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Focus: Changes to WA petroleum legislation

5 November 2010

In brief: A new Bill amends the key legislation regulating upstream petroleum activities onshore in Western Australia and in WA waters up to three nautical miles from the coast. Partner Gerard Woods (view CV), Senior Associate Alison Baxter and Lawyer Jackson Allen report.

How does it affect you?

  • Those acquainted with the federal offshore legislative regime will find most of the amendments made by the Petroleum and Energy Legislation Amendment Bill 2009 (the Bill) familiar.
  • Significantly, the Bill amends renewal rights for exploration permits and the mandatory relinquishment requirements for exploration permit blocks.
  • The policy objective of some of the amendments, other than seeking alignment with the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) (the OPGGSA), appears to be to intensify permit holders' exploration efforts, most notably by removing the ability for exploration permits to be maintained indefinitely.
  • The Bill also provides for the introduction of indefinite-term production licences and pipeline licences but, in addition, gives the Minister power to terminate licences where there are no operations in a five-year period.
  • The construction and operation of petroleum infrastructure under the Petroleum (Submerged Lands) Act 1982 (WA) (the PSLA) is now covered by an 'infrastructure licence' – a concept drawn from the OPGGSA.
  • Transactions and dealings relating to infrastructure licences will be subject to petroleum registration fees in lieu of duty.

Background

The Bill has now passed through both Houses of Parliament and is awaiting assent. The state legislation is currently based on the superseded Petroleum Submerged Lands Act 1967 (Cth) and, for the most part, these amendments align WA's legislation with the OPGGSA.

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Acts the Bill amends

The Bill's main focus is to amend the:

  • Petroleum and Geothermal Energy Resources Act 1967 (WA) (the PGER Act);
  • the PSLA; and
  • Petroleum Pipelines Act 1969 (WA) (the Pipelines Act).

The Bill also makes consequential amendments to the:

  • Crimes at Sea Act 2000 (WA);
  • National Gas Access Act 2009 (WA);
  • Petroleum (Submerged Lands) Registration Fees Act 1982 (WA); and
  • Workers' Compensation and Injury Management Act 1981 (WA).

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Amendments

Key amendments to both the PGER Act and PSLA

These include:

  • Limitation on renewal: Renewal rights for exploration permits granted after the Bill commences will be limited to two renewals.
  • Mandatory relinquishment: The formula for mandatory relinquishment of blocks on renewal of exploration permits has been changed, with a new formula having been introduced for renewal of permits consisting of less than six blocks. The requirement for blocks constituting a renewal to be adjoining has been removed, as has the ministerial discretion to grant a renewal of up to 16 blocks where application of the relinquishment formula would result in an area comprising less than 16 blocks. These new relinquishment requirements will apply to existing permits after their first renewal under the amended PGER Act. Existing exploration permits that are reduced to four blocks or less will only be capable of renewal once.
  • Ranking of applications: The Bill amends the PGER Act to allow the Minister to rank the most deserving applications for exploration permits and exclude undeserving applications, having regard to criteria the Minister is to make publicly available. Under the amended Act, the Minister will also be permitted to call for proposals for additional work and expenditure from equally deserving applicants without issuing a new public invitation. Applicants will now be permitted to withdraw their applications before award of a permit, and the Minister will be able to revisit previously unsuccessful applications – again, without issuing a new public invitation. These changes will align the PGER Act with sections 106, 108 and 109 of the OPGGSA. Similar provisions will now be included for applications for drilling reservations.
  • Form of application: The need for applications for all types of permits, licences or leases (or applications for their renewal) to be in the 'approved form' has been removed, although we expect this will have little practical effect.
  • Failure to report discovery: A $10,000 penalty has been added for failure to report a discovery of petroleum or geothermal energy resources.
  • Existence of petroleum: The Bill introduces, in a number of circumstances, an express requirement that the Minister be satisfied as to the existence of petroleum or geothermal energy resources. In particular, this requirement is introduced in the context of a declaration of location, grant of a retention lease and grant of a production licence.
  • Grant of production licence: Under the amended PGER Act, the Minister will be able to restrict the grant of a production licence to those blocks that the Minister is satisfied contain petroleum or geothermal energy resources.
  • Term of production licence: Production licences with an indefinite term will now be granted and existing production licences will convert to an indefinite term on their second renewal.
  • Termination of production licences: The Minister will have the authority to terminate a production licence if there have been no operations for the recovery of petroleum or geothermal energy for a continuous period of five years (not including circumstances beyond the licensee's control).
  • Retention leases over unused production licence: The Bill provides for holders of production licences to apply for retention leases over unused portions of their licences.
  • Access authorities: The process for consultation with affected title holders and other interested parties will no longer apply where the affected title holders have consented to the grant of an access authority.
  • Data management: There are new powers to make regulations relating to keeping and providing of records, accounts, documents, cores, cuttings and samples.
  • Release of information: A new Part has been inserted to deal with public release of exploration and production data supplied to the WA Government. Information may be disclosed for the purposes of administration of the PGER Act and in circumstances provided under regulations (yet to be drafted).
  • Regulations: The power to make regulations has been expanded to include facilities, environment plans and responsibilities relating to release of information.
Key amendments specific to the PGER Act
  • Royalty rate – secondary licence: A definition of 'tight gas' has been included and a new royalty rate applying to secondary licences for tight gas will be introduced. The new royalty rate for tight gas is 'not less than 5% nor more than 12.5%'. The existing royalty rate of 'not less than 10% nor more than 12.5%' remains and will continue to apply to petroleum other than tight gas.
  • Interference with rights: Holders of petroleum titles are now required to carry out their operations in a manner that does not interfere with navigation, fishing or the conservation of the sea and seabed resources.
Key amendments specific to the PSLA
  • Terminology: The terms 'adjacent area' and 'offshore area' will be clarified and any changes in the boundaries between the state and Commonwealth, as a result of changes to the baseline, will not affect titles granted under the relevant legislation.
  • Infrastructure licences: The concept of infrastructure licences will be introduced, on very similar terms to the regime in the OPGGSA (including the definition of infrastructure). Accordingly, it will be an offence to construct, alter or operate any infrastructure facility without an infrastructure licence. Duty will not be chargeable on an infrastructure licence, on the transfer of an infrastructure licence (to which s78 applies) or on any other instrument in so far as it relates to a legal or equitable interest in or affecting an infrastructure licence. Transfers and dealings relating to infrastructure licences will, however, be subject to registration fees under the Petroleum (Submerged Lands) Registration Fees Act 1982 (WA).
  • Pipelines from Commonwealth waters: It is now clear that a pipeline licence under the state legislation can be granted to allow the conveyance of petroleum recovered from outside WA's adjacent area (ie from Commonwealth waters).
  • Term of pipeline licences: Pipeline licences will be granted for an indefinite term.
  • Termination of pipeline licences: The Minister will have the authority to terminate a pipeline licence if there has been construction work under the licence and the pipeline (or part of it) has not been used for a continuous period of five years (not including circumstances beyond the licensee's control).
  • WA offshore area: The description of WA's scheduled offshore area (and, consequently, the adjacent area) will be amended to be consistent with the OPGGSA.
Key amendments to the Pipelines Act
  • Term of pipeline licences: Pipeline licences will now be granted for an indefinite term.
  • Termination of pipeline licences: The Minister will have the authority to terminate a pipeline licence if the licensee has not carried out any construction work under the licence or used the pipeline (or part of it) at any time during a continuous period of five years (not including circumstances beyond the licensee's control).
  • Regulations: The power to make regulations has been expanded to include environmental plans.
  • Form of application: The need for applications to be in the 'approved form' will be removed, although, as noted above, we expect this to have little practical effect.
Amendments not included

A proposed change to introduce carbon dioxide into the definition of 'petroleum' was not passed. Had it received approval, the amendment would have allowed carbon dioxide to be transported through pipelines and injected into the ground separately, rather than merely as a mixture of other elements.

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Conclusion

With these amendments, the WA petroleum regime has moved closer to the federal legislation's approach. It is vital to take note of these changes, as they affect administrative elements (such as renewal of permits) that can easily be overlooked but are extremely important.

For further information, please contact:

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