Commonwealth Government response to the Productivity Commission Review of regulatory burden on the upstream petroleum (oil & gas) sector
On 25 May 2011, the Hon Martin Ferguson AM MP, Minister for Resources and Energy released the Commonwealth Government's response to the Productivity Commission Review of regulatory burden on the upstream petroleum (oil & gas) sector.
Background to the Productivity Commission Review
On 26 March 2008, the Council of Australian Governments (COAG) announced the Productivity Commission Review of regulatory burden on the upstream petroleum (oil & gas) sector.
The Productivity Commission was requested to consider Australia's framework for upstream petroleum regulation and consider opportunities for streamlining regulatory approvals, providing clear timeframes and removing duplication between jurisdictions.
On 30 April 2009, the Productivity Commission released its final Review of Regulatory Burden on the Upstream Petroleum (Oil & Gas) Sector.
Government process for responding to the Productivity Commission Review
The Productivity Commission Review was submitted to all Australian Governments for consideration and its recommendations covered Commonwealth, state and Northern Territory (NT) jurisdictions. The Ministerial Council on Mineral and Petroleum Resources (MCMPR) was requested to develop responses and implementation plans for submission to the Council of Australian Governments (COAG).
25 agreed Productivity Commission Review recommendations
On 15 December 2009, MCMPR agreed to responses and implementation plans to 25 of the Productivity Commission's 30 recommendations and forwarded them to COAG. Implementation of these 25 agreed recommendations is now nearly complete.
On 28 May 2010, MCMPR suspended consideration of the five remaining Productivity Commission recommendations for institutional reform until the outcomes of the Montara Commission of Inquiry were known.
Montara Commission of Inquiry Report and Government response
On 24 November 2010 Minister Ferguson released the report of the Montara Commission of Inquiry
and the Government's final response was released on 25 May 2011. The Montara Commission of Inquiry Report recommended that the establishment of a national offshore regulator should, at a minimum, be pursued.
Five non-agreed Productivity Commission Review recommendations
On 18 February 2011, MCMPR met to consider the Commonwealth's proposed responses and implementation plans to the five remaining recommendations of the Productivity Commission Review, including a revised model for upstream petroleum regulatory reform.
Consensus was not reached at the MCMPR meeting on 18 February 2011, however Minister Ferguson advised MCMPR that the Commonwealth would implement the revised reforms in Commonwealth waters by 1 January 2012.
MCMPR also agreed to the establishment of a working group of officials from all Australian jurisdictions to be formed, reporting to the Commonwealth Minister to guide the transition of the new regulatory arrangements. The Working Group on Transition to the New Offshore Petroleum Regulatory Arrangements has met five times since its inception.
On 15 September 2011, the Parliament passed a package of five amendment Acts to the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (OPGGS Act) and associated Acts to:
- expand the functions of the National Offshore Petroleum Safety Authority (NOPSA) to become the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA), the regulator of occupational health and safety, integrity of facilities and wells, environmental management and day to day operations relating to petroleum activities in Commonwealth waters
- create a National Offshore Petroleum Titles Administrator (NOPTA), in the Department of Resources, Energy and Tourism, to advise the Joint Authority on petroleum titles and to administer titles and data
- impose cost-recovery levies on holders of offshore petroleum titles in respect of environmental approvals and titles administration under the OPGGS Act to fund the new regulatory activities of NOPSEMA and NOPTA
- allow the Commonwealth to retain the monies for a period that are payable under the Offshore Petroleum and Greenhouse Gas Storage (Registration Fees) Act 2006 (the Registration Fees Act) to recover the establishment costs of NOPSEMA and NOPTA
- make consequential amendments to the Registration Fees Act and the Offshore Petroleum (Royalty) Act 2006
- exclude application of the Personal Property Securities Act 2009 to the registration of dealings in titles under the OPGGS Act and the Offshore Minerals Act 1994.
The new Acts received Royal Assent on 14 October 2011. The Government is committed to commencing NOPSEMA and NOPTA on 1 January 2012. Consequential amendments to the regulations under the OPGGS Act and associated Acts are currently being prepared.
Cost recovery process
Cost recovery arrangements
In December 2002 the Australian Government adopted a formal cost recovery policy to improve the consistency, transparency and accountability of its cost recovery arrangements and promote the efficient allocation of resources.
The underlying principle of the policy is that entities should set charges to recover all the costs of products or services where it is efficient and effective to do so, where the beneficiaries are a narrow and identifiable group and where charging is consistent with Australian Government policy objectives.
Cost recovery policy is administered by the Department of Finance and Deregulation and outlined in the Australian Government Cost Recovery Guidelines (Cost Recovery Guidelines).
The policy applies to all Financial Management and Accountability Act 1997 (FMA Act) agencies and to relevant Commonwealth Authorities and Companies Act 1997 (CAC Act) bodies that have been notified. In line with the policy, individual portfolio ministers are ultimately responsible for ensuring entities' implementation and compliance with the Cost Recovery Guidelines.
Benefits of Reform
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Expanding the existing safety and integrity functions of the National Offshore Petroleum Safety Authority (NOPSA) to include regulation of environment plans and day-to-day operations – NOPSA becomes the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA).
Provides an integrated approach to the regulation of the integrity of structures, the safety of people and the protection of the environment – consistent with the recommendations of the Montara Report and the Offshore Petroleum Safety Regulation Inquiry (OPSRI).
Separate offshore regulation and titles administration.
Avoids any potential or perceived conflicts of objectives or priorities between the regulation of activities and the promotion of exploration and development.
Titles administration will be undertaken by a National Offshore Petroleum Titles Administrator (NOPTA) within the Department of Resources, Energy and Tourism from 1 January 2012.
Reduction in duplication, overlap and inconsistent administration and improvement in efficiency and effectiveness of titles administration.
Retaining the Joint Authorities (JA).
Ensures that the state and territory ministers continue to have a role in key titles decisions and full access to information about projects in Commonwealth waters.
Full cost recovery of establishment and operations of NOPSEMA and NOPTA from industry.
Industry will have full transparency in how its cost recovery fees and levies are used.