EXPLANATORY STATEMENT
Issued by the authority of the Minister for Industry, Energy and Emissions Reduction
Industry Research and Development Act 1986
Industry Research and Development (Golden Beach Gas Storage Acceleration Program) Instrument 2022
Purpose and Operation
Section 33 of the Industry Research and Development Act 1986 (the IR&D Act) provides a mechanism for the Minister to prescribe programs, by disallowable legislative instrument, in relation to industry, innovation, science or research, including in relation to the expenditure of Commonwealth money under such programs.
The statutory framework provided by section 33 of the IR&D Act enables a level of flexibility to provide authority for Commonwealth spending activities in relation to industry, innovation, science and research programs. This allows the Government to respond quickly and appropriately to the need to implement innovative ideas and pilot programs on an ongoing basis and as opportunities arise. Prescribing programs in legislative instruments provides transparency and parliamentary oversight of Government programs and spending activities, whilst reducing administrative burden on the Commonwealth.
Once a program is prescribed by the Minister under section 33, subsection 34(1) allows the Commonwealth to make, vary or administer arrangements in relation to activities under the prescribed program. Arrangements may include contracts, funding agreements or other arrangements, and may provide for money to be payable by the Commonwealth to one or more third parties. The power conferred on the Commonwealth by subsection 34(1) may be exercised on behalf of the Commonwealth by a Minister or an accountable authority of a non‑corporate entity, or by their delegate (under section 36).
The purpose of the Industry Research and Development (Golden Beach Gas Storage Acceleration Program) Instrument 2022 (the Legislative Instrument) is to prescribe the Golden Beach Gas Storage Acceleration Program (the Program). The funding for the Program has been secured through the Department of Industry, Science, Energy and Resources 2021-2022 Budget.
The proposed Golden Beach gas storage project includes development of the Golden Beach gas field and associated storage infrastructure to increase the supply of gas to the east coast market. It is anticipated that after two years of gas production the project will convert to a natural gas storage facility to assist in addressing fluctuations in gas demand. The purpose of the Program is to support this project’s progression to a final investment decision (FID) in time so that the project can assist in alleviating a forecast gas supply shortfall. The Golden Beach gas storage project was identified in the Government’s National Gas Infrastructure Plan: Interim Report (Interim NGIP) as one of the critical infrastructure projects required to progress in order to play a role in mitigating the risk of gas supply shortfalls and avoid the economic consequences of gas supply scarcity.
The Program will involve providing a short-term loan of up to $32 million to GB Energy (VIC) Pty Limited, the proponent of the Golden Beach project, to ensure the project has access to the funds required to stay on track and progress early works ahead of FID. These early works involve securing project elements that are time critical for future imminent project steps. Funding authorised by this Legislative Instrument comes from Program 3.1, Outcome 3 as set out in the Portfolio Budget Statements 2021-22, Budget Related Paper No. 1.9, Industry, Science, Energy and Resources Portfolio (https://www.industry.gov.au/sites/default/files/2021-05/2021-22-department-of-industry-science-energy-and-resources-pbs.pdf) at page 58.
The Program will be delivered by the Gas Taskforce Division in the Department of Industry, Science, Energy and Resources.
The Program is a loan arrangement, and will be administered by the Department in accordance with applicable legislative requirements (such as those under the Public Governance, Performance and Accountability Act 2013) and applicable Commonwealth policies (such as Resource Management Guide 308: Commonwealth Investments).
The spending decision will be made by the Minister for Industry, Energy and Emissions Reduction with advice from the Department of Industry, Science, Energy and Resources, based on due diligence checking and negotiation of a satisfactory loan agreement. The loan agreement will be on commercial terms and funding will be provided on the basis that it would support the proposed Golden Beach gas storage project. As the Program involves funding to an identified recipient, decisions will not be subject to merits review.
Persons who are affected by decisions or who have complaints about the Program will have recourse to the Department. The Department investigates any complaints about the Program in accordance with its complaints policy and procedures. If a person is not satisfied with the way the Department handles the complaint, they may lodge a complaint with the Commonwealth Ombudsman.
The Legislative Instrument specifies that the legislative powers in respect of which the Instrument is made are the following:
Corporations power
Section 51(xx) of the Constitution empowers the Parliament to make laws with respect to ‘foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth’.
In Williams v Commonwealth (2014) 252 CLR 416 (Williams No 2), the High Court, considering section 32B of the Financial Management and Accountability Act 1997 (the FMA Act), held (at [50]) that:
A law which gives the Commonwealth the authority to make an agreement or payment of that kind is not a law with respect to trading or financial corporations. The law makes no provision regulating or permitting any act by or on behalf of any corporation.
However, the relevant provisions of the IR&D Act are substantially different to the provisions considered by the High Court in Williams No 2. Section 34 of the IR&D Act corresponds to section 32B of the FMA Act considered by the High Court in Williams No 2. However, the FMA Act contained no provision in terms equivalent to those of section 35 of the IR&D Act.
Subsection 35(2) of the IR&D Act limits the arrangements made under section 34 so that, where a party to an arrangement made under section 34 is a constitutional corporation, the arrangement must be subject to a written agreement containing terms and conditions under which money is payable by the Commonwealth. The corporation must comply with the terms and conditions. The activities of the corporation are therefore regulated through the terms and conditions made under each agreement pursuant to subsection 35(2).
Further, subsection 35(3) provides that the agreement must provide for circumstances in which the corporation must repay amounts to the Commonwealth.
The only applicant who will be eligible to receive benefits under the Program prescribed by the Legislative Instrument is a constitutional corporation. The funding conferred by the Program will be directed to assisting that corporation in the conduct of its ordinary activities (here, developing the Golden Beach gas storage project to provide critical gas supply and storage infrastructure to Australia’s east coast energy market) .The Program will impose terms and conditions on that corporation under a loan agreement in accordance with section 35 of the IR&D Act, in relation to receipt of funding under the Program. The terms and conditions will set out what the funding may be used for, and the circumstances in which it must be repaid.
Background
On 7 May 2021, the Government delivered the National Gas Infrastructure Plan: Interim Report (Interim NGIP). It found that supplies of gas to the domestic east coast gas market are forecast to fall short of residential, commercial and industrial demand by 2024. The Interim NGIP identified that the Golden Beach gas storage project can play an important role in alleviating the risk of a gas shortfall by enhancing flexibility and responsiveness during periods of peak gas demand. While industry is leading development of the Golden Beach gas storage project, there is a role for Government to ensure that the project can make final investment decisions in time to come online to meet the supply shortfall. It is critical this project progresses in time to avoid the economic consequences of supply scarcity.
Authority
Section 33 of the IR&D Act provides authority for the Legislative Instrument.
Consultation
In accordance with section 17 of the Legislation Act 2003, the Attorney-General’s Department have been consulted on this Legislative Instrument.
The Department of Finance and the Infrastructure and Project Financing Authority have also been consulted on this Legislative Instrument.
Regulatory Impact
It is estimated that the regulatory burden is likely to be minor (OBPR reference number 43638).
Details of the Industry Research and Development (Golden Beach Gas Storage Acceleration Program) Instrument 2022
Section 1 – Name of Instrument
This section specifies the name of the Legislative Instrument as the Industry Research and Development (Golden Beach Gas Storage Acceleration Program) Instrument 2022.
Section 2 – Commencement
This section provides that the Legislative Instrument commences on the day after registration on the Federal Register of Legislation.
Section 3 – Authority
This section specifies the provision of the Industry, Research and Development Act 1986 (the IR&D Act) under which the Legislative Instrument is made.
Section 4 – Definitions
This section provides for definitions of terms used in the Legislative Instrument.
Section 5 – Prescribed Program
This section prescribes the Golden Beach Gas Storage Acceleration Program (the Program) for the purposes of section 33 of the IR&D Act.
The purpose of the Program is to ensure that GB Energy (VIC) Pty Limited can reach a final investment decision in relation to the Golden Beach gas storage project in time for the project to play a part in alleviating forecast gas shortfalls in the east coast gas market.
The Program will do this by providing a loan to GB Energy (VIC) Pty Limited of up to $32 million in total.
Section 6 – Specified Legislative Power
This section specifies that the legislative power in respect of which the Legislative Instrument is made is the power of the Parliament to make laws with respect to foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth (paragraph 51(xx) of the Constitution).
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Industry Research and Development (Golden Beach Gas Storage Acceleration Program) Instrument 2022
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Legislative Instrument
The purpose of the Industry Research and Development (Golden Beach Gas Storage Acceleration Program) Instrument 2022 is to prescribe the Golden Beach Gas Storage Acceleration Program (the Program).
On 7 May 2021, the Government delivered the National Gas Infrastructure Plan: Interim Report (Interim NGIP). It found that supplies of gas to the domestic east coast gas market are forecast to fall short of residential, commercial and industrial demand by 2024. The Interim NGIP identified that the Golden Beach gas storage project can play an important role in alleviating the risk of a gas shortfall by enhancing flexibility and responsiveness during periods of peak gas demand. The purpose of the Program is to ensure GB Energy (VIC) Pty Limited can reach a final investment decision in relation to the Golden Beach gas storage project in time for the project to play a part in alleviating forecast gas shortfalls in the east coast gas market. The Program will do this by providing a loan to GB Energy (VIC) Pty Limited of up to $32 million in total.
Human rights implications
This Legislative Instrument does not engage any of the applicable rights or freedoms.
Conclusion
This Legislative Instrument is compatible with human rights as it does not raise any human rights issues.
The Hon Angus Taylor MP
Minister for Industry, Energy and Emissions Reduction