Barrow Island Royalty Variation Agreement Act 1985 (Western Australia)

This Act ratifies and gives statutory backing to the Barrow Island Royalty Variation Agreement between the State of Western Australia and West Australian Petroleum Pty. Limited (the Lessee), and authorises implementation of that Agreement (s 4(1)-(2); Schedule cl 3 and cl 4). The Agreement, which is printed in the Schedule, replaces the royalty regime in the Barrow Island petroleum lease (Petroleum Lease No. 1H) by substituting new royalty assessment, payment, administration, inspection and dispute‑resolution mechanics into the lease from 1 July 1985 (Schedule cl 6(1)). The Act expressly authorises that the Agreement “shall operate and take effect according to its terms notwithstanding any other Act or law” subject to the statutory preservation of the lease’s character as a petroleum lease (s 4(3); s 5(2)-(3)).

Mechanically, the Agreement substitutes Clause 2 of the Barrow Island lease with a resource‑rent style royalty calculated as 40% of the “accumulated nett value” of petroleum commodities produced from the production unit in each royalty year (Schedule cl 6(1) replacing Clause 2; Clause 2(4) in the substituted lease). “Accumulated nett value” is a multi‑year, carried‑forward measurement that depends on an accumulation rate and a series of eligible deductions (defined terms, Schedule cl 1). The Lessee must deliver detailed royalty returns, support them with a statutory declaration and an auditor’s certificate, make quarterly provisional payments, keep specified books and records on location (or at another place agreed or determined by the Minister), and permit entry, inspection and copying by authorised persons (Schedule Clause 2(5), 2A(2), 2(10), 2(9)).

The Agreement gives the Minister broad administrative powers to determine valuation points, allocate expenses among eligible deduction categories, determine market value where there is no agreement and assess accumulated nett value and royalty (Schedule cl 1 definitions, Clause 2(6), 2(11)-(15)). It also establishes mechanisms for default assessments, amended assessments (with a seven‑year window in many circumstances), accrual of interest calculated using the accumulation rate, and a deemed breach and the application of specified lease remedies where royalty remains unpaid (Schedule cl 2(12)-(13), 2A(4)-(5)).

CrestWestern Australia

Barrow Island Royalty Variation Agreement Act 1985

Western Australia

Barrow Island Royalty Variation Agreement Act 1985

Contents

Part I — Preliminary

Short title 2
Commencement 2

Part II — Ratification and effect of Agreement

Interpretation 3
Ratification of agreement 3
Legal character of Barrow Island lease preserved 3

Schedule — Barrow Island Royalty Variation Agreement

Notes

Compilation table 38

Uncommenced provisions table 38

Other notes 38

Defined terms

Western Australia

Barrow Island Royalty Variation Agreement Act 1985

An Act to ratify an agreement between the State of Western Australia and West Australian Petroleum Pty. Limited relating to Petroleum Lease 1H granted under the Petroleum Act 1936, to amend the Petroleum and Geothermal Energy Resources Act 1967 and for related purposes.

[Long title amended: No. 35 of 2007 s. 91(2).]

Part I — Preliminary

1. Short title

This Act may be cited as the Barrow Island Royalty Variation Agreement Act 1985.

2. Commencement

This Act shall come into operation on the day on which it is assented to by the Governor 1.

Part II — Ratification and effect of Agreement

3. Interpretation

In this Part —

the Agreement means the agreement a copy of which is set forth in the Schedule to this Act and includes that agreement as varied from time to time in accordance with its provisions.

4. Ratification of agreement

(1) The Agreement is hereby ratified.

(2) The implementation of the Agreement is authorised.

(3) Without limiting or otherwise affecting the application of the Government Agreements Act 1979 but subject to section 5, the Agreement shall operate and take effect according to its terms notwithstanding any other Act or law.

5. Legal character of Barrow Island lease preserved

(1) In this section —

the Barrow Island lease means the petroleum lease dated 27 February 1967 granted under the Petroleum Act 1936 1 and registered as Number 1H and named “Barrow Island” pursuant to that Act.

(2) Nothing in this Act or the Government Agreements Act 1979 shall give the force, effect or character of a written law to —

(a) the provisions inserted into the Barrow Island lease by the Agreement; or

(b) the provisions of the Agreement incorporated by reference into the Barrow Island lease by the Agreement.

(3) The Barrow Island lease as varied and affected by the Agreement shall remain, and shall retain the character and incidents of, a petroleum lease under the provisions of the Petroleum Act 1936 2 as they are deemed to subsist and enure, with modifications, under sections 134 and 134A of the Petroleum and Geothermal Energy Resources Act 1967.

[Section 5 amended: No. 35 of 2007 s. 91(3)]

[Part III omitted under the Reprints Act 1984 s. 7(4)(e).]

Schedule — Barrow Island Royalty Variation Agreement

[s. 3]

[Heading amended: No. 19 of 2010 s. 4.]

THIS AGREEMENT is made the 8th day of November 1985,
BETWEEN

THE HONOURABLE BRIAN THOMAS BURKE, M.L.A., Premier of the State of Western Australia, acting for and on behalf of the said State and its instrumentalities from time to time (hereinafter called “the State”) of the first part

AND

WEST AUSTRALIAN PETROLEUM PTY. LIMITED a company incorporated in the State of Western Australia and having its principal place of business in the State of Western Australia at 233 Adelaide Terrace, Perth (hereinafter called “the Lessee”) of the other part

WHEREAS:

(a) The Lessee is the holder of a petroleum lease granted under the former provisions of the Petroleum Act 1936 registered as Petroleum Lease Number 1H (hereinafter called “the Barrow Island Lease”).

(b) The State and the Lessee have agreed to new arrangements to replace for the term of the Barrow Island Lease the royalty payable under the Barrow Island Lease (and Commonwealth excise on the production of petroleum from the Barrow Island Lease) and desire to vary Barrow Island Lease in the manner hereinafter set out.

NOW THIS AGREEMENT WITNESSETH: —

Definitions 2

In this Agreement (and in the Barrow Island Lease) subject to the context: —

“advise”, “apply”, “approve”, “approval”, “consent”, “certify”, “direct”, “notify”, “request” or “require” means advise, apply, approve, approval, consent, certify, direct, notify, request, or require in writing as the case may be and any inflexion or derivation of any of those words has a corresponding meaning;

“accumulated nett value of a petroleum commodity” in relation to the production unit, in respect of a royalty year is an amount calculated in accordance with the formula —

View image in the official source

Where —

NV = the nett value of a petroleum commodity in the royalty year in respect of which the assessment is being made,

R = the accumulation rate,

A = the accumulated nett value at the end of the preceding royalty year,

For the 12 month period ending 30th June 1985 the accumulated nett value is deemed to be zero for the purpose of calculating the accumulated nett value in respect of all subsequent royalty years.

If the accumulated nett value in respect of the production unit at the end of a royalty year is positive, it shall be deemed to be zero for purposes of calculating the accumulated nett value in respect of subsequent royalty years;

“accumulation rate” in relation to the production unit in respect of a royalty year is a percentum per annum equal to the threshold rate defined in the Commonwealth legislation relating to the resource rent tax applying to offshore petroleum projects, or in the absence of such legislation is the maximum threshold rate determined in accordance with the “threshold rate” as defined in Schedule 1 to the Petroleum Revenue Act 1985 of the Commonwealth but, if and at such time or times as it becomes necessary to calculate the accumulation rate for the purpose of calculating accumulated nett value of a petroleum commodity in respect of a royalty year, either party to this Agreement considers the rate as mentioned above to be inappropriate, then the accumulation rate shall be the percentum per annum as agreed between the Minister and the Lessee and failing agreement within such period as the Minister allows it shall be such percentum per annum determined by arbitration in accordance with paragraph (g) of clause 21 of the Barrow Island Lease as represents a reasonable and appropriate return on the investment to which the accumulation rate is to be applied taking into account: —

(a) the cost of equity funds commonly applicable to investments for the exploration for and recovery of petroleum in Australia;

(b) the cost of loan funds commonly applicable to loans for the purpose of financing investment in the exploration for and recovery of petroleum in Australia;

(c) rates of discount commonly used to evaluate investments for the exploration for and recovery of petroleum in Australia;

(d) the nature and size of anticipated investments for the exploration for and recovery of petroleum from the Barrow Island Lease, and the extent to which the risk associated with such investments differs from other investments for the exploration for and recovery of petroleum in Australia; and

“active operation”, in relation to the production unit means the operation of that unit for the production of a petroleum commodity from petroleum from the Barrow Island Lease;

“approved” means approved by the Minister;

“authorised person” means a person appointed by the Minister to be an authorised person;

“Barrow Island Lease” means the petroleum lease dated 27th February, 1967 granted under the former provisions and registered as Number 1H and includes any renewal, substitution or variation thereto and according to the requirements of the context shall describe the area of land demised as well as the instrument by which it is demised;

“clause” means a Clause of the Agreement;

“commencement date” means the date on which the provisions of this Agreement other than clauses 1, 2 and 3 come into operation pursuant to clause 4;

“Commonwealth” means the Commonwealth of Australia and includes the Government for the time being thereof;

“eligible administration expenditures” in relation to the production unit in respect of a royalty year, means —

(a) expenditure paid in that royalty year which the Lessee demonstrates to the satisfaction of the Minister was reasonably and properly paid by the Lessee for administration in the State of the production unit in respect of —

(i) accounting and auditing fees directly and solely related to the active operation of the production unit, other than those directly attributable to or necessitated by the resolution of any dispute between the parties arising under the Barrow Island Lease;

(ii) legal fees directly and solely associated with the active operation of the production unit, other than those directly attributable to royalty matters;

(iii) salaries, allowances, employer contributions to superannuation schemes allowed as deductions from time to time under the Income Tax Assessment Act 1936, or any other Act of the Parliament of the Commonwealth replacing that Act, payroll tax and wages of employees attributable to administration of the production unit but limited to the proportion of their hours of duty during which they were engaged directly and solely in the administration of the production unit; and

(iv) office expenses directly and solely associated with the active operation of the production unit;

(b) other expenditures paid in that royalty year (including overhead and indirect costs of rendering services to the Lessee) which the Lessee demonstrates to the satisfaction of the Minister were reasonably and properly paid in that royalty year for the proper administration of the production unit;

Provided That the provisions of paragraphs (g) and (gb) of Clause 21 of the Barrow Island Lease shall not apply to any dispute arising out of the exercise of any discretion, whether express or implied, conferred upon the Minister pursuant to this definition, but this provision shall not limit the other rights and remedies of the parties;

“eligible capital expenditures” in relation to the production unit in respect of a royalty year, means expenditures paid in that royalty year which were reasonably and properly paid by the Lessee directly and solely for the production of a petroleum commodity solely from petroleum from the Barrow Island Lease in respect of —

(a) feasibility studies;

(b) studies and investigations required by or under a law in force in Western Australia to be carried out;

(d) design, acquisition, installation and construction of —

(i) plant for stabilisation of crude oil and separation of gas liquids;

(ii) storage facilities;

(iii) water storage and supply;

(iv) electricity generation and reticulation;

(v) communication facilities;

(vi) transport and pipeline facilities;

(vii) accommodation and welfare facilities at the production unit;

(viii) enhanced recovery facilities; and

(ix) other facilities which the Lessee demonstrates to the satisfaction of the Minister are reasonably and properly required for the operation of the production unit;

together with the value of any capital assets, including plant and equipment, purchased by the Lessee after 30th June 1985 and transferred to the production unit and used directly and solely in relation to the production unit (where the value is the amount as agreed between the Minister and the Lessee to be the value of the capital assets, or in the absence of such an agreement is such an amount determined by the Minister taking account of those criteria numbered 1 to 8 inclusive set out in paragraph (i) of the definition of “eligible deduction” which may be relevant) less the amount of any other deductions allowed by the State in respect thereof, whether under this Agreement or in assessing any other royalty paid to the State;

“eligible deduction” in relation to the production unit in respect of a royalty year, means an amount equal to the sum of the following eligible expenditures in that royalty year, where an amount claimed may not include expenditure deducted in a previous royalty year —

(a) eligible enhanced recovery research expenditure;

(b) eligible exploration expenditure;

(d) eligible capital expenditure;

(e) eligible administration expenditure;

(f) eligible rehabilitation and well abandonment expenditure;

(g) such other expenditure as the Minister may allow as an eligible deduction pursuant to paragraphs (c) and (d) of subclause 2(6) of the Barrow Island Lease or which the lessee demonstrates to the satisfaction of the Minister was reasonably and properly paid directly and solely in respect of the production of a petroleum commodity solely from petroleum from the Barrow Island Lease, Provided That the provisions of paragraphs (g) and (gb) of clause 21 of the Barrow Island Lease shall not apply to any dispute arising out of the exercise of any discretion, whether express or implied, conferred upon the Minister pursuant to paragraph (g) of this definition, but this provision shall not limit the other rights or remedies of the parties;

less the sum of —

(i) value of capital assets, including plant and equipment, sold or removed without sale from the production unit in that royalty year (other than capital assets included in and as part of a bona fide sale or transfer of the Barrow Island Lease or a direct or indirect interest in that Lease) for a purpose other than repair and maintenance, where the value is the amount as agreed between the Minister and the Lessee to be the market value of the asset, or in the absence of such an agreement is such an amount as determined by the Minister to be the market value, taking account of, where relevant —

the gross proceeds from the sale or disposal of the capital asset;
the age and condition of the capital asset;
the characteristics of the market in which it was sold or disposed of;
the terms of relevant contracts or sales agreements;
prices received elsewhere in comparable arms length transactions;
the point of sale;
the cost of transporting the capital asset to the point of sale; and
such other relevant matters as the Minister thinks fit;

but excludes the value of those capital assets which were in place on the production unit as at 30th June 1985 and were so sold or removed without sale from the production unit at a later date except to the extent that such value has resulted from expenditure on extensions, improvements and refurbishment of such assets after 30th June 1985 and except to the extent that expenditures on such assets have been deducted under the former clause 2 of the Barrow Island Lease, with such value limited as determined above calculated as agreed between the Lessee and the Minister or, in the absence of agreement within such period as the Minister allows, as determined by the Minister;

(ii) value of services provided by the production unit in that royalty year not directly connected with the active operation of the production unit for the production of petroleum from the Barrow Island Lease, including the lease or hire of plant and equipment and other capital assets and the provision of accommodation and catering, transportation and petroleum storage services, where the value is the amount as agreed between the Minister and the Lessee to be the value of the services provided, or in the absence of agreement, is such amount as determined by the Minister;

(iii) any amount received by the Lessee in that royalty year by way of compensation, insurance or indemnity for or in respect of any loss or destruction of capital assets used in the operation of the production unit, including plant and equipment other than an amount by way of compensation, insurance or indemnity taken into account elsewhere in the calculation of nett value of a petroleum commodity;

(iv) the value of any information sold by the Lessee relating to the production unit, (other than information included in and as part of a bona fide sale or transfer of the Barrow Island Lease or a direct or indirect interest in that Lease) where the value is the amount as agreed between the Minister and the Lessee to be the value of the information, or in the absence of agreement is such amount as determined by the Minister;

(v) any amount received by the Lessee as a refund of any category of eligible expenditures mentioned in paragraphs (a) to (g) inclusive of this definition;

(vi) any other like charge or payment received by the Lessee in respect of the production unit;

Provided That expenditures on capital assets, services or other items referred to in paragraphs (i) to (vi) inclusive of this definition are allowable, have been allowed or would have been allowed if expended after this Agreement came into effect, under one of the categories of eligible expenditures mentioned in paragraphs (a) to (g) of this definition,

but eligible deduction does not include

A interest or an amount in lieu of interest, and loan service fees paid on funds borrowed to finance the operation of the production unit and repayments of principal of such borrowings,

B dividends, bonus share issues or equity capital payments or repayments,

C depreciation and amortisation allowances,

D petroleum royalty paid under the Barrow Island Lease,

E taxes on profit or income,

F Commonwealth duties of customs and excise or other like levies on the production or export of petroleum from the Barrow Island Lease, and

G payments in the nature of a royalty, override royalty or any other payment considered by the Minister to be a levy on petroleum output or value, other than those levied by or payable to the Commonwealth or the State;

“eligible enhanced recovery research expenditure” in relation to the production unit in respect of a royalty year means expenditure paid in that royalty year directly and solely in relation to the production unit which in the opinion of the Minister was reasonably and properly paid by the Lessee for research into methods designed directly to improve the rate and amount of recovery of petroleum from the Barrow Island Lease, Provided That the provisions of paragraphs (g) and (gb) of clause 21 of the Barrow Island Lease shall not apply to any dispute arising out of the exercise of any discretion, whether express or implied, conferred upon the Minister pursuant to this definition, but this provision shall not limit the other rights and remedies of the parties;

“eligible exploration expenditure” in relation to the production unit in respect of a royalty year means expenditure paid in that royalty year which was reasonably and properly paid by the Lessee directly and solely in respect of the exploration for or the determining of the existence, location, extent, quality or occurrence of petroleum in the Barrow Island Lease, and includes geological and geophysical surveys and exploration, development and appraisal drilling, and for the 1985‑86 royalty year only, includes expenditure paid in the financial year ended 30th June 1985 in respect of exploration, development and appraisal drilling programmes for “new” oil and “substantial new development” oil and for the equipment of production wells drilled in accordance with those programmes;

“eligible operating expenditure” in relation to the production unit in respect of a royalty year means expenditure paid in that royalty year which was reasonably and properly paid by the Lessee and is directly and solely attributed to the production or the maintenance of production of a petroleum commodity from the production unit;

“eligible rehabilitation and well abandonment expenditure” in relation to the production unit in respect of a royalty year means expenditure paid in that royalty year which was reasonably and properly paid by the Lessee directly for rehabilitation of the land, water or environment comprised in or contiguous to the production unit, or in closing and making safe or removing for the purposes of rehabilitation, facilities reasonably and properly required for the production of a saleable petroleum commodity solely from petroleum from the Barrow Island Lease and, in the case only of final abandonment of active operations on the Barrow Island Lease in accordance with programmes approved in advance by the Minister, Provided That the provisions of paragraphs (g) and (gb) of clause 21 of the Barrow Island Lease shall not apply to any dispute arising out of the exercise of any discretion, whether express or implied, conferred upon the Minister pursuant to this definition, but this provision shall not limit the other rights and remedies of the parties;

“former provisions” means the provisions of the Petroleum Act 1936 which, by force of section 134 of the Petroleum Act are deemed to subsist and enure in their application to or in relation to the Barrow Island Lease;

“f.o.b. valuation and measurement point” for any petroleum commodity sold or removed without sale from the production unit means such valve station or other point as is agreed between the Lessee and the Minister, or in the absence of agreement within such period as the Minister allows, such a valve station or other point as is determined by the Minister as being that f.o.b. valuation and measurement point;

“Lessee” includes the Lessee and its successors and permitted assigns and appointees. Where there is more than one Lessee their liability shall be several;

“Minister” means the Minister for the time being charged with the administration of the Petroleum Act, acting for and on behalf of the State;

“month” means calendar month;

“nett value of a petroleum commodity” in relation to the production unit in respect of a royalty year means the amount (which may be a negative amount) in that royalty year that is the sum of —

(a) the value of all petroleum commodities produced solely from petroleum from the Barrow Island Lease and sold or removed without sale from the production unit in that royalty year, but excluding the value of any petroleum commodity which is flared or vented with the approval of the Minister or which is used by the Lessee for the purposes of active operations of the production unit or which is otherwise lost,

(b) the value of that proportion of all petroleum commodities produced partly from petroleum from the Barrow Island Lease and partly from other petroleum which is agreed between the Lessee and the Minister to be attributable to petroleum from the Barrow Island Lease or, in the absence of agreement within such period as the Minister allows, the value reasonably attributed to petroleum from the Barrow Island Lease by the Minister, taking account of the quantity of petroleum entering the production unit, as measured at a measurement point or points approved by the Minister, and

(c) any amount received by way of insurance or indemnity for or in respect of any loss of a petroleum commodity produced from the production unit from petroleum from the Barrow Island Lease, which, if the loss had not occurred, would have been taken into account in calculating the value of that production commodity,

as reduced by the sum of “eligible deductions”;

“notice” means notice in writing;

“person” or “persons” includes bodies corporate;

“petroleum” means: —

(a) any naturally occurring hydrocarbon, whether in a gaseous, liquid or solid state;

(b) any naturally occurring mixture of hydrocarbons, whether in a gaseous, liquid or solid state; or

(c) any naturally occurring mixture of one or more hydrocarbons, whether in a gaseous, liquid or solid state, and one or more of the following, that is to say, hydrogen sulphide, nitrogen, helium and carbon dioxide,

and includes any petroleum as defined by paragraphs (a), (b) or (c) of this definition that has been returned to a natural reservoir but excludes oil shale;

“Petroleum Act” means the Petroleum Act 1967;

“petroleum commodity” means petroleum or a substance derived from petroleum at any stage of treatment of that petroleum up to the time that it has first become a saleable petroleum commodity, and includes a saleable petroleum commodity;

“production unit” means the Barrow Island Lease together with those facilities reasonably and properly required for the production of a saleable petroleum commodity from petroleum from the Barrow Island Lease, including without limitation the tanker‑loading pipeline from the Barrow Island Lease and the associated mooring facilities;

“quantity of a petroleum commodity sold or removed without sale” from the production unit, in respect of a royalty year means —

(a) the quantity measured during that royalty year by a measuring procedure approved by the Minister and performed at the f.o.b. valuation and measurement point or such other places as the Minister approves; or

(b) where no such measuring procedure is so performed, or the Minister is not satisfied that the quantity of a petroleum commodity removed by the Lessee as been properly and accurately measured, the quantity determined by the Minister;

“records” include —

(a) production statistics, accounts, account books or accounting records;

(b) contracts;

(d) petroleum reserve estimates and production projections;

however compiled, recorded or stored;

“royalty year” means initially, the six‑month period from 1st July 1985 to 31st December 1985, and thereafter the twelve month period from 1st January in one calendar year to 31st December of the same calendar year, unless otherwise agreed;

“saleable petroleum commodity” means petroleum treated to an extent that is, in the opinion of the Minister, the minimum treatment necessary to enable that petroleum to be sold commercially, having regard to the nature and location of the petroleum, the production unit and the market;

“sold” means that title to the subject matter of the sale has passed from the seller to the buyer and payment has been received;

“State” means the State of Western Australia;

“the Agreement”, “this Agreement”, “hereof” and “hereunder” refer to this Agreement whether in its original form or as from time to time added to, varied or amended;

“value of a petroleum commodity” means —

(a) the gross proceeds realised upon sale of that petroleum commodity, less any coats paid for the transportation of that commodity from the f.o.b. valuation and measurement point to the point of sale if, in the opinion of the Minister, the resulting amount represents the fair and reasonable market value of the petroleum commodity when sold on an arm’s length basis; or

(b) in any case not covered by paragraph (a) of this definition, the market value agreed between the Lessee and the Minister for that petroleum commodity at the f.o.b. valuation and measurement point or, in the absence of agreement within such period as the Minister allows, the market value as determined by the Minister at the f.o.b. valuation and measurement point, taking account of —

(i) the gross proceeds from the sale or disposal of the petroleum commodity;

(ii) the quality and quantity of the petroleum commodity;

(iii) the characteristics of the market;

(iv) the terms of similar relevant contracts or sales agreements and the quantities specified therein;

(v) the state of the petroleum market at the time the prices in the contract or sales agreement were set;

(vi) the provisions of the contract or sales agreement relating to variation or renegotiations of prices;

(vii) prices received by producers elsewhere in arm’s length transactions;

(viii) the point of sale;

(ix) the cost of transporting the petroleum commodity from the f.o.b. valuation and measurement point to the point of sale;

(x) petroleum transportation costs incurred in other similar arms length transactions

(xi) any prevailing petroleum commodity pricing policy or law of the Commonwealth or the State (including the policy of the Commonwealth on import parity pricing of crude oil recovered in Australia); and

(xii) such other relevant matters as the Minister thinks fit;

Provided That the provisions of paragraphs (g) and (gb) of clause 21 of the Barrow Island Lease shall not apply to any dispute arising out of the exercise of any discretion, whether express or implied, conferred upon the Minister pursuant to this definition, but this provision shall not limit the other rights and remedies of the parties.

Interpretation 3

In this Agreement: —

(a) monetary references are references to Australian currency unless otherwise specifically expressed;

(b) marginal notes do not affect the interpretation or construction 3;

(c) reference to an Act unless otherwise specifically expressed includes the amendments to that Act for the time being in force and also any Act passed in substitution therefor or in lieu thereof and the regulations for the time in force thereunder; and

(d) where any provision of the Barrow Island Lease is inconsistent with any provision of this Agreement, this Agreement shall prevail and the Barrow Island Lease shall to the extent of the inconsistency be invalid.

State to Sponsor Bill 3

The State shall introduce and sponsor a Bill in the Parliament of Western Australia to ratify this Agreement and endeavour to secure its passage and coming into operation as an Act prior to 31st December 1985.

Operation of Agreement 3

The provisions of this Agreement other than Clauses 1, 2 and 3 shall not come into operation unless and until —

(a) the Bill mentioned in Clause 3 comes into operation as an Act;

(b) the Lessee certifies to the State not later than 30th June 1986 that:

(i) Commonwealth legislation which is satisfactory to the Lessee has come into operation and all of the necessary acts, matters, and things have been done under that legislation to exempt petroleum commodities produced from the production unit from petroleum from the Barrow Island Lease from duties of excise of the Commonwealth with effect from 1st July 1985;

(ii) the Lessee has made arrangements satisfactory to it with the Commonwealth for a refund of any duties of excise paid on petroleum produced from the production unit from petroleum from the Barrow Island Lease on or after 1st July 1985; and

(iii) The agreement, arrangement or understanding between the State and the Commonwealth mentioned in Clause 9, so far as it affects the Lessee, is satisfactory to it; and

(i) it has entered into an agreement with the Commonwealth for the sharing with the Commonwealth of the royalty payable under the Barrow Island Lease; and

(ii) Commonwealth legislation which is satisfactory to the State has come into operation for the exemption of petroleum commodities produced from the production unit from petroleum from the Barrow Island Lease from duties of excise of the Commonwealth with effect from 1st July 1985.

Transitional Arrangements 3

(a) All petroleum commodities produced from the production unit from petroleum from the Barrow Island Lease and held in stock on the production unit as at midnight on 30th June 1985 shall be subject to the provisions of the former Clause 2 of the Barrow Island Lease as though that Clause was still in force. For the purpose of paragraph (b) of this clause 5 the interim royalty payable with respect to that petroleum in stock shall be the royalty paid by the Lessee to the State with respect to that petroleum upon its sale or removal without sale from the Barrow Island Lease, as agreed between the Minister and the Lessee or, in default of agreement within such period as the Minister allows, as determined by the Minister. Within 3 months after the commencement date the Lessee shall file with the Minister an audited royalty return for the period from 1st January 1985 to 30th June 1985 in accordance with the provisions of the former Clause 2 of the Barrow Island Lease and the Minister shall within 3 months after the receipt of that return determine the amount of the royalty actually payable with respect to that petroleum in stock. Any amount of royalty found to be overpaid or owing shall be refunded or paid, as the case may be within one month of that determination. Any determination by the Minister of the royalty payable on gross value of all petroleum commodities held in stock on the production unit as at midnight on 30th June 1985 shall be deemed to be a decision made under the Barrow Island Lease and shall be subject to the provisions of paragraphs (g), (ga) and (gb) of clause 21;

(b) Within 14 days of the commencement date, the State shall refund to the Lessee an amount equivalent to the sum of all those payments made by the Lessee prior to the commencement date which were made on account of royalty in respect of petroleum recovered from the Barrow Island Lease and sold or removed without sale from the production unit between 30th June 1985 and the commencement date, less the amount of interim royalty payable by the Lessee under paragraph (a) of this Clause 5.

Amendments of Lease 3

The Barrow Island Lease is hereby varied with effect from 1st July 1985 as follows: —

(1) by deleting Clause 2 and substituting the following Clauses: —

“ 2. IMPOSITION AND ASSESSMENT OF ROYALTY

2(1) DEFINITIONS

For the purpose of Clauses 2 and 2A of this lease, and subject to the context, the terms and expressions set out in Clause 1 of the Agreement shall have the meanings therein ascribed.

2(2) OBLIGATION TO PAY ROYALTY

The Lessee shall with effect from 1st July 1985 and during the continuance of this lease pay to the State a royalty in respect of petroleum recovered by the Lessee from the Barrow Island Lease.

2(3) BASIS OF CALCULATION OF ROYALTY

The royalty shall be calculated by reference to all petroleum commodities produced from the production unit in a royalty year from petroleum from the Barrow Island Lease.

2(4) AMOUNT OF ROYALTY

The royalty payable under subclause 2(2) is 40% of the accumulated nett value of a petroleum commodity sold or removed without sale from the production unit in a royalty year in respect of the production unit, Provided That if this calculation yields a negative number the royalty payable is nil, but no royalty shall be payable under this Subclause 2(4) in respect of those petroleum commodities held in stock on the production unit as at midnight on 30th June 1985 and on which interim royalty has been paid under paragraph (a) of Clause 5 of the Agreement and the nett value of those petroleum commodities shall be as agreed between the Minister and the Lessee or, in default of agreement within such period as the Minister allows, as determined by the Minister.

2(5) ROYALTY RETURN

(a) The Lessee shall, within three months after the expiration of a royalty year or such longer period as the Minister in writing allows, deliver to the Minister or to such other person as the Minister may direct a detailed statement relating to the production unit, containing or indicating —

(i) the name and description of the production unit;

(ii) the name and address, of each Lessee in respect of the production unit;

(iii) the quantity of a petroleum commodity sold or removed without sale from the production unit during the royalty year;

(iv) the name and address of the refinery or person to which a petroleum commodity recovered was sent;

(v) the name and address of any person with an interest in the production unit;

(vi) the value and the basis of valuation of a petroleum commodity sold or removed without sale from the production unit;

(vii) details of all sales or shipments of a petroleum commodity from the production unit;

(viii) details of all contracts and sale or exchange agreements relating to a petroleum commodity obtained from the production unit; and

(ix) such other relevant information as the Minister requires.

(b) A statement referred to in paragraph (a) of this subclause 2(5) shall, in addition to the matters required under that paragraph to be contained or indicated, contain —

(i) details of all expenditure claimed as eligible deductions in calculating nett value;

(ii) by way of summary, a calculation of nett value;

(iii) by way of summary, a calculation of accumulated nett value; and

(iv) an estimate of the royalty payable.

(i) be in an approved form and signed by the Lessee or a person given full representative authority by the Lessee; and

(ii) be supported by statutory declaration given by a duly authorised officer of the Lessee and accompanied by written advice by an auditor approved by the Minister certifying that in his opinion, the statement has been correctly completed in accordance with the provisions of this lease, and expressing an opinion, on grounds to be stated by him, as to whether all expenditures have been reasonably and properly paid for the purposes mentioned in this lease, and stating all interpretations of the provisions of this lease by the Lessee that materially affect the amount of royalty payable.

(d) If a statement is delivered after the date provided in paragraph (a) of this subclause 2(5), the Lessee shall be liable to pay an amount of royalty additional to that specified in a notice of assessment under subclause 2(15) with such additional amount to be calculated by applying an annual rate of interest equal to the accumulation rate to the amount specified in such notice as being the balance of royalty due to the State for the period for which the statement is overdue.

(e) The provisions of paragraphs (g) and (gb) of clause 21 of the Barrow Island Lease shall not apply to any dispute arising out of the exercise of any discretion, whether express or implied, conferred upon the Minister pursuant to this subclause 2(5), but this paragraph shall not limit the other rights and remedies of the parties.

2(6) ALLOCATION OF EXPENDITURES

(a) A particular expenditure is not to be included in more than one category of eligible expenditure in calculating the royalty payable by the Lessee.

(b) The Minister may determine in accordance with the provisions of this lease the extent to which a particular expenditure is to be attributed to a particular category of eligible expenditure in calculating the royalty payable by the Lessee, and upon his so determining, that particular expenditure shall be attributed accordingly.

(c) Where any expenditure paid by the Lessee in a royalty year in respect of activities or facilities of the Lessee on or in relation to the production unit is, in the opinion of the Minister, directly but not solely related to the production of a petroleum commodity from petroleum from the Barrow Island Lease but that expenditure would otherwise be an eligible expenditure, the Minister shall, for the purpose of calculating the royalty payable by the Lessee, allow as an eligible deduction such portion of that expenditure as he thinks fit.

(d) Where any expenditure paid by the Lessee in a royalty year in respect of activities or facilities of the Lessee on or in relation to the production unit is, in the opinion of the Minister, related to the production of a petroleum commodity not solely from petroleum from the Barrow Island Lease but that expenditure would otherwise be an eligible expenditure, the Minister shall, for the purpose of calculating the royalty parable by the Lessee, allow as an eligible deduction such portion of that expenditure as he thinks fit.

(e) The provisions of paragraphs (g) and (gb) of clause 21 of the Barrow Island Lease shall not apply to any dispute arising out of the exercise of any discretion, whether express or implied, conferred upon the Minister pursuant to this subclause 2(6), but this paragraph shall not limit the other rights and remedies of the parties.

2(7) INFORMATION TO BE SUPPLIED

The Lessee shall —

(a) within 30 days of the ratification of this Agreement notify the Minister of the name and address of the manager of the production unit or of some other person to whom notices required to be given under this lease may be given;

(b) within 30 days after the occurrence of any of the following events notify the Minister —

(i) of every change in the name or address, or both, of the manager of the production unit or other person referred to in paragraph (a) of this subclause 2(7);

(ii) subject to Clause 9 of this Lease, of a change in the ownership of the production unit or of the Barrow Island Lease;

(iii) of a significant change in the level of production of a petroleum commodity by the production unit;

(iv) of a discontinuance of active operations; and

(v) of a recommencement of active operations after discontinuance;

(c) within 30 days of a request by the Minister for further information relating to a statement under subclause 2(5), supply such information to the Minister.

2(8) APPOINTMENT OF AUTHORISED PERSON

The Minister may, by writing signed by him, appoint a person to be an authorised person for the purposes of this lease.

2(9) INSPECTION OF STOCK AND RECORDS

(a) For the purposes of this lease, an authorised person may, at reasonable times —

(i) enter the production unit or part thereof;

(ii) enter premises occupied by the Lessee where there is stored, or where the authorised person has reasonable cause to believe is stored, a petroleum commodity in respect of which royalty is or has been or, in his opinion, is likely to be payable under this lease;

(iii) enter premises occupied by the Lessee where there are, or where he has reasonable cause to believe are kept, records relating to the recovery, processing, storage or sale or other disposal of a petroleum commodity which has been recovered under the Barrow Island Lease;

(iv) inspect or take stock of a petroleum commodity;

(v) inspect the active operation of the production unit;

(vi) inspect the records relating to the drilling, extraction, processing, storage or sale or other disposal of a petroleum commodity recovered from the production unit;

(vii) inspect the records relating to any other petroleum commodity which may have passed through the production unit; and

(viii) where he has reasonable cause to believe that a person in the production unit or on those premises has information relevant to the authorised person’s inspection, require the person to furnish to the authorised person his name and position and to answer questions put to him relating to that information.

(b) An authorised person may make and retain copies of, or extracts from, the records inspected by him under this subclause 2(9).

(c) The occupier or person in charge of a production unit or part of a production unit, or of premises referred to in subparagraphs (a)(ii) or (iii) of this subclause 2(9) shall provide an authorised person with all reasonable assistance for the effective exercise of the authorised person’s powers under this subclause, other than transport to and from the production unit.

(d) The provisions of paragraphs (g) and (gb) of clause 21 of the Barrow Island Lease shall not apply to any dispute arising out of the exercise of any discretion, whether express or implied, conferred upon the State or the Minister pursuant to this subclause 2(9), but this paragraph shall not limit the other rights and remedies of the parties.

2(10) PROPER BOOKS AND RECORDS TO BE KEPT

(a) The Lessee shall keep and maintain at the production unit, or at some other place agreed between the Lessee and the Minister or, in the absence of agreement, as determined by the Minister, proper records as described in subclause 2(9) and proper books of account showing in respect of the production unit —

(i) the amount and particulars of each expenditure in each category of eligible deduction;

(ii) details of all sales, transfers and other disposals of assets, being assets the cost of which has been included in calculating eligible capital expenditure;

(iii) details of the quantity and quality of a petroleum commodity removed from the production unit as measured at the f.o.b. valuation and measurement point, and details of sales, shipments, transfers and other disposals of a petroleum commodity to and from the production unit, including the time, destination, value and basis of valuation and quantity and quality of each sale, shipment, transfer or other disposal; and

(iv) details of all assets, being assets the cost of which has been included in calculating eligible capital expenditure, eligible exploration expenditure and eligible enhanced recovery research expenditure.

(b) A petroleum commodity shall not be sold or removed from the production unit, or treated in a processing plant not included in the production unit, until its quantity and quality have been ascertained and entered in a book of account referred to in paragraph (a) of this subclause 2(10).

2(11) ASSESSMENT

From the statement required to be delivered under subclause 2(5) and from any other information in his possession, whether or not obtained under this lease, the Minister shall make an assessment consistent with the provisions of this lease of the accumulated nett value, and the royalty payable by the Lessee, in respect of the royalty year to which that statement relates.

In addition to the assessment of the accumulated nett value, and the royalty payable by the Lessee, the notice of assessment served on the Lessee in accordance with subclause 2(15) shall also indicate the basis of the assessment made by the Minister, the provisional royalty payments for the year made by the Lessee in accordance with paragraph (a) of subclause 2A(2) and the balance of royalty due to the State or the refund due to the Lessee for royalty over‑payment.

2(12) DEFAULT ASSESSMENT

If —

(a) the Lessee makes default in delivering a statement referred to in subclause 2(5) or

(b) the Lessee makes default by not keeping proper books of account referred to in subclause 2(10); or

the Minister shall promptly make an assessment consistent with the provisions of this lease of the amount of accumulated nett value of a petroleum commodity sold or removed without sale from the production unit in respect of which, in his opinion, royalty ought to be levied, and that accumulated nett value shall be the accumulated nett value in respect of which royalty shall be payable.

2(13) AMENDMENT OF ASSESSMENT

(a) Where the Lessee has not made to the Minister a full and true disclosure of all the material facts necessary for the Minister’s assessment and, in the Minister’s opinion, there has been an avoidance of royalty, the Minister may —

(i) where he is of the opinion that the avoidance of royalty is due to fraud or evasion — at any time; and

(ii) in any other case — within 7 years after the date upon which the royalty became due and payable under the assessment,

amend the assessment by making such alterations or additions as he thinks fit to correct an error in calculation or a mistake of fact, or to prevent avoidance of royalty, as the case may be.

(b) Where the Lessee has made to the Minister a full and true disclosure of all the material facts necessary for the Minister’s assessment, and an assessment is made after that disclosure, any consequential amendment of the assessment varying the liability of the Lessee in any particular shall be made to correct an error in calculation or a mistake of fact, and no such amendment shall be made after the expiration of 7 years from the date upon which the royalty became due and payable under that assessment.

(c) Notwithstanding paragraphs (a) and (b) of this subclause 2(13), where the assessment of nett value in respect of a royalty year includes an estimate of a category of nett value of a petroleum commodity, the value of which was not ascertainable at the end of that year, the Minister may, at any time within 7 years after ascertaining the nett value of the petroleum commodity, amend the assessment so as to ensure its completeness and accuracy on the basis of that nett value and where an estimate of a category of nett value of a petroleum commodity has been used, the Lessee shall provide final figures with his next royalty return, after the figures have been finalised.

2(14) AMENDED ASSESSMENT TO BE ASSESSMENT

An assessment amended under subclause 2(13) shall be an assessment for the purposes of this lease.

2(15) NOTICE OF ASSESSMENT

Within three months of receipt of the statement referred to in subclause 2(5) the Minister shall serve a written notice of assessment on the Lessee or a person given full representative authority by the Lessee.

2(16) VALIDITY OF ASSESSMENT

The validity of an assessment made under this lease shall not be affected by reason that a provision of this lease has not been complied with by the Lessee.

2(17) EVIDENCE

The production of a notice of assessment, or of a document under the hand of the Minister that purports to be a copy of a notice of assessment, shall be conclusive evidence of the making of the assessment and prima facie evidence that the amount and all the particulars of the assessment are correct.

2A COLLECTION AND RECOVERY OF ROYALTY

2A(1) WHEN ROYALTY PAYABLE

Subject to this Clause 2A royalty assessed by the Minister shall be due and payable by the Lessee on the date specified in the notice of assessment under subclause 2(15) as the date on which royalty is due and payable, being not less than 30 days after service of the notice or, if no date is so specified, on the thirtieth day after service of the notice.

2A(2) PAYMENT ON ACCOUNT OF ROYALTY

The Lessee shall pay on account of royalty —

(a) four provisional royalty payments in respect of royalty payable under subclause 2(4) for the three month periods ending 31st March, 30th June, 30th September and 31st December in each royalty year, each of which payments shall be made no later than 23rd March, 23rd May, 23rd September and 23rd December respectively in each royalty year, the amount of each payment being equal to the royalty as estimated by the Lessee to be payable under subclause 2(4) for the preceding three month periods ending 31st December, 31st March, 30th June and 30th September respectively. In the 1985 royalty year the first provisional royalty payment shall be paid no later than 14 days after the commencement date. Each of the first four provisional payments shall be $22.7 million;

(b) where the sum of the four provisional payments referred to in paragraph (a) of this subclause 2A(2) in respect of the royalty year is less than 90% of the assessment under subclauses 2(11), 2(12) and 2(13) of royalty payable, additional royalty shall be paid of an amount calculated by applying a rate of interest equal to the accumulation rate to the difference between the sum of the four provisional royalty payments in respect of the royalty year and the assessment under subclauses 2(11), 2(12) and 2(13) of royalty payable in respect of the royalty year, and this lease shall apply to and in relation to that additional royalty (except for the purpose of making a calculation under this subclause 2A(2)) as if the additional royalty was assessed under subclauses 2(11), 2(12) and 2(13), but such additional royalty shall not be payable in respect of the 1985 royalty year. For the purpose of the 1986 royalty year the relevant comparison shall be between the sum of the two provisional payments due no later than 23rd September and 23rd December 1986 and 45% of the assessment of royalty payable under subclauses 2(11), 2(12) and 2(13);

(c) the Minister may, in his discretion, if he is satisfied that the liability to pay additional royalty under paragraph (b) of this subclause 2A(2) was not brought about by an attempt on the part of the Lessee to avoid the payment of royalty, remit additional royalty payable under that subparagraph, or any part of that additional royalty, and on his so doing the liability to pay the additional royalty or part of the additional royalty, as the case may be, shall cease; and

(d) at the time of making a statement under subclause 2(5) in respect of a royalty year, the balance of royalty payable for that royalty year as estimated in the statement.

2A(3) EXTENSION OF TIME

The Minister may without prejudice to his rights hereunder grant such extension of time for payment of royalty or an amount on account of royalty as he considers the circumstances warrant but in such a case, the royalty shall be due and payable, or the liability to make the payment on account of royalty shall accrue, accordingly.

2A(4) UNPAID ROYALTY

(a) Subject to paragraphs (b) and (c) of this subclause 2A(4) if any royalty remains unpaid after the time it becomes due and payable, or a payment on account of royalty remains unpaid after the liability to make the payment accrues, the Lessee shall be liable to pay an amount of additional royalty calculated by applying an annual rate of interest equal to the accumulation rate to the amount of royalty outstanding for the period of time it is outstanding.

(b) Where an extension of time for the payment of royalty or on account of royalty has been granted under subclause 2A(3), the additional royalty payable under this subclause 2A(4) shall be computed from such date as the Minister determines, being not earlier than the date on which the royalty would have been due and payable or the liability to make the payment on account of royalty accrued, had that extension of time not been granted.

(c) If any royalty remains unpaid for more than three (3) months after the time it becomes due and payable or a payment on account of royalty remains unpaid for more than one (1) month after the liability to make the payment accrues, then in either case the Lessee shall be deemed to have breached this lease and the provisions of paragraphs (a) and (b) of Clause 21 of this lease shall apply.

2A(5) AMOUNTS OVERPAID

(a) Where, by reason of an assessment or an amendment of an assessment of his liability to pay royalty, or for any other reason, the Lessee has paid an amount for royalty in excess of his liability to pay, the Minister: —

(i) may, where he is satisfied that the Lessee will have, within 30 days after the Minister becomes aware of the overpayment, a liability to pay a further amount of or on account of royalty, retain that overpayment, or so much of it as he thinks necessary to meet that further liability, on account of that further liability, which liability shall be reduced by the amount so retained; and

(ii) shall, in any other case, refund to the Lessee within 30 days of a claim for repayment being made by the Lessee in writing the amount of royalty overpaid.

(b) Where eligible rehabilitation and well abandonment expenditure paid by the Lessee immediately prior to or after ceasing of active operation of the production unit has resulted in negative nett value in the royalty year in which the production unit ceases active operation or in the subsequent three royalty years the Minister shall refund an amount of royalty equal to 40 per cent of the nett value in those royalty years, with an upper limit equal to the total value of previous royalty payments by the Lessee under this Lease.”

(2) Clause 21 — by inserting after paragraph (g) the following paragraphs: —

“ (ga) In any case where the State, the Minister or any other Minister in the Government of the State is by this lease given a discretionary power including without limitation a power to form an opinion, make a determination, give consideration, reach a conclusion, make a grant, give an approval, make a requirement or be satisfied as to any matter, then in the exercise of such discretionary power the State or Minister shall act reasonably and shall have due regard to the circumstances enumerated in this Lease in relation to which the discretion is to be exercised as they exist in fact independently of the exercise of such discretion or the formation of such opinion.

(gb) If the Lessee considers that the State or the Minister has exercised any discretionary power otherwise than in accordance with paragraph (ga) of clause 21 it may, except as otherwise provided in this lease, within 42 days after becoming aware of the exercise of that discretionary power, give notice in writing to the State or the Minister stating the reasons why it considers that discretionary power has not been exercised in accordance with paragraph (ga) of clause 21 and requiring the exercise of that discretionary power to be referred to arbitration in accordance with paragraph (g) of clause 21. An arbitrator acting in accordance with paragraph (g) of clause 21 shall, in reviewing the exercise of a discretionary power by the State or the Minister, be empowered to determine the decision which should have been made upon the proper exercise of that discretionary power in accordance with paragraph (ga) of clause 21 and that determination by the arbitrator shall bind the State and the Minister and the Lessee. This paragraph shall not, however, limit the other rights and remedies of the parties. ”

(3) by adding after Clause 21 the following Clause: —

“22. NOTICES

Any notice, consent or other writing authorised or required by this lease to be given or sent shall be deemed to have been duly given or sent by the State if signed by the Minister or by any senior officer of the Public Service of the State acting by the direction of the Minister and forwarded by prepaid registered post or handed to the Lessee at its nominated office for the time being in the State and by the Lessee if signed on its behalf by any person or persons authorised by the Lessee or by its solicitors as notified to the State from time to time and forwarded by prepaid post or handed to the Minister and except in the case of personal service any such notice, consent or writing shall be deemed to have been duly given or sent on the day on which it would be delivered in the ordinary course of post. ”.

Variation 3

(1) The parties hereto may from time to time by agreement in writing add to substitute for cancel or vary all or any of the provisions of this Agreement or of the Barrow Island Lease for the purpose of more efficiently or satisfactorily implementing or facilitating any of the objects of this Agreement, including but without limitation the object of providing for the payment of royalty in a way that does not render uneconomic eligible capital expenditures to enhance recovery of petroleum in the Barrow Island Lease.

(2) The Minister shall cause any agreement made pursuant to subclause (1) of this Clause 7, in respect of any addition substitution cancellation or variation of the provisions of this Agreement to be laid on the Table of each House of Parliament within 12 sitting days next following its execution.

(3) Either House may, within 12 sitting days of that House after the agreement has been laid before it pass a resolution disallowing the agreement, but if after the last day on which the agreement might have been disallowed neither House has passed such a resolution the agreement shall have effect from and after that last day.

Facilitation 3

The Minister or the Premier for the time being of the State may from time to time make, execute and do or cause to be made executed or done all necessary incidental instruments and acts which may be necessary or convenient to protect, secure or otherwise ensure compliance by the Lessee with the terms of the Barrow Island Lease.

Commonwealth State arrangements 3

The State and the Lessee acknowledge and record that this Agreement has been entered into in pursuance of an agreement, arrangement or understanding between the State and the Commonwealth and that the State and the Commonwealth have entered or will enter into an agreement under which the State will pay a proportion of the royalty payable under the Barrow Island Lease to the Commonwealth and the Commonwealth will exempt petroleum commodities produced from petroleum from the Barrow Island Lease from duties of excise with effect from 1st July 1985.

Modification 3

Save as modified and varied by this Agreement, the Barrow Island Lease shall continue in full force and effect.

Applicable Law 3

This Agreement shall be interpreted according to the law for the time being in force in the State of Western Australia.

IN WITNESS WHEREOF this Agreement has been executed by or on behalf of the parties hereto the day and year first hereinbefore mentioned.

SIGNED by the said THE HONOURABLE BRIAN THOMAS BURKE, M.L.A. in the presence of: —	) ) )	BRIAN BURKE

DAVID PARKER
MINISTER FOR MINERALS AND ENERGY

THE COMMON SEAL of WEST AUSTRALIAN PETROLEUM PTY. LIMITED was hereunto affixed by authority of the Directors in the presence of: —	) ) ) ) )	(C.S.)

D.E. HURST H.P. WILLIAMS
MANAGING DIRECTOR ASSISTANT SECRETARY

Notes

This is a compilation of the Barrow Island Royalty Variation Agreement Act 1985 and includes amendments made by other written laws. For provisions that have come into operation see the compilation table. For provisions that have not yet come into operation see the uncommenced provisions table.

Compilation table

Short title	Number and year		Assent		Commencement
Barrow Island Royalty Variation Agreement Act 1985	113 of 1985		7 Jan 1986		7 Jan 1986 (see s. 2)
Petroleum Amendment Act 2007 s. 91	35 of 2007		21 Dec 2007		19 Jan 2008 (see s. 2(b) and Gazette 18 Jan 2008 p. 147)
Standardisation of Formatting Act 2010 s. 4		19 of 2010	28 Jun 2010	11 Sep 2010 (see s. 2(b) and Gazette 10 Sep 2010 p. 4341)

Uncommenced provisions table

To view the text of the uncommenced provisions see Acts as passed on the WA Legislation website.

Short title	Number and year	Assent	Commencement
Petroleum Legislation Amendment Act 2024 s. 433(2)	17 of 2024	14 May 2024	To be proclaimed (see s. 2(b))

Other notes

1 Though repealed by No. 72 of 1967, the Petroleum Act 1936 continues to apply to the Barrow Island lease and renewals of it (see No. 72 of 1967 s. 134).

2 Marginal notes in the agreement have been represented as bold headnotes in this compilation but that does not change their status as marginal notes.

Defined terms

[This is a list of terms defined and the provisions where they are defined. The list is not part of the law.]

Defined term Provision(s)

the Agreement 3

the Barrow Island lease 5(1)

This work is licensed under a Creative Commons Attribution 4.0 International Licence (CC BY 4.0). To view relevant information and for a link to a copy of the licence, visit www.legislation.wa.gov.au.

By Authority: GEOFF O. LAWN, Government Printer

Western Australia

Barrow Island Royalty Variation Agreement Act 1985

Western Australia

Barrow Island Royalty Variation Agreement Act 1985

Contents

Part I — Preliminary

Short title 2
Commencement 2

Part II — Ratification and effect of Agreement

Interpretation 3
Ratification of agreement 3
Legal character of Barrow Island lease preserved 3

Schedule — Barrow Island Royalty Variation Agreement

Notes

Compilation table 38

Uncommenced provisions table 38

Other notes 38

Defined terms

Western Australia

Barrow Island Royalty Variation Agreement Act 1985

[Long title amended: No. 35 of 2007 s. 91(2).]

Part I — Preliminary

1. Short title

This Act may be cited as the Barrow Island Royalty Variation Agreement Act 1985.

2. Commencement

This Act shall come into operation on the day on which it is assented to by the Governor 1.

Part II — Ratification and effect of Agreement

3. Interpretation

In this Part —

the Agreement means the agreement a copy of which is set forth in the Schedule to this Act and includes that agreement as varied from time to time in accordance with its provisions.

4. Ratification of agreement

(1) The Agreement is hereby ratified.

(2) The implementation of the Agreement is authorised.

5. Legal character of Barrow Island lease preserved

(1) In this section —

The Agreement embedded in the Schedule introduces a handful of foundational concepts that govern calculation, administration and enforcement of royalty for the Barrow Island lease. These concepts are defined in the Agreement and are the mechanical building blocks of the new royalty regime.

Accumulated nett value. This is the central tax base: accumulated nett value is a carried‑forward amount calculated by reference to the nett value of petroleum commodities in a royalty year, the accumulation rate and the accumulation from prior royalty years (Schedule cl 1, definition “accumulated nett value”; substituted Clause 2(4)). The netting operation deducts a prescribed set of eligible deductions from agreed valuations of output (definition “nett value of a petroleum commodity”; Clause 2(4)). If the year’s accumulated nett value is negative, it is set to zero for purposes of later years (Schedule cl 1: accumulated nett value provisions).
Accumulation rate. The accumulation rate is the annual percentage applied to calculate accumulated nett value. The definition links the rate, initially, to the threshold rate in Commonwealth resource rent tax‑style legislation (or Schedule 1 to the Commonwealth Petroleum Revenue Act 1985), or otherwise to an agreed rate between Minister and Lessee; failing agreement, the rate is to be determined by arbitration under the lease’s arbitration clause and must reflect a reasoned return‑on‑investment assessment (Schedule cl 1 definition “accumulation rate”).
Eligible deductions. These are multi‑category expense buckets that reduce gross output values to a nett value. The definition is extensive and granular, covering eligible enhanced recovery research, exploration, operating, capital, administration, rehabilitation and well abandonment expenditure, plus a residual Ministerial discretion to allow other items (Schedule cl 1 definition “eligible deduction” and component definitions). The definition also specifies exclusions such as interest, dividends, depreciation allowances, profit taxes, Commonwealth excise, and other levies that are in the nature of a royalty (Schedule cl 1, “eligible deduction” exclusions A-G).
Nett value and value. Value of a petroleum commodity is to be the gross proceeds less specified transport costs at an agreed or Minister‑determined f.o.b. valuation and measurement point; the Minister may determine point, measurement method and market value factors if the parties cannot agree (Schedule cl 1 definitions “value of a petroleum commodity”, “nett value”, “f.o.b. valuation and measurement point”; substituted Clause 2).
Provisional payments and interest. The Lessee must make four provisional royalty payments in each year (Schedule Clause 2A(2)(a)), with special figures for the 1985 year (first four provisional payments fixed at $22.7 million). If provisional payments are less than a specified share of assessed liability, additional royalty is payable calculated by applying the accumulation rate, and unpaid amounts attract interest at the accumulation rate (Clause 2A(2)(b) and Clause 2A(4)).
Ministerial determination and administrative discretion. The Minister has broad power to determine valuation points, measure quantities, allocate or attribute expenditures across categories, inspect premises and records, accept or reject statements and make assessments and amended assessments (Schedule Clause 2(6), 2(9)-(15), and definitions). Many definitions require the Lessee to “demonstrate to the satisfaction of the Minister” that claimed items were “reasonably and properly paid” for specified purposes (see the various eligible expenditure definitions in Schedule cl 1).
Oversight and review. The lease establishes inspection rights for authorised persons (Clause 2(9)); assessment is the Minister’s primary device (Clause 2(11)); assessments can be amended under specific grounds, and the Minister may amend for fraud at any time and otherwise within seven years (Clause 2(13)). The Agreement inserts a requirement that discretionary powers be exercised reasonably and provides an arbitration pathway to challenge discretionary exercises in many contexts (Clause 21 paragraphs (ga) and (gb) added by Schedule cl 6(2)). However, many definitions contain an express proviso excluding paragraphs (g) and (gb) of Clause 21 from disputes arising out of the exercise of discretion conferred upon the Minister pursuant to that definition , meaning that for a number of defined matters the arbitration pathway is excluded (see Schedule cl 1 repeated provisos).
Conditioning on Commonwealth arrangements. The Agreement will not operate until the parties have satisfied specified Commonwealth excise and sharing arrangements, and the Lessee must certify that Commonwealth legislation and refund arrangements are satisfactory (Schedule cl 4; cl 9 records the State‑Commonwealth understanding).

These concepts together implement a quasi‑tax, resource‑rent royalty inside the existing lease framework and allocate to the Minister a suite of factual and value determinations, together with inspection and enforcement powers. The definitions and procedural rules allocate the burden of substantiation to the Lessee (demonstrate to the Minister’s satisfaction), but also create triggers for Ministerial determinations and, where allowed, arbitration under lease arbitration provisions.

The Agreement and the Act primarily affect a small set of concentrated parties, with some secondary impacts on broader public revenue administration and commercial counterparties.

The Lessee and its successors, permitted assigns and appointees. The principal directly affected party is West Australian Petroleum Pty. Limited, the Lessee named in the Schedule, and any successors or permitted assigns (Schedule cl 1 definitions “Lessee”; Clause 6(1) renames obligations). Where there is more than one Lessee liability is several (Schedule cl 1 “Lessee” definition). Obligations include payment of the new royalty, making provisional payments, filing returns with statutory declarations and auditor certification, keeping and making available records, and compliance with inspections (Schedule Clause 2(4), 2(5), 2(10), 2(9), 2A(2)).
The State and the Minister. The State appears as a party to the Agreement and the Minister (the Minister for the time being charged with the administration of the Petroleum Act) is given sweeping administration, valuation and enforcement powers: to determine f.o.b. points, to assess accumulated nett value and royalty, to determine eligible deductions and to appoint authorised persons for inspection (Schedule cl 1 definitions; Clause 2(6), 2(9)-(11), 2A(3)). The State also has the duty to introduce and sponsor the ratifying Bill and to enter into Commonwealth arrangements (Schedule cl 3, cl 4, cl 9).
The Commonwealth. The Agreement explicitly contemplates and requires arrangements with the Commonwealth: the lessee must certify that satisfactory Commonwealth legislation and refund arrangements in relation to Commonwealth excise exist and the State must certify the same and confirm a revenue sharing agreement with the Commonwealth before operation (Schedule cl 4; cl 9). Clause 9 records the understanding that the State will pay a proportion of royalty to the Commonwealth and that the Commonwealth will exempt petroleum from excise from 1 July 1985.
Buyers, refineries and third‑party counterparties. The valuation, measurement and reporting obligations reference purchasers and refineries (Schedule Clause 2(5)(a)(iv), and the definition of value requires accounting for the gross proceeds from sale). Entities that buy, refine, transport or otherwise handle Barrow Island product will be implicated in measurement and evidence (measurement point, transport costs). The lessee must report counterparty identities and contract terms.
Other interested parties and future owners. The Agreement requires the Lessee to notify the Minister of changes in ownership of the production unit or the lease (subject to Clause 9) within 30 days (Schedule Clause 2(7)(b)(ii)), and treats stock and transfers specially in transitional arrangements (Schedule Clause 5). Successors and assignees are included in the Lessee definition. Any party considering acquisition will step into a regime of provisional payments, extensive information rights and Ministerial determinations.
Auditors and advisers. The lease requires an auditor approved by the Minister to certify returns and to express opinions on whether expenditures have been reasonably and properly paid for the purposes mentioned (Clause 2(5)(c)(ii)). Accounting, legal and tax advisers therefore have defined roles and compliance risks.
The public/State revenue. While not a contractual party in day‑to‑day operation, the State’s revenue receipts and their allocation (including a share to the Commonwealth) are directly affected: the Agreement replaces prior royalty mechanics, provides for refunds and adjustments, and creates a provisional payment stream and longer‑term measurement regime, which matters for fiscal forecasting.
Persons whose activities or facilities are on the production unit. The Minister’s authorised persons can inspect premises where stored product or records are kept and can require persons on the premises to give their name, position and to answer questions relating to the inspection (Clause 2(9)(a)(ii)-(viii)). Occupiers must provide reasonable assistance for inspection (Clause 2(9)(c)).

Who pays and who decides. The Lessee bears the economic burden: the royalty, provisional payments, record‑keeping and investigative co‑operation obligations. The Minister and State decide the many administrable, valuation and assessment issues and have enforcement remedies available; for many matters the Minister has primary decision authority and discretion, although certain discretionary exercises are subject to a reasonableness obligation and a contractual arbitration mechanism as to what the Minister should have decided (see Clause 21 paragraphs (ga) and (gb) added by Schedule cl 6(2)).

This Part summarises concrete, recurring duties placed on the Lessee, and the principal rights and powers reserved to the State and the Minister under the Agreement as ratified by the Act.

Lessee duties (financial and reporting)

Pay royalty of 40% of accumulated nett value. The core duty is to pay royalty from 1 July 1985 equal to 40% of the accumulated nett value of petroleum commodities sold or removed without sale from the production unit for each royalty year (Schedule Clause 2(4)).
Make provisional payments. The Lessee must make four quarterly provisional royalty payments each year, on dates set out in Clause 2A(2)(a), with the first four provisional payments in the 1985 year specified. Each of the first four provisional payments is fixed at $22.7 million for that initial year (Schedule Clause 2A(2)(a)).
Deliver detailed royalty returns. Within three months after the end of a royalty year (or a longer period if allowed), the Lessee must deliver to the Minister a detailed statement containing production and sale information, the basis of valuation, and particulars of expenditures claimed as eligible deductions, together with a statutory declaration and an auditor’s certificate addressing correct completion of the statement and whether expenditures are reasonably and properly paid (Schedule Clause 2(5)(a)-(c)).
Keep location accounting and records. The Lessee must keep proper books and records at the production unit or at another place agreed or determined by the Minister, and maintain details of expenditures, sales and asset disposals and quantities and qualities as measured at the f.o.b. valuation and measurement point (Schedule Clause 2(10)(a)-(b)).
Supply further information and keep the Minister informed. The Lessee must notify the Minister of specified events (manager details, ownership change, significant change to production levels, discontinuances of operations) within 30 days and supply further information upon Ministerial request (Schedule Clause 2(7)).
Demonstrate eligibility of deductions. For the several categories of eligible deductions (capital, operating, administration, exploration, enhanced research, rehabilitation) the Lessee must demonstrate to the Minister’s satisfaction that asserted expenditures were “reasonably and properly paid” and were directly and solely for specified purposes (Schedule cl 1 definitions). The Lessee must ensure expenditures are not double counted across categories (Clause 2(6)(a)).
Facilitate inspections. The Lessee and occupiers must provide reasonable assistance to authorised persons exercising inspection powers and must not obstruct inspection; authorised persons may enter the production unit, premises where product or records are stored, inspect stock and make and retain copies of records (Clause 2(9)).

Lessee rights and protections

Audit certificate and statutory declaration. The Lessee may have an auditor approved by the Minister provide certification that statements are correctly completed and that expenditures are reasonably and properly paid; this forms part of the return mechanism (Clause 2(5)(c)(ii)).
Arbitration for challenges to discretionary exercises (in many cases). Clause 21(ga) requires that discretionary powers be exercised reasonably and with due regard to enumerated circumstances. Clause 21(gb) allows the Lessee to require that the exercise of a discretionary power be referred to arbitration in accordance with Clause 21(g) where it considers the Minister has failed to act in accordance with paragraph (ga). An arbitrator may determine what decision should have been made and that determination binds the State and Minister (Schedule cl 6(2)). However, numerous definitions include an express proviso excluding paragraphs (g) and (gb) of Clause 21 from disputes arising from the exercise of specific discretions conferred upon the Minister pursuant to those definitions , meaning arbitrability is expressly limited in those defined contexts (see Schedule cl 1 provisos in multiple definitions).

Minister and State rights and powers

Determine valuations and measurement points. The Minister may determine the f.o.b. valuation and measurement point, the measuring procedure and the market value of petroleum where no agreement exists (Schedule cl 1 definitions “f.o.b. valuation and measurement point” and “value of a petroleum commodity”; Clause 2(5)(a)(vi)-(vii)).
Inspect and copy. Authorised persons appointed by the Minister may enter the production unit and other premises, inspect stock and records, inspect active operations, and require persons to answer questions and provide names and positions; they may make and retain copies or extracts (Clause 2(9)).
Assess and amend assessments. From returns and any other information, the Minister must make an assessment of accumulated nett value and royalty (Clause 2(11)). The Minister may amend assessments for fraud at any time, and in other cases within seven years of the royalty becoming due and payable; the amended assessment is treated as an assessment for lease purposes (Clause 2(13)-(14)).
Default assessment and enforcement. If the Lessee defaults in filing returns or keeping proper books or the Minister is not satisfied with a return, the Minister may promptly make a default assessment (Clause 2(12)). Unpaid royalty attracts additional royalty calculated at the accumulation rate (Clause 2A(4)), and prolonged non‑payment triggers deemed breach and the lease’s sanctions (Clause 2A(4)(c) refers to paragraphs (a) and (b) of Clause 21).
Remission and refunds. The Minister has discretion to remit additional royalty in some provisional payment shortfall situations if not caused by an attempt to avoid royalty (Clause 2A(2)(c)). Where overpayments are found the Minister may retain an overpayment against a subsequent liability or shall refund overpayments within 30 days of a written claim (Clause 2A(5)).

Statutory preservation

Lease remains a petroleum lease. Section 5 preserves the legal character and incidents of the Barrow Island lease as a petroleum lease under the former Petroleum Act 1936 and as deemed to subsist under sections 134 and 134A of the Petroleum and Geothermal Energy Resources Act 1967 (s 5(3)). Section 5(2) further clarifies that neither the Act nor the Government Agreements Act 1979 give the provisions inserted into the lease the force of written law.

Taken together, these duties and powers create a system in which the Lessee bears documentation, payment and disclosure obligations; the Minister has broad evaluative, assessment and enforcement powers; and there are specific procedural protections such as auditor certification and, in many but not all contexts, arbitration against unreasonable exercise of discretion.

The Agreement uses monetary mechanisms, contractual lease remedies and administrative powers rather than criminal penalties in the text reproduced. Enforcement is effected primarily via assessment mechanics, interest charges, default provisions, and the lease’s remedial clauses that become available on deemed breach.

Monetary penalties and interest

Additional royalty for late provisional payments or underpayment. If provisional payments are less than 90% (or other specified benchmarks for transitional years) of the assessed royalty, an additional royalty is payable calculated by applying the accumulation rate to the shortfall (Clause 2A(2)(b)).
Interest on late payments. Where royalty or provisional payments remain unpaid, the Lessee is liable to pay additional royalty calculated by applying an annual rate equal to the accumulation rate to the outstanding amount for the period it remains unpaid (Clause 2A(4)(a)). If the Minister grants an extension of time, the Minister may specify a date from which additional royalty is computed, being not earlier than the date the amount would otherwise have been due (Clause 2A(4)(b)).
Penalty consequences of extended non‑payment. If royalty remains unpaid more than three months after it is due, or a payment on account remains unpaid more than one month after the liability accrues, the Lessee shall be deemed to have breached the lease and the provisions of paragraphs (a) and (b) of Clause 21 of the lease shall apply (Clause 2A(4)(c)). The text of paragraphs (a) and (b) of Clause 21 is part of the lease and is incorporated as varied; the Agreement references those paragraphs as the remedial vehicle for non‑payment, but the Agreement itself does not restate the content of those paragraphs in full. The consequence is that prolonged non‑payment triggers contractual remedies available under the lease.

Assessment and adjusted assessment as enforcement tools

Default assessments. If the Lessee fails to deliver the required statement, fails to keep proper books, or the Minister is not satisfied the submitted statement is full and accurate, the Minister may promptly make a default assessment consistent with the lease (Clause 2(12)). That default assessment becomes the basis for royalty payable and may be imposed without waiting for Lessee cooperation.
Amended assessments. The Minister may amend an assessment where there is a lack of full and true disclosure in cases of fraud or evasion (at any time), and in other cases within seven years of the date the royalty became due and payable (Clause 2(13)). Amended assessments are treated as assessments for lease purposes (Clause 2(14)). This gives the Minister a long window to reopen prior years where errors or avoidance are detected.

Administrative inspection and evidence presumptions

Inspection and production powers. Authorised persons may enter the production unit and other premises, inspect stock and records, inspect active operations, make and retain copies/extracts of records and require persons to answer questions and give their identification (Clause 2(9)). Occupiers must provide reasonable assistance to authorised persons (Clause 2(9)(c)). Failure to cooperate can lead to adverse default assessment consequences.
Conclusive evidence of assessment. The production of a notice of assessment or a document under the Minister’s hand purporting to be a copy of a notice of assessment is conclusive evidence that the assessment was made and is prima facie evidence that the amount and particulars are correct (Clause 2(17)). This evidentiary provision privileges the Minister’s written assessment in enforcement contexts.

Refunds and remissions

Refund for overpayment and rehabilitation. The Minister may refund overpayments within time limits and may retain overpayments to offset imminent liabilities. There is a specific refund mechanism where eligible rehabilitation and well abandonment expenditure has generated negative nett value in the year of final abandonment or in the subsequent three royalty years; the Minister must refund 40% of the nett value up to the total value of previous royalty payments (Clause 2A(5)(a)(i) and (b)). The Minister also has discretion to remit additional royalty attributable to provisional payment shortfalls if not caused by avoidance (Clause 2A(2)(c)).

Dispute resolution and limits

Arbitration and reasonableness guarantees for many discretions. The Agreement inserts paragraphs (ga) and (gb) into Clause 21 to require the State or Minister to act reasonably when exercising discretionary powers and to permit the Lessee to require arbitration under Clause 21(g) to review whether the discretion was exercised in accordance with paragraph (ga) (Schedule cl 6(2)). The arbitrator can determine what decision should have been made and that determination binds the State, Minister and Lessee.
Express exclusions from Contractual arbitration. Many of the definition clauses in the Agreement include a proviso that paragraphs (g) and (gb) of Clause 21 shall not apply to disputes arising out of the exercise of any discretion conferred upon the Minister pursuant to that definition (Schedule cl 1 repeated provisos). That means for a number of specified matters the arbitration pathway created by the Clause 21 amendments is excluded by the definitions themselves; the Agreement preserves other rights and remedies, but limits referral to Clause 21(g)/(gb) arbitration for those defined discretions.

Practical enforcement structure

The enforcement structure is predominantly administrative and civil/contractual. It relies on Ministerial assessments, default assessments where the Lessee fails to comply, interest and additional royalty as financial pressure, statutory evidentiary presumptions favouring Ministerial assessments, and the lease’s contractual remedies for deemed breach. Audit certification is required of the Lessee’s returns, but the Minister retains capacity to determine values, to reallocate expenditures and to reopen assessments on fraud or within seven years otherwise. The specified exclusion of arbitration for certain defined discretions creates pockets of administrative finality, while other discretionary exercises remain subject to an express contractual standard of reasonableness and arbitral correction.

The Act and the Agreement are drafted to operate in a specific legal ecology that includes State petroleum legislation, the Government Agreements Act 1979, and Commonwealth excise and revenue arrangements. The Schedule repeatedly references the Petroleum Act 1936 (referred to in the text as “former provisions”) and the Petroleum and Geothermal Energy Resources Act 1967. The Act itself contains two key statutory interaction rules.

Primacy and preservation

Statutory primacy of the Agreement with a carve‑out. Section 4(3) of the Act authorises that, subject to section 5, the Agreement “shall operate and take effect according to its terms notwithstanding any other Act or law.” That is an express statement that the Agreement is intended to have operational primacy where it conflicts with other law, subject to the preservation of the lease’s legal character (s 5). The Government Agreements Act 1979 is not limited in application by the Act, but s 4(3) provides that the Agreement’s terms apply notwithstanding other law.
Preservation of lease character and limits on creating a statutory instrument. Section 5 preserves the Barrow Island lease as a petroleum lease under the former Petroleum Act 1936 and emphasises that neither the Act nor the Government Agreements Act 1979 give the provisions inserted into the Barrow Island lease “the force, effect or character of a written law” (s 5(2)). Section 5(3) affirms the lease remains a petroleum lease as deemed to subsist under sections 134 and 134A of the Petroleum and Geothermal Energy Resources Act 1967. In short, while the Agreement is ratified and granted operational primacy, it is not elevated into an ordinary statute applying generally; the lease retains its character under petroleum law.

Commonwealth excise and revenue arrangements

Conditional operation on Commonwealth measures. The Agreement’s commencement is conditional on a set of Commonwealth arrangements. Clause 4 requires that the Lessee certify that Commonwealth legislation exempting petroleum commodities produced from the production unit from Commonwealth duties of excise is in force and that refund arrangements have been made, and that the State certify it has entered into a revenue sharing arrangement with the Commonwealth (Schedule cl 4). Clause 9 records the bilateral understanding that the State will pay a proportion of royalty to the Commonwealth and that the Commonwealth will exempt petroleum from excise effective 1 July 1985.
Exclusion of Commonwealth excise from eligible deductions. The eligible deduction definition explicitly excludes Commonwealth duties of customs and excise (Schedule cl 1 “eligible deduction”, exclusions E and F). That is consistent with the Agreement’s expectation that Commonwealth excise will be avoided by a Commonwealth exemption for Barrow Island product and that the State and Commonwealth will share royalty.

Interaction with the Petroleum Acts and reservation of original statutory incidents

Continued application of former Petroleum Act provisions. The Agreement and s 5(3) preserve application of the “former provisions” of the Petroleum Act 1936 to the Barrow Island lease, which continues to be treated as a petroleum lease governed by the special subsisting provisions (s 5(3); Schedule cl 1 definition “former provisions”).
Ministerial authorities under petroleum regime. The Minister is defined as the Minister charged with administration of the Petroleum Act and exercises functions under the lease that are inter‑woven with the State’s regulatory responsibilities under petroleum legislation (Schedule cl 1 definition “Minister”).

Administrative law and judicial review context

Contractual and statute‑driven administrative discretions. The Agreement creates many discretionary powers for the Minister, and those powers are framed as contractual obligations under the lease. The Agreement also inserts an express contractual requirement that the State/Minister must exercise discretionary powers reasonably and permits arbitration review in many contexts (Clause 21 ga/gb). However, the Agreement also contains several explicit exclusions of Clause 21(g)/(gb) in relation to specific defined discretions, removing that contractual arbitration pathway for certain determinations (Schedule cl 1 provisos). The Agreement does not, in its text, limit access to judicial review under public law or other remedies beyond the contractual arbitration route; the text itself treats arbitration and other lease remedies as the primary dispute mechanisms. Any interaction with public law (for example judicial review of administrative action) is not expressly addressed in the Agreement text and would depend on general law principles as to the amenability of the Minister’s actions to review, noting that some determinations are framed as contractual and given evidentiary weight in the lease.

Statutory time limits and evidentiary effect

Seven‑year amendment window and evidentiary presumptions. The Minister’s power to amend assessments within seven years in many circumstances (Clause 2(13)) and the clause making notice of assessment conclusive evidence of assessment (Clause 2(17)) create long‑running interactional effects with statutes of limitation and evidentiary rules.

Parliamentary oversight of later variations

Parliamentary disallowance of later variations. The Agreement allows the parties to vary it in writing, but requires the Minister to lay any such variation before each House of Parliament within 12 sitting days; either House may disallow within that period and the variation will not take effect if disallowed (Schedule cl 7(2)-(3)). That mechanism subjects future ministerial variations to an element of parliamentary oversight and interacts with parliamentary procedures governing disallowance.

In short, the Agreement is intended to sit alongside, and in some respects override, other State law in relation to the Barrow Island lease, subject to preservation of the lease’s legal character and to the requirement that certain Commonwealth excise and revenue sharing arrangements be in place. It creates a hybrid administrative‑contractual regime in which the Minister has broad determination powers but with specified contractual constraints and a complex pattern of arbitral availability and exclusions that will influence how other legal remedies and statutory regimes interact with the lease.

The compilation material appended to the Act shows that the Barrow Island Royalty Variation Agreement Act 1985 has been subject to a small number of formal amendments in the statute book since its enactment. The compilation table in the Act identifies the following amendments and notes.

Original enactment and commencement. The Barrow Island Royalty Variation Agreement Act 1985 (No. 113 of 1985) received assent 7 January 1986 and commenced the same day, per s 2 and the compilation table.
Petroleum Amendment Act 2007. The compilation table records amendment by the Petroleum Amendment Act 2007 (No. 35 of 2007), s 91, with assent on 21 December 2007 and commencement on 19 January 2008 (see compilation table). The effect recorded in the Act body is that s 5 was amended by No. 35 of 2007 s 91(3). Section 5 in its current form retains the preservation prescription that the Barrow Island lease remains a petroleum lease and that provisions inserted into the lease by the Agreement are not to be treated as written law (s 5(2) and (3)).
Standardisation of Formatting Act 2010. The Standardisation of Formatting Act 2010 (No. 19 of 2010) effected formatting and minor editorial amendments; it appears in the compilation table with assent 28 June 2010 and commencement 11 September 2010. The Schedule heading was amended by that Act at s 4, per the marginal note.
Uncommenced provisions. The compilation includes a note that the Petroleum Legislation Amendment Act 2024 (No. 17 of 2024) s 433(2) is not yet proclaimed and remains uncommenced as to parts of the petroleum statute complex (compilation table, uncommenced provisions table). The Barrow Island Act’s compilation notes contain that uncommenced entry; no textual change to the Barrow Island Act is shown there.

Practical import of the amendment history

Material content preserved. The compilation table shows that only limited technical or formal amendments have been made to the Barrow Island Act’s text since ratification. The 2007 amendment specifically amended s 5(3) in the Act to update references reflecting the petroleum legislative framework, preserving the lease’s status as a petroleum lease under sections 134 and 134A of the Petroleum and Geothermal Energy Resources Act 1967.
No schedule content amendments recorded in the Act text here. There is no statutory record in the reproduced compilation that the core economic terms of the Agreement (the substituted Clause 2 with the 40% accumulated nett value royalty, the eligible deductions framework, provisional payment rules, and the Clause 21(ga)/(gb) additions) were further amended by later Acts in the compilation table. The Agreement itself contemplates future written variations between the parties and a parliamentary disallowance process for those variations (Schedule cl 7(1)-(3)), but the compilation notes do not indicate substantive later amendments to the Agreement text apart from the formatting and s 5 changes.
Keep an eye on petroleum legislative reform. The compilation’s uncommenced entry for the Petroleum Legislation Amendment Act 2024 indicates ongoing reform in the petroleum statutory environment. Any changes to the broader petroleum statute book (Petroleum and Geothermal Energy Resources Act) or to how “former provisions” or deeming provisions operate could have consequential effects on the practical operation of the Barrow Island lease, though the Act itself limits some interactions by design (see s 5).

For practitioners advising clients on the lease or on transactions affecting Barrow Island interests, the main statutory changes to track historically are the 2007 technical amendment to s 5 and the continuing effects of newer broader petroleum legislation reforms, which may interact with the lease through the deeming clauses referenced in s 5(3). The Agreement itself expressly provides a mechanism for later written variations between the parties with parliamentary oversight (Schedule cl 7), which is the internal pathway for contractual evolution outside of formal legislative amendment.

The text of the Act and the printed Agreement in the Schedule, as provided, does not record or cite any litigation history or judicial decisions concerning the Barrow Island Royalty Variation Agreement Act 1985 or the Agreement provisions. The reproduced material contains no case names, reported decisions, or references to litigation. Consequently, this section summarises the dispute resolution architecture created by the Agreement (which is the principal, contractually embedded pathway for contesting Ministerial actions) and flags the absence of recorded cases in the text.

Dispute mechanisms embedded in the Agreement

Arbitration under Clause 21(g). The lease contains an arbitration provision at Clause 21(g) (referred to several times). The Agreement, by inserting paragraphs (ga) and (gb) into Clause 21 (Schedule cl 6(2)), establishes that the State or Minister must act reasonably in exercising discretionary powers and allows the Lessee, within 42 days of becoming aware of an allegedly improper exercise of that discretionary power, to require reference to arbitration under Clause 21(g). The arbitrator can determine what decision should have been made under the proper exercise of the discretion, and that determination binds the State, Minister and Lessee (Schedule cl 6(2), paragraph (gb)).
Exclusions from arbitration. Numerous definitions in the Agreement carry a proviso excluding the application of paragraphs (g) and (gb) of Clause 21 to disputes arising out of the exercise of any discretion conferred upon the Minister pursuant to those definitions (see multiple provisos at the end of definitions in Schedule cl 1). That means arbitration under Clause 21(g)/(gb) is expressly unavailable for some determinations , for example, certain eligibility determinations where the definition requires the Lessee to “demonstrate to the satisfaction of the Minister” that an expenditure is eligible. The provisos preserve “the other rights and remedies of the parties” but remove the specific lease arbitration route for those defined discretional exercises.
Ministerial review and statutory assessment/amendment windows. The Agreement provides administrative review mechanics , the Minister must issue assessments, may amend assessments in fraud cases at any time and in other circumstances within seven years, and default assessments are available where the Lessee fails to comply with return or record keeping obligations (Schedule Clause 2(11)-(13)). These mechanics structure when and how contested assessments can be revisited.

Absence of reported judicial decisions in the text

No cases cited in the printed Agreement. The Agreement as printed in the Schedule does not cite any judicial decisions or indicate any litigation between the parties or involving third parties.
Practical consequence for advisers. Because the text does not record litigation, practitioners will need to search external case law databases and government records to determine whether any disputes under this Agreement have proceeded to arbitration or court. The Agreement’s mix of contractual arbitration and explicit carve‑outs for certain Ministerial discretions suggests potential institutional litigation pathways: arbitration where Clause 21(gb) is available; contractual lease remedies for deemed breach; and a potential public law route (judicial review) for some administrative acts depending on the legal character of the act and whether it is amenable to public law challenge despite contractual framing. The Agreement itself does not preclude judicial review explicitly in the printed text.

Because the legislative text supplied contains no litigation record, advisers should treat the dispute resolution architecture described in the Agreement as the primary procedural map but verify by external research whether arbitration or court decisions have interpreted key concepts such as “demonstrate to the satisfaction of the Minister,” the scope of Clause 21(ga)/(gb) and how the arbitration carve‑outs in the definitions have been handled in practice.

This Agreement and the Act embed several practical risk points and compliance traps that advisers and operators should not treat as theoretical. These “gotchas” are grounded in the text and affect valuation, administration, dispute rights and timing.

Ministerial determination and “to the satisfaction of the Minister” tests. Many eligible‑expenditure definitions require the Lessee to “demonstrate to the satisfaction of the Minister” that claimed amounts were “reasonably and properly paid” and “directly and solely” for the specified purpose (see definitions for “eligible administration expenditures”, “eligible capital expenditures”, “eligible deduction”, “eligible enhanced recovery research expenditure”, “eligible operating expenditure”, “eligible rehabilitation and well abandonment expenditure” in Schedule cl 1). Those subjective tests place a heavy evidential burden on the Lessee and expose claims to final Ministerial evaluative judgment, which in several cases is excluded from Clause 21(g)/(gb) arbitration (see repeated provisos). Practically, this means that the Lessee must document and contemporaneously justify claims in detail, and cannot assume contractual arbitration will be available to overturn an adverse Ministerial finding in all cases.
Arbitration carve‑outs across definitions. The Agreement inserts paragraphs (ga) and (gb) into Clause 21 (Schedule cl 6(2)), creating a general contractual reasonableness standard and an arbitration remedy in many instances. However, numerous definitions expressly provide that paragraphs (g) and (gb) of Clause 21 shall not apply to disputes arising out of the exercise of any discretion conferred on the Minister pursuant to that definition (Schedule cl 1 provisos). This patchwork of arbitral availability means some disputes may be arbitrable, others not. Advisers must map which specific determinations remain subject to arbitration and which are not.
Evidentiary tilt to Minister’s assessment. Clause 2(17) provides that production of a notice of assessment, or of a document purporting to be a copy under the hand of the Minister, is conclusive evidence of the making of the assessment and prima facie evidence of its correctness. This shifts evidentiary burden toward the Lessee in judicial or enforcement contexts and strengthens administrative momentum in favour of the Minister’s figures.
Long amendment window up to seven years. The Minister may amend an assessment where full and true disclosure was not made , at any time for fraud or evasion and otherwise within seven years of the date when the royalty became due and payable (Clause 2(13)). Lessees must therefore retain records and be prepared for assessments to be reopened for a long period. Auditors, record retention policies and historical compliance will be critical.
Default assessment power and inspection rights. Failure to file a timely return, to keep proper books or to satisfy the Minister as to a return’s completeness allows the Minister to make a prompt default assessment consistent with the lease (Clause 2(12)). Coupled with inspection and copying powers (Clause 2(9)) and the requirement to supply information on demand (Clause 2(7)(c)), these provisions give the Minister powerful corrective levers and reduce the safe‑harbour for non‑cooperation.
Provisional payment mechanics and fixed initial quarterly sums. The provisional payment regime requires four quarterly payments and establishes a test for additional royalty if provisional sums fall short of the assessed liability. The Agreement fixes the first four provisional payments as $22.7 million each for the initial year (Clause 2A(2)(a)). That fixed initial figure may be advantageous or burdensome depending on actual production and cashflow; there is also interest exposure for under‑provision.
Interest linked to accumulation rate rather than market interest. Additional royalty and late payment interest are calculated by applying the accumulation rate (Clause 2A(4)), which is itself referenced to Commonwealth resource rent tax threshold concepts, Petroleum Revenue Act criteria or arbitration. This makes the effective rate dynamic and potentially higher or lower than conventional commercial rates; uncertainty in the accumulation rate has cashflow consequences.
Transitional stock valuation and refund timing. Transitional arrangements treat stock at midnight 30 June 1985 under the former Clause 2 (Schedule Clause 5). Lessees must file an audited royalty return for 1 January 1985 to 30 June 1985 within three months of the commencement date and may be required to accept Ministerial determinations on interim royalty for stock. Delays or disputes here produce short window refund/payment consequences.
Interaction with Commonwealth excise arrangements is a precondition. Clause 4 makes entry into operation conditional on specified certifications by the Lessee and the State regarding Commonwealth excise exemption and sharing arrangements. If those Commonwealth steps fail or are delayed, the Agreement’s substantive regime may not come fully into operation. Practitioners must monitor the Commonwealth legislative and administrative position.
Record location and access. Clause 2(10) permits records to be kept at the production unit or at another place agreed by Minister and Lessee, or determined by the Minister. This means the Minister can compel off‑site centralisation of records if there is no agreement, raising practical issues for multinational operators with central accounting systems.
“Value” determination flexibly defined and Minister‑determined. The definition of value contemplates agreed market sale proceeds but supplies a wide set of factors the Minister may use to determine market value where there is no agreement, including transport costs, comparable contract prices and policy considerations (Schedule cl 1 “value of a petroleum commodity”). The Minister’s discretion here interacts directly with royalty base and therefore cashflow; absence of an agreed valuation point is a commercial risk.
Parliamentary oversight of future variations. The Agreement allows future variations by written agreement, but the Minister must lay any variation before each House and the Houses may disallow within 12 sitting days (Schedule cl 7(2)-(3)). This subjects negotiated variations to parliamentary scrutiny and potential reversal, adding political and timing risk to amendment strategies.

These “gotchas” are concrete, text‑based mechanics that determine where compliance costs, litigation risk, and operational frictions will concentrate. For lessees and potential acquirers the combination of subjective Ministerial thresholds, evidentiary presumptions favouring ministerial assessments, lengthy amendment windows, and carved‑out arbitration can create pockets of administrative finality and therefore warrant careful compliance planning, tight contemporaneous documentation and pre‑emptive negotiation of as many valuation and categorisation points as possible.

Compliance with the Agreement requires operational, financial and governance measures that address the Act’s reporting, record‑keeping, valuation, payment and cooperation requirements. The following practical checklist maps those textually grounded obligations into implementation steps.

Establish robust books, records and audit trail consistent with Clause 2(10) and definitions

Maintain detailed ledgers that separately identify each category of eligible expenditure (eligible exploration, capital, operating, administration, rehabilitation, enhanced recovery research), and tag individual transactions so that each item is included in at most one category (Clause 2(6)(a) and Schedule cl 1 definitions).
Document contemporaneous justifications for each claimed eligible expenditure demonstrating the item was “reasonably and properly paid” and directly and solely related to specified purposes. For categories where the definition requires prior approval or Minister satisfaction, prepare administrative files showing the factual basis and direct nexus to the production unit (Schedule cl 1 definitions).
Preserve records for at least seven years and longer where the nature of the expenditure or amended assessment risk warrants it because the Minister can amend assessments within seven years and for fraud at any time (Clause 2(13)).
Agree the record location with the Minister where operationally appropriate, or be prepared for Ministerial determination of record location and inspection logistics (Clause 2(10)(a)).

Ensure auditor and statutory declaration processes are in place

Retain an auditor acceptable to the Minister and ensure that the auditor understands the lease’s requirements: the auditor must provide written advice certifying that the royalty statement has been correctly completed and express an opinion, with grounds, about whether expenditures have been reasonably and properly paid (Clause 2(5)(c)(ii)).
Implement internal controls and ensure a responsible officer is prepared to provide the statutory declaration required for each royalty return (Clause 2(5)(c)(i)).

Calendar and fund provisional payments and royalty returns

Build the twelve‑month provisional payment schedule and payment dates into cashflow planning: provisional payments are due in advance on dates specified in Clause 2A(2)(a) (23 March, 23 May, 23 September, 23 December or such dates as specified for specific years).
For the initial transition years, note specific fixed figures and transitional treatment (first four provisional payments in the 1985 royalty year fixed at $22.7 million per Clause 2A(2)(a)).
Deliver detailed royalty returns within three months after the end of each royalty year, or secure Ministerial extensions if required (Clause 2(5)(a), 2(5)(d)).

Prepare for Ministerial measurement, valuation and audit inspections

Develop and document measurement procedures and agree an f.o.b. valuation and measurement point with the Minister, or be ready to accept Ministerial determination if no agreement is reached (Schedule cl 1 definitions “f.o.b. valuation and measurement point”; Clause 2(9) inspection powers).
Ensure operational staff can provide authorised persons with reasonable assistance, and have procedures for record reproduction and controlled copying requests compliant with Clause 2(9)(b) and (c).

Prove eligibility for deduction categories

For capital assets transferred to the production unit after 30 June 1985, establish valuation evidence acceptable to the Minister or be prepared for Ministerial determination taking the eight criteria in the eligible capital expenditure definition into account (Schedule cl 1 “eligible capital expenditures”).
For cross‑border or multi‑facility costs (shared services, corporate overhead), prepare allocation methodologies and supporting time‑sheets or cost allocations demonstrating the proportion “directly and solely” attributable to the Barrow Island production unit or agree an allocation methodology with the Minister in advance (Clause 2(6)(c)-(d)).

Map arbitral availability and manage disputes proactively

Catalogue the specific discretions and identify which are subject to Clause 21(ga)/(gb) arbitration and which are excluded by explicit provisos in the definitions. For matters excluded from Clause 21 arbitration, prepare to litigate or rely on other contractual or statutory remedies; for matters still arbitrable, ensure timelines are tracked: the Lessee must give notice within 42 days after becoming aware of the exercise of an allegedly improper discretion if it seeks arbitration under Clause 21(gb) (Schedule cl 6(2)).
Where possible, resolve valuation and method issues with the Minister by agreement to avoid Ministerial determinations that may be hard to overturn in excluded contexts.

Monitor and manage accumulation rate exposure

The accumulation rate is linked to Commonwealth resource rent threshold concepts or to an agreed rate or arbitration‑determined rate (Schedule cl 1 definition “accumulation rate”). Because interest calculations and accumulated nett value use this rate, ensure treasury policies can accommodate variability and that disputes about the rate are anticipated in planning.

Prepare for assessment amendment and tax/revenue integrations

Keep tax, accounting and legal teams aligned because the Agreement’s eligible deductions and exclusions (e.g. exclusion of depreciation and profit taxes, interest, excise) interact with tax treatment and accounting classification. Maintain contemporaneous supporting documentation to defend against later Ministerial amendment within the seven‑year window (Clause 2(13)).
Coordinate with Commonwealth liaising processes to ensure that the required Commonwealth excise exemption and refund arrangements are secured and documented, since commencement of the Agreement is conditional on those certifications (Schedule cl 4 and cl 9).

Plan for transfers, acquisitions and change in ownership

If contemplating a sale, acquisition or assignment, model the impact of the full suite of obligations (provisional payments, required returns, audit evidence duties, inspection rights, and potential for amended assessments), and ensure the purchaser is scheduled to receive required notices under Clause 2(7)(b)(ii) (subject to Clause 9).
Consider securing indemnities, escrows or covenants addressing contingent liabilities from prior royalty years given the seven‑year amendment window and possible future amended assessments.

Parliamentary engagement if proposing variations

If the State or Lessee proposes an amendment to the Agreement under Clause 7, the Minister must lay the variation before Parliament and it may be disallowed within 12 sitting days (Schedule cl 7(2)-(3)). Factor parliamentary timelines and potential political risk into any planned amendments.

Operational checklist summary

Maintain tightly coded ledgers and contemporaneous justification for eligible deductions.
Agree or document measurement and valuation methodologies and keep auditor and statutory declaration processes timely.
Fund and schedule provisional payments and maintain cash reserves to meet interest exposure.
Prepare for Minister inspections and provide authorised persons with full cooperation and immediate access to records.
Map the scope of arbitration availability and preserve rights by giving timely notices when clause 21(ga)/(gb) relief is pursued.
Retain records for at least seven years and, where specific transactions carry fraud risk, indefinitely as appropriate.

Following these steps maps the Agreement’s textual duties into operational practice and reduces the principal compliance risks identified in the Act and the Schedule.

Barrow Island Royalty Variation Agreement Act 1985

Plain English Summary

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What it does

Current sections