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Australia’s first offshore wind farm and the proposed regulatory framework

14 April 2021

#Renewable Energy

Published by:

David Harley

Australia’s first offshore wind farm and the proposed regulatory framework

Increasing demand in Australia for power generated from renewable sources (including wind) has been met with opposition from local communities for land-based wind farms on the basis that they allegedly affect farming land and tourism.

The alternative solution is to develop wind farms offshore. The potential viability of offshore wind farms has been driven by the Star of the South wind farm project which is the first offshore wind farm under development in Australia. The project has been in the pipeline since 2012 although it has faced significant delays due to Australia’s lack of regulatory framework for this kind of development.  

The Star of the South (and many future wind farms) will be located more than three nautical miles offshore meaning they will be located in Commonwealth waters and will therefore require Commonwealth legislation as opposed to state.

The Commonwealth government has developed a proposed regulatory framework, and in January 2020, released a paper on the proposed ‘Offshore clean energy infrastructure regulatory framework’ (Framework) for public feedback and discussion. Below is a summary of the Framework, issues for consideration and our thoughts on the way forward. 

Current laws

In developing the Framework, the government has drawn on rules that currently exist for offshore oil and gas explorations in order to develop a bespoke arrangement for the development and generation of offshore wind power.

Existing Commonwealth legislation

The current Commonwealth Acts that apply to offshore oil and gas activities include:

  • the Offshore Petroleum and Greenhouse Gas Storage Act 2006
  • the Offshore Petroleum and Greenhouse Gas Storage (Environment) Regulations 2009
  • Part 3 of the Environment Protection and Biodiversity Conservation Act 1999.

These laws have a number of requirements that companies must meet before commencing offshore oil and gas activities, including:

  • holding the appropriate permits, leases and licences
  • having comprehensive environment and safety plans accepted by the National Offshore Petroleum Safety and Environmental Management Authority (NOPSEMA).

Before a company can commence activities, it must have approval from the relevant Joint Authority and the independent regulator. The government releases new offshore areas for oil and gas exploration each year which provides an opportunity for companies to bid for an exploration permit. The successful company is then granted an exploration permit which is valid for six years and can be renewed for a further two periods of five years. All companies must have an environmental plan assessed and accepted by NOPSEMA before any activity can take place.

Existing state legislation

The Victorian legislation and regulations for oil and gas exploration follow very closely to that of the Commonwealth.

The key statutes that govern the oil and gas exploration in Victoria are:

  • the Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth)
  • the Victorian Offshore Petroleum and Greenhouse Gas Storage Act 2010
  • NOPSEMA, which regulates safety via a Memorandum of Understanding arrangement between NOPSEMA and the Department of Jobs, Precincts and Regions (DJPR).

Current proposal

The Federal Government’s proposal was open for public comment until 28 February 2020. The main aspects that make up the Framework are set out below.

Responsible entity

The Australian Government Minister responsible for energy matters will make all major decisions under the Framework. It is proposed to leverage the experience of NOPSEMA to operate as the regulator for any new industry. NOPSEMA would be responsible for safety, environmental and structural integrity regulation, as well as providing technical advice to the Energy Minister to support their decision-making.

Pre-qualification

Before anyone can participate in the offshore clean energy infrastructure regime, they must first apply for pre-qualification. The pre-qualification process will assess suitability to participate in the offshore clean energy industry and will include periodic re-assessment. Tests will include a fit and proper person test, an assessment of technical and financial capability, as well as measures of past performance.

Commercial activities

For developers seeking to undertake commercial activities, the process is as follows:

  • a Feasibility Licence will be awarded, allowing developers five years to complete exploration, project design, and detailed consultation with other users and regulators and to demonstrate their ability to manage safety and environmental risks and impacts
  • a Commercial Licence will be awarded next if the developer has satisfied the Minister that all requirements and conditions have been met. The Commercial Licence entitles the developer to an initial term of up to 30 years to construct, test and commission, operate the project, and decommission the project, and can be renewed indefinitely.

Non-commercial activities

A non-exclusive Non-Commercial Licence will be available for pre-commercial seismic exploration or genuinely innovative offshore clean energy demonstration projects, and will be a low-cost pathway to ensure that these activities are regulated for safety and environmental matters, and appropriately decommissioned once they cease. These licences are limited to 10 years and do not lead to a Commercial Licence. 

Transmission and infrastructure permit

A separate non-exclusive Transmission and Infrastructure Permit for construction and operation of transmission or other infrastructure will be granted in conjunction with commercial or non-commercial licences. This type of permit will be awarded for the purpose of transmitting energy generated onshore through the offshore environment. This permit will allow for a safety zone to be established for infrastructure protection if required.

Management plans

Management plans will be required for all licences, which will provide requirements on delivery and protections for the project and include information relating to environmental and safety management, project design, engineering, and plans for construction, commissioning, operation and decommissioning.

All licence holders will also be required to lodge a decommissioning bond. Decommissioning bonds are expected to equal the amount it would cost the government to decommission all infrastructure should the licence holder fail to meet its decommissioning obligations.

All licence holders will also be subject to regular reporting and compliance obligations.

Key issues

There are a number of issues that have not been addressed in the proposed Framework, along with a number of key points that will require further consideration throughout the initial public consultation process.

  1. It is unclear how the framework will interact with existing state laws, and in particular, circumstances where a project covers both Commonwealth and state-controlled areas.
  2. NOPSEMA will be the main authority to oversee and be responsible for the decision making processes, advising the relevant Ministers on the various issues, and also exercising enforcement powers against licence holders. While NOPSEMA is an accepted and qualified regulator of oil and gas activities in Australia, it may not be the most appropriate fit in its current form because oil and gas activities present hazards of an inherently different character.
  3. The licensing won’t cover existing projects such as Star of the South. The proposed Framework acknowledges that offshore clean energy exploration is already being undertaken, and states that these rights “will be recognised and continue to operate under current arrangements, however any successive or new exploration or development activity or new transmission projects will be subject to the framework”.

Responses to the proposal

Over 40 submissions were received from industry, researchers and the community with around 250 people attending public consultation workshops in Perth and Melbourne. The majority response was support for the design and principles of the Framework, along with requests for further detail and consultation on specific measures.

The Government held submissions and consultations to provide informed updates to the framework design. The name has now been changed from ‘offshore clean energy infrastructure’ to ‘offshore renewable energy infrastructure’ to provide greater clarity on the Framework’s coverage.

The legislative settings and framework aim to be in place and operational by mid-2021 with further opportunity to consult on regulations and policy details in 2021.

Conclusion

While it is unclear how the proposed Framework will work in reality, this is a positive step towards providing Australia with a renewable energy solution that works for all. The hybrid Framework incorporating existing legislation from oil and gas exploration combined with bespoke drafting for wind farm specific projects should allow for a well-regulated industry.  There may be some issues that will occur along the way, but as this is an ever-evolving industry, the laws and regulations will evolve as well.

Authors: Scott Schlink, Tony Rutherford & David Harley

Disclaimer
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

David Harley

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