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New Australian Law Makes Offshore Energy Companies Pay for Cleanup

Oil rig and support vessel on offshore, credit: Vladimirovic
The Australian government has had to assume responsibility for decommissioning the defunct FPSO Northern Endeavour, above (Government of Australia)

Published Aug 27, 2021 2:53 PM by The Maritime Executive

The Australian parliament this week passed a law to force big oil and gas producers to pay for the cost of decommissioning offshore rigs, with Keith Pitt, the federal minister for Resources and Water, stating the law was to ensure taxpayers are not left to foot the bill. 

Earlier this month, the minister told Australia's parliament that the cost of removing offshore rigs from the ocean would be approximately $43 billion over the next 30 years. Although offshore energy companies sign binding commitments to gain government approval at the start of production, gaps in the law have allowed them to pass liability to another company if the production facility is sold before their statutory end-of-life.

Under the new Offshore Petroleum and Greenhouse Gas Storage Amendment Bill, the government gains callback powers to force previous owners of an asset to pay for decommissioning if the current owner cannot. The law also creates a trailing liability for the energy giants, which applies retrospectively from January 1, 2021.

“The trailing liability provisions will be an action of last resort when all other safeguards have been exhausted and will reduce the risk that the financial costs of decommissioning will be left to Australian taxpayers,” Minister Pitt said. “It also sets the expectation that sellers will undertake appropriate due diligence before selling assets, titles and infrastructure, so they can avoid being called back to decommission and remediate title areas.”

The law is largely drawn from recommendations of Steve Walker, who last year was appointed by Pitt to look into circumstances leading up to the liquidation of Northern Oil and Gas Australia Ltd (NOGA). The company owned the Northern Endeavour FPSO moored in the Timor Sea, some 300 nm northwest of Darwin City. It is currently being decommissioned by the Australian government.