Hansard debates

                                 PETROLEUM BILL
                                 Second reading

  Mr REYNOLDS (Minister for Sport) -- I move:
That this bill be now read a second time.
The  bill  is an important  new  step in encouraging  exploration and production
activity  in  the  Victorian petroleum  and  mining industries.  It  repeals the
current  Petroleum Act 1958  and replaces it  with contemporary legislation  for
onshore Victorian petroleum exploration and production.
The petroleum industry has provided Victoria with a local  source of oil and gas
for the last 30 years from the offshore Bass Strait oil and gas fields.

Onshore  Victoria  is  also  prospective  for  small to medium oil and gas field
discoveries. Such discoveries provide  major  benefits  to regional Victoria, as
seen at Warrnambool and Portland, which are supplied by the onshore Paaratte gas
field. This legislation will encourage petroleum exploration  activity  so  that
Victoria's onshore petroleum potential is realised and utilised for  the benefit
of Victorians.
This  bill will  provide  greater  certainty  to  petroleum  explorers within  a
legislative  framework  that protects the environment and respects the interests
of private landowners. The legislation provides  a licensing regime that allows,
through the holding  of various authorities, the exploration for and  production
of  petroleum  from beneath  land  onshore in  Victoria.  While  reaffirming the
state's ownership  of all  petroleum on  or  below the  surface of  any land  in
Victoria it  maintains  mechanisms for the  private sector to  find  and develop
these resources for the benefit of industry and all Victorians.

Authorities
This  bill provides for  four  types of  authorities  that reflect the  resource
exploration and production process.  Exploration  permits  will allow holders to
explore for petroleum  within their authority area giving them exclusive  rights
to  develop  -- subject  to  planning  approval  --  any  petroleum discoveries.
Retention  leases  will  allow exploration  permit-holders  to retain  petroleum
discoveries that are not currently commercially viable but which might be in the
future.  Production  licences  will  allow  exploration  permit   and  retention
leaseholders to  produce  from their  petroleum  discoveries. A  fourth  type of
authority, a  special  access  authorisation,  will  allow  holders to undertake
exploration activities to gain  geological information for their use or for sale
but does not confer any rights 
to petroleum discoveries or allow drilling.

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The introduction of the retention lease shifts the risk  profile  in a direction
which will encourage exploration expenditure.
Consistent with competition  reform policy, land must  initially be offered  for
petroleum exploration through an  open competitive tendering system based on the
best exploration program bid. However, if tendering is unsuccessful the land can
be made available for application. Exploration permits will be issued for longer
initial terms of five years, rather than the current two years. This change will
provide explorers with a longer initial fixed period, related to the time needed
for a cycle  of  exploration  and evaluation of prospects, thus enabling them to
explore  in  a progressive  and  logical  manner. The  bill  also  provides  the
certainty that  all explorers want  to develop a petroleum  discovery. Explorers
must be granted a retention lease  or production licence over their discovery if
they have complied with all these legislated requirements.

Exploration permits are offered for a maximum  10  years: an initial 5-year term
followed  by an option to renew for a further 5 years over up to 50  per cent of
the  land  area.  Returning  half  of  the  land  for  tender  provides  regular
contestability of  the  land, encourages  increased  exploration  intensity  and
facilitates opportunities for a  larger range of  upstream explorers. This  bill
also ensures that any known petroleum resources  not held under an authority can
be offered for development only through an open tender process.
Clear  mechanisms  are  provided  for  authority  holders  to  relinquish  their
authorities if they choose to  do  so. The minister may cancel authorities where
their holders have not exercised their authority rights by exploring, evaluating
or producing a resource in a timely manner.
Explorers submitting  the winning work program  bid are bound  to undertake that
work in the initial five years of the exploration permit.

This  work  will be unambiguously confirmed in writing by the  minister  as  key
activities to be completed. If an explorer elects to renew an exploration permit
for a further five years a  new set of activities to be completed will be agreed
with  the minister. Completing work  is required in the absence of extraordinary
circumstances. Failure to do so means that the licence may be cancelled.
Underground storage
This bill  preserves  the ability of  a production licence-holder  to  undertake
storage of  petroleum  in  underground  natural  reservoirs.  Such  activity  is
expected to provide important gas market  benefits to Victoria in  the immediate
future through providing for greater gas supply diversity and security.

In  recognition of  the  expected future  importance  of  underground storage  a
mechanism is provided to  ensure that suitable reservoirs are made available for
underground  storage  and not left  idle  within a  production  licence.  On the
application of a potential storer the minister can excise unused reservoirs from
licence areas and  make  them available for  storage  through open tender.  This
provision supports the  underlying principles that authority holders must remain
active on their authority area and that land can only be offered through an open
competitive tender.
Land access
Petroleum resources may underlie any  land, irrespective of the  status given to
that land. All  Victorian  land  may  be  included in a petroleum authority. The
legislation recognises differential environmental values  ascribed to parks  and
other Crown land and sets appropriate access regimes for petroleum activities.

This  bill  provides  for four categories of Crown land in  recognition  of  the
various environmental values that are  ascribed to Crown  land. These categories
are:
        Wilderness  Crown  land covers  wilderness zones,  wilderness  parks and
        reference areas. Petroleum operations are prohibited in these areas.
        Parks  Crown land includes  the national, state  and  other parks within
        this  category  where  only  the  Minister  for  Conservation  and  Land
        Management can consent to  petroleum operations. The existing provisions
        under section 40(2) of the National Parks Act 1975 have been preserved.
        Restricted Crown  land  is defined  and  is largely linked  to  approved
        recommendations of the former Land Conservation Council.

        The  consent of the  Minister for Conservation and  Land Management must
        also be obtained for operations over this category of land.
        Unrestricted Crown land is all remaining Crown land representing some 50
        per cent  (approximately  4 million hectares)  of all Crown land  in the
        state.  The  Minister  for  Conservation  and  Land  Management must  be
        consulted before any significant operations occur over this land.
Private  landowners'  interests  are  recognised  and  protected.  No  petroleum
operations can be carried out on any  private  land unless compensation has been
agreed  with  the  landowner  or  settled   through  the  Victorian   Civil  and
Administrative Tribunal (VCAT). The bill also requires that advance notification
of operations must be given, that consultation be undertaken  on  the  nature of
the operations and that appropriate rehabilitation is undertaken.

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Compensation
In  setting  out compensation  for  private landowners, this  bill  broadens the
compensation now payable  and aligns these compensation provisions for petroleum
operations with  those  of mining which  are contained in the  Mineral Resources
Development Act 1990. The mining compensation model has operated effectively and
this  bill  will now  give  private landowners  a  common  mechanism and  rights
relating to explorers wanting to access resources under their land.
This bill also recognises that petroleum  operations over Crown land  may result
in the  Crown or other authorised Crown land users suffering loss or damage. The
bill provides that the minister may require  holders of petroleum authorities to
pay compensation for loss or  damage in prescribed circumstances. In considering
compensation to the Crown the minister will take into account the benefits  that
may accrue to the people of Victoria from the petroleum operations.

Planning matters
Exploration will be authorised without requiring multiple approvals. Exploration
carried  out  under a petroleum authority will not require a planning permit nor
be  prohibited  under  any  planning  scheme approved  under  the  Planning  and
Environment  Act  1987.  Production carried out  under  a  production  authority
granted under the  bill cannot be prohibited  under any planning scheme approved
under the Planning and Environment Act 1987. A petroleum production project that
has been the subject of an Environment Effects Statement  (EES)  will  not  also
require  a planning permit.  Victorian  planning provisions  will  be amended to
ensure consistency with this bill.
Land protection

The  bill ensures that measures are set down for protection  of the  land before
petroleum operations are undertaken.
In seeking acceptance for a petroleum operation, an authority holder is required
to put forward an operation plan. The requirements of this plan will be detailed
in  regulation and will  include  the need for  authority holders to demonstrate
that  they will operate to an acceptable environmental code of practice and have
developed appropriate environment plans for the area they wish to operate on.
The bill  also  ensures  that measures  are  in  place for  land  rehabilitation
following petroleum operations. Petroleum  authority holders will be required to
provide rehabilitation bonds. These may be utilised for rehabilitation, clean-up
and pollution  prevention work on  private  or public land  should the authority
holders not meet their obligations in this area. If the bond is insufficient the
minister can recover such debt from the authority holder.

Land protection measures  are strengthened by  enabling the minister  to require
that petroleum authority holders hold insurance against expenses and liabilities
that may arise from  their exploration and production activities on private  and
public land.
Native title
The  bill recognises the rights of native title holders as  provided for  by the
commonwealth Native  Title Act 1993 and  therefore ensures its  validity and the
validity of authorities issued.
Royalties
The bill  retains the current royalty on petroleum production at 10 per cent  of
wellhead value.

However,  it is  now possible  for a  production title  holder to  enter  into a
different royalty arrangement  with  the agreement  of  the minister  and  after
consultation  with  the  Treasurer.  This flexibility will allow  other  revenue
arrangements to be agreed between the state and a producer. It will  also allow,
when  appropriate,  a  lesser  royalty  rate  to be set to enable the  continued
operation of economically marginal  fields  and  marginal  new discoveries. This
provision will help maximise the level of petroleum production and  minimise any
waste of Victoria's petroleum resources.
Authority holders who  occupy Crown land on  an ongoing basis while  undertaking
their  petroleum operations are  expected  to pay rent  for occupying that land.
Exploration operations are  usually transient activities lasting only days to  a
few  months  and  there  is  no  intention to level  rent  for  such  short-term
activities.

However,  where equipment or facilities occupy Crown land on an ongoing basis as
part of a production operation authority holders will be liable  to pay  rent to
the minister.
Information
The bill improves the provision of the public geological database of Victoria by
requiring  authority holders to submit all geological information gained through
their petroleum operations. The bill clearly sets out when such information will
be released  into  the public domain  but  ensures that  authority  holders have
exclusive use of their information during much or all of their  authority  terms
through  appropriate  retention times  for  the  information.  Authority holders
benefit through  open access to  the geological information gained  through past
exploration of their authority areas. They in turn provide the information  they
gather for the benefit of future exploration.

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Inspectors
The  bill  provides  for  the  appointment of  petroleum  inspectors  to  ensure
compliance  and  now provides  a  formal  means  for  the  minister  to  provide
directions to authority holders through improvement and prohibition notices.
It  is intended  that  the petroleum  inspectors  also undertake enforcement  of
occupational health  and safety matters  in  relation to  activities  under this
Petroleum  Bill.  The  government  intends   to   introduce  amendments  to  the
Occupational Health and Safety Act 1985 to enable delegation to the Secretary to
the Department of Natural  Resources and Environment  of the required  functions
and  powers.  This will  recognise  the primacy of  the  Occupational Health and
Safety Act 1985  and its consistent  application to Victorian industry  while at
the  same  time  ensuring  efficient and effective delivery of industry-specific
regulations under the petroleum legislation.

Transitional provisions
The transitional provisions provide for  existing  explorers  and  producers  to
continue their current operations and benefit from the passage of this Petroleum
Bill.  Current exploration permit  holders may apply  for  a once-only five-year
renewal of their permits.  This provides certainty of  term where currently they
only  have  two-year  terms  with  discretionary  one-year  extensions.  Current
petroleum producers  can continue to  produce from their petroleum  leases until
they  are  surrendered  or  cancelled.  This provides producers with  continuing
certainty  whereas  currently they have only  discretionary  and  shorter  fixed
terms.
Current legislation is silent on the  eventual release into the public domain of
interpretative  information  -- that  is,  basic  data  enhanced  by  scientific
analysis -- arising from petroleum exploration.

Consistent with other  Australian jurisdictions, this bill  now provides such  a
mechanism. To ensure that no current exploration permit holder is disadvantaged,
the earliest release time will postdate expiry of the renewed exploration permit
term. The bill also provides for a formal appeal mechanism.
In putting forward this bill the  government  is mindful of the economic benefit
that the petroleum industry can bring to this state. The bill seeks to develop a
more competitive market for exploration and production of this state's petroleum
resources which in turn will contribute to a  more competitive supply market for
petroleum.
This  proposal provides  Victoria with contemporary  petroleum legislation  that
encourages development of this  state's  petroleum resources while maintaining a
high  level  of  protection  for  the  environment  and the  rights  of  private
landowners.

I commend the bill to the house.
Debate adjourned on motion of Mr LONEY (Geelong North).
Debate adjourned until next day.