Commonwealth of Australia Explanatory Memoranda

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OFFSHORE PETROLEUM (ROYALTY) AMENDMENT BILL 2011

                                  2010-2011





               THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA




                                   SENATE





              OFFSHORE PETROLEUM (ROYALTY) AMENDMENT BILL 2011





                       REVISED EXPLANATORY MEMORANDUM





     (Circulated by authority of the Minister for Resources and Energy,
                   the Honourable Martin Ferguson AM, MP)






  THIS EXPLANATORY MEMORANDUM TAKES ACCOUNT OF AMENDMENTS MADE BY THE HOUSE
                OF REPRESENTATIVES TO THE BILL AS INTRODUCED
              OFFSHORE PETROLEUM (ROYALTY) AMENDMENT BILL 2011


GENERAL OUTLINE

The purpose of the Bill is to amend the Offshore Petroleum (Royalty) Act
2006 (the Royalty Act) to confer the functions currently exercisable by the
Designated Authority under that Act on the responsible State Minister.

This Bill also modifies a few of the functions that will be conferred on
the responsible State Minister by the Royalty Act to take account of the
fact that the State Minister individually does not have any functions under
the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (OPGGS Act).

The Royalty Act applies only to petroleum titles in the North West Shelf
project area, which is in the Commonwealth offshore area located adjacent
to Western Australia (WA).  Therefore, the functions relating to the
administration and collection of royalty under the Royalty Act are at
present exercised only by the Designated Authority for the WA offshore
area, i.e. the WA Minister for Mines and Petroleum.

Amendments to the OPGGS Act contained in the Offshore Petroleum and
Greenhouse Gas Storage Amendment (National Regulator) Bill 2011 will, among
other things, abolish the Designated Authorities for each offshore area
This Bill will therefore enable the continued use of specialist royalty
expertise in the WA Department following the abolition of the Designated
Authorities by effectively conferring the functions relating to the
verification, administration and collection of royalty under the Royalty
Act on the WA Minister.

The functions will not enable the WA Minister to make decisions affecting
the operations of titleholders in the North West Shelf project area.

FINANCIAL IMPACT STATEMENT

Nil financial impact on the Australian Government Budget.

REGULATORY IMPACT STATEMENT

This Bill does not impose any new significant regulatory burden on the
petroleum industry.



NOTES ON INDIVIDUAL CLAUSES

Clause 1 - Short title

Clause 1 is a formal provision specifying the short title of the Act.

Clause 2 - Commencement

Sections 1 to 3 in the Bill will commence on the day the amending Act
receives Royal Assent.

Schedule 1 will commence at the same time as Part 1 of Schedule 2 to the
Offshore Petroleum and Greenhouse Gas Storage Amendment (National
Regulator) Act 2011 commences.

Clause 3 - Schedules

This clause gives effect to the provisions in the Schedules to this Bill.


Schedule 1 - Amendments

Item 1A - Section 4

This clause inserts a definition for "State Minister" into section 4 of the
Royalty Act.  For the purposes of the Royalty Act, "State Minister" will
effectively be the responsible State Minister of Western Australia (i.e.
the Western Australian Minister with portfolio responsibility for offshore
petroleum matters) as offshore petroleum royalties only apply to the North
West Shelf project area.  The responsible State Minister of Western
Australia is also the State member of the Joint Authority for the
Commonwealth-Western Australia offshore area.

Item 1 - Paragraphs 6(4)(a) and (b)

This item replaces the reference to the Designated Authority with a
reference to the State Minister.

Item 2 - Paragraph 6(4)(c)

This item replaces the reference to the Designated Authority with a
reference to the State Minister.

Item 3 - Subsection 9(1)

This item replaces the reference to the Designated Authority with a
reference to the State Minister.




Item 3A - Paragraph 10(1)(a)

This item replaces the reference to the Designated Authority with a
reference to the State Minister.

Item 3B - Paragraphs 10(1)(b) and (c)

This items repeals existing paragraphs 10(1)(b) and (c) of the Royalty Act,
and replaces them with new paragraphs 10(1)(b) and (c).

The new paragraph 10(1)(b) provides that royalty is not payable in relation
to petroleum if two requirements are satisfied.  The first is that the
State Minister is satisfied that the petroleum titleholder used the
petroleum for the purposes of petroleum exploration operations or
operations for the recovery of petroleum, and the second is that the use of
the petroleum did not contravene the OPGGS Act or regulations under that
Act.

In effect, this new paragraph 10(1)(b) differs from the existing paragraph
10(1)(b) by replacing the reference to the Designated Authority with a
reference to the State Minister.  It also requires that the use of
petroleum for the purposes of petroleum exploration or recovery must have
been in accordance with the OPGGS Act or associated regulations.  The State
Minister's role under the Royalty Act relates only to the verification,
administration and collection of royalties, and does not extend to enabling
the State Minister to approve the use of petroleum for petroleum
exploration or recovery.

The new paragraph 10(1)(c) provides that royalty is not payable in relation
to petroleum if two requirements are satisfied.  The first is that the
State Minister is satisfied that the petroleum has been flared or vented in
connection with operations for the recovery of petroleum, and the second is
that the use did not contravene the OPGGS Act or regulations under that
Act.

In effect, this new paragraph 10(1)(c) differs from the existing paragraph
10(1)(c) by replacing the reference to the Designated Authority with a
reference to the State Minister.  It also requires that the flaring or
venting of petroleum in connection with operations for the recovery of
petroleum must have been in accordance with the OPGGS Act or associated
regulations.  The State Minister's role under the Royalty Act relates only
to the verification, administration and collection of royalties, and does
not extend to enabling the State Minister to approve the flaring or venting
of petroleum.

Item 3C - Subsection 10(2)

This item repeals existing subsection 10(2) of the Royalty Act and replaces
it with a new subsection 10(2).

The new subsection 10(2) provides that royalty is not payable where two
requirements are satisfied.  The first is that the State Minister is
satisfied that the petroleum has been returned to a natural reservoir, and
the second is that the return of the petroleum did not contravene the OPGGS
Act or regulations under that Act.

In effect, this new subsection 10(2) differs from the existing subsection
10(2) by requiring that the return of petroleum to a natural reservoir did
not contravene the OPGGS Act or associated regulations.  For example, in
the case of a petroleum production licence, the return of petroleum must be
consistent with an accepted field development plan in force for a field in
the licence area.  The State Minister's role under the Royalty Act relates
only to the verification, administration and collection of royalties, and
does not extend to enabling the State Minister to approve the return of
petroleum to a natural reservoir.

Items 3D to 3H - Sections 11; Section 12; Section 13; Section 14;
Subsection 15(1)

These items replace references to the Designated Authority, wherever
occurring, with references to the State Minister.

Item 3J - After section 16

This item inserts a new section 16A into the Royalty Act to provide the
State Minister with the power to delegate functions and powers of the State
Minister under the Royalty Act to an employee of Western Australia.

A similar provision to specifically provide the Joint Authority with the
power to delegate its functions and powers under the Royalty Act is not
required.  Existing section 3 of the Royalty Act applies Chapter 1 of the
OPGGS Act to the Royalty Act.  Section 66 of the OPGGS Act, which provides
the Joint Authority with the ability to delegate its functions and powers,
is in Chapter 1, and this therefore applies to provide the Joint Authority
with the power to delegate its functions and powers under the Royalty Act.

Item 4 - Transitional - instruments

This item provides a transitional provision to provide that an instrument
previously made or given by the Designated Authority under the Royalty Act
is taken to have been made or given by the State Minister after the
commencement of this Act.

This does not include, however, approval given by the Designated Authority
under paragraph 10(1)(b) or (c) or subsection 10(2).  The Royalty Act will
no longer require these approvals.

Item 5 - Transitional - acts of Designated Authority to be attributed to
the State Minister etc.

This item provides a transitional provision to provide that an act or thing
previously done by the Designated Authority under the Royalty Act is taken
to have been done by the State Minister after the commencement of this Act.

This does not include, however, acts or things done by the Designated
Authority under paragraph 10(1)(b) or (c) or subsection 10(2).  The Royalty
Act will no longer require these acts or things to be done.


Item 6 - Application of amendments - exemptions from royalty

This item ensures that the amendments to section 10 of the Royalty Act made
by this Bill, relating to exemptions from royalty, apply only to activities
in relation to petroleum that occur after the commencement of this item.