Explanatory Statement
Excise (Prescribed Condensate Production Area) By-Law 2022
General Outline of Instrument
- This instrument is made under section 165 of the Excise Act 1901.
- This instrument prescribes condensate production areas for the purposes of section 6CA of the Excise Tariff Act 1921 (Excise Tariff Act).
- The instrument is a legislative instrument for the purposes of the Legislation Act 2003.
- Under subsection 33(3) of the Acts Interpretation Act 1901, where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws) the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument.
Date of effect
5. This instrument commences on the day after it is registered on the Federal Register of Legislation.
6. This instrument will sunset ten years after commencement. A ten year period is required to provide certainty to businesses on their obligations.
What is the effect of this instrument
7. This instrument prescribes each condensate production area for the purposes of the definition of the term “prescribed condensate production area” contained in subsection 6CA (1) of the Excise Tariff Act.
8. By prescribing condensate production areas, this instrument makes condensate produced from those areas subject to a duty of excise to be “Free or if higher the amount of duty worked out under section 6CA” of the Excise Tariff Act.
9. Compliance Cost Impact: Minor – There will be no additional regulatory impacts for both implementation and ongoing compliance costs from this Instrument. The legislative instrument is minor or machinery in nature.
Background
10. Subitem 21.3 of the Schedule to the Excise Tariff Act imposes a duty of excise on certain condensate to be "Free, or if higher the amount of duty worked out under section 6CA".
11. Section 6CA of the Excise Tariff Act provides that a Prescribed condensate production area means "a condensate production area prescribed by by-laws (which, without limiting the generality of the foregoing, may be a relevant accumulation, a well, an oil field or a gas field)".
12. A by-law is required to prescribe condensate production areas for the purposes of section 6CA of the Excise Tariff Act.
13. This instrument repeals and replaces Excise By-Law – Prescribed Condensate Production Area (F2019L00411), registered on 26 March 2019 (previous instrument).
14. The Minister for Resources and Water recently determined that Tidepole reservoir is separate from an existing production area (the Rankin Trend). As a consequence, this instrument adds Tidepole reservoir as an additional prescribed condensate production area in the Carnarvon Basin. Aside from this addition, this instrument is substantially the same as the previous instrument that it replaces. An entity that satisfied the requirements of the previous instrument will satisfy the requirements of this instrument.
15. In accordance with Excise By-Law No. 114 (F2009C00659), the first 4767.3 megalitres of production from the Tidepole reservoir will be exempt from excise duty. Once that production threshold is met, excise duty may apply depending upon annual production levels.
Consultation
16. Subsection 17(1) of the Legislation Act 2003 requires, before the making of a determination, that the Commissioner is satisfied that appropriate and reasonably practicable consultation has been undertaken.
17. Targeted consultation was undertaken for a period of 2 weeks. Copies of the draft legislative instrument and explanatory statement were sent to the operator of the Tidepole reservoir for comment and feedback.
18. No comments were received.
Legislative references
Acts Interpretation Act 1901
Excise Act 1901
Excise Tariff Act 1921
Legislation Act 2003
Legislation (Exemptions and Other Matters) Regulation 2015.
Statement of compatibility with Human Rights
Table item 16 of section 10 of the Legislation (Exemptions and Other Matters) Regulation 2015 states that a by-law is not subject to disallowance where it is made under section 165 of the Excise Act 1901 for the purposes of the Excise Tariff within the meaning of section 4 of that Act. This by-law falls within that item and is therefore not subject to disallowance. Paragraph 15J(2)(f) of the Legislation Act 2003 exempts this instrument from the requirement to contain a statement of compatibility with human rights.
Overview
The Excise (Prescribed Condensate Production Area) By-Law 2022 was enacted to address the need for clearly defined condensate production areas for the purposes of the Excise Tariff Act 1921. This by-law was made under section 165 of the Excise Act 1901 and is a legislative instrument for the purposes of the Legislation Act 2003. The policy objective is to provide certainty to businesses regarding their obligations concerning excise duties on condensate, ensuring compliance with the Excise Tariff Act. This by-law replaces the previous Excise By-Law – Prescribed Condensate Production Area (F2019L00411) and adds the Tidepole reservoir in the Carnarvon Basin as a new prescribed condensate production area, separate from the Rankin Trend. The by-law ensures that condensate produced from these areas is subject to the appropriate excise duty as defined in the Excise Tariff Act. The instrument also includes a sunset clause, expiring ten years after its commencement to allow for periodic review and updates in line with industry changes and developments.
Scope and Application
The Excise (Prescribed Condensate Production Area) By-Law 2022 applies to specific condensate production areas within the context of the Excise Tariff Act 1921. It is made under the authority of the Excise Act 1901 and serves to define "prescribed condensate production area" for the purposes of section 6CA of the Excise Tariff Act. This by-law specifically identifies and prescribes areas such as relevant accumulations, wells, oil fields, or gas fields within Australia, thereby subjecting the condensate produced from these areas to excise duty as defined under the Excise Tariff Act. The instrument is intended to provide certainty for businesses by outlining their obligations regarding excise duty on condensate produced from these specified areas. The by-law has a national jurisdictional reach and will sunset ten years after its commencement to allow for periodic review and amendment. Subitem 21.3 of the Schedule to the Excise Tariff Act imposes a duty of excise on certain condensate, and the by-law ensures that these areas are clearly defined and subject to the relevant excise duty.
Key Provisions
The Excise (Prescribed Condensate Production Area) By-Law 2022 (F2022L00583) is a legislative instrument created under section 165 of the Excise Act 1901, and it serves to designate specific areas as prescribed condensate production zones for the purposes of section 6CA of the Excise Tariff Act 1921 (Excise Tariff Act). The by-law, which is a legislative instrument as defined by the Legislation Act 2003, specifically identifies the condensate production areas (section 7), thereby subjecting the condensate produced from these areas to a duty of excise as outlined in the Excise Tariff Act (section 8). This instrument takes effect from the day after its registration on the Federal Register of Legislation (section 5) and will expire ten years from its commencement (section 6).
The primary obligations under this by-law concern the identification and designation of specific areas within the Carnarvon Basin, particularly the addition of the Tidepole reservoir as a prescribed condensate production area. This by-law replaces the previous Excise By-Law – Prescribed Condensate Production Area (F2019L00411) and, aside from the addition of the Tidepole reservoir, remains largely consistent with its predecessor. Therefore, entities that previously complied with the requirements of the repealed instrument will continue to meet the obligations under this new by-law. Additionally, the by-law stipulates that the first 4767.3 megalitres of production from the Tidepole reservoir will be exempt from excise duty, with any subsequent production being subject to excise duty depending on the annual production levels (section 15).
In terms of compliance, there are no additional regulatory impacts or ongoing compliance costs expected from this by-law. It is designed to be minor or machinery in nature. The Minister for Resources and Water determined that the Tidepole reservoir is distinct from the existing Rankin Trend production area, which necessitated its inclusion in the by-law. The by-law is also subject to consultation requirements as per subsection 17(1) of the Legislation Act 2003, although no comments were received during the targeted consultation period (section 18).
Regarding potential breaches and penalties, this by-law does not specify offences or penalties directly within its text. However, non-compliance with the excise duty provisions as outlined in the Excise Tariff Act could lead to civil or criminal penalties, including fines and imprisonment, depending on the severity and intent of the breach. The specific penalties would be governed by the broader provisions of the Excise Act 1901 and related legislation.