What does the new Decommissioning Bill mean for you?

By Igor Bogdanich, Anne Beresford

Significant changes proposed 8 min read

On 8 April 2021, the Australian Government released an exposure draft of the Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021 (the Bill). The Bill follows recommendations made in the Department of Industry, Science, Energy and Resources' consultation paper on Australia's offshore decommissioning framework. It proposes significant changes to Australia's offshore oil and gas regulatory framework.

In particular, the Bill proposes that the Titles Administrator will have approval rights in relation to changes of control of titleholders (defined by reference to a 20% rather than 50% ownership benchmark), introduces trailing liability for prior titleholders in respect of decommissioning, and enhances the assessment criteria for entities applying to operate, or increase their activities, in offshore oil and gas.

Stakeholders have until 23 April 2021 to provide feedback on the Bill.

Enhanced Framework

On 14 December 2020, the Department of Industry, Science, Energy and Resources released its consultation paper entitled 'Enhancing Australia's decommissioning framework' (Enhanced Framework). We previously reported on the key features of the Enhanced Framework, and the Bill released last week takes on a number of the recommendations made in the Enhanced Framework.

Key features of the Bill

As recommended in the Enhanced Framework, the Bill seeks to substantially strengthen Australia's decommissioning framework. The key features of the Bill include changes in relation to the following:

  • Changes of control: the Bill seeks to ensure greater transparency in, and oversight of, transactions that may result in changes to ownership or control of a titleholder. The Bill proposes that approval from the National Offshore Petroleum Titles Administrator (NOPTA) will be required in relation to all changes in control of a registered title holder, including where a person comes to control, or ceases to control, a registered titleholder. Significantly, the threshold for a transaction constituting a change of control is set at a lower threshold than might typically be considered to constitute a change of control. The Bill considers a person to have control of a title holder if it (whether alone or with one or more other persons) has the power to exercise, or control the exercise of, 20% or more of the voting rights in the registered title holder; or holds, or holds an interest in, 20% or more of the issued securities in the registered title holder. This would have the effect that transactions that do not, in substance, change who is actually in control of a titleholder will nonetheless require approval. Seeking to avoid the changes of company control regime will attract harsh penalties.
  • Tracing and anti-avoidance: the Bill seeks to introduce anti-avoidance provisions, which are designed to catch changes of control 'up the chain' of ownership.
  • Accountability and trailing liability: the Bill also seeks to ensure that previous title holders will not be shielded from responsibility for remediation and decommissioning. Though the intention is for such provisions to be relied on as a last resort, the result is that a previous titleholder, a related body corporate of a previous titleholder, or former joint venture party can be called upon to undertake remediation and decommissioning activities.
  • Suitability to operate: the Bill also seeks to expand the decision-making criteria that applies in assessing the suitability of applicants applying to operate in Australia's offshore regime.

We provide further details on these key features below.

Importantly, though the Enhanced Framework suggested that the legislative measures would be backdated to be effective from 14 December 2020 (other than in respect of the trailing liability changes), this is not expressly reflected in the Bill. Presently, the Bill contemplates that its provisions will commence on a single day to be fixed by proclamation. The exception to this is the trailing liability provisions, which may apply to persons whose title ceased to be in force, in whole or part, on or after 1 January 2021.

Change of control: approval may be necessary for changes of control

The Bill expands the types of transactions that require assessment and approval from NOPTA to include a change in ownership or control of a titleholder entity. Previously, NOPTA approval was required only in relation to a transfer of ownership of a petroleum title, rather than in respect of changes in the ownership of a titleholder.

A person is defined as controlling the registered holder of a title if they, either solely or jointly:

  • hold the power to exercise, or control the exercise of, 20% or more of the registered title holder's voting rights; or
  • hold, or hold an interest in, 20% or more of the issued securities in the registered title holder.

The Bill proposes that approval from NOPTA will be required for any transaction which would result in a person coming or ceasing to control a registered title holder, including where:

  • a person acquires up to or more than a 20% share in a titleholder entity; or
  • a person reduces its share in a titleholder entity below 20%,

regardless of whether that occurs in single or multiple transactions.

This 20% threshold applies in relation to the relevant corporate acquisition and does not take into account the percentage interest held in the petroleum title by the relevant titleholder. Accordingly, approval for a change of control of a titleholder will be required irrespective of the percentage interest in the relevant petroleum title that is owned by the titleholder.

If a change of control occurs without NOPTA approval, or the change of control takes effect after the end of the relevant approval period, a person may commit an offence and be liable for a maximum criminal penalty of imprisonment for five years or 1,200 penalty units (a fine of $266,400), or both. A body corporate will be subject to a maximum criminal penalty of a fine up to $1,332,000. The person may also be liable for a maximum civil penalty of 2,400 penalty units (a fine of $532,800 for an individual or $2,664,000 for a body corporate).

In considering whether to approve a change of control application, NOPTA will consult with the Cross-Boundary Authority, the Joint Authority, NOPSEMA and the responsible federal minister.

NOPTA will consider whether, after the change of control takes effect, the registered holder will have sufficient technical advice and financial resources to carry out the relevant operations and works and discharge their obligations under the Act. It is unclear how this would be relevant if the change of ownership percentage does not affect who is, in fact, in operational control of the relevant titleholder.

If, either before the decision is made or during the approval period, there is a material change of circumstances that would impact the decision, the person must notify NOPTA or face a civil penalty of 480 units ($106,560). If this change in circumstances occurs during the approval period, NOPTA has power to request any information, document or evidence from a person or body corporate it believes is relevant to the matter. This will importantly mean that parties must continually monitor circumstances and consider whether further information must be provided to NOPTA.

Tracing and anti-avoidance: Change of control can be assessed up the corporate chain

The Bill establishes a tracing regime that allows control to be traced through corporate structures for the purposes of the change of company control rules. If a person (individually or jointly) holds the power to exercise, or controls the exercise, of 20% of the voting rights in a corporation or partnership (the higher party), and that corporation or partnership in turn holds the power to exercise, or controls the exercise, of 20% of the voting rights in a different corporation or partnership (the lower party), then the first person is taken to hold the power to exercise, or control the exercise, of the higher party's voting rights in the lower party.




The same regime applies for a person who, individually or jointly, holds 20% or more of the issued securities in a corporation or holds 20% or more of the interests in a trust or partnership (including beneficial interests and interests in a unit trust).

The Bill also introduces a new anti-avoidance provision that penalises entities for entering into, or carrying out, a scheme for the sole or dominant purpose of avoiding the change of control provisions if, as a result of that scheme, the entity actually does avoid the application of the change of control provisions. For a fault-based offence, the penalty is 1,200 penalty units ($266,400). The civil penalty for contravention is doubled (2,400 penalty units, or $532,800)).

Trailing liability: previous titleholder and others may be called back to remediate or decommission

The Bill expands the circumstances in which a previous titleholder may be called upon to remediate the site or undertake decommissioning activities in place of the current titleholder. These entities may be called upon to remediate or decommission the site even if NOPTA has previously consented to the sale and the previous titleholder sold its interest in a commercial transaction. Application of these provisions is intended to be a measure of last resort for when all other regulatory avenues have been exhausted.

Under the proposed provisions, a remediation notice can be given to:

  • the current registered holder of the permit, lease or licence;
  • any former registered holder of the permit, lease or licence;
  • a related body corporate of the current or former registered holder of the permit, lease or licence; and
  • any entity in respect of which NOPSEMA or the responsible federal minister has issued a determination, having regard to whether:
    • the entity was either capable of benefiting (or has significantly benefitted) financially from the operations;
    • the entity was in a position to influence compliance with the Act; and
    • the entity acted jointly with the titleholder.

As a result, there may be several parties that can be held liable to remediate and decommission a single site.

The proposed amendments do not provide an order of priority in which these parties will be called upon. Instead, this would be determined on a case by case basis (though it is expected that chronological order back from the current title holder will likely be a starting point). The Government has committed to developing further guidance on this point.

Titleholder groups will be responsible for working together to meet a remediation order. For example, where an order is given to a joint venture, the joint venture parties will be required to determine how to comply with the order as part of their own commercial arrangements – the order will not set out the manner in which parties should discharge their respective responsibilities. There is no prohibition on contractually allocating liability amongst previous and current title holders, although this allocation will naturally only apply as between the titleholders and would not be binding on the Government.

If an entity is ordered to remediate or decommission a site and does not comply, the Government may undertake the activity and recover costs. This amount is a debt due to the Government and is recoverable in the Federal Court, Federal Circuit Court and any state court with jurisdiction. Criminal prosecution and civil penalties may also apply for ongoing failure to comply.

These amendments will apply to directions given after the amendment of the Act. Directions can only be issued to former registered holders and related bodies corporate of former registered holders in relation to permits, leases, licences and authorities that ceased to be in force, in whole or in part, on or after 1 January 2021.

Expanded scope of decision-making criteria: enhancing the decision-making criteria

The Bill also seeks to expand the information that the Joint Authority may request and have regard to in assessing the competency and suitability of applicants who apply to operate in Australia's offshore regime or progress to higher-risk activities within it. Consideration may be given to whether the technical advice and financial resources available to the applicant are sufficient to:

  • carry out the operations and works that will be authorised by the permit; and
  • discharge the obligations that will be imposed under this Act, or a legislative instrument under this Act, in relation to the permit.

The Joint Authority will also be able to have regard to other specified matters – including relevant experience in the industry, prior offences and involvement in criminal or civil proceedings, previous applications that have been refused or titles that were cancelled, debts payable, insolvency, disqualification from management of corporations, and whether under the Act the person has made or given false or misleading statements, information, documents or evidence.

Other measures

In addition to the above, the Bill proposes other measures that stakeholders should be aware of:

  • the Bill expands the information-gathering powers of NOPTA, particularly in relation to decommissioning operations and an entity's capacity to comply with its obligations under the Act. These broader information-gathering powers can be applied to conduct or operations that occurred before the relevant provisions are effective.
  • The Bill also contains some minor amendments to support a transition to digital systems for filing applications and related documents.

What does this mean for you?

Past, present and future titleholders should consider carefully what the Bill may mean for them:

  • For those with upcoming negotiations or currently negotiating commercial transactions, you should:
    • be on notice that if the transaction results in any changes to ownership and/or control of a titleholder entity, you may have to apply to NOPTA for approval or risk facing penalty; and
    • consider the implications of the trailing liability provisions for your transaction (including the adequacy and duration of any security).
  • Former title holders and related bodies corporate of former registered holders of permits, leases, licences and authorities that ceased to be in force, wholly or partly, on or after 1 January 2021 should assess their potential exposure to be called back to undertake remediation or decommissioning works.
  • Prospective applicants or existing titleholders that are seeking to increase their activities in the offshore regime should be aware of the enhanced scrutiny that can be applied to these applications and the further information that can be requested.

Stakeholders have until 23 April 2021 to provide feedback on the Bill.