George Brandis (Queensland, Liberal Party, Shadow Attorney-General) Share this | Link to this | Hansard source

These bills will amend the Offshore Petroleum and Greenhouse Gas Storage Act. They will establish two new regulatory bodies to administer and regulate petroleum and greenhouse gas storage operations in Commonwealth waters in the Australian offshore area. The new bodies will replace the designated authorities, which are the state and Northern Territory ministers who, through their departments, have perfor­med the functions and exercised powers conferred directly on them by the Offshore Petroleum and Greenhouse Gas Storage Act 2006 and its predecessor act, the Petroleum (Submerged Lands) Act 1967.

There will be no change to the joint authority arrangements with respect to petroleum titles that have taken place since 1980. The joint authority for each state and the Northern Territory comprises the respon­sible Commonwealth minister, currently the Minister for Resources and Energy, and the relevant state or Northern Territory minister. The joint authorities make the major deci­sions under the act concerning the granting of petroleum titles, the imposition of title conditions and the cancelling of titles, as well as core decisions about resource man­agement and resource security.

In the case of greenhouse gas titles the corresponding decision maker will continue to be the responsible Commonwealth mini­ster. The two new regulatory bodies are the National Offshore Petroleum Safety and Environmental Management Authority, known by the elegant acronym NOPSEMA, and the National Offshore Petroleum Titles Administrator. NOPSEMA will be an expanded version of the National Offshore Petroleum Safety Authority, or NOPSA. NOPSA, which is a body corporate, will continue to exist under the new name and will have an extended range of functions in relation to petroleum and greenhouse gas operations. Its principal functions will be occupational health and safety, structural integrity of facilities, wells and well related equipment, environmental management and regulation of day-to-day petroleum opera­tions. NOPSEMA will appoint and deploy OHS inspectors and petroleum and green­house gas project inspectors. NOPSEMA, like NOPSA, will be fully funded by cost recovery levies and fees managed by means of a special account under the Financial Management and Accountability Act 1997.

The titles administrator will be the holder of an APS office within the Department of Resources, Energy and Tourism and will be assisted principally by APS employees with­in the department. The titles administrator's principal functions will be to provide information, assessments, analysis, reports, advice and recommendations to members of the joint authorities and the responsible Commonwealth minister in relation to the performance of those ministers' functions and the exercise of their powers, the collect­ion and management and release of data, titles administration, approval and registra­tion of transfers and dealings, and the keeping of the register of petroleum and greenhouse gas titles.

NOPSEMA and the titles administrator will each have an express function of cooper­ating with the other in matters relating to the administration and enforcement of the act and regulations. While it is an important aspect of the new regime that the two bodies will act entirely independently of each other in their decision making and regulatory practices, a level of administrative coordin­ation between the agencies will assist in minimising any potential impact on the industry of having offshore operations regu­lated by two different entities.

The objective of the Offshore Petroleum and Greenhouse Gas Storage (Registration Fees) Amendment Bill 2011 is to amend the Offshore Petroleum and Greenhouse Gas Storage (Registration Fees) Act 2006 to correctly reference the new National Offshore Petroleum Titles Administrator. The objective of the Offshore Petroleum (Royalty) Amendment Bill 2011 is to amend the Offshore Petroleum (Royalty) Act 2006 to correctly reference the proposed National Offshore Petroleum Titles Administrator. The objective of the Offshore Resources Legislation Amendment (Personal Property Securities) Bill is to amend the Offshore Petroleum and Greenhouse Gas Storage Act 2006 and the Offshore Minerals Act 1994 to exclude application of the Personal Property Securities Act 2009. The objective of the Offshore Petroleum and Greenhouse Gas Storage Regulatory Levies Legislation Amendment (2011 Measures No. 2) Bill 2011 is to amend the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Act to impose new cost-recovery levies on holders of offshore petroleum and green­house gas storage titles. The levies will recover the costs of the National Offshore Petroleum Titles Administrator and the National Offshore Petroleum Safety and Environment Management Authority.

Following a High Court decision in 1975 that confirmed that the Commonwealth had jurisdiction and the right to explore for and exploit seabed resources in the territorial sea and the continental shelf—that is, the continental shelf case—in June 1979 the Commonwealth and the states agreed to a division of offshore rights, powers and responsibilities, known as the Offshore Constitutional Settlement. Pursuant to the Offshore Constitutional Settlement, the Commonwealth parliament enacted the Coastal Waters (State Title) Act 1980 and the Coastal Waters (State Powers) Act 1980, and equivalent acts for the Northern Terri­tory, by which the Commonwealth conferred on the states and the Northern Territory the same title to the area and seabed of the three nautical mile territorial sea and the same legislative jurisdiction as the states and the Territory would have had if that part of the territorial sea had been within the limits of the states or the Territory.

Following the Offshore Constitutional Settlement, an amendment confined the application of the Petroleum (Submerged Lands) Act 1967, which is now the Offshore Petroleum and Greenhouse Gas Storage Act 2006, to waters outside the three nautical mile limit. The states and the Northern Territory enacted mirror legislation applying in waters landward of that boundary. Again, as provided by the Offshore Constitutional Settlement, under the Commonwealth act the states and the Northern Territory shared in the administration of the Commonwealth act under the joint authority and designated authority arrangements described in the outline.

Post the Offshore Constitutional Settle­ment, the most significant legislative deve­lopment has been the establishment of the National Offshore Petroleum Safety Author­ity. This followed the 2001 Commonwealth government report on offshore safety Future arrangements for the regulation of offshore petroleum safety. The primary conclusion of this report was:

... that the Australian legal and administrative framework and the day-to-day application of this framework for regulation of health, safety and environment in the offshore petroleum industry is complicated and insufficient to ensure appropriate, effective and cost efficient regulation of the offshore petroleum industry.

Much would require improvement for the regime to deliver world-class safety practice.

Since 1 January 2005, NOPSA has been the regulator of occupational health and safety in Commonwealth waters under the Common­wealth act and in state and Northern Territory coastal waters under the states' and Northern Territory's Petroleum (Submerged Lands) Act—that is, the mirror cooperative legislative scheme.

The Productivity Commission's Review of regulatory burden on the upstream petroleum (oil and gas) sector in 2009 identified significant unnecessary regulatory burden on the sector and made 30 recomm­endations, including the establishment of a national offshore petroleum regulator in Commonwealth waters and the imple­mentation of regulatory best practice. The Varanus Island gas pipeline explosion of 2008 and the uncontrolled release of oil and gas from the Montara wellhead platform in 2009 also highlighted inadequacies in the offshore petroleum regulatory regime. Of particular concern was a shortage of technical staff in the designated authorities' departments with the necessary qualifi­cations, skills and experience. There was also a perceived lack of independence of staff with responsibility for regulatory oversight of well integrity and environmental management, located as they were in the state and Northern Territory departments that were responsible for resource development.

The June 2010 report of the Montara Commission of Inquiry recommended that the Productivity Commission's proposal to establish a national offshore petroleum regulator should be pursued at a minimum. The Montara commission recommended that a single independent regulatory body should be created, looking after safety as a primary objective along with well integrity and environmental approvals. Industry policy and resource development and promotion activity should continue to reside in government departments and not with the independent regulatory agency.

The amendments in the national regulator bill reflect extensive consultation with jurisdictions, industry and NOPSA and will implement the institutional reforms arising from the Productivity Commission review and the Montara Commission of Inquiry. Should these reforms not be progressed, Australia will miss an opportunity to streng­then the regulation of offshore petroleum activities and reduce unnecessary regulatory burden and would forgo significant potential national income benefits. Reform of the sector is a priority of the COAG National Partnership Agreement to Deliver a Seamless National Economy.

The legislation will enable the Common­wealth to obtain amounts received under the Offshore Petroleum and Greenhouse Gas Storage (Registration Fees) Act 2006, which are currently required to be paid to the states and the Northern Territory in order to fund the establishment of NOPTA and the expan­sion of NOPSA to NOPSEMA. After these costs have been funded the legislation will repeal the registration fees act. The bill also repeals the Offshore Petroleum and Green­house Gas Storage (Annual Fees) Act 2006. NOPTA and NOPSEMA will operate on a cost-recovery basis with levies raised by the offshore petroleum industry, imposed by the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Act 2003.

The primary objectives of this suite of bills are not controversial. Delays in the implementation of the legislation arose from the need to finalise negotiations between the governments of the Commonwealth and Western Australia. Those negotiations having been satisfactorily finalised and implemented by these bills, the coalition supports their passage through the Senate.

Rachel Siewert (WA, Australian Greens) Share this | Link to this | Hansard source

The Greens have taken a fairly strong stance, as people would be aware, on these issues and particularly since the Montara inquiry. The flaws in our current regulation of the offshore oil and gas industry were made extremely apparent with the Montara oil spill. As many of you know, I have been engaged with this issue since then and flew up to the Montara well to look at the spill at that time.

As the commission of inquiry found, it was the worst oil spill in the history of the offshore gas industry in Australia and the third worst in Australia's history. Oil and gas continued to flow unabated into the Timor Sea for 10 weeks, with patches of sheen covering up to 90,000 square kilometres. The oil made it into Indonesian waters and the inquiry confirmed that an oil sample that I sent, which Indonesian fishers had sent to me, was Montara oil. I continue to maintain that the Australian government, which was responsible for regulating this oilwell, should have taken leadership in ensuring that the issues in relation to the impact of the spill on subsistence fishers in Indonesia and their claims for compensation should have been dealt with by now. I have always maintained Australia should have taken a leading role in ensuring that happened. As it is, I understand that those fishers are still negotiating and have not been adequately compensated for their losses. We believe that legislation in the longer term should be enacted to ensure that people who are innocent bystanders and are adversely affected should not have to bear the costs. Oil blowouts offshore can have major and long-lasting effects such as loss of human life, pollution of the marine environment and coastal areas, as well as commercial losses for industries involved such as fisheries. The likelihood of blowouts may have been seen as low but this relies on the competence of the operator and the regulator in ensuring the integrity and the management of the wells.

In terms of responsibility for this particular spill the report from the inquiry could not have been clearer that PTTEPAA shortcomings led directly to the spill. The report said:

In essence, the way that PTTEPAA operated the Montara Oilfield did not come within a ‘bull’s roar’ of sensible oilfield practice. The Blowout was not a reflection of one unfortunate incident, or of bad luck. What happened with the H1 Well was an accident waiting to happen; the company’s systems were so deficient and its key personnel so lacking in basic competence, that the Blowout can properly be said to have been an event waiting to occur.

The report went on to note that:

... not one of the five Montara wells currently complies with the company’s Well Construction Standards ...

The inquiry also found that the regulatory environment was:

... totally inadequate, being little more than a ‘tick and flick’ exercise.

In contrast what is needed is a regulator that actively probes and inquires, that is not passive and that makes sure well operations management plans—WOMPs or 'womps' as they are called—are adequate and that their requirements are being met. The inquiry also found that the overall regulatory system needs improvement including ensuring adequate minimum standards of good oilfield practice such as at least two barriers in place for wells that have been properly tested and verified.

When you look at the environmental impacts, the report was also damning of the Montara incident. It found that it is unlikely that the full environmental consequences of the blowout will ever be known. This reflects the vast and remote area affected by the spill, the absence of solid, reliable baseline data on species and ecosystems and the slow response to putting in place the monitoring plan. The report said there was a failure of proper coordination across government agencies when it came to looking at environ­mental issues and there was a failure to share information. There was a lack of monitoring from the start of the spill and no monitoring was done on the subsurface water, in other words on the impact of dispersants and the dispersed oil on the marine environment. In particular we will never know the extent of the environmental damages because insuffi­cient environmental baseline monitoring was done in the first place by the company, which the NT government allowed and ticked and flicked. The report noted that the adequacy of the monitoring plan has been lessened because of the significant delay in implementing scientific monitoring and inadequate water sampling, which has made it difficult to assess the impact of oil and gas dispersants.

The Greens welcome the commission of inquiry's report and its recommendations. We have been supportive of the government in its response to the inquiry, the legislative changes it has already made and the changes contained in the package of bills we are debating today. In particular we support the establishment of a single regulator for oilwell integrity, environmental management and occupational health and safety. We support the Commonwealth having primary responsibility for the regulation of this industry in Commonwealth waters. I note my disappointment with the government of my own state who have been so slow in taking up this initiative and have been resisting the absolute necessity for a single national regulator of the offshore oil and gas industry. We also fully support the separation of regulatory functions from the administration of titles.

The effectiveness of the national regulator will ultimately be dictated by the way it operates and the funding allocated to it. It must not copy the culture of its predecessors and be a friend to industry. It must be truly independent and be a robust regulator by taking into consideration the interests of all Australians as its considers its work and not just look at the interests of the oil and gas industry. There also needs to be a high degree of accountability and transparency for this agency. It must be able to employ and retain highly trained workers, which means competing with the high-paying jobs in the resource sector, and it must have enough resources to be equipped to conduct its operations and audit compliance to the highest levels of quality, transparency and consistency. We have been reassured by the minister's commitment to experienced staff with the necessary degrees of expertise to undertake the necessary regulatory activities and to monitor the companies. We will be making sure that every government that uses this legislation is committed to the same.

This regulatory process that we are deal­ing with now in this package of bills is part of the government's response. The govern­ment has also committed to better coordina­tion across the agencies because, as I have just highlighted, the commission of inquiry found there were problems. We will continue to monitor that with the government to ensure that we have regulatory processes and adequate responses to oil spills and that the rest of the promises they have made are put in place.

While the Greens are supportive in principle of this legislation, we also have some concerns and that is why I am seeking to move some amendments. We have a number of amendments and I will quickly go into what they do. This is a relatively quick summary and we will talk about it a bit more in committee. We believe the addition of an extra person to the advisory board for NOPSEMA, the regulator, is important. We understand that the minister has in fact agreed to this amendment that ensures there are a sufficient number of people on the advisory board to ensure that a person with environmental expertise is included. I will seek confirmation of that when we move the amendment. We believe it is essential that this person be included so that somebody on the board has experience in environmental management and has an environmental background, given the expanded responsi­bilities of NOPSEMA.

I will also be moving an amendment about a prohibition on decisions and orders under the Offshore Petroleum Act. We want to make sure that they are not accredited under the Environment Protection and Biodiversity Conservation Act 1999. We do not want to see the role of the environment minister or the environment department being sidelined from assessing the environmental implica­tions of offshore oil and gas operations. While government's proposed amendments to the regulatory regime do not in themselves address the role of the environment minister, we are deeply concerned that there is potential for a resources minister to seek to have the environment minister accredit NOPSEMA's processes under the EPBC Act. We want to make sure that this cannot occur under any circumstances into the future and that the proper role of the EPBC Act is retained.

An issue that I raised during the course of the inquiry, and which has been ongoing since then and before then, is the fact that PTTEP was allowed to acquire further leases and titles while it was being investigated, with the government knowing full well from the company's own submissions to the inquiry and from transcripts of the inquiry that there were serious concerns about its operations. The very fact that it had a spill obviously raised that issue. So I will be moving amendments to enable the govern­ment to choose not to grant a licence to companies where there are sufficient questions about their ability to manage oil­fields and where they have caused a signifi­cant accident like the Montara accident.

There is a similar amendment in relation to the titles administrator not approving the transfer of titles where the transferee is under investigation. These provisions are triggered when an entity is under investigation under the commission of inquiry provisions of part 9.10A.

The final amendment is to require the titles administrator to notify the environment minister when titles are vacated. This will allow the environment minister to easily know and consider marine areas for further protection when it is clear the area is not of interest to resource companies.

I will go quickly into several other issues that I think are pertinent to the discussion of this issue and have come out of the Montara PTT incident in particular. I know that there are potentially issues around workers compensation for workers injured during this period, and I understand there are at least two workers who continue to suffer from post-traumatic stress disorder as a result of the blow-out at the Montara well. They are in fact still fighting to receive fair and reason­able compensation. As I understand it, these workers were on the West Atlas rig off the north-west Australian coast when the blow-out occurred and were involved in the emergency response. We all saw quite vividly the extent of the emergency response. I understand that these workers are yet to be compensated and that there is no responsi­bility claimed by the company that they are required to pay reparations to these workers. As a result of the incident, these workers have not been able to return to their usual employment in the offshore oil and gas industry and are now confronting the pros­pect of their current workers compensation payments running out, which leaves them facing potential financial ruin and possible further trauma. We urge the company involved, PTTEP, to look again into this matter and resolve it urgently, so that these workers who are already suffering do not have to suffer further.

The oil and gas industry plays an important role in our economy, but it has enormous potential to pose risks to human life and our environment, as we saw with Montara. To a certain extent, we in Western Australia escaped a bullet with the Montara leak, given that it occurred further offshore and that the prevailing weather was favourable to good oil spill response. With the level of oil and gas exploration and production that is going on in Western Australia—off our entire coast—there is the potential for us not to be so lucky in the future. In other words, we do not want to see an accident like this happen again and happen where oil and gas could end up on the Kimberley coast or on the rest of the coast of Western Australia—or any of Australia, for that matter. We have been very vocal in our opposition to the release of some acreages for oil and gas exploration, such as that in the Mentelle Basin, also known as the Naturaliste Plateau, which is only 83 kilometres off the coast of the Margaret River in the south-west of WA. There is very strong opposition to this in the area, which is one of the areas that has not yet been taken up by the industry. We believe that area and other areas like it should be put into the conservation estate and made a marine reserve so that we know they are protected in perpetuity. If we had had a spill of the size of the Gulf of Mexico spill in the Mentelle Basin, we could end up with oil on the beaches north of Perth and quite a way around the south coast. This is why we need robust oil and gas legislation and why we will be supporting the govern­ment's bill. But—and this is a clear message to government—we also need this as part of a package that protects important marine biodiversity, so it needs to go hand in hand with that process.

We also believe that we need to have put in place a process where the public gets to comment on the release of areas for the take-up of oil and gas exploration. In other words: when acreage is released a public process should be undertaken. We will continue to pursue that with government

Lastly, on the issues of marine protected areas: we strongly believe in and are deeply committed to a proper, comprehensive, ade­quate and representative series of marine protected areas around the coast of Western Australia. I note that we were disappointed with the draft plans released just this week by the government for the north-west of Western Australia and the north of Western Australia—around the very area where a lot of oil and gas activity is happening in this country. We need to make sure that the important areas there are protected. The government's current plans do not do that. So we will continue to pursue that.

In summary, we support this legislation in principle. We have amendments that we believe enhance this legislation. I ask the government to reconsider our amendments. I recommend those amendments, which I will again talk to in committee, and meanwhile note the Greens' in-principle support for this legislation.

Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

The oil and gas industry is a very important industry for my home state of Western Australia, which is why Liberal members and senators in this parliament have taken a very close interest in the progress of the Offshore Petroleum and Greenhouse Gas Storage Amendment (National Regulator) Bill 2011 and related legislation. This legislation has been floating around the parliament in various guises now for way more than a year. That it has taken so long is yet another example of govern­ment incompetence, government arrogance and government refusal to go through proper process. In fact, the processes that were followed by the federal Minister for Resources and Energy in relation to this are nothing short of world's worst practice.

This legislation was introduced without any consultation whatsoever with the state government in Western Australia. Yes, there has been, belatedly, some negotiation in recent months. And, yes, we are now in a position where the coalition is able to support passage of this legislation given the agreements that have been reached. But it should not have taken so long. It should not have required the Senate's insisting on send­ing the minister back to the drawing board. The minister, being part of a government that promised in the lead-up to the 2007 election that this was going to be a new era of cooperative federalism, should never have been forced back to the drawing board. He should have gone through proper process right from the start.

This bill seeks to establish national regulators. Senator Siewert talks about the Commonwealth wanting to take primary responsibility for regulation, and I will have some further remarks about how effective that might be later on. This bill seeks to establish national regulators through expans­ion of the current National Offshore Petrole­um Safety Authority to the National Off­shore Petroleum Safety and Environmental Management Authority. It also seeks to create the National Offshore Petroleum Titles Administrator.

Under the current process, ministers from the states and the Northern Territory, through their departments, have performed the func­tion and exercised powers conferred directly on them by the Offshore Petroleum and Greenhouse Gas Storage Act 2006 and its predecessor act, the Petroleum (Submerged Lands) Act 1967. The Commonwealth conferred these powers on the states and territories as part of the then decision on how to manage these affairs. The state govern­ment in Western Australia has managed that responsibility very competently and in the national interest. Sixty per cent of offshore petroleum activity is being conducted off the coast of Western Australia. Yes, we have Commonwealth waters and we have the three-nautical-mile zone in which the state is responsible. Of course, we cannot draw some artificial line whereby the Commonwealth can do all the things it wants to do without talking to anyone and the states are going to do all their sorts of things without talking to anybody about it. Clearly there have to be lines of communication. Clearly there has to be coordination. Clearly different levels of government have to work together to make sure that there are no unintended conse­quences—environmental, social or safety consequences—on either side of that particu­lar line.

This government thought: 'We're just going to press ahead. We want to just throw overboard all the processes that have happened in the past without talking to anyone.' I note that Senator Eggleston, a very distinguished Liberal senator from Western Australia, was the coalition representative on—and in fact the Deputy Chair of—the Senate Economics Legislation Committee, which looked into this legislation. He was responsible for drafting a very eloquent report into the flaws in the process and in what was proposed at the time.

But I will just stick with the process for a moment. These bills were initially intro­duced without any consultation. Eventually Minister Ferguson was shamed into talking to the Minister for Mines and Petroleum in Western Australia, the Hon. Norman Moore. A process was underway whereby the state minister in Western Australia thought that some negotiations were happening in good faith between the state government and the Commonwealth government. And what happened? While these negotiations were ongoing and had not been resolved, the government some months ago pressed ahead again with this legislation, trying to create facts. It is very difficult to negotiate and have discussions on the basis of trust when, again and again, the actions taken by the govern­ment are completely counter to what is being worked on in good faith by the different parties involved in the negotiations.

We were led to believe that the govern­ment would make amendments to the legisla­tion that was being presented to the Senate in June last year, only to find out that the legislation—which was still in the form in which we opposed it—was being reintro­duced in exactly the same fashion as what we had complained about. There was mis­leading, there was bad process, there was lack of consultation and lack of cooperation on something where, quite frankly, the Com­monwealth, state and territory governments with relevant interests in offshore oil and gas activities should be working together in the national interest.

The Western Australian government was very concerned that, under the proposals as they originally stood, there would be no requirement for the Commonwealth to advise the WA state government about the location of licences over the WA coast. They were concerned that activities could take place in Commonwealth waters offshore from WA, which often can come under significant public and media scrutiny due to their proximity to sensitive environmental areas. Yet the Commonwealth government arro­gantly wanted to press ahead without having any proper protocols in place about lines of communication between the Commonwealth and the states and territories. I draw attention to the observation made in Senator Eggleston's report. He would have liked to have contributed to this debate but is sadly not here today, and I want to make sure that we have proper focus on the report that he put together. He noted the involvement of the US National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling and said:

The Commission recommended the need to actually strengthen state and local involvement in oil spill contingency planning and training, rather than weaken it.

I just want to make some observations in relation to the incidents that have happened in recent years. We have had the Montara incident, which was very concerning. Incidentally, it happened in a circumstance where it was the Commonwealth that decided to contract out wellhead supervision to the Northern Territory. The Common­wealth was already responsible. In relation to the Varanus Island incident, the mistake that the Western Australian state government made was to contract the Commonwealth agency, NOPSA, to conduct the supervisory role. The point here, Senator Siewert, is that the suggestion of centralising things in Canberra and giving responsibility to a single Commonwealth regulatory authority is not a way to guarantee that the situation will improve into the future. There has to be a level of competence, a level of skill, a level of expertise and a level of professionalism applied to ensure that the objectives which we are trying to achieve are actually going to be achieved. Looking at the track record, I think that has not necessarily always been the case.

Offshore petroleum operations in Australia beyond designated state and territory coastal waters are governed by the Commonwealth but are currently jointly administered through a designated joint authority arrangement with the states and the Northern Territory governments. The national regulator is NOPSA, and that is what is being proposed to be amended here. The Western Australian regulator is the Department of Mines and Petroleum, formerly the Department of Industry and Resources. The regulatory regime in Australia is a performance objective based regulatory regime, which makes the operator of an offshore facility responsible for the safe and effective operation of the facility. This regime arose from the recommendations made in 1990 by the Hon. Lord Cullen in an inquiry into the Piper Alpha explosion in the North Sea. This performance objective based regulation process allows for continuous improvement rather than a compliance mentality, and the onus is placed on operators to ensure and to demonstrate to regulators that the risk of an incident in their oil and gas operations is reduced to as low as reasonably practicable. This is not industry self-regulation. Industry must demonstrate to the regulators, and the regulators must assess and approve or not approve that the risks have been reduced to as low as reasonably practicable.

In its review of the Macondo oil spill in the Gulf of Mexico, the US National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling recommend­ed that the US policy position on the regulation of offshore drilling move from the current prescriptive model to a less prescriptive safety case approach, which is similar to the existing Australian model. So it is not as if we have to re-invent the world.

In 2009, the Productivity Commission conducted a review of regulatory burden on the upstream petroleum oil and gas sector. The Productivity Commission found that the current regulatory framework imposed a significant, unnecessary burden on the sector. It made a series of recommendations, including the need to establish a national offshore petroleum regulator, extending the role of the National Offshore Petroleum Safety Authority and establishing lead agen­cies. The Ministerial Council on Mineral and Petroleum Resources agreed in December 2009 to implement 25 of the Productivity Commission's 30 recommendations.

In May 2010, the Ministerial Council on Mineral and Petroleum Resources agreed to defer the other five recommendations, which included the institutional recommendations for a national regulator until after the Montara Commission of Inquiry reported. After the report and the government's response to it were released, the Ministerial Council on Mineral and Petroleum Resour­ces met earlier this year, 18 February 2011, to consider moving forward on the five remaining recommendations, including a revised model for upstream petroleum regu­latory reform. Consensus was not reached at that time, as I understand it, but the federal Minister for Resources and Energy advised the meeting that, irrespective of that, he would proceed with revised reforms in Commonwealth waters.

I want to make a series of points on the Montara incident. On 21 August 2009, there was an uncontrolled oil and gas release at the Montara oil field in the Timor Sea, in north Western Australia. Work commenced to drill a relief well on 14 September 2009. On 1 November 2009, during the relief efforts, a fire broke out on the drilling rig, and on 3 November the relief operations were successful in extinguishing the fire and con­taining the oil leak. The Northern Territory Department of Resources was the designated authority for the regulation of this field, as part of the NOPSA arrangements. The Montara Commission of Inquiry found that the cause of the blow-out incident was the failure of the primary well control barrier. Initial cementing problems to contain the leak were compounded by the fact that only one of two secondary well control barriers were installed. Chapter 4 of the inquiry report concluded that the existing regulatory regime supporting offshore petro­leum activities provided sufficient powers to the regulator to enable the effective monitoring and enforcement of offshore petroleum related operations. The inade­quacies identified by the inquiry primarily relate to the implementation of the regulatory regime—that is, it pointed the finger at the existing regulators as not having done their job properly. In the interests of time, I will just go quickly to the area of WA concerns. WA was concerned that the Commonwealth proposed to change the structure of the regulator without having any ongoing commitment to proper lines of communi­cation between the Commonwealth and the states. What ought to have happened, in the Western Australian state government's view, is that, rather than jettison the entire regula­tory regime that had worked well for the past 50 years, it would have been better to find areas to improve and, through incremental improvements, to improve the way the system currently operates.

A memorandum of understanding has now been signed between the Commonwealth and the state, and that is a good thing. We welcome that. That is the way the process should have got underway from the start. Since this legislation was debated in the House of Representatives—where the coali­tion was not able to support the legislation—the federal Minister for Resources and Energy has finally managed to reach agreement with Western Australia by signing a memorandum of understanding which achieved the following outcomes, which I will just put on the record for future reference. NOPSA and its successor body, NOPSEMA, will be headquartered in Perth, strengthening WA as the centre of the petroleum industry in Australia. The joint authorities, comprising the Commonwealth and relevant state or Northern Territory minister, will be retained as the decision makers for key petroleum titles in Common­wealth waters. State and Northern Territory departments will be provided with full access to relevant information about petroleum projects in Commonwealth waters. The Offshore Petroleum (Royalty) Amendment Bill 2011 will be amended to maintain the WA minister's role in the administration of offshore petroleum royalties from the North West Shelf project.

The environment regulations made under the offshore petroleum legislation will be amended to require proponents to lodge an environment plan with NOPSEMA and to have notified all persons whose interests may be affected expressly, including state govern­ment agencies, of proposed activities to be undertaken under the environment plan. The regulations will provide for stakeholder submissions to be lodged with NOPSEMA along with the draft environment plan and require that the proponents adequately deal with legitimate concerns within the environ­ment plan. NOPSEMA will then consider the stakeholder submissions and decide whether the environment plan adequately deals with the concerns raised. NOPSEMA could consult with other relevant agencies to inform itself appropriately before accepting or rejecting the environment plan.

The environment plan would also include a requirement of advance notification of state and Northern Territory agencies on dates proposed for activities such as seismic surveys and drilling where there could be local impacts of the activity and concern from the local community. This will ensure that state governments like the Western Australian government and the Northern Territory government are advised of potential activities and have the opportunity to comment and will allow NOPSEMA to seek relevant expert advice from state agencies. Practical consultation mechanisms between NOPSEMA and relevant WA government agencies will be put in place to give practical effect to all these arrange­ments.

The state government in Western Australia is still not excited about all this, but significant progress has been made. The only reason this progress has been made is that the coalition shamed the federal Minister for Resources and Energy into going through proper process. We shamed the federal Minister for Resources and Energy to comply with the Labor government's promise before the 2007 election about cooperative federalism. This is an area like no other, where proper coordination, proper consulta­tion, proper engagement and proper lines of communication between the Commonwealth government and, in particular, the state government of Western Australia are critical­ly important, because of course the offshore petroleum industry is particularly important to my home state of Western Australia. The LNG industry in particular has great potential to be a win-win for Australia: a win on the economic front and a win on the environmental front for the world. Much as this government is trying to make it harder for the LNG industry to grow and prosper in Australia, it is actually an industry that can help reduce global greenhouse gas emiss­ions. Even though it would cause increased emissions in Australia, to export LNG to places like China and Japan would actually help reduce emissions by more in other parts of the world.

With those few words: the coalition now are in a position where we are satisfied enough to support passage of this legislation. However, we remain concerned about the very bad process that the government follow­ed along the way.

Louise Pratt (WA, Australian Labor Party) Share this | Link to this | Hansard source

The Offshore Petroleum and Green­house Gas Storage Amendment (National Regulator) Bill 2011 and related bills are very important for our nation and especially for the state of Western Australia. They are important for our environment and very important to the safety of people working in the oil and gas industry. They are also very important for our energy security.

We know that the Montara incident in the Timor Sea and the incident in the Gulf of Mexico dramatically focused attention—and rightly so—on and highlighted our commu­nity's expectations about the accountabilities of our offshore petroleum industry. Investi­gations into those incidents have found that those disasters should have been preventable. Sadly, the reports on the incidents pointed to a culture of complacency in both industry and regulators. I also look very much to the impact of the Varanus Island gas explosion and, in particular, its dramatic impact on the economy of Western Australia and the state's energy security. Those impacts demonstrate the absolutely vital need for this legislation.

Governments, regulators and industry here in Australia and abroad are implementing lessons from these events. Importantly, this is a partnership of industry—directors, man­agers and workers—and regulators, govern­ment ministers and officials. We must focus on continuous improvement in this space. We know that the oil and gas industry is very significant to Western Australia, but it is only worth doing if we can do it safely. We need safety for the sake of our people and safety for the sake of our environment. For this industry to maintain its social licence to operate, it must operate to the very highest possible standards. We simply must protect human health and safety. We must protect our marine environment. We must ensure that Australia's offshore petroleum industry is both the best and the safest in the world. We need to do this to make sure that this industry is able to continue to contribute to Australia's ongoing energy security and economic prosperity.

John Hogg (President) Share this | Link to this | Hansard source

Order! It being 2 pm, we will proceed to questions without notice.