5 August, 2021
I rise to speak on the Offshore Petroleum and Greenhouse Gas Storage Amendment (Titles Administration and Other Measures) Bill 2021, and cognate bill, the Offshore Petroleum and Greenhouse Gas Storage (Regulatory Levies) Amendment Bill 2021. These bills aim to change Australia's offshore oil and gas regulatory regime so that the inevitable decommissioning of oil rigs is managed and that the costs of the decommissioning do not land on the taxpayer. The decommissioning of wells will be a growing issue over the coming years. The industry has no problem putting rigs in the ocean; it has serious difficulties in decommissioning safely at minimum cost and taking responsibility for doing it. This is exacerbated by the industry struggling to find buyers for ageing assets as more investors are now conscious of the risk, climate or otherwise of taking on such assets.
As the Rystad Energy report projects, the number of oil and gas wells waiting to be decommissioned will rise from 160 today to 440 by 2026. So this is clearly a growing problem. This will be the largest amount of decommissioning to take place that we have seen for decades. It's important that the costs of decommissioning are not heaped on the taxpayer, because the invoice and the cost will be substantial. The worst example is that of the Northern Endeavour. The facility is 274 metres long and is located 550 kilometres north-west of Darwin, in the Timor Sea. The owners of the facility, Northern Oil and Gas Australia, were placed into liquidation in February last year. That has left the unprecedented clean-up costs on the taxpayer that could run up to $1 billion. Decommissioning will take several years and the taxpayer is footing the bill of $5 million a month just to maintain the facility. Wood Mackenzie modelled that the Australian petroleum industry's decommissioning liability, both onshore and offshore, will be more than $60 billion over the next 30 years. With Australia's net debt approaching $1 trillion, Australia needs to be absolutely cognisant, more than ever, of this cost and we cannot put this on taxpayer. Unsurprisingly, there has been opposition to this measure, but it is absolutely one that has to occur.
From a technical point of view, the bills will amend the Offshore Petroleum and Greenhouse Gas Storage Act 2006 to increase oversight of entities throughout the life of an offshore project. The proposed regime is sensible and will ensure proponents manage the decommissioning and restore the environment. One of the more controversial parts of this legislation is the introduction of the 'trailing liability', whereby a former title holder can be liable for decommissioning. This measure is already used overseas, including in the UK, where massive decommissioning works are happening in the North Sea.
Probably the most controversial part of this bill is a plan to introduce a levy on the industry, which is ironic, coming from a government that continually talks about not wanting to introduce taxes. But this is the exact point where a levy is incredibly important. In the 2021-22 budget the government announced that there will be a temporary levy to offset the cost of decommissioning the Northern Endeavour. This levy will be set at 38c per barrel, and it will cease when the Northern Endeavour has been decommissioned. The levy is projected to raise $367 million per annum. Of course, the industry has issues with the levy, but it's well past time that oil companies started paying their way for the consequences of their business. But what I disagree with is the temporary nature of this levy.
We know that there is much more decommissioning that will be necessary in the future. In fact, hundreds of wells will need to be remediated in the mid-2020s. We know that many of these companies are probably going to fold as the world transitions to net zero emissions. Who's going to pick up the bill then? What assurances is the government providing to the Australian people? We need to pre-empt the inevitable decommissioning crisis by establishing a permanent decommissioning fund. We can't have this land on the taxpayer at a time when our national debt is already so high. Many of the previous speakers from the government spoke about the great achievements of the Morrison government on emissions reduction and its focus on carbon capture and storage. Of course there's always a focus on technology rather than taxes, but this is a clear point where this levy needs to be made permanent. We need to ensure we have a fund to deal with the issues of decommissioning in the future. This is something that needs to be maintained. This should not be a temporary measure.
I would say we need to go a step further. We actually need to place on the industry a national climate disaster levy to collect money from oil and gas companies that are contributing to climate change, for which the taxpayer is picking up the bill. It is the taxpayer who is ultimately taxed for the cost of these disasters. Oil and gas companies should be on the hook for a lot of the consequences that they are causing. Too many of these corporations don't even pay significant taxes in Australia. We know that the greenhouse gases being released into the atmosphere are directly linked to the worsening extreme weather events that severely impact our economy, our communities, our health and our environment. Fossil fuels are the major contributing cause of increased gas emissions. Currently it is the Australian taxpayer who pays in taxes or directly when disasters hit. It is not the oil and gas majors. If we were to set a $1 per tonne for embodied carbon and oil and gas extracted from gas wells, this would raise money to meet the considerably escalating costs of natural disasters. One estimate has natural disaster costs growing to almost $39 billion per annum to the economy over the next 30 years. Who is going to pay for that? The Black Summer bushfires alone were projected to have cost the Australian economy over $50 billion. The Australian public has been asked about this type of measure—a natural disaster levy—and supports it. In the Australia Institute's 2020 climate of the nation report, the majority of Australians, some 65 per cent, support a levy on fossil fuels to pay for climate disasters. It's time for oil and gas majors to pay their fair share for the clean-up of the climate mess and obviously the clean-up of decommissioning wells.
I support the bill, but I would say that, ironically, the government is working against its own interests with respect to other decisions. Just recently, on 15 June, the federal government released a further 80,000 square kilometres of offshore petroleum exploration acreage. Some of that acreage is in prime tourism areas. For example, there is now acreage just six kilometres away from the Twelve Apostles, near Port Campbell, off the Victorian coast. It will be terrible for the local economy and tourism, the climate and the local environment if that acreage is developed.
The International Energy Agency has said there can be no new fossil fuel developments from this year. If we are to stay true to our commitment to the Paris Agreement, to actually limiting global warming to 1.5 degrees, we need to reach net zero prior to 2050, and that means no new acreage can be developed. Of course, the Minister for Energy and Emissions Reduction and the Prime Minister will talk about 'preferably' reaching net zero by 2050, and the spin is always that it's about technology, not taxes. It's absolutely empty and meaningless, because the reality is that technology needs targets. You need targets and legislation to drive investment and the uptake of technologies.
We must double our targets to reduce emissions, at the minimum, by 2030, and we must stop all new gas exploration and drilling. The push for gas is just a cynical short-term move, I would argue, from regional MPs who are trying to win votes on promises that these fossil fuel industries will be around forever. They will not. It is selling an empty promise to communities that do face a serious transition risk and are not being properly protected. We must abandon this folly, this short-sighted policy, and actually put in place plans to assist these communities.
The gas folly that the government is continuing is clear. Gas will not lower prices. We have tripled supply, and gas prices have increased 130 per cent. Gas is not a transitional fuel, and it's disappointing to hear both sides of the political spectrum continually harp on like that when it's clearly not. Grid batteries outperform gas peakers on cost by as much as 30 per cent now. The market has spoken: it has invested over $4 billion in batteries just this year. We don't need more gas supply for domestic markets, as over 70 per cent of our supply goes offshore anyway. There will not be a market for gas in 30 years, as most of our major trading partners have committed to and are putting in place plans for net zero targets by 2050 or 2060. It's an entirely counterproductive measure. It is short-sighted. Continuing down this road just shows political opportunism versus actual good planning.
The issue of offshore gas platforms is very sensitive and hot in Warringah and on the east coast from Newcastle to Manly. We have significant uncertainty about another future fossil fuel project off the coast. Petroleum exploration permit 11, PEP-11, is a permit for oil and gas exploration extending from Newcastle to Manly Beach. It is the most ludicrous project. Some areas of this permit are just five kilometres offshore. Bounty Oil & Gas NL and Asset Energy Pty Ltd are the titleholders, and they are intent on pressing ahead against the wishes of the community, who overwhelmingly reject the proposal. It must not go ahead. It would be a calamity for the environment, the local economy and the coastal region. It just defies common sense. The IEA has found that no new fossil fuel projects should go ahead, so it is clear that these projects should be cancelled. PEP-11 expired in February this year, but the minister continues to maintain that the fate of the program is undecided. The Minister for Resources and Water, the member for Hinkler, continues to threaten to extend this licence. He should be forthright with the community and end the uncertainty. It has already been rejected at the state government level and it should also be rejected at the federal level.
This bill before the House to force oil and gas producers to start paying their way, paying for their responsibility for decommissioning, is important. Many of the measures in this bill are prudent, but what we need to see are permanent measures—a permanent levy in this respect. Decommissioning liabilities are likely to be north of $60 billion, and that cannot fall on the taxpayer. It should not be a question of taxpayer bailouts to these companies. It is clear that we need to make sure we have a permanent, long-term fund to address these issues. We need to have a levy to address the growing cost of natural disasters. Many in the community agree with this. We absolutely need to move on this. We as a government and we as a parliament all have a responsibility for the legacy this parliament will leave, and at the moment it is a short-sighted, short-term policy. We absolutely need to stop increasing oil and gas exploration acreage and to address all the transition aspects and decommissioning aspects that are coming. Finally, I call again on the minister to cancel the PEP 11 licence that currently exists off the coast from Manly to Newcastle.