David Van (Victoria, Liberal Party) Share this | Hansard source

I also rise to speak on the Offshore Petroleum and Greenhouse Gas Storage Amendment (Benefit to Australia) Bill, a bill that is noble in intent but, I'm afraid, flawed in its execution. Before I go into the details of the bill, I recognise just how important this industry is to Australia's export performance. Australia has abundant supplies of natural gas both offshore and onshore, enough for more than 50 years based on current production. It is Australia's third-largest energy resource, after coal and uranium, and it is a crucial part of Australia's energy mix, providing a quarter of the nation's needs.

Australia is one of the world's two largest liquefied natural gas exporters. Australia exported 78.3 million tonnes of LNG in 2020, valued at approximately $36.2 billion. LNG is Australia's second-largest energy export commodity, behind iron ore. Natural gas from Australia is exported to many countries in the region, mainly Japan, the largest importer of Australian gas, China and South Korea but also Taiwan, Malaysia, India and other places via spot markets.

The Australian oil and gas industry directly supports over 32,000 jobs. The National Energy Resources Australia, NERA, estimates that each direct job in the oil and gas industry supports an additional 10 jobs across the supply chain in the wider economy. Ernst & Young have estimated that over $310 billion would have been spent between 2010 and 2020, highlighting Australia's strong place in the upstream industry. This includes about $170 billion spent directly since 2007 on five offshore LNG projects, which include Pluto, Gorgon, Wheatstone, Ichthys and Prelude. Growth of the market since then has seen Australia become the largest LNG exporter in the world, overtaking Qatar as additional LNG plant capacity has come onstream over the last few years. This has meant more export earnings, or royalties, and greater export income, something that benefits all Australians, as it provides not only taxation but also royalty income to help fund infrastructure, education and social services.

One Nation is proposing to add the following clause to the objective of the existing Offshore Petroleum and Greenhouse Gas Storage Act:

… to ensure that the exploitation of these natural resources is for the benefit of the Australian community—

the remaining objects of the act are:

(a) to provide an effective regulatory framework for:

(i) petroleum exploration and recovery; and

(ii) the injection and storage of greenhouse gas substances;

in offshore areas …

While this change might seem innocuous, in effect it injects a major uncertainty into the act. It would make potential legal challenges to decisions made under the act more likely. The OPGGS Act provides for the safe and responsible operation of offshore oil and gas activities. It ensures that risks to safety and the environment are reduced to as low as reasonably practicable. It also ensures that industry meets the requirements of good oilfield practice and ensures that the recovery of oil and gas is at its optimal level.

The proposed One Nation amendment injects ambiguity and uncertainty into the objective, particularly around the use of the term 'for the benefit of the Australian community'. The issue that I have is this term is not defined and would therefore likely be open to interpretation by the courts. The courts rely on stated objectives of an act to help them interpret those acts, and it will be up to them to decide what such a benefit means. As we've seen, the courts have become far more active in accepting legal challenges to resource projects based on a range of environmental arguments, so it would seem highly likely that activist groups could use the One Nation objective to argue that an activity such as drilling an offshore well to recover oil is contributing to, let's say, climate change or impacting the environment. Therefore, they would argue, it is not for the benefit of the Australian community. If a court accepted that argument, it rapidly flows on to all the activities regulated under this act. Even if the courts did not accept this argument, the process of legal challenges can take years, and we've seen that in so many projects over the years, particularly in Senator Hanson's home state of Queensland. So, even if the challenge is ultimately unsuccessful, the process can be lengthy enough to effectively derail projects.

The stated aim of amending the objective appears to be around collecting more tax from the industry, which One Nation and Senator Patrick both believe is inadequate. However, as the Economics Legislation Committee noted in its report on this bill:

Taxation treatment is not a responsibility of the OPGGS Act but rather fits within the legislation under the purview of the Treasurer such as the Petroleum Resource Rent Tax (PRRT) and company taxation arrangements. The PRRT is a profits-based tax and specifically recognises the large investments required to explore for, and produce, oil and gas resources.

As a result, One Nation is seeking to turn an industry regulatory act into a taxation act. It is ill-fitting both the objectives of the current act and the type of regime it is enacted under.

As we know, offshore petroleum activities—and that includes oil and gas exploration and development, along with greenhouse gas storage—in Commonwealth waters beyond state and territory coastal waters are governed by the Offshore Petroleum and Greenhouse Gas Storage Act 2006. We also know that Commonwealth waters are three nautical miles from the territorial sea baseline to the edge of the outer limits of the continental shelf. The object of the legislation is to provide an effective regulatory framework for petroleum exploration and recovery and the injection and storage of greenhouse gases in those offshore areas. The legislation provides the framework of rights, entitlements and responsibilities of governments and industry and is objective based. Importantly, the framework also sets out the requirements for occupational health and safety, structural well integrity, environmental management and resource management.

The OPGGS Act also establishes a regulator and a titles administrator. The National Offshore Petroleum Safety and Environmental Management Authority, commonly known as NOPSEMA, is an independent statutory body. NOPSEMA and the National Offshore Petroleum Titles Administrator, NOPTA, are both cost recovered from the offshore oil and gas industry. An audit of NOPSEMA was conducted by the Chief Scientist, Dr Alan Finkel, and relevant experts in 2019. That audit provides an additional level of assurance to the community that the relevant scientific and environmental considerations are part of NOPSEMA's assessment process and decision-making. Dr Finkel's audit found that NOPSEMA is a highly skilled, professional and competent regulator, that it has appropriate processes and practices to meet regulatory requirements under the Offshore Petroleum Greenhouse Gas Storage (Safety) Regulations 2009 and that NOPSEMA has appropriate processes and practices to ensure that environment plans are assessed against relevant, sufficient and complete scientific and technical information.

The OPGGS Act has established a regime that enables a title holder to progress from exploration through to production and decommissioning. Offshore petroleum titles provide rights to companies to apply for permission to undertake petroleum related activities within their title area, and those proposed activities are subject to approvals for environmental and safety matters and technical title assessments, based on resource management. Title decisions under the OPGGS Act are made by the joint authority comprising the responsible state or territory minister and the responsible Commonwealth minister. This joint decision-making arrangement with states and territories recognises that offshore oil and gas projects play an important role in supplying natural gas to domestic markets and generating economic activity in regional areas.

According to publicly available title data, there are currently around 366 active offshore petroleum titles and around 80 companies active in Commonwealth waters. Of these titles, there are currently 82 active petroleum retention leases in Commonwealth waters. The OPGGS Act requires regular five-yearly reviews of the commercial viability of oil and gas resources under the retention release, with discretion for governments to initiate a commerciality review within the five-year period if required.

This industry is incredibly important to Australia. It directly supports over 32,000 jobs, and National Energy Resources Australia estimates that each job adds 10 additional ones. It bears repeating: 10 additional jobs. Further, Ernst & Young has estimated that over $310 billion will have been spent between 2010 and 2020, highlighting Australia's strong place in the upstream industry. So I think it's safe to say that this industry is not one that we want to put at risk of activists or activist courts.