Gary Gray (Brand, Australian Labor Party, Shadow Minister for Resources) Share this | Link to this | Hansard source

This piece of legislation, the Offshore Petroleum and Greenhouse Gas Storage Amendment (Miscellaneous Measures) Bill 2014, responds to a significant discovery last year of rocky formations off the Western Australian coast. In 2006, the government of the day began a process of mapping the seaward-facing shore of Australia to better understand our boundaries and also, more importantly, to better understand the interaction of state boundaries and Commonwealth boundaries in a maritime context. That work commenced under the Howard government. It was extremely valuable work. It was overseen by the then minister for resources, Ian Macfarlane, and this change has also been implemented and overseen by Minister Macfarlane.

The changes are genuinely significant. To some extent, they have been already reported in the West Australian, in a piece that was insightfully published last year publicising the discovery of what was referred to as Golden Rock, a rock that is not much bigger than the table in front of me but that, through its location, has redrawn the boundaries of Western Australia. The newly identified high-water features around Scott and Seringapatam Reefs triggered a change in the dataset which is used to determine the maritime boundaries.

The features were identified by Geoscience Australia during a regular review of, as I say, the most seaward features that define the limit of Australia's maritime jurisdiction. The review was undertaken in accordance with the Seas and Submerged Lands Act 1973. The review was one that had produced, by 2008, a much celebrated image of the expanded national maritime boundaries. They expanded into the Southern Ocean and into parts of the Indian and Pacific oceans in a much celebrated expansion of Australia's maritime properties, territories and jurisdiction. The flip side of that was that the review continued into the coastal waters. In that review, when I was Minister for Resources and Energy in 2013, the features that had been identified in this current process were simply not known of.

The features that were identified on North Scott Reef affect the blocks comprising the Commonwealth retention lease WA-30-R and Western Australian retention leases R2 and TR5, which cover the Torosa gas field. In and of themselves, these are petroleum titles over the Calliance, Brecknock and Torosa fields, and they tend not to be very much in the public gaze. The importance of them here, and in this piece of legislation, is that the Western Australian parliament and government's capability to make decisions which influence the direct development options that might be chosen by the Browse oil and gas field operator Woodside is genuinely impacted. Why is that important? It is important because, over the course of the last three years, there has been a very substantial public debate in Western Australia about how those oil and gas fields should be developed, including whether they should be developed onshore.

I stress that the government of Western Australia tried very hard to get an onshore development for the Browse Basin oil and gas fields. It tried so hard that it invested its own money. It worked very hard with the communities of the Kimberley coast and worked carefully in concert with the then federal government and with the current federal government to try to get a good solution to an onshore development that could work. Unfortunately, the operator announced in April 2013 that an onshore development did not meet the commerciality test for the joint venture. Because it did not reach the commerciality test, it was then necessary for the joint venture to apply for a standard Commonwealth retention lease. Why was that necessary? It was necessary because, prior to that point, the retention lease had specified that the development of the Browse gas fields should be done onshore at James Price Point.

These changes provide to the parliament of Western Australia and to the government of Western Australia a great opportunity to make a decision that accelerates the development of the Browse gas fields. That is important because, as we stand here today, on 3 March 2015, around our entire country there is not one single onshore LNG greenfield production plant being proposed—not one in any jurisdiction: not in Queensland, not in the Northern Territory and not, unfortunately, in Western Australia. The construction phase, which had grown to the point quite possibly of being overheated during the last five years, has now entirely ground to a halt. Unless we get a project sanctioned by an operator, we will enter an extended period where there is no greenfield onshore LNG project proposed anywhere in our country. We have not seen that since the LNG industry arrived in Australia with the North West Shelf in the 1980s. North West Shelf was a project first in so many different ways, not just because of the air-cooled nature of that facility, a world first, and not just because of the size of that facility—at North Rankin A it was, in its day, the world's largest offshore platform. It was constructed immediately after the Piper Alpha explosion in the North Sea and it was constructed in a way that responded to all of the learnings from that disaster in the North Sea. It was a first of its kind in so many ways. That project being so big, it absorbed the entire investment banking capability of the Australian banking sector. It renovated how our banking sector worked and it renovated the economy of Western Australia.

But now those sorts of developments are simply no more. They are no more because of project economics. The future lies in a better technology pathway. That technology pathway is almost certainly to allow the joint venture to make the most commercial decision that it can make to try to commercially develop these gas resources, and for the first time now the Western Australian government has real skin in the game. No longer can Canberra and Perth flip this ball between each other and point to each other for having failed or dropped the ball. This is now a game that very firmly has a Western Australian regulatory interest because Western Australia, for the first time, has the capacity to genuinely influence how this project progresses.

In the past year, we have seen in the parliament in Western Australia a couple of inquiries into floating LNG—and they were not particularly good inquiries. They tended to be inquiries where the answer was known before the question was even asked. The benefit that comes to Western Australia from floating technology is not just that it is easier to approve; it is not just that it has a smaller and contained environmental footprint; it is not just that it has a lower cap ex; it is also that it is literally the technology of the future. It is the technology that allows development in a capital constrained world; a world where oil companies are reducing their capital expenditure. We saw in recent weeks Wood Mackenzie, respected hydrocarbons analysts, announce that they could see a pipeline of $143 billion worth of oil and gas projects, which are now cancelled. Our Browse gas fields stand a chance of being part of that cancelled arrangement for future oil and gas investments, unless we can get these projects kicked off. That is why I was particularly taken by the terrific front page of our local paper, The West Australian, advertising the golden rock in a terrific piece last year titled 'Stony outcrops to reap billions in gas royalties for Western Australia'. I certainly know that, from the perspective of the Western Australian government, the Western Australian opposition and informed oil and gas observers in Western Australia, this legislation is both sorely needed and strongly supported. The support that this legislation will receive from our side of the House is given because we want to see these Kimberley coast gas developments move closer and be realised.

It is good news when both sides of politics see eye to eye, but this is good news particularly for Western Australia. The 'golden rock', as it has been referred to in The West Australian, is part of a newly identified high-water feature at Scott and Seringapatam Reefs. The passage of this legislation confirms changes in Western Australia's maritime boundaries. It means that the Western Australian government has a much bigger say and a slice of the Browse gas fields that are operated by Woodside energy. This is because the previously unknown rocky outcrops are in the vicinity of the Torosa gas field in the Browse Basin, and they are now known rocky outcrops. They have caused boundaries to be redrawn and legislation to be changed, because the offshore boundaries are set by reference to high water, low water, coastline, islands, rocks and the like—and they change.

When I was minister two years ago, as I said, I was advised that the WA interest in the Browse Basin oil and gas resource was as small as five per cent. Because of the discovery of these rocks near the Torosa gas fields, the WA interest is now big—it is very big. It actually gives the Western Australian government and parliament such a significant say in the development of this basin that in fact whether or not it does get developed is now very strongly in the hands of the Western Australian parliament. As I said, last year Geoscience Australia completed reviewing all of Australia's most seaward features, including the newly identified features around North Scott Reef and in the Browse Basin. When The West Australian reported the appearance of the golden rocks on its front page, and when Premier Barnett handed Woodside a framed copy of the front page at a dinner in June last year, the significance of the rock was understood—if not actually embraced—by all who were present.

Some feared that the gold rock would prevent the development of the Browse gas field. You may recall imprudent references to the Browse developments in the Western Australian parliament last year, as I referred to, and in even poorly conceived reports into FLNG. I advised many people at the time that these rocks, this discovery, could be the enabler the Browse oil and gas projects need to win approval from the Western Australian government and the parliament of Western Australia.

So debate about this Browse development is no longer a debate about empty rhetoric. It is no longer about people positioning themselves on local content. It is no longer about trying to seek a local, parochial political advantage. It is, literally, 'make up your mind' time. It is make up your mind time for the Browse operator and for the parliament of Western Australia. It is clear that with the passage of these bills achieved—I am very sure, with the unanimous support on both sides of two parliaments, here in Canberra and in Perth—that we have a clear Western Australian interest in a good and speedy development of the Browse gas fields. The fields, Mr Deputy Speaker, as you would be well aware, were discovered in the 1970s, in about 1974. They have not been developed, despite holding substantial reserves of condensate—some 300 million barrels—and something in the order of 14 trillion cubic feet of gas.

The benefit for Western Australia from the development of these fields is absolutely clear. The benefit to the Kimberley coast is absolutely clear, and it may well now include significant revenue streams for Western Australia's Future Fund, or for education, roads or hospitals. And it also means, most importantly, an abundance of clean, energy-dense export gas—liquefied, of course.

Western Australia, the Kimberley communities and Australia can no longer afford to have the Browse gas fields stalled. We need the development. We need the revenue. We need the high-tech jobs and the economic activity that come from the very best modern liquefied natural gas processing. A development in the Browse will bring great jobs. Those jobs will last 30 to 50 years. The commissioning of the North West Shelf Gas project in the early 1980s has seen that project operate, uninterrupted, for in the order of 25 years. And it will operate, in its silent, highly effective, extremely beneficial manner, for the next 25 years.

The jobs and the technology of the highly valuable fuel for the carbon constrained, energy hungry countries in Northern Asia can no longer be stalled. That is not in the interests of Western Australia. It is not in the interests of the Kimberley coast nor of Australia. Today, for the first time in a generation, without any greenfield onshore LNG developments around our entire country, we need to embrace the technology that can unlock the gas of the Browse Basin. If we do not do it, if we seek other development options that constrain optimising the benefits for the Kimberley coast and for Western Australia, it could be a blow from which Western Australia may not recover.

Let me explain what I mean by that. Our North Asian markets are already receiving negotiations and offers of gas out of Russia. The Chinese have already signed up a couple of 10-million tonne agreements with the Russians to supply pipeline gas into China. That pipeline gas is an ever present commercial threat to Australia's export LNG industry. That pipeline gas has the potential to remove these markets from Australia's reach for potentially the next 25 to 30 years. Such a development would not be in the interests of Western Australia, would not be in the interests of the Kimberley coast and certainly would not be in the interests of Australia.

Last week I had the great pleasure of attending the University of Western Australia Centre for Offshore Foundation Systems. This is a very interesting facility that exists at UWA and is funded by the great oil companies that operate in Western Australian waters. It is a facility that exists because it became apparent very early on in the construction of North Rankin A that we needed a better understanding of the subsurface, of the nature of the soils that are below the sea that separate the surface of the subsea from our oil and gas deposits. In the early days of the construction of North Rankin A, during the pile-driving process, whole structures were lost—simply pounded into the carbon structures in the seabed and lost—not able to be used as part of the support structure for North Rankin A. It then became apparent that a better study of those subsea structures was critically important. Out of that, at the University of Western Australia we now have world-leading technology to understand how the subsurface structures operate. Out of that, we have a terrific set of discoveries and inquiries designed to look at how we can best anchor systems in the offshore environment.

This area that I describe off the Kimberley coast is more accurately described by meteorologists as cyclone alley. It is where cyclones form and it is where they come belting into the coast every season. Because of those extreme maritime conditions, knowing how vessels can be anchored becomes not just an academic interest but a critical industrial capability for Australia. At the University of Western Australia the work that is done on anchoring systems is not simply world-leading; the University of Western Australia has become the go-to academic institution for understanding how these anchoring systems work, how to optimise these anchoring systems and, most importantly, how to design them for whatever kind of structure needs to be anchored.

We will have, in the course of the next couple of years, arriving into the Western Australian offshore environment, in Commonwealth waters, the Prelude floating LNG facility. It is 488 metres long and about 100 metres wide. It is the world's largest human-made floating structure. The size of this anchoring system is almost beyond belief. For those of us from Western Australia, it is almost as if one anchoring unit would be located in the suburb of Cockburn, another in the equivalent of the northern suburbs, up near Quinns Rock, and then another in Canning Vale. It is a structure that has a footprint of gargantuan proportions and an anchoring system that is able to hold in place the world's largest human-made floating structure, which needs to be held in place in a specific way so that hydrocarbons can be extracted efficiently, so that hydrocarbons can be extracted safely and so that hydrocarbons can be exported on time every time. That outstanding piece of engineering that grows from the excellence of places like Western Australia generates the real engineering jobs of the future. It generates the jobs that will be around in 25 and 30 years time. It generates the jobs in operations and production that will work every day, 24 hours a day, for 10, 15, 20, 25, 30 years. They are the jobs that will create for us the technical platform and future for our industry, that will create for us the status our nation needs in hydrocarbon.

Most of us who have oil refineries in our seats are aware of the massive cost pressures that our refineries are under, and we are aware that refineries are closing. Hardly a year goes by without a refinery in Australia closing. I am lucky: my refinery in Kwinana is not just open; it is a refinery in which BP is investing. But most refineries are under extreme pressure. In Queensland, one close was announced last year. Refineries in Sydney are closing. There are no refineries in Adelaide. Refineries in Victoria are under massive pressures.

The technologies that relate to oil and gas refining are technologies that support engineering schools in our universities. They are the technologies that support the most advanced manufacturing sector that we have. They are the technologies that create the transport fuels. They are the technologies that literally keep our lights burning, that keep our trucks and transport working and that keep our roads and airways operating. When that technology transforms to gas based technologies, what we will see through these floating technologies is again the pathway to the future, supported by outstanding academic research, supported by governments that genuinely support the pathway to the future in creating the technology options that our country currently does not have.

We are, by any measure, as I am fond of saying, a global energy superpower; but we need also to be a global energy technology superpower. To be the global energy technology superpower, our nation must embrace these new technologies. By doing that, we will generate industries based in Perth, in Darwin, in Geelong, in Melbourne, in Adelaide and in Brisbane that will support the great effort to extract our oil and gas and to export it in the most environmentally efficient, sensitive and capable way, in a way that means our oil and gas investments can more than compete on a global scale with every other hydrocarbons' province. We can do that because our regulatory environment has certainty. Our governments support these ventures and do not squabble about it—and we have seen some squabbling on this issue in this province over the past two years. We now have an opportunity to change that—and this legislation provides that opportunity. It gives to Western Australia an unambiguous slice of the action and an unambiguous slice of the accountability. If we do not get this project up, and, if we do not see the development of the Browse oil and gas fields in a meaningful time frame, we will see an opportunity disappear for Western Australia. As our competitor countries in East Africa and in other parts of the globe take our markets with the very technology that I have described, we will see in East Africa the development of floating technologies that will deliver gas into our north Asian markets more cheaply and quickly. We will see pipeline gas out of Russia delivered into China more cheaply and quickly.

We have the capacity here and now to support the parliament of Western Australia and to support the government of Western Australia to take the brave decisions to support our future as a global energy superpower. These are decisions that will ensure that we can supply these markets from a close location with co-investment from our customer countries and with technologies that will develop the newer industries in Perth and drive our industry in an environmental, a sustainable, an industrially-ambitious and, most importantly, a nationally courageous way This way would allow us all to be proud that, when we were asked in this place to vote on creating certainty for the tenure that exists in these oil and gas fields, not only did this place vote for it, but we voted for it unanimously—not only did they vote for it in the Western Australian parliament, but they voted for it unanimously. We need to keep the courage in place and allow and encourage the project proponents to invest in the interests of the Kimberley coast, Western Australia and our nation in a technology that will exist and continue to operate for future generations.

I commend Minister McFarlane for his incredibly hard work in bringing this bill to our table. I commend the parliament of Western Australia for the speedy manner in which they have dealt with this legislation. I commend also Geoscience Australia for doing its work in a tough environment, in a contested environment and in a way that makes us all very proud of that institution and the great skill and knowledge that it brings to the work that it does in supporting these decisions.

Geoscience Australia received the first draft legal advice on the appearance of these rocks less than a year ago. That advice confirmed that the high-tide features of Scott and Seringapatam Reefs did fall within the limits of the WA jurisdiction. Within less than a year, the government has responded. Within less than a year, the parliament of Western Australia has responded. Within less than a year, our parliament has responded and responded in an emphatic way to create certainty in this jurisdiction. This certainty underpins our view that these oil and gas fields should be developed for our national interest; to create the energy of the future for our North Asian markets; to create the jobs of the future for kids who are not yet at school in Australia; for our universities that have not yet developed the new technologies that will support the safe extraction of this gas; and to support the investors and the superannuation accounts of our country that will want to invest in an energy future that is Australian, that links to our North Asian markets and that gives Australian investors the great opportunity that this energy option provides.

There are professors and technologists that are not yet in schools. Those technologists and those professors, who will work to develop our maritime offshore manufacturing capability, are going to thank this parliament and the West Australian parliament for having the courage to do what it needed to do and to have done it quickly in order to create the certainty for this great project. I thank the government for bringing this legislation to us in a timely fashion. I thank members on both sides for being prepared to support this legislation so quickly and without controversy to ensure that we are able to say: 'This was unanimously supported. Now let's get on with the job.' I commend this legislation to the House.

David Gillespie (Lyne, National Party) Share this | Link to this | Hansard source

The Offshore Petroleum and Greenhouse Gas Storage Amendment (Miscellaneous Measures) Bill 2014 and related bills are very important, as the member for Brand has so aptly summarised. I not only support most of his observations, but I note that $134 billion worth of potential development that may be put on hold or put at risk is of great concern to everyone in this House—at least I hope it is—because it is this sort of investment that drives wealth for the nation, wealth for individuals, jobs, employment security, and energy.

We have had so much energy in our lifetime that people tend to take it for granted. It has been the delivery of energy which has driven so many of the things that we take for granted, whether it be a car, a mobile phone, a TV, or a video—all the electronics. They all come from minerals which have been dug out of the ground by the use of extensive energy. They have been smelted in furnaces that require enormous amounts of energy. All of that energy, along with lots of other inventions over the centuries, is what differentiates us from medieval times and times before then when people were energy poor and energy amounted to burning wood, or the use of kinetic energy, horsepower, cattle power—all the simple things.

As the member for Brand so aptly pointed out, we are blessed with natural gas and offshore gas in the north-west of the country, in the Browse Basin. He also mentioned that it has, unfortunately, been left in limbo because it did not pass the commerciality test. I thoroughly agree with him, but it is a very polite way of saying that it costs too much to get it processed on shore. That should be sending alarm bills all around people working in the industry in Australia. Basically, we have priced ourselves out of the market. Our researchers and universities helped deliver the LNG technology and floating platforms, but the exorbitant cost of developing the huge natural gas reserves on shore led the oil and gas industry to develop this technology. So not only have we helped in a pure scientific manner but also the costs of doing business in the LNG space in Australia have driven them to invent it. So it seems ironic that people are saying, 'All our LNG developments are potentially at risk or will not proceed.' It is a salutary lesson that you cannot cook the goose that laid the golden egg.

When there was a rush for gas and energy, a lot of terms and conditions were not what any reasonable person would have expected two or three years earlier. But our chickens have come home to roost and, now that the construction phase has finished in many of these major projects, we have had to have a wake-up call. As the member for Brand so politely mentioned, it did not pass the commerciality test. The bleeding obvious was also stated—that is, that Australia is not the sole repository of oil and gas or mineral wealth, for that matter too, and that there are huge areas to be developed in North and South America, in Africa, in Russia, in the Confederate States and in China. It is a competitive world.

When billions are being mentioned—like you or I would mention millions or hundreds of thousands—that capital has to get a good return. It is a very risky business. To build a huge LNG ship, float it out into the middle of the ocean and anchor it on the seafloor, you have billions and billions at risk. If we do not do it better here, those boats will float off and get it off for those millions of people in Asia and elsewhere around the world who need energy to keep warm, to have their electricity generated, to run their furnaces, to build cars, to build electronics and to build housing. People take it for granted. Energy has to come from somewhere, and the most concentrated form of it—whether we like it or not—is oil and gas. I am all for developing other sources of energy. We are blessed with coal as well and lots of sunlight and lots of wind, but the efficiencies of petrol, oil, diesel and gas in a concentrated form is the reason it is being used so much.

There are four bills before us and they have come about because of our very efficient Geoscience Australia people, who have identified two little outcrops—North Scott and Seringapatam reefs. They have altered the definitions of what are Commonwealth waters and what are state or territory waters, and unintended consequences have arisen. There is a lot of concern about the title and the regulation around these titles. In particular, it materially affects the Woodside Browse Basin and two licences in the Conoco-Poseidon joint venture, which have huge reserves of natural gas. Quite clearly, the state, the Commonwealth and the titleholders want to have security of tenure and they want to know the circumstances in which everything is going to operate. So it is quite urgent that we get this all sorted out, and that is what these bills are addressing.

The legislation will clarify the arrangements for how the two statutory authorities, NOPSEMA—the National Offshore Petroleum Safety and Environmental Management Authority—and the National Offshore Petroleum Titles Administrator, NOPTA, regulate these titles and the levies. If the land is being transferred over to a state or vice-versa by virtue of these developments by Geoscience Australia, they will still be able to operate. What we do not want to see is a whole logjam of current development turned on its head because of some minor regulatory confusion. We want to have everything regulated in one place in one time so that the oil and gas companies that do want to develop these huge reserves for Western Australia, for Australia and for the world will be able to get on and do it—because, if cannot, they will go and do it elsewhere. So NOPSEMA and NOPTA will be able to regulate areas that are currently being regulated by them even though the areas are transferred over to Western Australia.

There are other legal issues at play here. Many of these titles, because they involve huge areas and huge amounts of money, are often held in several names. Currently, voluntary action can be taken by one of the parties of these joint ventures without notifying the other or, vice-versa, one party can remove themselves from it without notifying the others. This will streamline that process so that they can do things jointly and everyone knows what is going on. It sounds pretty straightforward, but, as you know, law is a complex animal and we are trying to make it simple.

I look forward to these areas being developed by companies here in Australia that use Australian technology and will pay their levies to the Australian government and to the Western Australian government. The royalties will flow through to the state and federal governments and the people of Western Australia and Australia will benefit. Schools and hospitals will be built, highways will be maintained and railways will be built because the states will have income from the natural resources that the nation is blessed with. But that will not happen if we are too expensive and we price ourselves out of the market. All this regulatory red tape, green tape and industrial relations tape can, as I have said so often, cook the goose that laid the golden egg. Not only is this cluster of amendments and legislation very important; it has huge ramifications for the wellbeing of the oil and gas industry and development in Australia. I commend all the bills to the House.

Alannah Mactiernan (Perth, Australian Labor Party) Share this | Link to this | Hansard source

It was obviously cause of great celebration in Western Australia when the golden rocks were discovered. The rocks—or islands, as they may officially be called—are about the size of a kitchen table. They are about three metres across and penetrate a mere one metre beyond the surface of the water. I have had some conflicting advice—whether it is a metre above the low water mark or a metre above the high water mark. It is probably the high water mark because that seems to be the reference point for making the determination on the territory of the coast surrounding them. It is very exciting that Western Australia's sphere of influence has now expanded quite considerably into the Browse Basin and, in particular, into the Torosa retention lease. There has been a great deal of celebration about the added benefits that this will bring to Western Australia financially if the project does indeed go ahead.

I am slightly less optimistic about the benefits that will accrue to Western Australia, because we know from the way that the Grants Commission works that for every additional cent that we receive in royalties we receive a direct reduction in our GST return. From the last figures I saw, we are down to giving about 32c in the dollar back from our imputed GST contributions. The actual benefit to Western Australians is going to be somewhat more muted than the headline 'Golden rock story' first implied. Certainly, there is some short-term advantage in that you get the money before you have to take your cut in the GST. There is a three-year rolling average process, so you have a small window of opportunity when you get the dough when you are not having your GST massively cut, but of course that has a problem at the back end, as Premier Barnett is now experiencing, where the royalty growth is drying up and the GST disbenefit is continuing. I just put this word of caution to those who see these rocks as golden: it may indeed be, in the immediate and direct royalty sense, something of fools gold.

However, as the member for Brand pointed out, very considerable benefit comes to the state government by way of being able to influence the manner in which these retention leases are ultimately developed. On the basis of the material that we are considering here today, in relation to the Torosa lease there will be a majority share in the hands of Western Australia. That will give Western Australia much more say in the determination of the technology to be used. The member for Brand described it as having 'skin in the game'. I point out again that the amount of the skin that one has is diminished very considerably by the GST arrangements and that the direct financial benefit is, in fact, very limited.

I go on to say that I do think that there has been a lot of wasted opportunity in Western Australia surrounding Browse. The insistence by the Premier that the development take place at James Price Point was a unilateral decision that he made—that it had to be an onshore development—and it saw us spend a hell of a lot of time and effort for very little gain. I agree with the member for Brand: you have to be prepared to go with the most cost-effective and environmentally sound technology. It is not reasonable for us to expect in this globally competitive environment that we are going to have a company proceed with a development that uses a technology, which some would argue has been superseded. Having said that, I would also say there is a hell of a lot more scope for us to insist in the development of FLNG that we have a much greater slice of the action in Western Australia. I do not accept that we should accept without any critique the industry participation plans that have been proposed by Woodside around this project.

Before I go on to that, I should also mention that, in terms of the environmental impact, by about 2011 a very strong view had emerged in the Kimberley that they did not want to see a facility developed on the coast. They did not want to industrialise the Kimberley and they believed the offshore option was a much better option, but that is not to say that there was not a degree of diversity in opinion within the community. Over those years I was travelling regularly to the Kimberley and it was my very strong sense that the community on balance was in favour of a development proposal that involved the protection of the coast. That has indeed been borne out by the subsequent election results in 2013, when this was still a very contested issue. I think most of us realise that Woodside had probably already made its decision well before that election, though it did not share that decision with the community at that point.

As a project in this location, FLNG has great economic and environmental benefits. From my discussions with Woodside, I do believe that the analysis from the member for Brand about developing the anchoring technology for the first FLNG facility in Western Australian waters is sound. There certainly are benefits to be gained from that. I also think that we need to be far more vigilant in determining the way we lock in the requirement for this work to be done in Western Australia—the front-end engineering and design and the detailed design should be done in Western Australia. From reading the industry participation plan that Woodside put out through Browse, I am concerned that we have not demanded enough. I have in the past quoted, as others have, the experience of the Hebron development in Canada. There they specified in man hours—or person hours—the amount of FEED. From the top of my head, I think it was something like 25,000 hours of FEED—man hours that had to be directed towards FEED in Newfoundland. For their detailed design, it was over a million man hours.

I have to say that we have a much bigger problem here than we sometimes acknowledge. We have engineering schools producing young oil and gas engineers who cannot get an entry-level or a graduate job. The major companies are no longer bothering to turn up to careers days put on by engineering schools, because they are not offering any jobs. Unless we do more to insist that we get more of that detailed design locked in locally, our young people are going to miss out on getting those entry-level jobs. They are not going to get the jobs which go to Paris and Seoul. We have to be stronger on that point. There is a lot of concern that if other countries are providing the engineering design then they will also have an advantage in competing for the maintenance work. Unless we demand it, unless we lock it in and unless we make it part of these agreements, then we will not see those benefits go to Australia and, indeed, Western Australia. I hope that one outcome of this new arrangement is a greater focus on extracting the benefit. The benefit will not come from the royalty alone; that will be lost in GST. The benefit will emerge from ensuring that we get good jobs out of this. We are not luddites; we are not resisting—well, I am not—FLNG. We should be arguing for FLNG, but we have to do more than accept the expressions of best endeavours by the company to ensure that we bring home the bacon on this one.

Karen Andrews (McPherson, Liberal Party, Parliamentary Secretary to the Minister for Industry and Science) Share this | Link to this | Hansard source

I thank the previous speakers for their contribution to this debate. In summing up, I will address each bill commencing with the Offshore Petroleum and Greenhouse Gas Storage Amendment (Miscellaneous Measures) Bill. The Commonwealth government announced in February 2014 a new streamlined approach for environmental approvals for offshore petroleum activities, making the National Offshore Petroleum Safety and Environmental Management Authority, NOPSEMA, the sole environmental regulator for these activities in Commonwealth waters. This approach has significantly increased regulatory efficiency in respect of petroleum activities in Commonwealth waters and continues to deliver clarity and certainty for industry participants.

Recognising these significant gains, the Commonwealth government is seeking to streamline regulatory arrangements in respect of all offshore petroleum activities. As part of this process, the Commonwealth is encouraging the states and the Northern Territory to confer functions and powers relating to matters of occupational health and safety, structural integrity and environmental management upon NOPSEMA in relation to those waters of the sea falling within their respective jurisdictions. However, the Offshore Petroleum and Greenhouse Gas Storage Act in its present iteration includes a number of legislative impediments to conferral. Therefore, this bill amends the act to permit conferral by the states and the Northern Territory across as wide as possible geographic area. This represents an important step towards the establishment of a single national regulator for all safety, structural integrity and environmental management matters in Commonwealth and coastal waters. It also underscores this government's ongoing commitment to maintaining and improving Australia's regulatory framework for offshore petroleum activities.

The bill also makes a number of technical amendments to the administrative framework relating to the taking of eligible voluntary actions by multiple title holders under the act and regulations in response to issues identified as a result of the implementation of the current framework. These amendments will clarify the operation of the process relating to the taking of eligible voluntary actions and provide an alternative option for multiple holders of a single title to take eligible voluntary actions.

The Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment (Designated Coastal Waters) Bill makes consequential amendments to the Offshore Petroleum and Greenhouse Gas Storage Regulatory Levies Act 2003—the levies act. These amendments are necessary as a result of the Offshore Petroleum and Greenhouse Gas Storage Amendment (Miscellaneous Measures) Bill 2014, which expands the geographical scope of the definition of designated coastal waters in the Offshore Petroleum and Greenhouse Gas Storage Act 2006, the OPGGS Act, to facilitate the conferral of powers and functions upon NOPSEMA by the states and the Northern Territory in respect of all waters of the sea landward of the Commonwealth offshore area. The levies act, which recovers NOPSEMA's costs associated with its regulatory activities, defines designated coastal waters to have the same meaning as under the OPGGS Act. Expanding the geographic coverage of designated coastal waters under the OPGGS Act will therefore consequentially extend the area in respect of which levies might be imposed. To avoid the possibility of this extension resulting in the imposition of taxation that discriminates between the states, or parts thereof, on the basis of geographic location, this bill amends the levies act to limit the operation of the levy regime to the area constituted by the existing definition of designated coastal waters.

T he Offshore Petroleum and Greenhouse Gas Storage Amendment (Miscellaneous Matters) Bill 2015 makes amendments to the Offshore Petroleum and Greenhouse Gas Storage Act 2006, the act, to (1) ensure security of tenure for titles in Commonwealth waters where the boundary between Commonwealth and state or territory coastal waters changes; (2) ensure that the National Offshore Petroleum Safety and Environmental Management Authority, NOPSEMA, can effectively perform regulatory functions when conferred with such functions under state or Northern Territory legislation; and (3) make technical amendments to further improve the act.

The most significant of these amendments relates to changes to coastal water boundaries. Last year, Geoscience Australia, in accordance with its responsibilities, announced changes to the maritime boundaries between the Commonwealth and Western Australia. This case prompted a closer look at how the offshore petroleum regime protects security of tenure for title holders following a boundary change. Currently, the act provides continuity of state or Northern Territory title over blocks that relocate to Commonwealth waters until that title ceases to be in force. However, once it ceases to be in force there is no present legislative mechanism that provides for the immediate granting of an equivalent title to ensure security of tenure. The government acknowledges that these title holders may have made considerable investments and efforts to obtain that title and conduct exploration activities. Therefore, it is critical that there is continuity of title within Commonwealth waters when the state or Northern territory title ceases.

These proposed amendments provide an automatic statutory grant of an equivalent Commonwealth title over affected blocks that relocate to Commonwealth waters following a boundary change. Considering that Geoscience Australia continues to make efforts to accurately define Australia's maritime boundaries, future boundary changes that affect title holders is a realistic prospect. Accordingly, these amendments will provide the exact certainty that title holders require, as they ensure there is a secure tenure for titles that fall into Commonwealth waters.

This bill builds upon efforts to streamline regulatory arrangements for offshore petroleum activities. The government recognises that streamlining improves regulatory efficiency and provides clarity and certainty for industry participants. To further this agenda, the states and Northern Territory are being encouraged to confer powers and functions on the national regulator, NOPSEMA. To this end, this bill further clarifies the conditions in which conferral can be made and finalises conferral cost-recovery arrangements for NOPSEMA.

This bill proposes some technical amendments to improve the administration of the act. These measures highlight the government's commitment to creating an effective regulatory framework that provides regulatory certainty, enhances investment and enables growth in the offshore petroleum industry.

Finally, the amendments in the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment (Miscellaneous Matters) Bill 2015 are consequential to the Offshore Petroleum and Greenhouse Gas Storage Amendment (Miscellaneous Matters) Bill 2015. This last bill will provide that, where a titleholder holds state or Northern Territory title over blocks that relocate to Commonwealth waters, there will be an automatic statutory grant of an equivalent Commonwealth title over affected blocks when the title of that state or the Northern Territory ceases. Given that cross-boundary titles are granted automatically under the statute instead of by the normal process of releasing acreage and receiving bids by prospective titleholders, when they are an exploration permit these titles will be provided with a specific name to differentiate them from other types of exploration permits.

The National Offshore Petroleum Titles Administrator is responsible for administering offshore petroleum titles and is funded on a full cost recovery basis. The titles administrator will undertake administration and compliance work in relation to an exploration permit granted as a result of a boundary change. That is similar to the work undertaken in relation to existing permits. So this bill amends the levies act to ensure the annual titles administration levy is imposed on a boundary change exploration permit. I commend these bills to the House.

Question agreed to.

Bill read a second time.