Fuel Security (Fuel Security Services Payment) Rule 2021

This instrument, the Fuel Security (Fuel Security Services Payment) Rule 2021 (the Rule), prescribes the operational detail required to implement Part 3 and related parts of the Fuel Security Act 2021 (the Act). Mechanically, it does the following.

Defines which petroleum products qualify as FSSP fuels for the Act (s 5). Gasoline, diesel and kerosene are specified by reference to the Fuel Quality Standards Act 2000 (FQS Act) and to reporting categories in the Petroleum and Other Fuels Reporting Rules 2017 (POFR rules) (s 5(2)-(5)). Gasoline and diesel are split into the POFR reporting categories and gasoline is split by research octane number (RON) bands (s 5(3)-(4)). Kerosene must be reported as jet fuel and saleable for air transport (s 5(5)).
Sets the content and security requirements for applications for fuel security services payments (FSSP payments) (s 6). Applications must include corporate details, evidence of the refinery producing a majority of FSSP fuel (per s 7), historic or forward-looking evidence, risk mitigation plans, a nominated commitment end date in a prescribed range (quarter ending 30 June 2027 to quarter ending 30 June 2030), bank details and one of two forms of security: a deed of guarantee from the Australian controlling corporation or a bank guarantee (s 6(2)-(3)).
Prescribes eligibility requirements that must be met for approval by the Minister, including that FSSP fuels must be the majority of annual output at application time, and that the refinery’s operations involve transformation of crude and other feedstocks into the specified products (s 7). The Minister must be satisfied that the applicant has the capability and intention to refine FSSP fuels for the commitment period and that the security is sufficient (s 8).

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Fuel Security (Fuel Security Services Payment) Rule 2021

I, Angus Taylor, Minister for Energy and Emissions Reduction, make the following instrument.

Dated: 21 July 2021

Angus Taylor

Minister for Energy and Emissions Reduction

Contents

Part 1—Preliminary

1 Name

2 Commencement

3 Authority

4 Definitions

5 FSSP fuel

Part 2—Applications for fuel security services payment

6 Applications for fuel security services payment

Part 3—Eligibility decision

7 Requirements for refining of FSSP Fuel

8 General requirements to approve applications

Part 4—Commitment periods

9 Initial commitment period

10 Variation or termination of commitment period

Part 5—Payment of fuel security services payment

11 Circumstances when fuel security services payment is not payable

12 Rate of fuel security services payment

13 Determining quantity of FSSP fuel

14 Process for fuel security services payments

15 Publication of information

Part 6—Reporting and notification obligations

16 Reporting refinery operation—general

17 Reporting refinery operation—closure circumstances

18 Notification

Part 7—Repayment obligations

19 Waiver of debts and payment by instalments

20 Circumstances when repayment obligation does not apply

21 Partial repayment circumstances

22 Extension of period of cessation

Part 1—Preliminary

1 Name

This instrument is the Fuel Security (Fuel Security Services Payment) Rule 2021.

2 Commencement

This instrument commences on the day after it is registered.

3 Authority

This instrument is made under subsection 84(1) of the Fuel Security Act 2021.

4 Definitions

In this instrument:

Act means the Fuel Security Act 2021.

average is the mean of values.

bank means a body corporate that is an authorised deposit-taking institution for the purposes of the Banking Act 1959.

blendstock means a finished product imported to the refinery that is added to, or mixed with, a refined finished product produced at the refinery before it is sold.

Note: It does not include a feedstock transformed at the refinery into FSSP fuels and other products.

close, in relation to a refinery, means when the refinery ceases to refine all FSSP fuels under paragraph 50(1)(a) of the Act.

cpl means cents per litre.

EBITDA means earnings before interest, taxes, depreciation, and amortization.

EBIT means earnings before interest and taxes.

feedstock means crude oil, condensate, vegetable or animal oils and fats and other hydrocarbon inputs that are transformed at a refinery into petroleum products.

force majeure event—see subsection 20(3).

guidelines means the Fuel Security (Fuel Security Services Payment) Guidelines 2021 as in force from time to time.

FQS Act means the Fuel Quality Standards Act 2000.

investment grade credit rating means a credit rating from a recognised ratings agency, such as Standard and Poor’s, that is regarded in financial markets as of investment grade, typically a BBB- or higher grade.

material adverse change—see subsection 20(5).

milestone report means the milestone report under the guidelines and any subsequent reports of a similar nature.

POFR Act means the Petroleum and Other Fuels Reporting Act 2017.

POFR rules means the Petroleum and Other Fuels Reporting Rules 2017.

refinery operator means the person eligible for fuel security services payments for a refinery and any other entity with operational control of the refinery.

relevant independent analysis—see subsection 20(10).

related refinery entity means:

(a) the Australian controlling corporation for a refinery operator; and

(b) any other entity which owns the refinery; and

(c) any related body corporate of the refinery operator which is able to control or exert significant influence over the operation of the refinery.

RON means research octane number.

TRPPP means the Temporary Refinery Production Payment Program established by the Industry Research and Development (Temporary Refinery Production Payment Program) Instrument 2021.

5 FSSP fuel

(1) This section prescribes requirements to be met for FSSP fuels for the definition of “FSSP fuel” in the Act.

(2) Gasoline and diesel must be able to be supplied and used for road transport consistent with the FQS Act.

(3) Gasoline must be one of the following as reported under the POFR rules:

(a) regular unleaded—less than RON 95;

(b) premium unleaded—RON 95 to less than RON 98;

(4) Diesel must be one of the following as reported under the POFR rules:

(a) regular diesel;

(b) premium diesel.

(5) Kerosene must be:

(a) jet fuel as reported under the POFR rules; and

(b) saleable for air transport purposes in Australia.

Part 2—Applications for fuel security services payment

6 Applications for fuel security services payment

(1) For paragraph 39(3)(b) of the Act, applications must meet the requirements, and include the information, required by this section.

Note: Under subsection 39(2) of the Act the application must also include the person’s consent to the imposition of repayment obligations under section 50. Paragraph 39(3)(a) of the Act requires applications to be in a form (if any) approved by the Secretary under section 81 of the Act.

(2) An application must:

(a) set out the applicant’s contact details and Australian Company Number; and

(b) provide evidence that the applicant and refinery meet the requirements relevant to the Minister’s decision under subsection 40(2) of the Act; and

(i) if the refinery is not eligible under the TRPPP—historic information to support the refining of FSSP fuels meeting the requirements of section 5; or

(ii) if the refinery is new—a detailed explanation of how it will refine FSSP fuels meeting the requirements of section 5 and relevant regulatory approvals for the refinery; and

(d) outline the applicant’s operational and other risk mitigation policies and procedures, such as its insurance arrangements, that seek to mitigate the likelihood of the circumstances in section 20 arising; and

(e) include a security relating to the fulfilment of any requirements to repay fuel security services payment covered by subsection (3); and

(f) state the intended end date for the commitment period as the end of a quarter:

(i) no earlier than the quarter ending 30 June 2027; and

(ii) no later than the quarter ending 30 June 2030; and

(g) if any parameter for the calculation of fuel security services payments must be determined—include that parameter and the basis of its calculation; and

(h) include the applicant’s intention to cooperate with the Department in relation to the milestone report for fuel security services payments, including through access to appropriate financial information relating to the refinery’s margin and the preparation of the milestone report; and

(i) specify the applicant’s bank account and any other relevant details for receiving fuel security services payments.

(3) For paragraph (2)(e), one of the following forms of security must be included:

(a) a deed by the Australian controlling corporation for the applicant that:

(i) is enforceable by the Commonwealth of Australia; and

(ii) guarantees that the Australian controlling corporation will pay any debt due under section 50 of the Act by the applicant that has not been paid at the time it becomes due and payable; and

(iii) requires the provision of a replacement guarantee in the event that the Australian controlling corporation is, or is reasonably likely to be, unable to meet the obligations guaranteed under subparagraph (ii); or

(b) a bank guarantee issued by a bank covering the payment of any debt due under section 50 of the Act by the applicant that has not been paid at the time it becomes due and payable.

Part 3—Eligibility decision

7 Requirements for refining of FSSP Fuel

(1) For paragraph 40(2)(c) of the Act, refining of FSSP fuel must meet the requirements of this section.

(2) The refining must involve the transformation of crude oil, with other feedstocks, into gasoline, diesel and kerosene meeting the requirements to be an FSSP fuel.

Note: The crude oil and feedstocks may come from domestic or international sources. The requirements to be an FSSP fuel are set out in section 5.

(3) At the time of the application under section 39 of the Act, FSSP fuels must constitute a majority of the annual output of the refinery.

8 General requirements to approve applications

(1) For paragraph 40(2)(d) of the Act, applications must meet the requirements required by this section to be approved.

Note: Under subsection 40(2) of the Act the applicant must also be a constitutional corporation, refine FSSP fuel at a refinery in Australia and refine fuel consistent with the requirements in section 7.

(2) The Minister must not grant the application unless satisfied that:

(a) the applicant has the capability to refine FSSP fuel at the refinery and has the intention to do so for the duration of the commitment period; and

(b) the security provided for under subsection 6(3) is sufficient to mitigate the risks of non-repayment, having regard to the creditworthiness of the person providing the security and other relevant matters; and

(c) the applicant intends to cooperate with the Department in relation to the preparation of the milestone report for fuel security services payments, including through access to appropriate financial information relating to the refinery’s margin and the preparation of the milestone report; and

(d) the approval of the application would not result in two persons being eligible for fuel security services payments for the same refinery and quarter; and

(e) the applicant was not previously approved under section 40 of the Act for the same refinery.

(3) For paragraph (2)(b) and without limiting other relevant matters, an investment grade credit rating of the person providing the security is prima facie evidence of the sufficiency of the creditworthiness of the person providing the security.

Part 4—Commitment periods

9 Initial commitment period

For paragraph 41(1)(a) of the Act, a commitment period specified in a notice to a person under subsection 40(3) of the Act must end at the end of a quarter requested by the applicant in their application that is:

(a) no earlier than the quarter ending 30 June 2027; and

(b) no later than the quarter ending 30 June 2030.

10 Variation or termination of commitment period

(1) For subsection 41(3) of the Act, the requirements in this section are prescribed.

(2) A commitment period must not be varied or terminated other than as prescribed under subsection (3) or (4).

(3) If an application under subsection 41(2) of the Act is made to request a variation to extend a commitment period to 30 June 2030, the Minister must approve the application and extend the period to 30 June 2030 unless satisfied that the requirements of subsection 40(2) of the Act (other than paragraph 8(2)(e) of this instrument) are no longer met.

(4) If an application under subsection 41(2) of the Act is made to request a variation to terminate or shorten a commitment period to a date specified in the application, the Minister must approve the application and make the termination or variation if:

(a) the Minister is satisfied:

(i) information required to be reported by section 17 has been provided to the Minister; and

(ii) the circumstances for when repayment would not be required in section 20 would be met if the refinery closed on the last day of the varied or terminated commitment period; or

(b) all payments made under Part 3 of the Act in relation to the committed refinery that would be repayable under section 21 have been repaid to the Commonwealth (assuming the repayment day was the start of the 120 day period for that section and the period was not varied under this section) and no further fuel security services payments would be made to the applicant after the variation or termination; or

(c) the Minister is satisfied that the Act, this instrument or guidelines made under subsection 43(4) of the Act have been amended to materially reduce the payments under Part 3 of the Act in respect of the committed refinery in the 180 days before an application under subsection 41(2) of the Act to terminate or vary the period.

(5) The end date of a commitment period varied or terminated in accordance with subsection 10(3) may be before the date of the application under subsection 41(2) of the Act if requested in that application.

Part 5—Payment of fuel security services payment

11 Circumstances when fuel security services payment is not payable

(1) For paragraph 42(2)(c) of the Act, fuel security services payment is not payable to a person for a quarter in accordance with subsection (2) or (3).

(2) Fuel security services payment is not payable if:

(a) refining of fuel by the committed refinery during the quarter no longer meets the requirements of subsection 7(2); and

(b) any breach of the requirements of subsection 7(2) does not relate to a temporary cessation of the production of one or more FSSP fuels.

(3) Fuel security services payment is not payable if:

(a) if the person providing the security for subsection 6(3) previously had an investment grade credit rating—the rating is no longer an investment grade credit rating; and

(b) the person providing the security for subsection 6(3) is reasonably likely to be unable to meet the repayment obligations guaranteed by the security; and

(4) However, if subsection (3) applied to a quarter and an appropriate replacement security is subsequently provided to the Secretary, fuel security services payments are then payable for the quarters to which subsection (3) applied.

(5) For paragraph (3)(c) and subsection (4), an appropriate replacement security includes:

(a) a bank guarantee covered by paragraph 6(3)(b); or

(b) a guarantee provided in accordance with subparagraph 6(3)(a)(iii).

(6) A decision that fuel security services payment is not payable to a person for a quarter because of this section or subsection 42(2) of the Act is taken to be a reviewable decision under Division 2 of Part 5 of the Act, with the Secretary being the responsible person for that decision.

12 Rate of fuel security services payment

(1) For subsection 43(1) of the Act, the number of cents per litre for each FSSP fuel is:

(a) if the rate (R) worked out under subsection (2) is equal to or greater than 1.8—1.8 cpl; and

(b) if the rate (R) worked out under subsection (2) is between 0 and 1.8 cpl—that amount; and

(2) For subsection (1), the rate is given by the following formula:

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where:

R is the rate of the fuel security services payment in cpl for a quarter, rounded to two decimal places.

MMt is the margin marker for each month (t) in the quarter, determined under subsection (3).

(3) For subsection (2), MM for a month is given by the following formula:

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where:

FP is the assumed price of FSSP fuels and fuel oil applicable to the refinery for the month, based on an average price weighted by yield of each fuel, in cpl, determined under subsection (4).

CP is the average price of crude oil for the month, in cpl, converted to litres and Australian dollars, from the monthly “Kimanis (Asia close)” price published by S&P Global Platts (Platts code: AASCL00) in United States dollars per barrel.

BD is the basis differential, in cpl, representing the historical differences between the margin marker in the guidelines and the margins of the refinery either:

(a) specified in the guidelines for the refinery (and converted from dollars per barrel to cpl); or

(b) if not specified in the guidelines—determined by the Minister in approving an application under section 40 of the Act, taking into account the operating environment for each refinery.

SRF is the cost of shipping refined fuel from Singapore for the product mix of the refinery for the month, in cpl, determined under subsection (5).

SC is the cost of shipping crude oil from Indonesia for the month, in cpl, determined under subsection (6).

(4) For subsection (3), FP is given by the following formula:

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where:

f is the fuel types being:

(a) gasoline;

(b) diesel;

(d) fuel oil;

(e) marine fuel oil.

Pf is the price of the fuel type f for the month, in cpl, converted to Australian dollars and litres, from the monthly average price of the following:

(a) for gasoline—“Gasoline Unl 95 FOB Spore Cargo” published by S&P Global Platts (Platts code: PGAEZ00) in United States dollars per barrel;

(b) for diesel—“Gasoil 0.001% S (10 ppm) FOB Spore Cargo” published by S&P Global Platts (Platts code: AAOVC00) in United States dollars per barrel;

(c) for kerosene—“Jet Kero FOB Spore Cargo” published by S&P Global Platts (Platts code: PJABF00) in United States dollars per barrel;

(d) for fuel oil—“FO 380 CST 3.5% S FOB Spore Cargo” published by S&P Global Platts (Platts code: PPXDK00) in United States dollars per tonne;

(e) for marine fuel oil—“FOB Spore Marine Fuel 0.5% Cargo” published by S&P Global Platts (Platts code: AMFSA00) in United States dollars per tonne.

Note: The values in paragraphs (d) and (e) must first be converted from tonnes to barrels under paragraph (7)(c) before being converted to litres under paragraph (7)(b).

Yf is the yield of fuel type f for the refinery, expressed as a percentage of the volume of fuel type f from an equivalent volume of crude oil, either:

(a) specified in the guidelines for the refinery; or

(b) if not specified in the guidelines—determined by the Minister in approving an application under section 40 of the Act.

(5) For subsection (3), SRF is the amount given by the following formula (in United States dollars per barrel), converted to Australian dollars and litres and expressed in cpl:

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where:

CF is the Singapore – Australia freight cost for refined fuels for the month from the monthly average “Clean Singapore-Australia 30kt MR $/mt” price published by S&P Global Platts (Platts code: AAJPV00) in United States dollars per tonne of refined fuel.

f is the fuel types under subsection (4).

SV is a specific volume conversion for the fuel, in barrels per tonne, being the following:

(a) for gasoline—8.5;

(b) for diesel—7.45;

(d) for fuel oil—6.35;

(e) for marine fuel oil—6.35.

Y is the refinery’s yield of each fuel type f under subsection (4).

(6) For subsection (3), SC is given by the following formula (in United States dollars per barrel), converted to Australian dollars and litres and expressed in cpl:

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DF is the Indonesia – Australia freight cost for crude oil for the month from the monthly average “Dirty Indonesia-Australia 80kt $/mt” price published by S&P Global Platts (Platts code: TDABC00) in United States dollars per tonne of crude oil.

SV is a specific volume conversion for the crude oil, in barrels per tonne, being 7.67.

(7) For this section:

(a) an amount in United States dollars is converted to Australian dollars by multiplying the amount by the monthly average exchange rates published by the Reserve Bank of Australia for the month; and

(b) a barrel is converted to litres by multiplying the number of barrels by 158.987295; and

(c) a tonne is converted to barrels by multiplying the number of tonnes by the specific volume for the fuel in subsection (5); and

(d) if a monthly average is not published for a value, an average of daily published values in a month is calculated as the mean of the values for each day where any day without a published value is excluded from the calculation; and

(e) if S&P Global Platts modifies or ceases to publish a classification or code for a value, the most equivalent or similar published value must be used to determine that value.

(8) If the circumstance in paragraph (7)(e) arises, the Secretary must consult with each person eligible for fuel security services payments about the most equivalent or similar published value before first using that value to calculate fuel security services payments.

13 Determining quantity of FSSP fuel

For subsection 43(3) of the Act, the number of litres of FSSP fuel refined by a person in a quarter must:

(a) be measured consistently with requirements for the sale of those fuels in Australia and reporting of information relating to those fuels under the POFR rules; and

(b) not include the volume of any blendstocks; and

14 Process for fuel security services payments

(1) For section 45 of the Act, the fuel security services payment is payable for a quarter after the Secretary is satisfied with the volume of FSSP fuel refined at a committed refinery in the quarter meeting the requirements under sections 5 and 13 and reported under the POFR Act for the refinery.

(2) The payments are to be made:

(a) to the bank account nominated in the application; or

(b) if an authorised representative of the person provides updated bank account details—to that account.

(3) The Secretary must make payments under subsection (1) as soon as practicable, and no later than 30 days, after receiving the relevant information and becoming satisfied under that subsection.

15 Publication of information

For paragraph 46(b) of the Act, the Secretary must publish on the Department’s website the total amount of fuel security services payments for the preceding quarter within 14 days after those amounts are paid.

Part 6—Reporting and notification obligations

16 Reporting refinery operation—general

(1) For paragraph 47(2)(a) of the Act, a person must report:

(a) if the operation of the committed refinery does not meet the requirements of subsection 7(2) in the previous quarter—the reasons why these requirements were not met; or

(b) if there was no time in the quarter at which the person refined any FSSP fuel at the committed refinery—the reasons why this was the case; or

(c) if subsection 11(3) applies to a quarter—why the subsection applies and whether a replacement security is likely to be provided.

(2) For paragraph 47(2)(c) of the Act, any reports required under subsection (1) must be provided within 21 days of the end of the quarter.

(3) However, subsection (1) does not apply if the person has notified the Commonwealth under section 48 of the Act of an event that has the effect that the person will no longer be eligible for fuel security services payments for the rest of their commitment period.

Note: Additional reporting of the volume of FSSP fuel refined in each quarter is required under the POFR Act and POFR rules.

17 Reporting refinery operation—closure circumstances

(1) For paragraph 47(2)(a) of the Act, a person must provide a report with the following information if they consider that a circumstance has occurred where the obligation to repay under subsection 50(1) of the Act would not arise if the refinery closed or has already closed:

(a) the nature of the circumstance and why they consider the obligation to repay would not arise;

(b) the steps taken and proposed to be taken by the refinery operator and related refinery entities to prevent or limit the effect of the circumstance, including those outlined in the information provided under paragraph 6(2)(d), and why further steps were not or cannot be taken;

(c) the costs associated with addressing any force majeure event or material adverse change, including relevant supporting documentation of those costs;

(d) the relevant independent analysis required by paragraph 20(2)(c) or (4)(d);

(e) unless otherwise agreed with the Secretary, the data and information used to support the analysis provided under paragraph (d).

(2) For paragraph 47(2)(c) of the Act, the reports under subsection (1) must be provided as soon as practicable after the circumstance has arisen and the relevant independent analysis has been prepared.

18 Notification

(1) For paragraph 48(1)(f) of the Act, an event covered by subsection (2) is prescribed.

(2) A force majeure event or material adverse change has occurred, or is very likely to occur, that has the potential to result in the closure of the refinery.

(3) For paragraph 48(3)(c) of the Act, the notice must be provided by the later of:

(a) 14 days after the event occurs; or

(b) if under subsection (2) the impact of the force majeure event or material adverse change on the operation of the committed refinery is not clear—14 days after the person forms a conclusion that the event or change has the potential to result in the closure of the refinery.

Part 7—Repayment obligations

19 Waiver of debts and payment by instalments

A decision by the Secretary under paragraph 50(6)(b) or (c) of the Act must take into account, and be consistent with, the Public Governance, Performance and Accountability Act 2013 and relevant rules and guidelines under that Act.

20 Circumstances when repayment obligation does not apply

(1) For subsection 51(1) of the Act, this section prescribes circumstances in which the obligation to repay under subsection 50(1) of the Act does not apply.

Note: A person may also apply under subsection 41(2) of the Act to terminate their commitment period which would avoid the application of repayment obligations. If the circumstances in this section are met, the Minister can approve that termination under paragraph 10(4)(a). Decisions on applications to vary or terminate a commitment period are reviewable decisions under Division 2 of Part 5 of the Act.

Force majeure

(2) Repayment under subsection 50(1) does not apply if the Minister is satisfied that:

(a) the refinery is operationally unviable or commercially unviable as the result of a force majeure event that the refinery operator:

(i) could not have reasonably prevented; or

(ii) cannot reasonably limit the effect of;

notwithstanding the refinery operator having taken appropriate steps which a prudent, experienced and reasonable person in the circumstances of the refinery operator would have taken; and

(b) related refinery entities have not unreasonably stopped, or impeded the ability for, the refinery operator taking appropriate steps under paragraph (a); and

(c) relevant independent analysis is provided by the person subject to the repayment to the Minister to evidence paragraph (2)(a).

(3) For paragraph (2)(a), a force majeure event is one of the following events:

(a) fire, flood, earthquake, weather events or acts of God;

(b) war or other state of armed hostilities, act of terrorism, act of sabotage, national emergency, embargo, closure of federal, state or other administrative borders, or actions by customs;

(d) curtailment or failure of the supplies of feedstocks, blendstocks or raw materials from any of the refiner’s, or any of its suppliers’, sources of supply;

(e) equipment or mechanical breakdown, such as those leading to an unplanned shutdown;

(f) a restraint, restriction, direction or request by any government agency, body or department, court, tribunal, administrative authority or stock exchange;

(g) a strike, lockout, boycott, work ban or other industrial action (whether or not the refiner is party to it or would be able to influence or procure its settlement);

(h) an epidemic, pandemic or similar public health concern;

(i) any other event or circumstance impacting the operation of the refinery that is beyond the reasonable control of the refinery operator and related refinery entities.

Material adverse change

(4) Repayment under subsection 50(1) of the Act does not apply if the Minister is satisfied that:

(a) a material adverse change has occurred; and

(b) if the material adverse change is covered by paragraph (5)(a), (b) or (d)—the refinery operator has taken appropriate steps, before and after the change, which a prudent, experienced and reasonable person in the circumstances of the refinery operator would have taken to mitigate or otherwise address the consequences of the situation; and

(c) related refinery entities have not unreasonably stopped, or impeded the ability for, the refinery operator taking appropriate steps under paragraph (b); and

(d) relevant independent analysis is provided by the person subject to the repayment to the Minister to evidence:

(i) paragraph (4)(a); and

(ii) if paragraphs (4)(b) or (5)(a), (b), (c) or (f) apply—those paragraphs.

(5) For paragraph (4)(a), a material adverse change is one of the following circumstances:

(a) the refinery has operated continuously below a quarterly margin of 4.6 cents per litre (not taking into account fuel security services payments) for at least 9 months before a decision to close the refinery;

(b) the refinery operations have recorded losses of at least $60 million in a continuous period of 9 months or less prior to a decision to close the refinery;

Note: The occurrence of losses would take into account fuel security services payments and other support for the refinery, such as financial support provided by the Commonwealth government.

(d) the refinery and its employees have failed to make an enterprise agreement within the meaning of the Fair Work Act 2009 in circumstances where:

(i) the refinery (including its bargaining representatives) have met the good faith bargaining requirements in the Fair Work Act 2009; and

(ii) all dispute resolution processes under the Fair Work Act 2009 have been exhausted in an attempt to make the enterprise agreement; and

(iii) the decision to close the refinery is directly related to the failure to make an enterprise agreement;

(e) an amendment to the Act or this instrument that has the effect that fuel security services payments are no longer available to the refinery for the remainder of its commitment period;

(f) the Act or this instrument was amended to materially reduce the payments under Part 3 of the Act in respect of the refinery over the remainder of its commitment period in the 180 days before a decision to close the refinery.

Regulatory change event

(6) For paragraph (5)(c), a regulatory change event occurs if:

(a) there is a change to Commonwealth, State, Territory or local government regulatory settings (including relevant laws, subordinate legislation or regulatory approvals) that materially increases costs for the refinery; and

(b) the change is not a change to fuel quality standards that the refinery has been funded, or offered funding, by the Commonwealth to implement; and

Commercially unviable

(7) For subsection (2) and paragraph (6)(c), a refinery is commercially unviable if the continued operation of the refinery is reasonably likely to result in:

(a) the refinery operating continuously below a quarterly margin of 4.6 cents per litre (not taking into account fuel security services payments) for at least the next 9 months; or

(b) the refinery operations recording losses of at least $60 million within the next 9 months; or

Note: The expectation of losses would take into account fuel security services payments and other support for the refinery, such as financial support provided by the Commonwealth.

(c) the refinery operations not achieving a commercial return on investment (such that the net present value (NPV) of the asset would be less than zero over the refinery’s commitment period); or

(d) material ongoing losses that the Minister considers sufficient to make the refinery unviable from a commercial perspective.

(8) For subsections (5) and (7), losses means EBITDA minus normalised capital expenditure, where normalised capital expenditure means the average capital expenditure across a 5 year period (which ends at the end of the 9 month or less period under paragraph (5)(b) or the 9 month period under paragraph (7)(b), as applicable), and is pro rata adjusted to the relevant period of assessment.

Operationally unviable

(9) For paragraph (2)(a), a refinery is operationally unviable if it is not reasonably practicable for operational reasons to operate the refinery, or bring the refinery back into operation, on an ongoing basis in substantially the same manner as prior to the force majeure event.

Relevant independent analysis

(10) For paragraph (2)(c) and (4)(d), relevant independent analysis must include independent engineering, operational, market and financial analysis that is:

(a) prepared by appropriately qualified experts with access to:

(i) all relevant records of the refinery operator; and

(ii) EBIT and EBITDA for the refinery; and

(b) relevant and proportionate to the matters which need to be evidenced.

21 Partial repayment circumstances

(1) For subsection 51(2) of the Act, this section prescribes circumstances when an amount less than the total amount under paragraph 50(2)(a) of the Act is repayable and how to calculate that lesser repayable amount.

(2) A lesser amount calculated under subsection (3) is repayable, in the circumstances where the start of the 120 day period under subsection 50(1) of the Act occurs after 1 January 2022 and before 30 June 2030.

(3) The repayable amount (RA) for paragraph 50(2)(b) of the Act is given by the following formula:

View image in the official source

where:

RC is the days remaining in the commitment period for the committed refinery after the start of the 120 day period under subsection 50(1) of the Act.

CP is the total number of days in the commitment period for the committed refinery starting from the first day of the first quarter the person subject to subsection 50(1) of the Act was eligible for fuel security services payments for the refinery.

TP is the total amount of fuel security services payments paid to the person subject to subsection 50(1) of the Act in respect of the committed refinery.

22 Extension of period of cessation

(1) For section 52 of the Act, this section prescribes circumstances when the Secretary may extend the 120 day period mentioned in paragraph 50(1)(b) of the Act.

(2) The Secretary may extend the period if satisfied that:

(a) the refinery operator is taking, and will continue to take, reasonable steps to continue refining FSSP fuel at the refinery as soon as reasonably practicable; and

(b) the refinery is expected to restart refining FSSP fuel:

(i) within 60 days after the end of the period mentioned in paragraph 50(1)(b) of the Act; or

(ii) if essential maintenance or capital works need longer than the period in subparagraph (i)—as soon as reasonably practicable after that maintenance or capital works are completed.

(3) Without limiting subsection (2), if the refinery is conducting a scheduled maintenance turnaround notified to the Secretary in advance of its commencement, the Secretary may extend the period if satisfied that:

(a) the extension is appropriate to allow for the completion of the maintenance; and

(b) the refinery operator is expected to resume refining FSSP fuel at the refinery as soon as practicable after the completion of the maintenance.

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Fuel Security (Fuel Security Services Payment) Rule 2021

I, Angus Taylor, Minister for Energy and Emissions Reduction, make the following instrument.

Dated: 21 July 2021

Angus Taylor

Minister for Energy and Emissions Reduction

Contents

Part 1—Preliminary

1 Name

2 Commencement

3 Authority

4 Definitions

5 FSSP fuel

Part 2—Applications for fuel security services payment

6 Applications for fuel security services payment

Part 3—Eligibility decision

7 Requirements for refining of FSSP Fuel

8 General requirements to approve applications

Part 4—Commitment periods

9 Initial commitment period

10 Variation or termination of commitment period

Part 5—Payment of fuel security services payment

11 Circumstances when fuel security services payment is not payable

12 Rate of fuel security services payment

13 Determining quantity of FSSP fuel

14 Process for fuel security services payments

15 Publication of information

Part 6—Reporting and notification obligations

16 Reporting refinery operation—general

17 Reporting refinery operation—closure circumstances

18 Notification

Part 7—Repayment obligations

19 Waiver of debts and payment by instalments

20 Circumstances when repayment obligation does not apply

21 Partial repayment circumstances

22 Extension of period of cessation

Part 1—Preliminary

1 Name

This instrument is the Fuel Security (Fuel Security Services Payment) Rule 2021.

2 Commencement

This instrument commences on the day after it is registered.

3 Authority

This instrument is made under subsection 84(1) of the Fuel Security Act 2021.

4 Definitions

In this instrument:

The Rule operationalises a handful of core concepts that govern eligibility, payment and repayment.

FSSP fuel (s 5). The Rule narrows the Act’s definition into operational categories: gasoline (by RON bands and POFR reporting categories), diesel (regular or premium per POFR), and kerosene (jet fuel per POFR and saleable for air transport). This ties eligibility to Australia’s fuel quality framework (FQS Act) and to POFR reporting categories.
Commitment period (ss 9-10). The applicant nominates an end date for their commitment period within a bounded window: earliest quarter end 30 June 2027 and latest 30 June 2030 (s 6(2)(f), s 9). The Minister may extend or shorten the period only in prescribed circumstances (s 10), and approval to extend to 30 June 2030 is effectively mandatory unless the applicant no longer meets approval requirements (s 10(3)).
Security (s 6(3)). Applicants must provide a security to cover potential repayment obligations: either a deed by the Australian controlling corporation (with a replacement guarantee requirement) or a bank guarantee. The Minister must be satisfied that security is sufficient (s 8(2)(b)); an investment grade credit rating is prima facie evidence of sufficiency (s 8(3)).
Payment rate and margin marker (s 12). The Rule specifies a mechanistic margin formula that compares assumed product prices and freight-adjusted crude costs to derive a monthly MMt, averaged for the quarter and converted into a capped cpl rate (between 0 and 1.8 cpl). Inputs come from S&P Global Platts publications and RBA exchange rates, with prescribed unit conversions (s 12(3)-(7)). The formula explicitly includes a basis differential (BD) and shipping adjustments (SRF and SC).
Volume measurement (s 13). Eligible volume must be measured in accordance with POFR rules, exclude blendstocks, and exclude any volume that does not meet the Rule’s FSSP fuel requirements.
Repayment exceptions and relief (s 20). The Rule sets out two main avenues that can avoid repayment: force majeure and material adverse change. Each branch requires the Minister’s satisfaction and supporting independent analysis; both branches include detailed enumerated circumstances (s 20(2)-(5)). Material adverse change includes continuous low margins (below 4.6 cpl) for nine months or losses of at least $60 million in not more than nine months (s 20(5)(a)-(b)), as well as regulatory change events and enterprise bargaining failures directly causing closure (s 20(5)(c)-(d)).
Reporting, notification and review mechanics (ss 14-18, 11(6)). The Rule sets timelines for reporting, notification and for payments to be made, and treats some decisions as reviewable administrative decisions, with the Secretary accountable for certain decisions (s 11(6)).

These main concepts interlock: eligibility depends on production profile and security; payments depend on formulaic margins using specified market indices; reporting obligations and security preserve the Commonwealth’s capacity to seek repayment; and exemptions to repayment are tightly defined, requiring independent evidence and Ministerial satisfaction.

Identify the players, their roles and who pays.

Applicants/Refinery operators. The primary affected parties are constitutional corporations that operate refineries in Australia and intend to receive FSSP payments (ss 6-8). An applicant must be the refinery operator (or the person eligible for payments) and must demonstrate the capacity and intention to refine qualifying FSSP fuels for the commitment period (s 8(2)(a)). At application time FSSP fuels must be the majority of the refinery’s annual output (s 7(3)).
Australian controlling corporations and related entities. The Rule requires either a guarantee from the Australian controlling corporation or a bank guarantee as security for potential repayment obligations (s 6(3)). The Rule defines related refinery entities and the Australian controlling corporation for the purposes of guarantees (Definitions). Related entities must not unreasonably impede mitigation steps in repayment-relief assessments (s 20(2)(b), (4)(c)).
Commonwealth (Minister and Department/Secretary). The Minister decides approval of applications and variation/termination of commitment periods (s 8, s 10). The Secretary administers payments, determines satisfaction with volumes and payment triggers (s 14(1)), makes decisions that are reviewable (s 11(6)), publishes total quarterly payments (s 15), and receives reports and notices under ss 16-18. The Secretary also has discretions to extend cessation periods (s 22) and to waive or accept instalment arrangements for repayments consistent with PGPA Act (s 19).
Financial institutions. Banks issuing guarantees are a named permitted form of security (s 6(3)(b)); investment grade credit ratings of security providers are treated as prima facie evidence of sufficiency (s 8(3)). Therefore, banks and rating agencies are implicated in the security architecture.
Suppliers and markets. The Rule references international price series and freight indices (S&P Global Platts), and requires freight and price conversions (s 12). While not direct parties, global crude and refined fuel markets, and freight markets in the Singapore-Australia and Indonesia-Australia corridors, materially affect payment rates (s 12(3)-(6)).
Employees and unions. The Rule contemplates enterprise bargaining failures as a material adverse change that can excuse repayment (s 20(5)(d)). Therefore, workforce bargaining outcomes at refineries intersect with repayment risk.

Who pays. The Commonwealth funds FSSP payments under Part 3 of the Act; recipients are refinery operators. If the recipient later becomes subject to the repayment obligation (s 50 of the Act), the applicant or guarantor will be liable, and the Rule prescribes security and repayment mechanics (s 6, ss 19-22). Repayment relief is possible but subject to tests (s 20). The measure therefore transfers financial outlays from the Commonwealth to refineries on the basis of eligibility, with the Commonwealth retaining recourse via security and repayments.

This section summarises the operational duties imposed by the Rule and the corresponding rights and decision-making powers.

Duties imposed on applicants/refinery operators

Application content and security (s 6). Applicants must provide detailed evidence about refinery capability, historic or projected production of FSSP fuels, operational risk mitigation policies, cooperation with the Department’s milestone report, bank account details and a security to cover repayment obligations (ss 6(2)(a)-(i), 6(3)).
Production profile (s 7). At application time, FSSP fuels must be a majority of the refinery’s annual output and refining must be transformation of crude and feedstocks into gasoline, diesel and kerosene that meet s 5 standards (s 7(2)-(3)).
Reporting (ss 16-17). Quarterly reporting obligations: reasons for failing to meet s 7(2) requirements, reasons for not refining FSSP fuel in a quarter, and explanations if s 11(3) (security downgrade) applies (s 16). In closure-related circumstances, operators must provide detailed reports including independent analysis, costs, mitigation steps and supporting data as soon as practicable (s 17). Notices of force majeure or material adverse change that could lead to closure must be given within 14 days (s 18).
Accurate measurement and POFR compliance (s 13). Eligible volumes must be measured consistent with POFR rules; blendstocks and non-FSSP volumes are excluded (s 13(1)).
Cooperation in milestone reporting (ss 6(2)(h), 8(2)(c)). Applicants must cooperate with the Department and allow access to financial information about refinery margins for the milestone report.

Duties on the Commonwealth (Minister and Secretary)

Decision-making on applications (s 8). The Minister must be satisfied of specified matters before approving an application, including capability, intention, sufficiency of security, uniqueness of eligibility for a refinery, and that the applicant was not previously approved for the same refinery (s 8(2)).
Payment timing and publication (ss 14-15). The Secretary is obliged to make payments as soon as practicable and no later than 30 days after receiving the required information and being satisfied (s 14(3)); the Secretary must publish total quarterly payments within 14 days of payment (s 15).
Reviewability (s 11(6)). A decision that payments are not payable for a quarter (under s 11 or s 42(2) of the Act) is reviewable administrative action with the Secretary as the responsible person.
Extension discretion (s 22). The Secretary has an administrative discretion to extend the 120 day cessation period in specified circumstances, such as reasonable expectation of restart or scheduled maintenance.
Repayment waivers/instalments consistent with PGPA (s 19). The Secretary’s decisions on waiving debts or accepting instalment payments must take account of public financial law (s 19).

Rights and protections

Review rights for non-payment (s 11(6)). Operators can seek review of decisions that payments are not payable, with the Secretary responsible for those decisions.
Ministerial determinations subject to statutory tests. Applicants can seek variation or termination of commitment periods under s 41 of the Act, but the Rule prescribes when the Minister must approve (s 10).
Repayment exceptions (s 20). Operators who can demonstrate force majeure or material adverse change supported by independent analysis may be exempt from repayment obligations under s 50 of the Act.
Partial repayment calculation (s 21). If closure occurs in certain time windows, a formula reduces the total repayable amount proportionate to days remaining in the commitment period.

Decision-makers and thresholds

Ministerial decision for approvals and commitment changes (ss 8, 10). The Minister must be satisfied that the statutory criteria are met before granting approvals or varying/terminating commitment periods.
Secretary’s operational determinations (ss 11(6), 14, 15, 22). The Secretary implements payments, assesses requirements for payment, handles publication, and exercises certain discretions related to cessation extensions and administrative repayment decisions.

In short, the Rule creates conditional rights to payments tied to production and reporting duties, backed by security and subject to Ministerial and Secretary oversight, while also creating narrowly defined relief pathways from repayment obligations subject to independent expert evidence.

The Rule embeds enforcement through payment denial, repayment obligations and reviewable administrative processes rather than criminal penalties. Key enforcement mechanisms are as follows.

Payment denial

The Secretary can refuse to pay for a quarter where the committed refinery ceases to meet the refining requirements of s 7(2) and the breach is not a temporary cessation, or where the security provider’s investment grade rating is lost and no replacement security is provided (s 11(2)-(3)). This operates as an administrative enforcement tool: payments can be suspended or withheld until conditions are rectified (s 11(4)).

Repayment obligations and security enforcement

The Rule requires applicants to provide security in the form of a controlling corporation’s deed or a bank guarantee to secure the repayment obligation under s 50 of the Act (s 6(3)). If repayment is triggered by closure or cessation under s 50, the Commonwealth can call on that security or pursue the debtor for the repayment amount as provided by the Act. The Rule also prescribes that the Minister/Secretary can consider waivers under s 50(6) consistent with the PGPA Act (s 19).
Partial repayment mechanics. If closure occurs in prescribed windows, the Rule provides a formula to calculate a lesser repayable amount, which determines the quantum the Commonwealth may enforce (s 21).

Reviewability and administrative review

Certain decisions are reviewable administrative decisions under Division 2 of Part 5 of the Act. In particular, a decision that payments are not payable for a quarter because of the Rule or subsection 42(2) of the Act is reviewable, with the Secretary being the responsible person (s 11(6)). Decisions under the Act to grant, vary or terminate approval are reviewable (notes at ss 6, 10, 20), and the Rule’s procedural requirements interact with those review pathways.

Reporting and notice obligations

Failure to meet reporting or notification obligations in ss 16-18 could affect eligibility and trigger the Secretary or Minister to take enforcement action, such as treating the lapse as a non-temporary cessation and withholding payments (s 11(2)). The Rule does not provide a separate penalty structure for late reports; the remedial approach is administrative (loss of payment, possible repayment triggers).

Discretion subject to public law constraints

The Secretary’s decisions on waivers and instalment arrangements must be consistent with the Public Governance, Performance and Accountability Act 2013 and its rules and guidelines (s 19). This creates an administrative law constraint but not an enforcement escalation beyond civil recovery and administrative review.

No criminal sanctions in the Rule

The Rule prescribes no criminal offences or fines; enforcement is focused on administrative denial of payments, recovery of payments through security or the repayment obligation under s 50 of the Act, and review processes.

Practical enforcement pathways

Where repayment is due and security is inadequate, the Commonwealth can rely on bank guarantees or guaranteed obligations from the Australian controlling corporation (s 6(3)). The Rule requires the replacement of guarantees if the guarantor’s creditworthiness declines (s 11(3)-(5)) and makes the absence of replacement security a ground to withhold payments (s 11(3)).
In closure circumstances, the Rule places evidentiary requirements on operators (independent analysis, cost data) to avoid repayment (s 17, s 20). Failure to provide satisfactory evidence may result in the repayment obligation crystallising and the Commonwealth enforcing recovery against security or the operator.

Therefore, enforcement under the Rule is primarily civil-administrative: withholding of payments, recovery of funds, reliance on contractual guarantees and administrative review, constrained by PGPA obligations for waiver decisions.

The Rule deliberately links to several existing legal and regulatory regimes. It uses cross-references and external benchmarks to determine eligibility, measurement, and evidentiary standards. Key interactions:

Fuel Quality and reporting regimes

Fuel Quality Standards Act 2000 (FQS Act). The Rule requires that gasoline and diesel be supplied and usable for road transport consistent with the FQS Act (s 5(2)). This ties eligibility to compliance with the national fuel quality regime and ensures qualifying fuels meet domestic legal product standards.
Petroleum and Other Fuels Reporting Act 2017 (POFR Act) and POFR rules. The Rule adopts POFR reporting categories as the basis for defining gasoline, diesel and kerosene for FSSP purposes (s 5(3)-(5)). Volume measurement for payments must be consistent with POFR reporting requirements (s 13(1)(a)), and the Secretary’s satisfaction that volumes meet s 5 and s 13 depends on POFR reporting (s 14(1)). The Rule therefore leverages existing reporting infrastructure and statutory definitions for fuel sales and inventory.

Industrial relations law

Fair Work Act 2009. The Rule treats failure to make an enterprise agreement, after good faith bargaining and exhaustion of dispute resolution, as a potential material adverse change that can exempt repayment where the decision to close is directly related to that failure (s 20(5)(d)). This embeds enterprise bargaining outcomes within the repayment relief framework and makes industrial relations outcomes a factor in repayment and closure assessments.

Public finances

Public Governance, Performance and Accountability Act 2013 (PGPA Act). Decisions by the Secretary to waive debts or accept instalment payments must be consistent with the PGPA Act and its rules (s 19). That cross-reference imports public finance governance and accountability constraints on waiver decisions and may limit discretion where public resources are at stake.

Platts indices and Reserve Bank publication

International price and freight indices published by S&P Global Platts are incorporated as primary inputs to the margin and rate calculations (s 12(3)-(6)). The Rule also depends upon Reserve Bank of Australia monthly average exchange rates for currency conversions (s 12(7)(a)). If Platts changes or ceases an index, the Rule requires the Secretary to consult with eligible persons for a substitute (s 12(7)(e)-(8)). This externalises part of the methodology to private-sector market data providers and the RBA.

Fuel Security Act 2021

The Rule is made under subsection 84(1) of the Act and operationalises multiple Act provisions: application requirements (s 39-40 of the Act), commitment periods (s 41), payment triggers and rates (s 42-45, s 43 formulas), repayment obligations (s 50-52), reporting and notification (ss 47-48) and reviewability (Division 2 of Part 5 of the Act). The Rule therefore must be read alongside the Act for full legal effect.

Temporary Refinery Production Payment Program (TRPPP)

The Rule references the TRPPP (defined in the Definitions), distinguishing applicants eligible under TRPPP from those not eligible and requiring historic information for non-TRPPP refineries (s 6(2)(c)(i)). This indicates the Rule is designed to interact with, and not duplicate, other government refinery support programs.

Other statutory regimes

Administrative law and review. Several decisions under the Rule are expressly reviewable (s 11(6) and notes referencing Division 2 of Part 5 of the Act). Administrative law principles and internal departmental review processes will thus apply to decisions under the Rule.

Overall, the Rule integrates with existing fuel regulatory architecture (FQS Act, POFR Act), public finance law (PGPA Act), industrial relations law (Fair Work Act), and relies on internationally published market indices. These links determine measurement standards, evidentiary thresholds and constraints on discretion.

The Rule text supplied is a single instrument dated 21 July 2021 and made under subsection 84(1) of the Fuel Security Act 2021 (preamble). The instrument includes a reference to guidelines that may be in force from time to time (Definitions, “guidelines means the Fuel Security (Fuel Security Services Payment) Guidelines 2021 as in force from time to time”), establishing a subordinate instrument pathway for details to be updated without amending the Rule.

Within the instrument itself:

Contingency for updates to external indexes. Section 12(7)(e) contemplates S&P Global Platts modifying or ceasing publication of classifications or codes and requires use of the most equivalent published value; the Secretary must consult eligible payment recipients before first using a substituted value (s 12(8)). That provides a practical mechanism to adapt to external data-provider changes without amending the Rule.
Guidelines and Ministerial determinations. The Rule references guidelines (Definitions) and gives the Minister discretion to specify basis differentials, yields and other refinery-specific parameters in approving applications (s 12(3)(BD), s 12(4)(Yf)). That creates a route to affect substantive parameterisation through approval processes and guidelines which can change over time without necessarily amending the Rule.
Interaction with amendments to the Act. The Rule contemplates that amendments to the Act or the instrument itself that materially reduce payments may be a ground for terminating or shortening commitment periods (s 10(4)(c), s 20(5)(e)-(f)). This anticipates a legal interaction where changes to higher-level law alter rights under existing commitments and provides a mechanism to effect commitment changes if the statutory or instrument environment shifts.

No further amendment history such as subsequent variations, repeal or replacement clauses is contained in the supplied text. For an up-to-date amendment history a practitioner must consult the Commonwealth legislation register for any subsequent instruments, modifications to the guidelines, or notices by the Secretary or Minister that change parameter settings, yields, basis differentials or other ministerial determinations referenced in the Rule.

Practical implication for users

The Rule is designed with delegated instruments and administrative instruments in mind (guidelines, ministerial approvals and secretary determinations). This means many detailed parameters are likely specified or updated outside the Rule itself, through guidelines or approval letters. Monitoring those subordinate instruments and any changes to the Act is required to understand current operation.
The Rule includes mechanisms that permit operational continuity when third-party price publishers change methodology (s 12(7)-(8)). Nevertheless, any substantive change to the Platts inputs or the guideline parameters could materially change payment calculations for recipients and therefore will effectively function as an amendment in economic effect.

The instrument text supplied does not contain any judicial decisions or cited cases. It does not mention litigation or court interpretations. The Rule does establish a network of administrative decisions that are reviewable under Division 2 of Part 5 of the Act (see the notes at ss 6, 10 and s 11(6)), but no cases are named or described in the instrument itself.

What is observable from the Rule about potential litigation touchpoints

Reviewable decisions. The Rule explicitly makes certain decisions reviewable: a decision that fuel security services payment is not payable for a quarter is a reviewable decision under Division 2 of Part 5 of the Act, with the Secretary as the responsible person (s 11(6)). Decisions by the Minister to grant, refuse, vary or terminate an approval under the Act are reviewable under the Act (notes to ss 6 and 10). Those review pathways create the likely judicialisation points: administrative review, merits review and potentially judicial review in the Federal Court if jurisdictional error or denial of procedural fairness is alleged.
Discretionary tests amenable to challenge. The Rule requires Ministerial and Secretary satisfaction in numerous places (s 8, s 10, s 11(6), s 20). Those satisfactions rest on facts and evidence, including “relevant independent analysis” and whether an entity took “appropriate steps” a prudent person would take (s 20(2)(a)-(b), (4)(b)). These standards are fact-intensive and could be subject to merits review or judicial review challenges based on procedural fairness, reasonableness or failure to take relevant considerations into account.
Complex quantitative formulae. The payment rate is determined by a multi-step formula using external indices and conversions (s 12). Disputes could arise over index selection or conversion methods, particularly where S&P Global Platts makes changes and the Secretary selects an “equivalent” index (s 12(7)(e)-(8)). Affected parties might seek review of the Secretary’s determination about the most equivalent value if they argue it departs from the Rule’s intention.
Repayment relief evidentiary standards. The Rule requires “independent engineering, operational, market and financial analysis” from qualified experts with access to all relevant records to evidence force majeure or material adverse change (s 20(10)). There is a risk of dispute about sufficiency, scope and reliability of such reports, creating another litigation or review pathway.

Since the instrument itself contains no litigation history, practitioners should track administrative review determinations under the Act and subsequent judicial proceedings interpreting the Rule’s satisfaction thresholds, formula inputs and repayment relief tests for any developing case law.

This section flags specific operational, evidential and discretional traps in the Rule, grounded in its text.

Commitment end-date window and lock-in. Applicants must nominate an end date that is the end of a quarter no earlier than 30 June 2027 and no later than 30 June 2030 (s 6(2)(f), s 9). This fixes a long-term commitment horizon and can bind applicants to a multi-year schedule; the Minister can approve an extension to 30 June 2030 unless requirements are no longer met (s 10(3)). Practitioners should note the lack of flexibility to choose earlier end dates outside the prescribed window unless specific termination conditions are met (s 10(4)).
Security requirement and replacement triggers. Applicants must include either a controlling corporation deed or a bank guarantee (s 6(3)). If the guarantor previously had an investment grade credit rating and then loses it, payments can be withheld until replacement security is provided (s 11(3)-(5)). This creates counterparty risk: eligibility and payment continuity hinge on the ongoing creditworthiness of the guarantor or availability of a bank guarantee.
Payments capped at 1.8 cpl and floor at 0. The Act’s rate formula is capped at 1.8 cpl and floored at 0 cpl irrespective of margin calculations (s 12(1)). For refineries with low margins, this cap may limit support. The calculation is sensitive to international index movements, freight and yields; small changes in these inputs may not produce payments above the cap.
Reliance on external market data and conversion rules. The calculation relies heavily on S&P Global Platts and RBA published averages and specific conversion factors (s 12(3)-(7)). If Platts changes an index, the Secretary can select the most equivalent published value after consultation (s 12(7)(e)-(8)). Disputes may arise over whether a selected substitute is truly equivalent and the appropriate conversions.
POFR measurement and exclusion of blendstocks. Volumes eligible for payment must be measured in accordance with POFR rules and exclude blendstocks (s 13). Where refineries rely on imported blendstocks (or branded product) mixed with local output, careful separation is required. Reporting errors or differing interpretations of blendstock classification could reduce eligible volumes.
Reporting and timing risks. The Secretary must be satisfied before making payment, and payments must be made no later than 30 days after that satisfaction (s 14(1),(3)). However, the Rule ties the Secretary’s satisfaction to reporting under the POFR Act and the Department’s milestone reporting process (ss 6(2)(h), 14(1)). Administrative delays in obtaining or verifying information may delay payments even if technically payable.
Repayment relief high evidentiary bar. To avoid repayment on closure, an operator must satisfy the Minister that closure was caused by force majeure or a material adverse change and provide “relevant independent analysis” by qualified experts with access to records and EBIT/EBITDA (s 20(2),(10)). The Rule insists on both operational and financial analysis, and that related entities have not unreasonably impeded mitigation steps (s 20(2)(b)). The evidentiary and access requirements may be costly and time-consuming, and confidentiality issues with third-party records could complicate compliance.
Material adverse change thresholds numeric and forward-looking. The Rule uses bright-line financial tests: continuous quarterly margin below 4.6 cpl for nine months or losses of at least $60 million over a period of nine months or less (s 20(5)(a)-(b)). It also defines commercial unviability prospectively using the same thresholds over the next 9 months (s 20(7)). Utilities and accountants must ensure calculations of margin and losses conform to the Rule’s definitions (losses = EBITDA minus normalised capex over a five-year average, pro rata) (s 20(8)). Miscalculation risks producing adverse repayment outcomes.
Enterprise agreement path to repayment relief is narrow. The Rule permits enterprise bargaining failure as a material adverse change only when good faith bargaining requirements are met, dispute resolution exhausted and closure decision is directly related to the bargaining failure (s 20(5)(d)). This is a narrow and fact-specific pathway requiring documentation of bargaining conduct and outcomes.
Interaction with amendments and policy changes. If the Act or instrument is amended to materially reduce payments, the Rule provides mechanics for terminating or shortening commitments (s 10(4)(c), s 20(5)(e)-(f)). Operators should be alert to legal or policy changes that alter payment streams, especially within 180 days prior to an application to vary or terminate.
Publication of total payments, but not per-recipient details. The Secretary must publish total amounts of payments per preceding quarter on the Department’s website within 14 days after payments (s 15). The Rule does not require publication of recipient-level detail, but public disclosure of totals may still attract political or market attention.
Reviewability: timing and grounds. Decisions that payments are not payable are reviewable (s 11(6)). Applicants should be prepared to collate evidence and understand review windows; administrative review strategy may be necessary where withholding of payments would cause cashflow stress.

These operational frictions are grounded in the Rule’s text. Practitioners should map the interdependencies: application content and security (s 6), measurement and reporting (s 13-14), payment-rate inputs (s 12), and the repayment relief evidentiary matrix (s 20).

This section gives concrete steps, document checklists and operational practices derived directly from the Rule to help an applicant or compliance officer prepare and satisfy obligations.

Pre-application and application stage

Confirm corporate status and refinery profile (s 6(2)(a), s 7(3)).
- Ensure the applicant is a constitutional corporation and identify the Australian Company Number.
- Compile production data demonstrating that FSSP fuels constitute a majority of the refinery’s annual output at the time of application (s 7(3)). Use POFR reporting data to substantiate volumes (s 5, s 13).
Prepare product specification evidence (s 5, s 6(2)(c)).
- For gasoline and diesel, map refinery products to POFR reporting categories and verify RON bands for gasoline (s 5(3)-(4)).
- For kerosene, document that product is reported as jet fuel in POFR and is saleable for air transport in Australia (s 5(5)).
Collect historic operational data or build a forward plan for new refineries (s 6(2)(c)).
- If not eligible under the TRPPP, include historic information to support past refining of FSSP fuels (s 6(2)(c)(i)).
- If new, provide detailed explanations of planned refining processes and regulatory approvals (s 6(2)(c)(ii)).
Compile risk mitigation and insurance material (s 6(2)(d), s 20(2)(a),(b)).
- Document operational risk policies, insurance arrangements, maintenance regimes and contingency plans addressing force majeure, equipment breakdown and supply chain interruptions.
Decide security form and arrange guarantee (s 6(3)).
- Arrange a deed of guarantee from the Australian controlling corporation that satisfies enforceability and replacement guarantee requirements, or obtain a bank guarantee from an authorised deposit-taking institution (s 6(3)(a)-(b)).
- Prepare to evidence the creditworthiness of the guarantor; an investment grade rating is prima facie evidence that security is sufficient (s 8(3)).
Nominate commitment end date and bank details (s 6(2)(f), s 6(2)(i)).
- Choose an end-of-quarter date between the quarter ending 30 June 2027 and quarter ending 30 June 2030 inclusive (s 6(2)(f), s 9).
- Provide bank account details for payments and identify any authorised representatives.
Identify parameters for payment calculation and ensure transparency (s 6(2)(g), s 12(3)-(6)).
- If any parameter for the calculation must be determined (e.g. BD or yields), include the parameter and calculation basis in the application (s 6(2)(g)).
- Be prepared to provide yields (Yf) or accept Ministerial determination if not specified in guidelines (s 12(4)).

Operational compliance during commitment period

Maintain POFR-compliant measurement and records (s 13(1)).
- Measure volumes consistent with POFR rules; clearly segregate and exclude blendstocks and any product not meeting FSSP fuel definitions (s 13(1)(a)-(c)).
- Retain supporting documentation (loading records, custody transfer receipts, POFR submissions) to support Secretary’s satisfaction for payment (s 14(1)).
Regular reporting and notifications (ss 16-18).
- Prepare quarterly reports within 21 days after the quarter ends if refinery operation did not meet s 7(2) or if there were periods with zero FSSP refining (s 16(2)).
- If an event that may lead to closure occurs (force majeure or material adverse change), notify the Secretary within 14 days as required (s 18(3)). If uncertain, monitor and provide notification within 14 days after forming the view that the event could result in closure (s 18(3)(b)).
Cooperate with milestone reporting and Department access (ss 6(2)(h), 8(2)(c), 17(1)(d)-(e)).
- Provide timely access to financial information about margin and other data required for milestone reports; maintain transparent accounting of EBIT, EBITDA, and capital expenditure so independent analysis can be prepared if necessary (s 20(10)(a)(ii)).
Manage guarantor creditworthiness and replacement security (s 11(3)-(5)).
- Monitor guarantor credit ratings and be ready to provide a replacement bank guarantee or replacement controlling corporation guarantee if the guarantor’s investment grade rating is lost (s 11(3)-(5)).
- If replacement security is not provided and payments are withheld, prepare to submit the new security promptly to restore payment eligibility (s 11(4)).

Payment and disputes

Timing for payments (s 14).
- Ensure the Department receives the POFR reporting and any other evidence the Secretary requires; payments must be made as soon as practicable and no later than 30 days after the Secretary is satisfied (s 14(3)).
- Plan cashflow recognising periodic verification steps and potential administrative delays.
Prepare for administrative review (s 11(6)).
- If payments are withheld, promptly consider internal review or review under the Act. Keep contemporaneous records demonstrating compliance with production definitions, reporting and security adequacy to support review.

Closure and repayment relief

Evidence collection for force majeure or material adverse change (s 20).
- If closure is contemplated or occurs, commission independent engineering, operational, market and financial analyses from appropriately qualified experts with access to records and EBIT/EBITDA as required by s 20(10). Ensure reports are timely and proportionate.
- Document the steps taken to mitigate impacts and why further steps were not available (s 17(1)(b)); collect cost documentation (s 17(1)(c)).
Calculating losses and margin. Ensure accounting conforms to Rule definitions (s 20(8)).
- Losses = EBITDA minus normalised capital expenditure (normalised capex is the average across a five-year period ending at the assessment date, pro rata adjusted). Maintain capex records with year-by-year figures to permit the five-year average calculation.
Partial repayment mechanics (s 21).
- If closure occurs after the start of the 120 day period and within the specified window (after 1 January 2022 and before 30 June 2030), calculate repayable amount using the RA formula: RA = TP × (RC/CP), where RC is days remaining and CP is total days in the commitment period (s 21(3)). Track TP (total payments made) precisely.

Governance and record-keeping

Document retention and access. The Rule assumes access to “all relevant records” for independent analysis (s 20(10)(a)(i)). Maintain contemporaneous, auditable records for production volumes, feedstock sourcing, freight invoices, price hedges, yields, maintenance schedules, enterprise bargaining documents, insurance claims and financial statements (EBIT, EBITDA, capex). Prepare confidentiality and data-sharing arrangements for independent experts to access records suitably.
Liaison with the Department. Proactively engage with the Department in respect of guideline releases, milestone reports and any consultations required under s 12(8) if external index changes occur. Early engagement reduces friction at payment-authorisation time.
Legal and financial advisors. Use counsel and accountants to verify that application materials, security deeds and financial analyses align with the Rule’s technical definitions and numeric tests (e.g. margin thresholds, conversions, yield definitions).
Monitor law and guideline changes. Track updates to the Fuel Security (Fuel Security Services Payment) Guidelines 2021 and any amendments to the Act or Rule that could affect payment calculations, security or repayments (Definitions; s 10(4)(c), s 20(5)(e)-(f)).

Following these steps, grounded in the Rule’s sections, will position a refinery operator to meet the administrative, evidential and financial obligations required to apply for, receive, and, if necessary, justify exceptions to repayment of FSSP payments.

Fuel Security (Fuel Security Services Payment) Rule 2021

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What it does

Current sections