The Senate Economics Legislation Committee Provisions of the Greater Sunrise Unitisation Agreement Implementation Bill 2004 and the Customs Tariff Amendment (Greater Sunrise) Bill 2004 March 2004 © Commonwealth of Australia 2004 ISBN 0 642 71378 2 Printed by the Senate Printing Unit, Parliament House, Canberra. SENATE ECONOMICS LEGISLATION COMMITTEE CORE MEMBERS Senator George Brandis, Chair (Queensland, LP) Senator Ursula Stephens, Deputy Chair (New South Wales, CL) Senator Grant Chapman (South Australia, LP) Senator Andrew Murray (Western Australia, AD) Senator John Watson (Tasmania, LP) Senator Ruth Webber (Western Australia, ALP) SUBSTITUTE MEMBERS Senator Allison to replace Senator Murray for matters relating to the Resources portfolio Senator O'Brien to replace Senator Webber for matters relating to tourism Senator Ridgeway to replace Senator Murray for the committee’s consideration of the provisions of the Treasury Legislation Amendment (Professional Standards) Bill 2003 Senator Stott Despoja to replace Senator Murray for the committee's consideration of the provisions of the Greater Sunrise Unitisation Agreement Implementation Bill 2004 and the Customs Tariff Amendment (Greater Sunrise) Bill 2004 PARTICIPATING MEMBERS Senator the Hon Eric Abetz (Tasmania, LP) Senator the Hon Ronald Boswell (Queensland, NPA) Senator Bob Brown (Tasmania, AG) Senator Geoffrey Buckland (South Australia, ALP) Senator George Campbell (New South Wales, ALP) Senator Kim Carr (Victoria, ALP) Senator John Cherry (Queensland, AD) Senator Stephen Conroy (Victoria, ALP) Senator the Hon Peter Cook (Western Australia, ALP) Senator the Hon Helen Coonan (New South Wales, LP) Senator Alan Eggleston (Western Australia, LP) Senator Christopher Evans (Western Australia, ALP) Senator the Hon John Faulkner (New South Wales, ALP) Senator Alan Ferguson (South Australia, LP) Senator Jeannie Ferris (South Australia, LP) Senator Michael Forshaw (New South Wales, ALP) Senator Brian Harradine (Tasmania, Ind) Senator Leonard Harris (Queensland, PHON) Senator Linda Kirk (South Australia, ALP) Senator Susan Knowles (Western Australia, LP) Senator Meg Lees (South Australia, Ind) Senator Ross Lightfoot (Western Australia, LP) Senator Joseph Ludwig (Queensland, ALP) Senator Kate Lundy (Australian Capital Territory, ALP) iii PARTICIPATING MEMBERS (Continued) Senator Sue Mackay (Tasmania, ALP) Senator Gavin Marshall (Victoria, ALP) Senator Brett Mason (Queensland, LP) Senator Julian McGauran (Victoria, NPA) Senator Shayne Murphy (Tasmania, Ind) Senator Kerry O'Brien (Tasmania, ALP) Senator Marise Payne (New South Wales, LP) Senator Aden Ridgeway (New South Wales, AD) Senator the Hon Nick Sherry (Tasmania, ALP) Senator Natasha Stott Despoja (South Australia, AD) Senator Tsebin Tchen (Victoria, LP) Senator John Tierney (New South Wales, LP) Senator Penny Wong (South Australia, ALP) SECRETARIAT Dr Sarah Bachelard, Secretary Dr Anthony Marinac, Principal Research Officer Ms Stephanie Holden, Senior Research Officer Mr Matthew Lemm, Research Officer Ms Barbara Rogers, Executive Assistant Suite SG.64 Parliament House Canberra ACT 2600 Ph: 02 6277 3540 Fax: 02 6277 5719 E-mail: [email protected] Internet: http://www.aph.gov.au/senate/committee/economics_ctte/index.htm iv TABLE OF CONTENTS Membership of Committee iii CHAPTER 1 INTRODUCTION 1 Background 1 Purpose of the bills 1 Reference of the bills 2 Submissions 2 Hearings and evidence 2 Acknowledgment 2 CHAPTER 2 THE BILL 3 Background to the bills 3 Principles underlying the Greater Sunrise bill 4 Changes made by the bills 4 CHAPTER 3 EVIDENCE TO THE INQUIRY 7 Question of good faith 7 Trust or escrow 9 Customs amendment 10 Conclusion 11 Recommendation 11 DISSENTNG REPORT – AUSTRALIAN DEMOCRATS 13 DISSENTING REPORT – AUSTRALIAN GREENS 19 APPENDIX 1 SUBMISSIONS RECEIVED 21 APPENDIX 2 PUBLIC HEARING AND WITNESSES 23 v vi CHAPTER 1 INTRODUCTION Background 1.1 The Greater Sunrise Unitisation Agreement Implementation Bill 2004 and the Customs Tariff Amendment (Greater Sunrise) Bill 2004 were introduced into the House of Representatives on 10 March 2004 by the Hon Ian Macfarlane MP, Minister for Industry, Tourism and Resources. On the same day, the bills were introduced into the Senate by Senator Ian Campbell, Minister for Local Government, Territories and Roads. Purpose of the bills 1.2 The Greater Sunrise Unitisation Agreement Implementation Bill 2004, together with the Customs Tariff Amendment (Greater Sunrise) Bill 2004, puts in place the framework necessary to give effect to the Agreement between Australia and the Democratic Republic of Timor-Leste relating to the unitisation of the Sunrise and Troubadour (Greater Sunrise) petroleum fields.1 1.3 The Agreement, signed in Dili on 6 March 2003, governs the unitisation of the Greater Sunrise petroleum resource. Where a petroleum resource, whether comprised of one or more pools, straddles a boundary between administrative systems, sound resource management often requires the resource to be developed as a single unit. This is known as the unitisation of a petroleum resource. Without unitisation, production from one part of the resource could adversely affect the resource as a whole or the interests of those with an interest in the resource on the other side of the boundary.2 1.4 The Greater Sunrise Unitisation Agreement Implementation Bill 2004 puts into place the administrative arrangements for the unit development of the Greater Sunrise petroleum resource.3 The Customs Tariff Amendment (Greater Sunrise) Bill 2004 gives effect to Article 22 of the Agreement, which provides for the duty-free entry into the Greater Sunrise unitisation area of all goods and equipment required for petroleum activities.4 1 Explanatory Memorandum, Greater Sunrise Unitisation Agreement Implementation Bill [Greater Sunrise Bill] 2004, p.1. In the report, the names Timor-Leste and East Timor are used interchangeably. 2 Explanatory Memorandum, Greater Sunrise Bill, p.1. 3 Second Reading Speech, Greater Sunrise Bill, p.1. 4 Second Reading Speech, Customs Tariff Amendment (Greater Sunrise) Bill 2004, p.1. Page 2 Reference of the bills 1.5 On 10 March 2004, the Senate adopted the Selection of Bills Committee Report No.4 of 2004 and referred the provisions of the bills to the Senate Economics Legislation Committee for consideration and report by 23 March 2004. Submissions 1.6 The Committee advertised its inquiry into the provisions of the Greater Sunrise Unitisation Agreement Implementation Bill 2004 and the Customs Tariff Amendment (Greater Sunrise) Bill 2004 on the internet. In addition the Committee contacted a number of organisations alerting them to the inquiry. A list of submissions received appears at Appendix 1. Hearings and evidence 1.7 The Committee held one public hearing at Parliament House, Canberra, on Monday, 22 March 2004. 1.8 Witnesses who appeared before the Committee at that hearing are listed in Appendix 2. 1.9 Copies of the Hansard transcript are tabled for the information of the Senate. They are also available through the internet at http://aph.gov.au/hansard. Acknowledgment 1.10 The Committee wishes to thank all those who assisted with its inquiry. CHAPTER 2 THE BILL Background to the bills 2.1 The Greater Sunrise petroleum resource comprises the Sunrise and Troubadour deposits and lies in the Timor Sea, approximately 500 kilometres north-west of Darwin.1 2.2 The field straddles the border of the Joint Petroleum Development Area, which is the area of shared jurisdiction between Australia and East Timor established by the Timor Sea Treaty, and an area of sole Australian jurisdiction located within the Northern Territory adjacent area.2 The former area is labelled in the bill as the Western Greater Sunrise area, the latter as the Eastern Greater Sunrise area. 2.3 In June 2003, Mr John Hartwell, Head, Resources Division, Department of Industry, Tourism and Resources, described the resource to the Joint Standing Committee on Treaties as 'a world-class petroleum resource containing an estimated 8.4 trillion cubic feet of natural gas and 295 million barrels of condensate. It is estimated that 20.1 per cent of these resources lie within the JPDA – the Joint Petroleum Development Area – and 79.9 per cent outside it'.3 2.4 On 6 March 2003, Australia and East Timor agreed to the unitisation of the Greater Sunrise petroleum resource.4 Under the unitisation agreement, East Timor's share of the Greater Sunrise field is calculated by reference to the agreed formula that applies to the sharing of the JPDA, where East Timor has title to 90% of the petroleum resource. This means that East Timor receives 90% of the 20.1% of the Greater Sunrise field that lies within the Joint Petroleum Development Area. Australia's share is the 10% remainder of the 20.1% from the JPDA, and the 79.9% of the Greater Sunrise field outside the JPDA. 'Allowing for the calculations involved, Australia's actual share of the Greater Sunrise gas field is some 82%'.5 2.5 The Financial Impact Statement in the Explanatory Memorandum to the bill states that the development of the Greater Sunrise resource is expected to yield $8.5 billion in revenue to Australia over the life of the project. 1 Transcript of Evidence, Joint Standing Committee on Treaties, 23 June 2003, Hartwell, p.72. 2 Explanatory Memorandum, Greater Sunrise Bill, p.1. 3 Transcript of Evidence, Joint Standing Committee on Treaties, 23 June 2003, Hartwell, p.72. 4 Explanatory Memorandum, Greater Sunrise Bill, p.1. 5 Draft Bills Digest, Greater Sunrise Unitisation