Petroleum (Submerged Lands) Act 1982

• Petroleum exploration and production companies holding or applying for permits, licences, pipeline licences or access authorities in WA's adjacent area.
• The WA Minister for Petroleum (Designated Authority): Grants, conditions, varies, transfers and cancels petroleum titles.
• The Commonwealth Minister and Joint Authority: Co-administer aspects of the regime under the national framework.
• National Offshore Petroleum Safety Authority (NOPSA/NOPSEMA): The Safety Authority with OHS jurisdiction in the adjacent area under the Commonwealth Act.
• Landholders and traditional owners whose interests may be affected by offshore petroleum activities and associated onshore infrastructure.
• Joint venture partners in WA offshore petroleum projects: the Act imposes obligations on each registered holder of a title.

Work program obligations: Permittees must carry out specified exploration activities within each year of the permit term. Failure to comply with work program obligations is a ground for permit cancellation.

Royalty: Titleholders (for production licences) must pay royalties on petroleum recovered from the licence area. Royalty periods are monthly from commencement.

Annual rentals: Permittees and licensees must pay annual rentals for their titles.

Good oilfield practice: All operations must be conducted in accordance with good oilfield practice (s 4 definition).

Information and reporting: Titleholders must provide geological, geophysical and production data and reports to the Designated Authority.

Notification of discoveries: A permittee who discovers a petroleum pool must notify the Designated Authority.

Insurance and financial assurance: Conditions on production licences include requirements for insurance and financial capacity to meet obligations.

Designated Authority (WA Minister):

• Grant exploration permits, retention leases, production licences, pipeline licences and access authorities.
• Vary permit terms and work programs.
• Cancel or suspend titles for breach of conditions or obligations.
• Declare locations following discovery reports.
• Approve transfers and dealings in titles.

Titleholder operational discretions:

• Select the specific exploration methods and targets within the work program framework.
• Apply for variations of terms and areas.
• Apply for production licence conversion upon locating a commercial petroleum pool.

The Act creates offences for breaching key obligations including:

• Carrying out petroleum operations in the adjacent area without a valid title.
• Failing to comply with directions from inspectors.
• Breaching safety requirements.

Regulatory enforcement tools include permit conditions, work program compliance monitoring, and cancellation of titles for breach.

Exploration permit grant:

1. Application with work program proposed.
2. Gazette notice and consideration period.
3. Minister grants or refuses.
4. Permit in force for initial term (typically 6 years for a primary permit).
5. Relinquishment of percentage of area on each renewal.

Discovery to production:

1. Permittee discovers petroleum pool.
2. Permittee declares a location.
3. Permittee applies for a production licence over the location blocks.
4. Production licence granted (primary or secondary).
5. Production commences; royalty obligations apply.

Pipeline licence: Application, grant, construction approval, and ongoing operation under licence conditions.

Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) (Commonwealth Act): The principal Commonwealth statute for offshore petroleum regulation. For the outer continental shelf (beyond 3 nautical miles from the baseline), the Commonwealth Act governs. The WA Act applies in the inner offshore area (within 3 nautical miles). The two regimes interact closely.

Income Tax Assessment Act 1997 (Cth): In the Commissioner of Taxation v Shell Energy Holdings Australia Limited case ([2022] FCAFC 2), the Court applied provisions of both the WA Act and the Commonwealth Act (collectively called "the Petroleum Acts") to determine the capital depreciation treatment of Shell's interest in exploration permits under the Browse Basin project. The FCAFC confirmed the WA Petroleum (Submerged Lands) Act 1982 issues statutory titles (the "statutory titles") that are the assets in question for income tax depreciation purposes.

Coastal Waters (State Powers) Act 1980 (Cth) and Coastal Waters (State Title) Act 1980 (Cth): These Commonwealth Acts vest jurisdiction in States over the inner offshore (territorial sea) area, enabling WA to enact the Petroleum (Submerged Lands) Act for that area.

Native Title Act 1993 (Cth): Offshore petroleum activities may interact with native title rights in the offshore zone. The WA Act predates the Native Title Act but activities under petroleum titles must now consider native title rights and interests.

The WA Act applies only to the inner offshore area: The WA Petroleum (Submerged Lands) Act applies to the adjacent area within the territorial sea (broadly within 3 nautical miles of the baseline). The outer continental shelf beyond this limit is governed by the Commonwealth Offshore Petroleum and Greenhouse Gas Storage Act 2006. Many Browse Basin and offshore WA projects involve both regimes.

Royalty on re-injected petroleum: The definition of "petroleum" (s 4) expressly includes petroleum "returned to a natural reservoir." This means petroleum that is re-injected and later recovered may attract royalty on both recovery episodes.

Work program compliance is strictly monitored: The permit work program sets out specific exploration activities and expenditure commitments year by year. The Designated Authority monitors compliance. Permittees that fail to meet work program obligations without obtaining a variation risk permit cancellation.

Register of titles: Dealings in titles (assignments, mortgages, charges) are registered under Part 3, Division 5. Unregistered dealings are generally ineffective against third parties. Due diligence in petroleum title acquisitions must include a register search.

The "exploration" concept for tax purposes: In the Shell Energy Holdings case, the FCAFC examined what it means for assets held under WA petroleum titles to be "used for exploration" for income tax depreciation purposes. The definition of exploration in both the WA Act and the Commonwealth Act was central to the analysis.

Exploration permit application for Browse Basin block: A petroleum company identifies a prospective block in the WA offshore area. It applies to the Designated Authority for an exploration permit under Part 3 of the Act, lodging a proposed work program committing to specified seismic survey and drilling activities over the 6-year term. If granted, the company must carry out those activities or apply for work program variations with good reason.

Discovery and production licence conversion: Following a well that encounters a substantial petroleum pool, the permittee declares a location. The permittee then has the primary entitlement to apply for a production licence over the location blocks. Once a production licence is granted, the company may begin production operations and is liable to pay royalties on petroleum recovered.

Capital depreciation of petroleum titles (Shell Energy Holdings [2022] FCAFC 2): Shell acquired additional proportional interests in exploration permits held under the WA Act and the Commonwealth Act for the Browse Basin project. The FCAFC considered whether those interests (the "statutory titles") were depreciating assets "first used for exploration" for income tax purposes. The Court applied the concept of exploration as defined in both the WA Act and the Commonwealth Act, confirming the WA Act's exploration permit framework was the relevant statutory context.

Pipeline licence for offshore gathering: A production company requires a pipeline in the adjacent area to gather gas from wells and transport it to a terminal station. The company applies for a pipeline licence under Part 3. The licence specifies the route, dimensions, and operating conditions. Annual rentals apply throughout the term.