see the benefit of introducing this regime when we were in government. I am pleased to say that the now government has picked up the recommendations and the changes to the legislation that we were looking at introducing before the election. These are changes that will strengthen the industry, improve environmental protection and ensure that we look after our pristine environment in those very special areas.

At the same time—because this is a cognate bill—the bill allows for the collection of annual administration fees by the National Offshore Petroleum Titles Administrator, and that will cover the ongoing costs associated with the cash-bidding bill. And so I am quite confident that the changes that have been outlined in this bill, which resulted from a review that was undertaken by the previous government, will benefit the industry, will benefit our economy and will be great for the future.

Julie Owens (Parramatta, Australian Labor Party, Shadow Parliamentary Secretary for Small Business) Share this | Link to this | Hansard source

I am delighted to rise to speak on the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2013 and the sister bill, the Offshore Petroleum and Green Hills Gas Storage Amendment (Cash Bidding) Bill 2013.

I am delighted for two reasons: firstly, it really is an example of what is very good regulation. While we quite often hear the current government—now and while in opposition—decrying regulation generally, you do find quite often very good examples of regulating, in this case by the use of a market based mechanism to achieve not just good economic outcomes for the industry itself but good outcomes for the Australian community in terms of safety and a return on the assets that it owns.

We should be reminded from past years how dangerous offshore exploration and drilling can be. We have seen two workplace deaths on offshore drills, we have seen a number of explosions and we have seen some unexplained release of hydrocarbons. We should always be aware that whatever regulatory regime we introduce in our offshore assets that safety of workers is one of the principal objectives, as also is safety of the environment. Our offshore assets are valuable for a range of reasons. They are incredibly valuable because of their pristine nature—'invaluable' perhaps one should say because of their pristine nature and the work they do in keeping our environment stable and in keeping us in good health. They are an extraordinary asset that we should be protecting for our children. But it is also because of this amazing wealth in hydrocarbon that sits below the ocean floor; these hydrocarbons belong to all the generations from now on and we must ensure that we get a return from them that we can share with future generations.

We are one of the world leaders in this field. We are incredibly good at finding and extracting hydrocarbons from below the ocean floor. We have been doing it for a while and we are renowned around the world for our safety record. But we can always do it better. The addition of this market based mechanism ensures the three things that we need to ensure—that human health and safety comes first, that the environment is protected in the way that we need to do for future generations and that we provide certainty and a return both to the businesses that engage in exploration and extraction of hydrocarbons and also to the generations to come.

It is a very interesting approach that is being taken here. It was first put forward and announced in November 2012 by the former Labor government when a decision was made to apply a cash-bidding mechanism to allocate titles for select blocks as released in the 2014 Offshore Petroleum Exploration Acreage Release. This model applies to the allocation of petroleum exploration permits for mature areas. They are areas that are known to contain petroleum accumulations and it is intended to prevent overexploration where none or little may be required. So this relates to areas where we already know that there are deposits or where it is strongly believed that there are ones.

It is a market based model and it imposes a competitive bidding system. But because of the issues of safety for its workers, the environment and the return to the Australian community, price is not the only indication. We all know of bidding processes where decisions are made once the bids have been put and they require judgements on expertise and on readiness as well as on price. They are incredibly complex and are not as transparent as one would want for the industry or for the community.

In this process the two issues of the qualifications to actually undertake the exploration and the drilling and the bid itself are separated into two processes. There is a prequalification assessment of potential bidders that takes place prior to the submission of the cash bids to ensure that those that are bidding are actually eligible. This involves an assessment of the technical and financial capacity of an applicant to undertake the exploration work offshore commensurate with being the holder of an exploration permit over the blocks that are being released for cash bidding. As a consequence of this, the companies placing the bids can be confident that those bids will be assessed on price and price alone and those assessing the bids can be confident that they are looking at price alone once the bids are placed. That is because in preassessment the judgements on whether a company is capable, eligible, has the appropriate record, has the appropriate expertise and has the appropriate financial assets to sustain their efforts in future years are all done prior to the submitting of the cash bid. So that part of the process takes care of a lot of the issues which have to be taken into consideration concerning the ability of a company to deliver safety for its workers and the ability of a company to be able to manage its exploration and drilling in a way that protects the incredibly valuable environment for future generations. That then means that when the bid is submitted the thing that matters at that point is the return for Australians and future generations. It is purely a matter of price at that point. So it is a very interesting application of a market based approach that manages to ensure firstly that the companies are able to deliver the things that the community needs them to deliver and, secondly, then considers price alone and the return to the Australian community on the assets which they own.

There are a number of other nice little bits in this bill as well and I do congratulate the minister and the government of the day, as back in 2012 there was extensive consultation on this process. In fact they brought in auctioneering experts and consulted widely. There was a very comprehensive process which led to the development of this rather clever approach.

There are two other elements that protect Australian owners of the assets and the companies themselves. Firstly, there is a reserve price, which is very important. The reserve price is set by the joint authority for each of the areas being released, so that ensures that the government cannot and does not sell the permits for less than a desirable price or below their public value. And the reserve price will be determined in advance of inviting applications and will be disclosed or undisclosed depending on the circumstances.

The reserve price will be set to ensure that if, at a point in the history of commodity prices, there is a slump in prices—and we know that prices for oil and gas and everything else we pull out of the ground go up and down—and the bids that are put in are less than the reserve price, those assets will remain in Australian hands until the prices are better. When you are dealing with assets that belong to this and future generations you never have to take a price that is less than desirable, because the assets stay in the ground until the price is right. In the growing market for hydrocarbons in our region it is hard to imagine that the value of our hydrocarbon reserves would decrease over the long term; one can only imagine them increasing if we wait for the right price.

The second interesting addition to the bill is the limiting of the discretion to refuse an offer of a permit. Again, once a company has passed its eligibility process and submitted a bid, to ensure that the highest bidder is incentivised to accept the offer of permit, a 10 per cent deposit will be forfeited if they do not accept it. This discourages frivolous or ambit-claim bids and ensures that bids are serious. If you are the highest bidder and you refuse an offer of permit, you forfeit 10 per cent of the cash price of your bid. That is quite an onerous burden for a company making a bid that they do not intend to follow through on.

The other bill that we are talking about today, the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill, is also an interesting one. It is the less complex of the two bills but it is an interesting one. It essentially requires companies engaging in the bidding process to pay a levy, which allows the National Offshore Petroleum Titles Administrator to recover costs for its annual titles administration activity. If we had actually managed to pass this bill—at the time it was a more controversial bill—I am sure that the then opposition, the current government, would have called it a tax. They do not seem to like the word 'levy' when we use it but love it when they do.

This is a case of very reasonable cost recovery. The companies are making profits from the use of our assets, but they require this kind of regulatory regime in order to protect the community now and into the future from damage to its environmental assets. This ensures that our community now and into the future receives the financial benefit from the assets that it owns beneath our ocean shores and that these incredibly dangerous workplaces are managed in a way that keeps workers safe—they can go to work and come home again, as I put it, with all their bits intact. It is absolutely appropriate that the companies—a relatively small number of companies—that are engaged in this activity pay the cost of the regulatory regime. That is the second bill.

This is a very good pair of bills that takes a very practical, market based approach to ensuring that our very valuable offshore hydrocarbon assets are exploited in a way which is safe for workers, which ensures the best environmental outcomes that we can achieve, and ensures the best possible returns to Australians in this generation and the next. I commend the bills to the House.

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Offshore Petroleum and Greenhouse Gas Storage Amendment (Cash Bidding) Bill 2013. I commend the member for Parramatta on her contribution. I know that she is passionate about this topic. She is forever talking about hydrocarbons, and the pricing and extraction thereof. I have been in parliament for six years and have spoken on hundreds of pieces of legislation. Some of those were momentous, some exciting. This legislation is neither of those, but it is an important piece of legislation, supported by both sides of the House, in terms of ensuring that the Australian public receive the best possible return for the resources that they own. In fact, I would suggest that much of this legislation borrows elements from the Queensland Mineral Resources Act, a piece of legislation I know a lot about, having worked in that area in another life. It takes many of the competitive bidding characteristics from the Queensland legislation, so I am very familiar with that side of the legislation.

The purpose of the bills is to amend the act to provide a new model for allocating cash-bid exploration permits in the offshore petroleum regulatory regime. For those listening at home, the Commonwealth has control over the resources under the ocean and states have control over the resources on land. That is the way cooperative federation works. If we look back over the years there was much heated debate in this parliament when the states and the Commonwealth were working out that divide and how it was going to do it. In fact I think a previous member for Moreton, Sir James Killen, received a lot of attention over some of the sorting out of that process. The debate was nice and cold at the time—if you read the Hansard from the time at which we were working out the Petroleum Resource Rent Tax, it was going to be the end of society as we knew it. Obviously that piece of legislation has resulted in $25 billion to $28 billion going into the coffers of the Commonwealth government.

Sadly, today we are having a similar debate about the MRRT. I understand that those opposite took that to the election and in their electorates they received confirmation that it is important that Gina Rinehart be given extra money. On this side of the chamber we support the idea that if super-profits are being made they should go to the Commonwealth. If super-profits are not being made, then obviously the tax is not being paid. So we are still passionate about the MRRT.

Nevertheless, in regard to the bill in front of us, in November last year the Gillard government announced the decision to apply the cash-bidding title allocation method for select blocks, as released in the 2014 offshore petroleum exploration acreage release. This is sort of like the way the gold rush was handled in days gone by, where it was said that you needed to put in a bid and stake out a claim. Obviously you just cannot stick up a flag like they did in the Klondike, as offshore exploration is a bit more complicated. You have to be able to put a deposit down. They set a reserve price so that speculators or carpetbaggers would not come in.

I think this method of ensuring we receive the best return on our resources is the envy of the world, although with the number of metres of drilling the Canadians are doing at the moment they have established a couple of factors that Australia needs to lift its game on. Where they have it over us at the moment is on the Australian equivalent of flow-through shares. I think it is still the Labor Party position that we would achieve this, even though it did not come in during the six years we were in office. The reason the cash-bid exploration permit process works is because of the great resource we have in Geoscience Australia. They have some of the best, if not the best, data in the world, which they are able to sell around the world at fairs and markets. The way that they do it is a lesson in federation, in that the individual states, although they are competitors, go to the rest of the world and offer an Australian product. I wish tourism would take a ticket out of this process. It is a situation where, even though northern New South Wales is competing against Queensland, Victoria and Western Australia, we need to have one brand. I can see the member opposite nodding. I think it is something we need to work on a bit more: that we have that one recognisable brand. Rather than poor old Maroochydore going and trotting themselves out to the world, we need that Australian brand. But I think Geoscience Australia, despite the states competing for explorers, miners and capital, are able to go to the world and sell this information in such a way that for the last 20 years they have been able to sustain a level of investment that is the envy of the world.

There are a few grey clouds on the horizon and there are some bad decisions coming our way—I see Rio the other day announced that they are rethinking their capex in Australia, and a few other mines and exploration projects are on hold at the moment—but nevertheless this legislation, which is supported by both sides of the chamber, is all about making sure that we receive the best possible price. How do we do it? The independent review of the act said the cash-bidding model needed to be tweaked, so the proposed amendments to the existing cash bid exploration permit allocation model have the following key features. They limit the discretion to refuse an offer of a permit made by the joint authority. The failure of the highest bidder to accept an offer results in the 10 per cent deposit paid by the bidder as part of the cash bid being forfeited to the Commonwealth, so it hits corporations in the wallet if they are not able to carry through, and that money must be paid within 14 days rather than 30 days. There is also something that I am particularly supportive of: even though capex is tapering off in the mining industry, there is a reserve price. So the joint authority—

Jill Hall (Shortland, Australian Labor Party) Share this | Link to this | Hansard source

Why are you so supportive of that?

Graham Perrett (Moreton, Australian Labor Party) Share this | Link to this | Hansard source

Because the reserve price ensures that we get the best possible price, and it also means that only serious players come to the table. You cannot be a speculative outfit just trying to leverage money out of nothing when you are nothing more than a $2 company. Only serious players come to the table. That price is based on the information provided by Geoscience Australia, which is Australia's national geoscience agency and has some of the best geologists in the world, I would suggest. So this reserve price will be determined in advance of inviting applications for the permit and, at the discretion of the joint authority, will be disclosed or not disclosed to bidders via the government Gazette. Then, where an offer is made below the reserve price, the permit will be offered only at the reserve price. There is also the separate prequalification and bidding process. This prequalification assessment of potential bidders' technical and financial capacity to hold an exploration permit will take place prior to applicants placing their cash bids. The other feature that they have brought in is the tie breaker rule: where there are two or more equal highest cash bids, further cash bids will be invited from the tied applicants and the highest bidder obviously will be offered the permit.

I had a bit to do with this in the 42nd Parliament when I was a member of the House of Representatives Standing Committee on Primary Industries and Resources, chaired by the very capable Dick Adams. The deputy chair was Alby Schultz. In that committee, we were particularly looking at the greenhouse gas storage side of the legislation in advance of putting a price on carbon, realising that it would be in people's interest to be able to use these offshore facilities to store greenhouse gases. The reason I touch on that side of the legislation is that it illustrates how, in a carbon-constrained world, much of the low-hanging fruit has gone. It seriously calls into question the efficacy of the Direct Action policy that has been proposed, which we are yet to see unpacked or explained.

The reality is that most technical innovations—as I said, the low-hanging fruit—have already been taken by industry and households. When I drive around my electorate I see that just about every second or third house has solar panels on the roof. People are making the changes because they have experienced a price on carbon—that gentle guide to change behaviour, which is a market mechanism. Obviously the Labor Party still believe in markets, not in the command and control of Canberra bureaucrats. We believe in a market achieving the best price. It has worked for the last 5,000 years and it obviously will work when we are sorting out the future of the planet.

It will be interesting to see how people take advantage of the offshore petroleum and greenhouse gas storage legislation in a direct action environment. It will be interesting to see who makes such choices, what public servant makes the decision to undertake such a speculative venture as putting greenhouse gases down in Bass Strait or the like.

The legislation we have before us is about achieving the best possible return for the Australian people for the resources, the hydrocarbons, that they earn. We know—the Labor Party and even those opposite know, because I remember what they said in the lead-up to the 2007 election when they were all gung-ho for ratifying Kyoto and putting a price on carbon—that putting a price on carbon will have the lowest possible cost to society. It will be interesting to see how direct action is rolled out.

It is 4 December today and I remember 2 December 2009 when the now Prime Minister became the opposition leader and that scuttled the deal that had been done in this parliament. Labor and Liberal had agreed to put a price on carbon. The ETS had gone through the lower house—supported by the member for Wentworth, I seem to recall. He came and voted with us. It went to the other place, where it was supported by Labor. If the Greens had voted with Labor, because two Liberal senators voted for it, we would have had an ETS back in December before we went off to Copenhagen. Imagine how the world would have been different if the biggest emitter per person on the planet, Australia, had been able to go to Copenhagen and say, 'We've done it.' Obviously, that did not take place. We cannot live in the past, even though that seems to be the prerogative of the current government. We cannot live in the past; we need to deal with today.

This legislation in front of us is about recognising that there will be a transition. Hydrocarbons will obviously play a part. They are a valuable resource for the Australian people. We can see the economic benefits that come when a country is not relying on hydrocarbons being imported. Look at the transformation in the US economy in the last two or three years. That is a story of hydrocarbons coming out of North America, rather than the Middle East. That is how the US is transforming its economy in the current climate.

This legislation is noncontroversial; it is supported by both sides of the chamber. I commend the Gillard government for bringing it forward and the Abbott government for bringing it forward. I commend the bills to the House. (Time expired)

Stephen Jones (Throsby, Australian Labor Party, Shadow Parliamentary Secretary for Regional Development and Infrastructure) Share this | Link to this | Hansard source

The Offshore Petroleum and Greenhouse Gas Storage Amendment (Cash Bidding) Bill 2013 and related bill deal with our energy security and the efficient allocation of rights to explore for petroleum related resources. A stable and internationally competitive offshore exploration investment regime is critical to this objective. I think that view is shared by members of all the major parties in this country.

Each year the Commonwealth engages with stakeholders and releases offshore petroleum exploration acreage for competitive bidding by those in the industry who wish to prospect and explore. The amendments in these bills before the House introduce a range of tools to achieve a more efficient allocation of exploration permits. They are not new. In 2012 the Labor government made an announcement that we would introduce cash bidding for offshore petroleum permits. In fact, this returns to a system that had previously been used in Australia in the mid-1980s. In fact, it was used up until 1992. It has been used successfully in other jurisdictions including in the United States in the Gulf of Mexico, where they have massive resources and a lot of interest from explorers to exploit those resources. It has also been used recently in Queensland for onshore coal tenement titles. It has been proven around the world to be one of the more effective means of having an open and transparent mechanism for distributing these rights and ensuring that there is a fair return to taxpayers.

Pursuing this, last year the then Labor government decided that cash bidding would be used from 2014 onwards to allocate offshore petroleum acreage in mature areas and in areas containing known petroleum accumulations. So these bills, in effect, build on the work that the previous government did in the area and seek to make amendments to cash bidding for petroleum exploration permits functions to make it more efficient. Under a competitive cash bidding system, applicants offer cash bids for the right to explore with exploration permits being awarded to the highest cash bidder. So this legislation follows from the 2010 future tax system review, which recommends a move to cash bidding for these sorts of petroleum exploration permits.

The bills contain a compulsory payment of a 10 per cent deposit from all bidders as part of their cash bid—in essence, to ensure that we have bona fide bidders only and that people are not squatting on their rights. This is relinquished to the Commonwealth if the highest bidder fails to accept an offer. It is designed to guarantee that the bidder will accept the offer. The creation of a reserve price is to ensure that the Commonwealth does not sell the permits below their public value. And, finally, there is a prequalification of potential bidders for technical and financial capacity to hold an exploration permit to ensure expeditious processing of permits. It includes provisions to ensure that where there are two or more equal highest bids, a highest bidder will be determined and offered the exploration permit. Using cash bidding as the method to allocate petroleum exploration permits for mature areas, or those known to contain petroleum accumulations, is intended to prevent overexploration where none or little may be required.

The 2013-14 budget predicted that the reintroduction of cash bidding would provide around $160 million in additional revenue from 2014-15 alone, through to 2016-17. In a tight revenue environment where the present government is militantly denying itself sources of revenue from Australia's mineral wealth, measures such as these are absolutely critical—not just now, but well into the future—so that Australians, no matter what state they live in, benefit from the resources that all Australians own.

I said at the outset that these bills are a part of our total package of measures to ensure that we have resource security now and into the future. To that extent, I welcome the bipartisan support for this legislation and other measures. Of course, more needs to be done. I have in mind in particular the crisis that we are about to face, particularly in the Eastern States—particularly in New South Wales, Victoria and Tasmania—around the supply of natural gas. So if we are going to address energy security issues, and if we are going to have an efficient market for our energy resources, then we should be looking at each and every one of these pressure points. The position with the eastern gas market is something that requires urgent attention and legislation before the House.

You would know, coming from the Territory, Deputy Speaker Griggs, that Australia has an abundant supply of natural gas resources. We are set to become the second or third, if not the largest, exporter of natural gas in the world based on the abundance of our exploitable supplies. Against this background, it must strike Australians, whatever their political hue, as passing strange that over the next couple of years we are about to face a shortage of natural gas in the eastern states because of a failure of government policy to protect supplies for domestic users. The reason for this is that as large natural gas trains come on line in Northern Queensland they are going to be sucking up natural gas from right around the east coast and leaving domestic users, particularly manufacturers on the east coast of Australia, with a potential shortage of supplies and a doubling of prices. So whilst we are considering legislation which is about the efficient allocation of rights to explore our petroleum resources, we should also be considering policies and legislation before this House which deal with this impending crisis.

We are facing a situation where natural gas prices for domestic users could double by 2020. We have had a lot of hue and cry about the impact of a carbon price on electricity bills. All I can say is that domestic users have seen nothing yet. If we are going to address the impact on domestic manufacturers and householders, particularly in the eastern states, of soaring energy prices, then we are negligent unless we address this impending crisis.

It is not just me saying this; it is the large retailers of natural gas supplies in the eastern states and the large manufacturers as well. According to the managing director of New South Wales's largest gas supplier, AGL, when Gladstone comes online:

Gladstone is going to be like a giant vacuum cleaner for the East Coast gas market hoovering up all the gas it can get its hands on.

And they predict that natural gas prices are going to double for energy users on the east coast of Australia—potentially, further driving manufacturers offshore and seeing people switch from clean or relatively clean sources of energy such as natural gas back to electricity. As many manufacturers have told me, they have done the right thing in reducing their carbon footprint by switching from coal to natural gas, and unless this issue is addressed they will be switching back to coal—not because they want to but because the market will drive them that way. So if we are going to consider legislation that deals with our future energy security and ensure that we are benefiting all Australians with the wealth of natural resources that we have, then we should also be considering these important issues.

I do not want to see this situation for consumers in my state of New South Wales. I see the member for Paterson over there; he should be equally concerned about the potential impact on manufacturers and households in his electorate. I know he has had a lot to say about the impact of carbon pricing on power bills for businesses and households in his electorate. He should be worried sick about the impact on businesses in his electorate of a doubling in gas prices because of a failure of governments to address this impending crisis. It is within our gift to do it, and it is no wonder that the large manufacturing businesses in this country have formed an alliance to lobby all sides of parliament to do something about this issue. They are deeply concerned that a failure of policy in this area will see manufacturers go offshore.

Government Members:

Government members interjecting—

Stephen Jones (Throsby, Australian Labor Party, Shadow Parliamentary Secretary for Regional Development and Infrastructure) Share this | Link to this | Hansard source

I am asked by the members opposite what I did when I was sitting on the other side of the House. I was the only member who brought this matter before parliament, and I did not enjoy any support from members opposite when I brought this before parliament as a private member's matter. I enjoyed no support from members opposite on this particular issue. There were declaratory cries and crocodile tears but no support and no action. Now you have the opportunity to do something about it. You have retailers and manufacturers crying out for action on this issue. You are now in government. It is time to act like a government and not like an opposition and address this impending crisis.

So I welcome the fact that you have picked up one of the bills prepared by Labor when we were in government to address the efficient allocation of exploration licences in the petroleum industry, but the job cannot stop there. If we are going to address energy security in this country then we cannot take our eye off the main game. It strikes Australians as bizarre that we are one of the world's wealthiest nations when it comes to natural gas resources yet we are going to be paying one of the highest prices for natural gas in this country, not because we have to but because of a deliberate policy by government to ensure that Australians pay some of the highest prices for natural gas in the world.

I commend the bill to the House. I think it is good legislation, but if members of this House are truly interested in ensuring that Australians reap the benefits of our bountiful supplies of energy then we have to address these impending crises, and I see no action at the moment. I see a big cry from industry. I see a big cry from gas suppliers saying, 'Complete the picture; do something about this.' So I call upon those opposite to do something about it, and you will enjoy support at least from this member of parliament in any efforts that you are able to make to ensure that businesses and households in my electorate and the adjoining electorates are not faced with some of the world's highest gas prices. While those opposite are whinging about the modest impact of a carbon price, they are taking their eye off the main game, and that main game is the price of gas in this country. I commend the legislation to the House.

Bob Baldwin (Paterson, Liberal Party, Parliamentary Secretary to the Minister for Industry) Share this | Link to this | Hansard source

I rise to provide the closing arguments on the Offshore Petroleum and Greenhouse Gas Storage Amendment (Cash Bidding) Bill 2013 and the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2013. Every year the Australian government releases offshore exploration acreage for competitive bidding. The areas released are selected to offer the global petroleum exploration industry a variety of investment opportunities. The regular release of acreage ensures that Australia has a pipeline of exploration investment opportunities—an essential component of Australia's retaining its attractiveness as a premier investment destination for the oil and gas industry.

Currently, the Australian offshore acreage is allocated through a competitive work-bidding system, essentially, a tender system, whereby exploration acreage is awarded to those who will undertake the most comprehensive program of exploration. The system has served Australia's interests well to date and will continue to do so in the future for frontier area basins where the geology is less understood.

However the inclusion of cash bidding starting in the 2014 offshore exploration acreage as an additional method of exploration permit allocation in mature areas or those known to contain petroleum accumulations, is intended to prevent over-exploration where none or little may be required and to ensure the release of these areas continues to be equitable, economic and efficient. To enable this, the minister, Minister Macfarlane, introduced this bill containing amendments to the Offshore Petroleum and Greenhouse Gas Storage Act 2006 to optimise the existing cash-bidding system in respect of both efficiency and administrative integrity by setting a reserve price in advance of bids being received, which will help to ensure the government does not sell the right to explore below its value and ensuring a return to the Australian community. It requires prequalification of bidders to ensure that eligible bidders have the requisite technical and financial capacity, encouraging serious and genuine bidding through the requirement to pay a 10 per cent deposit together with a placement of a cash bid, and specifying nondiscretionary tie-breaker mechanisms.

The member for Makin asked whether there is an appeal mechanism for bidders if they are assessed as unsuitable. Our response to that is that the Administrative Decisions (Judicial Review) Act applies in this situation. The technical and financial assessments undertaken for cash bidding are the same as those taken for the existing work-program bidding for exploration permits.

Turning my attention to the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2013, the Australian government recently announced its intention to include cash bidding in the 2014 offshore exploration acreage release as an alternative method of exploration permit allocation in relation to mature areas or those known to contain certain petroleum accumulations. The inclusion of cash bidding as an alternative to work-program bidding is intended to prevent over-exploration where none or little may be required, while ensuring that the release of these areas continues to be equitable, economic and efficient. To enable this, Minister Macfarlane introduced some amendments to the Offshore Petroleum and Greenhouse Gas Storage Act 2006 to optimise the existing cash-bidding system.

The National Offshore Petroleum Titles Administrator performs an important function in Australia's offshore petroleum regulatory regime through assisting and advising the joint authority and the minister, the responsible Commonwealth minister, on the award of titles as well as managing the ongoing titles administration function, including keeping a register of titles and data and information management. This bill amends the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Act 2003 to allow the National Offshore Petroleum Titles Administrator to cost-recover for its annual titles administration activities in relation to cash-bid petroleum experts. We appreciate the contributions of the members opposite and we commend this bill to the House.

Question agreed to.

Bill read a second time.

Ordered that this bill be reported to the House without amendment.