Introduction

The Offshore Petroleum and Greenhouse Gas Storage Legislation Amendment (Miscellaneous Measures) Bill 2010 (Cth) (Offshore Petroleum Bill) proposes to amend the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) (Offshore Petroleum Act). The Offshore Petroleum Bill was introduced to the House of Representatives and received its second reading speech on 10 February 2010.

The Offshore Petroleum Act is the principal piece of legislation regulating petroleum operations and carbon capture and storage activities in offshore waters.

Summary of amendments

The Offshore Petroleum Bill makes a number of minor policy and technical amendments to the Offshore Petroleum Act. The amendments:

  • retain fees raised under the Offshore Petroleum and Greenhouse Gas (Registration Fees) Act 2006 (Cth) to provide funding for the new National Offshore Petroleum Regulator  
  • clarify how titleholder provisions relating to making applications and titleholder provisions imposing obligations apply to multiple titleholders  
  • provide that a titleholder’s occupational, health and safety (OHS) responsibilities relate only to wells and to facilities where the titleholder is the operator or had control of the facility or any party of it  
  • augment the functions of the National Offshore Petroleum Safety Authority (NOPSA) to include regulatory oversight of the non-OHS structural integrity of facilities, wells and well-related equipment, and  
  • make certain offences which apply to titleholders, offences of strict liability.  

Key changes

Finance

Fees to be retained by the Commonwealth

On 5 August 2009 the government announced that a new National Offshore Petroleum Regulator (NOPR) would be established and commence operations on 1 January 2012.The establishment of the NOPR appears to be a response to the Productivity Commission Research Report into the Regulatory Burden on the Upstream Petroleum (Oil and Gas) Sectors (Report) on 30 April 2009. The Report recommended, amongst other things, for the establishment of a national offshore petroleum industry regulator, in place of the state regulators, to streamline the approval processes for oil & gas projects.

The parliamentary materials do not outline what the exact role of the NOPR will be as legislation establishing the regulator is not to be introduced until next year. It is expected that parliament is waiting upon the final report of the Montara Commission of Inquiry, before defining the precise role of the NOPR, as the Ministerial Council on Mineral and Petroleum Resources have agreed to postpone any further decisions on the NOPR until the inquiry has been concluded.1

The amendments provide that the Commonwealth will retain fees raised under the Offshore Petroleum and Greenhouse Gas Storage (Registration Fees) Act 2006 (Cth) in order to provide funding for the NOPR. At present, those fees are paid to the states and the Northern Territory.

The retention of fees by the Commonwealth is proving to be a contentious topic in Western Australia. It is estimated that $15.3 million will be removed from the State budget in 2010–11 and $7.7 million in 2011–12 as a result of these amendments.2 The creation of the NOPR has been criticised as creating another level of bureaucracy, with little perceived benefit, using state government revenue which could be used to fund important infrastructure projects.

Fees raised under the Offshore Petroleum Act and under the Offshore Petroleum and Greenhouse Gas Storage (Annual Fees) Act 2006 (Cth) will continue to be paid to the states and the Northern Territory.

Multiple titleholders

Actions and obligations of multiple titleholders

The amendments insert a new part 9.6A into the Offshore Petroleum Act which deals with the actions and obligations of multiple titleholders. The amendments recognise that, due to the high cost of offshore petroleum and greenhouse gas operations, petroleum and greenhouse gas titles are often owned by a consortium of titleholders rather than a single titleholder. Under the current provisions of the Offshore Petroleum Act, it is unclear how multiple titleholders ought to carry out administrative actions (such as making applications to the relevant authorities) and how obligations apply to them.

The amendments provide that where there are multiple holders of a petroleum or greenhouse gas title, the titleholders may nominate one of them to perform certain administrative tasks on behalf of them all, such as:

  • making an application  
  • giving a nomination  
  • making a request, or  
  • giving notice

to the relevant authorities.

The amendments also provide that where there are multiple holders of a petroleum or greenhouse gas title and the Offshore Petroleum Act imposes an obligation on a titleholder, the obligation:

  • applies to each and every titleholder, and  
  • may be discharged by any titleholder.

While the Offshore Petroleum Bill makes it clear that any titleholder can discharge an obligation, it is unclear how liability between the titleholders will operate where the failure to complete an obligation has resulted in an offence being committed. Is it sufficient to prosecute only one of the titleholders so that liability is joint or must each titleholder be held to account for their part in the offence so that liability is joint and several? The difficulties in proving an offence if liability were joint and several implies that Parliament intended that liability be joint only. If this is the case, the Offshore Petroleum Bill should be clearer on this point to avoid any uncertainty in the future.

Safety

OHS responsibilities of titleholders relate only to wells

The current provisions of the Offshore Petroleum Act provide that a titleholder has responsibility in relation to the design of a facility to ensure that it is safe and without risk. The intention of the legislation was to allow a titleholder to be prosecuted if there was a failure in well design which breached the duty of care.

The current wording of the Offshore Petroleum Act could be read as imposing responsibility on titleholders for the design of certain facilities, such as a drilling rig or a floating storage and offtake vessel, which the titleholder could not be reasonably expected to have any control over, given that these facilities are normally procured through subcontractors.

The amendments recast these provisions to make it clear that a titleholder is responsible for ensuring that wells are designed, constructed, equipped, maintained and operated in such a way as to ensure the health and safety of those at or near a facility from the well. In respect of the occupation health and safety responsibilities of other facilities, a titleholder is only responsible where they are the registered operator of the facility or where they are in control of any part of a facility or any particular work at a facility.

Non-OHS structural integrity of facilities

The amendments in the Offshore Petroleum Bill augment the powers of the National Offshore Petroleum Safety Authority (NOPSA) by conferring functions and powers in relation to the non-OHS structural integrity of facilities, wells and well-related equipment.

Under the current legislation, NOPSA has functions in relation to the structural integrity of facilities and wells to the extent that it relates to occupational health and safety. In petroleum operations, however, some structures (such as a well or a pipeline) are on the sea floor and contact between people and the structure is rare. For example, NOPSA can consider the OHS structural integrity of a pipeline which sits on the seabed but its considerations would be focused on the health and safety of workers who, from time to time, perform maintenance work on the pipeline.

Under the amended provisions, even the aspects of structural integrity which, for example, fall outside those relevant to the health and safety of maintenance crews could be considered by NOPSA. This would allow NOSPA to take a comprehensive approach to assessing the integrity of structures without any question as to the scope of its functional responsibilities.

Offences

Certain offences relating to titleholders become offences of strict liability

The amendments make certain offences which relate to titleholders and are contained in the Offshore Petroleum Act, offences of strict liability.

The effect of the amendments imposing strict liability is that the prosecutor would not need to prove any intention on the part of the titleholder to secure a conviction. It would be sufficient merely to establish that the titleholder had committed the physical elements of the offence. It is worth noting, however, that the defence of honest and reasonable mistake of fact is still available to titleholders.

In their current form, in order to secure a conviction, the prosecutor must prove that the titleholder committed the physical elements of the offence with intent.

The amendments apply to offences in relation to:

  1. failing to comply with directions to vary pipeline licences (penalty reduced from five years to 100 penalty units)  
  2. ceasing to operate pipeline licences without consent (penalty reduced from five years to 100 penalty units)  
  3. interference with other rights (eg navigation, fishing, native title)  
  4. failing to comply with reporting obligations to titleholders  
  5. failing to notify discovery of petroleum or greenhouse gas storage formation in particular title areas if there are reasonable grounds to suspect that such an area is present  
  6. failing to comply with work practice obligations  
  7. failing to comply with an authority’s requests for particular information  
  8. failing to comply with an authority’s directions to undertake remedial action, and  
  9. failing to comply with record-keeping directions.  

The maximum penalty proposed for these offences is 100 penalty units. One penalty unit equals $110.00.

For some of the offences listed above, the introduction of strict liability will be relatively uncontroversial. For example, where the offence relates to a relatively simple administrative procedure, like the failure to lodge a report.

However, there are a number of other offences that appear to be ill suited to strict liability. Where an offence is based on a titleholder’s failure to perform an act to a ‘reasonable’ or variable standard, it seems unjust to exclude from consideration the element of fault. For example, the offence of interfering with other rights. A titleholder will be subject to strict liability where the interference was to a greater extent than was necessary for the reasonable exercise of the titleholder’s rights and the performance of its duties. The introduction of strict liability to these sorts of offences creates a more onerous regime for titleholders’ as the amendments go beyond mere ‘administrative’ change and substantially alter titleholders’ rights.

Progress of the Offshore Petroleum Bill

On 24 February 2010 the Senate referred the Offshore Petroleum Bill to the Senate Economics Committee for inquiry and report. The principal issue for consideration is Schedule 1 Part 1, in relation to the retention of fees under the Offshore Petroleum and Greenhouse Gas Storage (Registration Fees) Act 2006 (Cth). The reporting date for the inquiry is 23 April 2010.