Carol Brown (Tasmania, Australian Labor Party, Shadow Assistant Minister for Infrastructure and Regional Tourism) Share this | Hansard source

I rise today to support the Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021 and the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021 on behalf of the Labor opposition. In doing so, I move the second reading amendment on sheet 1363 standing in the name of Senator Watt, which has been circulated in the chamber:

At the end of the motion, add ", but the Senate notes that:

(a) the Government has known about the impending decommissioning of a range of offshore assets in Australian waters since it was first elected eight years ago;

(b) while this legislation compels the National Offshore Petroleum Safety and Environmental Management Authority to regulate the financial assurance capabilities of offshore oil and gas producers, the Government has not provided any additional funding to the agency to undertake this critical task;

(c) the current legislation fails to include a comprehensive definition of what the permitted alternatives to complete removal requirements will be, making it possible for pipelines and concrete structures to be left in place without certainty over environmental, safety and well integrity outcomes; and

(d) the Government's lackadaisical approach to decommissioning reform has resulted in Australian taxpayers footing the bill for the Northern Endeavour fiasco, which has to date wasted $210 million of public money".

I, for one, am glad that the government has finally accepted the need for reform in this crucial policy area, the decommissioning of offshore oil and gas assets. The minister has argued that the time is now for Australia's regulatory framework to catch up with demand, but I would ask the minister: Why now? Why not two years ago?

As with all things with this government, they are far more concerned with sexy announcements and political stunts than meaningful reform in the interests of all Australians. The government, who have been in power for nearly a decade, had to wait for the Northern Endeavour bail-out disaster to address the glaringly obvious reform needed here. If the government weren't the ones to foot the bill, would they have acted at all? The Australian taxpayer is $210 million in the red—and counting, might I add—but I will get to that palaver in due course. Let's start from the top.

By way of background, decommissioning is the process through which all equipment, infrastructure and wells associated with petroleum activity are safely removed when they are no longer used or required. Currently, the complete removal of infrastructure and the plugging and abandonment of wells are the default decommissioning requirements under the Offshore Petroleum and Greenhouse Gas Storage Act. This is consistent with Australia's international obligations, primarily under the United Nations Convention on the Law of the Sea and the London convention and associated protocol, to remove disused installations and structures and to preserve and protect the marine environment.

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

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

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

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

One such example of this was evidently too big to ignore: the Northern Endeavour-Northern Oil and Gas Australia incident. The LamCor oilfields, or the Laminaria-Corallina oilfields, are situated approximately 550 kilometres offshore from Darwin, as is the associated Northern Endeavour floating production storage and offtake facility, the chief infrastructure for extraction and development. Production of Northern Endeavour and associated wells commenced in 1999. By 2015 the titleholder for the fields was a joint venture of Woodside and Talisman Oil and Gas, with Woodside operating the Northern Endeavour.

In 2015 Woodside announced its intention to cease production from the Northern Endeavour in the second half of 2016 and moved to decommission the field soon afterwards. However, before this decommissioning could occur, Woodside sold its share to its joint venture partner Talisman, later known as Timor Sea Oil and Gas Australia, who had been acquired by Northern Oil and Gas Australia. The sale was facilitated through NOPTA and was perfectly allowable in the current legislative environment. NOPSEMA identified concerns about its capability and capacity to respond to an oil spill—an obvious and fundamental titleholder responsibility. This led to formal intervention and enforcement just three days after TSOGA became the titleholder. TSOGA and its contractors were unable to convince NOPSEMA that it had identified the baseline of the corrosion hazards on the facility or undertaken the subsequent assessment prioritisation and planning to address those risks. By 2019 NOPSEMA had lost confidence in the ability of the titleholder and the operator to fulfil their statutory obligations and resolve the identified concerns over the adequate safety and environmental management of the ageing Northern Endeavour facility.

An environmental inspection identified that TSOGA could not demonstrate sufficient financial assurance to cover its liabilities in case of an oil spill, and this required prompt enforcement to resolve. As a result, NOPSEMA issued a prohibition notice on TSOGA's contractor, UPS, on 10 July 2019 and a general direction on TSOGA on 18 June 2020, enforcing the cessation of production on the Northern Endeavour until a range of longstanding serious issues were resolved particularly related to corrosion.

The loss of production until the prohibition notice and the general direction were resolved had serious implications for TSOGA's cash flows. The NOGA group was loss making and had not generated a net profit after tax for the past four consecutive financial years. Essentially the companies could not afford to maintain, let alone decommission, the asset. On 20 September 2019 the Northern Oil and Gas Australia Pty Ltd group of companies went into voluntary administration and subsequently, on 7 February 2020, into liquidation.

The government had to step in. The Commonwealth set up the Northern Endeavour Temporary Operations Program, taking control of the Northern Endeavour until a longer term solution could be agreed. To date it has cost at least $200 million to maintain the vessel—all taxpayers' money. This is at a time when the industry is battling on multiple fronts against extremists with their own agendas and where a social licence to operate is pivotal. They are faced with cleaning up the mess by a negligent government themselves via a proposed levy on industry. This bill, however, does not impose any such levy. As I understand it, consultation is ongoing and a levy is proposed to apply to the industry to fund the decommissioning of the Northern Endeavour. Relevant legislation will come to the fore in due course.

Labor recognises the key role gas plays in creating economic growth and export income earnings for Australia. Labor recognises the many thousands of jobs the industry creates and sustains. We understand the importance of gas as a critical feedstock for Australia's manufacturing industry as well as in electricity generation and in providing the energy that millions of Australian households need for heating and cooking. Labor recognises the role of natural gas as a transition fuel in capitalising on renewable energy opportunities. We support opening up new gas reserves, subject to independent scientific assessments and effective environmental regulation. Gas will play a major part in reducing Australia's carbon emissions and it will assist our regional neighbours on their own journey to decarbonisation as they seek cleaner burning fuels as part of their energy mix, which is why the government's negligence on this issue is so callous and why it's high time they introduced meaningful reform in this place.

The bill strengthens Australia's offshore oil and gas regulatory regime to ensure that emerging decommissioning challenges facing the industry are able to be managed effectively and it addresses a loophole that failed to ensure that the cost of decommissioning an offshore project remained with the entity or entities who are or were responsible for or had the capacity to influence. This bill aims to strengthen the decommissioning framework from cradle to grave and better protect the marine environment and the taxpayer from bearing the cost.

These are important objectives, but I also point out that tightening decommissioning standards will result in significant jobs in the highly specialised oil and gas workforce. In pursuing successful decommissioning and the jobs it creates we must also be mindful of the workplace safety requirements that will need to be in force to keep this workforce safe. This bill increases regulatory oversight and scrutiny by providing for specific decision-making criteria decision points across the OPGGS Act to ensure entities are suitable on entry into the regime and remain suitable throughout the life of the project. It also expands the type of information that may be requested by the relevant decision maker from the applicant or applicants seeking to either enter into or progress through the regime.

There are four key pillars of the bill. The bill provides for oversight of changes in control of titleholders. The sale of an offshore project is meant to be captured as a transfer of the title or titles related to the project, which is also provided under the act. It is also common in the industry, both in Australia and overseas, for an offshore project to be transferred by the sale of the shares in the company that is the titleholder. Such transactions are not currently captured by the OPGGS Act because there is no transfer of the interest of the title or titles.

It provides for specific decision-making criteria and expanded information-gathering powers to assess the suitability of entities wishing to enter into or progress through the regime. It includes minor and technical amendments to improve the operation of the act. It mandates trailing liabilities, expanding existing powers to call back previous titleholders to decommission infrastructure and remediate the marine environment in a title area where the current or immediate former titleholder is unable to do so. It aims to ensure that risks and liabilities in petroleum activities remain the responsibility of those who held—or had the ability to influence operations under—the title and it aims to change industry behaviour by increasing the due diligence undertaken by companies regarding who they sell their assets to.

I'm running out of time, so I will wind up. While it has taken a long time for the government to act to ensure full removal of facilities at the ends of their lives, Labor supports the legislation to ensure Australians receive the assurance they require that offshore oil and gas facilities are safely and appropriately decommissioned and removed.