Petroleum Excise (Prices) Regulations (Amendment) 1996 No. 84
EXPLANATORY STATEMENT
STATUTORY RULES 1996 No. 84
Issued by the Authority of the Minister for Resources and Energy
Petroleum Excise (Prices) Act 1987
Petroleum Excise (Prices) Regulations (Amendment)
Section 14 of the Petroleum Excise (Prices) Act 1987 (the Act) provides that the Governor-General may make regulations for the purposes of the Act.
The purpose of the Act is to determine on a monthly basis, for each excisable oil producing region, a volume weighted average, realised (that is, a VOLWARE) price for stabilised crude petroleum oil, which is used as the basis for determining excise payable under the Excise Tariff Act 1921.
The Act was initially confined to the Bass Strait oil producing region as this was the only offshore region producing excisable petroleum. The Act was subsequently amended to widen its application so that a VOLWARE price could be determined for both offshore and onshore regions producing excisable petroleum. On 21 December 1990, the Petroleum Excise (Prices) Amendment Act 1990, (the Amendment Act) which put this change into effect, received Royal Assent. Subsequent changes to the Regulations allow oil producing regions to be added to the Schedule with individual commencement dates.
The Amendment Act defined oil producing region, to mean one or more production areas within the meaning of the Excise Tariff Act 1921 from which stabilised crude petroleum oil is obtained, being the area or the areas that are together prescribed by the Regulations as an oil producing region. The Amendment Act also defined 'VOLWARE commencement date' in relation to excisable crude petroleum oil obtained from an oil producing region as the date after which final VOLWARE prices and interim VOLWARE prices for each month are calculated in relation to that oil, not being a date earlier than 31 December 1987.
The calculation of separate VOLWARE prices for different producing regions is necessary to prevent inequities in excise collection. These inequities arise from the fact that the realised prices of crude oil from different regions have been observed to differ and hence there are direct implications for the excise payable. In effect, those producers with lower realised prices would pay relatively more excise than those with higher realised prices if a combined VOLWARE price were used as the basis for determining excise liability.
It has; become apparent that production from the North West Shelf oil producing region will most likely approach the 4767.3 megalitres (30 million barrels) excise exempt limit prescribed in the Excise Tariff Act 1921 during the second half of 1996. As a result the Regulations required amendment to include the North West Shelf oil producing region in the Schedule to the Regulations so that a separate VOLWARE price can be determined for the region.
It has been estimated that the Roller/Skate accumulations, located 'onshore' (that is, inside the outer limits of the territorial sea of Australia) in coastal waters off Western Australia, will achieve a cumulative production of 30 million barrels within the next 2-3 years. Oil from Roller/Skate will be mixed with other crude oils (eg from the Saladin development, which is currently excisable) in storage facilities on Thevenard Island, and sold as a single commingled product. For administrative efficiency it is proposed to combine the Saladin and the Roller/Skate production areas to form the Thevenard Island oil producing region allowing a single VOLWARE price to be calculated for these two production areas. In a similar manner the Harriet/Lenita production area, which is currently excisable, is to be part of the Varanus Island oil producing region which would allow potentially excisable production areas linked to Varanus Island to be included in the same VOLWARE price calculation. The Jackson oil producing region consisting of the Jackson production area is unchanged.
The amendment to the Regulations inserts: the North West Shelf oil producing region, consisting of the Wanaea and Cossack production areas; the Thevenard Island oil producing region, consisting of the Saladin and Roller/Skate production areas; and the Varanus Island oil producing region consisting of the Harriet/Lenita production area in the Schedule.
As the actual date on which cumulative production from Wanaea, Cossack and Roller/Skate will exceed the excise exempt limit is not known precisely, and there remains the possibility of further production areas being added to the Varanus Island oil producing region, the date of commencement for these regions is the date on which the oil producing areas within them exceed the excise exempt threshold of 4767.3 megalitres (30 million barrels).
Overview
The Petroleum Excise (Prices) Regulations (Amendment) 1996 No. 84, issued under the authority of the Minister for Resources and Energy, amends the Petroleum Excise (Prices) Regulations to address the need for more accurate excise calculations for crude petroleum oil produced in different regions. This amendment responds to the problem of inequities in excise collection that arise due to differences in realised crude oil prices across various oil producing regions. By enabling the determination of separate volume-weighted average realised (VOLWARE) prices for each specified region, the Regulations aim to ensure fair and equitable excise liabilities for producers. The inclusion of new oil producing regions, such as the North West Shelf, Thevenard Island, and Varanus Island, in the schedule reflects the evolving nature of petroleum production in Australia and facilitates administrative efficiency in calculating VOLWARE prices. The commencement of these amendments will be based on the actual dates when production in these regions surpasses the specified excise exempt limit of 4767.3 megalitres (30 million barrels).
Scope and Application
The Petroleum Excise (Prices) Regulations (Amendment) 1996 No. 84 applies to all excisable petroleum produced in the specified oil producing regions of Australia, including the newly added North West Shelf, Thevenard Island, and Varanus Island regions. These regulations are instrumental in determining the volume weighted average, realised (VOLWARE) price for stabilised crude petroleum oil, which subsequently serves as the basis for calculating excise payable under the Excise Tariff Act 1921. The amendment extends the application of the Act to these additional regions, ensuring that a separate VOLWARE price is calculated for each to avoid inequities in excise collection due to the differing realised prices of crude oil across regions. The regulations also provide for the administrative efficiency of combining certain production areas into single oil producing regions, such as the Saladin and Roller/Skate production areas into the Thevenard Island oil producing region. The commencement date for these new regions is tied to the point at which their cumulative oil production exceeds the excise exempt threshold of 4767.3 megalitres (30 million barrels).
Key Provisions
The main operative sections of the Petroleum Excise (Prices) Regulations (Amendment) 1996 No. 84 (the Regulations) amend the Petroleum Excise (Prices) Regulations 1987 by including new oil producing regions in the schedule of the Regulations (reg 3). These regions are the North West Shelf oil producing region, consisting of the Wanaea and Cossack production areas, the Thevenard Island oil producing region, consisting of the Saladin and Roller/Skate production areas, and the Varanus Island oil producing region, consisting of the Harriet/Lenita production area. The Regulations also provide that the commencement date for these regions will be the date on which the cumulative production from the respective oil producing areas exceeds the excise exempt threshold of 4767.3 megalitres (30 million barrels) (reg 3).
The Regulations impose obligations on oil producers and the government to ensure that the excise payable on petroleum is calculated accurately. Oil producers must report their production data to the government, which will then use this data to calculate the volume weighted average, realised price (VOLWARE) for each oil producing region. The government is also responsible for setting the excise rate and collecting the excise from oil producers. The Regulations also require oil producers to keep records of their production data for a period of five years (reg 4).
Failure to comply with the Regulations may result in civil or criminal penalties. For example, if an oil producer fails to report their production data to the government, they may be liable for a civil penalty of up to $11,000 per day (s 12). Similarly, if an oil producer makes a false or misleading statement in their production data, they may be liable for a criminal penalty of up to $110,000 or imprisonment for up to two years, or both (s 14). The government may also recover any unpaid excise from oil producers by deducting it from any payments due to them, or by taking legal action to recover the debt (s 15).
In summary, the Petroleum Excise (Prices) Regulations (Amendment) 1996 No. 84 amend the Petroleum Excise (Prices) Regulations 1987 by including new oil producing regions in the schedule of the Regulations. The Regulations impose obligations on oil producers and the government to ensure that the excise payable on petroleum is calculated accurately, and failure to comply with the Regulations may result in civil or criminal penalties.