Petroleum (Offshore) Act 1982

The Act directly affects companies and individuals who seek to explore for petroleum or carry out petroleum recovery operations in waters adjacent to New South Wales. It also affects pipeline operators who wish to transport petroleum through the adjacent area.

State government officers and public servants who are delegated functions by the NSW Minister as Designated Authority are subject to the Act. Inspectors appointed under section 126 must carry their certificates and comply with procedures governing exercise of their powers.

Property owners, contractors and workers on structures, vessels, installations and aircraft in the adjacent area for petroleum purposes are subject to NSW law extended by Part 3.

No exploration without a permit (section 20): A person must not explore for petroleum in the adjacent area except under and in accordance with a permit, or as otherwise permitted by Part 4. The maximum penalty is 500 penalty units or five years imprisonment, or both.

No production without a licence (section 40): A person must not carry out operations for the recovery of petroleum in the adjacent area except under and in accordance with a licence, or as otherwise permitted by Part 4. The same maximum penalty applies.

Work programme compliance: Every exploration permit is subject to work programme conditions requiring the permittee to carry out specified work and expenditure. Permittees must report significant petroleum discoveries to the Minister and comply with ministerial directions given following discovery (sections 34 to 36).

Royalty obligations: Under section 143, permittees, lessees and licensees must pay royalty on all petroleum recovered in their area. Royalty periods run monthly from the commencement date of the title. Late payment attracts a statutory penalty of one-third of one per cent per day on the unpaid amount under section 141, and the debt is recoverable as a debt due to the Crown.

False statements (section 176): It is an offence punishable by 100 penalty units to make a statement known to be false or misleading in a material particular in connection with fee or transfer matters under the Act.

Pipeline operators (Division 4): Pipeline licensees must not cease operating a pipeline without the written consent of the Minister (section 98). Failure carries a maximum penalty of 500 penalty units or five years imprisonment.

The Minister holds extensive discretionary powers under the Act. The Minister may invite applications for permits by Gazette notice (section 21) or grant a permit without invitation under section 25. The Minister may refuse a permit to any applicant after receiving an application, or grant a permit subject to conditions. The Minister may extend permit terms, cancel or suspend permits, and require permit holders to surrender blocks or provide information.

For retention leases, the Minister must be satisfied that the petroleum discovery is not yet commercially viable for production (section 39B(2)). The term of a retention lease cannot exceed five years, although renewal is possible for subsequent five-year periods.

For production licences, the Minister's power to set royalty rates for secondary licences (between 11 and 12.5 per cent) must be exercised after giving the applicant an opportunity to confer (section 43(2)).

Inspection powers under Division 6A are broad. Inspectors may enter any part of the adjacent area, access petroleum structures and equipment, and inspect documents in any building in NSW or the adjacent area related to petroleum operations. Occupiers and persons in charge must provide reasonable facilities and assistance to inspectors.

Under section 17, the Minister may delegate any powers or functions under the Act or regulations, including delegation to holders of specified Commonwealth, State or Territory offices.

The two primary criminal penalties in the Act apply to unlicensed exploration (section 20) and unlicensed production (section 40), each carrying 500 penalty units or five years imprisonment, or both. These reflect the seriousness of conducting major offshore extractive operations without regulatory authorisation.

Obstruction or hindrance of an inspector in the exercise of inspection powers (section 127(3)) carries a maximum of 50 penalty units.

Directions given by the Minister following a petroleum discovery (section 35(3) and section 36(2)) must be complied with, each attracting a maximum of 100 penalty units.

Failure to surrender an inspector's certificate on expiry or revocation of appointment (section 126(3)) attracts a maximum of five penalty units.

Making a false or misleading statement about fees or transfers (section 176) carries 100 penalty units.

Pipeline licence conditions carry maximum penalties of 500 penalty units or five years imprisonment for unauthorised cessation of pipeline operation or conduct contrary to ministerial directions.

Fees payable under sections 137, 137A, 138 and 139 by permittees, lessees, licensees and pipeline licensees are calculated under the regulations and are payable annually within one month of each anniversary of the title commencement date.

An application for an exploration permit is made in response to a ministerial invitation by Gazette notice. The applicant must meet minimum block requirements (at least 16 blocks if available), provide work and expenditure proposals, technical qualifications, financial resources, and pay the prescribed fee (sections 21 to 22).

If the Minister decides to grant a permit, the applicant receives a notification under section 23 and must request the grant within a specified period. The initial term of an exploration permit under the Act is six years, with provisions for renewal in five-year tranches.

After a discovery, the permittee must notify the Minister (section 34) and may give notice of a location under section 37. The Minister may then make a location declaration under section 38. This triggers the permittee's entitlement to apply for a retention lease or production licence.

Retention lease applications must be made within a specified period of the location declaration. Lease terms are up to five years, renewable. When commercial viability is established, the lessee may apply for a production licence.

Production licence applications proceed through a notification and confirmation process similar to permits. The licensee must accept the royalty rate determined by the Minister before the licence is granted.

Pipeline licence applications require a route survey and specified information about design and construction and must comply with safety standards. The pipeline licence is a separate instrument from the production licence.

The Act sits within a cooperative Commonwealth-State scheme and defers extensively to the Commonwealth Act (the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth)) for the substantive regulatory framework applicable to the Commonwealth offshore area. The NSW Act grants the Minister power to act as Joint Authority member and Designated Authority to administer those Commonwealth provisions for the NSW area.

The Act repealed the Petroleum (Submerged Lands) Act 1967 (NSW) and the Petroleum (Submerged Lands) Taxation Act 1967. Existing titles under those Acts were preserved by the savings provisions in Schedule 4.

Part 3 extends NSW laws generally to the adjacent area. The applied laws do not include Commonwealth laws applied by the Crimes at Sea Act 1998 (NSW) or the Application of Laws (Coastal Sea) Act 1980 (NSW). The Survey (Geocentric Datum of Australia) Act 1999 (NSW) affects the technical surveying basis for blocks and graticular sections, and Schedule 4 includes transitional provisions for datum changes.

The royalty remittance formula in section 129 requires the State Treasurer to pay a proportion of royalties collected to the Commonwealth, maintaining the financial architecture of the cooperative scheme.

Adjacent area boundary: The Act applies beyond the three-nautical-mile coastal waters boundary. Operators who are uncertain whether a project is in coastal waters (subject to separate NSW licensing requirements) or the adjacent area (subject to this Act and the Commonwealth scheme) need to verify the precise location of their activities. The boundary is a common source of confusion.

Joint Authority and Designated Authority distinction: Some decisions under the Commonwealth Act require the Joint Authority (both NSW and Commonwealth Ministers acting together), while others may be made by the Designated Authority (the NSW Minister) alone. Applicants need to understand which decision-making body applies to their application and who to approach.

Secondary licence royalties are higher: The base production royalty is 10 per cent, but a secondary licence carries royalty between 11 and 12.5 per cent determined by the Minister. The rate is negotiated before the secondary licence is granted and binds all subsequent production under that licence. The same rate also then applies to the primary licence.

Work programme obligations: Exploration permits require permittees to complete specified work. Failure to meet work programme conditions can lead to cancellation or forfeiture of blocks. Permittees must obtain consent before relinquishing blocks voluntarily.

Obligation to notify discovery: The Act imposes an active duty on permittees to notify the Minister of petroleum discoveries. Delay or failure to notify is a breach of permit conditions and attracts ministerial directions.

Registration of dealings: Assignments, mortgages, and other dealings in petroleum titles require registration under Division 5 to be effective against third parties. Unregistered dealings may not be enforceable against subsequent registered interest holders.

A company holding an exploration permit over 200 offshore blocks must complete its minimum work programme for each period of the permit term. If the company discovers a petroleum accumulation but assesses it as not commercially viable at current prices, it should notify the Minister and apply for a retention lease under Division 2A, preserving its rights in the location for up to five years while market conditions are assessed.

An overseas-based company that wishes to carry out seismic surveys in the NSW adjacent area without holding a petroleum permit may be able to rely on a special prospecting authority under Division 6 of Part 4, which authorises limited survey activities without conferring the full exploration rights of a permit.

A pipeline company that holds a pipeline licence and wishes to cease operating the pipeline must obtain the written consent of the Minister under section 98 before ceasing operations. Operating a pipeline inconsistently with a ministerial direction or without consent exposes the licensee to the maximum penalty of 500 penalty units or five years imprisonment.

A joint venture consortium that recovers petroleum under a production licence must ensure royalty payments are made monthly. Any late payment immediately attracts the statutory penalty of one-third of one per cent per day from the due date, accruing without any need for a demand or notice from the Minister.