EXPLANATORY STATEMENT
Select Legislative Instrument 2010 No. 330
Subject Offshore Petroleum and Greenhouse Gas Storage (Safety Levies) Act 2003
Offshore Petroleum and Greenhouse Gas Storage (Safety Levies) Amendment Regulations 2010 (No. 2)
Section 11 of the Offshore Petroleum and Greenhouse Gas Storage (Safety Levies) Act 2003 (the Safety Levies Act) provides that the Governor-General may make regulations for the purposes of sections 5, 6, 7 and 8 of the Safety Levies Act.
The Offshore Petroleum and Greenhouse Gas Storage Act 2006 provides the legal framework for the exploration and recovery of petroleum and for the injection and storage of greenhouse gas substances in offshore areas. This Act is administered jointly by the Commonwealth Government and the state and Northern Territory governments and provides for a range of administrative decisions to be made in relation to petroleum and greenhouse gas titles.
The Safety Levies Act imposes safety investigation levies and safety case levies in relation to offshore petroleum and greenhouse gas facilities. Safety case levies are collected by the safety regulator for the upstream petroleum and greenhouse gas storage sectors, the National Offshore Petroleum Safety Authority (NOPSA), which collects the levies in order to fund its operations on a cost-recovery basis.
The safety case levy imposed by the Safety Levies Act is calculated in accordance with the provisions of the Offshore Petroleum and Greenhouse Gas Storage (Safety Levies) Regulations 2004 (the Principal Regulations). Among other things, the Principal Regulations set out a “unit value” and “SMS amount” (where “SMS” means “safety management system”), by reference to which a safety case levy is calculated.
The Offshore Petroleum and Greenhouse Gas Storage (Safety Levies) Amendment Regulations 2010 (the Amendment Regulations) amended the Principal Regulations to:
- Increase the unit value amount from $26,000 to $29,000;
- Increase the SMS amounts for facilities other than mobile facilities from $125,000 to $140,000; and
- Increase the SMS amounts for mobile facilities from $80,000 to $90,000.
These fees were previously amended in 2009 (taking effect from 1 January 2010), prior to which NOPSA had not requested or made any changes to the unit value or SMS amounts since its establishment on 1 January 2005. The levy increase for 2011 ensures that NOPSA has sufficient cash reserves to pay staff and suppliers as and when payments fall due, as well as maintain a reserve to meet any unplanned costs and asset replacements and upgrades. The amendments continue the implementation of staged increases in levies, enabling a gradual reduction to NOPSA’s accumulated surplus and negating the need for substantial levy increases in 2012. The increase represents a price change lower than the annual increases to the Consumer Price Index over the previous five years.
Regulation 39 of the Principal Regulations requires the Chief Executive Officer of NOPSA to meet annually with representatives of the offshore petroleum industry to explain and discuss the cost-effectiveness of NOPSA’s operations. NOPSA held the required meeting on 29 October 2010, at which the details of and rationale for the proposed levy increase were discussed with industry representatives. Industry representatives did not express any concerns with the proposed levy increase during the consultation process.
In addition, NOPSA prepared an addendum to its 2008 Cost Recovery Impact Statement, which outlined the rationale for the levy increase and stakeholder consultation processes. A copy of the addendum is available at http://www.nopsa.gov.au/document/Addendum%20to%20the%202008%20Cost%20Recovery%20Impact%20Statement.pdf.
The Amendment Regulations are a legislative instrument for the purposes of the Legislative Instruments Act 2003.
The Amendment Regulations commence on 1 January 2011.
Overview
The Offshore Petroleum and Greenhouse Gas Storage (Safety Levies) Amendment Regulations 2010 (No. 2) was enacted to address the need for increased funding for the National Offshore Petroleum Safety Authority (NOPSA) to ensure it could meet its operational costs, including staff salaries, supplier payments, and unplanned costs, while maintaining adequate reserves. The problem this legislation aimed to solve was the insufficiency of the existing levies to cover NOPSA's expenses, necessitating a gradual increase to prevent abrupt financial strain. This legislative instrument was introduced by the Governor-General in accordance with Section 11 of the Offshore Petroleum and Greenhouse Gas Storage (Safety Levies) Act 2003, with the policy objective of ensuring NOPSA's financial sustainability while implementing staged increases in levies to avoid substantial hikes in future years. The regulations were designed to enhance NOPSA's cash reserves and maintain a balance between cost recovery and operational efficiency, thereby supporting the safe management of offshore petroleum and greenhouse gas activities.
Scope and Application
The Offshore Petroleum and Greenhouse Gas Storage (Safety Levies) Amendment Regulations 2010 (No. 2) amends the Offshore Petroleum and Greenhouse Gas Storage (Safety Levies) Regulations 2004 to adjust the unit value and safety management system (SMS) amounts for offshore petroleum and greenhouse gas facilities. These levies are imposed under the Offshore Petroleum and Greenhouse Gas Storage (Safety Levies) Act 2003, and collected by the National Offshore Petroleum Safety Authority (NOPSA) to fund its operations on a cost-recovery basis. The Amendment Regulations increase the unit value from $26,000 to $29,000 and increase the SMS amounts for non-mobile facilities from $125,000 to $140,000 and for mobile facilities from $80,000 to $90,000. These changes, which take effect from 1 January 2011, aim to ensure that NOPSA maintains adequate financial reserves to meet operational costs and unexpected expenses. The amendments are part of a staged approach to gradually reduce NOPSA's accumulated surplus and avoid large increases in levies in subsequent years.
Key Provisions
The main operative sections of the Offshore Petroleum and Greenhouse Gas Storage (Safety Levies) Amendment Regulations 2010 (No. 2) concern the amendments to the unit value and Safety Management System (SMS) amounts for levy calculations under the Offshore Petroleum and Greenhouse Gas Storage (Safety Levies) Regulations 2004. Specifically, Regulation 4 of the Amendment Regulations increases the unit value from $26,000 to $29,000, while Regulation 5 increases the SMS amounts for facilities other than mobile facilities from $125,000 to $140,000 and for mobile facilities from $80,000 to $90,000. These adjustments are made to ensure that the National Offshore Petroleum Safety Authority (NOPSA) maintains sufficient cash reserves to meet its operational needs and to avoid significant increases in levies in the future.
The Amendment Regulations impose obligations on NOPSA and the offshore petroleum industry. NOPSA is required to calculate safety investigation levies and safety case levies in accordance with the amended unit value and SMS amounts. The industry must pay these levies to NOPSA as part of the cost-recovery mechanism to fund NOPSA’s operations. Moreover, Regulation 39 mandates that NOPSA’s Chief Executive Officer hold an annual meeting with industry representatives to discuss the cost-effectiveness of NOPSA’s operations, ensuring transparency and consultation in the regulatory process. NOPSA must also prepare a cost recovery impact statement addendum to explain the rationale behind any proposed levy changes and detail the consultation process, which is made publicly available.
Breaches of the obligations and requirements set out in the Amendment Regulations may lead to civil and criminal consequences, although the specific offences and penalties are not detailed in the explanatory statement. However, it is implied that non-compliance with levy payment obligations could result in enforcement actions by NOPSA or legal proceedings under the Offshore Petroleum and Greenhouse Gas Storage (Safety Levies) Act 2003. The maximum penalties for offences under this Act are not explicitly stated but would typically include fines and other civil remedies as determined by the relevant courts.